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Unaudited interim consolidated financial results for the six months ended 31 August 2012
Tradehold Limited
(“Tradehold” or “the company” or “the group”)
(Registration number 1970/009054/06)
JSE share code: TDH ISIN: ZAE000152658
INTERIM CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED
31 AUGUST 2012
Tradehold is an investment holding company listed on the Main Board of the
JSE Limited. It has no operating assets in South Africa. Its business
consists of an 85% interest in the property-owning Moorgarth Holdings
(Luxembourg) S.à.r.l. (“Moorgarth”), 71% of Reward Investments Limited
(“Reward”), an asset-backed, short-term lending business, and an indirect
holding of 15,9% in the variety retail group Instore. All these businesses
are based in the UK. By far the largest investment is in Moorgarth which
manages a £54,2 million portfolio of unencumbered retail, leisure and
commercial properties.
Despite the continuing depressed state of the UK economy, Tradehold produced
a trading profit of £2,2 million against a trading profit of £0,3 million in
the corresponding period. After exceptional items of £1,2 million, interest
and taxation, it recorded a profit for the period of £1,0 million compared
to a loss of £3,3 million in the corresponding six months. Moorgarth
produced a net profit of £0,7 million (2011: £0,4 million). The latter's
results were boosted by a net increase of £0,5 million primarily driven by
an escalation in the value of one of its properties for which planning
permission for residential development was obtained.
Business review
The British economy remained in the doldrums during the reporting period
with official figures released at the end of July indicating that the
economy had shrunk for three consecutive quarters. However, towards the end
of the period there was the start of a surge in job creation; inflation
decreased closer to the government's target of 2% while consumer spending
was slowly starting to gain momentum.
Moorgarth
The entire real estate market has slowed during the period under review with
the number of transactions well down on the previous year. The commercial
property sector continued to be negatively influenced by the deepening
concern over the wider European economy. Few property investment
opportunities were available during the first 4 months of the period
although towards the end of the period a number of shopping centre
opportunities have come to the market. Moorgarth responded hereto and
acquired a shopping centre in Glasgow at an attractive gross initial yield.
It has made it known in the market that it is keen to acquire similar
properties, and management is at present investigating a number of options
capable of providing similar returns. It is particularly on the lookout for
properties offering opportunities for improving the fabric of the building
to enhance the tenant mix, income stream and consequently capital value.
Management will continue to look to sell the smaller assets within the
existing portfolio with a view to replacing these with higher yielding,
better quality assets primarily in the retail sector. The value of the
portfolio at the end of the reporting period stood at £54,2 million.
In the second half of the year the focus will be on acquiring more secondary
retail warehouse and shopping centre properties. The group's available cash
reserves enable management to respond quickly to opportunities.
Reward
Management's expectation at the end of the previous period that the outlook
for this start-up business was highly promising was proven correct in the
period under review when net profit of £0,4 million, after tax and members
interests, exceeded the £0,2 million achieved for the whole of the previous
year. The number of short-term loans granted to small businesses which are
struggling to obtain funding from the major banks has increased sharply.
Being highly aware of the risks involved in a business of this nature in the
present economic climate, management has made a senior appointment for the
full-time risk management of Reward's 35 loan investments.
Reward expects to exceed its profit forecast for the full year as the level
of deal flow continues to gain momentum.
Comments on the results
Included in the trading profit are:
- An unrealised currency gain of £0,4 million on a Swiss Franc denominated
loan, and
- Valuation gains on Moorgarth investment properties of £0,5 million.
Exceptional items are: (£'million) Unaudited Unaudited Audited
6 months 6 months 12 months
to 31/08/12 to 31/08/11 to 29/02/12
- Fair value loss on financial
assets at fair value through
profit and loss (1,1) (2,1) (2.2)
- Impairment of loans - - (0,1)
- Legal and professional expenses (0,1) (0,4) (0,5)
Total (1,2) (2,5) (2,8)
Reclassification of revenue
Following the establishment of Reward as a permanent part of the group's
operations, it was determined that it would be more suitable to classify the
income generated from this business as revenue, whereas this had previously
been included within other income (included in trading profit). This
reclassification resulted in an increase in revenue of £125 000 and £853 000
in the comparatives for the first half of 2012 and the 12 months ended 29
February 2012 respectively.
The effect on the 2012 accounts compared to the previous method is largely
neutral; an increase in revenue is offset against a decrease in other income
in 2012 and operating profit has remained unchanged.
The segmental analysis includes this restatement and the short-term lending
business is now disclosed as a separate segment.
Dividend
In order to preserve cash and given the continuing uncertainty in the market
the board does not recommend paying a dividend to shareholders.
Outlook
Although the present adverse conditions in the British economy are expected
to continue, the board is nevertheless positive in its outlook for the next
six months. Moorgarth will continue in its efforts to enhance the quality of
its portfolio as well as its profitability. Given its results to date it is
expected that Reward will make a meaningful contribution to group profit
this year. The board therefore expects the positive trends in the business
to continue for the remainder of the year.
This general forecast has not been reviewed nor reported on by the company's
auditors.
Accounting policy
The interim results have been prepared in accordance with the recognition
and measurement principles of International Financial Reporting Standards
(IFRS) and the AC 500 Standards as issued by the Accounting Practices Board,
including IAS 34: Interim Financial Reporting, and in accordance with the
requirements of the South African Companies Act, Act 71 of 2008, as amended,
and the Listings Requirements of the JSE Limited. Other than the
reclassification explained above, the accounting policies are consistent
with those applied in the annual financial statements for the year ended 29
February 2012.
Preparation of financial results
The preparation of the financial results was supervised by the group
financial director, Cornus Moore, B Com. These results have not been audited
nor have they been reviewed by the group's auditors, PricewaterhouseCoopers
Inc.
Reporting currency
As the operations of Tradehold's subsidiaries are conducted in pound
sterling and because of the distortion caused by the fluctuating value of
the rand, the company is reporting its results in the former currency.
By order of the board
CH Wiese C Moore
Chairman Director
Malta
25 October 2012
Executive directors: CH Wiese, C Moore and TA Vaughan
Non-executive directors: MJ Roberts, C Stassen, HRW Troskie and JD Wiese
Independent non-executive directors: MJ Roberts, C Stassen and HRW Troskie
Company secretary: JF Pienaar
Transfer secretaries: Computershare Investor Services (Pty) Ltd
Sponsor: Deloitte & Touche Sponsor Services (Pty) Ltd
Statement of comprehensive income
Unaudited Unaudited Audited
6 months 6 months 12 months
to to to
(£'000) 31/08/12 31/08/11* 29/02/12*
Revenue 4 719 3 241 7 498
Trading profit 2 201 281 1 207
Exceptional items (1 167) (2 589) (2 761)
Operating profit/(loss) 1 034 (2 308) (1 554)
Finance income 191 120 390
Finance cost (25) (1 099) (1 558)
Profit/(loss) before taxation 1 200 (3 287) (2 722)
Taxation 151 34 124
Profit/(loss) for the period 1 049 (3 321) (2 846)
Other comprehensive income
Currency translation differences - - (14)
Total comprehensive income/(loss)
for the period 1 049 (3 321) (2 860)
Profit/(loss) attributable to:
Owners of the parent 757 (3 392) (2 493)
Non-controlling interest 292 71 (353)
1 049 (3 321) (2 846)
Total comprehensive
income/(loss) attributable to:
Owners of the parent 757 (3 392) (2 507)
Non-controlling interest 292 71 (353)
1 049 (3 321) (2 860)
Earnings/(loss) per share (pence):
basic and diluted
– basic and diluted earnings/(loss) 0,5 (3,4) (2,1)
– headline earnings/(loss) 0,2 (4,0) (2,1)
Number of shares for calculation of
earnings per share ('000) 138 394 99 550 118 841
* Reclassified
Statement of financial position
Unaudited Unaudited Audited
(£'000) 31/08/12 31/08/11 29/02/12
Non-current assets 54 875 71 844 47 247
Investment properties 49 198 65 800 41 498
Property, plant and equipment 5 644 6 029 5 737
Deferred taxation 25 - -
Financial assets 8 15 12
Current assets 45 877 49 698 52 025
Financial assets 6 301 7 484 7 403
Trade and other receivables 11 715 1 932 5 601
Inventories 32 35 24
Cash and cash equivalents 27 829 40 247 38 997
Total assets 100 752 121 542 99 272
Equity 88 397 86 884 87 213
Ordinary shareholders' equity 87 730 85 768 86 838
Non-controlling interest 667 1 116 375
Non-current liabilities 51 12 56
Preference share capital 51 12 51
Deferred taxation - - 5
Current liabilities 12 304 34 646 12 003
Short-term borrowings 6 279 28 659 6 601
Other current liabilities 6 025 5 987 5 402
Total equity and liabilities 100 752 121 542 99 272
Statement of changes in equity
Unaudited Unaudited Audited
6 months 6 months 12 months
to to to
(£'000) 31/08/12 31/08/11 29/02/12
Balance at beginning of the period 87 213 31 349 31 349
Proceeds from ordinary share issue - 58 856 58 856
Disposal of treasury shares 135 - -
Transactions with non-controlling
shareholders - - (43)
Purchase of treasury shares - - (89)
Total comprehensive
income/(loss) for the period 1 049 (3 321) (2 860)
Balance at end of the period 88 397 86 884 87 213
Statement of cash flows
Unaudited Unaudited Audited
6 months 6 months 12 months
to to to
(£'000) 31/08/12 31/08/11 29/02/12
Cash flows from operating activities (3 719) (865) (3 874)
Cash flows from investing activities (7 262) (13 882) 10 028
Acquisition of investment properties (7 700) (15 072) (15 073)
Acquisition of property,
plant and equipment (60) (113) (233)
Proceeds on disposal of
investment properties 494 1 300 25 253
Other investment activities 4 3 81
Net cash flow (10 981) (14 747) 6 154
Cash flows from financing activities (187) 45 965 23 814
Proceeds from ordinary share issue - 58 856 58 856
Proceeds from preference share issue - - 39
Proceeds of borrowings - - 317
Repayment of borrowings (322) (12 891) (35 266)
Proceeds on disposal of treasury shares 135 - -
Purchase of treasury shares - - (89)
Transactions with non-controlling
shareholders - - (43)
Net (decrease)/increase in cash
and cash equivalents (11 168) 31 218 29 968
Cash and cash equivalents at
beginning of the period 38 997 9 029 9 029
Cash and cash equivalents at
end of the period 27 829 40 247 38 997
Supplementary information
Unaudited Unaudited Audited
6 months 6 months 12 months
to to to
(£'000) 31/08/12 31/08/11 29/02/12
1. Depreciation for the period 153 210 392
2. Capital expenditure for the period 7 760 15 185 15 306
3. Calculation of headline earnings
Profit/(loss) attributable to
owners of parent 757 (3 392) (2 493)
(Surplus)/shortfall on revaluation
of investment properties (450) (642) 630
Profit on disposal of investment
properties (44) - (923)
Impairment of property, plant and
equipment - - 230
Taxation - - -
Non-controlling interest 74 96 9
337 (3 938) (2 547)
Unaudited Unaudited Audited
31/08/12 31/08/11 29/02/12
4. Number of shares in issue
(net of treasury shares) ('000) 138 567 138 488 138 296
5. Net asset value per share (pence) 63,3 61,9 62,8
6. Financial assets
Listed investments at fair value 4 489 5 672 5 591
Unlisted investments at fair value 1 812 1 812 1 812
Loans 8 133 12
6 309 7 617 7 415
7. Contingent liabilities - 5 349 -
Segmental analysis
Trading Total
(£'000) Revenue profit/(loss) assets
Six months to 31 August 2012 (unaudited)
Property – retail 1 562 851 36 858
- commercial 275 767 7 883
– offices 181 (15) 4 397
– leisure 1 381 154 7 226
Short-term lending 1 320 1 005 10 120
Treasury - (561) 34 268
4 719 2 201 100 752
Six months to 31 August 2011 (unaudited)*
Property – retail 1 325 1 893 56 167
– commercial 171 (38) 7 133
– offices 283 191 5 178
– leisure 1 337 99 7 112
– other - (133) 154
Short-term lending 125 65 915
Treasury - (1 796) 44 883
3 241 281 121 542
Twelve months to 29 February 2012 (audited)*
Property – retail 2 879 3 176 30 475
– commercial 358 87 7 367
– offices 722 40 4 425
– leisure 2 686 (447) 6 546
– other - 367 5 813
Short-term lending 853 343 5 592
Treasury - (2 359) 39 054
7 498 1 207 99 272
* Reclassified
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