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TRADEHOLD LIMITED - Audited results for the 12 months to 28 February 2013

Release Date: 30/05/2013 13:45
Code(s): TDH     PDF:  
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Audited results for the 12 months to 28 February 2013





TRADEHOLD LIMITED

(Registration number: 1970/009054/06)

("Tradehold" or "the group")

Incorporated in the Republic of South Africa

JSE Share code: TDH  ISIN: ZAE000152658



Audited results for the 12 months to 28 February 2013



Tradehold Limited is an investment holding company listed on the Main Board of the JSE. It has no operating assets in South Africa. At its financial year-end, its business consisted of an 85% interest in the property-owning Moorgarth group of companies; an indirect holding through Reward Investments Limited of 71% in the two operating Reward LLP's, an asset-backed, short-term lending business; and an indirect holding of 15,9% in the variety retail group Instore. All these businesses are UK-based. By far the largest investment is in Moorgarth which manages a £52,0 million portfolio of unencumbered retail, commercial and industrial buildings.



Although trading conditions did not change materially in the year under review, Tradehold produced a substantially improved set of financial results. Revenue increased 34,6% to £10,1 million and the group achieved a trading profit of £3,6 million (2012: £1,2 million). Exceptional items contributed £2,8 million to a net profit for the year of £6,5 million (2012: a loss of £2,9 million). Moorgarth reported an operating profit of £2,4 million (2012: £2,8 million) but nevertheless suffered a net loss of £2,6 million (2012: loss of £1,8 million) due to a £2,8 million downward adjustments in the fair value of its portfolio, reflecting the general tendency in the UK's property market. Reward, in its second full year of trading, posted a net profit of £0,9 million compared to £0,1 million in its first year.



Tradehold's auditors, PriceWaterhouseCoopers Inc., audited the results and their unqualified report is available at Tradehold's registered office. 



BUSINESS ENVIRONMENT

During the review period the British economy remained in the doldrums, narrowly avoiding slipping into a triple-dip recession. In the first quarter of 2013 it grew by less than 0,5%. At the end of February, Moody's, one of the world's largest rating agencies, unsurprisingly downgraded Britain's credit rating, given its struggle to reduce the deficit. Wages growing at a slower rate than inflation eroded consumer spending which remained weak even when compared with previous recessions. On the more positive side, the Bank of England continued to keep interest rates at historically low levels to help drive business growth and borrowings. However, the banking sector remained highly risk-averse. This was despite strategies put in place by the government to encourage lending. In such an environment, trading conditions remained extremely demanding.



Moorgarth

Moorgarth continued to develop the potential of the existing buildings in its portfolio to attract financially robust tenants and meet the fast-changing needs of its retail clients. At the same time it substantially changed its acquisition criteria: where in the past it took an opportunistic approach in acquiring, in different sectors, commercial properties with refurbishment potential, its focus has shifted to larger shopping centre assets. This change in strategy has been driven by the availability of high-yielding, well-located quality centres with established tenant bases. In May 2012 it acquired its first such shopping centre near Glasgow, which is generating a high initial yield. As part of this shift in focus Moorgarth will continue with its strategy to clear the portfolio of smaller properties with no future potential to enhance value.



The company remains ungeared in terms of external funding. Its access to group funds has provided considerable flexibility in restructuring its portfolio.



While the property market in Central London has remained highly resilient to market changes with significant value increases, conditions elsewhere were just the opposite, with retail and office rentals falling further in most locations. As a result, the fair value of Moorgarth's property portfolio was reduced by £2,8 million, continuing a tendency also evident the previous year.  



Reward

Market conditions continued to favour the two operating units of Reward Investments Limited - Reward Capital and Reward Commercial Finance. Tradehold, which funds their operations via a £12 million loan, indirectly holds 71% in the two units. They focus on short-term, asset-backed loans to small and medium-sized businesses and on invoice-discounting facilities to similar businesses respectively. Most of the income was generated by Reward Capital with demand for loans remaining strong throughout the year.



The two operating units achieved an operating profit of £2,0 million (2012: £0,3 million).  No bad debt was incurred during the reporting period and the two businesses geared themselves for continued strong growth in the new financial year. They moved to larger premises, increased the staff complement and upgraded existing IT systems.



COMMENTS ON THE RESULTS

The trading profit includes a reversal of a provision for lease repair liabilities of £2,9 million (see Developments after Year-end below).



Exceptional items

Exceptional items are made up as follows:                2013          2012

(£million)

Fair value adjustment of UBS AG shares                    1,0          (2,2)

Fair value adjustment of Instore Limited shares           1,8             -

Fair value adjustment Abbeycrest plc shares                 -          (0,1)

Legal costs                                                 -          (0,5)

Total                                                     2,8          (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 £853 000 in the comparative for the 12 months ended 29 February 2012.



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.



DEVELOPMENTS AFTER YEAR-END

After year-end Tradehold sold its remaining 15,9% interest in Instore for £3,6 million, payable in 18 monthly instalments. Tradehold also concluded a Deed of Release; releasing it of a lease repair liability for which it had previously created a £2,9 million provision. As the negotiations for both these transactions had been substantially completed at year-end, this resulted in a fair value adjustment to the investment and a release of the provision.



DIVIDEND DISTRIBUTION

On 28 May 2013, the board approved and declared a final gross dividend of 5 cents per ordinary share. The payment will reduce the company's share premium.  The dividend will be paid in cash. 



The salient dates in respect of the dividend are as follows:

Declaration date                                        Tuesday, 28 May 2013

Last date to trade cum dividend                       Thursday, 13 June 2013

Date trading commences ex dividend                      Friday, 14 June 2013

Record date                                             Friday, 21 June 2013

Date of payment to shareholders                         Monday, 24 June 2013



Share certificates may not be dematerialised or rematerialised between Friday, 14 June 2013 and Friday, 21 June 2013, both days inclusive.



Additional Information

Although the distribution reduces the share premium of the company, the distribution constitutes a foreign dividend as defined in section 1 of the Income Tax Act ("ITA") and is a dividend for purposes of Dividends Tax ("DT"), since the shares are listed on the JSE Limited. In determining the DT of 15% to be withheld in terms of the ITA for those shareholders who are not exempt from the DT, no Secondary Tax on Companies ("STC") credits have been utilised. Shareholders who are not exempt from the DT will therefore receive a dividend of 4.25 cents net of DT. The company has 138 566 911 ordinary shares in issue and its income tax reference number is 9725126719. Shareholders that may qualify for an exemption from the DT should declare their status to their regulated intermediary.



An exemption is provided for in the ITA in respect of foreign dividends received or accrued in respect of listed shares.  We recommend that shareholders consult their own tax advisors on the tax consequences of the foreign dividend. 



OUTLOOK

Moorgarth has a strong, experienced management team whose members have demonstrated their ability to survive and grow in the present tough economic environment. Moorgarth's decision to focus on regionally dominant shopping centres with tangible opportunities for enhancement offers, in our view, a solid base for future growth.



In the same way we believe Reward has enormous potential in the present market. The media in the UK reports almost daily on the reluctance of the mainstream banks when it comes to lending and how alternative funding sources are flourishing as a result. At the same time we believe that its potential is not just determined by the present economic climate but that that it will continue to flourish, and perhaps even more so, when the economy starts growing again.



This general forecast has not been reviewed nor reported on by the company's auditors.



ACCOUNTING POLICY

The summary consolidated financial statements for the 12 months to 28 February 2013, are prepared in accordance with the requirements of the JSE Limited Listings Requirements for preliminary reports and the requirements of the Companies Act applicable to summary financial statements. The Listings Requirements require preliminary reports to be prepared in accordance with the framework concepts, the measurement and recognition requirements of International Financial Reporting Standards (IFRS), the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee and must also, as a minimum, contain the information required by IAS 34 Interim Financial Reporting. The accounting policies applied in the preparation of the consolidated financial statements for the year ended 28 February 2013, from which the summary consolidated financial statements for the 12 months to 28 February 2013 were derived, are in terms of IFRS and are consistent with the accounting policies applied in the preparation of the previous consolidated annual financial statements.



PREPARATION OF FINANCIAL RESULTS

The preparation of the financial results was supervised by the group financial director, Cornus Moore, B Com.  



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 reports its results in the former currency.



J D Wiese             C Moore

Director              Director



Malta

28 May 2013



GROUP RESULTS



STATEMENT OF COMPREHENSIVE INCOME

                                                      Audited       Audited

                                                 12 months to  12 months to

(£'000)                                              28/02/13      29/02/12*

Revenue                                                10 095         7 498

Trading profit                                          3 561         1 207 

Exceptional items                                       2 823        (2 761)

Operating profit/(loss)                                 6 384        (1 554)

Finance income                                            257           390 

Finance cost                                              (63)       (1 558)

Profit/(loss) before taxation                           6 578        (2 722)

Taxation                                                   84           124 

Profit/(loss) for the year                              6 494        (2 846)

Other comprehensive income

Currency translation differences                          (47)          (14)

Total comprehensive income/(loss) for the year          6 447        (2 860)

Profit/(loss) attributable to:

Owners of the parent                                    6 527        (2 493)

Non-controlling interest                                  (33)         (353)

                                                        6 494        (2 846)

Total comprehensive income/(loss) attributable to:

Owners of the parent                                    6 480        (2 507)

Non-controlling interest                                  (33)         (353)

                                                        6 447        (2 860)

Earnings/(loss) per share (pence): basic and diluted

- before exceptional items                                2,7          0,20 

- basic                                                   4,7          (2,1)

- headline earnings/(loss)                                6,4          (2,1)

Number of shares for calculation 

of earnings per share ('000)                          138 476       118 841 

*Reclassified



STATEMENT OF FINANCIAL POSITION

                                                      Audited       Audited

(£'000)                                              28/02/13      29/02/12

Non-current assets                                     51 900        47 247 

Property, plant and equipment                           5 524         5 737 

Investment properties                                  46 341        41 498 

Financial assets                                            -            12 

Deferred taxation                                          35             -

Current assets                                         51 136        52 025 

Financial assets                                       10 238         7 403 

Trade and other receivables                            10 714         5 601 

Inventories                                                 -            24 

Cash and cash equivalents                              30 184        38 997 

Total assets                                          103 036        99 272

Equity                                                 93 793        87 213 

Ordinary shareholders' equity                          93 465        86 838 

Non-controlling interest                                  328           375 

Non-current liabilities                                    88            56 

Preference share capital                                   51            51 

Deferred taxation                                          37             5 

Current liabilities                                     9 155        12 003 

Short-term borrowings                                   6 706         6 601 

Other current liabilities                               2 449         5 402 

Total equity and liabilities                          103 036        99 272 



STATEMENT OF CASH FLOWS

                                                      Audited       Audited

                                                 12 months to  12 months to

(£'000)                                              28/02/13      29/02/12

Cash flows utilised by operating activities             3 716          (224)

Cash flows (utilised by)/from investing activities    (12 720)        6 378

Acquisition of investment properties                   (8 093)      (15 073)

Acquisition of property, plant and equipment             (120)         (233)

Proceeds on disposal of investment properties             494        25 253

Reward loans issued                                   (20 633)       (6 162)

Reward loans repaid                                    15 632         2 512

Other investment activities                                 -            81 

Net cash flow                                          (9 004)        6 154 

Cash flows from financing activities                      238        23 814 

Proceeds from borrowings                                  105           317 

Proceeds from ordinary share issue                        133        58 856 

Proceeds from preference share issue                        -            39 

Repayment of borrowings                                     -       (35 266)

Purchase of treasury shares                                 -           (89)

Transactions with non-controlling shareholders              -           (43)

Net (decrease)/increase in cash and cash equivalents   (8 766)       29 968 

Effect of changes in exchange rate                        (47)            -

Cash and cash equivalents at beginning of the year     38 997         9 029 

Cash and cash equivalents at end of the year           30 184        38 997 



STATEMENT OF CHANGES IN EQUITY

                                                      Audited       Audited

                                                 12 months to  12 months to

(£'000)                                              28/02/13      29/02/12

Balance at beginning of the year                       87 213        31 349 

Proceeds from ordinary share issue                        133        58 856 

Transactions with non-controlling shareholders              -           (43)

Purchase of treasury shares                                 -           (89)

Total comprehensive income/(loss) for the year          6 447        (2 860)

Balance at end of the year                             93 793        87 213 



SUPPLEMENTARY INFORMATION

                                                      Audited       Audited

                                                 12 months to  12 months to

(£'000)                                              28/02/13      29/02/12

1. Depreciation for the year                              333           392 

2. Capital expenditure for the year                     8 213        15 306 

3. Calculation of headline earnings/(loss)

   Net profit/(loss)                                    6 527        (2 493)

   Shortfall on revaluation of investment properties    2 800           630 

   Profit on sale and scrapping of property, 

   plant and equipment and investment properties          (44)         (923)

   Impairment of property, plant and equipment              -           230 

   Non-controlling interest                              (413)            9 

                                                        8 870        (2 547)



                                                      Audited       Audited

(£'000)                                              28/02/13      29/02/12

4. Number of shares in issue 

   (net of treasury shares) ('000)                    138 567       138 296 

5. Net asset value per share (pence)                     67,5          62,8 

6. Financial assets

   Listed investments at fair value                     6 657         5 591 

   Unlisted investments at fair value                   3 581         1 812 

   Loans                                                    -            12 

                                                       10 238         7 415 

7. Contingent liabilities                                   -             -



SEGMENTAL ANALYSIS

                                                      Trading         Total

(£'000)                                 Revenue  profit/(loss)       assets

Twelve months to 

28 February 2013 (audited)

Property - retail                         3 288            11        36 732 

         - commercial                       522          (514)        6 817 

         - offices                          441          (973)        4 000 

         - leisure                        2 833         1 119         6 750 

         - other                              -           (61)          197

Short-term lending                        3 011         2 036        11 820

Treasury                                      -         1 943        36 720

                                         10 095         3 561       103 036



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



There was no intersegment revenue, resulting in all revenue being received from external customers.


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