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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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