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Audited Results for the 12 months to 28 February 2014
TRADEHOLD LIMITED
(Registration number: 1970/009054/06)
("Tradehold" or "the Group")
Incorporated in the Republic of South Africa
JSE Share code: TDH ISIN: ZAE000152658
Tradehold Limited - audited results for the 12 months to 28 February 2014
Tradehold Limited is an investment holding company listed on the main board
of the JSE. At its financial year-end, it had no operating assets in South
Africa. Its business interests then consisted of an 85% holding in the
property-owning Moorgarth group of companies and an indirect holding,
through Reward Investments Limited, of 63% in the two operating Reward
LLP's, an asset-backed, short-term lending business. All these businesses
are UK-based. By far the largest investment is in Moorgarth which manages a
£77,4 million portfolio of retail, commercial and industrial buildings.
FINANCIAL PERFORMANCE
In the improving economic climate of the United Kingdom, Tradehold in the
year to February 2014 built on the already much improved financial results
of the previous year by growing revenue by 24,4% to £12,6 million (2013:
£10,1 million) and trading profit by 72,5% to £6,1 million (2013: £3,6
million). Exceptional items contributed £1,7 million (2013: £2,8 million) to
a net profit for the year of £7,3 million (2013: £6,5 million).
Moorgarth achieved an operating profit of £3,2 million compared to £2,4
million in the corresponding 12 months and, after two years of losses,
reported a net profit of £0,4 million (2013: a net loss of £2,6 million).
Where the net loss in 2013 was caused mainly by a downward adjustment of
£2,8 million in the value of its property portfolio, it was buoyed this time
by a valuation increase of £0,2 million which also reflects the steady
improvement in the UK property market.
Reward in its third full year of operation continued to build on the success
of the previous two years by increasing turnover by 43,3% to £4,3 million
(2013: £3 million) and net profit by 44,4% to £1,3 million (2013: £0,9
million).
Tradehold's auditors, PriceWaterhouseCoopers Inc., audited the results and
their unqualified report is available at Tradehold's registered office.
BUSINESS ENVIRONMENT
The UK economy has been improving steadily throughout 2013 to the extent
where it is expected to grow by 2,9% in 2014 which, according to the World
Monetary Fund, would make it the fastest growing economy of the G7 nations.
Inflation, which has dropped to a four-year low of 1,7% has been well under
control throughout the reporting period while interest rates were held at a
record low of 0,5%. All these positive indicators have led to a growing
confidence in the economy which is reported to be now at its highest peak
since August 2007. Consumer spending is increasing, with retail sales up
2,4% in the month of February. All sectors of the property market have also
benefited from the economic recovery. However, money for development has
remained tight, with short-term funding in particular becoming increasingly
difficult to obtain from High Street banks.
Moorgarth
Moorgarth continued during the year to dispose of non-core assets to allow
it to focus on larger, more centrally located investments, particularly
regionally dominant shopping centres. In line with this new acquisition
strategy, the Group in November 2013 bought the 37 000 m² Market Place
shopping centre in Greater Manchester for £23,5 million thereby increasing
the value of its portfolio by 46%. The centre, which cost £105 million to
build, has suffered a decline in recent years and Moorgarth will be
extending its facilities substantially.
Moorgarth has sufficient own resources and arranged facilities to support
growth projections.
Moorgarth, whose properties are located mainly in Northern England and
Scotland, during the year made its first foray into Central London when it
agreed terms to acquire two smaller office buildings. Both these
transactions were completed after year-end, giving it a presence in the
City, an objective pursued by management for some time. Rental growth in the
office sector in Central London is expected to grow by 5,6% until 2017
reflecting the shortage of supply.
Moorgarth also made excellent progress during the year in filling void space
in some of its properties by refurbishing these to an acceptable standard.
Reward
During the year to February 2014, the operating units of Reward Investments
Limited - Reward Capital and Reward Commercial Finance - continued to build
on the solid foundation established during the previous 12 months. The two
businesses focus in the one instance on short-term, asset-backed loans to
small and medium-sized companies and, in the other, on invoice-discounting
facilities to similar-sized businesses.
Market conditions continued to favour Reward, especially in the case of the
short-term loan facilities offered by Reward Capital - which has little
direct competition - as such funding remains difficult to obtain from High
Street banks. At the same time Reward Commercial Finance operates in an
industry which is also on a substantial growth curve.
To drive new business, Reward, which operates primarily in West Yorkshire,
intends extending its geographic reach to Greater Manchester, one of the
largest regional markets outside London.
Despite its aggressive growth during the year, no bad debt was incurred due
mainly to the very prudent lending policies management adhered to.
COMMENTS ON THE RESULTS
Exceptional items
Exceptional items are made up as follows: 2014 2013
(£million)
Fair value adjustment of UBS AG shares 1,7 1,0
Fair value adjustment of Instore limited shares - 1,8
Total 1,7 2,8
DIVIDEND DISTRIBUTION
On 27 May 2014, the board approved and declared a final gross dividend of
5.5 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, 27 May 2014
Last date to trade cum dividend Thursday, 12 June 2014
Date trading commences ex dividend Friday, 13 June 2014
Record date Friday, 20 June 2014
Date of payment to shareholders Monday, 23 June 2014
Share certificates may not be dematerialised or rematerialised between
Friday, 13 June 2014 and Friday, 20 June 2014, 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 4.675 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 from DT is provided for in the ITA in respect of foreign
dividends paid to a South African company and to a non-resident to the
extent that it is paid in respect of listed shares, provided certain
administrative procedures are complied with. The ITA further provides for
an exemption from income tax 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.
DEVELOPMENTS AFTER YEAR-END
On 3 March 2014 ("Acquisition Date"), Tradehold acquired the total issued
share capital as well as all shareholders' loans in Mettle Investments
Proprietary Limited ("Mettle"). Mettle is an established financial services
business with considerable synergies between its operations and those of
Reward Capital and Reward Commercial Finance. The initial purchase
consideration, limited to R32 million, is dependent on Mettle's profit after
tax for the year ending 28 February 2015 and its net asset value at
28 February 2015. The additional purchase consideration, limited to
R38 million, is dependent on Mettle's profit after tax for the year ending
29 February 2016.
The purchase consideration will be settled in full through the issue of new
Tradehold shares. The excess of the purchase consideration over the net
assets acquired will be recognised as goodwill at the Acquisition Date.
The results of operations for Mettle will be included in Tradehold's
consolidated financial statements from the Acquisition Date.
The net asset value of Mettle as on the Acquisition Date is R35 million.
OUTLOOK
With the turnaround in the British economy and the growing confidence in
both the business community and among ordinary consumers, we believe
Tradehold and its subsidiaries are well-placed to benefit from the improving
market sentiment. Moorgarth's new acquisition strategy and the proven asset-
management capabilities of its senior team indicate a potentially strong
performance by Tradehold's largest investment in the new financial year.
The board is equally convinced of the growth potential of Reward's two LLPs.
The activities of these two businesses complement each other well, with
Reward Commercial Finance providing the needed consistent cash flow. With
the appointment of several key executives to bolster Reward's expansion
plans in the new financial year we expect the business to further build on
its excellent performance in the 2014 reporting period.
We also believe the acquisition of Mettle will further enrich the fabric of
Tradehold through the entrepreneurial flair of its management and the
development potential it offers.
This outlook 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 2014, are prepared in accordance with the requirements of the JSE
Limited Listings Requirements for preliminary reports, and the requirements
of the Companies Act, 2008 (Act No 71 of 2008) applicable to summary
financial statements. The Listings Requirements require preliminary reports
to be prepared in accordance with the framework concepts and the measurement
and recognition requirements of International Financial Reporting Standards
("IFRS") and the SAICA Financial Reporting Guides as issued by the
Accounting Practices Committee and Financial Pronouncements as issued by the
Financial Reporting Standards Council and to 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 2014 from which the summary consolidated
financial statements for the 12 months to 28 February 2014 were derived, are
in terms of IFRS and are consistent with those 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, BCom.
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.
C H Wiese
Chairman
Malta
27 May 2014
SUMMARY CONSOLIDATED FINANCIAL STATEMENTS
STATEMENT OF COMPREHENSIVE INCOME
Audited Audited
12 months to 12 months to
(£'000) 28/02/14 28/02/13
Revenue 12 559 10 095
Trading profit 6 143 3 561
Exceptional items 1 741 2 823
Operating profit 7 884 6 384
Finance income 157 257
Finance cost (245) (63)
Profit before taxation 7 796 6 578
Taxation 514 84
Profit for the year 7 282 6 494
Other comprehensive income
Currency translation differences 61 (47)
Total comprehensive income for the year 7 343 6 447
Profit attributable to:
Owners of the parent 6 392 6 527
Non-controlling interest 890 (33)
7 282 6 494
Total comprehensive income attributable to:
Owners of the parent 6 453 6 480
Non-controlling interest 890 (33)
7 343 6 447
Earnings per share (pence): basic and diluted
- before exceptional items 3,4 2,7
- basic 4,6 4,7
- headline earnings 4,5 6,4
Number of shares for calculation of earnings
per share ('000) 138 567 138 476
STATEMENT OF FINANCIAL POSITION
Audited Audited
(£'000) 28/02/14 28/02/13
Non-current assets 77 873 51 900
Property, plant and equipment 5 337 5 524
Investment properties 72 536 46 341
Deferred taxation - 35
Current assets 50 274 51 136
Financial assets 8 130 10 238
Trade and other receivables 16 952 10 714
Cash and cash equivalents 25 192 30 184
Total assets 128 147 103 036
Equity 99 939 93 793
Ordinary shareholders' equity 99 327 93 465
Non-controlling interest 612 328
Non-current liabilities 17 627 88
Preference share capital 51 51
Long-term borrowings 17 444 -
Deferred taxation 132 37
Current liabilities 10 581 9 155
Short-term borrowings 6 537 6 706
Other current liabilities 4 044 2 449
Total equity and liabilities 128 147 103 036
STATEMENT OF CASH FLOWS
Audited Audited
12 months to 12 months to
(£'000) 28/02/14 28/02/13
Cash flows from operating activities 5 678 3 716
Cash flows utilised by investing activities (27 394) (12 720)
Acquisition of investment properties (25 973) (8 093)
Acquisition of property, plant and equipment (109) (120)
Proceeds on disposal of investment properties - 494
Proceeds on disposal of property, plant and equipment 17 -
Proceeds on disposal of financial asset 1 780 -
Reward loans issued (35 812) (20 633)
Reward loans repaid 32 703 15 632
Net cash flow (21 716) (9 004)
Cash flows from financing activities 16 663 238
Proceeds from borrowings 17 363 105
Proceeds from ordinary share issue - 133
Drawings (700) -
Net decrease in cash and cash equivalents (5 053) (8 766)
Effect of changes in exchange rate 61 (47)
Cash and cash equivalents at beginning of the year 30 184 38 997
Cash and cash equivalents at end of the year 25 192 30 184
STATEMENT OF CHANGES IN EQUITY
Audited Audited
12 months to 12 months to
(£'000) 28/02/14 28/02/13
Balance at beginning of the year 93 793 87 213
Proceeds from ordinary share issue - 133
Drawings (700) -
Other 3 -
Dividends distributed to shareholders (500) -
Total comprehensive income for the year 7 343 6 447
Balance at end of the year 99 939 93 793
SUPPLEMENTARY INFORMATION
Audited Audited
12 months to 12 months to
(£'000) 28/02/14 28/02/13
1. Depreciation for the year 297 333
2. Capital expenditure for the year 26 082 8 213
3. Calculation of headline earnings
Net profit 6 392 6 527
(Gain)/shortfall on revaluation of investment
properties (222) 2 800
Profit on sale and scrapping of property,
plant and equipment and investment properties (17) (44)
Non-controlling interest 33 (413)
6 186 8 870
Audited Audited
(£'000) 28/02/14 28/02/13
4. Number of shares in issue
(net of treasury shares) ('000) 138 567 138 567
5. Net asset value per share (pence) 71,7 67,5
6. Financial assets
Listed investments at fair value 8 130 6 657
Unlisted investments at fair value - 3 581
8 130 10 238
7. Contingent liabilities 480 -
SEGMENTAL ANALYSIS
Trading Total
(£'000) Revenue profit/(loss) assets
Twelve months to 28 February 2014
(audited)
Property - retail 4 559 3 274 64 324
- commercial 610 167 6 929
- offices 290 (12) 4 225
- leisure 2 839 35 6 541
- other - 122 1 101
Short-term lending 4 261 3 137 15 096
Treasury - (580) 29 931
12 559 6 143 128 147
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
There was no intersegment revenue, resulting in all revenue being received
from external customers.
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