Wrap Text
Audited Results for the 12 months to 28 February 2015
TRADEHOLD LIMITED
(Registration number: 1970/009054/06)
("Tradehold" or "the Group")
Incorporated in the Republic of South Africa
JSE Share code: TDH ISIN: ZAE000152658
JSE Preference Share code: TDHP ISIN: ZAE000201166
Tradehold Limited - Audited results for the 12 months to 28 February 2015
Although listed on the JSE, the bulk of the operating assets of Tradehold
Limited, an investment holding company, are located in the UK. These assets
consist primarily of a 95% holding in the property-owning Moorgarth group of
companies and an indirect holding, through Reward Investments Limited, of
70% in the two operating Reward LLP's, Reward Capital and Reward Commercial
Finance. By far the largest of Tradehold's investments is in Moorgarth which
manages a £116 million portfolio of retail, commercial and industrial
buildings. In the course of the year, Tradehold also acquired the total
issued share capital of the South African financial services business Mettle
whose operations show considerable synergies with those of the two Reward
companies.
FINANCIAL PERFORMANCE
By the end of February 2015, Tradehold had emerged as a substantially
changed and enlarged business, when compared to a year ago, growing its
total assets by 61.4% to £207 million. Its UK property interests held
through Moorgarth are - and will for the foreseeable future continue to be -
the dominant component of its business. However, in the past year it also
extended its property interests to Africa through the establishment of
Tradehold Africa and the acquisition, to be finalised in the new financial
year, of the bulk of the property holdings of the Collins Group in Africa
(outside South Africa) and in the UK. Independent of those acquisitions,
Tradehold Africa has already embarked on major development projects with
local partners. Tradehold Africa made no contribution to revenue for the
year as the company is still in its investment phase.
During the reporting period, Tradehold expanded its property holdings in the
UK, resulting in an increase in revenue of 65.1% to £20.7 million (2014:
£12.6 million). Operating profit increased by 39% from £7.9 million to £11
million while net profit for the year stood 22.5% higher at £7.8 million
(2014: £6.4 million). Core headline earnings per share (as defined by
entity) were 5.4 pence (2014: 3.3 pence).
BUSINESS ENVIRONMENT
In 2014, the British economy grew at its fastest pace in nine years, with
GDP expanding by 2.8%, according to the UK's Office for National Statistics.
The positive climate of the benign economic environment - low inflation, low
interest rates, rising employment and stabilising wages - stimulated
business. It also boosted consumer confidence to reach its highest level in
12 years. The UK's powerful CBI business lobby reported that economic output
during the year accelerated at the fastest rate since the early stages of
the financial crisis in 2007. Buoyed by factors such as these, the
commercial and retail property market strengthened further, with domestic
and international investment spreading out from London into regional markets.
Rentals seem to have bottomed out in the more secondary markets while there
are positive signs of an increase in the demand for space.
PROPERTY
Moorgarth
In the past year the value of Moorgarth's property portfolio increased by
49.9% from £77.4 million to £116 million. It generated an operating profit
of £8.5 million (2014: £3.5 million) and its contribution to net profit of
the group was £7 million (2014: £3.3 million). With the steady improvement
in the British economy, the company was able to secure a number of
significant lettings to enhance the profile of its assets in the market.
During the reporting period Moorgarth acquired six new properties at a total
cost of £39.1 million. Of the six, five are located in central London while
the sixth, in Leeds, serves as the Group's UK headquarters. Of the five
London properties, four are office buildings and one a block of residential
units. One of the office buildings offers opportunities for redevelopment
which would double the size of the present lettable area. Moorgarth's new
serviced office business operates in two of these buildings.
The extensive refurbishment of the Market Place regional shopping centre in
Greater Manchester is expected to be completed by December this year.
Substantial interest is being received from leading retailers for space in
the centre and several new lettings have been concluded.
Tradehold Africa
Tradehold Africa identifies real estate investment opportunities on the
African continent outside South Africa, increasingly a focus area for
investors seeking higher returns than those delivered in the developed
economies. As part of its expansion programme, Tradehold Africa is currently
implementing an agreement with Collins Group of KwaZulu-Natal to acquire the
bulk of its commercial property holdings in Namibia, Zambia, Botswana and
Mozambique, in addition to those in the UK. The integration of these
properties into the Tradehold portfolio is now underway.
The company has also identified other opportunities to either develop or
acquire commercial properties in various African countries. In Maputo in
Mozambique it is developing, with local partners and at a cost of £30.5
million, executive accommodation for the United States government and the
multinational Anadarko Petroleum Corporation on a medium- to long-term lease
basis. In Namibia, it will be a partner in a development pipeline of £97.9
million which will be invested in the next three years.
FINANCIAL SERVICES
Reward
In the year to February 2015, the operating units of Reward Investments
Limited - Reward Capital, which focuses on short-term, asset-backed loans to
small and medium-sized businesses, and Reward Commercial Finance which
offers bespoke invoicing-discounting facilities to similar-sized ones -
continued to mature as businesses, generating revenue of £5.1 million (2014:
£4.3 million) produced operating profit of £3.4 million (2014: £3.1 million).
Its contribution to net profit of the group was £2.2 million (2014: £2
million). The two businesses continued recruiting key personnel with risk
management skills in anticipation of future expansion in both products and
geographical coverage.
The reluctance of High Street banks to provide short-term overdraft
facilities continues to ensure strong demand for the loan facilities offered
by Reward Capital. Whilst the last 12 months saw a number of new entrants
into the market operating in a similar space and putting some pressure on
margins, Reward Capital again proved itself capable of growing both turnover
and profit. Reward Commercial Finance operates in a growing, yet highly
competitive industry but where innovative solutions are still in demand.
Internet-based funders, the emergence of "challenger" banks and the
increasing prevalence of peer-to-peer funders, continue to transform the
lending landscape in the UK.
Mettle
In its first year as part of the Tradehold group, Mettle produced an
operating profit of £1.1 million and its contribution to net profit of the
group was £0.4 million. Its services and product offerings include invoice
discounting, incremental housing finance, corporate finance, outsourced
credit administration in the asset finance industry, outsourced treasury
services and solar energy solutions. Members of its senior management have
been brought into the group structure and now fill the positions of joint
chief executive and group financial director.
COMMENTS ON THE RESULTS
Fair value adjustments on non-core assets are:
(£'million) Audited Audited
12 months 12 months
to 28/02/15 to 28/02/14
Fair-value adjustment of UBS AG shares (0.9) 1.7
DIVIDEND DISTRIBUTION
On 29 May 2015, the board approved and declared a final gross dividend of
6 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 Friday, 29 May 2015
Last date to trade cum dividend Friday, 19 June 2015
Date trading commences ex dividend Monday, 22 June 2015
Record date Friday, 26 June 2015
Date of payment to shareholders Monday, 29 June 2015
Share certificates may not be dematerialised or rematerialised between
Monday, 22 June 2015, and Friday, 26 June 2015, 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. Shareholders who are not
exempt from the DT will therefore receive a dividend of 5.1 cents net of DT.
The company has 156 132 877 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.
LISTING OF "A" PREFERENCE SHARES
At the end of January 2015, Tradehold undertook a capital raising to
facilitate the growth of its property portfolio in the UK and to fund its
investment in commercial and retail property in sub-Saharan Africa
(excluding South Africa). This step is in line with the board's strategy
to grow the net asset value of the Group. The capital raising programme was
implemented through the listing, on 5 February 2015, of 65 million
cumulative, redeemable "A" preference shares on the JSE at an issue price
of R10 a share, raising £35.7 million.
SHARE ISSUE
On 15 April 2014 Tradehold issued 2 666 666 shares to five key management
personnel on full recourse loan accounts, for a total consideration of
R31 999 992. On 14 July 2014 Tradehold issued 14 366 844 shares to five
investors for cash, in terms of a special placement, for a total
consideration of R207 263 192.
CAPITAL COMMITMENTS
Capital commitments contracted but not provided for at year-end are
£12,265,000 principally relating to property development in Mozambique,
to be funded by long term borrowings (Standard Bank).
Tradehold and Collins Property Projects Proprietary Limited ("Collins")
entered into an agreement on 11 June 2014 whereby Tradehold will acquire a
portfolio of commercial property assets in Botswana, Zambia, Namibia,
Mozambique and the United Kingdom from Collins and its affiliates, subject
to the fulfilment of certain conditions. Collins and its affiliates will use
the proceeds of such disposal to subscribe for ordinary shares in Tradehold.
At the reporting date, all the conditions pursuant to the agreement had not
yet been fulfilled. It is expected that the acquisitions will take place
within the 2016 financial year following the fulfilment of such conditions.
OUTLOOK
The board expects the growth of the past financial year to continue in
2015/16. Much of what is now on the drawing board is intended for the longer
term; some of it will, however, also come to fruition in the months ahead
such as the acquisition of properties in Southern Africa and the UK to the
value of some £22.7 million once the transaction with Collins Group is
finalised.
The capital raised in the South African market at the end of the financial
year is clear evidence of the Group's determination to grow its asset base
in both the UK and Africa. In the UK the income stream generated by the new
properties in London will start making a meaningful contribution to rental
income while the renovations to our Market Place shopping complex, to be
completed towards the end of the year, will enhance the desirability of the
address for retailers in the Greater Manchester area.
We are confident that the broad-based economic revival in the UK will retain
its momentum following the re-election of the Tory government in early May.
We are also convinced that our financial services arm will continue to
flourish as it extends its services and enlarges its client base.
ACCOUNTING POLICY
The summary consolidated financial statements are prepared in accordance
with the requirements of the JSE Limited Listings Requirements for abridged
reports, and the requirements of the Companies Act, 2008 (Act No 71 of 2008)
applicable to summary financial statements.
The Listings Requirements require abridged 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 from
which the summary consolidated financial statements were derived, are in
terms of International Financial Reporting Standards and are consistent with
those accounting policies applied in the preparation of the previous
consolidated annual financial statements, except for the adoption of the
following new standard, amendments to publicised standards and
interpretations that became effective for the current reporting period
beginning on 1 March 2014:
- Amendments to IAS 39, 'Novation of derivatives and continuation of hedge
accounting'.
The amendment provides guidance on whether an entity is required to
discontinue hedging when the derivatives which are designated hedging
instruments are novated to a central party.
- Amendments to IAS 36, 'Recoverable amount disclosures for non-financial
assets'.
The amendment brings the disclosures for impaired assets whose recoverable
amount is fair value less cost to sell in line with the disclosure
requirements of IFRS 13,
'Fair value measurements'. - Amendments to IAS 32, 'Offsetting financial
assets and liabilities'.
Classification of certain aspects concerning the requirements for offsetting
financial assets and liabilities.
Core headline earnings
Core headline earnings exclude once off and non-operating items. Management
believes that it is a useful measure for shareholders of the group's
sustainable operating performance. However, this is not a defined term under
IFRS and may not be comparable with similarly titled measures reported by
other companies.
AUDIT OPINION
These summary consolidated financial statements for the year ended 28
February 2015 have been audited by PricewaterhouseCoopers Inc., who
expressed an unmodified opinion thereon. The auditor also expressed an
unmodified opinion on the annual financial statements from which these
summary consolidated financial statements were derived.
A copy of the auditor's report on the summary consolidated financial
statements and of the auditor's report on the annual consolidated financial
statements are available for inspection at the company's registered office,
together with the financial statements identified in the respective
auditor's reports.
The auditor's report does not necessarily report on all of the information
contained in this announcement/financial results. Shareholders are therefore
advised that in order to obtain a full understanding of the nature of the
auditor's engagement they should obtain a copy of the auditor's report
together with the accompanying financial information from the issuer's
registered office.
PREPARATION OF FINANCIAL RESULTS
The preparation of the financial results was supervised by the group
financial director, Karen Nordier BAcc, BCompt Hons, CA(SA).
REPORTING CURRENCY
As the operations of most 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 K L Nordier
Chairman Director
Malta
29 May 2015
Sponsor
Bravura Capital (Pty) Ltd
STATEMENT OF COMPREHENSIVE INCOME
Audited Audited
12 months to 12 months to
(£'000) 28/02/15 28/02/14
Revenue 20 731 12 559
Trading profit 12 012 6 146
Gain/(loss) on disposal/(purchase) of investments 1 117 (3)
Impairment of goodwill (1 288) -
Fair value (loss)/gain through profit or loss (886) 1 741
Operating profit 10 955 7 884
Finance income 809 157
Finance cost (2 289) (245)
Profit from associated companies 165 -
Profit before taxation 9 640 7 796
Taxation 605 514
Profit for the year 9 035 7 282
Other comprehensive income
Items that may be subsequently reclassified to
profit or loss
Net fair value loss on hedging instruments
entered into for cash flow hedges (549) -
Currency translation differences (161) 61
Total comprehensive income for the year 8 325 7 343
Profit attributable to:
Owners of the parent 7 832 6 392
Non-controlling interest 1 203 890
9 035 7 282
Total comprehensive income attributable to:
Owners of the parent 7 259 6 453
Non-controlling interest 1 066 890
8 325 7 343
Earnings per share (pence): basic
- basic 5,1 4,6
- headline earnings 3,3 4,5
- core headline earnings (as defined by entity) 5,4 3,3
Number of shares for calculation of earnings
per share ('000) 153 143 138 567
Earnings per share (pence): diluted
- diluted 5,0 4,6
- headline earnings 3,3 4,5
- core headline earnings (as defined by entity) 5,4 3,3
Number of shares for calculation of diluted earnings
per share ('000) 155 341 138 567
STATEMENT OF FINANCIAL POSITION
Audited Audited
(£'000) 28/02/15 28/02/14
Non-current assets 133 399 77 873
Property, plant and equipment 5 186 5 337
Investment properties 120 552 72 536
Goodwill 2 306 -
Investments in associates 1 544 -
Deferred taxation 261 -
Trade and other receivables 1 645 -
Loans receivable 1 905 -
Current assets 74 138 50 274
Financial assets 7 271 8 130
Loans to associates 550 -
Trade and other receivables 31 969 16 952
Cash and cash equivalents 34 348 25 192
Total assets 207 537 128 147
Equity 122 328 99 939
Ordinary shareholders' equity 122 244 99 327
Non-controlling interest 84 612
Non-current liabilities 63 901 17 627
Preference share capital 34 753 51
Long-term borrowings 19 792 17 444
Derivative financial instruments 2 314 -
Deferred revenue 4 818 -
Contingent consideration 2 064 -
Deferred taxation 160 132
Current liabilities 21 308 10 581
Short-term borrowings 12 529 6 537
Bank overdrafts 206 -
Other current liabilities 8 573 4 044
Total equity and liabilities 207 537 128 147
STATEMENT OF CASH FLOWS
Audited Audited
12 months to 12 months to
(£'000) 28/02/15 28/02/14
Cash flows from operating activities 9 034 5 678
Cash flows utilised by investing activities (52 001) (27 394)
Acquisition of investment properties (50 723) (25 973)
Acquisition of property, plant and equipment (389) (109)
Proceeds on disposal of investment properties 10 044 -
Proceeds on disposal of property, plant and equipment 39 17
Business combinations, net of cash acquired 625 -
Net proceeds on disposal of financial asset (181) 1 780
Dividends received from associates 95 -
Loans advanced to associate undertaking (396) -
Loans and advances - issued (55 461) (35 812)
Loans and advances - repaid 44 346 32 703
Net cash flow (42 967) (21 716)
Cash flows from financing activities 52 118 16 663
Proceeds from borrowings 7 549 17 444
Repayment of borrowings (1 095) (81)
Proceeds from ordinary share issue 11 276 -
Share buy-back from minority shareholder (187) -
Proceeds from preference share issue 35 674 -
Redemption of preference shares (216) -
Dividend to non-controlling interests (883) (700)
Net increase/(decrease) in cash and cash equivalents 9 151 (5 053)
Effect of changes in exchange rate (201) 61
Cash and cash equivalents at beginning of the year 25 192 30 184
Cash and cash equivalents at end of the year 34 142 25 192
NON CASH TRANSACTION
During the period under review the following non cash transactions took
place:
- Purchase of the subsidiary Mettle Investments (Pty) Ltd
Refer to 12.1 for detail of the transaction
- Tradehold Limited share issues
On 15 April 2014 2,666,666 Tradehold Limited shares were issued to key
persons on loan account.
- Sale of subsidiary Lendcor (Pty) Ltd
Refer to 12.4 for detail of the transaction
STATEMENT OF CHANGES IN EQUITY
Audited Audited
12 months to 12 months to
(£'000) 28/02/15 28/02/14
Balance at beginning of the year 99 939 93 793
Proceeds from ordinary share issue 13 614 -
Transactions with owner of the entity (624) -
Distributions to minorities (883) (700)
Disposal of subsidiary (280) -
Acquisition of subsidiary 211 -
Contingent consideration recognised
directly in equity 2 453 -
Dividends distributed to shareholders (427) (500)
Profit for the year 9 035 7 282
Other comprehensive income for the year (710) 64
Balance at end of the year 122 328 99 939
SUPPLEMENTARY INFORMATION
Audited Audited
12 months to 12 months to
(£'000) 28/02/15 28/02/14
1. Depreciation for the year 372 297
2. Capital expenditure for the year 51 112 26 082
3. Calculation of headline earnings
Net profit 7 832 392
Gain on revaluation of investment properties (2 156) (222)
Profit on disposal of investment properties (1 359) -
Gain from bargain purchase (9) -
(Profit)/loss on disposal/purchase of
investment (1 117) 3
Impairment of goodwill 1 288 -
Loss/(profit) on disposal of property,
plant and equipment 134 (17)
Non-controlling interest and tax 508 33
5 121 6 189
4. Calculation of core headline earnings
Headline profit 5 121 6 189
Gain on revaluation of investment properties 2 156 222
Profit on disposal of investment properties 1 359 -
Legal fee income (782) -
Loss/(profit) on fair value adjustment of
UBS shares 886 (1 741)
Non-controlling interest and tax (410) (33)
8 330 4 637
5. Number of shares in issue ('000) 156 133 138 567
6. Net asset value per share (pence) 78,3 71,7
7. Financial assets
Listed investments at fair value 7 271 8 130
8. Contingent liabilities 480 480
9. Related parties
During the year under review, in the ordinary course of business,
certain companies within the Group entered into transactions with each
other. All these intergroup transactions are similar to those in the
prior year and have been eliminated in the annual financial statements
on consolidation. For further information, refer to the audited annual
financial statements.
10. Events after the reporting period
On 22 April 2015 Inception Holdings S.ar.l. entered into a £12,094,423
contract with McLaren Construction Limited for the refurbishment of
the Market Place Shopping Centre in Bolton; the central part of the
project is the construction of a new 9 screen cinema.
Moorgarth Holdings (Luxembourg) S.ar.l. ("Moorgarth") has entered into
a joint arrangement with Texton Property Fund Limited ("Texton")
whereby Moorgarth will acquire 50% of a newly incorporated special
purpose vehicle, Inception (Reading) S.ar.l. ("Inception"). Inception
will then be used as the vehicle to acquire a well-located retail
shopping centre ("Broad Street Mall") in Reading, England, with an
idependent gross valuation of £63 million. The effective date of the
acquisition will be on or about 1 June 2015.
11 Goodwill
Audited Audited
28/02/15 28/02/14
11.1 Cost 3 594 -
Accumulated impairment losses (1 288) -
2 306 -
11.2 Cost
Balance at beginning of year - -
Acquired through business combinatio 3 566 -
Foreign currency translation movements 28
Balance at end of year 3 594 -
11.3 Accumulated impairment losses
Balance at beginning of year - -
Impairment losses recognised in the year (1 288) -
(1 288) -
The carrying amount of the SA short-term lending segment has been
reduced to its recoverable amount through recognition of an
impairment loss against goodwill. This loss is shown in the income
statement.
11.4 Allocation of goodwill to cash-generating units
Management reviews the business performance based on geography and
type of business. It has identified the United Kingdom, South Africa
and Africa as the main geographies. There are property and short-term
lending operating segments in the UK, mainly short-term lending in SA
and property -residential in Africa. Goodwill is monitored by
management at the operating segment level. The following is a
summary of the goodwill allocation for each applicable operating
segment:
2015 Opening Additions Impairment Closing
SA short-term lending - 3 575 (1 288) 2 287
Africa property - residential - 19 - 19
Total - 3 594 (1 288) 2 306
As the goodwill allocated to the Africa property - residential
segment is negligible to the group operations, the impairment test
was focused on the SA short-term lending segment. The recoverable
amount has been determined based on value-in-use calculations. These
calculations use pre-tax cash flow projections based on financial
budgets approved by management covering a five-year period. Cash flows
beyond the five-year period are extrapolated using the estimated
growth rates stated below.
Audited Audited
28/02/15 28/02/14
The key assumptions, long term growth
rate and discount rate used in the
value-in-use calculations are as follows:
Operating profit margin (% of revenue) 25,14% -
Operating profit growth rate 8,00% -
Sustainable growth rate 2,10% -
Pre-tax discount rate 15,49% -
An impairment charge of £1.288million arose in the SA short-term
lending segment during the course of the year, resulting in the
carrying amount being written down to its recoverable amount. The
impairment charge arose as a result of the disposal of 40.08% of
Lendcor (Pty) Limited during the year.
The sensitivity of the recoverable amount of the CGU to changes in
the principal assumptions is:
All amounts in £'000
Key assumption Increase Decrease
by 1% by 1%
Operating profit margin (% of revenue) 330 (327)
Operating profit growth rate 317 (307)
Sustainable growth rate 430 (370)
Pre-tax discount rate (596) 696
12 Business Combinations
12.1 Mettle Investments Proprietary Limited
On 3 March 2014, the group acquired 100% of the share capital of
Mettle Investments Proprietary Limited ("Mettle"), a South African
financial services business focusing on asset-backed short-term
lending, incremental housing finance and credit administration
services, for a consideration of £4,271,000.
As a result of this acquisition, the Group has acquired a skilled
and entrepreneurial management team, and is expected to expand its
financial services operations in Africa and the United Kingdom.
The goodwill arising from this acquisition is attributable to
economies of scale expected from combining the acquired management
skills with those of Reward Capital and Reward Commercial Finance for
pursuance of expansion opportunities in both Africa and the United
Kingdom.
The following table summarises the purchase price allocation for the
Mettle acquisition, and the amounts of the assets acquired and
liabilities assumed recognised at the acquisition date.
Audited Audited
12 months to 12 months to
28/02/15 28/02/14
Total consideration 4 271 -
Initial consideration 2 453 -
Additional contingent consideration 1 818 -
Recognised amounts of identifiable assets
acquired and liabilities assumed at provisional
fair value
Total assets 5 374 -
Loan receivables 4 028 -
Investment in associates 392 -
Loans due by associates 136 -
Trade receivables 434 -
Cash and cash equivalents 142 -
Other 242 -
Total liabilities (4 138) -
Borrowings (3 795) -
Other (343) -
Total identifiable net assets 1 236 -
Non-controlling interests (204) -
Goodwill 3 239 -
Total consideration 4 271 -
Contingent consideration (4 271) -
Cash outflow from purchase - -
Cash acquired 142 -
Net cash (out)/inflow on acquisition 142 -
Acquisition-related cost are immaterial and were charged to
administrative expenses in the consolidated income statement of the
company for the year ending 28 February 2014.
The initial and contingent consideration arrangement requires the
group to pay the former owners of Mettle in full through the issue of
new Tradehold Limited shares in two separate tranches.
The initial consideration is 3,200,000 shares valued at £2.4 million
based on the Tradehold Limited closing share price on the transaction
date.
The additional contingent consideration, limited to £2.1 million, is
dependent on Mettle's profit after tax for the year ending 29 February
2016, and its net asset value at 29 February 2016.
The potential discounted amount of all future payments that the group
could be required to make under this arrangement is £4,696 million.
The fair value of the contingent consideration is a maximum of
£2.243 million, and was estimated based on assumed profit after tax in
Mettle of R11.7 million for the year ending 29 February 2016. This
profit is based on management's forecast at the date of acquisition
and to date there has been no change in this forecast.
Every R1 of profit after tax below R11.67 million for 29 February 2016,
will decrease the liability by R6, with a similar credit to the income
statement for the year ending 29 February 2016.
The fair value of loan receivables included in total assets is
R72,705,891. The gross contractual amount for trade receivables due is
R80,735,335 , of which R8,029,444 is expected to be uncollectable.
The revenue included in the consolidated income statement for the
current year contributed by Mettle was £3.4 million. Mettle also
contributed profit after tax and controlling interest of £0.4 million
for the current year.
12.2 Cognis 1, Limitada
On 29 August 2014, the group effectively acquired 85% of the share
capital of Cognis 1, Limitada ("Cognis"), a Mozambique registered
property holding company.
The total consideration was 1,350,000 Meticais.
The group's effective shareholding in Cognis is 60%.
Cognis owns land in Maputo, Mozambique with development rights for a
large residential development comprising 18 buildings with 78
residential units, adjoining the American, French and Portuguese
private schools.
The following table summarises the purchase price allocation for the
Cognis acquisition, and the amounts of the assets acquired and
liabilities assumed recognised at the acquisition date.
Recognised amounts of identifiable assets acquired and liabilities
assumed at provisional fair value
Total assets 4 837 -
Investment property 2 845 -
Loans receivable 856 -
Trade receivables 726 -
Cash and cash equivalents 410 -
Total liabilities (4 818) -
Deferred revenue (4 818) -
Total identifiable net assets 19 -
Non-controlling interest (7) -
Goodwill 16 -
Total consideration paid 28 -
Cash acquired 410 -
Net cash inflow on acquisition 382 -
Acquisition-related cost of Cognis are
immaterial and were charged to administrative
expenses in the consolidated income statement
for the year.
The fair value of loan receivables included
in total assets is £856,289.
The non-controlling interest has been
recognised as a proportion of net assets
acquired.
12.3 Acquisition of other subsidiaries
Mettle Investments (Pty) Ltd acquired
two former associates Mettle Administrative
Services for a total consideration of
£249,121 and Mettle Vehicle Finance for
£1, resulting in a goodwill of £160,932
and a bargain purchase gain of £8,676
respectively.
Net cash inflow on acquisition 97 -
Mettle Investments Proprietary Ltd
acquired 100% of the ordinary share
capital of Pointbreak M&A Proprietary
Limited for £108,639, of which £104,193
is contingent, resulting in a goodwill
of £146,891.
Net cash inflow on acquisition 7 -
Tradehold Africa Limited acquired 100%
of TC Mozambique Properties Limited,
70.6% of TC Maputo Properties Limited
and 100% of Tradehold Solar Limited
for £3,353, resulting in a goodwill of £3,190.
Net cash outflow on acquisition (3) -
12.4 Disposal of a subsidiary
On 30 November 2014, Mettle Investments
Proprietary Ltd effectively disposed
of 40.08% of Lendcor (Pty) Limited for
£996,900, thereby retaining an interest
of 39.92% and resulting in a loss of control.
The following table summarises the
assets and liabilities over which
control was lost:
Total assets (5 669) -
Loan receivables (5 072) -
Cash and cash equivalents (181) -
Other assets (416) -
Total liabilities 4 269 -
Borrowings 4 031 -
Other 238 -
Total net assets before non-controlling
interest (1 400) -
Non-controlling interest 280 -
Net assets over which control was lost (1 120) -
Consideration due 2 189 -
Deferred consideration 997 -
Fair value of retained equity interest 1 192 -
Profit on disposal 1 069 -
Net cash outflow on disposal of subsidiary (181) -
Consideration due (2 189) -
Deferred consideration 997 -
Fair value of retained equity interest 1 192 -
Cash disposed of (181) -
13 Fair value hierarchy
Effective 1 March 2009, the group adopted the amendment to IFRS 7
for financial instruments that are measured in the statement of
financial position at fair value. This requires disclosure of fair
value measurements by level of the following fair value measurement
hierarchy:
- Quoted prices (unadjusted) in active markets for identical assets or
liabilities (level 1).
- Inputs other than quoted prices included within level 1 that are
observable for the asset or liability, either directly (that is,
as prices) or indirectly (that is, derived from prices) (level 2).
- Inputs for the asset or liability that are not based on observable
market data (that is, unobservable inputs) (level 3).
Audited 28/02/15
Assets Level 1 Level 2 Level 3
Financial assets at fair value
through profit and loss
Trading securities 7 271 - -
Non-financial assets at
fair value through
profit or loss
Investment properties - - 120 552
Total assets 7 271 - 120 552
Liabilities
Financial liabilities at
fair value through profit and loss
Contingent consideration - - 2 064
Trading derivatives
Cross currency swap - 1 765 -
Derivatives used for hedging
Interest rate contracts - 549 -
Financial liabilities at
amortised cost
Preference shares 34 753 - -
Borrowings - - 32 321
Total liabilities 34 753 2 314 34 385
Audited 28/02/14
Assets Level 1 Level 2 Level 3
Financial assets at fair value
through profit and loss
Trading securities 8 130 - -
Non-financial assets at
fair value through profit or loss
Investment properties - - 72 536
Total assets 8 130 - 72 536
Liabilities
Financial liabilities at
fair value through
profit and loss
Contingent consideration - - -
Trading derivatives
Cross currency swap - - -
Derivatives used for hedging
Interest rate contracts - - -
Financial liabilities at
amortised cost
Preference shares - - -
Borrowings - - 23 981
Total liabilities - - 23 981
The fair value of financial instruments traded in active markets is
based on quoted market prices at year-end. A market is regarded as
active if quoted prices are readily and regularly available from an
exchange, dealer, broker, industry group, pricing service, or
regulatory agency, and those prices represent actual and regularly
occurring market transactions on an arm's length basis. The quoted
market price used for financial assets held by the group is the
current bid price.
The fair value of investment properties is based on rental yield
valuations at year-end. Should property yields increase by 1%, the
valuations would be approximately £15 million lower. Should the
property yields decrease by 1%, the valuations would be approximately
£21 million higher.
The fair value of financial liabilities for disclosure purposes is
estimated by discounting the future contractual cash flows at the
current market interest rate that is available to the group for
similar financial instruments.
There were no transfers between the levels 1 and 2 and 3 during
the year.
14 Fair value of financial instruments
The carrying amounts reported in the statement of financial position
approximate fair values. Discounted cash flow models are used for
trade and loan receivables. The discount yields in these models use
calculated rates that reflect the return a market participant
would expect to receive on instruments with similar remaining
maturities, cash flow patterns, credit risk, collateral and
interest rates.
SEGMENTAL ANALYSIS
Trading
(£'000) Revenue profit/(loss)
Twelve months to 28 February 2015 (audited)
Property - retail 6 900 5 447
- commercial 611 1 187
- offices 1 330 1 278
- leisure 3 057 111
- residential 87 209
- other 260 -
Short-term lending 8 486 4 456
Treasury - (676)
20 731 12 012
Twelve months to 28 February 2014 (audited)
Property - retail 4 559 3 274
- commercial 610 167
- offices 290 (12)
- leisure 2 839 35
- other - 125
Short-term lending 4 261 3 137
Treasury - (580)
12 559 6 146
There was no intersegment revenue, resulting in all revenue being received
from external customers.
Date: 29/05/2015 05:06:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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