Wrap Text
Summary of the audited consolidated results of the
Tradehold group for the 12 months to 29 February 2016
TRADEHOLD LIMITED
(Registration number: 1970/009054/06)
("Tradehold" or "the Group" or "the Company")
Incorporated in the Republic of South Africa
JSE Share code: TDH ISIN: ZAE000152658
TRADEHOLD LIMITED - Summary of the audited consolidated results of the
Tradehold group for the 12 months to 29 February 2016
Although listed on the JSE Limited (JSE), Tradehold has by far the greatest
part of its operating assets outside South Africa. These are located mostly
in the UK but also in Africa outside South Africa. For this reason - and to
avoid distortion caused by the fluctuating value of the rand - the Company
reports its results in pounds sterling. Its assets are in property and, to a
lesser extent, financial services. It holds its property assets in the UK -
the dominant component of its business - through a 95% interest in the
Moorgarth Group and in Africa through a 100% ownership in Tradehold Africa.
Its financial services interests are vested in companies in the UK and in
South Africa. In the UK it has, through Reward Investments, an indirect
holding of 70% in the two main operating Reward companies, Reward Capital
and Reward Invoice Finance, while in South Africa it wholly owns the multi-
faceted Mettle Investments.
FINANCIAL PERFORMANCE
In the year to February 2016 Tradehold continued its growth path of the
previous financial year, expanding its presence in the UK and certain
countries of Southern Africa outside South Africa. The portfolio of
properties in the UK and Southern Africa acquired from the Collins Group of
KwaZulu-Natal in the beginning of the financial year was successfully
integrated into Tradehold's overall operations. During the reporting period
the group's total assets grew by 54% to £319 million while revenue increased
by 38% to £28.7 million and total profit attributable to shareholders by 82%
to £14.3 million (2015: £7.8 million). Total profit includes a £4.6 million
gain in the fair-value adjustment of its investment properties.
Despite an increase of about 32 million in the number of shares in issue,
core headline earnings per share as defined by the entity, increased 20% to
6.5 pence from 5.4 pence and net asset value per share increased by 9% to
85.1 pence from 78.3 pence.
BUSINESS ENVIRONMENT
Economic growth in the UK, where the bulk of Tradehold's property interests
is located, slowed in 2015 from 2.8% in 2014 to 2.2% according to official
figures. This slowdown in GDP growth comes against the backdrop not only of
a waning global economy but also of the political uncertainty caused by the
imminent referendum on the country's EU membership. The reporting period saw
continued growth in real estate values across all sectors of the economy
with vacancy levels reducing markedly in all major cities.
None of the Southern African countries in which Tradehold Africa is
expanding its property interests is immune to the challenges facing
resource-dependent emerging economies and in the case of all of them growth
is expected to slow although from a relatively high base. Despite these
lower growth predictions and infrastructural restrictions, development
opportunities still abound.
PROPERTY
Moorgarth
In the year under review the value of Moorgarth's property portfolio
increased by 18.7% to £137.8 million or increased by 47% to £170 million if
50% (£32.7 million) of the joint venture asset (see below) is included.
Turnover grew 34% to £16.3 million or 47% to £18.3 million if 50% of the
joint venture turnover is included. Moorgarth's contribution (net profit
plus group interest) to total group net profit increased by 17% to £8.2
million (2015: £7 million). Non-core assets to the value of £4.2 million
were disposed of while the UK properties acquired through the Collins Group
transaction were integrated into Moorgarth's overall operations.
Among the highlights of the year was the acquisition of the Broad Street
Mall in Reading outside London for £65.4 million in a joint venture with the
South African based Texton Property Fund. The property, that is actively
managed by Moorgarth, is not only providing a strong income stream but also
large-scale residential and leisure development potential as part of the
existing complex. The first phase of the refurbishment of the existing mall
and office complex has now commenced and is due for completion by the end of
the calendar year.
The extensive refurbishment and expansion of The Market Place, the Company's
other regional shopping centre is well advanced and a number of strategic
lettings have been concluded. After acquiring several properties in central
London, where demand had been extremely high for a number of years,
management is holding back on further acquisitions given the prevailing
economic uncertainties for the British economy during the reporting period.
However, the Company did acquire, at a cost of £13.8 million, a leading
central London serviced-office provider, Ventia, combining its operations
with those of Moorgarth's The Boutique Workplace Company. Together they
operate 26 business centres offering more than 2 800 work stations.
In the light of the growth in the size of Moorgarth's operations a new
business unit, Moorgarth Property Management Services, was created to
provide all property management services in-house.
Tradehold Africa
Following on the acquisition in March 2015 of the Collins Group's property
assets in Namibia, Botswana, Zambia and Mozambique, a focus during the year
was to streamline and integrate the management of these properties in the
Tradehold Africa structure. Tradehold Africa's property portfolio was £62.8
million and its contribution to total group profits was £1.4 million for the
year under review.
The company's major residential development in Maputo, fully let on long-
term leases to the US Embassy in Mozambique and to the American oil
exploration company Anadarko, was close to completion at the end of the
reporting period. The first stage is to be handed over on 1 June and the
second phase on 1 September this year. Work on a 15 000m2 shopping centre in
Beira which is being built at a cost of US$44.6 million, will start in June
while construction on a 8 000m2 retail centre, a joint venture between
Atterbury and Tradehold Africa, in the northern port city of Pemba is also
imminent. Both developments will on completion be anchored by the Shoprite
Group.
During the year Safland, Tradehold's development partner in Namibia,
completed a 13 500m2 regional shopping centre in Rundu in the north of that
country while the construction of a 30 000m2 retail shopping mall in Walvis
Bay, developed in conjunction with Atterbury, is on schedule. The company is
at present developing a pipeline of mainly retail centres in places such as
Gobabis and Oshakati.
In Zambia the company is currently maximising the income from its properties
in the highly desirable location Cairo Road in the capital, Lusaka. Earlier
in the year, Tradehold's offer, in conjunction with African Property
Investments of Mauritius, for 51% of Real Estate Investments Zambia did not
receive the required support from that company's shareholders and the offer
was withdrawn.
FINANCIAL SERVICES
Reward
In the 12 months to February 2016, the two operating units of Reward
Investments - Reward Capital, which focuses on short-term, asset-backed
loans to smaller businesses, and Reward Invoice Finance which offers bespoke
invoicing-discounting facilities to similar-sized ones - generated net
profit of £2.3 million (2015: £2 million) on turnover of £6.6 million (2015:
£5.1 million). Its total contribution to the net profit of the group (i.e.
after minorities plus group interest) was £3.3 million, an increase of 49%
over the previous year (2015: £2.2 million). At year-end the total loan book
stood at £32 million, an increase of £12 million over the previous year.
Mettle
Over the review period Mettle has shown consistent organic growth across its
seven business units which span a wide spectrum - from corporate advisory,
specialist lending, credit administration and solar power solutions. During
the year, Mettle Solar bought a 50% stake in Sustainable Power Solutions
(SPS), a leading engineering and construction firm that specialises in the
design, installation and operation of solar photovoltaic (PV) systems.
Mettle produced a net after-tax profit of £785 000 (2015: £428 000).
COMMENTS ON THE RESULTS
The non-core UBS AG shares were all disposed of during the year, resulting
in a gain of £1.9 million.
(£'million) Audited Audited
12 months 12 months
to 28/2/16 to 28/02/15
Fair-value adjustment of UBS AG shares - (0.9)
Gain on disposal of UBS AG shares 1.9 -
The Moorgarth joint venture with Texton Property Fund Limited for the
acquisition of the Broad Street Mall in Reading, has been classified as a
joint venture under International Financial; Reporting Standards (IFRS) 11
and accounted under the equity method.
DIVIDEND DISTRIBUTION
On 23 May 2016, the board approved and declared a final gross dividend of
6.5 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 Monday, 23 May 2016
Last date to trade cum dividend Friday, 17 June 2016
Date trading commences ex dividend Monday, 20 June 2016
Record date Friday, 24 June 2016
Date of payment to shareholders Monday, 27 June 2016
Share certificates may not be dematerialised or rematerialised between
Monday, 20 June 2016, and Friday, 24 June 2016, 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. Shareholders who are not exempt from
the DT will therefore receive a dividend of 5.525 cents net of DT. The
Company has 188 239 902 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.
SHARE ISSUE
On 15 June 2015 Tradehold issued 3 200 000 shares to the former shareholders
of Mettle, in settlement of the deferred consideration owing by it in terms
of the Mettle acquisition in 2014.
On 28 August 2015 Tradehold issued 26 327 171 shares to various subscribers
related to the Collins Group and its affiliates, in settlement of the
consideration for the acquisition of the commercial property portfolio of
the Collins Group and its affiliates, and on 18 December 2015 Tradehold
issued a further 2 579 854 shares in settlement of the deferred
consideration for the acquisition. The assets acquired comprise investment
properties valued at £45.8 million and an interest in a property fund valued
at £6.8 million.
CAPITAL COMMITMENTS
Capital commitments contracted but not provided for at year-end are £21 785
265 relating to investment property in the UK, principally relating to a
completion payment of £1 357 355 due on a residential development in London,
and £5 468 707 relating to investment property in Africa, principally
relating to property development in Mozambique, to be funded by long-term
borrowings.
OUTLOOK
The board expects satisfactory growth in 2016/17. Tradehold is growing its
asset base in both the UK and Africa while several major projects - the
regional shopping centres in Bolton and Reading in the UK and the Cognis
residential development in Maputo - will contribute to revenue in the new
financial year. Others will follow as they reach completion. The financial
services division is expected to maintain the momentum built up during the
review period while Mettle has entered, through Mettle Solar, the exciting
area of renewable energy with its potential in countries such as those of
Southern Africa.
The above statements have not been reviewed or reported on by Tradehold's
auditors.
BASIS OF PRESENTATION AND ACCOUNTING POLICIES
The summary consolidated financial statements are prepared in accordance
with the requirements of the JSE Listings Requirements for abridged reports,
and the requirements of the Companies Act, 2008 (Act No 71 of 2008) (the
Companies Act) applicable to summary financial statements.
The JSE Listings Requirements require abridged reports to be prepared in
accordance with the framework concepts and the measurement and recognition
requirements of 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.
The group has adopted all new and amended accounting pronouncements issued
by the International Accounting Standards Board that are effective for
financial years commencing 1 March 2015. None of the new or amended
accounting pronouncements that are effective for the financial year
commencing 1 March 2015 had a material impact on the group.
The group's reportable segments reflect those components of the group that
are regularly reviewed by the chief executive officers and other senior
executives who make strategic decisions.
Trading profit on the face of the statement of comprehensive income, being
the group's operating result excluding fair value gains or losses on
financial assets at fair value through profit or loss and impairment losses
on goodwill.
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 titles measures reported by
other companies.
AUDIT OPINION
The summary consolidated financial statements are prepared in accordance
with the requirements of the JSE Listings Requirements for abridged reports,
and the requirements of the Companies Act 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 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.
These summary consolidated financial statements for the year ended 29
February 2016 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. 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
pounds 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
23 May 2016
SUMMARY CONSOLIDATED FINANCIAL STATEMENTS
Audited Audited
STATEMENT OF COMPREHENSIVE INCOME 12 months to 12 months to
(£'000) 29/02/16 28/02/15
Revenue 28 651 20 731
Trading profit 16 080 12 012
Gain/(loss) on disposal/(purchase) of investments 24 1 117
Impairment of goodwill - (1 288)
Gain on disposal of financial assets 1 920
Fair value (loss)/gain through profit or loss (237) (886)
Operating profit 17 787 10 955
Finance income 3 600 809
Finance cost (6 684) (2 289)
Profit from joint venture 197
Profit from associated companies 381 165
Profit before taxation 15 281 9 640
Taxation (638) (605)
Profit for the year before non-controlling interest 14 643 9 035
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 (163) (549)
Currency translation differences (3 987) (161)
Total comprehensive income for the year 10 493 8 325
Profit attributable to:
Owners of the parent 14 280 7 832
Non-controlling interest 363 1 203
14 643 9 035
Total comprehensive income attributable to:
Owners of the parent 10 170 7 259
Non-controlling interest 323 1 066
10 493 8 325
Earnings per share (pence): basic
- basic 7.6 5.1
- headline earnings 5.2 3.3
- core headline earnings (as defined by entity) 6.5 5.4
Number of shares for calculation of earnings
per share ('000) 186 818 153 143
Earnings per share (pence): diluted
- diluted 7.6 5.0
- headline earnings 5.1 3.3
- core headline earnings (as defined by entity) 6.4 5.4
Number of shares for calculation of diluted
earnings per share ('000) 188 124 155 341
STATEMENT OF FINANCIAL POSITION Audited Audited
(£'000) 29/02/16 28/02/15
Non-current assets 235 845 133 399
Property, plant and equipment 7 860 5 186
Investment properties 196 879 120 552
Goodwill 11 758 2 306
Investment in joint venture 13 793
Investments in associates 3 490 1 544
Deferred taxation 510 261
Trade and other receivables 303 1 645
Loans receivable 1 252 1 905
Current assets 83 213 74 137
Financial assets 6 344 7 271
Loans receivable 3 216 -
Loans to associates 3 648 550
Trade and other receivables 48 051 31 968
Taxation 1 -
Cash and cash equivalents 21 953 34 348
Total assets 319 058 207 536
Equity 160 214 122 328
Ordinary shareholders' equity 160 167 122 244
Non-controlling interest 47 84
Non-current liabilities 113 223 63 901
Preference share capital 28 288 34 753
Long-term borrowings 69 937 19 792
Derivative financial instruments 8 566 2 314
Deferred revenue 5 801 4 818
Contingent consideration 106 2 064
Deferred taxation 526 160
Current liabilities 45 621 21 308
Short-term borrowings 29 519 12 529
Contingent consideration 1 691 -
Taxation 1 286 -
Bank overdrafts - 206
Other current liabilities 13 125 8 573
Total equity and liabilities 319 058 207 537
Audited Audited
STATEMENT OF CHANGES IN EQUITY 12 months to 12 months to
(£'000) 29/02/16 28/02/15
Balance at beginning of the period 122 328 99 939
Proceeds from ordinary share issue 28 158 13 614
Transactions with owner of the entity 204 (624)
Distribution to minorities (564) (883)
Acquisition of subsidiaries 90 (280)
Disposal of subsidiary - 211
Contingent consideration recognised directly in equity - 2 453
Deferred consideration recognised directly in equity - -
Dividends distributed to shareholders (495) (427)
Profit for the year 14 643 9 035
Other comprehensive income for the year (4 150) (710)
Balance at the end of the period 160 214 122 328
Audited Audited
STATEMENT OF CASH FLOWS 12 months to 12 months to
(£'000) 29/02/16 28/02/15
Cash flows from operating activities 4 700 9 034
Cash flows utilised in investing activities (60 529) (52 001)
Acquisition of investment properties (35 610) (50 723)
Acquisition of property, plant and equipment (1 161) (389)
Business combinations, net of cash acquired (9 899) 625
Proceeds on disposal of investment properties 5 637 10 044
Proceeds on disposal of property, plant and equipment 19 39
Net proceeds on disposal of investment 9 191 (181)
Dividends received from associates 576 95
Loans advanced to joint venture (13 542)
Loans repaid by/(advanced to) associate undertaking (4 571) (396)
Borrowings repaid - -
Loans and advances - issued (69 787) (55 461)
Loans and advances - repaid 58 618 44 346
Net cash flow (55 829) (42 967)
Cash flows from financing activities 43 593 52 118
Proceeds from borrowings 65 904 7 549
Repayment of borrowings (21 747) (1 095)
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)
Dividends to non-controlling interests (564) (883)
Net increase in cash and cash equivalents (12 236) 9 151
Effect of changes in exchange rate 47 (201)
Cash and cash equivalents at beginning of the year 34 142 25 192
Cash and cash equivalents at end of the year 21 953 34 142
NON CASH TRANSACTION
During the year under review the following non cash transactions took place:
- Purchase of the Collins group property portfolio
Refer to note 12.1 for detail of the transaction
- Tradehold Limited share issues
On 15 June 2015 3,200,000 Tradehold Limited shares were issued to the
former Mettle Investments (Pty) Limited shareholders in settlement of the
deferred purchase consideration.
SEGMENTAL ANALYSIS
(£'000) Revenue Operating
profit/(loss)
Twelve months to 29 February 2016 (audited)
Property - United Kingdom 16 331 9 051
Property - Namibia 3 269 4 266
Property - Africa excluding Namibia 1 055 1 053
Short-term lending - United Kingdom 6 558 4 678
Short-term lending - South Africa 1 438 384
Other - (1 645)
28 651 17 787
Twelve months to 28 February 2015 (audited)
Property - United Kingdom 12 245 8 518
Property - Namibia - -
Property - Africa excluding Namibia - (290)
Short-term lending - United Kingdom 5 146 3 423
Short-term lending - South Africa 3 340 867
Other - (1 563)
20 731 10 955
There was no intersegment revenue, resulting in all revenue being received
from external customers.
Audited Audited
SUPPLEMENTARY INFORMATION 12 months to 12 months to
(£'000) 29/02/16 28/02/15
1. Depreciation for the year 608 372
2. Capital expenditure for the year 36 771 51 112
3. Calculation of headline earnings
Net profit 14 280 7 832
Gain on revaluation of investment properties (4 613) (2 156)
Profit on disposal of investment properties (239) (1 359)
Gain from bargain purchase (9)
Gain on disposal of investments (24) (1 117)
Impairment of goodwill - 1 288
(Profit)/loss on disposal of property,
plant and equipment (19) 134
Non-controlling interest 244 508
9 629 5 121
4. Calculation of core headline earnings
Headline profit 9 629 5 121
Gain on revaluation of investment properties 4 613 2 156
Profit on disposal of investment properties 239 1 359
Legal fee income (220) (782)
(Profit)/loss on disposal / fair value
adjustment of UBS shares (1 920) 886
Non-controlling interest (233) (410)
12 108 8 330
5. Number of shares in issue ('000) 188 240 156 133
6. Net asset value per share (pence) 85.1 78.3
7. Financial assets
Unlisted investments at fund managers valuation 6 344 -
Listed investments at fair value - 7 271
6 344 7 271
8. Contingent liabilities - 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
There are no significant subsequent after year end which need to be
adjusted for or additional disclosure required.
11. Goodwill
Audited Audited
12 months to 12 months to
29/02/16 28/02/15
11.1 Cost 12 806 3 594
Accumulated impairment losses (1 048) (1 288)
11 758 2 306
11.2 Cost
Balance at beginning of year 3 594 -
Acquired through business combinations 9 948 3 566
Foreign currency translation movements (736) 28
Balance at end of year 12 806 3 594
11.3 Accumulated impairment losses
Balance at beginning of year (1 288) -
Foreign currency translation movements 240 -
Impairment losses recognised in the year - (1 288)
(1 048) (1 288)
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 and South
Africa as the main geographies. There are property segments in the
UK, and short-term lending in South 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:
Twelve months to 29 February 2016 (audited)
Opening Additions Impairment
SA short-term lending 2 287 26 -
UK property - serviced offices - 9 586 -
Other 19 336 -
Total 2 306 9 948
Twelve months to 29 February 2016 (audited)
Foreign currency
translation movements Closing
SA short-term lending (428) 1 885
UK property - serviced offices - 9 586
Other (68) 287
Total (496) 11 758
Twelve months to 28 February 2015 (audited)
Opening Additions Impairment
SA short-term lending - 3 575 (1 288)
Other - 19 -
Total - 3 594 (1 288)
Twelve months to 28 February 2015 (audited)
Foreign currency
translation movements Closing
SA short-term lending - 2 287
Other - 19
Total - 2 306
11.4.1 The goodwill allocated to the UK property segment has been determined
to be the serviced office business owned by subsidiaries acquired by
the Group, mainly relating to the Ventia acquisition disclosed in
Note 12.2
No impairment charge arose as a result of the impairment test. 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 one-year
period. Cash flows beyond the budget period are extrapolated using
the estimated growth rates stated below.
Audited
29/02/16
The key assumptions, long term growth rate
and discount rate used in the value-in-use
calculations are as follows:
WACC 10.50%
Growth rate 2.50%
Sustainable growth rate 0.50%
The principal assumptions where impairment
occurs are as follows:
WACC 11.80%
Growth rate (11.00%)
Sustainable growth rate (1.50%)
11.4.2 The goodwill allocated to the SA short-term
lending segment relates to the operations of
Mettle Investments (Pty) Limited and its
subsidiaries, mainly relating to the acquisition
by the Group in the 2015 financial year.
No impairment charge arose as a result of the
impairment test (2015: £1.288 million). 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 sustainable growth rates stated
below.
The key assumptions, long term growth rate
and discount rate used in the value-in-use
calculations are as follows:
Audited Audited
29/02/16 28/02/15
WACC 15.28% 15.49%
Growth rate 8.50% 8.00%
Sustainable growth rate 2.10% 2.10%
Operating profit margin (% of revenue) 25.68% 25.14%
The principal assumptions where impairment
occurs are as follows:
WACC 15.60%
Growth rate 7.60%
Sustainable growth rate 1.40%
12. Business Combinations
12.1 Collins group property portfolio
On 18 March 2015 the group acquired a portfolio of commercial
property assets in Botswana, Zambia, Namibia, Mozambique and the
United Kingdom from Collins Property Projects Proprietary Limited and
its affiliates ("Collins group"), and as a composite transaction the
Collins group utilised the sale proceeds to subscribe for ordinary
shares in Tradehold Limited. This is considered, in substance, to be
a non-cash transaction. The subscribers are not permitted to dispose
of more than 50% of the Tradehold Limited shares during a 5 year
"lock-in" period.
As a result of the acquisition, the group has expanded its property
interest in southern Africa (excluding South Africa), and has gained
access to the resources and property expertise of the Collins group
in Namibia, Botswana, Zambia and Mozambique to assist with the
development of the group's African portfolio.
The following table summarises the purchase price allocation for the
acquisition, and the amounts of the assets acquired and liabilities
assumed recognised at the acquisition date.
Audited
12 months to
29/02/16
Total consideration 28 157
Issuance of ordinary shares 28 157
Recognised amounts of identifiable assets
acquired and liabilities
assumed at fair value:
Total assets 60 531
Investment property 45 789
Financial assets 6 855
Property plant and equipment 35
Loans to associates 2 977
Cash and cash equivalents 2 962
Trade and other receivables 1 580
Tax receivables 333
Total liabilities (32 710)
Borrowings (29 008)
Tax creditor (81)
Trade and other payables (3 621)
Total identifiable net assets 27 821
Goodwill 336
Total consideration 28 157
Goodwill represents the assembled workforce and synergies from the
acquisition.
Acquisition-related costs of £113 000 were charged to administrative
expenses in the consolidated income statement of the group for the
year ending 29 February 2016.
The revenue included in the consolidated income statement for the
current year contributed by these assets was £4,714 million. These
assets also contributed profit after tax and controlling interest of
£1,055 million for the current year.
12.2 Ventia Ltd
On 2 December 2015 The Boutique Workplace Company Ltd acquired the
issued share capital of Ventia Ltd, a serviced office business. The
acquisition has significantly increased the group's serviced office
presence in London and complements the group's existing serviced
office business.
The following table summarises the provisional purchase price
allocation for the acquisition, and the amounts of the assets
acquired and liabilities assumed recognised at the acquisition date.
The purchase price allocation will be finalised before the next
interim reporting date.
Audited
12 months to
29/02/16
Total consideration 13 827
Cash paid 13 827
Recognised amounts of identifiable assets acquired
and liabilities assumed at provisional fair value:
Total assets 9 331
Property plant and equipment 2 058
Cash and cash equivalents 955
Trade and other receivables 6 318
Total liabilities (5 090)
Deferred revenue (3 406)
Tax creditor (617)
Trade and other payables (1 067)
Total identifiable net assets 4 241
Provisional goodwill 9 586
Total consideration paid 13 827
Cash acquired (955)
Net cash flow on acquisition 12 872
Goodwill represents the assembled workforce and synergies from the
acquisition.
Acquisition-related cost of £271,513 were charged to administrative
expenses in the consolidated income statement of the group for the
year ending 29 February 2016.
The revenue included in the consolidated income statement for the
current year contributed by these assets was £3.2 million. These
assets also contributed profit after tax and controlling interest of
£0.45 million for the current year.
13. Fair value hierarchy
IFRS7 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).
The following table presents the group's financial assets and
liabilities that are measured at fair value at 29 February 2016:
Audited 29/02/16
Assets Level 1 Level 2 Level 3
Financial assets at fair value
through profit and loss
Securities - - 6 344
Non-financial assets at fair
value through profit or loss
Investment properties - - 196 879
Total assets - - 203 222
Liabilities
Financial liabilities at fair
value through profit and loss
Contingent consideration - - 1 797
Trading derivatives
Cross currency swap - 7 854 -
Derivatives used for hedging
Interest rate contracts - 712 -
Financial liabilities at
amortised cost
Preference shares 28 288 - -
Borrowings - - 99 456
Total liabilities 28 288 8 566 101 253
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
The fair value of financial instruments traded in active markets is
based on quoted market prices at the period-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 the year-end.
Should UK property yields increase by 1%,
the valuations would be lower by approximately £17.94 million.
Should UK property yields decrease by 1%,
the valuations would be higher by approximately £24.57 million.
Should Namibia property yields increase by 1%,
the valuations would be lower by approximately £2.13 million.
Should Namibia property yields decrease by 1%,
the valuations would be higher by approximately £2.53 million.
Should Africa property yields increase by 1%,
the valuations would be lower by approximately £0.86 million.
Should Africa property yields decrease by 1%,
the valuations would be higher by approximately £1.04 million.
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.
Date: 24/05/2016 04:48:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
Sharenet Sites 
