Wrap Text
Interim Condensed Consolidated Unaudited Financial
Statements For The Six Months To 31 August 2016
Tradehold Limited
("Tradehold" or "the company" or "the group")
(Registration number 1970/009054/06)
JSE share code: TDH
ISIN: ZAE000152658
Interim condensed consolidated unaudited financial
statements for the six months to 31 August 2016
Although listed on the JSE Limited ("JSE"), by far the greater part of
Tradehold's operating assets lies outside South Africa - mostly in the UK
but also on the African continent. For this reason - and to avoid distortion
caused by the fluctuating value of the rand - the company reports its
results in pound sterling. Its assets are in property, serviced offices and,
to a lesser extent, in financial services. It holds its property assets in
the UK through its holding in Moorgarth, the dominant component of the
business, and in Africa through its holding in Tradehold Africa, whilst 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
For the six months to August 2016, Tradehold continued the robust growth of
the previous two years across its businesses both in terms of profit and, in
the case of its property companies, in the size of their investment
portfolios. The group's total assets grew by 26% to £379 million (2015: £301
million) against the corresponding period while revenue increased by 71% to
£20.9 million (2015: £12.2 million) and total profit attributable to
shareholders by 39% to £10.9 million (2015: £7.8 million).
Net asset value per share grew 11.7% to 92.6 pence (2015: 82.9 pence) or 9%
for the 6 month period (February 2016: 85.1 pence) and earnings per share
grew 38.1% to 5.8 pence (2015: 4.2 pence).
BUSINESS ENVIRONMENT
The unexpected outcome of the Brexit referendum created immediate turmoil in
the markets in the UK, with the FTSE initially tumbling and sterling
dropping to its lowest level against the US$ in more than 30 years. However,
the share market has since stabilised although the currency has remained
under pressure. At the end of the reporting period the prices of commercial
properties, unlike residential, had held up well in central London. After an
initial downward slide, retail trading in this area also recovered across
the board. Outside London, on average the property market held up well with
ongoing demand for space. However, the situation remains volatile, and the
decision of the Prime Minister after the reporting period to invoke Article
50 of the EU treaty by the end of March 2017 has caused a new round of
uncertainty.
The expansion of Tradehold's operations in Africa continues to be centred on
Southern Africa, mainly Namibia and Mozambique. Namibia's political
stability and its sound economic management over the years enable developers
to invest there with a considerable measure of confidence while Mozambique's
economy is expected to recover once the mega gas projects come on stream.
However, we remain cautious about substantial further investments in the
near term outside the Common Monetary Area.
PROPERTY
Moorgarth
Moorgarth continues as Tradehold's biggest income producer. The Brexit vote,
coming as it did towards the end of the reporting period, did not have a
material effect on its operations which continued to trade well even with
the initial market turmoil. Although there are signs of property values
falling slightly in some sectors, the work Moorgarth has done in active
asset management of its portfolio has underpinned the overall portfolio
value. Revenue increased 104.5% to £13.9 million, reflecting, inter alia,
the impact of the acquisition in December 2015 of Ventia, which has helped
elevate the group's serviced-office division to one of the foremost in
central London. Moorgarth's contribution (net profit plus group interest) to
total group net profit increased by 220% to £6.4 million (2015: £2 million).
The merger of Ventia with the existing serviced office business has been
completed, and the merged business now operates under a new corporate
identity The Boutique Workplace Company Limited, which operates over 3000
workstations in 26 centres across central London.
Work continued on the redevelopment of the Market Place, a major retail
centre in Bolton near Manchester, which saw a significant increase in
lettings and a 20% increase in footfall.
The refurbishment of the Broad Street Mall at Reading outside London,
acquired in June 2015 at a cost of £65.4 million in a joint venture with
Texton Property Fund Ltd, is due for completion before the end of the
calendar year. In addition, two floors were recently let in the office block
adjoining the mall, with a further two remaining to be let.
Shortly before the end of the reporting period Moorgarth acquired, at a cost
of £10.4 million, a retail unit in Nottingham, which is let to New Look. The
opportunity arose to buy the asset at a 10% yield due to short term
liquidity issues for the pension fund vendor.
Tradehold Africa
The focus of Tradehold Africa during the reporting period remained on
consolidating and achieving economies of scale, in particular in Namibia and
Mozambique. Tradehold Africa's contribution (net profit plus group interest)
to total group net profit increased by 38% to £4,8m (2015: £1m).
Tradehold Africa, which develops either independently or with partners, is
at present involved in 11 properties across Namibia which are in various
stages of planning, construction and completion. Of these, eight are
shopping centres or include retail components. Three of them are substantial
malls completed in or planned for the populous north in the towns of Rundu,
Oshakati and Katima Mulilo. All three are expected to eventually dominate
their retail environments.
In Maputo in Mozambique the company has completed, on time and within
budget,
the large, highly specialised and purpose-built Acacia Estate (the Cognis
development), with units being leased on a long-term basis both to the
American Embassy and to the American oil-exploration company Anadarko.
Current developments in which the company is involved on a partnership basis
include shopping malls along the coast at Beira and Pemba.
Collins South Africa
Tradehold entered into agreements with the Collins Group of KwaZulu-Natal to
acquire its commercial property business within South Africa for ZAR1 715
million. This follows the acquisition of its UK and Southern Africa
(excluding South Africa) assets in the previous financial year. This fourth-
generation family-owned property development business has built an excellent
track record for the development and management of commercial properties
across Southern Africa and beyond.
The portfolio consists of 151 industrial, distribution centre, retail and
office property assets located mainly in Gauteng and KwaZulu-Natal.
The transaction is expected to complete in December 2016 and will add a
diversified portfolio of South African properties and an experienced
property development and management team to Tradehold. The resultant
increase in Tradehold's net asset value and profitability will facilitate
further growth both in South Africa, via Collins, and abroad with a
particular focus on Tradehold's investments in the UK.
FINANCIAL SERVICES
Reward
The uncertainty created among small business owners following the UK's vote
to leave the EU has led to a marked drop in the SME confidence index.
Nevertheless, the lending market in this sector has become more competitive
with new players entering the field and offering additional funding options.
Despite the intensified competition within the sector, Reward's highly
experienced management team continues to provide the company with a very
real advantage in the market place, with its ability to quickly assess and
deliver flexible funding solutions. Defying difficult trading conditions,
the company achieved a pre-tax net profit of £1.3 million (2015: £1.1
million) on turnover of £3.7 million (2015: £3.1 million). Its total
contribution to the net profit of the group (i.e. after minorities plus
group interest) was £1.9 million, an increase of 19% over the previous year
(2015: £1.6 million).
Mettle
Over the review period Mettle has performed in line with budget across its
business units which span a wide spectrum - from corporate advisory,
specialist lending, credit administration and solar power solutions. Mettle
Solar, a division established in the previous financial year and which rents
out solar photovoltaic systems, is currently involved in ten projects. Four
of these are in Namibia.
Mettle achieved a net profit of £358 000 for the reporting period,
marginally below the £379 000 of the corresponding period.
DIVIDEND
The board has decided not to declare an interim dividend.
OUTLOOK
The UK market is expected to remain volatile while the country navigates the
complex process of withdrawing from the EU over a likely period of two
years.
In terms of our UK operations we therefore remain careful in the acquisition
of new properties while rigorously managing assets already in the portfolio
to ensure they deliver optimal benefits. Our serviced office business should
benefit in the current uncertain economic conditions, as it offers flexible
occupation contracts for its clients. The board is comfortable that Reward's
highly skilled and experienced management team will continue to capitalise
on the opportunities of a changing market with vision but caution. We are
also confident of unlocking value from our existing opportunities in
Tradehold Africa.
Judging by the performance of the companies in the group since the end of
the reporting period, we expect Tradehold to improve on the results achieved
in the 2016 financial year.
The above statements have not been reviewed or reported on by Tradehold's
auditors.
ACCOUNTING POLICY
The consolidated interim financial information is prepared in accordance
with the requirements of the JSE Listings Requirements for interim reports,
and the requirements of the Companies Act, 2008 (Act No 71 of 2008).
The JSE Listings Requirements require interim 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 interim financial statements,
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 standards, amendments to publicised standards and
interpretations that became effective for the current reporting period
beginning on 1 March 2016:
Amendment to IAS 16, 'Property, plant and equipment' and IAS 38,'Intangible
assets', on depreciation and amortisation
In this amendment the IASB has clarified that the use of revenue based
methods to calculate the depreciation of an asset is not appropriate because
revenue generated by an activity that includes the use of an asset generally
reflects factors other than the consumption of the economic benefits
embodied in the asset. The IASB has also clarified that revenue is generally
presumed to be an inappropriate basis for measuring the consumption of the
economic benefits embodied in an intangible asset.
Amendments to IFRS 10, 'Consolidated financial statements' and IAS 28,
'Investments in associates and joint ventures'
These amendments address an inconsistency between the requirements in IFRS
10 and those in IAS 28 in dealing with the sale or contribution of assets
between an investor and its associate or joint venture. The main consequence
of the amendments is that a full gain or loss is recognised when a
transaction involves a business (whether it is housed in a subsidiary or
not). A partial gain or loss is recognised when a transaction involves
assets that do not constitute a business, even if these assets are housed in
a subsidiary.
Annual Improvements 2012 - 14 cycle
IFRS 5, 'Non-current assets held for sale and discontinued operations'
regarding methods of disposal. The amendment clarifies that, when an asset
(or disposal group) is reclassified from 'held for sale' to 'held for
distribution', or vice versa, this does not constitute a change to a plan of
sale or distribution, and does not have to be accounted for as such.
IFRS 7, 'Financial instruments: Disclosures', regarding servicing contracts.
If an entity transfers a financial asset to a third party under conditions
which allow the transferor to derecognise the asset, IFRS 7 requires
disclosure of all types of continuing involvement that the entity might
still have in the transferred assets.
IAS 19, 'Employee benefits' regarding discount rates. The amendment
clarifies that, when determining the discount rate for post-employment
benefit obligations, it is the currency that the liabilities are denominated
in that is important, and not the country where they arise.
IAS 34, 'Interim financial reporting' regarding disclosure of information.
The amendment clarifies what is meant by the reference in the standard to
'information disclosed elsewhere in the interim financial report'. The
amendment further amends IAS 34 to require a cross-reference from the
interim financial statements to the location of that information.
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.
PREPARATION OF FINANCIAL RESULTS
The preparation of the financial results was supervised by the group
financial director, Karen Nordier BAcc, BCompt Hons, CA (SA). The condensed
consolidated interim results for the six months ended 31 August 2016 have
not been audited or independently reviewed by the group's external auditors,
PricewaterhouseCoopers Inc.
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.
H R W Troskie K L Nordier
Acting Chairman Director
Malta
2 November 2016
STATEMENT OF COMPREHENSIVE INCOME
Unaudited Unaudited Audited
6 months to 6 months to 12 months to
(£'000) 31/08/16 31/08/15 29/02/16
Revenue 20 905 12 206 28 651
Other operating income 146 4 085 822
Profit on disposal of investment properties - - 239
Net gain from fair value adjustment
on investment property 12 618 628 4 613
Loss on disposal and scrapping
of PPE (excluding buildings) (54) - 19
Employee benefit expenses (1 676) (1 317) (4 708)
Lease expenses (246) (297) (593)
Depreciation, impairment and amortisation (931) (158) (608)
Other operating costs (11 689) (7 548) (12 355)
Trading profit 19 073 7 599 16 080
Gain on disposal/purchase of investments 242 - 24
Gain on disposal of financial assets - 1 919 1 920
Fair value (loss)/gain on financial
assets at fair value through profit or loss 167 (372) (237)
Operating profit 19 482 9 146 17 787
Finance income 843 1 868 3 600
Finance cost (4 449) (2 846) (6 684)
Earnings from joint venture 70 80 197
Earnings from associated companies 140 159 381
Profit before taxation 16 086 8 407 15 281
Taxation (615) (404) (638)
Profit for the year before
non-controlling interest 15 471 8 003 14 643
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)
Currency translation differences 3 427 (4 170) (3 987)
Total comprehensive income for the year 18 898 3 833 10 493
Profit attributable to:
Owners of the parent 10 894 7 818 14 280
Non-controlling interest 4 577 185 363
15 471 8 003 14 643
Total comprehensive income attributable to:
Owners of the parent 14 327 3 648 10 170
Non-controlling interest 4 571 185 323
18 898 3 833 10 493
Earnings per share (pence): basic
- basic 5.8 4.2 7.6
- headline earnings (as required by IFRS) 1.3 3.9 5.2
- core headline earnings
(as defined by entity) 5.7 3.1 6.5
Number of shares for calculation
of earnings per share ('000) 188 770 185 412 186 818
Earnings per share (pence): diluted
- diluted 5.8 4.2 7.6
- headline earnings (as required by IFRS) 1.3 3.8 5.1
- core headline earnings
(as defined by entity) 5.7 3.1 6.4
Number of shares for calculation
of diluted earnings per share ('000) 189 034 187 222 188 124
STATEMENT OF FINANCIAL POSITION
Unaudited Unaudited Restated
(£'000) 31/08/16 31/08/15 29/02/16
Non-current assets 295 986 208 730 235 845
Property, plant and equipment 8 333 5 207 7 860
Investment properties 249 707 179 397 196 879
Intangible assets 1 054 - 1 518
Goodwill 10 454 3 562 10 240
Investment in joint venture 18 452 13 458 13 793
Investments in associates 4 521 2 483 3 490
Deferred taxation 501 124 510
Trade and other receivables 359 352 303
Loans receivable 2 605 4 147 1 252
Current assets 83 720 92 092 83 213
Financial assets 6 280 6 217 6 344
Loans receivable 49 1 580 3 216
Loans to associates 893 125 3 648
Trade and other receivables 55 229 40 359 48 051
Taxation - - 1
Cash and cash equivalents 21 269 43 811 21 953
Total assets 379 706 300 822 319 058
Equity 179 767 154 084 160 214
Ordinary shareholders' equity 175 488 153 933 160 167
Non-controlling interest 4 279 151 47
Non-current liabilities 136 556 105 330 113 223
Preference share liability 33 087 30 716 28 288
Long-term borrowings 92 109 62 882 69 937
Derivative financial instruments 4 468 6 325 8 565
Deferred revenue 6 140 5 198 5 801
Contingent consideration - 83 106
Deferred taxation 752 126 526
Current liabilities 63 383 41 408 45 621
Trade and other payables 12 989 12 099 12 028
Short-term borrowings 47 905 27 000 29 519
Loans from joint venture 245 - 47
Loans from associates - - 1 050
Contingent consideration 125 1 779 1 691
Taxation 2 119 530 1 286
Total equity and liabilities 379 706 300 822 319 058
STATEMENT OF CHANGES IN EQUITY
Unaudited Unaudited Audited
6 months to 6 months to 12 months to
(£'000) 31/08/16 31/08/15 29/02/16
Balance at beginning of the period 160 214 122 328 122 328
Issue of ordinary shares 1 743 25 644 28 158
Transactions with owner of the entity (535) 264 294
Distribution to minorities - - (564)
Share based payment 19 - -
Deferred consideration recognised
directly in equity - 2 513 -
Dividends distributed to shareholders (572) (498) (495)
Profit for the year 15 471 8 003 14 643
Other comprehensive income for the year 3 427 (4 170) (4 150)
Balance at the end of the period 179 767 154 084 160 214
STATEMENT OF CASH FLOWS
Unaudited Unaudited Audited
6 months to 6 months to 12 months to
(£'000) 31/08/16 31/08/15 29/02/16
Cash flows from operating activities 5 508 1 999 4 700
Cash flows utilised in investing
activities (42 504) (25 517) (60 529)
Acquisition of investment properties (33 320) (18 663) (35 610)
Acquisition of property, plant
and equipment (1 457) (179) (1 161)
Business combinations - 2 933 (9 899)
Proceeds on disposal of investment
properties - 1 650 5 637
Proceeds on disposal of property,
plant and equipment - - 19
Net proceeds on disposal of investment - 9 191 9 191
Dividends received from associates 444 687 576
Loans advanced to joint venture (2 590) (13 378) (13 542)
Loans repaid by/(advanced to)
associate undertaking 602 863 (4 571)
Loans and advances - issued (41 297) (35 615) (69 787)
Loans and advances - repaid 35 114 26 994 58 618
Cash flows from financing activities 36 263 33 300 43 593
Proceeds from borrowings 60 578 33 300 65 904
Repayment of borrowings (24 208) - (21 747)
Share buy-back from minority shareholder (117) - -
Proceeds from preference share issue 10 - -
Dividends to non-controlling interests - - (564)
Net increase in cash and cash equivalents (733) 9 782 (12 236)
Effect of changes in exchange rate 49 (113) 47
Cash and cash equivalents at beginning
of the year 21 953 34 142 34 142
Cash and cash equivalents at
end of the year 21 269 43 812 21 953
Cash and cash equivalents consists of:
Cash and cash equivalents 21 269 43 811 21 953
21 269 43 811 21 953
Non cash transaction
During the period under review the following non cash transactions took
place:
- Tradehold Limited share issues
On 10 June 2016 1 189 730 Tradehold Limited shares were issued to the former
Mettle Investments (Pty) Limited shareholders in final settlement of the
deferred purchase consideration.
SEGMENTAL ANALYSIS
Revenue Operating
(£'000) profit/(loss)
Six months to 31 August 2016 (unaudited)
Property
- United Kingdom 13 859 8 085
- Namibia 1 744 1 492
- Africa excluding Namibia 781 7 943
Short-term lending
- United Kingdom 3 711 2 672
- South Africa 810 201
Other - (911)
20 905 19 482
Six months to 31 August 2015 (unaudited)
Property
- United Kingdom 6 775 2 472
- Namibia 935 901
- Africa excluding Namibia 525 1 455
Short-term lending
- United Kingdom 3 087 2 193
- South Africa 884 341
Other - 1 784
12 206 9 146
Twelve months to 29 February 2016 (audited)
Property
- United Kingdom 16 331 9 051
- Namibia 3 269 4 266
- Africa excluding Namibia 1 055 1 053
Short-term lending
- United Kingdom 6 558 4 678
- South Africa 1 438 384
Other - (1 645)
28 651 17 787
SUPPLEMENTARY INFORMATION
Unaudited Unaudited Audited
6 months to 6 months to 12 months to
(£'000) 31/08/16 31/08/15 29/02/16
1. Depreciation for the period 931 158 608
2. Capital expenditure for the period 34 777 14 519 36 771
3. Calculation of headline earnings
Net profit 10 894 7 818 14 280
Net gain from fair value adjustment
on investment properties (12 618) (629) (4 613)
Profit on disposal of investment
properties - - (239)
Gain on disposal of investments (242) - (24)
Loss/(profit) on disposal of
property, plant and equipment 54 - (19)
Total non-controlling interest
and tax effects of adjustments 4 333 - 244
2 421 7 189 9 629
4. Calculation of core headline earnings
Headline profit 2 421 7 189 9 629
Net gain from fair value adjustment
on investment properties 12 618 629 4 613
Profit on disposal of investment
properties - - 239
Legal fee income - - (220)
Profit on disposal/fair value
adjustment of UBS shares - (1 919) (1 920)
Total non-controlling interest
and tax effects of adjustments (4 333) (33) (233)
10 706 5 866 12 108
5. Number of shares in issue ('000) 189 430 185 660 188 240
6. Net asset value per share (pence) 92.6 82.9 85.1
7. Financial assets
Unlisted investments at fund
managers valuation 6 280 6 217 6 344
8. Contingent liabilities - 480 -
9. Related parties
During the period 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 interim financial
statements on consolidation.
10. Cashflow from operating activities
Operating profit/(loss) 19 482 9 146 17 787
Non-cash items (12 023) (2 018) (5 530)
- depreciation, impairment and
amortisation 931 158 608
- profit on disposal of investment
properties - - (239)
- loss/(profit) on disposal of PPE 54 - (19)
- net gain on fair value adjustment
on investment properties (12 618) (629) (4 613)
- fair value (gain)/loss on
financial assets at fair value (167) 372 237
- impairment of loans - - 440
- profit on disposal of investments (242) (1 919) (1 947)
- other non-cash items 19 - 3
Changes in working capital 2 043 (4 941) (4 138)
- trade and other receivables 761 (6 333) 1 182
- trade and other payables 1 282 1 392 (5 320)
Cash used in operations (3 994) (188) (3 419)
- interest received 844 1 868 3 600
- interest paid (4 720) (2 846) (6 233)
- dividends paid (572) (498) (495)
- taxation paid 454 1 288 (291)
Net cash flows from operating
activities 5 508 1 999 4 700
11. Goodwill
11.1 Cost 11 676 4 850 11 288
Accumulated impairment losses (1 222) (1 288) (1 048)
10 454 3 562 10 240
11.2 Cost
Balance at beginning of year 11 288 3 594 3 594
Acquired through business
combinations 25 1 547 8 430
Foreign currency translation
movements 363 (291) (736)
Balance at end of year 11 676 4 850 11 288
11.3 Accumulated impairment losses
Balance at beginning of year (1 048) (1 288) (1 288)
Foreign currency translation
movements (174) - 240
(1 222) (1 288) (1 048)
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:
Opening Additions Impairment
Six months to 31 August 2016 (unaudited)
SA short-term lending 1 885 - -
UK property 8 068 25 -
Other 287 - -
Total 10 240 25 -
Six months to 31 August 2015 (unaudited)
SA short-term lending 2 287 - -
UK property - 489 -
Other 19 1 058 -
Total 2 306 1 547 -
Twelve months to 29 February 2016 (restated)
SA short-term lending 2 287 26 -
UK property - 8 068 -
Other 19 336 -
Total 2 306 8 430 -
Foreign
currency
translation
movements Closing
Six months to 31 August 2016 (unaudited)
SA short-term lending 314 2 199
UK property - 8 093
Other (125) 162
Total 189 10 454
Six months to 31 August 2015 (unaudited)
SA short-term lending (291) 1 996
UK property - 489
Other - 1 077
Total (291) 3 562
Twelve months to 29 February 2016 (restated)
SA short-term lending (428) 1 885
UK property - 8 068
Other (68) 287
Total (496) 10 240
12. Business Combinations
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 fair value exercise is now complete and the following table
summarises the revised fair value purchase price allocation for the
acquisition.
Unaudited Unaudited Restated
6 months to 6 months to 12 months to
31/08/16 31/08/15 29/02/16
Total consideration - - 13 827
Cash paid - - 13 827
Recognised amounts of identifiable
assets acquired and liabilities
assumed at fair value
Total assets - - 10 849
Property plant and equipment - - 2 058
Intangible assets - - 1 518
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 - - 5 759
Goodwill - - 8 068
Total consideration paid - - 13 827
Cash acquired - - (955)
Net cash flow on acquisition - - 12 872
13. Fair value estimation
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).
The following table presents the group's financial assets and
liabilities that are measured at fair value at 31 August 2016.
Assets Level 1 Level 2 Level 3
Financial assets at fair value
through profit and loss
Securities - 6 280
Non-financial assets at fair value
through profit or loss
Investment properties - - 249 707
Total assets - - 255 987
Liabilities
Financial liabilities at fair
value through profit and loss
Contingent consideration - - 125
Trading derivatives
Cross currency swap - 3 761 -
Derivatives used for hedging - 707 -
Interest rate contracts
Financial liabilities at amortised cost
Preference shares 33 087 - -
Borrowings - - 140 014
Total liabilities 33 087 4 468 140 139
The following table presents the group's financial assets and
liabilities that are measured at fair value at 31 August 2015.
Assets Level 1 Level 2 Level 3
Financial assets at fair value
through profit and loss
Securities - - 6 217
Non-financial assets at fair value
through profit or loss
Investment properties - - 179 397
Total assets - - 185 614
Liabilities
Financial liabilities at fair
value through profit and loss
Contingent consideration - - 1 862
Trading derivatives
Cross currency swap - 5 776 -
Derivatives used for hedging - 549 -
Interest rate contracts
Financial liabilities at amortised cost
Preference shares 30 716 - -
Borrowings - - 89 882
Total liabilities 30 716 6 325 91 744
The following table presents the group's financial assets and
liabilities that are measured at fair value at 29 February 2016.
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 - - 203 223
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 - - 99 455
Total liabilities 28 288 8 566 101 252
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 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.
The fair value of investment properties is based on rental yield
valuations at the period-end.
Should UK property yields increase by 1%, the valuations would be lower
by approximately £41.54 million.
Should UK property yields decrease by 1%, the valuations would be
higher by approximately £85.69 million.
Should Namibia property yields increase by 1%, the valuations would be
lower by approximately £4.96 million.
Should Namibia property yields decrease by 1%, the valuations would be
higher by approximately £7.19 million.
Should Africa property yields increase by 1%, the valuations would be
lower by approximately £1.57 million.
Should Africa property yields decrease by 1%, the valuations would be
higher by approximately £2.13 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
period.
14. Events after the reporting period
Purchase of the Collins group South Africa property portfolio:
During the reporting period Tradehold Limited entered into written
agreements with the various sellers to acquire a portfolio of
immoveable properties located in, inter alia, Kwa-Zulu Natal, Eastern
Cape, Western Cape and Gauteng, South Africa (the "Collins Portfolio"),
effective from 29 February 2016, through the purchase of the total
issued share capital, as well as all the shareholder's loans in Imbali
Props 21 Pty Ltd, Saddle Path Props 69 Pty Ltd and Collins Property
Projects Pty Ltd (the "Transaction").
The Purchase Consideration will be discharged by way of a combination
of the issue of 57.7 million new Tradehold Ordinary Shares at an issue
price of ZAR28.73 (£1.5) each, and £3 million in cash.
The Acquisition Date is dependent on the fulfilment of the final
conditions precedent to the Transaction. The Transaction is subject
to the following conditions precedent: the approval of the Transaction
by the South African Competition Authorities and the Takeover
Regulation Panel; the obtaining of all other required third party
consents, including from debt funding counterparties; the JSE
approving the listing of the Tradehold Shares to be issued in terms
of the Transaction; the approval of the Transaction by the Shareholders
in terms of the Companies Act and the JSE Listings Requirements; and
the increase of Tradehold's authorised share capital to enable
Tradehold to settle a portion of the Purchase Consideration by way of
the issue of Tradehold Ordinary Shares.
The results of the operations of the Collins Portfolio will be included
in Tradehold Limited's consolidated financial statements from the
Acquisition Date.
The provisional carrying values of the assets and liabilities of the
Colllins Portfolio on 31 August 2016 are as follows:
(£'000)
Total consideration 79 947
Issuance of ordinary shares 76 919
Cash paid 3 028
Assets
Investment properties 321 155
Cash and cash equivalents 191
Total assets 321 346
Liabilities
Non-controlling interest 6 648
Long term liabilities 224 838
Total liabilities 231 486
Total net assets 89 860
Bargain purchase gain (9 913)
Total consideration paid 79 947
The provisional bargain purchase gain arises due to the decrease in
the Tradehold share price from the Transaction share price of ZAR28.73,
to ZAR25.45 at 31 August 2016. The final Goodwill / Bargain purchase
gain will be dependent on the Tradehold share price at the Acquisition
Date.
15. Share based payments
A new employee share option scheme, the Tradehold Limited Employee
Share Trust ("ESOP"), was adopted during the period. The options
granted under the ESOP are exercisable at the market price of the
shares on the date of Tradehold board approval of the award, in three
equal tranches on the fourth, fifth and sixth anniversary of the board
approval date, provided that the employee is still employed on such
exercise date. The fair value at the date of acceptance of the award by
the employee (the "Grant Date") is estimated using a binomial pricing
model, taking into account the terms and conditions upon which the
options were granted. There is no cash settlement of the options.
The following options were granted in terms of the ESOP during the six
months ended 31 August 2016:
On 23 March 2016 (the Grant Date), an award of 263 681 share options
of ZAR 22.18 per share were accepted by DA Harrop, exercisable in three
equal tranches on 5 November 2019, 5 November 2020 and 5 November 2021
respectively.
The fair value of the options granted was estimated on the Grant Date
using the following assumptions:
Dividend yield (%) -
Expected volatility (%) 19.30
Risk-free interest rate (%) 9.32
Expected life of share options (years) 5.62
Weighted average share price (ZAR) 29.25
The weighted average fair value of the options granted during the six
month period was £ 181 838
For the six months ended 31 August 2016, Tradehold has recognised a
share-based payment expense in the statement of profit or loss of
£18 776 (31 August 2015: £0).
DIRECTORS AND ADMINISTRATION
Executive directors: TA Vaughan, FH Esterhuyse, DA Harrop, KL Nordier
Non-executive directors: CH Wiese (alternate JD Wiese), HRW Troskie,
JM Wragge, MJ Roberts
Independent non-executive directors: HRW Troskie, JM Wragge, MJ Roberts
Company secretary: Mettle Corporate Finance (Pty) Ltd
Transfer secretary: Computershare Investor Services (Pty) Ltd
Sponsor: Bravura Capital (Pty) Ltd
Date: 24/11/2016 11:32:00 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.
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