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Summary of the audited consolidated results of the Tradehold Group for the 12 months to 28 feb 2017 and cash div
TRADEHOLD LIMITED
(Registration number: 1970/009054/06)
Incorporated in the Republic of South Africa
JSE Share code: TDH ISIN: ZAE000152658
("Tradehold" or "the Group")
SUMMARY OF THE AUDITED CONSOLIDATED RESULTS OF THE TRADEHOLD GROUP FOR THE
12 MONTHS TO 28 FEBRUARY 2017 AND CASH DIVIDEND DISTRIBUTION
KEY INFORMATION
- Total assets up 213% to £998 million
- Revenue 80% higher at £51.6 million
- Total profit attributable to shareholders up 210% to £44.3 million
- Core headline earnings per share increases 112% to 13.8 pence
- Net asset value per share 40% higher at 119.4 pence
Where in the past the bulk of Tradehold's property assets were held in the
UK and elsewhere in Southern Africa, the acquisition of the Collins Group's
South African portfolio of 152 mainly industrial buildings during the past
financial year has changed that situation to the extent where the major part
of its gross assets are now in South Africa. In addition to its property
portfolios which represent the bulk of its assets, Tradehold also owns
financial services businesses in the UK and in South Africa. It holds its
property assets in the UK through a 100% interest in the Moorgarth Group; in
Africa, through a 100% ownership of Tradehold Africa; and in South Africa
through its 100% ownership of the Collins Group. Its financial services
interests are vested in companies in the UK and in South Africa. In the UK
it has, through Reward Finance Group, an indirect holding of 70% in the
three operating Reward companies - Reward Capital, Reward Invoice Finance
and Reward Trade Finance - while in South Africa it wholly owns the multi-
faceted Mettle Investments.
FINANCIAL PERFORMANCE
In the year to February 2017 Tradehold substantially increased the size of
its business through the acquisition of the South African portfolio of the
Collins Group after purchasing its property assets in the UK and Africa
outside South Africa in the previous financial year. The results of the
latest acquisition were integrated in Tradehold's results for the final two
months of the financial year while the strong growth in its UK business
further boosted its overall performance. During the reporting period total
assets grew by 213% to £998 million from £319 million while revenue
increased by 80% to £51.6 million (2016: £28.7 million). Total profit
attributable to shareholders rose by 210% to £44.3 million (2016: £14.3
million). This includes a £27 million gain (2016: £4.6 million) in the fair-
value adjustment of its investment properties. Despite an increase of almost
59 million in the number of shares in issue, core headline earnings per
share as defined by the entity, increased 112% to 13.8 pence from 6.5 pence
and net asset value per share increased by 40% to 119.4 pence from 85.1
pence.
BUSINESS ENVIRONMENT
Brexit has brought considerable political and financial uncertainty to the
UK. This will continue to impact the country's economy and thus also its
property market although the latter has been stabilising in the months
preceding year-end. The retail sector is one of those which have come under
increasing pressure following a drop in consumer disposable income. While
interest rates are expected to remain at their present record low levels for
the foreseeable future, the weakness of the pound, trading at up to 25%
below its high in 2016, has prompted ongoing interest from foreign investors
particularly in industrial and commercial properties.
Almost all of Africa is experiencing a slowdown in economic growth. The
countries in which Tradehold is active, are no exception. For much of the
reporting period Southern Africa found itself in the grip of a devastating
drought which decimated crops. Its impact has been exacerbated by the
continued slide in the prices of commodities, the mainstay of many African
countries, putting considerable pressure on employment. However, towards the
end of the reporting period the situation started to improve following
abundant rains and a surge in commodity prices.
PROPERTY
Moorgarth
During the year Moorgarth has grown the value of its portfolio by £36
million to £174.2 million, or £218 million if its interest in joint
ventures, which are not reflected in the balance sheet, are included. It
acquired five new properties at a cost of £46.1 million, some of them in
joint ventures with the long established South African Moolman Property
Group. During the reporting period it grew turnover by 76% to £28.8 million
and its contribution (net profit plus group interest) by 121% to £18.1
million.
Return on equity increased to 21.7% from 11.4%.
The strong growth in turnover was due largely to the full-year effect of the
acquisition of the leading central London serviced-office provider, Ventia
Ltd. Its operations have been fully integrated with those of Moorgarth's
own The Boutique Workplace Company (TBWC). Together they now operate 31
business centres offering 3 500 work stations in London. TBWC has been able
to capitalise on the uncertainty and volatility in the market as companies,
unwilling to enter into long-term commitments, sought flexible solutions for
their businesses, turning increasingly to serviced-office accommodation. In
the light of this demand, Moorgarth is looking to expand its existing
facilities in central London while also investigating the potential of
serviced apartments in the same area. It is at present acquiring properties
in the capital for the sole purpose of leasing these to TBWC for conversion
to serviced-office space.
During the reporting period Moorgarth's central focus remained on growing
asset value across the existing portfolio through the pro-active management
of its properties. As part of the process it disposed of a number of smaller
legacy properties above their 2016 book value to allow management to focus
its energies on the major assets in the portfolio. New properties are only
acquired if they offer substantial potential for value enhancement. Once
part of the portfolio, such properties are aggressively managed to unlock
their full potential, a process in which Moorgarth's property management
division, established in the previous financial year, plays a crucial role.
Lettings in the company's two regional shopping centres - The Market Place
Shopping Centre in Bolton in the greater Manchester area and the Broad
Street Mall in Reading near London - are at more than satisfactory levels in
an environment in which occupiers, due to the suppressed retail environment,
are able to drive very hard bargains. With its renovation virtually
complete, The Market Place was independently valued at year-end at £68.2
million, a year-on-year increase of £11.9 million. The property was acquired
several years ago for £24.9 million.
Of particular note this year has been Moorgarth's success in winning the
Revo Gold Award for The Market Place. This is a national award for the best
in
class refurbishment of a shopping centre throughout the UK. The award
focused on Moorgarth's innovation, commercial acumen and willingness to
partner with the key stakeholder in Bolton. The scheme, which includes a 9
screen cinema and 6 restaurants on a heritage property, has been a catalyst
for the regeneration of the town as a whole. Moorgarth's creative marketing
campaign has won it three further awards during the year, once again against
major institutional competition. These accolades have raised its profile
enormously and demonstrate a new, refreshing, innovative and creative
approach to asset management.
Tradehold Africa
The benefits of Tradehold Africa's acquisition of the Collins Group's
property assets in certain neighbouring countries in Southern Africa became
increasingly evident in the 12 months under review. With the acquisition
also came the expertise of the Collins Group's team of professional property
asset managers and developers, thereby reinforcing Tradehold's focus on
proactive asset management and development.
The value of Tradehold Africa's portfolio, outside South Africa, increased
from £62.8 million to £119.3 million while its contribution to total group
profits escalated from £1.4 million to £8.7 million.
A strong focus remained during the year on Tradehold Africa's operations in
Namibia which the group intends listing on the Namibian Stock Exchange once
the local portfolio of mainly retail and commercial properties reaches a
size justifying such a step.
The Dunes Mall, a major retail centre in Walvis Bay co-owned with South
Africa's Atterbury Group, is due for completion in October while a regional
shopping centre of equal size in Rundu in the north is trading well after
opening its doors in the previous financial year. At the same time Tradehold
Africa has several projects under construction in the capital, Windhoek, in
conjunction with Safland, its Namibian development partner.
In Maputo in Mozambique the group's major residential development was
completed at a cost of US$45 million and handed to its major long-term
tenants, the US Embassy and the oil-exploration company Anadarko. Also in
the capital Tradehold acquired, in a strategic alliance with Atterbury, 75%
of a company owning a warehouse near the city's airport leased on a ten-year
contract to British American Tobacco (BAT). A retail centre in the northern
port city of Pemba which will be anchored by Shoprite, is expected to be
completed during the present calendar year. A strategic decision was taken
to delay the construction of a shopping centre in Beira which is also being
undertaken as a joint venture with Atterbury, until such time as the
country's economic outlook improves.
Collins Group
Towards the end of its financial year Tradehold acquired the Collins Group's
South African property portfolio, as well as its property development and
management business after earlier acquiring its UK and African portfolios.
The contractual purchase price of R1.7 billion was settled by means of R60
million in cash and the issuing of 57.7 million new Tradehold shares at
R28.73 per share. The purchase price at fair market value is R1.3 billion
due to the market price of the Tradehold shares at the closing date of the
transaction of R22.40 per share. Valued at R8.3 billion with a net asset
value of R1.7 billion, the diversified South African portfolio consists of
152 commercial, industrial and retail properties with a total gross lettable
area (GLA) of 1,6 million square metres, occupied by mainly national
tenants.
At year-end the vacancy rate was a low 0.8% of GLA.
The transaction offered Tradehold the opportunity to acquire an extensive
portfolio of quality properties, together with a highly rated team of
property asset managers and developers with a reputation built up over
generations. It created a perfect fit for Tradehold in its stated objective
of growing its balance sheet to the point where it could engage in major
property transactions both here and in the UK.
FINANCIAL SERVICES
Reward
In the 12 months to February 2017, Reward continued to build on the success
of previous years, with turnover increasing by 13.6% to £7.5 million while
its net profit contribution to the group (net profit after minorities plus
group interest) was 12% higher at £3.7 million (2016: £3.3 million). At
year-end its total loan book had grown to £40 million from £32 million the
previous year. The business consists of three operating units: Reward
Capital, which focuses on short-term, asset-backed loans to smaller
businesses, Reward Invoice Finance which offers bespoke invoicing-
discounting facilities to similar-sized ones and Reward Trade Finance.
During the reporting period there was an increasing focus on invoice
financing which grew by 80% to £10.8 million. Reward is a solid business
which is finding an increased demand for its services against the backdrop
of continuing reticence by the banks to extend loan facilities to small and
medium-sized businesses.
Mettle
The various divisions of Cape-based Mettle Investments generated a net
after-tax profit of £777 000 (2016: £785 000) which was 1% lower than in the
previous year. This was due mainly to the fact that the recently
established Mettle Solar, which specialises in solar power solutions in
Southern Africa, still requires substantial capital investment to sustain
its strong growth. Mettle Solar commissioned seven new projects during the
year, four in Namibia and three in South Africa, to bring its total number
of projects to 13. In the new financial year Mettle will continue to seek
acquisition opportunities providing a strategic fit to further bolster its
financial services offering.
SHARE ISSUE
On 10 June 2016 Tradehold issued 1 189 730 shares to the former shareholders
of Mettle, in settlement of the final deferred consideration owing by it in
terms of the Mettle acquisition in 2014.
On 29 December 2016 and 20 February 2017 Tradehold issued 47 165 682 shares
to various subscribers related to the Collins Group and its affiliates, in
settlement of the consideration for the acquisition of the South African
commercial property portfolio of the Collins Group and its affiliates. The
assets acquired comprise investment properties valued at £480 million. In
order to avoid a cross-holding resulting from the transaction, Tradehold
repurchased 7 433 346 of its own shares from an acquired entity prior to the
closing of the transaction, and issued 7 414 761 to the former beneficial
owner of the acquired entity.
ORDINARY SHARE CASH DIVIDEND
Notice is hereby given that the Directors have declared a gross cash
dividend of 10 cents per Ordinary Share (2016: 6.5 cents) on 23 May 2017.
The dividend will reduce Tradehold's stated capital.
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.
An exemption from DT is provided for in the ITA in respect of foreign
dividends paid to a South African company and to a non-resident to the
extent that it is paid in respect of listed shares, provided certain
administrative procedures are complied with.
The ITA further provides for an exemption from income tax in respect of
foreign dividends received or accrued in respect of listed shares.
In terms of the ITA, DT of 20% has been withheld for those shareholders who
are not exempt from DT. Shareholders who are not exempt from DT will
therefore receive a net dividend of 8 cents per Ordinary Share.
Tradehold has 247 092 926 Ordinary Shares in issue.
Tradehold Limited's income tax reference number is 9725/126/71/9.
The salient dates for the dividend will be as follows:
Declaration date Tuesday, 23 May 2017
Last date to trade cum dividend Tuesday, 20 June 2017
Date trading commences ex dividend Wednesday, 21 June 2017
Record date Friday, 23 June 2017
Date of payment to shareholders Monday, 26 June 2017
Share certificates may not be dematerialised or rematerialised between
Wednesday, 21 June 2017, and Friday, 23 June 2017, both days inclusive.
COMMENTS ON THE RESULTS
The acquisition of the South African portfolio of the Collins Group during
the financial year resulted in a provisional gain on business combination of
£16.5 million, mainly due to the decrease in the company share price from
the agreed consideration share price of ZAR28.73 to the closing date share
price of ZAR22.40.
(£'million) Audited Audited
12 months 12 months
to 28/2/17 to 29/02/16
Gain on business combination 16 481 -
The results of the Collins Group have been incorporated in the Group results
with effect from 23 December 2016.
OUTLOOK
Political and financial volatility are expected to continue if not escalate
in the UK as the Brexit negotiations progress and the implications of the
separation from the rest of the EU become increasingly clear. However, we
are confident that Moorgarth is well positioned to cope with the changing
environment. Our expanding serviced-office accommodation is playing an
increasingly important role in income generation while we expect to continue
benefiting from management's entrepreneurial flair, supported by the Group's
ready access to finance, in acquiring top-quality assets at highly
competitive prices in a market characterised by investor uncertainty. At the
same time the properties in Moorgarth's existing portfolio all still offer
considerable potential for further value enhancement which are being
actively pursued.
Although the economic slowdown in our Southern African markets has led to
certain projects being temporarily placed on hold, we have the fullest
confidence that with improving agricultural and mining conditions we shall
be able to implement and add to our present development pipeline. At the
same time we shall be placing a strong accent on developing and growing our
newly acquired South African portfolio. As a board we are therefore
confident that the Group will continue to provide an above-average return on
investment, with our financial services divisions continuing to maintain its
growth momentum.
Any reference to future financial performance included in this statement
has not been reviewed and reported on by the Group's external auditors and
does not constitute an earnings forecast.
POLICY ADOPTION FOR TRADING STATEMENTS
The Group has adopted net asset value per share as the measure for trading
statements with effect from the 28 February 2017 financial year-end.
BASIS OF PRESENTATION AND ACCOUNTING POLICIES
The summary consolidated financial statements are prepared in accordance
with the requirements of the JSE Listings Requirements for preliminary
reports, and the requirements of the Companies Act, No 71 of 2008 (the
"Companies Act") applicable to summary financial statements.
The JSE Listings Requirements require preliminary reports to be prepared in
accordance with the framework concepts and the measurement and recognition
requirements of International Financial Reporting Standards (IFRS) and the
SAICA Financial Reporting Guides as issued by the Accounting Practices
Committee and Financial Pronouncements as issued by the Financial Reporting
Standards Council and to also, as a minimum, contain the information
required by IAS 34 Interim Financial Reporting. The accounting policies
applied in the preparation of the consolidated financial statements from
which the summary consolidated financial statements were derived, are in
terms of IFRS and are consistent with those accounting policies applied in
the preparation of the previous consolidated annual financial statements.
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 2016. None of the new or amended
accounting pronouncements that are effective for the financial year
commencing 1 March 2016 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 (the chief operating decision
maker).
Trading profit on the face of the statement of comprehensive income is 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.
The directors of the Group take full responsibility for the preparation of
this preliminary report.
AUDIT OPINION
These summary consolidated financial statements for the year ended 28
February 2017 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 Group'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 Group'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 Group reports its results in the former currency.
CHANGES TO BOARD AND COMPANY SECRETARY
The following changes to the Tradehold board and company secretary occurred
during the period under review:
- Mr FM ver Loren van Themaat resigned as company secretary and Mettle
Corporate Finance Proprietary Limited was appointed as company secretary
with effect from 12 September 2016; and
- Mr. KR Collins was appointed as a non-executive director with effect from
23 December 2016.
C H Wiese K L Nordier
Chairman Director
Malta
23 May 2017
STATEMENT OF COMPREHENSIVE INCOME
Audited Audited
12 months to 12 months to
(£'000) 28/02/17 29/02/16
Revenue 51 554 28 651
Trading profit 49 752 16 080
Gain on business combination 16 481 -
Gain on disposal of investments 287 24
Gain on disposal of financial assets - 1 920
Fair value (loss)/gain through profit or loss (419) (237)
Operating profit 66 101 17 787
Finance income 3 924 3 600
Finance cost (16 089) (6 684)
Profit from joint venture - 197
Profit from associated companies 165 381
Profit before taxation 54 101 15 281
Taxation (4 444) (638)
Profit for the year before non-controlling interest 49 657 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 181 (163)
Currency translation differences 14 929 (3 987)
Total comprehensive income for the year 64 767 10 493
Profit attributable to:
Owners of the parent 44 303 14 280
Non-controlling interest 5 354 363
49 657 14 643
Total comprehensive income attributable to:
Owners of the parent 59 580 10 170
Non-controlling interest 5 187 323
64 767 10 493
Earnings per share (pence): basic
- basic 22,2 7,6
- headline earnings 3,3 5,2
- core headline earnings (as defined by entity) 13,8 6,5
Number of shares for calculation of
earnings per share ('000) 199 921 186 818
Earnings per share (pence): diluted
- diluted 22,1 7,6
- headline earnings 3,2 5,1
- core headline earnings (as defined by entity) 13,8 6,4
Number of shares for calculation of
diluted earnings per share ('000) 200 185 188 124
STATEMENT OF FINANCIAL POSITION
Audited Audited
(£'000) 28/02/17 29/02/16
Non-current assets 868 571 235 844
Property, plant and equipment 9 396 7 860
Investment properties - fair value for
accounting purposes 805 139 196 879
Investment properties - straight-line lease
income adjustment 1 521 -
Intangible assets other than goodwill 754 1 518
Goodwill 11 802 10 240
Investment in joint venture 20 631 13 793
Investments in associates 6 132 3 490
Deferred taxation 10 961 510
Trade and other receivables 552 302
Loans receivable 1 683 1 252
Current assets 129 706 83 213
Financial assets 5 924 6 344
Assets held for resale 14 389 -
Loans receivable 129 3 216
Derivative financial instruments 2 656 -
Loans to associates 8 707 3 648
Trade and other receivables 66 953 48 051
Taxation 17 1
Cash and cash equivalents 30 931 21 953
Total assets 998 277 319 058
Equity 308 750 160 214
Ordinary shareholders' equity 295 054 160 167
Non-controlling interest 13 696 47
Non-current liabilities 527 956 113 223
Preference share liability 48 28 288
Long-term borrowings 474 167 69 937
Derivative financial instruments 532 8 565
Deferred revenue 7 581 5 801
Contingent consideration - 106
Deferred taxation 45 628 526
Current liabilities 161 571 45 621
Preference share liability 38 951 -
Short-term borrowings 96 055 29 519
Contingent consideration 105 1 691
Taxation 1 303 1 286
Bank overdrafts 558 -
Other current liabilities 24 599 13 125
Total equity and liabilities 998 277 319 058
STATEMENT OF CHANGES IN EQUITY
Audited Audited
12 months to 12 months to
(£'000) 28/02/17 29/02/16
Balance at beginning of the period 160 214 122 328
Proceeds from ordinary share issue 75 926 28 157
Transactions with owner of the entity - 295
Distribution to minorities (548) (564)
Acquisition of subsidiaries 8 986 -
Disposal of subsidiary (60) -
Capital reserve (Employee Share Option Scheme) 38 -
Dividends distributed to shareholders (572) (495)
Profit for the year 49 657 14 643
Other comprehensive income for the year 15 109 (4 150)
Balance at the end of the period 308 750 160 214
STATEMENT OF CASH FLOWS
Audited Audited
12 months to 12 months to
(£'000) 28/02/17 29/02/16
Cash flows from operating activities 11 408 4 700
Cash flows utilised in investing activities (69 372) (60 529)
Acquisition of investment properties (54 468) (35 610)
Acquisition of property, plant and equipment (2 944) (1 161)
Business combinations, net of cash acquired 758 (9 899)
Proceeds on disposal of investment properties 5 898 5 637
Proceeds on disposal of property, plant and equipment 4 913 19
Net proceeds on disposal of investment 1 9 191
Dividends received from associates 186 576
Loans advanced to joint venture (6 884) (13 542)
Loans repaid by/(advanced to) associate undertaking (8 267) (4 571)
Borrowings repaid - -
Loans and advances - issued (86 955) (69 787)
Loans and advances - repaid 78 390 58 618
Net cash flow (57 964) (55 830)
Cash flows from financing activities 66 426 43 592
Proceeds from borrowings 109 777 65 904
Repayment of borrowings (42 825) (21 747)
Proceeds from ordinary share issue - -
Share buy-back from minority shareholder - -
Proceeds from preference share issue 22 -
Redemption of preference shares - -
Dividends to non-controlling interests (548) (564)
Net increase in cash and cash equivalents 8 462 (12 236)
Effect of changes in exchange rate (42) 47
Cash and cash equivalents at beginning of the year 21 953 34 142
Cash and cash equivalents at end of the year 30 373 21 953
NON CASH TRANSACTION
During the year under review the following non cash transactions took place:
- Purchase of the Collins group South African property portfolio
Refer to note 12.1 for detail of the transaction
- 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 settlement of the
final tranche of the deferred purchase consideration.
SEGMENTAL ANALYSIS
(£'000) Operating
Revenue profit/ Total Total
(loss) assets liabilities
Twelve months to
28 February 2017 (audited)
Property - United Kingdom 28 841 22 544 246 465 222 894
Property - Namibia 3 518 9 006 55 511 41 445
Property - Africa excluding
Namibia and South Africa 3 301 8 412 83 800 82 053
Property - South Africa 6 874 22 176 455 390 421 742
Short-term lending
- United Kingdom 7 482 5 425 43 076 37 783
Short-term lending
- South Africa 1 538 610 12 820 6 285
Other - (2 072) 101 215 (122 675)
51 554 66 101 998 277 689 527
Twelve months to
29 February 2016 (audited)
Property - United Kingdom 16 331 9 051 188 461 190 533
Property - Namibia 3 269 4 266 30 329 26 015
Property - Africa excluding
Namibia 1 055 1 053 39 155 42 188
Short-term lending
- United Kingdom 6 558 4 678 33 729 30 676
Short-term lending
- South Africa 1 438 385 11 276 7 167
Other - (1 645) 16 108 (137 735)
28 651 17 787 319 059 158 843
There was no intersegment revenue, resulting in all revenue being received
from external customers.
SUPPLEMENTARY INFORMATION
Audited Audited
12 months to 12 months to
(£'000) 28/02/17 29/02/16
1 Depreciation for the year 1 270 608
2 Capital expenditure for the year 57 412 36 771
Capital commitments contracted
but not provided for at
year-end are:
South Africa - £7.2 million and
£463 000 relating to phase 1 of the
Mzuri development by Imbali
Props 21 (Pty) Ltd and the
purchase of land by Ifana
Investments (Pty) Ltd respectively.
Namibia - £17.2 million relating
to the developments of Oasis Mall,
Dunes Lifestyle and Steps.
Mozambique - £8 million principally
relating to retail property development,
to be funded by long term borrowings
from Standard Bank (South Africa).
3 Calculation of headline earnings
Gross Net Gross Net
Net profit 44 303 14 280
Gain on revaluation of
investment properties (26 956) (19 516) (4 613) (4 380)
Profit on disposal of
investment properties (1 573) (239)
Gain from business combination (16 481) -
Gain on disposal of investments (287) (24) (13)
Loss/(profit) on disposal
of property, plant and equipment 52 (19)
6 498 9 630
4 Calculation of core headline earnings
Gross Net Gross Net
Headline profit 6 498 9 630
Gain on revaluation of
investment properties 26 956 19 516 4 613 4 380
Profit on disposal of
investment properties 1 573 239
Legal fee income (220)
Profit on disposal of UBS shares (1 920)
27 587 12 109
5 Number of shares in issue ('000) 247 093 188 240
6 Net asset value per share (pence) 119,4 85,1
7 Financial assets
Unlisted investments at
fund managers valuation 5 924 6 344
8 Contingent liabilities 516 -
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
28/02/17 29/02/16
11,1 Cost 13 243 11 288
Accumulated impairment losses (1 441) (1 048)
11 802 10 240
11,2 Cost
Balance at beginning of year 11 288 3 594
Acquired through business combinations 788 8 429
Foreign currency translation movements 1 167 (736)
Balance at end of year 13 243 11 288
11,3 Accumulated impairment losses
Balance at beginning of year (1 048) (1 288)
Foreign currency translation movements (393) 240
Impairment losses recognised in the year - -
(1 441) (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:
Twelve months to 28 February 2017 (audited) Opening Additions
SA short-term lending 1 885 -
UK property - serviced offices 7 975 25
Other 380 763
Total 10 240 788
Twelve months to
28 February 2017 (audited) Foreign
currency
translation
Impairment movements Closing
SA short-term lending - 707 2 592
UK property - serviced offices - - 8 000
Other - 67 1 210
Total 774 11 802
Twelve months to 29 February 2016 (audited) Opening Additions
SA short-term lending 2 287 26
UK property - serviced offices - 7 975
Other 19 429
Total 2 306 8 430
Twelve months to
29 February 2016 (audited) Foreign
currency
translation
Impairment movements Closing
SA short-term lending - (428) 1 885
UK property - serviced offices - - 7 975
Other - (68) 380
Total - (496) 10 240
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 in
the previous financial year.
The goodwill allocation for 2016 has been finalised for the Ventia
purchase price allocation in the current financial year, disclosed in
Note 12,3.
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
five-year period. Cash flows beyond the five year period are
extrapolated using the estimated sustainable growth rates
stated below.
Audited Audited
28/02/17 29/02/16
The key assumptions, long term growth
rate and discount rate used in
the value-in-use calculations are
as follows:
WACC 8,00% 10,50%
Growth rate 2,50% 2,50%
Sustainable growth rate 0,50% 0,50%
The principal assumptions where
impairment occurs are as follows:
WACC 18,10% 11,80%
Growth rate -11,30% -11,00%
Sustainable growth rate -1,50% -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 (2016: nil).
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:
WACC 15,26% 15,28%
Growth rate 8,50% 8,50%
Sustainable growth rate 2,10% 2,10%
Operating profit margin (% of revenue) 25,68% 25,68%
The principal assumptions where
impairment occurs are as follows:
WACC 15,58% 15,60%
Growth rate 7,50% 7,60%
Sustainable growth rate 1,30% 1,40%
12 Business Combinations
12,1 Collins group South African property portfolio
On 22 December 2016 the group acquired 100% of the equity and voting
interest in Imbali Props 21 (Pty) Ltd and Saddle Path Props 69 (Pty)
Ltd, holding a portfolio of commercial property assets located in
Kwa-Zulu Natal, Eastern Cape, Western Cape and Gauteng in South
Africa, as well as 100% of the equity and voting interest in the
property management company, Collins Property Projects (Pty) Ltd.
The purchase consideration was discharged by the issue of
57.7 million new ordinary shares in the company at an issue
price of ZAR28.73 (£1.50) each, and £3.5 million in cash.
As a result of the acquisition, the group has expanded its property
interest in to South Africa, and has gained access to the resources
and property expertise of the Collins group in South Africa, to
assist with the growth and development of the group's Southern
African property portfolio.
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.
Audited Audited
12 months to 12 months to
28/02/17 29/02/16
Total consideration 78 209
Issuance of ordinary shares 74 741 -
Cash paid 3 468 -
Recognised amounts of identifiable assets
acquired and liabilities assumed at
fair value:
Total assets 493 188
Investment property 480 683 -
Property plant and equipment 4 552 -
Loans to associates 893 -
Cash and cash equivalents 2 502 -
Trade and other receivables 4 541 -
Tax receivables 16 -
Total liabilities (398 498)
Non-controlling interest (8 849) -
Borrowings (350 035) -
Tax creditor (30 834) -
Trade and other payables (8 780) -
Total identifiable net assets 94 690 -
Goodwill (16 481) -
Total consideration 78 209 -
Consideration paid in cash (3 468)
Acquisition costs charged to equity (552)
Cash acquired 2 502
Net cash flow on acquisition (1 518)
The gain on business combination arises due to the decrease in the
company share price from the agreed consideration share price of
ZAR28.73 to the closing date share price of ZAR22.40.
Aquisition related costs of £552 430 were charged to equity as
transaction costs on the issue of shares.
Aquisition related costs of £115 977 were charged to administrative
expenses in the consolidated income statement of the group for the
year ending 28 February 2017.
Since the acquisition date of the above business combination,
revenue of £6 873 593 and net profit of £777 273 have been included
in the income statement relating to Collins SA.
Had the revenue and net results of Collins SA been included from
1 March 2016, group revenue and net profit contributed by Collins
SA would have amounted to £33 405 233 and £25 466 842 respectively.
12,2 Atterbury Mauritius Ltd
On 26 January 2017 the group acquired 75% of the voting and equity
interest in Atterbury Matola Mauritius Ltd (owning a warehouse in
Mozambique tenanted by British American Tobacco plc) and Atterbury
Pemba Properties Ltd (developing a retail centre in Pemba,
Mozambique).
As a result of the acquisition, the group has expanded its
property interest in Mozambique which are tenanted by large
listed tenants and exposed to US dollar rental.
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.
Audited Audited
12 months to 12 months to
28/02/17 29/02/16
Total consideration -
Issuance of ordinary shares - -
Cash paid - -
Total assets 19 294 -
Investment property 16 298 -
Non-controlling interest 254 -
Cash and cash equivalents 2 276 -
Trade and other receivables 425 -
Tax receivables 41 -
Total liabilities (20 057) -
Borrowings (17 360) -
Trade and other payables (2 697) -
Total identifiable net assets (763) -
Provisional goodwill 763 -
Total consideration paid 0 -
Cash acquired 2 276 -
Net cash flow on acquisition 2 276 -
12,3 Ventia Ltd
On 2 December 2015 The Boutique Workplace Company Ltd acquired
100% of the equity and voting interest in 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. The comparatives have been finalised.
Audited Audited
12 months to 12 months to
28/02/17 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 - 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 of financial instruments
The carrying amounts, net gains and losses recognised through profit
and loss, total interest income, total interest expense and
impairment of each class of financial instrument are as follows:
28 February 2017
Net Total Total
Assets Carrying (losses) interest interest
(£'million) value /gains income expense Impairment
Financial
asset at
fair value
through profit
or loss 5,9 (0,4) - - 0,4
Derivatives 2,7 10,5 - - -
Loans to joint
venture 20,0 - 1 - -
Loans to
associates 12,0 - 1 - -
Loans and trade
receivables 49,5 - 1,5 - 1,1
Other
receivables 19,8 - - - -
Cash and cash
equivalents 30,9 - - - -
Liabilities
(£'million)
Long-term
borrowings 489,1 - - 9,9 -
Derivatives 0,5 - - - 0,2
Preference
shares 39,0 - - 2,6 -
Deferred revenue 7,6 - - - -
Contingent
consideration 0,1 - - - -
Short-term
borrowings 81,2 - - 2,5 -
Bank overdrafts 0,6 - - - -
Trade and
other payables 24,6 - - - -
29 February 2016
Net Total Total
Assets Carrying (losses) interest interest
(£'million) value /gains income expense Impairment
Financial asset
at fair value
through profit
or loss 6,3 (0,2) - - 0,2
Loans
receivable 41,9 - 2,1 - 0,9
Trade and other
receivables 10,9 - - - -
Cash and cash
equivalents 22,0 - - - -
Liabilities
(£'million)
Long-term
borrowings 82,9 - - 4,2 -
Derivatives 8,6 - - - 0,0
Preference
shares 28,3 - - 2,2 -
Contingent
consideration 1,8 - 0,3 - 6,3
Short-term
borrowings 17 - - 0,8 -
Bank overdrafts - - - - -
Trade and
other payables 12,0 - - - -
The fair value of all amounts, except long-term borrowings with fixed
interest rates, approximate their carrying amounts.
All financial instruments are classified as loans receivable/payable
at amortised cost, except listed investments, which are classified
as financial assets at fair value through profit or loss and the
derivatives, which are partly carried at fair value through profit
and loss held for trading and partly as fair value through profit
and loss designated as a hedge.
14 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 28 February 2017:
Audited 28/02/17
Assets Level 1 Level 2 Level 3
Financial assets at fair
value through profit and loss
Securities 5 924
Trading derivatives
Cross currency swap 2 656
Non-financial assets at fair
value through profit or loss
Investment properties 806 660
Total assets 2 656 812 584
Liabilities
Financial liabilities at fair
value through profit and loss
Contingent consideration 105
Derivatives used for hedging
Interest rate contracts 532
Financial liabilities
at amortised cost
Preference shares 38 951
Borrowings 570 222
Total liabilities 38 951 532 570 327
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 99 455
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 year-end.
Should UK property yields increase by 1%, the valuations would be
lower by approximately £25,79 million.
Should UK property yields decrease by 1%, the valuations would be
higher by approximately £36,64 million.
Should Namibia property yields increase by 1%, the valuations would
be lower by approximately £4,67 million.
Should Namibia property yields decrease by 1%, the valuations would
be higher by approximately £5,97 million.
Should Africa (excluding Namibia and South Africa) property yields
increase by 1%, the valuations would be lower by approximately
£14,35 million.
Should Africa (excluding Namibia and South Africa) property yields
decrease by 1%, the valuations would be higher by approximately
£22,98 million.
Should South Africa property yields increase by 1%, the valuations
would be lower by approximately £68,32 million.
Should South Africa property yields decrease by 1%, the valuations
would be higher by approximately £93,12 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.
Reconciliation of recurring level 3 fair value financial instruments:
Audited Audited
28/02/17 29/02/16
Investment Properties
At beginning of year 196 879 120 553
Additions 54 468 35 610
Acquired through business combinations 496 981 45 789
Capitalisation of borrowing costs 1 165 504
Foreign currency translation differences 48 536 (4 791)
Disposals (4 325) (5 398)
Transfer to assets held for sale (14 000) -
Net gain from fair value adjustments
on investment property 26 956 4 613
At end of year 806 660 196 879
Securities
At beginning of year 6 344 -
Acquired through business combinations - 6 854
Fair value loss (419) (237)
Distribution received (1) (274)
At end of year 5 924 6 344
Contingent consideration
Balance at beginning of the year 1 797 2 086
Settled through the issue of ordinary shares (2 004) -
Unwinding of interest 18 110
Foreign currency translation 294 (399)
Balance at end of the year 105 1 797
15 Share based payments
A new employee share option scheme, the Tradehold Limited Employee
Share Trust ("ESOP"), was adopted during the year. 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 year:
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) -
Weighted average share price (ZAR) 29,25
The weighted average fair value of the options granted during the
year was £181 838
For the year ended 28 February 2017, Tradehold has recognised a
share-based payment expense in the statement of changes in equity
of £37 551 (2016: £0).
Date: 24/05/2017 04:41:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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