Wrap Text
Interim condensed consolidated unaudited financial statements for the six months to 31 August 2017
TRADEHOLD LIMITED
(Registration number: 1970/009054/06)
Incorporated in the Republic of South Africa
JSE Share code: TDH ISIN: ZAE000152658
("Tradehold" or "the Group")
TRADEHOLD LIMITED - INTERIM CONDENSED CONSOLIDATED UNAUDITED FINANCIAL
STATEMENTS OF THE TRADEHOLD GROUP FOR THE SIX MONTHS TO 31 AUGUST 2017
KEY INFORMATION
- Total assets up 161.7% to £994 million
- Revenue 165.5% up at £55.5 million
- Ordinary shareholders equity up 74.8% to £306.8 million
- Net asset value per share up 34% to 124.1 pence
- Tangible net asset value per share up 54.8% to 134.2 pence
- Headline earnings per share up 169% to 3.5 pence
Previously the bulk of Tradehold's property assets were held in the UK and
in Southern Africa outside South Africa. However, the acquisition of the
Collins Group's South African portfolio of 152 mainly industrial buildings
during the 2017 financial year has changed that situation to the extent
where the major part of Tradehold's 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. These businesses are in the process of being transferred to a new
company to be listed separately. Tradehold holds its property assets in the
UK through a 100% interest in Moorgarth Group; in Africa, through a 100%
ownership of Tradehold Africa; and in South Africa through its 100%
ownership of the Collins Group. Its existing 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.
RESTRUCTURING
Shortly before the end of the reporting period Tradehold announced a
restructuring of its business aimed at strengthening the focus on its core
property markets in the UK and South Africa. As part of this process, its
financial services businesses will be stripped out and listed separately to
create two focused businesses each with its own, clear identity. Tradehold
shareholders will receive shares in the new company equal to the number of
shares held in Tradehold. Although the financial services assets are at this
stage still relatively small, they are considered an effective platform for
growth both organically and through acquisitions.
FINANCIAL PERFORMANCE
The strong revenue growth during the reporting period was due largely to the
results of the South African-based Collins Group, acquired towards the end
of the 2017 financial year, being integrated with those of Tradehold for the
full six-month period. This resulted in total assets growing by 161.7% to
£993.7 million from £379.7 million against the corresponding period. Revenue
increased by 165.5% to £55.5 million (2016: £20.9 million). Total profit
attributable to shareholders is £10.8 million (2016: £10.9 million). The
decrease is mainly because the reporting period gain in the fair-value
adjustment of its investment properties is £1.6 million, compared to a gain
of £8 million after minorities in the corresponding period. The gain in the
corresponding period was mainly due to revaluation uplifts in the case of
the Bolton retail development in the UK and the Cognis residential
development in Mozambique on completion of works. Headline earnings per
share increased 169% to 3.5 pence from 1.3 pence while net asset value per
share grew 34% to 124.1 pence from 92.6 pence. Tangible net asset value per
share (as defined by management) was 54.8% higher at 134.2 pence, up from
86.7 pence.
BUSINESS ENVIRONMENT
The main markets in which Tradehold operates - the UK and South Africa -
continue to be in a state of flux. The UK economy is at present
characterised by a high level of uncertainty as to the affect of the
country's intended withdrawal from the EU on its relationships with its
major markets. Economic growth has been the weakest this year since 2012
while consumer demand has been dampened by the rise in inflation to its
highest level in almost five years, following the drop in the value of the
pound after the Brexit vote. However, this drop has in turn also stimulated
interest in some UK real estate asset sectors by overseas investors.
The South African economy has experienced several years of anaemic growth
and there is little indication of any marked improvement in the near future.
Although inflation levels have come down, political instability, a weakened
rand, growing unemployment and government interference in the economy have
combined to stifle investor confidence, prompting an exodus of foreign
capital from the country. Lack of consumer disposable income has furthermore
led to a drop in demand, impacting the industrial and retail sectors in
particular.
PROPERTY
Moorgarth
During the six month reporting period Moorgarth grew the value of its
portfolio by £3 million to £177.2 million , or by £16 million to £234
million if its interest in joint ventures (not reflected in the balance
sheet), is included. It acquired the Waverley Mall in Edinburgh at a cost of
£24.7 million in a joint venture with the long established South African
Moolman Property Group, and disposed of two non-core properties as part of
its ongoing portfolio upgrade drive. During the reporting period it
generated turnover of £13.7 million (2016: £13.8 million). The decrease in
turnover was due to the inclusion of revenue of £1.5 million in the
corresponding period from the group's formerly owned hotel investment, a
legacy asset which was disposed of in February 2017. Moorgarth's
contribution to total group profits (net profit plus group interest) was
£3.3 million (2016: £6.4 million). The decrease was due mainly to a £3.75
million valuation uplift on the Market Place retail centre in Bolton in the
corresponding period.
Tradehold's UK business remained robust in a highly volatile environment in
which it continued to actively manage its assets to extract the maximum
benefit from the potential they offer. This resulted in its balance sheet
reflecting an increase in the value of the portfolio. Despite a growing lack
of consumer disposable income due to high inflation, its retail centres
performed well. They are located in densely populated areas and enjoy high
levels of passing trade, as in the case of Waverley Mall located next to
Edinburgh's main railway station. The mid-town Market Place shopping centre
in Bolton, has been repositioned as an exciting meeting place for consumers
with a strong entertainment component complementing an extensive line-up of
sought-after retail brands. In the last 12 months Market Place has won the
Revo (formerly British Council of Shopping Centres) Gold Award as the best
major refurbishment of over £5 million in the UK, as well as the shopping
centre industry's top marketing award across Europe and Africa.
During the reporting period Moorgarth continued to expand its offering of
serviced office space through its wholly owned subsidiary, The Boutique
Workplace Company (TBWC), which during the reporting period acquired new
buildings, signed new leases and has undertaken an extensive refurbishment
programme. In the short term these actions affected profitability, but they
are intended to build value in the long-term. Although TBWC's turnover grew
12% in the six months to £8.5 million (2016: £7.6 million), EBITDA fell to
£0.8 million (2016: £1.6 million) and EBIT or operating profit to £0.2
million (2016: £1.4 million). On a like-for-like basis, excluding new
buildings that are initially loss-making and buildings closed for
refurbishment, underlying EBITDA is £1.6 million.
The service TBWC provides is becoming increasingly popular with companies
hesitant to enter into long-term leases in the UK's present volatile
business environment and is increasingly preferred by professionals and
entrepreneurs who want to get on with their business without having to
provide their own infrastructure. After the end of the reporting period
Moorgarth acquired a further two centrally located buildings in London which
will be converted to fit the needs of its serviced office division and then
leased to it on a long-term basis.
Tradehold Africa
The value of Tradehold Africa's portfolio, outside South Africa, increased
by £0.1 million to £119.4 million since the year-end, while revenue grew by
118.8% to £5.5 million (2016: £2.5 million). It contributed £2.3 million to
total group profits compared to £5 million in the corresponding period. The
decrease resulted mainly from the £4.6 million fair value gain in the
corresponding period following the completion of the Cognis residential
development in Maputo in Mozambique. The development is let on long-term
leases to the US Embassy and the oil-exploration company Anadarko.
The main focus of Tradehold Africa's operations continued to be Namibia
where one of its major retail developments, the 27 000m2 Dunes Mall in
Walvis Bay in partnership with Atterbury Property Group, was recently
completed at a cost of £29 million. Also completed during the same period
was the Town Lodge, which forms part of The Steps development in Windhoek.
Meanwhile construction has started on the 10 000m2 shopping mall in Gobabis
to be anchored by Shoprite. The completion date has been set for November
2018.
Tradehold has made considerable progress with its plan to list its Namibian
interests on the Namibian Stock Exchange. Discussions with key investors are
underway. If successful, these assets will be listed by the end of the 2018
financial year.
In the other countries in Southern Africa in which Tradehold Africa has an
interest - Zambia, Mozambique and Botswana - the company continued managing
its assets on a profitable basis. In June its new retail mall in Pemba on
the north coast of Mozambique was opened, with Shoprite as its anchor
tenant.
Collins Group
Much time was devoted during the reporting period to bedding down the
Collins Group, a fourth-generation family business, of which its property
portfolio as well as its property development and management division, were
acquired in the 2017 financial year. Its portfolio of 152 commercial,
industrial and retail properties built up over many years, has a total gross
lettable area (GLA) of 1.6 million m2. The accent lies very heavily on
industrial properties, which constitute about 91% of total GLA and include
premium big box distribution centres and major industrial complexes that are
let on long-term triple net leases to investment grade tenants such as
Unilever, Sasol, Massmart, Nampak and Pep. Properties with triple net leases
constitute 70% of the industrial portfolio. Retail represents about 6% of
the portfolio, with tenants such as Shoprite, Pick n Pay, Edcon and Boxer,
with the remaining 3% taken up by office accommodation.
The portfolio, which is managed by an experienced team of in-house property
managers and developers, is well structured in terms of lease expiry dates,
with 0.8% lapsing in 2018, 5.6% in 2019 and 8.1% in 2020 and the balance of
some 85% thereafter. Vacancies during the reporting period escalated
slightly from 0.8% to 1.4%.
Although most of South Africa is already well served by retail malls and
other supermarket outlets, Collins' management believes it has identified a
gap in the market for smaller convenience centres adjacent to transport hubs
such as taxi ranks and train stations. The company has acquired three such
locations for development and has entered into 12-year leases with Shoprite
(two) and Cambridge. In light of the positive response from value retailers,
Collins has developed a pipeline of similar developments in seven regions of
the country.
At the end of the reporting period the Collins Group's portfolio was valued
at £504 million. During the six months it achieved turnover of £31 million
and contributed £5.2 million to net profit after minorities.
FINANCIAL SERVICES
Reward
In the 6 months to August 2017, Reward continued to build on the success of
previous years, with turnover increasing by 19.6% to £4.4 million compared
to the corresponding period while its net profit contribution to the group
(net profit after minorities plus group interest) was 6% higher at £2
million (2016: £1.9 million). At the end of the reporting period its loan
book had grown to £43.7 million from £38.6 million in the corresponding six
months. 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.
Since its establishment in 2011, Reward has consistently enjoyed strong,
profitable growth. The continuing volatility in the UK business environment
has created substantial opportunities for the group as banks and other
mainstream lenders are increasingly loathe to grant loans to smaller
businesses. Reward aggressively addresses this gap in the market. It is
expanding the business with additional offices and debt offerings to take
full advantage of the opportunities. Shortly before the end of the reporting
period, it obtained a £40 million debt-funding facility from the UK's
Foresight Group to fund the future growth of the business.
Mettle
The various divisions of Cape-based Mettle Investments generated a net
after-tax contribution to the group of £401 000 (2016: £385 000), an
increase of 4.2%. The company aims to grow organically and also continues to
pursue acquisitions in the financial services industry. Mettle Solar, the
company's venture into solar power solutions in Africa, continued its strong
growth. By August this year, it had commissioned 19 rooftop projects of
which nine are in South Africa, eight in Namibia and two in Kenya.
SHARE ISSUE
On 12 June 2017 Tradehold issued 81 449 shares to the former shareholders of
Pointbreak Corporate Finance, in settlement of the final deferred
consideration owing in terms of the acquisition by Mettle in 2015.
ORDINARY SHARE CASH DIVIDEND
The board has decided not to declare an interim dividend.
COMMENTS ON THE RESULTS
The provisional purchase-price allocation for the acquisition of the South
African portfolio of the Collins Group during the 2017 financial year was
finalised during the reporting period, resulting in a favourable restatement
of the 28 February 2017 comparative results. The main changes are as
follows:
(£'million) Restated Reported
Audited Audited
12 months 12 months
to 28/2/17 to 28/02/17
Statement of Comprehensive Income
Operating profit 73 180 66 103
Profit attributable to owners of the parent 50 869 44 303
Statement of Financial Position
Ordinary shareholders' equity 301 885 295 054
Non-controlling interest 13 258 13 696
Net asset value per share (pence) 122.2 119.4
LOOKING AHEAD
Bedding down the restructuring of Tradehold into two fully independent and
focused entities will be a major objective of senior management in the
coming months. As its financial services division at this stage represents
only about 6.5% of total assets, the aim will be, once it is on its own, to
grow this business strongly over time both organically and through
acquisitions. In the case of the property division, the aim will be not so
much to add to the size of the portfolios in its main markets but to use the
excellent platform they already offer to unlock the full potential of the
individual properties owned.
The political volatility and economic instability dominating the UK and
South Africa present the property market with enormous challenges. However,
as a board we believe we have shown our ability to navigate our way around
these challenges. But more than that, we believe our results for the past
reporting period amply demonstrate that management possesses the
entrepreneurial skills to turn the challenges in these markets to our
advantage. We are therefore confident that we shall be able to generate
acceptable results for the second half of the year.
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 consolidated interim financial statements are prepared in accordance
with the requirements of the JSE Listings Requirements for interim reports,
and the requirements of the Companies Act, No 71 of 2008 (the "Companies
Act") applicable to interim financial statements.
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 IFRS 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 2017:
Amendments to IAS 7, Statement of cash flows on disclosure initiative
These amendments to IAS 7 introduce an additional disclosure that will
enable users of financial statements to evaluate changes in liabilities
arising from financing activities. The amendment is part of the IASB's
Disclosure Initiative, which continues to explore how financial statement
disclosure can be improved.
Amendments to IAS 12, 'Income taxes' on Recognition of deferred tax assets
for unrealised losses
These amendments on the recognition of deferred tax assets for unrealised
losses clarify how to account for deferred tax assets related to debt
instruments measured at fair value.
There was no material impact on the annual financial statements as a result
of the adoption of these standards.
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.
Tangible net asset value per share
Tangible net asset value per share excludes intangible assets, deferred tax
assets and deferred tax liabilities from the calculation of the group's net
asset value. Management believes that it is a useful measure for
shareholders of the Group's intrinsic net worth. However, this is not a
defined term under IFRS and may not be comparable with similarly titled
measures reported by other companies.
The directors of the Group take full responsibility for the preparation of
this interim report.
PREPARATION OF FINANCIAL RESULTS
The preparation of the financial results was supervised by the Group's
financial director, Karen Nordier BAcc, BCompt Hons, CA(SA). The condensed
consolidated interim results for the six months ended 31 August 2017 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 Group reports its results in the former currency.
CH Wiese KL Nordier
Chairman Director
Malta
7 November 2017
STATEMENT OF COMPREHENSIVE INCOME
Unaudited Unaudited Audited
6 months 6 months 12 months
to to to
(£'000) 31/08/17 31/08/16 28/02/17
Revenue 55 509 20 905 52 518
Other operating income 1 418 146 2 047
Profit on disposal of investment
properties 646 - 1 571
Net gain from fair value adjustment
on investment property 1 598 12 618 26 187
Loss on disposal and scrapping of
PPE (excluding buildings) - (54) (52)
Employee benefit expenses (4 068) (1 676) (7 273)
Lease expenses (2 960) (246) (4 794)
Depreciation, impairment
and amortisation (1 247) (931) (2 058)
Other operating costs (10 751) (11 689) (17 975)
Trading profit 40 145 19 073 50 171
Gain on business combination - - 23 141
Gain on disposal of investments 3 242 287
Fair value (loss)/gain through
profit or loss (3) 167 (419)
Operating profit 40 145 19 482 73 180
Finance income 3 406 843 3 928
Finance cost (26 715) (4 449) (16 652)
Profit from joint venture 199 70 -
Profit from associated companies 101 140 165
Profit before taxation 17 136 16 086 60 621
Taxation (5 251) (615) (4 387)
Profit for the year before
non-controlling interest 11 885 15 471 56 234
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 120 - 180
Currency translation differences (4 635) 3 427 15 193
Total comprehensive income for the year 7 370 18 898 71 607
Profit attributable to:
Owners of the parent 10 843 10 894 50 869
Non-controlling interest 1 042 4 577 5 365
11 885 15 471 56 234
Total comprehensive income attributable to:
Owners of the parent 6 298 14 327 66 410
Non-controlling interest 1 072 4 571 5 197
7 370 18 898 71 607
Earnings per share (pence): basic
- basic 4.4 5.8 25.4
- headline earnings 3.5 1.3 3.6
Number of shares for calculation of
earnings per share ('000) 247 174 188 770 199 921
Earnings per share (pence): diluted
- diluted 4.4 5.8 25.4
- headline earnings 3.5 1.3 3.6
Number of shares for calculation of
diluted earnings per share ('000) 247 438 189 034 200 185
STATEMENT OF FINANCIAL POSITION
Unaudited Unaudited Audited
(£'000) 31/08/17 31/08/16 28/02/17
Non-current assets 868 534 295 986 868 571
Property, plant and equipment 11 265 8 333 9 396
Investment properties - fair value
for accounting purposes 790 294 249 707 804 239
Investment properties - straight-line
lease income adjustment 10 698 - 2 422
Intangible assets other than goodwill 538 1 054 754
Goodwill 11 632 10 454 11 802
Investment in joint venture 26 781 18 452 20 630
Investments in associates 6 621 4 521 6 132
Deferred taxation 8 608 501 10 961
Trade and other receivables 621 359 552
Loans receivable 1 476 2 605 1 683
Current assets 125 193 83 720 129 208
Financial assets 6 281 6 280 5 924
Assets held for resale - - 14 389
Loans receivable 5 210 49 531
Derivative financial instruments 1 765 - 2 656
Loans to associates 9 853 893 8 707
Trade and other receivables 67 658 55 229 66 053
Taxation 1 483 - 17
Cash and cash equivalents 32 943 21 269 30 931
Total assets 993 727 379 706 997 779
Equity 320 561 179 767 315 143
Ordinary shareholders' equity 306 795 175 488 301 885
Non-controlling interest 13 766 4 279 13 258
Non-current liabilities 529 980 136 556 527 956
Preference share liability 61 33 087 48
Long-term borrowings 480 476 92 109 474 167
Derivative financial instruments 412 4 468 532
Deferred revenue 3 443 6 140 7 581
Deferred taxation 45 588 752 45 628
Current liabilities 143 186 63 383 154 680
Preference share liability 37 574 - 38 951
Short-term borrowings 90 172 47 905 89 164
Contingent consideration - 125 105
Taxation 2 820 2 119 1 303
Bank overdrafts - - 558
Other current liabilities 12 620 13 234 24 599
Total equity and liabilities 993 727 379 706 997 779
STATEMENT OF CHANGES IN EQUITY
Unaudited Unaudited Audited
6 months 6 months 12 months
to to to
(£'000) 31/08/17 31/08/16 28/02/17
Balance at beginning of the period 315 143 160 214 160 214
Profit for the year 11 885 15 471 56 234
Proceeds from ordinary share issue 93 1 743 76 478
Dividends distributed to shareholders (1 501) (572) (572)
Transaction costs on issue of shares - - (552)
Disposal of subsidiary/liquidation
of employees share trust - - (60)
Acquisition of subsidiaries - (535) 8 537
Capital reserve (Employee Share
Option Scheme) 20 19 38
Distribution to minorities (564) - (548)
Other comprehensive income for the year (4 515) 3 427 15 374
Balance at the end of the period 320 561 179 767 315 143
STATEMENT OF CASH FLOWS
Unaudited Unaudited Audited
6 months 6 months 12 months
to to to
(£'000) 31/08/17 31/08/16 28/02/17
Cash flows from operating activities (7 100) 5 509 10 670
Operating profit 40 145 19 482 73 180
Non-cash items (9 341) (12 023) (48 204)
Changes in working capital (15 645) 2 044 4 053
Interest received 3 407 844 2 573
Interest paid (22 645) (4 720) (18 479)
Dividends paid (1 501) (572) (572)
Taxation paid (1 520) 454 (1 881)
Cash flows utilised in
investing activities 5 905 (42 621) (69 374)
Acquisition of investment properties (11 917) (33 320) (54 468)
Acquisition of property, plant
and equipment (3 098) (1 457) (2 944)
Acquisition of investment (360) - -
Business combinations, net
of cash acquired - - 758
Proceeds on disposal of investment
properties 18 869 - 5 896
Proceeds on disposal of property,
plant and equipment - - 4 913
Net proceeds on disposal of investment 389 - 1
Dividends received from associates - 327 186
Loans advanced to joint venture (5 952) (2 590) (6 884)
Loans repaid by/(advanced to)
associate undertaking 3 975 602 (8 267)
Loans and advances - issued 55 433 (41 297) (86 955)
Loans and advances - repaid (51 434) 35 114 78 390
Net cash flow (1 195) (37 112) (58 704)
Cash flows from financing activities 3 801 36 380 67 177
Proceeds from borrowings 132 926 60 578 109 778
Repayment of borrowings (128 573) (24 208) (42 075)
Proceeds from preference share issue 12 10 22
Dividends to non-controlling interests (564) - (548)
Net increase in cash and
cash equivalents 2 606 (732) 8 473
Effect of changes in exchange rate (36) 48 (53)
Cash and cash equivalents at beginning
of the year 30 373 21 953 21 953
Cash and cash equivalents at end
of the year 32 943 21 269 30 373
NON CASH TRANSACTION
During the period under review the following non cash transaction took
place:
Tradehold Limited share issue
On 12 June 2017 Tradehold issued 81 449 shares to the former shareholders of
Pointbreak Corporate Finance, in settlement of the final deferred
consideration owing in terms of the acquisition by Mettle in 2015.
SEGMENTAL ANALYSIS
(£'000) Operating
profit/ Investment Total Total
Revenue (loss) properties assets liabilities
Six months to
31 August 2017
(unaudited)
Property -
United Kingdom 5 235 4 004 177 216 214 244 195 522
Serviced office -
United Kingdom 8 449 178 - 17 017 10 885
Property - Namibia 2 013 1 604 41 273 53 658 40 365
Property - Africa
excluding Namibia
and South Africa 3 511 3 136 78 095 87 430 82 911
Property -
South Africa 31 059 28 980 504 408 524 338 403 980
Short-term
lending -
United Kingdom 4 440 3 023 - 48 551 41 993
Short-term lending -
South Africa 802 308 - 15 926 8 985
Other - (1 088) - 32 563 (111 475)
55 509 40 145 800 992 993 727 673 166
Six months to
31 August 2016
(unaudited)
Property -
United Kingdom 6 269 6 663 161 234 201 640 205 537
Serviced office -
United Kingdom 7 590 1 422 - 15 347 9 906
Property - Namibia 1 744 1 492 32 015 32 732 27 404
Property - Africa
excluding Namibia
and South Africa 781 7 943 56 458 62 714 56 498
Property -
South Africa - - - - -
Short-term
lending -
United Kingdom 3 711 2 672 - 39 180 34 787
Short-term lending -
South Africa 810 201 - 14 178 9 812
Other - (911) - 13 915 (144 004)
20 905 19 482 249 707 379 706 199 940
Twelve months
to 28 February 2017
(audited)
Property -
United Kingdom 13 401 19 824 174 236 226 767 208 799
Serviced office -
United Kingdom 15 440 2 720 - 19 698 14 095
Property - Namibia 3 518 8 237 42 945 54 611 41 446
Property - Africa
excluding Namibia
and South Africa 3 301 8 412 76 363 83 800 82 053
Property -
South Africa 7 838 30 023 513 117 534 003 414 867
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 - (2 071) - 23 004 (122 692)
52 518 73 180 806 661 997 779 682 636
There was no intersegment revenue, resulting in all revenue being received
from external customers.
SUPPLEMENTARY INFORMATION
Unaudited Unaudited Audited
6 months 6 months 12 months
to to to
(£'000) 31/08/17 31/08/16 28/02/17
1. Number of
shares in
issue ('000) 247 174 189 430 247 093
2. Net asset
value per
share (pence) 124.1 92.6 122.2
Tangible net
asset value
per share
(pence) 134.2 86.7 131.1
(as defined by
management -
excludes deferred
tax assets and
liabilities and
intangible assets)
3. Depreciation
for the period 1 031 931 1 270
4. Capital
expenditure
for the period 15 015 34 777 57 412
Capital commitments contracted but not provided for at period-end
are:
- South Africa - £9.5 million relating to the property development
of Mamelodi, Langa, Nkandla, Elliotdale and Paarl.
- Namibia - £4.5 million relating to the developments of City Lodge
and Gobabis Mall.
5. Calculation of headline earnings
Unaudited Unaudited Audited
6 months 6 months 12 months
to to to
(£'000) 31/08/17 31/08/16 28/02/17
Gross Net Gross Net Gross Net
Net profit 10 843 10 894 50 869
Gain on
revaluation
of
investment
properties
(1 598) (1 598) (12 618) (8 285) (26 187) (18 748)
Profit on
disposal
of
investment
properties (646) (1 571)
Gain from
business
combination (23 141)
Gain on
disposal
of investments (3) (242) (287)
Loss/(profit)
on disposal
of property,
plant and
equipment 54 52
8 596 2 421 7 174
6. Financial assets
Unlisted
investments
at fund
managers
valuation 6 281 6 280 5 924
7. Contingent
liabilities 824 - 516
8. 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.
9. Events after the reporting period
Shortly before the end of the reporting period Tradehold announced a
restructuring of its business aimed at strengthening the focus on its
core property markets in the UK and South Africa. As part of this
process, its financial services businesses will be stripped out and
listed separately to create two focused businesses each with its
own, clear identity. Tradehold shareholders will receive shares in
the new company equal to the number of shares held in Tradehold.
Although the financial services assets are at this stage still
relatively small, they are considered an effective platform for
growth both organically and through acquisitions. The transaction is
expected to complete before the end of the current financial year.
During October 2017, Moorgarth contracted to a £35.7 million finance
facility with Canada Life Ltd, to re-finance eleven of its investment
properties for a duration of ten years.
In October 2017, Moorgarth acquired two office buildings near Euston
Station in London, collectively known as Connolly Works, for
£13.35 million.
Disposal of certain investment properties in South Africa have been
agreed to with independent third parties but certain sale conditions
at reporting date, have not been fully met. As such the properties
are shown as part of investment property until such time as the
conditions pass. The decisions to sell the assets were taken after
year end and therefore the requirements of IFRS 5 were not met.
The development on the investment property held by an associate,
Ifana Investments (Pty) Ltd is expected to commence after reporting
date.
Discussions are well under way to list some of the Namibian property
assets, together with the assets of development partners, Safland
Property Group, on the Namibian Stock Exchange.
10. Goodwill
Unaudited Unaudited Audited
6 months 6 months 12 months
to to to
31/08/17 31/08/16 28/02/17
10.1 Cost 13 055 11 676 13 243
Accumulated
impairment
losses (1 423) (1 222) (1 441)
11 632 10 454 11 802
10.2 Cost
Balance at
beginning
of year 13 243 11 288 11 288
Acquired
through business
combinations - 25 788
Foreign currency
translation
movements (188) 363 1 167
Balance at
end of year 13 055 11 676 13 243
10.3 Accumulated
impairment losses
Balance at
beginning
of year (1 441) (1 048) (1 048)
Foreign
currency
translation
movements 18 (174) (393)
(1 423) (1 222) (1 441)
10.4 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:
Foreign
currency
translation
Opening Additions Impairment movements Closing
Six months to
31 August 2017
(unaudited)
SA short-term
lending 2 592 (94) 2 498
UK property -
serviced
offices 8 000 8 000
Other 1 210 (76) 1 134
Total 11 802 - - (170) 11 632
Six months to
31 August 2016
(unaudited)
SA short-term
lending 1 885 314 2 199
UK property -
serviced
offices 7 975 25 8 000
Other 380 (125) 255
Total 10 240 25 - 189 10 454
Twelve months to
28 February 2017
(audited)
SA short-term
lending 1 885 707 2 592
UK property -
serviced
offices 7 975 25 8 000
Other 380 763 67 1 210
Total 10 240 788 - 774 11 802
10.4.1 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 2016
financial year.
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.
The key assumptions, long term growth rate and discount rate used in
the value-in-use calculations are as follows:
Unaudited Unaudited Audited
31/08/17 31/08/16 28/02/17
WACC 8.00% 8.00% 8.00%
Growth rate 2.50% 2.50% 2.50%
Sustainable
growth rate 0.50% 0.50% 0.50%
The principal assumptions where impairment occurs are as follows:
Unaudited Unaudited Audited
31/08/17 31/08/16 28/02/17
WACC 18.10% 18.10% 18.10%
Growth rate (11.30%) (11.30%) (11.30%)
Sustainable
growth rate (1.50%) (1.50%) (1.50%)
10.4.2 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:
Unaudited Unaudited Audited
31/08/17 31/08/16 28/02/17
WACC 15.25% 15.26% 15.26%
Growth rate 8.50% 8.50% 8.50%
Sustainable
growth rate 2.10% 2.10% 2.10%
Operating
profit margin
(% of revenue) 25.68% 25.68% 25.68%
The principal assumptions where impairment occurs are as follows:
Unaudited Unaudited Audited
31/08/17 31/08/16 28/02/17
WACC 15.34% 15.58% 15.58%
Growth rate 8.30% 7.50% 7.50%
Sustainable
growth rate 1.90% 1.30% 1.30%
11. Business Combinations
11.1 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 fair value exercise is now complete, and has resulted in a
favourable revision of the provisional fair value purchase price
allocation which was reported for the year ending 28 February 2017.
The significant changes are the gain on business combination,
which has increased by £6.66 million, from £16.481 million to
£23.141 million, and loans payable to sellers which have reduced
by £7.817 million, from payables of £6.344 million to receivables
of £1.473 million. The comparatives have been restated in order
to account for this.
The following table summarises the revised fair value purchase
price allocation for the acquisition.
Audited
12 months
to
28/02/17
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 494 665
Investment property 480 683
Property plant and equipment 4 552
Investment in associates 893
Loans receivable from sellers 1 473
Cash and cash equivalents 2 503
Trade and other receivables 4 534
Deferred tax 11
Tax receivables 16
Total liabilities (393 315)
Non-controlling interest (8 849)
Borrowings (351 196)
Deferred tax (29 554)
Tax creditor (1 281)
Trade and other payables (2 435)
Total identifiable net assets 101 350
Gain on business combination (23 141)
Total consideration 78 209
Consideration paid in cash (3 468)
Acquisition costs charged to equity (552)
Cash acquired 2 503
Net cash flow on acquisition (1 517)
12. 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:
31 August 2017
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
Derivatives 1.8 1.7
Loans to
joint venture 23.6 0.3
Loans to
associates 13.5 0.5
Loans and trade
receivables 74.3 1.9
Other receivables 0.6
Cash and
cash equivalents 32.9
Liabilities
(£'million)
Long-term
borrowings 480.5 22.6
Derivatives 0.4
Preference
shares 37.5 1.5
Deferred revenue 3.4
Contingent
consideration
Short-term
borrowings 90.2 1.8
Bank overdrafts
Trade and
other payables 12.6
31 August 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 to joint
venture 18.0
Loans to
associates 4.5
Loans and trade
receivables 47.3 2.1 0.9
Other
receivables 10.9
Cash and cash
equivalents 21.3
Liabilities (£'million)
Long-term
borrowings 102.1 4.2
Derivatives 4.5
Preference
shares 33.1 2.2
Deferred revenue 6.1
Contingent
consideration 0.3 6.3
Short-term
borrowings 37.9 0.8
Bank overdrafts
Trade and
other payables 13.2
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 1.0
Loans to
associates 12.0 1.4
Loans and trade
receivables 49.9 1.4 1.1
Other
receivables 18.9
Cash and cash
equivalents 30.9
Liabilities
(£'million)
Long-term
borrowings 489.1 10.6
Derivatives 0.5 0.2
Preference
shares 39.0 2.6
Deferred revenue 7.6
Contingent
consideration 0.1
Short-term
borrowings 74.3 2.5
Bank overdrafts 0.6
Trade and other
payables 24.6
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.
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 31 August 2017:
Unaudited 31/08/17
Level 1 Level 2 Level 3
Assets
Financial
assets at fair
value through
profit and loss
Securities 6 281
Trading derivatives
Cross currency swap 1 765
Non-financial
assets at fair
value through
profit or loss
Investment properties 800 992
Total assets - 1 765 807 273
Liabilities
Financial
liabilities at
fair value
through profit
and loss
Contingent
consideration
Derivatives
used for hedging
Interest rate
contracts 412
Financial
liabilities at
amortised cost
Preference shares 37 574 61
Borrowings 570 648
Total liabilities - 37 986 570 709
Unaudited 31/08/16
Level 1 Level 2 Level 3
Assets
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 - 37 555 140 139
Audited 28/02/17
Level 1 Level 2 Level 3
Assets
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 806 661
Total assets - 2 656 812 585
Liabilities
Financial
liabilities
at fair value
through profit
and loss
Contingent consideration 105
Trading derivatives
Cross currency swap
Derivatives
used for hedging
Interest rate
contracts 532
Financial
liabilities at
amortised cost
Preference shares 38 951
Borrowings 570 222
Total liabilities - 39 483 570 327
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 £26,00 million.
Should UK property yields decrease by 1%, the valuations would be
higher by approximately £36,00 million.
Should South Africa property yields increase by 1%, the valuations
would be lower by approximately £82,08 million.
Should South Africa property yields decrease by 1%, the valuations
would be higher by approximately £22,45 million.
Should Namibia property yields increase by 1%, the valuations would
be lower by approximately £8,24 million.
Should Namibia property yields decrease by 1%, the valuations would
be higher by approximately £0,21 million.
Should Africa (excluding Namibia and South Africa) property yields
increase by 1%, the valuations would be lower by approximately
£8,03 million.
Should Africa (excluding Namibia and South Africa) property yields
decrease by 1%, the valuations would be higher by approximately
£6,38 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.
Reconciliation of recurring level 3 fair value financial instruments:
Unaudited Unaudited Audited
31/08/17 31/08/16 28/02/17
Investment
Properties
At beginning
of year 806 661 196 879 196 879
Additions 11 917 33 320 54 468
Acquired
through
business
combinations 496 981
Capitalisation
of borrowing
costs 1 165
Foreign
currency
translation
differences (23 325) 7 334 48 538
Disposals (4 223) (444) (4 325)
Transfer to
assets held
for resale (14 000)
Straight
line lease
adjustment 8 364 768
Net gain
from fair
value adjustments
on investment
property 1 598 12 618 26 187
At end of
period 800 992 249 707 806 661
Securities
At beginning
of year 5 924 6 344 6 344
Additions 360
Fair value loss (3) (64) (419)
Distribution
received (1)
At end of
period 6 281 6 280 5 924
Contingent
consideration
At beginning
of year 105 1 797 1 797
Settled through
the issue of
ordinary shares (93) (2 004) (2 004)
Unwinding of
interest 19 18
Foreign currency
translation (12) 314 294
At end of period - 126 105
14. Share based payments
A new employee share option scheme, the Tradehold Limited Employee
Share Trust ("ESOP"), was adopted during the 2016 financial 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 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.
There were no options granted in terms of the ESOP during the
reporting period.
For the period ended 31 August 2017, Tradehold has recognised a
share-based payment expense in the statement of changes in equity
of £20 038 (2016: £19 000).
Directorate
CH Wiese (75)^
B A, LL B, D Com (HC)
Chairman
KR Collins (45)^
Appointed on 22 December 2016
MJ Roberts (70)*+
B A
HRW Troskie (47)*+
B Juris, LL B, LL M
JD Wiese (36)^
B A, LL B, M Com
Alternate to CH Wiese
JM Wragge (69)*
TA Vaughan (51)#
B Sc Hons, MRICS
FH Esterhuyse (47)#
B Acc Hons, M Com, CA(SA)
KL Nordier (50)#
B Acc, BCompt Hons, CA (SA)
Financial director
DA Harrop (47)#
B A Hons, ACA
# Executive
* Non-executive and member of audit committee and social and ethics
committee
^ Non-executive
+ Non-executive and member of the remuneration committee
Administration
Company secretary
Mettle Corporate Finance (Pty) Ltd
PO Box 3991
Tygervalley 7536
Sponsor
Bravura Capital (Pty) Ltd
Registrars
Computershare Investor Services (Pty) Ltd
PO Box 61051
Marshalltown 2107
Telephone: +27 11 370 5000
Facsimile: +27 11 370 5487
Registered office/number
Tradehold Limited
Registration number 1970/009054/06
Incorporated in the Republic of South Africa
36 Stellenberg Road
Parow Industria 7493
PO Box 6100
Parow East 7501
Telephone: +27 21 929 4800
Facsimile: +27 21 929 4785
Business address
Fourth Floor
Avantech Building
St Julian's Road
San Gwann SGN 2805
Malta
Telephone: +356 214 463 77
Auditors
PricewaterhouseCoopers Inc
Date: 09/11/2017 07:05:00 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 
