Wrap Text
Summary of Audited Consolidated Results of the Tradehold Goup for the 12 months to 28 February 2018 & Cash Dividend
TRADEHOLD LIMITED
(Registration number: 1970/009054/06)
Incorporated in the Republic of South Africa
JSE Ordinary Share code: TDH ISIN: ZAE000152658
JSE B Preference Share code: TDHBP ISIN: ZAE000253050
("Tradehold" or "the Group")
SUMMARY OF THE AUDITED CONSOLIDATED RESULTS OF THE TRADEHOLD GROUP FOR THE
12 MONTHS TO 28 FEBRUARY 2018 AND CASH DIVIDEND DISTRIBUTION
KEY INFORMATION
- Total assets up 7.8% to £1 075 million
- Revenue 138.6% up at £101 million
- Ordinary shareholders equity up 9% to £325 million
- Headline earnings per share up 300% to 9.2 pence
- Tangible net asset value per share up 11.2% to 144 pence
- Sum-of-the-parts valuation per share of 152.9 pence
Whereas previously most of Tradehold's property assets were located in the
UK and in Southern Africa beyond South Africa, the acquisition of the
Collins Group's South African portfolio of 153 properties towards the end of
the 2016 calendar year, has led to the major part of the company's gross
assets now being in South Africa. Tradehold's property assets in the UK are
held 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 Collins Group. In addition to its property portfolios which
represent more than 90% of its assets, the company also owns financial
services businesses 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
Tradehold is in the final stages of restructuring its business to strengthen
the focus on its core property markets in the UK and South Africa. As part
of this process, its financial services businesses will be unbundled and
listed separately to create two focused businesses each with its own clear
identity. 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 small, they are considered an effective platform for
growth both organically and through acquisitions.
FINANCIAL PERFORMANCE
The strong revenue growth - by 138.6% to £101 million from £42.5 million in
the 2017 financial year - was due largely to the integration of the results
of Collins Group for the first time with those of Tradehold for the full
reporting period. Total assets increased by 7.8% to £1 075 million from
£997.6 million. Total profit attributable to shareholders came to £30.8
million (2017: £47.5 million). The decrease is mainly due to the once-off
gain on business combination of £21.6 million in the 2017 financial year
following the acquisition of Collins Group. Headline earnings per share
increased 300% to 9.2 pence from 2.3 pence while tangible net asset value
("TNAV") per share (as defined by management) was 11.2% higher at 144 pence,
up from 129.5 pence. The sum-of-the-parts ("SOTP") valuation per share (as
defined by management) was 152.9 pence. The SOTP valuation is calculated as
the sum of the TNAV of the property divisions plus the fair value of the
serviced office business, The Boutique Workplace Company (90% interest at
£12.9 million), based on the latest transaction between third parties
(Enterprise value of 6 times forward EBITDA) and the fair value of the
financial services unbundling dividend of R604 million (£37 million in
total, being 15 pence per share).
BUSINESS ENVIRONMENT
Economic conditions in the UK and South Africa - the main markets in which
Tradehold is invested - remain fragile. Although the UK economy has to date
outperformed the gloomy forecasts made following the Brexit referendum in
2016, the market is still characterised by uncertainty as negotiations with
the EU drag on and companies delay investment until there is greater
clarity. The real-estate market in particular has proved very challenging.
Although the economy is now growing at a higher than expected 1.7%, the pace
is still below that of most of the G20 countries. A weaker currency was
expected to produce an export boom but this has not quite materialised. On
the positive side unemployment is at its lowest level in almost 40 years,
while strong VAT returns confirm a welcome upturn in consumer spending for
the final months of the reporting period.
In South Africa, the election of a new political leadership with its promise
of significant social and economic changes has altered the general mood in
the country for the better. In the first quarter of 2018 consumer confidence
rose to its highest level since 1982. Contributing to this positive
sentiment has been the decision of the international credit ratings agency
Moody's to keep the South African government's debt rating unchanged while
revising the outlook from negative to stable. The rand has strengthened
amidst signs of greater stability while the government has embarked on an
intensive programme to attract international investment. The new optimism in
the country, supported by predictions of stronger economic growth, also by
the World Bank, are expected to generate renewed investor interest in the
local property market as demand increases for industrial space in
particular.
PROPERTY
Moorgarth
During the twelve-month reporting period Moorgarth grew the value of its
portfolio by £32 million to £250 million if its interest in joint ventures
is included. Its major acquisitions during the year were 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 Connelly Works for £14
million, a Central London office building. It disposed of three non-core
properties, at prices above book value, as part of its ongoing drive to
upgrade its portfolio. During the reporting period it generated revenue of
£29 million, compared to 2017's £28.8 million which included income of £1.5
million from a hotel investment, a legacy asset disposed of in February
2017. Moorgarth's contribution to total group profits was £8.3 million
(2017: £18.1 million). The decrease was due mainly to a prior year £12
million valuation uplift following completion of extensive renovations at
the Market Place retail centre in Bolton.
Tradehold's UK business has withstood the highly volatile environment, with
management focussing on driving value and income, particularly from the
regional shopping centres and office portfolio across the UK. Moorgarth's
four major shopping centres - in Bolton in Greater Manchester, in Reading,
Edinburgh and Birmingham - are all 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. To increase operational efficiency
and reduce outsourcing costs, Moorgarth is increasingly bringing all
business activity in-house. This move has already yielded considerable
savings and increased productivity.
During the year Moorgarth continued to expand its offering of serviced
office space through its 90% held subsidiary, The Boutique Workplace Company
(TBWC), in an increasingly competitive environment. The refurbishment of an
office building in Grays Inn Road in London, acquired to provide additional
space for TBWC, was completed and fully occupied by year-end. Although
turnover grew £2.8 million, results were below forecast, due to a long-term
focus on investing in growth, an approach which impacts short-term
profitability. Two new centres incurred operating losses of £1 million,
thereby reducing EBITDA to £1.8 million (2017: £3.1 million). However,
management is confident that TBWC will, in the new financial year, further
entrench its leading position in this fast-evolving industry and deliver
substantially improved results.
Collins Group
Tradehold's association with Collins Group, a privately-owned Kwa-Zulu/Natal
company founded in 1904, dates to 2015. This is when it bought that
company's portfolio of properties in the UK and elsewhere in Southern
Africa. Towards the end of the 2017 financial year, Tradehold acquired its
far larger South African portfolio. The Collins name has been retained for
Tradehold's interests in South Africa.
At the end of the period under review the value of the South African
portfolio was £535 million (2017: £513 million). It comprises 144 properties
with a total gross lettable area (GLA) of 1.6 million square metres. Almost
91% of these are industrial properties, including a number of major state-
of-the-art distribution centres and industrial complexes that are let on
long-term triple-net leases to tenants such as Unilever, Sasol, Massmart,
Nampak and Pep. By February 2018, occupancy of the total portfolio was 98.4%
while the weighted average lease expiry profile was 7.7 years.
Management is in the process of rationalising the portfolio by selling off
non-core assets to reduce gearing and to enable it to focus on developments
that better support the needs of major players in the market.
Currently retail represents about 6% of the portfolio, and office space the
remaining 3%. The company is at present developing a number of small
convenience shopping centres near major taxi ranks and railway stations with
likely anchor tenants such as Shoprite, Spar, Cambridge (Massmart) and
Boxer. All these developments are expected to deliver yields above 10.5%. In
the light of the positive response from value retailers to these convenience
centres, Collins is developing a pipeline of them in seven regions of the
country.
In view of the present depressed market conditions, Tradehold has decided
not to pursue its previously announced intention of listing its Namibian
assets on the Namibian Stock Exchange but to integrate these more closely
with its South African operations as they are located within the rand-
denominated Common Monetary Area. These assets are now in the care of the
highly experienced team of in-house property managers and developers that
came with the Collins acquisition. The total Collins portfolio, including
Namibia (£41 million), was £576 million at year-end.
Namibia continues to be the main focus of Tradehold's property holdings
elsewhere in Africa. One of its major retail developments, the 27 000m²
Dunes Mall in Walvis Bay in partnership with Atterbury Property Group, was
completed during the year at a cost of £29 million. Work in the meanwhile is
continuing on the 10 000m² shopping mall in Gobabis, to be anchored by
Shoprite. The completion date has been set for November 2018.
During the twelve months to February 2018, Collins, including Namibia,
achieved turnover of £66 million and contributed £15 million to net profit
after minorities. Its prior year contribution is not comparable, due to the
2017 financial year including only two months of its results.
Tradehold Africa
The value of Tradehold Africa's portfolio, outside South Africa and Namibia,
decreased by £2 million to £74 million, mainly due to the disposal of two
Botswana properties during the review period. Revenue grew by 88% to £6.2
million (2017: £3.3 million) and the company contributed £4.3 million to
total group profits compared to £3 million in the corresponding period.
Given the complexity of managing a small number of properties across
different countries, Tradehold has decided to reduce its exposure to the
rest of Africa. With the exception of one, all the assets owned in Botswana
have been sold, while those in Zambia are on the market. The Cognis
corporate residential development in Maputo in Mozambique that is let on a
long-term basis to the US Embassy and the oil-exploration company Anadarko,
is in the process of being sold.
FINANCIAL SERVICES
Reward
Reward's business is spread across 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.
Established in 2011, Reward has been benefiting considerably from the
continuing volatility in the UK business environment which has seen banks
and other mainstream lenders increasingly loathe to grant loans, especially
to smaller businesses. Reward addresses this gap in the market. To derive
the maximum benefit from these conditions, it has been further building its
presence in especially the Manchester market and recruiting additional
qualified staff to man its new offices.
During the year Reward secured its first external funding, a £40 million
loan note facility from the London-based Foresight Fund. Access to this
funding, together with favourable market conditions, enabled Reward to
report another profitable year. Its total loan book grew 28% from £41
million to £52.5 million while turnover increased 17.3% to £8.8 million and
its contribution to net profit after minorities by 10.5% to £2.1 million.
Mettle
The various divisions of Cape-based Mettle Investments produced a strong
combined performance during the year, generating a net after-tax
contribution to the group of £990 000 (2017: £777 000), an increase of 27%.
The company continues to grow organically and through acquisitions in the
financial services industry. Mettle Solar, the company's venture into solar
power solutions in Africa, commissioned five new roof-top projects during
the year.
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 WITH A NEW SHARE SUBSCRIPTION RE-INVESTMENT
ALTERNATIVE
Notice is hereby given that the directors have declared a gross cash
dividend of 50 ZAR cents per ordinary share (2017: 10 ZAR cents) on 22 May
2018. Shareholders who do not wish to receive the cash dividend may utilise
all or part of the cash dividend to which they are entitled, to subscribe
for new ordinary shares in the Company. The dividend will reduce Tradehold's
stated capital.
Shareholders are referred to the declaration announcement that will be
released on SENS on Thursday, 24 May 2018 for full details of the cash
dividend and new share subscription re-investment alternative.
COMMENTS ON THE RESULTS
The provisional purchase-price allocation for the acquisition of the South
African portfolio of 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:
Restated Reported
Audited Audited
12 months 12 months
to 28/2/17 to 28/02/17
£'000 £'000
Statement of Comprehensive Income
Profit attributable to owners of the parent 47 486 44 303
Statement of Financial Position
Ordinary shareholders' equity 297 896 295 054
Non-controlling interest 13 210 13 696
Net asset value per share (pence) 120.6 119.4
Due to the imminent unbundling of the financial services businesses, these
operations have been classified as discontinued operations, which has
resulted in a restatement of the 28 February 2017 comparative income
statement, with the net result of the discontinued operations shown on a
separate line, but with no effect on net profit.
OUTLOOK
The year ahead will be another challenging one. In the UK, there is still no
clarity as to how and on what basis the country will divorce itself from its
European partners. Until that happens, the volatility in the British economy
is bound to continue. At the same time, change generates new opportunities
and Moorgarth's management has a track record for resourcefulness and drive
in capitalising on such opportunities. Its move into serviced office space
is a cogent example.
The problems facing South Africa are severe and resolving them over time
will require enormous effort and sacrifice. However, there is viable hope of
growth in many areas. We expect the present high consumer confidence to lead
to increased spending, spawning greater demand for industrial space. This
could in turn generate renewed investor interest in the local property
market away from rand-hedge companies invested in Central and Eastern
Europe.
Management's focus in the new financial year will be on unlocking the full
potential of our various businesses, as we continue to add value to the
assets we acquire. The process of separating our property interests from our
financial services businesses in South Africa and the UK is almost complete.
Much attention will be paid to bedding down the new company, to be listed on
the JSE under the name Mettle Investments. Financial services represent only
about 7% of total assets, so a priority will be to bulk up the new company
through both organic growth and meaningful acquisitions while establishing
clear separate identities for the two businesses in investors' minds.
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,
except for the adoption of the following new standards, amendments to
publicised standards and interpretations that became effective for the
current reporting period beginning 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 preliminary report.
AUDIT OPINION
These summary consolidated financial statements for the year ended 28
February 2018 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 occurred shortly after the
period under review:
- Mr J M Wragge resigned as a non-executive director with effect from
1 March 2018
- Dr L L Porter has been appointed as a non-executive director with effect
from 2 May 2018.
C H Wiese K L Nordier
Chairman Director
Malta
22 May 2018
STATEMENT OF COMPREHENSIVE INCOME
Audited Audited
12 months to 12 months to
(£'000) 28/02/18 28/02/17
Revenue 101 471 42 535
Other operating income 1 427 1 964
Profit on disposal of investment properties 1 157 1 571
Net gain from fair value adjustment on
investment property 11 760 26 956
Loss on disposal and scrapping of PPE
(excluding buildings) (54)
Employee benefit expenses (5 915) (5 221)
Lease expenses (6 361) (4 735)
Depreciation, impairment and amortisation (2 656) (2 018)
Other operating costs (19 383) (18 523)
Trading profit 81 500 42 475
Gain on business combination - 21 586
Gain on disposal of investments 340 147
Fair value (loss)/gain through profit or loss (37) (419)
Operating profit 81 803 63 789
Finance income 6 152 5 273
Finance cost (51 877) (16 591)
Profit from joint venture 662
Profit from associated companies 539 59
Profit before taxation 37 279 52 530
Taxation (7 000) (3 351)
Profit for the year from continuing operations
before non-controlling interest 30 279 49 179
Profit from operations held for distribution
before non-controlling interest 4 060 3 624
Profit for the year before non-controlling interest 34 339 52 803
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 308 226
Income tax relating to these items (62) (45)
Currency translation differences (2 814) 14 587
Total comprehensive income for the year 31 772 67 571
Profit attributable to:
Owners of the parent 30 826 47 486
Non-controlling interest 3 513 5 317
34 339 52 803
Total comprehensive income attributable to:
Owners of the parent 28 228 62 422
Non-controlling interest 3 543 5 149
31 772 67 571
Earnings per share (pence): basic
- basic 12,5 23,8
- headline earnings 9,2 2,3
Number of shares for calculation of
earnings per share ('000) 247 174 199 921
Earnings per share (pence): diluted
- diluted 12,5 23,7
- headline earnings 9,1 2,3
Number of shares for calculation of diluted
earnings per share ('000) 247 519 200 185
STATEMENT OF FINANCIAL POSITION
Audited Audited
(£'000) 28/02/18 28/02/17
Non-current assets 913 741 868 571
Property, plant and equipment 11 150 9 396
Investment properties - fair value for
accounting purposes 822 459 805 139
Investment properties - straight-line lease
income adjustment 19 188 1 521
Intangible assets 9 374 12 556
Loans to discontinued operations held
for distribution 8 419
Investment in joint venture 865 658
Loans to joint venture 26 218 19 973
Investments in associates 674 6 132
Deferred taxation 11 678 10 961
Trade and other receivables 1 337 552
Loans receivable 2 379 1 683
Current assets 161 252 128 988
Financial assets 5 886 5 924
Assets held for sale 1 271 14 389
Assets held for distribution 76 091 -
Loans to discontinued operations held for
distribution 13 421 -
Loans receivable 754 531
Derivative financial instruments 5 847 2 656
Loans to associates 8 484 8 707
Trade and other receivables 32 748 65 833
Taxation 353 17
Cash and cash equivalents 16 397 30 931
Total assets 1 074 993 997 559
Equity 338 602 311 106
Ordinary shareholders' equity 324 744 297 896
Non-controlling interest 13 858 13 210
Non-current liabilities 604 911 527 898
Preference share liability 69 321 48
Long-term borrowings 472 384 474 167
Derivative financial instruments 224 532
Deferred revenue 10 669 7 581
Deferred taxation 52 313 45 570
Current liabilities 131 480 158 555
Preference share liability 1 229 38 951
Short-term borrowings 46 349 89 164
Contingent consideration - 105
Liabilities held for distribution 58 688 -
Taxation 325 1 303
Bank overdrafts 514 558
Other current liabilities 24 375 28 474
Total equity and liabilities 1 074 993 997 559
STATEMENT OF CHANGES IN EQUITY
Audited Audited
12 months to 12 months to
(£'000) 28/02/18 28/02/17
Balance at beginning of the period 311 106 160 213
Profit for the year 34 339 52 803
Proceeds from ordinary share issue 93 76 478
Dividends distributed to shareholders (1 501) (572)
Transaction costs on issue of shares - (552)
Acquisition of treasury shares (124) -
Disposal of subsidiary - (58)
Transactions with minorities (1 881) 8 537
Capital reserve (Employee Share Option Scheme) 40 38
Distribution to minorities (1 092) (548)
Other comprehensive income for the year (2 378) 14 767
Balance at the end of the period 338 602 311 106
STATEMENT OF CASH FLOWS
Audited Audited
12 months to 12 months to
(£'000) 28/02/18 28/02/17
Cash flows from operating activities 13 173 10 448
Operating profit / (loss) 81 803 63 789
Non-cash items (10 525) (47 234)
Changes in working capital (11 936) 7 034
Interest received 4 888 2 343
Interest paid (51 442) (16 625)
Dividends paid to ordinary shareholders (1 501) (572)
Dividends to non-controlling interests (1 092) (548)
Taxation paid (1 220) (1 158)
Operating activities of operations held for
distribution 4 198 3 419
Cash flows utilised in investing activities (40 247) (69 093)
Acquisition of investment properties (25 422) (54 187)
Acquisition of property, plant and equipment (4 097) (2 867)
Business combinations, net of cash acquired - 758
Proceeds on disposal of investment properties 10 853 5 896
Proceeds on disposal of property, plant
and equipment 13 4 911
Loans repaid by operations held for distribution 17 646 -
Loans advanced to joint venture (4 532) (6 877)
Loans repaid by/(advanced to) associate undertaking 44 (4 785)
Borrowings repaid - -
Loans and advances - issued (2 468) (302)
Loans and advances - repaid 100 189
Investing activities of operations held for
distribution (32 384) (11 829)
Cash flows from financing activities 12 642 67 726
Proceeds from borrowings 154 144 100 197
Repayment of borrowings (195 719) (42 023)
Proceeds from preference share issue 62 983 22
Redemption of preference shares (35 601) -
Acquisition of treasury shares (124) -
Acquisition of non-controlling interest in
subsidiary (2 600) -
Financing activities of operations held
for distribution 29 559 9 530
Net increase in cash and cash equivalents (14 432) 9 081
Effect of changes in exchange rate (58) (661)
Cash and cash equivalents at beginning of the year 30 373 21 953
Cash and cash equivalents at end of the year 15 883 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
Twelve months to
28 February 2018
(audited)
Property -
United Kingdom 10 778 9 961 191 556 239 808 125 644
Property -
South Africa
and Namibia 66 216 62 871 575 886 615 793 455 608
Property -
Africa excluding
Namibia and
South Africa 6 204 11 048 74 205 93 956 68 089
Serviced office -
United Kingdom 18 273 (59) - 21 795 13 568
Operations
held for
distribution
- United Kingdom
and South Africa - - - 74 098 56 649
Other - (2 018) - 29 543 16 833
101 471 81 803 841 647 1 074 993 736 391
Twelve months to
28 February 2017
(audited)
Property -
United Kingdom 14 110 21 308 174 236 226 736 68 864
Property -
South Africa
and Namibia 10 393 33 361 556 061 588 835 449 211
Property -
Africa excluding
Namibia and
South Africa 3 301 8 109 76 363 83 582 52 005
Serviced office
- United Kingdom 14 731 1 236 - 19 729 13 161
Operations held
for distribution
- United Kingdom
and South Africa - - - 55 896 5 850
Other - (225) - 22 781 97 362
42 535 63 789 806 660 997 559 686 453
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) 28/02/18 28/02/17
1 Number of shares in issue ('000) 247 174 247 093
2 Net asset value per share (pence) 131,4 120,6
Tangible net asset value per share (pence) 144,0 129,5
(as defined by management - excludes
deferred tax assets and liabilities and
intangible assets)
3 Depreciation for the period 2 224 1 294
4 Capital expenditure for the period 29 519 57 412
Capital commitments contracted
but not provided for at period-end are:
South Africa
Phase 1 of the Mezuri development by
Imbali Props 21 (Pty) Ltd to be funded
by Investec Ltd 1 309
Purchase of land and infrastructure
by Ifana Investments (Pty) Ltd to be funded
by Investec Ltd 535
Nkandhla development by Colkru Investments
(Pty) Ltd to be funded by Investec Ltd 166
Washington Street development by
Langa Property Investments (Pty) Ltd
to be funded by Investec Ltd 1 770
Paarl development by Paarl Property
Development (Pty) Ltd to be funded
by Investec Ltd 6 994
Namibia
Probo development to be bank funded
by Investec Ltd 5 040
5 Calculation of headline earnings
Gross Net Gross Net
Net profit 30 826 47 486
Gain on revaluation
of investment
properties (11 760) (6 804) (26 956) (19 516)
Profit on disposal
of investment
properties (1 043) (1 571)
Gain from business
combination (21 586)
Gain on disposal of
investments (340) (287)
Loss/(profit) on
disposal of property,
plant and equipment 52
22 638 4 578
6 Financial assets
Unlisted investments
at fund managers valuation 5 886 5 924
7 Contingent liabilities 1 280 516
Contingent liabilities relates to an obligation by Tradehold
Mozambique Limitada to build additional infrastructure. The
estimated amount is £1 200 000. The remaining balance of £80 000
relates to the refinancing of a bank loan due to a margin call in
Dimopoint (Pty) Ltd.
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 annual financial
statements on consolidation.
9 Events after the reporting period
During the current financial year the group took a decision to
restructure its business aimed at strengthening the focus on its
core property markets in the UK and South Africa. Its financial
services businesses will be unbundled and listed separately, in
order 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 businesses are at this stage still relatively
small, they are considered an effective platform for growth both
organically and through acquisitions.
The unbundling transaction is expected to complete on 28 May 2018.
The unbundling transaction resulted in Tradehold classifying its
investments in Reward group, Mettle group and Tradehold Solar as
disposal groups held for distribution in line with the requirements
of IFRS 5: Non-current Assets Held for Sale and Discontinued
Operations. The assets and liabilities attributable to the Reward,
Mettle and Tradehold Solar groups, classified as held for
distribution, have been separately disclosed in the statement of
financial position. In addition, the Reward, Mettle and Tradehold
Solar groups qualify as discontinued operations as they are
components of Tradehold that have been classified as held for
distribution, and represent a separate major line of business. In
line with the requirements of IFRS 5, the income and expenses
relating to Reward, Mettle and Tradehold Solar were presented in
the income statement and statement of other comprehensive income as
a single amount as after tax profit and other comprehensive income
relating to discontinued operations.
The Cognis corporate residential development in Maputo in Mozambique
that is let on a long-term basis to the US Embassy and the oil-
exploration company Anadarko, is in the process of being sold.
Disposal of certain investment properties in South Africa have been
agreed to with independent third parties after reporting date. 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 reporting date 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.
10 Goodwill
Audited Audited
12 months to 12 months to
28/02/18 28/02/17
10.1 Cost 9 052 13 243
Accumulated impairment losses - (1 441)
9 052 11 802
10.2 Cost
Balance at beginning of year 13 243 11 288
Acquired through business combinations 10 788
Transfer to assets held for sale (4 013)
Warranty settlement (212)
Foreign currency translation movements 24 1 167
Balance at end of year 9 052 13 243
10.3 Accumulated impairment losses
Balance at beginning of year (1 441) (1 048)
Transfer to assets held for sale 1 434
Foreign currency translation movements 7 (393)
- (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:
Twelve months to 28 February 2018 (audited)
Transfer to
assets
held for
Opening Additions distribution
SA short-term lending 2 592 - (2 580)
UK property - serviced offices 8 000 10 -
Namibia property 447 - -
Africa property 763 - -
Total 11 802 10 (2 580)
Twelve months to 28 February 2018 (audited) (continued)
Foreign
currency
Warranty translation
settlement Impairment movements Closing
SA short-term
lending - - (12) -
UK property -
serviced offices - - - 8 010
Namibia property (212) - 122 357
Africa property - - (78) 685
Total (212) - 32 9 052
Twelve months to 28 February 2017 (audited)
Transfer to
assets
held for
Opening Additions distribution
SA short-term lending 1 885 - -
UK property - serviced offices 7 975 25 -
Namibia property 380 - -
Africa property - 763 -
Total 10 240 788 -
Twelve months to 28 February 2017 (audited) (continued)
Foreign
currency
Warranty translation
settlement Impairment movements Closing
SA short-term
lending - - 707 2 592
UK property -
serviced offices - - - 8 000
Namibia property - - 67 447
Africa property - - - 763
Total - - 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
held by the Group.
No impairment charge arose as a result of the impairment test
(2017: 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.
Audited Audited
28/02/18 28/02/17
The key assumptions, long term
growth rate and discount rate used
in the value-in-use calculations
are as follows:
WACC 8,00% 8,00%
Growth rate 2,50% 2,50%
Sustainable growth rate 0,50% 0,50%
The principal assumptions where
impairment occurs are as follows:
WACC 29,13% 18,10%
Growth rate -20,00% -11,30%
Sustainable growth rate -1,50% -1,50%
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 £5.1 million, from £16.481 million to £ 21.586
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 Audited
12 months to 12 months to
28/02/18 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 - (394 870)
Non-controlling interest - (8 849)
Borrowings - (351 196)
Deferred tax - (29 554)
Tax creditor - (1 281)
Trade and other payables - (3 991)
Total identifiable net assets - 99 795
Gain on business combination - (21 586)
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 - (1 518)
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:
28 February 2018
Net Total Total
Carrying (losses)/ interest interest
value gains income expense Impairment
Assets
(£'million)
Financial asset
at fair value
through profit
or loss 5,9 - - - -
Derivatives 5,8 3 - - -
Loans to
joint venture 26,2 - 2 - -
Loans to
associates 8,5 - 1 - -
Loans and trade
receivables 8,3 - 1 - -
Other
receivables 28,9 - - - -
Cash and cash
equivalents 16,4 - - - -
Liabilities
(£'million)
Long-term
borrowings 482,0 - - 44,8 -
Derivatives 0,2 - - - -
Preference
shares 70,5 - - 3,3 -
Deferred
revenue 10,7 - - - -
Contingent
consideration - - - - -
Short-term
borrowings 36,8 - - 5,4 -
Bank overdrafts 0,5 - - - -
Trade and
other payables 24,4 - - - -
28 February 2017
Net Total Total
Carrying (losses)/ interest interest
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 18,7 - - - -
Cash and cash
equivalents 30,9 - - - -
Liabilities
(£'million)
Long-term
borrowings 489,1 - - 10,8 -
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 28 February 2018:
Audited 28/02/18
Assets Level 1 Level 2 Level 3
Financial assets at fair
value through profit and loss
Securities 5 886
Trading derivatives
Cross currency swap 5 847
Non-financial assets at fair
value through profit or loss
Investment properties 841 647
Total assets 5 847 847 533
Liabilities
Financial liabilities at fair
value through profit and loss
Derivatives used for hedging
Interest rate contracts 224
Financial liabilities
at amortised cost
Preference shares 70 550
Borrowings 518 733
Total liabilities 70 774 518 733
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
Trading derivatives
Cross currency swap
Derivatives used for hedging
Interest rate contracts 532
Financial liabilities
at amortised cost
Preference shares 38 951
Borrowings 563 331
Total liabilities 39 483 563 436
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 and vacancy rates at the year-end.
Should UK property yields increase by 1%, the valuations would be
lower by approximately £31,00 million.
Should UK property yields decrease by 1%, the valuations would be
higher by approximately £43,00 million.
Should UK property vacancy rates increase by 1%, the valuations
would be lower by approximately £1,83 million.
Should UK property vacancy rates decrease by 1%, the valuations would
be higher by approximately £1,99 million.
Should Namibia property yields increase by 1%, the valuations would
be lower by approximately £4,27 million.
Should Namibia property yields decrease by 1%, the valuations
would be higher by approximately £5,37 million.
Should Namibia property vacancy rates increase by 1%, the valuations
would be lower by approximately £0,50 million.
Should Namibia property vacancy rates decrease by 1%, the valuations
would be higher by approximately £0,03 million.
Should Africa (excluding Namibia and South Africa) property
yields increase by 1%, the valuations would be lower by
approximately £28,44 million.
Should Africa (excluding Namibia and South Africa) property
yields decrease by 1%, the valuations would be higher by
approximately £18,36 million.
Should Africa (excluding Namibia and South Africa) property vacancy
rates increase by 1%, the valuations would be lower by approximately
£22,04 million.
Should Africa (excluding Namibia and South Africa) property vacancy
rates decrease by 1%, the valuations would be higher by approximately
£21,96 million.
Should South Africa property yields increase by 1%, the valuations
would be lower by approximately £ 82.90 million.
Should South Africa property yields decrease by 1%, the valuations
would be higher by approximately £ 21.30 million.
Should South Africa property vacancy rates increase by 1%, the
valuations would be lower by approximately £ 33.01 million.
Should South Africa property vacancy rates decrease
by 1%, the valuations would be higher by approximately £ 21.99
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
28/02/18 28/02/17
Investment Properties
At beginning of year 806 660 196 879
Additions 25 422 54 468
Acquired through business combinations 496 981
Acquired through change in control of
associate to subsidiary 4 840
Capitalisation of borrowing costs 641 1 165
Foreign currency translation differences (10 797) 48 536
Disposals (9 696) (4 325)
Transfer to assets held for resale (1 271) (14 000)
Straight line lease adjustment 14 088 (1)
Net gain from fair value adjustments
on investment property 11 760 26 956
At end of year 841 647 806 660
Securities
At beginning of year 5 924 6 344
Additions 123 -
Fair value loss (37) (419)
Transferred to equity - treasury shares (124)
Distribution received - (1)
At end of year 5 886 5 924
Contingent consideration
Balance at beginning of the year 105 1 797
Settled through the issue of ordinary shares (93) (2 004)
Unwinding of interest 18
Foreign currency translation (12) 294
Balance at end of the year - 105
14 Share based payments
A new employee share option scheme, the Tradehold Limited Employee
Share Trust ("ESOP"), was adopted in the previous financial year. The
maximum number of shares that can be awarded under the ESOP is 7
806 644. 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 (2017: 263 681):
On 4 December 2017 (the Grant Date), an award of 53 819 share options
of ZAR 17.91 per share were accepted by W D Marais, exercisable in
three equal tranches on 4 December 2021, 4 December 2022 and
4 December 2023 respectively.
On 4 December 2017 (the Grant Date), an award of 27,207 share options
of ZAR 17.91 per share were accepted by A T Kretzmann, exercisable
in three equal tranches on 4 December 2021, 4 December 2022 and
4 December 2023 respectively.
The fair value of the options granted was estimated on the Grant Date
using the following assumptions:
Audited Audited
28/02/18 28/02/17
Dividend yield (%) - -
Expected volatility (%) 9,88 19,30
Risk-free interest rate (%) 9,24 9,32
Expected life of share options (years) - -
Weighted average share price (ZAR) 19,25 29,25
The weighted average fair value of the
options granted during the year was £ 27 046 181 838
For the year ended 28 February 2018,
Tradehold has recognised a share-based
payment expense in the statement of
changes in equity of £ 40 076 37 551
At 28 February 2018, there are 7 461 937 (2017: 7 542 963) shares
available for utilisation under the ESOP.
JSE Sponsor to Tradehold
Mettle Corporate Finance Proprietary Limited
Date: 24/05/2018 09:04:00 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 
