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Interim Consolidated Unaudited Financial Statements of the Tradehold Group for the Six Months to 31 August 2018
TRADEHOLD LIMITED
(Registration number: 1970/009054/06)
Incorporated in the Republic of South Africa
JSE Share code: TDH ISIN: ZAE000152658
JSE B Preference Share code: TDHBP ISIN: ZAE000253050
("Tradehold" or "the Group")
TRADEHOLD LIMITED: INTERIM CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS OF
THE TRADEHOLD GROUP FOR THE SIX MONTHS TO 31 AUGUST 2018
KEY INFORMATION
In the six months to 31 August 2018 the business has undergone a major
change. Its financial services interests were unbundled to shareholders and
listed separately on the AltX of the JSE Limited ("JSE") as Mettle
Investments on 23 May this year, with shareholders receiving shares in
Mettle Investments equal to the number of shares held in Tradehold.
It is important to note that because of the restructuring, Tradehold's
financial results for the six months to 31 August 2018 are not directly
comparable to those of the corresponding period in 2017:
- Total assets £843.7 million (2017: £994 million, or £929 million if
financial services are excluded)
- Revenue £48.6 million (2017: £50.3 million as restated for the
discontinued operations)
- Ordinary shareholders equity £278.4 million (2017: £306.8 million or
£287 million if financial services are excluded)
- Headline earnings per share 2.3 pence (2017: 3.5 pence or 2.5 pence if
financial services are excluded)
- Tangible net asset value per share 119 pence / R22.73 (2017: 134.2 pence /
R22.50 or 127.2 pence / R21.33 if financial services are excluded)
The unbundling has turned Tradehold into a dedicated property business with
its net assets split between the United Kingdom in pounds sterling (40%),
United States dollar assets in Africa (8%), and the balance in South African
rand (52%). In South Africa it owns 100% of the Collins Property Group and
focuses on large-scale industrial properties. In the UK it holds 100% of the
Moorgarth Property Group, including a 90% stake in The Boutique Workplace
Company (TBWC), a provider of serviced office accommodation in London, with
four of its sites being owned by Moorgarth.
FINANCIAL PERFORMANCE
Following the restructuring, total assets now amount to £843.7 million
(2017: £993.7 million, or £929 million if financial services are excluded).
Revenue was £48.6 million (2017: £50.3 million) while total profit
attributable to shareholders stood at £5.7 million (2017: £10.8 million).
The decrease is mainly due to the loss during the reporting period in the
fair-value adjustment of its investment properties of £2.1 million, compared
to a gain of £1.6 million in the corresponding period in the 2017 financial
year, and financial services net profit of £2.9 million in the prior period,
compared to profit from discontinued operations of £0.3 million in the
current period. Headline earnings per share was 2.3 pence, down from 3.5
pence (or 2.5 pence if financial services are excluded), and tangible net
asset value per share (as defined by management) was 119 pence / R22.73,
compared to 134.2 pence / R22.50 (or 127.2 pence / R21.33 if financial
services are excluded) in the corresponding period.
BUSINESS ENVIRONMENT
During the reporting period Tradehold's subsidiaries operated under
demanding conditions in both the United Kingdom and South Africa. In the
former, the continuing uncertainty about the outcome of the country's stop-
start negotiations with its partners in the EU intensified. The latest
figures by the Confederation of British Industry (CBI) show a severe scaling
back of investment by UK factories and this is symptomatic of what is
happening elsewhere across the economy. Whatever growth there is, is led
largely by consumer spending that continues to show surprising resilience.
In South Africa, there is little sign of a recovery with the economy
shrinking by 0.7% in the second quarter. The country slipped into a
recession after a revised 2.6% contraction in the first quarter, brought on
mainly by a major fall-off in activity in the agricultural, transport, trade
and manufacturing sectors coupled with shrinking consumer demand. These
conditions have led to a further contraction in formal employment. Expected
growth for the year has since been lowered to 0.5% as economic prospects
have worsened. During the reporting period the rand was at one point pushed
to over R15/$ while uncertainty persists around the government commitment to
land expropriation without compensation.
Collins Group
Tradehold has retained the Collins name for its property holdings in South
Africa. Its portfolio consists of 150 mainly industrial and commercial
buildings. The focus is on quality industrial warehousing, offering about
1.46 million square metres of gross lettable area (GLA) and constituting
some 91% of total space available for rent. The balance of the portfolio is
made up of retail (5.7%) and office accommodation (3.2%). The weighted
average lease profile is 7.17 years while vacancies constitute 2% of the
total of 1.61 million square metres of GLA. Long-term tenants for its
sophisticated large-scale units include Sasol, Pep, Unilever, MassMart, and
Nampak.
Following a decision to dispose of non-core assets, these being mainly
smaller buildings in the portfolio, management has identified 37 properties
with a total value of R1 billion for sale. The proceeds from sales will
predominantly be used to reduce debt. A number of these buildings have
already been sold, others are awaiting transfer or the outcome of due-
diligence processes. Where buildings have already been sold, prices achieved
have been at or above their holding costs.
Tradehold owns a number of mainly retail and commercial properties offering
close to 50 000 square metres of GLA in neighbouring Namibia. The end of the
reporting period saw the opening on 30 August of the first phase of the
Gobabis Mall in the strategically located town of Gobabis that provides
about 10 000 square metres of trading space. The development forms part of
Tradehold's strategy to locate dominant retail malls in some of Namibia's
major towns.
The total Collins portfolio was £501 million (R9 571 million) at the
reporting date, which includes Namibia at £40.2 million, compared with 28
February 2018 of £576 million (R9 370 million) which included Namibia's £41
million. The value has been adversely affected by the currency deterioration
of the South African rand to pound sterling (R19.097 at the end of the
reporting period compared to R16.2706 at 28 February 2018).
Collins Group, including Namibia, contributed £5.1 million (2017: £5.8
million) to net profit after minorities. The deterioration is mainly due to
exchange rate movements.
The Collins Group's total contribution to net asset value per share is 63.8
pence (R12.18).
Moorgarth
Moorgarth's portfolio of 23 properties are located throughout the UK. The
portfolio is diversified across a range of sectors, with 51.8% (by value) in
retail, 31.3% in offices (primarily in London), 9.8% in Leisure and the
balance of 7.1% being residential and development.
Moorgarth Group has experienced a challenging six months mainly in terms of
lettings in its retail and commercial properties. In addition to the
uncertainties created by Brexit, conventional retail in the UK also has to
grapple with the far-reaching changes in consumer purchasing patterns
brought about largely by on-line shopping which in July reached an all-time
high of 18.2% (The Office of National Statistics). These changes, which have
contributed to a seismic shift in retail dynamics world-wide, are having a
substantial effect on traditional retail shopping malls.
In response to the prevailing shifts in consumer buying, Moorgarth has
continued to pro-actively pursue asset management strategies which change
the nature of its major retail assets. The intention is to stimulate greater
human interaction and create a sense of community, in contrast to the
isolation of on-line shopping. In line with the global changes, strong focus
has been placed on leisure and convenience. This change in positioning also
involves a return to a traditional trading market model that embraces
community-driven retail involving local suppliers and local produce. In
addition, Moorgarth is increasingly accommodating in its malls not only
retail stores but also a growing range of services such as restaurants,
cinemas, gyms, dentists' and doctors' rooms, etc. to position these as one-
stop community centres that satisfy an expanding range of consumer needs.
Moorgarth is in the process of submitting planning applications for a 100-
room hotel adjacent to one of its malls (owned through a joint venture) as
well as a masterplan for some 500 residential apartments to be built atop
another, to further enhance that sense of community. The development
pipeline on its existing portfolio is in excess of £150 million. This will
ensure, once planning permission is granted, a significant move away from
reliance on traditional retail.
During the six month reporting period the value of Moorgarth's portfolio
(excluding work in progress) reduced to £248.3 million from £248.5 million
if its interest in joint ventures (not reflected in the balance sheet) is
included, mainly due to the disposal of two non-core properties.
Moorgarth's contribution to net asset value per share is 48.2 pence (R9.20).
The Boutique Workplace Company (TBWC)
TBWC, which offers serviced office accommodation in 31 sites across London,
has experienced a challenging six months due to intense competition from
mainly new entrants in the market that are aggressively building market
share at the expense of profitability. As a result, TBWC has lost some
tenants in certain key sites whom management is in the process of replacing.
In this it is assisted by the quality of the accommodation in which its
portfolio of 4 000 work stations are located - all 31 sites are housed in
relatively small, centrally located buildings offering a true boutique
working environment. TBWC's EBITDA for the six month reporting period was
£0.7 million (2017: £0.8 million).
During the reporting period, Moorgarth including TBWC contributed £1 million
(2017: £3.3 million) to group profits. The decrease was mainly due to a £1.8
million valuation uplift on its portfolio in the equivalent period in the
previous year, primarily relating to two Lime Street properties, compared to
a revaluation loss of £0.2 million for the current reporting period.
Tradehold Africa Group
The company owns properties in Mozambique, Botswana and Zambia. The value of
this portfolio decreased by £44.3 million to £29.7 million, from £74 million
at the end of February 2018, mainly due to the disposal of the Cognis
corporate residential development in Maputo in Mozambique during the review
period. This sale is in line with Tradehold's decision to reduce its
exposure to Africa outside South Africa. The net proceeds have been applied
to settle debt.
The company contributed £2.4 million to total group profits, enhanced by a
once-off gain on the disposal of subsidiary companies relating to the Cognis
property of £1.8 million, compared to net profit of £2.3 million for the
corresponding prior period.
Tradehold Africa's total contribution to net asset value per share is 9.6
pence (R1.83).
SHARE ISSUE AND REPURCHASE
On 19 June 2018 Tradehold issued 6 046 591 ordinary shares to shareholders
electing the dividend re-investment alternative, in lieu of the cash
dividend of 50 cents per ordinary share declared to ordinary shareholders on
22 May 2018.
It repurchased 1 310 549 of its ordinary shares on the market during the
reporting period, resulting in a total number of treasury shares held of 1
391 998 ordinary shares.
INTERIM DIVIDEND
The board has decided not to declare an interim dividend.
COMMENTS ON THE RESULTS
On 25 May 2018 Tradehold distributed its 247 174 375 ordinary shares in
Mettle Investments Limited to its shareholders as a dividend in specie, as
the final step of the unbundling of its financial services and solar energy
business interests, comprising 90% of the Reward group (retaining an
interest of 10%), 100% of the Mettle group and 100% of Tradehold Solar, to
its ordinary shareholders. 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
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. The assets
and liabilities attributable to the Reward, Mettle and Tradehold Solar
groups, classified as held for distribution, were separately disclosed in
the statement of financial position in the previous financial year.
In line with the requirements of IFRS 5, the income and expenses relating to
Reward, Mettle and Tradehold Solar are 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 main disclosures are as follows:
Reported
Unaudited Unaudited Audited
6 months 6 months 12 months
to to to
(£'million) 31/8/18 31/8/17 28/02/18
Statement of Comprehensive Income
Profit from operations held for
distribution before non-controlling interest 304 2 893 4 060
Statement of Financial Position
Current assets - Assets held for distribution - - 76 091
Current liabilities - Liabilities held
for distribution - - 58 688
Statement of Changes in Equity
Distribution of discontinued operations
to shareholders (28 940) - -
OUTLOOK
We have no doubt that the business environment in both Tradehold's main
markets will continue to be demanding in what remains of the financial year.
Even if Britain were to make dramatic progress in its Brexit negotiations
before the March 2019 deadline, any improvement in confidence will come too
late to have a material impact on Moorgarth's results. At the same time,
there are too many structural problems inhibiting meaningful growth in the
South African economy for us to expect material change in the short term. We
therefore have accepted that market conditions are not going to change
materially in either of our main markets and we have adapted our strategies
accordingly.
As reported elsewhere, Collins has started selling off its non-core property
holdings in a planned, structured manner to strengthen its balance sheet.
Disposing of these non-core assets will enable management to focus on the
company's substantial portfolio of large industrial buildings. In the
present trying times it is a comfort to know that all these buildings are
leased on long-term contracts to major South African companies, that on
average, leases have more than seven years to run and that vacancies have
been maintained at 2%.
In the UK, we believe what management is doing to adapt our retail
investments to the worldwide shift in consumer shopping habits, will go a
long way towards enhancing their relevance and profitability. As far as TBWC
is concerned, we are of the opinion its present setback is temporary. The
business has grown substantially over the past two years and new centres
opened always hold back short term performance as each takes a few months to
achieve profit. Worldwide the way people work is changing and shared office
space as a concept is here to stay. We believe we were fortunate in
obtaining a foothold in this market early on and we are convinced that
TBWC's quality offering will gain increasing acceptance from a discerning
market.
In these trying times Tradehold is fortunate in being served by a senior
management team of highly experienced professionals with deep-seated
knowledge of their markets and with the ability to extract the maximum
benefit from the quality assets in our various portfolios.
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 2018:
Adoption of IFRS 9: Financial Instruments
IFRS 9 contains three principal classification categories for financial
assets:
- measured at amortised cost;
- measured at fair value through OCI; and
- measured at fair value through profit or loss.
The classification of financial assets is based on how the asset is managed
and its contractual cash flow characteristics. The accounting policy for
financial liabilities remain the same under IFRS9. Impairment of financial
assets is to be assessed using the expected credit loss model. This model
applies to financial assets measured at amortised cost and to contract
assets. IFRS 9 has been applied prospectively and no retrospective
adjustments have been made.
Adoption of IFRS 15: Revenue from Contracts with Customers
IFRS 15 is applied to all contracts with tenants to provide a distinct good
or service (excluding those that are in scope of another standard) whether
over time or at a point in time. Revenue is recognised when control over the
distinct good or service is transferred to the tenant. Revenue is recognised
at the transaction price which is the consideration expected to be received
for providing the distinct good or service. Where the transaction price is
variable, an estimate of the variable consideration should be included in
the transaction price. In the prior year, tenant recoveries were recognised
as they were earned in line with the contractual rights in the leases. IFRS
15 has been applied cumulatively and no retrospective adjustments have been
made.
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.
PREPARATION OF FINANCIAL RESULTS
The preparation of the financial results was supervised by the group
financial director Karen Nordier BAcc, BCompt Hons, CA(SA). The condensed
consolidated interim results for the six months ended 31 August 2018 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.
CHANGES TO BOARD
The following changes to the Tradehold board occurred during the period
under review:
- Mr JM Wragge resigned as a non-executive director with effect from
1 March 2018
- Dr LL Porter has been appointed as a non-executive director with effect
from 2 May 2018.
HRW Troskie KL Nordier
Acting Chairman Director
Malta
6 November 2018
STATEMENT OF COMPREHENSIVE INCOME
Unaudited Unaudited Audited
6 months 6 months 12 months
to to to
(£'000) 31/08/18 31/08/17* 28/02/18
Revenue 48 566 50 267 101 471
Other operating income 734 1 244 1 427
(Loss) / profit on disposal of
investment properties (24) 646 1 157
Net (loss) / gain from fair value
adjustment on investment property (2 116) 1 598 11 760
Profit on disposal and scrapping of
PPE (excluding buildings) 4 - -
Employee benefit expenses (3 060) (3 024) (5 915)
Lease expenses (3 191) (2 926) (6 361)
Depreciation, impairment and
amortisation (1 531) (1 231) (2 656)
Other operating costs (12 024) (9 768) (19 383)
Trading profit 27 358 36 806 81 500
(Loss) / gain on disposal of investments (50) - 340
Gain on disposal of subsidiary 1 790 - -
Fair value gain / (loss) through
profit or loss 110 (3) (37)
Operating profit 29 208 36 803 81 803
Finance income 1 687 3 095 6 152
Finance cost (24 947) (26 417) (51 877)
Earnings from joint venture 17 199 662
Earnings from associated companies 35 27 539
Profit before taxation 6 000 13 707 37 279
Taxation 84 (4 715) (7 000)
Profit for the year from continuing
operations before non-controlling interest 6 084 8 992 30 279
Profit from operations held for
distribution before non-controlling interest 304 2 893 4 060
Profit for the year before
non-controlling interest 6 388 11 885 34 339
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 143 144 308
Income tax relating to these items (34) (24) (62)
Currency translation differences (21 354) (4 635) (2 814)
Total comprehensive income for the year (14 857) 7 370 31 771
Profit attributable to:
Owners of the parent 5 655 10 843 30 826
Non-controlling interest 733 1 042 3 513
6 388 11 885 34 339
Total comprehensive income attributable to:
Owners of the parent (15 590) 6 298 28 258
Non-controlling interest 733 1 072 3 513
(14 857) 7 370 31 771
Earnings per share (pence): basic 2.3 4.4 12.5
Number of shares for calculation of
earnings per share ('000) 248 846 247 174 247 174
Earnings per share (pence): diluted 2.3 4.4 12.5
Number of shares for calculation of
diluted earnings per share ('000) 248 846 247 438 247 519
* The comparatives have been restated for the discontinued operations.
STATEMENT OF FINANCIAL POSITION
Unaudited Unaudited Audited
(£'000) 31/08/18 31/08/17 28/02/18
Non-current assets 791 372 868 534 913 741
Property, plant and equipment 10 296 11 265 11 150
Investment properties - fair value
for accounting purposes 702 465 790 294 822 459
Investment properties - straight-line
lease income adjustment 19 721 10 698 19 188
Intangible assets 8 973 12 170 9 374
Loans to discontinued operations
held for distribution - - 8 419
Investment in joint venture 9 072 865 865
Loans to joint venture 17 339 25 916 26 218
Investments in associates 549 674 674
Loans to associates - 5 947 -
Loans receivable 9 174 1 476 2 379
Deferred taxation 12 446 8 608 11 678
Trade and other receivables 1 337 621 1 337
Current assets 52 305 125 193 161 252
Financial assets 5 344 6 281 5 886
Assets held for sale 220 - 1 271
Assets held for distribution - - 76 091
Investments carried at fair value
through profit and loss 2 586 - -
Loans receivable 754 5 210 754
Derivative financial instruments - 1 765 5 847
Loans to discontinued operations held
for distribution - - 13 421
Loans to associates 5 598 9 853 8 484
Trade and other receivables 25 910 67 658 32 748
Taxation 206 1 483 353
Cash and cash equivalents 11 687 32 943 16 397
Total assets 843 677 993 727 1 074 993
Equity 287 839 320 561 338 602
Ordinary shareholders' equity 278 349 306 795 324 744
Non-controlling interest 9 490 13 766 13 858
Non-current liabilities 506 411 529 980 604 911
Preference share liability 58 703 61 69 321
Long-term borrowings 395 986 480 476 472 384
Derivative financial instruments 4 601 412 224
Deferred revenue 4 267 3 443 10 669
Deferred taxation 42 854 45 588 52 313
Current liabilities 49 427 143 186 131 480
Preference share liability 1 010 37 574 1 229
Short-term borrowings 27 896 90 172 46 349
Liabilities held for distribution - - 58 688
Taxation 444 2 820 325
Bank overdrafts - - 514
Other current liabilities 20 077 12 620 24 375
Total equity and liabilities 843 677 993 727 1 074 993
STATEMENT OF CHANGES IN EQUITY
6 months 6 months 12 months
to to to
(£'000) 31/08/18 31/08/17 28/02/18
Balance at beginning of the period 338 602 311 106 311 106
Profit for the year 6 388 11 885 34 339
Proceeds from ordinary share issue - 93 93
Dividends distributed to shareholders (6 888) (1 501) (1 501)
Dividends reinvested by shareholders 4 879 - -
Acquisition of treasury shares (1 030) - (124)
Distribution of discontinued
operations to shareholders (28 940) - -
Transactions with minorities (3 780) - (1 881)
Capital reserve (Employee Share
Option Scheme) - 20 40
Distribution to minorities (149) (564) (1 092)
Other comprehensive income for the year (21 243) (478) (2 378)
Balance at the end of the period 287 839 320 561 338 602
STATEMENT OF CASH FLOWS
6 months 6 months 12 months
to to to
(£'000) 31/08/18 31/08/17 28/02/18
Cash flows from operating activities (6 589) (7 665) 13 173
Operating profit / (loss) 29 208 36 803 81 803
Non-cash items 1 816 (9 263) (10 525)
Changes in working capital (9 463) (16 008) (11 936)
Interest received 1 687 3 855 4 888
Interest paid (22 523) (22 524) (51 442)
Dividends paid to ordinary shareholders (6 888) (1 501) (1 501)
Dividends to non-controlling interests (149) (230) (1 092)
Taxation paid (277) (1 081) (1 220)
Operating activities of operations
held for distribution - 2 284 4 198
Cash flows utilised in investing
activities 35 331 22 288 (40 247)
Acquisition of investment properties (7 076) (11 917) (25 422)
Acquisition of property, plant and equipment (545) (3 071) (4 097)
Acquisition of financial assets (32) 1 815 -
Business combinations, net of cash acquired - - -
Proceeds on disposal of investment
properties 47 894 18 869 10 853
Proceeds on disposal of property, plant
and equipment 4 - 13
Proceeds on disposal of investments 731 (366) -
Loans repaid by operations held for
distribution - 16 383 17 646
Loans advanced to joint venture 689 (5 714) (4 532)
Loans repaid by/(advanced to) associate
undertaking 461 5 673 44
Borrowings repaid - - -
Loans and advances - issued - 3 502 (2 468)
Loans and advances - repaid (6 795) 3 999 100
Investing activities of operations
held for distribution - (6 885) (32 384)
Cash flows from financing activities (32 886) (12 018) 12 642
Proceeds from borrowings 14 099 110 764 154 144
Repayment of borrowings (50 309) (128 479) (195 719)
Proceeds from ordinary share issue 4 879 - -
Proceeds from preference share issue - 12 62 983
Redemption of preference shares (525) - (35 601)
Acquisition of treasury shares (1 030) - (124)
Acquisition of additional interest
in existing subsidiary - - (2 600)
Financing activities of operations held
for distribution - 5 685 29 559
Net (decrease) / increase in cash and
cash equivalents (4 144) 2 605 (14 432)
Effect of changes in exchange rate (52) (35) (58)
Cash and cash equivalents at beginning
of the year 15 883 30 373 30 373
Cash and cash equivalents at end
of the year 11 687 32 943 15 883
NON CASH TRANSACTION
During the period under review the following non cash transaction took
place:
Tradehold Limited dividend in specie
On 25 May 2018 Tradehold distributed its 247 174 375 ordinary shares in
Mettle Investments Limited to its shareholders as a dividend in specie, as
the final step of the unbundling of its financial services and solar energy
business interests, comprising 90% of the Reward group (while retaining an
interest of 10%), 100% of the Mettle group and 100% of Tradehold Solar, to
its ordinary shareholders. 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
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.
SEGMENTAL ANALYSIS
(£'000) Operating Investment Total Total
Revenue profit/(loss) properties assets liabilities
Six months to
31 August 2018
(unaudited)
Property
- United Kingdom 5 277 2 280 191 356 238 777 118 582
Property
- South Africa
and Namibia 30 785 27 258 501 164 532 087 392 199
Property
- Africa
excluding
Namibia and
South Africa 2 264 1 537 29 666 38 414 13 942
Serviced
office
- United Kingdom 10 240 (441) - 22 810 15 054
Operations
held for
distribution
- United Kingdom
and South Africa - - - - -
Other - (1 426) - 11 589 16 061
48 566 29 208 722 186 843 677 555 838
Six months to
31 August 2017
(unaudited)
Property
- United Kingdom 5 235 4 004 177 216 214 244 195 522
Property
- South Africa
and Namibia 33 072 30 584 545 681 577 996 444 345
Property
- Africa
excluding
Namibia and
South Africa 3 511 3 136 78 095 87 430 82 911
Serviced office
- United Kingdom 8 449 178 - 17 017 10 885
Operations held
for distribution
- United Kingdom
and South Africa - - - 64 477 50 978
Other - (1 099) - 32 563 (111 475)
50 267 36 803 800 992 993 727 673 166
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 11 049 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 - (2 020) - 29 543 16 834
101 471 81 803 841 647 1 074 993 736 391
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) 31/08/18 31/08/17 28/02/18
1. Number of shares
in issue ('000) 251 829 247 174 247 174
2. Net asset value per
share (pence) 110.5 124.1 131.4
Tangible net asset
value per share (pence) 119.0 134.2 144.0
(as defined by management
- excludes deferred tax
assets and liabilities
and intangible assets)
3. Depreciation for
the period 1 399 1 031 2 224
4. Capital expenditure
for the period 7 621 15 015 29 519
Capital commitments
contracted but not
provided for at
period-end are:
United Kingdom
- Carter Lane
refurbishment to be
part funded by HSBC
development facility 1 168
- Rutherglen car park
to be funded by
operating cash 296
South Africa
- Phase 1 of the Mezuri
development by Imbali
Props 21 (Pty) Ltd
to be funded by
Investec Ltd 1 115
- Purchase of land and
infrastructure by
Ifana Investments
(Pty) Ltd to be funded
by Investec Ltd 456
- Washington Street
development by Langa
Property Investments
(Pty) Ltd to be funded
by Investec Ltd 754
- Paarl development by
Paarl Property
Development (Pty) Ltd
to be funded by
Investec Ltd 2 985
Namibia
- Probo development
to be bank funded by
Investec Ltd 1 445
5. Headline earnings
per share
5.1 Headline earnings
per share (pence):
basic 2.3 3.5 9.2
Headline earnings
per share (pence):
diluted 2.3 3.5 9.1
5.2 Calculation
of headline
earnings Gross Net Gross Net Gross Net
Net profit 5 655 10 843 30 826
Loss/(gain)
on
revaluation
of investment
properties 2 116 1 799 (1 598) (1 598) (11 760) (6 804)
Loss/(profit)
on disposal
of
investment
properties 24 24 (646) (646) (1 157) (1 043)
Gain on
disposal of
subsidiaries (1 790) - -
Loss/(gain)
on disposal
of investments 50 (3) (340)
Profit on
disposal of
property, plant
and equipment (4) - -
5 734 8 596 22 639
6. Financial assets
Unlisted investments
at fund managers
valuation 5 344 6 281 5 886
7. Contingent liabilities - 824 1 280
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 results
on consolidation.
9. Events after the reporting period
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.
10. Goodwill
Unaudited Unaudited Audited
6 months to 6 months to 12 months to
31/08/18 31/08/17 28/02/18
10.1 Cost 8 783 13 055 9 052
Accumulated
impairment losses - (1 423) -
8 783 11 632 9 052
10.2 Cost
Balance at
beginning of year 9 052 13 243 13 243
Acquired through
business combinations - - 10
Disposals / transfer
to assets held
for sale (22) - (4 013)
Warranty settlement - - (212)
Foreign currency
translation movements (247) (188) 24
Balance at end of year 8 783 13 055 9 052
10.3 Accumulated
impairment losses
Balance at beginning
of year - (1 441) (1 441)
Transfer to assets
held for sale - - 1 434
Foreign currency
translation movements - 18 7
- (1 423) -
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 as the main
geography, and the type of business is property. Goodwill is
monitored by management at the operating segment level. The
following is a summary of the goodwill allocation for each
applicable operating segment:
Transfer
to
assets
held for
distri-
Opening Additions bution
Six months to 31 August 2018 (unaudited)
UK property - serviced offices 8 010 - -
Namibia property 357 - (22)
Africa property 685 - -
Total 9 052 - (22)
Six months to 31 August 2017 (unaudited)
SA short-term lending 2 592 - -
UK property - serviced offices 8 000 - -
Namibia property 447 - -
Africa property 763 - -
Total 11 802 - -
Twelve months to 28 February 2018 (audited)
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)
Foreign
currency
transla-
Warranty Impair- tion
settlement ment movements Closing
Six months to
31 August 2018 (unaudited)
(continued)
UK property - serviced offices - - - 8 010
Namibia property - - (292) 43
Africa property - - 45 730
Total - - (247) 8 783
Six months to 31 August 2017
(unaudited) (continued)
SA short-term lending - - (94) 2 498
UK property - serviced offices - - - 8 000
Namibia property - - (16) 431
Africa property - - (60) 703
Total - - (170) 11 632
Twelve months to 28 February 2018
(audited) (continued)
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
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.
Unaudited Unaudited Audited
31/08/18 31/08/17 28/02/18
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% 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:
WACC 29.13% 18.10% 29.13%
Growth rate (20.00%) (11.30%) (20.00%)
Sustainable growth rate (1.50%) (1.50%) (1.50%)
11. 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:
Net Total Total
31 August 2018 Carrying (losses) interest interest Impair-
Assets (£'million) value /gains income expense ment
Financial asset
at fair value
through profit or
loss 7.9 0.1 - - -
Loans to joint
venture 17.3 - 0.5 - -
Loans to associates 5.6 - 1.0 - -
Loans and trade
receivables 9.9 - - - 0.5
Other receivables 27.5 - - - -
Cash and cash
equivalents 11.7 - 0.2 - -
Liabilities (£'million)
Long-term borrowings 396.0 - - 23.1 -
Derivatives 4.6 - - - -
Preference shares 59.7 - - 0.9 -
Deferred revenue 4.3 - - - -
Short-term borrowings 27.9 - - 1.0 -
Trade and other payables 20.1 - - - -
Net Total Total
31 August 2017 Carrying (losses) interest interest Impair-
Assets (£'million) value /gains income expense ment
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 - - - -
Short-term borrowings 90.2 - - 1.8 -
Trade and other payables 12.6 - - - -
Net Total Total
28 February 2018 Carrying (losses) interest interest Impair-
Assets (£'million) value /gains income expense ment
Financial asset
at fair value
through profit
or loss 5.9 - - - -
Derivatives 5.8 - - - -
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 - - - -
Short-term borrowings 36.8 - - 5.4 -
Bank overdrafts 0.5 - - - -
Trade and other payables 24.4 - - - -
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.
12. 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 2018:
Unaudited 31/08/18
Assets Level 1 Level 2 Level 3
Financial assets at
fair value through
profit and loss
Securities 7 930
Non-financial assets
at fair value through
profit or loss
Investment properties 722 186
Total assets 730 116
Liabilities
Financial liabilities
at fair value through
profit and loss
Trading derivatives
Cross currency swap 4 486
Derivatives used for hedging
Interest rate contracts 115
Financial liabilities
at amortised cost
Preference shares 59 660 53
Borrowings 423 882
Total liabilities 64 261 423 935
Unaudited 31/08/17
Assets Level 1 Level 2 Level 3
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
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
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
Derivatives used
for hedging
Interest rate contracts 224
Financial liabilities
at amortised cost
Preference shares 70 488 62
Borrowings 518 733
Total liabilities 70 712 518 795
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 period end.
Should UK property yields increase by 1%, the valuations would be
lower by approximately £31 million.
Should UK property yields decrease by 1%, the valuations would
be higher by approximately £43 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 £4.23 million.
Should Namibia property yields decrease by 1%, the valuations
would be higher by approximately £5.33 million.
Should Namibia property vacancy rates increase by 1%, the
valuations would be lower by approximately £0.42 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 £10.40 million.
Should Africa (excluding Namibia and South Africa) property
yields decrease by 1%, the valuations would be higher by
approximately £6.71 million.
Should Africa (excluding Namibia and South Africa) property
vacancy rates increase by 1%, the valuations would be lower by
approximately £8.06 million.
Should Africa (excluding Namibia and South Africa) property
vacancy rates decrease by 1%, the valuations would be higher by
approximately £8.03 million.
Should South Africa property yields increase by 1%, the valuations
would be lower by approximately £82.28 million.
Should South Africa property yields decrease by 1%, the valuations
would be higher by approximately £21.14 million.
Should South Africa property vacancy rates increase by 1%, the
valuations would be lower by approximately £36.19 million.
Should South Africa property vacancy rates decrease by 1%, the
valuations would be higher by approximately £21.82 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
31/08/18 31/08/17 28/02/18
Investment Properties
At beginning of year 841 647 806 660 806 660
Additions 7 076 11 917 25 422
Acquired through
change in control
of associate to
subsidiary - - 4 840
Capitalisation of
borrowing costs 361 - 641
Foreign currency
translation
differences (80 949) (23 324) (10 797)
Disposals (47 917) (4 223) (9 696)
Transfer to assets
held for resale (223) - (1 271)
Straight line
lease adjustment 4 307 8 364 14 088
Net (loss) / gain
from fair value
adjustments on
investment property (2 116) 1 598 11 760
At end of period 722 186 800 992 841 647
Securities
At beginning of year 5 886 5 923 5 923
Additions 79 361 -
Loss of controlling
interest in subsidiary 2 586 - -
Fair value gain / (loss) 110 (3) (37)
Distribution received (731) - -
At end of period 7 930 6 281 5 886
DIRECTORATE AND ADMINISTRATION
Directorate
C H Wiese (76)^
B A, LL B, D Com (HC)
Chairman
K R Collins (46)+
L L Porter (66)*
B A, BSc, DPhil, FBCS, CITP
Appointed on 2 May 2018
M J Roberts (71)*+~
B A
H R W Troskie (48)*+~
B Juris, LL B, LL M
J D Wiese (37)^
B A, LL B, M Com
alternate to C H Wiese
J M Wragge (70)*
Resigned on 1 March 2018
T A Vaughan (52)#
B Sc Hons, MRICS
F H Esterhuyse (48)#
B Acc Hons, M Com, CA(SA)
K L Nordier (51)#~
B Acc, BCompt Hons, CA (SA)
Financial director
D A Harrop (48)#
B A Hons, ACA
# Executive
^ Non-executive
* Non-executive and member of the audit committee
+ Non-executive and member of the remuneration committee
~ Member of the social and ethics committee
Administration
Company secretary
Mettle Corporate Finance (Pty) Ltd
PO Box 3991
Tygervalley 7536
Sponsor
Mettle Corporate Finance (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: 08/11/2018 07:05:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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