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Summary of Audited Consolidated Financial Results of Tradehold Group for Year to 28 February 2019 and 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 FINANCIAL RESULTS OF THE TRADEHOLD GROUP
FOR THE YEAR TO 28 FEBRUARY 2019 AND CASH DIVIDEND DISTRIBUTION
KEY DEVELOPMENTS
In the year to 28 February 2019 the business experienced major changes.
Its financial services interests were unbundled to shareholders and listed
separately on the AltX of the JSE Limited as Mettle Investments Limited.
Shareholders received shares in the new company 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 year to 28 February 2019 are not directly
comparable to those of the corresponding year:
- Total assets £859 million (2018: £1 075 million, or £985 million if
financial services are excluded)
- Revenue £96.4 million (2018: £101.5 million)
- Ordinary shareholders equity £287.2 million (2018: £324.7 million or £295
million if financial services are excluded)
- Headline earnings per share 8 pence (2018: 9.2 pence or 7.9 pence if
financial services are excluded)
- Tangible net asset value per share 123.7 pence / R22.97 (2018: 144 pence /
R23.43 or 132 pence / R21.48 if financial services are excluded).
The unbundling has turned Tradehold into a dedicated property business with
net assets at year end split between the United Kingdom in pound sterling
(46%), United States dollar assets in Africa (8%), and the balance in South
African rand (46%). In South Africa at year end it owned 100% of the Collins
Property Group, while in the UK it holds 100% of the Moorgarth Property
Group which includes a 90% stake in The Boutique Workplace Company (TBWC),
a provider of serviced office accommodation in London, with a number of its
sites owned by Moorgarth.
Shortly before year-end, Tradehold was approached by I Group Investments
(Pty) Ltd ("I Group") with an offer to invest R833 million in Tradehold's
South African property portfolio of mostly industrial assets. The
transaction has now been finalised. Among the benefits of the investment are
the following:
- I Group has subscribed for a 25.7% shareholding at the tangible net asset
value of the South African business.
- Collins Group's gearing levels are immediately reduced by the investment.
- The reduction in gearing levels results in an immediate interest cost
saving to the group and also creates an opportunity to restructure
remaining debt more efficiently. This in turn will lead to further savings
in interest costs and improve cash flows significantly.
The investment will see Collins Group unbundled from Tradehold and listed
separately on the JSE as an industrially focused REIT by February 2022.
This step should further unlock value for Tradehold shareholders.
FINANCIAL PERFORMANCE
Total assets now amount to £859 million (2018: £1 075 million, or £985
million if financial services are excluded). Revenue was £96.4 million
(2018: £101.5 million) while total profit attributable to shareholders stood
at £13.2 million (2018: £30.8 million). The decrease is mainly due to the
loss in the fair-value adjustment of its investment properties of £17.3
million, reduced by a £8.6m fair value gain on financial assets relating to
investment property (i.e. net loss of £8.7m) during the year, compared to a
gain of £11.8 million in the corresponding financial year, and financial
services net profit of £4 million in the prior financial year, compared to
profit from discontinued operations of £0.3 million in the current financial
year.
Headline earnings per share was 8 pence, down from 9.2 pence (and up by
0.1 pence from 7.9 pence if financial services are excluded), and tangible
net asset value per share (as defined by management) was 123.7 pence /
R22.97, compared to 144 pence / R23.43 (or 132 pence / R21.48 if financial
services are excluded) in the corresponding year.
The sum-of-the-parts valuation per share (as defined by management) was
126.5 pence / R23.50.
BUSINESS ENVIRONMENT
Business conditions for Tradehold's operations in South Africa and the UK
during the second half of the financial year did not differ materially from
those of the first six months. If anything, pressure mounted, given the
rising political tensions in South Africa prior to the elections, while in
the UK, protracted Brexit negotiations further undermined business
confidence.
In South Africa the economy overall grew by a meagre 0.8% in 2018, with
recessionary conditions during the first two quarters of the year. Marred
by strikes, service delivery protests and ongoing revelations of widespread
corruption, business confidence remained at a low ebb. In addition,
investment was put largely on hold ahead of the elections.
In the UK, fundamental changes in the global retail market combined with
shorter-term confidence issues as a result of Brexit have affected us like
all others. Despite all the negative news, retail sales in the UK have in
reality increased by 1.2% overall, but those sales have been directed more
towards online which now represent 18% of total retail sales in the UK.
To counter the effects on Tradehold's business and ensure continued growth,
management:
- Has unbundled its financial services businesses and listed these
separately on the JSE's AltX to turn Tradehold into an exclusive and
focused property company
- Is withdrawing from the rest of Africa excluding Namibia to enable it to
focus all its attention on its two main markets
- As a post year end event Tradehold has entered into a transaction with an
independent third party which has substantially strengthened Tradehold's
balance sheet and gearing levels in the Group (see above under Key
Developments)
- Is disposing of non-core assets, particularly in South Africa, and
- Is progressively reducing its exposure in the UK to mainstream retail
through increasing residential, office and leisure exposures.
Collins Group
The company owns a portfolio mainly of industrial and commercial buildings
in South Africa which together offer some 1.6 million square metres of gross
lettable area (GLA). Its major focus remains on quality industrial and
distribution centres. These constitute some 91% of total space available for
rent. The political uncertainty and concomitant slowdown in the economy have
seen many corporates defer investment in new developments. Consequently,
there has been little opportunity to grow the size of the industrial
portfolio. The focus has been on retaining tenants, which include, inter
alia, Sasol, Unilever, MassMart and Pep, keeping vacancies at just 1.95% at
the end of the reporting period. Moreover, the weighted average lease
expiring profile was 7.2 years.
To strengthen the balance sheet and reduce debt, a decision was taken early
in the reporting period to dispose of non-core assets. Of the 37 mainly
smaller commercial buildings identified for this purpose, 10 had been sold
by year-end for a combined total of R136 million, realising a profit above
book value of R24 million. The remaining assets for sale with a combined
value of R831 million are currently on the market.
The total Collins portfolio was £464.7 million (R8 634 million) at the
reporting date, compared with 28 February 2018 of £535 million (R8 703
million). The value has been adversely affected by the currency
deterioration of the South African rand to pound sterling (R18.58 at the
reporting date compared to R16.27 at 28 February 2018) and lower property
valuations.
Collins Group contributed £11.4 million (2018: £12.7 million) to net profit
after minorities. The deterioration is mainly due to the loss in the fair-
value adjustment of its investment properties of £11.4 million during the
year, reduced by £8.4m fair value gain on financial assets relating to
investment properties (i.e. net loss of £3m).
The Collins Group's total contribution to tangible net asset value per share
is 58.4 pence (R10.84).
Moorgarth
The properties in Moorgarth's portfolio cover a range of sectors including
retail, which represents about 50% by value, commercial (mainly office
accommodation), leisure and residential. The focus during the year was on
broadening the retail offer away from mainstream retail, increasing the food
and beverage presence in its centres and adding leisure.
Management has been responding pro-actively in its four large shopping malls
to the far-reaching changes in consumer purchasing patterns increasingly
evident in the UK, in line with major markets elsewhere. Asset management
initiatives were focused on a community-based model and on establishing a
clear connection with the mall's demographic. The objective is to expand the
tenant mix by including restaurants, bars, cinemas, gyms, dentists' and
doctors' surgeries to establish these centres as one-stop meeting places for
the community.
A major breakthrough during the reporting period was the approval given by
the Edinburgh City Council for the extensive redevelopment of the crucial
rooftop area of Waverley Mall in the heart of the city's historical centre,
acquired two years ago. It will allow the company to add 3 000m2 mainly
leisure area to the existing 8 000m2 of the historical mall which adjoins
its principal railway station.
A planning application has also been submitted for the development of a
hotel, pre-let to a leading UK hotel group, and the development of 493
residential apartments at Broad Street Mall in Reading outside London.
It has also obtained planning approval for the redevelopment of two
buildings in Central London that will increase their bulk from 1 900m2 to 3
000m2. Moorgarth has also partnered with its serviced office business, The
Boutique Workplace Company (TBWC), in refurbishing an office building in
Carter Lane near St Paul's in London, owned by Moorgarth and now let to
TBWC. It has also acquired a building near Euston station which is currently
being refurbished and which is also pre-let to TBWC.
Moorgarth's contribution to group net profit was £4.2 million, against £8.7
million in 2018.
During the reporting period the value of Moorgarth's portfolio (excluding
work in progress) increased to £256.7 million from £250 million if its
interest in joint ventures (not reflected in the balance sheet) is included.
The valuation of its Market Place shopping centre in Bolton was reduced by
£7.3 million (i.e. 10,5%) due to concerns over the future of its anchor
tenant, Debenhams.
Moorgarth's contribution to tangible net asset value per share is 49.6 pence
(R9.21).
The Boutique Workplace Company (TBWC)
TBWC is a key component of the Group's strategy in the UK. In the 12 months
to end February 2019, TBWC, which specialises in the provision of serviced
office space, maintained its momentum in an extremely challenging market,
increasing occupancy across its portfolio to 92% at year-end in its 30 sites
across Greater London. TBWC now has 4 500 work stations under contract
compared to 2 200 in 2015.
The Group's early entry into the flexible-office environment has enabled it
to establish a presence ahead of a number of highly aggressive competitors
in the market. In terms of its 10-year strategy, it plans to open two to
three new sites annually while it is also investigating additional avenues
for growth. Initiatives are also under way to expand its flexible-office
brand into regional markets, including the UK's major university cities.
TBWC's EBITDA (earnings before interest, tax, amortisation and depreciation)
for the financial year was £1.7 million (2018: £1.8 million).
Nguni group (Namibia)
The properties in Namibia consist of just under 60 000m2 of gross lettable
area, mainly retail space but also commercial accommodation, the latter
mainly in the capital, Windhoek, where further development opportunities are
under consideration. The second half of the year saw the completion of the
first phase of a new mall in Gobabis, a major town strategically located on
the Trans-Kalahari Highway. Anchored by the Shoprite Group and fully let,
the mall offers about 10 000m2 of trading space. The second phase was
completed in the first half of the new financial year.
The Namibia portfolio was £40.8 million (R757 million) at the reporting
date, compared with 28 February 2018 of £41 million (R667 million). The
value has been adversely affected by the currency deterioration of the South
African rand to pound sterling (R18.58 at the reporting date compared to
R16.27 at 28 February 2018).
Namibia reported a net loss after minorities of £1,1 million (2018: net
profit of £2.4 million). The deterioration is mainly due to the loss in the
fair-value adjustment of its investment properties of £2.3 million during
the year.
The Nguni Group's total contribution to tangible net asset value per share
is 9.6 pence (R1.79).
Tradehold Africa Group (Mozambique, Botswana and Zambia)
The sale of the Cognis corporate residential development (also known as
Acasia) in Maputo was in line with the strategy to dispose of all the
properties it owns in Africa outside of South Africa and Namibia. In Zambia,
the Group is busy finalising the sale of its three properties there for
US$6.5 million while negotiations for the sale of its single asset in
Botswana have reached an advanced stage. The reason for the Group's
withdrawal from the rest of Africa is primarily the cost of managing a small
number of widely spread properties.
The value of this portfolio decreased by £47.7 million to £26.5 million,
from £74.2 million at the end of February 2018, mainly due to the disposal
of Cognis. 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
£3.1 million, compared to net profit of £4.3 million for the corresponding
prior period.
Tradehold Africa's total contribution to tangible net asset value per share
is 8.3 pence (R1.54).
SHARE ISSUE
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.
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 55 cents per ordinary share (2018: 50 cents) on 21 May 2019.
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 Friday, 24 May 2019 for full details of the cash
dividend and new share subscription re-investment alternative.
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 Mettle Solar Africa
(formerly Tradehold Solar), to its ordinary shareholders. The unbundling
transaction resulted in Tradehold classifying its investments in Reward
Group, Mettle group and Solar Africa 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 Solar
Africa 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 Solar Africa 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 Solar Africa 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:
Audited Audited
year year to
to 28/2/19 28/2/18
£000 £000
Statement of Comprehensive Income
Profit from operations held for distribution
before non-controlling interest 296 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 28 947 -
OUTLOOK
Although 2019 is expected to be another tough year for British consumers,
with the Bank of England reducing its growth projection from 1.7% to 1.2%
for the year, the macro-economic outlook is turning positive, depending on
the outcome of the Brexit negotiations. Whatever the outcome, it would at
least provide certainty about the challenges that lie ahead for the British
economy and provide a basis on which it can again move forward. As reported
in this document, we are making exciting progress with a number of
initiatives in this market while we continue with our new vision for our
destination malls in adapting them to changing consumer needs. Shared work-
space is increasingly replacing traditional office accommodation and much of
management's attention will devoted to ensuring TBWC remains at the
forefront in the strongly growing market.
In South Africa the economy is expected to continue to struggle in an
environment of low business confidence deepened by slow structural reform
and with the albatross of Eskom around its neck. In such an environment
demand for industrial and commercial space is expected to remain restricted.
To counter these conditions, we are following a defensive strategy - by
reducing debt, strengthening the balance sheet, divesting ourselves of non-
core assets and working to protect income by maintaining vacancies at the
present level of 1.95%. We believe we are in a better position than most to
weather these conditions as the weighted average lease profile of the
portfolio as a whole is 7.2 years, allowing us considerable breathing space.
However, this provides management with no reason for complacency as the year
ahead will not lack for challenges, with growth under constant threat.
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 Limited 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 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 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 remains the same under IFRS 9.
Impairment of financial assets is to be assessed using the expected credit
loss model which required the recognition of a loss allowance for expected
credit losses on certain financial assets. This model applies to financial
assets measured at amortised cost and to contract assets.
The adoption of IFRS 9 Financial Instruments from 1 March 2018 resulted in
changes in accounting policies and adjustments to the amounts recognised in
the financial statements. In accordance with the transitional provisions in
IFRS, comparative figures have not been restated.
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 (i.e. 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 2019 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
The following changes to the Tradehold board and company secretary occurred
during the financial year:
- 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.
H R W Troskie K L Nordier
Acting Chairman Director
Malta
21 May 2019
STATEMENT OF COMPREHENSIVE INCOME
Audited Audited
12 months to 12 months to
(£'000) 28/02/19 28/02/18
Revenue 96 438 101 471
Other operating income 1 875 1 427
Profit on disposal of investment properties 1 369 1 157
Net (loss) / gain from fair value adjustment on
investment property (17 315) 11 760
Gain on disposal and scrapping of PPE
(excluding buildings) 11
Impairment losses on financial assets (825)
Employee benefit expenses (6 586) (5 915)
Lease expenses (7 536) (6 361)
Depreciation, impairment and amortisation (3 006) (2 656)
Other operating costs (21 166) (19 383)
Trading profit 43 259 81 500
Gain/(loss) on disposal of investments (48) 340
Gain on disposal of subsidiary 3 107 -
Impairment of goodwill (115) -
Fair value gain / (loss) on financial assets at
fair value through profit or loss 8 773 (37)
Operating profit 54 976 81 803
Finance income 7 975 6 152
Finance cost (51 241) (51 877)
Earnings from joint venture 2 473 662
Earnings from associated companies 13 539
Profit before taxation 14 196 37 279
Taxation (664) (7 000)
Profit for the year from continuing operations
before non-controlling interest 13 532 30 279
Profit from operations held for distribution
before non-controlling interest 296 4 060
Profit for the year before non-controlling interest 13 828 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 320 308
Deferred tax on cash flow hedges (59) (62)
Exchange differences on translation
of foreign operations (19 496) (2 814)
Total comprehensive income for the year (5 407) 31 771
Profit attributable to:
Owners of the parent 13 212 30 826
Non-controlling interest 616 3 513
13 828 34 339
Total comprehensive income attributable to:
Owners of the parent (6 023) 28 258
Non-controlling interest 616 3 513
(5 407) 31 771
Earnings per share (pence): basic
- basic 5.3 12.5
- headline earnings 8.0 9.2
Number of shares for calculation of
earnings per share ('000) 250 140 247 174
Earnings per share (pence): diluted
- diluted 5.3 12.5
- headline earnings 8.0 9.1
Number of shares for calculation of diluted
earnings per share ('000) 250 519 247 519
STATEMENT OF FINANCIAL POSITION
Audited Audited
(£'000) 28/02/19 28/02/18
Non-current assets 805 592 919 588
Property, plant and equipment 9 336 11 150
Investment properties - fair value for
accounting purposes 702 124 822 459
Investment properties - straight-line lease
income adjustment 25 085 19 188
Intangible assets 8 080 9 374
Deferred taxation 11 811 11 678
Investments accounted for using the equity method
Investments in joint venture 11 328 865
Investments in associates 543 674
Derivative financial instruments 8 286 5 847
Financial assets at amortised cost
Loans to operations held for distribution - 8 419
Loans to joint venture 18 371 26 218
Loans receivable 9 770 2 379
Other non-current assets 858 1 337
Current assets 53 434 155 405
Financial assets at fair value through
profit and loss 7 548 5 886
Financial assets at amortised cost
Loans to operations held for distribution - 13 421
Loans receivable 872 754
Loans to associates 6 488 8 484
Trade and other receivables 7 964 16 864
Assets classified as held for sale 893 1 271
Assets held for distribution - 76 091
Other current assets 16 465 15 884
Taxation 308 353
Cash and cash equivalents 12 896 16 397
Total assets 859 026 1 074 993
Equity 297 032 338 602
Ordinary shareholders' equity 287 161 324 744
Non-controlling interest 9 871 13 858
Non-current liabilities 506 793 594 242
Preference share liability 59 780 69 321
Long-term borrowings 401 101 472 384
Derivative financial instruments 2 296 224
Deferred taxation 43 616 52 313
Current liabilities 55 201 142 149
Preference share liability 1 099 1 229
Short-term borrowings 27 120 46 349
Deferred revenue 6 335 10 669
Liabilities held for distribution - 58 688
Taxation 559 325
Bank overdrafts 638 514
Trade and other payables 19 450 24 375
Total equity and liabilities 859 026 1 074 993
STATEMENT OF CHANGES IN EQUITY
12 months to 12 months to
(£'000) 28/02/19 28/02/18
Balance at beginning of the year 338 602 311 106
Profit for the year 13 827 34 339
Issue of ordinary shares by the company - 93
Dividends distributed to shareholders (6 888) (1 501)
Dividends reinvested by shareholders 4 879 -
Acquisition of treasury shares (1 278) (124)
Capital distribution* (28 947) -
Disposal of subsidiary (3 706)
Transactions with minorities (1 881)
Capital reserve (Employee Share Option Scheme) (76) 40
Distribution to minorities (145) (1 092)
Other comprehensive income for the year (19 236) (2 378)
Balance at the end of the year 297 032 338 602
* A capital distribution was made on 28 May 2018 as part of the unbundling
transaction. The distribution is a return of capital, and has therefore
been recognised as a reduction of share capital and premium.
STATEMENT OF CASH FLOWS
12 months to 12 months to
(£'000) 28/02/19 28/02/18
Cash flows from operating activities (1 755) 13 173
Operating profit 54 976 81 803
Non-cash items (1 001) (10 525)
Changes in working capital (7 047) (11 936)
Interest received 4 333 4 888
Interest paid (46 517) (51 442)
Dividends paid to ordinary shareholders (6 888) (1 501)
Dividends paid to non-controlling interests (145) (1 092)
Taxation refunded / (paid) 534 (1 220)
Operating activities of operations
held for distribution - 4 198
Cash flows utilised in investing activities 39 166 (40 247)
Acquisition of investment properties (15 221) (25 422)
Acquisition of property, plant and equipment (1 805) (4 097)
Acquisition of financial assets (84) -
Proceeds on disposal of investment properties 54 258 10 853
Proceeds on disposal of property, plant and equipment 344 13
Proceeds on disposal of financial assets 1 729 -
Loans repaid by operations held for distribution - 17 646
Loans advanced to joint venture (227) (4 532)
Loans repaid by/(advanced to) associate undertaking (94) 44
Loans and advances - issued (580) (2 468)
Loans and advances - repaid 846 100
Investing activities of operations
held for distribution - (32 384)
Cash flows from financing activities (41 002) 12 642
Proceeds from borrowings 99 793 154 144
Repayment of borrowings (143 381) (195 719)
Proceeds from ordinary share issue 4 879 -
Proceeds from preference share issue 2 62 983
Redemption of preference shares (1 017) (35 601)
Acquisition of treasury shares (1 278) (124)
Acquisition of non-controlling interest - (2 600)
Financing activities of operations
held for distribution - 29 559
Net (decrease) / increase in cash and cash equivalents (3 591) (14 432)
Effect of changes in exchange rate (34) (58)
Cash and cash equivalents at beginning of the year 15 883 30 373
Cash and cash equivalents at end of the year 12 258 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 Solar Africa, to its
ordinary shareholders. The unbundling transaction resulted in Tradehold
classifying its investments in Reward group, Mettle group and Solar Africa
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 Solar Africa 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 Solar Africa 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
profit/ Investment Total Total
Revenue (loss) properties assets liabilities
Twelve months to
28 February 2019
(unaudited)
Property -
United Kingdom 10 048 4 895 195 274 243 651 118 693
Property -
South Africa 57 272 51 437 64 692 494 333 369 624
Property -
Namibia 4 015 481 40 768 51 739 28 736
Property -
Africa excluding
Namibia and
South Africa 3 700 1 639 26 475 34 762 12 722
Serviced office -
United Kingdom 21 403 (437) - 23 251 16 607
Operations
held for
distribution
- United Kingdom
and South Africa - - - - -
Other - (3 039) - 11 290 15 612
96 438 54 976 727 209 859 026 561 994
Twelve months to 28 February 2018 (audited)
Property -
United Kingdom 10 778 9 961 191 556 239 808 125 644
Property -
South Africa 61 980 59 525 534 862 560 370 428 707
Property - Namibia 4 236 3 346 41 024 55 423 26 901
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 - (2 019) - 29 543 16 833
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
12 months to 12 months to
(£'000) 28/02/19 28/02/18
1 Number of shares in issue ('000) 251 424 247 174
2 Net asset value per share (pence) 114.2 131.4
Tangible net asset value per share (pence) 123.7 144.0
(as defined by management - excludes
deferred tax assets and liabilities and
intangible assets)
3 Depreciation for the period 2 742 2 224
4 Capital expenditure for the period 12 773 29 519
Capital commitments contracted but not
provided for at period-end are:
South Africa
Phase 1 of the Mzuri development
by Imbali Props 21 (Pty) Ltd to be
funded by Investec Ltd 2 594
Purchase of land and infrastructure by
Ifana Investments (Pty) Ltd to be
funded by Investec Ltd 222
Washington Street development by Langa
Property Investments (Pty) Ltd to be
funded by Investec Ltd 161
Nquthu, Nongoma and Madadeni by Colkru
Investments (Pty) Ltd to be
funded by Nedbank Ltd 8 398
5 Calculation of headline earnings
Gross Net Gross Net
Net profit 13 212 30 826
Loss/(gain) from fair
value adjustment on
investment property 17 315 3 493 (11 760) (6 804)
Fair value gain from
equity-accounted
investments (2 519)
Gain on disposal of
investment properties (1 369) 1 274) (1 043)
Gain on disposal
of subsidiaries (3 107)
Loss/(gain) on disposal
of investments 48 (340)
Impairment of goodwill 115
Gain on disposal of
property, plant
and equipment (11)
19 956 22 639
6 Financial assets
Unlisted investments at
management valuation 2 586 -
Unlisted investments at
fund managers valuation 4 962 5 886
7 Contingent liabilities 3 759 1 280
8 Related parties
During the year under review, in the ordinary course of business,
certain companies within the Group entered into transactions with
each other. All these intergroup transactions are similar to
those in the prior year and have been eliminated in the annual
financial statements on consolidation.
9 Events after the reporting period
On 27 February 2019, the group entered into an agreement with I
Group Retail Holdings (Pty) Ltd to invest R833 million directly into
its portfolio of South African property assets, with an option to
subscribe for or acquire 12.5 million shares in Tradehold Ltd for
R200 million. The transaction completed in May 2019 and I Group now
hold 25.7% of the Collins South Africa group.
A conditional sale agreement was signed to dispose of Tradehold
Africa Limited's investment in Danbury Properties Limited and
Falcata Limited, together with their respective investment holdings
in First Properties Investment Limited and Hospitality Properties
Investment Limited.
A conditional sale agreement was signed to dispose of Tradehold
Africa Limited's investment in Collwana Properties (Pty) Ltd.
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.
Phase 2 of the development of Gobabis shopping centre was completed
on the 31st of March 2019. This shopping centre redevelopment is now
fully complete.
10 Goodwill
Audited Audited
12 months to 12 months to
(£'000) 28/02/19 28/02/18
10.1 Cost 8 145 9 051
Accumulated impairment losses (124) -
8 021 9 051
10.2 Cost
Balance at beginning of year 9 051 13 243
Acquisition 43 10
Disposals/Transfer to assets held for sale (720) (4 013)
Warranty settlement - (212)
Foreign currency translation movements (229) 23
Balance at end of year 8 145 9 051
10.3 Accumulated impairment losses
Balance at beginning of year - (1 441)
Impairment losses recognised in the year (115) -
Transfer to assets held for sale - 1 434
Foreign currency translation movements (9) 7
(124) -
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:
Twelve months to 28 February 2019 (unaudited)
Opening Additions Disposals
UK property - serviced offices 8 010 11 -
Other 1 041 33 (720)
Total 9 051 44 (720)
Twelve months to 28 February 2019 (unaudited) (continued)
Foreign
currency
Warranty translation
settlement Impairment movements Closing
UK property -
serviced offices - - - 8 021
Other - (115) (239) -
Total - (115) (239) 8 021
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
Other 1 210
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
Other (212) 43 1 041
Total (212) - 31 9 051
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 (2018:
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
(£'000) 28/02/19 28/02/18
The key assumptions, long term growth rate
and discount rate used in the value-in-use
calculations are as follows:
WACC 5.90% 8.00%
Growth rate 20.90% 2.50%
Sustainable growth rate 0.00% 0.50%
The principal assumptions where impairment
occurs are as follows:
WACC 15.60% 29.13%
Growth rate 15.60% -20.00%
Sustainable growth rate 0.00% -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:
28 February 2019
Net Total Total
Carrying (losses)/ interest interest
value gains income expense Impairment
Assets
(£'million)
Financial asset
at fair value
through profit
or loss 7.5 0.2 - - -
Derivatives 8.3 8.6 - - -
Loans to joint
venture 18.4 - 1.3 - -
Loans to
associates 6.5 - 1.0 - -
Loans
receivable 10.6 - - - (0.9)
Trade and other
receivables 8.3 - - - -
Cash and cash
equivalents 12.9 - 0.3 - -
Liabilities
(£'million)
Long-term
borrowings 401.1 - - (40.2) -
Derivatives 2.3 - - (4.3) -
Preference
shares 60.8 - - (5.1) -
Deferred
revenue 6.3 5.6 - - -
Short-term
borrowings 27.1 - - (4.7) -
Bank overdrafts 0.6 - - - -
Trade and
other payables 19.4 - - (0.8) -
Financial
guarantee
contract - - - - -
28 February 2018
Net Total Total
Carrying (losses)/ interest interest
value gains income expense Impairment
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 28 February 2019:
Audited 28/02/19
Assets Level 1 Level 2 Level 3
Financial assets at fair
value through profit and loss
Securities 7 548
Trading derivatives
South Africa CPI hedge 8 286
Non-financial assets at
fair value through profit
or loss
Investment properties 727 209
Total assets 8 286 734 757
Liabilities
Financial liabilities at
fair value through profit
and loss
Trading derivatives
Cross currency swap 2 236
Derivatives used for hedging
Interest rate contracts 60
Financial liabilities at
amortised cost
Preference shares 60 823 56
Borrowings 428 221
Total liabilities 63 119 428 277
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
Trading derivatives
Cross currency swap
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
12 Fair value hierarchy (continued)
The fair value of financial instruments traded in active markets
is based on quoted market prices at the year-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. The key observable
inputs are rental yields and vacancy rates.
Should UK property yields increase by 1%, the valuations would be
lower by approximately £34.41 million.
Should UK property yields decrease by 1%, the valuations would be
higher by approximately £53.45 million.
Should UK property vacancy rates increase by 1%, the valuations
would be lower by approximately £1.88 million.
Should UK property vacancy rates decrease by 1%, the valuations
would be higher by approximately £2.02 million.
Should Namibia property yields increase by 1%, the valuations would
be lower by approximately £4.28 million.
Should Namibia property yields decrease by 1%, the valuations would
be higher by approximately £5.19 million.
Should Namibia property vacancy rates increase by 1%, the valuations
would be lower by approximately £0.49 million.
Should Namibia property vacancy rates decrease by 1%, the valuations
would be higher by approximately £0.36 million.
Should Africa (excluding Namibia and South Africa) property yields
increase by 1%, the valuations would be lower by approximately
£32.60 million.
Should Africa (excluding Namibia and South Africa) property yields
decrease by 1%, the valuations would be higher by approximately
£34.72 million.
Should Africa (excluding Namibia and South Africa) property vacancy
rates increase by 1%, the valuations would be lower by approximately
£0.27 million.
Should Africa (excluding Namibia and South Africa) property vacancy
rates decrease by 1%, the valuations would be higher by
approximately £0.27 million.
Should South Africa property yields increase by 1%, the valuations
would be lower by approximately £60.25 million.
Should South Africa property yields decrease by 1%, the valuations
would be higher by approximately £39.38 million.
Should South Africa property vacancy rates increase by 1%, the
valuations would be lower by approximately £74.50 million.
Should South Africa property vacancy rates decrease by 1%, the
valuations would be higher by approximately £45.41 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
28/02/19 28/02/18
Investment Properties
At beginning of year 841 647 806 660
Additions 10 968 25 422
Acquired through change in control of
associate to subsidiary 4 252 4 840
Capitalisation of borrowing costs 979 641
Foreign currency translation differences (69 222) (10 797)
Disposals (52 890) (9 696)
Transfer to assets held for resale (893) (1 271)
Straight line lease adjustment 9 683 14 088
Net gain from fair value adjustments
on investment property (17 315) 11 760
At end of year 727 209 841 647
Financial assets
At beginning of year 5 886 5 924
Additions 84 -
Loss of controlling interest in subsidiary 2 586
Fair value gain / (loss) 191 (38)
Distribution received (1 199) -
At end of year 7 548 5 886
Directorate and administration
Directorate
C H Wiese (77)^
B A, LL B, D Com (HC)
Chairman
K R Collins (47) +
L L Porter (67) *
B A, BSc, DPhil, FBCS, CITP
Appointed on 2 May 2018
M J Roberts (72) * + ~
B A
H R W Troskie (49) * + ~
B Juris, LL B, LL M
J D Wiese (38) ^
B A, LL B, M Com
alternate to C H Wiese
T A Vaughan (53) #
B Sc Hons, MRICS
F H Esterhuyse (49) #
B Acc Hons, M Com, CA(SA)
K L Nordier (52) # ~
B Acc, BCompt Hons, CA (SA)
Financial director
D A Harrop (49) #
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: 24/05/2019 08:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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