To view the PDF file, sign up for a MySharenet subscription.

TRADEHOLD LIMITED - Interim Consolidated Unaudited Financial Statements of the Tradehold Group for the Six Months to 31 August 2019

Release Date: 14/11/2019 07:05
Code(s): TDH TDHBP     PDF:  
Wrap Text
Interim Consolidated Unaudited Financial Statements of the Tradehold Group for the Six Months to 31 August 2019

(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")


- Total assets: £916.4 million (2018: £843.7 million)
- Revenue: £47.7 million (2018: £48.6 million)
- Ordinary shareholders' equity: £285.7 million (2018: £278.3 million)
- Loss attributable to shareholders: £0.4 million 
  (2018: profit £5.7 million).
- Headline earnings per share: 6.9 pence (2018: 2.3 pence)
- Tangible net asset value per share: 116.8 pence / R21.70 
  (2018: 119 pence / R22.73).

Tradehold's net assets at the reporting date were split across the United 
Kingdom in pound sterling (42.7%), United States dollar assets in Africa 
(8%), and the balance in South African rand (49.3%). In South Africa it owns 
74.3% of the Collins Property Group (after the investment by I-Group). In 
the UK it holds 100% of the Moorgarth Property Group, including a 90% stake 
in Boutique (previously known as The Boutique Workplace Company), a provider 
of serviced office accommodation in Greater London. Moorgarth owns a number 
of Boutique's sites.

Total assets now amount to £916.4 million (2018: £843.7 million). Revenue 
was £47.7 million (2018: £48.6 million) while total loss attributable to 
shareholders stood at £0.4 million (2018: profit of £5.7 million). The 
decrease is mainly due to the loss in the fair-value adjustment of its 
investment properties of £14.8 million during the reporting period, compared 
to a fair value loss of £2.1 million in the corresponding period, and profit 
from discontinued operations of £0.3 million in the prior period. 

Headline earnings per share was 6.9 pence, up from 2.3 pence and tangible 
net asset value per share (as defined by management) was 116.8 pence / 
R21.70, compared to 119 pence / R22.73 in the corresponding period.

The sum-of-the-parts valuation per share (as defined by management) was 
119.6 pence / R22.22, compared to 125.8 pence / R24.03 in the corresponding 

The difficult business conditions under which Tradehold's subsidiaries 
operated in South Africa and the UK last year, persisted during the 
reporting period to 31 August 2019. In South Africa, business confidence 
remained fragile, plunging to its lowest level since 1999, given concerns 
about the poor health of the economy and perceptions of the inability of 
Government to address the constraints that continue to impede growth. High 
levels of unemployment, ongoing labour disputes, civil unrest across the 
country and political in-fighting in especially the governing party have all 
contributed to the prevailing negative sentiment.

In the UK, the uncertainty surrounding the outcome of Brexit has severely 
hampered business confidence, with investment in future growth virtually 
coming to a standstill. Media reports reflect a continuing decline in 
consumer confidence with growth slowing to its lowest levels in six years. 
Retail has been particularly hard hit. 

Against this background, Tradehold's management teams in both the UK and 
Southern Africa have adopted a defensive stance, preserving cash, reducing 
debt, minimising non-core assets and managing assets astutely. 

Collins Group 
Collins Group owns a property portfolio comprising mainly industrial and 
commercial buildings that collectively accounts for some 1.6 million square 
metres of gross lettable area (GLA). Its major focus remains on quality 
industrial and distribution centres that together represent about 91% of 
total space available for rent. Political uncertainty has led many 
corporates to postponing investments. Consequently, there has been little 
opportunity to grow the size of the industrial portfolio. The focus has 
therefore been on retaining tenants and vacancies remained low at just 1.55% 
at the end of the reporting period. The weighted average lease expiring 
profile remains at over seven years.

Management sought to focus on enhancing the quality of the portfolio and 
protecting its current income stream. To strengthen the company's financial 
position, I-Group Holdings (Pty) Ltd (I-Group) subscribed for a 25.7% 
shareholding in Collins Group for R833 million in a transaction finalised 
early in the reporting period. The capital raised was used to reduce gearing 
thereby lowering the company's loan to value (LTV) from 67.5% to 61.2%, 
while also allowing the company to start a process of restructuring 
remaining debt more efficiently. 

In the face of such depressed market conditions, Collins continued its 
defensive strategy of disposing of non-core assets. This process started 
during the 2019 financial year when 37 mainly smaller commercial buildings 
were identified for sale. Of these, ten were sold in that year and six in 
the period to end August, with the transfer of a further two to new owners 
now underway. However, as most other property funds were also shedding non-
core assets, the number of buildings coming on to the market placed downward 
pressure on valuations. This led to Collins suffering a loss of R16.5 
million to book value on these sales, with R15 million resulting from three 
vacant properties.

For the foreseeable future management's focus will in the main be on the 
- To grow the Group's industrial portfolio with quality acquisitions
- To further reduce exposure to Government-tenanted properties which
  fortunately constitute just 2.5% of the portfolio's lettable space; and 
- To restructure remaining debt thereby reducing overall cost of finance.

The total value of the Collins portfolio was £466.7 million (R8 673 million) 
at end August, compared with £464.7 million (R8 634 million) as at 
28 February 2019. It contributed net profit of £4.8 million 
(2018: £4.6 million) to the group's net loss after minorities while its
total contribution to tangible net asset value per share was 55.4 pence

The significance of the impact on the British economy of the continuing 
uncertainties surrounding Brexit should not be underestimated. Across the 
board investment decisions have been postponed, cancelled and, in some 
instances, diverted to mainland Europe. The property industry has been 
particularly hard hit, with tenants increasingly defaulting through 
insolvency or company voluntary arrangements (CVAs), the UK version of 
business rescue. While all property segments have suffered, retail which 
constitutes about 50% by value of Moorgarth's portfolio, has been especially 

In the light of major changes in consumer purchasing patterns, particularly 
fast-growing online shopping, management has continued its focus on 
repurposing its four large shopping malls to give them wider appeal while 
reducing their reliance on retail. This is being done, inter alia, by 
expanding the tenant mix to include quality restaurants, bars, cinemas, 
gyms, dentists' and doctors' surgeries to transform these spaces into one-
stop meeting places for the community. 

To reduce the focus on retail and reach consumers in other ways, asset 
management initiatives have included other forms of hospitality. Plans are 
underway to build a hotel and 493 residential apartments on or adjacent to 
the property on which the group's Broad Street Mall in Reading outside 
London is located. Planning permission has been obtained for the new hotel 
that is to be leased to the Premier Inn hotel group. 

Full planning consent has been obtained from the Edinburgh City Council for 
the extensive redevelopment of the historic Waverley Mall, including that of 
the rooftop area, a famous landmark in the heart of the old city centre. 
Improvements to the entrances have already increased footfall through the 
centre which adjoins the city's principal railway station. 

A fire in the St Catherine's Retail Park in Perth Scotland, thought to be 
arson according to media and other reports, virtually destroyed the centre a 
week before the balance-sheet date. Rebuilding of the fully insured property 
is expected to start in 2020. 

Moorgarth's Market Place mall in Bolton, Greater Manchester, was 
particularly hard hit by the slump in retail sales in the UK. The 
financially troubled Debenhams chain, an anchor tenant, has entered into a 
company voluntary arrangement (though which rental is automatically reduced 
to 63% of the agreed contract price) while several other tenants were 
declared insolvent and moved out. Although negotiations with potential 
tenants to take up the vacant space are ongoing, management has nevertheless 
obtained an external valuation for Market Place. This necessitated a 
£5.3 million write-down to its valuation of £60 million. The fire in 
Perth necessitated an additional write-down of £1.7 million net after 
taking into account the insurance claim proceeds.

Moorgarth's share of the group net loss amounted to £7.1 million, against a 
net profit of £145 000 in 2018. The value of its portfolio reduced to £244.6 
million from £256.7 million if its interest in joint ventures (not reflected 
in the balance sheet) is included. This was mainly due to fair-value losses 
of £14.6 million on investment properties. 

Moorgarth's contribution to tangible net asset value per share is 44.8 pence 

Moorgarth continues to drive business at Boutique (previously known as The 
Boutique Workplace Company or TBWC) in acquiring suitable properties which 
are then refurbished for flexible office space lets. A recent acquisition is 
Connolly Works, a building in Euston that has been leased to Boutique, which 
is in turn sub-letting the entire building for five years to the London 
motoring business Cazoo.

Boutique performed well during the reporting period and for the first time 
exceeded income of £2 million in a single month. Occupancy averaged 91% in 
an extremely challenging market and it now offers more than 4 500 work 
stations spread across 31 buildings in Greater London. 

Its 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. Management continues its investigations into expanding 
Boutique's services into regional markets, including the UK's major 
university cities. 

Boutique's EBITDA (earnings before interest, tax, amortisation and 
depreciation) for the six months to end August was £5 million, boosted by 
the new IFRS 16 reporting requirements. Excluding IFRS 16, EBITDA would have 
been £1.4 million (2018: £714,000).

Nguni Group (Namibia)
The Namibian portfolio consists of a selection of mainly retail but also 
commercial buildings, offering a total of 92 000 square metres of gross 
lettable space in the country's main centres. The period under review saw 
the completion of the second and final phase of a new mall in Gobabis, a 
major town strategically located on the Trans-Kalahari Highway. The mall, 
which is anchored by the Shoprite Group, offers about 10 000 square metres 
of trading space. The company is at present in negotiations with a major 
corporate with a view to developing an office block as part of its own Steps 
development in the capital, Windhoek. 

The value of the Nguni Group's portfolio was £41.3 million (R767 million) at 
the reporting date, compared with £40.8 million (R757 million) on 
28 February 2019. It reported a net profit after minorities of £409,000 
(2018: net profit of £403,000) while its total contribution to tangible net 
asset value per share is 9.6 pence (R1.78).

Tradehold Africa Group (Mozambique, Botswana and Zambia)
In line with the Group's strategy of withdrawing from all the countries in 
Africa outside of South Africa and Namibia, it has sold, or is in the 
process of selling, all its properties in Zambia. It is also finalising the 
sale of the last property in Botswana. All that remains of the existing 
portfolio are three properties in Mozambique. 

The value of the portfolio decreased by £0.8 million to £25.7 million from 
£26.5 million at the end of February 2019, mainly due to the disposal of the 
Lusaka Hotel in Zambia, offset by the strengthening of the USD against the 
GBP during the period under review. The company contributed £1.7 million to 
total group profits, compared to a net profit of £2.4 million for the 
corresponding period. The decrease is due to the disposal of properties in 
Mozambique and Zambia. 

Tradehold Africa's contribution to tangible net asset value per share is 
7.8 pence (R1.45).

The board has decided not to declare an interim dividend.

The stalemate in British politics continues with a general election now 
scheduled for 12 December 2019. On the positive side, with the EU's decision 
to grant the UK's request for a further three-month extension, one can 
assume that a no-deal Brexit with its potentially disastrous consequences 
for the British economy is no longer on the table. Whatever the outcome of 
the election, we believe that in the coming months the British economy will 
start recovering as certainty about the country's future grows.

In the case of South Africa, the country's economic future now appears much 
bleaker following Finance Minister Mboweni's ominous description in his 
medium-term budget policy statement of the sharp deterioration in the 
country's finances and the looming debt trap it faces. It is obvious that it 
will take years to return the country to a strong and consistent growth 
path, even with the implementation of far-reaching turn-around strategies 
which at this stage are completely absent. 

In the light of the above and until there are clear indications of recovery 
in the economies of both South Africa and the UK, we shall continue our 
present defensive strategy. We shall focus relentlessly on our core 
business; on upgrading and maintaining our portfolio, keeping it in prime 
condition to assure full occupancy; and on reducing debt by selling off non-
core assets. At the same time, we shall remain sensitive to changes in the 
market to benefit from any opportunities that may arise. Conditions will 
undoubtedly remain difficult during all of the second half of the year, but 
we are confident we have the capabilities to continue to achieve acceptable 

C H Wiese     K L Nordier
Chairman      Director

12 November 2019

The contents of this announcement is the responsibility of the directors of 
Tradehold Limited. It is only a summary of the information contained in the 
full announcement. Any investment decisions by investors and shareholders 
should be based on consideration of the full announcement published on SENS 
on Thursday, 14 November 2019; and on 
Tradehold's website at Copies of the full announcement 
are available for inspection and may be requested at no charge from 
Tradehold's registered office at 36 Stellenberg Road, Parow Industria, or 
from that of its sponsor, Exchange Sponsors (2008) (Pty) Ltd, 44a Boundary 
Road, Inanda, Sandton, at no charge, from Monday to Friday during office 

Executive directors: T A Vaughan, F H Esterhuyse, D A Harrop, K L Nordier
Non-executive directors: C H Wiese (alternate J D Wiese), H R W Troskie,
M J Roberts, K R Collins, L L Porter
Independent non-executive directors: H R W Troskie, M J Roberts, L L Porter
Company secretary: P J Janse van Rensburg 
Transfer secretary: Computershare Investor Services (Pty) Ltd
Sponsor: Exchange Sponsors (2008)(Pty) Ltd

Date: 14/11/2019 07:05:00
Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE'). 
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
 the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct, 
indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on,
 information disseminated through SENS.

Share This Story