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Tradehold Limited - Group Interim Results for the six months to 31 August 2005
Tradehold Limited
(Registration number 1970/009054/06)
JSE share code: TDH & ISIN: ZAE000026902
GROUP INTERIM RESULTS FOR THE SIX MONTHS TO 31 AUGUST 2005
Tradehold is an investment holding company with interests centred mainly in the
listed UK retailing group Instore plc (previously known as Brown & Jackson plc)
in which it holds a controlling share of 53,6%, and in wholly-owned Tradegro
(UK), which holds a portfolio of mainly retail buildings through Moorgarth Group
Ltd. Tradehold"s results are largely determined by the achievements of Instore
plc.
Operating review
Instore plc
The review period was one of continuing development and transformation of the
business. To reflect this transformation from the Poundstretcher brand to
...instore, the name of the company was changed at the end of July to Instore
plc.
It operates two retail discount chains - the original Poundstretcher and the
more modern, value-driven ...instore, developed since the appointment of the
current management team in 2002. Poundstretcher stores are being systematically
converted to the ...instore format while all new outlets trade under that name.
During the review period 25 stores were converted while eight new outlets were
opened. The total number of ...instore outlets has grown to 120. Results from
converted stores continue to exceed expectations.
The company completed the move to its purpose-built head office and 35 000 m2
distribution centre at Huddersfield. The new facility, replacing four outdated
centres, has greatly increased handling capacity at peak times and enables staff
to respond swiftly to store demands. Its capacity also allows for a major
increase in the future number of stores.
However, the changeover to the new distribution centre unavoidably affected
sales and profit performance in the first quarter while slowing the stock-build
for the April/May trading period. The period"s shortfall in profit was incurred
in the first quarter. Once the distribution centre was fully operational, like-
for-like sales started to improve as did profitability compared to the
corresponding period.
During the review period gross margins grew 1,9%, and this positive trend
continued in the first seven weeks of the second half of the year. Like-for-like
sales during these seven weeks were broadly level against strong 2004
comparatives.
In addition to the GBP4,0 million operating loss - some of it a direct result of
the adoption of International Financial Reporting Standards - Instore plc also
suffered exceptional losses of GBP3,3 million. It ended the period with net cash
of GBP1,6 million.
Tradegro (UK)
Although it operates as a standalone business, an important function of
Tradehold"s property division is to support its retail interests by sourcing and
acquiring suitable sites for Instore plc.
When Your More Store (YMS) ceased trading in September 2004, the division was
left with a number of vacant properties in a poor state of repair. Most of these
have since been extensively refurbished and are being let to good-quality
tenants, substantially improving the net asset value of the portfolio.
Management is far advanced in negotiations with tenants for those properties
still unlet. These are all expected to be let by the end of the financial year.
Taking into consideration the new acquisitions and a revaluation amounting to
about GBP1,8 million in terms of International Financial Reporting Standards,
the value of the property portfolio at the end of the review period was GBP22,7
million.
Comments on the results
Basis of preparation
The group has adopted International Financial Reporting Standards (IFRS) for the
year ending 28 February 2006. The interim results have been prepared and
presented in accordance with IAS 34 - Interim Financial Reporting. Comparative
figures have accordingly been restated, except as set out below.
The financial statements for the year ending 28 February 2006 will be the
group"s first consolidated IFRS-compliant financial statements and hence IAS 1 -
First Time Adoption of International Financial Reporting, has been applied in
preparing this interim report.
An explanation of how the transition to IFRS has affected the group"s accounting
policies is provided below.
Share-based payments (IFRS 2)
Under IFRS 2, the charge recognised in the income statement for share options,
long-term incentive plans and other share-based payments will be based on the
"fair value" of the awards, calculated using an option-pricing model. This
contrasts with the group accounting policy for 2005, where the charge recognised
was based on the "intrinsic value" of awards, being the difference between the
market value of the shares at the date of the award and the option exercise
price.
In accordance with the transitional provisions of IFRS 2, the group has applied
the fair value model to all grants of equity instruments after 7 November 2002
that had not vested at 1 January 2005. For equity-settled share-based payments,
the fair value determined at the date of grant is expensed through the income
statement on a straight-line basis over the vesting period, based on the group"s
estimate of the number of shares that will eventually vest.
Deferred taxation (IFRS 12)
Immaterial differences between UK Generally Accepted Accounting Practice (UK
GAAP) and SA Generally Accepted Accounting Practice (SA GAAP) were brought into
account to bring the group"s accounting treatment in line with IFRS.
Financial instruments (IFRS 39)
The group has previously applied AC 133 - Financial Instruments: Recognition and
Measurement, under SA GAAP, but with effect from 1 March 2005 hedge accounting
is applied. In accordance with IFRS 1 the group has elected not to restate
comparative information for this change, resulting in an adjustment to ordinary
shareholders" equity on 1 March 2005 in respect of certain financial
instruments.
Leases (AC 415)
Immaterial differences between UK GAAP and SA GAAP were brought into account to
bring the group"s accounting treatment in line with IFRS.
Cash and cash equivalents
Historically the figure shown for cash and cash equivalents was the total of
bank statement balances together with any cash balances. Uncredited lodgements
relating to cheques and credit card deposits were shown in accounts receivable
and unpresented cheques were shown in creditors. The figures shown for cash and
cash equivalents were restated such that uncredited lodgements and unpresented
cheques are now included.
Exceptional items
Exceptional items consist of provisions by Instore plc of GBP2,9 million for
store closure costs and GBP0,4 million for relocation costs less an GBP0,5
million receipt by Tradegro (UK) from the liquidator of The Famous Brunswick
Warehouse, a retail discount chain previously owned by Tradehold.
Outlook
The results achieved in the first six months largely reflect the highly cyclical
nature of British retailing. As in the past, the outcome for the year will
depend largely on Instore"s November/December trading performance. However, the
Board is confident that the substantial investment in improved distribution
facilities will stand the Group in good stead in the run-up to the peak
Christmas trading period.
Reporting currency
As the operations of Tradehold"s subsidiaries are conducted in pound sterling
and because of the distortion caused by the fluctuating value of the rand, the
company is reporting its results in the former currency. Rand equivalents are
provided to comply with regulatory requirements.
C Moore
Director
G Bernard
Director
Luxemburg
19 October 2005
Group income statement
Unaudited Unaudited
12 months 6 months to 6 months to 12 months
to to
28/02/05 31/08/04 31/08/05 31/08/05 31/08/04 28/02/05
Restated Restated Restated Restated
GBP"000 GBP"000 GBP"000 R"000 R"000 R"000
276 094 126 894 120 333 Revenue 1 430 141 1 501 889 3 175 209
Operating
14 304 (2 028) (2 323) loss (27 470) (23 183) 156 670
Net
interest
1 441 643 542 received 6 412 7 527 16 402
Loss
before
except-
ional
15 745 (1 385) (1 781) items (21 058) (15 656) 173 072
Except-
ional
648 (304) (2 842) items (32 715) (3 641) 6 876
Loss
before
16 393 (1 689) (4 623) taxation (53 773) (19 297) 179 948
3 562 (663) (253) Taxation (3 319) (7 854) 39 236
Loss after
12 831 (1 026) (4 370) taxation (50 454) (11 443) 140 712
Attri-
butable
to:
Minority
3 950 (1 216) (2 630) interest (30 565) (14 088) 42 410
Resulting
from
normal
4 141 (1 050) (1 130) activities (13 219) (12 095) 44 920
Resulting
from
except-
ional
(191) (166) (1 500) items (17 346) (1 993) (2 510)
Ordinary
share-
8 881 190 (1 740) holders (19 889) 2 645 98 302
12 831 (1 026) (4 370) (50 454) (11 443) 140 712
Earnings
pence pence pence per share cents cents cents
- before
except-
ional
2,3 0,1 (0,1) items (1,3) 1,2 25,6
- after
except-
ional
2,6 0,1 (1,3) items (5,7) 0,8 28,3
- headline
1,2 (0,3) (0,4) earnings (4,8) (3,5) 12,4
Number of
shares for
calcu-
lation of
earnings
per share
347 330 347 330 347 330 ("000) 347 330 347 330 347 330
28/02/05 31/08/04 Recon- 31/08/04 28/02/05
ciliation
of
previously
reported
results to
restated
GBP"000 GBP"000 figures R"000 R"000
Profit
attri-
butable to
ordinary
share-
holders
as
previously
reported
under SA
9 200 289 GAAP 3 838 101 946
Restate-
ments for
IFRS
(110) (9) Leases (103) (1 244)
Share-
based
(225) (90) payments (1 090) (2 588)
16 - Taxation - 188
Restated
profit
attri-
butable to
ordinary
share-
8 881 190 holders 2 645 98 302
Group statement of changes in shareholders" equity
Unaudited: Unaudited:
6 months to 6 months to
31/08/04 31/08/05 31/08/05 31/08/04
Restated Restated
GBP"000 GBP"000 R"000 R"000
53 879 63 030 Balance at 1 March 703 471 665 562
Financial instrument
adjustment on 1 March 2005
resulting from the
application of hedge
- 64 accounting 714 -
(16) - Exchange rate adjustments 25 027 (17 035)
169 140 Share-based payments 1 661 2 036
Attributable (loss)/profit
190 (1 740) for the period (19 889) 2 645
54 222 61 494 Balance at 31 August 710 984 653 208
Group cash flow statement
Unaudited: Unaudited:
6 months to 6 months to
31/08/04 31/08/05 31/08/05 31/08/04
Restated Restated
GBP"000 GBP"000 R"000 R"000
5 418 (5 711) Cash flow from operations (58 427) 56 876
(5 639) 1 468 Investment activities 17 418 (66 854)
Net acquisition of fixed
(5 032) (9 674) assets (114 790) (59 616)
(607) 11 142 Other investment activities 132 208 (7 238)
(221) (4 243) Net cash flow (41 009) (9 978)
11 206 4 194 Financing activities 50 675 134 471
Proceeds from share issue
10 993 - of subsidiary - 132 114
213 4 194 Net debt raised 50 675 2 357
Increase/(decrease) in cash
10 985 (49) and cash equivalents 9 666 124 493
Analysis of results
Unaudited: Unaudited:
6 months to 6 months to
31/08/04 31/08/05 31/08/05 31/08/04
Restated Restated
GBP"000 GBP"000 R"000 R"000
Attributable earnings of
(1 210) (1 613) Instore plc (18 918) (13 933)
Earnings of Tradegro (UK)
891 Ltd 10 572 18 142
Other Tradehold Ltd group
7 324 companies 3 826 84
(Loss)/profit before
328 (398) exceptional items (4 520) 4 293
Attributable exceptional
(138) (1 342) items (15 369) (1 648)
190 (1 740) Net (loss)/profit (19 889) 2 645
Group balance sheet
Unaudited Unaudited
28/02/05 31/08/05 31/08/05 28/02/05
Restated Restated
GBP"000 GBP"000 R"000 R"000
69 480 64 621 Non-current assets 747 148 775 471
Property, plant and
53 897 61 884 equipment 715 503 601 550
13 681 2 737 Investments 31 645 152 693
1 902 - Deferred taxation - 21 228
74 695 79 391 Current assets 917 918 833 667
39 734 37 505 Inventories 433 633 443 471
9 449 16 423 Accounts receivable 189 882 105 459
25 512 25 463 Cash and cash equivalents 294 403 284 737
144 175 144 012 Total assets 1 665 066 1 609 138
Ordinary shareholders"
63 030 61 494 equity 710 984 703 471
12 12 Preference share capital 144 144
22 711 20 118 Minority interest 232 608 253 477
16 805 23 525 Non-current liabilities 271 996 187 561
4 300 9 650 Long-term loans 111 573 47 992
513 913 Deferred taxation 10 556 5 726
11 992 12 962 Provisions 149 867 133 843
41 617 38 863 Current liabilities 449 334 464 485
1 156 - Short-term loans - 12 906
40 461 38 863 Other current liabilities 449 334 451 579
Total equity and
144 175 144 012 liabilities 1 665 066 1 609 138
28/02/05 Reconciliation of 28/02/05
previously reported
results to restated
GBP"000 figures R"000
Ordinary shareholders"
equity as previously
63 993 reported under SA GAAP 714 215
Restatements for IFRS
Leases - opening retained
(900) income adjustment (11 123)
Leases - income statement
(110) impact (1 244)
Leases - exchange rate
- adjustments 1 093
Share-based payments -
raising opening equity
150 balance 1 848
Share-based payments -
opening retained income
(150) adjustment (1 848)
Share-based payments -
(225) income statement impact (2 588)
Share-based payments -
225 raising equity balance 2 588
Taxation - opening
31 retained income adjustment 393
Taxation - income
16 statement impact 188
Taxation - exchange rate
- adjustments (51)
63 030 703 471
Supplementary information
Unaudited: Unaudited:
6 months to 6 months to
31/08/04 31/08/05 31/08/05 31/08/04
Restated Restated
GBP"000 GBP"000 R"000 R"000
2 283 3 519 1. Depreciation for the period 41 756 27 054
2. Capital expenditure for the
8 244 12 115 period 143 754 97 691
3. Calculation of headline
earnings
190 (1 740) Net (loss)/profit (19 889) 2 645
Attributable exceptional
138 1 342 items 15 369 1 648
Surplus on revaluation of
investment properties after
taxation and minority
- (1 090) interest (12 934) -
Loss/(profit) on sale and
scrapping of fixed assets
after taxation and
(1 381) 73 minority interest 866 ( 16 361)
(1 053) (1 415) (16 588) ( 12 068)
Unaudited Unaudited
28/02/05 31/08/05 31/08/05 28/02/05
4. Number of shares in issue
347 330 347 330 ("000) 347 330 347 330
5. Net asset value per share
18,1 17,7 (pence/cents) 204,7 202,5
6. Investments
13 681 2 737 Loans 31 645 152 693
2 032 - 7. Capital commitments - 22 679
15 355 14 719 8. Contingent liabilities 170 183 171 377
29 906 28 193 9. Operating lease commitments 325 967 333 781
Date: 20/10/2005 12:05:15 PM Produced by the JSE SENS Department
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