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TDH
TDH
Tradehold - Interim group results for the six months to 31 August 2006
Tradehold Limited
Registration number: 1970/009054/06
JSE share code: TDH
ISIN number: ZAE000026902
Tradehold is an investment holding company with interests centred mainly
in the listed UK retailing group Instore Plc in which it holds a
controlling share of 65,6%, 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
The operating loss suffered by Tradehold Limited in the first half of the
2007 financial year was due mainly to an extensive stock reduction and
clearance programme undertaken by Instore plc, the listed British retail
business in which Tradehold now owns a controlling interest of 65,6%. Its
shareholding, previously 55,2%, increased due to the re-acquisition of
the shares of Mr Angus Monro, the previous chief executive, and certain
senior members of management following their departure at the end of the
2006 financial year. The stock reduction and clearance programme followed
a strategic review of the business undertaken by its new chief executive,
Mr Trevor Coates, when he assumed his position at the beginning of the
present reporting period. Tradehold"s property interests, on the other
hand, have again reported encouraging results that involve a solid
improvement in the value and composition of a more diversified portfolio.
Instore Plc
Despite total sales growing 6,4% to GBP128,0 million - and like-for-like
sales at an even faster rate of 7,4% - the operating loss in the review
period was greater than in the corresponding six months. Higher operating
costs and the determined clearance of ageing stock reduced gross profit,
before items of a capital nature, to GBP7,9 million (2005: GBP12,0
million) and the gross profit margin from 10,0% to 6,2%. The business
reported a net operating loss, before items of a capital nature, of
GBP9,7 million, GBP5,7 million higher than the GBP4,0 million loss in the
same period in 2005. Instore"s balance sheet, however, strengthened
substantially, and the company ended the half-year with net cash balances
of GBP11,3 million (2005: GBP1,6 million).
Following on the strategic re-appraisal of the business during the
reporting period, a number of significant changes have been effected of
which some are expected to have a far-reaching effect on the business. An
important decision has been to retain both the Instore and Poundstretcher
trading fascias, both of which will be further refined and upgraded. This
decision was prompted by the recognition that the Poundstretcher
trademark continues to enjoy a strong price and value perception with
many customers in the value convenience market. Future decisions on which
branding a store will carry will be based on its catchment area, a
brand"s regional strength and local market conditions.
During the review period a determined campaign was launched to reduce
excess and ageing stock, improve stock management systems and rationalise
product categories to improve stock turn. This campaign has to date
reduced inventory from GBP40,7 million to GBP28,8 million, thereby
freeing up almost GBP12 million of working capital. This was done without
seriously affecting the ability of stores to satisfy customer demands.
The old stock will make room for new ranges that will be introduced
progressively, the intention being to improve sales and profit densities.
New store openings were deferred until a full review of operations would
be completed and a new strategy would be in place. As this has now been
accomplished, Instore has committed itself to four new stores and one
replacement for the second half of the year.
Profitability in the first half of the year was negatively affected by
the substantial cost of marking down and clearing out ageing and excess
stock. However, as a result, stocks now represented 11 weeks trading
against 16 weeks the previous year. Already measurable improvements have
been achieved in key areas such as homewares and outdoor leisure while
like-for-like sales trends have remained strong in a market characterised
by declining volumes.
Moorgarth
Tradehold"s property interests are vested in several Moorgarth companies
in which it holds the controlling interest. The portfolio initially
consisted mainly of retail properties, and management continues to work
closely with Instore plc in identifying and developing new space for the
chain. At the same time Moorgarth has started diversifying into offices
and industrial premises, actively managing the portfolio by selling
properties with limited value growth potential and acquiring ones
offering additional development opportunities.
Capital released by the sale of properties is re-invested in new
acquisitions and refurbishments. New acquisitions include an office and
warehouse facility in Leeds, and an office and residential development
opportunity in Harrogate while management is also investigating
opportunities outside the UK that could provide better investment
returns. During the six months the value of the portfolio increased from
GBP26,9 million to GBP32,0 million.
Also during the review period, Moorgarth acquired a majority shareholding
in a new project management business to support its own expansion
programme while it will also undertake projects gained independently in
the open market. This business, Bowcliffe LLP, has already negotiated
projects outside Moorgarth that will support it for the next two years.
Comments on the results
Items of a capital nature
Items of a capital nature consist of a provision by Instore plc of GBP1,8
million for store closure costs less a receipt of GBP0,7 million
representing a recovery of previous write-offs on the disposal of
subsidiaries.
Dividend
The board only considers declaring a dividend at year-end and not at the
interim stage.
Outlook
Although Tradehold does not expect to report a profit for the full year,
the board nevertheless remains confident of the medium to long-term
potential of its major investments. A solid foundation based on a
thoroughly professional approach has been put in place at Instore plc,
and although continued stock clearances will, for a while, impact
negatively on profitability, general sales trends are positive. As far as
Tradehold"s investment in Moorgarth is concerned, this division is no
longer simply fulfilling a support function for the Group"s retail
operations but is developing into a freestanding business with
considerable growth and profit potential.
Accounting policy
Accounting policies comply with International Financial Reporting
Standards which have been applied consistently in line with those adopted
for the year ended 28 February 2006.
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.
The financial information for the six months ended 31 August 2006 has not
been reviewed and / or reported on by the company"s auditors.
C Moore
Director
C Stassen
Director
Luxemburg
26 October 2006
Group
income
statement
Audited Unaudited Unaudited Unaudited Unaudited Audited
12 6 months 6 months 6 months 6 months 12 months
months to to to to to
to
28/02/06 31/08/05 31/08/06 31/08/06 31/08/05 28/02/06
GBP"000 GBP"000 GBP"000 R"000 R"000 R"000
268 562 120 333 127 988 Revenue 1 579 785 1 430 141 3 083 323
7 021 (2 323) (7 703) Trading (90 922) (27 470) 73 539
(loss)/pr
ofit
(6 145) (2 842) (1 133) Items of (11 170) (32 715) (68 093)
a capital
nature
876 (5 165) (8 836) Operating (102 092) (60 185) 5 446
(loss)/pr
ofit
875 542 (330) Net (3 883) 6 412 10 109
interest
(paid)/re
ceived
1 751 (4 623) (9 166) (Loss)/pr (105 975) (53 773) 15 555
ofit
before
taxation
(366) (253) 22 Taxation 463 (3 319) (4 884)
2 117 (4 370) (9 188) Net (106 438) (50 454) 20 439
(loss)/pr
ofit
Attributa
ble to:
(1 058) (2 630) (3 610) Minority (42 161) (30 565) (13 757)
interest
1 946 (1 130) (2 991) Resulting (35 493) (13 219) 19 713
from
normal
activitie
s
(3 004) (1 500) (619) Resulting (6 668) (17 346) (33 470)
from
items of
a capital
nature
3 175 (1 740) (5 578) Ordinary (64 277) (19 889) 34 196
sharehold
ers
2 117 (4 370) (9 188) (106 438) (50 454) 20 439
pence pence pence Earnings cents cents cents
per share
1,8 (0,1) (1,5) - before (17,2) (1,3) 19,8
items of
a capital
nature
0,9 (0,5) (1,6) - basic (18,5) (5,7) 10,7
0,8 (0,4) (1,9) - (22,2) (4,8) 8,2
headline
earnings
Number of
shares
for
calculati
on of
earnings
347 330 347 330 347 330 per share 347 330 347 330 347 330
("000)
Group
balance
sheet
Audited Unaudited Unaudited Audited
28/02/06 31/08/06 31/08/06 28/02/06
GBP"000 GBP"000 R"000 R"000
69 835 80 019 Non-current 1 074 584 749 033
assets
45 288 42 303 Property, 578 409 485 752
plant and
equipment
20 885 26 620 Investment 363 975 224 007
properties
1 088 6 622 Goodwill 71 027 11 670
1 156 2 493 Investments 34 087 12 395
1 418 1 981 Deferred 27 086 15 209
taxation
95 945 67 815 Current 927 235 1 029 162
assets
40 737 28 769 Inventories 393 359 436 941
12 291 12 929 Accounts 176 778 131 895
receivable
42 917 26 117 Cash and 357 098 460 326
cash
equivalents
165 780 147 834 Total assets 2 001 819 1 778 195
66 009 59 979 Ordinary 800 599 708 048
shareholders
" equity
12 12 Preference 144 144
share
capital
21 317 12 322 Minority 168 479 228 643
interest
29 335 28 905 Non-current 395 217 314 647
liabilities
17 264 15 935 Long-term 217 879 185 175
loans
75 500 Deferred 6 836 804
taxation
11 996 12 470 Provisions 170 502 128 668
49 107 46 616 Current 637 380 526 713
liabilities
214 238 Short-term 3 254 2 292
loans
48 893 46 378 Other 634 126 524 421
current
liabilities
165 780 147 834 Total equity 2 001 819 1 778 195
and
liabilities
Group cash
flow
statement
Unaudited Unaudited Unaudited Unaudited
6 months 6 months 6 months 6 months
to to to to
31/08/05 31/08/06 31/08/06 31/08/05
GBP"000 GBP"000 R"000 R"000
(5 711) 1 467 Cash flow 55 694 (58 427)
from
operations
1 468 (16 962) Investment (192 588) 17 418
activities
(9 674) (4 945) Net (60 964) (114 790)
acquisition
of fixed
assets
11 142 (12 017) Other (131 624) 132 208
investment
activities
(4 243) (15 495) Net cash (136 894) (41 009)
flow
Financing
activities
4 194 (1 305) - Net debt 33 666 50 675
(repaid)/ra
ised
(49) (16 800) (Decrease)/ (103 228) 9 666
increase in
cash and
cash
equivalents
Group
statement
of changes
in
shareholder
s" equity
Unaudited Unaudited Unaudited Unaudited
6 months 6 months 6 months 6 months
to to to to
31/08/05 31/08/06 31/08/06 31/08/05
GBP"000 GBP"000 R"000 R"000
62 459 66 009 Balance at 708 048 697 093
1 March
Financial
instrument
adjustment
on 1 March
2005
64 - resulting - 714
from the
application
of hedge
accounting
- - Exchange 162 400 25 027
rate
adjustments
140 218 Share-based 2 688 1 661
payments
- (670) Adjustment (8 260) -
to hedging
reserve
(1 740) (5 578) Attributabl (64 277) (19 889)
e loss for
the period
60 923 59 979 Balance at 800 599 704 606
31 August
Supplementary
information
Unaudited Unaudited Unaudited Unaudited
6 months 6 months 6 months 6 months to
to to to
31/08/05 31/08/06 31/08/06 31/08/05
GBP"000 GBP"000 R"000 R"000
3 519 4 104 1. 50 596 41 756
Depreciation
for the
period
12 115 7 463 2. Capital 92 007 143 754
expenditure
for the
period
3.
Calculation
of headline
earnings
(1 740) (5 578) Net loss (64 277) (19 889)
1 342 514 4 502 15 369
Attributable
items of a
capital
nature
Surplus on
revaluation
of investment
properties
after
taxation and
(1 090) (1 136) minority (14 005) (12 934)
interest
73 (266) (Profit)/loss (3 279) 866
on sale and
scrapping of
fixed assets
after
taxation and
minority
interest
(1 415) (6 466) (77 059) (16 588)
Audited Unaudited Unaudited Audited
28/02/06 31/08/06 31/08/06 28/02/06
347 330 347 330 4. Number of 347 330 347 330
shares in
issue ("000)
19,0 17,3 5. Net asset 230,5 203,9
value per
share
(pence/cents)
1 156 2 493 6. 34 087 12 395
Investments -
Loans
1 050 1 050 7. Contingent 14 357 11 262
liabilities
374 429 356 087 8. Operating 4 868 778 4 016 084
lease
commitments
Analysis of
results
Unaudited Unaudited Unaudited Unaudited
6 months 6 months 6 months 6 months to
to to to
31/08/05 31/08/06 31/08/06 31/08/05
GBP"000 GBP"000 R"000 R"000
(1 613) (6 130) Attributable (72 917) (18 918)
earnings of
Instore plc
891 805 Earnings of 9 924 10 572
Tradegro (UK)
Ltd
324 261 Other 3 218 3 826
Tradehold Ltd
group
companies
(398) (5 064) Loss before (59 775) (4 520)
items of a
capital
nature
(1 342) (514) Attributable (4 502) (15 369)
items of a
capital
nature
(1 740) (5 578) Net loss (64 277) (19 889)
Date: 27/10/2006 08:50:14 AM Produced by the JSE SENS Department
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