Tradehold shows resilience in demanding markets

Posted On Friday, 24 May 2019 12:43 Published by
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In the year to February, 2019 Tradehold, with property interests split between southern Africa and the United Kingdom, made several far-reaching structural and operational changes to the company to strengthen its balance sheet and tighten its focus.

 -FRIEDRICH-ESTERHUYSE-

Its financial services division has been unbundled and listed separately on JSE’s AltX, making Tradehold exclusively a property company.

Underscoring the new route, an unrelated party (i.e. I-Group Investments (Pty) Ltd) sought to invest R833m in Tradehold’s South African portfolio of mainly industrial buildings in exchange for a 25.7% shareholding in the Collins Group that was restructured post year end.  The full transaction has since been finalised, valuing the restructured South African business at R2.4bn.

Tradehold joint CEO Friedrich Esterhuyse said the cash injection at the tangible net asset value of the Collins Group will be used to restructure the balance sheet by reducing gearing and restructuring debt under more favourable conditions, which should have a marked effect on the group’s future profitability and dividend prospects for shareholders.

With the unbundling of the financial services division, the value of Tradehold’s total assets reached £859m compared to £985m in 2018 if financial services are excluded. Revenue came in at £96.4m compared to £101.4m the previous year. Total profit dropped to £13.3m from £30.8m. The decrease is mainly due to the net loss in the fair-value adjustment of its investment properties and related assets of £8.9 million, compared to a gain of £11.8 million in the previous financial year and financial services net profit of £4 million in the previous year. Headline earnings per share was 8 pence, up by 0.1 pence from 7.9 pence if financial services are excluded, and tangible net asset value per share was 123.7 pence / R22.97, compared to 132 pence / R21.48 if financial services are excluded.

Esterhuyse said business conditions for Tradehold’s operations in South Africa and the UK during the second half of the year did not differ materially from those of the first half. “If anything, pressure mounted all round, given the rising pre-election political tensions in South Africa and the protracted Brexit negotiations that have further undermined UK business confidence.”

To streamline the business and strengthen its focus on its operations in South Africa and the UK, Tradehold is withdrawing from the rest of Africa excluding Namibia. All its assets in Mozambique, Zambia and Botswana are thus in the process of being sold off.

In South Africa, where it operates under the Collins brand, Tradehold’s main focus continues to be on large industrial and distribution centres which constitute 91% or 1.41m m² of total gross lettable area (GLA). Vacancies were maintained at 1,95%.  Long-term leases with major corporates such as Sasol, Unilever and MassMart and Pep, provide the company with some breathing space under the present depressed market conditions. These leases have on average more than seven years to run.

The value of the Collins portfolio stood at £465m (R8,6bn) at year-end, lower than the £535m (R8,7bn) of 2018, again due to lower revaluations and rand weakness, while that of the UK portfolio was £257m (2018: £250m). The latter portfolio covers a range of sectors of which retail constitutes about 50% of value.

During the year much work was done to adapt the nature of the group’s four large retail malls in the UK to the far-reaching changes in consumer shopping patterns brought about by the growth in on-line shopping. Malls are being revitalised as community orientated meeting places offering a wide range of services and facilities not only for shopping but also entertainment.

Moorgarth, the name under which Tradehold operates in the UK, also focused strongly on growing the commercial component of the portfolio. It is acquiring properties in Central London which are adapted to the needs of The Boutique Workplace Company (TBWC), a company in the group which provides serviced office space from more than 30 sites in the British capital. And in Reading outside London it is awaiting approval for the erection of three buildings housing 493 apartments on top of its Broad Street Mall. At the same time Moorgarth has secured a 20-year lease with a major UK hotel group for a hotel development adjoining the mall.

The company has also received approval from the Edinburgh City Council for the extensive redevelopment of a crucial part of its Waverley Mall in the heart of the city’s historical centre. This will add 3 000m² to the existing 8 000m² trading space and will be devoted exclusively to leisure in the form of a range of restaurants.

Esterhuyse said 2019 is expected to be another tough year for consumers both in the UK and South Africa. “Although the macro-economic outlook is improving for the UK, we believe the local economy will continue to struggle for as long as Eskom is an albatross around its neck.  To counter these conditions, we are following a defensive strategy – reducing debt, divesting ourselves of non-core assets and protecting value – while readying ourselves for when there is an upturn in market conditions,” Esterhuyse said.

Last modified on Friday, 24 May 2019 12:56
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