Tradehold confident of surviving COVID-19

Posted On Thursday, 21 May 2020 20:12 Published by
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Despite a drop in profits, Tradehold’s management believes the company, which operates mainly in South Africa and the UK, has weathered well the highly volatile and demanding conditions that defined its 2020 financial year to end February.

CEO_Friedrich_Esterhuyse

And thanks to the fortuitously timed restructuring of the business that started some two years ago, management believes Tradehold is well positioned to confront the challenges presented by the Covid-19 pandemic, even should they continue into next year.

Total assets increased from £858 million to £883 million while revenue was slightly down from £96.4 million to £94.6 million. Headline earnings per share rose from 8 pence to 9.4 pence. Profit attributable to shareholders dropped from £13.2 million to £5.99 million mainly due to additional tax of £7.1 million and the reduction in Tradehold’s 100% holding in Collins Group to 74.3% (having sold 25.7% of the company to the I-Group early in the financial year).

The-sum-of-the-parts valuation as defined by management, was 122.8 pence (R24.60) per share compared to 126.5 pence (R23.50) in the corresponding period. 

Tradehold continues to report its results in pound sterling as the operations of most of its subsidiaries are conducted in that currency and also because of the distortion caused to the figures by the fluctuating value of the rand.

The board has declared a gross cash dividend of 30 cents per ordinary share (2019: 55 cents) for the 12 months to February 2020.  

In announcing Tradehold’s results, joint CEO Friedrich Esterhuyse said the company had started to see the benefits of the ongoing restructuring programme aimed at increasing its flexibility and resilience so it could adapt rapidly to any change in the environment. “As part of that programme, we are also simplifying its structure and strengthening its focus.”

In the UK, the company, through its wholly-owned subsidiary Moorgarth, owns a property portfolio consisting of four substantial shopping malls and a number of commercial buildings in Greater London. Some are let to Boutique, a 90% subsidiary of Tradehold that offers flexible office space on short-term leases. 

Some two years ago, when management anticipated major changes in consumer buying patterns, it began implementing an extensive programme to repurpose its shopping centres, widening their consumer appeal while reducing the dependence on traditional retail. This involved giving greater focus to facilities designed to accommodate health and wellness, hospitality, entertainment and community activities.

Working closely with tenants and achieving a number of key new lettings in all four centres, enabled Moorgarth to increase footfall to between 11% and 15% in two of its major centres and reduced vacancies to only 5.6% after taking into account all contracted new lettings concluded before the year end. Vacancy in its office portfolios was 0.9% and 1.3% in its leisure portfolio. Rigorous cash and asset management further assisted management in exceeding the budgeted operating profit for the year.

Moorgarth partners closely with Boutique which specialises in short-term, flexible office accommodation. “Unlike co-working, where different entities share desk space in an open office environment, Boutique provides clients with a traditional private office environment. This allows tenants to manage for themselves the hygiene regimes imposed by the present pandemic conditions,” Esterhuyse said.

“With an occupancy level of 92% in the case of its 4 500 individual work stations, we believe this business is excellently positioned to benefit substantially from the new work-from-home culture that we anticipate will remain in place after the pandemic, coupled with a need by businesses for a physical presence in the major cities accommodating fewer employees on a more flexible basis.  Another 500 work stations are in the pipeline.”

Esterhuyse said management was simplifying the group’s structure by, inter alia, reducing the number of countries in Africa where it does business. It has disposed of its properties in Botswana and reached agreements with potential buyers to acquire what remains of its portfolio in Zambia.  It still owns three properties in Mozambique as well as an established portfolio in Namibia. Esterhuyse said if the occasion arose, “we would not be averse to withdrawing from Namibia in the medium term as well”.  

In South Africa Tradehold is fortunate in that 83% of its total gross lettable area (GLA) of 1.5 million square metres held through its subsidiary Collins Group, comprises large-format industrial and distribution centres leased on long-term contracts to prominent local corporates. Vacancies reduced from 1.95% at half-year to 1.26% at year-end while the weighted average lease expiry profile remains at just under seven years. 

Esterhuyse said for a considerable time now management’s focus had been on reducing debt. “Early in the year we raised equity of R500 million for Collins Group while the proceeds from the on-going sale of non-core assets are also being used to bring down debt. Since the start of the new financial year we have been focusing aggressively on cost and cash management at all levels.  In South Africa we collected 87% of rent payable for the month of April.

In the UK we are confident of collecting 67% of all rent for the March quarter (the 3 months starting 25 March). In South Africa, we took advantage of the recent spike in long- term interest rates after year-end to unwind expensive fixed-rate debt to immediately benefit from much lower floating rate debt.  All these actions have put Tradehold in a very strong position to weather the Covid-19 storm with the Group having access to sufficient liquidity for the foreseeable future. 

“I believe the way our highly resilient and experienced management teams have adapted Tradehold to a changing and highly volatile environment, offers us a realistic chance to successfully confront the challenges brought on by the pandemic, even if these continue into next year. Our new flexible culture also ensures we shall be better equipped at the end of it to benefit from any new opportunities and challenges that arise,” Esterhuyse said.

Last modified on Thursday, 21 May 2020 20:25

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