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Trading Statement for the 12 Months Ended 31 August 2022
TRUSTCO GROUP HOLDINGS LIMITED
Incorporated in the Republic of Namibia
(Registration number 2003/058)
Registered as an external company in South Africa
(External registration number 2009/002634/10)
NSX share code: TUC
JSE share code: TTO
OTCQX share code: TSCHY
ISIN Number: NA000A0RF067
(“Trustco” or “the Group”)
TRADING STATEMENT FOR THE 12 MONTHS ENDED 31 AUGUST 2022
1. Introduction
1.1 Trustco shareholders (“Shareholders”) are advised that the Group is finalising its
Audited Annual Financial Statements for the 12-month period ended 31 August 2022
(“2022 Year End Results”).
1.2 In terms of the Listings Requirements ("LR") of JSE Limited ("JSE"), companies are
required to publish a trading statement as soon as they become reasonably certain
that the financial results for the period to be reported on will differ by more than 20%
from that of the previous corresponding period.
1.3 In this regard, comparisons for purposes of this trading statement are made against
Trustco’s restated results for the 12-month period ended 31 August 2021 (“2021
Restated Results”).
1.4 With effect from 1 September 2021, the Trustco Group, after consultation with its
professional advisors, determined that it meets the criteria for the investment entity
exception of IFRS 10 (International Financial Reporting Standards), whereby
investment entities are required to measure certain investments at fair value.
1.5 Trustco had already commenced with this transition in 2017, when it first sold a
minority interest in part of its financial services portfolio. As a result, the group
transitioned from managing only fully owned and operated businesses, to evaluating
each business portfolio for its investment returns to shareholders and investors
instead. During the COVID-19 pandemic, this process accelerated, as each
investment portfolio was assessed in terms of its returns, which incorporates fair
value assessments, as well as when the group should exit each investment to
maximise shareholder and investor value.
1.6 This has resulted in Trustco Group as an entity having to value its portfolio of
investments in terms of IFRS 13. Valuations were done mainly via the income
approach, with differing discount rates relative to the portfolio companies’ activities,
all applied from a market participants’ perspective.
2. Trading Statement
Accordingly, a review by management of the financial results for the 2022 Year End Results
has indicated that Trustco expects to report:
2.1 Net Asset Value per share (“NAVPS”) for the 2022 Year End Results of between 182
and 190 cents per share, compared to the NAVPS of 42 cents in respect of the 31
August 2021 Restated Results;
2.2 Basic earnings per share (“EPS”) for the 2022 Year End Results of between 137.22
and 154.56 cents per share, compared to the loss per share (“LPS”) of (86.66) cents
reported on in respect of the 31 August 2021 Restated Results; and
2.3 Headline loss per share (“HLPS”) for the 2022 Year End Results of between (187.59)
and (202.67) cents per share, compared to the headline loss per share of (75.41)
cents in respect of the 31 August 2021 Restated Results.
2.4 The financial information of this trading statement has not been reviewed or reported
on by Trustco’s auditors.
3. Restatement
3.1 Following a JSE proactive monitoring process, the ruling of the Financial Services
Tribunal and the judgement of the North Gauteng High Court of the Republic of South
Africa, these financial statements have been restated as a result of the instruction of
the JSE.
3.2 The JSE determined that the recognition of certain waivers of shareholder loans in
profit or loss was not compliant with IFRS and, therefore, should be corrected and
recognised in equity as these were transactions with equity holders in that capacity.
The JSE further determined that Trustco should not have reclassified certain phases
of the real estate investment portfolio from inventory to investment property and that
these should have remained classified as inventory.
3.3 Regarding the accounting Trustco applied concerning the loan waivers, the
recognition of a gain through profit or loss triggered the earnout provision under the
Huso Transaction. As such, Trustco issued TTO shares to Dr Q Van Rooyen (“Van
Rooyen”) and Next Capital Ltd ("Next") and its associates.
3.4 As described above, the restatement decision of the JSE has the effect that the
earnout under the Huso Transaction was not triggered, and therefore, no shares
should have been issued.
3.4.1 To comply with the JSE’s restatement decision, the following corrective actions
were required and have been applied:
3.4.2 Reversing the waiver by Van Rooyen and/or Next of the NAD 545.6 million loan
and the resultant NAD 545.6 million (FY2019) gain on the waiver of shareholder's
debt previously recognised in profit or loss.
3.4.3 Reversing the waiver by Next of the NAD 1.0 billion loan and the resultant NAD
1.0 billion (FY2020) gain on the waiver of shareholder's debt previously
recognised in profit or loss.
3.4.4 Reversing the reclassification of a portion of the real estate investment portfolio
from investment property to inventory, consequently reversing the FY2019 NAD
693 million gain (presented as revenue of NAD 984 million and cost of sales of
NAD 291 million) from profit or loss.
3.4.5 Reversing fair value adjustments against a portion of the real estate portfolio
investment whilst they were classified as investment properties represented a
loss of NAD 200 million (FY2020) and a gain of NAD 69 million (FY2021).
3.4.6 Reversing management fees accrued to Next due to revenue, profit and headline
earnings reduction. The fees were previously recognised as an expense of NAD
35.5 million (FY 2019), NAD 21.0 million (FY2020) and NAD 1.6 million (FY2021).
3.4.7 Reversing VAT recognised on management fees paid to Next, which was
previously identified as NAD 5.3 million (FY 2019), NAD 3.2 million (FY2020) and
NAD 0.2 million (FY2021).
3.5 It was noted by the Board that its initial decision to accept the loan waivers had been
made in the bona fide belief that it would result in an issue of shares under the Huso
Transaction earnout triggers, and it was also clear to it that the offer to waive the
loans was made on the same understanding. This understanding was confirmed after
consultation with its IFRS advisers and also passed review by the auditors, who did
not issue any related qualifications for the periods in which these transactions were
accounted for as understood by Trustco.
3.6 The Board has taken legal advice and based on that, concluded that the legal effect
of implementing the JSE’s instruction is that both the loan waiver transactions should
be reversed and that the parties must be reinstated in their original positions as if the
loan waivers and the resultant benefits derived therefrom, never occurred.
3.7 Based on legal advice, and to give effect to these consequential effects of the JSE
restatement decision, the following further adjustments have been applied by the
Board to the restatement:
3.7.1 Reversing shares issued to Next and its associates in the 2020 reporting period
in terms of the earnout mechanism of the Huso Transaction. The reversal resulted
in the reinstatement of shares for vendors of NAD 2.3 billion.
3.7.2 Reinstatement of the loans in favour of Next on the same terms and conditions
as had applied before the waivers.
3.7.3 Next has deferred the charging of any interest circa NAD 400 million of the re-
instated loans, until discussions with the board, together with its European and
African Group of International Funders have been concluded.
3.7.4 Next will also be entitled to a payment of NAD 2.9 billion if the earnout targets of
the Huso transaction are met before the FY2028.
3.8 The restatements relate to financial reporting periods before the current period and
affect the financial position and associated financial performance for the periods
ending 31 March 2019, 30 September 2020, and 31 August 2021. The Board, while
complying with the rule of law, has no option but to comply with the JSE’s instruction,
and to deal with the consequences thereof at the time of publishing the current annual
financial statements despite pending appeal proceedings. Should Trustco succeed
on appeal these issues may have to be revisited.
3.9 As a result of these restatements described above, headline loss per share ("HLPS")
reporting for 2021 Year End Results increased from 48.82 cents to 75.41 cents.
3.10 Furthermore the results of these restatements above, loss per share ("LPS") reporting
for 2021 Year End Results increased from 55.55 cents to 86.66 cents.
3.11 Weighted average number of ordinary shares in issue for the reporting period 2021
Year End Results were adjusted from 1,569,706,000 to 940,868,381 incorporating
the restatements above.
4. Conclusion
4.1 Shareholders are referred to the announcement published on SENS on 31 January
2023 in terms whereof Trustco advised that they aim to publish their 2023 Year End
Results at the first available time.
4.2 Trustco and its JSE-accredited independent external auditors are in the final stages
of completing their audit and internal quality assurance processes and therefore
Trustco is expecting to release its 2022 Year End Results on or about Tuesday the
28th of February 2023.
Trustco apologises to its shareholders for any inconvenience caused and shareholders are
welcome to contact the company secretary for more information at komada@tgh.na.
Windhoek, Namibia,
22 February 2023
Komada Holdings (Pty) Ltd
Company Secretary and Investor Relations Services to Trustco Group Holdings
Limited
JSE Sponsor
Vunani Sponsors
NSX Sponsor
Simonis Storm Securities Proprietary Limited – Windhoek
OTCQX Sponsor
J.P Galda & Co – New York
Date: 22-02-2023 09:12:00
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