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Interim results and dividend declaration
TRUSTCO GROUP HOLDINGS LIMITED
Incorporated in the Republic of Namibia
(Registration number 2003/058)
NSX Share Code: TUC
JSE Share Code: TTO
ISIN Number: NA000A0RF067
("Trustco", or "the group")
Unaudited Condensed Consolidated Interim Results
for the six months ended 30 September 2015
and Interim Dividend Declaration
Nature of the business
Trustco is a Namibian-based Insurance and Banking group. The
group's insurance and banking portfolios are strengthened by
active investments into various industries including, real estate,
education and resources.
Highlights
Trustco's 2016 interim results show an increase in headline earnings
of 38% on the 2015 interim period ('comparative period'). This
increase, which is mirrored by a 17% increase in net profit after tax,
is a result of the growing positive climate for businesses operating
a diversified model in an unforgiving economic environment.
Administrative costs remain in line with the comparative period,
however there is a marked increase in finance costs, which is
due to the group's growing banking portfolio which favours a
leveraged model.
In the 2016 interim period Trustco announced its intention to
acquire control over a diamond mining and polishing group, Huso
Investments (Pty) Ltd and its subsidiaries ('Huso'). Shareholders
voted favourably for the transaction on 5 October 2015 at a
general meeting of shareholders. The transaction is expected to
close on or around the financial year-end date upon the issuance
of a diamond mining licence and Export Processing Zone status
to the subsidiaries of Huso, at which date Trustco expects mining,
cutting and sale of diamonds to immediately begin contributing to
the group's returns.
Operational review
INSURANCE SEGMENT
The group continues to focus on growing insurance revenues and
is pleased to report an increase of 28% on insurance premiums
for the 2016 Interim period compared to the comparative period.
The insurance segment once again benefited from positive returns
in its investment portfolio, and consistent with the previous
24 months, property investments recorded the largest proportion
of contribution to the segment's results. Strong sales continue
in both residential and commercial/industrial estates with price
growth and strong market demand indicating that the market for
property remains robust in Namibia. Overall revenue from the sale
of properties is lower on a comparative basis as fewer properties
were made available for sale in the 2016 interim period. This is
due to the slightly smaller residential phase which was sold in this
period relative to the comparative period.
BANKING AND FINANCE SEGMENT
The banking and finance segment targets three main asset classes,
namely mortgage lending, student loans and SME financing. The
growth in the segment is expected to be funded by a blend of term
funding and retail deposits. Total gross advances have grown by
6.6% to NAD908 million from 31 March 2015, whilst non-performing
loans as a percentage of total advances have decreased to 3.7%
from 5.3% as at March 2015.
Trustco Bank Namibia Ltd continues to remain well capitalised with a
total capital adequacy ratio of 34%. Tier 1 Capital of NAD33.3 million
coupled with a NAD2.5 million Tier 2 charge in the bank is expected
to support and maintain its near-term asset growth targets. Total
capital is NAD30.8 million as at 30 September 2015 which exceeds
the required capital of NAD8.6 million. The bank remains exposed
predominantly to credit risk on its advances portfolio, which
remains well buffered by capital adequacy and provisioning.
Outlook for the future
The group plans to markedly increase its Namibian presence in the
insurance and banking markets, in the medium term. The growth
strategy for the ancillary investment portfolio is a continued
expansion through the acquisition of businesses where active
management and economies of scale can eventually translate into
positive group earnings contributions.
BASIS OF PREPARATION AND PRESENTATION
Statement of compliance
The unaudited interim results have been prepared in accordance
with the framework concepts and measurement and recognition
criteria of International Financial Reporting Standards ('IFRS')
and comply with IAS 34: Interim Financial Reporting and are in
accordance with the SAICA Financial Reporting Guides as issued
by the Financial Reporting Standards Council, the Namibian
Companies Act, No 28 of 2004 (as amended) and the Listings
Requirements of the JSE Limited and the Namibian Stock Exchange.
Basis of preparation
The unaudited condensed consolidated interim results are prepared
in thousands of Namibian Dollars ("NAD'000"). The group's functional
and presentation currency is Namibian Dollars. At 30 September
2015, NAD1 was equal to ZAR1.
These interim results are unaudited and have not been reviewed by
the auditors. The accounting policies applied are in accordance with
IFRS and are consistent with those of the previous annual financial
statements.
The preparation of the interim results has been supervised by the
Financial Director, Ryan McDougall CA(SA), CA(Namibia).
EXPLANATORY NOTES TO THE INTERIM FINANCIAL RESULTS
The South African Insurance division took the decision during the
2015 financial year to close all the existing sales branches in South
Africa and move to a more traditional broker-type sales approach.
The reduction in branches has resulted in various fixed overhead
savings albeit having precipitated a slower rate of growth in revenues
from the operations.
The amalgamation of Namibian and South African operations has
necessitated a revision to the IAS 8: Operating Segments disclosure
to align reporting with internal operational oversight by the group
Executive Committee. The previously reported Emerging Markets
segment is therefore now a part of the Insurance segment.
The cash flow statement reflects that operating activities resulted
in a net utilisation of cash. This is caused by the protracted period
between cash proceeds and recognition of property sales; a cycle
which averages between 18 and 24 months. The proceeds from
properties sold in 2014Q4 are expected to transfer before the end
of this calendar year – this will result in an overall net cash generated
by operations position.
The group has, at the date of publication, undrawn facilities of
NAD45 million and unissued approved bonds of NAD700 million.
In July 2015, the remainder of the Trustco Group Holdings shares
held by Trustco Life as a listed investment were disposed of in order
to liquidate the position and invest in a more diversified portfolio.
The transaction generated NAD198 million of proceeds.
DIVIDENDS
The Directors of Trustco ("the Board") are pleased to announce
that the Board passed a resolution on 3 November 2015 to pay an
interim dividend of 3.4 cents per share for the six months ended
30 September 2015.
The following information is provided to shareholders in respect of
tax on dividends:
- The dividend has been declared from income reserves;
- Shareholders are advised that Namibian non-resident shareholders'
tax ('NRST') of 20% on the declared dividend will be applicable to all
shareholders with addresses outside Namibia (unless any specific
rules relating to double tax treaties apply) resulting in a net dividend
of 2.72 cents per share;
- The NRST rate for South African resident shareholders is 15%
resulting in a net dividend of 2.89 cents per share;
- South African dividend tax does not apply;
- Trustco Group Holdings Limited's Namibian Income Tax
Reference Number is 3356338011; and
- Trustco had 772 142 090 shares in issue at the declaration date.
The salient dates for the payment of this dividend are set out below:
Last day to trade cum-dividend Friday, 20 November 2015.
Trading ex dividend commences Monday, 23 November 2015.
Record date Friday, 27 November 2015.
Payment date Tuesday, 8 December 2015.
Share certificates may not be dematerialised or rematerialised
between Monday, 23 November 2015 and Friday, 27 November 2015,
both days included. The dividend is declared in Namibian Dollars
and payable in the currencies of the Republics of South Africa and
Namibia which are pegged 1:1.
ACKNOWLEDGEMENTS
The board of directors of Trustco acknowledge with gratitude the
efforts and commitment from stakeholders and staff.
Condensed Consolidated Statement of Financial Position
6 months 12 months 6 months
30 Sep 31 Mar 30 Sep
2015 2015 2014
Unaudited Audited Unaudited
Notes change NAD'000 NAD'000 NAD'000
ASSETS
Cash and cash equivalents (60%) 47 368 118 700 69 019
Advances 1 8% 874 586 806 965 763 719
Trade and other receivables 2 48% 852 617 574 390 491 850
Current tax assets (68%) 4 195 12 982 3 693
Inventories 9% 351 756 323 917 341 131
Property, plant and equipment 3 5% 282 474 269 329 204 563
Investment property 3% 728 017 708 835 605 014
Intangible assets 11% 218 773 197 623 201 970
Deferred tax assets 20% 175 268 146 359 146 533
Total assets 12% 3 535 054 3 159 100 2 827 492
EQUITY AND LIABILITIES
Liabilities
Overdraft 10% 16 596 15 020 33 306
Borrowings 4% 1 088 762 1 045 641 778 187
Trade and other payables 10% 86 892 78 891 159 960
Current tax liabilities 92% 15 269 7 945 11 511
Amounts due to related parties (100%) – 527 1 367
Other liabilities (75%) 23 187 92 750 174 690
Deferred tax liabilities 17% 357 350 304 441 269 398
Technical provisions 13% 21 404 18 880 19 771
Policyholders' liability under
insurance contracts 7% 48 052 44 839 45 335
Total liabilities 3% 1 657 512 1 608 934 1 493 525
Capital and reserves
Share capital – 177 595 177 595 177 595
Share premium – 46 300 46 300 46 300
Deemed treasury shares 4 100% – (57 043) (69 026)
Shares for vendors – 14 976 14 976 14 976
Contingency reserve – 2 250 2 250 2 983
Revaluation reserves 2% 53 279 52 083 30 857
Foreign currency translation
reserve (54%) (2 724) (5 936) (2 164)
Distributable reserves 20% 1 585 866 1 319 941 1 132 446
Total capital and reserves 21% 1 877 542 1 550 166 1 333 967
Total equity and liabilities 12% 3 535 054 3 159 100 2 827 492
Condensed Consolidated Statement of Movements in Equity
6 months 12 months 6 months
30 Sep 31 Mar 30 Sep
2015 2015 2014
Unaudited Audited Unaudited
change NAD'000 NAD'000 NAD'000
Balance at the beginning of the period 27% 1 550 166 1 224 355 1 224 355
Sale of deemed treasury shares 325% 198 581 46 711 –
Deemed treasury shares purchased (100%) – (1 861) –
Dividends for the period (35%) (26 625) (40 817) (19 146)
Total comprehensive income
for the period (52%) 155 420 321 778 128 758
Balance at the end of the period 21% 1 877 542 1 550 166 1 333 967
Condensed Consolidated Statement of Comprehensive Income
6 months 6 months 12 months
30 Sep 30 Sep 31 Mar
2015 2014 2015
Unaudited Unaudited Audited
change NAD'000 NAD'000 NAD'000
Banking and investment income (1%) 411 915 416 853 972 337
Insurance premium 28% 122 701 96 162 180 863
Income from operations 4% 534 616 513 015 1 153 200
Insurance benefits and claims 6% (24 955) (23 516) (42 616)
Operating expenses 1% (262 412) (260 340) (608 693)
Finance costs 31% (65 087) (49 747) (105 496)
Profit before taxation 2% 182 162 179 412 396 395
Taxation (39%) (31 150) (50 781) (93 157)
Profit for the period 17% 151 012 128 631 303 238
Other comprehensive income,
net of tax 3 371% 4 408 127 18 540
Items that will not be subsequently
reclassified to profit or loss
– Revaluation of property, plant
and equipment 454% 1 197 216 22 401
Items that may be subsequently
reclassified to profit or loss
– Foreign currency translation
adjustment 3 708% 3 211 (89) (3 861)
Total comprehensive income
for the period 21% 155 420 128 758 321 778
Condensed Consolidated Statement of Cash Flows
6 months 6 months 12 months
30 Sep 30 Sep 31 Mar
2015 2014 2015
Unaudited Unaudited Audited
change NAD'000 NAD'000 NAD'000
Cash flow from operating activities
Cash (utilised)/generated by operations (172%) (62 894) 87 192 171 134
Interest received 177% 1 388 501 6 421
Finance costs 31% (65 087) (49 747) (105 496)
Net loans advanced (8%) (67 621) (73 841) (98 215)
Proceeds from funding liabilities (30%) 35 000 50 000 220 000
Taxation paid (322)% (15 037) (3 563) (25 014)
Net cash flow from operating activities (1 753%) (174 251) 10 542 168 830
Net cash flow from investing activities (1 960%) (39 952) 2 148 (7 988)
Net cash flow from financing activities 248% 141 295 (95 182) (188 768)
Net change in cash
and cash equivalents (12%) (72 908) (82 492) (27 926)
Cash and cash equivalents at
beginning of period (21%) 103 680 131 606 131 606
Cash and cash equivalents
at end of period (37%) 30 772 49 114 103 680
Condensed Segment Analysis
Total INSURANCE INSURANCE BANKING AND
(INVESTMENT) FINANCE
NAD'000 NAD'000 NAD'000 NAD'000
6 months 30 September 2015 – unaudited
Revenue 552 042 126 520 328 841 96 681
External revenue 498 769 126 079 294 537 78 153
Intersegment revenue 53 273 441 34 304 18 528
Net profit after tax 151 012 39 503 76 692 34 817
Total assets 3 535 054 1 149 403 1 450 209 935 442
Total liabilities 1 657 512 83 828 1 111 098 462 586
6 months 30 September 2014 – unaudited
Revenue 537 439 98 454 365 085 73 900
External revenue 455 761 97 775 295 883 62 103
Intersegment revenue 81 678 679 69 202 11 797
Net profit after tax 128 631 8 624 86 001 34 006
Total assets 2 827 492 280 532 1 715 341 831 619
Total liabilities 1 493 525 92 394 1 087 931 293 200
12 months 31 March 2015 – audited
Revenue 1 135 031 284 995 662 943 187 093
External revenue 1 017 073 183 525 660 434 173 114
Intersegment revenue 117 958 101 470 2 509 13 979
Net profit after tax 303 238 (15 452) 266 162 52 528
Total assets 3 159 100 422 615 1 214 622 1 521 863
Total liabilities 1 608 934 109 535 1 034 090 465 309
Headline Earnings per Share
6 months 6 months 12 months
30 Sep 30 Sep 31 Mar
2015 2014 2015
Unaudited Unaudited Audited
change NAD'000 NAD'000 NAD'000
Profit attributable to ordinary
shareholders 17% 151 012 128 631 303 238
Adjustments: (86%) (2 871) (20 983) (27 494)
(Profit)/loss on disposal of property, plant
and equipment (569%) (4 285) 913 2 098
Fair value adjustments on investment
properties – – – 400
Gain on bargain purchase (100%) – (21 595) (29 244)
Tax effect 569% 1 414 (301) (748)
Headline earnings 38% 148 141 107 648 275 744
Earnings per share
Basic earnings per share (cents) 10% 20.29 18.48 43.59
Diluted earnings per share (cents) 10% 20.16 18.35 43.29
Headline earnings per share (cents) 29% 19.91 15.46 39.64
Diluted headline earnings per share (cents) 29% 19.78 15.35 39.36
Dividends paid per share (cents) 45% 4.00 2.75 5.75
Shares
Total number of ordinary shares in issue – 772 142 772 142 772 142
Weighted number of ordinary shares
in issue 7% 744 107 696 236 695 582
Contingently issuable shares as a result
of business acquisition – 4 922 4 922 4 922
Weighted number of ordinary shares for
diluted earnings per share 7% 749 029 701 158 700 504
Notes to the Condensed interim results
6 months 12 months 6 months
30 Sep 31 Mar 30 Sep
2015 2015 2014
Unaudited Audited Unaudited
NAD'000 NAD'000 NAD'000
1 Advances
Total loans advanced 908 257 851 879 794 955
Provision for bad debts (33 671) (44 914 (31 236)
Net advances 874 586 806 965 763 719
Less: Short-term portion (191 146) (199 063) (191 963)
Long-term portion 683 440 607 902 571 756
NAD11.2 million of impairment reversals were passed relating to improving credit
quality of student advances as well as a release of impairment relating to bank
advances (2015: NAD21.7 million release).
6 months 12 months 6 months
30 Sep 31 Mar 30 Sep
2015 2015 2014
Unaudited Audited Unaudited
NAD'000 NAD'000 NAD'000
2 Trade and other receivables
Trade receivables 30 871 27 499 37 476
Property sales receivables 763 391 501 489 406 091
Other receivables 58 355 35 895 48 283
852 617 564 883 491 850
3 Property, plant and equipment
Property acquired 40 065 74 290 8 980
Disposals (1 365) (12 201) (910)
4 Deemed treasury shares
The carrying value of treasury shares as at 30 September 2015 is NAD0 (31 March 2015:
NAD57.0 million). The group made no repurchases (6 months ended 30 September 2014: NAD0)
of its own shares during the interim period. Disposals of NAD69.0 million (6 months ended
30 September 2014: NAD0 million) were made.
6 months 12 months 6 months
30 Sep 31 Mar 30 Sep
2015 2015 2014
Unaudited Audited Unaudited
NAD'000 NAD'000 NAD'000
5 Fair value hierarchy
Level 1
No assets or liabilities are categorised as level 1 – – –
Level 2
Land and buildings 119 171 117 617 95 801
Investment property 728 017 708 835 605 014
Aircraft 95 719 109 268 63 471
Level 3
Advances 874 586 806 965 763 719
Trade and other receivables 852 617 574 390 491 850
Trade and other payables (86 892) (78 891) (159 960)
Other liabilities (23 187) (92 750) (174 690)
Borrowings (1 088 762) (1 045 641) (778 187)
The carrying value of financial assets held as loans and receivables, and liabilities
at amortised cost approximate their fair values.
Advances, trade and other receivables, trade and other payables and borrowings
are carried at amortized cost using the effective interest method. The group
applies market related discount rates where appropriate and hence all carrying
values approximate fair values.
Land and buildings, aircraft and investment property are revalued either by
independent experts or by reference to quoted similar assets. The techniques and
inputs used have not changed since the year-end.
Technical provisions and policyholder liabilities under insurance contracts remain
calculated on a forecast modelling and/or pre-identified factor. Such factors have
not been adjusted since financial year-end.
6 months 12 months 6 months
30 Sep 31 Mar 30 Sep
2015 2015 2014
Unaudited Audited Unaudited
NAD'000 NAD'000 NAD'000
6 Transactions with related parties
Next Investments (Proprietary) Limited
Management fees paid (13 113) (22 036) (11 512)
Charter income received 336 202 19
Surety fees and other (8 274) (11 130) (2 975)
Northern Namibia Development Company
(Proprietary) Limited
Charter income received 257 1 278 580
7 Business combination
On 30 June 2015, the group acquired control by way of the purchase of all the ordinary
shares of Watermeyer Mining and Construction (Proprietary) Limited ('WMC') for
NAD30 000 000. WMC is a construction company specialising in construction projects.
The assets and resources acquired include staff and office buildings related to the
operations. The group has taken over the management of the operations of the entity.
This expansion will augment the existing investment and property development
operations of the group and extend the foreseeable development timetable.
The following table summarises the consideration paid at fair value of assets
acquired and liabilities assumed at the acquisition date:
Fair value
of net
assets
acquired
NAD'000
Property, plant and equipment 24 000
Bank and cash 10 649
Other assets 1 300
Other liabilities (14 817)
Deferred tax liabilities (3 508)
Net assets 17 624
Purchase consideration (28 066)
Goodwill* 10 442
Cash flow on acquisition
Cash and cash equivalents 10 649
Bank overdraft –
Net cash acquired 10 649
Consideration paid** (15 000)
Cash outflow on acquisition, net of cash acquired (4 351)
* Goodwill is attributable to the expected savings to be made by the group relating to the
reduced cost of bulk servicing via WMC rather than external vendors.
** A portion of the consideration for the purchase of Watermeyer Mining and Construction
(Proprietary) Limited was deferred. The purchase consideration is payable by the group
in two instalments of NAD15 000 000 the first having been paid in July 2015 and the
second instalment payable in July 2016. The deferred purchase consideration bears
no interest.
Acquisition-related costs of NAD385 000 have been charged to administrative expenses
in the consolidated income statement for the period ended 30 September 2015.
Namibia
4 November 2015
JSE Sponsor
Sasfin Capital
(A division of Sasfin Bank Limited)
NSX Sponsor
IJG (Pty) Ltd
Date: 04/11/2015 08:30:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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