Trustco sees profits more than double for the year to end-March

The Namibia-based company sees strong operational performance across its insurance, resources and banking divisions.

Namibian investment company Trustco saw its profit after tax more than double in the year to end-March 2019 due to a strong operational performance across its three business divisions of insurance, resources, and banking. 

The financial results of Trustco, which is listed on the JSE, were also boosted by its decision to not develop certain properties, the waiver of loans and accrual of income tax benefits.

Across all measures of profitability, the company came out positive. The company’s group consolidated revenue increased by 85 percent to Namibian dollar (N$)1.48 billion (about R1.5 billion), with profit after tax surging by 165 percent to N$725 million (R722 million).

Trustco’s headline earnings per share increased by 157 percent to 70 cents. Headline earnings per share is another measure of profit because it excludes certain once-off items that might boost profits.

“The group’s diversified business model, both in revenue streams, geographical regions and asset spread again proved its worth,” Trustco said in a statement issued on the JSE’s regulatory news service.

Its revenue was boosted by N$984.4 million (R985 million), which was accounted as a “transfer of inventory to investment property” gain. This means that Trustco had decided to not develop certain properties that were earmarked for development, which resulted in the company reclassifying those properties from inventory to investment property.

Its net profit was boosted by an income tax benefit of N$119.1 million (R119.1 million), compared to a gain of N$32 million (R32 million) the previous year. The company also recorded a loan-waiver gain of N$545.6 million (R546 million).

Next Investments, which belongs to the family of Trustco founder, CEO and major shareholder Dr. Quinton van Rooyen (pictured), waived the facility.  The amount due to Next Investments arises from the N$1 billion (R1 billion) loan transaction announced on October 8, 2018, in terms of which Quinton and his investment vehicle, Next Investments, would lend to Trustco.

The waiver of the loan facility by Next Investments means that Trustco was “being legally released from its contractual obligation to settle the loan, and the financial liability was derecognised.”

“Owing to the fact that there was no consideration paid by the group, nor equity instruments issued by the group in exchange for this release of debt, the gain has been recognised in as was [sic] released to profit or loss,” the company said.

Segment performance 

Trustco said revenue from its 80 percent-owned insurance business rose 241 percent to N$1.3 billion. Meanwhile, profit after tax nearly doubled to N$292 million (R292 million). The resources segment, whose assets include Meya Mining, Northern Namibia Development Company, and Morse Investment, grew after-tax profit to N$486 million (R486 million), from N$139 million (R139 million).

“At the time of reporting, an offer was made for a diamond asset, two copper assets are being evaluated, and one zinc asset has been identified. These assets are all located in Namibia,” Trustco said.

The company’s banking and finance segment “continued its upward trajectory”, which resulted in profit after tax of N$262 million (R262 million, compared with a loss after tax of N$52 million previously (R52 million).

Trustco, which operates Trustco Bank, said it has the opportunity to expand its lending operations during its next financial period. But it didn’t elaborate on its expansion plans.

The company didn’t pay dividends during the period under review because it is broadening its lender and capital base.

The restructuring of its debt with the international lenders has been partially completed, “with transactions concluded with five of the 11 lenders”. “The group is confident that the remaining international debt will be successfully restructured as the lenders indicated their willingness to conclude the restructuring process when the standstill agreement expires on June 15, 2019.”