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Trading Statement for the 12 Months Ended 31 August 2023
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 2023
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 2023
("2023 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 audited results for the 12-month period ended 31 August 2022 ("2022 Year
End Results").
2. Key Factors
2.1 Trustco is a diversified investment entity based in Windhoek, Namibia, with its
investment focus on the insurance, education, real estate, mining, commercial
banking and micro-finance sectors. The company's investment portfolio has shown
exceptional returns historically, with NAV CAGR of 69% since inception and a robust
18.1% post-listing in 2006. Its asset mix is weighted 34% on average towards US
Dollar assets, with the remaining 66% in Namibia Dollar assets (1 NAD = 1 ZAR).
2.2 In the current global economic landscape, a constellation of challenges has arisen,
marked by a widespread and more abrupt deceleration of growth, mounting
inflationary pressures and escalating geopolitical complexities. These intricacies are
manifesting in a global growth deceleration, expected to decline from 3.5% in 2022
to a modest 3.0% in both 2023 and 2024.
2.3 The primary catalysts behind this swifter-paced deceleration encompass the
burgeoning cost-of-living conundrum, tightening financial constraints across multiple
regions, global military disruptions and the persistent spectre of the after-effects of
the COVID-19 pandemic. Inflation, too, has surged to levels unprecedented in
decades, registering an average of 8.7% in 2022 and, while anticipated to abate, is
predicted to hover at 6.8% in 2023 and further diminish to 5.2% in 2024.
2.4 Conversely, Namibia's economic landscape paints a somewhat distinct picture,
characterised by a cautiously optimistic outlook albeit clouded by notable
uncertainties. The World Bank suggests an economic growth rate of 2.8% for 2023,
a marked deceleration from the robust 4.6% witnessed in 2022. Factors contributing
to this subdued growth trajectory encompass comparatively high inflation rates,
monetary tightening measures and a reduced growth momentum in the neighbouring
South Africa and Europe. Nevertheless, 2024 portends a more buoyant outlook with
growth anticipated to rebound to 3.4%, buoyed by the ongoing resurgence in diamond
processing and exports, augmented consumption in the wholesale and retail sectors
and the resurgence of tourism, a vital sector to the Namibian economy.
2.5 In this financial year, a notable factor contributing to the decline in portfolio valuations
was the collective surge in discount rates, totalling 11.68% (approximately NAD 650
million, or 66 cents per share) across Trustco's portfolios. The prevailing global
trajectory of escalating central bank rates appeared to have reached its apex as of
the current reporting period. Forecasts indicate a potential moderation in these rates,
hinting at an anticipated reduction in discount rates over the coming years. This
expected adjustment may lead to a reversal of the valuation declines witnessed in
the current financial year.
2.6 In the real estate portfolio over the past few years, the imposition of Loan-to-Value
(LTV) restrictions by the Bank of Namibia significantly contributed to a decline in
property values by 42%. After the end of the financial year, however, noteworthy
revisions have been made by the Bank of Namibia to its loan-to-value ratio
prerequisites for prospective homebuyers. This was only done after a High Court
challenge by Trustco. These amendments now entail a reduction in mandatory
deposits, shifting from the prior stipulation of up to a 50% deposit requirement to a
maximum of 10% for properties owned beyond the second. This strategic adjustment
is anticipated to invigorate the property market by fostering amplified sales and
expediting property development timelines. Consequently, these changes are poised
to yield elevated valuations within this portfolio in the coming years.
2.7 The achievement of commercial production and the subsequent expected revenue
growth within Trustco's mining portfolio significantly bolsters the monetisation of
Trustco's 116 million USD investment, since inception. This accomplishment also
draws expected dividend payments from this investee nearer to the present. This
validates the calculated investment decision made in diamond mining back in 2016,
diversifying Trustco's investment basket by asset class, geography as well as by
currency.
2.8 In the commercial banking and micro-financing portfolios, the uptick in interest rates
has been a favourable revenue development. However, the spectre of higher inflation
amplifies the risk of borrower defaults. Furthermore, the usual consequence of
monetary tightening creates a contraction in credit demand, somewhat offsetting
growth by raising discount rates. The ongoing restructuring of this portfolio's
international debt has influenced the timeous acquisition of fresh capital for this
leverage model, contributing to the decreased valuation of this portfolio.
2.9 The education portfolio has exhibited resilience amidst the challenging economic
landscape marked by increased inflation and tightened monetary conditions. This
specific facet of Trustco's portfolio, closely associated with the lending operations of
the micro-financing portfolio, has faced a temporary slowdown in its growth trajectory.
2.10 Within the insurance portfolio, the confluence of heightened inflation and monetary
tightening has produced mixed effects. While higher interest rates augur well for
insurers' investment returns, they concurrently elevate liabilities and capital requisites.
The ramifications of monetary tightening extend to the economic conditions and risk
proclivities of consumers and businesses, thereby influencing their demand for
insurance products. The valuation of the insurance portfolio has therefore declined
by an unexpected margin.
2.11 Comprehensive details of all portfolio valuations will be accessible within the annual
report.
3. Trading Statement
Accordingly, a review by management of the financial results for the 2023 Year End Results
has indicated that Trustco expects to report:
3.1 Net Asset Value per share ("NAVPS") for the 2023 Year End Results of between 98
and 136 cents per share, compared to the NAVPS of 181 cents in respect of the 31
August 2022 Year End Results;
3.2 Basic loss per share ("LPS") for the 2023 Year End Results of between (54.55) and
(83.73) cents per share, compared to the earnings per share ("EPS") of 145.89 cents
reported on in respect of the 31 August 2022 Year End Results; and
3.3 Headline loss per share ("HLPS") for the 2023 Year End Results of between (49.73)
and (88.75) cents per share, compared to the headline loss per share of (195.13)
cents in respect of the 31 August 2022 Year End Results.
3.4 The financial information of this trading statement has not been reviewed or reported
on by Trustco's auditors.
4. Conclusion
4.1 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 2023 Year End Results on or about Wednesday
the 13th of December 2023.
Shareholders are welcome to contact the company secretary for more information at
komada@tgh.na.
Windhoek, Namibia,
12 December 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: 12-12-2023 03:30:00
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