Headwinds dent Trustco Group performance in 2023 financial year
The diversified financial, property and commodity group, Trustco Group Holdings Ltd, announced its financial results for the financial year ended 31 August 2023 on Monday 18 December 2023. Despite some major headwinds, the group still closed the year with N$1.15 billion in shareholder equity.
The investment portfolio, valued at N$3.1 billion on 31 August 2023, comprises unlisted African entities across various sectors, including short- and long-term insurance, real estate, commercial banking, micro-finance, education and mining.
Trustco’s Group MD, Dr Quinton van Rooyen (pictured right) stated: “Trustco remains a family-centric enterprise, co-investing with more than 5100 other investors, including 94 local and international institutional partners. We are deeply committed to long-term investment growth, as demonstrated by our stellar track record: a 69% CAGR in NAV since inception and a robust 18.1% since listing in 2006.
This financial year witnessed a decline in the Group’s Net Asset Value (NAV), reducing to N$1153 million from N$1834 million in the previous year. Similarly, NAV per share decreased to 117c from 186c, reflecting the challenging worldwide economic environment.
For most of the financial year, the share price gyrated between 40c and 80c. The five months during which trade in Trustco shares was suspended (November 2022 to March 2023) following a financial reporting dispute with the Johannesburg Securities Exchange, also had a major impact on annual performance.
During this financial year, the portfolio experienced a decline in valuations largely due to the collective surge in discount rates totalling 11.68% (approximately N$650 million, or 66c per share). “Forecasts suggest a potential moderation in these rates, hinting at their reduction in the coming years, which may reverse the valuation declines,” the Group said in a statement announcing the release of the financial results.
“The real estate portfolio witnessed a 42% decline in property values over the past few years due to Loan-to-Value (LTV) restrictions imposed by the Bank of Namibia. However, post-financial year end, the Bank of Namibia revised its LTV ratio prerequisites for prospective homebuyers, reducing mandatory deposits from up to 50% to a maximum of 10% for properties beyond the second.
The mining portfolio (Meya Mining) achieved commercial production, bolstering the monetization of Trustco’s US$116 million investment and moving anticipated dividend payments closer. Trustco said the mine diversifies its asset base geography as well as by currency.
In commercial banking and micro-financing, higher interest rates have contributed to revenue growth. However, the spectre of higher inflation poses risks of borrower defaults and credit demand contraction due to fiscal and monetary tightening. To mitigate the impact of COVID-19, the micro-financing portfolio has allocated N$210 million since 2020 for expected credit losses and credit relief to students.
Amid challenging economic conditions, the education portfolio exhibited resilience having served over 62,000 students since its inception. It is currently experiencing a temporary slowdown in growth due to its close association with the lending operations of the micro-financing portfolio.
In the insurance portfolio, higher interest rates boosted investment returns, but they also raised liabilities and capital requirements, which lowered the value of the overall insurance portfolio.
Trustco Group Chairman, Adv Raymond Heathcote SC (pictured left) commented: “This year presented headwinds from global dynamics and domestic policy changes impacting investment firms. However, Trustco has the fortitude to navigate challenges while creating superior value. Regulations are essential but cannot solely dictate our path to prosperity. Our commitment to the highest governance standards, business ethics and community upliftment remains unwavering.”
“It’s the audacious spirit of entrepreneurship that’s the true driver of economic success. We focus on creating long-term value for our investors by daring to challenge norms, innovate, steering to a future of enduring growth and opportunity,” concluded Dr van Rooyen.
Financial Year 2023 Summary:
• Net Asset Value per share (NAVPS) decreased by 37% to 117 cents per share, compared to the NAVPS of 186 cents in respect of the 31 August 2022 Year End Results;
• Basic loss per share (LPS) decreased by 147% to (69.14) cents per share, compared to the earnings per share (EPS) of 145.89 cents in respect of the 31 August 2022 Year End Results; and
• Headline loss per share (HLPS) decreased by 65% to (69.24) cents per share, compared to the headline loss per share of (195.13) cents in respect of the 31 August 2022 Year End Results.
• No dividends have been declared for the 12 months ended 31 August 2023.
The complete Integrated Annual Report for the 2023 financial year is available on the Trustco website at www.tgh.na.
