| Thu 26 May 2011, 7:05 | | TTO - Trustco Group Holdings Limited - Reviewed Preliminary Consolidated |
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TTO - Trustco Group Holdings Limited - Reviewed Preliminary Consolidated
Condensed Financial Results For the 12 Months Ended 31 March 2011 and Further
Cautionary Announcement Relating to Trustco Mobile (Pty) Ltd
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
("the Company" or "the Group" or "Trustco")
Reviewed Preliminary Consolidated Condensed Financial Results For the 12
Months Ended 31 March 2011 and Further Cautionary Announcement Relating to
Trustco Mobile (Pty) Ltd
Nature of Business
Trustco Group Holdings Limited ("Trustco"), with its core activities in micro
insurance and microfinance, is primarily a diversified financial services
company serving the lower end of the consumer market. Through the use of
technology, affordable and appropriate products and services, Trustco is able
to better service the mass market, where access to finance and insurance
remains limited. Following the recent launch of its mobile insurance product
in Zimbabwe, its 2009 listing on the Africa Board of the JSE Limited ("JSE"),
and its integration with mobile telephony to reach underserved communities,
Trustco is poised to become a truly Pan-African group.
Financial Overview
Despite Southern Africa`s slow emergence from the global recession, historical
low interest rates and severe flooding in northern Namibia, Trustco was still
able to provide a stellar performance. Profit after tax increased by 38% to
NAD 190 million while headline earnings grew by 55% to NAD 132 million
compared to the previous corresponding financial period ended 31 March 2010.
This financial period marked Trustco Mobile (Pty) Limited`s ("Trustco Mobile")
first contribution to the Group profits with the company adding NAD 23 million
to net profit after tax.
Earnings were further boosted by property sales from the Lafrenz property,
Trustco`s veritable "Land Bank", which houses prime industrial property on the
outskirts of Windhoek. During the financial period ended 31 March 2011, the
Group sold 54 000 square meters of the Lafrenz property for NAD68 million at
an average sales price of NAD1,250 per square meter. This recent sale
represents only 3% of the approximate 1.8 million square meters of land
available for sale. An additional 120 000 square meters are earmarked for sale
during the next financial year.
Earnings were further enhanced by an award in favour of Trustco for damages
arising out of a breach of contract by the South African Broadcasting
Commission ("SABC"). The award was recognised during this period to the extent
of NAD 54 million.
Revenue in the microfinance and education segment declined marginally as a
result of new loans being subjected to stricter credit criteria, therefore
improving the quality of assets on the loan book. This is confirmed by the
significantly reduced income statement charge during the period under review,
which more than halved when compared to the comparative period, and this on an
increased gross loan book in the period under review.
Administrative expenses increased 10% for the current financial period
compared to the previous financial period. This is mainly due to a NAD17
million underwriting fee paid to a third party insurance firm in Zimbabwe as
part of the Trustco Mobile business and NAD14 million impairment charge
recognised on the loans provided on the sale of the restaurant business. Legal
proceedings have been instituted against the relevant parties, however
management deem it prudent to provide for the loans.
Review of Operations
Micro insurance and Technology Solutions
Namibia
The financial period showed a marginal increase in revenue which amounted to
NAD111.52 million for Micro insurance. The net profit after tax increased by
11% compared to the corresponding period, as result of effective expense
controls being in place. With the recent introduction of new products, revenue
for this segment is expected to achieve further growth. Premium increases were
put on hold during 2010 as an incentive to members as the Company celebrated
its 10th anniversary. Premium increases will resume during the current
financial year.
Zimbabwe
The 2011 financial period has been a momentous one for Trustco Mobile. On
October 7, 2010, EcoLife, a partnership between Trustco Mobile, First Mutual
Life Assurance Company (Pty) Limited and Econet Wireless (Private) Limited,
was launched all across Zimbabwe. This marked the second step in Trustco`s
African expansion beyond Namibia. EcoLife has been well received in the
Zimbabwean market, and continues to grow apace. On 31 March, Trustco Mobile
boasted 1.6 million registered customers across Zimbabwe and it anticipates a
rapid increase in this number as discussions with telecommunication operators
and financial service providers develop into new business opportunities across
the African continent.
While the current model leverages off the high mobile penetration rate to
increase insurance permeation in Sub-Saharan Africa, where less than 5% of the
population has access to insurance, the robustness and flexibility of the
technology allows it to be applied to any transactional-based system. Given
Trustco Mobile`s potential replicability and adaptability across various
emerging markets, this business is expected to blaze the trail for the
expansion of Trustco`s other subsidiaries into the rest of the African
continent.
South Africa
Trustco Financial Services ("Pty) Limited ("TFS") provides intermediary
administrative and software solutions to the financial services and insurance
market. The financial period ended March 2011 proved to be a challenging year
for the South African insurance industry due to the global economic recession.
Consequently, revenues declined by 10% and net profits dropped by 18% compared
to the previous corresponding financial period. With the focus on enhancing
services along the value chain and responding to the increased interest in
TFS`s software solutions, the next financial year should see a marked increase
in top and bottom line performance.
Micro Finance and Education
Namibia
Severe flooding in the northern part of Namibia, where the bulk of students
are located, resulted in a 13% decline in revenue and a 13% drop in net profit
after tax compared to the period ending 31 March 2010. The reduction in the
prime lending rate further adversely affected the yield on Educational loans.
Stricter credit criteria also subdued growth during the current financial
period.
Despite the challenging conditions, gross Educational loans increased from
NAD193 million to NAD226 million from 31 March 2010 to 31 March 2011. Trustco
Finance concluded a loan agreement with the International Finance Corporation
which should significantly improve the lending program and the growth of the
loan book.
Trustco Properties
Namibia
Property investment and development has been an integral part of the Trustco
business culture since the inception of Trustco. The current property
portfolio consists primarily of residential, commercial and industrial
properties in Namibia as well as strategic virgin land, a key driver in this
business segment.
Following the acquisition in 2004 of 360 hectares (3.6 million square meters)
of undeveloped industrial and residential land north of Windhoek, the Group`s
"Land Bank" has just yielded its first significant returns through the sale of
industrial plots.
Capital requirements in the Group will be enhanced through the sale of land
during the next financial period.
Dividends Paid
An interim dividend of 1,5 cps was paid on 27 of January 2011. A final
dividend payment will be considered during the June 2011 Trustco Board
meeting.
Subsequent events
Following the conversion of ABSA Bank`s NAD37 million short term facility into
a NAD40 million term loan, IFC disbursed a second tranche of NAD30 million in
April 2011. The first tranche of NAD40 million was received in December 2010.
Future outlook
The availability of term debt will support the growth of the microfinance book
along with the anticipated sales of Lafrenz industrial property. With Trustco
Mobile now well proven and accepted in the mobile and insurance markets,
growth of this segment is expected to significantly increase and pave the way
for the expansion of Trustco`s other products and service offerings into the
rest of Africa.
Basis for preparation and presentation of reviewed condensed consolidated
annual financial statements
Basis of preparation
These preliminary condensed consolidated financial statements are prepared in
thousands of Namibian Dollar ("NAD `000"). The Group`s functional and
presentation currency is Namibian Dollar. At 31 March 2010, NAD 1 was equal to
ZAR 1.
The reviewed results have been prepared in accordance with IAS 34, Interim
Financial Reporting, and in compliance with the accounting policies of the
Group that comply with the requirements of IFRS and the AC 500 standards as
issued by the Accounting Practices Board, the JSE Limited Listings
Requirements and the NSX Listing Requirements. The accounting policies have
been consistently applied throughout the Group, and are consistent with those
of the previous financial statements.
The Company`s auditors, BDO Namibia and BDO South Africa Inc., have reviewed
the preliminary condensed consolidated financial statements for the year ended
31 March 2011. Their unqualified report is available for inspection at the
registered office of the Company.
Appreciation
With all the success enjoyed by the Group during the year, the Board extends
its gratitude for the tremendous effort from all Trustco staff in order to
achieve these results. The Board would also like to express its thanks to the
service providers and clients without whom this Company would not have
prospered as it has done.
REVIEWED PRELIMINARY CONSOLIDATED CONDENSEDFINANCIAL INFORMATION FOR THE YEAR
ENDED 31 MARCH 2011
CONSOLIDATED STATEMENT OF
COMPREHENSIVE INCOME
% Reviewed Audited
31 31
March2011 March2010
Change NAD `000 NAD `000
Insurance premium revenue 3% 111 520 108 365
Revenue 8% 475 498 442 083
Total revenue 7% 587 018 550 448
Cost of sales -5% -265 144 -279 087
Gross profit 19% 321 874 271 361
Investment income >100% 29 306 7 883
Fair value gains and losses -28% 63 514 88 261
Other income >100% 65 144 23 754
Insurance benefits and claims -26% -21 405 -16 922
Transfer to policyholder liabilities -40% -3 409 -2 427
Change in unearned premium provision -71% -629 -367
Administrative expenses 10% -208 302 -189 556
Finance costs -8% -22 139 -20 489
Profit before taxation 39% 223 954 161 498
Taxation -43% -34 183 -23 954
Profit for the period 38% 189 771 137 544
Other comprehensive income, net of 9% -684 -753
tax
Revaluation of property, plant and 9% -684 -753
equipment
Total comprehensive income for the 38% 189 087 136 791
period
Earnings per shares:
Basic earnings per share (cents) 38% 28.02 20.31
Diluted earnings per share (cents) 38% 28.02 20.31
Dividends per share (cents) -25% 1.50 2.00
RECONCILIATION OF HEADLINE EARNINGS TO EARNINGS ATTRIBUTABLE TO
EQUITY HOLDERS OF THE PARENT
% Reviewed Audited
31 31
March2011 March2010
Change NAD `000 NAD `000
Profit attributable to ordinary 38% 189 771 137 544
shareholders
Adjustments net of taxation: 11% -57 831 -52 212
Loss on disposal of property, plant & -90% 353 3 657
equipment
Fair value adjustments on investment -31% -40 079 -58 159
properties
Impairment of intangible assets -83% 381 2 290
Negative goodwill on business -100% -18 486 -
acquisition
Headline earnings 55% 131 940 85 332
Weighted number of ordinary shares 0% 677 240 677 240
for basic earnings per share
Weighted number of ordinary shares 0% 677 240 677 240
for diluted earnings per share
Basic earnings per share (cents) 38% 28.02 20.31
Diluted earnings per share (cents) 38% 28.02 20.31
Headline earnings per share (cents) 55% 19.48 12.60
Diluted headline earnings per share 55% 19.48 12.60
(cents)
CONSOLIDATED SEGMENTAL ANALYSIS
% Reviewed Audited 31
31 March2010
March2011
Change NAD `000 NAD `000
Total revenue
Micro insurance and technology
solutions
Namibia 3% 111 520 108 365
Gross revenue 3% 111 520 108 365
Inter segment revenue - -
Zimbabwe 100% 45 317 -
Gross revenue 100% 45 317 -
Inter segment revenue - -
South Africa (10%) 263 123 291 699
Gross revenue (10%) 263 123 291 699
Inter segment revenue - -
Micro finance and education
Namibia (13%) 91 293 104 542
Gross revenue (8%) 95 793 104 542
Inter segment revenue (100%) ( 4 500)
Property
Namibia >100% 59 948 28 875
Gross revenue >100% 64 118 29 100
Inter segment revenue <(100%) ( 4 169) ( 225)
South Africa (25%) 174 232
Gross revenue (25%) 174 232
Inter segment revenue - -
Head office and strategic business
Namibia (7%) 15 643 16 734
Gross revenue (19%) 98 678 122 462
Inter segment revenue 21% ( 83 035) ( 105 728)
Total External Revenue 7% 587 018 550 448
Net profit after tax
Micro insurance and technology
solutions
Namibia 11% 49 762 44 985
Segment result (33%) 25 764 38 488
Inter segment >100% 23 998 6 497
Zimbabwe 100% 23 910 -
Segment result 100% 23 910 -
Inter segment 100% -
South Africa (18%) 16 284 19 937
Segment result (30%) 16 342 23 367
Inter segment 98% ( 58) ( 3 430)
Micro finance and education
Namibia (13%) 34 203 39 342
Segment result >100% 11 324 2 338
Inter segment (38%) 22 879 37 004
Property
Namibia 30% 90 904 69 814
Segment result 36% 94 858 69 589
Inter segment <(100%) ( 3 954) 225
South Africa >100% 985 ( 249)
Segment result <(100%) ( 4 527) ( 249)
Inter segment 100% 5 512 -
Head office and strategic business
Namibia (-28%) ( 26 277) ( 36 285)
Segment result (63%) 32 771 20 121
Inter segment (5%) ( 59 049) ( 56 406)
Profit attributable to equity holders 38% 189 771 137 544
Total assets
Micro insurance and technology
solutions
Namibia 56% 59 631 38 222
South Africa 9% 216 843 199 107
Zimbabwe 100% 15 167 -
Micro finance and education
Namibia 14% 220 824 193 547
Property
Namibia 91% 169 163 88 551
South Africa 16% 13 275 11 425
Head office and strategic business
Namibia 35% 527 444 390 252
33% 1 222 347 921 104
Total liabilities
Micro insurance and technology
solutions
Namibia 9% 30 638 28 219
South Africa 0% 128 804 129 116
Micro finance and education
Namibia >100% 105 566 28 152
Property
Namibia 5% 63 028 60 299
South Africa -2% 7 219 7 334
Head office and strategic business
Namibia 13% 214 552 189 339
24% 549 807 442 459
Volume analysis per geographical area
Micro insurance and technology Unaudited Unaudited
solutions
Namibia
Insured members 7% 303 856 284 957
South Africa
Premiums administered (N$`000) (25%) 1 061 049 1 408 506
Zimbabwe
Registered clients (`000) 100% 1 568 -
Micro finance and education
Namibia
Students 19% 24 090 20 167
Loans 10% 28 595 25 899
Property
Namibia
Residential (`000 area sqm) - 2 030 2 030
Industrial (`000 area sqm) (3%) 1 516 1 570
Business (`000 area sqm) - 155 155
South Africa
Residential (`000 area sqm) - 5 5
CONSOLIDATED STATEMENT OF FINANCIAL
POSITION
% Reviewed Audited
31 31
March2011 March2010
Change NAD `000 NAD `000
ASSETS
Non-current assets
Property, plant and equipment -7% 129 697 139 366
Investment properties 63% 232 829 143 233
Intangible assets 24% 240 922 194 718
Deferred income tax assets 22% 62 096 50 855
Educational loans advanced 13% 120 266 106 840
Other loans advanced -35% 24 164 37 163
Finance lease receivable -48% 457 872
Total non-current assets 20% 810 431 673 047
Current assets
Financial assets at fair value 41% 25 699 18 274
through profit & loss
Short-term portion of educational 22% 87 473 71 463
loans advanced
Short-term portion of other loans -8% 833 908
advanced
Short-term portion of finance lease 8% 419 387
receivables
Inventories -11% 16 541 18 677
Trade and other receivables >100% 197 500 46 549
Current income tax assets 2% 766 752
Cash and cash equivalents -9% 82 685 91 047
Total current assets 66% 411 916 248 057
Total assets 33% 1 222 347 921 104
LIABILITIES AND SHAREHOLDERS` EQUITY
LIABILITIES
Non-current liabilities
Long-term liabilities 36% 151 435 111 090
Other liabilities -89% 334 3 150
Deferred income tax liabilities 54% 87 833 57 082
Policy holders` liability under 70% 8 307 4 899
insurance contracts
Amounts due to related parties -100% - 20 834
Total non-current liabilities 26% 247 909 197 055
Current liabilities
Current portion of long-term >100% 55 288 15 367
liabilities
Current portion of other liabilities 90% 3 127 1 645
Trade and other payables -11% 167 262 187 572
Technical provisions 7% 18 428 17 189
Amounts due to related parties 100% 8 826 -
Current income tax liabilities >100% 7 778 2 005
Bank overdraft 90% 41 189 21 626
Total current liabilities 23% 301 898 245 404
Total liabilities 24% 549 807 442 459
Shareholders` equity
Capital and reserves
Share capital 0% 162 645 162 645
Deemed treasury shares 0% -18 731 -18 731
Contingency reserves 24% 2 361 1 902
Revaluation reserves -4% 15 414 16 098
Vendor shares >100% 14 976 -
Distributable reserves 57% 495 875 316 731
Attributable to equity holders of the 41% 672 540 478 645
parent
Total liabilities and shareholders` 33% 1 222 347 921 104
equity
CONSOLIDATED STATEMENT OF CASH FLOWS
% Reviewed Audited31
31 March2010
March2011
Change NAD `000 NAD `000
Cash flow from operating activities
Cash generated by operations before >100% 165 506 82 650
working capital changes
Changes in working capital < (100%) -137 304 -9 015
Interest received >100% 29 306 7 883
Finance costs -8% -22 139 -20 489
Net educational loans advanced 35% -29 436 -45 276
Dividends paid 28% -10 168 -14 143
Taxation paid < (100%) -5 517 -397
Net cash flow from operating >100% -9 752 1 213
activities
Cash flow from investing activities
Additions to property, plant and -26% -25 402 -20 180
equipment
Additions to investment properties < (100%) -6 303 -200
Additions to intangible assets < (100%) -39 701 -11 739
Acquisition of subsidiary, net of -100% -7 254 -
cash acquired
Acquisition of business, net of cash -100% -3 315 -
acquired
Additions to assets at fair value 10% -7 425 -8 239
through profit and loss
Proceeds on sale of property, plant -90% 895 9 042
and equipment
Net cash flow from investing < (100%) -88 505 -31 316
activities
Cash flow from financing activities
Sale of deemed treasury shares -100% - 496
Proceeds from / (repayment of) long >100% 80 266 -7 075
term liabilities
(Repayment of) / proceeds from other < (100%) -1 334 2 077
liabilities
(Repayment of) / proceeds from < (100%) -12 008 8 050
related party loans
Increase in policy holder under 40% 3 408 2 427
insurance contracts
Net cash flow from financing >100% 70 332 5 975
activities
Net change in cash and cash -16% -27 925 -24 128
equivalents
Cash and cash equivalents at -26% 69 421 93 549
beginning of period
Cash and cash equivalents at end of -40% 41 496 69 421
period
CONSOLIDATED STATEMENTS OF MOVEMENTS
IN EQUITY
% Reviewed Audited
31 31
March2011 March2010
Change NAD `000 NAD `000
Balance at beginning of period 29% 478 645 370 477
Profit for the period per the income 38% 189 771 137 544
statement
Revaluation of property, plant and -9% (684) (753)
equipment
Sale of deemed treasury shares by -100% - 406
Trustco Staff Share Incentive Scheme
Trust
Profit on sale of deemed treasury -100% - 90
shares
Vendor shares -200% 14 976 (14 976)
Dividends paid -28% (10 168) (14 143)
Balance at end of period 41% 672 540 478 645
Comprising:
Share capital - 162 645 162 645
Deemed Treasury Shares due to - (18 731) (18 731)
management control
Distributable reserves 57% 495 875 316 731
Contingency Reserve 24% 2 361 1 902
Revaluation Reserve -4% 15 414 16 098
Vendor shares 100% 14 976 -
41% 672 540 478 645
Further Cautionary Announcement Relating to Trustco Mobile
Shareholders are referred to the cautionary announcements, dated 03 February
2011,14 March 2011 and 15 April 2011 and are advised that Trustco`s
subsidiary, Trustco Mobile, is currently still in negotiations with several
parties in pursuance of its reported expansion strategy into Africa.
These negotiations, if successfully concluded, may have a material effect on
the price of the Company`s securities.
Accordingly shareholders are therefore advised to continue exercising caution
when dealing in the Company`s securities until a full announcement is made
By order of the Board
Adv. Raymond Heathcote Mr Q van Rooyen
(Chairman) (Managing Director)
Windhoek, 26 May 2011
Sponsors:
Namibia
IJG Securities (Pty) Ltd
South Africa
Questco
Date: 26/05/2011 07:05:21 Produced by the JSE SENS Department.
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