| Tue 1 Mar 2016, 13:12 | | TRENCOR LIMITED - Trading statement |
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TRE 201603010064A
Trading statement
TRENCOR LIMITED
(Incorporated in the Republic of South Africa)
(Registration No 1955/002869/06)
Share Code: TRE
ISIN: ZAE000007506
(“Trencor”)
TRADING STATEMENT
Shareholders are advised that earnings per share (“EPS”), headline earnings per share (“HEPS”)
and adjusted HEPS for the year ended 31 December 2015 are expected to be within the ranges
set out below:
2015 Expected 2014 Actual
% decrease cps cps
HEPS 5 - 10 493 - 520 548
Adjusted HEPS (which excludes net
unrealised foreign exchange gains
on translation of long-term 12 - 17 432 - 458 521
receivables)
Basic EPS Greater than 20% To be determined 543
Textainer Group Holdings Limited (NYSE: TGH) (“Textainer”) in which Trencor has a 48,3%
beneficiary interest (2014: 48,0%) reported net profit expressed in US GAAP for the year to
31 December 2015 of US$106,9 million compared to US$189,4 million in the same period in
2014. Adjusted to conform with International Financial Reporting Standards (“IFRS”) and before
accounting for impairment of the container fleet as required under IFRS, Textainer’s net profit
for the year was US$107,3 million (2014: US$175,0 million). Trencor is a beneficiary under the
Halco Trust and is required to consolidate the results of Textainer and TAC Limited in
accordance with IFRS.
It should be noted that in valuing the container fleets for the purposes of determining whether
any impairment is required, under US GAAP the impairment model is based on undiscounted
future cash flows, whereas IFRS requires a discounted cash flow model. This difference in
requirement means that under IFRS, a charge for impairment is required at 31 December 2015,
whereas under US GAAP, no such impairment is required. The impairment provision required
under IFRS is attributable mainly to the requirement that future cash flows be discounted. The
impairment provision is a charge against basic earnings but not against headline earnings.
The exercise to determine the amount of impairment required at 31 December 2015 under IFRS
has not yet been completed. We are presently not able to quantify the effect on basic EPS but
believe that it will decrease by at least 20% from the corresponding period. Once the amount
has been determined, a further Trading Statement with specific guidance on basic EPS will be
issued.
A further issue arises in regard to future depreciation charges. Under IFRS, residual values of
containers for the purpose of calculating future depreciation are estimated assuming that
current market conditions will exist at the end of their useful lives (i.e. current selling prices are
used to determine residual values). These residual values are required to be reassessed at least
at each reporting date. This differs from US GAAP under which container residual values are
based on Textainer’s and TAC’s expectations of their values at the end of their useful lives.
Under US GAAP, residual values are not required to be reviewed at least at each reporting date;
rather, residual values are only reviewed when events or changes in circumstances indicate that
current estimated disposal values at end of useful life are no longer appropriate.
A reassessment of the residual values of containers owned by Textainer and TAC was required
at year-end in order to determine future depreciation in accordance with IFRS, as the current
selling prices at the financial reporting date of containers at the end of useful life were lower
than the recorded residual values at year end. The calculation of the impact of adjusting
residual values at year end on the IFRS depreciation charge for 2016 and future periods in order
to comply with the 2015 note disclosure requirements of IAS 8 and the determination of the
impairment charge under IFRS have proved to be very onerous undertakings which will delay
the publication of the Reviewed Results for the year ended 31 December 2015 by a few weeks.
Initial indications are that, under IFRS, the additional depreciation charge in 2016, over and
above the amount that Textainer and TAC will report under US GAAP, will be material.
The results of Textainer expressed in US GAAP can be accessed on its website
www.textainer.com.
The financial information on which this trading statement is based has not been reviewed and
reported on by Trencor’s independent auditors.
On behalf of the Board
NI Jowell Chairman
1 March 2016
Sponsor: Rand Merchant Bank (A division of FirstRand Bank Limited)
www.trencor.net
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