Trustco Group Holdings Limited recently retained its BBB- and A3 rating from Global Credit Ratings (GCR), affording it a stable outlook for 2014.
The group had recently reported a surge in profit of N$252 million from a paltry N$39 million for 2013. The group also reported its basic earnings per share increasing by 521% to 253 while headline earnings per share shot up 304% to 142 thus affirming the rating. Trustco has an established and expanding franchise in its main areas of operation which are made up of education, student and mortgage finance, insurance, and property development, to markets both within Namibia and South Africa. A sound capital structure, a low to moderating credit risk and improving profitability support the rating, which excludes the prospect of systemic support, given its low likelihood. The rating's outlook considers Trustco's enhanced prospects and strategic focus, viewed in the context of divergent macroeconomic trends in its core markets said Global Credit Ratings.
In the financial year 2014, growth in property and lending balances resulted in capital coverage of assets declining from 63.2% for the fiscal year end 2013 to 48.3% for the fiscal year end 2014, and net debt to capital rising to 48.9% for fiscal year 2014 from 29.3% for 2013 Global Credit Rating said in its outlook. Swift asset and debt growth without a commensurate increase in profit may place strain on capital resources and leverage. Nevertheless, to date, Trustco has managed growth and dividend policies to maintain adequate capital, while remaining within covenanted levels Global Credit Ratings said. Earnings prospects seem positive in all business segments. Sales of educational courses are gaining momentum, consequently growth in student finance has a strong outlook. More consistency in property sales should result in meaningful and consistent segment contributions to earnings going forward, supported by mortgage lending. Insurance is entering an expansion phase, with new products capacity likely to yield benefits in fiscal year 2015 and beyond Global Credit Ratings said. Trustco had reported securing funding of N$300 million via the group's bond programme during the 2014 financial year from the Norfund and International Finance Corporation. Said Trustco about the funding received, "Less than two months into 2014, global investors pulled more money out of emerging-market stock and bond funds than the total amount they retracted last year. Conversely Trustco, an emerging market group, managed to procure R300 million Trustco had in May announced acquiring 100% of the issued share capital of Fides Bank after gaining regulatory approval for the deal.