… As independent evaluation justifies N$3.6bn sale to Trustco
By Hilary Mare
THE controversial N$3.6 billion sale of Huso Investments, by the Van Rooyen family to Trustco Group Holdings, was approved after independent evaluators assigned by the Johannesburg Stock Exchange (JSE) found that the actual value of the firm was N$6.5 billion, Confidente has established.
Huso is the holding company of Northern Namibian Development Company, a diamond mining and exploration entity, and Morse Investments, a licensed diamond processing and polishing factory, both in the Kunene region.
Trustco Chief Executive Officer, Quinton van Rooyen, said that apart from the independent valuation that justified the selling price, the Van Rooyen family, which is the majority shareholder in Trustco, was also forbidden from voting for the deal.
“When a company acquires an asset from a related party, there are various legal hurdles that you have to jump through. In this case, the minority shareholders decided on purchasing this resource, and the Van Rooyen family was excluded, because it was a related party.
“Contrary to reports that Huso was overpriced, independent valuators found the resource to be N$6.5 billion, yet it was sold for N$3.6 billion. So, from the family to the company, N$3 billion or so moved freely, which sums up that this was a good deal,” ,” Van Rooyen told Confidente.
According to Trustco, the rationale for this acquisition included the argument that it would create a natural foreign exchange hedge for the company.
Trustco added that the diamond market fundamentals supported the proposed purchase price, and indications are that demand will outstrip supply, from 2019 onwards.
It said opportunities in the diamond market are scarce, especially an operation that is vertically integrated, as this one is.
Last year, then Trustco Group Financial Director, Ryan McDougall, quit the company and returned to his native South Africa, fuelling rumours in financial circles that the Trustco management and shareholders was deeply divided over plans by Quinton van Rooyen (Snr) to buy Huso Investments.
Affirming Van Rooyen’s stance late last week, Trustco Group Company Secretary, Amanda Bruyns, said that the minority shareholders had indeed voted to approve the purchase.
“The shareholders approved the transaction. Notwithstanding the fact that the major shareholders were excluded from the voting processes, the resource, as per JSE standard, was evaluated by an independent evaluator, who actually found the resource to be worth more than N$6.5 billion, compared to the purchase price of around N$3.6 billion,” she said.
The Trustco Group announced last week that it had increased its operating profit by N$132 million, posting a profit before tax of N$581 million.
Trustco’s revenue grew by 8 percent, to N$1 247 million.
According to Van Rooyen, the revenue grew substantially from previous years, due predominantly to a surge in revenue from investments.
The group’s real estate investments continued to post an exceptionally strong performance. Van Rooyen ascribed the results to a combination of maintaining its focus on priority markets and extracting value from its core business.
According to the group, investment income continued its positive momentum, mainly from investment property capital gains and currency exchange gains.
Total expenses increased by 3 percent, which supported the growth of revenue.
The interest cover ratio decreased from 4.35 times in FY2016 to 4.23 times in FY2017. However, the number remains healthy.
In terms of earnings per share, the group said that it increased to 69 cents from 55 cents (a 25 percent growth), while headline earnings per share grew by 28 percent, from 55 cents to 71 cents.
Meanwhile, the growth in the net asset value of the group remains a function of organic growth in the main business areas.
“During the 2017 financial year, growth in plant, property and equipment (PPE), advances, investment properties and other receivables, dominated the increases in the balance sheet, and consistent with earnings, are largely attributable to investment activities,” the group said.
Trustco did not divulge when it will pay the dividend to shareholders, which was scheduled for February this year.
Commenting on the acquisition of Huso, Trustco Group Financial Director, Floors Abrahams, said: “The selling price will be paid only after the mine realises profits.”
Confidente. Lifting the Lid. Copyright © 2015