Trustco Group Holdings has lost a drawn-out battle with the Johannesburg Stock Exchange (JSE) after the South African Financial Services Tribunal (FST) dismissed its appeal against a directive by the bourse.
The Namibian company, with operations in insurance and investments, resources, and banking and finance, had appealed against a JSE directive that it revises and restates its financial information for the year ended March 31, 2019 and interim results for the six months to September 30, 2019, which the bourse found not to be compliant with its listings requirements.
“Trustco’s repeated failure to take the FRIP, the JSE and the Tribunal into its confidence by explaining Dr. Van Rooyen’s waivers of the loans amounts to exceptional circumstances which warrants an order that Trustco pays 50% of the JSE’s costs. In these circumstances the JSE decision that the Company had not complied with IFRS in respect of the three matters referred to, has been confirmed by the Tribunal,” a JSE SENS said.
The JSE had found errors that pushed up Trustco’s profits by a combined N$2.1 billion, a position which the company had disputed.
The issues were the classification of gains derived from loans that were written off on two occasions with a gain value of N$1,5 billion; the reclassification of unsold erven held by Trustco in a property development from inventory to investment property, showing a N$693 million gain. The third issue pertains to the company recognising revenue in the sale of undeveloped land.
The company following the decision, is still expected to implement corrective action as follows:
- Reversing the N$546m gain previously recognised in profit and loss and recognising this ‘credit amount’ to reduce the common control reserve initially recognised in equity as a result of the Huso acquisition.
- Reversing the reclassification of the Elisenheim properties (incorrectly reclassified to investment properties) and consequently reversing the N$693m gain (presented as revenue of N$984m and cost of sales of N$291m) from profit and loss.
- Reversing the N$1bn gain previously recognised in profit and loss and accounting for this as a transaction with an equity participant i.e. recognising the credit directly in equity.
Trustco operates in three segments: insurance and investments, resources, and banking and finance.
