Further Trading Statement

4 April 2016

(Incorporated in the Republic of South Africa)
(Registration No 1955/002869/06)
Share Code: TRE
ISIN: ZAE000007506



Further to the Trading Statement published on 1 March 2016 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 – 521 548
Adjusted HEPS (which excludes net unrealised foreign exchange gains on translation of long-term receivables) 12 – 17 432 – 458 521
Basic EPS 144 – 149 (239) – (266) 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 been completed and the financial effects thereof are included in basic earnings in the table above.

A further aspect 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, estimated residual values are evaluated on an ongoing basis and Textainer and TAC take a long-term view to evaluate expected sales prices 12 to 13 years in the future.  When events or changes in circumstances indicate that current estimated disposal values at end of useful life are no longer appropriate Textainer and TAC will adjust estimated residual values accordingly.

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 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 have delayed the publication of the Reviewed Results for the year ended 31 December 2015.  It is anticipated that the Reviewed Results for the year ended 31 December 2015 will be published mid April 2016.

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

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

4 April 2016

Sponsor: Rand Merchant Bank (A division of FirstRand Bank Limited)