Trust Co justifies hype

Fending off potential suitors all year hasn't distracted The Trust Co management from delivering a strong first half result.

After a three way tussle for control that has occupied management form most of this year, The Trust Co (TRU) has justified all the attention with a 28% lift in first half earnings and an upbeat assessment for the future.

Perpetual (PPT) won the battle with a $247 million offer for the group, outbidding Equity Trustees and IOOF (IFL), although shareholders of both companies have yet to ratify the deal that will make Perpetual the dominant market force.

The Trust Co has a diversified trust business with personal, corporate and charitable trust operations, offering everything from financial planning and wealth management to structured finance and REIT trustee services.

Net earnings rose to $5.2 million on a 12% hike in revenue to $48 million compared to the same period last year.

The financial scorecard was impressive on all counts. The dividend was lifted 42% to 17c a share, cash on hand was 52% higher and net tangible assets rose 12% to $1.57 a share.

The group reported improved performances in all divisions across each jurisdiction including Australia, New Zealand and Singapore.

While the growth was aided by a lift on markets, 60% of the revenue growth in personal services was the result of new business from existing and new clients.

Corporate services also performed well despite the impact of superannuation reforms and the group believes momentum will build as corporate restructurings and Initial Public Offerings gather pace.

The lift in confidence in the wake of the election has also boosted sentiment and chief executive Shailendra Singh said the company was well placed to maintain its earnings growth momentum.

IOOF may have been trumped in its tilt for The Trust Co but has not abandoned its ambitions with chief executive Chris Kelaher adamant that his group will pursue the company if the deal is not approved by shareholders.

A condition of the Perpetual purchase is that it must divest  TheTrust Co’s 13% holding in Equity Trustees which IOOF kindly has pledged to pick up, sparking speculation that it will be next in line for a takeover bid.

For more potential takeover targets, see Tom Elliott's 10 stocks in the takeover spotlight.

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