THE BOTTOM LINE
All at sea: Trencor bosses paddling madly to keep up
Painstaking committee work and expensive auditing have tied the shipping group in governance knots
Trencor is a case of well-intentioned governance, including accounting oversight, that has got out of control.
This is a holding company that oversees one large operation, Textainer; a smaller operation, TAC; and some cash. It doesn’t really have anything in the way of operating assets that need much direct oversight.And yet, because it is a JSE-listed company it is required to have all manner of board committees. This means its seven directors, including two executive directors, get the opportunity to serve on lots of committees. The entire board is on the risk committee. In addition Roddy Sparks, Herman Wessels and David Nurek are on the nomination committee, the remuneration committee, the social and ethics committee and the governance committee. This really is a case of form over substance.
Things will hopefully look different once the Trencor board has finalised its plans to unbundle the company’s 47% stake in US-listed Textainer, which is the former world leader in containers and is Trencor’s most significant asset. It accounts for 75% of Trencor’s net asset value.
The unbundling should also help to reduce Trencor’s audit fees, which has been its largest expense in the past few years. In financial 2016 management attributed most of the R89-million “other operating expenses” to auditing expenses. In financial 2017 “other operating expenses” increased to R129-million with audit fees again accounting for the largest chunk.
The audit fees are attributable to the painstaking amount of work that has to be done to convert Textainer’s GAAP-based accounts into the IFRS accounts required by the JSE. It is not only an expensive exercise, it is a time-consuming one, and explains why Trencor’s financial statements have been late enough to incur the wrath of the JSE and threats of suspension.