Announcements Financial Institutions Rating Alerts

GCR Assigns Long and Short-term National Scale Issuer Ratings of BBB-(NG)/A3(NG) to Greenwich Trustees Limited (formerly, GTL Trustees Limited), Outlook Stable

Lagos, 07 October 2021 – GCR Ratings (“GCR”) has assigned Greenwich Trustees Limited’s national scale long term and short-term issuer ratings of BBB-(NG) and A3(NG), respectively, with a Stable Outlook.

Rated Entity / Issue Rating class Rating scale Rating* Outlook / Watch
Greenwich Trustees Limited Long Term Issuer National BBB-(NG) Stable Outlook
Short Term Issuer National A3(NG)

GCR has withdrawn the *(mq) rating as a business decision, without review.  MQ ratings are not credit ratings, therefore they do not measure the relative ability of an entity to meet its financial obligations.  Conversely. GCR’s issuer credit ratings are forward-looking opinions on the relative creditworthiness of a specific financial obligation, or a class of financial obligations issued by an entity.

Rating Rationale

The ratings assigned to Greenwich Trustees Limited (“Greenwich Trustees” or “the Company”) reflects its modest credit profile, with an ungeared balance sheet, moderate liquidity, and earnings. However, these strengths are offset by its low competitive position in a niche market.

The company’s competitive position score is low, underpinned by its limited competitive position in terms of balance sheet size (excluding clients’ funds), asset under management (“AUM”) and earnings relative to its peers within the trusteeship and portfolio management space. Positively, AUM has grown consistently over the last three years of review from a low base of N6.9bn at FY18 to N14.7bn at FY20, representing an average growth rate of 47% over the period. However, AUM continues to rank within the mid-sized range when compared to other players, given that it is coming off a low base. Diversification by product lines and geography is considered limited and generally in line with other competitors. Going forward, competitive positioning is expected to remain low over the next 12-18months, albeit improvement may be achieved through consistent efforts.

Leverage position is considered sound, with no interest-bearing debt on the balance sheet. However, operational cash generating capacity is weak and may remain constrained except the company is able to significantly scale up the business over time. GCR expects the leverage position to remain positive should the balance sheet remain ungeared.

Earnings is considered positive to the rating. The company’s revenue has been somewhat stable over the last three years of review, albeit remains highly vulnerable to fluctuations in AUM as demonstrated in the past. EBITDA margin remains high, averaging 40% over the last three years, with high likelihood for further improvement in the next 12-18months based on the ongoing initiates to improve the company’s market visibility.

Greenwich Trustees displays adequate liquidity to cater for clients’ funds requirements. However, excluding the managed funds, the company displayed some degree of liquidity pressure over the last two years of review following the acquisition of an investment property in 2019 and a further equity investment in 2020. While these are solely based on the company’s proprietary funds, it introduces some level of operational risk which is considered negative to the rating. Further suppressing liquidity is the consistent dividend pay-outs within the last two years of review. Going forward, we expect liquidity to be maintained at sufficient level to support operations.

Outlook Statement

The stable outlook reflects our expectation that Greenwich Trustees will continue to improve its market position and grow the AUM, balance sheet will remain ungeared, earnings will remain at modest level, with minimal risk exposures over at least the next 12-18 months.

Rating Triggers

The ratings could go up following a significant improvement in earnings and competitive positioning over a sustained period. Also, ability to demonstrate value from the recent change of name to reflect its affiliation with the Greenwich Group (an investment banking group) may impact the ratings positively. However, the ratings may be negatively impacted by debt issuance which supresses the company’s credit profile.

Analytical Contacts

Primary analyst Funmilayo Abdulrahman Senior Analyst, Financial Institutions
Lagos, NG Funmilayo@GCRratings.com +234 1 904 9462
Committee chair Matthew Pirnie Group Head of Ratings
Johannesburg, ZA MatthewP@GCRratings.com +27 11 784 1771

Related Criteria and Research

Criteria for the GCR Ratings Framework, May 2019
Criteria for Rating Asset Managers, November 2019* appendix to the Criteria for Financial Services Companies, May 2019
GCR Ratings Scale, Symbols & Definitions, May 2019
GCR Country Risk Scores, February 2021
GCR Financial Institutions Sector Risk Score, February 2021

Ratings history

Greenwich Trustees Limited (formerly, GTL Trustee Limited)

Rating class Review Rating scale Rating Outlook/Watch Date
Management quality Initial/last National BBB-(NG)(mq)* Stable Outlook September 2020

Risk Score Summary

Rating Components & Factors Risk scores
Operating environment 5.75
Country risk score 3.75
Sector risk score 2.00
Business profile -3.00
Competitive position -3.00
Management and governance 0.00
Financial profile 3.25
Cash flow and Leverage 2.00
Earnings vs. Risk 1.00
Liquidity 0.25
Comparative profile 0.00
Group support 0.00
Peer analysis 0.00
Total Score 6.00

Glossary

Capital The sum of money that is invested to generate proceeds.
Cash Funds that can be readily spent or used to meet current obligations.
Cash Flow The inflow and outflow of cash and cash equivalents. Such flows arise from operating, investing and financing activities.
Credit Rating An opinion regarding the creditworthiness of an entity, a security or financial instrument, or an issuer of securities or financial instruments, using an established and defined ranking system of rating categories.
Debt An obligation to repay a sum of money. More specifically, it is funds passed from a creditor to a debtor in exchange for interest and a commitment to repay the principal in full on a specified date or over a specified period.
Liquidity The speed at which assets can be converted to cash. It can also refer to the ability of a company to service its debt obligations due to the presence of liquid assets such as cash and its equivalents. Market liquidity refers to the ease with which a security can be bought or sold quickly and in large volumes without substantially affecting the market price.

Salient Points of Accorded Ratings

GCR affirms that a.) no part of the ratings were influenced by any other business activities of the credit rating agency; b.) the ratings were based solely on the merits of the rated entity, security or financial instrument being rated; and c.) such ratings were an independent evaluation of the risks and merits of the rated entity, security or financial instrument.

The credit rating has been disclosed to Greenwich Trustees Limited. The rating above was solicited by, or on behalf of, the rated entity, and therefore, GCR has been compensated for the provision of the rating.

Greenwich Trustees Limited participated in the rating process via telephonic management meetings, and other written correspondence. Furthermore, the quality of information received was considered adequate and has been independently verified where possible. The information received from Greenwich Trustees Limited and other reliable third parties to accord the credit ratings included:

  • Audited financial results as at 31 December 2020;
  • Unaudited financial results as at 30 June 2021 and
  • Other publicly available information.
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