Inqo Investments Ltd - Audited Group Results for Year ended 28 Feb 2018
RNS Number : 6331V
Inqo Investments Limited
25 July 2018
 

Inqo Investments Limited

 

Audited Group Results for the Year ended 28 February 2018

  

CHAIRMAN AND CHIEF EXECUTIVE STATEMENT

 

Inqo Investments Limited ("Inqo" or "the Group") is a South African based social impact company that acquires and invests in businesses that tackle poverty and the social needs of low income earners in Sub-Saharan Africa.

 

COMMENTARY

 

The Group has continued its process of consolidating its financial position that started in 2014 and remains in a good financial position with no debt.

 

The Group consolidated revenues showed a 35% increase to R22,962,689 from R17,026,098 in 2017. The Inqo group results for the year to date reflect a loss after tax of R4,274,616 (2017: a profit of R7,390,986 due to a large write back on the settlement of a loan). The loss takes into account depreciation of R2,447 768 and operating costs incurred during the year with listing costs of R721,820, directors emoluments of R676,000 and audit and professional fees of R675,554. The loss for the year equates to a loss of R0.41 cents per share.

 

In Inqo company results, the loan to Kuzuko has historically been fully impaired due to losses incurred by this main subsidiary company. However since Kuzuko has achieved two years of profits and forecasts that it will continue to be profitable, the Kuzuko loan impairment has been reduced by R3,500,000 in the 2018 year.  The Group annually reviews the value of its income earning assets to ensure that they reflect fair value. The assets which have traditionally resulted in valuation movements have been Biological Assets (game animals owned by Inqo). The market for game has been very volatile in South Africa and as a result, game prices have reduced substantially which has resulted in an impairment charge of R2,052,000 in 2018. 

 

During this financial year, 3 current Inqo shareholders committed to funding of £2.5m payable in 2 equal tranches through a private placement. The first tranche of funding was received in the current financial year and the second tranche will be received in the 2018/9 financial year. These funds will be used for new investments in our growing pipeline of social impact opportunities in 2018 and 2019.

 

INVESTEE COMPANIES

 

Kuzuko Lodge (South Africa)

 

The continued financial improvement of the Group is mainly attributable to the Kuzuko Lodge operation, Inqo's main trading subsidiary which earned a profit before tax for the year of R1,051,644 (2017: profit of R783,706). Sales increased to R22,946,724 (2017: R17,026,098) with operating costs of R21,929,592 (2017: R16,227,023). The Kuzuko costs are traditional costs incurred by a business operating in the hospitality industry.

 

The profit turnaround has come about from the business being able to achieve both improved occupancies and improved average room rates.  As Kuzuko enters its tenth season of trading we expect this profit turnaround achieved in the last two years of trading to continue into the future.

 

Conservation costs remain high as Kuzuko continues to rehabilitate the game reserve as well as the gradual introduction of more animals from our breeding camps.

  

 

Spekboom Trading (South Africa)

 

The contract entered into with the Department of Environmental Affairs (DEA) to fund the planting of Spekboom on the Kuzuko Game Reserve to achieve reforestation of the Reserve and to create jobs in the local community has come to an end.  During the term of the contract some 500 acres of degraded land were replanted with Spekboom and in the process 100 job opportunities were created. Analysis has been undertaken to record survival rates and efficiency of the different experimental methods of planting and these learnings will be used in the next re-planting phase.

 

We are currently investigating other opportunities to continue the reforestation program.

 

 

Bee Sweet Honey (Zambia)

 

This operation is based in Zambia and operates as a commercial producer of honey.  The company operates in an environment where it collects and purifies honey with a desire to maximise holistic benefits to farmers, investors, customers and local communities.

 

The Bee Sweet operation has placed 90,000 bee hives in the field with 13,000 farmers in its program. Inqo earns its return on investment from the yield of 3 000 hives.

 

The hives are harvested twice a year, generally in May and November. Inqo earned revenue from the May 2017 harvest but not from the November/December harvest because torrential rain damaged the bulk of the honey crop. From its first harvest, Inqo earned R41,438 as its share of revenue from the proceeds of the May 2017 honey crop.

 

 

Four One Financial Services Limited (Uganda)

 

In April 2017, Inqo made an investment in Four-One Financial Services Limited, a Ugandan based company which manages the Mazima Voluntary Individual Retirement Benefits Scheme.

 

The Mazima Retirement Plan is the trading name of Mazima Voluntary Individual Retirement Benefits Scheme (MVIRBS). It is a retirement savings scheme for low income earners in the informal sector of the economy. The poor and informal workers do not currently have any formal retirement savings schemes. The Uganda government has licensed Mazima to provide a voluntary savings scheme for such low income earners. Mazima is supervised by a group of trustees and is licensed and regulated by the Uganda Retirements Benefits Regulatory Authority (URBRA), the government body that regulates all pension and retirement benefits schemes. Four-One Financial Services is the management company responsible for marketing and administration of the Mazima retirement scheme.

 

Savers register online and pay through mobile banking or e-banking through the bank. No cash is used. Each saver has his/her own account managed by the custodian bank, Housing Finance Bank. The investments are managed by AA Financial, a regulated advisor.

 

Over the 18 months since its launch, the scheme has attracted over 1,100 savers with a fund size of UGX 800m. Mazima has entered into an agreement with Pride Microfinance Limited, the largest microfinance institution in Uganda, to roll out its services to its 500,000 micro-finance clients. In addition, the company has entered into an agreement with MTN, Uganda's largest mobile operator, to jointly promote the Mazima scheme to its 10 million Mobile Money subscribers.

 

Inqo earned interest on its investment in the Four One Financial Services operation of R90,529 (2017: Nil).

  

 

OUTLOOK

 

Inqo will continue to benefit from the improved trading of the Kuzuko operation and revenues earned from investments in the Bee Sweet operation in Zambia and the management by Four One Financial Services of the Maxima Benefits Scheme.

 

The improved room rates being achieved by Kuzuko with increased occupancies experienced in the latter part of 2017/8 and the first quarter of 2018/9 are expected to continue on the back of the fact that the Rand remains weak against other currencies making South Africa an attractive destination of travel.

 

SUMMARY OF SOCIAL & ENVIRONMENTAL METRICS SINCE PROJECT COMMENCEMENT

 

·    39,000 acres of former farmland restored as a game reserve in a region of endemic poverty in the poorest province in South Africa.

·   Increased VAT and income tax paid year on year, currently 51 fulltime and 11 part-time and contracted staff employed. 51 of the workforce of Kuzuko Lodge are drawn from local communities.

·      All staff living at Kuzuko in standard housing with flush toilets, power, water and solar panels.

·      Conservation of 3 endangered species.

·      Reforestation of 500 acres of degraded land with spekboom providing work for 100 part time staff.

·      90,000 beehives in the field providing 13,000 farmers with increased income.

·      1,100 voluntary savers in micro-pension scheme.

 

STAFF

 

The directors would like to take this opportunity to thank all the operating staff in the Group for their contribution and commitment to the group's objectives.

 

FINANCIAL INFORMATION

 

The financial information set out in this announcement does not constitute statutory financial statements. This financial information has been extracted from Inqo's audited group financial statements for the year ended 28 February 2018. A copy of these audited financial statements will be available on the company website by 17 August 2018.

 

DIVIDEND

 

The company has not declared a dividend for the year ended 28 February 2018.

 

K.S Tan                                                                                  C.J Bertie

Chairman                                                                            Chief Financial Officer

 

 

 

Inqo Investments Limited

 

Mr Chris Bertie, Chief Financial Officer

 

and Chief Operating Officer

Tel: +27 (0)83 625 4069

 

 

Shard Capital Partners LLP

 

NEX Exchange Corporate Adviser and Broker

 

Dr Wang Chong

Tel: +44 (0)20 7186 9948

 

 

Inqo Investments Limited Group

Condensed consolidated statement of profit or loss and other comprehensive income

For the year ended 28 February 2018

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Audited)

 

(Audited)

 

 

 

Year ended

 

Year ended

 

 

 

28 February

 

28 February

 

 

 

2018

 

2017

 

 

 

 

 

 

 

 

 

R'000

 

R'000

 

 

 

 

 

 

Revenue

 

 

22 963

 

            17 026

Cost of sales

 

 

(3 046)

 

            (2 390)

Gross profit

 

 

       19 917

 

            14 636

 

 

 

 

 

 

Other income

 

 

               146

 

            14 042

Depreciation

 

(2 448)

 

(2 262)

Directors compensation

 

(676)

 

(636)

Selling and administrative expenses

 

    (21 016)

 

          (16 559)

Operating (loss) / profit

 

 

               (4 077)

 

              9 221

 

 

 

 

 

 

Fair value adjustment

 

 

                     (2 052) 

 

                 502

 

 

 

 

 

 

Net financing income    

 

 

135

 

                 536

Finance income

 

 

166

 

581

Finance costs

 

 

(31)

 

(45)

 

 

 

 

 

 

(Loss) / profit before taxation

 

 

               (5 994)

 

            10 259

Taxation

 

 

              1 720

 

            (2 868)

(Loss) / profit for the year

 

 

                 (4 274)

 

              7 391

Other comprehensive income

 

 

 

 

 

                                       

 

 

                     -  

 

            10 575

Revaluation of land

 

 

                     -  

 

            13 627

Deferred tax on revaluation

 

 

                     -  

 

            (3 052)

 

 

 

 

 

 

Total comprehensive income for the year

 

 

                 (4 274)

 

            17 966

 

 

 

 

 

 

 

 

 

 

 

 

(Loss)/earnings per share (cents)

 

 

(0.41)

 

0.61

Diluted (loss)/earnings per share (cents)

 

 

(0.41)

 

0.58

 

 

 

 

 

 

                   

 

  

Inqo Investments Limited Group

 

 

 

 

 

Condensed consolidated statement of financial position

 

 

 

At 28 February 2018

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Audited)

 

 

(Audited)

 

 

28 February

 

 

28 February

 

 

2018

 

 

2017

 

 

R'000

 

 

R'000

Assets

 

 

 

 

 

Non-current assets

 

131 196

 

 

         132 870

Property, plant and equipment

 

        129 725

 

 

         131 898

Intangible assets

 

                 15

 

 

                 18

Other Investments

 

            1 456

 

 

                954

 

 

 

 

 

 

Current assets

 

            28 767

 

 

           10 655

Inventories

 

               730

 

 

                486

Trade and other receivables

 

            22 668

 

 

             3 115

Biological assets

 

            2 463

 

 

             3 512

Cash and cash equivalents

 

               2 906

 

 

             3 542

 

 

 

 

 

 

Total assets

 

        159 963

 

 

         143 525

 

 

 

 

 

 

Equity and liabilities

 

 

 

 

 

Capital and reserves

 

 

 

 

 

Ordinary share capital

 

65 004

 

 

           58 198

Share premium

 

          70 774

 

 

           58 228

Revaluation reserve

 

          70 774

 

 

           70 774

Accumulated loss

 

       (63 546)

 

 

         (58 786)

Equity attributable to equity holders of Inqo Investments Limited

 

        143 006

 

 

         128 414

Non-controlling interest

 

            659

 

 

173

Total equity

 

        143 665

 

 

         128 587

 

 

 

 

 

 

Non-current liabilities

 

7 815

 

 

             9 753

Loans from related parties

 

189

 

 

                436

Other long term loans

 

               595

 

 

                566

Deferred taxation

 

            6 838

 

 

             8 558

Debentures

 

               193

 

 

                193

 

 

 

 

 

 

Current liabilities

 

8 483

 

 

             5 185

Trade and other payables

 

8 336

 

 

             4 933

Provision

 

               147

 

 

                252

 

 

 

 

 

 

Total liabilities

 

16 298

 

 

           14 938

 

 

 

 

 

 

Total equity and liabilities

 

159 963

 

 

         143 525

 

 

 

 

 

 

 

  

Inqo Investments Limited Group

Condensed consolidated statements of cash flows

For the year ended 28 February 2018

 

 

 

 

 

 

 

 

(Audited)

Year ended 28 February

2018

 

(Audited)

Year ended

28 February

2017

 

 

 

R'000

 

R'000

 

 

 

 

 

 

 

Cash generated/(utilised) by operations

 

1 337

 

(986)

 

Net cash inflow/(outflow) from operating activities

 

1 337

 

(986)

 

 

 

 

 

 

 

Cash flows from investing activities

 

 

 

 

Acquisition of other investments

 

(59)

 

(954)

 

Loan advanced to other investments

 

(443)

 

-

 

Acquisition of property, plant and equipment

 

(1 193)

 

(2 228)

 

Acquisition of intangible assets

 

(7)

 

-

 

Acquisition of biological assets

 

(93)

 

(60)

 

Proceeds on disposal of property, plant and equipment

 

40

 

66

 

Net cash outflow from investing activities

 

(1 755)

 

(3 176)

 

 

 

 

 

 

 

Cash flows from financing activities

 

 

 

 

Loans from related parties repaid

(269)

 

-

 

Loans and borrowings repaid

 

-

 

(16 003)

 

Loans and borrowings received

 

29

 

27

 

Loans from related parties received

 

22

 

22

 

Net cash outflow from financing activities

 

(218)

 

(15 954)

 

 

Net movement in cash and cash equivalents

 

(636)

 

 

(20 116)

 

Cash and cash equivalents at beginning of year

3 542

 

23 658

 

Cash and cash equivalents at end of year

 

2 906

 

3 542

 

 

Inqo Investments Limited

Condensed consolidated statement of changes in equity

For the year ended 28 February 2018

 

 

 

Ordinary share capital

Share premium

Revaluation reserve

Accumulated loss

Non-controlling interest

Total

 

 

R'000

R'000

R'000

R'000

R'000

             R'000

 

 

 

 

 

 

 

 

Balance at 1 March 2016

 

58 198

58 228

60 200

(65 871)

(133)

110 622

Profit for the year

 

-

-

-

7 085

306

7 391

Other comprehensive income for the year

 

-

-

10 574

-

-

10 574

Balance at 28 February 2017

 

58 198

58 228

70 774  

(58 786)

173

128 587

 

 

 

 

 

 

 

 

Balance at 1 March 2017

 

58 198

58 228

70 774

(58 786)

173

128 587

Shares Issued

 

6 806

12 546

-

-

-

19 352

Loss for the year

 

-

-

-

(4 760)

486

(4 274)

Balance at 28 February 2018

 

65 004

70 774

70 774

(63 546)

659

143 665

 


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