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Inqo Investments Ltd - Half-year Results

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Inqo Investments Limited · INQO

27/11/2020 17:00

Inqo Investments Ltd - Half-year Results
RNS Number : 8017G
Inqo Investments Limited
27 November 2020

Inqo Investments Limited


Unaudited Group Results for the period ended 31 August 2020




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.




The Group remains in a strong financial position with minimal debt.  Cash reserves for investment stood at R7 072 767 with total assets of R169 973 016 on the balance sheet.


The results for the six months under review showed revenue of R1 746 170 (August 2019: R8 738 816) but a loss after tax of R4 760 046 (August 2019 a loss of R5 147 304).  The loss for the period is reported after accounting for the following operating costs:





Listing expenses

Directors fees and salaries

Professional fees

August 2020


1 743 117

528 106

300 540

259 942

August 2019


1 531 521

421 117

388 563

248 887


Like businesses around the world, the Group has been heavily impacted by the Covid-19 pandemic.  The result of this pandemic has been that all the businesses in the Group have reported reduced earnings and are taking extensive steps to reduce operating costs to the absolute minimum while the businesses operate in a holding mode as the world waits to see how the Covid-19 pandemic plays out.


The directors of the holding company review the valuation placed on all income carrying assets to ensure that they reflect their fair value.  This review was done at 31 August 2020 and having conducted the review, the directors are of the view that the Group's assets are reflected at fair value.




Kuzuko Lodge (South Africa)


Kuzuko Lodge ("KUZUKO") closed down in early April 2020 due to the lockdown restrictions in South Africa.  Prior to the Covid-19 pandemic, Kuzuko was performing well with strong bookings in place for 2020.  The Covid-19 pandemic has had a severe effect on the tourism industry globally and at this stage it is unclear what the full impact will be.  Inqo anticipates that disruption due to reduced travel and the depression on sales due to the Covid-19 related economic downturn will last for a minimum of two years.  Restrictions on local inter-provincial leisure travel was lifted on 12 August 2020, giving Kuzuko the opportunity to open to the rest of the country for bookings. On 11 November 2020 South Africa relaxed restrictions on international travel, allowing international bookings. In an effort to protect the going concern of the business many fixed costs have been renegotiated to new lower cost structures and unfortunately 24% of the workforce has had to be retrenched. A foodbank has been established for those retrenched. Inqo directors and the management company, Legacy Hotels and Resorts, are working closely with the Kuzuko management team to control costs efficiently to protect the viability of the business.


Spekboom Trading (South Africa)


The company has to date replanted some 500 acres of degraded land with spekboom, an indigenous shrub that naturally sequesters exceptionally high levels carbon, creating 100 job opportunities in the process.


The spekboom thicket restoration at Kuzuko is planned to restart once the Covid-19 pandemic crisis has passed and restoration work can commence.  A memorandum of understanding is being negotiated with a leading carbon fund to restore 12,500 acres of spekboom on the Kuzuko property in order to generate carbon credits.


There has recently been a renewed interest in the carbon markets in response to the growing global awareness of the impact of climate change with nature-based solutions, such as spekboom, being a high priority.  Inqo anticipates scaling up spekboom restoration activities once the Covid-19 pandemic situation has resolved providing valuable employment opportunities as well as a positive environmental benefit.


A small-scale trial plot has just been planted to test the best method for growing spekboom based on the latest scientific research.  The next step is to undertake large-scale trials over 40 hectares to refine the cost model of the investment.  This will take place as soon as it is feasible (in the context of Covid-19 lockdowns) to run the trials.


Bee Sweet Honey (Zambia)


Inqo made an initial investment into Bee Sweet Honey's commercial honey production operation in 2016 with further investments in 2018 and 2019.  Bee Sweet Honey contracts with rural farmers to manage hives placed on the farmer's land in return for a share of the harvest.


The Bee Sweet operation currently has 85,512 bee hives in the field with 10,000 farmers in its programme.  Inqo has invested in the income that will accrue from 14,150 hives and receives a return on investment as a profit share on the yield produced by these hives.


The hives are harvested twice a year, generally in May and November. 


Inqo earned R42 102 as its share of revenue in the period ended 31 August 2020 from the May 2020 harvest (2019: R136 821).


Four-One Financial Services Limited (Uganda)


Inqo made an initial investment in 2017 and a further investment in 2018 in Four-One Financial Services Limited, a Ugandan based company that provides micro-pension, savings and short-term loan products to the informal sector.


Prior to the Covid-19 pandemic Four-One was performing well having endured challenging operating conditions for the previous 18 months.  The impact of the lockdown and subsequent economic downturn is likely to be severe in Uganda and so for Four-One.  The senior management team have a strong track record in navigating a difficult business environment through lean operations and have developed an agile response to market demands.


Inqo earned interest on its investment in the Four-One Financial Services operation of R149 634 in the period ended 31 August 2020 (2019: R116 578).


South Lake Medical Centre - SLMC (Kenya)


SLMC is a private healthcare provider in the Naivasha region of Kenya serving predominantly low-income flower farm workers. SLMC operate a 'hub and spoke' model around a 27-bed private referral-level hospital with smaller satellite clinics based on surrounding flower farms and in nearby population centres.  Inqo invested in SLMC in the current 2019/20 year.


This hospital receives around 64,000 patient visits per annum with the capacity to treat three times this number. Currently, SLMC offers a range of in and outpatient services including consultations, laboratory testing, radiology and pharmacy services. Following this investment, SLMC will be expanded to include a surgical unit making it the most advanced hospital at the southern end of Lake Naivasha.  The Naivasha region in Kenya is predominantly populated by low income workers working in the horticultural, agricultural and tourism industries.


The impact of Covid-19 will be economically challenging for SLMC.  The major industry in the area is cut flowers for the European market - a sector that has dropped off in the current climate but with the resumption of international flights sales levels are returning.  In addition, there is a strong vegetable growing industry in Naivasha that continues to trade and provide medical appointments for SLMC.


Inqo earned interest of R48 424 on its investment in SLMC in the period ended 31 August 2020 (2019: R8 295).


Kentegra Biotechnology Limited (Kenya)


Kentegra is a Kenyan based biotechnology firm owned by the US holding company, Kentegra Biotechnology Holdings LLC.  Kentegra produces pyrethrum, a natural active ingredient from the chrysanthemum flower, for the use in biocide, agricultural and pharmaceutical pesticide markets.  The chrysanthemum flowers must be grown in specific conditions in order to produce pyrethrum - these conditions are found only in a few places around the world, predominantly East Africa (Tanzania, Uganda, Rwanda and Kenya) and Australia.  With ideal growing conditions, Kenya was once the largest producer of pyrethrum in the world until management issues and synthetic alternatives led to a major decline in the nationalised industry in the early 2000s.  In 2013 the Kenyan government liberalised the pyrethrum sector in a concerted effort to revive the industry and support the growing worldwide "organic" movement.  Kentegra is one of the six companies in Kenya with a licence to produce pyrethrum.


Kentegra continues to operate in a scaled down manner but has reported demand during the Covid-19 pandemic.  They have recently installed a new factory that is in the process of being commissioned and ready for production.  The senior management team have responded quickly and professionally drawing up well considered contingency plans for all eventualities and are re-evaluating the situation on a continual basis.  Kentegra has shown a strong commitment to both their smallholder farmer partners and their employees during this time, going above and beyond to minimise the economic impact while ensuring safety for the organisation.




Aquis Exchange PLC (AIM:AQX) acquired the NEX Exchange in March 2020, which has now been renamed The Aquis Stock Exchange (AQSE).  Shares on AQSE will remain exempt from Capital Gains Tax and Inheritance Tax as they were on the NEX Exchange.




Kuzuko Private Game Reserve - The Lodge saw high occupancy rates before the Covid-19 pandemic. Once international tourism re-commences, we are confident that Kuzuko will make a good recovery although it will take time for confidence to return to the tourism industry in South Africa.  The directors do not expect this recovery to start before the latter part of 2021.


Bee Sweet Honey - The market in which Bee Sweet is currently operating is very challenging but management is making headway on both the production and sales fronts.  Currently the company is negotiating with international third parties to buy the stock on hand of some 400 tons.  The company's production facilities have been upgraded through the internal promotion of a senior employee to General Manager.  The General Manager will be responsible for the management of both production and field work.  The crop of honey harvested in May this year was smaller than in 2019 but the business is very happy with the quality of the stock.


Spekboom Trading - The Covid-19 pandemic has meant that re-planting activity had to cease. However, discussions have been on-going with a number of environment focussed investment funds to start re-planting of spekboom when lockdown is relaxed


Four-One Financial Services - This business has been especially hard hit because it serves the informal sector in Uganda with savings and short-term loans products. The Covid-19 pandemic has brought the informal sector to a complete standstill with many traders going out of business. We are pessimistic about the outlook given the overall economic impact of the pandemic in Uganda.


South Lake Medical Centre - As an essential service, SLMC has been able to continue trading though footfall to the hospital declined with patients hesitant about attending the hospital for treatment due to fear of being infected with Covid-19.  International flower sales have resumed and this has had a positive impact on the operation of SLMC.


Kentegra Biotechnology - As an Agri business, Kentegra was deemed an essential service by the Kenyan government and has been able to continue operations during the lockdown. During this period, the company has on-boarded a significant number of new out-grower farmers as well as installed and commissioned their new factory and made their first export sale.  




·      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 by Kuzuko year on year, currently 46 fulltime staff employed.

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

·      Conservation of 3 endangered species.

·      Re-wilded, bred and released 6 cheetahs with new genetics into the metapopulation in South Africa

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

·      85,512 beehives in the field with positive impact on bee populations and retention of forests

·      2,100+ voluntary low-income savers in micro-pension and loan schemes

·    74,582 patient visits between January and December 2019 including 110 safe deliveries, 299 HIV patients receiving care and counselling, 658 infants immunised, 658 mothers receiving nutrition advice and 1,277 people receiving health education including, Covid-19 education, through community outreach in Kenya

·      Increased the economic livelihoods of over 17,000 farmers and their families in Zambia and Kenya




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 during this challenging time.




The financial information set out in this announcement does not constitute statutory financial statements. This financial information has been extracted from Inqo's unaudited group financial statements for the period ended 31 August 2020.




The company has not declared a dividend the period ended 31 August 2020.


K.S Tan                                                                                              C.J Bertie

Chairman                                                                                       Chief Financial Officer




Inqo Investments Limited

Tel: +27 (0)83 6254069

Chris Bertie, Chief Financial Officer and Chief Operating Officer




Hobart Capital Markets LLP


AQSE Corporate Adviser and Broker

Tel: +44 (0)20 7070 5665

Dr Wang Chong



Condensed consolidated statement of profit or loss and other comprehensive income

for the six months ended 31 August 2020





Six Months ended

31 August 2020


Six Months ended

31 August 2019














1 746 170


8 738 816


Cost of Sales




(240 331)


(1 198 952)


Gross profit




1 505 839


7 539 864


Other income



1 252 416


136 821


Personnel expenses



(2 400 248)


(4 048 171)





(1 743 117)


(1 531 521)


Listing expenses



(528 106)


(421 117)


Professional fees



(259 942)


(248 887)


Directors emoluments



(300 540)


(388 563)


Selling and administrative expenses



(2 921 969)


(6 883 256)


Operating loss




(5 395 667)


(5 844 830)


Net financing income                                       




355 206


247 879


Finance income




424 966


340 465


Finance costs




(69 760)











Loss before taxation




(5 040 461)


(5 596 951)


Taxation credit




280 415


449 647


Loss for the period




(4 760 046)


(5 147 304)


Loss attributable to:








Equity holders




(3 587 714)


(4 236 248)


Non-controlling interest




(1 172 332)


(911 056)






(4 760 046)


(5 147 304)


Other comprehensive income:








Other comprehensive income








Total comprehensive income for the period




(4 760 046)


(5 147 304)


Total comprehensive income attributable to:








Equity holders




(3 587 714)


(4 236 248)


Non-controlling interest




(1 172 332)


(911 056)






(4 760 046)


(5 147 304)



Condensed consolidated statement of financial position

as at 31 August 2020





31 August 2020



28 February 2020



















Non-current assets



145 802 368


146 063 205


Property, plant and equipment



133 575 459


134 430 943



Intangible assets



6 847


9 062


Right of use asset



790 490


893 597


  Other investments



11 429 572


10 729 603









Current assets



18 475 303


27 644 153


Biological assets



3 058 866


3 058 866





4 863 586


4 763 430


Trade and other receivables



3 480 084


4 150 071


Cash and cash equivalents



7 072 767


15 671 786









Assets held for sale



5 695 345


5 695 345


Land held for sale



5 695 345


5 695 345









Total assets



 169 973 016


179 402 703


Equity and liabilities








Capital and reserves








Ordinary share capital



71 809 195


71 809 195



Share premium



86 294 138


86 294 138



Revaluation reserve



73 152 702


73 152 702



Accumulated loss



(73 899 572)


(70 311 858)



Equity attributable to equity holders of:

Inqo Investments Limited

Non-controlling interest



157 356 463


 (398 697)



160 944 177


 773 635



Total equity



156 957 766


161 717 812











Non-current liabilities



6 971 713


7 328 094



Loans from  related parties



167 846


167 845



Other long term loans



687 580


668 210



Deferred taxation



5 268 973


5 549 379






193 457


193 457



Lease liability



653 857


749 203











Current liabilities



6 043 537


 10 356 797



Trade and other payables



5 114 032


9 494 844






744 006


686 559



Lease liability



185 499


175 394



Total liabilities



13 015 250


17 684 891



Total equity and liabilities



169 973 016


179 402 703




Condensed consolidated statement of cash flows

for the six months ended 31 August 2020






Six months ended 31 August 2020


Six months ended 31 August 2019






Cash flows from operating activities





Net loss before tax


(5 040 461)


(5 596 951)



2 215


3 457



1 637 795


 1 493 705

Depreciation of right of use asset


103 107


34 370

Finance cost on lease liability


50 055


19 218

Loss on disposal of motor vehicle


22 385



Net working capital changes







(100 156)


44 802

Trade payables


(4 323 365)


(1 629 147)

Trade receivables


669 987


(299 633)

Net cash outflow from operating activities


(6 978 438)


(5 930 179)






Cash flows from investing activities





Acquisition of investments


(699 969)


(1 727 606)

Acquisition of  biological assets




(229 459)

Acquisition of property, plant and equipment and intangible assets

(990 368)


(3 772 495)

Proceeds from disposal of property, plant and equipment and intangible assets

185 682



Finance lease payments


(135 296)


(45 099)

Loans advanced to Associates




(980 735)

Net cash outflow from investing activities


(1 639 951)


(6 755 394)






Cash flows from financing activities





Proceeds of shares issued




4 115 250

Proceeds of shares issued during the prior period




18 210 000

Loans and borrowings raised


19 370


21 428

Net cash inflow from financing activities


19 370


22 346 678

Net movement in cash and cash equivalents


(8 599 019)


9 661 105

Cash and cash equivalents at beginning of period


15 671 786


11 557 690

Cash and cash equivalents at end of period


7 072 767


21 218 795


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