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Inqo Investments Ltd - Unaudited Results for period ended 31 August 2022


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Inqo Investments Limited · INQO

29/11/2022 07:00

Inqo Investments Ltd - Unaudited Results for period ended 31 August 2022
RNS Number : 8070H
Inqo Investments Limited
29 November 2022
 

Inqo Investments Limited

 

Unaudited Group Results for the period ended 31 August 2022

 

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 remains in a good financial position with total assets of R 147,458,432 and minimal debt.  Funds provided by shareholders of R2,824,078 and the proceeds of R1,481,182 from the sale of the groups interest in its Bee Sweet Honey investment have provided the Group with the funds to support subsidiaries from a working capital perspective. Furthermore, the Group expects to receive the first tranche of monies from Reforest 'Action in early 2023 pertaining to the spekboom project. A portion will be earned by the Group for project management services delivered and the balance will be used to fund operations.

 

Kuzuko Lodge, the main subsidiary of Inqo Investments, has required continued financial support through the Covid-19 pandemic period. Travel restrictions, lockdowns and consumer confidence in travel have significantly impacted the business throughout the financial year to date - as it has for the hospitality industry around the world.

 

There are a number of challenges for businesses across the group. However, the outlook has improved since the height of the Covid-19 pandemic and the directors of the company have assessed that it will continue as a going concern.

 

The results for the six months under review showed revenue of R3,389,258 (August 2021: R607,688) and incurred a loss after tax of R 4 327 761 (August 2021: R5,060,946).  The loss for the period is reported after accounting for the following operating costs:

 

 

 

Depreciation

Listing expenses

Directors' fees and salaries

Professional fees

Impairments and fair value adjustments

August 2022

 

1,730,282

428,462

490,403

315,678

194,417

August 2021

 

1,659,770

357,806

418,136

321,415

-

 

Like businesses around the world, the Group has been heavily impacted by the Covid-19 pandemic.  To counter the effects of the pandemic, the Group has taken extensive steps to reduce costs with companies in the Group adopting industry appropriate strategies to operate safely and effectively under challenging condition.  The diverse nature of the Group portfolio has meant that the impact of the pandemic has been less significant across investee companies in the hospitality sector than the agricultural sector.  Now that most of the world has relaxed Covid-19 restrictions, the companies in the Group are seeing their operations returning to some form of normality, but whilst some were able to grow despite the pandemic, others have yet to return to pre-Covid-19 business levels.

 

The directors of the holding company reviewed the valuation placed on all assets to ensure that they reflect their fair value.  This review was done at 31 August 2022 and having conducted the review, the directors are of the view that the Group's assets are reflected at fair value.  In reaching this conclusion it was decided that the group's investment in Four One Financial Services was further impaired by R 194,417 (August 2021:  R 16,196 ).

 

 

INVESTEE COMPANIES

 

Kuzuko Lodge (South Africa)

 

Kuzuko Lodge ("Kuzuko") reopened to guests on 1 September 2021 but has not yet reached pre-Covid-19 trading levels. The tourism industry has been particularly effected in the Eastern Cape Province with tour operators reporting that interest in the region is not returning at the same pace as other South African destinations. The management team at Kuzuko is now actively seeking new strategies to position the lodge in the post-pandemic market.  An improvement in bookings at the Lodge is expected to be felt when international bookings for the traditional peak season commence. Revenue levels for Kuzuko, are not expected to return closer to pre-pandemic levels until the 2023/4 financial year.

 

Pre-Covid, the Lodge had a full-time staff complement of 64, the bulk of whom were drawn from the local community.  Currently the staff complement is 31 who once again are mainly drawn from the local community.  The directors of the company and the management company, Legacy Hotels and Resorts, have maintained contact with the members of the workforce who were retrenched/laid off and provided them with food parcels during the period that the Lodge has been closed in recent months.  The previously retrenched/laid off staff will be re-employed by the Lodge as soon as occupancies allow.

 

 

Spekboom Trading (South Africa)

 

The company signed an agreement with Reforest'Action, a B Corp certified reforestation specialist based in Paris, France in August 2022 to reforest over 5,000 hectares of degraded land on the Kuzuko Private Game Reserve.  The restoration project, one of the largest of its kind, will make an important contribution towards climate change through carbon sequestration, whilst restoring habitats to boost biodiversity and creating jobs.

 

The project is a direct response to the call for action by the UN Decade on Ecosystem Restoration for individuals and organisations to rapidly upscale the implementation of ecosystem restoration projects so that hundreds of millions of hectares of degraded land are restored by the year 2030.

 

 

Bee Sweet Honey (Zambia)

 

Inqo made a series of investments in the Bee Sweet commercial honey production operation between 2016 and 2019.  Bee Sweet Honey contracts with rural farmers to manage hives placed on farmers' land in return for a share of the profit from the harvest.

 

The directors of the company realised that this investment was not performing in terms of its agreed financial mandate and thus concluded a sale agreement in May 2022 to dispose of the Bee Sweet investment.  The realisation of this asset was done at a capital loss to the company.

 

 

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 ("Four-One"), a Ugandan based financial services company that pioneered a micro-pension approach in Uganda and has also offered savings and short-term loan products. A combination of regulatory challenges and the Covid-19 pandemic led Four-One to pivot their business model into property development. Four One launched Bitbricks in 2021, leveraging their financial expertise and technology platforms to offer micro shares in property developments which offer affordable housing at 20% below market rate whilst offering investors a financial return.

 

Bitbricks are now looking to complete their phase one development in December 2022 and are now looking for additional investment to begin phase two with the construction of a second apartment block. Bitbricks have two units remaining to be sold in their phase one development after which they anticipate starting to pay back their investors in Q1 2023.

 

 

South Lake Medical Centre (Kenya)

 

South Lake Medical Centre ("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 30-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 2019/20 year. The Naivasha region in Kenya is predominantly populated by low-income workers working in the horticultural, agricultural and tourism industries.

 

SLMC has continued to execute its growth plans despite challenging conditions this financial year including challenging economic conditions in the country, the challenges of working with Kenya's National Health Insurance Fund (NHIF) and a period of uncertainty during the Kenyan election. SLMC have worked extensively on developing and refining their medical, financial and businesses processes to ensure they can offer high quality care at affordable prices with improvements made across the board. SLMC is in a stable financial position with the management team controlling costs well in what is at times a turbulent business environment. The SLMC team also achieved an important win this year as they were recently upgraded from Level 3 to Level 4 by NHIF in recognition of the developments in their major surgical unit placing the facility on par with a district level hospital.

 

 

Kentegra Biotechnology Limited (Kenya)

 

Kentegra Biotechnology Limited ("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 has continued to push forward and grow throughout this financial year despite challenging conditions including extended periods of drought in the East African region which have impacted flower production. The team have continued to focus on refining their agronomy practices and production practices with increased efficiencies across the board. Sales remain strong with Kentegra shipping product across the globe including North America, Africa, Asia and Europe. At its core, Kentegra remains committed primarily to its farmers providing them with additional benefits such as financial training in support of human flourishing.

 

 

Sanergy Incorporated (Kenya)

 

Sanergy Incorporated ("Sanergy") is a Nairobi based firm recycling sanitation and organic waste into high protein animal feed, fertilizer and biomass briquettes using an innovative circular economy approach.  Sanergy currently recycles 40,000 tons of organic waste per year. At full capacity, the factory is capable of processing 90,000 tons of organic waste per annum.

 

Sanergy have made steady progress during this financial year with demand consistently outstripping supply for their products and a successful investment round completed. The rise in fuel prices, in part due to the ongoing war in Ukraine, has led to a significant rise in fertilizer prices which has increased demand Sanergy's organic Evergrow fertilizer. In response, Sanergy are looking to establish fertilizer operations across Kenya which are simpler operations than their complete factory but will play an important role in Kenya's food security. Sales of Kuzapro insect protein also comfortably outstrip supply with both domestic and international interest. Sanergy are also exploring possible carbon finance options due to the carbon savings from their circular economy approach - potentially a valuable new revenue stream. Sanergy going forward will operate under Regen Organics brand, which reflects its links to regenerative agriculture and the circular economy.

 

 

STOCK EXCHANGE LISTING

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.

 

 

OUTLOOK

Kuzuko Lodge - The Lodge reopened in September 2021 and while there has been a regular flow of guests since that date, occupancies have not yet reached pre-Covid-19 levels and are not expected to until the 2023/4 financial year.  There has been an upturn in booking enquiries experienced with booking enquiries indicating that the property should see an increase in occupancy levels from November 2022.

 

Spekboom Trading - Planting in terms of the reforestation project commenced on 5 September 2022.  Planting teams involved in the planting process are becoming more comfortable with the planting process and currently planting seedlings/cuttings at an average rate of 75 acres (30 hectares) a month.

 

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 been extremely challenging for the informal sector in Uganda 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 -Despite the challenging conditions the management team have made steady progress and continue to make improvements across the board placing them in a strong position for the future.

 

Kentegra Biotechnology - The company continues to perform well and has made progress in the efficiency of both flower production and processing this year. With continued strong demand for their product the outlook for Kentagra is positive. 

 

Sanergy Incorporated - The company rebranded its operation and now operates as The Sanergy Collaboration.  The company enjoys support from a wide range of clients across all its product lines where orders for product currently exceed production levels.

 


SUMMARY OF SOCIAL & ENVIRONMENTAL METRICS SINCE PROJECT COMMENCEMENT

 

·     35,705 acres (14,450 hectares) 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, Kuzuko has a reduced staff complement due to Covid-19.

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

·      Conservation of 3 endangered species.

·    Re-wild, bred and released 6 cheetahs with new genetics into the metapopulation in South Africa, with a further 4 cheetahs still to be released.

·     Reforestation of 500 acres (200 hectares) of degraded land with spekboom providing work for 100 part-time staff and sequestering carbon in prior financial periods.

·    15 acres (37 hectares) of land between the reception area of the Lodge and the Lodge area has been replanted with various forms of vegetation to recover heavily degraded land on the property.  As part of this erosion recovery process 100,000 spekboom cuttings have been planted.

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

·     60,033 patient visits in the first 9 months of 2022 including 101 safe deliveries, 365 HIV patients receiving care and counselling, 644 infants immunised, and 28,762 people receiving health education including, Covid-19 education, through community outreach programs in Kenya.

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

·      4,000 toilets serving 125,000 people daily in Nairobi

·    The reforestation contract planting program, in terms of the contact signed on 5 August 2022, started on 5 September 2022. 

 

 

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 during this challenging time.

 

 

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 unaudited group financial statements for the period ended 31 August 2022.

 

 

DIVIDEND

 

The company has not declared a dividend the period ended 31 August 2022.

 

K.S Tan                                                                                              C.J Bertie

Chairman                                                                                       Chief Financial Officer

 

 

Enquiries

 

Inqo Investments Limited

Tel: +27 (0)83 6254069

Chris Bertie, Chief Financial Officer and Chief Operating Officer

Email: cbertie@acland.co.za



Hobart Capital Markets LLP


AQSE Corporate Adviser and Broker

Tel: +44 (0)20 7070 5665

Dr Wang Chong

Email: wang.chong@hobartcapital.com

 



 

Condensed consolidated statement of profit or loss and other comprehensive income

for the six months ended 31 August 2022





Six Months ended

31 August 2022


Six Months ended

31 August 2021


                                                          

 



R


R


Revenue




3 389 258


607 688


Cost of Sales




(481 850)


(112 692)


Gross profit




2 907 408


494 996


Other income



761 454


44 773

 

Personnel expenses



(1 962 577)


(1 282 230)

 

Depreciation



(1 730 282)


(1 659 770)

 

Loss on disposal of land



-


(82 898)

 

Listing expenses



(428 462)


(357 806)

 

Professional fees



(315 678)


(321 415)

 

Impairment



(57 142)


(16 196)

 

Directors emoluments



(490 403)


(418 136)

 

Provision for doubtful debts



(137 275)


-

 

Selling and administrative expenses



(3 826 319)


(2 361 669)

 

Operating loss




(5 279 276)

 

(5 960 351)


Net financing income                                       

 

 

 

102 949

 

122 757

 

Finance income




184 255

 

217 629


Finance costs




(81 306)

 

(94 872)






 

 



Loss before taxation




(5 176 327)

 

(5 837 594)


Taxation credit




848 566

 

776 648


Loss for the period




(4 327 761)

 

(5 060 946)


Loss attributable to:




 

 



Equity holders




(4 216 047)

 

(4 938 835)


Non-controlling interest




(111 714)

 

(122 111)


 

 

 

 

(4 327 761)

 

(5 060 946)

 

Other comprehensive income:




 

 



Other comprehensive income




-


-


Total comprehensive income for the period




(4 327 761)

 

(5 060 946)






 

 



 



 

Condensed consolidated statement of financial position

as at 31 August 2022

 

 



Reviewed

31 August 2021


Audited

28 February 2021

 



R


R

Assets



 



Non-current assets



141 662 382


143 346 953

Property, plant and equipment



129 893 594


131 315 802

Intangible assets



5 854


8 517

Right of use asset



425 059


505 421

  Other investments



11 337 875


11 517 213

 



 



Current assets



14 328 453


11 702 363

Inventories



4 119 836


4 264 824

Trade and other receivables



3 097 180


3 139 521

Other investments



440 388


440 388

Biological assets



2 864 694


2 864 694

Cash and cash equivalents



3 806 355


992 936

 






Assets held for sale



-


5 695 345

Land held for sale



-


5 695 345

Total current assets



14 328 453


17 397 708

 






Total assets

 



155 990 835


160 744 661

 

  Equity and liabilities






Capital and reserves






Ordinary share capital



72 584 925


71 809 195

Share premium



87 585 270


86 294 138

Revaluation reserve



72 015 535


72 015 535

Accumulated loss



(86 522 896)


(81 584 061)

Equity attributable to equity holders of:

  Inqo Investments Limited

Non-controlling interest



 

145 662 833

360 054

 

 

 

148 534 807

482 164

Total equity



146 022 887


149 016 971

 



 



Non-current liabilities



3 809 633


4 632 671

Loans from related parties



167 845


167 845

Other long-term loans



740 384


707 185

Deferred taxation



2 568 257

 

3 344 896

Lease liability



333 147


412 745

 



 



Current liabilities



6 158 315


7 095 019

Trade and other payables



5 788 110


6 695 255

Provision



215 347


253 341

Lease liability



154 858


146 423

Total liabilities



9 967 948


11 727 690

Total equity and liabilities

 

 

155 990 835


160 744 661



Condensed consolidated statement of financial position

as at 31 August 2022

 



Reviewed

31 August 2022


Audited

28 February 2022


 



R


R


Assets



 




Non-current assets



135 954 488


137 275 303


Property, plant and equipment



126 853 067


128 440 653


Intangible assets



2 652


3 622


Right of use asset



308 687


362 693


  Other investments



8 790 082


8 468 335


 



 




Current assets



10 022 761


10 396 005


Inventories



4 045 519


4 058 788


Trade and other receivables



2 802 496


2 743 619


Biological assets



2 671 627


2 921 627


Cash and cash equivalents



503 119


671 971


 







Assets held for sale



1 481 183


               1 333 287


Assets held for sale



1 481 183


                1 333 287


Total current assets



11 503 944


               11 729 292


 







Total assets

 



147 458 432


           149 004 595


 

  Equity and liabilities







Capital and reserves







Ordinary share capital



72 584 925


72 584 925


Share premium



87 585 270


87 585 270


Revaluation reserve



72 015 535


72 015 535


Accumulated loss



(98 180 375)


(93 964 328)


Equity attributable to equity holders of:

  Inqo Investments Limited

Non-controlling interest



 

134 005 355

136 130

 

 

 

138 221 402

247 844


Total equity



134 141 485


138 469 246

 

 



 




Non-current liabilities



4 807 132


2 903 675


Loans from related parties



3 739 431


902 409


Deferred taxation



889 555

 

1 738 112

 

Lease liability



178 146


263 154


 



 




Current liabilities



8 509 815


7 631 674


Bank overdraft



575 460


688 491


Trade and other payables



7 741 413


6 770 068


Lease liability



192 942


173 115


Total liabilities



13 316 947


10 535 349


Total equity and liabilities

 

 

147 458 432


149 004 595


 

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