Group Results for the year ended 28 February 2023
07/08/2023 17:49
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RNS Number : 5632I Inqo Investments Limited 07 August 2023
Inqo Investments Limited
Group Results for the year ended 28 February 2023
CHAIRMAN AND CHIEF EXECUTIVE'S STATEMENT
Inqo Investments Limited ("Inqo" or "the Group") is a South African based
social impact company that invests in businesses that tackle poverty and
environmental challenges in Sub-Saharan Africa.
COMMENTARY
The Group remains in a strong financial position with total assets of
R210,256,710 and minimal debt.
Subsequent to the financial year end, Inqo received an additional investment
of R17,786,900 in the form of a convertible loan note (CLN) that was made by a
new investor on 1(st) of March 2023. The net proceeds of the CLN and the
balance of the funds that the group has available will be used for working
capital and to execute a range of new potential investments that Inqo have
identified in Sub-Saharan Africa that will have a positive impact on the
environment and the poor. This set of investments includes the current
Conservation and Rural Enterprise (CARE) project that will invest in several
joint ventures around the Budongo Forest, Uganda, with the aim of tackling the
links between poverty and environmental degradation such as deforestation for
wood fuel use or bushmeat poaching. The first investment for the CARE project
is a luxury tented eco-lodge within the Budongo forest which will begin
construction in Q3 2023.
Like businesses around the world, the Group has been heavily impacted by the
Covid-19 pandemic with reduced earnings and implementation of cost saving
measures. The severity of the impact and speed of recovery has varied across
investee companies. Despite the challenges being faced, the directors of the
Company have assessed that the Company and its subsidiaries will continue as a
going concern.
The results for the year under review showed revenue of R11,730,190 (February
2022: R3,872,007) with a profit after tax of R3,774,907 (February 2022: loss
of R12,614,587). The primary reason for the profit before tax position is due
to the grant income recognised between 1 September 2022 and 28 February 2023
for the cost of planting Spekboom cuttings on the property through the
Reforest Action carbon credit contract.
The profit for the year is reported after the following income and cost items
have been accounted for:
February 2023 February 2022
Other income
Grant received:
Included in other income is grant received for the cost of planting Spekboom
cuttings on the property in terms of the Reforest Action carbon credit
contract between 1 September 2022 and 28 February 2023 9 090 000 -
Operating costs incurred:
Depreciation & amortisation
Listing expenses 3 790 520 3 295 251
Directors' fees and salaries 760 765 581 917
Professional fees 736 000 696 000
Impairment & fair value adjustments 593 633 629 847
Provision for bad & doubtful debts 107 993 2 357 326
286 490 529 069
In February 2023, the directors of Inqo reviewed the valuation placed on all
income earning assets to ensure that they reflect their fair value. Following
the review, the directors are of the view that the Group assets as stated in
the Balance Sheet are reflected at fair value. In the process of carrying
out this review it was decided that the following value adjustments should be
processed.
· The Kuzuko Lodge operation has not yet returned to pre Covid-19
occupancies and as a result is currently operating at a loss. It was
therefore decided to make further provision in the Company for doubtful debt
of R1,000,000. The current provision for doubtful debts now stands at a value
of R2,750,937 against the total amount due of R3,581,895.
· The only non-South African company where Inqo held investments on
28th February 2023 that required assessment from a fair value adjustment
perspective was Four One Financial Services Limited. The company has struggled
financially but managed to remain operational, however in the process has
defaulted on loan and interest repayments. The consequences of this are that
the full loans made by Inqo with a value of R728,715 have been impaired and a
provision for doubtful debts raised against interest owing of R1,057,292.
· The drought conditions that were experienced in the Eastern Cape
in the 2021/2 financial year and up to September 2022 have ended resulting in
a more productive breeding season and game sale values have also recovered.
The result is that the value of the buffalo herd has increased by R1,029,940
and the impairment against the cost of game has been reduced by R767,774.
· Kuzuko Lodge has experienced a difficult trading year like so
many of the other game reserves in the Eastern Cape. Kuzuko Lodge has not
recovered its pre-Covid trading levels and as a result the directors have
decided to further impair the company's investment in Kuzuko Lodge by an
amount of R1,476,882.
The land and buildings were revalued by an independent valuer in March 2023 in
accordance with Inqo's accounting policies. The fact that the Eastern Cape has
recovered from the drought experienced in previous years and that there have
been sales of farmland in neighbouring areas has resulted in the value of the
land and buildings being increased by R19,099,877.
INVESTEE COMPANIES
· Kuzuko Lodge (Pty) Ltd (South Africa) is a subsidiary entity
that operates a Five Star game lodge designed to create jobs in an area of
high unemployment and limited opportunities. The Lodge is slowly returning to
pre-pandemic occupancy rates, however the tourism industry in the Eastern Cape
Province has been slower to recover than in other parts of South Africa.
Kuzuko management are now exploring several new avenues for marketing the
lodge, in particular around the current global focus on sustainability, and
expect that bookings will increase in strength over the next 12 months.
· Inqo Africa (Pty) Ltd, is a wholly owned subsidiary formed on 27
October 2020 to facilitate with making investments in Kenya and Uganda.
· Spekboom Trading (Pty) Ltd (South Africa) is a subsidiary, which
is currently rehabilitating degraded land on the Inqo Investments Limited
property through reforestation using the indigenous Spekboom shrub. Spekboom
Trading also has a licence to trade carbon credits. Spekboom Trading entered
into a 30-year contract with an international carbon finance specialist,
Reforest Action based in Paris, France, to restore 5,185 hectares of land on
Inqo's property through planting of 25 million indigenous Spekboom cuttings.
The project is progressing well with planting anticipated to be complete by
December 2024.
· Four One Financial Services Limited (Uganda) is a financial
services company offering specially designed products for the underserved
low-income demographic in Uganda. Four One was particularly hard hit by the
pandemic with its loan portfolio highly impaired resulting in a pivot towards
property development. We are pessimistic about the outlook of the company due
to the damage to their loan portfolio. We have provided for a full impairment
of the loans payable but have not impaired the conversion loan note between
the Company and Four One Financial Services.
· Kentegra (Kenya) is a Kenyan based biotechnology firm owned by
the US holding company, Kentegra Biotechnology Holdings LLC, producing
pyrethrum, a natural biocide and pesticide. The company has seen significant
growth over the last 12 months and has continued to refine their factory
processes. We are hopeful that the business will soon achieve a positive
EBITDA.
· South Lake Medical Centre - SLMC (Kenya) is a private healthcare
provider in the Naivasha region of Kenya serving predominantly low-income
flower farm workers. Since investment SLMC has progressed well developing a
major and minor surgical unit and a positive EBITDA. The outlook for SLMC is
positive as we expect the surgical revenue to continue to grow.
· Sanergy Incorporated (Kenya) is a circular economy organic
recycling business producing high protein animal feed from black soldier fly
larvae in Nairobi, Kenya. Sanergy has continued to grow their business,
refining their processes and exploring new markets for their animal feed and
fertilizer. The outlook for Sanergy is positive.
STOCK EXCHANGE LISTING
The company is listed on the Aquis Exchange PLC (AIM:AQX) in London. Shares on
AQSE will remain exempt from Capital Gains Tax and Inheritance Tax as they
were on the NEX Exchange.
SUMMARY OF SOCIAL & ENVIRONMENTAL METRICS SINCE PROJECT COMMENCEMENT
· 35,617 acres (14,414 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.
· All staff living at Kuzuko in standard housing with flush
toilets, power, water and solar panels.
· Conservation of 3 endangered species.
· Kuzuko has re-wilded 14 adult cheetah and produced 10 cubs with
diverse genetics to bolster the meta-population in southern Africa. Currently
there are 4 orphaned cheetah cubs on the property being re-wilded.
· Reforestation of 500 acres (200 hectares) of degraded land with
Spekboom plants providing work for 100 part-time staff and sequestering carbon
in prior financial periods.
· 37 acres (15 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
contract signed on 5 August 2022 is in progress. 748 acres (303 hectares) of
land have been planted with Spekboom cuttings by 28 February 2023. The
project currently employs between 120 and 150 local previously unemployed
individuals in the planting process.
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 audited group financial statements for the year ended 28 February
2023. A copy of these audited financial statements will be available on the
Company website by 31 August 2023.
DIVIDEND
The company has not declared a dividend for the year ended 28 February 2023.
K.S
Tan
C.J Bertie
Chairman
Chief Financial
Officer
Issued on: 7 August 2023
Enquiries
Inqo Investments Limited Tel: +27 (0)83 625 4069
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
Inqo Investments Limited Group
Condensed consolidated statement of profit or loss and other comprehensive
income
For the year ended 28 February 2023
Group Company
2023 2022 2023 2022
R R R R
Revenue 11 730 190 3 872 007 952 647 386 160
Cost of sales (1 514 608) (648 136) - -
Gross profit 10 215 582 3 223 871 952 647 386 160
Other income 11 198 922 360 072 10 076 244 360 072
Personnel expenses (5 813 170) (4 022 886) (905 084) (826 680)
Depreciation & amortisation (3 790 520) (3 295 251) (3 395 008) (2 777 934)
Listing expenses (760 765) (581 917) (760 765) (581 917)
Professional fees (593 633) (629 847) (593 633) (629 847)
Bad debt (231 385) - (231 385) -
Provision for doubtful debts (286 490) (529 069) (1 286 490) (1 043 193)
Impairment and fair value 7 (107 993) (2 357 326) (1 584 875) (2 357 326)
adjustment
Selling and administrative expenses (9 339 646) (6 559 034) (1 938 776) (1 476 856)
Operating profit/(loss) 490 902 (14 391 387) 332 875 (8 947 521)
Inventory write-up (down) 767 774 (186 464) 767 774 (186 464)
Fair value adjustment 1 029 940 56 933 1 029 940 56 933
Net financing income 336 967 299 547 1 046 262 783 326
Finance income 506 642 460 595 1 087 555 811 063
Finance expense (169 675) (161 048) (41 293) (27 736)
Profit/(loss) before taxation 2 625 583 (14 221 371) 3 176 851 (8 293 726)
Taxation 1 149 324 1 606 784 1 149 324 1 606 784
Profit/(loss) for the year 3 774 907 (12 614 587) 4 326 175 (6 686 942)
Inqo Investments Limited Group
Condensed consolidated statement of profit or loss and other comprehensive
income
For the year ended 28 February 2023
Group Company
2023 2022 2023 2022
R R R R
Profit/(loss) attributable to:
Equity holders 3 862 532 (12 380 267) 4 326 175 (6 686 942)
Non-controlling interest (87 625) (234 320) - -
3 774 907 (12 614 587) 4 326 175 (6 686 942)
Other comprehensive income - Items that will not subsequently be reclassified
to profit or loss:
Revaluation of land and buildings 18 904 001 - 18 904 001 -
Deferred tax on revaluation (4 226 189) - (4 226 189) -
Total other comprehensive income for the year 14 677 812 - 14 677 812 -
Total comprehensive income for the year 18 452 719 (12 614 587) 19 003 987 (6 686 942)
Total comprehensive income attributable to:
Equity holders 18 540 344 (12 380 267) 19 003 987 (6 686 942)
Non-controlling interest (87 625) (234 320) - -
18 452 719 (12 614 587) 19 003 987 (6 686 942)
Earnings/(Loss) per share (rand) 0.27 (0.85)
Diluted Earnings/(loss) per share (rand) 0.27 (0.85)
Inqo Investments Limited Group
Condensed consolidated statement of financial position
At 28 February 2023
Group Company
2023 2022 2023 2022
R R R R
Assets
Non-current assets 163 310 393 137 275 303 176 080 324 148 514 260
Property, plant and equipment 154 054 726 128 440 653 152 888 843 128 088 946
Intangible assets 1 840 3 622 - -
Right of use asset 236 171 362 693 - -
Trade and other receivables - - 849 417 1 167 288
Loans to subsidiaries - - 14 990 626 10 979 026
Other investments 9 017 656 8 468 335 7 349 935 6 800 615
Investments in subsidiaries - - 1 503 1 478 385
Current assets 46 946 317 10 396 005 44 423 723 8 303 721
Inventories 4 862 236 4 058 788 4 194 454 3 426 680
Trade and other receivables 3 124 989 2 743 619 1 710 486 2 298 950
Biological assets 2 788 980 2 921 627 2 788 980 2 009 040
Cash and cash equivalents 36 170 112 671 971 35 729 803 569 051
Assets held for sale - 1 333 287 - 1 333 287
Assets held for sale - 1 333 287 - 1 333 287
Total current assets 46 946 317 11 729 292 44 423 723 9 637 008
Total assets 210 256 710 149 004 595 220 504 047 158 151 268
Equity and liabilities
Capital and reserves
Share capital 72 584 925 72 584 925 72 584 925 72 584 925
Share premium 87 585 270 87 585 270 87 585 270 87 585 270
Revaluation reserve 86 693 347 72 015 535 86 693 347 72 015 535
Accumulated loss (90 101 796) (93 964 328) (72 960 353) (77 286 528)
Equity attributable to equity holders of Inqo Investments Limited 156 761 746 138 221 402 173 903 189 154 899 202
Non-controlling interest 160 218 247 844 - -
Total equity 156 921 964 138 469 246 173 903 189 154 899 202
Non-current liabilities 9 403 433 2 903 675 9 178 263 2 512 847
Loans from related parties 4 511 589 902 409 4 363 278 774 735
Deferred tax liability 4 814 985 1 738 112 4 814 985 1 738 112
Lease liability 76 859 263 154 - -
Current liabilities 43 931 313 7 631 674 37 422 595 739 219
Bank overdraft 146 855 688 491 - -
Trade and other payables 8 503 452 6 770 068 2 355 669 739 219
Unutilised grant funding 35 066 926 - 35 066 926 -
Lease liability 214 080 173 115 - -
Total liabilities 53 334 746 10 535 349 46 600 858 3 252 066
Total equity and liabilities 210 256 710 149 004 595 220 504 047 158 151 268
Inqo Investments Limited Group
Statements of cash flows
For the year ended 28 February 2023
Group Company
2023 2022 2023 2022
R R R R
Cash utilised by operations (1 449 747) (9 099 312) 734 120 (4 552 374)
Interest received 506 642 186 687 504 453 185 955
Interest paid (169 674) (72 467) (41 293) -
Net cash flow from operating activities (1 112 779) (8 985 092) 1 197 280 (4 366 419)
Cash flows from investing activities
Increase in loans to subsidiary - - (3 350 470) (4 819 162)
Unrealised forex profit/(loss) - (177 121) - (177 121)
Loan (extended to)/ repaid by other investments 1 214 514 733 980 1 136 490 733 980
Acquisition of property, plant and equipment (269 388) (254 874) (200 904) (222 644)
Proceeds on disposal of biological assets 150 000 186 957 150 000 186 957
Grant funding received 33 409 740 - 33 409 740 -
Proceeds on disposal of property, plant and equipment - 5 612 447 - 5 612 447
Net cash flow from investing activities 34 504 866 6 101 389 31 144 856 1 314 457
Cash flows from financing activities
Proceeds from shares issued - 2 066 862 - 2 066 862
Loans received from related parties 2 839 253 - 2 818 616
Repayment of finance lease (191 564) (192 615) - - -
Net cash flow from financing activities 2 647 689 1 874 247 2 818 616 2 066 862
Net movement in cash and cash equivalents 36 039 777 (1 009 456) 35 160 752 (985 100)
Cash and cash equivalents at beginning of year (16 520) 992 936 569 051 1 554 151
Cash and cash equivalents at end of year 36 023 257 (16 520) 35 729 803 569 051
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