RNS Number : 5679U
Inqo Investments Limited
26 November 2019
Inqo Investments Limited
Unaudited Group Results for the six month period ended 31 August 2019
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 strong financial position with minimal debt. Cash reserves for the investment stood at R21 million, with total assets of R179 million on the balance sheet.
The results for the six months under review showed revenues of R8.739m (August 2018: R8.367m) but a loss after tax of R5.147m (August 2018: a loss of R4.118m). The loss for the period is reported after accounting for the following operating costs:
Depreciation Listing expenses Directors fees Professional fees
August 2019 1 531 521 421 117 388 563 248 887
August 2018 1 268 207 115 145 393 759 212 958
Inqo's revenues are derived primarily from its main subsidiary, Kuzuko Lodge. In the six month period under review, revenue grew from R8.367m to R8.738m, a rise of 4% during the low season where turnovers are traditionally low and having closed for a three week period for annual renovations. The marketing efforts that kicked off in 2016 to boost room occupancy and revenues have continued to be effective, resulting in improved revenues this year to date. We expect this trend to be maintained into the high season during the next 6 months.
During the last two financial years some of the Inqo shareholders committed to a private placement of shareholder funds of £2.5 million. The final instalment of these funds was received during the period under review.
INVESTEE COMPANIES
Kuzuko Lodge (South Africa)
The Lodge traded at a loss for the six months to date reflecting a loss of R3.390m (August 2018: R3.640m). The negative impact of the Cape Town water shortage experienced in the 2019/20 year has been overcome and trading experienced by the lodge has returned to expected levels, with the lodge operating as financially budgeted.
The dining area of the lodge building was extended by 260 square metres during the winter period. Concurrently with the building improvements substantial sums were also spent on repairs and maintenance to the lodge. The combined impact of the building upgrade and the repairs and maintenance led to some reservation cancellations which caused lower than expected revenues for the year to date. Improved occupancy levels are anticipated for the rest of 2019/20 high season as reflected by a strong level of advanced bookings currently in the system and already prepaid.
Spekboom Trading (South Africa)
We continue our interaction with the Department of Environmental Affairs (DEA) and interested 3rd parties to obtain funding to extend the planting of spekboom on the Kuzuko Game Reserve. When an agreement is reached we will create some 100 new jobs in the local community. To date, the company has replanted 500 acres of spekboom on degraded land.
The company is currently embarking on further experiments to test alternative planting methodologies for spekboom for future plantings.
Bee Sweet Honey (Zambia)
Bee Sweet Honey Limited is a Zambian commercial producer of honey with 85 000 bee hives and around 10,000 farmers in its program. The bee hives are harvested twice a year in May and November each year.
Inqo initially invested in Bee Sweet in 2016 when the right to the income flow from 3,000 hives were bought. In 2018 a second investment was made when the income flow from 3,500 hives was acquired. The half-year harvest yield in May was 285 tonnes (2018: 262 tonnes) of honey.
Four-One Financial Services Limited (Uganda)
Inqo has made two investments into Four-One Financial Services Limited, a Ugandan based micro-pensions and small business loans company, which manages the Mazima Voluntary Individual Retirement Benefits Scheme. The bulk of the investment was by way of interest bearing loans.
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 using its proprietary online mobile banking platform. This pilot scheme currently has over 2,200 savers and UGX1.6b in cumulative savings.
In the last 6 months, Four One Financials launched a short-term loan scheme for small businesses called MayiCard Business Loan using its proprietary online platform. This pilot has shown some initial success with over 800 loans and a UGX400m loan book since launch.
Both pilot schemes are ready to be scaled and the company will be looking for additional investments in Q4 2019.
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.
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.
OUTLOOK
Inqo expects to continue benefitting from the improved trading of the Kuzuko Lodge operation and the revenue flow from its three investments in Kenya, Zambia and Uganda as they move into profitability. Inqo is evaluating further new investment opportunities in these countries.
The occupancies and average room rates currently achieved at Kuzuko Lodge in the second six months of the 2018/9 year are very strong with the Lodge experiencing good occupancy levels in the final quarter of 2019. The trend is expected to continue into 2020 on the back of the fact that the Rand remains weak against other currencies making South Africa an attractive destination of travel. Kuzuko Lodge is situated in a malaria free area and this factor is proving to be positive to the business as the Lodge is now experiencing a higher level of enquiries from a number of countries who have not visited the property before including North American.
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 65 full-time and 12 part-time and contracted staff employed. 51 of the full-time staff are employed from local communities.
· All staff living at Kuzuko in standard housing with flush toilets, power, water and solar panels.
· Conservation of 3 endangered species.
· 50 pupils from township schools entertained on a day visit to the Kuzuko Educational Centre to learn about conservation in the period from June to August.
· Reforestation of 500 acres of degraded land with spekboom providing work for 100 part time staff.
· 85,000 beehives in the field providing 10,000 farmers with increased income. Inqo has acquired the right to the income generated from 6 500 of these hives.
· The Mazima Retirement Plan now has some 2,200 active members having grown from 430 active members in August 2016. Members are earning an average return of 11.5% on their investments currently. The MayiCard Business Loan has 800 clients since launch.
· In September 2018, Kuzuko Lodge partnered with the Ashia Foundation in a project that set out to re-wild captive cheetah and return them to the cheetah metapopulation. We are pleased to report that the first two cheetahs in this program have been fully wilded and been released in third party reserves in South Africa under the guidance of the Endangered Wildlife Trust.
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 unaudited Group financial statements for the six months ended 31 August 2019. KPMG has performed a review of the condensed consolidated interim financial statements for the six months ended 31 August 2019. A copy of these condensed interim financial statements and KPMG's review report will be available at the Company's offices on 25 November 2019.
DIVIDEND
The company has not declared a dividend for the period ended 31 August 2019.
K.S Tan C.J Bertie
Chairman Chief Financial Officer
Enquiries:
Inqo Investments Limited
Chris Bertie, Chief Financial Officer and Chief Operating Officer
Tel: +27 (0)83 6254069
Shard Capital Partners LLP
ISDX 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 six months ended 31 August 2019
Group
(Reviewed)
(Reviewed)
(Audited)
Six Months
Six Months
Year ended
ended 31
ended 31
28 February
August 2019
August 2018
2019
(6 months)
(6 months)
(12 months)
R'000
R'000
R'000
Revenue
8 739
8 371
23 796
Cost of sales
(1 199)
(1 456)
(3 459)
Gross profit
7 540
6 915
20 337
Other income
137
197
853
Personnel expenses
(4 048)
(4 109)
(8 176)
Depreciation
(1 532)
(1 268)
(2 697)
Listing expenses
(421)
(115)
(834)
Professional fees
(249)
(213)
(621)
Directors emoluments
(389)
(394)
(896)
Selling and administrative expenses
(6 883)
(5 637)
(12 495)
Operating loss
(5 845)
(4 624)
(4 529)
Fair value adjustment
-
-
1 178
Net financing income
248
509
850
Finance income
340
559
1 060
Finance costs
(92)
(50)
(210)
Loss before taxation
(5 597)
(4 115)
(2 501)
Taxation
450
(4)
638
Loss for the year
(5 147)
(4 119)
(1 863)
Other comprehensive income
-
-
2 379
Revaluation of land
-
-
3 065
Deferred tax on revaluation
-
-
(687)
Total comprehensive income for the period
(5 147)
(4 119)
516
Loss per share (cents)
(0.29)
(0.24)
(0.15)
Diluted Loss per share (cents)
-
(0.24)
(0.15)
Inqo Investments Limited Group
Condensed consolidated statement of financial position
At 31 August 2019
Group
(Reviewed)
(Reviewed)
(Audited)
31 August
31 August
28 February
2019
2018
2019
R'000
R'000
R'000
Assets
Non-current assets
145 211
135 355
137 201
Property, plant and equipment
137 833
131 629
135 555
Intangible assets
11
16
15
Right of use asset
997
-
-
Other Investments
3 359
1 691
1 631
Loan Receivables
3 011
2019
-
Current assets
33 595
18 702
43 690
Inventories
866
881
911
Trade and other receivables
3 573
2 870
23 513
Biological assets
7 937
2 618
7 708
Cash and cash equivalents
21 219
12 333
11 558
Total assets
178 806
154 057
180 891
Equity and liabilities
Capital and reserves
Ordinary share capital
71 809
65 004
70 559
Share premium
86 294
70 774
83 429
Revaluation reserve
73 153
70 774
73 153
Accumulated loss
(69 796)
(66 672)
( 65 557)
Equity attributable to equity holders of Inqo Investments Limited
161 460
139 880
161 584
Non-controlling interest
(101)
(334)
808
Total equity
161 359
139 546
162 32
Non-current liabilities
8 284
7 810
7 872
Loans from related parties
168
165
168
Other long term loans
647
610
625
Deferred taxation
6 436
6 842
6 886
Debentures
193
193
193
Finance lease liability
840
-
-
Current liabilities
9 163
6 701
10 627
Trade and other payables
8 240
5 878
10 037
Finance lease liability
166
-
-
Provision
757
823
590
Total liabilities
17 447
14 511
18 499
Total equity and liabilities
178 806
154 057
180 891
Inqo Investments Limited Group
Unaudited interim financial information for the six months ended 31 August 2019
Basis of preparation
The interim financial statements are prepared in accordance with IAS 34 Interim Financial Statements and the requirements of the Companies Act of South Africa and should be read in conjunction with the Group's last annual consolidated financial statements as at and for the year ended 28 February 2019 ('last annual financial statements'). They do not include all of the information required for a complete set of IFRS financial statements.
The condensed financial information has been presented on the historical cost basis, except for financial instruments carried at fair value, and are presented in Rands which is Inqo Investment Ltd's functional and presentation currency.
This financial information has been extracted from Inqo's unaudited condensed consolidated interim financial statements for the six months ended 31 August 2019.
This financial information was prepared under the supervision of Mr C Bertie CA(SA), in his capacity as Group financial director.
Inqo Investments Limited Group
Summarised financial information
For the six months ended 31 August 2019
Group
(Reviewed)
(Reviewed)
(Audited)
Six Months
Six Months
Year ended
ended 31
ended 31
28 February
August 2019
August 2018
2019
(6 months)
(6 months)
(12 months)
Earnings/(loss) per share
Loss per share (cents)
(0.29)
(0.24)
(0.15)
Diluted loss per share (cents)
-
(0.24)
(0.15)
Loss attributable to equity shareholders (R'000)
(4 236)
(3 125)
(2011)
Weighted average number of shares in issue for normalised EPS calculation
14 361 839
13 000 727
13 000 727
Weighted average number of shares in issue for diluted normalised EPS calculation
-
13 610 618
-
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