Unaudited Results for period ended 31 August 2022
29/11/2022 07:00
For best results when printing this announcement, please click on link below:
http://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20221129:nRSc8070Ha&default-theme=true
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:
August 2022 August 2021
Depreciation 1,730,282 1,659,770
Listing expenses 428,462 357,806
Directors' fees and salaries 490,403 418,136
Professional fees 315,678 321,415
Impairments and fair value adjustments 194,417 -
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 (mailto: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 Six Months ended
31 August 2022 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 102 949 122 757
income
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 Audited
31 August 2021 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 145 662 833 148 534 807
Non-controlling interest 360 054 482 164
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 Audited
31 August 2022 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 134 005 355 138 221 402
Non-controlling interest 136 130 247 844
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
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact
rns@lseg.com (mailto:rns@lseg.com)
or visit
www.rns.com (http://www.rns.com/)
.
RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our
Privacy Policy (https://www.lseg.com/privacy-and-cookie-policy)
. END NEXBPBTTMTBTBLT