Unaudited results for period ended 31 August 2023
29/11/2023 07:00
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RNS Number : 9581U Inqo Investments Limited 29 November 2023
Inqo Investments Limited
Unaudited Group Results for the period ended 31 August 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
R285,367,338 and minimal debt.
The funds that the Company received from Belmont University in the latter part
of the 2022/3 financial year and the new shareholder funds received in the
early part of the current 2023/4 financial year will be used to develop Inqo's
Conservation and Rural Enterprise (CARE) project that will invest in
businesses that tackle social and environmental issues in and around the
Budongo Forest in Uganda. The first investment of the CARE project is an
eco-lodge that will help create jobs, generate value from conservation for
local communities and fund reforestation in the local area. Plans for the
lodge have been approved and construction will begin in the third quarter of
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 corresponding speed of recovery has
varied across investee companies. Despite the challenges being faced, the
directors of the Company have assessed the Company and its subsidiaries and
agree that the operating units will continue as a going concern.
The results for the period under review showed revenue of R7,366,899 (August
2022: R3,389,258) with a profit after tax of R57,444,000 (August 2022: loss of
R4,327,761). The primary reason for the profit before tax position is due to
the grant income recognised between 1 September 2022 and 31 August 2023 for
the cost of planting Spekboom cuttings on the property through the Reforest
Action carbon credit contract.
The profit for the period is reported after accounting for the following
income and cost items:
August 2023 August 2022
Income earned:
Included in other income is donation received for the cost of planting
Spekboom cuttings on the property in terms of the Reforest Action carbon
credit contract. The value of the donations received between 1 September 2022
and 28 February 2023 amounted to R9,090,000
61 513 070 -
Operating costs incurred:
Depreciation & amortisation
Listing expenses
1 605 019 1 730 282
Directors' fees and salaries
372 904 428 462
Professional fees
486 168 490 403
Impairment & fair value adjustments
306 600 315 678
Provision for bad & doubtful debts
24 822 57 142
160 321 137 275
In August 2023, the directors of Inqo reviewed the valuation placed on all
income earning assets to ensure that they reflect their fair value.
Following the reviews, the directors are of the view that 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, whilst steadily improving, has not
yet returned to pre Covid-19 occupancies and still operates at a loss. Inqo
has provided for impairment of Kuzuko receivables to the value of R2,750,937
against the total amount due of R4,076,944.
· There have been major operational changes at Kuzuko Lodge in that
the group has decided, effective 31 October 2023, to part ways with the
management company, Legacy Hospitality Management Services (Pty) Ltd. This
parting of ways has been entered into in a very fair, balanced and equitable
manner.
· Mr J. Tan was appointed CEO of Kuzuko Lodge in July 2023 and he
is now working with his fellow directors to put in place a new and effective
management structure. The building of the new management unit is operating
smoothly and on track to be fully operational before the summer season begins
in November 2023.
· The game on the property has not seen any major change in numbers
on the land or in value and therefore there are no material changes in the
game valuation at 31 August 2023.
· 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 R753,537 have been impaired and a
provision for doubtful debts have been raised against interest owing of
R1,217,613.
The land and buildings are in terms of Inqo's accounting policies to be
revalued every two years by an independent valuer. The valuation was done in
March 2023 as required. 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 resulted in the land and buildings having
increased in value by R19,099,881.
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 (South Africa), is a wholly owned
subsidiary formed on 27 October 2020 to facilitate with the acquisition of
investments in Kenya and Uganda. The group investment in Sanergy Incorporated
is held by Inqo Africa (Pty) Ltd.
· 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 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
trees. 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.
· 63,423 patient visits in the first 9 months of 2023 including 386
HIV patients receiving care and counselling, 5,599 people receiving health
education including through community outreach and 149 surgeries in the new
surgical unit which is the only surgical facility at the southern end of Lake
Naivasha, 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. 5,701 acres (2,307
hectares) of land have been planted with Spekboom cuttings by 31 August
2023. The project currently employs between 200 and 250 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 unaudited group financial statements for the period ended 31
August 2023.
DIVIDEND
The company has not declared a dividend the period ended 31 August 2023.
K.S
Tan
C.J Bertie
Chairman
Chief Financial
Officer
Issued on: 29 November 2023
Enquiries
Inqo Investments Limited Tel: +44 7768 613346
Dr Kim Tan, Chairman Email: kimtan2@springhilluk.com
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 2023
Six Months ended Six Months ended
31 August 2023 31 August 2022
R R
Revenue 7 366 899 3 389 258
Cost of Sales (1 049 896) (481 850)
Gross profit 6 317 003 2 907 408
Other income 61 793 066 761 454
Personnel expenses (2 854 379) (1 962 577)
Directors' emoluments (486 169) (490 403)
Depreciation & amortisation (1 605 019) (1 730 282)
Listing expenses (372 904) (428 462)
Professional fees (306 600) (315 678)
Provision for doubtful debts (160 321) (137 275)
Impairment and fair value adjustment (24 822) (57 142)
Selling and administrative expenses (6 511 330) (3 826 319)
Operating profit/(loss) 55 788 525 (5 279 276)
Inventory write-up (down) 8 000 -
Fair value adjustment 296 460 -
Net financing 1 132 991 102 949
income
Finance income 1 218 522 184 255
Finance costs (85 531) (81 306)
Profit/(Loss) before taxation 57 225 976 (5 176 327)
Taxation credit 218 024 848 566
Loss for the period 57 444 000 (4 327 761)
Loss attributable to:
Equity holders 57 565 554 (4 216 047)
Non-controlling interest (121 554) (111 714)
57 444 000 (4 327 761)
Other comprehensive income:
Other comprehensive income - -
Total comprehensive income for the period 57 444 000 (4 327 761)
Condensed consolidated statement of financial position
as at 31 August 2023
Reviewed Audited
31 August 2023 28 February 2023
R R
Assets
Non-current assets 223 643 437 163 310 393
Property, plant and equipment 214 355 118 154 054 726
Intangible assets 1 340 1 840
Right of use asset 152 975 236 171
Other investments 9 134 004 9 017 656
Current assets 61 723 901 46 946 317
Inventories 5 055 693 4 862 236
Trade and other receivables 3 858 133 3 124 989
Biological assets 3 085 440 2 788 980
Cash and cash equivalents 49 724 635 36 170 112
Total current assets 61 723 901 46 946 317
Total assets 285 367 338 210 256 710
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 86 693 347 86 693 347
Accumulated loss (32 536 242) (90 101 796)
Equity attributable to equity holders of: 214 327 290 156 761 746
Inqo Investments Limited
Non-controlling interest 38 665 160 218
Total equity 214 365 965 156 921 964
Non-current liabilities 9 196 420 9 403 433
Loans from related parties 3 803 662 4 511 589
Deferred taxation 795 796 4 815 985
Lease liability 4 596 961 76 859
Current liabilities 61 804 953 43 931 313
Bank overdraft 532 409 146 855
Trade and other payables 8 064 296 8 503 452
Unutilised grant funding 52 994 005 35 066 926
Lease liability 217 243 214 080
Total liabilities 71 001 373 53 334 746
Total equity and liabilities 285 367 338 210 256 710
Condensed consolidated statement of cash flows
for the six months ended 31 August 2023
Six months ended 31 August 2023 Six months ended 31 August 2022
R R
Cash utilised by operations (4 901 289) (2 686 488)
Interest received 1 218 522 184 255
Interest paid (85 531) (81 306)
Net cash flow from operating activities (3 768 298) (2 683 539)
Cash flows from investing activities
Loan (extended to)/ repaid by other investments (141 170) -
Acquisition of property, plant and equipment (300 055) (57 539)
Proceeds on disposal of biological assets 248 100 -
Grant funding received 17 066 111 -
Proceeds on disposal of property, plant and equipment 58 696 -
Net cash flow from investing activities 16 931 682 (57 539)
Cash flows from financing activities
Loans received from related parties 62 000 2 804 544
Other loans received external 25 869 -
Repayment of finance lease (82 284) (119 287)
Net cash flow from financing activities 6 585 2 685 257
Net movement in cash and cash equivalents 13 169 969 (55 821)
Cash and cash equivalents at beginning of year 36 023 257 (16 520)
Cash and cash equivalents at end of year 49 192 226 (72 341)
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