INQO INVESTMENTS LIMITED

 

AUDITED GROUP RESULTS FOR THE YEAR ENDED 28 FEBRUARY 2017

 

CHAIRMAN AND CHIEF EXECUTIVE STATEMENT

 

Inqo Investments Limited ('Inqo' or 'the Company') 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 at the base of the economic pyramid in Sub-Saharan Africa.

 

COMMENTARY

 

The group started a process of consolidating its financial position in 2014 and we are pleased to report that the various negotiations entered into with lender institutions have been concluded resulting in a R14m write-back and a stronger balance sheet with no debt.

 

The results for the year reflect a profit before tax of R10,259,510 (2016: Loss of R4,718,271) equating to R0.61 cents per share. Revenues increased by 59% from R10,650,195 in 2016 to R17,026,098  in 2017.

 

The Selling & Administration expenses for the group amounted to R19,456,853 in 2016/7, the Kuzuko costs amounted to R13,837,149 while those of Inqo amounted to R5,869,837. The Kuzuko costs are traditional costs incurred by an operating unit in the game lodge hospitality industry. The material cost contributors for Inqo were depreciation R2,082,399, listing costs R572,019, directors emoluments R636,000, audit & professional fees R642,169 and impairments R629,169.

 

Investee companies

 

Kuzuko Lodge (South Africa)

The improved profitability of the group is mainly attributable to the Kuzuko Lodge operation, Inqo's main trading subsidiary which earned a profit before tax for the year of R783,706 (2016:  Loss of R950,638).

 

The profit turnaround has come about from the business being able to achieve both improved occupancies and improved average room rates.  As Kuzuko enters its ninth season of trading we expect this profit turnaround achieved in 2016/7 to continue into the future.

 

Conservation costs remain high as Kuzuko continues to rehabilitate the game reserve as well as the gradual introduction of more animals.

 

Spekboom Trading (South Africa)

The contract entered into with the Department of Environmental Affairs (DEA) to fund the planting of Spekboom on the Kuzuko Game Reserve to achieve reforestation of the Reserve and to create jobs in the local community has come to an end.  During the term of the contract some 500 acres of degraded land were replanted with Spekboom and in the process 100 job opportunities were created.

 

We are currently investigating other opportunities to continue the reforestation program.

 

Bee Sweet Honey (Zambia)

We concluded negotiations in the first quarter with Bee Sweet Honey Limited a Zambian commercial producer of honey. The number of beehives placed by the company increased by 50% taking the total to 90,000 beehives with 13,000 farmers in its programme. Output for 2016 was around 220 tons of honey for export.  Inqo invested an initial tranche of US$60,000 in this venture to allow Bee Sweet to acquire and supply an additional 3,000 hives and recruit 500 new farmers to the honey production programme. The bee hives are harvested twice a year and Inqo expects to earn its first revenues in the next financial year.

 

Four One Financial Services Limited (Uganda)

In April 2017, we made an investment in Four-One Financial Services Limited, a Ugandan based company which manages the Mazima Voluntary Individual Retirement Benefits Scheme.

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 of the economy. The poor and informal workers do not currently have any formal retirement savings schemes. The Uganda government has licensed Mazima to provide a voluntary savings scheme for such low income earners. Mazima is supervised by a group of trustees and is licensed and regulated by the Uganda Retirements Benefits Regulatory Authority (URBRA), the government body that regulates all pension and retirement benefits schemes. Four-One Financial Services is the management company responsible for marketing and administration of the Mazima retirement scheme. 

 

Savers register online and pay through mobile banking or e-banking through the bank. No cash is used. Each saver has his/her own account managed by the custodian bank, Housing Finance Bank. The investments are managed by AA Financial, a regulated advisor.

 

OUTLOOK

 

Inqo expects to benefit from the improved trading from the Kuzuko Lodge operation and the first revenues from each of the Bee Sweet Honey and Four One Financial Services Investment.

 

The improved room rates that have been achieved and the increased occupancies experienced at Kuzuko Lodge in the latter part of the 2016/7 year and the first quarter of 2017/8 are expected to continue on the back of the fact that the Rand remains weak against other currencies  making South Africa an attractive destination of travel.

 

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 55 fulltime and 12 part-time and contracted staff employed.

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

·      Conservation of 3 endangered species.

·      Reforestation of 500 acres of degraded land with spekboom providing work for 100 part time staff.

·      90,000 beehives in the field providing 13,000 farmers with increased income.

 

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 audited group financial statements for the year ended 28 February 2017. A copy of these audited financial statements will be available on the company website by 21 June 2017.

 

DIVIDEND

 

The company has not declared a dividend for the year ended 28 February 2017.

 

K.S Tan                                                                       C.J Bertie

Chairman                                                                     Chief Financial Officer

 

19 June 2017

 

 

Enquiries

 

Inqo Investments Limited
Mr Chris Bertie, Chief Financial Officer
and Chief Operating Officer	Tel: +27 (0)83 625 4069
Shard Capital Partners LLP
NEX Exchange Corporate Adviser and Broker
Dr Wang Chong	Tel: +44 (0)20 7186 9948

 

 

Inqo Investments Limited Group 

 

Statements of profit or loss and other comprehensive income

for the year ended 28 February 2017

 

					Audited		Audited
					28 Feb 17		29 Feb 16
					R'000		R'000
Revenue					17 026		10 651
Cost of Sales					(2 390)		(1 650)
Gross profit					14 636		9 001
Other income					14 042		867
Selling and administrative expenses					(19 457)		(14 796)
Operating profit/(loss)					9 221		(4 928)
Fair value adjustment					502		268
Net financing income/(costs)					536		(58)
Finance income					581		997
Finance expense					(45)		(1 055)
Profit/(loss) before taxation					10 259		(4 718)
Taxation					(2 868)		259
Profit/(loss) for the year					7 391		(4 459)
Profit/(loss) attributable to:
Equity holders					7 085		(4 326)
Non-controlling interest					306		(133)
					7 391		(4 459)
Other comprehensive income
					10 575		(2 896)
Revaluation of land					13 627		-
Deferred tax on revaluation					(3 052)		(2 896)
Total comprehensive income/(loss) for the year					17 966		(7 355)
Total comprehensive income attributable to:
Equity holders					17 660		(7 222)
Non-controlling interest					306		(133)
					17 966		(7 355)
Earnings/(loss) per share (cents)					0.61		(0.53)
Diluted earnings/(loss) per share (cents)					0.58		(0.50)

 

 

Statements of financial position

for the year ended 28 February 2017

 

				Audited		Audited
				28 Feb 17		29 Feb 16
				R'000		R'000
Assets
Non-current assets				132 870		119 110
Property, plant and equipment				131 898		119 082
Intangible assets				18		28
Loans to subsidiaries				-		-
Other investments				954		-
Investments in subsidiaries				-		-
Current assets				10 655		31 803
Inventories				486		389
Trade and other receivables				3 115		4 806
Biological assets				3 512		2 950
Cash and cash equivalents				3 542		23 658
Total assets				143 525		150 913
Equity and liabilities
Capital and reserves
Ordinary share capital				58 198		58 198
Share premium				58 228		58 228
Revaluation reserve				70 774		60 200
Accumulated loss				(58 786)		(65 871)
Equity attributable to equity holders of Inqo Investments Limited				128 414		110 755
Non-controlling interest				173		(133)
Total equity				128 587		110 622
Non-current liabilities				9 753		17 759
Loans from related parties				436		414
Other long term loans				566		538
External loans and borrowings				-		13 977
Deferred tax liability				8 558		2 637
Debentures				193		193
Current liabilities				5 185		22 532
Trade and other payables				4 933		6 277
Provision				252		252
External loans and borrowings - current portion				-		16 003
Total liabilities				14 938		40 291
Total equity and liabilities				143 525		150 913