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Inqo Investments Ltd (INQO)

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Wednesday 27 July, 2016

Inqo Investments Ltd

Final Results

RNS Number : 4472F
Inqo Investments Limited
27 July 2016
 

Inqo Investments Limited

 

("Inqo" or the "Company")

 

Preliminary results for the year ended 29 February 2016

 

CHAIRMAN AND CHIEF EXECUTIVE STATEMENT

 

Inqo Investments Limited (ISDX: INQO) 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 period since October 2014 to date has been one of consolidation for Inqo.  Between October 2014 and April 2016, we renegotiated loans with institutions which will result in a total saving of R30 million in interest repayments and during this period we listed Inqo on the ISDX Growth Market in London.

 

The results for this year reflect a loss before tax for the year of R4,718,271 (2015: Profit of R8,974,270) equating to 0.62 cents per share  with revenues  of R10,650,195 (2015: R11,249,300). The company incurred listing expenses amounting to R1.5 million during the year and these are viewed as once-off costs that will not recur each year. Finance costs during the year amounted to R1.1 million mainly related to the convertible loans which were converted to equity before year end and this is also a non-recurring expense. The loan negotiations and the convertible loan restructuring has resulted in the company being free of any borrowings and loans.

 

Investee companies

 

Kuzuko Lodge

 

The trading losses at Inqo group level are mainly attributable to losses at Kuzuko Lodge, Inqo's main trading subsidiary of R950,638 (2014: R1,992,798). Whilst the lodge operation has essentially been profitable, conservation and habitat rehabilitation work on the reserve continues to require funding, resulting in losses. Kuzuko Lodge continues to see improvements in its trading position reflecting a reduced loss in comparison to the previous year.  Our main thrust with Kuzuko Lodge in the 2015/6 year was to increase the average rate achieved per room to provide a platform to get the operation to profitability.  We are pleased to report that while the annual occupancy decreased by 8% due to changes in visitor visa requirements affecting the whole industry, the average room rate achieved increased by 30%.  We are pleased to report that this trend has continued in the first quarter of 2016/7. Kuzuko Lodge is now in its 8th season and we expect to see further improvements as we continue to build its reputation.

 

Spekboom Trading

 

We continue our interaction with the Department of Environmental Affairs (DEA) to obtain a further reforestation grant to extend the planting of spekboom on the Kuzuko Game Reserve.  When agreement is reached with the DEA we will create some 100 new jobs in the local community. To date, the company has re-planted 500 acres of spekboom on degraded land.

 

Bee Sweet Honey

 

We concluded negotiations in the first quarter with Bee Sweet Honey Limited a Zambian commercial producer of honey with 60,000 beehives and 12,000 farmers in its programme. Output for 2016 is expected to be 200 tons of honey for export.  Inqo invested an initial tranche of US$60 000 in this venture that will allow Bee Sweet to acquire and supply an additional 5,000 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.

 

Medical Diagnostech

 

The company manufactures rapid point-of-care (POC) tests for HIV/AIDS, malaria, drugs of abuse and pregnancy.

 

The company produced 800,000 test kits in 2015/6.

 

OUTLOOK

 

In the current year Inqo expects to benefit from the improved trading at Kuzuko Lodge and first revenues from its Bee Sweet Honey investment.

 

The improved room rates that have been achieved and the increased occupancies experienced at Kuzuko Lodge in the latter part of the 2015/6 year and the first quarter of 2016/7 are expected to continue on the back of the fact that the Rand remains weak against other currencies, making South Africa an attractive destination for tourists.

 

A factor that must be borne in mind in the current 2016/7 year is that the DBSA long term loan was settled in April 2016, being the final part of the restructuring exercise that the group entered into in 2015. The settlement of R15 million made and the resulting write back of interest historically charged of a further R14 million that will arise as a result of the loan settlement will strengthen the financial position of the company and reflect positively on the groups trading results for the 2016/7 year.

 

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 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 81 part time staff.

·      800,000 low cost medical diagnostic tests for infectious diseases manufactured and supplied.

·      60,000 beehives in the field providing 12,000 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

 

During the year the group and company identified that the revaluation reserve has always excluded deferred tax relating to the land revaluation, whereas the revaluation reserve should have been reflected net of deferred tax. In prior years, the company and group had been in an overall deferred tax asset position which was not recognised due to the uncertainty of the timing of future taxable income. However, due to the change in the capital gains tax rate notified in the South African February 2016 budget speech, the company and group moved into a deferred tax liability position at 29 February 2016.

 

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 29 February 2016. A copy of these audited financial statements will be available on the company website by 31 July 2016.

 

DIVIDEND

 

The company has not declared a dividend for the year ended 29 February 2016.

 

K.S Tan

C.J Bertie

Chairman

Chief Financial Officer

 

For further information please contact:

 

Inqo Investments Limited

 

Chris Bertie, Chief Financial Officer

Tel: +27 (0)83 6254069

and Chief Operating Officer

 

 

 

Shard Capital Partners LLP

 

ISDX Corporate Adviser and Broker

Tel: +44 (0)20 7186 9948   

Dr Wang Chong      

 

 

 

 

 

Statement of comprehensive income

for the year ended 29 February 2016         

 

 

 

 

 

 

Restated

 

 

 

 

Audited

Year ended 29 February

2016

 

Audited

Year ended 28 February

2015

 

 

 

 

R'000

 

R'000

 

Revenue

 

 

10 650

 

11 249

 

Cost of Sales

 

 

(1 650)

 

(1 799)

 

Gross profit

 

 

9 000

 

9 450

 

Other income

 

1 134

 

14 977

 

Selling and administrative expenses

 

(14 795)

 

(15 809)

 

Operating (loss)/profit

 

 

(4 661)

 

8 618

 

Net financing (costs)/income

 

 

(57)

 

356

 

(Loss)/profit before taxation

 

 

(4 718)

 

8 974

 

Taxation

 

 

259

 

905

 

(Loss)/profit for the year

 

 

(4 459)

 

9 879

 

Other comprehensive income

 

 

(2 896)

 

3 946

 

Revaluation of land

 

 

-

 

4 851

 

Deferred tax on revaluation

 

 

(2 896)

 

(905)

 

 

 

 

 

 

 

 

Total comprehensive income for the year

 

(7 355)

 

13 825

 

 

 

 

 

 

 

 

(Loss)/earnings per share (cents)

 

 

(0.62)

 

0.48

 

 

 

 

 

 

 

 

Diluted (loss)/earnings per share (cents)

 

(0.59)

 

0.41

 

 

Statement of financial position

at 29 February 2016

 

 

 

 

 

 

 

 

Audited

29 February

2016

 

Restated

Audited

28 February 

2015

Assets

 

 

R'000

 

R'000

Non-current assets

 

 

119 110

 

118 714

Property, plant and equipment

 

 

119 082

 

118 687

Intangible assets

 

 

28

 

27

 

 

 

 

 

 

Current assets

 

 

31 803

 

23 078

Inventories

 

 

389

 

742

Trade and other receivables

 

 

4 806

 

2 828

Biological assets

 

 

2 950

 

2 683

Cash and cash equivalents

 

 

23 658

 

16 825

 

 

 

 

 

Total assets

 

 

150 913

 

141 792

Equity and liabilities

 

 

 

 

 

Capital and reserves

 

 

 

 

 

Ordinary share capital

 

 

58 198

 

28 813

Share premium

 

 

58 228

 

13 266

Revaluation reserve

 

 

60 200

 

63 096

Accumulated loss

 

 

(65 871)

 

(61 546)

Equity attributable to equity holders of Inqo Investments Limited

 

110 755

 

 

43 629

Non-controlling interest

 

 

(133)

 

1

Total equity

 

 

110 622

 

43 630

 

 

 

 

 

 

Non-current liabilities

 

 

17 759

 

82 950

Loans from related parties

 

 

414

 

28 153

Other long term loans

 

 

538

 

34 617

External loans and borrowings

 

 

13 977

 

19 987

Deferred tax liability

 

 

2 637

 

-

Debentures

 

 

193

 

193

 

 

 

 

 

 

Current liabilities

 

 

22 532

 

15 212

Trade and other payables

 

 

6 277

 

3 849

Provision

 

 

252

 

353

External loans and borrowings - current portion

 

 

16 003

 

 

11 010

Total liabilities

 

 

40 291

 

98 162

Total equity and liabilities

 

 

150 913

 

141 792

 

Statement of changes in equity

for the year ended 29 February 2016

 

 

Share capital

Share premium

Revaluation reserve

Accumulated loss

Non-controlling interest

Total

 

 

R'000

R'000

R'000

R'000

R'000

             R'000

Restated balance at 28 February 2015

 

28 813

13 266

63 096

(61 546)

1

43 630

Shares issued

 

29 385

44 962

-

-

-

74 347

Loss for the year

 

-

-

(2 896)

(4 325)

(134)

(7 355)

Balance at 29 February 2016

 

58 198

58 228

60 200

(65 871)

(133)

110 622

 

 

 

 

 

 

 

 

Restated balance at 28 February 2014

 

28 813

13 266

59 150

(71 425)

1

29 805

Opening balance as previously reported

 

 

 

72 726

(85 001)

 

29 805

Prior year error

 

 

 

(13 576)

13 576

 

-

 

 

 

 

 

 

 

 

Loss for the year

 

-

-

-

9 879

 

9 879

Loss as previously reported

 

 

 

 

8 974

 

8 974

Prior year error

 

 

 

 

905

 

905

Other comprehensive income

 

 

 

3 946

-

 

3 946

Other comprehensive income as previously reported

 

 

 

4 851

-

-

4 851

Prior year error

 

-

-

(905)

-

-

(905)

 

 

 

 

 

 

 

 

Restated balance at 28 February 2015

 

28 813

13 266

63 096

(61 546)

1

43 630

 

 

 

 

 

Statement of cash flows

for the year ended 29 February 2016

 

 

Audited for the year ended 29 February

2016

 

 

Audited

 for the year ended 28 February 2015

 

 

 

R'000

 

R'000

 

 

 

 

 

 

 

Cash (utilised) /generated by operations

 

(3 938)

 

9 744

 

Net cash (outflow)/inflow from operating activities

(3 938)

 

9 744

 

 

 

 

 

 

 

Cash flows from investing activities

 

 

 

 

 

Acquisition of biological assets

 

-

 

(107)

 

Acquisition of property, plant and equipment and intangible assets

 

(1 758)

 

(1 424)

 

Net cash outflow from investing activities

(1 758)

 

(1 531)

 

 

 

 

 

 

 

Cash flows from financing activities

 

 

 

 

 

Loans and borrowings received/(repaid)

 

29

 

(19 916)

 

Shares issued to new shareholder for cash

 

12 500

 

-

 

Loans from related parties repaid

 

-

 

(2 738)

 

Net cash inflow/(outflow) from financing activities

 

12 529

 

(22 654)

 

Net movement in cash and cash equivalents

 

 

6 833

 

(14 441)

 

Cash and cash equivalents at beginning of year

 

16 825

 

31 266

 

Cash and cash equivalents at end of year

 

23 658

 

16 825

 

 


This information is provided by RNS
The company news service from the London Stock Exchange
 
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