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DJ Inqo Investments Limited Inqo Investments Ltd HY Results to 31 August 2019

TIDMINQO

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:

 
                       August 2019   August 2018 
  Depreciation          1 531 521     1 268 207 
   Listing expenses      421 117       115 145 
   Directors fees        388 563       393 759 
   Professional fees     248 887       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 GBP2.5 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 3(rd) 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 

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Enquiries:

 
 Inqo Investments Limited 
 Chris Bertie, Chief Financial Officer and   Tel: +27 (0)83 6254069 
  Chief Operating Officer 
 
 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 

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DJ Inqo Investments Limited Inqo Investments Ltd HY -3-

  (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                                 13 000 
  normalised EPS calculation           14 361 839           727          13 000 727 
 Weighted average number 
  of shares in issue for 
  diluted normalised EPS                                 13 610 
  calculation                                   -           618                   - 
 
 
 
 
 
 

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November 26, 2019 02:02 ET (07:02 GMT)