TIDMINQO
RNS Number : 8856T
Inqo Investments Limited
30 November 2021
Inqo Investments Limited
Unaudited Group Results for the period ended 31 August 2021
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 R155,990,835 and minimal debt. Funds provided by shareholders of
R2,066,862 and the proceeds of R5,612,447 from the sale of land to
South African National Parks (SANParks) have provided the Group
with the funds to support subsidiaries and investments during the
difficult Covid-19 pandemic.
Kuzuko Lodge, the main subsidiary of Inqo Investments, has
required substantial financial support through the Covid-19
pandemic period. Travel restrictions, lockdowns and consumer
confidence in travel has significantly impacted the business
throughout 2020 and 2021 - as it has for the hospitality industry
around the world. A recent easing of travel restrictions by the UK
government, Kuzuko's largest market, is a positive sign for the
lodge. However, due to an announcement on 25 November, that a new
potentially more contagious Covid-19 variant had been identified in
South Africa, the UK placed South Africa on the travel red list on
26 November.
Therefore, despite the challenges that have been faced by the
investments held by the Group, 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
R607,688 (August 2020: R1,746,170) and incurred a loss after tax of
R5,060,946 (August 2020: R4,760,046). The loss for the period is
reported after accounting for the following operating costs:
August 2021 August 2020
Depreciation 1,659,770 1,743,117
Listing expenses 357,806 528,106
Directors' fees and salaries 348,000 259,500
Professional fees 321,415 259,942
Like businesses around the world, the Group has been heavily
impacted by the Covid-19 pandemic. All businesses in the Group have
reported reduced earnings during the pandemic and have taken
extensive steps to reduce operating costs to the minimum and adapt
to the realities of operating a business during the ongoing
Covid-19 pandemic.
The directors of the holding company review the valuation placed
on all income carrying assets to ensure that they reflect their
fair value. This review was done at 31 August 2021 and having
conducted the review, the directors are of the view that the
Group's assets are reflected at fair value.
INVESTEE COMPANIES
Kuzuko Lodge (South Africa)
Kuzuko Lodge ("Kuzuko") only traded for 3 months of this
financial period as the directors of the company and Kuzuko's
management company decided to mothball the operation during the
South African winter season from May to September. The Lodge
reopened for business on 1 September 2021 to local South African
guests and a small number of European travellers. The decision by
the British government to lift the ban on travel to South Africa on
11 October 2021 was a major boost for Kuzuko Lodge as the United
Kingdom market has historically provided 25 to 30% of the annual
occupancy for the Lodge. Kuzuko Lodge has started to receive
enquiries for accommodation from British based travellers, which is
a very positive sign for the business.
The directors of the company and the management company, Legacy
Hotels and Resorts, have maintained contact with 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 has to date replanted some 500 acres of degraded
land with spekboom, an indigenous shrub that naturally sequesters
exceptionally high levels carbon, creating 100 job opportunities in
the process.
A memorandum of understanding is being negotiated with a leading
carbon fund to restore 3,000 acres of spekboom on the Kuzuko
property in order to generate carbon credits. There has recently
been a renewed interest in the carbon markets in response to the
growing global awareness of the impact of climate change with
nature-based solutions, such as spekboom, being a high priority.
Inqo anticipates scaling up spekboom restoration activities once
the Covid-19 pandemic situation has resolved providing valuable
employment opportunities as well as a positive environmental
benefit.
Small scale plantings have continued to take place during the
Covid-19 pandemic period and it is anticipated that larger scale
planting trials will take place in the near future. Pilot plantings
will maximise chances of success when more widescale replanting
operations take place as part of the company's conservation and
land regeneration plans.
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 Bee Sweet operation currently has 61,203 bee hives in the
field with over 8,000 beekeepers in its programme. Inqo has
invested in 14 150 hives and receives a return on investment as a
profit share on the yield produced by these hives.
The hives are harvested twice a year, generally in May and
November.
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 company that provides micro-pension, savings and
short-term loan products to the informal sector.
Prior to the Covid-19 pandemic Four-One was performing well
having endured challenging operating conditions for the previous 18
months. The senior management team have a strong track record in
navigating a difficult business environment through lean operations
and have developed an agile response to market demands. However,
the impact of the lockdown and subsequent economic downturn has
been severe in Uganda, which has impacted Four-One. It will take
time before the full impact to the business and Ugandan economy is
known. In the meantime, Inqo continues to work with the management
team to assist where possible.
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 27-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.
This hospital receives large numbers of 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 expanded its operation with the
inclusion of major and minor surgical units that have recently been
opened, making the SLMC facility 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.
The impact of Covid-19 has been economically challenging for
SLMC. The major industry in the area being cut flowers for the
European market - a sector that has experienced variable sales
during the Covid-19 pandemic period. Fortunately, there is a strong
vegetable growing industry in Naivasha that continues to trade and
provides medical appointments for SLMC. Through the strong
leadership of the management team, SLMC has endured the challenging
conditions of 2020 and 2021 whilst still implanting the required
development for their growth plans. The hospital is now in a strong
position to achieve its objectives as the Kenyan economy begins to
recover.
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.
As an essential industry, Kentegra had been able to operate
normally and continues to report demand despite the Covid-19
pandemic. The senior management team have responded quickly and
professionally drawing up well considered contingency plans for all
eventualities and are re-evaluating the situation on a continual
basis. Kentegra has shown a strong commitment to both their
smallholder farmer partners and their employees during this time,
going above and beyond to minimise the economic impact while
ensuring safety for the organisation. Kentegra's recently built
factory has been successfully in production for several months. At
the end of this period, the company has recruited around 7,000
farmers cultivating 1,700 acres of chrysanthemum flowers. Kentegra
has also raised over US$2m in a mix of grants and loans. Further
funding is being raised to install a second production line.
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 12,000 tons
of organic waste per year.
We closed our investment in Sanergy Inc in October 2020. When
the pandemic struck, Sanergy were in the process of raising funds
for a Series B investment round with a proportion of the funding
already secured from Novastar Ventures. The challenges of
conducting a due diligence in a pandemic meant the funding round
was paused and Sanergy sought additional investors for a bridging
round. Investment timing was critical as Sanergy were in the
process of completing their first major expansion in Nairobi and
required funds to finish the build. Following the closing of the
bridging round in October 2020, Sanergy were able to find
additional funding for their Series B and our convertible loan note
converted to equity in November 2020.
Since the investment, Sanergy have completed and opened their
new factory. At full capacity, the factory is capable of processing
72,000 tons of organic waste per annum. Waste collection has
remained slightly unpredictable throughout the pandemic. The
hospitality industry is a major source of organic waste for Sanergy
and a combination of lockdowns, travel restrictions and slow
economic growth have meant that supply is hard to predict. Sanergy
continue to take a methodical approach to refining their
methodology on a larger scale and remain optimistic for the
remainder of the year. With around 4,000 toilets, Sanergy serves
over 125,000 people daily. Sanergy was also one of 5 finalists in
this year's prestigious Earthshot Prize
(https://earthshotprize.org/finalists/sanergy/).
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 for guests on 1 September 2021
and has to date received mainly South African and a small number of
European visitors to the property. The decision by the British
government to remove South Africa from their red list was a major
boost to the business as it is Kuzuko's most important market.
While the directors expect to see an increase in bookings to the
Lodge in the short term, they do not expect occupancies to return
to pre-Covid occupancy levels until late in 2022 as consumer
confidence will take time to return, although the reimplementation
of travel restrictions on 26 November, by the UK and EU may slow
down this anticipated growth.
Bee Sweet Honey - The market in which Bee Sweet is currently
operating is very challenging but in spite of this management is
making good headway on both the production and sales front. The
company has recorded good sales and is currently negotiating with a
buyer for the sale of a large quantity of stock that will provide
the company with the cash flow needed to fund the harvesting of the
honey crop in November and December this year.
Spekboom Trading - The Covid-19 pandemic has meant that
re-planting activity had to cease. However, discussions have been
on-going with a number of environment-focussed investment funds to
start the re-planting of spekboom.
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 - As an essential service, SLMC has
been able to continue trading though footfall to the hospital
declined with patients hesitant about attending the hospital for
treatment due to fear of being infected with Covid-19. Despite the
challenges, management have been able to continue to implement
development plans during 2020 and 2021 putting SLMC in a strong
position as the Kenyan economy begins to recover.
Kentegra Biotechnology - As an Agri business, Kentegra was
deemed an essential service by the Kenyan government and has been
able to continue operations during the lockdown. During this
period, the company has on-boarded a significant number of new
out-grower farmers as well as installed and commissioned their new
factory and made their first export sale. The company has a strong
order book for the rest of 2021.
Sanergy Incorporated - The company is receiving strong demand
for its product and is confident that this start-up operation will
expand as budgeted in spite of the impact of the Covid-19 pandemic
in Africa.
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 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 of degraded land with spekboom
providing work for 100 part-time staff and sequestering carbon.
-- 61,203 beehives in the field with positive impact on bee
populations and retention of forests.
-- 2,100+ voluntary low-income savers in micro-pension and loan schemes.
-- 73,124 patient visits between January and December 2020
including 121 safe deliveries, 324 HIV patients receiving care and
counselling, 1,204 infants immunised, 468 mothers receiving
antenatal care and 8,275 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.
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 2021.
DIVID
The company has not declared a dividend the period ended 31
August 2021.
K.S Tan C.J Bertie
Chairman Chief Financial Officer
Issued on: 26 November 2021
Enquiries
Inqo Investments Limited Tel: +27 (0)83 6254069
Chris Bertie, Chief Financial Officer Email: cbertie@acland.co.za
and Chief Operating Officer
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 2021
Six Months ended Six Months ended
31 August 2021 31 August 2020
R R
Revenue 607 688 1 746 170
Cost of Sales (112 692) (240 331)
----------------- -----------------
Gross profit 494 996 1 505 839
Other income 44 773 1 252 416
Personnel expenses (1 700 366) (2 700 788)
Depreciation (1 659 770) (1 743 117)
Loss on disposal of land (82 898) -
Listing expenses (357 806) (528 106)
Professional fees (321 415) (259 942)
Impairment (16 196) -
Other expenses (2 361 669) (2 921 969)
----------------- -----------------
Operating loss (5 960 351) (5 395 667)
Net financing income 122 757 355 206
----------------- -----------------
Finance income 217 629 424 966
Finance costs (94 872) (69 760)
----------------- -----------------
Loss before taxation (5 837 594) (5 040 461)
Taxation credit 776 648 280 415
----------------- -----------------
Loss for the period (5 060 946) (4 760 046)
----------------- -----------------
Loss attributable to:
Equity holders (4 938 836) (3 587 714)
Non-controlling interest (122 110) (1 172 332)
----------------- -----------------
(5 060 946) (4 760 046)
----------------- -----------------
Other comprehensive income:
Other comprehensive income - -
Total comprehensive income for the period (5 060 946) (4 760 046)
----------------- -----------------
Total comprehensive income attributable to:
Equity holders (4 938 836) (3 587 714)
Non-controlling interest (122 110) (1 172 332)
----------------- -----------------
(5 060 946) (4 760 046)
----------------- -----------------
Condensed consolidated statement of financial position
as at 31 August 2021
Reviewed Audited
31 August 28 February
2021 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 cash flows
for the six months ended 31 August 2021
Six months Six months
ended 31 August ended 31 August
2021 2020
R R
Cash flows from operating activities
Net loss before tax (5 837 594) (5 040 461)
Amortisation 2 663 2 215
Depreciation 1 576 747 1 637 795
Depreciation of right of use asset 80 360 103 107
Finance cost on lease liability 29 817 50 055
Impairments and loan write off 44 586 -
Loss on disposal of assets 82 898 22 385
Unrealised forex loss 220 186
Net working capital changes
Inventory 144 988 (100 156)
Trade payables (945 130) (4 323 365)
Trade receivables (2 244) 669 987
Net cash outflow from operating activities (4 602 723) (6 978 438)
----------------- -----------------
Cash flows from investing activities
Acquisition of investments - (699 969)
Acquisition of property, plant and equipment
and intangible assets (162 187) (990 368)
Proceeds from disposal of property, plant
and equipment and intangible assets 5 612 447 185 682
Finance lease payments (100 980) (135 296)
Net cash outflow from investing activities 5 349 280 (1 639 951)
----------------- -----------------
Cash flows from financing activities
Proceeds of shares issued 2 066 862 -
Loans and borrowings raised - 19 370
Net cash inflow from financing activities 2 066 862 19 370
----------------- -----------------
Net movement in cash and cash equivalents 2 813 419 (8 599 019)
Cash and cash equivalents at beginning
of period 992 936 15 671 786
Cash and cash equivalents at end of
period 3 806 355 7 072 767
================= =================
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END
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