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IDQ
IDQ
IDQ - Indequity Group - Annual Report For The Year Ended 30 September 2007
And Notice To Members Of Annual General Meeting
Indequity Group Limited
Registration number: 1998/015883/06
Incorporated in the Republic of South Africa
"Indequity" or "the Group" or "the company"
Share code: IDQ
ISIN: ZAE000016606
ANNUAL REPORT FOR THE YEAR ENDED 30 SEPTEMBER 2007 AND NOTICE TO MEMBERS OF
ANNUAL GENERAL MEETING
ABRIDGED CONSOLIDATED BALANCE SHEET
as at
30 Sep 2007 30 Sep 2006
Audited Audited
R`000 R`000
ASSETS
Property and equipment 233 330
Intangible assets 935 943
Investment at fair value through
profit and loss 21 382 8 713
Loans receivable 1 864 613
Subrogation and salvage recoveries 726 393
Deferred tax asset 771 2 369
Income tax receivable - 3
Inventory 78 34
Trade and other receivables 396 529
Cash and cash equivalents 7 073 6 492
Total assets 33 458 20 419
LIABILITIES
Deferred tax liability 2 987 538
Loans payable 1 809 2 222
Preference shareholder`s interest 1 008 1 587
Insurance contract provisions 2 437 1 759
Tax payable 436 319
Accounts payable 2 942 2 501
Total liabilities 11 619 8 926
EQUITY
Share capital 24 24
Share premium 14 620 14 086
Contingency reserve 1 566 1 077
Accumulated loss (175) (10 716)
Ordinary shareholders` interest 16 035 4 471
Minority interest 5 804 7 022
Total equity 21 839 11 493
Total liabilities and equity 33 458 20 419
ABRIDGED CONSOLIDATED INCOME STATEMENT for the year ended
30 Sep 2007 30 Sep 2006
Audited Audited
R`000 R`000
Insurance income 15 919 10 906
Investment income 3 532 3 298
Investment banking and private equity 14 157 876
income
Net income 33 608 15 080
Claims incurred 9 161 5 206
Commission paid 1 112 656
Employee benefit costs 3 314 4 293
Depreciation 115 123
Amortisation 15 10
Other operating expenses 4 034 3 044
Total operating expenses 17 751 13 332
Finance costs (275) (271)
Profit before taxation 15 582 1 477
Taxation (4 139) (620)
Profit for the period 11 443 857
Attributable to:
Equity holders of the parent 11 346 692
Minority interest 97 165
Profit for the period 11 443 857
Basic earnings per share (cents) 95,95 5,69
Diluted earnings per share (cents) 95,95 5,69
Dividends per share (cents)
- Ordinary 2 -
- A-Class preference 0,4 -
Share Contingen Accumulated Total
capital cy and loss
and Non-
premium distribut
able
reserves
R`000 R`000 R`000 R`000
Balance at 1 14 110 1 194 (10 136) 5 168
October 2005
Minority (1 454) (1 454)
interest
adjustment
Profit for 692 692
the year
Recoupment 65 65
of minority
losses
Transfer to
contingency 389 (389) -
reserve
Reclassifica (506) 506
tion of non-
distributabl
e reserve -
Balance at 14 110 1 077 (10 716) 4 471
30 September
2006
Ordinary 749 749
shares
issued
Treasury (463) (463)
shares
acquired
Treasury 248 248
shares sold
Profit for 11 346 11 346
the year
Transfer to 489 (489) -
contingency
reserve
Dividends (316) (316)
paid
Balance at 14 644 1 566 (175) 16 035
30 September
2007
ABRIDGED CONSOLIDATED CASH FLOW STATEMENT for the year ended
30 Sep 2007 30 Sep 2006
Audited Audited
R`000 R`000
Net cash from operating activities 2 521 1 044
Net cash from / (used in) investing 29 (258)
activities
Net cash used in financing activities (1 969) (1 561)
Net increase /(decrease) in cash and 581 (1 298)
cash equivalents
Cash and cash equivalents at 6 492 7 790
beginning of year
Cash and cash equivalents at end of 7 073
year 6 492
SEGMENT REPORTING - BUSINESS
SEGMENTS
30 Sep 2007 30 Sep 2006
Audited Audited
R`000 R`000
NET INCOME
Investment 2 878 3 032
Investment Banking and 14 131 832
Private Equity
Insurance 16 599 11 216
Consolidated net income 33 608 15 080
SEGMENT RESULTS
Investments
Segment results 897 733
Outside shareholders`
interest in private equity (97) (101)
income
Taxation (94) (538)
Profit for the year 706 94
Investment Banking and
Private Equity
Segment results 13 398 446
Outside shareholders` (64)
interest in private equity -
income
Taxation (3 865) -
Profit for the year 9 533 382
Insurance
Segment results 1 287 298
Taxation (180) (82)
Profit for the year 1 107 216
Consolidated segment results
Segment results 15 582 1 477
Outside shareholders`
interest in private equity (97) (165)
income
Taxation (4 139) (620)
Profit for the year 11 346 692
SEGMENT REPORTING - BUSINESS
SEGMENTS (continued)
30 Sep 2007 30 Sep 2006
Audited Audited
R`000 R`000
SEGMENT ASSETS
Investments 10 019 11 556
Investment Banking and 8 748 404
Private Equity
Insurance 14 678 8 268
Unallocated corporate assets 13 190
Consolidated assets 33 458 20 418
SEGMENT LIABILITIES
Investment 3 054 2 734
Investment Banking and 3 134 774
Private Equity
Insurance 4 681 4 883
Unallocated corporate 750 534
liabilities
Consolidated liabilities 11 619 8 925
SEGMENTAL CAPITAL EXPENDITURE
Investments 6 -
Insurance 19 75
Unallocated corporate capital - -
expenditure
Consolidated capital 25 75
expenditure
SEGMENTAL DEPRECIATION
Investment 1 2
Investment Banking and 58 -
Private Equity
Insurance 56 121
Consolidated depreciation 115 123
SEGMENTAL AMORTISATION
Insurance 15 10
Consolidated amortisation 15 10
ACCOUNTING POLICIES AND BASIS OF PREPARATION
The abridged group financial statements have been prepared in accordance with
the recognition and measurement requirements of the International Financial
Reporting Standards ("IFRS") and the interpretations issued by the International
Accounting Standards Board ("IASB"), and the disclosure requirements of IAS 34 -
Interim Financial Reporting and are in compliance with the Companies Act. The
abridged consolidated financial statements are presented in South African Rand.
The abridged consolidated financial statements have been prepared on the
historical cost basis except for financial instruments classified as at fair
value through profit or loss assets which are recognized at fair value.
The accounting policies have been applied consistently to all periods presented
in these abridged consolidated financial statements and agree with those
principal policies used in the preparation of the 30 September 2006 annual
financial statements. The accounting policies have been applied consistently by
all Group entities. Certain comparative amounts have been reclassified to
conform with the current year`s presentation.
HEADLINE EARNINGS PER SHARE AND DILUTED HEADLINE EARNINGS PER SHARE
Year ended Year ended
30 30
September September
2007 2006
Audited Audited
Headline earnings per share 95,95 5,69
(cents)
Diluted headline earnings per share 95,95 5,69
(cents)
COMMENTS ON RESULTS
It is now almost 10 years since we have taken the Indequity Group to a listing
on the JSE in November 1998. For some companies a listing signals the final
chapter on a long history of growth and profitability for others it is just the
start on a journey to become a respected contributor to the South African
economy and society at large. We believe Indequity to be one of the latter.
On listing day in 1998 the management of Indequity was entrusted with a "start-
up" capital amount of R2 million. Today we have just over R20 million to use as
capital in the various operations that we run. We have introduced innovative
short term insurance products for the professional and high net worth private
market. We have built an asset management business that provides personalized
service to a select number of wealthy clients who have come to trust us with the
management of their family`s assets.
Both the insurance and asset management businesses have taught us patience over
the years (much easier as you get older). We learnt that it takes time to
establish and build these two lines of business, with the reward being a stable
income stream for those that can persevere. In the end it all comes down to the
quality and dedication of the people that form part of the team. Without the
support of our current and past employees we would never have been able to come
this far.
The financial year to September 2007 truly was an exceptional one for the group.
Turnover increased from R15 million in 2006 to R33,6 million in 2007 whilst
headline earnings per share increased by 1586% to 95,95c per share. More
importantly the Group`s net asset value grew from 42,5 cents per share to 126,2
cents per share which represents an increase of 197%.
This remarkable performance can largely be attributed to contributions from the
following divisions:
INSURANCE OPERATIONS
As anticipated these operations are now starting to make a meaningful
contribution to the group`s financial results. We continue to see strong growth
in the premium income and expect this to continue into the future. Although the
overall claims ratio increased from 48,5% in 2006 to 58,5% in 2007, we are still
very pleased with this result, as it is still well below industry averages. As
an indication of the progress made and challenges faced in our insurance
operations, we provide you with some statistics:
Year Premium Underwrit Contribution Earnings Number of
income ing to carry from employees
expenses Insurance insurance (Insurance
and operations operations operations)
claims and group before tax
overheads
2003 1 094 125 835 197 258 928 (3 541 287) 4
2004 3 314 903 2 166 125 1 148 778 (1 565 224) 8
2005 6 961 283 4 709 391 2 251 892 (2 283 682) 10
2006 10 729 5 861 955 4 867 488 297 920 14
443
2007 15 668 10 273 5 394 877 1 286 639 16
006 129
During the period under review we introduced a commercial insurance product that
caters for the professional practice market. This was done primarily as a result
of requests received from our private clients, most of whom are in private
professional practice. As expected, the claims ratio on this product continues
to be in line with our current product offering.
INVESTMENT MANAGEMENT OPERATIONS
Come 15 December 2007 our unit trusts will have been in existence for 3 years.
This will mark an opportunity to embark on an active marketing campaign for
these unit trusts to the general public, broking community and LISPs. Until a
unit trust has not proven itself over the medium term period it is not regarded
as a serious contender by investors and their advisors. We are pleased to report
that our unit trusts have also done exceptionally well compared to our peers
during this initial 3 year period (some funds are currently in the top position
and all of them in the top 25%) and we expect stronger inflows of funds in the
next year from this source.
We have continued to grow our assets under management during the past year with
our continued focus on the management of private family wealth. Although not yet
reflected in the assets under management we are pleased to report that we have
added a further R200 million in assets during the month of October 2007. This
occurred as a result of a single transaction following months of commitment and
hard work. None of the income earned on these assets are included in the income
for the financial period under review.
Year Assets under Investment
management as at management
year- end income
2003 65 000 000 931 734
2004 100 000 000 790 325
2005 156 000 000 1 500 380
2006 243 000 000 2 238 259
2007 300 000 000 2 553 563
Our strategy for the next couple of years is to focus on growing the assets
under management.
INVESTMENT BANKING & PRIVATE EQUITY
This must be the division where you need the most patience, a clear strategy and
a measure of luck. This year was an exceptionally BIG year for us in this
division. Not only did we earn handsome fees but we have added a well run,
established family business to our portfolio.
We must emphasize that the income from these sources are ad-hoc and most
unpredictable. It is for precisely this reason that we shied away from these
kinds of operations from 2002 until now. Although we will continue to build our
annuity income operations, we will now start to slowly venture back into the ad-
hoc income world.
Alexecovet (Pty) Ltd (Trading as Eco-Vet)(effective holding of 43,04%)
The new packaging and a younger company profile introduced in Aug/Sep 2006 are
starting to show positive results. Sales levels are once again on the up and
income should start to improve. During the year our general manager, Colleen
Shimwell resigned to join her husband in his business. We were sad to lose her
but wish her and her family a most prosperous future.
It so happened that we had a most capable replacement within Eco-Vet allowing a
smooth hand-over. Martie Kalmeier was appointed as general manager during March
2007 and has already proven herself on a number of occasions. We wish her and
her team all the best for the future.
African Brick Centre Limited (effective holding of 3.4%)
African Brick Centre Limited is a group that has been in operation since 1943.
It started as a clay brick manufacturer but has now expanded to include a strong
retail arm that supplies the building industry with all that is required to
build the shell of a property. They have recently also expanded their range to
include tiles and sanitary ware.
Although our effective equity holding is small in percentage terms, it
constitutes a large monetary stake in this R320 million plus (market
capitalisation) company. We are also confident that in years to come this
investment will provide us not only with a steady stream of dividends but also
substantial capital appreciation. The company is in the trusted hands of Beno
van Graan (CEO)(Third generation Van Graan) and Bernard Reyneke (Managing
Director).
For those of our shareholders who wish to follow this company its JSE code is
ABK.
FUTURE CHALLENGES AND PROSPECTS
At the start of the 2008 financial year, we are as optimistic about the
Indequity Group as never before. We now have a core of healthy business
operations, good investments, most capable management and a growing number of
loyal employees, all working together to build a bright future for all involved.
With growth comes a sense of responsibility to all our stakeholders and our
fellow South Africans. It is only in a country in which all of its citizens have
hopes and dreams to aspire to, that we can grow a world-class operation. Even on
a small scale we can all play a role in creating this kind of atmosphere,
environment and opportunities.
AUDIT OPINION
The annual financial statements have been audited by Grant Thornton. Their
unqualified audit opinion is available for inspection at the registered office
of Indequity.
DIVIDEND
Interim dividends of 2 cents per ordinary share and 0,4 cents per A-Class
preference share were declared on 28 September 2007.
NOTICE TO MEMBERS OF ANNUAL GENERAL MEETING
Notice is hereby given that the annual general meeting of members of Indequity
Group Limited will be held at the registered office, First Floor, Cascade House,
corner 14th Avenue and Hendrik Potgieter Road, Constantia Kloof, at 15:00 on 30
January 2008.
ON BEHALF OF THE BOARD
A V van Jaarsveldt L J van Rensburg Johannesburg
Chairman Chief Executive Officer 14 December 2007
Directors: AV van Jaarsveldt* (British), LJ van Rensburg, TC Meyer, JF Zwarts*
(* non-executive) Company secretary: S le Roux Registered address: First
Floor, Cascade House, Constantia Office Park, cnr 14th Avenue and Hendrik
Potgieter Road, Constantia Kloof, 1709 Postal address: PO Box 5433,
Weltevredenpark, 1715 Telephone: (+2711) 475-0816 Fax: (+2711) 475-0877
Website: www.indequity.com
Date: 14/12/2007 16:52:27 Produced by the JSE SENS Department.
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