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IDQ
IDQ
IDQ - Indequity Group - Abridged Report for the Year Ended 30 September 2008 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
ABRIDGED REPORT FOR THE YEAR ENDED 30 SEPTEMBER 2008 AND NOTICE TO MEMBERS OF
ANNUAL GENERAL MEETING
ABRIDGED CONSOLIDATED BALANCE SHEET
as at
30 Sep 2008 30 Sep 2007
Audited Audited
R`000 R`000
ASSETS
Property and equipment 618 233
Intangible assets 1 234 935
Investment at fair value through
profit and loss 7 862 21 382
Loans receivable 292 1 864
Subrogation and salvage recoveries 2 493 726
Deferred tax asset 958 771
Trade and other receivables 384 474
Cash and cash equivalents 7 471 7 073
Total assets 12 312 33 458
LIABILITIES
Deferred tax liability 736 2 987
Loans payable 1 393 1 809
Preference shareholder`s interest 57 1 008
Insurance contract provisions 3 483 2 437
Tax payable 184 436
Dividends payable 3 316
Accounts payable 3 074 2 626
Total liabilities 8 930 11 619
EQUITY
Share capital 24 24
Share premium 14 159 14 620
Contingency reserve 2 206 1 566
Accumulated loss (8 488) (175)
Ordinary shareholders` interest 7 901 16 035
Minority interest 4 481 5 804
Total equity 12 382 21 839
Total liabilities and equity 21 312 33 458
ABRIDGED CONSOLIDATED INCOME STATEMENT for the year ended
30 Sep 2008 30 Sep 2007
Audited Audited
R`000 R`000
Insurance income 22 146 15 919
Investment income 3 516 3 532
Investment banking and private equity
(expense)/income (7 548) 14 157
Net income 18 114 33 608
Claims incurred 14 009 9 161
Commission paid 1 938 1 112
Employee benefit costs 4 762 3 314
Depreciation 154 115
Amortisation 15 15
Other operating expenses 4 896 4 034
Total operating expenses 25 774 17 751
Finance costs (161) (275)
Profit before taxation (7 821) 15 582
Taxation 1 932 (4 139)
Profit for the period (5 889) 11 443
Attributable to:
Equity holders of the parent (5 773) 11 346
Minority interest (116) 97
Profit for the period (5 889) 11 443
Basic earnings per share (cents) (47,48) 95,95
Diluted earnings per share (cents) (47,48) 95,95
Dividends per share (cents)
- Ordinary - 2
- A-Class preference 19,0 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 1 077 (10 716) 4 471
October 2006
Profit for 11 346 11 346
the year
Transfer to 489 (489) -
contingency
reserve
Ordinary 749 749
shares
issued
Treasury (463) (463)
shares
acquired
Treasury 248 248
shares sold
Dividends (316) (316)
paid
Balance at 14 644 1 566 (175) 16 035
30 September
2007
Treasury (461) (461)
shares
acquired
Loss for the (5 773) (5 773)
year
Transfer to 640 (640) -
contingency
reserve
Dividends (1 900) (1 900)
paid
Balance at 14 183 2 206 (8 488) 7 901
30 September
2008
ABRIDGED CONSOLIDATED CASH FLOW STATEMENT for the year ended
30 Sep 2008 30 Sep 2007
Audited Audited
R`000 R`000
Net cash (used in)/from operating (2 154) 2 521
activities
Net cash from investing activities 5 125 29
Net cash used in financing activities (2 573) (1 969)
Net increase in cash and cash 398 581
equivalents
Cash and cash equivalents at 7 073 6 492
beginning of year
Cash and cash equivalents at end of 7 471 7 073
year
SEGMENT REPORTING - BUSINESS
SEGMENTS
30 Sep 2008 30 Sep 2007
Audited Audited
R`000 R`000
NET INCOME / (LOSS)
Investment 2 872 2 878
Investment Banking and (7 583) 14 361
Private Equity
Insurance 22 825 16 369
Consolidated net income 18 114 33 608
SEGMENT RESULTS
Investments
Segment results (117) 897
Outside shareholder`s 116 (97)
interest
Taxation 12 (94)
Profit for the year 11 706
Investment Banking and
Private Equity
Segment results (8 433) 13 628
Taxation 1 929 (3 865)
Profit for the year 6 504 9 763
Insurance
Segment results 729 1 057
Taxation (9) (180)
Profit for the year 720 877
Consolidated segment results
Segment results (7 821) 15 582
Outside shareholder`s 116 (97)
interest
Taxation 1 932 (4 139)
Profit for the year (5 773) 11 346
SEGMENT REPORTING - BUSINESS
SEGMENTS (continued)
30 Sep 2008 30 Sep 2007
Audited Audited
R`000 R`000
SEGMENT ASSETS
Investments 7 673 10 019
Investment Banking and 2 159 8 747
Private Equity
Insurance 11 448 14 678
Unallocated corporate assets 32 14
Consolidated assets 21 312 33 458
SEGMENT LIABILITIES
Investment 3 185 3 055
Investment Banking and 697 3 134
Private Equity
Insurance 4 811 4 681
Unallocated corporate 237 749
liabilities
Consolidated liabilities 8 930 11 619
SEGMENTAL CAPITAL EXPENDITURE
Investments 316 6
Investment Banking and 153 -
Private Equity
Insurance 384 19
Unallocated corporate capital - -
expenditure
Consolidated capital 853 25
expenditure
SEGMENTAL DEPRECIATION
Investment 32 1
Investment Banking and 12 58
Private Equity
Insurance 110 56
Consolidated depreciation 154 115
SEGMENTAL AMORTISATION
Insurance 15 15
Consolidated amortisation 15 15
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 2007 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
2008 2007
Audited Audited
Headline earnings per share (47,48) 95,95
(cents)
Diluted headline earnings per share (47,48) 95,95
(cents)
COMMENTS ON RESULTS
Starting out as a small company and growing it into a medium sized group over a
number of years makes one appreciate the benefits that come with size. Had
Indequity been smaller, the "paper" loss we suffered by writing down our
investment in African Brick Centre Ltd to the prevailing market price at year-
end, might have caused a lot of damage. Fortunately this investment (although
still large for us as a group) was acquired at a price that allowed us a
significant margin of error. With hindsight our exposure to a single industry
(that we do not know well enough) was too large and the abrupt turn in the
fortunes of the residential construction industry caught even the most
experienced participant off-guard. Still we should have acted sooner and without
emotion.
Fortunately, we can still report that all in all, we made a handsome profit on
the advisory services provided to African Brick`s controlling shareholders and
on our investment held in African Brick. With the Yakani group now taking
control of African Brick, that group is now entering a new phase in its
corporate life. Although we believe that a lot of positive results will flow
from Yakani`s involvement going forward, we believe it prudent to rather exit
from our investment and re-deploy the capital.
Our ongoing business operations continue to grow in leaps and bounds and in
particular the short term insurance business has made significant progress
during the year. The asset management business suffered as assets under
management decreased in line with the significant downward share price movements
experienced in the global equity markets since May 2008. With our investment in
African Brick Centre Ltd liquidated subsequent to year-end, we should see a
stable income pattern returning to our financial statements.
This remarkable performance can largely be attributed to contributions from the
following divisions:
INSURANCE OPERATIONS
These operations have again grown significantly strong during the 2008 financial
year. As usual we provide you with some statistics showing the progress made:
Year Premium Underwritin Contribution Earnings from Number of
income g expenses to carry insurance employees
and claims Insurance operations (Insurance
operations before tax operations)
and group
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 9 161 000 6 507 000 1 056 271 16
000
2008 22 067 14 009 805 8 057 722 728 694 17
527
We intend to continue to both grow and improve this business in size as well as
endeavouring to enhance the quality of risks we underwrite. We are confident
that our efforts will continue to deliver the desired results for our
stakeholders over the longer term.
INVESTMENT MANAGEMENT OPERATIONS
All Indequity`s unit trusts consistently performed in the top quartile (the
general benchmark in the Unit Trust industry) of their respective categories.
Some funds were in and out of the number 1 position and most were in the top 10
for 90% of the time. Indeed a remarkable achievement, BUT investment returns
alone do not generate more income for Indequity. What is needed is an active
marketing campaign of the unit trusts to the institutional and retail markets.
The investment division realized that it did not have the capital base to embark
on a national marketing drive to reach the retail investor. They rather opted to
get their funds listed on so called "platforms". As at year-end our funds are
now listed on the Glacier (Sanlam), PSG Future Wealth, Equinox and Intervest
platforms. This will allow independent financial planners to recommend our unit
trusts as investment options for their clients when they invest in these named
institutions` products. We expect this indirect marketing effort from the
investment division to contribute in growing the assets under management during
the years to come.
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
2008 220 000 000 2 901 028
Our strategy for the next couple of years is to focus on growing the assets
under management.
INVESTMENT BANKING & PRIVATE EQUITY
The ad-hoc nature of this division`s income is not in line with our Group`s core
principals of building a strong annuity base and as such is not the Group`s
primary focus. However, we intend to utilise any opportunities that we may come
across on an ad-hoc basis.
OUR CHAIRMAN
Our Chairman for the past 10 years has indicated the desire to step down from
the role as Chairman of the Board. However Adriaan has kindly agreed to stay on
as a non-executive director until the end of 2009. Adriaan van Jaarsveldt has
supported, guided and provided Indequity, the Board and our employees with
numerous insights and words of wisdom. For this we feel it appropriate to extend
our sincere appreciation to him in this letter to Stakeholders. We are confident
that he will continue to play a role in the future of our group. Nevertheless,
we wish him, and his family only the very best for the future.
PROSPECTS
Looking into the future we are both optimistic and concerned. Optimistic about
Indequity`s business units and growth prospects BUT concerned as to what the
effect of the global credit crunch and economic slowdown may have on us as a
Group, our clients, employees and South Africa as an emerging economy in
general.
We can only advise all concerned to keep the faith, work as clever and
diligently as possible and to live and operate frugally. As a responsible
participant in the South African economy we will do all within our power to
contribute wherever possible.
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
No ordinary dividend has been declared for the year under review.
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 14:00 on
Thursday, 29 January 2009.
ON BEHALF OF THE BOARD
A V van Jaarsveldt L J van Rensburg Johannesburg
Chairman Chief Executive Officer 12 December 2008
Directors: AV van Jaarsveldt* (British), LJ van Rensburg, TC Meyer,
JF Zwarts*, G Williamson* (* 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: 12/12/2008 15:55:20 Produced by the JSE SENS Department.
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