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IDQ
IDQ
IDQ - Indequity Group Limited - Abridged report for the year ended 30 September
2010 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 2010 AND NOTICE TO MEMBERS OF
ANNUAL GENERAL MEETING
ABRIDGED CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 30
SEPTEMBER 2010
30 Sep 30 Sep
2010 2009
Audited Audited
R`000 R`000
ASSETS
Property and equipment 342 430
Intangible assets 530 1 454
Investment at fair value through profit and
loss - 4 560
Subrogation and salvage recoveries 2 705 2 060
Reinsurance portion of insurance contract 20 9
provisions
Deferred tax asset 80 259
Income tax receivable - 210
Loans and receivables 243 769
Cash and cash equivalents 13 767 12 154
Total assets 17 687 21 905
EQUITY
Capital and reserves attributed to the
company`s equity holders
Share capital 24 24
Share premium 13 554 14 049
Contingency reserve 2 758 2 485
Accumulated loss (7 514) (6 946)
Equity attributed to equity holders of the 8 822 9 612
parent
Minority interest 1 100 4 632
Total equity 9 922 14 244
LIABILITIES
Deferred tax liability - 201
Loans payable 219 999
Insurance contract provisions 3 242 2 821
Tax payable 16 3
Dividends payable 3 3
Trade and other payables 4 285 3 634
Total liabilities 7 765 7 661
Total shareholders` equity liabilities 17 687 21 905
ABRIDGED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE
YEAR ENDED 30 SEPTEMBER 2010
30 Sep 30 Sep
2010 2009
Audited Audited
R`000 R`000
Gross written premium 28 555 25 716
Less: reinsurance premium (981) (880)
Net written premium 27 574 24 836
Change in provision for unearned premiums,
net of reinsurance (27) (54)
Net insurance premium revenue 27 547 24 782
Other income 660 259
Investment income 682 843
Revenue from continuing operations 28 889 25 884
Income from unbundled division - 3 609
Investment division income - 2 401
Investment banking and private equity - 1 208
income
Total revenue 28 889 29 493
Claims incurred, net of reinsurance (14 315) (14 841)
Administration Expenses (9 666) (10 842)
Acquisition costs (2 023) (1 871)
Finance costs (34) (159)
Profit/(loss) before taxation 2 851 1 780
Taxation (629) (101)
Profit/(loss) for the year 2 222 1 679
Total comprehensive income for the year 2 222 1 679
Profit/(loss) attributable to:
Equity holders of the parent 2 222 1 821
Minority interest - (142)
2 222 1 679
Earnings attributed to the equity holders
Basic earnings per share (cents) 18.10 15.23
Diluted earnings per share (cents) 18.10 15.23
Dividends per share (cents)
- Ordinary shares - -
- A-Class preference shares - -
ABRIDGED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 SEPTEMBER 2010
Ordinar Preferen Share Non- Accumula Minorit Total
y ce Premium distribut ted loss y
shares shares able and Interes
Contingen t
cy
reserves
R`000 R`000 R`000 R`000 R`000 R`000 R`000
Balance at
30
September
2008 12 12 14 159 2 206 (8 488) 4 481 12 382
Changes in Equity for the
year ended 30 September 2009
Treasury
shares
acquired - - (110) - - - (110)
Total
comprehensi
ve income
for the
year ended
30
September
2009 - - - - 1 821 (142) 1 679
Transfer to
contingency
reserve
- - - 279 (279) - -
Dividends
paid - - - - - - -
Preference
share
profit - - - - - 293 293
Balance at
30
September
2009 12 12 14 049 2 485 (6 946) 4 632 14 244
Changes in Equity for the
year ended 30 September 2010
Treasury
shares
acquired - - (495) - - - (495)
Unbundling
transaction
- - - - (2 517) (3 532) (6 049)
Total
comprehensi
ve income
for the
year ended
30
September
2010 - - - - 2 222 - 2 222
Transfer to
contingency
reserve
- - - 273 (273) - -
Dividends
paid
- - - - - - -
Balance at
30
September
2010 12 12 13 554 2 758 (7 514) 1 100 9 922
ABRIDGED CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED
30 Sep 2010 30 Sep 2009
Audited Audited
R`000 R`000
Net cash (used in)/from operating 2 771 1 570
activities
Net cash from investing activities (378) 3 274
Net cash used in financing activities (780) (161)
Net increase in cash and cash 1 613 4 683
equivalents
Cash and cash equivalents at 12 154 7 471
beginning of year
Cash and cash equivalents at end of 13 767 12 154
year
SEGMENT ANALYSIS - BUSINESS SEGMENTS
30 Sep 2010
No segment analysis has been prepared for the current year
as the group unbundled it`s investments and investment
banking divisions. There is no segmented information
reported to management in the insurance division. The
insurance activities are managed as a whole.
30 Sep 2009
Audited
R`000
REVENUE
Investments 2 401
Investment Banking and Private Equity 1 208
Insurance 25 884
Consolidated net income 29 493
SEGMENT RESULTS
Investments
Segment results (521)
Outside shareholder`s interest 142
Taxation 93
(Loss)/Profit for the year (286)
Investment Banking and Private Equity
Segment results (234)
Taxation 769
Profit/(Loss) for the year 535
Insurance
Segment results 2 535
Taxation (963)
Profit for the year 1 572
Consolidated segment results
Segment results 1 780
Outside shareholder`s interest 142
Taxation (101)
Profit for the year 1 821
SEGMENT REPORTING - BUSINESS SEGMENTS
(continued)
30 Sep
2009
Audited
R`000
SEGMENT ASSETS
Investments 7 991
Investment Banking and Private Equity 578
Insurance 13 319
Unallocated corporate assets 9
Consolidated assets 21 897
SEGMENT LIABILITIES
Investment 2 500
Investment Banking and Private Equity 1 509
Insurance 3 535
Unallocated corporate liabilities 109
Consolidated liabilities 7 653
SEGMENT CAPITAL EXPENDITURE
Investments 19
Investment Banking and Private Equity -
Insurance 304
Consolidated capital expenditure 323
SEGMENT DEPRECIATION
Investment 27
Investment Banking and Private Equity 68
Insurance 108
Consolidated depreciation 203
SEGMENT AMORTISATION
Insurance 7
Investment Banking and Private Equity 2
Consolidated amortisation 9
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 2009 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
2010 2009
Audited Audited
Headline earnings per share 18,10 15,84
(cents)
Diluted headline earnings per share 18,10 15,84
(cents)
COMMENTS ON RESULTS
Following the unbundling of the investments and investment banking divisions by
way of a distribution in specie on 1 October 2009 this is the first year
Indequity Group Limited reports solely as a short-term insurance entity. We are
again delighted to report very pleasing results. Profit before taxation
increased from R1,8 million reported in 2009 to R2,9 million in 2010. More
importantly, this represents a pre-taxation return on equity of 29,6%. Net cash
generated by operating activities also increased from R1,6 million in 2009 to
R2,8 million in 2010.
UNBUNDLING TRANSACTION
Since the group`s listing in 1998 its operations have been categorised into
three distinctive divisions namely: Insurance, Investments and Investment
Banking and Private Equity. The perceived synergies between the three divisions
were never really realised and even cross selling between the different clients
bases did not materialise for a number of different reasons.
One of the main reasons for a company to remain listed is that it has access to
equity capital. The Insurance division will need capital as it grows and in
anticipation of future changes to license requirements in terms of its capital
adequacy requirements.
Having had a critical look at all the group`s operations and divisions it has
become clear that the other two divisions do not have the same capital
requirements and growth prospects as the Insurance division. In order to provide
focus and not confuse potential investors as to what line of business they are
investing in, the controlling shareholders and the Board have considered it
appropriate to split the group into two sections. The Insurance division
remained the only listed part of the group.
INSURANCE OPERATIONS
The group continued it`s emphasis on building and maintaining a superior quality
insurance business. Particular focus was placed during the year under review on
maintaining underwriting discipline and avoiding the temptation of attracting
business at "any" premium in, which has become a highly competitive marketplace.
Strict control over claims expenses delivered the expected result, with claims
as a percentage of net premium written being 51.9% compared to the industry
standard of approximately to the industry standard of approximately 67%.
Administration expenses continued to be higher than desired and management will
specifically address this area in the years ahead.
We wish to illustrate the progress made by this business through the following
statistics:
2003 2004 2005 2006 2007 2008 2009 2010
R`000 R`000 R`000 R`000 R`000 R`000 R`000 R`000
Premium 1 094 3 315 6 961 10 729 15 668 22 068 24 782 28 555
Income
Under-
writing 259 1 149 2 252 4 867 6 507 8 058 9 941 12 551
Profit
Profit -3 541 -1 565 -2 284 298 1 056 729 2 535 2 851
before
tax
Going forward, we intend to continue with the same formula which has brought
about
this successful outcome.
PROSPECTS
We wish to start off on a cautionary note by again reiterating that stakeholders
should always bear in mind the uncertain nature of any insurance business. In
addition, the marketplace has become highly competitive though many new entrants
now competing in the market. Nevertheless, we again wish to emphasize that
Indequity will always remains logical and sane about the risks it takes on, as
well as the premiums it charges in return. Although this may impact on growth
in the short-term we believe that this is the only appropriate long term
strategy for the group and that it will reap the desired benefits over time.
In conclusion, now that group operations have been simplified and with the solid
foundation that has to date been established, management are optimistic about
the group`s future prospects and intend to build on the successes of the past.
AUDIT OPINION
The annual financial statements have been audited by Grant Thornton. Both the
financial statements and the unqualified audit opinion are 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 10:00 on
1 February 2011.
ON BEHALF OF THE BOARD
TC Meyer L J van Rensburg Johannesburg
Chairman Chief Executive Officer 2 December 2010
Directors: TC Meyer*, AV van Jaarsveldt* (British), LJ van Rensburg, JF Zwarts*,
G Williamson* (* non-executive) Company secretary: CM Koekemoer 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
Johannesburg
7 December 2010
Sponsor: KPMG Services (Pty) Ltd
Date: 07/12/2010 10:26:01 Produced by the JSE SENS Department.
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