| Tue 23 Apr 2002, 0:00 | | Indequity Group Limited - Interim Results |
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Indequity Group Limited
("Indequity" or "the Group")
(Incorporated in the Republic of South Africa)
Regsitration number: 1998/015883/06
Share Code: IDQ
ISIN: ZAE000016606
Summarised group income
statement for the
6 Months 6 Months % Year
ended 31 ended 31 Moveme ended
March 2002 March 2001 nt 30
Unaudited Unaudited Septemb
(revised)* er 2001
R R Audited
R
Investment income 2 897 687 1 956 298 4 614
384
- Interest received 164 130 418 188 659 681
- Dividends received 48 700 66 392 112 748
- Realised income - 91 244 295 065 402 813
marketable securities
- Unrealised income - 1 778 901 702 645 2 560
marketable securities 436
- Income from private 799 622 474 008 878 706
equity investments
- Other income 15 090 - -
Investment banking 808 069 1 300 400 1 319
income 503
- Fees received 24 997 1 300 400 1 306
518
- Other income 783 072 - 12 985
Insurance income 4 145 229 5 887 316 11 502
407
- Net premiums earned 3 656 082 5 012 731 9 402
698
- Commission received 86 926 123 804 218 514
- Fees received 23 259 166 091 764 385
- Interest received 497 386 584 690 1 116
810
- Unrealised loss - (118 424) - -
marketable securities
Total revenue 7 850 985 9 144 014 (14%) 17 436
294
Expenses attributable to 1 733 681 2 809 100 5 740
cell holders 451
Net underwriting 2 030 102 2 206 430 3 684
expenses and claims 151
incurred
Finance charges 109 302 11 661 26 640
Operating expenses 2 486 115 2 455 228 4 817
624
Total expenses 6 359 200 7 482 419 (15%) 14 268
866
Profit before taxation 1 491 785 1 661 595 (10%) 3 167
428
Taxation (371 579) (398 642) (832
327)
Profit from ordinary 1 120 206 1 262 953 2 335
activities 101
Minority shareholders'
interest in private 297 514 130 689 212 436
equity investments'
losses/profits
Net income attributable 1 417 720 1 393 642 2% 2 547
to ordinary shareholders 537
Dividends per share
(cents)
- paid 3,75 - 4,25
- declared - 4,25 3,75
Headline earnings per 9,85 11,47 (14%) 19,75
share (cents)
Earnings per share 9,85 11,47 (14%) 17,07
(cents)
Fully diluted headline 9,85 9,68 2% 17,69
earnings per share
(cents)
Number of shares
- in issue 14 390 000 12 400 000 13 400
000
- weighted average (up 14 398 333 12 150 000 12 900
to 31 March 2002) 000
- fully diluted 14 390 000 14 400 000 14 400
000
Summarised group
balance sheet as at
31 March 31 March 30
2002 2001 September
Unaudited Unaudited 2001
(revised)* Audited
R R R
ASSETS
Non-current assets 13 084 9 828 113 11 455
221 944
Property, plant and 842 561 1 033 774 937 583
equipment
Intangible assets 434 576 457 319 445 307
Goodwill - 308 462 -
Other investments 6 602 530 3 018 104 4 768 000
Loan to Indequity Group
Limited Employee Share 5 204 554 5 010 454 5 305 054
Incentive Trust
Current assets 18 670 18 901 332 19 131
503 790
Marketable securities 6 182 100 2 607 831 2 163 120
Receivables 933 094 432 657 1 004 752
Cash and cash 11 555 15 860 844 15 963
equivalents 309 918
Total assets 31 754 28 729 445 30 587
724 734
EQUITY AND LIABILITIES
Capital and reserves
Share capital 14 390 14 400 14 400
Share premium 19 342 19 353 800 19 353
732 800
Non distributable 15 514 - 6 118
reserve
Retained income 4 541 267 3 430 188 3 667 390
Shareholders' funds 23 913 22 798 388 23 041
903 708
Preferred shareholders' 3 607 080 2 562 367 3 559 063
interest
Minority shareholders' (845 077) (465 840) (547 586)
interest
Non-current liabilities 1 503 531 979 893 1 206 308
Interest-bearing 362 017 171 440 217 729
borrowings
Negative goodwill 553 924 808 453 673 405
Deferred tax 587 590 - 315 174
Technical insurance 1 566 521 1 529 991 1 485 684
provisions
Net outstanding claims 1 551 1 529 991 1 475 271
377
Net unearned premiums 15 144 - 10 413
Current liabilities 2 008 766 1 324 646 1 842 557
Trade payables 1 314 155 710 695 812 947
Accruals and provisions 118 498 43 654 520 000
Current tax liabilities 576 113 570 297 509 610
Total equity and 31 754 28 729 445 30 587
liabilities 724 734
Net asset value per 1.66 1,84 1.72
ordinary share (cents)
Statement of changes in
equity
Share Retained Non Total
capital income distributable
and reserves
premium
Balance as at 1 October 19 368 3 667 390 6 118 23 041
2001 200 708
Share buy back (11 078) (11 078)
Net income after
taxation for the 6 1 417 720 1 417 720
months ended 31 March
2002
Dividends paid (final
for the year ended 30 (540 085) (540 085)
September 2001)
Transfer to contingency (9 396) 9 396
reserve
Apportioned to 5 638 5 638
preference shareholders
Balance as at 31 March 19 357 4 541 267 15 514 23 913
2002 122 903
Summarised cash flow
statement as at
31 March 31 March 30
2002 2001 September
Unaudited Unaudited 2001
R R Audited
R
Cash flow to operating (462 499) (160 450) (1 307
activities 458)
Cash flow to investment (4 013 (7 502 (7 164
activities 518) 473) 025)
Cash flow from/(to) financing 67 408 (5 843 (4 931
activities 437) 803)
Net decrease in cash and cash (4 408 (13 506 (13 403
equivalents 609) 360) 286)
Cash and cash equivalents - 15 963 29 367 29 367
beginning of period/year 918 204 204
Cash and cash equivalents - 11 555 15 860 15 963
end of period/year 309 844 918
* The comparative figures (March 2001) have been adjusted to reflect
the following changes in the accounting policy adopted in the annual
financial statements for the year ended 30 September 2001:
the investment in Alexecovet (Pty) Ltd is accounted for as a
consolidated subsidiary and no longer as an associate company; and
the carrying amount of negative goodwill is adjusted by the reduction
in the contingency reserve which existed on the date of acquisition of
Indequity Specialised Insurance Limited. Previously negative goodwill
were recognised as income over a maximum period of twenty years.
The interim financial report has been compiled in accordance with AC
127, Interim financial reporting.
Comments on results
Against the backdrop of a difficult economic climate, volatile equity
markets and general instability which prevailed for much of the period under
review, the Group is largely satisfied with the results for the six months
ended 31 March 2002. Turnover decreased by 14% to R7,8 million whilst the
Group managed to reduce expenses by 15% to R6,4 million. The net result,
being net income attributable to ordinary shareholders of R1,4 million, is
in line with the results reflected in the comparative period. However, as a
result of an increase in the number of ordinary shares in issue to 14 390
000, headline earnings per share reflects a decrease of 14% to 9,85 cents.
Divisional results
Investments
The investments division continued to perform admirably. In accordance with
AC 133, investments in listed equities are recorded at market value with the
corresponding movement being reflected in the income statement as either
income or expense. The results of the Group's private equity investments are
consolidated.
It is also noteworthy that at 31 March 2002, the Group's investment
portfolio (including investments held by the Group's insurance company), at
cost, consisted of 54,6% in the money market, 26,3% in listed equities,
14,1% in Proper Group Ltd, and 5,0% in private equity investments.
The decision to invest a larger portion of cash resources in listed
equities, in particular proved to have been a correct decision. Indequity
(SA) Capital Ltd, through which the largest portion of the Group's listed
investments are held, showed an annualised pre-tax return for the period of
30, 6% (Year to September 2001: 25,9%).
The Group's strategic investment in Proper Group Ltd was increased to an
effective stake of 18,57%. Although this investment also contributed
positively to earnings, the long-term prospects of our investment are
obviously directly linked to the performance of the company. The Group
noted, with concern, the profit warning which this company released during
March 2002. However, management is confident that problem areas will receive
the required attention and that they will be rectified.
The Group's private equity investment in Alexecovet (Pty) Ltd continued to
deliver negative results. Consequently, operational changes have been
implemented and the international expansion has been put on hold. The Group
remains confident that, once these measures are fully effective, it will
receive an acceptable return on its investment. The Group's remaining
private equity investment, Cyan Communications (Pty) Ltd, is still in its
early growth phase. Whilst the Group's investment in Cyan is currently
immaterial in relation to the remainder of the Group, management is positive
about the medium to long-term prospects of Cyan.
Investment Banking
As indicated in our previous report to shareholders, the fortunes of this
division are strongly correlated to the general state of equity markets. The
decline in profits can therefore largely be attributed to this fact.
Nevertheless, the fact that this division managed to hold its own in such
trying market conditions, is testimony to management's commitment and
innovation.
Insurance
Management's focus during this period under review was directed mainly at
the expansion of the Group's insurance license into a full general insurance
license (as opposed to a cell captive license only). We are pleased to
confirm that this license was granted to Indequity Specialised Insurance Ltd
during March 2002.
Unfortunately as a result of this focus, management was unable to focus
their attention fully on the growth of its current book of business, which
explains the decrease in premiums and profitability of this division.
Nevertheless, the Group believes that it is now well positioned to offer a
more diverse product range and to be able to serve our clients better in
future.
Prospects
Although the results for the period under review reflect no growth in
profits, we remain committed to our objective to deliver above average
earnings growth over the longer term. But, looking forward, we do not expect
a predictable, stable pattern of increases every six months. Fluctuating
market conditions will continue to make it extremely difficult for the
Group, in all three of its divisions, to achieve the stability and
predictability of some businesses in other industries. However, the Group
intends to continue to build for the future and is continually striving to
increase the contribution of recurring and annuity income in order to create
a more stable earnings base.
Appointment of director
The Group has appointed Mr. Johan Zwarts as a non-executive director with
effect from 13 December 2001. We welcome him and look forward to his
contribution to the Group.
Dividends
In accordance with the Group's current cash requirements, in order to
increase the capital base of Indequity Specialised Insurance Ltd, no
dividend is declared for the current period.
On behalf of the board
L J van Rensburg T C Meyer Johannesburg
Chief Executive Director 23 April 2002
Officer
Directors: A V van Jaarsveldt* (British), L J van Rensburg, T C Meyer, B J
Slabbert*, J F 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: (+27 11) 475-0816
Fax: (+27 11) 475-0877 Website: www.indequity.com
