| Tue 20 Dec 2005, 17:10 | | Indequity - Abridged report on the annual financia |
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Indequity - Abridged report on the annual financial statements and notice of AGM
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 ON THE ANNUAL FINANCIAL STATEMENTS FOR THE YEAR ENDED 30
SEPTEMBER 2005 AND NOTICE TO MEMBERS OF ANNUAL GENERAL MEETING
ABRIDGED GROUP INCOME STATEMENT for the year ended
30 Sep 2005 30 Sep 2004
Audited Audited
R R
Investment income 1 980 164 1 275 949
Investment banking and private equity
income 834 009 1 069 023
Insurance income 7 196 351 3 642 253
Total revenue 10 010 524 5 987 225
Net expenses/(income) attributable to cell
captive underwriting 17 258 (433 046)
Underwriting expenses and claims incurred
- proprietary underwriting 4 709 391 2 166 125
Employee benefit costs 4 212 193 3 354 594
Depreciation and amortisation 271 011 271 430
Other expenses 2 938 047 2 441 127
Total expenses 12 147 900 7 800 230
Loss before taxation (2 137 376) (1 813 005)
Taxation 342 671 592 352
Outside shareholders" interest in private
equity investments" losses (154 121) 113 716
Basic earnings (1 948 826) (1 106 937)
Headline earnings per share (cents) (16,01) (9,10)
Basic earnings per share (cents) (16,01) (9,10)
Fully diluted headline earnings per share (16,01) (9,10)
(cents)
Number of shares
- in issue 12 170 000 12 170 000
- weighted average 12 170 000 12 170 000
- fully diluted 12 170 000 12 170 000
ABRIDGED GROUP BALANCE SHEET as at
30 Sep 2005 30 Sep 2004
Audited Audited
R R
ASSETS
Non-current assets 9 682 678 1 333 183
Current assets 8 803 632 9 806 450
Receivables 500 846 464 037
Deferred tax 2 375 549 1 924 332
Current tax asset 674 674
Inventory 66 539 36 472
Cash and cash equivalents 5 860 024 7 380 935
Total assets 18 486 310 11 139 633
EQUITY AND LIABILITIES
Share capital and premium 14 109 766 14 109 766
Non-distributable reserve 1 407 757 832 731
Accumulated loss (10 186 844) (7 876 816)
Ordinary shareholders" funds 5 330 679 7 065 681
Preference shareholders" interest 10 420 184 3 830 520
Minority shareholders" interest (1 062 990) (1 542 111)
Non-current liabilities 1 481 379 869 907
Technical insurance provisions 1 594 271 534 736
Current liabilities 722 787 380 900
Trade payables 485 139 380 900
Provisions 237 648 0
Total equity and liabilities 18 486 310 11 139 633
Net asset value per ordinary share (cents) 43,80 58,06
ABRIGED STATEMENT OF CHANGES IN EQUITY for the year ended
30 Sep 2005 30 Sep 2004
Audited Audited
R R
Balance at the beginning of the year
7 065 681 7 666 100
Net loss for the year (1 948 826) (1 106 937)
Transfer to contingency reserve 213 824 506 518
Balance at end of year 7 330 679 7 065 681
ABRIDGED CASH FLOW STATEMENT for the year ended
30 Sep 2005 30 Sep 2004
Audited Audited
R R
Cash flows relating to operating
activities (787 031) (1 603 846)
Cash flows relating to investing
activities (5 973 733) 514 018
Cash flows relating to financing
activities 5 239 853 (225 179)
Net decrease in cash and cash equivalents (1 520 911) (1 315 007)
Cash and cash equivalents - beginning of
year 7 380 935 8 695 942
Cash and cash equivalents - end of year
5 860 024 7 380 935
ACCOUNTING POLICIES
The accounting policies followed in preparing these financial statements comply
in all material respects with South African Statements of Generally Accepted
Accounting Practice and are consistent with those of the previous financial
year.
AUDIT OPINION
The annual financial statements have been audited by Dannhauser Inc. Their
unqualified audit opinion is available for inspection at the registered office
of Indequity.
COMMENTS ON RESULTS
The accounting profession has over the years made significant progress in
developing accounting standards that will assist in preparing financial
statements that reflect the financial status of a company. Further development
is still needed to accurately reflect a company"s intrinsic value. The Indequity
group illustrates this point, as the value built up over the past couple of
years is not reflected by the current set of financial statements.
Looking at the reported results we cannot blame stakeholders who feel that this
group is not making any headway. If we consider the income statement of the
group for the past couple of years the losses incurred seem never ending, the
published net asset value per share decreases year after year and cash resources
continue to dwindle. We will attempt to communicate our views on the value that
has been created during the past 3 years and our level of optimism on the future
of the group with this letter.
DIVISIONAL RESULTS
INSURANCE OPERATIONS
These operations are by far the group"s largest, most exciting, but also most
challenging businesses by far. It is the largest contributor to the group"s
gross profit and carries most of the group"s overhead costs. Growth during the
past year has been exceptional and we believe that it will continue in this
fashion for the foreseeable future. As an indication of the progress made and
challenges faced we provide you with some statistics:
Year Premium Underwriting Contribution Number of
income expenses and to carry employees
claims Insurance (Insurance
operations operations)
and group
overheads
2003 1 094 125 835 197 258 928 4
2004 3 314 903 2 166 125 1 148 778 8
2005 6 961 283 4 709 391 2 251 892 10
2006 14 000 000 9 100 000 4 900 000 15
(Budget)
As we write this letter, R12m of the budgeted R14m in premium income is already
practically guaranteed by our current client base.
At this point we would like to discuss the positive effect that the above-
mentioned progress made has on the Indequity group as a whole. Readers may
recollect that we took the strategic decision in 2002 to focus on building the
group"s annuity income at the expense of short-term profitability. From the
above it is clear that this strategy is now starting to pay dividends.
"But you are still making losses" a number of readers may argue. Albeit correct,
we must draw readers" attention to the cash flow statement and in particular the
"Cash flow relating to operating activities". This is the only place in the
reported financial statements where readers can get a glimpse of the actual
progress made. We are pleased to report that we have now reached the critical
point where cash is no longer utilised by operations but instead is now starting
to generate surplus cash.
Year Cash utilised by operating
activities
2002 3 355 381
2003 4 341 860
2004 1 603 846
2005 (After first 6 months) 639 854
2005 (Full year) 787 031
None of the progress made by the Indequity Group would have been possible
without the tireless effort, commitment and perseverance of our CEO, Lourens
Jansen van Rensburg and his team in the insurance operations.
INVESTMENT MANAGEMENT OPERATIONS
It is with great pleasure that we welcome David Botha as the Managing Director
of the investment management operations. David has more than 15 years stock
broking and private client asset management experience gained at one of the top
international firms. He initially joined us in December 2004 as Managing
Director of the unit trust division and only assumed his current position on 1
October 2005.
These operations are aimed at providing private clients with R5 million plus
investment portfolios with an equity advisory service similar in nature to the
private banking experience. Other products offered to these affluent clients
include our own range of unit trusts, living annuities, endowment policies as
well as pension and provident fund investments.
Assets under management have grown exponentially during the past 3 years and we
believe this positive trend will continue during the next couple of years.
Year Assets under Investment
management management income
2003 65 000 000 931 734
2004 100 000 000 790 325
2005 156 000 000 1 524 172
These operations are in comparison much smaller than the insurance operations,
but function with a lower head count and generates annuity income that has more
stable characteristics.
ALEXECOVET (PTY) LTD
We have an effective equity investment of 42.97% in this private company. The
company shares Indequity"s premises and interaction between its capable general
manager, Colleen Shimwell and Indequity occurs on a daily basis. Growth in the
South African market has however been limited to 10% year on year. Efforts are
being made to penetrate new markets both locally and internationally without
incurring exorbitant costs. The company is seen as a "cash cow" and the steady
income that it produces is used to repay the loans made by Indequity and its
equity partners.
PROSPECTS
As indicated earlier in this letter, we are very optimistic about the future of
the Indequity group and all of its current operations. As the business grows
there will however continuously still be the need for additional capital. This
is due to the statutory minimum capital requirements to be able to operate as a
short-term insurer and investment manager registered with the Financial Services
Board. In addition the insurance company will need substantial new capital
inflows going forward, both as a result of the strong growth in premium income
and expected new statutory requirements due for introduction early in 2007.
The board is continuously evaluating the options available to fund these
requirements.
DIVIDEND
No 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 15:00 on 30
January 2006.
ON BEHALF OF THE BOARD
A V van Jaarsveldt L J van Rensburg Johannesburg
Chairman Chief Executive Officer 20 December 2005
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: 20/12/2005 05:10:25 PM Produced by the JSE SENS Department
