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Abridged report for the year ended 30 September 2016 and Notice To AGM
Indequity Group Limited
Registration number: 1998/015883/06
Incorporated in the Republic of South Africa
Share code: IDQ
ISIN: ZAE000016606
(“Indequity” or “the Group” or “the Company”)
ABRIDGED REPORT FOR THE YEAR ENDED 30 SEPTEMBER 2016
GROUP STATEMENT OF FINANCIAL POSITION AS AT 30 SEPTEMBER 2016
30-Sep-16 30-Sep-15
Audited Audited
R’000 R’000
ASSETS
Property and equipment 1 017 822
Intangible assets 585 659
Investments 8 879 -
Deferred tax asset 252 -
Subrogation and salvage recoveries 2 263 1 525
Reinsurance portion of insurance contract provisions 53 41
Normal tax receivable - 10
Loans and receivables 234 95
Cash and cash equivalents 25 341 30 693
Total assets 38 624 33 845
EQUITY
Capital and reserves attributed to the Company’s
equity holders
Share capital 23 23
Share premium 11 311 11 311
Retained income 20 051 16 244
Non distributable reserve (336) -
Total equity 31 049 27 578
LIABILITIES
Insurance contract provisions 4 158 3 426
Deferred tax liability 289 137
Normal tax payable 334 -
Dividends payable 211 53
Trade and other payables 2 583 2 651
Total liabilities 7 575 6 267
Total shareholders’ equity and liabilities 38 624 33 845
GROUP STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 30 SEPTEMBER 2016
30-Sep-16 30-Sep-15
Audited Audited
R’000 R’000
Gross written premium 49 069 44 397
Less: reinsurance premium (2 236) (1 779)
Net written premium 46 833 43 158
Change in provision for gross unearned premiums (27) (14)
Net insurance premium earned 46 806 43 144
Other income 103 72
Investment income 778 1 703
Total income 47 687 44 919
Claims incurred, net of reinsurance (19 884) (18 991)
Administration Expenses (12 942) (12 571)
Acquisition costs (3 586) (3 312)
Profit before taxation 11 275 10 045
Taxation (3 157) (2 802)
Profit for the year 8 118 7 243
Fair value adjustment through OCI on available for
(336) -
sale assets, net of tax
Total comprehensive income for the year 7 782 7 243
Profit attributable to: Equity holders of the parent 7 782 7 243
Earnings attributable to the equity holders
Basic earnings per share (cents) 71.18 63.45
Diluted earnings per share (cents) 71.18 63.45
GROUP STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 SEPTEMBER 2016
Non-
Ordinary Preference Share Retained
distributable Total
shares shares Premium Income
reserve
R'000 R'000 R'000 R'000 R'000 R'000
Balance at 1 October 2014 11 12 11411 11436 0 22870
Changes in Equity for the year
ended 30 September 2015
Total comprehensive income for
the year ended 30 September 7243 7243
2015
Transactions with owners of
the company
Dividend paid to shareholders -2435 -2435
Repurchase of shares from
-10 -10
subsidiary
10 000 shares repurchased -90 -90
Balance at 30 September 2015 11 12 11311 16244 0 27578
Changes in Equity for the year
ended 30 September 2016
Profit for the year 8118 8118
Fair value adjustment on
-336 -336
available for sale assets
Transactions with owner of the
company
Dividend paid to shareholders -4311 -4311
Balance at 30 September 2016 11 12 11311 20051 -336 31049
Group Company
2016 2015 2016 2015
Dividend per ordinary share
31.50 17.50 31.50 17.50
(cents)
Dividend per A-class share
5.46 3.33 5.46 3.33
(cents)
GROUP STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 30 SEPTEMBER 2016
30-Sep-16 30-Sep-15
Audited Audited
R’000 R’000
Net cash from operating activities 9 166 6 088
Net cash movement in investing activities (10 365) (441)
Net cash used in financing activities (4 153) (2 508)
Net increase in cash and cash equivalents (5 352) 3 139
Cash and cash equivalents at beginning of year 30 693 27 554
Cash and cash equivalents at end of year 25 341 30 693
SEGMENT ANALYSIS – BUSINESS SEGMENTS
No segment analysis has been prepared as the Group is only involved in insurance
activities, which are managed as a whole. There is no segmented information reported to
management.
NOTES TO THE GROUP ANNUAL FINANCIAL STATEMENTS FOR THE YEAR ENDED
30 SEPTEMBER 2016
ACCOUNTING POLICIES AND BASIS OF PREPARATION
This abridged report has been prepared in accordance with the framework concepts
and the measurement and recognition requirements of International Financial
Reporting Standards (“IFRS”), the SAICA Financial Reporting Guides as issued by
the Accounting Practices Committee and Financial Reporting Pronouncements as
issued by Financial Reporting Standards Council, the JSE Listings Requirements and
the Companies Act (71 of 2008), as amended. This abridged report contains the
information required by IAS 34: Interim Financial Reporting. The financial
information included in this abridged report has been extracted from the audited
financial statements.
The financial statements have been prepared on the historical cost basis.
The accounting policies are in terms of IFRS and have been applied consistently to
all periods presented in this abridged report and agree with those principal
policies used in the preparation of the 30 September 2016 financial statements,
which are consistent with those, applied in the preparation of the 30 September
2015 financial statements. The accounting policies have been applied consistently
by all Group entities.
The abridged report has been prepared by B. Payne CA(SA) – Financial Manager,
under the supervision of TE Vorster CA(SA)(Financial Director).
HEADLINE EARNINGS PER SHARE AND DILUTED HEADLINE EARNINGS PER SHARE
Year ended Year ended
30-Sep-16 30-Sep-15
Audited Audited
Basic earnings per share (cents) 71.18 63.45
- Profit attributable to shareholders of the parent R'000 8 118 7 243
- Weighted average number of ordinary shares in issue 11 405 632 11 415 440
Diluted earnings per share (cents) 71.18 63.45
- Profit attributable to shareholders of the parent R'000 8 118 7 243
- Weighted average number of ordinary shares in issue 11 405 632 11 415 440
Headline earnings per share (cents) 74.5 63.45
- Headline earnings R’000 8 498 7 243
- Weighted average number of ordinary shares in issue 11 405 632 11 415 440
Diluted headline earnings per share (cents) 74.5 63.45
- Headline earnings R’000 8 498 7 243
- Weighted average number of ordinary shares in issue 11 405 632 11 415 440
Reconciliation of net profit attributable to shareholders
of the parent to headline earnings
Net profit attributable to shareholders of the parent R'000 8 118 7 243
Loss on sale of shares held as available for sale assets
402
R'000
- Before tax 518
- Tax -116
Profit on sale of property and equipment R'000 -22
- Before tax -31
- Tax 9
Headline earnings R'000 8 498 7 243
COMMENTS ON RESULTS
We are proud to announce a very pleasing set of financial results for the past
year. Before we expand on these, we again wish to remind our stakeholders of some
of our core principles. Indequity’s main objective is to create significant
shareholder wealth, by utilising the capital resources at our disposal more
effectively than our competitors. We therefore do not measure our progress and our
success by the size of our operation or by the growth or extent of our gross
written premiums (turnover). The primary yardstick we use in measuring our
performance is the return on capital achieved. In the year under review, our pre-
taxation return on capital was an outstanding 45.4% (2015: 47.6%).
INSURANCE OPERATIONS
The domestic short-term insurance market remains extremely competitive and is
currently characterized by high claim ratios and very low profit margins. This
fact, together with the usual upward pressure on claims expenses due to the
weakening Rand and unpredictable weather patterns, resulted in a particularly
challenging period for the insurance industry.
Against this backdrop, we are therefore delighted to report that we managed to
grow profit before tax and investment income by 25.8% from R8.342 million in 2015
to R10.497 in 2016. Profit before taxation increased by 12.2% from R10.045 million
in 2015 to R11.275 million in 2016 and headline earnings per share by 17.4% from
63.45 cents to 74.50 cents. As always, Indequity has remained focused on
attracting quality business at sensible premiums. Consequently, gross written
premium increased by 9.2% (2015: 9%) over the prior year. Indequity managed to
achieve a net claims ratio of 42.5% (2015: 44%), significantly outperforming its
industry sector peers who reported an average claims ratio of approximately 68.5%
(2015: 65%).
We constantly strive to improve efficiencies in our business and we are therefore
pleased to announce a very gratifying profit before tax margin of 23% (2015:
22.4%) of gross written premium for the financial year. This again bears testimony
to the exceptional quality of Indequity’s insurance business.
INVESTMENT ACTIVITIES
Given the uncertainties surrounding the value of the Rand and the potential
downgrade of South Africa to a below investment grade credit rating, we have
decided to invest a portion of the Group’s assets in a combination of US Dollar
denominated cash balances and Rand hedge equities as a measure to protect the
Group against a possible further decline in the value of the Rand. As at year end
R12.653 million has been invested in US Dollar denominated cash balances, Rand
hedge shares, foreign equities and collective investment schemes. Due to the
increase in the Rand’s value before the year end, a foreign currency loss of
R0.615 million has been recorded against the current year’s profit.
RESULTS
As has become customary, we again wish to summarise the progress made by the
insurance business, through the following graph and statistics:
2010 2011 2012 2013 2014 2015 2016
R’000 R’000 R’000 R’000 R’000 R’000 R’000
Net Earned Premium 27 574 31 030 33 841 36 917 39 702 43 158 46 833
Underwriting Profit 13 259 16 381 17 796 19 439 21 006 24 167 26 949
Profit before tax 2 851 5 036 6 094 6 841 8 012 10 045 11 275
PROSPECTS
An excellent foundation has now been established from which the Group can be grown
exponentially, without compromising on the core principles which contributed to
our success. Taking this into account, management believes that it is now
opportune to raise additional capital to facilitate growth. We are therefore
planning to issue additional shares for cash in the near future, in order to
finance our growth plans.
Raising the additional capital, it is likely to impact the Group’s return on
capital in the short to medium term. Benefits from our growth initiatives will
likely only accrue in the longer term. However, as always, we are more than
willing to make short term sacrifices in order to reap significant gains in the
future.
CONCLUSION
Once again, we wish to express our gratitude to all our stakeholders for their
continued support and faith in Indequity and its management over many years. We
also wish to thank our management and employees for their unwavering commitment,
dedication and perseverance, without which such results would not have
materialised.
AUDIT OPINION
This abridged report is extracted from the audited information but is not itself
audited. The directors take full responsibility for the preparation of the
abridged report and the correct extraction of the financial information included
therein from the underlying annual financial statements.
The financial statements have been audited by KPMG Inc. Both the financial
statements and the unqualified audit opinion are available for inspection at the
registered office of Indequity.
FINAL DIVIDEND
The Board has declared a final dividend of 13.5 cents per Indequity ordinary share
(“Ordinary Share”)
(2015 final: 21 cents per Ordinary Share; 2016 interim: 10.5 cents per Ordinary
Share) and 2.34 cents per Indequity A class preference share (“A Class Preference
Share”) (2015 final: 3.64 cents per A Class Preference Share; 2016 interim: 1.82
cents per A Class Preference Share) for the year ended 30 September 2016, to all
ordinary shareholders and A class preference shareholders recorded in the books of
Indequity at the close of business on Friday, 25 November 2016. The Group has a
dividend cover of 2.47 times.
The cash dividend timetable is structured as follows: the declaration date is
Monday, 7 November 2016. The last day to trade cum dividend in order to participate
in the dividend is Tuesday, 22 November 2016. The shares commence trading ex -
dividend from the commencement of business on Wednesday, 23 November 2016 and the
record date is Friday, 25 November 2016. The dividend is to be paid on Monday, 28
November 2016. Share certificates will not be able to be rematerialized or
dematerialized between Wednesday, 23 November 2016 and Friday, 25 November 2016,
both days inclusive.
All ordinary shareholders and A class preference shareholders are hereby advised
that the dividends will be subject to the dividends tax, which was introduced with
effect from 1 April 2012. In accordance with paragraphs 11.17(a)(i) to (x) and
11.17(c) of the JSE Listings Requirements, the following additional information is
provided:
- The dividend has been declared out of income reserves;
- The local dividend tax rate is 15%;
A Class Preference
Ordinary share
Share dividend (cents
dividend (cents per
per A Class Preference
Ordinary Share)
Share)
Gross local dividend amount for
ordinary shareholders/A class
13.5 2.34
preference shareholders exempt from
dividends tax
Local dividend withholding tax
amount for ordinary shareholders /A
2.025 0.351
class preference shareholders to pay
the dividend tax
Net local dividend amount for
ordinary shareholders /A class
11.475 1.989
preference shareholders liable to
pay the dividend tax
- Indequity’s income tax reference number is 9887001718.
- The Group has 11 405 632 Ordinary Shares, 13 170 000 A Class Preference
Shares and 11 669 850 Indequity B class preference shares in issue.
NOTICE TO MEMBERS OF ANNUAL GENERAL MEETING
Notice is hereby given that the tenth annual general meeting of the shareholders
of Indequity Group Limited will be held at the registered office of the company,
First Floor, Cascade House, Constantia Office Park, corner 14th Avenue and Hendrik
Potgieter Road, Constantia Kloof, Johannesburg on Wednesday 07 December 2016 at
11:00.
ON BEHALF OF THE BOARD
JF Zwarts L J van Rensburg
Chairman Chief Executive Officer
Johannesburg
07 November 2016
Directors: AV van Jaarsveldt* (British), LJ van Rensburg, JF Zwarts*,
G Williamson*, TE Vorster (* non-executive) Company secretary: WS de Vries
Registered address: First Floor, Cascade House, Constantia Office Park, cnr 14th
Avenue and Hendrik Potgieter Road, Constantia Kloof, Johannesburg, 1709 Postal
address: PO Box 5433, Weltevredenpark, 1715 Telephone: (+2711) 475-0816 Fax:
(+2711) 475-0877 Website: www.indequity.com
Sponsor: KPMG Services (Pty) Ltd
Date: 07/11/2016 12:06:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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