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IDQ - Indequity Group Limited - Abridged report for the year ended 30 September
2009 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 2009 AND NOTICE TO MEMBERS OF
ANNUAL GENERAL MEETING
ABRIDGED CONSOLIDATED BALANCE SHEET
as at
30 Sep 2009 30 Sep 2008
Audited Audited
R`000 R`000
ASSETS
Property and equipment 430 618
Intangible assets 1 454 1 234
Investment at fair value through
profit and loss 4 560 7 862
Loans receivable 372 292
Subrogation and salvage recoveries 2 060 2 493
Deferred tax asset 259 958
Trade and other receivables 607 384
Cash and cash equivalents 12 154 7 471
Total assets 21 896 21 312
LIABILITIES
Deferred tax liability 201 736
Loans payable 999 1 393
Preference shareholder`s interest - 57
Insurance contract provisions 2 812 3 483
Tax payable 3 184
Dividends payable 3 3
Trade and other payables 3 634 3 074
Total liabilities 7 652 8 930
EQUITY
Share capital 24 24
Share premium 14 049 14 159
Contingency reserve 2 485 2 206
Accumulated loss (6 946) (8 488)
Ordinary shareholders` interest 9 612 7 901
Minority interest 4 632 4 481
Total equity 14 244 12 382
Total liabilities and equity 21 896 21 312
ABRIDGED CONSOLIDATED INCOME STATEMENT for the year ended
30 Sep 2009 30 Sep 2008
Audited Audited
R`000 R`000
Insurance income 25 002 22 146
Earned premiums net of reinsurance 24 782 22 068
Commission income 39 47
Other income 181 31
Investment division income 3 272 3 516
Interest received 948 720
Dividends received - 20
Realised income - marketable - -
securities
Unrealised surplus/(loss) on 27 (125)
investments
Asset management fee income 2 297 2 901
Investment banking and private equity
(expense)/income 1 219 (7 548)
Investment banking and other income 16 39
Income from private equity investment 747 936
Unrealised surplus/(loss) on 456 (8 523)
investments
Net income 29 493 18 114
Claims incurred, net of reinsurance 14 841 14 009
Commission paid 1 871 1 938
Employee benefit costs 5 779 4 762
Depreciation 203 154
Amortisation 9 15
Other operating expenses 4 851 4 896
Total operating expenses (27 554) (25 774)
Finance costs (159) (161)
Profit before taxation 1 780 (7 821)
Taxation (101) 1 932
Profit for the period 1 679 (5 889)
Attributable to:
Equity holders of the parent 1 821 (5 773)
Minority interest (142) (116)
Profit for the period 1 679 (5 889)
Basic earnings per share (cents) 15.23 (47,48)
Diluted earnings per share (cents) 15.23 (47,48)
Dividends per share (cents)
- Ordinary shares - -
- A-Class preference shares - 19,0
ABRIDGED STATEMENT OF CHANGES IN EQUITY for the year ended 30 September 2009
Ordinar Preferen Share Non- Accumula Minori Total
y ce Premiu distribut ted loss ty
shares shares m able and Intere
Contingen st
cy
reserves
R`000 R`000 R`000 R`000 R`000 R`000 R`000
Balance at 1 14 620 1 566 (175) 21 839
October 2007 12 12 5 804
Treasury (461) (461)
shares
acquired
Loss for the (5 773) (5 889)
year (116)
Transfer to 640 (640) -
contingency
reserve
Dividends (1 900) (1 900)
paid
Preference (1 185)
share profit (1
185)
Redemption (22)
of share (22)
capital
Balance at 14 159 2 206 (8 488) 12 382
30 September 12 12 4 481
2008
Treasury (110) (110)
shares
acquired
Profit/(Loss 1 821 1 679
) for the (142)
year
Transfer to 279 (279) -
contingency
reserve
Dividends - -
paid
Preference 293
share profit 293
Balance at 14 049 2 485 (6 946) 14 244
30 September 12 12 4 632
2009
ABRIDGED CONSOLIDATED CASH FLOW STATEMENT for the year ended
30 Sep 2009 30 Sep 2008
Audited Audited
R`000 R`000
Net cash (used in)/from operating 1 570 (2 154)
activities
Net cash from investing activities 3 274 5 125
Net cash used in financing activities (161) (2 573)
Net increase in cash and cash 4 683 398
equivalents
Cash and cash equivalents at 7 471 7 073
beginning of year
Cash and cash equivalents at end of 12 154 7 471
year
SEGMENT ANALYSIS - BUSINESS
SEGMENTS
30 Sep 2009 30 Sep 2008
Audited Audited
R`000 R`000
REVENUE
2 872
Investments 2 401
(7 583)
Investment Banking and
Private Equity 1 208
22 825
Insurance 25 884
18 114
Consolidated net income 29 493
SEGMENT RESULTS
Investments
(117)
Segment results (521)
116
Outside shareholder`s 142
interest
12
Taxation 93
11
(Loss)/Profit for the year (286)
Investment Banking and
Private Equity
(8 433)
Segment results (234)
1 929
Taxation 769
(6 504)
Profit/(Loss) for the year 535
Insurance
729
Segment results 2 535
(9)
Taxation (963)
720
Profit for the year 1 572
Consolidated segment results
(7 821)
Segment results 1 780
116
Outside shareholder`s 142
interest
1 932
Taxation (101)
(5 773)
Profit for the year 1 821
SEGMENT REPORTING - BUSINESS
SEGMENTS (continued)
30 Sep 2009 30 Sep 2008
Audited Audited
R`000 R`000
SEGMENT ASSETS
7 673
Investments 7 991
Investment Banking and 2 159
Private Equity 578
Insurance 13 319 11 448
Unallocated corporate assets 9 32
21 312
Consolidated assets 21 897
SEGMENT LIABILITIES
3 185
Investment 2 500
Investment Banking and 697
Private Equity 1 509
Insurance 3 535 4 811
Unallocated corporate 109 237
liabilities
8 930
Consolidated liabilities 7 653
SEGMENT CAPITAL EXPENDITURE
316
Investments 19
Investment Banking and 153
Private Equity -
Insurance 304 384
853
Consolidated capital 323
expenditure
SEGMENT DEPRECIATION
Investment 27 32
Investment Banking and
Private Equity 68 12
Insurance 108 110
Consolidated depreciation 203 154
SEGMENT AMORTISATION
15
Insurance 7
Investment Banking and -
Private Equity 2
15
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 2008 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
2009 2008
Audited Audited
Headline earnings per share 15,84 (47,48)
(cents)
Diluted headline earnings per share 15,84 (47,48)
(cents)
COMMENTS ON RESULTS
Despite the challenging economic conditions that prevailed for much of the year,
Indequity is pleased to report very satisfactory results. Profits before
taxation increased to R1,8 million which represents a return on ordinary
shareholders funds of 23%.
More importantly, cash and cash equivalents increased by R4,7 million as a
result of the liquidation of the Group`s interest in African Brick Centre
Limited as well as a pleasing contribution from the Group`s operations.
INSURANCE OPERATIONS
The insurance business continued to grow strongly over the past year. As
predicted, the past efforts in establishing a superior quality business are now
bearing fruit. Management`s focus in enhancing the quality of risks it
underwrites together with strict cost management, and in particular claims
costs, has resulted in this business being able to report outstanding results.
Profit before taxation of the separate company financial statements of Indequity
Specialised Insurance Limited increased to R3,4 million which represents a pre-
tax return on equity of 49,1%.
However, we hasten to caution that this remarkable performance is unlikely to be
repeated annually, especially by an insurance company. Nevertheless, this
business fired on all cylinders during this year and importantly, we managed to
avoid any large catastrophic incidents. Again we wish to illustrate the
progress made by this business through the following statistics:
Year Premium Underwritin Contribution Earnings Number of
income g expenses to carry from employees
and claims Insurance insurance (Insurance
operations operations operations)
and group before tax
overheads per segment
report
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
2009 24 782 14 841 191 9 940 882 2 535 206 19
073
Going forward, we intend to continue with the same formula which has brought
about
this successful outcome.
INVESTMENT MANAGEMENT OPERATIONS
The exceptionally challenging global equity markets also took their toll on
Indequity`s investment business. Assets under management decreased as a result
of the significant downward share price movements in global markets.
Consequently, asset management fee income decreased by 20,8 % to R2,4 million.
On the positive side, there were few withdrawals of funds by clients as clients
generally have an understanding of and appreciation for these extraordinary
circumstances. Furthermore this also bears testimony to the faith that clients
have in Indequity`s abilities to continue to add significant value to their
portfolios as conditions normalize. It is noteworthy that Indequity`s unit
trusts continued to perform in line with those of its peers. In addition, as
Indequity`s funds are now listed on various so called "platforms" we are
confident that this will assist us to grow assets under management during the
years to come.
INVESTMENT BANKING & PRIVATE EQUITY
The positive contribution by this division occurred largely as a result of the
final liquidation of the group`s stake in African Brick Centre Limited. Much
has already been said in the past about the group`s investment in this entity.
However, we wish to add that the difficulty in comprehending this transaction
was exacerbated by the required accounting treatment of this investment.
Mainly as a result of this investment, Indequity reported a profit before
taxation in 2007 of R15,6 million and a pre-tax loss of R7,8 million in 2008.
Obviously, the net result was a significantly profitable one for the group.
Seeing that this stake has now finally been liquidated, the results of the group
will henceforth reflect the ongoing more stable business operations and should
be easier to comprehend.
PROSPECTS
With the global economic crisis seemingly receding, we are confident that this
will have a positive impact on group operations as a whole. We intend to
continue to focus on building superior quality business operations and to build
on the success of the past.
We will continually strive to enhance, optimise and simplify operations and
group structures for the long-term benefit of our stakeholders.
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
29 January 2010.
ON BEHALF OF THE BOARD
A V van Jaarsveldt L J van Rensburg Johannesburg
Chairman Chief Executive Officer 18 December 2009
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
Johannesburg
Sponsor: KPMG Services (Pty) Ltd
Date: 18/12/2009 16:38:02 Supplied by www.sharenet.co.za
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