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INDEQUITY GROUP LIMITED - Abridged report for the year ended 30 September 2012

Release Date: 12/12/2012 15:00
Code(s): IDQ     PDF:  
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Abridged report for the year ended 30 September 2012

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 2012

GROUP STATEMENT OF FINANCIAL POSITION AS AT 30 SEPTEMBER 2012

                                                       30 Sep 2012   30 Sep 2011
                                                           Audited       Audited
                                                             R’000         R’000

ASSETS

Property and equipment                                         500           465
Intangible assets                                              532           534
Subrogation and salvage recoveries                           2 147         2 263
Reinsurance portion of insurance contract provisions            35            23
Deferred tax asset                                              21            66
Loans and receivables                                           91           306
Cash and cash equivalents                                   20 142        15 987
Total assets                                                23 468        19 644

EQUITY
Capital and reserves attributed to the company’s
equity holders

Share capital                                                   24            24
Share premium                                               13 702        13 633
Contingency reserve                                              -         3 104
Retained income/(Accumulated loss)                           3 220        (4 178)
Equity attributed to equity holders of the parent           16 946        12 583
Non-controlling interest                                         -         1 100
Total equity                                                16 946        13 683

LIABILITIES

Insurance contract provisions                                4 168         3 292
Tax payable                                                     82           142
Dividends payable                                                3             3
Trade and other payables                                     2 269         2 524
Total liabilities                                            6 522         5 961

Total shareholders’ equity and liabilities                  23 468        19 644



GROUP STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 30 SEPTEMBER 2012

                                                       30 Sep 2012   30 Sep 2011
                                                           Audited       Audited
                                                             R’000         R’000

Gross written premium                                       35 384        32 196
Less: reinsurance premium                                   (1 543)       (1 166)
Net written premium                                         33 841        31 030
Change in provision for unearned premiums, net of
reinsurance                                                    (16)           (4)
Net insurance premium revenue                               33 825        31 026

Other income                                                   150           504
Investment income                                              950           711
Total revenue                                               34 925        32 241


Claims incurred, net of reinsurance                        (16 045)      (14 649)
Administration Expenses                                     (9 966)      (10 124)
Acquisition costs                                           (2 820)       (2 430)
Finance costs                                                    -            (2)

Profit before taxation                                       6 094         5 036
Taxation                                                    (1 800)       (1 354)
Profit for the year                                          4 294         3 682

Total comprehensive income for the year                      4 294         3 682

Profit attributable to:
Equity holders of the parent                                 4 294         3 682
Non-controlling interest                                         -             -
                                                             4 294         3 682

Earnings attributable to the equity holders
Basic earnings per share (cents)                             36.12         31.33
Diluted earnings per share (cents)                           36.12         30.98
Headline earnings per share (cents)                          35.61         31.33
Fully diluted headline earnings per share (cents)            35.61         30.98

Dividends per share (cents)
- Ordinary shares                                                -            -
- A-Class preference shares                                      -            -


GROUP STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 SEPTEMBER 2012

                  Ordinary   Preference     Share           Non-      Retained          Non-       Total
                    shares       shares   Premium  distributable       Income/   Controlling
                                                             and  (Accumulated      interest
                                                     Contingency          loss)
                                                        reserves
                     R’000        R’000     R’000          R’000         R’000         R’000       R’000


Balance at
1 October 2010          12           12    13 554          2 758        (7 514)        1 100       9 922

Changes in Equity for the year ended 30
September 2011

Total
comprehensive
income for the
year ended 30
September 2011           -            -         -              -         3 682             -       3 682
                         
Transfer to
contingency
reserve                  -            -         -            346          (346)            -           -
                         
Ordinary shares
distributed by
Employee Share           
Incentive
Purchase Scheme          -            -        79              -             -             -          79

Balance at
30 September
2011                    12           12    13 633          3 104        (4 178)        1 100      13 683


Changes in Equity for the year ended 30
September 2012

Total
comprehensive
income for the
year ended 30
September 2012          -             -         -              -         4 294             -       4 294
                         
Transfer from
contingency
reserve                 -             -         -         (3 104)        3 104             -           -
                         
Ordinary shares
distributed by
Employee Share
Incentive
Purchase Scheme          -            -        69              -             -             -          69

Redemption of
preference
shares
                         -            -         -              -             -        (1 100)     (1 100)

Balance at 30
September 2012          12           12    13 702              -         3 220             -      16 946


GROUP STATEMENT OF CASH FLOWS FOR THE YEAR ENDED

                                                    30 Sep 2012      30 Sep 2011
                                                        Audited          Audited
                                                          R’000            R’000

Net cash from operating activities                        5 231            2 616
Net cash from investing activities                           24             (177)
Net cash used in financing activities                    (1 100)            (219)


Net increase in cash and cash equivalents                 4 155            2 220

Cash and cash equivalents at beginning of
year                                                     15 987           13 767

Cash and cash equivalents at end of year                 20 142           15 987


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 2012

ACCOUNTING POLICIES AND BASIS OF PREPARATION

The consolidated annual financial statements from which these abridged financial
statements have been derived have been prepared in accordance with the framework
concepts and the measurement and recognition requirements of International
Financial Reporting Standards (“IFRS”), the AC500 Standards issued by the
Accounting Practices Board, the JSE Listings requirements and the Companies Act No.
71 of 2008, as amended. These abridged financial statements contain the information
required by IAS 34: Interim Financial Reporting.

The annual financial statements have been prepared on the historical cost basis
except for financial instruments classified as at fair value through profit or loss
which are recognised at fair value.

The accounting policies are in terms of IFRS and have been applied consistently to
all periods presented in these financial statements and agree with those principal
policies used in the preparation of the 30 September 2011 annual financial
statements. The accounting policies have been applied consistently by all Group
entities.

The abridged report has been prepared by D. Deoraj (Bcom Accounting UJ) –
Financial Accountant, under the supervision of TE Vorster (Financial Director).


HEADLINE EARNINGS PER SHARE AND DILUTED HEADLINE EARNINGS PER SHARE

                                                         Year ended     Year ended
                                                       30 September   30 September
                                                               2012           2011
                                                            Audited        Audited

Basic earnings per share (cents)                              36.12          31.33
- Net profit attributable to shareholders of
  the parent R'000                                            4 294          3 682
- Weighted average number of ordinary shares
  in issue                                               11 886 817     11 753 333

Diluted earnings per share (cents)                            36.12          30.98
- Net profit attributable to shareholders of
  the parent R'000                                            4 294          3 682
- Weighted average number of ordinary shares
  in issue                                               11 886 817     11 886 817

Headline earnings per share (cents)                           35.61          31.33
- Headline earnings R’000                                     4 233          3 682
- Weighted average number of ordinary shares
  in issue                                               11 886 817     11 753 333

Diluted headline earnings per share (cents)                   35.61          30.98
- Headline earnings R’000                                     4 233          3 682
- Weighted average number of ordinary shares
  in issue                                               11 886 817     11 886 817


Reconciliation of Weighted Average Number of
Shares used in diluted earnings

Weighted average number of shares                        11 886 817     11 753 333
Weighted effect of shares in Indequity Group
Limited Share Incentive Scheme                                    -        133 484
Diluted weighted average number of shares                11 886 817     11 886 817

Reconciliation of net profit attributable to
shareholders of the parent to headline earnings

Net profit attributable to shareholders of the
parent R'000                                                 4 294           3 682
Profit on sale of property and equipment less
taxation (R’000)                                               (61)              -
Headline earnings R'000                                      4 233           3 682


COMMENTS ON RESULTS

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
only by the growth in our premiums (turnover). Consequently, 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 44.5% (2011: 50.8%). Also
noteworthy is the fact that operations generated cash of R6.1 million for the year
(2011: R3.1 million).

INSURANCE OPERATIONS

Conditions in the short term insurance market remained tough, with a focus by most
insurers on business retention rather than expansion. The industry has also seen a
substantial increase in claims over the last few months, notably an increase in
weather related claims. In light of these market factors, we are pleased to
announce that our insurance operations managed to grow its profit before tax by
21%, from R5 million in 2011 to R6.1 million in 2012.

Indequity has remained focused on attracting the “right” business at sensible
premiums, consequently gross written premium increased by 10% over the prior year.
Indequity managed to maintain its exceptional net claims ratio on 47%. This should
be compared with industry averages of approximately 58% for the same period-a truly
outstanding performance!

We constantly strive to improve efficiency in our business and we are therefore
pleased to announce a very pleasing profit before tax margin of 17% (2011:16%) for
the financial year. This can be compared to the negative profit margins reported by
some general insurers on their personal lines businesses over the last few years.
This bears testimony to the exceptional quality of Indequity’s insurance business.


                      2004     2005     2006     2007     2008     2009     2010     2011     2012


                      R’000    R’000    R’000    R’000    R’000    R’000    R’000    R’000    R’000

Net Earned Premium    3 315    6 961   10 729   15 668   22 068   24 836   27 574   31 030   33 841

Underwriting Profit   1 149    2 252    5 523    6 507    8 059    9 995   13 259   16 381   17 796

Profit before tax    -1 565   -2 284      298    1 056      729    2 535    2 851    5 036    6 094


PROSPECTS

As far as the general personal lines and business insurance operations are
concerned, we anticipate the business environment to be increasingly competitive
with various new entrants to the market. We anticipate growth to remain under
pressure as the same business considerations as outlined above will continue to be
pertinent. We again commit to place emphasis on building a quality long-term
sustainable business and as a result we will continue to follow the same
disciplined approach in these operations, that we had in the past. As always, we
are constantly considering and implementing innovative methods to increase the
efficiency of our business.

In order to continue to deliver superior growth, we remain hard at work to develop
novel, innovative products to compliment the Group’s existing product offering.
Indequity received no income from new products during the year under review, as
only test marketing of these products was done. Based on the outcome thereof,
enhancements were made to our new product offerings and we are confident that we
will soon be able to report a positive contribution to group results from these.

CONCLUSION

We again wish to express our gratitude to our stakeholders for their continued
support and faith in Indequity and its management over many years. We trust that
their patience will be well rewarded over time.

We also wish to thank our management and employees for their commitment, dedication
and perseverance, without which such outstanding results would not have
materialised.

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.

The auditor’s report does not necessarily cover all of the information contained in
this abridged report. Shareholders are therefore advised that in order to obtain a
full understanding of the nature of the auditor’s work they should obtain a copy of
that report together with the accompanying financial information from the
registered office of the company.

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
22 January 2013.


ON BEHALF OF THE BOARD

JF Zwarts                  L J van Rensburg
Chairman                   Chief Executive Officer

Johannesburg
5 December 2012


Directors: AV van Jaarsveldt* (British), LJ van Rensburg, JF Zwarts*,
G Williamson*, TE Vorster (* non-executive) Company secretary: D Deoraj 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


Johannesburg
12 December 2012
Sponsor: KPMG Services (Pty) Ltd

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