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INDEQUITY GROUP LIMITED - Abridged report for the year ended 30 September 2015

Release Date: 08/12/2015 10:00
Code(s): IDQ     PDF:  
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Abridged report for the year ended 30 September 2015

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 2015

GROUP STATEMENT OF FINANCIAL POSITION AS AT 30 SEPTEMBER 2015

                                                       30 Sep 2015   30 Sep 2014
                                                           Audited       Audited
                                                             R’000         R’000

ASSETS

Property and equipment                                         822           701
Intangible assets                                              659           535
Subrogation and salvage recoveries                           1 525         1 707
Reinsurance portion of insurance contract provisions            41            45
Normal tax receivable                                           10             -
Loans and receivables                                           95            54
Cash and cash equivalents                                   30 693        27 554
Total assets                                                33 845        30 596

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

Share capital                                                   23            23
Share premium                                               11 311        11 411
Retained income                                             16 244        11 436
Total equity                                                27 578        22 870

LIABILITIES

Insurance contract provisions                                3 426         4 629
Deferred tax liability                                         137             -
Normal tax payable                                               -           201
Dividends payable                                               53            26
Trade and other payables                                     2 651         2 870
Total liabilities                                            6 267         7 726

Total shareholders’ equity and liabilities                  33 845        30 596

GROUP STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 30 SEPTEMBER 2015

                                                             30 Sep 2015   30 Sep 2014
                                                                 Audited       Audited
                                                                   R’000         R’000

Gross written premium                                            44 397         41 220
Less: reinsurance premium                                        (1 779)        (1 518)
Net written premium                                              43 158         39 702
Change in provision for gross unearned
premiums                                                            (14)           (26)
Net insurance premium earned                                     43 144         39 676

Other income                                                         72             76
Investment income                                                 1 703          1 200
Total income                                                     44 919         40 952


Claims incurred, net of reinsurance                             (18 991)       (18 696)
Administration Expenses                                         (12 571)       (11 259)
Acquisition costs                                                (3 312)        (2 985)

Profit before taxation                                            10 045         8 012
Taxation                                                         (2 802)        (2 273)
Profit for the year                                                7 243         5 739

Total comprehensive income for the year                           7 243          5 739

Profit attributable to:
    Equity holders of the parent                                  7 243          5 739

Earnings attributable to the equity holders
Basic earnings per share (cents)                                  63.45          49.76
Diluted earnings per share (cents)                                63.45          49.76

       GROUP STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 SEPTEMBER 2015

                    Ordinary     Preference        Share          Retained          Total
                     shares        shares         Premium          Income

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

Balance at
1 October 2013
                        11            12          12 129           8 160          20 312

Changes in Equity for the year ended 30 September 2014

Total
comprehensive
income for the                                                     5 739           5 739
year ended 30
September 2014
Dividend paid
to shareholders                                                   (2 463)        ( 2 463)

146 643
Treasury shares
purchased by                                         (718)                          (718)
subsidiary
Balance at 30
September 2013
                           11            12         11 411        11 436          22 870


Changes in Equity for the year ended 30 30 September 2015


Total
comprehensive
income for the
year ended 30
September 2015
Divi
                                                                       7 243          7 243
Dividend paid
to shareholders
                                                                      (2 435)        (2 435)
Repurchase of
shares from
subsidiary                                            (10)                              (10)
10 000 shares
repurchased                                           (90)                              (90)



Balance at 30
September 2015            11             12         11 311             16 244         27 578


       Dividends paid during the financial year           Group                           Company
                                                   2015            2014            2015         2014
       Dividend per ordinary share (cents)        17.50           17.50           17.50         17.50
       Dividend per A-class share (cents)          3.33            3.33            3.33           3.33

 GROUP STATEMENT OF CASH FLOWS FOR THE YEAR ENDED

                                               30 Sep 2015     30 Sep 2014
                                                   Audited         Audited
                                                     R’000           R’000

Net cash from operating activities                   6 088            5 957
Net cash movement in investing activities             (441)           (183)
Net cash used in financing activities               (2 508)         (3 158)



Net increase in cash and cash equivalents            3 139            2 616

Cash and cash equivalents at beginning of
year                                                27 554           24 938

Cash and cash equivalents at end of year            30 693           27 554



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 2015

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 2015 financial statements,
which are consistent with those, applied in the preparation of the 30 September
2014 financial statements. The accounting policies have been applied consistently
by all Group entities.

The abridged report has been prepared by Z. Olivier (BCom - US) – Financial Accountant,
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 September   30 September
                                                               2015           2014
                                                            Audited        Audited

Basic earnings per share (cents)                              63.45          49.76
   - Profit attributable to shareholders of the
      parent R'000                                            7 243          5 739
   - Weighted average number of ordinary shares
      in issue                                           11 415 440     11 531 334

Diluted earnings per share (cents)                            63.45          49.76
   - Profit attributable to shareholders of the
      parent R'000                                            7 243          5 739
   - Weighted average number of ordinary shares
      in issue                                           11 415 440     11 531 334

Headline earnings per share (cents)                           63.45          49.94
   - Headline earnings R’000                                  7 243          5 760
   - Weighted average number of ordinary shares
      in issue                                           11 415 440     11 531 334

Diluted headline earnings per share (cents)                   63.45          49.94
   - Headline earnings R’000                                  7 243          5 760
   - Weighted average number of ordinary shares
      in issue                                           11 415 440     11 531 334

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

Net profit attributable to shareholders of the
parent R'000                                                  7 243          5 739
Loss/(Profit) on sale of property and equipment
R’000                                                             -             21
Before tax                                                        -             29
Tax                                                               -             (8)
Headline earnings R'000                                       7 243          5 760




COMMENTS ON RESULTS

As another year has passed, we are pleased to announce an exceptionally pleasing set of
financial results once again. 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 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 47.6% (2014: 43.5%).

INSURANCE OPERATIONS

The domestic short-term insurance market has become increasingly competitive and is
therefore currently characterized by high claim ratios and very low profit margins.
This fact, together with the usual upward pressure on claims expenses 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 taxation by 25% from R8 million in 2014 to R10 million in 2015 and
headline earnings per share by 27.1% from 49.94 cents to 63.45 cents. As always,
Indequity has remained focused on attracting quality business at sensible premiums.
Consequently, gross written premium increased by 9% (2014:7.7%) from the prior year.
Indequity managed to achieve a net claims ratio of 44% (2014:47.1%), significantly
outperforming its industry sector peers who reported an average claims ratio of
approximately 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 22.4% (2014:19.4%) of
gross written premium for the financial year. This again bears testimony to the
exceptional quality of Indequity’s insurance business.

Indequity’s results over the past seven years can be summarised as follows:


                         2009     2010     2011     2012     2013     2014      2015


                         R’000    R’000    R’000    R’000    R’000    R’000    R’000
    Net Earned Premium
                         24 836   27 574   31 030   33 841   36 917   39 702   43 158
    Underwriting
    Profit               9 995    13 259   16 381   17 796   19 439   21 006   24 167

    Profit before tax    2 535    2 851    5 036    6 094    6 841    8 012   10 045




PROSPECTS

It is indeed a great honour to look back on how far Indequity has come since its early
days and to reflect on the value that has been created for all our stakeholders. In
particular, it is noteworthy that the Indequity share price has increased from 145
cents per share in October 2010 to 1000 cents per share recently, which reflects an
annual compound growth of 47.14% over the past five years. Going forward, Indequity
will remain true to the principles that have contributed to its success to date. We
will continue to seek ways to enhance our value proposition and the efficiencies in our
business, in order to continue delivering exceptional value for our stakeholders.


CONCLUSION

Once again, we wish to express our gratitude to 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 21 cents per Indequity ordinary share
(“Ordinary Share”)
(2014: 17.5 cents per Ordinary Share) and 3.64 cents per Indequity A class
preference share (“A Class Preference Share”) (2014: 3.33 cents per A Class
Preference Share) for the year ended 30 September 2015, to all ordinary
shareholders and A class preference shareholders recorded in the books of Indequity
at the close of business on Friday, 15 January 2016. The Group has a dividend cover
of 2.52 times.

The cash dividend timetable is structured as follows: the declaration date is
Tuesday, 8 December 2015. The last day to trade cum dividend in order to
participate in the dividend is Friday, 8 January 2016. The shares commence trading
ex -dividend from the commencement of business on Monday, 11 January 2016 and the
record date is Friday, 15 January 2016. The dividend is to be paid on Monday, 18
January 2016. Share certificates will not be able to be rematerialised or
dematerialised between Monday, 11 January 2016 and Friday, 15 January 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%;



                               Ordinary share dividend    A Class Preference Share
                               (cents per Ordinary        dividend
                               Share)                     (cents per A Class
                                                          Preference Share)
   Gross local dividend                 21.00000                   3.63733
   amount for ordinary
   shareholders/A class
   preference shareholders
   exempt from dividends tax
   Local dividend                       3.15000                    0.54560
   withholding tax amount
   for ordinary shareholders
   /A class preference
   shareholders to pay the
   dividend tax
   Net local dividend amount            17.85000                   3.09173
   for ordinary shareholders
   /A class 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 ninth 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 20 January 2016, at 11:00.

ON BEHALF OF THE BOARD

JF Zwarts                   L J van Rensburg
Chairman                    Chief Executive Officer

Johannesburg
8 December 2015

Directors: AV van Jaarsveldt* (British), LJ van Rensburg, JF Zwarts*,
G Williamson*, TE Vorster (* non-executive) Company secretary: Z Olivier
Registered address:   First Floor, Cascade House, Constantia Office Park, cnr 14 th
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

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