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Abridged report for the year ended 30 September 2017
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 2017
GROUP STATEMENT OF FINANCIAL POSITION AS AT 30 SEPTEMBER 2017
30-Sep-17 30-Sep-16
Audited Audited
R’000 R’000
ASSETS
Property and equipment 2 058 1 017
Intangible assets 825 585
Investments 3 985 8 879
Deferred tax asset 250 252
Subrogation and salvage recoveries 2 095 2 263
Reinsurance portion of insurance contract provisions 42 53
Loans and receivables 145 234
Cash and cash equivalents 45 781 25 341
Total assets 55 181 38 624
EQUITY
Capital and reserves attributed to the Company’s equity
holders
Share capital 25 23
Share premium 23 268 11 311
Retained income 24 086 20 051
Non distributable reserve -292 -336
Total equity 47 087 31 049
LIABILITIES
Insurance contract provisions 5 187 4 158
Deferred tax liability 352 289
Normal tax payable 39 334
Dividends payable 215 211
Trade and other payables 2 301 2 583
Total liabilities 8 094 7 575
Total shareholders’ equity and liabilities 55 181 38 624
GROUP STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 30 SEPTEMBER 2017
30-Sep-17 30-Sep-16
Audited Audited
R’000 R’000
Gross written premium 53 956 49 069
Less: reinsurance premium -1 847 -2 236
Net written premium 52 109 46 833
Change in provision for gross unearned
premiums 12 -27
Net insurance premium earned 52 121 46 806
Other income 59 103
Investment income 2 331 778
Total income 54 511 47 687
Gross claims incurred -24 763 -19 896
Reinsurance recoveries -11 12
Administration Expenses -15 467 -12 942
Acquisition costs -3 924 -3 586
Profit before taxation 10 346 11 275
Taxation -2 812 -3 157
Profit for the year 7 534 8 118
Fair value adjustment through OCI on available for sale
44 -336
assets, net of tax
Total comprehensive income for the year 7 578 7 782
Profit attributable to:
Equity holders of the parent 7 578 7 782
Earnings attributable to the equity holders
Basic earnings per share (cents) 58.92 71.18
Diluted earnings per share (cents) 58.92 71.18
GROUP STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 SEPTEMBER 2017
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 2015 11 12 11 311 16 244 - 27 578
Changes in Equity for the year
ended 30 September 2016
Total comprehensive income for
the year ended 30 September
2016 8 118 8 118
Fair value adjustment on
available for sale assets -336 -336
Transactions with owners of
the company
Dividend paid to shareholders -4 311 -4 311
Balance at 30 September 2016 11 12 11 311 20 051 -336 31 049
Changes in Equity for the year
ended 30 September 2017
Share issue (1 700 000 shares
at R10.00 each) 2 16 998 17 000
Profit for the year
7 534 7 534
Fair value adjustment on
available for sale assets 44 44
Transactions with owner of the
company
Dividend paid to shareholders
-3 499 -3 499
Treasury shares purchased by
*
subsidiary -5 041 -5 041
Balance at 30 September 2017 13 12 23 268 24 086 -292 47 087
* Amounts less than R1 000.
Group Company
2017 2016 2017 2016
Dividend per ordinary share
22.25 31.50 22.25 31.50
(cents)
Dividend per A-class share
3.92 5.46 3.92 5.46
(cents)
GROUP STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 30 SEPTEMBER 2017
30-Sep-17 30-Sep-16
Audited Audited
R’000 R’000
Operating activities
Cash generated/(utilised) by operations 9 388 10 070
Interest received 1 771 1 858
Dividend received 295 53
Taxation paid -3 027 -2 815
Net cash movement in operating activities 8 427 9 166
Investing activities
Proceeds from the disposal of property and equipment 90 191
Acquisition of property and equipment -1 567 -586
Acquisition of intangible assets -330 -
Acquisition of shares -19 364 -12 505
Proceeds from the disposal of shares 24 720 2 674
Increase in loan to subsidiaries - -
Increase in loans receivable - -139
Net cash movement in investing activities 3 549 -10 365
Financing activities
Purchase of treasury shares -5 041 -
Proceeds from issue of shares 17 000 -
Dividends paid to shareholders -3 495 -4 153
Net cash movement in financing activities 8 464 -4 153
Movement in cash and cash equivalents 20 440 -5 352
Cash and cash equivalents
At beginning of the year 25 341 30 693
Movement per above 20 440 -5 352
At end of the year 45 781 25 341
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 2017
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 2017 financial statements,
which are consistent with those, applied in the preparation of the 30 September
2016 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-17 30-Sep-16
Audited Audited
Basic earnings per share (cents) 58.92 71.18
- Profit attributable to shareholders of the parent R'000 7 534 8 118
- Weighted average number of ordinary shares in issue 12 786 823 11 405 632
Diluted earnings per share (cents) 58.92 71.18
- Profit attributable to shareholders of the parent R'000 7 534 8 118
- Weighted average number of ordinary shares in issue 12 786 823 11 405 632
Headline earnings per share (cents) 59.70 74.50
- Headline earnings R’000 7 633 8 498
- Weighted average number of ordinary shares in issue 12 786 823 11 405 632
Diluted headline earnings per share (cents) 59.70 74.50
- Headline earnings R’000 7 633 8 498
- Weighted average number of ordinary shares in issue 12 786 823 11 405 632
Reconciliation of net profit attributable to shareholders of
the parent to headline earnings
Net profit attributable to shareholders of the parent R'000 7 534 8 118
Loss on sale of shares held as available for sale assets
78 402
R'000
- Before tax 108 518
- Tax -30 -116
Profit on sale of property and equipment R'000 21 -22
- Before tax 29 -31
- Tax -8 9
Headline earnings R'000 7 633 8 498
COMMENTS ON RESULTS
As readers may recall, it is Indequity’s main objective to create wealth for
shareholders by utilising the capital resources at our disposal more effectively
than our competitors. Consequently, we 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 24.9% (2016: 45.4%). The decrease is largely due to a R17 million
share issue which took place in November 2016.We wish to remind our stakeholders
that the rationale for the capital raising was to obtain sufficient capital to
fund the growth initiatives of the group. It is also noteworthy that, largely as a
result of the capital raising, the net asset value of the Group increased by 35.3%
from 272 cents per share in 2016 to 368 cents per share in 2017. Although the
decrease in return on capital is significant, it is still well above our targeted
pre-tax return of 20% per annum and as the additional capital is deployed more
effectively over time, we expect the return on capital to increase.
INSURANCE OPERATIONS
The summer of 2016/2017 has been an exceptionally difficult period for the short
term insurance industry. Against this backdrop, Indequity’s profit after tax
decreased by 7.2% (2016 increase: 12.1%). Headline earnings per share for the year
ended 30 September 2017 decreased by 19.9% (59.70 cents per share) when compared
to the headline earnings per share for the year ended 30 September 2016 (2016:
74.50 cents per share). The main reason for this decline was the severe flooding
experienced in Gauteng in November 2016, resulting in R1.4 million in additional
claims in November 2016 compared to November 2015. Indequity’s gross claims ratio
therefore increased from 40.6% in 2016 to 45.9% in 2017, which still reflects a
significant outperformance of its industry peers. If the aforementioned flood
claims are disregarded, profit after taxation for the year ended 30 September
2017, would have increased by 5.2%.
As always, Indequity remains focused on attracting quality business at sensible
premiums and we constantly strive to improve efficiencies in our business. This
translated into an increase of 10% (2016: 9.2%) in gross written premium and a
very gratifying profit before tax margin of 19.2% (2016: 23%) of gross written
premium for the financial year.
RESULTS
As has become customary, we again wish to summarise the progress made by the
insurance business, through the following statistics:
2010 2011 2012 2013 2014 2015 2016 2017
R’000 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 52 109
Underwriting
13 259 16 381 17 796 19 439 21 006 24 167 26 949 27 335
Profit
Profit before tax 2 851 5 036 6 094 6 841 8 012 10 045 11 275 10 346
PROSPECTS
As mentioned in the Group’s previous financial report, raising additional capital
will likely impact the groups return on capital negatively in the short to medium
term whilst benefits from growth initiatives will likely only accrue over the
longer term. We are however more than willing to make short term sacrifices in
order to reap material gains in the future.
The Group is constantly seeking for ways in which utilisation of the capital at
our disposal, can be optimised. However, this often requires perseverance and
patience, as growth initiatives typically take time to come to fruition. Although
the group is well aware of the numerous challenges it faces as a niche player in a
notoriously difficult and competitive South African insurance market, it is
confident that, barring any unforeseen natural disasters or similar events beyond
the Group’s control, the historical returns on capital and growth in earnings
patterns will again become a reality over the longer term.
CONCLUSION
Once again, we wish to express our gratitude to all our stakeholders for their
continued support and faith in Indequity and its management. We also wish to thank
management and employees for their unwavering commitment, dedication and
perseverance.
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 final dividend for the year ending 30 September 2017 has been declared to all
ordinary shareholders and A class preference shareholders recorded in the books
of Indequity at the close of business on Friday, 08 December 2017. The Group has
a dividend cover of 2.15 times (2016: 2.47 times).
The cash dividend timetable is structured as follows:
Declaration date Tuesday 21 November 2017
Finalisation date Tuesday 28 November 2017
Last day to trade cum dividend in order to
participate in the dividend Tuesday 05 December 2017
First day to trade ex-dividend Wednesday 06 December 2017
Record date Friday 08 December 2017
Payment date Monday 11 December 2017
Share certificates will not be able to be
rematerialized or dematerialized between (Both Wednesday 06 December 2017 - Friday
days inclusive) 08 December 2017
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 (ix) 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 20%;
A Class Preference
Ordinary share dividend
Share dividend
(cents per Ordinary
(cents per A Class
Share)
Preference Share)
Gross local dividend amount for
ordinary shareholders/A class
13.50 2.38
preference shareholders exempt
from dividends tax
Local dividend withholding tax
amount for ordinary shareholders
2.70 0.48
/A class preference shareholders
to pay the dividend tax
Net local dividend amount for
ordinary shareholders /A class
10.80 1.90
preference shareholders liable to
pay the dividend tax
- Indequity’s income tax reference number is 9887001718.
- The Group has 13 105 632 Ordinary Shares, 14 870 000 A Class Preference
Shares and 11 669 680 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 Tuesday, 16 January 2018 at
11:00.
The AGM timetable is structured as follows:
Last day to trade Tuesday, 02 January 2018
Record date Friday, 05 January 2018
Proxy date Friday, 12 January 2018
AGM Tuesday, 16 January 2018
ON BEHALF OF THE BOARD
JF Zwarts L J van Rensburg
Chairman Chief Executive Officer
Johannesburg
21 November 2017
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 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
Date: 21/11/2017 12:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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