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INDEQUITY GROUP LIMITED - Abridged report for the year end 30 September 2018

Release Date: 21/11/2018 09:29
Code(s): IDQ     PDF:  
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Abridged report for the year end 30 September 2018

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 2018

GROUP STATEMENT OF FINANCIAL POSITION AS AT 30 SEPTEMBER 2018

                                                          30-Sep-18     30-Sep-17
                                                            Audited       Audited
                                                              R’000         R’000

ASSETS

Property and equipment                                        1 336         2 058
Intangible assets                                               806           825
Investments                                                  10 695         3 985
Deferred tax asset                                              248           250
Subrogation and salvage recoveries                            2 080         2 095
Reinsurance portion of insurance contract provisions             31            42
Normal tax receivable                                             7             -
Loans and receivables                                            84           145
Cash and cash equivalents                                    38 997        45 781
Total assets                                                 54 284        55 181

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

Share capital                                                    25            25
Share premium                                                16 964        23 268
Retained income                                              29 125        24 086
Non-distributable reserve                                         -          -292
Foreign currency translation reserve                         -1 036             -
Total equity                                                 45 078        47 087

LIABILITIES

Insurance contract provisions                                   5 354       5 187
Deferred tax liability                                            183         352
Normal tax payable                                                264          39
Dividends payable                                                 258         215
Trade and other payables                                        3 147       2 301
Total liabilities                                               9 206       8 094

Total shareholders’ equity and liabilities                  54 284        55 181
GROUP STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 30 SEPTEMBER 2018



                                                         30-Sep-18   30-Sep-17
                                                           Audited     Audited
                                                             R’000       R’000

Gross written premium                                       59 148      53 956
Less: reinsurance premium                                   -1 179      -1 847
Net written premium                                         57 969      52 109
Change in provision for gross unearned
premiums                                                       -33          12
Net insurance premium earned                                57 936      52 121

Other income                                                   388          59
Investment income                                            1 006       2 331
Total income                                                59 330      54 511



Gross claims incurred                                      -25 424     -24 763
Reinsurance recoveries                                         -11         -11
Administration Expenses                                    -17 694     -15 467
Acquisition costs                                           -4 163      -3 924


Profit before taxation                                      12 038      10 346
Taxation                                                    -3 442      -2 812
Profit for the year                                          8 596       7 534


Fair value adjustment through OCI on available for
                                                               405          61
sale assets
Related tax on fair value movement of available-for-
                                                              -113         -17
sale assets


Total comprehensive income for the year                      8 888       7 578


Profit attributable to:
   Equity holders of the parent                              8 888       7 578


Earnings attributable to the equity holders
Basic earnings per share (cents)                             71.41       58.92
Diluted earnings per share (cents)                           71.41       58.92
         GROUP STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 SEPTEMBER 2018

                              Share                                           Foreign
                                                           Non-
                             capital     Retained                            currency
                                                      distributable                          Total
                               and        Income                           translation
                                                         reserve
                             premium                                          reserve
                                          R'000           R'000               R'000          R'000


Balance at 1 October 2016     11 334       20 051                 -336              -        31 049

Changes in Equity for the
year ended
30 September 2017

Share issue (1 700 000
                              17 000                                                         17 000
shares at R10.00 each)
Profit for the year                         7 534                                             7 534
Fair value adjustment on
                                                                    44                           44
available for sale assets
Transactions with owner
of the company
Dividend paid to
                                           -3 499                                            -3 499
shareholders
Group shares purchased by
                              -5 041                                                         -5 041
subsidiary
Balance at 30 September
                              23 293       24 086                 -292               -       47 087
2017

Changes in Equity for the
year ended
30 September 2018

Profit for the year                         8 596                                             8 596
Fair value adjustment on
                                                                   292                          292
available for sale assets
Exchange differences on
                                                                                -1 036       -1 036
foreign operations
Transactions with owner
of the company
Dividend paid to
                                           -3 557                                            -3 557
shareholders
Group shares purchased by
                              -5 924                                                         -5 924
subsidiary
Group Shares repurchased
                                -380                                                           -380
and cancelled
Balance at 30 September
                              16 989       29 125                    -          -1 036       45 078
2018


                                                            Group            Company
                                                         2018   2017      2018    2017

          Dividend per ordinary share (cents)            24.00    22.25   24.00   22.25
          Dividend per A-class share (cents)              4.22     3.92    4.22    3.92
GROUP STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 30 SEPTEMBER 2018

                                                        30-Sep-18    30-Sep-17

                                                          Audited     Audited

                                                            R’000        R’000
Operating activities

Cash generated by operations                               12 726        9 388
Interest received                                           1 987        1 771
Dividend received                                             125          295
Taxation paid                                              -3 504       -3 027
Net cash movement in operating activities                  11 334        8 427


Investing activities

Proceeds from the disposal of property and equipment          475           90
Acquisition of property and equipment                        -300       -1 567
Acquisition of intangible assets                              -28         -330
Acquisition of shares                                     -16 692      -19 364
Proceeds from the disposal of shares                       10 386       24 720
Net cash movement in investing activities                  -6 159        3 549


Financing activities

Purchase of treasury shares                                -5 924       -5 041
Shares repurchased and cancelled                             -380            -
Proceeds from issue of shares                                   -       17 000
Dividends paid to shareholders                             -3 514       -3 495
Net cash movement in financing activities                  -9 818        8 464


Movement in cash and cash equivalents                      -4 643       20 440


Cash and cash equivalents

At beginning of the year                                   45 781       25 341
Movement per above                                         -4 643       20 440
Effect of exchange rate changes                            -2 141            -
At end of the year                                         38 997       45 781
      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
      2018

      ACCOUNTING POLICIES AND BASIS OF PREPERATION


      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 underlying
      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 2018 financial statements,
      which are consistent with those, applied in the preparation of the 30 September
      2017 financial statements. The accounting policies have been applied consistently
      by all Group entities.

      The abridged report has been prepared by B. Payne CA(SA) – Group 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-18      30-Sep-17
                                                                   Audited        Audited

Basic earnings per share (cents)                                     71.41          58.92

-    Profit attributable to shareholders of the parent
                                                                     8 596          7 534
R'000

-    Weighted average number of ordinary shares in issue        12 037 132     12 786 823



Diluted earnings per share (cents)                                   71.41          58.92

-    Profit attributable to shareholders of the parent
                                                                     8 596          7 534
R'000

-    Weighted average number of ordinary shares in issue        12 037 132     12 786 823
Headline earnings per share (cents)                                  74.06          59.70

-    Headline earnings R’000                                         8 915          7 633

-    Weighted average number of ordinary shares in issue        12 037 132     12 786 823



Diluted headline earnings per share (cents)                          74.06          59.70

-    Headline earnings R’000                                         8 915          7 633

-    Weighted average number of ordinary shares in issue        12 037 132     12 786 823



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


Net profit attributable to shareholders of the parent R'000          8 596          7 534


Loss on sale of shares held as available for sale assets
                                                                       251             78
R'000
- Before tax                                                           349            108
- Tax                                                                  -98            -30


Profit on sale of property and equipment R'000                          68             21
- Before tax                                                            95             29
- Tax                                                                  -27             -8


Headline earnings R'000                                              8 915          7 633




        COMMENTS ON RESULTS

        Indequity is once again pleased to report a very gratifying set of results for
        the year ended 30 September 2018. As has become the custom, we wish to highlight
        a few noteworthy figures. Our pre-taxation return on capital was 29,4% (2017:
        24,9%), which comfortably exceeds our target of 20% per annum. Turnover grew by
        9,6% (2017; 10%) whilst our gross claims ratio decreased from 45,9% in 2017 to
        43% in 2018. This translated into growth in pre-taxation profit of 16,4% over the
        prior year.

        As a result of share repurchases made by the Group in terms of its share repurchase
        program, the weighted average number of shares outstanding at year-end decreased
        which, in addition to the increased profits, contributed to a 21.2% increase in
        diluted earnings per share and a headline earnings per share increase of 24,1%
        to 74,06 (2017: 59.70) cents per share.

        OPERATIONS

        The insurance industry in South Africa remains exceedingly competitive.     With
        this as a backdrop, achieving growth targets and delivering superior results is
        always a challenge. On a positive note, no major natural disasters impacted the
        Group during the year, which enabled the Group to deliver a very pleasing set of
financial results. A particularly noteworthy aspect in this year’s results, is
the cash generated by our insurance operations, which came to R12,7 million.

LONG TERM GROWTH OF THE BUSINESS

The progress Indequity has made over the years, can be illustrated through the
following graph and statistics:

                2011     2012      2013    2014     2015     2016     2017     2018
                R’000    R’000    R’000    R’000    R’000    R’000    R’001    R’001
Net Earned
                31 030   33 841   36 917   39 702   43 158   46 833   52 109   57 970
Premium
Underwriting
                16 381   17 795   19 439   21 006   24 167   26 949   27 335   32 535
Profit
Profit
                 5 036   6 094     6 841   8 012    10 045   11 275   10 346   12 038
before tax


PROSPECTS

The Group’s cash resources amounted to approximately R50 million at year end.
The challenge remains to utilize these as optimally as possible. To this end, R
19,5 million ($ 1,3 million) was invested in a US subsidiary with the objective
to serve as a hedge against a depreciation of the South African Rand, but also
to seek opportunities to deploy the cash more productively internationally.

The Group continues to look for attractive investment opportunities where returns
on the capital could be maximized. As with any long-term investment strategy,
we do not expect immediate results, but we are confident that our efforts will
be rewarded over time and that the contribution from this avenue will be material
over time.

As far as Indequity’s insurance operations are concerned, we are confident that
a solid foundation has been established. Consequently, we expect similar long-
term growth patterns to those from the past, to continue into the foreseeable
future.

CONCLUSION

Favourable results such as these published by Indequity, would not have been
possible without the loyalty, support and commitment of Indequity’s many
stakeholders.   As always, we wish to express our sincere gratitude for the
contributions made by each and every stakeholder.

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.

CAPITAL REDUCTION

For the year ending 30 September 2018, a capital reduction of 14.00 cents per
ordinary share (2017: dividends of 13.50 cents per share) and 2.46 cents per A
class preference share (2017: dividends of 2.38 cents per share) 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, 14 December 2018. Given
the abovementioned capital reduction declaration, the Group has a dividend cover
     of 2.23 times (2017: 2.15 times). This payment is being paid out of contributed
     tax capital. CTC is defined as stated capital before 01 January 2011 less any
     deemed dividend before that date plus the consideration for new share issues
     subsequent to 01 January 2011 less any distribution from contributed tax capital
     after 1 January 2011.

The capital reduction timetable is structured as follows:


Declaration and finalisation date                            Wednesday, 21 November 2018
Last day to trade cum capital reduction                        Tuesday, 11 December 2018
First day to trade ex-capital reduction                      Wednesday, 12 December 2018
Record date                                                     Friday, 14 December 2018
Payment date                                                   Tuesday, 18 December 2018
Share certificates will not be able to be rematerialised     Wednesday, 12 December 2018
or dematerialized between (Both days inclusive)             and Friday, 14 December 2018

     All ordinary shareholders and A class preference shareholders are hereby advised
     that the capital reduction will not be subject to dividends tax. 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 capital reduction has been declared out of stated capital
        -     The local dividend tax rate is 20%

                                                                     A Class Preference
                                            Ordinary share capital   Share capital
                                            reduction (cents per     reduction (cents per
                                            Ordinary Share)          A Class Preference
                                                                     Share)
     Capital reduction amount for
     ordinary shareholders/A class
                                                     14.00                    2.46
     preference shareholders exempt
     from dividends tax




        -     Indequity’s income tax reference number is 9887001718.
        -     The Group has 13 050 632 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 Wednesday, 16 January 2019 at
     11:00.
The AGM timetable is structured as follows:


Last day to trade             Tuesday 08 January 2019
Record date                    Friday,11 January 2019
Proxy date                    Monday, 14 January 2019
AGM                          Tuesday, 16 January 2019

 ON BEHALF OF THE BOARD


 JF Zwarts                   L J van Rensburg
 Chairman                    Chief Executive Officer




 Johannesburg
 15 November 2018

 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
 21 November 2018

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