Inqo Investments Ltd - Unaudited results for period ended 31 August 2024

Announcement provided by

Inqo Investments Limited · INQO

27/11/2024 07:00

RNS Number : 7409N

Inqo Investments Limited

27 November 2024

Inqo Investments Limited

Unaudited Group Results for the half-year period ended 31 August 2024

CHAIRMAN AND CHIEF EXECUTIVE'S STATEMENT

Inqo Investments Limited ("Inqo" or "the Group") is a South African based social impact company that invests in businesses that tackle poverty and environmental challenges in Sub-Saharan Africa.

COMMENTARY

The Group remains in a strong financial position with total assets of R234,859,780 and minimal debt.

The results for the half-year period under review showed revenue of R8,199,813 (August 2023: R7,366,899). The hospitality and tourism industry is characterised by seasonal fluctuations, with the interim period aligning with the off-peak season, which historically results in lower occupancy rates and revenue. The Group generates 80% of its revenue from the hospitality and tourism sector. The Group earned a profit after tax of R532,516 (August 2023: loss after tax R4,069,070).

In April 2024, the company issued 1,854,646 new ordinary shares, raising gross capital of R 29,984,428. This includes the conversion of two credit loan notes of USD 1,000,000 and R 2,000,000 respectively into equity by the lenders exercising their conversion rights.

In 2023, Inqo was awarded a US$4 million grant over three years to fund its Conservation and Rural Enterprise (CARE) project in Uganda. To date, Inqo has received US$3 million of this grant. During the period, the Group formalised three CARE investments in Uganda, namely Flybox Budongo (BSF) Farm Limited, Pabidi Lodge Budongo Limited and Empower Clean Cooking Limited. In the current period, grant funding utilised amounted to R5,143,989 (August 2023: Rnil).

Whilst there has been no change in the company's shareholding in Spekboom Trading (Pty) Limited, a shift in the voting rights has occurred. As a result, the company has ceased consolidation and now recognises the investment under the equity method.

FINANCIAL INFORMATION

The financial information set out in this announcement does not constitute statutory financial statements. This financial information has been extracted from Inqo's unaudited group financial statements for the half-year period ended 31 August 2024.

FINANCIAL RESULTS

The unaudited financial results for the half-year period ended 31 August 2024 are as follows:

	Aug-24	Aug-23
	R'000	R'000
Revenue	8,200	7,367
Profit/(Loss) for the year	533	(4,069)
Earnings per share	0.03	(0.27)

Total Assets	234,860	223,854

Unutilised Grant Funding	41,620	34,404
Total Liabilities excl Unutilised Grant Funding	10,540	36,597

Net Assets	182,700	152,853
Profit/(Loss) from operating activities includes the following items
Grant income	5,144	-
Depreciation and amortisation	(1,102)	(1,605)
Personnel Costs	(2,524)	(2,855)
Directors' Fees and Salaries	(648)	(486)
Listing Expenses	(486)	(373)
Professional Fees	(528)	(307)
Reversal/(Raising) of impairment of loans: Four One	181	(25)
Re-instatement of impairment of loans: Spekboom Trading	(530)	-
Fair value adjustment of the buffalo herd	18	296

In August 2024, the directors of Inqo reviewed the valuation placed on all income earning assets to ensure that they reflect their fair value. Following the reviews, the directors are of the view that Group assets as stated in the Statement of Financial Position are reflected at fair value. The only non-South African company where Inqo held investments that required assessment from a fair value adjustment perspective was Four One Financial Services Limited. The company has struggled financially but managed to remain operational, however in the process has defaulted on loan and interest repayments. For this reason, the loan including interest amounting to R4,005,264 remains impaired in full.

INVESTEE COMPANIES: FINANCIAL, ENVIRONMENTAL AND SOCIAL PERFORMANCE COMMENTARY

Beyond the specific changes outlined below, there have been no other material developments or significant events impacting the investee companies during the period.

Kuzuko Lodge (Pty) Limited (South Africa)

After exiting the hotel management company approximately one year ago, Kuzuko Lodge has implemented a focused strategy to improve operational efficiency and increase revenue. These efforts have resulted in a turnaround, with a loss of R4,013,271 in August 2023 shifting to a loss of R743,774 in August 2024. This positive trajectory can be attributed to a combination of cost containment measures and targeted marketing initiatives. The directors anticipate that Kuzuko will continue to build on this momentum and achieve profitability by the end of the year, particularly as the peak tourism season approaches.

CARE Investees

· Flybox Budongo (BSF) Farm Limited (Uganda) forms part of the Uganda CARE project. Inqo has partnered with Mana Biosystems Limited (United Kingdom) (FlyBox UK) to implement the Black Soldier Fly project in Uganda. The purpose of insect farming is to upcycle organic waste into animal protein and compost. The business will initially sell larvae and eggs to farmers to grow to maturity by feeding on market and organic waste. These larvae can then be harvested for use as protein substitute in animal feed. At reporting date, Flybox UK had been commissioned to build modular insect farms due for delivery in Uganda in December 2024. No further business activity has commenced.

· Pabidi Lodge Budongo Limited (Uganda) forms part of the Uganda CARE project. Pabidi Lodge is currently under construction and it is expected to open in May 2025. The lodge will be the only luxury accommodation offering sustainable ecotourism to guests in the Budongo Forest. The Lodge will be operated by Great Lakes Safaris, one of the leading tour operators in Uganda. Great Lakes Safaris hold the sole conservancy in the Budongo Forest, an 825 sq km forest that is home to more than 600 chimpanzees. The founder and CEO of Great Lake Safaris is the majority shareholder of Budongo-Eco Lodge Limited, Inqo's joint venture partner. The site clearance and construction of the lodge commenced during the reporting period.

· Empower Clean Cooking Limited (Uganda) forms part of the Uganda CARE project. Empower Clean Cooking Limited is a joint venture between Inqo and East African Power Limited. Empower Clean Cooking Limited will be managed and operated by East Africa Power, a highly experienced renewable energy developer and operator with hydro and solar plants in Rwanda, Uganda, DRC, Zambia, Zimbabwe and Kenya. The objective of the company is to safeguard the environment through providing clean cooking solutions to local environments. The joint venture will manufacture biomass pellets for cooking fuel as an alternative to wood and charcoal and to explore clean cooking solutions for the local community. The company has not commenced operations.

SUMMARY OF SOCIAL & ENVIRONMENTAL METRICS SINCE PROJECT COMMENCEMENT

· Kuzuko Lodge

o 35,617 acres (14,414 hectares) of former farmland restored and protected as a game reserve

o 70 km of game fencing erected

o 45 FTE staff at Kuzuko in standard housing with flush toilets, power, water and solar panels

o 120 fixed term jobs

o Conservation of 2 endangered species, 8 endangered species protected, 23 species introduced

o Re-wilded 18 adult cheetahs with diverse genetics to bolster the meta-population in southern Africa

· Southlake Medical Centre

o 98,719 patient visits including 386 HIV patients receiving care and counselling, 5,599 people receiving health education including through community outreach, 217 safe deliveries, 205 surgeries, 2,000 cervical cancer screens and 700+ HPV vaccinations

· Kentegra

o 300 FTE and 26,000 contracted out-growers

· Sanergy

o 1,000 FTE, 2,000 indirect jobs, 5,000 toilets serving 270,000 people in Nairobi, Kisumu and Eldoret

· Spekboom Trading

o 5,185 hectares degraded land planted with 30 million spekboom; 350 fixed term jobs

STAFF

The directors would like to take this opportunity to thank all the operating staff in the Group for their contribution and commitment to the Group's objectives during this challenging time.

K.S Tan R.H Steyn

Chairman Chief Financial Officer

Issued on: 27 November 2024

Enquiries

Inqo Investments Limited	Tel: +27 834249880
Robyn Steyn, Chief Financial Officer	Email: finance@inqo.co.za

Hobart Capital Markets LLP
AQSE Corporate Adviser and Broker	Tel: +44 (0)20 7070 5665
Dr Wang Chong	Email: wang.chong@hobartcapital.com

Statements of Financial Position

Figures in R	Group 31 August 2024	Group 29 February 2024	Group 31 August 2023 - restated*
Assets
Non-current assets Property, plant and equipment *	150,695,290	151,980,926	152,842,048
Right-of-use assets		68,147	152,975
Intangible assets	339	840	1,340
Investment in joint ventures and associates	7,867,661
Other investments	7,179,889	7,306,227	9,134,004
Total non-current assets *	165,743,179	159,356,140	162,130,367
Current assets
Inventories	4,179,170	4,295,937	5,055,693
Trade and other receivables	3,550,837	6,059,424	3,858,133
Biological assets	995,000	977,000	3,085,440
Cash and cash equivalents	60,391,594	43,771,590	49,724,635
Total current assets	69,116,601	55,103,951	61,723,901
Total assets *	234,859,780	214,460,091	223,854,268

* - The donation of Spekboom plantings had been recognised as Other Income in the interim report for the period ended 31 August 2023. This was not the final accounting treatment in the audited annual financial statements for the year ended 29 February 2024, and as such the 31 August 2023 interim comparatives above have been corrected to follow the annual financial statements.

Figures in R	Group 31 August 2024	Group 29 February 2024	Group 31 August 2023 - restated*
Equity and liabilities
Equity
Ordinary share capital	81,858,155	72,584,925	72,584,925
Share premium	108,296,468	87,585,270	87,585,270
Accumulated loss *	(94,528,411)	(95,364,654)	(94,049,312)
Revaluation reserve	86,693,347	86,693,347	86,693,347
Total equity attributable to owners of the parent*	182,319,559	151,498,888	152,814,230
Non-controlling interests	380,106	119,507	38,665
Total equity*	182,699,665	151,618,395	152,852,895
Liabilities
Non-current liabilities
Deferred tax liabilities	4,582,035	3,809,116	4,596,962
Loans from related parties	1,614,127	3,423,672	4,599,458
Other loans		18,931,500	18,590,000
Total non-current liabilities	6,196,162	26,164,288	27,786,420
Current liabilities
Trade and other payables	4,344,165	3,683,554	8,061,296
Lease liabilities		80,155	217,243
Unutilised grant funding	41,619,788	32,846,571	34,404,005
Bank overdraft		67,128	532,409
Total current liabilities	45,963,953	36,677,408	43,214,953
Total liabilities	52,160,115	62,841,696	71,001,373
Total equity and liabilities *	234,859,780	214,460,091	223,854,268

Statements of Profit or Loss and Other Comprehensive Income

		Group
Group		12 month	Group 6 month
6 month		period ended	period ended
period ended		29 February	31 August 2023
Figures in R 31 August 2024		2024	- restated*
Revenue	8,199,813	20,610,801	7,366,899
Cost of sales	(1,074,048)	(2,421,823)	(1,049,896)
Gross profit	7,125,765	18,188,978	6,317,003
Other income *	5,378,999	3,630,200	279,996
Personnel expenses	(3,171,797)	(6,996,171)	(3,340,548)
Depreciation and amortisation	(1,102,141)	(2,936,964)	(1,605,019)
Listing expenses	(486,185)	(933,451)	(372,904)
Professional fees	(528,209)	(369,556)	(306,600)
Provision for doubtful debts	(160,321)	(319,841)	(160,321)
Impairment	181,457	(1,920,552)	(24,822)
Reinstatement of loan impairment - Spekboom	(530,286)
Other expenses	(5,966,543)	(12,836,487)	(6,511,330)
Profit/ (loss) from operating activities *	740,739	(4,493,844)	(5,724,545)
Inventory write (down)/up		(832,272)	8,000
Fair value adjustment	18,000	(1,811,980)	296,460
Finance income	568,705	995,676	1,218,522
Finance costs	(22,008)	(167,020)	(85,531)
Profit/ (loss) before tax*	1,305,436	(6,309,440)	(4,287,094)
Income tax (expense)/ credit	(772,920)	1,005,869	218,024
Profit/ (loss) for the period *	532,516	(5,303,571)	(4,069,070)

		Group
	Group	12 month	Group 6 month
	6 month	period ended	period ended
	period ended	29 February	31 August 2023
Figures in R	31 August 2024	2024	- restated*
Profit/ (loss} for the period attributable to:
Owners of Parent *	553,267	(5,262,858)	(3,947,516)
Non-controlling interest	(20,751)	(40,713)	(121,554)
	532,516	(5,303,571}	(4,069,070}
Earnings per share from continuing and discontinuing operations
attributable to owners of the parent during the period Basic earnings per share * Basic earnings/ (loss) per share *	0.03	(0.36)	(0.27)
Diluted earnings per share * Diluted earnings/ (loss) per share *	0.03	(0.36)	(0.27)

Total comprehensive income*	532,516	(5,303,571}	(4,069,070}
Comprehensive income attributable to:
Comprehensive income, attributable to owners of parent *	553,267	(5,262,858)	(3,947,516)
Comprehensive income, attributable to non-controlling interests	(20,751)	(40,713)	(121,554)
	532,516	(5,303,571}	(4,069,070}

Statement of Cash Flows

	Group 6 month period ended	Group 12 month period ended 29 February	Group 6 month period ended
Figures in R	31 August 2024	2024	31 August 2023
Net cash flows used in operations	(1,013,582)	(11,800,817)	(4,901,289)
Interest paid	(12,251)	(143,656)	(85,531)
Interest received	1,013,664	995,676	1,218,522
Net cash flows used in operating activities	(12,169)	(10,948,797)	(3,768,298)
Cash flows from investing activities
Cash flows from losing control of subsidiaries	(2,668)
Cash flows used in obtaining control of subsidiaries or other businesses	(7,225,997)
Proceeds from sales of property, plant and equipment		(17,103)	58,696
Purchase of property, plant and equipment	(746,289)	(677,038)	(300,055)
Purchase of biological assets			248,100
Purchase of other financial assets			(141,170)
Grant funding received	17,728,014	1,397,799	17,066,111
Cash flows from investing activities	9,753,060	703,658	16,931,682
Cash flows from financing activities
Proceeds from issuing shares	10,197,528
Other loans			25,869
Payments to related parties	227,105	(1,087,917)	62,000
Loans received related parties		17,786,900
Repayments of finance lease	(80,155)	(234,148)	(82,284)
Cash flows from financing activities	10,344,478	16,464,835	5,585
Net increase in cash and cash equivalents before effect of
exchange rate changes	20,085,369	6,219,696	13,168,969
Effect of exchange rate changes on cash and cash equivalents	(3,398,237)	1,461,509
Net increase in cash and cash equivalents	16,687,132	7,681,205	13,168,969
Cash and cash equivalents at beginning of the period	43,704,462	36,023,257	36,023,257
Cash and cash equivalents at end of the period	60,391,594	43,704,462	49,192,226

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