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INDEQUITY GROUP LIMITED - Interim Results for the Six Months Ended 31 March 2019

Release Date: 23/04/2019 08:30
Code(s): IDQ     PDF:  
 
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Interim Results for the Six Months Ended 31 March 2019

INDEQUITY GROUP LIMITED
Incorporated in the Republic of South Africa
Registration number 1998/015883/06
Share code: IDQ ISIN: ZAE000016606
(“Indequity” or “the Group”)

INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 MARCH 2019

CONDENSED CONSOLIDATED INTERIM STATEMENTS OF FINANCIAL POSITION
                                                                                                
                                                         31 March 2019         31 March 2018     30 September
                                                                                                         2018
                                                             Unaudited             Unaudited          Audited
                                                                                                     
                                                                 R'000                 R'000            R'000                                                                                                  

ASSETS
Property and equipment                                             2 037               2 126            1 336
Intangible assets                                                    588                 809              806
Investments                                                      15 570                6 443           10 695
Deferred tax asset                                                   148                 303              248
Subrogation and salvage recoveries                                 2 366               2 061            2 080
Reinsurance portion of insurance contract provisions                  29                  38               31
Normal tax receivable                                                  -                   -                7
Loans and receivables                                                 67                 413               84
Cash and cash equivalents                                        35 338               33 145           38 997
Total assets                                                     56 143               45 338           54 284
EQUITY
Capital and reserves attributed to the company's
equity holders
Share capital                                                         24                   21              25
Share premium                                                     13 008               17 036          16 964
Retained income                                                   33 821               25 500          29 125
Foreign currency translation reserve                               (441)              (3 994)         (1 036)
Total equity                                                      46 412               38 563          45 078
LIABILITIES
Insurance contract provisions                                      6 342               4 131            5 354
Deferred tax liability                                               271                 391              183
Dividends payable                                                    316                 349              258
Normal tax payable                                                    67                   -                -
Trade and other payables                                           2 735               1 904            3 411
Total liabilities                                                  9 731               6 775            9 206


Total shareholders' equity and liabilities                        56 143               45 338          54 284

CONDENSED CONSOLIDATED INTERIM STATEMENTS OF COMPREHENSIVE INCOME
                                                                                            
                                                          6   Months ended    6 Months ended       Year ended
                                                                                            
                                                              31 March 2019     31 March 2018    30 September
                                                                                                         2018
                                                                  Unaudited         Unaudited         Audited
                                                                                                
                                                                      R'000             R'000           R'000
                                                                                                    
Gross written premium                                                31 383            28 987          59 148

Less: reinsurance premium                                             (679)             (611)         (1 179)
 
Net premium written                                                  30 704            28 376          57 969
Change in provision for gross unearned premiums                        (26)              (70)            (33)
Net insurance premium earned                                         30 678            28 306          57 936
Other income                                                            125               240             388
Investment income                                                     1 744              ( 2)           1 006
Total income                                                         32 547            28 544          59 330
Gross claims incurred                                              (14 772)          (12 851)        (25 424)
Reinsurance recoveries                                                  (2)              (46)            (11)
Administration expenses                                             (9 275)           (8 716)        (17 694)
Acquisition costs                                                   (2 149)           (2 048)         (4 163)
Profit before taxation                                                6 349             4 883          12 038
Taxation                                                            (1 653)           (1 345)         (3 442)

Profit for the period                                                 4 696             3 538           8 596

Other comprehensive income, net of tax
Items that may subsequently be reclassified to
income:
Fair value adjustment on available for sale assets                        -                 -            405
Related tax on fair value adjustment on available for
                                                                         -                 -           (113)
sale assets
Exchange differences on translation of foreign
                                                                      595            (3 994)         (1 036)
operations
Total comprehensive income for the period                            5 291             (456)           7 852


Profit attributable to:
- Equity holders of the parent                                       5 291             (456)           7 852
Earnings attributable to the equity holders
- Basic earnings per share (cents)                                   40.94             28.72           71.41
- Diluted earnings per share (cents)                                 40.94             28.72           71.41

CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS
                                                                                        
                                                           6 Months ended    6 Months ended       Year ended
                                                                                       
                                                             31 March 2019     31 March 2018    30 September
                                                                                                        2018
                                                                 Unaudited         Unaudited         Audited
                                                                                            
                                                                     R'000             R'000           R'000
                                                                                              

Cash generated by operations                                          5 050            3 205          12 726
Interest received                                                     1 131            1 007           1 987
Dividend received                                                        87              111             125
Taxation paid                                                      (1 653)           (1 380)         (3 504)
Net cash from operating activities                                   4 615             2 943          11 334


Movement in intangible assets                                            -               (7)            (28)
Movement in fixed assets                                              (884)             (294)            175
Movement in equity investments                                     (3 885)           (3 645)         (6 306)
Movement in loans receivable                                             -               22                -
Net cash used in investing activities                              (4 769)           (3 924)         (6 159)
 

Dividends paid to shareholders                                     (1 919)           (1 990)         (3 514)
Purchase of treasury shares                                              -           (5 921)         (5 924)
Shares repurchased and cancelled                                   (1 981)             (317)           (380)
Net cash used in financing activities                              (3 900)           (8 228)         (9 818)


Net movement in cash and cash equivalents                          (4 054)           (9 209)         (4 643)
Effects of currency translation on cash and cash     
                                                                      395            (3 427)         (2 141)
equivalents
Cash and cash equivalents at beginning of the
                                                                    38 997            45 781          45 781
period
Cash and cash equivalents at end of the period                      35 338            33 145          38 997

CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CHANGES IN EQUITY
                                                                                                  
                                                                                                    
                                                      Share       Retained             Non -        Foreign
                                                capital and         income     distributable       currency       Total
                                                    premium                        reserve      translation
                                                                                              
                                                   R'000            R'000             R'000          R'000        R'000  
                                                                                

Balance at 30 September 2017                      23 293           24 086             (292)                      47 087
Changes in Equity for the year ended 30
September 2018
Profit for the year                                                 8 596                                         8 596
Fair value adjustment on available for sale
                                                                                        292                         292
assets
 
Exchange differences on translation of                                                             (1 036)      (1 036)
foreign operations     
Transactions with owners of the company
Dividend declared to shareholders                                  (3 557)                                      (3 557)
Group shares purchased by subsidiary              (5 924)                                                       (5 924)
Group shares repurchased and cancelled              (380)                                                         (380)
Balance at 30 September 2018                      16 989           29 125                         (1 036)        45 078
Changes in Equity for the 6 months ended
                                                                                                                      -
31 March 2019
Profit for the period                                               4 696                                         4 696
Exchange differences on translation of
                                                                                                     595            595
foreign operations
Transactions with owners of the company
Capital distribution out of share premium         (1 976)                                                        (1 976)
Group shares repurchased and cancelled            (1 981)                                                        (1 981)
Balance at 31 March 2019                          13 032           33 821                          (441)          46 412


Balance at 1 October 2017                         23 293           24 086              (292)                      47 087

Changes in Equity for the 6 months ended                                                                            
31 March 2018 
Profit for the period                                               3 538                                         3 538
Fair value adjustment on available for sale
                                                                                         292                        292
assets
Exchange differences on translation of
                                                                                                  (3 994)        (3 994)
foreign operations
Transactions with owners of the company
Dividend declared to shareholders                                  (2 124)                                       (2 124)
Group shares purchased by subsidiary              (5 921)                                                        (5 921)
Cancellation of shares                              (315)                                                          (315)
Balance as at 31 March 2018                       17 057           25 500                         (3 994)         38 563


                                                            31 March 2019            31 March 2018          30 September
                                                                Unaudited                Unaudited          2018 Audited
                                                                 R'000                    R'000                    R'000

Dividends per share (cents)
- Ordinary shares                                                   13.50                   13.50                  24.00
- A class preference shares                                          2.38                    2.34                   4.22
EARNINGS PER SHARE  
                                                           6 Months ended          6 Months ended          Year ended 30
                                                            31 March 2019           31 March 2018         September 2018
                                                                Unaudited               Unaudited                Audited



Basic earnings per share (cents)                                    40.94                   28.72                  71.41

Diluted earnings per share (cents)                                  40.94                   28.72                  71.41

Headline earnings per share (cents)                                 40.94                   30.76                  74.06
Fully diluted headline earnings per share (cents)                   40.94                   30.76                  74.06
Number of shares
- in issue                                                     12 451 404              13 060 632              13 050 632
- weighted average                                             11 471 273              12 321 050              12 037 132


The weighted average number of shares has been used in the calculations of earnings per share, diluted earnings
per share, headline earnings per share and fully diluted headline earnings per share.

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

Net profit attributable to shareholders of the
parent and headline earnings                                          4 696                 3 538                  8 596

Adjusted for:
Loss on sale of property and equipment                                     -                     -                    95
Tax on the above                                                           -                     -                  (27)
Loss on sale of shares held as available for sale
                                                                           -                   349                   349
assets
Tax on the above                                                           -                  (97)                  (98)
Headline earnings                                                      4 696                 3 790                 8 915


COMMENTS ON RESULTS

Indequity is pleased to announce that its basic earnings per share (“EPS”) has increased by 42.5% compared
to the basic EPS reported in the previous six month period, from 28.72 cents for the six months ended 31 March
2018, to 40.94 cents per share for the six months ended 31 March 2019. The pre-taxation return on capital for
the period was an excellent 29.7% (2018: 22.3%), exceeding our target of 20% per annum. The growth in EPS
is largely due to an increase in investment income as well as a reduction in the weighted average number of
shares in issue due to share repurchases after the previous corresponding period. The Group continues to
maintain a strategic hedge against possible depreciation of the value of the Rand by investing a large portion
of liquid company assets in US Dollar based investments and will thus maintain a large exposure to the US
Dollar. Indequity will continue to utilise its disciplined underwriting strategy to optimise the returns of the Group.
Indequity has always believed in having rational and unbending standards for measuring progress and its main
objective therefore remains the creation of superior stakeholder wealth. We are thankful that the Group has
again achieved the exceptional results to which stakeholders have become accustomed.

ACCOUNTING POLICIES AND PREPARATION

The principal accounting policies applied in preparing the condensed interim financial statements for the six
months ended 31 March 2019 are in terms of International Financial Reporting Standards (”IFRS”) and are
consistent with those of the annual financial statements for the year ended 30 September 2018. The interim
financial statements were prepared in accordance with and containing information required by the recognition,
measurement, presentation and disclosure requirements of IFRS, IAS 34 - Interim Financial Reporting as well
as the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee and Financial
Reporting Pronouncements as issued by the Financial Reporting Standards Council and in compliance with the
Listing Requirements of the JSE Limited and the Companies Act (No.71 of 2008), as amended. The financial
information has been prepared in accordance with standards of IFRS that are currently effective. This may differ
from interpretive guidance from the International Financial Reporting Interpretation Committee of International
Accounting Standards Board.

SEGMENT INFORMATION

No segment analysis has been prepared for the six months as the Group's operations are focused only on short-
term insurance activities.

CAPITAL DISTRIBUTION

The board has declared a capital distribution out of share premium of 15.72 cents per Indequity ordinary share
("Ordinary Share") (March 2018: 10.5 cents) and 2.63 cents per Indequity A class preference share ("A Class
Preference Share") (March 2018: 1.85 cents) for the six months ended 31 March 2019, to all ordinary
shareholders and A class preference shareholders recorded in the books of Indequity at close of business on
Friday, 17 May 2019. This payment is being paid out of contributed tax capital ("CTC"). CTC is defined as stated
capital before 1 January 2011 less any deemed dividend before that date plus the consideration for new share
issues subsequent to 1 January 2011 less any distribution from contributed tax capital after 1 January 2011.

The capital distribution timetable is structured as follows: the declaration date is Tuesday, 23 April 2019. The
last day to trade cum-capital distribution in order to participate in the distribution is Tuesday, 14 May 2019. The
shares commence trading ex-capital distribution from the commencement of business on Wednesday, 15 May
2019 and the record date is Friday, 17 May 2019. The capital distribution is to be paid on Monday, 20 May 2019.
Share certificates will not be able to be rematerialised or dematerialised between Wednesday, 15 May 2019
and Friday, 17 May 2019, both days inclusive.

Relative to this distribution, the directors have confirmed that the Company will satisfy the solvency and liquidity
test immediately after completing the distribution.

For income tax purposes, shareholders are advised that the distribution will be paid out of qualifying contributed
tax capital as contemplated in the definition of “contributed tax capital” in section 1 of the Income Tax Act, 1962,
and as it will be regarded as a return of capital with no dividend tax being payable, consideration should be
given to the potential capital gains tax consequences. Indequity shareholders are, therefore, advised to consult
their tax advisors with regard to how they may be impacted by the distribution.

- Indequity's income tax reference number is 9887001718

- The group has 12 451 404 Ordinary Shares, 14 870 000 A Class Preference Shares and 11 669 680
  B Class Preference Shares in issue on declaration date.

- Both A Class Preference Shares and B Class Preference Shares are unlisted.

This interim report has not been audited or reviewed by the Group auditor.

This report has been published on 23 April 2019.

ON BEHALF OF THE BOARD

LJ van Rensburg       Chief Executive Officer
JF Zwarts             Chairman

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

Company secretary:    WS de Vries

Transfer secretary:   Link Market Services South Africa (Pty) Ltd

Sponsor:              Merchantec Capital

Registered address:   First Floor, Cascade House, Constantia Office Park, CNR 14th Avenue and Hendrik
                      Potgieter Road, Constantia Kloof, 1709

Postal address:       PO Box 5433, Weltevredenpark, 1715

Telephone:            (+27 11) 475-0816

Fax:                  (+27 11) 475 0877

Prepared by:          W du Preez CA(SA) (Financial Manager) under the supervision of TE Vorster
                      CA(SA) (Financial Director).

Date: 23/04/2019 08:30:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE'). 
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