Inqo Investments Limited

Group Results for the year ended 28 February 2023

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.

The Group remains in a strong financial position with total assets of R210,256,710 and minimal debt.

Subsequent to the financial year end, Inqo received an additional investment of R17,786,900 in the form of a convertible loan note (CLN) that was made by a new investor on 1^st of March 2023.  The net proceeds of the CLN and the balance of the funds that the group has available will be used for working capital and to execute a range of new potential investments that Inqo have identified in Sub-Saharan Africa that will have a positive impact on the environment and the poor.  This set of investments includes the current Conservation and Rural Enterprise (CARE) project that will invest in several joint ventures around the Budongo Forest, Uganda, with the aim of tackling the links between poverty and environmental degradation such as deforestation for wood fuel use or bushmeat poaching. The first investment for the CARE project is a luxury tented eco-lodge within the Budongo forest which will begin construction in Q3 2023.

Like businesses around the world, the Group has been heavily impacted by the Covid-19 pandemic with reduced earnings and implementation of cost saving measures. The severity of the impact and speed of recovery has varied across investee companies. Despite the challenges being faced, the directors of the Company have assessed that the Company and its subsidiaries will continue as a going concern.

The results for the year under review showed revenue of R11,730,190 (February 2022:  R3,872,007) with a profit after tax of R3,774,907 (February 2022: loss of R12,614,587). The primary reason for the profit before tax position is due to the grant income recognised between 1 September 2022 and 28 February 2023 for the cost of planting Spekboom cuttings on the property through the Reforest Action carbon credit contract.

The profit for the year is reported after the following income and cost items have been accounted for:

In February 2023, the directors of Inqo reviewed the valuation placed on all income earning assets to ensure that they reflect their fair value. Following the review, the directors are of the view that the Group assets as stated in the Balance Sheet are reflected at fair value.  In the process of carrying out this review it was decided that the following value adjustments should be processed.

·      The Kuzuko Lodge operation has not yet returned to pre Covid-19 occupancies and as a result is currently operating at a loss.  It was therefore decided to make further provision in the Company for doubtful debt of R1,000,000. The current provision for doubtful debts now stands at a value of R2,750,937 against the total amount due of R3,581,895.

·      The only non-South African company where Inqo held investments on 28th February 2023 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.  The consequences of this are that the full loans made by Inqo with a value of R728,715 have been impaired and a provision for doubtful debts raised against interest owing of R1,057,292.

·      The drought conditions that were experienced in the Eastern Cape in the 2021/2 financial year and up to September 2022 have ended resulting in a more productive breeding season and game sale values have also recovered. The result is that the value of the buffalo herd has increased by R1,029,940 and the impairment against the cost of game has been reduced by R767,774.

·      Kuzuko Lodge has experienced a difficult trading year like so many of the other game reserves in the Eastern Cape.  Kuzuko Lodge has not recovered its pre-Covid trading levels and as a result the directors have decided to further impair the company's investment in Kuzuko Lodge by an amount of R1,476,882.

The land and buildings were revalued by an independent valuer in March 2023 in accordance with Inqo's accounting policies. The fact that the Eastern Cape has recovered from the drought experienced in previous years and that there have been sales of farmland in neighbouring areas has resulted in the value of the land and buildings being increased by R19,099,877.

·       Kuzuko Lodge (Pty) Ltd (South Africa) is a subsidiary entity that operates a Five Star game lodge designed to create jobs in an area of high unemployment and limited opportunities. The Lodge is slowly returning to pre-pandemic occupancy rates, however the tourism industry in the Eastern Cape Province has been slower to recover than in other parts of South Africa. Kuzuko management are now exploring several new avenues for marketing the lodge, in particular around the current global focus on sustainability, and expect that bookings will increase in strength over the next 12 months.

·      Inqo Africa (Pty) Ltd, is a wholly owned subsidiary formed on 27 October 2020 to facilitate with making investments in Kenya and Uganda.

·      Spekboom Trading (Pty) Ltd (South Africa) is a subsidiary, which is currently rehabilitating degraded land on the Inqo Investments Limited property through reforestation using the indigenous Spekboom shrub. Spekboom Trading also has a licence to trade carbon credits. Spekboom Trading entered into a 30-year contract with an international carbon finance specialist, Reforest Action based in Paris, France, to restore 5,185 hectares of land on Inqo's property through planting of 25 million indigenous Spekboom cuttings. The project is progressing well with planting anticipated to be complete by December 2024.

·      Four One Financial Services Limited (Uganda) is a financial services company offering specially designed products for the underserved low-income demographic in Uganda. Four One was particularly hard hit by the pandemic with its loan portfolio highly impaired resulting in a pivot towards property development. We are pessimistic about the outlook of the company due to the damage to their loan portfolio. We have provided for a full impairment of the loans payable but have not impaired the conversion loan note between the Company and Four One Financial Services.

·      Kentegra (Kenya) is a Kenyan based biotechnology firm owned by the US holding company, Kentegra Biotechnology Holdings LLC, producing pyrethrum, a natural biocide and pesticide. The company has seen significant growth over the last 12 months and has continued to refine their factory processes. We are hopeful that the business will soon achieve a positive EBITDA.

·      South Lake Medical Centre - SLMC (Kenya) is a private healthcare provider in the Naivasha region of Kenya serving predominantly low-income flower farm workers. Since investment SLMC has progressed well developing a major and minor surgical unit and a positive EBITDA. The outlook for SLMC is positive as we expect the surgical revenue to continue to grow.

·      Sanergy Incorporated (Kenya) is a circular economy organic recycling business producing high protein animal feed from black soldier fly larvae in Nairobi, Kenya. Sanergy has continued to grow their business, refining their processes and exploring new markets for their animal feed and fertilizer. The outlook for Sanergy is positive.

The company is listed on the Aquis Exchange PLC (AIM:AQX) in London. Shares on AQSE will remain exempt from Capital Gains Tax and Inheritance Tax as they were on the NEX Exchange.

·      35,617 acres (14,414 hectares) of former farmland restored as a game reserve in a region of endemic poverty in the poorest province in South Africa.

·      Increased VAT and income tax paid by Kuzuko year on year.

·      All staff living at Kuzuko in standard housing with flush toilets, power, water and solar panels.

·      Conservation of 3 endangered species.

·      Kuzuko has re-wilded 14 adult cheetah and produced 10 cubs with diverse genetics to bolster the meta-population in southern Africa. Currently there are 4 orphaned cheetah cubs on the property being re-wilded.

·      Reforestation of 500 acres (200 hectares) of degraded land with Spekboom plants providing work for 100 part-time staff and sequestering carbon in prior financial periods.

·      37 acres (15 hectares) of land between the reception area of the Lodge and the Lodge area has been replanted with various forms of vegetation to recover heavily degraded land on the property.  As part of this erosion recovery process 100,000 Spekboom cuttings have been planted.

·      2,100+ voluntary low-income savers in micro-pension and loan schemes.

·      60,033 patient visits in the first 9 months of 2022 including 101 safe deliveries, 365 HIV patients receiving care and counselling, 644 infants immunised, and 28,762 people receiving health education including, Covid-19 education, through community outreach programs in Kenya.

·      Increased the economic livelihoods of over 17,000 farmers and their families in Zambia and Kenya.

·      4,000 toilets serving 125,000 people daily in Nairobi.

·      The reforestation contract planting program, in terms of the contract signed on 5 August 2022 is in progress.  748 acres (303 hectares) of land have been planted with Spekboom cuttings by 28 February 2023.  The project currently employs between 120 and 150 local previously unemployed individuals in the planting process.

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.

The financial information set out in this announcement does not constitute statutory financial statements. This financial information has been extracted from Inqo's audited group financial statements for the year ended 28 February 2023.  A copy of these audited financial statements will be available on the Company website by 31 August 2023.

The company has not declared a dividend for the year ended 28 February 2023.

K.S Tan                                                                                              C.J Bertie

Chairman                                                                                       Chief Financial Officer

Issued on:  7 August 2023

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Inqo Investments Limited Group

Condensed consolidated statement of profit or loss and other comprehensive income

For the year ended 28 February 2023

Inqo Investments Limited Group

Condensed consolidated statement of profit or loss and other comprehensive income

For the year ended 28 February 2023

Inqo Investments Limited Group

Statements of cash flows

For the year ended 28 February 2023