Inqo Investments Limited

Unaudited Group Results for the period ended 31 August 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 R285,367,338 and minimal debt.

The funds that the Company received from Belmont University in the latter part of the 2022/3 financial year and the new shareholder funds received in the early part of the current 2023/4 financial year will be used to develop Inqo's Conservation and Rural Enterprise (CARE) project that will invest in businesses that tackle social and environmental issues in and around the Budongo Forest in Uganda. The first investment of the CARE project is an eco-lodge that will help create jobs, generate value from conservation for local communities and fund reforestation in the local area. Plans for the lodge have been approved and construction will begin in the third quarter of 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 corresponding speed of recovery has varied across investee companies. Despite the challenges being faced, the directors of the Company have assessed the Company and its subsidiaries and agree that the operating units will continue as a going concern.

The results for the period under review showed revenue of R7,366,899 (August 2022: R3,389,258) with a profit after tax of R57,444,000 (August 2022: loss of R4,327,761). The primary reason for the profit before tax position is due to the grant income recognised between 1 September 2022 and 31 August 2023 for the cost of planting Spekboom cuttings on the property through the Reforest Action carbon credit contract.

The profit for the period is reported after accounting for the following income and cost items:

In August 2023, 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 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, whilst steadily improving, has not yet returned to pre Covid-19 occupancies and still operates at a loss. Inqo has provided for impairment of Kuzuko receivables to the value of R2,750,937 against the total amount due of R4,076,944.  

·      There have been major operational changes at Kuzuko Lodge in that the group has decided, effective 31 October 2023, to part ways with the management company, Legacy Hospitality Management Services (Pty) Ltd.  This parting of ways has been entered into in a very fair, balanced and equitable manner.

·      Mr J. Tan was appointed CEO of Kuzuko Lodge in July 2023 and he is now working with his fellow directors to put in place a new and effective management structure.  The building of the new management unit is operating smoothly and on track to be fully operational before the summer season begins in November 2023.

·      The game on the property has not seen any major change in numbers on the land or in value and therefore there are no material changes in the game valuation at 31 August 2023.

·      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 R753,537 have been impaired and a provision for doubtful debts have been raised against interest owing of R1,217,613.

The land and buildings are in terms of Inqo's accounting policies to be revalued every two years by an independent valuer.  The valuation was done in March 2023 as required.  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 resulted in the land and buildings having increased in value by R19,099,881.

·       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 (South Africa), is a wholly owned subsidiary formed on 27 October 2020 to facilitate with the acquisition of investments in Kenya and Uganda. The group investment in Sanergy Incorporated is held by Inqo Africa (Pty) Ltd.

·      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 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 trees. 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.

·      63,423 patient visits in the first 9 months of 2023 including 386 HIV patients receiving care and counselling, 5,599 people receiving health education including through community outreach and 149 surgeries in the new surgical unit which is the only surgical facility at the southern end of Lake Naivasha, 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.  5,701 acres (2,307 hectares) of land have been planted with Spekboom cuttings by 31 August 2023.  The project currently employs between 200 and 250 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 unaudited group financial statements for the period ended 31 August 2023.

The company has not declared a dividend the period ended 31 August 2023.

K.S Tan                                                                                              C.J Bertie

Chairman                                                                                       Chief Financial Officer

Issued on: 29 November 2023

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Condensed consolidated statement of profit or loss and other comprehensive income

for the six months ended 31 August 2023

Condensed consolidated statement of financial position

as at 31 August 2023