Enterprise Group Limited (EGL.gh) 2018 Annual Report

We have extracted below the Chairman’s Statement from the 2018 annual report of Enterprise Group Limited (EGL.gh), listed on the Ghana Stock Exchange:

“We successfully concluded the Rights Issue to raise additional capital of $50m to undertake various strategic initiatives.”

It is my pleasure to welcome shareholders to this year’s Annual General Meeting and to present our Annual Report for 2018. There have been challenges during the year, but through it all, we have stuck to our main goal: to do our very best to meet our clients’ needs and create sustainable value for our cherished shareholders. The drive to build our core businesses in the insurance sector was passionately pursued notwithstanding the challenging environment.

The year 2018 was the first full year with our new partners, Black Star Holdings Limited. The partnership started on a very positive note with effective collaboration to improve our offerings, and ensuring that the key risks faced by our businesses are managed in a well-coordinated and holistic manner.

We successfully concluded the Rights Issue to raise additional capital of $50m to undertake various strategic initiatives. I wish to inform you that we have completed the buyback from Black Star Holdings of 9% additional shares in Enterprise Life, 15% additional shares in Enterprise Insurance and 20% additional shares in Enterprise Trustees at a total cost of US$29.9m. Similarly, we concluded the sale to Black Star Holdings of 30% shares in Enterprise Properties at a value of USD$10.9m.

Currently, therefore EGL now has the following shareholding in the operating companies; 60% in Enterprise Life, 80% in Enterprise Trustees, 75% in Enterprise Insurance and 70% in Enterprise Properties. We also started the process to enter the Nigerian financial services market and we expect some positive outcomes in the course of this year. We have also identified a strategic partner for our Health Insurance initiative and now expect to move with more purpose on the project. Let me assure shareholders that the money raised in the rights issue will be used for the purposes set out in our prospectus at the time.

Review of 2018

2018 was expected to build upon the economic gains made in 2017, however the economic environment turned out to be tougher than anticipated. The financial sector was stressed with the continuation of the cleaning of the banking sector by the Central Bank ahead of the 31 December 2018 deadline of meeting the new minimum capital of ₵400m. The Stock Market went southwards in 2018 with the Composite Index declining by 0.29% and the Financial Index following suit at 6.79% decline. Our share price also reflected the general performance of the GSE to close the year at ₵2.24 from a high of about ₵5 per share during the year. The cedi experienced higher depreciation at 9% against the US dollar compared to prior year.

Notwithstanding these difficulties, economic indicators trended positively. GDP for the first three quarters trended positively at a 6.1% average. Inflation ended the year at 9.4% from the 2017 level of 11.8% whilst the Bank of Ghana Policy rate also saw a 300 basis point decline from 20% to 17% in December 2018. Government continued its tight fiscal discipline and pursed initiatives that ensured there were no slippages in policy. Revenue mobilisation was given further impetus during the year with the introduction of some tax interventions like the Luxury Vehicle Levy, the conversion of the NHIL and GETFUND portion of the VAT to a special levy and the increase in PAYE income tax to 35%. Rebasing of the economy also reduced the debt to GDP ratio to about 63%.

2019 Outlook

We expect government to consolidate gains made on the fiscal and macro economic fronts over the past two years. 2019 being the third year in office of this administration, greater focus will be shifted to infrastructure development as articulated in the Budget and Economic Policy. This we expect will increase liquidity in the economy and generate more business opportunities. Government has forecasted a GDP growth rate of 6% for 2019

Business Performance

Overall, our performance for 2018 shows our determination to continually improve irrespective of the tough prevailing conditions in the business environment. We grew our net income by 12% as against 28% in 2017. Profit after tax went up by only 2% compared to 27.9% in 2017, due to impairments made on receivables and interest paid on the SCB loan.

Our drive to grow across all our subsidiaries continued to be our focus. Enterprise Life retained market leadership with a market share of 26.6%. Enterprise Insurance attained market leadership of the general insurance sector for the first time in 2018 with a market share of 14.5%. Enterprise Trustees, our pensions business, had a total of ₵3bn Assets under Management maintaining their leadership of the sector with 28% market share. Transitions, our Funeral Services business, has already built a good image in their first full year of operations

Share price performance and Dividend

The overall performance of the Ghana Stock Exchange in 2018 was negative compared to 2017. Generally, investor perception of the problems in the banking sector fuelled the decline experienced on the GSE. Enterprise Group’s share price was not insulated from the negative performance on the GSE. Our share price ended the year at ₵2.24 bringing our total market capitalisation to ₵383m. As is our usual practice, Enterprise Group actively engaged with interested shareholders and prospective investors to provide relevant information and explanation. Management also participated in a Facts Behind the Figures session organised by the GSE. It was highly interactive and very successful. The Board remains confident in the real and growing long term value shown by our strong actuarial position and financial performance .

In 2017, the Board felt it was not prudent to declare any dividend in view of the process to raise additional capital through the Rights Issue. Therefore, there was no dividend paid for 2016 and 2017. On consideration of the Group’s performance, and the Directors confidence in future prospects, the Board is proposing a final dividend of GH¢0.045 per share for 2018.

Board Changes

At the Board level, I welcome Mrs Amina Oyagbola to the Board of Enterprise Life Assurance Company Limited. I am very thankful to Amina for accepting to be part of our Board. It is my sincere believe that her experience, expertise and insights in the West African business space particularly in the Nigerian market will bring new impetus to our deliberations.. Inflation is projected to come within the band of 8% plus or minus 2%. Fiscal and monetary policy discipline will be key in the post IMF era to ensure sustainable development.

Conclusion

As I move round the various businesses within Enterprise Group, I am impressed by how true we are to our core values. I would like to take this opportunity to say thank you to everyone at Enterprise Group who has gone the extra mile this year in serving our customers, partners, communities and shareholders. The Board is grateful for our management team, led by our CEO, Keli Gadzekpo, who continues to guide and manage effectively. They are ably supported by staff who are passionate about their work. At the recent Ghana Human Resources Innovation Awards held in February this year, Enterprise Group was awarded the HR Innovation of the year. Our Group CEO was recognised as the Most-People Focused CEO and our Group Head of HR featured in the Top 20 HR Leaders. I am very proud of these achievements and congratulate everyone who played a part.

My report cannot be complete without thanking you, our shareholders, for your continued trust and investment. I am pleased with what was achieved in 2018, and I am excited about the opportunities that lie ahead.

Trevor Trefgarne
Chairman
Enterprise Group Limited