AMDP Investment Proposal

To: Clark Hansen

From: Raphavel Koudounaris, Analyst (AMDP)

Date: March 6th, 2024

Subject: Innscor Africa Limited (JAL) - The Investment You Need

"Why should you invest in Innscor" is the wrong question, Mr Hansen.

"Why should you not invest in Innscor" is the right question, and unfortunately, I do not have the answer to it.

Innscor Africa Limited is a consumer goods company based in Zimbabwe, that thrives itself on social and environmental responsibility. After much analysis, it is recommended that AMDP goes forward with investing in IAL. We will first go over the AMDP guidelines, and where our ethics and motivations lie,

from an investing perspective. Following this, we will do an in-depth dive about Innscor Africa Limited, the financials, and how they are attempting to constantly improve the environmental and social situation in their operations, despite being present in highly difficult economic and political situations.

AMDP

AMDP invests in companies that are not only profitable, but companies that undergo operations in a highly environmentally friendly, and socially responsible manner. These guidelines below demonstrate the pillars of our investment strategy:

Triple Bottom Line

A business should have three main priorities:

People - create masses value for people and. bettering the lives of others.

Profit - generate great cash flow that benefits shareholders.

Planet - have a positive impact on the planet and the environment. (Kenton, 2023)

We invest in business that put these three pillars on the forefront of their mission.

Social Enterprise

A business with specific social objectives that serve its primary purpose. They use a

portion of their profits to better the community. (Barone, 2022)

We invest in companies that want to have a positive impact on society and customers.

Carbon Footprint

A carbon footprint is the total amount of greenhouse gases that are generated by our

actions. In a business sense, it is the amount of greenhouse gases produced by their

operations (fossil-fuel combustion in the manufacturing process. (The Nature

Conservancy, 2023)

We invest in companies that do their best to minimize their carbon footprint.

Corporate Social Responsibility

A business self-regulation whereby they have a critical commitment to contributing to

the well-being of society, the environment, and people through their business

operations. In essence, it is a when companies constantly look to improve society in

any way they can. (Fernando, 2024)

We invest in companies that want the very best for society and the environment.

Overview of Innscor Africa Limited

"Our vision is to improve the quality of life of the customers in our chosen target

markets and thereby create and unlock value for all our stakeholders. We do this by

bringing access to best value consumer staple goods at the lowest relative price." This

statement just shows you the quality of the group, and how their motivation is not

monetary.

Innscor was founded in 1987 in Harare, Zimbabwe. Initially, it started as a fast-food

chicken shop, however over the course of its life, it has developed into a manufacturer

of consumer staple and durable goods for the mass market. Here are the main product

offerings:

- Bread

- Flour

- Maize

- Chicken and table eggs

- FMCG (Fast moving consumer goods)

- Dairy & Dairy Blends

- Stockfeed & petfood

- Packaging

Since 1998, Innscor has grown into different food sectors, and is composed of many

different brands. They are viewed as not only a provider of food, but a company that

impacts society in very beneficial way. They do what they can in difficult and

challenging economic and political environments to impact the country in a positive

way.

Zimbabwe Economic Situation

Before we get into financials, Zimbabwe's inflation rate is usually over 10,000%

annually, with an interest rate of 200%. This year, a new Zimbabwean stock exchange

was introduced - The Victoria Falls Stock Exchange, and it allowed companies to report

in the US Dollar, instead of the local currency. The 2023 values are USD values,

however the previous years, we are unsure what the real amount is as a lot of the

money received by the company was inflated, devalued local Zimbabwe currency. For

the simplicity of this exercise, we will only look at current metrics as they are the most

realistic and reliable.

Financials

- Turnover (2023) was $804 million.

- Net Income (2023) was $38.7 million.

- Dividend pay-out (2023) was $18.9 million.

- Growth Capital Expenditures (2023) was $78 million.

- Cash flow generated from operating activities (2023) was $112 million.

Other metrics:

- Profit margin of 4.8% (for every dollar in sales, there is profit of $0.048)

- Return on Equity of 9.23% (they generate $0.0923 in profit for every dollar in

equity)

Fig 1 illustrates Innscor's revenue since 2019. Whilst inflation is present, a lot of Innscor's sales were in the US Dollar. The 2023 values are in the US Dollar. As we can see, this graph, combined with the other metrics mentioned above, highlights that the company performs at great quality. We can further see that Innscor invests almost all of the cash flow they generate from operations in growing the company: 90% of the total capital expenditures was Growth Capex- meaning investing in new factories, plants, and other elements that increase the capacity, and productivity of the company.

Company Credibility and Claims

Innscor prides itself on their morality, honesty, and quality provided to all of their customers. Some of which are mentioned below:

- ISO 9001 [Quality Management system

- ISO 22000 [Food Safety Management System]

- ISO 14001:2015 Environmental Management System

- ISO 45001:2018 [Occupational Health & Safety Management System]

- ISO 17025 [Competence of testing and calibration laboratories]

- FSSC 22000 [Food Safety Management]

These are all the standards to which they obtain by constant audit and check from health organizations, the government, and any other institutions. Innscor's most critical purpose is bettering the lives of those living in Zimbabwe. Out of the vast social awareness actions that are taken by Innscor, here are a few that came to mind:

-Kidzcan Zimbabwe - private humanitarian Child centres dedicated to increasing

the survival rate of children with cancer and blood related disorders in

Zimbabwe.

- subsidiary (National Foods Limited) provides monthly support to 50 carefully

selected in vulnerable communities.

- A subsidiary (Bakers Inn) made $300,000 in charitable contributions to under

privileged populations (in cash and product), equating to serving over 10,000

people daily.

8,000 loaves of bread donated to children's orphanages per week, health centres, and

other vulnerable communities, equating to almost 420,000 loaves of bread over

the year.

- A subsidiary (Profeeds) training 3,000 underprivileged citizens on how to farm,

how to raise livestock, and how to be self-sufficient farmers. (This is by one

subsidiary; all of the others do the same in their respective industry)

Investing more than 70% of their cash flow back into the business to improve the

quality of work life, expanding the facilities to provide more jobs, and to better

Zimbabwe.

Innscor places heavy emphasis on the health and wellbeing of their employees. Below

are the two major elements, amongst many others:

Free health care and access to hospitals specifically for Innscor employees at

all levels, on the business sites. (25,000 onsite visits, and 24,000 offsite visits in

the 2023 Financial Year)

- Employee Share Trust (EST) - a trust setup to empower employees and develop

a sense of belonging amongst them. In 2023, the Trust received a dividend of $1

million dollars. Additionally, the trust allows employees to take out short term

and long-term loans towards their personal needs.

- subsidiary (Colcom & Irvine's) provides access to education for employee

families and local communities through primary schools located on their farms

or by transporting children to their nearby schools.

to be continued