Discontinued operation
In December 2017, management committed to a plan to discontinue the UK Contract Distribution (CD) business. As a result, this operation has been classified as a discontinued operation.
CD was not previously classified as held-for-sale or as a discontinued operation. The comparative consolidated statement of profit or loss and OCI has been re-presented to show the discontinued operation separately from continuing operations.
The relevant requirements of IFRS 5 have been met for this classification.
The results of the discontinued operation included in the Group’s results for the year ended June 30, are detailed below:
| R000s | 2018 Audited |
2017 Audited |
|||
| Revenue | 18 254 268 | 20 458 449 | |||
|---|---|---|---|---|---|
| Cost of revenue | (16 686 301) | (18 622 873) | |||
| Gross profit | 1 567 967 | 1 835 576 | |||
| Operating expenses | (2 194 450) | (1 814 230) | |||
| Trading (loss) profit | (626 483) | 21 346 | |||
| Share-based payment expense | (3 110) | (3 456) | |||
| Impairment of property, plant and equipment | (793) | (21 366) | |||
| Operating loss | (630 386) | (3 476) | |||
| Net finance charges | (5 226) | (3 446) | |||
| Finance income | 5 | 11 | |||
| Finance charges | (5 231) | (3 457) | |||
| Loss before taxation | (635 612) | (6 922) | |||
| Taxation | 106 283 | (4 317) | |||
| Loss for the year from discontinued operation | (529 329) | (11 239) | |||
| The following adjustments to profit attributable to shareholders were taken into account in the calculation of discontinuing headline (loss) earnings: | |||||
| Loss attributable to shareholders of the company from discontinuing operation | (529 329) | (11 239) | |||
| Impairment of property, plant and equipment | 793 | 21 366 | |||
| Taxation relief | (151) | (4 060) | |||
| Headline (loss) earnings from discontinued operation | (528 687) | 6 067 | |||
| Basic loss per share (cents) | (159,1) | (3,4) | |||
| Diluted basic loss per share (cents) | (158,6) | (3,4) | |||
| Headline (loss) earnings per share (cents) | (158,9) | 1,8 | |||
| Diluted headline (loss) earnings per share (cents) | (158,5) | 1,8 |
| R000s | 2018 Audited |
|||
| Effect of the discontinued operation on the statement of financial position of the Group | ||||
| Assets classified as held-for-sale | 2 590 657 | |||
| Property, plant and equipment | 212 090 | |||
| Intangible assets | 7 437 | |||
| Deferred taxation asset | 1 338 | |||
| Investments and loans | 440 | |||
| Inventories | 428 733 | |||
| Trade and other receivables | 1 161 229 | |||
| Taxation | 101 043 | |||
| Cash and cash equivalents | 678 347 | |||
| Liabilities classified as held-for-sale | 2 613 207 | |||
| Deferred taxation liability | 6 476 | |||
| Long-term portion of provisions | 30 013 | |||
| Trade and other payables | 2 576 718 | |||
| R000s | 2018 Audited |
2017 Audited |
||
| Cash flows from discontinued operation | ||||
| Net operating cash flows from discontinued operation | 36 227 | (258 291) | ||
| Net investing cash flows from discontinued operation | (12 491) | (15 384) | ||
| Net increase (decrease) in cash and cash equivalents | 23 736 | (273 675) |
Capital commitments
The board of directors’ policy is to maintain a strong capital base so as to sustain future development of the businesses so that it can continue to provide benefits to its shareholders.
| R000s | 2018 Audited |
2017 Audited |
||
| Capital expenditure approved | ||||
| Contracted for | 831 471 | 675 164 | ||
| Not contracted for | 1 015 846 | 873 494 | ||
| 1 847 317 | 1 548 658 | |||
| Capital expenditure split | ||||
| Property, plant and equipment | 1 794 724 | 1 515 614 | ||
| Computer software | 52 593 | 33 044 | ||
| 1 847 317 | 1 548 658 |
It is anticipated that capital expenditure will be financed out of existing cash resources.
Financial instruments
Fair value hierarchy
When measuring the fair value of an asset or a liability, the Group uses market observable data as far as possible. Fair values are categorised into different levels in a fair value hierarchy based on the inputs used in the valuation techniques categorised as follows:
- Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.
- Level 2: inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).
- Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).
The following table shows the carrying amounts and fair values of financial assets and financial liabilities, including their levels in the fair value hierarchy for financial instruments measured at fair value. It does not include fair value information for financial assets and financial liabilities not measured at fair value if the carrying amount is a reasonable approximation of fair value.
| Non-current assets (liabilities) | Current assets (liabilities) | ||||||||||||
| R000s | Puttable non- controlling interests |
Invest- ments |
Vendors
for acquisition |
Puttable non- controlling interests |
Vendors
for acquisition |
||||||||
| June 30 2018 | |||||||||||||
| Financial assets measured at fair value | – | 56 288 | – | – | – | ||||||||
| Financial liabilities measured at fair value | (356 522) | – | (300 315) | (1 122 068) | (234 709) | ||||||||
| June 30 2017 | |||||||||||||
| Financial assets measured at fair value | – | 54 504 | – | – | – | ||||||||
| Financial liabilities measured at fair value | (118 028) | – | (82 377) | (1 077 168) | (379 474) | ||||||||
| R000s | Total | Level 1 | Level 2 | Level 3 | |||||
| June 30 2018 | |||||||||
| Financial assets measured at fair value | 56 288 | – | – | 56 288 | |||||
| Financial liabilities measured at fair value | (2 013 614) | – | – | (2 013 614) | |||||
| June 30 2017 | |||||||||
| Financial assets measured at fair value | 54 504 | – | 1 848 | 52 656 | |||||
| Financial liabilities measured at fair value | (1 657 047) | – | – | (1 657 047) |
Valuation techniques and significant unobservable inputs
Valuation technique
The expected payments are determined by considering the possible scenarios of forecast EBITDA, the amount to be paid under each scenario and the probability of each scenario. The valuation models consider the present value of expected payment, discounted using a risk-adjusted discount rate.
Significant unobservable inputs
| – EBITDA growth rates: | 5% – 15% (2017: 10% – 23%) |
| – EBITDA multiples: | 5,5x – 8,5x (2017: 4,8x – 7x) |
| – Risk-adjusted discount rate: | 0,5% – 9,0% (2017: 1,99% – 5,0%) |
Inter-relationship between significant unobservable inputs and fair value measurement
The estimated fair value would increase (decrease) if:
– the EBITDA was higher (lower); or
– the risk-adjusted discount rate were lower (higher).
Exchange rates
The following exchange rates were used in the conversion of foreign interests and foreign transactions for the year ended:
| June 30 | ||||
| 2018 Audited |
2017 Audited |
|||
| Rand/Sterling | ||||
| Closing rate | 18,06 | 16,80 | ||
| Average rate | 17,27 | 17,29 | ||
| Rand/Euro | ||||
| Closing rate | 16,00 | 14,78 | ||
| Average rate | 15,30 | 14,85 | ||
| Rand/Australian dollar | ||||
| Closing rate | 10,15 | 9,93 | ||
| Average rate | 9,94 | 10,27 | ||