Discontinued operations
In December 2017, management committed to a plan to discontinue the UK Contract Distribution (CD) business segment which operates in the United Kingdom. The CD business segment is a component of the Group's United Kingdom business, the operations and cash flows of which can be clearly distinguished from the rest of the Group. By June 30 2018, Bidcorp was close to finalising its proposed exit from this non-core segment. Post-June 30 2018, the prospective purchaser of the CD business notified Bidcorp that for its own internal reasons, it has decided not to proceed with the transaction. The CD business remains a non-core activity in respect of Bidcorp's global foodservice operations. Accordingly, Bidcorp pursued alternative exit proposals, and engaged in a formal sale process, managed by independent advisers. The sale process is ongoing at June 30 2019. The process is at an advanced stage and management is optimistic of a successful conclusion to these negotiations. Any transaction would still subject to regulatory competition commission approval, which is anticipated to take up to four months to complete.
PCL's performance for the year was disappointing. Towards the end of 2018, following a dispute with Arla, management committed to exit the PCL business by either selling the PCL transport operations to Arla or to close down the PCL business. At June 30 2019, the PCL transport operations had been sold to Arla and the sales process/exit of the remaining insignificant warehousing and handling components are ongoing at June 30 2019.
The comparative consolidated statement of profit or loss and the consolidated statement of cash flows has been re-presented as a result of classifying the remaining UK logistics' activity, PCL, as a discontinued operation. The results of the discontinued operations included in the Group's results are detailed below:
| R000s | 2019 Audited |
2018 Audited Re-presented |
|||
|---|---|---|---|---|---|
| Revenue | 19 502 386 | 19 408 282 | |||
| Cost of revenue | (16 838 559) | (16 686 301) | |||
| Gross profit | 2 663 827 | 2 721 981 | |||
| Operating expenses | (3 049 910) | (3 353 932) | |||
| Trading loss | (386 083) | (631 951) | |||
| Share-based payments | (2 414) | (3 110) | |||
| Capital items | (470 514) | (145 545) | |||
| Operating loss | (859 011) | (780 606) | |||
| Net finance charges | (12 326) | (8 459) | |||
| Finance income | 193 | 45 | |||
| Finance charges | (12 519) | (8 504) | |||
| Loss before taxation | (871 337) | (789 065) | |||
| Taxation relief | 139 368 | 126 352 | |||
| Loss for the year from discontinued operations | (731 969) | (662 713) | |||
| The following adjustments to loss attributable to shareholders were taken into account in the calculation of discontinued headline loss: | |||||
| Loss attributable to shareholders of the company from discontinued operations | (731 969) | (662 713) | |||
| Impairments | 383 907 | 145 394 | |||
| Intangible assets | 465 147 | – | |||
| Property, plant and equipment | – | 3 408 | |||
| Goodwill | – | 142 137 | |||
| Taxation relief | (81 240) | (151) | |||
| Loss on disposal of intangible assets and property, plant and equipment | 4 347 | – | |||
| Intangible assets | 3 185 | – | |||
| Property, plant and equipment | 2 182 | – | |||
| Taxation relief | (1 020) | – | |||
| Headline loss from discontinued operations | (343 715) | (517 319) | |||
| Basic loss per share (cents) | (219,6) | (199,2) | |||
| Diluted basic loss per share (cents) | (219,2) | (198,6) | |||
| Headline loss per share (cents) | (103,1) | (155,5) | |||
| Diluted headline loss per share (cents) | (103,0) | (155,0) |
| R000s | 2019 Audited |
2018 Audited |
|||
|---|---|---|---|---|---|
| Effect of the discontinued operations on the statement of financial position of the Group | |||||
| Assets classified as held-for-sale | 2 944 460 | 2 590 657 | |||
| Property, plant and equipment | 323 355 | 212 090 | |||
| Intangible assets | 5 871 | 7 437 | |||
| Deferred tax asset | 6 952 | 1 338 | |||
| Investments and loans | 434 | 440 | |||
| Inventories | 523 457 | 428 733 | |||
| Trade and other receivables | 1 687 617 | 1 161 229 | |||
| Taxation | 114 368 | 101 043 | |||
| Cash and cash equivalents | 282 406 | 678 347 | |||
| Liabilities classified as held-for-sale | 3 116 633 | 2 613 207 | |||
| Deferred tax liability | 11 704 | 6 476 | |||
| Long-term portion of provisions | 128 056 | 30 013 | |||
| Trade and other payables | 2 976 873 | 2 576 718 | |||
| R000s | 2019 Audited |
2018 Audited Re-presented |
|||
|---|---|---|---|---|---|
| Cash flows from discontinued operations | |||||
| Net operating cash flows from discontinued operations | (582 319) | 51 273 | |||
| Net investing cash flows from discontinued operations | (50 137) | (16 319) | |||
| Net (decrease) increase in cash and cash equivalents | (632 456) | 34 954 |
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 | 2019 Audited |
2018 Audited Represented |
|||
|---|---|---|---|---|---|
| Capital expenditure approved | |||||
| Contracted for | 1 113 122 | 831 471 | |||
| Not contracted for | 1 188 901 | 1 015 846 | |||
| 2 302 023 | 1 847 317 | ||||
| Capital expenditure split | |||||
| Property, plant and equipment | 2 171 767 | 1 794 724 | |||
| Computer software | 130 256 | 52 593 | |||
| 2 302 023 | 1 847 317 |
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 |
Total | Level 1 | Level 2 | Level 3 | |||||
| June 30 2019 | ||||||||||||||
| Financial assets measured at fair value | – | 55 115 | – | – | – | 55 115 | – | – | 55 115 | |||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Financial liabilities measured at fair value | (336 620) | – | (275 144) | (1 126 128) | (103 882) | (1 841 774) | – | – | (1 841 774) | |||||
| June 30 2018 | ||||||||||||||
| Financial assets measured at fair value | – | 56 288 | – | – | – | 56 288 | – | – | 56 288 | |||||
| Financial liabilities measured at fair value | (356 522) | – | (300 315) | (1 122 068) | (234 709) | (2 013 614) | – | – | (2 013 614) | |||||
Valuation techniques and significant unobservable inputs
Valuation technique
The expected payments are determined by considering the possible scenarios of forecast EBITDAs, 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
|
3% – 35% (2018: 5% – 15%) |
|
5,8x – 10x (2018: 5,5x – 8,5x) |
|
1,99% – 9,0% (2018: 0,5% – 9,0%) |
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 | |||
| 2019 | 2018 | ||
|---|---|---|---|
| Rand/Sterling | |||
| Closing rate | 17,82 | 18,06 | |
| Average rate | 18,35 | 17,27 | |
| Rand/Euro | |||
| Closing rate | 15,97 | 16,00 | |
| Average rate | 16,18 | 15,30 | |
| Rand/Australian Dollar | |||
| Closing rate | 9,87 | 10,15 | |
| Average rate | 10,14 | 9,94 | |