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)                    
R000 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 2020                                      
Financial assets measured at fair value  –  32 264 –                  32 264         –  –  32 264   
Financial liabilities measured at fair value (4 632 682) (73 150)       (55 262) (204 188)       (4 965 282)       –  –  (4 965 282)  
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)  

VALUATION TECHNIQUES AND SIGNIFICANT UNOBSERVABLE INPUTS

Valuation technique

The expected payments are determined by considering the possible scenarios of forecast EBITDA’s, 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

> Average EBITDA growth rates: 10% (2019: n/a)
> EBITDA multiples: 10,5x (2019: 7,0x)
> Risk-adjusted discount rate: 1,7% (2019: 1,99%)

Sensitivity analysis on changes in significant variable unobservable inputs for puttable non-controlling interests (liability)

  Increase in 
assumption 
Increase in 
liability 
R000 
      Decrease in 
assumption 
Decrease in 
liability 
R000 
 
Average EBITDA growth rate (4 632 682) (73 150)       (55 262) (204 188)  

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)