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Basis of presentation of summary consolidated financial statements


The summary consolidated financial statements are prepared in accordance with the JSE Limited Listings Requirements for provisional reports, and the requirement of the Companies Act of South Africa applicable to summary financial statements. The Listings Requirements require provisional reports to be prepared in accordance with the framework concepts and the measurement and recognition requirements of International Financial Reporting Standards (IFRS) and the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee and Financial Reporting Pronouncements as issued by Financial Reporting Standards Council, and to also, as a minimum, contain the information required by IAS 34 Interim Financial Reporting. The accounting policies applied in the preparation of the consolidated financial statements from which the summary financial statements were derived are in terms of IFRS.

The consolidated financial statements adopted the following new accounting pronouncements:

Accounting pronouncement   Adoption impact
Definition of Material – Amendments to IAS 1 and IAS 8  

The IASB made amendments to IAS 1 Presentation of Financial Statements and IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors which use a consistent definition of materiality throughout International Financial Reporting Standards and the Conceptual Framework for Financial Reporting, clarifying when information is material and incorporating some of the guidance in IAS 1 about immaterial information. The amendment did not have a material impact for the group.

Definition of a Business – Amendments to IFRS 3  

The amended definition of a business requires an acquisition to include an input and a substantive process that together significantly contribute to the ability to create outputs. The definition of the term ‘outputs’ is amended to focus on goods and services provided to customers, generating investment income and other income, and it excludes returns in the form of lower costs and other economic benefits. The amendment did not have a material impact for the group as our acquisitions generate outputs through the selling of frozen, chilled, ambient, and non-food products (goods) to customers.

Conceptual Framework  

The IASB also issued amendments to references to the Conceptual Framework in IFRS Standards. The document contains amendments to IFRS 2, IFRS 3, IFRS 6, IFRS 14, IAS 1, IAS 8, IAS 34, IAS 37, IAS 38, IFRIC 12, IFRIC 19, IFRIC 20, IFRIC 22, and SIC-32. The amendments did not have a material impact for the group.

Phase 2 amendments – Interest rate benchmark to IFRS 7, IFRS 9 and IAS 1  

The Phase 2 amendments address issues that arise from the implementation of the reform of an interest rate benchmark, including the replacement of one benchmark with an alternative one. The amendment did not have a material impact for the group.

Other than the adopted amendments above, the accounting policies are consistent with those accounting policies applied in the preparation of the previous consolidated annual financial statements.

AUDIT REPORT

These summary consolidated financial statements for the year ended June 30  2021 have been audited by PricewaterhouseCoopers Inc. (PwC). The auditor expressed a modified opinion on the annual consolidated financial statements from which these summary consolidated financial statements were derived. The basis of the modification is in relation to the Miumi fraud, where PwC was unable to obtain sufficient and appropriate audit evidence to conclude whether the recorded loss is complete, and whether the amounts allocated by management to each respective financial year, and the related presentation and disclosures, are accurate.

A copy of the auditor’s report on the summary consolidated financial statements and of the auditor’s report on the annual consolidated financial statements are available for inspection on the company’s website and at the company’s registered office, together with the financial statements identified in the respective auditor’s reports.

The auditor’s report does not necessarily report on all of the information contained in this announcement. Shareholders are therefore advised that in order to obtain a full understanding of the nature of the auditor’s engagement they should obtain a copy of the auditor’s report together with the accompanying financial information from the issuer’s registered office.

PREPARATION AND RESULTS

These summary consolidated financial statements have been prepared by CAM Bishop CA(SA), under the supervision of DE Cleasby CA(SA) and were approved by the board of directors on September 29  2021.

The directors are responsible for the preparation of the preliminary report and the correct extraction of the financial information from the financial statements.

FORWARD-LOOKING STATEMENT

This announcement may contain forward-looking statements regarding financial prospects of the group and specific businesses. By their nature, forward-looking statements involve risk and uncertainty, and although we have taken reasonable care to ensure the accuracy of the information presented, no assurance can be given that such expectations will prove correct.

EXCHANGE RATES

The following exchange rates were used in the conversion of foreign interests and foreign transactions for the year ended:

  Statement of comprehensive
income (average)
  Statement of financial
position (spot)
Currency conversion guide at June 30 2021 2020   2021   2020
Rand/Sterling 20,72 19,73   19,79   21,37
Rand/Euro 18,35 17,31   16,99   19,46
Rand/Australian dollar 11,49 10,50   10,74   11,92
Rand/New Zealand dollar 10,69 9,96   9,99   11,14
Rand/Hong Kong dollar 1,98 2,01   1,84   2,24
Rand/Singapore dollar 11,43 11,32   10,64   12,43
Rand/Czech koruna 0,70 0,67   0,67   0,73
Rand/Polish zloty 4,07 3,97   3,76   4,37
Rand/Brazilian real 2,85 3,51   2,88   3,19
Rand/US dollar 15,38 15,65   14,30   17,33
Rand/Chilean peso 0,02 0,02   0,02   0,02
Rand/United Arab Emirates dirham 4,19 4,26   3,89   4,72
Rand/Turkish lira 1,99 2,56   1,64   2,53

Supplementary pro forma information regarding the currency effects of the translation of foreign operations on the group

for the year ended June 30


The pro forma financial information has been compiled for illustrative purposes only and is the responsibility of the board. Due to the nature of this information, it may not fairly present the group’s financial position, changes in equity and results of operations or cash flows. An unmodified reasonable assurance report has been issued by the group’s auditor, PricewaterhouseCoopers Inc. in terms of ISAE 3420 Assurance Engagements to Report on the Compilation of the Pro Forma Information in a Prospectus, and is available for inspection at the company’s registered office. The pro forma information has been compiled in terms of the JSE Listings Requirements and the Revised Guide on Pro Forma Information by SAICA and in a manner consistent with group’s accounting policies.

The illustrative information, detailed below, has been prepared on the basis of applying the 2020 average rand exchange rates, above, to the 2021 foreign subsidiary income statements and recalculating the reported revenue, trading profit, headline earnings, and headline earnings per share of the group for the year ended June 30  2021.

          Illustrative 2021 at 2020
average exchange rates
 
R’000 2021
Audited
Restated
2020
Audited
%
change
  2021
Pro forma
%
change
 
Continuing operations              
Revenue 114 803 442 120 574 182 (4,8)   109 484 856 (9,2)  
Trading profit 4 787 652 4 067 161 17,7   4 505 568 10,8  
Headline earnings 2 900 878 2 380 704 21,8   2 703 622 13,6  
Headline earnings per share (cents) 868,4 712,7 21,8   809,3 13,6  
Constant currency per segment from continuing operations              
Revenue              
   Australasia1 33 010 216 28 986 744 13,9   30 377 505 4,8  
   United Kingdom2 24 955 373 31 462 683 (20,7)   23 767 297 (24,5)  
   Europe3 35 706 221 40 199 177 (11,2)   33 859 431 (15,8)  
   Emerging Markets4 21 131 632 19 925 578 6,1   21 480 622 7,8  
  114 803 442 120 574 182 (4,8)   109 484 855 (9,2)  
Trading profit              
   Australasia1 2 489 692 1 923 857 29,4   2 289 490 19,0  
   United Kingdom2 394 303 666 755 (40,9)   367 898 (44,8)  
   Europe3 1 086 046 958 081 13,4   1 032 528 7,8  
   Emerging Markets4 923 551 589 352 56,7   918 833 55,9  
   Corporate office5 (105 940) (70 884)     (103 182)    
  4 787 652 4 067 161 17,7   4 505 567 10,8  

Exchange rates used in recalculating the reported revenue and trading profit:

1 Australian dollar and New Zealand dollar.
2 Sterling.
3 Euro, Czech koruna, and Polish zloty.
4 Singapore dollar, Hong Kong dollar, Chilean peso, Brazilian real, South African rand, Turkish lira, United Arab Emirates dirham.
5 Sterling, South African rand, New Zealand dollar, and Hong Kong dollar.

Restatement of consolidated annual financial statements


In late June  2021, our internal surveillance and control processes uncovered a significant and sophisticated fraud that was being perpetuated in the Miumi division of our Greater China business. This was carried out by our 10% minority shareholder in Miumi, who was also the general manager of that business, certain employees within Miumi as well as third-party service providers. All employees involved have had their employment terminated. Ernst & Young (China) Limited was appointed in early July to conduct a comprehensive forensic investigation into this fraud. However, at the time of finalising the group annual financial statements the forensic investigation is not yet complete. It is apparent that this fraud has been going on since about 2016 and has involved the manipulation of accounts receivables, prepayments, the misappropriation of inventories and unrecorded liabilities the result of which these balances have been progressively misstated over the past six years.

Miumi operates on a relatively standalone basis specialising in the global procurement of Japanese-style product (mainly seafood, meat, poultry, and dairy) for distribution into Hong Kong and China, through both the direct HORECA market, as well as through other wholesalers, particularly in China. It was in this wholesaling component that the fraud occurred. New management has been put into Miumi, the business has been significantly scaled back and all wholesaler activities have ceased. Management believe based on its own investigations, the forensic work conducted to date and on the work performed by our external auditors, PricewaterCoopers Inc., that this fraud relates only to Miumi, and that the balance of our Greater China business is not impacted and continues to trade profitably and ahead of our expectations, although COVID challenges are rapidly reappearing in that market.

Notwithstanding that the forensic investigation is not yet complete, the group has taken the prudent view by reversing the full overstated accounts receivables, prepayments, and inventory involved and providing for the unrecorded liabilities. We do, however, remain confident of some future recoveries from insurance, the perpetrators and other third parties involved. The quantum of the losses as a result of this six-year fraud are HK$253 million (R471 million) in respect of receivables and prepayments, and HK$102 million (R190 million) in respect of inventory, and an unrecorded liability of HK$18 million (R33 million), which have been adjusted as set out below. The tax deductibility of these amounts is uncertain so no provision for any tax relief has been accounted for.

The group’s best estimate based on evidence available is that the loss attributable to the statement of profit or loss for the 2021 financial year is HK$60,9 million (R121 million), around HK$47,5 million (R95 million) relates to the financial year ended June 2020 and the balance to the financial years prior to this, these rand amounts were translated at the respective average South African rand/Hong Kong dollar exchange rates for these respective financial years. These losses per financial year approximate the statement of financial position movements in the net of intercompany debt and cash related balances for Miumi, which is considered reasonable given that Miumi had little or no investment activities.

After recording the impact of the losses attributable to the Miumi fraud, the Miumi contribution of the 2021 consolidated financial statement items is:

  • Revenue: R282 million (0,25% of consolidated revenue);
  • Cost of revenue: R237 million (0,27% of consolidated cost of revenue);
  • Inventories: R33 million (0,33% of consolidated inventories);
  • Trade and other receivables: R78 million (0,58% of consolidated trade and other receivables); and
  • Trade and other payables: R68 million (0,33% of consolidated trade and other payables).

Processes followed to restate the trade and other receivables, inventory and trade and other payables at July 1  2019 and June 30  2020:

  • Trade and other receivables

    We reviewed the background of the Miumi customers that were managed by implicated Miumi employees and cross-border trading wholesalers. In addition, the fraudulent debtors were also identified by:

    if the customer used an abnormal delivery/business registration address (eg address in the People’s Republic of China (PRC), residential address, or non-existent Hong Kong business registration/operation address);
    incorrect customer name in PRC legal format (ie there is a typical naming requirement in the PRC, normally contains the PRC province/city name in the company name);
    through Angliss Greater China management review, if the customer was associated with abnormal accounting activities such as significant sales returns and trading balances that had been directly set-off with trade payable balances; and
    from the Miumi accounting records and the above fraudulent debtor approach we were able to generate a detailed sales and cost of sales transaction listing (by invoice and by customer) that identified the fraudulent trade debtor balances at July 1  2019, June 30  2020 and June 30  2021. These fraudulent trade debtor balances at these respective dates were reversed.
  • Inventory

    Due to the reliability of documentation to support the Miumi inventory balance, the following procedures/calculations were performed to determine a Miumi inventory balance at July 1  2019 and June 30 2020. Miumi specialises in the global procurement of Japanese-style product (mainly seafood, meat, poultry, and dairy) for distribution into Hong Kong and China, through both the direct HORECA market, as well as through other wholesalers particularly in China. The average inventory stock holdings for similar Angliss businesses is between 60 and 80 days stock on hand. This is supported by evidence that other Angliss PRC companies and the Miumi closing inventory balances for June 30  2021 (which have all been physically counted) are within these expected stock days on hand of 60 to 80 days. The group selected the mid-point of this range being 70 days to determine the expected Miumi inventory balances on hand at July 1  2019 and June 30  2020.

    A sensitivity analysis was done using stock days at 35, 53, 63, 77, 88 and 105 days. Results are compared against the calculated stock-holding balance of 70 days. Negatives reflect lower stock-holding numbers and positives reflect higher stock-holding numbers:

      July 1  2019
    R’000
    June 30  2020
    R’000
    Stock-holding at 35 days (50% change in assumption) (18 319) (18 525)
    Stock-holding at 53 days (25% change in assumption) (9 159) (9 263)
    Stock-holding at 63 days (10% change in assumption) (3 664) (3 705)
    Stock-holding at 77 days (10% change in assumption) 3 664 3 705
    Stock-holding at 88 days (25% change in assumption) 9 159 9 263
    Stock-holding at 105 days (50% change in assumption) 18 319 18 525

    Results from the sensitivity analysis performed are that changes in number of stock-holding days (including 50% changes) does not result in a material change to the expected Miumi inventory balance at July 1  2019 and June 30  2020 or prior period loss allocation. The calculated inventory balances at July 1  2019 and June 30  2020 is comparable to the physically counted inventory balance of HK$16,8 million (R30,9 million) at June 30  2021. The June 30  2021 Miumi inventory balance represents 0,3% of the group’s total inventory balance at June 30  2021.

  • Trade and other payables

    The unrecorded trade and other payables have been allocated to prior financial periods based on the financial years in which the loans/services were received by Miumi. No future costs were provided for and all known claims against Miumi at the time of finalising the annual financial statements have been provided for.

Net debt movements in Miumi

These losses per financial year approximate the statement of financial position movements in the net of intercompany debt and cash-related balances for Miumi, which is considered reasonable given that Miumi had little or no investment activities.

Restatement of prior period errors

The 2020 financial statements and the consolidated statement of financial position as at July 1  2019 have been restated to correct the prior period errors in relation to the identified fraud.

Statement of financial position (extract) as at July 1  2019

R’000 Reported
balance
June 30  2019
Cumulative
effects of
restatement
Restated
July 1  2019
Trade and other receivables 15 213 598 (329 192) 14 884 406
Inventory 9 703 879 (125 318) 9 578 561
Trade and other payables (18 698 495) (20 270) (18 718 765)
Net assets 28 735 967 (474 780) 28 261 187
Foreign currency translation reserve 5 263 176 2 921 5 266 097
Retained earnings 17 902 350 (477 701) 17 424 649
Total equity 28 735 967 (474 780) 28 261 187

Statement of financial position (extract) as at June 30  2020

R’000 Reported
balance
June 30  2019
Cumulative
effects of
restatement
Restated
June 30  2020
Trade and other receivables 12 289 674 (570 126) 11 719 548
Inventory 10 195 539 (98 346) 10 097 193
Trade and other payables (17 602 244) (28 347) (17 630 591)
Net assets 27 938 586 (696 819) 27 241 767
Foreign currency translation reserve 9 609 715 (123 741) 9 485 974
Retained earnings 12 593 698 (573 078) 12 020 620
Total equity 27 938 586 (696 819) 27 241 767

Statement of profit or loss (extract) for the year ended June 30  2020

R’000 Reported
balance
June 30  2020
Effects of
restatement
Restated
June 30  2020
Continuing operations      
Revenue 121 117 480 (543 298) 120 574 182
Cost of sales (91 921 749) 466 378 (91 455 371)
Gross profit 29 195 731 (76 920) 29 118 811
Operating expenses (25 033 193) (18 457) (25 051 650)
Trading profit 4 162 538 (95 377) 4 067 161
Share-based payment expense (100 774) (100 774)
Acquisition costs (1 968) (1 968)
Capital items (923 687) (923 687)
Operating profit 3 136 109 (95 377) 3 040 732
Net finance charges (710 263) (710 263)
Share of profit of associates and jointly controlled entities 6 448 6 448
Profit before taxation 2 432 294 (95 377) 2 336 917
Taxation (868 614) (868 614)
Profit for the year from continuing operations 1 563 680 (95 377) 1 468 303
Loss after taxation from discontinued operations (331 578) (331 578)
Profit for the year 1 232 102 (95 377) 1 136 725
Other comprehensive income 4 331 548 (123 741) 4 207 807
Total comprehensive income for the year 5 563 650 (219 118) 5 344 532
Profit for the year attributable to:      
Shareholders of the company 1 216 805 (95 377) 1 121 428
Non-controlling interests 15 297 15 297
Total comprehensive income attributable to:      
Shareholders of the company 5 506 566 (219 118) 5 287 448
Non-controlling interests 57 084 57 084
Continuing operations (cents)      
Basic earnings per share 463,5 (28,6) 434,9
Diluted basic earnings per share 462,6 (28,5) 434,1
Headline earnings per share 741,3 (28,6) 712,7
Diluted headline earnings per share 739,7 (28,5) 711,2
Discontinued operations (cents)      
Basic loss per share (99,3) (99,3)
Diluted basic loss per share (99,1) (99,1)
Headline loss per share (47,3) (47,3)
Diluted headline earnings per share (47,2) (47,2)
Total operations (cents)      
Basic earnings per share 364,2 (28,6) 335,6
Diluted basic earnings per share 363,5 (28,5) 335,0
Headline earnings per share 694,0 (28,6) 665,4
Diluted headline earnings per share 692,5 (28,5) 664,0

Statement of cash flows (extract) for the year ended June 30  2020

R’000   Reported
balance
June 30  2020
        Effects of
restatement
        Restated
June 30  2020
   
Cash flows from operating activities   3 928 340                 3 928 340    
   Cash generated by continuing operations   8 374 137                 8 374 137    
      Operating profit   3 136 109         (95 377)         3 040 732    
      Adjustments to operating profit   4 053 593                 4 053 593    
      Working capital changes   1 184 435         95 377         1 279 812    
   Finance income received   80 683                 80 683    
   Finance charges paid   (677 897)                 (677 897)    
   Taxation paid   (1 354 174)                 (1 354 174)    
   Dividends paid   (2 213 668)                 (2 213 668)    
   Net operating cash flows from discontinued operations   (280 741)                 (280 741)    
Cash effects from investment activities   (3 153 212)                 (3 153 212)    
Cash effects from financing activities   (912 235)                 (912 235)    
Net movement in cash and cash equivalents   (137 107)                 (137 107)    
Cash and cash equivalents at beginning of the year   6 058 269                 6 058 269    
Effects of exchange rate fluctuations on cash and cash equivalents   1 103 264                 1 103 264    
Cash and cash equivalents at end of the year   7 024 426                 7 024 426    

The cash flow restatements are non-cash adjustments on the changes in the statement in financial position.

Acquisition of businesses and subsidiaries

for the year ended June 30


Acquisition opportunities due to COVID travel restrictions and management’s focus on underperforming businesses were limited. As a consequence, five relatively small bolt-on acquisitions were concluded. These bolt-on acquisitions were as follows:

  • Craven Foods, a regional food distributor based in Bunbury, Western Australia, on May 31  2021;
  • COAR S.p.A, a food distributor situated near Milan, Italy. The group purchased the remaining 50% shareholding it didn’t own on March 31  2021;
  • Wet Fish Trading LLC, a specialist seafood distributor in Dubai, United Arab Emirates, on July 1  2020;
  • Leão Marinho located in São Sebastião, Brazil distributing food and beverages in the region, on February 17  2021; and
  • Fein Feinkost GmbH & Co. KG, a small retail bakery supplier located close to Ingolstadt, Germany, on April 1  2021.

Goodwill arose on the acquisitions as the anticipated value of future cash flows that were taken into account in determining the purchase consideration exceeded the net assets or net liabilities acquired at fair value. The acquisitions have enabled the group to expand its range of complementary products and services and, as a consequence, has broadened the group’s base in the marketplace.

These bolt-on acquisitions contributed R206,3 million of revenue and R16,2 million of trading loss for the year ended June 30  2021.

There were no significant contingent liabilities identified in the businesses acquired.

The impact of acquisitions on the group’s results can be summarised as follows:

R’000 2021
Unaudited
2020
Unaudited
Property, plant and equipment (40 393) (44 679)
Right-of-use lease assets (528)
Deferred taxation (6 689) 935
Investments and advances (1 117)
Inventories (39 189) (39 395)
Trade and other receivables (85 332) (124 860)
Cash and cash equivalents (13 064) 34 080
Defined pension fund obligations 9 247
Borrowings 28 242 14 554
Right-of-use lease liabilities 528
Trade and other payables and provisions 55 363 100 061
Taxation 1 076 3 845
Total identifiable net assets at fair value (91 856) (55 459)
Separately identifiable intangible assets (917)
Gain from bargain purchase 3 136
Derecognition of previously held investment in associate 26 346
Goodwill (68 657) (80 307)
Total value of acquisitions (131 948) (135 766)
Cash and cash equivalents acquired 13 064 (34 080)
Vendors for acquisition recognised 38 366 210
Costs incurred in respect of acquisitions (6 151) (1 968)
Net amounts paid (86 669) (171 604)

The purchase price allocations are provisional and may be retrospectively adjusted if the group obtains new information about facts and circumstances that existed at the acquisition date relating to these entities.

DISPOSALS

No subsidiary disposals occurred during the year ended June 30  2021.

SUBSEQUENT EVENTS

Subsequent to year end, South Africa was impacted by civil unrest (looting) in KwaZulu-Natal and Gauteng. Our owned facility in Cornubia, KwaZulu-Natal and Crown Food Group’s factory mart sites in Springfield KZN and Soweto were looted. Current estimates of the total direct loss of assets (including inventory, property, and vehicles) is approximately R73 million. A loss of profits claim will be formalised but is not expected to be significant. Losses as a result of the looting will be claimed against Sasria (a South African government-backed insurance programme). As the looting occurred post June 30  2021, no adjusting entries have been processed in the financial statements of the Bidcorp group.

On September 22  2021, the group signed a facility agreement with a syndicate of relationship banks giving the group access to a revolving credit facility of €300 million (R5,1 billion) for three years, with options to extend to five years. Other than these matters, there are no other material events since or subsequent to June 30  2021.

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.

R’000 2021 2020
Capital expenditure approved:    
   Contracted for 1 060 248 747 726
   Not contracted for 1 316 229 686 007
  2 376 477 1 433 733
Capital expenditure split:    
   Property, plant and equipment 2 298 914 1 336 171
   Computer software 77 562 97 562
  2 376 476 1 433 733

It is anticipated that capital expenditure will be financed out of existing cash resources.

Significant contracted capital expenditures relate to the following:

  • Australia – infrastructure investment in five new buildings;
  • Bidfood UK – infrastructure investment in new Glasgow site and vehicle fleet;
  • Czech Republic – new fish plant to replace the burnt-down Kralupy fish plant;
  • South Africa – infrastructure investment in Port Elizabeth building; and
  • Netherlands – new building in Zierikzee and a new freezer in Meppel and an upgrade to the warehouse management system.

Financial instruments

for the year ended June 30


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 (ie as prices) or indirectly (ie 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)
R’000 Puttable
non-
controlling
interests
Investments Vendors
for
acquisition
  Puttable
non-
controlling
interests
Vendors
for
acquisition
Total
June 30  2021              
Financial assets measured at fair value 27 281   27 281
Financial liabilities measured at fair value (3 983 808) (23 779)   (74 753) (175 395) (4 257 735)
June 30  2020              
Financial assets measured at fair value 32 264   32 264
Financial liabilities measured at fair value (4 632 682) (73 150)   (55 262) (204 188) (4 965 282)
  Total Level 1 Level 2 Level 3
June 30  2021        
Financial assets measured at fair value 27 281 27 281
Financial liabilities measured at fair value (4 257 735) (4 257 735)
June 30  2020        
Financial assets measured at fair value 32 264 32 264
Financial liabilities measured at fair value (4 965 282) (4 965 282)

VALUATION TECHNIQUES AND SIGNIFICANT UNOBSERVABLE INPUTS

Valuation technique   Significant unobservable inputs   Inter-relationship between significant unobservable inputs and fair value measurement

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.

 
  • Average EBITDA growth rates: 16% (2020: 10%)
  • EBITDA multiples: 10,5x (2020: 10,5x)
  • Risk-adjusted discount rate 1,7% (2020: 1,7%)
 

The estimated fair value would increase (decrease) if:

  • the EBITDA were higher (lower); or
  • the risk-adjusted discount rate was lower (higher).

SENSITIVITY ANALYSIS ON CHANGES IN SIGNIFICANT VARIABLE UNOBSERVABLE INPUTS FOR PUTTABLE NON-CONTROLLING INTERESTS (LIABILITY)

  Increase in
assumption
%
Increase
(decrease) in
liability
R’000
Decrease in
assumption
%
Decrease
(increase) in
liability
R’000
Average EBITDA growth rate 10 127 757 10 124 190
Risk-adjusted discount rate 10 (27 734) 10 (27 979)

The group recognises any changes in the value of the liability as a result of changes in assumptions used to estimate the future purchase price directly in retained earnings in the statement of changes in equity.

Independent auditor’s report on the summary consolidated financial statements

To the shareholders of Bid Corporation Limited


Opinion

The summary consolidated financial statements of Bid Corporation Limited set out on pages 2 to 7 and 21 to 31 of the accompanying provisional report, which comprise the summary consolidated statement of financial position as at June 30  2021, the summary consolidated statements of profit or loss, other comprehensive income, changes in equity and cash flows for the year then ended, and related notes, are derived from the audited consolidated financial statements of Bid Corporation Limited for the year ended June 30  2021.

In our opinion, the accompanying summary consolidated financial statements are consistent, in all material respects, with the audited consolidated financial statements, in accordance with the requirements of the JSE Limited Listing Requirements for provisional reports, as set out in the “Basis of presentation of summary consolidated financial statements note” to the summary consolidated financial statements, and the requirements of the Companies Act of South Africa as applicable to summary financial statements.

Summary consolidated financial statements

The summary consolidated financial statements do not contain all the disclosures required by International Financial Reporting Standards and the requirements of the Companies Act of South Africa as applicable to annual financial statements. Reading the summary consolidated financial statements and the auditor’s report thereon, therefore, is not a substitute for reading the audited consolidated financial statements and the auditor’s report thereon.

The audited consolidated financial statements and our report thereon

We expressed a qualified audit opinion on the audited consolidated financial statements in our report dated September 30  2021. That report also includes communication of key audit matters. Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the consolidated financial statements of the current period.

The basis for the qualified audit opinion was due to a fraud perpetrated at the Miumi division of the Group which comprises four subsidiaries and one division of the Greater China business (collectively, the “Miumi division”). This fraud commenced in prior financial years and involved the manipulation of trade receivables, prepayments, inventories, liabilities, revenue, and cost of revenue resulting in the cumulative misstatement of these balances.

Management has quantified and recorded a cumulative estimated loss in the amount of R694 million in the consolidated financial statements for the year ended June 30  2021. The forensic investigation into the matter has not been concluded as at the date of the audit opinion on the audited consolidated financial statements. Consequently, we were unable to obtain sufficient and appropriate audit evidence to conclude on whether the recorded loss and the associated disclosures are complete and accurate.

Furthermore, management has quantified the loss allocation attributable to the current and preceding financial years. We were unable to obtain sufficient and appropriate evidence to support this allocation in respect of the various financial years.

After recording the allocated portion of the current year loss as described above, we were unable to determine whether any further adjustments were required to the Miumi division’s contribution to the consolidated financial statement line items, which includes:

  • Revenue: R282 million;
  • Cost of revenue: R237 million;
  • Inventories: R33 million;
  • Trade and other receivables: R78 million;
  • Trade and other payables: R68 million.

The related financial statement line items in the summary consolidated financial statements are also impacted by this matter.

Director’s responsibility for the summary consolidated financial statements

The directors are responsible for the preparation of the summary consolidated financial statements in accordance with the requirements of the JSE Limited Listings Requirements for provisional reports, set out in note “Basis of presentation of summary consolidated financial statements” to the summary consolidated financial statements, and the requirements of the Companies Act of South Africa as applicable to summary financial statements.

Auditor’s responsibility

Our responsibility is to express an opinion on whether the summary consolidated financial statements are consistent, in all material respects, with the audited consolidated financial statements based on our procedures, which were conducted in accordance with International Standard on Auditing (ISA) 810 (Revised), Engagements to Report on Summary Financial Statements.

PricewaterhouseCoopers Inc.
Director: E J Gerryts
Registered Auditor
4 Lisbon Lane, Waterfall City, Jukskei View, 2090
Private Bag X36, Sunninghill, 2157, Johannesburg, South Africa

September 30  2021

Report on the Assurance Engagement on the Compilation of
Pro Forma Financial Information included in the Annual Results

To the Directors of Bid Corporation Limited


We have completed our assurance engagement to report on the compilation of the Pro Forma financial information of Bid Corporation Limited (the “Company”) by the directors. The Pro Forma financial information, as set out on page 20 of the Provisional Report (the “Annual Results”), consist of Pro Forma financial information which presents the impact of the currency effects of the translation of foreign operations on the Group as at June 30  2021. The applicable criteria on the basis of which the directors have compiled the Pro Forma financial information are specified in the JSE Limited (JSE) Listings Requirements and described on page 20 of the Annual Results.

The Pro Forma financial information has been compiled by the directors to provide users with relevant information and measures used by the Company to assess performance and to illustrate the impact of foreign currency movements on the Company’s reported financial results for the year ended June 30  2021. As part of this process, information about the Company’s financial performance has been extracted by the directors from the Company’s financial statements for the year ended June 30  2021, on which an audit report has been published.

Directors’ responsibility

The directors of the Company are responsible for compiling the pro forma financial information on the basis of the applicable criteria specified in the JSE Listings Requirements and described in page 20 of the Bidcorp Results.

Our independence and quality control

We have complied with the independence and other ethical requirements of the Code of Professional Conduct for Registered Auditors, issued by the Independent Regulatory Board for Auditors’ (IRBA Code), which is founded on fundamental principles of integrity, objectivity, professional competence and due care, confidentiality, and professional behaviour. The IRBA Code is consistent with the corresponding sections of the International Ethics Standards Board for Accountants’ International Code of Ethics for Professional Accountants (including International Independence Standards).

The firm applies International Standard on Quality Control 1 and, accordingly, maintains a comprehensive system of quality control including documented policies and procedures regarding compliance with ethical requirements, professional standards and applicable legal and regulatory requirements.

Reporting accountant’s responsibility

Our responsibility is to express an opinion about whether the pro forma financial information has been compiled, in all material respects, by the directors on the basis of the applicable criteria specified in the JSE Listings Requirements and described on Page 20 of the Bidcorp Results based on our procedures performed.

We conducted our engagement in accordance with the International Standard on Assurance Engagements (ISAE) 3420, Assurance Engagements to Report on the Compilation of Pro Forma Financial Information Included in a Prospectus issued by the International Auditing and Assurance Standards Board. This standard requires that we plan and perform our procedures to obtain reasonable assurance about whether the pro forma financial information has been compiled, in all material respects, on the basis specified in the JSE Listings Requirements.

For purposes of this engagement, we are not responsible for updating or reissuing any reports or opinions on any historical financial information used in compiling the pro forma financial information, nor have we, in the course of this engagement, performed an audit or review of the financial information used in compiling the pro forma financial information.

The purpose of pro forma financial information is solely to illustrate the impact of a significant event or transaction on unadjusted financial information of the company as if the event had occurred or the transaction had been undertaken at an earlier date selected for purposes of the illustration. Accordingly, we do not provide any assurance that the actual outcome of the event or transaction would have been as presented.

A reasonable assurance engagement to report on whether the pro forma financial information has been compiled, in all material respects, on the basis of the applicable criteria involves performing procedures to assess whether the applicable criteria used by the directors in the compilation of the pro forma financial information provide a reasonable basis for presenting the significant effects directly attributable to the event or transaction, and to obtain sufficient appropriate evidence about whether:

  • The related pro forma adjustments give appropriate effect to those criteria; and
  • The pro forma financial information reflects the proper application of those adjustments to the unadjusted financial information.

The procedures selected depend on our judgment, having regard to our understanding of the nature of the Company, the event or transaction in respect of which the pro forma financial information has been compiled, and other relevant engagement circumstances.

Our engagement also involves evaluating the overall presentation of the pro forma financial information.

We believe that the evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Opinion

In our opinion, the pro forma financial information has been compiled, in all material respects, on the basis of the applicable criteria specified by the JSE Listings Requirements and described on Page 20 of the Bidcorp Results.

PricewaterhouseCoopers Inc.
Director: E J Gerryts
Registered Auditor
4 Lisbon Lane, Waterfall City, Jukskei View, 2090
Private Bag X36, Sunninghill, 2157, Johannesburg, South Africa
30 September 2021

 

 

Administration


DIRECTORS
Chairman: S Koseff
Lead independent director: NG Payne
Independent non-executive: T Abdool-Samad, PC Baloyi, B Joffe, KR Moloko, CJ Rosenberg*, H Wiseman*
Executive directors: BL Berson* (chief executive), DE Cleasby (chief financial officer)
*Australian

COMPANY SECRETARY
Bidcorp corporate services (Pty) Ltd
Represented by Ms AK Biggs

BID CORPORATION LIMITED
(Bidcorp or the group or the company)
Incorporated in the Republic of South Africa
Registration number: 1995/008615/06
Share code: BID
ISIN: ZAE000216537

Registered office
Bid Corporation Limited
2nd Floor North Wing, 90 Rivonia Road
Sandton, 2196
Postnet Suite 136, Private Bag X9976
Sandton, 2146

Transfer secretaries
Computershare Investor Services (Pty) Ltd
Private Bag X9000, Saxonwold, 2132

Sponsor
The Standard Bank of South Africa Limited
30 Baker Street, Rosebank, 2196

Independent auditor
PricewaterhouseCoopers Inc.
Registration number: 1998/012055/21
Waterfall City, 4 Lisbon Lane, Jukskei View
Midrand, 2090