Bidcorp

Basis of presentation of the condensed interim consolidated financial statements

The condensed interim consolidated financial statements have been prepared in accordance with the JSE Limited Listings Requirements for interim reports, and the requirement of the Companies Act of South Africa applicable for condensed interim consolidated financial statements. The Listings Requirements require interim 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 include disclosure as required by IAS 34: Interim Financial Reporting and the Companies Act of South Africa. The accounting policies applied in the preparation of the condensed interim consolidated financial statements from which the condensed interim consolidated financial statements were derived are in terms of IFRS and are consistent with those accounting policies applied in the preparation of the previous consolidated annual financial statements.

In preparing these interim condensed consolidated financial statements, management make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates.

Acquisitions

Bidcorp acquired 70% of Pier 7 Foods, a small foodservice business based in Germany and Austria, a niche Portuguese horeca business was integrated into Bidfood Iberia and bolt–on acquisitions were completed in Australia, Spain, New Zealand and Turkey. Total investment in acquisitions was R588,2 million, and their contribution to revenue and trading profit for the half–year ended December 31 2017 was R1,2 billion and R33,5 million respectively.

Financial instruments

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.

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

– EBITDA growth rates	10% – 23% (2016: 10% – 23%)
– EBITDA multiples	4,8x – 7x (2016: 4,8x – 7x)
– Risk-adjusted discount rate	1,99% – 5,00% (2016: 1,99% – 5,00%)

Inter–relationship between significant unobservable inputs and fair value measurement

The estimated fair value would increase (decrease) if:

– the EBITDA were higher (lower); or

– the risk–adjusted discount rate were lower (higher).

Discontinued operation

In December 2017, management committed to a plan to discontinue the Logistics CD business segment which operates in the United Kingdom. Efforts to dispose of this operation have started and a sale is expected by December 2018. As a result, this operation has been classified as a discontinued operation.

The Logistics CD segment was not previously classified as held-for-sale or as a discontinued operation. The comparative consolidated statement of profit or loss, statement of cash flows and segmental analysis have been restated 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 period ending December 31 2017, are detailed below:

Preparation and results

These half-year ended December 31 results have not been audited or reviewed by the Group's auditors. The condensed interim 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 February 20 2018.

The audit and risk committee engaged KPMG Inc., to review the previously audited June 30 2017 consolidated statement of profit or loss, consolidated statement of cash flows and segmental analysis which have been re-presented as a result of classifying CD business as a discontinued operation in the 2018 interim period, together with the related notes. Re-presented special purpose financial statements ("special purpose financial statements") containing the re–presented consolidated statement of profit or loss, consolidated statement of cash flows, segmental analysis, and related notes, were reviewed by KPMG for this purpose. KPMG Inc. expressed an unmodified conclusion on these special purpose financial statements. A copy of the special purpose financial statements, together with KPMG Inc.'s review report is available for inspection at the Company's registered office.

As a result of this review, the June 30 2017 consolidated statement of profit and loss, consolidated statement of cash flows and segmental analysis, and related notes have been described as "reviewed" in the interim financial statements contained herein. It should be noted that KPMG Inc.'s review report on this matter draws attention to the basis of preparation contained in the special purpose financial statements, which describes how they were prepared. The review report also notes that the special purpose financial statements were prepared to provide information to the audit and risk committee. As a result, the special purpose financial statements may not be suitable for another purpose. The conclusion reached by KPMG Inc. is not modified in respect of this matter.

This review did not cover the entire set of interim financial statements, and for this reason the interim financial statements should not be regarded as reviewed by KPMG Inc.

Exchange rates

The following exchange rates were used in the conversion of foreign interests and foreign transactions during the periods: