sebata holdings limited to... · 2019-12-20 · “amanzi” amanzi meters proprietary limited...
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THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION
The definitions and interpretations commencing on page 4 of this Circular apply, mutatis mutandis, throughout this Circular.
If you are in any doubt as to the action you should take, please consult your broker, CSDP, attorney, accountant, banker or other professional adviser immediately.
1. If you have disposed of all of your Shares in Sebata, then this Circular, together with the attached notice of General Meeting and form of proxy should be forwarded to the purchaser to whom, or the broker, agent, CSDP or banker through whom you disposed of your Shares.
2. The General Meeting convened in terms of this Circular will be held at 10:00 on Wednesday, 22 January 2020 at the registered office of Sebata, Sebata House, 66 Park Lane, Sandton, 2196.
3. Certificated Shareholders and Dematerialised Shareholders with “own-name” registration, who are unable to attend the General Meeting and wish to be represented thereat, must complete and return the attached form of proxy in accordance with the instructions contained therein.
Dematerialised Shareholders, other than Dematerialised Shareholders with “own-name” registration, who:
• are unable to attend the General Meeting and wish to be represented thereat, must provide their CSDP or broker with their voting instructions, in terms of the Custody Agreement entered into between themselves and the CSDP or broker concerned, in the manner and within the time stipulated therein;
• wish to attend the General Meeting, must instruct their CSDP or broker to issue them with the necessary letter of representation to attend, in the form of a letter of representation.
4. Sebata does not accept any responsibility and will not be held liable for any failure on the part of any CSDP or broker of a Dematerialised Shareholder to notify such Shareholder of the General Meeting or any business to be concluded thereat.
SEBATA HOLDINGS LIMITED Incorporated in the Republic of South Africa
(Registration number 1998/003821/06)Share code: SEB ISIN: ZAE000260493
(“Sebata” or “the Company” or “the Group”)
CIRCULAR TO SHAREHOLDERS OF SEBATA
regarding:
• the empowerment transaction relating to the disposal by Sebata of the majority of Sebata’s shareholding in USC and Amanzi;
and enclosing• a notice convening the General Meeting; and• a form of proxy for use by Certificated Shareholders of Sebata and “own-name” registered
Dematerialised Shareholders only.
Corporate Advisor and Sponsor to Sebata
Independent Reporting Accountants and Auditors to Sebata
Date of issue: 20 December 2019Additional copies of this Circular, in its printed format, may be obtained from the registered office of the Company and the Sponsor at the addresses set out in the “Corporate information” section of this Circular during normal business hours from Friday, 20 December 2019 up to and including, Wednesday, 22 January 2020, or on the Company’s website at www.sebata.co.za. Copies of this Circular are available in the English language only.
CORPORATE INFORMATION
Sebata Holdings Limited
Date of incorporation: 2 March 1998
Place of incorporation: South Africa
Company Secretary and registered address of Sebata
Reegan Smith Sebata House66 Park Lane Sandton, 2196(Private Bag X9966, Sandton, 2146)
Corporate Advisor and Sponsor
Merchantec Capital(Registration number 2008/027362/07)13th Floor, Illovo Point68 Melville RoadIllovo, Sandton, 2196(PO Box 41480, Craighall, 2024)
Independent Reporting Accountants and Auditors
Nexia SAB&T(Registration number 1997/018869/21)119 Witch-Hazel AvenueHighveld TechnoparkCenturion, 0157(PO Box 10512, Centurion, 0046)
Transfer secretaries
Singular Systems Proprietary Limited (Registration number 2002/001492/07)28 Fort StreetBirnamJohannesburg, 2196(PO Box 785261, Sandton, 2146)
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FORWARD-LOOKING STATEMENT DISCLAIMER
This Circular includes statements about Sebata and/or the Sebata Group that are, or may be deemed to be forward-looking statements. All statements other than statements of historical fact are, or may be deemed to be, forward-looking statements. These forward-looking statements are not based on historical facts, but rather reflect current expectations concerning future results and events and generally may be identified by the use of forward-looking words such as “believe”, “aim”, “expect”, “project”, “anticipate”, “intend”, “foresee”, “forecast”, “likely”, “should”, “planned”, “may”, “will”, “estimated”, “potential” or similar words and phrases.
By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. Sebata cautions that forward-looking statements are not guarantees of future performance. Actual results, financial and operating conditions, liquidity and the developments within the industry in which Sebata operates may differ materially from those made in, or suggested by, the forward-looking statements contained in this Circular.
All these forward-looking statements are based on estimates and assumptions made by Sebata, as communicated in publicly available documents by Sebata, all of which estimates and assumptions, although Sebata believes them to be reasonable, are inherently uncertain. Such estimates, assumptions or statements may not eventuate. Factors which may cause the actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied in those statements or assumptions include other matters not yet known to Sebata or not currently considered material by Sebata.
Shareholders should keep in mind that any forward-looking statement made in this Circular or elsewhere is applicable only at the date on which such forward-looking statement is made. New factors that could cause the business of Sebata not to develop as expected may emerge from time to time and it is not possible to predict all of them. Further, the extent to which any factor or combination of factors may cause actual results to differ materially from those contained in any forward-looking statement are not known. Sebata has no duty to, and does not intend to, update or revise the forward-looking statements contained in this Circular after the date of this Circular, except as may be required by law.
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TABLE OF CONTENTS
Page
Corporate information Inside front cover
Forward-looking statement disclaimer 1
Important dates and times 3
Definitions and interpretations 4
Circular to Shareholders of Sebata 8
1. Introduction 8
2. Nature of the business of Sebata 8
3. The Transaction 9
4. Pro forma financial effects 10
5. Share capital of Sebata 12
6. Prospects 12
7. Irrevocable letters of undertaking 12
8. Major Shareholders 13
9. Directors of Sebata 13
10. Material contracts 15
11. Material loans 16
12. Material changes 16
13. Working capital statement 16
14. Litigation statement 16
15. Opinions and recommendation 16
16. Directors’ responsibility statement 16
17. Experts’ consents 17
18. Costs 17
19. Financial information incorporated by reference 17
20. Documents available for inspection 17
21. General Meeting 18
Annexure 1 Pro forma financial information of Sebata 19
Annexure 2 Independent reporting accountants’ assurance report on the pro forma financial information of Sebata
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Annexure 3 Historical financial information of USC for the three financial years ended 31 March 2019, 31 March 2018 and 31 March 2017
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Annexure 4 Independent reporting accountants’ report on the historical financial information of USC for the three financial years ended 31 March 2019, 31 March 2018 and 31 March 2017
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Annexure 5 Historical financial information of Amanzi for the three financial years ended 31 March 2019, 31 March 2018 and 31 March 2017
57
Annexure 6 Independent reporting accountants’ report on the historical financial information of Amanzi for the three financial years ended 31 March 2019, 31 March 2018 and 31 March 2017
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Notice of General Meeting Enclosed
Form of proxy Enclosed
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The definitions and interpretations commencing on page 4 of this circular apply to this section.
IMPORTANT DATES AND TIMES 2019 /2020
Record date to determine which Shareholders are entitled to receive the Circular
Friday, 13 December
Circular posted to shareholders and announced on SENS on Friday, 20 December
Last day to trade in respect of the General Meeting Tuesday, 14 January
General Meeting record date Friday, 17 January
Last day to lodge forms of proxy for the General Meeting by 10:00 on Monday, 20 January
General Meeting to be held at 10:00 on Wednesday, 22 January
Results of General Meeting released on SENS on Wednesday, 22 January
Results of General Meeting published in the press on Thursday, 23 January
Notes:1. The above dates and times are subject to amendment. Any such amendment will be released on SENS.
2. Additional copies of this Circular in its printed format, may be obtained from the registered office of the Company and the Sponsor at the addresses set out in the “Corporate information” section of this Circular during normal business hours from Friday, 20 December 2019 up to and including, Wednesday, 22 January 2020, or on the Company’s website at http://sebataholdings.com.
3. Any form of proxy not delivered to the Transfer Secretaries by 10:00 on Monday, 20 January 2020 may be handed to the Chairperson of the General Meeting immediately before the appointed proxy exercises any of the Shareholder’s votes at the General Meeting.
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DEFINITIONS AND INTERPRETATIONS
In this Circular and the annexures hereto, unless the context indicates otherwise, references to the singular include the plural and vice versa, words denoting one gender include the others, expressions denoting natural persons include juristic persons and associations of persons and vice versa, and the words in the first column hereunder have the meaning stated opposite them in the second column, as follows:
“Agreements” collectively, the Amanzi Sale Agreement, Amanzi Donation Agreement, Amanzi Shareholders Agreement, USC Sale Agreement, USC Donation Agreement and USC Shareholders Agreement;
“Amanzi” Amanzi Meters Proprietary Limited (Registration number 2012/109411/07), a private company duly registered and incorporated in accordance with the laws of South Africa and a Subsidiary of Sebata (75%), the minority shareholders of which are Johan Anton van Der Merwe, Juan Van Schalkwyk, Graham Garside and Jan Van Der Merwe;
“Amanzi Donation” the donation by Sebata of 5% of the total issued share capital in Amanzi to Inzalo;
“Amanzi Donation Agreement” the donation of shares agreement entered into between Sebata and Inzalo on 19 August 2019, in terms of which the Amanzi Donation is governed;
“Amanzi Sale” the sale by Sebata of 55% of the total issued share capital in Amanzi, to Inzalo;
“Amanzi Sale Agreement” the sale of shares agreement entered into between Sebata and Inzalo on 19 August 2019, in terms of which the Amanzi Sale is governed;
“Amanzi Shareholders’ Agreement” the agreement entered into between Sebata, Inzalo, Johan Anton van Der Merwe, Juan Van Schalkwyk, Graham Garside and Jan Van Der Merwe on 19 August 2019 and the addendum thereto dated 2 December 2019, in terms of which the interests of the shareholders of Amanzi following implementation of the Transaction are governed;
“BEE” Broad-Based Black Economic Empowerment as defined in the Broad-Based Black Economic Empowerment Act, 2003 (Act 53 of 2003), as amended;
“Board” or “Directors” the board of directors of Sebata at the Last Practicable Date, whose details are set out in paragraph 9 of this Circular;
“Business Day” any day other than a Saturday, Sunday or a public holiday in South Africa;
“Certificated Shareholder” a Sebata Shareholder who holds Certificated Shares;
“Certificated Share” a Sebata Share that has not been Dematerialised, title to which is evidenced by a Document of Title;
“Circular” this bound document dated Friday, 20 December 2019, including the annexures hereto and incorporating a notice of General Meeting and a form of proxy;
“Closing Date” the third Business Day after the last outstanding Suspensive Condition to the Disposal is fulfilled or waived, as the case may be;
“Companies Act” the Companies Act, 2008 (Act 71 of 2008), as amended;
“CSDP” a Central Securities Depository Participant, accepted as a participant in terms of the Financial Markets Act, appointed by an individual shareholder for the purposes of, and in regard to dematerialisation;
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“Custody Agreement” the agreement which regulates the relationship between the CSDP or broker and each beneficial holder of dematerialised shares;
“Dematerialisation” the process by which Certificated Shares are converted into electronic format as Dematerialised Shares and recorded in Sebata’s Uncertificated Securities Register;
“Dematerialised Shareholder” a Sebata Shareholder who holds Dematerialised Shares;
“Dematerialised Share” a Sebata Share that has been Dematerialised or has been issued in Dematerialised form, and recorded in Sebata’s Uncertificated Securities Register;
“Disposal” collectively, the USC Sale and the Amanzi Sale;
“Disposal Shares” 55% of the total issued shares in each of USC and Amanzi;
“Documents of Title” share certificates, certified transfer deeds, balance receipts and/or any other form of acceptable documents of title acceptable to Sebata in respect of Sebata Shares;
“Donation” the donation of 5% of the total issued share capital in each of the companies comprising the Water Group to Inzalo;
“Donation Agreements” collectively, the USC Donation Agreement and the Amanzi Donation Agreement;
“Donation Shares” 5% of the total issued shares in each of USC and Amanzi;
“Financial Markets Act” Financial Markets Act, 2012 (Act 19 of 2012), as amended;
“General Meeting” the general meeting of Sebata shareholders to be held at 10:00 on Wednesday, 22 January 2020 at the registered office of Sebata, Sebata House, 66 Park Lane, Sandton, 2196, which meeting is convened in terms of the notice of general meeting attached to this Circular;
“ICT” Information and Communication Technology;
“IFRS” International Financial Reporting Standards;
“Inzalo” Inzalo Capital Holdings Proprietary Limited (Registration number 2019/199492/07), a private company duly registered and incorporated in accordance with the laws of South Africa, the directors and shareholders of which are Sihle Lloyd Ndlovu (50%) and Sbonelo Trinity Mazibuko (50%);
“JSE” JSE Limited (Registration number 2005/022939/06), a public company duly incorporated in accordance with the laws of South Africa and licensed as an exchange under the Financial Markets Act;
“Last Practicable Date” Friday, 6 December 2019, being the last practicable date prior to the finalisation of this Circular;
“Listings Requirements” the Listings Requirements of the JSE, as amended from time to time by the JSE;
“Merchantec Capital” or “Sponsor” Merchantec Proprietary Limited (Registration number 2008/027362/07), a private company duly registered and incorporated under the laws of South Africa;
“Micromega H20” Micromega H20 Proprietary Limited (Registration number 1993/001112/07), a private company duly registered and incorporated in accordance with the laws of South Africa and a wholly-owned Subsidiary of Sebata;
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“Mubesko” Mubesko Africa Proprietary Limited (Registration number 2015/020183/07), a private company duly registered and incorporated under the laws of South Africa. Sebata’s 50% (fifty percent) shareholding in Mubesko was disposed of with effect from 1 May 2019;
“ Professional Procurement Regulations”
the Preferential Procurement Regulations, 2017 issued in terms of section 5(1) of the Preferential Procurement Policy Framework Act No. 5 of 2000;
“Purchase Price” an aggregate amount of R388 484 000, comprising R355 484 000 in respect of the USC Sale and R33 000 000 in respect of the Amanzi Sale;
“Rand” or “R” South African Rand, the official currency of South Africa;
“Register” Sebata’s securities register, including the Uncertificated Securities Register;
“Sale Agreements” collectively, the USC Sale Agreement and the Amanzi Sale Agreement;
“SANAS” South African National Accreditation System;
“Sebata” or “the Company” Sebata Holdings Limited (Registration number 1998/003821/06), a public company duly registered and incorporated in accordance with the laws of South Africa and listed on the JSE;
“Sebata shareholders” or “shareholders”
holders of Sebata Shares;
“Sebata Shares” or “Shares” ordinary shares currently with a par value of one cent each in the issued share capital of Sebata;
“SENS” the Stock Exchange News Service;
“Signature Date” the date of signature of the Agreements, being 19 August 2019;
“South Africa” the Republic of South Africa;
“Strate” the settlement and clearing system used by the JSE, managed by Strate Proprietary Limited (Registration number 1998/022242/07), a private company duly incorporated in accordance with the laws of South Africa and which company is a registered Central Securities Depository in terms of the Financial Markets Act;
“Subsidiary” a subsidiary as defined in the Companies Act;
“Suspensive Conditions” the suspensive conditions to the Disposal as set out in paragraph [3.5] of this Circular;
“Transaction” collectively, the Disposal and the Donation;
“Transfer Secretaries” Singular Systems Proprietary Limited (Registration number 2002/001492/07), a private company duly incorporated in accordance with the laws of South Africa;
“Uncertificated Securities Register” the record of Dematerialised Shares administered and maintained by a CSDP and which forms part of the Register;
“USC” USC Metering Proprietary Limited (Registration number 2004/007636/07), a private company duly registered and incorporated in accordance with the laws of South Africa and a wholly-owned Subsidiary of Micromega H20;
“USC Donation” the donation by Micromega H20 of 5% of the total issued share capital in USC to Inzalo;
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“USC Donation Agreement” the donation of shares agreement entered into between Sebata, Micromega H2O and Inzalo on 19 August 2019, in terms of which the USC Donation is governed;
“USC Sale” the sale by Micromega H20 of 55% of the total issued share capital in USC to Inzalo;
“USC Sale Agreement” the sale of shares agreement entered into between Sebata, Micromega H2O and Inzalo on 19 August 2019, in terms of which the USC Sale is governed;
“USC Shareholders Agreement” the agreement entered into between Micromega H20, Sebata and Inzalo on 19 August 2019 and the addendum thereto dated 2 December 2019, in terms of which the interests of the shareholders of USC following implementation of the Transaction are governed;
“VAT” value added tax, levied in terms of the provisions of the Value-Added Tax Act, 1991 (Act 89 of 1991), as amended; and
“Water Group” collectively, USC and Amanzi.
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SEBATA HOLDINGS LIMITED Incorporated in the Republic of South Africa
(Registration number 1998/003821/06)Share code: SEB ISIN: ZAE000260493
(“Sebata” or “the Company” or “the Group”)
Directors
ExecutiveI G Morris (Chief Executive Officer)P van Eeden (Financial Director)C A King (Executive Director)K Moses (Executive Director)Non-executiveD A Di Siena (Chairperson)*T W HamillR C Lewin*P H DuvenhageD Passmore*S Nodwele*
* Independent
CIRCULAR TO SEBATA SHAREHOLDERS
1. INTRODUCTION
On 20 August 2019, it was announced on SENS that Sebata, and where applicable Micromega H20, had entered into the Agreements with Inzalo for the disposal of 55% and donation of 5% of the total issued share capital in each of USC and Amanzi to Inzalo for the Purchase Price in order to improve the BEE credentials of the Water Group while simultaneously creating shareholder value. The Transaction constitutes a category 1 transaction in terms of the Listings Requirements.
The purpose of this Circular is to provide Sebata Shareholders with the relevant information relating to, inter alia, the Transaction, and to give notice of the General Meeting in order for Sebata Shareholders to consider and, if deemed fit, to pass, inter alia, the resolutions necessary to approve and implement the Transaction in accordance with the Listings Requirements. A notice convening such meeting is attached to, and forms part of, this Circular.
2. NATURE OF THE BUSINESS OF SEBATA
Sebata is an ICT company, listed on the Main Board of the JSE, with four key divisions, namely software solutions, water technologies, consulting and ICT support services. These are primarily focused on smart city technologies and support.
Sebata’s continued success is a result of staying true to its core business values. Strong fiscal disciplines and attentive focus on details are the foundation in managing the consistent growth in the Company’s asset portfolio. Further detail in respect of the markets in which Sebata group companies operate, is as follows:
Public Sector Optimisation – Over 60% of South African local municipalities rely on Sebata’s in-house technologies to improve and better manage service delivery to millions of individuals across the country.
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Water Management Solutions – To ensure the sustainability of the planets scarcest resource, the Company’s water management businesses have built devices that help monitor, measure and control the flow and delivery of water to communities across the globe.
Cloud hosting, Connectivity and Support – The Company’s Connectivity and IT Support business’ are fast becoming the de facto providers of Telecommunication and Managed Solutions to the SME and corporate market in South Africa. The businesses are comprised of dedicated solutions from over 35 Tier 1 Network and Service Providers, with over 20 years’ experience in Managed Support.
3. THE TRANSACTION
3.1 Nature of the business of the Water Group
3.1.1 USC
USC (trading as Utility Systems) is the premier supplier of electronic water control and Standard Transfer Specification (STS) Association approved prepayment devices. They cater for a wide range of tailor-made metering solutions for water service providers and their customers through the application of next generation smart water management devices with a strong footprint in both the prepaid and bulk water metering market in South Africa. USC provides various products and services that enable flow limitation, prepaid, postpaid billing and credit and revenue management. Following the Transaction Sebata, through Micromega H20, will hold a 40% stake in USC.
3.1.2 Amanzi
Amanzi Meters designs, develops and manufactures plastic water meters, ball valves and a variety of meter boxes. Dedication to a compliance-driven production environment means all of Amanzi’s products are tested in accordance with SANAS regulations in its fully accredited lab. Amanzi’s bespoke products provide practical solutions for water management reticulation and the nature of the business’ activities have allowed for various synergies with USC to be achieved, specifically in respect of the manufacturing of plastic-based meters for USC. Following the Transaction Sebata will hold a 15% stake in Amanzi.
3.2 Rationale for the Transaction
Over the past few years Sebata and its subsidiaries have come under increasing pressure to transform and become more compliant with the BEE legislation in order to continue operating at a competitive level within the local economy. This was further reinforced by the Preferential Procurement Regulations released in January 2017 which allow an organ of the state to set pre-qualification criteria for any tender released, including a tenderer having a stipulated minimum BEE status.
The rationale of the Transaction is to simultaneously improve the empowerment credentials of the Water Group while creating shareholder value. Currently, the sum of the parts of the Sebata group exceeds its market capitalisation.
3.3 The Disposal
3.3.1 Purchase Price
3.3.1.1 The consideration payable by Inzalo in respect of the USC Sale is an amount of R355 484 000.
3.3.1.2 The consideration payable by Inzalo in respect of the Amanzi Sale is an amount of R33 000 000.
3.3.1.3 The considerations set out in paragraphs 3.3.1.1 and 3.3.1.2 above are payable by 30 September 2021 on achievement by the Water Group of a combined net profit after tax target of R165 million, based on the finalised management accounts of USC and Amanzi as at 31 July 2021.
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3.3.1.4 Inzalo has the right at any time to make accelerated payments in full or in part of the Purchase Price prior to the period defined for the achievement of the profit target referred to in paragraph 3.3.1.3 above. All dividends received by Inzalo through its shareholding in the Water Group will be appropriated to the settlement of the Purchase Price until such consideration has been paid in full or has been discharged in terms of paragraph 3.3.1.5 below.
3.3.1.5 In the event that the profit target referred to in paragraph 3.3.1.3 above is not achieved, the documents of title in respect of USC and Amanzi will be returned to Sebata, any amounts paid by Inzalo to Sebata will be returned to Inzalo and the Transaction will be terminated with neither party having any claim against the other. For avoidance of doubt, should this occur, it will not constitute an acquisition by Sebata of the Disposal Shares requiring categorisation in terms of the Listings Requirements at such time but rather the termination and unwinding of the current transaction.
3.3.2 Application of the sale proceeds
It is intended that the majority of the net proceeds of the Disposal will be distributed to shareholders once the proceeds of the Transaction have been received with the remainder being used to grow the businesses within the Sebata group.
3.4 The Donation
3.4.1 In terms of the Donation Agreements, Sebata, or Micromega H2O as the donor in the case of USC, will donate the Donation Shares to Inzalo. The Donation is made concurrently with the execution of the Sale Agreements in respect of the Disposal and is conditional thereon. The Donation Shares will be transferred to Inzalo as follows:
3.4.1.1 On Signature Date, the documents of title in respect of 50% of the Donation Shares will be delivered to Inzalo; and
3.4.1.2 On 1 August 2020, the documents of title in respect of the remaining 50% of the Donation Shares will be delivered to Inzalo.
3.4.1.3 In the event that the profit target referred to in paragraphs 3.3.1.3 above is not achieved, Sebata, or Micromega H2O as the donor in the case of USC, will purchase the Donation Shares from Inzalo for a consideration calculated as the difference between the Net Asset Value per share of the Donation Shares at 1 August 2019, and the Net Asset Value per share of the Donation Shares at 31 July 2021, as evidenced by the management accounts of USC and Amanzi. For the avoidance of doubt, should this occur, it will constitute an acquisition by Sebata of the Donation Shares requiring categorisation in terms of the Listings Requirements at such time based on the purchase consideration.
3.5 Suspensive conditions to the Transaction and effective date
The Transaction is subject to the fulfilment or waiver, as the case may be, of the following Suspensive Condition by no later than 22 January 2020:
3.5.1 Such statutory and regulatory approvals that may be required are obtained and to the extent that the approval of such authorities is conditional, the parties agreeing in writing to such conditions.
The Transaction will be effected on the Closing Date and the effective date of the Transaction will be 1 August 2019.
4. PRO FORMA FINANCIAL EFFECTS
The table below sets out the pro forma financial information of the Transaction on the audited Group results of Sebata for the year ended 31 March 2019.
The pro forma financial information has been prepared to illustrate the impact of the Transaction had the Transaction occurred on 1 April 2018 for purposes of the statement of comprehensive income and on 31 March 2019 for purposes of the statement of financial position.
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The pro forma financial information has been prepared using accounting policies that comply with IFRS and that are consistent with those applied in the audited Group results of Sebata for the year ended 31 March 2019. The pro forma financial information has been presented in accordance with the Listings Requirements and the Guide on Pro Forma Financial Information issued by the South African Institute of Chartered Accountants and ISAE 3420: Assurance Engagements to Report on the Compilation of Pro Forma Financial Information Included in a Prospectus.
The pro forma financial effects, which are the responsibility of the Directors of the Company, are provided for illustrative purposes only and, because of their pro forma nature may not fairly present Sebata’s financial position, changes in equity, results of operations or cash flow nor the effect and impact of the Transaction going forward.
The pro forma financial information should be read in conjunction with the Independent Reporting Accountants’ assurance report thereon contained in Annexure 2.
Before the Trans-
action1
Pro forma after the
Trans- action2
%Change
Basic earnings per Share (cents) 131.93 495.02 275.21Headline earnings per Share (cents) (30.19) (29.10) (3.60)Net asset value per Share (cents) 649.94 1 010.45 55.47Tangible net asset value per Share (cents) 103.10 561.33 444.43Weighted average number of Shares in issue (millions) 114 628 114 628 –Total number of Shares in issue (millions) 114 915 114 915 –
Notes:
1. Extracted from the audited Group results of Sebata for the year ended 31 March 2019.
2. The “Pro forma after the Transaction” column reflects the unaudited pro forma financial effects of the Transaction on Sebata as if it had occurred on 1 April 2018 for statement of comprehensive income purposes and on 31 March 2019 for statement of financial position purposes, and are based on the following principle assumptions:
2.1 Loss on disposal of R2.2 million has been recognised after disposing of the net assets of Mubesko to the value of R50.2 million, derecognising goodwill to the value of R20.7 million and derecognising non-controlling interests to the value of R25.5 million;
2.2 Profit on disposal of R436.7 million has been recognised after disposing of the net assets of USC to the value of R110.5 million, derecognising goodwill to the value of R21.7 million, derecognising non-controlling interests to the value of 19.1 million and recognising the fair value of the retained investment in USC of R258.8 million;
2.3 Profit on disposal of R44.8 million has been recognised after disposing of the net assets of Amanzi to the value of (R13.1) million, derecognising goodwill to the value of R0.7 million, derecognising non-controlling interests to the value of R3.6 million and recognising the fair value of the retained investment in Amanzi of R9 million;
2.4 Transaction costs of R1.3 million have been expensed;
2.5 Interest is earned on the present value of the proceeds at a rate of 10%;
2.6 Share-based payment expense has been recognised in admin expenses for the Donation Shares;
2.7 The applicable legislated tax rates utilised for South Africa for income tax purposes is 28% and capital gains tax is 22.4%;
2.8 The proceeds on the disposal of Mubesko have been recognised in cash and cash equivalents;
2.9 Goodwill attributed to the acquisition of Mubesko to the value of R20.7 million rand is derecognised;
2.10 Goodwill recognised at acquisition of USC to the value of R21.7 million is derecognised;
2.11 Goodwill recognised at the acquisition of Amanzi to the value of R0.7 million is derecognised;
2.12 The acquisition of the balance of the minority interest of 17% in USC has been reflected as a transaction between the owners and recognised in equity;
2.13 It is assumed for purposes of the pro forma financial effects that the profit targets set in the Sale Agreements will be met and have recognised the present value of the proceeds in other financial assets;
2.14 The balance of the investment in USC has been recognised at a fair value of R258 million; and
2.15 The balance of the investment in Amanzi has been recognised at a fair value of R9 million.
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5. SHARE CAPITAL OF SEBATA
The share capital of Sebata as at the Last Practicable Date is set out in the table below:
R’000
Authorised200 000 000 ordinary shares of 1 cent each 2 000
Issued114 915 089 ordinary shares of 1 cent each 1 149Share premium 187 263
Total issued share capital 188 412
Sebata holds 1 787 332 Shares in treasury.
6. PROSPECTS
As stated in paragraph 3.3.2 above, the Board intends to declare a dividend of the majority of the net proceeds to shareholders once the proceeds of the Transaction have been received. Furthermore, with the improved empowerment credentials of the businesses, the Board expects to see a significant increase in the earnings capabilities of these businesses. Post implementation of the Transaction Sebata still maintains control of its ICT, Consulting and Software businesses. The core focus of these businesses to deliver ERP solutions, accounting and professional services and connectivity solutions into public sector South Africa. With a more aligned portfolio of businesses, the Board expects with the renewed focus into the public sector to see significant growth generated from the remaining assets within the Group. The board is actively seeking to empower the remaining businesses and generate the best possible returns for shareholders.
7. IRREVOCABLE LETTERS OF UNDERTAKING
To date, irrevocable undertakings to vote in favour of the Transaction have been received from certain Sebata shareholders holding in aggregate of 88 702 084 Sebata Shares, representing 77% of the voting rights at the General Meeting or any adjournment thereof. The following Sebata shareholders have provided irrevocable undertakings to vote the stated number of Sebata Shares in favour of the Transaction:
Shareholder
Date of irrevocable
undertaking
Shares subject to
under- taking
Percentage holding
(%)
Laird Investments Proprietary Limited 20 August 2019 73 843 704 64Kamberg Investment Holdings Proprietary Limited 20 August 2019 11 483 180 10Seratrix Proprietary Limited 20 August 2019 3 375 200 3
88 702 084 77
13
8. MAJOR SHAREHOLDERS
In the preceding five-year period there has been no change in controlling Shareholder in either Sebata or any of its major Subsidiaries.
Those Shareholders (excluding directors whose interests are detailed in paragraph 9.2 below) who, as at the Last Practicable Date insofar as is known to Sebata, directly or indirectly, were beneficially interested in 5% or more of the issued share capital of Sebata are as follows:
ShareholderNumber
of Shares
Percentageshare-
holding (%)
Laird Investments Proprietary Limited* 73 843 704 64
Total 73 843 704 64
* The King Family Trust is the sole beneficial shareholder of Laird Investments Proprietary Limited.
9. DIRECTORS OF SEBATA
9.1 Directors’ information
The details of the executive and non-executive Directors of the Group at the Last Practicable Date are as follows:
Directors of Sebata Capacity
I G Morris Chief Executive OfficerP van Eeden Financial DirectorC A King Executive DirectorK Moses Executive Director
D A Di Siena Independent Non-executive ChairpersonT W Hamill Non-executive DirectorR C Lewin Independent Non-executive DirectorP H Duvenhage Non-executive DirectorD Passmore Independent Non-executive DirectorS Nodwele Independent Non-executive Director
14
9.2 Directors’ interests
At the Last Practicable Date, the Directors held, directly or indirectly, beneficial interests in 12 166 085 Shares in Sebata, representing approximately 10.74% of the total issued share capital of Sebata net of treasury Shares, being Sebata 113 127 757 Shares. The direct and indirect beneficial interests of members of the Board are as follows:
Beneficial Total Total
Director Direct Indirect Shares %
ExecutiveI G Morris – 11 483 180 11 483 180 10.15P van Eeden – – – –C A King 40 063 – 40 063 0.03K Moses – – – –
Non-executive D A Di Siena – – – –T W Hamill 1 500 - 1 500 0.00R C Lewin – 641 342 641 342 0.56P H Duvenhage – – – –D Passmore – – – –S Nodwele – – – –
41 563 12 124 522 12 166 085 10.74
Notes:
1. There has been no change in the aforementioned interests of the directors, between the financial year ended 31 March 2019 and the Last Practicable Date.
2. The Directors’ interests will not change as a result of the Transaction.
9.3 Former Directors’ interests
At the Last Practicable Date, Directors who had resigned during the last 18 months held, directly or indirectly, beneficial interests in 37 220 Shares in Sebata, representing approximately 0.03% of the total issued share capital of Sebata net of treasury Shares, being 113 127 757 Sebata Shares, as follows:
Beneficial Total Total
Director Direct Indirect Shares %
C Kemp 37 220 – 37 220 0.03
Total 37 220 – 37 220 0.03Notes:
C Kemp resigned on 31 October 2018.
9.4 Directors’ interests in transactions
None of the Directors have had any beneficial interest, either directly or indirectly, in any transactions effected by Sebata during the current or preceding financial year or during any earlier financial year which remains outstanding or unperformed in any respect.
9.5 Directors’ emoluments
9.5.1 Shareholders are referred to note 30 of the audited annual financial statements of the Company for the year ended 31 March 2019, which can be found on the Company’s website at:http://www.sebataholdings.com/wp-content/uploads/Annual%20consolidated%20financial%20statements.pdf. There will be no change in the remuneration of any of the Directors as a consequence of the Transaction.
15
9.5.2 Save as set out in paragraph 9.5.1 above, the directors did not receive any emoluments in the form of:
9.5.2.1 fees for services as a Director;
9.5.2.2 management, consulting, technical or other fees paid for such services rendered, directly or indirectly, including payments to management companies, a part of which is then paid to a Director of the company;
9.5.2.3 basic salaries;
9.5.2.4 bonuses and performance-related payments;
9.5.2.5 sums paid by way of expense allowance;
9.5.2.6 any other material benefits received;
9.5.2.7 contributions paid under any pension scheme;
9.5.2.8 any commission, gain or profit-sharing arrangements;
9.5.2.9 share options or any other right given to a Director of the Company in respect of providing a right to subscribe for shares in the Company; and
9.5.2.10 any shares issued and allotted in terms of a share purchase/option scheme for employees.
9.5.3 Save as set out in paragraph 9.5.1 above, the Directors did not receive any remuneration or benefit in any form from any holding company, Subsidiary, associates of the holding company or Subsidiary, joint venture or other third party management or advisory company.
9.6 Directors’ service contracts
There are no existing or proposed contracts relating to the Directors’ and managerial remuneration, secretarial and technical fees and restraint payments payable by Sebata or any of its major Subsidiaries.
No additional directors are proposed to be appointed as a result of the Transaction.
10. MATERIAL CONTRACTS
10.1 Save for the Transactions listed below and as contemplated in this Circular and the material loans as set out in paragraph 11 below, neither Sebata nor its Subsidiaries have entered into any material contract otherwise than in the ordinary course of business within two years prior to the Circular, or entered into at any time and containing an obligation or settlement that is material to Sebata or its Subsidiaries at the date of this Circular.
10.1.1 On 6 May 2019, Sebata acquired the balance of the minority interest of 17% minority interest in USC for a consideration of R20 million.
10.1.2 Sebata disposed of the NOSA group of companies on 3 April 2018 for a total consideration of R625.7 million. For further detail refer to audited annual financial statements of the Company for the year ended 31 March 2019.
10.1.3 On 31 May 2019, Sebata disposed of its 50% holding in Mubesko for a consideration of R43.1 million. This transaction has been taken into account in Annexure 1 – Pro Forma Financial Information of Sebata.
10.1.4 During the 2019 financial year, USC acquired intellectual property valued at R8 million developed by Amanzi at the book value.
10.2 There have been no further acquisitions of material assets by USC or Amanzi during the three years prior to the date of this Circular.
16
11. MATERIAL LOANS
Save for the material loans set out in the table below, Sebata and its Subsidiaries had no material loans receivable and had not made any loans or furnished any security to or for the benefit of any director or manager of any associates of any director or manager Sebata.
Lender SecurityAmount
Rand Terms Rate
Laird Investments Proprietary Limited
Unsecured 45 440 027 Loan granted 28 April 2019, no set repayment date.
Prime
Kamberg Proprietary Limited Unsecured 10 168 333 Loan granted 19 July 2019, no set repayment date
Prime
12. MATERIAL CHANGES
Save for the effects of the Transaction which have been disclosed in the pro forma financial information set out in paragraph 4 above and in Annexure 1 to the Circular, at the Last Practicable Date, there have been no material changes in the financial or trading position of the Company since the reported financial information of the Group for the year ended 31 March 2019.
13. WORKING CAPITAL STATEMENT
The Board has considered the effects of the Transaction and is of the opinion that, for a period of 12 months subsequent to the date of this Circular:
• the Group, as impacted by the Transaction, will in the ordinary course of business be able to pay its debts;
• the assets of the Group, as impacted by the Transaction, fairly valued, will be in excess of its liabilities. For this purpose the assets and liabilities are recognised and measured in accordance with the accounting policies applied to the latest audited financial results;
• the share capital and reserves of the Group, as impacted by the Transaction, will be adequate for ordinary business purposes; and
• the working capital of the Group, as impacted by the Transaction, will be adequate for ordinary business purposes.
14. LITIGATION STATEMENT
The Board reports that Sebata is currently engaged in legal and arbitration with the Purchaser of the NOSA Group of companies. The dispute relates to the final purchase price, the dispute value is R29 million and this has been disclosed in the audited annual financial statements for the year ended 31 March 2019.
15. OPINIONS AND RECOMMENDATION
The Directors, having considered the terms and conditions of the Transaction, are of the opinion that the Transaction is beneficial to Sebata Shareholders and that it will have a beneficial financial effect on the Group. Accordingly, the directors recommend that Shareholders vote in favour of the resolutions, to be proposed at the General Meeting, to approve the Transaction. The Directors, who are Shareholders of the Group, intend to vote in favour of such resolutions to be proposed at the General Meeting to approve the Transaction.
16. RESPONSIBILITY STATEMENT
The Directors, whose names are given in paragraph 9.1 above, collectively and individually, accept full responsibility for the accuracy of the information contained in the Circular and certify that, to the best of their knowledge and belief that there are no facts that have been omitted which would make any statement false or misleading, and that all reasonable enquiries to ascertain such facts have been made and that the Circular contains all information required by the Listings Requirements.
17
17. EXPERTS’ CONSENTS
The Corporate Adviser and Sponsor, Independent Reporting Accountants and Auditors and the Transfer Secretaries have consented in writing to act in the capacities stated and to their names being stated in this Circular and, where applicable, to the inclusion of their reports in the form and context in which they have been reproduced in this Circular in Annexures 2, 4 and 6 and have not, prior to the Last Practicable Date, withdrawn their consents prior to publication of this Circular.
18. COSTS
The total costs relating to the Transaction, which amounts to approximately R1 300 000 excluding VAT, are set out in the table below:
Estimatedamount
R
Merchantec Capital – Corporate Adviser to Sebata 250 000Merchantec Capital – Sponsor to Sebata 650 000Nexia SAB&T – Reporting accountants 200 000JSE – Documentation inspection fees 49 912Ince – Printing and postage fees 130 000Contingencies 20 088
Total 1 300 000
19. FINANCIAL INFORMATION INCORPORATED BY REFERENCE
In accordance with sections 11.61 and 11.62 of the Listings Requirements, the audited annual financial statements of the Company for the year ended 31 March 2019 can be accessed on the Company’s website, at http://www.sebataholdings.com/wp-content/uploads/Annual%20consolidated %20financial%20statements.pdf, and is also available for inspection as set out in paragraph 21 below.
20. DOCUMENTS AVAILABLE FOR INSPECTION
The following documents, or copies thereof, will be available for inspection at the registered office of Sebata and the office of the Sponsor which addresses are set out in the “Corporate information” section of the Circular, during normal business hours from Friday, 20 December 2019 up to and including Wednesday, 22 January 2020:• the Memorandum of Incorporation of the Company and its major Subsidiaries;• copies of the Amanzi Sale Agreement;• copies of the Amanzi Donation Agreement;• copies of the Amanzi Shareholders’ Agreement;• copies of the USC Sale Agreement;• copies of the USC Donation Agreement;• copies of the USC Shareholders’ Agreement;• copies of the irrevocable letters of undertaking referred to in paragraph 7 above;• the agreements in respect of the material loans referred to in paragraph 11 above;• the signed independent reporting accountants’ limited assurance report on the pro forma financial
information of Sebata, the text of which is included as Annexure 2 to this Circular;• the signed independent reporting accountants’ report on the historical financial information of USC
for the three financial years ended 31 March 2017, 31 March 2018, 31 March 2019, the text of which is included as Annexure 4, to this Circular;
• the signed independent reporting accountants’ report on the historical financial information of Amanzi for the three financial years ended 31 March 2017, 31 March 2018, 31 March 2019, the text of which is included as Annexure 6, to this Circular;
• the audited annual financial statements of the Company for the three financial years ended 31 March 2017, 31 March 2018, 31 March 2019;
• the written consent letters referred to in paragraph 18 above; and• a signed copy of this Circular.
18
21. GENERAL MEETING
A General Meeting of Sebata Shareholders will be held at 10:00 on Wednesday, 22 January 2020 at the registered office of Sebata, Sebata House, 66 Park Lane, Sandton, 2196, in order to consider and approve, with or without modification, the resolutions set out in the notice of General Meeting included in this Circular.
A notice convening the General Meeting and a form of proxy for use by Certificated Shareholders and Dematerialised Shareholders with “own name” registration who are unable to attend the General Meeting, form part of this Circular.
Certificated Shareholders and Dematerialised Shareholders with “own name” registration, who are unable to attend the General Meeting and wish to be represented thereat, must complete and return the attached form of proxy in accordance with the instructions contained therein.
Dematerialised Shareholders, other than Dematerialised Shareholders with “own name” registration, who:
• are unable to attend the General Meeting and wish to be represented thereat, must provide their CSDP or broker with their voting instructions, in terms of the Custody Agreement entered into between themselves and the CSDP or broker concerned, in the manner and within the time stipulated therein;
• wish to attend the General Meeting, must instruct their CSDP or broker to issue them with the necessary written letter of representation to attend.
SIGNED BY I G MORRIS ON HIS OWN BEHALF AS A DIRECTOR AND ON BEHALF OF ALL THE OTHER DIRECTORS OF SEBATA HOLDINGS LIMITED, BEING DULY AUTHORISED IN TERMS OF POWERS OF ATTORNEY GRANTED TO HIM BY SUCH DIRECTORS
By order of the Board
I G Morris Chief Executive Officer
20 December 2019
19
ANNEXURE 1
PRO FORMA FINANCIAL INFORMATION OF SEBATA
Basis of Preparation
The tables below set out the pro forma financial information of the Transaction on the audited Group results of Sebata for the year ended 31 March 2019.
The pro forma financial information has been prepared to illustrate the impact of the Transaction had the Transaction occurred on 1 April 2018 for purposes of the pro forma statement of comprehensive income and on 31 March 2019 for purposes of the pro forma statement of financial position.
The pro forma financial information has been prepared using accounting policies that comply with IFRS and that are consistent with those applied in the audited results of Sebata for the year ended 31 March 2019. The pro forma financial information has been presented in accordance with the JSE Limited Listings Requirements and the Guide on Pro Forma Financial Information issued by the South African Institute of Chartered Accountants.
The pro forma financial effects, which are the responsibility of the directors of the Company, are provided for illustrative purposes only and, because of their pro forma nature may not fairly present Sebata’s financial position, changes in equity, results of operations or cash flow nor the effect and impact of the Transaction going forward.
The pro forma financial information presented below does not purport to be indicative of the financial results and effects of the Transaction if they had been implemented on a different date.
The pro forma financial information has been prepared based on the assumptions indicated in this Annexure.
The pro forma financial information should be read in conjunction with the Independent Reporting Accountants’ assurance report thereon contained in Annexure 2.
20
Pro
form
a S
tate
men
t o
f P
rofit
an
d L
oss
for
the
year
en
ded
31
Mar
ch 2
019
Fig
ure
s in
R’0
00
Bef
ore
th
ed
isp
osa
lN
ote
1
Fin
anci
alIn
for-
mat
ion
for
Mu
bes
koN
ote
2
Ad
just
-m
ents
Mu
bes
koN
ote
3
Fin
anci
alIn
for-
mat
ion
for
US
CN
ote
4
Dis
po
sal
of
par
tial
inte
rest
inU
SC
No
te 5
Fin
anci
alIn
for-
mat
ion
for
Am
anzi
No
te 6
Dis
po
sal
of
par
tial
inte
rest
in A
man
ziN
ote
7
Fin
anci
alin
form
atio
naf
ter
dis
po
sal
Rev
enue
751
909
(57
392)
–(2
06 5
19)
(1 0
70)
(18
483)
16 0
0448
4 45
0C
ost o
f sal
es(3
84 1
89)
13 9
49
–13
0 78
6 –
18 8
67
(14
102)
(234
689
)
Gro
ss p
rofit
367
720
(43
443)
–(7
5 73
3)(1
070
)38
4 1
902
249
761
Oth
er n
et in
com
e/(e
xpen
ses)
308
380
441
(2 2
54)
(86)
436
730
4144
819
78
8 07
0 A
dmin
istra
tion
expe
nses
(382
956
)31
158
–
63 3
30
(18
491)
7 91
7 (1
585
)(3
00 6
27)
Dis
tribu
tion
expe
nses
(4 4
67)
4–
593
–47
–
(3 8
23)
Ope
ratin
g pr
ofit
288
677
(11
840)
(2 2
54)
(11
896)
417
169
8 38
945
136
73
3 38
1
Fina
nce
inco
me
7 83
1 (5
27)
–(2
58)
29 1
29(1
)2
704
38 8
77
Fina
nce
cost
s(6
875
)–
–23
7 (1
38)
3 –
(6 7
73)
Shar
e of
pro
fit in
inve
stm
ents
acc
ount
ed fo
r usi
ng
the
equi
ty m
etho
d1
896
––
–3
416
–(9
18)
4 39
4
Prof
it be
fore
taxa
tion
291
529
(12
367)
(2 2
54)
(11
917)
449
576
8 39
1 46
922
76
9 88
0
Tax
expe
nse
(133
381
)4
413
(3 5
17)
3 37
6 (6
2 85
4)(2
269
)(6
814
)(2
01 0
46)
Prof
it fo
r the
yea
r15
8 14
8 (7
954
)(5
771
)(8
541
)38
6 72
2 6
122
40 1
08
568
833
Prof
it fo
r the
yea
r attr
ibut
able
to:
Ow
ners
of t
he p
aren
t – c
ontin
uing
ope
ratio
ns15
1 23
3 (2
335
)(5
771
)(7
117
)38
6 72
24
592
40 1
0856
7 43
1 N
on-c
ontro
lling
inte
rest
s –
cont
inui
ng o
pera
tions
6 91
5(5
619
)–
(1 4
24)
–1
530
–1
402
158
148
(7 9
54)
(5 7
71)
(8 5
41)
386
722
6 12
2 40
108
56
8 83
3
Ear
nin
gs
per
sh
are
(cen
ts)
Bas
ic13
1.93
49
5.02
D
ilute
d ba
sic
131.
82
494.
61
Hea
dlin
e(3
0.19
)(2
9.10
)D
ilute
d he
adlin
e(3
0.16
)(2
9.08
)Is
sued
third
par
ty s
hare
s11
2 28
4 25
0 11
2 28
4 25
0 W
AN
OS
114
628
694
114
628
694
Dilu
ted
WA
NO
S11
4 72
3 05
7 11
4 72
3 05
7 N
AV p
er s
hare
649.
94
1 01
0.45
Ta
ngib
le N
AV p
er s
hare
103.
10
561.
33
21
Rec
on
cilia
tio
n o
f H
ead
line
Ear
nin
gs
(Net
of
tax)
:
Fig
ure
s in
R’0
00
Bef
ore
th
ed
isp
osa
lN
ote
1
Fin
anci
alIn
for-
mat
ion
for
Mu
bes
koN
ote
2
Ad
just
-m
ents
Mu
bes
koN
ote
3
Fin
anci
alIn
for-
mat
ion
for
US
CN
ote
4
Dis
po
sal
of
par
tial
inte
rest
inU
SC
No
te 5
Fin
anci
alIn
for-
mat
ion
for
Am
anzi
No
te 6
Dis
po
sal
of
par
tial
inte
rest
in A
man
ziN
ote
7
Fin
anci
alin
form
atio
naf
ter
dis
po
sal
Prof
it at
tribu
tabl
e to
ow
ners
of t
he p
aren
t15
1 23
3 (2
335
)(5
771
)(9
357
)38
8 96
2 6
410
38 2
90
567
431
Loss
/(pro
fit)
on d
ispo
sal o
f pro
pert
y, p
lant
and
eq
uipm
ent
670
––
50
–20
–
740
Loss
/(pro
fit) o
n di
spos
al o
f inv
estm
ents
in
subs
idia
ries
and
busi
ness
es(1
86 5
10)
–5
771
–(3
82 0
32)
–(3
8 76
2)(6
01 5
32)
Hea
dlin
e ea
rnin
gs(3
4 60
7)(2
335
)–
(9 3
07)
6 93
1 6
430
(471
)(3
3 36
0)N
ote
s:1.
Th
e fig
ures
incl
uded
in th
e “B
efor
e D
ispo
sal”
colu
mn
have
bee
n ex
tract
ed w
ithou
t adj
ustm
ent f
rom
the
audi
ted
annu
al c
onso
lidat
ed fi
nanc
ial s
tate
men
ts o
f Seb
ata
Hol
ding
s Li
mite
d fo
r th
e pe
riod
ende
d 31
Mar
ch 2
019.
2.
The
finan
cial
info
rmat
ion
for M
ubes
ko h
as b
een
extra
cted
from
the
annu
al fi
nanc
ial s
tate
men
ts o
f Mub
esko
for t
he y
ear e
nded
31
Mar
ch 2
019.
Mub
esko
doe
s no
t for
m p
art o
f the
tran
sact
ion
unde
r co
nsid
erat
ion.
How
ever
, the
dis
posa
l of M
ubes
ko is
a m
ater
ial p
ost b
alan
ce s
heet
tran
sact
ion
and
is re
quire
d to
be
incl
uded
in th
e pr
o fo
rma
finan
cial
info
rmat
ion.
3.
The
pro
form
a ad
just
men
ts m
ade
to th
e M
ubes
ko fi
nanc
ial i
nfor
mat
ion
refe
rred
to in
Not
e 2
abov
e co
mpr
ise
adju
stm
ents
bas
ed o
n th
e fo
llow
ing
prin
cipl
e as
sum
ptio
ns:
a.
Loss
on
disp
osal
of
R2.
2 m
illio
n ha
s be
en r
ecog
nise
d af
ter
disp
osin
g of
the
net
ass
ets
of M
ubes
ko t
o th
e va
lue
of R
50.2
mill
ion,
der
ecog
nisi
ng g
oodw
ill t
o th
e va
lue
of R
20.7
mill
ion
and
dere
cogn
isin
g no
n-co
ntro
lling
inte
rest
s to
the
valu
e of
R25
.5 m
illio
n.b.
Th
e ap
plic
able
legi
slat
ed ta
x ra
tes
utili
sed
for S
outh
Afri
ca fo
r inc
ome
tax
purp
oses
is 2
8% a
nd c
apita
l gai
ns ta
x is
22.
4%.
c.
Elim
inat
ion
of in
terc
ompa
ny tr
ansa
ctio
ns re
late
d to
inte
rcom
pany
sal
es a
nd in
tere
st e
arne
d to
the
valu
e of
R3.
7 m
illio
n.d.
A
ll ad
just
men
ts a
re e
xpec
ted
to h
ave
a co
ntin
uing
effe
ct, s
ave
for t
he tr
ansa
ctio
n fe
es in
curr
ed fo
r the
impl
emen
tatio
n of
the
Tran
sact
ion.
4.
The
finan
cial
info
rmat
ion
for U
SC h
as b
een
extra
cted
from
the
His
toric
al F
inan
cial
Info
rmat
ion
for U
SC p
rese
nted
in A
nnex
ure
3, fo
r the
yea
r end
ed 3
1 M
arch
201
9.5.
Th
e pr
o fo
rma
adju
stm
ents
mad
e to
the
USC
fina
ncia
l inf
orm
atio
n re
ferr
ed to
in N
ote
4 ab
ove
com
pris
e ad
just
men
ts b
ased
on
the
follo
win
g pr
inci
ple
assu
mpt
ions
:a.
Pr
ior t
o th
is tr
ansa
ctio
n U
SC w
as c
ontro
lled
by S
ebat
a an
d co
nsol
idat
ed in
to th
e gr
oup
resu
lts, p
ost t
he tr
ansa
ctio
n th
e in
vest
men
t in
USC
will
be
equi
ty a
ccou
nted
. Thu
s, th
e sh
are
of p
rofit
from
in
vest
men
ts in
ass
ocia
tes
of R
3.4
mill
ion
has
been
reco
gnis
ed.
b.
Prof
it on
dis
posa
l of R
436.
7 m
illio
n ha
s be
en re
cogn
ised
afte
r dis
posi
ng o
f the
net
ass
ets
of U
SC to
the
valu
e of
R11
0.5
mill
ion,
der
ecog
nisi
ng g
oodw
ill to
the
valu
e of
R21
.7 m
illio
n, d
erec
ogni
sing
no
n-co
ntro
lling
inte
rest
s to
the
valu
e of
R19
.1 m
illio
n an
d re
cogn
isin
g th
e fa
ir va
lue
of th
e re
tain
ed in
vest
men
t in
USC
of R
258.
8 m
illio
n.
c.
The
appl
icab
le le
gisl
ated
tax
rate
s ut
ilise
d fo
r Sou
th A
frica
for i
ncom
e ta
x pu
rpos
es is
28%
and
cap
ital g
ains
tax
is 2
2.4%
.d.
El
imin
atio
n of
inte
rcom
pany
tran
sact
ions
to th
e va
lue
of R
2.7
mill
ion
refle
cted
in re
venu
e an
d ad
min
exp
ense
s.e.
Sh
are-
base
d pa
ymen
t exp
ense
has
bee
n re
cogn
ised
in a
dmin
exp
ense
s fo
r the
don
atio
n sh
ares
.f.
Tran
sact
ion
cost
s of
R1.
3 m
illio
n ha
ve b
een
expe
nsed
and
refle
cted
in a
dmin
exp
ense
s.g.
In
tere
st is
ear
ned
on th
e pr
esen
t val
ue o
f the
pro
ceed
s at
a ra
te o
f 10%
.h.
A
ll ad
just
men
ts a
re e
xpec
ted
to h
ave
a co
ntin
uing
effe
ct, s
ave
for t
he tr
ansa
ctio
n fe
es in
curr
ed fo
r the
impl
emen
tatio
n of
the
Tran
sact
ion.
6.
The
finan
cial
info
rmat
ion
for A
man
zi h
as b
een
extra
cted
from
the
His
toric
al F
inan
cial
Info
rmat
ion
for A
man
zi p
rese
nted
in A
nnex
ure
5, fo
r the
yea
r end
ed 3
1 M
arch
201
9.7.
Th
e pr
o fo
rma
adju
stm
ents
com
pris
e ad
just
men
ts b
ased
on
the
follo
win
g pr
inci
ple
assu
mpt
ions
:a.
Pr
ior
to th
is tr
ansa
ctio
n A
man
zi w
as c
ontro
lled
by S
ebat
a an
d co
nsol
idat
ed in
to th
e gr
oup
resu
lts, p
ost t
he tr
ansa
ctio
n th
e in
vest
men
t in
Am
anzi
will
be
equi
ty a
ccou
nted
. Thu
s, th
e sh
are
of
prof
it/(lo
ss) f
rom
inve
stm
ents
in a
ssoc
iate
s of
(R0.
9) m
illio
n ha
s be
en re
cogn
ised
.b.
Pr
ofit
on d
ispo
sal o
f R44
.8 m
illio
n ha
s be
en re
cogn
ised
afte
r dis
posi
ng o
f the
net
ass
ets
of A
man
zi to
the
valu
e of
(R13
.1) m
illio
n, d
erec
ogni
sing
goo
dwill
to th
e va
lue
of R
0.7
mill
ion,
der
ecog
nisi
ng
non-
cont
rolli
ng in
tere
sts
to th
e va
lue
of R
3.6
mill
ion
and
reco
gnis
ing
the
fair
valu
e of
the
reta
ined
inve
stm
ent i
n A
man
zi o
f R9
mill
ion.
c.
Th
e ap
plic
able
legi
slat
ed ta
x ra
tes
utili
sed
for S
outh
Afri
ca fo
r inc
ome
tax
purp
oses
is 2
8% a
nd c
apita
l gai
ns ta
x is
22.
4%.
d.
Elim
inat
ion
of in
terc
ompa
ny tr
ansa
ctio
ns to
the
net v
alue
of R
2 m
illio
n re
flect
ed in
Sal
es, c
ost o
f sal
es a
nd a
dmin
exp
ense
s.e.
Sh
are-
base
d pa
ymen
t exp
ense
has
bee
n re
cogn
ised
in a
dmin
exp
ense
s fo
r the
don
atio
n sh
ares
.f.
Inte
rest
is e
arne
d on
the
pres
ent v
alue
of t
he p
roce
eds
at a
rate
of 1
0%.
g.
All
adju
stm
ents
are
exp
ecte
d to
hav
e a
cont
inui
ng e
ffect
, sav
e fo
r the
tran
sact
ion
fees
incu
rred
for t
he im
plem
enta
tion
of th
e Tr
ansa
ctio
n.
22
Pro
form
a S
tate
men
t o
f Fi
nan
cial
Po
siti
on
as
at 3
1 M
arch
201
9
Fig
ure
s in
R’0
00
Bef
ore
th
ed
isp
osa
lN
ote
1
Fin
anci
alIn
for-
mat
ion
for
Mu
bes
koN
ote
2
Ad
just
-m
ents
Mu
bes
koN
ote
3
Fin
anci
alIn
for-
mat
ion
for
US
CN
ote
4
Dis
po
sal
of
par
tial
inte
rest
inU
SC
No
te 5
Fin
anci
alIn
for-
mat
ion
for
Am
anzi
No
te 6
Dis
po
sal
of
par
tial
inte
rest
in A
man
ziN
ote
7
Fin
anci
alin
form
atio
naf
ter
dis
po
sal
Ass
ets
No
n-C
urr
ent A
sset
sPr
oper
ty, p
lant
and
equ
ipm
ent
29 8
29
(1 2
39)
–(7
672
)–
(858
)–
20 0
60
Inta
ngib
le a
sset
s62
6 83
1 –
(20
722)
(68
845)
(21
732)
–(7
09)
514
823
Oth
er fi
nanc
ial a
sset
s–
––
–29
1 28
7 –
27 0
41
318
327
Inve
stm
ents
in a
ssoc
iate
s19
702
–
––
258
534
–9
000
287
236
Def
erre
d ta
x as
sets
13 6
41
(471
)–
––
(5 1
75)
–7
995
690
003
(1 7
10)
(20
722)
(76
517)
528
089
(6 0
33)
35 3
32
1 14
8 44
1
Cu
rren
t Ass
ets
Inve
ntor
ies
74 2
88
––
(59
948)
–(7
308
)–
7 03
2 C
urre
nt ta
x6
681
––
(1 1
48)
–(2
74)
–5
259
Oth
er fi
nanc
ial a
sset
s79
854
–
–(1
015
)-
––
78 8
39
Trad
e an
d ot
her r
ecei
vabl
es22
5 88
9 (1
4 36
6)–
(29
382)
–(2
837
)–
179
304
Cas
h an
d ca
sh e
quiv
alen
ts41
672
(1
4 48
7)20
000
(1
64)
-(2
5)–
46 9
96
428
384
(28
853)
20 0
00
(91
657)
–(1
0 44
4)–
317
430
Tota
l Ass
ets
1 11
8 38
7 (3
0 56
3)(7
22)
(168
174
)52
8 08
9 (1
6 47
7)35
332
1
465
871
Equi
ty a
nd li
abili
ties
Equi
tyIs
sued
cap
ital
280
372
––
––
––
280
372
Oth
er re
serv
es8
653
––
––
––
8 65
3 R
etai
ned
earn
ings
455
992
(27
116)
21 3
45
(110
493
)49
0 77
2 (1
3 11
0)3
047
846
656
745
017
(27
116)
21 3
45
(110
493
)49
0 77
2 (1
3 11
0)3
047
1 13
5 68
1
Non
-con
trolli
ng in
tere
st45
424
–
(25
584)
–(1
9 13
4)–
3 62
3 4
329
No
n-C
urr
ent
Lia
bili
ties
Oth
er fi
nanc
ial l
iabi
litie
s88
1 –
–(6
33)
––
–24
8 D
efer
red
tax
liabi
litie
s94
675
–
–(1
2 30
7)54
698
–
6 05
7 14
3 12
3
95 5
56
––
(12
940)
54 6
98
–6
057
143
371
23
Pro
form
a S
tate
men
t o
f Fi
nan
cial
Po
siti
on
as
at 3
1 M
arch
201
9 (c
on
tin
ued
)
Fig
ure
s in
R’0
00
Bef
ore
th
ed
isp
osa
lN
ote
1
Fin
anci
alIn
for-
mat
ion
for
Mu
bes
koN
ote
2
Ad
just
-m
ents
Mu
bes
koN
ote
3
Fin
anci
alIn
for-
mat
ion
for
US
CN
ote
4
Dis
po
sal
of
par
tial
inte
rest
inU
SC
No
te 5
Fin
anci
alIn
for-
mat
ion
for
Am
anzi
No
te 6
Dis
po
sal
of
par
tial
inte
rest
in A
man
ziN
ote
7
Fin
anci
alin
form
atio
naf
ter
dis
po
sal
Cu
rren
t lia
bili
ties
Trad
e an
d ot
her p
ayab
les
116
863
(3 2
82)
–(2
6 34
0)1
753
(5 2
42)
2383
775
C
urre
nt ta
x79
756
(1
65)
3 51
7 –
––
–83
108
O
ther
fina
ncia
l lia
bilit
ies
5 75
2 –
–(4
269
)–
(24
345)
22 5
82(2
80)
Def
erre
d ve
ndor
pay
men
ts7
473
––
––
––
7 47
3 B
ank
over
draf
t22
546
–
–(1
4 13
2)–
––
8 41
4 23
2 39
0 (3
447
)3
517
(44
741)
1 75
3 (2
9 58
7)22
605
182
490
Tota
l eq
uit
y an
d li
abili
ties
1 11
8 38
7 (3
0 56
3)(7
22)
(168
174
)52
8 08
9 (1
6 47
7)35
332
1
465
871
No
tes:
1.
The
figur
es in
clud
ed in
the
“Bef
ore
Dis
posa
l” co
lum
n ha
ve b
een
extra
cted
with
out a
djus
tmen
t fro
m th
e au
dite
d an
nual
con
solid
ated
fina
ncia
l sta
tem
ents
of S
ebat
a H
oldi
ngs
Lim
ited
for
the
perio
d en
ded
31 M
arch
201
9.2.
Th
e fin
anci
al in
form
atio
n fo
r Mub
esko
has
bee
n ex
tract
ed fr
om th
e an
nual
fina
ncia
l sta
tem
ents
of M
ubes
ko a
s at
31
Mar
ch 2
019.
Mub
esko
doe
s no
t for
m p
art o
f the
tran
sact
ion
unde
r con
side
ratio
n.
How
ever
, the
dis
posa
l of M
ubes
ko is
a m
ater
ial p
ost b
alan
ce s
heet
tran
sact
ion
and
is re
quire
d to
be
incl
uded
in th
e pr
o fo
rma
finan
cial
info
rmat
ion.
3.
The
pro
form
a ad
just
men
ts fo
r the
fina
ncia
l inf
orm
atio
n of
Mub
esko
refe
renc
ed in
Not
e 2
abov
e co
mpr
ise
adju
stm
ents
bas
ed o
n th
e fo
llow
ing
prin
cipl
e as
sum
ptio
ns:
a.
The
proc
eeds
hav
e be
en re
cogn
ised
in C
ash
and
cash
equ
ival
ents
.b.
G
oodw
ill a
ttrib
uted
to th
e ac
quis
ition
of M
ubes
ko to
the
valu
e of
R20
.7 m
illio
n ra
nd is
der
ecog
nise
d.
c.
The
appl
icab
le le
gisl
ated
tax
rate
s ut
ilise
d fo
r Sou
th A
frica
for i
ncom
e ta
x pu
rpos
es is
28%
and
cap
ital g
ains
tax
is 2
2.4%
.4.
Th
e fin
anci
al in
form
atio
n fo
r USC
has
bee
n ex
tract
ed fr
om th
e H
isto
rical
Fin
anci
al In
form
atio
n fo
r USC
pre
sent
ed in
Ann
exur
e 3,
for t
he y
ear e
nded
31
Mar
ch 2
019.
5.
The
pro
form
a ad
just
men
ts in
clud
e bo
th th
e sa
le o
f sha
res
and
dona
tion
agre
emen
ts, f
or th
e fin
anci
al in
form
atio
n of
USC
refe
renc
ed in
Not
e 3
abov
e co
mpr
ise
adju
stm
ents
bas
ed o
n th
e fo
llow
ing
prin
cipl
e as
sum
ptio
ns:
a.
The
acqu
isiti
on o
f the
bal
ance
of t
he m
inor
ity in
tere
st o
f 17%
to th
e va
lue
of R
23.6
miil
liion
has
bee
n re
flect
ed a
s a
trans
actio
n be
twee
n th
e ow
ners
and
reco
gnis
ed in
equ
ity.
b.
Prio
r to
this
tran
sact
ion
USC
was
con
trolle
d by
Seb
ata
and
cons
olid
ated
into
the
grou
p re
sults
, pos
t the
tran
sact
ion
USC
will
be
an in
vest
men
t in
an a
ssoc
iate
and
equ
ity a
ccou
nted
. The
dis
posa
l an
d do
natio
n sh
ares
are
see
n as
par
t of t
he s
ame
trans
actio
n as
the
dona
tion
shar
es a
re c
ontin
gent
on
the
sale
s sh
ares
.c.
It
is a
ssum
ed fo
r th
e pu
rpos
es o
f the
pro
form
a fin
anci
al e
ffect
s th
at th
e pr
ofit
targ
ets
set i
n th
e Sa
le A
gree
men
ts w
ill b
e m
et a
nd h
ave
reco
gnis
ed th
e pr
esen
t val
ue o
f the
pro
ceed
s in
oth
er
finan
cial
ass
ets.
d.
Goo
dwill
reco
gnis
ed a
t acq
uisi
tion
of U
SC to
the
valu
e of
R21
.7 m
illio
n is
der
ecog
nise
d.e.
Th
e ba
lanc
e of
the
inve
stm
ent i
n U
SC h
as b
een
reco
gnis
ed a
t a fa
ir va
lue
of R
258
mill
ion.
f.
app
licab
le le
gisl
ated
tax
rate
s ut
ilise
d fo
r Sou
th A
frica
for i
ncom
e ta
x pu
rpos
es is
28%
and
cap
ital g
ains
tax
is 2
2.4%
.6.
Th
e fin
anci
al in
form
atio
n fo
r Am
anzi
has
bee
n ex
tract
ed fr
om th
e H
isto
rical
Fin
anci
al In
form
atio
n fo
r Am
anzi
pre
sent
ed in
Ann
exur
e 5,
for t
he y
ear e
nded
31
Mar
ch 2
019.
7.
The
pro
form
a ad
just
men
ts i
nclu
de b
oth
the
sale
of s
hare
s an
d do
natio
n ag
reem
ents
, for
the
finan
cial
info
rmat
ion
of A
man
zi re
fere
nced
in N
ote
6 ab
ove
com
pris
e ad
just
men
ts b
ased
on
the
follo
win
g pr
inci
ple
assu
mpt
ions
:a.
Pr
ior
to t
he t
rans
actio
n A
man
zi w
as c
ontro
lled
by S
ebat
a an
d co
nsol
idat
ed in
to t
he g
roup
res
ults
, po
st t
rans
actio
n A
man
zi w
ill b
e an
inve
stm
ent
in a
n as
soci
ate
and
equi
ty a
ccou
nted
. Th
e di
spos
al a
nd d
onat
ion
shar
es a
re s
een
as p
art o
f the
sam
e tra
nsac
tion
as th
e do
natio
n sh
ares
are
con
tinge
nt o
n th
e sa
les
shar
esb.
It
is a
ssum
ed fo
r th
e pu
rpos
es o
f the
pro
form
a fin
anci
al e
ffect
s th
at th
e pr
ofit
targ
ets
set i
n th
e sa
le a
gree
men
ts w
ill b
e m
et a
nd h
ave
reco
gnis
ed th
e pr
esen
t val
ue o
f the
pro
ceed
s in
oth
er
finan
cial
ass
ets.
b.
Goo
dwill
reco
gnis
ed a
t the
acq
uisi
tion
of A
man
zi to
the
valu
e of
R0.
7 m
illio
n is
der
ecog
nise
d.d.
Th
e ba
lanc
e of
the
inve
stm
ent i
n A
man
zi h
as b
een
reco
gnis
ed a
t a fa
ir va
lue
of R
9 m
illio
n.e.
Th
e ap
plic
able
legi
slat
ed ta
x ra
tes
utili
sed
for S
outh
Afri
ca fo
r inc
ome
tax
purp
oses
is 2
8% a
nd c
apita
l gai
ns ta
x is
22.
4%.
24
ANNEXURE 2
INDEPENDENT REPORTING ACCOUNTANT’S ASSURANCE REPORT ON THE COMPILATION OF PRO FORMA FINANCIAL INFORMATION INCLUDED IN A CIRCULAR
“The DirectorsSebata Holdings Limited66 Park LaneSundownSandton 2196Johannesburg
INDEPENDENT REPORTING ACCOUNTANT’S ASSURANCE REPORT ON THE COMPILATION OF THE PRO FORMA FINANCIAL INFORMATION OF SEBATA HOLDINGS LIMITED INCLUDED IN A CIRCULAR
To the Directors of Sebata Holdings Limited
We have completed our assurance engagement to report on the compilation of the Pro forma Financial Information of Sebata Holdings Limited (hereinafter referred to as “Sebata”) by the Directors. The pro forma financial information, as set out in paragraph 4 and Annexure 1 of the Circular, consists of the pro forma statement of comprehensive income of Sebata and the related notes (collectively the “Pro forma SoCI”), as if the Transaction below had taken place on 1 April 2018 for the year ended 31 March 2019, and the pro forma statement of financial position of Sebata and the related notes (collectively the “Pro forma SoFP”), as if the Transaction below had taken place on 31 March 2019. The Pro forma SoCI and Pro forma SoFP are collectively referred to as the Pro forma Financial Information of Sebata for the purposes of this Report. The applicable criteria on the basis of which the directors have compiled the Pro forma Financial Information are specified in the Johannesburg Stock Exchange Limited (JSE) Listings Requirements and described in the Basis of Preparation paragraph of Annexure 1 of the Circular.
The Pro forma Financial Information has been compiled by the directors to illustrate the impact of the disposal of 60% of USC Metering Proprietary Limited (“USC Metering”), 60% of Amanzi Meters Proprietary Limited (“Amanzi Meters”) and the disposal of 50% of Mubesko Africa Proprietary Limited (“Mubesko Africa”), as if the transactions had taken place as at 31 March 2019 for purposes of the Pro forma SoFP, and at 1 April 2018 for purposes of the Pro forma SoCI for the year ended 31 March 2019. Accordingly, we do not provide any assurance that the actual outcome of the Transaction, subsequent to its implementation, will be as presented in the Pro forma Financial Information of Sebata. As part of this process, financial information about Sebata’s financial position and financial performance has been extracted by the directors from Sebata’s published financial statements for the year ended 31 March 2019, on which an audit report was issued on 28 June 2019.
Directors’ Responsibility for the Pro Forma Financial Information
The directors 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 the Basis of Preparation paragraph of Annexure 1 of the Circular (“Applicable Criteria”).
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Our independence and quality control
We are independent of the company in accordance with the sections 290 and 291 of the Independent Regulatory Board for Auditors’ Code of Professional Conduct for Registered Auditors (Revised January 2018), parts 1 and 4B of the Independent Regulatory Board for Auditors’ Code of Professional Conduct for Registered Auditors (Revised November 2018) (together the IRBA Codes) and other independence requirements applicable to performing assurance engagements in South Africa. We have fulfilled our other ethical responsibilities, as applicable, in accordance with the IRBA Codes and in accordance with other ethical requirements applicable to performing assurance engagements in South Africa. The IRBA Codes are consistent with the corresponding sections of the International Ethics Standards Board for Accountants’ Code of Ethics for Professional Accountants and the International Ethics Standards Board for Accountants’ International Code of Ethics for Professional Accountants (including International Independence Standards) respectively.
Nexia SAB&T applies the International Standard on Quality Control 1, Quality Control for Firms that Perform Audits and Reviews of Financial Statements, and Other Assurance and Related Services Engagements 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 specified in the JSE Listings Requirements based on our procedures performed.
We conducted our engagement in accordance with International Standard on Assurance Engagements (ISAE) 3420, Assurance Engagements to Report on the Compilation of Pro Forma Financial Information Included in a Prospectus which is applicable to an engagement of this nature, issued by the International Auditing and Assurance Standards Board. This standard requires that we plan and perform 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 included in a Circular is solely to illustrate the impact of Transaction on the Sebata Financial Information as if the Transaction had been undertaken on 1 April 2018 for purposes of the Pro forma SoCI and on 31 March 2019 for purposes of the Pro forma SoFP. Accordingly, we do not provide any assurance that the actual outcome of the Transaction, subsequent to its implementation, will be as presented in the Pro forma Financial Information of Sebata.
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 provides a reasonable basis for presenting the significant effects directly attributable to the 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.Our procedures selected depend on our judgment, having regard to our understanding of the nature of Sebata, the 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.
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Opinion
In our opinion, the Pro forma Financial Information has been compiled, in all material respects, on the basis of the applicable criteria specified in the JSE Listing Requirements and described in the Basis for Preparation paragraph of Annexure 1.
Consent
This report on the Pro forma Financial Information is included solely for the information of the Sebata shareholders.
We consent to the inclusion of our report on the Pro forma Financial Information, and the references thereto, in the form and context in which they appear in the Circular.
Yours faithfully
Nexia SAB&TPer: J. Engelbrecht – DirectorChartered Accountant (SA)Registered Auditor and Reporting Accountant Specialist20 December 2019119 Witch-Hazel Avenue Highveld TechnoparkCenturion
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ANNEXURE 3
HISTORICAL FINANCIAL INFORMATION OF USC FOR THE THREE FINANCIAL YEARS ENDED 31 MARCH 2019, 31 MARCH 2018 AND 31 MARCH 2017
Statement of Financial Position as at 31 March
Note(s) March 2019 March 2018 March 2017
AssetsNon-Current AssetsProperty, plant and equipment 6 7 672 226 6 623 538 4 379 641 Intangible assets 7 68 844 893 53 105 838 41 940 700
76 517 119 59 729 376 46 320 341
Current AssetsInventories 9 59 947 913 41 840 912 27 741 381Current tax receivable 13 1 147 564 2 824 773 –Related party loans 8 1 015 232 19 464 098 10 632 134 Trade and other receivables 10 29 382 064 68 384 575 91 310 443 Cash and cash equivalents 163 922 12 694 655 2 816 696
91 656 695 145 209 013 132 500 654
Total Assets 168 173 814 204 938 389 178 820 995
Equity and LiabilitiesEquityIssued capital 120 120 120Retained earnings 110 493 240 102 148 335 88 768 508
110 493 360 102 148 455 88 768 628
Non-Current LiabilitiesOther financial liabilities 632 964 – –Deferred tax liabilities 11 12 306 713 11 721 365 8 708 968
12 939 677 11 721 365 8 708 968
Current LiabilitiesTrade and other payables 12 26 339 511 36 965 102 33 639 082 Current tax payable 13 – 2 869 636 1 723 949 Related party loans 8 4 269 428 51 212 608 45 951 500 Bank overdraft 14 131 838 21 223 28 868
44 740 777 91 068 569 81 343 399
Total Equity and Liabilities 168 173 814 204 938 389 178 820 995
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Statement of Profit and Loss
Note(s) March 2019 March 2018 March 2017
Revenue 14 206 518 637 216 505 862 206 427 803 Cost of sales (130 786 030) (150 048 159) (131 447 168)
Gross profit 75 732 607 66 457 703 74 980 635
Other net income/(expenses) 86 271 (1 813 057) 1 424 855 Admin expenses 15 (63 330 376) (45 921 351) (40 535 922)Distribution expenses (592 836) (96 741) (66 868)
Operating profit 11 895 666 18 626 554 35 802 700
Finance income 257 842 537 574 877 901 Finance costs (236 519) (212 789) (29 754)
Profit before taxation 11 916 989 18 951 339 36 650 847
Tax expense 16 (3 375 902) (5 571 512) (9 130 039)
Profit for the year 8 541 087 13 379 827 27 520 808
Statement of comprehensive income
Note(s) March 2019 March 2018 March 2017
Profit for the period 8 541 087 13 379 827 27 520 808Other comprehensive incomeForeign currency translation differences – – –
Total comprehensive income for the year 8 541 087 13 379 827 27 520 808
Statement of Changes in Equity
Sharecapital
Retainedearnings Total
Balance at 1 April 2016Total comprehensive income for the year 120 71 247 700 71 247 820Profit for the year – 27 520 808 27 520 808Transactions with owners recorded directly in equityDividends paid – (10 000 000) (10 000 000)
Balance at 31 March 2017 120 88 768 508 88 768 628
Balance at 1 April 2017 120 88 768 508 88 768 628Total comprehensive income for the yearProfit for the year – 13 379 827 13 379 827
Balance at 31 March 2018 120 102 148 335 102 148 455
Balance at 1 April 2018 as previously reported 120 102 148 335 102 148 455Adjustment on initial application of IFRS 9 and IFRS 15 net of taxes – (196 182) (196 182)
Balance at 1 April 2018 as adjusted 120 101 952 153 101 952 273Total comprehensive income for the yearProfit for the year – 8 541 087 8 541 087
Balance at 31 March 2019 120 110 493 240 110 493 360
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Statement of Cash Flow
Note(s) March 2019 March 2018 March 2017
Cash flows from operating activities Cash generated from operations 17 29 233 390 32 785 066 14 406 279 Finance income received 257 842 537 574 877 901 Finance costs paid (236 519) (212 789) (29 754)Income tax paid (3 982 982) (4 239 399) (5 670 240)
Net cash from operating activities 25 271 731 28 870 452 9 584 186
Cash flows from investing activitiesProperty, plant and equipment acquired (3 931 210) (4 435 120) (2 489 554)Intangible assets acquired (20 273 268) (11 536 565) (8 372 947)Proceeds on disposals of property, plant and equipment 59 717 179 602 72 599
(24 144 761) (15 792 083) (10 789 902)
Cash flows from financing activitiesRelated party loans repaid (46 306 734) (4 360 801) –Related party loans received 18 538 416 1 168 036 13 372 687Dividends paid – – (10 000 000)
(27 768 318) (3 192 765) 3 372 687
(Decrease)/Increase in cash and cash equivalents (26 641 348) 9 885 604 2 166 971 Cash and cash equivalents at beginning of the year 12 673 432 2 787 828 620 857
Cash and cash equivalents at end of the year (13 967 916) 12 673 432 2 787 828
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ACCOUNTING POLICIES
1. STATEMENT OF COMPLIANCE
The historic financial information (hereinafter referred to as “financial statements”) has been prepared in accordance with the JSE Limited Listings Requirements, the conceptual framework, the measurement and recognition requirements of International Financial Reporting Standards (IFRS), the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee and Financial Pronouncements as issued by Financial Reporting Standards Council.
2. BASIS OF PREPARATION
The financial statements are presented in South African Rand, which is the company’s functional currency.
The historic financial information have been prepared under the historical cost convention.
The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the company’s accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the annual financial statements are disclosed in note 4.
The historical financial information is the responsibility of the directors.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The principal accounting policies applied in the preparation of these annual financial statements are set out below. These policies have been consistently applied.
3.1 Property, plant and equipment
Property, plant and equipment is stated at cost less accumulated depreciation and impairment. Cost includes expenditure that is directly attributable to the acquisition of the items.
Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the company and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognised. All other repairs and maintenance are charged to the statement of profit and loss during the financial period in which they are incurred.
Depreciation methods, residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period. Useful lives are affected by technology innovations, maintenance programs and future economic benefits. Residual value assessments consider issues such as future market conditions, the remaining life of the asset and projected disposal values. Consideration is also given to the extent of current profits and losses on the disposal of similar assets.
Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognised within “Other income” in the statement of profit and loss. When revalued assets are sold, the amounts included in other reserves are transferred to retained earnings.
Depreciation is provided on the straight-line basis which, will reduce the carrying amount of the property, plant and equipment to their residual values at the end of their useful lives. Depreciation is generally recognised in profit or loss, unless the amount is included in the carrying amount of another asset. Leased assets are depreciated over the shorter of the lease term and their useful lives unless it is reasonably certain that the group will obtain ownership by the end of the lease term. Land is not depreciated. Items of property, plant and equipment are depreciated from the date that they are installed and available for use.
Where an item of property, plant and equipment comprises major components with different useful lives, the components are accounted for as separate items of property, plant and equipment.
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The major categories of property, plant and equipment are depreciated at the following rates:
Plant and equipment 5 – 15 yearsMotor vehicles 4 – 5 yearsFurniture and fittings 5 – 10 yearsOffice equipment 5 – 10 yearsComputer equipment 2 – 5 yearsLeasehold improvements Over the period of the lease
3.2 Intangible assets
Computer software, internally generated
Expenditure of research activities, undertaken with the prospect of gaining new scientific or technical knowledge and understanding, is recognised in profit or loss as incurred.
Development activities involve a plan or design for the production of new or sustainable improved products and processes. Development expenditure is capitalised only if development costs can be, measured reliably, the product or process is technically commercially feasible, future economic benefits are probable, and the company intends to and has sufficient resources to complete development and to use or sell the asset. The expenditure capitalised includes the cost of materials, direct labour, overhead costs that are directly attributable to preparing the assets for its intended use, and capitalised borrowing costs. Other development expenditure is recognised in profit or loss as incurred.
Capitalised development expenditure is allocated to computer software under development until such time that the products and processed are ready for use. The relevant items are then transferred from the computer software under development category to the computer software internally generated category within intangible assets.
Capitalised development expenditure is measured at cost less accumulated amortisation and accumulated impairment losses.
Amortisation
The estimated useful lives for the current and comparative years are as follows :
Computer software, internally generated and computer software externally purchased 5 – 15 years
Amortisation methods, useful lives and residual values are reviewed at each reporting date and adjusted if appropriate.
An intangible asset is regarded as having an indefinite useful life when, based on all relevant factors, there is no foreseeable limit to the period over which the asset is expected to generate net cash inflows. Amortisation is not provided for these intangible assets but they are tested for impairment annually or more frequently if events or changes in circumstances indicate that the carrying value may be impaired, and it is subsequently carried at cost less accumulated impairment losses.
3.3 Impairment of non-financial assets
The carrying amount of the company’s non-financial assets, other than inventories and deferred tax assets, are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists then the asset’s recoverable amount is estimated.
For the purpose of impairment testing, assets are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of cash inflows of other assets (the “cash-generating unit”). The goodwill acquired in a business combination, for the purpose of impairment testing, is allocated to cash-generating units that are expected to benefit from the synergies of the combination.
An impairment loss is recognised if the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount. A cash-generating unit is the smallest identifiable asset group that generates cash flows that are largely independent from other assets and groups.
The recoverable amount of an asset or cash-generating unit is the greater of its value-in-use and its fair value less cost to sell. In assessing value-in-use, the estimated future cash flows are discounted
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to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset.
Impairment losses are recognised in profit or loss. Impairment losses recognised in respect of cash-generated units are allocated first to reduce the carrying amount of any goodwill allocated to the units and then to reduce the carrying amount of the other assets in the group on a pro rata basis.
An impairment loss in respect of goodwill is not reversed. In respect of other assets, impairment losses recognised in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.
3.4 Inventories
Inventories are measured at the lower of cost and net realisable value. The cost of inventories comprises all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition and is assigned by using the weighted average cost formula. In the case of manufactured inventories and work in progress, cost includes an appropriate share of production overheads based on normal operating capacity. Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale.
When inventories are sold, the carrying amount of those inventories is recognised as an expense in the period in which the related revenue is recognised. The amount of any write-down of inventories to net realisable value and all losses of inventories are recognised as an expense in the period the write-down or loss occurs.
The amount of any reversal of any write-down of inventories, arising from an increase in net realisable value, is recognised as a reduction in the amount of inventories recognised as an expense in the period in which the reversal occurs.
Where necessary, provision is made for obsolete, slow-moving and defective inventories.
3.5 Financial assets
Financial assets comprise trade and other receivables (excluding prepayments); cash and cash equivalents and other financial assets.
Financial assets are recognised in the company’s statement of financial position when the company becomes a party to the contractual provisions of the instruments. Financial assets are classified as current if expected to be realised or settled within 12 months from the reporting date; if not, they are classified as non-current.
Classification
The company classifies financial assets on initial recognition as measured at amortised cost as the company’s business model and objective is to hold the financial asset in order to collect the contractual cash flow and the contractual terms allows for cash flows on specified dates for the payment of the principal amounts outstanding.
Financial assetsClassification in 2019 (IFRS 9)
Classification in 2018 and 2017 (IAS 32)
Trade and other receivables Financial asset at amortised cost
Loans and receivables at amortised cost
Cash and cash equivalents Financial asset at amortised cost
Loans and receivables at amortised cost
Other financial assets Financial asset at amortised costLoans and receivables at amortised cost
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Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, except for maturities greater than 12 months after the end of the reporting period. These are classified as non-current assets. The company’s loans and receivables comprise ‘trade and other receivables’ and ‘cash and cash equivalents’ in the statement of financial position.
Recognition and measurement
Regular purchases and sales of financial assets are recognised on the trade-date – the date on which the company commits to purchase or sell the asset. Investments are initially recognised at fair value plus transaction costs for all financial assets not carried at fair value through profit or loss.
Loans and receivables are initially recognised at fair value and subsequently measured at amortised cost.
Offsetting financial instruments
Financial assets and liabilities are offset and the net amount reported in the statement of financial position when there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis or realise the asset and settle the liability simultaneously.
Impairment of financial assets
Assets carried at amortised cost (IFRS 9)
Under IFRS 9 the company calculates its allowance for credit losses as expected credit losses (ECLs) for financial assets measured at amortised cost. ECLs are a probability weighted estimate of credit losses. To calculate ECLs the company segments/groups trade receivables by customer type and ageing. The company applies the simplified approach to determine the ECL for trade receivables. This results in calculating lifetime expected credit losses for trade receivables. ECLs for trade receivables are calculated using a provision matrix. The provision matrix is determined by using reference to the credit quality of the assets, the customers ability to pay, historical default rates and credit losses incurred along with reference to forward-looking information such as macro-economic factors and future forecasts. The company has defined a default as a significant deviation to the contractual payment terms and accepted historical payment rates from customers which has impacted on the ability of the customers’ ability to settle current and future debt. If there have been significant defaults from a specific customer and these have given rise to indications that the customer has a decreased ability to settle the debt when due these expected credit losses are provided for in full and not with reference to the provision matrix. In determining whether there has been a significant increase in credit risk the company has rebutted the presumption that this occurs once contractual payments extend past 30 days, this is due to the segment in which the Group operates in which it is common practice for payment terms to extend past 30 days.
ECLs for other financial assets are assessed on an individual basis based on a credit risk assessment of the borrower, this credit risk comprises historical defaults by the borrower, the borrower’s ability to repay the debt and security that is in place over the debt.
Assets carried at amortised cost (IAS 32)
The company assesses at the end of each reporting period whether there is objective evidence that a financial asset or group of financial assets is impaired.
A financial asset or a group of financial assets is impaired and impairment losses are incurred only if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a “loss event”) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated.
Evidence of impairment may include indications that the debtors or a group of debtors is experiencing significant financial difficulty, default or delinquency in interest or principal payments, the probability that they will enter bankruptcy or other financial reorganisation, and where observable data indicate that there is a measurable decrease in the estimated future cash flows, such as changes in arrears or economic conditions that correlate with defaults.
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For loans and receivables category, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset’s original effective interest rate. The carrying amount of the asset is reduced and the amount of the loss is recognised in the statement of comprehensive income. If a loan has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate determined under the contract. As a practical expedient, the company may measure impairment on the basis of an instrument’s fair value using an observable market price.
If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised (such as an improvement in the debtor’s credit rating), the reversal of the previously recognised impairment loss is recognised in the statement of comprehensive income.
Trade and other receivables
Trade and other receivables comprises trade receivables, deposits, prepayments, advances and other receivables.
Trade and other receivables are initially measured at fair value and, after initial recognition, at amortised cost less impairment losses for bad and doubtful debts, if any, except for the following receivables:
• Interest-free loans made to related parties without any fixed repayment terms or the effect of discounting being immaterial, that are measured at cost less impairment losses for bad and doubtful debt, if any; and
• Short-term receivables with no stated interest rate and the effect of discounting being immaterial, that are measured at their original invoice amount less impairment losses for bad and doubtful debt, if any.
Cash and cash equivalents
Cash comprises cash on hand and at bank and demand deposits with bank. Cash equivalents are short-term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.
Cash and cash equivalents are initially recognised at fair value and subsequently measured at amortised cost.
For the purpose of statement of cash flows, bank overdrafts which are repayable on demand form an integral part of the company’s cash management are included as a component of cash and cash equivalents.
Other financial assets
Other financial assets comprise of deferred payments due on the disposal of subsidiaries and loans receivable extended. These are initially measured at fair value and, after initial recognition, at amortised cost less impairment losses.
Derecognition
Financial assets are derecognised when the rights to receive cash flows from the assets have expired or have been transferred and the group has transferred substantially all risks and rewards of ownership. On derecognition of a financial asset, any difference between the carrying amount extinguished and the consideration paid is recognised in profit or loss.
3.6 Financial liabilities
Financial liabilities comprise trade and other payables (excluding indirect taxation payable), other financial liabilities and bank overdrafts.
Recognition
Financial liabilities are recognised in the company’s statement of financial position when the company becomes a party to the contractual provisions of the instruments. Financial liabilities are classified as non-current if the group has an unconditional right to defer payment for more than 12 months from the reporting date otherwise they are classified as current.
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Classification
All financial liabilities are classified at amortised cost except for deferred vendor payments that are measured at fair value through profit and loss.
Financial liabilities Classification in 2019 (IFRS 9) Classification in 2018 (IAS 32)
Trade and other payables Financial liability at amortised cost Financial liability at amortised cost
Other financial liabilities Financial liability at amortised cost Financial liability at amortised cost
Trade and other payables
Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Accounts payable are classified as current liabilities if payment is due within one year or less (or in the normal operating cycle of the business if longer). If not, they are presented as non-current liabilities.
Trade payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method.
Borrowings
Borrowings comprises loans from shareholders, loans from directors, loans from third parties and instalment sale obligations.
Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently carried at amortised cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognised in the statement of comprehensive income over the period of the borrowings using the effective interest method.
Derecognition
Financial liabilities are derecognised when the obligations specified in the contracts are discharged, cancelled or expire. On derecognition of a financial liability, any difference between the carrying amount extinguished and the consideration paid is recognised in profit or loss.
3.7 Leases
Finance Leases – Lessee
Leases that transfer substantially all the risks and rewards of ownership of the underlying asset to the company are classified as finance leases. Assets acquired in terms of finance leases are capitalised at the lower of the fair value of the asset and the present value of the minimum lease payments at inception of the lease, and depreciated over the shorter of the estimated useful life of the asset or the lease term if there is no reasonable certainty that the company will obtain ownership at the end of the lease term. The capital element of future obligations under these leases is included as a liability in the balance sheet. Lease payments are allocated using the effective interest method to determine the lease finance cost, which is recognised in profit or loss over the lease period, and the capital repayment, which reduces the liability to the lessor.
Operating Leases
Leases where the lessor retains the risks and rewards of ownership of the underlying asset are classified as operating leases. Payments made under operating leases are recognised in profit or loss on a straight-line basis over the period of the lease.
3.8 Employee benefits
Defined contribution plans
The company pays fixed contributions into independent entities in relation to several state plans and insurance for individual employees. The company has no legal or constructive obligations to pay contributions in addition to its fixed contributions, which are recognised as an expense in the period that relevant employee services are received.
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Short-term employee benefits
The cost of all short-term employee benefits is recognised during the period in which the employee renders the related service on an undiscounted basis.
Accruals for employee entitlement to annual leave represents the present obligation, which the company has to pay as a result of employees’ services, provided to the reporting date. The accruals have been calculated at undiscounted amounts based on current salary rates.
A liability is recognised for the amount expected to be paid under short-term bonuses in the company as the company has a present legal constructive obligation to pay the amount as a result of past service provided by the employee, and the obligation can be estimated reliably.
3.9 Income tax
Income tax for the year includes current tax and deferred tax. Current tax and deferred tax are recognised in profit or loss, except to the extent that the tax arises from a transaction or event which is recognised directly in equity in which case current tax and deferred tax are also recognised directly equity.
Current tax liabilities and assets are measured at the amount expected to be paid to or recovered from the taxation authorities, using the tax rates and tax laws that have been enacted or substantively enacted by the statement of financial position date. Current tax is the amount of income taxes payable or recoverable in respect of the taxable profit or loss for a year, and any adjustments in respect of previous years.
Deferred tax assets and liabilities arise from deductible and taxable temporary differences respectively. Temporary differences are the differences between the carrying amounts of assets and liabilities for financial reporting purposes and their tax bases. Deferred tax assets also arise from unused tax losses and unused tax credits.
Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realised simultaneously.
A deferred tax asset is recognised to the extent that it is probable that future taxable profits will be available against which temporary differences can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised.
At each statement of financial position date, the company reviews and assesses the recognised and unrecognised deferred tax assets and the future taxable profit to determine whether any recognised deferred tax assets should be derecognised and any unrecognised deferred tax assets should be recognised.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled, based on tax rates and tax laws that have been enacted or substantively enacted by the statement of financial position date. Deferred tax assets and liabilities are not discounted.
Dividends withholding taxes that arise from the distribution of dividends are recognised when the distributions are made to shareholders that do not qualify for exemption in terms of the Income Tax Act.
3.10 Revenue recognition
Revenue contracts with customers
Revenue is measured at the fair value of the consideration specified in a contract with a customer and excludes amounts collected on behalf of third parties. The company recognises revenue when it transfers control over a product or services to a customer. The following indicators are used by the company in determining when control has passed to the customer:
• the company has the right to payment for the product or service;• the customer has legal title to the product;
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• the company has transferred physical possession of the product to the customer;• the customer has the significant risks and rewards of ownership of the product; and• the customer has accepted the product.
The transaction price is allocated to specific performance obligations within the contract, these prices are specifically linked and disclosed in accordance to the performance obligations. Hence there is no need for management to make any assumptions as it relates to allocating the transaction price to the various performance obligations.
Nature of significant revenue streams
The company’s revenue streams consists of the major products and services lines set out below, which includes a description of the principle activities from which the company generates its revenue, significant judgements applied in assessing the timing of measurement of performance obligation and the transaction price allocated to performance obligations.
Major product lines at a point in time
Products and servicesNature, timing of satisfaction of performance obligations and significant payment terms
Support and maintenance Revenue from support and maintenance services is recognised as ad-hoc services are provided and the necessary repairs, maintenance or equivalent services has been completed to the customer’s satisfaction.
Physical goods Revenue from physical goods is recognised at the point in time when ownership of the goods are transferred, and the customer takes control of the goods.
Contract assets
Timing of revenue recognition may differ from the timing of invoicing to customers. We record a contract asset when revenue is recognised prior to invoicing.
Contract liabilities
Timing of revenue recognition may differ from the timing of invoicing to customers. We record a contract liability where the consideration relating to the revenue has been received prior to the performance obligation having been met.
Sales of goods (IAS18)
Revenue from the sale of goods in the course of ordinary activities is measured at the fair value of the consideration received or receivable, net of returns, trade discounts and volume rebates. Revenue is recognised when the significant risks and rewards of ownership have been transferred to the buyer, recovery of the consideration is probable, the associated costs and possible return of goods can be estimated reliably, and there is no continuing management involvement with the goods, and the amount of revenue can be measured reliably. If it is probable that discounts will be granted and the amount can be measured reliably, then the discount is recognised as a reduction of revenue as the sales are recognised.
Rendering of services (IAS18)
Revenue from rendering of services is recognised in profit or loss in proportion to the stage of completion of the transaction at the reporting date. The stage of completion is assessed by reference to surveys of work performed.
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4. CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY
The company’s management makes assumptions, estimates and judgements in the process of applying the company’s accounting policies that affect the assets, liabilities, income and expenses in the consolidated annual financial statements prepared in accordance with IFRSs. The assumptions, estimates and judgements are based on historical experience and other factors that are believed to be reasonable under the circumstances. While the management reviews their judgements, estimates and assumptions continuously, the actual results will seldom equal to the estimates.
The estimates and the underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision policy affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.
Residual values and useful lives of tangible and intangible assets
The useful lives and residual values of items of property, plant and equipment and intangible assets are estimated annually. The actual lives and residual values may vary depending on a variety of factors such as the nature of item, the condition as result of current usage and the expected physical wear and tear of each item and technical relevance of property, plant and equipment and intangible assets.
Estimated impairment of goodwill and intangible assets with indefinite useful lives
The company tests annually whether intangible assets with indefinite lives have suffered any impairment, in accordance with the accounting policy stated in note 3.3. The recoverable amounts of certain cash-generating units have been determined based on the value-in use calculations. The company assessed on an annual basis whether the classification of indefinite life intangible assets is appropriate.
Measurement of the recoverable amount of trade receivables
Management utilised estimates to determine the recoverable amount if the company’s trade receivables, which focusses on the ability of the customer to settle outstanding debt when it becomes due and payable. The company uses judgement in making these estimations and selecting the inputs to the credit loss calculations, based on the company’s past payment history, historical write-offs, existing market conditions as well as forward-looking estimates at the end of the reporting period estimations on future default rates translated into expected credit losses.
Percentage of completion
Management estimates the costs to complete projects at each reporting period and calculates the percentage of completion based on the costs incurred at that date as a percentage of the total costs to be incurred. The percentage of completion is applied to the expected revenue of the project to measure the revenue to be recognised at the end of each reporting period.
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5. NEW STANDARDS AND INTERPRETATIONS
The company has chosen not to early adopt the following standards and interpretations and will do so in future financial periods.
The amendments as set out below have been assessed are considered not to have a material impact on the financial statements:
IFRS 10 Consolidated Financial Statements
Sale or Contribution of Assets between an Investor and its Associate or Joint Venture (Amendments to IFRS 10 and IAS 28): Narrow scope amendment address an acknowledged inconsistency between the requirements in IFRS 10 and those in IAS 28 (2011), in dealing with the sale or contribution of assets between an investor and its associate or joint venture.
The effective date of this amendment has been deferred indefinitely until further notice
IFRS 16 Leases New standard that introduces a single lessee accounting model and requires a lessee to recognise assets and liabilities for all leases with a term of more than 12 months, unless the underlying asset is of low value. A lessee is required to recognise a right-of-use asset representing its right to use the underlying leased asset and a lease liability representing its obligation to make lease payments. A lessee measures right-of-use assets similarly to other non-financial assets (such as property, plant and equipment) and lease liabilities similarly to other financial liabilities. As a consequence, a lessee recognises depreciation of the right-of-use asset and interest on the lease liability, and also classifies cash repayments of the lease liability into a principal portion and an interest portion and presents them in the statement of cash flows applying IAS 7 Statement of Cash Flows.
01-Jan-19
IFRS 16 contains expanded disclosure requirements for lessees. Lessees will need to apply judgement in deciding upon the information to disclose to meet the objective of providing a basis for users of financial statements to assess the effect that leases have on the financial position, financial performance and cash flows of the lessee.
IFRS 16 substantially carries forward the lessor accounting requirements in IAS 17. Accordingly, a lessor continues to classify its leases as operating leases or finance leases, and to account for those two types of leases differently.
IFRS 16 also requires enhanced disclosures to be provided by lessors that will improve information disclosed about a lessor’s risk exposure, particularly to residual value risk.
IFRS 16 supersedes the following Standards and Interpretations:
(a) IAS 17 Leases;
(b) IFRIC 4 Determining whether an Arrangement contains a Lease;
(c) SIC-15 Operating Leases – Incentives; and
(d) SIC-27 Evaluating the Substance of Transactions Involving the Legal Form of a Lease.
The company expects to adopt IFRS16 in the 2020 financial year.
The company had embarked on a project to consider the impact of the changes in the standard on the company’s financial statements. The project is still ongoing as at the date of this report.
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NOTES TO THE HISTORICAL FINANCIAL INFORMATION
6. PROPERTY, PLANT AND EQUIPMENT
CostAccumulateddepreciation
Carrying value
March 2019Owned assetsPlant and equipment 5 185 826 (2 065 846) 3 119 980Motor vehicles 1 223 856 (208 729) 1 015 127Furniture and fittings 1 056 028 (382 250) 673 778Office equipment 849 007 (237 272) 611 735IT equipment 1 713 291 (876 259) 837 032
10 028 008 (3 770 356) 6 257 652
Capitalised leased assetsLeasehold improvements 2 653 408 (1 238 834) 1 414 574
12 681 416 (5 009 190) 7 672 226
CostAccumulateddepreciation
Carrying value
March 2018Owned assetsPlant and equipment 3 736 558 (1 415 825) 2 320 733Motor vehicles 625 228 (258 030) 367 198Furniture and fittings 907 629 (348 537) 559 092Office equipment 885 829 (198 843) 686 986IT equipment 1 864 079 (1 125 441) 738 638
8 019 323 (3 346 676) 4 672 647
Capitalised leased assetsLeasehold improvements 3 550 526 (1 599 635) 1 950 891
11 569 849 (4 946 311) 6 623 538
CostAccumulateddepreciation
Carrying value
March 2017Owned assetsPlant and equipment 3 042 182 (961 709) 2 080 473Motor vehicles 566 336 (228 048) 338 288Furniture and fittings 563 844 (245 275) 318 569Minor assets 444 307 (50 139) 394 168Office equipment 343 211 (133 665) 209 546IT equipment 1 145 917 (832 216) 313 701
6 105 797 (2 451 052) 3 654 745
Capitalised leased assetsLeasehold improvements 1 681 533 (956 637) 724 896
7 787 330 (3 407 689) 4 379 641
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Reconciliation of carrying value
2019
Carryingvalue at
beginningof year Additions Disposals Depreciation
Carrying value at end
of year
Owned assetsPlant and equipment 2 320 733 1 660 350 (53 573) (807 530) 3 119 980Motor vehicles 367 198 768 892 – (120 963) 1 015 127Furniture and fittings 559 092 276 454 (3 190) (158 578) 673 778Office equipment 686 986 316 909 (1 679) (390 481) 611 735IT equipment 738 638 531 731 (71 249) (362 088) 837 032Capitalised leased assetsLeasehold Improvements 1 950 891 376 874 – (913 191) 1 414 574
6 623 538 3 931 210 (129 691) (2 752 831) 7 672 226
2018
Carryingvalue at
beginningof year Additions Disposals Depreciation
Carryingvalue at end
of year
Owned assetsPlant and equipment 2 080 473 917 237 (222 862) (454 116) 2 320 732Motor vehicles 338 288 213 578 (87 655) (97 012) 367 199Furniture and fittings 318 569 347 360 (3 575) (103 262) 559 092Office equipment 603 714 359 343 – (276 071) 686 986IT equipment 313 701 728 609 (10 447) (293 225) 738 638Capitalised leased assetsLeasehold Improvements 724 896 1 868 993 – (642 998) 1 950 891
4 379 641 4 435 120 (324 539) (1 866 684) 6 623 538
2017
Carryingvalue at
beginningof year Additions Disposals Depreciation
Carryingvalue at end
of year
Owned assetsPlant and equipment 1 274 180 1 201 336 – (395 043) 2 080 473Motor vehicles 350 328 241 387 (62 403) (191 024) 338 288Furniture and fittings 309 341 85 637 (241) (76 168) 318 569Minor assets – 444 307 – (50 139) 394 168Office equipment 271 336 6 296 (1 576) (66 510) 209 546IT equipment 389 687 163 552 (26 974) (212 564) 313 701Leasehold Improvements 897 572 347 039 – (519 715) 724 896
3 492 444 2 489 554 (91 194) (1 511 163) 4 379 641
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7. INTANGIBLE ASSETS
CostAccumulatedamortisation
Carrying value
March 2019Computer software, internally generated 63 455 940 (3 756 571) 59 699 369Software 2 500 236 (1 567 130) 933 106Intellectual property 8 000 000 – 8 000 000Customer relationships – – –Goodwill 212 418 – 212 418
74 168 594 (5 323 701) 68 844 893
CostAccumulated amortisation
Carrying value
March 2018Computer software, internally generated 52 135 674 (69 766) 52 065 908Software 1 617 001 (789 489) 827 512Intellectual property – – –Customer relationships – – –Goodwill 212 418 – 212 418
53 965 093 (859 255) 53 105 838
Cost Accumulated amortisation
Carrying value
March 2017Computer software, internally generated 41 314 560 – 41 314 560Software 901 550 (487 828) 413 722Intellectual property – – –Customer relationships – – –Goodwill 212 418 – 212 418
42 428 528 (487 828) 41 940 700
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Reconciliation of carrying value
2019
Carryingvalue at
beginningof year Additions
Reversal ofimpairment/(Impairment) Amortisation
Carryingvalue at end
of year
Computer software, internally generated 52 065 908 11 390 032 – (3 756 571) 59 699 369Software 827 512 883 236 – (777 642) 933 106Intellectual property – 8 000 000 – – 8 000 000Goodwill 212 418 – – – 212 418
53 105 838 20 273 268 – (4 534 213) 68 844 893
2018
Carrying value at
beginningof year Additions
Reversal of impairment/(Impairment) Amortisation
Carryingvalue at end
of year
Computer software, internally generated 41 314 560 10 821 114 (69 766) – 52 065 908Software 413 722 715 451 – (301 661) 827 512Goodwill 212 418 – – – 212 418
41 940 700 11 536 565 (69 766) (301 661) 53 105 838
2017
Carrying value at
beginning of year Additions
Reversal ofimpairment/(Impairment) Amortisation
Carrying value at end
of year
Computer software, internally generated 33 238 480 8 076 080 – – 41 314 560Software 298 350 296 867 – (181 495) 413 722Goodwill 212 418 212 418
33 749 248 8 372 947 – (181 495) 41 940 700
Intangible assets are allocated to their respective underlying cash-generating units, which support the valuation of the intangible asset.
Intangible assets are recognised as indefinite useful life intangible assets when an analysis of the relevant underlying factors confirm there is no foreseeable limit to the period over which the asset is expected to generate net cash inflows for the entity.
Goodwill and indefinite life intangible assets are assessed for impairment on an annual basis, which is determined by calculating the recoverable amount of a cash-generating unit based on value-in use.
Value-in use calculations use pre-tax cash flow projections based on financial forecast, approved by management, and cover a five-year period. The estimated growth rates applied are in line with that of the industry in which the cash-generating unit operates and are materially similar to assumptions of external market sources. The cash-generating units’ recoverable amount is most sensitive to the growth rate assumptions applied. Assumptions were based on management’s past experience and best estimates regarding forecasts. Management determined forecasted gross margin based on past performance and its expectations of market developments. The discount rates used are pre-tax and reflect the appropriate risk associated with the industry and respective businesses. Growth rate for the five-year period is 12.5% – 21%, the growth rate into perpetuity is 6% and the discount rates used ranged between 9.12% and 14.45%.
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The impairment calculations were tested for sensitivity to significant changes in the key assumptions used. The basis for the sensitivity analysis was a reduction of up to 20% in the forecasted operating profit used in the value-in use calculation and a reduction of 5% of the weighted average cost of capital. The discount rates used ranged between 16.5% and 22.9% depending on the cash generating unit being assessed.
The sensitivity analysis did not result in any impairment.
Intangible assets with defined useful lives are tested for impairment if conditions are identified which might be indicative of a potential reduction in the value-in-use or net realisable value compared to its carrying value.
The intellectual property is the technology that is used in the manufacturing of the water meters.
8. RELATED PARTY LOANS
March 2019 March 2018 March 2017
Non-interest-bearing loansLondoloza Amanzi Proprietary Limited 1 015 232 – –Sebata Holdings Limited – (51 212 608) (45 951 500)
1 015 232 (51 212 608) (45 951 500)
Interest-bearing loansSebata Holdings Limited (4 269 428) 19 464 098 10 632 134
(4 269 428) 19 464 098 10 632 134
Loans to related parties – net 1 015 232 19 464 098 10 632 134Loans from related parties (4 269 428) (51 212 608) (45 951 500)
(3 254 196) (31 748 510) (35 319 366)
The interest-bearing loans bear interest at a rate of 5.3%. All loans are unsecured and repayable in the ordinary course of business.
The carrying amount of related party loans approximate their fair value due to the short-term nature thereof.
The carrying amounts of related party loans are denominated in South African Rand only.
9. INVENTORIES
March 2019 March 2018 March 2017
Raw materials 18 780 892 19 328 481 14 338 682Finished goods 41 167 021 22 512 431 13 402 699
59 947 913 41 840 912 27 741 381
No inventory has been pledged as security. Inventories are shown net of write-downs.
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10. TRADE AND OTHER RECEIVABLES
March 2019 March 2018 March 2017
Trade debtors 25 304 308 67 918 323 90 891 859Prepaid expenses 694 590 – –Deposits 703 599 614 676 391 660Staff advances 5 857 16 089 2 200Value Added Tax 2 822 210 – 548 615
29 530 564 68 549 088 91 834 334Credit loss allowance (148 500) (164 513) (523 891)
29 382 064 68 384 575 91 310 443
Items included in trade and other receivables not classified as financial instrumentsPrepaid expenses 694 590 – –Value Added Tax 2 822 210 – 548 615
3 516 800 – 548 615
Trade and other receivables net of non-financial instruments 25 865 264 68 384 575 90 761 828
The average credit period is less than 60 days with no interest charged on late payment. The amounts presented above include amounts that are past due at the end of the reporting period for which the company has not recognised an allowance for credit loss because there has not been significant change in the credit quality of the receivables and the amounts are considered to still be recoverable. The credit quality of trade and other receivables is considered to be high as there has been no significant default historically.
The carrying amount of trade and other receivables approximates their fair value due to the short-term nature thereof.* Allowance for credit losses has been calculated under IAS39 for the 2017 and 2018 financial period and IFRS 9 for the 2019
period.
The carrying amounts of trade and other receivables are denominated in South African Rand only.
Trade and other receivables were pledged as security for factoring facilities. The rate charged is prime.
11. DEFERRED TAX LIABILITIES
Deferred tax assets and liabilities are only offset when the income tax relates to the same legal entity or the same fiscal authority or they intend to settle the assets and liabilities on a net basis.
The directors assessed that the deferred tax assets will be recovered based on profitability forecasts and their review of business plans.
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March 2019 March 2018 March 2017
Reconciliation of deferred tax:Balance at beginning of year (11 721 365) (8 708 968) (6 709 368)Movements consisting of:Temporary differences recognised in profit and lossIntangible assets (1 919 629) (3 010 378) (2 210 483)Credit loss allowance (3 363) (75 469) –Bonus accrual 631 120 – –Leave accrual (9 146) 40 371 210 883Smoothing of leases 1 048 4 861 –Severance pay 714 622 28 218 –
Balance at end of year (12 306 713) (11 721 365) (8 708 968)
The deferred tax asset and liability arises from the following temporary differences:Property, plant and equipmentIntangible assets (14 490 414) (12 570 785) (9 560 407)Credit loss allowance and accruals 2 155 191 243 212 273 450Contract liability 28 510 606 208 577 989
(12 306 713) (11 721 365) (8 708 968)
Deferred tax liability (12 306 713) (11 721 365) (8 708 968)
12. TRADE AND OTHER PAYABLES
March 2019 March 2018 March 2017
Trade creditors 17 468 177 32 669 858 30 352 009Accrued expenses 5 114 115 2 432 453 2 255 592Leave pay accrual 614 487 647 150 502 969Lease straight-lining accrual 101 853 98 080 80 723Payroll accruals 3 040 879 954 952 445 708Value Added Tax – 162 608 –Sundry creditors – – 2 081
26 339 511 36 965 101 33 639 082
Items included in trade and other payables not classified as financial instrumentsValue Added Tax – 162 608 –Leave pay accrual 614 487 647 150 502 969Lease straight-lining accrual 101 853 98 080 80 723
716 340 907 838 583 692
Trade and other payables net of non-financial instruments 25 623 171 36 057 263 33 055 390
Creditors and accruals principally comprise amounts outstanding for trade purchases and ongoing costs. The average credit period taken is less than 60 days. The carrying amounts approximate fair value due to the short-term nature thereof.
Employees’ entitlement to annual leave is recognised when it accrues to employees. An accrual is made for the estimated liability for annual leave due as a result of services rendered by employees up to Statement of financial position date.
The carrying amounts of trade and other payables are denominated in South African Rand only.
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13. CURRENT TAX RECEIVABLE/(PAYABLE)
March 2019 March 2018 March 2017
Current tax in the Statement of Financial Position represents:Current yearTaxation payable for the year (2 790 554) (2 413 595) (7 130 439)Payments made relating to current year 3 883 587 4 239 399 5 359 166Prior yearsFor tax relating to previous years (44 861) (1 723 949) (263 750)Payments made relating to previous years 99 395 – 311 074Under/(over) provision in prior years – (145 520) –Interest and penalties incurred – (1 198) –
1 147 567 (44 863) (1 723 949)
Tax receivable 1 147 564 2 824 773 –Tax payable – (2 869 636) (1 723 949)
1 147 564 (44 863) (1 723 949)
Total tax payments 3 982 982 4 239 399 5 670 240
14. REVENUE FROM CONTRACTS WITH CUSTOMERS
March 2019 March 2018 March 2017
Sale of goods 204 472 885 214 670 129 205 430 612Services rendered 2 045 752 1 835 733 997 191
206 518 637 216 505 862 206 427 803
Disaggregation of RevenueMajor product lines at a point in timeSupport Services 2 045 752 1 835 733 997 191Goods 204 472 885 214 670 129 205 430 612
206 518 637 216 505 862 206 427 803
15. EXPENDITURE BY NATURE
March 2019 March 2018 March 2017
Major expense items include the following:Auditors’ remuneration 144 043 193 091 121 021Depreciation of property, plant and equipment 2 752 831 2 029 032 1 511 163Amortisation of intangible assets 4 534 213 301 661 181 495Operating lease charges 2 561 841 1 839 071 1 030 468Employee compensation and benefit expense 27 366 468 20 278 218 13 165 597Travel – Local 1 903 389 695 925 721 008
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16. INCOME TAX EXPENSE
March 2019 March 2018 March 2017
Current taxCurrent year 2 790 554 2 413 595 7 130 439Under/(over) provision in prior year – 145 520 –Deferred taxationCurrent year 585 348 3 012 397 1 999 600
3 375 902 5 571 512 9 130 039
Reconciliation of rate of taxation % % %
South African normal taxation rate 28.00 28.00 28.00Adjusted for:Permanent differences 0.30 1.00 (3.00)
Net reduction 0.30 1.00 (3.00)
Effective rate of taxation 28.30 29.00 25.00
17. CASH GENERATED FROM OPERATIONS
March 2019 March 2018 March 2017
Profit before tax 11 916 989 18 951 339 36 650 847Adjusted for:Depreciation and amortisation 7 287 044 2 330 693 1 692 658Loss on disposal of property, plant and equipment (129 691) (324 539) (91 194)Insurance received (89 550) – –Finance income (257 842) (537 574) (877 901)Finance costs 236 519 212 789 29 754Movement in working capital(Increase)/decrease in inventories (18 107 001) (14 099 531) 1 184 681Increase in trade and other receivables 39 002 511 22 925 868 (36 066 567)Increase/(decrease) in trade and other payables (10 625 589) 3 326 021 11 884 001
29 233 390 32 785 066 14 406 279
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18. FINANCIAL INSTRUMENTS
The company has classified its financial assets in the following categories:
2019 Amortised cost Total
Related party loans 1 015 232 1 015 232Trade and other receivables 25 865 264 25 865 264Cash and cash equivalents 163 922 163 922
27 044 418 27 044 418
2018
Loans andreceivables held
at amortised cost Total
Related party loans 19 464 098 19 464 098Trade and other receivables 68 384 575 68 384 575Cash and cash equivalents 12 694 655 12 694 655
100 543 328 100 543 328
2017
Loans andreceivables held
at amortised cost Total
Related party loans 10 632 134 10 632 134Trade and other receivables 90 761 828 90 761 828Cash and cash equivalents 2 816 696 2 816 696
104 210 658 104 210 658
The company has classified its financial liabilities in the following categories
2019 Amortised cost Total
Other financial liabilities 632 964 632 964Related party loans 4 269 428 4 269 428Trade and other payables 25 623 171 25 623 171Bank overdraft 14 131 838 14 131 838
44 657 401 44 657 401
2018 Amortised cost Total
Related party loans 45 951 500 45 951 500Trade and other payables 36 057 263 36 057 263Bank overdraft 21 223 21 223
82 029 986 82 029 986
2017 Amortised cost Total
Related party loans 45 951 500 45 951 500Trade and other payables 33 055 390 33 055 390Bank overdraft 28 868 28 868
79 035 758 79 035 758
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The estimated fair values of financial assets and financial liabilities as at 31 March 2019 have been determined using available market information and appropriate valuation methodologies. The fair value of almost all financial instruments equals their carrying value, either because of the short-term nature and normal trade terms thereof, or the market-related interest rates attached to it.
19. RELATED PARTY TRANSACTIONS AND BALANCES
Transactions with related parties are effected on a commercial basis and related party debts are repayable on a commercial basis unless otherwise stated.
The following transactions were carried out with related parties:
March 2019 March 2018 March 2017
Revenue(Sale of goods and services rendered)Amanzi Proprietary Limited – 979 607 –Sebata Municipal Solutions Proprietary Limited 1 069 917 6 538 906 11 988 226IPES – Utility Management Services Proprietary Limited 10 648 334 – –
11 718 251 7 518 513 11 988 226
PurchasesAmanzi Proprietary Limited 14 102 288 878 988 –Aspirata Auditing Testing and Certification Proprietary Limited – 5 502 –MICROmega Financial Services Proprietary Limited 79 704 69 964 72 602Nerdworks Proprietary Limited 105 600 284 386 –NOSA Proprietary Limited – 2 886 –NOSA Travel Agency Proprietary Limited 88 186 107 326 –Sebata Municipal Solutions Proprietary Limited – 4 904 –Turrito Networks Proprietary Limited 758 961 – 41 491
15 134 738 1 353 956 114 093
Interest receivedSebata Holdings Limited 138 043 (485 600) (774 298)
138 043 (485 600) (774 298)
Management fees paidSebata Holdings Limited 10 000 000 10 000 000 19 610 000
10 000 000 10 000 000 19 610 000
Balances with related parties were as follows:Trade receivablesSebata Municipal Solutions Proprietary Limited – 2 720 1 392 276
– 2 720 1 392 276
Trade payablesAmanzi Proprietary Limited – 342 –Aspirata Auditing Testing and Certification Proprietary Limited – 6 272 –MICROmega Financial Services Proprietary Limited – – 82 766Sebata Holdings Limited – 106 727 42 525NOSA Proprietary Limited – 27 353 –NOSA Travel Agency Proprietary Limited – 79 693 –Turrito Networks Proprietary Limited 452 856 44 250 54 738
452 856 264 637 180 029
Loans receivable/(payable)The detail on related party loans is disclosed in note 8.
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20. RISK MANAGEMENT
Overview
The company has exposure to the following risks from its use of financial instruments:
• credit risk• liquidity risk• interest rate risk
This note presents information about the company’s exposure to each of the above risks, the company’s objectives, policies and processes for measuring and managing risk, and the company’s management of capital. Further quantitative disclosures are included throughout these financials.
The directors have overall responsibility for the establishment and oversight for the company’s risk management framework. The directors are responsible for developing and monitoring the company’s risk management policies.
The company’s risk management policies are established to identify and analyse the risk faced by the company, to set appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly.
The Board oversees how management monitors compliance with the company’s risk management policies and procedures and reviews the adequacy of the risk management framework in relation to the risks faced by the company.
Credit risk
Credit risk is the risk of financial loss to the company if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the company’s trade receivables from customers, instalment sale debtors and deposits with banks.
Customer credit risk is managed by each business unit subject to the Group’s established policy, procedures and control relating to customer credit risk management. Credit quality of a customer is assessed based on individual credit limits and historical default rates. Outstanding customer receivables are regularly monitored to ensure exposure to credit risk is maintained within the defined parameters.
An impairment analysis is performed at each reporting date using a provision matrix to measure expected credit losses. The provision rates are based on days past due for groupings of various customer segments with similar loss patterns. The calculation reflects the probability-weighted outcome, the time value of money and reasonable and supportable information that is available at the reporting date about past events, current conditions and forecasts of future economic conditions. Generally, trade receivables are written-off if there is an indication that these are impaired. The maximum exposure to credit risk at the reporting date is the carrying value of each class of financial assets disclosed in Note 37. The Group does not hold collateral as security.
Set out below is the information about the credit risk exposure on the Group’s trade receivables using a provision matrix:
2019 Carrying value ECL rateExpected
credit loss
Trade Debtors Carrying Amount:Current 8 499 321 0.47% 39 60930 Days 4 163 153 0.14% 5 76060 Days 4 644 935 0.03% 1 52390 Days – 0.00% –+120 Days 7 920 689 0.06% 4 675
Total 25 228 098 51 566
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2018 Carrying value ECL rateExpected
credit loss
Trade Debtors Carrying Amount:Current 30 069 603 0.52% 157 54930 Days 20 322 462 0.10% 19 75060 Days 8 904 669 0.07% 5 95590 Days 8 457 079 0.04% 3 458+120 Days 164 511 5.76% 9 469
Total 67 918 324 196 182
* Provision matrix was not applicable to the 2017 financial year.
The company establishes an allowance for impairment that represents its estimate of incurred losses in respect of trade and other receivables and investments. The main components of this allowance are a specific loss component that relates to individually significant exposures, and a collective loss component established for groups of similar assets in respect of losses that have been incurred but not yet identified.
Credit quality of trade and other receivables can be analysed as follows:
March 2019 March 2018 March 2017
Group 1 34,270 1,189,818 6,845Group 2 9,085,928 64,763,667 70,276,184Group 3 16,184,110 1,964,828 20,084,939Group 4 – 523,891
Total 25,304,308 67,918,313 90,891,859
Group 1 – new customers (less than six months)
Group 2 – existing customers (more than six months) with no defaults (no bad debt write-off/hand-overs) in the past
Group 3 – existing customers (more than six months) with some defaults
Group 4 – customers with defaults, no trading and hand over. This category of trade receivables related mainly to contractors and sub-contractors exposed to government and parastatal bodies. Appropriate security policies are in place to limit this category.
Performance categories of trade and other receivables
Trade receivables that are within the prescribed trading terms are considered to be fully performing. Past due and not impaired trade receivables relate to a number of independent customers for whom there is no history of default, and payment cession exist over these customers. Trade receivables impaired and provided for mainly relate to independent customers, which are in difficult economic situations. The risk component of this category has been provided for.
March 2019 March 2018 March 2017
Performance categories:Fully performing 12 728 588 58 336 281 68 065 729Past due and not impaired 12 427 220 9 417 529 22 302 239Impaired and provided for 148 500 164 513 523 891
25 304 308 67 918 323 90 891 859
The ageing of amounts past due but not impaired is as follows:1 month past due – – –2 months past due – –3 months past due 14 247 220 7 785 049 2 217 300More than 3 months past due – 1 632 480 20 084 939
14 247 220 9 417 529 22 302 239
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Credit loss allowance
As at year end trade receivables were provided for as follows:
Movement on the credit loss allowance is as follows:
March 2019 March 2018 March 2017
Balance at the beginning of the year (164 513) (523 891) (1 366)Credit loss allowance raised during the period (51 566) (164 513) (523 891)Reversal of credit loss from prior year 67 579 523 891 1 366Balance written off – – –
Balance at the end of the year (148 500) (164 513) (523 891)
Management does not expect any losses from non-performance by these counterparties as the disclosure above is the maximum exposure due from credit risk.
Liquidity risk
Liquidity risk is the risk that the company will not be able to meet its financial obligations as they fall due. The company’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient cash/ liquid assets to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the company’s reputation.
Typically the company ensures that it has sufficient cash on demand to meet expected operational expenses for a period of 60 days, including the servicing of financial obligations; this excludes the potential impact of extreme circumstances that cannot reasonably be predicted, such as natural disasters. In addition, the company’s statement of financial position remains lowly geared and thus the directors are comfortable with the ability to receive lines of credit.
The table below analyses the company’s financial liabilities that will be expected to be settled on a net basis into relevant maturity groups based on the remaining period at the reporting date to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows:
2019Less than
1 yearBetween
1 and 5 years Over 5 years
Related party loans 4 269 428 – –Trade and other payables 25 623 171 – –Bank overdraft 14 131 838 – –
44 024 437 – –
2018Less than
1 yearBetween
1 and 5 years Over 5 years
Related party loans 45 951 500 – –Trade and other payables 36 057 263 – –Bank overdraft 21 223 – –
82 029 986 – –
2017Less than
1 yearBetween
1 and 5 years Over 5 years
Related party loans 45 951 500 – –Trade and other payables 33 055 390 – –Bank overdraft 28 868 – –
79 035 758 – –
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Interest rate risk
The company exposure on fair value interest rate risk mainly arises from its fixed deposits with banks and investments in fixed rate debt securities, which are classified as held-to-maturity investments and available-for-sale financial assets. It also has exposure on cash flow interest rate risk which is mainly arising from its deposits with banks and interest-bearing borrowings with the banks. It is a common practice in South Africa to have floating rate borrowings with the banks.
The company mainly holds fixed deposits with banks with maturity within three months and the exposure is considered not significant. It also invests surplus funds in fixed rate debt securities only and such investments are not normally material. In consequence, no material exposure on fair value interest rate risk is expected. Even that, the company closely monitors the fair value fluctuation of the investments and disposes of them in case of significant increase in interest rate is foreseen.
In order to manage the cash flow interest rate risk, the company will repay the corresponding borrowings when it has surplus funds.
Sensitivity analysis
March 2019 March 2018 March 2017
Cash and cash equivalents 163 922 12 694 655 2 816 696Bank overdraft (14 131 838) (21 223) (28 868)Other financial liabilities (632 964) – –
Net interest-bearing assets/(liabilities) (14 600 880) 12 673 432 2 787 828
Interest rate change 2% 2% 2%Potential after tax impact on earnings (210 253) 182 497 40 145
The sensitivity analysis has been prepared with the assumption that the change in interest rates had occurred at the balance sheet date and had been applied to the exposure to interest rate risk for the relevant financial instruments in existence at that date. The changes in interest rate represent management’s assessment of a reasonably possible change in interest rates at that date over the period until the next annual balance sheet date.
21. GOING CONCERN
The annual financial statements have been prepared on the basis of accounting policies applicable to a going concern. This basis presumes that funds will be available to finance future operations and that the realisation of assets and settlement of liabilities, contingent obligations and commitments will occur in the ordinary course of business.
22. EVENTS AFTER REPORTING DATE
On 6 May 2019 Sebata acquired the balance of the minority shareholding 17% in USC for a consideration of R20 million. The directors are not aware of any further matter or circumstance arising since the end of the financial year to the date of this report that could have a material effect on the financial position of the company.
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ANNEXURE 4
INDEPENDENT REPORTING ACCOUNTANTS’ REPORT ON THE HISTORICAL FINANCIAL INFORMATION OF USC FOR THE THREE FINANCIAL YEARS ENDED 31 MARCH 2019, 31 MARCH 2018 AND 31 MARCH 2017
“The DirectorsSebata Holdings Limited66 Park LaneSundownSandton, 2169Johannesburg
INDEPENDENT REPORTING ACCOUNTANT’S REPORT ON THE HISTORICAL FINANCIAL INFORMATION OF USC METERING PROPRIETARY LIMITED (“USC”) FOR THE THREE YEARS ENDED 31 MARCH 2019, 31 MARCH 2018 AND 31 MARCH 2017
At your request and for the purposes of the Circular to be dated on or about 20 December 2019 (“the Circular”), we have audited the Historical Financial Information of USC for the three years ended 31 March 2019, 31 March 2018 and 31 March 2017 presented in the report of Historic Financial Information which has been set out in Annexure 3 to the Circular.
The Historical Financial Information was prepared in accordance with the requirements of the JSE Listings Requirements. The JSE Listings Requirements require the historical financial information to be prepared in accordance with the conceptual framework, the measurement and recognition requirements of International Financial Reporting Standards (IFRS), the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee and Financial Pronouncements as issued by Financial Reporting Standards Council.
Opinion
We have audited the Historic Financial Information of USC set out on Annexure 3 to the Circular, which comprise the statement of financial position as at 31 March 2019, 31 March 2018 and 31 March 2017, the statement of profit or loss and other comprehensive income, the statement of changes in equity and the statement of cash flows for the years then ended, and notes to the financial statements, including a summary of significant accounting policies.
In our opinion, the Historic Financial Information present fairly, in all material respects, the financial position of the company as at 31 March 2019, 31 March 2018 and 31 March 2017, and its financial performance and cash flows for the year then ended in accordance with International Financial Reporting Standards and the requirements of the JSE Limited Listing Requirements.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Historic Financial Information section of our report. We are independent of the Company in accordance with the sections 290 and 291 of the Independent Regulatory Board for Auditors’ Code of Professional Conduct for Registered Auditors (Revised January 2018), parts 1 and 3 of the Independent Regulatory Board for Auditors’ Code of Professional Conduct for Registered Auditors (Revised November 2018) (together the IRBA Codes) and other independence requirements applicable to performing audits of financial statements in South Africa. We have fulfilled our other ethical responsibilities, as applicable, in accordance with the IRBA Codes and in accordance with other ethical requirements applicable to performing audits in South Africa. The IRBA Codes are consistent with the corresponding sections of the International Ethics Standards Board for Accountants’ Code of Ethics for Professional Accountants and the International Ethics Standards Board for Accountants’ International Code of Ethics for Professional Accountants (including International Independence Standards) respectively. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
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Directors Responsibility for the Historical Financial Information
The directors are responsible for the preparation and fair presentation of the Historical Financial Information in accordance with International Financial Reporting Standards and the JSE Limited Listing Requirements, and for such internal control as the directors determine is necessary to enable the preparation of Historic Financial Information that are free from material misstatement, whether due to fraud or error.
In preparing the Historic Financial Information, the directors are responsible for assessing the company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the company or to cease operations, or have no realistic alternative but to do so.
Auditor’s responsibility for the Audit of the Historical Financial Information
Our objectives are to obtain reasonable assurance about whether the Historic Financial Information as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the Historical Financial Information.
As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional scepticism throughout the audit. We also:
• Identify and assess the risks of material misstatement of the Historical Financial Information, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control.
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the directors.
• Conclude on the appropriateness of the director’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the Historical Financial Information or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Company to cease to continue as a going concern.
• Evaluate the overall presentation, structure and content of the Historical Financial Information, including the disclosures, and whether the Historical Financial Information represent the underlying transactions and events in a manner that achieves fair presentation.
We communicate with the directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
Consent
We consent to the inclusion of this report and the reference to our opinion in the Circular in the form and context in which it appears.
Yours faithfully
Nexia SAB&T
Director: J. EngelbrechtRegistered Auditor
20 December 2019119 Witch-Hazel AvenueHighveld TechnoparkCenturion”
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ANNEXURE 5
HISTORICAL FINANCIAL INFORMATION OF AMANZI FOR THE THREE FINANCIAL YEARS ENDED 31 MARCH 2019, 31 MARCH 2018 AND 31 MARCH 2017
Statement of Financial Position as at 31 March
Note(s) March 2019 March 2018 March 2017
AssetsNon-Current AssetsProperty, plant and equipment 6 857 605 903 963 1 589 733Intangible assets 7 – 7 043 864 4 998 105Deferred tax assets 8 5 175 068 2 823 542 2 419 357
6 032 673 10 771 369 9 007 195
Current AssetsInventories 7 307 686 7 556 228 9 143 971Current tax 274 270 – –Trade and other receivables 9 2 836 585 1 760 497 1 876 621Cash and cash equivalents 25 275 22 412 60 853
10 443 816 9 339 137 11 081 445
Total Assets 16 476 489 20 110 506 20 088 640
Equity and LiabilitiesEquityIssued capital 200 200 200Accumulated loss (13 111 112) (6 987 127) (6 038 240)
(13 110 912) (6 986 927) (6 038 040)
Current LiabilitiesTrade and other payables 10 5 242 434 1 805 805 2 012 573Related party loans 11 24 344 967 25 291 628 24 114 107
29 587 401 27 097 433 26 126 680
Total Equity and Liabilities 16 476 489 20 110 506 20 088 640
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Statement of Profit and Loss
Note(s) March 2019 March 2018 March 2017
Revenue 12 18 483 172 11 691 583 8 060 490Cost of sales (18 867 007) (7 645 785) (6 282 547)
Gross (loss)/profit (383 835) 4 045 798 1 777 943Other net income/(expenses) (41 005) 587 981 39 000Admin expenses 13 (7 917 191) (5 945 178) (4 872 076)Distribution expenses (47 351) (42 259) (63 561)
Operating loss (8 389 382) (1 353 658) (3 118 694)Finance income 1 290 680 1 134Finance costs (3 205) (94) (263)
Loss before taxation (8 391 297) (1 353 072) (3 117 823)Tax expense 14 2 269 392 404 185 872 991
Loss for the year (6 121 905) (948 887) (2 244 832)
Statement of Comprehensive Income
Note(s) March 2019 March 2018 March 2017
Loss for the period (6 121 905) (948 887) (2 244 832)Other comprehensive incomeForeign currency translation differences – – –
Total comprehensive income for the year (6 121 905) (948 887) (2 244 832)
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Statement of Changes in Equity
Share capital
Retained earnings Total
Balance at 1 April 2016Total comprehensive income for the year 200 (3 793 408) (3 793 208)Loss for the year – (2 244 832) (2 244 832)
Balance at 31 March 2017 200 (6 038 240) (6 038 040)
Balance at 1 April 2017 200 (6 038 240) (6 038 040)Total comprehensive income for the yearLoss for the year – (948 887) (948 887)
Balance at 31 March 2018 200 (6 987 127) (6 986 927)Balance at 1 April 2018 as previously reported 200 (6 987 127) (6 986 927)Adjustment on initial application of IFRS 9 and IFRS 15 net of taxes – (2 080) (2 080)
Balance at 1 April 2018 as adjusted 200 (6 989 207) (6 989 007)Total comprehensive income for the yearLoss for the year – (6 121 905) (6 121 905)
Balance at 31 March 2019 200 (13 111 112) (13 110 912)
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Statement of Cash Flow
Note(s) March 2019 March 2018 March 2017
Cash flows from operating activitiesCash generated from operations 15 (5 299 851) 905 659 (1 921 793)Finance income 1 290 680 1 134Finance costs (3 205) (94) (263)Income tax paid – – –
Net cash from operating activities (5 301 766) 906 245 (1 920 922)
Cash flows from investing activitiesProperty, plant and equipment acquired (421 304) (76 450) (228 394)Intangible assets acquired (1 085 445) (2 045 760) (2 041 463)Proceeds on disposals of property, plant and equipment – – 127 648
(1 506 749) (2 122 210) (2 142 209)
Cash flows from financing activitiesRelated party loans raised 6 811 378 1 177 524 4 073 984
6 811 378 1 177 524 4 073 984
Increase/(Decrease) in cash and cash equivalents 2 863 (38 441) 10 853Cash and cash equivalents at beginning of the year 22 412 60 853 50 000
Cash and cash equivalents at end of the year 25 275 22 412 60 853
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ACCOUNTING POLICIES
1. STATEMENT OF COMPLIANCE
The historical financial information (hereinafter referred to as “financial statements”) has been prepared in accordance with the JSE Limited Listing Requirements, the conceptual framework, the measurement and recognition requirements of International Financial Reporting Standards (IFRS), the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee and Financial Pronouncements as issued by Financial Reporting Standards Council.
2. BASIS OF PREPARATION
The annual financial statements are presented in South African Rand, which is the company’s functional currency.
The annual financial statements have been prepared under the historical cost convention.
The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the company’s accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the annual financial statements are disclosed in note 4.
The historical financial information is the responsibility of the directors.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The principal accounting policies applied in the preparation of these annual financial statements are set out below. These policies have been consistently:
3.1 Property, plant and equipment
All other property, plant and equipment is stated at cost less accumulated depreciation and impairment. Cost includes expenditure that is directly attributable to the acquisition of the items.
Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the company and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognised. All other repairs and maintenance are charged to the statement of profit and loss during the financial period in which they are incurred.
Depreciation methods, residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period. Useful lives are affected by technology innovations, maintenance programs and future economic benefits. Residual value assessments consider issues such as future market conditions, the remaining life of the asset and projected disposal values. Consideration is also given to the extent of current profits and losses on the disposal of similar assets.
Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognised within “Other income” in the statement of profit and loss. When revalued assets are sold, the amounts included in other reserves are transferred to retained earnings.
Depreciation is provided on the straight-line basis which, will reduce the carrying amount of the property, plant and equipment to their residual values at the end of their useful lives. Depreciation is generally recognised in profit or loss, unless the amount is included in the carrying amount of another asset. Leased assets are depreciated over the shorter of the lease term and their useful lives unless it is reasonably certain that the group will obtain ownership by the end of the lease term. Land is not depreciated. Items of property, plant and equipment are depreciated from the date that they are installed and available for use. Land is not depreciated as it is deemed to have an indefinite life.
Where an item of property, plant and equipment comprises major components with different useful lives, the components are accounted for as separate items of property, plant and equipment.
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The major categories of property, plant and equipment are depreciated at the following rates:
Plant and equipment 5 – 15 yearsMotor vehicles 4 – 5 yearsFurniture and fittings 5 – 10 yearsOffice equipment 5 – 10 yearsComputer equipment 2 – 5 yearsLeasehold improvements Over the period of the lease
3.2 Intangible assets
Computer software, internally generated
Expenditure of research activities, undertaken with the prospect of gaining new scientific or technical knowledge and understanding, is recognised in profit or loss as incurred.
Development activities involve a plan or design for the production of new or sustainable improved products and processes. Development expenditure is capitalised only if development costs can be, measured reliably, the product or process is technically commercially feasible, future economic benefits are probable, and the company intends to and has sufficient resources to complete development and to use or sell the asset. The expenditure capitalised includes the cost of materials, direct labour, overhead costs that are directly attributable to preparing the assets for its intended use, and capitalised borrowing costs. Other development expenditure is recognised in profit or loss as incurred.
Capitalised development expenditure is measured at cost less accumulated amortisation and accumulated impairment losses.
Amortisation
The estimated useful lives for the current and comparative years are as follows:
Computer software, internally generated and computer software externally purchased 5 – 15 years
Amortisation methods, useful lives and residual values are reviewed at each reporting date and adjusted if appropriate.
An intangible asset is regarded as having an indefinite useful life when, based on all relevant factors, there is no foreseeable limit to the period over which the asset is expected to generate net cash inflows. Amortisation is not provided for these intangible assets but they are tested for impairment annually or more frequently if events or changes in circumstances indicate that the carrying value may be impaired, and it is subsequently carried at cost less accumulated impairment losses.
3.3 Impairment of non-financial assets
The carrying amount of the company’s non-financial assets, other than inventories and deferred tax assets, are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists then the asset’s recoverable amount is estimated. For goodwill and intangible assets that have indefinite lives or that are not yet available for use, the recoverable amount is estimated at each reporting date.
For the purpose of impairment testing, assets are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of cash inflows of other assets (the “cash-generating unit”). The goodwill acquired in a business combination, for the purpose of impairment testing, is allocated to cash-generating units that are expected to benefit from the synergies of the combination.
An impairment loss is recognised if the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount. A cash-generating unit is the smallest identifiable asset group that generates cash flows that are largely independent from other assets and groups.
The recoverable amount of an asset or cash-generating unit is the greater of its value-in-use and its fair value less cost to sell. In assessing value-in-use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset.
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Impairment losses are recognised in profit or loss. Impairment losses recognised in respect of cash-generated units are allocated first to reduce the carrying amount of any goodwill allocated to the units and then to reduce the carrying amount of the other assets in the group on a pro rata basis.
An impairment loss in respect of goodwill is not reversed. In respect of other assets, impairment losses recognised in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.
3.4 Inventories
Inventories are measured at the lower of cost and net realisable value. The cost of inventories comprises all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition and is assigned by using the weighted average cost formula. In the case of manufactured inventories and work in progress, cost includes an appropriate share of production overheads based on normal operating capacity. Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale.
When inventories are sold, the carrying amount of those inventories is recognised as an expense in the period in which the related revenue is recognised. The amount of any write-down of inventories to net realisable value and all losses of inventories are recognised as an expense in the period the write-down or loss occurs.
The amount of any reversal of any write-down of inventories, arising from an increase in net realisable value, is recognised as a reduction in the amount of inventories recognised as an expense in the period in which the reversal occurs.
Where necessary, provision is made for obsolete, slow-moving and defective inventories.
3.5 Financial assets
Financial assets comprise trade and other receivables (excluding prepayments); cash and cash equivalents and other financial assets.
Financial assets are recognised in the company’s statement of financial position when the company becomes a party to the contractual provisions of the instruments. Financial assets are classified as current if expected to be realised or settled within 12 months from the reporting date; if not, they are classified as non-current.
Classification
The company classifies financial assets on initial recognition as measured at amortised cost as the company’s business model and objective is to hold the financial asset in order to collect the contractual cash flow and the contractual terms allows for cash flows on specified dates for the payment of the principal amounts outstanding.
Financial assetsClassification in 2019(IFRS 9)
Classification in 2018 and 2017 (IAS 32)
Trade and other receivables Financial asset at amortised cost
Loans and receivables at amortised cost
Cash and cash equivalents Financial asset at amortised cost
Loans and receivables at amortised cost
Other financial assets Financial asset at amortised costLoans and receivables at amortised cost
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Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, except for maturities greater than 12 months after the end of the reporting period. These are classified as non-current assets. The company’s loans and receivables comprise “trade and other receivables” and “cash and cash equivalents” in the statement of financial position.
Recognition and measurement
Regular purchases and sales of financial assets are recognised on the trade-date – the date on which the company commits to purchase or sell the asset. Investments are initially recognised at fair value plus transaction costs for all financial assets not carried at fair value through profit or loss.
Loans and receivables are initially recognised at fair value and subsequently measured at amortised cost.
Offsetting financial instruments
Financial assets and liabilities are offset and the net amount reported in the statement of financial position when there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis or realise the asset and settle the liability simultaneously.
Impairment of financial assets
Assets carried at amortised cost (IFRS 9)
Under IFRS 9 the company calculates its allowance for credit losses as expected credit losses (ECLs) for financial assets measured at amortised cost. ECLs are a probability weighted estimate of credit losses. To calculate ECLs the company segments/groups trade receivables by customer type and ageing. The company applies the simplified approach to determine the ECL for trade receivables. This results in calculating lifetime expected credit losses for trade receivables. ECLs for trade receivables are calculated using a provision matrix. The provision matrix is determined by using reference to the credit quality of the assets, the customers ability to pay, historical default rates and credit losses incurred along with reference to forward-looking information such as macro-economic factors and future forecasts. The company has defined a default as a significant deviation to the contractual payment terms and accepted historical payment rates from customers which has impacted on the ability of the customers’ ability to settle current and future debt. If there have been significant defaults from a specific customer and these have given rise to indications that the customer has a decreased ability to settle the debt when due these expected credit losses are provided for in full and not with reference to the provision matrix. In determining whether there has been a significant increase in credit risk the company has rebutted the presumption that this occurs once contractual payments extend past 30 days, this is due to the segment in which the Group operates in which it is common practice for payment terms to extend past 30 days.
ECLs for other financial assets are assessed on an individual basis based on a credit risk assessment of the borrower, this credit risk comprises historical defaults by the borrower, the borrower’s ability to repay the debt and security that is in place over the debt.
Assets carried at amortised cost (IAS 32)
The company assesses at the end of each reporting period whether there is objective evidence that a financial asset or group of financial assets is impaired.
A financial asset or a group of financial assets is impaired and impairment losses are incurred only if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a “loss event”) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated.
Evidence of impairment may include indications that the debtors or a group of debtors is experiencing significant financial difficulty, default or delinquency in interest or principal payments, the probability that they will enter bankruptcy or other financial reorganisation, and where observable data indicate that there is a measurable decrease in the estimated future cash flows, such as changes in arrears or economic conditions that correlate with defaults.
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For loans and receivables category, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset’s original effective interest rate. The carrying amount of the asset is reduced and the amount of the loss is recognised in the statement of comprehensive income. If a loan has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate determined under the contract. As a practical expedient, the company may measure impairment on the basis of an instrument’s fair value using an observable market price.
If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised (such as an improvement in the debtor’s credit rating), the reversal of the previously recognised impairment loss is recognised in the statement of comprehensive income.
Trade and other receivables
Trade and other receivables comprises trade receivables, deposits, prepayments, advances and other receivables.
Trade and other receivables are initially measured at fair value and, after initial recognition, at amortised cost less impairment losses for bad and doubtful debts, if any, except for the following receivables:
• Interest-free loans made to related parties without any fixed repayment terms or the effect of discounting being immaterial, that are measured at cost less impairment losses for bad and doubtful debt, if any; and
• Short-term receivables with no stated interest rate and the effect of discounting being immaterial, that are measured at their original invoice amount less impairment losses for bad and doubtful debt, if any.
Cash and cash equivalents
Cash comprises cash on hand and at bank and demand deposits with bank. Cash equivalents are short-term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.
Cash and cash equivalents are initially recognised at fair value and subsequently measured at amortised cost.
For the purpose of statement of cash flows, bank overdrafts which are repayable on demand form an integral part of the company’s cash management are included as a component of cash and cash equivalents.
Other financial assets
Other financial assets comprise of deferred payments due on the disposal of subsidiaries and loans receivable extended. These are initially measured at fair value and, after initial recognition, at amortised cost less impairment losses.
Derecognition
Financial assets are derecognised when the rights to receive cash flows from the assets have expired or have been transferred and the group has transferred substantially all risks and rewards of ownership. On derecognition of a financial asset, any difference between the carrying amount extinguished and the consideration paid is recognised in profit or loss.
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3.6 Financial liabilities
Financial liabilities comprise trade and other payables (excluding indirect taxation payable), other financial liabilities and bank overdrafts.
Recognition
Financial liabilities are recognised in the company’s statement of financial position when the company becomes a party to the contractual provisions of the instruments. Financial liabilities are classified as non-current if the group has an unconditional right to defer payment for more than 12 months from the reporting date otherwise they are classified as current.
Classification
All financial liabilities are classified at amortised cost except for deferred vendor payments that are measured at fair value through profit and loss.
Financial liabilities Classification in 2019 (IFRS 9) Classification in 2018 (IAS 32)
Trade and other payables Financial liability at amortised cost Financial liability at amortised cost
Other financial liabilities Financial liability at amortised cost Financial liability at amortised cost
Trade and other payables
Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Accounts payable are classified as current liabilities if payment is due within one year or less (or in the normal operating cycle of the business if longer). If not, they are presented as non-current liabilities.
Trade payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method.
Borrowings
Borrowings comprises loans from shareholders, loans from directors, loans from third parties and instalment sale obligations.
Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently carried at amortised cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognised in the statement of comprehensive income over the period of the borrowings using the effective interest method.
Derecognition
Financial liabilities are derecognised when the obligations specified in the contracts are discharged, cancelled or expire. On derecognition of a financial liability, any difference between the carrying amount extinguished and the consideration paid is recognised in profit or loss.
3.7 Leases
Finance Leases – Lessee
Leases that transfer substantially all the risks and rewards of ownership of the underlying asset to the company are classified as finance leases. Assets acquired in terms of finance leases are capitalised at the lower of the fair value of the asset and the present value of the minimum lease payments at inception of the lease, and depreciated over the shorter of the estimated useful life of the asset or the lease term if there is no reasonable certainty that the company will obtain ownership at the end of the lease term. The capital element of future obligations under these leases is included as a liability in the balance sheet. Lease payments are allocated using the effective interest method to determine the lease finance cost, which is recognised in profit or loss over the lease period, and the capital repayment, which reduces the liability to the lessor.
Operating Leases
Leases where the lessor retains the risks and rewards of ownership of the underlying asset are classified as operating leases. Payments made under operating leases are recognised in profit or loss on a straight-line basis over the period of the lease.
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3.8 Employee benefits
Defined contribution plans
The company pays fixed contributions into independent entities in relation to several state plans and insurance for individual employees. The company has no legal or constructive obligations to pay contributions in addition to its fixed contributions, which are recognised as an expense in the period that relevant employee services are received.
Short-term employee benefits
The cost of all short-term employee benefits is recognised during the period in which the employee renders the related service on an undiscounted basis.
Accruals for employee entitlement to annual leave represents the present obligation, which the company has to pay as a result of employees’ services, provided to the reporting date. The accruals have been calculated at undiscounted amounts based on current salary rates.
A liability is recognised for the amount expected to be paid under short-term bonuses in the company as the company has a present legal constructive obligation to pay the amount as a result of past service provided by the employee, and the obligation can be estimated reliably.
3.9 Income tax
Income tax for the year includes current tax and deferred tax. Current tax and deferred tax are recognised in profit or loss, except to the extent that the tax arises from a transaction or event which is recognised directly in equity in which case current tax and deferred tax are also recognised directly equity.
Current tax liabilities and assets are measured at the amount expected to be paid to or recovered from the taxation authorities, using the tax rates and tax laws that have been enacted or substantively enacted by the statement of financial position date. Current tax is the amount of income taxes payable or recoverable in respect of the taxable profit or loss for a year, and any adjustments in respect of previous years.
Deferred tax assets and liabilities arise from deductible and taxable temporary differences respectively. Temporary differences are the differences between the carrying amounts of assets and liabilities for financial reporting purposes and their tax bases. Deferred tax assets also arise from unused tax losses and unused tax credits.
Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realised simultaneously.
A deferred tax asset is recognised to the extent that it is probable that future taxable profits will be available against which temporary differences can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised.
At each statement of financial position date, the company reviews and assesses the recognised and unrecognised deferred tax assets and the future taxable profit to determine whether any recognised deferred tax assets should be derecognised and any unrecognised deferred tax assets should be recognised.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled, based on tax rates and tax laws that have been enacted or substantively enacted by the statement of financial position date. Deferred tax assets and liabilities are not discounted.
Dividends withholding taxes that arise from the distribution of dividends are recognised when the distributions are made to shareholders that do not qualify for exemption in terms of the Income Tax Act.
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3.10 Revenue recognition
Revenue contracts with customers
Revenue is measured at the fair value of the consideration specified in a contract with a customer and excludes amounts collected on behalf of third parties. The company recognises revenue when it transfers control over a product or services to a customer. The following indicators are used by the company in determining when control has passed to the customer:
• the company has the right to payment for the product or service;• the customer has legal title to the product;• the company has transferred physical possession of the product to the customer;• the customer has the significant risks and rewards of ownership of the product; and• the customer has accepted the product.
The transaction price is allocated to specific performance obligations within the contract, these prices are specifically linked and disclosed in accordance to the performance obligations. Hence there is no need for management to make any assumptions as it relates to allocating the transaction price to the various performance obligations.
Nature of significant revenue streams
The company’s revenue streams consists of the major products and services lines set out below, which includes a description of the principle activities from which the company generates its revenue, significant judgements applied in assessing the timing of measurement of performance obligation and the transaction price allocated to performance obligations.
Major product lines at a point in time
Products and servicesNature, timing of satisfaction of performance obligations and significant payment terms
Support and maintenance Revenue from support and maintenance services is recognised as ad hoc services are provided and the necessary repairs, maintenance or equivalent services has been completed to the customer’s satisfaction.
Physical goods Revenue from physical goods is recognised at the point in time when ownership of the goods are transferred, and the customer takes control of the goods.
Contract assets
Timing of revenue recognition may differ from the timing of invoicing to customers. We record a contract asset when revenue is recognised prior to invoicing.
Contract liabilities
Timing of revenue recognition may differ from the timing of invoicing to customers. We record a contract liability where the consideration relating to the revenue has been received prior to the performance obligation having been met.
Sales of goods (IAS18)
Revenue from the sale of goods in the course of ordinary activities is measured at the fair value of the consideration received or receivable, net of returns, trade discounts and volume rebates. Revenue is recognised when the significant risks and rewards of ownership have been transferred to the buyer, recovery of the consideration is probable, the associated costs and possible return of goods can be estimated reliably, and there is no continuing management involvement with the goods, and the amount of revenue can be measured reliably. If it is probable that discounts will be granted and the amount can be measured reliably, then the discount is recognised as a reduction of revenue as the sales are recognised.
Rendering of services (IAS18)
Revenue from rendering of services is recognised in profit or loss in proportion to the stage of completion of the transaction at the reporting date. The stage of completion is assessed by reference to surveys of work performed.
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4. CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY
The company’s management makes assumptions, estimates and judgements in the process of applying the company’s accounting policies that affect the assets, liabilities, income and expenses in the consolidated annual financial statements prepared in accordance with IFRSs. The assumptions, estimates and judgements are based on historical experience and other factors that are believed to be reasonable under the circumstances. While the management reviews their judgements, estimates and assumptions continuously, the actual results will seldom equal to the estimates.
The estimates and the underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision policy affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.
Residual values and useful lives of tangible and intangible assets
The useful lives and residual values of items of property, plant and equipment and intangible assets are estimated annually. The actual lives and residual values may vary depending on a variety of factors such as the nature of item, the condition as result of current usage and the expected physical wear and tear of each item and technical relevance of property, plant and equipment and intangible assets.
Estimated impairment of goodwill and intangible assets with indefinite useful lives
The company tests annually whether intangible assets with indefinite lives have suffered any impairment, in accordance with the accounting policy stated in note 3.3. The recoverable amounts of certain cash-generating units have been determined based on the value-in use calculations. The company assessed on an annual basis whether the classification of indefinite life intangible assets is appropriate.
Measurement of the recoverable amount of trade receivables
Management utilised estimates to determine the recoverable amount if the company’s trade receivables, which focusses on the ability of the customer to settle outstanding debt when it becomes due and payable. The company uses judgement in making these estimations and selecting the inputs to the credit loss calculations, based on the company’s past payment history, historical write-offs, existing market conditions as well as forward-looking estimates at the end of the reporting period estimations on future default rates translated into expected credit losses.
Percentage of completion
Management estimates the costs to complete projects at each reporting period and calculates the percentage of completion based on the costs incurred at that date as a percentage of the total costs to be incurred. The percentage of completion is applied to the expected revenue of the project to measure the revenue to be recognised at the end of each reporting period.
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5. NEW STANDARDS AND INTERPRETATIONS
The company has chosen not to early adopt the following standards and interpretations and will do so in future financial periods.
The amendments as set out below have been assessed are considered not to have a material impact on the financial statements:
IFRS 10 Consolidated Financial Statements
Sale or Contribution of Assets between an Investor and its Associate or Joint Venture (Amendments to IFRS 10 and IAS 28): Narrow scope amendment address an acknowledged inconsistency between the requirements in IFRS 10 and those in IAS 28 (2011), in dealing with the sale or contribution of assets between an investor and its associate or joint venture.
The effective date of this amendment has been deferred indefinitely until further notice
IFRS 16 Leases New standard that introduces a single lessee accounting model and requires a lessee to recognise assets and liabilities for all leases with a term of more than 12 months, unless the underlying asset is of low value. A lessee is required to recognise a right-of-use asset representing its right to use the underlying leased asset and a lease liability representing its obligation to make lease payments. A lessee measures right-of-use assets similarly to other non-financial assets (such as property, plant and equipment) and lease liabilities similarly to other financial liabilities. As a consequence, a lessee recognises depreciation of the right-of-use asset and interest on the lease liability, and also classifies cash repayments of the lease liability into a principal portion and an interest portion and presents them in the statement of cash flows applying IAS 7 Statement of Cash Flows.IFRS 16 contains expanded disclosure requirements for lessees. Lessees will need to apply judgement in deciding upon the information to disclose to meet the objective of providing a basis for users of financial statements to assess the effect that leases have on the financial position, financial performance and cash flows of the lessee.IFRS 16 substantially carries forward the lessor accounting requirements in IAS 17. Accordingly, a lessor continues to classify its leases as operating leases or finance leases, and to account for those two types of leases differently.IFRS 16 also requires enhanced disclosures to be provided by lessors that will improve information disclosed about a lessor’s risk exposure, particularly to residual value risk.IFRS 16 supersedes the following Standards and Interpretations:(a) IAS 17 Leases;(b) IFRIC 4 Determining whether an Arrangement contains a
Lease;(c) SIC-15 Operating Leases – Incentives; and(d) SIC-27 Evaluating the Substance of Transactions Involving
the Legal Form of a Lease.
The company expects to adopt IFRS16 in the 2020 financial year.
The company had embarked on a project to consider the impact of the changes in the standard on the company’s financial statements. The project is still ongoing as at the date of this report.
01-Jan-19
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NOTES TO THE HISTORICAL FINANCIAL INFORMATION
6. PROPERTY, PLANT AND EQUIPMENT
CostAccumulated depreciation
Carrying value
March 2019Owned assetsPlant and equipment 3 586 689 (2 790 591) 796 098Furniture and fittings 14 339 (6 795) 7 544Office equipment 38 245 (13 502) 24 743IT equipment 92 329 (81 533) 10 796
3 731 602 (2 892 421) 839 181
Capitalised leased assetsLeasehold improvements 154 619 (136 195) 18 424
3 886 221 (3 028 616) 857 605
CostAccumulated depreciation
Carrying value
March 2018Owned assetsPlant and equipment 3 211 290 (2 460 444) 750 846Furniture and fittings 38 173 (19 493) 18 680Office equipment 31 331 (25 262) 6 069IT equipment 154 274 (116 095) 38 179
3 435 068 (2 621 294) 813 774
Capitalised leased assetsLeasehold improvements 219 657 (129 468) 90 189
3 654 725 (2 750 762) 903 963
CostAccumulateddepreciation
Carrying value
March 2017Owned assetsPlant and equipment 3 151 959 (1 819 796) 1 332 163Furniture and fittings 36 723 (13 364) 23 359Office equipment 28 920 (17 871) 11 049IT equipment 141 016 (81 262) 59 754
3 358 618 (1 932 293) 1 426 325
Capitalised leased assetsLeasehold improvements 219 657 (56 249) 163 408
3 578 275 (1 988 542) 1 589 733
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Reconciliation of carrying value
March 2019
Carrying value at
beginning of year Additions Disposals Depreciation
Carrying value at end
of year
Owned assetsPlant and equipment 750 846 375 399 – (330 147) 796 098Furniture and fittings 18 680 – (8 763) (2 373) 7 544Office equipment 6 069 30 167 (499) (10 994) 24 743IT equipment 38 179 15 738 (8 955) (24 166) 10 796Capitalised leased assetsLeasehold Improvements 90 189 – – (71 765) 18 424
903 963 421 304 (28 217) (439 445) 857 605
March 2018
Carrying value at
beginning of year Additions Disposals Depreciation
Carrying value at end
of year
Owned assetsPlant and equipment 1 332 163 59 331 – (640 648) 750 846Furniture and fittings 23 359 1 450 – (6 129) 18 680Office equipment 11 049 2 411 – (7 391) 6 069IT equipment 59 754 13 258 – (34 833) 38 179Capitalised leased assetsLeasehold Improvements 163 408 – – (73 219) 90 189
1 589 733 76 450 – (762 220) 903 963
March 2017
Carrying value at
beginning of year Additions Disposals Depreciation
Carrying value at end
of year
Owned assetsPlant and equipment 1 945 608 14 515 – (627 960) 1 332 163Motor vehicles 100 000 – (86 000) (14 000) –Furniture and fittings 19 157 9 491 – (5 289) 23 359Office equipment 12 269 13 030 (2 648) (11 602) 11 049IT equipment 62 573 36 739 – (39 558) 59 754Capitalised leased assetsLand and buildings 63 585 154 619 – (54 796) 163 408
2 203 192 228 394 (88 648) (753 205) 1 589 733
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7. INTANGIBLE ASSETS
CostAccumulated amortisation
Carryingvalue
March 2019Owned assetsComputer software under development – – –
– – –
CostAccumulated amortisation
Carrying value
March 2018Owned assetsComputer software under development 7 043 864 – 7 043 864
7 043 864 – 7 043 864
CostAccumulatedamortisation
Carrying value
March 2017Owned assetsComputer software under development 4 998 105 – 4 998 105
4 998 105 – 4 998 105
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Reconciliation of carrying value
March 2019
Carryingvalue at
beginningof year Additions Disposals Amortisation
Carrying value at end
of year
Indefinite life intangible assetsComputer software under development 7 043 864 1 085 445 (8 129 309) – –
7 043 864 1 085 445 (8 129 309) – –
March 2018
Carryingvalue at
beginningof year Additions Disposals Amortisation
Carryin value at end
of year
Indefinite life intangible assetsComputer software under development 4 998 105 2 045 759 – – 7 043 864
4 998 105 2 045 759 – – 7 043 864
March 2017
Carrying value at beginning of year Additions Disposals Amortisation
Carrying value at end of year
Indefinite life intangible assetsComputer software under development 2 956 642 2 041 463 – – 4 998 105
2 956 642 2 041 463 – – 4 998 105
Intangible assets are allocated to their respective underlying cash-generating units, which support the valuation of the intangible asset.
Intangible assets are recognised as indefinite useful life intangible assets when an analysis of the relevant underlying factors confirm there is no foreseeable limit to the period over which the asset is expected to generate net cash inflows for the entity.
Goodwill and indefinite life intangible assets are assessed for impairment on an annual basis, which is determined by calculating the recoverable amount of a cash-generating unit based on value-in-use.
Value-in-use calculations use pre-tax cash flow projections based on financial forecast, approved by management, and cover a five-year period. The estimated growth rates applied are in line with that of the industry in which the cash-generating unit operates and are materially similar to assumptions of external market sources. The cash-generating units’ recoverable amount is most sensitive to the growth rate assumptions applied. Assumptions were based on management’s past experience and best estimates regarding forecasts. Management determined forecasted gross margin based on past performance and its expectations of market developments. The discount rates used are pre-tax and reflect the appropriate risk associated with the industry and respective businesses. Growth rate for the five-year period is 12.5% – 21%, the growth rate into perpetuity is 6% and the discount rates used ranged between 9.12% and 14.45%.
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The impairment calculations were tested for sensitivity to significant changes in the key assumptions used. The basis for the sensitivity analysis was a reduction of up to 20% in the forecasted operating profit used in the value-in-use calculation and a reduction of 5% of the weighted average cost of capital. The discount rates used ranged between 16.5% and 22.9% depending on the cash-generating unit being assessed.
The sensitivity analysis did not result in any impairment.
Intangible assets with defined useful lives are tested for impairment if conditions are identified which might be indicative of a potential reduction in the value-in-use or net realisable value compared to its carrying value.
The intellectual property is the technology that is used in the manufacturing of the water meters.
8. DEFERRED TAX ASSETS
Deferred tax assets and liabilities are only offset when the income tax relates to the same legal entity or the same fiscal authority or they intend to settle the assets and liabilities on a net basis.
The directors assessed that the deferred tax assets will be recovered based on profitability forecasts and their review of business plans.
March 2019 March 2018 March 2017
Reconciliation of deferred tax:Balance at beginning of year 2 823 542 2 419 357 1 546 366Movements consisting of:Temporary differences recognised in profit and lossIntangible assets 1 525 690 (572 813) (553 129)Credit loss allowance 5 681 (13 535) –Bonus accrual 21 569 – –Leave pay accrual (17 999) (18 667) 106 361Assessed loss 816 585 1 009 200 1 319 758
Balance at end of year 5 175 068 2 823 542 872 990
The deferred tax asset and (liabilities) arises from the following temporary differences:Intangible assets – (1 525 690) (952 877)Accruals 83 409 74 159 106 361Assessed loss 5 091 659 4 275 073 3 265 873
5 175 068 2 823 542 2 419 357
Deferred tax asset 5 175 068 2 823 542 2 419 357
5 175 068 2 823 542 2 419 357
The deferred tax asset has been recognised based on the future forecasts and positioning of the business. During the 2019 year the decision was taken to dispose of the internally generated IP to USC Metering (a Sebata group-owned company) and to focus on the plastics side of the business. This has led to a full focus on the core of the business and there is no longer the distraction of trying to create a “smart meter”. With the disposal it was also agreed that Amanzi would become USC’s primary meter and plastics provider and USC would use Amanzi product in all possible cases. With this significantly increased order book the company has forecasted to generate taxable profits and utilise the assessed loss that has been built up.
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9. TRADE AND OTHER RECEIVABLES
March 2019 March 2018 March 2017
Trade debtors 1 426 489 1 569 133 1 077 247Prepaid expenses 795 591 – 142 024Deposits 138 761 55 680 55 680Staff advances 5 203 – –Value Added Tax 666 844 304 934 835 377
3 032 888 1 929 747 2 110 328Credit loss allowance (196 303) (169 250) (233 707)
2 836 585 1 760 497 1 876 621
Items included in trade and other receivables not classified as financial instrumentsPrepaid expenses 795 591 – 142 024Value Added Tax 666 844 304 934 835 377
1 462 435 304 934 977 401
Trade and other receivables net of non-financial instruments. 1 374 150 1 455 563 899 220
The average credit period is less than 60 days with no interest charged on late payment. The amounts presented above include amounts that are past due at the end of the reporting period for which the company has not recognised an allowance for credit loss because there has not been significant change in the credit quality of the receivables and the amounts are considered to still be recoverable. The credit quality of trade and other receivables is considered to be high as there has been no significant default historically.
The carrying amount of trade and other receivables approximates their fair value due to the short-term nature thereof.
The carrying amounts of cash and cash equivalents are denominated in South African Rand only
10. TRADE AND OTHER PAYABLES
March 2019 March 2018 March 2017
Trade creditors 4 991 121 1 417 478 1 056 954Deposits 109 175 109 175 610 621Accrued expenses 31 979 25 268 17 710Leave pay accrual 73 637 137 916 204 580Payroll accruals 36 522 115 968 122 708
5 242 434 1 805 805 2 012 573
Items included in trade and other payables not classified as financial instrumentsLeave pay accrual 73 637 137 916 204 580
73 637 137 916 204 580
Trade and other payables net of non-financial instruments 5 168 797 1 667 889 1 807 993
Creditors and accruals principally comprise amounts outstanding for trade purchases and ongoing costs. The average credit period taken is less than 60 days. Due to the short-term nature of the trade payables, the carrying value represents the fair value of the trade payables.
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11. RELATED PARTY LOANS
March 2019 March 2018 March 2017
Interest free loansJA Van Der Merwe (1 208 270) (1 208 270) (1 208 270)JG Van SChalkwyk (552 806) (552 806) (552 806)Sebata Municipal Solutions Proprietary Limited (22 583 891) (23 530 552) (22 353 031)
(24 344 967) (25 291 628) (24 114 107)
All loans are unsecured and repayable in the ordinary course of business. The related parties have subordinated their claim against Amanzi Meters Proprietary Limited in favour and for the benefit of other creditors of Amanzi Meters Proprietary Limited The primary shareholders have also provided a commitment of full support to continue funding the business due to the strategic nature of Amanzi within the Sebata group.
The carrying amount of related party loans approximate their fair value.
The carrying amounts of related party loans are denominated in South African Rand only.
12. REVENUE FROM CONTRACTS WITH CUSTOMERS
March 2019 March 2018 March 2017
Sale of goods 18 426 062 11 639 420 7 655 754Services rendered 57 110 52 163 404 736
18 483 172 11 691 583 8 060 490
Disaggregation of revenueMajor product lines at a point in timeSupport Services 57 110 52 163 404 736Goods 18 426 062 11 639 420 7 655 754
18 483 172 11 691 583 8 060 490
Total revenue from contracts with customers 18 483 172 11 691 583 8 060 490
13. EXPENDITURE BY NATURE
March 2019 March 2018 March 2017
Major expense items include the following:Auditors’ remuneration 40 440 28 396 20 038Depreciation of property, plant and equipment 439 445 762 220 753 205Amortisation of intangible assets – – –Operating lease charges 938 028 797 653 687 796Employee compensation and benefit expense 5 037 506 1 784 295 1 393 751Travel – Local 152 737 60 258 126 195
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14. INCOME TAX EXPENSE
March 2019 March 2018 March 2017
Current taxCurrent year – – –Under/(over) provision in prior year 82 134 – –Deferred taxationCurrent year (2 351 526) (404 185) (872 991)
(2 269 392) (404 185) (872 991)
Reconciliation of rate of taxation % % %
South African normal taxation rate 28.00 28.00 28.00Adjusted for:Overpayment of prior period current taxation (2.20) 1.90 –
Net increase (2.20) 1.90 –
Effective rate of taxation 25.80 29.90 28.00
15. CASH UTILISED IN OPERATIONS
March 2019 March 2018 March 2017
Profit before tax (8 391 297) (1 353 072) (3 117 823)Adjusted for:Depreciation and amortisation 439 445 762 220 753 205Profit on disposal of property, plant and equipment 28 218 – (39 000)Impairment of IP 12 787 – –Finance income (1 290) (680) (1 134)Finance costs 3 205 94 263Movement in working capital(Increase)/decrease in inventories 248 542 1 587 743 (3 463 487)(Increase)/decrease in trade and other receivables (1 076 088) 116 124 3 420 360Increase/(decrease) in trade and other payables 3 436 627 (206 770) 525 823
(5 299 851) 905 659 (1 921 793)
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16. FINANCIAL INSTRUMENTS
The company has classified its financial assets in the following categories:
Amortised cost Total
2019Trade and other receivables 1 374 150 1 374 150Cash and cash equivalents 25 275 25 275
1 399 425 1 399 425
Loans and receivables held
at amortised cost Total
2018Trade and other receivables 1 455 563 1 455 563Cash and cash equivalents 22 412 22 412
1 477 975 1 477 975
Loans and receivables held
at amortised cost Total
2017Trade and other receivables 899 220 899 220Cash and cash equivalents 60 853 60 853
960 073 960 073
The company has classified its financial liabilities in the following categories:
Amortised cost Total
2019Related party loans 24 344 967 24 344 967Trade and other payables 5 168 797 5 168 797
29 513 764 29 513 764
2018Related party loans 25 291 628 25 291 628Trade and other payables 1 667 889 1 667 889
26 959 517 26 959 517
2017Related party loans 24 114 107 24 114 107Trade and other payables 1 807 993 1 807 993
25 922 100 25 922 100
The estimated fair values of financial assets and financial liabilities as at 31 March 2019 have been determined using available market information and appropriate valuation methodologies. The fair value of almost all financial instruments equals their carrying value, either because of the short-term nature and normal trade terms thereof, or the market-related interest rates attached to it.
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17. RELATED PARTY TRANSACTIONS AND BALANCES
March 2019 March 2018 March 2017
Transactions with related parties are effected on a commercial basis and related party debts are repayable on a commercial basis unless otherwise stated.
The following transactions were carried out with related parties:
Revenue (Sale of goods and services rendered)R-Data Proprietary Limited – 62 103 –Sebata Municipal Solutions Proprietary Limited 1 902 080 5 056 115 5 591 894USC Metering Proprietary Limited 14 102 288 878 988 4 434
16 004 368 5 997 206 5 596 328
PurchasesMICROmega Financial Services Proprietary Limited 13 750 10 550 12 058Nerdworks Proprietary Limited 44 512 13 258 18 283NOSA Travel Agency Proprietary Limited 13 014 – –Sebata Municipal Solutions Proprietary Limited – – 495Turrito Networks Proprietary Limited 13 275 – –USC Metering Proprietary Limited – 979 607 –
84 551 1 003 415 30 836
Balances with related parties were as follows:
Trade receivablesR-Data Proprietary Limited – 25 859 –Sebata Municipal Solutions Proprietary Limited – – 114 570USC Metering Proprietary Limited – 342 –
– 26 201 114 570
Trade payablesNerdworks Proprietary Limited 12 361 – –Sebata Holdings Limited – 6 025 3 134R-Data Proprietary Limited – 1 552 –Sebata Municipal Solutions Proprietary Limited – – 34 507Turrito Networks Proprietary Limited 10 609 – –
22 969 7 577 37 641
Loans receivable/(payable)The detail on related party loans is disclosed in note 11.
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18. RISK MANAGEMENT
Overview
The company has exposure to the following risks from its use of financial instruments:
• credit risk• liquidity risk• interest rate risk
This note presents information about the company’s exposure to each of the above risks, the company’s objectives, policies and processes for measuring and managing risk, and the company’s management of capital. Further quantitative disclosures are included throughout these financials.
The directors have overall responsibility for the establishment and oversight for the company’s risk management framework. The directors are responsible for developing and monitoring the company’s risk management policies.
The company’s risk management policies are established to identify and analyse the risk faced by the company, to set appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly.
The Board oversees how management monitors compliance with the company’s risk management policies and procedures and reviews the adequacy of the risk management framework in relation to the risks faced by the company.
Credit risk
Credit risk is the risk of financial loss to the company if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the company’s trade receivables from customers, instalment sale debtors and deposits with banks.
The Board of Directors has established a credit policy under which each new customer is analysed individually for credit worthiness before the company’s standard payment and delivery terms and conditions are offered. Customers that fail to meet the company’s benchmark credit worthiness may transact with the company only on a prepayment basis.
Customer credit risk is managed by each business unit subject to the company’s established policy, procedures and control relating to customer credit risk management. Credit quality of a customer is assessed based on individual credit limits and historical default rates. Outstanding customer receivables are regularly monitored to ensure exposure to credit risk is maintained within the defined parameters.
An impairment analysis is performed at each reporting date using a provision matrix to measure expected credit losses. The provision rates are based on days past due for groupings of various customer segments with similar loss patterns. The calculation reflects the probability-weighted outcome, the time value of money and reasonable and supportable information that is available at the reporting date about past events, current conditions and forecasts of future economic conditions. Generally, trade receivables are written-off if there is an indication that these are impaired. The company does not hold collateral as security.
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Set out below is the information about the credit risk exposure on the company’s trade receivables using a provision matrix:
2019Carrying
valueECLrate
Expected credit loss
Trade Debtors Carrying Amount:Current 7 916 10.56% 83630 Days 260 752 0.08% 22160 Days 135 864 0.10% 14190 Days – 0.00% 61+120 Days 224 055 0.10% 214
Total 628 587 1 473
2018Carrying
valueECL rate
Expected credit loss
Trade Debtors Carrying Amount:Current – 0.00% –30 Days 343 852 0.42% 1 43460 Days 339 544 0.07% 23890 Days – 0.00% 105+120 Days 190 032 0.16% 305
Total 873 428 2 082
The company establishes an allowance for impairment that represents its estimate of incurred losses in respect of trade and other receivables and investments. The main components of this allowance are a specific loss component that relates to individually significant exposures, and a collective loss component established for groups of similar assets in respect of losses that have been incurred but not yet identified.
Credit quality of trade and other receivables can be analysed as follows:
March 2019 March 2018 March 2017
Group 1 – – 29 311Group 2 9 878 1 089 843 547 804Group 3 1 220 308 310 040 266 426Group 4 – – –
Total 1 230 186 1 399 883 843 541
Group 1 – new customers (less than six months)
Group 2 – existing customers (more than six months) with no defaults (no bad debt write-off/hand-overs) in the past
Group 3 – existing customers (more than six months) with some defaults
Group 4 – customers with defaults, no trading and hand over. This category of trade receivables related mainly to contractors and sub-contractors exposed to government and parastatal bodies. Appropriate security policies are in place to limit this category.
Performance categories of trade and other receivables
Trade receivables that are within the prescribed trading terms are considered to be fully performing. Past due and not impaired trade receivables relate to a number of independent customers for whom there is no history of default, and payment cession exist over these customers. Trade receivables impaired and provided for mainly relate to independent customers, which are in difficult economic situations. The risk component of this category has been provided for.
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Performance categories:
March 19 March 18 March 17
Fully performing 287 217 809 949 567 528Past due and not impaired 746 666 420 684 276 012Impaired and provided for 196 303 169 250 233 707
1 230 186 1 399 883 1 077 247
The ageing of amounts past due but not impaired is as follows:
March 19 March 18 March 17
1 month past due – – –2 months past due – – –3 months past due 126 551 313 494 110 432More than 3 months past due 620 115 107 190 165 580
746 666 420 684 276 012
Trade and other receivables credit loss allowanceAs at year end trade receivables were provided for as follows:
Movement on the allowance for credit loss:
March 19 March 18 March 17
Balance at the beginning of the year (169 250) (233 707) (56 122)Credit loss raised during the year (27 053) – (177 585)Reversal of credit loss – 64 457 –Balance at the end of the year (196 303) (169 250) (233 707)
Management does not expect any losses from non-performance by these counterparties.
Liquidity risk
Liquidity risk is the risk that the company will not be able to meet its financial obligations as they fall due. The company’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient cash/liquid assets to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the company’s reputation.
Typically the company ensures that it has sufficient cash on demand to meet expected operational expenses for a period of 60 days, including the servicing of financial obligations; this excludes the potential impact of extreme circumstances that cannot reasonably be predicted, such as natural disasters. In addition, the company’s statement of financial position remains lowly geared and thus the directors are comfortable with the ability to receive lines of credit.
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The table below analyses the company’s financial liabilities that will be expected to be settled on a net basis into relevant maturity groups based on the remaining period at the reporting date to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows:
2019Less than
1 yearBetween
1 and 5 yearsOver
5 years
Related party loans 24 344 967 – –Trade and other payables 5 168 797 – –
29 513 764 – –
2018Less than
1 yearBetween
1 and 5 yearsOver
5 years
Related party loans 25 291 628 – –Trade and other payables 1 667 889 – –
26 959 517 – –
2017Less than
1 yearBetween
1 and 5 yearsOver
5 years
Related party loans 24 114 107 – –Trade and other payables 1 807 993 – –
25 922 100 – –
Interest rate risk
The company exposure on fair value interest rate risk mainly arises from its fixed deposits with banks and investments in fixed rate debt securities, which are classified as loans and receivables. It also has exposure on cash flow interest rate risk which is mainly arising from its deposits with banks and interest-bearing borrowings with the banks. It is a common practice in South Africa to have floating rate borrowings with the banks.
In order to manage the cash flow interest rate risk, the company will repay the corresponding borrowings when it has surplus funds.
Sensitivity analysis
March 19 March 18 March 17
Cash and cash equivalents 25 275 22 412 60 853Net interest-bearing assets/(liabilities) 25 275 22 412 60 853
Interest rate change 2% 2% 2%Potential after tax impact on earnings 364 323 876
The sensitivity analysis has been prepared with the assumption that the change in interest rates had occurred at the balance sheet date and had been applied to the exposure to interest rate risk for the relevant financial instruments in existence at that date. The changes in interest rate represent management’s assessment of a reasonably possible change in interest rates at that date over the period until the next annual balance sheet date.
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GOING CONCERN
The annual financial statements have been prepared on the basis of accounting policies applicable to a going concern. This basis presumes that funds will be available to finance future operations and that the realisation of assets and settlement of liabilities, contingent obligations and commitments will occur in the ordinary course of business. Given the continued loss making position of the business the shareholders have subordinated their claims in favour of other creditors and the primary shareholder has provided commitment to continue funding the business.
EVENTS AFTER REPORTING DATE
The directors are not aware of any matter or circumstance arising since the end of the financial year to the date of this report that could have a material effect on the financial position of the company.
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ANNEXURE 6
INDEPENDENT REPORTING ACCOUNTANTS’ REPORT ON THE HISTORICAL FINANCIAL INFORMATION OF AMANZI FOR THE THREE FINANCIAL YEARS ENDED 31 MARCH 2019, 31 MARCH 2018 AND 31 MARCH 2017
“The DirectorsSebata Holdings Limited66 Park LaneSundownSandton, 2169Johannesburg
INDEPENDENT REPORTING ACCOUNTANT’S REPORT ON THE HISTORICAL FINANCIAL INFORMATION OF AMANZI METERS PROPRIETARY LIMITED (“AMANZI”) FOR THE THREE YEARS ENDED 31 MARCH 2019, 31 MARCH 2018 AND 31 MARCH 2017
At your request and for the purposes of the Circular to be dated on or about 20 December 2019 (“the Circular”), we have audited the Historical Financial Information of Amanzi for the three years ended 31 March 2019, 31 March 2018 and 31 March 2017 presented in the report of Historical Financial Information which has been set out in Annexure 5 to the Circular.
The Historical Financial Information was prepared in accordance with the requirements of the JSE Listings Requirements. The JSE Listings Requirements require the historical financial information to be prepared in accordance with the conceptual framework, the measurement and recognition requirements of International Financial Reporting Standards (IFRS), the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee and Financial Pronouncements as issued by Financial Reporting Standards Council.
Opinion
We have audited the Historical Financial Information of Amanzi set out on Annexure 5 to the Circular, which comprise the statement of financial position as at 31 March 2019, 31 March 2018 and 31 March 2017, the statement of profit or loss and other comprehensive income, the statement of changes in equity and the statement of cash flows for the years then ended, and notes to the financial statements, including a summary of significant accounting policies.
In our opinion, the Historical Financial Information present fairly, in all material respects, the financial position of the company as at 31 March 2019, 31 March 2018 and 31 March 2017, and its financial performance and cash flows for the year then ended in accordance with International Financial Reporting Standards and the requirements of the JSE Limited Listing Requirements.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Historical Financial Information section of our report. We are independent of the Company in accordance with the sections 290 and 291 of the Independent Regulatory Board for Auditors’ Code of Professional Conduct for Registered Auditors (Revised January 2018), parts 1 and 3 of the Independent Regulatory Board for Auditors’ Code of Professional Conduct for Registered Auditors (Revised November 2018) (together the IRBA Codes) and other independence requirements applicable to performing audits of financial statements in South Africa. We have fulfilled our other ethical responsibilities, as applicable, in accordance with the IRBA Codes and in accordance with other ethical requirements applicable to performing audits in South Africa. The IRBA Codes are consistent with the corresponding sections of the International Ethics Standards Board for Accountants’ Code of Ethics for Professional Accountants and the International Ethics Standards Board for Accountants’ International Code of Ethics for Professional Accountants (including International Independence Standards) respectively. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
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Directors Responsibility for the Historical Financial Information
The directors are responsible for the preparation and fair presentation of the Historical Financial Information in accordance with International Financial Reporting Standards and the JSE Limited Listing Requirements, and for such internal control as the directors determine is necessary to enable the preparation of Historical Financial Information that are free from material misstatement, whether due to fraud or error.
In preparing the Historical Financial Information, the directors are responsible for assessing the company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the company or to cease operations, or have no realistic alternative but to do so.
Auditor’s responsibility for the Audit of the Historical Financial Information
Our objectives are to obtain reasonable assurance about whether the Historical Financial Information as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the Historical Financial Information.
As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional scepticism throughout the audit. We also:
• Identify and assess the risks of material misstatement of the Historic Financial Information, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control.
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the directors.
• Conclude on the appropriateness of the director’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the Historical Financial Information or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Company to cease to continue as a going concern.
• Evaluate the overall presentation, structure and content of the Historical Financial Information, including the disclosures, and whether the Historical Financial Information represent the underlying transactions and events in a manner that achieves fair presentation.
We communicate with the directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
Consent
We consent to the inclusion of this report and the reference to our opinion in the Circular in the form and context in which it appears.
Yours faithfully
Nexia SAB&T Director: J. Engelbrecht Registered Auditor 20 December 2019 119 Witch-Hazel Avenue Highveld Technopark Centurion
88 PRINTED BY INCE (PTY) LTD REF. JOB019791
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SEBATA HOLDINGS LIMITED Incorporated in the Republic of South Africa
(Registration number 1998/003821/06)Share code: SEB ISIN: ZAE000260493
(“Sebata” or “the Company” or “the Group”)
NOTICE OF GENERAL MEETING
The definitions and interpretations commencing on page [4] of the Circular to which this notice of General Meeting is attached, apply mutatis mutandis to this notice of General Meetings and to the ordinary resolutions (“Resolutions”) set out herein.
If you are in any doubt as to what action you should take in respect of the following Resolutions, please consult your CSDP, broker, banker, attorney, accountant or other professional adviser immediately.
Notice is hereby given that a General Meeting of Shareholders of the Company will be held at 10:00 on Wednesday, 22 January 2020 at the registered office of Sebata, Sebata House, 66 Park Lane, Sandton, 2196, to consider, and, if deemed fit, to pass, with or without modification, the following Resolutions.
The Board has determined that, in terms of section 62(3)(a), as read with section 59 of the Companies Act, the record date for the purposes of determining which shareholders of the Company are entitled to participate in and vote at the General Meeting is Friday, 17 January 2020. Accordingly, the last day to trade Sebata shares in order to be recorded in the Company’s securities register to be entitled to vote will be Tuesday, 14 January 2020.
ORDINARY RESOLUTION NUMBER 1 – THE TRANSACTION
“RESOLVED THAT, in compliance with the Listings Requirements, the Transaction be and is hereby approved by the Shareholders.”
Explanatory note
The Transaction constitutes a category 1 transaction in terms of the Listings Requirements and accordingly is subject to approval thereof by Shareholders by way of an ordinary resolution.
The reason for and effect of this Ordinary Resolution Number 1 is to approve and authorise the Transaction as a category 1 transaction, as required by the Listings Requirements.
In terms of the Listings Requirements, a simple majority of the votes (i.e. more than 50%) entitled to be cast by Shareholders present or represented by proxy at the General Meeting, must be cast in favour of Ordinary Resolution Number 1 for it to be approved.
SPECIAL RESOLUTION NUMBER 1 – APPROVAL OF FINANCIAL ASSISTANCE IN TERMS OF SECTION 44 AND SECTION 45 OF THE COMPANIES ACT
“RESOLVED THAT, for purpose of section 44 and section 45 of the Companies Act, to the extent required, Sebata is hereby authorised to grant any direct or indirect financial assistance as contemplated in such sections of the Companies Act to any person, including Inzalo, or to any one or more related or inter-related companies of Sebata and/or to any one or more members of such related or inter-related company and/or to any one or more persons related to any such company, as the case may be, on such terms and conditions as the Board deems fit, for the purpose of and connection with the Transaction.
Explanatory note
In accordance with the provisions of sections 44 and 45 of the Companies Act, a special resolution is required to be approved by shareholders within the two years prior to the provision of any direct or indirect financial assistance as contemplated in such sections of the Companies Act. In terms of the Companies Act, Special Resolution Number 1 requires the approval of a 75% (seventy-five percent) majority of the votes cast in favour thereof by all shareholders present or represented by proxy at the general meeting.
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ORDINARY RESOLUTION NUMBER 2 – AUTHORITY GRANTED TO DIRECTORS
“RESOLVED THAT each Director of Sebata be and is hereby individually authorised, on behalf of Sebata, to enter into, sign and/or despatch any and all such agreements, documents and notices, as may be necessary, expedient or desirable (in each case in the opinion of such Director) and do all such other things and procure the doing of all such things as may be necessary for or incidental to the implementation of the Disposal, and should any such agreements, documents or notices have been signed, or any such action have been taken, before the date of this Ordinary Resolution Number 2, such signature or action, to the extent legally permissible, be and is hereby ratified and approved.”
Explanatory note
The reason for this Ordinary Resolution Number 2 is to authorise any Director of the Company to sign all documents and do all such further acts and things as he may in his discretion consider appropriate to implement and give effect to all of the resolutions set out in this Notice of General Meeting.
The effect of Ordinary Resolution Number 2 is to authorise any Director to sign all documents and take all actions necessary as he may in his discretion consider appropriate to implement and give effect to all of the resolutions set out in this Notice of General Meeting.
In terms of the Companies Act and the MOI, the percentage of voting rights that is required for Ordinary Resolution Number 2 to be adopted is more than 50% (fifty percent) of the votes exercised on such ordinary resolution by Shareholders present or represented by proxy at the General Meeting.
VOTING AND PROXIES
For an Ordinary Resolution to be adopted at the General Meeting, it must be supported by more than 50% of the voting rights exercised on the Resolution, excluding any Related Party/ies and associates, as the case may be.
A Shareholder entitled to attend and vote at the General Meeting is entitled to appoint a proxy or proxies to attend, speak and vote in his/her stead. A proxy need not be a Shareholder of the Company. For the convenience of registered Shareholders of the Company, a form of proxy is enclosed herewith.
The attached form of proxy is only to be completed by those Shareholders who:
• hold Shares in Sebata in Certificated form; or
• are recorded on the electronic sub-register in “own name” Dematerialised form.Shareholders who have Dematerialised their Shares through a CSDP or broker without “own name” registration and who wish to attend the General Meeting, must instruct their CSDP or broker to provide them with the relevant letter of representation to attend the General Meeting in person or by proxy and vote.
If they do not wish to attend in person or by proxy, they must provide the CSDP or broker with their voting instructions in terms of the relevant custody agreement entered into between them and the CSDP or broker.
Shareholders who hold Dematerialised Shares which are registered in their name or if they are the registered holder of Certificated Shares may attend the General Meeting in person, alternatively, they may appoint a proxy or proxies, who need not be a Shareholder of the Company to represent them at the General Meeting by completing the attached form of proxy in accordance with the instructions it contains. Forms of proxy should be forwarded to reach the Transfer Secretaries, Singular Systems Proprietary Limited, at least 48 hours, excluding Saturdays, Sundays and South African public holidays, before the time of the General Meeting. Any form of proxy not delivered by this time may be handed to the Chairperson of the General Meeting immediately before the appointed proxy exercises any of the Shareholder’s votes at the General Meeting.
Meeting participants, which include proxies, are required to provide identification reasonably satisfactory to the Chairperson of the General Meeting before being entitled to attend, participate in or vote a Shareholders’ meeting. The Company will regard the presentation of participants’ original drivers’ licences, identity documents or passports to be satisfactory “identification”.
By order of the Board
R Smith Company Secretary Johannesburg 20 December 2019
Registered office Sebata House, 66 Park Lane, Sandton, 2196
Transfer Secretaries Singular Systems Proprietary Limited 28 Fort Street, Birnam, 2196 (PO Box 785261, Sandton, 2146)
SEBATA HOLDINGS LIMITED Incorporated in the Republic of South Africa
(Registration number 1998/003821/06)Share code: SEB ISIN: ZAE000260493
(“Sebata” or “the Company” or “the Group”)
FORM OF PROXY
For use only by Sebata Shareholders who:
• hold Shares in Certificated form (“Certificated Shareholders”); or• have Dematerialised their Shares (“Dematerialised Shareholders”) and are registered with “own-name” registration,at the General Meeting of Shareholders of the Company to be held at 10:00 on Wednesday, 22 January 2020 at the registered office of Sebata, Sebata House, 66 Park Lane, Sandton, 2196.
Dematerialised Shareholders holding Shares other than with “own-name” registration, who wish to attend the General Meeting must inform their Central Securities Depository Participant (“CSDP”) or broker of their intention to attend the General Meeting and request their CSDP or broker to issue them with the relevant letter of representation to attend the General Meeting in person or by proxy and vote. If they do not wish to attend the General Meeting in person or by proxy, they must provide their CSDP or broker with their voting instructions in terms of the relevant Custody Agreement entered into between them and the CSDP or broker. These Shareholders must not use this form of proxy.
I/We (full name/s in block letters)
of (address)
Telephone work ( ) Telephone home ( )
Cellphone number Email address
being the holder/custodian of shares of the Company, hereby appoint (see note):
1. or failing him/her,
2. or failing him/her,
3. the Chairperson of the General Meeting,
as my/our proxy to attend and act for me/us on my/our behalf at the General Meeting of the Company convened for purpose of considering and, if deemed fit, passing, with or without modification, the resolutions to be proposed thereat and at each postponement or adjournment thereof, and to vote for and/or against such resolutions, and/or to abstain from voting for and/or against the resolutions, in respect of the Shares registered in my/our name in accordance with the following instructions:
Number of shares
For Against Abstain
Ordinary Resolution Number 1 – The Transaction
Special Resolution Number 1 – Financial Assistance
Ordinary Resolution Number 2 – Authority granted to Directors
Please indicate instructions to proxy in the space provided above by the insertion therein of the relevant number of votes exercisable.
Signed at on 2019 / 2020
Signature
Assisted by (where applicable)
Each Shareholder is entitled to appoint one or more proxies (who need not be a Shareholder of the Company) to attend, speak and vote in place of that Shareholder at the General Meeting.
Notes
1. Summary of Rights Contained in Section 58 of the Companies Act, 2008 (Act 71 of 2008), as amended (“Companies Act”).
In terms of section 58 of the Companies Act:-
• a shareholder may, at any time and in accordance with the provisions of section 58 of the Companies Act, appoint any individual (including an individual who is not a shareholder) as a proxy to participate in, and speak and vote at, a shareholders meeting on behalf of such shareholder;
• a proxy may delegate her or his authority to act on behalf of a shareholder to another person, subject to any restriction set out in the instrument appointing such proxy;
• irrespective of the form of instrument used to appoint a proxy, the appointment of a proxy is suspended at any time and to the extent that the relevant shareholder chooses to act directly and in person in the exercise of any of such shareholder’s rights as a shareholder;
• irrespective of the form of instrument used to appoint a proxy, any appointment by a shareholder of a proxy is revocable, unless the form of instrument used to appoint such proxy states otherwise;
• if an appointment of a proxy is revocable, a shareholder may revoke the proxy appointment by: (i) cancelling it in writing, or making a later inconsistent appointment of a proxy and (ii) delivering a copy of the revocation instrument to the proxy and to the company; and
• a proxy appointed by a shareholder is entitled to exercise, or abstain from exercising, any voting right of such shareholder without direction, except to the extent that the relevant company’s memorandum of incorporation, or the instrument appointing the proxy, provides otherwise (see note 6).
2. The form of proxy must only be used by Shareholders who hold Shares in certificated form or who are recorded on the sub-register in electronic form in “own name”.
3. All other beneficial owners who have Dematerialised their Shares through a CSDP or broker and wish to attend the General Meeting must provide the CSDP or broker with their voting instructions in terms of the relevant Custody Agreement entered into between them and the CSDP or broker.
4. A Shareholder entitled to attend and vote at the General Meeting may insert the name of a proxy or the names of two alternate proxies of the Shareholder’s choice in the space provided, with or without deleting “the Chairperson of the General Meeting”. The person whose name stands first on the form of proxy and who is present at the General Meeting will be entitled to act as proxy to the exclusion of such proxy(ies) whose names follow.
5. A Shareholder is entitled to one vote on a show of hands and, on a poll, one vote in respect of each ordinary Share held. A Shareholder’s instructions to the proxy must be indicated by the insertion of the relevant number of votes exercisable by that Shareholder in the appropriate space provided. If an “X” has been inserted in one of the blocks to a particular resolution, it will indicate the voting of all the Shares held by the Shareholder concerned. Failure to comply with this will be deemed to authorise the proxy to vote or to abstain from voting at the General Meeting as he/she deems fit in respect of all the Shareholder’s votes exercisable thereat. A Shareholder or the proxy is not obliged to use all the votes exercisable by the Shareholder or by the proxy, but the total of the votes cast and in respect of which abstention is recorded may not exceed the total of the votes exercisable by the Shareholder or the proxy.
6. A vote given in terms of an instrument of proxy shall be valid in relation to the General Meeting, notwithstanding the death, insanity or other legal disability of the person granting it, or the revocation of the proxy, or the transfer of the Shares in respect of which the proxy is given, unless notice as to any of the aforementioned matters shall have been received by the Company’s Transfer Secretaries, Singular Systems Proprietary Limited, not less than 48 (forty-eight) hours before the commencement of the General Meeting.
7. If a Shareholder does not indicate on this form of proxy that his/her proxy is to vote in favour of or against any resolution or to abstain from voting, or gives contradictory instructions, or should any further resolution(s) or any amendment(s) which may properly be put before the General Meeting be proposed, such proxy shall be entitled to vote as he/she thinks fit.
8. The Chairperson of the General Meeting may reject or accept any form of proxy which is completed and/or received other than in compliance with these notes.
9. A Shareholder’s authorisation to the proxy including the Chairperson of the General Meeting, to vote on such Shareholder’s behalf, shall be deemed to include the authority to vote on procedural matters at the General Meeting.
10. The completion and lodging of this form of proxy will not preclude the relevant Shareholder from attending the General Meeting and speaking and voting in person thereat to the exclusion of any proxy appointed in terms hereof.
11. Documentary evidence establishing the authority of a person signing the form of proxy in a representative capacity must be attached to this form of proxy, unless previously recorded by the Transfer Secretaries or is waived by the Chairperson of the General Meeting.
12. A minor or any other person under legal incapacity must be assisted by his/her parent or guardian, as applicable, unless the relevant documents establishing his/her capacity are produced or have been registered by the Transfer Secretaries.
13. Where there are joint holders of Shares:
• any one holder may sign the form of proxy;• the vote(s) of the senior Shareholders (for that purpose seniority will be determined by the order in which the names of
Shareholders appear in the Company’s register of ordinary Shareholders) who tenders a vote (whether in person or by proxy) will be accepted to the exclusion of the vote(s) of the other joint Shareholder(s).
14. Forms of proxy should be lodged with or mailed to the Transfer Secretaries:
Hand deliveries to: Postal deliveries to: Email:Singular Systems Proprietary Limited28 Fort StreetBirnam2196
Singular Systems Proprietary LimitedPO Box 785261Sandton2146
to be received by no later than 10:00 on Monday, 20 January 2020 (or 48 (forty-eight) hours before any adjournment of the General Meeting which date, if necessary, will be notified on the Stock Exchange News Service of JSE Limited) or may be handed to the Chairperson of the meeting immediately before the appointed proxy exercises any of the Shareholder’s votes at the General Meeting.
15. A deletion of any printed matter and the completion of any blank space need not be signed or initialled. Any alteration or correction must be signed and not merely initialled.