investing with the times - ecsponent limited | financial … · investing with the times africa is...
TRANSCRIPT
AnnuAl FinAnciAl
StAtementS
2019
Investing with the times
Africa is known for its spectacular and diverse landscapes, captivating scenery and abundant wildlife. it is also a continent bursting with passion, pride and potential.
this past financial period has not been without challenges. We have had to operate in sluggishand volatile, local and global economic conditions. like our fellow Africans, ecsponent seeks and
conquers challenges, finding opportunities in areas some may overlook and persevering courageouslyto achieve results over time. Our proven long-term track record transparently displays our enthusiasm
for wealth creation.
We remain positioned to withstand the tides of an ever evolving and complex operating environment bytaking bold but necessary steps in order to ensure the Group’s sustainability.
As the Group is on the brink of significant evolution and change, this report celebrates the unique natural beauty of the African continent. As an African country, we are invested in playing our role in the
continent’s success story.
We look forward to continuing the journey to a rewarding 2020.
cOntentS
lake malawi.
Audit and Risk committee report 4
independent Auditor’s report 8
Directors’ responsibilities and approval 12
company Secretary’s certification 13
corporate information 15
Directors’ report 18
consolidated statement of financial position 28
consolidated statement of profit and loss and other comprehensive income
30
consolidated statement of changes in equity 32
consolidated statement of cash flows 33
1. Accounting policies 34
2. Standards and interpretations effective and adopted in the current year 42
3. Financial instruments - Risk management 45
4. Financial instruments - Fair values 54
notes to the consolidated financial statements 55
Statement of financial position (company) 115
click on a page number for fast navigation.
4 ecsponent Annual Financial Statements ‘19
AuDit AnD RiSk cOmmittee RepORt
the Audit and Risk committee is constituted as a delegated Board committee with duties assigned by the Board in accordance with the king iV, the companies Act and the JSe listing Requirements.
Members of the Audit and Risk Committeethe members of the Audit and Risk committee are all independent non-executive directors during the financial period and up to date of this report. the committee comprise of:
The committee comprise of:
Member Function Date of the appointment Attendance of committee meetings during the period under review
Keith Rayner chairman January 2011 100%
Patrick Matute member march 2017 100%
Richard Connellan member February 2011 n/A (appointed to the committee on 20 September 2019)
Brandon Topham *Former chairman november 2010 100% (resigned on 31 January 2019)
Willem Oberholzer *Former member march 2017 100% (resigned on 31 July 2019)
Biographies of the committee members are available on the company’s website at: www.ecsponentlimited.com/leadership-team/
Keith Raynerchairman Audit and Risk committee
this report is provided by the Audit committee in respect of the 12-month financial period of ecsponent limited (“ecsponent”) and its subsidiaries ended 30 June 2019.
* See page 24.
ecsponent Annual Financial Statements ‘19 5
the remaining directors are invited to attend the committee meetings.
As at the date of this report, the chairman of the Board is a member of the committee, only to fill a vacancy until appointment of an alternate independent non-executive director to the Board, with the requisite skills and knowledge.
the Board has approved the committee terms of reference and is satisfied that the members thereof have the required knowledge and experience as set out in Section 94(5) of the companies Act 71 of 2008 (“the companies Act”) and Regulation 42 of the companies Regulations, 2011.
the Audit committee performs the duties laid upon it by Section 94(7) of the companies Act by holding meetings with the key role players on a regular basis and by the unrestricted access to the external auditors. the committee held five scheduled meetings during the financial period and all the committee members attended all meetings.
the committee has an independent role with accountability to both the Board and shareholders. the committee does not assume the functions of management, which remain the responsibility of the executive directors, officers and other members of senior management.
Responsibilitiesthe committee’s responsibilities include the statutory duties prescribed by the companies Act, activities recommended by king iV as well as additional responsibilities assigned by the Board. the Board has established and maintains internal controls and procedures, which are reviewed on a regular basis.
these are designed to manage the risk of business failures and to provide reasonable assurance against such failures. However, this is not a guarantee that such risks are eliminated.it is the duty of the committee, inter alia, to monitor and review:
› the appointment of external auditors and review of reports;
› evaluation of the performance of the financial director (FD);
› the governance of information technology (it) and the effectiveness of the Group’s information systems;
› interim and annual financial and operating reports, the audited consolidated annual financial statements and all other distributed financial documents;
› accounting policies of the Group and proposed revisions;› compliance with applicable legislation, requirements of
appropriate regulatory authorities and ecsponent’s code of ethics;
› the integrity of the annual financial report and associated reports (by ensuring that its content is reliable and recommending it to the Board for approval);
› policies and procedures for preventing and detecting fraud;
› approve and periodically review policies and plans for risk management to enhance the Group’s ability to achieve its strategic objectives; and
› oversee the operation of the Group’s risk management framework, which shall be commensurate with the structure, risk profile, complexity, activities, and size of the Group, including:ê policies and procedures establishing risk management
governance, risk management procedures, and risk control infrastructure for global operations; and
ê processes and systems for implementing and monitoring compliance with such policies and procedures, including processes and systems to:- identify and report risks and risk management
deficiencies, including emerging risks, and ensure effective and timely implementation of actions to address emerging risks and risk management deficiencies for the Group’s operations;
- establish managerial and employee responsibility for risk management; and
- ensure the independence of the risk management function.
the auditors have unrestricted access to the committee, the committee chairman and the chairman of the Board, ensuring that auditors are able to maintain their independence. the external auditors attended the audit and risk committee meetings by invitation. the auditors attend the company’s Annual General meeting (“AGm”) where the annual financial statements are presented, in order to answer any questions relevant to the audit of the financial statements.
External auditor reviewthe company is required in accordance with section 90(1) of the companies Act to appoint an external audit firm and designated audit partner that is compliant with section 90(2) of the companies Act and JSe listings Requirements, which appointment must be approved by shareholders at the company’s AGm.
Accordingly, in compliance with the companies Act and paragraph 3.84(g)(iii) of the JSe listings Requirements, the committee assessed the suitability for re-appointment of the current appointed audit firm, being nexia SAB&t. Furthermore, in accordance with section 92(1) of the companies Act, t de kock will be replaced by J engelbrecht as the designated auditor (“Auditor Suitability Review”).
the committee examined and reviewed:› the results of the most recent independent Regulatory
Board of Auditors (iRBA), international Standard on Quality control (iSQc) 1, engagement inspection of nexia SAB&t and all audit engagement partners involved with the ecsponent Group audit, including the designated individual auditor;
› confirmed the firm’s ongoing registration with the public company Accounting Oversight Board (pcAOB); and
› A summary and results of any legal and disciplinary proceedings that may have been concluded within the
6 ecsponent Annual Financial Statements ‘19
past seven years, instituted in terms of any legislation or by any professional body of which the audit firm and/or designated auditor are a member or regulator to whom they are accountable, including where the matter is settled by consent order or payment of a fine.
› As part of the Auditor Suitability Review, the committee met with the relevant audit partner of nexia SAB&t’s responsible for the ecsponent audit to assess the status of the review.
Based on the results of the Auditor Suitability Review and a review of the independence of nexia SAB&t and the designated audit partner, the committee is satisfied that there are no current material matters that have not been addressed by nexia SAB&t, and accordingly recommends that nexia SAB&t be re-appointed as the auditors of the company. in accordance with section 92(1) of the companies Act, t de kock will be replaced by J engelbrecht as the designated auditor and the committee recommends that J engelbrecht be appointed as the designated audit partner. the committee has satisfied itself that both nexia SAB&t and J engelbrecht are accredited in terms of the JSe listings Requirements. the Board concurred with the recommendation and has further recommended to shareholders the re-appointment of nexia SAB&t and the appointment of J engelbrecht as recorded in the notice of AGm.
in addition, the committee has recommended to the Board that in order to further improve the governance relating to the appointment of an audit firm, that such appointment be subject to a comprehensive review process every five years.
Auditor independence and feesthe committee has reviewed and assessed the independence of the external auditor and has confirmed in writing that the
criteria for independence, as set out in the rules of iRBA and international bodies, have been followed. the committee is satisfied that nexia SAB&t is independent of the Group.
the committee also reviewed and confirms that it is satisfied that the external audit firm and designated audit partner have the necessary independence, experience, qualifications and skills, and that audit and other fees were reviewed and approved.
the committee determines the nature and extent of non-audit services that the firm can provide and pre-approves all permitted non-audit assignments by the Group’s independent auditor. the external auditor did perform non-audit services to the Group during the accounting period in that it served and performed functions to the Group by acting as the reporting accountant in respect of corporate actions. All non-audit services are approved by the committee.
the committee approves the annual audit plan presented by the external auditors. the audit plan provides the committee with the necessary assurance on risk management, internal control environments and it governance.
Annual financial statementsthe committee reviewed the external audit scope, plans and findings, as well as management reports in order to determine the effectiveness of management systems and internal controls during the year. the committee continued to monitor key risks identified and their mitigation and how subsidiaries are performing to achieve the Group’s strategy.
the audit involved performing procedures to obtain audit evidence about the amounts and disclosures in the financial
Internal financial controls and systems
tHe cOmmittee ReVieWeD tHe FOllOWinG:
Sustainability issues
IT governance
Compliance governance
The quality and integrity of the integrated report
The financial statements and announcements in respect of the results
The appointment, remuneration, performance and independence of the external audit and the audit process, including the approval of non- audit services by the external auditor
The effectiveness of risk management and controls
ecsponent Annual Financial Statements ‘19 7
statements. the procedures selected depended on the auditors’ judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. in making those risk assessments, the auditors considered internal control relevant to the company’s preparation and fair presentation of the financial statements 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. the audit included evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.
the committee has reviewed and is satisfied the accounting policies and financial statements of the Group are appropriate and comply with iFRS, the JSe listings Requirements and the requirements of the companies Act.
the valuation of loans and receivables and the other financial assets were considered significant audit matters by the committee.
the audit included evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.
Committee statementAfter review and consideration of feedback received from management and the external auditors, the committee has resolved that the financial records may be relied upon as the basis for preparation of the audited consolidated annual financial statements.
the committee has considered and discussed the audited annual financial statements and associated reports with both management and the external auditors. During this process, the committee inter alia:› evaluated significant judgements and reporting decisions;› determined that the going-concern basis of reporting is
appropriate;› evaluated the material factors and risks that could impact
the annual financial report and associated reports;› evaluated the completeness of the financial and
sustainability discussion and disclosures, and is satisfied that the ecsponent Group has established appropriate financial reporting procedures and that those procedures are operating in accordance with paragraph 3.84(g)(ii) the JSe listings Requirements; and
› discussed the treatment of significant and unusual transactions with management and the external auditors.
the committee is satisfied that the expertise and experience of the financial director is appropriate to meet the responsibilities of the position. this is based on the qualifications, levels of experience, and the Board’s assessment of the financial knowledge of the financial director. the committee is also satisfied as to the appropriateness, expertise and adequacy of resources of the finance function and the experience of senior members of management responsible for the finance function.
the Group has internal controls and systems designed to provide assurance as to the reliability and integrity of the financial statements. the system of internal control is designed to manage, rather than eliminate, the risk of failure to achieve the Group’s business objectives. the committee considers that the audited annual financial statements comply in all material respects with the statutory requirements of the various laws and regulations governing disclosure and reporting of the audited annual financial statements and that the audited annual financial statements comply in all material respects with iFRS, the SAicA Financial Reporting Guides and Financial Reporting pronouncements, as well as the requirements of the companies Act and the JSe listings Requirements.
the committee has recommended to the Board that the audited annual financial statements be adopted and approved by the Board.
On behalf of the Audit and Risk committee
Keith Raynerchairman Audit & Risk committee
25 november 2019
8 ecsponent Annual Financial Statements ‘19
inDepenDent AuDitOR’S RepORt
to the Shareholders of ecsponent limited. Report on the Audit of the consolidated and Separate Financial Statements.
OpinionWe have audited the consolidated and separate financial statements of ecsponent limited and its subsidiaries (the Group), which comprise the consolidated and separate statement of financial position as at 30 June 2019, and the consolidated and separate statement of profit and loss and other comprehensive income, consolidated and separate statement of changes in equity and consolidated and separate statement of cash flows for the year then ended, and notes to the consolidated and separate financial statements, including a summary of significant accounting policies.
in our opinion, the consolidated and separate financial statements present fairly, in all material respects, the consolidated and separate financial position of the Group as at 30 June 2019, and its consolidated and separate financial performance and consolidated and separate cash flows for the year then ended in accordance with international Financial Reporting Standards and the requirements of the companies Act of South Africa.
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 consolidated and Separate Financial Statements section of our report. We are independent of the Group 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.
Key audit matters key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated and separate financial statements of the current period. these matters were addressed in the context of our audit of the consolidated and separate financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
ecsponent Annual Financial Statements ‘19 9
key AuDit mAtteRS HOW OuR AuDit ADDReSSeD tHe key AuDit mAtteR
Impairment assessment of loans and advances (Group)
loans and advances disclosed in note 6, comprise 30.6% of the total assets of the Group. these assets have been recognised in the consolidated statement of financial position as a consequence of transactions entered into by the Group.
As required by the applicable accounting standards, the directors conduct annual impairment tests to assess the recoverability of the carrying value of these assets. During the current year, the Group has adopted the expected credit loss (“ecl”) assessment in accordance with iFRS 9 for the first time, which requires the application of significant judgement and assumptions.
Accordingly, the expected credit loss assessment of these assets is considered to be a key audit matter.
We focused our testing on the assumptions and judgements applied in the ecl model of loans and advances.
Our procedures included:› Assessing adequacy of the present value of securities held
against loans advanced to customers;› using the knowledge of senior personnel and industry
specific resources to assist us in evaluating the assumptions and methodologies used by the Group;
› Assessing the financial health of customers to which loans have been advanced to determine the reasonability of the present value of future cash flows;
› Assessing stage 1 – 3 categories and probability of default;› Researching current market conditions and macro-
economic indicators for indications of financial distress;› testing forward looking assumptions of the ecl; and› Assessing reasonability of management assumptions
used the in calculation of ecl.
We considered the loans and advances disclosures to be appropriate.
Control assessment of Investment in associate – MyBucks SA Ltd (Group and Company)
the investment in myBucks SA ltd included as part of investment in Associates disclosed in note 5, comprise 36.2% of the total assets of the Group.
ecsponent obtain 39.71% of the issued share capital of mybucks SA ltd through a series of transactions entered into by the Group. Substantial judgement was applied to determine the factors influencing whether control as defined by iFRS 10 or significant influence as defined by iAS 28 had been obtained.
Accordingly, the control assessment test of the investment is considered to be a key audit matter.
in assessing whether control over myBucks has been obtained various factors had to be considered in terms of the requirements of iFRS 10.
› We obtained a technical opinion and assessed the reasonableness of the assumptions applied in determining whether control has been obtained;
› We assessed the adherence to; power; influence; and variable returns as defined in iFRS 10;
› We assessed possible voting pool arrangements and voting outcomes of meetings of shareholders during the current period and period subsequent to year-end.
We considered the assessment of control over myBucks SA ltd to be appropriately applied.
10 ecsponent Annual Financial Statements ‘19
Other informationthe directors are responsible for the other information. the other information comprises the information included in the document titled “ecsponent limited Annual Financial Statements 30 June 2019”, which includes the Directors’ Report and the company Secretary’s certificate as required by the companies Act of South Africa, the Audit and Risk committee’s Report and the integrated Report, which we obtained prior to the date of this report. Other information does not include the consolidated and separate financial statements and our auditor’s report thereon. Our opinion on the consolidated and separate financial statements does not cover the other information and we do not express an audit opinion or any form of assurance conclusion thereon. in connection with our audit of the consolidated and separate financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the consolidated and separate financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. if, based on the work we have performed on the other information obtained prior to the date of this auditor’s report, we conclude
that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.
Responsibilities of the directors for the consolidated and separate financial statementsthe directors are responsible for the preparation and fair presentation of the consolidated and separate financial statements in accordance with international Financial Reporting Standards and the requirements of the companies Act of South Africa, and for such internal control as the directors determine is necessary to enable the preparation of the consolidated and separate financial statements that are free from material misstatement, whether due to fraud or error. in preparing the consolidated and separate financial statements, the directors are responsible for assessing the Group’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 Group or to cease operations, or have no realistic alternative but to do so.
key AuDit mAtteRS HOW OuR AuDit ADDReSSeD tHe key AuDit mAtteR
Going concern (Group)
the Group made a total comprehensive loss for the year of R255 million. Furthermore, the net liability position of the Group as stated in the Statement of Financial position and note 36 as R61 million.
the above resulted in the going concern position to be considered as a key audit matter in the current year.
We focused our testing on the assumptions applied by management in their solvency and liquidity and future cash flow assessment performed.
Our procedures included:› evaluated whether the assumptions are realistic and
achievable and consistent with the external and internal environment and other matters identified in the audit;
› evaluated management’s assessment of the entity’s compliance with debt covenants;
› Assessed the reasonableness of management’s budgets and forecasts and evaluated whether future expected cash flows are within a reasonable range;
› tested the assumption applied by management as to whether the preference shares liability disclosed in the Statement of Financial position should be considered as equity for the going concern assessment;
› challenged management’s plans for future actions, and verified the reliability and relevance of data used;
› evaluated whether the use of the going concern assumption is appropriate in the preparation and presentation of the financial statements; and
› evaluated the adequacy of related disclosures in the financial statements.
Based on our work performed, we considered the solvency and liquidity assessment to be appropriate. We considered the going concern position of the Group to be appropriate.
ecsponent Annual Financial Statements ‘19 11
Auditor’s responsibilities for the audit of the consolidated and separate financial statements Our objectives are to obtain reasonable assurance about whether the consolidated and separate financial statements 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 these consolidated and separate financial statements.
As part of an audit in accordance with iSAs, we exercise professional judgement and maintain professional scepticism throughout the audit. We also:
› identify and assess the risks of material misstatement of the consolidated and separate financial statements, 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 Group’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 directors’ 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 Group’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 consolidated and separate financial statements 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 Group to cease to continue as a going concern.
› evaluate the overall presentation, structure and content of the consolidated and separate financial statements, including the disclosures, and whether the consolidated and separate financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
› Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated and separate financial statements. We are responsible for the direction, supervision and performance of the Group audit. We remain solely responsible for our audit opinion.
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.
We also provide the directors with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated with the directors, we determine those matters that were of most significance in the audit of the consolidated and separate financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.
Report on other legal and regulatory requirements in terms of the iRBA Rule published in Government Gazette number 39475 dated 4 December 2015, we report that nexia SAB&t has been the auditor of ecsponent limited for five years.
Nexia SAB&Tt.J. de kock
DirectorRegistered Auditor25 november 2019
119 Witch-Hazel Avenue, Highveld technopark, centurion
12 ecsponent Annual Financial Statements ‘19
DiRectORS’ ReSpOnSiBilitieS AnD AppROVAl
the directors are required in terms of the companies Act to maintain adequate accounting records and are responsible for the content and integrity of the consolidated financial information included in this report.
it is the directors’ responsibility to ensure that the financial statements fairly present the state of affairs of the Group as at the end of the financial period and the results of its operations and cash flows for the period then ended, in conformity with international Financial Reporting Standards.
the financial statements are prepared in accordance with international Financial Reporting Standards, the SAicA Financial Reporting Guidelines, the companies Act and the JSe’s listings Requirements and are based upon appropriate accounting policies consistently applied and supported by reasonable and prudent judgements and estimates.
the directors acknowledge that they are ultimately responsible for the system of internal financial control established by the Group and place considerable importance on maintaining a strong control environment. to enable the directors to meet these responsibilities, the Board sets standards for internal control aimed at reducing the risk of error or loss in a cost-effective manner. the standards include the proper delegation of responsibilities within a clearly defined framework, effective accounting procedures and adequate segregation of duties to ensure an acceptable level of risk.
these controls are monitored throughout the Group and all employees are required to maintain the highest ethical standards in ensuring the Group’s business is conducted in a manner that in all reasonable circumstances is above reproach. the focus of risk management in the Group is on identifying, assessing, managing and monitoring all known forms of
risk across the Group. While operating risk cannot be fully eliminated, the Group endeavours to minimise it by ensuring that appropriate infrastructure, controls, systems and ethical behaviour are applied and managed within predetermined procedures and constraints.
the directors are of the opinion, based on the information and explanations given by management that the system of internal control provides reasonable assurance that the financial records may be relied on for the preparation of the financial statements. However, any system of internal financial control can provide only reasonable, and not absolute, assurance against material misstatement or loss.
the directors have reviewed the Group’s cash flow forecast for the 12 months to 30 June 2020 and, in the light of this review and the current financial position, they are satisfied that the Group has or has access to the adequate resources to continue in operational existence for the foreseeable future.
the external auditors are responsible for independently reviewing and reporting on the Group’s financial statements. the financial statements have been examined by the Group’s external auditors and their report is presented on pages 8 - 11.
the financial statements set out on pages 28 - 141, which have been prepared on the going concern basis, were approved by the Board on 25 november 2019 and were signed on its behalf by:
Dirk van der MerweFinancial Director
Terence GregoryGroup chief executive
ecsponent Annual Financial Statements ‘19 13
cOmpAny SecRetARy’S ceRtiFicAtiOn
Lezanne du Preez-Cilliers company Secretary
in terms of Section 88(2)(e) of the companies Act, i certify that, to the best of my knowledge and belief, the company has lodged with the commissioner all such returns as are required in terms of the companies Act and that all such returns are true, correct and up to date.
Declaration by the company Secretary in respect of Section 88(2) (e) of the companies Act.
Lezanne du Preez-Cilliers company Secretary25 november 2019
14 ecsponent Annual Financial Statements ‘19
cORpORAteinFORmAtiOn
ecsponent Annual Financial Statements ‘19 15
Company secretaryLezanne du Preez-Cilliers
1st Floor, the Wedge, 43 Garsfontein RoadWaterkloof, 0145, pretoria, Gauteng, South Africa
Debt and equity sponsor and corporate advisorQuestco Proprietary Limited(Registration number 2002/005616/07)
1st Floor, yellow Wood HouseBallywoods Office park33 Ballyclare Drive, BryanstonJohannesburg, 2191
AuditorsNexia SAB&T
119 Witch-Hazel Avenue, Highveld technopark, centurion, pretoria
pO Box 10512, centurion, 0046
Computershare South Africa
Rosebank towers, 15 Biermann AveRosebank, Johannesburg, 2196
phone: 011 370 5000
BankerFirst National Bank a division of First Rand Bank Limited
1 First place, corner Simmonds and pritchard Street Johannesburg, 2001
pO Box 1153, Johannesburg, 2000
Registered address
1st Floor, the Wedge, 43 Garsfontein RoadWaterkloof, 0145, pretoria, Gauteng, South Africa
Date of incorporation: 09 July 1998place of incorporation: South Africa
16 ecsponent Annual Financial Statements ‘19
DiRectORS’ RepORt
ecsponent Annual Financial Statements ‘19 17
Rwenzori mountains national park is a ugandan national park and uneScO World Heritage Site located in the Rwenzori mountains. Almost 1,000 km² in size, the park offers great diversity. it has Africa’s third highest mountain peak and many waterfalls, lakes, and glaciers. it is noted for its botany, which has been described as some of the most beautiful in the world, ubundant bird life, butterflies and wildlife, which change according to changes in altitude.
18 ecsponent Annual Financial Statements ‘19
DiRectORS’ RepORt
the Group’s financial results for the period under review reflect the calculated and bold decisions that the Group has taken in order to position itself for future growth amidst challenging operating conditions such as a weak global economy, subdued consumer sentiment and currency volatility.
During the period, the Group continued to focus on its core business activities, building on the foundation it created through a series of rationalisation transactions in the previous periods. the Group grew its asset base by investing in businesses in niche, high growth sectors. ecsponent successfully executed significant corporate actions, with the most significant being in Frankfurt listed, fintech company myBucks. the Group’s total assets grew from R2.24 billion as at June 2018 to R3.17 billion, a 41.99% increase.
the short-term effect thereof has been a revenue contraction from R467 million in the prior 15-month period to R382 million for the 12-month review period.
An after-tax loss of R254.5 million was reported against a profit of R82 million in the prior 15-month period, with a negative net cash position of R516.7 million at year end against a positive position of R109.3 million in the prior 15-month reporting
period. earnings and headline earnings per share from continuing operations subsequently contracted to a loss of 23.66 and 12.64 cents per share respectively.
However, the Board and significant shareholders of the Group are confident that the acquisition in myBucks will be rewarding in the near term as it provides the Group with an immediate opportunity to expand its operations in other untapped markets around Africa. myBucks’ seamless financial services and products via innovative financial technology make it well-positioned for growth in Africa where most individuals don’t have access to traditional financial services, but a significant portion have access to mobile phone connections. the African banking industry is the second fastest growth sector in banking internationally and the investments provide the Group with assets within established banking licences and established infrastructure in five African countries.
three Rondavels, kruger national park, mpumalanga.
ecsponent Annual Financial Statements ‘19 19
As noted above, myBucks is a Frankfurt listed (luxembourg based) financial technology holding company. its main business differentiator is that it is a digital pan-African Banking Group that uses technology to provide financial services and products. myBucks has substantially rationalised its operations during the financial period to focus on its markets in Botswana, malawi, mozambique, uganda, Zambia and Zimbabwe, specifically investing in the banking sector. myBucks has disposed of non-core assets, aimed at improving profitability and reducing related infrastructure overheads.
myBucks’ main business offerings include banking solutions, consumer loans and insurance products.
the solutions are created with the aim of driving financial inclusion for both the unbanked and under-banked sectors of the population through innovative products and technology solutions. myBucks owns the following brands:› myBucks;› GetBucks;› GetSure; and › myBucks Banking corporation (mBc).
During the financial period ecsponent increased its exposure to myBucks after taking a significant interest which allowed ecsponent to provide strategic direction and drive the rationalisation of the myBucks operations.
the Group also announced in march 2019 a further planned investment in myBucks whereby ecsponent will convert loans owing by myBucks companies, together with predetermined assets to the aggregate value of R450 million (or euR27 829 312) into myBucks shares at a subscription price of euR1.00 per share. ecsponent’s final shareholding percentage is dependent on confirmation of the extent to which other shareholders participate in the larger recapitalisation being undertaken by myBucks.
the Group obtained a direct 34.71% interest in GetBucks microfinance Bank limited. Furthermore, the company made an additional contribution to its proportionate equity interest in the operations of myBucks Zambia to appropriately capitalise the banking operations.
the investments in myBucks and the direct investment in its subsidiaries are accounted for as an investment in associates at R1 524.1 million. At 30 June 2018 the investment in ecsponent Financial Services ltd trading as myBucks Zambia, was the only associate investment with the R236.9 million investment in myBucks disclosed as other financial assets.
Fundamental to ecsponent’s success is the portfolio of equity assets that provide platforms to unlock sustainable medium- to long-term returns. the equity business unit invests strategically in companies with significant intellectual property, which provide high barriers to entry, command sustainable margins and apply a robust business model. the Group holds investments in various sectors, including banking, financial services, asset management and a small, medium and micro enterprise (“Smme”) portfolio.
During the current financial period the Group further invested in banking and asset management operations.
eQuity HOlDinGS
BAnkinG
GROup OVeRVieWBelow is an overview of the Group’s operations for the 2019 financial period.
20 ecsponent Annual Financial Statements ‘19
12-month period ended
30 June 2019
15-month period ended
30 June 2018
%Holding
carrying/fair value
R ‘000
%Holding
carrying/fair value
R ‘000
myBucks S.A. 39.71% 1 150 563 12.10% 236 960
GetBucks microfinance Bank limited 34.89% 334 553 - % -
ecsponent Financial Services ltd trading as myBucks Zambia 25.00% 39 001 25.00% 21 500
these investments give the Group enhanced exposure to financial services and related technology, across multiple geographies and currencies which provide quantifiable value to its operations. the African banking industry is the second
fastest growth sector in banking internationally and the investments provide the Group with assets within established banking licences and established infrastructure in five African countries.
During the period, ecsponent invested in asset management capability by acquiring 70% of mHmk capital (pty) ltd (“mHmk”) which has a 49% investment in ngwedi capital Holdings (pty) ltd (“ngwedi”).
mHmk is a private equity and advisory business, the Group view this as a strategic investment as mHmk has the skills to source and evaluate a variety of private equity transactions. investing in businesses that are innovative, have high barriers to entry and growth potential is one of the strategic aims of the Group, thus to have the skills, via mHmk, to ensure that these investments meet ecsponent’s objectives, is a good fit with the Group.
ngwedi is a holding company with two wholly owned subsidiaries, ngwedi Alternative investment management (pty) ltd (“nAim”) and ngwedi investment management (pty) ltd (“nim”). Both companies have asset management licences and are managing portfolios of assets. this investment is part of ensuring that the Group’s equity investments are not concentrated in a few large equity investments, thereby reducing the concentration risk.
ASSet mAnAGement
ecsponent Annual Financial Statements ‘19 21
the Group’s credit operations provide secured credit to its commercial client base. the secured credit solutions address the demand for funding and other challenges clients face, while supporting large corporate businesses to meet their preferential procurement targets. through a combination of secured finance and procurement support these credit solutions support different business sectors, including:› emerging businesses and individuals;› Small and medium enterprises (Smes); and› large corporate businesses.
Broadly, these products include:› Sme credit, a model that provides wholesale funding to
its target market. the nature of these facilities is typically medium-term;
› enterprise development, which supports large corporate businesses in meeting their preferential procurement targets through Supplier and enterprise Development of emerging, qualifying vendors; and
› procurement and logistics services; which provides procurement support and credit terms to emerging businesses.
these credit models offer unique products, that are fully secured so that the Group never takes an unsecured position, thereby minimising risk.
the Group controls all credit operations centrally, which significantly improves both governance and consistency across the operations. in addition, the centralised procurement and logistics operations provide the critical mass required to support enterprise development in each of the territories. At the same time, it contributes to securing the Group’s interests in transactions related to the supply chain and enterprise development activities.
the demand for credit from the Sme sector remains buoyant providing the Group with a platform to unlock sustained growth within its credit operations.
the Wealth operations’ ability to deliver effective investment and other financial services products to the retail market is one of its core competencies. During the period the operations continued to diversify its financial product offering to ensure it provided clients with wealth creation solutions.
the operation increased its broker base with 88% (109 in 2018 to 205 in 2019) across its operations in South Africa and eswatini. the operations continue to expand its client base with 33% (3021 in 2018 to 4013 in 2019) in the number of clients.
cReDit
WeAltH
22 ecsponent Annual Financial Statements ‘19
Prospectsecsponent invested significantly in its equity portfolio during the year under review and in human capital expanding its operational team with quality professional people with deep skill and experience. its investment in myBucks and the corporate governance and structural changes implemented by the Group provides ecsponent with considerable scalability, especially at a time where the South African economy is expected to remain in the doldrums of low growth.
the ecsponent Group will continue to provide innovative investment products and financing solutions that will improve the rates of financial inclusion. in addition, it will continue providing innovative digital banking solutions in untapped markets and generating wealth for stakeholders in all areas of operation.
Acquisitions and disposals the Board actively considers investment opportunities that could contribute to the development of a robust and complementary financial services group, which continues to provide sustainable returns. Similarly, the Group remains committed to its focused investment strategies and following a series of transactions to further refine the Group’s business focus, the Group has disposed of several non-core assets and achieved significant asset growth.
The following acquisitions/investments were concluded during the financial period:
Transactions19 July 2018Secured, through its wholly owned subsidiary, ecsponent Botswana limited debt funding in an amount of uSD5 million on market related terms from norsad Finance ltd. the uS dollar-based funding will be deployed to expand ecsponent’s growing investment operations outside South Africa.
14 December 2018ecsponent announced on 23 may 2018 transactions which would increase its investment in myBucks to 23.6%. the acquisition of 1 145 998 myBucks shares to the value of R260 million by converting the outstanding debt of coronado trading 258 cc was approved by shareholders on 5 September 2018. Final regulatory approval being granted on 14 December 2018.
22 January 2019ecsponent treasury Services (pty) ltd, a wholly owned subsidiary of ecsponent, entered into an acquisition agreement on 26 September 2018, to acquire 100% of the issued ordinary shares of ecsponent mauritius ltd (formerly known as pink Orchid ltd), for a total consideration of R185 million.
ecsponent Annual Financial Statements ‘19 23
20 November 2019ecsponent announced on 26 march 2019 that it concluded an agreement with Frankfurt-listed fintech company myBucks which will enable ecsponent to take control of myBucks. the transaction is expected to result in an improvement in myBucks’ equity, while reducing finance cost on the ecsponent loans, which is expected to have a direct impact on the net profit of myBucks. the transaction was approved by shareholders at a general meeting on 20 november 2019.
Special resolutions Shareholders voted and approved, with the prerequisite majority, several special resolutions during the financial period. Below we provide a high-level summary of the special resolutions adopted during the financial period, refer to the appendix to the financial statements for the detailed special resolutions.
2018 Annual General MeetingDuring the annual general meeting held on 02 november 2018 shareholders approved:› Approval of the non-executive directors’ remuneration and
fees for ad hoc services rendered› General authority to enter into funding arrangements in
terms of sections 44 and 45 of the companies Act› General authority to repurchase the company’s ordinary
shares› General authority to repurchase the company’s
preference shares
Corporate actions in addition to the aforementioned transactions, the following corporate actions were implemented during the period under review. their objective was to expand the Group’s preference share product range and thereby providing additional investment options with enhanced flexibility to clients, in response to market demands.
Following Board and shareholder approval, ecsponent listed additional class A, B, D, e and G preference shares under its R5 billion preference share programme.
During the financial period under review, ecsponent also issued out additional notes under its R10 billion note programme, where investors could elect to subscribe to either Fixed Rate notes, Floating Rate notes or Zero-coupon notes.
Events after the reporting period the directors are not aware of any material event, other than the disclosure related to matters listed below, which occurred after the reporting date and up to date of this report. Recapitalisation of MyBucksthe Board announced on 26 march 2019 and on 13 September 2019 that the company had concluded agreements with myBucks setting out the terms which would enable ecsponent
to facilitate a restructure of the various loans owing to and from entities in the myBucks Group and the ecsponent Group (through the Debt Restructure).
myBucks will issue 27,829,312 (constituting 218% of myBucks issued share capital prior to the further recapitalisation planned by myBucks) for an amount of €1 per myBucks share. the parties have agreed that the subscription proceeds will be settled through off-setting against loans between the ecsponent Group and the myBucks group and through a cash top-up payment, if relevant, in order to ensure that the myBucks subscription proceeds equals €27,829,312, being R450 million at the euro/ZAR exchange Rate.
the approval and implementation of the above proposed transaction is subject to, inter alia, shareholders of the company entitled to vote passing the requisite resolution approving the additional myBucks Acquisition at a general meeting of the shareholders. the effective date of the acquisition will be the date of fulfilment of all conditions precedent.
Disposal of Ecsponent Business Creditecsponent treasury Services (pty) ltd (etS) disposed the ecsponent Business credit (pty) ltd, as a going concern, to DVn Family Office (pty) ltd effective on 23 August 2019 for an amount of R14 million.
Joint Venture agreement with Makaha Mining Cooperative Society Ltdthe Board of ecsponent announced on 5 november 2019 that ecsponent Botswana ltd, a wholly owned subsidiary of the company, has concluded an agreement with makaha mining cooperative Society ltd, (a Zimbabwean company owned by a consortium of Zimbabwean residents involved in the mining industry), in terms of which ecsponent Botswana and makaha mining will create a special purpose vehicle (“the JVc”).
the JVc’s purpose is for the exploration, development and exploitation of the existing chrome mineral claims currently owned by makaha mining. the JVc will be created as a private company limited by shares in Zimbabwe and owned 51% by eBl and 49% by makaha mining. the effective date of the Joint Venture Agreement will be 01 november 2019.
At the date of this report, the transactions remained conditional, subject to the fulfilment of the following conditions:› the JVc being incorporated in terms of the Joint Venture
Agreement;› the Reserve Bank of Zimbabwe or the Zimbabwe
investment Authority granting exchange control approval for the subscription of shares in the JVc, together with the capital commitments; and
› makaha mining registering all mining claims in the name of the JVc.
note that some of the mining claims are currently in the name of undertreasure mining consultancy (pvt) ltd but are already in the process of being transferred to be in the name of makaha mining.
24 ecsponent Annual Financial Statements ‘19
Ordinary dividendsthe company’s dividend policy is to consider an interim and a final dividend in respect of each financial period. At its discretion, the Board may consider a special dividend, where appropriate. Depending on the perceived need to retain funds for expansion or operating purposes, the Board may pass on the declaration of dividends. no dividends have been declared and no dividend is proposed.
Preference dividendsthe value of preference share dividends paid or accrued during the financial period amounted to R159.5 million.
Share capital During the current period, the number of issued ordinary shares of the company remained the same at 1 079 555 364 ordinary shares.
Borrowing powers in terms of the memorandum of incorporation of the company, the directors may exercise all the powers of the company to borrow money, as they consider appropriate, subject to the delegation of authority approved by the Board. the Board has passed a resolution to limit the Group borrowings to R500 million, excluding the liabilities related to the R5 billion preference share programme, and provided the shareholders with written notice thereof.
executiVe DiRectORS cHAnGeS DuRinG tHe RepORtinG peRiOD
Terence Gregory chief executive officer
Dirk van der Merwe Financial Director
George Manyere executive vice chairman
Appointed as non-executive vice chairman march 2017 Appointed as executive vice chairman 1 February 2019
inDepenDent nOn-executiVe DiRectORS
cHAnGeS DuRinG tHe RepORtinG peRiOD
Richard Connellanchairman
Keith Rayner
Patrick Matute
Brandon Topham Resigned 31 January 2019
Willem Oberholzer Resigned 31 July 2019
Shareholders approved at the last AGm a general authority allowing the company to enter into direct or indirect funding agreements in terms of Section 44 and 45 of the Act.
At 30 June 2019, the Group’s borrowings, excluding the preference share and note program liabilities, totalled R884.9 million (2018: 224.8 million).
consolidated financial statements and accounting policies the consolidated and company financial statements have been prepared in accordance with iFRS and in the manner required by the companies Act, the SAicA Financial Reporting Guidelines and the JSe listings Requirements. the principal accounting policies adopted in preparation of these financial statements are consistent with those of the prior period, as set out in note 1 on page 34.
King IVthe Group is committed to the principles of openness, integrity and accountability as contained in king iV. the Group has applied and explained the king iV principles as is applicable to the ecsponent Group.
the Group’s Audit and Risk committee comprises of:› keith Rayner (chair) › Richard connellan › patrick matute
the Audit and Risk committee met four times during the period under review, up to the date of the financial statements.
Visit www.ecsponentlimited.com/governance/ to view our corporate Governance statement and king iV application disclosure.
ecsponent Annual Financial Statements ‘19 25
Company Secretary lezanne du preez-cilliers remains the company Secretary for the Group.
Auditorsnexia SAB&t continued in office as auditors for the Group for the 2019 financial period.
At the Annual General meeting, the shareholders will be requested to reappoint nexia SAB&t as the independent external auditors of the Group and to confirm Johandré engelbrecht as the designated lead audit partner for the 2020 financial period.
Sponsor Questco (pty) ltd (“Questco”) remains the company’s appointed debt and equity sponsor.
Litigation statementthe Group is not involved in any claims and/or lawsuits incidental to its business which individually or in aggregate are expected to have a material adverse effect on its business or assets.
Directors’ interest in the CompanyAt 30 June 2019 the directors’ direct and indirect beneficial interests in the company amounted to 62.5% (2018: 60.4%%). the change in combined shareholding is attributable to the further investment by the majority shareholder, mHmk Group (pty) ltd (formerly known as mason Alexander (pty) ltd), a company in which George manyere holds an indirect interest.no associates of any of the directors held any shares at 30 June 2019 or at the date of approval of the consolidated financial statements.
Directors’ interest in contractsthe Group entered into an agreement announced on 26 September 2018 to acquire 100% of the issued share capital of ecsponent mauritius limited (formerly known as pink Orchid limited) in which mr G manyere (executive director) had an indirect interest. the transaction was approved by shareholders in terms of the JSe listing Requirements on 22 January 2019.
Interest in subsidiariesecsponent is the holding company of several operating subsidiaries incorporated in the consolidated Group financial statements. the relevant investments in subsidiaries, including the interest of the Group in the profits and losses of its subsidiaries for the period ended 30 June 2019, are disclosed in note 39 of the consolidated financial statements (page 113).
Holding CompanymHmk Group acquired 26 050 916 additional shares through an off-market trade on 10 December 2018. At the 2019 reporting date mHmk Group owned 56.6% of ecsponent limited.
Going concernthe Group reported a total comprehensive loss of R254.4 million for the period which resulted in the company’s total liabilities exceeding its total assets by R61.1 million at 30 June 2019. the loss materially emanates from the Group’s investment in myBucks which during the period incurred significant once off expenses as a result of a rationalisation of its operations.
the directors have evaluated the Group’s solvency and liquidity position in terms of the companies Act, 2008 and have concluded in terms of the Act’s provisions that the Group’s total assets exceeded its total liabilities by R2 223.0 million.
the directors believe that the Group has adequate financial resources to continue in operation for the foreseeable future and accordingly the condensed consolidated Financial Statements for the period ended 30 June 2019 have been prepared on a going concern basis. the directors have satisfied themselves that the Group is in a sound financial position and that it has access to enough equity and borrowing facilities to meet its foreseeable cash requirements. the directors are not aware of any new material changes that may adversely affect the Group’s ability to continue as a going concern. the directors are also not aware of any material non-compliance with statutory or regulatory requirements or of any pending changes to legislation which may affect the Group.
Review of results and financial positionthe consolidated and company financial statements detailed on pages 28 - 141 provide adequate disclosure of the financial results and position for the financial period ended 30 June 2019.
Date of authorisation for issue of financial statementthe consolidated financial statements have been authorised for issue by the directors on 25 november 2019. no authority was given to anyone to amend the financial statements after the date of issue.
26 ecsponent Annual Financial Statements ‘19
cOnSOliDAteD FinAnciAl StAtementS
ecsponent Annual Financial Statements ‘19 27
Consolidated financial statements of Ecsponent Limited and its subsidiaries the company changed its financial year-end during the comparative period ending 30 June 2018, changing the reporting date from 31 march to 30 June. the change resulted in the 30 June 2018 financial period being extended to a 15-month period that commenced on 1 April 2017. the impact of the change is that the current 12-month period ended 30 June 2019 is compared to the 15-month prior period.
28 ecsponent Annual Financial Statements ‘19
notes As at30 June 2019
R’000
As at30 June 2018
R’000
ASSetS
Non-current assets
loans and advances 6 139 763 803 599
Other financial assets 7 415 669 537 232
investments in associates 5 1 533 896 21 500
intangible assets and goodwill 20 5 704 4 066
property, plant and equipment 21 4 953 4 005
Deferred tax asset 19 138 586 49 635
trade and other receivables 8 17 804 -
2 256 375 1 420 037
Current assets
loans and advances 6 833 282 434 753
Other financial assets 7 792 294 956
cash and cash equivalents 9 37 658 45 086
trade and other receivables 8 39 124 37 878
current tax receivable 7 130 2 440
inventories 22 223 654
918 209 815 767
Total assets 3 174 584 2 235 804
cOnSOliDAteD StAtement OF FinAnciAl pOSitiOnAS At 30 June 2019
ecsponent Annual Financial Statements ‘19 29
notes As at30 June 2019
R’000
As at30 June 2018
R’000
eQuity
Share capital 14 145 170 145 170
Reserves 6 132 (2 957)
(Accumulated loss)/Retained income (213 202) 50 926
Equity attributable to equity holders of parent (61 900) 193 139
non-controlling interest 18 842 362
Total equity (61 058) 193 501
liABilitieS
Non-current liabilities
preference shares 10 1 954 610 1 694 362
note programme 16 64 659 -
Other financial liabilities 12 368 107 150 523
Finance lease liabilities 166 879
trade and other payables 13 - 1 616
Deferred tax liability 19 185 027 93 831
2 572 569 1 941 211
Current liabilities
preference shares 10 330 747 7 613
note programme 16 736 -
Other financial liabilities 12 309 272 72 432
current tax payable 2 368 138
Finance lease liabilities 35 158
trade and other payables 13 19 112 19 970
Bank overdraft 9 803 781
663 073 101 092
Total liabilities 3 235 642 2 042 303
Total equity and liabilities 3 174 584 2 235 804
30 ecsponent Annual Financial Statements ‘19
cOnSOliDAteD StAtement OF pROFit AnD lOSS AnD OtHeR cOmpReHenSiVe incOmeFOR tHe peRiOD enDeD 30 June 2019
notes 12-month period ended
30 June 2019R’000
15-month period ended
30 June 2018R’000
Continuing operations
Revenue 25 381 909 466 984
cost of sales (133 687) (83 637)
Other income 27 89 758 52 162
Operating expenses 29 (263 680) (175 838)
Fair value adjustments 26 26 229 153 951
loss from equity accounted investment (3 581) (1 173)
Operating profit 29 96 948 412 449
Finance costs 28 (346 681) (260 585)
(Loss)/profit before taxation (249 733) 151 864
taxation 31 (4 796) (69 812)
(Loss)/profit from continuing operations for the period (254 529) 82 052
Discontinued operations
profit from discontinued operations for the period - 15 311
(Loss)/profit for the period (254 529) 97 363
OtHeR cOmpReHenSiVe incOme
items that may be reclassified to profit or loss:
exchange differences on translating foreign operations 9 089 (2 547)
Other comprehensive profit/(loss) for the period 9 089 (2 547)
Total comprehensive (loss)/income for the period (245 440) 94 816
ecsponent Annual Financial Statements ‘19 31
notes 12-month period ended
30 June 2019R’000
15-month period ended
30 June 2018R’000
pROFit AnD lOSS AnD OtHeR cOmpReHenSiVe incOme AttRiButABle tO:
Owners of the parent:
(loss)/profit from continuing operations (255 376) 86 869
profit from discontinued operations - 15 311
(255 376) 102 180
Non-controlling interest:
profit/(loss) from continuing operations 847 (4 756)
loss from discontinued operations - (61)
847 (4 817)
Total (loss)/profit attributable to:
Owners of the parent (255 376) 102 180
non-controlling interest 18 847 (4 817)
(254 529) 97 363
Total comprehensive (loss)/income attributable to:
Owners of the parent (246 287) 99 623
non-controlling interest 847 (4 807)
(245 440) 94 816
eARninGS peR SHARe - BASic AnD DiluteD
Basic and diluted earnings per share (cents) attributable to equity holders of the parent:
› from continuing operation (23,656) 8,047
› from discontinued operation - 1.418
› from continuing and discontinued operations 17 (23,656) 9,465
32 ecsponent Annual Financial Statements ‘19
cOnSOliDAteD StAtement OF cHAnGeS in eQuityFOR tHe peRiOD enDeD 30 June 2019
not
esS
har
e ca
pit
alFo
reig
n
curr
ency
tr
ansl
atio
n
rese
rve
Tota
l res
erve
sR
etai
ned
p
rofi
t/(a
ccu
mu
late
d
loss
)
Tota
l at
trib
uta
ble
to
ow
ner
s o
f th
e p
aren
t
No
n-
con
tro
llin
g
inte
rest
Tota
l eq
uit
y
R’0
00
R’0
00
R’0
00
R’0
00
R’0
00
R’0
00
R’0
00
Bal
ance
at
31
Mar
ch 2
017
14
5 1
69
(39
8)
(39
8)
(37
785
)10
6 9
86
(11
42
9)
95
55
7
pro
fit fo
r th
e p
erio
d
--
-10
2 1
80
102
18
0(4
817
)9
7 3
63
Oth
er c
omp
reh
ensi
ve in
com
e
-(2
559
)(2
559
)-
(2 5
59)
12(2
547
)
issu
e of
sh
ares
14
1-
--
1-
1
Dis
pos
al o
f su
bsi
dia
ries
-
--
(13
46
9)
(13
46
9)
16 5
96
3 1
27
Bal
ance
at
30
Ju
ne
20
18
145
170
(2 9
57)
(2 9
57)
50
92
619
3 1
39
36
219
3 5
01
not
es
14
18
Bal
ance
at
30
Ju
ne
20
18
145
170
(2 9
57)
(2 9
57)
50
92
619
3 1
39
36
219
3 5
01
loss
for
the
per
iod
-
--
(25
5 3
76)
(25
5 3
76)
847
(25
4 5
29
)
Oth
er c
omp
reh
ensi
ve in
com
e
-9
08
99
08
9-
9 0
89
-9
08
9
iFR
S 9
ad
just
men
t
--
-(8
75
2)
(8 7
52
)-
(8 7
52
)
Dis
pos
al o
f su
bsi
dia
ries
--
--
-1
1
Bu
sin
ess
com
bin
atio
n
--
--
-(3
68
)(3
68
)
Bal
ance
at
30
Ju
ne
20
19
145
170
6 1
32
6 1
32
(213
20
2)
(61
90
0)
84
2(6
1 0
58
)
not
es
14
18
ecsponent Annual Financial Statements ‘19 33
cOnSOliDAteD StAtement OF cASH FlOWS FOR tHe peRiOD enDeD 30 June 2019
notes 12-month period ended
30 June 2019R’000
15-month period ended
30 June 2018R’000
inteReSt incOme DiSBuRSeD
cash (utilised)/generated by operations 33 (244 149) 343 682
Dividends received 5 500 3 000
Finance costs paid (264 433) (203 723)
taxation paid 32 (13 611) (33 647)
Net cash from operating activities (516 693) 109 312
cASH FlOW FROm inVeStinG ActiVitieS
purchase of property, plant and equipment 21 (3 026) (1 405)
Sale of property plant and equipment 21 1 437 -
investment in intangible assets 20 (109) (80)
cash and cash equivalents disposed of - (6 754)
proceeds on disposal of associate 5 - 10 000
Acquisition of other financial assets (25 536) (327 801)
proceeds from financial assets 12 623 -
Repayment of loans and advances 415 084 303 081
Disbursement of loans and advances (290 933) (921 003)
cash acquired during business combinations 113 -
Net cash from investing activities 20 109 653 (943 962)
cASH FlOW FROm FinAncinG ActiVitieS
proceeds on preference share issues 465 228 685 667
preference shares redeemed (4 025) -
proceeds on note issue 67 078 -
Other financial liabilities raised 197 529 184 287
Repayment of other financial liabilities (334 026) (13 452)
Finance lease payments (835) (1 141)
Net cash from financing activities 390 949 855 361
Total cash movement for the period (16 091) 20 711
effect of exchange rate movement on cash balances 8 641 (2 886)
cash at the beginning of the period 44 305 26 480
Total cash at the end of the period 9 36 855 44 305
34 ecsponent Annual Financial Statements ‘19
1. AccOuntinG pOlicieS
the principal accounting policies adopted in the preparation of these consolidated and separate financial statements are set out below.
Basis of preparationthe consolidated and separate financial statements have been prepared in accordance with international Financial Reporting Standards (‘iFRS’) as issued by the international Accounting Standards Board (‘iASB’) and iFRS interpretation committee, the Financial Reporting Guides as issued by the South African institute of chartered Accountants’ (‘SAicA’) Accounting practices committee, Financial pronouncements as issued by the Financial Reporting Standards council, the JSe listings Requirements and the requirements of the companies Act of South Africa 2008, as amended.
the financial statements have been prepared on the historical cost basis, except for the measurement of certain financial instruments at fair value and incorporate the principal accounting policies set out below.
the financial statements are presented in South African Rand.
the Group has, in the preparation of these consolidated and Separate financial statement, consistently applied the accounting policies with those applied in the previous financial period, unless otherwise stated.
Segmental reportingOperating segments are reported in a manner consistent with the internal reporting.
Consolidations Investment in subsidiaries and consolidation Company annual financial statements:in the company’s separate annual financial statements, investments in subsidiaries are carried at cost less any accumulated impairment.
Basis of consolidation:the consolidated financial statements incorporate the annual financial statements of the company and all investees that are controlled by the company (“Group”).
the Group has control of an investee when it has:› power over the investee; › it is exposed to or has rights to variable returns from
involvement with the investee; and › it has the ability to use its power over the investee to affect
the amount of the investor’s returns.
the Group reassesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control listed above, see note 5 investment in associates.
When the Group has less than a majority of the voting rights of an investee, it considers all relevant facts and circumstances in assessing whether or not the Group’s voting rights in an investee are sufficient to give it power.
Consolidation proceduresthe results of subsidiaries are included in the consolidated financial statements from the effective date of acquisition and/or control to the effective date of disposal. Adjustments are made when necessary to the financial statements of subsidiaries to bring their accounting policies in line with those of the Group. All intragroup assets and liabilities, equity, income, expenses and cash flows relating to transactions between members of the Group are eliminated in full on consolidation.
non-controlling interests in the net assets of consolidated subsidiaries are identified and recognised separately from the Group’s interest therein, and are recognised within equity. losses of subsidiaries attributable to non-controlling interests are allocated to the non-controlling interest even if this results in a debit balance being recognised for the non-controlling interest.
Transactions that result in changes in ownership levels – control is lostWhen the Group loses control of a subsidiary, a gain or loss is recognised in profit or loss and is calculated as the difference between:(i) the aggregate of the fair value of the consideration
received and the fair value of any retained interest; and(ii) the previous carrying amount of the assets (including
goodwill), and liabilities of the subsidiary and any non-controlling interests.
When a change in the Group’s ownership interest in a subsidiary results in a loss of control over the subsidiary, the assets and liabilities of the subsidiary, including any goodwill, are derecognised. Amounts recognised in other comprehensive income in respect of that entity are also reclassified to profit or loss or transferred directly to retained earnings, if required by a specific standard.
ecsponent Annual Financial Statements ‘19 35
Any retained interest in the entity is remeasured at fair value. the fair value of any investment retained in the former subsidiary, at the date when control is lost, is regarded as the fair value on initial recognition for subsequent accounting treatment under iAS 28 investments in Associates. the difference between the carrying amount of the retained investment at the date when control is lost, and its fair value is recognised in profit or loss.
Business combinationsthe Group applies the acquisition method to account for business combinations. the consideration transferred for the acquisition of a subsidiary is the fair values of the assets transferred, the liabilities incurred to the former owners of the acquiree and the equity interests issued by the Group. the consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement. identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date.
the Group recognises any non-controlling interest in the acquiree on an acquisition-by-acquisition basis, either at fair value or at the non-controlling interest’s proportionate share of the recognised amounts of acquiree’s identifiable net assets.
Investment in associatesAssociates are those entities over which the Group has significant influence.
in the separate company financial statements, investments in associates are recognised initially at cost. Subsequently, the investments are measured at cost less any accumulated impairment, if any.
For equity accounted investments, the Group’s investments in associates are designated at initial recognition at either the equity method of accounting or at fair value through profit and loss depending on the nature of the investment held.
the consolidated financial statements include the Group’s share of the profit or loss and other comprehensive income, after adjustments to align the accounting policies with those of the Group, from the date that significant influence commences until the date that significant influence ceases.
On acquisition of the investment in the associate, any excess of the cost of the investment over the Group’s share of the net fair value of the identifiable assets and liabilities of the investee is recognised as goodwill, which is included within the carrying amount of the investment, see note 5 investment in associates.
When a Group entity transacts with an associate of the Group, profits and losses resulting from the transactions with the associate are recognised in the Group’s consolidated financial statements only to the extent of interests in the associate that are not related to the Group.
Impairment of investment in associatesthe entire carrying amount of the investment in an associate (including goodwill) is tested for impairment in accordance with iAS 36 - impairment of Assets, as a single asset or as a cash-generating unit by comparing its recoverable amount (higher of value in use and fair value less costs of disposal) with its carrying amount. Any impairment loss recognised forms part of the carrying amount of the investment. Any reversal of that impairment loss is recognised in accordance with iAS 36 to the extent that the recoverable amount of the investment subsequently increases.
investments in associates which are recognised at fair value through profit and loss is not tested for impairment
Financial instrumentsInitial recognition and measurementFinancial instruments are recognised initially when the Group becomes a party to the contractual provisions of the instruments. the Group classifies financial instruments, or their component parts, on initial recognition as a financial asset, a financial liability or an equity instrument in accordance with the substance of the contractual arrangement.
transaction costs for financial instruments that are not classified as at fair value through profit or loss, are included in the initial measurement of the instrument. transaction costs on financial instruments at fair value through profit or loss are recognised immediately in profit or loss.
When the transaction price of the instrument differs from the fair value at origination and the fair value is based on a valuation technique using only inputs observable in market transactions, the Group recognises the difference between the transaction price and fair value in net trading income. in those cases where fair value is based on models for which some of the inputs are not observable, the difference between the transaction price and the fair value is deferred and is only recognised in profit or loss when the inputs become observable, or when the instrument is derecognised.
Subsequent measurementFinancial assets at amortised costthese are subsequently measured at amortised cost. the amortised cost is the amount recognised on the asset initially, minus principal repayments, plus cumulative amortisation (interest) using the effective interest method of any difference between the initial amount and the maturity amount, adjusted for any loss allowance.
Financial assets at fair value through profit and lossthese are subsequently measured at fair value. Fair value gains or losses recognised on investments at fair value through profit or loss are included in operating gains (losses).
Accounting policies (continued)
36 ecsponent Annual Financial Statements ‘19
Expected Credit Loss (IFRS 9)the Group recognises a loss allowance for expected credit losses on all financial assets measured at amortised cost. the amount of expected credit losses is updated at each reporting date to reflect changes in credit risk since initial recognition of the respective financial asset.
Loans and advancesthe Group measures the loss allowance at an amount equal to lifetime expected credit losses (lifetime ecl) when there has been a significant increase in credit risk since initial recognition. if the credit risk on a financial asset has not increased significantly since initial recognition, then the loss allowance for that financial asset is measured at 12 month expected credit losses (12-month ecl).
lifetime ecl represents the expected credit losses that will result from all possible default events over the expected life of a financial asset. in contrast, 12-month ecl represents the portion of lifetime ecl that is expected to result from default events on a financial asset that are possible within 12 months after the reporting date.
in order to assess whether to apply lifetime ecl or 12 month ecl, in other words, whether or not there has been a significant increase in credit risk since initial recognition, the company considers whether there has been a significant increase in the risk of a default occurring since initial recognition rather than at evidence of a financial asset being credit impaired at the reporting date or of an actual default occurring.
Trade and other receivablesthe Group recognises a loss allowance for expected credit losses on trade and other receivables, excluding VAt and prepayments. the amount of expected credit losses is updated at each reporting date.
the Group measures the loss allowance for trade and other receivables at an amount equal to lifetime expected credit losses (lifetime ecl), which represents the expected credit losses that will result from all possible default events over the expected life of the receivable.
measurement and recognition of expected credit losses for trade and other receivables are recognised based on the simplified approach permitted by iFRS 9, which requires expected lifetime losses to be recognised from initial recognition of the receivables.
Financial liabilities at amortised costthese are subsequently measured at amortised cost using the effective interest method.
ClassificationFinancial instruments held by the Group are classified in accordance with the provisions of iFRS 9 Financial instruments.
the classification, which have been adopted by the Group, is as follows:
Accounting policies (continued)
Financial instrument Classification 2019 (IFRS 9) Classification 2018 (IAS 39)
FinAnciAl ASSetS
loans and advances At amortised cost At amortised cost
Other financial assets (Bonds) At amortised cost At amortised cost
Other financial assets(equities and derivatives)
Fair value through profit and loss (FVpl) Fair value through profit and loss (FVpl)
loans to Group companies At amortised cost At amortised cost
trade and other receivables At amortised cost At amortised cost
cash and cash equivalents At amortised cost At amortised cost
FinAnciAl liABilitieS
preference shares At amortised cost At amortised cost
note programme At amortised cost At amortised cost
loans from Group companies At amortised cost At amortised cost
Other financial liabilities At amortised cost At amortised cost
trade and other payables At amortised cost At amortised cost
Bank overdraft At amortised cost At amortised cost
ecsponent Annual Financial Statements ‘19 37
Accounting policies (continued)
Write off policythe Group writes off a financial asset when there is information indicating that the counterparty is in severe financial difficulty and there is no realistic prospect of recovery, e.g. when the counterparty has been placed under liquidation or has entered into bankruptcy proceedings. Financial assets written off may still be subject to enforcement activities under the company recovery procedures, taking into account legal advice where appropriate. Any recoveries made are recognised in profit or loss.
Fair valuesDetermination of fair valuein order to show how fair values have been derived, financial assets are classified based on a hierarchy of valuation techniques, as summarised below.
Level 1 financial instruments those where the inputs used in the valuation are unadjusted quoted prices from active markets for identical assets or liabilities that the Group has access to at the measurement date.
the Group considers markets as active only if there are enough trading activities with regards to the volume and liquidity of the identical assets or liabilities and when there are binding and exercisable price quotes available on the balance sheet date.
Level 2 financial instrumentsthose where the inputs that are used for valuation and are significant, are derived from directly or indirectly observable market data available over the entire period of the instrument’s life. Such inputs include quoted prices for similar assets or liabilities in active markets, quoted prices for identical instruments in inactive markets and observable inputs other than quoted prices such as interest rates and yield curves, implied volatilities, and credit spreads.
in addition, adjustments may be required for the condition or location of the asset or the extent to which it relates to items that are comparable to the valued instrument. However, if such adjustments are based on unobservable inputs which are significant to the entire measurement, the Group will classify the instruments as level 3.
Level 3 financial instrumentsthose that include one or more unobservable input that is significant to the measurement as whole. the Group uses widely recognised valuation models for determining the fair value of financial instruments.
the Group evaluates the hierarchy at each reporting period on an instrument-by-instrument basis and reclassifies instruments when necessary, based on the facts at the end of the reporting period.
DerecognitionFinancial assetsthe Group derecognises a financial asset only when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another party. if the Group neither transfers nor retains substantially all the risks and rewards of ownership and continues to control the transferred asset, the Group recognises its retained interest in the asset and an associated liability for amounts it may have to pay. if the Group retains substantially all the risks and rewards of ownership of a transferred financial asset, the Group continues to recognise the financial asset and recognises a collateralised borrowing for the proceeds received.
On derecognition of a financial asset in its entirety, the difference between the asset’s carrying amount and the sum of the consideration received and receivable and the cumulative gain or loss that had been recognised in other comprehensive income and accumulated in equity, are recognised in profit or loss.
Financial liabilitiesthe Group derecognises financial liabilities when, and only when, the Group obligations are discharged, cancelled or they expire. the difference between the carrying amount of the financial liability derecognised and the consideration paid and payable, including any non-cash assets transferred or liabilities assumed, is recognised in profit or loss.
Share capital and equityOrdinary shares are classified as equity. mandatorily redeemable preference shares with stated coupons are classified as liabilities.
Any incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds.
Financial instruments: IAS 39 comparativesImpairment of financial assetsAt each reporting date the Group assesses all financial assets measured at amortised cost to determine whether there is objective evidence of impairment, for example significant financial difficulties of the debtor, probability that the debtor will enter insolvency and default on payments, increase in the number of delayed payments in the portfolio past the average credit period of 90 days, as well as observable changes in national or local economic conditions that correlate with default on receivables.
38 ecsponent Annual Financial Statements ‘19
Accounting policies (continued)
Significant financial assets are assessed individually. those where there is no objective evidence of impairment are assessed for impairment again but on a collective basis.impairment losses are recognised in profit or loss.
the amount of the impairment loss recognised is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the financial asset’s original effective interest rate.
the carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of trade receivables, where the carrying amount is reduced through the use of an allowance account.
Where financial assets are impaired through the use of an allowance account, the amount of the loss is recognised in profit or loss within operating expenses. When a trade receivable is considered uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against the allowance account. changes in the carrying amount of the allowance account are recognised in profit or loss.
impairment losses are reversed when an increase in the financial asset’s recoverable amount can be related objectively to an event occurring after the impairment was recognised, subject to the restriction that the carrying amount of the financial asset at the date that the impairment is reversed will not exceed what the carrying amount would have been had the impairment not been recognised. Reversals of impairment losses are recognised in profit or loss.
TaxCurrent taxtaxable income differs from ‘profit before tax’ as reported in the consolidated income statement due to items of income or expense that are taxable or deductible in different periods and items that are never taxable or deductible.
current tax for current and prior periods is, to the extent unpaid, recognised as a liability. if the amount already paid in respect of current and prior periods exceeds the amount due for those periods, the excess is recognised as an asset.
current tax liabilities or, where applicable assets for the current and prior periods are measured at the amount expected to be paid to or recovered from the tax authorities, using the tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period.
Deferred taxDeferred tax is recognised for all temporary differences, except to the extent that the deferred tax arises from the initial recognition of an asset or liability in a transaction which at the time of the transaction, affects neither accounting profit nor taxable income or tax loss and is not part of a business combination. Further to this deferred tax is not recognised on
the initial recognition of goodwill and a deferred tax asset is only recognised to the extent that it is probable that taxable profit will be available against which the deductible temporary difference can be utilised.
Deferred tax is not recognised on temporary differences associated with investments in subsidiaries and associates, where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future.
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 end of the reporting period.
the carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.
GoodwillGoodwill arises on the acquisition of subsidiaries and represents the excess of the consideration transferred, amount of any non-controlling interest in the acquired entity, and acquisition-date fair value of any previous equity interest in the acquired entity over the fair value of the net identifiable assets, liabilities and contingent liabilities of the acquiree.
Goodwill is not amortised but is tested at least annually for impairment, therefore carried at cost less accumulated impairment losses. For the purposes of impairment testing, goodwill is allocated to each of the Group’s cash-generating units (or Groups of cash-generating units) that are expected to benefit from the synergies of the combination.
A cash-Generating unit (cGu) is defined as the smallest identifiable Group of assets that generates cash inflows that are largely independent of the cash inflows from other assets or Groups of assets. A cGu to which goodwill has been allocated is tested for impairment annually, or more frequently when there is an indication that the unit may be impaired. if the recoverable amount of the cash-generating unit is less than its carrying amount, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro rata based on the carrying amount of each asset in the unit. Any impairment loss for goodwill is recognised directly in profit or loss. On disposal of the relevant cash-generating unit, the attributable amount of goodwill is included in the determination of the profit or loss on disposal.
Goodwill arising on the acquisition of foreign entities is considered an asset of the foreign entity. in such cases the goodwill is translated to Rand at the end of each reporting period with the adjustment recognised in equity through to other comprehensive income.
ecsponent Annual Financial Statements ‘19 39
Accounting policies (continued)
Intangible assets An intangible asset is recognised when:› it is probable that the expected future economic benefits
that are attributable to the asset will flow to the entity; and› the cost of the asset can be measured reliably.
intangible assets are initially recognised at cost.
intangible assets with finite useful lives that are acquired separately are carried at cost less accumulated amortisation and accumulated impairment losses. Amortisation is recognised on a straight-line basis over their estimated useful lives. the estimated useful life and amortisation method are reviewed at the end of each reporting period, with the effect of any changes in estimate being accounted for as a change in accounting estimate.
the useful lives are as follows:
item AVeRAGe uSeFul liFe
computer software three to five years
Impairment of intangible assetsFor intangible assets with a finite life, when indicators of impairment have been identified, the Group reviews the carrying amounts of its intangible assets to determine whether there is any indication of impairment. When it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash- generating unit to which the asset belongs. When a reasonable and consistent basis of allocation can be identified, corporate assets are also allocated to individual cash-generating units, or otherwise they are allocated to the smallest Group of cash-generating units for which a reasonable and consistent allocation basis can be identified.
Derecognition of intangible assetsAn intangible asset is derecognised on disposal, or when no future economic benefits are expected from use or disposal. Gains or losses arising from derecognition of an intangible asset, measured as the difference between the net disposal proceeds and the carrying amount of the asset, are recognised in profit or loss when the asset is derecognised.
Property, plant and equipment property, plant and equipment are initially measured at cost. the cost of an item of property and equipment is recognised as an asset 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.
property, plant and equipment are tangible assets which the Group holds for its own use and which are expected to be used for more than one year. cost includes all of the expenditure which is directly attributable to the acquisition or construction of the asset.
property, plant and equipment is subsequently stated at cost less accumulated depreciation and any accumulated impairment losses, except for land which is stated at cost less any accumulated impairment losses.
Depreciation of an asset commences when the asset is available for use as intended by management. Depreciation is charged to write off the asset’s carrying amount over its estimated useful life to its estimated residual value, using a method that best reflects the pattern in which the asset’s economic benefits are consumed by the Group. All assets are depreciated over a straight-line basis over the estimated useful life. leased assets are depreciated in a consistent manner over the shorter of their expected useful lives and the lease term.Depreciation is not charged to an asset if its estimated residual value exceeds or is equal to its carrying amount. Depreciation of an asset ceases at the earlier of the date that the asset is classified as held for sale or derecognised.
the residual value, useful life and depreciation method of each asset are reviewed at the end of each reporting year. if the expectations differ from previous estimates, the change is accounted for prospectively as a change in accounting estimate. each part of an item of property and equipment with a cost that is significant in relation to the total cost of the item is depreciated separately.
impairment tests are performed on property and equipment when there is an indicator that they may be impaired. When the carrying amount of an item of property and equipment is assessed to be higher than the estimated recoverable amount, an impairment loss is recognised immediately in profit or loss to bring the carrying amount in line with the recoverable amount.
An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected from its continued use or disposal. Any gain or loss arising from the derecognition of an item of property and equipment, determined as the difference between the net disposal proceeds, if any, and the carrying amount of the item, is included in profit or loss when the item is derecognised.
the depreciation and useful lives of items of property, plant and equipment have been assessed as follows:
40 ecsponent Annual Financial Statements ‘19
Accounting policies (continued)
item DepReciAtiOn metHOD AVeRAGe uSeFul liFe
plant and machinery Straight line three to eight years
Furniture and fixtures Straight line Five to seven years
motor vehicles Straight line Five years
Office equipment Straight line Five years
it equipment Straight line three to five years
leasehold improvements Straight line/lease period One to five years
Inventoriesinventories are measured at the lower of cost and net realisable value.
the cost of inventories is assigned using the first- in, first-out (FiFO) formula. the same cost formula is used for all inventories with a similar nature and use to the Group.
When inventories are sold, the carrying amounts of those inventories are 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, are recognised as a reduction in the amount of inventories recognised as an expense in the period in which the reversal occurs.
Revenue (2019: IFRS 15)the Group’s revenue consists of:1. interest revenue2. investment revenue
i. interestii. Dividends
3. Vendor deals 4. Services rendered for administration, origination and
management5. Sale of debtor’s book
Revenue recognitionInterest revenueinterest income earned on trading advances is recognised as revenue, on a time apportioned method taking into account the effective yield on assets.
Investment revenueinterestinterest income earned on investment advances is recognised as revenue, on a time apportioned method taking into accountthe effective yield on assets. Other interest is recognised, in profit or loss, using the eiR method.
DividendsDividends are recognised, in profit or loss, when the company’s right to receive payment has been established.
Vendor dealsVendor deals relate to procurement funding transactions. Revenue from vendor deals is recognised at the point in time where services and other performance obligations have been delivered or concluded as per the agreement. the performance obligations, as well as the timing of their satisfaction, are identified, and determined, at the inception of the contract. the Group’s revenue contracts do not typically include multiple performance obligations.
Services rendered for administration, origination and management the Group earns income from a diverse range of financial services it provides to its customers. Revenue from providing services is recognised in the accounting period in which the services are rendered. For fixed-price contracts, revenue is recognised based on the actual service provided to the end of the reporting period as a proportion of the total services to be provided, because the customer receives and uses the benefits simultaneously. the performance obligations, as well as the timing of their satisfaction, are identified, and determined, at the inception of the contract.
the Group’s revenue contracts do not typically include multiple performance obligations.
Sale of debtors’ bookRevenue from this sale is recognised at the point in time of conclusion of the agreement. the performance obligations, as well as the timing of their satisfaction, are identified, and determined, at the inception of the contract. the Group’s revenue contracts do not typically include multiple performance obligations.
Short-term employee benefitsthe costs of short-term employee benefits are recognised in the period in which the service is rendered and are not discounted. the cost of short-term employee benefits, (those payable within 12 months after the service is rendered, such as paid vacation leave, sick leave and bonuses), are recognised as an expense in the consolidated statement of comprehensive income, in the period in which the service is rendered and are not discounted.
ecsponent Annual Financial Statements ‘19 41
Accounting policies (continued)
Foreign currencies Functional and presentation currency the consolidated financial statements are presented in Rand which is the Group’s functional and presentation currency. items included in the financial statements of each entity within the Group are measured using the currency of the primary economic environment in which the entity operates (functional currency).
Foreign currency transactionsA foreign currency transaction is recorded, on initial recognition in the functional currency, by converting it using the spot exchange rate between the functional currency and the foreign currency at the date of the transaction.
At the end of the reporting period:› foreign currency monetary items are translated using the
closing rate;› non-monetary items that are measured in terms of
historical cost in a foreign currency are translated using the exchange rate at the date of the transaction; and
› non-monetary items that are measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined.
exchange differences arising on the settlement of monetary items or on translating monetary items at rates different from those at which they were translated on initial recognition during the period or in previous financial statements, are recognised in profit or loss in the period in which they arise.
When a gain or loss on a non-monetary item is recognised in other comprehensive income and accumulated in equity, any exchange component of that gain or loss is recognised in other comprehensive income and accumulated in equity. When a gain or loss on a non-monetary item is recognised in profit or loss, any exchange component of that gain or loss is recognised in profit or loss.
cash flows arising from transactions in a foreign currency are recorded in the functional currency by applying to the foreign currency amount the exchange rate between the functional currency and the foreign currency at the date of the cash flow.
Investments in foreign subsidiaries the results and financial position of a foreign operation are translated into Rand using the following procedures:› assets and liabilities for each statement of financial
position presented are translated at the closing rate at the date of that statement of financial position;
› income and expenses for each item of profit or loss are translated at exchange rates at the dates of the transactions; and
› all resulting exchange differences are recognised in other comprehensive income and accumulated as a separate component of equity.
exchange differences arising on a monetary item that forms part of a net investment in a foreign operation are initially recognised in other comprehensive income and accumulated in the foreign currency translation reserve. Any goodwill arising on the acquisition of a foreign operation and any fair value adjustments to the carrying amounts of assets and liabilities arising on the acquisition of that foreign operation are treated as assets and liabilities of the foreign operation. the cash flows of a foreign subsidiary are translated at the exchange rates between the functional currency and the foreign currency at the dates of the cash flows.
On the disposal of a foreign operation all of the exchange differences accumulated in equity in respect of that operation attributable to the owners of the company are reclassified to profit or loss.
Borrowing costsBorrowing costs are recognised as an expense in the period in which they are incurred.
Earnings per sharethe Group presents basic earnings per share (epS) data for its ordinary shares. Basic epS is calculated by dividing the profit or loss attributable to ordinary shareholders of the company by the weighted average number of ordinary shares outstanding during the period, adjusted for own shares held.
in addition, the Group presents headline earnings per share (HepS) data for its ordinary shares. Heps is calculated by dividing the headline earnings attributable to ordinary shareholders of the company by the weighted average number of ordinary shares outstanding during the period.
42 ecsponent Annual Financial Statements ‘19
notes to the consolidated financial statements for the period ended 30 June 2019 (continued)
the financial statements have been prepared in accordance with international Financial Reporting Standards on a basis consistent with the prior period except for the adoption of the following new or revised standards.
Application of IFRS 9 Financial InstrumentsWith the adoption of iFRS 9 - Financial instruments (“iFRS 9”) from 1 July 2018, the start of the current reporting period, the Group’s accounting policies were adjusted to comply with the standard. iFRS 9 replaces the provisions of iAS 39 Financial instruments: Recognition and measurement (“iAS 39”) that relate to the recognition, classification and measurement
of financial assets and financial liabilities, derecognition of financial instruments, impairment of financial assets and hedge accounting. iFRS 9 introduces an expected credit loss model replacing the incurred loss impairment model contained in iAS 39 for financial periods beginning on or after 1 January 2018. iFRS 9 adoption occurs without the need to restate comparative information, as allowed in terms of the standard.
the following table show the adjustments recognised for each individual line item, these adjustments are explained in more detail below.
Extract of the Statement of Financial Position
30 June 2018As originally presented
R’000
IFRS 9Adjustment
R’000
1 July 2018Amended opening
balanceR’000
ASSetS
loans and advances 1 238 352 (12 116) 1 226 236
Deferred tax asset 49 635 3 364 52 999
Total assets 2 235 804 (8 752) 2 227 052
Retained earnings 50 926 (8 752) 42 174
Attributable to owners of the parent 193 139 (8 752) 184 387
non-controlling interest 362 - 362
Total equity 193 501 (8 752) 184 749
2. StAnDARDS AnD inteRpRetAtiOnS eFFectiVe AnD ADOpteD in tHe cuRRent yeAR
Key requirements of IFRS 9Classificationthe classification of financial instruments remains unchanged from the prior period, when the classification criteria of iFRS 9 is applied to the individual instruments.
All recognised financial assets that are within the scope of iAS 39 Financial instruments: Recognition and measurement are required to be subsequently measured at amortised cost or fair value. Specifically, debt instruments that are held within a business model whose objective is to collect the contractual cash flows, and that have contractual cash flows that are solely payments of principal and interest on the outstanding principal are generally measured at amortised cost at the end of subsequent reporting periods.
All other debt and equity investments are measured at fair value at the end of subsequent reporting periods.
Expected credit lossthe adoption of iFRS 9 has fundamentally changed the Group’s loss impairment method by replacing iAS 39’s incurred loss approach with a forward-looking expected credit loss (“ecl”)
approach. From 1 July 2018, the Group has been recording the allowance for expected credit losses for all loans and advances and trade receivables, together with loan commitments.
the ecl allowance is based on the credit losses expected to arise over the life of the asset (the lifetime expected credit loss or “ltecl”), unless there has been no significant increase in credit risk since origination, in which case, the allowance is based on the 12 months’ expected credit loss (“12mecl”), except for trade receivables for which the Group applies the simplified approach to determine the ecl. this results in calculating lifetime ecls for trade receivables. ecls for trade receivables is mainly calculated using a provision matrix.
the 12mecl is the portion of ltecls that represent the ecls that result from default events on a financial instrument that are possible within the 12 months after the reporting date.
the Group has established a policy to perform an assessment, at the end of each reporting period, of whether a financial instrument’s credit risk has increased significantly since initial recognition, by considering the change in the risk of default occurring over the remaining life of the financial instrument.
ecsponent Annual Financial Statements ‘19 43
notes to the consolidated financial statements for the period ended 30 June 2019 (continued)
StAGe 1: 30 DAyS OR leSS in DeFAult When loans are first recognised, the Group recognises an allowance based on 12mecls. Stage 1 loans also include facilities where the credit risk has improved, and the loan has been reclassified from Stage 2.
StAGe 2: 31 DAyS tO 360 DAyS in DeFAultWhen a loan has shown a significant increase in credit risk since origination, the Group records an allowance for the ltecls. Stage 2 loans also include facilities, where the credit risk has improved, and the loan has been reclassified from Stage 3.
StAGe 3: lOAnS cOnSiDeReD 100% cReDit-impAiReD. the Group records an allowance for the ltecls.
BASeD On tHe ABOVe pROceSS, tHe GROup cAteGORiSeS itS lOAnS intO StAGe 1, StAGe 2 AnD StAGe 3, AS DeScRiBeD BelOW:
the Group calculates ecls based on probability-weighted scenarios to measure the expected cash shortfalls, discounted at an approximation to the eiR. A cash shortfall is the difference between the cash flows that are due to an entity in accordance with the contract and the cash flows that the entity expects to receive.
Forward looking informationin its ecl models, the Group relies on a broad range of forward-looking information as economic inputs, such as:› Gross domestic product (“GDp”)› central Bank base rates
Credit enhancements: collateral valuationto mitigate its credit risks on financial assets, the Group seeks to use collateral, where possible. the collateral comes in various forms for example listed and unlisted equities, personal payment guarantees and loan books. the fair value of collateral affects the calculation of ecls. to the extent possible, the Group uses active market data for valuing financial assets held as collateral. Other financial assets, held as collateral, which do not have readily determinable market values are valued using models.
IFRS 15 Revenue from Contracts with Customers iFRS 15 supersedes iAS 11 construction contracts; iAS 18 Revenue; iFRic 13 customer loyalty programmes; iFRic 15 Agreements for the construction of Real estate; iFRic 18 transfers of Assets from customers and Sic 31 Revenue - Barter transactions involving Advertising Services.
the core principle of iFRS 15 is that an entity recognises revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.
An entity recognises revenue in accordance with that core principle by applying the following steps:› identify the contract(s) with a customer;› identify the performance obligations in the
contract; › Determine the transaction price; › Allocate the transaction price to the performance
obligations in the contract; › Recognise revenue when (or as) the entity satisfies a
performance obligation. the adoption of this standard has not had a material impact on the results of the Group but has resulted in more disclosure than would have previously been provided in the annual financial statements.
Standards/Interpretations issued not yet effectiveIFRS 16 Leasesthe new standard provides a single lessee accounting model, requiring lessees to recognise assets and liabilities for all leases unless the lease term is 12 months or less or the underlying asset has a low value.
lessors continue to classify leases as operating or finance leases.
lessees are required to recognise a right-of-use asset and a lease liability for all leases, except short term leases or leases where the underlying asset has a low value, which are expensed on a straight line or other systematic basis. the cost of the right-of-use asset includes, where appropriate, the initial amount of the lease liability; lease payments made prior to commencement of the lease less incentives received; initial direct costs of the lessee; and an estimate for any provision
44 ecsponent Annual Financial Statements ‘19
notes to the consolidated financial statements for the period ended 30 June 2019 (continued)
for dismantling, restoration and removal related to the underlying asset.
the right-of-use asset is subsequently measured on the cost model at cost less accumulated depreciation and impairment and adjusted for any re-measurement of the lease liability.
the lease liability takes into consideration, where appropriate, fixed and variable lease payments; residual value guarantees to be made by the lessee; exercise price of purchase options; and payments of penalties for terminating the lease.
the lease liability is subsequently increased by interest, reduced by lease payments and re-measured for reassessments or modifications.
Re-measurements of lease liabilities are affected against right-of-use assets, unless the assets have been reduced to nil, in which case further adjustments are recognised in profit or loss.the lease liability is re-measured by discounting revised payments at a revised rate when there is a change in the lease term or a change in the assessment of an option to purchase the underlying asset. the lease liability is re-measured by discounting revised lease payments at the original discount rate when there is a change in the amounts expected to be paid in a residual value guarantee or when there is a change in future payments because of a change in index or rate used to determine those payments.
certain lease modifications are accounted for as separate leases. When lease modifications which decrease the scope of the lease are not required to be accounted for as separate leases, then the lessee re-measures the lease liability by decreasing the carrying amount of the right of lease asset to reflect the full or partial termination of the lease. Any gain or loss relating to the full or partial termination of the lease is recognised in profit or loss. For all other lease modifications which are not required to be accounted for as separate leases, the lessee re-measures the lease liability by making a corresponding adjustment to the right-of-use asset.
Right-of-use assets and lease liabilities should be presented separately from other assets and liabilities. if not, then the line item in which they are included must be disclosed. this does not apply to right-of-use assets meeting the definition of investment property which must be presented within investment property.
iFRS 16 contains different disclosure requirements compared to iAS 17 leases.
the effective date of the standard is for years beginning on or after 1 January 2019.
During 2019, the Group performed a detailed impact assessment of iFRS 16 and will apply the modified retrospective approach as permitted by the standard. the Group will recognise a right-of-use asset at the date of initial application for leases previously classified as an operating lease applying iAS 17. As permitted by the standard, this amount will be equal to the lease liability, adjusted for any prepayments or accrued lease payments relating to that lease.
the lease liability will be measured at an amount equal to the outstanding lease payments at the date of initial application, considering extension and termination options, discounted at the Group’s incremental borrowing rate in the economic environment of the lease. the capitalised right-of-use asset will mainly consist of office property, namely the head office.
in summary, the adoption of iFRS 16 is expected to have a material impact. the recognised right-of-use asset and lease liability will both equal approximately R8.9 million on initial recognition.
ecsponent Annual Financial Statements ‘19 45
notes to the consolidated financial statements for the period ended 30 June 2019 (continued)
Financial risk managementthe Group has documented financial risk management policies. these policies set out the Group’s overall business strategies and its risk management philosophy. the Group’s overall financial risk management programme seeks to minimise potential adverse effects of financial risks onthe financial performance of the Group. the Board of Directors provides written principles for overall financial risk management and written policies covering specific areas, such as:› capital risk;› market risk (including foreign exchange risk, interest rate
risk, equity price risk);› credit risk; and › liquidity risk.
Such written policies are reviewed annually by the Board of Directors and periodic reviews are undertaken to ensure that the Group’s policy guidelines are complied with.the Group has not use derivative financial instruments to manage its exposure to interest rate and foreign currency risk.
the directors are of the opinion that the carrying amount of all current financial assets and financial liabilities approximate their fair values, due to the short-term nature of these financial instruments. Where the effects of discounting are immaterial short-term receivables and short-term payables are measured at the original invoiced amount.
there have been no substantive changes to the Group's exposure to financial instrument risks, its objectives, policies and processes for managing those risks or the methods used to measure them from previous periods unless otherwise stated in this note. information disclosed has not been further disaggregated as the financial instruments used by the company share the same economic characteristics and market conditions.
Capital risk managementthe Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital. the capital structure of the Group consists of debt, which includes the borrowings disclosed in note 11, preference share note 10, note programme note 16,
cash and cash equivalents disclosed in note 9 and equity as disclosed in the statement of financial position. in order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt. there are no externally imposed capital requirements.the Group does not have a significant concentrations of credit risk in respect of cash balances as the Group uses appropriately rated banks in the territories in which the Group has operations.
Market riskmarket risk is the risk of changes in the market prices, such as interest rates, equity prices and foreign exchange rates which will affect the Group’s income, fair value and future cash flows of a financial instruments. the Group’s market risk arises from investments in listed and unlisted equities, open positions, interest rates and foreign currencies which are exposed to general and specific market movements and changes in the level of volatility. the objective of market risk management is to manage and control market risk exposures within acceptable parameters. Due to the volatility in some of the African countries’ currencies, hedging is either not available or prohibitively expensive. in such countries, the focus is to obtain local funding in local currency.
Market risk on equity investmentsthe Group enters into equity investments in listed and unlisted entities in accordance with delegation of authority limits. market risk on these investments is managed in terms of the investment objectives and strategic benefits to the Group, and not only on investment returns and mark-to-market considerations. periodic reviews and assessments are undertaken on the performance of these investments.
the Group’s exposure to market risk on equity investments increased substantially due to a series of additional investments in the listed equities of an associate. management has implemented processes to monitor the operational performance of the associate, these include quarterly operational performance analysis, to ensure the operational performance is in line with the associates approved budget. the details of this investment are disclosed in note 5.
management targets fair value return of the listed equities to increase by at least 20% . An increase of 20% in the market
3. FinAnciAl inStRumentS - RiSk mAnAGement
46 ecsponent Annual Financial Statements ‘19
notes to the consolidated financial statements for the period ended 30 June 2019 (continued)
price as at the reporting date, with reference to the period end exposures, would have increased equity and profit by the annualised amounts shown below. the analysis assumes that
all other variables remain constant. listed equities and the option contract to dispose of listed equities are exposed to equity price market risk:
30 June 2019R’000
30 June 2018R’000
FinAnciAl inStRument
Other financial assets - listed shares at fair value through profit or loss 9 299 280 700
Other financial assets - option agreement 194 293 238 904
mARket RiSk SenSitiVity AnAlySiS
Other financial assets - listed shares at fair value through profit or loss 1 860 56 140
Other financial assets - option agreement (38 859) (47 781)
Disclosed above is the profit impact if the market price of listed equities were to increase by 20%, if the price was to change in the opposite direction, an equal and opposite effect would be incurred.
Foreign currency riskForeign exchange risk arises when the fair value or future commercial transactions, recognised assets or liabilities are denominated in a currency that is not the entity’s functional currency. management has set up a policy to require group companies to manage their foreign exchange risk against their functional currency. management reviews its foreign currency exposure, including commitments on an on-going basis. the Group strategy is to establish sources of funding within the various regions in which it operates to fund the in-country operations thereby mitigating currency risk. the Group considers the need to hedge against foreign currency fluctuations on a regular basis where the controls and or structures implemented to mitigate the foreign currency risk is deemed insufficient.
the Group did not enter into contracts to hedge its foreign exchange fluctuations during the 2019 and 2018 financial period. the Group is exposed to, and actively manages, currency risk through: › its operations in Southern Africa outside of the common
monetary area;
› listed equity investments denominated in euro; and
› various foreign currency denominated borrowings.
the Group has investments in subsidiaries, whose net assets are exposed to foreign currency translation risk. currency exposure, arising from the net assets of the Group’s subsidiaries, is managed primarily through borrowings denominated in the relevant foreign currencies, including inter company loans made by the holding companies or the central treasury function to these subsidiaries in the relevant foreign currencies. these inter company loans expose the Group to foreign currency risk and create an open foreign currency position. the focus in the current financial year, and going forward, has been to close open foreign exchange positions on inter company loans. new local currency funding lines will enable the Group to replace inter company loans with local funding. the Group is however still exposed to currency risk in terms of its local currency loans and advances to customer assets that cannot be hedged in some of the countries that the subsidiaries operate in.
At the end of the reporting period, the Rand value of monetary assets and monetary liabilities denominated in currencies other than the respective Group's functional currency acts as a net investment hedge against Rand weakness.
Refer to the tables below indicating that the Rand value of foreign currency assets exceeded the Rand value of foreign currency liabilities.
ecsponent Annual Financial Statements ‘19 47
notes to the consolidated financial statements for the period ended 30 June 2019 (continued)
Analysis of financial assets and liabilities by currency
At 30 June 2019
Euro US Dollar Zambian Kwacha
Botswana Pula
Total
R’000 R’000 R’000 R’000 R’000
Other financial assets 194 293 - - 65 887 260 180
loans and advances - 204 110 10 216 2 271 216 597
investment in associates 1 524 117 - - - 1 524 117
cash and cash equivalents - 1 411 - 3 291 4 702
Total financial assets 1 718 410 205 521 10 216 71 449 2 005 596
preference shares - - - (18 079) (18 079)
Other financial liabilities (281 968) (298 903) - - (580 871)
trade and other payables - (599) - (182) (781)
Total financial liabilities (281 968) (299 502) - (18 261) (599 731)
Net financial asset/(financial liability) 1 436 442 (93 981) 10 216 53 188 1 405 865
At 30 June 2018
Euro US Dollar Botswana Pula
Total
R’000 R’000 R’000 R’000
Other financial assets 472 404 6 923 65 727 545 054
loans and advances - - 166 467 166 467
cash and cash equivalents - 190 4 506 4 696
Total financial assets 472 404 7 113 236 700 716 217
preference shares - - (17 794) (17 794)
Other financial liabilities - (222 954) - (222 954)
trade and other payables - (34) (4 780) (4 814)
Total financial liabilities - (222 988) (22 574) (245 562)
Net financial asset/(financial liability) 472 404 (215 875) 214 126 470 655
the expectation for exchange rates over the 12 months to end June 2020 is that Rand will continue to experience significant short-term fluctuations as a result of the subdued local economy, South Africa’s ever increasing Debt/GDp ratio, the widening budget deficit versus GDp of the country and international factors impacting emerging markets. the fluctuation in the Rand against major currencies will further be fuelled by policy uncertainty and political events in South Africa and the region. management’s expectation is that the Rand
will on average devalue against developed economy currencies over the period.
A 10% weakening of the Rand against the currencies below at the period end date, with reference to the period end exposures, would have increased equity by the amounts shown on the following page (10% weakening forecasted for 2018). the analysis assumes that all other variables remain constant.
48 ecsponent Annual Financial Statements ‘19
notes to the consolidated financial statements for the period ended 30 June 2019 (continued)
30 June 2019R’000
30 June 2018R’000
euro 143 644 47 240
uSD (9 398) (21 588)
pula 5 319 21 413
Total net position 139 565 47 065
Exchange rates used for conversion of foreign items at the reporting date were:
euro 15,96595 16,00323
uSD 14,04717 13,70070
pula 1,30211 1,29485
Interest rate riskinterest rate risk consists of cash flow interest rate risk and fair value interest rate risk. › cash flow interest rate risk is the risk that the future cash
flows of a financial instrument will fluctuate because of changes in market interest rates;
› Fair value interest rate risk is the risk that the value of a financial instrument will fluctuate because of changes in market interest rates.
the Group is exposed to both cash flow and fair value interest rate risk.
the Group's exposure to cash flow interest rate risk is limited to the class c preference shares, Group cash balances and bank borrowings. these financial assets and liabilities are linked to variable interest rates. the Group limits its cash flow interest rate risk through pricing in anticipated future interest rate movements into fixed contract rates within its credit operations.
the Group's credit assets are therefore subject to fair value interest rate risk only. management’s expectation for the 2020 financial period is that interest rates will decrease by 100 basis points (2018 outlook represented a 100 basis point decrease). A decrease of 100 basis points in interest rates at the reporting date, with reference to the period end exposures, would have increased/(decreased) equity and profit or loss by the annualised amounts shown below. the analysis assumes that all other variables remain constant. the interest rate sensitivity analsyis below reflects the effects of the decrease of a 100 basis point reduction in interest rates. Should the rate increase by 100 basis points the illustrated movement would be equal and opposite to the amounts disclosed below.
2019
Cash flow interest rate
risk
Fair value interest rate
risk
No interest rate risk
Total
R’000 R’000 R’000 R’000
inteReSt RAte RiSk AnAlySiS
Other financial assets - 65 887 350 574 416 461
loans and advances - 973 044 - 973 044
cash and cash equivalents 37 658 - - 37 658
preference shares (723 425) (1 561 933) - (2 285 358)
Other financial liabilities - (677 380) - (677 380)
Bank overdraft (803) - - (803)
(686 570) (1 200 382) 350 574 (1 536 378)
2018
Other financial assets - 65 885 766 303 832 188
loans and advances - 1 238 352 - 1 238 352
cash and cash equivalents 45 086 - - 45 086
preference shares (713 021) (988 954) - (1 701 975)
Other financial liabilities - (222 954) - (222 954)
Bank overdraft (781) - - (781)
(668 716) 92 329 766 303 189 916
ecsponent Annual Financial Statements ‘19 49
notes to the consolidated financial statements for the period ended 30 June 2019 (continued)
Liquidity riskliquidity risk is the risk that the Group will not be able to meet its current and future obligations, both expected and unexpected, without materially affecting its daily operations or overall financial position. this risk arises as a result of the inability to convert a security or hard asset to cash without a loss of capital and/or income in the process. it is inherent to most financial services operations and can be impacted by a range of specific institutional or general market factors.
the Group's treasury function manages liquidity risk through an on-going review of the liquidity profile of financial assets and financial liabilities and consideration of the projected cash flows of the Group operations. treasury further monitors future commitments and credit facilities. cash flow forecasts are prepared and adequate utilised borrowing facilities are monitored. the liquidity position of the Group is monitored
and reported daily, including cash flow projections containing business unit cash requirements.
the liquidity requirements of business units and subsidiaries are serviced through group treasury advances. the Group's approach to the management of liquidity is to consolidate all sources and uses of liquidity to maintain a balance between liquidity, profitability and asset growth.
the table below analyses the Group’s financial liabilities into relevant maturity groupings based on the remaining period at the statement of financial position date to the contractual maturity date. the amounts disclosed in the table are the contractual undiscounted cash flows. Balances due within 12 months equal their carrying amounts as the impact of discounting is not significant.
2019
Cash flow interest rate
risk
Fair value interest rate
risk
Total
R’000 R’000 R’000
SenSitiVity AnAlySiS
Other financial assets - (659) (659)
loans and advances - (9 730) (9 730)
preference shares 7 234 15 619 22 853
Other financial liabilities - 6 774 6 774
cash and cash equivalents (including bank overdraft) (369) - (369)
6 865 12 004 18 869
2018
Other financial assets - (659) (659)
loans and advances - (12 384) (12 384)
preference shares 7 130 9 890 17 020
Other financial liabilities - 2 230 2 230
cash and cash equivalents (including bank overdraft) (443) - (443)
6 687 (923) 5 764
50 ecsponent Annual Financial Statements ‘19
notes to the consolidated financial statements for the period ended 30 June 2019 (continued)
Credit riskcredit risk is the risk of financial loss to the Group if a client or counterparty to a financial instrument fails to pay interest, repay capital or otherwise fulfil their contractual obligations under loan agreements or other credit facilities. this risk arises principally from the Group’s loans and advances and bank balances. For risk management reporting purposes, the Group considers and consolidates all elements of credit risk exposure (such as individual obligor default risk, employer default risk and country risk).
the Group has an established credit committee which maintains an effective and current credit policy which embraces all aspects of the Group’s on-lending activities. the creditworthiness of clients as well as their ability to afford loan repayments is evaluated in accordance with regulation where appropriate and the Group’s approved credit policy. the Group's credit operations, as a principle, ensures that all credit positions are backed by adequate security with the credit policy guiding the level of security commensurate with the credit risk. the credit committee evaluates the credit risk in each region on an on-going basis and considers the need to adjust the credit policy accordingly.
credit loss allowances for expected credit losses are recognised for all debt instruments, but excluding those measured at fair value through profit or loss. in order to calculate credit loss allowances, management determine whether the loss allowances should be calculated on a 12 month or on a lifetime expected credit loss basis.
this determination depends on whether there has been a significant increase in the credit risk since initial recognition. if there has been a significant increase in credit risk, then the loss allowance is calculated based on lifetime expected credit losses. if not, then the loss allowance is based on 12 month expected credit losses. this determination is made at the end of each financial period. thus the basis of the loss allowance for a specific financial asset could change year-on-year. For trade receivables which do not contain a significant financing component, the loss allowance is determined as the lifetime expected credit losses of the instruments.
management have chosen as an accounting policy, to make use of the simplified approach for trade receivables and therefore the lifetime expected credit losses.
Appropriate credit risk premiums are priced into the financial products to ensure that acceptable returns are generated taking into account the credit risk profile. the Group limits its exposure to credit risk relating to cash deposits and cash equivalents by depositing cash only with major banks with high quality credit standing.
the most significant period-end assumptions used for the expected credit loss (ecl) estimate as at 30 June 2019 are set out below.
At 30 June 2019
Less than one year Between one and two years
Between two and five years
R’000 R’000 R’000
trade and other payables 19 112 - -
preference shares 566 319 549 476 2 322 370
note programme 736 - 64 659
Other financial liabilities 471 812 802 417 1 107 986
Bank overdraft 803 - -
At 30 June 2018
trade and other payables 21 586 - -
preference shares 185 602 466 048 3 082 606
Other financial liabilities 73 898 - 149 056
Bank overdraft 781 - -
the carrying value of the financial liabilities is considered to be in line with the fair value at the statement of financial position date, due to the market related interest rate applied.
ecsponent Annual Financial Statements ‘19 51
GeneRAl ASSumptiOnS
General the loans were originated at a market rate of interest. this was determined due to the fact that part of the business model of ecsponent includes credit operations and thus to remain competitive in the market, market related rates on loans and advances is charged.
General ecsponent considers all loans over 360 days to be credit-impaired based on historical experience with recovering the associated debt.
pROBABility OF DeFAult ASSumptiOnS
General if no defaults have been historically observed, a probability of default of 2% is used.
General A default has occurred when a loan instalment is more than 30 days past due
Stage Definition Measurement basis
Stage 1 30 days or less in default 12 month expected credit losses
Stage 2 31 days to 360 days in default lifetime expected credit losses (not credit impaired)
Stage 3 more than 360 days in default lifetime expected credit losses(credit impaired)
General the probability of default will be assumed/calculated for the specific stages as defined. the probability of default as well as the specific stages were determined based on the specific contracts with the customers as well as historical experience.
lOSS GiVen DeFAult ASSumptiOnS
General if the security on the loan exceeds the carrying amount of the loan, the percentage loss will be assumed 0%. Due to the fact that when the security is called the entire balance of the loan will be recovered, there will not be any expected loss to ecsponent. the security amount is fixed and no losses are expected to be incurred on the fair values of the securities.
General in any other case the percentage loss will be the difference between the present value of the expected payments and the carrying amount as a percentage of carrying amount. As mentioned above, the security amount will settle the outstanding balance and as such no loss is expected to be incurred on the balance of the security.
Accounting policies (continued)
52 ecsponent Annual Financial Statements ‘19
Accounting policies (continued)
pReSent VAlue OF expecteD ReceiptS ASSumptiOnS
Weight 1 the financial position of the borrower, weighted at 70% probability of the recovery of the total contractual future value.
Weight 2 the changes in interest rates will be weighted at 20% of the total contractual future value, based on the trends observed within the specific regions:
Region Weighting Recoverability Basis for determining recoverability
South Africa 20% 100% it is expected that the interest rate will decrease in the next 12 months, and therefore increasing the recoverability of the future cash flows to 100%.
Botswana 20% 90% it is expected that the interest rate will not change in the next 12 months, and therefore the recoverability of the future cash flows are assumed to be 90%.
mauritius 20% 90%
eswatini 20% 100% it is expected that the interest rate will decrease in the next 12 months, and therefore increasing the recoverability of the future cash flows to 100%.
Weight 3 the changes in GDp will be weighted at 10% of the total contractual future value, based on the trends observed within the following regions:
Region Weighting Recoverability Basis for determining recoverability
South Africa 10% 80% the GDp growth rate for 2019 was revised down to 1.5% from 1.7%. this will result in the recoverability of the future cash flows decreasing to 80%.
Botswana 10% 100% the GDp growth rate for Botswana is expected to increase, therefore increasing the recoverability of the future cash flows to 100%
mauritius 10% 80% it is expected that the GDp growth rate for mauritius will decrease slightly, therefore decreasing the recoverability of the future cash flows to 80%
eswatini 10% 50% the GDp growth rate for eswatini is expected to decrease to 0.5%, therefore decreasing the recoverability of the future cash flows to 50%
General the discount rate when calculating the present values will be the adjusted risk free rate that is indicative of the period of the loan. this rate will depend on the underlying loans and will reflect the specific risk per loan for the Group.
ecsponent Annual Financial Statements ‘19 53
notes to the consolidated financial statements for the period ended 30 June 2019 (continued)
Business creditthe credit committee has developed tailored policies within the Group’s Business credit operations to address the specific credit risks within this dynamic market. the policies incorporate guidelines on the nature of financial products provided, credit risk scoring and other measures to ensure sound loan decisions. the policy further contains guidelines ensuring that sufficient and sound security is obtained.
Supply chain fundingSupply chain funding is extended to individuals, start-up entities and existing businesses mainly operating in the Smme sector. the credit committee prescribed policies incorporate practices for risk profiling of customers and credit assessments based on the Group developed scoring methodologies. the credit policies further contain guidelines ensuring that sufficient and sound security is obtained, which in the enterprise Development market depends on the nature of the transaction funded and may vary between cash, fixed assets and/or movable assets. Supply chain funding and trade receivables comprise a widespread customer base.
management evaluates credit risk relating to customers on an on-going basis. if customers are independently rated, these ratings are used, otherwise, if there is no independent rating, management assesses the credit quality of the customer, taking into account its financial position, past experience and other factors.
Concentration riskconcentration risk is the risk of loss arising from an excessive concentration of exposure to a single counterparty, industry, product, or geographic region. the Group’s credit risk portfolio is well diversified. the Group’s approach relies on reporting of concentration risk along key dimensions and portfolio limits. concentration risk limits are used within the Group to ensure that funding diversification is maintained across products, geographic regions, and counterparties. the Group mainly advances loans and funding to related parties (subsidiaries, investments in private equity businesses and associates) and small medium enterprises.
the Group has implemented procedures to avoid excessive credit risk included amongst others the following:› maintaining a wider customer base;› continually looking for opportunities to expand the client
base and product offerings;› Subjecting all customers to a credit verification procedure
before agreements are entered into; and › Reviewing the loan book regularly with the intention of
minimising the exposure to bad debts.
the carrying values of the other financial assets comprise the Group’s maximum exposure to credit risk and at the financial period ended 30 June 2019 were as follows:
Financial instrument 2019
notes Gross carrying amount
Credit loss allowance
Amortised cost/Fair value
R’000 R’000 R’000
Other financial assets 7 416 461 - 416 461
loans and advances 6 1 029 929 (56 885) 973 044
trade and other receivables 8 43 370 (2 628) 40 742
cash and cash equivalents 9 37 658 - 37 658
1 527 418 (59 513) 1 467 905
Financial instrument 2018
Other financial assets 7 832 188 - 832 188
loans and advances 6 1 318 231 (79 879) 1 238 352
trade and other receivables 8 1 588 (375) 1 213
cash and cash equivalents 9 45 086 - 45 086
2 197 093 (375) 2 116 839
Country risk As a global financial services group, the Group is active in multiple jurisdictions. Significant changes in the economy or in the health of a particular industry segment, that represents a concentration in the Group’s portfolio, could result in losses
that are different from those provided for at the reporting date. country (or Sovereign) risk is part of the overall credit risk and is managed as part of the credit risk management function as it has a major impact on individual counter-parties ability to perform.
54 ecsponent Annual Financial Statements ‘19
notes to the consolidated financial statements for the period ended 30 June 2019 (continued)
in addition, for financial reporting purposes, fair value measurements are categorised into level 1, 2 or 3 based on the degree to which the inputs to the fair value measurements are observable and the significance of the inputs to the fair value measurement in its entirety, which are described as follows: › level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the
measurement date; › level 2 inputs are inputs, other than quoted prices included within level 1, that are observable for the asset or liability, either
directly or indirectly; and › level 3 inputs are unobservable inputs for the asset or liability.
4. FinAnciAl inStRumentS - FAiR VAlueS
ecsponent Annual Financial Statements ‘19 55
nOteS tO tHe cOnSOliDAteD FinAnciAl StAtementSFOR tHe peRiOD enDeD 30 June 2019
4.
Fin
anci
al in
stru
men
ts -
Fai
r va
lues
(co
nti
nu
ed)
30
Ju
ne
20
19
not
esFa
ir V
alu
e th
rou
gh
P
rofi
t/Lo
ss
Fin
anci
alas
sets
at
amo
rtis
ed
cost
Fin
anci
al
liab
ilit
ies
at
amo
rtis
ed
cost
Tota
l
R’0
00
R’0
00
R’0
00
R’0
00
Fin
An
ciA
l A
SS
etS
me
AS
uR
eD
At
FA
iR V
Alu
e
Oth
er fi
nan
cial
ass
ets
73
50
574
--
35
0 5
74
inve
stm
ent
in a
ssoc
iate
s5
1 4
94
89
5-
-1
49
4 8
95
Fin
An
ciA
l A
SS
etS
tH
At
AR
e n
Ot
me
AS
uR
eD
At
FA
iR V
Alu
e
Oth
er fi
nan
cial
ass
ets
7-
65
88
7-
65
88
7
loan
s an
d a
dva
nce
s6
-9
73 0
45
-9
73 0
45
trad
e an
d o
ther
rec
eiva
ble
s 8
-4
1 0
55
-4
1 0
55
cas
h a
nd
cas
h e
qu
ival
ents
9
-37
65
8-
37 6
58
-1
117
64
5-
1 11
7 6
45
Fin
An
ciA
l li
AB
ilit
ieS
tH
At
AR
e n
Ot
me
AS
uR
eD
At
FA
iR V
Alu
e
pre
fere
nce
sh
ares
10-
-(2
28
5 3
58
)(2
28
5 3
58
)
not
e p
rogr
amm
e16
--
(65
39
4)
(65
39
4)
Oth
er fi
nan
cial
liab
iliti
es
13-
-(6
77 3
79)
(677
379
)
trad
e an
d o
ther
pay
able
s 13
--
(15
85
0)
(15
85
0)
cas
h a
nd
cas
h e
qu
ival
ents
9
--
(80
3)
(80
3)
--
(3 0
44
78
4)
(3 0
44
78
4)
56 ecsponent Annual Financial Statements ‘19
4.
Fin
anci
al in
stru
men
ts -
Fai
r va
lues
(co
nti
nu
ed)
30
Ju
ne
20
18
not
esFa
ir V
alu
e th
rou
gh
P
rofi
t/Lo
ss
Fin
anci
alas
sets
at
amo
rtis
ed
cost
Fin
anci
al
liab
ilit
ies
at
amo
rtis
ed
cost
Tota
l
R’0
00
R’0
00
R’0
00
R’0
00
Fin
An
ciA
l A
SS
etS
me
AS
uR
eD
At
FA
iR V
Alu
e
Oth
er fi
nan
cial
ass
ets
776
6 4
61
--
766
46
1
Fin
An
ciA
l A
SS
etS
tH
At
AR
e n
Ot
me
AS
uR
eD
At
FA
iR V
Alu
e
Oth
er fi
nan
cial
ass
ets
7-
65
727
-6
5 7
27
loan
s an
d a
dva
nce
s6
-1
23
8 3
52
-1
23
8 3
52
trad
e an
d o
ther
rec
eiva
ble
s 8
-1
213
-1
213
cas
h a
nd
cas
h e
qu
ival
ents
9
-4
5 0
86
-4
5 0
86
-1
35
0 3
78-
1 3
50
378
Fin
An
ciA
l li
AB
ilit
ieS
tH
At
AR
e n
Ot
me
AS
uR
eD
At
FA
iR V
Alu
e
cas
h a
nd
cas
h e
qu
ival
ents
9
--
(78
1)(7
81)
pre
fere
nce
sh
ares
10-
-(1
70
1 9
75)
(1 7
01
975
)
Oth
er fi
nan
cial
liab
iliti
es
12-
-(2
22
95
5)
(22
2 9
55
)
trad
e an
d o
ther
pay
able
s 13
--
(20
06
0)
(20
06
0)
--
(1 9
45
771
)(1
94
5 7
71)
nOteS tO tHe cOnSOliDAteD FinAnciAl StAtementSFOR tHe peRiOD enDeD 30 June 2018
ecsponent Annual Financial Statements ‘19 57
notes to the consolidated financial statements for the period ended 30 June 2019 (continued)
4. Financial instruments - Fair values (continued)
Fair value hierarchythe following table shows the fair values of financial assets and financial liabilities, including their levels in the fair value hierarchy. it does not include fair value information for financial assets and financial liabilities not measured at fair value.
2019
notes Level 1 Level 2 Level 3 Total
R’000 R’000 R’000 R’000
FAiR VAlue tHROuGH pROFit/lOSS
Other financial assets 7 9 299 - 341 275 350 574
investment in associates 5 - - 1 494 895 1 494 895
2018
FinAnciAl ASSetS meASuReD At FAiR VAlue
Other financial assets 7 280 700 - 485 761 766 461
Fair value of other financial assets and liabilitiesthe fair value of all other financial assets and liabilities are considered to equal their carrying values. Directors consider the carrying value of financial instruments of a short term nature, that mature in 12 months or less, to approximate the fair value of such assets or liability classes. the carrying value of longer term assets are considered to approximate their fair value as these instruments bear interest at interest rates appropriate to the risk profile of the asset or liability class.
Measurements of fair value – valuation techniques and significant unobservable inputsthe following table reflects the valuation techniques used in measuring level 3 fair values, as well as the significant unobservable inputs.
Type Valuation technique Significant unobservable inputs
Option agreement the Binomial Options pricing model (BOpm) was applied to determine the value of the American put Option and benchmarked the result against the Black Sholes formula used to value a european put option.
› A 0% dividend yield on the underlying listed equity was assumed
› Volatility is calculated by determining the standard deviation of the last 252 daily returns and can then be annualised to calculate average price volatility at 92.52%
› A risk free rate of -0.78% based on euro bonds was applied
› Option strike price of euro 18 › 30 June 2019 spot euro rate to convert to
reporting currency
MyBucks S.A shares For the valuation at a Group level a Dividend Discount model (“DDm”) was performed based on the consolidated financials. A blended cost of equity was used to discount future dividends which reduces the overall risk of the Group.
› A blended risk free rate of 11.69% at 30 June 2019
› A market risk premium of 6%, being the most frequently applied figure for developed markets
› A five year monthly beta of 0.06 as at 30 June 2019
› An additional adjustment of 3% was applied as a small stock premium
› An adjustment of 3% was applied to the cost of equity in the WAcc calculations to account for certain company specific risks
› All of these adjustments lead to a final cost of equity of 18.05%
› myBucks Group assumes a current payout ratio of 15% moving to a target sustainable payout ratio of 80% over the forecast period.
› 30 June 2019 spot euro rate to convert to reporting currency
58 ecsponent Annual Financial Statements ‘19
notes to the consolidated financial statements for the period ended 30 June 2019 (continued)
Type Valuation technique Significant unobservable inputs
GetBucks Microfinance Bank Ltd
For the valuation a Dividend Discount model (“DDm”) was performed based on the company financials. the cost of equity was used to discount future dividends.
› a risk-free rate of 1.76%, based on a u.S. five year treasury bond as at 30 June 2019.
› a market risk premium of 6%, being the most frequently applied figure for developed markets.
› a median beta of 0.99 based on the most comparable listed peers.
› an additional adjustment of 6.3% was applied as a small stock premium.
› an adjustment of 2% was applied to the cost of equity in the WAcc calculations to account for certain company specific risks.
› a country risk premium of 12.5%› GetBucks Zimbabwe assumes a current
payout ratio of 20% moving to a target sustainable payout ratio of 90% over the forecast period.
Ngwedi Capital Holdings equity
the price to assets under management model was applied to determine the value of the investment.
› A 2.1% price to assets under management (p/Aum) was used
› p/Aum was determined with reference to peers
› Aum of R940 million was used
Capitis Equities - S 12 J portfolio
each individual asset class within the portfolio’s fair value was determined.
› Discount rate of 22% › 0% Dividend yield
Measurements of fair value – reconciliation of Level 1 fair valuesBelow is a reconciliation of the movement in level 1 fair values during the period.
notes 12-month period ended
30 June 2019R’000
15-month period ended
30 June 2018R’000
GROup liSteD eQuitieS
Other financial assets as at fair value through profit and loss
Fair value of loans and receivables as at FVtpl 7 9 299 280 700
Other financial assets as at fair value through profit and loss
Opening balance at the start of the period - myBucks shares 236 960 232 980
Opening balance at the start of the period - Go life shares 43 740 -
Opening balance at the start of the period 280 700 232 980
purchases - listed shares 357 500 88 234
Fair value profit/(loss) recognised in profit and loss 104 279 (82 557)
transfer to level 3 fair values (727 153) -
Disposals (16 720) -
Foreign currency loss recognised in profit and loss 10 693 42 043
Balance at the end of the period 9 299 280 700
4. Financial instruments - Fair values (continued)
ecsponent Annual Financial Statements ‘19 59
notes to the consolidated financial statements for the period ended 30 June 2019 (continued)
Measurements of fair value – reconciliation of Level 3 fair valuesBelow is a reconciliation of the movement in level 3 fair values during the period.
notes 12-month period ended
30 June 2019R’000
15-month period ended
30 June 2018R’000
GROup liSteD eQuitieS
Financial assets as at fair value through profit and loss
Fair value of financial assets as at FVtpl 1 836 170 485 761
Reconciliation of financial assets at fair value
Opening balance at the start of the period 485 761 -
transfer from level 1 fair values 727 153 -
purchases 762 005 260 059
Disposals (100 000) -
Foreign currency loss recognised in profit and loss (1 865) 6 108
Fair value loss recognised in profit and loss (36 884) 232 796
impairment of financial asset - (13 202)
Balance at the end of the period 1 836 170 485 761
4. Financial instruments - Fair values (continued)
60 ecsponent Annual Financial Statements ‘19
notes to the consolidated financial statements for the period ended 30 June 2019 (continued)
5. Investment in associates
At 30 June 2019 the Group had significant influence over myBucks, GetBucks microfinance Bank ltd, ngwedi capital Holdings (pty) ltd and ecsponent Financial Services ltd (“myBucks Zambia”) by virtue of its interest in these company’s shareholding and voting powers.
control for iFRS purposes is assessed in terms of iFRS10, which consider numerous factors when assessing “control”. in the case with ecsponent, there are several factors which lead to the assessment of control and ultimately also involves judgement by management.
this assessment included ecsponent making operational and financial decision for the myBucks group and certainly triggering “control” as defined in terms of Section 2.2(d) of the companies Act, 71 of 20018, as far as it related to related and inter-related companies (although the company would not be seen as a “subsidiary” as defined in Section 3 of the companies Act).
However, based on, inter alia, the lack of a contractual right to entrench control, control in terms of iFRS 10 is not established over myBucks and accordingly myBucks is not consolidated by the Group.
12-month period ended
30 June 2019R’000
15-month period ended
30 June 2018R’000
Opening balance 21 500 -
cost of investment in associate 759 663 22 119
Reclassification from other financial assets 727 153 10 000
Fair values adjustments passed 11 325 -
Foreign exchange differences (3 246) -
increase due recapitalisation 20 747 -
equity accounted post acquisition loss (3 246) (1 173)
1 533 896 30 946
Disposal of investment in associate - (9 446)
Investment in associates 1 533 896 21 500
AcQuiSitiOn DAte FAiR VAlue OF cOnSiDeRAtiOn pAiD
cash consideration paid - 10 000
ecsponent Annual Financial Statements ‘19 61
notes to the consolidated financial statements for the period ended 30 June 2019 (continued)
5. Investment in associates (continued)
Details of the Group's associate for the 2019 financial period were as follows:
Name of associate
Place of incorporation
and operations
Proportion of ownership interest (%)
Proportion of voting power (%)
Principle activity
2019 2018 2019 2018
ecsponent Financial Services (pty) ltd
Zambia (eFS Zambia)
Zambia 25% 25% 25% 25% Financial services
myBucks S.A. limited* South Africa 40% 0% 40% 0% Financial services
GetBucks microfinance Bank ltd* Zimbabwe 35% 0% 35% 0% Financial services
ngwedi capital Holdings* South Africa 34% 0% 34% 0% Financial services
* the associate is accounted for using the fair value method in these consolidated financial statements.
the equity Holdings segment of ecsponent limited is classified as a venture capital segment in terms of iFRS.
the classification of the equity Holdings segment as a venture capital segment is based on the following parameters:
› the Group has various listed and unlisted equity investments, which is classified under the equity Holdings segment; › the Group has various investors including, ordinary shareholders, preference shareholders, listed bonds and debt funders;› most of these investors are not related parties to the Group, and they do not have a significant influence over the Group and its
strategic direction; and› the Group holds shares in the investments it classified as equity Holdings, however it may provide funding to some of these
investments in the ordinary course of the business, as the company also operates a credit Business.
MyBucks Zambia
Ngwedi
capital
GetBucks
Microfinance
Bank Ltd
MyBucks S.A. Total
R’000 R’000 R’000 R’000 R’000
carrying amount/fair value of associates 39 001 9 779 334 553 1 150 563 1 533 896
Increase holding in MyBucksBy 30 June 2018 the Group held 12.1% of the myBucks issued share capital after increasing its interest in myBucks in a range of stepped acquisitions from its initial investment on 30 march 2017.
ecsponent continued to acquire additional shares during the current period and increased its shareholding to 24.3% effective on 14 December 2018, the date on which the final condition precedent was fulfilled to acquire a further 11.8% or 1 498 600 shares in myBucks.
the myBucks investment was classified as a financial instrument at fair value at the start of the current period until the acquisition on 14 December 2018. in determining the cost of the myBucks associate investment the fair value of the existing holding together with the fair value of the additional myBucks shares was classified as the fair value of the associate. Shareholders approved in the general meeting held on 22 January 2019 the acquisition of 100% of the shares in ecsponent mauritius ltd (previously “pink Orchid (pty) ltd”) a company incorporated in mauritius for R185 million. the transaction resulted in ecsponent obtaining a further 1 953 874 myBucks shares increasing its holding to 39.7% of myBucks and 34.89% of GetBucks Zimbabwe limited.
62 ecsponent Annual Financial Statements ‘19
notes to the consolidated financial statements for the period ended 30 June 2019 (continued)
5. Investment in associates (continued)
Transfer out of level 1 the fair value of the myBucks investment classified as other financial assets at level 1 at 30 June 2018 was transferred to level 3 on 14 December 2018 on the further investment and the classification as an associate.
management deemed the transfer to level 3 appropriate due to the inactive market, with thin trading volumes of less than 0.5% of the number of myBucks shares in issue during the six months interim period after the 30 June 2018 year end leading up to the effective date of the further acquisition. in addition, the volume of myBucks shares traded during the interim period reduced by 40% in comparison to the volumes traded in the preceding six months leading up to the 30 June 2018 period end.
in march 2019 myBucks management announced a planned two phased recapitalisation which would entail a private issue and a public offer. the recapitalisation was announced at €1 per share which resulted in an immediate and sharp decline in the ruling share price to align to the recapitalisation price per share. the myBucks share price declined from €3.56 close on 25 march 2019 to a close of €1.02 on 26 march 2019. At 30 June 2019 and up to the date of this report the recapitalisation had not concluded and the Board deemed the continued measurement of the myBucks investment in terms of level 3 of the fair value hierarchy appropriate.
Summarised financial information in respect of the Group’s associate is set out below. the summarised financial information below represents amounts shown in the associate’s management accounts prepared in accordance with iFRSs.
MyBucks Zambia
Ngwedi
capital
GetBucks
Microfinance
Bank Ltd
MyBucks S.A.
R’000 R’000 R’000 R’000
non-current assets 84 511 24 467 69 257 2 043 980
current assets 71 609 1 708 34 435 1 190 652
non-current liabilities (213) (2 738) (5 750) (3 346 366)
current liabilities (96 726) (22 020) (51 742) (638 238)
Revenue 108 575 1 280 194 012 808 862
(loss)/profit for the period (18 671) 3 000 78 861 (607 347)
Other comprehensive loss for the period - - - (256 056)
Total comprehensive (loss)/income for the period (18 671) 3 000 78 861 (863 403)
Dividends received from the associate during the period - - - -
ecsponent Annual Financial Statements ‘19 63
notes to the consolidated financial statements for the period ended 30 June 2019 (continued)
6. Loans and advances
12-month period ended
30 June 2019R’000
15-month period ended
30 June 2018R’000
lOAnS AnD ADVAnceS cARRieD At AmORtiSeD cOSt
Business credit 989 708 1 281 443
the business funding advances are secured, via a cession of the underlying equity
and/or assets, ranging between 100 – 150%. the advances bear interest at fixed
interest rates based on the entity risk profile, ranging between 24 – 30% (2018:
24 – 30%) and repayment terms are facility specific, ranging between one to
five years.
Supply chain funding 40 221 36 788
enterprise development and supply chain advances are of a short-term nature with
an average transaction cycle of 30 to 45 days. ecsponent secures the funding via
the terms of the transactions and where appropriate additional covering security
is obtained.
Total loans and advances 1 029 929 1 318 231
Expected credit losses per stage of default (56 885) -
Stage 1: 30 days or less in default (6 234) -
Stage 2: 31 days to 360 days in default (13 129) -
Stage 3: more than 360 days in default (37 522) -
Credit impairments (IAS 39 comparatives) - (79 879)
impairments for non-performing loans and advances - (22 289)
impairments for performing loans and advances - (57 590)
973 044 1 238 352
non-current assets 139 763 803 599
current assets 833 282 434 753
Total loan and advances 973 045 1 238 352
expecteD cReDit lOSSeS RecOnciliAtiOn
Opening balance 79 879 2 137
expected credit losses raised 37 814 66 094
expected credit losses released (60 808) (2 137)
Bad debts written off - 13 785
closing balance 56 885 79 879
Expected credit loss allowance for loans and advances the Group assesses its loans and advances for impairment at the end of each reporting period as per the expected credit loss accounting policy. this requires the application of judgement. Details of the main assumptions applied in these judgments have been disclosed in the credit risk note, note 3.
64 ecsponent Annual Financial Statements ‘19
notes to the consolidated financial statements for the period ended 30 June 2019 (continued)
7. Other financial assets
12-month period ended
30 June 2019R’000
15-month period ended
30 June 2018R’000
At FAiR VAlue tHROuGH pROFit OR lOSS
Listed shares - MyBucks - 236 960
the Group acquired foreign denominated listed equities of the issued share capital
of the myBucks Group, as part of its private equity portfolio. the shares are listed
on the Frankfurt stock exchange. Due to the additional investment in the listed
equities in the current period, this investment has been reclassified to an
investment in associate.
Option agreement 194 293 238 904
in June 2018, the Group entered into a put option agreement with mHmk capital
limited and Sunblaze investment Holdings incorporated, the Option issuers. in
terms of the agreement the Group holds an unconditional and nonexclusive option
to require the Option issuers to purchase, jointly or severally, all or any portion of
the Option Shares, being the total number of myBucks SA ordinary shares held by
ecsponent as at 31 December 2021, at an Option Strike price of €18.
the option can be exercised directly after the Option period’s expiration date being
31 December 2021, during the 30-day Option exercise period which follows.
Capitis Equities 134 756 146 857
the company invested in a Section 12J company, capitis equities (pty) ltd, by
acquiring a 19% stake in the ordinary shares of the entity. the company further
invested in the qualifying 12J investment portfolio of capitis. the Board assesses
the portfolio’s fair value on a regular basis and at a minimum at each reporting
period.
Ngwedi Capital Holdings 12 226 -
the Group acquired an effective 34.30% stake in ngwedi capital Holdings (pty)
ltd via mHmk capital (pty) ltd in which the Group has a 70% stake. this stake was
obtained through the issue of an interest free loan as well as staggered dividends
preference shares redeemable in ten years. the redemption amount is equal to the
issue price of the preference share. please refer to the investment in associates
note 5 for the investment held in ngwedi.
Preference shares - 100 000
the preference share investment comprises 1 666 667 preference shares held in
VSS Financial Services (pty) ltd (“VSS”). the preference shares are cumulative
perpetual instruments with VSS holding the right to redeem or to convert to an
alternative class of share. Dividends are declared at the discretion of the VSS board.
the shares were converted to a loan in the current year.
Listed shares - Go Life 9 299 43 740
the Group acquired 68.2 million ordinary shares in Go life international, a
healthcare company registered in the Republic of mauritius. the company’s
primary listing is on the mauritian stock exchange with a secondary listing on the
JSe’s Alt x. in the current period the Group disposed of 44 million shares.
350 574 766 461
ecsponent Annual Financial Statements ‘19 65
notes to the consolidated financial statements for the period ended 30 June 2019 (continued)
7. Other financial assets (continued)
12-month period ended
30 June 2019R’000
15-month period ended
30 June 2018R’000
OtHeR FinAnciAl ASSetS cARRieD At AmORtiSeD cOSt
Listed bond 65 887 65 727
Bond issued by GetBucks Botswana, listed on the Botswana stock exchange.
the bond has a fixed coupon rate of 18% per annum and matures on
31 December 2021.
65 887 65 727
Total other financial assets 416 461 832 188
nOn-cuRRent ASSetS
At fair value through profit and loss 350 574 485 761
At amortised cost 65 095 51 471
415 669 537 232
cuRRent ASSetS
At fair value through profit and loss - 280 700
At amortised cost 792 14 256
792 294 956
Total other financial assets 416 461 832 188
Expected credit loss allowance for other financial assets at amortised costthe Group assesses its other financial assets at amortised cost for impairment at the end of each reporting period as per the expected credit loss accounting policy. this requires the application of judgement. Details of the main assumptions applied in these judgments have been disclosed in the credit risk note 3.
66 ecsponent Annual Financial Statements ‘19
notes to the consolidated financial statements for the period ended 30 June 2019 (continued)
8. Trade and other receivables
12-month period ended
30 June 2019R’000
15-month period ended
30 June 2018R’000
nOn-FinAnciAl ASSetS
prepayments 11 727 19 394
VAt 4 146 10 826
FinAnciAl ASSetS
trade receivables 38 386 1 166
Other receivables 2 355 47
Deposits 314 6 445
Total trade and other receivables 56 928 37 878
non-current 17 804 -
current 39 124 37 878
Total trade and other receivables 56 928 37 878
Credit quality of trade and other receivables
2019 2018
Trade receivable
Expected credit losses
Trade receivable
Impairment allowance
current 4 313 (40) 594 -
30 days 4 373 (79) 288 -
60 days 2 854 (128) 212 -
90 days 3 717 (173) 13 -
Over 90 days 23 129 (2 208) 434 (375)
38 386 (2 628) 1 541 (375)
Non-current trade receivablesDuring the financial period ended 30 June 2019 the Group acquired a controlling interest in ecsponent Business credit, as noted in the directors’ report. this business allows trade credit terms of up to 72 months for payment plan debtors. the extended terms resulted in the disclosure of non-current trade receivables of R17.8 million at 30 June 2019.
Expected credit lossesexpected credit losses on trade and other receivables is calculated and accounted for in line with the expected credit loss model as disclosed in the accounting policies. the Group assesses the recoverability of individual trade receivable balances on a continuous basis to identify any possible write-offs based on the underlying circumstances.
it is the policy of the Group to allow varying trade credit terms appropriate to the nature of the respective Group operating entity’s business. At 30 June 2018 maximum trade credit terms allowed within the Group were up to 90 days, resulting in all trade receivables classified as current assets.
ecsponent Annual Financial Statements ‘19 67
notes to the consolidated financial statements for the period ended 30 June 2019 (continued)
8. Trade and other receivables (continued)
Where applicable, the expected credit loss in respect of trade receivables is calculated after taking into account the collateral/security provided by the debtor. the expected credit loss is based on days the amount is in arrears. Below see the percentages applied to the arrear amounts.
Type of debtor1 -30 days in arrears
31 -60 days in arrears
61 -90 days
in arrears
91 days in
arrears
collateralised 5% 10% 50% 100%
uncollateralised 10% 20% 50% 100%
these percentages are based on past experience.
Reconciliation of the expected credit loss allowance of trade and other receivables
12-month period ended
30 June 2019R’000
15-month period ended
30 June 2018R’000
Opening balance 375 5 103
expected credit loss allowance raised 10 302 79
expected credit loss allowance released (8 050) (4 807)
2 627 375
68 ecsponent Annual Financial Statements ‘19
notes to the consolidated financial statements for the period ended 30 June 2019 (continued)
9. Cash and cash equivalents
12-month period ended
30 June 2019R’000
15-month period ended
30 June 2018R’000
cASH AnD cASH eQuiVAlentS FROm cOntinuinG OpeRAtiOnS
Bank balance 37 658 45 086
Bank overdraft (803) (781)
36 855 44 305
Total cash and cash equivalents 36 855 44 305
current assets 37 658 45 086
current liabilities (803) (781)
36 855 44 305
Secured bank overdraft facilitiesthe Group’s secured overdraft facilities amount to R1 million at 30 June 2019 (2018: R1 000 000). the facility is secured via a cession of the debtors book of R622 656 (2018: R14.4 million) and surety in the name of ecsponent limited. the overdraft facility bears interest at a rate of 15%. the July debtors book amounted to R2 218 900 and the bank confirmed that the suretyship will not be invoked as at period end.
10. Preference share liability
Authorised Preference Shares
number number
ecSpOnent limiteD (incORpORAteD in SOutH AFRicA)
class A preference shares of no par value 1 000 000 000 1 000 000 000
class B preference shares of no par value 1 000 000 000 1 000 000 000
class c preference shares of no par value 1 000 000 000 1 000 000 000
class D preference shares of no par value 1 000 000 000 1 000 000 000
class e preference shares of no par value 1 000 000 000 1 000 000 000
class G preference shares of no par value 1 000 000 000 1 000 000 000
ecSpOnent eSWAtini limiteD (incORpORAteD in eSWAtini)
class A preference shares of e1.00 100 000 000 100 000 000
class B preference shares of e1.00 100 000 000 100 000 000
class c preference shares of e1.00 100 000 000 100 000 000
class D preference shares of e1.00 100 000 000 100 000 000
class e preference shares of e1.00 100 000 000 100 000 000
class F preference shares of e1.00 100 000 000 100 000 000
class G preference shares of e1.00 100 000 000 100 000 000
class H preference shares of e1.00 100 000 000 100 000 000
ecSpOnent BOtSWAnA limiteD (incORpORAteD in BOtSWAnA)
class A preference shares of no par value 100 000 000 100 000 000
class B preference shares of no par value 100 000 000 100 000 000
7 000 000 000 7 000 000 000
ecsponent Annual Financial Statements ‘19 69
notes to the consolidated financial statements for the period ended 30 June 2019 (continued)10
. P
refe
ren
ce s
har
e li
abil
ity
(co
nti
nu
ed)
Un
issu
ed p
refe
ren
ce s
har
est
he
un
issu
ed p
refe
ren
ce s
har
es in
all
regi
ons
are
un
der
th
e co
ntr
ol o
f th
e d
irec
tors
.
Rec
onci
liati
on o
f th
e n
um
ber
of p
refe
ren
ce s
har
es in
issu
e:
ecsp
onen
t li
mit
ed (
Sou
th A
fric
a)
30
Ju
ne
20
19
Cla
ss A
C
lass
BC
lass
CC
lass
DC
lass
EC
lass
G
R’0
00
R’0
00
R’0
00
R’0
00
R’0
00
R’0
00
Rep
orte
d a
t th
e b
egin
nin
g of
th
e p
erio
d
783
06
93
68
8 6
44
7 3
44
514
1 4
18 8
25
89
2 9
203
1 11
0
issu
e of
pre
fere
nce
sh
ares
du
rin
g th
e p
erio
d
-1
82
2 3
95
-2
05
3 3
91
1 10
7 5
102
2 1
52
78
3 0
69
5 5
11 0
39
7 3
44
514
3 4
72 2
162
00
0 4
30
53
26
2
Wei
gh
ted
ave
rag
e is
sue
pri
ce p
er s
har
e (R
and
s)
96
,80
100
,00
100
,00
100
,00
100
,00
100
,00
ecsp
onen
t e
swat
ini l
imit
ed
Cla
ss E
Cla
ss G
Rep
orte
d a
t th
e b
egin
nin
g of
th
e p
erio
d
14
8 2
08
92
70
5
Red
emp
tion
of p
refe
ren
ce s
har
es d
uri
ng
the
per
iod
(2 6
18)
(1 2
46
)
145
59
09
1 4
59
Wei
gh
ted
ave
rag
e is
sue
pri
ce p
er s
har
e (E
mal
ang
eni)
1,
00
1,0
0
Wei
gh
ted
ave
rag
e is
sue
pri
ce p
er s
har
e (c
on
vert
ed t
o R
and
)1,
00
1,0
0
ecsp
onen
t B
otsw
ana
lim
ited
Cla
ss A
C
lass
B
Rep
orte
d a
t th
e b
egin
nin
g of
th
e p
erio
d
10 3
50
2 0
27
Red
emp
tion
of p
refe
ren
ce s
har
es d
uri
ng
the
per
iod
-
(12
3)
10
35
01
90
4
Wei
gh
ted
ave
rag
e is
sue
pri
ce p
er s
har
e (P
ula
)1,
00
1,0
0
Wei
gh
ted
ave
rag
e is
sue
pri
ce p
er s
har
e (R
and
)1,
30
1,3
0
th
e p
refe
ren
ce s
har
es a
re is
sued
on
an
on
-goi
ng
bas
is t
o in
vest
ors
un
der
a g
ener
al a
uth
orit
y p
rovi
ded
to
the
dir
ecto
rs’ t
o is
sue
shar
es fo
r ca
sh.
70 ecsponent Annual Financial Statements ‘19
notes to the consolidated financial statements for the period ended 30 June 2019 (continued)
10. Preference share liability (continued)
Classification of redeemable preference shares Holders of the preference shares receive a cumulative dividend subject to the terms of the preference share class issued. the preference shares do not have the right to participate in any additional dividends declared to ordinary shareholders. these shares do not have voting rights at general meetings of the company.
the preference shares are redeemable after 60 months from the initial issue date and as a result are classified as debt and disclosed as such in the statement of financial position. the dividends declared to preference shareholders are classified as finance costs and disclosed on this basis in the statement of profit and loss.
Preference share liability the preference share liability at the end of the period comprises of the following:
12-month period ended
30 June 2019R’000
15-month period ended
30 June 2018R’000
HelD At AmORtiSeD cOSt
Preference shares issued by Ecsponent Limited (South Africa):
Preference share - class A 76 786 75 316
initial issue price redeemable after five years. monthly dividend paid at a rate of
10% per annum.
Preference share - class B 658 806 417 931
preference share redeems at 170% of the initial issue after five years. no monthly
dividends are paid.
Preference share - class C 723 425 713 021
initial issue price redeemable after five years. monthly dividend paid at a rate of
prime plus 4% per annum.
Preference share - class D 340 785 137 414
initial issue price redeemable after five years. monthly dividend paid at a rate of
12.5% per annum.
Preference share - class E 195 382 86 311
initial issue price redeemable after five years. monthly dividend paid at a rate of
11.25% per annum.
Preference share - class G 5 212 3 007
initial issue price redeemable after five years. monthly dividend paid at a rate of
10% per annum.
Preference shares issued by Ecsponent Eswatini Limited:
Preference share - class A 139 262 139 878
Five year income provider with a variable rate redeemable, convertible units of
e1 000 comprising e1 preference share and e999 claim. 15% rate at present paid
monthly.
Preference share - class E 127 621 111 303
Five year capital growth provider with a zero rate redeemable, convertible units of
e1 000 comprising e1 preference share and e999 claim. Redeemed at end of five
years at e2 000.
ecsponent Annual Financial Statements ‘19 71
notes to the consolidated financial statements for the period ended 30 June 2019 (continued)
12-month period ended
30 June 2019R’000
15-month period ended
30 June 2018R’000
HelD At AmORtiSeD cOSt
Preference shares issued by Ecsponent Botswana Limited:
Preference share - class A 13 658 13 560
Five year income provider with a variable rate redeemable, convertible units of
p1 000 comprising p1 preference share and p999 claim. 15% rate at present
paid monthly.
Preference share - class B 4 421 4 234
Five year capital growth provider with a zero rate redeemable, convertible units of
p1 000 comprising p1 preference share and p999 claim. Redeemed at end of five
years at p2 000.
Total preference shares 2 285 358 1 701 975
nOn-cuRRent liABilitieS
At amortised cost 1 954 610 1 694 362
cuRRent liABilitieS
At amortised cost 330 747 7 613
10. Preference share liability (continued)
72 ecsponent Annual Financial Statements ‘19
notes to the consolidated financial statements for the period ended 30 June 2019 (continued)
11. Preference shareholder analysis
Below an analysis of the Group’s classes of preference shares listed on the JSe securities exchange.
Class A Preference Shareholders
Nr of
shareholders
% of Total
shareholders
Nr of shares % of Total
issued share
capital
AnAlySiS OF SHAReHOlDinGS
1 - 1 000 80 29.9% 37 674 4.8%
1 001 - 10 000 174 64.9% 528 551 67.5%
10 001 - 100 000 14 5.2% 216 844 27.7%
100 001 - 1 000 000 - 0.0% - 0.0%
1 000 001 and over - 0.0% - 0.0%
Totals 268 100.0% 783 069 100.0%
mAJOR SHAReHOlDeRS
(3% and more of the Shares in issue) - - - -
mmA Snyman - - 25 000 3.19%
Totals - - 25 000 3.19%
SHAReHOlDeR SpReAD
non-public - 0.0% - 0.0%
10% of issued capital or more - 0.0% - 0.0%
public 268 100.0% 783 069 100.0%
Totals 268 100.0% 783 069 100.0%
DiStRiButiOn OF SHAReHOlDeRS
close corporations 2 0.7% 16 375 2.1%
individuals 253 94.4% 680 997 87.0%
nominees and trusts 13 4.9% 85 697 10.9%
Totals 268 100.0% 783 069 100.0%
Class B Preference Shareholders
AnAlySiS OF SHAReHOlDinGS
1 - 1 000 1 329 58.6% 711 356 12.9%
1 001 - 10 000 868 38.3% 3 276 960 59.5%
10 001 - 100 000 68 3.0% 1 402 723 25.5%
100 001 - 1 000 000 1 0.0% 120 000 2.2%
1 000 001 and over - 0.0% - 0.0%
Totals 2 266 100.0% 5 511 039 100.0%
mAJOR SHAReHOlDeRS
(3% and more of the Shares in issue)
none
ecsponent Annual Financial Statements ‘19 73
notes to the consolidated financial statements for the period ended 30 June 2019 (continued)
Class B Preference Shareholders (continued)
Nr of
shareholders
% of Total
shareholders
Nr of shares % of Total
issued share
capital
SHAReHOlDeR SpReAD
non-public - 0.0% - 0.0%
10% of issued capital or more - 0.0% - 0.0%
public 2 266 100.0% 5 511 039 100.0%
Totals 2 266 100.0% 5 511 039 100.0%
DiStRiButiOn OF SHAReHOlDeRS
individuals 2 228 98.3% 5 129 731 93.1%
nominees and trusts 18 0.8% 113 951 2.1%
close corporations 7 0.3% 36 757 0.7%
private companies 13 0.6% 230 600 4.2%
Totals 2 266 100.0% 5 511 039 100.0%
Class C Preference Shareholders
AnAlySiS OF SHAReHOlDinGS
1 - 1 000 261 20.9% 207 618 2.8%
1 001 - 10 000 732 58.6% 2 730 369 37.2%
10 001 - 100 000 257 20.6% 4 406 527 60.0%
100 001 - 1 000 000 0.0% 0.0%
1 000 001 and over 0.0% 0.0%
Totals 1 250 100.0% 7 344 514 100.0%
mAJOR SHAReHOlDeRS
(3% and more of the Shares in issue)
none
SHAReHOlDeR SpReAD
non-public - 0.0% - 0.0%
10% of issued capital or more - 0.0% - 0.0%
public 1 250 100.0% 7 344 514 100.0%
Totals 1 250 100.0% 7 344 514 100.0%
DiStRiButiOn OF SHAReHOlDeRS
close corporations 7 0.6% 30 690 0.4%
individuals 1 187 95.0% 6 788 293 92.4%
nominees and trusts 43 3.4% 364 839 5.0%
private companies 13 1.0% 160 692 2.2%
Totals 1 250 100.0% 7 344 514 100.0%
11. Preference shareholder analysis (continued)
74 ecsponent Annual Financial Statements ‘19
notes to the consolidated financial statements for the period ended 30 June 2019 (continued)
Class D Preference Shareholders
Nr of
shareholders
% of Total
shareholders
Nr of shares % of Total
issued share
capital
AnAlySiS OF SHAReHOlDinGS
1 - 1 000 1 0.5% 900 0.0%
1 001 - 10 000 97 46.9% 913 000 26.1%
10 001 - 100 000 108 52.2% 2 428 310 69.3%
100 001 - 1 000 000 1 0.5% 160 000 4.6%
1 000 001 and over 0.0% 0.0%
Totals 207 100.0% 3 502 210 100.0%
mAJOR SHAReHOlDeRS
(3% and more of the Shares in issue)
Warplas Share trust 160 000 4.6%
Totals 160 000 4.6%
SHAReHOlDeR SpReAD
non-public - 0.0% - 0.0%
10% of issued capital or more - 0.0% - 0.0%
public 207 100.0% 3 502 210 100.0%
Totals 207 100.0% 3 502 210 100.0%
DiStRiButiOn OF SHAReHOlDeRS
close corporations 5 2.4% 62 000 1.8%
individuals 184 88.9% 2 922 385 83.4%
nominees and trusts 14 6.8% 377 825 10.8%
private companies 4 1.9% 140 000 4.0%
Totals 207 100.0% 3 502 210 100.0%
Class E Preference Shareholders
AnAlySiS OF SHAReHOlDinGS
1 - 1 000 7 1.9% 6 500 0.3%
1 001 - 10 000 336 89.4% 1 367 530 68.0%
10 001 - 100 000 33 8.8% 637 700 31.7%
100 001 - 1 000 000 0.0% 0.0%
1 000 001 and over 0.0% 0.0%
Totals 376 100.0% 2 011 730 100.0%
mAJOR SHAReHOlDeRS
(3% and more of the Shares in issue)
none
11. Preference shareholder analysis (continued)
ecsponent Annual Financial Statements ‘19 75
notes to the consolidated financial statements for the period ended 30 June 2019 (continued)
Class E Preference Shareholders (continued)
Nr of
shareholders
% of Total
shareholders
Nr of shares % of Total
issued share
capital
SHAReHOlDeR SpReAD
non-public - 0.0% - 0.0%
10% of issued capital or more - 0.0% - 0.0%
public 376 100.0% 2 011 730 100.0%
Totals 376 100.0% 2 011 730 100.0%
DiStRiButiOn OF SHAReHOlDeRS
close corporations 5 1.3% 50 600 2.5%
individuals 359 95.5% 1 852 940 92.1%
nominees and trusts 8 2.1% 52 190 2.6%
private companies 4 1.1% 56 000 2.8%
Totals 376 100.0% 2 011 730 100.0%
Class G Preference Shareholders
AnAlySiS OF SHAReHOlDinGS
1 - 1 000 30 60.0% 24 100 45.2%
1 001 - 10 000 20 40.0% 29 162 54.8%
10 001 - 100 000 0.0% 0.0%
100 001 - 1 000 000 0.0% 0.0%
1 000 001 and over 0.0% 0.0%
Totals 50 100.0% 53 262 100.0%
mAJOR SHAReHOlDeRS
(3% and more of the Shares in issue)
S Shafer 2 500 4.7%
SB Van niekerk 1 852 3.5%
Totals 4 352 8.2%
SHAReHOlDeR SpReAD
non-public - 0.0% - 0.0%
10% of issued capital or more - 0.0% - 0.0%
public 50 100.0% 53 262 100.0%
Totals 50 100.0% 53 262 100.0%
DiStRiButiOn OF SHAReHOlDeRS
individuals 42 84.0% 47 662 89.5%
nominees and trusts 8 16.0% 5 600 10.5%
Totals 50 100.0% 53 262 100.0%
11. Preference shareholder analysis (continued)
76 ecsponent Annual Financial Statements ‘19
notes to the consolidated financial statements for the period ended 30 June 2019 (continued)
12. Other financial liabilities
12-month period ended
30 June 2019R’000
15-month period ended
30 June 2018R’000
HelD At AmORtiSeD cOSt
Scipion Active Trading Fund 140 471 138 385
uSD 10 million term loan facility that bears interest at 10% plus 12-month liBOR
screen rate amortised and payable monthly. 50% of the capital is payable by may
2021 and the remaining 50% is payable in August 2021.
this loan is secured by 1 100 000 myBucks shares.
Ever Prosperous Worldwide Limited 77 666 72 432
uSD 14.8 million loan is secured by a pledge of 381,506,336 shares in GetBucks
microfinance Bank limited, bears interest at 10% per annum, payable monthly.
the capital is repayable by 31 December 2019.
Colyn Promissory note 12 362 12 138
this loan bears interest at 8% per annum, interest is payable monthly, and the
capital is repayable by 25 July 2024.
Capitis Equities (Pty) Ltd 93 605 -
the loan is unsecured, bears interest at 8% per annum and is repayable
on demand.
Tailored Investments 207 836 -
the loan is secured by 1 953 874 shares of myBucks S.A., is interest free and is
repayable in monthly instalments until June 2022.
Ecsponent Eswatini Collective Investment Scheme 2 903 -
the loan is secured by a payment guarantee by ecsponent limited, repayable
12 months from date of advance and bears interest at 15% per annum.
GetBucks Ltd (Mauritius) 74 132 -
uSD 3.6 million loan facility is unsecured, bears interest at 10.5% per annum and
both interest and capital are repayable on demand.
Norsad Finance (Botswana) Limited 68 404 -
uSD 5 million loan is secured by a pledge of 444,000 myBucks shares that bears
interest at the three-month liBOR plus 11% per annum, payable quarterly. the loan
is repayable on 11 July 2022.
Total other financial liabilities 677 379 222 955
nOn-cuRRent liABilitieS
At amortised cost 368 107 150 523
cuRRent liABilitieS
At amortised cost 309 272 72 432
Total other financial liabilities 677 379 222 955
ecsponent Annual Financial Statements ‘19 77
notes to the consolidated financial statements for the period ended 30 June 2019 (continued)
13. Trade and other payables
12-month period ended
30 June 2019R’000
15-month period ended
30 June 2018R’000
nOn-FinAnciAl liABilitieS
VAt 2 198 1 409
Other payables 1 065 117
FinAnciAl liABilitieS
trade payables 9 758 12 060
payroll liabilities 1 383 757
Accrued leave pay 2 035 790
Accrued audit fees 1 297 318
Straight lining lease accrual 90 1 616
Other accrued expenses 351 284
Other payables 935 4 235
19 112 21 586
non-current portion - 1 616
current portion 19 112 19 970
Total 19 112 21 586
78 ecsponent Annual Financial Statements ‘19
notes to the consolidated financial statements for the period ended 30 June 2019 (continued)
14. Share capital
12-month period ended
30 June 2019
15-month period ended
30 June 2018
AutHORiSeD ORDinARy SHAReS
number of authorised ordinary shares of no par value 1 000 000 000 000 1 000 000 000 000
iSSueD ORDinARy SHAReS
number of issued ordinary shares of no par value 1 079 555 364 1 079 555 364
Ordinary shares Holders of these shares are entitled to dividends as declared from time to time and are entitled to one vote per share at the general meetings of the company.
RecOnciliAtiOn OF tHe numBeR OF ORDinARy SHAReS iSSueD
Reported at the beginning of the period 1 079 555 364 1 079 550 795
issue of ordinary shares - 4 569
1 079 555 364 1 079 555 364
no share issues took place during the 2019 financial period. the following share issues took place during the 2018 financial period:
Issue date Issue price (cents per
share)
Number of shares
issued
Share issue for cash 08 may 2018 0,15 4 569
Unissued ordinary shares the unissued ordinary shares are under the control of the directors in terms of a resolution of members passed at the last annual general meeting.
R’000 R’000
RecOnciliAtiOn OF tHe ORDinARy SHARe cApitAl
Reported at the beginning of the period 145 170 145 169
issue of shares - 1
145 170 145 170
ecsponent Annual Financial Statements ‘19 79
notes to the consolidated financial statements for the period ended 30 June 2019 (continued)
14. Share capital (continued)
Ordinary shareholders’ analysislisted below is an analysis of holdings extracted from the register of ordinary shareholders at 30 June 2019:
Nr of
shareholders
% of Total
shareholders
Nr of shares % of Total
issued share
capital
AnAlySiS OF SHAReHOlDinGS
1 - 1 000 384 12.5% 200 709 0.0%
1 001 - 10 000 1 769 57.8% 7 386 763 0.7%
10 001 - 100 000 690 22.5% 20 578 281 1.9%
100 001 - 1 000 000 168 5.5% 54 430 503 5.0%
1 000 001 and over 49 1.6% 996 959 108 92.3%
Totals 3 060 100.0% 1 079 555 364 100.0%
mAJOR SHAReHOlDeRS
(3% and more of the Shares in issue)
mHmk Group ltd (formerly mason Alexander (pty) ltd) - - 610 558 527 56.6%
pledged Securities Account - - 86 901 750 8.0%
mr terence patrick Gregory - - 38 634 423 3.6%
Settled investments three (pty) ltd - - 34 023 480 3.2%
Totals - - 770 118 180 71.3%
SHAReHOlDeR SpReAD
non-public 6 0.2% 614 387 359 56.9%
Directors 4 0.1% 64 478 869 6.0%
public 3 050 99.7% 400 689 136 37.1%
Totals 3 060 100.0% 1 079 555 364 100.0%
DiStRiButiOn OF SHAReHOlDeRS
Bank or nominee 4 0.1% 15 523 0.0%
Female 307 10.0% 21 097 826 2.0%
male 1 298 42.4% 198 224 663 18.4%
individual 1 365 44.6% 68 564 610 6.4%
Other company 32 1.0% 748 363 246 69.3%
Other corporation 16 0.5% 764 881 0.1%
trusts 38 1.2% 42 524 615 3.9%
Totals 3 060 100.0% 1 079 555 364 100.0%
80 ecsponent Annual Financial Statements ‘19
notes to the consolidated financial statements for the period ended 30 June 2019 (continued)
15. Director’s interest in issued share capital of the Company
At 30 June 2019 the directors’ beneficial interests in the company held directly and indirectly amounted to 6%, and 56.8% including the non-beneficial interest held. total directors’ interest were as follows:
DirectorTotal shares
heldHolding Direct Indirect
RJ connellan 2 495 080 0.2% 2 495 080 -
tp Gregory 38 634 423 3.6% 38 634 423 -
G manyere 610 558 527 56.6% - 610 558 527
p matute - - - -
W Oberholzer (directorship ended 31 Jul 2019) - - - -
kA Rayner 3 349 366 0.3% 3 349 366 -
BR topham (directorship ended 31 Jan 2019) 2 492 222 0.2% - 2 492 222
Dp van der merwe 20 000 000 1.9% 20 000 000 -
there were no other changes in directors’ interest since this issue and up to the date of approval of the financial statements for the period ended 30 June 2019.
At 30 June 2018 the directors’ beneficial interests in the company held directly and indirectly amounted to 5.5%, and 54.9% including the non-beneficial interest held. total directors’ interest were as follows:
RJ connellan 2 495 080 0.2% 2 495 080 -
tp Gregory 38 634 423 3.6% 38 634 423 -
G manyere 584 507 611 54.1% - 584 507 611
kA Rayner 3 349 366 0.3% 3 349 366 -
BR topham (directorship ended 31 Jan 2019) 2 492 222 0.2% - 2 492 222
Dp van der merwe 20 000 000 1.9% 14 500 000 5 500 000
ecsponent Annual Financial Statements ‘19 81
notes to the consolidated financial statements for the period ended 30 June 2019 (continued)
16. Note programme
12-month period ended
30 June 2019number
15-month period ended
30 June 2018number
AutHORiSeD BOnD nOte
Ecsponent Limited (incorporated in South Africa)
note 1 bond of no par value 1 000 000 000 -
note 2 bond of no par value 1 000 000 000 -
note 3 bond of no par value 1 000 000 000 -
note 4 bond of no par value 1 000 000 000 -
note 5 bond of no par value 1 000 000 000 -
5 000 000 000 -
During Q4 of 2018 ecsponent introduced its ZAR10 000 000 000 Domestic medium term note programme (“note programme”). ecsponent may from time to time issue notes of any kind denominated in South African Rand, on the terms and conditions contained in the note programme. the note programme was approved by the JSe on 21 August 2018. notes may be at a Fixed Rate, a Floating Rate or a Zero-coupon, or such combination of any of the foregoing or such other type of note as may be determined by ecsponent and specified in the Applicable pricing Supplement from time to time. Save as set out in the note programme, the notes will not be subject to any minimum or maximum maturity and the maximum aggregate principal amount of all notes from time to time outstanding will not exceed ZAR10 000 000 000.
notes currently on offer: › Zero-coupon notes with a return of 10.66% per annum, payable after three years together with capital;› Floating Rate notes with a return of prime + 1.5% per annum, payable monthly and capital after three years; and› Fixed Rate notes with a return ranging between 9% to 12.5% per annum, payable monthly and capital after three years.
ecsponent limited (South Africa)
30 June 2019
Fixed rate Note 1
Fixed rate
Note 2
Fixed rate
Note 3
Floating rate
Note
Zero-Coupon Note
Reported at the beginning of the period - - - - -
issue of notes during the period 45 4 582 1 068 3 337 4 302
45 4 582 1 068 3 337 4 302
Weighted average issue price per share (Rands)
100.00 100.00 100.00 100.00 100.00
82 ecsponent Annual Financial Statements ‘19
notes to the consolidated financial statements for the period ended 30 June 2019 (continued)
16. Note programme (continued)
12-month period ended
30 June 2019R’000
15-month period ended
30 June 2018R’000
HelD At AmORtiSeD cOSt
Note 1 – Fixed Rate 1 330 -
initial issue price redeemable after three years. monthly interest is paid at a rate of
9% per annum.
Note 2 – Fixed Rate 12 947 -
initial issue price redeemable after three years. monthly interest is paid at a rate of
10% per annum.
Note 3 – Fixed Rate 29 662 -
initial issue price redeemable after three years. monthly interest is paid at a rate of
12% per annum.
Note 4 – Zero-Coupon 9 446 -
note redeems at 137.49% of the initial issue price after three years. no monthly
interest is paid.
Note 5 – Floating Rate 12 009 -
initial issue price redeemable after three years. monthly interest is paid at a rate of
prime plus 1.5% per annum.
Total notes in issue 65 394 -
nOn-cuRRent liABilitieS
At amortised cost 64 659 -
cuRRent liABilitieS
At amortised cost 736 -
Total notes in issue 65 395 -
ecsponent Annual Financial Statements ‘19 83
notes to the consolidated financial statements for the period ended 30 June 2019 (continued)
17. Earnings and fully diluted earnings per share
12-month period ended
30 June 2019R’000
15-month period ended
30 June 2018R’000
eARninGS
› total profit for the period (excluding other comprehensive income) (254 529) 97 363
› loss attributable to non-controlling interest (847) 4 817
Basic earnings (255 376) 102 180
no share issues took place during the 2019 financial period.
number of shares in issue at start of period 1 079 555 326 1 079 550 795
Weighted average of shares issued during the period - 531
Total weighted number of shares in issue at end of period 1 079 555 326 1 079 551 326
Earnings and diluted earnings per shareprofit and diluted profit per share has been calculated using the following:
net profit for the period attributable to ordinary shareholders (255 376) 102 180
› from continuing operations (255 376) 86 869
› from discontinuing operations - 15 311
Weighted average number of shares in issue for the period 1 079 555 326 1 079 551 326
Basic (loss) profit and diluted profit per share (cents) (23 656) 9 465
› from continuing operations (23 656) 8 047
› from discontinuing operations - 1,418
Headline earnings and diluted headline earnings per shareHeadline earnings and diluted headline earnings per share have been calculated as follows:
› Basic earnings (255 376) 102 180
› Gain/loss of control on disposal of subsidiary - (7 780)
› Gain on disposal of associate - (399)
› Gain on disposal of subsidiary - discontinued operations - (15 438)
› (Gain) loss on disposal of property, plant and equipment (155) 5
› loss on disposal of intangible assets - 811
› impairment of goodwill 119 108 -
› Gain on disposal of disposal group held for sale - (3 905)
Total headline earnings (136 423) 75 474
Headline earnings attributable to ordinary shareholders (136 423) 75 474
› from continuing operations (136 423) 75 601
› from discontinuing operations - (127)
84 ecsponent Annual Financial Statements ‘19
notes to the consolidated financial statements for the period ended 30 June 2019 (continued)
12-month period ended
30 June 2019R’000
15-month period ended
30 June 2018R’000
Weighted average number of shares in issue for the period 1 079 555 326 1 079 551 326
Headline earnings per share (cents) (12,637) 6,991
› from continuing operations (12,637) 7,003
› from discontinuing operations - (0,012)
there are no dilutive impacts during the current year of assessment.
Period ending 30 June 2019
Reconciliation of headline earnings
Gross adjustment Nett adjustment
Basic earnings (249 733) (255 376)
loss on disposal of property, plant and equipment (215) (155)
loss on impairment of goodwill 119 108 119 108
Total headline earnings (130 840) (136 423)
Period ending 30 June 2018
Reconciliation of headline earnings
Basic earnings 151 864 102 180
Gain of control on disposal of subsidiary (10 806) (7 780)
Gain on disposal of associate (554) (399)
Gain on disposal of subsidiary - discontinued operations (16 837) (15 438)
loss on disposal of property, plant and equipment 7 5
loss on disposal of intangible assets 1 126 811
Gain on disposal of disposal group held for sale (5 424) (3 905)
Total headline earnings 119 376 75 474
17. Earnings and fully diluted earnings per share (continued)
ecsponent Annual Financial Statements ‘19 85
notes to the consolidated financial statements for the period ended 30 June 2019 (continued)
12-month period ended
30 June 2019R’000
15-month period ended
30 June 2018R’000
Balance at the beginning of the period 362 (11 429)
non-controlling interest in current period income 847 (4 817)
Foreign currency translation on non-controlling interest - 12
Business combinations and common control acquisitions (368) 5 604
Disposal of investments 1 10 992
Total non-controlling interest at the end of the period 842 362
the table below summarises the information relating to each of the Group’s subsidiaries for the financial period ended 30 June 2019 that has material non-controlling interest, before any intragroup eliminations.
Ecsponent Eswatini Limited
Vitasave (Pty)
Ltd
MHMK Capital
(Pty) Ltd
Total
R’000 R’000 R’000 R’000
non-controlling interest 15.30% 49.00% 30.00%
principle place of business eswatini South Africa South Africa
pROFit/lOSS AllOcAteD tO nOn-cOntROllinG inteReSt
Revenue 45 798 - 4 602 50 400
total comprehensive profit/(loss) for the period 349 - 2 645 2 994
Allocated to non-controlling interest 53 - 793 846
the following summarises the changes in the company’s ownership interest as a result of the acquisitions and disposal during the period:
Vitasave (Pty)
Ltd
MHMK Capital
(Pty) Ltd
Total
R’000 R’000 R’000
non-controlling ownership interest at beginning of the period (1) - (1)
Share of comprehensive profit/(loss) for the period - 793 793
purchase of minority interest - (368) (368)
Disposal of investment in subsidiaries 1 - 1
Non-controlling ownership interest at 30 June 2019 - 425 425
18. Non-controlling interest
86 ecsponent Annual Financial Statements ‘19
notes to the consolidated financial statements for the period ended 30 June 2019 (continued)
Ecsponent
Eswatini
Limited
MHMK Capital
(Pty) Ltd
Total
R’000 R’000 R’000
cARRyinG AmOunt OF nOn-cOntROllinG inteReSt
non-current assets 8 275 25 450 33 725
current assets 263 055 1 708 264 763
non-current liabilities (259 895) (2 738) (262 633)
current liabilities (8 714) (22 020) (30 734)
Net assets 2 721 2 400 5 121
Carrying amount of non-controlling interest 417 425 842
cASH FlOW OF SuBSiDiARieS WitH nOn-cOntROllinG inteReSt
cash flows from operating activities (8 804) (51)
cash flows from investing activities (7 217) (8 880)
cash flows from financing activities 15 587 9 844
Net (decrease)/increase in cash and cash equivalents (434) 913
Notes › no dividends were declared or paid from subsidiaries with non-controlling interest.› the following changes to non-controlling interests were effected during the period under review:
ê mHmk capital (pty) ltd was purchased effective on 1 April 2019 by ecsponent South Africa (pty) ltd, taking the controlling interest from 0% to 70%;
ê ecsponent ltd made the following disposals during the financial period (as detailed below);
Vitasave (pty) ltd 1
the company was de-registered in the current year hence there was no purchase consideration received. As a result there is no gain or loss on disposal due to the de-registration.
18. Non-controlling interest (continued)
ecsponent Annual Financial Statements ‘19 87
notes to the consolidated financial statements for the period ended 30 June 2019 (continued)
12-month period ended
30 June 2019R’000
15-month period ended
30 June 2018R’000
Fair value adjustments (94 098) (35 806)
capital loss 4 111 -
tax losses available for set off against future taxable income 70 532 11 101
capital growth accruals 28 616 19 175
Allowance for credit loss 5 783 18 508
capital gain - 12J (34 944) (34 944)
Other deferred tax (liabilities)/assets (1 909) 401
Deferred transaction cost (19 541) (18 919)
Foreign currency translation reserve (4 991) (3 712)
(46 441) (44 196)
The deferred tax asset disclosed in the Group statement of financial position as non-current asset comprises:
Fair value adjustments 15 874 404
tax losses available for set off against future taxable income 70 699 11 101
capital growth accruals 28 637 19 175
capital loss 4 111 -
Allowance for credit loss 16 919 221
trade receivable impairments - 18 508
Other deferred tax assets 2 346 226
138 586 49 635
The deferred tax liability disclosed in the Group statement of financial position as non-current liabilities comprises:
capital gain - 12J (34 944) (34 944)
Fair value adjustments (109 972) (36 210)
Other deferred liabilities (4 443) -
Allowance for credit loss (11 136) (27)
Deferred transaction cost (19 541) (18 919)
Foreign currency translation reserve (4 991) (3 731)
(185 027) (93 831)
19. Deferred taxation
88 ecsponent Annual Financial Statements ‘19
notes to the consolidated financial statements for the period ended 30 June 2019 (continued)
19. Deferred taxation (continued)
12-month period ended
30 June 2019R’000
15-month period ended
30 June 2018R’000
Reconciliation of the deferred tax liability:
Deferred tax (liability) asset at the beginning of the period (44 196) 15 004
Adjustment to opening balance due to iFRS 9 adoption 3 364 -
(increase)/decrease in tax losses available for set off against future taxable income 56 067 5 852
Originating temporary differences on trade receivable impairments (18 508) 105
Originating temporary on fair value adjustments (58 291) (38 159)
Other originating timing differences 16 402 21 677
Originating temporary on section 12J investments - (34 944)
Derecognition due to disposal of investment - (10 034)
effect of foreign currency translation (1 279) (3 697)
(46 441) (44 196)
Tax losses available for set off against future taxable income the Group recognises the net tax benefit relating to deferred income tax assets arising from future deductible temporary differences and past income tax losses. the deferred income tax asset is recognised to the extent it is probable that taxable income will be available from forecast profits to realise the future tax saving. (Refer to note 31 - taxation, for additional information regarding the estimated tax losses). the expectation of future profits is based on the continued improvement in the Group’s operating results arising from the restructure initiatives already implemented and the continuation of the Group’s restructure and recapitalisation project. the main objective of the initiative is to ensure the Group’s profitability and sustainability.
ecsponent Annual Financial Statements ‘19 89
notes to the consolidated financial statements for the period ended 30 June 2019 (continued)
2019
Cost Accumulated
amortisation
Carrying value
R’000 R’000 R’000
computer software 189 (36) 153
Goodwill 5 551 - 5 551
Total 5 740 (36) 5 704
2018
computer software 80 (6) 74
Goodwill 3 992 - 3 992
Total 4 072 (6) 4 066
Reconciliation of intangible assets
2019
Opening
balance
Additions Business
combinations
Amortisation
and
impairments
Total
R’000 R’000 R’000 R’000 R’000
computer software 74 109 - (31) 153
Goodwill 3 992 - 120 668 (119 108) 5 551
Total 4 066 109 120 668 (119 139) 5 704
2018
Opening
balance
Additions Sale of
business
Disposal Amortisation Total
R’000 R’000 R’000 R’000 R’000 R’000
computer software 2 019 80 (1 165) - (860) 74
Goodwill 3 992 - - - - 3 992
Total 6 011 80 (1 165) - (860) 4 066
20. Intangible assets and goodwill
ecsponent ltd acquired a 100% interest in ecsponent procurement Services (pty) ltd (formerly Quilibet trading (pty) ltd), a supplier of engineering goods and services, effective 1 march 2015. the transaction was a strategic purchase to unlock opportunities for secured funding to select financial service companies and credit to small, medium and micro enterprises and providing specific goods and services required by relevant vendors. the transaction yielded a goodwill element of R4 million.
ecsponent treasury Services (pty) ltd acquired a 100% interest in ecsponent Business credit (pty) ltd (formerly GetBucks Smme (pty) ltd), a financial services company, effective 12 October 2018. the transaction was a strategic purchase to unlock opportunities for secured term loan funding to small and medium enterprises. the transaction yielded a goodwill element of R19.9 million. the entire balance of goodwill was written off in the current period.
ecsponent ltd acquired a 100% interest in ecsponent mauritius limited (formerly pink Orchid limited), an investment company which holds shares in GetBucks Zimbabwe and myBucks, effective 12 October 2018. the transaction was a strategic purchase to position ecsponent with both myBucks and GetBucks Zimbabwe limited shares, increasing its holding to 39.7% and 34.89% respectively. the transaction yielded a goodwill element of R99.2 million. the entire balance of goodwill was written off in the current period.
ecsponent ltd acquired a 70% interest in mHmk capital (pty) ltd, a financial services company, effective 31 march 2019. the transaction was a strategic purchase to unlock opportunities for exposure to select financial service companies, namely ngwedi capital Holdings and services required to manage investment entities. the transaction yielded a goodwill element of R1.6 million.
90 ecsponent Annual Financial Statements ‘19
notes to the consolidated financial statements for the period ended 30 June 2019 (continued)
Goodwill acquired in a business combination is allocated, at acquisition, to the cash generating units (cGus) that are expected to benefit from that business combination.
the goodwill is not amortised as it is deemed to have an indefinite useful life.
During the financial period the Group assessed the recoverable amount through the annual impairment assessment. the assessment determined that the goodwill allocated to the ecsponent procurement Services (pty) ltd and mHmk capital (pty) ltd cash generating units were not impaired and consequently no impairment was recognised.
Goodwill was tested for impairment by fair value less cost to sell for the ecsponent Business credit (pty) ltd, mHmk capital (pty) ltd and ecsponent mauritius limited cash generating units. the ecsponent mauritius limited fair value was determined with reference to the myBucks Group as a cGu, as the only investments in this entity relates to investments in myBucks Group companies. the fair value (level 3) was determined on the same basis as disclosed in the financial instruments note 4. through the assessment, it was determined that the assets were already accounted for at fair value and as such the entire balance of goodwill was written off in the current period.
ecsponent Business credit was disposed after year end. please refer to the events after the reporting date note 24. Due to this transaction ecsponent recovers the loan, but the goodwill recognised will not be recovered through the sale of the company. the entire balance of goodwill was written off in the current period.
the mHmk capital fair value was determined with reference to the value of the associate (ngwedi capital Holdings), as the only investments in this entity relates to investments in ngwedi. through the assessment, it was determined that the underlying assets are accounted for at fair value and has experienced significant growth. As such the entire balance of goodwill recognised in the mHmk capital acquisition was assessed as recoverable in the current period.
Goodwill relating to the acquisition of ecsponent procurement Services was tested for impairment by using value in use because it is higher than the fair value less cost to sell. cash flow forecasts are derived from the most recent financial budgets of ecsponent procurement Services (pty) ltd approved by management. the cash flows are forecast for the following five years based on an estimated and very conservative growth rate of 8%. this rate does not exceed the average long-term growth rate for the relevant markets. A pre-tax discount rate of 11% (2018: 11%) was used for the value in use calculation after the impact of the industry related risk.
the following key assumptions, based on past experience, were included in the financial budgets to determine the future cash flows: › continued growth of budgeted sales volumes and services
of a very conservative 8%› continued growth in budgeted gross margins based on
historical performance, of 10%› maintaining the budgeted levels of overheads and growth
of new business and enterprise development funding based on past experience of the market demand
› the Group had no outstanding contractual commitments to acquire additional items of intangible assets at the end of the respective reporting periods.
the Group had no assets that were encumbered by other financial liabilities, as described in note 12.
20. Goodwill
ecsponent Annual Financial Statements ‘19 91
notes to the consolidated financial statements for the period ended 30 June 2019 (continued)
Goodwill acquired as part of business combinations in 2019
Group 12-month period ended
30 June 2019R’000
AGGReGAteD BuSineSS cOmBinAtiOnS FOR tHe peRiOD
property, plant and equipment 2
Deferred tax asset 41 586
loans and advances 38 698
Other financial assets 785 769
trade and other receivables 368
cash and cash equivalents 113
Other financial liabilities (736 632)
Deferred tax liability (52 700)
trade and other payables (3 225)
total identifiable net assets 73 979
non-controlling interest 368
purchase consideration 195 013
Goodwill 120 666
net cASH FlOW On AcQuiSitiOn
purchase consideration -
net cash balance assumed 113
Business acquisitions during the 2019 financial periodEcsponent Business Credit (Pty) Ltd (“EBC”)ecsponent treasury Services (pty) ltd acquired a 100% interest in ecsponent Business credit (pty) ltd (formerly GetBucks Smme (pty) ltd), a financial services company, effective 12 October 2018. the transaction was a strategic purchase to unlock opportunities for secured term loan funding to small and medium enterprises. the transaction yielded a goodwill element of R19.9 million. the entire balance of goodwill was written off in the current period.
loans and advances 38 698
Deferred tax asset 3 273
cash and cash equivalents 113
Other financial liabilities (48 994)
trade and other payables (2 980)
net identifiable assets (9 890)
non-controlling interest -
purchase consideration, payment was made by Group loan conversions 10 000
Goodwill 19 890
net cASH FlOW On AcQuiSitiOn
purchase consideration -
net cash balance assumed 113
20. Goodwill (continued)
92 ecsponent Annual Financial Statements ‘19
notes to the consolidated financial statements for the period ended 30 June 2019 (continued)
Ecsponent Mauritius Limited (“EML”)ecsponent ltd acquired a 100% interest in ecsponent mauritius limited (formerly pink Orchid limited), an investment company which holds shares in GetBucks Zimbabwe and myBucks, effective 12 October 2018. the transaction was a strategic purchase to position ecsponent with both myBucks and GetBucks Zimbabwe limited shares, increasing its holding to 39.7% and 34.89% respectively. the transaction yielded a goodwill element of R99.2 million. the entire balance of goodwill was written off in the current period.
Goodwill acquired as part of business combinations in 2019
Group 12-month period ended
30 June 2019R’000
Other financial assets 780 344
Deferred tax asset 36 538
Other financial liabilities (679 410)
Deferred tax liability (51 676)
total identifiable net assets 85 796
non-controlling interest -
purchase consideration 185 013
Goodwill 99 217
net cASH FlOW On AcQuiSitiOn
purchase consideration -
net cash balance assumed -
MHMK Capital (Pty) Ltd (“MHMK”)ecsponent ltd acquired a 70% interest in mHmk capital (pty) ltd, a financial services company, effective 31 march 2019. the transaction was a strategic purchase to unlock opportunities for exposure to select financial service companies, namely ngwedi capital Holdings and services required to manage investment entities. the transaction yielded a goodwill element of R1.6 million.
property, plant and equipment 2
Deferred tax asset 1 775
Other financial assets 5 425
trade and other receivables 368
Other financial liabilities (8 228)
Deferred tax liabilities (1 024)
trade and other payables (245)
total identifiable net assets (1 927)
non-controlling interest 368
purchase consideration -
Goodwill 1 559
net cASH FlOW On AcQuiSitiOn
purchase consideration -
net cash balance assumed -
20. Goodwill (continued)
ecsponent Annual Financial Statements ‘19 93
notes to the consolidated financial statements for the period ended 30 June 2019 (continued)
2019 2018
Cost Accumulated
depreciation
Carrying value Cost Accumulated
depreciation
Carrying value
R’000 R’000 R’000 R’000 R’000 R’000
land and buildings 1 380 - 1 380 1 380 - 1 380
plant and machinery 159 (70) 89 159 (55) 104
leasehold improvements 925 (57) 868 79 (37) 42
information technology
equipment
1 023 (581) 442 662 (461) 201
Furniture and fixtures 2 033 (209) 1 824 1 252 (140) 1 112
motor vehicles 445 (392) 53 895 (728) 167
motor vehicles - held under
finance lease
264 (70) 194 1 057 (70) 987
Office equipment 112 (9) 103 28 (16) 12
Total 6 341 (1 388) 4 953 5 512 (1 507) 4 005
2019
Opening
balance
Additions Disposals Depreciation Total
R’000 R’000 R’000 R’000 R’000
land and buildings 1 380 - - - 1 380
plant and machinery 104 - - (15) 89
leasehold improvements 42 925 (29) (70) 868
information technology equipment 201 404 (29) (134) 442
Furniture and fixtures 1 113 1 585 (663) (211) 1 824
motor vehicles 167 - (78) (36) 53
motor vehicles - held under finance lease 986 - (630) (162) 194
Office equipment 12 112 (9) (12) 103
Total 4 005 3 026 (1 438) (640) 4 953
the current residual value of the land and buildings exceeded the cost and hence no depreciation charge was recognised for the current or previous financial period.
2018
land and buildings 1 380 - - - 1 380
plant and machinery 2 930 - (2 833) 7 104
leasehold improvements 1 284 - (1 016) (226) 42
information technology equipment 692 204 (294) (401) 201
Furniture and fixtures 152 1 188 (57) (171) 1 112
motor vehicles 310 - (29) (114) 167
motor vehicles - held under finance lease - 1 057 - (70) 987
Office equipment 62 13 (37) (26) 12
Total 6 810 2 462 (4 266) (1 001) 4 005
A register containing the information required by Regulation 25(3) of the companies Regulations, 2011 is available for inspection at the registered office of the company. the Group had no outstanding contractual commitments to acquire additional items of property, plant and equipment at the end of the respective reporting periods. the following asset were subject to finance lease agreements at the end of the respective reporting period:› Vehicles with a carrying amount of R193 775 (2018: R986 489) are held under a finance lease.
21. Property, plant and equipment
94 ecsponent Annual Financial Statements ‘19
notes to the consolidated financial statements for the period ended 30 June 2019 (continued)
12-month period ended
30 June 2019R’000
15-month period ended
30 June 2018R’000
Finished goods 223 654
merchandise - -
223 654
the amount of inventory recognised as an expense during the period amounted to
25 814 25 674
Obsolete inventory of R774 000 was written off during the current financial period. the amount is presented in the consolidated Statement of profit or loss and Other comprehensive income in the current period of assessment. no inventory was written off during the comparative financial period, neither has any reversal of previous write-down inventory amounts been recognised in the 2019 or comparative period presented above.
Inventory pledged as security there are no inventories pledged as security.
23. Commitments and contingencies
12-month period ended
30 June 2019R’000
15-month period ended
30 June 2018R’000
OpeRAtinG leASe cOmmitmentS
Minimum lease payments due:
› Within one year 2 350 2 973
› in second to fifth year 10 314 13 872
› in sixth to tenth year - 18 666
12 664 35 511
Operating lease payments represent rentals payable by the Group for office properties. lease agreements include escalation clauses and options to renew contracts.
Contingencies the directors are not aware of any matter or circumstances of material significance that requires disclosure as a contingent liability.
22. Inventory
ecsponent Annual Financial Statements ‘19 95
notes to the consolidated financial statements for the period ended 30 June 2019 (continued)
24. Events after the reporting date
the directors are not aware of any material event, other than the disclosure related to matters listed below, which occurred after the reporting date and up to date of this report. Recapitalisation of MyBucksthe Board announced on 26 march 2019 and on 13 September 2019 that the company had concluded agreements with myBucks setting out the terms which would enable ecsponent to facilitate a restructure of the various loans owing to and from entities in the myBucks Group and the ecsponent Group (through the Debt Restructure).
myBucks will issue 27,829,312 (constituting 218% of myBucks issued share capital prior to the further recapitalisation planned by myBucks) for an amount of €1 per myBucks share. the parties have agreed that the subscription proceeds will be settled through off-setting against loans between the ecsponent Group and the myBucks group and through a cash top-up payment, if relevant, in order to ensure that the myBucks subscription proceeds equals €27,829,312, being R450 million at the euro/ZAR exchange Rate.
the transaction was approved at a general meeting of shareholders held on 20 november 2019.
Disposal of Ecsponent Business Creditecsponent treasury Services (pty) ltd (etS) disposed the ecsponent Business credit (pty) ltd, as a going concern, to DVn Family Office (pty) ltd effective on 23 August 2019 for an amount of R14 million.
Joint Venture agreement with Makaha Mining Cooperative Society Ltdthe Board of ecsponent announced on 5 november 2019 that ecsponent Botswana ltd, a wholly owned subsidiary of the company, has concluded an agreement with makaha mining cooperative Society ltd, (a Zimbabwean company owned by a consortium of Zimbabwean residents involved in the mining
industry), in terms of which ecsponent Botswana and makaha mining will create a special purpose vehicle ("the JVc").
the JVc's purpose is for the exploration, development and exploitation of the existing chrome mineral claims currently owned by makaha mining. the JVc will be created as a private company limited by shares in Zimbabwe and owned 51% by eBl and 49% by makaha mining. the effective date of the Joint Venture Agreement will be 01 november 2019.
At the date of this report, the transactions remained conditional, subject to the fulfilment of the following conditions:› the JVc being incorporated in terms of the Joint Venture
Agreement;› the Reserve Bank of Zimbabwe or the Zimbabwe
investment Authority granting exchange control approval for the subscription of shares in the JVc, together with the capital commitments; and
› makaha mining registering all mining claims in the name of the JVc.
note that the mining claims are currently in the name of undertreasure mining consultancy (pvt) ltd but are already in the process of being transferred to be in the name of makaha mining.
96 ecsponent Annual Financial Statements ‘19
notes to the consolidated financial statements for the period ended 30 June 2019 (continued)
12-month period ended
30 June 2019R’000
15-month period ended
30 June 2018R’000
interest revenue 183 744 334 752
Dividend income 24 937 3 000
Vendor deals 77 424 62 951
Facility restructure fee - 5 042
Sale of goods - 17 638
Stem cell processing and storage 654 25 108
Services rendered for administration, origination and management 6 287 17 852
Sale of debtors book 88 863 641
Total revenue 381 909 466 984
25. Revenue
ecsponent Annual Financial Statements ‘19 97
notes to the consolidated financial statements for the period ended 30 June 2019 (continued)
12-month period ended
30 June 2019R’000
15-month period ended
30 June 2018R’000
Fair value (losses) gains - Option agreement (21 758) 238 904
Fair value gains (losses) - listed equities 55 747 (82 557)
Fair value gains (losses) - unlisted equities (7 760) (13 202)
Fair value gain - loss of control - 10 806
26 229 153 951
Option agreement in June 2018, the Group entered into a put option agreement whereby it holds an unconditional and nonexclusive option to require the Option issuers to purchase, jointly or severally, all or any portion of the Option Shares, being the total number of myBucks SA ordinary shares held by ecsponent as at 31 December 2021, at an Option Strike price of €18.
the option can be exercised directly after the Option period’s expiration date being 31 December 2021, during the 30-day Option exercise period which follows. the company contracted an independent corporate finance house to consider the option agreement’s fair value.
Listed equities the Group holds strategic investments in a portfolio of listed equities. the majority of this portfolio is carried at fair value as an associate, namely myBucks and GetBucks microfinance Bank, whose value was determined by an external valuator. the remainder of the portfolio is restated to the quoted closing share price on 28 June 2019 the final trading day of the financial period.
Unlisted investments the Group has invested in an unlisted preference share and capitis, a company registered in terms of Section 12J of the income tax act.
At the reporting date these investments are stated at their respective fair values based on valuation techniques appropriate for each class of asset.
Deconsolidation/loss of control On 1 April 2018, the Group lost control over certain subsidiaries which were consolidated previously.
On 1 April 2018 these investments were classified as investments in associates and the fair value capitalised to the investment value.
26. Fair value adjustments
98 ecsponent Annual Financial Statements ‘19
notes to the consolidated financial statements for the period ended 30 June 2019 (continued)
12-month period ended
30 June 2019R’000
15-month period ended
30 June 2018R’000
profit on foreign currency exchange differences 1 38 049
profit on sale of other financial asset 5 280 3 200
profit on sale of businesses - 5 424
Bad debts recovered 60 808 2 008
Other miscellaneous 23 669 3 481
89 758 52 162
28. Finance costs
Other financial liabilities 60 281 19 434
preference share dividends 285 620 241 144
Other miscellaneous 780 7
346 681 260 585
27. Other income
ecsponent Annual Financial Statements ‘19 99
notes to the consolidated financial statements for the period ended 30 June 2019 (continued)
Operating profit for the period is stated after accounting for the following:
12-month period ended
30 June 2019R’000
15-month period ended
30 June 2018R’000
Operating lease charges:
› premises 4 055 4 809
› equipment 2 549 2 219
loss on foreign currency exchange differences 33 874 369
employee costs - settled in cash 33 253 40 948
30. Director’s remuneration
12 months ended 30 June 2019
Emoluments Expense allowances Total
R’000 R’000 R’000
executiVe
tp Gregory 1 972 257 2 228
G manyere # 958 - 958
Dp van der merwe 1 852 240 2 092
4 782 497 5 278
# Appointed as an executive director on 1 February 2019. prior to this date mr G manyere served as a non-executive director.
no other remuneration was paid to directors by way of management fees, consulting, technical or other fees, directly or indirectly or in terms of bonuses, other material benefits, contributions under pension scheme, commission, gain or profit sharing or share options.
29. Operating expenses
100 ecsponent Annual Financial Statements ‘19
notes to the consolidated financial statements for the period ended 30 June 2019 (continued)
15 months ended 30 June 2018
Emoluments Expense allowances Total
R’000 R’000 R’000
executiVe
tp Gregory 1 971 342 2 312
B Shanahan 1 686 200 1 886
Dp van der merwe 657 100 757
4 314 642 4 955
B Shanahan resigned as the financial director from 31 January 2018. Dp van der merwe was appointed as financial director effective from 1 February 2018.
12 months ended 30 June 2019
Fees
R’000
nOn-executiVe
RJ connellan (chairman) 418
BR topham* 269
kA Rayner 394
p matute 386
G manyere 268
W Oberholzer** 394
2 129
* Resigned as a Director with effect from 31 January 2019.
**Resigned as a Director with effect from 31 July 2019.
15 months ended 30 June 2018
nOn-executiVe
RJ connellan (chairman) 366
BR topham 336
kA Rayner 336
p matute 336
G manyere 347
W Oberholzer 336
2 057
e engelbrecht resigned as a non-executive director effective on 31 may 2017.
30. Director’s remuneration (continued)
ecsponent Annual Financial Statements ‘19 101
notes to the consolidated financial statements for the period ended 30 June 2019 (continued)3
0.
Dir
ecto
r’s
rem
un
erat
ion
(co
nti
nu
ed)
Dir
ecto
rs o
f su
bsi
dia
ries
an
d k
ey m
anag
emen
t
12 m
on
ths
end
ed 3
0 J
un
e 2
019
Dir
ecto
rG
rou
p C
om
pan
y
Bas
ic s
alar
yIn
cen
tive
sE
xpen
se
allo
wan
ces
Co
mm
issi
on
sO
ther
Tota
l
R’0
00
R’0
00
R’0
00
R’0
00
R’0
00
R’0
00
A H
ayec
spon
ent
Fin
anci
al S
ervi
ces
(pty
) lt
d12
0-
-1
745
50
1 9
15
F S
lab
ber
tec
spon
ent
Fin
anci
al S
ervi
ces
(pty
) lt
d6
15-
-1
718
89
2 4
22
m l
ukh
ele
ecsp
onen
t e
swat
ini l
imit
ed3
172
58
43
-5
62
3
e S
oon
ius
ecsp
onen
t e
swat
ini l
imit
ed9
8-
--
1911
7
c v
an n
ieke
rkec
spon
ent
pro
cure
men
t S
ervi
ces
(pty
) lt
d78
7-
120
-6
69
73
e D
alto
nec
spon
ent
pro
cure
men
t S
ervi
ces
(pty
) lt
d78
7-
120
-6
69
73
kJ
Fish
erec
spon
ent
Bu
sin
ess
cre
dit
(p
ty)
ltd
977
96
4-
45
1 12
2
yG G
avaz
am
Hm
k c
apit
al (
pty
) lt
d5
01
--
--
50
1
B n
dab
aec
spon
ent
lim
ited
(B
otsw
ana)
--
--
109
109
l m
um
ba
ecsp
onen
t H
old
ings
(Z
amb
ia)
34
4-
--
-3
44
l Vila
kati
ecsp
onen
t e
swat
ini l
imit
ed-
--
237
242
61
en
mag
agu
laec
spon
ent
esw
atin
i lim
ited
--
--
2424
nc
mam
ba
ecsp
onen
t e
swat
ini l
imit
ed-
--
-3
53
5
4 5
46
35
42
87
3 7
00
53
29
419
102 ecsponent Annual Financial Statements ‘19
notes to the consolidated financial statements for the period ended 30 June 2019 (continued)3
0.
Dir
ecto
r’s
rem
un
erat
ion
(co
nti
nu
ed)
Dir
ecto
rs o
f su
bsi
dia
ries
an
d k
ey m
anag
emen
t
15 m
on
ths
end
ed 3
0 J
un
e 2
018
Dir
ecto
rG
rou
p C
om
pan
y
Bas
ic s
alar
yIn
cen
tive
sE
xpen
se
allo
wan
ces
Co
mm
issi
on
sO
ther
Tota
l
R’0
00
R’0
00
R’0
00
R’0
00
R’0
00
R’0
00
A H
ayec
spon
ent
Fin
anci
al S
ervi
ces
(pty
) lt
d15
0-
-2
48
14
32
674
F S
lab
ber
tec
spon
ent
Fin
anci
al S
ervi
ces
(pty
) lt
d5
25
--
3 1
00
113
3 7
38
e S
oon
ius
ecsp
onen
t lt
d S
waz
ilan
d3
66
25
-1
427
122
1 9
40
t k
hou
ry *
Ret
urn
on
inn
ovat
ion
(p
ty)
ltd
919
--
-10
51
024
c v
an n
ieke
rkec
spon
ent
pro
cure
men
t S
ervi
ces
(pty
) lt
d77
75
015
0-
187
1 16
4
e D
alto
nec
spon
ent
pro
cure
men
t S
ervi
ces
(pty
) lt
d77
75
015
0-
187
1 16
4
3 5
1412
53
00
7 0
08
757
11 7
04
* t
kho
ury
resi
gned
as
exec
utiv
e d
irec
tor
of R
etur
n on
inno
vati
on (
pty
) lt
d w
ith
effec
t fr
om 3
1 m
arch
20
18.
Em
plo
yee
ben
efits
All
emp
loye
e b
enefi
ts in
clu
din
g th
e d
irec
tor’
s re
mu
ner
atio
n a
re o
f a s
hor
t-te
rm n
atu
re.
no
pos
t-em
plo
ymen
t b
enefi
ts, o
ther
lon
g-te
rm b
enefi
ts o
r te
rmin
atio
n b
enefi
ts p
aym
ents
are
pai
d o
r ac
cru
e to
any
em
plo
yee
or d
irec
tor
of t
he
Gro
up.
ecsponent Annual Financial Statements ‘19 103
notes to the consolidated financial statements for the period ended 30 June 2019 (continued)
12-month period ended
30 June 2019R’000
15-month period ended
30 June 2018R’000
mAJOR cOmpOnentS OF tAx (incOme)/expenSe
Continuing operations
current
income tax – current period 11 151 19 515
Deferred
Originating and reversing temporary differences (6 355) 50 297
Continuing operations - tax expense for the period 4 796 69 812
Discontinued operations
income tax – current period - (242)
Deferred tax on originating and reversing temporary differences - 1 399
Discontinued operations - tax expense for the period - 1 157
Total Group tax expense for the period 4 796 70 969
Reconciliation of the tax expense Reconciliation between applicable tax rate and average effective tax rate
% %
Applicable tax rate* (28,00) 28,00
Different tax rates applied in foreign subsidiaries (0,18) (2,18)
previously unrecognised deferred tax asset - -
Disallowable charges - preference share dividends 17,68 26,73
Disallowable charges - goodwill impairment 13,32 -
Disallowable charges - penalties and miscellaneous 1,20 0,01
exempt income - dividends received (2,47) (0,51)
tax effect of equity accounted earnings 0,40 (0,22)
effect of unused tax losses and tax offsets not recognised as deferred tax asset - -
capital gains tax (0,01) (5,10)
1,94 46,73
* A negative tax rate of 28% was used in the current year due to the fact that the company was in a tax payable position, even though an accounting loss was made.
the Group’s estimated tax loss available for set off against future taxable income, is R 241 960 484 (2018: R30 321 600). the deferred tax asset arising on the Group tax loss has been recognised in full as at 30 June 2019.
31. Taxation
104 ecsponent Annual Financial Statements ‘19
notes to the consolidated financial statements for the period ended 30 June 2019 (continued)
the Group estimated tax loss available for set off against future taxable income comprises of the following:
Group Company
12-month period ended
30 June 2019R’000
15-month period ended
30 June 2018R’000
ecsponent management Services ltd - 2 819
ecsponent treasury Services (pty) ltd 59 803 2 382
ecsponent Biotech (pty) ltd 106 543
Vitasave (pty) ltd* - 3
lazaron Biotechnologies (SA) (pty) ltd - 41
Return on innovation (pty) ltd 2 794 12 885
ecsponent limited (South Africa) 103 -
ecsponent credit Services (pty) ltd 37 25
ecsponent limited (eswatini) - -
Sanceda collection Services (pty) ltd (eswatini) 3 628 4 443
Sanceda collection Services (pty) ltd 5 186 3 332
ecsponent limited (Botswana) 29 313 1 712
ecsponent Holdings (pty) ltd (Swaziland) 365 125
ecsponent Wealth (pty) ltd 114 139
mHmk (pty) ltd 476 -
ecsponent Business credit (pty) ltd 10 755 -
pink Orchid limited 129 230 -
Sanceda collection Services (pty) ltd (Botswana) - 31
ecsponent Holdings (pty) ltd (mauritius) 50 31
ecsponent procurement Services (pty) ltd - 645
ecsponent Development Fund (pty) ltd - 1 166
241 960 30 322
* these operations were disposed of during the current financial period.
32. Taxation paid
Balance at the beginning of the period 2 302 (11 678)
current tax for the period recognised in profit and loss (11 151) (19 757)
Balance at the end of the period (4 762) (2 302)
Disposal of investment in subsidiary - 91
(13 611) (33 646)
31. Taxation (continued)
ecsponent Annual Financial Statements ‘19 105
notes to the consolidated financial statements for the period ended 30 June 2019 (continued)
notes 12-month period ended
30 June 2019R’000
15-month period ended
30 June 2018R’000
profit before taxation (249 733) 168 378
Adjusted for:
Dividends received (24 937) (3 000)
interest income 25 (183 744) -
Finance costs 327 545 252 331
Adjusted for non-cash flow movements:
Depreciation and amortisation 671 1 861
(Gain)/loss on sale of tangible assets (215) 89
Other financial assets - impairment loss 12 325 71 375
Fair value adjustments 26 (26 230) (153 951)
Accrued interest revenue - (9)
Realisation of deferred transaction cost 19 136 15 672
profit on sale of other financial assets 27 (5 280) (3 200)
Bad debts 19 901 23 395
interest revenue distributed (170 721) -
Bad debt recovery (60 808) (2 008)
(profit)/loss on sale of investment in subsidiary - (554)
(profit)/loss on sale of business of investment in subsidiary - (5 424)
impairment loss and (Reversal) - (947)
Goodwill impairments 119 107 -
income from equity accounted investments 3 581 1 173
unrealised forex gain 35 165 (38 418)
Changes in working capital:
inventories 22 431 569
trade and other receivables 8 (57 122) 13 743
Deferred revenue - (2 631)
trade and other payables 13 (3 220) 5 238
(244 148) 343 682
33. Cash generated from/(used in) operations
106 ecsponent Annual Financial Statements ‘19
notes to the consolidated financial statements for the period ended 30 June 2019 (continued)
34. Restrictive funding arrangementsecsponent Holdings ltd (mauritius), a wholly owned subsidiary of ecsponent limited, entered into a term loan facility agreement (“the facility”) with Scipion Active trading Fund (“SAtF”) during December 2017 to provide funding to ecsponent Botswana ltd and ecsponent Holdings limited (Zambia), secured by a payment guarantee of ecsponent limited, security over debt books and a registered pledge of shares. All concerned ecsponent group entities are referred to as “Obligors”. the facility is considered a restrictive funding arrangement under 8.63(p) of the JSe listing requirements, due to the following:› the Obligors must obtain the prior consent from SAtF
before entering into any of the following transactions:ê an amalgamation, demerger, merger or corporate
reconstruction;ê acquire a company or any shares or securities or a
business or undertaking;ê incorporate a new company;ê enter into a transaction or transactions to sell, lease,
transfer or otherwise dispose of any asset provided as security in terms of this agreement;
ê declare, make or pay any dividend, charge, fee or other distribution on or in respect of its share capital, except for ecsponent limited, in respect of its listed preference shares in accordance with their terms; or
ê pay any management, advisory or other fee to, or to the order of, any of the Obligors’ shareholders.
the facility does not provide for early settlement at the option of the Obligors/Borrower. this provision is currently under negotiation with SAtF to explicitly allow for prepayment at the election of the Borrower. At the date of this report this report executive management have entered into negotiation with SAtF to explicitly allow for prepayment at the election of the Borrower.
35. Dividendsno ordinary dividends have been declared or proposed for the year.
the company has six classes of preference shares in issue with the following dividend terms:› class A – 10% fixed rate monthly dividend;› class B – 0% monthly dividend, but redeeming at a rate
equal to 170% of the initial issue price;› class c – prime plus 4% floating rate monthly dividend;› class D – 12.5% fixed rate monthly dividend;› class e – 11.25% fixed rate monthly dividend;› class G – 10% fixed rate monthly dividend.
preference Share dividends and interest of R159.5 million accrued to investors for the 12-months ended 30 June 2019. the dividends are classified as finance costs and included in the finance cost expense in the consolidated Statement of profit and loss and comprehensive income.
36. Going concernthe Group reported a total comprehensive loss of R254.4 million for the period which resulted in the company’s total liabilities exceeding its total assets by R61.1 million at 30 June 2019. the loss materially emanates from the Group’s investment in myBucks which during the period incurred significant once off expenses as a result of a rationalisation of its operations.
the directors have evaluated the Group’s solvency and liquidity position in terms of the companies Act, 2008 and have concluded in terms of the Act’s provisions that the Group’s total assets exceeded its total liabilities by R2 223 million.
the directors believe that the Group has adequate financial resources to continue in operation for the foreseeable future and accordingly the condensed consolidated Financial Statements for the period ended 30 June 2019 have been prepared on a going concern. the directors have satisfied themselves that the Group is in a sound financial position and that it has access to enough equity and borrowing facilities to meet its foreseeable cash requirements. the directors are not aware of any new material changes that may adversely affect the Group’s ability to continue as a going concern. the directors are also not aware of any material non-compliance with statutory or regulatory requirements or of any pending changes to legislation which may affect the Group.
ecsponent Annual Financial Statements ‘19 107
notes to the consolidated financial statements for the period ended 30 June 2019 (continued)
RelAtiOnSHip
Subsidiaries Refer to note 39
Associates Refer to note 5
Shareholders with significant influence
› mHmk Group limited (Represented by G. manyere)› tp Gregory › Dp van der merwe
Members of key management Refer to note 30
12-month period ended
30 June 2019R’000
15-month period ended
30 June 2018R’000
Related party balances
investments in
Associate companies 1 533 896 21 500
Other financial assets
mHmk Group limited 194 293 238 904
ngwedi capital Holdings (pty) ltd 12 226 -
GetBucks ltd (Botswana)* 65 887 -
Loans and advances
myBucks S.A limited 124 847 -
GetBucks (pty) ltd (South Africa)* 193 434 -
GetBucks (pty) ltd (eswatini)* 171 480 -
GetSure (pty) ltd* 3 900 -
Other financial liabilities
GetBucks ltd (mauritius)* (74 132) -
Trade and other receivables/(payables)
myBucks S.A limited 1 032 -
myBucks S.A limited (5) -
GetBucks microfinance Bank ltd* 2 894 -
VSS Financial Services (pty) ltd* 5 -
RelAteD pARty tRAnSActiOnS
Associate companies - equity accounted loss (3 581) (1 173)
Fair value gains/(losses)
› myBucks S.A limited 123 545 -
› GetBucks microfinance Bank ltd* (41 065) -
› mHmk Group limited (45 835) -
› ngwedi capital Holdings (pty) ltd 3 642 -
37. Related parties
108 ecsponent Annual Financial Statements ‘19
notes to the consolidated financial statements for the period ended 30 June 2019 (continued)
12-month period ended
30 June 2019R’000
15-month period ended
30 June 2018R’000
RelAteD pARty tRAnSActiOnS
Expense recoveries
› myBucks S.A limited 19 208 -
› GetBucks (pty) ltd (South Africa)* 7 759 -
Interest income/(expense)
› myBucks S.A limited 8 347 -
› GetBucks (pty) ltd (South Africa)* 49 091 -
› GetBucks (pty) ltd (eswatini)* 43 382 -
› GetBucks ltd (mauritius)* (4 261) -
› GetBucks ltd (Botswana)* 10 594 -
VSS Financial Services (Pty) Ltd dividends received* 22 000 -
*please note that these related parties are part of the myBucks S.A limited group of companies.
38. Segment report
the segments identified are based on the operational and financial information reviewed by management for performance assessment and resource allocation.
the Group rationalisation as concluded in prior periods also resulted in a change to the basis of operational segmentation and the basis of measurement of segment profit or loss from the 2018 annual financial statements. the Financial Services segment was split into investment Services and credit and the collections segment was dissolved.
OpeRAtiOnAl SeGment
Credit the credit operations provide secured credit funding to commercial clients via two specific products. Business credit in the form of medium term loans subject to appropriate security cover and Supply chain and/or enterprise Development solutions with the aim to integrate vendors into the supply chain.
Investment Services the operations provide financial investment products to the retail market.
Equity holdings Strategic investments in well managed, profit focused companies.
Corporate this segment represents the Group’s corporate head office which provides shared services across the operational segments.
37. Related parties (continued)
ecsponent Annual Financial Statements ‘19 109
notes to the consolidated financial statements for the period ended 30 June 2019 (continued)3
8.
Seg
men
t re
po
rt (
con
tin
ued
)
Rep
orta
ble
seg
men
ts
12 m
on
ths
end
ed 3
0 J
un
e 2
019
Inve
stm
ent
Ser
vice
sE
qu
ity
Ho
ldin
gs
Cre
dit
Co
rpo
rate
Eli
min
atio
ns
Tota
l C
on
tin
ued
Tota
l
R’0
00
R’0
00
R’0
00
R’0
00
R’0
00
R’0
00
R’0
00
ext
ern
al r
even
ues
10
59
115
1 3
63
216
876
3 0
78-
38
1 9
08
38
1 9
08
inte
r-se
gmen
t re
ven
ue
224
32
8-
31
93
918
124
(274
39
1)-
-
Seg
men
t re
ven
ue
23
4 9
1915
1 3
63
248
815
21
202
(274
39
1)3
81
90
83
81
90
8
Dep
reci
atio
n a
nd
am
orti
sati
on
(28
6)
(36
)(3
9)
(310
)-
(671
)(6
71)
Fair
val
ue
adju
stm
ents
(9
16
6)
(6 2
03
)3
1 16
3-
10 4
36
26
23
02
6 2
30
inte
rest
in p
rofit
/los
s fr
om a
ssoc
iate
(3 5
81)
--
--
(3 5
81)
(3 5
81)
non
-cas
h t
ran
sact
ion
s -
fore
ign
cu
rren
cy g
ain
(lo
ss)
(1 8
16)
15 9
68
(32
577
)-
(16
73
9)
(35
16
4)
(35
16
4)
Seg
men
t op
erat
ing
pro
fit/(
loss
)2
83
376
45
96
72
59 8
575
66
7(4
97
919
)9
6 9
48
96
94
8
Fin
ance
cos
ts(2
90
48
1)(1
0 1
20)
(410
88
3)
(13
8)
36
4 9
42
(34
6 6
80
)(3
46
68
0)
taxa
tion
(7 2
34
)18
13
82
9(1
573
)-
(4 7
97)
(4 7
97)
Seg
men
t p
rofi
t/(l
oss
) af
ter
tax
(14
33
9)
36
02
8(1
47
197)
3 9
56
(13
2 9
77)
(25
4 5
29
)(2
54
52
9)
Seg
men
t as
sets
2 4
90
43
81
590
80
02
724
34
87
141
(3 6
38
14
3)
3 1
74 5
84
3 1
74 5
84
Seg
men
t lia
bili
ties
(2 5
35
419
)(7
71 5
77)
(3 3
44
19
3)
(1 6
68
)3
417
215
(3 2
35
64
2)
(3 2
35
64
2)
cap
ital
exp
end
itu
re1
54
1-
100
1 3
85
-3
02
63
02
6
Re
Ve
nu
eS
FR
Om
mA
JOR
cli
en
tS
maj
or c
lien
t 1
-2
937
104
275
--
107
212
107
212
maj
or c
lien
t 2
--
34
59
7-
-3
4 5
97
34
59
7
110 ecsponent Annual Financial Statements ‘19
notes to the consolidated financial statements for the period ended 30 June 2019 (continued)3
8.
Seg
men
t re
po
rt (
con
tin
ued
)
Geo
grap
hic
seg
men
ts
12 m
on
ths
end
ed
30
Ju
ne
20
19
So
uth
Afr
ica
Bo
tsw
ana
Esw
atin
iM
auri
tiu
sZ
amb
iaE
lim
inat
ion
sTo
tal
con
tin
ued
Tota
l rep
ort
ed
R’0
00
R’0
00
R’0
00
R’0
00
R’0
00
R’0
00
R’0
00
R’0
00
ext
ern
al r
even
ues
2
83
20
34
9 6
83
45
16
42
937
92
1-
38
1 9
08
38
1 9
08
inte
r-se
gmen
t re
ven
ue
210
63
6-
45
62
318
13
2-
(274
39
1)-
-
Seg
men
t re
ven
ue
49
3 8
39
49
68
39
0 7
87
21
06
99
21
(274
39
1)3
81
90
83
81
90
8
Dep
reci
atio
n a
nd
am
orti
sati
on
(63
4)
-(3
7)-
--
(671
)(6
71)
Fair
val
ue
adju
stm
ents
27
915
(48
68
5)
-3
6 5
64
-10
43
62
6 2
30
26
23
0
inte
rest
in p
rofit
/los
s fr
om a
ssoc
iate
(3 5
81)
--
--
-(3
58
1)(3
58
1)
non
-cas
h t
ran
sact
ion
s -
fore
ign
cu
rren
cy
gain
(lo
ss)
(18
55
0)
(17
014
)-
16 7
42
39
7(1
6 7
39
)(3
5 1
64
)(3
5 1
64
)
Seg
men
t op
erat
ing
pro
fit/(
loss
)4
15 2
87
15 8
40
86
23
076
74
376
7(4
97
919
)9
6 9
48
96
94
8
Fin
ance
cos
ts(5
37 4
91)
(57
90
2)
(88
30
3)
(27
150
)(7
77)
36
4 9
42
(34
6 6
81)
(34
6 6
81)
taxa
tion
(6 5
92
)9
23
1(3
21)
(7 1
17)
3-
(4 7
96
)(4
79
6)
Seg
men
t p
rofi
t/(l
oss
)
afte
r ta
x
(12
8 7
96
)(3
2 8
31)
(2 3
94
)4
2 4
76(7
)(1
32
977
)(2
54
52
9)
(25
4 5
29
)
Seg
men
t as
sets
4 4
14 2
65
796
85
55
42
916
1 0
48
49
010
20
1(3
63
8 1
43
)3
174
58
43
174
58
4
Seg
men
t lia
bili
ties
(4 4
29
30
7)(7
49
93
2)
(54
8 5
92
)(9
15 8
70)
(9 1
56
)3
417
215
(3 2
35
64
2)
(3 2
35
64
2)
cap
ital
exp
end
itu
re2
714
-3
12-
--
3 0
26
3 0
26
Re
Ve
nu
eS
FR
Om
mA
JOR
cli
en
tS
maj
or c
lien
t 1
49
09
111
80
24
3 3
82
2 9
37-
-10
7 2
1210
7 2
12
maj
or c
lien
t 2
-3
4 5
97
--
--
34
59
73
4 5
97
ecsponent Annual Financial Statements ‘19 111
notes to the consolidated financial statements for the period ended 30 June 2019 (continued)3
8.
Seg
men
t re
po
rt (
con
tin
ued
)
Rep
orta
ble
seg
men
ts
12 m
on
ths
end
ed 3
0 J
un
e 2
018
Inve
stm
ent
Ser
vice
sE
qu
ity
Ho
ldin
gs
Cre
dit
Co
rpo
rate
Eli
min
atio
ns
Dis
con
tin
ued
op
erat
ion
s
Tota
l
R’0
00
R’0
00
R’0
00
R’0
00
R’0
00
R’0
00
R’0
00
ext
ern
al r
even
ues
3
29
43
9 3
36
42
1 78
12
573
-(8
875
)4
58
10
9
inte
r-se
gmen
t re
ven
ue
359
115
2 0
00
75 7
95
35
411
(472
32
1)-
-
Seg
men
t re
ven
ue
36
2 4
09
41
33
64
97
576
37 9
84
(472
32
1)(8
875
)4
58
10
9
Dep
reci
atio
n a
nd
am
orti
sati
on
(14
3)
(1 4
76)
(21)
(36
0)
139
139
(1 7
22
)
Fair
val
ue
adju
stm
ents
-
157
80
5-
-(3
85
4)
-15
3 9
51
non
-cas
h t
ran
sact
ion
s -
fore
ign
cu
rren
cy g
ain
(lo
ss)
246
(7 3
41)
29
80
3-
15 7
10-
38
418
Seg
men
t op
erat
ing
pro
fit/(
loss
)2
88
99
413
8 9
55
36
3 3
54
724
(379
578
)(7
04
0)
40
5 4
09
Fin
ance
cos
ts(2
37 7
13)
(8 3
68
)(4
09
96
5)
(2 8
56
)3
98
317
7 4
09
(25
3 1
76)
taxa
tion
(45
36
8)
(28
96
3)
11 1
275
83
(7 1
91)
(24
2)
(70
05
4)
Seg
men
t p
rofi
t/(l
oss
) af
ter
tax
5 9
1310
1 6
24
(35
48
4)
(1 5
49
)11
54
812
78
2 1
79
Seg
men
t as
sets
375
771
617
15
01
42
2 8
7016
30
7(1
96
29
4)
-2
23
5 8
04
Seg
men
t lia
bili
ties
(24
8 2
44
)(1
67
88
5)
(1 8
56
513
)(1
3 9
23
)24
4 2
62
-(2
04
2 3
03
)
cap
ital
exp
end
itu
re1
06
34
211
22
314
--
3 5
31
Re
Ve
nu
eS
FR
Om
mA
JOR
cli
en
tS
maj
or c
lien
t 1
--
116
06
1-
--
116
06
1
maj
or c
lien
t 2
--
108
89
2-
--
108
89
2
112 ecsponent Annual Financial Statements ‘19
notes to the consolidated financial statements for the period ended 30 June 2019 (continued)3
8.
Seg
men
t re
po
rt (
con
tin
ued
)
Geo
grap
hic
seg
men
ts
12 m
on
ths
end
ed
30
Ju
ne
20
18
So
uth
Afr
ica
Bo
tsw
ana
Sw
azil
and
Nam
ibia
Mau
riti
us
Zam
bia
Eli
min
atio
ns
Dis
con
tin
ued
o
per
atio
ns
Tota
l rep
ort
ed
R’0
00
R’0
00
R’0
00
R’0
00
R’0
00
R’0
00
R’0
00
R’0
00
R’0
00
ext
ern
al r
even
ues
3
86
92
64
8 1
153
1 2
67
50
816
8-
-(8
875
)4
58
10
9
inte
r-se
gmen
t re
ven
ue
40
5 6
28
-6
6 6
93
--
-(4
72 3
21)
--
Seg
men
t re
ven
ue
792
55
44
8 1
159
7 9
60
50
816
8-
(472
32
1)(8
875
)4
58
10
9
Dep
reci
atio
n a
nd
am
orti
sati
on
(1 9
60
)-
(40
)-
--
139
139
(1 7
22
)
Fair
val
ue
adju
stm
ents
15
76
314
2 0
42
--
--
(3 8
54
)-
153
95
1
non
-cas
h t
ran
sact
ion
s -
fore
ign
cu
rren
cy g
ain
(lo
ss)
4 0
50
18 6
58
--
--
15 7
10-
38
418
Seg
men
t op
erat
ing
pro
fit/
(los
s)
55
0 9
65
147
49
18
5 5
51
(5)
8 0
25
-(3
79 5
78)
(7 0
40
)4
05
40
9
Fin
ance
cos
ts(5
11 5
94
)(5
3 7
04
)(8
5 2
74)
-(8
33
0)
-3
98
317
7 4
09
(25
3 1
76)
taxa
tion
(41
785
)(2
0 6
83
)(1
63
)2
8-
(7 1
91)
(24
2)
(70
05
4)
Seg
men
t p
rofi
t/(l
oss
) af
ter
tax
(2 4
14)
73 1
04
114
(3)
(29
7)-
11 5
48
127
82
179
Seg
men
t as
sets
1 4
48
08
079
5 9
1217
1 9
66
194
2 1
1213
83
5(1
96
29
4)
-2
23
5 8
05
Seg
men
t lia
bili
ties
(1 6
94
720
)(2
41
35
4)
(18
2 5
88
)(3
04
)(1
50
675
)(1
6 9
24)
244
26
2-
(2 0
42
30
3)
cap
ital
exp
end
itu
re3
524
-7
--
--
-3
53
1
Re
Ve
nu
eS
FR
Om
mA
JOR
cli
en
tS
maj
or c
lien
t 1
70 7
61
14 3
50
30
95
0-
--
--
116
06
1
maj
or c
lien
t 2
108
89
2-
--
--
--
108
89
2
ecsponent Annual Financial Statements ‘19 113
notes to the consolidated financial statements for the period ended 30 June 2019 (continued)3
9.
Inte
rest
s in
su
bsi
dia
ries
th
e cu
rren
t st
ruct
ure
of t
he
Gro
up
is d
etai
led
bel
ow:
Su
bsi
dia
ryH
eld
by
Nat
ure
of
bu
sin
ess
Co
un
try
of
inco
rpo
rati
on
% h
old
ing
Pro
fit/
(lo
ss)
for
the
per
iod
(#
)
30
Ju
ne
20
19%
30
Ju
ne
20
18%
30
Ju
ne
20
193
0 J
un
e 2
018
ecsp
onen
t c
red
it S
ervi
ces
(pty
) lt
dec
spon
ent
ltd
(S
A)
Fin
anci
al S
ervi
ces
Sou
th A
fric
a10
0.0
010
0.0
0(R
8 6
05
)(R
17
65
6)
ecsp
onen
t Fi
nan
cial
Ser
vice
s (p
ty)
ltd
ecsp
onen
t lt
d (
SA
)Fi
nan
cial
Ser
vice
sS
outh
Afr
ica
100
.00
100
.00
R 2
80
89
8R
46
9 9
83
ecsp
onen
t B
otsw
ana
lim
ited
ec
spon
ent
ltd
(S
A)
Fin
anci
al S
ervi
ces
Bot
swan
a10
0.0
010
0.0
0(B
Wp
7 4
98
04
5)
BW
p 5
9.8
52
.557
San
ced
a c
olle
ctio
ns
Bot
swan
a (p
ty)
ltd
ecsp
onen
t B
otsw
ana
lim
ited
Deb
t co
llect
ion
Bot
swan
a10
0.0
010
0.0
0B
Wp
31
134
BW
p 8
60
ecsp
onen
t H
old
ings
ltd
(m
auri
tiu
s)ec
spon
ent
Bot
swan
a
lim
ited
Fin
anci
al S
ervi
ces
mau
riti
us
100
.00
100
.00
($ 6
7 3
88
)($
24
179
)
ecsp
onen
t H
old
ings
ltd
(Z
amb
ia)
ecsp
onen
t H
old
ings
ltd
(mau
riti
us)
Fin
anci
al S
ervi
ces
Zam
bia
100
.00
100
.00
($ 4
52
)-
ecsp
onen
t H
old
ings
(p
ty)
ltd
ecsp
onen
t lt
d (
SA
)Fi
nan
cial
Ser
vice
se
swat
ini
100
.00
100
.00
(SZ
l 2
68
3 4
91)
(SZ
l 8
6 0
88
)
ecsp
onen
t e
swat
ini l
imit
edec
spon
ent
Hol
din
gs (
pty
)
ltd
Fin
anci
al S
ervi
ces
esw
atin
i8
4.7
08
4.7
0S
Zl
34
9 4
90
SZ
l 47
7 6
93
ecsp
onen
t e
nte
rpri
se D
evel
opm
ent
(pty
) lt
d
ecsp
onen
t H
old
ings
(p
ty)
ltd
Deb
t co
llect
ion
esw
atin
i10
0.0
010
0.0
0S
Zl
160
747
(SZ
l 27
7 0
64
)
laza
ron
Bio
tech
nol
ogie
s (p
ty)
ltd
ecsp
onen
t lt
d (
SA
)B
iote
chn
olog
ies
Sou
th A
fric
a10
0.0
010
0.0
0R
76
54
4R
52
418
ecS
Au
tom
otiv
e (p
ty)
ltd
ecsp
onen
t lt
d (
SA
)B
iote
chn
olog
ies
Sou
th A
fric
a10
0.0
010
0.0
0R
39
7 6
56
(R 2
07
769
)
Vit
asav
e (p
ty)
ltd
*ec
spon
ent
ltd
(S
A)
Bio
tech
nol
ogie
sS
outh
Afr
ica
0.0
05
1.0
0-
R 4
83
8
ecsp
onen
t m
auri
tiu
s li
mit
edec
spon
ent t
reas
ury
Ser
vice
s
(pty
) lt
d
Fin
anci
al S
ervi
ces
mau
riti
us
100
.00
n1
$ 5
88
1 74
5-
ecsp
onen
t B
usi
nes
s c
red
it (
pty
) lt
dec
spon
ent t
reas
ury
Ser
vice
s
(pty
) lt
d
Fin
anci
al S
ervi
ces
Sou
th A
fric
a10
0.0
0n
1(R
4 9
98
98
9)
-
mH
mk
cap
ital
(p
ty)
ltd
ecsp
onen
t S
outh
Afr
ica
(pty
) lt
d
Fin
anci
al S
ervi
ces
Sou
th A
fric
a70
.00
n1
R 2
99
9 7
85
-
San
ced
a c
olle
ctio
n S
ervi
ces
(pty
)
ltd
ecsp
onen
t lt
d (
SA
)D
ebt
colle
ctio
nS
outh
Afr
ica
100
.00
100
.00
(R 5
557
514
)(R
9 8
15 2
69
)
ecsp
onen
t m
anag
emen
t S
ervi
ces
ltd
ec
spon
ent
ltd
(S
A)
man
agem
ent
serv
ices
Sou
th A
fric
a10
0.0
010
0.0
0(R
3 9
56
50
5)
(R 1
547
778
)
114 ecsponent Annual Financial Statements ‘19
notes to the consolidated financial statements for the period ended 30 June 2019 (continued)
Su
bsi
dia
ryH
eld
by
Nat
ure
of
bu
sin
ess
Co
un
try
of
inco
rpo
rati
on
% h
old
ing
Pro
fit/
(lo
ss)
for
the
per
iod
(#
)
30
Ju
ne
20
19%
30
Ju
ne
20
18%
30
Ju
ne
20
193
0 J
un
e 2
018
ecsp
onen
t tre
asu
ry S
ervi
ces
(pty
)
ltd
ecsp
onen
t lt
d (
SA
)tr
easu
ry s
ervi
ces
Sou
th A
fric
a10
0.0
010
0.0
0(R
127
93
5 6
45
)R
11
66
2 0
63
ecsp
onen
t D
evel
opm
ent
Fun
d (
pty
)
ltd
ecsp
onen
t lt
d (
SA
)Fi
nan
cial
Ser
vice
sS
outh
Afr
ica
100
.00
100
.00
R 1
33
4 9
32
R 7
37 5
20
ecsp
onen
t p
rocu
rem
ent
Ser
vice
s
(pty
) lt
d
ecsp
onen
t lt
d (
SA
)e
ngi
nee
rin
g go
ods
and
ser
vice
Sou
th A
fric
a10
0.0
010
0.0
0R
54
3 8
61
R 1
32
36
4
ecsp
onen
t S
outh
Afr
ica
(pty
) lt
dec
spon
ent
ltd
(S
A)
Fin
anci
al S
ervi
ces
Sou
th A
fric
a10
0.0
010
0.0
0(R
38
372
)-
Ret
urn
on
inn
ovat
ion
(p
ty)
ltd
ecsp
onen
t lt
d (
SA
)m
edia
mon
itor
ing
Sou
th A
fric
a10
0.0
010
0.0
0R
3 2
63
013
(R 2
219
18
7)
ecsp
onen
t Wea
lth
(p
ty)
ltd
ecsp
onen
t lt
d (
SA
)Fi
nan
cial
Ser
vice
sS
outh
Afr
ica
100
.00
100
.00
R 1
8 2
28
(R 1
00
78
7)
#)
the
ind
ivid
ual s
ubsi
dia
ry p
rofit
/(lo
ss)
as d
iscl
osed
ab
ove
is b
efor
e th
e ad
just
men
t fo
r gr
oup
elim
inat
ions
.
n1
- new
com
pany
inco
rpor
ated
/acq
uire
d d
urin
g th
e cu
rren
t fin
anci
al p
erio
d
* t
he c
ompa
ny w
as d
e-re
gist
ered
in t
he c
urre
nt p
erio
d.
th
e ca
rryi
ng
amou
nts
of s
ub
sid
iari
es a
re s
how
n n
et o
f im
pai
rmen
t lo
sses
.
th
e e
swat
ini p
rin
cip
le p
lace
of b
usi
nes
s is
mb
aban
e an
d fo
r B
otsw
ana,
Gab
oron
e.
39
. In
tere
sts
in s
ub
sid
iari
es (
con
tin
ued
)
ecsponent Annual Financial Statements ‘19 115
StAtement OF FinAnciAl pOSitiOnAS At 30 June 2019 (cOmpAny)
notes As at30 June 2019
R’000
As at30 June 2018
R’000
ASSetS
Non-current assets
property, plant and equipment 40.13 1 024 987
investment in subsidiaries 40.5 25 885 25 885
investment in associate 40.26 52 237 22 118
Other financial assets 40.4 841 722 246 856
Deferred tax asset 40.12 17 445 -
938 313 295 846
Current assets
loans to group companies 40.3 1 133 731 1 286 947
Other financial assets 40.4 134 756 3 461
trade and other receivables 40.6 8 672 13 480
loans and advances 40.14 124 847 -
current tax receivable 7 157 1 332
cash and cash equivalents 40.7 12 081 5 511
1 421 244 1 310 731
Total assets 2 359 557 1 606 577
eQuity
Share capital 14 145 170 145 170
Accumulated loss (2 668) (12 955)
Total equity 142 502 132 215
liABilitieS
Non-current liabilities
preference shares 40.8 1 708 882 1 426 243
note programme 40.9 64 659 -
Finance lease liabilities 40.11 166 879
Deferred tax liability 40.12 54 314 33 138
1 828 021 1 460 260
Current liabilities
preference shares 40.8 291 514 6 756
note programme 40.9 736 -
Other financial liabilities 40.15 93 605 -
Finance lease liabilities 40.11 35 158
trade and other payables 40.10 3 123 7 188
Bank overdraft 40.7 21 -
389 034 14 102
Total liabilities 2 217 055 1 474 362
Total equity and liabilities 2 359 557 1 606 577
116 ecsponent Annual Financial Statements ‘19
StAtement OF pROFit AnD lOSS AnD OtHeR cOmpReHenSiVe incOme
FOR tHe peRiOD enDeD 30 June 2019 (cOmpAny)
notes 12-month period ended
30 June 2019R’000
15-month period ended
30 June 2018R’000
cOntinuinG OpeRAtiOnS
Other income 40.19 9 037 16 824
Operating expenses (41 200) (34 786)
Fair value adjustments 40.18 (6 890) (14 643)
Operating loss 40.20 (39 053) (32 605)
investment revenue 40.17 303 208 282 279
Finance costs 40.21 (245 806) (201 142)
Profit before taxation 18 349 48 532
taxation 40.22 (8 062) (44 302)
Profit from continuing operations for the period 10 287 4 230
Other comprehensive income - -
profit for the period 10 287 4 230
Total comprehensive income for the period 10 287 4 230
ecsponent Annual Financial Statements ‘19 117
StAtement OF cHAnGeS in eQuity
Share capital Accumulated (loss) Total equity
Balance at 31 March 2017 145 169 (17 185) 127 984
profit for the period - 4 230 4 230
issue of shares 1 - 1
Balance at 30 June 2018 145 170 (12 955) 132 215
profit for the period - 10 287 10 287
issue of shares - - -
Balance at 30 June 2019 145 170 (2 668) 142 502
FOR tHe peRiOD enDeD 30 June 2019 (cOmpAny)
118 ecsponent Annual Financial Statements ‘19
StAtement OF cASH FlOWS FOR tHe peRiOD enDeD 30 June 2019 (cOmpAny)
the principal accounting policies adopted in the preparation of these financial statements are set out in note 1 above.
the company has, in the preparation of these financial statements, consistently applied the accounting policies with those applied in the previous financial period, except for the iFRS 9 and 15 see note 2 above. the adoption of these accounting policies has not had a material impact on the results of the company, but has resulted in more disclosure than would have previously been provided in the financial statements.
40.1. AccOuntinG pOlicieS
notes 12-month period ended
30 June 2019R’000
15-month period ended
30 June 2018R’000
cASH FlOW FROm OpeRAtinG ActiVitieS
cash used in operations 40.23 (31 477) (40 335)
Dividends received 5 500 3 000
investment revenue 7 087 271 946
Finance costs (164 456) (134 092)
taxation paid 40.24 (10 156) (25 055)
(193 502) 75 464
cASH FlOWS FROm inVeStinG ActiVitieS
purchase of property, plant and equipment (885) -
proceeds on disposal of property plant and equipment 624 -
investment in associate 40.26 (14) -
proceeds on sale of investment in associate - 10 000
Other financial assets - advances (2 342) (259 468)
proceeds from other financial assets - 119 250
loans advanced to group companies (578 873) (866 570)
loan repayments received group companies 230 755 356 325
(350 735) (640 463)
cASH FlOWS FROm FinAncinG ActiVitieS
proceeds on preference share and notes issued 551 441 565 811
Finance lease payments (655) (84)
550 786 565 727
total cash movement for the period 6 549 729
cash at the beginning of the period 5 511 4 782
Cash at the end of the period 40.7 12 060 5 511
ecsponent Annual Financial Statements ‘19 119
nOteS tO tHe cOnSOliDAteD FinAnciAl StAtementS
40
.2.
Fin
anci
al in
stru
men
ts –
fai
r va
lues
an
d r
isk
man
agem
ent
not
esc
arry
ing
amou
nts
Fair
val
ue
30
Ju
ne
20
19
Fair
Val
ue
thro
ug
h
Pro
fit/
Loss
Am
ort
ised
co
stF
inan
cial
li
abil
itie
s at
am
ort
ised
co
st
No
n-
fin
anci
al
inst
rum
ents
Tota
lLe
vel 1
Leve
l 3
Tota
l
R’0
00
R’0
00
R’0
00
R’0
00
R’0
00
R’0
00
R’0
00
R’0
00
Fin
An
ciA
l A
SS
etS
me
AS
uR
eD
At
FA
iR V
Alu
e
Oth
er fi
nan
cial
ass
ets
40
.413
6 3
38
-
--
136
33
8
-13
6 3
38
13
6 3
38
inve
stm
ent
in a
ssoc
iate
s4
0.2
69
371
--
-9
371
-9
371
9 3
71
Fin
An
ciA
l A
SS
etS
tH
At
AR
e n
Ot
me
AS
uR
eD
At
FA
iR V
Alu
e
loan
s to
gro
up
com
pan
ies
40
.3-
1 13
3 7
31
--
1 13
3 7
31
--
-
loan
s an
d a
dva
nce
s4
0.1
4
-12
4 8
47-
-12
4 8
47-
--
Oth
er fi
nan
cial
ass
ets
40
.4-
84
0 1
40
--
84
0 1
40
--
-
trad
e an
d r
ecei
vab
les
40
.6-
1 0
55
-7
617
8 6
72-
-
cas
h a
nd
cas
h e
qu
ival
ents
4
0.7
-12
06
0-
-12
06
0-
--
-2
111
83
3-
7 6
172
119
45
0-
-
Fin
An
ciA
l li
AB
ilit
ieS
tH
At
AR
e n
Ot
me
AS
uR
eD
At
FA
iR V
Alu
e
pre
fere
nce
sh
ares
40
.8-
-(2
00
0 3
95
)-
(2 0
00
39
5)
--
-
not
e p
rogr
amm
e4
0.9
--
(65
39
5)
-(6
5 3
95
)-
--
Oth
er fi
nan
cial
liab
iliti
es
40
.15
--
(93
60
5)
-(9
3 6
05
)-
--
trad
e an
d o
ther
pay
able
s 4
0.1
0-
-(3
12
3)
-(3
12
3)
--
-
--
(2 1
62
518
)-
(2 1
62
518
)-
-
FOR tHe peRiOD enDeD 30 June 2019 (cOmpAny)
120 ecsponent Annual Financial Statements ‘19
nOteS tO tHe cOnSOliDAteD FinAnciAl StAtementSFOR tHe peRiOD enDeD 30 June 2018 (cOmpAny)
40
.2.
Fin
anci
al in
stru
men
ts –
fai
r va
lues
an
d r
isk
man
agem
ent
(co
nti
nu
ed)
not
esc
arry
ing
amou
nts
Fair
val
ue
30
Ju
ne
20
18
Fair
Val
ue
thro
ug
h
Pro
fit/
Loss
Loan
s an
d
rece
ivab
les
Fin
anci
al
liab
ilit
ies
at
amo
rtis
ed
cost
No
n-
fin
anci
al
inst
rum
ents
Tota
lLe
vel 1
Leve
l 3
Tota
l
R’0
00
R’0
00
R’0
00
R’0
00
R’0
00
R’0
00
R’0
00
R’0
00
Fin
An
ciA
l A
SS
etS
me
AS
uR
eD
At
FA
iR V
Alu
e
Oth
er fi
nan
cial
ass
ets
40
.42
50
317
--
-2
50
317
3 4
61
246
85
62
50
317
Fin
An
ciA
l A
SS
etS
tH
At
AR
e n
Ot
me
AS
uR
eD
At
FA
iR V
Alu
e
loan
s to
gro
up
com
pan
ies
40
.3-
1 2
86
947
--
1 2
86
947
--
-
trad
e an
d r
ecei
vab
les
40
.6-
1 5
19-
11 9
61
13 4
80
--
cas
h a
nd
cas
h e
qu
ival
ents
4
0.7
-5
511
--
5 5
11-
--
-1
29
3 9
77-
11 9
61
1 3
05
93
8-
-
Fin
An
ciA
l li
AB
ilit
ieS
tH
At
AR
e n
Ot
me
AS
uR
eD
At
FA
iR V
Alu
e
pre
fere
nce
sh
ares
40
.8-
-(1
43
2 9
99
)-
(1 4
32
99
9)
--
-
trad
e an
d o
ther
pay
able
s 4
0.1
0-
-(7
18
8)
-(7
18
8)
--
-
--
(1 4
40
18
7)-
(1 4
40
18
7)-
-
ecsponent Annual Financial Statements ‘19 121
notes to the consolidated financial statements for the period ended 30 June 2019 (company) (continued)
Measurements of fair value – reconciliation of Level 1 fair valuesBelow is a reconciliation of the movement in level 1 fair values during the period.
12-month period ended
30 June 2019R’000
15-month period ended
30 June 2018R’000
OtHeR FinAnciAl ASSetS At FAiR VAlue tHROuGH pROFit AnD lOSS
carrying amount of loans and receivables as at FVtpl - 3 461
OtHeR FinAnciAl ASSetS At FAiR VAlue tHROuGH pROFit AnD lOSS
Opening balance at the start of the period 3 461 -
purchases - 5 082
Foreign currency loss recognised in profit and loss 281 -
Fair value loss recognised in profit and loss 5 905 (1 441)
transfer to level 3 fair values (9 647) -
Balance at the end of the period - 3 461
Measurements of fair value – reconciliation of Level 3 fair valuesBelow is a reconciliation of the movement in level 3 fair values during the period.
OtHeR FinAnciAl ASSetS At FAiR VAlue tHROuGH pROFit AnD lOSS
carrying amount of loans and receivables as at FVtpl 145 709 246 856
RecOnciliAtiOn OF lOAnS AnD ReceiVABleS At FAiR VAlue
Opening balance at the start of the period 246 856 -
transfer from level 1 fair values 9 647 -
purchases and revaluations 2 356 260 065
conversion to loan (100 000) -
Foreign currency loss recognised in profit and loss (356) -
Fair value loss recognised in profit and loss (12 794) (13 202)
Balance at the end of the period 145 709 246 856
40.2. Financial instruments – fair values and risk management (continued)
122 ecsponent Annual Financial Statements ‘19
notes to the consolidated financial statements for the period ended 30 June 2019 (company) (continued)
Liquidity risk Refer to note 3 “Risk management - financial instruments” of the consolidated financial statements for the Group’s approach to managing liquidity risk which applies to the company.
At 30 June 2019
Less than one year Between one and two years
Between two and five years
R’000 R’000 R’000
trade and other payables 3 123 - -
note programme 736 - 64 659
Other financial liabilities 93 605 - -
preference shares 424 052 426 615 1 934 077
Bank overdraft 2 346 43 558 -
At 30 June 2018
trade and other payables 7 188 - -
preference shares 145 872 393 300 2 755 656
Interest rate riskRefer to note 3 “Risk management - financial instruments” of the consolidated financial statements for the Group’s approach tomanaging interest rate risk which applies to the company.
management’s expectation for the 2020 financial period is that interest rates will decrease by 100 basis points (2018 outlook represented a 100-basis point decrease). A decrease of 100 basis points in interest rates at the reporting date, with reference to the period end exposures, would have increased/(decreased) equity and profit or loss by the annualised amounts shown below. the analysis assumes that all other variables remain constant.
40.2. Financial instruments – fair values and risk management (continued)
ecsponent Annual Financial Statements ‘19 123
notes to the consolidated financial statements for the period ended 30 June 2019 (company) (continued)
Interest rate risk (continued)
2019
Cash flow interest rate
risk
Fair value interest rate
risk
No interest rate risk
Total
R’000 R’000 R’000 R’000
inteReSt RAte RiSk AnAlySiS
loans to group companies - 1 133 731 - 1 133 731
Other financial assets - 976 478 - 976 478
cash and cash equivalents 12 060 - - 12 060
preference shares (723 425) (1 276 971) - (2 000 396)
note programme (65 395) - (65 395)
Other financial liabilities - (93 605) - (93 605)
(711 365) 674 238 - (37 127)
2018
loans to group companies - 1 286 947 - 1 286 947
Other financial assets - 246 856 3 461 250 317
cash and cash equivalents 5 511 - - 5 511
preference shares (713 021) (719 979) - (1 433 000)
(707 510) 813 824 3 461 109 775
2019
Cash flow interest rate
risk
Fair value interest rate
risk
Total
R’000 R’000 R’000
SenSitiVity AnAlySiS
loans to group companies - (11 337) (11 337)
Other financial assets - (9 765) (9 765)
cash and cash equivalents (121) - (121)
preference shares 7 234 12 770 20 004
note programme - 654 654
Other financial liabilities - 936 936
7 114 (6 742) 371
2018
loans to group companies - (12 869) (12 869)
Other financial assets - (2 469) (2 469)
cash and cash equivalents (55) - (55)
preference shares 7 130 7 200 14 330
7 075 (8 138) (1 063)
the above sensitivity analysis reflects the effects of the decrease of a 100-basis point reduction in interest rates. Should the rate increase by 100 basis points the illustrated movement would be equal and opposite to the amounts disclosed above.
40.2. Financial instruments – fair values and risk management (continued)
124 ecsponent Annual Financial Statements ‘19
notes to the consolidated financial statements for the period ended 30 June 2019 (company) (continued)
Credit riskRefer to note 3 “Risk management - financial instruments” of the consolidated financial statements for the Group’s approach tomanaging interest rate risk which applies to the company.
the company provides funding to the various group companies via intercompany loans and short-term trade facilities. the company controls the Group operations and therefore has control over these entities cash flow and holds the ability to mitigate its credit risk. Refer to note 3 “Risk management - financial instruments” of the consolidated financial statements for the underlying credit risk within the Group. the carrying values of the other financial assets comprise the Group’s maximum exposure to credit risk. Financial assets exposed to credit risk at the period end date were as follows:
12-month period ended
30 June 2019R’000
15-month period ended
30 June 2018R’000
FinAnciAl inStRument
loans to group companies 1 133 731 1 286 947
loans and advances 124 847 -
Other financial assets 976 478 250 317
trade and receivables 1 055 1 519
cash and cash equivalents 12 060 5 511
40.2. Financial instruments – fair values and risk management (continued)
ecsponent Annual Financial Statements ‘19 125
notes to the consolidated financial statements for the period ended 30 June 2019 (company) (continued)
Market risk Refer to note 3 “Risk management - financial instruments” of the consolidated financial statements for the Group’s approach tomanaging market risk which applies to the company. management targets fair value return of the listed equities to increase by at least 20%. An increase of 20% in the market price as at the reporting date, with reference to the period end exposures, would have increased equity and profit by the annualised amounts shown below. the analysis assumes that all other variables remain constant. listed equities and the option contract to dispose of listed equities are exposed to equity price market risk:
12-month period ended
30 June 2019R’000
15-month period ended
30 June 2018R’000
FinAnciAl inStRument
Other financial assets 136 338 250 317
mARket RiSk SenSitiVity AnAlySiS
Other financial assets 27 268 50 063
Above the profit impact if the market price of listed equities were to increase by 20%, if the price was to change in the opposite direction, an equal and opposite effect would be incurred.
Currency risk Refer to note 3 “Risk management - financial instruments” of the consolidated financial statements for the Group’s approach to managing currency risk which applies to the company.
40.2. Financial instruments – fair values and risk management (continued)
126 ecsponent Annual Financial Statements ‘19
notes to the consolidated financial statements for the period ended 30 June 2019 (company) (continued)notes to the consolidated financial statements for the period ended 30 June 2019 (company) (continued)
Currency risk (continued) At the end of the reporting period, the carrying amounts of monetary assets and monetary liabilities denominated in currencies other than the respective Group entities’ functional currencies are as follows:
2019
Euro Botswana Pula
Total
R’000 R’000 R’000
Other financial assets 1 582 - 1 582
loans to group companies - 13 021 13 021
investment in associates 9 371 - 9 371
Total financial assets 10 953 13 021 23 974
Other financial liabilities (93 605) - (93 605)
Total financial liabilities (93 605) - (93 605)
Net financial asset/(financial liability) (82 652) 13 021 (69 631)
2018
Other financial assets 3 461 - 3 461
loans to group companies - 12 949 12 949
trade and receivables - 1 721 1 721
Total financial assets 3 461 14 670 18 131
A 10% weakening of the Rand against the currencies below at the period end date, with reference to the period end exposures, would have increased equity by the amounts shown below (10% forecasted for 2018). the analysis assumes that all other variables remain constant.
12-month period ended
30 June 2019R’000
15-month period ended
30 June 2018R’000
FOReiGn excHAnGe SenSitiVity AnAlySiS
euro (8 265) 346
pula 1 302 1 467
Total net position (6 963) 1 813
exchange rates used for conversion of foreign items at the reporting date were:
euro 15,96595 16,00323
pula 1,30211 1,29485
40.2. Financial instruments – fair values and risk management (continued)
ecsponent Annual Financial Statements ‘19 127
notes to the consolidated financial statements for the period ended 30 June 2019 (company) (continued)notes to the consolidated financial statements for the period ended 30 June 2019 (company) (continued)
12-month period ended
30 June 2019R’000
15-month period ended
30 June 2018R’000
SuBSiDiARieS
Ecsponent Treasury Services (Pty) Ltd 1 120 710 1 273 998
the loan is unsecured, bears interest at 14% per annum and is repayable
on demand.
Ecsponent Limited (Botswana) 13 021 12 949
the loan is unsecured, interest free and is repayable on demand.
1 133 731 1 286 947
impairment of loans to subsidiaries - -
1 133 731 1 286 947
current assets 1 133 731 1 286 947
non-current assets - -
1 133 731 1 286 947
the company does not hold any collateral as security.
40.3. Loans to group companies
128 ecsponent Annual Financial Statements ‘19
notes to the consolidated financial statements for the period ended 30 June 2019 (company) (continued)
12-month period ended
30 June 2019R’000
15-month period ended
30 June 2018R’000
At FAiR VAlue tHROuGH pROFit OR lOSS
Preference shares - 100 000
the preference share investment comprises 1 666 667 preference shares held in VSS Financial Services (pty) ltd (“VSS”). the preference shares are cumulative perpetual instruments with VSS holding the right to redeem or to convert to an alternative class of share. Dividends were declared at the discretion of the VSS board.
Listed shares - MyBucks - 3 461
the Group acquired foreign denominated listed equities of the issued share capital of the myBucks Group, as part of its private equity portfolio. the shares are listed on the Frankfurt stock exchange. Due to the additional investment in the listed equities in the current period, this investment has been reclassified to an investment in associate.
Option agreement 1 582 -
in June 2018, the Group entered into a put option agreement with mHmk Group limited and Sunblaze investment Holdings incorporated, the Option issuers. in terms of the agreement the Group holds an unconditional and nonexclusive option to require the Option issuers to purchase, jointly or severally, all or any portion of the Option Shares, being the total number of myBucks SA ordinary shares held by ecsponent as at 31 December 2021, at an Option Strike price of €18.
the option can be exercised directly after the Option period’s expiration date being 31 December 2021, during the 30-day Option exercise period which follows.
Capitis Equities 134 756 146 856
the company invested in a Section 12J company, capitis equities (pty) ltd, by acquiring a 19% stake in the ordinary shares of the entity. the company further invested in the qualifying 12J investment portfolio of capitis. the Board assesses the portfolio’s fair value on a regular basis and at a minimum at each reporting period.
136 338 250 317
Refer to note 4 for details relating to the relevant fair value measurement assumptions.
OtHeR FinAnciAl ASSetS cARRieD At AmORtiSeD cOSt
Ecsponent Treasury Services (Pty) Ltd 840 140 -
17 000 000 class F 10% perpetual preference shares of R100/share at a discounted price of R49,42/share.
impairment of other financial assets - -
Net other financial assets after credit impairments 976 478 250 317
nOn-cuRRent ASSetS
At fair value through profit and loss 1 582 246 856
At amortised cost 840 140 -
841 722 246 856
nOn-cuRRent ASSetS
At fair value through profit and loss 134 756 3 461
At amortised cost - -
134 756 3 461
Total other financial assets 976 478 250 317
40.4. Other financial assets
ecsponent Annual Financial Statements ‘19 129
notes to the consolidated financial statements for the period ended 30 June 2019 (company) (continued)4
0.5
. In
tere
sts
in s
ub
sid
airi
es
Su
bsi
dia
ries
ple
dg
ed a
s se
curi
ty
At
30
Ju
ne
2019
an
d u
p t
o th
e d
ate
of t
he
rep
ort
non
e of
th
e su
bsi
dia
ries
hav
e b
een
ple
dge
d a
s se
curi
ty.
t
her
e ar
e n
o si
gnifi
can
t re
stri
ctio
ns
to t
he
Gro
up
in r
esp
ect
of t
he
abili
ty t
o ac
cess
ass
ets
and
liab
iliti
es o
f th
e su
bsi
dia
ries
.
th
e fo
llow
ing
tab
le li
sts
the
enti
ties
wh
ich
are
con
trol
led
dir
ectl
y by
th
e co
mp
any,
an
d t
he
carr
yin
g am
oun
ts o
f th
e in
vest
men
ts in
th
e co
mp
any’
s se
par
ate
finan
cial
sta
tem
ents
.
Su
bsi
dia
ryH
eld
by
% h
old
ing
Car
ryin
g v
alu
e
30
Ju
ne
20
19%
30
Ju
ne
20
18%
30
Ju
ne
20
193
0 J
un
e 2
018
ecsp
onen
t c
red
it S
ervi
ces
(pty
) lt
dec
spon
ent
ltd
(S
A)
100
.00
100
.00
--
ecsp
onen
t Fi
nan
cial
Ser
vice
s (p
ty)
ltd
ec
spon
ent
ltd
(S
A)
100
.00
100
.00
15 0
00
15 0
00
ecsp
onen
t li
mit
ed (
Bot
swan
a)ec
spon
ent
ltd
(S
A)
100
.00
100
.00
5 0
00
5 0
00
ecsp
onen
t H
old
ings
Sw
azila
nd
(p
ty)
ltd
ecsp
onen
t lt
d (
SA
)10
0.0
010
0.0
01
1
laza
ron
Bio
tech
nol
ogie
s (p
ty)
ltd
ecsp
onen
t lt
d (
SA
)10
0.0
010
0.0
02
2
ecS
Au
tom
otiv
e (p
ty)
ltd
ecsp
onen
t lt
d (
SA
)10
0.0
010
0.0
0-
-
Vit
save
(p
ty)
ltd
ec
spon
ent
ltd
(S
A)
-5
1.0
0-
-
San
ced
a c
olle
ctio
ns
(pty
) lt
d
ecsp
onen
t lt
d (
SA
)10
0.0
010
0.0
01
1
ecsp
onen
t m
anag
emen
t S
ervi
ces
ltd
ecsp
onen
t lt
d (
SA
)10
0.0
010
0.0
08
05
80
5
ecsp
onen
t p
rocu
rem
ent
Ser
vice
sec
spon
ent
ltd
(S
A)
100
.00
100
.00
5 1
00
5 1
00
Ret
urn
on
inn
ovat
ion
(p
ty)
ltd
ecsp
onen
t lt
d (
SA
)10
0.0
010
0.0
01
50
01
50
0
ecsp
onen
t tre
asu
ry S
ervi
ces
(pty
) lt
dec
spon
ent
ltd
(S
A)
100
.00
100
.00
11
ecsp
onen
t D
evel
opm
ent
Fun
d (
pty
) lt
dec
spon
ent
ltd
(S
A)
100
.00
100
.00
11
ecsp
onen
t S
outh
Afr
ica
(pty
) lt
dec
spon
ent
ltd
(S
A)
100
.00
100
.00
22
2
7 4
132
7 4
13
imp
airm
ent
of in
vest
men
t in
su
bsi
dia
ry(1
52
8)
(1 5
27)
25
88
52
5 8
86
Th
e im
pai
rmen
t p
rovi
sio
n c
on
sist
s o
f th
e fo
llo
win
g:
ecsp
onen
t S
outh
Afr
ica
(pty
) lt
d(1
)(1
)
Ret
urn
on
inn
ovat
ion
(p
ty)
ltd
(1 5
00
)(1
50
0)
ecsp
onen
t m
anag
emen
t S
ervi
ces
ltd
(27)
(26
)
(1 5
28
)(1
52
7)
130 ecsponent Annual Financial Statements ‘19
notes to the consolidated financial statements for the period ended 30 June 2019 (company) (continued)
12-month period ended
30 June 2019R’000
15-month period ended
30 June 2018R’000
nOn-FinAnciAl ASSetS
prepayments 5 072 1 456
VAt 2 545 9 669
FinAnciAl ASSetS
trade receivables 1 055 2 292
Other receivables - 63
8 672 13 480
current 8 672 13 480
8 672 13 480
Trade receivables Age analysis of trade and other receivables:
2019 2018
Trade receivable
Expected credit losses
Trade receivable
Impairment provision
R’000 R’000 R’000 R’000
current 1 054 - 2 292 -
30 days 1 - - -
1 055 - 2 292 -
expected credit losses on trade and other receivables is calculated and accounted for in line with the expected credit loss model as disclosed in the accounting policies. the company assesses the recoverability of individual trade receivable balances on a continuous basis to identify any possible write-offs based on the underlying circumstances.
40.7. Cash and cash equivalents
cASH AnD cASH eQuiVAlentS FROm cOntinuinG OpeRAtiOnS
Bank balance 12 081 5 511
Bank overdraft (21) -
12 060 5 511
40.6. Trade and other receivables
ecsponent Annual Financial Statements ‘19 131
notes to the consolidated financial statements for the period ended 30 June 2019 (company) (continued)
12-month period ended
30 June 2019number
15-month period ended
30 June 2018number
AutHORiSeD pReFeRence SHAReS
Ecsponent Limited (incorporated in South Africa)
class A preference shares of no-par value 1 000 000 000 1 000 000 000
class B preference shares of no-par value 1 000 000 000 1 000 000 000
class c preference shares of no-par value 1 000 000 000 1 000 000 000
class D preference shares of no-par value 1 000 000 000 1 000 000 000
class e preference shares of no-par value 1 000 000 000 1 000 000 000
class G preference shares of no-par value 1 000 000 000 1 000 000 000
6 000 000 000 6 000 000 000
Reconciliation of the number of preference shares in issue:
30 June 2019
Class A Class B Class C Class D Class E Class G
R’000 R’000 R’000 R’000 R’000 R’000
Reported at the beginning of
the period
783 069 3 688 644 7 344 514 1 418 825 892 920 31 110
issue of preference shares
during the year
- 1 822 395 - 2 053 391 1 107 510 22 152
783 069 5 511 039 7 344 514 3 472 216 2 000 430 53 262
Weighted average issue price
per share (Rands)
96.80 100.00 100.00 100.00 100.00 100.00
the preference shares are issued on an on-going basis to investors under a general authority provided to the directors to issue shares for cash.
Unissued preference shares the unissued preference shares in all regions are under the control of the directors.
Classification of redeemable preference sharesHolders of the preference shares receive a cumulative dividend subject to the terms of the preference share class issued. the preference shares do not have the right to participate in any additional dividends declared to ordinary shareholders. these shares do not have voting rights at general meetings of the company.
the preference shares are redeemable after 60 months from the initial issue date and as a result are classified as debt and disclosed as such in the statement of financial position. the dividends declared to preference shareholders are classified as finance costs and disclosed on this basis in the statement of profit and loss.
40.8. Preference shares
132 ecsponent Annual Financial Statements ‘19
notes to the consolidated financial statements for the period ended 30 June 2019 (company) (continued)
Preference share liability the preference share liability at the end of the year comprises of the following:
Preference shares issued by Ecsponent Limited (South Africa)
12-month period ended
30 June 2019R’000
15-month period ended
30 June 2018R’000
HelD At AmORtiSeD cOSt
Preference share - class A 76 786 75 316
initial issue price redeemable after five years. monthly dividend paid at a rate of
10% per annum.
- -
Preference share - class B 658 806 417 931
preference share redeems at 170% of the initial issue after five years. no monthly
dividends are paid.
- -
Preference share - class C 723 425 713 021
initial issue price redeemable after five years. monthly dividend paid at a rate of
prime plus 4% per annum.
- -
Preference share - class D 340 785 137 414
initial issue price redeemable after five years. monthly dividend paid at a rate of
12.5% per annum.
- -
Preference share - class E 195 382 86 311
initial issue price redeemable after five years. monthly dividend paid at a rate of
11.25% per annum.
- -
Preference share - class G 5 212 3 006
initial issue price redeemable after five years. monthly dividend paid at a rate of
10% per annum.
Total preference shares 2 000 396 1 432 999
nOn-cuRRent liABilitieS
At amortised cost 1 708 882 1 426 243
cuRRent liABilitieS
At amortised cost 291 514 6 756
40.8. Preference shares (continued)
ecsponent Annual Financial Statements ‘19 133
notes to the consolidated financial statements for the period ended 30 June 2019 (company) (continued)
12-month period ended
30 June 2019number
15-month period ended
30 June 2018number
AutHORiSeD BOnD nOte
Ecsponent Limited (incorporated in South Africa)
note 1 bond of no-par value 1 000 000 000 -
note 2 bond of no-par value 1 000 000 000 -
note 3 bond of no-par value 1 000 000 000 -
note 4 bond of no-par value 1 000 000 000 -
note 5 bond of no-par value 1 000 000 000 -
5 000 000 000 -
During Q4 of 2018 ecsponent introduced its ZAR10 000 000 000 Domestic medium-term note programme (“note programme”). ecsponent may from time to time issue notes of any kind denominated in South African Rand, on the terms and conditions contained in the note programme. the note programme was approved by the JSe on 21 August 2018.
notes may be at a Fixed Rate, a Floating Rate or a Zero-coupon, or such combination of any of the foregoing or such other type of note as may be determined by ecsponent and specified in the Applicable pricing Supplement from time to time. Save as set out in the note programme, the notes will not be subject to any minimum or maximum maturity and the maximum aggregate principal Amount of all notes from time to time outstanding will not exceed ZAR10 000 000 000.
notes currently on offer: › Zero-coupon notes with a return of 10.66% per annum, payable after three years together with capital;› Floating Rate notes with a return of prime + 1.5% per annum, payable monthly and capital after three years; and› Fixed Rate notes with a return ranging between 9% to 12.5% per annum, payable monthly and capital after three years.
ecsponent limited (South Africa)
30 June 2019
Fixed rate Note 1
Fixed rate
Note 2
Fixed rate
Note 3
Floating rate
Note
Zero-Coupon Note
R’000 R’000 R’000 R’000 R’000
Reported at the beginning of the period - - - - -
issue of notes during the year 45 424 458 218 1 068 005 333 699 430 222
45 424 458 218 1 068 005 333 699 430 222
Weighted average issue price per share (Rands)
100.00 100.00 100.00 100.00 100.00
40.9. Note programme
134 ecsponent Annual Financial Statements ‘19
notes to the consolidated financial statements for the period ended 30 June 2019 (company) (continued)
12-month period ended
30 June 2019R’000
15-month period ended
30 June 2018R’000
HelD At AmORtiSeD cOSt
Note 1 – Fixed Rate 1 330 -
initial issue price redeemable after three years. monthly interest is paid at a rate of
9% per annum.
Note 2 – Fixed Rate 12 947 -
initial issue price redeemable after three years. monthly interest is paid at a rate of
10% per annum.
Note 3 – Fixed Rate 29 662 -
initial issue price redeemable after three years. monthly interest is paid at a rate of
12% per annum.
Note 4 – Zero-Coupon 9 446 -
note redeems at 137.49% of the initial issue price after three years. no monthly
interest is paid.
Note 5 – Floating Rate 12 009 -
initial issue price redeemable after three years. monthly interest is paid at a rate of
prime plus 1.5% per annum.
Total notes in issue 65 394 -
nOn-cuRRent liABilitieS
At amortised cost 64 659 -
cuRRent liABilitieS
At amortised cost 736 -
Total notes in issue 65 395 -
40.10. Trade and other payables
FinAnciAl liABilitieS
trade payables 2 808 3 575
payroll liabilities 13 12
Accrued audit fees 133 -
Other accrued expenses 90 133
Other payables 79 3 468
3 123 7 188
40.9. Note programme (continued)
ecsponent Annual Financial Statements ‘19 135
notes to the consolidated financial statements for the period ended 30 June 2019 (company) (continued)
12-month period ended
30 June 2019R’000
15-month period ended
30 June 2018R’000
current finance lease payable 35 158
non-current finance lease payable 166 879
Total 201 1 037
Finance lease liabilities are payable as follows:
Future minimum
lease payments
Interest Present value of minimum
lease payment
R’000 R’000 R’000
less than one year 57 21 35
Between one and five years 204 37 166
more than five years - - -
Total 261 58 201
During the prior year, the company entered into finance lease agreements for the lease of four motor vehicles. During the current year, three of those vehicles were disposed. the interest rate charged is 11.5% and the lease period is 72 months.
40.12. Deferred taxation
12-month period ended
30 June 2019R’000
15-month period ended
30 June 2018R’000
Fair value adjustments (1 695) 404
capital growth accruals 17 420 12 114
capital gain - 12J (34 944) (34 944)
Other deferred (liabilities)/assets (1 395) 4 116
Deferred transaction cost (16 255) (14 828)
(36 869) (33 138)
The deferred tax asset disclosed in the Group statement of financial position as non-current asset comprises:
capital growth accruals 17 420 -
Other deferred assets 25 -
17 445 -
The deferred tax liability disclosed in the Company statement of financial position as non-current liabilities comprises:
Accelerated capital allowances for tax purposes (34 944) (34 944)
capital gain - 12J (1 695) 404
Fair value adjustments (16 255) (14 828)
Deferred transaction cost - 12 114
capital growth accruals (1 420) 4 116
Other deferred liabilities - -
(54 314) (33 138)
40.11. Finance lease liabilities
136 ecsponent Annual Financial Statements ‘19
notes to the consolidated financial statements for the period ended 30 June 2019 (company) (continued)
12-month period ended
30 June 2019R’000
15-month period ended
30 June 2018R’000
Reconciliation of the deferred tax asset/(liability):
Deferred tax asset at the beginning of the period (33 138) (4 949)
(increase)/decrease in tax losses available for set off against future taxable income - -
Originating temporary differences on capital growth accruals 5 306 5 914
Originating temporary on deferred transaction cost (1 427) (3 679)
Originating temporary on fair value adjustments (2 099) 404
Originating temporary on section 12J investments - (34 944)
Other originating temporary differences (5 511) 4 116
(36 869) (33 138)
40.13. Property, plant and equipment
2019 2018
Cost Accumulated
depreciation
Carrying value Cost Accumulated
depreciation
Carrying value
R’000 R’000 R’000 R’000 R’000 R’000
motor vehicles - held under
finance lease
264 (70) 194 1 057 (70) 987
leasehold improvements 885 (55) 830 - - -
Total 1 149 (125) 1 024 1 057 (70) 987
Reconciliation of property, plant and equipment:
2019
Opening
balance
Additions Disposals Depreciation Total
R’000 R’000 R’000 R’000 R’000
motor vehicles - held under finance lease 986 - (630) (162) 194
leasehold improvements - 885 - (55) 830
total 986 885 (630) (217) 1 024
2018
motor vehicles - held under finance lease - 1 057 - (70) 987
total - 1 057 - (70) 987
A register containing the information required by Regulation 25(3) of the companies Regulations, 2011 is available for inspection at the registered office of the company.
the Group had no outstanding contractual commitments to acquire additional items of property, plant and equipment at the end of the respective reporting periods. the following asset were subject to finance lease agreements at the end of the respective reporting period: › Vehicles with a carrying amount of R193 775 are held under a finance lease. Refer to note 40.11 for more detail.
40.12. Deferred taxation (continued)
ecsponent Annual Financial Statements ‘19 137
notes to the consolidated financial statements for the period ended 30 June 2019 (company) (continued)
Reconciliation of the deferred tax asset/(liability):
12-month period ended
30 June 2019R’000
15-month period ended
30 June 2018R’000
lOAnS AnD ADVAnceS cARRieD At AmORtiSeD cOSt
MyBucks S.A. 124 847 -
the loan is unsecured, bears interest at a rate of 28% per annum, and is repayable
on demand.
Total loans and advances 124 847 -
non-current assets - -
current assets 124 847 -
Total loans and advances 124 847 -
40.15. Other financial liabilities
HelD At AmORtiSeD cOSt
Capitis Equities (Pty) Ltd 93 605 -
the loan is unsecured, bears interest at 8% per annum and is repayable
on demand.
Total other financial liabilities 93 605 -
cuRRent liABilitieS
Total other financial liabilities 93 605
40.16. Commitments and contingencies
OpeRAtinG leASe cOmmitmentS
minimum lease payments due:
› Within one year 2 350 -
› in second to fifth year 10 314 -
12 664 -
Operating lease payments represent rentals payable by the company for office properties. lease agreements include escalation clauses and options to renew contracts. the directors are not aware of any matter or circumstances of material significance that requires disclosure as a contingent liability.
40.14. Loans and advances
138 ecsponent Annual Financial Statements ‘19
notes to the consolidated financial statements for the period ended 30 June 2019 (company) (continued)
12-month period ended
30 June 2019R’000
15-month period ended
30 June 2018R’000
Subsidiaries interest 152 277 271 919
Subsidiaries capital raising fees - 7 200
Dividends: - -
› From third parties 22 000 3 000
› Subsidiaries 128 082 -
Other miscellaneous 849 160
Total revenue 303 208 282 279
40.18. Fair value adjustments
Fair value gains (losses) - listed equities 5 918 (1 441)
Fair value gains (losses) - unlisted equities (14 442) -
Fair value gains (losses) - Other financial assets 1 634 (13 202)
(6 890) (14 643)
Unlisted investmentsthe company invested in an unlisted preference share and capitis, a company registered in terms of Section 12J of the income tax act. At the reporting date these investments are stated at their respective fair values based on valuation techniques appropriate for each class of asset. Listed equitiesthe company acquired shares in myBucks SA, a company listed on the Frankfurt stock exchange. the fair value represents the movement in the acquisition share price/opening balance and the value as determined by an external valuator on 30 June 2019.
40.19. Other income
expense recoveries 3 497 2 174
profit on foreign currency exchange differences - 246
profit on sale of businesses - 3 010
management fees 5 520 10 420
Other miscellaneous 20 974
9 037 16 824
40.20. Operating profit/(loss)
Operating profit/(loss) for the period is stated after accounting for the following:
Operating lease charges:
› premises 968 -
› equipment 2 549 2 043
loss on foreign currency exchange differences 1 816 -
employee costs - settled in cash 3 246 2 057
40.17. Investment revenue
ecsponent Annual Financial Statements ‘19 139
notes to the consolidated financial statements for the period ended 30 June 2019 (company) (continued)
12-month period ended
30 June 2019R’000
15-month period ended
30 June 2018R’000
preference share dividends 240 588 201 140
Other miscellaneous 5 218 2
245 806 201 142
40.22. Taxation
Major components of tax (income)/expense
cuRRent
income tax – current period 4 331 16 113
DeFeRReD
Originating and reversing temporary differences 3 731 28 189
Arising from previously unrecognised tax losses - -
3 731 28 189
8 062 44 302
Reconciliation of the tax expense Reconciliation between applicable tax rate and average effective tax rate.
% %
Applicable tax rate 28.00 28.00
Disallowable charges - preference share dividends 245.06 83.36
exempt income - dividends received (229.12) (1.73)
capital gains tax (18.35)
43.94 91.28
40.23. Cash used in operations note
R’000 R’000
profit before taxation 18 350 48 532
Adjusted for:
Depreciation and amortisation 218 70
Dividends received (150 082) (3 000)
loss on sale of property, plant and equipment 6 -
profit on sale of business of investment in subsidiary - (3 010)
Fair value adjustments 6 890 14 643
Realisation of deferred transaction cost 16 310 13 326
interest received (153 126) (271 946)
Finance costs 229 495 174 676
impairment loss - 1 500
Reversal of impairment - (947)
unrealised forex gain (281) (246)
trade and other receivables 4 808 (20 872)
trade and other payables (4 065) 6 939
(31 477) (40 335)
40.21. Finance costs
140 ecsponent Annual Financial Statements ‘19
notes to the consolidated financial statements for the period ended 30 June 2019 (company) (continued)
12-month period ended
30 June 2019R’000
15-month period ended
30 June 2018R’000
Balance at the beginning of the period 1 332 (7 610)
taxation charge for the year (4 331) (16 113)
Balance at the end of the period (7 157) (1 332)
(10 156) (25 055)
40.25. Related parties
RelAtiOnSHip
Subsidiaries Refer to note 40.5
Associates myBucks S.A. limited
Fellow subsidiaries of the group mHmk capital (pty) ltd
Shareholders with significant influence
› mHmk Group limited (represented by G. manyere)› tp Gregory › Dp van der merwe
Members of key management Refer to note 37
R’000 R’000
lOAn AccOuntS - OWinG (tO) By inteR GROup cOmpAnieS
ecsponent treasury Services (pty) ltd 1 120 710 1 273 998
ecsponent Botswana limited 13 021 12 949
myBucks S.A. 124 847 -
OtHeR FinAnciAl ASSetS
mHmk Group limited 1 582 -
pReFeRence SHAReS iSSueD FROm GROup cOmpAnieS
ecsponent treasury Services (pty) ltd 840 140 -
RelAteD pARty tRAnSActiOnS
Interest (received from)/paid to inter Group companies
ecsponent treasury Services (pty) ltd (143 931) (271 919)
myBucks S.A. (8 347) -
40.24. Taxation paid
ecsponent Annual Financial Statements ‘19 141
notes to the consolidated financial statements for the period ended 30 June 2019 (company) (continued)
12-month period ended
30 June 2019R’000
15-month period ended
30 June 2018R’000
ADminiStRAtiOn FeeS pAiD tO/(ReceiVeD FROm) inteR GROup cOmpAnieS
ecsponent Financial Services (pty) ltd 33 815 38 073
ecsponent management Services (pty) ltd - (7 200)
ecsponent management Services (pty) ltd 12 000 11 250
ecsponent procurement Services (pty) ltd (1 200) (900)
ecsponent Development Fund (pty) ltd (3 600) (2 700)
mHmk capital (pty) ltd 1 280 -
ecsponent limited (eswatini) - (2 700)
ecsponent limited (Botswana) (720) (4 120)
DiViDenDS ReceiVeD FROm RelAteD pARtieS
ecsponent treasury Services (pty) ltd (128 082) -
VSS Financial Services (pty) ltd * (22 000) -
RecOVeRieS pAiD tO / (ReceiVeD FROm) inteR GROup cOmpAnieS
ecsponent management Services (pty) ltd (3 497) 2 174
* please note that these related parties are part of the myBucks S.A limited group of companies.
For details relating to related party business acquisitions and/or disposals, please refer to note 40.5.
40.26. Investment in associate
At 30 June 2019 the company had significant influence over myBucks S.A. (“myBucks”) and ecsponent Financial Services ltd (“myBucks Zambia”) by virtue of its interest in these company’s shareholding and voting powers. Significant influence over myBucks was determined based on the fact that the company, together with other group companies, hold a 39.71% share in myBucks. Refer to note 5 for additional information.
Opening balance 22 118
cost of investment in associate 14 22 118
increase due to recapitalisation 20 747 -
Reclassification from other financial assets 9 647 -
Fair values adjustments passed 15 -
Foreign exchange differences (304) -
Reclassification from investment in subsidiary - 6 990
equity accounted post acquisition loss - (6 990)
52 237 22 118
AcQuiSitiOn DAte FAiR VAlue OF cOnSiDeRAtiOn pAiD
cash consideration paid - 10 000
2019
EFS Zambia MyBucks S.A. Total
R’000 R’000 R’000
carrying amount/fair value of associates 42 866 9 371 52 237
40.25. Related parties (continued)
142 ecsponent Annual Financial Statements ‘19
nOteS
Suspension bridge over the river mouth of the Storms River in the tistsikamma national park, South Africa.
Bridging the gap to emBrace a growing future.
Ecsponent Limited Head Office1st Floor, the Wedge, 43 Garsfontein road, Waterkloof, 0145, pretoria, Gauteng+27 87 808 0100 | +27 86 432 3459 | [email protected]
Registration no. 1998/013215/06
ecsponent.com