Wrap Text
Provisional consolidated audited annual financial statements for the year ended 28 February 2015
AFRICAN DAWN CAPITAL LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1998/020520/06)
JSE code: ADW
ISIN: ZAE000060703
("the Company" or "the Group" or "Afdawn")
Provisional consolidated audited annual financial statements for the year ended 28 February 2015, withdrawal of
cautionary announcement and cautionary announcement
Statement of Financial Position as at 28 February 2015
Group
Restated Restated
2015 2014 2013
Notes R'000 R'000 R'000
Assets
Non-Current Assets
Property, plant and equipment 937 1,042 899
Goodwill 2 8,076 - -
Intangible assets 3 6,479 2,844 1,792
Investments in subsidiaries - - -
Investment in associate 4 - 2,259 787
Other financial assets - - 638
15,492 6,145 4,116
Current Assets
Other financial assets 724 1,554 300
Properties in possession 6 22,968 24,748 21,335
Loans to group companies - - -
Trade and other receivables 7 39,835 58,525 75,885
Current tax receivable 8 - 95 95
Cash and cash equivalents 15,397 5,358 9,014
78,924 90,280 106,629
Non-current assets held for sale 9 - 4,129
and discontinued operations -
Total Assets 94,416 96,425 114,874
Equity and Liabilities
Equity
Share capital and share premium 10 313,943 284,634 284,634
Accumulated loss (284,532) (251,520) (227,707)
29,411 33,114 56,927
Liabilities
Non-Current Liabilities
Loans from directors 11 1,535 - -
Deferred tax 5 1,365 - -
Borrowings 13,298 8,844 22,366
Finance lease liabilities 60 194 316
16,258 9,038 22,682
Current Liabilities
Loans from group companies - - -
Current tax payable 8 14,840 17,829 18,365
Borrowings 17,782 26,902 7,292
Finance lease liabilities 122 87 77
Loans from directors 11 3,777 - -
Operating lease liability 23 174 195
Trade and other payables 12 11,729 9,281 9,336
Deferred income 474 - -
48,747 54,273 35,265
Total Liabilities 65,005 63,311 57,947
Total Equity and Liabilities 94,416 96,425 114,874
Statement of Profit or Loss and Other Comprehensive Income
Group
Restated
2015 2014
Notes R'000 R'000
Continuing operations
Revenue 13 40,149 35,736
Cost of sales (268) -
Gross profit 39,881 35,736
Other income 14 7,417 959
Operating expenses (65,508) (55,496)
Operating loss 15 (18,210) (18,801)
Investment income 735 80
Impairment of investment in subsidiaries - -
Loss on fair value movement - contingent 19 (2,000) -
consideration liability
Deemed interest expense (110) -
Impairment to properties in possession (1,500) -
(Loss)/profit from equity accounted investment 4 (2,259) 1,472
Loss on non-current assets held for sale - (311)
Finance costs 16 (8,633) (3,863)
Loss before taxation (31,977) (21,423)
Taxation 17 (1,035) (407)
Loss from continuing operations (33,012) (21,830)
Discontinued operations
Loss from discontinued operations - (1,983)
Loss for the year (33,012) (23,813)
Loss attributable to:
Owners of the parent:
Continuing operations (33,012) (21,830)
Discontinued operations - (1,983)
(33,012) (23,813)
From continuing and discontinued operations
Basic and diluted loss per share (c) 27 (3.84) (4.48)
From continuing operation
Basic and diluted loss per share (c) 27 (3.84) (4.11)
From discontinued operations
Basic and diluted loss earnings per share (c) 27 - (0.37)
Statement of Changes in Equity
Share capital Share premium Total share
capital Accumulated Total equity
loss
R'000 R'000 R'000 R'000 R'000
Group
Opening balance as previously reported 5,074 279,560 284,634 (221,383) 63,251
Adjustments
Prior period errors - - - (6,324) (6,324)
Balance at 01 March 2013 as restated 5,074 279,560 284,634 (227,707) 56,927
Total comprehensive loss for the year - - - (23,813) (23,813)
Balance at 01 March 2014 as restated 5,074 279,560 284,634 (251,520) 33,114
Total comprehensive loss for the year - - - (33,012) (33,012)
Issue of shares 3,729 25,580 29,309 - -
Total contributions by and distributions to
owners of company recognised directly in
equity 3,729 25,580 29,309 - 29,309
Balance at 28 February 2015 8,803 305,140 313,943 (284,532) 29,411
Note(s) 10 10 10
* The restatement of the financial statements is reconciled in notes 23 and 24.
Statement of Cash Flows
Group
Restated
2015 2014
Notes R'000 R'000
Cash flows from operating activities
Cash used in operations 18 (2,280) (1,125)
Interest income 735 80
Finance costs (3,115) (3,838)
Tax paid (574) (968)
Cash flows from discontinued operations - (1,983)
Net cash from operating activities (5,234) (7,834)
Cash flows from investing activities
Purchase of property, plant and equipment (346) (549)
Proceeds on disposal of property, plant and 56 13
equipment
Purchase of intangible assets 3 - (1,263)
Business combinations 19 16 -
Sale of business 20 (396) -
Proceeds from loans from group companies - -
Repayment of loans from group companies - -
Net cash from investing activities (670) (1,799)
Cash flows from financing activities
Proceeds on share issue 10 20,309 -
Borrowings (repaid) / raised (4,003) 6,089
Finance lease payments (99) (112)
Repayment of directors' loans acquired in business (21) -
combinations (refer to note 37)
Repayment of directors' loans 11 (243) -
-
Net cash from financing activities 15,943 5,977
Total cash movement for the year 10,039 (3,656)
Cash at the beginning of the year 5,358 9,014
Total cash at end of the year 15,397 5,358
Statement of compliance
These audited condensed provisional consolidated financial statements have been prepared in accordance with the
International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board, IAS 34:
Interim Financial Reporting, the Johannesburg Stock Exchange ("JSE") Listings Requirements, the requirements of
the South African Companies Act, as amended and the SAICA financial reporting guidance as issued by the
Accounting Practices Committee.
Changes in accounting policies and basis of preparation
New and revised standards that are effective for annual periods beginning on or after 1 March 2014
Other than as explained below, the principal accounting policies applied in the preparation of these provisional
consolidated financial statements have been consistently applied to all the years presented and are in terms of IFRS
and consistent with those of the previous year save for as set out below.
Refer to notes 23 and 24 for details of material prior period errors and reclassifications.
The Group has early adopted an amendment to IAS 27 – Separate Financial Statements, which permits entities to
use the equity method to account for investments in subsidiaries, joint ventures and associates in their separate
financial statements. The Group has elected to apply the equity method to account for investments in associates in
the separate financial statements of the investor.
A number of new and revised standards are effective for annual periods beginning on or after 1 March 2014.
Information on these new standards is presented below. None of these have an impact on the recognition and
measurement of assets and liabilities within the Group. However, comparative information is provided for new
disclosures where applicable and required in terms of the standards.
- Amendments to IFRS 10, IFRS 12 and IAS 27 – Investment entities (1 March 2014)
- Amendment to IAS 32 – Offsetting financial assets and financial liabilities (1 March 2014)
- Amendment to IAS 36 – Recoverable amount disclosures for non-financial assets (1 March 2014)
- Amendment to IAS 39 – Novation of derivatives and continuation of hedge accounting (1 March 2014)
- IFRIC 21 Levies (1 March 2014)
Standards, amendments and interpretations to existing standards that are not yet effective and have not been
adopted early by the Group
At the date of authorisation of these financial statements, certain new standards, interpretations and amendments
to existing standards have been published by the IASB that are not yet effective, and have not been early adopted by
the Group. Management anticipates that all relevant pronouncements will be adopted in the Group's accounting
policies for the first period beginning after the effective date of the pronouncement.
Significant judgements and estimation uncertainty
The preparation of financial statements in conformity with IFRS requires management to exercise its judgement in
the process of applying the Group's accounting policies rand also requires the use of certain critical accounting
estimates.
The areas that involve a higher degree of judgement or complexity, or areas where assumptions and estimates are
significant to the consolidated financial statements are disclosed in note 1
Contents of provisional consolidated annual financial statements
The provisional consolidated annual financial statements have been extracted from the consolidated audited annual
financial statements, but is itself not audited. The directors take full responsibility for the preparation of the
provisional report and that the financial information has been correctly extracted from the underlying audited
annual financial statements.
Annual financial statements
The consolidated financial statements for the year have been audited by Grant Thornton Cape Inc., and their accompanying
unmodified audit report which includes an Emphesis of Matter paragraph, regarding going concern, is available for
inspection at the Company's registered office. Shareholders are therefore advised that in order to obtain a full
understanding of the nature of the auditor's engagement they should obtain a copy of their report with the accompanying
financial information from the Company's registered office.
Emphasis of matter
'Without qualifying their opinion, the auditors would like to draw attention to Note 1, Going concern judgement, in this
SENS announcement which indicates the existence of a material uncertainty which may cast significant doubt on the company's
and groups' ability to continue as a going concern.'
These provisional consolidated financial statements were compiled by Dylan Kohler, Professional Accountant (SA)
Approval by the Board
The provisional consolidated financial statements for the year ended 28 February 2015 (including comparatives)
were approved and authorised for issue by the board of directors on 20 November 2015.
Withdrawal of cautionary announcement
Shareholders are referred to the cautionary announcement dated 15 May 2015 and the renewal of cautionary
announcements dated 9 June 2015, 29 June 2015, 11 August 2015, 1 September 2015 and 14 October 2015 relating to the finalisation
of the financial statements of the Company for the year ended 28 February 2015 and the impact of the prior year
restatements. Shareholders are hereby advised that full disclosure of the aforementioned in included in this
announcement. Accordingly, caution is no longer required to be exercised by shareholders when dealing in the
Company's securities.
Definitions used
Knife Capital means Knife Capital Proprietary Limited
Knife Capital Group means Knife Capital Proprietary Limited and Grindstone Accelerator Proprietary Limited
Elite means Elite Group Proprietary Limited
Elite Two means Elite Group Two Proprietary Limited
Elite Cell means Elite Group Cell No 00181 Proprietary Limited
Grindstone means Grindstone Accelerator Proprietary Limited
Afdawn or the Company means African Dawn Capital Limited
Candlestick means Candlestick Park Investments Proprietary Limited
Nexus means Nexus Personnel Finance Proprietary Limited
Afdawn Group or group means African Dawn Capital Limited and its subsidiary companies
1.Significant judgements and sources of estimation uncertainty
When preparing the financial statements, management and the board make a number of judgements, estimates and
assumptions. The following are the most significant judgements, estimates and assumptions that have been made in
preparing the financial statements.
Going concern judgement
The consolidated and separate financial statements have been prepared on the basis of accounting policies applicable to a going
concern. This basis presumes that funds will be available to finance future operations and that the realisation of assets and
settlement of liabilities, contingent obligations and commitments will occur in the ordinary course of business.
The material uncertainties relating to events or conditions which may cast doubt upon the ability to continue as a going
concern are outlined below
This judgement is based on a careful consideration of the following:
- Financial statements should be prepared on a going concern basis unless it is intended to liquidate the entity or
to cease trading or there is no realistic alternative but to do so.
- In considering whether the going concern assumption is appropriate, all available information is taken into
account, including information about the foreseeable future.
- Where there are material uncertainties relating to events or conditions which may cast doubt upon the ability to
continue as a going concern, those uncertainties should be disclosed.
The material uncertainties relating to events or conditions which may cast doubt upon the ability to continue as a going
concern are outlined in the table below. The table also outlines the actions being taken to manage these uncertainties
and also the current status of these uncertainties and actions.
Uncertainty Action Status
Timing of the amount payable to The directors have engaged with tax advisors to assist The current relationship with
SARS them in making a submission to SARS. SARS
(refer to note 7) is constructive and conducive
The submission to SARS has sought to an
to demonstrate that: (a) it is not in amicable outcome i.e. an
SARS' interest to demand payment in outcome
full in the short term as this will likely results in SARS that achieves full payment of
not being able to recover the full, or a substantial the tax liability over a
portion of the debt, and (b) the prospect of payment in reasonable period of time.
full of the tax liability will improve substantially over
the next 12 months.
In order to demonstrate good faith Afdawn has offered
to make certain minimum payments pending resolution
of the above application
Ability of Afdawn and all of its subsidiaries A number of actions are being taken to a) Some of these discussions are at
to meet ongoing commitments. The risk of mitigate the risk of this uncertainty an advanced stage and are
this uncertainty materialising in a manner materialising. These include: (a) considered to have a reasonably
that could affect the relevance of the Discussions are under way with various high probability of resulting in
going concern assumption could arise in a parties that could result in the sale or transactions. b) There is
period of about 9 months' time. other realization of various assets (or ongoing engagement with
portions thereof). In one instance the funders
possible transaction would also generate
additional income streams. (b) The
Company has a long-enduring and very
constructive relationship with its
funders. Experience has proved that
these relationships can be relied on to
support the continued existence of the
Group.
Elite has been repaying the Elite has made arrangement with Elite has ongoing negotiations
Sandown loan on a monthly Sandown on a monthly basis when with Sandown. These negotiations
basis, but has not fully complied needed. centre on accommodating Elite's
with the agreed repayment ability to repay the loan within a
schedule. Sandown could longer period.
demand repayment of the loan. Sandown's continued support is
based on the successful conclusion
of the recapitalisation of Elite
referred to below. Since October
2014, Elite has repaid R4,1m of
the original R15m Sandown loan.
Elite needs to be recapitalized. Afdawn will convert a portion of The shareholder's loan will be
its shareholders loan into equity converted into equity in Elite by 15
in Elite. A third party will November 2015.A heads of
acquire 51% of the economic agreement
interest in Elite by providing has already been signed with a third
R15m of permanent capital, a party.
further R15m loan funding
facility for 5 years and access to
a client base. This will give Elite
the ability to generate the
required cash flow to fund
operations, growth and other
financial obligations.
Having regard to the nature of the uncertainties, the actions being taken and also the current status of these
uncertainties, the judgment of the management and board is that it is appropriate that the financial statements be
prepared on the going concern basis.
Other significant management judgements
Knife Capital Group Acquisition – shares held in escrow
In terms of the agreements relating to the acquisition of Knife Capital Group, 100 million Afdawn shares at 10 cents per
share were issued to the Knife Capital vendors to settle the acquisition price of R10 million. 100% of the shares were
issued immediately but 35% are held in escrow for three years.
The guidance in IFRS 3 – Business Combinations, has been applied to assess whether the shares that are held in escrow for
three years form part of the purchase price relating to the acquisition of Knife Capital or whether they relate to services
to be rendered by the vendors of Knife Capital in the three years after the acquisition.
This assessment revealed that the shares held in escrow form part of the purchase price based on the following:
- All the selling shareholders became employees in the Afdawn Group. The purchase and sale agreement
provides for future short term incentives linked to key performance indicators as well as a long-term share
incentive scheme and a further long term incentive;
- The shares are not automatically forfeited if employment terminates;
- The remuneration of the Knife Capital directors is in line with that of the Afdawn Group directors;
- The arrangement is not linked to providing services; and
- The purpose of the shares being held in escrow is to protect Afdawn Group against possible claims it may have
against the sellers during that three year period. These general warranties and representations are verifying
conditions that existed at the acquisition date.
Knife Capital Group acquisition - purchase price amounts
In terms of the agreements relating to the acquisition of Knife Capital Group, the purchase price of R10 million was
subject to adjustment in two instances:
1. If the net asset value ("NAV") of Afdawn Group at the 28 February 2014 was less than 10 cents per share. In this case,
the difference between 10 cents and the NAV per share would be multiplied by 100 million shares and would be
payable in cash to the sellers on or before 1 March 2015 ("NAV liability"); and
2. If the capital raised by Afdawn Group in the year to 26 March 2015 was less than R50 million, the purchase price would
be adjusted as follows:
(R50 million – capital raised) x 20% but limited to a maximum of R2 million.
This is known as the "share issue liability" and would be settled by Afdawn Group issuing a variable number of shares (i.e.
it is calculated by dividing the Rand amount of the share issue liability by the 30 day volume weighted average price of
the Afdawn shares).
Original issue of shares
In terms of the agreements relating to the acquisition of Knife Capital Group, 100 million Afdawn shares at 10 cents per
share were issued to the Knife Capital vendors to settle the acquisition price of R10 million.
At the date that control passed, the ruling share price was 9 cents per share, which resulted in an initial cost of
R9 million instead of the R10 million that was initially expected.
First NAV liability
In terms of IFRS 3, the fair value of the contingent consideration should be added to the purchase price at the date of the
acquisition. At acquisition, the fair value of the first NAV liability could not be determined because it was based on the
NAV per share on the 28 February 2014. It therefore became apparent that the NAV was less than 10 cents per share and
an amount of R1 460 000 was owed to the sellers to be paid on or before 1 March 2015. This amount was interest-free.
(Refer to note 11 and 19).
In November 2014, the term was renegotiated. It was agreed that this amount would remain interest-free and would be
payable to the sellers over twenty four months with effect from November 2014. (Refer to notes 11 and 19).
Second NAV liability
Subsequent to 28 February 2015, a material prior period error relating to the 2014 and 2013 impairment of debtors in
Elite was discovered. This resulted in a restatement of the 2014 and 2013 financial statements (refer to notes 23 and 24)
and the impact thereof was that the NAV was restated. This decrease in NAV per share meant that the Knife Capital
vendors were entitled to a further payment of R2,095,000, to be settled on the same terms as the first NAV liability.
R2,095,000 was added to the purchase price. (Refer to notes 11 and 19).
Share issue liability
At the time of the Knife Capital acquisition it was expected that Afdawn Group would raise capital of R50 million and
therefore the fair value of the share issue liability at the date of acquisition was nil. The fair value was unchanged at the
interim reporting date (31 August 2014).
However, at 28 February 2015, it became clear that this capital would not be raised and therefore the fair value of the
contingent consideration changed. In terms of IFRS 3, any adjustment to the at-acquisition fair value of the contingent
consideration affects profit or loss if it results from an event after the acquisition date and after the finalisation of the
measurement period relating to the acquisition. The measurement period relating to the Knife Capital acquisition was
finalised by the 31 August 2014.
This adjustment meets the definition of a financial liability in terms of IAS 32 – Financial Instruments: Presentation,
because it is an obligation to issue shares to the value of a specified Rand amount (with a maximum of R2 million). A
financial liability of R2 million was recognised and will be settled by the issue of a variable number of shares in the short
term. Refer to note 19.
Knife Capital Group acquisition - additional remuneration
The agreement relating to the acquisition of Knife Capital Group outlines various future incentives that the sellers would
be entitled to. It was agreed that these amounts would be finalised by the effective date of the acquisition of Knife
Capital Group. At the year end, these incentives had not been finalised and therefore the amount of the liability cannot
be measured with sufficient reliability.
This has been disclosed as a contingent liability. (Refer to note 21).
Subsequent to year end, and as announced on SENS on the 1st July 2015, the vendors of Knife Capital released Afdawn
Group from the second NAV liability, the share issues liability and the contingent liability relating to the additional
remuneration. (Refer to notes 11, 19 and 25)
Knife Capital Group acquisition – revision to terms (non-adjusting event refer note 25)
As announced on SENS on 1 July 2015 as part of the Voluntary Business Update, the vendors of Knife Capital and Afdawn
have entered into an agreement in terms of which the vendors have agreed to release Afdawn from the obligation to pay
the second NAV liability of R2,095,000 and the share issue liability of R2,000,000 (refer to notes 11, 19 and 25). In
addition, they have agreed to release Afdawn Group from any obligation to pay an amount relating to long-term
incentives (Refer to note 25).
In return, Afdawn Group has agreed to waive any potential claim it may have (whether as the shareholder of Knife Capital
or otherwise) to the Carried Interest (as defined in annexure C of the Transaction Agreement) and has consented to the
Carried Interest being paid by Knife Capital Group to the Knife Capital vendors.
The impact of this agreement is that:
Lastly, in terms of the settlement agreement, Mr EA van Heerden would remain as the chief financial officer of the Group
until the earlier of 31 August 2015 or when a new chief financial officer had been appointed. He subsequently agreed to
remain in office until the finalization of the financial statements. As at 31 August 2015, Mr EA van Heerden became the
chief executive officer of the Knife Capital Group. At the date the financial statements were issued, a new chief financial
officer has not yet been appointed.
Elite Two - associate (2014) and subsidiary (2015)
In 2011, Elite entered into an agreement with Sandown Capital Proprietary Limited ("Sandown"). Sandown assisted Elite
by introducing a R10 m facility to Elite to facilitate the growth of Elite through the special purpose vehicle (SPV), being
Elite Two, that was in line with, and benefitted, the business of Elite. Elite (with the assistance of Sandown) had set up
Elite Two to make short term salary-deducted personal loans – this is the main business of Elite Two and was funded by
Sandown (who earned interest) and managed by Elite (who earned management fees). Elite Two was 100% owned by
Sandown. Elite and Sandown were each entitled to 50% of the profits assuming that the total bad debts were 3% or less.
To the extent that the bad debts exceeded 3%, Elite would forfeit an equal amount of its share of the profit. However,
Elite was not exposed to any further losses.
In the years ended February 2012 and February 2013, Elite Two earned a profit of R249 067 and R1 325 426 respectively.
No management fees or equity accounted earnings were recognised by Elite despite the fact that Elite was entitled to
half of these amounts (being a cumulative amount of R787 247).
However, Elite had significant influence over Elite Two because it had the right to appoint two of the four directors,
despite it holding no shares in Elite Two. In light of the fact that Elite had not previously accounted for any investment
in an associate, no equity accounted earnings relating to Elite Two were recognised in 2012, 2013 and 2014. Instead, the
cumulative management fee of R2 259 181 was recognised in 2014. This is therefore a material prior period error which
has been retrospectively restated – refer to notes 23 and 24.
In the year ended February 2014, Elite previously recognised a cumulative management fee of R2 259 181. This has now
been restated to reflect R787,247 in the 2013 financial year and R1,471,934 in the 2014 financial year.
In November 2014, Elite acquired all the shares in Elite Two from Sandown (refer to note 19). A thorough assessment of
the requirements in IFRS 10 – Consolidated Financial Statements, and SIC 12 – Consolidation – Special Purpose Entities,
revealed that Elite did not control Elite Two prior to this date. Both Sandown and Elite were exposed, or had rights, to
variable returns from their involvement with Elite Two. However, on balance, Sandown had more exposure than Elite
and had the ability to affect those returns through its power over the investee. Sandown therefore consolidated Elite
Two until November 2014.
With effect from November 2014, Elite Two has been consolidated by Elite – refer to note 19 for information on the
deemed disposal of the associate and the acquisition of the subsidiary.
Elite Two - contingent liabilities
At the time that Elite acquired 100% of Elite Two from Sandown, Sandown took over debtors with a value of R14 337 165.
The claims against those debtors will be pursued in Sandown's name. However, the costs of the legal proceedings will be
shared equally by Elite and Sandown. If at least R10 million of this amount is collected, Elite will be paid a fee of 50% of
the excess. However, Elite is not liable for any amount that is not collected.
With respect to the legal claims no legal fees were incurred to the reporting date. Subsequent to the reporting date fees
of R91,554 were incurred in relation to the collection of the debt. Litigation is in the process against debtors in Elite
Two relating to the settlement of outstanding debt. The Company's lawyers and management consider the likelihood of
the action against the debtor being successful as likely, and the case should be resolved within the next two years.
Impairment of non-financial assets
The recoverable amounts of cash-generating units and individual assets have been determined based on the higher of
value-in-use calculations and fair value less costs of disposal. These calculations require the use of estimates and
assumptions. It is reasonably possible that certain key assumptions may change, which may then impact our estimations
and may then require a material adjustment to the carrying value of assets.
The assets that have been tested for impairment are as follows:
- Goodwill (2015) - refer to note 2
- Intangible assets (2015) - refer to note 3
- Elite (2015 and 2014) - refer to note 9
- Elite Two (2015) - refer to note 7
Insurance revenue
Certain of the micro finance debtors choose to purchase insurance from Elite and Elite Two. The insurance covers the
debtor in the event of death, disability or loss of employment. The Group does not re-insure the debts and therefore
bears the risk in such situations.
IFRS 4 - Insurance Contracts, is not applicable to the Company because the Company does not administrator the insurance
contracts. All the administration of the contracts is conducted by Guardrisk.
Although the Group is not an insurer, the revenue has been described as insurance revenue to differentiate it from other
categories of revenue.
Estimation uncertainty
Information about estimates and assumptions that have the most significant effect on recognition and measurement of
assets, liabilities, income and expenses is provided below. Actual results may be substantially different.
Impairment of trade receivables in Elite and Elite Two
The amount recognised related to the impairment of receivables by Elite and Elite Two requires the use of significant
estimates and assumptions. The Group reviews its loans to assess impairment at least on a monthly basis.
In determining whether an impairment loss should be recognised, the Group makes judgements as to whether there has
been an adverse change in the payment status of borrowers in a group, or national or local economic conditions that
correlate with defaults on assets in the Group.
Management uses estimates based on historical loss experience for assets with similar credit risk characteristics and
objective evidence of impairment similar to those in the portfolio when scheduling its future cash flows. The
methodology and assumptions used for estimating both the amount and timing requires significant judgement and
estimation.
Subsequent to February 2015, a material prior period error relating to the 2014 and 2013 impairment of debtors in Elite
was discovered. This resulted in an additional amount of R6,732,077 being recognised as an impairment for 2014 and
R7,455,429 for 2013. As a result, the 2014 and 2013 financial statements have been restated (refer to note 23).
The amount recognised in 2015 for the impairment of Elite debtors was R10,845,633.
Goodwill impairment - Knife Capital Group
The goodwill of R8,076,000 relating to the acquisition of Knife Capital Group was tested for impairment at year end. No
impairment has been recognised. Refer to note 2 for further information about the estimates and assumptions used.
Goodwill impairment – Elite Two
The share capital of Elite Two was acquired at the same value as the Net Asset Value of Elite Two so no goodwill arose on
the acquisition. Refer to note 19 for further information about the estimates and assumptions used.
Discounting of interest free loans
Several loans are interest free or bear interest at a rate that is not market related. The following judgements are made
relating to these loans:
- Credit loans that have no repayment terms are:
- classified as liabilities at amortised cost,
- included in current liabilities (because the Company does not have the right to defer
payment for at least 12 months after the reporting date;) and
- not discounted because the amount that could be demanded by the lender is equal to the carrying
amount of the loans.
- Credit loans that have repayment terms are:
- classified as liabilities at amortised cost,
- split between non-current liabilities and current liabilities in accordance with the terms; and
- discounted over the repayment period with deemed interest expense being recognised subsequent to
the initial recognition.
- Debit loans that have no repayment terms are:
- classified as loans and receivables;
- split between non-current assets and current assets in accordance with the terms and the intention
of the lender;
- assessed for impairment; and
- discounted over the estimate repayment period with deemed interest income being recognised
subsequent to
the initial recognition.
- Debit loans that have repayment terms are:
- classified as loans and receivables;
- split between non-current assets and current assets in accordance with the terms and the intention
of the lender;
- assessed for impairment; and
- discounted over the repayment period with deemed interest income being recognised subsequent
to the initial recognition.
Capital Classification Initial present Deemed
amount value interest
R'000 adjustment (income)/
R'000 expense
R'000
National Housing Finance Corporation ("NHFC") 1,750 Liability at 91 -
amortised cost
Sandown Capital Elite Two loan (B) 1,750 Liability at 76 (43)
amortised cost
Sandown Capital Interest portion of loan (C) 3,333 Liability at 494 (66)
amortised cost
6,833 - 661 (109)
The interest rates that have been applied in the discounting is an effective interest rate of 10.16%.
Estimation uncertainty related to Greenoaks
Refer to note 6
Change in estimate – interest and penalties on income tax and VAT liability
As disclosed in the prior year financial statements an estimate was made of the current tax and VAT liabilities relating to
Afdawn, Elite and Bhenka, plus the related interest and penalties that would be due to SARS. However, as a result of the
section 200 application to SARS being declined in May 2015 (refer to note 13), additional interest and penalties of R5,518
million were due.
R2,808 million of the interest and penalties relates to VAT and is recognised as an additional VAT liability in note 12
and R2,710 million of this relates to current income tax and is recognised as an additional current tax liability refer
to note 8.
This has been accounted for as a change in accounting estimate and recognised in full in the current year.
The total group liabilities (including penalties and interest) are as follows:
- VAT - R7,709 million (refer to note 12)
- Current tax - R14, 840 million (refer to note 8)
2. Goodwill
Group 2015
Cost Accumulated Carrying
impairment amount
Goodwill 8,076 - 8,076
Reconciliation of goodwill - Group - 2015
Opening balance Additions through Closing
business balance
combinations
Goodwill - 8,076 8,076
Goodwill impairment
Impairment test for goodwill
During 2015, goodwill of R8 076 000 arose on the acquisition of the Knife Capital Group (refer to note 37) and has been allocated
to the cash-generating units (CGUs) as follows:
Opening Additions Disposals Impairment Closing
Knife Capital - 7,133 - - 7,133
Grindstone - 943 - - 943
- 8,076 - - 8,076
The recoverable amount of the CGUs has been determined based on value-in-use calculations. These calculations use pre-tax cash flow projections
based on financial budgets approved by management covering a six-year period in line with the carried interest cycle. Cash flows beyond the six-year
period are extrapolated using the estimated growth rates stated below:
The growth rate does not exceed the long-term average growth rate for the business in which the CGU operates. The key assumptions, long term
growth rates and discount rates used in the value-in-use calculations are as follows:
Assumptions Note Knife Capital Grindstone
Compounded annual revenue increase % 1 14% 11%
Compounded annual total operating costs increase % 2 8% 7%
Pre-taxation discount rate 20% 20%
Recoverable amount of the CGU (R'000) 17,622 2,931
Notes
These assumptions have been used for the analysis of each CGU within the Knife Capital Group:
1. Revenue increase is based on past performance and management's expectations of growth.
2. Operating costs are the fixed costs of the CGUs, which do not vary significantly with sales volumes or prices.
Management forecasts these costs based on the current structure of the business, adjusting for inflationary
increases and these do not reflect any future restructurings or cost saving measures.
No impairment was necessary.
With regard to Knife Capital
- The recoverable amount calculated based on value in use exceeded the carrying amount by R4 886 029.
- An annual revenue growth rate of 7%, annual operating costs growth rate of 14% or a rise in discount rate to
29% would, all changes taken in isolation, result in the recoverable amount being equal to the carrying amount.
With regard to Grindstone
- The recoverable amount calculated based on value in use exceeded the carrying amount by R1 511 697.
- An annual revenue growth rate of 7%, annual operating costs growth rate of 11% or a rise in discount rate to
42% would, all changes taken in isolation, result in the recoverable amount being equal to the carrying amount.
3. Intangible assets
Group 2015 2014
Cost Accumulated Carrying Cost Accumulated Carrying
amortisation amount amortisation amount
and and
impairment impairment
Micro finance software 1,709 (562) 1,147 1,709 (220) 1,489
Medical finance software 1,355 (1,355) - 1,355 - 1,355
Contractual customer 6,543 (1,211) 5,332 - - -
contracts on acquisition of
Knife Capital Group
Total 9,607 (3,128) 6,479 3,064 (220) 2,844
Group 2013
Cost Accumulated Carrying
amortisation amount
and
impairment
Micro finance software 829 (10) 819
Medical finance software 973 - 973
Contractual customer contracts on acquisition of Knife Capital Group - - -
Total 1,802 (10) 1,792
Notes to the Financial Statements
Reconciliation of intangible assets - Group - 2015
Opening Additions Amortisation Impairment Closing
balance through balance
business
combinations
Micro finance software 1,489 - (342) - 1,147
Medical finance software 1,355 - (205) (1,150) -
Contractual customer contracts on - 6,543 (1,211) - 5,332
acquisition of Knife Capital Group
2,844 6,543 (1,758) (1,150) 6,479
Reconciliation of intangible assets - Group - 2014
Opening Additions Amortisation Closing
balance balance
Micro finance software 819 881 (211) 1,489
Medical finance software 973 382 - 1,355
1,792 1,263 (211) 2,844
Reconciliation of intangible assets - Group - 2013
Opening Additions Amortisation Closing
balance balance
Micro finance software - 829 (10) 819
Medical finance software - 973 - 973
- 1,802 (10) 1,792
Contractual customer contracts
The intangible assets recognised on the acquisition of Knife Capital Group relate to contractual customer relationships
and have a useful life of 3 to 6 years.
Internally generated software
The software is all internally generated and was specifically developed to support the unsecured and medical finance
business models.
Medical finance software with a cost of R1,355,165 (2014: R1,355,165) was under construction. It was brought into use
in the current year and then impaired. Elite decided to exit the medical finance business with the result that the carrying
amount of the medical finance software (R1 150 000) exceeded the recoverable amount of nil. An impairment loss of
R1 150 000 was therefore recognised in operating expenses.
The impairment of the intangible asset relates to the Micro finance segment.
The carrying amount and remaining useful life of material intangible assets is as follows:
Intangible assets Carrying Remaining Carrying Remaining
amount amortisation amount amortisation
2015 period 2014 period
R'000 R'000
Micro finance software 1,147 48 months 1,489 60 months
Medical finance software - 1,355 Not in use as
yet
Branded education 960 25 months -
GAP self-assessment and intervention tools 2,958 61 months -
Fund management agreements 1,414 61 months -
Notes to the Financial Statements
6,479 - 2,844 -
4 Investment in associate
Company
Name of company 2015 % 2014 % 2013 % 2015 2014 2013
Ownership ownership ownership Carrying Carrying Carrying
Interest interest interest amount amount amount
Elite Two 100.00 % -% -% - 2,259 787
The Company's principal - - -
place of business and
incorporation – South
Africa
- 2,259 787
Elite Two prior to February 2015
In 2011, Elite entered into a management agreement with Sandown in respect of a company called Elite Two. The purpose of
the agreement was to allow Elite to make use of a funding line, to earn a management fee, to share in the returns of Elite Two
and therefore to continue to grow its business during the recapitalisation of the Afdawn Group.
The main terms of the agreement and subsequent events are as follows:
- Sandown lent Elite Two R10 million.
- Sandown owned 100% of Elite Two.
- Elite and Sandown could each appoint 2 of the 4 directors of Elite Two.
- Sandown financed Elite Two to a maximum of R10 million ("the Sandown capital loan").
- Elite managed Elite Two on behalf of Sandown and sourced potential clients to which it could provide short term
personal loans.
- Elite earned a monthly management fee and shared the profits of Elite Two on a 50:50 basis with Sandown.
- Elite and Sandown shared the bad debts provided they were no more than the historical amount of 3% of the
receivables book. To the extent that the provision increased, Elite would be liable but only to the
extent of any cumulative profits earned to date.
- Sandown had the option (in August 2012) of selling 100% of the shares in Elite Two to Elite for a price
based on the net asset value ("NAV") of Elite Two ("the selling price"). The Selling Price was to be settled by
the issue of shares in Elite to Sandown. The issue price was 100 cents per Elite share, such that Sandown would
acquire 30% of the issued share capital of Elite following the Elite Two acquisition and subject to the selling
price not exceeding 49% of the market capitalisation of Afdawn Group on the date of exercise of the
Sandown option.
- If the NAV of Elite Two was greater or lower than 30% of the combined NAV of Elite and Elite Two at the time of
the exercising of the option referred to above, then Elite Two would be obliged to either distribute profits
and/or assets to Sandown or to recapitalise Elite Two, so as to ensure that the NAV of Elite Two would be
equal to 30% of the combined NAV of Elite Two and Elite.
- In the event that Sandown exercised the Sandown option, it would be obliged to provide a two year funding
line of R20 million to Elite which could be drawn in tranches of a maximum of R1.5 million per month.
- If Sandown advised Elite and/or Afdawn Group of its intention to exercise the option then Elite and/or
Afdawn group would have had 30 days in which to acquire Elite Two for its then NAV.
- In the event that Sandown decided not to exercise its option then no new loans would be granted from
31 July 2013 by Elite Two and Elite would be retained to manage and collect the remaining loan book so
as to repay the Sandown Capital Loan.
- Over time, the Sandown Loan was extended to a R20 million facility under similar terms with Elite
providing a guarantee limited to the additional R10 million facility. .
The terms of the agreement gave Elite significant influence over Elite Two and it has therefore been equity accounted
whereas previously a management fee was recognised. Refer to notes 23 and 24 for the prior period errors. Refer to note
1. for the significant judgement made in this regard.
At this point, Elite Two was profitable and therefore Elite had no exposure to any losses.
Elite Two is an unlisted company and there is no quoted market price available for its shares.
There were no contingent liabilities relating to the Group's interest in the associate.
Elite Two February 2015 financial year
At 31 October 2014, Elite Two had not yet repaid the Sandown capital loan of R10 million nor any interest thereon.
By this date, Sandown had lent Elite Two an additional loan. Interest on this loan had been paid as had a portion of the
capital, leaving a balance of R4 150 000.
A further agreement was entered into during November 2014 in terms of which, Elite bought 100% of the Elite Two shares
(refer to note 19) from Sandown on a voetstoots basis i.e. without Sandown giving any warranties or making any
representations relating to the sale shares of Elite Two. Elite acknowledged that Sandown had not been involved in the
day to day running or management of Elite Two (because this was done by Elite). The conversion rights into Afdawn
shares and the guarantee provided by Elite fell away as part of the settlement deal.
Elite Two committed to repaying:
- The capital and interest on the R10 million bond; and
- A portion of the initial and additional loans made to Elite Two together with interest thereon.
- The total amount owed was R16 837 065.
- Certain debtors (to the value of R14 337 165) were ceded to Sandown as payment of
this amount and a balance of R2 499 900 was still owed by Elite Two.
- With regard to the R14 337 165, Elite or Elite Two will pursue claims against those debtors. This will be
done in Sandown's name and the costs of the legal proceedings will be shared by Elite and Sandown.
(refer to note 21). If at least R10 million of this amount is collected, Elite will be paid a fee of 50% of
the excess collected.
- With regard to the R2 499 900, this amount plus R100 for the Elite Two shares is to be repaid in
monthly instalments between November 2014 and March 2016, by Elite. Provided the payment terms are
complied with, no interest will be levied. As the interest rate is not market related the loan has been
discounted.
In terms of the settlement agreement, Elite obtained control of Elite Two with effect from November 2014. It has
therefore been equity accounted from March 2014 to November 2014 (during this period a loss of R2,259,181 was
recognised). Subsequently Elite Two became a subsidiary and was consolidated thereafter.
Summarised financial information of associate
Summarised Statement of Profit or Loss and Other Comprehensive Income Elite Two
2015 2014 2013
R'000 R'000 R'000
Revenue 1,531 7,844 2,605
Other income and expenses (1,763) (6,214) (767)
(Loss) / profit before taxation (232) 1,630 1,838
Taxation expense - (463) (512)
(Loss)/profit (232) 1,167 1,326
Total comprehensive (loss) / income (232) 1,167 1,326
Elite Two
Summarised Statement of Financial Position
2015 2014 2013
Assets
Non-current - -
Current - 24,705 11,961
Total assets - 24,705 11,961
Liabilities
Non-current - 19,149 10,386
Current - 405 -
Total liabilities
- 19,554 10,386
Total net assets - 5,151 1,575
Additional information relating to net assets to equity accounted Elite Two
investments in associates
2015 2014 2013
Investment in associate at 50% - 2,259 787
Management fee direct with Elite 316
Carrying value of investment in associate - 2,575 787
Investment at beginning of period 2,575 787 -
Equity accounted (loss)/profit (2,259) 1,472 787
Management fee direct with Elite (paid)/raised (316) 316
Investment at end of period - 2,575 787
The summarised information presented above reflects the financial statements of the associate after adjusting for
differences in accounting policies between the Group and the associate.
The 2015 year relates to 1 March 2014 to November 2014 at which point Elite Two became a subsidiary. A loss of
R2,259,181 was recognised by Elite for the period March 2014 to November 2014. Refer to note 19 for details of the
acquisition.
Associate with different reporting date
The management accounts of Elite Two were used for the financial statements as at 28 February 2015 because the
Company was previously a subsidiary of Sandown Capital Proprietary Limited which has a March year end. No significant
transactions took place between the reporting period of February 2015 and the year end of March 2015.
Group
2015 2014
R'000 R'000
5 Deferred tax
Deferred tax liability
Deferred tax liability - intangible asset on acquisition (1,493) -
of Knife Capital Group
Deferred tax assets 128 -
Net deferred tax liability (1,365) -
Reconciliation of deferred tax asset/liability
At beginning of year - -
Business combination Knife Capital Group assessed loss (refer 54 -
to note 19)
Assessed loss utilised during the year against current income (54) -
tax
Deferred tax raised on acquisition of Knife Capital Group (1,833) -
intangible assets. (Refer to note 19)
Deferred tax effect of amortisation of intangible asset raised 340 -
on Knife Capital Group (refer to note 3)
Temporary difference on leave pay accruals 51 -
Temporary difference on deferred income 77 -
(1,365) -
Group
2015 2014
R'000 R'000
6 Properties in possession
Almika Properties 81 Proprietary Limited, Benoni, Gauteng 6,749 7,029
Greenoaks - Centurion, Gauteng 44,415 44,415
Greenoaks - PTF3 share of property (16,174) (16,174)
34,990 35,270
Impairment (12,022) (10,522)
Carrying amount 22,968 24,748
Reconciliation of movement 2015 Almika Greenoaks
Opening balance 7,029 44,415
Sold (280) -
PTF3 share of Greenoaks - (16,174)
Impairment (3,609) (8,413)
3,140 19,828
Reconciliation of movement 2014 Almika Greenoaks
Opening balance asset - 44,415
Reclassification asset (refer to note 9) 7,029 -
PTF3 share of Greenoaks - (16,174)
Opening balance of impairment - (6,913)
Reclassification impairment (refer to note 9) (3,609) -
3,420 21,328
Almika
Almika owns a low-cost residential development consisting of 50 units in Loerie Park, Benoni, Gauteng. The development
has now been completed and the units are in the process of being sold. In terms of the agreement with the property
developer, Afdawn Group will receive R70 000 on transfer of each unit that is sold. It is estimated that this will amount
to approximately R3,4 million.
Four units have been transferred and payments of R280 000 have been received by February 2015.
Greenoaks
Candlestick has title to a residential housing complex called Greenoaks in Centurion, Gauteng. These units are currently
being rented to tenants on annual leases (with renewal periods and rates subject to negotiation). Rental income of
R5 345 811 (2014: R5 108 862) has been recognised (refer to note 13).
Greenoaks was transferred to Candlestick in August 2010 in settlement of amounts due to African Dawn Property Transfer
Finance 2 Proprietary Limited ("PTF 2") and Africa Dawn Property Transfer Finance 3 Proprietary Limited ("PTF 3") by Blue
Dot Properties 1198 CC ("Blue Dot"). PTF 3 is not part of the Afdawn Group.
In terms of an agreement between PTF 2 and PTF 3, any amount realised on disposal of the property less amounts
payable to Nedbank (under the first mortgage bond) less related costs less amounts due to certain other third parties will
be shared between PTF 2 and PTF 3 on a 50:50 basis in settlement of the balance of their respective loans to Blue Dot.
For this reason, the reconciliation above is split as follows:
- Amount relating to legal title of entire property
- Less PTF3 share of the property (50%)
- Equals amount relating to Afdawn Group's share of the property (i.e. the 50% referred to above that is in
substance Afdawn Group's share of the property).
Blue Dot has since been placed in liquidation and there is a dispute in terms of which the liquidator is attempting to have
the property transferred back into the insolvent estate of Blue Dot. Negotiations between the Blue Dot liquidator and
Candlestick are currently under way in an attempt to settle the dispute between the parties in order to enable
Candlestick to sell the property.
The other claims against the property include:
- A Nedbank loan, in terms of which Nedbank registered a first bond against the property. The original facility
was R14 100 000 and the amount outstanding at the reporting date was R8 868 592 (2014: R10 073 653) .
- A possible claim relating to Blue Dot linked to the perfecting of the security that lead to the acquisition of
Greenoaks from Blue Dot in August 2010. In an attempt to stop the transfer of Greenoaks to Candlestick, the
claimant applied for the liquidation of Blue Dot Properties in December 2010. The Group does not believe that
this meets the definition of a liability and due to the nature of the dispute, has not disclosed any further
information because such disclosure would seriously prejudice the position of the Group (refer to notes 1.and
21).
7 Trade and other receivables
Group
2015 2014
R'000 R'000
Trade receivables (restated for 2014) 101,924 158,861
Impairment allowance (restated for 2014) (66,489) (102,313)
Deposits (restated for 2014) 276 291
VAT (restated for 2014) 373 473
Other receivables (restated for 2014) 3,750 1,213
39,835 58,525
Trade and other receivables Trade Impairment Deposits VAT
reconciliation - group 2014 receivables allowance
R'000
As previously reported 148,484 (130,122) 124 473
Elite reclassified from 56,163 (4,575) 167 -
discontinued operations (refer to
notes 23 & 24)
Elite prior period error (refer to - (14,188) - -
notes 23 & 24)
Elite Two prior period error 787 - - -
(refer to notes 23 & 24)
Rounding (2) 1 - -
Subtotal 205,432 (148,884) 291 473
Transfer of gross trade debtors (46,571) 46,571 - -
and impairment thereof to other
receivables. Write off as a bad
debt. (refer to notes 23 & 24)
158,861 (102,313) 291 473
In 2014 trade receivables with regards to Nexus with a gross value of R44.5 million, impaired by R38,7 million, to a
carrying amount of R5.8 million were ceded as security on borrowings related to the National Housing Fund Corporation.
Group
2015 2014
R'000 R'000
8. Current tax receivable/(payable)
Current tax receivable - 95
Current tax payable (14,840) (17,829)
(14,840) (17,734)
A Section 200 application was made in June 2013 and was declined in May 2015 on the basis that Afdawn Group's financial
position did not warrant a compromise. A new submission has subsequently been made to SARS with a view to reaching a
settlement on this.
A liability has been recognised in full for all interest and penalties that are payable to SARS. Refer to note 29 which includes
R2,710 000 (2014: R25 000) relating to the interest and penalties.
Change in estimate – interest and penalties on income tax and VAT liability
As disclosed in the prior year financial statements an estimate was made of the current tax and vat liabilities relating to
Afdawn, Elite and Bhenka, plus the related interest and penalties that would be due to SARS. However, as a result of the
section 200 application to SARS being declined in May 2015 additional interest and penalties of R2.710 million were due.
9. Non-current assets held for sale and discontinued operations
Non-current assets held for sale
In 2013 the non-current assets held for sale of R4,128,829 consisted of:
- ERF 1593 - ERF 1599 Volksrust, Mpumulanga which was sold during 2014 for a loss of R311,141.
- Partially developed land at ERF149 Anzac, Extension 2, Benoni, Gauteng has been re-classified in 2014 as
property in possession as no viable buyer had been found. The carrying amount is R3,140 million (2014: 3,420
million). Refer to note 6.
Discontinued operations
In 2014 in line with the new vision for the Group, management decided to discontinue the personal and short term
financing division of the Group including Elite which includes, Elite Cell and Nexus. All these were classified as
discontinued operations. The directors were in discussion with potential buyers for the acquisition of Elite and Elite Cell.
The Company's assets and liabilities were reclassified as non-current assets held for sale. A contract for the sale of Elite
Group was concluded in May 2014, but the buyers were in breach of the contract and the contract was cancelled, a
penalty of R1,315,789 was received (refer to note 14). The discontinued operations and non-current assets held for sale
have thus been reclassified into operations. Nexus went into liquidation on 18 October 2014 and has been deconsolidated
from that date (refer to note 20).
The Elite impairment test was done as follows:
Amount
Elite carrying amount in African Dawn Capital Ltd R'000 10,882
The recoverable amount Elite has been determined based on value-in-use calculations. These calculations use pre-tax
cash flow projections based on financial budgets approved by management covering a five-year period. Cash flows
beyond the five-year period are extrapolated using the estimated growth rates stated below.
The growth rate does not exceed the long-term average growth rate for the business in which Elite operates.
The key assumptions, long term growth rates and discount rates used in the value-in-use calculations are as follows:
Compounded annual revenue increase % 1 3% to 5%
Compounded annual total operating cost increase % 2 5%
WACC 17.37%
Recoverable amount of Elite R'000 12,334
1.Revenue increase is based on past performance and management's expectation of growth. Management expects
growth of 3% for 3 years and 5% for 2 years.
2. Operating costs are the fixed costs of Elite which do not vary significantly with loans made.
Management forecasts these costs based on the current structure of the business, and adjusts for
inflationary increases and these do not reflect any future restructurings or cost saving measures.
The recoverable amount calculated based on value in use exceeded the carrying amount by R1 452,000.
An annual revenue growth rate of 4,5%, annual operating costs growth rate of 5,5 % or a rise in WACC to 18,5% would, all
changes taken in isolation, result in the recoverable amount being equal to the carrying amount.
No impairment was necessary.
Group
2015 2014
10. Share capital and share premium
Authorised
5,000,000,000 Ordinary shares of 1c each 50,000,000 50,000,000
The total shares in issue as at 28 February 2015 amounted to 880,270,597 (2014: 508,184,155).
Reconciliation of number of shares in issue
Reported as at 01 March net of treasury shares 508,184 508,184
Issue of ordinary shares in rights offer 272,086 -
Issue of shares to Knife Capital Vendors 100,000 -
880,270 508,184
Reconciliation of share values 'R000:
Reported at beginning of period 284,634 284,634
Issue of ordinary shares in rights offer 21,767 -
Issue of shares to Knife Capital Vendors (refer to note 19) 9,000 -
Capitalisation of share issue costs (1,458) -
313,943 284,634
Group
2015 2014
R'000 R'000
Share premium 317,972 292,392
Treasury shares (12,832) (12,832)
Total share premium 305,140 279,560
Ordinary shares 8,803 5,074
313,943 284,634
As part of the capital raising completed on 31 October 2011, two convertible bonds were issued which were convertible
into ordinary share capital at the option of the holders after 3 years from the commencement date. The conversion
option of the bond holders became due during the current financial year and the bond holders decided not to convert the
bonds into shares.
During March 2014 a 1 for 1 rights offer of 222,086,442 shares were taken up at 8c per share, with a further 50,000,000
shares being issued to the underwriter of the share issue. At around the same time as the rights issue took place
100,000,000 shares at 9c per share were issued to the vendors of Knife Capital to purchase 100% of the share capital.
Refer to note 19 for further details on the acquisition of Knife Capital Group. Refer to note 25 for details on the delisting
of the treasury shares.
Group
Proceeds from share issues 2015 2014
R'000 R'000
Share issue 21,767 -
Share issue costs (1,458) -
20,309 -
Group
2015 2014
R'000 R'000
11. Loans from directors
EA Van Heerden 1,770
JK Van Zyl 1,771
A Bohmert 1,771
5,312
The loans arose as part of the Knife Capital Group acquisition transaction detailed in the circular issued on 7 March 2014.
Refer to the significant judgements in the accounting policies note 1. and note 19 for further details.
Reconciliation 2015 2014
First NAV liability 1,460 -
(interest free payable at R60 833 per month with effect from November 2014) - -
Repayments (243) -
Subtotal (A) 1,217 -
Second NAV liability (interest free and payable in June 2015) 2,095 -
Repayments - -
Share issue liability (to be settled immediately in a variable number of shares) 2,000 -
5,312 -
Subsequent to year end and, as announced on SENS on 1 July 2015, the vendors of Knife Capital have released Afdawn
from the second NAV liability and the share issue liability. Refer to the judgement disclosed in note 1 as well as notes 19
and 25
(A) The outstanding balance of loans from directors on acquisition of Knife Capital is R1.218 million.
2015 2014
Non-current liabilities (1,535) -
Current liabilities (3,777) -
(5,312) -
Group
2015 2014
R'000 R'000
12. Trade and other payables
Trade payables 1,343 1,705
VAT 7,709 5,049
Accrued leave pay 1,020 657
Accrued expenses 1,124 1,542
Accrued audit fees 180 -
Deposits received 353 328
11,729 9,281
R 6,109,000 of the VAT liability of the R7,709,000 is also the subset of the submission to SARS referred to in note 8.
13. Revenue
Rendering of services 8,740 812
Non-interest income (administration fees) 1,718 1,576
Rental income (refer to note 6) 5,346 5,109
Interest received 23,398 26,575
Insurance revenue (refer to note 1) 947 1,664
40,149 35,736
14. Other income
Profit on disposal of subsidiary (refer to note 20) 3,231 -
Gain on present value adjustment of interest free 662 -
borrowings
Bad debts recovered on trade receivables 1,850 927
Sundry income 232 12
VAT recovery 77 20
Sundry income 49 -
Penalty received on subsidiary sale cancellation (refer 1,316 -
to note 9)
7,417 959
Group
2015 2014
R'000 R'000
15. Operating loss
Operating loss for the year is stated after accounting for the following:
Operating lease charges
- Premises 3,828 3,458
- Equipment 566 746
4,394 4,204
Loss on sale of property, plant and equipment 23 1
Profit on disposal of subsidiary 3,231 -
Impairment to properties in possession 1,500 -
Legal fees 935 656
Loss on call up of NHFC guarantee still due 1,750 -
Loss on call up of NHFC guarantee paid during year
2,000 -
Group
2015 2014
R'000 R'000
16. Finance costs
NHFCE interest 491 756
Interest on convertible bond 1,251 1,913
Interest paid RHLF 44 44
Finance leases 22 26
Bank 28 25
Sandown Capital borrowing 196 -
STRB convertible bond interest 265 185
Penalties and interest on income tax (refer to note 8) 5,518 25
Nedbank bond interest 818 889
8,633 3,863
17. Taxation
Major components of the tax expense (income)
Current
Local income tax - current period 1,353 407
Local income tax - recognised in current tax for prior 95 -
periods
1,448 407
Deferred
Temporary difference on Knife Capital assessed loss utilized 54 -
Temporary difference on deferred income (77) -
Temporary difference leave pay accrual (51) -
Originating on amortisation of Knife Capital intangible (339) -
assets
(413) -
1,035 407
Reconciliation of the tax expense
Reconciliation between accounting loss and tax expense.
Accounting loss (31,977) (21,423)
Tax at the applicable tax rate of 28% (2014: 28%) (8,954) (5,998)
Tax effect of adjustments on taxable income
Non-deductible amount interest and penalties SARS 1,281 -
Non-deductible amount Nexus loan guarantee capital in nature 1,050
Non-deductible amount donations not allowed 3 8
Non-deductible amount fair value adjustment – Knife acquisition 560
Non-deductible amount gain in disposal of subsidiary (905)
Non-deductible amount loss on non current asset held for sale 87
Non-deductible amount fair value adjustment - property 420
Non-deductible amount fair value adjustment – investment in subsidiary
Deferred tax assets not recognised 7,580 6,310
1,035 407
No tax loss has been recognised as at year end as the final SARS assessments are still pending. The estimated tax loss
available for set off against future taxable income is R 126,808,226 (2014: R 149,649,356). The Company estimated tax
loss available for set off against future taxable income is R58,822,361 (2014: R51,960,289).
Group
2015 2014
R'000 R'000
18. Cash used in operations
Loss before taxation ( 31,977) (21,423)
Adjustments for:
Depreciation 424 392
Loss on disposal of property, plant and equipment 23 1
Loss on sale of non-current assets held for sale - 311
Movement in operating lease liability (151) (21)
Gain on present value adjustments on interest free (661) -
borrowings
Equity accounted income Elite Two 2,259 (1,472)
Investment income (735) (80)
Finance costs 3,115 3,838
Fair value of contingent consideration 2,000 -
Impairment adjustment group loans - -
Impairment of investment in subsidiary - -
Non-cash finance costs (penalties and interest on income tax) 5,518 25
Impairment of Candlestick Park Investment in Subsidiary - -
Amortisation (refer to note 3) 1,758 211
Deemed interest expense 110 -
Profit on disposal of Nexus (Refer to note 20) (3,231) -
Interest raised and paid on borrowings - -
Impairment of properties in possession 1,500 -
Bad Debt write off - -
Non-cash portion of NHFC guarantee 1,750 -
Impairment of intangible asset 1,150 -
Changes in working capital:
Properties in possession 280 405
Trade and other receivables 14,798 17,359
Trade and other payables (1,514) (55)
Deferred income 474 -
Other financial assets 830 (616)
(2,280) (1,125)
19. Business combinations Knife Capital Group
On 28 March 2014 the Group acquired 100% of the equity interest in Knife Capital Group which resulted in the Group
obtaining control over Knife Capital Group. The terms were outlined in the circular issued on 13 December 2013. Knife
Capital owns 100% of Grindstone. The Knife Capital Group operates in South Africa and it is principally involved in business
development services and investment management. The reason for the acquisition is to realise the new vision for the
Afdawn Group.
Goodwill of R 8,076,000 arose from the acquisition, (refer to note 4) and is attributable mainly to the synergies and
economies of scale expected from combining the operations of the entities, as well as from other intangible assets,
including brands, which did not qualify for separate recognition. Goodwill is not deductible for income tax purposes.
Group
2015 2014
R'000 R'000
Acquisition of Knife Capital Group
Purchase price calculation - -
100 million shares issued on 28 March 2014 at a share 9,000 -
price of 9c (A).
First NAV liability - additional payment of the 1,460 -
difference between the 10c per share stipulated in the
acquisition agreement and the NAV per share at 28
February 2014 (B).
Second NAV liability - top-up of the First NAV liability 2,095 -
due to the Elite prior period error, which further
reduced the Group NAV per share at 28 February
2014 (C).
Share issue liability - additional payment due because 2,000 -
Afdawn Group did not raise capital of R50 million by
26 March 2015 (D).
Recognition of share issue liability in profit or loss as it (2,000) -
relates to the subsequent fair value of the contingent
consideration (D).
12,555 -
Fair value of net assets acquired
Property, plant and equipment 52 -
Intangible assets on contracts (refer to note 3) 6,543 -
Deferred tax asset (refer to note 5) 54 -
Trade and other receivables (E) 522 -
Cash and cash equivalents 26 -
Tax payable (15) -
Trade and other payables (836) -
Deferred tax liability (refer to note 5) (1,833) -
Bank overdraft (13) -
Directors' loans (21) -
4,479 -
Goodwill recognised (refer to note 2) 8,076 -
The revenue included in the consolidated statement of comprehensive income since 26 March 2014 contributed by the
Knife Capital Group was R8 891 000 and the profit that was contributed was R2 023 000. Had Knife Capital Group been
consolidated from 1 March 2014, the consolidated statement of comprehensive income would show pro-forma revenue of
R8 891 000 and profit of R2 023 000. The transactions between 1 March and 26 March 2014 were insignificant.
(A) The share price of 9 cents was determined based on the listed share price on 28 March 2014. Acquisition related costs
of R550,000 has been recognised in profit or loss (refer to note 15). Acquisition costs of R80,000 relating to the issue of
shares have been netted against the deemed proceeds.
(B) The first NAV liability was due for payment in March 2015 and was interest free. In November 2014, the terms were
renegotiated and remained interest free but the amount is paid on a monthly basis over 24 months (R60 833 per month).
(C) The terms were the same as the first NAV liability. Subsequent to year end, and as announced on SENS on 1 July 2015,
the vendors have released the Group from the obligation to settle this liability (refer to note 25).
(D) This amount related to contingent consideration in terms of which an additional amount would be payable if the
Company did not raise capital of R50 million by 26 March 2015. The amount would be determined in accordance with a
specific formula but was capped at R2 million. It was due to be settled in a variable number of shares in the short term.
At the acquisition date, the fair value of the contingent consideration was nil. At year end, the fair value was R2 million
and this amount was therefore recognised in profit or loss. Subsequent to year end, and as announced on SENS on 1 July
2015, the vendors have released the Group from the obligation to settle this liability (refer to note 25).
(E) The fair value of trade receivables is R522 305. The gross contractual amount for trade receivables due is R522 305, of
which R522 305 is expected to be collectible.
Elite Two
In November 2014 the Group acquired 100% of the shares in Elite Two which resulted in the Group obtaining control
over Elite Two. Prior to this the Group had significant influence over Elite Group Two Proprietary Limited and it was
equity accounted (refer to the judgement disclosed in note 1. and to note 4). Elite Two is principally involved in the
unsecured lending industry.
Elite Two was equity accounted in the previous period and was deemed to be disposed of in November 2014 at which
point the fair value and carrying amount of the net assets were both nil. There was therefore no gain or loss on the step
acquisition.
Group
2015 2014
R'000 R'000
Fair value of net assets acquired
Trade and other receivables (A) 714 -
Cash and cash equivalents 3 -
Current account Elite (396) -
Current tax payable (4) -
Trade and other payables (317) -
Goodwill - -
The revenue included in the consolidated statement of comprehensive income since 1 March 2014 contributed by Elite
Two was R201 218 and the loss that was contributed was R678 880. Had Elite Two been consolidated from March 2014
to November 2014, the consolidated statement of comprehensive income would show pro-forma revenue of R1 732 710
and loss of R701 738. This excludes the equity accounted loss of R2 259 181 recognised by the Group from 1 March 2014
to October 2014.
(A) The fair value of trade receivables is R714 480. The gross contractual amount for trade receivables due is R1 659 995,
and an existing provision of R539 478 has been netted off that resulting in a balance of R1 120 517 of which of R406 037 is
expected to be uncollectible.
Cashflows
The cash flow related to Knife Capital Group and Elite Two acquisitions was R16,000 calculated as follows:
Cash effect of acquisitions
Cash and cash equivalents Knife Capital Group 26 -
Bank overdraft Knife Capital Group (13) -
Cash and cash equivalents Elite Two 3 -
16 -
Group
2015 2014
R'000 R'000
20. Liquidation of Nexus
Carrying amount of net assets disposed of
Trade and other receivables gross (43,309) -
Trade and other receivables impairment 38,181 -
Tax liabilities 6,497 -
Borrowings 5,000 -
Cash (396) -
Amount due from Elite (2,742) -
Total net assets disposed 3,231 -
Net assets on disposal 3,231 -
Profit on disposal (refer to note 14) (3,231) -
- -
No consideration was received.
Cash outflow on liquidation
Cash disposed of (396) -
21. Contingencies
Knife Capital Group incentive scheme
The agreement relating to the acquisition of Knife Capital Group outlined various future incentives that the sellers would
be entitled to. It stated that these amounts would be agreed upon by the effective date (being March 2014). This has not
been done and therefore the amount of the liability could not be measured with sufficient reliability. At year end it was
not possible to estimate the financial effect of this liability, nor when it would be settled, for this reason a liability was
not recognised. There was no possibility of any reimbursement.
Subsequent to year end, and as announced on SENS on 1 July 2015, the vendors of Knife Capital have released Afdawn
Group from these incentives.
Sandown legal fees
At the time that Elite acquired 100% of Elite Two from Sandown, Sandown took over debtors with a value of R14 337 165
(refer to note 7). The claims against those debtors will be pursued in Sandown's name. However, the costs of the legal
proceedings will be shared equally by Elite and Sandown. If at least R10 million of this amount is collected, Elite will be
paid a fee of 50% of the excess. However, Elite is not liable for any amount that is not collected.
With respect to the legal claims, no legal work had been done by the reporting date. Between 1 March 2015 and 31
August 2015, costs of R94 181 had been incurred. A contingent liability exists for possible future legal fees but the
amount cannot be reliably determined.
Greenoaks third party liability
There is a further possible claim relating to Greenoaks (refer to notes 1 and 6). In an attempt to stop the transfer of
Greenoaks from Blue Dot to Candlestick, the claimant applied for the liquidation of Blue Dot Properties in December
2010. The Group does not believe that this meets the definition of a liability. However, due to the nature of the dispute,
no further information has been disclosed because such disclosure would seriously prejudice the position of the Group.
Allegro Holdings Proprietary Limited ("Allegro")
Afdawn Group previously concluded a Memorandum of Understanding (28 February 2013) which will facilitate an amicable
conclusion to the matter. Progress has been slow in this regard. Thus far the Company has not become aware of any
information during its deliberations that will alter its conclusion reached previously. To the date of signing this report no
claims have been received by Afdawn Group, nor has it been possible to establish any basis for a potential claim against
Afdawn Group and therefore no provisions have been made for any such contingency.
22. Related parties
Relationships
Subsidiaries
Subsidiaries loan accounts
Associates and equity accounted income from Elite Two Refer to note 4
Significant shareholder with borrowings Sandown Capital Proprietary Limited refer to notes
16 and 21
Significant shareholder controlled by a director who resigned Vaalmac Proprietary Limited
before the year end
Company controlled by a director providing services to the Group Makalu Capital Proprietary Limited
Directors' loans and subsequent change Refer to notes 11, 19 and 21
Penalty paid by a company controlled by a subsidiary company director Elite Group 1 Proprietary Limited (refer to notes 14
R1.316 million and 15)
Companies acquired Refer to note 19
Liquidation of subsidiary Refer to note 20
Executive and non-executive directors PJ Bezuidenhout (Resigned September 2013)
Key management DD Breedt
GE Stoop (Resigned August 2014)
DA Turner (Resigned August 2014)
Related party balances
Group
2015 2014
R'000 R'000
Loan accounts - Owing (to) by related parties
Elite owes Sandown Capital Proprietary Limited (12,933) (12,486)
Elite owes Elite Two included in group loans in 2015 - (2,067)
Related party transactions
Value of shares issued to directors on acquisition of
Knife Capital @ 9c per share
EA van Heerden (A) 3,000 -
JK van Zyl 3,000 -
A Bohmert (A) 3,000 -
Cash paid to directors on acquisition of Knife Capital
EA van Heerden (A) 81 -
JK van Zyl 81 -
A Bohmert (A) 81 -
Outstanding loans to directors on acquisition of Knife
Capital
EA van Heerden (A) 406 -
JK van Zyl 406 -
A Bohmert (A) 406 -
Rent (received from) paid to related parties
Afdawn (303) (1,541)
African Dawn Debt Management Proprietary Limited - 245
Elite 149 1,296
Grindstone 54 -
Knife Capital 100 -
Administration fees (received from) paid to related
parties
African Dawn Wheels Proprietary Limited - (330)
Afdawn - 330
Commission (received from) paid to related parties
African Dawn Wheels Proprietary Limited 21 27
Elite (217) (192)
Nexus 196 165
Interest (received)/paid from related parties
Afdawn (31) -
Elite 31 -
JS van der Merwe - indirect via Vaalmac Proprietary
Limited
50,000,00 shares issued as underwriter @ 8c per share 4,000 -
Underwriters fee paid cash 80 -
WJ Groenewald related party transaction
Knife Capital Group due dilligence fee - via Makalu 150 -
Capital Proprietary Limited
Compensation to key management including
directors
Compensation 9,552 9,506
(A) The directors indicated became directors of the Company after the acquisition of Knife Capital.
23. Changes to prior year amounts
Prior year amounts have been restated (as indicated in note 24) and as explained below:
Discontinued operations
Elite – reclassification from discontinued to continuing operations
In 2014, and in line with the new vision for the Group, management decided to discontinue the personal and short term
financing division of the Elite group which included Elite and Elite Cell.
The directors were in discussion with potential buyers for the acquisition of Elite and Elite Cell. At that point these were
therefore classified as discontinued operations and Elite, classified as non-current asset held for sale. A contract for the
sale of Elite was concluded in May 2014, but thereafter the buyers were in breach of the contract and the contract was
cancelled resulting in a penalty being paid to Afdawn Group for a breach of contract (refer to notes 9 and 14).
One of the requirements relating to the classification as a non-current asset held for sale in IFRS 5 - Non-current Assets
Held for Sale and Discontinued Operations, is that the sale should be expected to qualify for recognition as a completed
sale within one year from the date of classification. However, at 28 February 2015, this requirement was no longer met
and therefore these operations are no longer classified as discontinued.
The results of Elite have therefore been reclassified from discontinued operations to continuing operations, for both the
current (2015) and prior periods. The amounts for prior periods are described as having been re-presented.
At the date of the subsequent decision not to sell, the recoverable amount of the Elite group was assessed in accordance
with IAS 36 – Impairment of Assets. This resulted in no impairment being recognised. Refer to note 9.
Nexus - reclassification from discontinued to continuing operations
In line with the new vision for the Group as outlined above, Nexus was also classified as a discontinued operation in 2014.
However, in 2015 Nexus has been classified as continuing and also reclassified to continuing operations for 2014. This is
because Nexus is not a major line of business (given the fact that the business of the Elite group is the same). During
2015, Nexus went into liquidation (refer notes 14 and 20 that reflect a gain on disposal of R3 231 000).
Material prior period errors and other reclassifications
The prior year amounts have been restated for material prior period errors and additional items that have been
reclassified as explained below:
Prior period errors
Reclassification within trade and other receivables (2014)
In the prior years, certain debtors that were classified as other receivables in the separate (i.e. company) financial
statements of Afdawn were classified as trade receivables on consolidation. In the separate financial statements, the
debtors were fully written off and therefore shown as nil. However, on consolidation the gross amount due and an
impairment were separately disclosed.
These have been retrospectively reclassified on consolidation. There is no impact on the statement of financial position,
the statement of profit or loss and other comprehensive income, the statement of changes in equity or the statement of
cash flows because the debtors were fully impaired. The impact is included in the impairment as disclosed within note 7.
Elite trade receivables - doubtful debt impairment error (2014 and 2013)
A material prior period error relating to the additional impairment of loans in Elite was discovered during the year.
Part of the credit management process within Elite involves managing debtors within one of three books:
- Current book – includes debtors that are paying within their credit terms as well as those that are up to 75 days
overdue where after they are transferred to the collections book.
- Collections book – debtors remain in collections and will move through the ageing brackets with provisions
recognised at varying percentages until they are 180 days overdue at which point they are fully written off
unless:
- The debtor was previously written off because it was sequestrated or deceased; or
- The debtor was transferred to the legal book.
- Legal book – includes debtors transferred from the collections book when the debtors have the following legal
status:
- A debt pack has been signed that would lead to an emolument attachment order; or
- The debtor is placed under administration; or
- The debtor is placed under debt review.
Debtors are written off in the legal book once deceased, sequestrated or the emoluments attachment order has lapsed.
Elite has specific percentages that are used to calculate the provision based on the ageing of the debtors. These are
outlined below:
- Current book – 0% progressing to 30% and then, if required, transferred to the collections book;
- Collections book – 45% progressing to 90% and then, if required, either written off or transferred to the legal
book; and
- Legal book – 30% progressing to 90% and then written off if required.
In certain circumstances, the debtors that had been moved from the current book to the collections book (or from the
collections book to the legal book) were re-aged. For example, a debtor that was 75 days overdue in the current book
would be transferred to the collections book with the same ageing as that in the current book being retained initially.
However, when a promise to pay was received from the debtor, or the debtor was flagged as being traced or a debt
management agreement was entered into with the debtor, the debtor was re-aged to current. The impact of this re-
ageing meant that instead of a higher percentage being recognised as provision because the debtor fell into an older
ageing bracket, a lower percentage was used because it appeared that the debtor was current. As a result, a material
prior period error has occurred.
In order to determine the extent of the material prior period error, the Board appointed an independent third-party to
assist with the re-ageing and calculation of the impairment in accordance with IAS 39 – Financial Instruments: Recognition
and Measurement.
The board also initiated a thorough investigation to ascertain the full scope of the material prior period error. This
investigation included a legal due diligence into the historic business operations of Elite. No other issues arose as a result
of the due diligence.
The Company did not recognise any taxation during 2014 and 2013 and does not recognise deferred tax on assessed losses
because it does not meet the requirements in IAS 12. As a result, the prior year adjustment has no impact on tax or
deferred tax.
R3,547,000 was recognised as an impairment against non-current assets held for sale, however the impairment related to
the trade receivables in Elite. The impairment error of R14,188,000 includes the impairment for the R3,547,000.
Elite Two error (2014) and (2013)
An assessment of the relationship between Elite and Elite Two revealed that Elite had significant influence over Elite Two
from 2011 until it obtained control in November 2014. This is because Elite had the right to appoint two of the four
directors despite it holding no shares in Elite Two. In light of the fact that Elite had not previously accounted for any
investment in an associate, no equity accounted earnings relating to Elite Two were recognised in 2012, 2013 and 2014.
Instead, a cumulative management fee of R2,259,181 was recognised in 2014. This is therefore a material prior period
error which has been retrospectively restated. This resulted in R787,247 being recognised as profit from equity account
investment in 2013 and R1,471,931 in 2014.
Elite Two became a subsidiary in November 2014 when 100% of the share capital was purchased from Sandown Capital
Proprietary Limited in terms of a purchase agreement. The Company is now consolidated by Afdawn Group. Refer to note
37 for information on the deemed disposal of the associate and the acquisition of the subsidiary.
The Company did not recognise any taxation during 2014 and 2013 and does not recognise deferred tax on assessed losses
because it does not meet the requirements in IAS 12. As a result, the prior year adjustment has no impact on tax or
deferred tax.
Elite Cell error (2014)
A contract was entered into with Guardrisk insurance company to insure unsecured receivables via a closed cell captive.
Elite is the owner of the cell captive and bears all the risk if the cell captive does not have sufficient reserves to settle
claims.
The cell captive should have been included in the annual financial statements of Elite. Therefore a prior period error has
occurred in Elite.
The Company did not recognise any taxation during 2014 and does not recognise deferred tax on assessed losses because
it does not meet the requirements in IAS 12, as a result, the prior year adjustment has no impact on tax or deferred tax.
Non-cash items in the cash flow statement (2014)
Several non-cash items were not adjusted against the loss from operations to arrive at the cash generated from
operations. These have subsequently been adjusted.
This prior year adjustment has no impact on tax or deferred tax.
Reclassification Elite Two
The loan between Elite and Elite Two was originally classified as other financial assets in 2013 but in 2014 was reclassified
as a borrowing. To enhance comparability the amount of R4,192 has been reclassified as borrowings in 2013.
Reclassifications in the cash flow statement (2014)
In 2014 the cash flow statement disclosed cash movements in group loans in the investing activities section. However, the
loans are of a financing nature and have therefore been reclassified to financing activities.
In 2014 the finance lease movement disclosed in financing activities did not exclude the interest paid which should have
been classified in cash generated from operating activities. The interest paid has therefore been reclassified.
In 2014 depreciation and amortisation were correctly adjusted as a non-cash flow within one line. In order to permit
reconciliation to the relevant notes, these have been split in 2015 and the comparative amounts restated.
The effects of the restatements affected most line items in the primary financial statements and are explained further in
note 24.
The impact of the 2014 restatements on loss and loss per share as well headline loss and headline loss per share is as
follows:
Loss per share continued operations 2014 Gross amount Tax effect EPS effect in
R'000 R'000 cents per
share
Loss as previously reported (17,126) - (3.37)
Adjustments - - -
Elite impairment error (A) (6,733) - (1.27)
Elite Two error (A) (787) - (0.15)
Impairment reclassification (B) 3,547 - 0.67
Reclassification of discontinued operation to continued (731) - (0.14)
Elite Cell should be included in discontinued 17 - -
Weighted average adjustment for rights issue 2015 (C) - - 0.15
(21,830) - (4.11)
Loss per share discontinued operations 2014 Gross amount Tax effect EPS effect in
R'000 R'000 cents per
share
Loss as originally stated (2,714) - (0.53)
Elite reclassified into operations (D) 348 - 0.07
Nexus reclassified into operations (D) 383 - 0.07
Weighted average adjustment for rights issue 2015 (C) - - 0.02
(1,983) - (0.37)
Headline loss per share from continued operations 2014 Gross amount Tax effect HEPS effect in
R'000 R'000 cents per
share
Headline loss as previously reported (13,268) - (2.61)
Adjustments - - -
Elite impairment error (A) (6,733) - (1.27)
Elite Two error (A) (787) - (0.15)
Impairment reclassification (B) 3,547 - 0.67
Reclassification of discontinued operations to continued error (731) - (0.14)
Reversal of previous headline earnings:
Impairment of non-current asset held for sale (B) (3,547) - (0.67)
Non-current asset held for sale (E) (311) - (0.06)
Weighted average adjustment for rights issue 2015 (C) - - 0.12
(21,830) - (4.11)
Headline loss per share from discontinued operations 2014 Gross amount Tax effect HEPS effect in
R'000 R'000 cents per
share
As originally stated (2,714) - (0.53)
Elite reclassified into operations (D) 348 - 0.07
Nexus reclassified into operations (D) 383 - 0.07
Weighted average adjustment for rights issue 2015 (C) - - 0.02
(1,983) - (0.37)
(A) The prior period errors have no tax effect as the Company already has a tax loss and does not recognise the
deferred tax assets on assessed losses.
(B) This relates to an additional impairment for trade receivables that were included as part of the disposal group
classified as a non-current asset held for sale. It is therefore not an excluded remeasurement and does not have a tax
effect.
(C) This relates to the rights issue that took place in the 2015 year - refer to note 48.
(D) The discontinued operations have no tax effects.
(E) This relates to a loss relating to property in possession (i.e. security repossessed when the debtors could not settle
the amounts owed). Refer to note 9. It is therefore not an excluded remeasurement.
24. Comparative amounts
The effects of the restatements and reclassifications explained in note 23 affected most disclosure items indicated in the
following tables:
Statement of Financial
Position
2014 As originally Elite Elite debtors Elite Two Elite Cell Impairment Total
stated reclassified impairment error error reclassified
error
Property, plant and 92 950 - - - - 1,042
equipment
Intangible assets - 2,844 - - - - 2,844
Other financial assets - - 193 - (193) 1,554 - 1,554
current
Tax receivable 95 - - - - - 95
Investment in associate - - - 2,259 - - 2,259
Trade and other receivables 19,497 53,216 (14,188) - - - 58,525
Cash and cash equivalents 1,084 4,274 - - - - 5,358
Non-current assets held for 59,766 (61,759) - - (1,554) 3,547 -
sale and assets of disposal
groups
Accumulated loss (241,223) - (13,844) - - 3,547 (251,520)
Borrowings - non-current 8,844 - - - - - 8,844
Finance lease liabilities non- - 194 - - - - 194
current
Borrowings - current 7,893 16,943 - 2,066 - - 26,902
Current tax payable 18,226 (53) (344) - - - 17,829
Finance lease obligation - - 87 - - - - 87
current
Operating lease liability 174 - - - - - 174
Trade and other payables 6,198 3,083 - - - - 9,281
Liabilities on disposal groups 20,535 (20,535) - - - - -
Statement of
Comprehensive Income
2014 As originally Elite Elite Elite Two Nexus Impairment Total
stated reclassified impairment error reclassified reclassified
error
Revenue 6,079 28,855 - - 802 - 35,736
Gross profit 6,079 28,855 - - 802 - 35,736
Other income 34 922 - - 3 - 959
Operating expenses (21,474) (27,389) (6,733) (2,259) (1,188) 3,547 (55,496)
Operating (loss)/profit (15,361) 2,388 (6,733) (2,259) (383) 3,547 (18,801)
Investment income 77 3 - - - - 80
Finance costs (1,124) (2,739) - - - - (3,863)
Profit from equity - - - 1,472 - - 1,472
accounted investment
Reversal of non-current (311) - - - - - (311)
assets held for sale
impairment
(Loss)/profit before tax (16,719) (348) (6,733) (787) (383) 3,547 (21,423)
Taxation (407) - - - - - (407)
(Loss) profit from (17,126) (348) (6,733) (787) (383) 3,547 (21,830)
continuing operations
(Loss)/profit from (2,714) 348 - - 383 - (1,983)
discontinued operations
(Loss)/profit for the (19,840) - (6,733) (787) - 3,547 (23,813)
year
Statement of changes in equity As originally Elite Elite Elite Two Impairment Total
2014 stated reclassified impairment error reclassified
error
Accumulated (loss)/profit (19,840) - (6,733) (787) 3,547 (23,813)
Statement of Financial Position As originally Elite Elite Elite Two Nexus Total
2013 stated reclassified impairment error reclassified
error
Investment in associate - - - 787 - 787
Trade and other receivables 83,340 - (7,455) - - 75,885
Total assets 121,542 - (7,455) 787 - 114,874
Accumulated loss (221,383) - (7,111) 787 - (227,707)
Current tax payable 18,709 - (344) - - 18,365
Total equity and liabilities 121,542 - (7,455) 787 - 114,874
Statement of Comprehensive As originally Elite Group Nexus Elite Elite Two Total
Income stated reclassified Reclassified impairment Error
2013 error
Revenue 6,458 26,745 286 - - 33,489
Cost of sales 142 (399) - - - (257)
Gross profit 6,600 26,346 286 - - 33,232
Other income 570 1,095 - - - 1,665
Operating expenses (10,655) (22,753) 812 (7,455) - (40,051)
Operating (loss)/profit (3,485) 4,688 1,098 (7,455) - (5,154)
Investment income 553 67 - - - 620
Finance costs (1,175) (1,111) - - - (2,286)
Profit from equity accounted - - - - 787 787
Investment
(Loss)/profit before taxation (4,107) 3,644 1,098 (7,455) 787 (6,033)
Taxation (166) (461) - 344 - (283)
(Loss)/profit from continuing (4,273) 3,183 1,098 (7,111) 787 (6,316)
Operations
Profit/(loss) from discontinued 2,163 (3,183) (1,098) - - (2,118)
Operations
(Loss)/profit for the year (2,110) - - (7,111) 787 (8,434)
Statement of changes in equity 2013
As originally Elite Group Elite Elite Two Nexus Total
stated reclassified impairment error Reclassified
error
Accumulated loss (221,383) - (7,111) 787 - (227,707)
25. Events after the reporting period
Non-adjusting events
SARS
Refer to note 8 and 12 for details of subsequent events relating to SARS. None of these events are adjusting events.
Delisting of treasury shares
On 1 December 2014, the board resolved to apply to the JSE Limited for the treasury shares (refer to note 10) to be de-
listed. These shares were de-listed on 9 March 2015 and have therefore been disclosed as a non-adjusting event.
Knife Capital Group acquisition - revision of terms
Refer to note 1.
Elite Recapitalisation and cautionary annoucement
Afdawn will convert a portion of its shareholder loan into equity of Elite by 15 November 2015. A Heads of Agreement has been
signed with a third party who will acquire 51% of the economic interest of Elite by providing R15 000 000 of permanent capital,
a further R15 000 000 of loan funding facility for 5 years and access to a client base. This will give Elite the ability to generate
the required cash flow to fund operations, growth and other financial obligations. Full details relating to the Elite recapitalisation will be
made to shareholders once the necessary agreements have been concluded accordingly, shareholders are advised to exercise caution when
dealing in the company's securities until a full announcement is made.
26. Segment report
The segment information has been prepared in accordance with IFRS 8 - Operating Segments which defines the
requirements for the disclosure of financial information of an entity's operating segments. IFRS 8 requires segmentation
based on the Group's internal organisation and reporting of revenue and operating income based upon internal accounting
methods.
The Group discloses its operating segments according to the components regularly reviewed by the chief operating
decision-makers, being the executive directors. These amounts have been reconciled to the consolidated financial
statements. The measures reported by the Group are in accordance with the accounting policies adopted for preparing
and presenting the consolidated financial statements. Segment revenue excludes value added taxation and includes inter-
segment revenue which is nil. Net revenue represents segment revenue from which intersegment revenue has been
eliminated. Sales between segments are made on a commercial basis. Segment operating profit before capital items
represents segment revenue less segment expenses. Segment expenses consist of operating expenses. Depreciation,
amortisation and impairments have been allocated to the segments to which they relate.
The segment assets comprise all assets of the different segments that are employed by the segment and that are either
directly attributable to the segment, or can be allocated to the segment on a reasonable basis.
The Group's reportable segments are based on the following lines of business:
- Investment advisory and investment management
This segment consists of the Knife Capital Group which provides investment advisory and investment management
services to entrepreneurial and innovative companies.
- Micro finance
This segment consists of Elite and Elite Two. These companies are involved in micro finance in the unsecured lending
industry and have a wide base of customers (mostly individuals).
- Rentals of properties in possession
This segment consists of a residential complex with 76 units (a mix of 2 and 3 bedrooms), that are rented out on annual
leases to individuals.
- Other
Other consists of the holding company together with other smaller entities not dealt with in other segments.
Segment information has been restated to comply with the segments identified above.
All the segments operate only in South Africa, largely in the Gauteng and Western Cape provinces therefore no
geographical information is provided. Similarly all non-current assets are in South Africa.
2015 Investment Micro finance Rentals of Other Total
advisory and R'000 properties in R'000 R'000
investment possession
management R'000
R'000
Revenue external 8,891 25,241 5,346 671 40,149
Revenue internal - - - - -
Cost of sales 268 - - - 268
Other income - 2,406 77 4,934 7,417
Investment income 30 1 2 702 735
Finance costs 2 2,590 818 5,223 8,633
Operating expenses 5,836 42,249 2,848 14,575 65,508
Impairment trade and other - 11,400 370 1,229 12,999
receivables (refer to note 12)
Bad debts actually written off - 14,007 157 42547 56,711
Fair value adjustments - - - 2,000 2,000
Deemed interest expense - 145 - (35) 110
Equity accounted loss - 2,259 - - 2,259
Loss on sale of non-current - 11 - 70 81
assets
Loss on call up of NHFC - - - 3,750 3,750
guarantee(refer to note 26)
Depreciation and amortisation 33 875 - 1,274 2,182
Impairment of intangible assets - 1,150 - - 1,150
Profit/(loss) before taxation 2,804 (19,595) 259 (15,445) (31,977)
Taxation 781 - 498 (244) 1,035
Discontinued operations - - - - -
Other comprehensive income - - - - -
Total comprehensive 2,023 (19,595) (239) (15,201) (33,012)
profit/(loss)
- - - - -
Segment total assets 4,617 32,173 20,886 36,740 94,416
Segment total liabilities 2,377 46,557 22,171 (6,100) 65,005
Intangible assets acquired - - - 6,543 6,543
Goodwill - - - 8,076 8,076
Property, plant and equipment 81 44 1 220 346
acquired
2014
Revenue external - 28,856 5,109 1,771 35,736
Other income - 922 20 17 959
Investment income - 2 2 76 80
Finance costs - 2,739 889 235 3,863
Operating expenses - 36,398 2,866 16,232 55,496
Impairment trade and other - 16,916 247 8,804 25,967
receivables (refer to note 12)
Bad debts actually written off - 922 121 340 1,383
Equity accounted profit - 1,472 - - 1,472
Loss on sale of non-current - - - 311 311
assets held for sale
Depreciation and amortisation - 548 - 55 603
(Loss)/profit before taxation - (7,885) 1,375 (14,913) (21,423)
Taxation - - 406 1 407
Discontinued operations - - - 1,966 1,966
Total comprehensive - (7,885) 969 (16,880) (23,796)
profit/(loss)
Segment total assets - 51,307 22,403 22,715 96,425
Segment total liabilities - 46,502 23,449 (6,640) 63,311
Property, plant and equipment - 549 - - 549
acquired
Intangible assets acquired - 1,262 - - 1,262
27. Loss per share
Basic and diluted loss per share
Basic loss per share and diluted loss per share are calculated by dividing the loss attributable to equity holders of the
Company by the weighted average number of ordinary shares in issue during the year excluding ordinary shares held as
treasury shares (refer to note 10).
2015 2014
Basic and diluted loss per share
From continuing operations (c per share) (3.84) (4.11)
From discontinued operations (c per share) - (0.37)
(3.84) (4.48)
Reconciliation of loss for the year to basic and
diluted loss
Loss from continuing operations (33,012) (21,830)
Loss from discontinued operations - (1,983)
(33,012) (23,813)
Reconciliation of weighted average number of
ordinary shares used for basic and diluted loss per
share and headline and diluted headline loss per
share
Number of ordinary shares in issue 508,184 508,184
Adjusted for:
Rights issue 259,110 22,797
Shares issued Knife Capital Group acquisition 28 March 92,603 -
2014
Weighted average number of shares used for loss
and headline loss per share 859,897 530,981
Group
2015 2014
R'000 R'000
Loss per share (continued)
Headline loss and diluted headline loss per share
Headline loss per share continued (c) (4.08) (4.11)
Headline loss per share - discontinued (c) - (0.37)
(4.08) (4.48)
2015
Gross Net
Loss from continuing operations (33 012)
Loss from discontinued operations #
Total loss for the year (33 012)
Loss on disposal of property, plant
and equipment 23 17
Impairment of intangible asset 1 150 1 150
Profit on disposal of subsidiary (3 231) (3 231)
Headline loss from continuing and
discontinued operations - (5 076)
Note 2014
Gross Net
Loss from continuing operations (21 830)
Loss from discontinued operations A (1 983)
Total loss for the year (23 813)
Loss on disposal of property, plant 1 000 720
and equipment
Impairment of intangible asset 0 0
Profit on disposal of subsidiary 0 0
Headline loss from continuing and (23 813)
discontinued operations
(A) This relates to the trading loss for the year and is therefore not adjusted in calculating headline loss.
The effect of prior year errors on earnings and headline earnings per share is indicated in note 42.
28. Restrictions
Various contracts have restrictions in them that limit access to the assets by the Group. These restrictions are explained
below:
2015 - Existing as at year end
Sandown Capital Proprietary Limited
No amounts can be paid to Afdawn by Elite until all amounts owing to Sandown Capital Proprietary Limited have been
settled. The carrying amount of the liabilities is R14 222 000 . There was no such restriction in 2014.
Candlestick
The Greenoaks property cannot be sold until such time as the dispute with the liquidator of Blue Dot Properties 1198 CC
is resolved. The carrying amount is R19 828 000 (2014: R21 328 238). Refer to note 6.
Elite Cell
The cash in Elite Cell can only be accessed if a claim is submitted to Guardrisk or if Elite Cell declares a dividend. The
carrying amount is R724 000 (2014: R1 554 000).
2014 - Existing at year end
Elite Cell
The cash in Elite Cell can only be accessed if a claim is submitted to Guardrisk or if Elite Cell Captive declares a dividend.
The carrying amount is R1 554 000.
Administration
Registered office Company secretary
202 Waterfront Terraces A Rich(on behalf of Statucor Proprietary Limited)
Waterfront Road Auditors
Tygervalley Waterfront Grant Thornton
7530 Designated Advisor
Tel: +27 (12) 914 5566 PSG Capital
Tranfer secretaries
Computershare Investor Services Proprietary Limted 70 Marshall Street, Johannesburg, 2001
Date: 20 November 2015
www.afdawn.co.za
Date: 20/11/2015 03:30:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
Sharenet Sites 
