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TOTAL CLIENT SERVICES LIMITED - Reviewed Condensed Consolidated Provisional Financial Statements for the year ended 28 February 2015

Release Date: 23/05/2017 07:05
Code(s): TCS     PDF:  
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Reviewed Condensed Consolidated Provisional Financial Statements for the year ended 28 February 2015

Total Client Services Limited
Incorporated in the Republic of South Africa
(Registration number 1998/025018/06)
Share code: TCS ISIN: ZAE000116208
(“TCS” or “the Group” or “the Company”)


REVIEWED CONDENSED CONSOLIDATED PROVISIONAL FINANCIAL STATEMENTS
FOR THE YEAR ENDED 28 FEBRUARY 2015



CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

                                                                   Reviewed       Reviewed
                                                  %       Note         Year     Year ended
                                               Change              ended 28    28 Feb 2014
                                                                   Feb 2015
                                                                      R'000          R'000                                                        
                                                                
                                                                               
Revenue                                          (32)                19 232         28 293
Cost of sales                                     36                 (8 157)       (12 681)

Gross Profit                                     (29)                11 075         15 612
Other Income                                               1          7 380             15
Operating Expenses                                23                (22 513)       (29 423)
Loss from operations                              71                 (4 058)       (13 796)
Finance costs                                     57                 (1 817)        (4 227)
Loss before taxation                              67                 (5 875)       (18 023)
Taxation                                         216                    448           (387)
Loss for the period                               71                 (5 427)       (18 410)
Other comprehensive income
Revaluation of equipment                                              1 602              -
Deferred tax on revaluation                                            (448)             -
Total comprehensive loss for the
year                                              77                 (4 273)       (18 410)
Loss attributable to:
Equity holders of the company                     71                 (5 427)       (18 410)
Non-controlling interest                                                  -              -

Total comprehensive loss
attributable to:
Equity holders of the company                     77                 (4 273)       (18 410)
Non-controlling interest                                                  -              -

Reconciliation of loss to headline
loss
Loss after tax                                    71                 (5 427)       (18 410)
Adjusted for:
Loans Written Off/Forgiven                                           (5 000)             -
Insurance Refund                                                       (978)             -
Asset Impairment                                                           -            10
Loss on disposal of equipment                                             60            41
Tax effect of the above                                                    -            (3)


Headline loss for the period                      38                 (11 345)      (18 362)
Basic loss per ordinary share 
attributable to the equity                        71                   (1.40)        (4.76)
holders of the Company (cents)

Weighted average number of ordinary shares in issue                  386 697       386 363
in thousands
Headline loss per ordinary share (cents)          38                   (2.93)        (4.76)




CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION


                                                                      Reviewed                  Reviewed
                                                                    Year ended               Year ended
                                                                   28 Feb 2015              28 Feb 2014
                                                           Notes         R'000                    R'000

ASSETS
Non-current assets                                                       3 864                    2 621
Property, Plant and Equipment                                2           2 653                    2 621
Intangible Assets                                            4           1 211                        -

Current assets                                                           4 737                    5 905
Trade and other receivables                                              3 878                    4 657
Cash and cash equivalents                                                  859                    1 248

TOTAL ASSETS                                                             8 601                    8 526



EQUITY AND LIABILITIES
Capital and reserves                                                   (31 368)                 (39 468)
Share Capital                                                3          19 122                    18 122
BEE reserves                                                            (9 923)                  (9 923)
Revaluation Reserve                                                      1 829                     1 044
Equity Portion of Loan Option                                6          11 374                         -
Retained earnings                                                      (53 770)                 (48 710)

Non-current liabilities                                                 23 859                        58
Borrowings                                                   6          23 859                        58

Current liabilities                                                     16 111                    47 936
Current tax payable                                                      1 467                     1 467
Borrowings                                                   6           1 531                    24 529
Trade and other payables                                     5          13 113                    21 940

TOTAL LIABILITIES                                                       39 969                    47 994

TOTAL EQUITY AND LIABILITIES                                             8 601                     8 526
Total number of ordinary shares in issue at the year-end
(in thousands)                                                         391 135                   390 135
Treasury shares (in thousands)                                          (3 771)                   (3 771)
Total number of ordinary shares in issue excluding
treasury shares (in thousands)                                         387 363                   386 363

Net asset value per ordinary share (cents)                               (8.10)                   (10.22)
  
Net tangible assets value per ordinary share (cents)                     (8.41)                   (10.22)




CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

                                                                Reviewed       Reviewed
                                                              Year ended     Year ended
                                                             28 Feb 2015    28 Feb 2014
                                                                   R'000          R'000

 Net cash (outflow) / inflow from operating activities            (3 290)        (3 082)
 Net cash (outflow) / inflow from investing activities            (1 419)          (169)
 Net cash (outflow) / inflow from financing activities             5 098            (64)

 Net (decrease) / increase in cash and cash equivalents             (389)        (3 315)
 Cash and cash equivalents at the beginning of the
 period                                                            1 248          4 563

 Cash and cash equivalents at the end of the
 period                                                              859          1 248


CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

                                                                                          Equity
                                        Share       Share        BEE    Revaluation   portion of       Retained
                                      Capital     Premium    Reserve        Reserve        share         Income        Total
                                                                                         options                                                                                                       
                                        R'000       R'000      R'000          R'000        R'000          R'000        R'000
                                                                                    


Balance as at 1 March 2013                 39      18 084    (9 923)          1 707            -       (30 963)      (21 058)
Loss for the period                         -           -          -              -            -       (18 410)      (18 410)
Realisation of revaluation reserve          -           -          -          (663)            -            663            -
Revaluation of equipment                    -           -          -              -            -              -            -
Balance as at 28 February 2014             39      18 084    (9 923)          1 044            -       (48 710)      (39 468)

Shares Issued                               1         999          -              -            -             -         1 000
Loss for the period                         -           -          -              -            -        (5 427)       (5 427)
Realisation of revaluation reserve          -           -          -           (369)           -           369             -
Equity portion of share options             -           -          -              -       11 374             -        11 374
Revaluation of equipment                    -           -          -           1 154           -             -         1 154
Balance as at 28 February 2015             40      19 083    (9 923)           1 829      11 374       (53 770)      (31 368)
COMMENTARY ON THE GROUP RESULTS


OPERATIONAL PERFORMANCE

During the period under review, TCS continued to deal with the challenges at hand in order to take advantage
of opportunities in the market. Management’s focus during this period was to continue to consolidate the
existing contracts, improve the service offering and secure new business. The aim was to move away from
non-performing or unsustainable contracts and focus on sustainable business.

Although there are notable losses in the period under review, it needs to be understood that these losses
were compounded by the challenges brought about by the Business Rescue process in 2014. Although the
Business Rescue process added value and enabled the restructuring of the Company, the impact it had on
general operations should be taken into consideration when considering the performance. The negative
perception in the market had a definite impact on current and new business, and also allowed opportunity
for competitors to take advantage of the situation.

Following release from Business Rescue in August 2014, the Company faced further challenges in continuing
with the internal restructuring process, the re-alignment of the basic business model and the restoration of
faith amongst clients.

FINANCIAL PERFORMANCE

Revenue for the year under review compared to the previous year has decreased by 32% to R19.2 million.
This can be largely attributed to the Limpopo and Gauteng contracts coming to an end during the period.
The efforts by management to improve efficiency and the service offering started to deliver results with
certain cost reductions noted. Earnings before, interest, tax, depreciation and amortisation (“EBITDA”)
improved on the 2014 result, with a negative EBITDA of R2.0 million reported.

After deducting depreciation and finance costs, a loss before tax of R5.9 million has been recorded compared
to R18 million recorded in the prior year. Cost of sales reduced during the year by R4.5 million compared to
the corresponding year, this change reflects the decline in revenue, the results of cost containment efforts
and efficient deployment of resources.

The headline loss per share reduced to 2.93 cents compared to a loss of 4.76 cents for the prior year ending
28 February 2014.

The movement in non-current assets relates mainly to the valuation and addition of new developed software.
The reduction in current assets reflects the reduced cash balances and trade receivables at year end. Trade
and other payables of R13.1 million includes regular trade payables of R2.4 million and SARS liabilities of
R7.5 million. These SARS liabilities are those accumulated debts recorded during the Business Rescue period
(up to August 2014) and the accumulated taxes until year end. At the end of the year the Group’s closing
cash balance was R0.9 million.


PROSPECTS

The Administration Adjudication of Road Traffic Offences Project (“AARTO”) has been delayed and a new
date has not as yet been announced. It is anticipated that AARTO will enhance the Company’s revenue and
growth prospects. TCS has aligned its business strategy, products and services in accordance with the
requirements of AARTO and our systems are fully compliant.

The Company introduced, and aims to continue with, a more focussed approach based on superior software,
technology and equipment. The market provides sustainable targets for the TCS Group of companies with
the potential to achieve measured growth.
      Achievements in this regard already include the introduction of new products to the market, being: own re-
      engineered Artimas fixed radar camera, own new “TCS CAPTURE” mobile camera, handheld devices, new
      Windows based Traffic Management System, the Pound Management System and the On Board Automatic
      Number Plate recognition systems.

      These products, together with other new innovations, will play a significant role in the re-focussed TCS.


      NOTES TO THE CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

           1. Other income:

               The other income of R7.4 million recorded for the period under review, included the following
               significant items:
                   - R5.0 million loan write-off in Total Client Services in accordance with the business rescue
                     plan.
                   - R1.4 million recovery of doubtful debt in Total Computer Services
                   - R0.9 million related to an insurance refund received



      NOTES TO THE CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

           2. Property, plant and equipment

                            Opening                                                                                Closing
                            Balance     Additions     Disposals      Depreciation    Impairment    Revaluation     Balance
Group 2015
Furniture and fittings      146 489        56 713             -           (66 906)           -              -      136 296
Motor vehicles              242 143             -       (48 995)          (95 365)           -              -       97 783
Office equipment             78 830             -             -           (48 175)           -              -       30 655
IT equipment                454 308       109 212       (36 862)         (224 116)           -              -      302 542
Camera Accessories        1 698 793             -             -        (1 215 116)           -       1 601 707   2 085 384
Total                     2 620 563       165 924       (85 857)           (1 649)           -       1 601 707   2 652 661

Group 2014
Furniture and fittings      217 500            -             -            (71 011)           -              -      146 489
Motor vehicles              340 974            -             -            (98 831)           -              -      242 143
Office equipment            128 184            -             -            (49 354)           -              -       78 830
IT equipment                497 872      169 486             -           (213 050)           -              -      454 308
Camera Accessories        3 694 726            -       (40 936)        (1 954 997)           -              -    1 698 793
Total                     4 879 256      169 486       (40 936)        (2 387 243)           -              -    2 620 563


      Revaluation assumptions:
      Management performed a revaluation at February 2015 year end on camera equipment that were still in use.
      The revaluation was based on the depreciated replacement cost approach, with the replacement cost
      obtained from external suppliers and taking cognisance of the camera’s current and total expected useful
      lives. This resulted in a gross increase in the camera carrying value of R2.3 million.
  
 3. Share Capital

Figures in Rand
                                                                            2015            2014
Authorised
500 000 000 (2014: 500 000 000) Ordinary shares of
R0.0001 (2014: R0.0001) each                                              50 000          50 000
Issued
391 134 690 (2014: 390 134 690) ordinary shares of
R0.0001 each                                                              39 114          39 014
Share premium                                                         19 276 000      18 276 000
Treasury shares                                                         (192 869)       (192 869)
                                                                      19 122 245      18 122 145

All shares are fully paid. 3 771 484 (2014: 3 771 484) of the ordinary share capital of Total Client Services Limited
were held by their subsidiary, Total Computer Services Proprietary Limited as at 28 February 2015.


Reconciliation of number of shares issued:
Shares in issue at the beginning of the year                          390 134 690     390 134 690
Shares issued during the year                                           1 000 000               -
Closing Balance                                                       391 134 690     390 134 690

 4. Intangible assets

    Reconciliation of Intangible                 Accumulated     Accumulated    Carrying
    Assets                           Additions  Amortisation      Impairment       Value
                                                   

    Group 2015
    Computer software
    Internally generated             1 253 034      (41 768)             -     1 211 266

    Total                            1 253 034      (41 768)             -     1 211 266

5. Trade and other payables

   Trade payables are obligations to pay for goods or services that have been acquired in the ordinary
   course of business from suppliers. Trade payables are initially recognised at fair value, and are
   subsequently measured at amortised cost, using the effective interest rate method.

                                                                                 Group
                                                                               2015          2014
 Trade payables                                                           2 647 341     2 722 183
 Amounts received in advance                                              1 304 489     1 398 613
 Preference shares dividends and interest accrual                                 -    11 270 000
 SARS liabilities                                                         8 552 844     5 800 646
 Other payables                                                                   -       207 814
 Accrued leave pay                                                          607 856       540 702
                                                                         13 112 531    21 939 958

  The accrual for dividends and interest on the preferential shares were adjusted in accordance with
  the Business Rescue plan and now included in the Mvela borrowings balances (Refer note 6).

  SARS liabilities reflects VAT and PAYE, as well as interest and penalties on these amounts. According
  to the Business Rescue plan, repayment of this debt was due to start from 1 January 2015. The
  Company engaged SARS prior to January 2015 to start negotiations for a more favourable settlement
  of these debts. At the date of this report, settlement has been reached with SARS whereby the
  Company is required to pay an amount of R500k as settlement for all debt up to, and including
  March 2017. This settlement amount is payable before the end of June 2017.

6. Borrowings

   Borrowings are initially recognised at fair value, and are subsequently measured at amortised cost,
   using the effective interest rate method.

                                                                                 Group
    Figures in Rand
                                                                               2015             2014
    Instalment sale agreements                                               29 062           87 013
    Redeemable preference shares                             *                    -       24 500 000
    Primary loan                                             *           21 345 798
    Other loans                                             **            4 014 888                -
                                                                         25 389 748       24 587 013

    Current
    Instalment sale agreements                                               29 062           28 760
    Redeemable preference shares                                                  -       24 500 000
    Primary loan                                                          1 502 151
    Other loans                                                                   -                -
                                                                          1 531 213       24 528 760
    Non-Current
    Instalment sale agreements                                                    -           58 253
        Primary loan                                                     19 843 647                -
        Other loans                                                       4 014 888                -
                                                                         23 858 535           58 253
                                                                                                               

                                                                                                              Nominal
 * Redeemable preference shares / Primary loan                                                                 Values

 The Group issued 2600 cumulative redeemable preference shares with a par value of R1 per
 share on 29 November 2007. 150 Cumulative preference shares with a par value of R1 per share
 were redeemed in March 2010 for R1 500 000. The remaining shares were mandatorily
 redeemable on 29 November 2013, and paid dividends at 12% annually. In November 2013, the
 company entered business rescue. In terms of the business rescue plan, the outstanding
 redeemable preference shares was dealt with as follows:

 R5 000 000 was written off

 R5 000 000 was converted to a senior loan, repayable over 3 years at 10% interest per annum.               5 000 000
 Repayment of capital and interest was scheduled to commence on 1 March 2015. The Company
 was not in a position to start with the repayments. Repayment of this loan remains suspended
 and the loan remains subordinated until the parties are in a position to renegotiate the terms.


 The remaining amount owing was converted to a subordinated loan, subordinated in favour of                25 770 000
 other creditors. This loan was interest free for the first 12 months. After the first 12 months, the
 loan became convertible, at the option of the creditor, to ordinary shares at R0.01c per share. If
 not converted to ordinary shares, the loan became repayable over 3 years commencing only once
 the senior loan of R5 million has be repaid. Interest will accrue at the prime interest rate.
                                                                                                           30 770 000



                                                                                                              Nominal
** Other loans                                                                                                 Values

The Group required and received funding to support the recovery and stabilizing period
during and following the business rescue process of 2014. This funding was provided in
the form of loans with suspended repayment terms and which are subordinated to other
creditors. The Company is not required to start repayments of these loans until it has
sufficient cash to do so.
The loans were provided by:

Mvelaphanda through its subsidiary RHW Southern Africa Holdings (Pty) LTD
Repayment of this, in terms of the original loans, have been suspended by the financier
until the Company has the financial resources to start repayment or until an alternative
agreement can be reached. This loan was interest free up to year end.
                                                                                                            1 150 000


 Slade Investments (Pty) Ltd                                                                                1 000 000
      - As part of the business rescue plan
 This loan was interst free for the first 12 months, whereafter the provider of the loan would have the
 option to convert to ordinary shares at R0.01c per share. Should this option not be exercised, the loan
 became repayable over 12 months at the prime interest rate.

     - Additional loans                                                                                     2 066 692
 Repayment of this, in terms of the original loans, have been suspended by the financier until the
 Company has the financial resources to start repayment or until an alternative agreement can be
 reached. These loans accrues interest at the prime interest rate.
                                                                                                            3 066 692
The carrying values of these borrowings in the financial statements are different than the nominal values
as a result of the initial recognition adjustments to reflect fair value of the options to convert
the loans to equity.


BASIS OF PREPARATION

Statement of compliance

The condensed consolidated financial statements are prepared in accordance with the Listings Requirements
of the JSE Limited (“JSE Listings Requirements”) for provisional reports and the requirements of the
Companies Act of South Africa, 2008 (Act 71 of 2008), as amended. The JSE Listings Requirements require
reports to be prepared in accordance with the framework concepts and the measurement and recognition
requirements of International Financial Reporting Standards (IFRS) and the SAICA Financial Reporting Guides
as issued by the Accounting Practices Committee and Financial Pronouncements as issued by Financial
Reporting Standards Council and to also, as a minimum, contain the information required by IAS 34 Interim
Financial Reporting. The accounting policies applied in the preparation of the condensed consolidated
financial statements are in terms of IFRS and consistent with those of the annual financial statements for the
year ended 28 February 2013 and the condensed results for the year ended 29 February 2014, except for
the adoption of new, improved and revised standards and interpretations which became effective, which had
no material effect on the financial results.

The directors take full responsibility for the preparation of the financial information and the financial
information has been correctly extracted from the underlying financial information.

The reviewed condensed financial statements have been prepared under the supervision of the Financial
Director, Mr C Els.


Business rescue process and subsequent events

As per the announcement released on SENS on 22 November 2013, the board of directors of TCS (“the
Board”) deemed TCS to be financially distressed as contemplated in Chapter 6 of the Companies Act, 71 of
2008, as amended (“the Companies Act”) and accordingly, on 21 November 2013 resolved that business
rescue proceedings commence, and that TCS be placed under supervision in terms of section 129 of the
Companies Act.

In this regard, Mr Piers Marsden of Matuson & Associates was appointed as the Company’s business rescue
practitioner (“Business Rescue Practitioner”) on 9 December 2013.

An announcement was released on SENS on 2 May 2014, informing shareholders of the publication of a
proposed business rescue plan (“Business Rescue Plan”) and included a notice of meeting of creditors, other
holders of a voting interest and shareholders to be held on 19 May 2014 to consider the Business Rescue
Plan.

As per the announcement released on SENS on 19 May 2014, the Business Rescue Plan was approved by the
requisite majority of creditors, other holders of a voting interest and shareholders. Subsequent to the
announcement released on SENS on 19 June 2014, wherein shareholders were advised that the Company
submitted its Schedule 13 application to the JSE to enable the Company to raise capital through the issue of
new shares, the application was approved by JSE Limited.

The Business Rescue Practitioner confirmed on 14 August 2014 that the Business Rescue Plan had been
substantially implemented and that the control of the Company effectively reverted back to the Board.

The Business Rescue Plan included the below restructuring of the Statement of Financial Position. The pro-
forma financial effects of the specific issue of shares as part of the business rescue and subsequent
restructuring was released in an announcement on 9 June 2016.


     -   Equity Injection - Slade Investments CC (“Slade”)

     The Company required a cash injection. The amount injected into the Company would be used as
     working capital. The Company’s financial model indicated a cash requirement of R2million. Slade
     injected R2 million into the Company as follows:

     1.   R1 million by subscribing to 100 million shares at a fixed price of 1 cent per share. This
          constituted 20.4% of the issued share capital post the issues of the new shares.
     2.   R1 million loan, which will be interest free for the first twelve months. Slade has the option
          to convert the loan to ordinary shares at a fixed price of 1 cent per share after twelve
          months, subject to all the JSE Listing Requirements and Companies Act regulations being
          met at that date. Should the option to convert not be exercised the loan will become
          repayable over 12 months at the prime interest rate.


    -   Debt Restructuring and Forgiveness - Mvelapanda Holdings Proprietary Limited (“Mvela”)
        A total amount of R35.77 million was due and payable to Mvela relating to the preference shares
        and accrued interest thereon. The repayment/distribution of the preference shares were subject to
        section 46 of the Companies Act including the solvency and liquidity test. An amount of R5 million
        was written off.

        The remaining preference share capital and accrued interest were converted to loans as indicated
        below which are not subject to section 46 of the Companies Act requirements.

    -   Terms and Repayment of Remaining Debt
            The remaining debt of R30.77 million owing to Mvela was structured as follows:

                 R5 million to be a senior loan repayable monthly over 3 years at 10% interest per annum
                 with repayment of capital and interest commencing on 1 March 2015.

                 R25.77 million loan subordinated in favour of all creditors.
                     - Interest free for the first 12 months commencing on adoption of the Business
                       Rescue plan.
                     - After 12 months have the option to convert into ordinary shares at the fixed price
                       of 1 cent per share, subject to all the JSE Listing Requirements and Companies Act
                       regulations being met at that date.
                     - Should the option to convert not be exercised the loan will become repayable over
                       3 years commencing only once the senior loan has been repaid. Interest will accrue
                       at the prime interest rate.

    -   South African Revenue Services (SARS)
        The tax debts of R7.9 million owing to SARS was addressed as follows:
        The amount, including interest but excluding penalties, plus all tax debts up to the date of release
        in August 2014, will be payable in equal instalments over 30 months starting on 1 January 2015.

        After release from Business Rescue in August 2014, the Company engaged with SARS to reach
        agreement on the final settlement amount and to seek relief on the payment terms. This process
        was ongoing and not concluded at the end of the period under review.

        At the date of this report the Company has received and accepted a final settlement offer from SARS,
        which requires payment of R500,000 to settle all SARS outstanding amounts up to and including
        March 2017.


Going Concern

During the term certain significant contracts came to an end which contributed to the Group making a loss
after tax of R5.4 million for the year. As at the year ended 28 February 2015, the Group had a negative
equity position of R31 million.
Even though borrowings to the value of R22.5 million has been subordinated in favour of other creditors, the
Group’s Statement of Financial Position still reflects a technical insolvent position with liabilities exceeding
assets.

The Company was also not able to settle its borrowing repayments as they became due, but is was able to
renegotiate and extend the repayment of the borrowings with the financiers so that these loans have been
subordinated in favour of other creditors and that repayment would only be required once the Company has
sufficient cash resources to be able to settle the loan repayments as they become due.

Ekhurhuleni and Emfuleni contracts historically contributed revenue of approximately R20 million per annum
and the loss of these contracts during 2013, largely contributed to the reported drop in revenue. During the
2015 financial period, revenue declined further, mainly due to the negative effects of the Business Rescue
process and the contracts for Limpopo Province and Gauteng Province coming to an end. These contracts
contributed approximately R10.8 million in annual revenue.

These losses, together with the operating restrictions experienced during, and after, the Business Rescue
process, continued to have a severe effect on the trading during the year from March 2014 until the date of
this report. Restrictions mainly relate to limited cash for operations, as well as reservations amongst existing
clients and new clients in the market to engage in, or increase business activities with the Company.

However, since the discharge from Business Rescue, as announced on SENS on 29 August 2014, the Company
has managed to restructure the business to a sustainable level. The Company also managed to secure new
profitable contracts, including full service contracts for Polokwane (September 2014), Tlokwe (May 2015)
and Buffalo City (December 2015). It also includes a relationship with the Namibian Police, whereby TCS will
be providing services and equipment to support the traffic law enforcement expansion in Namibia over the
next few years.

Focus also remains on equipment technology advances and service delivery to improve income from existing
contracts and confidently pursue new markets and contracts.

In addition to the revenue initiatives, the cost saving processes started during the Business Rescue period
continued during 2015 and 2016, and will continue as part of an ongoing profitability improvement process.

The Board believes that as a result of the above, positive operating cash flows will be realised in the
foreseeable future. The Board determined the future cash flows of the Group when it assessed the going
concern status. Although due care has been exercised in the preparation of these forecasts, any forecast is
based on certain assumptions which may or may not materialise in future. Any forecast financial information
contained in the year end results has not been reviewed and reported on by the Group’s auditors in
accordance with paragraph 8.40(a) of the Listings Requirements. However, the Board is of the opinion that
the mentioned positive developments combined with management processes and initiatives implemented,
makes the forecasts realistic and achievable.

The Group has come through an extremely difficult trading period and cash flow remains under constant
pressure. The key components of the Group continuing as a going concern is the ability to provide
sophisticated management systems and equipment to the market, maintain a low cost base, selectively
approach new tenders, considering strategic partnerships and co-operation agreements and ensuring existing
contracts are profitable.

The forecasts are based on the following assumptions:
- no deterioration in the current market conditions;
- municipalities continue to outsource the administration of traffic violations;
- the Company is able to reduce and maintain its operational expenses in line with sales levels;
- no deterioration in the payment and collection cycle;
- the Company continues to have the ongoing support of all its stakeholders, especially key staff and
  financiers;
- no repayment of loans is required during the foreseeable future; and
- the Company’s JSE listing to be re-instated.

Significant negative change in these areas of assumptions will require swift action and adjustment by the
Company in order to continue as a going concern.
These conditions underline the ever-present uncertain and variable circumstances in the market. Failure by
the Company to effectively operate under these conditions, will give rise to a material uncertainty which may
cast significant doubt about the Company’s ability to continue as a going concern and, therefore that it may
be unable to realise its assets and discharge its liabilities in the normal course of business.

The financial information has been prepared on a going concern basis which presumes that the Group will
generate sufficient cash flows to enable it to service its debts in the normal course of business as and when
they become payable.

Modified review report

The condensed consolidated financial statements for the year ended 28 February 2015 have been reviewed
by the Company's auditor, BDO South Africa Incorporated, who has expressed a modified review conclusion
on the results. A copy of their review report is available for inspection at the Company’s registered office.
The auditor’s report does not necessarily report on all of the information contained in these financial results.
Shareholders are therefore advised that in order to obtain a full understanding of the nature of the auditor’s
engagement they should obtain a copy of the auditor’s report together with the accompanying financial
information from the issuer’s registered office.

The Disclaimer of Opinion and Report on Other Legal and Regulatory Requirements paragraphs as contained
in the review report are set out below:


Basis for Disclaimer of Opinion

As indicated in the going concern section, the Group incurred a net loss for the year ended 28 February 2015
of R5.4 million (2014: loss of R18.4 million) and, as at that date its total liabilities exceeded its total assets
by R31.4 (2014: R39.5 million). The Business Rescue Plan was approved and substantially implemented by
the Business Rescue Practitioner. The going concern of the Group is significantly dependent on a number of
factors. The going concern note also indicates that these conditions indicates the existence of a material
uncertainty which may cast significant doubt on the Group’s ability to continue as a going concern and
therefore it may be unable to realise its assets and discharge its liabilities in the normal course of business.
In these circumstances and as a result of the significance thereof, we have not been able to obtain sufficient
appropriate audit evidence to confirm or dispel whether it is appropriate to prepare the financial statements
on the going concern basis.


Disclaimer of opinion

Because of the significance of the matter described in the Basis for Disclaimer of Opinion paragraph, we have
not been able to obtain sufficient appropriate audit evidence to provide a basis for an opinion. Accordingly
we do not express an opinion on the financial statements.


Report on Other Legal and Regulatory Requirements

In accordance with our responsibilities in terms of sections 44(2) and 44(3) of the Auditing Profession Act,
we report that we have identified certain unlawful acts or omissions committed by persons responsible for
the management of the Company which constitute reportable irregularities in terms of the Auditing Profession
Act, and have reported such matters to the Independent Regulatory Board for Auditors. The matters
pertaining to the reportable irregularities are as follows:
-   The entity has submitted Income Tax returns (IT14), Value Added Tax returns (VAT 201) and Employees
    Tax returns (EMP 201) to the South African Revenue Services but no payment has been made to settle
    the outstanding liability.
-   Contravention of Section 30 of the Companies Act, 2008 by failing to prepare annual financial
    statements within six months after its financial year end.
-   Contravention of Listing Requirement 3.19 of the JSE Limited Listing Requirements which requires
    issuers to distribute a notice of the annual general meeting and annual financial statements to all
    holders of securities and to submit to the JSE Limited within six months after its financial year end.
-   Contravention of Section 66(2)(b) of the Companies Act, 2008 by failing to have the minimum
    number of directors as prescribed.
-   Contravention Section 94 (6) of the Companies Act by failing to appoint a person to fill any vacancy
    on the audit committee within 40 business days after the vacancy arises.
-   Potential contravention of Section 22 and Section 29 of the Companies Act, 2008 as the company was
    unable to settle liabilities as it became due and is technically insolvent.


Contingent liabilities

There are no contingent liabilities at the end of the reporting period.


DIRECTORATE

The following changes to the Board occurred during the year under review, up to and including the date of
this report:

Director                                          Detail                  Date
Lucas Ramagaga                                    Resignation             2 May 2014 (last working date)
Christo Els                                       Appointment             8 May 2014
Nathi Chonco                                      Resignation             11 December 2014
Piet Nieman                                       Appointment             9 December 2015
Francois Smit                                     Appointment             9 December 2015
Dumisani Mafu                                     Passed away             9 July 2016


By order of the Board


P Nieman
Acting Non-Executive Chairman


22 May 2017


Directors
L Sipoyo, (CEO), C Els (Executive: Financial Director), P Nieman**, F Smit*
(*Independent Non-executive)
(** Non-executive)


Registered office:
Futurum Office Park, Units C1A and D2A
Lenchen Avenue
Centurion, 0157
(P.O. Box 863, Wingate Park, 0153)


Company secretary:
Merchantec Proprietary Limited
2nd Floor, North Block
Hyde Park Office Towers
Cnr 6th Road & Jan Smuts Ave
Hyde Park, 2196
Auditors:
BDO South Africa Incorporated
Summit Place Office Park
221 Garsfontein Road
Ashlea Gardens
Pretoria
0181


Designated Adviser:
Merchantec Capital
2nd Floor, North Block
Hyde Park Office Towers
Cnr 6th Road & Jan Smuts Ave
Hyde Park, 2196


Transfer secretaries:
Computershare Investor Services Proprietary Limited
Rosebank Towers, 15 Biermann Avenue, Rosebank, Johannesburg, 2196
(PO Box 61051, Marshalltown, 2107)


Company website:
www.tcsonline.co.za
www.viewfines.net

Date: 23/05/2017 07:05:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE'). 
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