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Condensed unaudited interim results for the six months ended 30 June 2017
BRAINWORKS LIMITED:
Incorporated in the Republic of Mauritius,
Registration number: 115883 C1/GBL, JSE Share code: BWZ, ISIN: MU0548S00000
CONDENSED UNAUDITED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 2017
COMMENTARY
INTRODUCTION
The directors hereby present the condensed unaudited interim financial statements of Brainworks Limited ("Brainworks" or "the Company") together
with its subsidiaries and associates ("the Group") for the six months ended 30 June 2017. This is the first publication of the Group's results following the
Company's listing on the Johannesburg Stock Exchange ("JSE") on the 13th of October 2017.
The macro economic environment in Zimbabwe continued to face a number of hurdles, as evidenced by low liquidity, subdued foreign direct investments
and constrained foreign currency reserves. The continued strength of the United States of America dollar relative to the regional currencies resulted in
subdued tourist arrivals particularly from South Africa, our key regional source market. Global tourism registered notable growth from traditional source
markets, mainly Europe and Asia, with a notable recovery from the United States of America.
Notwithstanding the myriad of challenges, the Group's underlying businesses continues to reflect resilience and growth.
FINANCIAL RESULTS
The Group's revenue grew by 23% to close at US$24.22 million relative to US$19.67 million achieved during the 2016 comparable period. Revenue growth
was recorded across all the Group's three main operating segments, with major growth being recorded by the hospitality segment. The hospitality
segment contributed 87% of the total Group revenues for the period under review, 4% lower when compared to the comparable 2016 period on the
back of revenue growth in the other business segments. Post elimination of intersegment revenues, the other business segments contributed US$3.21
million to the current period total revenues.
The hospitality segment recorded revenue amounting to US$21.01 million, 17% up from the US$17. 99 million recorded during the same period in 2016.
In response to market development, the tactical downward review of the hotel room rates yielded the desired outcome as occupancy increased by 8%
points from 37% reported last year to 45%. As a result, revenue per available room ("RevPAR") increased by 14% to US$40 from US$35 achieved last year.
This had a notable impact on revenue growth.
Occupancy growth was supported by strong performance from all our markets, with local, international and regional rooms sold increasing by 21%, 33%
and 2% respectively. In addition, the commissioning of the upgraded Victoria Falls International airport which now has capacity to handle wide body
aircraft positively contributed towards improving occupancies and ultimately revenue from the Group's Victoria Falls based hotel assets.
At US$19.98 million, the Group's operating expenses increased by 23% relative to US$16.28 million recognised during the same period in 2016. The
growth was mainly driven by non-recurring expenses of US$0.52 million, US$1.26 million listing costs and US$1 million increase in operating expenses
recorded by the hospitality segment whose variable costs increased in response to revenue increase. The operating expenses also include an impairment
allowance of US$0.92 million recognised on the Group's receivable from its associate investment, Coporeti Support Services (Private) Limited t/a GetCash.
Total net finance charges for the period remained flat at US$1.91 million notwithstanding increase in total borrowings to US$37.32 million as at 30 June
2017 relative to US$27.33 million as at 30 June 2016, reflecting the decrease in the efective borrowing cost for the Group.
The Group posted losses before tax of US$4.87 million, which was substantially higher when compared to the US$2.20 million recorded in same period
last year. This was mainly due to:
a) Once off expenses amounting to US$1.78 million referred to above;
b) Fair value losses of US$0.62 million recognised on the Group's listed equity investments; and
c) Impairment allowance of US$0.92 million on a receivable as earlier reported.
Historically, the Group incurs losses in the first half of the year as the business cycle is such that the peak season of the Group's principal business activity
is in the second half of the year. Accordingly, as in previous years, the Group expects the improvement in performance seen in the first half of the year to
accelerate in the second half of the year.
OUTLOOK
The second half of the year traditionally represents the Group's peak business season for its hospitality segment. This is expected to drive performance,
particularly at our Victoria Falls based hotels where foreign arrivals have been on an increase following the commissioning of the upgraded Victoria Falls
International Airport.
The real estate segment is expected to complete its maiden residential development project which will result in 58 residential units being on the market.
Sales thereof are expected to contribute to Group revenue growth for the year.
LISTING UPDATE
As reported in the Group's financial statements for the year ended 31 December 2016, Brainworks was working towards attaining a listing on the
Johannesburg Stock Exchange ("the JSE"). The directors are pleased to report that the Company was duly listed and commenced trading on the JSE on
Friday, 13 October 2017 under JSE share code "BWZ" and the allocated ISIN is MU0548S00000.
The directors are now working towards a secondary listing of the Company on the Zimbabwe Stock Exchange and this is expected to have been
completed by 31 December 2018.
For and on behalf of the Board
Brett I. Childs Peter Saungweme
Chief Executive Officer Chief Finance Officer
CONDENSED UNAUDITED GROUP STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2017
Unaudited Unaudited Audited
All figures in US$ Notes 30 June 2017 30 June 2016 31 December 2016
ASSETS
Property and equipment 88 599 884 90 036 116 89 469 927
Investment property 23 982 605 22 820 541 24 176 235
Biological assets 165 137 165 137 165 137
Goodwill 8 261 050 8 261 050 8 261 050
Other intangible assets 219 195 - 285 486
Investments in associates 3 741 419 2 909 209 3 276 024
Deferred tax asset 813 984 1 652 950 813 984
Trade and other receivables 221 703 172 271 382 524
126 004 977 126 017 274 126 830 367
Current assets
Financial assets held at fair value through profit or loss 4 569 843 4 402 076 4 892 962
Inventory 5 597 521 2 843 057 4 793 764
Trade and other receivables 13 465 332 9 547 580 15 355 922
Cash and cash equivalents 4 600 243 5 442 372 5 593 010
28 232 939 22 235 085 30 635 658
Total assets 154 237 916 148 252 359 157 466 025
EQUITY AND LIABILITIES
Equity
Stated capital 6.6 55 785 508 - -
Share capital and premium 6.6 - 58 535 508 58 535 508
Other reserves (928 090) (505 937) (934 816)
Retained earnings 2 415 332 5 087 435 7 705 220
57 272 750 63 117 006 65 305 912
Non controlling interests 31 177 055 28 999 735 31 085 243
Total equity 88 449 805 92 116 741 96 391 155
Non current liabilities
Borrowings 12 291 921 15 141 233 15 629 899
Deferred tax liabilities 7 748 215 6 618 468 7 687 568
Trade payables 1 430 148 860 744 1 730 148
21 470 284 22 620 445 25 047 615
Current liabilities
Borrowings 25 027 059 12 183 835 19 349 309
Trade and other payables 17 817 315 17 423 595 13 351 194
Insurance liabilities 1 004 550 330 589 755 708
Provisions - 2 733 593 1 499 126
Income tax 468 903 843 561 1 071 918
44 317 827 33 515 173 36 027 255
Total liabilities 65 788 111 56 135 618 61 074 870
Total equity and liabilities 154 237 916 148 252 359 157 466 025
UNAUDITED CONDENSED GROUP STATEMENT OF COMPREHENSIVE INCOME
FOR THE SIX MONTHS ENDED 30 JUNE 2017
UNAUDITED UNAUDITED AUDITED
6 months ended 6 months ended Year ended
All figures in US$ Notes 30 June 2017 30 June 2016 31 December 2016
Revenue 24 216 040 19 670 199 48 063 843
Cost of sales and other direct costs (7 762 518) (6 277 531) (14 307 988)
Gross profit 16 453 522 13 392 668 33 755 855
Share profit/(loss) of associates 574 383 378 347 (65 853)
(Loss)/gain from financial assets at fair value through profit or loss (612 619) 902 076 1 276 215
Other income 607 721 1 320 742 3 986 505
569 485 2 601 165 5 196 867
Total income 17 023 007 15 993 833 38 952 722
Operating expenses (19 978 559) (16 277 969) (31 161 524)
Operating (loss)/profit before net interest expense (2 955 552) (284 136) 7 791 198
Net interest expense (1 911 834) (1 915 681) (3 419 056)
Interest income 42 597 157 488 278 109
Interest expense (1 954 431) (2 073 169) (3 697 165)
(Loss)/profit before tax (4 867 386) (2 199 817) 4 372 142
Income tax expense/(credit) (335 627) 772 530 (813 642)
(Loss)/profit from continuing operations (5 203 013) (1 427 287) 3 558 500
Loss from discontinued operations - (160 986) (129 325)
(Loss)/profit for the period (5 203 013) (1 588 273) 3 429 175
Other comprehensive income
Foreign currency translation gains/(losses) 11 663 131 960 (611 074)
Total comprehensive (loss)/income for the period (5 191 350) (1 456 313) 2 818 101
(Loss)/profit attributable to:
Owners of the parent (5 289 888) (1 560 510) 1 057 275
Non-controlling interests 86 875 (27 763) 2 371 900
(5 203 013) (1 588 273) 3 429 175
Total comprehensive (loss)/income attributable to:
Owners of the parent (5 283 162) (1 484 343) 704 563
Non-controlling interests 91 812 28 030 2 113 538
(5 191 350) (1 456 313) 2 818 101
Earnings/(loss) per share (cents)
Basic 6.1 (6.99) (0.20) 0.13
Diluted 6.2 (6.99) (0.20) 0.13
Headline 6.3 (7.01) (0.25) (0.11)
CONDENSED UNAUDITED GROUP STATEMENT OF CHANGES IN EQUITY
FOR THE SIX MONTHS ENDED 30 JUNE 2017
ATTRIBUTABLE TO OWNERS OF BRAINWORKS LIMITED
Share Non-
Stated capital and Other Retained controlling
All figures in US$ Note Capital premium reserves profits Total interests Total
SIX MONTHS ENDED 30 JUNE 2017
Balance as at 1 January 2017 - 58 535 508 (934 816) 7 705 220 65 305 912 31 085 243 96 391 155
Total comprehensive income:
(Loss)/profit for the period - - - (5 289 888) (5 289 888) 86 875 (5 203 013)
Other comprehensive income for the
year - - 6 726 - 6 726 4 937 11 663
Total comprehensive income for
the period - - 6 726 (5 289 888) (5 283 162) 91 812 (5 191 350)
Transactions with owners in their
capacity as owners:
Conversion of shares to shares of no par
value 6.6 58 535 508 (58 535 508) - - - - -
Recognition of treasury shares 6.6 (2 750 000) - - - (2 750 000) - (2 750 000)
55 785 508 - - - (2 750 000) - (2 750 000)
Balance as at 30 June 2017 55 785 508 - (928 090) 2 415 332 57 272 750 31 177 055 88 449 805
SIX MONTHS ENDED 30 JUNE 2016
Balance as at 1 January 2016 - 58 535 508 (582 104) 6 647 945 64 601 349 28 971 705 93 573 054
Total comprehensive income:
Loss for the period - - - (1 560 510) (1 560 510) (27 763) (1 588 273)
Other comprehensive income - - 76 167 - 76 167 55 793 131 960
Total comprehensive income for
the period - - 76 167 (1 560 510) (1 484 343) 28 030 (1 456 313)
Transactions with owners in their
capacity as owners:
Balance as at 30 June 2016 - 58 535 508 (505 937) 5 087 435 63 117 006 28 999 735 92 116 741
YEAR ENDED 31 DECEMBER 2016
Balance as at 1 January 2016 - 58 535 508 (582 104) 6 647 945 64 601 349 28 971 705 93 573 054
Total comprehensive income:
Profit for the year - - - 1 057 275 1 057 275 2 371 900 3 429 175
Other comprehensive income - - (352 712) - (352 712) (258 362) (611 074)
Total comprehensive income for
the period - - (352 712) 1 057 275 704 563 2 113 538 2 818 101
Transactions with owners in their
capacity as owners:
Balance as at 31 December 2016 - 58 535 508 (934 816) 7 705 220 65 305 912 31 085 243 96 391 155
CONDENSED UNAUDITED GROUP STATEMENT OF CASH FLOWS
FOR THE PERIOD ENDED 30 JUNE 2017
UNAUDITED UNAUDITED AUDITED
6 months ended 6 months ended Year ended
All figures in US$ 30 June 2017 30 June 2016 31 December 2016
Operating cashflows before working capital changes (884 565) 802 063 4 777 950
Working capital changes
Increase in inventory (803 757) (298 797) (2 255 147)
Increase/(decrease) in trade and other payables 4 042 798 (1 285 396) (3 782 320)
Decrease/(increase) in trade and other recievables 312 994 622 223 (4 112 505)
Cash (utilised in)/generated from operations 2 667 470 (159 907) (5 372 022)
Interest received 42 597 161 776 278 109
Interest paid (1 627 764) (1 552 513) (3 697 165)
Dividends received 108 988 155 648 233 985
Income tax paid (298 267) (432 357) (835 648)
Net cash generated from/(used in) operating activities 893 024 (1 827 353) (9 392 741)
Cash flows from investing activities
Acquisition of investments (289 500) (100) (1 045 000)
Proceeds from disposal of investments - - 45 468
Purchase of property and equipment (1 712 043) (3 305 357) (3 070 558)
Purchases and improvements to investment property (6 370) - (807 449)
Proceeds from disposal of property and equipment 413 334 729 580 803 744
Net cash utilised in investing activities (1 594 579) (2 575 877) (4 073 795)
Cash flows from financing activities
Deposit released from debt service reserve account - - 104 602
Proceeds from borrowings 6 279 405 8 705 974 25 738 629
Repayment of borrowings (6 581 219) (4 320 743) (12 250 796)
Net cash (used in)/generated from financing activities (301 814) 4 385 231 13 592 435
Net (decrease)/increase in cash and cash equivalents (1 003 369) (17 999) 125 899
Exchange gains on cash and cash equivalents 10 602 5 457 12 197
Cash and cash equivalents at beginning of the period 5 593 010 5 454 914 5 454 914
Cash and cash equivalents at end of the period 4 600 243 5 442 372 5 593 010
NOTES TO THE CONDENSED UNAUDITED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 2017
1 GENERAL INFORMATION
Brainworks and its subsidiaries and associates has a diversified portfolio of business interests in hospitality, real estate, financial services, and
energy logistics sectors in Zimbabwe.
Brainworks was incorporated in the Republic of Mauritius on 22 April 2013. The Company is domiciled in the Republic of Mauritius and has its
registered office at c/o Imara Trust Company (Mauritius) Limited, Level 2 Silicone Avenue, Alexander House, 35 Ebène, Cybercity, Republic of
Mauritius. The Company was listed on the Johannesburg Stock Exchange ("JSE") on 13 October 2017.
The Company is the holder of a Category 1 Global Licence under the Mauritius Companies Act 2001 and the Financial Services Act 2007.
2 BASIS OF PREPARATION
The condensed consolidated interim financial statements of the Group ("the condensed interim financial statements") for the six months ended
30 June 2017 have been prepared in accordance with the recognition and measurement principles of International Financial Reporting Standards
("IFRSs"), the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee and Financial Reporting Pronouncements as
issued by the Financial Reporting Standards Committee. The condensed interim financial statements were presented in accordance with the
Listings Requirements of the Johannesburg Stock Exchange and IAS 34 "Interim Financial Reporting".
These condensed interim financial statements have not been audited or reviewed by the Company's auditors.
These condensed interim financial statements were prepared under the supervision of the Finance Director, Peter Saungweme, CA(Z) and were
approved for publication by the Board of Directors on 19 October 2017.
This announcement does not include the financial information required pursuant to paragraph 16A(j) of IAS 34. The full interim report is available
on the issuer's website, at the issuer's registered office and upon request.
3 ACCOUNTING POLICIES
The accounting policies adopted are prepared in accordance with IFRS and are consistent with those adopted in the preparation of the financial
statements for all the prior periods presented. Taxes on income in the interim period are measured using the tax rate that is expected to be
applicable to the full year profit or loss.
There are no new IFRSs or International Financial Reporting Interpretations ("IFRICs") that are effective for the first time in this interim period that
would be expected to have a material effect on the Group's financial statements.
4 ESTIMATES
The preparation of financial statements requires management to make judgements, estimates and assumptions that affect the application of
accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.
In preparing these condensed interim financial statements, the significant judgements made by management in applying the Group's
accounting policies and key sources of estimation uncertainty were the same as those applied to the consolidated interim financial statements
for the period ended 30 June 2016 and the year ended 31 December 2016.
5 SEGMENT REPORT
UNAUDITED
Corporate
Financial and Continuing Discontinued
All figures in US$ Hospitality Real estate services eliminations operations operations Group
Six months ended 30 June 2017
Revenue 21 012 102 2 211 411 795 068 197 459 24 216 040 - 24 216 040
Cost of sales and other related
costs (6 700 874) - (393 473) (668 171) (7 762 518) - (7 762 518)
Gross profit 14 311 228 2 211 411 401 595 (470 712) 16 453 522 - 16 453 522
Operating expenses (14 363 132) (1 653 698) (539 641) (3 422 088) (19 978 559) - (19 978 559)
Share of loss of associates - - - 574 383 574 383 - 574 383
Operating profit/(loss) 507 171 585 211 222 528 (4 270 462) (2 955 552) - (2 955 552)
Net interest (expense)/income (470 622) (141 631) 73 574 (1 373 155) (1 911 834) - (1 911 834)
Profit/(loss) before tax 36 550 443 580 296 102 (5 643 618) (4 867 386) - (4 867 386)
Property and equipment 20 886 916 886 968 200 058 66 625 942 88 599 884 - 88 599 884
Investment property - 86 269 407 375 000 (62 661 802) 23 982 605 - 23 982 605
Goodwill - - - 8 261 050 8 261 050 - 8 261 050
Other assets 11 645 930 8 210 148 4 796 712 8 741 587 33 394 377 - 33 394 377
Borrowings 7 310 657 4 264 518 - 25 743 804 37 318 979 - 37 318 979
Other liabilities 18 359 486 6 546 498 1 428 694 2 134 454 28 469 132 - 28 469 132
UNAUDITED
Corporate
Financial and Continuing Discontinued
All figures in US$ Hospitality Real estate services eliminations operations operations Group
Six months ended 30 June 2016
Revenue 17 987 889 1 854 846 421 087 (593 623) 19 670 199 - 19 670 199
Cost of sales and other related costs (5 932 066) - (205 453) (140 012) (6 277 531) - (6 277 531)
Gross profit 12 055 823 1 854 846 215 634 (733 635) 13 392 668 - 13 392 668
Operating expenses (13 550 852) (1 241 204) (500 252) (985 661) (16 277 969) (160 986) (16 438 955)
Share of profit of associates - - - 378 347 378 347 - 378 347
Operating (loss)/profit (494 873) 705 153 (201 590) (292 826) (284 136) (160 986) (445 122)
Net interest expense (741 401) - - (1 174 280) (1 915 681) - (1 915 681)
Profit/(loss) before tax (1 236 273) 705 153 (201 590) (1 467 107) (2 199 817) (160 986) (2 360 803)
Property and equipment 21 758 846 - 225 003 68 052 267 90 036 116 - 90 036 116
Investment property - 86 897 183 - (64 076 642) 22 820 541 - 22 820 541
Goodwill - - - 8 261 050 8 261 050 - 8 261 050
Other assets 10 076 347 3 924 931 1 986 716 11 146 658 27 134 652 - 27 134 652
Borrowings 8 075 666 157 870 - 19 091 532 27 325 068 - 27 325 068
Other liabilities 21 720 646 6 681 398 422 335 (13 829) 28 810 550 - 28 810 550
AUDITED
Corporate
Financial and Continuing Discontinued
All figures in US$ Hospitality Real estate services eliminations operations operations Group
Year ended 31 December 2016
Revenue 43 646 340 4 348 774 1 072 105 (1 003 376) 48 063 843 45 415 48 109 258
Cost of sales and other related costs (13 014 777) - (748 907) (544 304) (14 307 988) (21 169) (14 329 157)
Gross profit 30 631 563 4 348 774 323 198 (1 547 680) 33 755 855 24 246 33 780 101
Operating expenses (16 001 963) (2 488 541) (1 143 028) (11 527 992) (31 161 524) (54 184) (31 215 708)
Share of loss of associates - - - (65 853) (65 853) - (65 853)
Operating profit(loss) 5 588 619 1 728 038 (853 053) 1 327 594 7 791 198 (129 325) 7 661 873
Net interest (expense)/income (753 174) (53 871) 156 344 (2 768 355) (3 419 056) - (3 419 056)
Profit/(loss) before tax 4 835 445 1 674 167 (696 709) (1 440 761) 4 372 142 (129 325) 4 242 817
Property and equipment 21 270 729 973 145 235 406 66 990 647 89 469 927 - 89 469 927
Investment property - 86 263 037 - (62 086 802) 24 176 235 - 24 176 235
Goodwill - - - 8 261 050 8 261 050 - 8 261 050
Other assets 12 346 085 7 777 276 4 711 315 10 724 137 35 558 813 - 35 558 813
Borrowings 8 269 540 4 258 748 - 22 450 920 34 979 208 - 34 979 208
Other liabilities 18 687 477 6 217 048 1 364 351 (173 214) 26 095 662 - 26 095 662
6 EARNINGS PER SHARE
UNAUDITED UNAUDITED AUDITED
6 months ended 6 months ended Year ended
All figures in US$ 30 June 2017 30 June 2016 31 December 2016
6.1 Basic earnings/(loss) per share
From continuing operations (cents) (6.99) (0.19) 0.14
From discontinued operations (cents) - (0.01) (0.01)
(6.99) (0.20) 0.13
AUDITED
UNAUDITED UNAUDITED Year ended
6 months ended 6 months ended 31 December 2016
All figures in US$ 30 June 2017 30 June 2016
6.2 Diluted earnings/(loss) per share (cents)
From continuing operations (cents) (6.99) (0.19) 0.14
From discontinued operations (cents) - (0.01) (0.01)
(6.99) (0.20) 0.13
6.3 Headline earnings/(loss) per share
From continuing operations (cents) (7.01) (0.24) (0.10)
From discontinued operations (cents) - (0.01) (0.01)
(7.01) (0.25) (0.11)
6.4 Diluted headline earnings/(loss) per share
From continuing operations (cents) (7.01) (0.24) (0.10)
From discontinued operations (cents) - (0.01) (0.01)
(7.01) (0.25) (0.11)
6.5 Reconciliation of earnings used in calculating earnings per share
Earnings attributable to owners of parent arising from:
Continuing operations (5 289 888) (1 492 365) 1 131 921
Discontinued operations - (68 145) (74 646)
Total (loss)/earnings attributable to owners of parent (5 289 888) (1 560 510) 1 057 275
Adjusted to headline earnings as follows:
Profit from disposal of subsidiary - - (1 176 165)
Fair value (loss)/gain on investment property - - (886 893)
Recycled foreign currency translation reserve (11 663) (131 960) (755 651)
Profit from disposal of property and equipment (5 100) (282 336) (281 992)
Impairment of property and equipment - - 103 037
Tax effect of headline earnings adjustments - - 201 843
Total non-controlling effect of adjustments 4 937 55 859 839 683
Headline loss attributable to owners of parent (5 301 714) (1 918 947) (898 863)
AUDITED
UNAUDITED UNAUDITED Year ended
6 months ended 6 months ended 31 December
All figures in Number 30 June 2017 30 June 2016 2016
6.6 Weighted average number of shares in issue
Shares at the beginning of the period 863 061 948 863 061 948 863 061 948
Share consolidation* (776 755 753) - -
Treasury shares (post consolidation)# (10 680 556) (77 750 000) (77 750 000)
Shares at the end of the period 75 625 639 785 311 948 785 311 948
Weighted average number of shares for basic earnings per share 75 625 639 785 311 948 785 311 948
Weighted average number of shares for diluted earnings per share 75 625 639 785 311 948 785 311 948
* - In preparation of Brainworks listing on the Johannesburg Stock Exchange, the Directors during the period under review resolved to consolidate
the number of shares in issue on the basis of 1 new share for every 10 previously held.
# - The treasury shares relates to shares in Brainworks which are held by Brainworks Capital Management (Private) Limited ("BCM"). BCM is
a wholly owned subsidiary of the Company. All the treasury shares are held through a nominee company called Adcone Holdings SA ("the
nominee").
7 775 000 of the treasury shares arose from a 2015 Group re-organisation exercise which culminated in Brainworks being the ultimate holding
company, owning all the issued shares in BCM. BCM had hitherto been the holding company, holding all the issued shares of the Company. To
achieve the Group re-organisation, the shareholders of BCM gave up their shares in BCM to Brainworks as consideration, for which in return they
received an equivalent number of shares with the same rights in Brainworks.
At the time of the Group re-organisation, BCM had 77 750 000 (before 2017 share consolidation) of its own ordinary shares held as treasury
shares, which shares were given up to Brainworks. As consideration, BCM was issued with 77 775 000 ordinary shares with a par value of
US$0.0001 each in Brainworks, which shares BCM are holds through the nominee.
2 905 555 of the treasury shares were acquired by BCM in January 2017 from the former Chief Executive Offcer, in exchange for a receivable of US$2 750
000 which was due to BCM, which receivable BCM had impaired in full during the 2015 financial reporting period as prospects of recovery were
in significant doubt. The amount was due from Kestrel International Corporation (Private) Limited.
7 SUBSEQUENT EVENTS
7.1 Listing on the Johannesburg Stock Exchange
Subsequent to the reporting date, Brainworks Limited was listed on the Johannesburg Stock Exchange ("JSE") on 13 October 2017 under the
abbreviated name: "Brainwrks", JSE share code: BWZ and ISIN: MU0548S00000.
7.2 Disposal of the Group's 51% in Coporeti Support Services (Private) Limited
On 1 July 2017, the Group disposed of its 51% shareholding in Coporeti Support Services (Private) Limited, t/a GetCash to MyBucks, a Luxembourg
company listed on the Frankfurt Stock Exchange. The investment in GetCash had previously been accounted for as an associate notwithstanding
the Group's 100% shareholding as it had been concluded that the Group did not have control. The disposal is still subject to approval by the
regulatory authorities in Zimbabwe.
8 CONTINGENT LIABILITIES
8.1 Valued added and withholding tax claim against African Sun Limited
The Zimbabwe Revenue Authority ("ZIMRA") had lodged a claim against African Sun Limited for valued added tax ("VAT") and withholding tax
of US$1.57 million and US$0.29 million respectively relating to food and beverages sold to foreign guests before the introduction of VAT on all
foreign guests revenue and withholding tax on foreign tour operators.
The Ministry of Finance and Economic development indicated that the VAT claim for all hotel operations had been waived and Statutory
Instrument 97 of 2017 was issued to give legal effect to the pronouncement.
8.2 Valued added tax claim against Brainworks Capital Management (Private) Limited
The Group has a claim from ZIMRA against BCM for VAT in respect of certain invoices issued by BCM in relation to advisory services allegedly
provided as part of the proposed indigenisation programme for the mining sector in the prior years. The mandate was based on a success fee,
performance of which was not accepted by the principals and the pro-forma invoices issued by BCM were never paid and cancelled. BCM has
obtained legal advice that it is not liable for the VAT claim. The matter is currently sub judice at the Fiscal Tax Court. If BCM is unsuccessful in its
defence against the claim, this could result in BCM being required to pay principal VAT amount of US$3.8 million, together with a penalty of
US$0.8million and interest of US$1.7 million to ZIMRA.
There were no changes to the other contingencies reported in the financial statement for the year ended 31 December 2016.
9 GOING CONCERN
As at 30 June 2017, the Group's current liabilities exceeded its current assets by US$16.08 million, with loans contributing a significant portion.
The Group intends to raise capital via a share placement and disposal of the existing treasury shares to raise funding for repayment of some
of the maturing debt, simultaneously engaging Lenders for debt restructuring. The Group is also considering issuing a convertible loan note.
Interest in the convertible instrument has been received from certain investors. The Board is confident that the combined impact of these
initiatives would enable the Group to fully discharge its obligations as they fall due.
The Board has thus not identified any events or conditions that individually or collectively cast significant doubt on the ability of the Company
and/or the Group to continue as a going concern.
10 BOARD CHANGES
Mr. G Manyere and Mr W. Kambwanji stepped down as the Chief Executive Officer and the Chief Finance Officer of the Company respectively.
Mr Manyere and Mr Kambwanji resigned with effect from 31 January 2017 and 31 March 2017 respectively. They are now both non-executive
directors. They were replaced by Mr B. Childs and Mr P. Saungweme respectively on the same dates.
11 DIVIDEND
No dividend was declared in respect of the six months ended 30 June 2017.
CORPORATE INFORMATION
NON-EXECUTIVE DIRECTORS REGISTERED OFFICE:
Simon F.W VILLAGE (Chairman) C/o Imara Trust Company (Mauritius) Limited
Martin J. WOOD Level 2 Alexander House, Silicone Avenue,
George MANYERE Ebène Cybercity,
Walter T. KAMBWANJI Republic of Mauritius
Richard G. MUIRIMI Registration number: 115883 C1/GBL
George S.J. BENNETT JSE Share code: BWZ
Audrey M. MOTHUPI ISIN: MU0548S00000
Richard N. CHARRINGTON
INDEPENDENT AUDITORS:
EXECUTIVE DIRECTORS PricewaterhouseCoopers
Brett I. CHILDS (Chief Executive Officer) Business Registration Number: F07000530,
Peter SAUNGWEME (Chief Finance Officer) 18 CyberCity, Ebène,
Réduit 72201,
LEGAL ADVISORS Republic of Mauritius
Gill Godlonton and Gerrans
7th Floor, Beverly Court, PricewaterhouseCoopers Inc
100 Nelson Mandela Avenue, 2 Eglin Road,
Harare, Zimbabwe Sunninghill 2157,
Johannesburg,
Dube, Manikai and Hwacha South Africa
7th Floor, Mercury House,
Sam Nujoma Street/Robert Mugabe Road, SPONSOR:
24 George Silundika Avenue, Questco Corporate Advisory Proprietary Limited
Harare, Zimbabwe 1st Floor, Yellowwood House,
Ballywoods Office Park,
Atherstone & Cook 33 Ballyclare Drive,
119 Josiah Chinamano Avenue, Bryanston 2191,
Harare, Zimbabwe Johannesburg,
South Africa
Evershed Sutherlands
Suite 310, 3rd Floor, Barkly Wharf, BANKERS:
Le Caudan Waterfront, AfrAsia Bank Limited
Port Louis, Mauritius 4th Floor, NeXTeracom Tower III,
Ebène,
COMPANY SECRETARY Republic of Mauritius
Imara Trust Company (Mauritius) Limited
Level 2 Alexander House, Silicone Avenue,
Ebène Cybercity,
Republic of Mauritius
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