ALVIVA HOLDINGS LIMITED - Interim results for the six months ended 31 December 2017

Release Date: 05/03/2018 16:17
Code(s): AVV
 
Wrap Text
Interim results for the six months ended 31 December 2017

ALVIVA HOLDINGS LIMITED
incorporated in the Republic of South Africa
Registration number: 1986/000334/06
ISIN: ZAE000227484
Share code: AVV
(“Alviva� or “the company� or “the group�)
INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 DECEMBER 2017
COMMENTARY
INTRODUCTION 
The board of directors presents Alviva’s unreviewed condensed consolidated interim financial results for the six months ended 31 December 2017.  
OVERVIEW 
The group performed as expected in tough market conditions. We had cautioned in our previous profit announcement for the year ended  30 June 2017 that we anticipated this period to be difficult due to the uncertainty created in the political arena. Notwithstanding the market, the group has delivered excellent returns to shareholders largely due to the quality of our recent investments, mainly the acquisition of the balance of Datacentrix Holdings Limited (“Datacentrix�) in February 2017 along with the investment into our share repurchase programme. These acquisitions are essentially responsible for the healthy improvement in the returns to shareholders for the period. 
Further acquisitions have been finalised in the period (detailed below) and these will start to contribute more meaningfully in the ensuing reporting periods.
FINANCIAL RESULTS
The group increased revenue for the six months to December 2017, albeit by a small percentage.
Demand for infrastructural products was considerably down compared to the prior period and, although the enterprise product set remained well supported, there was a decrease in the income earned from this section of the market across all segments.
Gross profit margins increased, and we invested in certain areas of the business from which we expect future growth, which resulted in increased expenses. This left the group’s operating profit marginally down at R350 million. In addition, amortisation charges in the six months to  31 December 2017 increased due to the charges related to intangibles recognised on business combinations. 
Headline earnings per share was up 25% to 133,0 cents per share (cps) (H1 2017: 106,1 cps).
SEGMENT PERFORMANCE
The ICT Distribution segment increased revenue by 4% and EBITDA by 7%.
–  The segment has traded well in a difficult market.
–  Working capital was well managed throughout the period, 
   resulting in reduced finance costs. 
The Services and Solutions segment experienced many delayed projects and were unable to repeat some of the large projects executed in the comparable period, even though the activity levels and quote registers have increased ahead of expectation over the period. Corporate and government awards appear to have been delayed due to the ‘wait and see approach’. 
Centrafin (Financial Services segment) continued to manage its book very well during the tougher period. Centrafin has recently undergone a refresh of its brand and, in the process, moved to new premises in Waterfall City, Midrand. We expect that this may have a short-term diminution in the return of the entity, but we are confident that we are positioning the business for growth in the longer term. 
INVESTMENT ACTIVITIES AND FINANCIAL POSITION
Cash generated by operating activities in the six months to 31 December 2017 was still healthy at R352 million. 
This allowed us to invest R151 million in new businesses, repurchase a further R96 million of Alviva shares, and pay the annual dividend of R40 million.
ACQUISITIONS
SINTREX INTEGRATION SERVICES PROPRIETARY LIMITED (“Sintrex�)
Effective 31 October 2017, Alviva, through its subsidiary company DCT Holdings Proprietary Limited (“DCT�), entered into an agreement to acquire 51% of the shareholding in Sintrex for R102 million, and has an option to acquire a further 24% within a two-year period following the effective date of the transaction. Sintrex is an infrastructure management company, based in South Africa, providing end-to-end IT solutions and services. Sintrex develops IT products, services and solutions that, along with global partnerships, provide clients with the visibility and performance insight into IT infrastructure management, network management and monitoring solutions. 
The Sintrex acquisition will not only add a specialised products and services offering, but also a higher margin business to the group. 
GRIDCARS PROPRIETARY LIMITED (“Gridcars�) 
On 31 August 2017, Alviva, through its 51%-held subsidiary Solareff Proprietary Limited, subscribed for shares in Gridcars to the value of R3 million, representing 75% of the total issued equity. Gridcars is a Pretoria-based developer of electric vehicle charge-point software management systems and supplier of charge points. Alviva believes that growing a network of charge points in South Africa will be the enabler of a carbon-free transport system. This acquisition forms part of our renewable energy business strategy.
VH FIBRE OPTICS PROPRIETARY LIMITED (“VH Fibre�)
Effective 30 November 2017, Alviva, through its subsidiary company DCT, acquired 100% of the equity of VH Fibre for a total purchase consideration  of R110 million. VH Fibre specialises in supplying fibre-to-the-home and fibre-to-the-building passive network solutions to its customers and has the exclusive Prysmian Group distribution agreement for South Africa.
This acquisition will give us access to the fibre infrastructure business that we had not really addressed properly and will enhance our margin in these product sets.
CHANGES TO THE BOARD AND COMMITTEES
RESIGNATION AND APPOINTMENT OF NEW CHAIRMAN
Following the resignation of Mr AJ Fourie, the board announced that Mr A Tugendhaft, the then current deputy chairman, had been appointed as the new non-executive chairman of Alviva. The appointment was effective 3 October 2017. Mr Tugendhaft has had a long-standing association with the company, having served the board in various capacities including non-executive director, deputy chairman and member of the remuneration committee. The board thanks Mr Fourie for his phenomenal contribution to the group over the past twenty-five years and wishes him all of the best in his future endeavours. The succession planning process, that started two years ago, has therefore been successfully implemented.
APPOINTMENT OF A LEAD INDEPENDENT DIRECTOR
Following the annual general meeting held on 23 November 2017, Mr B Sibiya, the lead independent director, opted not to stand for re-election as a director. Ms P Natesan (38) was appointed as an independent non-executive director and lead independent director with effect from 6 December 2017. Ms Natesan was also appointed as a member of the audit and risk committee and the social and ethics committee.
Ms Natesan holds the following qualifications – BCom (Cum Laude), BCom (Honours), Chartered Accountant (SA). She joined the Institute of Directors in Southern Africa (“IoDSA�) in 2010 as senior governance specialist and has served as an executive director of the IoDSA since September 2014. She serves on various committees and holds various memberships including: member of the South African Institute of Chartered Accountants, King Committee on Corporate Governance, King IV Task Team, the Institute of Directors Southern Africa and the Institute of Directors UK.
COMPOSITION OF BOARD AND COMMITTEES
Following the appointment of Ms Natesan, the board and committees of the board are composed as follows:
BOARD OF DIRECTORS
Mr A Tugendhaft – Chairman
Ms P Natesan – Lead independent director
Ms SH Chaba – Independent non-executive director
Ms N Medupe – Independent non-executive director
Mr P Spies – Executive director – Chief executive officer
Mr RD Lyon – Executive director – Chief financial officer
Audit and risk committee
Ms M Medupe – Chairman 
Ms SH Chaba – Member 
Ms P Natesan – Member 
Remuneration committee
Ms SH Chaba – Chairman
Ms N Medupe – Member
Mr A Tugendhaft – Member
Social and ethics committee
Ms SH Chaba – Chairman
Ms P Natesan – Member
Mr R Nkuna – Member
EVENTS AFTER THE REPORTING PERIOD
With effect 31 January 2018, Alviva, through its subsidiary DCT Holdings Limited, acquired a 72% shareholding in Obscure Enterprises Proprietary Limited (“Obscure�). Obscure provides innovative information cyber security technology and solutions to system integrators. Through the acquisition, Alviva gains access to prominent cyber security vendors, scarce cyber security skills and existing customers. The transaction is now unconditional. 
Alviva, through its subsidiary Datacentrix Holdings Limited, has acquired a 70% shareholding in DG Store Proprietary Limited (“DG Store�).  DG Store provides hardware and software procurement and consulting solutions to its clients, including specialised services such as product lifecycle management, highly secure cloud and hybrid data storage solutions as an on-demand backup service and cloud computing. The transaction is subject to a number of conditions precedent that are expected to be fulfilled during March 2018, including the approval of the competition commission.
DIVIDENDS
In line with previous years, no interim dividend is proposed for the period under review.
PROSPECTS AND STRATEGIC INITIATIVES
The outlook for the year to 30 June 2018 is positive with earnings per share expected to be above those of June 2017. Our new acquisitions will hopefully contribute positively to the group and the renewed confidence being felt in the commercial arena should translate into greater business activity than that experienced in 2017.
For and on behalf of the board
A Tugendhaft                          P Spies    
Chairman                              Chief executive officer
CONDENSED CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
                           Half year    Half year     Full year
                              31 Dec       31 Dec        30 Jun
                                2017         2016          2017
                          Unreviewed   Unreviewed       Audited
                               R’000        R’000         R’000
Revenue                    6 427 676    6 345 738    12 811 498 
Cost of sales             (5 278 166)  (5 219 096)  (10 538 710)
Gross profit               1 149 510    1 126 642     2 272 788 
Operating expenses          (746 943)    (717 065)   (1 448 670)
Selling expenses             (28 945)     (35 546)     (103 738)
Employee benefit expenses   (610 264)    (577 513)   (1 156 831)
Administration expenses     (106 140)     (99 764)     (186 503)
Gain on discounting of 
 finance lease agreements      1 565        2 248         3 702
Loss on foreign exchange      (3 159)      (6 490)       (5 300)
EBITDA *                     402 567      409 577       824 118 
Depreciation and 
 amortisation                (52 190)     (44 996)      (90 594)
Operating profit before 
 interest                    350 377      364 581       733 524
Net finance costs            (62 764)     (54 205)     (107 037)
Investment income             17 426       14 718        39 453
Finance costs                (80 190)     (68 923)     (146 490)
Profit before tax            287 613      310 376       626 487
Income tax expense           (80 586)     (96 031)     (182 494)
Net profit for the period    207 027      214 345       443 993 
  –  Owners of the company   208 993      178 746       405 277 
  –  Non-controlling 
      interests               (1 966)      35 599        38 716
Other comprehensive income            
  –  Items that can be 
      reclassified to profit 
      or loss net of tax:     (1 701)       3 353         3 028
Exchange differences from 
 translating foreign 
 operations                   (1 153)       1 031           758
Cash flow hedge                 (548)       2 322         2 270
Total comprehensive income 
 for the period              205 326      217 698       447 021 
  –  Owners of the company   207 292      182 099       408 305 
  –  Non-controlling 
      interests               (1 966)      35 599        38 716 
* Earnings before interest, taxation, depreciation and 
  amortisation.
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
                              31 Dec       31 Dec        30 Jun
                                2017         2016          2017
                          Unreviewed   Unreviewed       Audited
                               R’000        R’000         R’000
ASSETS
Non-current assets         1 307 152    1 121 779     1 079 064
Property, plant and 
 equipment                   108 475      118 203       104 661
Intangible assets and 
 goodwill                    693 408      486 447       462 703
Finance lease receivables    440 380      429 206       434 581
Deferred tax                  64 889       87 923        77 119
Current assets             3 946 956    3 808 788     3 670 358
Inventory (note 6)           931 920      847 947       751 702
Derivative financial asset         –        1 800         3 287
Trade and other 
 receivables               2 486 594    2 247 448     2 304 629
Finance lease receivables    251 505     222 640        210 972
Income tax receivable             38       6 430         10 008
Cash and cash equivalents    276 899     482 523        389 760
Total assets               5 254 108   4 930 567      4 749 422
EQUITY AND LIABILITIES            
Capital and reserves       2 135 574   2 484 816      2 020 223
Stated capital                 1 646     122 988         43 359
Treasury shares             (107 824)    (43 047)       (98 492)
Other equity reserves         35 713      37 139         36 866
Cash flow hedge reserve            –         600            548
Retained earnings          2 145 604   2 037 060      2 015 491
Non-controlling interests    60 435      330 076         22 451
Non-current liabilities     667 208      479 928        585 642
Interest-bearing 
 liabilities                543 822      403 077        510 145 
Non-interest-bearing 
 liabilities                 39 841            –              –
Deferred revenue             28 575       14 144         39 320 
Deferred tax                 54 970       62 707         36 177
Current liabilities       2 451 326    1 965 823      2 143 557 
Trade and other 
 payables                 2 250 356    1 730 206      1 974 752 
Interest-bearing 
 liabilities                  6 199          141          5 572
Non-interest-bearing 
 liabilities                 25 555            –              –
Deferred revenue            155 026      205 802        148 818
Income tax payable           14 190       29 674         14 415 
Total equity and 
 liabilities              5 254 108    4 930 567      4 749 422 
Capital management            
Net asset value per 
 share (cents)              1 341,1      1 292,3        1 251,2 
Net tangible asset value 
 per share (cents)            893,0      1 000,6          961,4 
Working capital management            
Investment in working 
 capital (R'000)          1 013 132    1 159 387        932 761 
Liquidity and solvency 
Debt to equity (%)             26,5         18,7           25,8 
Current ratio (excluding 
 inventory in transit 
 and work in progress)         1,63         2,00           1,74 
Acid test (excluding 
 inventory in transit 
 and work in progress)         1,27         1,60           1,42 
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
                           Half year    Half year     Full year
                              31 Dec       31 Dec        30 Jun
                                2017         2016          2017
                          Unreviewed   Unreviewed       Audited
                               R’000        R’000         R’000
Opening balance            2 020 223    2 409 517     2 409 517 
Ordinary shares 
 repurchased                 (86 239)     (70 602)     (209 432)
Treasury shares purchased     (9 328)      (3 756)            –
Profit for the period        207 027      214 345       443 993 
Other comprehensive income    (1 701)       3 353         3 028 
  –  Foreign currency 
      translation reserve 
      movements               (1 153)       1 031           758
  –  Cash flow hedge 
      reserve movements         (548)       2 322         2 270
Net movements in 
 non-controlling interest     41 042     (34 694)      (598 106)
Equity-accounted 
 share-based payment 
 reserve movements             4 212           –          4 570 
Dividend paid                (39 662)    (33 347)       (33 347)
Closing balance            2 135 574   2 484 816      2 020 223
Attributable to:            
Owners of the company      2 075 139   2 154 740      1 997 772
Non-controlling 
 interests                    60 435     330 076         22 451
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS  
                           Half year    Half year     Full year
                              31 Dec       31 Dec        30 Jun
                                2017         2016          2017
                          Unreviewed   Unreviewed       Audited
                               R’000        R’000         R’000
Profit before tax            287 613      310 376       626 487 
Adjusted for:            
Interest income              (17 426)     (14 718)      (39 453)
Finance costs                 80 190       68 923       146 490 
Non-cash flow items           59 123       42 074        89 845 
Changes in working capital   (57 313)     184 632       436 434 
Cash generated by 
 operating activities        352 187      591 287     1 259 803
Net finance costs            (62 764)     (54 205)     (107 037)
Interest income               17 426       14 718        39 453 
Finance costs                (80 190)     (68 923)     (146 490)
Tax paid                     (77 559)     (81 458)     (202 484)
                             211 864      455 624       950 282 
Cash flows from 
 investing activities            
Property, plant and 
 equipment acquired          (18 989)     (18 597)      (33 278)
Proceeds on disposals of 
 property, plant and 
 equipment                       585        2 400         8 396 
Acquisition of intangible 
 assets                      (15 215)      (3 275)       (5 542)
Acquisition of 
 subsidiaries               (150 669)      (3 500)            –
Net investment in 
 finance leases receivable   (44 842)     (65 163)      (58 870)
                            (229 130)     (88 135)      (89 294)
Cash flows from 
 financing activities            
Interest-bearing 
 liabilities raised           36 000       50 000       150 000 
Interest-bearing 
 liabilities repaid           (7 703)        (353)       (4 007)
Non-interest-bearing 
 liabilities raised              400            –             –
Derivative financial 
 liability paid                    –      (16 154)            –
Repurchase of ordinary 
 shares                      (95 567)     (74 358)     (209 433)
Non-controlling interest 
 acquired                          –      (34 694)     (598 107)
Dividends paid to 
 shareholders                (39 662)     (33 347)      (33 347)
                            (106 532)    (108 906)     (694 894)
Increase in net cash, 
 cash equivalents and 
 overdrafts                 (123 798)    258 583        166 094 
Net cash and cash 
 equivalents acquired 
 from business 
 combinations                 10 199           –              –
Net cash and cash 
 equivalents at 
 beginning of reporting 
 period                      389 760     222 908        222 908 
Effects of exchange rate 
 changes on the balance 
 of cash held in 
 foreign currencies              738       1 032            758 
Net cash and cash 
 equivalents at end of 
 reporting period            276 899     482 523        389 760 
SEGMENT ANALYSIS
                           Half year    Half year     Full year
                              31 Dec       31 Dec        30 Jun
                                2017         2016          2017
                          Unreviewed   Unreviewed       Audited
                               R’000        R’000         R’000
REVENUE            
ICT Distribution           4 954 474    4 751 162     9 537 040 
Services and Solutions     1 757 821    1 772 964     3 539 563 
Financial Services            87 476       85 887       172 237 
Less: Intra-segmental 
 revenue                    (372 095)    (264 275)     (437 342)
                           6 427 676    6 345 738    12 811 498 
EBITDA *            
ICT Distribution             224 894      210 631       422 636 
Services and Solutions       124 051      134 745       271 979 
Financial Services            61 408       62 394       116 831 
Group Central Services        (7 786)       1 807        12 672 
                             402 567      409 577       824 118 
RECONCILIATION OF PROFIT            
Segment EBITDA               402 567      409 577       824 118 
Depreciation and 
 amortisation                (52 190)     (44 996)      (90 594)
Net finance costs            (62 764)     (54 205)     (107 037)
Profit before tax            287 613      310 376       626 487 
NET OPERATING ASSETS            
ICT Distribution           1 001 659    1 114 464     1 019 142 
Services and Solutions       598 605      801 167       499 213 
Financial Services           172 975      176 304       197 254 
Group Central Services       362 335      392 881       304 614 
                           2 135 574    2 484 816     2 020 223 
* Earnings before interest, taxation, depreciation and 
  amortisation.
The segments of the entity are based on the information reported to the chief operating decision maker (CEO) and has not changed from the prior reporting period.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL RESULTS  
1.  STATEMENT OF COMPLIANCE, BASIS OF PREPARATION AND ACCOUNTING 
    POLICIES   
    The unreviewed condensed consolidated interim financial 
    results for the six months ended 31 December 2017 have been 
    prepared in accordance with the group’s accounting policies 
    under the supervision of the chief financial officer, Mr RD 
    Lyon CA, and complies with IAS 34: Interim Financial 
    Reporting, the framework concepts and the measurement and 
    recognition requirements of International Financial Reporting 
    Standards (“IFRS�), SAICA financial reporting guides as 
    issued by the Accounting Practices Committee and Financial 
    Reporting Pronouncements as issued by the Financial Reporting 
    Standards Council, the JSE Limited Listings Requirements and 
    the requirements of the Companies Act of South Africa (Act 71 
    of 2008), as amended. All new standards and interpretations 
    that came into effect during the period were assessed and 
    adopted with no material impact to the unreviewed 
    consolidated interim financial results. The accounting 
    policies, inclusive of reasonable judgements and assessments, 
    applied in the unreviewed condensed consolidated interim 
    financial results, are consistent with those applied in the 
    preparation of the audited consolidated annual financial 
    statements for the year ended 30 June 2017 and comply with 
    IFRS.
    The unreviewed condensed consolidated financial results 
    comprise the condensed statement of financial position at 
    31 December 2017 and the condensed statements of profit or 
    loss and other comprehensive income, changes in equity and 
    cash flows for the period then ended.
    The unreviewed condensed consolidated interim financial 
    statements do not include all the information and disclosures 
    required in the annual financial statements, and should be 
    read in conjunction with the group’s audited consolidated 
    annual financial statements for the year ended 30 June 2017.
    Neither the unreviewed condensed consolidated interim 
    financial results for the six months ended 31 December 2016, 
    nor this set of condensed financial information and 
    disclosure, have been reviewed or audited by the company’s 
    auditors, SizweNtsalubaGobodo Inc. The directors take full 
    responsibility for the preparation of this condensed report. 
    Any reference to future financial performance included in 
    this announcement has not been reviewed or reported on by the 
    company’s auditors.
    The unreviewed condensed consolidated interim financial 
    results of the group are prepared as a going concern on a 
    historical basis except for certain financial instruments, 
    which are stated at fair value as applicable.
    Core earnings per share is a non-IFRS measure, which is part 
    of the accounting policies of the group, and is based on 
    headline earnings per share adjusted to exclude amortisation 
    charges of intangible assets recognised on business 
    combinations, and related transaction costs.
2.  FINANCIAL REVIEW
                           Half year    Half year     Full year
                              31 Dec       31 Dec        30 Jun
                                2017         2016          2017
                          Unreviewed   Unreviewed       Audited
                               R’000        R’000         R’000
    PERFORMANCE PER 
     ORDINARY SHARE 
    (CENTS) 
    Basic and diluted 
     earnings per ordinary 
     share            
     –  Basic earnings per 
         ordinary share        133,2        106,5         244,2 
     –  Diluted basic 
         earnings per 
         ordinary share        131,2        106,5         243,5 
    Basic and diluted 
     headline earnings 
     per ordinary share             
     –  Basic headline 
         earnings per 
         ordinary share        133,0        106,1         243,9 
     –  Diluted headline 
         earnings per 
         ordinary share        131,0        106,1         243,2 
    Core and diluted core 
     earnings per ordinary 
     share             
     –  Core earnings 
         per ordinary share    142,8        110,2         256,3 
     –  Diluted core 
         earnings per 
         ordinary share        140,7        110,2         255,6 
    Dividend cover               5,3          5,4          12,2 
    RETURNS (%) 
    Gross profit                17,9         17,8          17,7 
    Operating expenses         (11,6)       (11,3)        (11,3)
    EBITDA *                     6,3          6,5           6,4 
    Operating profit before 
     interest and tax            5,5          5,7           5,7 
    Effective tax rate **       28,0         30,9          29,1 
    Net profit                   3,2          3,4           3,5 
    Return on equity            20,5         16,9          19,9 
     * Earnings before interest, taxation, depreciation and 
       amortisation.
    ** Based on profit before tax excluding share of profit of 
       equity-accounted investee.
3.  RECONCILIATION OF HEADLINE AND CORE EARNINGS
                           Half year    Half year     Full year
                              31 Dec       31 Dec        30 Jun
                                2017         2016          2017
                          Unreviewed   Unreviewed       Audited
                               R’000        R’000         R’000
    Earnings attributable 
     to ordinary 
     shareholders            208 993      178 746       405 277 
    Profit on sale of 
     property, plant and 
     equipment net of tax       (408)        (688)         (618)
    Profit on sale of 
     property, plant and 
     equipment                  (567)        (955)         (858)
    Less: Tax thereon            159          267           240 
    Headline earnings        208 585      178 058       404 659 
    Acquisition costs 
     net of tax                1 029            –         2 598
    Amortisation of 
     intangible assets 
     net of tax               14 454        6 998        17 997
    Core earnings            224 068      185 056       425 254
    Number of ordinary 
     shares in issue ('000) 
    – Total number of 
       shares in issue *     154 731      166 733       159 673 
    – Weighted average 
       number of shares 
       in issue *            156 867      167 858       165 944 
    – Weighted average 
       number of shares in 
       issue for purpose 
       of dilution*          159 252      167 858       166 417 
    * Adjusted for treasury shares.
4.  ANALYSIS OF GOODWILL
                           Half year    Half year     Full year
                              31 Dec       31 Dec        30 Jun
                                2017         2016          2017
                          Unreviewed   Unreviewed       Audited
                               R’000        R’000         R’000
    Opening balance          347 846      347 846       347 846 
    Business combination 
     acquisitions            113 039            –             –
    Closing balance          460 885      347 846       347 846 
    Business combination 
     acquisitions            
    Gridcars Proprietary 
     Limited                   2 772            –             –
    Sintrex Integration 
     Services Proprietary 
     Limited                  61 426            –             –
    VH Fibre Optics 
     Proprietary Limited      48 841            –             –
                             113 039            –             –
5.  BUSINESS COMBINATIONS
    5.1  Sintrex Integration Services Proprietary Limited 
        (“Sintrex�)
         On 31 October 2017, Alviva, through its subsidiary DCT 
         Holdings Proprietary Limited, obtained control of 
         Sintrex by acquiring a 51% interest in the issued stated 
         capital and voting rights of the company.
         Sintrex is an infrastructure management company 
         providing end-to-end IT solutions and related services. 
         In terms of the strategy adopted by the group, the board 
         of directors identified the solutions offering of 
         Sintrex as a complementary service line offering to 
         current and future customers as well as synergistic end-
         to-end solutions within the current spectrum of services 
         of the group.    
         In the two months to the reporting date, Sintrex 
         contributed revenue of R14,7 million and net profit of 
         R1,1 million to the group’s results. If the acquisition 
         had occurred at the beginning of the reporting period, 
         Sintrex would have contributed revenue of R43,3 million 
         and a net profit of R1,7 million to the group’s results.
         The total consideration of R102,1 million was settled in 
         cash by way of electronic transfer during November 2017.
         The transaction meets the definition of a business 
         combination as set out in IFRS 3: Business Combinations.
         The carrying amounts of the identifiable assets and 
         liabilities included in the condensed consolidated 
         interim financial statements of Alviva immediately 
         before the acquisition were as follows:
                                     Fair value     Previously
                                     recognised     recognised
                                             on       carrying
                                    acquisition        amounts
                                          R’000          R’000
         Property, plant and 
          equipment                       5 443          5 443 
         Intangible assets               87 531          1 395 
         Other financial assets             775            775 
         Inventory                           72             72 
         Deferred tax                     2 009          2 009 
         Trade and other 
          receivables                     9 273          9 273 
         Cash and cash equivalents       12 388         12 388 
         Total assets                   117 491         31 355 
         Other financial liabilities       (380)          (380)
         Deferred tax on intangible 
          asset : customer 
          relationship                  (24 429)             –
         Trade and other payables       (10 351)       (10 351)
         Income tax payable              (2 708)        (2 708)
         Total liabilities              (37 868)       (13 439)
         Identifiable net assets         79 623         17 916 
         Non-controlling interest       (38 991)   
         Acquirer's interest              40 632    
         Purchase consideration         102 058    
         Goodwill on acquisition          61 426    
         CASH FLOW INFORMATION      
         Cash and cash equivalents 
          acquired                       12 388   
         The total intangible assets acquired are classified as 
         customer relationships due to the fact that the 
         Sinteligent system, although being separately 
         identifiable, has no reliable determinable fair value.    
         The customised software is continuously updated to meet 
         the requirements of specific customers, which is 
         indicative of a close relationship between the customer 
         relationship intangible asset and the software. Due to 
         the fact that no active market exists for the customised 
         internally developed software, no reliable basis for the 
         separate measurement of the components could be 
         determined by management.
         The fair values have been determined on a provisional 
         basis. If any new information obtained within a year 
         from the acquisition date about the facts and 
         circumstances that existed at the acquisition date 
         identifies adjustments to the above amounts, or any 
         additional provisions that existed at the acquisition 
         date, then the acquisition accounting will be revised.
         The fair value of the trade and other receivables 
         acquired represents the future contractual amounts 
         receivable due to the fact that none of the trade and 
         other receivables extends beyond the contract term. 
         Management is of the opinion that all outstanding trade 
         and other receivables are recoverable.
         The non-controlling interest related to the business 
         combination was measured at the proportionate share of 
         the recognised amounts of the acquiree’s net 
         identifiable assets.
         The goodwill of this business combination will have no 
         impact on the tax asset or liability of the acquirer or 
         acquiree.
         No contingent liabilities were recognised as a result of 
         the business combination.
         DCT Holdings Proprietary Limited has a call option to 
         purchase an additional 24% interest in the issued share 
         capital of Sintrex. The intrinsic value of the call 
         option was determined at 31 December 2017 in terms of a 
         discounted cash flow model of which the following inputs 
         were used:
         –  Discount rate: 17,20%
         –  Risk factor: 2%
         –  Growth rate: 10%
         –  Terminal growth rate: 10%.
         The determined intrinsic value approximates the purchase 
         consideration to be paid in terms of the option 
         agreement.   
    5.2  VH Fibre Optics Proprietary Limited (“VH Fibre�)
         On 30 November 2017, Alviva, through its subsidiary DCT 
         Holdings Proprietary Limited, obtained control of VH 
         Fibre by acquiring a 100% interest in the issued stated 
         capital and voting rights of the company.   
         VH Fibre is an infrastructure management company 
         providing end-to-end IT solutions and related services. 
         In terms of the strategy adopted by the group, the board 
         of directors identified the solutions offering of  VH 
         Fibre as a complementary service line offering to 
         current and future customers as well as synergistic end-
         to-end solutions within the current spectrum of services 
         of the group.
         In the month to the reporting date, VH Fibre contributed 
         revenue of R11,3 million and net profit of R1 million to 
         the group’s results. If the acquisition had occurred at 
         the beginning of the reporting period, VH Fibre would 
         have contributed revenue of R110,3 million and net 
         profit of R9,9 million to the group’s results.
         R46 million of the total consideration was settled in 
         cash in December 2017, with the remaining consideration 
         payable over the next two years, based on the audited 
         results of VH Fibre for the 2018 and 2019 reporting 
         periods. The consideration due has been recorded as a 
         loan payable, with the expected payment due during the 
         2019 financial year being reflected as a long-term 
         liability, in the statement of financial position.
         The transaction meets the definition of a business 
         combination as set out in IFRS 3: Business Combinations.   
         The carrying amounts of the identifiable assets and 
         liabilities included in the condensed consolidated 
         interim financial statements of Alviva immediately 
         before the acquisition were as follows:
                                     Fair value     Previously
                                     recognised     recognised
                                             on       carrying
                                    acquisition        amounts
                                          R’000          R’000
         Property, plant and 
          equipment                       3 305          3 305 
         Intangible assets               44 535              –
         Other financial assets             716            716 
         Deferred tax                       129            129 
         Trade and other receivables     45 337         45 337 
         Inventory                       20 837         20 837 
         Cash and cash equivalents           14             14
         Total assets                   114 873         70 338 
         Other financial liabilities     (5 649)        (2 266)
         Deferred taxation on 
          intangible assets: customer 
          relationship                  (12 470)             –
         Trade and other payables       (29 758)       (29 758)
         Bank overdraft                  (2 202)        (2 202)
         Income tax payable              (3 635)        (3 635)
         Total liabilities              (53 714)       (37 861)
         Identifiable net assets         61 159         32 477
         Non-controlling interest             –      
         Acquirer's interest             61 159    
         Purchase consideration         110 000    
         Goodwill on acquisition         48 841    
         CASH FLOW INFORMATION      
         Cash and cash equivalents 
          acquired                       (2 189)   
         The fair values have been determined on a provisional 
         basis. If any new information obtained within a year 
         from the acquisition date about the facts and 
         circumstances that existed at the acquisition date 
         identifies adjustments to the above amounts, or any 
         additional provisions that existed at the acquisition 
         date, then the acquisition accounting will be revised.   
         The fair value of the trade and other receivables 
         acquired represents the future contractual amounts 
         receivable due to the fact that none of the trade and 
         other receivables extends beyond the contract term. 
         Management is of the opinion that all outstanding trade 
         and other receivables are recoverable.
         The goodwill of this business combination will have no 
         impact on the tax asset or liability of the acquirer or 
         acquiree.
         No contingent liabilities were recognised as a result of 
         the business combination.
    5.3  Gridcars Proprietary Limited (“Gridcars�)
         On 31 August 2017, Alviva, through its subsidiary 
         Solareff Proprietary Limited, obtained control of 
         Gridcars by acquiring a 75% interest in the issued 
         stated capital and voting rights of the company.
         Gridcars is a developer of electric vehicle charge-point 
         software management systems and supplier of charge 
         points. The operations of Gridcars are aligned to the 
         renewable energy strategy adopted by the group.
         The total consideration of R3 million was settled in 
         cash by way of electronic transfer during October 2017.
         The transaction meets the definition of a business 
         combination as set out in IFRS 3: Business Combinations.
         Management is in the process of finalising the 
         acquisition method of recognition in terms of the 
         business combination as the transaction still falls 
         within the allowable measurement period as permitted by 
         IFRS 3: Business Combinations.
6.  INVENTORY ANALYSIS
                           Half year    Half year     Full year
                              31 Dec       31 Dec        30 Jun
                                2017         2016          2017
                          Unreviewed   Unreviewed       Audited
                               R’000        R’000         R’000
    Inventory on hand        815 392      747 026       669 125
    Inventory in transit      82 236       70 206        58 119 
    Work in progress          34 292       30 715        24 458 
                             931 920      847 947       751 702 
7.  FAIR VALUE HIERARCHY
    A summary of the financial instruments measured at fair value 
    is set out below.
    Fair value hierarchy:
    Level 1 – fair value is determined from quoted prices 
    (unadjusted) in active markets for identical assets or 
    liabilities.    
    Level 2 – fair value is determined through the use of 
    valuation techniques based on observable inputs, either 
    directly or indirectly. 
    Level 3 – fair value is determined through the unobservable 
    inputs for the asset or liability. 
                           Half year    Half year     Full year
                              31 Dec       31 Dec        30 Jun
                                2017         2016          2017
                          Unreviewed   Unreviewed       Audited
                   Level       R’000        R’000         R’000
    Financial 
     assets
    Derivative 
     financial 
     asset             2           –        1 800         3 287 
    The group has not disclosed the fair values of financial 
    instruments measured at amortised cost as their carrying 
    amounts closely approximate their fair value.
    There were no other financial instruments measured at fair 
    value that were individually material at the end of the 
    current reporting period.
Midrand 
5 March 2018
Sponsor: Deloitte & Touche Sponsor Services Proprietary Limited
ALVIVA HOLDINGS LIMITED
incorporated in the Republic of South Africa
Registration number: 1986/000334/06
ISIN: ZAE000227484
Share code: AVV
(“Alviva� or “the company� or “the group�)
Directors:
A Tugendhaft * (chairman), P Spies (chief executive officer),  
SH Chaba*^, RD Lyon (chief financial officer), N Medupe *^,  
P Natesan*^ (lead independent director)                                                                                                              
 * Non-executive     ^ Independent     
Registered office: 
The Summit, 269, 16th Road, Randjespark, Midrand, 1685
Preparer of results: RD Lyon CA
Company secretary: SL Grobler CA (SA)
Transfer secretaries: 
Computershare Investor Services Proprietary Limited,  Rosebank Towers, 15 Biermann Avenue, Rosebank, 2196
Auditors: 
SizweNtsalubaGobodo Inc., Registered Auditors,  Summit Place Office Park, Building 4, 221 Garstfontein Road,  Menlyn, 0081
Sponsor: 
Deloitte & Touche Sponsor Services Proprietary Limited,  Building 8, Deloitte Place, The Woodlands,  20 Woodlands Drive, Woodmead, 2196
https://protect-za.mimecast.com/s/nRn7CP1G6WUDvoJHzVvGG?domain=alvivaholdings.com

Date: 05/03/2018 04:17:00 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.

Email this JSE Sens Item to a Friend.

Share This Story