COGNITION HOLDINGS LIMITED - Abridged Audited Results for the Year Ended 30 June 2018, Dividend Declaration and Notice of AGM

Release Date: 27/09/2018 14:00
Code(s): CGN
 
Wrap Text
Abridged Audited Results for the Year Ended 30 June 2018, Dividend Declaration and Notice of AGM

COGNITION HOLDINGS LIMITED
Incorporated in the Republic of South Africa
(Registration number 1997/010640/06)
Share code: CGN ISIN: ZAE000197042
(“Cognition” or “the Group” or “the Company”)

ABRIDGED AUDITED RESULTS FOR THE YEAR ENDED 30 JUNE 2018, DIVIDEND DECLARATION AND NOTICE OF AGM

ABRIDGED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

Figures in Rands
                                                                    Audited as at    Audited as at
                                                Change
                                                                     30 June 2018     30 June 2017

Assets
Non-Current Assets
  Property, plant and equipment                 -10.59%                15 458 706       17 290 611
  Goodwill                                                             30 331 527       30 331 527
  Intangible assets                             -20.65%                13 864 618       17 471 718
  Investment in associates                       11.49%                 4 606 523        4 131 943
  Deferred tax asset                             -2.87%                 1 059 138        1 090 381
  Unlisted Investment                                                           -        1 660 000
                                                 -9.25%                65 320 512       71 976 180


Current Assets
  Inventories                                                                   -           25 730
  Trade and other receivables                    5.87%                 51 930 148       49 049 219
  Current tax receivable                                                  158 629          194 628
  Cash and cash equivalents                     28.44%                104 390 853       81 279 090
                                                19.86%                156 479 630      130 548 667


Total Assets                                     9.52%                221 800 142      202 524 847


Equity and Liabilities
Equity
  Share capital                                                        56 110 451       56 110 451
  Change in ownership                                                 (12 892 945)     (12 892 945)
  Retained income                                3.22%                106 081 816      102 774 161
                                                 2.27%                149 299 322      145 991 667
Non-controlling interest                                                  752 875          857 519
                                                 2.18%                150 052 197      146 849 186


Liabilities
Non-Current Liabilities
  Deferred tax liability                       -20.24%                  2 206 411       2 766 200
  Other financial liability                    -81.43%                    872 483       4 699 232
  Interest bearing liabilities                                                  -         373 974
                                               -60.73%                  3 078 894       7 839 406


Current Liabilities
  Interest bearing liabilities                 -74.12%                    372 335       1 438 673
  Provisions                                   -68.21%                  1 879 550       5 912 245
  Trade and other payables                      69.67%                 36 925 778      21 762 957
  Other financial liabilities                  -73.03%                  1 600 000       5 932 602
  Current tax payable                           44.25%                  2 105 929       1 459 964
  Dividend payable                              10.65%                    187 082         169 069
  Third party prize money                      129.36%                 25 598 377      11 160 745
                                                43.55%                 68 669 051      47 836 255


Total Liabilities                               28.87%                 71 747 945      55 675 661


Total Equity and Liabilities                     9.52%                221 800 142     202 524 847


Net asset value per share (cents)                2.27%                     108.49          106.09
Net tangible asset value per share (cents)       7.04%                      76.37           71.35
Shares in issue                                  0.00%                137 615 798     137 615 798



ABRIDGED CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME


                                                        Audited as at   Audited as at
Figures in Rands                              Change
                                                         30 June 2018    30 June 2017



Gross Revenue                                   25.5%     351 077 557     279 699 557
Less: Agency Revenue                            49.5%    (193 193 159)   (129 193 104)

Revenue                                          4.9%     157 884 398     150 506 453
Cost of services                                22.7%     (62 244 072)    (50 711 879)

Gross profit                                    -4.2%      95 640 326      99 794 574
Other income                                  1030.6%       5 418 185         479 231
Operating expenses                              -3.6%     (18 357 330)    (19 041 271)
Staff costs                                      0.8%     (52 587 169)    (52 167 926)
Depreciation and amortisation expense            9.6%      (7 650 338)     (6 982 720)
Operating profit                                 1.7%      22 463 674      22 081 888
Investment income                               15.1%       6 466 943       5 617 407
Income from equity accounted investments        22.3%         474 580         388 050
Finance costs                                  119.5%       ( 983 365)      ( 447 978)
Profit before taxation                           2.8%      28 421 832      27 639 367
Taxation                                                   (7 824 846)     (8 114 438)

Total comprehensive income for the year          5.5%      20 596 986      19 524 929

Profit for the year attributable to:
Owners of the parent                            10.2%      20 509 630      18 612 289
Non-controlling interest                                       87 356         912 640
                                                 5.5%      20 596 986      19 524 929


Basic and diluted earnings per share (cents)   10.2%            14.90           13.52
Headline earnings per share (cents)            10.0%            14.88           13.52


Weight average shares in issue                            137 615 798     137 615 798

ABRIDGED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY


                                                                       
                                 Share         Share        Total       Equity due to      Retained      Total Equity    Non-controlling    Total Equity 
                               Capital       Premium        Share           change in        income      attributable           interest
Figures in Rands                                                            ownership                      to holders
                                                                                                        of the parent                       
                                                                                                                                                                                                                                                                                        
Balance at 1 July 2016         137 528    55 806 392   55 943 920         (6 135 464)    95 171 136       144 979 592         1 929 129      146 908 721

Profit for the year                  -             -            -                   -    18 612 289        18 612 289           912 640       19 524 929
  
Total comprehensive
income for the year                  -             -            -                   -    18 612 289        18 612 289           912 640       19 524 929

Sale of own / treasury shares      88        166 443      166 531                   -             -           166 531                 -          166 531

Changes in ownership
interest in subsidiary              -             -            -            (6 757 481)           -        (6 757 481)       (1 791 750)     (8 549 231)
Dividends                                                                               (11 009 264)      (11 009 264)        ( 192 500)    (11 201 764)

Total contributions by and
distributions to owners of
company recognised
directly in equity                88       166 443       166 531            (6 757 481) (11 009 264)      (17 600 214)       (1 984 250)    (19 584 464)


Balance at 1 July 2017       137 616    55 972 835    56 110 451           (12 892 945)  102 774 161      145 991 667           857 519     146 849 186

Profit for the year                -             -             -                     -    20 509 630       20 509 630            87 356      20 596 986

Total comprehensive
income for the year                -             -            -                      -    20 509 630       20 509 630            87 356      20 596 986
Dividends                          -             -            -                          (17 201 975)     (17 201 975)         (192 000)    (17 393 975)

Total contributions by and
distributions to owners of
company recognised
directly in equity                 -             -            -                      -   (17 201 975)     (17 201 975)         (192 000)    (17 393 975)


Balance at 30 June 2018      137 616    55 972 835    56 110 451           (12 892 945)  106 081 816      149 299 322           752 875      150 052 197

ABRIDGED CONSOLIDATED STATEMENT OF CASH FLOWS

                                                                 Audited         Audited
Figures in Rands                                   Change     year ended      year ended
                                                            30 June 2018    30 June 2017
Cash flows from operating activities
Cash generated from operations                                52 771 859      29 617 871
Interest income                                                6 466 943       5 617 407
Finance costs                                                  ( 983 365)      ( 447 978)
Tax paid                                                      (7 654 627)     (7 921 685)
Net cash from operating activities                 88.35%     50 600 810      26 865 615


Cash flows from investing activities

Purchase of property, plant and equipment                     (1 231 877)      (2 324 550)
Proceeds on disposal of property, plant and
equipment                                                         56 278           161 141
Purchase of intangible assets                                  ( 997 824)      (2 201 527)
Expenditure on product development                                     -       (4 596 760)
Sale of other intangible assets                                        -            4 201
  
Acquisition of additional interest in subsidiary                       -       (1 701 230)

Purchase of unlisted investment                                ( 146 667)      (1 660 000)
Sale of unlisted investment                                    1 806 667                -
Net cash from investing activities                -95.83%      ( 513 423)     (12 318 725)


Cash flows from financing activities
Proceeds on share issue                                                -          166 531
(Repayment of) proceeds from other financial
                                                              (8 159 350)         404 483
liabilities
Repayment of interest bearing liabilities                     (1 440 312)      (2 655 066)
Dividends received from associate                                      -          477 000
Dividends paid                                                (17 375 962)    (11 182 391)
Net cash from financing activities                 110.92%    (26 975 624)    (12 789 443)


Total cash and cash equivalents movement
for the year                                                   23 111 763       1 757 447
Cash and cash equivalents at the beginning of
the year                                                       81 279 090      79 521 643
Total cash and cash equivalents at end of
the year                                           28.44%     104 390 853      81 279 090

NOTES TO THE ABRIDGED CONSOLIDATED AUDITED FINANCIAL RESULTS

1. BASIS OF PREPARATION

The Group annual financial statements from which these consolidated audited financial statements were
derived have been prepared on the historical cost basis excluding financial instruments which are accounted
for in terms of IAS39 and conform to International Financial Reporting Standards (“IFRS”) and with the
SAICA Financial Reporting Guides as issued by the Accounting Practices Committee and Financial
Reporting Pronouncements as issued by the Financial Reporting Standards Council. The accounting policies
applied in the preparation of these abridged consolidated audited financial results, which are based on
reasonable judgements and estimates, are in accordance with IFRS, and are consistent with those applied in
the Group annual financial statements for the year ended 30 June 2018. These abridged consolidated
audited statements set out in this report have been prepared in terms of IAS 34 – Interim Financial
Reporting, the Companies Act, 2008 (Act 71 of 2008), as amended, and the Listings Requirements of JSE
Limited.

These consolidated audited financial statements were prepared under the supervision of the Financial
Director, Pieter Scholtz CA(SA).

2. RECONCILIATION BETWEEN EARNINGS AND HEADLINE EARNINGS


                                                                    Audited for the    Audited for the
 Figures in Rands                                                        year ended         year ended
                                                                       30 June 2018       30 June 2017


 The calculation of earnings per share is based on profits of
 R20,509,630 attributable to equity holders of the parent               14.90 cents       13.52 cents
 (2017: R18 612 289) and a weighted average of 137 615 798
 (2017: 137 615 798) ordinary shares in issue during the year


 The calculation of headline earnings per share is based on
 profits of R20 482 335 attributable to equity holders of the parent    14.88 cents       13.52 cents
 (2017: R18 604 293) and a weighted average of 137 615 798
 (2017: 137 615 798) ordinary shares in issue during the year



 Reconciliation between earnings and headline earnings

 Profit attributable to ordinary shareholders of parent                  20 509 630        18 612 289
 Profit on disposal of property, plant and equipment                       ( 37 910)         ( 11 106)

 Tax effect of the disposal of property, plant and equipment                 10 615             3 110

                                                                         20 482 335        18 604 293


 The calculation of diluted earnings per share is based on profits
 of R20 509 630 (2017: R18 612 289) and a weighted average of           14.90 cents       13.52 cents
 137 615 798 (2017: 137 615 798) ordinary shares issued during
 the year.

3. SEGMENTAL REPORTING

Segment reporting

Operating segments are reported in a manner consistent with the internal reporting provided to the chief
operating decision makers. These chief operating decision-makers ("the CODM") have been identified as the
executive committee members who make strategic decisions. The CODM have organised the operations of
the Company based on its brands and this has resulted in the creation of the following reportable segments:
Active Data Exchange Services - a unified messaging system that integrates and delivers a suite of
messaging services through a single hosted platform.

Knowledge Creation and Management - Building permission-based marketing strategies to enhance singular
customer profiles, with deep granularity in line with privacy legislation. Using technology to establish a "new
asset class" by collecting data, adding content and meaning to create information and providing insights,
inferences and experiences to culminate in knowledge.

The accounting policies applied to the operating segments are the same as those described in the basis of
preparation paragraph above. Active Data Exchange Services are provided within South Africa as well as in
36 African countries ("Africa Sales"). Within the period under review 10.30% (2017: 4.20%) of its revenue
can be attributed to Africa Sales. The Company allocates revenue to each country based on the relevant
domicile of the client. All of the Company's assets are located in South Africa.

Active Data Exchange currently generates 30.15% (2017: 44.15%) of its revenue through three large
network providers whereas Knowledge Creation and Management generates 44.3% (2017: 23.3%) of its
revenue by rendering services to two large multinational companies. The CODM reviews these income and
expense items on a group basis and not per individual segment. All assets and liabilities are reviewed on a
group basis by the CODM.

Both segments share the use of the Group’s assets and liabilities as well as the same operating environment
and therefore the Group is not in a position to report on the Assets and Liabilities of each segment nor
analyse the operating expenditure separately.


                                                            Audited for the year      Audited for the year
 Figures in Rands                              Change
                                                             ended 30 June 2018        ended 30 June 2017

 Gross Revenue
    Active Data Exchange Services                                   137 867 178              122 714 679
    Knowledge Creation and
    Management                                                      213 210 379              156 984 878
                                                                    351 077 557              279 699 557
 Revenue generated as agency
 services
   Active Data Exchange Services                                   (84 258 954)             (55 489 088)
   Knowledge Creation and
   Management                                                     (108 934 206)             (73 704 016)
                                                                  (193 193 160)            (129 193 104)

 Revenue
   Active Data Exchange Services                                    53 608 225               67 225 591
   Knowledge Creation and
                                                                   104 276 172               83 280 862
   Management
                                                                   157 884 397              150 506 453
 Cost of sales
    Active Data Exchange Services                                  (18 092 551)             (23 379 908)
    Knowledge Creation and
    Management                                                     (44 151 520)             (27 331 971)
                                                                   (62 244 071)             (50 711 879)
 Gross Profit
    Active Data Exchange Services                                   35 515 674               43 845 683
    Knowledge Creation and
    Management                                                      60 124 653               55 948 891
                                                                    95 640 326               99 794 574


COMMENTARY

The board of directors of Cognition (“the Board”) are proud to announce their results for the year ended
30 June 2018.

NATURE OF THE BUSINESS

The Group’s products and services are all orientated around customer-centricity and assisting our clients,
who are typically large corporations, to achieve a paradigm shift by forming long-term partnerships with their
customers so as to achieve enhanced benefits for both parties.

FINANCIAL PERFORMANCE

Despite very difficult trading conditions, the Group was able to increase its Gross Revenue by 25% and
earnings attributable to shareholders of the Group within the 2018 financial year by 10%.

Gross revenue, which includes revenue earned by the Group for facilitating agency-based payment services,
amounted to R193 million compared to R129 million in the previous financial year. Revenue for the Group
(after deducting Agency Revenue) increased to R158 million compared to R150 million in the previous
financial year, a 5% increase. The growth achieved was purely organic in nature as the Group did not make
any new acquisitions in this financial year.

As per the segment report, revenue from Active Data Exchange Services declined by 26% from R67 million
to R53 million which is attributed to the decline in the Fax2Email services. Despite the decline, the Group still
earns 33% (2017: 44%) of its revenue through this segment without having to spend a significant amount of
development and operational cost on it. The Gross Profit Margin of this segment remained steady at around
66% resulting in a Gross Profit of R35.5 million, which is 19% down on the prior year’s Gross Profit of
R43.8 million.

During the past 3 years the Group has invested in the Knowledge Creation and Management segment by
acquiring business within the research industry and by an aggressive organic growth strategy, specifically
within the Channel Incentive and Loyalty area. The result of this strategy is that the Knowledge Creation and
Management segment has grown from R3.7 million revenue in 2014 to R104 million in the past financial
year, which represents a 25% increase from the prior year’s revenue of R83 million. The Gross Profit for this
division grew by 7% from R56 million in the previous financial year to R60 million in this financial year,
representing 63% of the Group’s Gross Profit.

The combined Gross Profit of the Group declined by 4% from R99.8 million to R95.6 million.

Given the prevailing economic climate, the Group has focused on keeping Operating Expenditure as low as
possible and was able to decrease Operating Expenditure from R19 million to R18.3 million, a decrease of
3.6%. This was aided by a cost recovery relating to energy charges that the Group was able to successfully
claim back in the year.

Staff numbers remained relatively stable during the year under review. The Group employed between 145
and 150 staff members across its three operating divisions. Because staff numbers remained relatively
stable, the Group was able to curtail its staff costs at R52.5 million (2017: R52 million).

The Group is burdened with an increase in Depreciation and Amortisation charges which represents an
increase of 10% from the previous financial year to R7.6 million, compared to R7 million in the previous
financial year. Due to changing technology and ever-improving communication infrastructure within the
country, the Group has been able to move away from capital intensive solutions and it is therefore expected
that the Group will benefit from decreasing Depreciation and Amortisation charges within the next few years.

The Group benefited from significant Forex profit and adjustments made relating to contingent
considerations as well as other incidental revenues resulting in Other Operating Income amounting to
R5.4 million that offset the decline in Gross Profit for the Group and subsequently the Earnings Before
Interest, Tax, Depreciation and Amortisation (“EBITDA”) remained relatively stable at R30 million for the year
up 3.5% from the R29 million in the previous financial year.

The effective tax rate for the financial year under review is 27.53 % compared to the previous financial year’s
effective rate of 29.3%. Total Comprehensive Income for the Group grew by 5.5% from R19.5 million to
R20.6 million. Based on the weighted average number of shares in issue, earnings per share (“EPS”) grew
by 10% from 13.52 cents in the 2017 financial year to 14.90 cents this financial year.


Statement of Financial Position

The Group maintains a prudent approach with regards to the use of its resources and maintaining a healthy
financial position whilst still ensuring a steady dividend flow to shareholders.

The Group improved its cash resources held from R82 million in the previous financial year to R104 million in
the current financial year. This was bolstered by a significant increase in current liabilities that increased from
R47.8 million to R68.7 million. It should be noted that this increase can mostly be attributed to a
R15.5 million increase in 3rd party prize money that was being held over the Group’s financial year end.

The Group’s Net Tangible Asset value increased by 6.9% from 71.97 cents per share to 76.96 cents per
share and its Net Asset Value per share increased by 2.2% to 109.08 cents per share from 106.71 cents per
share.

Equity movements

During the year the Group declared and paid a final 2017 dividend of 8.5 cents per share and an interim
2018 dividend of 4 cents per share resulting in a cash and equity outflow of R17.2 million.

The Board has also declared a final dividend for the 2018 financial year of 6 cents per share resulting in a
total dividend of 10 cents per share for the 2018 financial year.

As at 30 June 2018 the Company did not hold any treasury shares.

Going Concern

The Board has formally considered the going concern assertion for the year going forward and is of the
opinion that it is appropriate.

Conclusion

The Group is in a healthy financial position with adequate cash resources and diversified revenue streams
that will enable the Group to expand its operations through acquisitions and organic growth within the next
financial year.

OPERATIONAL PERFORMANCE

Group Profile

Cognition is a multi-disciplinary data collection, communication, research and marketing company that
provides a broad range of services to Fast Moving Consumer Goods (“FMCG”) companies, media and digital
agencies.

Cognition is committed to fair and sustainable business practices and strict adherence to legislative
requirements and frameworks.
Cognition operates via two distinct strategic objectives, being:
   - Active Data Exchange Services; and
   - Knowledge Creation and Management.

These objectives are underpinned by the Group’s various operating divisions.

Cognition operates from its head office in Randburg and satellite offices in Cape Town and Durban. The
Group’s strategy is underpinned by a high value system which encourages innovation, performance and a
strong client-centric philosophy. The Group prides itself in being able to develop bespoke services to meet
the client’s specific needs, as well as the design, hosting and management of its own service delivery
platforms.

Cognition has recognised the growing international trend of consumers realising:
   - their right to have their privacy respected;
   - the value of their personal data (an “asset class”);
   - the need to be in control when sharing data; and
   - having the mechanism to be rewarded for sharing their data.

Group Performance

Despite a challenging political and economic environment, we are pleased with the results for the year under
review.

The 2018 financial year showed a growth of 25% in the Group’s gross revenue.

Group revenue increased to R157 million (2017: R150.5 million), representing a 4.9% increase.

In addition, this growth was achieved despite the further decline in faxing revenue.

Net cash and equivalents amounted to R104.3 million (2017: R81.2 million) representing a growth of 28%.

The Group’s investment in new product offerings, like Channel Incentive Programmes, has successfully
created new and exciting revenue streams which have been able to buffer the Group from the decline in
faxing and also create a solid platform for future revenue growth with new brands adopting this platform.

Similarly, earnings per share for the period under review grew by 10% to 14.90 cents (2017: 13.53 cents).

The Group and its operating divisions offer a multi-disciplinary data collection and communication platform
that provides a broad range of services incorporating research, consumer activation, corporate loyalty,
mystery shopping, analytics and sponsorship quantification.

Divisional Performance

Active Data Exchange Services

Brands need to understand consumers at a more granular level and to build up a comprehensive 360° view
of each customer. This requires customer engagement at an individual level. To achieve this MediaWorx
offers a range of communication services to interact with the consumer and collect data.

These services include SMS, USSD, email and WhatsApp applications aimed at interacting with consumers
at a singular level.

MediaWorx has seen a marked increase in USSD services in South Africa and certain territories in Africa.

MediaWorx has designed, hosted and managed very large campaigns using USSD for blue-chip brands with
huge success, generating over 30 million responses for one brand in one month and rewarding consumers
with over R50 million in airtime for the corresponding period.
This form of “Call2Action” is used successfully to enable brands to interact with consumers via promotions,
competitions or voting platforms.

During the period under review MediaWorx managed a multitude of campaigns for blue-chip clients such as:
ABInBev (Beer Bonanza Hansa, Redds and the Carling Cup), SATMA Awards, Defy, Lion Match, Pep,
Ackermans, Imana, Premier Foods, Amka, Marico, Checkers, Soweto TV, Cambridge, Lucky Star, Bokomo
and Heinz Foods. The rest of Africa showed growth in the number of campaigns managed. Successful
campaigns were managed for: DStv (Big Brother and The Voice), AVI (Five Roses and Bakers), Pep,
AfriSam, Bokomo and ABInBev (Carling Black Label and Castle Lager).

Brands are realising that there is a need to create a new ‘social contract’ with consumers based on
transparency and trust and are coming to terms with what we refer to as ‘consumer push back’, invigorated
by privacy legislation around the Protection of Personal Information Act (“POPIA”) and the General Data
Protection Regulations (“GDPR”), all of which enhance our platform offerings to collect, store, process and
manage consumers’ data in conformity with consumer expectations and regulative requirements.

We believe our platform, methodology and acute understanding of the regulatory framework will enable us to
grow these services in the coming years.

MediaWorx continues to maintain a positive presence in the Call2Action market by offering a one-stop-shop
of a range of technology platforms incorporating: moderation, fulfilment of prizes, web and mobile App
development and consulting services.

Document Exchange

These services incorporate Fax2Email, Email2Fax and our new Blockchain service SecurDox. As
anticipated, faxing continues to decline, primarily from a usage point of view. We still maintain an active
database of around 90 000 subscribers however, the average rate per user (“ARPU”) is declining.

Certain corporates like pharmacies, doctors and bankers still use faxing as a formal communication channel
and we will still receive a healthy return on faxing which generates around 44 000 faxes per day.

SecurDox is a Blockchain secure and encrypted document exchange service. We have recently appointed
consultants to take this to market on a more aggressive basis as we feel the market has matured in line with
its exposure and understanding of both Blockchain and the regulatory requirements of POPIA.

Channel Incentive and Loyalty

We are extremely pleased with the growth of this new division which has secured some blue-chip clients in
the cellular and white appliance industries.

Over the last twelve months our platform has been enhanced to provide a full turnkey “end to end” solution
for corporates to incentivise staff, agents or third parties.

We have increased the number of private branded cards, underwritten by a registered bank, by over 70%
representing close to 17 000 cards which have processed over R100 million in incentive claims.

The platform incorporates a mobile App, web and customer interface.

Our moderation services which aim to facilitate this process have been enhanced and the platform enables a
“multi-channel” route to market to enable flexible incentives by brand, date, time and cardholder. A new
ticketing system was introduced into the moderation process which enhances customer care and provides
transparent audit trails for management and clients alike.

We currently process around 2 300 claims per day.

The platform provides clients with rich insights and analytics which means this solution becomes part of the
client’s strategic KPI.
We believe that we have good potential to acquire new blue-chip clients in 2019 and also to increase the
footprint of existing brands with additional card deployments and increased throughput.

The Channel Incentive platform has proprietary IP, which enables clients to evaluate statistics by channel,
device, product, region, date, time, card and other variables.

This becomes a very critical element of the clients’ evaluation of market-share, activity levels, sales
performance and return on investment (“ROI”).

Platform Technology

Personal data is an important asset class that is essential for brands as a fundamental tool to interact with
consumers. A brand must accordingly accumulate data (demographic and psychographic data) at a granular
level to be able to deliver the correct and desired product or service to the consumer at a singular level.

Historically, brands have relied on either observed or inferred data, which can be misleading. There is,
accordingly, a drive to obtain “volunteered data” or consumer “self-curated data”, which is more accurate and
up-to-date. This methodology supports the stringent requirements of privacy legislation.

Consumers are producers of data and businesses (brands) ‘consume’ this data to deliver bespoke offerings.
The exchange of data between consumers and brands is managed by our PIMS platform (mibubble) with the
overarching purpose of consummating matches among users and to facilitate the exchange of personal data,
goods, services or currency, thereby enabling value creation for all participants. Our PIMS platform will
provide a secure platform for consumers to self-curate their own proprietary demographic and psychographic
data with the ability to control which brand has access to this data and on what terms. The PIMS platform will
be fully compliant with POPIA and GDPR.

Our PIMS platform will form the core database for the Group’s own proprietary brands and will also be
channelled to the market with business to business (B2B) methodology which will result in a business to
consumer (B2C) interface.

Research and Analytics

The Group’s investment in research companies (BMi Sport, BMi Research and Livingfacts) aims to enhance
the Group’s capacity to manage data and analytics which are becoming more important in corporate
agendas.


Our strategic drivers are:
   - To provide a service to our clients to be able to identify, combine and manage multiple sources of
        data within the regulatory frameworks
   - To build advanced analytics models for predicting outcomes
   - To transform the culture of an organisation so that the data platform yields better decisions

The data that is aggregated from each of our own commercial verticals (or that of our clients) is used to
create a value chain of analysis and decision metrics that provide the foundation and evidence upon which
our clients’ strategies are built.

BMi Research Proprietary Limited (“BMi R”)
BMi R performed extremely well in the financial year under the stewardship of CEO Gareth Pearson.

BMi R has a well-defined strategy offered via eight solutions:

Advertising:                             Monitoring campaigns across TV, radio, print, outdoor and digital

Analytics:                               Dashboards, statistical optimisation models and predictive analytics

Business Research:                       Commissioned research to evaluate a brand and its offering
(B2B)
Category Quantification:                 Market sizing for volume, value and consumption trends
Consumer Research:                       Consumer insights via qualitative and quantitative methodologies
In-store:                                Monitoring of product versus competitors, basket analysis, price
                                         trends, geospatial data etc
Mystery Shopping:                        Strategic insights from consumers around service levels, staff and
                                         environment
Print Ads:                               Promotional pricing and share of print spend

BMi R continues to innovate and provide valuable services to a broad range of blue-chip consumer
packaged goods (“CPG”) suppliers, retailers and wholesale outlets. Despite a challenging economy, BMi R is
anticipated to make positive inroads into these markets.

BMi Sport Info Proprietary Limited (“BMi S”)
BMi S had a very challenging year with a decline in revenue and corresponding decline in profits.

On the positive side, great strides were made in the year under review by management, under the
stewardship of CEO David Sidenberg, in refining processes, procedures, reporting and evolving the analytics
and dashboards.

The primary reason for the decline in revenue is the constraints in the sponsorship market, with most blue-
chip brands reducing budgets, research and bespoke services. This is reflective of a challenging economy
and the re-allocation of budgets.

BMi S has enhanced its offerings to cater for the changes in the market and offer the following services:
   - Sports tracking and sponsorship
   - e-Gaming
   - Millennial tracking
   - Socio-economic and sporting impact evaluation
   - Bespoke sporting evaluation

During the year under review, BMi S has conceptualised a new offering which will launch in 2019 to provide
granular databases around defined sporting codes, to provide sponsors and brands with a one-to-one
marketing platform with each sporting fan.

Livingfacts Proprietary Limited (“Livingfacts”)
Livingfacts, under the leadership of CEO Marylou Kneale, had a stable performance for the year under
review.

Livingfacts provides customised market research solutions that assist boards in implementing insightful and
intelligent strategies.

Their expertise and experience are vested in: quantitative and qualitative, community, secondary data, web
and digital.

Prospects

Whilst we believe that trading conditions will remain challenging, given the current state of the economy and
the uncertain political situation, we do believe that there will be pockets of excellent opportunities within our
portfolio of offerings.

We will continue to look at meaningful acquisition opportunities and the ability to leverage across our various
solutions.

We continue to manage the business being conscious of always improving operational efficiencies. The
Group maintains a strong balance sheet and positive cash flow.
Our Appreciation

On behalf of Cognition, we remain thankful to the members of the Board for their valuable input and
contribution to the growth of the Group as well as to all our staff for their hard work, loyalty and contribution
to the execution of our strategy.

We would also like to extend our thanks to the leadership of BMi Research, BMi Sport and Livingfacts for
their contribution to our collective strategy, and lastly, but importantly, to all our network suppliers, dealers,
partners, customers and stakeholders.

AUDIT REPORT

The auditor, Grant Thornton Johannesburg Partnership, has issued its unmodified opinion on the Group’s
annual financial statements for the year ended 30 June 2018. The audit was conducted in accordance with
International Standards on Auditing. A copy of the auditor’s report together with a copy of the audited
financial statements are available for inspection at the Company’s registered office. These abridged financial
statements have been derived from the Group’s annual financial statements and are consistent in all material
respects with the Group’s annual financial statements. The contents of this announcement are extracted
from audited information, although the announcement is not itself audited. The directors of the Group take
full responsibility for the preparation of this announcement and confirm that the financial information has
been correctly extracted from the underlying annual financial statements.

The auditor’s report does not necessarily report on all of the information contained in this
announcement/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 during office hours.

CORPORATE GOVERNANCE

The Board recognises the need to conduct the affairs of the Group with integrity and in compliance with the
principles of the King Report on Governance Principles of South Africa (“King IV report”). Throughout the
year under review, the Group has complied with the principles as set out in the King IV.

FINAL DIVIDEND DECLARATION

Notice is hereby given that the directors have declared a gross final dividend of 6 cents per share for the
financial year ended 30 June 2018 (2017: 8.50 cents per share), which is adjusted for withholding tax. The
final dividend has not been included as a liability in these audited financial statements as it was declared
subsequent to year end. The final dividend for June 2018 is payable to all shareholders on the Register of
Members on Friday, 19 October 2018. In terms of the dividends tax, effective 1 April 2012, the following
additional information is disclosed:

-     the local dividend tax rate is 20%;
-     the dividends will be payable from income reserves;
-     the dividend tax to be withheld by the Company amounts to 1.2 cents per share;
-     therefore the net dividend payable to shareholders who are not exempt from dividends tax amounts to
      4.8 cents per share, while the gross dividend payable to shareholders who are exempt from dividend
      tax amounts to 6 cents per share;
-     the issued share capital of the Company at the declaration date comprises 137 615 798 ordinary
      shares; and
-     the Group’s income tax reference number is 9087/450/84/8.

Declaration date                                          Thursday, 27 September 2018
Last day to trade cum dividend                            Tuesday, 16 October 2018
Date trading commences ex the dividend                    Wednesday, 17 October 2018
Record date                                               Friday, 19 October 2018
Date of payment                                           Monday, 22 October 2018

Share certificates may not be dematerialised or rematerialised between Wednesday, 17 October 2018 and
Friday, 19 October 2018, both dates inclusive.

ANNUAL REPORT

Shareholders are advised that the Annual Report is available on the Company’s website at www.cgn.co.za.
The Annual Report will be distributed to shareholders on Monday, 1 October 2018.

NOTICE OF AGM

Notice is hereby given that the 20th Annual General Meeting of shareholders of Cognition (“Annual General
Meeting”) will be held at 10:00 on Thursday, 22 November 2018 at Cognition House, Corner Bram Fischer
Drive and Will Scarlet Road, Ferndale Randburg (entrance on Will Scarlet Road) for the purpose of
considering, and, if deemed fit, passing, with or without modification, the resolutions set out in the notice of
Annual General Meeting, which is contained in the Annual Report.

The Board has determined that, in terms of section 62(3)(a), as read with section 59 of the Companies Act,
the record date for the purposes of determining which shareholders of the Company are entitled to
participate in and vote at the Annual General Meeting is Friday, 16 November 2018. Accordingly, the last day
to trade Cognition shares to be recorded in the Register to be entitled to vote will be Tuesday,
13 November 2018.

For and on behalf of the Board


Ashvin Mancha                         Mark Smith                            Pieter Scholtz
Chairman                              Chief Executive Officer               Financial Director


Johannesburg
27 September 2018

Business and Registered Office:
Cognition House
Corner of Bram Fischer Drive and Will Scarlet Road
Ferndale, Randburg, 2194
PO Box 3386, Pinegowrie, 2123
Telephone +27-11-293-0000
Fax 086-610-1000 / +27-11-787-2137

Directors: Ashvin Mancha#* - Chairman, Mark Smith – Chief Executive Officer, Pieter Scholtz - Financial
Director, Gaurang Mooney#* (Botswana), Graham Groenewaldt – Sales Director, Paul Jenkins#*, Roger
Pitt#*,Marc du Plessis#, Piet Greyling#, Trevor Ahier#, Dennis Lubambo#
 # Non-executive

* Independent

Company Secretary: Stefan Kleynhans BA BIuris LLB LLM (Banking Law)/(Corporate Law)

Auditor: Grant Thornton Johannesburg Partnership

Transfer Secretaries: Computershare Investor Services Proprietary Limited

Sponsor: Merchantec Capital

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