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Condensed Consolidated Financial Statements for the Year Ended 29 February 2016
Total Client Services Limited
Incorporated in the Republic of South Africa
(Registration number 1998/025018/06)
Share code: TCS ISIN: ZAE000116208
(“TCS” or “the Group” or “the Company”)
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 29 FEBRUARY 2016
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Audited Audited
%
Note Year ended Year ended
Change
29 Feb 2016 28 Feb 2015
R'000 R'000
Revenue (6) 18 009 19 232
Cost of sales 7 (7 571) (8 157)
Gross Profit (6) 10 438 11 075
Other Income 669 7 380
Operating Expenses 14 (19 469) (22 513)
Loss from operations (106) (8 362) (4 058)
Investment revenue (100) 8 4
Finance costs (269) 1 (6 711) (1 821)
Loss before taxation (156) (15 065) (5 875)
Taxation - 448
Loss for the period (178) (15 065) (5 427)
Other comprehensive income
Revaluation of equipment - 1 602
Deferred tax on revaluation - (448)
Total comprehensive loss for the
year (252) (15 065) (4 274)
Loss attributable to:
Equity holders of the company (158) (15 065) (5 427)
Non-controlling interest - -
Total comprehensive loss
attributable to:
Equity holders of the company (228) (15 065) (4 274)
Non-controlling interest - -
Reconciliation of loss to headline
loss
Loss after tax (158) (15 065) (5 427)
Adjusted for:
Loans Written Off/Forgiven - -
Insurance Refund - (978)
Loss on disposal of equipment - 60
Tax effect of the above - -
Headline loss for the period (137) (15 065) (6 344)
Basic loss per ordinary share attributable to the
equity holders of the Company (cents) (140) (3.10) (1.29)
Weighted average number of ordinary shares in 486 363 419 696
issue in thousands
Headline loss per ordinary share (cents) (105) (3.10) (1.51)
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Audited Year Audited Year
ended 29 Feb ended 28 Feb
2016 2015
Notes R'000 R'000
ASSETS
Non-current assets 2 895 3 864
Property, Plant and Equipment 2 1 934 2 653
Intangible Assets 3 961 1 211
Current assets 4 826 4 737
Trade and other receivables 4 686 3 878
Cash and cash equivalents 140 859
TOTAL ASSETS 7 721 8 601
EQUITY AND LIABILITIES
Capital and reserves (44 879) (31 368)
Share Capital 19 122 19 122
Revaluation Reserve 1 203 1 829
Equity Portion of Loan Option 5 12 928 11 374
Retained earnings (78 132) (63 693)
Non-current liabilities 31 808 23 859
Borrowings 5 31 808 23 859
Current liabilities 20 792 16 111
Current tax payable 1 467 1 467
Borrowings 5 5 384 1 531
Trade and other payables 4 13 941 13 113
TOTAL LIABILITIES 52 600 39 969
TOTAL EQUITY AND LIABILITIES 7 721 8 601
Total number of ordinary shares in issue at the year-end
(in thousands) 490 135 423 467
Treasury shares (in thousands) (3 771) (3 771)
Total number of ordinary shares in issue excluding
treasury shares (in thousands) 486 363 419 696
Net asset value per ordinary share (cents) (9.23) (6.45)
Net tangible assets value per ordinary share (cents) (9.42) (6.70)
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
Audited Audited
Year ended Year ended
29 Feb 2016 28 Feb 2015
R’000 R’000
Cash flows from operating activities
Cash generated from operations (8 111) (4 060)
Investment revenue 8 4
Finance costs (5) (12)
Taxation paid - -
Net cash from operating activities (8 108) (4 068)
Cash flow from investing activities
Purchase of property, plant and equipment (268) (166)
Purchase of intangibles - (1 253)
Net cash from investing activities (268) (1 419)
Cash flow from financing activities
Loans received 7 685 4 155
Shares issued - 1 000
Repayment of interest bearing borrowings (29) (58)
Net cash from financing activities 7 656 5 097
Total cash movement for the year (719) (389)
Cash at the beginning of the period. 859 1 248
Total cash at the end of the year 140 859
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Equity
Share Share Revaluation BEE Retained
portion Total
Capital Premium Reserve Reserve Income
of share R'000
R'000 R'000 R'000 R'000 R'000
options
Balance as at 1 March 2014 39 18 084 1 044 - - (58 634) (39 468)
Shares Issued 10 990 - - - - 1 000
Loss for the period - - - - - (5 427) (5 427)
Realisation of revaluation reserve - - (369) - - 369 -
Equity portion of share options - - - - 11 374 - 11 374
Revaluation of equipment - - 1 154 - - - 1 154
Balance as at 28 February 2015 49 19 074 1 829 - 11 374 (63 693) (31 368)
Loss for the year - - - - - (15 065) (15 065)
Realisation of revaluation - - (626) - - 626 -
Equity portion of share options - - - - 1 554 - 1 554
Balance as at 29 February 2016 49 19 074 1 203 - 12 928 (78 132) (44 879)
COMMENTARY ON THE GROUP RESULTS
OPERATIONAL PERFORMANCE
During the period under review, TCS continued to deal with the challenges at hand in order to adjust to
changing market conditions and seize opportunities. Management’s focus during this period has been to
continue to consolidate the existing contracts, improve the service offering and pursue new viable business.
The Company moved away from non-performing or unsustainable contracts and focused on sustainable
segments of the business.
Although there are notable losses in the period under review, it needs to be understood that these losses
were compounded by changes in the market conditions, the challenges brought by an ongoing internal
restructuring process and the re-alignment of the basic business model. These adjustments were necessary
to address the effects of 2014 and 2015 and the subsequent re-positioning of the Company within the market-
place.
FINANCIAL PERFORMANCE
Revenue for the year under review compared to the previous year decreased by 6% to R18 million. The
continued efforts by management to stabilise income and improve efficiency and the service offering, started
to deliver results with certain cost reductions noted.
After depreciation and finance costs, a loss before tax of R15 million was recorded compared to the loss of
R13.2 million recorded in the prior year (excluding extraordinary income of R7.4 million in 2015). Cost of
sales improved by 7% on the prior year and this reduction is in line with the reduction in sales.
The headline loss per share reduced to 3.10 cents compared to a headline loss per share of 1.51 cents for
the prior year ending 28 February 2015.
The movement in non-current assets relates mainly to depreciation recorded during the year. Trade and
other payables of R11.5 million includes regular trade payables of R3.1 million, revenue received in advance
of R1.2 million and SARS liabilities of R6.7 million. These SARS liabilities are accumulated debts recorded
during the Business Rescue period (up to August 2014) and the accumulated taxes until year end. At the end
of the year the Group’s closing cash balance was R0.1 million.
PROSPECTS
TCS has aligned its business strategy, products and services in accordance with the requirements of the
current market, specifically those of the Administration Adjudication of Road Traffic Offences Project, and
our equipment and systems are fully compliant.
The Company continues with a more focussed approach based on its superior software, technology and
equipment. The Company will form alliances, co-operate or support clients and other role players within the
market, either as primary or secondary service provider.
In this regard, the Company offers a quality basket of products and services, these being: own re-engineered
Artimis fixed radar camera, own new “TCS CAPTURE” mobile camera, handheld devices, new Windows based
Traffic Management System, the Pound Management System and the On Board Automatic Number Plate
recognition systems.
These products, supported by superior customer service and market knowledge, will be at the centre of the
business model going forward.
NOTES TO THE CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
1. Finance costs:
The finance costs of R5.6 million recorded for the period under review, included the following
significant items:
• R4.5 million provision made for interest on borrowings; and
• R1.0 million adjustment for interest on SARS debts
NOTES TO THE CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
2. Property, plant and equipment
Opening Closing
Balance Additions Disposals Depreciation Revaluation Balance
Group 2016
Furniture and
fittings 136 296 - - (56 668) - 79 628
Motor vehicles 97 783 170 000 - (71 402) - 196 381
Office equipment 30 655 - - (28 102) - 2 553
IT equipment 302 542 97 935 - (161 372) - 239 105
Camera Accessories 2 085 384 - - (668 829) - 1 416 555
Total 2 652 661 267 935 - (986 373) - 1 934 223
Group 2015
Furniture and
fittings 146 489 56 713 - (66 906) - 136 296
Motor vehicles 242 143 - (48 995) (95 365) - 97 783
Office equipment 78 830 - - (48 175) - 30 655
IT equipment 454 308 109 212 (36 862) (224 116) - 302 542
Camera Accessories 1 698 793 - - (1 215 116) 1 601 707 2 085 384
Total 2 620 563 165 924 (85 857) (1 649 677) 1 601 707 2 652 661
3. Intangible assets
Reconciliation of Intangible Opening Carrying
Assets Balance Amortisation Value
Group 2016
Computer software
Internally generated 1 211 266 (250 609) 960 657
Total 1 211 266 (250 609) 960 657
4. Trade and other payables
Trade payables are obligations to pay for goods or services that have been acquired in the ordinary
course of business from suppliers. Trade payables are initially recognised at fair value, and are
subsequently measured at amortised cost, using the effective interest rate method.
Group
2016 2015
Trade payables 2 604 247 2 647 341
Amounts received in advance 1 253 238 1 304 489
SARS liabilities 9 673 433 8 552 844
Accrued leave pay 410 483 607 857
13 941 401 13 112 531
SARS liabilities reflects VAT and PAYE, as well as interest and penalties on these amounts. According
to the Business Rescue plan, repayment of this debt was due to start from 1 January 2015. The
Company engaged SARS prior to January 2015 to start negotiations for a more favourable settlement
of these debts. At the date of this report, settlement has been reached with SARS whereby the
Company is required to pay an amount of R500 000 as settlement for all debt up to, and including
March 2017. This settlement amount is payable before the end of June 2017.
5. Borrowings
Borrowings are initially recognised at fair value, and are subsequently measured at amortised cost,
using the effective interest rate method.
Group
Figures in Rand
2016 2015
Instalment sale agreements - 29 062
Primary loan * 25 867 483 21 345 798
Other loans ** 11 838 951 4 014 888
37 706 434 25 389 748
Current
Instalment sale agreements - 29 062
Primary loan 3 162 590 1 502 151
Other loans 2 031 981 -
5 194 571 1 531 213
Non-Current
Instalment sale agreements - -
Primary loan 22 704 893 19 843 647
Other loans 9 806 970 4 014 888
32 511 863 23 858 535
Carrying value Carrying
2016 value
Primary loans - Mvelaphanda 2015
R5 000 000 was converted to a senior loan, repayable over 3 years at 10% interest per annum. Repayment of capital and
interest was scheduled to commence om 1 March 2015. The Company was not in a position to start with the repayments
and renegotiated with the creditor. Repayment of this loan remains suspended and the loan remains subordinated until the 5 198 040 4 595 799
parties are in a position to renegotiate the terms.
The remaining R 25 770 000 owing was converted to a subordinated loan, subordinated in favour of other creditors. This
loan was interest free for the first 12 months. Thereafter interest will accrue at the prime interest rate and after the first 12
months, the loan becomes convertible, at the option of the creditor, to ordinary shares at R0.01 per share. If not converted
to ordinary shares, the loan becomes repayable over 3 years commencing only once the senior loan of R5 million has been
repaid. 20 669 443 16 749 999
At the initial conversion date these loans were assessed as compounded instruments with a liability and equity portion as it
contains interest free periods as well as an embedded option to convert to ordinary shares. The difference between the
nominal value of the loans and the fair value of the liabilities at initial recognition were accounted for within equity (equity
portion of compounded instrument). The liability portions are subsequently measured at amortised cost, using the effective
interest rate of 15%-18%.
Total – Primary loans 25 867 483 21 345 798
Other loans
The Group required and received funding to support the recovery and stabilising period during and following the business rescue
process of 2014. This funding was provided in the form of loans with suspended repayment terms and which are subordinated to
other creditors. The Company is not required to start repayments of these loans until it has sufficient cash to do so. These loans
were provided by:
RHW Southern Africa Holdings (Pty) Ltd (subsidiary of Mvelaphanda) 6 330 524 1 150 000
Repayment of this, in terms of the original loans, has been suspended by the financier for 12 months after the reporting
date or until the Company has the financial resources to start repayment or until an alternative agreement can be reached.
This loan was interest free up to year end.
At the initial conversion date this loan had an interest free portion from a shareholder related entity and were assessed as
compounded instruments with a liability and equity portion as it contains interest free. The difference between the nominal
value of the loans and the fair value of the liabilities at initial recognition were accounted for within equity (equity portion
of compounded instrument). The liability portion is subsequently measured at amortised cost, using the effective interest
rate of 15%
Slade Investments (Pty) Ltd
- As part of the Business Rescue Plan 998 003 859 439
This loan amounting to R 1 000 000 was interest free for the first 12 months, whereafter the provider of the loan would
have the option to convert to ordinary shares at R0.01 per share. Should this option not be exercised, the loan becomes
repayable over 12 months and carry interest at the prime interest rate. The loan was assessed as a compounded
instrument with a liability and equity portion. The difference between the nominal value of the loan and the fair value of
the liability at initial recognition was accounted for within equity (Equity portion of Compounded instrument). The liability
portion is subsequently measured at amortised cost, using the effective interest rate of 15%
- Additional loans 2 206 417 2 005 449
Repayment of this, in terms of the original loans, has been suspended by the financier until the Company has the financial
resources to start repayment, or until an alternative agreement can be reached. This loan accrue interest at the prime
interest rate during the year.
Merchant Factors 1 789 250 -
This was a temporary factoring/bridging facility to complete the Namibian project. Interest was charged at prime rate and
the full amount was settled in June 2016.
This amount was secured by a cession of the specific debtors invoices related to the transaction. 11 324 194 4 014 888
6. Condensed Consolidated Segment report for the Group
North- Group
Southern Northern Coastal Corporate
2016 West Unallocated Total
R'000 R'000 R'000 R'000
R'000 R’000 R'000
Revenue 11 2 139 332 385 15 141 - 18 009
Profit/(loss) after tax 11 (551) 18 (94) 8 253 (22 705) (15 065)
North- Group
Southern Northern Coastal Corporate
2015 West Total
R'000 R'000 R'000 R'000
R'000 R'000
Revenue 16 3 595 473 566 14 582 19 232
Profit/(loss) after tax 16 603 113 34 (6 193) (5 427)
7. Financial instruments
The following table shows the carrying amounts and fair values of financial assets and financial liabilities,
including their levels in the fair value hierarchy for financial instruments measured at fair value. It does
not include fair value information for financial assets and liabilities which are not measured at fair value
if the carrying amount approximates the fair value.
Carrying Value February 2016
Loans and Amortised
Receivables Cost Fair Value Total
R’000 R’000 R’000 R’000
Financial assets not measured at
fair value
Trade and other receivables 4 227 4 227
Cash and cash equivalents 140 140
4 367 4 367
Financial liabilities not measured at
fair value
Borrowings (37 707) (37 707)
Trade and other payables (11 474) (11 474)
(49 181) (49 181)
Carrying Value February 2015
Loans and Amortised
Receivables Cost Fair Value Total
R’000 R’000 R’000 R’000
Financial assets not measured at
fair value
Trade and other receivables 3 681 3 681
Cash and cash equivalents 859 859
4 540 4 540
Financial liabilities not measured at
fair value
Borrowings (25 390) (25 390)
Trade and other payables (10 184) (10 184)
(35 574) (35 574)
BASIS OF PREPARATION
Statement of compliance
The condensed consolidated financial statements are prepared in accordance with the Listings Requirements
of the JSE Limited (“JSE Listings Requirements”) and the requirements of the Companies Act of South Africa,
2008 (Act 71 of 2008), as amended. The JSE Listings Requirements require reports to be prepared in
accordance with the framework concepts and the measurement and recognition requirements of International
Financial Reporting Standards (IFRS) and the SAICA Financial Reporting Guides as issued by the Accounting
Practices Committee and Financial Pronouncements as issued by Financial Reporting Standards Council and
to also, as a minimum, contain the information required by IAS 34 Interim Financial Reporting. The
accounting policies applied in the preparation of the condensed consolidated financial statements are in terms
of IFRS and consistent with those of the annual financial statements for the year ended 28 February 2013
and the condensed results for the 2014 and 2015 financial years, except for the adoption of new, improved
and revised standards and interpretations which became effective, which had no material effect on the
financial results.
These Condensed Consolidated Financial Statements are extracted from audited information but are not
themselves audited. The directors take full responsibility for the preparation of the financial information and
the financial information has been correctly extracted from the underlying financial information.
The annual statements have been prepared under the supervision of the Financial Director, Mr C Els and
have been audited by the Group’s auditors, BDO South Africa Incorporated, who’s modified audit report is
available for inspection at the registered office of the Company.
The auditor’s report does not necessarily report on all of the information contained in these Condensed
Consolidated Financial Statements. Shareholders are therefore advised that in order to obtain a full
understanding of the nature of the auditor’s engagement they should obtain a copy of the auditor’s report
together with the accompanying financial information from the issuer’s registered office.
The Disclaimer of Opinion and Report on Other Legal and Regulatory Requirements paragraphs as contained
in the audit report are set out below:
“Basis for Disclaimer of Opinion
As indicated in note 31 (going concern) to the financial statements as well as in the directors’ report, the
Group incurred a net loss for the year ended 29 February 2016 of R15 million and, as at that date its total
liabilities exceeded its total assets by R44,8 million. The going concern of the Group is significantly dependent
on the ongoing support of all its stakeholders, especially key staff and financiers including subordination and
non-repayment of certain loans for the foreseeable future, the Group securing new contracts, the successful
restructuring of its operational expenses in line with sales levels and the JSE listing to be re-instated. The
going concern note also indicates that these conditions, along with other matters, indicates the existence of
a material uncertainty which may cast significant doubt on the Group’s ability to continue as a going concern
and therefore it may be unable to realise its assets and discharge its liabilities in the normal course of
business. In these circumstances and as a result of the significance thereof, we have not been able to obtain
sufficient appropriate audit evidence to confirm or dispel whether it is appropriate to prepare the financial
statements on the going concern basis.
Disclaimer of opinion
Because of the significance of the matter described in the Basis for Disclaimer of Opinion paragraph, we have
not been able to obtain sufficient appropriate audit evidence to provide a basis for an opinion. Accordingly,
we do not express an opinion on the financial statements.
Report on other legal and regulatory requirements
In accordance with our responsibilities in terms of sections 44(2) and 44(3) of the Auditing Profession Act,
we report that we have identified reportable irregularities in terms of the Auditing Profession Act. We have
reported such matters to the Independent Regulatory Board for Auditors. These matters pertaining to the
reportable irregularities are as follows:
• The entity has submitted Income Tax returns, the Value Added Tax returns (VAT 201) and Employees
Tax returns (EMP 201) to the South African Revenue Services, but no payment has been made to settle
the outstanding liability.
• Contravention of Section 30 of the Companies Act by failing to prepare annual financial statements within
six months after its financial year end.
• Contravention of paragraph 3.19 of the JSE Listings Requirements which requires issuers to distribute a
notice of the annual general meeting and annual financial statements to all holders of securities and to
submit to the JSE Limited within six months after its financial year end.
• Contravention of Section 66(2)(b) of the Companies Act by failing to have the minimum number of
directors as prescribed
• Contravention Section 94 (6) of the Companies Act by failing appoint a person to fill any vacancy on the
audit committee within 40 business days after the vacancy arises.
• Potential contravention of Section 22 and Section 129 of the Companies Act as the Company was unable
to settle its liabilities as it became due and it is technically insolvent.”
Business rescue process and subsequent events
As per the announcement released on SENS on 22 November 2013, the board of directors of TCS (“the
Board”) deemed TCS to be financially distressed as contemplated in Chapter 6 of the Companies Act, 71 of
2008, as amended (“the Companies Act”) and accordingly, on 21 November 2013 resolved that business
rescue proceedings commence, and that TCS be placed under supervision in terms of section 129 of the
Companies Act.
In this regard, Mr Piers Marsden of Matuson & Associates was appointed as the Company’s business rescue
practitioner (“Business Rescue Practitioner”) on 9 December 2013.
An announcement was released on SENS on 2 May 2014, informing shareholders of the publication of a
proposed business rescue plan (“Business Rescue Plan”) and included a notice of meeting of creditors, other
holders of a voting interest and shareholders to be held on 19 May 2014 to consider the Business Rescue
Plan.
As per the announcement released on SENS on 19 May 2014, the Business Rescue Plan was approved by the
requisite majority of creditors, other holders of a voting interest and shareholders. Subsequent to the
announcement released on SENS on 19 June 2014, wherein shareholders were advised that the Company
submitted its Schedule 13 application to the JSE to enable the Company to raise capital through the issue of
new shares, the application was approved by JSE Limited.
The Business Rescue Practitioner confirmed on 14 August 2014 that the Business Rescue Plan had been
substantially implemented and that the control of the Company effectively reverted back to the Board.
The Business Rescue Plan included the below restructuring of the Statement of Financial Position. The pro-
forma financial effects of the specific issue of shares as part of the business rescue and subsequent
restructuring was released in an announcement on 9 June 2016.
• Equity Injection - Slade Investments CC (“Slade”)
The Company required a cash injection. The amount injected into the Company would be used as
working capital. The Company’s financial model indicated a cash requirement of R2 million. Slade
injected R2 million into the Company as follows:
1. R1 million by subscribing to 100 million shares at a fixed price of 1 cent per share. This
constituted 20.4% of the issued share capital post the issues of the new shares.
2. R1 million loan, which will be interest free for the first twelve months. Slade has the option
to convert the loan to ordinary shares at a fixed price of 1 cent per share after twelve
months, subject to all the JSE Listing Requirements and Companies Act regulations being
met at that date. Should the option to convert not be exercised the loan will become
repayable over 12 months at the prime interest rate.
• Debt Restructuring and Forgiveness - Mvelapanda Holdings Proprietary Limited (“Mvela”)
A total amount of R35.77 million was due and payable to Mvela relating to the preference shares
and accrued interest thereon. The repayment/distribution of the preference shares were subject to
section 46 of the Companies Act including the solvency and liquidity test. An amount of R5 million
was written off.
The remaining preference share capital and accrued interest were converted to loans as indicated
below which are not subject to section 46 of the Companies Act requirements.
• Terms and Repayment of Remaining Debt
The remaining debt of R30.77 million owing to Mvela was structured as follows:
R5 million to be a senior loan repayable monthly over 3 years at 10% interest per annum
with repayment of capital and interest commencing on 1 March 2015.
R25.77 million loan subordinated in favour of all creditors.
- Interest free for the first 12 months commencing on adoption of the Business
Rescue plan.
- After 12 months have the option to convert into ordinary shares at the fixed price
of 1 cent per share, subject to all the JSE Listing Requirements and Companies Act
regulations being met at that date.
- Should the option to convert not be exercised the loan will become repayable over
3 years commencing only once the senior loan has been repaid. Interest will accrue
at the prime interest rate.
• South African Revenue Services (SARS)
The tax debts of R7.9 million owing to SARS was addressed as follows:
The amount, including interest but excluding penalties, plus all tax debts up to the date of release
in August 2014, will be payable in equal instalments over 30 months starting on 1 January 2015.
After release from Business Rescue in August 2014, the Company engaged with SARS to reach
agreement on the final settlement amount and to seek relief on the payment terms. This process
was ongoing and not concluded at the end of the period under review.
At the date of this report the Company has received and accepted a final settlement offer from SARS,
which requires payment of R500 000 by the end of June 2017 to settle all SARS outstanding amounts
up to and including March 2017.
Going Concern
During the term certain minor contracts came to an end which contributed to the Group making a loss after
tax of R15 million for the year. This includes finance costs of R6.7 million as explained in note 20 of this
report. As at the year ended 29 February 2016, the Group had a negative equity position of R45 million.
Also refer to notes 12 and 30 which provides additional information on the restructuring of the borrowings
and the favourable settlement of the SARS liabilities through the final settlement agreement.
Even though borrowings to the value of R32 million have been subordinated in favour of other creditors, the
Group’s Statement of Financial Position still reflects a technical insolvent position with liabilities exceeding
assets.
The Company was also not able to settle its borrowing repayments as they became due in terms of the
original agreements, but was able after year end to renegotiate and extend the repayment of the borrowings
with the financiers so that these loans have been subordinated in favour of other creditors and that repayment
would only be required once the Company has sufficient cash resources to be able to settle the loan
repayments as they become due. During the period after year end and up to the date of this report, the
primary shareholders provided capital to fund the operational losses and cash shortfalls when required.
This was done in support of the business and its restructuring initiatives during the transition period. There
are no indication that the Company will not continue to receive similar support if required for the foreseeable
future.
During the 2016 financial period, revenue reduced as a result of a number of smaller contracts, contributing
annual revenue of approximately R2 million, coming to an end and not being renewed.
These losses, together with the operating restrictions experienced in the 24 months following the Business
Rescue process, continued to have a severe effect on the trading during the year.
During the period, the primary shareholders provided capital to fund the operational losses and cash shortfalls
when required. This was done in support of the business and its restructuring initiatives during the transition
period. There is no indication that the Company will not continue to receive similar support if required for the
foreseeable future.
The Company remains confident that a sustainable business model will be achieved and that external support
will not be required in the future. Since the discharge from Business Rescue as announced on SENS on 29
August 2014, the Company has managed to restructure the business to a sustainable level. TCS managed to
secure new profitable contracts, which include full service contracts for Polokwane (September 2014), Tlokwe
(May 2015) and Buffalo City (December 2015). It also includes a relationship with the Namibian Police,
whereby TCS will be providing services and equipment to support the traffic law enforcement expansion in
Namibia over the next few years.
Focus will also remain on equipment technology advances and service delivery to improve income from
existing contracts and confidently pursue new markets and contracts. In addition to the revenue initiatives,
the cost saving processes started during the Business Rescue period continued during 2016, and will continue
as part of an ongoing profitability improvement process.
The Board believes that as a result of the above, positive operating cash flows will be realised in the
foreseeable future. The Board determined the future cash flows of the Group when it assessed the going
concern status. Although due care has been exercised in the preparation of these forecasts, any forecast is
based on certain assumptions which may or may not materialise in the future.
Any forecast financial information contained in the year end results has not been reviewed and reported on
by the Group’s auditors in accordance with paragraph 8.40(a) of the Listings Requirements. However, the
Board is of the opinion that the mentioned positive developments combined with management processes and
initiatives implemented, makes the forecasts realistic and achievable.
The Group has come through an extremely difficult trading period and cash flow remains under constant
pressure. The key components of the Group continuing as a going concern is the ability to provide
sophisticated management systems and equipment to the market, maintain a low cost base, selectively
approach new tenders, considering strategic partnerships and co-operation agreements, and ensuring
existing contracts are profitable.
The cash flow forecasts and Going Concern assumptions are based on the following:
- no deterioration in the current market conditions;
- municipalities continue to outsource the administration of traffic violations;
- the Company is able to reduce and maintain its operational expenses in line with sales levels;
- no deterioration in the payment and collection cycle;
- the Company continues to have the ongoing support of all its stakeholders, especially key staff and
financiers;
- no repayment of loans is required during the foreseeable future; and
- the Company’s JSE listing to be re-instated.
Significant negative change in these areas of assumptions will require swift action and adjustment by the
Company in order to continue as a going concern.
These conditions underline the ever-present uncertain and variable circumstances in the market. Failure by
the Company to effectively operate under these conditions will be detrimental to the business. These
conditions give rise to a material uncertainty which may cast significant doubt about the Company’s ability
to continue as a going concern and, therefore that it may be unable to realise its assets and discharge its
liabilities in the normal course of business.
The financial information has been prepared on a going concern basis which presumes that the Group will
generate sufficient cash flows to enable it to service its debts in the normal course of business as and when
they become payable.
Contingent liabilities
There are no contingent liabilities at the end of the reporting period.
DIRECTORATE
The following changes to the Board occurred during the year under review, up to and including the date of
this report:
Director Detail Date
Christo Els Appointment 8 May 2014
Piet Nieman Appointment 9 December 2015
Francois Smit Resignation 21 November 2018
Dumisani Mafu Passed away 9 July 2016
By order of the Board
P Nieman
Acting Non-Executive Chairman
18 December 2018
Directors as at year end:
L Sipoyo, (CEO), C Els (Executive: Financial Director), P Nieman**, F Smit*
(*Independent Non-executive)
(** Non-executive)
Registered office:
Futurum Office Park, Units C1A and D2A
Lenchen Avenue
Centurion, 0157
(P.O. Box 863, Wingate Park, 0153)
Company secretary:
Merchantec Proprietary Limited
2nd Floor, North Block
Hyde Park Office Towers
Cnr 6th Road & Jan Smuts Ave
Hyde Park, 2196
Auditors:
BDO South Africa Incorporated
Summit Place Office Park
221 Garsfontein Road
Ashlea Gardens
Pretoria
0181
Designated Adviser:
Merchantec Capital
2nd Floor, North Block
Hyde Park Office Towers
Cnr 6th Road & Jan Smuts Ave
Hyde Park, 2196
Transfer secretaries:
Computershare Investor Services Proprietary Limited
Rosebank Towers, 15 Biermann Avenue, Rosebank, Johannesburg, 2196
(PO Box 61051, Marshalltown, 2107)
Company website:
www.tcsonline.co.za
www.viewfines.net
Date: 18/12/2018 04:15:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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