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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
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