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ALVIVA HOLDINGS LIMITED - Unreviewed Condensed Consolidated Interim Results for the six months ended 31 December 2018

Release Date: 06/03/2019 15:00
Code(s): AVV     PDF:  
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Unreviewed Condensed Consolidated Interim Results for the six months ended 31 December 2018

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”)

UNREVIEWED CONDENSED CONSOLIDATED INTERIM RESULTS
for the six months ended 31 December 2018

COMMENTARY

INTRODUCTION 

The Board of Directors presents Alviva’s unreviewed condensed 
consolidated interim financial results for the six months ended 
31 December 2018.    

OVERVIEW

The Group has produced largely satisfactory results for the 
period. Revenue has grown by 20%, helped to some degree by 
acquisitions made over the previous 18 months. The increased 
profitability from these acquisitions has largely been negated by 
the increase in the amortisation of the intangibles, recognised 
as a result of the purchase price allocation exercise conducted 
in terms of IFRS 3: Business Combinations. 

The vast majority of our operations are exposed to the South 
African economy and so, given that there has been little or no 
growth in South Africa during this period, it would be of no 
surprise to advise shareholders that this has been a challenging 
operating environment. 

The decrease in the weighted average number of shares at the end 
of December has largely been due to our share re-purchase 
programme and has assisted in delivering increased returns to 
shareholders. Headline earnings per share were up 10% to 146,2 
cents per share (cps) (H1 2018: 133,0 cps). 

The increase in our working capital and the consequent low cash 
generated from operations is largely due to the exceptionally low 
stockholding at the end of June 2018 and to the increased 
activity of the Group.

FINANCIAL RESULTS

SEGMENT PERFORMANCE

The ICT Distribution segment increased revenue by 17% and EBITDA 
by 16%. This has been a really good performance in a difficult 
market and all entities have contributed positively. The newly 
acquired entities, VH Fibre Optics Proprietary Limited, Obscure 
Enterprises Proprietary Limited and Tricon Services, have 
performed to or above expectations and have settled down well 
into the Group. Working capital at the end of December largely 
reflects the increase in revenue of the entities but stockholding 
was approximately R75 million higher than planned due to some 
stalled orders and stocking up for worldwide product shortages. 

The Services and Solutions segment increased its revenue by 25% 
but EBITDA only increased by 2%. The newly acquired entities have 
been successfully bedded down and performed well in line with our 
expectations. Datacentrix Proprietary Limited, however, had a 
challenging six months. There has not been any loss of customers 
but, in general, their customers are spending less and there were 
no significant projects executed during the period. The pipeline 
for all businesses in the segment is encouraging and all efforts 
are being applied to ensure a satisfactory execution into the 
future.

Centrafin Proprietary Limited (Financial Services segment) had a 
good six months with revenue growing by 6%. Initiatives set up 
last year are beginning to bear fruit and we are encouraged by 
the progress. EBITDA has decreased due to additional expenses 
incurred in our re-branding and diversification strategy. 

INVESTMENT ACTIVITIES AND FINANCIAL POSITION

Cash generated by operating activities in the six months was R130 
million, compared to R352 million for the comparable reporting 
period. This decrease was due to working capital increasing by 
R333 million since June 2018, which is mainly due to an increase 
in business activity in the ICT Distribution segment as well as 
the timing issues mentioned earlier. 

R160 million has been spent on the acquisitions finalised in the 
reporting period and a further R49 million has been utilised to 
increase our investment in Sintrex Integration Services 
Proprietary Limited. In addition, R53 million has been utilised 
to pay some of the contingent consideration, raised on 
acquisitions made in the previous year. There has been an 
increase in the finance lease receivables book of R128 million 
due to the positive growth in Centrafin. The share repurchase 
programme has continued with funds of R36 million being applied 
and R41 million has been returned to shareholders in the form of 
dividends paid.

These payments have been facilitated by using the majority of the 
cash resources held at the end of June 2018.

CORPORATE ACTIONS

TRICON SERVICES (“Tricon”) 

Alviva completed the acquisition of the Services Division of Tri-
Continental Limited (“Tri-Continental”) on 3 September 2018 for a 
cash consideration of approximately R75 million. Tri-Continental 
is an IT-based company in London and has operated in the African 
market for over 30 years. Alviva has been granted the right to 
use the naming rights to “Tricon Services” and it operates as a 
division within the Group.

Tricon Services has developed a services operation with a 
resource complement of 200 multi-disciplined certified IT 
resources that spans 37 countries in Central, East and West 
Africa (CEWA) and southern Africa. It services an extensive 
network of IT partners, customers and integrators through its 
long-term relationship with a number of major international IT 
vendors and suppliers.

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.

SINTREX INTEGRATION SERVICES PROPRIETARY LIMITED (“Sintrex”) 

On 22 October 2018, Alviva, through its subsidiary DCT Holdings 
Proprietary Limited (“DCT”), exercised its option to acquire a 
further 59 shares in Sintrex for R49 million, giving DCT a 75.3% 
shareholding in Sintrex. The consideration was settled in cash. 

OBSCURE ENTERPRISES PROPRIETARY LIMITED (“Obscure”)

On 27 October 2018 Alviva, through its subsidiary DCT, acquired 
the balance of the equity (28%) that it did not own of Obscure. 
As previously announced in the financial results as at and for 
the period ended 30 June 2018, the total purchase price would be 
determined and paid on a formula (“formula”) that was based on 
the profits for the financial years ending 30 June 2020, 2021 and 
2022. This has subsequently been changed by agreement between all 
of the parties and the purchase price will now be determined and 
paid on the formula based on the profits for the financial years 
ending 30 June 2019, 2020 and 2021. Other terms remain the same.  
There has not yet been any cash consideration paid to date as it 
is based on an earn out and remains a contingent liability based 
on the future profitability of Obscure.

MERLYNN INTELLIGENCE TECHNOLOGIES PROPRIETARY LIMITED (“Merlynn”)

On 13 November 2018, Alviva acquired 65% of the equity of Merlynn 
for a total consideration of R94 million.

Merlynn is an artificial intelligence developer that is noted for 
its ability to “clone” specific human expertise as opposed to 
data mining. The Merlynn TOM technology appears to be unique in 
the market in this regard. Merlynn’s business is to create 
technologies that harness human expertise in a fast, effective, 
and accessible manner. The focus is on the financial and 
insurance sectors both locally and overseas. 

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.

CHANGES TO THE BOARD AND COMMITTEES

There have been no changes to the Board or any of its Committees 
for the period under review.

EVENTS AFTER THE REPORTING PERIOD

There were no events material to the understanding of the report 
that occurred in the period between the reporting date and the 
publication date of this report.

DIVIDENDS

In line with previous periods, no interim dividend is proposed 
for the period under review.

PROSPECTS AND STRATEGIC INITIATIVES

The outlook for the year to 30 June 2019 is positive with 
earnings per share expected to be above those of June 2018. Our 
new acquisitions should contribute positively to the Group 
although we expect business activity to remain subdued until 
after the general election in May 2019. 

Any forward-looking statement has not been reviewed nor reported 
on by the Company’s external auditors.

For and on behalf of the Board

A Tugendhaft                            P Spies 
Chairperson                             Chief Executive Officer

Midrand
6 March 2019

CONDENSED CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER 
COMPREHENSIVE INCOME

                                                        Twelve
                                Six          Six        months
                             months       months         ended
                              ended        ended        30 Jun
                             31 Dec       31 Dec          2018
                               2018         2017       Audited
                              R’000        R’000         R’000

Revenue (note 2)          7 721 683    6 427 676    13 628 916 
Cost of sales            (6 398 562)  (5 278 166)  (11 219 810)
Gross profit              1 323 121    1 149 510     2 409 106 
Operating expenses         (863 276)    (746 943)   (1 588 623)
Selling expenses            (33 197)     (29 240)*     (61 688)*
Employee benefit expenses  (671 807)    (610 264)   (1 273 532)
Administration expenses    (155 290)    (106 707)     (237 749)
Impairment loss/
 (reversal) on trade 
 receivables                (11 929)         295*      (34 235)*
Profit on disposal of 
 property, plant and 
 equipment                      243          567           634 
Gain on discounting of 
 finance lease 
 agreements                   1 917        1 565         2 656 
Gain/(loss) on foreign 
 exchange differences         6 787       (3 159)       15 291 
EBITDA **                   459 845      402 567       820 483 
Depreciation and 
 amortisation               (89 058)     (52 190)     (130 354)
Operating profit 
 before interest            370 787      350 377       690 129 
Net finance costs           (64 108)     (62 764)     (121 257)
Finance income               22 152       17 426        39 909
Finance costs               (86 260)     (80 190)     (161 166)
Profit before tax           306 679      287 613       568 872
Income tax expense          (89 484)     (80 586)     (151 548)
Profit for the period       217 195      207 027       417 324
 – Owners of the 
    Company                 213 729      208 993       421 707
 – Non-controlling 
    interests                 3 466       (1 966)       (4 383)
Other comprehensive income            
 – Items that may be 
    reclassified to profit 
    or loss net of tax:       1 636       (1 701)        1 136
Exchange differences 
 from translating 
 foreign operations           1 636       (1 153)        1 684
Cash flow hedge                   –         (548)         (548)
Total comprehensive 
 income for the period      218 831      205 326       418 460
 – Owners of the 
    Company                 215 365      207 292       422 843
 – Non-controlling 
    interests                 3 466       (1 966)       (4 383)
Earnings per ordinary 
 share (cents) 
 – Basic earnings per 
    ordinary share 
    (note 3)                  146,3        133,2         273,5
 – Diluted earnings 
    per ordinary share 
    (note 3)                  143,0        131,2         269,4

*  The comparative information is presented merely for the 
   purpose of comparison between the various reporting periods by 
   the user. Refer to note 1 for the change in significant 
   accounting policies.
** Earnings before interest, tax, depreciation and amortisation.

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

                                                         As at
                              As at        As at        30 Jun
                             31 Dec       31 Dec          2018
                               2018         2017       Audited
                              R’000        R’000         R’000

ASSETS            
Non-current assets        1 816 923    1 307 152     1 554 618 
Property, plant and 
 equipment                  124 766      108 475       120 697 
Intangible assets 
 and goodwill             1 016 559      693 408       847 153 
Investment in 
 equity-accounted 
 investees                   64 678            –        62 077 
Finance lease 
 receivables                546 971      440 380       449 930 
Deferred tax                 63 949       64 889        74 761 
Current assets            4 471 064    3 946 956     4 271 704 
Inventory (note 8)        1 093 337      931 920       774 111 
Trade and other 
 receivables              2 905 477    2 486 594     2 537 275 
Finance lease 
 receivables                261 008      251 505       230 508 
Current tax receivable       19 319           38        38 352 
Cash and cash 
 equivalents                191 923      276 899       691 458 
Total assets              6 287 987    5 254 108     5 826 322
EQUITY AND LIABILITIES            
Capital and reserves      2 314 480    2 135 574     2 227 404
Stated capital                1 507        1 646         1 584
Treasury shares             (89 808)    (107 824)     (129 090)
Other equity reserves        59 164       35 713        54 268
Retained earnings         2 258 826    2 145 604     2 211 329
Non-controlling 
 interests                   84 791       60 435        89 313
Non-current 
 liabilities              1 020 256      667 208       943 016 
Interest-bearing 
 liabilities                805 103      543 822       749 636 
Non-interest-bearing 
 liabilities                 89 267       39 841        98 635 
Contract liabilities         31 818       28 575        11 327 
Deferred tax                 94 068       54 970        83 418 
Current liabilities       2 953 251    2 451 326     2 655 902 
Trade and other 
 payables                 2 754 034    2 250 356     2 364 929 
Interest-bearing 
 liabilities                  9 292        6 199        42 019 
Non-interest-bearing 
 liabilities                 62 642       25 555        68 850 
Contract liabilities        107 137      155 026       157 235 
Current tax payable          20 146       14 190        22 869 
Total equity and 
 liabilities              6 287 987    5 254 108     5 826 322 

ADDITIONAL INFORMATION            

Capital management  
Net asset value per 
 share (cents)              1 536,0      1 341,1       1 453,6 
Net tangible asset 
 value per share (cents)      835,7        893,0         877,7 
Working capital management 
Investment in working 
 capital (R'000)          1 137 643    1 013 132       789 222
Liquidity and solvency   
Debt to equity (%)             36,5         26,5          37,0 
Current ratio (excluding 
 inventory in transit)         1,54         1,63          1,64 
Acid test (excluding 
 inventory in transit)         1,20         1,27          1,39

This information does not form part of the statement of financial 
position but is disclosed as additional information for the user.   

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

                                                        Twelve
                                Six          Six        months
                             months       months         ended
                              ended        ended        30 Jun
                             31 Dec       31 Dec          2018
                               2018         2017       Audited
                              R’000        R’000         R’000

Opening balance           2 227 404    2 020 223     2 020 223 
Ordinary shares 
 repurchased                (35 701)     (86 239)     (223 486)
Treasury shares 
 purchased *                      –       (9 328)      (30 598)
Total comprehensive 
 income                     218 831      205 326       418 460
Profit for the period       217 195      207 027       417 324 
Other comprehensive 
 income                       1 636       (1 701)        1 136 
 – Foreign currency 
    translation reserve 
    movements                 1 636       (1 153)        1 684 
 – Cash flow hedge 
    reserve movements             –         (548)         (548)
Transactions with 
 non-controlling 
 interests **               (58 620)      41 042        71 245 
Equity-settled 
 share-based payment 
 transaction                  3 260        4 212        11 222 
Dividend paid               (40 694)     (39 662)      (39 662)
Closing balance           2 314 480    2 135 574     2 227 404 
Attributable to:            
Owners of the Company     2 229 689    2 075 139     2 138 091 
Non-controlling 
 interests                   84 791       60 435        89 313

 * These shares include shares purchased and not cancelled to 
   service the forfeitable share plan.
** Excluding net profit attributable to non-controlling 
interests.

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS  

                                                        Twelve
                                Six          Six        months
                             months       months         ended
                              ended        ended        30 Jun
                             31 Dec       31 Dec          2018
                               2018         2017       Audited
                              R’000        R’000         R’000

Profit before tax           306 679      287 613       568 872 
Adjusted for:            
Finance income              (22 152)     (17 426)      (39 909)
Finance cost                 86 260       80 190       161 166 
Non-cash items               92 075       59 123       140 087 
 – Profit on disposal of 
 property, plant and 
 equipment (included 
 in EBITDA)                    (243)        (567)         (634)
 – Depreciation and 
    amortisation             89 058       52 190       130 354 
 – Equity-settled 
    share-based payment 
    expense                   3 260        4 212        11 222 
 – Other non-cash items           –        3 288          (855)
Changes in working 
 capital                   (333 163)     (57 313)      218 884
Cash generated by 
 operating activities       129 699      352 187     1 049 100
Net finance costs           (64 108)     (62 764)     (121 257)
Finance income received      22 152       17 426        39 909 
Finance expenses paid       (86 260)     (80 190)     (161 166)
Tax paid                    (89 301)     (77 559)     (186 364)
                            (23 710)     211 864       741 479
Cash flows from 
 investing activities  
Acquisition of property, 
 plant and equipment        (26 699)     (18 989)      (47 394)
Proceeds on disposals 
 of property, plant 
 and equipment                1 297          585         5 059 
Acquisition of 
 intangible assets           (6 079)     (15 215)      (26 447)
Advances of loans to 
 equity-accounted 
 investees                   (2 601)           –       (62 077)
Acquisition of 
 subsidiaries              (159 550)    (150 669)     (243 069)
Net investment in 
 finance lease 
 receivables               (127 541)     (44 842)      (34 111)
                           (321 173)    (229 130)     (408 039)
Cash flows from 
 financing activities 
Proceeds from 
 interest-bearing 
 liabilities                 24 000       36 000       235 619 
Repayment of 
 interest-bearing 
 liabilities                 (6 099)      (7 703)            –
Repayment of 
 non-interest-bearing 
 liabilities                (52 576)         400             –
Repurchase of shares        (35 701)     (95 567)     (254 084)
Acquisition of 
 non-controlling 
 interests                  (51 294)           –             –
Dividends paid              (40 694)     (39 662)      (39 662)
                           (162 364)    (106 532)      (58 127)
(Decrease)/increase 
 in net cash, cash 
 equivalents and 
 overdrafts                (507 247)    (123 798)      275 313 
Net cash acquired 
 from business 
 combinations                 6 076       10 199        24 701 
Net cash, cash 
 equivalents at 
 beginning of the period    691 458      389 760       389 760  
Effects of exchange 
 rate changes on the 
 balance of cash held in 
  foreign currencies          1 636          738         1 684
Net cash, cash 
 equivalents at end of 
 the period                 191 923      276 899       691 458

SEGMENT ANALYSIS

                                                        Twelve
                                Six          Six        months
                             months       months         ended
                              ended        ended        30 Jun
                             31 Dec       31 Dec          2018
                               2018         2017       Audited
                              R’000        R’000         R’000

REVENUE 
ICT Distribution          5 800 811    4 954 474    10 440 627 
Services and Solutions    2 195 894    1 757 821     3 685 842 
Financial Services           92 381       87 476       175 315 
Less: Intra-segment 
 revenue                   (367 403)    (372 095)     (672 868)
                          7 721 683    6 427 676    13 628 916 
EBITDA * 
ICT Distribution            260 888      224 894       458 509
Services and Solutions      126 635      124 051       235 673 
Financial Services           58 711       61 408       115 926 
Group Central Services       13 611       (7 786)       10 375 
                            459 845      402 567       820 483 
RECONCILIATION OF PROFIT 
Segment EBITDA              459 845      402 567       820 483 
Depreciation and 
 amortisation               (89 058)     (52 190)     (130 354)
Net finance costs           (64 108)     (62 764)     (121 257)
Profit before tax           306 679      287 613       568 872 
NET OPERATING ASSETS 
ICT Distribution          1 142 669    1 001 659     1 144 079 
Services and Solutions      635 343      598 605       611 195 
Financial Services          216 407      172 975       193 429 
Group Central Services      320 061      362 335       278 701 
                          2 314 480    2 135 574     2 227 404

* Earnings before interest, tax, depreciation and amortisation.

The segments of the entity are based on the information reported 
to the chief operating decision maker (CEO) and have not changed 
from the prior reporting period.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL RESULTS  

1.  SALIENT FEATURES OF THE CONDENSED CONSOLIDATED INTERIM 
    FINANCIAL STATEMENTS

    The condensed consolidated interim financial statements 
    comprise the condensed consolidated statement of financial 
    position at 31 December 2018, the condensed consolidated 
    statements of profit or loss and other comprehensive income, 
    changes in equity and cash flows and notes for the period 
    then ended. When reference is made to the “Group” in the 
    accounting policies, it should be interpreted as referring to 
    the Company, where the context requires, unless otherwise 
    noted.

    RESPONSIBILITY FOR INTERIM RESULTS

    The Board takes full responsibility for the preparation of 
    the condensed consolidated interim financial statements. The 
    directors are also responsible for such internal control as 
    the directors determine is necessary to enable the 
    preparation of the condensed consolidated interim financial 
    statements that are free from material misstatement, whether 
    owing to fraud or error.

    BASIS OF PREPARATION AND STATEMENT OF COMPLIANCE

    The condensed consolidated interim financial statements for 
    the six months ended 31 December 2018 have been prepared in 
    accordance with the Group’s accounting policies under the 
    supervision of the Group Financial Director, Richard Lyon CA, 
    and comply with 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 Listings Requirements for 
    interim reports of the JSE Limited, the requirements of the 
    Companies Act of South Africa (Act 71 of 2008), as amended 
    and, as a minimum, contain all of the information required by 
    IAS 34: Interim Financial Reporting.

    The condensed consolidated interim financial statements 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.

    The condensed consolidated interim financial statements do 
    not include all the information and disclosures required in 
    the consolidated annual financial statements, and should be 
    read in conjunction with the Group’s audited consolidated 
    annual financial statements as at and for the period ended 30 
    June 2018.

    Neither the condensed consolidated interim financial 
    statements as at and for the six months period ended 31 
    December 2017, nor this set of condensed consolidated interim 
    financial statements information and disclosure, have been 
    reviewed or audited by the Company’s auditors, 
    SizweNtsalubaGobodo Grant Thornton Incorporated.

    ACCOUNTING POLICIES, ESTIMATES AND JUDGEMENTS

    The accounting policies, inclusive of reasonable judgements 
    and assessments, applied in the condensed consolidated 
    interim financial statements, are consistent with those 
    applied in the preparation of the audited consolidated annual 
    financial statements as at and for the period ended 30 June 
    2018 except for new standards adopted as of 1 July 2018. The 
    accounting policies applied comply with IFRS.

    The Group has initially applied IFRS 15 and IFRS 9 from 1 
    July 2018. Other new standards are also effectively applied 
    from 1 July 2018 but they do not have a material effect on 
    the condensed consolidated interim results.

    IFRS 9: FINANCIAL INSTRUMENTS (“IFRS 9”)

    The Group has taken advantage of the exemption in IFRS 9 from 
    restating prior periods in respect of the classification and 
    measurement (including impairment) requirements of IFRS 9.

    As a result of the adoption of IFRS 9, the Group has adopted 
    sequential amendments to IAS 1: Presentation of Financial 
    Statements, which require the impairment of financial assets 
    to be presented in a separate line item in profit or loss. 
    Previously, the Group’s approach was to include the 
    impairment of trade receivables in other expenses. The 
    reclassification presented in profit or loss is merely for 
    the user of the condensed consolidated financial statements 
    in relation to comparability and not regarded as a 
    restatement.

    The adoption of IFRS 9 has not had a material impact on the 
    Group’s accounting policies in relation to financial assets 
    and liabilities.  

    IFRS 15: REVENUE FROM CONTRACTS WITH CUSTOMERS (“IFRS 15”)

    The Group has adopted IFRS 15 using the cumulative effect 
    method, with the effect of initially applying this standard 
    at the date of initial application i.e. 1 July 2018. 
    Accordingly, information presented, as previously reported, 
    has not been restated.

    The adoption of IFRS 15 did not have a material impact on the 
    Group’s accounting policies with respect to the various 
    revenue streams.

    No other standard, interpretation or amendment that has been 
    issued but is not yet effective, has been early adopted by 
    the Group.

    The preparation of the consolidated annual financial 
    statements in conformity with IFRS requires management to 
    make judgements, estimates and assumptions that affect the 
    application of accounting policies and the reported amounts 
    of assets, liabilities, income and expenses. The estimates 
    and associated assumptions are based on historical experience 
    and various other factors that are believed to be reasonable 
    under the circumstances, the results of which form the basis 
    of making the judgements about carrying values of assets and 
    liabilities that are not readily apparent from other sources.

    Actual results may differ from these estimates. Estimates and 
    underlying assumptions are reviewed on an ongoing basis. 
    Changes to accounting estimates are recognised in the period 
    in which the estimates are revised and in any future periods 
    affected.

    NEW STANDARDS AND INTERPRETATIONS NOT YET ADOPTED

    A new standard, IFRS 16: Leases, has been issued by the 
    International Accounting Standards Board prior to the 
    publication of these condensed consolidated financial 
    statements, but is only effective in future accounting 
    periods. The impact of the assessment of this standard has 
    been fully disclosed in the audited consolidated annual 
    financial statements as at and for the period ended 30 June 
    2018. Management still assesses the impact to be material.

    PRESENTATION CURRENCY 

    The condensed consolidated interim financial statements are 
    presented in South African Rands, the functional currency of 
    the Group. All amounts are rounded to the nearest thousand, 
    except where another rounding measure has been indicated in 
    the condensed consolidated interim financial statements.

    COMPARATIVE FIGURES

    Unless otherwise indicated, comparative figures refer to the 
    six months ended 31 December 2017 and to the year ended 30 
    June 2018, respectively.

    FINANCIAL RISK MANAGEMENT

    The Group’s financial risk management objectives and policies 
    are consistent with those disclosed in the audited 
    consolidated annual financial statements as at and for the 
    year ended 30 June 2018.

2.  REVENUE
    The Group’s operations and main revenue streams are those 
    described in the last annual financial statements. The 
    Group’s revenue is derived from contracts with customers and 
    the effect of initially applying IFRS 15 on the Group’s 
    interim financial statements is described in note 1.

    The Group has initially applied IFRS 15 at 1 July 2018. Under 
    the transition method chosen, comparative information is not 
    restated.

    DISAGGREGATION OF REVENUE 

    In the following table, revenue is disaggregated by sector 
    and timing of revenue recognition. The table also includes a 
    reconciliation of the disaggregated revenue with the Group’s 
    reportable segments (refer to segment analysis).

                                  Six months ended 31 Dec 2018 
                                             R’000
                                  At a       Over a
                                 point       period
    Sector                     in time      of time        Total

    ICT Distribution         5 705 206       95 605    5 800 811
    Services and Solutions   1 394 585      801 309    2 195 894
    Financial Services               –       92 381       92 381
                             7 099 791      989 295    8 089 086
    Less:  Intra-segment 
    Revenue                                             (367 403)
                                                       7 721 683

3.  FINANCIAL REVIEW

                                                          Twelve
                                   Six          Six       months
                                months       months        ended
                                 ended        ended       30 Jun
                                31 Dec       31 Dec         2018
                                  2018         2017      Audited

    Performance per 
     ordinary share (cents) 
    Basic and diluted 
     earnings per ordinary 
     share  
     – Basic earnings per 
        ordinary share           146,3        133,2        273,5
     – Diluted earnings per 
        ordinary share           143,0        131,2        269,4
    Headline basic and 
     diluted earnings per 
     ordinary share 
     – Basic headline 
        earnings per ordinary 
        share                    146,2        133,0        273,2
     – Diluted headline 
        earnings per ordinary 
        share                    142,8        131,0        269,1
    Core and diluted 
     earnings per ordinary 
     share 
     – Basic core earnings 
        per ordinary share       172,4        142,8        302,2 
     – Diluted core earnings 
        per ordinary share       168,5        140,7        297,7 
    Returns (%) 
    Gross profit                  17,1         17,9         17,7 
    Operating expenses           (11,3)       (11,6)       (11,7)
    EBITDA *                       6,0          6,3          6,0 
    Operating profit before 
     interest and tax              4,8          5,5          5,1 
    Effective tax rate            29,2         28,0         26,6 
    Net profit                     2,8          3,2          3,1 
    Return on equity              19,9         20,5         20,4

   * Earnings before interest, tax, depreciation and 
     amortisation.

4.  RECONCILIATION OF HEADLINE AND CORE EARNINGS

                                                          Twelve
                                   Six          Six       months
                                months       months        ended
                                 ended        ended       30 Jun
                                31 Dec       31 Dec         2018
                                  2018         2017      Audited
                                 R'000        R'000        R'000
    Earnings attributable to 
     ordinary shareholders     213 729      208 993      421 707 
    Profit on sale of 
     property, plant and 
     equipment net of tax         (175)        (408)        (456)
    Profit on sale of 
     property, plant and 
     equipment                    (243)        (567)        (634)
    Less: Tax thereon               68          159          178 
    Headline earnings          213 554      208 585      421 251 
    Acquisition costs net 
     of tax                      1 437        1 029        2 869 
    Amortisation of 
     intangible assets 
     net of tax                 36 900       14 454       41 910 
    Core earnings **           251 891      224 068      466 030 
    Number of ordinary 
     shares in issue ('000) 
    – Total number of shares 
       in issue *              145 160      154 731      147 087  
    – Weighted average number 
       of shares in issue *    146 106      156 867      154 192  
    – Weighted average number 
       of shares in issue 
       for purpose of 
       dilution *              149 507      159 252      156 536

  * Adjusted for treasury shares.

 ** Core earnings per ordinary share is considered a meaningful 
    additional measure of evaluating the performance of the 
    Group’s operations. It is based on the headline earnings 
    measure and adjusted to exclude the amortisation cost of 
    intangible assets recognised in terms of business 
    combinations and related business combination acquisition 
    costs. This is not an IFRS measure.

5.  ANALYSIS OF GOODWILL

                                                           Twelve
                                   Six          Six        months
                                months       months         ended
                                 ended        ended        30 Jun
                                31 Dec       31 Dec          2018
                                  2018         2017       Audited
                                 R'000        R'000         R'000

    Opening balance            564 235      347 846       347 846 
    Business combinations 
     during the period          93 871      113 039       216 389 
      Gridcars Proprietary 
       Limited                       –        2 772             –
      Sintrex Integration 
       Services Proprietary 
       Limited                       –       61 426        61 426 
      VH Fibre Optics 
       Proprietary Limited           –       48 841        48 841 
      Obscure Enterprises 
       Proprietary Limited           –            –        39 696 
      DG Store (SA) 
       Proprietary Limited           –            –        66 426 
      Tricon Services           38 265            –             –
      Merlynn Intelligence 
       Technologies 
       Proprietary Limited      55 606            –             –
    Closing balance            658 106      460 885       564 235

6.  BUSINESS COMBINATIONS
    6.1  TRICON SERVICES (“Tricon”)
         On 3 September 2018, Alviva, through its subsidiary Axiz 
         Proprietary Limited, purchased the services and service 
         desk cash-generating unit of Tri-Continental Limited 
         (“Tri-Continental”) for a cash consideration of 
         approximately R74,55 million. 

         Tri-Continental is an IT-based company in London and has 
         operated in the African market for over 30 years. Alviva 
         has been granted the right to use the naming rights to 
         Tricon Services and it operates as a division within the 
         Group. 

         Tricon has developed an operation in Central, East and 
         West Africa (CEWA) as well as in southern Africa and 
         continues to service an extensive channel of IT partners 
         and customers through its long-term relationship with 
         IBM and Lenovo. In terms of the strategy adopted by the 
         Group, the Board of Directors identified the solutions 
         offering of Tricon as a complimentary 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 four months to the reporting date, Tricon 
         contributed revenue of R37,7 million and profit of R7,7 
         million to the Group’s results. If the acquisition had 
         occurred at the beginning of the reporting period, the 
         contributions would have remained unchanged.   

         The total consideration was settled in cash by way of 
         electronic transfer during September 2018.   

         The fair value of the identifiable assets and 
         liabilities included in the consolidated results of 
         Alviva Holdings Limited on the date of acquisition, 
         compared to the carrying amounts of the identifiable 
         assets and liabilities recognised in the accounting 
         records of the acquiree immediately before the 
         acquisition, was as follows: 

                                                       Previously
                                         Fair value    recognised
                                      recognised at      carrying
                                        acquisition     amount by 
                                               date      acquiree
                                              R'000         R'000

         Intangible assets                   50 395             –
         Total assets                        50 395             –
         Deferred tax                       (14 110)            –
         Total liabilities                  (14 110)            –
         Identifiable net assets             36 285    
         Non-controlling interest                 - 
         Acquirer's interest                 36 285 
         Purchase consideration              74 550 
         Goodwill on acquisition             38 265 
 
         Cash flow information 
         Cash and cash 
          equivalents acquired                    – 

         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.

         No trade debtors or receivables were acquired.   
 
         The goodwill from 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.

    6.2  MERLYNN INTELLIGENCE TECHNOLOGIES PROPRIETARY LIMITED 
         (“Merlynn”)
         On 13 November 2018, the Group obtained control of 
         Merlynn Intelligence Technologies Proprietary Limited 
         (“Merlynn”) by acquiring a 65% interest in the issued 
         stated capital and voting rights of the company.

         Merlynn is in the business of replicating and scaling 
         human expertise through the technology of artificial 
         intelligence. In terms of the strategy adopted by the 
         Group, the Board of Directors identified the solutions 
         offering of Merlynn 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, Merlynn 
         contributed revenue of R2,6 million and profit of 
         R183 000 to the Group’s results. If the acquisition had 
         occurred at the beginning of the reporting period, 
         Merlynn would have contributed revenue of R7,7 million 
         and profit of R915 000 to the Group’s results.

         R85 million of the total consideration was settled in 
         cash by way of electronic transfer during November 2018. 
         Contingent consideration estimated at R9 million, based 
         on the audited results of the 2020 reporting period, has 
         been recognised. The total consideration recognised in 
         terms of this business combination amounts to 
         R94 million.

         The fair value of the identifiable assets and 
         liabilities included in the consolidated results of 
         Alviva Holdings Limited on the date of acquisition, 
         compared to the carrying amounts of the identifiable 
         assets and liabilities recognised in the accounting 
         records of the acquiree immediately before the 
         acquisition, was as follows:

                                                      Previously
                                         Fair value   recognised
                                      recognised at     carrying
                                        acquisition    amount by 
                                               date     acquiree
                                              R'000        R'000

         Property plant and equipment         2 750        2 750 
         Intangible assets                   83 792            –
         Investments                              1            1 
         Deferred tax                           531          531 
         Trade and other receivables          1 402        1 402 
         Cash and cash equivalents            6 076        6 076 
         Total assets                        94 552       10 760 
         Other financial liabilities         (4 839)      (4 839)
         Deferred tax on intangible 
          asset: customer relationship      (23 462)            –
         Trade and other payables              (435)        (435)
         Contract liabilities                (6 200)      (6 200)
         Current tax                           (548)        (548)
         Total liabilities                  (35 484)     (12 022)
         Identifiable net assets             59 068       (1 262)
         Non-controlling interest           (20 674) 
         Acquirer's interest                 38 394 
         Purchase consideration              94 000 
         Goodwill on acquisition             55 606 
         The impact on the statement of 
          cash flows of the acquisition 
          was as follow: 
         Consideration to be settled 
          by cash                            85 000 
         Cash and equivalents at 
          acquisition date                   (6 076) 
         Net cash outflow of acquisition     78 924 

         The total intangible assets acquired are classified as 
         customer relationships due to the fact that the TOM 
         software, 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 from this business combination will have no 
         impact on the tax asset or liability of the acquirer or 
         acquiree.

7.  CHANGES TO NON-CONTROLLING INTERESTS

    7.1  SINTREX INTEGRATION SERVICES PROPRIETARY LIMITED 
         (“Sintrex”) 

         Effective 31 October 2017, Alviva, through its 
         subsidiary DCT Holdings Proprietary Limited (“DCT”), 
         entered into an agreement to acquire 51% of the 
         shareholding in Sintrex for R102 million with an option 
         to acquire a further 24% within a two-year period 
         following the effective date of the transaction.

         The option was exercised during the current financial 
         period and on 22 October 2018, DCT acquired the 
         remaining 24% for an amount of R49 million.

    7.2  OBSCURE ENTERPRISES PROPRIETARY LIMITED (“Obscure”)

         With effect from 1 February 2018, Alviva, through its 
         subsidiary DCT, acquired 72% of the equity of Obscure 
         for a total estimated contingent purchase consideration 
         of R72 million based on future earnings.

         On 27 October 2018, the Group acquired the remaining 28% 
         of Obscure for an estimated contingent consideration of 
         R28 million on the same terms and conditions.  

8.  INVENTORY ANALYSIS

                                                           Twelve
                                   Six          Six        months
                                months       months         ended
                                 ended        ended        30 Jun
                                31 Dec       31 Dec          2018
                                  2018         2017       Audited
                                 R'000        R'000         R'000

    Inventory on hand          900 369      815 392       635 285 
    Inventory in transit       145 754       82 236       112 729 
    Work in progress            47 214       34 292        26 097 
                             1 093 337      931 920       774 111

9.  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. 

    The following table presents the Group’s material financial 
    instrument that is measured at fair value:

                                                          Twelve
                                   Six          Six       months
                                months       months        ended
                                 ended        ended       30 Jun
                                31 Dec       31 Dec         2018
                                  2018         2017      Audited
                    Level        R'000        R'000        R'000

    Contingent 
     consideration      3      135 168*           –      150 761*

    * The contingent consideration is classified as part of the 
      non-interest-bearing liabilities in the statement of 
      financial position.

    The fair value of financial instruments traded in active 
    markets is based on quoted market prices, which represent 
    actual and regularly occurring market transactions between 
    market participants at the reporting date. 

    The fair value of financial instruments that are not traded 
    in an active market (for example, over-the-counter 
    derivatives) is determined by using valuation techniques. If 
    all significant inputs required to fair value an instrument 
    are observable, the instrument is included in level 2.

    If one or more of the significant inputs are not based on 
    observable market data, the instrument is included in level 
    3.

    The fair value of contingent consideration was determined at 
    the reporting date using the discounted cash flow method. The 
    inputs into the model included the expected cash flows in 
    terms of the performance conditions of the acquirees, based 
    on internally prepared budget and forecasted estimates, 
    discounted at an intrinsic borrowing rate of the treasury 
    function of the Group. Based on the expected timing of the 
    cash flows related to the contingent consideration and the 
    respective acquisition dates of the respective entities, the 
    fair value at the reporting date approximates the contingent 
    consideration recognised on the acquisition dates of the 
    business combinations. 

    For all other financial assets and liabilities, the carrying 
    value is considered to approximate the fair value.

Midrand
6 March 2019 
 
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 * (Chairperson), 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 Grant Thornton 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

www.alvivaholdings.com

Date: 06/03/2019 03:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE'). 
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