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Pro Forma Financial Information and Amplification of Note 11.3 Pertaining to the 2017 Annual Financial Statements
CONDUIT CAPITAL LIMITED
Incorporated in the Republic of South Africa
(Registration number: 1998/017351/06)
Share code: CND ISIN: ZAE000073128
(“Conduit” or “the Group”)
PRO FORMA FINANCIAL INFORMATION AND AMPLIFICATION OF NOTE 11.3 PERTAINING TO THE
2017 ANNUAL FINANCIAL STATEMENTS
Following the conclusion of the JSE’s proactive monitoring process in respect of Conduit’s Annual
Financial Statements for the 2017 financial year, shareholders are advised of the following
amendments thereto as it pertains to the Tables included in the “CFO’s Letter to Shareholders” (which
is deemed to constitute pro forma financial information) as well as to “Note 11.3 - Restatement of
Comparative Numbers”. The information below replaces the information included in the Annual
Financial Statements for the 2017 financial year.
Pro forma financial information
The adjusted information in Tables 1, 2 and 3 below is the responsibility of the Group’s Board of
Directors and is presented for illustrative purposes only. Due to the nature of this information, it may
not fairly present the Group’s financial position, changes in equity and results of operations or cash
flows. The pro forma information has been compiled in terms of the JSE Listings Requirements and
the Revised Guide on Pro Forma Information by SAICA and the accounting policies of the Group as at
30 June 2017. The illustrative information has been derived from the Group’s audited financial
information and has been reported on in an independent Reporting Accountant’s assurance report
which can be found on the Group’s website at www.conduitcapital.co.za.
The pro forma information in Table 1 below is presented to demonstrate how certain contributing
items to the Group’s Statement of Changes in Equity for the 2017 financial year would have reflected
differently if:
1. the date on which the Midbrook Lane Proprietary Limited (“Midbrook”) and Snowball Wealth
Proprietary Limited (“Snowball”) transactions became effective on 19 July 2016, i.e. the date on
which it was agreed that the two entities would be acquired by Conduit, rather than the actual
effective dates of 2 February 2017 and 30 March 2017, respectively; and
2. a special dividend from Anthony Richards and Associates Proprietary Limited (“ARA”) was
accounted for on an equity accounted basis (i.e. as if the entity was reflected as an associate),
rather than as an asset held for sale and how such change would have impacted the impairment
of the investment in ARA.
These tables should be read in conjunction with the section a. Net asset value/shareholders’ equity on
pages 10 and 11 of the Group’s Integrated Annual Report for 2017 (“IAR”).
Table 1 – STATEMENT of CHANGES in EQUITY (WITH EXPANDED RETAINED INCOME SECTION)
Equity Total per
attribu- audited
table to Non- statement Our
Stated Share Treasury Retained owners of controlling of changes Adjust- represent-
capital premium shares income the parent interest in equity ment tation
R'000 R'000 R'000 R'000 R'000 R'000 R'000 R’000 R’000
Balance as at 30 June 2016, per the June 2016 Integrated Report 3,314 319,881 - 254,727 577,922 346 578,268 - 578,268
Correction of prior period errors (refer note 11.1 to the Annual
Financial Statements (“AFS”)) - - - (16,122) (16,122) - (16,122) - (16,122)
Revised balance as at 30 June 2016 3,314 319,881 - 238,605 561,800 346 562,146 - 562,146
Issue of share capital1 651,319 - - - 651,319 - 651,319 (19,062) 632,257
Treasury stock acquired through subsidiaries2 - - (127,911) - (127,911) - (127,911) 3,424 (124,487)
Total comprehensive loss for the year3 - - - (136,695) (136,695) (36) (136,731) 15,638 (121,093)
- Change in Midbrook and Snowball fair value since acquisition4 - - - 22,232 22,232 - 22,232 (25,770) (3,538)
- Expenses incurred in acquiring Midbrook and Snowball5 - - - (6,101) (6,101) - (6,101) - (6,101)
- Impairment of goodwill paid on Midbrook and Snowball acquisition6 - - - (41,408) (41,408) - (41,408) 41,408 -
- ARA excess dividend received7 - - - 12,800 12,800 - 12,800 (12,800) -
1 The “Our representation” column reflects what the value of the Midbrook and Snowball consideration would have been if all Conduit shares were issued on 19 July 2016 at
245 cents each, rather than at 259 cents and 250 cents (the Conduit share prices as at the Midbrook and Snowball transactions’ effective dates of 2 February 2017 and
30 March 2017, respectively).
2 The “Our representation” column reflects what the value of the treasury stock acquired with Midbrook and Snowball would have been if the effective date of the transactions
were 19 July 2016, rather than 2 February 2017 and 30 March 2017, respectively.
3 The “Our representation” column reflects what the total comprehensive loss for the year would have been if the effective date of the Midbrook and Snowball transactions
were 19 July 2016, rather than 2 February 2017 and 30 March 2017, respectively.
4 Changes in the fair value of Midbrook, Snowball and their subsidiaries between the effective dates of the transactions (2 February 2017 and 30 March 2017, respectively)
and 30 June 2017, adjusted for changes in the fair value of treasury stock held by the entities during the period and tax. The “Our representation” column reflects what the
changes in the fair value of Midbrook, Snowball and their subsidiaries would have been between 19 July 2016 and 30 June 2017, adjusted for changes in the fair value of
treasury stock held by the entities during the period and tax.
5 Per note 36.3 to the AFS.
6 Per note 36.3 to the AFS. The “Our representation” column reflects the impact of the goodwill impairment being reversed on the basis that the adjustments in terms of
items 1, 2 and 4 above would have resulted in no goodwill, i.e. no impairment would have been required.
7 Dividend received in addition to the normal dividend that ARA declares semi-annually. Included under “Dividend income” per note 35 to the AFS. The “Our representation”
column reflects the result if the ARA excess dividend were accounted for on an equity accounted basis, i.e. it would have been excluded from income due to it having been
set off directly against the investment in the balance sheet.
Equity Total per
attribu- audited
table to Non- statement Our
Stated Share Treasury Retained owners of controlling of changes Adjust- represent-
capital premium shares income the parent interest in equity ment tation
R'000 R'000 R'000 R'000 R'000 R'000 R'000 R’000 R’000
- ARA revaluation8 - - - (32,800) (32,800) - (32,800) 12,800 (20,000)
- Expenses incurred to grow Constantia9 - - - (42,154) (42,154) - (42,154) - (42,154)
- Other losses incurred during the year (net)10 - - - (84,472) (84,472) (36) (84,508) - (84,508)
- Taxes, excl. taxes i.r.o. Midbrook and Snowball11 - - - 35,208 35,208 - 35,208 - 35,208
Reallocation of share premium12 319,881 (319,881) - - - - - - -
Balance as at 30 June 201713 974,514 - (127,911) 101,910 948,513 310 948,823 - 948,823
8 Per note 36.3 to the AFS. Assuming that the ARA excess dividend was set off directly against the investment in the balance sheet per item 7 above, the “Our representation”
column reflects that the revaluation would have been reduced by the dividend amount, as the book value of the investment, before revaluation, would have been lower
by that value.
9 Expenses identified by management as specifically incurred to foster growth initiatives in Constantia. This item will have a continuing effect.
10 Total comprehensive loss for the year less items 4 – 9 above and item 11 below.
11 Taxation per note 42 to the AFS, adjusted for Midbrook and Snowball taxation of R3.683 million included in item 2 above.
12 Due to conversion from share capital to stated capital. This item will have a continuing effect.
13 As reflected in the Annual Financial Statements for the year ending 30 June 2017.
The pro forma information in Table 2 below is presented to provide readers of the Group’s IAR with more insight into the various components that contributed
to the attributable loss generated during the 2017 financial year and how these numbers tie into the AFS. This table should be read in conjunction with the
section b. Earnings on pages 11, 12 and 13 of the Group’s IAR.
Table 2
Cash
losses
generated
Increase on the Provision Per audited
in the medical Medical for future consolidated
Expenses IBNR gap cover Malpractice expenses statement
incurred reserve books under- Write-off where no of profit or
to associated before writing of future Other loss and
Expenses acquire with the corrective result salvages economic Investment expenses other
ARA incurred Midbrook medical action before and benefit Cost of income and compre-
ARA dividend to grow and gap cover taken in operating recoveries will be solvency (equities losses hensive
Goodwill revaluation (normal) Constantia Snowball business Jan '17 expenses accrual obtained reinsurance only) (net) Taxation income
Gross written
premium - - - - - - 262,457 17,959 - - 44,246 - 745,132 - 1,069,794
Reinsurance
premium - - - - - - (217) (8,903) - - (563,078) - (115,692) - (687,890)
Net written
premium - - - - - - 262,240 9,056 - - (518,832) - 6 29,440 - 381,904
Net change in
provision for
unearned
premium - - - - - - - (520) - - 5,632 - (18,974) - (13,862)
Net insurance
income - - - - - - 262,240 8,536 - - (513,200) - 610,466 - 368,042
Reinsurance
commission
received - - - - - - - - - - 305,847 - 48,118 - 353,965
Other income - - - - - - - - - - - - 28,826 - 28,826
Income from
insurance
operations - - - - - - 262,240 8,536 - - (207,353) - 687,410 - 750,833
Cash
losses
generated
Increase on the Provision Per audited
in the medical Medical for future consolidated
Expenses IBNR gap cover Malpractice expenses statement
incurred reserve books under- Write-off where no of profit or
to associated before writing of future Other loss and
Expenses acquire with the corrective result salvages economic Investment expenses other
ARA incurred Midbrook medical action before and benefit Cost of income and compre-
ARA dividend to grow and gap cover taken in operating recoveries will be solvency (equities losses hensive
Goodwill revaluation (normal) Constantia Snowball business Jan '17 expenses accrual obtained reinsurance only) (net) Taxation income
Total insuran-
ce expenses - - - (42,154) - (12,142) (281,512) (13,951) (12,130) (6,484) 200,652 - (717,461) - (885,182)
Net claims and
movement in
claims reserves - - - - - (12,142) (152,325) (13,677) (12,130) - 250,017 - (289,548) - (229,805)
Insurance
contract
acquisition
costs - - - - - - (57,506) (274) - - (15,486) - (106,541) - (179,807)
Administration
and marketing
expense - - - (42,154) - - (71,681) - - (6,484) (33,879) - (314,947) - (469,145)
Other expenses - - - - - - - - - - - - (6,425) - (6,425)
Net under-
writing loss - - - (42,154) - (12,142) (19,272) (5,415) (12,130) (6,484) (6,701) - (30,051) - (134,349)
Net non-
insurance
income
(expenses) - 12,800 11,200 - - - - - - - - 26,784 (3,428) - 47,356
Investment
income - 12,800 11,200 - - - - - - - - 26,784 13,766 - 64,550
Other income - - - - - - - - - - - - 310 - 310
Administration
and marketing
expense - - - - - - - - - - - - (17,492) - (17,492)
Other expenses - - - - - - - - - - - - (12) - (12)
Cash
losses
generated
Increase on the Provision Per audited
in the medical Medical for future consolidated
Expenses IBNR gap cover Malpractice expenses statement
incurred reserve books under- Write-off where no of profit or
to associated before writing of future Other loss and
Expenses acquire with the corrective result salvages economic Investment expenses other
ARA incurred Midbrook medical action before and benefit Cost of income and compre-
ARA dividend to grow and gap cover taken in operating recoveries will be solvency (equities losses hensive
Goodwill revaluation (normal) Constantia Snowball business Jan '17 expenses accrual obtained reinsurance only) (net) Taxation income
Operating
(loss) profit - 12,800 11,200 (42,154) - (12,142) (19,272) (5,415) (12,130) (6,484) (6,701) 26,784 (33,479) - (86,993)
Finance
charges - - - - - - - - - - - - (577) - (577)
Equity
accounted
(loss) income - - - - - - - - - - - - (362) - (362)
Other expenses
and losses (41,408) (32,800) - - (6,101) - - - - - - - (15) - (80,324)
(Loss) profit
before
taxation (41,408) (20,000) 11,200 (42,154) (6,101) (12,142) (19,272) (5,415) (12,130) (6,484) (6,701) 26,784 (34,433) - (168,256)
Taxation - - - - - - - - - - - - - 31,525 31,525
(Loss) profit
for the year (41,408) (20,000) 11,200 (42,154) (6,101) (12,142) (19,272) (5,415) (12,130) (6,484) (6,701) 26,784 (34,433) 31,525 (136,731)
Non-
controlling
interest - - - - - - - - - - - - 36 - 36
Total
comprehensive
(loss) profit
per Table 2 on
p11 of the IAR (41,408) (20,000) 11,200 (42,154) (6,101) (12,142) (19,272) (5,415) (12,130) (6,484) (6,701) 26,784 (34,397) 31,525 (136,695)
The pro forma information in Table 3 below is presented to provide readers of the Group’s IAR with more insight into the various components that resulted
in the cash flows generated during the 2017 financial year and how these numbers tie into the AFS. This table should be read in conjunction with the section
c. Cash flows on pages 13 and 14 of the Group’s IAR.
Table 3
Equities
Growth sold to Per
Cash and related fund the Net cash Other cash audited
cash acquisition acquisition Further acquired flows consoli-
equivalents of fixed of fixed investment First time with (including , dated
at the assets and Growth assets and to enhance investment Midbrook funding via statement
beginning computer related computer the equity in unlisted and insurance of cash
of the year software expenses software portfolio fund Snowball float) flows
Cash flows from operating activities - - (42,154) - - - - 36,855 (5,299)
- Cash (utilised) generated by operations - - (42,154) - - - - (9,507) (51,661)
- Interest received - - - - - - - 13,766 13,766
- Finance charges - - - - - - - (577) (577)
- Dividends received from investments - - - - - - - 26,621 26,621
- Taxation received (paid) - - - - - - - 6,552 6,552
Cash flows from investing activities - (66,247) - 62,697 (10,475) (22,880) - (8,415) (45,320)
- (Acquisition) disposal of associates - - - - - - - (3) (3)
- (Acquisition) disposal of subsidiaries - - - - - - - (433) (433)
- Acquisition of property, plant and equipment - (5,393) - - - - - - (5,393)
- Disposal of property, plant and equipment - - - - - - - 141 141
- Acquisition of investment properties - - - - - - - (80) (80)
- Acquisition of intangible assets - (60,854) - - - - - - (60,854)
- Disposal of intangible assets - - - - - - - - -
- Acquisition of financial investments - - - - (130,603) (22,880) - (8,040) (161,523)
- Disposal of financial investments - - - 62,697 120,128 - - - 182,825
Cash flows from financing activities - - - - - - (13,179) (16,552) (29,731)
- Interest bearing borrowings repaid - - - - - - (13,179) - (13,179)
- Loans granted to third parties - - - - - - - (960) (960)
- Loans repaid by third parties - - - - - - - 1,560 1,560
- Loans granted to joint ventures, associates and
assets held for sale - - - - - - - (15,553) (15,553)
Equities
Growth sold to Per
Cash and related fund the Net cash Other cash audited
cash acquisition acquisition Further acquired flows consoli-
equivalents of fixed of fixed investment First time with (including dated
at the assets and Growth assets and to enhance investment Midbrook funding via statement
beginning computer related computer the equity in unlisted and insurance of cash
of the year software expenses software portfolio fund Snowball float) flows
- Loans granted to unlisted investments - - - - - - - (1,599) (1,599)
Net (decrease) increase in cash and cash equivalents - (66,247) (42,154) 62,697 (10,475) (22,880) (13,179) 11,888 (80,350)
Cash and cash equivalents at the beginning of the year 272,473 - - - - - - - 272,473
Cash acquired - - - - - - 15,978 - 15,978
Cash and cash equivalents at the end of the year per
Table 3 on p13 of the IAR 272,473 (66,247) (42,154) 62,697 (10,475) (22,880) 2,799 11,888 208,101
Note 11.3 - Restatement of Comparative Numbers
In line with the Group’s new strategy, the Consolidated Statements of Profit or Loss and Other Comprehensive Income have been presented in a manner that
makes it less complicated to distinguish the Group’s insurance-related results from other non-insurance income and expenses. For consistency, the prior
period’s Consolidated Statements of Profit or Loss and Other Comprehensive Income are presented in a manner similar to that of the current period in order
to simplify comparative analysis.
Other income (Insurance) includes all rental income and fees received by Constantia, whereas Other income (Non-insurance) comprises fees received in other
Group entities. The restatement of income items has been effected as follows:
Other income Other income Previously
(Insurance) (Non-insurance) reported
R’000 R’000 R’000
Non-insurance revenue 18,036 195 18,231
Restated 18,036 195 18,231
Administration and marketing expenses (Insurance) includes all operating expenses incurred by Constantia, whereas Other expenses (Insurance) include
currency translation losses and impairments associated with operational assets that can be tied directly to Constantia. Similar expense lines have been created
for other Group entities. Other expenses and losses include non-operating impairment losses on associates, assets held for sale, joint ventures and property,
plant and equipment. The restatement of expense and loss items has been effected as follows:
Administration
Administration and marketing Other
and marketing Other expense expenses Other
expense expenses (Non- (Non- expenses and Previously
(Insurance) (Insurance) insurance) insurance) losses reported
R’000 R’000 R’000 R’000 R’000 R’000
Underwriting management fees (200,228) (200,228)
Profit commissions (66,702) (66,702)
Administration costs (36,213) (36,213)
Other expenses (29,371) (409) (13,638) (5,011) (48,429)
Other (251) (11,858) (12,109)
Correction of prior period error (12,551) (12,551)
Restated (332,514) (13,211) (13,638) (5,011) (11,858) (376,232)
Johannesburg
26 April 2019
Sponsor
Merchantec Capital
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