The Group financial statements as set out here have been prepared on the historical cost basis except for certain financial instruments that are measured at fair values, as explained in the accounting policies below. Significant details of the Group’s accounting policies are set out below and are consistent with those applied in the previous year.
The financial statements comply with the International Financial Reporting Standards (“IFRS”) of the International Accounting Standards Board, interpretations issued by the IFRS Interpretations Committee, the JSE Listings Requirements, AIM Rules, the Companies Act of South Africa as well as the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee and the Financial Reporting Pronouncements as issued by the Financial Reporting Standards Council.
The Group adopted the following amendments to accounting standards. The adoption of these amendments did not have a material impact on the Group annual financial statements.
No new or revised accounting standards or interpretations were adopted during the year.
At the date of authorisation of these annual financial statements, the following new or revised standards, amendments to existing standards, and interpretations applicable to the Group were in issue but not yet effective:
The Group is in the process of assessing the impact of IFRS 9 and IFRS 15. The Group has assessed the remaining new or revised standards, amendments to existing standards, and interpretations applicable to the Group, and does not believe that the adoption of these will have a material impact on the financial results or disclosures of the Group.
In the application of the Group’s accounting policies described below, management is required to make judgements, estimates and assumptions about the carrying value of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors which are considered to be relevant. Actual results may differ from these estimates.
The estimates and the underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.
Some of the Group’s assets and liabilities are measured at fair value for financial reporting purposes.
In estimating the fair value of an asset or a liability, the Group uses market-observable data to the extent that it is available and the Group also engages third parties to perform valuations.
Information about the valuation techniques and inputs used in determining the fair value of various assets and liabilities are disclosed in the relevant notes.
The following are the key assumptions concerning the future, and other key areas of estimation and judgement included in the Group’s annual financial statements, that have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities within the next financial year:
The Group reports in US Dollars as the US Dollar is the functional currency in which the major part of the Group’s trading is conducted and is consistent with the economic substance of most of the Group’s transaction flows worldwide. Reporting in US Dollars also simplifies financial analysis and is more meaningful to global investors and shareholders and for international benchmarking.
The translation into US Dollars for reporting purposes is performed as follows:| (a) | Assets and liabilities (including comparatives) are translated at the closing rate ruling at the date of each statement of financial position. |
| (b) | Income and expense items for all periods presented (including comparatives) are translated at a weighted average rate that approximates the ruling exchange rates at the dates of the transactions. |
| Exchange differences arising from the translations in (a) and (b) are recognised in other comprehensive income and accumulated in the foreign currency translation reserve. | |
| (c) | The functional currency of the parent company is South African Rand. The share capital and share premium of the parent company are translated into US Dollars at the closing exchange rates. |
| (d) | The exchange differences arising on this translation (c) are recognised directly in equity and accumulated in non-distributable reserves. |
The Group consolidated annual financial statements incorporate the financial statements of the Company and all enterprises controlled by the Company during the reporting period.
Control is achieved when the Group:The Group reassesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the elements of control listed above. Consolidation of subsidiaries begins when the Group obtains control over a subsidiary and ceases when the Group loses control of a subsidiary. Profit or loss and each component of other comprehensive income are attributable to the owners of the Group and to the non-controlling interests. Total comprehensive income of subsidiaries is attributable to the owners of the Group and to the non-controlling interests even if this results in the non-controlling interests having a deficit balance.
The operating results of Group entities are included from the effective date of acquisition to the effective date of disposal. All significant inter-company transactions, balances, income and expenses are eliminated in full on consolidation.
When the Group loses control of a subsidiary, a gain or loss is recognised in profit or loss and is calculated as the difference between (i) the aggregate of the fair value of the consideration received and the fair value of any retained interest and (ii) the previous carrying amount of the assets (including goodwill), less liabilities of the subsidiary and any non-controlling interests. All amounts previously recognised in other comprehensive income in relation to that subsidiary are accounted for as if the Group had directly disposed of the related assets and liabilities of the subsidiary (ie reclassified to profit or loss or transferred to another category of equity as specified/permitted by applicable IFRS).
Where necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies in line with those of the Group.
Acquisitions of subsidiaries and businesses are accounted for using the acquisition method. The consideration transferred in a business combination is measured as the aggregate of the fair values (at the date of exchange) of assets given, liabilities incurred or assumed, and equity instruments issued by the Group in exchange for control of the acquiree. The acquiree’s identifiable assets, liabilities and contingent liabilities that meet the conditions of recognition under IFRS 3 Business Combinations are recognised at their fair values at the acquisition date, except for non-current assets that are classified as held-for-sale in accordance with IFRS 5 Non-current Assets Held for Sale and Discontinued Operations, which are recognised and measured at fair value less costs to sell.
Goodwill arising on acquisition is recognised as an asset and initially measured at cost, being the excess of consideration transferred over the Group’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities recognised. If, after reassessment, the Group’s interest in the net fair value of the acquiree’s identifiable assets, liabilities and contingent liabilities exceeds the cost of the consideration transferred, the excess is recognised immediately in profit and loss. Costs associated with the acquisition are expensed, and may include such costs as advisory, legal, accounting, valuation and other professional costs associated with the transaction.
Intangible assets acquired in a business combination and recognised separately from goodwill are initially recognised at their fair value at the acquisition date (which is regarded as their cost). Subsequent to initial recognition, intangible assets acquired in a business combination are reported at cost less accumulated amortisation and accumulated impairment losses, on the same basis as intangible assets that are acquired separately.
Contingent consideration is measured at fair value at the acquisition date and included as part of the consideration transferred in a business combination. Subsequent adjustments to the consideration are recognised against the cost of the acquisition, with corresponding adjustments against goodwill, only to the extent that they arise from new information obtained within the measurement period (which is not more than 12 months from the acquisition date) about facts and circumstances that existed at the acquisition date. All other subsequent adjustments that do not qualify as measurement period adjustments, classified as assets or liabilities, are recognised in profit or loss.
A non-controlling interest in the acquiree is initially measured at the proportion of the net fair value of the assets, liabilities and contingent liabilities recognised. Non-controlling interests consist of the amount of those interests at the date of the original business combination and the share of changes in equity since the date of the combination.
Changes in the Group’s ownership interests in subsidiaries that do not result in variations in the Group’s control over the subsidiaries are accounted for as equity transactions. The carrying amounts of the Group’s interests and the non-controlling interests are adjusted to reflect the changes in their relative interests in the subsidiary. Any difference between the amount by which the non-controlling interest is adjusted and the fair value of the consideration paid or received is recognised directly in equity and attributed to the owners of the parent. Additionally the proportionate share of the cumulative amount of the exchange differences recognised in other comprehensive income is transferred within equity between the foreign currency translation reserve and non-controlling interest.
A business combination of entities or businesses under common control is excluded from IFRS 3 Business Combinations as it involves the combination of businesses that are ultimately controlled by the same company. Any such business combination is accounted for at the net asset value and no goodwill is raised. Any difference between the net asset value and the fair value of the consideration paid or received is recognised directly in equity and attributed to the owners of the parent.
Transactions in currencies other than the reporting currency are initially recorded at the rates of exchange ruling on the dates of the transactions. At each reporting date, monetary assets and liabilities denominated in such currencies are retranslated at the rates prevailing at the reporting date. Profits and losses arising on exchange are dealt with in the statement of comprehensive income, except for profits and losses on exchange arising from equity loans, which are taken directly to equity until the loan is derecognised, at which time they are recognised as income or expenses. Exchange differences arising on equity loans and the translation of foreign subsidiaries are classified as equity and transferred to the Group’s translation reserve.
Where appropriate, in order to minimise its exposure to foreign exchange risks, the Group enters into forward exchange contracts.
Goodwill and fair value adjustments arising on the acquisition of a foreign operation are treated as assets and liabilities of the foreign operation and translated at the closing rate. Exchange differences arising are recognised in other comprehensive income and accumulated in equity.
All property, plant and equipment have been stated at cost less accumulated depreciation except land, which is shown at cost. Depreciation is calculated based on cost using the straight-line method over the estimated useful lives of the assets less their residual value.
The basis of depreciation provided on property, plant and equipment is as follows:
Useful lives (years) |
|
| Office furniture and equipment | 2 – 6 |
| Motor vehicles | 2 – 4 |
| Computer equipment | 2 – 6 |
| Buildings | 20 |
| Leasehold improvements | Period of the lease |
Land and buildings comprise mainly warehouses and offices (land is not depreciated). Software purchased to support the Group’s back-office, accounting and customer relationship functions, and having little customisation, is included in computer equipment and is depreciated over its expected useful life.
All assets’ residual values and useful lives are reviewed and adjusted, if appropriate, at each reporting date. An impairment review of property, plant and equipment is carried out when there is an indication that these may be impaired by comparing the carrying amount thereof to its recoverable amount. An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount.
Gains and losses on disposals are determined by comparing proceeds with the carrying amount. These are included in the statement of comprehensive income.
Assets leased in terms of agreements which are considered to be finance leases are capitalised. Capitalised leased assets are depreciated at the same rate and on the same basis as equivalent owned assets or over the term of the lease, if this is shorter. The liability to the lessor is included in the statement of financial position as a finance lease obligation. Lease finance charges are amortised over the duration of the underlying leases, using the effective interest rate method.
Operating leases, mainly for the rental of premises, office furniture, computer equipment and motor vehicles, are not capitalised and rentals are expensed on a straight-line basis over the lease term.
An intangible asset arising from internal development (or from the development phase of an internal project) is recognised only if the Group can demonstrate all of the following conditions:
| (a) | The technical feasibility of completing the intangible asset so that it will be available for use or sale; |
| (b) | Its intention or ability to complete the intangible asset, and use or sell it; |
| (c) | How the intangible asset will generate probable future economic benefits, including the existence of a market for the output of the intangible asset or the intangible asset itself or, if it is to be used internally, the usefulness of the intangible asset; |
| (d) | The availability of adequate technical, financial and other resources to complete the development, and to use or sell the intangible asset; and |
| (e) | Its ability to reliably measure the expenditure attributable to the intangible asset during its development. |
Capitalised software development assets are amortised using the straight-line method over their useful lives, which generally do not exceed 10 years.
All other expenditure on research activities is recognised as an expense in the period in which it is incurred.
Other intangible assets include those intangible assets acquired and identified as part of a business combination, and software.
An intangible asset is recognised when it meets the following criteria:
| (a) | It is identifiable; |
| (b) | The entity has control over the asset; |
| (c) | It is probable that economic benefits will flow to the entity; and |
| (d) | The cost of the asset can be measured reliably. |
Intangible assets are amortised using the straight-line method over their useful lives. The estimated useful life and amortisation method are reviewed at the end of each reporting period, with the effect of any changes in estimate being accounted for on a prospective basis.
Useful lives (years) |
|
| Software | 2 – 6 |
| Other intangible assets | Maximum of 10 |
Intangible assets which do not meet the criteria listed above are recognised as expenses in the period in which they are incurred.
Goodwill represents the excess cost of an acquisition over the fair value of the Group’s share of the net identifiable assets of the acquiree at the date of acquisition. For the purpose of impairment testing, goodwill is allocated to each of the Group’s cash-generating units expected to benefit from the synergies of the business combination. Goodwill is tested annually for impairment and carried at cost less accumulated impairment losses. The carrying amount of goodwill (or relevant portion thereof) is included in computing the gains and losses on the disposal of an entity.
Impairment tests are conducted annually or more frequently when an indication of impairment exists on goodwill attributed to the cash-generating units, based on the value of future discounted cash flows and other appropriate methods.
If the recoverable amount of the cash-generating unit is less than its carrying amount, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro rata based on the carrying amount of each asset in the unit. Any impairment loss for goodwill is recognised directly in profit or loss in the consolidated statement of comprehensive income. An impairment loss recognised for goodwill is not reversed in subsequent periods.
The results and assets and liabilities of associates and joint ventures are incorporated in these financial statements using the equity method of accounting.
Any excess of the cost of acquisition over the Group’s share of the net fair value of the identifiable assets, liabilities and contingent liabilities of the associate and joint venture recognised at the date of acquisition is recognised as goodwill. The goodwill is included within the carrying amount of the investment and is assessed for impairment as part of that investment. Any excess of the Group’s share of the net fair value of the identifiable assets, liabilities and contingent liabilities over the cost of acquisition, after reassessment, is recognised immediately in profit or loss.
Where a Group entity transacts with an associate or joint venture of the Group, profits and losses are eliminated to the extent of the Group’s interest in the relevant associate or joint venture.
At each reporting date, the Group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss, if any. The recoverable amount is the higher of fair value less costs to sell and value-in-use. In assessing value-in-use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset.
If the recoverable amount of an asset or cash-generating unit is estimated to be less than its carrying amount, its carrying amount is reduced to its recoverable amount. Impairment losses are recognised as an expense immediately and are reflected in the statement of comprehensive income.
Where an impairment loss subsequently reverses, the carrying amount of the asset or cash-generating unit is increased to the revised estimate of its recoverable amount, but will never exceed the carrying amount that would have been determined had no impairment loss been recognised in prior years. A reversal of an impairment loss is recognised immediately in the statement of comprehensive income.
Inventories, comprising spares/maintenance inventory, finished goods and merchandise for resale, are stated at the lower of cost and net realisable value and are mainly valued on the weighted average cost basis.
Provision is made for obsolete and slow-moving inventory.
Contract work in progress is recognised on the percentage of completion method by reference to the milestones for each contract.
Financial assets and financial liabilities are recognised when a Group entity becomes a party to the contractual provisions of the instruments.
In addition, for financial reporting purposes, fair value measurements are categorised into level 1, 2 or 3 based on the degree to which the inputs to the fair value measurements are observable and the significance of the inputs to the fair value measurement in its entirety, which are described as follows:
In estimating the fair value of an asset or a liability, the Group uses market-observable data to the extent it is available. Where level 1 inputs are not available, the Group engages third-party qualified valuers to perform the valuation. Information about the valuation techniques and inputs used in determining the fair value of the assets and liabilities is disclosed in Notes 19 and 24.
The effective interest rate method is a method of calculating the amortised cost of a financial asset or financial liability and of allocating interest income or expense over the period of the instrument. Effectively this method determines the rate that exactly discounts the estimated future cash payments or receipts through the expected life of the financial instrument or, if appropriate, a shorter period, to the net carrying amount of the financial asset or liability.
Trade receivables are initially recognised at cost, which approximates fair value, and are subsequently measured at amortised cost using the effective interest rate method.
A provision for impairment of trade receivables is established when there is objective evidence that the Group will not be able to collect all the amounts due according to the original terms of the receivables. Objective evidence includes observable data about the following loss events:
In instances where there is clear and unassailable evidence that a trade receivable has been impaired and there is no evidence to indicate that the trade receivable is recoverable and all reasonable measures to recover the amount have been exhausted, the Group reduces the carrying amount of the impaired trade receivable directly against the asset account or the provision for impairment of trade receivables if one had previously been raised.
Any increase or decrease in the provision for impairment of trade receivables, or any reduction in trade receivables directly against the asset account, is recorded in operating profit.
Cash and cash equivalents include cash on hand, deposits held on call with banks, other short-term highly liquid investments with original maturities of three months or less, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities on the statement of financial position.
Borrowings are initially recorded at fair value, net of direct issue costs, and are subsequently measured at amortised cost using the effective interest rate method. Finance charges, including premiums payable on settlement or redemption, are accounted for on an accrual basis and are added to the carrying amount of the instrument to the extent that they are not settled in the period in which they arise.
Trade payables are recognised initially at cost, which approximates fair value and are subsequently measured at amortised cost using the effective interest rate method.
Equity instruments issued by the Company are recorded at the proceeds received, net of the direct issue costs.
Provisions are recognised when the Group has a present legal or constructive obligation, as a result of past events, for which it is probable that an outflow of economic benefits will be required to settle the obligation, and a reliable estimate can be made for the amount of the obligation.
Present obligations arising under onerous contracts are recognised and measured as a provision. An onerous contract is considered to exist where the Group has a contract under which the unavoidable costs of meeting the obligations under the contract exceed the economic benefits expected to be received under it.
A restructuring provision is recognised when the Group has developed a detailed formal plan for the restructuring and has raised a valid expectation in those affected that it will carry out the restructuring by starting to implement the plan or announcing its main features to those affected by it. The measurement of a restructuring provision includes only the direct expenditures arising from the restructuring and not associated with the ongoing activities of the entity.
Amounts owing to vendors represent purchase considerations owing in respect of acquisitions. These purchase considerations are to be settled with the vendors in cash or shares on fulfilment of agreed performance criteria. The amounts classified as short-term are interest free and will be settled within the next year. Amounts payable to vendors are included in the purchase consideration at acquisition and, to the extent that agreed performance criteria are not met, affect the statement of comprehensive income in the period in which that determination is made.
The tax expense represents the sum of the tax currently payable and deferred tax.
The tax currently payable is based on taxable income for the year. Taxable income differs from net income as reported in the statement of comprehensive income because it includes items of income or expense that are taxable or deductible in other periods and it further excludes items that are never taxable or deductible. The Group’s liability for current tax uses relevant rates that have been enacted or substantively enacted by the reporting date.
Deferred tax is accounted for using the balance sheet liability method in respect of temporary differences which arise from differences between the carrying amount of assets and liabilities in the financial statements and the corresponding tax basis used in the computation of taxable income. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable income will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from the initial recognition of goodwill or from the initial recognition, other than in a business combination, of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.
Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries and associates, and interests in joint ventures, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary differences associated with such investments and interests are only recognised to the extent that it is probable that there will be sufficient taxable profits against which to utilise the benefits of the temporary differences and they are expected to reverse in the foreseeable future.
The carrying value of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable income will be available to allow all or part of the asset to be recovered.
Deferred tax is calculated at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled. Deferred tax is charged or credited in the statement of comprehensive income, except when it relates to items credited or charged directly to equity, in which case the deferred tax is also dealt with in equity.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities on a net basis.
Revenue is measured at fair value of the consideration received or receivable and, except for certain sales arrangements where the Group acts as an agent, represents the invoiced value of sales and services rendered, excluding discounts and sales-related taxes. Revenue from sales arrangements where the Group acts as agent is recognised on a net basis and the commission or gross profit earned on these contracts is recognised as revenue. In respect of trading operations, revenue is recognised at the date on which goods are delivered to customers or services are provided.
Revenue from the rendering of services on long-term and fixed-price contracts is recognised on the percentage of completion method, after providing for contingencies and once the outcome of the contract can be assessed with reasonable assurance. The percentage of completion is measured by reference to milestones set out in each contract. As soon as losses on individual contracts become evident, they are provided for in full.
Revenue from cost-plus contracts is recognised by reference to the recoverable costs incurred during the period plus the fee earned, measured by the proportion that costs incurred to date bear to the estimated total costs of the contract.
Where recorded revenue exceeds amounts invoiced to clients, the excess is classified as accrued income and where recorded revenue is less than the amounts invoiced to clients, the difference is classified as deferred income.
Within the Group, inter-company and inter-divisional revenue are eliminated on consolidation.
Interest received is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable.
All borrowing costs are recognised in profit and loss in the period in which they are incurred.
The Group issues equity-settled and cash-settled share-based incentives to certain employees.
Equity-settled share-based payments are measured at fair value (excluding the effect of non-market-based vesting conditions) at the date of grant. The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straight-line basis over the vesting period, based on the Group’s estimate of shares that will eventually vest, and adjusted for the effect of non-market-based vesting conditions. At the end of each reporting period, the Group revises its estimate of the number of equity instruments expected to vest. The impact of the revision of the original estimates, if any, is recognised in profit or loss such that the cumulative expense reflects the revised estimate, with a corresponding adjustment to the equity-settled employee benefits reserve.
For cash-settled share-based payments, the liability for the fair value of all unexercised share rights which are expected to vest is determined initially at grant date and then revalued at each reporting date and amortised over the applicable period.
Fair value is measured by use of appropriate actuarial models. The expected life used in the models has been adjusted, based on management’s best estimate, for the effects of non-transferability, exercise restrictions and exercise behavioural considerations.
Certain subsidiaries of the Group make contributions to various defined contribution retirement plans on behalf of employees, in accordance with the local practice in the country of operation. These contributions are charged against income as incurred.
The Group has no liability to these defined contribution retirement plans other than the payment of its share of the contribution in terms of the agreement with the funds and employees concerned, which differs from country to country.
The liability for dividends and related taxation thereon is raised only when the dividend is declared.
Dividends are recognised when the right to receive payment is established.
Earnings, excluding impairment of goodwill and intangible assets, profit or loss on sale of investments and assets, amortisation of acquired intangible assets, unrealised foreign exchange movements, acquisition-related adjustments, fair value movements on acquisition-related financial instruments and the taxation effect on all of the aforementioned.