In the course of its business, the Company is exposed to a number of financial risks: credit risk,
liquidity risk and market risk (including foreign currency and other price risk). This note presents the
Company�s objectives, policies and processes for managing its financial risk and capital.
Credit risk arises because a counterparty may fail to meet its obligations to the Company. The
Company is exposed to credit risks on financial instruments such as receivables, loans receivable and
cash.
Trade and other receivables consist primarily of invoiced amounts owing from related parties. The
recoverability of these amounts are regularly monitored with reference to the counterparties� financial
performance. Where necessary, a provision for impairment is made.
The Company places cash and cash equivalents with major banking groups and quality institutions
that have high credit ratings.
Loans are only granted to holders with an appropriate credit history, taking into account the holder�s
financial position and past experience.
The Company�s maximum credit risk exposure is the carrying amount of all financial assets on the
statement of financial position and sureties provided with the maximum amount the Company could
have to pay if the sureties are called on amounting to R1.5 billion (2014: R1 billion).
|
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|
|
|
|
|
| |
2015
R’000 |
|
|
|
2014
R'000 |
|
|
|
|
|
|
|
|
| Group 1 |
— |
|
|
|
— |
|
| Group 2 |
976 |
|
|
|
32 619 |
|
| Group 3 |
— |
|
|
|
— |
|
|
|
|
|
|
|
|
| |
976 |
|
|
|
32 619 |
|
|
|
|
|
|
|
|
| Group 1 |
— |
|
|
|
— |
|
| Group 2 |
80 672 |
|
|
|
63 035 |
|
| Group 3 |
— |
|
|
|
— |
|
|
|
|
|
|
|
|
| |
80 672 |
|
|
|
63 035 |
|
|
|
|
|
|
|
|
| Counterparties without external credit rating |
|
|
|
|
|
|
| Group 1 |
— |
|
|
|
— |
|
| Group 2 |
3 592 |
|
|
|
— |
|
| Group 3 |
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
3 592 |
|
|
|
— |
|
The rating groups for counterparties without external credit ratings are categorised as follows:
| Group 1 – New customers/related parties (less than six months). |
| Group 2 – Existing customers/related parties (more than six months) with no defaults in the past. |
| Group 3 � Existing customers/related parties (more than six months) with some defaults in the past.
All defaults were fully recovered. |
Credit rating based on latest Fitch local currency long-term issuer default ratings.
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| |
2015
R’000 |
|
|
|
2014
R'000 |
|
|
|
|
|
|
|
|
| BBB |
2 088 |
|
|
|
— |
|
| BBB- |
195 |
|
|
|
1 418 |
|
|
|
|
|
|
|
|
| |
2 283 |
|
|
|
1 418 |
|
Liquidity risk arises when a company encounters difficulties to meet commitments associated with
liabilities and other payment obligations. The Company�s objective is to maintain prudent liquidity risk
management by maintaining sufficient cash and marketable securities, the availability of funding
through an adequate amount of committed credit facilities and the ability to close out market
positions. Company finance monitors rolling forecasts of the Company�s liquidity requirements to
ensure it has sufficient cash to meet operational needs. Due to the dynamic nature of the underlying
businesses, the Company aims to maintain flexibility in funding by keeping committed credit lines
available.
Management is satisfied as to the liquidity of the Company since the majority of the current liabilities
relate to the loans from subsidiaries. These subsidiaries are 100% held by the Company and therefore
the Company has control of their assets including cash resources.
The Company and a subsidiary company have issued a cross surety in respect of a guarantee for an
overdraft facility in the amount of R19.85 million in favour of FNB, a division of FirstRand Bank
Limited. This facility was unutilised as at 31 May 2015. In addition, the Company and four of its
subsidiaries have issued a cross surety in the amount of R1.3 million.
The Company has issued a surety in respect of a guarantee in the amount of R80.7 million in favour
of third parties, for normal trade obligations of group companies.
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| |
Less than
one month
or on
demand
R’000 |
More than
one month
but not
exceeding
one year
R’000 |
Payable in:
More than
one year
but not
exceeding
two years
R’000 |
More than
two years
but not
exceeding
five years
R’000 |
More than
five years
R�000 |
|
|
|
|
|
|
|
|
|
|
| Loans from subsidiaries |
754 891 |
— |
— |
— |
— |
|
|
| Trade and other payables* |
2 785 |
10 946 |
48 425 |
55 300 |
— |
|
|
|
757 676 |
10 946 |
48 425 |
55 300 |
— |
|
|
|
|
|
|
|
|
|
|
| Loans from subsidiaries |
474 949 |
— |
— |
— |
— |
|
|
| Trade and other payables* |
2 512 |
11 557 |
— |
— |
— |
|
|
|
477 461 |
11 557 |
— |
— |
— |
|
|
* Trade and other payables exclude non-financial instruments being VAT and certain amounts within
accruals and sundry creditors.
Market risk is the risk that changes in market prices (interest rate and currency risk) will affect the
Company�s income or the value of its holding of financial instruments. The objective of market risk
management is to manage and control market risk exposures within acceptable parameters, while
optimising the return.
The Company is exposed to risks from movements in foreign exchange rates and interest rates that
affect its assets, liabilities and anticipated future transactions.
Fair value measurement hierarchy:
| • |
Level 1: |
fair value based on quoted prices (unadjusted) in active markets for identical assets or
liabilities |
| • |
Level 2: |
fair value based on inputs other than quoted prices included within level 1 that are
observable for the asset or liability, either directly (that is, as prices) or indirectly (that is,
derived from prices); or |
| • |
Level 3: |
fair value based on inputs for the asset or liability that are not based on observable market
data (that is, unobservable inputs). |
Contingent consideration, included in trade and other payables, are level 3 financial liabilities.
Changes in level 3 instruments are as follows:
|
|
|
|
|
|
|
| |
2015
R’000 |
|
|
|
2014
R'000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Opening balance |
7 256 |
|
|
|
3 030 |
|
| Acquisition of Panacea Proprietary Limited |
— |
|
|
|
6 155 |
|
| Acquisition of Viamedia Proprietary Limited |
84 783 |
|
|
|
— |
|
| Settlements |
(4 113) |
|
|
|
(1 800) |
|
| Gains and losses recognised in profit or loss |
5 354 |
|
|
|
(129) |
|
|
93 280 |
|
|
|
7 256 |
|
| Total gains or losses for the period included in profit or loss for liabilities held at the end of the reporting period, under: |
|
|
|
|
|
|
| Other income |
(923) |
|
|
|
(827) |
|
| Interest paid |
6 277 |
|
|
|
698 |
|
|
1 382 |
|
|
|
698 |
|
The Company's cash flow interest rate risk arises from loans receivable and cash and cash equivalents.
The Company is not exposed to fair value interest rate risk as the Company does not have any fixed
interest-bearing instruments carried at fair value nor any interest-bearing borrowings.
As part of the process of managing the Company�s exposure to interest rate risk, interest rate
characteristics of new borrowings and the refinancing of existing borrowings are positioned according
to expected movements in interest rates.
The Company is exposed to foreign currency risk from transactions. Transaction exposure arises due to
the Company granting loans to affiliated companies in foreign currencies.
The Company manages its exposure to foreign currency risk by ensuring that the net foreign currency
exposure remains within acceptable levels. Hedging instruments are used in certain instances to reduce
risks arising from foreign currency fluctuations. The Company did not enter into any forward exchange
contracts during the period under review.
The Company has used a sensitivity analysis technique that measures the estimated change to the
statement of comprehensive income of either an instantaneous increase or decrease of
1% (100 basis points) in market interest rates or a 10% strengthening or weakening of the rand
against all other currencies, from the rates applicable at 31 May 2015, for each class of financial
instrument with all other variables remaining constant. This analysis is for illustrative purposes only,
as in practice market rates rarely change in isolation.
The interest rate sensitivity analysis is based on the following assumptions:
| • |
Changes in market interest rates affect the interest income or expense of variable interest financial
instruments; and |
| • |
Changes in market interest rates only affect interest income or expense in relation to financial
instruments with fixed interest rates if these are recognised at fair value. |
Under these assumptions, a 1% increase or decrease in market interest rates at 31 May 2015 would
increase or decrease profit before tax by R22 830 (2014: R655 070).
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
ZAR
R’000 |
USD
R’000 |
Total
R’000 |
|
|
|
ZAR
R’000 |
|
USD
R’000 |
|
Total
R’000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Cash |
2 283 |
— |
2 283 |
|
|
|
1 418 |
|
— |
|
1 418 |
|
| Trade and other receivables* |
3 592 |
— |
3 592 |
|
|
|
177 |
|
— |
|
177 |
|
| Loans to subsidiaries and associates |
976 |
|
976 |
|
|
|
31 565 |
|
1 054 |
|
32 619 |
|
| Loans receivable |
— |
80 672 |
80 672 |
|
|
|
— |
|
63 035 |
|
63 035 |
|
| |
6 851 |
80 672 |
87 523 |
|
|
|
33 160 |
|
64 089 |
|
97 249 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Non-interest-bearing borrowings |
754 891 |
— |
754 891 |
|
|
|
474 949 |
|
— |
|
474 949 |
|
| Trade and other payables* |
117 456 |
— |
117 456 |
|
|
|
14 069 |
|
— |
|
14 069 |
|
| |
872 347 |
— |
872 347 |
|
|
|
489 018 |
|
— |
|
489 018 |
|
|
(865 496) |
80 672 |
(784 824) |
|
|
|
(455 858) |
|
64 089 |
|
(391 769) |
|
* Trade and other receivables and trade and other payables exclude non-financial instruments.
With a 10% strengthening or weakening in the rand against the US dollar, profit before tax would
increase or decrease by R8.1 million respectively.
The Company�s objectives when managing capital are to safeguard the Company�s ability to continue as
a going concern in order to provide returns for shareholders and benefits for other stakeholders and to
maintain an optimal capital structure to reduce the cost of capital. Although the Company is in a deficit
position, the value of its significant subsidiary exceeds the carrying value.
In order to maintain or adjust this capital structure, the Company may issue new shares, adjust the
amount of dividends paid to shareholders, return capital to shareholders or sell assets to reduce debt.
The Company defines capital as capital and reserves and non-current borrowings.
The Company is not subject to externally imposed capital requirements. There were no changes to the
Company�s approach to capital management during the year.
For all short-term financial assets and liabilities, the carrying amount is regarded as an approximation of
the fair value.
|