Note 1.1

Results of operations

1.1

Segmental summary

The Group’s segment reporting follows the organisational structure as reflected in its internal management reporting systems, which are the basis for assessing the financial performance of the business segments and for allocating resources to these segments. Management’s assessment of the Group’s organisational structure takes the geographical location of the segments into account

Operating segments are reported internally to the chief operating decision-maker in a manner consistent with the financial statements. In addition, the chief operating decision-maker uses core net profit and core headline earnings as non-IFRS measures in evaluating the Group’s performance on a segmental level. The chief operating decision-maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the executive directors, who are responsible for making strategic decisions on behalf of the Group.

Transactions between reportable segments are conducted on similar terms as other transactions of a similar nature.

The segment results for the year ended 31 May are as follows:

	Total		South Africa Distribution		International Distribution		Mobile		Solutions		Corporate
	2017 R’000	2016 R’000	2017 R’000	2016 R’000	2017 R’000	2016 R’000	2017 R’000	2016 R’000	2017 R’000	2016 R’000	2017 R’000	2016 R’000
Total segment revenue	32 724 069	32 558 421	32 058 672	31 934 736	–	–	361 754	307 661	178 286	196 703	125 357	119 321
Internal revenue	(6 412 194)	(6 353 699)	(6 272 276)	(6 212 196)	–	–	(13 896)	(15 805)	(665)	(6 377)	(125 357)	(119 321)
Revenue	26 311 875	26 204 722	25 786 396	25 722 540	–	–	347 858	291 856	177 621	190 326	–	–
Segment result
Operating profit/(loss) before depreciation, amortisation and impairment charges	1 331 323	1 240 559	1 388 296	1 133 433	(31 792)	44 152	99 101	111 142	34 020	35 889	(158 302)	(84 057)
Depreciation, amortisation and impairment charges	(112 851)	(95 615)	(92 554)	(74 562)	–	–	(14 866)	(13 288)	(657)	(1 521)	(4 774)	(6 244)
Impairment of intangible assets	–	(2 568)	–	(1 042)	–	–	–	(1 526)	–	–	–	–
Finance costs	(303 027)	(214 110)	(297 889)	(203 713)	(507)	(1)	(1 105)	(2 584)	(1)	–	(3 525)	(7 812)
Finance income	242 194	193 899	211 386	169 198	13 285	10 224	5 523	3 277	1 018	933	10 982	10 267
Gain on associate and joint venture measured at fair value	160 200	–	–	–	160 200	–	–	–	–	–	–	–
Share of (losses)/profits from associates and joint ventures	(164 941)	(71 770)	(5 406)	(4 937)	(162 218)	(70 283)	2 228	2 690	455	760	–	–
Taxation	(332 037)	(318 783)	(303 040)	(258 313)	1 953	(16 062)	(25 066)	(23 826)	(11 361)	(14 680)	5 477	(5 902)
Net profit/(loss) for the year	820 861	731 612	900 793	760 064	(19 079)	(31 970)	65 815	75 885	23 474	21 381	(150 142)	(93 748)
Reconciliation of net profit for the year to core headline earnings for the year
Net profit/(loss) for the year	820 861	731 612	900 793	760 064	(19 079)	(31 970)	65 815	75 885	23 474	21 381	(150 142)	(93 748)
Amortisation of intangibles raised through business combinations net of tax	14 833	17 457	9 775	11 617	1 859	2 641	3 199	3 199	–	–	–	–
Core net profit/(loss) for the year*	835 694	749 069	910 568	771 681	(17 220)	(29 329)	69 014	79 084	23 474	21 381	(150 142)	(93 748)
Headline earnings adjustment	362	(23 029)	22	435	339	(29 975)	(38)	1 060	–	5 448	39	3
Core headline earnings for the year*	836 056	726 040	910 590	772 116	(16 881)	(59 304)	68 976	80 144	23 474	26 829	(150 103)	(93 745)
Core headline earnings for the year attributable to:
Equity holders of parent	801 396	684 911	893 128	751 086	(16 874)	(59 327)	56 289	65 333	18 956	21 564	(150 103)	(93 745)
Non-controlling interest	34 660	41 129	17 462	21 030	(7)	23	12 687	14 811	4 518	5 265	–	–
Non-cash items
Net (loss)/profit on sale of subsidiaries	–	(3 885)	–	–	–	–	–	–	–	(3 885)	–	–
Net profit on disposal of associates	–	–	–	–	–	–	–	–	–	–	–	–
Discounting of receivables	163 069	129 633	163 069	129 633	–	–	–	–	–	–	–	–
Discounting of payables	(197 509)	(165 903)	(197 509)	(165 903)	–	–	–	–	–	–	–	–
The segment assets and liabilities at 31 May are as follows:
Assets excluding investments in and loans to associates and joint ventures	7 830 272	6 395 384	7 113 582	5 725 082	22 959	16 608	545 379	489 351	137 834	135 841	10 518	28 502
Investments in and loans to associates and joint ventures	315 833	910 567	87 945	62 649	176 406	792 488	48 216	54 210	3 266	1 220	–	–
Investments in and loans to venture capital associates and joint venture	544 165	–	–	–	544 165	–	–	–	–	–	–	–
Total assets	8 690 270	7 305 951	7 201 527	5 787 731	743 530	809 096	593 595	543 561	141 100	137 061	10 518	28 502
Additions to non-current assets
Property, plant and equipment	57 655	41 956	51 074	37 706	–	–	4 494	2 469	38	928	2 049	853
Intangible assets and goodwill	57 137	85 175	52 138	53 562	–	–	4 983	31 198	–	407	16	8
Investment in associates	21 306	210 416	21 306	–	–	210 416	–	–	–	–	–	–
Total liabilities	(3 685 828)	(2 786 387)	(3 446 376)	(2 482 650)	(26 155)	(35 974)	(119 998)	(120 457)	(11 281)	(17 101)	(82 018)	(130 205)

The Company is domiciled in the Republic of South Africa. The result of its revenue from external customers in South Africa is R26.294 billion (2016: R26.188 billion), and the total revenue from external customers from other countries is R17.7 million (2016: R16.9 million).

The total non-current assets other than financial instruments and deferred tax assets located in South Africa is R1.372 billion (2016: R1.426 billion), and the total non-current assets located in other countries is R721 million (2016: R792 million).

The South African Distribution segment includes revenues of R7.737 billion and R4.901 billion earned from two external customers.

At 31 May 2017, the Group is managed on the basis of five main business segments:

•	South African Distribution, which includes the distribution of physical and virtual prepaid airtime and electricity of the South African mobile/fixed-line network operators and utility suppliers, and the distribution of starter packs in South Africa.
•	International which includes international distribution of physical and virtual prepaid airtime in India and Mexico, and payment solutions in India. This segment also incorporates the Africa Prepaid Services group.
•	Mobile, which includes the provision of a complete mobile transactional ecosystem and services provisioning platform delivering mobile-centric products and services through any mobile channel, including location-based and WASP services, and music and digital content provision.
•	Solutions, which includes marketing of cellular and financial products and services through outbound telemarketing and other channels, provides inbound customer care and technical support, and markets data and analytics services.
•	Corporate, which performs the head office administration function.

* Core net profit and core headline earnings

Core net profit and core headline earnings are non-IFRS measures used by the Group in evaluating the Group’s performance. These supplement the IFRS measures. Core net profit is calculated by adjusting net profit for the year with the amortisation of intangible assets net of deferred taxation and non-controlling interests that arise as a consequence of the purchase price allocations completed in terms of IFRS 3 – Business Combinations. Core headline earnings is calculated by adjusting core net profit with the headline earnings adjustments required by SAICA circular 2/2015.

Reconciliation of core net profit and core headline earnings to relevant IFRS measures are presented in note 1.5.