Blue Label Telecoms Integrated Annual Report 2019

Blue Label annual financial statements 2019 23 This right only becomes exercisable once Glocell has settled its outstanding debt of R121 million to Investec Bank Limited. Glocell’s ability to repay TPC the amounts owing to it is dependent on the extent of dividends receivable from Glocell Distribution on a piecemeal basis. TPC is therefore exposed to the value of Glocell Distribution and accordingly has reclassified the amount due by Glocell to it from trade receivables to financial assets at fair value through profit or loss. A discounted cash flow valuation of Glocell Distribution has been used to determine the value of Glocell’s 40% shareholding in Glocell Distribution. This is used to determine the fair value of the loan. This valuation has been performed by the finance department of the Group using cash flow projections based on forecasts for up to five years which are based on assumptions of the business, industry and economic growth. A fair value downward adjustment of R141 million of the R343 million owing to TPC was required due to unfavourable wholesale trading conditions impacting on Glocell Distribution’s financial performance. The derivatives are level 3 instruments in the fair value hierarchy. The ARCC is satisfied that it has complied with its legal, regulatory and other responsibilities as per its terms of reference. On behalf of the Audit, Risk and Compliance Committee JS Mthimunye Chairman 26 September 2019