1. RESULTS OF OPERATIONS
1.1 Segmental summary
 

The Groupís 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. Managementís assessment of the Groupís 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 headline earnings as a non-IFRS measure in evaluating the Groupís 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 2020 are as follows:

Total   Africa Distribution   International  
2020 
Rí000 
  Restated*
2019 
Rí000 
  2020 
Rí000 
  Restated*
2019 
Rí000 
  2020 
Rí000 
  Restated*
2019 
Rí000 
 
Continuing operations 
Total segment revenue  30 818 506    33 413 055    30 165 762    33 016 255    —    —   
Internal revenue  (9 683 180)   (9 810 791)   (9 219 540)   (9 617 229)   —    —   
Revenue  21 135 326    23 602 264    20 946 222    23 399 026    —    —   
Segment result 
Operating profit/(loss) before depreciation, amortisation and the additional items listed below  1 305 929    1 387 130    1 331 270    1 443 689    31 397    18 314   
Impairment of goodwill  (213 583)   (50 398)   (213 583)   (50 398)   —    —   
Surety receivable recognised  19 826    29 998    —    —    19 826    29 998   
Fair value losses on SPV1 and SPV2  (48 694)   (750 264)   (48 694)   (750 264)   —    —   
Fair value losses on other financial instruments  (121 782)   (123 613)   (73 516)   (123 613)   —    —   
Expected credit loss on loans  (56 214)   (163 552)   (4 458)   (2 060)   (31 749)   (101 672)  
Financial guarantee contracts  7 829    (58 832)   7 829    3 300    —    —   
Bad debts and expected credit losses on trade receivables, other receivables and advances to customers  (67 947)   (13 169)   (67 673)   (13 169)   —    —   
Depreciation and amortisation  (189 314)   (170 455)   (168 855)   (168 596)   —    —   
Operating profit/(loss) 636 050    86 845    762 320    338 889    19 474    (53 360)  
Finance costs  (229 988)   (230 306)   (215 296)   (211 616)   (48)   —   
Finance income  78 175    92 292    75 474    77 356    998    7 946   
Impairments on associates and joint venture  —    (2 639 564)   —    (2 521 152)   —    (118 412)  
Share of profits/(losses) from associates and joint ventures  16 598    (3 693 431)   2 635    (3 605 759)   (5 806)   (110 441)  
Taxation  (219 752)   (278 449)   (203 637)   (256 656)   (8 547)   (3 178)  
Profit/(loss) for the year from continuing operations  281 083    (6 662 613)   421 496    (6 178 938)   6 071    (277 445)  
Profit/(loss) for the year from continuing operations attributable to: 
Equity holders of parent  226 786    (6 672 923)   375 952    (6 179 847)   6 071    (277 445)  
Non-controlling interest  54 297    10 310    45 544    909    —    —   
(Loss)/profit from discontinued operations attributable to equity holders of the parent  (102 305)   26 540    (261 707)   61 972    14 617    14 186   
Profit/(loss) for the year attributable to equity holders of the parent  124 481    (6 646 383)   114 245    (6 117 875)   20 688    (263 259)  
Reconciliation of profit/(loss) for the year to core headline earnings for the year 
Profit/(loss) for the year attributable to equity holders of the parent  124 481    (6 646 383)   114 245    (6 117 875)   20 688    (263 259)  
Amortisation of intangibles raised through business combinations net of tax and non-controlling interest  40 819    70 485    36 357    61 151    3 835    7 675   
Headline earnings adjustment  396 832    3 792 743    372 374    3 530 852    (2 908)   165 443   
Core headline earnings for the year  562 132    (2 783 155)   522 976    (2 525 872)   21 615    (90 141)  

 

Mobile   Solutions   Corporate  
2020 
Rí000 
  Restated*
2019 
Rí000 
  2020 
Rí000 
  2019 
Rí000 
  2020 
Rí000 
  2019 
Rí000 
 
Continuing operations 
Total segment revenue  —    —    191 830    205 106    460 914    191 694   
Internal revenue  —    —    (2 726)   (1 868)   (460 914)   (191 694)  
Revenue  —    —    189 104    203 238    —    —   
Segment result 
Operating profit/(loss) before depreciation, amortisation and the additional items listed below  —    —    40 798    38 049    (97 536)   (112 922)  
Impairment of goodwill  —    —    —    —    —    —   
Surety receivable recognised  —    —    —    —    —    —   
Fair value losses on SPV1 and SPV2  —    —    —    —    —    —   
Fair value losses on other financial instruments  —    —    —    —    (48 266)   —   
Expected credit loss on loans  —    —    (194)   (263)   (19 813)   (59 557)  
Financial guarantee contracts  —    —    —    —    —    (62 132)  
Bad debts and expected credit losses on trade receivables, other receivables and advances to customers  —    —    (274)   —    —    —   
Depreciation and amortisation  —    —    (923)   (292)   (19 536)   (1 567)  
Operating profit/(loss) —    —    39 407    37 494    (185 151)   (236 178)  
Finance costs  —    —    (196)   —    (14 448)   (18 690)  
Finance income  —    —    1 470    3 154    233    3 836   
Impairments on associates and joint venture  —    —    —    —    —    —   
Share of profits/(losses) from associates and joint ventures  —    —    19 769    22 769    —    —   
Taxation  —    —    (10 784)   (10 453)   3 216    (8 162)  
Profit/(loss) for the year from continuing operations  —    —    49 666    52 964    (196 150)   (259 194)  
Profit/(loss) for the year from continuing operations attributable to: 
Equity holders of parent  —    —    40 913    43 563    (196 150)   (259 194)  
Non-controlling interest  —    —    8 753    9 401    —    —   
(Loss)/profit from discontinued operations attributable to equity holders of the parent  144 785    (49 618)   —    —    —    —   
Profit/(loss) for the year attributable to equity holders of the parent  144 785    (49 618)   40 913    43 563    (196 150)   (259 194)  
Reconciliation of profit/(loss) for the year to core headline earnings for the year 
Profit/(loss) for the year attributable to equity holders of the parent  144 785    (49 618)   40 913    43 563    (196 150)   (259 194)  
Amortisation of intangibles raised through business combinations net of tax and non-controlling interest  627    1 659    —    —    —    —   
Headline earnings adjustment  27 369    96 448    (3)   —    —    —   
Core headline earnings for the year  172 781    48 489    40 910    43 563    (196 150)   (259 194)  
* As a result of the discontinued operations, the Group has restated its comparative financial information. Refer to note 11 for details.

The Company is domiciled in the Republic of South Africa. The continuing revenue earned from external customers in South Africa is R21.1 billion (2019: R23.6 billion), and from external customers from other countries is R6 million (2019: R49 million).

The Africa Distribution segment includes revenue of R2.7 billion and R2.1 billion earned from two external customers.

At 31 May 2020, the Group is managed on the basis of five main business segments:

  • Africa Distribution, which includes the distribution of prepaid airtime, starter packs and electricity of the South African network operators and utility suppliers, and the distribution and financing of handsets, tablets and other devices within South Africa and certain African countries.
  • International, which includes associate operations involved in the distribution of prepaid airtime in Mexico and the investment in Oxigen Services India. Refer to note 2.1.
  • 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. The entities within this segment, forming part of the VAS operations, were disposed of in the current year and accounted for as discontinued operations. Refer to note 11 for details.
  • 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.

Discontinued operations

The current and prior year segmental results have been adjusted to account for the discontinued operations within the Africa Distribution segment (3G Mobile, Airvantage and WiConnect), the Mobile segment (Cellfind, Panacea, Simigenix and Viamedia) and the International segment (AV Technology and Airvantage Brazil). Refer to note 11 for details. In addition, Blue Label One has been reallocated from the Mobile segment to the Africa Distribution segment.

Core headline earnings

Core headline earnings is a non-IFRS measures used by the Group in evaluating the Groupís performance. This supplements 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 noncontrolling interests that arise as a consequence of the purchase price allocations completed in terms of IFRS 3 Ė Business Combinations. Core headline earnings is calculated by adjusting core net profit with the headline earnings adjustments required by SAICA circular 1/2019.

Reconciliation of core headline earnings to relevant IFRS measures is presented in note 1.5.