Basis of presentation of summarised consolidated financial statements
These summarised provisional financial statements have been prepared in accordance with the framework concepts and the measurement and recognition requirements of IFRS and the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee and Financial Reporting Pronouncements as issued by Financial Reporting Standards Council, and includes, at a minimum, disclosure as required by IAS 34 Interim Financial Reporting, the Companies Act and the Listings Requirements. They do not include all the information required for a complete set of IFRS financial statements. However, selected explanatory notes are included to explain events and transactions that are significant to an understanding to the changes in the Group's financial position and performance since the last annual consolidated financial statements as at and for the year ended 30 June 2019.
In preparing the consolidated financial statements from which these summarised final consolidated financial statements are prepared, directors make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates.
The significant judgements made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those that applied to the consolidated financial statements as at and for the year ended 30 June 2019.
Significant accounting policies
The accounting policies applied in these summarised financial statements are the same as those applied in the Group's consolidated financial statements as at and for the year ending 30 June 2019, except those relating to the accounting for and treatment of, operating leases. Effective 1 July 2019 the Group adopted IFRS 16 Leases (IFRS 16) as issued by the IASB. In transitioning to IFRS 16 the Group used a modified retrospective approach where the right-of-use asset is recognised at the date of initial application (1 July 2019) as an amount equal to the lease liability, using the entity's prevailing incremental borrowing rate at the date of initial application, adjusted for any prepaid or accrued lease payments relating to that lease that were recognised in the statement of financial position immediately before the date of initial application.
The Group has applied the following practical expedients allowed under IFRS 16:
- reliance on onerous lease assessments under IAS 37 to impair right-of-use assets recognised on adoption instead of performing a new impairment assessment for those assets on adoption;
- elected not to reassess whether a contract is, or contains a lease, at the date of initial application. Instead, for contracts entered into before the transition date, the Group relied on its assessment made applying IAS 17 and IFRIC 4 in determining whether an arrangement contains a lease;
- accounting for operating leases with remaining lease terms of less than 12 months as at 1 July 2019 as short-term leases;
- the low value expedient;
- the use of single discount rates for portfolios of leases with reasonably similar characteristics; and
- the use of hindsight in determining the lease term where the contract contains options to extend or terminate the lease.
The adoption of IFRS 16 has had a material impact on the Group's statement of financial position, right-of-use assets of R5.4 billion and R5.6 billion operating lease liabilities were recognised during the period. Lease liabilities recognised at 1 July 2019 were measured at the present value of the remaining lease payments, discounted using the lessee's incremental borrowing rates of between 4.25% and 9.28%, due to the Group's geographic spread and variation in these terms. The impact of IFRS 16 on the consolidated income statement and consolidate statement of cash flows is as follows:
|Operating expenses||203 154|
|Net finance charges||(436 295)|
|Net capital items||(145 144)|
|Share of profit of associates||5 800|
|Loss for the period||(282 917)|
|Non-controlling interest||7 399|
|Attributable to shareholders||(275 518)|
|Impairment of property, plant and equipment, right-of-use assets, goodwill and intangible assets||114 936|
|Right-of-use assets||145 144|
|Taxation effect||(30 208)|
|Headline earnings||(160 582)|
|Cash flows from operating activities||(1 052 307)|
|Profit before finance charges and associate income||(58 010)|
|Depreciation and amortisation||(1 225 089)|
|Impairment of PPE and right-of-use assets||(145 144)|
|Net finance charges paid||375 936|
|Cash flows from financing activities||1 052 307|
|Repayment of lease liability||1 052 307|
|Net increase in cash and cash equivalents||–|
IASB's IFRIC Interpretation 23: Uncertainty over Income Tax Treatments (IFRIC 23) is applicable to the Group for the year ending 30 June 2020. IFRIC 23 clarifies the recognition and measurement of IAS 12 income taxes when there is uncertainty over income tax treatments. The Group has reassessed the tax treatment of international transactions completed in prior periods and in light of new facts and circumstances has estimated and recognised an additional R173 million tax liability. In concordance with the transitional provisions allowed in IFRIC 23 the Group elected to account for the additional provision retrospectively without restating comparatives. Accordingly the R173 million tax liability was recognised in the current period and opening retained earnings was reduced by the same amount.
Bidvest Car Rental (BCR) is a motor vehicle rental business operating in South Africa, Botswana and Namibia. As a result of declining international and domestic travel brought on by the COVID-19 pandemic and a low prospect of a short- to mid-term recovery, management took the decision to exit the business. The BCR business is an identifiable component of the Group's business, the operations and cash flows of which can be clearly distinguished from the rest of the Group. BCR represents a separate major line of business in the geographical area of Southern Africa. The relevant requirements of IFRS 5 were met for this operation to be classified as a disposal group held for sale and as a discontinued operation as at 30 June 2020. BCR is a separate and major business component of the Automotive segment.
A buyer was engaged during June 2020 and the indicative purchase price remains largely unchanged. COVID-19 restrictions added additional challenges to the transaction execution. Success in obtaining financing is considered to be highly probable and some suspensive conditions exist.
BCR was not previously classified as a disposal group held for sale and as a discontinued operation. The comparative consolidated income statement and consolidated statement of cash flows and financial reporting were restated to show the discontinued operation separately from continuing operations.
Results of the discontinued operation included in the Group's results for the year ended 30 June are detailed as follows:
|Revenue||1 057 525||1 094 022|
|Cost of revenue||(840 519)||(630 877)|
|Gross profit||217 006||463 145|
|Operating expenses||(716 538)||(396 414)|
|Other income||1 063||1 813|
|Trading (loss) profit||(498 469)||68 544|
|Share-based payment expense||(1 324)||(1 269)|
|Impairment of property, plant and equipment and right-of-use assets||(128 300)||–|
|Operating (loss) profit before finance charges and associate income||(628 093)||67 275|
|Net finance charges||(210 151)||(130 348)|
|Finance income||5 151||7 320|
|Finance charges||(215 302)||(137 668)|
|Operating loss before taxation||(838 244)||(63 073)|
|Taxation||205 977||14 587|
|Loss for the year from discontinued operations||(632 267)||(48 486)|
|Basic earnings per share (cents) - discontinued operations||(186,4)||(14,4)|
|Diluted basic earnings per share (cents) - discontinued operations||(186,1)||(14,3)|
|Effect of the discontinued operation on the Group's consolidated statement of financial position|
|Assets of disposal group held for sale||1 806 855|
|Vehicle rental fleet||1 561 338|
|Trade and other receivables||168 694|
|Current tax asset||58 335|
|Cash and cash equivalents||16 888|
|Liabilities of disposal group held for sale||1 639 219|
|Post retirement medical aid obligations||1 123|
|Lease liabilities||78 096|
|Trade and other payables||195 325|
|Provisions for discontinuation||255 233|
|Interest-bearing borrowings||345 993|
|Cash and cash equivalents (overdrafts)||763 449|
|Cash of disposal group held for sale|
|Net operating cash flows from discontinued operations||232 661||293 106|
|Net investing activities from discontinued operations||(653 016)||(276 453)|
|Net financing activities from discontinued operations||290 223||–|
|Net (decrease) increase in cash and cash equivalents||(130 132)||16 653|
Bidvest Freight's completion of the LPG tank farm in the port of Richards Bay has been delayed three months as a result of travel restrictions arising from the COVID-19 lockdown with a new commissioning date expected in September 2020. At 30 June 2020 R923 millon has been spent with an additional R73 million committed to complete and commission the facility. Bidvest Freight has committed R201 million to an LPG tank farm project in Isando, Gauteng. The estimated completion date for the Isando LPG project is March 2022.
Fair value of financial instruments
The Group's investments of R3 173 million (2019: R2 944 million) include R141 million (2019: R135 million) recorded at amortised cost, R1 757 million (2019: R1 498 million) recorded and measured at fair values using quoted prices (Level 1) and R1 276 million (2019: R1 311 million) recorded and measured at fair value using factors not based on observable data (Level 3). Fair value losses on Level 3 investments recognised in the income statement total R103 million (2019: R249 million gain).
Analysis of investments at a fair value not determined by observable market data
|Balance at the beginning of year||1 311 132||1 056 988|
|On acquisition of business||29 627||3 798|
|Purchases, loan advances or transfers from other categories||41 169||10 540|
|Fair value adjustment recognised directly in equity||55||5|
|Fair value adjustment arising during the year recognised in the income statement||(102 831)||248 830|
|Proceeds on disposal, repayment of loans or transfers to other categories||(3 396)||(12 906)|
|Profit on disposal of investments||–||2 085|
|Exchange rate adjustments||582||1 792|
|1 276 338||1 311 132|
The Group's effective beneficial interest in the Indian-based MIAL is an unlisted investment held at fair value through profit or loss, where the fair value is not based on observable market data (Level 3). The carrying value of this investment at 30 June 2020, based on the directors' valuation of 30 June 2019, is R1 billion (2019: R1 billion). The valuation of MIAL is fair value less cost to sell and was based on a signed sale agreement, subject to suspensive and conditions precedent. The investment is classified as a current asset and is expected to be sold within the next 12 months.
MIAL is a foreign based asset and the ruling year-end exchange rate, ₹1cr = R2 298 610 (2019: US$1 = R14.09), is a further factor that affects the carrying value.
The carrying values of all financial assets and liabilities approximate their fair values, with the exception of borrowings of R29 470 million whose carrying value is R29 636 million.
The table below summarises the derecognition of the associate investment in Adcock and recognition and consolidation of Adcock as a 51.40% held subsidiary effective 1 August 2019, following the dissolution of the Adcock Ingram Broad-Based Black Empowerment Scheme. No additional consideration was paid for the ordinary shares received on the dissolution of the Scheme. Adcock has been included in the Branded Products segment.
of NCI, fair
|Property, plant and equipment||–||1 534 423||–||1 534 423|
|Right-of-use assets||–||297 373||–||297 373|
|Deferred taxation||–||(96 342)||(1 188 176)||(1 284 518)|
|Interest in associates and joint ventures||(5 057 908)||519 668||–||(4 538 240)|
|Investments and advances||–||29 627||–||29 627|
|Inventories||–||1 499 187||96 930||1 596 117|
|Trade and other receivables||–||2 065 534||–||2 065 534|
|Cash and cash equivalents||–||467 913||–||467 913|
|Post retirement medical aid obligations||–||(15 660)||–||(15 660)|
|Lease liabilities||–||(327 164)||–||(327 164)|
|Trade and other payables and provisions||–||(2 234 860)||–||(2 234 860)|
|Net tangible assets||(5 057 908)||3 739 325||(1 091 246)||(2 409 829)|
|Non-controlling interest^||–||(3 196)||(3 386 266)||(3 389 462)|
|Intangible assets||–||432 322||3 714 234||4 146 556|
|Goodwill||–||176 339||1 476 396||1 652 735|
|Net assets recognised||(5 057 908)||4 344 790||713 118||–|
|^||Subsequent to 1 August 2019 the Group purchased an additional 1 597 100 Adcock ordinary shares for R90 million raising the Group's economic interest in Adcock to 52.3%. During March 2020 Adcock purchased 4 014 038 of its own shares from shareholders other than the Group, which raised the Group's effective holding to 53.6% and a R154 million Group cash outflow. The NCI has been measured at the Group's proportionate share.|
Adcock contributed R6 855 million to revenue and R822 million to operating income. Had the acquisition taken place 1 July 2019, the contribution to revenue would have been R7 347 million and R862 million to operating profit. Trade receivables are stated net of impairment allowances of R32 million and there were no significant contingent liabilities.
Acquisition of businesses, subsidiaries, associates and investments
Effective 7 May 2020, the Group acquired 100% of the share capital and voting rights of, and claims on loan accounts against PHS Bidco Limited and PHS Group Limited (PHS) via its UK subsidiary, Bidvest Services Group (UK) Limited. The PHS Group are specialists in washroom, healthcare and floorcare hygiene, and are a leading hygiene service provider in the UK, Spain and Ireland. With over 120 000 customers in over 300 000 locations the Group supports, among others, restaurants, offices, hospitals and schools and meets the hygiene needs of up to 100 million people. The acquisition adds significance to the Group's hygiene service offerings as a whole and in the UK and Europe geography. The Group will gain and achieve substantial synergies from this acquisition, which has been funded with a one-year sterling bridge facility, with an option to extend for a further one-year period.
On 1 July 2019, the Group acquired 100% of the share capital and voting rights of Future Cleaning Services Limited (Future Cleaning) via its UK subsidiary, Noonan Services Group (UK) Limited. Future Cleaning, a North Yorkshire company formed in 2003, is an office and commercial cleaning services company operating throughout the UK and Ireland through bespoke packages designed to service any size company and budget providing the best value contracts. Specialist cleaning services include boat, transport and escalator cleaning, jet washing and road sweeping. General cleaning services include, daily contract, commercial, industrial, window and carpet cleaning. This bolt-on acquisition increases the Group's cleaning service footprint and market share in the UK and Ireland and was funded from existing cash resources and facilities.
As at 1 July 2020, the Group acquired 100% of the share capital and voting rights of New Frontiers Tours Proprietary Limited (New Frontiers). New Frontiers is a full service ground handler, specialising in the deluxe end of the market and offering accommodation, safaris, car rental, transfers, day tours, private touring, charter flights and VIP Meet and Greet services throughout Southern Africa. The consulting team is made up of travel professionals who have been in the industry a minimum of seven years and who are driven by passion and creativity to ensure impeccable on the ground service and responses. This inbound travel and tourism acquisition compliments the Group's existing portfolio of internal and outbound travel and tourism offerings. The acquisition was funded from cash resources and existing facilities.
The Group also made a number of less significant acquisitions during the year. These acquisitions were funded from existing cash resources.
The following table summaries the assets acquired and liabilities assumed at fair value which have been included in these results from the respective acquisition dates. The goodwill, intangible and tangible asset values represented for PHS are provisional, as this acquisition was completed close the Group's reporting date. The remaining values represent the final at acquisition fair values consolidated by the Group.
|Property, plant and equipment||1 079 088||60 885||2 291||7 740||1 150 004|
|Right-of-use assets||916 375||4 037||2 036||–||922 448|
|Deferred taxation||166 683||(48 603)||(1 822)||(66 573)||49 685|
|Interest in associates and joint ventures||–||–||617||59 529||60 146|
|Investments and advances^||–||–||4 728||4 258 585||4 263 313|
|Inventories||177 736||147||–||58 674||236 557|
|Trade and other receivables||1 413 900||112 115||93 926||39 797||1 659 738|
|Cash and cash equivalents||1 218 465||9 201||31 720||21 652||1 281 038|
|Borrowings||(12 377 334)||–||–||(12 940)||(12 390 274)|
|Trade and other payables and provisions||(2 891 003)||(100 986)||(83 443)||(49 504)||(3 124 936)|
|Lease liabilities||(901 659)||(4 037)||(2 181)||–||(907 877)|
|Taxation||(186 155)||(5 832)||3 777||(1 068)||(189 278)|
|Intangible assets||–||236 034||25 022||235 811||496 867|
|(11 383 904)||262 961||76 671||4 551 703||(6 492 569)|
|Goodwill||11 685 164||296 493||215 715||211 439||12 408 811|
|Net assets acquired||301 260||559 454||292 386||4 763 142||5 916 242|
|Settled as follows:|
|Cash and cash equivalents acquired||(1 281 038)|
|Acquisition costs||178 179|
|Net change in vendors for acquisition||515 620|
|Net acquisition of businesses, subsidiaries, associates and investments||5 329 003|
|^||R43 million of advances to B-BBEE and other partners, R21 million costs capitalised to MIAL investment, R4 194 million purchases made in the Bidvest Insurance and Bidvest Bank investment portfolios, and R5 million towards acquisitions.|
Goodwill arose on the acquisitions as the anticipated value of future cash flows that were taken into account in determining the purchase consideration exceeded the net assets acquired at fair value. The acquisitions have enabled the Group to expand its range of complementary products and services and, as a consequence, has broadened the Group's base and geographic reach in the market place.
PHS contributed R767 million to revenue and R121 million to operating profit. Had the acquisition taken place 1 July 2019 the contribution to revenue would have been R5 144 million and R741 million to operating profit. Future Cleaning was acquired 1 July 2019 and contributed R572 million to revenue and R26 million to operating profit. New Frontiers contributed R1 112 million and R41 million to operating profit. Other acquisitions contributed R178 million to revenue and an operating loss of R3 million. Had these other acquisitions taken place 1 July 2019, the contribution to revenue would have been R407 million and R20 million to operating profit.
In the current period the Group disposed of 100% of the share capital and voting rights of DH Mansfield Group Limited (DH Mansfield). DH Mansfield is a rescue and recovery business operating services centres across the northern, central and southern geographical areas of the UK. The business is considered non-core to the Group because of its size, geographic isolation and lack of scalability.
The Group disposed of the entire share capital of Glenryck South Africa Proprietary Limited to the African Pioneer Group. Glenryck is a leading South African oil-rich canned fish brand and its disposal is in line with the Group's divestiture of its fishing and associated interests and follows the disposal of fishing interests in 2018 and 2019.
|Property, plant and equipment||(136 433)||(531)||(24 412)||(161 376)|
|Right-of-use assets||(51 011)||–||–||(51 011)|
|Deferred taxation||6 361||(25 431)||18 218||(852)|
|Interest in associates||–||–||(3 049)||(3 049)|
|Investments and advances^||–||–||(3 964 433)||(3 964 433)|
|Inventories||(14 611)||(13 827)||(21 800)||(50 238)|
|Trade and other receivables||(95 489)||(48 228)||(130 602)||(274 319)|
|Cash and cash equivalents and bank overdrafts||33 205||(14 143)||(15 360)||3 702|
|Borrowings||24 289||–||–||24 289|
|Lease liability||47 991||–||–||47 991|
|Trade and other payables and provisions||61 381||28 684||9 742||99 807|
|Taxation||(13 479)||–||899||(12 580)|
|Intangible assets||–||(18 205)||–||(18 205)|
|(137 796)||(91 681)||(4 130 797)||(4 360 247)|
|Non-controlling interest||–||–||(1 087)||(1 087)|
|Realisation of foreign currency translation reserve||(2 803)||–||(4 542)||(7 327)|
|Goodwill||–||–||(2 152)||(2 152)|
|Net assets disposed of||(140 599)||(91 681)||(4 138 560)||(4 370 840)|
|Settled as follows:|
|Cash and cash equivalents and bank overdrafts disposed of||(3 702)|
|Net loss on disposal of operations||261 155|
|Raising of receivable arising on disposal of subsidiaries and associates||99 020|
|Net proceeds on disposal of businesses, subsidiaries, associates and investments||(4 014 367)|
|^||R24 million repayment of advances to B-BBEE and other partners, R3 936 million sales made in the investment portfolios of Bidvest Insurance and Bidvest Bank, and R4 million in disposals.|
Significant accounting judgements
Judgement was required to consider the impact of COVID-19 on the results of the Group for the year. The Group's assessment of the impact is detailed below.
|COVID-19 capital impairments||1 147 958|
|COVID-19 non-capital charges||1 552 086|
|Restructuring costs||460 443|
|Bidvest COVID-19 Fund||400 000|
|Impairment of MIAL||351 442|
|Net impairment losses on financial assets (ECLs)||228 315|
|Onerous contracts||57 148|
|Inventory obsolescence provisions||54 738|
- Impairment of goodwill and intangible assets – The impact of lower forecast cash flows, the expected slowdown in economic activity due to COVID-19 as well as higher discount rates resulted in impairment of certain automotive dealerships, some Brandcorp businesses as well as smaller businesses in Branded Products.
- Property, plant and equipment – The decision to divest of Bidair Services as a result of declining international and domestic air travel resulted in an impairment of customised plant and equipment.
- Working capital – The increased credit risk posed by the consequences of COVID-19 and the impact on forward looking economic assumptions resulted in higher ECLs, particularly in Financial Services and Services. The impact of lower expected demand on inventories was assessed and provisions were increased in select trading and distribution businesses.
- Investments, associates and joint ventures – Comair filed for voluntary business rescue as a direct consequence of COVID-19. As a result, the Group ceased equity accounting for this 27.2% held investment and impaired its value to nil. The capital impairment amounted to R241 million and the Group's share of operating losses was R201 million. The financial position of MIAL deteriorated as a direct consequence of COVID-19 on air travel. The investment was impaired to its recoverable amount based on a revised offer accepted.
- Deferred tax assets – No material impact was noted.
- Restructuring – The socio-economic shifts and long-term structural changes caused by COVID-19 resulted in a strategic review and right-sizing of businesses. This impacted all divisions. Restructuring and retrenchment costs were provided for. The cost of adhering to health and safety protocols has been included.
- Bidvest COVID-19 Fund – The Group has pledged to provide support to its employees and wider society to assist in dealing with the impact of COVID-19. R400 million was approved by the board and set aside for this purpose. A significant amount has already been spent on the project and employee support.
- Trading impact – The impact of lost business due to the trade restrictions and lower demand caused by the pandemic was not quantified.
- Going concern – Based on projections of future results and cash flows, future debt repayment commitments, available liquidity and funding covenants in place, no going concern risk has been identified.
Restatement of comparatives
During the current period, a prior year acquisition UAV and Drone Solutions Proprietary Limited (UDS) was subject to a Purchase Price Allocation (PPA) review. The PPA review resulted in the recognition of an indefinite life intangible asset, beyond visual line of sight (BVLOS) license in the amount of R457 million, deferred tax liabilities of R128 million and the derecognition of goodwill in the amount of R330 million. The prior year comparative consolidated statement of financial position has been restated accordingly.
As a result of an internal reporting restructure, effective 1 July 2019, Bidvest Electrical and Bidvest Commercial Products were merged and reported under the Bidvest Commercial Products segment, the prior year comparative has been re-presented to reflect the merger. Following the rationalisation and restructure of the Group's Namibian investments, the Bidvest Namibia segment has been dissolved with the remaining Namibian operations reported under the Groups seven operating segments, the prior period comparatives have been restated. Certain other operations were reclassified between segments and the comparative period's segmental information has been amended to reflect these insignificant changes.
Net impairment losses on financial assets, in accordance with IAS 1, have been disclosed as a separate line item in the consolidated income statement and the comparative period has been restated accordingly.
No comparative information has been changed following the adoption of IFRS 16.
Subsequent to the 30 June 2020 the Group has received a non-binding offer for BCR, which has been disclosed as a disposal group held for sale and discontinued operation. There have been no other events noted, that occurred subsequent to the reporting date, including events associated with the COVID-19 pandemic, that could have a material impact on these annual consolidated financial statements.
The auditors, PricewaterhouseCoopers Inc, have issued their opinion on the consolidated financial statements for the year ended 30 June 2020. The audit was conducted in accordance with International Standards on Auditing. They have issued an unmodified opinion. A copy of the auditor's report together with a copy of the audited consolidated financial statements are available for inspection at the Company's registered office.
These summarised consolidated financial statements have been derived from the consolidated financial statements and are consistent in all material respects with the consolidated financial statements. These summarised consolidated financial statements have been audited by the Company's auditors who have issued an unmodified opinion on Independent auditor's report. The auditor's report does not necessarily report on all of the information contained in this announcement. Any reference to future financial information included in this announcement has not been reviewed or reported on by the auditors. Shareholders are advised, that in order to obtain a full understanding of the nature of the auditor's engagement they should obtain a copy of that report together with the accompanying financial information from the Company's registered office.
Preparer of the summarised consolidated financial statements
The consolidated financial statements and summarised consolidated financial statements have been prepared under the supervision of the chief financial officer, MJ Steyn BCom CA (SA), and were approved by the board of directors on 11 September 2020.