Basis of presentation of summarised consolidated financial statements
The provisional summarised consolidated financial statements have been prepared in accordance with and containing information required by IAS 34: Interim Financial Reporting as well as the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee and Financial Reporting Pronouncements as issued by Financial Reporting Standards Council and the Companies Act of South Africa and the JSE Listings Requirements. The summarised report does not include all the notes of the type normally included in an annual financial report. Accordingly, this report is to be read in conjunction with the annual report for the year ended 30 June 2021 and any public announcements made by the Group during the interim reporting period (IAS 34 para 6). 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 2021.
In preparing these provisional summarised consolidated financial statements, management 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.
Significant accounting policies and judgements
The accounting policies applied in these provisional summarised consolidated financial statements are the same as those applied in the Group's consolidated financial statements as at and for the year ending 30 June 2021. 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 2021.
Judgement was required to consider the impact of COVID-19 on the results of the Group for the period under review. The financial impact arising from the Group's assessment is detailed below:
| R'000s | 2021 | 2020 |
| Restructuring and retrenchment costs | 160 638 | 460 443 |
|---|---|---|
| Net impairment losses on financial assets (IFRS 9: Expected Credit Losses) | 5 622 | 228 315 |
| Write-down of inventory to net realisable value | 11 302 | 54 738 |
| Onerous contracts | 4 903 | 57 148 |
| Bidvest COVID-19 Fund | – | 400 000 |
| Impairment of MIAL, classified as a financial asset at fair value through profit or loss, where the fair value is not based on observable market data (Level 3) | – | 351 442 |
| COVID-19 non-capital charges | 182 465 | 1 552 086 |
| COVID-19 capital impairments | 134 693 | 1 147 958 |
Restatement of comparatives
The comparative consolidated statement of financial position has been restated following a Purchase Price Allocation (PPA) review of a prior year acquisition (refer Business Combinations note for further details). In prior periods the net life assurance fund was disclosed on the face of the consolidated statement of financial position. In the current reporting period the gross life assurance fund asset and the gross reinsurer's share have been separately disclosed in non-current assets and non-current liabilities respectively, the prior year comparative has been restated accordingly. The impact on the 2019 financial period was not material. Interest revenue, disclosed in the Rendering of services category in prior periods, has been restated and disclosed in the interest from banking operations category.
Significant commitments
Bidvest Properties has committed R195 million to build two Gauteng distribution centres for operations within the Bidvest Commercial Products division. The estimated completion date for the distribution centre project is 30 November 2021.
Fair value of financial instruments
The Group's investments of R2 759 million (2020: R3 173 million) include R163 million (2020: R141 million) recorded at amortised cost, R2 476 million (2020: R1 757 million) recorded and measured at fair values using quoted prices (Level 1) and R119 million (2020: R1 276 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 R140 million (2020: R103 million gain).
Analysis of investments at a fair value not determined by observable market data
| Year ended 30 June | ||
| R'000s | 2021 Audited |
2020 Audited |
| Balance at the beginning of year | 1 276 338 | 1 311 132 |
|---|---|---|
| On acquisition of business | – | 29 627 |
| Purchases, loan advances or transfers from other categories | 36 815 | 41 169 |
| Fair value adjustment recognised directly in equity | 124 | 55 |
| Fair value adjustment arising during the year recognised in the income statement | (3 040) | (102 831) |
| Proceeds on disposal, repayment of loans or transfers to other categories | (1 050 807) | (3 396) |
| Loss on disposal of investments | (140 222) | – |
| Exchange rate adjustments | – | 582 |
| 119 208 | 1 276 338 | |
Effective 5 February 2021 the Group disposed of its entire remaining interest in the Indian based Mumbai International Airport Private Limited (MIAL) for R1.0 billion (
cr 505). MIAL was an unlisted investment held at fair value through profit or loss, where the fair value is not based on observable market data (Level 3). A R140 million loss on disposal was recognised in the current period. The carrying value at 30 June 2020 was R1.1 billion (cr 497).
The carrying values of all financial assets and liabilities approximate their fair values, with the exception of borrowings of R20 796 million whose carrying value is R20 735 million.
Discontinued operations
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 slow anticipated 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.
Effective 29 June 2021 the Group disposed of its entire interest in BCR for the gross consideration of R725 million (net R701 million) to the Thesele Consortium, lead by the 100% Black-owned Thesele Group. The balance of the discontinued operations' net assets were disposed of on the open market.
Results of the discontinued operation included in the Group's results for the year ended 30 June are detailed as follows:
| R'000s | 2021 Audited |
2020 Audited |
|
| Revenue | 536 819 | 1 057 525 | |
|---|---|---|---|
| Cost of revenue | (291 257) | (840 519) | |
| Gross profit | 245 562 | 217 006 | |
| Operating expenses | (7 135) | (716 538) | |
| Other income | – | 1 063 | |
| Trading profit (loss) | 238 427 | (498 469) | |
| Share-based payment expense | 1 427 | (1 324) | |
| Impairment of property, plant and equipment and right-of-use assets | 52 051 | (128 300) | |
| Loss on disposal of discontinued operations | (85 224) | – | |
| Operating profit (loss) before finance charges and associate income | 206 681 | (628 093) | |
| Net finance charges | (77 931) | (210 151) | |
| Finance income | 31 815 | 5 151 | |
| Finance charges | (109 746) | (215 302) | |
| Operating profit (loss) before taxation | 128 750 | (838 244) | |
| Taxation | (124 961) | 205 977 | |
| Gain (loss) for the year from discontinued operations | 3 789 | (632 267) | |
| Basic earnings per share (cents) – discontinued operations | 1.1 | (186.4) | |
| Diluted basic earnings per share (cents) – discontinued operations | 1.1 | (186.1) | |
| Effect of the discontinued operation on the Group's consolidated statement of financial position | |||
| Assets of disposal group held for sale | – | 1 806 855 | |
| Current tax asset | – | 58 335 | |
| Vehicle rental fleet | – | 1 561 338 | |
| Inventories | – | 1 600 | |
| Trade and other receivables | – | 168 694 | |
| 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 flows from discontinued operations | |||
| Net operating cash flows from discontinued operations | 393 293 | 232 661 | |
| Net investing activities from discontinued operations | 1 440 186 | (653 016) | |
| Net financing activities from discontinued operations | (358 982) | 290 223 | |
| Net increase (decrease) in cash and cash equivalents | 1 474 497 | (130 132) | |
| Analysis of discontinued net assets sold and consideration received | |||
| Assets of disposal group sold | 864 757 | – | |
| Liabilities of disposal group sold | (54 533) | – | |
| Net assets sold | 810 224 | – | |
| Loss on disposal | (85 224) | – | |
| Gross consideration received | 725 000 | – | |
| Cash and cash equivalents included in net assets of disposal group sold | (24 206) | – | |
| Net consideration received | 700 794 | – | |
Business combinations
The prior year acquisition, PHS Group was subject to a Purchase Price Allocation (PPA) review in the current period.
The PPA review, which was finalised during the current period, resulted in the recognition at 30 June 2020 of an indefinite life Brand intangible asset in the amount of R2 336 million (£108.8 million), a 15-year definite life Customer Relationships intangible asset in the amount of R2 482 million (£115.6 million) and deferred tax liabilities of R915 million (£42.6 million), a resultant net R3 903 million (£181.7 million) goodwill has been de-recognised. The 30 June 2020 comparative condensed consolidated statement of financial position has been restated accordingly, the impact of which is illustrated in the table below. The impact of the PPA on the consolidated income statement and condensed consolidated statement of other comprehensive income was considered immaterial and these statements were not restated.
| R'000s | De-recognised at acquisition (1 May 2020) |
Restated at acquisition (1 May 2020) |
Movement in FCTR to 30 June 2020 |
Net impact of restatement at 30 June 2020 |
|---|---|---|---|---|
| Deferred taxation | – | (1 006 737) | 91 253 | (915 484) |
| Intangible asset – PHS brand (indefinite life) | – | 2 569 026 | (232 863) | 2 336 163 |
| Intangible asset – Customer relationships (15-year life) | – | 2 729 590 | (247 416) | 2 482 174 |
| Goodwill | (11 685 164) | 7 393 285 | 389 026 | (3 902 853) |
| Net assets recognised | (11 685 164) | 11 685 164 | – | – |
The relief-from-royalty method was used to determine the value of the PHS brand. A royalty rate of 3.5% was applied after considering PHS's market-leading position, profitability levels and licensing transactions for similar entities. The Multi-Period Excess Earnings Method (MPEEM), an income-based valuation method that isolates the cash flow attributable to the customer related intangible asset, was used to value Customer Relationships, which were estimated to have a Remaining Useful Life (RUL) of 15 years. A ratio of 92.5% was applied to forecasted revenues (representing the revenue remaining after removing revenue from new customers) in addition to an existing customer attrition rate of 13.5%. The Weighted Average Cost of Capital (WACC) was calculated as 9.8%, to which a 0.25% intangible asset specific risk premium was added to arrive at the discount rate of 10.05% used in valuation of the identified intangible assets. The residual Goodwill is supported by the identified trained and assembled workforce.
Acquisition of businesses, subsidiaries, associates and investments
During the current period, Bidvest Services' international operations, Noonan Services (UK) and Noonan Services (ROI) made a number of bolt-on acquisitions in the United Kingdom (UK) and Republic of Ireland (ROI), which have been collectively disclosed as the Bidvest Services international acquisitions. The acquired companies specialise in security, cleaning and other facilities management services throughout the UK and ROI in the retail, transport, corporate, warehouse and distribution sectors. The acquisitions substantially add to the Bidvest Services division's facilities management offerings as a whole and in the UK and ROI. The Group will gain and achieve substantial synergies from these bolt-on acquisitions, which have been funded using the Group's cash resources and existing facilities.
| Acquisition | Effective acquisition date |
Net identifiable assets |
Goodwill | Cash and cash equivalents acquired |
Net purchase price paid |
| Axis Group Limited (United Kingdom) | 01-Feb-21 | 186 490 | 200 818 | (12 734) | 374 574 |
| Cordant Group (United Kingdom) | 01-Jun-21 | 484 309 | 116 056 | 292 767 | 893 132 |
| Lynch Interact (Republic of Ireland) | 01-May-21 | 116 499 | 64 863 | (25 554) | 155 808 |
| Amber Cleaning (United Kingdom) | 01-May-21 | 51 824 | 5 267 | (17 300) | 39 791 |
| 839 122 | 387 004 | 237 179 | 1 463 305 |
A PPA review resulted in the identification of definite life Customer Relationship intangible assets in the amount of R1 087 million (£47 million and €9 million). The Multi-Period Excess Earnings Method (MPEEM) using cash flows attributable to the customer related intangible asset was used to value Customer Relationships, which were estimated to have a Remaining Useful Life (RUL) of 20 years. An existing customer attrition rate of 5% was applied to forecasted existing customer revenues. A WACC of 11% was used in valuation. The residual Goodwill is supported by the identified trained and assembled workforce.
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 date. The values represent the final at acquisition fair values consolidated by the Group.
| Bidvest Services international acquisitions | |||||
|---|---|---|---|---|---|
| R'000s | Cordant Group |
Axis Group Limited |
Other Services int. acquisitions |
Other minor acquisitions |
Total acquisitions |
| Property, plant and equipment | 18 894 | 8 663 | 10 875 | 638 | 39 070 |
| Right-of-use assets | 3 109 | 22 854 | 2 144 | – | 28 107 |
| Deferred taxation | (110 394) | (57 374) | (25 281) | (2 047) | (195 096) |
| Interest in associates and joint ventures | – | – | – | 62 054 | 62 054 |
| Investments and advancesº | – | – | 42 | 2 364 541 | 2 364 583 |
| Inventories | – | 692 | – | 787 | 1 479 |
| Trade and other receivables | 935 228 | 629 655 | 60 898 | 1 808 | 1 627 589 |
| Cash and cash equivalents | (292 767) | 12 734 | 42 854 | 324 | (236 855) |
| Borrowings | – | – | (20 191) | – | (20 191) |
| Trade and other payables and provisions | (609 030) | (717 585) | (79 233) | (13 329) | (1 419 177) |
| Lease liabilities | (9 741) | (39 948) | (2 013) | – | (51 702) |
| Taxation | (32 011) | – | (5 192) | 159 | (37 044) |
| Intangible assets | 581 021 | 326 799 | 183 420 | 10 094 | 1 101 334 |
| 484 309 | 186 490 | 168 323 | 2 425 029 | 3 264 151 | |
| Non-controlling interest | – | – | – | (3 106) | (3 106) |
| Goodwill | 116 056 | 200 818 | 70 130 | 14 939 | 401 943 |
| Net assets acquired | 600 365 | 387 308 | 238 453 | 2 436 862 | 3 662 988 |
| Settled as follows: | |||||
| Cash and cash equivalents acquired | 292 767 | (12 734) | (42 854) | (324) | 236 855 |
| Acquisition costs | 33 509 | 33 509 | |||
| Net change in vendors for acquisition | 1 860 | 1 860 | |||
| Net acquisition of businesses, subsidiaries, associates and investments | 893 132 | 374 574 | 195 599 | 2 471 907 | 3 935 212 |
| º | R8 million of advances to B-BBEE and other partners, R36 million costs capitalised to MIAL investment, R2 321 million purchases made in the Bidvest Insurance and Bidvest Bank investment portfolios. |
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, have broadened the Group's base and geographic reach in the marketplace.
Trade receivables acquired are stated net of impairment allowances of R25 million (2020: R151 million). There were no significant contingent liabilities identified in the businesses acquired.
The Bidvest Services international acquisitions contributed R1 412 million to revenue and R98 million to operating profit, had the acquisitions taken place 1 July 2020 the contribution to revenue would have been R7 094 million and R328 million to operating profit. Other minor acquisitions contributed R54 million in revenue and R1.1 million in operating losses, had these other acquisitions taken place 1 July 2020 the contribution to revenue would have been R56 million and R0.7 million in operating losses.
Disposals
On 23 December 2020, the Group disposed of 100% of the share capital and voting rights of Ontime Automotive Limited (Ontime). Ontime is a specialist in vehicle transport services and is Europe's largest enclosed car delivery operator. This disposal follows the prior period disposal of DH Mansfield and completes the divestiture of the Group's Freight interests in the United Kingdom, which are considered non-core because of size, geographical isolation and lack of scalability.
On 4 June 2021, the Group disposed of its entire interest in BidAir Services Proprietary Limited to National Aviation Services (NAS), Colossal Africa and a consortium comprising the BidAir Services executive management team. BidAir Services provides handling services, including passenger and ramp handling, load control and operations, cleaning, and toilet and water services, at nine South African airports. The decision to sell arose due to the advent of COVID-19 and the Group's reassessment of the suitability of this investment within its security and aviation portfolio.
| R'000s | On Time Automotive |
BidAir Services |
Other disposals |
Total disposals |
|---|---|---|---|---|
| Property, plant and equipment | (140 601) | (66) | (12 077) | (152 744) |
| Right-of-use assets | (42 609) | – | (208) | (42 817) |
| Deferred taxation | (3 305) | (9) | 1 719 | (1 595) |
| Interest in associates | – | – | (2 815) | (2 815) |
| Investments and advancesº | – | – | (2 747 929) | (2 747 929) |
| Inventories | (818) | (672) | (12 380) | (13 870) |
| Trade and other receivables | (74 493) | (45 157) | (8 803) | (128 453) |
| Cash and cash equivalents and bank overdrafts | 31 262 | (5 537) | (3 642) | 22 083 |
| Borrowings | 18 169 | – | – | 18 169 |
| Lease liability | 45 151 | – | 230 | 45 381 |
| Trade and other payables and provisions | 52 965 | 31 374 | 16 853 | 101 192 |
| Taxation | (162) | 4 618 | (198) | 4 258 |
| Intangible assets | (55) | (717) | (116) | (888) |
| (114 496) | (16 166) | (2 769 366) | (2 900 028) | |
| Non-controlling interest | – | – | (227) | (227) |
| Realisation of foreign currency translation reserve | (62 143) | – | 9 189 | (52 954) |
| Realisation of share based payment reserve | – | 533 | (2 266) | (1 733) |
| Goodwill | – | (16 983) | (5 770) | (22 753) |
| Net assets disposed of | (176 639) | (32 616) | (2 768 440) | (2 977 695) |
| Cash and cash equivalents and bank overdrafts disposed of | (31 262) | 5 537 | 3 642 | (22 083) |
| Net loss on disposal of operations | 96 580 | (42 382) | 8 622 | 62 820 |
| Raising of other investment arising on disposal of subsidiaries and associates | – | 35 000 | – | 35 000 |
| Net receivable reversed on disposal of subsidiaries and associates | 51 839 | – | (99 020) | (47 181) |
| Net proceeds on disposal of businesses, subsidiaries, associates and investments | (59 482) | (34 461) | (2 855 196) | (2 949 139) |
| º | R30 million repayment of advances to B-BBEE and other partners, R1 666 million sales made in the investment portfolios of Bidvest Insurance and Bidvest Bank, R1 040 million for the disposal of MIAL and R12 million disposal of other investments |
Subsequent event
Subsequent to the year end the Group executed a new three year banking facility dated 8 July 2021 with a Syndicate of seven international and local banks for a total facility amounting to £400 million. The facility comprises a Term loan of £160 million and a committed Revolving Credit Facility ("RCF") of £240 million. The facility can be drawn in multi-currencies and has the potential to be upsized to an aggregate of £460 million upon request by the Company. £345 million of the facility was drawn down on 14 July 2021 and used to repay in full the €320 million Term Facility (due for repayment in September 2022) and the remaining £60 million balance of the PHS Bridge facility (due for repayment in December 2021). Both repaid facilities have been terminated. The facility adds further available liquidity to the group in terms of the undrawn portion of the RCF and lengthens the loan maturity to July 2024.
The company has the option to extend the facility by a further two years upon request to the lenders.
Audit report
The auditors, PriceWaterhouseCoopers Inc. have issued their audit opinion on the consolidated financial statements for the year ended 30 June 2021. 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 provisional consolidated financial statements have been audited by the Company's auditors who have issued an unmodified opinion. 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 final 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 3 September 2021.