EX-99.1 3 ex991.htm EX-99.1
Exhibit 99.1
1
Connect
Combined
Audited
Financial
Statements
for the
years ended
28 February
2022 and
2021
These combined audited financial statements were prepared by:
BDO South Africa Incorporated
(under supervision of M McGarrigle CA (SA))
These combined financial statements have been audited in compliance
with the applicable requirements of
the Companies Act of South Africa
Connect
Combined Audited Financial Statements for the years ended 28 February
2022 and 2021
Index
2
Page
Directors' Responsibilities and Approval
2
Report of Independent Auditors
3-4
Combined Statements of Financial Position as at 28 February 2022 and 2021
5
Combined Statement of Profit or Loss and Other Comprehensive Income
for the years ended 28 February 2022 and 2021
6
Combined Statement of Changes in Equity for the years ended 28 February 2022
and 2021
7
Combined Statement of Cash Flows for the years ended 28 February 2022
and 2021
8
Background, scope and basis of preparation
10-19
Notes to the Combined Financial Statements for the years ended 28 February
2022 and 2021
20-36
Connect
Combined Audited Financial Statements for the years ended 28 February
2022 and 2021
Directors’ Responsibilities and Approval
3
The
directors
are
responsible
for
the
preparation
and
fair
presentation
of
the
combined
financial
statements
of
Connect,
comprising
the
Combined
Statements
of
Financial
Position
as
at
28
February
2022
and
2021,
the
Combined
Statement
of
Profit
or
Loss
and
Other
Comprehensive Income,
Combined Statement
of Changes
in Equity,
Combined Statement
of Cash
Flows for
the years
ended 28
February
2022
and
2021,
and
the
notes
to
the
combined
financial
statements
which
include
the
background,
scope
and
basis
of
preparation,
in
accordance with the International
Financial Reporting Standard for
Small and Medium-sized Entities and
reconciled to Generally Accepted
Accounting Policies.
The directors are also responsible
for such internal control as the directors
determine is necessary to enable
the preparation of the combined
financial statements that are free from material misstatement, whether due to fraud or error, and for maintaining adequate accounting records
and an effective system of risk management.
The
directors
have
made
an
assessment
of
the
ability
of
Connect
to
continue
as
going
concerns
and
have
no
reason
to
believe
that
the
businesses will not be going concerns in the year ahead.
The auditor is responsible for reporting on whether
the combined financial statements are fairly presented
in accordance with the applicable
financial
reporting framework.
Approval of the combined financial statements
The combined financial statements of Connect, as identified in the
first paragraph, were approved by the board of directors on 30 June 2022
and signed by:
/s/ Steven. Heilbron
Steven Heilbron
Authorised Director
4
Report of Independent Auditors
To the Directors
of Cash Connect Management Solutions Proprietary Limited and K2021477132
Proprietary Limited
Opinion
We
have
audited
the
combined
financial
statements
of
Cash
Connect
Management
Solutions
Proprietary
Limited
and
K2021477132
Proprietary Limited (together
“Connect”), which comprise
the combined statements
of financial position
as of 28 February
2022 and 2021,
and
the
related
combined
statements
of
profit
or
loss
and
other
comprehensive
income,
combined
statements
of
changes
in
equity
and
combined statements of cash flows for the years then ended, and the related
notes (collectively referred to as the “financial statements”).
In our opinion, the accompanying financial statements present
fairly, in all material respects, the financial position of Connect at 28
February
2022
and
2021,
and
the
results
of
its
operations
and
its
cash
flows
for
the
years
then
ended
in
accordance
with
International
Financial
Reporting Standards
for Small
and Medium-sized
Entities (“IFRS
for SMEs”)
as issued
by the
International Accounting
Standards Board
(IASB).
Basis for Opinion
We
conducted
our
audits
in
accordance
with
auditing
standards
generally
accepted
in
the
United
States
of
America
(GAAS).
Our
responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of
the Financial Statements section
of our
report. We
are required
to be
independent of
Connect and
to meet
our other
ethical responsibilities
in accordance
with the
relevant
ethical requirements
relating to
our audits.
We
believe that
the audit
evidence we
have obtained
is sufficient
and appropriate
to provide
a
basis for our audit opinion.
US GAAP Reconciliation
IFRS for
SMEs vary
in certain
respects from
accounting principles
generally accepted
in the
United States
of America.
In Note
27 to
the
combined financial statements is a reconciliation from IFRS for SMEs to US GAAP.
Our opinion is not modified with respect to this matter.
Responsibilities of Management for the Financial Statements
Management is responsible
for the preparation
and fair presentation of
the financial statements in
accordance with IFRS
for SMEs, and
for
the design, implementation, and maintenance
of internal control relevant to the
preparation and fair presentation of financial
statements that
are free of material misstatement, whether due to fraud or error.
In preparing the financial statements, management is
required to evaluate whether there are
conditions or events, considered in the aggregate,
that raise substantial doubt about Connect’s ability to continue as a going concern for one year after the date that the financial statements are
available to be issued.
Auditor’s Responsibilities for the Audit of the Financial Statements
Our objectives are
to obtain reasonable
assurance about whether
the financial statements
as a
whole are free
of material misstatement,
whether
due to fraud or
error, and to
issue an auditor’s
report that includes our
opinion. Reasonable assurance
is a high level
of assurance but is
not
absolute
assurance
and
therefore
is
not
a
guarantee
that
an
audit
conducted
in
accordance
with
GAAS
will
always
detect
a
material
misstatement when it exists. The risk
of not detecting a material misstatement
resulting from fraud is higher than for
one resulting from error,
as fraud
may
involve
collusion,
forgery,
intentional
omissions,
misrepresentations,
or
the override
of internal
control.
Misstatements
are
considered material
if there
is a substantial
likelihood that,
individually or
in the
aggregate, they
would influence
the judgment
made by a
reasonable user based on the financial statements.
In performing an audit in accordance with GAAS, we:
●
Exercise professional judgment and maintain professional skepticism throughout
the audit.
●
Identify
and assess
the risks
of material
misstatement of
the financial
statements, whether
due
to fraud
or error,
and design
and
perform
audit procedures
responsive
to
those
risks.
Such
procedures
include
examining,
on
a
test
basis,
evidence
regarding
the
amounts and disclosures in the financial statements.
5
●
Obtain
an
understanding
of
internal
control
relevant
to
the
audit
in
order
to
design
audit
procedures
that
are
appropriate
in
the
circumstances, but not for the purpose of expressing an opinion
on the effectiveness of Connect’s
internal control. Accordingly,
no
such opinion is expressed.
●
Evaluate
the
appropriateness
of
accounting
policies
used
and
the
reasonableness
of
significant
accounting
estimates
made
by
management, as well as evaluate the overall presentation of the financial
statements.
●
Conclude whether,
in our judgment,
there are conditions
or events,
considered in
the aggregate,
that raise
substantial doubt
about
Connect’s ability to continue
as a going concern for a reasonable period of time.
We
are required to
communicate with those
charged with governance
regarding, among other
matters, the planned
scope and timing
of the
audit, significant audit findings, and certain internal control-related matters that
we identified during the audit.
/s/ Ernst & Young
Incorporated
Johannesburg, South Africa
30 June 2022
Connect
Combined Audited Financial Statements for the years ended 28 February
2022 and 2021
6
Combined Statements of Financial Position as at 28 February 2022
and 2021
Figures in Rand
Note(s)
2022
2021
Assets
Non-current assets
Property, plant and equipment
2
294,543,366
269,354,718
Goodwill
3
328,327,404
369,476,330
Intangible assets
4
385,943,323
434,125,523
Investments in associates
5
1,169,157
1,006,129
Loans to shareholders
6
784,073
844,046
Deferred tax
7
13,537,492
8,649,749
1,024,304,815
1,083,456,495
Current assets
Inventories
8
175,452,924
166,868,090
Current tax receivable
21
6,241,191
1,454,847
Trade and other receivables
9
339,314,594
222,965,461
Cash and cash equivalents
10
580,302,053
490,922,551
1,101,310,762
882,210,949
Total
assets
2,125,615,577
1,965,667,444
Equity and liabilities
Equity attributable to equity holders of parent
Foreign currency translation reserve
(515,614)
(130,282)
Other invested equity
464,170,919
377,482,093
Total invested equity
attributable to Parent entities
463,655,305
377,351,811
Non-controlling interest
2,789,069
3,271,904
Total
equity
466,444,374
380,623,715
Non-current liabilities
Loans from financial institutions
11
413,478,065
735,907,015
Finance lease obligation
12
-
10,994
Deferred tax
7
90,089,089
104,697,320
503,567,154
840,615,329
Current liabilities
Loans from financial institutions
11
536,189,657
171,876,266
Current tax payable
21
9,472,370
5,641,771
Finance lease obligation
12
-
222,700
Trade and other payables
13
609,941,944
566,682,298
Bank overdraft
10
78
5,365
1,155,604,049
744,428,400
Total
liabilities
1,659,171,203
1,585,043,729
Total
equity and liabilities
2,125,615,577
1,965,667,444
Connect
Combined Audited Financial Statements for the years ended 28 February
2022 and 2021
7
Combined Statement of Profit
or Loss and Other
Comprehensive Income for the
years ended
28 February 2022 and 2021
Figures in Rand
Note(s)
2022
2021
Revenue
14
5,151,666,378
4,234,613,920
Cost of sales
(4,582,035,806)
(3,819,036,705)
Gross profit
569,630,572
415,577,215
Other income
15
53,006,700
49,317,766
Operating expenses
(422,443,964)
(334,979,310)
Operating profit
16
200,193,308
129,915,671
Finance income
17
4,702,641
2,619,368
Finance expense
18
(75,422,555)
(72,034,566)
Profit before taxation
129,473,394
60,500,473
Taxation
19
(46,593,037)
(26,393,762)
Profit for the year
82,880,357
34,106,711
Other comprehensive income
(385,332)
(130,282)
Total
comprehensive income for the year
82,495,025
33,976,429
Total
comprehensive income attributable to:
Owners of the parent
80,829,962
34,523,163
Non-controlling interest
1,665,063
(546,734)
82,495,025
33,976,429
Profit/(loss) attributable to:
Owners of the parent
81,215,294
34,653,445
Non-controlling interest
1,665,063
(546,734)
82,880,357
34,106,711
8
Combined Statement of Changes in Equity for the years ended 28 February
2022 and 2021
Figures in Rand
Foreign currency
translation
reserve
Other invested
equity
Total invested
equity
attributable to
Parent entities
Non- controlling
interest
Total equity
Balance at 01 March 2020
-
343,127,530
343,127,530
3,818,638
346,946,168
Profit for the year
-
34,653,445
34,653,445
(546,734)
34,106,711
Other comprehensive income
(130,282)
-
(130,282)
-
(130,282)
Total comprehensive income for the year
(130,282)
34,653,445
34,523,163
(546,734)
33,976,429
Contribution from parent
-
13,200,000
13,200,000
-
13,200,000
Repayment of equity loan
-
(13,280,000)
(13,280,000)
-
(13,280,000)
Net other distributions to Parent entities
-
(218,882)
(218,882)
-
(218,882)
Balance at 01 March 2021
(130,282)
377,482,093
377,351,811
3,271,904
380,623,715
Profit for the year
-
81,215,294
81,215,294
1,665,063
82,880,357
Other comprehensive income
(385,332)
-
(385,332)
-
(385,332)
Total comprehensive income for the year
(385,332)
81,215,294
80,829,962
1,665,063
82,495,025
Contribution from parent
-
7,022,797
7,022,797
-
7,022,797
Transactions with non-controlling interests
-
(1,375,737)
(1,375,737)
(2,147,898)
(3,523,635)
Net other distributions to Parent entities
-
(173,528)
(173,528)
-
(173,528)
Balance at 28 February 2022
(515,614)
464,170,919
463,655,305
2,789,069
466,444,374
9
Combined Statement of Cash Flows for the years ended 28 February 2022 and
2021
Figures in Rand
Note(s)
2022
2021
Cash flows from operating activities
Cash generated from operations
20
300,024,440
326,979,481
Interest received
4,702,641
2,619,368
Interest paid
(75,422,555)
(71,838,449)
Tax paid
21
(66,948,756)
(45,101,029)
Net cash inflow from operating activities
162,355,770
212,659,371
Cash flows from investing activities
Purchase of property,
plant and equipment
2
(136,445,016)
(114,761,280)
Proceeds from sale of property,
plant and equipment
2
18,810,810
14,188,792
Purchase of intangible assets
4
(210,100)
(606,204)
Net cash outflow from investing activities
(117,844,306)
(101,178,692)
Cash flows from financing activities
Contribution from parent entities
7,022,797
13,200,000
Acquisition of minority interest
(3,523,635)
-
Proceeds from loans from financial institutions
41,884,442
79,840,862
Repayment of loans from related parties
(103,057)
(35,762,514)
Repayment of finance lease obligations
(233,694)
(524,287)
Distribution to parent entities
(173,528)
(218,882)
Repayment of shareholder loan
-
(13,280,000)
Net cash inflow from financing activities
44,873,325
43,255,179
Total
cash and cash equivalents movement for the year
89,384,789
154,735,858
Cash and cash equivalents at the beginning of the year
490,917,186
336,181,328
Total
cash and cash equivalents at end of the year
10
580,301,975
490,917,186
Connect
Combined Audited Financial Statements for the years ended 28 February
2022 and 2021
Background, scope and basis of preparation
10
Background and scope
On 14
April 2022,
Lesaka Technologies,
Inc.
(“Lesaka”),
formerly
known as
Net 1
UEPS Technologies,
Inc.,
through its
wholly
owned
subsidiary
Net1
Applied
Technologies
South
Africa
Proprietary
Limited
(“Net1
SA”)
acquired
(the
“Acquisition”)
all of
the
issued
and
outstanding ordinary shares of Ovobix
(RF) Proprietary Limited (“Ovobix”)
and Luxanio 227 Proprietary Limited (“Luxanio”)
and 14.14%
of Cash
Connect Management
Solutions Proprietary
Limited (“CCMS”)
and K2021477132
(South Africa)
Proprietary Limited
(“K2021”)
and together with Ovobix, Luxanio and CCMS (the “Target
Companies”). Each of Ovobix and Luxanio own 69.05% and 16.81%
of CCMS
and K2021, respectively,
and combined with the 14.14% referred to previously,
Lesaka effectively owns 100% of CCMS and K2021.
The transaction consideration of ZAR3.8 billion was funded through existing cash resources of ZAR2.1 billion, upsized
net
debt facilities of
ZAR1.4 billion
and deferred
equity consideration
of ZAR350.0
million. The
deferred equity
consideration represents
3,185,079
shares of
Lesaka’s
common stock which
are to be
issued ratably (or
1,061,693 per year)
on the first,
second and third
anniversaries of the
closing to
the Sellers of the Target
Companies.
Lesaka determined
that the
operations of
CCMS and
K2021 and
their respective
subsidiaries (together
“Connect”) constitute
the business
acquired.
Such
businesses
were
under
the
common
control
of
Ovobix.
The
entities
that
form
Connect
for
the
purposes
of
the
combined
financial
statements
historically
did
not
prepare
separate
consolidated
financial
statements.
The
Connect
financial
statements
therefore
represent
a
combination
of
the
consolidated
financial
statements
of
CCMS
and
the
consolidated
financial
information
of
K2021
(which
includes K2020 Connect Proprietary Limited ("K2020")
in respect of the years ended 28 February 2022 and 2021)
which are the businesses
which are the subject of the Acquisition.
Connect offers a specialist retail cash management solutions to its customers and its activities include the
development and manufacturing of
cash acceptance, cash management and
related products for use
in cash intensive retail environments,
unsecured lending to the
retail industry,
merchant card payment solutions and enabling merchants to vend
a range of value added services (VAS),
through a prepaid eWall
et.
The combined financial statements were authorized for issue by the company’s
board of directors on 30 June 2022.
1.
Basis of preparation
The purpose of these combined financial statements is to meet the reporting requirements
of Rule 8-04 of Regulation S-X (“Rule 8-04”).
The combined
financial statements
of Connect
have been
prepared in
accordance
with the
International Financial
Reporting Standard
for
Small
and
Medium-sized
Entities
(“IFRS
for
SMEs”)
and
interpretations
of
those
standards
as
issued
by
the
International
Accounting
Standards Board (IASB) and reconciled
to Generally Accepted Accounting Policies in
the United States (“U.S. GAAP”) in order
to comply
with Rule
8-04. The
combined financial
statements of
Connect were
derived from
the consolidated
financial statements
of CCMS
and the
consolidated financial information of K2021 (which included K2020 in respect
of both years ended 28 February
2022 and 28 February 2021)
for the years
ended 28 February
2022 and 28
February 2021, which
were prepared in
accordance with IFRS
for SMEs. The
combined financial
statements have
been prepared
for the
purpose of
presenting the
financial position,
and results
of operations
of Connect
on a
stand-alone
basis.
As IFRS for SMEs does not provide specific guidance for the preparation of combined financial
statements, consideration has been given to
the principles outlined in Section 10 Accounting Policies, Estimated and Errors
(“Section 10”). Section 10 requires consideration of the most
recent
pronouncements
of
other
standard-setting
bodies,
other
financial
reporting
requirements
and
recognised
industry
practices
in
the
preparation of the combined financial statements as detailed below.
The accounting policies applied in the combined financial
statements are consistent with those applied by
CCMS in its consolidated financial
statements, and K2021 in its consolidated financial information. The
combined financial statements are:
●
Presented in South African Rand (ZAR).
●
Prepared using the historic cost convention, except for certain financial instruments measured at fair value.
●
Prepared on the going concern basis. and,
●
Prepared as at and for the years ended 28 February 2022 and 28 February 2021.
Connect
Combined Audited Financial Statements for the years ended 28 February
2022 and 2021
Background, scope and basis of preparation
11
As Connect
does not
constitute a
Group as
defined by
Section 9
Consolidated and
Separate Financial
Statements, the
combined financial
statements are not consolidated financial
statements and do
not comply with
the requirements
of Section
9.
However,
the
combined
financial
statements
have
been
prepared
on
a
combined
basis
by
applying
the
consolidation principles of Section 9, since the entities comprising
Connect were under common control.
The combined financial statements comprise all revenues, costs, assets and liabilities directly attributable to Connect.
In preparing the combined
financial statements, Section 35
Transition to the
IFRS for SMEs has been
applied at the 1 April
2020 transition
date. The combined financial statements have
been prepared by applying accounting policies
consistent with IFRS for SMEs effe
ctive at 28
February 2022 and
have not elected
to apply any
of the exemptions.
Since Connect has
not previously prepared
financial statements, it
has
not presented a reconciliation of its income statement, financial position or
cash flows to previous generally accepted accounting principles.
Limitations inherent to combined financial statements
As
the
combined
financial
statements
of
Connect
have
been
prepared
on
a
combined
basis it
may
not
be
indicative
of
Connect’s
future
performance
and what
its combined
results of
operations, financial
position and
cash flows
would
have been,
had Connect
operated
as a
separate reporting entity for the periods presented.
The following principles and assumptions have been applied:
Equity
●
As Connect did not
historically constitute a combined legal
group there is no
issued share capital.
Earnings Per Share
was not presented
as this is not possible given the combined entity is not a legal entity.
●
As
a
result
of
combining
CCMS
consolidated
financial
statements
and
K2021
consolidated
financial
information
there
is
no
consolidating
parent
entity,
so
the
contribution
to
Connect
from
its
shareholders
is
recognised
at
the
carrying
value
of
the
net
assets
contributed to the acquired business at
the earliest comparative period presented. This contribution represents the aggregated combined share
capital and retained earnings
of the entities included
in the combined historical
financial information of Connect
at the earliest comparative
period presented.
The opening balance
and movements in
aggregated combined
share capital and
retained earnings of
the entities included
in the
combined historical
financial information
of Connect
has been
described as
“Total
invested equity
attributable to
Parent entities”
in
the combined statement of changes in equity of Connect.
●
No other
reserves have
been presented
as there are
no categories in
equity that will
be recycled to
profit or loss
in the
future, with the exception of the foreign currency translation reserve.
Goodwill and intangible assets
Goodwill
and
intangible
assets
that
arose
on
the
acquisition
of
the
entities
by
CCMS
have
been
recognised
in
the
combined
financial
statements. During
the reporting
periods presented,
goodwill was
already tested
for impairment
at a
Cash- generating
unit (“CGU”)
level.
IFRS for SMEs requires assets to be grouped at the lowest level for which identifiable cash flows
are largely independent of cash flows from
other assets and liabilities. Because cash flows are identified at this level, there
are no changes in the asset groups in Connect.
Allocation of central costs
No additional central costs were required to be allocated to Connect as no additional
outside costs were incurred outside the acquired group.
Taxation
The entities that
comprise Connect have historically
filed separate tax returns
in South Africa. All
entities will continue to
file separate tax
returns. The income
taxes have been
accounted for using
the separate tax return
method by aggregating
the tax positions of
the individual
entities of Connect.
Deferred taxation has already been calculated by comparing the assets and liabilities in the consolidated financial statements of CCMS and
the consolidated financial information of K2021.
Connect
Combined Audited Financial Statements for the years ended 28 February
2022 and 2021
Background, scope and basis of preparation
12
Intercompany
Transactions and balances with Ovobix and Luxanio have been disclosed as
related party transactions and balances in the
combined financial
statements. All intergroup transactions and balances between the
entities comprising Connect are eliminated.
Connect’s key management personnel are deemed to
be the non-executive directors of
Connect and those individuals, including
the executive
directors in Connect, whose remuneration is determined by Connect's
Remuneration Committee.
Subsequent events
Subsequent events have been considered from 28 February 2022
up to the date that the combined financial statements were authorized
for
issuance. Refer to note 25.
Significant accounting policies
1.1
Property, plant
and equipment
Recognition and measurement
Property, plant and equipment are measured
at cost, less accumulated depreciation and impairment losses.
If significant parts
of an item
of property,
plant and equipment
have different
useful lives then
they are accounted
for as a
separate item of
property, plant and
equipment.
Any gain or loss on disposal of an item of property, plant and equipment is recognised
in profit or loss.
Subsequent costs
Subsequent
expenditure
is
capitalised
only
if
it
is
probable
that
the
future
economic
benefits
associated
with
the expenditure will
flow to the company. All other
costs are recognised in profit or loss as an expense as incurred.
Depreciation
Depreciation
is calculated
to write
off
the cost
of items
of property,
plant and
equipment less
their residual
values using
the straight
line
method over
their estimated
useful lives, and
is generally
recognised in
profit or loss.
Leased assets are
depreciated over
the shorter
of the
lease term and their useful lives unless it is reasonably certain that the company
will obtain ownership by the end of the lease term.
The estimated useful lives for the current and comparative years are as follows:
Item
Useful life
Plant and machinery, including
POS Terminals
2 - 6 years
Furniture and fixtures
3 years
Motor vehicles
3 - 5 years
Computer equipment
3 years
Leasehold improvements
5 years; or the initial lease period
Safe assets
8 years
Residual values, depreciation methods and useful lives of all assets are reviewed and adjusted if appropriate.
Property,
plant and equipment
are derecognised upon
disposal or when
no future economic
benefits are expected
to flow to the
group from
either their use or disposal. Gains or losses on derecognition of an item of property, plant and equipment are determined by the comparing of
the proceeds from disposal, if applicable, with the carrying amount of the
item and are recognised directly in profit or loss.
Connect
Combined Audited Financial Statements for the years ended 28 February
2022 and 2021
Background, scope and basis of preparation
13
Property, plant and equipment are
assessed for impairment as non-financial assets as per note 1.9.
1.2
Business combinations and goodwill
Connect accounts for
business combinations using
the purchase method
when control is
transferred. The consideration
transferred is generally
measured at fair
value at the
date of acquisition, as
are the identifiable net
assets acquired. Any goodwill
(the excess of
the cost of
the business
combination
over
the
acquirer's
interest
in
the
net
fair
value
of
the
identifiable
assets,
liabilities
and
contingent
liabilities)
that
arises
is
amortised
and
tested
annually
for
impairment.
Any
excess
over
the
cost
of
the
company's
interest
in
the
net
fair
value
of
the
acquirer's
identifiable assets,
liabilities and
contingent liabilities
is recognised
in profit
or loss immediately.
Transaction
costs directly
attributable to
the business combination are capitalised to the cost of the acquisition.
The
consideration
transferred
does
not
include
amounts
related
to
settlement
of
pre-existing
relationships.
Such
amounts
are
generally
recognised in profit or loss.
Goodwill
Goodwill arising
on an acquisition
of a business
combination is carried
at cost as
established at
the date of
acquisition of
the business less
accumulated impairment losses and amortisation. Goodwill is amortised
over ten years.
Goodwill is assessed for impairment as a non-financial asset as per note 1.9.
Non-controlling
interest
in
the
acquiree
is
measured
at
the
non-controlling
interest’s
proportionate
share
of
the
acquiree’s
recognised
identifiable net assets.
1.3
Intangible assets
Intangible
assets
are
measured
at
cost
less
accumulated
amortisation
and
accumulated
impairment
losses.
Research
and
development
expenditure is recognised in profit or loss when incurred unless they form part of the cost of another asset that meets the recognition criteria.
Subsequent expenditure is capitalised only when it increases the future economic
benefits embodied in the specific asset to which it relates.
Other intangible assets, including
computer software and intellectual
property that are acquired
by the company and have
finite useful lives
are measured at
cost less accumulated amortisation
and any accumulated impairment
losses. For intangible assets
with infinite useful
lives,
they are amortised over 10 years.
Amortisation
is
calculated
on
the
cost
of
intangible
assets
less
their
estimated
residual
values
using
the
straight
line
method
over
their
estimated useful lives, and is recognised in profit or loss.
The amortisation
methods, useful
lives and residual
values are reviewed
at each reporting
date and adjusted
appropriately.
Residual values
of intangibles is zero unless there is an active market or a commitment by a third party
to acquire at the end of useful life.
Intangible assets are assessed for impairment as non-financial assets as per note 1.9.
Intangible assets are derecognised upon disposal or when no future
economic benefits are expected to flow to the company from
either their
use or disposal.
Gains or losses
on derecognition of an
intangible asset are
determined by comparing the
proceeds from disposal,
if applicable,
with the carrying amount of the intangible asset and are recognised directly
in profit
or loss.
The estimated useful lives for the current and comparative years:
Item
Useful life
Computer software
2 – 3 years
Intellectual property
5 – 10 years
Integrated trading platform
10 years
Connect
Combined Audited Financial Statements for the years ended 28 February
2022 and 2021
Background, scope and basis of preparation
14
1.4
Investments in associates
Connect uses the equity method to account for investments in
companies when it has significant influence but not control
over the operations
of the company.
Under the equity
method, the Company
initially records the
investment at cost
and thereafter adjusts
the carrying value
of
the investment to recognize the proportional share of the equity-accounted
company’s net income or loss.
1.5
Financial instruments
An entity recognises
a financial asset
or financial liability
only when the
entity becomes a
party to the
contractual provisions of
the instrument.
On initial recognition,
financial instruments are
measured at their
transaction price, unless
the arrangement constitutes
a financing transaction.
Subsequently they are measured as detailed below.
Financial assets
Connect initially recognises financial assets on the date when they originated. Such assets consist of
cash, a contractual right to receive cash
or another financial asset or a contractual right to exchange financial instruments
with another entity on potentially favourable terms.
Connect classifies its
financial assets
as loans and
receivables which
comprise of:
trade and other
receivables including
amounts owing
by
related parties and loans to customers and cash and cash equivalents.
Trade and other receivables
including amounts owing by related parties and loans to
customers
Trade and other receivables, including
amounts owing by
related parties and
loans to customers
are financial assets
with fixed or
determinable
payments that are not quoted in an active market. Subsequent to initial recognition trade and other receivables and amounts owing by related
parties are
measured at
amortised cost
using the
effective interest
method, less
any impairment
loss. Appropriate
allowances for
estimated
irrecoverable amounts are recognised in profit or loss where
there is objective evidence that the asset is impaired.
Cash and cash equivalents including bank overdrafts
Cash and cash equivalents including bank overdrafts are measured at amortised
cost. Cash and cash equivalents comprises of cash balances,
bank overdrafts and cash on hand.
For the
purpose of
the cash
flow statement,
cash and cash
equivalents comprise
cash at bank,
bank overdrafts
and cash on
hand which
are
available for use by Connect unless otherwise stated.
Impairment of financial assets
A financial asset is assessed at each reporting
date to determine whether there is any objective evidence
that it is impaired. A financial asset
is considered to be impaired if objective evidence indicates that one or more loss events have occurred and have had a negative effect on the
estimated future cash flows of that asset.
Objective evidence
that financial assets
are impaired
can include default
or delinquency
by a debtor,
restructuring of an
amount due
to the
Company on terms that the company would not consider otherwise and indications
that a debtor or issuer will enter bankruptcy.
Impairment losses
are recognised
in profit
or loss and
reflected in
an allowance
account against
receivables. When
the company
considers
that there are no realistic prospects of recovery of the asset, the relevant amounts are written off.
If the amount of the actual impairment loss
subsequently causes the amount of the initial impairment loss
provided for to decrease and the decrease can
be related objectively to an event
occurring after the impairment was recognised, then the previously recognised
impairment loss is reversed through profit or loss.
Connect
Combined Audited Financial Statements for the years ended 28 February
2022 and 2021
Background, scope and basis of preparation
15
Financial liabilities
Connect initially recognises
financial liabilities at
the transaction price
when the entity becomes
a party to the
contractual provisions of
the
instrument.
Financial liabilities are derecognised if Connect’s obligations specified
in the contract are discharged, cancelled or expire.
Interest-bearing bank loans and other financial liabilities
Interest-bearing
bank
loans
and
other
financial
liabilities
are
initially
measured
at
transaction
price,
and
are
subsequently
measured
at
amortised cost, using the effective interest rate method. Interest on
bank and other financial liabilities is recognised in profit or loss.
Trade and other payables, including amounts owing
to related parties and loans from shareholders
Subsequent
to
initial
recognition,
trade
and
other
payables,
amounts
owing
to
related
parties
and
loans
to
shareholders
are
measured
at
amortised cost using the effective interest method.
1.6
Taxation
Income tax
Income tax comprises of
current and deferred tax.
It is recognised
in profit or
loss except to the
extent that it
relates to a business
combination,
or items recognised directly
in equity or in
other comprehensive income,
in which case it is recognised
in equity or in other
comprehensive
income respectively.
Current taxation
Current
tax comprises
the expected
tax payable
or receivable
on the
taxable income
or loss
for
the year
and any
adjustments to
the tax
payable or receivable in
respect of previous
years. It is
measured using tax rates
enacted or substantively enacted
at the reporting
date. Current
tax also includes any tax arising from dividends.
Current tax
assets and
liabilities are
offset only
if there
is a legally
enforceable right
to set off
the amounts
and the entity
can demonstrate
without undue cost or effort that it plans either to settle on a net basis or to
realise the asset and settle the liability simultaneously.
Deferred taxation
Deferred
taxation
is
recognised
in
respect
of
temporary
differences
between
the
carrying
amounts
of
assets
and
liabilities
for
financial
reporting purposes and their taxation bases.
Deferred
tax
assets
are
recognised
for
unused
tax
losses,
unused
tax
credits
and
deductible
temporary
differences
to
the
extent
that
it
is
probable that future taxable profits
will be available against which
they can be used. Deferred
tax assets are reviewed at each
reporting period
date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised; such reductions
are reversed when
the probability of future taxable profits improves.
Unrecognised deferred
tax assets are
reassessed at
each reporting
date and
recognised to
the extent
that it has
become probable
that future
taxable profits will be available against which they can be used.
Deferred tax is measured
at the tax rates that are
expected to be applied
to temporary differences when
they reverse, using tax rates
enacted
or substantively enacted at the reporting date.
A deferred tax liability is recognised for all taxable temporary differences.
Connect
Combined Audited Financial Statements for the years ended 28 February
2022 and 2021
Background, scope and basis of preparation
16
1.7
Leases
Assets held
by Connect
under leases
that transfer
to the
company substantially
all of
the risks
and rewards
of ownership
are classified
as
finance leases.
Leases of
assets under
which all
the risks
and benefits
of ownership
are effectively
retained by
the lessor
are classified
as
operating leases.
Assets held under other leases are classified as operating leases and are not recognised
in Connect’s statement of financial
position.
Finance leases – lessee
Finance leases
are recognised
as assets and
liabilities in the
statement of
financial position
at amounts
equal to
the fair value
of the
leased
property or, if lower, the present
value of the minimum lease payments. The corresponding liability to the lessor is included in the statement
of
financial
position
as
a
finance
lease
obligation.
Subsequent
to
initial
recognition,
the
assets
are
accounted
for
in
accordance
with
the
accounting policy applicable to that asset.
The lease payments are apportioned between the finance charge and reduction of the outstanding
liability. The finance charge
is allocated to
each period during the lease term so as to produce a constant periodic rate on
the remaining
balance of the liability.
Operating leases - lessor
Operating lease income is recognised as an income on a
straight-line basis over the lease term except in cases where another systematic
basis
is representative
of the
time pattern
of the
benefit from
the leased
asset, even
if the
receipt of
payments is
not on
that basis,
or where
the
payments are structured to increase in line with expected general inflation.
Initial direct costs incurred in negotiating and arranging operating leases are added to the carrying amount of
the leased
asset and recognised
as an expense over the lease term on the same basis as the lease income.
Operating leases – lessee
Operating lease payments are recognised as an expense
on a straight-line basis over the lease term except in cases
where another systematic
basis is representative
of the time pattern
of the benefit from
the leased asset, even
if the receipt of
payments is not
on that basis, or
where
the payments are structured to increase in line with expected general inflation.
1.8
Inventories
Inventories consists of bulk purchases of VAS
products, consumables and spares used to repair / manufacture safe assets.
Inventories are measured at the lower of cost and net realisable value. The cost of inventories is determined on First in, First out (FIFO) cost
principle and includes expenditure incurred in acquiring
the inventories, production or conversion costs and other
costs incurred in bringing
them to their existing location
and condition. In the case
of manufactured inventories and work
in progress, cost includes
an appropriate share
of production overheads on normal operating capacity.
Net
realisable
value
is
the
estimated
selling
price
in
the
ordinary
course
of
business,
less
the
estimated
costs
of
completion
and
selling
expenses.
When inventories are sold, the carrying amounts of those inventories are recognised as an expense in the period in which the related revenue
is
recognised.
Obsolete,
redundant
and
slow
moving
inventories
are
identified
on
a
regular
basis.
The
amount
of
any
write-down
of
inventories to net realisable value and all losses of inventories are recognised
as an expense in the period the write-down or loss occurs.
Connect
Combined Audited Financial Statements for the years ended 28 February
2022 and 2021
Background, scope and basis of preparation
17
1.9
Impairment
Impairment of non financial assets
The
company’s
non-financial
assets,
other
than
inventories
and
deferred
taxation
assets
are
reviewed
whenever
events
or
changes
in
circumstances indicate that the carrying amount may not be recoverable, to
determine whether there is any indication of impairment.
An impairment
test is
performed
on all
goodwill and
intangible assets
not available
for use
whenever events
or changes
in circumstances
indicate that the carrying amount may not be recoverable. If an impairment indicator exists, the asset’s
recoverable amount is estimated. For
impairment
testing, assets
are grouped
together into
the smallest
group
of assets
that generates
cash inflows
from continuing
use that
are
largely independent
of the
cash inflows
of other
assets or
CGUs.
Goodwill arising
from a
business combination
is allocated
to CGUs
or
groups of CGUs that are expected to benefit from the synergies
of the combination.
The recoverable
amount of
an asset
or CGU
is the
greater of
its fair
value less
cost to
sell and
value in
use. Value
in use
is based
on the
estimated future
cash flows,
discounted to
their present
value using
a pre-tax
discount rate
that reflects
current market
assessments of
the
time value of money and the risks specific to the asset or CGU.
An impairment loss
is recognised if
the carrying amount
of an asset
or CGU exceeds
its recoverable amount.
Impairment losses are
recognised
in profit or loss. They are allocated first to reduce the carrying amount of any goodwill allocated to the CGU,
and then to reduce the carrying
amounts of the other assets in the CGU on a pro rata basis.
An impairment loss in respect
of goodwill is not reversed.
For other assets, an impairment loss is
reversed only to the extent that
the asset’s
carrying amount does not exceed the carrying
amount that would have
been determined, net of depreciation or
amortisation, if no impairment
loss had been recognised.
A reversal of an impairment loss is recognised in profit or loss.
1.10
Employee benefits
Short-term employee benefits
The cost of all short-term employee benefits is recognised during the period in
which the employee renders the related service.
The accruals for
employee entitlements to
salaries, performance
bonuses and annual
leave represent the
amounts which the
company has a
present legal or
constructive obligation to pay
as a result
of services provided
by employees to
date. The obligation must
be estimated reliably.
The accruals have been calculated at undiscounted amounts based on current
salary rates.
The expected cost of bonus payments is recognised as an expense when
there is a legal or constructive obligation to make such payments
as
a result of past performance.
Connect
Combined Audited Financial Statements for the years ended 28 February
2022 and 2021
Background, scope and basis of preparation
18
1.11
Revenue
Revenue comprises proceeds from
the sale of goods (prepaid and
other vouchers, sale of zip
zap machines), proceeds from
the rendering of
services, safe rental
income, cash deposit
fee income, cash-in-transit
fee income, treasury
income, management
fee income, transaction
fee
income, installation income and minimum discount charges.
Sale of goods
Revenue from the sale of goods is recognised at the fair value of the consideration received or receivable net of indirect taxation, rebates and
trade discounts and
consists primarily of
the sale of prepaid
and other vouchers
and the sale of
zip zap machines.
Revenue from the
sale of
goods are recognised
when a group
entity sells
a product to
the customer, because control
passes to
the customer on
the day
that the transaction
takes place.
For pinned airtime transactions Connect
holds the virtual voucher stock
as inventory bearing the risk of
stock losses on its platforms
until it
is on-sold to merchants and recognises the revenue on a gross basis.
For pinless airtime transactions
no stock is held and
it has therefore been determined
that Connect should be considered
as an agent and
for
transactions related to the sale of pinless airtime revenue is recognised on a
net basis.
Rendering of services
Revenue from
the rendering
of services
such as
safe rental
income,
cash deposit
fee income,
cash-in-transit (“CIT”)
fee income,
treasury
income, management fee income, transaction fee income, installation income and minimum discount charges is measured at the fair value of
the consideration received or receivable which is, net of trade discounts
and volume rebates, and value added tax.
As Connect acts as
principal by taking
primary responsibility for
fulfilling the promise
for the provision
of CIT services
with the customer
and has discretion in establishing the prices by negotiating prices with the customer,
CIT fee income is presented on a gross basis.
For pinless airtime transactions no stock is held and it has therefore been determined that Connect
should be considered as an agent and as a
result transactions related to the sale of pinless airtime revenue are recognised
on a net basis.
Rental income
Rental income from POS terminals and other devices that are leased to a third party
under an operating lease is recognised in the Statement
of Profit or Loss and Other Comprehensive income on a straight-line basis overthe
lease term and is included in “revenue”.
Interest income
Interest
income
earned
on
loans
to
customers
is
recognised,
in
profit
or
loss,
using
the
effective
interest
rate
method
and
is
included
in
“revenue”.
1.12
Finance income and costs
Finance income
Finance income
comprises interest
income on
funds invested.
Interest income
is recognised
as it accrues
(taking into
account the
effective
yield on the asset) unless collectability is in doubt.
Finance costs
Financing costs comprise interest expense on borrowings. All borrowing costs are recognised in profit or loss using the effective interest rate
method.
Connect
Combined Audited Financial Statements for the years ended 28 February
2022 and 2021
Background, scope and basis of preparation
19
Use of judgements, estimates and assumptions
The preparation of
consolidated and separate financial
statements in conformity
with IFRS for SMEs
requires management to
make certain
judgments,
estimates
and
assumptions
that
affect
the
application
of
policies
and
reported
amounts
of
assets
and
liabilities,
income
and
expenses.
The estimates,
and associated
assumptions,
are based
on historical
experience and
various other
factors that
are believed
to be
reasonable
under
the
circumstances,
the
results
of
which
form
the
basis
of
making
the
judgements
about
carrying
values
of
assets
and
liabilities that are not readily apparent from other sources.
Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are
recognised in the period
in which the estimate
is revised if the revision affects
only that period, or in the
period of the revision and
future periods if the revision affects
both current and future periods.
In particular,
information about
significant areas of estimation uncertainty and critical judgements in applying accounting policies that have
the most significant effect on the amount recognised in
the financial statements are described below:
-
principal vs agent assessments in the recognition of revenue for CIT fee income
and airtime vouchers (Note 1.11)
-
useful lives and residual values of property,
plant and equipment (Note 1.1)
-
useful lives and residual values of goodwill (Note 1.2)
-
useful lives and residual value of intangible assets (Note 1.3)
-
financial instruments (Note 1.5)
-
deferred taxation (Note 1.6)
-
impairment (Note 1.9)
Connect
Combined Audited Financial Statements for the years ended 28 February
2022 and 2021
Notes to the Combined Financial Statements for the years ended 28 February 2022 and
2021
Figures in Rand
2022
2021
20
2.
Property, plant
and equipment
Figures in Rand
2022
2021
Cost
Accumulated
depreciation
and
impairments
Carrying
value
Cost
Accumulated
depreciation
and
impairments
Carrying
value
Plant and machinery
67,129,675
(21,447,535)
45,682,140
46,790,972
(11,831,157)
34,959,815
Furniture and fixtures
9,425,283
(6,634,205)
2,791,078
8,454,422
(4,557,411)
3,897,011
Motor vehicles
6,146,593
(3,299,756)
2,846,837
4,515,404
(2,083,666)
2,431,738
Office equipment
340,670
(339,193)
1,477
340,670
(329,965)
10,705
Computer equipment
15,591,304
(9,929,732)
5,661,572
10,219,709
(6,274,359)
3,945,350
Leasehold improvements
6,176,031
(5,416,861)
759,170
5,805,983
(4,049,275)
1,756,708
Safe assets
443,452,658
(206,651,566)
236,801,092
435,208,870
(212,855,479)
222,353,391
Total
548,262,214
(253,718,848)
294,543,366
511,336,030
(241,981,312)
269,354,718
Reconciliation of property,
plant and equipment
-
2022
Figures in Rand
Opening
balance
Additions
Disposals
Foreign
exchange
movements
Depreciation
Total
Plant and machinery
34,959,815
40,645,336
(7,042,401)
(27,933)
(22,852,677)
45,682,140
Furniture and fixtures
3,897,011
519,747
-
(4,219)
(1,621,461)
2,791,078
Motor vehicles
2,431,738
1,568,776
(12,078)
-
(1,141,599)
2,846,837
Office equipment
10,705
-
-
-
(9,228)
1,477
Computer equipment
3,945,350
4,361,276
(1,663)
(1,700)
(2,641,691)
5,661,572
Leasehold improvements
1,756,708
373,116
-
(460)
(1,370,194)
759,170
Safe assets
222,353,391
88,976,765
(11,754,668)
-
(62,774,396)
236,801,092
269,354,718
136,445,016
(18,810,810)
(34,312)
(92,411,246)
294,543,366
Reconciliation of property,
plant and equipment
-
2021
Figures in Rand
Opening
balance
Additions
Disposals
Foreign
exchange
movements
Depreciation
Total
Plant and machinery
33,036,778
24,895,754
(3,737,306)
(1,164)
(19,234,247)
34,959,815
Furniture and fixtures
3,388,285
2,297,660
-
(766)
(1,788,168)
3,897,011
Motor vehicles
812,556
2,577,104
(8,951)
231
(949,202)
2,431,738
Office equipment
63,940
15,881
(15,881)
-
(53,235)
10,705
Computer equipment
3,293,024
2,811,745
(53)
(9,758)
(2,149,608)
3,945,350
Leasehold improvements
2,488,932
417,120
-
3,548
(1,152,892)
1,756,708
Safe assets
209,568,981
81,730,232
(10,402,909)
-
(58,542,913)
222,353,391
252,652,496
114,745,496
(14,165,100)
(7,909)
(83,870,265)
269,354,718
Motor vehicles
are pledged
as security
to WesBank
- a
division of
FirstRand Bank
Limited, refer
to note
12 for
the details
relating to
the
Finance lease obligation.
Connect
Combined Audited Financial Statements for the years ended 28 February
2022 and 2021
Notes to the Combined Financial Statements for the years ended 28 February 2022 and
2021
Figures in Rand
2022
2021
21
3.
Goodwill
Figures in Rand
2022
2021
Cost
Accumulated
amortisation
Carrying
value
Cost
Accumulated
amortisation
Carrying
value
Goodwill
412,413,448
(84,086,044)
328,327,404
412,509,448
(43,033,118)
369,476,330
Reconciliation of goodwill
-
2022
Figures in Rand
Opening
balance
Transfers
Amortisation
Total
Goodwill
369,476,330
(96,000)
(41,052,926)
328,327,404
Reconciliation of goodwill
-
2021
Figures in Rand
Opening
balance
Transfers
Amortisation
Total
Goodwill
410,677,750
-
(41,201,420)
369,476,330
4.
Intangible assets
Figures in Rand
2022
2021
Cost
Accumulated
amortisation
Carrying
value
Cost
Accumulated
amortisation
Carrying
value
Computer software
5,254,693
(4,648,970)
605,723
8,098,660
(7,477,937)
620,723
Intellectual property
11,660,731
(11,660,731)
-
11,660,731
(11,660,731)
-
Integrated trading platform
481,672,000
(96,334,400)
385,337,600
481,672,000
(48,167,200)
433,504,800
Total
498,587,424
(112,644,101)
385,943,323
501,431,391
(67,305,868)
434,125,523
Reconciliation of intangible assets - 2022
Figures in Rand
Opening
balance
Additions
Amortisation
Total
Computer software
620,723
210,100
(225,100)
605,723
Integrated trading platform
433,504,800
-
(48,167,200)
385,337,600
434,125,523
210,100
(48,392,300)
385,943,323
Reconciliation of intangible assets - 2021
Figures in Rand
Opening
balance
Additions
Amortisation
Total
Computer software
392,935
606,204
(378,416)
620,723
Integrated trading platform
481,672,000
-
(48,167,200)
433,504,800
482,064,935
606,204
(48,545,616)
434,125,523
Amortisation
of computer
software and
the integrated
trading platform
is included
in operating
expenses and
amortisation
of intellectual
property is included in cost of sales.
Connect
Combined Audited Financial Statements for the years ended 28 February
2022 and 2021
Notes to the Combined Financial Statements for the years ended 28 February 2022 and
2021
Figures in Rand
2022
2021
22
5.
Investments in associates
Figures in Rand
% Holding
% Holding
Carrying
amount
Carrying
amount
Name of company
2022
2021
2022
2021
Sandulela Technology
Proprietary Limited
49.00%
49.00%
1,169,157
1,006,129
6.
Loans to shareholders
Ovobix (RF) Proprietary Limited
784,073
784,073
This loan is unsecured, bears no interest and has no fixed repayment
terms.
Leon de Wit
-
59,973
This loan is unsecured, bears no interest and has no fixed repayment terms.
784,073
844,046
7.
Deferred tax
Deferred tax liability
Accelerated wear and tear on property plant and equipment and intangible
assets
(90,089,089)
(104,531,580)
Prepaid expenses
-
(165,740)
Total
net deferred tax asset
(90,089,089)
(104,697,320)
Deferred tax asset
Allowance for doubtful debts
6,783,558
2,985,958
Other accruals
5,969,657
3,359,493
Tax losses available for
set off against future taxable income
784,277
2,304,298
Total
deferred tax asset
13,537,492
8,649,749
Reconciliation of deferred tax asset (liability)
At beginning of the year
(96,047,571)
(111,609,930)
Increase (decrease) in tax losses available for set off against future
taxable income
(1,520,022)
2,304,298
Originating temporary difference on tangible fixed and intangible
assets
14,439,900
11,704,034
Allowance for doubtful debts
3,647,403
729,811
Other accruals
2,920,059
664,253
Prepaid expenditure
8,634
159,963
(76,551,597)
(96,047,571)
8.
Inventories
Raw materials
42,981,000
42,269,243
Work in progress
1,580,904
1,245,593
Finished goods
313,540
313,540
Prepaid airtime vouchers
78,491,750
74,783,572
Point of sale terminals
14,044,521
17,106,448
Consumables
39,476,275
31,155,532
176,887,990
166,873,928
Inventories (write-downs)
(1,435,066)
(5,838)
175,452,924
166,868,090
Connect
Combined Audited Financial Statements for the years ended 28 February
2022 and 2021
Notes to the Combined Financial Statements for the years ended 28 February 2022 and
2021
Figures in Rand
2022
2021
23
9.
Trade and other receivables
Trade receivables (net of allowance for doubtful
debts)
113,620,153
145,694,109
Loans to customers (net of allowance for doubtful debts)
202,221,116
59,255,014
Prepayments
15,642,009
8,635,753
Deposits
708,604
491,391
Customs value added tax receivable
2,678,674
920,357
Other receivables
4,444,038
7,968,837
339,314,594
222,965,461
10.
Cash and cash equivalents
Cash and cash equivalents consist of:
Cash on hand
140,577
116,901
Bank balances
580,161,476
490,805,650
Bank overdraft
(78)
(5,365)
580,301,975
490,917,186
Current assets
580,302,053
490,922,551
Current liabilities
(78)
(5,365)
580,301,975
490,917,186
Included in the bank balances are the following:
●
Cash held by Cash
Connect Collateral Holding Trust of ZAR331,656,897
(2021: ZAR308,891,329) which is
ring-fenced in the Special
Purpose Vehicle
for client settlements.
●
Merchant cash held by Main Street 1723 Proprietary Limited in a separate bank account on behalf of its merchants of
ZAR31,183,251
(2021: ZAR9,060,350).
Connect
Combined Audited Financial Statements for the years ended 28 February
2022 and 2021
Notes to the Combined Financial Statements for the years ended 28 February 2022 and
2021
Figures in Rand
2022
2021
24
11.
Loans from financial institutions
At amortised cost
ABSA Bank Limited
Commercial Asset Facility
51,323,894
39,897,843
The Commercial Asset Facility is an amortising facility,
interest is charged at prime + 1% and is
repayable between 36-48 months depending on the asset financed by the
facility. The Commercial
Asset Facility is used to finance POS terminals, safe assets and motor vehicles. The
Commercial
Asset Facility was settled in full on 14 April 2022.
Overdraft
121,039,842
102,300,013
The overdraft is repayable on demand and bears interest at prime. The
facility has an unutilised
balance of ZAR3,960,158. The overdraft facility was settled in full on
14 April 2022.
Facility A
167,704,863
223,180,028
Facility A has an outstanding balance of ZAR168,750,001 (2021:
ZAR225,000,001), which
includes capitalised cost incurred to place the facility of ZAR1,045,137. The loan
has a 60 month
term and bears interest at JIBAR plus 3.55% per annum. Interest is serviced quarterly,
no repayment
was made for the first 12 months from the date of the first draw down of the facility (28
February
2020) and thereafter the facility will be repaid evenly each quarter over the remaining
48 months.
Facility A was settled in full on 14 April 2022.
Facility B
273,040,279
272,387,039
Facility B has an outstanding balance of ZAR275,000,000 (2021:
ZAR275,000,000), which includes
capitalised cost incurred to place the facility of ZAR1,959,721. The loan has
a 60 month term and
bears interest at JIBAR plus 4.05% per annum. Interest is serviced quarterly
and the facility shall be
repaid with a single capital payment in full within 60 months from the date of first draw
down of the
facility (28 February 2020). Facility
B was settled in full on 14 April 2022.
Facility C
214,865,495
214,730,970
Facility C has an outstanding balance of ZAR215,000,020 (2021:
ZAR215,000,020), which includes
capitalised cost incurred to place the facility of ZAR134,252. The loan has a 36 month
term loan
and bears interest at JIBAR plus 3.65% per annum. Interest is serviced quarterly
and the facility
shall be repaid with a single capital payment in full within 36 months from
the date of first draw
down of the facility (28 February 2020). Facility C was settled in full on 14 April 2022.
FirstRand Bank Limited
Revolving Credit Facility
121,693,349
55,287,388
The revolving credit facility agreement with FirstRand Bank Limited (acting
through its Rand
Merchant Bank division) commenced on 15 February 2021. The facility
is for an amount of
ZAR150,000,000 which matures on 12 August 2022. The facility has an outstanding
balance of
ZAR122,725,905 (2021: ZAR57,233,395), which includes capitalised cost
incurred to place the
facility of ZAR1,032,556. Interest is charged at prime plus 1.25%
per annum on the utilised balance.
In addition to the interest a commitment fee of 1.5% per annum is charged
on the undrawn available
facility amount.
949,667,722
907,783,281
Non-current liabilities
At amortised cost
413,478,065
735,907,015
Current liabilities
At amortised cost
536,189,657
171,876,266
949,667,722
907,783,281
Connect
Combined Audited Financial Statements for the years ended 28 February
2022 and 2021
Notes to the Combined Financial Statements for the years ended 28 February 2022 and
2021
Figures in Rand
2022
2021
25
Loans to customers have been pledged as security for the loan received from Rand Merchant Bank. Refer to
note 26 for more information on
guarantees provided for the above loans.
12.
Finance lease obligation
Minimium lease payments due
- within one year
-
230,349
- in second to fifth year inclusive
-
11,086
-
241,435
less: future finance charges
-
(7,741)
Present value of minimum lease payments
-
233,694
Present value of minimum lease payments due
- within one year
-
222,700
- in second to fifth year inclusive
-
10,994
-
233,694
Non-current liabilities
-
10,994
Current liabilities
-
222,700
-
233,694
13.
Trade and other payables
Trade payables
193,369,402
203,237,822
Value
added tax payable
19,669,657
16,999,529
Settlement control payable
355,583,018
323,693,181
Accruals
32,862,752
19,415,020
Other payables
8,457,115
3,336,746
609,941,944
566,682,298
Included in Settlement control payable balance are the following:
●
Client settlements owing
in Cash Connect
Collateral Holding Trust of
ZAR329,647,593 (2021: ZAR310,664,337) which
is ring-fenced
in the Special Purpose Vehicle.
●
Merchant settlements owing in Main Street 1723 Proprietary Limited of ZAR25,935,425
(2021: ZAR13,028,844).
14.
Revenue
Sale of airtime vouchers, goods and transaction fees
4,516,676,406
3,708,273,929
Cash deposit fees
192,061,505
160,139,471
Rental income
257,032,285
227,622,176
Interest income
53,448,502
31,301,888
Cash in transit income
100,835,022
81,681,164
Risk fees
16,712,628
11,779,851
Minimum discount charges
948,174
2,233,900
Treasury interest income
13,951,856
11,581,541
5,151,666,378
4,234,613,920
Connect
Combined Audited Financial Statements for the years ended 28 February
2022 and 2021
Notes to the Combined Financial Statements for the years ended 28 February 2022 and
2021
Figures in Rand
2022
2021
26
15.
Other income
Profit on sale of property,
plant and equipment
323,971
57,141
Profit and loss on exchange differences
5,912
(53,836)
Management fees received from associate
1,176,000
1,873,298
Recoveries
1,366,366
-
Sundry income
1,948,348
7,691,257
Cost recovery income
116,564
10,525,136
Insurance recovery
2,621,200
13,224,417
Recoupments
25,151,130
4,479,421
Installation and maintenance income
18,730,839
11,520,932
Share of profits from associate
1,566,370
-
53,006,700
49,317,766
16.
Operating profit
Operating profit for the year is stated after accounting for the following:
Operating lease charges
Premises
(10,135,982)
(8,927,413)
Equipment
(402,811)
(529,792)
(10,538,793)
(9,457,205)
Audit fees
(2,389,519)
(2,961,426)
Profit on exchange differences
174,671
53,836
Amortisation on intangible assets - included in operating expenses
(48,392,300)
(48,545,616)
Amortisation of goodwill
(41,052,926)
(41,201,420)
Depreciation on property,
plant and equipment
(92,411,516)
(83,870,265)
Employee costs
(196,459,489)
(166,108,407)
Directors remuneration (included in employee cost)
(27,422,148)
(26,041,222)
Key management remuneration (excluding directors) (included in
employee cost)
(6,769,395)
(14,903,409)
17.
Finance income
Interest revenue
Cash balances
4,702,641
2,619,368
4,702,641
2,619,368
18.
Finance expense
Interest Expense
Loans from related parties
-
1,115,363
Loans from financial institutions
65,667,839
70,415,874
Overdraft balances
9,703,366
488,568
SARS
51,350
-
Other related parties
-
14,761
75,422,555
72,034,566
Connect
Combined Audited Financial Statements for the years ended 28 February
2022 and 2021
Notes to the Combined Financial Statements for the years ended 28 February 2022 and
2021
Figures in Rand
2022
2021
27
19.
Taxation
Major components of the tax expense
Current
Local income tax - current period
66,557,641
40,993,795
Local income tax - recognised in current tax for prior periods
(1,834,947)
(369,212)
Foreign income tax or withholding tax - current period
1,236,938
1,380,884
65,959,632
42,005,467
Deferred
Originating and reversing temporary differences
(19,366,595)
(15,611,705)
46,593,037
26,393,762
Reconciliation of the tax expense
Reconciliation between accounting profit and tax expense.
Accounting profit
129,473,394
60,500,473
Tax at the applicable
tax rate of 28% (2021: 28%)
36,158,209
16,940,127
Tax effect
of adjustments on taxable income
Non deductible expenses
3,971,164
918,489
Non deductible amortisation and impairment
11,777,258
9,096,000
Non-taxable income
(3,674,473)
(521,923)
Non deductible depreciation of leasehold improvements
124,272
151,591
Non deductible debt raising fees
-
129,849
Tax losses carried forward
71,554
48,841
Prior year (under)/over provision
(1,834,947)
(369,212)
46,593,037
26,393,762
The effective tax rate for Connect for the year is 36% (2021: 44%).
20.
Cash generated from (used in
)
operations
Profit/ (loss) before taxation
129,473,394
60,500,473
Adjustments for:
Depreciation on property,
plant and equipment
92,411,516
83,870,266
Interest received
(4,702,641)
(2,619,368)
Interest paid
75,422,555
71,838,449
Movement in foreign currency reserve
(351,290)
(130,282)
Amortisation of goodwill
41,052,926
41,201,420
Amortisation of intangible assets
48,392,300
48,545,616
Changes in working capital:
Inventories
(8,584,834)
(62,643,889)
Trade and other receivables
(116,349,133)
(41,155,977)
Trade and other payables
43,259,647
127,572,773
300,024,440
326,979,481
Connect
Combined Audited Financial Statements for the years ended 28 February
2022 and 2021
Notes to the Combined Financial Statements for the years ended 28 February 2022 and
2021
Figures in Rand
2022
2021
28
21.
Tax refunded
/ (paid)
Balance at beginning of the year
(4,236,269)
(7,331,831)
Current tax for the year recognised in profit or loss
(65,959,632)
(42,005,467)
Balance at end of the year
3,247,145
4,236,269
(66,948,756)
(45,101,029)
22.
Commitments
Operating lease
Minimum lease payments due
- within one year
7,697,015
4,126,681
- in second to fifth year inclusive
6,521,553
4,656,908
14,218,568
8,783,589
The above
commitments relate
to future
commitments for
cash charges
and not
the future accounting
expense calculated
on a straight
-line
basis disclosed in profit or loss.
23.
Related parties
Relationships
Common control company
Ovobix (RF) Proprietary Limited
Associates
Refer to note 5
Shareholders with significant influence
Futuregrowth Asset Management Proprietary Limited (acting on behalf
of client funds)
Luxanio 227 Proprietary Limited
Members of key management
Richard Philips
Steven Heilbron
Neil Davis
Mark Templemore
-Walters
Martin Wright
Ivan Epstein
Pieter Erasmus
Amrishsingh Narrandes
Christopher Meyer
Naeem Kola
Lincoln Mali
Related party balances and transactions with entities with control, joint control or
significant influence over Connect
Related party balances
Loan accounts - Owing (to) by related parties
Ovobix (RF) Proprietary Limited
784,073
784,073
Leon de Wit
-
59,973
Amounts included in Trade
receivables (Trade
Payables) regarding related parties
Sandulela Technology
Proprietary Limited
6,783,550
(8,520,822)
Connect
Combined Audited Financial Statements for the years ended 28 February
2022 and 2021
Notes to the Combined Financial Statements for the years ended 28 February 2022 and
2021
Figures in Rand
2022
2021
29
Related party transactions
Management fees (received from)
paid to related parties
Sandulela Technology
Proprietary Limited
(1,176,000)
(59,843)
Compensation to directors and other key management
Short-term employee benefits
34,191,543
41,024,666
24.
Going concern
The directors
believe that
Connect has adequate
financial resources
to continue
in operation
for the foreseeable
future and
accordingly the
combined financial statements
have been prepared on
a going concern basis.
The directors are
satisfied that Connect is
in a sound financial
position and that it has access to sufficient borrowing
facilities to meet its foreseeable cash requirements. The directors are
not aware of any
new material changes that may adversely impact Connect. The directors are also not aware of any material non-compliance with statutory or
regulatory requirements or of any pending changes to legislation which
may affect Connect.
25.
Events after the reporting period
Lesaka Technologies,
Inc. transaction
On 14 April 2022,
Lesaka, through its wholly
owned subsidiary Net1 SA
acquired all of the
issued and outstanding ordinary shares
of Ovobix
and Luxanio and
14.14% of CCMS
and K2021
and together with
Ovobix, Luxanio and
CCMS. Each of
Ovobix and Luxanio
own 69.05%
and 16.81%
of CCMS
and K2021,
respectively,
and combined
with the
14.14% referred
to previously,
Lesaka effectively
owns 100%
of
CCMS and K2021.
As
part
of
the
Lesaka
Technologies,
Inc.
transaction,
all
the
facilities
with
ABSA
Limited
were
settled
and
replaced
with
new
facilities
advanced by FirstRand Bank Limited (acting through its Rand Merchant Bank
division).
Change in shareholding of Deposit Manager
There was a change
in shareholding in
that Deposit Manager's minority
interests were purchased
from shareholders on
14 April 2022,
thus
making Deposit Manager a wholly-owned subsidiary of CCMS.
The directors are not
aware of any other
significant matter or circumstance
arising since the end
of the financial year
and to the date
of this
report that may materially affect the results of the group for the period
reported or their financial position as at year end.
26.
Commitments and guarantees
Guarantees provided to ABSA Limited
On 28 February 2020 CCMS acquired Main Street 1723 Proprietary Limited and its subsidiaries from Main Street 1722 Proprietary
Limited
(part of the
Paycorp Group) (“the
Transaction”). In order
to partly
fund the Transaction,
CCMS raised
funding from ABSA
Limited (“ABSA”)
to the value of ZAR500,000,000 (“Senior Debt”).
In order to facilitate the
security requirement for such Senior Debt
as required by the Finance
Documents, the subsidiaries within the Connect
Group stood as guarantor for the obligations of CCMS to ABSA in terms of the
funding arrangements.
Connect
Combined Audited Financial Statements for the years ended 28 February
2022 and 2021
Notes to the Combined Financial Statements for the years ended 28 February 2022 and
2021
30
As security for
such obligations in
favour of ABSA,
CCMS has
agreed to pledge
the shares and
securities held in
the capital of
each of its
subsidiaries and to cede in securitatem debiti of all of its rights, title and interest.
•
all and any
claims of whatsoever nature
and howsoever arising,
whether actual, prospective
or contingent, direct
or indirect, whether a
claim for the
payment of money
(whether in respect
of interest,
principal or otherwise)
or for
the performance of
any other obligation,
including, without
limitation, all rights
to any dividends
and/or distributions made
and/or claims on
account of shareholders
loans
whether on loan account or
otherwise, which CCMS now or
from time to time in the
future has or will have
against each company
that are subsidiaries;
•
all of the shares and securities in the capital
of the company’s subsidiaries,
of which it is or becomes the owner
from time to time or which may be issued or transferred to it, including the following -
Ø
all the shares of any class in the share capital of each subsidiary;
Ø
all other
securities in
the capital
of each
subsidiary (including
any capitalisation
shares or
bonus shares
issued in
respect of
the
shares referred to above); and
Ø
any securities issued in substitution or exchange for the securities in the aforementioned, including all
dividends (whether paid
or unpaid), rights to dividends and voting rights in relation to those shares and
securities; and
•
in relation to the rights listed above, the
Ø
any monies and
proceeds (including
the proceeds of
a disposal or
other realisation) accrued
or receivable in
respect of all
or part
thereof;
Ø
all rights and benefits in respect of any agreement for the disposal or other realisation
thereof; and
Ø
all contracts,
warranties, remedies, security,
indemnities and other undertakings in respect thereof.
Finance Document means:
•
the Common Terms
Agreement
•
the Facility A Agreement
•
the Facility B Agreement
•
the Facility C Agreement
•
the Borrower Cession and Pledge;
•
the Obligor Cession;
•
the Shareholder Cession and Pledge;
•
the Target
Cession and Pledge;
•
the Special Notarial Bond;
•
the Subordination Agreement;
•
the Option Agreement.
Guarantees provided to FirstRand Bank Limited
On 15 February 2021
Connect provided FirstRand
Bank Limited (“FirstRand”)
an unsecured limited
guarantee (“the guarantee”) in
respect
of
the
facility
entered
into
between
Connect
and
FirstRand.
The
guarantee
shall
be
limited
to
a
maximum
aggregate
amount
of
ZAR10,000,000 and will become due and payable should there be any default
on any of its payment obligations to FirstRand.
Inventories already contracted for but not provided
for by Main Street 1723 Proprietary Limited
Inventories already contracted for but not provided for
36,055,951
36,702,666
Guarantees provided by Main Street 1723 Proprietary Limited Already
contracted for but not
provided for
Syntell
200,000
200,000
Fundamental Holdings
530,716
530,716
City of Cape Town*
2,573,947
2,573,947
*
City
of
Cape
Town
guarantee
of
ZAR2,573,946.76,
Guarantor
for
the
full
amount
is
FirstRand
Bank
Limited.
FirstRand
Bank
is
guaranteeing the sum on behalf of Sandulela Technology Proprietary Limited. The beneficiary of the guaranteed sum would be City of Cape
Town. Main Street 1723 Proprietary Limited ("Main Street 1723") indemnifies FirstRand for the entire guaranteed sum if
the sum is released
to City of Cape Town. Nk Mvulana then indemnifies Main Street 1723 in the event that the sum is released in an amount equal to his prorata
shareholding at the time, currently 51% of amount released.
Connect
Combined Audited Financial Statements for the years ended 28 February
2022 and 2021
Notes to the Combined Financial Statements for the years ended 28 February 2022 and
2021
31
27.
Reconciliation of certain financial information to US GAAP
These combined
financial statements
have been
prepared in
accordance with
the basis
of preparation
as set
out above
in accordance
with
IFRS for
SMEs which differs
in certain respects
from accounting principles
generally accepted in
the United States
of America
(“US GAAP”).
The tables presented
below provide a
reconciliation of certain
financial information prepared in
accordance with IFRS
for SMEs to
US GAAP
as at and for the years ended 28 February 2022 and 28 February 2021.
Statement of Financial Position as at 28 February 2022
IFRS for SMEs
US GAAP
Figures in Rand
Note
2022
Adjustments
2022
Assets
Non-current assets
Property, plant and equipment
294,543,366
-
294,543,366
Operating lease right-of-use
(b)
-
11,601,815
11,601,815
Goodwill
(a)
328,327,404
84,086,044
412,413,448
Intangible assets
385,943,323
-
385,943,323
Investments in associates
1,169,157
-
1,169,157
Loans to shareholders
784,073
-
784,073
Deferred tax
13,537,492
-
13,537,492
1,024,304,815
95,687,859
1,119,992,674
Current assets
Inventories
175,452,924
-
175,452,924
Current tax receivable
6,241,191
-
6,241,191
Trade and other receivables
339,314,594
-
339,314,594
Cash and cash equivalents
580,302,053
-
580,302,053
1,101,310,762
-
1,101,310,762
Total assets
2,125,615,577
95,687,859
2,221,303,436
Equity and liabilities
Equity attributable to equity holders of parent
Foreign currency translation reserve
(515,614)
-
(515,614)
Other invested equity
(a)
464,170,919
84,086,044
548,256,963
Total invested equity attributable to Parent entities
463,655,305
84,086,044
547,741,349
Non-controlling interest
2,789,070
-
2,789,070
Total equity
466,444,375
84,086,044
550,530,419
Non-current liabilities
Loans from financial institutions
413,478,065
-
413,478,065
Operating lease liability - long-term
(b)
-
5,512,830
5,512,830
Deferred tax
90,089,089
-
90,089,089
503,567,154
5,512,830
509,079,984
Current liabilities
Loans from financial institutions
536,189,657
-
536,189,657
Current tax payable
9,472,370
-
9,472,370
Operating lease liability - current
(b)
-
6,894,104
6,894,104
Trade and other payables
609,941,943
(805,119)
609,136,824
Bank overdraft
78
-
78
1,155,604,048
6,088,985
1,161,693,033
Total liabilities
1,659,171,202
11,601,815
1,670,773,017
Total equity and liabilities
2,125,615,577
95,687,859
2,221,303,436
Connect
Combined Audited Financial Statements for the years ended 28 February
2022 and 2021
Notes to the Combined Financial Statements for the years ended 28 February 2022 and
2021
32
Statement of Financial Position as at 28 February 2021
IFRS for SMEs
US GAAP
Figures in Rand
Note
2021
Adjustments
2021
Assets
Non-current assets
Property, plant and equipment
269,354,718
-
269,354,718
Operating lease right-of-use
(b)
-
11,556,222
11,556,222
Goodwill
(a)
369,476,330
43,033,118
412,509,448
Intangible assets
434,125,522
-
434,125,522
Investments in associates
1,006,129
-
1,006,129
Loans to shareholders
844,046
-
844,046
Deferred tax
8,649,749
-
8,649,749
1,083,456,494
54,589,340
1,138,045,834
Current assets
Inventories
166,868,090
-
166,868,090
Current tax receivable
1,454,847
-
1,454,847
Trade and other receivables
222,965,461
-
222,965,461
Cash and cash equivalents
490,922,551
-
490,922,551
882,210,949
-
882,210,949
Total assets
1,965,667,443
54,589,340
2,020,256,783
Equity and liabilities
Equity attributable to equity holders of parent
Foreign currency translation reserve
(130,282)
-
(130,282)
Other invested equity
(a)
377,482,093
43,033,118
420,515,211
Total invested equity attributable to Parent entities
377,351,811
43,033,118
420,384,929
Non-controlling interest
3,271,904
-
3,271,904
Total equity
380,623,715
43,033,118
423,656,833
Non-current liabilities
Loans from financial institutions
735,907,015
-
735,907,015
Finance lease obligation
10,994
-
10,994
Operating lease liability - long-term
(b)
-
5,529,051
5,529,051
Deferred tax
104,697,320
-
104,697,320
840,615,329
5,529,051
846,144,380
Current liabilities
Loans from financial institutions
171,876,266
-
171,876,266
Current tax payable
5,641,771
-
5,641,771
Finance lease obligation
222,700
-
222,700
Operating lease liability - current
(b)
-
6,612,848
6,612,848
Trade and other payables
566,682,297
(585,677)
566,096,620
Bank overdraft
5,365
-
5,365
744,428,399
6,027,171
750,455,570
Total liabilities
1,585,043,728
11,556,222
1,596,599,950
Total equity and liabilities
1,965,667,443
54,589,340
2,020,256,783
Connect
Combined Audited Financial Statements for the years ended 28 February
2022 and 2021
Notes to the Combined Financial Statements for the years ended 28 February 2022 and
2021
33
Notes
(a)
Goodwill is not amortized under US
GAAP,
and the adjustment is made to reverse
the goodwill amortization recognised under
IFRS for
SMEs.
(b)
Under US GAAP,
a company
is required
to determine
whether an arrangement
is a lease
at inception.
A lessee is
required to
classify a
lease as
an operating
or a
finance lease.
In respect
of leases
recognised as
operating leases,
right of-use
assets (“ROU”),
and operating
lease liabilities are recognised in the consolidated statements of financial position
.
A ROU asset represents the company’s
right to use an underlying
asset for the lease term and the
lease liabilities represent its obligation
to make lease payments arising from the lease arrangement. Operating lease ROU assets and
liabilities are recognized at commencement
date based on
the present value
of lease payments
over the lease term.
As most of the
company’s
leases do not
provide an implicit
rate,
the company
generally
uses its
incremental
borrowing
rate based
on the
estimated rate
of interest
for
collateralized
borrowing
over a
similar term as the lease payments at commencement date. The operating lease ROU asset also includes any lease prepayments made and
excludes lease incentives. The terms of the company’s lease arrangements may include options to extend or terminate the lease when it is
reasonably certain that the company will exercise
that option. Lease expense for
lease payments is recognized on a
straight-line basis over
the lease term.
IFRS for
SMEs does
not require
the recording
of an
operating
lease ROU
and
operating lease
liability,
and
an adjustment
is made
to
record such amounts under US GAAP.
In recognising the ROU Connect accounted for all components in a lease arrangement
as a single
combined lease component as permitted under
US GAAP. There is no tax implication arising from
this adjustment since the
lease expense
is still recognised on a straight-line basis over the lease term under
US GAAP.
Connect
Combined Audited Financial Statements for the years ended 28 February
2022 and 2021
Notes to the Combined Financial Statements for the years ended 28 February 2022 and
2021
34
Statement of Profit or Loss and Other Comprehensive
Income for the year ended 28 February 2022
IFRS for SMEs
US GAAP
Figures in Rand
Note
2022
Adjustments
2022
Revenue
5,151,666,378
-
5,151,666,378
Cost of sales
(4,582,035,806)
-
(4,582,035,806)
Gross profit
569,630,572
-
569,630,572
Other income
53,006,700
-
53,006,700
Operating expenses
(a)
(422,443,964)
41,052,926
(381,391,038)
Operating profit
200,193,308
41,052,926
241,246,234
Finance income
4,702,641
-
4,702,641
Interest paid
(75,422,555)
-
(75,422,555)
Profit before taxation
129,473,394
41,052,926
170,526,320
Taxation
(46,593,037)
-
(46,593,037)
Profit after tax
82,880,357
41,052,926
123,933,283
Profit for the year
82,880,357
41,052,926
123,933,283
Other comprehensive income
(385,332)
-
(385,332)
Total comprehensive income for the year
82,495,025
41,052,926
123,547,951
Total comprehensive income/(loss)
Owners of the parent
(a)
80,829,962
41,052,926
121,882,888
Non-controlling interest
(a)
1,665,063
-
1,665,063
Total comprehensive income for the year
82,495,025
41,052,926
123,547,951
Profit/(loss) attributable to:
Owners of the parent
(a)
81,215,294
41,052,926
122,268,220
Non-controlling interest
(a)
1,665,063
-
1,665,063
82,880,357
41,052,926
123,933,283
Connect
Combined Audited Financial Statements for the years ended 28 February
2022 and 2021
Notes to the Combined Financial Statements for the years ended 28 February 2022 and
2021
35
Statement of Profit or Loss and Other Comprehensive
Income for the year ended 28 February 2021
IFRS for SMEs
US GAAP
Figures in Rand
Note
2021
Adjustments
2021
Revenue
4,234,613,920
-
4,234,613,920
Cost of sales
(3,819,036,705)
-
(3,819,036,705)
Gross profit
415,577,215
-
415,577,215
Other income
49,317,766
-
49,317,766
Operating expenses
(a)
(334,979,310)
41,201,420
(293,777,890)
Operating profit
129,915,671
41,201,420
171,117,091
Finance income
2,619,368
-
2,619,368
Interest paid
(72,034,566)
-
(72,034,566)
Profit before taxation
60,500,473
41,201,420
101,701,893
Taxation
(26,393,762)
-
(26,393,762)
Profit after tax
34,106,711
41,201,420
75,308,131
Profit for the year
34,106,711
41,201,420
75,308,131
Net loss
(130,282)
-
(130,282)
Total comprehensive income for the year
33,976,429
41,201,420
75,177,849
Total comprehensive income/(loss)
Owners of the parent
(a)
34,523,163
41,201,420
75,724,583
Non-controlling interest
(a)
(546,734)
-
(546,734)
Total comprehensive income for the year
33,976,429
41,201,420
75,177,849
Profit/(loss) attributable to:
Owners of the parent
(a)
34,653,445
41,201,420
75,854,865
Non-controlling interest
(a)
(546,734)
-
(546,734)
34,106,711
41,201,420
75,308,131
Notes
(a)
Goodwill is not amortized under US
GAAP,
and the adjustment is made to reverse
the goodwill amortization recognised under
IFRS for
SMEs.
Connect
Combined Audited Financial Statements for the years ended 28 February
2022 and 2021
Notes to the Combined Financial Statements for the years ended 28 February 2022 and
2021
36
Statement of Cash Flows for the years ended 28 February 2022 and 28 February
2021
No significant
adjustments were
required to
the statement
of cash
flows if
U.S. GAAP
had been
applied instead
of IFRS
for
SMEs.
The
following was noted with regard to the adjustments above:
The reversal of goodwill amortization will have no net impact on the Cash generated from operations as
the increase in profit before taxation
will be offset by
the absence of a corresponding
adjustment for non-cash items.
The recognition of an
operating lease right of
use asset and
lease liability in accordance with US GAAP will not require significant adjustment
to the Statement of Cash Flows.
ASC 842 requires
lessees to report the
single expense associated with
an operating lease as
an operating activity and
operating lease payments
should be
classified as operating
activities. Under
ASC 842, both
a right-of-use asset
and lease liability
are recorded
as separate line
items
on the
balance sheet
for operating
leases. Changes
in right-of-use
assets and
lease liabilities
arising from
lease expense
would be
reported
separately consistent
with the
balance sheet
presentation, by
presenting the
amortization of
the right-of-use
asset as a
non-cash adjustment
from net
income and
the change in
the lease liability
due to
cash payments
as a change
in operating
assets and liabilities.
This is therefore
consistent with
the existing
treatment under
IFRS for
SMEs where
the cash
flow impact
of operating
leases is
presented within
operating
activities.
*****************************