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
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.
*****************************