Notes

NOTE 1

Intangible assets

  Carrying value
2019
R’000
  Carrying value
2018
R’000
  Amortisation
2019
R’000
  Amortisation
2018
R’000
 
Goodwill 1 336 842   883 488      
Goodwill – AfroCentric Health 460 460   409 534      
Goodwill – Retail Cluster 876 382   473 954      
Intangible Assets 1 219 170   855 598   (110 941)   (89 603)  
AfroCentric Health intangible PPA 55 149   35 226   (8 367)   (4 992)  
Customer relationships – Retail Cluster 312 830   63 385   (14 204)   (8 948)  
AfroCentric Health intangible Software 297 240   181 106   (36 203)   (31 087)  
AfroCentric Health Nexus 253 152   283 111   (21 393)   (20 058)  
AfroCentric Health Fusion* 195 165   150 917      
Insurance Fraud Manager (Fraud Management Software)   105 634     141 853     (30 774)     (24 518)  

* Amortisation starting in 2020 financial year as modules are operationally deployed.

NOTE 2

Total group cash resources

  Year ended
30 June
2019
R’000
  Year ended
30 June
2018
R’000
 
Cash and cash equivalents 265 296   212 918  
Managed funds and deposits (current)   152 250  
Total current cash, managed funds and deposits 265 296   365 168  
Managed funds and deposits (non current)   65 028  
Total cash resources 265 296   430 196  

NOTE 3

The decrease in the managed funds and deposits is attributed to the disinvestment of funds that were then used to fund acquisitions.

NOTE 4

Effective 1 March 2019, AfroCentric Healthcare Assets (Proprietary) Limited (a 71.3% held subsidiary of AfroCentric Investment Corporation Limited) acquired the remaining 74% shares in Activo Health (Proprietary) Limited. As part of the purchase consideration payable to the minority shareholders, 19 864 753 shares in AfroCentric Investment Corporation Limited were issued to them, resulting in an increase in the share premium.

The acquisition resulted in the associate share (26% of Activo Health) being transferred to the Investment is subsidiaries (R44 million).

The transfer of the associate investment (26%) in Activo Health resulted in a fair value gain of R118.7 million, upon recognition of the 100% held subsidiary effective 1 March 2019.

NOTE 5

The Group utilised R550 million of its credit facilities during the year of which R59 million was repaid as at year end over and above the cash resources of R265 million available at year-end. The balance of the facility is R491.5 million (R371.5 million + R120 million).

NOTE 6

On adoption of IFRS16-Leases, a right of use asset was recognised and a corresponding lease liability raised. This resulted in depreciation on the right of use asset and the interest unwinding on the liability being recognised in the statement of comprehensive income.

The operating lease reversal line, has been included to show the impact of rental expenses on operating profit.

Refer to Note 7 for the detailed impact of the new accounting standards.

NOTE 7

New accounting standards adopted by the group

7.1   IFRS 16 – Leases

The Group has elected to early adopt IFRS 16 from 1 July 2018 and elected the modified retrospective approach. This resulted in the cumulative impact of applying IFRS 16 being accounted for as an adjustment to Right of use of asset amounting to R12.7 million at the start of the current accounting period. The most significant impact of the adoption was the right of use asset recognised on the balance sheet and the corresponding lease liability.

On adoption of IFRS 16, the group recognised lease liabilities in relation to leases which had previously been classified as “operating leases” under the principles of IAS 17 Leases. These liabilities were measured at the present value of the remaining lease payments, discounted using the lessee’s incremental borrowing rate as of 1 July 2018. The weighted average lessee’s incremental borrowing rate applied to the lease liabilities on 1 July 2018 was 9.3%.

  R’000  
Operating lease commitments disclosed as at 30 June 2018 527 172  
Discounted using the group’s incremental borrowing rate of 9.3% 394 47  
(Less): short-term leases recognised on a straight-line basis as expense (20 692)  
Add/(less): adjustments as a result of a difference treatment of extension and termination options  
Lease liability recognised as at 1 July 2018 373 783  

The associated right of use assets for the property leases were measured on a modified retrospective basis, with the new rules applied effective 1 July 2018. The right of use assets were measured at the account equal to the lease liability on adoption date.

In applying IFRS 16 for the first time, the group use/applied the following practical expedients permitted by the standard:

  • the use of a single discount rate to a portfolio of leases with reasonable similar characteristics;
  • the accounting for operating leases with a remaining lease term of less than 12 months as at 1 July as short term leases;
  • the exclusion of initial direct costs for the measurement of the right of use assets at the date of initial application; and
  • the use of hindsight in determining the lease term where the contract contains options to extend or terminate the lease.
  June 2019
R’000
 
Right use of asset 1 July 2018 as equal to lease liability 373 783  
IFRS 16 modified approached adjustment/Accrual for straight-lining (12 757)  
Right of use assets 1 July 2018 361 026  

7.1.1   Changes to the group’s accounting policies

The group had to change its accounting policies and make certain retrospective adjustments following the adoption of IFRS 16.

The Group has initially applied IFRS 16 from 1 July 2018.

7.2   IFRS 9 – Financial Instruments

The group has applied IFRS9 from 1 July 2018 and elected not to restate comparatives on transition, with the impact of adoption recognised as an adjustment to the opening balance of retained earnings as at 1 July 2018.

The most significant impact of adoption was an increase in impairment allowances on trade receivables due to the IFRS 9 requirement to consider forward looking information when determining impairment allowances. The cumulative net impact of adopting IFRS 9 was an increase of R2.8 million in impairment allowances and a corresponding decrease of R2.8 million in retained earnings.

The total impact on the group’s retained earnings as at 1 July 2018 is as follows:

  R’000  
Closing retained earnings 30 June 2018 865 026  
Increase in provision for trade receivables (2 818)  
Increase in deferred tax assets relating to impairment provisions 788  
Adjustment to retained earnings from adoption of IFRS 9 on 1 July 2018 (2 030)  
Opening retained earnings 1 July – IFRS 9 (before restatement for IFRS 16) 862 996  
  R’000  
IAS 39 Provision on 30 June 2018 24 800  
ECL adjustments to provision 2 818  
IFRS 9 Provision on 1 July 2018 27 618  

7.2.1   Changes to the group’s accounting policies

The group had to change its accounting policies and make certain retrospective adjustments following the adoption of IFRS 9. The Group has initially applied IFRS 9 from 1 July 2018.

The adoption of IFRS 9 Financial Instruments from 1 July 2018 resulted in changes in accounting policies and adjustments to the amounts recognised in the financial statements. In accordance with the transitional provisions in IFRS 9 (7.2.15) and (7.2.26), comparative figures have not been restated.

Classification and measurement

IFRS 9 contains three principal classification categories for financial assets:

  • Measured at amortised cost;
  • Fair value through other comprehensive income (“FVOCI”) and;
  • Fair value through profit and loss (“FVTPL”).

The classification of financial assets within IFRS 9 is generally based on the business model in which a financial asset is managed and its contractual cash flow characteristics. IFRS 9 eliminates the previous IAS 39 categories of held to maturity, loans and receivables and available for sale.

IFRS 9 largely retains the existing requirements in IAS 39 for the classification and measurement of financial liabilities.

On the date of initial application, 1 July 2018, the financial instruments of the group were as follows with any reclassifications noted:

  Measurement category Carrying amount  
  Original
(IAS 39)
New
(IFRS 9)
Original
R’000
New
R’000
Difference
R’000
 
Non-current financial assets            
Available for sale financial instruments Available for sale FVPL 9 000 9 000  
Financial assets FVPL FVPL 65 028 65 028  
Current financial assets            
Trade and other receivables Amortised cost Amortised cost 354 267 354 267  
Cash and cash equivalents Amortised cost Amortised cost 212 918 212 918  
Financial assets FVPL FVPL 152 250 152 250  
Non-current financial liabilities            
Deferred Payment FVPL FVPL 5 263 5 263  
Current financial liabilities            
Trade and other payables Amortised cost Amortised cost 292 626 292 626  
Employment benefit liability Amortised cost Amortised cost 49 955 49 955  

Impairment of financial assets

With the adoption of IFRS 9 in the current financial year, the ‘incurred loss’ model in IAS 39 has been replaced with an ‘expected credit loss’ (ECL) model. The new impairment model applies to financial assets that the Group measures at amortised cost as the standard requires assessment of contractual cash flows for financial assets measured at amortised cost and fair value through other comprehensive income (FVTOCI). This has resulted in the losses being recognized earlier than under IAS 39.

The Group’s trade and other receivables do not contain a significant financing component and therefore the allowance is measured at initial recognition as expected credit losses that result from all possible defaults events over the expected life these assets. The Group uses a provision matrix and time value of money approach to estimate ECL for these financial assets.

The group was required to revise its impairment methodology under IFRS 9 for trade and other receivables. The impact of the change in the impairment methodology on the group’s retained earnings and equity is disclosed in the table in note 7.2 above.

While cash and cash equivalents are also subject to the impairment requirements of IFRS 9, the identified impairment loss was immaterial. 

7.3   IFRS 15 – Revenue from contracts with customers

The application of IFRS 15 did not have a significant impact on the group’s results of financial position.

7.3.1   Changes to the group’s accounting policies

IFRS 15 did not have any impact on the amounts recognised in the prior periods and does not affect the current period in terms of revenue recognition.