Wrap Text
Reviewed Condensed Consolidated Financial Statements for the year ended 31 December 2017
Brainworks Limited
(Incorporated in the Republic of Mauritius)
(Registration number 115883 C1/GBL)
Share code: BWZ, ISIN MU0548S00000
REVIEWED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2017
COMMENTARY
INTRODUCTION
The directors hereby present the reviewed condensed consolidated financial statements of Brainworks Limited (“the Company”)
together with its subsidiaries and associates (“the Group”) for the year ended 31 December 2017. This is the first publication of
the Group’s full year results following the Company’s listing on the Johannesburg Stock Exchange (“the JSE”) on the 13th of
October 2017.
ECONOMIC AND POLITICAL REVIEW
The Zimbabwean economy continues to be beset by high unemployment leading to weak domestic demand and high public local
and international debt. The foreign currency and cash shortages that began in 2016 continued in 2017 and this, coupled with other
structural weaknesses in the economy, hampered economic growth. In spite of these and other challenges, the economy recorded
3.7% growth in 2017 on the back of commendable performance particularly by the agricultural and mining sectors.
Zimbabwe offcially came out of deflation in February 2017 and the average inflation rate for 2017 was 1%. While still low, the
persistent shortage of foreign currency for a country that is heavily reliant on imported raw materials and finished goods remains a
concern. This has seen prices beginning to creep up as importers are forced to resort to the parallel market to secure foreign currency.
The Reserve Bank of Zimbabwe with the assistance of the Afreximbank established a US$600 million nostro stabilisation facility
to ensure that the country’s critical foreign payment needs continue to be met. Various policy initiatives including the imposition of
restrictions on non-essential imports also saw the current account deficit narrow significantly from US$2.1 billion in 2016 to
US$1.45 billion in 2017.
November 2017 saw the inauguration of a new government now led by President Emmerson Dambudzo Mnangagwa. Since his
inauguration, the new President has embarked on a diplomatic offensive across the globe with the theme “Zimbabwe is open for
business”. There have been some reforms promulgated, in particular around the previously controversial indigenisation policy, which
has now been amended and clarified as being applicable only to the mining sector, in particular platinum and diamonds. Following
the establishment of a new government, there has been increased investment enquiries in the country. However, actual investment
inflows if any, are expected after the harmonised elections which are expected to have been held by the end August 2018, as investors
wait for Zimbabwe to conclude this critical national event. Sentiment is very positive fired by the current government assuring the
global community that it will do all it can to ensure that the elections are free, fair and credible.
OVERVIEW OF THE TOURISM AND HOSPITALITY INDUSTRY
The Group’s major assets namely hotels, and revenues are linked to the tourism industry in Zimbabwe.
The weak regional currencies against the United States of America dollar (“US$”) particularly the South African Rand (“Rand”)
resulted in flat room rates for our hotels. The Rand relative to the US$ affected the South African market, which contributes
significantly to tourist arrivals into Zimbabwe. However post year-end, there are signs that the Rand is firming, which is likely to
positively influence arrivals from South Africa going forward. The international market performed strongly in line with the global
tourism industry, registering growth of 29% during the year under review.
The tourism industry is expected to continue growing in 2018 and to benefit from key activities, which include elections,
infrastructure development and other government projects. The Group’s hotel reservations, particularly in Victoria Falls are looking
positive. Government is set to introduce a number of measures to rejuvenate the tourism and hospitality industry. These measures
among others include:
a. committing to the creation of a conducive political and socio-economic environment to make the country’s tourist
destinations competitive and appealing to both local and international tourists;
b. changing the visa regime to enable tourists to apply for visas at the port of entry;
c. introducing systems and processes that would speed up immigration clearance time;
d. building new airports and refurbishing existing ones;
e. opening the skies to other international airlines; and
f. Improving roads and ability to travel on these uninterrupted.
PERFORMANCE REVIEW
Revenues
The Group’s revenues increased by 22% to US$58.6 million relative to US$48.1 million achieved during the prior year. Revenue
growth was recorded across all the Group’s three operating segments, with major growth being recorded by the hospitality segment.
Hospitality in particular contributed 88% of the total revenues for the year under review, 3% lower when compared to the prior year
on the back of revenue growth in the Group’s other investments. Post elimination of inter group revenues, the Group’s other
investments contributed US$6.8 million to 2017 revenues.
Hospitality revenues of US$51.8 million represents growth of 19% relative to US$43.6 million recorded in 2016. The growth was
driven by the increase in hotel occupancy from 44% recorded in the prior year to 52% for the year under review. Notwithstanding
the myriad of challenges the Zimbabwean economy is facing, growth in hotel occupancy was recorded in all three-market segments,
with the international market recording the highest growth of 29%, domestic 17% and regional 3%. Increase in traffic was particularly
recorded by the Victoria Falls based hotels following the commissioning of the upgraded Victoria Falls International hotel in the
prior year.
The Group maintained its average daily rate (“ADR”) at US$93 in line with the prior year as focus was on driving occupancies.
Occupancy growth spurred a 17% growth in revenue per available room (“RevPAR”) from US$41 recorded last year to US$48, with
total revenue per available room (“Total RevPAR”) also increasing by 18% to US$86 from US$73 recorded in 2016.
Operating expenses
At US$40.3 million, the Group’s operating expenses increased by 18% relative to US$34.1 million recognised during the same
period in 2016. Prior year operating expenses of US$31.2 million recorded in the statement of comprehensive income include the
impairment allowance reversal of US$2.9 million.
Operating expenses growth was mainly driven by listing expenses amounting to US$1.7 million, US$1.2 million impairment
provisions and other non- recurring expenses amounting to US$0.6 million. The hospitality segment in particular recorded an
increase in its operating expenses by US$2.8 million during the year under review, which represents an increase of 10% when
compared to US$28.3 million recorded in 2016. The growth was in line with that particular segment’s 19% increase in revenues.
Finance charges
The Group’s finance charges increased by 19% from US$3.7 million incurred in 2016 to US$4.4 million for the year under review.
The growth was predominantly due to the full year impact of the US$10 million loan that was accessed by the Group in 2016, and
the increase in the total borrowing from US$35 million as at the end of 2016 to US$38.5 million as at 31 December 2017.
Profitability
The Group recorded a loss before income tax of US$6 million, compared to profit before income tax of US$4.4 million recorded in
the prior year. The current year performance was adversely impacted by the following major items:
a. The finance charges of US$4.4 million;
b. Fair value losses of US$2.3 million (2016: gain of US$1.2 million) recorded from the Group’s investment in the listed MyBucks
shares;
c. US$1.6 million being the Group’s share of losses from one of its associate investments (Coporeti Support Services (Private)
Limited t/a GetCash);
d. Increase in insurance liabilities of US$0.9 million arising from actuarial valuation of policyholder liabilities at the end of the
year; and
e. Listing expenses of US$1.7 million.
SIGNFICANT TRANSACTIONS
a. Placement of Treasury shares
Brainworks Limited announced on 26 October 2017 that it had placed a total of 9 078 677 (10.52%) of its treasury shares
with various Institutional Investors in Zimbabwe, subject to receipt of various approvals including exchange control approval
by the Reserve Bank of Zimbabwe. A delay in the requisite approvals required resulted in non-delivery of the shares subscribed
for by the various Institutional Investors. In order to expedite delivery of a portion of these shares to the Institutional Investors,
the Previous Directors, through certain of their associates agreed to dispose of their shares to the Institutional Investors.
b. Disposal of equity investment in GetBucks Microfinance Bank Limited
In December 2017, the Group through GetSure Life Assurance (Private) Limited (“GetSure”) and Brainworks Capital
Management (Private) Limited (“BCM”), entered into agreements with entities and individuals (“the Buyers”) related to Mr.
George Manyere and Mr. Walter Kambwanji for the sale of 163 769 298 shares in GetBucks Microfinance Bank Limited
(“GetBucks”) for total consideration of US$5.5 million (“the Transaction”). Mr. George Manyere and Mr. Walter Kambwanji
are former non-executive directors of the Company. In terms of the JSE listing rules, the Transaction is subject to shareholders’
approval.
Pending approval by the shareholders of the Transaction, the Buyers advanced the consideration of approximately US$5.5
million through a loan bearing interest at 9% per annum to BCM. The principal amount together with the accrued interest
thereon would be settled through delivery of the GetBucks shares on approval of the transaction by the shareholders, otherwise
this would be repaid in cash by the 11th of June 2018. The process of obtaining the shareholder approvals is still underway and
these are expected to have been obtained by the end of the second quarter of 2018.
The Transaction is part of the Group’s plan to exit its financial services investment portfolio and balance sheet restructuring
initiatives.
SECONDARY LISTING UPDATE
As part of the interim results publication, the Company reported that it successfully completed its listing on the JSE on the 13th
of October 2017 and was now pursuing a secondary listing on the Zimbabwe Stock Exchange in 2018, a commitment it had made
to the Reserve Bank of Zimbabwe (“the Regulator”).
After considering the fact that Zimbabwe would be holding its harmonised elections in 2018 and the recent positive developments
in the economic environment, the Board has resolved to approach the Regulator with a view to apply to deferring the initiative
until 2019. In the meantime, the Board would be working on restructuring the Group’s balance sheet with a view to making it more
attractive to investors.
OUTLOOK
Following the political developments towards the end of 2017, the new government has declared that “Zimbabwe is open for
business” and that broad theme has been well received by the business community in general and international investors in
particular. The current Zimbabwean government has already begun to reverse some policies that were previously considered
restrictive to investors coming into the country and these business friendly developments have reignited investor interest in
Zimbabwe. The momentum arising from these positive changes and sentiment is expected to drive performance particularly within
the hospitality sector.
Key objectives for 2018 will be to raise capital in order to restructure the Group’s debt, and to consolidate and strengthen portfolio
companies. The Group will continue to improve operational efficiencies, boost revenues and control costs which should lead to
improved profitability and cash flows.
The Company continues to seek new opportunities in key sectors as they become available in order to build shareholder value. The
directors have always believed that the Group’s assets are anchored on an improvement in the social, political and economic fortunes
of Zimbabwe, which is now imminent. Being an election year, 2018 may deliver some challenges and benefits but with every
likelihood of a much improved investor and business climate following the elections.
FOR AND ON BEHALF OF THE BOARD
P. SAUNGWEME B.I. CHILDS
Chief Finance Officer Chief Executive Officer
6 APRIL 2018
CORPORATE INFORMATION
NON-EXECUTIVE DIRECTORS REGISTERED OFFICE:
Simon F.W VILLAGE (Chairman) C/o Imara Trust Company (Mauritius) Limited
Martin J. WOOD Level 2 Alexander House, Silicone Avenue,
Richard G. MUIRIMI Ebène Cybercity,
George S.J. BENNETT Republic of Mauritius
Audrey M. MOTHUPI Registration number: 115883 C1/GBL
Richard N. CHARRINGTON JSE Share code: BWZ
ISIN: MU0548S00000
EXECUTIVE DIRECTORS
Brett I. CHILDS (Chief Executive Officer)
Peter SAUNGWEME (Chief Finance Officer) INDEPENDENT STATUTORY AUDITORS:
PricewaterhouseCoopers
LEGAL ADVISORS Business Registration Number: F07000530,
18 CyberCity, Ebène,
Gill Godlonton and Gerrans Réduit 72201,
7th Floor, Beverly Court, Republic of Mauritius
100 Nelson Mandela Avenue,
Harare, PricewaterhouseCoopers Zimbabwe
Zimbabwe 4 Arundel Office Park, Norfolk Road,
Mount Pleasant,
Dube, Manikai and Hwacha Harare,
7th Floor, Mercury House, Zimbabwe
Corner Sam Nujoma Street and Robert Mugabe Road,
24 George Silundika Avenue,
Harare, JOHANNESBURG STOCK EXCHANGE INDEPENDENT
Zimbabwe AUDITORS:
PricewaterhouseCoopers Inc.
Atherstone & Cook 4 Lisbon Lane, Waterfall City, Jukskei view,
119 Josiah Chinamano Avenue, 2090,
Harare, South Africa
Zimbabwe
SPONSOR:
Evershed Sutherlands Questco Corporate Advisory Proprietary Limited
Suite 310, 3rd Floor, Barkly Wharf, 1st Floor, Yellowwood House,
Le Caudan Waterfront, Ballywoods Office Park,
Port Louis, 33 Ballyclare Drive,
Mauritius Bryanston 2191,
Johannesburg,
COMPANY SECRETARY South Africa
Imara Trust Company (Mauritius) Limited
Level 2 Alexander House, Silicone Avenue,
Ebène Cybercity, BANKERS:
Republic of Mauritius AfrAsia Bank Limited
4th Floor, NeXTeracom Tower III,
Ebène,
Republic of Mauritius
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2017
REVIEWED AUDITED
All figures in US$ NOTES 2017 2016
ASSETS
Non current assets
Property and equipment 88 438 821 89 469 927
Investment property 22 254 000 24 176 235
Goodwill 8 261 050 8 261 050
Investments in associates 4 370 066 3 276 024
Deferred tax asset 1 343 037 813 984
Trade and other non current assets 655 788 833 147
125 322 762 126 830 367
Current assets
Financial assets held at fair value through profit or loss 3 139 091 4 892 962
Inventory 7 151 702 4 793 764
Trade and other receivables 10 626 429 15 355 922
Cash and cash equivalents 10 544 319 5 593 010
31 461 541 30 635 658
156 784 303 157 466 025
EQUITY AND LIABILITIES
Equity
Stated capital 6.6 55 785 508 -
Share capital and premium 6.6 - 58 535 508
Other reserves (916 141) (934 816)
(Accumulated losses)/retained earnings (3 394 300) 7 705 220
51 475 067 65 305 912
Non controlling interests 34 151 255 31 085 243
Total equity 85 626 322 96 391 155
Non current liabilities
Borrowings 9 935 373 15 629 899
Deferred tax liabilities 9 113 735 7 687 568
Trade payables 1 334 185 1 730 148
20 383 293 25 047 615
Current liabilities
Borrowings 28 388 655 19 349 309
Trade and other payables 19 014 783 14 850 320
Insurance contract liabilities 1 397 443 463 400
Investment contract liabilities 943 112 292 308
Income tax 1 030 695 1 071 918
50 774 688 36 027 255
Total liabilities 71 157 981 61 074 870
Total equity and liabilities 156 784 303 157 466 025
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2017
REVIEWED AUDITED
All figures in US$ NOTES 2017 2016
Revenue 5 58 586 714 48 063 843
Cost of sales and other direct costs 5 (19 131 121) (14 307 988)
Gross profit 39 455 593 33 755 855
(Loss)/gain from financial assets at fair value through profit or loss (2 189 551) 1 276 215
Operating expenses 5 (40 256 440) (31 161 524)
Other income 1 340 365 3 986 505
(41 105 626) (25 898 804)
Operating (loss)/profit before finance cost (1 650 033) 7 857 051
Net finance expense (4 242 066) (3 419 056)
Finance income 172 001 278 109
Finance expense (4 414 067) (3 697 165)
Share of loss of associates (112 732) (65 853)
(Loss)/profit before income tax (6 004 831) 4 372 142
Income tax expense (2 042 401) (813 642)
(Loss)/profit from continuing operations (8 047 232) 3 558 500
Loss from discontinued operations - (129 325)
(Loss)/profit for the year (8 047 232) 3 429 175
Other comprehensive income
Exchange differences on translation of foreign operations 32 399 (611 074)
Total comprehensive (loss)/income for the year (8 014 833) 2 818 101
(Loss)/profit attributable to:
Owners of the parent (11 099 520) 1 057 275
Non-controlling interests 3 052 288 2 371 900
(8 047 232) 3 429 175
Total comprehensive (loss)/income attributable to
Owners of the parent (11 080 845) 704 563
Non-controlling interests 3 066 012 2 113 538
(8 014 833) 2 818 101
(Loss)/earnings per share (cents)
Basic and diluted 6.1 (14.68) 0.13
Number of shares in issue 6.6 75 625 640 785 311 948
Weighted average number of shares in issue 6.6 75 625 640 785 311 948
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENED 31 DECEMBER 2017
ATTRIBUTABLE TO OWNERS OF THE COMPANY
(Accumulated
Share losses)/ Non-
Stated capital and Other retained controlling
All figures in US$ Note Capital premium reserves earnings Total interests Total
YEAR ENDED 31
DECEMBER 2016
Balance as at 1 January 2016 - 58 535 508 (582 104) 6 647 945 64 601 349 28 971 705 93 573 054
Total comprehensive income:
Profit for the year - - - 1 057 275 1 057 275 2 371 900 3 429 175
Other comprehensive loss - - (352 712) (352 712) (258 362) (611 074)
Total comprehensive income for - - (352 712) 1 057 275 704 563 2 113 538 2 818 101
the year
Transactions with owners in
their capacity as owners: - - - - - - -
Balance as at 31 December
2016 - 58 535 508 (934 816) 7 705 220 65 305 912 31 085 243 96 391 155
YEAR ENDED 31
DECEMBER 2017
Balance as at 1 January 2017 - 58 535 508 (934 816) 7 705 220 65 305 912 31 085 243 96 391 155
Total comprehensive income:
(Loss)/profit for the year - - - (11 099 520) (11 099 520) 3 052 288 (8 047 232)
Other comprehensive income - - 18 675 - 18 675 13 724 32 399
Total comprehensive
(loss)/income for the year - - 18 675 (11 099 520) (11 080 845) 3 066 012 (8 014 833)
Transactions with owners in
their capacity as owners:
Conversion of shares to shares of
no par value 6.6 58 535 508 (58 535 508) - - - - -
Acquisition of treasury shares 6.6 (2 750 000) - - - (2 750 000) - (2 750 000)
55 785 508 (58 535 508) - - (2 750 000) - (2 750 000)
Balance as at 31 December
2017 55 785 508 - (916 141) (3 394 300) 51 475 067 34 151 255 85 626 322
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENED 31 DECEMBER 2017
REVIEWED AUDITED
All figures in US$ 2017 2016
Operating cashflows before working capital changes
6 337 178 4 777 951
Working capital changes
Increase in inventory (2 357 938) (2 255 147)
Increase/(decrease) in trade and other payables 5 512 109 (3 782 320)
Decrease in trade and other receivables (685 391) (4 112 505)
Cash generated from/(utilised in) operations 8 805 958 (5 372 021)
Interest received 172 001 278 109
Interest paid (3 660 408) (3 697 165)
Dividends received 283 178 233 985
Income tax paid (581 123) (835 648)
Net cash generated from/(utilised in) operating activities 5 019 606 (9 392 740)
Cash flows from investing activities
Acquisition of financial assets at fair value through profit or loss (435 680) -
Acquisition and additional investment in an associate - (1 045 000)
Proceeds from disposal of investments 90 000 45 468
Purchase of property and equipment (3 276 078) (3 070 558)
Purchases and improvements to investment property (62 267) (807 449)
Proceeds from disposal of property and equipment 983 315 803 744
Net cash utilised in investing activities (2 700 710) (4 073 795)
Cash flows from financing activities
Deposit released from debt service reserve account - 104 601
Proceeds from borrowings 19 125 974 25 738 629
Repayment of borrowings (16 508 398) (12 250 796)
Net cash generated from financing activities 2 617 576 13 592 434
Net increase in cash and cash equivalents 4 936 472 125 899
Exchange gains on cash and cash equivalents 14 837 12 197
Cash and cash equivalents at beginning of the year 5 593 010 5 454 914
Cash and cash equivalents at end of the year 10 544 319 5 593 010
NOTES TO THE REVIEWED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2017
1. GENERAL INFORMATION
Brainworks Limited (“Brainworks” or “the Company”) through its subsidiaries and associates has a diversified portfolio of
business interests in hospitality, real estate, financial services, and energy logistics sectors in Zimbabwe.
Brainworks was incorporated in the Republic of Mauritius on 22 April 2013. The Company is domiciled in the Republic of
Mauritius and has its registered office at c/o Imara Trust Company (Mauritius) Limited, Level 2 Silicone Avenue, Alexander
House, 35 Ebène, Cybercity, Republic of Mauritius. The Company was listed on the Johannesburg Stock Exchange (“the
JSE”) on 13 October 2017.
The Company is a holder of a Category 1 Global Licence under the Mauritius Companies Act 2001 and the Financial Services
Act 2007.
2. BASIS OF PREPARATION
The condensed consolidated financial statements for the year ended 31 December 2017 have been prepared in accordance
with the requirements of the JSE Limited Listings Requirements for provisional reports. The Listings Requirements
require provisional reports to be prepared in accordance with the framework concepts and the measurement and recognition
requirements of International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards
Board (“IASB”), the preparation and disclosure requirements of IAS 34 “Interim Financial Reporting”, the SAICA
Financial Reporting Guides as issued by the Accounting Practices Committee and Financial Reporting Pronouncements as
issued by Financial Reporting Standards Council (“FRSC”).
Chief Finance Officer, Peter Saungweme CA(Z), supervised the preparation of the condensed consolidated financial
statements. The accounting policies applied in the preparation of the condensed consolidated financial statements are in
terms of IFRS and are consistent with those applied in the previous consolidated annual financial statements as at 31
December 2016 other than as described in note 3. The condensed consolidated financial statements should be read in
conjunction with the annual financial statements for the year ended 31 December 2016, which have been prepared in
accordance with IFRS.
This announcement does not include the information required pursuant to paragraph 16A(j) of IAS 34. The full provisional
report is available on the Company’s website, at the Company’s offices and upon request. The directors take full responsibility
and confirm that this information has been correctly extracted from the underlying report.
This announcement is itself not reviewed but is extracted from the underlying reviewed information.
The condensed consolidated financial statements for the year ended 31 December 2017 contained in the provisional report
have been reviewed by PricewaterhouseCoopers Inc., who expressed an unmodified review conclusion. A copy of the
auditor’s review report is available for inspection at the Company’s registered office together with the financial statements
identified in the auditor’s report.
The condensed financial statements are expressed in the United States of America dollar (“US$”) and are prepared under
the historical cost convention as modified by the fair valuation of financial assets at fair value through profit or loss and
investment property.
3. ACCOUNTING POLICIES
The accounting policies adopted are prepared in accordance with IFRSs and are consistent with those adopted in the
preparation of the financial statements in the prior year.
New and amended standards adopted by the Group
A number of new or amended became applicable for the current reporting period. However, the Group did not have to change
its accounting policies or make retrospective adjustments as a result of adopting these standards.
IFRS 9, ‘Financial instruments’, amended and effective 1 January 2018 - This standard replaces the guidance in IAS 39. It
includes requirements on the classification and measurement of financial assets and liabilities; it also includes an expected
credit losses model that replaces the current incurred loss impairment model.
The Group has determined that IFRS 9 will impact the classification of financial instruments and the measurements of
impairment allowances.
IFRS 15, ‘Revenue from contracts with customers’, effective 1 January 2018. Establishes principles for reporting useful
information to users of the financial statements about the nature, amount, timing and uncertainty of revenue and cash flows
arising from an entity’s contracts with customers.
The standard is not expected to change the timing of revenue recognition for the Group.
4. ESTIMATES
The preparation of financial statements requires management to make judgments, estimates and assumptions that affect
the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results
may differ from these estimates.
In preparing these condensed consolidated financial statements, the significant judgements made by management in
applying the Group’s accounting policies and key sources of estimation uncertainty were the same as those applied to the
financial statements for the year ended 31 December 2016.
5. SEGMENT INFORMATION
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-
maker. The chief operating decision-maker, who is responsible for allocating resources and assessing performance of the
operating segments, has been identified as the Executive Committee that makes strategic decisions.
The Group does not rely on any one specific customer as none of its customers contribute a minimum of 10% of its revenue.
All interest bearing liabilities have been allocated to segments as they relate to specific bank loans obtained by the segments.
Revenue
The revenue from external parties reported to the Executive Committee is measured in a manner consistent with how revenue
is measured in the statement of comprehensive income. The amounts provided to the Executive Committee with respect to
total assets are measured in a manner consistent with that of the financial statements. These assets are allocated based on the
operations of the segment and the physical location of the asset.
Description of segments and principal activities
Entity Segment 2017 2016 Principal activities
African Sun Limited Hospitality Included Included Hotel and hospitality operations
Dawn Properties Limited Real estate Included Included Property holding, development and consulting
Getsure Life Assurance
(Private) Limited Financial services Included Included Life assurance products and services
FML Logistics (Private) Other Included Included Fuel transportation services
Limited
Brainworks Capital
Management Other Included Included Investment holding company in Zimbabwe
(Private) Limited
Brainworks Limited Other Included Included Ultimate parent company in Mauritius
REVIEWED
Financial Continuing Discontinued
All figures in US$ Hospitality Real estate services Other Eliminations operations operations Group
Year ended 31 December
2017
Revenue
- external customers 51 827 232 2 161 573 1 880 963 2 716 946 - 58 586 714 - 58 586 714
- internal customers - 2 970 210 - - (2 970 210) - -
51 827 232 5 131 783 1 880 963 2 716 946 (2 970 210) 58 586 714 - 58 586 714
Cost of sales and other
direct costs (15 444 453) - (2 343 465) (1 343 203) - (19 131 121) - (19 131 121)
Gross profit/(loss) 36 382 779 5 131 783 (462 502) 1 373 743 (2 970 210) 39 455 593 39 455 593
Operating expenses (31 022 450) (2 919 369) (1 118 175) (7 437 786) 2 241 340 (40 256 440) - (40 256 440)
Operating profit/(loss) 6 905 535 4 228 147 (1 388 913) (11 786 329) 391 527 (1 650 033) - (1 650 033)
Share of profit/(loss) of
associate - - 829 745 615 289 (1 557 766) (112 732) - (112 732)
Net finance (costs)/income (1 046 123) (327 280) 128 998 (3 165 296) 167 635 (4 242 066) - (4 242 066)
Profit/(loss) before income
tax 5 859 412 3 900 867 (430 170) (14 336 336) (998 604) (6 004 831) - (6 004 831)
Total assets as at 31
December 2017 39 226 663 97 987 352 5 926 758 78 456 611 (64 813 081) 156 784 303 - 156 784 303
Total assets include:
Property and equipment 21 284 122 63 326 245 144 583 4 063 741 (379 870) 88 438 821 - 88 438 821
Goodwill 8 261 050 - - - - 8 261 050 - 8 261 050
29 545 172 63 326 245 144 583 4 063 741 (379 870) 96 699 871 - 96 699 871
Total liabilities as at 31
December 2017 27 717 942 10 400 553 2 778 061 46 118 311 (15 856 886) 71 157 981 - 71 157 981
AUDITED
Year ended 31 December
2016
Revenue
- external customers 43 646 340 2 098 396 1 072 105 1 292 417 - 48 109 258 (45 415) 48 063 843
- internal customers - 2 250 375 - (2 250 375) - - -
43 646 340 4 348 771 1 072 105 1 292 417 (2 250 375) 48 109 258 (45 415) 48 063 843
Cost of sales and other
direct costs (13 014 777) - (748 907) (565 473) 21 169 (14 307 988) - (14 307 988)
Gross profit 30 631 563 4 348 771 323 198 726 944 (2 229 206) 33 801 270 (45 415) 33 755 855
Operating expenses (28 265 630) (2 693 265) (1 143 025) (4 293 137) 5 179 349 (31 215 708) 54 184 (31 161 524)
Operating profit/(loss) 5 588 619 1 728 038 (619 606) 964 820 195 180 7 857 051 (129 325) 7 727 726
Share of loss of associate - - - - (65 853) (65 853) - (65 853)
Net finance (costs)/income (753 174) (53 871) 156 344 (2 768 355) - (3 419 056) - (3 419 056)
Profit/(loss) before income
tax 4 835 445 1 674 167 (463 262) (1 803 535) 129 327 4 372 142 (129 325) 4 242 817
Total assets as at 31
December 2016 33 616 814 95 013 458 4 946 720 80 470 036 (56 581 003) 157 466 025 - 157 466 025
Total assets include:
Property and equipment 21 270 729 63 776 106 235 406 4 187 686 62 802 961 89 469 927 - 89 469 927
Goodwill 8 261 050 - - - - 8 261 050 - 8 261 050
29 531 779 63 776 106 235 406 4 187 686 - 97 730 977 - 97 730 977
Total liabilities as at 31
December 2016 26 957 017 10 486 129 1 364 353 28 390 883 (6 123 512) 61 074 870 - 61 074 870
Goodwill was incorrectly allocated to the Other segment for segment reporting for the year ended 31 December 2016 instead of being allocated to
the hospitality segment, which is consistent with how the goodwill arose and impairment testing of goodwill was done.
6 EARNINGS PER SHARE
All figures in US$ REVIEWED AUDITED
2017 2016
6.1 Basic (loss)/earnings per share
From continuing operations (cents) (14.68) 0.14
From discontinued operations (cents) - (0.01)
(14.68) 0.13
6.2 Diluted (loss)/earnings per share (cents)
From continuing operations (cents) (14.68) 0.14
From discontinued operations (cents) - (0.01)
(14.68) 0.13
6.3 Headline loss per share
From continuing operations (cents) (14.22) (0.10)
From discontinued operations (cents) - (0.01)
(14.22) (0.11)
6.4 Diluted headline loss per share
From continuing operations (cents) (14.22) (0.10)
From discontinued operations (cents) - (0.01)
(14.22) (0.11)
6.5 Reconciliation of earnings used in calculating earnings per share
Earnings attributable to owners of parent arising from:
Continuing operations (11 099 520) 1 131 921
Discontinued operations - (74 646)
Total (loss)/earnings attributable to owners of parent (11 099 520) 1 057 275
Adjusted to headline earnings as follows:
Profit from disposal of subsidiary - (1 176 165)
Fair value loss/(gain) on investment property 384 502 (886 893)
Recycled foreign currency translation reserve - (755 651)
Loss/(profit) from disposal of property and equipment 203 751 (281 992)
Impairment of property and equipment 44 400 103 037
Tax effect of headline earnings adjustments (110 442) 201 843
Total non-controlling effect of adjustments (175 457) 839 683
Headline loss attributable to owners of parent (10 752 766) (898 863)
6.6 Weighted average number of shares in issue
Shares at the beginning of the year 863 061 948 863 061 948
Share consolidation* (776 755 752) -
Treasury shares (post consolidation)# (10 680 556) (77 750 000)
Shares at the end of the year 75 625 640 785 311 948
Weighted average number of shares for basic earnings per share 75 625 640 785 311 948
Weighted average number of shares for diluted earnings per share 75 625 640 785 311 948
* - In preparation for Company’s listing on the JSE, the Directors resolved to consolidate the number of shares in issue on the
basis of 1 new share for every 10 previously held.
# - The treasury shares relate to shares in the Company which are held by BCM. BCM is a wholly owned subsidiary of the
Company. All the treasury shares are held through a nominee company called Adcone Holdings SA (“the nominee”).
7 775 000 of the treasury shares arose from a 2015 Group re-organisation exercise which culminated in the Company being the
ultimate holding company, owning all the issued shares in BCM. BCM had hitherto been the holding company, holding all the
issued shares of the Company. To achieve the Group re-organisation, the shareholders of BCM gave up their shares in BCM to
the Company as consideration, for which in return they received an equivalent number of shares with the same rights in the
Company.
At the time of the Group re-organisation, BCM held 77 750 000 (before the 2017 share consolidation) of its own ordinary shares
as treasury shares, which shares were given up to the Company. As consideration, BCM was issued with 77 775 000 ordinary
shares with a par value of US$0.0001 each in the Company, which shares BCM holds through the nominee.
2 905 556 of the treasury shares were acquired by BCM in January 2017 from the former Chief Executive Officer, in exchange
for a receivable of US$2 750 000 which was due to BCM, which receivable BCM had impaired in full during the 2015
financial reporting year as prospects of recovery were in significant doubt. The amount was due from Kestrel International
Corporation (Private) Limited.
7. COMMITMENTS
All figures in US$ REVIEWED AUDITED
2017 2016
7.1 Capital commitments
Authorised and contracted for 191 540 -
Authorised and not contracted for 6 130 272 6 262 291
6 321 812 6 262 291
Capital commitments relate to acquisition of hotel equipment, as well as property
development. These expenditures are expected to be financed through a combination
of debt and internally generated cashflows.
7.2 Operating lease commitments
The Group leases some of its hotels in Zimbabwe under operating lease agreements.
The lease terms are between 5 and 15 years, and all the lease agreements are
renewable at the end of the lease period at market rates. The estimated undiscounted
future minimum lease payments under the operating leases based on fixed monthly
lease payments is as follows:
Not later than 1 year 1 461 564 1 573 992
Later than 1 year and not later than 5 years 5 846 256 6 295 968
Less than 5 years 1 461 564 3 147 984
8 769 384 11 017 944
8. MATERIAL RELATED PARTY TRANSACTIONS
8.1 Disposal of equity investment in GetBucks MicroFinance Bank Limited to former executive directors
In December 2017, the Group through GetSure and BCM, entered into agreements with entities and individuals (“the
Buyers”) related to Mr. George Manyere and Mr. Walter Kambwanji for the sale of 163 769 298 shares in GetBucks for
a total consideration of US$5.5 million (“the Transaction”). Mr. George Manyere and Mr. Walter Kambwanji are former
non-executive directors of the Company. In terms of the JSE listing rules, the Transaction is subject to shareholders’ approval.
Pending approval by the shareholders’ of the Transaction, the Buyers advanced the consideration of US$5.5 million
through a loan bearing interest at 9% per annum to BCM. The loan is included in the current portion of the borrowings. The
principal amount together with the accrued interest thereon would be settled through delivery of the GetBucks shares on
approval of the Transaction by the shareholders, otherwise this would be repaid in cash by the 11th of June 2018.
The process of obtaining the shareholders’ approvals is still underway and these are expected to have been obtained by the
end of the second quarter of 2018.
8.2 Loan from a shareholder
Included in the current portion of the borrowings as at the reporting date is an amount of US$2.5 million (2016: nil) due
to Mr Christopher Rokos which was advanced to the Company in December 2017. The loan, which is unsecured, bears
interest at 15% per annum and is repayable quarterly in arrears with the first payment due on 28 February 2018. Mr Rokos
has an indirect beneficial shareholding in the Company.
9. CONTINGENT LIABILITIES
The Group had no significant contingent liabilities as at 31 December 2017.
10. EVENTS AFTER THE REPORTING DATE
10.1 Disposal of investment in MyBucks
During January 2018, the Group entered into an agreement to dispose of its entire shareholding of 249 050 listed shares in
MyBucks to parties unrelated to the Group. The disposal is part of the Group’s strategy restructure the statement of financial
position through exit of the financial services sector.
10.2 Non-executive directors’ resignations
On 30 January 2018, Mr. George Manyere and Mr. Walter Kambwanji resigned from the Board of Directors of the Company.
11. GOING CONCERN
The condensed financial statements reflect that as at 31 December 2017, the Group had negative working capital amounting to
US$19.9 million, a position which reflects a deterioration from the prior year negative working capital position of US$5.4
million. The current year working capital deficit was mainly driven by the increase in debt due within 12 months from the
reporting date from US$19.3 million in the prior year to US$28.4 million as at the reporting date. The major component of the
debt that is due to be settled in the ensuing year relates to Brainworks Capital Management (Private) Limited and Brainworks
Limited which in aggregate amounts to US$23.9 million as at the reporting date.
In order to address the working capital gap, the Group is working on the following strategies:
a. Working on restructuring of short term debt. This would be achieved through negotiating for extended repayment terms
with providers of all debt that is set to mature within the next 12 months. Should this strategy fail to yield the desired
outcome, the Group would seek to establish new long-tenured debt facilities from whom the short term debt would be
retired.
b. Raising liquidity through disposal of its financial assets as the Group seeks to exit the financial services sector. In that
regard, the Group entered into a transaction in terms of which it sold a total of 163 769 297 of its shares in GetBucks and
realised gross proceeds of US$5.5 million (“the Transaction”). In terms of the JSE rules, the Transaction is subject to
shareholders’ approval and processes to secure the said approval were still underway as at the reporting date.
The shareholders’ approvals are expected to be secured within the first half of the 2018 financial year. Conclusion of the
Transaction is expected to result in an immediate reduction of the short term debt by approximately US$5.5 million within
the first half of 2018. The Group would actively seek opportunities to dispose of the remaining 176 819 203 GetBucks
shares in order to raise liquidity.
The disposal of the investment in MyBucks as reported under note 10.1 is expected to generate additional liquidity that
would be deployed towards meeting debt commitments as they become due.
c. Embarking on an equity capital raising exercise. The contemplated initiative would involve approaching investors with a
target to raise at least US$15 million that would be primarily deployed towards debt repayment at the Company and BCM
levels.
d. As a last resort, the Directors would approach the Company’s shareholders with a view to raising capital through a rights
issue.
12. DIVIDEND
Due to the fact that the Company posted losses during the year, the Board did not declare a dividend.
Ebène, Mauritius
6 April 2018
Sponsor
Questco Corporate Advisory Proprietary Limited
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