PEREGRINE HOLDINGS LIMITED
However, due to the short term nature of this investment, the
provisions of IFRS 5 - Net Asset Held For Resale applies to the disclosure of this investment.
The results of the above discontinued operations included in the Group's results for the period ended 31 March 2019, are detailed below:
Condensed consolidated statement of comprehensive income from discontinued operations
2019 2018
R'000 R'000
Total revenue 348 057 719 686
Operating expenses (290 707) (647 857)
Profit from operations 57 350 71 829
Net interest received 78 013 91 798
Share of profits from equity accounted investees 13 636 33 699
Profit before taxation and capital items 148 999 197 326
Capital items 116 500 -
Profit before taxation 265 499 197 326
Taxation (89 061) (44 942)
Profit for the year from discontinued operations 176 438 152 384
Discontinued operations profit for the year attributable to:
Equity holders of the company 135 850 103 064
Non-controlling interests 40 588 49 320
176 438 152 384
Discontinued operations profit for the year attributable to equity holders 135 850 103 064
Adjustment relating to earnings attributable to participating treasury shares (3 961) (1 858)
Discontinued operations profit attributable to ordinary shareholders 131 889 101 206
Gain on disposal of interest in subsidiary (56 668) -
Headline earnings from discontinued operations 75 221 101 206
Basic earnings per ordinary share (cents) 63.4 47.9
Headline earnings per ordinary share (cents) 36.1 47.9
The effect of the discontinued operations on the statement of financial position of the Group is detailed below:
The assets and liabilities reflected below have been recognised at 31 March 2019 at the lower of their carrying value and fair value
less costs to sell or using measurement principles of IFRS 9 in accordance with IFRS 5.
2019
R'000
Assets held for resale 241 931
Financial investments 150 148
Trade and other receivables 2 314
Cash and cash equivalents 89 469
Liabilities held for resale (160 068)
Financial instrument liabilities (159 275)
Trade and other payables (486)
Taxation (307)
Attributable surplus net assets 81 863
The effect of the discontinued operations on the statement of cash flows of the Group is detailed below:
2019 2018
R'000 R'000
Cash flow from discontinued operations
Net operating cash flows from discontinued operations (526 410) 157 060
Net investing cash flows from discontinued operations (529 172) (8 411)
Net financing cash flows from discontinued operations 21 990 (166 179)
Net decrease in cash and cash equivalents from the discontinued operations (1 033 592) (17 530)
Disposal
Shareholders are referred to previous announcements released on SENS indicating that with effect from 1 October 2018 the Group disposed
of its investment in the Broking & Structuring division, comprising Peregrine SA Holdings Proprietary Limited's 65% shareholding in both
Peregrine Securities Proprietary Limited and in Peregrine Fund Platform Proprietary Limited and Peregrine International Holdings Limited's
65% shareholding in Peresec International Limited.
The net assets at the date of effective disposal were:
2019
R'000
Identifiable assets 17 842 866
Property, plant and equipment 14 503
Intangible assets 25 460
Investment in equity accounted investees 109 999
Deferred taxation 21 994
Loans and receivables 11 818
Trade and other receivables 83 187
Amounts receivable in respect of stockbroking activities 15 997 940
Cash and cash equivalents 1 577 965
Identifiable liabilities (16 553 417)
Loans and other payables (17 330)
Financial instruments liabilities (16 120)
Trade and other payables (223 191)
Amounts payable in respect of stockbroking activities (16 287 893)
Taxation (8 883)
Attributable surplus net assets 1 289 449
Other assets (Intercompany assets) (46 829)
Non-controlling interest (399 153)
Net assets disposed of 843 467
Cash consideration received 958 673
Agreed purchase price 910 000
Profit after tax and non-controlling interest for the six months ended 30 September 2018 80 785
Less: Portion received in the form of a dividend (32 112)
Gain on disposal 115 206
Foreign exchange gain 3 547
Cost of disposals (2 253)
Capital profit 116 500
Taxation (53 293)
Net capital profit per statement of comprehensive income 63 207
Attributable to participating treasury shares and non-controlling interest (6 539)
Net capital profit headline earnings adjustment 56 668
Net cash flow from Broking & Structuring disposal: (574 716)
Consideration received 958 673
De-recognition of cash and cash equivalents on disposal (1 577 965)
Other assets settled (Intercompany assets) 46 829
Cost of disposals (2 253)
Represented on the cash flow statement as follows: (574 716)
Net disposal of interest in equity accounted investee companies 88 357
Disposal of subsidiary companies (658 030)
De-recognition on loss of control of hedge fund (5 043)
Critical accounting estimates and judgements
On 1 July 2014 the Group subscribed for 50% of Java Capital (Pty) Ltd ('Java') for a total subscription price of R205 million. Java is
accounted for as an equity accounted investee and the carrying value of the investment in Java had grown to R241 million as at
31 March 2019 (2018: R231 million). Java Capital's attributable earnings for the year decreased over that of the prior year driven
by significantly reduced deal flows in both the general corporate finance arena as well as in equity capital markets during the year.
Given current market conditions in the property sector as well as the level of activity in the equity market as a whole, management has
identified the impairment indicator and assessed its investment in Java for impairment.
In performing the assessment, management have used a price earnings multiple to determine the fair value of the business to estimate the net
realisable value. As Java is an unlisted entity, the valuation of Java required the use of management's estimates and judgement in the determination
of the recoverable amount of the investment. In determining the recoverable amount the following estimates and judgements were applied in the price
earnings multiple calculation:
1. Five years of historical profit after tax
2. A price earnings multiple of 6
3. An industry discount of 30%
The outcome of the impairment assessment revealed that the carrying value of the Group's investment in Java of R241 million at 31 March 2019 exceeded
the estimated recoverable amount of R141 million by R100 million. As such, an impairment of R100 million before tax and non-controlling interest was
recognised in the current year in profit or loss ('Capital items' on the face of the Condensed consolidated statement of comprehensive income).
The deferred tax effect was not recognised as the likelihood of a future capital gain arising against which a capital loss may be offset is remote.
The portion attributable to participating treasury shares and non-controlling interest amounted to R17 million.
Restatement of prior year financial statements
1. Adoption of IFRS 9- Financial Instruments (IFRS 9)
The Group adopted IFRS 9 for the first time in the current year. The classification of the Group's financial instruments have been reassessed
in accordance with IFRS 9.
The outcome of the reassessment is as follows:
IAS 39 classification and measurement approach IFRS 9 classification and measurement approach
Loans and receivables at amortised cost Debt instruments at amortised cost
Financial assets held for trade or designated at fair value through profit Financial assets at FVTPL
or loss (FVTPL)
Available for sale - equity instruments Equity instruments at Fair Value through Other
Comprehensive Income (FVOCI)
Financial liabilities designated at FVTPL Financial liabilities designated at FVTPL
Financial liabilities at amortised cost Financial liabilities at amortised cost
The adoption of an expected credit loss approach for impairment had no impact on the Group due to the nature of the Group's debt instruments.
The impact of adoption is concentrated to the treatment of Nala PGR SA Holdings Proprietary Limited's (Nala) (in which the Group has a 30% equity
accounted interest) underlying listed equity investment which is designated at FVOCI and which is explained in more detail below.
The Group has elected to restate its financial statements for the adoption of IFRS 9.
2. Accounting treatment of non-controlling interests (NCIs)
Nala holds 20% of the ordinary shares of Peregrine SA Holdings Proprietary Limited (PSAH). Peregrine Holdings Limited holds 30% of the ordinary
shares of Nala and thus the effective NCI percentage held in PSAH is 14%.
Both IFRS 10 - Consolidated Financial Statements and IAS 28 - Investments in Associates and Joint Ventures are silent on the appropriate accounting
treatment to be applied to a situation in which the Group holds an investment in an associate that in turn holds an investment in a subsidiary of
the Group. There are two options that are considered appropriate for the accounting of NCIs in this structure: either the NCI is determined after
considering the associates ownership of the subsidiary (the look through approach), or based on the holdings of the Group in the subsidiary only.
The treatment of NCI in this scenario is complex and judgemental. The Group upon advice has to date consistently and appropriately applied the '
look through approach' in accounting for the allocation of profit to Nala at its effective shareholding of 14%.
As and when dividends were declared and paid by PSAH, 20% was paid to Nala and recognised as a reduction in NCI (with 80% being paid to
Peregrine Holdings Limited). Other than an aggregate of R12.5 million declared in May 2017 by Nala to its shareholders (in order to facilitate a
distribution to the beneficiaries of the Employee Portfolio Trust), no dividends have been declared or paid by Nala to Peregrine Holdings Limited
(or any of its other shareholders), with all the remaining dividends received by Nala (being in aggregate R405 million) having been utilised, in
accordance with the terms of the debt facility, to repay and partially retire Nala's external debt funding commitments. The dividend payment to
Nala was correctly paid at the full contractual 20% as opposed to the effective 14%. The 6% differential between the shareholding and the effective
interest is akin to an increase in Peregrine's associate interest in Nala and as a result should have been, and has subsequently been, accounted
for as an increase in Peregrine's investment in Nala, with a corresponding increase in NCI. The Group undertook an extensive evaluation of all NCI
treatment to identify any other potential errors in the accounting treatment of NCIs. The Group identified one other accounting treatment error
between NCI and equity attributable to ordinary shareholders which has been incorporated into the restatement. It needs to be noted that neither of
these prior period errors have had a material impact on earnings or headline earnings and no impact at all on dividends declared and paid to
ordinary shareholders in any of the previous years.
Excluding Nala's investment in PSAH, Nala has incurred losses in the last three financial years, primarily arising from its investment in a listed
equity instrument which has been designated as FVOCI under IFRS 9, the effective carrying amount of which is R11 million as at 31 March 2019.
The increase in the carrying amount of the investment in Nala as a result of the above mentioned treatment, means that the Group must recognise its
attributable share of Nala's losses through other comprehensive income, subject to the limitation set out by IAS 28. Consequently, the Group has
reflected their share of these losses in other comprehensive income. Nala's other income and expenses are not material to the Group.
3. Presentation of Investec Revolving Credit Facility (RCF)
In the prior year, a classification error between non-current and current liabilities occurred with regards to the RCF with Investec Bank Limited,
whereby R253 million was incorrectly classified as non-current. In order to align to the contractual terms of the RCF the comparative period has
been restated by reclassifying the R253 million from non-current to current liabilities. This reclassification had no other effect on the reported
results of the Group as at 31 March 2018.
4. Quantification of above mentioned matters
These matters have been quantified, and the financial statements restated, with the financial effects of these restatements being as follows:
Recognition of
attributable share of
losses in equity Recognition of As previously
Restated as at Representation of accounted NCI reported as at
31 March 2018 RCF associate adjustment 31 March 2018
R'000 R'000 R'000 R'000 R'000
Dr/(Cr) Dr/(Cr) Dr/(Cr) Dr/(Cr) Dr/(Cr)
4.1 Statements of financial position
Assets
Non-current assets
Investment in equity accounted investee 414 520 - (67 440) 108 366 373 594
Equity and liabilities
Equity * (2 558 779) - 67 440 (108 366) (2 517 853)
Equity attributable to equity holders of the company (2 007 376) - 67 440 31 550 (2 106 366)
Non-controlling interest (551 403) - - (139 916) (411 487)
Non-current liabilities
Interest bearing borrowings - non-current (170 428) 252 830 - - (423 258)
Current liabilities
Interest bearing borrowings - current (305 298) (252 830) - - (52 468)
4.2 Statements of comprehensive income
Profit for the year (684 333) - - - (684 333)
Other comprehensive income for the year net of taxation 42 542 - 67 440 - (24 898)
Total comprehensive income for the year (641 791) - 67 440 - (709 231)
Profit for the year attributable to:
Equity holders of the company (513 176) - - - (513 176)
Non-controlling interests (171 157) - - - (171 157)
(684 333) - - - (684 333)
Total comprehensive income for the year attributable to:
Equity holders of the company (469 343) - 67 440 - (536 783)
Non-controlling interests (172 448) - - - (172 448)
(641 791) - 67 440 - (709 231)
* Please refer to the statements of changes in equity for the financial effects of the above mentioned matters.
Events subsequent to reporting date
The directors are not aware of any other matters or circumstances arising since the end of the reporting period which significantly affect the
financial position of the Group or the results of its operations.
Contingent liabilities and guarantees issued
There were no contingent liabilities and no new guarantees issued during the reporting period.
Commitments
Operating lease commitments as at 31 March 2019 amounted to R365 million (2018: R389 million).
Supplementary information
Applicable exchange rates
Average rates Closing rates
USD:ZAR
31 March 2019 13.76 14.42
31 March 2018 13.00 11.85
GBP:ZAR
31 March 2019 18.04 18.79
31 March 2018 17.22 16.62
This announcement does not include the information required pursuant to paragraph 16A(j) of IAS 34. The full provisional report is available on
Peregrine's website, at Peregrine's offices and upon request.
Date of release of this announcement on SENS: 20 June 2019
Date: 20/06/2019 07:05:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
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Peregrine Holdings Limited published this content on 20 June 2019 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 20 June 2019 05:33:06 UTC
