Notes For the year ended 30 september 2019

 

1.

Basis of preparation

These preliminary summarised consolidated financial statements have been prepared in compliance with the:

> framework concepts and the recognition and measurement requirements of International Financial Reporting Standards (IFRS) in effect for the Group at 30 September 2019;
> South African Institute of Chartered Accountants (SAICA) Financial Reporting Guides, as issued by the Accounting Practices Committee;
> Financial Reporting pronouncements as issued by the Financial Reporting Standards Council;
> Listings Requirements of the JSE Limited; and
> the requirements of the Companies Act, 71 of 2008.
These summarised consolidated financial statements contain the minimum information as required by IAS 34 – Interim Financial Reporting. This report was compiled under the supervision of NA Thomson CA(SA) (Chief Financial Officer).

The Group’s accounting policies applied for the year ended 30 September 2019 were consistent with those applied in the prior year’s audited consolidated annual financial statements, except for the impact of the first time adoption of IFRS 9 – Financial Instruments and IFRS 15 – Revenue from Contracts with Customers, the impact of which is set out in note 16. These accounting policies comply with IFRS.
 
 
R million
Audited 2019 Audited
2018

2.

Revenue

Revenue from contracts with customers:
Products 8 703 8 243
Services 1 482 1 488
Other:
Interest received on lease receivables 425 379
Rental and other revenue 104 382
Total
10 714 10 492

The EE segment earned the majority of its revenue in the sale of goods and services categories.

The ICT segment earned revenue in each of the above categories.

The AE segment earned revenue in each category except for interest.

Refer to the segmental analysis for a disaggregation of the revenue contribution by each segment.

On adoption of IFRS 15 – Revenue from Contracts with Customers, the policy for revenue recognition has changed. Refer to note 16.

 
 
R million
Audited 2019 Audited
2018

3.

Operating profit

Operating profit includes:
– Cost of sales (excluding depreciation and amortisation) 7 399 6 999
– Other expenses (excluding depreciation and amortisation) 1 873 1 976
– Other income 80 82
– Fair value gain on contingent consideration 4 100*
– Depreciation and amortisation 165** 157**
Included in other expenses above are:
– Realised foreign exchange losses (66) (99)
– Unrealised foreign exchange gains 92 21
– Impairment of non-derivative financial assets (trade receivables and finance leases and loans receivable) 22 28
– Auditors’ remuneration 27 25
– Profit on disposal of property, plant and equipment 2 28
* In the prior year, this included routine remeasurements of R23 million and a once-off remeasurement of R77 million arising from SkyWire.
** Depreciation and amortisation allocated to cost of sales in gross margin calculations is R58 million (2018:
R51 million). Depreciation and amortisation allocated to other expenses is R107 million (2018: R106 million).

4.

Net Interest (Expense)/income

Interest income 44 60
Interest expense (50) (40)
Interest on unwinding of put option liability (9) (9)
Total (15) 11

5.

Empowerment Transactions

IFRS 2 share based payment cost of B-BBEE transactions 3 32
Professional costs related to B-BBEE transactions 10
Taxation thereon
Net empowerment transactions after taxation 3 42

6.

Number of shares and earnings used to calculate earnings per share1

Weighted average number of shares in issue, net of empowerment and treasury shares, for basic earnings, headline earnings and normalised headline earnings per share (millions of shares) 161 161
Adjusted by the dilutive effect of unexercised share options granted (millions of shares) 2 3
Weighted average number of shares for diluted basic, headline and normalised headline earnings per share (millions of shares) 163 164
1 The earnings used to determine earnings per share and diluted earnings per share is the profit for the year attributable to equity holders of Reunert of R790 million (2018: R1 158 million).

 

 
R million
Audited 2019 Audited
2018

7.

HEADLINE EARNINGS

   
7.1
PROFIT ATTRIBUTABLE TO EQUITY HOLDERS OF REUNERT
790 1 158
Headline earnings are determined by eliminating the effect of the following items from attributable earnings:
Loss on disposal of subsidiary (after a tax charge of Rnil and non-controlling interest (NCI) portion of Rnil) (2018: Rnil) 44
Goodwill impairment (after a tax credit of Rnil and NCI portion
of Rnil) (2018: Rnil)
67
Impairment of property, plant and equipment (after a tax credit of R6 million and NCI portion of R8 million) (2018: Rnil) 26
Net gain on disposal of assets (after a tax charge of R1 million and NCI of Rnil) (2018: tax charge of R5 million and NCI of Rnil) (3) (23)
Headline earnings
924 1 135
7.2
NORMALISED HEADLINE EARNINGS#
Headline earnings 924 1 135
Normalised headline earnings are determined by eliminating the effect of the following items from headline earnings:
Empowerment transactions 2 42
Recurring IFRS 2 – Share-based Payment cost of B-BBEE transactions (tax of Rnil and NCI of R1 million) (2018: tax and NCI of Rnil) 2
Once-off IFRS 2 – Share-based Payment cost of B-BBEE transactions (tax of Rnil and NCI of R1 million) (2018: tax and NCI of Rnil) 32
Once-off professional fees for B-BBEE transactions (tax and NCI of Rnil)
(2018: tax and NCI of Rnil)
10
Acquisition transactions 6 (68)
Recurring professional fees for acquisitions (tax and NCI of Rnil) (2018: tax and NCI of Rnil) 6 9
Once-off contingent consideration fair value remeasurement
(tax and NCI of Rnil) (2018: tax and NCI of Rnil)
(77)
Normalised headline earnings 932 1 109
# The pro forma financial information above has been prepared for illustrative purposes only to provide information on how the normalised earnings adjustments might have impacted on the financial results of the Group. Because of its nature, the pro forma financial information may not be a fair reflection of the Group’s results of operations, financial position, changes in equity or cash flows.
  The pro forma financial effects have been prepared in a manner consistent in all respects with IFRS, the accounting policies adopted by Reunert Limited as at 30 September 2019, the revised SAICA guide on pro forma financial information and the Listings Requirements of the JSE Limited.
  There are no post-balance sheet events that necessitate adjustment to the pro forma financial information. The directors are responsible for and have compiled the pro forma financial information on the basis of the applicable criteria specified in the JSE Listings Requirements.
  The pro forma financial information should be read in conjunction with the unmodified Deloitte & Touche
independent reporting accountants’ reasonable assurance report thereon, which is available for inspection at the
Company’s registered office.

 

 
R million
Audited 2019 Audited
2018

8.

Goodwill

Carrying amount at the beginning of the year 1 053 921
Impairment of goodwill1 (67)
Acquisition of businesses2 (Note 11) 76 146
Disposal of business (Note 12) (62)
Exchange differences on consolidation of foreign subsidiaries (1) (14)
Carrying amount at the end of the year 999 1 053
1 During the current financial year, the Group impaired goodwill which arose on acquisition of two of its subsidiaries: Metal fabricators of Zambia Plc (Zamefa) R57 million) and Polybox Proprietary Limited (R10 million). In addition, a further impairment of R40 million was charged against of the property, plant and equipment in Zamefa.
2 At 30 September 2019, the purchase price allocation of the acquisitions made in 2019 have not been finalised and therefore the amounts reported are provisional and subject to change.

9.

Put Option Liability

As part of the Terra Firma and Ryonic acquisitions in 2017,
the Group granted put options in favour of the non-controlling shareholders for 25% of the issued share capital. During the 2018 financial year the Ryonic put obligation was renegotiated and settled. The Terra Firma put option is exercisable between 2019 and 2023.
A reconciliation of the closing balance is as below:
Balance at the beginning of the year 120 121
Fair value remeasurements (9) (9)
Payment to option holder (Ryonic) (1)
Unwinding of discount 9 9
Balance at the end of the year 120 120
Less: current portion 120
Non-current portion 120

The obligations were classified as level 3 instruments in the fair value hierarchy.

The Terra Firma obligation represents the fair value of the put option liability which has been determined using a discounted cash flow valuation technique based on the multiples stipulated in the sales and purchase agreement. Significant unobservable inputs include:


> The 2020 forecast revenue and net profit after tax (NPAT) have been used. These forecasts are based on management’s best estimate of the revenue and NPAT likely to be achieved in 2020.
> The earnings multiples are as stipulated in the sales and purchase agreement.
> The discount rate applied was 8,0%, being the average cost of borrowings.
If the key unobservable inputs to the valuation model being estimated were 1% higher/lower while all the other variables were held constant, the carrying amount of the put option liabilities would decrease/increase by R1 million respectively.
 
R million
Audited 2019 Audited
2018

10.

Long-term LOANS

Total long-term loans (including finance leases) 60 100
Less: current portion (including finance leases) (3) (18)
57 82

 

 
R million
Audited 2019

11.

Acquisition of businesses and related intangible assets

During the current period the Group made the following acquisitions:
> OculusIP Proprietary Limited: With effect from 1 June 2019, the Group, through SkyWire Proprietary Limited, acquired 100% of the business and related net assets of OculusIP. As part of the acquisition, an intangible asset of R7 million was recognised. This was attributable to the customer base in key geographic regions. Goodwill of R23 million was recognised as the Company had a well-established brand that will assist with product development within the ICT segment. The agreement contains a contingent consideration up to an amount of R12 million based on the achievement of a targeted annuity gross profit for wireless line and voice rentals over a 12-month period from acquisition. The fair value of the contingent consideration at acquisition was R12 million.

The acquisition of OculusIP complements the ICT segment’s expansion strategy and increases the geographical presence of SkyWire. The acquisition also provides the opportunity to expand the suite of connectivity service offerings to a broader customer base.
  Cash paid
18
> Blue Nova Energy Proprietary Limited: With effect from 1 August 2019, the Group, through Blue Nova Energy Proprietary Limited (previously RC&C Manufacturing Company Proprietary Limited) (BNE) acquired 100% of the business and related net assets of BNE. BNE issued R43 million of new shares at fair value to the previous owner of BNE as part of the purchase consideration. This represents 49% of the issued capital of BNE, calculated as a proportion of the net asset value of the combined business immediately after the transaction. BNE specialises in energy storage solutions, mainly through the development and assembly of lithium iron batteries together with a battery management system. An intangible asset of R30 million was recognised on acquisition based on the brand, customer base and unpatented technology that exists with the entity. R53 million goodwill arose from the acquisition, which is attributable to the expected value to be achieved from the key products that BNE sells. A contingent consideration payable up to an amount of R12 million is based on the achievement of a financial hurdle and key performance indicators stipulated within the purchase agreement. The fair value of the contingent consideration at acquisition was R12 million. The acquisition of BNE, an early life cycle business, expands the Group’s interests in the renewable energy and associated markets. Synergies have been identified from the vertical integration with some of the Group’s other businesses in the Applied Electronic segment.
  Cash paid
9
Acquisition of intangible assets:

> The Group purchased a customer base from a mining company in Australia. The purpose of the acquisition was to create a footprint in Australia by enhancing relationships with key mining clients and thereby positioning the Group for further growth in the mining radar market. An intangible asset of R5 million was raised on acquisition.
  Cash paid
5
Direct cash cost 32
Contingent considerations (OculusIP and BNE) 24
Shares issued as part of consideration transferred in the BNE acquisition
(disclosed in NCI)
43
Offset receivable in acquiring company against payable in acquired business
(BNE acquisition)
23
Total purchase consideration 122
Represented by:
Property, plant and equipment 2
Intangible assets 42
Inventory 20
Payables (11)
Deferred taxation (7)
Goodwill 76
Net assets acquired (fair value at acquisition date)
122
Revenue since acquisition 31
Profit after taxation since acquisition
Revenue for the 12 months ended 30 September 2019 as though the acquisition dates had been 1 October 2018 186
Profit after taxation for the 12 months ended 30 September 2019 as though the acquisition dates had been 1 October 2018 19
2018
Refer to 2018 published results

12.

Disposal of business

During the current period the Group made the following disposal:
> Prodoc Svenska AB: With effect from 26 March 2019 the net assets
and business of Prodoc Svenska AB, were sold at the fair value less cost
to sell of R37 million.
Net assets disposed in Prodoc Svenska AB:
Property, plant and equipment and intangible assets 4
Goodwill 62
Finance leases and loans receivable 26
Inventory 32
Deferred taxation 2
Trade and sundry receivables 79
Trade and sundry payables (102)
Foreign currency translation reserve 10
Non-controlling interests (13)
Long-term loans (26)
Current portion of long-term loans   (15)
Net book value of net assets disposed 59
Less: consideration received: (15)
Cash received on sale (37)
Less: cash on hand 22
Loss on sale of subsidiary (net of taxation of Rnil) 44
2018
The Group made no disposals in the prior year.    

13.

Unconsolidated entity

The financial results of Cafca Limited (Cafca), an entity incorporated in Zimbabwe, have not been consolidated into the Group results as the Group does not exercise control because it does not have the ability to affect its variable returns through its holding in Cafca.
Reunert does not have the current ability to appoint a majority of the directors to the board of directors of Cafca and therefore does not control the board.
The Group does not equity account for its investment in Cafca as it does not have significant influence over Cafca due to its inability to influence financial and operating policy decisions as a result of the broader operating regime in which Cafca operates. Therefore, the Group's interest is measured at fair value through profit or loss. Although Cafca is listed on the Zimbabwean stock exchange, there is limited trading in the share. Accordingly, an income approach was used to determine the fair value of Rnil (2018: Rnil). This income approach took into consideration that Reunert has not received and does not expect to receive any cash flow benefit from this investment. This is a level 3 instrument in the fair value hierarchy.
At 30 September 2019, Cafca’s share capital and reserves amounted to ZWL$105 million*
(2018: ZWL$74 million)*.
The Group has made sales to Cafca of R11 million in the current financial year (2018: R33 million).
* In previous years, Cafca’s results were presented in US$. Due to a shortage of the US$ in the Zimbabwean economy, the Real Time Gross Settlement (RTGS) dollar (ZWL) was officially introduced in February 2019. Consequently, the ZWL became the company’s functional and presentation currency with effect from 1 October 2018.
  The Public Accountants and Auditors Board issued a pronouncement that financial statements for Zimbabwean companies prepared after 1 July 2019 be prepared in terms of IAS 29 – Financial Reporting in Hyperinflationary Economies.
  The results presented above therefore contain appropriate adjustments and reclassifications in conforming with IAS 29.

14.

Related-party transactions

Relationship
Sales Purchases Lease pay- ments Treasury shares Amounts owed to related parties Amounts owed by related parties Dividends received
Counterparty R million
September 2019
CBI-electric Telecom Cables Proprietary Limited Joint venture 74 29
Oxirostax Proprietary Limited (Nashua Winelands) Associate 20 2
Bargenel Investments Proprietary Limited Empowerment partner owning 18,5m Reunert shares 276
Lexshell 661 Investment
Proprietary Limited
Joint venture 4 4 3
September 2018
CBI-electric Telecom Cables Proprietary Limited Joint venture 2 5 1
Oxirostax Proprietary Limited (Nashua Winelands) Associate 16 2 2
Bargenel Investments Proprietary Limited Empowerment partner owning 18,5m Reunert shares 276
Lexshell 661 Investment
Proprietary Limited
Joint venture 5 4
  Audited 2019 Audited
2018

15.

Contingent considerations

Balance at the beginning of the year 37
Transfer from provisions 27
Raised at acquisition at fair value 24 110
Settlement of contingent consideration (16)
Fair value remeasurements (4) (100)
Balance at the end of the year1
41 37
1 The balance of the contingent consideration has been included in ‘Trade and other payables, provisions and taxation’ on the balance sheet. The balance of the contingent consideration relates to R17,5 million for DoppTech, R12 million for Blue Nova Energy and R12 million for OculusIP.

These were classified as level 3 instruments in the fair value hierarchy based on the following unobservable inputs:

 

Contingent considerations settled:

 

Omnigo: the fair value of the contingent consideration was determined using a cash flow valuation technique and is based on earnings multiples stipulated in the purchase agreement. The contingent consideration for Omnigo was determined as 40% of the expected excess of profit before interest and tax (PBIT) exceeding a 25% return on expected average capital employed during the year.

 

The amount is assessed on an annual basis using forecasted average capital employed and PBIT.

 

The discount rate used is 9,1% (Jibar plus 2%), as per the purchase agreement.

 

SkyWire: the contingent consideration is based on a defined business plan according to which the Company has to achieve certain predefined strategic tasks and objectives within 12 months of the acquisition date.

 

The discount rate used is 9,1% (Jibar plus 2%), as per the purchase agreement.

 

The SkyWire contingent consideration was settled in the current year for R16 million.

 

Contingent considerations still in effect:

 

DoppTech: the contingent consideration is stipulated within the purchase agreement based on the achievement of specific key performance indicators.

 

BNE: a contingent consideration payable up to an amount of R12 million is based on an achievement of a future EBITDA and key performance indicators stipulated within the purchase agreement. The fair value at acquisition was R12 million and is based on management’s best estimate of the most likely outcome of the achievement of future key performance indicators.

 

OculusIP: a contingent consideration payable up to an amount of R12 million is based on an annuity gross profit for wireless line and voice rentals over a 12-month period from acquisition. The fair value at acquisition was R12 million and is based on management’s best estimate of the most likely outcome of the achievement of annuity gross profit for line and voice rentals.

   

16.

Changes in Accounting Policies

IFRS 15 Revenue from Contracts with Customers replaces both IAS 11 Construction Contracts and IAS 18 Revenue as well as SIC 31, IFRIC 13, IFRIC 15 and IFRIC 18 and establishes a comprehensive framework for recognition of revenue from contracts with customers. Revenue is recognised when a customer obtains control of the goods or services. Determining the timing of the transfer of control – at a point in time or over time – requires a certain level of judgement. On application of IFRS 15, the following material changes and considerations have been made:
Revenue category
Nature of material considerations and changes in accounting policy
Product revenue

Revenue relating to certain contracts previously recognised on the basis of the percentage of completion under IAS 11 and 18 has changed to recognition based on inputs towards satisfaction of the performance obligation. For some contracts, it was determined that there was no direct relationship between the inputs and the transfer of control of the goods and services to the customer.

 

Accordingly, for these contracts the effects of these inputs are excluded when measuring the progress towards satisfaction of the performance obligation. This resulted in a change in the measurement of the recognition of the revenue.

 

Under IFRS 15, the transaction price is allocated between the identified obligations according to the relative standalone selling prices of the obligations. Any variable consideration for discounts, rebates or other variability on a contract is estimated either using the expected value or the most likely amount depending on the nature of the contract.

 

Previously, certain contracts that contained a variable consideration, namely a discount to the transaction price and multiple performance obligations, did not allocate the discount to the appropriate identified performance obligations in the contract. This new treatment results in the discounting being recognised in the margin as the obligations are met.

 

Under IFRS 15, a significant financing component exists for certain contracts where the contract term exceeds 12 months and the customer pays an advance consideration. The transaction price is reduced and interest revenue is recognised over the customer’s payment period using an interest rate reflecting the relevant customer credit risk.

Service revenue Under certain service contracts, the Group receives consideration from customers for installation services at the inception of the contract. No separate performance obligation exists for the installation services provided at inception of the contract. Accordingly, the consideration received is recognised as a contract liability and recognised in revenue over the period of the service contract. Previously, the Group recognised revenue on completion of the installation but before delivery of the related services to the value of the consideration received upfront. Under IFRS 15 the revenue related to the installations is recognised as the services are delivered.
All contracts were considered as part of the transition to IFRS 15, however no further material changes were identified apart from the above.
   
IFRS 9 – Financial Instruments

IFRS 9 sets out requirements for recognising and measuring financial assets, financial liabilities and contracts to buy or sell certain non-financial items.

 

This standard replaces IAS 39 – Financial Instruments: Recognition and Measurement.

 

Classification and measurement of financial assets

IFRS 9 has reduced the number of categories required for classification and measurement, however, the adoption of IFRS 9 has not had a material impact on the Group’s accounting policies related to the classification and measurement of financial assets, financial liabilities and derivative financial instruments.

 

Impairment of financial assets

IFRS 9 replaces the incurred loss model in IAS 39 with an expected credit loss (ECL) model. The Group has four types of financial assets that are subject to the new ECL model:


> trade receivables; and
> finance leases and loans receivable
> investments and loans
> cash and cash equivalents

The Group revised its impairment methodology under IFRS 9 for each of these classes of assets. The impact of the change in impairment methodology on the Group’s retained earnings is disclosed below.

 

Trade receivables

The Group applies the IFRS 9 simplified approach to measuring ECL, which uses a lifetime expected loss model for all trade receivables. ECLs are calculated by applying a loss ratio to the age analysis of trade receivables at each reporting date. The loss ratio is calculated according to the ageing/payment profile of sales by applying historic write-offs to the payment profile of the sales population.

 

Trade receivable balances have been grouped so that the ECL calculation is performed on groups of receivables with similar risk characteristics and ability to pay. The historic loss ratio is then adjusted for forward-looking information to determine the ECL for the portfolio of trade receivables at the reporting date.

 

Finance leases and loans receivable

The Group applies the IFRS 9 general approach to measuring ECLs, which uses a 12-month expected loss allowance. This is calculated by applying a loss ratio to the balance at each reporting date.

 

The loss ratio for the rental and finance lease receivables is calculated according to the ageing/payment profile by applying historic write-offs to the payment profile of the population.

 

The historic loss ratio is then adjusted for forward-looking information to determine the ECL at the reporting date to the extent that there is a strong correlation between the forward-looking information and the ECL.

 

Other loans and investments

The Group has provided loans to associates and joint ventures of the Group to satisfy operational and other requirements. These associates and joint ventures are located in South Africa. The Group manages credit risk on this portfolio of loans by following strict protocols for the approval.

 

They are considered to have low credit risk, and the identified impairment loss was immaterial.

 

Cash and cash equivalents

Cash and cash equivalents are held with major banking groups and quality institutions that have high credit ratings and therefore are considered to have low credit risk; and the identified impairment loss was immaterial.

 

Accounting judgements and assumptions

The ECL for financial assets is based on assumptions about risk of default and expected loss rates. The Group uses judgement in making these assumptions and selecting the input to the impairment calculation, based on the Group’s past history, existing market conditions, as well as forward-looking estimates at the end of each reporting date.

IFRS 15 and IFRS 9 transition

The Group has applied both IFRS 9 – Financial Instruments and IFRS 15 – Revenue from Contracts with Customers using the modified retrospective approach, by recognising the cumulative effect of initially applying IFRS 9 and IFRS 15 as an adjustment to the opening balance of equity at 1 October 2018.

 

Therefore, the comparative information on the audited summarised group statement of financial position and audited summarised group statement of comprehensive income has not been restated for the adoption of these new standards and continues to be reported under the previously applied standards.

 

The following table shows the adjustments recognised for each individual line items. Line items that were not affected by the changes have not been included.

 

The effect of the IFRS 9 and 15 transition on the statement of financial position is as follows:

 
  IFRS 9
adjustments
IFRS 15
adjustments
Total
Summarised consolidated statement
of financial position
Non-current assets
Finance leases and loans receivable1 (19) (19)
Deferred taxation 9 13 22
Current assets
Trade and other receivables and taxation2 (20) (20) (40)
Equity
Retained earnings (27) (29) (56)
Non-controlling interests (3) (6) (9)
Current liabilities
Trade and other payables, provisions and taxation3 28 28
1 The reduction in finance leases and loans receivable is due to an increase in the impairment required by IFRS 9.
2 The reduction in trade and other receivables is due to an increase in the provision for impairment required by IFRS 9 and due to the revenue that was recognised but is required to be deferred based on IFRS 15.
3 The increase in trade and other payables is due to revenue being deferred based on the IFRS 15 assessment above.
During the current year, R22 million (R16 million net of taxation) of the opening IFRS 9 adjustment was realised in the statement of profit or loss.
   

17.

Impact of standards not yet effective

IFRS 16 – Leases introduces a single lease accounting model and requires a lessee to recognise assets and liabilities for all operating leases with a term of more than 12 months, unless the underlying asset is of low value. A lessee is required to recognise a right-of-use asset representing its right to use the underlying leased asset and a lease liability representing its obligation to make lease payments. Lessee accounting for finance leases will be similar under IFRS 16 to the existing IAS 17 accounting. Lessor accounting under IFRS 16 is also similar to the existing IAS 17 accounting and is not expected to be material for the Group. The Group expects that the most significant impact of the new standard will result from its current property and network site operating leases. The Group intends to apply the modified retrospective approach and will not restate comparative amounts for the year prior to first adoption. Right-of-use assets will be measured at the amount of the lease liability on adoption (adjusted for any prepaid lease expenses). The Group’s current estimate of the primary financial impact of these changes on the consolidated statement of financial position on adoption is the recognition of an additional lease liability at 1 October 2019 of between R195 million and R235 million The right-of-use asset recognised at 1 October 2019 will be between R190 million and R230 million. All lease straight-lining balances relating to IAS 17 operating leases will be released to right-of-use assets on 1 October 2019. On adoption of IFRS 16, the operating expense (rental) will be replaced with interest and depreciation. Due to the impact of reducing finance charges over the life of the lease, the impact on earnings will initially be negative, before being positive in later periods.

 

There are no other standards that are not yet effective and that would be expected to have a material impact on the entity in the current or future reporting periods and on foreseeable future transactions.

   

18.

Litigation

There is no material litigation being undertaken against or by the Group. The Group has made adequate provision against any cases where the Group considers there are reasonable prospects for the litigation to succeed. The Group has adequate resources and good grounds to defend any litigation of which it is aware.
   

19.

Events after reporting date

No events have occurred after the reporting date that require additional disclosure or adjustment to the results presented.
   

20.

Audit opinion

These summarised consolidated financial statements, set out on pages 6 to 26, were derived from the consolidated financial statements and are consistent in all material respects with the Group’s consolidated financial statements. The directors take full responsibility for the preparation of the summarised consolidated financial statements. The auditors, Deloitte & Touche, have issued unmodified audit opinions on the consolidated financial statements and on these summarised consolidated financial statements for the year ended 30 September 2019 and the audit opinions and consolidated financial statements are available for inspection at Reunert’s registered office. The audit was conducted in accordance with the International Standards on Auditing. The auditor’s report does not necessarily report on all information contained in this announcement. Shareholders are therefore advised that in order to obtain a full understanding of the nature of the auditor’s engagement they should obtain a copy of that report together with the accompanying financial information from Reunert’s registered office. Any reference to future performance included in this announcement has not been reviewed or reported on by the auditors.