Notes

for the year ended 30 September 2021

1. Basis of preparation

These preliminary reviewed condensed consolidated financial statements (condensed financial statements) have been prepared in compliance with the:

These condensed financial statements are in accordance with and contain the information required by IAS 34 Interim Financial Reporting, as well as the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee and Financial Pronouncements as issued by the Financial Reporting Standards Council, and were compiled under the supervision of NA Thomson CA(SA) the Group's Chief Financial Officer.

The Group's accounting policies applied for the year ended 30 September 2021, were consistent with those applied in the prior year's audited consolidated annual financial statements. These accounting policies comply with IFRS.

The condensed financial statements for the year ended 30 September 2021 have been reviewed by Deloitte & Touche who have expressed an unmodified review conclusion.

The auditor’s review report on the condensed financial statements is available for inspection at the registered offices of the Company, together with the condensed financial statements.

Rm 2021
Reviewed
2020
Reviewed

2. Revenue

Revenue from contracts with customers:
Category of revenue
Products 7 632 6 014
Services 1 575 1 581
9 207 7 595
Timing of revenue recognition:
Revenue recognised at a point in time 7 911 6 215
Revenue recognised over time 1 296 1 380
Total revenue from contracts with customers 9 207 7 595
Other revenue:
Interest received on lease and loan receivables 340 412
Rental revenue 28 39
Total 9 575 8 046

Refer to the segmental analysis, for a disaggregation of the total revenue into the revenue contribution per segment.


Rm 2021
Reviewed
2020
Reviewed
Restated1

3. Operating profit

Operating profit is arrived at as follows:
Revenue 9 575 8 046
Items included in operating profit
Changes in inventory (5 852) (4 382)
Employee costs (1 967) (1 890)
Salaries and wages (1 776) (1 617)
Pension and provident fund contributions2 (126) (192)
Other staff costs3 (65) (81)
Fair value remeasurements 65 (1)
Gain on investment at fair value through profit or loss 103
Gain on contingent consideration 13 2
Gain on option contract 41
Loss on option contract (92)
Loss on put option liability (3)
Impairment of financial assets (1) (586)
Credit write-off (20) (298)
Expected credit losses 19 (288)
Auditors remuneration (28) (29)
Audit fees (27) (28)
Other fees (1) (1)
Net forex gains/(losses) 24 (90)
Net realised forex gains/(losses)4 40 (42)
Net unrealised forex losses4 (16) (48)
Other income 47 17
Lease modification 49 17
Profit on disposal of property, plant and equipment and intangible assets 12 4
Share-based payment expense5 (17) (7)
Interest paid to finance Quince Capital (Pty) Ltd (Quince) rental book (24) (28)
Operating lease charges (27) (30)
Research and development (150) (172)
Other operating expenses (395) (322)
EBITDA6 1 311 547
The following additional disclosable items have been included in arriving at operating profit:
Depreciation and amortisation (253) (240)
Impairment of non-financial assets
Impairment of goodwill (75)
Impairment of property, plant and equipment (1) (4)
Profit on disposal of associate 1
Loss on disposal of subsidiary (1) (20)
Transaction-related share-based payments7 (7)
Operating profit as per the statement of profit or loss 1 050 208
1 The operating profit note has been restated to provide more detail.
2 Payments to defined contribution retirement plans are charged as an expense as they fall due.
3 Includes staff training, staff welfare, skills development levy, commissions and incentives and other staff related costs.
4 Transactions denominated in a foreign currency are recorded at the rates of exchange prevailing at the dates of the transactions. At the end of each reporting period, monetary items denominated in foreign currencies are retranslated at the rates prevailing at that date. Exchange differences on monetary items are recognised in the statement of profit or loss in the period in which they arise. Derivative instruments are initially measured at fair value at the date the derivative contract is entered into and are subsequently remeasured to fair value at each reporting date. The resulting gains or losses are recognised in the statement of profit or loss.
5 Included in share-based payment expense is a charge of R1 million (2020: a release of R3 million) relating to the Deferred Bonus Plan. This is classified as a cash-settled, share-based payment with the equivalent amount included in liabilities.
6 Earnings before net interest, tax, depreciation and amortisation, impairment of goodwill and property, plant and equipment, profit on disposal of associate, loss on disposal of subsidiary and transaction-related share-based payments. EBITDA includes interest income received on leases and loans receivable in the ICT Segment.
7 Included in the transaction-related share-based payments is an empowerment charge in the ICT Segment of R6 million and in the AE Segment of R1 million.

 

Rm 2021
Reviewed
2020
Reviewed

4. Interest and dividend income

Dividend income 2 3
Interest earned on financial assets analysed by category of asset:
Bank deposits 16 31
Other assets 10 7
Total interest income and dividends 28 41

5. Interest expense

Loans, bank overdrafts and short-term facilities (47) (53)
Lease liabilities (19) (22)
Unwinding of present value discount (4) (8)
Interest expense as per the statement of profit or loss (70) (83)
External interest expense in Quince (included in Group operating expenses as Quince is a finance business) (24) (28)
Total interest expense using the effective interest rate method (94) (111)

6. Impairment of financial assets

Credit write-off 20 298
Expected credit losses (ECL) (19) 288
1 586

 

Analysis of movement in the ECL
30 September 2021

Rm ECL
as at
1 October
2020
(Released)/
raised
during the
year
through the
statement of
profit or loss
Utilised
during
the year
Disposal
of
subsidiaries
Foreign
exchange
movement
ECL
as at
30 September
2021
Lease and loan receivables 210 (29) (29) 152
Trade and other receivables 192 10 (39) (2) 6 167
Credit write-off for trade and other receivables 20
Total impairment of financial assets per the statement of profit or loss 1

 

Analysis of movement in the ECL
30 September 2020

Rm ECL
as at
1 October
2019
Raised
during the
year
through the
statement of
profit or loss
Utilised
during
the year
Foreign
exchange
movement
ECL
as at
30 September
2020
Lease and loan receivables 41 219 (50) 210
Trade and other receivables 150 69 (14) (13) 192
Credit write-off for lease and loan receivables1 298
Total impairment of financial assets per the statement of profit or loss 586
1 The credit write-off in the 2020 financial year resulted from an external fraud perpetrated against Quince by a non-connected independent third party dealer.

 

Lease and loan receivables

The Group applies the IFRS 9 general approach to measuring the ECL required in respect of lease and loan receivables.

This is calculated by applying a historical loss ratio to the lease and loan receivables at each reporting date. The loss ratio for the lease and loan 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 required ECL at the reporting date.

Impact of COVID-19

Historical levels of credit impairment (pre 2020) are now not considered representative of what is expected in terms of future defaults due to the COVID-19 pandemic. The ongoing impact of the national lockdowns and waves of infection on economic activity and consequentially the expected increase in business failures have made the estimation of future credit losses complex.

Subsequent to the easing of lockdown conditions after the second and third wave of COVID-19 infections during 2021; economic activity has improved and the Group has incorporated this improvement in their assessment of the management overlay incorporated into the ECL.

The Group has considered these factors above and also used the following key assumptions in estimating the ECL as at 30 September 2021:

2021 2020
Probability of default (PD) 5,6% 9,3%
Loss given default (LGD) 63,0% 63,0%
Exposure at default (EAD) Exposure of receivables
at 30 September 2021
Exposure of receivables
at 30 September 2020

 

In estimating the PD the following estimates and judgements were applied:

The LGD rate used was obtained from the quoted recovery rate of the World Bank for South African debt of 37%. This was corroborated against the Moody’s recovery rate for emerging markets. Due to the uncertainty of the impact of COVID-19 on South Africa and limited allocated credit information, this remains the best independent and credible information available, to estimate the expected LGD and this results in an LGD of 63%. In computing the management overlay, management assessed the industry classification of each rental customer and where the industry was, in the experience of management, still experiencing adverse consequences of the COVID-19 pandemic impacting on its credit capacity/risk (largely in the categories of hospitality, tourism and sections of education) applied a management overlay taking this risk into account.

The following is a categorisation of the different stages in accordance with IFRS 9:

Expected credit losses
Rm Carrying
amount
before ECL
Stage 1 Stage 2 Stage 3 Net carrying
amount
after ECL
30 September 2021 2 628 (41) (13) (98) 2 476
Lease receivables 707 (9) (6) (9) 683
Loan receivables 1 921 (32) (7) (89) 1 793
30 September 2020 2 783 (68) (92) (50) 2 573
Lease receivables 918 (41) (18) (14) 845
Loan receivables 1 865 (27) (74) (36) 1 728

Significant increase in credit risk

In assessing whether the credit risk in a financial asset has increased significantly since initial recognition, the Group compares the risk of a default occurring on the financial asset as at the reporting date with the risk of a default occurring on the financial asset as at the date of initial recognition. In making this assessment, the Group considers quantitative information that is reasonable and supportable, including historical experience and forward-looking information that is available without undue cost or effort. In assessing the stage categorisation, receivables that are 30 days overdue are classified as stage 2 and receivables that are 90 days overdue are classified as stage 3.

Credit write-off in 2020

The credit write-off resulted from an external fraud perpetrated against Quince by a non-connected independent third party dealer. A comprehensive external forensic investigation has been completed and has resulted in a credit write-off of R298 million, which was reported in the 31 March 2020 interim financial results. In the period 31 March 2020 to 30 September 2020 the following actions were completed:

These recommendations were fully implemented in the 2021 financial year.

Trade and other receivables

The Group has consistently applied the IFRS 9 simplified approach to measuring ECL for trade receivables which uses a lifetime expected loss model. ECLs are calculated by using a provision matrix and applying a loss ratio to each entity in the Group’s age analysis of trade receivables and contract assets. These have been aggregated into groupings that represent, to a large degree, major risk types and how the Group manages its receivables and contract assets. This also illustrates the spread of credit risk 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. Similarly, the sales population selected to determine the ageing/payment profile of the sales is representative of the entire population and in line with future payment expectations.

Rm 2021
Reviewed
2020
Reviewed

7. Impairment of non-financial assets

Goodwill
Carrying amount as at 1 October 924 999
Disposal of subsidiary (4)
Acquisition of businesses 14
Impairment of goodwill (75)
Carrying amount as at 30 September 934 924

The following information summarises the individual assumptions used to test for impairment of goodwill
at a cash generating unit (CGU) level, using the value-in-use method.1

 

30 September 2021 30 September 2020 30 September 2021 30 September 2020 Group
goodwill
Measurement currency Discount rate (pre-tax)2
%  
Discount rate (pre-tax)2
%  
Terminal growth rate3 %   Terminal growth rate3
%  
30 September 2021
Rm
30 September 2020
Rm
Significant CGUs
ICT
Nashua Office Automation ZAR 16,9 20,3 4,0 4,0 199 203
Quince Capital ZAR 14,3 11,4 4,0 4,0 124 124
ECN ZAR 17,4 20,6 4,0 4,0 140 140
SkyWire ZAR 16,1 18,9 4,0 4,0 170 170
+OneX ZAR 20,6 4,0 14
AE
Omnigo ZAR 20,7 22,1 4,0 4,0 40 40
Terra Firma Solutions ZAR 20,2 21,0 4,0 4,0 88 88
Nanoteq ZAR 19,9 22,7 4,0 4,0 69 69
Blue Nova Energy ZAR 21,1 22,6 4,0 4,0 53 53
897 887
Other4 ZAR 17,9 – 20,4 20,6 – 22,5 4,0 4,0 37 37
Net carrying amount 934 924
Gross goodwill carrying amount 1 076 1 066
Less: accumulated impairment loss (142) (142)
1 The base (year 1) for the value-in-use calculations are the management approved budgets for 2022. The 2022 budget contains revenue growth rates that indicate a gradual improvement towards pre-COVID-19 levels. Average growth rates used in years 2023 to 2026 (except for SkyWire Technologies, Blue Nova and +OneX) were higher than terminal growth rates due to the expected gradual improvement towards pre-COVID-19 levels of activity but are all lower than 10% growth. Growth rates for SkyWire Technologies (12%), Blue Nova (17%) and +OneX (18%) are higher than the average as these businesses operate in industries experiencing high growth and demand. Management have assessed the growth rates applied and consider them to be reasonable and appropriate based on management’s knowledge of the industries and the underlying businesses.
2 The discount rate used is calculated as the weighted average cost of the different components of capital, being debt and equity (WACC). This is consistent with international best practice and covers the different industries in which the Reunert group operates. The discount rate is then converted to the pre-tax discount rate as required by IAS 36 using an appropriate methodology.
3 The terminal growth rate is calculated using the forecast South African consumer price index (CPI) as a basis and thereafter adjusted for various risk factors. This is used to extrapolate the cash flow projections beyond the period covered of 5 years.
4 This consists of the aggregate of individual immaterial goodwill balances across all segments above.

Sensitivities

Under the economic conditions that have arisen during the COVID-19 pandemic, revenue growth is a key consideration. Accordingly, management has undertaken a sensitivity analysis of the consequence of a 5% reduction in forecast revenue on the cash flow forecasts without factoring in any management actions required from the drop in revenue.

The results of this sensitivity analysis were that additional impairments would be required for Nanoteq (R14 million), African Cables (R21 million) and Skywire (R69 million), if revenue forecasts are not met by 5% i.e. 95% achievement.

If the terminal growth rates were decreased by 1%, no impairment would be required.

If the discount rates were increased by 1%, an impairment of R1 million would be required in Nanoteq.

Impairment of property, plant and equipment

In the current financial year an impairment of R1 million was raised on damaged property, plant and equipment.

2020

In 2020, the impact of COVID-19 resulted in the Group impairing goodwill which arose on acquisition of two of its subsidiaries: African Cables (R61 million) and Dynateq International (Dynateq) (R14 million) and R4 million of property, plant and equipment in Polybox.

African Cables

African Cables delivered a subdued performance in the 2020 financial year, primarily due to the following:

Although the business has secured framework tenders at Eskom and various municipalities, the impact of the reprioritisation of Government's expenditure on infrastructure due to the impact of COVID-19 remains uncertain. Management’s view was that this business was likely to continue to experience pressure on volumes over the medium term and have therefore used forecasts taking this uncertainty into consideration. This resulted in the goodwill impairment of R61 million being required.

Dynateq

Dynateq’s revenue is largely driven by securing contracts in the global defence sector. The business is dependent on the export market in various economies including the Middle East and Europe. Although a portion of the short-term order book is secured, management is of the view that this business is likely to experience pressure on volumes over the medium term and consequently impaired the goodwill of R14 million.

Investment in joint venture

In the 2020 financial year, the outlook for CBI Electric Telecom Cables (Pty) Ltd (CBI Telecoms) remained uncertain, due to it having a limited order book, significant margin degradation due to competition and declining volumes which all contributed to weak cash flow forecasts over the short to medium term. These factors together with the substantial losses experienced over 3 consecutive financial years resulted in the management of CBI Telecoms impairing the carrying amount of its property, plant and equipment by R147m. The impact of the impairment of R42 million (after tax) is included in the equity-accounted earnings from joint ventures for the 2020 financial year.

8. investment at fair value through profit or loss

In terms of IAS 28 Investments in Associates, Reunert is presumed to have significant influence over CAFCA as it owns more than 20% of CAFCA’s share capital. However, as it has less than 20% representation on its board of directors and does not have the current ability to appoint additional directors, 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 the 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.

During the current year the Group received and accepted two unsolicited offers for a portion of its investment in CAFCA for R27 million. These transactions have resulted in the Group remeasuring the fair value of its investment in CAFCA. The fair value has been determined using an appropriate price/net asset value multiple of comparable companies to the historical net asset value of the share. The selling price per share of the sale transactions negotiated during 2021 was also considered as a key factor in assessing the reasonability of the fair value for 2021.

This is a level 3 instrument in the fair value hierarchy.

Accordingly, the Group recognised a gain as follows:

Rm 2021
Reviewed
Fair value remeasurement of investment in CAFCA 103
Realised gain on remeasurement of investment 27
Unrealised gain on remeasurement of investment 76

Rm 2021
Reviewed

9. Non-current Derivative financial assets and liabilities

Put option derivative financial asset 41
Call option derivative financial liability 92
Fair value remeasurement loss on option contract 51

The Group has concluded an agreement with AP Moller Capital through AIF I Africa C&I Renewable Energy LLP (AIF I) to establish a joint venture, Lumika Renewables (Pty) Ltd (Lumika). The Group subscribed for a 50,1% interest in Lumika. Although the Group holds a 50.1% interest, due to the contractual arrangement with AP Moller Capital, the Group exercises joint control over the venture. The Group sold an effective 25% interest in Terra Firma Solutions (Pty) Ltd (TFS) (the Group’s Solar PV business) to Lumika and concluded a put and a call option for the sale of 65% being its residual interest in TFS. The call and put is exercisable after the third anniversary of the establishment of Lumika which date is 30 September 2023.

In terms of these arrangements, the Group has the right to put its remaining interest in TFS to Lumika in exchange for the strike price in US dollars and Lumika has the right to call the remaining interest in TFS from the Group at the same price. The put and call have been recognised as a non-current derivative asset and liability respectively at their fair values through profit or loss.

Valuation technique

The equity value of TFS was determined at the reporting date. The equity value, strike price in US dollars and other inputs (see below) were applied to a Black Scholes valuation model to determine the value of the put and call.

The following significant unobservable inputs were used in the determination of the value of the put and call and the resulting net fair value loss:

This is a level 3 instrument in the fair value hierarchy.

Rm 2021
Reviewed
2020
Reviewed

10. Number of shares used to calculate earnings per share1

Weighted average number of shares in issue, net of empowerment and treasury shares, for basic earnings and headline earnings per share (millions of shares) 1612 1612
Adjusted by the dilutive effect of unexercised share options granted (millions of shares) 1
Weighted average number of shares for diluted basic and diluted headline earnings per share (millions of shares) 161 162
1 The earnings used to determine earnings per share and diluted earnings per share
is the profit for the period attributable to equity holders of Reunert of R777 million (2020: R47 million).
2 The Group has elected to treat the shares under the equity forward contract as issued shares for purposes of earnings per share.

 

Rm 2021
Reviewed
2020
Reviewed

11. Headline earnings

Profit attributable to equity holders of Reunert 777   47
Headline earnings are determined by eliminating the effect of the following items from attributable earnings:
Goodwill impairment –   75
Impairment of non-financial assets in a joint venture (after a tax credit of Rnil (2020: R14 million)) 1   42
Net loss on disposal of subsidiary and associate (after a tax charge of R1 million (2020: Rnil)) 1   20
Impairment of property, plant and equipment 1 4
Profit on disposal of property, plant and equipment and intangible assets (after a tax charge of R3 million and NCI portion of Rnil) (2020: after a tax charge of R1 million and NCI portion of R1 million)2 (11) (2)
Headline earnings 768 186
Headline earnings per share (cents) 478 115
Diluted headline earnings per share (cents) 476 115
1 The impairment of property, plant and equipment after tax results in the amount being less than R0,5 million and therefore has been rounded to Rnil for the headline earnings calculation.
2 Includes R2 million profit on disposal of property, plant and equipment arising from an investment in joint venture.

 

Rm 2021
Reviewed
2020
Reviewed

12. Contingent consideration

Carrying amount as at 1 October 24   41
Raised on acquisitions at fair value 18  
Raised on acquisition of NCI during the year1 6  
Fair value remeasurements (13)2 (2)
Settlement (7)   (15)
Carrying amount as at 30 September 28   24
Less: current portion 18   24
Non-current portion 10  
1 This relates to a contingent consideration that arose during the year on the acquisition of the non-controlling interest in Kopano Solutions Company (Pty) Ltd.
2 Includes a remeasurement gain of R11 million for Blue Nova arising from the related targets not being met

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

13. PUT OPTION LIABILITY

As part of the TFS acquisition in 2017, the Group granted put options in favour of the non-controlling shareholders for 25% of the issued share capital. The majority of this put option was exercised in the 2020 financial year. The amount remaining is carried at fair value and amounts to R365 303 (2020: R307 428).

The measurement period for the TFS empowerment transaction concluded on 30 September 2021. The non-controlling shareholders have the right to claw back some or all of the shares issued to the TFS empowerment partner in the event of the empowerment partner not achieving certain pre-agreed targets by 30 September 2021. The claw back mechanism is based on an agreed formula with the empowerment partner. The non-controlling shareholders have a further right to put the shares clawed back from the empowerment partner to the Group. As a result, an additional put option liability arose on completion of the measurement period, in the current year, which is measured using the same methodology as the original put option for 25% granted to the non-controlling shareholders when the Group acquired its controlling interest in TFS.

A reconciliation of the closing balance is as below:

Rm 2021
Reviewed
2020
Reviewed
Carrying amount as at 1 October 120
Raised during the year 25
Fair value remeasurements 3
Unwinding of present value discount 8
Settlement (131)
Carrying amount as at 30 September 25

The obligation is classified as a level 3 instrument in the fair value hierarchy.

Valuation technique

The fair value of the put option liability is determined using an agreed formula in the shareholders agreement. This formula applies a multiple to revenue and an adjusted profit after tax and incorporates the investment in build-own-operate plants.

Significant unobservable inputs include:

14. Reconciliation of restated operating profit

The operating profit on the consolidated statement of profit and loss has been restated in order to include all non-finance and tax related items of income and expenditure in the determination of operating profit in line with the emerging issues identified by the JSE in their proactive monitoring report of 9 November 2021. The 2020 financial year restatements have been subject to a review in 2021 by the external auditors. Accordingly the restated 2020 comparatives are now classified as reviewed and not audited.

Rm  
Operating profit as reported in September 2020 307
Less:
Impairment of non-financial assets
Impairment of goodwill (75)
Impairment of property, plant and equipment (4)
Loss on disposal of subsidiary (20)
Operating profit as now reported 208

15. ACQUISITION OF BUSINESSES

2021

All business combinations are accounted for by applying the acquisition method. All acquisition-related costs are recognised as expenses in the period in which the costs are incurred and the services received.

If the initial accounting for the business combinations is incomplete at the end of the reporting period in which the combination occurs, the Group reports provisional amounts for the items for which the accounting is incomplete. These provisional amounts are then adjusted during the remaining measurement period, or additional assets and liabilities are recognised, to reflect any new information obtained about facts and circumstances that existed at the acquisition date, which if known at the time of making the initial recognition entries, would have impacted the amounts recognised at that time.

Non-controlling interests (NCI) in the net assets of consolidated subsidiaries are identified separately from the Group’s equity therein. NCI consists of the value of those interests at the date of the original business combination and the NCI’s share of changes in equity since the date of the combination. Losses applicable to the NCI in excess of the NCI’s share of changes in equity are allocated against the interests of the Group except to the extent that the NCI has a binding obligation and is able to make an additional investment to cover their share of losses beyond their contributed equity.

1. TripleH Cloud Services (Pty) Ltd (TripleH)

With effect from 1 June 2021, the Group, through +OneX, acquired 100% of the business and related net assets of TripleH. TripleH is a company focused on virtual cloud based solutions. The existing work force is appropriately skilled and resourced to service the existing client base and new clients that will come from synergistic benefits within the ICT segment.

The acquisition of TripleH complements the ICT Segment’s expansion strategy and increases the geographical presence of +OneX. The acquisition also provides +OneX with additional service offerings such as multi-cloud management, infrastructure as a service, disaster recovery as a service and backup as a service. As +OneX is a cloud systems integrator, the TripleH Cloud Services business will be core to its cloud service offering.

2. Datacore Media (Pty) Ltd (DCM)

With effect from 1 May 2021, the Group, through +OneX, acquired 100% of the business and related net assets of DCM. DCM is a company focused on the digital media planning industry space. The existing work force is appropriately skilled and resourced to service the existing client base and new clients that will come from synergistic benefits within the ICT Segment.

The acquisition of DCM complements the ICT Segment’s expansion strategy and increases the geographical presence of +OneX. The acquisition also provides +OneX with additional service offerings such as digital media and data consultancy business and will strengthen +OneX’s position as an end-to-end business transformation partner.

Rm 2021
Reviewed
Cash paid 8
Contingent consideration 18
Working capital offset against the purchase price (3)
Total purchase consideration 23
Represented by:
Property, plant and equipment 4
Goodwill 14
Intangible assets 11
Deferred tax liabilities (3)
Trade and other payables (3)
Net assets acquired (fair value at acquisition date) 23
Revenue since acquisition 12
Profit after tax since acquisition 2
Revenue for 2021 as though the acquisition date had been 1 October 2020 32
Profit after tax for 2021 as though the acquisition date had been 1 October 2020 6

16. Disposal of subsidiary and associate

2021

Sale of Nashua Paarl and West Coast (Pty) Ltd (PWC)

With effect from 1 August 2021 Nashua Holdings (Pty) Ltd sold the interest it held in the franchise known as PWC for R3 million.

Rm 2021
Reviewed
Net assets disposed in PWC:
Goodwill 4
Deferred tax assets 1
Lease receivables 72
Inventory 2
Trade and other receivables 11
Non-controlling interests (4)
Long-term loans (1)
Trade and other payables (9)
Amounts owing to subsidiaries (74)
Net carrying amount disposed of 2
Consideration received 1
Cash received on sale 3
Less: cash on hand 2
Loss on disposal of subsidiary (net of tax of Rnil) (1)
Sale of Oxirostax (Pty) Ltd (Winelands)1
With effect from 1 August 2021 Nashua Holdings (Pty) Ltd sold its interest in the Winelands franchise it owned for R9 million consideration.
Investment in associate 8
Consideration received:
In cash 9
Profit on disposal of associate (net of tax of Rnil) 1
1 The investment in Winelands was previously recognised as an investment in associate and equity accounted for in the Group’s financial statements.

Rm 2020
Reviewed
In the 2020 financial year Reunert ICT Holdings sold the Pansolutions shares it owned for R1.
Net assets disposed in Pansolutions:
Lease and loan receivables 3
Inventory 20
Current and deferred tax 4
Trade and other receivables 12
Trade and other payables (20)
Long-term loans (2)
Short-term portion of long-term loans (1)
Net carrying amount disposed of 16
Consideration paid (4)
Cash received on sale
Less: cash on hand 4
Loss on disposal of subsidiary (net of taxation of Rnil) 20

17. Equity transactions with non-controlling interests (NCIs)

Changes in the Group’s interest in a subsidiary that do not result in a loss of control are accounted for as equity transactions. The carrying amounts of the Group’s interests and the NCIs are adjusted to reflect the changes in their relative interests in the subsidiary concerned. Any difference between the amount by which the non-controlling interests are adjusted and the fair value of the consideration paid or received is recognised directly in equity and attributed to all the owners of the Company.

Rm 2021
Reviewed
Transactions to increase controlling interest in subsidiaries’ holdings
Kopano Solutions Company (Pty) Ltd (Nashua Kopano)
With effect from 1 April 2021, the Group acquired all of the non-controlling interest in Nashua Kopano, a Group-owned Nashua franchise in the ICT Segment.
Consideration paid 21
Main Street 1052 (Pty) Ltd (Nashua Central)
With effect from 1 August 2021, the Group acquired all of the non-controlling interest in Nashua Central, a Group-owned Nashua franchise in the ICT Segment.
Consideration paid 10
Transactions to decrease controlling interest in subsidiaries’ holdings
Classic Number Trading 80 (Pty) Ltd (Nashua Tshwane)
With effect from 1 June 2021, the Group sold 30% of its interest in Nashua Tshwane, a Group-owned Nashua franchise in the ICT Segment.
Consideration received (3)
Reunert Investment Company No 2 (Pty) Ltd (RIC #2)
With effect from 1 July 2021 Reunert Limited through its subsidiary, Reunert Applied Electronics Holdings (Pty) Ltd (RAEH) has, concluded a shareholders agreement with
AIF I to establish a joint venture, Lumika Renewables (Pty) Ltd (Lumika). As part of the establishment of Lumika, RAEH has agreed to sell an effective 27,8% interest to Lumika.
Through this 27,8% interest, Lumika will hold an effective 25% in TFS, which remains a subsidiary consolidated by Reunert.
Reunert has elected to eliminate the equity-accounted earnings associated with TFS in the consolidated financial statements.
Consideration received (38)
+OneX
+OneX was introduced into the Group on the 1st of August 2020 whereby Reunert Connect (Pty) Ltd was renamed to +OneX, Reunert ICT held 100% of the shares. With effect from 1 December 2020 the +OneX group was formed and Nashua Communications (Pty) Ltd which was 100% owned by Reunert ICT was then moved to be a part of this cluster and renamed to +OneX Communications (Pty) Ltd. On 1 December 2020, non-controlling interests were introduced by way of an issue of shares by +OneX Solutions to the founders.
On 30 September 2021, a further dilution of shareholding occurred resulting in a reduction in Reunert ICT shareholding in +OneX group. This reduction was due to new shares being issued to a strategic BEE group, which will now hold 20% of the +OneX group. Due to this dilution the shareholding for +OneX Group will change resulting in Reunert ICT, The Founders and the Black Founders now holding 56,9%, 14,4% and 8,7% respectively.
Consideration received (27)
Net consideration received (37)
Non-controlling interests (65)
Transactions with non-controlling interests 47
Investment in joint venture (19)

Rm 2020
Reviewed
Transactions to increase percentage holding
During the 2020 financial year the Group increased its holding in TFS from 62,49% to 89,94% at a cash cost of R132 million.
The increase was due to direct purchase of shares and by the exercise of put options held by the non-controlling shareholders of TFS.
Net consideration paid 132
Non-controlling interests 15
Transactions with non-controlling interests (14)
Put option liability 131
Equity transactions/put option with non-controlling interests (94)
Retained earnings 94

18. Litigation

There is no material litigation being undertaken against or by the Group, other than the ongoing process to seek to recover the losses incurred through the Quince fraud.

19. Events after reporting date

Subsequent to the reporting date the Group has:

20. Going concern

The directors have reviewed the Group’s financial position, existing credit facilities and available cash resources and are satisfied that the Group will continue as a going concern.

21. External auditor’s review opinion

Deloitte & Touche has issued an unmodified review report on the reviewed condensed consolidated financial statements for the year ended 30 September 2021. The review was concluded in accordance with ISRE 2410 – Review of Interim Financial Information performed by the independent auditor of the entity. A copy of their unmodified review report is available for inspection at Reunert’s registered office. The auditor’s review report does not necessarily report on all information contained in this announcement. Investors 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 from Reunert’s registered office. Any reference to future performance included in this announcement has not been reviewed or reported on by the auditors.