integrated - annual report - 2020 - ShareData Online
293
annual report 2020 2020 integrated
-
Upload
khangminh22 -
Category
Documents
-
view
0 -
download
0
Transcript of integrated - annual report - 2020 - ShareData Online
annual report
20202020integrated
1
Ove
rvie
wG
over
nanc
eSu
stai
nabi
lity
Ann
ual fi
nanc
ial s
tate
men
tsSh
areh
olde
rs’ in
form
atio
n
Contents
Page
3 OVERVIEW 4 Profile
5 About our integrated report
8 2020 at a glance
10 5-year financial review and statistics
13 Geographic footprint
14 Group structure
16 Alviva as an investment
17 Alviva business model
19 Strategic focus areas
21 Report to shareholders
Page
125 ANNUAL FINANCIAL STATEMENTS
126 Certificate by Company Secretary
127 Statement by CEO and CFO
128 Directors’ responsibility statement and approval
129 Audit and Risk Committee report
137 Directors’ report
145 Report of the independent auditor
150 Statements of financial position
151 Statements of profit or loss and other comprehensive income
152 Statements of changes in equity
153 Statements of cash flows
154 Notes to the financial statements
28 GOVERNANCE 29 Board of Directors
31 Governance and compliance structure
32 Corporate governance report
49 Combined assurance
51 Risk management
57 Stakeholder engagement
61 Remuneration Committee report
86 Social and Ethics Committee report
269 SHAREHOLDERS’ INFORMATION270 Shareholders’ diary
271 Notice of AGM
285 Form of proxy
287 Annexure A: Participation in the AGM via electronic communication
289 Annexure B: Online shareholders’ meeting guide 2020
291 Corporate information91 SUSTAINABILITY 92 Sustainability report
1
Ove
rvie
wG
over
nanc
eSu
stai
nabi
lity
Ann
ual fi
nanc
ial s
tate
men
tsSh
areh
olde
rs’ in
form
atio
n
Glossary of termsAGM annual general meeting
AI artificial intelligence
Alviva Alviva Holdings Limited and its subsidiaries
B-BBEE broad-based black economic empowerment
CAE Chief Audit Executive
CEO Chief Executive Officer
CCO Chief Commercial Officer
CFO Chief Financial Officer
CIO Chief Information Officer
COVID-19 Coronavirus Disease 2019 or the pandemic
CRO Chief Risk Officer
CSI corporate social investment
EIM enterprise information management
EME Exempted Micro Enterprise
ERP enterprise resource planning
FSP forfeitable share plan
GRI Global Reporting Standards 2018 – GRI references in [red]
HR human resources
ICAS ICAS Employee and Organisation Enhancement Southern Africa (Pty) Ltd
ICT information communication technology
IFRS International Financial Reporting Standards
IIA Institute of Internal Auditors
IoDSA Institute of Directors in South Africa
IP intellectual property
ISO International Standards Organisation
IT information technology
JSE Johannesburg Stock Exchange
JSE Listings Require-ments
JSE Listings Requirements – service issue 27
King IV™ King IV Report on Corporate Governance for South Africa™ 2016
KPA Key Performance Areas
KWp kilowatt peak
LTIFR lost time injury frequency rate
MDP management development programme
MERSETA Manufacturing, Engineering and Related Services Sector Education and Training Authority
MICT SETA Media, Information and Communications Technologies Sector Edu-cation and Training Authority
MOI Memorandum of Incorporation
MSR Minimum Shareholding Requirement
MWp megawatt peak
NICD National Institute for Communicable Diseases
OCPP Open Charge Point Protocol
OHS Occupational Health and Safety
OHS Act Occupational Health and Safety Act, No 85 of 1993
PoPI Protection of Personal Information
PwC PricewaterhouseCoopers Incorporated
QSE Qualifying Small Enterprise
SABS South African Bureau of Standards
SARS South African Revenue Service
SENS Stock Exchange News Service
SDL skills development levies
SHE Safety, health and environment
SMME Small Medium Micro Enterprise
the Board the Board of Directors of Alviva Holdings Limited
the Committee the specific committee being covered under the preceding heading
the Company Alviva Holdings Limited
the Companies Act Companies Act, No 71 of 2008 of South Africa
the OHS Act Occupational Health and Safety Act, No 85 of 1993 of South Africa
the Group Alviva Holdings Limited and its subsidiaries
TRIFR total recordable injury frequency rate
WHO World Health Organisation
2
ALV
IVA
HO
LDIN
GS
LIM
ITED
•
Inte
grat
ed a
nnua
l rep
ort 2
020
3
Ove
rvie
wG
over
nanc
eSu
stai
nabi
lity
Ann
ual fi
nanc
ial s
tate
men
tsSh
areh
olde
rs’ in
form
atio
n
OVERVIEW
The Group operates through three distinct business segments: [GRI 102-2] [GRI 102-6]
� ICT Distribution – imports and, in some cases, assembles ICT hardware and software and sells it into the sub-Saharan African markets via reseller channels and national retail chains;
� Solutions and Services – systems integration and ICT solutions, including cybersecurity, application development, artificial intelligence solutions, renewal energy projects in South Africa, the rest of Africa and beyond; and
� Financial Services – finance solutions to business entities in the SMME and commercial sector, principally for office automation and technology-based equipment.
Group Central Services provides strategic direction and shared services to the Group.
Alviva has significant proprietary brands and agency agreements with prominent suppliers and also sources branded products from a well-established vendor network, both locally and internationally.
Alviva Holdings Limited is listed in the Technology sector of the JSE, and its head office is based in Midrand at The Summit, 269 16th Road, Randjespark, Midrand, South Africa. [GRI 102-3] [GRI 102-5]
Alviva is one of Africa’s largest providers of information and communication technology products and services. The Group comprises focused operating subsidiaries who specialise in their unique product and service offerings.
Profile
from
CUSTOMERS
Approx 7 000
PRODUCTS
Approx 17 000
OEM SUPPLIERS
Approx 250
EMPLOYEES
Approx 3 200
to
by
4
ALV
IVA
HO
LDIN
GS
LIM
ITED
•
Inte
grat
ed a
nnua
l rep
ort 2
020
Ove
rvie
wG
over
nanc
eSu
stai
nabi
lity
Ann
ual fi
nanc
ial s
tate
men
tsSh
areh
olde
rs’ in
form
atio
n
5
REPORTING PHILOSOPHY
This is our sixth integrated report. We continuously strive to improve our reporting
elements, alignment to relevant reporting frameworks and best practice.
Over time, the process evolved from publishing three separate reports, being the annual report, corporate
governance report and sustainability report as an integrated report, to publishing one integrated annual report incorporating
governance and sustainability in an integrated manner.
We seek to provide relevant and material information for investors and other stakeholders through a report that is accessible to the reader.
Our objective is to strengthen our application of the Integrated Reporting Framework’s guiding principles and content elements, focusing on:
It has therefore adopted the following approach:
REPORTING FRAMEWORKSAlviva’s integrated annual report was developed considering and applying frameworks including:
� the International Integrated Reporting Council’s (IIRC) International Integrated Reporting <IR> Framework;
� the International Financial Reporting Standards;
� the JSE Listings Requirements;
� Global Reporting Standards 2018 [GRI 102-54]; and
� the Companies Act, no 71 of 2008 of South Africa, as amended.
The Company has adopted the value-adding principles enshrined in the King IV™ Report on Corporate Governance South Africa 2016 and views integration, together with Board and executive education, as a phase of the process.
The Board realises the importance of an integrated annual report that fully promotes transparency and accountability to reinforce its role as a responsible corporate citizen.
� streamlining financial reporting;
� enhancing the transparency of the remuneration chapter;
� benchmarking performance according to achievements; and
� improving connectivity of information.
THESE FRAMEWORKS INFORM OUR
THE REPORTING PHILOSOPHY LED TO OUR
integrated annual reportAbout our
[GRI 102-46] [GRI 102-52]
6
ALV
IVA
HO
LDIN
GS
LIM
ITED
•
Inte
grat
ed a
nnua
l rep
ort 2
020
SCOPE AND BOUNDARYThe primary objective of this integrated annual report is to demonstrate the ability of Alviva to create and sustain value. The integrated annual report will provide a greater understanding of the Group’s strategy, its business model and its major impacts across economic, social and environmental aspects as well as insight into how the Group is managed.
The 2020 integrated annual report addresses all businesses, which comprise the South African operations, including subsidiary companies, and the African operations, in the financial reporting elements as well as on sustainability matters, unless specifically indicated otherwise. The cross-border operations complement the local volumes generated by Alviva, enhance the economies of scale, expand the geographic footprint and contribute to competitiveness, while providing an entrance to the African market.
A complete sustainability report has not been prepared for the 2020 reporting period and a synopsis of core economic, environmental and social indicators is presented on pages 92 to 124, as the Group progresses on its path to adopt a more integrated approach in its reporting. The adoption of integrated reporting principles is a developmental and evolutionary process and it may take several years to fully implement these principles and achieve the desired level of reporting. This report, nevertheless, offers stakeholders a more holistic view of Alviva’s operations and provides insight on both financial and non-financial matters for the year ended 30 June 2020. [GRI 102-50]
As the concepts and practices of integrated reporting develop, management will aim to improve disclosures and application, as deemed appropriate.
The integrated annual report is also available online at www.alvivaholdings.com.
Financial
Manufactured
Intellectual
Human
Social andrelationship
Natural
Value creation
Businessactivities
Governance
Outputs Outcomes
External environment
Vision and mission
CAPITALS CAPITALS
Financial
Manufactured
Intellectual
Human
Social andrelationship
Natural
Business model
Report structure
Performance Outlook
Risks and opportunities
Strategy and resource
allocation
Inputs
$ $
7
Ove
rvie
wG
over
nanc
eSu
stai
nabi
lity
Ann
ual fi
nanc
ial s
tate
men
tsSh
areh
olde
rs’ in
form
atio
n
ASSURANCE, COMPARABILITY AND RESTATEMENTSA combined assurance model is applied to provide a coordinated approach to all assurance activities.
An internal assurance process, which included risk-based assurance from Internal Audit, was followed in respect of the data disclosed in the sustainability synopsis.
Most of the performance measures included in this report have comparative figures and, unless specifically stated otherwise, cover the financial year of the Group.
There were no restatements during the reporting period. [GRI 102-48]
FEEDBACK REQUESTThe Board welcomes feedback on Alviva’s integrated annual report 2020 from stakeholders. Please contact Ms SL Grobler, Company Secretary, on [email protected] with any questions or queries on this report. [GRI 102-53]
FORWARD-LOOKING STATEMENTSCertain statements in this report are forward-looking statements, which Alviva believes are reasonable, and take into account information available up to the date of the report. Results could, however, differ materially from those set out in the forward-looking statements as a result of, amongst other factors, changes in economic and market conditions, changes in the regulatory environment and fluctuations in commodity prices and exchange rates. As a result, these forward-looking statements are not guarantees of future performance and are based on numerous assumptions regarding Alviva’s present and future business models, strategy and the environments in which it operates.
All subsequent oral or written forward-looking statements attributable to the Group or any member thereof or any persons acting on their behalf are expressly qualified in their entirety by the cautionary statements above and below. Alviva expressly disclaims any obligation or undertaking to disseminate any updates or revisions to any forward-looking statements contained herein or to reflect any change in their expectations with regard thereto or any change in events, conditions or circumstances on which any such forward-looking statement is based. The forward-looking statements have neither been reviewed nor audited by the Group’s external auditors, SNG Grant Thornton.
BOARD APPROVAL OF THE INTEGRATED REPORTThe Board acknowledges its responsibility to ensure the integrity of the integrated annual report. The Board has accordingly applied its mind to the integrated annual report and in the opinion of the Board the integrated annual report addresses all material issues, and presents fairly the integrated performance of the organisation and its impacts. The integrated annual report has been prepared in line with best practice to the extent possible for the year under review. On 25 September 2020, the Board authorised the integrated annual report for release on 30 September 2020.
For and on behalf of the Board
P Spies RD LyonCEO CFO
8
ALV
IVA
HO
LDIN
GS
LIM
ITED
•
Inte
grat
ed a
nnua
l rep
ort 2
020
Fiscal Year FY 2020 FY 2019 FY 2018 FY 2017 FY 2016
Rm (unless otherwise stated)
Revenue 14 804 15 923 13 629 12 811 10 969
Gross profit 2 434 2 608 2 409 2 273 1 663
Gross profit (%) 16,4 16,4 17,7 17,7 15,2
EBITDA * 708 860 820 824 679
Operating profit before interest and tax 389 670 690 734 616
Operating income (%) 2,6 4,2 5,1 5,7 5,6
Attributable profit 149 395 422 405 342
Basic earnings per share (cents) 112,7 275,3 273,5 244,2 207,1
Headline earnings per share (cents) 149,4 297,1 273,2 243,9 197,8
Core earnings per share (cents) 225,9 352,9 302,2 256,3 205,1
Weighted average shares outstanding (millions)
132 143 154 166 165
Inventory excluding goods in transit 1 080 920 661 694 895
Total stockholders equity 2 278 2 265 2 138 1 998 2 086
Debt to equity ratio (%) 61,8 39,1 37,0 25,8 18,8
Return on net equity (%) 6,5 17,8 20,4 19,9 18,8
* Earnings before interest, tax, depreciation and amortisation.
EBITDA PER SEGMENT
3%
54%30%
13%
7%
49%
25%
19%
2020 at a glance
2020 2019
ICT Distribution Services and Solutions Financial Services Group Central Services
[GRI 201-1]
9
Ove
rvie
wG
over
nanc
eSu
stai
nabi
lity
Ann
ual fi
nanc
ial s
tate
men
tsSh
areh
olde
rs’ in
form
atio
n
REVENUE (Rm)
0
5 000
10 000
15 000
20 000
2016 2017 2018 2019 2020
10 969
12 81113 629
15 923
ATTRIBUTABLE PROFIT (Rm)
0
100
200
300
400
500
2016 2017 2018 2019 2020
342
405422
395
TOTAL ASSETS (Rm)
0
1 000
2 000
3 000
4 000
5 000
6 000
7 000
8 000
9 000
2016 2017 2018 2019 2020
5 0134 749
5 826
6 494
NET ASSET VALUE PER SHARE (cents)
0
500
1 000
1 500
2 000
2016 2017 2018 2019 2020
1 218,41 251,2
1 453,6
1 658,2
EBITDA (Rm)
0
200
400
600
800
1 000
2016 2017 2018 2019 2020
679
824 820860
HEADLINE EARNINGS PER SHARE (cents)
0
50
100
150
200
250
300
350
2016 2017 2018 2019 2020
197,8
243,9
273,2
297,1
14 804
149
708
149,4
7 792 1 763,9
10
ALV
IVA
HO
LDIN
GS
LIM
ITED
•
Inte
grat
ed a
nnua
l rep
ort 2
020
Group2020
R’0002019*R’000
2018*R’000
2017*R’000
2016*R’000
EXTRACT FROM STATEMENTS OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
Revenue 14 804 155 15 922 641 13 628 916 12 811 498 10 969 132
Cost of sales (12 370 493) (13 314 503) (11 219 810) (10 538 710) (9 305 726)
Gross profit 2 433 662 2 608 138 2 409 106 2 272 788 1 663 406
Operating expenses and other income (2 045 125) (1 938 365) (1 718 977) (1 539 264) (1 047 528)
Operating profit before interest 388 537 669 773 690 129 733 524 615 878
Finance income 50 666 52 059 39 909 39 453 17 617
Finance costs (227 640) (185 108) (161 166) (146 490) (126 311)
Share of profit of equity-accounted investee – – – – 22 702
Profit before tax 211 563 536 724 568 872 626 487 529 886
Income tax expense (74 688) (145 866) (151 548) (182 494) (148 283)
Profit for the period 136 875 390 858 417 324 443 993 381 603
Attributable to owners of the Company 148 724 394 500 421 707 405 277 341 652
Attributable to non-controlling interests (11 849) (3 642) (4 383) 38 716 39 951
EXTRACT FROM STATEMENTS OF CASH FLOWS
Cash generated from operating activities 1 801 043 275 076 1 049 100 1 259 803 745 769
Finance income received 50 666 52 059 39 909 39 453 25 787
Finance costs paid (227 640) (185 108) (161 166) (146 490) (126 311)
Tax paid (115 736) (172 331) (186 364) (202 484) (180 411)
1 508 333 (30 304) 741 479 950 282 464 834
Cash flows from investing activities (165 848) (429 010) (383 338) (89 294) 109 310
Cash flows from financing activities (93 220) (266 844) (58 127) (694 894) (280 097)
Increase/(decrease) in cash and cash equivalents 1 249 265 (726 158) 300 014 166 094 294 047
Effects of exchange rate changes on the balance of cash held in foreign currencies
4 609 447 1 684 758 2 126
(Overdraft)/cash and cash equivalents at the beginning of the period
(34 253) 691 458 389 760 222 908 (73 265)
Cash and cash equivalents/(overdraft) at the end of the period
1 219 621 (34 253) 691 458 389 760 222 908
Non-IFRS information
Earnings before interest, tax, depreciation and amortisation 707 619 859 784 820 483 824 118 679 162
* Restated
[GRI 201-1] [GRI 102-48]
5-year financial review and statisticsfor the year ended 30 June
11
Ove
rvie
wG
over
nanc
eSu
stai
nabi
lity
Ann
ual fi
nanc
ial s
tate
men
tsSh
areh
olde
rs’ in
form
atio
n
Group2020
R’0002019
R’0002018
R’0002017
R’0002016
R’000
EXTRACT FROM STATEMENTS OF FINANCIAL POSITION
ASSETS
Non-current assets 2 080 544 1 784 247 1 554 618 1 079 064 1 100 391
Property, plant and equipment 457 218 122 312 120 697 104 661 120 011
Intangible assets 320 127 287 895 282 918 114 857 158 817
Goodwill 614 454 631 526 564 235 347 846 347 846
Investment in equity-accounted investees 41 773 88 119 62 077 – –
Deferred tax 90 834 78 206 74 761 77 119 65 697
Finance lease receivables 556 138 576 189 449 930 434 581 408 020
Current assets 5 711 445 4 710 221 4 271 704 3 670 358 3 912 260
Inventory 1 228 187 1 036 748 774 111 751 702 957 725
Derivative financial asset – – – 3 287 –
Finance lease receivables 298 383 269 975 230 508 210 972 178 663
Trade and other receivables 2 946 836 3 264 856 2 537 275 2 304 629 2 524 373
Income tax receivable 18 418 14 096 38 352 10 008 10 006 Cash and cash equivalents 1 219 621 124 546 691 458 389 760 241 493
Total assets 7 791 989 6 494 468 5 826 322 4 749 422 5 012 651
EQUITY AND LIABILITIES
Capital and reserves 2 377 779 2 335 027 2 227 404 2 020 223 2 409 517
Stated capital 1 363 1 434 1 584 43 359 193 646
Treasury shares (115 328) (125 819) (129 090) (98 492) (72 856)
Other equity reserves 46 289 33 568 54 268 41 436 36 107
Cash flow hedge reserve – – – 548 (1 722)
Retained earnings 2 345 484 2 355 661 2 211 329 2 010 921 1 931 000
Non-controlling interests 99 971 70 183 89 313 22 451 323 342
Non-current liabilities and deferred tax 1 244 584 915 171 943 016 585 642 432 612
Current liabilities 4 169 626 3 244 270 2 655 902 2 143 557 2 170 522
Trade and other payables 3 626 394 2 806 046 2 364 929 1 974 752 2 026 899
Bank overdrafts – 158 799 – – 18 585
Non-interest-bearing liabilities 7 584 44 130 68 850 – –
Derivative financial liability – – – – 16 154
Interest-bearing liabilities 332 194 106 285 42 019 5 572 154
Contract liabilities* 183 929 114 847 157 235 148 818 96 111
Income tax payable 19 525 14 163 22 869 14 415 12 619
Total equity and liabilities 7 791 989 6 494 468 5 826 322 4 749 422 5 012 651
* Previously included in the deferred revenue line item.
for the year ended 30 June
5-year financial review and statistics continued
12
ALV
IVA
HO
LDIN
GS
LIM
ITED
•
Inte
grat
ed a
nnua
l rep
ort 2
020
Group 2020 2019 2018 2017 2016
Total number of ordinary shares (’000) 129 137 136 587 147 087 159 673 171 226
Weighted average number of ordinary shares (’000)
131 987 143 281 154 192 165 944 164 992
Weighted average number of shares in issue for purposes of dilution (‘000)
134 351 147 141 156 536 166 417 164 992
Performance per ordinary share (cents)
Basic earnings per ordinary share 112,7 275,3 273,5 244,2 207,1
Diluted basic earnings per ordinary share 110,7 268,1 269,4 243,5 207,1
Headline earnings per ordinary share 149,4 297,1 273,2 243,9 197,8
Diluted headline earnings per ordinary share 146,7 289,3 269,1 243,2 197,8
Dividend declared per ordinary share 15,0 30,0 27,0 25,0 20,0
Dividend cover 3,6 9,7 10,6 12,2 0,0
Net asset value 1 763,9 1 658,2 1 453,6 1 251,2 1 218,4
Net tangible asset value 1 040,2 985,0 877,7 961,4 922,5
Return on net equity (%) 6,5 17,8 20,4 19,9 18,8
Working capital management
Investment in working capital (R’000) 364 700 1 380 711 789 222 932 761 1 359 088
Liquidity and solvency
Debt to equity (%) 61,8 39,1 37,0 25,8 18,8
Current ratio (excluding inventory in transit and work in progress)
1,48 1,46 1,64 1,74 1,85
Acid test ratio (excluding inventory in transit) 1,08 1,17 1,39 1,42 1,44
Returns (%)
Gross profit 16,4 16,4 17,7 17,7 15,2
EBITDA * 4,8 5,4 6,0 6,4 6,2
Effective tax rate 35,3 27,2 26,6 29,1 29,2
Net profit 0,9 2,5 3,1 3,5 3,5
* Earnings before interest, tax, depreciation and amortisation.
for the year ended 30 June
5-year financial review and statistics continued
13
Ove
rvie
wG
over
nanc
eSu
stai
nabi
lity
Ann
ual fi
nanc
ial s
tate
men
tsSh
areh
olde
rs’ in
form
atio
n
Axiz
Axiz Services
Centrafin
Datacentrix
Digital Generation
GridCars
Merlynn
Obscure
Pinnacle
Sintrex
Solareff
SynergERP
VH Fibre Optics
Legend:
Branches with sales and technical support presence
Sales presence
Technical support presence
Axiz
Axiz Services
Centrafin
Datacentrix
Digital Generation
GridCars
Merlynn
Obscure
Pinnacle
Sintrex
Solareff
SynergERP
VH Fibre Optics
Legend:
Branches with sales and technical support presence
Sales presence
Technical support presence
UNITED STATES OF AMERICA
BURKINAFASO
DEMOCRATICREPUBLIC
OF THE CONGO
ESWATINI
MAURITIUS
CÔTED’IVOIRE
SIERRA LEONE
SENEGAL
ALGERIA
EGYPT
MOROCCOTUNISIA
NIGERIA
NIGERCHAD
UNITEDARAB
EMIRATES
UGANDA
ETHIOPIA
SEYCHELLES
RWANDA
KENYA
TANZANIA
CAMEROON
CONGO
GABON
ANGOLA
BOTSWANA
ZIMBABWEMOZAMBIQUE
MADAGASCARNAMIBIA
SOUTH AFRICA
ZAMBIA
GHANA
MALAWI
DELAWARE
QATAR
LESOTHO
Geographic footprint
Businesses in:
– USA
– UK
– Australia
[GRI 102-4] [GRI 102-6] [GRI 102-9]
14
ALV
IVA
HO
LDIN
GS
LIM
ITED
•
Inte
grat
ed a
nnua
l rep
ort 2
020
CENTRAL SERVICES
Group Central Services provides strategic direction and
shared services to the Group.
Group structure[GRI 102-2] [GRI 102-7] [GRI 102-9] [GRI 102-45]
GROUP ADMINISTRATION
GROUP TREASURY
GROUP IT
Axiz – a leading IT infrastructure and software distributor that provides technology intelligence to its business partners through the supply of world-class products. Its comprehensive product portfolio, combined with broad- and value-based distribution, aligns well with new market dynamics such as cloud computing and data centre expansion, thereby enabling its partner base to architect and provide best-of-breed solutions with which to address the business requirements of their customers.
Axiz Services – (previously Tricon Services) – an IT hardware and software services and support business that operates across the African continent, specialising in IT hardware and infrastructure installations and implementation of services, which services include hardware maintenance support, efficient and effective parts logistics, warranty fulfilment and end-user support.
Obscure – specialises in brokering best-of-breed security solutions to the market, creating a channel for vendors and customers through its offering of information security products and concepts.
VH Fibre – a value-add distribution and installation services company specialising in the supply of fibre-to-the-home and fibre-to-the-building passive network solutions.
Pinnacle – focuses on the assembly and distribution of ICT hardware and software distributed via the reseller channel into small to medium corporate and government markets and into the retail markets through the national retail chains. The continually expanding product range, which includes most of the top international tier one brands, as well as its own mainstay brand, Proline, spans the entire breadth of ICT hardware and related peripherals. Datanet is a division in the Pinnacle business entity.
ICT DISTRIBUTION
The ICT Distribution segment imports and, in some cases, assembles
ICT hardware and software and distributes it into the sub- Saharan
African markets via reseller channels and national retail chains.
Centrafin – provides asset-based finance by providing turnkey solutions, insurance and financial products to customers, principally for the acquisition of office automation and technology equipment.
centrafinRAPID | RELIABLE | RESPONSIVE
FINANCIAL SERVICES
The Financial Services segment offers finance solutions to business
entities in the SMME and commercial sector, principally for office automation
and technology-based equipment.
15
Ove
rvie
wG
over
nanc
eSu
stai
nabi
lity
Ann
ual fi
nanc
ial s
tate
men
tsSh
areh
olde
rs’ in
form
atio
n
Datacentrix – one of the largest systems integrator and ICT solutions providers in South Africa, operating through three divisions with a national footprint, namely Managed Services, Technology Solutions and Business Applications. Managed Services is a progressive centre of excellence that delivers end-to-end ICT services, which are pertinent to customers’ needs and supports their relevance into the future. Technology Solutions is a technology solutions integrator delivering business value from traditional compute, storage and networking to software-defined, data-driven and cybersecurity solutions. Business Applications enables organisations to take advantage of the information that is created and stored in their ICT infrastructures by applying EIM, ERP solutions and professional services.
Solareff – a leading specialist in Solar Photovoltaic solutions in South Africa, for medium- to large-scale rooftop and ground-mounted installations.
Sintrex – a solution-based company specialising in IT infrastructure management, providing end-to-end solutions and services across all IT silos, thereby ensuring visibility and performance insight into IT infrastructure management, network management and monitoring solutions.
Merlynn – an AI technology business that focuses on solutions within risk management, by removing uncertainty within processes through leveraging the power of AI to reduce risks. Merlynn assists organisations in the development of AI-related strategies and their practical translation into operational environments. Strategies include AI impact (risk and opportunity definition), IP capture (knowledge retention and deployment) and proactive risk management strategies and methodologies, underpinned by a strict policy of ‘technology with a conscience’.
SynergERP – offers end-to-end ERP software solutions to medium and large companies involved in manufacturing, distribution and business services. SynergERP’s solutions allow businesses to streamline processes, align information across companies, sites, departments and make better-informed strategic decisions by breaking down silos and empowering stakeholders with the right data at the right time.
GridCars – a developer of electric vehicle charge-point software management systems and supplier of charge points.
Digital Generation (DG) – is a leading consulting and services business providing custom-made ICT business solutions, designed to unlock and maximise the full lifecycle value of ICT products, services and infrastructure for businesses in both the public and private sectors.
Intdev – a preferred IT partner, focusing on connectivity, communications and managed services.
CentraVoice – provides information and communications technology products and services, specialising in total communications solutions.
SERVICES AND SOLUTIONS
The Services and Solutions segment offers systems integration and ICT solutions,
including cybersecurity, application development, artificial intelligence solutions and
renewable energy projects in South Africa, the rest of Africa and beyond.
SOLUTIONS AND INTEGRATORS
RENEWABLE ENERGY
APPLICATIONS AND IP
16
ALV
IVA
HO
LDIN
GS
LIM
ITED
•
Inte
grat
ed a
nnua
l rep
ort 2
020
Provider of a choice of world-leading information, communication and technology products and services – A leading provider of information, communication, technology and related services and products in South Africa with an expanding footprint in selected African countries and Mauritius.
People skills – Experienced, long-serving employees with an industry-leading track record supported by skills development programmes.
Leading brands – Proprietary products and distribution agreements with world-class brands for the supply of information, communication, technology and related products and services.
Strong cash flow – Proven record with the ability to generate strong cash flows.
Regional and national footprint – Well positioned relative to major growth areas of the country and aligned to market demand for our services and products.
The result – Integrated provider of information, communication, technology and ancillary products and services with assets and HR to support a sustainable business.
CORE COMPETENCIES Alviva’s core competencies are the combination of knowledge and technical capacities that allow the Group to be competitive in the marketplace. The core competencies in the Group allow it to expand into new markets as well as provide a significant benefit to customers. Alviva’s core competencies are defined as follows:
Core competencies Adoption in Alviva
Alignment with technological developments through product and technology knowledge
Ensuring the ongoing identification of growth opportunities and maximising revenue growth on those areas to the benefit of all of the Group’s stakeholders.
Value-added supplierAlviva boasts a well-rounded end-to-end service thanks to a number of important value-added services.
AgilityAlviva has a proven ability to rapidly adjust to market and environmental changes in productive and cost-effective ways.
Ability to executeAlviva has an exceptional ability to execute and deliver on projects, generally exceeding expectations.
Supply-chain excellenceAlviva understands the supply-chain and is continuously looking to innovate and improve on the status quo.
Best people in the industryAlviva’s ‘cherry-picked’ employees are the best in the industry, are continually trained, developed and empowered to achieve success.
Technical expertise, local assembly and customised manufacturing
Alviva has unbeatable technical expertise, which includes its ability to locally assemble and manufacture superior customised products, as well as its extensive range.
Focused product breadthAlviva’s continually expanding product range spans the end-to-end breadth of ICT software, hardware equipment and services.
Alviva as an investment
17
Ove
rvie
wG
over
nanc
eSu
stai
nabi
lity
Ann
ual fi
nanc
ial s
tate
men
tsSh
areh
olde
rs’ in
form
atio
n
VISION [GRI 102-14]
Our people are our biggest asset and, with the drive for constant improvement and a service-driven culture, we are building a company for generations to come.
MISSIONAlviva’s mission is to maximise the returns of all its stakeholders through the execution of its vision, which will be achieved by focusing on:
� being an equal opportunity company and developing staff to their full potential through the implementation of training and development programmes;
� continuous innovation and improvement in supply-chain management, services and solutions;
� growth opportunities;
� being a preferred provider of superior products;
� continued expansion of product and service offerings to promote growth, penetrate new sectors and contribute to the development of infrastructure;
� expansion of its geographical footprint into markets which offer growth opportunities;
� delivering above average returns to all stakeholders;
� proactive participation in B-BBEE; and
� subscribing to the principles of sustainable development through identification, management and measurement of integrated economic, social, environmental and business performance.
VALUES [GRI 102-16]
The Group’s values, as contained in the Code of Conduct, are:
Respect
Honour Integrity
Honesty
Fairness
Accountability
ResponsibilityServiceexcellence
Professionalism
Enthusiasm
Creativity
Trust
Alviva business model
18
ALV
IVA
HO
LDIN
GS
LIM
ITED
•
Inte
grat
ed a
nnua
l rep
ort 2
020
STRATEGY [GRI 102-14]
ALVIVA HOLDINGS STRATEGY
Continued growth of current revenue streams coupled with business through diversification and expansion in world-leading technology products and services
INPUTS (what we have)
OUTPUTS (what we deliver)
� Best-of-breed brands
� Best-in-class people
� Technical skills
� Geographic representation
� Strong financial position
� Shareholder value
� Quality products
� Service excellence
� Sustainable development
KEY DRIVERS THAT BRING OUR BUSINESS MODEL TO LIFE [GRI 102-14]
(what we measure)
We invest in our peopleThrough competitive remuneration structures, targeted transformation programmes, broad-based skills development programmes, visible succession plans and a culture of promoting from within, Alviva ensures that staff development and retention embed strong support for the Group’s long-term goals.
We invest in high-quality complementary operationsAlviva ensures that there is a continuous investment into the replacing of assets and the introduction of new technology, and this is enhanced by an effective workplace improvement programme, a best-cost culture and a value-added offering to constantly promote greater productivity and efficiency.
We focus on performance, reliability and sustainabilityThe existence of key best practices underpinning good corporate citizenship and the identification of the main business risks and procedures for ongoing risk control and management, documented targets for strategic growth plans and strategic objectives as well as systems to manage and protect key assets, Alviva strives to ensure that a long-term sustainable results driven performance will be delivered.
We are passionate about our external relationshipsAlviva is passionate about its engagement with external stakeholders, and a committed orientation towards this ideal is supported by a culture of open and transparent communication, product responsibility, quality management systems, statutory and regulatory compliance, coupled with a strong sense of self-regulation and high ethical standards.
Alviva business model continued
19
Ove
rvie
wG
over
nanc
eSu
stai
nabi
lity
Ann
ual fi
nanc
ial s
tate
men
tsSh
areh
olde
rs’ in
form
atio
n
ALVIVA’S APPROACH TO SUSTAINABLE VALUE CREATION [GRI 102-14]
Material focus areas Operational/strategic response
ECONOMIC
Operational efficiencies � Vertical integration
� Optimise performance
� Information management
Income and growth � Increase capacity
� Market segment participation
� Product innovation
� Integrated planning
� International expansion
� Building a company for generations to come
Cost and cash management � Best-cost approach
� Reduce impact of administered cost increases
� Sound working capital management
� Maintain a strong statement of financial position
Business risk � Regulatory compliance
� Internal control environment
� Internal and external audits
� Policies and procedures
SOCIAL
Human rights � Compliance policies
� Code of conduct
� Occupational health and safety
Employees � Skills development
� Staff retention
� Leadership and senior management succession planning
Equality, empowerment and transformation
� Preferential procurement
� Overall B-BBEE rating
� Employment equity
ENVIRONMENT
Regulatory compliance � Environmental risk and impact assessments
� Responsibility to monitor emissions
Alternative energy sources � Sustainability reporting
Resource optimisation � Waste management
� Electricity management
Strategic focus areas
20
ALV
IVA
HO
LDIN
GS
LIM
ITED
•
Inte
grat
ed a
nnua
l rep
ort 2
020
Material focus areas Operational/strategic response
EXTERNAL RELATIONSHIPS
Strategic alliances � Membership of industry bodies
� Strategic local and international partners
� Preferred suppliers
Customers � Brand awareness
� Product responsibility
� New products
CSI � Wellness programme
� Community investment
Stakeholder engagement � Integrated reporting
� Continuous, open and transparent communication
� Investor roadshows
� SENS reporting
PRODUCTS
Quality standards � ISO certifications
Consumer Protection Act � Standard operating procedures
� Group Compliance Policy
Strategic focus areas continued
21
Ove
rvie
wG
over
nanc
eSu
stai
nabi
lity
Ann
ual fi
nanc
ial s
tate
men
tsSh
areh
olde
rs’ in
form
atio
n
We are pleased to present the report to shareholders for the 2020 reporting period.
OVERVIEWIt has been an extraordinary year for the world, brought about by the events from the impact of COVID-19, and Alviva has been unable to avoid the economic fall-out that has ensued. Although the financial results are disappointing when compared to those in prior periods, a great deal has been achieved despite the enormous challenges. During the national lockdown, initiated by the South African government on 26 March 2020, Alviva’s management had extensive discussions with employees, suppliers and customers regarding the sustainability of each entity within the Group. These interactions revealed an overwhelming support for all of the businesses and management was tremendously encouraged with the feedback and commitment. Alviva has assisted its customers, where possible, with extended terms and requested, and were granted, payment extensions with most of its significant suppliers. The Group’s employees sacrificed some of their leave entitlement and the Company supported them by processing their basic salaries in full and assuring them that no retrenchments, related to the uncertainty created by COVID-19, would take place. Alviva’s shareholders, although they have not been rewarded by the share price, may take tremendous comfort from this support from the Group’s other stakeholders.
Of equal significance for the long-term sustainability of the Group, the migration from previously unsupported legacy systems continued with three more entities implementing Sage X3, the most recent two with effect from July 2020. This takes enormous effort and planning and the benefits of these actions will be felt in future periods.
The second half of the year was obviously affected by COVID-19. First of all, there was a delay in supplies of product from China and then the imposition of the national lockdown by the South African government on 26 March ensured that there would be no chance of the Group recovering lost ground in its financial performance. During the lockdown, most of Alviva’s businesses were able to trade, albeit at a reduced capacity and within the limits set by the government. The distribution businesses then had to cope, using reduced resources, with handling April and May’s order load in one month, when stage 4 was declared at the beginning of May. Notwithstanding these obstacles, May and June were reasonable trading periods.
Revenue for the year was approximately 7% below last year and attributable profit was down by a substantial 62%. As well as the factors mentioned already, there have been a number of one-off transactions that impacted the results that are worthy of mention.
� The Group recognised income on the release from its contingent consideration of approximately R24 million, in respect of its acquisitions of Merlynn Intelligence Technologies (Pty) Ltd (“Merlynn”) and Obscure Enterprises (Pty) Ltd (“Obscure”).
� Merlynn, the artificial intelligence business that Alviva had acquired in 2019, has made progress in getting its offering into various entities but the time taken to sign up these sizeable international entities has been underestimated. Consequently, the profit targets were not reached and the additional payment of R9 million will not be made.
� Obscure performed reasonably well during the period but did not meet its targeted income, largely affected by the economy and COVID-19, resulting in the release of approximately R14 million from the contingent consideration.
� Alviva has recognised significant estimated credit losses, largely in the second half, comprising, inter alia, the following:
� An additional expected credit loss to the value of R28 million (2019: R23 million) on its loan to equity-accounted investee. This business was gaining traction in executing on the RT3 contract with government but was badly affected by COVID-19 and the national lockdown; and
� Expected credit losses and write-offs of approximately R45 million on certain customers that found the lack of income during the lockdown too much of a burden. Some customers are either in business rescue, have ceased trading or are considered unlikely to survive.
� It is anticipated that the economy will take some time to recover from the effects of COVID-19 and Alviva has rigorously tested its intangible assets with this in mind. Substantial write-downs in the carrying value of goodwill, on VH Fibre particularly, amounted to R50 million.
� Foreign exchange losses that were recognised at the interim stage were entirely reversed and the profits would have been higher were it not for having to account for the exchange rate differences on the acquisition price of the Synerg international businesses for which no risk exposure management was readily available. The loss in this regard was R6 million included in the gain on foreign exchange line item in profit or loss.
Report to shareholders
22
ALV
IVA
HO
LDIN
GS
LIM
ITED
•
Inte
grat
ed a
nnua
l rep
ort 2
020
A huge emphasis was placed on maintaining and improving liquidity since the imposition of the lockdown due to the uncertainty that it had created. The R100 million redemption of the preference share to Absa Bank was postponed for three months to 20 August 2020, the Share Repurchase programme was put on hold, despite the temptation of the attractive share price, and discretionary capital expenditure was suspended. The decrease in working capital at the reporting date, the consequent extraordinarily high cash generated from operations, and the substantial cash holdings at the reporting date, were largely due to the extension of credit terms granted by vendors to aid the businesses through the post-lockdown period. Substantial repayments to the supportive vendors have been made in the ensuing months, the R100 million preference shares have been redeemed and the cash holdings have decreased subsequent to the reporting date to normalised levels.
FINANCIAL RESULTS
Segment performance The ICT Distribution segment has had a tough year from a financial results perspective, with the challenges of implementing new systems and coping with COVID-19 being most notable. Notwithstanding, the segment is in a solid position to commence the reporting period ahead. Revenue decreased by 11% and EBITDA by 25%.
The ICT Distribution segment is made up of Axiz, Axiz Services, Obscure, Pinnacle and VH Fibre. Axiz is the most significant of the businesses in this cluster.
Axiz remains the leading distributor in the region and has implemented Gartner’s Bimodal IT model, being the practice of managing two separate coherent models of IT delivery, one focused on stability and the other on agility.
In order to achieve this, the segment had to modernise its IT systems and processes to be digitally ready and to ensure delivery of cloud products and services to the channel in a more digital manner. New demands on, and opportunities for, distributors globally are calling for services to be provided with many of these new and existing product offerings. To this end, Axiz has implemented the following during the reporting period:
� The successful implementation of a modern modular ERP system, SAGE X3, migrating from a legacy and high-risk ERP system, which was 13 years old and unsupported. This eliminated the single biggest risk and inhibitor facing the business. The new ERP system, whilst dealing with some anticipated operational disruptions, has been bedded down and was deemed a success. Enhancement phases from 1 to 4 have been rolled out, providing modern business intelligence and data management tools. This project was within budget and required no emergency interventions or roll-backs;
� A successful migration of the Group’s Digital Cloud platform to the new ERP system, which now provides true digital integration to vendors and partners as well as unlocking new digital features to resellers and a vendor marketplace that was not previously possible. Phases rolled out during early 2020 allowed for e-commerce of high run-rate physical goods for the segment’s traditional channel;
� The challenging but now successful implementation of the Tricon Services business unit (renamed Axiz Services) that was purchased in September 2018. This unit is operationally profitable. Unfortunately, COVID-19 had a meaningful impact on the business but this division gives Axiz, partners and vendors access to over 150 technical resources in over 30 countries in Africa with a solid annuity and long-term order book, implementing datacentre services for the likes of IBM. Axiz will be aggressively adding new vendor and customer partnerships to this portfolio during 2021. It is expected that the unit will enhance and diversify operational profitability of the distribution business going forward; and
� The set up and implementation of an offshore distribution company based in Mauritius, Alviva International, trading as Axiz. This will further enhance expansion for both distribution and services efforts in more countries in Africa and will be more efficient than from the previous base of South Africa.
Obscure, given the circumstances, had a reasonable second six months but the profit before tax for the reporting period decreased to R9,7 million (2019: R14,4 million) largely as a result of a comparatively poor first six months of the reporting period. Their cyber security product portfolio is market-leading and Alviva remains confident that this business will continue to yield good returns. Obscure has successfully expanded the product range and activity levels have increased.
Report to shareholders continued
23
Ove
rvie
wG
over
nanc
eSu
stai
nabi
lity
Ann
ual fi
nanc
ial s
tate
men
tsSh
areh
olde
rs’ in
form
atio
n
Pinnacle has been ‘re-engineered’ over the period and is now better positioned for the future. Unfortunately, Pinnacle had exposures to a number of businesses that had been struggling with the downturn in economic activity and, with the advent of COVID-19, these entities faced challenges to survive. Consequently, approximately R35 million of expected credit losses was recognised at the end of the reporting period. One of the key strategies at the beginning of the reporting period was to diversify by increasing the level of enterprise business. This has been achieved through products such as Nutanix, Commvault, SuperMicro, Dell, HPE and Huawei. In addition, much time has been invested into the move onto the same ERP system which took place on 1 July 2020. So far, the results have been pleasing.
VH Fibre (“VHF”): Since January 2019, the South African fibre market has seen a sharp contraction. VHF has also seen a marked slowdown in the demand for its exclusive high quality brand, Prysmian, as the major metropolitan areas reached saturation points and, as fibre network owners expand into the less dense and lower LSM areas, the uptake has been lower than the metropolitan areas. VHF is making progress in diversifying into the wireless backhaul market, as the lack of investment in fixed-line metro links is reducing and this presents an opportunity. Cross-border activity on products and services continues to grow at a faster rate than in South Africa. VHF’s results for the reporting period are significantly lower at a R0,5 million loss before tax compared to a R14,2 million profit in the prior period.
In summary –
The main components of the downturn in profitability for this segment have been as follows:
� The lacklustre economic environment, COVID-19-related restrictions and uncertainty in general have had a significant impact on the results, although the quantum is difficult to estimate;
� The introduction of the new ERP system as mentioned above. This has been bedded down and the team is adapting to the new disciplines inherent in the system; and
� The performance of VHF referred to above.
The Services and Solutions segment is made up of three sub-segments:
� Solutions and Integrators, incorporating Datacentrix, DG, and Centravoice/IntDev
� Renewable Energy: Solareff and GridCars
� Applications and IP: Merlynn, Sintrex and Synerg
Solutions and Integrators
This part of the business has been more resilient than the ICT Distribution segment.
Datacentrix maintained its revenue despite the impact of the pandemic in the second half of the reporting period. Execution to customers was exceptional given the various levels of lockdown and this was expressed by the large number of customer compliments that were received, specifically in the Managed Services division. Due to a change in mix and competitive market pressures, margins weakened, resulting in the profit before tax declining by 35%. Cash flow was impressive though, with the cash generated from its operations reaching a healthy R339 million. The Cyber security and Digital transformation divisions showed encouraging growth in the reporting period and the implementation of new digital platforms and strategies in the Managed Services, Digital Business Solutions and eNetworks businesses have started to bear fruit. The overall business has been much diversified over the years and has evolved some way from pure box-dropping with services now contributing nearly half of total revenue.
Whilst Datacentrix has a robust execution capability and is well positioned, the uncertainties occasioned by the pandemic and economic conditions will weigh on the business. Datacentrix remains a key strategic component of the Group’s service offering and has an enviable depth in skills in some exciting growth areas.
DG had a remarkable year, given the circumstances. Revenue increased by 9% and profit before tax went up by an extraordinary 31%. The unit was able to take advantage of some meaningful one-off deals with their corporate customer base during the period. Effective November 2019, Alviva purchased a further 10% of the equity of DG, bringing its holding to 80%.
Centravoice and IntDev, the connectivity and managed solutions unit, had a tough second six months and their profitability decreased from the prior period by approximately 30%.
Report to shareholders continued
24
ALV
IVA
HO
LDIN
GS
LIM
ITED
•
Inte
grat
ed a
nnua
l rep
ort 2
020
Renewable Energy
Solareff was on track to record a reasonable year but was impacted in the last quarter of the reporting period by being unable to get access to the sites in order to complete their orders. Despite this, Solareff turned in a small profit when compared to the loss in the prior period. GridCars has completed its roll-out of charging stations on the major highways between Johannesburg, Cape Town and Durban. It remains loss-making but the amounts are insignificant.
Applications and IP
Sintrex has had a difficult year, with certain maintenance and service contracts not renewed in the government sector. This has resulted in their turnover being 23% down on last year and a decline of 59% in profitability. Much effort is being expended to renew these contracts, sign up new annuity business and to find alternate sources of income. The cost structure has been re-aligned accordingly.
Merlynn has gained good traction but encountered frustrating delays with COVID-19 and in getting their TOM technology and solutions implemented in first world countries. Proof of concept trials have largely been successful and well accepted but the process of execution into commercial contracts has been delayed through the procurement departments of these large corporates. Merlynn has changed its route to market and has signed up some large multi-national system integrators to take the technology to their customer base.
Synerg, Alviva’s new acquisition into the ERP solutions and implementation arena, has proven its mettle with the successful implementation of both Axiz and Pinnacle onto Sage X3. During the reporting period, they have made much progress on their Robotic Process Automation solutions and this should add value to their future offering to clients. Profitability is in line with expectations.
The Financial Services segment had to endure a significant shock to their impetus with the national lockdown. Debit order rejections doubled in April from those recorded in the prior month, applications completely dried up and many negotiations took place with customers to restructure their repayments. The book consequently reduced over the quarter and, at the end of the period, ended up almost where it was at the beginning of the period, after having grown by R66 million in the first half. Alviva is tremendously encouraged with the performance of the team and of the book. It is often said that bad loans are written during good times and Alviva’s experience so far is that the selection of customers by the credit team has been exemplary. There has been strain as one would expect, given the economic conditions, but so far, the book has stood up well. The existing securitisation structure continues to provide the optimum funding and the relationship with financiers remains solid and beneficial to both parties.
Investment activities and financial position Property, plant and equipment has increased substantially, mainly due to the adoption of IFRS 16, with a corresponding increase in interest-bearing liabilities.
The value of inventory held at the end of June is more than usual, due to the receipt of two months of normal orders in the month of May, as noted previously. This should be brought into line within the following three to four months as the Group aligns the holdings to the anticipated demand.
The cash and cash equivalents, as noted previously, was exceptionally high at the end of June and has returned to normal levels during the ensuing two months.
The share repurchase programme was suspended to conserve and maintain liquidity during the exceptional suspension of trading activity with the lockdown. Notwithstanding, during the reporting period R102 million was spent on repurchasing more than 7 million shares and a further R10 million was spent on acquiring additional shares for the Forfeitable Share Plan. A dividend of R41 million was paid to shareholders.
Report to shareholders continued
25
Ove
rvie
wG
over
nanc
eSu
stai
nabi
lity
Ann
ual fi
nanc
ial s
tate
men
tsSh
areh
olde
rs’ in
form
atio
n
CORPORATE ACTIONS [GRI 102-10]
Acquisition of the Synerg Group As detailed in the annual results announcement on SENS, dated 16 September 2019, and in note 35 of this report, Alviva acquired 70% of the issued share capital of SynergERP Proprietary Limited (“Synerg SA”) through its subsidiary DCT Holdings Proprietary Limited (“DCT”) for a purchase consideration of R69 million.
In addition, the Company acquired 51% of the issued share capital of Synergy DWC-LLC (“Synerg UAE”) and SynergERP Limited (“Synerg UK”) through its subsidiary Alviva International Investments Proprietary Limited (“Alviva International”) for a maximum purchase consideration of AED12,8 million and GBP2,7 million, respectively.
The acquisition of Synerg SA was effective from 1 July 2019 and the acquisitions of Synerg UAE and Synerg UK were effective from 1 November 2019.
All three transactions meet the definition of a business combination as set out in IFRS 3: Business Combinations and still fall within the allowable measurement period, as permitted.
Early settlement of contingent consideration Obscure Enterprises Proprietary Limited (“Obscure”)
As detailed in the annual results announcement on SENS, dated 16 September 2019, Alviva, through its subsidiary DCT, reached an agreement with the sellers of Obscure to amend the calculation of the purchase consideration. Consequently, during September 2019, 53% of the vendors were paid R27 million in full for their shares and the balance of the sellers were paid R7 million for the component that relates to the June 2019 financial year. There now only remains a contingent consideration for the amounts due in respect of June 2020 and June 2021.
Acquisition of additional 10% in DG Store SA Proprietary Limited (“DG”) Effective 1 November 2019, Alviva, through its subsidiary Datacentrix Holdings Proprietary Limited, acquired an additional 10% of the issued share capital of DG for an amount of R15 million, thereby increasing its shareholding in DG to 80%.
Effect of new acquisitions Over the last few years, Alviva has paid approximately R629 million to acquire businesses to add to the Group’s offering, to improve its growth prospects and to diversify its revenue streams from ICT distribution.
The annualised returns, based on the year to June 2020, in attributable profit to the Group has been R63 million, although this has been negated by the attributable annualised amortisation charges of R84 million. After accounting for the finance costs, annualised at R47 million, there has been a negative contribution of some R68 million.
Within the next two years, once the intangible assets have been fully amortised, it is expected that these new acquisitions will contribute meaningfully to the Group.
ENVIRONMENT, SOCIAL AND GOVERNANCE
EnvironmentAlviva collates and analyses carbon footprint data as well as data on other specific topics of environmental indicators annually. The data, together with management’s approach, is included in the sustainability report on pages 99 to 104. Management continually strives to minimise the Group’s environmental impact to protect our planet for future generations. Total carbon emissions for the reporting period were 8 754 CO₂e tonnes (2019: 10 467 CO₂e tonnes), a reduction of 16%, mainly attributable to reduced electricity and fuel consumption during the national lockdown, which was in place during the last quarter of the reporting period.
Report to shareholders continued
26
ALV
IVA
HO
LDIN
GS
LIM
ITED
•
Inte
grat
ed a
nnua
l rep
ort 2
020
SocialAlviva’s employees are at the heart of its business and the Group invests in opportunities for the development of its employees and in leadership programmes to enable current and future leaders of the Group. A diverse and inclusive workforce is essential to the Group’s ability to be an innovative organisation that is able to adapt and prosper in a fast-changing world. In 2020, Alviva maintained its B-BBEE contributor status of Level 1, as verified by EmpowerLogic (Pty) Ltd on 17 September 2020.
Upliftment of the communities in which the Group operates, through CSI initiatives which carry a strong education focus, is prioritised on a continuous basis.
COVID-19Various business entities within the Alviva Group were classified as being providers of essential products and services under the initial Level 5 Regulations issued under the Disaster Management Act. These included the provision of IT products and services to other essential service providers. These essential products and services were further expanded with the easing of the Levels in terms of the Regulations.
Alviva’s policy is to provide a safe and, as far as is possible, risk-free work environment to all its stakeholders, especially its employees. Therefore, in terms of government and WHO guidance, COVID-19 procedures were formulated, as contained in the Group COVID-19 OHS Policy and Framework, and COVID-19 Compliance Officers were appointed in the various operating entities.
With the need to continue providing essential products and services, the various Group entities were able to adapt to remote working through the deployment of business continuity plans, which included the use of various technologies. Back-to-work plans have been formulated in terms of government guidance and, when required, employees can access the physical work sites to carry out essential tasks and services.
The impact of the coronavirus was as follows:
30 June2020
31 August2020
Number of employees in the Group 3 257 3 197
Number of positive tests * 22 87
Number of recoveries * 22 83
Number of active cases at end of period 0 4
Number of employees in quarantine or isolation during the period * 85 145
Number of employees in quarantine or isolation at end of period 45 7
* Cumulative.
For further disclosure, please refer to the Sustainability Report on page 110.
GovernanceSound corporate governance is inherent in Alviva’s values, culture, processes, functions and organisational structure. The Board is fully committed to the highest standard of governance and accountability, as recommended by King IV™, and delivery of the outcomes of an ethical culture, good performance, effective control and legitimacy. The Group’s corporate governance disclosure is shown on pages 32 to 48 and the Board is satisfied that the Group applies the principles and recommended practices of King IV™, as applicable to Alviva, and the mandatory corporate governance requirements of the JSE.
The Board plays a pivotal role in strategy planning and establishing benchmarks to measure the Group’s strategic objectives.
Changes to the Board and CommitteesFollowing Ms N Medupe’s resignation from the Board on 31 May 2019, Ms MG Mokoka and Mr PN Masemola were appointed as independent non-executive directors with effect from 29 July 2019.
Following the above changes, the Board comprises seven directors, two executive directors and five non-executive directors. The executive directors are the Chief Executive Officer and the Chief Financial Officer. Four of the five non-executive directors are independent. The Chairperson, who is a non-executive director, is not considered to be independent but the independence of the Board is strengthened by the inclusion of a Lead Independent Director as recommended by King IV™.
Report to shareholders continued
27
Ove
rvie
wG
over
nanc
eSu
stai
nabi
lity
Ann
ual fi
nanc
ial s
tate
men
tsSh
areh
olde
rs’ in
form
atio
n
STAKEHOLDER ENGAGEMENT [GRI102-44]
Stakeholder relationships are built on the basis of open dialogue and mutual trust as sustainable value creation depends on successful engagement with stakeholders. These engagements assist Alviva to understand and respond to the interests and expectations of key stakeholders. The Group strives to ensure the completeness, timeliness, objectivity, reliability and consistency of information. During the period of uncertainty created by the COVID-19 pandemic, stakeholder engagement has been enhanced in order to facilitate feedback from the different stakeholder groups and in support of the Board’s intentional stakeholder-inclusive approach. Alviva’s stakeholder engagement framework will be further developed for the new jurisdictions that it is entering as those operations are established.
Stakeholder relationships are actively managed by the executive directors and senior management and the nature of engagements during the reporting period is outlined on pages 57 to 60.
SHARE REPURCHASES At the annual general meeting (“AGM”) held on 21 November 2019, shareholders gave the Board general approval in terms of sections 46 and 48 of the Companies Act, by way of a special resolution, to acquire shares in the Company. The Board exercised this authority and mandated the repurchase of issued ordinary shares of the Company, to a maximum of 6 550 000 shares. Since then the Company has repurchased 1 990 309 ordinary shares, bringing the total number of shares repurchased for the year to 7 104 041.
DIVIDENDS The Company’s policy is to declare a dividend of 10% of HEPS (and since the introduction of Dividends Tax, a gross dividend of 10% of HEPS before deducting Dividends Tax). To this end, the Board has declared a final dividend of 15 cents (2019: 30 cents) per ordinary share for the reporting period ended 30 June 2020.
PROSPECTS AND STRATEGIC INITIATIVES The outlook for the year to 30 June 2021 remains uncertain. The economy is under huge pressure following the measures taken to protect lives in connection with COVID-19 and yet we have seen healthy demand for our products and services due to remote working requirements. The Group has well established businesses with solid experienced management in place that have shown themselves to be adept at growing revenues during times of hardship. In addition, the new acquisitions that have been acquired by the Group recently offer exciting prospects. Much will depend on how the economy reacts following all of the disruption that has taken place.
APPRECIATION We extend our appreciation to all employees across the Group for their contribution amid unprecedented times. The relationships with our external stakeholders, including our customers, shareholders and funders, advisors, suppliers and business associates, are critical to the sustainability of the business and we thank them for their continued support and engagement. Thank you to the Board of Directors for their active participation in Board and Committee meetings, and for providing valuable insight and oversight.
A Tugendhaft P Spies RD Lyon Chairperson CEO CFO
Report to shareholders continued
28
ALV
IVA
HO
LDIN
GS
LIM
ITED
•
Inte
grat
ed a
nnua
l rep
ort 2
020
GOVERNANCE
29
Ove
rvie
wG
over
nanc
eSu
stai
nabi
lity
Ann
ual fi
nanc
ial s
tate
men
tsSh
areh
olde
rs’ in
form
atio
n
NON-EXECUTIVE DIRECTOR
INDEPENDENT NON-EXECUTIVE DIRECTORS
Board of directors
Ms SH Chaba (62) Independent Non-Executive Director
BA (Economics and Industrial Psychology); Post-Graduate Diploma in Human Resources Management (Wits); Senior Executive Programme (Wits and Harvard Business School)
Appointed: 31 August 2012
Chairperson of the Social and Ethics Committee and the Remuneration Committee as well as a member of the Audit and Risk Committee.
Ms Chaba is an HR expert and business strategist who sits on a number of boards in the private and public sectors. She runs businesses in the areas of agriculture and transport and has extensive public and private sector experience at both executive and board levels. In the public sector, she has served in all three spheres of government and in state-owned enterprises such as Gauteng Provincial Government, City of Johannesburg and the Central Energy Fund. In the private sector, she has experience in the petrochemical, retail, construction and financial industries such as Sasol Ltd, AECI Ltd, Edgars and Thebe Investment Corporation (Pty) Ltd.
External membership and appointments: Director of Safrican Insurance Company Ltd, Dijalo Mbung (Pty) Ltd, Amispan (Pty) Ltd, Azonex (Pty) Ltd, Avery Dennison Reflective Materials Africa (Pty) Ltd, Rulelang Investments (Pty) Ltd and Kgosi Neighbourhood Foundation, a non-profit organisation. Remuneration Committee member of the Legal Practitioners Fidelity Fund and the Indemnity Insurance Fund.
Ms P Natesan (41) Lead Independent Director
BCom (Cum Laude) (Nelson Mandela University); BCom (Honours) (Nelson Mandela University); CA(SA); CD(SA)
Appointed: 6 December 2017
Chairperson of the Audit and Risk Committee.
Ms Natesan is the CEO at the Institute of Directors in South Africa, serving as an executive director on their board and overseeing the business growth and performance on a day-to-day basis. Her areas of expertise include governance, finance, risk and compliance as well as strategy development.
She is a corporate governance specialist and a thought leader in corporate governance in South Africa, having penned many articles and papers on the topic. She also holds the prestigious Chartered Director (SA) designation.
External membership and appointments: Member of the South African Institute of Chartered Accountants, King Committee on Corporate Governance, 30% Club, Integrated Reporting Committee of South Africa and Institute of Directors in South Africa (IoDSA).
Mr A Tugendhaft (72) Non-Executive Chairperson
BA (Wits); LLB (Wits)
Appointed: 24 November 1998
Appointed as Chairperson: 3 October 2017
Member of the Remuneration Committee.
Mr Tugendhaft is the senior partner of attorneys Tugendhaft, Wapnick, Banchetti and Partners. He is an accomplished practitioner in commercial and corporate law and has more than 45 years’ experience in practice.
External membership and appointments: Non-Executive Director and Deputy Chairperson of Motus Holdings Ltd.
[GRI 102-22] [GRI 405-1]
Board diversity as at 30 June 2020
Female Male
43% 57%
Black White
57% 43%
Independent Non-Executive ExecutiveNon-Executive
57% 14% 29%
More than 9 years
0 to 3 years3 to 8 years
14% 43% 43%TENURE
INDEPENDENCE
RACE
GENDER
30
ALV
IVA
HO
LDIN
GS
LIM
ITED
•
Inte
grat
ed a
nnua
l rep
ort 2
020
INDEPENDENT NON-EXECUTIVE DIRECTORS (continued)
EXECUTIVE DIRECTORS
Board of directors continued
Mr PN Masemola (57)
Independent Non-Executive Director
BScEng (Mech) (University of Cape Town)
Appointed: 29 July 2019
Member of the Social and Ethics Committee.
Mr Masemola is a past director of Cisco South Africa (Pty) Ltd and Cisco Technical Services (Pty) Ltd. He led Cisco’s Smart & Connected Communities strategy in South Africa and assisted the Gauteng Provincial Government with its Broadband strategy. He also led the Internet Business Solutions Group within Cisco Systems South Africa, and was part of a wider group of consultants that collaborated across the world on ICT solutions. Prior to that, he led government sales at Hewlett Packard South Africa where he developed the sales strategy. He has held various senior management and board positions and is currently an investor in start-ups in the ICT, mining and energy sectors.
External membership and appointments: Investor in and director of Datacyte (Pty) Ltd and Mokwatla Industrial Solutions (Pty) Ltd. Director at Bona Lesedi Disability Centre.
Mr P Spies (56) Executive Director – CEO
BCom (UJ)
Appointed: 27 January 2016
Mr Spies has extensive experience in the ICT industry having served in various roles, including that of CFO and CEO at Tarsus Technology Group. His experience includes the successful national and international expansion of various companies, various mergers and acquisitions and the establishment of a channel finance business. With over 30 years’ experience, he is a stalwart of the ICT industry, and is well respected by the Group’s customers, vendors and staff.
Mr RD Lyon (62) Executive Director – CFO
BA (Economics and Business Law)(University of Stirling); CA
Appointed: 1 January 2013
Mr Lyon qualified as a Chartered Accountant in Scotland in 1983 and then joined Fisher Hoffman Stride in South Africa shortly thereafter. He served as a Financial Manager in Metro Cash and Carry (Pty) Ltd for three years before taking on the Finance Director role in Cashbuild Ltd for seven years. He has been with Alviva and Axiz for over 20 years and in general commerce for over 30 years.
Ms MG Mokoka (46) Independent Non-Executive Director
BCom (Accounting) (University of Limpopo); Postgraduate Diploma in Management (Financial Accounting) (University of Cape Town); BCom Honours (Accounting) (University of Natal), Postgraduate Diploma in Auditing (University of Cape Town); CA(SA)
Appointed: 29 July 2019
Member of the Audit and Risk Committee and the Remuneration Committee.
Ms Mokoka is a qualified Chartered Accountant (SA) with diverse work experience in strategic and financial management. She has sound public and private sector experience on boards, and currently holds a number of non-executive board positions for leading South African companies.
External membership and appointments: Director of Sanlam Ltd, Palabora Mining (Pty) Ltd, CSG Holdings Ltd and Stadio Holdings Ltd. Member of the South African Institute of Chartered Accountants (SAICA), the Institute of Directors in South Africa (IoDSA) and African Women Chartered Accountants (AWCA).
Ages as at 25 September 2020.
31
Ove
rvie
wG
over
nanc
eSu
stai
nabi
lity
Ann
ual fi
nanc
ial s
tate
men
tsSh
areh
olde
rs’ in
form
atio
n
The Board and individual directors are committed to the principles of transparency, integrity and accountability and accept their duty and responsibility to ensure that the principles and underlying recommended practices, outlined in King IV™, are observed with the resultant governance outcomes of an ethical culture, good performance, effective control and legitimacy.
BOARD OF DIRECTORSRisk tolerance/appetite Reporting
Company Secretary
AUDIT AND RISK COMMITTEE REMUNERATION COMMITTEE
SOCIAL AND ETHICS COMMITTEE
Combined assurance framework
AUDIT RISK
CEO EXECUTIVES
Internal AuditRisk
management and governance
Ethics
IT Governance
Risk management Sustainability
Compliance
Assurance Consulting
Environmental/ health and safety
Compliance framework
IT business systems• Risks• Standards• Disaster recovery
• Achievement of company strategy and goals
• Safeguarding of assets• Compliance with laws,
regulations and policies• Reliability of information• Effective and efficient
operations
• Operational risk/opportunity• Tactical risk/opportunity• Strategic risk/opportunity• Project risk/opportunity
• Third party assurance• Group safety, health and
environment function
• Competition Act• Companies Act• Consumer Protection Act• Occupational Health and Safety Act• National Credit Act• JSE• King IVTM
• Income Tax Act• B-BBEE• Anti-bribery legislation
• Legal• Policies and procedures• Ethics and Code of Conduct• Delegation of authority• Declaration of interest
• Fraud and irregularities• Ethics hotline• Training and awareness• Code of Conduct
Reporting Global Reporting Initiative/ Socially Responsible Investment Index (JSE) Combined assurance plan
Projects• Procurement practices• Carbon reduction• Waste reduction• B-BBEE• Training and education• Diversity• Non-discrimination• Local communities
Func
tiona
l
Adm
inistr
ative
Risk-based audit plan
Assurance• Risk-based • IIA standards
Governance and compliance structure[GRI 102-18]
32
ALV
IVA
HO
LDIN
GS
LIM
ITED
•
Inte
grat
ed a
nnua
l rep
ort 2
020
The Board is satisfied that the Group complies with the principles and recommended practices of King IV™, applicable to Alviva, and the mandatory corporate governance disclosure requirements of the JSE.
LEADERSHIP
Principle 1: The governing body should lead ethically and effectively. [GRI 102-16]
The Board exercises effective leadership, with directors adhering to their ethical and fiduciary duties. The directors discharge their responsibilities in the following manner:
� Integrity: acting in good faith and in the best interest of Alviva. Declarations pertaining to conflicts of interest are tabled at each Board meeting and untenable conflicts are identified and acted on.
� Competence: ensuring the necessary experience, expertise and competency to lead effectively.
� Responsibility: considering risks and overseeing and monitoring management’s implementation and execution of the mitigating strategies ensuring accountability for the Group’s performance.
� Accountability: accepting responsibility for the execution of their duties, even when these were delegated.
� Fairness: adopting a stakeholder-inclusive approach and ensuring the equitable treatment of all stakeholders, while remaining cognisant of the Group’s short-, medium- and long-term impact on the economy, environment, society and its stakeholders.
� Transparency: exercising governance roles and responsibilities in a transparent manner.
Members of the Board are expected to attend Board and Committee meetings and devote sufficient time and effort to prepare for those meetings. Attendance records are kept and disclosed in the integrated annual report. Arrangements by which Board members are being held to account for ethical and effective leadership include, but are not limited to, the Code of Conduct and annual performance evaluations of individual directors as well as of the Board as a whole. The result of these evaluations is monitored to ensure that directors’ performance levels meet expectations.
Directors disclose their interests at each Board meeting and, in cases where a conflict cannot be avoided, these matters of conflict are proactively managed, as determined by the Board, and subject to legal provisions. Members of the Board are expected to avoid conflicts of interest. [GRI 102-25]
Planned areas of future focus:
Alviva’s Code of Conduct will be reviewed on a continuous basis to ensure that it remains aligned with best practice.
ORGANISATIONAL ETHICS
Principle 2: The governing body should govern the ethics of the organisation in a way that supports the establishment of an ethical culture. [GRI 102-16] [GRI 102-17]
The Board determines and sets the tone of Alviva values, including principles of ethical business practice and human rights considerations, and, supported by the Social and Ethics Committee, approves Alviva’s Code of Conduct and considers the requirements for the Group to be a responsible corporate citizen, based on integrity, competence, responsibility, accountability, fairness and transparency.
The implementation and execution of the Code of Conduct has been delegated to management with the Board, assisted by the Social and Ethics Committee, providing ongoing oversight of the management of ethics to ensure that the Company’s ethics performance is assessed, monitored, reported and disclosed, as well as ensuring that it is integrated into the operations of the Group. An overview of the arrangement for governing and managing organisational ethics is disclosed in the integrated annual report.
Corporate governance report[GRI 102-12]
33
Ove
rvie
wG
over
nanc
eSu
stai
nabi
lity
Ann
ual fi
nanc
ial s
tate
men
tsSh
areh
olde
rs’ in
form
atio
n
The ethics programme, including the whistle-blowing mechanism and management of the independent and anonymous disclosure of information gathered from whistle-blowers to detect breaches of ethical standards, as well as ongoing effort to create awareness, detect and resolve ethical violations, together with the provision of training on anti-corruption, bribery and anticompetitive behaviour, contribute to a strong ethical foundation.
Internal Audit performs regular ethics assessments. The scope of these assessments includes an assessment of both the adequacy and effectiveness of ethics governance processes and policies set by the Board in line with corporate governance requirements.
Anonymous surveys are issued to all employees to measure their perceptions of the Company’s ethics culture and the effectiveness of ethics programmes. The Company participates in the Ethics Institute’s ethics surveys. The results of the assessments are submitted to the Audit and Risk Committee as well as the Social and Ethics Committee for consideration and appropriate action plans, with oversight by the Board. Anonymous ethics line reports are monitored by the Social and Ethics Committee and the results of the ethics line reports and ethics surveys are reviewed, and the outcomes assessed to ensure adequate resolution.
The Code of Conduct has been updated with the objective of aligning both employee and director conduct to the achievement of the governance outcomes, as recommended by King IV™, being:
� an ethical culture;
� performance and value creation;
� adequate and effective control; and
� trust, good reputation and legitimacy.
Planned areas of future focus:
The Board, through the Social and Ethics Committee will provide oversight of the management of ethics throughout the organisation to ensure that the Group’s ethical standards are applied to the processes for the recruitment, evaluation of performance and reward of employees, as well as the sourcing of suppliers.
A process for the monitoring of adherence to the Group’s ethical standards by all stakeholders through, amongst others, periodic independent assessments, will continue to be performed.
New employees, as well as those new employees arising from acquisitions, will continue to be inducted into Alviva’s ethical culture and the Board’s commitment to ethical behaviour will be re-communicated.
RESPONSIBLE CORPORATE CITIZENSHIP
Principle 3: The governing body should ensure that the organisation is and is seen to be a responsible corporate citizen. [GRI 102-16] [GRI 102-17] [GRI 102-31]
The Board, assisted by the Social and Ethics Committee and supported by the executives, oversees and monitors how the operations and activities of the Group affect its status as a responsible corporate citizen and ensures that its arrangements for governing and managing responsible corporate citizenship is aligned to the requirements of King IV™. This is achieved by identifying any gaps on the Group’s governance processes and aligning those through the adoption of appropriate policies and procedures.
Through stakeholder engagement and collaboration, Alviva has committed to understanding and being responsive to the interests and expectations of stakeholders and to partnering with them in finding solutions to sustainability challenges.
The Board reviews compliance with King IV™ and periodically reviews processes and procedures to ensure the Group remains within the requirements expected of a responsible corporate citizen.
Oversight and monitoring of activities and outputs that affect Alviva’s status as a responsible corporate citizen include:
� workplace (employment equity; fair remuneration; health, safety and the environment; training and development of employees);
� economy (economic transformation; prevention, detection and response to fraud and corruption);
� society (consumer protection; community development; protection of human rights); and
� environment (carbon footprint).
Corporate governance report continued
34
ALV
IVA
HO
LDIN
GS
LIM
ITED
•
Inte
grat
ed a
nnua
l rep
ort 2
020
During the reporting period, the key focus areas were the implementation of the Protection of Personal Information Policy, aligning socio-economic development to the Corporate Social Investment Policy, aligning the training and development of employees with the objectives of the business and the accuracy of reportable injuries on duty. The Group’s status as a corporate citizen is further disclosed in the Sustainability Report (workplace, economy, society and environment) and the Social and Ethics Committee Report (transformation) contained in this integrated annual report.
Planned areas of future focus:
Due to recent acquisitions, the Board, through the Social and Ethics Committee, will continue to consider measures to ensure that responsible corporate citizenship is embraced.
STRATEGY AND PERFORMANCE
Principle 4: The governing body should appreciate that the organisation’s core purposes, its risks and opportunities, strategy, business model, performance and sustainable development are all inseparable elements of the value creation process. [GRI 102-14] [GRI 102-26]
The Board informs and approves Alviva’s strategy, which is aligned with the purpose of the Group, the value capitals and value drivers of the business, and the expectations of its stakeholders, aimed at ensuring sustainability and which takes into account the top risks facing the Group. With the support of the Board Committees, the Board oversees and monitors the implementation and execution by management of the policies, procedures and priorities and ensures that Alviva accounts for its performance by, amongst others, reporting and disclosure.
Alviva as an investment, its core competencies, its business model and strategic focus areas are disclosed on pages 16 to 20 of the integrated annual report and risk management appears on pages 51 to 56.
Sustainability issues are particularly considered by the Board when strategies or new business opportunities are evaluated. These include the effect on all stakeholders, including shareholders, suppliers, customers, employees and communities.
The Stakeholder Engagement Policy includes a framework for stakeholder engagement, and disclosure on stakeholder engagements is shown on pages 57 to 60.
Planned areas of future focus:
To ensure that the Group’s strategy remains aligned with stakeholder expectations, mechanisms for two-way communications with stakeholder groups, including the management of the affects of actions, will be further explored.
REPORTING
Principle 5: The governing body should ensure that reports issued by the organisation enable stakeholders to make informed assessments of the organisation’s performance, and its short, medium and long-term prospects.The Board, through the Audit and Risk Committee, ensures that the necessary controls are in place to verify and safeguard the integrity of the integrated annual report and any other disclosures.
Reporting frameworks and materiality are approved by the Audit and Risk Committee to ensure compliance with legal requirements and relevance to stakeholders. The Board ensures that reports issued by Alviva enable stakeholders to make informed assessments of the Group’s performance and its short-, medium- and long-term prospects.
The Audit and Risk Committee and the Social and Ethics Committee performed an evaluation of the material topics on which Alviva should report in the sustainability section of its 2020 integrated annual report. Taking cognisance of Alviva’s stakeholders and the environment in which it operates, the topics have overall been prioritised and are disclosed in the Sustainability Report on pages 92 to 124.
The Audit and Risk Committee oversees the integrated reporting process and reviews the financial statements. Alviva ensures that the integrated annual report, including the sustainability report, the annual financial statements and corporate governance disclosures, are published on the website, www.alvivaholdings.com under ‘Reports and Presentations’.
Corporate governance report continued
35
Ove
rvie
wG
over
nanc
eSu
stai
nabi
lity
Ann
ual fi
nanc
ial s
tate
men
tsSh
areh
olde
rs’ in
form
atio
n
Planned areas of future focus:
An ongoing focus area will be the continued streamlining of reporting to enhance disclosure in a concise manner and aligned to the Integrated Reporting Framework.
PRIMARY ROLE AND RESPONSIBILITIES OF THE GOVERNING BODY
Principle 6: The governing body should serve as the focal point and custodian of corporate governance in the organisation.The Board has an approved charter which it reviews annually, which charter sets out its governance responsibilities, including the role, responsibilities, membership requirements and procedural conduct. Through its sub-Committees, the Board implements and monitors the governance practices within the Group.
The number of meetings of the Board held during the reporting period and the attendance at those meetings are disclosed on page 36.
The Board, as well as any director or Committee, may obtain independent, external professional advice at Alviva’s expense concerning matters within the scope of their duties and the directors may request documentation from, and set up meetings with, management, as and when required.
An appropriate governance and compliance structure is in place to ensure all entities within Alviva adhere to Group requirements and governance and compliance standards.
The Board is satisfied that it has fulfilled its responsibilities in accordance with its charter for the reporting period.
Planned areas of future focus:
The process of alignment of Alviva’s policies and procedures to King IV™ is ongoing and will continue in the year ahead.
COMPOSITION OF THE GOVERNING BODY
Principle 7: The governing body should comprise the appropriate balance of knowledge, skills, experience, diversity and independence for it to discharge its governance role and responsibilities objectively and effectively.JSE Listings Requirements (paragraph 3.84, service issue 27) – mandatory disclosure requirements: Categorisation of directors; Balance of power and authority on the Board; Appointment of the CEO and Chairperson; Policy on the promotion of broader diversity on the Board, specifically focusing on the promotion of the diversity attributes of gender, race, culture, age, field of knowledge, skills and experience; CV of each director standing for election or re-election.
The capacity of each director is categorised as defined in the JSE Listings Requirements, also taking into consideration King IV™ and other factors as outlined in the Board Charter.
Board composition [GRI 102-27] [GRI 405-1]
To further strengthen the independence of the Board, two independent non-executive directors were appointed on 29 July 2019. The Board now comprises a majority of independent non-executive directors with four of the five non-executive directors being independent, according to the Companies Act definition, and two executive directors, the CEO and the CFO. The categorisation and details of individual members of the Board are outlined on pages 29 and 30. The Board is satisfied that its composition reflects the appropriate mix of knowledge, skills, experience, diversity and independence.
Mr A Tugendhaft is not considered independent in terms of the definition as his law firm provides legal services and advice to Alviva, albeit that the value of these services is not significant to either of the parties. Mr Tugendhaft is also the Chairperson of the Board and, consequently, as recommended by King IV™, when the Chairperson is considered not to be independent, Ms P Natesan, an independent non-executive director, has been appointed as Lead Independent Director to deal with any perceived issues flowing from the limited area of potential non-independence or conflict of interest. [GRI 102-23]
Corporate governance report continued
36
ALV
IVA
HO
LDIN
GS
LIM
ITED
•
Inte
grat
ed a
nnua
l rep
ort 2
020
One of the non-executive directors on the Board has served a term exceeding nine years. The Board reviewed the impartiality of Mr A Tugendhaft and, after due consideration, concluded that his long association with the Group has not impaired his integrity and objectivity and that he has retained his ability to act impartially.
Due to the size of the Board, a separate Nomination Committee has not been appointed and the Board assumes this responsibility.
When considering appointment or re-election of directors, the Board gives consideration to the knowledge, skills and resources required for conducting the business as well as considering the size, diversity and demographics to ensure the Board’s effectiveness.
A candidate, nominated for election as a non-executive member of the Board, is requested to provide the Board with details of professional commitments and a statement that confirms that the candidate has sufficient time available to fulfil the responsibilities as a member of the Board.
The Board reviewed Alviva’s succession plan for management and considers it to be appropriate.
There is a clear distinction between the roles of the CEO and the Chairperson, and these positions are occupied by separate individuals.
A brief CV for each director standing for election and re-election at the AGM is included in the integrated annual report, of which the notice of AGM forms part. Mr A Tugendhaft and Ms P Natesan retire by rotation and, being eligible, offer themselves for re-election. The Board has confirmed that it supports the re-election of Mr A Tugendhaft and Ms P Natesan.
Board meeting attendance [GRI 405-1]
The Board meets at least four times a year. Additional meetings can be convened to consider specific business issues which may arise between scheduled meetings. The attendance of meetings held during the period 1 July 2019 and 30 June 2020 was as follows:
11 Sep 2019
21 Nov 2019
24 Feb 2020
24 Mar 2020
12 Jun2019
Members
Mr A Tugendhaft (Non-Executive Chairperson) √ √ √ √ √
Ms P Natesan (Independent Non-Executive Director; Lead Independent Director)
√ √ √ √ √
Ms SH Chaba (Independent Non-Executive Director) √ √ √ √ √
Mr PN Masemola (Independent Non-Executive Director)
Ms MG Mokoka (Independent Non-Executive Director) √ √ √ √ √
Mr P Spies (CEO) √ √ √ √ √
Mr RD Lyon (CFO) √ √ √ √ √
Invitees
Mr JV Parkin (CCO) √ √ √ √ √
Company Secretary
Ms SL Grobler √ √ √ √ √
Board diversity
The Board adopted a policy on diversity on 12 June 2018. The Policy addresses gender and race diversity at Board level. As outlined in the Policy, the Board specifically:
� supports the principles and aims of gender and race diversity at Board level;
� promotes equitable gender and race representation at Board level through a structured approach adopted by the Board pertaining to new appointments to the Board;
Corporate governance report continued
37
Ove
rvie
wG
over
nanc
eSu
stai
nabi
lity
Ann
ual fi
nanc
ial s
tate
men
tsSh
areh
olde
rs’ in
form
atio
n
� recognises and embraces the benefits of having a diverse Board which will include and make use of differences in the skills, regional and industry experience, background, race, gender and other distinctions between directors;
� endorses that all Board appointments will be made on merit, in the context of the skills, experience, independence and knowledge, which the Board as a whole requires to be effective;
� discusses and agrees all measurable objectives for achieving diversity on the Board;
� reports annually, in the corporate governance section of the integrated annual report, on the process applied in relation to Board appointments; and
� reviews this Policy annually, including an assessment of the effectiveness of this Policy, any revisions that may be required and any such revisions to the Board.
The gender and race diversity targets for the Board were reviewed in 2020 when new Board appointments were made. The Board annually reviews its progress against its voluntary targets.
The voluntary targets set by the Board are as follows:
� At least 50% of the Board should comprise historically disadvantaged individuals; and
� At least 50% of the Board should comprise women. [GRI 405-1]
The achievement of the voluntary targets is as follows:
� 57% of the Board comprises historically disadvantaged individuals; and
� 43% of the Board comprises women. [GRI 405-1]
Planned areas of future focus:
The Board Diversity Policy will be broadened in alignment with paragraph 3.84(i) of the JSE Listings Requirements, The Board will review, at least annually, its composition and diversity targets, as well as the appropriateness of the skills, experience and expertise of individual directors and the effectiveness of the Board as a whole.
COMMITTEES OF THE GOVERNING BODY
Principle 8: The governing body should ensure that its arrangements for delegation within its own structures promote independent judgement and assist with balance of power and the effective discharge of its duties. [GRI 102-18] [GRI 102-19]
JSE Listings Requirements (paragraph 3.84, service issue 27) – mandatory disclosure requirements: Audit Committee, Remuneration Committee and Social and Ethics Committee; Expertise and experience of the Financial Director. JSE Listings Requirements (paragraph 7.F.5, service issue 27) – Social and Ethics Committee compliance with Companies Act requirements.
Committees have been established to assist the Board in discharging its responsibilities. The Committees of the Board comprise the Audit and Risk Committee, the Remuneration Committee and the Social and Ethics Committee.
The Committees are appropriately constituted and members are appointed by the Board, except for the Audit and Risk Committee (which is a statutory committee in terms of the Companies Act – from an audit perspective), whose members are nominated by the Board and elected by shareholders.
External advisors and executive directors attend Committee meetings by invitation. Formal charters have been established and approved for each Committee, which charters are reviewed annually.
The Board considers the allocation of roles and associated responsibilities and the composition of membership across committees holistically, so as to achieve the following:
� Effective collaboration through cross-membership between committees, where required; coordinated timing of meetings; and avoidance or duplication or fragmented functioning as far as possible.
� Where more than one committee has jurisdiction to deal with a similar matter, the specific role and positioning of each committee in relation to such matter is defined to ensure complementary rather than competing approaches.
Corporate governance report continued
38
ALV
IVA
HO
LDIN
GS
LIM
ITED
•
Inte
grat
ed a
nnua
l rep
ort 2
020
� There is a balanced distribution of power in respect of membership across committees, so that no individual has the ability to dominate decision making, and no undue reliance is placed on any individual.
� A delegation by the Board of its responsibilities to a committee does not by or of itself constitute a discharge of the Board’s accountability.
Audit and Risk Committee
The Audit and Risk Committee is constituted as a statutory committee in respect of its statutory duties in terms of section 94(7) of the Companies Act and a committee of the Board in terms of all other duties assigned to it by the Board, which include the monitoring and evaluation of committee risk functions.
The Committee performs the functions as set out in the Companies Act. Adequate processes and structures have been implemented to assist the Committee in providing oversight and ensuring the integrity of financial reporting, internal control and other governance matters relating to subsidiaries.
Membership [GRI 405-1]
The Committee comprised three independent non-executive directors who were appointed by the shareholders, as determined by the Companies Act, at the AGM held on 21 November 2019. The Committee members were:
� Ms P Natesan (BComm (Cum Laude), BComm (Hons), CA(SA));
� Ms SH Chaba (BA (Economics and Industrial Psychology), Diploma in Human Resources Management)); and
� Ms MG Mokoka (BCom (Accounting) (University of Limpopo); Postgraduate Diploma in Management (Financial Accounting) (University of Cape Town); BCom Honours (Accounting) (University of Natal), Postgraduate Diploma in Auditing (University of Cape Town); CA(SA)).
Shareholders will be requested to ratify the appointments and resolutions to appoint the Chairperson and Committee members above for the ensuing year will be presented at the AGM to be held on Wednesday, 18 November 2020.
The Chairperson of the Board is not eligible to chair the Committee. He does, however, have a standing invitation to attend all Committee meetings. The CFO, CRO, CAE and the external audit partner attend all meetings by permanent invitation. Other attendees comprise the CEO and certain Alviva employees (including the CIO) and consultants who are invited to attend meetings, as and when required.
Corporate governance report continued
39
Ove
rvie
wG
over
nanc
eSu
stai
nabi
lity
Ann
ual fi
nanc
ial s
tate
men
tsSh
areh
olde
rs’ in
form
atio
n
Meetings of the Committee [GRI 405-1]
The four scheduled meetings per annum, as required by the Audit and Risk Committee Charter, were held. Attendance of meetings held during the period 1 July 2019 to 30 June 2020 is outlined below.
11 Sep 2019
21 Nov 2019
24 Feb 2020
8 Jun 2020
Members
Ms P Natesan (Independent Non-Executive Director – Chairperson of the Committee)
√ √ √ √
Ms SH Chaba (Independent Non-Executive Director) √ √ √ √
Ms MG Mokoka (Independent Non-Executive Director) √ √ √ √
Invitees
Mr A Tugendhaft (Non-Executive Director – Chairperson of the Board)
√ √ √ √
Mr P Spies (CEO) √ √ √ √
Mr RD Lyon (CFO) √ √ √ √
Mr A Gerber (CAE) √ √ √ √
Mr A Govender (External auditor’s representative) n/a n/a √ √
Mr A Philippou (External auditor’s representative) √ x n/a n/a
Mr R Anand (External auditor’s representative) √ √ √ √
Mr M van Heerden (CIO) √ √ n/a √
Mr JV Parkin (COO) √ √ √ √
Company Secretary
Ms SL Grobler √ √ √ √
Mr JV Parkin, the Chief Risk and Compliance Officer, attends all meetings by invitation. Ms SL Grobler, the Company Secretary, attends all meetings and presents any IRBA and JSE-related matters.
The performance of the Audit and Risk Committee and significant issues dealt with during the reporting period are set out in the Audit and Risk Committee Report included in the annual financial statements from pages 129 to 136.
Remuneration Committee
The Remuneration Committee is responsible for overseeing remuneration.
Membership [GRI 405-1]
The Committee comprises at least three non-executive directors, of whom the majority is independent. The Chairperson of the Board is a member of the Committee. The Board nominates members of the Committee and its Chairperson.
The Committee comprised Ms SH Chaba (Independent Non-Executive Director – Chairperson of the Committee), Ms MG Mokoka (Independent Non-Executive Director) and Mr A Tugendhaft (Non-Executive Chairperson of the Board) during the reporting period.
Corporate governance report continued
40
ALV
IVA
HO
LDIN
GS
LIM
ITED
•
Inte
grat
ed a
nnua
l rep
ort 2
020
Meetings of the Committee [GRI 405-1]
Three scheduled meetings, one more than required by the Remuneration Committee Charter, were held during the period. The attendance of the meetings held during the period 1 July 2019 to 30 June 2020 is outlined below:
11 Sep 2019
21 Nov 2019
8 Jun 2020
Members
Ms SH Chaba (Independent Non-Executive Director – Chairperson of the Committee)
√ √ √
Ms MG Mokoka (Independent Non-Executive Director) √ √ √
Mr A Tugendhaft (Non-Executive Director) √ √ √
Invitees
Mr P Spies (CEO) √ √ √
Mr RD Lyon (CFO) √ √ √
Company Secretary
Ms SL Grobler √ √ √
� Meetings of the Committee are held as frequently as the Committee considers appropriate, but it will normally meet not less than twice a year. The Board, or any member thereof including members of the Committee, may call additional meetings.
� The Chairperson, at his or her discretion, may invite other employees to attend and to be heard at the meetings of the Committee.
� The CEO and the CFO attend meetings by invitation only.
� The Chairperson of the Committee may meet with the CEO and/or Company Secretary prior to a Committee meeting to discuss important issues and/or agree on the agenda.
� All and any attendees by invitation may take part in discussions but do not have any voting rights and may not vote on any issues raised.
� Committee members must attend all scheduled meetings including ad-hoc meetings for special matters, unless a prior apology with reasons has been submitted to the Chairperson or Company Secretary.
The Remuneration Committee Report appears on pages 61 to 85.
Nomination Committee [GRI 102-24]
The Board assumes the role, function and responsibilities of a Nomination Committee as a decision was taken to not constitute a separate sub-committee to perform these duties and, in this capacity, it ensures that the composition of the Board Committees, including the appointment of the Chairperson of each Committee, takes into account factors such as diversity and skills as well as the need to create an even spread of power and authority.
The Board is further responsible for:
� the process for nominating, electing and appointing members of the Board;
� the succession planning of directors; and
� the evaluation of the performance of the Board and its Committees.
Corporate governance report continued
41
Ove
rvie
wG
over
nanc
eSu
stai
nabi
lity
Ann
ual fi
nanc
ial s
tate
men
tsSh
areh
olde
rs’ in
form
atio
n
Social and Ethics Committee
The Social and Ethics Committee is responsible for overseeing and reporting on social, ethics, transformation and sustainability matters. It is also responsible to execute on the statutory duties set out in the Companies Act.
Membership [GRI 405-1]
Considerations for appointments to the Committee are based on the independence, business acumen and experience of the independent non-executive directors in order to assist the Committee in achieving its role and responsibilities.
As required by Regulation 43 of the Companies Act, the Committee comprises two independent non-executive directors and a prescribed officer of the Company. The majority of the members of the Committee are therefore independent non-executive directors.
As announced on SENS on 29 July 2019, Ms P Natesan was appointed as Chairperson of the Audit and Risk Committee and stepped down as a member of the Social and Ethics Committee. Mr PN Masemola, an independent non-executive director, was appointed as a member of the Social and Ethics Committee in her stead.
Ms SH Chaba, an independent non-executive director, is the Chairperson of the Committee and the other two members are Mr PN Masemola, an independent non-executive director, and Mr JV Parkin, the CCO, a prescribed officer. [GRI 102-23]
As Alviva’s CAE, Mr A Gerber attends the meetings by invitation. He is not a member, to avoid compromising his independence as an assurance officer of the Group, and reports to the Committee on information which falls within his mandate.
Meetings of the Committee [GRI 405-1]
The two scheduled meetings per annum, as required by the Social and Ethics Committee Charter, were held. The attendance of the meetings held during the period 1 July 2019 to 30 June 2020 is outlined below:
20 Nov 2019
5 Jun 2020
Members
Ms SH Chaba (Independent Non-Executive Director – Chairperson of the Committee) √ √
Mr PN Masemola (Independent Non-Executive Director) √ √
Mr JV Parkin (Prescribed Officer) √ √
Invitees
Mr A Gerber (CAE) √ √
Company Secretary
Ms SL Grobler Apologies Apologies
The Social and Ethics Committee Report appears on pages 86 to 90.
Planned areas of future focus:
The Board and its Committees have approved their respective annual workplans for the year ahead, which plans will be actioned and reported on in the next integrated annual report.
Corporate governance report continued
42
ALV
IVA
HO
LDIN
GS
LIM
ITED
•
Inte
grat
ed a
nnua
l rep
ort 2
020
EVALUATION OF THE PERFORMANCE OF THE GOVERNING BODY [GRI 102-28]
Principle 9: The governing body should ensure that the evaluation of its own performance and that of its committees, its chair and its individual members, support continued improvement in its performance and effectiveness.The Board evaluation process does not only satisfy compliance commitments but has as an objective, improved governance and overall performance in the interest of all stakeholders. An evaluation of the Board, its Committees and the individual directors is conducted annually and consists of a questionnaire being completed by all Board members. This annual evaluation is comprehensive, encompassing all aspects of the Board’s responsibilities. It covers the effectiveness of the Board as a whole. A director’s contribution is measured against his or her duties. Evaluation questions also evaluate the performance of the Chairperson and the Lead Independent Director. The Chairperson annually appraises the CEO and the results of this appraisal are considered by the Remuneration Committee to guide it in its evaluation of the performance and remuneration of the CEO. Evaluations are performed in line with both the Company’s own objectives and the guidance that is given in King IV™ and by the IoDSA. The results are collated by the Company Secretary and passed on to the Board who assesses the results.
The Board discusses the evaluation results to formulate improvement plans. Following the evaluation of the performance of the Board and its members in 2020, the Board concluded that the evaluation process improves its performance and effectiveness and no gaps in the skills, experience, expertise and qualifications of individual directors were identified in the evaluation process.
Nomination for re-appointment of a director only occurs after evaluation of performance and the satisfactory attendance at meetings by the director.
Planned areas of future focus:
The Board will annually consider other commitments of directors and whether the director has sufficient time to fulfil the responsibilities as a director to ensure they can still execute their job effectively and are free from conflicts that cannot be managed satisfactorily. Should the Board be of the view that a director is overcommitted or has an unmanageable conflict, the Chairperson will meet with that director to discuss the resolution of the matter to the satisfaction of the Board.
APPOINTMENT AND DELEGATION TO MANAGEMENT
Principle 10: The governing body should ensure that the appointment of, and delegation to, management contributes to role clarity and the effective exercise of authority and responsibilities.JSE Listings Requirements (paragraph 3.84, service issue 27) – mandatory disclosure requirements: The Company Secretary.
CEO and executive management
The role and function of the CEO are specified in the Board Charter and the performance of the CEO is evaluated by the Board against the criteria specified.
The Board approves and regularly reviews the delegation of authority. The CEO, CFO and executive management are jointly and severally the highest executive decision-making authority of the Group and are jointly and severally delegated with authority from, and are jointly and severally accountable to, the Board for the successful implementation of the Group strategy and the overall management and performance of the Group, consistent with the primary aim of enhancing long-term shareholder value.
In terms of the delegation of authority framework, executive management supports the CEO and CFO in the implementation of the Group strategy and the overall management and performance of Alviva. The CEO and CFO may sub-delegate all matters not specifically reserved for decision-making by the Board or shareholders.
The CEO and CFO are not members of the Audit and Risk, Remuneration and Social and Ethics Committees, but attend any meeting, or part thereof, by invitation, if needed, to contribute pertinent insights and information.
The Board evaluates the performance of the CEO and CFO annually against agreed performance measures and targets.
Corporate governance report continued
43
Ove
rvie
wG
over
nanc
eSu
stai
nabi
lity
Ann
ual fi
nanc
ial s
tate
men
tsSh
areh
olde
rs’ in
form
atio
n
Delegation of authority
The Board delegates certain of its powers and authority, outside of the reserved powers, to management and/or such committees/ forums, as they may deem appropriate. The directors appreciate that, despite such delegation occurring, they still remain ultimately responsible for the powers and authority so delegated and have, therefore, to monitor the effective execution of the same. However, it is understood that, any person or committee/forum to whom power or authority has been delegated, shall not, unless stated expressly to the contrary, be required to obtain consent to act in accordance with his/her/its delegated authority, but shall report regularly for monitoring purposes.
In the event of there being any dispute over the interpretation of the powers delegated by the Board to management, any committee or forum, the matter will be referred to the Board for a ruling and the decision of the Board in this regard shall be final and binding.
The Board is satisfied that the Delegated Authorities Framework contributes to role clarity and the effective exercise of authority.
The Framework specifically addresses:
� budget, strategy and action plans;
� appointments, dismissals and remuneration;
� risks, contracts and accounting;
� acquisitions and disposals; and
� administrative issues.
Succession planning
The Board has satisfied itself that there is succession planning in place for executive management and other key positions to provide continuity of leadership. Succession planning was reviewed during the reporting period, including succession plans for the CEO and CFO. The succession plans provide for the event of a temporary, unplanned absence (short-term and long-term) and the event of a permanent unplanned absence.
Governance
The Board has appointed an Internal Governance Officer and the Internal Governance Officer provides corporate governance services reports to the Board via the Chairperson on all statutory duties and functions performed in connection with the Board.
Regarding other duties and administrative matters, the Company Secretary reports to the executives, as appropriate. The Board considers these arrangements satisfactory as professional corporate governance services are underpinned by the expertise of the Lead Independent Director, Ms P Natesan, who is an expert in the field of governance.
Company Secretary
The Company’s appointed secretary, Ms SL Grobler, plays a pivotal role in the continuing effectiveness of the Board. The Company Secretary is not a director of the Company and was appointed by the Board in line with requirements of the Companies Act. The Company Secretary is considered independent and competent in the role as Company Secretary, but remains accountable to the Board. The Board has empowered the Company Secretary to properly fulfil the duties expected of the position.
Based on the evaluation of performance throughout the year, professional qualifications and experience in the current position and positions prior to appointment, the Board has assessed the competence, qualifications and experience of the Company Secretary as required in terms of section 3.84(h) of JSE Listings Requirements. It was confirmed that the Company Secretary is suitably qualified, competent and experienced to hold the position of Company Secretary. The Board has further resolved that, based on the manner in which the Company Secretary conducts herself with respect to matters related to the Board, the Company Secretary maintains an arm’s length relationship with the Board.
Corporate governance report continued
44
ALV
IVA
HO
LDIN
GS
LIM
ITED
•
Inte
grat
ed a
nnua
l rep
ort 2
020
The Company Secretary is sufficiently knowledgeable in relevant laws as required by the role. Key functions are formally documented and vetted by the Board and include the following:
� provision of guidance to the Board as a whole and to individual directors with regard to how their responsibilities should properly be discharged in the best interests of the Group;
� overseeing the induction and orientation of new directors and ongoing training and education of all directors;
� providing a central source of guidance and advice to the Board, and within the Company, on matters of good governance and of changes in legislation;
� assisting the Chairperson and the CEO in determining the annual Board plan and Board agendas;
� formulating governance and Board-related issues;
� ensuring that the Board and Board Committee Charters are kept up to date;
� ensuring that minutes of all shareholders meetings, Board meetings and the meetings of any committees of the directors, including those of the Audit and Risk Committee, are properly recorded in accordance with the Companies Act;
� being responsible for ensuring the proper compilation and timely circulation of Board papers;
� certifying the Company’s financial statements;
� ensuring that the Company has filed the required returns and notices in terms of the Companies Act, and confirming that all such returns and notices appear to be true, correct and up to date; and
� assisting with the yearly evaluation of the Board, its individual directors and senior management.
Planned areas of future focus:
Effective corporate governance is embedded in the values of the Group and is, therefore, not merely seen as a set of recommendations that has to be ticked off, but is considered a way of life. The effective exercise of authority and responsibilities is, therefore, a regular agenda item on Board and Committee meeting agendas to ensure that time constraints and potential conflicts of interests are considered and balanced against the opportunity for professional development.
RISK GOVERNANCE
Principle 11: The governing body should govern risk in a way that supports the organisation in setting and achieving its strategic objectives.JSE Listings Requirements (paragraph 7.F.7, service issue 27) – mandatory disclosure requirements: Material risks.
The Board has direct responsibility for the governance of risk and approves Alviva’s risk policy that gives effect to its set direction on risk. Alviva is committed to effective risk management in pursuit of its strategic objectives, with the ultimate aim to grow value sustainably for all stakeholders by embedding risk management into key decision-making processes. The Board also approves Alviva’s top risk profile and financial risk appetite and tolerance levels, ensuring that risks are managed within these levels, and considers the risk environment from time to time, as deemed appropriate and based on materiality and changes in the external and internal environments.
To support the Board in ensuring effective risk management oversight, the Board Committees are responsible for ensuring the effective monitoring of relevant Group top risks within the ambit of each Committee’s scope. In monitoring and providing oversight on Alviva’s risk, each Committee will consider potential risks and/or opportunities, as appropriate.
The Board, through the Social and Ethics Committee and Audit and Risk Committee, provided specific oversight in response to the regulations and the implementation of business continuity arrangements during the COVID-19 lockdown period and thereafter.
Key risks and mitigation strategies, specific to Alviva, the ICT industry and/or Alviva securities, are disclosed under Risk Management on pages 51 to 56 in the integrated annual report. Proper consideration has been given to the material risks that face Alviva, and material risks were grouped together in a coherent manner, with material risks considered to be of the most immediate significance disclosed prominently at the beginning of the material risks disclosure. The Audit and Risk Committee reviews the effectiveness of risk management and has satisfied itself of the outcomes.
Corporate governance report continued
45
Ove
rvie
wG
over
nanc
eSu
stai
nabi
lity
Ann
ual fi
nanc
ial s
tate
men
tsSh
areh
olde
rs’ in
form
atio
n
Planned areas of future focus:
The identification and monitoring of key risk indicators, together with mitigating strategies, are ongoing.
A Business Continuity Policy has been approved, which Policy includes the establishment and implementation of arrangements that allow the Group to operate under conditions of volatility, and to withstand and recover from acute shocks. The Business Continuity Plan is constantly under review and development.
TECHNOLOGY AND INFORMATION GOVERNANCE
Principle 12: The governing body should govern technology and information in a way that supports the organisation setting and achieving its strategic objectives.The Board is ultimately accountable for the governance of technology and information management.
The Board, through the Audit and Risk Committee, oversees and monitors the governance of technology and information in the Group. Information management risks are addressed and the return on major IT investments, aligned to Alviva’s strategy, is monitored by the Board. The technology and information strategy is aligned to Alviva’s business needs and sustainability objectives.
The IT Steering Committee assists the Board in its responsibility for technology and information governance and facilitates the integration of the IT strategy into Group companies’ strategic and business processes. The Committee is chaired by the CEO and the CIO and Managing Directors of subsidiary companies are members of the Committee. The CIO is the cybersecurity appointee.
Obsolete technology and information are disposed of responsibly, with due regard to its environmental impact and information security. External specialist waste disposal companies are used for the disposal of obsolete hardware.
The ethical and responsible use of technology and information includes an acceptable use policy which pops up when a computer is switched on with access to the computer being dependent on acceptance of the policy.
To improve redundancy and continuity, the single datacentre was replicated across three physical sites. The RubiQ system has been adopted to align IT and risks, underpinned by policies and procedures. The implementation of the ISO 27001 standard ensures IT standards are conformed to and aligned to compliance and legislative requirements, such as the Protection of Personal Information Act (“PoPI”). In addition to the aforementioned, a further PoPI compliance initiative was launched in July 2020 with the objective of achieving full PoPI compliance by June 2021 across all Group subsidiaries. Compliance with laws, rules, codes and standards is mandated by the Code of Conduct. The IT risk register also considers key exposures to non-compliances.
The leveraging of information to sustain and enhance Alviva’s intellectual capital includes improvements to the ERP system to gain quicker access to information to the benefit of stakeholders, including customers and suppliers, sustaining the Group’s data and turning it into a better repository, combined with extensive staff training. Regular training will be driven through the RubiQ system.
The security of information is monitored continually and is being documented in a policy that applies across the Group.
The Board is not aware of any major incidents during the reporting period which could have a negative impact on the Group.
Acquisitions continue to be integrated into the systems and procedures, as appropriate.
The effectiveness of technology and information management is monitored through internal surveys in Alviva’s subsidiary companies and managed by the IT Manager in the relevant subsidiary company, addressing outcomes and reporting thereon to the subsidiary’s Executive Committee.
Planned areas of future focus:
Certain aspects of the Technology and Information Governance Policy, which address governance, business continuity and security of information, continue to be documented to formalise alignment between King IV™ practices and the IT strategy of the Group.
Business Continuity procedures will be further enhanced through updated procedures and periodic validated system testing of disaster recovery procedures of the major subsidiaries.
A review of software licencing arrangements will be undertaken in order to ensure access to the latest technologies that should improve collaboration, security and productivity. Ongoing reviews and improvements of the security posture will be undertaken in order to further reduce cyber security risk. It is further intended to review the current processes around the disposal of equipment.
Corporate governance report continued
46
ALV
IVA
HO
LDIN
GS
LIM
ITED
•
Inte
grat
ed a
nnua
l rep
ort 2
020
COMPLIANCE GOVERNANCE
Principle 13: The governing body should govern compliance with applicable laws and adopt, non-binding rules, codes and standards in a way that supports the organisation being ethical and a good corporate citizen.The Board requires all Group companies and their directors and employees to comply with all applicable laws and adopt non-binding rules, codes and standards in a way that supports Alviva’s ethical corporate citizenship. Legal compliance systems and processes are in place and are continuously improved to mitigate the risk of non-compliance with the laws and also to ensure appropriate responses to changes and developments in the regulatory environment.
The Alviva compliance structure has been designed to:
� provide the directors with regular information in respect of the level of compliance with applicable laws and adopted non-binding rules, codes and standards;
� report non-compliance to the Group Compliance Officer, CEO and the Board in a timely manner;
� provide for structured monitoring of compliance and appropriate responses to changes and developments;
� enhance a culture of compliance;
� promote communication through effective co-ordination by the Group Compliance Officer; and
� develop an effective risk management approach that includes legal compliance.
The Social and Ethics Committee and Audit and Risk Committee receive regular reports on compliance matters, relevant to their charters. The Group Compliance Officer is supported by Compliance Officers in the major subsidiary companies.
To the extent that legal and regulatory matters have an impact on the financial statements, reports are presented to the Audit and Risk Committee.
In line with the regulations issued as regards COVID-19, the Social and Ethics Committee and Audit and Risk Committee provided oversight in terms of compliance procedures implemented across the Group, including the appointment of a COVID-19 Compliance Officer and a review of the COVID-19 Occupational Health and Safety Policy and Framework.
The Board adopted a Compliance Policy which applies to Alviva and its subsidiary companies. The Group Compliance Policy also informs Group Internal Audit’s mission and activities.
There has been no regulatory penalties, sanction or fines for contraventions of, or non-compliance with, statutory obligations, whether imposed on Alviva or members of the Board or officers during the reporting period.
Planned areas of future focus:
In line with their risk-based audit approach, Internal Audit conducts a due diligence at each new acquisition to evaluate the compliance universe in each respective entity with a view to aligning these businesses’ compliance levels with those of Alviva, and as applicable.
Corporate governance report continued
47
Ove
rvie
wG
over
nanc
eSu
stai
nabi
lity
Ann
ual fi
nanc
ial s
tate
men
tsSh
areh
olde
rs’ in
form
atio
n
REMUNERATION GOVERNANCE
Principle 14: The governing body should ensure that the organisation remunerates fairly, responsibly and transparently so as to promote the achievement of strategic objectives and positive outcomes in the short, medium and long-term. [GRI 102-35]
JSE Listings Requirements (paragraph 3.84, service issue 27) – mandatory disclosure requirements: The remuneration policy and the implementation report.
Alviva has an embedded rewards strategy and policy which translates into competitive and appropriate reward outcomes. The background information, Remuneration Policy and Implementation Report are reported on in detail on pages 61 to 85 in the Remuneration Committee Report contained in the integrated annual report.
Alviva’s Remuneration Committee is tasked by the Board to independently approve and oversee the implementation of a remuneration policy that will encourage the achievement of Alviva’s strategy and grow stakeholder value sustainably. Alviva discloses the remuneration of each director and prescribed officer individually in its financial statements and in the Implementation Report on pages 78 to 85.
In line with the recommended practices in King IV™ and the JSE Listings Requirements, both the Remuneration Policy and the Implementation Report will be tabled for separate non-binding advisory votes by the shareholders at the AGM to be held on 18 November 2020.
Prior to the approval of the executive and non-executive directors’ remuneration for the year ending June 2020, a benchmark survey of directors’ remuneration across industries was performed, directors’ remuneration was aligned, and the Remuneration Policy expanded to reflect fair allocation of remuneration. Following the impact of COVID-19 on the business, there were no increases to the executive and non-executive directors’ remuneration for the year ending June 2021.
Planned areas of future focus:
Planned areas of future focus are disclosed in the Remuneration Committee report on page 64.
ASSURANCE
Principle 15: The governing body should ensure that assurance services and functions enable an effective control environment, and that these support the integrity of information for internal decision-making and of the organisation’s external reports. [GRI 102-56]
The Audit and Risk Committee is responsible for the quality and integrity of Alviva’s integrated reporting. The Board, with the support of the Audit and Risk Committee, satisfies itself that the combined assurance model is effective and sufficiently robust for the Board to be able to place reliance on the combined assurance underlying the statements that the Board makes concerning the integrity of information for internal decision-making and of the Company’s external reports. Internal Audit annually provides an overall statement as to the effectiveness of Alviva’s governance, risk management and control processes to the Audit and Risk Committee, for presentation to the Board.
A Combined Assurance Framework, based on a three-lines of defence model and aligned to the six value capitals (financial, manufactured, intellectual, human, social and relationship, natural), has been implemented, which approach assists in addressing control over the key risks facing the Group.
Ongoing collaboration between the external auditors and Internal Audit aims to avoid duplication of work.
During 2020, it was confirmed that Internal Audit conforms to the International Standards for the Professional Practice of Internal Auditing and guidance by King IV™. This is supported by the results of an independent Quality Assurance Review which was performed with external assurance providers during November/December 2017.
Further disclosure is contained in the Combined Assurance section on pages 49 and 50 of the integrated annual report.
Corporate governance report continued
48
ALV
IVA
HO
LDIN
GS
LIM
ITED
•
Inte
grat
ed a
nnua
l rep
ort 2
020
Planned areas of future focus:
The combined assurance approach will be reviewed on a continuous basis to identify opportunities for the improvement of assurance levels. Integrated assurance and effective risk management processes will be further enhanced in the year ahead. With the roll-out of the online risk management system, RubiQ, to acquired companies, the integration of risk management in daily operations would also further enhance combined assurance.
STAKEHOLDERS
Principle 16: In the execution of its governance role and responsibilities, the governing body should adopt a stakeholder-inclusive approach that balances the needs, interests and expectations of material stakeholders in the best interests of the organisation over time. [GRI 102-15]
Alviva strives to ensure a systematic and integrated approach to stakeholder engagement across the Group, facilitated through engagement programmes to enable increased assurance to the Board that all stakeholder issues have been identified, prioritised and appropriately addressed.
It is a business imperative that Alviva understands and is responsive to the needs and interests of its key stakeholder groups.
The Board has a Stakeholder Engagement Policy, which Policy includes a Stakeholder Engagement Framework.
The subsidiary companies have delegated responsibilities, as required, to Board Committees of the holding company and have adopted the policies and procedures of the holding company.
Stakeholder engagement disclosures appear on pages 57 to 60 of the integrated annual report.
Planned areas of future focus:
Stakeholder engagement, which has been enhanced during the period of uncertainty created by COVID-19, will continue in order to facilitate feedback from the different stakeholder groups and in support of the Board’s intentional stakeholder-inclusive approach.
A comprehensive Group Governance Framework, which articulates and gives direction on relationships and the exercise of authority across the Group, will be further developed.
Corporate governance report continued
49
Ove
rvie
wG
over
nanc
eSu
stai
nabi
lity
Ann
ual fi
nanc
ial s
tate
men
tsSh
areh
olde
rs’ in
form
atio
n
Alviva has adopted the Three-lines of Defence Model. The following lines of assurance have been identified:
Alviva has further refined its combined assurance efforts during the reporting period. Combined Assurance has the objective of coordinating work performed by the various internal and external assurance providers, preventing duplication of effort, to increase collaboration and developing a holistic view of Alviva’s risks and control environment. The Audit and Risk Committee, aligned to King IV™ recommended practice, has been tasked with the responsibility of monitoring the appropriateness of Alviva’s Combined Assurance Framework and ensuring that all significant risks facing the Group are appropriately assured and identified control deficiencies are addressed. The Framework assists with the achievement of governance outcomes through the effective application of the six capitals, being financial, manufactured, intellectual, human, social and relationship, and natural. It also assists with the governance outcomes, as suggested by King IVTM, mainly relating to good performance and effective control.
The Audit and Risk Committee has reviewed the combined assurance results for the Group and has satisfied itself that appropriate assurance activities are in place in relation to the controls operating over key risks and controls identified in the management of risk.
ASSURANCE PROVIDERS
Management-based assuranceManagement-based assurance, included in the first line of defence, includes the implementation of strategy, key performance indicators, performance measurement and continuous monitoring of mechanisms and systems.
Internal assuranceRisk management, compliance, health and safety, and quality assurance processes are included in this second line of defence. These functions are responsible for maintaining policies, minimum standards, risk management performance, monitoring and reporting.
Independent assuranceThe third line of defence is constituted by various independent assurance providers. Key providers are detailed below:
Internal Audit
Internal Audit is an independent appraisal function, which examines and evaluates the activities and the appropriateness of the systems of internal control, risk management and governance processes. The Audit and Risk Committee is satisfied that Internal Audit’s functions align with the Internal Audit Charter and specifically that it is independent.
Combined assurance
Oversight
� Board of Directors
� Audit and Risk Committee
� Remuneration Committee
� Social and Ethics Committee
Lines of defence
Lines of assurance
1stline of defence
2ndline of defence
3rdline of defence
Functions that own
and manage risk
� Executive Management
� Business Unit Management
Functions that oversee
or specialise in risk
management
� Group Risk Management
� Group Health and Safety
� Control self-assessment
� Group Legal
� Group Secretarial
� Group Sustainability
� IT Steering Committee
� HR Steering Committee
Functions that provide
independent assurance
� Internal Audit
� Consultants and Regulators
� External Audit
� External Regulators
� Vendors
[GRI 102-56]
50
ALV
IVA
HO
LDIN
GS
LIM
ITED
•
Inte
grat
ed a
nnua
l rep
ort 2
020
External audit
The Audit and Risk Committee is responsible for recommending the external auditor for appointment by shareholders. The Committee has been mandated by the Board to ensure that the external auditor carries out an annual audit of Alviva and its subsidiaries in accordance with international auditing standards. They are also mandated to ensure that the external auditors report in detail on the results of the audit, both to the management of Alviva’s subsidiaries and to the Audit and Risk Committee. The external auditor is the main external assurance provider for the Board in relation to the Group’s financial results for each reporting period.
Vendors
Vendors from time to time perform independent reviews to ensure that Alviva and its subsidiaries continue to comply with both the vendors’ internal as well as legal requirements.
Board and oversight committees
In addition to the Board, the following committees provide oversight as stated below:
� Audit and Risk Committee – with regard to financial and internal controls outlined in its Charter and the enterprise-wide risk management framework.
� Remuneration Committee – with regard to controls in the remuneration sphere.
� Social and Ethics Committee – with regard to oversight of the Group’s controls in the sphere of ethics, corporate social responsibility, sustainability and transformation.
Alviva does not have a Nomination Committee. The Board provides assurance in relation to Board diversity, succession planning and corporate governance structures.
BOARD ASSESSMENT OF THE GROUP’S SYSTEMS OF INTERNAL CONTROLS AND RISK MANAGEMENTThe Board has confirmed that nothing has come to their attention or arose out of the internal control self-assessment process, internal audit or year-end external audits that causes the Board to believe that the Group’s systems of internal controls and risk management are not effective or that the internal financial controls do not form a sound basis for the preparation of reliable financial statements. The Board’s opinion is based on the combined assurance received from all parties forming part of the Combined Assurance model, including external and internal auditors, management and the Audit and Risk Committee.
ASSURANCEThe information contained in the Alviva integrated annual report 2020 has been assured to the extent set out below.
Alviva’s management and directors are responsible for the preparation and presentation of the identified sustainability information, as incorporated in the 2020 sustainability data and information, and for the information contained in the integrated annual report, in accordance with their internally defined procedures. Alviva’s management and directors are also responsible for maintaining adequate records and internal controls that are designed to support the reporting process.
The financial statements have been audited by the independent auditors, SNG Grant Thornton. A summary of their audit report appears on pages 145 to 149 of the integrated annual report.
The B-BBEE rating, contained in the Report of the Social and Ethics Committee, has been independently verified by EmpowerLogic (Pty) Ltd.
The Audit and Risk Committee has reviewed the sustainability matters in the sustainability data and in the integrated annual report to ensure that they are reliable and that there is no conflict with the financial information. Group Internal Audit provided independent assurance on sampled material sustainability data.
Combined assurance continued
51
Ove
rvie
wG
over
nanc
eSu
stai
nabi
lity
Ann
ual fi
nanc
ial s
tate
men
tsSh
areh
olde
rs’ in
form
atio
n
Risk management
The assumption of risk is inherent in all businesses. Alviva recognises this in its mission of creating ongoing and sustainable value for all its stakeholders. Cognizance is therefore taken of risks, both strategic and operational, which are commensurate with the returns that are expected. The Company has a responsibility to evaluate and manage risk in such a way that the interests of all its stakeholders are effectively considered. This will promote the underlying quality and sustainability of the business for the benefit of all.
The Group’s risk management framework aims to:
� align strategy with risk appetite and tolerance;
� improve decision-making which improves the Group’s risk profile;
� ensure equitable commercial terms and conditions are contracted;
� promote continuous improvement through the application of key lessons learnt;
� improve predictability and build shareholder confidence;
� build robust organisational risk structures and facilitate timeous interventions to promote long-term sustainability; and
� promote the efficient and proactive utilisation of opportunities.
The Board has direct responsibility for the governance of risk and approves Alviva’s risk policy that gives effect to its set direction on risk. Alviva is committed to effective risk management in pursuit of its strategic objectives, with the ultimate aim to grow value sustainably for all stakeholders by embedding risk management into key decision-making processes. The Board also approves Alviva’s top risk profile and financial risk appetite and tolerance levels, ensuring that risks are managed within these levels and considers the risk environment from time to time, as deemed appropriate and based on materiality and changes in the external and internal environments.
This Risk Appetite Statement seeks to articulate Alviva’s risk policies, tolerances, parameters, models and governance.
METRICS
Risk AppetiteAs Alviva has a number of subsidiaries operating in different markets, each subsidiary sets its own Risk Appetite when performing its individual risk assessment according to the Group Risk Management Policy.
In terms of the Risk Management Policy, risk appetite is calculated by taking into account revenue and net profit before tax. The resultant risk appetite value is the higher of 1% of revenue and 20% of net profit before tax.
Tolerance LevelsAlviva’s key strategic initiatives and risk tolerance levels are as follows:
� Acquisition strategy – Focusing on scalable IP-based IT companies – Medium Tolerance
� Expansion into international markets – Africa, based in Mauritius, and Delaware in the USA – Medium Tolerance
� Digitisation of the business – Low Tolerance
Alviva’s risk tolerance levels as regards its stakeholders:
Stakeholder Tolerance Level
Customers Medium
Suppliers Medium
Communities Medium
Media Medium
Shareholders Medium
Government Low
Employees Low
Bankers Low
Regulators Low
Tolerance, as it relates to ethical business conduct, in relation to all of the above stakeholders Low
[GRI 102-11] [GRI 102-15] [GRI 205-1]
52
ALV
IVA
HO
LDIN
GS
LIM
ITED
•
Inte
grat
ed a
nnua
l rep
ort 2
020
The top ten risks are included in the table below:
Risk category Risk description Risk consequence Risk mitigating strategiesInherent
riskResidual
risk
Public health risk or pandemic, e.g. COVID-19
� Business continuity risk.
� Risks arising from interruptions to the IT supply chain.
� Risks as regards key employees who may become infected and general employee shortages due to mass infections, self-isolation and quarantine measures.
� Risks as regards the proper implementation of protocols to ensure the safety and protection of its employees.
� Sustainability risks due to the impact on revenue and cash flow.
� Loss of revenue due to the inability to secure stock for resale.
� Loss of revenue due to a general downturn in economic activity.
� Cash flow pressure due to customers’ inability to pay or requirement for increased credit terms.
� Business continuity and sustainability challenges.
� The current performance of the Group is such that adequate facilities are in place with bankers.
� Daily cash flows are done, and covenants are measured and reviewed regularly to retain a holistic view of the Group’s exposure.
� Monthly subsidiary Board meetings are attended by the executive directors to ensure continued financial oversight.
� Solvency and liquidity tests are performed at the quarterly Board meetings and the going concern status is reviewed and confirmed.
� Remote working utilising IT systems is in place.
� COVID-19 procedures and protocols are implemented based on the latest guidance from government and the WHO.
High Medium
Cybersecurity � Inadequate network security allowing for unauthorised access to Company networks.
� Unauthorised access resulting in theft of data.
� Corporate sabotage leading to downtime and, consequently, loss of earnings.
� The network is monitored on a continuous basis.
� Selected technologies are deployed to proactively manage, monitor and reduce the risk.
� Ongoing proactive processes and procedures are constantly followed to identify possible threats.
High Medium
B-BBEE rating � Not keeping pace with the transformation objectives as set out in the ICT Sector Code on B-BBEE could result in the B-BBEE rating not being maintained or reducing.
� This could result in
� customers seeking alternative sources of supply, affecting the financial performance of the Group;
� suppliers considering alternative distributors for their products; and
� an inability to attract top talent.
� Regular reviews of the B-BBEE scorecard are performed with continued focus on projected B-BBEE scores and transformation performance.
High Medium
Risk management continued
53
Ove
rvie
wG
over
nanc
eSu
stai
nabi
lity
Ann
ual fi
nanc
ial s
tate
men
tsSh
areh
olde
rs’ in
form
atio
n
Risk management continued
Risk category Risk description Risk consequence Risk mitigating strategiesInherent
riskResidual
risk
Economy and competition
� The macro-economic downturn could result in a reduced demand for products and services, and delayed and/or reduced investment in IT products and services.
� Competition related to shifts in the commercial market (e.g. cloud computing), the operating presence of vendors in South Africa, direct imports by resellers and increased competition from non-traditional channel businesses.
� Volume reduction, impacting financial results and cash flow.
� A business diversification strategy has been implemented through acquisitions in order to expand on product and service offerings.
� Senior management’s involvement in the market and in operations gives the business and the management team the ability to adapt quickly to market conditions.
� Aggressive cost control measures are in place.
� Ongoing facility and covenant management.
High Medium
Liquidity � The inability to attract facilities from bankers and suppliers could affect solvency and liquidity, thereby impacting the sustainability of the Group.
� Failing to attract facilities could affect the financing of operations and could lead to an inability to meet financial obligations, resulting in reduced performance and shareholder returns.
� The current performance of the Group is such that adequate facilities are in place.
� Daily cash flows are done, and covenants are measured and reviewed regularly to retain a holistic view of the Group’s exposure.
� Monthly subsidiary Board meetings are attended by the executive directors to ensure continued financial oversight.
� Solvency and liquidity tests are performed at the quarterly Board meetings and the going concern status is reviewed and confirmed.
High Medium
54
ALV
IVA
HO
LDIN
GS
LIM
ITED
•
Inte
grat
ed a
nnua
l rep
ort 2
020
Risk category Risk description Risk consequence Risk mitigating strategiesInherent
riskResidual
risk
Key IT system failure/ business continuity
� Key IT system failure could cause an interruption of business operations, resulting in an inability to trade with subsequent financial loss.
� Loss of data, customers, vendors or employees could result in financial losses, affecting the sustainability of the Company and the Group.
� Inability to grow.
� Reduced customer service levels resulting in lower revenue or loss of key customers.
� Inability to report accurately and timeously to vendors, thereby placing distribution agencies at risk.
� Loss of financial data resulting in an inability to collect payments from customers and pay vendors and employees.
� Systems are monitored through proactive alerts and acted upon.
� Hardware and software systems are periodically replaced and upgraded.
� Appropriate disaster recovery procedures are in place.
� Appropriate business continuity insurance is in place.
High Medium
Risk management continued
55
Ove
rvie
wG
over
nanc
eSu
stai
nabi
lity
Ann
ual fi
nanc
ial s
tate
men
tsSh
areh
olde
rs’ in
form
atio
n
Risk management continued
Risk category Risk description Risk consequence Risk mitigating strategiesInherent
riskResidual
risk
Talent management
� Inadequate talent management and poor succession planning could lead to a loss of intellectual capital and high employee turnover.
� The loss of talent could result in reduced or inferior levels of customer service and operational excellence, impacting on the financial performance.
� An inability to grow.
� Focus on retaining talented people in correct positions with linked performance measures.
� Employee recognition, including the recognition of back-office employees, and employee feedback sessions are held.
� Employee incentives have been implemented.
� Employees are inducted to orientate them in Company culture and performance expectations.
� Formalised training plans have been implemented in all divisions of the business.
� Workplace forums, representing all employees, are held regularly.
� Succession planning programmes have been launched.
High Medium
Sovereign risk � Further credit rating downgrade and/or a junk status credit rating for the country could affect the ability to maintain international credit limits.
� Reduced foreign investment in South Africa carries the real risk of further economic deterioration.
� Impaired economic performance impacting on the financial results.
� Liquidity of the Group and the Company is monitored on an ongoing basis and regular solvency and liquidity tests are performed.
� Ongoing liaison with suppliers, as regards credit lines.
� Access to local bank finance is supported by strong local banking relationships and the Group’s responsible management of facilities and cash flows.
� Exposure to foreign lenders has been reduced.
� Diversification would be supported by offshore acquisitions and the Board would consider these opportunities as and when they arise.
High Medium
56
ALV
IVA
HO
LDIN
GS
LIM
ITED
•
Inte
grat
ed a
nnua
l rep
ort 2
020
Risk category Risk description Risk consequence Risk mitigating strategiesInherent
riskResidual
risk
Reputation and communication
� An inability to protect the Company’s reputation or to adequately manage potential reputational damage or events that undermine public trust in the Company and the brands that it represents.
� Non-compliance with regulatory and legal obligations.
� Inability to deliver minimum standards of service and product quality.
� Unethical practices.
� Unmanaged social media access.
� A tarnished image with investors, shareholders, customers, suppliers, government and other stakeholders could result in reduced revenues, higher input costs, reduced profit margins and less investment and capital available for growth opportunities as well as an inability to secure facilities to fund operations.
� Vendors cancelling vendor contracts could result in the inability to distribute certain brands.
� Unauthorised social media comments could affect the reputation of the Company.
� The Code of Conduct is understood and implemented across the Group and compliance rates are high, combined with strong central management oversight.
� Close management oversight in the day-to-day activities to monitor ongoing legal compliance and any reputational concerns.
� Continuing Board oversight of policies and procedures and monitoring of all reputational matters.
� Ongoing and timeous responsible communication with all stakeholders.
� Continued zero-tolerance to unethical behaviour.
� Maintaining controls which monitor unethical behaviour.
High Medium
Legal compliance
� Legal compliance risks relate to:
� non-adherence to legal and regulatory requirements, including the Basic Conditions of Employment Act, Occupational Health and Safety Act, Companies Act, Income Tax Act, King IV™ and PoPI; and
� an inability to ensure compliance with all applicable laws.
� Non-compliance could result in penalties, fines and criminal sanctions which may lead to civil litigation.
� Reputational damage and, in some cases, industrial action and injury or death of employees could be the outcome of non-compliance.
� Assurance on Companies Act adherence is monitored by management, the Audit and Risk Committee and Internal Audit, with legal compliance being a standing Audit and Risk Committee agenda item.
� A dedicated legal representative is contracted in with referral to other legal experts and legal resources, as and when required.
� A Safety, Health and Environment (“SHE”) Committee is in place to govern SHE processes and to ensure that SHE governance is fully rolled out across all branches.
� Close adherence to the Basic Conditions of Employment Act is monitored by HR.
� There is an ongoing focus on tax compliance in all the territories where the Group operates.
� A King IV™ gap analysis was performed during the reporting period and processes, policies and procedures, applicable to Alviva, are aligned to the principles and recommended practices contained in King IV™.
High Medium
Risk management continued
57
Ove
rvie
wG
over
nanc
eSu
stai
nabi
lity
Ann
ual fi
nanc
ial s
tate
men
tsSh
areh
olde
rs’ in
form
atio
n
The Alviva Board, in the execution of its governance role and responsibilities, approved a Stakeholder Engagement Policy. Stakeholder engagement is undertaken with a far broader aim than merely communication to various stakeholder groups. Rather, Alviva considers its various stakeholders as key partners in its endeavours and has adopted a stakeholder-inclusive approach in determining material challenges and opportunities within the Group.
The Board has identified the following key stakeholder groups with whom the Group engages in a structured and inclusive manner aimed at establishing and maintaining open and transparent, mutually beneficial relationships:
[GRI102-40]
Customers
Suppliers
Employees
Communities
Media
Government – national, provincial
and local
Regulators
Banks, fundersand insurance
companies
Shareholders andthe investment
community
Regulatory Specific contracts
Responsibilities
to societyCo-opera
tive
engagement
Stakeholder engagement[GRI 102-15] [GRI102-42] [GRI 102-43]
58
ALV
IVA
HO
LDIN
GS
LIM
ITED
•
Inte
grat
ed a
nnua
l rep
ort 2
020
StakeholderWho our stakeholders are What matters to them How we engage with them
REGULATORY
Shareholders and the investment community
Providers of share capital and the principal risk takers within the business.
The generation of sustainable, market-related returns on their investment, together with timely, relevant, open and ongoing communication on Alviva’s activities and performance as well as the creation of an informed perception of Alviva, whereby more accurate expectations are ensured, and a positive investment environment is created.
Investors are kept abreast of developments through formal engagements such as the Stock Exchange News Service, results presentations and investor updates, and specific meetings in accordance with the JSE Listings Requirements and as required by Alviva and its investors.
Alviva’s integrated annual report seeks to provide shareholders (and other stakeholders) with an in-depth understanding of Group strategy, sustainability, value drivers, governance, reward systems as well as actual performance on various aspects, including financial performance.
Shareholders are given the opportunity to put questions to the Board at the annual general meeting and all other shareholder meetings and presentations.
Banks, funders and insurance companies
Primary bankers who provide working capital and general transactional banking facilities, and credit underwriters who provide insurance on trade and other receivables to manage credit risk in accordance with Group policy.
Stable and sound financial management of the business and the management of funding within the parameters set by the agreements entered into between Alviva and its funders, supported by regular updates and communication on developments in the Group’s financial sphere.
Various financial services are provided to the Group, including credit insurance. The Group CFO engages with the financial service providers and attends to their ongoing requirements, including Group and ad hoc funding requirements, as the need arises, as well as interactions with the group’s bankers regarding cash flow forecasts and performance against covenants.
Annual, or more often as required, interactions entail the updating of insurance policies, which include short-term insurance, professional indemnity, and directors’ liability.
Stakeholder engagement continued
59
Ove
rvie
wG
over
nanc
eSu
stai
nabi
lity
Ann
ual fi
nanc
ial s
tate
men
tsSh
areh
olde
rs’ in
form
atio
n
StakeholderWho our stakeholders are What matters to them How we engage with them
REGULATORY (continued)
Regulators Industry associations and various regulatory bodies who ensure that Alviva adheres to all applicable laws, regulations, codes and corporate governance.
Compliance with laws and regulations that are designed to protect stakeholders, primarily through the submission of regular statutory returns and the timely collection and payment of duties and taxes.
Relationships of trust and transparency are maintained with all regulators. This is an ongoing process, which escalates when new requirements and legislation are introduced. Alviva is regulated by several stakeholders including the JSE Limited, South African Revenue Service, South African Reserve Bank, the Department of Trade and Industry, the Department of Labour and the B-BBEE Commission.
SPECIFIC CONTRACTS
Customers In the distribution business, customers comprise small resellers, solution providers, retailers and large corporate resellers. The services and solutions businesses address the needs of a cross-section of end-user customers, from corporates to small and medium enterprises.
To gain access to Alviva’s quality product and service offerings and obtain solutions that will achieve the desired outcomes for customers’ respective projects.
Engagements with customers are segmented and range from accounts that are managed through the Group’s various call centres to accounts that are managed on a face-to-face basis. Customer surveys are conducted within the various operating entities, and the results are evaluated, and appropriate action taken.
Suppliers Providers of products and services, in accordance with Alviva’s Procurement Policy.
To render an ongoing and commercially viable supply of products and services.
Face-to-face meetings between the senior management teams of both parties are held regularly. Presentations, reviews and marketing plans are attended to on a continuous basis.
Employees A diverse range of individuals of varying skills, expertise, qualifications, experience and nationalities (including race and gender diversity) are employed across the Group to add value to all stakeholders.
Career and personal development in a work environment that ensures job security and appropriate reward for performance.
On the appointment of new employees, a formal induction programme is conducted by the relevant human resources department.
Employees are engaged through the Workplace Forums during Community Hours, where regular feedback is provided on Company matters. Employees also have access to Company information on the intranet. Company newsletters are distributed by the various operating entities.
Stakeholder engagement continued
60
ALV
IVA
HO
LDIN
GS
LIM
ITED
•
Inte
grat
ed a
nnua
l rep
ort 2
020
StakeholderWho our stakeholders are What matters to them How we engage with them
RESPONSIBILITIES TO SOCIETY
Media Media includes every broadcasting and narrowcasting medium such as newspapers, magazines, TV, radio, billboards (including signage on buildings), direct mail, social media, telephone, and the internet.
To educate and inform the respective audiences of developments in the technology and information sectors, adding Alviva’s voice to the public debate, as well as to communicate the Group’s performance and contribution to the economy, including its product and service offerings.
Executive management conducts interviews and attends press briefings with members of the media. These take the form of one-on-one time with Alviva executives and key spokespeople across the Group to discuss pertinent issues relevant to the Group’s business activities. The Group’s interim and annual results are published in the press and executive management attends to the media briefings surrounding the release of the results.
Communities The areas in which Alviva’s operations are located and the people participating in and related to the Group’s activities.
The creation of partnerships to best facilitate integrated sustainability initiatives and to collaborate in a way that furthers economic, environmental and social agendas for the greater good of the community.
The Group adopts a consistent approach to community development and evaluates the socio-economic impact that the Group’s operations and activities have on the communities in which it operates. Engagement is ongoing as partnerships dictate or stakeholder needs require.
CO-OPERATIVE ENGAGEMENT
Government – national, provincial and local
Members of local, provincial and national government with particular emphasis on those involved in technology and information development.
Alviva is, and is seen to be, an active participant in driving the economic, social and environmental upliftment of the country through its participation in technology and information development.
As a result of Alviva’s participation in information, communication and technology development, the Group interacts, either directly or indirectly, with local and provincial government on projects. The primary method of engagement with government is through tender processes and formal meetings, as required.
Stakeholder engagement continued
61
Ove
rvie
wG
over
nanc
eSu
stai
nabi
lity
Ann
ual fi
nanc
ial s
tate
men
tsSh
areh
olde
rs’ in
form
atio
n
PART 1: BACKGROUND STATEMENT
Dear Shareholder
The latter part of 2020, in particular, has been a challenging year for all of our stakeholders: for you as our shareholders, for our executives who worked relentlessly as a result of the impact of the COVID-19 pandemic, for the Board who had to and continue to navigate the Company despite the economic challenges faced, and for all of our employees and the communities in which we operate. Despite these challenges, it is with great pleasure that I present the remuneration report for the reporting period on behalf of the Remuneration Committee (“the Committee”).
In line with King IV™ recommended practice, and in accordance with the JSE Listings Requirements, this report has been segregated into three parts, namely the Background Statement, Remuneration Policy and an Implementation Report:
� Part 1: The Background Statement sets out the rationale of the remuneration decisions taken by the Committee throughout the reporting period as well as the strategy moving forward.
� Part 2: An overview of the Remuneration Policy (“the Policy”), which sets out the remuneration principles that will be in place for the coming financial year. We provide a brief overview of the Policy as it applies to all of our employees, and an in-depth review of the policy applicable to executive management and non-executive directors.
� Part 3: Implementation Report, sets out how the Policy was implemented during the 2020 financial year (“FY20”, “the reporting period” or “period under review”), and includes the King IV™ recommended single figure format of disclosure for emoluments.
The following terms are frequently used in this report and have been defined for ease of reference below:
FSP the forfeitable share plan (the current long-term incentive)
KPIs key performance indicators
LTI long-term incentive
STI the annual short-term incentive
TGP total guaranteed pay
TR total remuneration
TSR total shareholder return
Remuneration Committee report[GRI 102-35] [GRI 102-36] [GRI 102-37] [GRI 102-38] [GRI 102-39]
62
ALV
IVA
HO
LDIN
GS
LIM
ITED
•
Inte
grat
ed a
nnua
l rep
ort 2
020
FACTORS INFLUENCING REMUNERATION AND SUMMARY OF MAIN DECISIONS TAKENThe impact of the depressed economy in general, as aggravated by the COVID-19 pandemic, had an impact on the remuneration decisions and outcomes, as reflected in part 3 of this report.
Whilst our Remuneration Policy has remained mostly unchanged, a number of internal and external factors also influenced the decisions taken during FY20. These factors, and the main decisions taken, are summarised below.
1. External competitiveness of remuneration We believe our remuneration offering should be competitive, fair and aligned with market norms. As a result, the following
decisions were made and implemented during FY20:
� During the previous financial year (“FY19”), much work was performed to benchmark executive and non-executive remuneration. The results of the benchmarking exercise were implemented at the commencement of FY20 as follows:
� Non-executive remuneration was substantially increased, particularly to bring the remuneration paid for their services from below to in-line with the market and Alviva’s comparator peer group. These increases were approved by shareholders at the previous AGM;
� Executive remuneration was increased, resulting in a potential increase in variable remuneration to help align the split of remuneration into the desired mix between fixed and variable elements.
� During the latter part of FY19, the Group CEO had been approached by a competitor and the Committee had to assess the risk factors associated with his potential resignation, due to the lack of a restraint of trade agreement in force between him and Alviva. The Committee resolved to approach the Board to commit his services until the end of June 2022 and to grant an additional FSP award to Mr Spies in FY20, should he agree to conclude a restraint of trade agreement. The award had specific performance measurements which were different to the current FSP performance conditions, as they included emphasis on the performance of the AI subsidiary, which is a key strategic initiative. The award is subject to malus, clawback and the new Minimum Shareholding Requirement Policy (“MSR Policy”) for executives, which was finalised in September 2019.
With the restraint in place and after a subsequent review, to our satisfaction, on the retention position of all senior executives at no additional cost, the Committee resolved that:
� no further additional FSP awards to the CEO would be necessary as the normal annual FSP would remain both attractive and within the remuneration benchmarks as identified in the benchmarking exercise performed in FY19; and
� a restraint of trade would be a condition imposed on any future appointment to the position of Group CEO.
� We reviewed the Group’s variable pay structures and decided to amend the measures on both the LTI (FSP) and STI by substituting the use of Core EPS with HEPS for future awards. Other than this minor amendment, we concluded that the measures and weightings remain appropriate.
2. Shareholder and governance expectations around executive pay As reported in FY19, we have adopted a malus and clawback policy and minimum shareholder requirements for our
executives. We are pleased with the traction we have made in implementing these policies during FY20.
3. COVID-19 The impact of the pandemic was felt throughout the second six months of FY20. Initially, in January and February, the
Group had difficulty in obtaining the normal supply of products as the majority of products emanate from China. March and April were adversely affected due to the national lockdown imposed in South Africa. In May and June, there was an increase in activity due to catching up from the total shutdown in April. However, the economic effects of the lockdown were immediately felt, and it is estimated that this will last for some time to come.
Remuneration Committee report continued
63
Ove
rvie
wG
over
nanc
eSu
stai
nabi
lity
Ann
ual fi
nanc
ial s
tate
men
tsSh
areh
olde
rs’ in
form
atio
n
Remuneration Committee report continued
Plans to ensure the long-term sustainability of the Group were conceived and implemented in the beginning of April. The payment of executive incentives was suspended, and a compulsory leave of six days was processed for all employees in April. Full pay, however, was met throughout the period, except for those on a variable income, who received approximately 75% of their normal earnings. In addition, no retrenchments were implemented.
As a result of the impact of COVID-19, the Committee approved the following:
� Suspension of salary increases, which are normally processed with effect 1 July, throughout the Group for the forthcoming financial year (FY21);
� No increase in non-executive director fees for FY21;
� Acceptance of the voluntary waiver by executives of the non-financial component of their STI for FY20, resulting in no STI payments;
� If we followed our standard LTI allocation methodology, the number of shares to be awarded in FY20 would have increased significantly compared to the number of shares awarded in FY19 when the shares were trading at a higher price. As a result, and to guard against any future windfall gains to executives as a result of our depressed share price, we took the decision to keep the number of FSP shares awarded in FY20 mostly unchanged from FY19;
� It was resolved to measure two of the FSP performance measurements on the annualised results for the six months ended 31 December 2019, rather than the full year’s results to June 2020. This effectively removed the effect of COVID-19 from the performance measurement. During the period January to June 2020, the executives had managed the business, and directed it towards different outcomes, in a manner that had not been set out in the performance criteria, albeit that their actions were supported by the Board. The TSR measure will continue to be measured until 30 September 2020. The impact of this amendment had the effect of increasing the estimated amount for vesting when compared to the final results now recorded, although considerably less than the estimate that was carried out on the completion of the results to December 2019. Overall, the Committee felt that this was the most equitable treatment for all concerned and was dealt with in terms of the rules of the scheme; and
� As far as target setting is concerned, the Committee has taken the decision to set challenging STI targets for the new year and review these targets after six months to establish if they are still appropriate. The setting and calibration of the LTI were challenging, but the Committee determined that it was an important exercise to ensure that executives have long-term targets.
4. Economic environment The budgets which were set for FY20 anticipated that the economic climate would not be conducive to substantial growth of
the mature businesses within Alviva. Consequently, remuneration increases at the commencement of FY20 were, therefore, kept within the inflationary bands to protect the Company through the economic downturn.
5. Group performance Against the background of the economic environment, targets for the STI for executives for FY20 were set comparatively
lower in growth terms than had been set in prior years, with the intention of still being challenging to meet. These targets, however, would still not have been met, in the opinion of the Committee, without the impact of COVID-19 on the business. Hence, no STI was payable to the executives for FY20 (despite the portion of the STI that related to non-financial measures – transformation being met in full but subsequently waived by the executives).
64
ALV
IVA
HO
LDIN
GS
LIM
ITED
•
Inte
grat
ed a
nnua
l rep
ort 2
020
Remuneration Committee report continued
VOTING ON REMUNERATION AND SHAREHOLDER ENGAGEMENTI am pleased to report that shareholders representing 75,82% of exercisable votes were present at the last AGM and the results of their voting are tabled below:
For Against
Endorsement of Remuneration Policy2019: 98,83% 2019: 1,17%
2018: 99,99% 2018: 0,01%
Endorsement of Implementation Report2019: 98,97% 2019: 1,03%
2018: 99,99% 2018: 0,01%
We discussed the remuneration arrangements in relation to the CEO with our main shareholder and have not received any other formal shareholder feedback in relation to our Policy or the implementation thereof.
As mentioned above, the Policy and Implementation Report will be tabled for separate non-binding advisory votes at the AGM, to be held on 18 November 2020. In the event that 25% or more of the voting rights exercised vote against either the Policy, the Implementation Report, or both, the Board will take steps, in good faith and with best reasonable effort, to do the following as a minimum:
� Implement an engagement process to ascertain the reasons for the dissenting votes; and
� Appropriately address legitimate and reasonable objections and concerns that have been raised. These may include amending the Policy, or clarifying or adjusting remuneration governance and/or processes.
REMUNERATION CONSULTANTSDuring the reporting period, Alviva used the services of PwC. In FY20, they were contracted to assist with a market practice overview of performance conditions used for STI and LTI plans. The Committee is satisfied that the remuneration consultants used were independent and remained objective in providing their services.
PLANNED INITIATIVES AND FUTURE AREAS OF FOCUSThe focus for the year ahead will be the continuous review of all aspects of our remuneration and employment offerings to ensure these remain agile in the COVID-19 environment with the aim of retaining our critical talent and thereby ensuring business sustainability over the long-term.
APPROVALAs a Committee, we are satisfied that the Policy, as detailed in the 2020 Remuneration Committee Report, was complied with, and that there were no substantial deviations from the Policy during the reporting period.
At the AGM in November 2020, you will be asked to endorse our Remuneration Policy and the implementation thereof. We encourage and pursue open and regular dialogues with all our stakeholders. Your constructive input is valued and appreciated as we continue to improve our remuneration policies. On behalf of the Committee, I thank you for your continued support and feedback regarding our remuneration framework.
Ms SH ChabaChairperson of the Remuneration Committee
25 September 2020
65
Ove
rvie
wG
over
nanc
eSu
stai
nabi
lity
Ann
ual fi
nanc
ial s
tate
men
tsSh
areh
olde
rs’ in
form
atio
n
Remuneration Committee report continued
PART 2: REMUNERATION POLICY
REMUNERATION PHILOSOPHYThe Policy reflects the Group’s objectives of good corporate governance and is aimed at ensuring that Alviva can attract, motivate and retain appropriately skilled, qualified and experienced employees. Remuneration shall be based on conditions that are market competitive and, at the same time, aligned with shareholders’ interests.
Remuneration of the executives shall consist of fixed and variable components to ensure adequate pay for performance alignment. Variable pay comprises an annual short-term incentive (STI) as well as a long-term incentive (LTI), namely the Forfeitable Share Plan (FSP). Participation in variable pay is not a condition of employment. These components are aimed at creating a well-balanced remuneration structure reflecting individual performance and responsibility, both short-term and long-term, as well as incorporating the overall performance of the Group and individual subsidiaries.
THE ROLE OF THE COMMITTEEThe Committee is tasked to ensure that the Company’s remuneration is fair and in line with good corporate governance and best market practice. The Committee ensures that the Policy supports the Company’s strategy in relation to fair and responsible remuneration and has full control over all matters relating to remuneration (including the accurate, complete and transparent disclosure of executive and non-executive remuneration). The Committee approves a remuneration strategy and policy which is then confirmed by the Board.
The Remuneration Committee Charter was reviewed and aligned to King IV™ in June 2020 and is available on the Company’s website at www.alvivaholdings.com under the “Reports and Presentations” link.
The Committee does not determine their own remuneration, but annually requests that executive management prepares proposals on the remuneration of the non-executive directors and these are in turn submitted to the Board for approval.
FAIR AND RESPONSIBLE REMUNERATIONThe Committee places great importance on the King IV™ recommendation that the remuneration of executive management should be fair and responsible in the context of the remuneration of the wider employee group, and understands that it is their responsibility to ensure a fair and responsible approach to the remuneration of executive directors. In this regard, the Committee performs benchmarking exercises against suitable comparator groups from time to time to ensure that executive remuneration remains externally competitive. Comparisons are also made between the average increase levels for executives to those of middle management and general staff. Alviva remains committed to addressing its internal wage gap by keeping average executive increase levels relatively modest. As mentioned in Part 1 above, fair and responsible remuneration is one of the focus areas identified for the coming year.
FAIR REMUNERATION PRINCIPLES
� Impartial and free from discrimination
� Free from self-interest, prejudice or favouritism
� Rational, i.e., not based on an irrational or emotional basis
RESPONSIBLE REMUNERATION PRINCIPLES
� Approved by the appropriate authority and subject to independent oversight
� Linked to value creation, transparently reported and easy to understand
� Takes the impact over the longer term into account
� Sustainability
66
ALV
IVA
HO
LDIN
GS
LIM
ITED
•
Inte
grat
ed a
nnua
l rep
ort 2
020
Remuneration Committee report continued
KEY ELEMENTS OF REMUNERATION
LINKING OUR STRATEGY TO REMUNERATIONThroughout the organisation, detailed forecasts are prepared for every business and customer segment. These forecasts are converted into targets with consideration being applied for growth and the total available market. The individual targets are rolled up to become enterprise and group targets that become the budgets for each entity and ultimately the Group. The targets that are set are challenging, are generally in excess of those achieved in prior periods and are assessed to ensure that they deliver the desired economic value.
It is also believed that remuneration is the optimum vehicle to drive the strategy of the business. Consequently, all employees have targets and objectives, with a mix of personal and company, that ensures that employees share in the successful execution of Group strategy.
The targets for both the STI and LTI plans are easy to measure, easy to understand and are relevant to all stakeholders. The Committee is confident that they represent a balanced approach for those involved and that, if met, deliver significant value to shareholders.
EXECUTIVE MANAGEMENT REMUNERATIONAs regards executives and senior management, the Group’s objectives are to:
� apply key short- and long-term performance indicators, including financial and non-financial measures of performance;
� demonstrate a clear relationship between individual performance and remuneration;
� apply an appropriate balance between fixed and variable remuneration, reflecting the short- and long-term performance objectives appropriate to the Group’s circumstances and goals;
� link rewards to the creation of value to shareholders; and
� ensure their total remuneration is competitive by market standards.
TOTAL REMUNERATION
FIXED PAY VARIABLE PAY
Salary Benefits STI LTI (FSP)
ALL EMPLOYEES EXECUTIVES AND SENIOR MANAGEMENT
67
Ove
rvie
wG
over
nanc
eSu
stai
nabi
lity
Ann
ual fi
nanc
ial s
tate
men
tsSh
areh
olde
rs’ in
form
atio
n
Remuneration Committee report continued
BenchmarkingFrom time to time the Committee uses the services of external independent advisors to benchmark the TR of executives against a peer group of listed companies. The currently used peer group is selected based on size and industry and is disclosed in Part 3. The same peer group is used to benchmark non-executive director fees.
The benchmarking exercise, conducted in FY19, indicated that the executives’, who have all had many years of experience in the industry, TR was below the 50th percentile. The Board resolved to amend the remuneration applicable to executive management in FY20 as follows:
� increase the executive TR to be on or above the 50th percentile; and
� restructure the executive target pay mix as detailed in the table below
FY19 pay mix FY20 pay mix
Fixed 50% 40%
STI 25% 20%
LTI 25% 40%
Total remuneration 100% 100%
Package design and pay mix
FY21 Target pay mix for executive management over time
As disclosed during FY19, the target pay mix was adjusted in FY20 to place a higher weighting on variable pay, in particular on the LTI. The target pay mix of the TR is in line with Alviva’s risk management policies and motivates executive directors to deliver on Alviva’s short- and long-term strategic objectives.
Due to legacy issues in previously established remuneration packages (such as executives brought into the Group through acquisitions), this is a target to be achieved over time. The balance of the total remuneration package is weighted towards variable pay, in the form of STIs and LTIs, however, the TGP component should be sufficient to ensure that executives are not overly reliant on variable pay.
40%40%
20%
Fixed
STI
LTI
68
ALV
IVA
HO
LDIN
GS
LIM
ITED
•
Inte
grat
ed a
nnua
l rep
ort 2
020
Remuneration Committee report continued
Scenario graphs
The table below illustrates the potential effects of minimum-, target- and maximum performance outcomes on the TR in FY21 of the CEO, CFO and CCO as a percentage of TGP.
CEO Below threshold Threshold Target Maximum
Fixed 100% 100% 100% 100%
STI – 33% 50% 150%
LTI (FSP) – 43% 100% 143%
Total remuneration 100% 175% 250% 393%
CFO Below threshold Threshold Target Maximum
Fixed 100% 100% 100% 100%
STI – 33% 50% 150%
LTI (FSP) – 43% 100% 143%
Total remuneration 100% 175% 250% 393%
CCO Below threshold Threshold Target Maximum
Fixed 100% 100% 100% 100%
STI – 17% 33% 66%
LTI (FSP) – 43% 100% 143%
Total remuneration 100% 160% 233% 309%
69
Ove
rvie
wG
over
nanc
eSu
stai
nabi
lity
Ann
ual fi
nanc
ial s
tate
men
tsSh
areh
olde
rs’ in
form
atio
n
Remuneration Committee report continued
The following charts illustrate the potential effects of minimum-, target- and maximum performance outcomes on the TR in FY21 of the CEO, CFO and CCO.
CEO
CFO
CCO
TGP
STI
LTI
R’000
0 5 000 10 000 15 000 20 000 25 000 30 000
Maximum
Target
Threshold
Below threshold
6 198 9 297 8 854
6 198
6 198
6 198
3 099 6 198
2 014 2 656
TGP
STI
LTI
R’000
0 2 000 4 000 6 000 8 000 10 000 12 000 14 000 16 000
Maximum
Target
Threshold
Below threshold
3 600 5 400 5 143
3 600
3 600
3 600
1 800 3 600
1 170 1 543
TGP
STI
LTI
R’000
0 1 000 2 000 3 000 4 000 5 000 6 000 7 000 8 000 9 000 10 000
Maximum
Target
Threshold
Below threshold
2 940 1 960 4 200
2 940
2 940
2 940
980 2 940
490 1 260
70
ALV
IVA
HO
LDIN
GS
LIM
ITED
•
Inte
grat
ed a
nnua
l rep
ort 2
020
Remuneration Committee report continued
TOTAL GUARANTEED PAY
BenchmarkingThe executives’ TGP will be competitive and based on the executive’s responsibilities and role, and will be reflective of the Group and individual’s historic performance, together with their experience in the position. From time to time, Alviva will conduct TR benchmarking exercises against suitable comparator groups and benchmarking results will be taken into consideration when determining the increases in executive pay.
Due to the scarcity of resources, the Committee has a sound working knowledge of the pay scales that are available within the market. Consequently, the Committee attempts to ensure that the TR is aligned to or above the 50th percentile of the market for executives in key roles, where they have sufficient experience. This assists in ensuring that dissatisfaction with TR is not the reason for a performing executive to leave the Group.
Setting remuneration and review proceduresThe Group’s remuneration determination and review procedures are as follows:
� the Group reviews remuneration packages annually at the start of the financial year;
� the Board, with the advice and assistance of the Committee, is responsible for making decisions in respect of the remuneration of directors and, in particular, the Group CEO. In determining the level and composition of the remuneration of the Group CEO and executives, the Committee is able to obtain independent advice on the appropriateness of remuneration packages by considering remuneration trends in other companies comparable in terms of size and market sector; and
� the annual review of remuneration packages for middle management and general staff considers performance evaluation results. Based on these results, the Committee is able to recommend changes to the TGP that may include annual increases and changes in the composition of remuneration.
The Committee considers various factors when reviewing overall TGP increases, including consideration of CPI, profitability ratios and individual performance against KPIs.
Benefits � All employees receive a limited range of prescribed and elective fringe benefits such as healthcare, disability, life insurance
and retirement benefits. Members have the option to structure their pensionable income, their monthly contributions to the Provident Fund and the nature of the fund invested in. Membership is compulsory for all new employees. A minimum of 5% of pensionable remuneration is invested in the Provident Fund for all new employees.
� All employees are required to belong to an approved medical aid scheme.
These benefits are funded from the TGP component of the package for each employee.
Life and disability benefits, together with funeral insurance, are paid by Alviva as a direct benefit.
Certain employees at a senior level who, due to the nature of their job are required to travel, are afforded travel allowances as part of their TGP component.
71
Ove
rvie
wG
over
nanc
eSu
stai
nabi
lity
Ann
ual fi
nanc
ial s
tate
men
tsSh
areh
olde
rs’ in
form
atio
n
Remuneration Committee report continued
VARIABLE PAY
Short-term incentives
Purpose The STI programme consists of a cash bonus that is linked to the achievement of predefined targets, depending on the level of the employee. The STI is subject to malus and clawback.
Participation The STI is extended to all employees, however, the participation terms are varied based on the level.
Operation All employees in the organisation have some form of STI as part of their overall remuneration package.
� Sales and marketing employees are given targets to achieve and their overall remuneration is, therefore, affected by their ability to achieve and surpass the targets set. Targets are based on annual budgets which are approved by the respective Boards per company and by the Board.
� Employees in the administrative side of the business have an STI that is partly based on the performance of the company in which they work and partly on their individual performance.
� At an executive level, the STI is calculated as a percentage of TGP and an on-target percentage. HEPS is used to determine a pool that is available for each participant and three measures are applied to determine how much of the pool is distributed, namely HEPS (70% weighting), transformation (15% weighting) and return on investments (15% weighting).
� If HEPS exceeds 100% of the target, HEPS is used as a modifier in accordance with the following formula: TGP x On-target % x HEPS modifier. 70% of the pool is allocated to the achievement of HEPS while the outcome of the other two measures are tested to determine what portion of the remainder of the pool (30%) will be allocated to these two measures;
� If HEPS is below 100%, the formula is as follows: TGP x On-target % x [(HEPS achievement x 70%) + (Transformation achievement x 15%) and (Return on investment achievement x 15%)]
The STI for executives is calculated on an annual basis. The actual targets for FY21 are stated below and the targets reached, compared to those set, for FY20 are disclosed in Part 3.
HEPS measurement to determine the pool, on-target percentage and maximum STI
The targets below are based on achieving the HEPS targets set by the Board. Achievement in excess of the targets set will result in the stretch outcome.
HEPS % of target achieved STI outcome Maximum outcomes
Below threshold < 90% 0%
Threshold 90% 50%
Target 100% 100% 100%
Stretch 101% to 120%Additional 10% per
1% above target300%
The earning potential for the STI by role is set out below and capped as indicated:
RoleOn-target STI
(as a % of TGP)Maximum earning potential
(as a % of TGP)
CEO 50% 150%
CFO 50% 150%
CCO 33% 66%
72
ALV
IVA
HO
LDIN
GS
LIM
ITED
•
Inte
grat
ed a
nnua
l rep
ort 2
020
Remuneration Committee report continued
Performanceconditions to distribute the pool
The configuration and weightings attached to the different elements of the STI formula differ to the extent that employees can influence the achievement of performance objectives directly or indirectly. The performance conditions were considered appropriate in the context of Alviva’s business model for growing the business profitability and generating these profits in the form of cash. The rationale for non-financial performance bonuses is to reward executives for strategic and sustainability-orientated achievements. However, poor performance in non-financial performance measures could override the good performance in terms of financial criteria, i.e. unethical or non-compliant behaviour cannot be compensated by good financial performance.
Executive directors:
� Company Earnings Performance (HEPS): 70% weighting;
� Transformation: 15% weighting – measured on a binary basis and a score of either 0% or 100% is assigned; and
� Return on Investments: 15% weighting – measured on a binary basis and a score of either 0% or 100% is assigned.
Prescribed officers:
� Company Earnings Performance (HEPS): 70% weighting;
� Transformation: 30% weighting – measured on a binary basis and a score of either 0% or 100% is assigned.
The table below summarises the performance targets that will be used in FY21.
Weighting Target
HEPS 70% R2,00 The level at which the target is met, will determine the pool that is available (as explained above)
Transformation 15%
Alviva Holdings Ltd, Level 4
DCT Holdings (Pty) Ltd, Level 3
Datacentrix (Pty) Ltd Level 2
Binary condition
Return on investments
15%Net profit before tax of certain acquisitions: R110 million
Binary condition
73
Ove
rvie
wG
over
nanc
eSu
stai
nabi
lity
Ann
ual fi
nanc
ial s
tate
men
tsSh
areh
olde
rs’ in
form
atio
n
Remuneration Committee report continued
Long-term incentive
Purpose The FSP is primarily used as an incentive to participants to deliver the Group’s business strategy over the long-term. The intent of the FSP is to incentivise, motivate and retain executives and senior management through the award of performance shares.
Participation Eligible employees include executive directors, prescribed officers and senior management of any employer company within Alviva. Participation in the FSP is not a condition of employment, and the Committee has the absolute discretion to make an award to any employee in terms of the FSP.
Operation Under the FSP, annual awards of performance shares are made to eligible employees. Ad hoc awards of retention shares can be considered should the Company face serious retention risks. The vesting of the award of performance shares is subject to the satisfaction of performance conditions, in line with the Group’s business strategy.
Award quantum (allocation percentage)
The on-target award value is approximately 100% of TGP.
Performance conditions and vesting percentages
The table below summarises the weighting and performance targets under which the FY21 FSP awards were granted.
Weighting Threshold Target Stretch
30% vesting 70% vesting 100% vesting
ROE 40% 13% 17,0% 20%
HEPS (Average for the three years
40% R1,91 R1,98 R2,04
Absolute TSR (calculated as share price plus dividends)
20% R8,34 R9,32 R10,10
Performance conditions will not be re-tested.
Vesting period The FSP awards will vest on the later of:
� Three years from the award date; or
� The date on which the Committee confirms that the performance conditions have been met.
Company limit For the duration of the FSP, the maximum number of shares which may be allocated under the FSP shall not exceed 9 164 802 shares, which represented approximately 5% of the Company’s total issued share capital as at the date of approval of the FSP by shareholders (currently approximately 6,4%). These limitations are in line with market best practice.
Alviva purchases shares in the market on the allocation date (which is also the settlement date), which means that these shares are not taken into account in considering the use of the limit (according to the JSE Listings Requirements, Schedule 14) and therefore Alviva will never exceed the dilution limit. The Committee has been concerned that, as long as Alviva continues this practice for the FSP allocations, the scheme is effectively “limitless”. Accordingly, the Committee has adopted a principle whereby the total value of the awards in any one year will not exceed 5% of EBITDA.
In addition, the current maximum that may be allocated to any one participant is limited to 3 665 920 (2019:1 832 960) shares. This equates to approximately 3% of the Company’s total issued share capital at the date of adoption of the FSP.
74
ALV
IVA
HO
LDIN
GS
LIM
ITED
•
Inte
grat
ed a
nnua
l rep
ort 2
020
Remuneration Committee report continued
Minimum shareholding requirementThe Company has adopted the MSR Policy to encourage specific executives to retain vested FSP shares, reinforcing the alignment between executive and shareholder interests. The adoption of such a policy is in line with global and local best practice. The MSR Policy provides that the executive must build up a target minimum shareholding within five years of appointment, or the approval date of the policy.
The following executives will be subject to the MSR Policy, with the associated target minimum shareholding:
� CEO: 200% of TGP;
� CFO: 150% of TGP; and
� Other executives designated by the Committee: 100% of TGP.
Executives can build up their minimum shareholding by holding or purchasing shares in their personal capacity or by committing shares that would potentially vest from an LTI award to a further holding period on a pre-tax basis.
Malus and clawbackMalus and clawback provisions have been adopted in respect of FSP and STI awards under the malus and clawback policy (“Malus and Clawback Policy”). These provisions allow the Company to reduce or recoup either LTI or STI awards made in specified circumstances as set out in the Malus and Clawback Policy. Malus provisions apply before awards have vested or been paid to an employee whilst clawback provisions apply to awards for a period of three years from the date the awards have vested or payment has been made to an employee.
Trigger events include:
� a material misstatement of the financial results resulting in an adjustment in the audited consolidated accounts of the Company or the audited accounts of any member of the Group; and/or
� in the case of awards which are subject to the achievement of performance conditions, the assessment of any performance metric or condition in respect of an award or payment which was based on error, or inaccurate or misleading information; and/or
� the fact that any information used to determine the quantum of an incentive remuneration amount was based on error, or inaccurate or misleading information; and/or
� action or conduct of a participant which, in the reasonable opinion of the Board/Remuneration Committee, amounts to serious misconduct or gross negligence; and/or
� events or behaviour of a participant or the existence of events attributable to a participant which led to the censure of the Company or a member of the Group, by a regulatory authority or have had a significant detrimental impact on the reputation of the Company.
CONDITIONS OF EMPLOYMENT
Terms of service � Alviva complies with relevant legislation when determining minimum terms and conditions for the appointment of executive
directors. Unless stated otherwise in the contract of employment, there are no fixed terms of employment although, where appropriate, Alviva does enter into minimum service term agreements of up to four years, particularly with executives of recent business acquisitions. As previously mentioned, the Group CEO has signed a service agreement for continued employment up to June 2022, but none of Alviva’s other current executive directors are subject to such agreements.
� Employment is terminated on the resignation or dismissal of the director upon notice of two months (other than during the first six months of employment), and the notice period may be waived at the discretion of Alviva.
� Employment contracts do not commit the Company to pay on termination arising from the director’s failure.
75
Ove
rvie
wG
over
nanc
eSu
stai
nabi
lity
Ann
ual fi
nanc
ial s
tate
men
tsSh
areh
olde
rs’ in
form
atio
n
Remuneration Committee report continued
� Alviva does not make provision for balloon payments on termination as they are not aligned to good corporate governance principles.
� The Committee reviews, at least annually, the terms and conditions of executive directors’ service agreements, taking into account information from comparable companies, where relevant.
� All recently contracted employment agreements with executive directors, management and sales staff include a restriction clause to protect Alviva’s proprietary interests and to ensure that the business is not prejudiced in any way or form. The restriction undertaking means that no employee can join a competitor for a period of 12 months from the date on which employment terminates. The CEO has signed a restraint of trade agreement that prohibits him from being involved in the industry for two years after his last day of employment in the Group.
� Executive directors are expected to manage their leave in such a manner that leave is not accumulated. On leaving the Company, any unutilised leave is not paid out.
Termination provisions
Termination Terms FSP STI
Good leavers Death, ill health, disability, retrenchment, retirement or any other event approved in the sole discretion of the Board
Entitled to a pro rata portion of awards, based on the period of employment, after adjustment for the performance conditions
Entitled to a pro rata portion of awards, based on the period of employment, assuming performance criteria has been met
Bad leavers Resignation, dismissal on grounds of misconduct, poor performance or fraudulent conduct or abscondment
Awards are forfeited No STI is payable
External appointments
Executive directors are not permitted to hold external directorships or office without the approval of the Board. The Board will only grant approval if such appointments will not create any conflict of interest and provided they will not impinge upon the executive director’s ability to maintain the level of performance expected by Alviva from him/her in the execution of his/her duties as an executive. If such approval is granted, directors may retain the fees payable from such appointments.
Any fees paid by any of the subsidiaries in the Group to any of the executive directors for their services as directors to those companies are paid to Alviva and not to the individual concerned.
76
ALV
IVA
HO
LDIN
GS
LIM
ITED
•
Inte
grat
ed a
nnua
l rep
ort 2
020
Remuneration Committee report continued
NON-EXECUTIVE DIRECTORS
Terms of service
While shareholders appoint non-executive directors at AGMs, the MOI authorises interim Board appointments by the Board between AGMs. Such interim appointees may not serve beyond the next AGM, though they may make themselves available for election by shareholders.
Non-executive directors serve for a period of no more than three consecutive AGMs after the AGM in which they are elected or re-elected by shareholders. They are required to retire at the close of the third AGM, although they may offer themselves for re-election for a further three years at that meeting. Besides this, the MOI specifies that at least one-third (rounded to the nearest integer) of the non-executive directors must offer themselves for election or re-election at each AGM, as the case may be, and it may be possible that a director is required to offer himself for re-election before the third AGM since his last election in order to comply with this rule. Executive directors are not required to comply with the election process and their position on the Board is governed by their employment agreements.
Fees � Each non-executive Board member receives a fixed fee per year. Ordinary Board members receive a fixed amount (the base
fee) and additional fees are paid for the additional portfolios of the Chairperson of the Board, the Chairperson of the Audit and Risk Committee, the Chairperson of the Remuneration Committee, the Chairperson of the Social and Ethics Committee, the Lead Independent Director, as well as to members of Board Committees.
� No fees are paid for attendance per meeting as the base fee is an all-inclusive fee with the non-executive directors’ employment agreements stipulating attendance as a requirement.
� Service on other sub-committees of the Board may entitle members to an additional payment, subject to workload and at the discretion of the Board.
� Individual Board members may take on specific ad hoc tasks outside the normal duties assigned by the Board. In such cases, the Board determines a fixed fee for the work.
� Expenses, such as travel and accommodation in relation to specific Board-approved activities as well as relevant training, are reimbursed.
� Non-executive directors’ fees are calculated exclusive of value added tax.
� There are no short- or long-term incentive schemes for non-executive directors. Exceptions apply only where non-executive directors previously held executive office and qualify for unvested benefits resulting from their employment with Alviva.
� There are no post-retirement benefits for non-executive directors.
Non-executive directors’ fees are reviewed annually and determined by the Board, following consultation with the Committee and having regard to fees paid to non-executive directors of similar companies. The fees are benchmarked against the fees paid to non-executive directors of companies operating in the same industry as Alviva. The comparator group used is the same comparator group used for benchmarking of executive directors’ remuneration. Where considered necessary, the Board may seek external advice on the subject. Shareholders will be requested to consider a special resolution approving the non-executive directors’ fee structure and fee amounts at the AGM.
77
Ove
rvie
wG
over
nanc
eSu
stai
nabi
lity
Ann
ual fi
nanc
ial s
tate
men
tsSh
areh
olde
rs’ in
form
atio
n
Remuneration Committee report continued
EMPLOYEE REMUNERATION
As regards general staff, the Policy is as follows:
� Remuneration of general employees may be subject to regulatory requirements, such as bargaining council agreements and collective agreements with trade unions.
� In the absence of the above, remuneration will be based on individual and Company performance as well as market trends.
� Typically, remuneration may comprise elements of fixed remuneration and performance-based (at-risk) remuneration, comprising of STI and LTI. The at-risk element of remuneration corresponds with Alviva’s risk tolerance.
� Certain employees have an element of their remuneration at-risk. The proportion of an employee’s total remuneration that is at-risk increases with seniority and with the individual’s ability to impact the performance of the entity in which he/she works.
An annual performance review process assesses the degree to which each qualifying employee satisfies the requirements of his/her role and the degree to which established performance objectives have been achieved.
PUBLIC ACCESS TO THE POLICY
The Policy is available on Alviva’s website at www.alvivaholdings.com under the “Reports and Presentations” link.
78
ALV
IVA
HO
LDIN
GS
LIM
ITED
•
Inte
grat
ed a
nnua
l rep
ort 2
020
Remuneration Committee report continued
PART 3: IMPLEMENTATION REPORT
The Implementation Report, which is outlined below, will be presented to shareholders at the AGM to be held on 18 November 2020 and shareholders will be requested to cast a non-binding advisory vote thereon.
SINGLE FIGURE OF REMUNERATION [GRI 201-1]
Executive directorsThe remuneration paid to the executive directors and a prescribed officer of Alviva during the reporting period is detailed in note 37.2 of the financial statements. The detailed disclosure of executives’ total remuneration, per executive aligned to performance criteria, appears below and follows the King IV™ recommended standard. The Board has previously determined that Mr JV Parkin is a prescribed officer.
Name YearTGP
R’000STI ¹
R’000LTI ² ³R’000
Qualifying dividends ⁴
R’000
Total single figure of
remunerationR’000
Mr P Spies
2020 6 198 – 905 573 7 676
2019 5 310 3 062 3 963 259 12 594
2018 5 104 3 062 – 240 8 406
Name YearTGP
R’000STI ¹
R’000LTI ² ³R’000
Qualifying dividends ⁴
R’000
Total single figure of
remunerationR’000
Mr RD Lyon
2020 3 600 – 453 228 4 281
2019 2 820 1 606 2 312 138 6 876
2018 2 708 1 625 – 128 4 461
79
Ove
rvie
wG
over
nanc
eSu
stai
nabi
lity
Ann
ual fi
nanc
ial s
tate
men
tsSh
areh
olde
rs’ in
form
atio
n
Remuneration Committee report continued
Prescribed officer
Name YearTGP
R’000STI ¹ ²R’000
LTIP ³ ⁴R’000
Qualifying dividends 5
R’000
Total single figure of
remunerationR’000
Mr JV Parkin
2020 2 940 – 151 68 3 159
2019 2 796 1 272 550 41 4 659
2018 2 687 1 254 – 38 3 979
1. The STIs are reported to match the performance and quantum earned to the applicable financial period.
2. The following STIs were earned but voluntarily forfeited by the respective executives:
Mr P Spies – R464 850
Mr RD Lyon – R270 000
Mr JV Parkin – R294 000
3. The value of the FSP awards made on 15 June 2017 with a vesting period ending on 31 October 2020 is reflected in the 2020 single figure of remuneration as it relates to the performance period ending during FY20. The value of the award was determined as follows: 20-day year-end VWAP (R7,02) x estimated vesting percentage (43%) x the number of awards.
4. The value of the FSP awards made on 14 December 2016 with a vesting period ending on 25 November 2019 is reflected in the 2019 single figure of remuneration. The value of the award was determined as follows: 20-day year-end VWAP (R16,43) x estimated vesting percentage (67%) x the number of awards.
5. Dividends relating to each executive director and prescribed officer’s shares received during the 2018, 2019 and 2020 financial years were included in qualifying dividends for 2018, 2019 and 2020, respectively, to the extent that the underlying shares have not been reflected in the single figure table.
TGP INCREASES FOR FY20
In FY19, the Committee contracted PwC to carry out a total reward benchmarking analysis on Alviva’s executive remuneration policies. This was done with reference to the market as well as to the Company’s comparator peer group. The following companies were selected to form part of the comparator group based on their size and the industry: –
� Allied Electronics Corporation Ltd
� Caxton & CTP Publishers and Printers
� City Lodge Hotels Ltd
� Clover Industries Ltd
� Datatec Ltd
� ENX Group Ltd
� EOH Holdings Ltd
� Homechoice International Plc
� Hudaco Industries Ltd
� Invicta Holdings Ltd
� Reunert Ltd
80
ALV
IVA
HO
LDIN
GS
LIM
ITED
•
Inte
grat
ed a
nnua
l rep
ort 2
020
Remuneration Committee report continued
PwC’s report concluded that the executive management TR measured primarily below or in the 25th percentile of the comparator group selected.
As a result of the benchmarking outcome and to ensure the Company’s desired pay-mix was achieved, the Board resolved to amend executive management remuneration in FY20 as follows:
� increase the executive TR to be aligned with or above the 50th percentile; and
� restructure the executive target pay mix as detailed in the table below.
FY19 FY20
Fixed 50% 40%
STI 25% 20%
LTI 25% 40%
Total remuneration 100% 100%
STI OUTCOMES FOR FY20
As disclosed in the table below, none of the financial targets for FY20 were met. Even though the non-financial measures were met in full, the executives themselves waived their entitlement, a decision that was supported by the Committee. The decision was driven by the overall impact of COVID-19 and the depressed economic outcome.
Description Weighting Target Achieved
Core EPS
Core earnings per share (“Core EPS”), in cents per share (“cps”), for the year to 30 June 2020
70% 371 226
Return on investmentsMr P Spies/
Mr RD Lyon: 15% R122,5 million R84,5 million
Non-financial measure: Transformation
B-BBEE
Mr P Spies/ Mr RD Lyon: 15%
Mr JV Parkin: 30%
Alviva Holdings Ltd Level 4 Level 1
DCT Holdings (Pty) Ltd Level 3 Level 1
Datacentrix (Pty) Ltd Level 2 Level 1
In terms of our policy, STI amounts may be paid in advance each quarter and are re-calibrated after the year-end audit has been performed. During the year no pre-payments were made and as a result no amounts had to be clawed back.
81
Ove
rvie
wG
over
nanc
eSu
stai
nabi
lity
Ann
ual fi
nanc
ial s
tate
men
tsSh
areh
olde
rs’ in
form
atio
n
FSP awards granted in FY20Parameters and conditions
The table below summarises the weighting and performance targets applicable to the 2020 FSP awards granted.
Weighting Threshold Target Stretch
FSP Award vesting percentage
30% 70% 100%
Return on equity
Average Group return on equity for the years ending June 2020, 2021 and 2022 *
40% 15,0% 17,5% 20,0%
Core EPS
Average of Core EPS for financial years ending June 2020, 2021 and 2022 *
40% R3,86 R3,93 R4,00
Absolute TSR
20-day VWAP on 30 September 2022 plus any dividends paid during the performance period
20% R22,45 R22,86 R23,28
* At the Committee meeting in June 2020, the Committee decided to replace the measurement for June 2020 with the annualised results for the six months ended
31 December 2019.
Award quantum
Details of the number of awards made can be found in the table of unvested FSP awards below.
Extraordinary FSP awards – CEOAs referred to earlier in the report, during the latter part of FY19, the Group CEO had been approached by a competitor and the Committee had to assess the risk factors associated with his potential resignation, due to the lack of a restraint of trade agreement in force between him and Alviva. The Committee resolved to make an additional award of the FSP to the CEO in FY20. The details relating to the CEO’s FY20 additional award were also disclosed in our FY19 report but were implemented in FY20 as follows: –
Quantum 500 000 shares
Performance conditions and weightings
ROE – 40%
Core EPS (Average over the three years ending June 2020, 2021 and 2022) – 40%
Profitability of AI subsidiary – 20%
Vesting period 3 years
On-target % 70%
Maximum potential 100%
Further conditionsThe CEO has signed a two-year restraint of trade, assented to the recently introduced Malus and Clawback Policy, and agreed to the MSR Policy for executives.
Remuneration Committee report continued
82
ALV
IVA
HO
LDIN
GS
LIM
ITED
•
Inte
grat
ed a
nnua
l rep
ort 2
020
FSP awards vesting during FY20FSP awards that vested during the year are included in the tables below. Details of awards that vest in November 2020, are included in the single figure of remuneration tables on pages 78 and 79 of this report. The Committee is unable to measure all of the performance conditions, as the TSR component is based on the 20-day VWAP as at the end of September 2020, although it has been estimated that vesting will be 43% of the total award.
Performance condition Weighting Threshold Target Stretch Actual Vesting
Return on equity 30% 15,0% 17,5% 20,0% 16,9% 17%
Core EPS 40% R2,94 R3,07 R3,20 R3,05 26%
TSR 30% R25,12 R27,61 R30,22 Est R7,00 0%
Schedule of unvested LTI awards and cash flow on settlement
2019
Name Grant date
Opening number
on 1 July 2018
Granted during
2019
Forfeited during
2019
Exercised during
2019
Closing number
on 30 June
2019
Value of receipts
2019 5
Estimated closing fair
value on 30 June
2019 6
Executive directors
Mr P Spies 14 Dec 2016 360 000 – – – 360 000 97 200 3 904 217
15 Jun 2017 300 000 – – – 300 000 81 000 3 450 697
18 Jun 2018 300 000 – – – 300 000 81 000 3 450 697
21 Jun 2019 – 450 000 – – 450 000 – 5 176 046
259 200 15 981 657
Mr RD Lyon 14 Dec 2016 210 000 – – – 210 000 56 700 2 277 460
15 Jun 2017 150 000 – – – 150 000 40 500 1 725 349
18 Jun 2018 150 000 – – – 150 000 40 500 1 725 349
21 Jun 2019 – 250 000 – – 250 000 – 2 875 581
137 700 8 603 739
Prescribed officer
Mr JV Parkin 14 Dec 2016 50 000 – – – 50 000 13 500 542 252
15 Jun 2017 50 000 – – – 50 000 13 500 575 116
18 Jun 2018 50 000 – – – 50 000 13 500 575 116
21 Jun 2019 – 100 000 – – 100 000 – 1 150 232
40 500 2 842 716
Remuneration Committee report continued
83
Ove
rvie
wG
over
nanc
eSu
stai
nabi
lity
Ann
ual fi
nanc
ial s
tate
men
tsSh
areh
olde
rs’ in
form
atio
n
2020
Name Grant date
Opening number
on 1 July 2019
Granted during
2020
Forfeited during
2020
Exercised during
2020
Closing number
on 30 June
2020
Value of receipts
2020 7
Estimated closing fair
value on 30 June
2020 8Grant price
Vesting date
Executive directors
Mr P Spies 14 Dec 2016 360 000 – (118 800) (241 200) – 3 557 160 – 17,92 25 Nov 2019
15 Jun 2017 300 000 – – – 300 000 90 000 905 029 16,75 31 Oct 2020
18 Jun 2018 300 000 – – – 300 000 90 000 1 473 304 18,68 31 Oct 2021
21 Jun 2019 450 000 – – – 450 000 135 000 2 209 956 16,59 31 Oct 2022
16 Sep 2019 – 500 000 – – 500 000 150 000 2 455 506 16,46 31 Oct 2022
26 Jun 2020 – 600 000 – – 600 000 – 2 946 607 6,85 31 Oct 2023
4 022 160 9 990 402
Mr RD Lyon 14 Dec 2016 210 000 – (69 300) (140 700) – 2 075 010 – 17,92 25 Nov 2019
15 Jun 2017 150 000 – – – 150 000 45 000 452 515 16,75 31 Oct 2020
18 Jun 2018 150 000 – – – 150 000 45 000 736 652 18,68 31 Oct 2021
21 Jun 2019 250 000 – – – 250 000 75 000 1 227 753 16,59 31 Oct 2022
26 Jun 2020 – 250 000 – – 250 000 – 1 227 753 6,85 31 Oct 2023
2 240 010 3 644 673
Prescribed officer
Mr JV Parkin 14 Dec 2016 50 000 – (16 500) (33 500) – 494 050 – 17,92 25 Nov 2019
15 Jun 2017 50 000 – – – 50 000 15 000 150 838 16,75 31 Oct 2020
18 Jun 2018 50 000 – – – 50 000 15 000 245 551 18,68 31 Oct 2021
21 Jun 2019 100 000 – – – 100 000 30 000 491 101 16,59 31 Oct 2022
26 Jun 2020 – 100 000 – – 100 000 – 491 101 6,85 31 Oct 2023
554 050 1 378 591
5 Value of dividends received on the unvested awards during the reporting period.6 Estimated closing fair values were determined as follows: Number of awards granted x 20-day year-end VWAP x estimated vesting percentage.7 Value of dividends received on the unvested awards during the reporting period.8 Estimated closing fair values were determined as follows: Number of awards granted x 20-day year-end VWAP x estimated vesting percentage.
Remuneration Committee report continued
84
ALV
IVA
HO
LDIN
GS
LIM
ITED
•
Inte
grat
ed a
nnua
l rep
ort 2
020
MINIMUM SHAREHOLDING OF EXECUTIVE DIRECTORSFollowing the implementation of the MSR Policy in FY20 as set out in Part 2 of this report, the executive directors had already locked in amounts for purposes of meeting the minimum shareholding targets. The table below represents the executive directors’ current standings in relation to their minimum shareholding requirements:
ExecutiveCurrent shareholding Target
share-holding
(% of TGP)
Commencement date Measurement date
Shares Value (R) % of TGP
Mr P Spies 341 200 3 802 494 61% 200% 15 November 2019 15 November 2024
Mr RD Lyon 720 700 9 258 249 257% 150% 15 November 2019 15 November 2024
Mr JV Parkin 255 200 3 590 664 122% 100% 15 November 2019 15 November 2024
NON-EXECUTIVE DIRECTORS’ REMUNERATIONDue to the uncertainties in the economy, as a result of the impact of COVID-19, no increases have been proposed for the year ending June 2021.
Details of the proposed FY21 non-executive director fee structure is included in the Notice of AGM under special resolution number 3.
Remuneration Committee report continued
85
Ove
rvie
wG
over
nanc
eSu
stai
nabi
lity
Ann
ual fi
nanc
ial s
tate
men
tsSh
areh
olde
rs’ in
form
atio
n
Fees paid to the non-executive directors of Alviva during the reporting period are detailed below:
Name Description2020
R’0002019
R’000
Mr A Tugendhaft 1 145 614
Chairperson– Board 850 408
Member
– Board 245 191
– Remuneration Committee 50 15
Ms P Natesan ¹ 600 439
Chairperson
– Audit Committee 92 –
Member
– Board 245 191
– Audit Committee 80 30
– Social and Ethics Committee 4 9
Lead Independent 180 209
Ms SH Chaba 520 299
Chairperson
– Remuneration Committee 50 27
– Social and Ethics Committee 50 27
Member
– Board 245 191
– Audit Committee 80 30
– Remuneration Committee 50 15
– Social and Ethics Committee 45 9
Mr PN Masemola ² 266 –
Member – –
– Board 225 –
– Social and Ethics Committee 41 –
Ms MG Mokoka ³ 344 –
Member
– Board 225 –
– Audit Committee 73 –
– Remuneration Committee 46 –
Ms N Medupi 4 – 277Chairperson
– Audit Committee – 61Member
– Board – 175– Audit Committee – 27– Remuneration Committee – 14
2 875 1 629
¹ Appointed as Chairperson of the Audit and Risk Committee and resigned as member of the Social and Ethics Committee with effect from 29 July 2019.
² Appointed as Independent Non-Executive Director and member of the Social and Ethics Committee with effect from 29 July 2019.
³ Appointed as Independent Non-Executive Director and member of the Audit and Risk Committee and Remuneration Committee with effect from 29 July 2019.
⁴ Resigned as Independent Non-Executive Director with effect from 31 May 2019.
Remuneration Committee report continued
86
ALV
IVA
HO
LDIN
GS
LIM
ITED
•
Inte
grat
ed a
nnua
l rep
ort 2
020
The Social and Ethics Committee (“the Committee”) is constituted in terms of Section 72(4) of the Companies Act.
ROLE AND RESPONSIBILITIESThe Committee’s role and responsibilities are governed by its Charter as approved by the Board. The Charter is subject to an annual review by the Board. In line with its mandate, the Committee assists the Board in monitoring and guiding Alviva’s performance as a responsible corporate citizen. This is achieved by monitoring the sustainable development practices of the Group.
In broader terms, the Committee focuses on corporate citizenship, corporate ethics, social and economic development, consumer relationships, environmental issues, occupational health and safety, as well as legal and other compliance obligations. The Committee’s key duties as contained in its Charter are:
� Social and economic development, including the Group’s standing in terms of the goals and purposes of:
� the 10 United Nations Global Compact Principles encompassing: [GRI 102-13]
Human rights
▷ support and respect the protection of internationally proclaimed human rights; and
▷ make sure that Alviva is not complicit in human rights abuses;
Labour standards
▷ uphold the freedom of association and the effective recognition of the right to collective bargaining;
▷ eliminate all forms of forced and compulsory labour;
▷ abolish child labour; and
▷ eliminate discrimination in respect of employment and occupation;
Environment
▷ support a precautionary approach to environmental challenges;
▷ undertake initiatives to promote greater environmental responsibility; and
▷ encourage the development and diffusion of environmentally-friendly technologies;
Anti-corruption
▷ work against corruption in all its forms, including extortion and bribery;
� the OECD (Organisation for Economic Co-operation and Development) recommendations on corruption;
� the Employment Equity Act; and
� the Broad-Based Black Economic Empowerment Act;
� Good corporate citizenship, including the Group’s:
� promotion of equality, prevention of unfair discrimination and reduction of corruption;
� contributions made to the development of communities in which its products or services are predominately marketed; and
� sponsorship, donations and charitable giving;
� The environment, health and public safety, including the impact of the Group’s activities and of its products or services;
� Consumer relationships, including the Group’s advertising, public relations and compliance with consumer protection laws;
� Labour and employment, including:
� monitoring the Group’s standing in terms of the International Labour Organisation Protocol on decent work and working conditions; and
� the Group’s employment relationships and its contribution toward the educational development of its employees;
Social and Ethics Committee report
87
Ove
rvie
wG
over
nanc
eSu
stai
nabi
lity
Ann
ual fi
nanc
ial s
tate
men
tsSh
areh
olde
rs’ in
form
atio
n
� Drawing matters within its mandate to the attention of the Board as the situation requires; and
� Reporting, through one of its members, to the Board at Board meetings and to the shareholders at the Company’s AGM on the matters within its mandate.
In addition, and complementary to its statutory duties in terms of the Companies Act, the Committee’s mandate is to assist the Group in discharging its business responsibility with respect to the implementation of practices that are consistent with good corporate citizenship with particular focus on:
� King IV™ principles and recommended practices;
� Alviva’s ethics and sustainability commitments; and
� B-BBEE requirements as described in the DTI combined generic scorecard and associated Codes of Good Practice.
BROAD-BASED BLACK ECONOMIC EMPOWERMENTAlviva acknowledges that for black economic empowerment to be sustainable, it must be broad-based. Alviva recognises the need to maintain and improve on its B-BBEE rating in order to continue transforming the Group and remaining relevant to doing business in South Africa. The Group adopts a holistic approach to empowerment, addressing skills development, employment equity, promotion in the workplace, procurement practices which support developing businesses and suppliers, enterprise creation and equity ownership in the Group.
In order for the Group to remain competitive, improve market position and leverage new business opportunities, thereby enhancing profitability, it is imperative that it not only complies with the requirements of the Broad-Based Black Economic Empowerment Act and related Codes of Good Practice, but that transformation is accelerated to bring the majority of historically disadvantaged individuals into the mainstream economy by also providing meaningful economic participation and to share in wealth creation resulting from economic activities.
In September 2020, Alviva was rated under the ICT Sector Code and achieved a Level 1 Rating (2019: Level 1 Rating). In accordance with 13(G) 2 of the B-BBEE Act, Alviva has provided the B-BBEE Commission with a report on its compliance with B-BBEE.
A summary of the information provided, as verified by the Broad-Based Black Economic Empowerment Verification Professional as per the ICT Scorecard, is as follows:
B-BBEE elements
ICT target score Bonus points Actual score achieved
2020 2019 2020 2019 2020 2019
Ownership 25 25 25,00 24,69
Management control 23 23 15,24 14,37
Skills development 20 20 4,33 4,80 23,18 24,20
Enterprise and supplier development 50 50 5,00 5,00 44,63 44,94
Socio-economic development 12 12 12,00 12,00
Total score 130 130 9,33 9,80 120,05 120,20
Priority elements achieved:
Ownership YES YES
Skills development YES YES
Enterprise and supplier development YES YES
Empowering supplier status YES YES
Final B-BBEE status level 1 1
Social and Ethics Committee report continued
88
ALV
IVA
HO
LDIN
GS
LIM
ITED
•
Inte
grat
ed a
nnua
l rep
ort 2
020
KEY ACTIVITIESThe Committee met periodically to consider and to act upon its statutory duties and functions and the Board confirms that the Committee has during the reporting period performed the duties mandated to it by the Board.
HUMAN RESOURCES
Learning and development
The Committee confirms that during the reporting period:
� training initiatives included the MDP, training for people with disabilities, and learnerships;
� a large percentage of learners and interns were absorbed across the Group, or found employment elsewhere, due to the skills gained from the training attended;
� combating youth unemployment remained a key focus of all training programmes; and
� training targets and initiatives were in line with the Economically Active Population of South Africa.
Employment equity
� Employment equity targets were set for each major subsidiary of the Company and achievement of these targets were incorporated into the Managing Directors respective KPA indicators, thereby directly influencing the achievement of their short-term incentives.
� The race and diversity targets for the Board were reviewed in 2019 when new Board appointments were made. The Board annually evaluates its progress against its voluntary targets.
� Periodic updates of the employment equity reports were presented to the Committee. These reports reflected the progress made against employment equity targets.
� All employment equity targets and initiatives were in line with the Economically Active Population of South Africa.
� The Committee concurred that the Group has achieved progress in terms of employment equity.
Labour relations
� The number of employees belonging to trade unions remains low, mainly attributable to Alviva’s pro-active engagement and its benefit offerings, which include provident fund membership, an Employee Health and Wellness Programme and cost-effective medical aid options or medical insurance which contributed to strong relationships between management and employees.
� The Committee is not aware of any significant unresolved labour dispute cases during the reporting period.
Employee Health and Wellness Programme
� Employee wellness goes beyond the absence of disease or a common cold. It is being mentally fit and enthusiastic about one’s work. It is within this context that ICAS has provided the Group with the tools and mechanisms to manage behavioural risks through the provision of wellness services to Alviva employees, thereby facilitating a workforce that functions optimally. Further disclosure appears in the Sustainability Report contained in the integrated annual report.
HR Steering Committee
� The HR Steering Committee reported to the Committee that progress had been made as regards the implementation of a digital performance management system.
� Progress was made in aligning Employment Equity compliance requirements for the annual reporting to the Department of Employment and Labour.
� Progress was also made as regards the adoption of Group HR policies within the subsidiaries that had been acquired.
Social and Ethics Committee report continued
89
Ove
rvie
wG
over
nanc
eSu
stai
nabi
lity
Ann
ual fi
nanc
ial s
tate
men
tsSh
areh
olde
rs’ in
form
atio
n
ETHICS
Ethics awareness and reporting
� Ethics training is provided at induction of new employees.
� In addition, regular ethics training of all employees is in place across the Group.
� Independent ethics audits are conducted to assess and monitor the Group’s ethics performance.
� The Alviva Ethics Line has been operational and effective during the reporting period.
� There were no major ethics concerns reported during the reporting period.
ANTI-FRAUD MANAGEMENT AND CONTROLS
Defalcations
� The defalcations report, which details losses associated with criminal activity in the Group, was submitted to the Committee. The report enables management and the Board to assess the effectiveness of the Company’s anti-fraud programmes. It also identifies possible actions required to mitigate or reduce fraud risks.
� The report reflected that, compared to the previous year, the Group has had an increased potential financial exposure associated with criminal activity. Actual financial losses remained low mainly as a result of insurance cover which reduces risk exposures. The increasing trend is not an indication of deteriorating internal controls, but rather a possible increase in criminal activity in South Africa as a whole.
OCCUPATIONAL HEALTH, SAFETY AND ENVIRONMENT
COVID-19
� Following the outbreak of the COVID-19 pandemic, the Committee reviewed the Group’s response, as encapsulated in the COVID-19 Group Occupational Health and Safety Policy and Framework.
� It further reviewed the reports that were implemented to track and monitor compliance against requirements.
� The Committee continues to monitor the situation in all territories where the Group operates. Group policy will be amended based on amendments to Government Regulations, the NICD or the WHO.
� The Group remains confident that its efforts to manage risks around COVID-19 remain adequate.
Occupational health and safety
� The Committee periodically reviewed a summary of all injuries on duty across the Group and noted that the number of cases reported were minimal. There were no fatalities in the reporting period.
Environment � The Group continues to track the volume of waste that it generates and attempts to reduce the
volume of waste going to landfill.
Reporting � There was a continued focus on occupational health and safety, including emphasis and detailed
discussions arising from the comprehensive occupational health, safety and environmental reports. All injuries on duty were followed up to ensure recovery and support of employees.
SUSTAINABILITY
Determining materiality
� The Committee performed an evaluation of the Global Reporting Standards 2018 to establish the material topics on which Alviva should report in the sustainability section of its 2020 Integrated Annual Report. As a result of the evaluation, material topics appear in the Sustainability Report contained in the integrated annual report.
10 United Nations Global Compact Principles
� In fulfilment of its statutory duties, the Committee is cognisant of the Principles and the Group’s application of the Principles which have been aligned to the material topics and disclosed in the Sustainability Report contained in the integrated annual report.
Corporate social initiatives
� Corporate social initiatives undertaken by Alviva and its subsidiaries are disclosed in the Sustainability Report contained in the integrated annual report.
Social and Ethics Committee report continued
90
ALV
IVA
HO
LDIN
GS
LIM
ITED
•
Inte
grat
ed a
nnua
l rep
ort 2
020
TRANSFORMATION
B-BBEE � Alviva disclosed its B-BBEE rating and submitted its B-BBEE affidavit, in compliance with
the JSE Listings Requirements and the B-BBEE Commission stipulations. The required SENS announcement was disseminated.
GOVERNANCE
King IV™ � A King IV™ gap analysis was presented to the Committee, the outcomes of which are addressed
in the Corporate Governance Report contained in the integrated annual report.
Charters, policies and frameworks
� The Social and Ethics Committee Charter, which is aligned to King IV™, was reviewed and approved by the Board.
� The policies and frameworks that have been aligned to King IV™ and the JSE Listings Requirements, where applicable, are subject to periodic review by the Committee for recommendation to the Board for approval.
COMPLIANCEIn terms of paragraph 7.F.5 of the JSE Listings Requirements, the social and ethics committee confirms that it has fulfilled its mandate as prescribed by the Companies Regulations to the Companies Act and that there are no instances of material non-compliance to disclose.
FOCUS AREAS IN THE YEAR AHEADThe Committee will, in the future, continue to attend to the following:
� Monitor developments as regards COVID-19 and review adoption of recommended practices;
� Review adoption of Alviva’s policies throughout the Group;
� Review the effectiveness of the newly implemented digital performance management system;
� Review requirements of the Employment Equity Amendment Bill.
PUBLIC REPORTINGThe Committee is required to report through one of its members to Alviva’s shareholders on the matters within its mandate. The Committee’s Chairperson will report on the Committee’s activities at Alviva’s AGM to be held on Wednesday18 November 2020.
APPROVALI wish to thank the members of the Committee for their contributions during the year in ensuring that the Committee could fulfil its mandate assigned to it by the Board.
Ms SH Chaba Chairperson of the Social and Ethics Committee
Social and Ethics Committee report continued
91
Ove
rvie
wG
over
nanc
eSu
stai
nabi
lity
Ann
ual fi
nanc
ial s
tate
men
tsSh
areh
olde
rs’ in
form
atio
n
SUSTAINABILITY
92
ALV
IVA
HO
LDIN
GS
LIM
ITED
•
Inte
grat
ed a
nnua
l rep
ort 2
020
Sustainability report
Our people are our biggest asset and, with the drive for constant improvement and a service-driven culture, we are building a company for generations to come.
The Board acknowledges that in addition to being responsible for corporate performance, it holds a responsibility to the sustainability and betterment of the environment in which Alviva operates. The Group’s corporate culture is one of absolute undeniable integrity, transparency, competency, high performance and efficiency in decision-making and fair and equitable treatment of its human and natural capital. From a moral point of view, the directors of the Group are expected to apply sound and reasonable judgement, which can only be achieved through nurturing the social capital element, mutual respect for cultural, social or other differences and to foster transparent and inclusive communication which detracts from subjective viewpoints. [GRI 102-32]
The directors understand that transparency not only relates to a principle of freely, and without prejudice or subjective interests, disclosing information to stakeholders, but also to acknowledge the individual shortcomings which could jeopardise stakeholders.
This report, once again, emphasises the Group’s commitment to integrity and the benefit of the greater good of all the stakeholders.
The sustainability report has been prepared in alignment with the six capitals (financial, manufactured, intellectual, human, social and relationship, natural), the Global Reporting Standards 2018 core option [GRI 102-54] [GRI 102-55] [GRI 102-56] and incorporating disclosure on the United Nations Global Compact’s ten principles, as set out below and indicated throughout this report. [GRI 102-13]
UNITED NATIONS GLOBAL COMPACT’S TEN PRINCIPLES
The UN Global Compact’s ten principles in the areas of human rights, labour, the environment and anti-corruption enjoy universal consensus and are derived from:
� The Universal Declaration of Human Rights;
� The International Labour Organisation’s Declaration on Fundamental Principles and Rights at Work;
� The Rio Declaration on Environment and Development; and
� The United Nations Convention against Corruption.
Human rights
Businesses should:
Principle 1: support and respect the protection of internationally proclaimed human rights; and
Principle 2: make sure that they are not complicit in human rights’ abuses.
Labour
Businesses should ensure:
Principle 3: the upholding of the freedom of association and the effective recognition of the right to collective bargaining;
Principle 4: the elimination of all forms of forced and compulsory labour;
Principle 5: the effective abolition of child labour; and
Principle 6: the elimination of discrimination in respect of employment and occupation.
Environment
Businesses should:
Principle 7: support a precautionary approach to environmental challenges;
Principle 8: undertake initiatives to promote greater environmental responsibility; and
Principle 9: encourage the development and diffusion of environmentally friendly technologies.
Anti-Corruption
Businesses should:
Principle 10: work against corruption in all its forms, including extortion and bribery.
93
Ove
rvie
wG
over
nanc
eSu
stai
nabi
lity
Ann
ual fi
nanc
ial s
tate
men
tsSh
areh
olde
rs’ in
form
atio
n
Sustainability report continued
MATERIALITY [GRI 103-1] [GRI 102-29] [GRI 102-49]
An evaluation of the Global Reporting Standards 2018 was performed to establish the material topics on which Alviva should report in the sustainability section of its 2020 integrated annual report.
Step 1: Identification
The process began with the identification of the relevant topics and their boundaries to be reported on.
Step 2: Prioritisation
The next step in defining report content was the prioritisation of the relevant topics from Step 1, to identify those that are material and therefore to be reported on.
Step 3: Validation
Validation was where the principles of completeness and stakeholder inclusiveness were applied to finalise the identification of the report content.
The outcome of steps 1 to 3 was a list of material topics and their boundaries, which should be disclosed in the sustainability section.
Step 4: Review
After the publication of the 2020 sustainability report, Alviva will undertake a review of the report, in preparation for the next reporting cycle. The findings will inform and contribute to the identification step for the next reporting period.
Topics Aspects Disclosures on management approach and indicators
Sustainability context Materiality Completeness
Stakeholder inclusiveness
Sustainability context Stakeholder inclusiveness
REPORT
STEP 1
Identification
STEP 2
Prioritisation
STEP 4
Review
STEP 3
Validation
94
ALV
IVA
HO
LDIN
GS
LIM
ITED
•
Inte
grat
ed a
nnua
l rep
ort 2
020
Step 1: Identification [GRI 103-1]
Determine boundary
The Alviva group of companies is based primarily in South Africa, with trading entities or branches in Angola, Botswana, Ethiopia, Ghana, Kenya, Mauritius, Mozambique, Namibia, Nigeria, Qatar, Tanzania, United Arab Emirates and Zambia. The economic, environmental and social context in South Africa has, therefore, been taken into account in determining the material topics in respect of economic, environmental and social indicators. The focus has primarily been on the topic’s impact within the Alviva Group and not outside the organisation, for example, suppliers located in different geographic areas.
Scope
The scope refers to the range of sustainability topics covered in the report with the sum of the topic and disclosures reported being sufficient to reflect significant economic, environmental and social impacts. It should also enable stakeholders to assess Alviva’s performance.
Taking cognisance of Alviva’s stakeholders and the environment in which it operates, the indicators have overall been prioritised as follows:
Economic
Alviva’s disclosure in respect of the topics pertaining to the economic indicator is material and, in certain instances, legislated.
Shareholders are material stakeholders and the Board is accountable to them to provide transparent, ethical and meaningful disclosure on both financial and non-financial matters that may impact on the well-being and profitability of the Alviva Group.
Social
One of Alviva’s primary stakeholder groups is its employees and, consequently, the communities in which its operations are based and where its employees reside. The Companies Act also regulates the impacts on society under the regulations for social and ethics committees. Legislation in terms of labour, employment equity and B-BBEE furthermore regulates activities that fall within the scope of this indicator. Disclosure in respect of topics under this indicator is therefore material.
Environment
As Alviva is primarily a holding company with business entities mainly operating in the trading and logistics sectors, and not in the manufacturing sector, its impact on the environment is not significant or material and the topics to be reported on have been selected accordingly.
Step 2: PrioritisationThe level of coverage of a particular topic, according to relative reporting priority, takes into account:
� topics that may be reported on to fulfil a regulatory or other reporting requirement, and not because they are material;
� topics with medium reporting priority, even if not material, to prepare for future disclosure requirements or focus areas;
� topics with high reporting priority, identified as material, to be reported on in detail due to its impact (both from a positive and negative perspective) on the economy, environment and society.
Step 3: ValidationValidation was undertaken with the aim of ensuring the report provides a reasonable and balanced representation of Alviva’s sustainability performance, including both its positive and negative impacts. If a topic has been identified as material and the organisation lacks sufficient information to report on it, the report will in the future state what action will be taken to resolve the gap, and the timeframe for doing so.
Sustainability report continued
95
Ove
rvie
wG
over
nanc
eSu
stai
nabi
lity
Ann
ual fi
nanc
ial s
tate
men
tsSh
areh
olde
rs’ in
form
atio
n
Sustainability report continued
The following topics have been identified as topics to be reported on in the 2020 sustainability section of the integrated annual report: [GRI 102-47]
Topics that are reported on to fulfil a regulatory or other reporting requirement, and not because they are material:
Topics with medium reporting priority, even if not material, to prepare for future disclosure requirements or focus areas:
Topics with high reporting priority, identified as material, to be reported on in detail due to its impact (both from a positive and negative perspective) on the economy, environment and society:
Economic
GRI 204: Procurement practices
GRI 206: Anti-competitive behaviour
Environment
GRI 307: Environmental compliance
Social
GRI 103-2: Labour practices grievance mechanisms (management approach)
GRI 402: Labour/management relations
GRI 407: Freedom of association and collective bargaining
GRI 417: Marketing and labelling
GRI 418: Customer privacy
GRI 419: Socio-economic compliance
Environment
GRI 302: Energy
GRI 303: Water and effluents
Social
GRI 103-2: Grievance mechanisms for impacts on society (management approach)
GRI 412: Human rights assessment
GRI 414: Supplier social assessment
Economic
GRI 201: Economic performance
GRI 205: Anti-corruption
Environment
GRI 306: Waste
Social
GRI 401: Employment
GRI 403: Occupational health and safety
GRI 404: Training and education
GRI 405: Diversity and equal opportunity
GRI 406: Non-discrimination
GRI 410: Security practices
GRI 413: Local communities
GRI 415: Public policy
ConclusionThroughout the exercise of determining materiality, the significance of stakeholder engagement and a stakeholder-inclusive approach to factors that may determine the materiality of a topic became clearer. Alviva will commence the drafting of a framework to assist management in identifying a process for taking such views into account in determining materiality.
96
ALV
IVA
HO
LDIN
GS
LIM
ITED
•
Inte
grat
ed a
nnua
l rep
ort 2
020
DATA COLLATIONSustainability performance information was gathered and data collated for publication in the integrated annual report and on Alviva’s website. Every effort has been made to ensure data accuracy and completeness. There is, however, the possibility of small inconsistencies due to human error in recording and collating, and differences in interpretation of definitions.
Data has mainly been collated for Alviva’s major subsidiary companies, unless specifically indicated otherwise, for the economic, environmental and social indicators for the period 1 July 2019 to 30 June 2020, and sustainability data collation coincides with Alviva’s financial reporting cycle.
Financial data has been extracted from the consolidated annual financial statements. Intergroup transactions have been eliminated.
The basis for reporting on the financial elements is in accordance with the Group’s accounting policies, which are disclosed in the financial statements.
Data is only reported where considered to be of sufficient accuracy and is reported according to the Global Reporting Standards 2018 guidelines.
Ongoing efforts are being made to improve the data quality and to broaden the content in the range of material topics.
ECONOMICDuring the reporting period, Alviva generated revenue of R14 804 million (2019: R15 923 million) of which R12 979 million (2019: R14 574 million) was generated in South Africa and R1 825 million (2019: R1 348 million) was generated outside South Africa.
Operating profit before interest amounted to R389 million (2019: R671 million) with an operating margin of 3% (2019: 4%). Profit before tax was R212 million (2019: R537 million) with total tax paid of R75 million (2019: R146 million) of which R73 million (2019: R144 million) was paid in South Africa and R2 million (2019: R2 million) was paid outside South Africa. An attributable profit of R149 million (2019: R395 million) was generated for the reporting period.
Total fees paid to auditors of R4 million (2019: R4 million) did not include any non-audit fees as non-audit services were not rendered by the auditors in either the current or the prior reporting period. During 2020, finance lease commitments on properties amounted to R296 million (2019: R240 million – operating lease commitments).
Sustainability report continued
97
Ove
rvie
wG
over
nanc
eSu
stai
nabi
lity
Ann
ual fi
nanc
ial s
tate
men
tsSh
areh
olde
rs’ in
form
atio
n
Sustainability report continued
DIRECT ECONOMIC VALUE GENERATED AND DISTRIBUTED
Value-added statement [GRI 201-1] Value-added is the measure of wealth created by the Group in its operations by ‘adding value’ to the cost of raw materials, products and services purchased. The statement below summarises the total wealth created and shows how it was shared by employees and other stakeholders that contributed to its creation.
Also set out below is the amount retained and reinvested in the Group for the replacement of assets and the further development of operations.
2020R’000
2020%
2019R’000
2019%
Revenue 14 804 155 15 922 641
Cost of materials and services (12 772 754) (13 724 275)
Value added by operations 2 031 401 97,6 2 198 366 97,7
Investment income 50 666 2,4 52 059 2,3
2 082 067 100,0 2 250 425 100,0
Applied as follows:
Employees’ salaries, wages and benefits 1 323 782 63,6 1 338 582 59,5
Government taxation 74 688 3,6 145 866 6,5
Providers of capital and interest 227 640 10,9 185 108 8,2
Retained in the Group 455 957 21,9 580 869 25,8
Retained income 148 724 7,1 394 500 17,5
Minority shareholders (11 849) (0,6) (3 642) (0,2)
Depreciation and amortisation 319 082 15,3 190 011 8,4
2 082 067 100,0 2 250 425 100,0
2020 2019
59,5%
6,5%
8,2%
25,8%
63,6%
3,6%
10,9%
21,9%
Employees’ salaries, wages and benefits Government taxation Providers of capital and interest Retained in the Group
98
ALV
IVA
HO
LDIN
GS
LIM
ITED
•
Inte
grat
ed a
nnua
l rep
ort 2
020
PROCUREMENT PRACTICES [GRI 204-1]
Alviva’s strategy is based on the supply of world-class local and international information and technology products and services. Where applicable, these products and services are sourced through local suppliers, wherever possible. Alviva recognises that the procurement of local products and services creates job opportunities in local communities. Such job opportunities should then lead to further growth and development, rendering opportunities for those previously unemployed to become employed and eventually progress through the ranks.
During the reporting period, products and services procured locally in South Africa amounted to R5 611 million (2019: R6 466 million), whereas due to the nature of the products distributed by the Group, imports amounted to R7 160 million (2019: R7 973 million), with imports constituting 56% (2019: 55%) of the Group’s procurement spend.
ANTI-CORRUPTION [GRI 205]
UNGC – Principle 10: Work against corruption in all its forms, including extortion and bribery.
Experience and integrity guide the Board to confidently acknowledge that, despite lucrative and/or tangible benefits, there is never a requirement or justification to accept a dealing or transaction where bribery or corruption is evident. Successful business is not only derived from the successful outcome of large decisions, but also from the ongoing successful small decisions which are made. The small decisions result in a snowball effect, the one good decision impacting positively on the next. Similarly, the inverse is true. An ongoing succession of poor decisions made, will conclude in ongoing, often untruthful, results which snowball into and impact worse on successive decisions. This principle carries forward into each aspect of the business and is particularly pertinent to decisions surrounding corrupt dealings.
The Board asserts, once again, their stance against partaking in any dealings of a corrupt nature or where undue payments are implied or required and further emphasises their commitment to absolute transparency.
Alviva is implacably opposed to bribery and corruption and has implemented anti-corruption policies.
Employees are discouraged from accepting any gifts or favours from suppliers that obligate them in any way to reciprocate. Alviva has implemented a system to encourage employees to report all incidences or suspicion of fraud, theft, corruption and similar unethical behaviour through a confidential and secure whistle-blowing line. The Group complies with all the requirements of the Anti-Fraud and Corruption Act and the Protected Disclosures Act.
The objectives of the policies are to ensure that fraud is addressed both pro-actively and reactively in a structured manner and the policy is founded on the following fundamental fraud prevention principles:
� promoting a set of values, complemented by sound ethical behaviour and a supporting code of ethics;
� pro-active identification of fraud risks through structured fraud risk assessment;
� prevention strategies to limit the risk of fraud;
� strategies for early detection of fraud;
� investigation approaches when incidents of fraud do occur;
� comprehensive resolution and remediation after investigations; and
� programmes to create awareness of the policy.
A whistle-blowing mechanism is in place for the reporting of suspected irregularities and unethical behaviour. There is a strong focus on staff awareness of this facility through regular interventions. A copy of the Code of Conduct is available on the Company’s website.
All reports related to Alviva’s anonymous, toll-free hotline are submitted to the CAE who ensures that all incidents are logged, investigated, actioned (if necessary), reported to the Social and Ethics Committee and resolved. The cycle time for answering callers’ questions or closing an investigation on a case is recorded and feedback is provided continuously and within a short timeframe. No material cases were reported during the reporting period.
Sustainability report continued
99
Ove
rvie
wG
over
nanc
eSu
stai
nabi
lity
Ann
ual fi
nanc
ial s
tate
men
tsSh
areh
olde
rs’ in
form
atio
n
Sustainability report continued
Communication on anti-corruption policies and procedures is incorporated in the policy pack, which is available at all Group businesses. Training in respect of these matters are included in the Alviva induction programme. No material incidents of corruption occurred during the reporting period. [GRI 205-3]
ANTI-COMPETITIVE BEHAVIOUR [GRI 206]
The Group supports and encourages free external and internal competition in all businesses.
No legal action was brought against Alviva or any of its subsidiary companies for anti-competitive behaviour, anti-trust and monopoly practices.
ENVIRONMENTThe Board assigned the responsibility for governance of environmental management and monitoring to the Social and Ethics Committee. An Environmental Policy is in force, which is reviewed and updated on a regular basis, to ensure ongoing relevance. In addition, standard operating procedures guide the Group’s adherence to the Environmental Policy.
Alviva’s commitment to sustainable development is contained in the Alviva Code of Conduct, with one of the Code’s pillars being “Protect the Environment”. Continuous and more effective methodologies are being implemented to lower the financial impact of liability and satisfy the duty of care responsibilities.
Accordingly, it is Alviva’s policy to:
� do all that is reasonably practicable to minimise the environmental impact of its operations using standards which are scientifically sustainable and commonly acceptable;
� review and continuously improve the performance of its products, services and operations, as measured by its environmental impact;
� work in co-operation with members of industry, government bodies, suppliers and customers to promote the achievement of high standards of environmental care;
� promote responsibly the real advantages it has achieved, whilst avoiding making false or misleading claims of environmental benefit;
� take an active part in protecting the environment by continuous improvement in the environmental impact of its operations;
� meet or exceed the requirements of legislation and responsible customer opinion;
� heighten employees’ environmental awareness through suitable training;
� encourage its suppliers to develop environmentally superior processes and ingredients and co-operate with other members of the chain to improve overall environmental performance; and
� set annual improvement objectives aimed at improving the overall environmental performance of the business.
Alviva is mainly a distributor of finished goods and services with finished and semi-finished goods being procured from a variety of vendors, both locally and internationally. No materials used in operations have a significant impact on the environment. As such, Alviva has been classified as having an overall low environmental impact and the only environmental topics considered to have a level of materiality, and which are being reported on in this sustainability report, are energy, water and effluents, waste and compliance.
100
ALV
IVA
HO
LDIN
GS
LIM
ITED
•
Inte
grat
ed a
nnua
l rep
ort 2
020
ENERGY [GRI 302-1]
Carbon footprintUNGC – Principle 8: Undertake initiatives to promote greater environmental responsibility.
Being in the main a distribution and services company, Alviva acknowledges the environmental impacts of carbon emissions relating to the transportation and delivery of products. The delivery of product relies on internal as well as external transport providers, which have their own initiatives to limit impacts on the environment. Alviva does not currently measure specific criteria against performance targets, including impacts on climate change.
Alviva applies energy and resource-saving production processes and technology, which reduce negative impacts on the environment, as far as economically possible. The Board is committed to consistently improve production and business processes in order to reduce costs but also, more importantly, to reduce its carbon footprint. The table below portrays consumption by primary energy source year-on-year.
Consumption Gigajoules Consumption Gigajoules
1 July 2019 to 30 June 2020 1 July 2018 to 30 June 2019
CARBON FOOTPRINT
Total energy consumption by primary energy
– Electricity (MWh) 7 907 28 465 9 486 34 150
– Fuel consumption (litres) 139 898 5 400 154 277 5 955
Core energy consumption (gigajoules) 33 865 40 105
Total carbon emissions (CO₂e tonnes) 8 754 n/a 10 467 n/a
– Electricity 8 381 n/a 10 055 n/a
– Fuel 373 n/a 412 n/a
Total number of employees 3 257 n/a 3 526 n/a
Total carbon emissions per employee (CO₂e tonnes) (Fuel)
2,69 n/a 2,97 n/a
Total carbon emissions for the reporting period were 8 754 CO₂e tonnes (2019: 10 467 CO₂e tonnes), a reduction of 16% (2019: reduced by 1%). The 17% reduction in electricity consumption and the 9% reduction in fuel consumption are mainly attributable to the effect of the national COVID-19 lockdown during the last quarter of the reporting period, as well as the disposal of Modrac, which was included in the prior reporting period’s carbon footprint.
WATER AND EFFLUENTS
EffluentsIn order to minimise water pollution associated with storm water run-off, and in line with ISO standards, all electricity generators at the various locations are fitted with the required protection mechanisms to prevent oil and diesel from entering the storm-water drainage systems. [GRI 303-2]
WASTE [GRI 306]
Alviva’s main environmental impact relates to waste packaging materials, emanating from finished goods as well as semi-finished components, which are used during the assembly of its in-house computer brand, Proline. [GRI 306-1]
The Group’s objective is to control and manage any undesirable or superfluous by-products, emissions and/or residue caused by any process or activity. Alviva aims to provide adequate means for all waste types to be properly stored, contained and disposed of. It is a further objective to protect employees, visitors, contractors or the public from exposure to any hazardous waste that the Group may or could accumulate or handle. [GRI 306-2]
Sustainability report continued
101
Ove
rvie
wG
over
nanc
eSu
stai
nabi
lity
Ann
ual fi
nanc
ial s
tate
men
tsSh
areh
olde
rs’ in
form
atio
n
Sustainability report continued
Non-hazardous waste
The total volume of waste generated and recorded from the Group’s major business sites amounted to 303 700kg (2019: 463 054kg), a decrease of 34% on the prior year. [GRI 306-2] The total volume of waste sent for recycling reduced to 120 040kg (2019: 209 811kg). The percentage of waste disposed of that was sent for recycling reduced by 5% to 40% (2019: 45%). [GRI 306-4]
During the previous reporting period, a major building project at Pinnacle contributed to the generation of additional general waste. In addition, the reduction in both waste generated and waste sent to recycling was largely as a result of the disposal of Modrac, a manufacturing concern, in the prior reporting period that was not included in the current reporting period.
The total waste that was recorded and managed therefore decreased by 159 354kg, resulting in the volume of recyclable waste generated reducing.
A detailed analysis of waste appears below.
2020Kg
2019Kg
VarianceKg
Waste to landfill
General waste – commercial 183 660 253 243 (69 583)
Total waste to landfill [GRI 306-2] 183 660 253 243 (69 583)
Waste to recycling
Cardboard K4 75 318 91 999 (16 681)
E-waste 4 082 4 325 (243)
Glass 4 111 3 704 407
Metal/Cans 2 077 65 557 (63 480)
Pallets 0 43 (43)
Paper – common mix 7 733 10 689 (2 956)
Paper – magazines 1 556 1 307 249
Paper – newspapers 631 729 (98)
Paper – white 4 801 7 416 (2 615)
Plastic – PE-HD 1 683 2 800 (1 117)
Plastic – PE-LD 7 187 7 456 (269)
Plastic – PET 1 403 1 943 (540)
Plastic – PP 748 684 64
Plastic – PS 47 1 151 (1 104)
Plastic – sticky 458 89 369
Tetrapak 1 147 537 610
Other 7 058 9 383 (2 325)
Total waste to recycling [GRI 306-2] 120 040 209 811 (89 771)
TOTAL WASTE 303 700 463 054 (159 354)
102
ALV
IVA
HO
LDIN
GS
LIM
ITED
•
Inte
grat
ed a
nnua
l rep
ort 2
020
Three of the main contributors to environmental waste in the Group were paper, cardboard and plastic. Recycling initiatives focused mainly on these three categories of waste and recycling. In addition, e-waste relates to discarded electronic appliances such as mobile phones, computers and televisions. All e-waste is disposed of in a controlled manner by a waste removal company, which disposes of the waste responsibly and with recycling as a key objective.
Hazardous waste
Alviva’s operations in the main do not make use of or conduct activities that would result in the spillage of chemical substances.
The Group, however, acknowledges that chemical substances, whether toxic or non-toxic, do form part of general daily operations.
All such chemicals have been identified and evaluated as to their chemical properties, storage, compatibility, transportation and emergency preparedness.
Amongst various legal compliance appointments made in terms of the OHS Act, Alviva has appointed Hazardous Chemical Co-coordinators and Controllers at all operations. Detailed risk assessments in accordance with SABS0228 and SABS072 as well as ISO and the OHS Act are conducted at Alviva’s manufacturing concerns.
Chemical substances have been classified under the following categories:
� Flammable
� Poisonous
� Non-ionising
� Combustible
� Corrosive
� Toxic
� Biological
PRECAUTIONARY APPROACH [GRI 102-11]
UNGC – Principle 7: Support a precautionary approach to environmental challenges.
As Alviva is mainly a distribution and services organisation, its overall impact on the environment is considered to be largely immaterial. The Board has, however, adopted a precautionary approach to risk management, which facilitates the mitigation of risks in the context of uncertainty. As such, caution is practiced if the outcomes of actions, as they relate to the sustainability of the Group and stakeholders, are uncertain.
ENVIRONMENTAL INITIATIVESUNGC – Principle 9: Encourage the development and diffusion of environmentally friendly technologies.
Pinnacle has a rooftop solar installation to increase energy efficiency, thereby further reducing its impact on the environment and carbon footprint. Wherever possible, branches in the Group are consolidated into combined premises, resulting in both cost and energy savings.
Sustainability report continued
103
Ove
rvie
wG
over
nanc
eSu
stai
nabi
lity
Ann
ual fi
nanc
ial s
tate
men
tsSh
areh
olde
rs’ in
form
atio
n
Sustainability report continued
Environmentally friendly technologies [GRI 302-5] Solareff
Solareff, established in May 2010, has become renowned as one of the leading specialists in solar photovoltaic (PV) and battery energy storage solutions (BESS) in South Africa, for medium- to large-scale rooftop and ground-mounted installations, with the proven ability to deliver optimised PV and energy storage solutions to effectively meet customers’ consumption requirements.
Solar PV solutions save costs and reduce carbon emissions at the same time. Typically, the implementation of a solar PV solution represents a significant step towards achieving a customer’s sustainability goals. The electricity generated by the solar PV solution is for the customer’s own consumption, resulting in substantial reductions in the overall cost of operations, with a typical payback period of three to six years. The installation of a solar PV solution will produce clean green electricity for at least a 25-year period, providing long-term tangible environmental benefits for sustainable, responsible business. BESS are highly versatile, scalable, expandable and can be successfully coupled with solar PV solutions. Typically, BESS installations are part of a customer’s risk avoidance or cost reduction strategies.
Solareff is currently one of the South African engineering, procurement and construction (EPC) solar providers with the largest installed capacity within the embedded (rooftop) solar PV space through the provision of end-to-end services from engineering, designing, procuring the components, installation, monitoring and after-sales management. Post-installation online monitoring tools are utilised to pro-actively manage the solution, ensuring early fault detection and correction for ongoing optimal power generation.
Through a team of highly qualified engineers and project managers, Solareff has successfully completed over 300 installations and has over 85MWp of commissioned and current projects across South Africa and neighbouring countries.
Projects have included record-breaking installations such as:
Clearwater Mall
The 2,9MWp Clearwater Mall project was South Africa’s first commercial rooftop solar PV installation to break the 1MWp barrier for own consumption. The energy generated by the solution supports the Mall’s day-to-day power requirements while decreasing its overall annual carbon footprint by 2 867 tonnes of coal and avoiding over 5 021 tonnes of CO₂ emissions. The solution is estimated to produce 4 873MWh annually, equal to the consumption of 677 average households.
Mall of Africa
The Mall of Africa 4,75MWp installation is the largest rooftop solar PV system of its kind in the southern hemisphere and tenth worldwide and, as far as can be established, this system is also the world’s largest integrated rooftop PV/diesel hybrid solution. The energy generated by the solution supports the Mall’s day-to-day power requirements, while decreasing its overall annual carbon footprint by 8 034 tonnes and avoiding over 4 394 tonnes of CO₂ emissions. The solution is estimated to produce 7 800MWh annually. The resulting reduction in consumption will alleviate pressure on the national power grid, allowing for greater available capacity to support the substantial growth currently experienced in the Waterfall City area.
GridCars
GridCars is a South African developer of electric vehicle charging infrastructure, charge-point software management systems and supplier of charge points. In September 2017, Solareff expanded into green mobility through the acquisition of a 75% stake in GridCars, who has since grown from a start-up business to becoming the South African industry leader in electric vehicle (EV) charging.
At the end of 2018 GridCars, in partnership with Jaguar, set out to establish the foundation for the future of electric and plug-in hybrid vehicles in South Africa through the deployment of 82 new public charging stations nationwide. Part of this deployment was the establishment of the GridCars and Jaguar National Powerway, which now consists of 52 charging stations located at various
104
ALV
IVA
HO
LDIN
GS
LIM
ITED
•
Inte
grat
ed a
nnua
l rep
ort 2
020
convenient stopovers, including fuel service stations, shopping malls and hotels along the N1 from Cape Town to Polokwane, the N2 from Cape Town to East London, the N3 between Gauteng and Durban and the N4 from Rustenburg to Nelspruit. The establishment of the Powerway has been a game changer for EV drivers, as it makes long-distance travel possible within South Africa.
In addition to the national Powerway (the N1, N2, N3 and N4), public charging stations have been installed in customer parking areas at every Jaguar Land Rover retailer in South Africa. As leading electric vehicle charging authorities, GridCars continues to work with various players in the industry, including OEMs, property managers and traditional fuel companies, in order to effectively grow the national charge-point network. GridCars has also started to expand its services into other African countries.
ENVIRONMENTAL COMPLIANCE [GRI 307-1]
There was no material, monetary or other, penalties brought against Alviva or any of its subsidiaries for non-compliance with environmental laws and regulations during the reporting period.
SOCIAL
EMPLOYMENT [GRI 401]
UNGC – Principle 6: The elimination of discrimination in respect of employment and occupation.
Alviva’s employment strategy focuses on employee initiatives, social conditions and sustaining jobs in the supply base as well as occupational health and safety. Alviva’s employees are the foundation of the business that enable the execution of the Group’s business strategy to deliver sustainable profit growth. The Group’s focus is on attracting, engaging and retaining the best talent to deliver on its strategic plan.
Alviva’s employment brand is built on a combination of its culture, its leadership, its products and its reputation.
The number of employees in the Group decreased from 3 526 in 2019 to 3 257 [GRI 102-8] at the reporting date, a decrease of 8%, mainly attributable to the reduction of fixed term contractors, natural attrition and a limited number of retrenchments, none of which were COVID-19 related. [GRI 401-1] The employment by nature, segment and region are graphically depicted below:
Employment profile by nature [GRI 102-8]
Fixed term employees comprise 13% (2019: 17%) of the Group’s workforce.
2020 2019
83%
17%
87%
13%
Fixed term
Full time
Sustainability report continued
105
Ove
rvie
wG
over
nanc
eSu
stai
nabi
lity
Ann
ual fi
nanc
ial s
tate
men
tsSh
areh
olde
rs’ in
form
atio
n
Sustainability report continued
Segment [GRI 102-8]
Employment by segment, at the reporting date, was as follows:
2020 2020%
2019 2019%
ICT Distribution 1 263 39 1 433 40
Services and Solutions 1 901 58 2 005 57
Financial Services 58 2 56 2
Central Group Services 35 1 32 1
Total 3 257 100 3 526 100
2020 2019
ICT Distribution Services and Solutions Financial Services Central Group Services
39%
58%
1%2%
40%
57%
1%2%
106
ALV
IVA
HO
LDIN
GS
LIM
ITED
•
Inte
grat
ed a
nnua
l rep
ort 2
020
Region [GRI 102-8]
At the reporting date, 97% (2019: 96%) of employees were employed in South Africa and 3% (2019: 4%) outside South Africa.
2020 2019
SOUTH AFRICAEastern Cape 35 42Free State 25 31
Gauteng 2 366 2 563
KwaZulu-Natal 147 159
Mpumalanga 13 13
Northern Cape 3 2
Western Cape 574 588
Total – South Africa 3 163 3 398
REST OF AFRICA
Botswana 4 20
Egypt 7 6
Kenya 8 6
Mozambique 10 9
Namibia 35 39
Zambia 5 9
Other African countries 25 39
Total – Rest of Africa 94 128
TOTAL 3 257 3 526
At the reporting date, the percentage of employees who are deemed historically disadvantaged South Africans was 63% (2019: 64%), with the percentage of management (top and senior) who are deemed historically disadvantaged South Africans being 31% (2019: 29%). Historically disadvantaged middle management was 44% (2019: 44%) and historically disadvantaged junior management 69% (2019: 70%).
The staff turnover rate for the reporting period was 19% (2019: 18%). [GRI 401-1]
Staff turnover was calculated as follows: employees who resign, are retrenched, retire, leave due to mutually agreed settlements, as a percentage of the average number employed during the period.
During the reporting period there were 541 (2019: 622) resignations and 44 (2019: 54) dismissals with the total number of person hours worked being 5,9 million (2019: 6,4 million) hours. The total number of person days lost due to absenteeism was 11 934 days (2019: 14 295 days), equating to a percentage of total person days lost due to absenteeism of 1,4% (2019: 1,6%). No person days were lost due to industrial action in either the current or the prior reporting period.
Employee benefits and remuneration decreased by 1% to R1 324 million (2019: R1 339 million). [GRI 201-1]
The reduction in the number of employees and consequently employee benefits and remuneration are reflective of the reduction in business activity generally and compounded by the effect of the COVID-19 pandemic during the last quarter of the reporting period.
Sustainability report continued
107
Ove
rvie
wG
over
nanc
eSu
stai
nabi
lity
Ann
ual fi
nanc
ial s
tate
men
tsSh
areh
olde
rs’ in
form
atio
n
Sustainability report continued
LABOUR/MANAGEMENT RELATIONS [GRI 402-1]
NNGC – Principle 3: Uphold the freedom of association and the effective recognition of the right to collective bargaining.
The number of unionised employees, per union, is listed below and constitutes 5% (2019: 6%) [GRI 102-41] of the Group’s workforce.
2020 2019
NUMSA 35 38
CWU 12 13
SACCAWU 12 13
ICTU 110 138
Total number of unionised employees [GRI 102-41] 169 202
Non-unionised number of employees 3 088 3 324
Unionised employees as a percentage of the workforce [GRI 102-41] 5% 6%
Non-unionised employees as a percentage of the workforce 95% 94%
NUMSA – National Union of Metalworkers of South Africa
CWU – Communication Workers Union
SACCAWU – South African Commercial, Catering and Allied Workers Union
ICTU – Information Communication Technology Union
In addition to union representation and the Group’s drive to ensuring the workforce is adequately represented at management level, Alviva has workplace forums in its major subsidiaries. These forums serve as two-way communication platforms to develop positive relationships between management and employees. The forums’ monthly meetings deal with matters of mutual interest, including operational efficiencies, employment equity, skills development and conditions of employment affecting all employees.
Alviva adheres to labour laws and statutory minimum Basic Conditions of Employment Act requirements, including notice periods, leave entitlement, overtime pay, notices of possible restructuring or cases of termination of contracts, etc.
OCCUPATIONAL HEALTH AND SAFETYThe Group assigns high priority to employee health and safety through the application of best practice-based safety, health and the environment (SHE) policies, which continue to be reviewed and updated, where required. Health and safety consultants are appointed, when required, to evaluate and report on areas deemed to be high-risk areas and also to evaluate and report on risk areas not identified which need to be added and prioritised.
Each company in the Group has established a SHE Committee, which reports to the Group SHE Committee. 100% of the workforce is represented in formal joint management-worker SHE Committees.
Monthly inspections are conducted by the trained and appointed health and safety representatives. Contributing reports and surveys are presented to each of the SHE Committees by trained and appointed stacking inspectors, incident investigators, electrical equipment inspectors, hazardous substance controllers and hygiene coordinators. Alviva’s compliance levels to health and safety standards are monitored as a standing agenda item of the Audit and Risk Committee.
Over and above the fact that employees are an important asset in ensuring the sustainability of the Group, Alviva also has a statutory responsibility to ensure that occupational injuries, diseases and environmental incidents are formally recorded. Alviva is also committed to ensuring that investigations or enquiries are conducted, and that immediate action is implemented to prevent future incidents from recurring. The Group complies with the requirements of local, national and international laws, regulations and standards. Thus, various measures and safe work procedures have been implemented in order to measure and utilise incident data and associated trends. This serves as the basis for a pro-active and focused approach to reduce the severity and frequency of safety, health and environmental incidents. Incidents also impact negatively on productivity hours, staff motivation and internal efficiencies.
108
ALV
IVA
HO
LDIN
GS
LIM
ITED
•
Inte
grat
ed a
nnua
l rep
ort 2
020
Occupational Health and Safety Management System [GRI 403-1]
An Occupational Health and Safety Management System, based on both OSHAS 45001 and the OHS Act, has been implemented throughout the Group and complies specifically with the relevant legislation and all the requirements, as listed in the OHS Act.
The Group’s workforce consists of a combination of warehouse and office workers and the Occupational Health and Safety Management System covers and accounts for all employees, activities and workplaces throughout the Group.
Hazard identification, risk assessment and incident investigation [GRI 403-2]
All tasks, operations and processes are identified and assessed through the systematic evaluation of the task, the process, legal responsibilities pertaining to a task or process and the impact of the risk on the organisation. Processes include baseline risk assessments, task-based risk assessments, hazard identification and health risk analysis studies.
Health and safety representative training is provided by reputable training service providers to ensure the competence of individuals performing risk assessments and hazard identification. The process is governed by Standard Operating Procedures, which clearly define the methodology around performing the required assessments.
The results of risk assessments and hazards identification are entered into a Health and Safety Risk Matrix for each site. This matrix is used as a tool for baseline topics in the monthly SHE Committee meetings and are then actioned, as appropriate.
Work-related incidents are investigated through various processes, based on any occurrence that may have an effect on the employee. The processes and injury criteria for defining work-related incidents include first aid administered, disabling injuries, property damage, near misses, section 24 incidents as well as fatal and environmental incidents. Work-related hazards are reported directly to the responsible health and safety representative, who conducts a hazard identification analysis as well as a task-based risk assessment to eliminate or control the hazard and establishes improvements required to implement corrective actions.
Occupational health services [GRI 403-3]
Health and safety representatives formally inspect their delegated areas during normal working hours. They note the location of the deviation, their findings and should this deviation pose a threat to the health or safety of employees, the threat is identified and immediately reported to the responsible Health and Safety Manager and appointed 16.2 assignee (a senior staff member in the business entity appointed by the CEO in terms of section 16.2 of the OHS Act).
Worker participation, consultation and communication on occupational health and safety [GRI 403-4]
All employees throughout the Group are represented by the various SHE Committees. The goal of the Committees is to ensure that legal requirements are met and that they are proactive in initiating, developing, promoting, maintaining and reviewing measures to ensure the health and safety of all employees. Committee members are appointed by the 16.2 assignee and collective decisions and approvals are conducted by the appointed Chairperson of the Committee and the 16.2 assignee.
Communication to employees is done via various platforms which include toolbox talks, audio-visual programmes, health and safety notice boards and the participation of employees in the various SHE Committees.
Worker training on occupational health and safety [GRI 403-5]
All newly appointed employees undergo compulsory induction training after commencing employment. In addition, health and safety representative training, basic first aid training, basic fire-fighting training, incident and accident investigation training and driven machinery training are provided to employees.
Health and safety programmes during the reporting period included:
� Safety induction training;
� Standing operating procedures; and
� HIV information and awareness.
Sustainability report continued
109
Ove
rvie
wG
over
nanc
eSu
stai
nabi
lity
Ann
ual fi
nanc
ial s
tate
men
tsSh
areh
olde
rs’ in
form
atio
n
Sustainability report continued
Promotion of worker health [GRI 403-6]
HIV/AIDS
The planned annual wellness event in major subsidiaries did not take place, due to the global COVID-19 pandemic and lockdown protocols, therefore, no employees and contractors were tested for HIV/AIDS, during the reporting period (2019: 615). The Group continues to encourage employees to participate, on a voluntary basis, during future annual HIV screening events and at community level.
The Group’s healthcare provider offers a comprehensive HIV and AIDS programme for its members who have been diagnosed with HIV and AIDS. The programme assists employees, who have been diagnosed with HIV and AIDS, by providing the necessary information and care needed to treat them.
The Group also continues to make available to employees contact information at both governmental and non-governmental organisations which have facilities available in local communities, to ensure that affected employees get the required support and care, at an early stage.
Employees’ assistance programme
The Group has rolled out an employees’ assistance programme for all employees and this programme covers employees and their families for any assistance, which includes, amongst others, financial, emotional and trauma support services, which are available 24/7. In future, the Group will continue to provide employees with regular information about the benefits of the programme.
Prevention and mitigation of occupational health and safety impacts directly linked by business relationships [GRI 403-7]
The Group does not have significant occupational health and safety impacts linked to its operations, products or services.
Workers covered by an occupational health and safety management system [GRI 403-8]
The Group’s Occupational Health and Safety Management System covers all employees and no employees are excluded from such cover, including workers who are not employees of Alviva but whose work and/or workplace is controlled by the Group.
Work-related injuries [GRI 403-9]
The Group recorded an LTIFR of 0,4377 (2019: 0,4354) and a TRIFR of 0,9763 (2019: 2,2390). The total number of recordable injuries, including first aid cases, medical treatment cases and lost time injuries was 29 (2019: 72), comprising 12 (2019: 47) first aid cases, 4 (2019: 11) medical treatment cases and 13 (2019: 14) lost time injuries. LTIFR and the TRIFR are calculated per 200 000 hours worked with the total number of hours worked during the reporting period being 5 940 768 hours (2019: 6 431 424 hours).
The reason for the decrease was attributable to the disposal of Modrac which, due to it being a manufacturing concern, was susceptible to a higher rate of workplace injuries.
The majority of incidents reported required only on-site first aid. Typical injuries sustained reported over the 12-month period mainly involved slips, cuts, muscle strains and other minor injuries. The low levels of injuries on duty can be ascribed to high levels of health and safety standards and awareness, which are maintained throughout the Group.
The Group is working towards zero incidents through training and awareness programmes, improved housekeeping practices and manager-employee relationships.
Section 37 Contractors Agreements, in terms of the OHS Act, are in place for all workers who are not employees of the Group but whose work and/or workplace is controlled by the organisation.
110
ALV
IVA
HO
LDIN
GS
LIM
ITED
•
Inte
grat
ed a
nnua
l rep
ort 2
020
Work-related ill health [GRI 403-10]
Due to the nature of Alviva’s operations, employees are not exposed to any occupational activities which have a known high incidence or high risk of specific diseases.
COVID-19 pandemicThe WHO announced the COVID-19 outbreak as a pandemic on 11 March 2020. On 15 March 2020, the South African President, Mr Cyril Ramaphosa, declared a national state of disaster in terms of the Disaster Management Act, 2002. This declaration was to enable the South African government to have an integrated and coordinated disaster management mechanism that focusses on preventing and reducing the outbreak of COVID-19 under its risk-adjusted strategy. In terms of the declaration, South Africa entered into a national lockdown from midnight on Thursday, 26 March 2020.
Easing of the national lockdown restrictions, based on the risk-adjusted strategy, started on 1 May 2020 with a reduction from the initial Level 5 to Level 4. From 1 June 2020, the national restrictions were further lowered to Level 3 and from 17 August 2020, the national restrictions were lowered to Level 2.
Various business entities within the Alviva Group were classified as being providers of essential products and services under the initial Level 5 Regulations issued under the Disaster Management Act. These included the provision of IT products and services to other essential service providers. These essential products and services were further expanded under Level 4 Regulations to include wholesale and retail ICT distribution and sales of personal ICT equipment including computers, mobile phones and other home office equipment information and communication services as well as all telecommunication services and infrastructure information and communication technology services for all private and business customers.
Alviva’s policy is to provide a safe and, as far as is possible, risk-free work environment to all its stakeholders, especially its employees. Therefore, in terms of government and WHO guidance, COVID-19 procedures were formulated as contained in the Group COVID-19 OHS Policy and Framework. The Policy includes guidance on workplace controls specific to COVID-19, periodic employee declarations, employee and visitor health screening and processes to follow for employees who have contracted the virus or been in contact with a person that tested positive as well as COVID-19 reporting. In order to oversee and implement the COVID-19 policies and procedures, COVID-19 Compliance Officers were appointed in the various operating entities.
With the need to continue providing essential products and services, the various Group entities were able to adapt to remote working through the deployment of business continuity plans, which included the use of various technologies. Back to work plans have been formulated in terms of government guidance and, when required, employees can access the physical work sites to carry out essential tasks and services.
As the lockdown levels have eased to Level 2, the various operating entities continue to work remotely, wherever possible, and continue to follow all government and WHO guidance as regards COVID-19. Alviva continues to monitor the situation in South Africa and beyond as regards the spread of the virus, and will continue to implement further amendments to the Regulations or guidance issued by government, the NICD or the WHO.
The impact of the coronavirus was as follows:
30 June2020
31 August2020
Number of employees in the Group 3 257 3 197
Number of positive tests * 22 87
Number of recoveries * 22 83
Number of active cases at end of period – 4
Number of employees in quarantine or isolation during the period * 85 145
Number of employees in quarantine or isolation at end of period 45 7
* Cumulative.
Sustainability report continued
111
Ove
rvie
wG
over
nanc
eSu
stai
nabi
lity
Ann
ual fi
nanc
ial s
tate
men
tsSh
areh
olde
rs’ in
form
atio
n
Sustainability report continued
TRAINING AND EDUCATIONAlviva continues to accelerate its learning and development capability and delivery to its employees, using both internal and external resources to train its workforce, to address both current and future skills gaps. The Group subsidiaries have continued to implement specific learnership, internship, vendor and other skills programmes to prepare employees to meet personal development and business goals.
Graduates attend vocational-specific formal training courses and receive practical guidance from mentors, who are assigned to impart specific job knowledge and skills in the workplace, across various specialised fields. The skills attained enhance the interns’ work experiences and increase their opportunities for employment within the Group and the broader ICT industry.
The internship or learnership programmes have been tailored to encourage and promote gender representation in the Group, to transfer skills and open up more opportunities for women in the traditionally male-dominated ICT industry. The programmes are part of the Group’s key sustainability initiatives and Alviva continues to engage with the MICT SETA and MERSETA to secure funding for additional internships and learnerships as well as other scarce and critical skills programmes in order to address skills shortages and support job creation in the country, in line with the demands of the 4th Industrial Revolution. [GRI 404-2]
The training and development of employees are planned well in advance to ensure effective implementation with training partners and to ensure employees are given enough time to absorb and apply knowledge gained in the workplace in the short- and long-term.
The Group Skills Development Facilitators, Workplace Forums and Employment Equity Managers of the different subsidiaries continue to be instrumental in the planning, implementation and monitoring of the overall training requirements and effective delivery thereof. [GRI 404-2]
Alviva acknowledges that tailored skills development, which has relevance in the ever-changing ICT industry, is vital to the organisation. Therefore, several training initiatives, including product, technical and management development initiatives have been planned and implemented, based on a skills audit conducted during the reporting period. Records of planned and actual training conducted are maintained to ensure that completed training is tracked and measured. The MICT SETA-sponsored learnership programmes are aimed at the long-term development of unemployed persons. These programmes are registered and managed in partnership with the MICT SETA and an approved training provider. As Alviva mainly distributes technology products and services, vendor training on new products, due to changes in technology, make up a large percentage of training reported to the MICT SETA on an annual basis. [GRI 404-2]
The Group continues to invest in the Management Development Programme (MDP), which supports the selected employees’ growth aspirations and overall development of management talent at all organisational levels. As part of the retention strategy, identified individuals are prioritised during annual salary reviews and earmarked for further training opportunities to embed the knowledge gained, through mentorship and other specialised interventions. [GRI 404-2]
Alviva’s training programmes are managed and conducted by selected accredited training providers with industry knowledge and the ability to fast-track the growth and development of learners. Relevant training records and other information are regularly submitted to the MICT SETA, the Department of Labour, the B-BBEE Commission and the Group’s B-BBEE ratings agency. The data is used by management for succession planning and sustainability planning. [GRI 404-2]
Succession planningAlviva views succession planning as an ongoing process that identifies the necessary competencies and then works to assess, develop and retain a talent pool of employees in order to ensure continuity of leadership for all critical positions. Since Alviva relies on its sales force to generate and increase revenue, steps have been taken to enhance the sourcing, screening and assessment of the sales workforce to determine the right competencies before recruitment decisions are made.
Employees in the Group are viewed as critical assets and key to meeting Alviva’s business objectives and delivering on its vision.
Senior managers in the Group have identified key employees in their respective business units whom they consider as potential successors and focused training programmes and accelerated development initiatives will be made available to them. They are earmarked to take up key positions, when opportunities become available.
112
ALV
IVA
HO
LDIN
GS
LIM
ITED
•
Inte
grat
ed a
nnua
l rep
ort 2
020
Skills developmentGroup companies have established skills development forums which are combined with employment equity forums and work according to a formal constitution. The constitution guides forum members on the policies and procedures of the Group as well as on equity issues and objectives. Fairness regarding training and development is critical as regards the input and functioning of these forums. [GRI 404-1]
The MDP has enhanced the skills of the candidates and established the basis for further study and improved qualifications. The majority of these employees are individuals from historically disadvantaged backgrounds. The MDP continues to broaden employees’ leadership skills and equip those in supervisory roles with the necessary skills to assume future management leadership roles in the Group and the industry at large. [GRI 404-2]
Alviva, in partnership with Microsoft, continues to offer computer-related training and encourages employees to up-skill themselves by taking advantage of an on-line Microsoft system for self-paced learning. [GRI 404-2]
Training investmentTotal training spend amounted to R17 million (2019: R26 million), with 1 915 (2019: 2 548) [GRI 401-1] employees receiving training during the reporting period. All training and training spend occurred in South Africa and resulted in a training spend of R9 118 (2019: R10 456) per employee trained. [GRI 401-1]
Training spend was 2% (2019: 3%) of the total payroll of R1 324 million (2019: R1 339 million), with an SDL spend of R13 million (2019: R13 million).
Detailed below is a summary of training initiatives undertaken during the year, also categorised by gender and race. [GRI 404-1]
Number of employees trained by employment category [GRI 401-1]
2020 2019
17%
20%
48%
1%
5%9%
1%
6%
20%
46%
18%
9%
Sustainability report continued
Top management
Skilled technical and academically qualified workers, junior management, supervisors, foremen and superintendents
Senior management
Professionally qualified and experienced specialists and mid-management
Unskilled and defined decision-making
Semi-skilled and discretionary decision-making
113
Ove
rvie
wG
over
nanc
eSu
stai
nabi
lity
Ann
ual fi
nanc
ial s
tate
men
tsSh
areh
olde
rs’ in
form
atio
n
Sustainability report continued
Number of employees trained by gender
Number of employees trained by race
DIVERSITY AND EQUAL OPPORTUNITY [GRI 405-1]
Alviva’s vision of transformation is translated into strategies and specific targets and plans which are monitored and governed by the Board. Transformation plans and targets are reflected in the leadership and other relevant employees’ performance goals.
The Board adopted a policy on diversity on 12 June 2018. The policy addresses gender and race diversity at Board level. Board diversity is disclosed on page 29.
The Group’s employment diversity profile is disclosed below.
2020 2019
Male
Female
39%
61%
40%
60%
African
White
Indian
Coloured
Foreign nationals
2020 2019
9%
49%
30%
10%
9%
51%
26%
12%
2%2%
114
ALV
IVA
HO
LDIN
GS
LIM
ITED
•
Inte
grat
ed a
nnua
l rep
ort 2
020
Employment equity profile by race [GRI 405-1]
During the reporting period, 64% of the staff complement was black (African, Indian and Coloured), excluding foreign nationals, compared to 64% in 2019. The Group’s aim is to align the race composition of employees to the demographics of the country as well as to achieve its employment equity targets.
Alviva has consulted with the respective skills and employment equity forums in the subsidiary companies on the development of employment equity plans, as required by the Employment Equity Act and Skills Development Act. These plans, aimed at creating diversity in the workplace, are monitored on an ongoing basis.
Gender diversity [GRI 102-8]
Female employment was consistent at 36% in 2020 (2019: 36%). [GRI 405-1]
2020 2019
African
White
Indian
Coloured
Foreign nationals
8%44%
33%
12%
3%
8%44%
31%
12%
5%
2020 2019
Male
Female
36%
64%
36%
64%
Sustainability report continued
115
Ove
rvie
wG
over
nanc
eSu
stai
nabi
lity
Ann
ual fi
nanc
ial s
tate
men
tsSh
areh
olde
rs’ in
form
atio
n
Sustainability report continued
Employment equity profile by race and genderAt the reporting date, black females constituted 26% (2019: 26%) and black males 41% (2019: 39%) of the workforce.
Employment by age group [GRI 401-1] [GRI 405-1]
During the reporting period, the spread of employment by age group showed that 34% (2019: 34%) young employees, under the age of 30, are in a developmental phase, with 57% (2019: 56%) of employees between the ages of 30 and 50 on a career path where succession training and planning occurs, and 9% (2019: 10%) of employees over 50 with the experience and expertise to impart on the younger generations.
African male
White male
Indian male
Coloured male
Male (foreign nationals)
African female
White female
Indian female
Coloured female
Female (foreign nationals)
0
500
1 000
1 500
2 000
2 500
3 000
3 500
4 000
2020
2019
922
643
768
321
177
132
44
106
257
156
827
582
756
325
166
92
23
98
243
145
2019 2020
2020 2019
Between 30 and 50
Under 30
Over 50
34%
10%
56%
34%
9%
57%
116
ALV
IVA
HO
LDIN
GS
LIM
ITED
•
Inte
grat
ed a
nnua
l rep
ort 2
020
Employment equity
Alviva has consulted with the respective skills and employment equity forums in the subsidiary companies on the development of employment equity plans, as required by the Employment Equity Act and Skills Development Act. These plans, aimed at creating diversity in the workplace, are monitored on an ongoing basis.
Group employment equity profile (permanent employees, excluding foreign nationals [GRI 405-1]
Number of employees by occupational levels [GRI 405-1]
The total number of employees in each of the following occupational levels are shown in the table below.
F2020 Male Female Foreign nationals
Occupational levels A C I W A C I W Male Female TOTAL
Top management 1 0 0 3 1 0 0 0 0 0 5
Senior management 11 10 19 110 14 7 10 49 4 1 235
Professionally qualified and experienced specialists and mid-management
61 47 51 216 44 21 26 102 18 4 590
Skilled technical and academically qualified workers, junior management, supervisors, foremen and superintendents
413 116 73 310 269 73 51 133 16 7 1 461
Semi-skilled and discretionary decision-making
156 40 10 50 125 36 10 15 7 1 450
Unskilled and defined decision-making
33 4 1 8 33 1 0 6 1 1 88
Total permanent 675 217 154 697 486 138 97 305 46 14 2 829
Fixed term employees 152 26 12 59 96 7 1 20 46 9 428
GRAND TOTAL 827 243 166 756 582 145 98 325 92 23 3 257
0
150
300
450
600
750
900
1 050
1 2002020 ACI
2020 WHITE
2019 ACI
2019 WHITE
Unskilled WorkersSemi-SkilledJunior ManagementMiddle ManagementTop and Senior Management
251
314
67
1 060
462
373
72 508
%
157 162
73
250
443
318
995
65
377
1472
2019 White
2019 ACI
2020 White
2020 ACI
Sustainability report continued
117
Ove
rvie
wG
over
nanc
eSu
stai
nabi
lity
Ann
ual fi
nanc
ial s
tate
men
tsSh
areh
olde
rs’ in
form
atio
n
Sustainability report continued
NON-DISCRIMINATION [GRI 406-1]
UNGC – Principle 1: Support and respect the protection of internationally proclaimed human rights.
UNGC – Principle 2: Make sure that they are not complicit in human rights abuses.
Alviva and its Board strive to eliminate any forms of discrimination through leading by example.
Experience and psychology prove that discrimination tends to be driven by one of three elements being hatred, fear derived from the unknown or the threat of being inferior.
The Board supports a multicultural and multiracial work environment which respects people for who they are, where they come from and also the insights that each employee is able to offer to the Group. No opinion or point of departure is discriminated against or dismissed without due consideration being granted. The HR department is under a strict mandate from the Board to actively and diligently search across all levels of employment for suitable candidates as vacancies arise without any preconceived or mandated agendas other than to find the right person for the vacancy, with due regard to the employment equity targets for the Group.
The Alviva Board subscribes to a Human Rights Policy, which was adopted during 2018.
Management is not aware of any material incidents of discrimination reported during the reporting period.
FREEDOM OF ASSOCIATION AND COLLECTIVE BARGAINING [GRI 407-1] Employees have the right to belong to collective bargaining associations, which are recognised according to clearly defined criteria, and recognised when they are sufficiently representative or represent the majority of the workforce. Several workplace forums have been established within the Group to enhance communication and develop relationships between both management and labour representatives. Regular consultation and consultation with representatives take place on relevant issues that affect the majority of the workforce. [GRI 102-41]
No operations were identified in which the right to exercise freedom of association and collective bargaining may be a significant risk.
CHILD LABOUR [GRI 408-1]
FORCED OR COMPULSORY LABOUR [GRI 409-1]
UNGC – Principle 4: The elimination of all forms of forced and compulsory labour.
UNGC – Principle 5: The effective abolition of child labour.
Alviva does not condone or tolerate any underaged or compulsory labour practices within the Group. The Board will summarily reject and refuse further business endeavours with any supplier or business partner if it were to be discovered that such labour practices are in place within their respective businesses.
The Group strictly supports labour practices which are aligned with all relevant legislation and best practices including the Labour Relations Act, the Employment Equity Act, the Skills Development Act and the Basic Conditions of Employment Act.
118
ALV
IVA
HO
LDIN
GS
LIM
ITED
•
Inte
grat
ed a
nnua
l rep
ort 2
020
SECURITY PRACTICES [GRI 410-1]
Monthly security risk assessments are conducted on all security practices within the Group in order to ensure that employees, customers and service providers are able to conduct operations in an environment that is safe and without risk. All permanent security personnel as well as third-party security personnel undergo strict induction training where security policies and procedures, as well as occupational health and safety policies, are presented and explained in detail. Training is conducted in conjunction with the Group’s HR department where the aspects of Alviva’s human rights policies are explained.
Third-party security service providers are specifically trained on the requirements of the various posts which he or she will manage. Section 37 of the OHS Act is applicable to the third-party service provider management.
HUMAN RIGHTS ASSESSMENT [GRI 412-1] [GRI 414-2]
Alviva respects human rights and is committed to fair labour practices as enshrined in the Constitution of the Republic of South Africa, the Labour Relations Act of 1995 and the Employment Equity Act of 1998, as amended. All suppliers and contractors doing business with Alviva are expected to comply with guidelines of the International Labour Organisation and local legislations.
No operations have been subject to human rights reviews or impact assessments.
LOCAL COMMUNITIES [GRI 413-1]
Alviva sees its employees as key stakeholders and strives to create a safe, humane, ethical work environment. As employees are recruited from the local communities where Alviva’s operations are based, this approach extends to the communities in which the Group operates. The Group’s environmental and social responsibility principles guide its daily decision-making and govern how it enters, operates in and exits from a community.
With the dearth of skills in South Africa, Alviva’s initiatives focus on skills development with a view to enabling individuals to enter the workplace, particularly in the industry in which the Group operates. Data has not been compiled on the percentage of operations with implemented local community engagement, impact assessments and development programmes and may be addressed in the future.
None of the operations in the Alviva Group have a significant potential or actual negative impact on local communities.
Corporate social initiatives and investments [GRI 203-1]
Corporate social initiatives and investments are central to realising meaningful transformation in South Africa. Alviva’s strategy aligns its social investment programme with its core business objectives and imperatives. Alviva seeks to create partnerships with beneficiaries, government and non-governmental organisations to bring about long-term sustainable development.
Alviva views socio-economic development as an integral part of its commitment to sustainable development and a foundation for branding and enhancing the Company’s reputation as a responsible corporate citizen and valued partner amongst communities in which it operates.
In the selection of projects, the Company’s key focus area continues to be the investment in education in South Africa. The impact of this strategy is far-reaching, touching both individual beneficiaries and the larger community in which it functions.
During the reporting period, Alviva’s contribution to investments and services that benefit local communities included the following:
Sustainability report continued
119
Ove
rvie
wG
over
nanc
eSu
stai
nabi
lity
Ann
ual fi
nanc
ial s
tate
men
tsSh
areh
olde
rs’ in
form
atio
n
Sustainability report continued
Food for Life
Contribution of ICT equipment to Food for Life. Food for Life’s mission is to eradicate hunger and malnutrition in South Africa. In its purest form, food has the innate ability to break down barriers and heal body, mind and soul. Recognising that the ultimate solution to the problem of hunger is the elimination of poverty, Food for Life not only provides direct food distribution services, but also addresses, through its affiliated programmes, diverse but related issues such as education, environmental health, sustainability and healthcare.
Karabo Centre for Mathematics, Science and Commerce
Financial assistance to assist with the comprehensive teaching of Mathematics and Physical Sciences to learners from under-resourced schools, career guidance and the facilitation of tertiary applications and bursaries for matric learners.
Kingsway Centre of Concern
Contribution of ICT equipment to Kingsway Centre of Concern. Over the past 30 years, the Kingsway Christian School, a community-based organisation, has provided education to children of the Zandspruit informal settlement, North-West Johannesburg, South Africa. Their motto of “rise up and shine” embodies the school and its children. The school pursues a standard of excellence to ensure that their children have a brighter future. The learners come from abusive and neglected homes as well as from stable, albeit very poor homes. The contribution was utilised in respect of the IT development of teachers and learners and to assist with on-line learning.
Kwa-Mahlobo Secondary School
Contribution of ICT tools that complement and enhance the Gauteng Department of Education’s paperless classroom rollout. Kwa-Mahlobo is a non-fee-paying secondary school based in the township of Meadowlands, Johannesburg, South Africa.
Maharishi Education for Invincibility Trust
IT equipment and repairs were contributed to the Maharishi Education for Invincibility Trust (“MEIT”), a division of the Maharishi Invincibility Institute. The Institute enriches the distance education learning experience and makes it complete through the provision of comprehensive support services, including work experience, infrastructure access, bridging programmes and self-development programmes.
Paarl Coding and Robotics Academy
Contribution of ICT Equipment to assist with the establishment of the academy to make the skills of coding and robotics available to the broader Paarl community.
TEARS Foundation
Contribution of ICT equipment to TEARS. Founded in 2012, TEARS is a registered NPO and PBO that uses technology innovatively in the scourge against domestic violence, sexual assault and child abuse.
TEARS is responsible for the sourcing and collating of a database comprised of a fully comprehensive network of services: medical, medico-legal, legal and psychological. The database is currently available throughout South Africa, for the assistance and support of survivors of rape and sexual abuse.
Tshimologong Precinct
Professional services, installation and maintenance of IT infrastructure over five years was provided and committed to in 2017 and continued during the reporting period. “Tshimologong Precinct”, from the seTswana word for “new beginnings”, Witwatersrand University, through its Johannesburg Centre for Software Engineering, has been driving an initiative to promote the creation of successful ICT start-ups. The “Digital Technology Innovation Zone” is established in a row of five buildings in Juta Street, Braamfontein, Johannesburg, South Africa, close to the university’s main campus. The Zone provides an exciting environment that attracts students and a broad spectrum of other residents of Johannesburg with an interest in digital technology innovation and entrepreneurship.
120
ALV
IVA
HO
LDIN
GS
LIM
ITED
•
Inte
grat
ed a
nnua
l rep
ort 2
020
Wasp Community Services
Contribution of ICT Equipment to WASP Community Service. WASP is a community-based organisation which conducts various community upliftment projects. Their mission is to provide support to widows, orphans, street children, pensioners and to those infected with and affected by HIV Aids within the community that have practical needs and do not have the means to fulfil these needs. Current projects include the provision of food, clothing and extra tuition for underprivileged school children. Future projects include basic computer training, counselling and career guidance to the community.
SUPPLIER SOCIAL ASSESSMENT [GRI 414-1] [GRI 414-2]
The Group has not conducted supplier assessments for impact on society and, therefore, the percentage of existing and/or new suppliers that were screened for impacts on society and potential significant negative impacts on society in the supply-chain are not available. In the future, Alviva may consider implementing a formal supplier assessment process to be in a position to effectively report on suppliers and contractors that have undergone screening on social assessments and actions taken.
PUBLIC POLICY [GRI 415-1]
During the reporting period, the Group did not participate in public policy development and lobbying. The Group does not contribute to any political parties and no such contributions were made in the reporting period.
MARKETING AND LABELLING [GRI 417-1]
The Consumer Protection Act promotes a fair, accessible and sustainable marketplace for consumer products and services. The Act entrenches national norms and standards on consumer protection and provides for improved standards of consumer information. The Act prohibits certain unfair marketing and business practices and promotes responsible consumer behaviour.
Warranty policies are in place for Alviva’s branded products, which are owned by the Company, and assurance is gained from external suppliers where products are purchased in, where any returns revert back to the external supplier. The terms of trading and the trading agreements are reviewed and aligned with the requirements of the Act. As far as imported products are concerned, the Group ensures that controls around quality exist at the source.
The businesses in the Group provide labelling and product information in compliance with local regulations.
Appropriate measures are introduced to ensure that the information or labelling is adequate from a marketing, safety or regulatory perspective.
CUSTOMER PRIVACY [GRI 418-1]
There were no substantiated complaints regarding breaches of customer privacy during the reporting period.
The PoPI Policy, applicable to all Group subsidiaries, was adopted by the Board on 12 June 2018.
Sustainability report continued
121
Ove
rvie
wG
over
nanc
eSu
stai
nabi
lity
Ann
ual fi
nanc
ial s
tate
men
tsSh
areh
olde
rs’ in
form
atio
n
Sustainability report continued
SOCIO-ECONOMIC COMPLIANCE [GRI 419-1]
There were no significant fines or non-monetary sanction for non-compliance with laws and regulations brought against Alviva or any of its subsidiaries during the reporting period, including significant fines relating to non-compliance matters concerning the provision and use of products and services provided by the Group.
MANAGEMENT APPROACH: GRIEVANCES [GRI 103-2]
The Group’s subsidiaries have formal grievance mechanisms, consisting of procedures, roles and rules for receiving complaints and providing remedies. Newly acquired subsidiaries are in the process of adopting the Group’s policies.
Management is not aware of any grievances concerning the Group’s labour practices or any negative impacts on human rights and society that have been filed through formal grievance mechanisms.
BROAD-BASED BLACK ECONOMIC EMPOWERMENT (B-BBEE)
SCORECARDIn September 2020, Alviva was recognised as a Level 1 (2019: Level 1) contributor in accordance with the B-BBEE amended ICT Codes, gazetted on 7 November 2016, following an independent verification by EmpowerLogic Proprietary Limited. The Group scored 120,05 points (2019: 120,20 points) with a procurement recognition level of 135% and classification as an empowering supplier.
OwnershipBlack equity ownership in Alviva accumulated 25,00 (2019: 24,69) points, with exercisable voting rights by black people at 51,00% (2019: 34,95%); black women voting rights of 41,93% (2019: 27,42%); black economic interest of 51,00% (2019: 34,94%); and black women economic interest of 41,93% (2019: 27,42%).
Management controlManagement control comprises Board representation and other executive management as well as employment equity in senior, middle and junior management and people living with disabilities as a percentage of all employees. Alviva prioritises the advancement of historically disadvantaged groups and promotes the achievement of employment equity objectives in its recruitment and employee development policies. The status of employment equity targets is reported to the Department of Labour on an annual basis. Career advancement and skills development programmes are aligned with each business’ employment equity targets.
Alviva achieved a score of 15,24 points (2019: 14,37 points), an improvement over the prior year. Black female representation at Board level was maintained at 42,85% (2019: 42,85%).
Black employees in senior, middle and junior management constituted 47,40% (2019: 46,80%) of Alviva’s employee base with black female representation at those management levels constituting 17,80% (2019: 17,30%).
Skills developmentAll companies in the Group have established skills development forums which are combined with the employment equity forums and consultation regarding workplace skills plans and progress reports is channelled through the forums.
The Alviva Group conducts an MDP, and this programme is presented by an accredited training provider.
Several technical skills training initiatives are continuously being conducted within Alviva companies to ensure expertise levels are kept up to date. Individual development plans have also been developed for specific employees or employee groupings to assist and drive personal development as well as to drive the succession planning within the Group.
The Group’s latest skills development plan was submitted to the MICT SETA. Skills development spend amounted to R17,0 million (2019: R26,6 million), with 86,19% (2019: 84,62%) being in respect of black staff skills development spend. The number of points awarded in respect of skills development on the scorecard was 23,18 points (2019: 24,20 points).
122
ALV
IVA
HO
LDIN
GS
LIM
ITED
•
Inte
grat
ed a
nnua
l rep
ort 2
020
Supplier and enterprise developmentDuring the reporting period Alviva’s preferential procurement spend amounted to R5,6 billion (2019: R6,4 billion). [GRI 201-1] [GRI 204-1]
Preferential procurement spend with suppliers classified in terms of their B-BBEE status
Supplier development seeks to promote the development, sustainability and financial and operational independence of EME and QSE beneficiaries. 94% of contributions were made in the form of standard loans and 6% were interest-free with no security requirements.
Enterprise development seeks to promote the development of black-owned EMEs and QSEs through contributions that add to the further development, sustainability and financial and operational independence of these beneficiaries. 92% of contributions were made in the form of standard loans and 8% were interest-free with no security requirements.
Alviva’s B-BBEE scorecard for 2020 reflected 44,63 points (2019: 44,94 points) in respect of enterprise and supplier development.
Socio-economic developmentThe socio-economic development initiatives are managed by each subsidiary business individually, under the umbrella of a Group framework of responsible investment. The Group’s approach to its socio-economic development initiatives has as its main objective the broadening of skills and education in the ICT industry, specifically targeting schools and educational facilities, professional and technical development, and learnerships.
Socio-economic development spend of R4,4 million (2019: R7,4 million) as a percentage of net profit after tax was at a verified level of 3,2% (2019: 1,9%), resulting in 12 points (2019: 12 points) on the scorecard. [GRI 201-1]
Level 1
Level 2
Level 3
Level 4
Level 5
Level 6
Level 7
Level 8
Non-compliant
No status
2020 2019
51%
1%
1%1% 11%
8%
15%2%
10%55%
13%
14%2%
7%
2%
1%
1%
2%
3%
Sustainability report continued
123
Ove
rvie
wG
over
nanc
eSu
stai
nabi
lity
Ann
ual fi
nanc
ial s
tate
men
tsSh
areh
olde
rs’ in
form
atio
n
Sustainability report continued
AWARDS AND CERTIFICATIONSThe following awards and certifications were received by companies within the Group during the reporting period.
AXIZ
Awards � CONTEXT Channelwatch – Distributor of the Year 2019
� CONTEXT Channelwatch – Distributor of the Year for Customer Service 2019
� CONTEXT Channelwatch – Distributor of the Year for Best Retail Partner 2019
Certifications � ISO 9001:2015 Quality Management System Certification
At Axiz, the technical division has been ISO 9001:2015 (Quality Management) certified.
DATACENTRIX
Awards � BeyondTrust Implementation Partner of the Year 2019 for EMEIA
� Veeam Software Best Subscription Partner 2019 for Africa
� HPE Storage Partner of the Year; Hybrid IT Platinum Partner of the Year; Hybrid IT Pre-Sales Ambassador of the Year; Pointnext Services Delivery Partner of the Year
� Aruba Elite Partner of the Year; Aruba Distinguished Partner Architect of the Year
� HP Inc. Partner First Printing Services Sales Partner of the Year 2019; Executive of the Year 2019 – James Scott; PC Platinum Partner of the Year 2019 (second consecutive year); Print Platinum Partner of the Year 2019
� Aruba Over-Achievement Award 2019
� Citrix SD-WAN Partner of the Year Award
� Aruba Over-Achievement Award 2019
� Citrix SD-WAN Partner of the Year Award
� Lenovo Data Centre Group (DCG) Platinum Partner of the Year for South Africa and the Southern African Development Community (SADC) Region
� Mimecast Top Performing Partner of the Year and Most Improved Partner 2018
� Tenable Gold Level Partner Status
� Huawei IT Certified Service Partner (CSP) 4-Stars
� Lenovo Authorised Service Partner (ASP)
� Nutanix Master Partner Status
� Veritas Force Program Platinum Partner Recertification
� UiPath Silver Business Partner
124
ALV
IVA
HO
LDIN
GS
LIM
ITED
•
Inte
grat
ed a
nnua
l rep
ort 2
020
Certifications � Payment Card Industry Data Security Standard (PCI DSS) certification (Managed Services division)
� Private Security Industry Regulatory Authority (PSiRA) Certification
� Level one broad-based black economic empowerment status
� Level 6 CIDB (Electrical Engineering Works and Mechanical Engineering); and Level 1 CIDB (General Building; and Civil Engineering) recertification (Infrasol)
� ISO 9001:2015 – Quality Management System Certification
� ISO 14001:2015 – Environmental Management System Certification
� ISO 27001:2013 – Information Security Management System (ISMS)
� OHSAS 18001:2007 – Occupational Health and Safety Assessment Series
PINNACLE
Certifications � ISO 9001:2015 – Quality Management System Certification
� ISO 14001:2015 – Environmental Management System Certification
At Pinnacle, all technical divisions have been ISO 9001:2015 (Quality Management) and ISO 14001:2015 (Environmental Management) certified. Everything from the production line all the way through to implementation, repairs and warranty as well as the call centre, have been ISO approved for quality and environmental care.
SOLAREFF
Certifications � ISO 9001: 2015 – Quality Management System Certification
� PV Green Card Certified (SAPVIA endorsed programme to ensure the quality and safety of PV)
� P4 Platform Quality Assurance Programme (independent system that scores contractors on performance, knowledge and best practice to promote good practice in the PV sector)
Sustainability report continued
125
Ove
rvie
wG
over
nanc
eSu
stai
nabi
lity
Ann
ual fi
nanc
ial s
tate
men
tsSh
areh
olde
rs’ in
form
atio
n
ANNUAL FINANCIAL STATEMENTS
126
ALV
IVA
HO
LDIN
GS
LIM
ITED
•
Inte
grat
ed a
nnua
l rep
ort 2
020
LAWS OF INCORPORATION AND MOIAlviva Holdings Limited has been established and incorporated in compliance with the provisions of the Companies Act and operates in conformity with its MOI.
LEVEL OF ASSURANCEThese annual financial statements have been audited in compliance with the applicable requirements of the Companies Act.
AUDITORSSNG Grant Thornton
PREPARERRD Lyon CA, CFO
PUBLISHED28 September 2020
The Company Secretary of Alviva Holdings Limited certifies that in terms of section 88(2) of the Companies Act, the Company has lodged with the Companies and Intellectual Property Commission of South Africa all such returns and notices as are required of a public company in terms of this Act and that all such returns are true, correct and up to date in respect of the reporting period ended 30 June 2020.
Ms SL Grobler CA(SA) Postal address: Physical address: Company Secretary PO Box 483 The Summit Halfway House 269, 16th Road 28 September 2020 1685 Randjespark Midrand 1685
Annual financial statements
Certificate by Company Secretary
127
Ove
rvie
wG
over
nanc
eSu
stai
nabi
lity
Ann
ual fi
nanc
ial s
tate
men
tsSh
areh
olde
rs’ in
form
atio
n
The directors, whose names are stated below, hereby confirm that –
(a) the financial statements set out on pages 150 to 268, fairly present in all material respects the financial position, financial performance and cash flows of Alviva Holdings Limited in terms of IFRS;
(b) no facts have been omitted or untrue statements made that would make the financial statements false or misleading;
(c) internal financial controls have been put in place to ensure that material information relating to Alviva Holdings Limited and its consolidated subsidiaries have been provided to effectively prepare the financial statements of Alviva Holdings Limited; and
(d) the internal financial controls are adequate and effective and can be relied upon in compiling the financial statements, having fulfilled our role and function within the combined assurance model pursuant to principle 15 of the King Code. Where we are not satisfied, we have disclosed to the Audit and Risk Committee and the auditors the deficiencies in design and operational effectiveness of the internal financial controls and any fraud that involves directors, and have taken the necessary remedial action.
Signed by the CEO and the CFO
P Spies RD Lyon, CA
CEO CFO
Statement by the CEO and CFOin compliance with paragraph 3.84(k) of the JSE Listings Requirements
128
ALV
IVA
HO
LDIN
GS
LIM
ITED
•
Inte
grat
ed a
nnua
l rep
ort 2
020
The directors are required in terms of the Companies Act to maintain adequate accounting records and are responsible for the content and integrity of the financial statements and related financial information included in this report. It is their responsibility to ensure that the consolidated and separate financial statements fairly present the state of affairs of the Group and Company as at the reporting date and the results of its operations and cash flows for the period then ended, in conformity with IFRS.
The consolidated and separate financial statements have been prepared in accordance with IFRS, the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee, the Financial Reporting Pronouncements as issued by the Financial Reporting Standards Council, the Listings Requirements of the JSE Limited and in the manner required by the Companies Act and are based on appropriate accounting policies consistently applied throughout the Group and supported by reasonable and prudent judgements and estimates.
The directors acknowledge that they are ultimately responsible for the system of internal financial control established by the Group and place considerable importance on maintaining a strong internal financial control environment. To enable the directors to meet these responsibilities, the Board sets standards for internal financial control aimed at reducing the risk of error or loss in a cost-effective manner. These standards include the proper delegation of responsibilities within a clearly defined framework, effective accounting procedures and adequate segregation of duties in order to ensure an acceptable level of risk. The internal financial controls are monitored throughout the Group and all employees are required to maintain the highest ethical standards in ensuring that the Group’s business is conducted in a manner that in all reasonable circumstances is above reproach.
The focus of risk management in the Group is on identifying, assessing, managing and monitoring all known forms of risk across the Group. While operating risk cannot be fully eliminated, the Group endeavours to minimise it by ensuring that appropriate infrastructure, controls, systems and ethical behaviour are applied and managed within predetermined procedures and constraints.
The directors are of the opinion, based on the information and explanations given by management, that the system of internal financial control provides reasonable assurance that the financial records may be relied on for the preparation of the consolidated and separate financial statements. However, any system of internal financial control can provide only reasonable, and not absolute, assurance against material misstatement or loss.
The directors have reviewed the Group and Company’s cash flow forecasts for the next 12 months from date of approval of the consolidated and separate financial statements and, in the light of this review, taking into account the impact of the COVID-19 pandemic in South Africa and the current financial position, they are satisfied that the Group and the Company have, or have access to, adequate resources to continue in operational existence for the foreseeable future.
The directors are not aware of any events after the reporting period that have a material impact on the Group and Company’s cash flow forecasts for the next 12 months that have not already been incorporated into these forecasts.
The external auditors are responsible for independently examining and reporting on the consolidated and separate financial statements and their report is presented on pages 145 to 149.
The consolidated and separate financial statements for the year ended 30 June 2020, as set out in pages 150 to 268, were approved by the Board on 25 September 2020 and are signed on their behalf by:
A Tugendhaft P Spies RD Lyon, CA
Chairperson CEO CFO
Directors’ responsibility statement and approval
129
Ove
rvie
wG
over
nanc
eSu
stai
nabi
lity
Ann
ual fi
nanc
ial s
tate
men
tsSh
areh
olde
rs’ in
form
atio
n
Audit and Risk Committee reportfor the year ended 30 June 2020
The Alviva Audit and Risk Committee (“the Committee”) is constituted as a statutory sub-committee of the Board, in line with the JSE Listings Requirements, and reports in compliance with section 94(7)(f ) of the Companies Act.
Although not a statutory requirement, the Committee has also fulfilled its duties in terms of the requirements of King IV™. The Committee conducted its work in accordance with the Audit and Risk Committee Charter, which was reviewed and updated during the reporting period and approved by the Board.
The quality, integrity and reliability of audit and risk-related issues of the Group are delegated to the Committee to assist the Board in discharging its duties relating to the safeguarding of assets, the operation of adequate systems, control processes and the preparation of accurate financial reporting statements in compliance with all applicable legal requirements and accounting standards. Ensuring good corporate governance in the Group is also a mandate assigned to it by the Board.
DUTIES ASSIGNED BY THE BOARDIn addition to the statutory requirements of the Companies Act and King IV™, the Board assigned additional functions for the Committee to perform. Duties were mandated by the Board-approved Committee Charter and included the following key actions:
� Ensured that the appointment of the external auditors complied with the provisions of the Companies Act and any other relevant legislation, including auditor independence, fees payable and the nature and extent of any non-audit services;
� Examined the reliability and accuracy of the financial information presented to all users of such information, including the Company’s going concern assertion;
� Appointed the Chief Audit Executive, approved and monitored Internal Audit’s work plans and performance, the execution thereof and the results of work performed;
� Formed an integral component of the risk management process and as such reviewed the risk management process, resultant risk registers and action plans to mitigate all key risks. Key risks involved strategic risks, liquidity risks, financial reporting risks, fraud risks, operational risks, risks associated with information technology, legal and compliance risks and internal financial controls;
� Reported to the Board on the Committee’s activities and made recommendations to the Board concerning the adequacy and effectiveness of the risk policies, procedures, practices, controls or any other matters arising from the above responsibilities;
� Oversaw integrated reporting and reviewed all factors and risks that may impact on the integrity of the integrated annual report;
� Ensured that a combined assurance model is applied to provide a coordinated approach to all assurance activities;
� Monitored relationships between all assurance providers and monitored results and actions taken to address any deficiencies;
� Satisfied itself of the appropriateness, expertise, resources and experience of Alviva’s finance function, and specifically the CFO;
� Ensured that appropriate financial reporting procedures exist and are working;
� Assessed the information regarding the audit firm and designated audit partner provided by the external auditors, prior to recommending them for reappointment;
� Considered the most current information provided in respect of the JSE Proactive Monitoring Process;
� Monitored Alviva’s compliance with the recommendations of King IV™;
� Reviewed IT and fraud risks; and
� In addition to the above duties, the Committee reviewed the following:
� Integrated annual report;
� Interim report; and
� Provisional financial results and final profit statements.
130
ALV
IVA
HO
LDIN
GS
LIM
ITED
•
Inte
grat
ed a
nnua
l rep
ort 2
020
COMMITTEE ACTIVITIES AND DECISIONS TAKEN THROUGH THE REPORTING PERIODThe Committee has met periodically to consider and to act upon its statutory duties and functions and the Board confirms that the Committee has during the reporting period performed the duties mandated to it by the Board.
AUDIT
External audit � In terms of section 90(1) of the Companies Act, the Committee had nominated SNG Grant Thornton as the independent auditors and Mr A Govender, a registered independent auditor, as the designated partner, for appointment for the 2020 audit. This appointment was approved by shareholders at the AGM on 21 November 2019. The Committee has satisfied itself through enquiry that the auditor of Alviva is independent, as defined by the Companies Act, and as per the standards stipulated by the auditing profession. Requisite assurance was sought and provided by the auditor that the internal governance processes within the audit firm support and demonstrate the claim to independence.
� The Committee, in consultation with executive management, agreed to the engagement letter, terms, nature and scope of the audit function and audit plan for the 2020 reporting period. The budgeted fee was considered for appropriateness and then approved. The final adjusted fee will be agreed on completion of the audit. Audit fees are disclosed in note 27 of the financial statements.
� The Committee considers and approves the non-audit services rendered by the external auditor. The external auditors did not render any non-audit services during the reporting period. [GRI 405-1]
� Meetings were held with the auditor where executive management was not present, and no matters of concern were raised. In terms of the Committee Charter, the external auditors have unrestricted access to the Chairperson of the Committee.
� SNG Grant Thornton has been Alviva’s auditors since 2015, with Mr A Govender being appointed as the designated auditor in 2019. The attendant risk of familiarity between management and the external auditors is mitigated through various factors, which include but are not limited to:
� balancing the benefits of maximising the knowledge gained through the utilisation of the same audit and management teams and ensuring independence and avoidance where knowledge of processes and procedures create an environment where aspects are taken for granted;
� rotation of management and partners, not only from a statutory perspective, but also on an ongoing basis;
� the rotation of Mr A Philippou after serving as designated auditor for five years and the appointment of Mr A Govender as the designated audit partner at the AGM held on 21 November 2019;
� ongoing independence evaluations; and
� rotation of the Engagement Quality Control Reviewer.
� As gazetted on 5 June 2017, mandatory audit firm rotation will be effective for reporting periods commencing on or after 1 April 2023. An audit firm shall not serve as the appointed auditor of a company for more than ten consecutive reporting periods. The audit firm will only be eligible for reappointment as the auditor after the expiry of at least five reporting periods.
Audit and Risk Committee report continued
for the year ended 30 June 2020
131
Ove
rvie
wG
over
nanc
eSu
stai
nabi
lity
Ann
ual fi
nanc
ial s
tate
men
tsSh
areh
olde
rs’ in
form
atio
n
Audit and Risk Committee report continued
for the year ended 30 June 2020
AUDIT (continued)
External audit (continued)
� In light of the above and because Mr Philippou had reached the end of his five-year tenure, the Committee took the decision to conduct a selection process for external auditors. A request for proposal was distributed to six large- and mid-tier audit firms in August 2019, and four of the firms elected to submit proposals. The Committee assessed the proposals received, as required in paragraph 22.15(h) of the JSE Listings Requirements. The Committee has resolved to re-appoint, for approval at the AGM to be held on 18 November 2020, SNG Grant Thornton as the external auditor, and Mr A Govender as the designated auditor, for the 2021 reporting period. The Committee confirms that the auditor and designated auditor are accredited by the JSE Limited, and was satisfied with the quality of the external audit. [GRI 405-1]
� Significant matters that the Committee considered included:
� the impact of the COVID-19 pandemic in terms of significant judgements and estimates that affect the application of the Group’s accounting policies;
� the adoption of IFRS 16: Leases;
� fair valuation of assets and liabilities in terms of IFRS 3: Business Combinations; and
� the impairment of goodwill.
The Committee relied on assurance obtained from the detailed audit procedures performed, specifically on the above matters, by the external auditors.
External IFRS consultants assisted management with the application of the above.
Internal audit � The Committee confirms that internal audit work assisted them in fulfilling their mandate.
� The Committee assessed the independence of the internal audit function, Group Internal Audit’s compliance with the audit standards of the Institute of Internal Auditors and the effectiveness of the internal audit function. Internal Audit’s independence was also assessed as part of an independent quality assurance review, which was performed during 2018. Both the Committee assessment and the independent review confirmed Internal Audit’s independence.
� During 2020, it was confirmed that Internal Audit conforms to the International Standards for the Professional Practice of Internal Auditing and guidance by King IV™. [GRI 102-56]
� The Internal Audit Charter was reviewed, updated and approved by the Committee for recommendation to the Board. Internal Audit’s mandate is governed by the Internal Audit Charter, which was approved during 2020.
� Both Internal Audit’s mandate and activities were aligned to King IV™ and reviewed during 2020. Internal Audit’s execution of duties was guided by the three-year risk-based rolling audit plan as approved by the Committee.
� The Committee oversaw the cooperation between Internal Audit and other assurance providers, particularly the external auditors, as part of the Combined Assurance Model.
� In line with the Internal Audit Charter, to ensure independence, Internal Audit has direct access to the Committee, primarily through its Chairperson. The Committee met with the CAE at regular intervals throughout the reporting period without management being present, where audit results, challenges and possible concerns were discussed.
� During the reporting period there had been internal audit coverage in the key risk areas of the Group. The internal audit process did not highlight any breakdowns in internal control that are known to have a material impact on the Group’s performance and achievement of objectives during the reporting period.
� The Committee reviewed the Internal Audit rating methodology and dispute escalation process and deemed it to be satisfactory.
� The Committee confirmed its satisfaction with the effectiveness of the CAE and the arrangement for internal audit.
132
ALV
IVA
HO
LDIN
GS
LIM
ITED
•
Inte
grat
ed a
nnua
l rep
ort 2
020
AUDIT (continued)
Internal control � The Group maintains systems of internal control, which include financial, operational and compliance controls.
� The Committee is responsible for reviewing the functioning of the internal control system, the reliability and accuracy of the financial information provided by management as well as that provided for dissemination to other users of financial information. In addition, it reviews whether the Group should continue to use the services of the current external auditors, any accounting or auditing concerns identified as a result of the external audit, the Group’s compliance with legal and regulatory provisions, its MOI, Code of Conduct and by-laws.
� The Board is accountable for establishing appropriate risk and control policies. Executive management is responsible for monitoring, reviewing and communicating these controls and policies through the organisation. Corrective actions are taken to address control deficiencies and other opportunities for improving the systems, as they are identified.
� All processes have been in place for the reporting period and up to the date of the approval of the financial statements and the directors are not aware of any known material breakdown in the functioning of the internal financial controls that has occurred during the reporting period to render the control environment ineffective.
� The Committee assured itself of the internal financial controls through the integrated reporting model and, specifically, reports from both the internal and external auditors. The independent assurance, which was received during the reporting period, formed the basis for reporting to the Board on the reliability thereof.
� The Group’s overall system of internal control remains adequate and no significant deficiencies in the design, implementation or execution of internal financial controls were identified.
REPORTING
Evaluation of the CFO, finance function and financial reporting
� The Committee confirms that it has satisfied itself of the appropriateness of the expertise and experience of Mr RD Lyon CA, CFO of the Group.
� The Committee has considered, and has satisfied itself of, the appropriateness of the expertise and adequacy of resources of the finance function and experience of the senior members of management responsible for the finance function.
� The Committee has established that the Group has appropriate financial reporting procedures in place and that those procedures are operating and operated satisfactorily during the reporting period.
� The Committee is satisfied that all entities in the Group are considered and included in the consolidated financial statements.
Financial statements and accounting policies
� The Committee has reviewed the accounting policies and the financial statements of the Group and the Company. It is satisfied that they are appropriate and comply with International Financial Reporting Standards. There has been no change in the accounting policies, except for the adoption of IFRS 16: Leases. The adoption of the changes to accounting policies has been reviewed by the Committee.
� The Committee and the Board are confident that they have taken and continue to take all the necessary steps to execute their responsibilities in terms of the Companies Act and the principles of good governance as contemplated in King IV™.
� The Committee fulfilled its mandate and recommended the financial statements for the year ended 30 June 2020 for approval to the Board. The Board approved the financial statements on 25 September 2020 and the financial statements will be open for discussion at the AGM.
Audit and Risk Committee report continued
for the year ended 30 June 2020
133
Ove
rvie
wG
over
nanc
eSu
stai
nabi
lity
Ann
ual fi
nanc
ial s
tate
men
tsSh
areh
olde
rs’ in
form
atio
n
Audit and Risk Committee report continued
for the year ended 30 June 2020
REPORTING (continued)
Going concern � Management presented the results of the Company’s and the Group’s solvency and liquidity tests at each of the Committee’s meetings. The Committee satisfied itself that the Company and the Group have sufficient assets to carry on with operations and that the Group was both solvent and liquid. These results were reported at each of the Board meetings.
� The Committee monitored liquidity throughout the national lockdown and thereafter. Further details on the actions taken relating to the COVID-19 pandemic are discussed in note 5.
Integrated reporting process
The Committee oversaw the integrated reporting process in accordance with its terms of reference and, in particular, the Committee:
� regarded all factors and risks that may impact on the integrity of the integrated report, including factors that may predispose management to present a misleading picture, significant judgements and reporting decisions made, as well as any evidence that brings into question previously published information and forward-looking statements or information;
� reviewed the financial statements;
� reviewed the disclosure of material sustainability issues in the sustainability report and in the integrated annual report to ensure that it is reliable and does not conflict with the financial information;
� recommended the integrated annual report for approval by the Board; and
� reviewed the content of the summarised financial information to determine if it provides a balanced view.
JSE Proactive Monitoring Panel and JSE proposals
� The Committee has considered the 2019 JSE Report on Proactive Monitoring, issued on 18 February 2020, including Annexure 3 which includes Combined Findings of the JSE Proactive Monitoring of Financial Statements: Reviews done 2011 to 2018 issued on 11 October 2019, Activities of the Financial Reporting Investigation Panel in 2019 issued on 22 October 2019 and Final Findings of the JSE’s Thematic Review for Compliance with IFRS 9 and 15 issued on 6 November 2019, and has taken the appropriate action to apply the findings.
� The Committee noted the JSE proposals as regards amendments to the JSE Listings Requirements relating to the reporting of various performance measures including alternative or non-IFRS measures and ratios.
RISK
Risk management
� The Board assigned oversight of the Group’s risk management function to the Committee.
� In terms of King IV™, the Committee has satisfied itself of the effectiveness of the risk management function. [GRI 102-30]
� The total risk management process was reviewed. A decision was taken to implement software to assist in making the process of risk management more efficient, automated and digital. The project implementation is in progress and expected to be concluded during the coming reporting period. This further enables the business to integrate risk into daily operations.
� The Committee reviewed the annual risk maturity assessment presented by Internal Audit and was satisfied with the results in the reporting period.
� Standing Committee agenda items included risks associated with IT, financial reporting, liquidity risks, fraud, legal and regulatory compliance, litigation, insurance, reputation issues, ethics and health and safety compliance.
� Disclosure in respect of the risk management framework and key risks identified, together with mitigating strategies, are disclosed on pages 51 to 56 of the integrated annual report.
134
ALV
IVA
HO
LDIN
GS
LIM
ITED
•
Inte
grat
ed a
nnua
l rep
ort 2
020
Audit and Risk Committee report continued
for the year ended 30 June 2020
RISK (continued)
Fraud prevention and whistle-blowing
� The Code of Conduct is intended to assist individuals, who believe they have discovered serious malpractice or impropriety, to take the appropriate action. The Committee is assured that these arrangements provide for proportionate and independent investigation of matters reported and for suitable follow-up action.
� All reports to the anonymous whistle–blowing hotline (Ethics Line) were reported to the Committee via the Internal Audit function.
� The Committee reviewed summary reports of all defalcations throughout the Group as well as management actions to mitigate any fraud risks.
� The Committee is satisfied that management had taken appropriate actions to address fraud risks, which became evident as a result of these reports, and deemed management’s anti-fraud management and controls to be sufficient.
� It is confirmed that the Ethics Line remained operational and no major concerns were raised throughout the reporting period. The Committee is satisfied that instances of whistle-blowing were appropriately dealt with during the reporting period.
Technology and Information
� The Board assigned oversight of technology and information governance, and the risks associated therewith, to the Committee.
� The Committee accepts that technology has a fundamental impact on the way in which business is conducted and businesses are measured and, to keep the Committee abreast of the technology and information governance and IT risk management throughout the Group, the CIO presented a report to the Committee in respect of the reporting period. A decision was taken by the Committee that the CIO will present a report to the Committee bi-annually.
� The Committee noted the following from the IT risk presentation at the reporting date:
� The IT strategy for the Group is in place with the main drivers of the strategy being business need, appropriateness, scaleability, support and commercial viability.
� The continued implementation of a robust and updated IT infrastructure for the Group is in process;
� A King IV™ gap analysis was completed for the Group and gaps pertaining to IT were identified. The CIO presented the IT governance areas and governance structures that had been established to ensure ongoing management of IT governance ;
� A Security Remediation Report was presented, indicating that the Group was showing continued improvement and that various initiatives were in place to further improve and protect the Group’s information in the fast-changing cyber environment;
� The IT risk register detailed the top priority IT risks and mitigating strategies;
� A schedule of key audit findings and how these were being addressed, was presented and discussed;
� All current IT projects, the status of each and the expected date of completion, was presented ; and
� A report detailing achievements to SLA for each major subsidiary was presented to the Committee.
The Committee further noted that ERP systems had been replaced with the Sage X3 platform at Axiz and Centrafin during the reporting period, with Pinnacle and Alviva Shared Management Services following shortly after the reporting date. Lessons had been learnt from the Axiz implementation and successfully applied in the new implementations.
135
Ove
rvie
wG
over
nanc
eSu
stai
nabi
lity
Ann
ual fi
nanc
ial s
tate
men
tsSh
areh
olde
rs’ in
form
atio
n
Audit and Risk Committee report continued
for the year ended 30 June 2020
RISK (continued)
Technology and Information (continued)
� The Committee confirms that:
� risks associated with the IT environment and projects are continuously evaluated and appropriate plans are in place and implemented to mitigate these risks to an acceptable level;
� IT expenditure is motivated by sound commercial principles to ensure that the business strategies and IT strategies are aligned;
� a long-term IT plan has been developed and the appropriateness thereof is reviewed on a continuous basis to ensure that it supports and does not inhibit the long-term strategy of the Group;
� developments in the IT industry are monitored on an ongoing basis and the potential impact thereof on the Group’s long-term strategy is evaluated regularly;
� the necessary skills are in place to ensure that the internal control systems are adequately applied across the Group’s entire IT environment;
� appropriate disaster recovery and business continuity plans are developed, maintained and tested; and
� business continuity plans allowed remote working to continue during the COVID-19 lockdown period with minimal disruption to business processes.
ASSURANCE
Combined assurance
The Committee has fulfilled its mandate in terms of the custodianship of the combined assurance framework.
� A three-lines-of-assurance model was adopted, as detailed in the combined assurance section on pages 49 and 50 of the integrated annual report.
� The Committee is satisfied that the Group has optimised the assurance coverage obtained from management and internal and external assurance providers in accordance with the combined assurance framework.
COMPLIANCE
Legal and regulatory compliance
� The Committee has been assigned the responsibility for ensuring ongoing legal and regulatory compliance. This mandate has been fulfilled through regular reviews of exposure levels associated with any key non-compliances and legal disputes.
GOVERNANCE
Charter and policies
� The Charter of the Committee was reviewed and is aligned to King IV™ recommended practices. The Board ratified the Charter on 24 February 2020. The Charter is available for inspection at the registered office of the Company.
� The following charters and policies were subject to annual review and approved by the Committee:
� Internal Audit Charter;
� IT Charter;
� IT Steering Committee Charter; and
� Business Continuity Policy.
136
ALV
IVA
HO
LDIN
GS
LIM
ITED
•
Inte
grat
ed a
nnua
l rep
ort 2
020
Audit and Risk Committee report continued
for the year ended 30 June 2020
FINANCIAL STATEMENTSFollowing the review by the Committee of the consolidated and separate financial statements of Alviva for the reporting period ended 30 June 2020, the Committee is of the view that, in all material aspects, it complies with the relevant provisions of the Companies Act and International Financial Reporting Standards and fairly presents the financial position at that date and the results of its operations and cash flows for the reporting period.
In conjunction with the Social and Ethics Committee and the Board, the Committee has also satisfied itself as to the integrity of the remainder of the integrated annual report.
Having achieved its objectives for the reporting period, the Committee recommended the financial statements and integrated annual report for the reporting period ended 30 June 2020 for approval to the Board on 25 September 2020.
APPROVALThe Committee has fulfilled its responsibilities set out in paragraph 3.84 (g) of the JSE Listings Requirements, which includes a review of the information detailed in paragraph 22.15 (h).
The Committee has fulfilled its mandate during the reporting period and accordingly the financial statements have been approved for recommendation to the Board. The Board has subsequently approved the financial statements on 25 September 2020 which will be open for discussion at the AGM of shareholders.
I wish to thank the members of the Committee and management for their contributions during the reporting period to ensure that the Committee could fulfil its mandate assigned to it by the Board.
Ms P Natesan Chairperson of the Audit and Risk Committee
137
Ove
rvie
wG
over
nanc
eSu
stai
nabi
lity
Ann
ual fi
nanc
ial s
tate
men
tsSh
areh
olde
rs’ in
form
atio
n
Directors’ reportfor the year ended 30 June 2020
The directors take pleasure in presenting their report for the reporting period ended 30 June 2020.
DIRECTORS’ RESPONSIBILITYThe Company’s directors are responsible for the preparation and fair presentation of the financial statements in accordance with International Financial Reporting Standards (“IFRS”) and the requirements of the Companies Act, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
ALVIVA’S BUSINESSA description of Alviva’s business profile, Group structure and geographic footprint is set out in the integrated annual report.
The Company does not have a controlling shareholder and the directors of Alviva manage the Company for its stakeholders. Alviva Holdings Limited has its primary and only listing in South Africa in the Technology sector of the JSE.
CORPORATE GOVERNANCEThe Corporate Governance Report appears on pages 32 to 48 of the integrated annual report.
FINANCIAL RESULTSThe operating results and the state of affairs of the Company and the Group are discussed in the Report to Shareholders on pages 21 to 27 of the integrated annual report.
The Group generated an attributable profit of R149 million (2019: R395 million). The financial statements on pages 150 to 268 detail the Group’s and the Company’s financial performance, position and cash flow for the reporting period.
Segment analysisA detailed segment analysis of the Group’s performance is disclosed in note 40 to the financial statements.
Trading statementsThe Company issues trading statements when it is satisfied that a reasonable degree of certainty exists that the financial results for the period to be reported on, will differ by at least 20% from the preceding corresponding period. The measure adopted by the Company, in determining the trading statement requirement, is applied only on headline earnings per ordinary share and/or earnings per ordinary share.
STATED CAPITALAt the AGM held on 21 November 2018, which authority was renewed at the AGM held on 21 November 2019, shareholders gave the Board general approval in terms of sections 46 and 48 of the Companies Act, by way of a special resolution, to acquire shares in the Company. The Board exercised this authority and mandated the repurchase of issued ordinary shares of the Company, to a maximum of 6 550 000 shares. Since the renewal of the mandate, the Company has repurchased, to the end of June 2020, 1 990 309 ordinary shares, totalling 1,54% of the total issued share capital (excluding treasury shares), at an average price of R10,19 per share.
Following the repurchases of the abovementioned shares, the issued share capital of the Company at 30 June 2020 was 136 317 746 shares. Details of the authorised and issued share capital are provided in note 19 to the financial statements.
138
ALV
IVA
HO
LDIN
GS
LIM
ITED
•
Inte
grat
ed a
nnua
l rep
ort 2
020
Forfeitable Share Plan (FSP)Details of the FSP are disclosed in the Remuneration Committee Report on pages 73 and 74, pages 81 to 84 and in note 37 to the financial statements.
FSP 5
FSP 5, along with its participants and share allocation, was approved by the Board of Directors on 8 June 2020 and became effective on 26 June 2020. A total of 2 435 000 shares were allocated to FSP 5 and all participants accepted the shares granted to them before the reporting date.
RIGHTS ATTACHING TO SHARESEach ordinary Alviva share is entitled to identical rights in respect of voting, dividends, profits and a return of capital. The variation of rights attaching to Alviva shares requires the prior consent of at least 75% of the issued shares of that class or the sanction of a special resolution passed at a special general meeting of the holders of the Alviva shares of that class.
The issue of Alviva shares, whether in the initial or in any increased capital, is subject to shareholder approval.
DIRECTORS’ AND PRESCRIBED OFFICER’S INTERESTS AND SHAREHOLDING (INCLUDING DIRECTORS’ AND PRESCRIBED OFFICER’S ASSOCIATES)Directors’ and prescribed officer’s interests and shareholding, including directors’ and prescribed officer’s associates, as at 30 June 2020, are presented in the table below.
DirectorStatus of director/prescribed officer
Direct beneficial
Share register (own name)
FSP shares earned and held in MSR
share account
Indirect beneficial
Held by associates Total
% of issued
share capital
P Spies CEO 100 000 241 200 341 200 0,25
RD Lyon CFO 300 000 140 700 280 000 720 700 0,53
A TugendhaftNon-Executive Chairperson
– – 318 600 318 600 0,23
JV ParkinCCO – Prescribed Officer
193 000 33 500 28 700 255 200 0,19
Total 593 000 415 400 627 300 1 635 700 1,20
None of the directors’ shares are subject to security, guarantee, collateral or otherwise pursuant to paragraph 3.63(b)(1x) of the JSE Listings Requirements.
Directors’ and prescribed officer’s interests and shareholding, including directors’ and prescribed officer’s associates, as at 30 June 2019, are presented in the table below.
Director Status of director/prescribed officer
Direct beneficial
Share register (own name)
Indirect beneficial
Held by associates Total
% of issued
share capital
RD Lyon CFO 200 000 280 000 480 000 0,33
A Tugendhaft Non-Executive Chairperson – 218 600 218 600 0,15
JV Parkin CCO – Prescribed Officer 193 000 28 700 221 700 0,15
Total 393 000 527 300 920 300 0,63
Directors’ report continued
for the year ended 30 June 2020
139
Ove
rvie
wG
over
nanc
eSu
stai
nabi
lity
Ann
ual fi
nanc
ial s
tate
men
tsSh
areh
olde
rs’ in
form
atio
n
Directors’ report continued
for the year ended 30 June 2020
There has been no change in directors’ interests from the reporting date until the approval of the Alviva integrated annual report on 25 September 2020. The directors have no non-beneficial shareholdings.
Details of transactions in Alviva shares by directors and prescribed officers were disclosed on SENS during 2020 and are summarised in the table below. For the executive directors and the prescribed officer, any purchases in relation to the grant of shares under allocation of the long-term incentive scheme (FSP) were included in the various SENS announcements dealing with such allocations.
Name of director/prescribed officer Status Purchase
Earned on FSP and
held under MSR Sale
A Tugendhaft Direct beneficial 100 000 – –
P Spies Direct beneficial 100 000 241 200 –
RD Lyon Direct beneficial 100 000 140 700 –
JV Parkin Direct beneficial – 33 500 –
For further details refer to the Remuneration Committee Report and note 37 to the financial statements.
SHAREHOLDERS OTHER THAN DIRECTORSAn analysis of shareholders is set out in the tables below and in note 45 to the financial statements.
Major shareholdersPursuant to section 56(7) of the Companies Act, the following beneficial interests, equal to or exceeding 5%, as at 30 June 2020, were disclosed or established through enquiry:
Name Number of shares held% of total issued
ordinary shares
Invesco Canada Limited * 42 435 057 31,13
Fidelity Investments * 10 956 766 8,04
Forfeitable Share Plan 7 180 750 5,27
Total 60 572 573 44,44
* Held on behalf of various funds for the ultimate benefit of various individual shareholders.
No individual shareholder’s beneficial shareholding in any Alviva employee incentive scheme is equal to or exceeds 5%.
DIVIDEND POLICYThe Company’s policy is to declare a gross dividend of approximately 10% of headline earnings.
140
ALV
IVA
HO
LDIN
GS
LIM
ITED
•
Inte
grat
ed a
nnua
l rep
ort 2
020
DECLARATION OF ORDINARY DIVIDENDTo this end, the Board has declared a final dividend of 15 cents (2019: 30 cents) per ordinary share for the year ended 30 June 2020, as announced on SENS on 28 September 2020.
Notice is hereby given that a final dividend of 15 cents per ordinary share for the year ended 30 June 2020 has been declared by the Board of the Company.
The salient dates applicable to the final dividend are as follows:
Date
Last day of trade “cum” dividend Tuesday, 10 November 2020
First day to trade “ex” dividend Wednesday, 11 November 2020
Record date Friday, 13 November 2020
Payment date Monday, 16 November 2020
No share certificates may be dematerialised or rematerialised between Wednesday, 11 November 2020 and Friday 13 November 2020, both days inclusive.
Dividends are to be paid out of distributable reserves. Dividends Tax of 20% will be withheld in terms of the Income Tax Act for those shareholders who are not exempt from dividend tax. In accordance with paragraphs 11.17(a)(i) to (ix) and 11.17(c) of the JSE Listings Requirements, the following additional information is disclosed:
� The gross local dividend amount is 15 cents per ordinary share for shareholders exempt from Dividends Tax;
� The net local dividend amount is 12,00000 cents per ordinary share for shareholders liable to pay Dividends Tax;
� Alviva Holdings Limited currently has 136 317 746 ordinary shares in issue (which includes 7 180 750 FSP shares); and
� Alviva Holdings Limited’s income tax reference number is 9675/146/71/7.
Where applicable, payment in respect of certificated shareholders will be transferred electronically to shareholders’ bank accounts on the payment date. In the absence of specific mandates, payment cheques will be posted to certificated shareholders at their risk on the payment date. Shareholders who have dematerialised their shares will have their accounts at their Central Securities Depository Participant or broker credited on the payment date.
SERVICE CONTRACTS WITH DIRECTORSAlviva complies with relevant legislation when determining minimum terms and conditions for the appointment of executive directors. During the reporting period, the CEO signed an addendum to his contract of employment providing that his appointment will continue until 30 June 2022 with a restraint of trade period lasting up to 24 months following the termination date. The CFO’s employment agreement does not contain a minimum service term or restraint of trade clause.
Employment contracts do not commit the Company to pay on termination arising from the director’s failure. Balloon payments on termination are not seen as fair remuneration policy. The Remuneration Committee reviews, at least annually, the terms and conditions of executive directors’ service agreements, taking into account information from comparable companies, where relevant. All recently contracted employment agreements with executive directors, management and sales staff include a restriction of trade clause to protect Alviva’s proprietary interests and to ensure that the business is not prejudiced in any way or form. The restriction of trade undertaking is applicable for a period of six months from the date that the employment terminates. Executive directors are expected to manage their leave in such a manner that leave is not accumulated. On leaving the Company, any leave not utilised is not paid out.
Directors’ report continued
for the year ended 30 June 2020
141
Ove
rvie
wG
over
nanc
eSu
stai
nabi
lity
Ann
ual fi
nanc
ial s
tate
men
tsSh
areh
olde
rs’ in
form
atio
n
Directors’ report continued
for the year ended 30 June 2020
EXTERNAL AUDIT AND EXTERNAL AUDITOR INDEPENDENCESNG Grant Thornton acts as the external auditor of the Company, and has indicated its willingness to continue in office for the ensuing reporting period. The Audit and Risk Committee has satisfied itself of the independence of SNG Grant Thornton and the designated auditor, Mr A Govender, as required by section 90 of the Companies Act. The Board concurs with the Audit and Risk Committee’s assessment.
The Board has endorsed the recommendation of the Audit and Risk Committee to shareholders that SNG Grant Thornton be appointed as the independent external auditor of the Company for the ensuing reporting period with effect from the date of the AGM to be held on 18 November 2020. A resolution to re-appoint SNG Grant Thornton as the auditor and Mr A Govender as designated auditor will be proposed at the AGM on 18 November 2020.
The proposed audit fee to be paid to SNG Grant Thornton for the independent audit of Alviva Group entities for the reporting period ended 30 June 2020 amounts to R4,38 million (2019: R4,00 million).
SYSTEMS OF INTERNAL CONTROLThe Group maintains systems of internal control, which include financial, operational and compliance controls. The Audit and Risk Committee is responsible for reviewing the functioning of the internal control system, the reliability and accuracy of the financial information provided by management as well as that provided for dissemination to other users of financial information.
In addition, it reviews whether the Group should continue to use the services of the current external auditors, any accounting or auditing concerns identified as a result of the external audit, the Group’s compliance with legal and regulatory provisions, its MOI, Code of Conduct and by-laws.
The Board is accountable for establishing appropriate risk and control policies. Executive management is responsible for monitoring, reviewing and communicating these controls and policies throughout the organisation. Corrective actions are taken to address control deficiencies and other opportunities for improving the systems, as they are identified.
All processes have been in place for the reporting period and up to the date of the approval of the financial statements and the directors are not aware of any known material breakdown in the functioning of the internal financial controls that has occurred during the reporting period to render the control environment ineffective.
The Audit and Risk Committee assured itself of the internal financial controls through the integrated reporting model and, specifically, reports from both the internal and external auditors. The independent assurance, which was received during the reporting period, formed the basis for reporting to the Board on the reliability thereof.
Alviva’s overall system of internal control remains adequate and no significant deficiencies in the design, implementation or execution of internal financial controls were identified.
The reports of Internal Audit are also made available to Alviva’s external auditors to assist them in meeting their responsibilities.
142
ALV
IVA
HO
LDIN
GS
LIM
ITED
•
Inte
grat
ed a
nnua
l rep
ort 2
020
RESOLUTIONS PASSED AT THE AGM IN 2019The following resolutions were adopted by shareholders at the AGM held on 21 November 2019:
Resolution no Description
% vote in favour
Special resolutions
1 Issue of a general authority for the Company to repurchase its own shares 99,66
2Issue of a general authority to provide financial assistance in terms of section 44 of the Companies Act
99,66
3 Approval of the fee structure to be paid to non-executive directors 99,66
Ordinary resolutions
1 Reappointment of retiring director and ratification of appointment of directors
1.1 Reappointment of Ms SH Chaba as an Independent Non-Executive Director 99,91
1.2 Ratification of appointment of Ms MG Mokoka as an Independent Non-executive Director 99,91
1.3 Ratification of appointment of Mr PN Masemola as an Independent Non-executive Director 100,00
2 Appointment of the members of the Audit and Risk Committee
2.1 Ms P Natesan (Chairperson) 100,00
2.2 Ms SH Chaba 99,57
2.3 Ms MG Mokoka 99,91
3Approval to reappoint SizweNtsalubaGobodo Grant Thornton Incorporated and Mr A Govender as auditors
100,00
4 Endorsement of the Company’s Remuneration Policy and Its Remuneration Implementation Report
4.1 Endorsement of the Company’s Remuneration Policy 98,83
4.2 Endorsement of the Company’s Remuneration Implementation Report 98,97
5 General authorisation to place unissued shares under the control of the directors 98,95
6 General authorisation to issue shares for cash 99,63
7 Approval of the amendment of the Forfeitable Share Plan Rules 99,63
8 Authorisation of the directors to implement the special and ordinary resolutions 99,97
Directors’ report continued
for the year ended 30 June 2020
143
Ove
rvie
wG
over
nanc
eSu
stai
nabi
lity
Ann
ual fi
nanc
ial s
tate
men
tsSh
areh
olde
rs’ in
form
atio
n
Directors’ report continued
for the year ended 30 June 2020
BOARD OF DIRECTORSThe Board comprises seven directors, two executive directors and five non-executive directors. The executive directors are the CEO and the CFO. Four of the five non-executive directors are independent. The Chairperson, who is a non-executive director, is not considered to be independent and thus a Lead Independent Director was appointed.
Name Designation Date appointed
Mr A TugendhaftNon-Executive Director 24 November 1998
Appointed as Chairperson 3 October 2017
Ms P NatesanIndependent Non-Executive Director 6 December 2017
Appointed as Lead Independent Director 6 December 2017
Ms SH Chaba Independent Non-Executive Director 31 August 2012
Ms MG Mokoka Independent Non-Executive Director 29 July 2019
Mr PN Masemola Independent Non-Executive Director 29 July 2019
Mr P Spies Executive Director – CEO 27 January 2016
Mr RD Lyon Executive Director – CFO 1 January 2013
A brief biography of each of the directors is disclosed on pages 29 and 30 of the integrated annual report.
ROTATION OF DIRECTORSIn accordance with the Company’s MOI requirement that one-third or more of the non-executive directors must retire at each AGM, Mr A Tugendhaft and Ms P Natesan retire by rotation at the upcoming AGM to be held on 18 November 2020 and, being eligible, have offered themselves for re-election. Resolutions to re-elect Mr A Tugendhaft as non-executive director and Ms P Natesan as independent non-executive director of the Company will be put to shareholders at the AGM to be held on 18 November 2020.
STATE OF AFFAIRS AT THE COMPANY – MATERIAL MATTERS
Borrowing powersThe MOI imposes no restrictions on the borrowing powers of the Company or the directors. The Company does, however, have in place a formal delegation of authority imposing limitations in terms of transaction value and nature, which is fully operational and reviewed on an ongoing basis by the Board.
Business combinationsDetails of business combinations during the reporting period are disclosed in note 35 to the financial statements.
Investment in subsidiariesDetails of interest in subsidiaries held are disclosed in note 12 to the financial statements.
Investment in equity-accounted investeesDetails of the investments in the equity-accounted investees are disclosed in note 13 to the financial statements.
144
ALV
IVA
HO
LDIN
GS
LIM
ITED
•
Inte
grat
ed a
nnua
l rep
ort 2
020
Directors’ interest in contractsNo director of the Company had any interest in any contract of significance during the reporting period.
Contingent liabilitiesThe directors are not aware of any contingent liabilities that existed at 30 June 2020, or at the date of this report.
Litigation statementThe directors, whose names appear on pages 29 and 30 of the integrated annual report, are not aware of any legal or arbitration proceedings, including proceedings that are pending or threatened, that may have a material effect on the Group’s financial position.
Related party transactionsThe related party transactions entered into in the ordinary course of business are disclosed in note 38 to the financial statements.
InsuranceThe Group has placed cover in the South African traditional insurance markets to ensure that all categories of risk are covered adequately. Additional cover on a per risk basis has been purchased, where appropriate.
Impact of the COVID-19The COVID-19 pandemic has had a significant impact in South Africa and across the world. The first impact was noted in the Group in January 2020, with major markets all impacted from March 2020 onwards. Based on the magnitude of the pandemic and its potential impact on the financial statements, management has conducted a review of all possible financial effects the virus could have on the measurement, presentation and disclosure provided. The results of this assessment are disclosed in note 5 to the financial statements.
GOING CONCERN STATEMENTFollowing due consideration of the operating budgets, an assessment of Group debt covenants and funding requirements, solvency and liquidity, the key risks, outstanding legal, insurance and taxation issues, the impact of the COVID-19 pandemic and other pertinent matters presented by management, the directors have recorded that they have reasonable expectations that the Company and the Group have adequate resources and the ability to continue in operations for the foreseeable future. For these reasons, the financial statements have been prepared on the going concern basis.
EVENTS AFTER THE REPORTING DATEOther than as disclosed below, there were no events material to the understanding of the financial statements that occurred after the reporting date and the publication date of the financial statements, except the continuation of the risk-adjusted approach implemented by the South African government in relation to the COVID-19 pandemic.
Redemption of preference sharesAs announced on SENS on 20 May 2020 and 21 May 2020, respectively, Absa Bank Limited (acting through its Corporate and Investment Banking Division) is the holder of 40 (forty) redeemable preference shares of R10 million each in DCT Holdings (RF) Proprietary Limited, a subsidiary of Alviva.
In terms of the Preference Share Subscription Agreement entered into on 4 April 2017, the redemption date of 10 (ten) preference shares was scheduled for 20 May 2020. By mutual consent, the scheduled redemption date was amended by three months and, on 20 August 2020, the Company redeemed preference shares to the value of R100 million to Absa Bank Limited.
Directors’ report continued
for the year ended 30 June 2020
145
Ove
rvie
wG
over
nanc
eSu
stai
nabi
lity
Ann
ual fi
nanc
ial s
tate
men
tsSh
areh
olde
rs’ in
form
atio
n
Report of the independent auditor
To the Shareholders of Alviva Holdings Limited
Report on the Audit of the Consolidated and Separate Financial Statements
Opinion
We have audited the consolidated and separate financial statements of Alviva Holdings Limited (the group) set out on pages 150 to 268, which comprise the consolidated and separate statement of financial position as at 30 June 2020, and the consolidated and separate statement of profit or loss and other comprehensive income, the consolidated and separate statement of changes in equity and the consolidated and separate statement of cash flows for the year then ended, and notes to the consolidated and separate financial statements, including a summary of significant accounting policies.
In our opinion, the consolidated and separate financial statements present fairly, in all material respects, the consolidated and separate financial position of Alviva Holdings Limited as at 30 June 2020, and its consolidated and separate financial performance and consolidated and separate cash flows for the year then ended in accordance with International Financial Reporting Standards and the requirements of the Companies Act of South Africa.
Basis for Opinion
We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Consolidated and Separate Financial Statements section of our report. We are independent of the group and company in accordance with the Independent Regulatory Board for Auditors’ Code of Professional Conduct for Registered Auditors (IRBA Code) and other independence requirements applicable to performing audits of financial statements in South Africa. We have fulfilled our other ethical responsibilities in accordance with the IRBA Code and in accordance with other ethical requirements applicable to performing audits in South Africa. The IRBA Code is consistent with the corresponding sections of the International Ethics Standards Board for Accountants’ International Code of Ethics for Professional Accountants (including International Independence Standards). We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Key Audit Matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the consolidated and separate financial statements of the current period. These matters were addressed in the context of our audit of the consolidated and separate financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
146
ALV
IVA
HO
LDIN
GS
LIM
ITED
•
Inte
grat
ed a
nnua
l rep
ort 2
020
Report of the independent auditor continued
Key audit matter How our audit addressed the key audit matter
Adoption of IFRS 16 “Leases”.
The group adopted IFRS 16, ‘Leases’ (IFRS 16) for the first time in the 2020 reporting period which represented a significant event that took place during the year. The Group has adopted IFRS 16 using the modified retrospective approach and therefore, the comparative information has not been restated and continues to be reported under IAS 17. The implementation of this new accounting standard required a complex assessment by management to correctly apply the requirements of IFRS 16 against the lease agreements and thus this represented a significant risk for the audit. The implementation of IFRS 16 further resulted in a material impact to assets and liabilities as disclosed in the financial statements.
Refer to the leases accounting policy note 6.3.
Refer to the changes in significant accounting policies note 7 for IFRS 16: Leases in the notes to the financial statements.
We reviewed the Group’s implementation of IFRS 16 during the current reporting period through our evaluation of management’s assessments and conclusions on IFRS 16 based on the lease agreements that the group has in place. We performed this assessment by evaluating the lease agreements against the requirements of the IFRS 16 standard.
Our procedures included reviewing the reasonableness of the incremental borrowing rate applied in the measurement of the right of use liability, reviewing the accounting policy updates, financial statement disclosures and the recognition and measurement principles applied in the adoption of the standard.
Impairment assessment of goodwill
Due to the number of business combinations that the Group has historically entered into, the Group’s net assets include a significant amount of goodwill at the reporting date. There is a potential risk that these acquired businesses may not trade in line with expectations and forecasts, resulting in a potential impairment of the carrying amount of goodwill allocated to these businesses.
As required by International Accounting Standard (IAS) 36, Impairment of Assets (“IAS 36”), the Group performs an impairment assessment of goodwill on an annual basis and when impairment indicators are identified.
The goodwill impairment assessment is considered to be a matter of most significance in our audit of the consolidated financial statements due to the significant judgements and assumptions made by management when performing the impairment assessment, and in estimating the key assumptions applied, particularly:
� Weighted average cost of capital discount rates;
� Whether the impact of COVID-19 is appropriately considered in the cash-flow forecasts and whether the forecasts used in the impairment assessments are reasonable;
� Whether the other assumptions applied in the forecasts are reasonable.
This matter is disclosed in the following notes to the consolidated financial statements:
� Note 11: Goodwill;
� Note 4: Critical judgements made.
We tested the mathematical accuracy of the valuation models used by management. We also assessed the appropriateness of the valuation model applied by management, with reference to market practice and the requirements of IAS 36. We reviewed the reasonableness of the underlying assumptions, inputs and discount rates used in the cash flow forecasts through the performance of sensitivity analysis calculations and through the verification and corroboration of market related inputs.
We assessed the reliability of the Group’s budgets included in the business plans (which form the basis of the cash flow forecasts), by comparing prior period budgets to actual results and corroborating budget inputs to supporting evidence such as contracts and revenue models. We also agreed revenue and EBITDA, used to calculate cash flow forecasts, to approved budgets.
Utilising our valuations expertise, we independently sourced data such as the long-term growth rates, cost of debt, risk-free rates in the applicable market, market risk premiums, debt/equity ratios, as well as the beta of comparable companies. We independently calculated a discount rate for each cash generating unit using our independently sourced data. We applied these independently sourced and calculated inputs to management’s forecasts in order to calculate the recoverable amounts. We noted that management’s recoverable amounts calculated through application of the “fair value less costs to disposal” model fell within a reasonable range of our independent calculations.
147
Ove
rvie
wG
over
nanc
eSu
stai
nabi
lity
Ann
ual fi
nanc
ial s
tate
men
tsSh
areh
olde
rs’ in
form
atio
n
Report of the independent auditor continued
Other Information
The directors are responsible for the other information. The other information comprises the information included in the document titled “Alviva Holdings Limited Integrated Annual Report 2020”, and in the document titled “Alviva Holdings Limited Annual Financial Statements 2020”, which includes the Directors’ Report, the Report of the Audit and Risk Committee and the Certificate by the Company Secretary, as required by the Companies Act of South Africa and the Statement by the CEO and CFO. The other information further comprises the Analysis of Shareholding note on pages 267 to 268. The other information does not include the consolidated and separate financial statements and our audit report thereon.
Our opinion on the consolidated and separate financial statements does not cover the other information and we do not express an audit opinion or any form of assurance conclusion thereon.
In connection with our audit of the consolidated and separate financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the consolidated and separate financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.
Responsibilities of the Directors for the Consolidated and Separate Financial Statements
The directors are responsible for the preparation and fair presentation of the consolidated and separate financial statements in accordance with International Financial Reporting Standards and the requirements of the Companies Act of South Africa, and for such internal control as the directors determine is necessary to enable the preparation of consolidated and separate financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the consolidated and separate financial statements, the directors are responsible for assessing the group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the group or to cease operations, or have no realistic alternative but to do so.
148
ALV
IVA
HO
LDIN
GS
LIM
ITED
•
Inte
grat
ed a
nnua
l rep
ort 2
020
Report of the independent auditor continued
Auditor’s Responsibilities for the Audit of the Consolidated and Separate Financial Statements
Our objectives are to obtain reasonable assurance about whether the consolidated and separate financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated and separate financial statements.
As part of an audit in accordance with ISAs, we exercise professional judgement and maintain professional scepticism throughout the audit. We also:
� Identify and assess the risks of material misstatement of the consolidated and separate financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
� Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the group’s internal control.
� Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the directors.
� Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the consolidated and separate financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the group to cease to continue as a going concern.
� Evaluate the overall presentation, structure and content of the consolidated and separate financial statements, including the disclosures, and whether the consolidated and separate financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
� Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the group to express an opinion on the consolidated and separate financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.
We communicate with the directors regarding, amongst other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide the directors with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated with the directors, we determine those matters that were of most significance in the audit of the consolidated and separate financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.
149
Ove
rvie
wG
over
nanc
eSu
stai
nabi
lity
Ann
ual fi
nanc
ial s
tate
men
tsSh
areh
olde
rs’ in
form
atio
n
Report of the independent auditor continued
Report on Other Legal and Regulatory Requirements
In terms of the IRBA Rule published in Government Gazette Number 39475 dated 4 December 2015, we report that SizweNtsalubaGobodo Grant Thornton Inc. has been the auditor of Alviva Holdings Limited for six years.
Abendran Govender
SizweNtsalubaGobodo Grant Thornton Inc.Engagement DirectorRegistered Auditor
28 September 2020
20 Morris Street EastWoodmeadJohannesburgGauteng
150
ALV
IVA
HO
LDIN
GS
LIM
ITED
•
Inte
grat
ed a
nnua
l rep
ort 2
020
as at 30 June 2020
Statements of financial position
Group Company
Notes2020
R’0002019
R’0002020
R’0002019
R’000
ASSETS
Non-current assets 2 080 544 1 784 247 4 170 120 3 843 629
Property, plant and equipment 9 457 218 122 312 – –
Intangible assets 10 320 127 287 895 – –
Goodwill 11 614 454 631 526 – –
Interests in subsidiaries 12 – – 4 170 120 3 843 629
Investment in equity-accounted investees 13 41 773 88 119 – –
Finance lease receivables 14 556 138 576 189 – –
Deferred tax 15 90 834 78 206 – –
Current assets 5 711 445 4 710 221 172 495
Inventory 16 1 228 187 1 036 748 – –
Trade and other receivables 17 2 946 836 3 264 856 – –
Finance lease receivables 14 298 383 269 975 – –
Current tax assets 18 418 14 096 – –
Cash and cash equivalents 18 1 219 621 124 546 172 495
Total assets 7 791 989 6 494 468 4 170 292 3 844 124
EQUITY AND LIABILITIES
Capital and reserves 2 377 779 2 335 027 4 168 541 3 833 519
Stated capital 19 1 363 1 434 1 363 1 434
Treasury shares 20 (115 328) (125 819) – –
Other equity reserves 21 46 289 33 568 – –
Retained earnings 2 345 484 2 355 661 4 167 178 3 832 085
Non-controlling interests 34 99 971 70 183 – –
Non-current liabilities 1 244 584 915 171 – 9 000
Interest-bearing liabilities 22 1 075 406 778 342 – –
Non-interest-bearing liabilities 23 72 829 46 205 – 9 000
Contract liabilities 25 16 064 11 528 – –
Deferred tax 15 80 285 79 096 – –
Current liabilities 4 169 626 3 244 270 1 751 1 605
Trade and other payables 24 3 626 394 2 806 046 1 744 1 605
Interest-bearing liabilities 22 332 194 106 285 – –
Non-interest-bearing liabilities 23 7 584 44 130 – –
Contract liabilities 25 183 929 114 847 – –
Current tax liabilities 19 525 14 163 7 –
Bank overdrafts 18 – 158 799 – –
Total equity and liabilities 7 791 989 6 494 468 4 170 292 3 844 124
[GRI 201-1]
151
Ove
rvie
wG
over
nanc
eSu
stai
nabi
lity
Ann
ual fi
nanc
ial s
tate
men
tsSh
areh
olde
rs’ in
form
atio
n
for the year ended 30 June 2020
Statements of profit or loss and other comprehensive income
Group Company
Notes2020
R’0002019
R’0002020
R’0002019
R’000
Revenue 26 14 804 155 15 922 641 459 524 456 213
Cost of sales (12 370 493) (13 314 503) – –
Gross profit 2 433 662 2 608 138 459 524 456 213
Other income 27 382 56 788 19 155 4 047
Gain on discounting of finance lease agreements 1 272 2 841 – –
Gain on foreign exchange 630 8 068 – –
Profit on disposal of property, plant and equipment 1 611 609 – –
Share-based payment income – – 10 155 4 047
Gain on remeasurement of contingent consideration 23 23 869 45 270 9 000 –
Operating expenses (2 072 507) (1 995 153) – (327)
Selling expenses (59 940) (66 165) – –
Impairment losses and write-offs on trade and finance lease receivables
36.7 (45 645) (37 361) – –
Impairment loss on loan to equity-accounted investee 36.7 (27 990) (23 210) – –
Impairment loss on goodwill (49 563) – – –
Impairment loss on investment in subsidiary – – – (25 274)
Employee benefit expenses (1 323 782) (1 338 582) – –
Administration expenses (246 505) (307 683) – (327)
Loss on disposal of subsidiary – (32 141) – –
Depreciation and amortisation (319 082) (190 011) – –
Operating profit before interest 27 388 537 669 773 478 679 434 659
Finance income 28 50 666 52 059 42 35
Finance costs 28 (227 640) (185 108) – –
Profit before tax 211 563 536 724 478 721 434 694
Income tax expense 29 (74 688) (145 866) (12) (9)
Profit for the period 136 875 390 858 478 709 434 685
Other comprehensive income:Items that may be reclassified to profit or loss, net of tax: 4 609 447 – –
Exchange differences from translating foreign operations
4 609 447 – –
Total comprehensive income for the period 141 484 391 305 478 709 434 685
Net profit for the period attributable to: 136 875 390 858
Owners of the Company 148 724 394 500
Non-controlling interests 34 (11 849) (3 642)
Total comprehensive income attributable to: 141 484 391 305
Owners of the Company 153 333 394 947
Non-controlling interests 34 (11 849) (3 642)
Earnings per ordinary share (cents) 30
– Basic earnings per ordinary share 112,7 275,3
– Diluted basic earnings per ordinary share 110,7 268,1
Non-IFRS information*
Earnings before interest, tax, depreciation and amortisation 707 619 859 784 478 679 459 933
* This information is not required by IFRS but is presented as additional information to the users of the financial statements.
[GRI 201-1]
152
ALV
IVA
HO
LDIN
GS
LIM
ITED
•
Inte
grat
ed a
nnua
l rep
ort 2
020
for the year ended 30 June 2020
Statements of changes in equity
Attributable to owners of the Company
Notes
Statedcapital
R’000
TreasurysharesR’000
Otherequity
reservesR’000
Retainedearnings
R’000Total
R’000
Non-control-
ling interests
R’000
TotalequityR’000
Group
Balances at 30 June 2018 1 584 (129 090) 54 268 2 211 329 2 138 091 89 313 2 227 404
Repurchase of shares (85) – – (150 706) (150 791) – (150 791)
Treasury shares repurchased and cancelled (65) 39 290 – (39 225) – – –
Treasury shares acquired – (36 019) – – (36 019) – (36 019)
Equity-settled share-based payment – – 9 943 – 9 943 – 9 943
Profit for the period – – – 394 500 394 500 (3 642) 390 858
Other comprehensive income – – 447 – 447 – 447
Transactions with non-controlling interests 34 – – – (50 633) (50 633) (5 253) (55 886)
Transfer between reserves – – (31 090) 31 090 – – –
Dividends paid 30.5 – – – (40 694) (40 694) (10 235) (50 929)
Balances at 30 June 2019 1 434 (125 819) 33 568 2 355 661 2 264 844 70 183 2 335 027
Repurchase of shares (71) – – (102 123) (102 194) – (102 194)
Treasury shares acquired – (10 378) – – (10 378) – (10 378)
Treasury shares vested with FSP participants – 20 869 (12 346) (8 523) – – –
Profit for the period – – – 148 724 148 724 (11 849) 136 875
Other comprehensive income – – 4 609 – 4 609 – 4 609
Transactions with non-controlling interests – – – (6 763) (6 763) 52 102 45 339
Equity-settled share-based payment – – 20 458 – 20 458 – 20 458
Dividends paid 30.5 – – – (41 492) (41 492) (10 465) (51 957)
Balances at 30 June 2020 1 363 (115 328) 46 289 2 345 484 2 277 808 99 971 2 377 779
Company
Balances at 30 June 2018 1 584 – – 3 709 841 3 711 425 – 3 711 425
Repurchase of shares (85) – – (150 706) (150 791) – (150 791)
Treasury shares repurchased and cancelled (65) – – (119 286) (119 351) – (119 351)
Profit for the period – – – 434 685 434 685 – 434 685
Dividends paid 30.5 – – – (42 449) (42 449) – (42 449)
Balances at 30 June 2019 1 434 – – 3 832 085 3 833 519 – 3 833 519
Repurchase of shares (71) – – (102 124) (102 195) – (102 195)
Profit for the period – – – 478 709 478 709 – 478 709
Dividends paid 30.5 – – – (41 492) (41 492) – (41 492)
Balances at 30 June 2020 1 363 – – 4 167 178 4 168 541 – 4 168 541
[GRI201-1]
153
Ove
rvie
wG
over
nanc
eSu
stai
nabi
lity
Ann
ual fi
nanc
ial s
tate
men
tsSh
areh
olde
rs’ in
form
atio
n
for the year ended 30 June 2020
Statements of cash flows
Group Company
Notes2020
R’0002019
R’0002020
R’0002019
R’000
Cash generated from operations 31 1 801 043 275 076 139 (174)
Finance income received 28 50 666 52 059 42 35
Finance costs paid 28 (227 640) (185 108) – –
Income tax paid 33 (115 736) (172 331) (5) (9)
1 508 333 (30 304) 176 (148)
Cash flows from investing activities
Expenditure to maintain operating capacity
Acquisition of property, plant and equipment 9 (96 578) (64 964) – – Proceeds on disposal of property, plant and equipment
15 946 3 012 – –
Acquisition of intangible assets 10 (47 188) (17 134) – –
Proceeds on disposal of intangible assets 592 3 540 – –
Proceeds on disposal of subsidiary – 14 988 – – Receipts/(advances) of loan to equity-accounted investee
13 18 356 (49 252) – –
Acquisition of subsidiaries, net of cash acquired 35 (48 619) (153 474) – (85 000)Subscription of preference shares in existing subsidiary
– – (65 000) (100 000)
Net investment in finance leases receivable (8 357) (165 726) – –
Dividends received – – 459 524 456 213
(165 848) (429 010) 394 524 271 213
Cash flows from financing activities 32
Interest-bearing liabilities raised 205 000 96 464 – –
Interest-bearing liabilities repaid (60 967) (8 331) – –
Non-interest-bearing liabilities repaid (57 724) (68 679) – –
Repurchase of shares (102 194) (150 792) (102 195) (270 142)
Treasury shares acquired (10 378) (36 018) – –Transactions with non-controlling interests, including dividends paid
(25 465) (58 794) – –
Group loans (raised)/repaid – – (251 336) 41 681
Dividends paid to ordinary shareholders 30.5 (41 492) (40 694) (41 492) (42 449)
(93 220) (266 844) (395 023) (270 910)Increase/(decrease) in net cash, cash equivalents and overdrafts
1 249 265 (726 158) (323) 155
Effects of exchange rate changes on cash held in foreign currencies
4 609 447 – –
Net cash and cash equivalents at 1 July (34 253) 691 458 495 340
Net cash and cash equivalents at 30 June 1 219 621 (34 253) 172 495
Cash and cash equivalents 18 1 219 621 124 546 172 495
Bank overdrafts 18 – (158 799) – –
[GRI201-1]
154
ALV
IVA
HO
LDIN
GS
LIM
ITED
•
Inte
grat
ed a
nnua
l rep
ort 2
020
1. REPORTING ENTITY Alviva Holdings Limited is a company domiciled in South Africa. The address of the Company is The Summit, 269 16th Road,
Randjespark, Midrand, 1685. The consolidated financial statements of the Company as at and for the period ended 30 June 2020 comprise the Company and its subsidiaries (together referred to as the Group). The primary activities of the Group have been disclosed in the integrated annual report on pages 14 and 15.
2. STATEMENT OF COMPLIANCE The consolidated and separate financial statements (“the financial statements”) have been prepared in accordance with
IFRS, the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee, the Financial Reporting Pronouncements as issued by the Financial Reporting Standards Council, the JSE Listings Requirements and the Companies Act of South Africa.
The financial statements were authorised for issue by the Board of Directors on 25 September 2020 and are subject to the approval of the shareholders at the AGM.
3. BASIS OF PREPARATION The financial statements are prepared as a going concern on a historical basis except for derivative financial instruments
and contingent consideration, which are stated at fair value, as applicable. The accounting policies, inclusive of reasonable judgements and assessments, have been consistently applied for all reporting periods presented, except for the policy on lessee accounting, and comply with IFRS.
The financial statements are presented in South African Rand, which is the functional currency of the Group. Amounts are rounded to the nearest thousand, except where another rounding measure has been indicated in the financial statements.
4. SIGNIFICANT ESTIMATES AND JUDGEMENTS In preparing these financial statements, management has made judgements and estimates that affect the application
of the Group’s accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to estimates are recognised prospectively.
Judgements
Information about judgements made in applying accounting policies that have the most significant effects on the amounts recognised in the financial statements are included in the following notes:
Judgement description Related note
Revenue recognition: timing principles, i.e., over time or at a point in time 26.1
Equity-accounted investees: assessment of significant influence and joint control principles 13
Consolidation: assessment of control of structured entities 12
Preference shares: classification principles based on instrument characteristics as equity or a financial liability
22
Tax: judgements in terms of the complexity of legislation 29
COVID-19 impact: going concern assessment 5
for the year ended 30 June 2020
Notes to the financial statements
155
Ove
rvie
wG
over
nanc
eSu
stai
nabi
lity
Ann
ual fi
nanc
ial s
tate
men
tsSh
areh
olde
rs’ in
form
atio
n
Notes to the financial statements continued
for the year ended 30 June 2020
Assumptions and estimation uncertainties Information about assumptions and estimation uncertainties at 30 June 2019 that have a significant risk of resulting in
a material adjustment to the carrying amounts of assets and liabilities in the next reporting period is included in the following notes:
Assumptions and estimation uncertainty Related note
Deferred tax: availability of future taxable profits against which deductible temporary differences and tax losses carried forward can be utilised
15
Useful lives and residual values of tangible assets: key assumptions in relation to the useful life and residual values assessments
9
Impairment of non-financial assets: key assumptions underlying recoverable amounts 10
Impairment of goodwill: key assumptions underlying recoverable amounts 11
Revenue recognition: estimate of expected returns 26
Measurement of expected credit losses (“ECLs”): key assumptions in determining the loss rates and credit ratings
36.7
Net realisable value (“NRV”) of inventory: key assumptions in determining the NRV 16
Business combinations: fair value estimation of contingent consideration 23.2; 35
Share-based payment arrangement: key inputs into the appropriate valuation model 37.3
COVID-19 impact on measurement of ECLs: assessment of forward-looking information 5
COVID-19 impact on impairment of goodwill: input of forward-looking information into model 5
5. COVID-19 PANDEMIC During the reporting period, there has been widespread local and global uncertainty associated with the COVID-19
pandemic. On 15 March 2020, a National State of Disaster was declared in South Africa due to the COVID-19 pandemic and subsequently, on 26 March 2020, a national lockdown became effective for all South African citizens and businesses. This national lockdown was extended until 30 April 2020. On 1 May 2020, a risk-adjusted phased-in approach of economic activity was implemented and promulgated in terms of the Disaster Management Act of South Africa, 2002 (Act 57 of 2002).
It is important to note that the material operational entities within the Group, were classified as essential service providers during the national lockdown and remained operational throughout the economic restrictions implemented by Government during the reporting period. The majority of staff members worked remotely contributing to the limited disruption in operational activity although the various entities operated at reduced activity levels.
The COVID-19 pandemic has had a significant impact across the world, negatively affecting the lives of the Group’s customers and its employees. Based on the magnitude of the pandemic and its potential impact on the financial statements, management has conducted a review of the possible financial effects the pandemic could have on the measurement, presentation and disclosure provided.
156
ALV
IVA
HO
LDIN
GS
LIM
ITED
•
Inte
grat
ed a
nnua
l rep
ort 2
020
Notes to the financial statements continued
for the year ended 30 June 2020
COVID-19 consideration Assessment ImpactRelated
note
Impairment of goodwill The pandemic had an impact on the operational and valuation assumptions and inputs applied in the recoverability assessment in relation to the cash-generating units of the various investments in subsidiaries held within the Group. Management adopted a conservative approach in the assessment of the impairment models applied based on the long-term impact on the economy as a whole. It is important to note that overall the pandemic was not the sole contributing factor to the overall impairments recognised but merely a contributing factor.
Low to moderate
11
Financial asset impairment
The financial impact of the crisis has put an increased level of pressure on customers throughout the economic landscape in South Africa and foreign countries in which the Group operates. The overall increased risk is mitigated by the Group in relation to the continuous enforcement of the strict credit approval process, historically applied, as well as the insurance cover in relation to customer balances. The overall recoverability of the customers did not deteriorate significantly although some isolated customers indicated a level of financial difficulty and requested short-term payment relief. The Group adjusted the overall ECL ratings model for the impact of COVID-19 and other macro-economic factors and remained conservative in the application of the model based on the default indicators as set out in the accounting policies.
Moderate 36.7
There was a potential impairment on cash balances due to the negative impact of the pandemic on financial institutions. The nature of the bank balances of the Group is largely short-term, comprising mainly current accounts. Given the significant actions taken by central banks to improve liquidity through monetary and fiscal interventions, the Group’s ECLs on cash balances remained immaterial.
Insignificant 36.7
Non-financial asset impairment
The nature of the non-financial assets and the fact that the significant operational entities of the Group were classified as essential service providers, resulted that the overall non-financial assets have been recovered through use in the normal course of business albeit at a reduced operational level. In addition to this, the Group’s revenue-generating processes is not directly dependent on the non-financial assets of the Group. Discretionary capital expenditure was reduced during the last quarter of the reporting period.
Future projections and underlying insured values still support the carrying value of non-financial assets of the Group.
Insignificant 10
157
Ove
rvie
wG
over
nanc
eSu
stai
nabi
lity
Ann
ual fi
nanc
ial s
tate
men
tsSh
areh
olde
rs’ in
form
atio
n
Notes to the financial statements continued
for the year ended 30 June 2020
COVID-19 consideration Assessment ImpactRelated
note
Foreign currency exchange rates
Significant movements in currencies expose the Group to foreign currency gains and losses and also impact the Group’s translation of its results into its presentation currency i.e., South African Rand (ZAR). The ZAR weakened against most of the currencies of the Group’s foreign entities during the reporting period, which resulted in a slight increase in other comprehensive income of the Group. The Group manages the risk against foreign currency exposure by means of FEC contracts which mitigated the Group’s exposure from the impact of the pandemic.
Low 36.4
Inventories Although the overall pandemic resulted in a restriction on imports of certain inventory items during the national lockdown, the inventory levels stabilised during the implementation of the risk-adjusted approach implemented by Government. Mitigating factors include the fact that the significant operational entities of the Group were classified as essential service providers in combination with the continuing operations of the Group, although at a reduced level during the initial restricted economic environment. This resulted in no significant impact in relation to inventories as the items will be sold during the normal course of operations of the Group in the foreseeable future.
Low 16
Leases There has been no major impact on the accounting treatment of leases as a result of COVID-19. With the ICT industry being treated as an essential service provider, operations have continued to provide services to customers. The Group did receive minimal rent concessions from some landlords during the reporting period.
Low 22.1
Events after the reporting period
The pandemic did not result in any material or significant adjusting events after the reporting period.
Insignificant 43
158
ALV
IVA
HO
LDIN
GS
LIM
ITED
•
Inte
grat
ed a
nnua
l rep
ort 2
020
Notes to the financial statements continued
for the year ended 30 June 2020
COVID-19 consideration Assessment ImpactRelated
note
Going concern The operations of the Group have stabilised and management anticipates minimal disruptions in the foreseeable future. The Group maintains a level of solvency and liquidity and effective management of the cash position of the Group, without the utilisation of any government implemented debt relief schemes (except TERS funding in relation to leave days for employees), which are all indicators of a reduced impact of COVID-19 on the going concern of the Group. As part of the implemented pandemic responses by management, the Group implemented a liquidity management process whereby the Group obtained short-term repayment extensions from certain suppliers and extended the redemption of the preference shares by three months as per the contractual terms of the contract. Substantial repayments to suppliers and the redemption payment in relation to the preference share was successfully executed after the reporting date with the working capital of the Group stabilising to normal operational levels.
Low 44
Onerous contracts The nature of the Group's customers with contracts is not indicative of any likely significant onerous contract provisions.
Insignificant 17
Recoverability of deferred tax assets
A deferred tax asset is only recognised to the extent that the Group will have adequate future taxable income in relation to the unutilised estimated assessed losses. The pandemic lead to a reduced level of operations in the Group, which has since increased towards the end of the reporting period due to the classification of the major operational entities as essential service providers and the relaxation of economic restraints in relation to the overall risk-adjusted approach. The Group will have adequate future taxable income in relation to unutilised estimated assessed losses.
Low 15
Contingent consideration The pandemic resulted in pressure on the operational activities of some specific entities, which contributed as a factor to the adjustment of the contingent consideration. It is important to note that other business factors also contributed to the underperformance of these entities and that the pandemic was not the sole contributing factor.
Low 23.2
159
Ove
rvie
wG
over
nanc
eSu
stai
nabi
lity
Ann
ual fi
nanc
ial s
tate
men
tsSh
areh
olde
rs’ in
form
atio
n
Notes to the financial statements continued
for the year ended 30 June 2020
6. SIGNIFICANT ACCOUNTING POLICIES6.1 BASIS OF CONSOLIDATION
Business combinations
The consolidated financial statements incorporate the results of business combinations using the acquisition method. The consideration transferred in a business combination is measured as the aggregate of the fair values (at the date of exchange) of assets transferred, liabilities incurred or assumed, and equity instruments issued by the Group in exchange for control of the acquiree. The acquisition-related costs are accounted for as an expense in the period in which the costs are incurred and the services are received. The results of acquired operations are included in the consolidated financial statements from the date on which control is obtained.
Non-controlling interests that represent present ownership interest and entitle their holders to a proportionate share of the entity’s net assets in the event of liquidation, are initially measured at fair value or at the non-controlling interests’ proportionate share of the recognised amounts of the acquiree’s identifiable net assets. The choice of measurement basis is made on a transaction-by-transaction basis.
When the consideration transferred by the Group in a business combination includes assets or liabilities resulting from a contingent consideration arrangement, the contingent consideration is measured at its acquisition-date fair value and included as part of the consideration transferred in a business combination. Changes in the fair value of the contingent consideration that qualify as measurement period adjustments are adjusted retrospectively, with corresponding adjustments recognised in goodwill. Measurement period adjustments are adjustments that arise from additional information obtained during the ‘measurement period’ (which cannot exceed one year from the acquisition date) about facts and circumstances that existed at the acquisition date.
The subsequent accounting for changes in the fair value of the contingent consideration that do not qualify as measurement period adjustments depends on how the contingent consideration is classified. Contingent consideration that is classified as equity is not measured at subsequent reporting dates and its subsequent settlement is accounted for within equity. Contingent consideration that is classified as an asset or liability is remeasured at subsequent reporting dates in accordance with IFRS 9: Financial Instruments or, IAS 37 Provisions, Contingent Liabilities and Contingent Assets, as appropriate, with the corresponding gain or loss recognised in profit or loss.
Subsidiaries
The consolidated financial statements incorporate the financial statements of the Company and all investees controlled by the Company which are classified as subsidiaries, including the Ledibogo Group. The results of subsidiaries acquired or disposed of during the reporting period are included in the consolidated financial statements from or up to the effective date that control commences or is relinquished, as appropriate. Inter-company transactions and balances between Group companies are eliminated in full.
The Company measures, in its separate financial statements, its investments in subsidiaries at cost less impairment, if any.
Non-controlling interests (“NCI”)
NCI in the net assets (excluding goodwill) of consolidated subsidiaries are identified separately from the Group’s equity therein. NCI consist of the amount 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.
Where there is a change in the interest in a subsidiary that does not result in a loss of control, the difference between the fair value of the consideration transferred or received and the amount by which the NCI is adjusted, is recognised as an equity transaction directly in the statement of changes in equity. Transactions with NCI are treated as transactions with equity owners of the Group.
For purchases from NCI, the difference between the consideration paid and the relevant share acquired of the carrying value of the net assets of the subsidiary, is recognised in equity.
160
ALV
IVA
HO
LDIN
GS
LIM
ITED
•
Inte
grat
ed a
nnua
l rep
ort 2
020
Notes to the financial statements continued
for the year ended 30 June 2020
When the Group loses control over a subsidiary, it derecognises the assets and liabilities of the subsidiary, and any related NCI and other components of equity. Any resulting gain or loss is recognised in profit or loss. Any interest retained in the former subsidiary is measured at fair value when control is lost.
Investments in equity-accounted investees
The Group’s investments in equity-accounted investees comprise interests in an associate and a joint venture.
An associate is an investee over which the Group can exercise significant influence, but does not have control nor joint control over the financial and operating policies.
A joint venture is a joint arrangement whereby the Group and other parties undertake an economic activity that is subject to joint control, and the Group has rights to the net assets of the arrangement, rather than the right to its assets and obligations for its liabilities.
Interests in the associate and joint venture are accounted for using the equity method from the date on which the investee becomes an equity-accounted investee.
Equity method
Under the equity method, the investments in equity-accounted investees are initially recognised at cost and thereafter adjusted to recognise the investor’s share of the post–acquisition profits or losses of the investee, distributions received and any adjustments that are required. The share of profits or losses are recognised in profit or loss. The cumulative post acquisition movements are adjusted against the carrying amount of the investment.
Where a Group entity transacts with an equity-accounted investee of the Group, profits or losses are eliminated to the extent of the Group’s interest in the relevant investee.
In the separate financial statements of the Company, equity-accounted investees are accounted for at cost and adjusted for impairment if applicable.
Common control transactions
For transactions in which combining entities are controlled by the same party or parties before and after the transaction and where that control is not transitory are referred to as common control transactions. The Group’s accounting policy for the acquiring entity would be to account for the transaction at book values as reflected in the financial statements of the selling entity. The excess of the cost of the transaction over the acquirer’s proportionate share of the net assets value acquired in common control transactions, will be allocated to the common control reserve in equity.
An acquiring entity accounts for a common control transaction at the book values reflected in the financial statements of the selling entity and there is no restatement of comparative information. The difference between any purchase consideration and the net asset value of the acquiree is recognised in equity in the common control reserve of the acquirer.
Common control transactions are eliminated on consolidation.
6.2 PROPERTY, PLANT AND EQUIPMENT
All items of property and equipment, except for land, which is measured at cost, are measured at cost less accumulated depreciation and any accumulated impairment losses. The right-of-use asset represents property leased by the Group. The property comprises administrative and storage space.
Subsequent expenditure is capitalised only if it is probable that the future economic benefits associated with the expenditure will flow to the Group.
Freehold land is not depreciated. Depreciation is charged so as to write-off the cost of all other assets over their estimated useful lives to their residual values, using the straight-line method. The depreciation charge for each period is recognised in profit or loss. Depreciation commences when the assets are ready for their intended use. Right of use assets are depreciated over their expected useful lives on the same basis as owned assets or, where shorter, the term of the relevant lease.
161
Ove
rvie
wG
over
nanc
eSu
stai
nabi
lity
Ann
ual fi
nanc
ial s
tate
men
tsSh
areh
olde
rs’ in
form
atio
n
Notes to the financial statements continued
for the year ended 30 June 2020
The estimated useful lives for current and comparative periods are as follow:
Right-of-use assets: Properties Remainder of lease term
Buildings 25 to 50 years
Motor vehicles including right-of-use assets * 5 to 6 years
Office equipment * 6 years
Computer equipment * 3 to 4 years
Plant and equipment * 5 years
Right-of-use assets: Equipment * Remainder of lease term
Furniture, fittings and other equipment * 6 to 10 years
Leasehold improvements Remainder of lease term
Rental assets 3 to 5 years
* All of these classes are included under “Plant, vehicles and equipment” in note 9.
The residual values, useful lives and depreciation methods are reviewed at each reporting date and adjusted if appropriate.
Any gain or loss on disposal of an item of property, plant and equipment is recognised in profit or loss.
6.3 LEASES
The Group has initially applied IFRS 16 from 1 July 2019 (refer to note 22.1).
POLICY APPLICABLE FROM 1 JULY 2019
At inception of a contract, the Group assesses whether a contract is, or contains, a lease. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. To assess whether a contract conveys the right to control the use of an identified asset, the Group uses the definition of a lease in IFRS 16.
This policy is applied to contracts entered into, on or after 1 July 2019.
Group as lessee
The Group leases various properties for administrative and warehouse purposes.
At commencement or on modification of a contract that contains a lease component, the Group allocates the consideration in the contract to each lease component on the basis of its relative stand-alone prices. However, for the leases of property the Group has elected not to separate non-lease components and account for the lease and non-lease components as a single lease component.
The Group recognises a right-of-use asset and a lease liability at the lease commencement date. The right-of-use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date, less any lease incentives received.
The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to the end of the lease term. In addition, the right-of-use asset is periodically reduced by impairment losses, if any, and adjusted for certain remeasurements of the lease liability.
The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Group’s incremental borrowing rate. Generally, the Group uses its incremental borrowing rate as the discount rate.
The Group determines its incremental borrowing rate based on the external financing resources from a treasury function point of view as this is the function which would be utilised to fund the purchase of assets similar to the leased assets of the Group.
162
ALV
IVA
HO
LDIN
GS
LIM
ITED
•
Inte
grat
ed a
nnua
l rep
ort 2
020
Notes to the financial statements continued
for the year ended 30 June 2020
Lease payments included in the measurement of the lease liability comprise the following:
� fixed payments, including in-substance fixed payments; and
� lease payments in an optional renewal period if the Group is reasonably certain to exercise an extension option, and penalties for early termination of a lease unless the Group is reasonably certain not to terminate early.
The leases entered into by the Group do not have variable lease payments that depend on an index rate, residual value guarantees or any purchase options.
The lease liability is measured at amortised cost using the effective interest method. It is remeasured if there is a change in assessment of whether the Group will exercise an extension or termination option or if there is a revised in-substance fixed lease payment. When the lease liability is remeasured in this way, a corresponding adjustment is made to the carrying amount of the right-of-use asset, or is recognised in profit or loss if the carrying amount of the right-of-use asset has been reduced to zero.
The Group presents right-of-use assets in ‘property, plant and equipment’ and lease liabilities in ‘interest-bearing liabilities’ in the statement of financial position.
The Group has elected not to recognise right-of-use assets and lease liabilities for short-term leases in relation to properties and equipment. The Group recognises the lease payments associated with these leases as an expense on a straight-line basis over the lease term.
The Group enters into sale-and-leaseback transactions with external financing sources in relation to equipment. The Group transfers the underlying asset to the seller at the fair value of the underlying asset.
Reference is made to the requirements of IFRS 15 to determine whether or not the transfer of the underlying asset is a sale or not in relation to sale-and-leaseback transactions. If the transfer of the asset is not a sale, the seller will continue to recognise the transferred asset and will recognise a financial liability under IFRS 9 equal to the transfer proceeds.
For the Group, the transfer of the equipment under sale-and-leaseback transactions do not meet the definition of a sale under IFRS 15 and therefore the Group continues to recognise the underlying assets as property, plant and equipment. A financial liability has been recognised at an amount equal to the proceeds received and is presented in “interest-bearing liabilities” in the statement of financial position.
POLICY APPLICABLE BEFORE 1 JULY 2019
Group as lessee
Where substantially all of the risks and rewards incidental to ownership of a leased asset were transferred to the Group (a “finance lease”), the asset was treated as if it had been acquired. The amount initially recognised as an asset was the fair value or, if lower, the present value of the minimum lease payments payable over the term of the lease. The corresponding lease commitment was shown as a liability. Lease payments were analysed between capital and finance cost. The finance cost was allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability. The capital element reduced the balance owed to the lessor. Where substantially all of the risks and rewards incidental to ownership were retained by the lessor (an “operating lease”), the total rentals payable under the lease were recognised in profit or loss on a straight-line basis over the lease term. Land and buildings of property leases were considered separately for the purposes of lease classification.
Group as lessor
When the Group acted as a lessor, it determined at lease inception whether each lease was a finance lease or an operating lease.
To classify each lease, the Group made an overall assessment of whether the lease transferred substantially all of the risks and rewards incidental to ownership of the underlying asset. If this was the case, then the lease was a finance lease; if not, then it was an operating lease. As part of this assessment, the Group considered certain indicators such as whether the lease was for the major part of the economic life of the asset.
163
Ove
rvie
wG
over
nanc
eSu
stai
nabi
lity
Ann
ual fi
nanc
ial s
tate
men
tsSh
areh
olde
rs’ in
form
atio
n
Notes to the financial statements continued
for the year ended 30 June 2020
6.4 GOODWILL
Goodwill arising on acquisition represents the excess of the cost of a business combination plus NCI over the fair value of identifiable assets, liabilities and contingent liabilities acquired. Goodwill is recognised as an intangible asset with any impairment of the carrying value being recognised in profit or loss. Cash-generating units (“CGUs”) to which goodwill has been allocated are tested for impairment annually, or more frequently, when there is an indication that the unit may be impaired. If the recoverable amount of the CGU is less than the carrying amount of the unit, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro rata to the carrying amount of each asset in the unit. An impairment loss recognised for goodwill is not reversed in a subsequent period.
On disposal of a subsidiary, the attributable amount of goodwill is included in the determination of the profit or loss on disposal.
6.5 INTANGIBLE ASSETS
Externally acquired intangible assets are recognised at cost less accumulated amortisation and any accumulated impairment losses. These intangible assets are amortised on a straight–line basis over their useful lives. Software and trademarks are considered to have finite useful lives. The estimated useful life, residual values and amortisation method are reviewed at each reporting date, and adjusted if appropriate.
The intangibles recognised by the Group and their useful lives are as follows:
Contract-based intangible assets Term of the contract
Customer relationships 3 to 6 years
Mainframe software 5 to 10 years
Operating and desktop-based software 2 to 3 years
Trademarks 10 years
Any gain or loss on disposal of an intangible asset is recognised in profit or loss.
Internally generated intangible assets are recognised initially at cost, being the sum of expenditure from the date the recognition criteria for an intangible asset are met, bearing in mind the following additional criteria:
� During the research phase, no intangible asset is recognised. Expenditure on research is recognised as an expense when it is incurred.
� During the development phase, an intangible asset will be recognised only if the following can be demonstrated:
� it is technically feasible to complete the intangible asset so that it will be available for use or sale;
� there is an intention to complete the intangible asset and use or sell it;
� there is an ability to use or sell the intangible asset;
� it is possible to demonstrate how the asset will generate probable future economic benefits;
� there are available financial, technical and other resources to complete the development of the intangible asset as well as to use or sell the intangible asset; and
� the expenditure attributable to the intangible asset during the development phase can be reliably measured.
164
ALV
IVA
HO
LDIN
GS
LIM
ITED
•
Inte
grat
ed a
nnua
l rep
ort 2
020
Notes to the financial statements continued
for the year ended 30 June 2020
6.6 SHARE-BASED PAYMENTS
The grant-date fair value of equity-settled share-based payment arrangements granted to employees is generally recognised as an expense, with a corresponding increase in equity, over the vesting period of the awards. The amount recognised as an expense is adjusted to reflect the number of awards for which the related service and non-market performance conditions are expected to be met, such that the amount ultimately recognised is based on the number of awards that meet the related service and non-market performance conditions at the vesting date.
6.7 INVENTORIES
Inventories consist of inventory on hand, goods in transit and work in progress and are initially recognised at cost. Inventories are subsequently measured at the lower of cost and net realisable value. The cost of inventories is assigned using the weighted average cost formula. The same cost formula is used for all inventories having a similar nature and use to the Group.
When inventories are sold, the carrying amount is recognised as an expense in the period in which the related revenue is recognised.
An allowance for obsolete or damaged inventory is maintained by the Group. The level of the allowance for obsolete inventory is equivalent to the value of the difference between the cost of the inventory and its net realisable value or current replacement cost at the reporting date. Movements in this allowance are recognised in profit or loss.
6.8 FINANCIAL INSTRUMENTS
Recognition and initial measurement
Trade receivables are initially recognised when they are originated. All other financial assets and financial liabilities are initially recognised when the Group becomes a party to the contractual provisions of the instrument.
A financial asset (unless it is a trade receivable without a significant financing component) or financial liability is initially measured at fair value plus, for an item not at fair value through profit or loss (“FVTPL”), transaction costs that are directly attributable to its acquisition or issue. A trade receivable without a significant financing component is initially measured at the transaction price.
Financial assets
Classification
On initial recognition, a financial asset is classified as measured at:
� amortised cost;
� fair value through other comprehensive income (“FVOCI”) – debt investment;
� FVOCI – equity investment; or
� FVTPL.
165
Ove
rvie
wG
over
nanc
eSu
stai
nabi
lity
Ann
ual fi
nanc
ial s
tate
men
tsSh
areh
olde
rs’ in
form
atio
n
Notes to the financial statements continued
for the year ended 30 June 2020
Financial assets are not reclassified subsequent to their initial recognition unless the Group changes its business model for managing financial assets, in which case all affected financial assets are reclassified on the first day of the first reporting period following the change in the business model.
The Group’s financial assets comprise only financial assets at amortised cost and financial assets measured at FVTPL.
A financial asset is measured at amortised cost if it meets both of the following conditions and is not designated as at FVTPL:
� it is held within a business model whose objective is to hold assets to collect contractual cash flows; and
� its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
All financial assets not classified as measured at amortised cost as described above are measured at FVTPL, including derivative financial assets.
Business model assessment
The Group makes an assessment of the objective of the business model in which a financial asset is held at a portfolio level because this best reflects the way the business is managed and information is provided to management. The information considered includes:
� the stated policies and objectives for the portfolio and the operation of those policies in practice. These include whether management’s strategy focuses on earning contractual interest income, maintaining a particular interest rate profile, matching the duration of the financial assets to the duration of any related liabilities or expected cash outflows or realising cash flows through the sale of the assets;
� how the performance of the portfolio is evaluated and reported to the Group’s management;
� the risks that affect the performance of the business model (and the financial assets held within that business model) and how those risks are managed;
� how managers of the business are compensated – e.g. whether compensation is based on the fair value of the assets managed or the contractual cash flows collected; and
� the frequency, volume and timing of sales of financial assets in prior periods, the reasons for such sales and expectations about future sales activity.
The Group assessed the various financial assets in relation to the various considerations of the business model and concluded that all the financial assets, except derivatives, are held by the Group with the main objective of collecting the contractual cash flows and that the contractual terms give rise to cash flows that are solely payments of principal and interest (if applicable). Other factors considered by the Group that support the assessment include the fact that the portfolios of these financial instruments are assessed on the collectability of the portfolio, the fact that the Group does not have a history of selling these types of financial instruments and the fact that the remuneration of managers includes compensation based on the effective collectability of these financial instruments. The only exception was derivatives classified as FVTPL.
Transfers of financial assets to third parties in transactions that do not qualify for derecognition are not considered sales for this purpose, consistent with the Group’s continuing recognition of the assets.
Financial assets that are held for trading or are managed and whose performance is evaluated on a fair value basis are measured at FVTPL.
Assessment whether contractual cash flows are solely payments of principal and interest
For the purposes of this assessment, ‘principal’ is defined as the fair value of the financial asset on initial recognition. ‘Interest’ is defined as consideration for the time value of money and for the credit risk associated with the principal amount outstanding during a particular period of time and for other basic lending risks and costs (e.g. liquidity risk and administrative costs), as well as a profit margin.
166
ALV
IVA
HO
LDIN
GS
LIM
ITED
•
Inte
grat
ed a
nnua
l rep
ort 2
020
Notes to the financial statements continued
for the year ended 30 June 2020
In assessing whether the contractual cash flows are solely payments of principal and interest, the Group considers the contractual terms of the instrument. This includes assessing whether the financial asset contains a contractual term that could change the timing or amount of contractual cash flows such that it would not meet this condition. In making this assessment, the Group considers:
� contingent events that would change the amount or timing of cash flows;
� terms that may adjust the contractual coupon rate, including variable-rate features;
� prepayment and extension features; and
� terms that limit the Group’s claim to cash flows from specified assets (e.g. non-recourse features).
Subsequent measurement and gains and losses
Financial assets at FVTPL
These assets are subsequently measured at fair value. Net gains or losses are recognised in profit or loss. These assets include derivatives.
Financial assets at amortised cost
These assets are subsequently measured at amortised cost using the effective interest method. The amortised cost is reduced by impairment losses. Interest income and impairment losses are recognised in profit or loss. Any derecognition gain or loss is recognised in profit or loss.
Financial liabilities
Classification, subsequent measurement and gains and losses
Financial liabilities are classified as measured at amortised cost or FVTPL. A financial liability is classified as at FVTPL if it is classified as held-for-trading, it is a derivative or it is designated as such on initial recognition.
Financial liabilities at FVTPL are measured at fair value and net gains and losses, including any interest expense, are recognised in profit or loss. Other financial liabilities are subsequently measured at amortised cost using the effective interest method. Interest expense and foreign exchange gains and losses are recognised in profit or loss. Any gain or loss on derecognition is also recognised in profit or loss.
Derecognition
Financial assets
The Group derecognises a financial asset when the contractual rights to the cash flows from the financial asset expire, or it transfers the rights to receive the contractual cash flows in a transaction in which substantially all of the risks and rewards of ownership of the financial asset are transferred or in which the Group neither transfers nor retains substantially all of the risks and rewards of ownership and it does not retain control of the financial asset.
The Group enters into transactions whereby it transfers assets recognised in its statement of financial position, but retains either all or substantially all of the risks and rewards of the transferred assets. In these cases, the transferred assets are not derecognised.
Financial liabilities
The Group derecognises a financial liability when its contractual obligations are discharged or cancelled, or expire. The Group also derecognises a financial liability when its terms are modified and the cash flows of the modified liability are substantially different, in which case a new financial liability based on the modified terms is recognised at fair value.
On derecognition of a financial liability, the difference between the carrying amount extinguished and the consideration paid (including any non-cash assets transferred or liabilities assumed) is recognised in profit or loss.
Offsetting
Financial assets and financial liabilities are offset and the net amount presented in the statement of financial position when, and only when, the Group currently has a legally enforceable right to set off the amounts and it intends either to settle them on a net basis or to realise the asset and settle the liability simultaneously.
167
Ove
rvie
wG
over
nanc
eSu
stai
nabi
lity
Ann
ual fi
nanc
ial s
tate
men
tsSh
areh
olde
rs’ in
form
atio
n
Notes to the financial statements continued
for the year ended 30 June 2020
6.9 IMPAIRMENT OF FINANCIAL ASSETS AND FINANCE LEASE RECEIVABLES
Financial instruments and finance lease receivables
The Group recognises loss allowances for ECLs on:
� financial assets measured at amortised cost; and
� finance lease receivables.
The Group measures loss allowances at an amount equal to lifetime ECLs, except for bank balances for which credit risk (i.e. the risk of default occurring over the expected life of the financial instrument) has not increased significantly since initial recognition, which are measured at 12-month ECLs.
Loss allowances for trade receivables and finance lease receivables are always measured at an amount equal to lifetime ECLs. The simplified approach is applied to the trade receivables.
When determining whether the credit risk of a financial asset or finance lease receivable has increased significantly since initial recognition and when estimating ECLs, the Group considers reasonable and supportable information that is relevant and available without undue cost or effort. This includes both quantitative and qualitative information and analysis, based on the Group’s historical experience and informed credit assessment and including forward-looking information.
The Group assumes that the credit risk on a financial asset or finance lease receivable has increased significantly if it is more than 30 days past due.
The Group considers a financial asset or finance lease receivable to be in default when:
� the borrower is unlikely to pay its credit obligations to the Group in full, without recourse by the Group to actions such as realising security (if any is held); or
� the financial asset is more than 90 days past due.
Lifetime ECLs are the ECLs that result from all possible default events over the expected life of a financial instrument or finance lease receivable.
12-month ECLs are the portion of ECLs that result from default events that are possible within the 12 months after the reporting date (or a shorter period if the expected life of the instrument is less than 12 months).
The maximum period considered when estimating ECLs is the maximum contractual period over which the Group is exposed to credit risk.
Measurement of ECLs
ECLs are a probability-weighted estimate of credit losses. Credit losses are measured as the present value of all cash shortfalls (i.e. the difference between the cash flows due to the entity in accordance with the contract and the cash flows that the Group expects to receive). ECLs are discounted at the effective interest rate of the financial asset or finance lease receivable.
Credit-impaired financial assets
At each reporting date, the Group assesses whether financial assets measured at amortised cost and finance lease receivables are credit-impaired. A financial asset or finance lease receivable is ‘credit-impaired’ when one or more events that have a detrimental impact on the estimated future cash flows of the financial asset have occurred.
Evidence that a financial asset or finance lease receivable is credit-impaired includes the following observable data:
� significant financial difficulty of the borrower or issuer;
� a breach of contract such as a default or being more than 90 days past due;
� the restructuring of a loan or advance by the Group on terms that the Group would not consider otherwise;
� it is probable that the borrower will enter bankruptcy or other financial reorganisation.
168
ALV
IVA
HO
LDIN
GS
LIM
ITED
•
Inte
grat
ed a
nnua
l rep
ort 2
020
Notes to the financial statements continued
for the year ended 30 June 2020
Presentation of allowance for ECL in the statement of financial position
Loss allowances for financial assets measured at amortised cost are deducted from the gross carrying amount of the assets. Loss allowances for finance lease receivables are deducted from the gross carrying amount of the assets.
Write-off
The gross carrying amount of a financial asset or finance lease receivable is written off when the Group has no reasonable expectations of recovering a financial asset in its entirety or a portion thereof. For corporate customers, the Group individually makes an assessment with respect to the timing and amount of write-off based on whether there is a reasonable expectation of recovery. The Group expects no significant recovery from the amount written off. However, financial assets
or finance lease receivables that are written off are no longer subject to enforcement activities for recovery of amounts due.
6.10 IMPAIRMENT OF NON-FINANCIAL ASSETS
At each reporting date, the Group reviews the carrying amounts of its property, plant and equipment and intangible assets, other than goodwill, to determine whether there is any indication that those assets have incurred an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the CGUs to which the asset belongs. Where a reasonable and consistent basis of allocation can be identified, corporate assets are also allocated to individual CGUs, or otherwise they are allocated to the smallest group of CGUs for which a reasonable and consistent allocation basis can be identified. Intangible assets with indefinite useful lives, including goodwill, and intangible assets not yet available for use are tested for impairment annually, and whenever there is an indication that the asset may be impaired.
Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted. If the recoverable amount of an asset (or CGU) is estimated to be less than its carrying amount, the carrying amount of the asset (or CGU) is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss.
Where an impairment loss subsequently reverses, other than goodwill which never reverses, the carrying amount of the asset (or CGU) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or CGU) in prior years. A reversal of an impairment loss is recognised immediately in profit or loss.
6.11 STATED CAPITAL
Ordinary shares are classified as equity. Incremental external costs directly attributable to the issue of ordinary shares or share options are recognised in equity as a deduction, net of tax from the proceeds.
6.12 TREASURY SHARES
When shares recognised as equity are repurchased, the amount of the consideration paid, which includes directly attributable costs, is recognised as a deduction from equity. Repurchased shares are classified as treasury shares and are presented in the treasury share reserve. When treasury shares are sold or reissued subsequently, the amount received is recognised as an increase in equity and the resulting surplus or deficit on the transaction is presented in retained earnings.
169
Ove
rvie
wG
over
nanc
eSu
stai
nabi
lity
Ann
ual fi
nanc
ial s
tate
men
tsSh
areh
olde
rs’ in
form
atio
n
Notes to the financial statements continued
for the year ended 30 June 2020
6.13 FOREIGN CURRENCY
Foreign currency transactions
Transactions entered into by Group entities in a currency other than the currency of the primary economic environment in which it operates (the “functional currency”) are recognised at the rates ruling when the transactions occur. Foreign currency monetary assets and liabilities are translated at the rates ruling at the reporting date. Exchange differences arising on the translation of unsettled monetary assets and liabilities are recognised immediately in profit or loss.
Foreign currency non-monetary assets and liabilities measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of the transaction; and non-monetary assets and liabilities measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was measured. When a gain or loss on a non–monetary item is recognised in other comprehensive income, any exchange difference component of that gain or loss is recognised in other comprehensive income. Conversely, when a gain or loss on a non-monetary item is recognised in profit or loss, any exchange difference component of that gain or loss is recognised in profit or loss.
Foreign operations
On consolidation, the results of foreign operations are translated into South African Rand at rates approximating those ruling when the transactions took place. All assets and liabilities of foreign operations, including goodwill arising on the acquisition of those operations, are translated at the rate ruling at the reporting date. Exchange differences arising on translating the opening net assets at opening rate and the results of foreign operations at actual rate are recognised in other comprehensive income and accumulated in the foreign exchange translation reserve which is included in a separate reserve, presented as part of other equity in the statement of changes in equity.
Exchange differences recognised in profit or loss of Group entities’ separate financial statements on the translation of long-term monetary items forming part of the Group’s net investment in the foreign operation concerned are reclassified to the foreign exchange reserve if the item is denominated in the functional currency of the Group or the foreign operation concerned. On disposal of a foreign operation, the cumulative exchange differences recognised in the foreign exchange translation reserve relating to that operation up to the date of disposal are transferred to profit or loss as part of the gain or loss on disposal.
6.14 CONTRACT LIABILITIES
Warranty cover
The Group has a separate performance obligation in terms of its contracts with its customers to repair or replace goods sold with one, two or three year carry-in or on-site warranties in the event that the product should fail to operate under normal operating conditions. The portion of the revenue earned on the transaction with the customer that relates to the warranty cover is deferred and recognised in profit or loss over the period of the warranties.
Service and maintenance contracts
Revenue that relates to service and maintenance contracts contracted for a 12 to 36-month period is deferred and recognised on a systematic basis over the remaining period of the contract in terms of services rendered.
170
ALV
IVA
HO
LDIN
GS
LIM
ITED
•
Inte
grat
ed a
nnua
l rep
ort 2
020
Notes to the financial statements continued
for the year ended 30 June 2020
6.15 INCOME TAX
Deferred tax
Deferred tax assets and liabilities are recognised where the carrying amount of an asset or liability in the statement of financial position differs to its tax base, except for differences arising on:
� the initial recognition of goodwill;
� the initial recognition of an asset or liability in a transaction which is not a business combination and at the time of the transaction affects neither accounting nor taxable profit; and
� investments in subsidiaries where the Group is able to control the timing of the reversal of the difference and it is probable that the difference will not reverse in the foreseeable future.
Recognition of deferred tax assets is restricted to those instances where it is probable that taxable profit will be available against which the difference can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised; such reductions are reversed when the probability of future taxable profits improves. Unrecognised deferred tax assets are re-assessed at each reporting date and recognised to the extent that it has become probable that future taxable profits will be available against which they can be used.
The amount of the asset or liability is determined using tax rates that have been enacted or substantially enacted by the end of the reporting period and are expected to apply when the deferred tax liabilities/(assets) are settled/(recovered). Deferred tax balances are not discounted.
Deferred tax assets and liabilities are offset only when certain criteria are met.
Current tax
The tax currently payable (or receivable) is based on taxable profit for the year. Taxable profit differs from profit as reported in profit or loss because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Group’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the reporting date.
The Group and its subsidiaries offset current tax assets and current tax liabilities if only when certain criteria are met.
6.16 REVENUE
Revenue is measured based on the consideration specified in a contract with a customer and excludes amounts to be collected on behalf of third parties. The Group recognises revenue when it transfers control over a good or service to a customer.
Revenue from goods is recognised at a point in time, which is generally on delivery when no further performance obligations are required unless the product is provided as part of the installation process. Goods include ICT-related products such as hardware, software and associated licences, fibre-related components and solar components.
Revenue relating to services is recognised over the period which the service is performed and when control is transferred. Services include installation, distribution and maintenance. Revenue from the sale of extended warranties is recognised over the period of the warranty.
Revenue from leases is recognised on a straight-line basis over the period of the leases. Interest income from financing activities, directly related to the finance lease receivables, is recognised using the effective interest method.
Refer to note 26.3 for details about the Group’s accounting policies relating to contracts with customers.
171
Ove
rvie
wG
over
nanc
eSu
stai
nabi
lity
Ann
ual fi
nanc
ial s
tate
men
tsSh
areh
olde
rs’ in
form
atio
n
Notes to the financial statements continued
for the year ended 30 June 2020
6.17 FINANCE INCOME
Interest income on investments is accrued on a time basis, with reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts estimated future cash receipts over the expected life of the financial asset to that asset’s net carrying amount. However, for financial assets that have become credit-impaired subsequent to initial recognition, interest income is calculated by applying the effective interest rate to the amortised cost of the financial asset. If the asset is no longer credit-impaired, then the calculation of interest income reverts to the gross basis.
Dividend income from investments is recognised when the shareholders’ rights to receive payment have been established. Interest and dividend income received in relation to investments held are classified as revenue in profit or loss for the Company, based on the primary activities of the Company.
6.18 FINANCE COSTS
All finance costs are recognised in profit or loss using the effective interest method in the period in which they are incurred. The ‘effective interest rate’ is the rate that exactly discounts estimated future cash payments through the expected life of the financial instrument to the amortised cost of the financial liability.
6.19 EMPLOYEE BENEFITS
Short-term employee benefits
The cost of all short-term employee benefits is recognised as an expense during the reporting period in which the employee renders the related service.
Liabilities for employee entitlements to wages, salaries and annual leave represent the amount which the Group has a present obligation to pay as a result of employee services provided during the reporting period.
Defined contribution plan
Contributions to defined contribution pension schemes are recognised in profit or loss in the period to which they relate.
6.20 OPERATING PROFIT
Operating profit is the result generated from the continuing principal revenue-producing activities of the Group as well as other income and expenses related to operating activities. Operating profit excludes finance costs, finance income (other than recognised as revenue) and income taxes.
6.21 FAIR VALUE MEASUREMENT
‘‘Fair value’ is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date in the principal or, in its absence, the most advantageous market to which the Group has access at that date. The fair value of a liability reflects its non-performance risk.
A number of the Group’s accounting policies and disclosures require the measurement of fair values, for both financial and non-financial assets and liabilities (refer to note 36.2).
When one is available, the Group measures the fair value of an instrument using the quoted price in an active market for that instrument. A market is regarded as active if transactions for the asset or liability take place with sufficient frequency and volume to provide pricing information on an ongoing basis.
172
ALV
IVA
HO
LDIN
GS
LIM
ITED
•
Inte
grat
ed a
nnua
l rep
ort 2
020
Notes to the financial statements continued
for the year ended 30 June 2020
If there is no quoted price in an active market, then the Group uses valuation techniques that maximise the use of relevant observable inputs and minimise the use of unobservable inputs. The chosen valuation technique incorporates all of the factors that market participants would take into account in pricing a transaction.
If an asset or a liability measured at fair value has a bid price and an ask price, then the Group measures assets and long positions at a bid price and liabilities and short positions at an ask price.
The best evidence of the fair value of a financial instrument on initial recognition is normally the transaction price, i.e., the fair value of the consideration given or received. If the Group determined that the fair value on initial recognition differs from the transaction price and the fair value is evidenced neither by a quoted price in an active market for an identical asset or liability nor based on a valuation technique for which any unobservable inputs are judged to be insignificant in relation to the measurement, then the financial instrument is initially measured at fair value, on initial recognition at the transaction price. Consequently, that difference is recognised in profit or loss on an appropriate basis over the life of the instrument but no later than when the valuation is wholly supported by observable market data or the transaction is closed out.
7. CHANGES IN SIGNIFICANT ACCOUNTING POLICIES IFRS 16: Leases
IFRS 16: Leases was effective from 1 January 2019 and was adopted by the Group on 1 July 2019. The Group applied IFRS 16 using the modified retrospective approach. Accordingly, the comparative information has not been restated to reflect the requirements of the new standard, i.e., it is presented as previously reported under IAS17. In addition, the disclosure requirements in IFRS 16 have not been applied to comparative information.
IFRS 16 supersedes the previous standards relating to the accounting treatment of leases (IAS 17: Leases and IFRIC 4: Determining whether an Arrangement contains a Lease). Under IAS 17, lessees were required to classify a lease as either a finance lease or an operating lease.
Group as lessee
Assets held under finance leases as classified in terms of IAS 17 were capitalised as property, plant and equipment and finance lease liabilities were included in interest-bearing liabilities. Leases classified as operating under IAS 17, did not result in the recognition of the underlying assets as property, plant and equipment or lease liabilities. The operating lease rentals were expensed in profit or loss on a straight-line basis over the period of the lease.
For lessees, IFRS 16 does not distinguish between finance leases and operating leases; instead a right-of-use asset and corresponding lease liability must now be recognised in respect of each lease, except where recognition exemptions are applied as permitted under IFRS 16.
As lessee, the Group enters into leases in respect of properties utilised for administrative and storage purposes, and ad hoc leases over equipment.
On transition, lease liabilities were measured at the present value of remaining lease payments discounted at the Group’s incremental borrowing rate at 1 July 2019. Right-of-use assets were measured at an amount equal to the lease liability.
The Group has tested its right-of-use assets for impairment on the date of transition and concluded there is no indication of impairment.
For contracts in place on 1 July 2019, the Group elected not to reassess whether a contract is, or contains a lease. The Group applied the following practical expedients on adoption of IFRS 16, as permitted by the standard:
� the application of a single discount rate to a portfolio of leases with reasonably similar characteristics;
� leases with remaining lease terms of less than 12 months at 1 July 2019 were accounted for as short-term leases;
� the exclusion of initial direct costs from the measurement of right-of-use assets on 1 July 2019; and
� the use of hindsight in determining the lease term for contracts that contained options to extend or terminate the lease.
The Group leases equipment previously classified as finance leases under IAS 17. For these leases, the carrying amounts of the right-of-use asset and lease liability at 1 July 2019 were determined at the carrying amounts of the leased asset and finance lease liability under IAS 17 at 30 June 2019.
173
Ove
rvie
wG
over
nanc
eSu
stai
nabi
lity
Ann
ual fi
nanc
ial s
tate
men
tsSh
areh
olde
rs’ in
form
atio
n
Notes to the financial statements continued
for the year ended 30 June 2020
Group as lessor
As lessor, the Group enters into leases over equipment. These leases are entered into with customers subsequent to sale-and-leaseback transaction considerations.
The sale-and-leaseback transactions which existed at the transition date were not reassessed to determine whether the transfer of the underlying asset satisfied the IFRS 15 requirements to treat the transfer as a sale.
Sale-and-leaseback transactions were previously accounted for as sale and operating lease transactions. At transition date, the Group recognised a right-of-use asset and lease liability in respect of these leases.
Sub-leasing under IFRS 16 distinguishes between two types of leases: operating and finance leases. The Group enters into sub-leases over equipment, subject to sale-and-leaseback transactions, with customers. The Group assessed the classification of of sub-lease contracts with reference to the right-of-use asset and concluded that they are operating leases under IFRS 16.
Impact
At transition date, the Group recognised a right-of-use asset to the value of R308 million (included in property, plant and equipment) and a lease liability of R308 million (included in interest-bearing liabilities) in relation to property leases.
The Group recognised property, plant and equipment to the value of R34 million and a lease liability of R34 million (included in interest-bearing liabilities) in relation to sale-and-leaseback transactions over equipment that existed at transition date. The Group recognised a financial liability of R19 million in relation to sale-and-leaseback transactions entered into during the reporting period.
As a result of adopting IFRS 16, the operating profit before tax for the reporting period ended 30 June 2020 has decreased by R107 million due to the replacement of operating lease expenses with depreciation on the underlying assets (R76 million) and finance costs on lease liabilities (R31 million), totalling an amount of R107 million. The operating lease expenses in terms of IAS 17 would have amounted to R87 million for the period.
174
ALV
IVA
HO
LDIN
GS
LIM
ITED
•
Inte
grat
ed a
nnua
l rep
ort 2
020
Notes to the financial statements continued
for the year ended 30 June 2020
The impact of adopting IFRS 16 is as follows:
Statement of financial positionAt transition
1 July 2019R’000
Movementsduring the
reporting period R’000
As at reporting date
30 June 2020R’000
ASSETS
Increase in property, plant and equipment 342 196 (46 311) 295 885
Property leases 307 832 (32 185) 275 647
Right-of-use assets – recognised at transition 307 832 – 307 832
Movements
– Right-of-use assets – leases entered into during the reporting period – 33 256 33 256
– Lease modifications* – (773) (773)
– Accumulated depreciation for the period – (64 668) (64 668)
Sale-and-leaseback transactions (equipment) 34 364 (14 126) 20 238
Right-of-use asset (previously treated as sale and operating lease transactions) 34 364 – 34 364
Movements
– Derecognition of underlying assets subject to sub-leases – (2 763) (2 763)
– Accumulated depreciation for the period – (11 363) (11 363)
Increase in deferred tax
Movements
– Deferred tax recognised in profit or loss – 5 565 5 565
Total assets 342 196 (40 746) 301 450
LIABILITIES
Increase in lease liabilities (included in interest-bearing liabilities) 342 196 (23 787) 318 409
Property leases 307 832 (12 331) 295 500
Lease liabilities – recognised at transition 307 832 – 307 832
Movements
– Lease liabilities – leases entered into during the reporting period – 33 256 33 256
– Lease modifications* – (773) (773)
– Repayments during the period – (44 815) (44 815)
Sale-and-leaseback transactions (existing at transition) 34 364 (11 455) 22 909
Lease liabilities – recognised at transition 34 364 – 34 364
Movements
– Repayments during the period – (11 455) (11 455)
Increase in financial liabilities (included in interest-bearing liabilities) – 18 870 18 870
Sale-and-leaseback transactions (entered into during the reporting period) – 18 870 18 870
Transactions entered into net of capital repayments – 18 870 18 870
Total liabilities 342 196 (4 917) 337 279
Operating lease commitments at 30 June 2019 as disclosed under IAS 17 – – 289 116
Effect of extension options reasonably certain to be exercised and short-term leases – – 157 366
– – 446 482
Discounted using incremental borrowing rate as at 1 July 2019 (property leases and sale-and-leaseback transactions) – – 342 196
Finance leases liabilities as at 30 June 2019 – – 8 121
Lease liabilities recognised at 1 July 2019 – – 350 317
* The Group recognised the modification of leases in relation to leased properties during the reporting period. The lease modification was in terms of the lease payments over the remaining lease period.
175
Ove
rvie
wG
over
nanc
eSu
stai
nabi
lity
Ann
ual fi
nanc
ial s
tate
men
tsSh
areh
olde
rs’ in
form
atio
n
Notes to the financial statements continued
for the year ended 30 June 2020
Statement of profit or loss and other comprehensive income Movements during the
reporting period30 June 2020
R’000
Increase in depreciation (included in depreciation and amortisation) (76 031)
Decrease in operating profit before interest (76 031)
Increase in finance costs (31 108)
Decrease in profit before tax (107 139)
Decrease in income tax expense 5 565
Decrease in profit for the period – refer to total impact on profit or loss below (101 574)
Effect on basic earnings per ordinary share (cents) * (10,8)
Effect on diluted earnings per ordinary share (cents) * (10,6)
Reconciliation of impact on earnings for the period
Increase in depreciation (76 031)
Increase in finance costs (31 108)
Decrease in operating lease expense (as per IAS 17) 87 378
Decrease in earnings before considering tax impact (19 761)
Decrease in income tax expense 5 565
Total impact including adjustment for decrease in operating lease expense (14 196)
* The impact of adopting IFRS 16 includes the adjustment for the decrease in operating lease expenses that would have been recognised as cost of sales (sale-and-lease back transactions) and operating expenses (property leases) in the calculation of the earnings per ordinary share for the period under IAS 17.
During the reporting period, the Group re-assessed the terms of the property leases in relation to fixed lease payments. Fixed lease payments in terms of parking and operating costs were identified and included, resulting in an additional right-of-use asset of R24 million and corresponding lease liability of R24 million when compared to the interim results.
COVID-19-related rent concessions (amendment to IFRS 16)
During the reporting period, IFRS 16 was amended to include a practical expedient in response to the COVID-19 pandemic. The effective date of the amendment was for reporting periods commencing on 1 June 2020 and early adoption was permitted. The Group early adopted the amendment during the reporting period.
Under the amendment, a lessee elect not to assess whether a COVID-19-related rent concession is a lease modification. A lessee that makes this election shall account for any change in lease payments resulting from the COVID-19-related rent concession consistently with how it would account for the change applying IFRS 16 if the change were not a lease modification.
The practical expedient would apply only to rent concessions occurring as a direct consequence of the COVID-19 pandemic and only if all of the following conditions were met:
� the change in lease payments results in revised consideration for the lease that is the same as, or less than, the consideration for the lease immediately preceding the change;
� any reduction in lease payments affects only payments originally due on or before 30 June 2021 (a rent concession would meet this condition if it results in reduced lease payments on or before 30 June 2021 and increased lease payments that extend beyond 30 June 2021); and
� there is no substantive change to other terms and conditions of the lease.
The Group received a minimal rent concession in relation to some property leases during the reporting period which was directly associated with the COVID-19 pandemic and which did not result in any substantive change to other terms and conditions of the lease.
The impact of applying the practical expedient resulted in the recognition of other income (off-set in administration expenses) amounting to R1 million in profit or loss of the Group in the current reporting period.
The Group has not early adopted any other standard, interpretation or amendment that has been issued but not yet effective.
176
ALV
IVA
HO
LDIN
GS
LIM
ITED
•
Inte
grat
ed a
nnua
l rep
ort 2
020
Notes to the financial statements continued
for the year ended 30 June 2020
8. NEW STANDARDS AND INTERPRETATIONS
NEW AND REVISED STANDARDS AND INTERPRETATIONS ISSUED BUT NOT YET EFFECTIVE
A number of new standards are effective for annual periods beginning after 1 January 2020 and earlier application is permitted; however, the Group has not early adopted the new or amended standards in preparing these financial statements. The following amended standards and interpretations are not expected to have a significant impact on the financial statements:
Standards and Interpretations
Details of amendment Effective date
Amendments to References to the Conceptual Framework in IFRS Standards
Amendments to References to the Conceptual Framework in IFRS Standards.
Together with the revised Conceptual Framework published in March 2018, the IASB also issued Amendments to References to the Conceptual Framework in IFRS Standards.
Annual periods beginning on or after 1 January 2020
Definition of a Business (Amendments to IFRS 3)
The amendments in Definition of a Business (Amendments to IFRS 3) are changes to Appendix A Defined terms, the application guidance, and the illustrative examples of IFRS 3 only. They:
� clarify that to be considered a business, an acquired set of activities and assets must include, at a minimum, an input and a substantive process that together significantly contribute to the ability to create outputs;
� narrow the definitions of a business and of outputs by focusing on goods and services provided to customers and by removing the reference to an ability to reduce costs;
� add guidance and illustrative examples to help entities assess whether a substantive process has been acquired;
� remove the assessment of whether market participants are capable of replacing any missing inputs or processes and continuing to produce outputs;
� and add an optional concentration test that permits a simplified assessment of whether an acquired set of activities and assets is not a business.
Business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after 1 January 2020
Definition of Material (Amendments to IAS 1 and IAS 8)
The amendments in Definition of Material (Amendments to IAS 1 and IAS 8) clarify the definition of ‘material’ and align the definition used in the Conceptual Framework and the standards.
Annual reporting periods beginning on or after 1 January 2020
177
Ove
rvie
wG
over
nanc
eSu
stai
nabi
lity
Ann
ual fi
nanc
ial s
tate
men
tsSh
areh
olde
rs’ in
form
atio
n
Notes to the financial statements continued
for the year ended 30 June 2020
Standards and Interpretations
Details of amendment Effective date
Classification of Liabilities as Current or Non-Current (Amendments to IAS 1)
The amendments aim to promote consistency in applying the requirements by helping companies determine whether, in the statement of financial position, debt and other liabilities with an uncertain settlement date should be classified as current (due or potentially due to be settled within one year) or non-current.
Annual reporting periods beginning on or after 1 January 2022
Reference to the Conceptual Framework (Amendments to IFRS 3)
The amendments update an outdated reference to the Conceptual Framework in IFRS 3 without significantly changing the requirements in the standard.
Annual reporting periods beginning on or after 1 January 2022
Annual Improvements to IFRS Standards 2018–2020
Makes amendments to the following standards:
IFRS 9 – The amendment clarifies which fees an entity includes when it applies the ‘10 per cent’ test in paragraph B3.3.6 of IFRS 9 in assessing whether to derecognise a financial liability. An entity includes only fees paid or received between the entity (the borrower) and the lender, including fees paid or received by either the entity or the lender on the other’s behalf.
IFRS 16 – The amendment to Illustrative Example 13 accompanying IFRS 16 removes from the example the illustration of the reimbursement of leasehold improvements by the lessor in order to resolve any potential confusion regarding the treatment of lease incentives that might arise because of how lease incentives are illustrated in that example.
Annual reporting periods beginning on or after 1 January 2022
All Standards and Interpretations will be adopted at the effective date as disclosed.
178
ALV
IVA
HO
LDIN
GS
LIM
ITED
•
Inte
grat
ed a
nnua
l rep
ort 2
020
Notes to the financial statements continued
for the year ended 30 June 2020
Group
Land andbuildings *
R’000
Leaseholdimprove-
mentsR’000
Plant,vehicles
andequip-
ment **R’000
RentalassetsR’000
TotalR’000
9. PROPERTY, PLANT AND EQUIPMENT
Carrying amount as at 1 July 2018 15 295 1 828 100 633 2 941 120 697
Cost 15 295 4 113 226 325 13 096 258 829
Accumulated depreciation – (2 285) (125 692) (10 155) (138 132)
Movement for the year 2019
Additions – 936 64 028 – 64 964
Disposal through sale of subsidiary – – (16 487) – (16 487)
Cost – – (29 493) – (29 493)
Accumulated depreciation – – 13 006 – 13 006
Disposals – (73) (1 564) (766) (2 403)
Cost – (583) (40 546) (5 737) (46 866)
Accumulated depreciation – 510 38 982 4 971 44 463
Depreciation – (753) (42 771) (935) (44 459)
Carrying amount at 30 June 2019 15 295 1 938 103 839 1 240 122 312
Cost 15 295 4 466 220 314 7 359 247 434
Accumulated depreciation – (2 528) (116 475) (6 119) (125 122)
Movement for the year 2020
Recognition of ROU asset on initial application of IFRS 16 307 832 – 34 364 – 342 196
Additions 33 256 7 788 88 790 – 129 834
Transfer from inventory – sale-and-leaseback transactions – – 12 802 – 12 802
Lease modifications – decrease in right-of-use asset (773) – – – (773)
Acquisitions through business combinations – – 788 – 788
Cost – – 2 092 – 2 092
Accumulated depreciation – – (1 304) – (1 304)
Disposals *** – (6 799) (9 700) (599) (17 098)
Cost – (8 213) (49 219) (599) (58 031)
Accumulated depreciation – 1 414 39 519 – 40 933
Depreciation (64 668) (858) (66 833) (484) (132 843)
Carrying amount at 30 June 2020 290 942 2 069 164 050 157 457 218
Cost 355 610 4 041 309 143 6 760 675 554
Accumulated depreciation (64 668) (1 972) (145 093) (6 603) (218 336)
* Land and buildings include the right-of-use asset in relation to the property leases.
** Equipment includes the right-of-use asset in relation to the sale-and-leaseback transactions.
*** Disposals include the derecognition of right-of-use assets as a result of entering into finance sub-leases over equipment.
179
Ove
rvie
wG
over
nanc
eSu
stai
nabi
lity
Ann
ual fi
nanc
ial s
tate
men
tsSh
areh
olde
rs’ in
form
atio
n
Notes to the financial statements continued
for the year ended 30 June 2020
9. PROPERTY, PLANT AND EQUIPMENT (continued)
Property, plant and equipment includes right-of-use assets with a carrying amount of:
� R275 647 344, relating to leased property utilised for administrative and warehouse storage purposes. Refer to note 22.1.1 of the financial statements;
� R20 238 171, relating to sale-and-leaseback transactions which the Group entered into during the prior reporting periods. Refer to note 22.1.2 of the financial statements; and
� R267 151, relating to leased motor vehicles. Refer to note 22.1.1 of the financial statements.
Rental assets with a net carrying amount of R156 699 (2019: R1 239 499) serve as security for the Nedbank facility held (refer note 22.3).
The Group reviews the estimated useful lives and residual values of property, plant and equipment at each reporting date. No changes to the useful lives or residual values of property and equipment were made based on the current period review.
The Group reviews the carrying amount of property, plant and equipment at each reporting date to determine whether any indication of impairment is present. No indicators of impairment were present based on the current period review and therefore no impairment loss was recognised in profit or loss.
No current contractual commitments exist to purchase items of property, plant and equipment.
Group
2020R’000
2019R’000
9.1 Details of land and buildings
Midrand property
Land comprises stand number 865 Kosmosdal, Extension 11, Gauteng with buildings and additions thereon
Land and buildings acquired through business combination in January 2016
Land at cost 1 915 1 915
Buildings at cost 13 380 13 380
15 295 15 295
The residual value of the owned buildings exceeds the depreciable amount of the buildings and therefore no depreciation charge (2019: Rnil) has been recognised in profit or loss for the reporting period.
180
ALV
IVA
HO
LDIN
GS
LIM
ITED
•
Inte
grat
ed a
nnua
l rep
ort 2
020
Notes to the financial statements continued
for the year ended 30 June 2020
GroupCustomer
relation-shipsR’000
SoftwareR’000
Trade-marksR’000
TotalR’000
10. INTANGIBLE ASSETSCarrying amount as at 1 July 2018 252 909 28 551 1 458 282 918
Cost 372 832 46 713 3 500 423 045
Accumulated amortisation (119 923) (18 162) (2 042) (140 127)
Movement for the year 2019
Additions – 17 134 – 17 134
Acquisitions through business combinations 134 187 2 750 – 136 937
Cost 134 187 6 500 – 140 687
Accumulated amortisation – (3 750) – (3 750)
Disposal through sale of subsidiary – – – –
Cost – (76) – (76)
Accumulated amortisation – 76 – 76
Disposals – (3 543) – (3 543)
Cost – (12 737) – (12 737)
Accumulated amortisation – 9 194 – 9 194
Amortisation (128 594) (15 791) (1 167) (145 552)
Carrying amount at 30 June 2019 258 502 29 101 291 287 894
Cost 505 973 57 534 3 500 567 007
Accumulated amortisation (247 471) (28 433) (3 209) (279 113)
Movement for the year 2020
Additions – 47 188 – 47 188
Acquisitions through business combinations 172 014 22 – 172 036
Cost 172 014 98 – 172 112
Accumulated amortisation – (76) – (76)
Disposals – (752) – (752)
Cost – (18 416) – (18 416)
Accumulated amortisation – 17 664 – 17 664
Amortisation (171 056) (14 892) (291) (186 239)
Carrying amount at 30 June 2020 259 460 60 667 – 320 127
Cost 679 033 86 404 3 500 768 937
Accumulated amortisation (419 573) (25 737) (3 500) (448 810)
* Included in software is an amount of R2,2 million attributable to internally generated software not yet ready for use. The Group expects the internally generated software to be ready for use in the next reporting period.
The Group reviews the useful lives of the intangible assets at each reporting date. No changes have been made in the current or prior reporting periods.
The Group reviews the carrying amount of intangible assets at each reporting date to determine any indication of impairment present. No indicators of impairment were present based on the current period review and therefore no impairment loss was recognised in profit or loss.
181
Ove
rvie
wG
over
nanc
eSu
stai
nabi
lity
Ann
ual fi
nanc
ial s
tate
men
tsSh
areh
olde
rs’ in
form
atio
n
Notes to the financial statements continued
for the year ended 30 June 2020 Group
2020R’000
2019R’000
11. GOODWILLBalance at 1 July 631 526 564 235
Cost 639 356 572 065Accumulated impairment losses (7 830) (7 830)
Movement for the year 2020Business combinations (refer to note 35) 32 491 93 871 Derecognised through disposal of subsidiary – (26 580)Impairments (49 563) – Balance at 30 June 614 454 631 526
Cost 671 847 639 356Accumulated impairment losses (57 393) (7 830)
Method of testing for impairment
In testing the impairment of goodwill allocated to CGUs, the following key assumptions were used:
� Discount rate 15,7% � Growth rate 4% to 6% � Terminal growth rate 5% to 8%
The recoverable amounts have been calculated using the value-in-use method. Discounted cash flow forecasts for a five-year period with the application of a terminal growth rates were used to determine the recoverability of the goodwill.
Due to the fact that the Group has a centralised treasury function which determines an average discount rate applicable to the Group as a whole, each recoverable amount calculation includes a specific adjustment in terms of segment-related risk factors not considered by the treasury function in determining the average discount rate.
Group
Segment
Reporting period
acquired2020
R’0002019
R’000
CGUs and goodwill allocationExplix Technologies Proprietary Limited ICT Distribution 2008 24 591 24 591
Cost 28 210 28 210Accumulated impairment losses (3 619) (3 619)
Pinnacle Micro Proprietary Limited ICT Distribution 2009 15 801 15 801 Cost 20 012 20 012Accumulated impairment losses (4 211) (4 211)
Datanet Infrastructure Group Proprietary Limited ICT Distribution 2010 1 339 1 339 Centrafin Proprietary Limited Financial services 2011 12 744 12 744 Devtrade Security Proprietary Limited ICT Distribution 2013 25 360 25 360 Pacific Cables Proprietary Limited ICT Distribution 2014 1 751 1 751 Datacentrix Limited Services and Solutions 2016 190 464 190 465 Solareff Proprietary Limited Services and Solutions 2016 45 222 45 222 Intdev Internet Technologies Proprietary Limited Services and Solutions 2016 3 993 3 993 Sintrex Integration Systems Proprietary Limited Services and Solutions 2018 61 426 61 426 VH Fibre Optics Proprietary Limited ICT Distribution 2018 9 336 48 841
Cost 48 841 48 841 Accumulated impairment losses (39 505) –
DG Store SA Proprietary Limited Services and Solutions 2018 66 426 66 426 Obscure Enterprises Proprietary Limited ICT Distribution 2018 39 696 39 696 Tricon Services ICT Distribution 2019 38 266 38 266 Merlynn Intelligence Technologies Proprietary Limited Services and Solutions 2019 45 548 55 606
Cost 55 606 55 606 Accumulated impairment losses (10 058) –
SynergERP Proprietary Limited Services and Solutions 2020 18 928 – SynergERP Limited – DWC LCC Services and Solutions 2020 2 501 – SynergERP Limited – UK Services and Solutions 2020 11 062 –
614 454 631 526
182
ALV
IVA
HO
LDIN
GS
LIM
ITED
•
Inte
grat
ed a
nnua
l rep
ort 2
020
Notes to the financial statements continued
for the year ended 30 June 2020
11. GOODWILL (continued)
ICT Distribution
Explix Technologies Proprietary Limited, Pinnacle Micro Proprietary Limited, Datanet Infrastructure Group Proprietary Limited, Devtrade Security Proprietary Limited, Pacific Cables Proprietary Limited, VH Fibre Optics Proprietary Limited, Obscure Enterprises Proprietary Limited and Tricon Services were purchased in prior years and the respective goodwill formed part of the assets acquired in those periods.
Cash flows were determined using a combination of current reporting period’s actual profits and the following reporting period’s financial budgeted profits, as approved by the directors.
The key assumptions used in the budgets are a reflection of management’s past experience in the market in which the unit operates. Cash flows for the five following periods have been extrapolated using a steady 4% to 6% per annum (0% to 2% growth and 4% long-term forecasted inflation) growth rate, thereafter, a terminal growth rate of 5% to 8%.
These cash flows were discounted using a discount rate of 15,7%. The various sensitivity analyses, performed by changing key variables by 1% in the calculation, resulted in the recoverable amount exceeding the carrying amount in all instances. Services and Solutions
Datacentrix Holdings Proprietary Limited, Solareff Proprietary Limited, Intdev Internet Technologies Proprietary Limited, Sintrex Integration Systems Proprietary Limited and DG Store SA Proprietary Limited were acquired during prior reporting periods and the respective goodwill formed part of the assets. Cash flows were determined using the current reporting period’s actual profits and have been extrapolated in five future periods using a steady 4% to 6% per annum (0% to 2% growth and 4% long-term forecasted inflation) growth rate, thereafter, a terminal growth rate of 6%. These cash flows were discounted using a discount rate of 15,7%. The various sensitivity analyses, performed by changing key variables by 1% in the calculation, resulted in the recoverable amount exceeding the carrying amount in all instances.
SynergERP Proprietary Limited, SynergERP Limited – DWC and SynergERP Limited were acquired within this segment during the current reporting period.
Financial Services
Centrafin Proprietary Limited was purchased in a prior reporting period and the goodwill formed part of the assets acquired in that period.
Cash flows were determined using the current reporting period’s actual profits and have been extrapolated in five future periods using a steady 6% per annum (2% growth and 4% long-term forecasted inflation) growth rate, thereafter, a terminal growth rate of 5%. These cash flows were discounted using a discount rate of 15,7%. The various sensitivity analyses, performed by changing key variables by 1% in the calculation, resulted in the recoverable amount exceeding the carrying amount in all instances.
COVID-19 stress test
For the current reporting period, a further sensitivity analysis was performed by changing key variables by between 3% and 5% (stress test). This also resulted in the recoverable amount exceeding the carrying amount in all instances.
Impairment
Goodwill, attributable to VH Fibre Optics Proprietary Limited (“VH Fibre”) and Merlynn Intelligence Technologies Proprietary Limited (“Merlynn”), was impaired to the recoverable amounts of the respective CGUs during the current reporting period.
An impairment amounting to R40 million (VH Fibre) and R10 million (Merlynn) was recognised in the profit or loss for the period.
183
Ove
rvie
wG
over
nanc
eSu
stai
nabi
lity
Ann
ual fi
nanc
ial s
tate
men
tsSh
areh
olde
rs’ in
form
atio
n
Notes to the financial statements continued
for the year ended 30 June 2020
12. INTEREST IN SUBSIDIARIES The direct and indirect interests in subsidiaries at the reporting date are set out below:
2020
Country of incorporation
Principle operating industry
Interestclassi-
fication
Issued share
capital2020
% of pro-portion of
owner-ship
interest2020
% ofvotingrights
held2020
Invest-mentheld2020
R’000
Investment in subsidiaries 3 725 096
Alviva International Investments Proprietary Limited
South Africa Intermediate Direct 120 100,0 100,0 151 202
Alviva International Co Limited MauritiusICT industry and
relatedIndirect 100 100,0 100,0 –
Alviva Shared Management Services Proprietary Limited
South Africa Group services Direct 1 000 100,0 100,0 21 926
Alviva Treasury Services Proprietary Limited
South Africa Intermediate Direct 179 238 346 100,0 100,0 101 695
Appleby Solutions Limited ZambiaICT industry and
relatedIndirect 5 000 100,0 100,0 –
Arriba Technologies Proprietary Limited
South AfricaICT industry and
relatedIndirect 100 55,4 55,4 –
Axiz Botswana Proprietary Limited BotswanaICT industry and
relatedIndirect 100 100,0 100,0 –
Axiz Namibia Proprietary Limited NamibiaICT industry and
relatedIndirect 100 100,0 100,0 –
Axiz Proprietary Limited South AfricaICT industry and
relatedIndirect 90 55,4 55,4 –
Axiz Technology Proprietary Limited South AfricaICT industry and
relatedDirect 8 825 000 100,0 100,0 –
Axizworkgroup Mozambique Limitada
MozambiqueICT industry and
relatedIndirect 20 000 99,0 99,0 –
Boditse Proprietary Limited BotswanaICT industry and
relatedIndirect 1 000 100,0 100,0 –
Centrafin Proprietary Limited South Africa Financial Services Direct 1 000 100,0 100,0 23 801
Centravoice Proprietary Limited South AfricaICT industry and
relatedIndirect 1 000 000 55,4 55,4 –
Datacentrix Holdings Proprietary Limited **
South AfricaInvestment holding
in ICT industryIndirect 189 636 519 55,4 55,4 –
Datacentrix Properties Proprietary Limited
South Africa Property holding Indirect 100 55,4 55,4 –
Datacentrix Proprietary Limited South AfricaICT industry and
relatedIndirect 2 55,4 55,4 –
Datacentrix Solution DMCCUnited Arab
EmiratesICT industry and
relatedIndirect 50 55,4 55,4 –
Datacentrix Solution LCCUnited Arab
EmiratesICT industry and
relatedIndirect 20 000 27,1 27,1 –
DCT Holdings Proprietary Limited South AfricaInvestment Holding
CoDirect 892 55,4 55,4 3 301 479
DG Store (SA) Proprietary Limited South AfricaICT industry and
relatedIndirect 120 44,3 44,3 –
eNetworks Proprietary Limited South AfricaICT industry and
relatedIndirect 100 55,4 55,4 –
Froggy IT Solution Proprietary Limited
South AfricaICT industry and
relatedIndirect 100 55,4 55,4 –
GridCars Proprietary Limited South Africa Operating Co Indirect 100 21,2 21,2 –
Imbewu IT Solutions Proprietary Limited (formerly known as Digital Generation Consulting Proprietary Limited)
South AfricaICT industry and
relatedIndirect 100 44,3 44,3 –
Infrasol Proprietary Limited South AfricaICT industry and
relatedIndirect 1 55,4 55,4 –
Intdev Internet Technologies Proprietary Limited
South Africa Operating Co Indirect 2 500 55,4 55,4 –
184
ALV
IVA
HO
LDIN
GS
LIM
ITED
•
Inte
grat
ed a
nnua
l rep
ort 2
020
Notes to the financial statements continued
for the year ended 30 June 2020
2020
Country of incorporation
Principle operating industry
Interestclassi-
fication
Issued share
capital2020
% of pro-portion of
owner-ship
interest2020
% ofvotingrights
held2020
Invest-mentheld2020
R’000
Merqu Communications Proprietary Limited
South AfricaICT industry and
relatedIndirect 1 55,4 55,4 –
Obscure Enterprises Proprietary Limited
South AfricaICT industry and
relatedIndirect 100 55,4 55,4 –
Obscure Technology Proprietary Limited
South AfricaICT industry and
relatedIndirect 100 55,4 55,4 –
Parcea Computing Proprietary Limited
South AfricaICT industry and
relatedIndirect 100 51,0 51,0 –
Pinnacle Micro Namibia Proprietary Limited
NamibiaICT industry and
relatedIndirect 100 100,0 100,0 –
Pinnacle Micro Proprietary Limited South AfricaICT industry and
relatedIndirect 100 55,4 55,4 –
Sintrex Integration Systems Proprietary Limited
South AfricaICT industry and
relatedIndirect 243 41,6 41,6 –
Solareff Proprietary Limited South Africa Operating Co Indirect 1 000 28,3 28,3 –
VH Fibre Optics Proprietary Limited South AfricaICT industry and
relatedIndirect 400 000 55,4 55,4 –
Merlynn Intelligence Technologies Proprietary Limited
South Africa Operating Co Direct 100 65,0 65,0 94 000
SynergERP Proprietary Limited South Africa Operating Co Indirect 1 782 38,8 38,8 –
Synerg300 Proprietary Limited South Africa Operating Co Indirect 1 100 38,8 38,8 –
SynergIT Proprietary Limited South Africa Operating Co Indirect 1 158 38,8 38,8 –
SynergERP Limited – DWC LCCUnited Arab
EmiratesOperating Co Indirect 300 000 51,0 51,0 –
SynergERP Limited – UK United Kingdom Operating Co Indirect 1 500 51,0 51,0 –
Dormant
Axiz Investment Trust South Africa Employee Trust Direct 100,0 100,0 –
DG Education Proprietary Limited South AfricaICT industry and
relatedIndirect 100 44,3 44,3 –
Dirigible IT Proprietary Limited South Africa Dormant Indirect 100 55,4 55,4 –
Precision ICT Proprietary Limited South Africa Dormant Direct 120 100,0 100,0 –
Tri Continental Distribution SA Proprietary Limited *
South Africa Dormant Direct –
Workgroup IT Proprietary Limited South Africa Dormant Direct 1 000 100,0 100,0 30 993
Obscure Technology WC Proprietary Limited *
South AfricaICT industry and
relatedIndirect –
Loan to subsidiary
Alviva Treasury Services Proprietary Limited
445 024
4 170 120
* Deregistered during the reporting period.
** The interest held in this company has been provided as security for the Class B preference shares (refer note 22.5).
12. INTEREST IN SUBSIDIARIES (continued)
185
Ove
rvie
wG
over
nanc
eSu
stai
nabi
lity
Ann
ual fi
nanc
ial s
tate
men
tsSh
areh
olde
rs’ in
form
atio
n
Notes to the financial statements continued
for the year ended 30 June 2020
12. INTEREST IN SUBSIDIARIES (continued)
The direct and indirect interests in subsidiaries are set out below:
2019
Country of incorporation
Principle operating industry
Interestclassi-
fication
Issued share
capital
% of pro-portion of
owner-ship
interest2019
% ofvotingrights
held2019
Invest-mentheld2019
R’000
Investment in subsidiaries 3 645 941
Alviva International Investments Proprietary Limited (formerly known as PinnAcc Proprietary Limited)
South Africa Intermediate Direct 120 100,0 100,0 151 202
Alviva International Co Limited Mauritius ICT industry and related Indirect 100,0 100,0 100,0 –
Alviva Shared Management Services Proprietary Limited
South Africa Group services Direct 1 000 100,0 100,0 11 771
Alviva Treasury Services Proprietary Limited
South Africa Intermediate Direct 179 238 346 100,0 100,0 101 695
Appleby Solutions Limited Zambia ICT industry and related Indirect 5 000 100,0 100,0 –
Arriba Technologies Proprietary Limited
South Africa ICT industry and related Indirect 100 55,4 55,4 –
Axiz Botswana Proprietary Limited Botswana ICT industry and related Indirect 100 100,0 100,0 –
Axiz Namibia Proprietary Limited Namibia ICT industry and related Indirect 100 100,0 100,0 –
Axiz Proprietary Limited South Africa ICT industry and related Indirect 90 55,4 55,4 –
Axiz Technology Proprietary Limited South Africa ICT industry and related Direct 8 825 000 100,0 100,0 –
Axizworkgroup Mozambique Limitada
Mozambique ICT industry and related Indirect 20 000 99,0 99,0 –
Boditse Proprietary Limited Botswana ICT industry and related Indirect 1 000 100,0 100,0 –
Centrafin Proprietary Limited South Africa Financial Services Direct 1 000 100,0 100,0 23 801
Centravoice Proprietary Limited South Africa ICT industry and related Indirect 1 000 000 55,4 55,4 –
Datacentrix Holdings Proprietary Limited ***
South Africa Investment holding Indirect 189 636 519 55,4 55,4 –
in ICT industry
Datacentrix Properties Proprietary Limited
South Africa Property holding Indirect 100 55,4 55,4 –
Datacentrix Proprietary Limited South Africa ICT industry and related Indirect 2 55,4 55,4 –
Datacentrix Solution DMCCUnited Arab
EmiratesICT industry and
related Indirect 50 55,4 55,4 –
Datacentrix Solution LCCUnited Arab
EmiratesICT industry and
related Indirect 20 000 27,1 27,1 –
DCT Holdings Proprietary Limited South Africa Investment Holding Co Direct 892 55,4 55,4 3 232 479
DG Store (SA) Proprietary Limited South Africa ICT industry and related Indirect 120 38,8 38,8 –
Digital Generation Consulting Proprietary Limited
South Africa ICT industry and related Indirect 100 38,8 38,8 –
eNetworks Proprietary Limited South Africa ICT industry and related Indirect 100 55,4 55,4 –
Froggy IT Solution Proprietary
LimitedSouth Africa ICT industry and
related Indirect 100 55,4 55,4 –
GridCars Proprietary Limited South Africa Operating Co Indirect 100 21,2 21,2 –
Infrasol Proprietary Limited South Africa ICT industry and related Indirect 1 55,4 55,4 –
Intdev Internet Technologies Proprietary Limited
South Africa Operating Co Indirect 2 500 55,4 55,4 –
Merqu Communications Proprietary Limited
South Africa ICT industry and related Indirect 1 55,4 55,4 –
186
ALV
IVA
HO
LDIN
GS
LIM
ITED
•
Inte
grat
ed a
nnua
l rep
ort 2
020
Notes to the financial statements continued
for the year ended 30 June 2020
2019
Country of incorporation
Principle operating industry
Interestclassi-
fication
Issued share
capital
% of pro-portion of
owner-ship
interest2019
% ofvotingrights
held2019
Invest-mentheld2019
R’000
Modrac Proprietary Limited ** South AfricaICT industry and
relatedIndirect –
Obscure Enterprises Proprietary Limited
South AfricaICT industry and
relatedIndirect 100 55,4 55,4 –
Obscure Technology Proprietary Limited
South AfricaICT industry and
relatedIndirect 100 55,4 55,4 –
Parcea Computing Proprietary Limited
South AfricaICT industry and
relatedIndirect 100 51,0 51,0 –
Pinnacle Micro Namibia Proprietary Limited
NamibiaICT industry and
relatedIndirect 100 100,0 100,0 –
Pinnacle Micro Proprietary Limited South AfricaICT industry and
relatedIndirect 100 55,4 55,4 –
Sintrex Integration Systems Proprietary Limited
South AfricaICT industry and
relatedIndirect 243 41,6 41,6 –
Solareff Proprietary Limited South Africa Operating Co Indirect 1 000 28,3 28,3 –
VH Fibre Optics Proprietary Limited South AfricaICT industry and
relatedIndirect 400 000 55,4 55,4 –
Merlynn Intelligence Technologies Proprietary Limited
South Africa Operating Co Direct 100 65,0 65,0 94 000
Dormant
Axiz Investment Trust South Africa Employee Trust Direct 100,0 100,0 –
Devfam Fire Prevention Equipment
Proprietary Limited *South Africa Dormant Direct – – – –
DG Education Proprietary Limited South AfricaICT industry and
relatedIndirect 100 38,8 38,8 –
Dirigible IT Proprietary Limited South Africa Dormant Indirect 100 55,4 55,4 –
Precision ICT Proprietary Limited South Africa Dormant Direct 120 100,0 100,0 –
Protectaire Properties Proprietary Limited *
South Africa Dormant Indirect – – – –
Tri Continental Distribution SA Proprietary Limited
South Africa Dormant Direct 100 100,0 100,0 –
Workgroup IT Proprietary Limited South Africa Dormant Direct 1 000 100,0 100,0 30 993
Obscure Technology WC Proprietary Limited
South AfricaICT industry and
relatedIndirect 100 55,4 55,4 –
Loan to subsidiary
Alviva Treasury Services Proprietary Limited
– – – 197 688
3 843 629
* Deregistered during the reporting period.
** Disposed of during reporting period.
*** The interest held in this company has been provided as security for the Class B preference shares (refer note 22.5).
The aggregate profit after tax of the subsidiaries for the reporting period, attributable to the Company was R323 million (2019: R526 million). The aggregate loss after tax of the subsidiaries for the reporting period attributable to the Company was R125 million (2019: R14 million).
The aggregate profit and loss after tax referred to is prior to any intergroup eliminations.
12. INTEREST IN SUBSIDIARIES (continued)
187
Ove
rvie
wG
over
nanc
eSu
stai
nabi
lity
Ann
ual fi
nanc
ial s
tate
men
tsSh
areh
olde
rs’ in
form
atio
n
Notes to the financial statements continued
for the year ended 30 June 2020
12. INTEREST IN SUBSIDIARIES (continued)
Loan to subsidiary
The loan is unsecured, has no fixed terms of repayment and and is interest free. There is no expectation of repayment within the next twelve months.
Information about the Group’s exposure to credit risks and impairment losses for financial assets is included in note 36.7.
Controlled structured entities
The Ledibogo Trust
The main purpose of the Trust is to act as a vehicle which ensures compliance with the formal B-BBEE codes by the Group through the promotion of B-BBEE initiatives. The Trust controls Ledibogo (RF) Proprietary Limited (“Ledibogo”). Based on the judgement applied by management, the Trust and Ledibogo are consolidated in the Group as the structured entity is controlled by Alviva.
The Centrafin Owner Trust
The Trust was registered by Centrafin Proprietary Limited (“Centrafin”), a subsidiary of Alviva, as founder. The main objective of the Trust is to control and ring-fence Centrafin Receivables (RF) Limited (“Centrafin Receivables”), as part of a specific securitisation agreement with Nedbank Limited. Based on the judgement applied by management, the Trust and Centrafin Receivables are consolidated in the Group as the structured entity is controlled by Alviva through the control exercised over Centrafin.
13. INVESTMENT IN EQUITY-ACCOUNTED INVESTEESGroup
Notes2020
R’0002019
R’000
Investment in joint venture 13.1 – -
Investment in associate 13.2 – –
Loan to associate 13.2; 13.3 41 773 88 119
41 773 88 119
188
ALV
IVA
HO
LDIN
GS
LIM
ITED
•
Inte
grat
ed a
nnua
l rep
ort 2
020
Notes to the financial statements continued
for the year ended 30 June 2020
13. INVESTMENT IN EQUITY-ACCOUNTED INVESTEES (continued)
Group
2020R’000
2019R’000
13.1 Investment in joint ventureEffective rate of indirect interest held in joint venture (%) 50,0 50,0
Reconciliation between proportionate investment and current investment value:
Investment at cost 1 204 1 204
Equity-accounted proportionate share of losses (1 204) (1 204)
Investment in equity-accounted investee – –
Unrecognised share of losses – opening balance 380 254
Unrecognised share of losses for the period – 126
Utilisation of unrecognised share of losses for the period (375) –
Unrecognised share of losses carried forward 5 380
The Group has an indirect interest in Electronic-DNA Proprietary Limited (“EDNA”), a company incorporated in South Africa, through its subsidiary Datacentrix Proprietary Limited which holds a 50% interest in the company. The company supplies licences for security software developed. The equity-accounted investee is not a publicly listed entity and consequently does not have a quoted published price.
EDNA
2020R’000
2019R’000
The financial information of the equity-accounted investee is as follow:
Non-current assets 299 690
Current assets 10 409 6 754
Total assets 10 708 7 444
Non-current liabilities – –
Current liabilities (10 720) (8 206)
Total liabilities (10 720) (8 206)
Net asset value (12) (762)
Revenue 7 678 6 768
Cost of sales – –
Gross profit 7 678 6 768
Other expenses (7 518) (7 556)
Net finance income 380 417
Operating profit 540 (371)
Income tax benefit 210 119
Profit/(loss) for the period 750 (252)
189
Ove
rvie
wG
over
nanc
eSu
stai
nabi
lity
Ann
ual fi
nanc
ial s
tate
men
tsSh
areh
olde
rs’ in
form
atio
n
Notes to the financial statements continued
for the year ended 30 June 2020
13. INVESTMENT IN EQUITY-ACCOUNTED INVESTEES (continued)
Group
2020R’000
2019R’000
13.2 Investment in associateEffective rate of indirect interest held in associate (%) 49,0 49,0
Reconciliation between proportionate investment and current investment value:
Investment at cost * – –
Equity-accounted proportionate share of losses – –
Loan to associate 41 773 88 119
Investment in equity-accounted investee 41 773 88 119
Unrecognised share of losses – opening balance 11 373 1 081
Unrecognised share of losses for the period 14 245 10 292
Unrecognised share of losses carried forward 25 618 11 373
* Amount below R1 000.
The Group has an indirect interest in Apex Business Systems Proprietary Limited (“APEX”), a company incorporated in South Africa, through its subsidiary DCT Holdings Proprietary Limited which holds a 49% interest in the company. The indirect interest was obtained effectively on 1 May 2018. The company supplies SHARP related IT solutions. The equity-accounted investee is not a publicly listed entity and consequently does not have a quoted published price.
APEX
2020R’000
2019R’000
The financial information of the equity-accounted investee is as follow:
Non-current assets 5 365 3 459
Current assets 96 439 154 968
Total assets 101 804 158 427
Non-current liabilities (703) –
Current liabilities (153 383) (181 637)
Total liabilities (154 086) (181 637)
Net asset value (52 282) (23 210)
Revenue 123 552 29 564
Cost of sales (122 646) (23 631)
Gross profit 906 5 933
Other expenses (29 716) (25 378)
Net finance costs (262) (1 560)
Operating loss (29 072) (21 004)
Income tax expense – –
Loss for the period (29 072) (21 004)
190
ALV
IVA
HO
LDIN
GS
LIM
ITED
•
Inte
grat
ed a
nnua
l rep
ort 2
020
Notes to the financial statements continued
for the year ended 30 June 2020
13. INVESTMENT IN EQUITY-ACCOUNTED INVESTEES (continued)
Group
2020R’000
2019R’000
13.3 Loan to associate Opening balance at 1 July 88 119 62 077
Loan (repaid by)/advanced to equity-accounted investee (18 356) 49 252
Loss allowance (27 990) (23 210)
41 773 88 119
Terms of the loan to associate
The loan is secured, interest-free (2019: 10,25% per annum) and has no fixed terms of repayment. There is no expectation of repayment or intention to call for repayment within the next 12 months. The loan is secured by the cession whereby the company cedes all of its right, title, and interest in and to its book debts and a notarial bond has been registered over the inventory held in favour of the lender.
Information about the Group’s exposure to credit risks and impairment losses for financial assets is included in note 36.7.
Group
2020R’000
2019R’000
14. FINANCE LEASE RECEIVABLESNon-current assets 556 138 576 189
Finance service-related agreements 556 138 576 189
Current assets 298 383 269 975
Finance service-related agreements 298 383 265 254
Managed Print and Document Services agreements – 4 721
854 521 846 164
14.1 Finance service-related agreementsUndiscounted lease receivable * 1 094 477 1 118 697
– within one year 427 486 417 154
– within two to five years 666 991 701 543
Less: Unearned finance income (220 714) (241 945)
Less: Loss allowance (19 242) (35 309)
Present value of finance lease receivables 854 521 841 443
– within one year 298 383 265 254
– within two to five years 556 138 576 189
* The information disclosed for the current reporting period has been provided for comparability purposes (not required under IFRS 16). The maturity
analysis under IFRS 16 has been included below.
These leases are mainly for ICT and office equipment asset financing to customers over the economic life of the underlying assets, subject to specified minimum periods varying between one and five years. The receivables bear interest at an average rate of 18% (2019: 18%) and are secured by retention of ownership of the underlying assets.
These receivables have been provided as security for the Nedbank Senior loan and Nedbank overdraft facilities granted (refer notes 9 and 22.2).
191
Ove
rvie
wG
over
nanc
eSu
stai
nabi
lity
Ann
ual fi
nanc
ial s
tate
men
tsSh
areh
olde
rs’ in
form
atio
n
Notes to the financial statements continued
for the year ended 30 June 2020
Group
2020R’000
14. FINANCE LEASE RECEIVABLES (continued)
14.1 Finance service-related agreements (continued)
Maturity analysis
Less than one year 427 486
One to two years 65 008
Two to three years 172 451
Three to four years 175 065
Four to five years 251 914
More than five years 2 553
Total undiscounted lease receivables 1 094 477
Unearned finance income (220 714)
Net investment in leases 873 763
Group
2019R’000
14.2 Managed Print and Document Services agreementsFuture minimum lease payments 5 104
– within one year 5 104
– within two to five years –
Less: Unearned finance income (221)
Less: Loss allowance (162)
Present value of minimum lease payments 4 721
– within one year 4 721
– within two to five years –
During the previous reporting periods, the Group entered into finance leases in respect of customer transactions in the Managed Print and Document Solutions service offering. The leases are covered in back-to-back transactions with vendors. The leases bear interest at rates varying between 8% and 13%. All leases were settled during the reporting period.
Information about the Group’s exposure to credit risks and impairment losses for lease receivables is included in note 36.7.
192
ALV
IVA
HO
LDIN
GS
LIM
ITED
•
Inte
grat
ed a
nnua
l rep
ort 2
020
Notes to the financial statements continued
for the year ended 30 June 2020
Group
2020R’000
2019R’000
15. DEFERRED TAXDeferred tax balance at 1 July (890) (8 657)
Deferred tax assets acquired through business combinations 1 815 531
Previously unrecognised deferred tax asset 3 092 –
Utilisation of assessed losses (4 668) 269
Foreign currency translation reserve impact on opening balance – (36)
Temporary differences 41 101 39 751
Tax rate differential on temporary differences from acquisitions through business combination
1 641 5 879
Temporary differences from acquisitions through business combination (32 258) (37 572)
Over/(under) provisions relating to prior periods 716 (1 055)
Deferred tax balance at 30 June 10 549 (890)
Comprising:
Assessed losses 3 438 5 033
Temporary differences 7 111 (5 923)
Loss allowances 32 166 33 428
Property, plant and equipment 3 199 2 865
Intangible assets (60 158) (66 927)
Provisions and accruals 57 256 53 032
Lease liabilities 5 565 –
Finance lease receivables (30 917) (28 321)
Net balance at 30 June 10 549 (890)
Categorised as:
Deferred tax asset 90 834 78 206
Deferred tax liability (80 285) (79 096)
Management expects sufficient future taxable income in the relevant subsidiaries to enable these companies to utilise the unutilised tax losses as at 30 June 2020.
193
Ove
rvie
wG
over
nanc
eSu
stai
nabi
lity
Ann
ual fi
nanc
ial s
tate
men
tsSh
areh
olde
rs’ in
form
atio
n
Notes to the financial statements continued
for the year ended 30 June 2020
Group
2020R’000
2019R’000
16. INVENTORIESInventory on hand 1 107 948 950 049
Goods in transit 148 685 116 504
Work-in-progress 19 651 27 722
1 276 284 1 094 275
Allowance for obsolete inventory (48 097) (57 527)
1 228 187 1 036 748
During the current period there was a decrease in the allowance for obsolete inventory of R9 million (2019: decrease of R8 million) with a corresponding effect in cost of sales recognised in profit or loss.
The Group did not recognise a right to returned goods asset at the current or prior reporting dates.
17. TRADE AND OTHER RECEIVABLES
Trade receivable balances 2 885 703 3 204 462
Loss allowances (159 400) (111 105)
2 726 303 3 093 357
Other receivables * 138 547 156 603
Value-Added Tax receivable 81 986 14 896
2 946 836 3 264 856
* Other receivables comprise mainly prepayments and deposits.
A portion of trade receivables of various entities within the Group has been provided as security for banking facilities (refer notes 18 and 22.3).
Information about the Group’s exposure to credit and market risks, and impairment losses for trade receivables are included in note 36.7.
194
ALV
IVA
HO
LDIN
GS
LIM
ITED
•
Inte
grat
ed a
nnua
l rep
ort 2
020
Notes to the financial statements continued
for the year ended 30 June 2020
Group Company
2020R’000
2019R’000
2020R’000
2019R’000
18. CASH AND CASH EQUIVALENTS
Cash on hand 376 449 – –
Balances with banks 1 219 245 124 097 172 495
South African Rand 1 159 196 74 451 172 495
Namibian Dollar 7 271 9 038 – –
US Dollar 19 414 30 705 – –
Botswana Pula 4 042 4 647 – –
Mozambican Metical 18 438 4 430 – –
Kenyan Shilling 227 – – –
United Arab Emirates Dirham 87 – – –
Qatari Rial 1 626 – – –
Mauritian Rupee 8 071 – – –
Zambian Kwacha 873 826 – –
Bank overdraft – (158 799) – –
1 219 621 (34 253) 172 495
The Group holds cash and cash equivalents with reputable financial institutions. These institutions have a national short-term and national long-term credit rating of zaAA or above and zaA-1+ or above, respectively. (Source: S&P Global rating agency).
Information about the Group’s exposure to credit and market risks, and impairment losses for cash and cash equivalents are included note 36.7.
Banking facilities
The significant banking facilities available to specific companies within the Group at the reporting date were as follows:
Axiz Proprietary
LimitedR’000
Centrafin Proprietary
LimitedR’000
Datacentrix Proprietary
LimitedR’000
ObscureTechnologies
Proprietary Limited
R’000
Pinnacle Micro
Proprietary Limited
R’000
Sintrex Integration
Systems Proprietary
LimitedR’000
Direct facilities 600 000 70 000 152 250 15 000 321 000 5 000
Contingent facilities – – 2 697 12 000 274 160 –
Settlement facilities 100 000 – 330 000 – 4 102 –
700 000 70 000 484 947 27 000 599 262 5 000
195
Ove
rvie
wG
over
nanc
eSu
stai
nabi
lity
Ann
ual fi
nanc
ial s
tate
men
tsSh
areh
olde
rs’ in
form
atio
n
Notes to the financial statements continued
for the year ended 30 June 2020
18. CASH AND CASH EQUIVALENTS (continued)
Securities provided in terms of the banking facilities
Facility holder: Axiz Proprietary Limited
The following securities have been provided to Nedbank Limited:
� A deed of cession whereby the company cedes all of its right, title and interest in and to its book debts.
� A limited guarantee, including a pledge in security of intra-Group accounts, for an amount of R550 million between the company and Alviva Holdings Limited.
Cession by the company of its right, title and interest in Credit Guarantee Insurance Corporation of Africa insurance policies as set out below:
� Policy number SDC151755;
� Policy number 169459/ED; and
� Policy number 316228/ED.
The following imposed covenant is directly linked to the facility:
� Debt cover ratio in relation to utilised direct facilities not to be less than 1, based on a specific debtors book formula applied by the bank.
� The retained earnings of the company must exceed R350 million.
Facility holder: Centrafin Proprietary Limited
The following securities have been provided to Nedbank Limited:
� A deed of cession whereby the company cedes all of its right, title and interest in and to its book debts.
� A limited guarantee for an amount of R70 million between the company and Alviva Holdings Limited.
The following imposed covenant is directly linked to the facility:
� Debt cover ratio in relation to utilised direct facilities not to be less than 3, based on a specific debtors book formula applied by the bank.
Rental assets with a net carrying amount of R156 669 (2019: R1 239 499) serve as security for one of the overdraft facilities (refer note 9).
Facility holder: Datacentrix Proprietary Limited
The following securities have been provided to ABSA Bank Limited:
� A deed of cession whereby the company cedes all of its right, title and interest in and to its book debts.
� A limited guarantee for an amount of R208 million between the company and Datacentrix Holdings Proprietary Limited, excluding cession of loan accounts.
� The required level of insurance against credit losses by means of an active insurance policy.
The following imposed covenant is directly linked to the facility:
� Debt cover ratio in relation to utilised direct facilities not to be less than 2, based on a specific debtors book formula applied by the bank.
196
ALV
IVA
HO
LDIN
GS
LIM
ITED
•
Inte
grat
ed a
nnua
l rep
ort 2
020
Notes to the financial statements continued
for the year ended 30 June 2020
18. CASH AND CASH EQUIVALENTS (continued)
Facility holder: Obscure Technologies Proprietary Limited
The following securities have been provided to Nedbank Limited:
� A deed of cession whereby the company cedes all of its right, title and interest in and to its book debts.
� A limited guarantee for an amount of R27 million between the company and Alviva Holdings Limited.
� Suretyship for the amount of R5 million by the non-controlling interest of the company.
� A general condition contract for the purchase and sale of foreign currencies.
The following imposed covenant is directly linked to the facility:
� Debt cover ratio in relation to utilised direct facilities not to be less than 1 based on a specific debtors book formula applied by the bank.
Facility holder: Pinnacle Micro Proprietary Limited
The following securities have been provided to First National Bank, a division of FirstRand Bank Limited:
� A deed of cession whereby the company cedes all of its rights, titles and interest in and to its Credit Insurance Policy and all foreign exchange contracts entered into.
� The company shall not incur additional indebtedness unless this indebtedness is with the consent of the financial institution being obtained.
� The company shall not change its core business or merge or amalgamate with another party unless the consent of the financial institution is obtained.
� A collateral cover ratio of 167% is maintained.
� The company shall not dispose of material assets outside of the course of ordinary business unless the consent of the financial institution is obtained.
� The company shall insure at least 70% of the debtors’ book from time to time.
Facility holder: Sintrex Integration Systems Proprietary Limited
The following securities have been provided to Nedbank Limited:
� A deed of cession whereby the company cedes all of its right, title and interest in and to its book debts.
The following imposed covenants are directly linked to the facility:
� Debt cover ratio in relation to utilised direct facilities not to be less than 3 based on a specific debtors’ book formula applied by the bank.
� Dividend cover of at least 2 times by the company.
The Group’s bankers have issued guarantees to the value of R8 144 223 (2019: R2 127 605) on behalf of the Group.
197
Ove
rvie
wG
over
nanc
eSu
stai
nabi
lity
Ann
ual fi
nanc
ial s
tate
men
tsSh
areh
olde
rs’ in
form
atio
n
Notes to the financial statements continued
for the year ended 30 June 2020
Group Company
2020R’000
2019R’000
2020R’000
2019R’000
19. STATED CAPITALAuthorised share capital
300 000 000 ordinary shares of R0,01 each 3 000 3 000 3 000 3 000
Issued share capital
136 317 746 (2019: 143 421 787) ordinary shares 1 363 1 434 1 363 1 434
1 363 1 434 1 363 1 434
2020Shares
2019Shares
2020Shares
2019Shares
Reconciliation of issued shares
Opening balance at 1 July 143 421 787 158 371 854 143 421 787 158 371 854
Specific repurchase and cancellation of treasury shares – (6 500 000) – (6 500 000)
General share repurchase and cancellation (7 104 041) (8 450 067) (7 104 041) (8 450 067)
Closing balance at 30 June 136 317 746 143 421 787 136 317 746 143 421 787
During the current reporting period, Alviva repurchased a total of 7 104 041 (2019: 8 450 067 ) of its ordinary shares on the open market for a total consideration of R102 million (2019: R187 million).
The above repurchase transactions were executed in terms of the general authority granted by shareholders at its AGM.
198
ALV
IVA
HO
LDIN
GS
LIM
ITED
•
Inte
grat
ed a
nnua
l rep
ort 2
020
Notes to the financial statements continued
for the year ended 30 June 2020
Group
2020Number
2019Number
2020R’000
2019R’000
20. TREASURY SHARES
Opening balance 6 835 000 11 285 000 125 819 129 090
Repurchased and cancelled – (6 500 000) – (39 290)
Shares vested with FSP participants * (1 058 600) – (20 869) –
Shares allocated to FSP participants * 1 404 350 2 050 000 10 378 36 019
7 180 750 6 835 000 115 328 125 819
* Refer to note 37.3 .
21. OTHER EQUITY RESERVESGroup
Foreigncurrency
translationreserve
R’000
Profit ondisposal of
treasurysharesR’000
Equity-settledshare-based
paymentreserve
R’000OtherR’000
TotalR’000
Balance at 1 July 2018 7 383 31 090 15 792 3 54 268
Increase in foreign currency translation reserve 447 – – – 447
Equity-settled share-based payment (refer note 37.3) – – 9 943 – 9 943
Transfer between reserves – (31 090) – – (31 090)
Balance at 1 July 2019 7 830 – 25 735 3 33 568
Increase in foreign currency translation reserve 4 609 – – – 4 609
Equity-settled share-based payment (refer note 37.3) – – 8 112 – 8 112
Balance at 30 June 2020 12 439 – 33 847 3 46 289
199
Ove
rvie
wG
over
nanc
eSu
stai
nabi
lity
Ann
ual fi
nanc
ial s
tate
men
tsSh
areh
olde
rs’ in
form
atio
n
Notes to the financial statements continued
for the year ended 30 June 2020
22. INTEREST-BEARING LIABILITIESGroup
Notes
Totalbalance
R’000
Currentportion
R’000
Non-currentportion
R’000
2020
Secured
Lease liabilities – properties 22.1.1 295 502 51 897 243 605
Lease liabilities – sale-and-leaseback transactions * 22.1.2 22 909 12 506 10 403
Lease liabilities – motor vehicles 22.1.1 555 236 319
Financial liabilities – sale-and-leaseback transactions ** 22.1.2 18 870 5 608 13 262
Asset-backed senior loan: Nedbank 22.3 624 000 – 624 000
Term loan facility 22.4 35 750 11 947 23 803
Redeemable preference shares 22.5 400 000 250 000 150 000
Unsecured
Third-party loans 22.6 10 014 – 10 014
1 407 600 332 194 1 075 406
2019
Secured
Finance lease liabilities 22.2 8 121 6 285 1 836
Asset-backed senior loan: Nedbank 22.3 532 000 – 532 000
Redeemable preference shares 22.5 340 000 100 000 240 000
Unsecured
Third-party loan 22.6 4 506 – 4 506
884 627 106 285 778 342
* These sale-and-leaseback transactions existed on transition to IFRS 16.
** These sale-and-leaseback transactions were entered into during the reporting period.
22.1 Leases
The Group has adopted IFRS 16 using the modified retrospective approach and, therefore, the comparative information has not been restated and continues to be reported under IAS 17. Refer to note 6.3 of the financial statements.
Group
2020R’000
Leases as lessee
Lease liabilities – property 295 502
Lease liabilities – sale-and-leaseback agreements 22 909
Lease liabilities – motor vehicles 555
318 966
Non-current liabilities 254 327
Current liabilities 64 639
318 966
200
ALV
IVA
HO
LDIN
GS
LIM
ITED
•
Inte
grat
ed a
nnua
l rep
ort 2
020
Notes to the financial statements continued
for the year ended 30 June 2020
22. INTEREST-BEARING LIABILITIES (continued)
22.1.1 Property and motor vehicle leases
The Group leases various property for administrative and storage purposes. Some of these leases include a fixed monthly lease payment in relation to the parking and operating costs directly associated with the underlying property. In addition, the Group leases motor vehicles.
Terms
The property leases typically run for a period of five years, with an option to renew the lease after that date. Lease payments are renegotiated every three to five years to reflect market rentals. Most of the property leases were entered into before the commencement of the current reporting period. Previously, these leases were classified as operating leases under IAS 17.
The incremental borrowing rate applied at transition, of 8,75%, was the incremental borrowing rate of Alviva Treasury Services Proprietary Limited, which administrates the formal treasury function of the Alviva Group. Management applied this rate due to the fact that the Group will obtain funding for a building from the treasury function of the Group before approaching an external financial institution.
The motor vehicle leases (previously classified as finance leases) have an average maturity of 60 months and bear interest at market-related rates.
Right-of-use-assets
The right-of-use assets related to the property and motor vehicles are included in property, plant and equipment, as disclosed in note 9.
Short-term leases
In some instances, the property leases are negotiated on a month-to-month basis. These leases are classified as short-term leases. Previously, these leases were classified as operating leases under IAS 17.
In addition to the short-term property leases, the Group leases equipment on an ad hoc basis which are also classified as a short-term leases.
Maturity analysis of lease payments
The Group’s specific maturity analysis of these lease liabilities, based on contractual undiscounted cash flows, at the reporting date, is as follows:
Less than 3 months
Between 3 to 12
months1 to 5 years
More than
5 years
Lease liabilities – property leases 17 200 54 462 219 058 53 225
Lease liabilities – motor vehicle 84 235 281 –
Amounts recognised in profit or loss Leases under
IFRS 162020
Operatingleases under
IAS 172019
Lease expense (included in administration expenses) – 80 658
Short term lease expense * (included in administration expenses) 11 722 –
Interest on lease liabilities (included in finance costs) 27 657 –
Debt forgiveness related to lease payments ** (included in administration expenses) (1 262) –
38 117 80 658
* The short-term lease expense includes leases with a lease term of less than 12 months at transition as well as the properties leases on a month-to-month basis, as explained above.
** The Group received a debt forgiveness relief in relation to property leases, which was recognised in terms of IFRS 16’s practical expedient. The relief was
received in relation to a minimal number of leases and ranged for lease payments during the months of April 2020 to August 2020.
201
Ove
rvie
wG
over
nanc
eSu
stai
nabi
lity
Ann
ual fi
nanc
ial s
tate
men
tsSh
areh
olde
rs’ in
form
atio
n
Notes to the financial statements continued
for the year ended 30 June 2020
22. INTEREST-BEARING LIABILITIES (continued)
22.1.2 Sale-and-leaseback agreements
2020
Total liabilityR’000
Financial liabilities
R’000
Lease liabilities
R’000
Sale-and-leaseback agreements 41 779 18 870 22 909
41 779 18 870 22 909
Non-current liabilities 23 665 13 262 10 403
Current liabilities 18 114 5 608 12 506
41 779 18 870 22 909
The Group entered into sale-and-leaseback agreements in relation to office and ICT equipment as the underlying assets.
The Group entered into sale-and-leaseback agreements in prior reporting periods. Previously, these agreements were classified as operating leases under IAS 17. At transition, these agreements were recognised as lease liabilities with a corresponding right-of-use asset. During the reporting period, the Group entered into additional sale-and-leaseback agreements which have been recognised as financial liabilities in the current reporting period as the Group did not transfer control of the underlying assets in terms of these agreements.
Terms
The leases typically run for a period of between three and five years with no renewal options. The leases have an incremental borrowing rate of between 10% and 14%. The lease payments range between R1 120 and R471 394 in relation to the sale-and-leaseback agreements.
Right-of-use-asset
The right-of-use assets and underlying equipment are included in property, plant and equipment, as disclosed in note 9.
Maturity analysis of lease payments
The Company’s specific maturity analysis of these lease liabilities, based on contractual undiscounted cash flows, at the reporting date, is as follows:
Less than 3 months
Between 3 to 12
months1 to 5 years
Lease liabilities – sale-and-leaseback agreements 3 708 10 843 11 614
Amounts recognised in profit or loss Leases under
IFRS 162020
Operatingleases under
IAS 172019
Lease expense (included in cost of sales) – 18 083
Interest on lease liabilities (included in finance costs) 3 489 –
3 489 18 083
202
ALV
IVA
HO
LDIN
GS
LIM
ITED
•
Inte
grat
ed a
nnua
l rep
ort 2
020
Notes to the financial statements continued
for the year ended 30 June 2020
22. INTEREST-BEARING LIABILITIES (continued)
22.2 Finance lease liabilities
The Group entered into finance leases in respect of customer transactions in the Managed Print and Document Solutions service offering in the previous reporting periods. These leases were covered in back-to-back transactions with vendors. The leases had a maturity of between 24 and 36 months. The leases bore interest at rates varying between 8% and 13%. These leases were settled during the reporting period.
Group
2019R’000
Future minimum lease payments 8 587
– within one year 1 827
– within two to five years 6 760
Less: Future finance charges (466)
Present value of minimum lease payments 8 121
– within one year 6 285
– within two to five years 1 836
22.3 Asset-backed senior loan: Nedbank
The asset-backed senior loan is secured by a cession over finance lease receivables amounting to R612 million (2019: R612 million), cash resources of R70 million (2019: R70 million) and trade debtors of R10 million (2019: R10 million), bears interest at 3-month Jibar plus 2,5% and is repayable from 1 May 2022 over the life of the financed assets.
22.4 Term loan facility
During the reporting period, the Company entered into a term funding agreement amounting to a total of R44 million. The agreement was entered into in relation to a specific underlying transaction with a customer.
The loan is repayable in quarterly instalments and bears interest at a fixed rate of 9,50% per annum. The terms of the loan are structured based on the underlying customer transaction. No specific additional security was required in relation to the funding agreement.
203
Ove
rvie
wG
over
nanc
eSu
stai
nabi
lity
Ann
ual fi
nanc
ial s
tate
men
tsSh
areh
olde
rs’ in
form
atio
n
Notes to the financial statements continued
for the year ended 30 June 2020
22. INTEREST-BEARING LIABILITIES (continued)
22.5 Redeemable preference shares
DCT Holdings Proprietary Limited (“DCT”) issued 60 (2019: nil) redeemable preference shares to Absa Bank Limited during the reporting period. The applicable rate assigned to the preference shares is 79% of the official prime rate per annum compounded on a monthly basis. The scheduled redemption date of the preference shares is three years and one month from the issue date. The dividend payment dates are 31 January and 31 July of each year until the scheduled redemption dates, as follows:
Redemption Redemption date
Tranche 1 20 August 2020 (previously 20 May 2020)
Tranche 2 22 April 2021
Tranche 3 28 July 2021
Tranche 4 19 August 2022
During the reporting period the scheduled redemption date of Tranche 1 was extended by three months from 20 May 2020 to 20 August 2020. Despite the Group’s strong liquidity position, this was done by mutual consent with the holder of the preference shares to remain prudent in light of the uncertainty surrounding COVID-19.
A commitment fee, equal to 0,5% per annum of the commitment fee less the value of the issue price of issued preference shares, is payable to the holder of the preference shares. The maximum number of preference shares that may be issued to the holder is 50 Class B cumulative redeemable non-participating preference shares.
The shares held in Datacentrix Holdings Proprietary Limited (“DXL”), a subsidiary of the Group, have been pledged as security to Absa Bank Limited in relation to the preference shares.
The holder of the preference shares is entitled to monitor the use of the proceeds of the issue of preference shares to ensure that the proceeds are used within the scope of the qualifying purpose. The qualifying purpose of the additional amount received is to finance business acquisitions.
In terms of DCT’s Memorandum of Incorporation, the preference shares will at least rank pari passu with the claims of all of its other unsecured and unsubordinated creditors, except for obligations mandatorily preferred by law applying to companies in general and there shall be no class of shares in the stated capital of the company which ranks in priority to the preference shares issued in terms of this agreement.
The agreement requires the Company to remain listed on the JSE.
No changes in the shareholding between the Company, DCT, DXL and Datacentrix Proprietary Limited (“DXP”) are permitted until Class B preference shares have been redeemed.
Certain financial covenants apply to the Company and DXP in terms of the preference share agreement.
The interest expense of R13 million (2019: R12 million), which is payable after the reporting date on 31 July 2020, is included in trade and other payables.
22.6 Third-party loansGroup
2020R’000
2019R’000
Unsecured
Merlynn third-party loans 1 014 4 506
Solareff third-party loans 9 000 –
10 014 4 506
These loans bear interest at the official prime rate per annum. The loans will be settled after the 2021 reporting period.
204
ALV
IVA
HO
LDIN
GS
LIM
ITED
•
Inte
grat
ed a
nnua
l rep
ort 2
020
Notes to the financial statements continued
for the year ended 30 June 2020
23. NON-INTEREST-BEARING LIABILITIESGroup
Notes
Totalbalance
R’000
Currentportion
R’000
Non-current portion
R’000
2020
Unsecured
Third-party loans 23.1 437 – 437
Contingent consideration 23.2 79 976 7 584 72 392
80 413 7 584 72 829
2019
Unsecured
Third-party loans 23.1 437 – 437
Contingent consideration 23.2 89 898 44 130 45 768
90 335 44 130 46 205
23.1 Third-party loans
Group
2020R’000
2019R’000
Unsecured
Parcea Computing Proprietary Limited outside shareholders 437 437
437 437
Loans due to outside shareholders have no specified repayment terms. The Group has the unconditional right to defer settlement for at least the next 12 months as agreed with the shareholders.
205
Ove
rvie
wG
over
nanc
eSu
stai
nabi
lity
Ann
ual fi
nanc
ial s
tate
men
tsSh
areh
olde
rs’ in
form
atio
n
Notes to the financial statements continued
for the year ended 30 June 2020
23. NON-INTEREST-BEARING LIABILITIES (continued)
23.2 Reconciliation of movements in contingent consideration
Group Company
2020R’000
2019R’000
2020R’000
2019R’000
Acquisitions of interests in subsidiaries
Opening balance of liability 89 898 150 761 9 000 –
Acquisition of interest in Obscure Enterprises Proprietary Limited ("Obscure")
– 28 000 – –
Acquisition of interest in Merlynn Intelligence Systems Proprietary Limited ("Merlynn")
– 94 000 – 94 000
Acquisition of SynergERP Proprietary Limited * 13 381 – – –
Acquisition of interest in SynergERP Limited – DWC LLC ("Synerg DWC")
27 852 – – –
Acquisition of interest in SynergERP Limited – UK ("Synerg UK")
30 438 – – –
Settlement paid to vendors (57 724) (137 593) – (85 000)
Fair value adjustment to contingent consideration (23 869) (45 270) (9 000) –
79 976 89 898 – 9 000
* The contingent consideration in relation to the business combination was settled during the reporting period as set out in note 35.1.
Contingent consideration related to the acquisition of VH Fibre
The final purchase price will be determined and paid on a formula that is based on the profits for the current reporting period.
Group
2020R’000
2019R’000
The contingent consideration can be broken down as follows:
Current 1 827 9 835
Non-current – 3 210
1 827 13 045
The fair value of the contingent consideration was determined at the reporting date in terms of the discounted cash flow method. The inputs into the model included the expected cash flows in terms of the performance conditions of the acquiree, based on internally prepared budget and forecasted estimates, discounted at a rate of 5,8% (2019: 8,8%), which represents the borrowing rate of the treasury function of the Group.
206
ALV
IVA
HO
LDIN
GS
LIM
ITED
•
Inte
grat
ed a
nnua
l rep
ort 2
020
Notes to the financial statements continued
for the year ended 30 June 2020
23. NON-INTEREST-BEARING LIABILITIES (continued)
23.2 Reconciliation of movements in contingent consideration (continued)
Contingent consideration related to the acquisition of Obscure
As previously disclosed, the total purchase price will be determined and paid on a formula that is based on the profits for the reporting periods ending ending 30 June 2020 and 2021.
Group
2020R’000
2019R’000
The contingent consideration can be broken down as follows:
Current 5 757 34 295
Non-current 14 100 33 558
19 857 67 853
The fair value of the contingent consideration was determined at the reporting date in terms of the discounted cash flow method. The inputs into the model included the expected cash flows in terms of the performance conditions of the acquiree, based on internally prepared budget and forecasted estimates, discounted at a rate of 5,8% (2019: 8,8%), which represents the borrowing rate of the treasury function of the Group.
Contingent consideration related to the acquisition of Merlynn
In terms of the purchase agreement, the final purchase price will be determined and paid on a formula that is based on the profits for the current reporting period.
Group Company
2020R’000
2019R’000
2020R’000
2019R’000
The contingent consideration can be broken down as follows:
Non-current – 9 000 – 9 000
– 9 000 – 9 000
The fair value of the contingent consideration was determined at the reporting date in terms of the discounted cash flow method. The inputs into the model included the expected cash flows in terms of the performance conditions of the acquiree, based on internally prepared budget and forecasted estimates, discounted at a rate of 5,8% (2019: 8,8%), which represents the borrowing rate of the treasury function of the Group.
207
Ove
rvie
wG
over
nanc
eSu
stai
nabi
lity
Ann
ual fi
nanc
ial s
tate
men
tsSh
areh
olde
rs’ in
form
atio
n
Notes to the financial statements continued
for the year ended 30 June 2020
23. NON-INTEREST-BEARING LIABILITIES (continued)
23.2 Reconciliation of movements in contingent consideration (continued)
Contingent consideration related to the acquisition of Synerg DWC
During the reporting period, the Company acquired 51% of Synerg DWC’s issued share capital (refer to note 35.2). The total purchase price will be determined and paid on a formula based on the profits for the reporting period ending 30 June 2022.
Group
2020R’000
2019R’000
The contingent consideration can be broken down as follows:
Current – –
Non-current 27 852 –
27 852 –
The fair value of the contingent consideration was determined at the reporting date in terms of the discounted cash flow method. The inputs into the model included the expected cash flows in terms of the performance conditions of the acquiree, based on internally prepared budget and forecasted estimates, discounted at a rate of 5,8%, which represents the borrowing rate of the treasury function of the Group. Based on the expected timing of the cash flows related to the contingent consideration and the acquisition date, the fair value at the reporting date approximates the contingent consideration recognised on the acquisition date of the acquisition.
Contingent consideration related to the acquisition of Synerg UK
During the reporting period, the Company acquired 51% of Synerg UK’s issued share capital (refer to note 35.3). The total purchase price will be determined and paid on a formula based on the profits for the reporting period ending 30 June 2022.
Group
2020R’000
2019R’000
The contingent consideration can be broken down as follows:
Current – –
Non-current 30 438 –
30 438 –
The fair value of the contingent consideration was determined at the reporting date in terms of the discounted cash flow method. The inputs into the model included the expected cash flows in terms of the performance conditions of the acquiree, based on internally prepared budget and forecasted estimates, discounted at a rate of 5,8%, which represents the borrowing rate of the treasury function of the Group. Based on the expected timing of the cash flows related to the contingent consideration and the acquisition date, the fair value at the reporting date approximates the contingent consideration recognised on the acquisition date of the acquisition.
208
ALV
IVA
HO
LDIN
GS
LIM
ITED
•
Inte
grat
ed a
nnua
l rep
ort 2
020
Notes to the financial statements continued
for the year ended 30 June 2020
Group Company
2020R’000
2019R’000
2020R’000
2019R’000
24. TRADE AND OTHER PAYABLESTrade payables 3 227 763 2 357 584 1 744 1 605
Derivative liability – foreign exchange contracts 11 772 24 827 – –
Other payables * 211 666 220 014 – –
Value-Added Tax payable 24 333 50 674 – –
Employee-related accruals 81 148 112 066 – –
Operating cost accruals 69 712 40 881 – –
3 626 394 2 806 046 1 744 1 605
* Comprising other operational payables that are not considered to be trade creditors in the normal operating cycle.
The Group did not recognise a refund liability at the current and prior reporting dates. Refer to note 26.3 of the financial statements.
Group
2020R’000
2019R’000
25. CONTRACT LIABILITIES
Contract liabilities related to warranty cover 9 418 11 404
Contract liabilities related to service and maintenance contracts 190 575 114 971
199 993 126 375
Non-current portion 16 064 11 528
Current portion 183 929 114 847
Warranty cover
The Group offers warranty cover in relation to the repair or replacement of goods sold with one, two or three year carry-in or on-site warranties in the event that the product should fail to operate under normal operating conditions.
The portion of the revenue earned on the contractual sale transaction that relates to the warranty cover is deferred and recognised as revenue in profit or loss over the period of the warranties. Refer to note 26.3.
Service and maintenance contracts
This contract liability relates to project installations and service and maintenance contracts with a 12 to 36-month period. The advance consideration received from customers is recognised as revenue in profit or loss on a systematic basis over the remainder of the contract in terms of services rendered. Refer to note 26.3.
209
Ove
rvie
wG
over
nanc
eSu
stai
nabi
lity
Ann
ual fi
nanc
ial s
tate
men
tsSh
areh
olde
rs’ in
form
atio
n
Notes to the financial statements continued
for the year ended 30 June 2020
26. REVENUE
The Group generates revenue primarily from the sale of IT-, fibre- and solar-related products and provision of installation, distribution and maintenance services. Other sources of revenue for the Group include rental income from equipment and finance income from finance leases entered into with customers.
Group Company
2020R’000
2019R’000
2020R’000
2019R’000
Revenue from contracts with customers 14 586 277 15 711 229 – –
Other revenue 217 878 211 412 459 524 456 213
– Revenue related to leases 217 878 211 412 – –
– Dividend income – – 459 524 456 213
Total revenue 14 804 155 15 922 641 459 524 456 213
26.1 Disaggregation of revenue from contracts with customers
In the following tables, revenue from contracts with customers is disaggregated by timing of revenue recognition, major service offering and contributing industry. The table also includes a reconciliation of the disaggregated revenue with the Group’s reportable segments (refer to note 40). In addition, the Group also disaggregated total revenue into the geographical regions.
Reportable segments
2020
Reportable segments
Total2020
R’000Group
ICTDistribution
R’000
Services and Solutions
R’000
Financial Services
R’000
Timing of revenue recognition
At a point in time 9 629 391 2 972 845 – 12 602 236
Over a period of time 238 365 1 745 676 – 1 984 041
Revenue from contacts with customers 9 867 756 4 718 521 – 14 586 277
Revenue related to leases - 20 373 197 505 217 878
Total revenue 9 867 756 4 738 894 197 505 14 804 155
210
ALV
IVA
HO
LDIN
GS
LIM
ITED
•
Inte
grat
ed a
nnua
l rep
ort 2
020
Notes to the financial statements continued
for the year ended 30 June 2020
26. REVENUE (continued)
26.1 Disaggregation of revenue from contracts with customers (continued)
Major service offering
Reportable segments
Total2020
R’000Group
ICTDistribution
R’000
Services and Solutions
R’000
Financial Services
R’000
Service offerings
IT-related products 9 508 021 2 899 384 – 12 407 405
Fibre-related products 125 530 – – 125 530
Solar-related products – 73 461 – 73 461
Electric charge-point sales – 4 578 – 4 578
Installation services 13 260 241 217 – 254 477
Infrastructure management – 103 137 – 103 137
Maintenance services – 215 206 – 215 206
Consulting services – usage 104 449 180 528 – 284 977
Consulting services – labour hours 116 496 1 001 010 – 1 117 506
Revenue from contacts with customers 9 867 756 4 718 521 – 14 586 277
Revenue related to leases – 20 373 197 505 217 878
Total revenue 9 867 756 4 738 894 197 505 14 804 155
Contributing industry
Reportable segments
Total2020
R’000Group
ICTDistribution
R’000
Services and Solutions
R’000
Financial Services
R’000
Industries
ICT 9 728 966 4 365 744 – 14 094 710
Fibre solution 138 790 – – 138 790
Renewable energy – 245 996 – 245 996
Infrastructure management – 106 781 – 106 781
Revenue from contacts with customers 9 867 756 4 718 521 – 14 586 277
Revenue related to leases – 20 373 197 505 217 878
Total revenue 9 867 756 4 738 894 197 505 14 804 155
211
Ove
rvie
wG
over
nanc
eSu
stai
nabi
lity
Ann
ual fi
nanc
ial s
tate
men
tsSh
areh
olde
rs’ in
form
atio
n
Notes to the financial statements continued
for the year ended 30 June 2020
26. REVENUE (continued)
26.1 Disaggregation of revenue from contracts with customers (continued)
Geographical regions
Reportable segments
Total2020
R’000Group
ICTDistribution
R’000
Services and Solutions
R’000
Financial Services
R’000
Regions
South Africa 8 318 072 4 442 623 – 12 760 695
Africa (excluding South Africa) 1 549 684 209 643 – 1 759 327
Other * – 66 255 – 66 255
Revenue from contacts with customers 9 867 756 4 718 521 – 14 586 277
Revenue related to leases – 20 373 197 505 217 878
Total revenue 9 867 756 4 738 894 197 505 14 804 155
* Includes Group entities in the UK and the Middle East.
Reportable segments
2019
Reportable segments
Total2019
R’000Group
ICTDistribution
R’000
Services and Solutions
R’000
Financial Services
R’000
Timing of revenue recognition
At a point in time 10 865 248 2 708 818 – 13 574 066
Over a period of time 257 907 1 879 256 – 2 137 163
Revenue from contacts with customers 11 123 155 4 588 074 – 15 711 229
Revenue related to leases - 19 053 192 359 211 412
Total revenue 11 123 155 4 607 127 192 359 15 922 641
212
ALV
IVA
HO
LDIN
GS
LIM
ITED
•
Inte
grat
ed a
nnua
l rep
ort 2
020
Notes to the financial statements continued
for the year ended 30 June 2020
26. REVENUE (continued)
26.1 Disaggregation of revenue from contracts with customers (continued)
Major service offering
Reportable segments
Total2019
R’000Group
ICTDistribution
R’000
Services and Solutions
R’000
Financial Services
R’000
Service offerings
IT-related products 10 692 956 2 689 224 – 13 382 180
Fibre-related products 196 661 – – 196 661
Solar-related products – 19 594 – 19 594
Electric charge-point sales – 8 602 – 8 602
Installation services 61 692 226 373 – 288 065
Infrastructure management – 123 268 – 123 268
Maintenance services – 195 347 – 195 347
Consulting services – usage 82 152 518 518 – 600 670
Consulting services – labour hours 89 694 807 148 – 896 842
Revenue from contacts with customers 11 123 155 4 588 074 – 15 711 229
Revenue related to leases – 19 053 192 359 211 412
Total revenue 11 123 155 4 607 127 192 359 15 922 641
Contributing industry
Reportable segments
Total2019
R’000Group
ICTDistribution
R’000
Services and Solutions
R’000
Financial Services
R’000
Industries
ICT 10 864 801 4 209 933 – 15 074 734
Fibre solution 258 354 – – 258 354
Renewable energy – 252 201 – 252 201
Infrastructure management – 125 940 – 125 940
Revenue from contacts with customers 11 123 155 4 588 074 – 15 711 229
Revenue related to leases – 19 053 192 359 211 412
Total revenue 11 123 155 4 607 127 192 359 15 922 641
213
Ove
rvie
wG
over
nanc
eSu
stai
nabi
lity
Ann
ual fi
nanc
ial s
tate
men
tsSh
areh
olde
rs’ in
form
atio
n
Notes to the financial statements continued
for the year ended 30 June 2020
26. REVENUE (continued)
26.1 Disaggregation of revenue from contracts with customers (continued)
Geographical regions
Reportable segments
Total2019
R’000Group
ICTDistribution
R’000
Services and Solutions
R’000
Financial Services
R’000
Regions
South Africa 9 867 704 4 494 949 – 14 362 653
Africa (excluding South Africa) 1 255 451 89 316 – 1 344 767
Other * – 3 809 – 3 809
Revenue from contacts with customers 11 123 155 4 588 074 – 15 711 229
Revenue related to leases – 19 053 192 359 211 412
Total revenue 11 123 155 4 607 127 192 359 15 922 641
* Includes Group entities in the Middle East.
26.2 Contract balances
Total2020
R’000
Total2019
R’000Group
Receivables
The following table provides information about receivables from contracts with customers:
Receivables classified as trade and other receivables 2 885 703 3 204 462
Loss allowance (159 400) (111 185)
2 726 303 3 093 277
Refer to note 17 of the financial statements.
Contract liabilities
The contract liabilities refer to payments received in advance in relation to service and maintenance as well as the specific warranties provided (in certain instances) for revenue not yet recognised. Refer to note 24 of the financial statements.
No information is provided about remaining performance obligations at 30 June 2020 that have an original expected duration of one year or less, as allowed by IFRS 15.
The remaining performance obligations at 30 June 2020 that have an original expected duration of longer than one year amounts to R324 million (2019: R 212 million).
214
ALV
IVA
HO
LDIN
GS
LIM
ITED
•
Inte
grat
ed a
nnua
l rep
ort 2
020
Notes to the financial statements continued
for the year ended 30 June 2020
26. REVENUE (continued)
26.3 Performance obligations and revenue recognition policies
Revenue is measured based on the consideration specified in a contract with a customer. The Group recognises revenue when it transfers control over a good or service to a customer. The following table provides information about the nature and timing of the satisfaction of performance obligations in contracts with customers, including significant payment terms, and the related revenue recognition policies.
Type of service offering
Nature and timing of satisfaction of performance obligations, including significant payment terms Revenue recognition policies
IT-related products The Group sells various IT-related products to customers including hardware, software packages and associated licences. The software relates to third-party owned software which is under complete control of the customer.
Revenue is recognised at a point in time when control passes to the specific customer.
Customers obtain control of these products when the goods are delivered to and have been accepted at their premises or electronically.
Revenue is recognised when control of the products has transferred, being when the products are delivered to the customer, the customer has full discretion over the directed use of the products, and there is no unfulfilled obligation that could affect the customer’s acceptance of the products.
Invoices are generated at that point in time. Invoices are usually payable within 30-60 days which indicates that no financing is provided to customers.
Delivery occurs when the products have been shipped to the specific location, the risks of obsolescence and loss have been transferred to the customer, and either the customer has accepted the products in accordance with the sales contract, the acceptance provisions have lapsed, or the Group has objective evidence that all criteria for acceptance have been satisfied.
The Group allows for volume and similar rebates on specific deals and contracts but not as a standard term or condition.
Where a volume or similar rebate is allowed, revenue is only recognised to the extent that it is highly probable that a significant reversal will not occur. A refund liability (included in trade and other payables) is recognised for expected volume discounts payable to customers in relation to sales made until the end of the reporting period.
Some contracts permit the customer to return an item. Returned goods, are exchanged only for new goods, i.e., no cash refunds are offered. The return policy is rarely exercised by customers.
A refund liability included in trade and other payables and a right to the returned goods (included in inventories) are recognised for the products expected to be returned. Accumulated experience is used to estimate such returns at the time of sale at a portfolio level (expected value method). Because the number of products returned has been steady for years, it is highly probable that a significant reversal in the cumulative revenue recognised will not occur. The validity of this assumption and the estimated amount of returns are reassessed at each reporting date.
215
Ove
rvie
wG
over
nanc
eSu
stai
nabi
lity
Ann
ual fi
nanc
ial s
tate
men
tsSh
areh
olde
rs’ in
form
atio
n
Notes to the financial statements continued
for the year ended 30 June 2020
Type of service offering
Nature and timing of satisfaction of performance obligations, including significant payment terms Revenue recognition policies
Fibre- and solar-related products
The Group sells fibre- and solar-related products to customers.
Revenue is recognised at a point in time when control passes to the specific customer.
Customers obtain control of these products when the goods are delivered to and have been accepted at their premises. The Group does not allow any returns on these specialised products.
Revenue is recognised when control of the products has transferred, being when the products are delivered to the customer, the customer has full discretion over the directed use of the products, and there is no unfulfilled obligation that could affect the customer’s acceptance of the products.
Invoices are generated at that point in time. Invoices are usually payable within 30 days which indicates that no financing is provided to customers.
Delivery occurs when the products have been shipped to the specific location, the risks of obsolescence and loss have been transferred to the customer, and either the customer has accepted the products in accordance with the sales contract, the acceptance provisions have lapsed, or the Group has objective evidence that all criteria for acceptance have been satisfied.
Electric charge-point systems and installations
The Group sells and installs a unique motor vehicle electric charge-point at a customer's premises.
Revenue is recognised over a period of time.
The overall installation is considered to be specialised and directly linked to the charge-point console.
Installation and charge-point components
Input method based on the costs of the components completed at the reporting date as a proportion of the total cost estimate for the installation of the system.
Customers does not obtain control of the various charge-point components prior to the commencement of the installation at their premises.
Warranty component
Input method based on the number of months lapsed of the warranty period at the reporting date as a proportion of the total contractual term.
Invoices are generated on a milestone basis during the installation process. Invoices are usually payable within 30 days which indicates that no financing is provided to customers.
Unearned warranty revenue is included in contract liabilities.
As part of the installation, an internal warranty is provided to the customer in relation to the malfunctioning of the charge-points which forms part of the invoiced amount. The warranty is usually for a period of 24 months.
26. REVENUE (continued)
26.3 Performance obligations and revenue recognition policies (continued)
216
ALV
IVA
HO
LDIN
GS
LIM
ITED
•
Inte
grat
ed a
nnua
l rep
ort 2
020
Notes to the financial statements continued
for the year ended 30 June 2020
Type of service offering
Nature and timing of satisfaction of performance obligations, including significant payment terms Revenue recognition policies
Installations The Group installs some of the products sold to customers i.e., hardware components, fibre-related components and solar solutions.
Revenue is recognised over a period of time.
The overall installations in these cases are not considered to be specialised and are identified as a separate performance obligations.
Installation element
Input method based on the completed labour hours at the reporting date as a proportion of the total labour hours estimated for the installation of the related product.
In some cases the products, mostly IT-related products, are controlled by the customer before the installation project commences. In other cases, the products, mostly solar- and fibre-related products, are not controlled by the customer before the installation project is initiated and transferred during the installation process.
Product delivered as part of installation solution
Input method based on the costs of the products completed at the reporting date as a proportion of the total cost estimate for the completed product set.
Invoices are generated on a milestone basis during the installation process. Invoices are usually payable within 30 days which indicates that no financing is provided to customers.
Warranty component
Output method based on the number of months lapsed of the warranty period at the reporting date as a proportion of the total contractual term.
As part of some installation projects, an internal warranty is provided to the customer in relation to failing solutions which forms part of the invoiced amount. The warranty is usually for a period of 12 to 36 months.
Unearned warranty revenue is included in contract liabilities.
Infrastructure management
The Group owns internally developed software which specifically assists customers with infrastructure management.
Revenue is recognised over a period of time.
The software remains in the control of the Group whereby the customer receives merely the right to access and not the right to usage.
Licence agreement
Output method based on the number of months lapsed of the licencing agreement period at the reporting date as a proportion of the total contractual term.
Invoices are generated on a monthly basis. Invoices are usually payable within 30 days which indicates that no financing is provided to customers.
Payments received in advance are included in contract liabilities.
26. REVENUE (continued)
26.3 Performance obligations and revenue recognition policies (continued)
217
Ove
rvie
wG
over
nanc
eSu
stai
nabi
lity
Ann
ual fi
nanc
ial s
tate
men
tsSh
areh
olde
rs’ in
form
atio
n
Notes to the financial statements continued
for the year ended 30 June 2020
Type of service offering
Nature and timing of satisfaction of performance obligations, including significant payment terms Revenue recognition policies
Maintenance contracts The Group sells maintenance contracts as part of the service offering in combination with other contracts with customers.
Revenue is recognised over a period of time.
Invoices are generated on a monthly basis. Invoices are usually payable within 30 days which indicates that no financing is provided to customers.
Maintenance agreement
Output method based on the number of months lapsed of the licencing agreement period at the reporting date as a proportion of the total contractual term.
Payments received in advance are included in contract liabilities.
Consulting services – usage
The Group provides access to certain resources such as data, mobile connections, IT storage space on servers, Cloud services and various other similar resources to customers by means of contract with a fixed determined price per consumption unit.
Revenue is recognised over a period of time.
Invoices are generated on a monthly basis. Invoices are usually payable within 30 days which indicates that no financing is provided to customers.
Consumption/resources utilised by customer
Output method based on the utilisation or consumption by the customer measured in the contractually specific unit metric for example data or electric units.
Payments received in advance are included in contract liabilities.
Consulting services – labour hours
The Group provides technical resources to customers by means of consulting services.
Revenue is recognised over a period of time.
Some customers enter into a contract at a fixed monthly fee allowing access to technical consulting staff and other customers request the services on an ad-hoc basis.
Labour hours of consultants
Input method based on the labour hours spent at the reporting date as a proportion of the total labour hours coupled to the specific consulting service (contractually or ad-hoc).
Invoices are generated on a monthly basis or when the ad-hoc service is completed (whichever period is shorter). Invoices are usually payable within 30 days which indicates that no financing is provided to customers.
26. REVENUE (continued)
26.3 Performance obligations and revenue recognition policies (continued)
218
ALV
IVA
HO
LDIN
GS
LIM
ITED
•
Inte
grat
ed a
nnua
l rep
ort 2
020
Notes to the financial statements continued
for the year ended 30 June 2020
Group Company
2020R’000
2019R’000
2020R’000
2019R’000
27. OPERATING PROFITOperating profit before interest includes:
Auditor’s remuneration 4 379 3 786 – –
Audit services 4 379 3 786 – –
Employee benefit expenses [GRI 405-1] 1 323 782 1 338 582 – –
Defined contribution plan expense 67 800 76 062 – –
Depreciation 132 843 44 459 – –
Leasehold improvements 858 753 – –
Equipment and vehicles, owned 66 833 42 771 – –
Buildings 64 668 – – –
Rental equipment 484 935 – –
Amortisation 186 239 145 552 – –
Intangible assets 186 239 145 552 – –
Gain on remeasurement of contingent consideration (23 869) (45 270) – –
Gain on foreign exchange (630) (8 068) – –
Profit on disposal of property, plant and equipment (1 611) (609) – –
Impairment losses and write-offs on trade and finance lease receivables
45 645 37 361 – –
Impairment loss on loan to equity-accounted investee
27 990 23 210 – –
Impairment loss on goodwill 49 563 – – –
Loss on disposal of subsidiary – 32 141 – –
28. NET FINANCE COSTSFinance income (50 666) (52 059) (42) (35)
Interest income (50 666) (52 059) (42) (35)
Finance costs 227 640 185 108 – –
Short-term finance including lease liabilities 140 234 106 415 – –
Interest (forward points) on forward exchange contracts
57 553 50 995 – –
Preference share dividend (deemed interest) 29 853 27 698 – –
219
Ove
rvie
wG
over
nanc
eSu
stai
nabi
lity
Ann
ual fi
nanc
ial s
tate
men
tsSh
areh
olde
rs’ in
form
atio
n
Notes to the financial statements continued
for the year ended 30 June 2020
Group Company
2020R’000
2019R’000
2020R’000
2019R’000
29. INCOME TAX29.1 Tax expense
Normal tax 114 525 187 200 12 9
Current period 115 018 187 959 12 9
Adjustments in respect of the prior period (493) (759) – –
Securities transfer tax – 133 – –
Non-residents shareholders’ tax 134 – – –
Deferred tax (39 971) (41 467) – –
Current period – originating (39 696) (42 522) – –
Adjustments in respect of the prior period (275) 1 055 – –
74 688 145 866 12 9
29.2 Reconciliation of tax rateProfit before tax 211 563 536 724 468 566 434 694
Income tax expense (74 688) (145 866) (12) (9)
% % % %
Effective tax rate 35,3 27,2 – –
RSA normal tax rate 28,0 28,0 28,0 28,0
Non-residents shareholders' tax 0,9 – – –
Foreign and Trust tax rate differential 1,7 (1,0) – –
Unrecognised deferred tax asset 2,0 0,6 – –
Utilisation of assessed losses brought forward (0,8) – – –
Tax allowances not included in profit or loss (4,1) (1,4) – –
Non-deductible expenses 11,5 0,4 1,9 1,7
Non-taxable income (3,5) 0,6 (29,9) (29,7)
Adjustments in respect of the prior period (0,4) – – –
The estimated tax loss available within the Group for set off against future taxable income is R16 million (2019: R18 million).
220
ALV
IVA
HO
LDIN
GS
LIM
ITED
•
Inte
grat
ed a
nnua
l rep
ort 2
020
Notes to the financial statements continued
for the year ended 30 June 2020
Group
2020R’000
2019R’000
30. EARNINGS AND HEADLINE EARNINGS PER SHARE AND DIVIDENDS PAID
30.1 Basic and diluted earnings per ordinary shareBasic earnings per ordinary share has been calculated using the following:
Profit for the period attributable to owners of the Company 136 875 390 858
Net profit attributable to non-controlling interests 11 849 3 642
Earnings attributable to ordinary shareholders 148 724 394 500
Weighted average number of shares in issue (‘000 shares) * 131 987 143 281
Weighted average number of shares in issue for purpose of dilution (‘000 shares) * 134 351 147 141
Basic earnings per ordinary share (cents) 112,7 275,3
Diluted basic earnings per ordinary share (cents) 110,7 268,1
30.2 Headline and diluted headline earnings per ordinary shareNormal and diluted headline earnings per ordinary share
Headline earnings per ordinary share has been calculated using the following:
Earnings attributable to ordinary shareholders 148 724 394 500
Impairment loss on goodwill 49 563 –
Profit on disposal of property, plant and equipment net of tax (1 160) (438)
Profit on disposal of property, plant and equipment (1 611) (609)
Less: Tax thereon 451 171
Loss on disposal of subsidiary net of tax – 31 561
Loss on disposal of subsidiary – 32 141
Less: Tax thereon – (580)
Headline earnings for the period 197 127 425 623
Weighted average number of shares in issue (‘000 shares) * 131 987 143 281
Weighted average number of shares in issue for purpose of dilution (‘000 shares) * 134 351 147 141
Headline earnings per ordinary share (cents) 149,4 297,1
Diluted headline earnings per ordinary share (cents) 146,7 289,3
30.3 Core and diluted earnings per ordinary shareCore earnings per ordinary share has been calculated using the following:
Headline earnings for the period 197 127 425 623
Acquisition costs net of tax 790 1 770
Amortisation of intangibles net of tax 100 255 78 244
Core earnings for the period ** 298 172 505 637
Weighted average number of shares in issue (‘000 shares) * 131 987 143 281
Weighted average number of shares in issue for purpose of dilution (‘000 shares) * 134 351 147 141
Core earnings per ordinary share (cents) 225,9 352,9
Diluted core earnings per ordinary share (cents) 222,0 343,6
* Excluding treasury shares.
** Core EPS is considered a meaningful additional measure of evaluating the performance of the Group’s operations. It is based on the HEPS measure and adjusted to exclude the amortisation of intangible assets recognised on business combinations and related business combination acquisition costs. It is not an IFRS measure.
221
Ove
rvie
wG
over
nanc
eSu
stai
nabi
lity
Ann
ual fi
nanc
ial s
tate
men
tsSh
areh
olde
rs’ in
form
atio
n
Notes to the financial statements continued
for the year ended 30 June 2020
30. EARNINGS AND HEADLINE EARNINGS PER SHARE AND DIVIDENDS PAID (continued)
Group
2020 2019
Actual Weighted Actual Weighted
30.4 Reconciliation of weighted average number of shares in issue (‘000)Shares in issue at the beginning of the period 143 422 143 422 158 372 158 372
Less: held as treasury shares (7 181) (6 274) (6 835) (4 965)
Shares acquired and cancelled (7 104) (5 161) (14 950) (10 126)
At the end of the period 129 137 131 987 136 587 143 281
Being:
Shares in issue at the reporting date 136 318 138 261 143 422 148 246
Held as treasury shares at the reporting date (7 181) (6 274) (6 835) (4 965)
Dilutionary effect of FSP scheme – 2 364 – 3 860
Weighted number of shares at the end of the period for purposes of dilution
– 134 351 – 147 141
Group Company
2020R’000
2019R’000
2020R’000
2019R’000
30.5 Dividends paid [GRI 201-1]
Total dividends paid to ordinary shareholders 41 492 40 694 41 492 42 449
Notice is hereby given that a final dividend of 15 cents (2019: 30 cents) per ordinary share for the year ended 30 June 2020 has been declared by the Board of Directors of the Company.
The salient dates applicable to the final dividend are as follows:
Last day of trade “cum” dividend Tuesday, 10 November 2020
First day to trade “ex” dividend Wednesday, 11 November 2020
Record date Friday, 13 November 2020
Payment date Monday, 16 November 2020
No share certificates may be dematerialised or rematerialised between Wednesday, 11 November 2020 and Friday, 13 November 2020, both days inclusive.
Dividends are to be paid out of distributable reserves. Dividends Tax of 20% will be withheld in terms of the Income Tax Act for those shareholders who are not exempted from Dividends Tax. In accordance with paragraphs 11.17(1)(a)(i) and (ix) and 11.17(c) of the JSE Listings Requirements, the following additional information is disclosed:
� The gross local dividend amount is 15 cents per ordinary share for shareholders exempt from Dividends Tax;
� The net local dividend amount is 12,00000 cents per ordinary share for shareholders liable to pay Dividends Tax;
� Alviva has 136 317 746 ordinary shares in issue at the date of the declaration (which includes 7 180 750 treasury shares of which all shares constitute FSP shares); and
� Alviva’s income tax reference number is 9675/146/71/7.
Where applicable, payment in respect of certificated shareholders will be transferred electronically to shareholders’ bank accounts on the payment date. In the absence of specific mandates, payment cheques will be posted to certificated shareholders at their risk on the payment date. Shareholders who have dematerialised their shares will have their accounts at their Central Securities Depository Participant or broker credited on the payment date.
222
ALV
IVA
HO
LDIN
GS
LIM
ITED
•
Inte
grat
ed a
nnua
l rep
ort 2
020
Notes to the financial statements continued
for the year ended 30 June 2020
Group Company
2020R’000
2019R’000
2020R’000
2019R’000
STATEMENT OF CASH FLOWS
31. CASH GENERATED FROM OPERATIONS Profit before tax 211 563 536 724 478 721 434 694
Adjusted for
Finance income (50 666) (52 059) (42) (35)
Dividends received (included as revenue) – – (459 524) (456 213)
Finance costs 227 640 185 108 – –
Non-cash flow items 396 446 209 426 (19 155) 21 227
Depreciation and amortisation 319 082 190 011 – –
Loss on derecognition of investment – – – 25 274
Gain on remeasurement of contingent consideration (23 869) (45 270) (9 000) –
Foreign exchange losses on contingent consideration 6 162 – – –
Profit on disposal of property, plant and equipment (1 611) (609) – –
Loss on disposal of subsidiary – 32 141 – –
Equity-settled share-based payment expense/(income) 20 458 9 943 (10 155) (4 047)
Impairment loss on goodwill 49 563 – – –
Impairment loss on loan to equity-accounted investee 27 990 23 210 – –
Debt forgiveness relief on leases (1 242) – – –
Other non-cash flow items (87) – – –
Changes in working capital 1 016 060 (604 123) 139 153
Increase in inventories (191 439) (272 361) – –
Decrease/(increase) in trade and other receivables 335 702 (726 605) – –
Increase in trade and other payables 802 715 443 431 139 153
Increase/(decrease) in contract liabilities 69 082 (48 588) – –
1 801 043 275 076 139 (174)
223
Ove
rvie
wG
over
nanc
eSu
stai
nabi
lity
Ann
ual fi
nanc
ial s
tate
men
tsSh
areh
olde
rs’ in
form
atio
n
Notes to the financial statements continued
for the year ended 30 June 2020
32. CASH FLOWS FROM FINANCING ACTIVITIES ANALYSIS The changes in the Company’s cash flows from financing activities can be categorised as follows:
Group
Non-cash movements
R’000
Cash movements
R’000Total
R’000
2020
Description of transaction
Interest-bearing liabilities raised – 205 000 205 000
Interest-bearing liabilities repaid – (60 967) (60 967)
Non-interest-bearing liabilities repaid – (57 724) (57 724)
Repurchase of shares – (102 194) (102 194)
Treasury shares acquired – (10 378) (10 378)
Transactions with non-controlling interests – (25 465) (25 465)
Acquisition of non-controlling interest without the loss of control – (15 000) (15 000)
Dividends paid to non-controlling interests – (10 465) (10 465)
Dividends paid to shareholders – (41 492) (41 492)
– (93 220) (93 220)
2019
Description of transaction
Interest-bearing liabilities raised – 96 464 96 464
Interest-bearing liabilities repaid – (8 331) (8 331)
Non-interest-bearing liabilities repaid – (68 679) (68 679)
Repurchase of shares – (150 790) (150 790)
Treasury shares acquired – (36 020) (36 020)
Transactions with non-controlling interests – (58 794) (58 794)
Acquisition of non-controlling interest without the loss of control – (48 559) (48 559)
Dividends paid to non-controlling interests – (10 235) (10 235)
Dividends paid to shareholders – (40 694) (40 694)
– (266 844) (266 844)
None of the movements within the cash flows from financing activities in the statement of cash flows are attributable to non-cash transactions.
224
ALV
IVA
HO
LDIN
GS
LIM
ITED
•
Inte
grat
ed a
nnua
l rep
ort 2
020
Notes to the financial statements continued
for the year ended 30 June 2020
32. CASH FLOWS FROM FINANCING ACTIVITIES ANALYSIS (continued)
Company
Non-cash movements
R’000
Cash movements
R’000Total
R’000
2020
Description of transaction
Repurchase of shares – (102 195) (102 195)
Dividends paid to shareholders – (41 492) (41 492)
– (143 687) (143 687)
2019
Description of transaction
Repurchase of shares – (270 142) (270 142)
Group loans raised – 41 681 41 681
Dividends paid to shareholders – (42 449) (42 449)
– (270 910) (270 910)
None of the movements within the cash flows from financing activities in the statement of cash flows are attributable to non-cash transactions.
Group Company
2020R’000
2019R’000
2020R’000
2019R’000
33. NORMAL TAX PAID Net tax payable/(receivable) at beginning of the period 67 (15 483) – –
Tax liability acquired through business combinations 2 117 548 – –
Normal tax 114 525 187 200 12 9
Securities transfer tax – 134 – –
Non-residents shareholders’ tax 134 – – –
Net tax (payable)/receivable at end of the period (1 107) (67) (7) –
Tax receivable at end of the period 18 418 14 096 – –
Tax payable at end of the period (19 525) (14 163) (7) –
115 736 172 331 5 9
225
Ove
rvie
wG
over
nanc
eSu
stai
nabi
lity
Ann
ual fi
nanc
ial s
tate
men
tsSh
areh
olde
rs’ in
form
atio
n
Notes to the financial statements continued
for the year ended 30 June 2020
Group
Notes2020
R’0002019
R’000
34. NON-CONTROLLING INTERESTSBalance at 1 July 70 183 89 313
Share of profit (11 849) (3 642)
Acquisition of subsidiaries (business combinations) with NCI 58 428 20 674
Acquisition of NCI without change in control (6 326) (25 927)
Dividends paid (10 465) (10 235)
Balance at 30 June 99 971 70 183
NCIs at the reporting date are summarised below :
Group – 2020
Name of subsidiary Segment
Proportionof
ownershipinterests
and votingrights held
by NCI%
Openingbalance
R’000
Profit/(loss)
allocated toNCI
R’000
Acquisitionof NCI
throughbusiness
combinationsR’000
Acquisitionof NCI
throughshare
acquisitionsR’000
Dividendspaid
R’000Total NCI
R’000
Solareff Proprietary Limited
Services and Solutions
49,0 13 084 1 280 – – – 14 364
Parcea Computing Proprietary Limited
Group Central Services
49,0 655 (656) – – – (1)
GridCars Proprietary Limited
Services and Solutions
61,8 (3 633) (1 472) – – – (5 105)
Sintrex Integration Systems Proprietary Limited
Services and Solutions
24,7 21 987 (981) – – (4 840) 16 166
DG Store (SA) Proprietary Limited
Services and Solutions
20,0 22 513 7 357 – (6 326) (5 625) 17 919
Merlynn Intelligence Technologies Proprietary Limited
Services and Solutions
35,0 15 577 (8 015) – – – 7 562
SynergERP Proprietary Limited
Services and Solutions
30,0 – (2 371) 21 374 – – 19 003
SynergERP Limited - DWC LLC
Services and Solutions
49,0 – (6 991) 20 934 – – 13 943
SynergERP Limited - UK (“Synerg UK”)
Services and Solutions
49,0 – – 16 120 – – 16 120
Total 70 183 (11 849) 58 428 (6 326) (10 465) 99 971
226
ALV
IVA
HO
LDIN
GS
LIM
ITED
•
Inte
grat
ed a
nnua
l rep
ort 2
020
Notes to the financial statements continued
for the year ended 30 June 2020
34. NON-CONTROLLING INTERESTS (continued)
Group – 2019
Name of subsidiary Segment
Proportionof
ownershipinterests
and votingrights held
by NCI%
Openingbalance
R’000
Profit/(loss)
allocated toNCI
R’000
Acquisitionof NCI
throughbusiness
combinationsR’000
Acquisitionof NCI
throughshare
acquisitionsR’000
Dividendspaid
R’000Total NCI
R’000
Solareff Proprietary Limited
Services and Solutions
49,0 18 469 (5 385) – – – 13 084
Parcea Computing Proprietary Limited
Group Central Services
49,0 471 184 – – – 655
GridCars Proprietary Limited
Services and Solutions
61,8 (1 586) (2 047) – – – (3 633)
Sintrex Integration Systems Proprietary Limited
Services and Solutions
24,7 40 987 3 312 – (19 577) (2 735) 21 987
Obscure Enterprises Proprietary Limited
ICT Distribution
0,0 7 244 (894) – (6 350) – –
DG Store (SA) Proprietary Limited
Services and Solutions
30,0 23 728 6 285 – – (7 500) 22 513
Merlynn Intelligence Technologies Proprietary Limited
Services and Solutions
35,0 (5 097) 20 674 – – 15 577
Total 89 313 (3 642) 20 674 (25 927) (10 235) 70 183
227
Ove
rvie
wG
over
nanc
eSu
stai
nabi
lity
Ann
ual fi
nanc
ial s
tate
men
tsSh
areh
olde
rs’ in
form
atio
n
Notes to the financial statements continued
for the year ended 30 June 2020
34. NON-CONTROLLING INTERESTS (continued)
Summary of financial information of subsidiaries with material non-controlling interests
The following table summarises the information relating to subsidiaries that have material NCIs before any intra-Group eliminations:
Sintrex Integration Systems
Proprietary Limited
2020 2019
12 months ended
30 June 2020
R’000
12 months ended
30 June 2019R’000
NCI percentage (%) 24,69 24,69
Non-current assets 59 079 13 014
Current assets 36 680 51 468
Non-current liabilities (35 623) (279)
Current liabilities (15 602) (11 800)
Net assets 44 534 52 403
Net assets attributable to NCI 10 995 39 465
Revenue 115 315 141 297
Profit for the period 11 733 27 636
Total comprehensive income for the period 11 733 27 636
Profit attributable to NCI 2 897 6 823
Cash flows from operating activities (8 718) 43 477
Cash flows from investing activities (19 227) 26 763
Cash flows from financing activities (601) (7 729)
Net movement in cash and cash equivalents (28 546) 62 511
228
ALV
IVA
HO
LDIN
GS
LIM
ITED
•
Inte
grat
ed a
nnua
l rep
ort 2
020
Notes to the financial statements continued
for the year ended 30 June 2020
34. NON-CONTROLLING INTERESTS (continued)
DG Store SA Proprietary Limited
2020 2019
12 months ended
30 June 2020
R’000
12 months ended
30 June 2019R’000
NCI percentage (%) 20,00 30,00
Non-current assets 6 507 5 767
Current assets 484 717 214 581
Non-current liabilities – –
Current liabilities (412 041) (164 994)
Net assets 79 183 55 354
Net assets attributable to NCI 15 837 16 606
Revenue 1 248 982 1 152 099
Profit for the period 42 197 32 730
Total comprehensive income for the period 42 197 32 730
Profit attributable to NCI 8 439 9 819
Cash flows from operating activities 161 212 31 984
Cash flows from investing activities (2 942) (295)
Cash flows from financing activities (1 322) (16 966)
Net movement in cash and cash equivalents 156 948 14 723
229
Ove
rvie
wG
over
nanc
eSu
stai
nabi
lity
Ann
ual fi
nanc
ial s
tate
men
tsSh
areh
olde
rs’ in
form
atio
n
Notes to the financial statements continued
for the year ended 30 June 2020
34. NON-CONTROLLING INTERESTS (continued)
SynergERP Proprietary Limited
2020 2019
12 months ended
30 June 2020
R’000
4 months ended
30 June 2019R’000
NCI percentage (%) 30,00 30,00
Non-current assets 1 955 2 156
Current assets 33 262 24 228
Non-current liabilities – (98)
Current liabilities (20 103) (11 053)
Net assets 15 114 15 233
Net assets attributable to NCI 4 534 4 570
Revenue 33 467 73 511
(Loss)/profit for the period (119) 9 014
Total comprehensive income for the period (119) 9 014
Profit attributable to NCI (36) 2 704
Cash flows from operating activities 1 882 7 186
Cash flows from investing activities (2 212) (2 449)
Cash flows from financing activities 622 (900)
Net movement in cash and cash equivalents 292 3 837
As per management’s judgement, none of the other NCI are considered to be material. These NCIs amounted to a total of R46,9 million (2019: R60,1 million) at the reporting date.
34.1 DG Store SA Proprietary Limited (“DG”)
On 1 November 2019, Alviva, through its subsidiary company Datacentrix Holdings Proprietary Limited, acquired an additional 10% of the issued share capital of DG for an amount of R15 million, thereby increasing its shareholding in DG to 80%.
230
ALV
IVA
HO
LDIN
GS
LIM
ITED
•
Inte
grat
ed a
nnua
l rep
ort 2
020
Notes to the financial statements continued
for the year ended 30 June 2020
35. BUSINESS COMBINATIONS35.1 SynergERP Proprietary Limited (“Synerg SA”)
On 1 July 2019, Alviva, through its subsidiary DCT Holdings Proprietary Limited, acquired 70% of the issued share capital of Synerg SA for a maximum purchase consideration of R109 million.
Synerg SA enables businesses to leverage software in order to achieve operational efficiency in all areas of a business, from operations to human capital. The business was established in 1993 and has been a Sage Reseller for over 25 years. Synerg SA has earned Platinum reseller status and has been recognised as a top performing partner for three consecutive years – 2016, 2017 and 2018.
The business is currently dedicated to the Enterprise Management Software suite (also known as Sage X3 and Sage X3 People) and supports global organisations through its offices in South Africa. The business is invested in the Sage Enterprise product stack and has one of the largest complements of certified consultants in Africa. As a business, they are closely aligned with Sage and Sage’s growth areas, enabling them to stay up to date with the latest initiatives and focus areas.
In the twelve months to the reporting date, Synerg SA contributed revenue of R79 million and profit of R5 million to the Group’s results. The acquisition contributed to the Group’s revenue and profit for a full reporting period.
An amount of R55 million was paid in cash by way of electronic transfer during July 2019 and the balance of R14 million during May 2020 (contingent consideration).
The final payment was based on the audited results of the company for their year ended 31 December 2019.
The transaction meets the definition of a business combination as set out in IFRS 3: Business Combinations.
231
Ove
rvie
wG
over
nanc
eSu
stai
nabi
lity
Ann
ual fi
nanc
ial s
tate
men
tsSh
areh
olde
rs’ in
form
atio
n
Notes to the financial statements continued
for the year ended 30 June 2020
35. BUSINESS COMBINATIONS (continued)
35.1 SynergERP Proprietary Limited (“Synerg SA”) (continued)
The fair value of the identifiable assets and liabilities included in the consolidated results of the Group on the date of acquisition, compared to the carrying amounts of the identifiable assets and liabilities recognised in the accounting records of the acquiree immediately before the acquisition, was as follows:
Fair valuerecognised at
acquisition dateR’000
Previously recognised
carrying amountsby acquiree
R’000
Property, plant and equipment 810 810
Intangible asset: customer relationship 85 360 –
Investments – 2 258
Deferred tax 1 803 1 803
Trade and other receivables 16 417 16 417
Cash and cash equivalents 5 944 5 944
Total assets 110 334 27 232
Trade and other payables (12 546) (12 546)
Contract liabilities (42) (42)
Interest-bearing liabilities (482) (482)
Current tax liabilities (2 117) (2 117)
Deferred tax on intangible asset: customer relationship (23 901) –
Total liabilities (39 088) (15 187)
Identifiable net assets 71 246 12 045
NCI (21 374)
Acquirer’s interest 49 872
Purchase consideration 68 800
Goodwill on acquisition 18 928
The impact of the acquisition on the statement of cash flows was as follows:
Consideration to be settled in cash 55 419
Cash and cash equivalents acquired 5 944
Net cash outflow from acquisition 49 475
At 31 December 2019, management estimated the purchase price as R76 million and reported a contingent consideration of R21 million. During the measurement period, it came to light that the ECL amount on which the estimate was based, had been incorrectly calculated. The purchase consideration was subsequently adjusted to R69 million. This is seen as a change within the measurement period and not information which was obtained post the finalisation of the acquisition and goodwill had been adjusted accordingly.
The fair value of the trade and other receivables acquired represents the future contractual amounts receivable due to the fact that none of the trade and other receivables extends beyond the contract term. Management is of the opinion that all outstanding trade and other receivables are recoverable.
The non-controlling interest related to the business combination was measured at the proportionate share of the recognised amounts of the acquiree’s net identifiable assets.
The goodwill of this business combination will have no impact on the current tax asset or liability of the acquirer or acquiree.
232
ALV
IVA
HO
LDIN
GS
LIM
ITED
•
Inte
grat
ed a
nnua
l rep
ort 2
020
Notes to the financial statements continued
for the year ended 30 June 2020
35. BUSINESS COMBINATIONS (continued)
35.2 SynergERP Limited – DWC LLC (“Synerg DWC”)
On 1 November 2019, Alviva, through its subsidiary Alviva International Investments Proprietary Limited, acquired 51% of the issued share capital of Synerg DWC for a maximum purchase consideration of R53 million.
Synerg DWC enables businesses to leverage software in order to achieve operational efficiency in all areas of a business, from operations to human capital. The business is dedicated to the Enterprise Management Software suite (also known as Sage X3 and Sage X3 People) and is invested in the Sage Enterprise product stack. Synerg DWC was incorporated to take the SynergERP South Africa service compliment to the UAE and international. As a business, they are closely aligned with Sage and Sage’s strategic growth areas, enabling them to stay up to date with the latest initiatives and focus areas.
In the eight months to the reporting date, Synerg DWC contributed revenue of R3 million and a loss of R147 thousand to the Group’s results. If the acquisition had occurred at the beginning of the reporting period, the company would have contributed revenue of R5 million and a loss of R420 thousand to the Group’s results.
The full consideration will be calculated based on Synerg DWC’s audited results for their year ending 30 June 2022. An amount of R24 million has been recognised as contingent consideration included on non-interest-bearing liabilities, based on preliminary calculations.
The transaction meets the definition of a business combination as set out in IFRS 3: Business Combinations.
The fair value of the identifiable assets and liabilities included in the consolidated results of the Group on the date of acquisition, compared to the carrying amounts of the identifiable assets and liabilities recognised in the accounting records of the acquiree immediately before the acquisition, was as follows:
Fair valuerecognised at
acquisition dateR’000
Previously recognised
carrying amountsby acquiree
R’000
Intangible asset: customer relationship 42 672 –
Trade and other receivables 999 999
Cash and cash equivalents 545 545
Total assets 44 216 1 544
Interest-bearing liabilities (1 387) (1 387)
Trade and other payables (106) (106)
Total liabilities (1 493) (1 493)
Identifiable net assets 42 723 51
NCI (20 934)
Acquirer’s interest 21 789
Purchase consideration 24 290
Goodwill on acquisition 2 501
The impact of the acquisition on the statement of cash flows was as follows:
Consideration to be settled in cash –
Cash and equivalents at acquisition date 545
Net cash inflow from acquisition 545
233
Ove
rvie
wG
over
nanc
eSu
stai
nabi
lity
Ann
ual fi
nanc
ial s
tate
men
tsSh
areh
olde
rs’ in
form
atio
n
Notes to the financial statements continued
for the year ended 30 June 2020
35. BUSINESS COMBINATIONS (continued)
35.2 SynergERP Limited – DWC LLC (“Synerg DWC”) (continued)
The fair values have been determined on a provisional basis. If any new information obtained within a year from the acquisition date about the about the facts and circumstances that existed at the acquisition date, identifies adjustments to the above amounts, or any additional provisions that existed at the acquisition date, the acquisition accounting will be revised.
The fair value of the trade and other receivables acquired represents the future contractual amounts receivable due to the fact that none of the trade and other receivables extends beyond the contract term. Management is of the opinion that all outstanding trade and other receivables are recoverable.
The non-controlling interest related to the business combination was measured at the proportionate share of the recognised amounts of the acquiree’s net identifiable assets.
The goodwill of this business combination will have no impact on the current tax asset or liability of the acquirer or acquiree.
35.3 SynergERP Limited – UK (“Synerg UK”)
On 1 November 2019, Alviva, through its subsidiary Alviva International Investments Proprietary Limited, acquired 51% of the issued share capital of Synerg UK for a maximum purchase consideration of R53 million.
Synerg UK enables businesses to leverage software in order to achieve operational efficiency in all areas of a business, from operations to human capital. The business is dedicated to the Enterprise Management Software suite (also known as Sage X3 and Sage X3 People) and is invested in the Sage Enterprise product stack. Synerg UK was incorporated to take the SynergERP South Africa service compliment to the UK and international. As a business, they are closely aligned with Sage and Sage’s strategic growth areas, enabling them to stay up to date with the latest initiatives and focus areas.
In the eight months to the reporting date, Synerg UK contributed revenue of R682 thousand and a loss of R504 thousand to the Group’s results. If the acquisition had occurred at the beginning of the reporting period, the company would have contributed revenue of R1 million and a loss of R1 million to the Group’s results.
The full consideration will be calculated based on Synerg UK’s audited results for their year ending 30 June 2022. An amount of R28 million has been recognised as contingent consideration included on non-interest-bearing liabilities, based on preliminary calculations.
The transaction meets the definition of a business combination as set out in IFRS 3: Business Combinations.
234
ALV
IVA
HO
LDIN
GS
LIM
ITED
•
Inte
grat
ed a
nnua
l rep
ort 2
020
Notes to the financial statements continued
for the year ended 30 June 2020
35. BUSINESS COMBINATIONS (continued)
35.3 SynergERP Limited – UK (“Synerg UK”) (continued)
The fair value of the identifiable assets and liabilities included in the consolidated results of the Group on the date of acquisition, compared to the carrying amounts of the identifiable assets and liabilities recognised in the accounting records of the acquiree immediately before the acquisition, was as follows:
Fair valuerecognised at
acquisition dateR’000
Previously recognised
carrying amountsby acquiree
R’000
Intangible asset: customer relationship 43 982 –
Trade and other receivables 32 248
Cash and cash equivalents 311 6 095
Total assets 44 325 6 343
Interest-bearing liabilities (2 647) (2 647)
Deferred tax on intangible asset: customer relationship (8 357)
Trade and other payables (423) (423)
Total liabilities (11 427) (3 070)
Identifiable net assets 32 898 3 273
NCI (16 120)
Acquirer’s interest 16 778
Purchase consideration 27 840
Goodwill on acquisition 11 062
The impact of the acquisition on the statement of cash flows was as follows:
Consideration to be settled in cash –
Cash and equivalents at acquisition date 311
Net cash inflow from acquisition 311
The fair values have been determined on a provisional basis. If any new information obtained within a year from the acquisition date about the facts and circumstances that existed at the acquisition date, identifies adjustments to the above amounts, or any additional provisions that existed at the acquisition date, the acquisition accounting will be revised.
The fair value of the trade and other receivables acquired represents the future contractual amounts receivable due to the fact that none of the trade and other receivables extends beyond the contract term. Management is of the opinion that all outstanding trade and other receivables are recoverable.
The non-controlling interest related to the business combination was measured at the proportionate share of the recognised amounts of the acquiree’s net identifiable assets.
The goodwill of this business combination will have no impact on the current tax asset or liability of the acquirer or acquiree.
Alignment of accounting policies
The individual company accounting policies of the acquirees are not aligned to the accounting policies of the Group. This will result in certain line items provided in this note, not reconciling to the notes of the Group, for example, that certain financial liabilities are recognised as trade and other payables.
235
Ove
rvie
wG
over
nanc
eSu
stai
nabi
lity
Ann
ual fi
nanc
ial s
tate
men
tsSh
areh
olde
rs’ in
form
atio
n
Notes to the financial statements continued
for the year ended 30 June 2020
36. FINANCIAL INSTRUMENTS – FAIR VALUES AND RISK MANAGEMENT36.1 Capital risk management
The Group manages its capital to ensure that entities in the Group will be able to continue as a going concern while maximising the return to shareholders through the optimisation of the debt and equity balance. In order to maintain or adjust the capital structure of the Group, the board of directors may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt. This strategy has remained unchanged from the prior reporting period.
Externally imposed capital requirements are set out in notes 18 and 22 of the financial statements. The Group is not in breach of any of the capital requirements.
The debt to equity ratio of the Group is 61,8% (2019: 39,1%). The measure in terms of total debt for the Group excludes derivative financial liabilities, contract liabilities, deferred tax and current tax liabilities as well as trade and other payables when performing this calculation. The main contributing factors to the change of this ratio are related to the increase in the asset-backed facility and an additional term loan facility utilised to fund the Centrafin Proprietary Limited book (refer notes 22.3 and 22.4). Shareholders’ equity reduced following various share repurchase transactions during the reporting period.
36.2 Estimation of fair values
The following summarises the valuation methods and assumptions used in estimating the fair values of financial instruments reflected in the tables below.
Financial assets at amortised cost
The carrying value of financial assets at amortised cost with a remaining life of less than 12 months reasonably approximates fair value due to the short-term period to maturity. The fair value of long-term receivables is calculated based on the present value of future principal and interest cash flows.
Financial liabilities at amortised cost
The carrying value of financial liabilities with a maturity of less than 12 months reasonably approximates fair value due to their short-term nature. For longer maturities fair value is calculated based on the present value of future principal and interest cash flows.
Financial liabilities at fair value through profit or loss
The fair value of financial liabilities that are not traded in an active market is determined using suitable valuation techniques.
Derivative financial instruments
The fair value of derivative financial instruments is based on observable inputs and unobservable inputs, within the valuation model, directly linked to the underlying instrument to which the derivative is linked.
Fair value hierarchy
When measuring the fair value of an asset or a liability, the Group uses observable market data as far as possible. Fair values are categorised into different levels in a fair value hierarchy based on the inputs used in the valuation techniques as follows:
� Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.
� Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).
� Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).
236
ALV
IVA
HO
LDIN
GS
LIM
ITED
•
Inte
grat
ed a
nnua
l rep
ort 2
020
Notes to the financial statements continued
for the year ended 30 June 2020
36. FINANCIAL INSTRUMENTS – FAIR VALUES AND RISK MANAGEMENT (continued)
36.2 Estimation of fair values (continued)
The following table presents the fair values of financial assets and financial liabilities, including their levels in the fair value hierarchy. It does not include fair value information for financial assets and financial liabilities not measured at fair value if the carrying amount is a reasonable approximation of fair value.
Financial assets
GroupAt
amortised cost
R’000Total
R’000Fair value
R’000
2020
Finance lease receivables 854 521 854 521 1 075 235
Loan to associate 41 773 41 773 41 773
Cash and cash equivalents * 1 219 621 1 219 621 –
Trade and other receivables * 2 726 303 2 726 303 –
4 242 218 4 242 218 1 117 008
2019
Finance lease receivables 846 164 846 164 1 088 330
Loan to associate 88 119 88 119 88 119
Cash and cash equivalents * 124 546 124 546 –
Trade and other receivables * 3 093 357 3 093 357 –
4 152 186 4 152 186 1 176 449
* The carrying amount is a reasonable approximation of fair value. The financial instrument represents a financial instrument which is not measured at fair value on a recurring basis.
237
Ove
rvie
wG
over
nanc
eSu
stai
nabi
lity
Ann
ual fi
nanc
ial s
tate
men
tsSh
areh
olde
rs’ in
form
atio
n
Notes to the financial statements continued
for the year ended 30 June 2020
36. FINANCIAL INSTRUMENTS – FAIR VALUES AND RISK MANAGEMENT ((continued)
36.2 Estimation of fair values (continued)
Financial liabilities
Group
Fair value hierarchy
At fair value
through profit or
lossR’000
At amortised
costR’000
TotalR’000
Fair valueR’000
2020
Interest-bearing liabilities – 1 088 633 1 088 633 1 088 633
Non-interest-bearing liabilities *** Level 3 79 976 437 80 413 79 976
Trade and other payables * – 3 509 141 3 509 141 –
Derivatives related to risk management ** Level 2 11 772 – 11 772 11 772
91 748 4 598 211 4 689 959 1 180 381
2019
Bank overdraft * – 158 799 158 799 –
Interest-bearing liabilities – 884 627 884 627 884 627
Non-interest-bearing liabilities *** Level 3 89 898 437 90 335 90 335
Trade and other payables * – 2 618 479 2 618 479 –
Derivatives related to risk management ** Level 2 24 827 – 24 827 24 827
114 725 3 662 342 3 777 067 999 789
* The carrying amount is a reasonable approximation of fair value. The financial instrument represents a financial instrument which is not measured at fair value on a recurring basis.
** This liability is disclosed as part of the trade and other payables line item in the statement of financial position.
*** Contingent consideration is disclosed as part of non-interest-bearing liabilities.
Amounts disclosed in the tables above are exclusive of all statutory amounts payable or refundable from a legislative nature in relation to Value-Added Tax and prepayments that are not considered to be financial instruments.
238
ALV
IVA
HO
LDIN
GS
LIM
ITED
•
Inte
grat
ed a
nnua
l rep
ort 2
020
Notes to the financial statements continued
for the year ended 30 June 2020
36. FINANCIAL INSTRUMENTS – FAIR VALUES AND RISK MANAGEMENT (continued)
36.2 Estimation of fair values (continued)
Financial assetsCompany
At amortised
costR’000
TotalR’000
Fair valueR’000
2020
Loan to subsidiary 445 024 445 024 445 024
Cash and cash equivalents * 172 172 –
445 196 445 196 445 024
2019
Loan to subsidiary 197 688 197 688 197 688
Cash and cash equivalents * 495 495 –
198 183 198 183 197 688
Financial liabilitiesCompany
Fair value hierarchy
At fair value
through profit or
lossR’000
At amortised
costR’000
TotalR’000
Fair valueR’000
2020
Trade and other payables * – 1 744 1 744 –
– 1 744 1 744 –
2019
Non-interest-bearing liabilities ** Level 3 9 000 – 9 000 9 000
Trade and other payables * – 1 605 1 605 –
9 000 1 605 10 605 9 000
* The carrying amount is a reasonable approximation of fair value. The financial instrument represents a financial instrument which is not measured at fair value on a recurring basis.
** Contingent consideration is disclosed as part of non-interest-bearing liabilities.
Amounts disclosed in the tables above are exclusive of all statutory amounts payable or refundable from a legislative nature in relation to Value-Added Tax and prepayments that are not considered to be financial instruments.
239
Ove
rvie
wG
over
nanc
eSu
stai
nabi
lity
Ann
ual fi
nanc
ial s
tate
men
tsSh
areh
olde
rs’ in
form
atio
n
Notes to the financial statements continued
for the year ended 30 June 2020
36. FINANCIAL INSTRUMENTS – FAIR VALUES AND RISK MANAGEMENT (continued)
36.2 Estimation of fair values (continued)
Measurement of fair values and valuation techniques
Derivatives related to risk management (Level 2)
The fair value of forward exchange contracts have been determined based on valuations obtained from the Group’s bankers. The valuations are performed internally by each financial institution with internally specific inputs.
Contingent consideration (Level 3)
Refer to note 23.2 of the financial statements for the valuation technique and inputs used.
The Group did not have any other financial instruments measured at fair value on a recurring basis during the current or prior reporting periods.
36.3 Financial risk management objectives
Risks and related mitigating procedures are assessed by executives with assistance from line managers and employees on a continuous basis to ensure the safeguarding of the Group, its people, its assets and its businesses.
The Group has exposure to the following risks from its financial instruments:
� Market risk (including currency and interest rate risk)
� Credit risk
� Liquidity risk
This note presents information about the Group’s exposure to each of the above risks, the Group’s objectives, policies and procedures for measuring and managing risk and the Group’s management of capital. Further quantitative disclosures are included in the financial statement notes relating to the financial instrument concerned.
The Group’s objective is to effectively manage each of the above risks associated with its financial instruments, in order to limit the Group’s exposure as far as possible to any financial loss associated with these risks.
The Board is ultimately responsible and accountable for ensuring that adequate procedures and processes are in place to identify, assess, manage and monitor key business risks. The Board has established the Audit and Risk Committee, which is responsible for monitoring the Group’s risk management policies.
The Group’s risk management policies are established to identify and analyse the risks faced by the Group, to set appropriate risk limits and controls and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Group’s business activities. The Group, through training and management standards and procedures, aims to develop a disciplined and structured control environment in which all employees understand their roles and obligations.
The Audit and Risk Committee reviews the adequacy of the risk management framework in relation to the risks faced by the Group.
240
ALV
IVA
HO
LDIN
GS
LIM
ITED
•
Inte
grat
ed a
nnua
l rep
ort 2
020
Notes to the financial statements continued
for the year ended 30 June 2020
36. FINANCIAL INSTRUMENTS – FAIR VALUES AND RISK MANAGEMENT (continued)
36.4 Foreign currency risk
The Group is exposed to foreign currency risk through the importation of merchandise. This risk is mitigated by entering into forward exchange contracts and by offsetting the risk against foreign currency receivables. The Group does not use forward exchange contracts for speculative purposes and does not apply hedge accounting. The adjustments to fair value are recognised in profit or loss. The Group varies its exposure depending on its view of the currency values, within acceptable risk parameters.
The fair value of forward exchange contracts have been determined based on inputs obtained from the Group’s bankers.
The primary foreign currency (FC) to which the company is exposed is the US Dollar, Euro and the Pound Sterling.
Group
Spot rateContract FC
FC’000
Contract spot rate
valueR’000
Derivativeliability*
R’000
2020
US Dollar 17,37 80 985 1 406 709 (10 581)
Euro 19,48 4 313 84 017 (1 191)
1 490 726 (11 772)
2019
US Dollar 14,14 68 695 971 347 (24 768)
Euro 16,10 19 306 (26)
GBP 17,99 85 1 529 (33)
973 182 (24 827)
* This liability is disclosed as part of trade and other payables in the statement of financial position.
36.5 Foreign currency sensitivity
The following table indicates the Group’s sensitivity at reporting date to the indicated movements in foreign exchange on financial instruments including forward (foreign) exchange contracts. The rates of sensitivity are the rates used when reporting the currency risk to the Group and represents management’s assessment of the possible change in reporting foreign currency exchange rates. The Group is exposed to movements in the exchange rates related to the Pound Sterling, Euro and the US Dollar. Based on the risk profile of the Group at the reporting date, the foreign currency sensitivity is
performed only in relation to the US Dollar as this is the main foreign currency to which the Group has significant exposure.
241
Ove
rvie
wG
over
nanc
eSu
stai
nabi
lity
Ann
ual fi
nanc
ial s
tate
men
tsSh
areh
olde
rs’ in
form
atio
n
Notes to the financial statements continued
for the year ended 30 June 2020
36. FINANCIAL INSTRUMENTS – FAIR VALUES AND RISK MANAGEMENT (continued)
36.5 Foreign currency sensitivity (continued)
GroupUSD 1: R14,87
R’000R15,87
R’000R18,86
R’000R19,86
R’000
2020
Effect on profit or loss in relation to foreign exchange * 5 814 6 205 7 374 7 764
The sensitivity for the current period is performed excluding the specific foreign exchange loss recognised in relation to the contingent consideration. The current period sensitivity is based on a more volatile change in exchange rate than in the prior reporting period owing to the volatility of the exchange rate experienced related to the COVID-19 pandemic.
GroupUSD 1: R 13,14
R’000R 13,64
R’000R 14,64
R’000R 15,14
R’000
2019
Effect on profit or loss in relation to foreign exchange * – (571) (285) 285 571
* Effect on equity is equal to the effect on profit or loss (excluding tax effects thereon).
36.6 Interest rate risk management
The Group’s exposure to interest rate risk is on a floating rate basis. At the reporting date the interest rate profile of the Group’s interest-bearing financial instruments were:
Group
2020R’000
2019R’000
Interest-bearing financial assets 854 521 846 164
Interest-bearing financial liabilities (1 088 633) (884 627)
Cash and cash equivalents 1 219 621 (34 253)
985 509 (72 716)
Cash flow sensitivity analysis linked to interest rate risk
A change of 200 basis points (2019: 25 points) in interest rates at the reporting date would have increased/decreased profit or loss by the amounts shown below. This analysis assumes that the other variables remain constant and is based on closing balances compounded annually. The current period sensitivity is based on a more volatile change in interest rate than in the prior reporting period owing to the recent major changes to the South African prime rate.
Group
2020R’000
2019R’000
Impact on profit or loss for the reporting period * 19 710 (182)
* Effect on equity is equal to the effect on profit or loss (excluding tax effects thereon).
242
ALV
IVA
HO
LDIN
GS
LIM
ITED
•
Inte
grat
ed a
nnua
l rep
ort 2
020
Notes to the financial statements continued
for the year ended 30 June 2020
36. FINANCIAL INSTRUMENTS – FAIR VALUES AND RISK MANAGEMENT (continued)
36.7 Credit risk
Credit risk refers to the risk that a customer or counterparty will default on its contractual obligations resulting in financial loss to the Group. The credit risk is concentrated in the Group’s trade receivables and cash and equivalents.
The carrying amounts of financial assets represent the maximum credit exposure.
Summary of impairment losses recognised in profit or loss
The following table provides a summary of the impairment losses on financial assets recognised in profit or loss during the reporting period:
Group
2020R’000
2019R’000
Impairment loss on trade receivables and finance lease receivables 30 557 37 361
Impairment loss on loan to equity-accounted investee 27 990 23 210
58 547 60 571
Trade receivables and lease receivables
The Group’s exposure to credit risk is influenced mainly by the individual characteristics of each customer. However, management also considers the factors that may influence the credit risk of its customer base, including the default risk associated with the industry and country in which customers operate.
The risk management committee has established a credit policy under which each new customer is analysed individually for creditworthiness before the Group’s standard payment and delivery terms and conditions are offered. The Group’s review includes external ratings, if they are available, financial statements, credit agency information, industry information and in some cases bank references. Sale limits are established for each customer and reviewed quarterly. Any sales exceeding those limits require approval from the risk management committee.
The major contributing subsidiary within the Financial Services segment, Centrafin Proprietary Limited, requires collateral to be provided as part of any lease receivable contract. In addition to the collateral required, the company requires bank references and credit rating information as part of the application process for each lease contract.
The Group limits its exposure to credit risk from trade receivables by establishing a maximum payment period of up to one to two months for customers. In some instances, the standard payment period may be extended with specific approval.
The Group has a limited history of exposure to write-offs in relation to customer accounts. More so, although the Group is continuously expanding its footprint and client base, the Group has credit histories on many of the significant customers dealing with the Group on a recurring basis. In monitoring customer credit risk, customers are grouped according to their credit characteristics, including whether they are an individual or a legal entity, whether they are a wholesale, retail or end-user customer, their geographic location, industry, trading history with the Group and existence of previous financial difficulties.
The Group is monitoring the economic environment in Zimbabwe and is taking actions to limit its exposure to customers in countries experiencing particular economic volatility. The Group does not deal with customers in any other countries which are considered to have a current volatile economic environment.
The Group requires collateral in respect of trade receivables in extraordinary circumstances and in respect of all lease contracts for lease receivables. The Group does not have trade- or lease receivables for which no loss allowance is recognised because of collateral.
243
Ove
rvie
wG
over
nanc
eSu
stai
nabi
lity
Ann
ual fi
nanc
ial s
tate
men
tsSh
areh
olde
rs’ in
form
atio
n
Notes to the financial statements continued
for the year ended 30 June 2020
36. FINANCIAL INSTRUMENTS – FAIR VALUES AND RISK MANAGEMENT (continued)
36.7 Credit risk (continued)
Exposure to credit risk by geographic region
At the reporting date, the exposure to credit risk for trade and lease receivables by geographic region was as follows:
2020 R’000
2019 R’000
Trade receivables
Lease receivables
Trade receivables
Lease receivables
Geographic region
South Africa 2 544 506 873 763 2 858 105 881 635
Africa 340 052 – 345 990 –
Other 1 145 – 367 –
2 885 703 873 763 3 204 462 881 635
Exposure to credit risk by type of counterparty
At the reporting date, the exposure to credit risk for trade and lease receivables by type of counterparty was as follows:
2020 R’000
2019 R’000
Trade receivables
Lease receivables
Trade receivables
Lease receivables
Type of counterparty
Large corporations or enterprises 1 198 946 230 1 404 233 1 425
SMME type enterprises or similar 1 187 428 872 051 1 197 504 875 312
Foreign 333 069 – 346 357 –
Government, parastatals and municipalities 166 260 1 482 256 368 4 898
2 885 703 873 763 3 204 462 881 635
The majority of trade receivables are concentrated in the “Large corporations or enterprises” and “SMME type enterprises or similar” categories based on the strategic model of the Group whereby the Group enters into contracts with customers within both categories. The various distribution status of suppliers held by the Group allows the Group to deal with large corporations or enterprises. The majority of the lease book is concentrated in the “SMME type enterprise or similar” category as is expected from the Group’s strategic lease model. Both these categories are considered to indicate a lower level credit risk exposure to the Group.
244
ALV
IVA
HO
LDIN
GS
LIM
ITED
•
Inte
grat
ed a
nnua
l rep
ort 2
020
Notes to the financial statements continued
for the year ended 30 June 2020
36. FINANCIAL INSTRUMENTS – FAIR VALUES AND RISK MANAGEMENT (continued)
36.7 Credit risk (continued)
Exposure to overall credit risk based on internally designated credit ratings
At the reporting date, the exposure to overall credit risk based on internal credit ratings for trade receivables and lease receivables was as follows:
Group
Trade receivables Lease receivables
2020R’000
2019R’000
2020R’000
2019R’000
Type of counterparty
Credit rating of at least substandard risk (level 3) 2 560 725 2 947 394 860 694 856 028
Other customers:
– Higher risk with a credit rating of at least high risk (level 4)
324 978 257 068 13 069 25 607
Total gross carrying amount 2 885 703 3 204 462 873 763 881 635
Loss allowance (159 400) (111 105) (19 242) (35 471)
2 726 303 3 093 357 854 521 846 164
Based on the credit policy of the Group, it is clear that the stringent requirements and policies results in a majority of the trade- and lease receivables being classified as at least a “substandard risk” or lower risk level during the reporting period. Trade- and lease receivables of 89% (2019: 92%) and 98% (2019: 97%), respectively, were rated as a Level 3 or lower based on the Group’s internal grading system which is indicative of a low level exposure to credit risk.
Based on the credit approval process of the Group, the Group does not have any trade and lease receivables which are regarded to have been credit-impaired on initial recognition.
Expected credit loss (ECL) assessment
The Group allocates each exposure to a credit risk grade based on data that is determined to be predictive of the risk of loss (including but not limited to external ratings, audited financial statements, management accounts and cash flow projections and available press information about customers) and applying experienced credit judgement. Credit risk grades are internally defined using qualitative and quantitative factors that are indicative of the risk of default.
Exposures within each credit risk grade are segmented by customer type and geographic region and an ECL rate is calculated for each segment based on delinquency status and actual credit loss experience. These rates are adjusted to reflect differences between economic conditions during the period over which the historical data has been collected, current conditions and the Group’s view of economic conditions over the expected lives of the receivables.
The Group has external insurance in place against the loss of certain customers. The insured amounts are considered when calculating the ECLs for the various customers.
ECL rates are based on actual credit loss experience over the past three years. These rates are adjusted to reflect differences between economic conditions during the period over which the historical data has been collected, current conditions and the Group’s view of economic conditions over the expected lives of the receivables.
245
Ove
rvie
wG
over
nanc
eSu
stai
nabi
lity
Ann
ual fi
nanc
ial s
tate
men
tsSh
areh
olde
rs’ in
form
atio
n
Notes to the financial statements continued
for the year ended 30 June 2020
36. FINANCIAL INSTRUMENTS – FAIR VALUES AND RISK MANAGEMENT (continued)
36.7 Credit risk (continued)
Trade receivables
The following tables present the ECL rates of the Group having applied all factors as discussed above.
The ECL rates in the model are presented as a range as each risk grade has various ECL rates assigned to the type of customer as set out above.
Loss ratings model 2020
Risk grades
Internal rating
level
ECL rates at 30 June 2019
(Range %)
Forward-looking
adjustment(Range %)
ECL rates at30 June 2020
(Range %)
Low risk Level 1 0,10 to 0,25 0,00 0,10 to 0,25
Fair risk Level 2 2,00 to 3,50 0,03 to 0,04 2,03 to 3,54
Substandard risk Level 3 4,00 to 15,00 0,05 to 0,19 4,05 to 15,19
High risk Level 4 20,00 to 40,00 0,25 to 0,51 20,25 to 40,51
Doubtful Level 5 80,00 1,02 81,02
In default, i.e., loss Level 6 100,00 0,00 100,00
The loss ratings at the previous reporting date were adjusted for forward-looking information by increasing these ratios with a factor of 1,27%. This factor was determined using macro-economic factors and a weighting as indicated below.
Macro-economic factors considered
Factors consideredWeighting
assignedWeighted
adjustment
CPI Index * 20,00 0,46
Inflation * 20,00 0,57
Interest rates * 15,00 (4,39)
Moody's ratings ** 12,50 1,25
GDP growth ** 12,50 0,01
COVID-19 pandemic *** 20,00 3,37
Forward-looking factor 1,27
* Direct impact on operations in terms of product prices and spend of customers.
** Indirect impact as this is representative of the economy as a whole.
*** Adjusted indirect impact as a result of the COVID-19 pandemic.
246
ALV
IVA
HO
LDIN
GS
LIM
ITED
•
Inte
grat
ed a
nnua
l rep
ort 2
020
Notes to the financial statements continued
for the year ended 30 June 2020
36. FINANCIAL INSTRUMENTS – FAIR VALUES AND RISK MANAGEMENT (continued)
36.7 Credit risk (continued)
Loss ratings model 2019
Risk grades
Internal rating level
Historical ECL rates(Range %)
Forward-looking
adjustment(Range %)"
ECL rates at30 June 2019
(Range %)
Low risk Level 1 0,10 to 0,25 0,00 0,10 to 0,25
Fair risk Level 2 1,93 to 3,38 0,07 to 0,12 2,00 to 3,50
Substandard risk Level 3 3,86 to 14,48 0,14 to 0,52 4,00 to 15,00
High risk Level 4 19,31 to 38,62 0,69 to 1,38 20,00 to 40,00
Doubtful Level 5 77,24 2,76 80,00
In default, i.e., loss Level 6 100,00 0,00 100,00
The loss ratings at the previous reporting date were adjusted for forward-looking information by increasing these ratios with a factor of 3,58%. This factor was determined using macro-economic factors and a weighting as indicated below.
Macro-economic factors considered
Factors consideredWeighting
assignedWeighted
adjustment
CPI Index * 25,00 0,60
Inflation * 25,00 1,12
Interest rates * 20,00 0,50
Moody's ratings ** 15,00 1,50
GDP growth ** 15,00 ( 0,14)
Forward-looking factor 3,58
* Direct impact on operations in terms of product prices and spend of customers.
** Indirect impact as this is representative of the economy as a whole.
247
Ove
rvie
wG
over
nanc
eSu
stai
nabi
lity
Ann
ual fi
nanc
ial s
tate
men
tsSh
areh
olde
rs’ in
form
atio
n
Notes to the financial statements continued
for the year ended 30 June 2020
36. FINANCIAL INSTRUMENTS – FAIR VALUES AND RISK MANAGEMENT (continued)
36.7 Credit risk (continued)
The following tables provide information about the exposure to credit risk and ECLs for trade receivables for customers as at the reporting date based on the simplified approach adopted by management in the ECL assessment.
2020
Risk grade
Internal credit rating
level
Weighted average loss rate
%
Gross carrying amount
R’000
Loss allowance
R’000Credit-
impaired
Low risk Level 1 0 * 1 888 154 1 467 No
Fair risk Level 2 2 542 296 10 481 No
Substandard risk Level 3 5 130 274 7 137 No
High risk Level 4 38 48 345 18 257 No
Doubtful Level 5 71 28 683 20 428 Yes
In default, i.e., loss Level 6 41 247 951 101 630 Yes
2 885 703 159 400
* This percentage has been rounded. The weighted average loss rate is 0,1%.
2019
Risk grade
Internal credit rating
level
Weighted average loss rate
%
Gross carrying amount
R’000
Loss allowance
R’000Credit-
impaired
Low risk Level 1 0 * 2 002 725 5 686 No
Fair risk Level 2 1 840 428 9 492 No
Substandard risk Level 3 5 104 241 4 907 No
High risk Level 4 31 37 472 11 563 No
Doubtful Level 5 75 9 057 6 787 Yes
In default, i.e., loss Level 6 35 210 539 72 670 Yes
3 204 462 111 105
* This percentage has been rounded. The weighted average loss rate is 0,3%.
Based on the grading in conjunction with the Group’s credit policy, it is clear that 85% (2019: 89%) of the total trade receivable balances is graded as either a low risk or a fair risk. This supports the effectiveness of the rigid credit policy and approval process implemented by the Group. It is clear that 9% (2019: 7%) of the trade receivables have been graded as in default or a level 6 for which the Group has adequate insurance. The weighted average loss rates are aligned to the Group’s ECL model.
248
ALV
IVA
HO
LDIN
GS
LIM
ITED
•
Inte
grat
ed a
nnua
l rep
ort 2
020
Notes to the financial statements continued
for the year ended 30 June 2020
36. FINANCIAL INSTRUMENTS – FAIR VALUES AND RISK MANAGEMENT (continued)
36.7 Credit risk (continued)
Movements in the allowance for credit losses in respect of trade receivables
The Group assessed the intergroup trade receivables as being a low risk with default rate assigned to these specific receivables based on the fact that the Group, through its formal treasury function, provides financial guarantees for the total outstanding balances of all intergroup balances which limits any form of non-performance resulting in no exposure to the Group upon default by the related Group company.
The movement in the allowance for impairment in respect of trade receivables was as follows:
Group
Description2020
R’0002019
R’000
Balance at 1 July 111 105 92 866
Acquired through business combination 1 509 –
Written off – –
Net remeasurement of loss allowance 46 786 18 239
Balance at 30 June 159 400 111 105
The Group did not identify any significant changes in the gross carrying amounts of trade receivables that contributed to the changes in the impairment loss allowance during the reporting periods.
Lease receivables
The following tables present the ECL rates of the Group having applied all factors as discussed earlier.
The ECL rates in the model are presented as a range as each risk grade has various ECL rates assigned to the type of customer as discussed earlier.
Loss ratings model 2020
Risk grades
Internal rating
level
ECL rates at 30 June 2019
(Range %)
Forward-looking
adjustment(Range %)
ECL rates at30 June 2020
(Range %)
Low risk Level 1 0,10 to 0,50 0,00 0,10 to 0,50
Fair risk Level 2 0,50 to 3,00 0,00 to 0,02 0,50 to 3,02
Substandard risk Level 3 3,00 to 40,00 0,02 to 0,25 3,02 to 40,25
High risk Level 4 40,00 to 70,00 0,25 to 0,44 40,25 to 70,44
Doubtful Level 5 70,00 to 100,00 0,44 70,44 to 100,00
In default, i.e., loss Level 6 100,00 0,00 100,00
249
Ove
rvie
wG
over
nanc
eSu
stai
nabi
lity
Ann
ual fi
nanc
ial s
tate
men
tsSh
areh
olde
rs’ in
form
atio
n
Notes to the financial statements continued
for the year ended 30 June 2020
36. FINANCIAL INSTRUMENTS – FAIR VALUES AND RISK MANAGEMENT (continued)
36.7 Credit risk (continued)
The loss ratings at the previous reporting date were adjusted for forward-looking information by increasing these ratios with a factor of 0,62%. This factor was determined using macro-economic factors and a weighting as indicated below.
Macro-economic factors considered
Factors consideredWeighting
assignedWeighted
adjustment
CPI Index * 20,00 0,42
Inflation * 20,00 0,51
Interest rates * 15,00 (5,12)
Moody's ratings ** 12,50 1,30
GDP growth ** 12,50 0,01
COVID-19 pandemic *** 20,00 3,50
Forward-looking factor 0,62
* Direct impact on operations in terms of product prices and spend of customers.
** Indirect impact as this is representative of the economy as a whole.
*** Adjusted indirect impact as a result of the COVID-19 pandemic.
Loss ratings model 2019
Risk grades
Internal rating level
Historical ECL rates(Range %)
Forward-looking
adjustment(Range %)
ECL rates at30 June 2019
(Range %)
Low risk Level 1 0,10 to 0,48 0,00 to 0,02 0,10 to 0,50
Fair risk Level 2 0,48 to 2,90 0,02 to 0,10 0,50 to 3,00
Substandard risk Level 3 2,90 to 38,63 0,10 to 1,37 3,00 to 40,00
High risk Level 4 38,63 to 67,61 1,37 to 2,39 40,00 to 70,00
Doubtful Level 5 67,61 to 100,00 2,39 70,00 to 100,00
In default, i.e., loss Level 6 100,00 0,00 100,00
250
ALV
IVA
HO
LDIN
GS
LIM
ITED
•
Inte
grat
ed a
nnua
l rep
ort 2
020
Notes to the financial statements continued
for the year ended 30 June 2020
36. FINANCIAL INSTRUMENTS – FAIR VALUES AND RISK MANAGEMENT (continued)
36.7 Credit risk (continued)
The loss ratings at the previous reporting date were adjusted for forward-looking information by increasing these ratios with a factor of 3,54%. This factor was determined using macro-economic factors and a weighting as indicated below.
Macro-economic factors considered
Factors consideredWeighting
assignedWeighted
adjustment
CPI Index * 23,33 0,56
Inflation * 23,33 1,04
Interest rates * 23,34 0,58
Moody's ratings ** 15,00 1,50
GDP growth ** 15,00 (0,14)
Forward-looking factor 3,54
* Direct impact on operations in terms of product prices and spend of customers.
** Indirect impact as this is representative of the economy as a whole.
251
Ove
rvie
wG
over
nanc
eSu
stai
nabi
lity
Ann
ual fi
nanc
ial s
tate
men
tsSh
areh
olde
rs’ in
form
atio
n
Notes to the financial statements continued
for the year ended 30 June 2020
36. FINANCIAL INSTRUMENTS – FAIR VALUES AND RISK MANAGEMENT (continued)
36.7 Credit risk (continued)
The following tables provide information about the exposure to credit risk and ECLs for trade receivables for customers as at the reporting date based on the simplified approach adopted by management in the ECL assessment.
2020
Risk grade
Present value of
minimumlease
paymentsR’000
Internal credit rating
level
Weighted average loss rate
%
Gross carrying amount
R’000
Loss allowance
R’000Credit-
impaired
Low risk 640 225 Level 1 0 * 807 693 652 No
Fair risk 130 034 Level 2 0 ** 158 377 748 No
Substandard risk 90 435 Level 3 4 108 936 4 358 No
High risk 9 176 Level 4 59 13 757 8 081 No
Doubtful 852 Level 5 84 1 959 1 648 Yes
In default, i.e., loss 3 041 Level 6 100 3 755 3 755 Yes
873 763 1 094 477 19 242
* This percentage has been rounded. The weighted average loss rate is 0,1%.
** This percentage has been rounded. The weighted average loss rate is 0,5%.
2019
Risk grade
Present value of
minimumlease
paymentsR’000
Internal credit rating
level
Weighted average loss rate
%
Gross carrying amount
R’000
Loss allowance
R’000Credit-
impaired
Low risk 667 638 Level 1 0 * 853 589 1 067 No
Fair risk 139 594 Level 2 3 179 070 4 584 No
Substandard risk 48 796 Level 3 4 59 064 2 355 No
High risk 6 498 Level 4 64 8 337 5 335 No
Doubtful 11 370 Level 5 89 14 105 12 523 Yes
In default, i.e., loss 7 739 Level 6 99 9 636 9 607 Yes
881 635 1 123 801 35 471
* This percentage has been rounded. The weighted average loss rate is 0,1%.
Based on the grading in conjunction with the Group’s credit policy, it is clear that 88% (2019: 92%) of the total lease receivables balance is graded as either a low risk or a fair risk. This supports the effectiveness of the rigid credit policy and approval process implemented by the Group. Only 0,5% (2019: 1%) of the lease receivables has been graded as in default or a level 6 (based on gross carrying amounts). The weighted average loss rates are aligned to the Group’s ECL model.
The reason for the lower weighted average loss rate in the fair risk grading, in the current period, is a direct result of the decrease of the lease receivables with government, parastatals and municipalities, which are deemed to have a higher credit risk. The credit risk based on type of counterparty is disclosed earlier.
252
ALV
IVA
HO
LDIN
GS
LIM
ITED
•
Inte
grat
ed a
nnua
l rep
ort 2
020
Notes to the financial statements continued
for the year ended 30 June 2020
36. FINANCIAL INSTRUMENTS – FAIR VALUES AND RISK MANAGEMENT (continued)
36.7 Credit risk (continued)
Movements in the allowance for credit losses in respect of lease receivables
The movement in the allowance for impairment in respect of lease receivables was as follows:
Group
Description2020
R’0002019
R’000
Balance at 1 July 35 471 20 732
Written off – –
Net remeasurement of loss allowance (16 229) 14 739
Balance at 30 June 19 242 35 471
The Group did not identify any significant changes in the gross carrying amounts of lease receivables that contributed to the changes in the impairment loss allowance during the reporting periods.
Loans to Group companies
Impairment of loans to Group companies has been measured using the lifetime ECL model.
The Group considers all of the indicators within the ECL model when determining the credit risk associated with any loans to Group companies. The Group’s assessment indicates that the loans to Group companies generally have a low credit risk based on the financial performance of the related Group company as well as the financial performance and ability of the related company to settle the outstanding balance. The Group also considers the historical default information as well as forward-looking information such as budgets and forecasts.
Alviva Treasury Services Proprietary Limited
Due to the considerations above and the application of these considerations in the ECL model, the Company did not recognise an impairment on the loan.
Apex Business Solutions Proprietary Limited
Due to the considerations above and the application of these considerations in the ECL model, the Group recognised an impairment on this specific loan. This loan was considered to have a high credit risk with a loss rate of 73% (cumulative) based on the company’s financial performance which deteriorated in the current and prior reporting periods based on the non-performance of specific customers towards the latter parts of the reporting periods.
Refer to note 13.2 for the summarised financial information of the company. The company did not perform as expected in the current or prior reporting periods.
253
Ove
rvie
wG
over
nanc
eSu
stai
nabi
lity
Ann
ual fi
nanc
ial s
tate
men
tsSh
areh
olde
rs’ in
form
atio
n
Notes to the financial statements continued
for the year ended 30 June 2020
36. FINANCIAL INSTRUMENTS – FAIR VALUES AND RISK MANAGEMENT (continued)
36.7 Credit risk (continued)
Movements in the allowance for credit losses related to loans to Group companies
The movement in the allowance for impairment in respect of loans to Group companies was as follows:
Group
Description2020
R’0002019
R’000
Balance at 1 July 23 210 –
Net remeasurement of loss allowance 27 990 23 210
Balance at 30 June 51 200 23 210
Cash and equivalents
Impairment of cash and cash equivalents has been measured on a 12-month expected loss basis and reflects the short maturities of the exposures in terms of the general approach adopted by management.
The Group considers all of the indicators within the ECL model when determining the credit risk associated with cash and equivalents.
The Group considers that its cash and cash equivalents have low credit risk based on the external credit ratings of the financial institution combined with the fact that the institution is reputable within the economic environment (refer to note 18 of the financial statements) and the fact that none of the other indicators, considered in terms of the Group’s ECL model indicated an increased credit risk. For this reason, no loss allowance has been recognised in relation to cash and equivalents during the current and prior reporting periods.
254
ALV
IVA
HO
LDIN
GS
LIM
ITED
•
Inte
grat
ed a
nnua
l rep
ort 2
020
Notes to the financial statements continued
for the year ended 30 June 2020
36. FINANCIAL INSTRUMENTS – FAIR VALUES AND RISK MANAGEMENT (continued)
36.8 Liquidity risk
The liquidity risk of the Group is managed by the Group treasury function which monitors the repayment and settlement terms of all internally and externally funded debt. From a Group perspective, financial assistance is available to Group companies to ensure that all repayment terms outside of the Group are adhered to by each company. Any internal funding is repayable to the intergroup lender only when funds are available.
Refer to note 18 of the financial statements for details of banking facilities available to the Group.
The maturity analysis of financial liabilities at the reporting date is set out in the table below. These amounts are gross and undiscounted, and include contractual interest payments.
Group
TotalR’000
Up to 3 months
R’000
Between 3 to 12
monthsR’000
Between 1 to 5yearsR’000
2020
Interest-bearing liabilities ** 1 252 877 121 231 211 283 920 362
Non-interest-bearing liabilities 80 413 7 584 – 72 829
Trade and other payables * 3 509 141 3 509 141 – –
4 824 431 3 637 956 211 283 993 191
2019
Bank overdraft 158 799 158 799 – –
Interest-bearing liabilities ** 859 353 50 529 56 530 752 294
Non-interest-bearing liabilities 90 335 44 130 – 46 205
Trade and other payables * 2 618 479 2 618 479 – –
3 726 966 2 871 937 56 530 798 499
* Accrued expenses that are not financial liabilities are excluded.
** The interest-bearing liabilities represent all liabilities included in note 22 except all lease liabilities.
255
Ove
rvie
wG
over
nanc
eSu
stai
nabi
lity
Ann
ual fi
nanc
ial s
tate
men
tsSh
areh
olde
rs’ in
form
atio
n
Notes to the financial statements continued
for the year ended 30 June 2020
37. DIRECTORS AND PRESCRIBED OFFICERSDirect
NumberIndirectNumber
TotalNumber
Total%
37.1 Directors and prescribed officers’ interest in the share capital of the Company2020
Executive directors
P Spies 341 200 – 341 200 0,25
RD Lyon 440 700 280 000 720 700 0,53
Non-executive director
A Tugendhaft – 318 600 318 600 0,23
Prescribed officer
JV Parkin 226 500 28 700 221 700 0,16
1 008 400 627 300 1 602 200 1,18
2019
Executive director
RD Lyon 200 000 280 000 480 000 0,33
Non-executive director
A Tugendhaft – 218 600 218 600 0,15
Prescribed officer
JV Parkin 193 000 28 700 221 700 0,15
393 000 527 300 920 300 0,63
There have been no changes between the reporting date and the date of this report. The directors have no non-beneficial shareholdings.
256
ALV
IVA
HO
LDIN
GS
LIM
ITED
•
Inte
grat
ed a
nnua
l rep
ort 2
020
Notes to the financial statements continued
for the year ended 30 June 2020
37. DIRECTORS AND PRESCRIBED OFFICERS (continued)
Group
BasicsalaryR’000
Direc-tors’ fees
R’000
Travelallow-
anceR’000
Medicalcontri-
butionsR’000
Provi-dent fund
contri-butions
R’000
Short-term
incen-tive
R’000Total
R’000
37.2 Remuneration
2020 [GRI 201-1]
Executive directors
RD Lyon 3 048 – 96 66 390 – 3 600
P Spies 5 668 – 144 95 291 – 6 198
Non-executive directors
A Tugendhaft – 1 145 – – – – 1 145
Ms MG Mokoka 1 – 344 – – – – 344
PN Masemola ² – 266 – – – – 266
P Natesan 3 – 600 – – – – 600
SH Chaba – 520 – – – – 520
Prescribed officer
JV Parkin 2 467 – – 103 370 – 2 940
11 183 2 875 240 264 1 051 – 15 613
2019
Executive directors
RD Lyon 2 303 – 96 61 360 1 606 4 426
P Spies 4 831 – 144 86 249 3 062 8 372
Non-executive directors
A Tugendhaft – 614 – – – – 614
N Medupe 4 – 277 – – – – 277
P Natesan 3 – 439 – – – – 439
SH Chaba – 299 – – – – 299
Prescribed officer
JV Parkin 2 350 – – 94 352 1 272 4 068
9 484 1 629 240 241 961 5 940 18 495
1 Appointed as Independent Non-Executive Director and member of the Audit and Risk Committee and Remuneration Committee with effect from 29 July 2019.
2 Appointed as Independent Non-Executive Director and member of the Social and Ethics Committee with effect from 29 July 2019.
3 Appointed as Chairperson of the Audit and Risk Committee and resigned as member of the Social and Ethics Committee with effect from 29 July 2019.
4 Resigned as Independent Non-Executive Director with effect from 31 May 2019.
257
Ove
rvie
wG
over
nanc
eSu
stai
nabi
lity
Ann
ual fi
nanc
ial s
tate
men
tsSh
areh
olde
rs’ in
form
atio
n
Notes to the financial statements continued
for the year ended 30 June 2020
37. DIRECTORS AND PRESCRIBED OFFICERS (continued)
Group
2020R’000
2019R’000
37.3 Share awards
37.3.1 Equity-settled share-based scheme
Forfeitable Share Plan 1 Scheme – 12 034
Forfeitable Share Plan 2 Scheme 14 154 8 261
Forfeitable Share Plan 3 Scheme 10 652 5 440
Forfeitable Share Plan 4 Scheme 7 325 –
Forfeitable Share Plan PS Scheme 1 716 –
33 847 25 735
Participation
Members of the Board and the prescribed officer accepted awards under the FSP schemes as follows:
Forfeitable Share Plan 1 Scheme
P Spies and RD Lyon, executive directors of the Board, accepted awards of 360 000 and 210 000 FSP shares, respectively.
JV Parkin, a prescribed officer, accepted an award of 50 000 FSP shares.
67% of the forfeitable shares that had been awarded under this scheme, vested during the reporting period and were committed in terms of the Minimum Shareholding Requirement Policy. (Refer to the Remuneration Committee Report).
Forfeitable Share Plan 2 Scheme
P Spies and RD Lyon, executive directors of the Board, accepted awards of 300 000 and 150 000 FSP shares, respectively.
JV Parkin, a prescribed officer, accepted an award of 50 000 FSP shares.
Forfeitable Share Plan 3 Scheme
P Spies and RD Lyon, executive directors of the Board, accepted awards of 300 000 and 150 000 FSP shares, respectively.
JV Parkin, a prescribed officer, accepted an award of 50 000 FSP shares.
Forfeitable Share Plan 4 Scheme
P Spies and RD Lyon, executive directors of the Board, accepted awards of 450 000 and 250 000 FSP shares, respectively.
JV Parkin, a prescribed officer, accepted an award of 100 000 FSP shares.
Forfeitable Share Plan PS Scheme
P Spies, Group CEO, accepted an award of 500 000 FSP shares.
258
ALV
IVA
HO
LDIN
GS
LIM
ITED
•
Inte
grat
ed a
nnua
l rep
ort 2
020
Notes to the financial statements continued
for the year ended 30 June 2020
37. DIRECTORS AND PRESCRIBED OFFICERS (continued)
37.3 Share awards (continued)
Forfeitable Share Plan 2 Scheme (“FSP 2”)
Overview of scheme
FSP 2 was introduced during the 2018 reporting period. The scheme was introduced to executives and senior management of the Group. At the grant date of the scheme each participant received the respective voting and dividend rights in relation to the listed shares held in the Company.
Vesting conditions
Service conditions
The service condition of the scheme is a period of three years of employment within the Group. Should the employment of the employee be terminated before this date, for any reason, the scheme rules apply and the transfer of ownership is not automatically forfeited.
Performance conditions
The performance conditions are based on the return on equity, core earnings per share and total shareholder return of the Company over the service condition period.
Valuation of the scheme
The Black Scholes Option Valuation Methodology was applied in valuing of the scheme with the various inputs set out below:
Risk free rate The zero-coupon bond curve interest rate was used for each grant date in determining this rate.
Volatility The historical Company share price was used to compute daily volatility which was then annualised. The percentage used in the valuation was 40,4% (2019: 37,6%).
Vesting date 31 October 2020
Dividend yield An average dividend yield of 1,6% (2019: 1,6%) per annum was used within the model.
Quoted share price Quoted share price at the date of the valuation.
Forfeitable Share Plan 3 Scheme (“FSP 3”)
Overview of scheme
FSP 3 was introduced during the 2019 reporting period. The scheme was introduced to executives and senior management of the Group. At the grant date of the scheme each participant received the respective voting and dividend rights in relation to the listed shares held in the Company.
Vesting conditions
Service conditions
The service condition of the scheme is a period of three years of employment within the Group. Should the employment of the employee be terminated before this date, for any reason, the scheme rules apply and the transfer of ownership is not automatically forfeited.
Performance conditions
The performance conditions are based on the return on equity, core earnings per share and total shareholder return of the Company over the service condition period.
259
Ove
rvie
wG
over
nanc
eSu
stai
nabi
lity
Ann
ual fi
nanc
ial s
tate
men
tsSh
areh
olde
rs’ in
form
atio
n
Notes to the financial statements continued
for the year ended 30 June 2020
37. DIRECTORS AND PRESCRIBED OFFICERS (continued)
37.3 Share awards (continued)
Valuation of the scheme
The Black Scholes Option Valuation Methodology was applied in valuing of the scheme with the various inputs set out below:
Risk free rate The zero-coupon bond curve interest rate was used for each grant date in determining this rate.
Volatility The historical Company share price was used to compute daily volatility which was then annualised. The percentage used in the valuation was 40,4% (2019: 37,6%).
Vesting date 31 October 2021
Dividend yield An average dividend yield of 1,6% per annum was used within the model.
Quoted share price Quoted share price at the date of the valuation.
Forfeitable Share Plan 4 Scheme (“FSP 4”)
Overview of scheme
FSP 4 was introduced during the 2020 reporting period. The scheme was introduced to executives and senior management of the Group. At the grant date of the scheme each participant received the respective voting and dividend rights in relation to the listed shares held in the Company.
Vesting conditions
Service conditions
The service condition of the scheme is a period of three years of employment within the Group. Should the employment of the employee be terminated before this date, for any reason, the scheme rules apply and the transfer of ownership is not automatically forfeited.
Performance conditions
The performance conditions are based on the return on equity, headline earnings per share and total shareholder return of the Company over the service condition period.
Valuation of the scheme
The Black Scholes Option Valuation Methodology was applied in valuing of the scheme with the various inputs set out below:
Risk free rate The zero-coupon bond curve interest rate was used for each grant date in determining this rate.
Volatility The historical Company share price was used to compute daily volatility which was then annualised. The percentage used in the valuation was 40,4%.
Vesting date 31 October 2022
Dividend yield An average dividend yield of 1,6% per annum was used within the model.
Quoted share price Quoted share price at the date of the valuation.
260
ALV
IVA
HO
LDIN
GS
LIM
ITED
•
Inte
grat
ed a
nnua
l rep
ort 2
020
Notes to the financial statements continued
for the year ended 30 June 2020
37. DIRECTORS AND PRESCRIBED OFFICERS (continued)
37.3 Share awards (continued)
Forfeitable Share Plan PS Scheme (“FSP PS”)
Overview of scheme
FSP PS was introduced during the 2020 reporting period. The scheme was introduced to the CCO of the Group. At the grant date of the scheme the participant received the respective voting and dividend rights in relation to the listed shares held in the Company.
Vesting conditions
Service conditions
The service condition of the scheme is a period of three years of employment within the Group. Should the employment of the employee be terminated before this date, for any reason, the scheme rules apply and the transfer of ownership is not automatically forfeited.
Performance conditions
The performance conditions are based on the return on equity, core earnings per share and shareholder return of Merlynn Intelligence Technologies Proprietary Limited over the service condition period.
Valuation of the scheme
The Black Scholes Option Valuation Methodology was applied in valuing of the scheme with the various inputs set out below:
Risk free rate The zero-coupon bond curve interest rate was used for each grant date in determining this rate.
Volatility The historical Company share price was used to compute daily volatility which was then annualised. The percentage used in the valuation was 40,4%.
Vesting date 31 October 2022
Dividend yield An average dividend yield of 1,6% per annum was used within the model.
Quoted share price Quoted share price at the date of the valuation.
261
Ove
rvie
wG
over
nanc
eSu
stai
nabi
lity
Ann
ual fi
nanc
ial s
tate
men
tsSh
areh
olde
rs’ in
form
atio
n
Notes to the financial statements continued
for the year ended 30 June 2020
38. RELATED PARTY TRANSACTIONS A list of all subsidiaries and the equity-accounted investee are included in notes 12 and 13, respectively.
All key management personnel involved in the above related party transactions are directors whose remuneration is disclosed in note 37.2. All related party transactions are conducted on an arm’s length basis and any outstanding balances to or from the Group are no more or less favourable than any other supplier or customer of a similar size.
Type oftransaction
Amount oftransaction
R’000Balance
R’000
Company
2020
Alviva Treasury Services Proprietary Limited – Subsidiary
Group loan – 445 025
Ledibogo RF Proprietary Limited– Subsidiary
Group loan – (1)
Alviva International Investments Proprietary Limited – Subsidiary
Dividends received (21 981) –
Centrafin Proprietary Limited – Subsidiary
Dividends received (20 000) –
DCT Holdings Proprietary Limited – Subsidiary
Dividends received (417 543) –
2019
Alviva Treasury Services Proprietary Limited – Subsidiary
Group loan – 197 688
Ledibogo RF Proprietary Limited– Subsidiary
Group loan – (1)
Alviva Treasury Services Proprietary Limited – Subsidiary
Dividends paid 1 755 –
Devfam Fire Prevention Equipment Proprietary Limited– Subsidiary
Dividends received (1 483) –
Centrafin Proprietary Limited – Subsidiary
Dividends received (23 000) –
DCT Holdings Proprietary Limited – Subsidiary
Dividends received (431 729) –
262
ALV
IVA
HO
LDIN
GS
LIM
ITED
•
Inte
grat
ed a
nnua
l rep
ort 2
020
Notes to the financial statements continued
for the year ended 30 June 2020
Group
2019R’000
39. COMMITMENTSOperating leases – premises
Up to one year 60 952
One to five years 179 425
240 377
Future minimum lease payments on non-cancellable operating leases
The above comprised leases on business premises occupied by the Group, and were renewable at the end of term by negotiation. None of the leases had any purchase options.
At the reporting date, the Group had outstanding commitments under non-cancellable operating leases relating to equipment, which fell due as follows:
Group
2019R’000
Operating leases – equipment
Up to one year 18 465
One to five years 30 274
48 739
These leases related to ICT equipment used by the Group. None of these leases had any purchase options. These lease expenses were included as part of cost of sales based on the nature of the use of the equipment. IFRS 16 was adopted on 1 July 2019. Refer to notes 7, 9 and 22.
263
Ove
rvie
wG
over
nanc
eSu
stai
nabi
lity
Ann
ual fi
nanc
ial s
tate
men
tsSh
areh
olde
rs’ in
form
atio
n
Notes to the financial statements continued
for the year ended 30 June 2020
40. SEGMENT AND GEOGRAPHIC ANALYSIS A segment is a distinguishable component of the Group that is engaged in activities from which it may earn revenue
and incur expenses, whose operating results are regularly reviewed by the chief operating decision-maker (which by delegation by the Board of Directors, is the CEO under advice from his senior executive team) and for which discrete financial information is available. Operating segments are reported in a manner consistent with internal reporting provided to the chief operating decision-maker.
Group
Segment revenue Inter-segment revenue External revenue
2020R’000
2019R’000
2020R’000
2019R’000
2020R’000
2019R’000
40.1 Segment analysisBusiness unit
ICT Distribution 10 542 572 11 802 282 (674 816) (679 127) 9 867 756 11 123 155
Services and Solutions 4 819 613 4 657 418 (80 719) (50 291) 4 738 894 4 607 127
Financial Services 199 819 192 359 (2 314) – 197 505 192 359
15 562 004 16 652 059 (757 849) (729 418) 14 804 155 15 922 641
GroupRevenue *
2020R’000
2019R’000
Business unit
ICT Distribution 10 542 572 11 802 284
Services and Solutions 4 819 613 4 657 418
Financial Services 199 819 192 359
Less: Inter-segment revenue (757 849) (729 420)
External revenue 14 804 155 15 922 641
* No one customer contributed to more than 10% of the total external revenue.
GroupSegment EBITDA**
2020R’000
2019R’000
Business unit
ICT Distribution 346 348 463 046
Services and Solutions 176 465 254 423
Financial Services 133 498 111 791
Group Central Services 51 308 30 524
707 619 859 784
Depreciation, amortisation and impairments (319 082) (190 011)
Finance income 50 666 52 059
Finance costs (227 640) (185 108)
Profit before tax 211 563 536 724
** Earnings before interest, tax, depreciation and amortisation.
264
ALV
IVA
HO
LDIN
GS
LIM
ITED
•
Inte
grat
ed a
nnua
l rep
ort 2
020
Notes to the financial statements continued
for the year ended 30 June 2020
40. SEGMENT AND GEOGRAPHIC ANALYSIS (continued)
Group
Net operating assets
2020R’000
2019R’000
Business unit
ICT Distribution 1 169 630 1 254 375
Services and Solutions 598 512 640 405
Financial Services 239 004 209 963
Group Central Services 370 633 230 284
2 377 779 2 335 027
Group
Segment revenue* Segment EBITDA**
2020R’000
2019R’000
2020R’000
2019R’000
40.2 Geographic analysisGeographic location of business unit
South Africa 14 078 986 15 458 883 659 192 849 229
– Local 12 978 572 14 574 313 621 784 800 361
– International 1 100 414 884 570 37 408 48 868
Africa (excluding South Africa) 685 995 463 275 46 924 10 555
Other *** 39 174 483 1 503 –
14 804 155 15 922 641 707 619 859 784
Depreciation, amortisation and impairments (319 082) (190 011)
Finance income 50 666 52 059
Finance costs (227 640) (185 108)
Profit before tax 211 563 536 724
* No one customer contributed to more than 10% of the total external revenue. ** Earnings before interest, tax, depreciation and amortisation. *** Includes Group entities in the UK and Middle East (2019: Middle East).
Group
Net operating assets
2020R’000
2019R’000
Business unit
South Africa 2 257 579 2 239 193
Africa (excluding South Africa) 89 456 95 672
Other **** 30 744 162
2 377 779 2 335 027
**** Includes Group entities in the UK and Middle East (2019: Middle East).
41. CONTINGENT LIABILITIESThe directors are not aware of any contingent liabilities of a material nature.
265
Ove
rvie
wG
over
nanc
eSu
stai
nabi
lity
Ann
ual fi
nanc
ial s
tate
men
tsSh
areh
olde
rs’ in
form
atio
n
Notes to the financial statements continued
for the year ended 30 June 2020
Group
2020R’000
2019R’000
42. GUARANTEESIssued by the Company in favour of:
Attacq Waterfall Investment Company Proprietary Limited 1 800 1 800
Canadian Solar * 52 102 70 700
Credit Guarantee Insurance Corporation of Africa Limited 15 000 15 000
Dell Emerging Markets (EMEA) Limited – 169 680
Depfin Investments Proprietary Limited – 6 463
Hewlett-Packard Financial Services Holding Company Limited 15 000 15 000
Hitachi Vantara Proprietary Limited – 115 000
Huawei Technologies Africa Proprietary Limited 260 512 212 100
IBM Group of Companies ** 711 555 509 040
Lenovo PC HK Limited and Lenovo Global Technology HK Limited 434 187 –
Longi Solar Technology Co Limited 34 735 –
Lodestone Investments Proprietary Limited 13 653 –
Nutanix Netherlands BV 69 470 –
Microsoft Ireland Operations Limited 364 718 296 940
Oracle Systems Limited – 169 680
Palo Alto Networks (Netherlands) BV – 56 560
Pinnacle Property Trust 26 685 34 999
Prysmian Cables and Systems Limited 97 406 80 506
Radware Limited 27 788 22 624
Schneider Electric DC MEA FzCo 1 737 1 414
Splunk Inc 86 838 –
VMware International Limited 277 880 226 240
Vodacom Proprietary Limited 10 000 10 000
Wells Fargo Bank NA (Previously GE Capital Bank) 521 025 424 200
Ziegler South Africa Proprietary Limited 7 000 –
3 029 091 2 437 946
* Canadian Solar International Limited and Canadian Solar South Africa Proprietary Limited.
** IBM South Africa Proprietary Limited, IBM Global Financing South Africa Proprietary Limited, IBM World Trade Corporation, IBM United Kingdom Financial Services and IBM International Finance II BV.
The Company has issued guarantees to the above entities in respect of current facilities granted to its subsidiaries. These facilities are not fully utilised by the subsidiaries at the reporting date. These guarantees would become payable by the Company to the extent of outstanding balances should any subsidiary default. At the reporting date none of the subsidiaries were in default.
The Group assessed all of the subsidiaries, linked to a guarantee provided, to have a low level risk in relation to the ECL model applied based on the financial position and performance of each entity. This is substantiated by the fact that the Group treasury function provides the needed financial assistance to each subsidiary when required and the fact that no subsidiary has defaulted in the current or prior reporting period in relation to the payment of each of these vendors. The exposure of the Company to any vendor in terms of the guarantee provided is thus assessed as being minimal to none.
266
ALV
IVA
HO
LDIN
GS
LIM
ITED
•
Inte
grat
ed a
nnua
l rep
ort 2
020
Notes to the financial statements continued
for the year ended 30 June 2020
43. EVENTS AFTER THE REPORTING DATE Other than as disclosed below, there were no events material to the understanding of the financial statements that
occurred after the reporting date, except the continuation of the risk-adjusted approach implemented by the South African government in relation to the COVID-19 pandemic.
Redemption of preference shares
As announced on SENS on 20 May 2020 and 21 May 2020, respectively, Absa Bank Limited (acting through its Corporate and Investment Banking Division) is the holder of 40 (forty) redeemable preference shares of R10 million each in DCT Holdings (RF) Proprietary Limited, a subsidiary of Alviva.
In terms of the Preference Share Subscription Agreement entered into on 4 April 2017, the redemption date of 10 (ten) preference shares was scheduled for 20 May 2020. By mutual consent, the scheduled redemption date was amended by three months and, on 20 August 2020, the Company redeemed preference shares to the value of R100 million to Absa Bank Limited.
44. GOING CONCERN
Following due consideration of the operating budgets, an assessment of solvency and liquidity, the key risks and the impact of the COVID-19 pandemic and other pertinent matters presented by management, the directors have recorded that they have reasonable expectations that the Group has adequate resources and the ability to continue in operations for the foreseeable future. For these reasons, the financial statements have been prepared on the going concern basis. However, the extent of the impact of the COVID-19 pandemic remains uncertain and cannot be predicted by the directors.
267
Ove
rvie
wG
over
nanc
eSu
stai
nabi
lity
Ann
ual fi
nanc
ial s
tate
men
tsSh
areh
olde
rs’ in
form
atio
n
Notes to the financial statements continued
for the year ended 30 June 2020
45. ANALYSIS OF SHAREHOLDING
SHAREHOLDER SPREAD 2020 2019
Shareholders Shares in issue Shareholders Shares in issue
Range of shares held Number % Number % Number % Number %
1 – 5 000 3 916 81,70 3 550 921 2,60 3 059 80,04 3 517 971 2,45
5 001 – 10 000 333 6,95 2 586 024 1,90 274 7,17 2 140 331 1,49
10 001 – 50 000 370 7,72 8 777 088 6,44 312 8,16 7 469 254 5,21
50 001 – 100 000 59 1,23 4 213 389 3,09 57 1,49 4 126 741 2,88
100 001 – 1 000 000 94 1,96 28 272 035 20,74 94 2,46 28 699 216 20,01
Over 1 000 000 21 0,44 88 918 289 65,23 26 0,68 97 468 274 67,96
Total 4 793 100,00 136 317 746 100,00 3 822 100,00 143 421 787 100,00
SHAREHOLDER TYPE 2020 2019
Shareholders Shares in issue Shareholders Shares in issue
Number % Number % Number % Number %
Non-public shareholders 20 0,42 52 916 875 38,82 13 0,34 65 717 811 45,82
Strategic shareholders (>10%) 4 0,08 42 435 057 31,13 2 0,05 56 805 955 39,61
Share schemes 1 0,02 7 180 750 5,27 1 0,03 6 835 000 4,77
Directors and associates 8 0,17 2 102 019 1,54 6 0,16 1 305 119 0,91
Other employees 7 0,15 1 199 049 0,88 4 0,10 771 737 0,53
Public shareholders 4 773 99,58 83 400 871 61,18 3 809 99,66 77 703 976 54,18
Total 4 793 100,00 136 317 746 100,00 3 822 100,00 143 421 787 100,00
BENEFICIAL INTEREST GREATER THAN 5 % OF ISSUED SHARES * 2020 2019
Shares in issue Shares in issue
Number % Number %
Invesco Canada Limited 42 435 057 31,13 42 160 978 29,40
Fidelity Investments 10 956 766 8,04 14 644 977 10,21
36One Asset Management 2 367 775 1,74 7 729 857 5,39
Forfeitable Share Plan 7 180 750 5,27 6 835 000 4,76
Total 62 940 348 46,18 71 370 812 49,76
* Held on behalf of various funds for the ultimate benefit of various individual shareholders.
268
ALV
IVA
HO
LDIN
GS
LIM
ITED
•
Inte
grat
ed a
nnua
l rep
ort 2
020
Notes to the financial statements continued
for the year ended 30 June 2020
45. ANALYSIS OF SHAREHOLDING (continued)
2020 2019
DISTRIBUTION OF SHAREHOLDERS
Number ofshareholders %
Number ofshares %
Number ofshareholders %
Number ofshares %
Banks, brokers and nominees 29 0,61 7 518 239 5,52 27 0,71 5 624 129 3,92
Close corporations 35 0,73 611 820 0,45 31 0,81 408 282 0,28
Collective investment schemes 67 1,40 72 436 614 53,14 82 2,15 77 978 282 54,37
Control accounts and unclaimed shares 3 0,06 14 0,00 3 0,08 14 0,00
Employee share plans 1 0,02 7 180 750 5,27 1 0,03 6 835 000 4,77
Hedge funds 4 0,08 1 426 499 1,05 7 0,18 4 372 899 3,05
Insurance and assurance corporate funds
1 0,02 5 148 0,00 1 0,03 6 296 0,00
Lending, collateral and pledged accounts
4 0,08 3 383 840 2,48 6 0,16 3 469 687 2,42
Non-South African custodians 12 0,25 3 727 211 2,73 29 0,76 2 607 954 1,82
Non-profitable organisations and charity funds
5 0,10 187 711 0,14 7 0,18 1 243 414 0,87
Pooled and mutual funds 36 0,75 5 099 820 3,74 18 0,47 9 221 830 6,43
Private companies 92 1,92 3 123 232 2,29 79 2,07 2 186 759 1,52
Public companies – – – – 1 0,03 5 000 0,00
Retail individuals 4 264 88,96 24 564 352 18,02 3 277 85,74 22 125 181 15,43
Retirement benefit funds 37 0,77 2 104 892 1,54 28 0,73 1 803 392 1,26
Sovereign wealth fund 2 0,04 66 732 0,05 4 0,10 78 707 0,05
Trusts and investment partnerships 201 4,19 4 880 872 3,58 221 5,78 5 454 961 3,80
Total 4 793 100,00 136 317 746 100,00 3 822 100,00 143 421 787 100,00
SHARE PRICE PERFORMANCE 2020 2019
Opening price 1 July R16,50 R18,00
Closing price 30 June R6,70 R16,20
High for peroid R17,00 R19,74
Low for peroid R3,34 R15,50
Number of shares in issue 136 317 746 143 421 787
Volume traded during period 41 014 505 36 217 588
Ratio of volume traded to shares issued 30,09% 25,25%
Rand value traded during the period R392 702 267 R642 854 106
Market capitalisation at 30 June R913 328 898 R2 323 432 949
269
Ove
rvie
wG
over
nanc
eSu
stai
nabi
lity
Ann
ual fi
nanc
ial s
tate
men
tsSh
areh
olde
rs’ in
form
atio
n
SHAREHOLDERS’INFORMATION
270
ALV
IVA
HO
LDIN
GS
LIM
ITED
•
Inte
grat
ed a
nnua
l rep
ort 2
020
Financial year-end 30 June
ACTION/EVENT 2020
Record date to determine which shareholders are entitled to receive the 2020 integrated annual report (incorporating the Notice of 2020 AGM) on
Friday, 18 September
2020 integrated annual report (incorporating the Notice of 2020 AGM) distributed to shareholders on
Wednesday, 30 September
Last date to trade “cum” dividend Tuesday, 10 November
Last day to trade for shareholders to be recorded in the register on the record date Tuesday, 3 November
First date to trade “ex” dividend Wednesday, 11 November
Dividend record date Friday, 13 November
Record date to determine which shareholders are entitled to participate in and vote at the 2020 AGM on
Friday, 6 November
Dividend payment date Monday, 16 November
Last date and time (14:00) by when forms of proxy must be submitted to the transfer secretaries (note 2)
Monday, 16 November
Online registration using the online registration portal at www.smartagm.co.za by shareholders or their duly appointed proxy(ies) that wish to participate in the AGM via electronic communication by 14:00 on
Monday, 16 November
Electronic participation application forms to be received by the transfer secretaries by 14:00 on Monday, 16 November
Electronic participants notified by email of the relevant details through which participants can participate electronically by 14:00 on
Tuesday, 17 November
2020 AGM held at 14:00 on Wednesday, 18 November
Results of the 2020 AGM published on SENS on Wednesday, 18 November
Notes:
1. All dates and times set out above are subject to change and/or may be subject to certain regulatory approvals being granted. Any change to the aforementioned dates and times will be published on SENS and in the South African press.
2. Any form of proxy not delivered to the transfer secretaries by this time may be sent to the Chairperson of the AGM, care of the transfer secretaries at [email protected] at any time before the proxy exercises any rights of the shareholder at the AGM. However, to facilitate administration, it would be appreciated If proxies can be received by the transfer secretaries by 14:00 on Monday, 16 November 2020.
3. If the AGM is adjourned or postponed to a later time and/or date, the above dates and times will change, but the applicable form of proxy submitted for the relevant AGM will remain valid in respect of any postponement prior to convening, adjournment or postponement of that AGM.
4. All times given are local times in South Africa.
Shareholders’ diary
271
Ove
rvie
wG
over
nanc
eSu
stai
nabi
lity
Ann
ual fi
nanc
ial s
tate
men
tsSh
areh
olde
rs’ in
form
atio
n
ALVIVA HOLDINGS LIMITEDIncorporated in the Republic of South AfricaRegistration number: 1986/000334/06Share Code: AVVISIN: ZAE000227484(“Alviva”) or (“the Company”) or (“the Group”)
This document is important and requires your attention. If you are in any doubt as to what action you should take in respect of the resolutions contained in this notice, please consult your Central Securities Depository Participant (“CSDP” or “Participant”), broker, banker, attorney, accountant or other professional adviser immediately.
If you have sold or otherwise transferred all of your ordinary shares in the Company, please send this document together with the accompanying form of proxy at once to the relevant transferee or to the stockbroker, CSDP, bank or other person through whom the sale or transfer was effected, for transmission to the relevant transferee.
For consistency of reference in this notice of annual general meeting (hereinafter the “AGM”), the term “MOI” is used throughout to refer to the Company’s Memorandum of Incorporation (previously the Company’s Memorandum and Articles of Association) which was adopted by the shareholders at the AGM of shareholders held on Friday, 26 October 2012.
Section 63(1) of the Act – Identification of meeting Participants
Kindly note that meeting Participants (including proxies) are required to provide reasonably satisfactory identification before being entitled to attend or participate in a shareholders’ meeting. Forms of identification include valid identity documents, driver’s licenses and passports.
As a result of the COVID-19, and guidance from authorities regarding the need for social distancing, the AGM will be conducted entirely by electronic communication.
Shareholders or their duly appointed proxy(ies) that wish to participate in the AGM via electronic communication (“Participant(s)”) must either:
(1) register online using the online registration portal www.smartagm.co.za; or
(2) apply to Computershare Investor Services Proprietary Limited, by delivering the duly completed electronic participation form to: First Floor, Rosebank Towers, 15 Biermann Ave, Rosebank, 2196 or posting it to Private Bag x9000, Saxonwold, 2132 (at the risk of the Participant), or sending it by email to [email protected] so as to be received by Computershare Investor Services Proprietary Limited by no later than 14:00 on Monday, 16 November 2020.
The electronic participation application form can be found in Annexure A to this Notice of AGM. Computershare Investor Services Proprietary Limited will first validate such requests and confirm the identity of the shareholder in terms of section 63(1) of the Companies Act, and, if the request is validated, further details on using the communication facility will be provided.
The Company will inform Participants who notified Computershare Investor Services Proprietary Limited of their intended participation in accordance with paragraph 2 under Electronic Participation, on page 284 of this Notice of AGM, by no later than 14:00 on Tuesday, 17 November 2020, by email of the relevant details through which Participants can participate electronically.
Notice of annual general meeting
272
ALV
IVA
HO
LDIN
GS
LIM
ITED
•
Inte
grat
ed a
nnua
l rep
ort 2
020
NOTICE OF AGMNotice is hereby given that the AGM of the shareholders of Alviva Holdings Limited will be held by virtual attendance in electronic format, as provided by the JSE, the Companies Act and the Company’s MOI, on Wednesday, 18 November 2020 at 14:00 (or at any adjournment or postponement thereof ) to transact the following business and resolutions with or without amendments approved at the meeting:
The minutes of the AGM held on Thursday, 21 November 2019 will be available for inspection on the Alviva website at https://alvivaholdings.com/report/financial-year-2020-reports/.
Included in this document are the following:
� The notice of AGM setting out the resolutions to be proposed at the meeting, together with explanatory notes;
� A proxy form for completion, signature and submission to the transfer secretaries by shareholders holding Alviva ordinary shares in certificated form or recorded in the sub-register in electronic form in “own name”. Proxy forms may also be sent to the Chairperson of the AGM, care of the transfer secretaries at [email protected] at any time before the proxy exercises any rights of the shareholder at the AGM;
� Annexure A: Participation in the AGM via electronic communication; and
� Annexure B: Online shareholders’ meeting guide 2020.
Mailing details of the transfer secretaries are detailed on the proxy form and notes thereto.
PRESENTATION OF ANNUAL FINANCIAL STATEMENTS AND REPORTSThe consolidated audited annual financial statements for the Company and the Group, including the external Independent Auditor’s Report, the Audit and Risk Committee Report and the Directors’ Report for the year ended 30 June 2020, have been distributed, as required, and will be presented to shareholders at the AGM.
The consolidated audited annual financial statements, together with the abovementioned reports, are set out on pages 126 to 268 of the integrated annual report.
REPORT FROM THE SOCIAL AND ETHICS COMMITTEEIn accordance with Companies Regulation 43(5)(c), issued in terms of the Companies Act, the Chairperson of the Social and Ethics Committee, or, in the absence of the Chairperson, any member of the Committee, will present the Committee’s report to shareholders at the AGM. The Social and Ethics Committee Report is set out on pages 86 to 90 of the integrated annual report.
SPECIAL RESOLUTIONS
SPECIAL RESOLUTION NUMBER 1To issue a general authority to the Company to repurchase its own shares
“RESOLVED THAT the Company or a subsidiary, be and is hereby authorised, by way of general authority in terms of article 16 of the MOI, to acquire shares issued by it, subject to the requirements of sections 46 and 48 of the Companies Act and the Listings Requirements of the JSE Limited (“JSE”) and the MOI of the Company.”
Notice of annual general meeting continued
273
Ove
rvie
wG
over
nanc
eSu
stai
nabi
lity
Ann
ual fi
nanc
ial s
tate
men
tsSh
areh
olde
rs’ in
form
atio
n
It is recorded that the Listings Requirements of the JSE require, inter alia, that the Company or a subsidiary may make a general acquisition of shares issued by the Company only if:
� the repurchase of the ordinary shares is effected through the order book operated by the JSE trading system and done without any prior understanding or arrangement between the Company and the counterparty (reported trades are prohibited);
� at any point in time the Company may only appoint one agent to effect any repurchases on its behalf;
� this general authority shall only be valid until the next AGM of the Company, provided that it shall not extend beyond 15 (fifteen) months from the date of passing of this special resolution;
� the maximum price at which the shares may be acquired will be 10% (ten percent) above the weighted average market value at which such ordinary shares are traded on the JSE for such ordinary shares for the 5 (five) business days immediately preceding the date on which the transaction is effected. In the event that the Company’s shares have not traded in such five business-day period, the JSE will be consulted for a ruling;
� any such acquisition shall not, in any one financial year, exceed 20% (twenty percent) of the Company’s issued ordinary shares as at the passing of the general authority;
� the Company or its subsidiaries may not repurchase ordinary shares during a prohibited period as defined in paragraph 3.67 of the JSE Listings Requirements, unless they have in place a repurchase programme where the dates and quantities of securities to be traded during the relevant period are fixed (not subject to any variation) and has been submitted to the JSE in writing prior to the commencement of the prohibited period;
� the repurchase may only be effected if the shareholder spread requirements, as set out in paragraphs 3.37 and 4.28(e) of the JSE Listings Requirements, are still met after such repurchase;
� the directors have passed a resolution authorising the repurchase, resolving that the Company or the subsidiary, as the case may be, has satisfied the solvency and liquidity test as defined in Section 4 of the Companies Act and resolving that since the solvency and liquidity test had been applied, there have been no material changes to the financial position of the Group;
� such authority is limited to paragraphs 5.68, 5.72(a), (c) and (d) of the JSE Listings Requirements;
� when the Company has cumulatively repurchased 3% (three percent) of the initial number (the number of that class of shares in issue at the time that the general authority from shareholders is granted) of the relevant class of securities for each 3% (three percent) in aggregate of the initial number of that class acquired thereafter, an announcement must be made. Such announcement must be made as soon as possible and, in any event, by not later than 8:30 on the second business day following the day on which the relevant threshold is reached or exceeded and must contain the following information in terms of paragraph 11.27 of the JSE Listings Requirements:
� the date(s) of repurchase(s) of securities;
� the highest and lowest prices paid for securities so repurchased;
� the number and value of securities repurchased;
� the extent of authority outstanding, by number and percentage (calculated by using the number of shares in issue before any repurchases were effected);
� a statement as to the source of funds utilised;
� a statement by the directors that after considering the effect of such repurchase:
▷ the Company and the Group will be able, in the ordinary course of business, to pay its debts for a period of 12 (twelve) months after the date of the announcement;
▷ the assets of the Company and the Group will be in excess of the liabilities of the Company and the Group for a period of 12 (twelve) months after the date of the announcement. For this purpose, the assets and liabilities should be recognised and measured in accordance with the accounting policies used in the latest audited Group annual financial statements;
▷ the share capital and reserves of the Company and the Group will be adequate for ordinary business purposes for a period of 12 (twelve) months after the date of the announcement;
▷ the working capital of the Company and the Group will be adequate for ordinary business purposes for a period of 12 (twelve) months after the date of the announcement;
Notice of annual general meeting continued
274
ALV
IVA
HO
LDIN
GS
LIM
ITED
•
Inte
grat
ed a
nnua
l rep
ort 2
020
� a statement confirming that paragraph 5.72 (a) of the JSE Listings Requirements has been complied with;
� an explanation including supporting information (if any) of the impact on the repurchase on the financial information;
� the number of treasury shares held after the repurchase;
� the date on which the securities will be cancelled and the listing removed, if applicable; and
� in the event that the repurchase/purchase was made during a prohibited period through a repurchase programme pursuant to paragraph 5.72 and/or paragraph 14.9(e) of Schedule 14, a statement confirming that the repurchase was put in place pursuant to a repurchase programme prior to the prohibited period in accordance with the JSE Listings Requirements.
The directors of the Company do not have any specific intentions for utilising this general authority as at the date of this AGM.
Additional disclosure requirements required in terms of paragraph 11.26 of the JSE Listings Requirements
Material changes
Other than as set out in the integrated annual report, no material changes have occurred since 30 June 2020 and the date of distribution of this notice as incorporated with the integrated annual report.
Directors’ responsibility statement
The directors, whose names are given on pages 29 and 30 of the integrated annual report have considered all statements of fact and opinion in the notice and integrated annual report to which this notice is attached and therefore collectively and individually accept full responsibility for the accuracy of the information given and certify that to the best of their knowledge and belief there are no facts that have been omitted which would make any statement false or misleading, and that all reasonable enquiries to ascertain such facts have been made and that the notice and integrated annual report contain all information required by law and the JSE Listings Requirements.
The JSE Listings Requirements require the following disclosures, which are contained in the integrated annual report as tabled below: –
Requirements Reference
Major shareholders Page 267, Note 45
Share capital of the Company Page 197, Note 19
Statement by directors in terms of paragraph 11.26 (d) of the JSE Listings Requirements
The Company’s directors state that they have resolved by resolution that after considering the effect of such maximum repurchase:
� the Company and the Group will be able in the ordinary course of business to pay its debts for a period of 12 (twelve) months after the date of the notice of the AGM;
� assets of the Company and the Group will be in excess of the liabilities of the Company and the Group for a period of 12 (twelve) months after the date of the notice of the AGM. For this purpose, the assets and liabilities should be measured in accordance with the accounting policies used in the latest audited annual Group financial statements;
� the share capital and reserves of the Company and the Group will be adequate for ordinary business purposes for a period of 12 (twelve) months after the date of the notice of the AGM;
� working capital of the Company and the Group will be adequate for ordinary business purposes for a period of 12 (twelve) months after the date of the notice of the AGM; and
� a resolution by the Board of Directors has been passed that it has authorised the repurchase, that the Company and its subsidiaries have passed the solvency and liquidity test and that, since the test was performed, there have been no material changes to the financial position of the Group.
The directors state further, in terms of paragraph 11.26(e) of the JSE Listings Requirements, that such resolution contains a statement that such authority is limited to paragraphs 5.72(a), (c), (d) and 5.68 of the JSE Listings Requirements.
Notice of annual general meeting continued
275
Ove
rvie
wG
over
nanc
eSu
stai
nabi
lity
Ann
ual fi
nanc
ial s
tate
men
tsSh
areh
olde
rs’ in
form
atio
n
Reason for and effect of special resolution number 1
The reason for and effect of special resolution number 1 is to authorise the Company and/or its subsidiaries by way of a general authority to acquire Alviva issued shares on such terms, conditions and in such amounts as determined from time to time by the directors of the Company, subject to the limitations set out above and in compliance with sections 46 and 48 of the Companies Act. It is the intention of the directors of the Company to use such authority should prevailing circumstances, such as market conditions, in their opinion warrant it.
Percentage voting rights
This resolution requires at least 75% (seventy-five percent) of the voting rights exercised by shareholders present or represented by proxy and entitled to exercise voting rights on the resolution.
SPECIAL RESOLUTION NUMBER 2General authority to provide financial assistance in terms of section 44 of the Companies Act
“RESOLVED THAT, in terms of section 44(3)(a)(ii) of the Companies Act, as a general approval, the Board be and is hereby authorised to approve that the Company provides any direct or indirect financial assistance (“financial assistance” will herein have the meaning attributed to it in sections 44(1) and 44(2) of the Companies Act), that the Board may deem fit to any Company or corporation that is related or inter-related to the Company (“related” or “inter-related” will herein have the meaning attributed to it in section 2 of the Companies Act) and/or to any financier who provides funding by subscribing for preference shares or other securities in the Company or any Company or corporation that is related or inter-related to the Company, on the terms and conditions and for amounts that the Board may determine for the purpose of, or in connection with, the subscription of any shares or other securities, issued or to be issued by the Company or a related or inter-related Company or corporation, or for the purchase of any shares or securities of the Company or a related or inter-related Company or corporation, provided that the aforementioned approval shall be limited to a maximum amount of R1 billion (one billion Rand) and be valid until the date of the next AGM of the Company.”
Reason for special resolution number 2
The reason for and effect of special resolution number 2 is to grant the directors the authority, until the next AGM of the Company, to provide financial assistance to any company or corporation which is related or inter-related to the Company and/or to any financier for the purpose of or in connection with the subscription or purchase of shares or other securities in the Company or any related or inter-related company or corporation.
This means that the Company is authorised, inter alia, to grant loans to its subsidiaries and to guarantee and furnish security for the debt of its subsidiaries where any such financial assistance is directly or indirectly related to a party subscribing for shares or securities in the Company or its subsidiaries. A typical example of where the Company may rely on this authority is where a subsidiary raises funds by way of issuing preference shares and the third-party funder requires the Company to furnish security, by way of a guarantee or otherwise, for the obligations of its subsidiary to the third-party funder arising from the issue of the preference shares.
Approval is not sought for loans to directors or other individuals and no such financial assistance will be provided under this authority.
Compliance with section 44(3)(b)
The directors of the Company will, in accordance with the Companies Act, ensure that financial assistance is only provided if the requirements of that section are satisfied, inter alia, that immediately after providing the financial assistance, the Company would satisfy the solvency and liquidity test set out in section 4(1) of the Companies Act and the terms under which the financial assistance is proposed to be given are fair and reasonable to the Company.
Percentage voting rights
This resolution requires at least 75% (seventy-five percent) of the voting rights exercised by shareholders present or represented
by proxy and entitled to exercise voting rights on the resolution.
Notice of annual general meeting continued
276
ALV
IVA
HO
LDIN
GS
LIM
ITED
•
Inte
grat
ed a
nnua
l rep
ort 2
020
SPECIAL RESOLUTION NUMBER 3General authority to the Company to provide financial assistance for a period of two years to any of its subsidiaries in terms of section 45 of the Companies Act
“RESOLVED THAT the Board of the Company be given general authority for a period of two years or until the AGM following the next meeting, whichever occurs first, in terms of section 45(3)(a)(ii) of the Companies Act to authorise the Company from time to time to provide any direct or indirect financial assistance, as defined in section 45(1) of the Companies Act, to any subsidiary as contemplated in section 45(2) of the Companies Act for such amounts and on such terms and conditions as the Board of the Company may determine.”
Reason for and effect of special resolution number 3
The reason for special resolution number 3 is to obtain authority to transfer funds against loan accounts between Group companies in order to continue conducting centralised treasury operations of the Group; and for the Group to continue issuing covering guarantees in favour of financial institutions and certain major suppliers for credit and advances by those organisations to the Company’s operating subsidiaries, both of which practices require shareholder approval by way of special resolution in terms of section 45 of the Companies Act.
The effect of the resolution will be to allow the Group to continue critical Group functions, including treasury operations, and to satisfy major lenders’ and suppliers’ security requirements so that they can continue to lend to and supply the Group. Such financial assistance will be provided as part of the day-to-day operations of the Company in the normal course of its business and in accordance with its MOI and the provisions of the Companies Act.
Compliance with section 45(3) (b) of the Companies Act
The directors of the Company will, in accordance with section 45(3) (b) of the Companies Act, ensure that financial assistance is only provided if the requirements of that section are satisfied, inter alia, that immediately after providing the financial assistance, the Company would satisfy the solvency and liquidity test set out in section 4(1) of the Companies Act.
Notice given to shareholders of the Company in terms of section 45(5) of the Companies Act of a resolution adopted by the Board authorising the Company to provide such direct or indirect financial assistance in respect of special resolution number 3:
(a) by the time that notice of this AGM is delivered to shareholders of the Company, the Board will have adopted a resolution (“section 45 Board resolution”) authorising the Company to provide, at any time and from time to time during the period of two years commencing on the date on which special resolution number 3 is adopted, any direct or indirect financial assistance as contemplated in section 45 of the Companies Act (which includes lending money, guaranteeing a loan or other obligation, and securing any debt or obligation) to a related or inter-related Company or corporation;
(b) the section 45 Board resolution will be effective only if and to the extent that special resolution number 3 is adopted by the shareholders of the Company, and the provision of any such direct or indirect financial assistance by the Company, pursuant to such resolution, will always be subject to the Board being satisfied that:
(i) immediately after providing such financial assistance, the Company will satisfy the solvency and liquidity test as referred to in section 45(3)(b)(i) of the Companies Act; and
(ii) the terms under which such financial assistance is to be given are fair and reasonable to the Company as referred to in section 45(3)(b)(ii) of the Companies Act
(c) in as much as the section 45 Board resolution contemplates that such financial assistance will in the aggregate exceed one-tenth of one percent of the Company’s net worth at the date of adoption of such resolution, the Company will provide notice of the section 45 Board resolution to shareholders of the Company. Such notice will also be provided to any trade union representing any employees of the Company.
Percentage voting rights
This resolution requires at least 75% (seventy-five percent) of the voting rights exercised by shareholders present or represented by proxy and entitled to exercise voting rights on the resolution.
Notice of annual general meeting continued
277
Ove
rvie
wG
over
nanc
eSu
stai
nabi
lity
Ann
ual fi
nanc
ial s
tate
men
tsSh
areh
olde
rs’ in
form
atio
n
SPECIAL RESOLUTION NUMBER 4To approve the fee structure, exclusive of Value Added Tax, to be paid to directors for their services as non-executive directors of the Company
“RESOLVED THAT, in terms of section 66(9) of the Companies Act, the Company be and is hereby authorised to remunerate its directors for their services as directors and/or pay any fees related thereto on the following basis and on any other basis as may be recommended by the Remuneration Committee and approved by the Board of Directors, provided that the aforementioned authority shall be valid with effect from Wednesday, 18 November 2020 until the next AGM of the Company to be held in the last quarter of 2021 as follows:
2020/2021R
2019/2020R
Chairpersonships
Board Chairperson 850 000 850 000
Lead Independent Director 180 000 180 000
Audit and Risk Committee Chairperson 100 000 100 000
Remuneration Committee Chairperson 50 000 50 000
Social and Ethics Committee Chairperson 50 000 50 000
Memberships
Board 245 000 245 000
Audit and Risk Committee 80 000 80 000
Remuneration Committee 50 000 50 000
Social and Ethics Committee 45 000 45 000
Each fee is paid to each director who is a member of the Board or Committees referred to above. Chairperson fees are paid in addition to membership fees. No fees are paid for attendance per meeting as the base fee is an all-inclusive fee with the non-executive directors’ appointment agreements stipulating attendance at meetings as a requirement. Executive directors do not receive directors’ fees.
Reason for and effect of special resolution number 4
The reason for and effect of special resolution number 4 is for the Company to obtain the approval of shareholders by way of special resolution to remunerate its non-executive directors in accordance with the requirements of the Companies Act without requiring further shareholder approval until the next AGM.
Percentage voting rights
This resolution requires at least 75% (seventy-five percent) of the voting rights exercised by shareholders present or represented by proxy and entitled to exercise voting rights on the resolution.
Notice of annual general meeting continued
278
ALV
IVA
HO
LDIN
GS
LIM
ITED
•
Inte
grat
ed a
nnua
l rep
ort 2
020
ORDINARY RESOLUTIONSThe minimum percentage of voting rights required for ordinary resolutions 1 to 5 and 7 below to be adopted is more than 50% (fifty percent) of the voting rights exercised on each of the resolutions by shareholders present or represented by proxy. Ordinary resolution 6 must be passed by a 75% (seventy-five percent) majority of votes cast in favour of the resolution by all members present or represented by proxy.
ORDINARY RESOLUTION NUMBER 1Re-appointment of retiring directors
1.1 Mr A Tugendhaft
“RESOLVED THAT Mr A Tugendhaft, who retires in compliance with the MOI requirement that one-third or more of the non-executive directors must retire at each AGM, and being eligible offers himself for re-election, be and is hereby re-elected and confirmed as a non-executive director.”
A brief biography of Mr A Tugendhaft is as follows:
Mr A Tugendhaft (72) BA (Wits); LLB (Wits)
Mr Tugendhaft is the senior partner of attorneys Tugendhaft, Wapnick, Banchetti and Partners. He is an accomplished practitioner in commercial and corporate law and has more than 45 years’ experience in practice.
External membership and appointments: Non-Executive Director and Deputy Chairperson of Motus Holdings Ltd.
1.2 Ms P Natesan
“RESOLVED THAT Ms P Natesan, who retires in compliance with the MOI requirement that one-third or more of the non-executive directors must retire at each AGM, and being eligible offers herself for re-election, be and is hereby re-elected and confirmed as an independent non-executive director.”
A brief biography of Ms P Natesan is as follows:
Ms P Natesan (41) BCom (Cum Laude) (Nelson Mandela University); BCom (Honours) (Nelson Mandela University); CA(SA); CD(SA)
Ms Natesan is the CEO at the Institute of Directors in South Africa, serving as an executive director on their board and overseeing the business growth and performance on a day-to-day basis. Her areas of expertise include governance, finance, risk and compliance as well as strategy development.
She is a corporate governance specialist and a thought leader in corporate governance in South Africa, having penned many articles and papers on the topic. She also holds the prestigious Chartered Director (SA) designation.
External membership and appointments: Member of the South African Institute of Chartered Accountants, King Committee on Corporate Governance, 30% Club, Integrated Reporting Committee of South Africa and Institute of Directors in South Africa (IoDSA).
Notice of annual general meeting continued
279
Ove
rvie
wG
over
nanc
eSu
stai
nabi
lity
Ann
ual fi
nanc
ial s
tate
men
tsSh
areh
olde
rs’ in
form
atio
n
ORDINARY RESOLUTION NUMBER 2Appointment of the members of the Audit and Risk Committee
Note: For avoidance of doubt, all references to the Audit and Risk Committee of the Company is a reference to the Audit Committee as contemplated in the Companies Act.
“RESOLVED THAT the following independent non-executive directors, all of whom qualify in terms of section 94(4) of the Companies Act, be appointed as the Chairperson and members of the Audit and Risk Committee, subject to the re-appointment of Ms P Natesan’s ratification as director pursuant to ordinary resolution number 1.2:
2.1 Ms P Natesan (Chairperson)
BCom (Cum Laude) (Nelson Mandela University); BCom (Honours) (Nelson Mandela University); CA(SA); CD(SA)
A brief biography of Ms P Natesan is included under 1.2 above.
2.2 Ms SH Chaba
A brief biography of Ms SH Chaba is as follows:
Ms SH Chaba (62) BA (Economics and Industrial Psychology); Post-Graduate Diploma in Human Resources Management (Wits); Senior Executive
Programme (Wits and Harvard Business School)
Ms Chaba is an HR expert and business strategist who sits on a number of boards in the private and public sectors. She runs businesses in the areas of agriculture and transport and has extensive public and private sector experience at both executive and board levels. In the public sector, she has served in all three spheres of government and in state-owned enterprises such as Gauteng Provincial Government, City of Johannesburg and the Central Energy Fund. In the private sector, she has experience in the petrochemical, retail, construction and financial industries such as Sasol Ltd, AECI Ltd, Edgars and Thebe Investment Corporation (Pty) Ltd.
External membership and appointments: Director of Safrican Insurance Company Ltd, Dijalo Mbung (Pty) Ltd, Amispan (Pty) Ltd, Azonex (Pty) Ltd, Avery Dennison Reflective Materials Africa (Pty) Ltd, Rulelang Investments (Pty) Ltd and Kgosi Neighbourhood Foundation, a non-profit organisation. Remuneration Committee member of the Legal Practitioners Fidelity Fund and the Indemnity Insurance Fund.
2.3 Ms MG Mokoka
A brief biography of Ms MG Mokoka is as follows:
Ms MG Mokoka (46) BCom (Accounting) (University of Limpopo); Postgraduate Diploma in Management (Financial Accounting) (University of Cape
Town); BCom Honours (Accounting) (University of Natal), Postgraduate Diploma in Auditing (University of Cape Town); CA(SA)
Ms Mokoka is a qualified Chartered Accountant (SA) with diverse work experience in strategic and financial management. She has sound public and private sector experience on boards and currently holds a number of non-executive board positions for leading South African companies.
External membership and appointments: Director of Sanlam Ltd, Palabora Mining (Pty) Ltd, CSG Holdings Ltd and Stadio Holdings Ltd. Member of the South African Institute of Chartered Accountants (SAICA), the Institute of Directors in South Africa (IoDSA) and African Women Chartered Accountants (AWCA).
Notice of annual general meeting continued
280
ALV
IVA
HO
LDIN
GS
LIM
ITED
•
Inte
grat
ed a
nnua
l rep
ort 2
020
ORDINARY RESOLUTION NUMBER 3Re-appointment of the auditors
“RESOLVED THAT, upon the recommendation given by the Audit and Risk Committee of the Company, SNG Grant Thornton be re-appointed as the auditor of the Company and Mr A Govender be appointed as the designated audit partner who will undertake the audit of the Group, both until the date of the next AGM.”
ORDINARY RESOLUTION NUMBER 4Non-binding endorsement of Alviva’s Remuneration Policy and Remuneration Implementation Report
4.1 “RESOLVED THAT shareholders endorse the Company’s Remuneration Policy as detailed in the Remuneration Committee Report in the integrated annual report, through a non-binding advisory vote as recommended in part 5.4 practice 37 of the King IV Report on Corporate Governance for South Africa, 2016.”
4.2 RESOLVED THAT shareholders endorse the Company’s Remuneration Implementation Report as detailed in the Remuneration Committee Report in the integrated annual report, through a non-binding advisory vote as recommended in part 5.4 practice 37 of the King IV Report on Corporate Governance for South Africa, 2016.”
Reason for and effect of ordinary resolution number 4
The reason for ordinary resolutions number 4.1 and 4.2 is that the King IV Report on Corporate Governance for South Africa, 2016 recommends, and the JSE Listings Requirements in paragraph 3.84(j) stipulates, that the Remuneration Policy and the Remuneration Implementation Report of the Company be endorsed through separate non-binding advisory votes by shareholders.
Should either resolution number 4.1 or 4.2 be voted against by 25% or more of the voting rights exercised, the Board will enter into an engagement process to ascertain the reasons for the dissenting votes and appropriately address legitimate and reasonable objections and concerns raised.
ORDINARY RESOLUTION NUMBER 5Placement of unissued shares under the control of the directors
“RESOLVED THAT all of the authorised but unissued ordinary shares in the capital of the Company be and are hereby placed under the control of the directors of the Company as a general authority to allot or issue the same at their discretion in terms of and subject to the provisions of section 38 of the Companies Act, the JSE Listings Requirements and the Company’s MOI and subject to the proviso that the aggregate number of ordinary shares which may be allotted and issued in terms of this ordinary resolution number 5, shall be limited to 10% (ten percent) of the number of ordinary shares in issue from time to time.”
ORDINARY RESOLUTION NUMBER 6Authority to issue shares for cash
“RESOLVED THAT the directors of the Company be and are hereby authorised by way of a general authority to allot or issue all or any of the authorised but unissued shares in the capital of the Company for cash, at the discretion of the directors, as and when suitable opportunities arise, subject to the Listings Requirements of the JSE and shall be limited to 10% (ten percent) of ordinary shares, after deducting any treasury shares, in issue as at the date of the AGM.”
Notice of annual general meeting continued
281
Ove
rvie
wG
over
nanc
eSu
stai
nabi
lity
Ann
ual fi
nanc
ial s
tate
men
tsSh
areh
olde
rs’ in
form
atio
n
In terms of paragraph 5.52 of the JSE Listings Requirements, the allotment and issue of shares for cash shall be subject to the following limitations:
� that the securities which are the subject of the issue for cash must be of a class already in issue, or where this is not the case, must be limited to such securities or rights that are convertible into a class already in use;
� any such issue will be made to public shareholders as defined in paragraphs 4.25 to 4.27 of the JSE Listings Requirements, and not to related parties;
� shares which are the subject of such a general issue for cash must be less than 30% (thirty percent) of the applicant’s listed equity securities as at the date of the notice of AGM seeking the general issue for cash authority, provided that:
� as contemplated in paragraph 5.50(b) of the JSE Listings Requirements, this authority shall not be extended beyond the next AGM or 15 (fifteen) months from the date of this AGM, whichever is earlier;
� the number of issued ordinary shares as at the date of the notice of AGM is 136 317 746 (one hundred and thirty six million three hundred and seventeen thousand seven hundred and forty six), excluding Forfeitable Share Plan Shares;
� shares which are the subject of the general issue for cash shall in any one financial year not exceed 12 913 699 (twelve million nine hundred and thirteen thousand six hundred and ninety nine) ordinary shares, being 10% (ten percent) in aggregate of the number of shares (excluding Forfeitable Share Plan Shares) in the Company’s issued share capital in issue at the date of this notice of the AGM;
� any shares issued under this authority, prior to this authority lapsing, shall be deducted from the shares that the Company is authorised to issue in terms of this authority for the purpose of determining the remaining number of shares that may be issued in terms of this authority;
� in the event of a sub-division or consolidation of shares, prior to this authority lapsing, the existing authority shall be adjusted accordingly to represent the same allocation ratio;
� after the Company has issued shares in terms of the approved general issue for cash representing, on a cumulative basis within the financial year, 5% (five percent) or more of the number of equity securities in issue prior to that issue, the Company shall publish an announcement giving full details of the issue, including:
� the number of securities issued;
� the average discount to the weighted average trading price of the securities over the 30 (thirty) days prior to the date that the issue was determined and agreed by the directors of the Company; and
� the impact on net asset value, net tangible asset value and on earnings and headline earnings per share;
� in determining the price at which shares will be issued in terms of this authority, the maximum discount permitted shall be 10% (ten percent) of the weighted average traded price of such shares, as determined over the 30-day (thirty-day) business period prior to the date that the price of the issue is determined or agreed by the directors of the Company. If no shares have been traded in the said 30-day (thirty-day) business period, a ruling will be obtained from the JSE.
A 75% (seventy-five percent) majority of votes cast in favour of the resolution by all members present or represented by proxy, is required for this ordinary resolution to be passed.
ORDINARY RESOLUTION NUMBER 7Authorisation of the directors to implement the special and ordinary resolutions
“RESOLVED THAT any one director of the Company or the Company secretary be and is hereby authorised to do all such things as are necessary and to sign all such documents issued by the Company so as to give effect to such ordinary resolutions and special resolutions with or without amendment and, where applicable, registered.”
Transaction of such other matters as may be transacted at an AGM.
Notice of annual general meeting continued
282
ALV
IVA
HO
LDIN
GS
LIM
ITED
•
Inte
grat
ed a
nnua
l rep
ort 2
020
SALIENT DATES AND TIMES
Date
Record date to receive notice of AGM Friday, 18 September 2020
Notice of AGM to be posted to shareholders and announced on SENS Wednesday, 30 September 2020
Last day to trade to be recorded in the register on the record date for participation in the AGM
Tuesday, 3 November 2020
Record date to participate in and vote at the AGM Friday, 6 November 2020
To facilitate administration, it would be appreciated if proxies can be received by the transfer secretaries by 14:00 on
Monday, 16 November 2020
Online registration using the online registration portal at www.smartagm.co.za by shareholders or their duly appointed proxy(ies) that wish to participate in the AGM via electronic communication by 14:00 on
Monday, 16 November 2020
Electronic participation application forms to be received by the transfer secretaries by 14:00 on
Monday, 16 November 2020
Electronic Participants notified by email of the relevant details through which Participants can participate electronically by 14:00 on
Tuesday, 17 November 2020
Last day for lodging forms of proxy at 14:00 on Wednesday, 18 November 2020 *
AGM at 14:00 on Wednesday, 18 November 2020
Results of AGM released on SENS Wednesday, 18 November 2020
* Any form of proxy not delivered to the transfer secretaries by this time may be sent to the Chairperson of the AGM, care of the transfer secretaries at [email protected] at any time before the proxy exercises any rights of the shareholder at the AGM.
Note:
Any changes to the above dates will be announced on SENS, subject to JSE approval.
VOTING AND PROXIESCertificated shareholders and dematerialised shareholders who hold shares in “own name” registration who are unable to attend the AGM and who wish to be represented thereat, must complete the form of proxy as attached to this notice of AGM, in accordance with the instructions contained therein and return it to the transfer secretaries to be received by no later than 14:00 on the day of the AGM, being Wednesday, 18 November 2020. Proxies which are not delivered timeously to the transfer secretaries, may be sent to the Chairperson of the AGM, care of the transfer secretaries at [email protected] at any time before the proxy exercises any rights of the shareholder at the AGM. However, to facilitate administration, it would be appreciated if proxies can be received by the transfer secretaries by 14:00 on Monday, 16 November 2020.
Completion of the relevant form of proxy will not preclude such shareholder from participating in or attending and voting (in preference to those shareholders’ proxies) at the AGM.
Voting will be performed by way of a poll, so each shareholder present or represented by way of proxy will be entitled to 1 (one) vote for every ordinary share held or represented.
Notice of annual general meeting continued
283
Ove
rvie
wG
over
nanc
eSu
stai
nabi
lity
Ann
ual fi
nanc
ial s
tate
men
tsSh
areh
olde
rs’ in
form
atio
n
Shareholders’ rights regarding proxies
Shareholders’ rights regarding proxies in terms of section 58 of the Companies Act are as follows:
1. At any time, a shareholder of a Company may appoint any individual, including an individual who is not a shareholder of that Company, as a proxy to –
(a) participate in, and speak and vote at, a shareholders meeting on behalf of the shareholder; or
(b) give or withhold written consent on behalf of the shareholder to a decision contemplated in section 60.
2. A proxy appointment –
(a) must be in writing, dated and signed by the shareholder; and
(b) remains valid for:
(i) a period as set out in 23.7 of the MOI.
(ii) any longer or shorter period expressly set out in the appointment, unless it is revoked in a manner contemplated in section 58(4)(c) of the Companies Act, or expires earlier as contemplated in section 58(8)(d) of the Companies Act.
3. Other –
(a) a shareholder of the Company may appoint two or more persons concurrently as proxies, and may appoint more than one proxy to exercise voting rights attached to different securities held by the shareholder;
(b) a proxy may delegate the proxy’s authority to act on behalf of the shareholder to another person, subject to any restriction set out in the instrument appointing the proxy; and
(c) a copy of the instrument appointing a proxy must be delivered to the Company or to another person on behalf of the Company, before the proxy exercises any rights of the shareholder at a shareholders meeting.
4. Irrespective of the form of instrument used to appoint a proxy –
(a) the appointment is suspended at any time and to the extent that the shareholder chooses to act directly and in person in the exercise of any rights as a shareholder;
(b) the appointment is revocable unless the proxy appointment expressly states otherwise; and
(c) if the appointment is revocable, a shareholder may revoke the proxy appointment by:
(i) cancelling it in writing, or making a later inconsistent appointment of a proxy; and
(ii) delivering a copy of the revocation instrument to the proxy, and to the Company.
5. The revocation of a proxy appointment constitutes a complete and final cancellation of the proxy’s authority to act on behalf of the shareholder as of the later of –
(a) the date stated in the revocation instrument, if any; or
(b) the date on which the revocation instrument was delivered as required in section 58(4)(c)(ii) of the Companies Act.
6. A proxy is entitled to exercise, or abstain from exercising, any voting right of the shareholder without direction, except to the extent that the instrument appointing the proxy otherwise provides.
Notice of annual general meeting continued
284
ALV
IVA
HO
LDIN
GS
LIM
ITED
•
Inte
grat
ed a
nnua
l rep
ort 2
020
ELECTRONIC PARTICIPATIONShould any shareholder (or a representative or proxy for a shareholder) wish to participate in and/or vote at the AGM by way of electronic participation, such shareholder must either:
1 register online using the online registration portal at www.smartagm.co.za, prior to the commencement of the AGM; or
2 make a written application (the form of which is attached to this notice of the Company’s AGM as Annexure A) to so participate, by delivering the application form to the transfer secretaries, being Computershare Investor Services Proprietary Limited, at First Floor, Rosebank Towers, 15 Biermann Avenue, Rosebank, 2196, or posting it to Private Bag x9000, Saxonwold, 2132 (at the risk of the shareholder), or sending it by email to [email protected], so as to be received by the transfer secretaries by no later than 14:00 on Monday, 16 November 2020, in order for the transfer secretaries to arrange such participation for the shareholder and for the transfer secretaries to provide the shareholder with the details as to how access to the AGM by means of electronic participation is to be made. Shareholders may still register/apply to participate in and/or vote electronically at the AGM after this date, provided, however, that those shareholders are verified (as required in terms of section 63(1) of the Companies Act) and are registered at the commencement of the AGM.
The transfer secretaries will by no later than Tuesday, 17 November 2020, notify eligible shareholders of the username and password through which eligible shareholders can participate electronically. In-person registration of AGM Participants will not be carried out at the registered office of Alviva.
Neither Alviva nor Computershare can be held accountable in the case of loss of network connectivity or other network failure due to insufficient airtime, internet connectivity, internet bandwidth and/or power outages which prevents any such shareholder from participating in and/or voting at the AGM. Shareholders should take note of the following:
1 the cost of the electronic communication facilities will be for the account of the Company although shareholders will be liable for their own network charges in relation to electronic participation in and/or voting at the AGM. Any such charges will not be for the account of Alviva and/or Computershare. Costs of the shareholder’s call will be for his/her/its own expense; and
2 by delivery of the electronic participation notices, the shareholder indemnifies and holds harmless the Company against any loss, injury, damage, penalty or claim arising in any way from the use of the electronic communication facilities to participate in the AGM or any interruption in the ability of the shareholder to participate in the AGM via electronic communication whether or not the problem is caused by any act or omission on the part of the shareholder, or anyone else, including without limitation the Company and its employees.
By order of the Board
Ms SL Grobler Company Secretary
E-mail address: [email protected] number: 011 237 7031
25 September 2020
Registered address
Alviva Holdings Limited The Summit, 269, 16th Road, Randjespark, 1685, Midrand
Transfer secretaries
Computershare Investor Services Proprietary Limited Private Bag x9000, Saxonwold, 2132
Notice of annual general meeting continued
285
Ove
rvie
wG
over
nanc
eSu
stai
nabi
lity
Ann
ual fi
nanc
ial s
tate
men
tsSh
areh
olde
rs’ in
form
atio
n
Incorporated in the Republic of South AfricaRegistration number: 1986/000334/06
Share Code: AVVISIN: ZAE000227484
(“Alviva”) or (“the Company”) or (“the Group”)
Only to be completed by certificated and dematerialised shareholders with “own name” registration.
If you are a dematerialised shareholder, other than with “own name” registration, do not use this form. Dematerialised shareholders other than those with “own name” registration who wish to attend the AGM, must inform their CSDP or broker of their intention to attend and request their CSDP or broker to issue them with the relevant Letter of Representation to attend the AGM in person and vote, or, if they do not wish to attend the meeting in person, but wish to be represented thereat, provide their CSDP or broker with their voting instructions in terms of the relevant custody agreement entered into between them and their CSDP or broker in the manner and cut-off time stipulated therein.
An ordinary shareholder entitled to attend and vote at the AGM to be held virtually by electronic participation, on Wednesday, 18 November 2020 at 14:00, is entitled to appoint a proxy to attend, speak or vote thereat in his/her stead. A proxy need not be a shareholder of the Company.
All forms of proxy must be lodged at the Company’s transfer secretaries, Computershare Investor Services Proprietary Limited, First Floor, Rosebank Towers, 15 Biermann Avenue, Rosebank, 2196 (Private Bag x9000, Saxonwold, 2132) ([email protected]), by no later than 14:00 on Wednesday, 18 November 2020. Proxy forms may also be sent to the Chairperson of the AGM, care of the transfer secretaries (at [email protected]) at any time before the proxy exercises any rights of the shareholder at the AGM. However, to facilitate administration, it would be appreciated if proxies can be received by the transfer secretaries by 14:00 on Monday, 16 November 2020.
I/We (please print name in full)
of (address) Telephone number:
E-mail address: Cellphone number:
being an ordinary shareholder(s) of the Company holding ordinary shares in the Company do hereby appoint
1. or failing him/her
2. or failing him/her
3. the Chairperson of the AGM
as my/our proxy to vote on my/our behalf at the abovementioned AGM (and any adjournment thereof ) to be held virtually via electronic participation at 14:00 on Wednesday, 18 November 2020, for the purpose of considering and, if deemed fit, passing with or without modifications, the following resolutions to be considered at such meeting:
Number of votes (one per share)
In favour of Against Abstain
SPECIAL RESOLUTIONS
1. Issue a general authority for the Company to repurchase its own shares
2. Issue a general authority to provide financial assistance in terms of section 44 of the Companies Act
3. Issue of a general authority to provide financial assistance for a period of two years in terms of section 45 of the Companies Act
4. Approval of the fee structure to be paid to non-executive directors
ORDINARY RESOLUTIONS
1. Re-appointment of retiring directors
1.1 Re-appointment of Mr A Tugendhaft as Non-Executive Director
1.2 Re-appointment of Ms P Natesan as Independent Non-Executive Director
2. Appointment of the members of the Audit and Risk Committee
2.1 Ms P Natesan (Chairperson)
2.2 Ms SH Chaba
2.3 Ms MG Mokoka
3. Approval to re-appoint SNG Grant Thornton and Mr A Govender as auditors
4. Endorsement of the Company’s Remuneration Policy and its Remuneration Implementation Report
4.1 Endorsement of the Company’s Remuneration Policy
4.2 Endorsement of the Company’s Remuneration Implementation Report
5. General authorisation to place unissued shares under the control of the directors
6. General authorisation to issue shares for cash
7. Authorisation of the directors to implement the special and ordinary resolutions
Insert an “X” in the appropriate block. If no indications are given, the proxy will vote as he/she deems fit. Each member entitled to attend and vote at the meeting may appoint one or more proxies (who need not be a member of the Company) to attend, speak and vote in his/her stead.
Signed at on 2020
Signature
Assisted by (where applicable)
Please read the notes on the following page.
Form of proxy
286
ALV
IVA
HO
LDIN
GS
LIM
ITED
•
Inte
grat
ed a
nnua
l rep
ort 2
020
1. A shareholder may insert the names of a proxy or the names of two alternative proxies of the member’s choice in the space provided, with or without deleting “the Chairperson of the meeting”, but any such deletion must be initialled by the shareholder. The person whose name appears first on the proxy and which has not been deleted shall be entitled to act as proxy to the exclusion of those names following.
2. A shareholder is entitled to one vote in respect of each ordinary share held. A shareholder’s instructions to the proxy must be indicated by inserting the relevant number of votes exercisable by the shareholder in the appropriate box. Failure to comply with this will be deemed to authorise the proxy to vote or to abstain from voting at the AGM as he/she deems fit in respect of all the shareholder’s votes.
3. A vote given in terms of an instrument of proxy shall be valid in relation to the AGM notwithstanding the death, insanity or other legal disability of the person granting it, or the revocation of the proxy, or the transfer of the ordinary shares in respect of which the proxy is given, unless notice as to any of the aforementioned matters shall have been received by the transfer secretaries or by the Chairperson of the AGM before the commencement of the AGM.
4. If a shareholder does not indicate on this form that his/her proxy is to vote in favour of or against any resolution or to abstain from voting, or gives contradictory instructions, or should any further resolution(s) or any amendment(s) which may properly be put before the AGM, be proposed, the proxy shall be entitled to vote as he/she thinks fit.
5. The authority of a person signing a proxy in a representative capacity must be attached to the proxy unless that authority has already been recorded with the Company’s transfer secretaries or waived by the Chairperson of the AGM.
6. A minor or any other person under legal incapacity must be assisted by his/her parent or guardian as applicable, unless the relevant documents establishing capacity are produced or have been registered with the transfer secretaries.
7. Where there are joint holders of ordinary shares: any one holder may sign the form of proxy; the vote(s) of the senior shareholders (for that purpose seniority will be determined by the order in which the names of ordinary shareholders appear in the Company’s register) who tender a vote (whether in person or by proxy) will be accepted to the exclusion of the vote(s) of the other joint shareholder(s).
8. Proxies must be lodged at or posted or e-mailed to the Company’s transfer secretaries, Computershare Investor Services Proprietary Limited, First Floor, Rosebank Towers, 15 Biermann Avenue, Rosebank, 2196 (Private Bag x9000, Saxonwold, 2132) ([email protected]), to be received not later than 14:00 on Wednesday, 18 November 2020. Proxies which are not delivered timeously to the transfer secretaries, may be sent to the Chairperson of the AGM, care of the transfer secretaries at [email protected] at any time before the proxy exercises any rights of the shareholder at the AGM. However, to facilitate administration, it would be appreciated if proxies can be received by the transfer secretaries by 14:00 on Monday, 16 November 2020.
9. Any alteration or correction made to this form of proxy other than the deletion of alternatives must be initialled by the signatory/ies.
10. The completion and lodging of this proxy shall not preclude the relevant shareholder from attending the meeting and speaking and voting in person thereat to the exclusion of any proxy appointed in terms hereof.
11. The Chairperson of the meeting may reject or accept a proxy that is completed other than in accordance with these instructions, provided that he is satisfied as to the manner in which a shareholder wishes to vote.
Notes to the form of proxy
287
Ove
rvie
wG
over
nanc
eSu
stai
nabi
lity
Ann
ual fi
nanc
ial s
tate
men
tsSh
areh
olde
rs’ in
form
atio
n
Shareholders or their duly appointed proxy(ies) that wish to participate in the AGM via electronic communication (“Participant(s)”), must apply to Computershare, by delivering the duly completed form to:
Computershare Investor Services Proprietary Limited, First Floor, Rosebank Towers, First Floor, 15 Biermann Avenue, Rosebank, 2196, or posting it to Private Bag x9000, Saxonwold, 2132 (at the risk of the Participant), or by email to [email protected] so as to be received by Computershare by no later than 14:00 on Monday, 16 November 2020.
Important notice
The Company shall, by no later than Tuesday, 17 November 2020, notify Participants that have delivered valid notices in the form of this form, by e-mail of the relevant details through which Participants can participate electronically.
APPLICATION FORMFull name of Participant:
ID number:
Email address:
Cellphone number:
Telephone number: (code): (number):
Name of CSDP or broker (if shares are held in dematerialised format) (attach a copy of letter of representation):
I wish to participate electronically
I wish to participate and vote electronically
Signature:
Date:
Terms and conditions for participation in the AGM via electronic communication
1. The cost of electronic participation in the AGM is for the expense of the Participant and will be billed separately by the Participant’s own service provider.
2. The Participant acknowledges that the electronic communication services are provided by a third parties and indemnifies Alviva Holdings Limited against any loss, injury, damage, penalty or claim arising in any way from the use or possession of the electronic services, whether or not the problem is caused by any act or omission on the part of the Participant or anyone else. In particular, but not exclusively, the Participant acknowledges that he/she will have no claim against the Company, whether for consequential damages or otherwise, arising from the use of the electronic services or any defect in it or from total or partial failure of the electronic services and connections linking the Participant via the electronic services to the AGM.
3. The application to participate in the AGM electronically will only be deemed successful if this application form has been completed fully and
signed by the Participant.
Participant’s name:
Signature:
Date:
Participation in the AGM via electronic communicationAnnexure A
Incorporated in the Republic of South AfricaRegistration number: 1986/000334/06
Share Code: AVVISIN: ZAE000227484
(“Alviva”) or (“the Company”) or (“the Group”)
288
ALV
IVA
HO
LDIN
GS
LIM
ITED
•
Inte
grat
ed a
nnua
l rep
ort 2
020
289
Ove
rvie
wG
over
nanc
eSu
stai
nabi
lity
Ann
ual fi
nanc
ial s
tate
men
tsSh
areh
olde
rs’ in
form
atio
n
ATTENDING THE AGM ELECTRONICALLYThis year we will be conducting a virtual AGM, giving you the opportunity to attend the AGM and participate online, using your smartphone, tablet or computer.
If you choose to participate online you will be able to view a live webcast of the meeting, ask the Board questions and submit your votes in real time and you will need to either:
a) download the Lumi AGM app from the Apple App or Google Play Stores by searching for Lumi AGM; or
b) visit https://web.lumiagm.com on your smartphone, tablet or computer. You will need the latest versions of Chrome, Safari, Internet Explorer 11, Edge and Firefox. Please ensure your browser is compatible.
Meeting ID: 128-185-402
To login you must have your username and password which you can request from [email protected]
USING THE AGM ONLINE FACILITY
Online shareholders’ meeting guide 2020Annexure B
Incorporated in the Republic of South AfricaRegistration number: 1986/000334/06
Share Code: AVVISIN: ZAE000227484
(“Alviva”) or (“the Company”) or (“the Group”)
ACCESSOnce you have either downloaded the Lumi AGM app or entered web.lumiagm.com into your web browser, you’ll be prompted to enter the Meeting ID.
You will then be required to enter your:
a) username; and
b) password.
You will be able to log into the site from 13:00 on Wednesday, 18 November 2020.
To register as a shareholder, select “I have a login” and enter your username and password.
If you are a visitor, select “I am a guest”.
As a guest, you will be prompted to complete all the relevant fields including; title, first name, last name and email address.
Please note, visitors will not be able to ask questions or vote at the meeting.
NAVIGATIONWhen successfully authenticated, the info
screen will be displayed. You can view
Company information, ask questions and
watch the webcast.
If you would like to watch the webcast press
the broadcast icon at the bottom of
the screen.
If viewing on a computer, the webcast will appear at the side automatically once the meeting has started.
ONLINE SHAREHOLDERS’ MEETING GUIDE 2020
Meeting ID: xxx-xxx-xxxTo login you must have your Username and password which you can request from
Attending the AGM electronically
This year we will be conducting a virtual AGM, giving you the opportunity to attend the AGM and participate online, using your smartphone, tablet or computer.
If you choose to participate online you will be able to view a live webcast of the meeting, ask the board questions and submit your votes in real time and you will need to either:
a) Download the Lumi AGM app from the Apple App or Google Play Stores by searching for LumiAGM.
b) Visit https://web.lumiagm.com on your smartphone, tablet or computer. You will need the latestversions of Chrome, Safari, Internet Explorer 11, Edge and Firefox. Please ensure your browseris compatible.
Using the AGM online facility:
ACCESSOnce you have either downloaded the Lumi AGM app or entered web.lumiagm.com into your web browser, you’ll be prompted to enter the Meeting ID.
You will then be required to enter your:a) Username; andb) Password.
You will be able to log into the site from xx:xx, xxth xxxx 2020.
To register as a shareholder, select ‘Ihave a login’ and enter your username and password.
If you are a visitor, select ‘I am a guest’ As a guest, you will be prompted to complete all the relevant fields including; title, first name, last name and email address.
Please note, visitors will not be able to ask questions or vote at the meeting.
NAVIGATIONWhen successfully authenticated, the info screen will be displayed. Youcan view company information, ask questions and watch the webcast.
If you would like to watch thewebcast press the broadcast icon at the bottom of the screen.
If viewing on a computer the webcast will appear at the side automatically once the meeting has started.
i
290
ALV
IVA
HO
LDIN
GS
LIM
ITED
•
Inte
grat
ed a
nnua
l rep
ort 2
020
Annexure B (continued)
QUESTIONSAny shareholder or appointed proxy
attending the meeting is eligible to ask
questions. If you would like to ask a question,
select the messaging icon . Messages
can be submitted at any time during the
Q&A session up until the Chairperson closes the session.
Type your message within the chat box at the bottom of the messaging screen.
Once you are happy with your message click the send button.
Questions sent via the Lumi AGM online platform will be moderated before being sent to the Chairperson. This is to avoid repetition and remove any inappropriate language.
DOWNLOADSLinks are present on the info screen. When you click on a link, the selected document will open in your browser.
Data usage for streaming the annual shareholders’ meeting or downloading documents via the AGM platform varies depending on individual use, the specific device being used for streaming or download (Android, iPhone, etc.) and the network connection (3G, 4G).
VOTINGThe Chairperson will open voting on all resolutions at the start of the meeting. Once the voting has opened, the polling icon will appear on the navigation bar at the bottom of the screen. From here, the resolutions and voting choices will be displayed.
To vote, simply select your voting direction from the options shown on screen. A confirmation message will appear to show your vote has been received.
To change your vote, simply select another direction. If you wish to cancel your vote, please press Cancel.
Once the Chairperson has opened voting, voting can be performed at any time during the meeting until the Chairperson closes the voting on the resolutions. At that point your last choice will be submitted.
You will still be able to send messages and view the webcast while the poll is open.
For vote received
291
Ove
rvie
wG
over
nanc
eSu
stai
nabi
lity
Ann
ual fi
nanc
ial s
tate
men
tsSh
areh
olde
rs’ in
form
atio
n
ALVIVA HOLDINGS LIMITEDIncorporated in the Republic of South Africa Company Registration Number: 1986/000334/06 (“Alviva” or “the Company” or “the Group”)
Business address
The Summit 269,16th Road Randjespark Midrand 1685
Postal address
PO Box 483 Halfway House 1685
COMPANY SECRETARYMs SL Grobler CA (SA) PO Box 483 Halfway House 1685
E-mail: [email protected]
TRANSFER SECRETARIESComputershare Investor Services Proprietary Limited PO Box 61051 Marshalltown 2107
JSE LIMITEDShare Code: AVV ISIN: ZAE000227484
AUDITORSSNG Grant Thornton Incorporated Summit Place Office Park Building 4 221 Garsfontein Road Menlyn 0081
ATTORNEYSTugendhaft Wapnick Banchetti and Partners 20th Floor Sandton City Office Towers 5th Street Sandton 2196
BANKERSRand Merchant Bank (a division of FirstRand Bank Limited) 1 Merchant Place Corner Fredman Drive and Rivonia Road Sandton 2196
Nedbank Limited Corporate and Investment Banking Division 5th floor, F block Nedbank 135 Rivonia Campus 135 Rivonia Road Sandown Sandton 2196
SPONSORSDeloitte & Touche Sponsor Services Proprietary Limited Deloitte Place 5 Magwa Crescent Waterfall City Midrand 2090
GRAPHICULTURE
Corporate information
www.alvivaholdings.com
