Global Diversified Investment Holding Group · Global Diversified Investment Holding Group. About...

Mo

rvest Integrated rep

ort 2014

Integrated report 2014

Global DiversifiedInvestment Holding Group

About this report 1

Group at a glance 3

Global presence 4

Our operating model 5

Investment portfolio 6

Five-year review 7

Highlights 7

Leadership 8

Living our values 9

Chairman’s report 10

CEO’s review 12

CFO’s report 14

Directorate 18

Strategic context 20

Material issues and risks 21

Our stakeholders 22

Governance 24

Corporate governance 25

Risk report 31

Remuneration report 33

Our people 35

Human resources 36

Health, safety and wellness 43

Our social impact 45

Value-added statement 46

Social and Ethics Committee report 47

Transformation 48

Our environment 52

Independent assurance report 53

Annual fi nancial statements 55

Shareholder information 134

Analysis of shareholders 135

JSE statistics 136

Shareholders’ diary 136

Proposed change of name 137

Notice of annual general meeting 138

Form of proxy 147

G3.1 Content Index – GRI Application Level C 149

Defi nitions 155

Corporate information 156

Contents

Our name embodies our philosophy of “more”.Be more, do more and achieve more for our stakeholders.

Find related information in the report

Find related information on our website at www.morvest.co.za

Prosperity through exceptional people, products and services. Vision

Provide exceptional solutions to contribute to our customers’

success.

Successfully promote and enhance a performance-driven, innovative

culture, where staff are passionate, motivated and empowered to

maximise their full potential.

Create sustainable shareholder value.

Actively contribute towards social upliftment and environmental

sustainability.

Mission

Diversifi ed portfolio of

investments in key growth

sectors

Diversifi ed risk through

geographic and sectoral

spread

Successful track record

of investment in emerging

markets

Nine-year consistent revenue

and profi t growth

Strong cash fl ows

Expanding international

footprint

Subject specialists in niche

markets

Strong strategic leadership

Prudent fi nancial policies

Solid risk management

processes

Global customer and supplier

network

Partnerships with credible

global giants

Strategic enabler of

international brand penetration

into Africa

Personally invested

management

Blend of entrepreneurial spirit

and experienced business

resources

Agile and resilient

Investment case

Morvest integrated report 2014 1

About this report

Scope of this reportThis, our fourth integrated report, presents the fi nancial results

and the ESG performance of the group for the year 1 June 2013

to 31 May 2014, and follows our prior integrated report published

in October 2013. It is primarily targeted at current stakeholders

and potential investors in the group.

Morvest strives to communicate content that is useful and

relevant in an open and balanced manner. The report therefore

comprises an honest, measured account of the group’s

approach to sustainability that takes account of all resources

employed by the group in its business activities and all resources

and groups on which Morvest has an impact. This should enable

stakeholders to accurately evaluate Morvest’s ability to create

and sustain value over the short, medium and long-term.

The information disclosed encompasses all investment segments

as well as subsidiaries of the company, as illustrated in the

investment overview on page 6, across all regions of operation .

These same entities are included in the company’s consolidated

fi nancial statements as set out on pages 56 to 133 of this report

. There was no change to the boundary or any measurement

techniques, nor were there any restatements of previously

reported information. (For more information see the annual

fi nancial statements on pages 56 to 133 ).

Morvest’s scope of reporting on its sustainability initiatives

extends to the group holding company and its reportable

investment segments (including subsidiaries and associates),

namely Business and Industrial Services, Retail and Other

Investments and ICT Solutions as based in Africa. By excluding

the India, USA and UAE operations, there is no impact on the

completeness principle given that these offi ces and divisions do

not as yet contribute signifi cantly to group performance and were

not exposed to material risks during the year under review. The

supply chain and outsourced functions have not been assessed

for the purposes of this report. This may be considered in future

reports, as appropriate.

Corporate information

Registration number: 2003/012583/06

ISIN: ZAE000152567

JSE Main Board sector: Business Support Services

Share code: MOR

Listing date: 2004 on AltX, transferred to JSE

Main Board 20 June 2011

Shares in issue: 880 000 000 at 29 August 2014

Investment segments: – Business and Industrial Services;

– Retail and Other Investments; and

– ICT Solutions.

A copy of this integrated report is posted online at

www.morvest.co.za.

Company secretary: Noelene January

Email: [email protected]

Telephone: +27 11 231 1300

The group’s executive directors are Mohammed Varachia

(CEO), Suren Singh (CFO), Madoda Papiyana (HR director) and

Alex Evan (CLO). They can be contacted at the registered offi ce

of the company.

For additional contact details please see page 156. We welcome

your feedback and any suggestions you have for our reports in

future. Please forward any comments to the company secretary.

Applicable reporting requirements This integrated report is prepared in accordance with IFRS,

the Listings Requirements of the JSE and the Companies Act.

Morvest complies in all material respects with the principles

contained in the King III Report, as encapsulated in the

applicable regulations. Any King III principles which are not

applied are explained. The company’s compliance with all 75

principles of King III can be viewed on the company’s website.

Morvest is a black empowered global diversifi ed investment holding group listed

on the Main Board ot the JSE in the “Business Support Services” sector.

The group has recently shifted emphasis from an operating

to an investment holding company with decentralised

management. Investments are now grouped into and reported

on in three categories, according to the nature of business of

the underlying segments:

• Business and Industrial Services;

• Retail and Other Investments; and

• ICT Solutions.

Morvest’s geographic footprint spans Africa (including

South Africa, Mozambique and Nigeria) as well as India, the

UAE and the USA. The group has offi ces in all major South

African cities as well as Maputo, Mozambique and Lagos,

Nigeria. During the year Morvest established a presence

and acquired premises in Dubai, UAE.

Morvest integrated report 20142

Morvest has considered and applied many of the recommendations

contained in the International Integrated Reporting Framework

issued in December 2013 as well as those contained in the

Discussion Paper on the Framework for Integrated Annual

Reporting and the Integrated Annual Report issued by the

Integrated Annual Reporting Committee of South Africa. The

integrated report was further prepared based on principles and

guidance from the GRI and the relevant Sector Supplement

(collectively, the GRI G3.1 Guidelines), and is compiled based on

a self-declared Application Level C. The GRI index is on page 149.

Within this framework the principles of materiality, responsiveness

and inclusivity have defi ned content.

In compiling this report EXCO also attended a workshop facilitated

by an external consultant, at which group strategy, shareholder

engagement, material issues and other relevant matters were

interrogated and classifi ed.

The annual fi nancial statements have been prepared in accordance

with IFRS, the SAICA Financial Reporting Guides as issued by the

Accounting Practices Committee and the requirements of the

Companies Act.

AssuranceGrant Thornton has provided limited assurance in accordance

with ISAE 3000, over selected human resources, training and

corporate social spend key performance indicators as well as the

group’s self declaration of a C application level in accordance

with the GRI 3.1 Guidelines, as set out in this integrated report.

Based on the work Grant Thornton performed, nothing has

come to their attention that causes them to believe that the

selected indicators in the 2014 integrated report, as indicated

by, and the self-declared C application level, for the year ended

31 May 2014, has not been fairly stated. Their assurance

statement can be obtained from the company secretary or found

on page 57 of this report .

The combined assurance model of the group is set out below:

Business process Nature of assurance Status Assurance provider Disclosure

Annual financial statements Unqualified audit Assured Mazars (Gauteng) Inc. 56 – 133

B-BBEE BEE scorecard Assured BEESCORE 48

Sustainability information

Independent assessment –

“limited assurance” Assured Grant Thornton 53

Responsibility statement The Audit and Risk Committee acknowledges its responsibility on

behalf of the board to ensure the integrity of this integrated report.

The committee has applied its mind to the report and believes

that it appropriately and suffi ciently addresses all material issues,

and fairly presents the integrated performance of Morvest and

its subsidiaries and associates for the year within the scope and

boundary above. The Audit and Risk Committee recommended

this integrated report to the board for approval.

Forward-looking statementsThis integrated report contains forward-looking statements that,

unless otherwise indicated, refl ect the group’s expectations as

at year-end. Actual results may differ materially from the group’s

expectations. The group cannot guarantee that any forward-

looking statement will materialise and, accordingly, readers are

cautioned not to place undue reliance on any of these. The group

disclaims any intention and assumes no obligation to revise any

forward-looking statement even if new information becomes

available, other than as required by the JSE Listings Requirements

or any other applicable regulations.

Professor Ben Marx Mohammed Varachia Suren Singh

Audit and Risk CEO CFO

Committee Chairman

About this report continued

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Intergraph Security, Government & Infrastructure

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challenges.

≥ Group at a glance

Group at a glance

Midrand, Centurion, Nelspruit, Polokwane, Bloemfontein, Kimberly, Durban, Umhlanga Ridge, Port Elizabeth, Port St Francis, Mossel Bay, Cape Town

South African offi ces

South Africa Lagos, Nigeria Maputo, Mozambique India

UAE

USA

Ghana

Current footprint

Short-term expansion goal

Expansion during the year

CurCurCurrenrenrenttt ShoShoShort-rt-rt tertertermmm ExpExpExpansansansionionion dududurinrinringgg

Ghana

UAE India

USA

South Africa | Head offi ce: Midrand

Nigeria

Mozambique

Global presence

Morvest is a black empowered global diversifi ed

investment holding group with a strong emerging

markets presence and a proven track record of

nurturing successful and sustainable businesses.

25 regional and international offi ces

2 964 global headcount

4 Morvest integrated report 2014


Our operating model and how Morvest adds value at the centre

Our operating model

Our operations are decentralised ensuring that each business is appropriately run by entrepreneurial management with a wealth of

experience and comprehensive industry knowledge.

This is supported by a small, but strong and effi cient central team which provides strategic direction to drive ongoing growth in underlying

investee businesses.

Business and Industrial Services

ICT SolutionsRetail and Other Investments

successful track record in emerging markets;

sound BEE profi le;

credibility and scale;

balance sheet support;

leverage for client base and market diversifi cation;

geographic spread;

strong compliant governance and accountability;

ongoing investment in management team; and

compliance with IFRS in all investments.

Morvest offers individual investee businesses a number of sound strategic advantages including:


Group at a glance

Investment portfolio

46,4% * 53,6%

• Foster-Melliar

• Morvest Human Capital

Management

• Morvest Professional Services

• Morvest Mithratech

(South Africa/Mozambique)

• Premium Ideas

(South Africa/Nigeria)

• SAB and T Ubuntu

• Morvest Pinnacle Solutions

• Simmons SA*

• Omman*

• Morvest Travel

• Chanel Innovation

• Morvest Retail

• Morvest Information

Communication and

Technology

• ITQ Business Solutions

• iSolve Business Solutions

• Red Edge Solutions

• Intergraph Systems

(South Africa/Nigeria)

• Advocate Solutions

• SQLDB Technologies

• Advisory

• Consulting

• Governance

• Human capital management

• Training

• SIM packaging and fulfilment

• Secure print solutions

• Consumable supplies

• Project management of large

scale projects

• Retail

• Manufacturing

• Distribution

• Income generating property

• Travel

• eCommerce

• Resourcing

• Billing systems

• Software

• Education

• Claims administration system

• GIS

• Power Process Marine

• Office Automation

• Managed Services

• Vodacom

• MTN

• MCEL

• Department of Basic

Education

• SITA

• Simmons

• Lenovo

• Clics

• Asata

• Microsoft

• Oracle

• Acer

• Intergraph

• Lenovo

• ITEC

B2B B2C/B2B B2B

* Note: acquired post year-end.

Contribution to group

revenue

Investments

Key business focus

Partners

Markets

Business and Industrial Services

ICT SolutionsRetail

and Other Investments


Five-year review

Turnover (R’000)

HEPS (cents)

Headline earnings (R’000)

Return on total assets (cents)

‘10 ‘11 ‘12 ‘13 ‘140

200 000

400 000

600 000

800 000

1 000 000

1 200 000

693

830 868

576

807

300

956

164

1 10

0 75

7

‘10 ‘11 ‘12 ‘13 ‘140

3

6

9

12

15

5,03

6,81

6,02

8,20

10,2

3

0

5

10

15

20

25

30

‘10 ‘11 ‘12 ‘13 ‘14

14,6

8 17,4

421,2

6

17,4

5

27,5

0

‘10 ‘11 ‘12 ‘13 ‘14

27 3

51

35 9

56

32 3

34

40 0

32 46 5

76

0

10 000

20 000

30 000

40 000

50 000

EBITDA up 11,3% Revenue up 15,1% Headline earnings up 16,4% NTAV per share of 14,35 cents up 13,5% Gross dividend of 1 cent per share Disposed of non-core assets Number of employees up to 2 964

77% direct black ownership

52% direct management black ownership

Over R950 000 in CSI contributions

R5,3 million training spend on skills development and bursaries

Highlights

Post year-end milestones

Acquired Simmons SA

Acquired Omman, owners of Ushaka Mall, Stanger

Level 2 BEE status

Enterprise Engineering Software

Intergraph® PP&M is the world’s leading provider

of enterprise engineering software dedicated to

the process, power & marine industries.

≥ Leadership


Living our values

Our value How we live it

AccountabilityWe accept responsibility for our individual and team commitments. We are all held

accountable – not only for what we deliver but for how urgently we do so.

Effective

communication

We are committed to purposeful, open and pro-active communication. We

take responsibility to listen, speak and write clearly in order to inform and foster

collaboration.

IntegrityWe place fairness and honesty at the centre of all our policies, practices and

operations. We uphold the highest ethical standards, demonstrating honesty and

fairness in every action we take.

Excellence in

everything we do

We are dedicated to being the best in quality, satisfying customers’ needs and

honouring them.

InnovationWe are highly creative and strive to connect new ideas with business realities. Ideas

emanate from everywhere in the company including our customers and suppliers.

Passion and

commitment

We show pride, enthusiasm and dedication in everything we do. We are passionate

about our people, our products and services.

Sustainability We will always strive to strike the appropriate balance between our environmental

responsibilities, fi nancial performance and social commitments.

No baseline assessments or culture audits have been recently

conducted in order to provide a framework for measuring our

achievement of living our values. However, we try always to do

more than pay lip service to our values and certain of our core

values are measured in our annual Performance Management

and Key Results Areas exercise. Further, the recent introduction

of the Employee of the Month award highlights exceptional

performance where employees in our underlying investee

companies demonstrate our core values through their actions.

Our annual CEO Awards for underlying investee companies which

best demonstrate and live our core values also adds impetus to

the tracking process.


Leadership

Chairman’s report

The Morvest legacy is one of continued growth and evolution.

Over the past decade we have successfully evolved from a

B2B-focused operating group with a shared services platform

into a diversifi ed investment holding group with a decentralised

management structure. We have remained committed to leveraging

attractive growth opportunities in emerging markets as well as in

the USA, with a diversifi ed portfolio of investments offering steady

returns from varied and widespread sectors.

This activity has seen Morvest stamp an international footprint

on the globe and establish a track record of building successful

and sustainable businesses in these markets, often assisting

these businesses to achieve brand penetration in our unique and

challenging continent. We have delivered steady revenue and

profi t growth and maintained a strong cash position. Our solid risk

management processes and continually improving governance

have helped drive this result.

Our sights are now set on further growth in African markets

as well as the emerging markets of India and the UAE. We are

ideally positioned to capitalise on Africa’s considerable growth

momentum with a deep understanding of and experience in the

inherent risks and opportunities on the continent.

It is clear then that our objective to become a global diversifi ed

investment holding group is gaining traction.

This allows the Morvest executives to increase their focus on

strategic acquisitions and international expansion, and in doing

so galvanize our objective of African and international expansion.

The shift for long-term sustainabilityWe are confi dent that the incumbent strong management team in

each underlying investee company is ideally positioned to drive

growth and returns in their respective business.

All investments can rely on the group for sound strategic guidance,

balance sheet support and a strong governance framework as well

as both the advantages of critical mass and Morvest’s partnership

network of global industry giants and its global customer and

supplier networks.

Why Africa and other emerging markets?In 2014 Africa jumped from third least attractive investment

destination in 2011 to the second most attractive investment

destination in the world, behind only North America. Silicon

Valley venture capital funds have even coined their own term

for investment opportunities in Africa – Silicon Savannah. The

socio-economic landscape is changing rapidly and positively,

which is creating a platform conducive to signifi cant investment

opportunity. In the past decade Africa’s share of global FDI

projects has grown steadily in the consumer-facing industries,

particularly Technology, Media and Telecommunications (TMT),

Retail and Consumer Products (RCP) and fi nancial services.

African-headquartered companies maintain high levels of

confi dence in the continent. Intra-continental FDI reached an all-

time high of 22,8% of total FDI projects in 2013.

For the last three decades other emerging markets such as the

Middle East and India have, like Africa, offered a new growth

frontier for global corporations with a measured risk appetite

based on factors including low cost but increasingly skilled

labour, a hub of fast growing cities with rapid urbanisation, private

and public investment in infrastructure and the rise of a growing,

increasingly prosperous consumer class.

B-BBEE Morvest secured an improved BEE rating of Level 2 following

the BEE transaction approved during the year. Key management

and staff invested in the company, increasing black ownership to

77% of which black management holds 52%. The retention of a

Level 2 rating will strengthen Morvest’s competitive advantage in

both the private and public sectors as well as securing upcoming

contract renewals as well as allow for accelerated growth.

BVI acquired 290 million Morvest shares, which comprised

222 171 121 newly issued Morvest shares and 67 828 879 treasury

shares, both issued at 16 cents per share. The group facilitated

the transaction by providing funding assistance to BVI for 90% of

the total value of the shares. The remaining 10% of the total share

value was settled in cash by the key executives.

Dr Popo Molefe, Chairman

We have remained committed to

leveraging attractive growth opportunities

in emerging markets as well as in the

USA, with a diversifi ed portfolio of

investments offering steady returns from

varied and widespread sectors.


Our strategic focus for the medium to long-term is to maintain

and increase specifi cally black female shareholding.

OutlookThe next 12 to 18 months are expected to remain challenging.

A signifi cant focus for the year ahead will be implementing

the Simmons investment. Expansion further into Africa and

internationally, specifi cally emerging markets and further in the

USA, is a key strategic objective.

Thanks I would like to commend our CEO, Mohammed Varachia and

his management, for successfully steering the group through a

challenging shift in focus and a generally diffi cult market, while

achieving considerable strategic milestones which will help build

our long-term sustainability. Thank you to my fellow directors

for their support and guidance. I would also like to express

my appreciation for the support from our Morvest family of

employees and stakeholders as we continue to evolve as a

group. My appreciation also to our business partners for their

continued confi dence in and support of Morvest.

Dr Popo Molefe

Chairman

29 August 2014

African-headquartered companies

maintain high levels of confi dence in

the continent. Intra-continental FDI

reached an all-time high of 22,8% of

total FDI projects in 2013.


Leadership

Diversification

in industry and

geography

• Continued diversification • UAE offices and presence

established

• First investment in Dubai

• Morvest India established

• Simmons acquisition

• Omman acquisition

• Established Ghana presence

office

• Continue to identify investment

opportunities

Growing property

portfolio

investment

• Continued focus on

high-potential standalone

property investments – locally

and internationally

• Omman acquisition

• Head office construction

completed

• Acquisition of Dubai commercial

properties

• Continued focus on property

investment opportunities

Group

optimisation

• Focus on enhanced investor

engagement on strategy and

developments

• Continued pro-active approach

to reputation management

• Ongoing investor engagement • Ongoing investor engagement

Sustaining

B-BBEE platform

• Focus on being a truly

transformative company

• Achieve Level 2 BEE status

• Executive B-BBEE transaction

effectively concluded

• Regained Level 2 BEE status

• 52%+ black owned and managed

• Improving black female

shareholding

CEO’s review

FY2014 has been a hallmark year for the group, strewn with

strategic milestones. Our diversifi cation strategy has taken root

and yielded results not only in terms of regional footprint but also

market sector.

We established a presence in the UAE during the year, which

successfully expanded our emerging markets footprint. Post year-

end we also bolstered the Retail and Other Investments segment

with two signifi cant acquisitions that have partnered the group

with international bedding giant Simmons and seen Morvest

take ownership of Ushaka Mall in Stanger, KwaZulu-Natal.

Strategy scorecard

Objective FY2014 deliverable Progress FY14 Focus FY15

Further, despite challenging market conditions in South Africa

and Nigeria, we continued to deliver growth. All key performance

indicators – revenue, EBITDA and HEPS – improved year-on-

year, affi rming our growth strategy.

EXCO and the board set the group’s strategic direction and

targets. Morvest defi nes short-term as 12 months, medium-term

as two to three years, and long-term as fi ve years.

We target long-term investments in

market-leading businesses which replicate

our culture of entrepreneurship and are

differentiated in their sectors by a distinct

competitive advantage.

1

2

3

4

Mohammed Varachia, CEO


Investment strategy We target long-term investments in market-leading businesses

which replicate our culture of entrepreneurship and are

differentiated in their sectors by a distinct competitive advantage.

Our investments are clustered into three segments:

• Business and Industrial Services;

• Retail and Other Investments; and

• ICT Solutions.

Our investment criteria include:

• market leader;

• long-term sustainable business with a pipeline of at least

20 years;

• strong free cash flows;

• annuity-based income stream;

• profitability;

• premium brands;

• depth of management; and

• socially responsible investments.

Management strategyDuring the year we also achieved a level of maturity as a “diversified

investment holding group” with a shift in focus at group-level

from an operating to an investment holding company with

decentralised management. Our operations are now decentralised

empowering management to implement strategic input from the

group in a manner which aligns with their business, industry and

market environment. Empowered employees enhance and sustain

the entrepreneurial culture.

Reporting lines are defined, from subsidiary level, to an investment

head in each segment reporting to me, as CEO and in turn to

our board. This ensures that our investee companies’ approach

to their business and their corporate governance is in line with

group policies.

Financial overviewMorvest posted headline earnings of R46,6 million (2013:

R40,0 million) translating into HEPS of 10,23 cents (2013:

8,20 cents), up by 25%. EBITDA increased 11,3% (2013: 26,3%)

to R157,5 million (2013: R141,5 million).

Revenue was up by 15,1% to R1,1 billion, of which approximately

94% of this was generated in South Africa and the balance from

the rest of Africa. Investments in the Business and Industrial

Services category contributed 46,4% compared to 59% in the last

financial year, and the ICT Solutions category 53,6% compared

to 41% in FY2013.

Dividend declarationThe board has declared a final gross dividend of 1 cent per share

for the year on a par with last year.

Post year-end eventsSince year-end we have concluded two acquisitions, which will

fall under the Retail and Other Investments segment. These are

in line with our strategy of targeting investments in market-leading

companies with the potential to deliver attractive returns.

Specifically, and as previously announced, in June 2014 we

acquired the business of Simmons (South Africa) for R75 million.

Simmons is the South African partner of Simmons International,

a global leading manufacturer and distributor of bedding and

related products. Simmons International has a 140 year history

in manufacturing and selling high quality mattresses to premium

markets.

We also acquired 50,05% of Omman, a property rental business

whose sole property is Ushaka Mall in Stanger, Durban.

In addition we sold our stake in non-core investment R&S for

R141,7 million. Our portion of the sale, taking into account the

confirmed ‘agterskot’ payment would amount to R73 million.

Prospects The next 12 to 18 months are expected to remain tough, with

certain key contracts up for renewal in our underlying investee

companies. Opportunities in emerging economies offer a sound

alternative to offset the difficult local conditions.

Thanks I thank our Morvest family, employees and contractors for their

hard work in delivering a commendable performance in a tough

and challenging market. Thanks also to my fellow directors for

continuing to guide the group and to support me, to our customers

and partners and to our shareholders for their faith in our ability

to deliver.

Mohammed Varachia

CEO

29 August 2014


Leadership

CFO’s report

Morvest’s performance for the year was good despite challenging

conditions from local and African markets. However, the outlook

for the next 18 months will remain challenging with certain key

contracts up for renewal, with pricing pressure.

OverviewThis report is intended to provide additional insight into the

fi nancial performance of Morvest for the year under review. The

report needs to be read in conjunction with the consolidated

annual fi nancial statements presented on pages 56 to 133 and the

Chairman and the CEO’s report (pages 10 and 12 ).

Financial results Despite continuing challenging market conditions in South Africa

and Nigeria for the period under review, a good performance

was achieved from the domestic and African operations across

the group with organic growth resulting in turnover up by 15,1%

to R1,1 billion. The Business and Industrial Services segment

contributed 46,4% with the ICT Solutions segment accounting

for the balance. In the prior year the group established the Retail

and Other Investments segment. This segment does not meet

the requirements of IFRS8 for it to be reported separately and

has been included in the ICT Solutions segment. However, with

the acquisition of Simmons going forward this will be material

segment and will be reported separately. A total of 94% of the

revenue was generated locally and the balance from Africa, a

sector which is growing and presents good growth opportunity

going forward inspite of challenging conditions.

R’000

0

200 000

400 000

600 000

800 000

1 000 000

1 200 000

697

005

1 10

0 75

7

956

164

868

576

807

300

‘14‘13‘12‘11‘10

Revenue history

Subsequent to year-end and following shareholder approval

of the 2nd B-BBEE transaction in October 2013, the group was

able to secure an improved BEE rating of Level 2. A strategic

focus for the medium to long-term will be to maintain and increase

black female shareholding in order to maintain and renew some

of the group’s major contracts going forward. Revenue is likely

to remain under pressure due to continued pricing pressure and

tough market conditions expected to persist for the next 12 to

18 months.

Subsequent to year-end, the group has entered into the following

transactions:

• Morvest Retail (Pty) Ltd, a 50,01% owned subsidiary of Morvest,

has acquired Simmons (South Africa) and Omman Investments

(Ushaka Mall); and

• Morvest disposed of R&S Consulting (Pty) Ltd.

A good performance was achieved from

the domestic and African operations

across the group with organic growth

resulting in turnover up by 15,1% to

R1,1 billion.Suren Singh, CFO


Operating profi t before interest, impairments, taxation, depreciation and amortisationEBITDA margins achieved of 14,3% (2013:14,8%), amounting to

R157,5 million (2013: R141,5 million) resulted from pricing pressure

from certain of the key customer base as well as competition from

local and international markets. The group was able to post an

increase in EBITDA of 11,3% from the prior year due to careful

cost management. Morvest has achieved a compounded average

growth rate of 14,5% over the past fi ve years.

R’000

0

20 000

40 000

60 000

80 000

100 000

120 000

140 000

160 000

180 000

77 3

19

157

525

141

520

112

082

104

782

‘14‘13‘12‘11‘10

EBITDA history

Headline earnings and HEPSHeadline earnings growth of 16,4% amounted to R46,6 million

(2013: R40,0 million) translating into a 24,8% increase in HEPS

to 10,23 cents (2013: 8,20 cents). Based on the actual number of

shares in issue of 880 million, the earnings per share is 4,04 cents

and HEPS is 5,29 cents.

R’000

0

5 000

10 000

15 000

20 000

25 000

30 000

35 000

40 000

45 000

50 000

27 3

51

46 5

76

40 0

32

35 5

97

32 3

34

‘14‘13‘12‘11‘10

Headline earnings

Net tangible asset value per shareThe net tangible asset value per share increased 13,5% to

14,53 cents (2013:12,80 cents). This was primarily as a result of

capital and reserves increasing by 14,0%.

Goodwill and impairment, amortisation and depreciationThe goodwill impairment review for the year was performed

by management in terms of IAS 36. The implied fair value of

goodwill was less than the carrying value of the affected cash

generating unit, resulting in the impairment for the current

year of R12,3 million (2013: R33,5 million) from the Business

and Industrial Services segment of the group. The valuation

outlook has become more conservative resulting in the write

down of the goodwill. However, the underlying assets have

EBITDA up 11,3%

Revenue up 15,1%

Headline earnings up 16,4%

NTAV per share up 13,5%

Net tangible asset value per share 14,53 cents


Leadership

CFO’s report continued

not changed with the exception of the sale of R&S Consulting

subsequent to year-end (carrying value of goodwill sold was

R32,5 million).

The statement of comprehensive income was charged with a

depreciation expense of R16,3 million (2013: R14,6 million).

This is largely driven by capital expenditure to maintain current

operations. During the year, the group fi nalised construction of

the new Midrand offi ce building and the total cost incurred to

complete the construction was R93,4 million (2013: R84,9 million).

A mortgage bond of R50,0 million has been covered by Investec

Bank Limited for the Midrand offi ce building repayable over the

next fi ve years.

Interest and other fi nancial income and fi nance costsGroup treasury received investment income of R2,2 million (2013:

R3,1 million), comprising interest from banks, and incurred a

fi nance cost excluding vendor fi nance cost of R11,9 million

(2013: R9,4 million) mainly in respect of existing and additional

debt raised with Investec, Standard Bank and Nedbank to service

the construction of the Midrand offi ce campus and investment in

newer technology.

Financial structure and fundingThe annual fi nancial statements fully represent all the group’s debt

obligations of R150,1 million (2013: R135,6 million). This includes

the balance of vendor obligation for the R&S Consulting (Pty) Ltd

transaction of R6,8 million, and the iSolve and SQLDB (Pty) Ltd

transaction of R7,6 million which is due and payable based on

achievement of the profi t warranty.

Morvest’s net debt position at balance sheet date was

R13,3 million (2013: R52,5 million). The group will incur a further

R27,5 million of interest-bearing debt post balance sheet for the

Simmons and Ushaka Mall transactions.

The group’s strategy is to maintain the debt to equity ratio of 60%,

in order to secure access to fi nance at a reasonable cost. The

debt to equity ratio for the year under review is 57% (2013: 59%).

TaxationThe taxation paid for the year amounted to R27,8 million (2013:

R33,2 million). The tax charge to the income statement amounted

to R40,6 million which includes capital gains tax of R2,8 million

for the sale of Mint Management Technologies at balance sheet

date (2013: R29,6 million) and translates to an effective tax rate

for the year of 36,01%, normalised 30,6% after adjusting for non-

deductible expenses which is mainly due to temporary differences

arising from impairment of the goodwill of R12,3 million.

Cash fl owThe group’s cash on hand at year-end was R135,6 million (2013:

R83,1 million) after settling R11,2 million of vendor obligations

for R&S Consulting and ISolve & SQLDB (2013: R10,0 million)

and funding R19,0 million of property plant and equipment with

internal cash (2013: R82,6 million).

Net cash from operating activities amounted to R85,1 million

(2013: R99,3 million). There is a continuous focus on improving

the working capital cycle and managing any potential credit risk,

liquidity risk and market risk on an ongoing basis. Goods/services

are on average rendered at 60 days and the impairment for trade

receivable is calculated on a specifi c basis.

During the year Morvest’s net investing activities movement of

R22,5 million (2013: R56,5 million) was mainly driven from net

PPE of R19,1 million (proceed on disposal of property, plant and

equipment of R1,2 million), the acquisition of investment properties

for R2,3 million and loss on disposal of Mint Management

Technologies of R2,5 million.

The net cash (used in)/generated by fi nancing activities movement

of R10,0 million (2013: R63,5 million) resulted from the group’s

repurchase of shares for R2,1 million (2013: R8,9 million), net

increase in fi nancial liabilities of R22,4 million (2013: R18,9 million

net decrease), settlement of vendor liabilities of R11,2 million

(2013: R10,0 million) and payment of a dividend of R4,6 million

(2013: R5,1 million), R14,7 million (2013: R20,5 million) in dividend

to non-controlling shareholders.

Dividend On 29 August 2014 the board approved and resolved to declare

and pay a gross dividend for the group of one cent per share

in respect of the year ended 31 May 2014. This represents a

dividend yield of 5%. The board foresees this dividend as being

sustainable and it is the intention to grow this on a year-on-year

basis giving due consideration to the working capital, share

buy back and acquisition requirement of the group. The total

dividend payable will equate to R8,8 million based on 880 million

shares in issue and includes the BEE shares of 425 million.

ConclusionLooking ahead Morvest foresees a challenging 12 to 18 months due

to diffi cult market conditions and continued pricing pressure from

the local and international markets. These times call for running a

lean and mean group and operational structure, focusing on cash

fl ow generation, strict working capital management, accelerating

the paying down of debt as well as a continuation of maximising

internal cost effi ciencies through decentralised shared services

centre such as fi nance, human resources, procurement, and IT


on a geographical basis. The expansion and global diversification

further into Africa and internationally is a key strategic objective.

We will continue to focus on the share repurchase programme

over the next year as well as enhancing and sustaining the black

female equity ownership.

We thank all the financial heads and administrative staff across

the group for their sterling and commendable efforts in the last

year and, in particular, for all their hard work in assisting with

the delivery of the subsidiaries’ financial results well before the

due dates and for the board and the group company secretary

for their contribution in producing such an excellent quality

integrated report.

Suren Singh

CFO

29 August 2014

Looking ahead Morvest foresees a

challenging 12 to 18 months due to

difficult market conditions and

continued pricing pressure.


Leadership

Directorate

Dr Popo Simon Molefe (62) Chairman

Appointed: 16 July 2004

Dr Molefe has made the successful transition from a high-profi le

senior career in politics into commerce. He previously served

two terms as Premier of the North West province. For the past

11 years he has facilitated the development of businesses in the

North West province and founded Lereko Investment Holdings.

Dr Molefe has served as Chairman of Armscor and PetroSA,

and chancellor of North West University. He is Non-Executive

Chairman of Protea Technologies, a principal of Lereko Metier

Capital Growth Fund and Executive Chairman of Lereko

Investment Holdings.

Ahmed Mohammadali-Haji (33)

CA(SA), RA(SA)

Appointed: 15 June 2011

Ahmed is the Subject Head: Financial Accounting and senior

lecturer in advanced fi nancial accounting at the University

of Johannesburg. He holds a number of professional and

directorate positions on professional boards. Ahmed is

also a regular presenter of various Continuing Professional

Development Programmes.

Prof Benjamin Marx (49)

CA(SA) Appointed:

8 February 2011

Prof Marx holds a number of national and international

memberships which include the Independent Regulatory Board

for Auditors (“IRBA”) and the Association of Black Chartered

Accountants of South Africa (“ABASA”). He holds positions on

various listed and non-listed boards. He is a founding member of

the Corporate Governance Research Group, which researches

and consults on corporate governance in South Africa. Prof

Marx is also an accomplished author on areas such as auditing,

corporate governance and audit committees. He currently

serves as Chairman of the group’s Audit and Risk Committee.

Ntombizodwa Yvonne Mhinga (50)

Local Government Management and Administration, Adult Education,

Business Management (University of South Africa)

Appointed: 30 November 2006

Dubbed the “Princess of Africa” for her musical talent, Yvonne

has also successfully transitioned into commerce. She has

specifi c expertise in BEE initiatives. Yvonne further acts as

a brand ambassador for several global concerns and large

corporates as well as being a UNICEF goodwill ambassador.

She is the fi rst black African female to have won the Crystal

Award at the World Economic Forum, 2012.

Independent non-executive directors

Ahmed Mohammadali-Haji Ntombizodwa Yvonne Mhinga

Dr Popo Simon Molefe Prof Benjamin Marx


Executive directors

Mohammed Varachia (45) CEO

BCompt (Honours), CA(SA)

Appointed: 15 December 2005

Mohammed has over 24 years’ experience in senior leadership

positions in the banking, fi nancial and telecommunications

sectors, among others. This includes experience in corporate

advisory for large multi-nationals. In addition to co-founding

Motoma ICT Solutions group and MICT, Mohammed also

established a number of other companies primarily in the ICT

Solutions sector. He joined Morvest as CEO in 2005 following

the acquisition by the group of MICT.

Alex Evan (49) CLO

BA LLB

Appointed: 15 June 2011

Alex has in-depth practical experience in commercial

telecommunications regulation and legislation. He joined the

group in December 2005 to advise on commercial, regulatory

and legal matters and heads group Legal, Compliance and Risk

Management and general counsel.

Surendranath (Suren) Singh (55) CFO

MBA, MITM, CIS, ABP


Suren has over 26 years’ experience in leadership positions at

several large companies, within the FMCG, ICT Solutions and

fi nancial services sectors. Suren has held the positions of group

Financial Manager, group fi nancial director and group executive

director: Investments and Business Development. He joined

Morvest in 2005 as CFO following the acquisition by the group

of MICT.

Madoda Papiyana (40) HR director

NDHM, BTech, BSP (Cambridge)


Madoda has 18 years’ experience in the fi eld of human resources

and industrial relations. He previously held positions of group

HR Manager and General Manager of Resourcing and Labour

Broking. Madoda joined Morvest in 2005 as group HR director

following the acquisition by the group of MICT.

Alex Evan, CLO Madoda Papiyana

Mohammed Varachia, CEO Suren Singh, CFO

Simmons is an established premium bedding

manufacturer and supplier in the South African retail

and hospitality markets. Simmons was the inventor

of the Pocket Coil system and with over 148 patents,

Simmons has always been at the forefront of mattress

and sleep technology – confi rming our commitment

to “Better Sleep Through Innovation”.

≥ Strategic context

www.simmons.co.za


Material issues and risk

In formulating our growth strategy we consider the full range of issues that infl uence the sustainability of our business. Our most material

issues are so determined through an annual comprehensive materiality assessment process, as follows:

1. The Audit and Risk Committee (which consists wholly of independent directors) and internal audit function, which reviews the group’s

risk matrix, discusses and analyses materiality with respect to the group. Key risks and opportunities are identifi ed.

2. The Social and Ethics Committee’s assessment of the impact of Morvest’s activities is then taken into account, as is feedback from

stakeholders.

3. EXCO collates and reviews this information to determine material issues for the group. During the year EXCO further attended a

workshop facilitated by external consultant – Envisage Investor Relations – to further refi ne and inform our materiality assessment.

As a consequence of this process, material issues were identifi ed and are cross-referenced below to the relevant key risks and strategic

objectives.

Material issue Related key risk Potential impact on Morvest

Addressed

by strategic

objective*

Macro

environment

Pricing pressure in parts of the Business and

Industrial Services segment slowing

investment performance

• Decreasing profitability, revenue and

sustainability of the business

• Competition

• B2B market saturation

• Increased international competition

• Global trend in major corporations to central

procurement model

• Diminished revenue

• Margin pressure

Human resources Depth of management and succession

planning in underlying investee companies

and at group

• Certain investee industries are dynamic e.g.

ICT Solutions with low retention levels

• National skills shortage

• Inability to achieve strategic objectives

• Sustainability

• Opportunity cost

• Client relationship management

Transformation Loss of key contracts in underlying investee

companies due to reduced B-BBEE

compliance at group level

• Threat to sustainability

• Loss of revenue

• Inability to maintain and increase profitability

• Inability to retain contracts

• Sustainability

Income, growth

and returns

Customer sector and geographic

concentration

• Inability to sustain and maintain value

(dependent on retention of major contracts)

• Requirement for dramatic cost-cutting

initiatives to meet customers’ pricing

demands

• Loss of major customers could drastically

impact the “going concern” of certain group

businesses

Reputation

management

Investor lack of understanding of the group’s

focus

• Impact on credibility

• Reduced capital investment and returns for

shareholders (based on share price)

• Impact on diversification and investment

strategy

Capital adequacy Inability to raise sufficient capital to progress

the diversification and investment strategy

• Impact on revenue

* See page 12 for further detail on strategic objectives

1 2

3

3

1 2

3 4

1 2

3 4

1 4

3 4

4


Strategic context

Our stakeholders

Building relations and partnerships with our stakeholders is

critical to managing the risks and capitalising on opportunities

within our activities. Key stakeholders are considered to be

groups who have an impact on Morvest’s business strategy

and are materially impacted by our business activities.

We identify these stakeholders in terms of a Stakeholder

Management Policy.

The Morvest board engages in the process anew every year

as stakeholder interests are dynamic and require ongoing

assessment. During the year EXCO once again held a workshop

facilitated by an external consultant at which the board’s review

of stakeholder groups was reassessed and the methods of

engagement were discussed and debated.

Stakeholder group What matters to them Nature of engagement Responsibility

Shareholders/investors • Sustainability

• Profitability

• ROI (share price and

dividends)

• Cash generation

• Corporate governance and

compliance

• Risk management

• Growth prospects

• Company announcements

released on SENS and

posted on the group website

• Financial results

announcements posted to

shareholders

• CEO and CFO engage with

financial media where

appropriate

• Ongoing communication with

institutional shareholders and

investment analysts

• CEO

• CFO

• Company secretary

Lenders/providers of capital

(global and local)

• Profitability

• Capital management

• Covenant performance

• Cash generation

• Risk management

• Growth prospects

• Scale

• Contractually required

information flow

• Regular ad hoc meetings

• CEO

• CFO

• CLO

Employees • Job security

• Sustainability

• Personal growth and

development

• Skills development

• Remuneration and incentives

• Bi-annual performance

management process,

formal development plan

and training

• HR policies and incentive

schemes

• Regular site visits

• Regular internal

communication and

interaction

• Workplace forums

• Employee wellbeing

programme

• HR director

• HR managers at subsidiaries

National government, provincial

government and municipalities

• Quality assurance

compliance

• Skills development

• Job creation

• Revenue through corporate

taxation

• B-BBEE

• PPPFA compliance

• Active member and

involvement in Progressive

Business Forum

• Ongoing discussions with

key policy-makers

• EXCO

• Board


Stakeholder group What matters to them Nature of engagement Responsibility

Business partners – underlying

investee companies

• Key strategy

• Relationships suppliers

• Customers

• Reporting • Group executives

• Managing executives

Key strategic • Price

• Project delivery

• Quality

• Regular 1:1 contact • Group executives

• Managing executives

Associations and professional memberships • Morvest is a member of the Progressive Business Forum (“PBF”), the Institute of People Management (“IPM”), and the Institute of

Directors SA (“IoDSA”)

• All group directors and the company secretary are members of IoDSA

• Premium Ideas is a member of the Printing, Industry Federation of South Africa (“PIFSA”)

• Morvest Human Capital Management is a member of the Association of Personnel Service Organisation (“APSO”)

• Morvest Pinnacle Solutions is a member of the Road Freight Employees Association

Foster-Melliar is a Level 1 BEE training provider. The

company boasts a unique training methodology and

provides pre-and post-training services. Courses

offered include Kepner-Tregoe®, TOGAF®, ITIL®

Foundation, Cloud Essentials and HDI.

≥ Governance

KEPNER-TREGOE®

SECURITY

ISO PRINCE2®

HDI

ITIL®

TIPA®

CLOUD

TOGAF®

COBIT®


Corporate governance

Governance structure

Remuneration

Committee

Group executives

Investment heads

Business and Industrial Services,

Retail and Other Investments

and ICT Solutions

Morvest board

Independent non-executive directorsExecutive directors

HR DirectorCLOCFOAudit and Risk

CommitteeCEO

Social and Ethics

Committee

Subsidiary boards


Governance

Corporate governance continued

As a group, Morvest is committed to upholding the highest standards of ethics, transparency and good governance while pursuing wealth and value creation. The board is committed to ongoing review and refi nement of its governance principles and practices in terms of relevant local and international best practice. ( 2.1)

The board ensures sound corporate governance across the group by communicating to subsidiary and investee boards ( 2.24) at board and business review meetings, the overarching objective of sustainability including the integrated policies on corporate governance and ethics which result in responsible corporate citizenship. These policies are driven by Morvest head offi ce.

Stakeholder perceptions and the management and maintenance of the group’s reputation is always considered when the board deliberates. ( 2.11) All board members are required to review and comment on the integrated report before it is distributed. This is to ensure that all relevant matters are reported on in a fair and transparent manner. ( 2.12)

Application of King III The company complies in all material respects with the application of King III. The full King III application is available on the website (www.morvest.co.za ). Compliance with the principles in Chapter 2 is indicated in the margins throughout this report.

Ethical leadershipThe board is of the view that all business behaviour should be measured by standards comparable to those applied to any individual in terms of ethical conduct. ( 2.3) The directors are committed to leading by example and in this regard and subscribe to the King III RAFT principles of responsibility, accountability, fairness and transparency. ( 2.5) Directors are obliged through their directors’ appointment agreements, the group’s Code of Ethics and Code of Conduct and professional fi duciary ethics to act in the best interests of the company.

The Morvest Code of Ethics is intended specifi cally to raise ethical awareness throughout the group and to act as a guide in day-to-day decision-making. ( 2.14) It contains aspirational ethical guidelines for everyday events that occur throughout the group and should be read in conjunction with the Morvest Code of Conduct. Specifi c topics covered in the Code of Ethics include confl icts of interest, bribes, corruption, sensitive information, inside information and trading, reporting, business intelligence and employment equity. It is reviewed annually by the Social and Ethics Committee.

In line with King III a formal Whistleblowing Policy underwrites the group culture of transparency and openness. Any employee can report alleged contraventions of the Code of Ethics through the confi dential email: [email protected]. The Morvest Whistleblowing Policy is available on the intranet.

The Code of Conduct applies to executive and prescribed offi cers, as defi ned. It is also reviewed annually by the Social and Ethics Committee.

All executive and non-executive directors and prescribed offi cers are expected to report non-compliance allegations with the Code of Conduct directly to the Chairman of the Audit and Risk Committee. Matters are investigated in an appropriate manner, and disciplinary action is taken where warranted.

There were no reported incidences of non-compliance with either the Code of Ethics or Code of Conduct during the year under review.

The boardThe Morvest board performs its governance responsibilities within a framework of policies and controls that ensure the effective assessment and management of Morvest’s ESG performance. ( 2.2) ( 2.4)

The board’s authority and responsibilities are clearly outlined in a Board Charter, which is reviewed on an annual basis. It regulates the parameters within which the board operates and further sets out the roles and responsibilities of the board and its directors in line with sustainability practices. (Morvest’s Board Charter is available on www.morvest.co.za .)

The unitary board comprises eight directors, including four executive and four independent non-executive members. ( 2.18) Chairman Dr PS Molefe is an independent non-executive director. The responsibilities of the Chairman and the CEO, and the remaining independent non-executive and executive directors, are structured in a way that allows for

Principle 2.1 The board acts as the focal point for and custodian of corporate governance.

Principle 2.24 A governance framework has been agreed upon between the group and its subsidiary boards.

Principle 2.11 The board appreciates that stakeholders’ perceptions affect the company’s reputation.

Principle 2.12 The board ensures the integrity of the company’s integrated report.

Principle 2.3 The board provides for effective leadership based on ethical foundation.

Principle 2.5 The board ensures that the company’s ethics are managed effectively.

Principle 2.14 The board and its directors act in the best interests of the company.

Principle 2.2 The board appreciates that the strategy, risk, performance and sustainability are inseparable.

Principle 2.4 The board ensures that the company is and is seen as a responsible corporate citizen.

Principle 2.18 The board comprises a balance of power, with a majority of non-executive directors.


unencumbered decision-making. The Chairman provides independent board leadership and guidance that allows for deliberation on all matters where necessary and ensures that the board operates effi ciently and in unity. ( 2.16) The CEO and other executive directors are accountable for strategy implementation and operational decisions. The CEO reports to the board on behalf of management and also takes ultimate responsibility for the company on behalf of management. ( 2.17)

Independent non-executive directors are not involved in the daily operations of the company and comprise a group of objective, high-standing, knowledgeable and skilled individuals who play an active role in the board’s decision-making process. Within this context the board is cognisant that Dr PS Molefe’s length of service has exceeded nine years (the recommended cap for independence in terms of King III). Dr Molefe’s judgement has been assessed by the board and was not considered to be affected or impaired by the length of service and he therefore remains on as board Chairman. The board will continue to assess compliance with King III requirements on an ongoing basis.

At any time all independent non-executive directors have unrestricted access to management and to the group’s external auditors. Further, all directors are entitled to seek independent professional advice on any matters pertaining to the group as they decide is necessary, and at the group’s expense.

Succession planning is a material issue for the group and therefore an ongoing agenda item at board level. Morvest continually seeks to identify suitable candidates from within the group to train and mentor for succession to senior management and the board. To this end the group offers mentorship and coaching programmes (in-house at the Morvest Academy and externally) as well as short courses in conjunction with the Wits Business School.

The company secretary conducts an annual evaluation of the board’s performance, mix of skills and the individual contributions of directors, its achievements in terms of corporate governance and the effectiveness of its sub-committees. Directors also perform self-assessments during the year. ( 2.22) The Remuneration Committee is responsible for the evaluation of the CEO and other executive directors in terms of the annual remuneration assessment, while executive directors evaluates the performance of the independent non-executive directors. All the assessments and recommendations are fed back to the company secretary for inclusion in a formal report to the board.

The appointments of new directors are confi rmed at the annual general meeting following their appointment. In the absence of a separate committee, the board as a whole is responsible for the appointment of new directors and all board members are therefore consulted on, and contribute opinion to, new appointments. The process is therefore conducted in a formal and transparent manner. ( 2.19) In terms of appointments, the board takes into account skills and experience, calibre, ability to contribute meaningfully and concerns such as diversity.

A formal internal induction programme for any new directors is conducted by the company secretary, CFO and HR director. ( 2.20) This includes site visits, introductions to key management and access to copies of interim and annual fi nancial statements, as well as minutes of the last board meeting where available and the upcoming board meeting agenda. The programme is comprehensive, covering all relevant aspects of company law, securities exchange regulations, the roles, responsibilities and liabilities of directors, basic techniques of fi nancial analysis and the importance of investor and media relations.

The board meets quarterly with ad hoc special meetings convened as necessary. Details of directors’ attendance at board and board committee meetings during the year are set out on page 28 .

In terms of the MoI, one-third of the directors retire at each annual general meeting. Retiring directors may make themselves available for re-election provided that they remain eligible as required by the MoI and the JSE Listings Requirements. Accordingly, Yvonne Mhinga, Ben Marx and Mohammadali-Haji will retire by rotation and being eligible and making themselves available for re-election, may be re-elected at the upcoming annual general meeting.

The Audit and Risk, Social and Ethics and Remuneration Committees assist the board in discharging its duties within their own regulated frameworks of written authority. ( 2.6) ( 2.23)The directors acknowledge that notwithstanding this delegation, ultimate accountability and responsibility for the performance and affairs of the company and the group remain with the board.

Principle 2.16 The board has elected a Chairman of the board who is an independent non-executive director. The CEO of the company does not also fulfi l the role of Chairman of the board.

Principle 2.17 The board has appointed the CEO and has established a framework for the delegation of authority.

Principle 2.22 The evaluation of the board, its committees and individual directors is performed every year.

Principle 2.19 Directors are appointed through a formal process.

Principle 2.20 The induction of and ongoing training, as well as the development of directors are conducted through a formal process.

Principle 2.6 The board ensures that the company has an effective and independent audit committee.

Principle 2.23 The board delegates certain functions to well-structured committees without abdicating from its own responsibilities.


Governance


The board Committees

Audit and Risk and Committee(for the full report see page 58 )

Remuneration Committee(for the full report see page 33 )

MS Varachia (Chairman) 22/22

M Papiyana (HR director) 22/22

S Singh (CFO) 22/22

A Evan (CLO) 21/22

N January (company secretary) 21/22

F Varachia 21/22

M Cajee 20/22

EXCO

Prof B Marx (Chairman) 4/4

A Mohammadali-Haji 4/4

NY Mhinga 4/4

Number of independent non-executive directors 3/3

NY Mhinga (Chairman) 2/2

Prof B Marx 2/2


Dr PS Molefe 1/2


MS Varachia (Chairman) 1/1

NY Mhinga 1/1


A Evan (CLO) 1/1


Social and Ethics Committee(for the full report see page 47 )

The board retains full and effective control over the group

and monitors the executive management and decisions in

the subsidiary companies. The board’s responsibilities

include:

• Assessing and approving strategic plans;

• Monitoring of operational performance and

management; and

• Determining policy and processes to ensure the integrity

of the group’s risk management and internal controls.

(The responsibilities of the board are set out in full in its

Charter).

Executive directors

MS Varachia (CEO) 6/6

S Singh (CFO) 6/6


A Evan (CLO) 6/6

Independent non-executive directors

Dr PS Molefe (Chairperson) 6/6

Prof B Marx 6/6


NY Mhinga 4/6


The board formally evaluates the independence of the

non-executive directors annually having due regard to the

relevant factors which might impair independence. In the

year all non-executive directors were considered to be

independent.

Responsibility

Members and meeting attendanceMembers and meeting attendance


The committee is responsible for:• operational activities of the group;• developing strategy and policy proposals for consideration by the board;• implementing the board’s directives; • providing leadership to senior management and employees;• developing the annual budget and business plans for approval by the board;• developing, implementing and monitoring internal controls, risk management,

ethics and authority level; and• assisting with the implementation of corporate governance compliance at

group and divisional/subsidiary levels (supported by the internal audit function and group Risk Manager (the CLO)).

A mandatory committee in terms of the Companies Act, it is responsible for: • reviewing the interim and integrated

report and annual fi nancial statements;• the internal control framework and

procedures;• confi rming and reviewing the internal

audit as well as internal, fi nancial and operational controls;

• reviewing risk management, standards of grievance, reporting and compliance

and the integrity of the integrated report;

• monitoring the outsourced internal audit and IT governance functions; and

• approving the appointment of the auditors for non-audit services See the full Audit and Risk Committee report on page 58 .

• assessing the appropriateness of the expertise and experience of the fi nancial director

Self-evaluation completed

All committee members review their

performance annually. For each

committee the last annual appraisal was

in 2014, where no material matters arose.

The committee makes recommendations to the board on executive remuneration

packages and policies, as well as the Remuneration Policy for the group as a

whole. See the full Remuneration report on pages 33 and 34 .

Self-evaluation completed





The committee is tasked with overseeing the good corporate citizenship of

the group on behalf of the board.Self-evaluation completed





Responsibilities

Self-evaluation completedAll committee members review their performance annually. For each committee the last annual appraisal was



Governance


Company secretaryThe Morvest company secretary is Noelene January who joined the group on 1 May

2006. She has over 12 years’ experience in the company secretarial and corporate

governance arenas and is a member of the IoDSA. ( 2.21)

All directors have access to the company secretary, who provides guidance to the

board as a whole and to individual directors with regard to their responsibilities. Other

duties of the company secretary include:

• overseeing the induction of new directors and ongoing training of directors;

• assisting the Chairman and CEO in setting the annual board plan and board agendas;

• formulating governance and board-related issues; and

• arranging specifi c training or seminars for directors and senior management.

The company secretary is not a director of the company. An annual evaluation is

conducted to ensure that she maintains an arm’s length relationship with the board at

all times and is suffi ciently qualifi ed and skilled to act in accordance with, and update

directors in terms of, the King III Report and other relevant compliance with local and

international regulations and legislation.

Share dealings and confl icts of interestDirectors are required to declare their shareholdings, additional directorships,

potential confl icts of interest and any dealings in securities of the company to the

CEO and the company secretary. Should a confl ict of interest arise in respect of

a transaction involving a director, that director must recuse themselves from

deliberations in respect of that transaction. Complete recusal from the boardroom is

at the discretion of the Chairman.

All directors, management and prescribed offi cers with access to fi nancial information

and any other price sensitive information are prohibited from dealing in the securities

of the company during “closed periods” as defi ned by the JSE. This is governed by the

company’s Share Dealing Policy, which is reviewed on an annual basis by the board

and contains “clearance to deal” provisions. Appropriate alerts are sent to directors

and affected staff indicating when the company is entering a closed period.

IT governance( 2.8) The Audit and Risk Committee implements an IT Governance Charter which is

integrated into the group’s systems by the group IT manager. He heads an IT steering

committee, which, reviews the groups IT needs in terms of software and infrastructure

as well as business continuity plans.

An external IT consultant oversees the implementation of the IT strategy on a

continuous basis. Networks are continuously monitored and adapted to minimise risk.

Legal compliance ( 2.9) The company secretary and CLO, together with key management, compile

an annual checklist to monitor the group’s compliance with the JSE Listings

Requirements, the Companies Act and other applicable legislation. Subsidiaries report

all compliance issues to the company secretary who together with the CLO reports to

the board in this regard.

No fi nes or non-monetary sanctions were imposed on the group for non-compliance

with any laws or regulations during the year under review including concerning the

provision and use of products and services, nor has the group been party to any

legal actions for anti-competitive behaviour or anti-trust and monopoly practices

during the year.

Principle 2.21 The board should be assisted by a competent, suitably qualifi ed and experienced company secretary.

Principle 2.8 The board is responsible for information technology (“IT”) governance.

Principle 2.9 The board ensures that the company complies with applicable laws and considers adherence to non-binding rules, codes and standards.


Risk report

Risk managementMorvest implements a risk management process for identifying, evaluating and monitoring the nature and extent of risks affecting the achievement of its business objectives and the management and control of these risks. The directors are responsible for the group’s risk management and system of internal control in conjunction with the Audit and Risk Committee’s internal audit function. ( 2.7)

Risk management responsibility

Board • Sets level of risk tolerance and limits of risk appetite

Audit and Risk Committee • Monitors risk management activities on an ongoing

basis

• Actively discusses risk topics raised

• Reviews investee and group risk registers

• Monitors and reviews Morvest’s Risk Management

Policy

Group Risk Officer • The CLO, Alex Evan, is also the Group Risk Officer

• Each business unit reports to the CLO on a quarterly

basis

• The CLO reports to the Audit and Risk Committee

EXCO • Actively discusses risk at each meeting

• Each business unit reports to EXCO on a quarterly

basis

• EXCO reports to the board

Underlying investee

companies

• Regularly review strategic risks

• Compile a risk register

• Submit the risk register to the CLO and EXCO on a

quarterly basis

• Analyse new opportunities for risk including:

– evaluation

– appraisal

– management

Third parties • Certain risks are transferred to third parties e.g.

insurance and limitation of liability clauses. Risks are

mitigated by insurance cover and contracts are

vetted to ensure that any potential exposure would

fall under the umbrella of any policy.

• Property and business interruption policies are

evaluated and taken out where appropriate.

• Morvest only uses reputable providers, insurance

companies and underwriters.

The board monitors the liquidity and solvency of the group continually. Morvest has not faced a situation in which either is compromised and does not foresee such a situation in the near future. The board will, however, continue to monitor this and act accordingly if required. ( 2.15)

Morvest’s systems of internal control are designed to: ( 2.13)• provide reasonable assurance as to the integrity and reliability of the fi nancial

statements;• safeguard and maintain accountability of the group’s assets;• provide reasonable assurance regarding compliance with statutory laws and

regulations, and the maintenance of proper accounting records; and

Principle 2.7 The board is responsible for the governance of risk.

Principle 2.13 The board should report of the effectiveness of the company’s system of internal controls.

Principle 2.15 The board will/has consider/ed business rescue proceedings or other turnaround mechanisms as soon as the company has been/may be fi nancially distressed as defi ned in the Company’s Act, 71 of 2008.


Governance

• detect and minimise signifi cant fraud, potential liability, loss and material

misstatement.

Human involvement immediately creates limitations on the effectiveness of any

system of internal control. Therefore assurance cannot be guaranteed and the system

is designed to manage rather than eliminate risk of failure and opportunity risk.

Internal auditInternal audit assesses the effectiveness of the group’s system of internal control and

risk management, using a risk-based methodology. It reports directly to the Audit and

Risk Committee, which in turn reports to the board on project progress, problems

encountered, issues demanding attention, feedback from operations and project

priorities. The committee annually reviews the independence of internal audit. ( 2.10)

Areas of concern in internal control were identifi ed during the year as part of the annual

assessment and have been discussed with management, and where appropriate

remedial measures to address the issues raised have been implemented.

The internal audit function is governed by an Internal Audit Charter, which is reviewed

on an annual basis. This outlines the role of internal audit which is to provide

independent and objective assurance designed to help the group accomplish its

objectives through a systematic, disciplined approach to evaluating and improving

risk management, control and the governance process. It follows the standards for

the Professional Practice of Internal Audit established by the Institute of Internal

Auditors (“IIA”).

The group’s internal audit function also ensures that the internal audit resources

are appropriate and suffi cient for the group and that the team has the appropriate

professional qualifi cations and skills to maintain the internal audit competence.

External auditorsThe external auditors are responsible for reporting on whether the fi nancial statements

are fairly presented in compliance with IFRS and other applicable legislation and

regulations. Their audit includes an assessment of internal controls. The directors are

responsible for the preparation of the fi nancial statements.

The board, assisted by the Audit and Risk Committee, meets regularly with the

external auditors and formally evaluates their independence on an annual basis.

The board does not usually engage the external auditors for any non-audit services,

including tax compliance and assisting with company secretarial duties. Where the

external auditors, as an exception, are appointed for non-audit services, there is a

strict separation of divisions in order to maintain independence and any such service

requires Audit and Risk Committee approval.

Principle 2.10 The board ensures that there is an effective risk-based internal audit. An internal audit department exists.

Risk report continued


Remuneration report

Remuneration CommitteeDuring the year under review the Remuneration Committee comprised of independent

non-executive directors NY Mhinga (Chairperson), Prof B Marx, A Mohammadali-Haji and

Dr PS Molefe, meeting the Charter requirements that the committee comprise at least

three independent non-executive directors.

One meeting was held in the year (but more frequent meetings are mandated if required).

Details of directors’ attendance at the Remuneration Committee meetings are set out on

page 28 .

The CEO and HR director attended meetings by invitation and enjoyed ongoing

unrestricted access to the committee chairperson and members. They were excluded

from any deliberations regarding their respective, individual remuneration.

The structure of the committee demonstrates to all stakeholders that the remuneration

of executives is set by independent, objective peers who have no personal interest in

the outcome and who will give due regard to the interests of all stakeholders and to the

fi nancial and commercial health of the group.

The committee is an independent and objective body which monitors and strengthens

the credibility of the group’s executive remuneration system, by linking executive

remuneration to individual performance, the group’s performance and market conditions.

( 2.25) The committee makes recommendations to the board on executive remuneration

packages and policies. To carry out its mandate, the committee is entitled to obtain any

information from any employee and external legal and/or other independent professional

advisor if necessary, at the expense of the group.

Executives’ performance is measured on a task-by-task basis which is aligned with

group targets. The six target areas are B-BBEE, training and development, cash fl ow

management, business sustainability, client satisfaction and client relations.

The committee is further responsible for devising a Remuneration Policy for the group.

The Remuneration Policy is tabled at the annual general meeting for a non-binding

advisory vote by shareholders.

( 2.26) Current and proposed directors’ fees are set out below:

Approved fee

for the year

ended

31 May

2014

Proposed fee

for the year

ending

31 May

2015

Annual fee

Non-executive directors

Chairman of the board R318 000 R377 080

Board member R254 400 R269 664

Meeting fee



Members of the board R1 325 R1 405

Chairman of Audit and Risk Committee R2 650 R2 809

Member of Audit and Risk Committee R1 325 R1 405

Chairman of all other committees R1 325 R1 405

Members of all other committees R1 060 R1 124

The committee’s responsibilities are updated annually to refl ect current legislation and

recommendations, and it conducts an annual self-evaluation to ensure its effectiveness.

Principle 2.25 The company remunerates its directors and executives fairly.

Principle 2.26 The company has disclosed the remuneration of each individual director and prescribed offi cer.


Governance

It is also reviewed by the company secretary each year. The self-evaluation found the

committee to be effective during the year under review.

Remuneration policyMorvest recognises the value added by its human resources and aims to be “an employer

of choice”. To this end the group adopts a Remuneration Policy which ensures a balance

between the interests of staff and all other stakeholders. Basic salaries of employees are as

far as possible market-related, while annual bonuses are aligned with group performance.

Executive remuneration considers performance assessments against predetermined key

deliverables, as well as group performance (as above).

The Remuneration Policy is subject to approval by shareholders at the annual general

meeting through a non-binding advisory vote. ( 2.27)

Directors’ emoluments are set out in note 35.1 to the annual fi nancial statements.

The Remuneration Committee implemented an annual review of the group’s succession

strategy. The review report was presented to the board, which tasked management with

implementing the strategy during the current year.

Yvonne Mhinga Chairman

29 August 2014

Principle 2.27 The shareholders have approved the company’s remuneration policy.

Remuneration report continued

Human Capital Management is a leading HR service

provider offering employment staffi ng solutions

ranging from permanent, contract and temporary

placements to response handling, headhunting,

recruitment campaigns and verifi cations services.

The company also provides project & services

based resourcing, HR & IR consulting services and

payroll outsourcing & tax structuring solutions.

HUMANCAPITALCAPITALCAPITMANAGEMENT

≥ Our people


Our people

Human resources

2014 Highlights

R5,3 million spent on training

141 learners and interns

Key indicators 2014 2013

Permanent employee

headcount 914* 1 210

Contract employee headcount 2 050 380

Total employee headcount 2 964 1 590

Female employees 326 533

Number of employees hired 192* 150

% of employees represented

by unions 10 10

Total training spend (R’m) R5 359 517 R1 653 469

* Recruited staff only, excludes new staff due to acquisitions.

Our employees are the driving force behind the achievement of

our strategic objectives. Our success relies on their dedication,

skills, innovative ideas and ability to maintain close relationships

with our stakeholders. To maintain a strong work force requires

an environment conducive to attracting, developing and retaining

talent. A compelling employment value proposition is therefore

a key mitigator of human capital risk and accordingly a material

issue for the group (see material issues on page 21 ).

Morvest accordingly aims to offer:

• competitive salaries;

• an attractive work environment in which employees’ goals and

aspirations can be fulfi lled;

• incentive schemes rewarding employees for loyalty,

performance and innovation;

• benefi ts for all full-time employees including medical aid and

pension and provident fund; and

• ongoing training and development through Morvest’s Training

Academy internship and learnership programmes.

The HR director, Madoda Papiyana, assisted by all management,

is responsible for our employee relations and overseeing our

initiatives in this regard. The strategy and policy is determined at

holding company level, while operational activities (HR, fi nance,

IT, procurement) are managed at subsidiary level. Delegated

Authority Level (DAL) provides a framework for day-to-day

operations and decisionmaking. Each subsidiary has an active

board that approves and signs off budgets and road maps.

We continue to focus on communication, transparency and access

to information to keep employees informed and foster the Morvest

family spirit. Our new centralised campus has strengthened our

culture of communication by enabling immediate access and

integration of ideas. Our editorial committee remains responsible

for the compilation of our monthly newsletter MorNEWS, as well

as ad hoc electronic mailers to further ensure inclusivity. The

holding company is evolving into an investment company which

will give autonomy to underlying companies within defi ned policy

frameworks and DALs.

Morvest is an equal opportunities employer and is committed to a

working environment that is free from discrimination. No incidents

of discrimination were reported during the year.

Demographics

Total staff for the group by employment level 2013 – 2014

Female Male

A C I W

Total

Female A C I W

Total

Male

Grand

total

%

Black

%

Female

Top management 1 – 1 1 – 4 2 7 8 75 25

Senior management 3 – 8 14 25 3 3 9 26 41 66 39 39

Middle management 8 4 2 42 56 40 14 21 91 166 222 40 41

Junior management 81 17 8 36 142 144 47 33 52 276 418 79 12

Other 64 19 6 13 102 68 12 8 10 98 200 89 5

Grand total 156 41 24 105 326 256 75 75 181 588 914* 69 31

A African C Coloured I Indian W White

* Permanent employees excluding contracts.


Total staff for the group by employment level 2012 – 2013

Female Male

A C I W

Total

Female A C I W

Total

Male

Grand

total

%

Black

%

Female

Top management – 1 – – 1 1 – 2 1 4 5 80 20

Senior management – 1 4 10 15 – 3 6 16 25 40 35 40

Middle management 12 8 5 64 89 42 8 21 145 216 305 31 48

Junior management 62 22 12 23 119 95 23 11 34 163 282 80 12

Other 204 68 18 19 309 122 55 26 23 226 535 92 4

Grand total 278 100 39 116 533 260 89 66 219 634 1 167 71 29

Permanent employees only, excludes temporary staff.

Total excludes 43 foreign nationals (41 males and 2 females).

A African C Coloured I Indian W White

0 20 40 60 80 100

Western Cape

Nothern Cape

Mpumalanga

KZN

Gauteng

Free State

Eastern Cape

Male Female

% 0 20 40 60 80 100

Western Cape

Nothern Cape

Mpumalanga

KZN

Gauteng

Free State

Eastern Cape

Male Female

%

77%17%3%

1%0,65 %0,98%

0,5%

Western Cape

KZN

Free State

Eastern Cape Northern CapeGauteng

Mpumalanga

79,1%16,4%

2,2%

1,2%0,4%0,6%

0,1%

Western Cape

Eastern Cape

Mpumalanga

KZN Northern CapeGauteng

Free State

Gender split by region Gender split by region

Permanent employees by region Permanent employees by region

2014 2013


Our people

Human resources continued

Employee turnover

Action Breakdown

Total

2014

Total

2013

Engagements Male 96 149

Female 96 114

Total 192 263

Terminations Male 112 92

Female 123 108

Total 235 200

Labour relationshipsTwo group subsidiaries in the Business and Industrial Services

segment remain unionised through the following:

• Chemical Energy Paper Printing Wood and Allied Workers

Union (“CEPPWAWU”); and

• National Union of Printing Publishing and Paper in Nigeria.

Approximately 10% of all employees (2013: 10%) in group

investments are covered by collective bargaining agreements,

of which 3% is in South Africa and the balance in Nigeria. The

remaining groupwide headcount are covered by workplace

forums. One incident of labour unrest was reported during the

year at Morvest Mithratech, however, the situation was promptly

addressed and there was no signifi cant impact on production.

The majority of permanent staff receive benefi ts including group

risk cover, provident fund and medical aid.

Disciplinary actionThe Disciplinary Policy is published on the intranet and in the

group’s internal policy document. The holding group’s policy

applies to all subsidiaries and is broad enough to accommodate

different environments. In terms of the Policy any employee action

which impairs or endangers the relationship between an individual

employee and the company, or any ignoring by an employee of

policy, procedure, regulations or work instructions, will result in

disciplinary action. The disciplinary procedure is corrective rather

than punitive. However when there is no response to correction by

an employee, or it is found that there was a measure of wilfulness,

punitive steps are taken.

While the disciplinary procedure aims to identify and correct non-

conformance with the Policy, it also serves to provide a record

ensuring that corrective action is pursued in respect of each

transgression/incident.

The disciplinary system applies to all employees of the company.

Its key principles include:

• A balance of management rights and employee duties. When

these duties are not carried out, discipline is both the prerogative

and the inalienable right of management. Further, discipline is a

management duty and senior employees must take disciplinary

action against subordinates who commit a transgression or act

in an unacceptable manner.

• The lawful, just and consistent application of discipline at all

times. All relevant facts are thoroughly investigated before a

decision is made.

• The responsibility of the immediate supervisor for the discipline

of an employee.

• Respect as far as possible of employees’ privacy given that

discipline is a personal and confi dential matter. This means

involvement of the smallest possible number of people in

disciplinary actions and prohibition of observers or persons not

in the employ of the relevant company at disciplinary hearings.

• Formalised discipline when it becomes clear that a transgressor

has not responded favourably to personal, verbal guidance or

reprimand.

• The deliberate highlighting to a transgressor of his/her right

to request a review of disciplinary action by a more senior

manager, whose decision is then fi nal.

• Comprehensive and accurate record keeping of disciplinary

actions.

• During the year 11 (2013: 24) incidents were reported ranging

from policy transgressions, misconduct and absenteeism to

poor performance. There were eight dismissals (2013: 8) with

the balance resulting in written warnings.

A formal Grievance Policy is in place at Morvest to enable

employees to resolve real/perceived issues relating to the

employment relationship and work, and so prevent a negative

impact on productivity and commitment. Its main principles

include:

• management’s acceptance that employees may from time-to-

time be dissatisfi ed with aspects related to the employment

relationship;

• management’s responsibility for addressing and settling all

legitimate employee grievances in a fair manner;

• timeous and appropriate resolution of grievances;

• guaranteed protection for employees who air grievances against

any form of discrimination, victimisation or prejudice;

• the fundamental right of a worker to use the help of a colleague

or employee representative in raising a grievance;

• pursuit of explained procedural steps for a mutually optimal

resolution of the grievance; and

• employees’ right to pursue channels of resolution beyond

Morvest when grievances cannot be resolved through the

group’s grievance procedure.

There were no reported grievances during the year.

Performance managementMore than 90% of permanent employees (2013: 90%),

receive regular performance and career development reviews.


Performance is assessed according to specifi c key performance

objectives at least once and possibly twice yearly (depending on

the policy of the relevant underlying company).

Skills development and training 2014 review:

• R5,3 million committed to skills development, bursaries,

training, learnerships and internships

• 141 interns and learners

• 79% black participants

• Employees received an average of 24 hours of training.

Morvest relies primarily on highly skilled employees to deliver

superior quality products and services. The group therefore seeks

to develop, nurture and maximise the deployment of its skills

through training, mentorship, and coaching. Policy and strategy

is determined at holdings level, while training plans, road maps

and budgets are set at subsidiary level within an approved policy

framework and following approval by the subsidiary board.

Our annual investment in training and development at year-end

amounted to R5 359 517 (2013: R1 653 469) of which R4 278 730

was dedicated to previously disadvantaged individuals.

Morvest promotes a high performance culture of continuous

learning. All employees are engaged and encouraged to grow and

gain new skills and attend training at least once a year. All training

is competency based and helps the individual to cope with their

current job and prepare them for potential future roles. Training

is also considered a strong motivating factor in creating more

energetic, goal orientated and loyal staff as their performance

improves.

Every underlying company has in place a personal development

plan which is devised for every employee, focusing on training

needs and best practice implementation of training plans. This is a

critical fi rst step in staff taking ownership over their career.

The key objectives for skills development and training across

Morvest include:

• ensuring there is an availability of skill and a committed

workforce to meet present as well as future needs;

• helping our employees to achieve their career and personal

goals. This in turn enhances their contribution to the

organisation; and

• ensuring that Morvest is ethically and socially responsible and is

advancing skill levels of disadvantaged groups.

Our in-house training academy, the Morvest Academy, ensures

centralised management of most training interventions in the

group. This realises the benefi ts of cross-company training,

scale and effi ciencies. Training further includes learnerships and

internships. The group recruits learners and university graduates

who are trained at the Academy and intern at the group where

possible, in an attempt to develop a skills pool for the group and

for the industry at large.

During the year over 141 learners were trained with courses

including information management, plant engineering, IT training,

Microsoft certifi cation and smart IT infrastructure courses in

terms of fi ve such programmes

The following internships and learnership programmes were

conducted during the year:

Programme

Number of

learners/

interns

Intergraph Systems SA: Information

Management and Plant Engineering Internship 10

iSolve: National Certificate; Information

Technology, End User Computing 11

Mint: Microsoft Certification 7

Morvest Pinnacle Solutions: Printing and

Packaging Internship 88

Morvest Travel 2

R&S: In Store Data Expert (ISDE) Internship 23

141

(See pages 40 to 42 for selected case studies .)

Induction programmes are held monthly at the Academy for any new

employee of any underlying company. Induction covers information

on organisational structure, human resources processes and

documentation, the Employee Wellness Programme, and Morvest

culture including vision, mission and core values and the Code

of Ethics. This programme plays a critical role in socialising new

employees into the Morvest family and in shaping their performance,

attitude and organisational commitment.

Leadership development Our focus on developing group leaders is intended to help build

a sustainable “Morvest culture” in which we live the goal of

“exceptional service through exceptional people”. In addition

to developing new skills on an ongoing basis, senior leaders

groupwide are identifi ed for succession planning purposes and

are actively developed through short courses and programmes

provided by business schools, internationally and local.

The key leadership capabilities identifi ed for development are:

• ability to execute strategy;

• pro-activity, change and results focus;

• taking ownership and accountability;

• ability to deliver the employee value proposition;

• leading courageously; and

• systemic and strategic thinking.


Our people


For more than 25 years ISSA has provided leading Enterprise

Engineering Software and Geospatial Powered Solutions

in Sub-Saharan Africa. They offer software and services to

the process, power, offshore and marine industries through

integrated lifecycle solutions for design, construction and

operation of plants and ships. There is a marked shortage of

skills and few educational programmes in the area of plant

design and operation industries. Therefore in 2011 ISSA

designed a successful Internship Programme in the process

and power side of their business.

The third ISSA Smart Plant Internship commenced in February

2014 and will run until October 2014. The interns who were

unemployed graduates from South African universities of

technology were appointed after a stringent selection process.

The programme runs a dual track internship comprising:

1. Information Management which includes document

management and confi guration control.

2. Plant engineering which includes piping and

instrumentation, instrumentation and control, electrical

engineering, 3D design and layout (which includes

structural, civil, electrical and instrumentation/control as

well as design review solutions).

The training is intense and interns gain the necessary

knowledge skills to enable them to contribute productively to

the engineering industry. The methodology is also designed

to instil certain core values and work ethics such as discipline

and commitment, shaping the interns into mature and

marketable employees. Interns are equipped to work for

any organisation involved in petro-chemical, power utilities,

mining, pharmaceutical, food and paper pulp. For the class

of 2013 eight of the nine interns have found permanent

employment while the remaining intern is commencing

another internship programme.

Intergraph Systems South Africa (ISSA) Internship

In early 2013 three junior mangers attended the New Management

Programme (NMP) at the Wits Business School. The programme

ran until September 2013. The NMP’s aim is to progress

the participants from a specialist function role into a general

management and eventually into senior management roles. The

programme proved to be highly successful and the participants

have all been able to apply their learning in the workplace. Going

forward we will annually identify and select junior managers to

attend the programme.

We will continue to focus on building our management and

leadership capability and fast tracking our talented employees to

strengthen our succession pipeline.


iSolve Business Solutions is currently running a National Certifi cate: Information Technology, End User Computing (NQF Level 3) learnership for 11 internal administrative staff members who had limited computer literacy. The programme commenced on 1 October 2013 and ends on 30 September 2014. The objective of the programme is to provide these internal admin employees (all women) with the necessary administration and Microsoft Offi ce skills to improve their effi ciency and effectiveness in their day-to-day tasks. The learnership comprises of modules such as Introduction to PCs, Microsoft: Word, Power Point, Outlook, Excel and Access as well as training in maths literacy, communication skills and team work. Training is provided by iSolve Learning Solutions trainers coupled with self-studying and mentoring.

The programme has proven successful in up-skilling attendees and has also further motivated them and boosted their confi dence. Their newly acquired skills is also evident in

the improved quality, complexity and accuracy of their work while increasing their employment potential.

iSolve Business Solutions Learnership

The Morvest Pinnacle Solutions (MPS) Internship programme

comprises on the job training for 88 previously unemployed

or casual workers.

The group which is predominantly female participation (76%)

is made up as follows:

African female: 44

African male: 7

Coloured female: 20

Coloured male: 14

Indian female: 3

The 12-month programme commenced in January 2014 and

will end in December 2014.

The internship programme entails training in the operations

of packaging, scanning, printing, and coding and fulfi lment

services for the major cellular network service providers’

SIM card products in South Africa. The objectives of the

programme are to develop a talent pipeline of skilled

workers for the core functions of the plant at PISA; create an

opportunity for unemployed or unskilled workers to develop

competencies in the printing and packaging industry; and to

develop the workers’ interpersonal and operational skills and

work ethic, shaping them into well rounded functional workers

who will become an asset to any employer in the industry.

Key learning areas include:

• printing operations and equipment;

• packaging operations and equipment;

• inventory;

• machine operation;

• housekeeping; and• time and attendance management.

High-achieving candidates who display potential are identifi ed as the internship progresses and are given the opportunity to act as team leaders and assistant supervisors to enable them to learn the softer people management competencies. This internship is also an opportunity to identify and grow the future leaders in the business.

To date two female employees have been identifi ed to take on more responsibility in terms of staff management and to complete management reports.

All internship employees are currently still employed by Morvest Pinnacle Solutions at Premium Ideas South Africa in Cape Town. Following the training it is anticipated that the interns will be absorbed into the MPS or PISA employment structure and/or they will more easily fi nd employment within the industry.

Morvest Pinnacle Solutions Cape Town Internship Programme


Our people


ISSA participated in the Africa Geospatial Forum conference

held in Cape Town in July 2014. The event drew delegates

from as far afi eld as Ghana, Nigeria, Kenya, Germany and the

USA as well as high-level speakers from the United Nations,

Microsoft and Oracle discussing the future locations-based

services. ISSA was a representative of the Intergraph portion

of the Hexagon Group, which was a strategic sponsor of the

event. One of the technologies showcased is an integrated

water infrastructure management system called the H2O

Solution. The H2O Solution incorporates Leica Geosystems’

survey equipment and monitoring sensors with Intergraph’s

monitoring and dispatch solutions and geospatial tools to

provide a complete picture of the health of critical water

infrastructure.

Intergraph Systems South Africa (“ISSA”) participates in geospatial forum

Graham Herbst, ITIL Trainer and Business Development

Consultant, received a “Best Trainer Finalist” award at the

itSMF award ceremony held in Johannesburg in July 2013. He

attributed his nomination and award to strong team support

and effort. Graham believes that teamwork is what makes a

trainer successful, as without all the necessary components

effectively coming together, he would not be able to deliver to

the required level of professionalism.

Chris Chafunya, who is a qualifi ed ITIL Xpert, COBIT 5 and

Cloud Computing trainer, completed his MBA in August

2013 through the Milpark Business School, achieving two

distinctions.

Foster-Melliar staff achievements

An exciting new recognition programme was launched in the

past fi nancial year. The Employee of the Month is a monthly

and quarterly recognition award to staff who consistently

demonstrate the organisations’ core values and who display

exceptional performance over and above their usual duties.

This programme provides an avenue for management to

nominate and acknowledge the efforts of their staff and builds

a culture of high performance and excellence.

Employee of the Month


Health, safety and wellness

2014 Highlights

Zero reported fatalities

SHEQ Policy and procedures Morvest has a comprehensive SHEQ Policy in place setting out

appropriate procedures. It further provides guidelines on the

prevention of accidents in the workplace, reporting of incidents,

fi rst aid and fi re. A trained SHEQ representative at each underlying

company is responsible for implementing and maintaining the

policy throughout the organisation, and ensuring that health and

safety considerations are given priority in planning and day-to-day

supervision of work.

The companies ensure their respective employees are familiar

with the Policy as part of the annual performance assessment

sessions. It also forms part of induction training at the Morvest

Academy. Employees are responsible for reporting incidents to a

supervisor trained to manage the consequences.

The group’s SHEQ Policy and process include commitment to:

• compliance with all relevant laws, regulations, standards and

any other possible requirements as a minimum standard;

• ensuring that all underlying companies have appropriate GRI,

OHSAS 18001 and ISO 14001 accreditations;

• communicating openly to all persons working under the

control of Morvest, such as employees, contractors, elected

representatives and affected parties, to promote a system

of enhanced occupational safety, health and environmental

management;

• following a process of risk management that continually

endeavours to reduce and/or prevent ill health and injuries

arising from safety and environmental risks;

• developing remedial action and emergency response plans;

• providing the necessary resources, including training, in order to

encourage greater responsibility for each employee;

• reducing and controlling all forms of potential pollution, in

particular ground, water and air pollution;

• minimising waste and developing and encouraging opportunities

for recycling, recovery and rehabilitation;

• promoting the effi cient use of water, raw materials, energy and

natural resources;

• encouraging associate companies, suppliers, contractors and

customers to adopt appropriate responsible SHEQ practices;

• liaising with employees, regulatory authorities and all other

interested and affected parties on a regular basis in order

to promote constructive interaction in matters of common

concern; and

• monitoring and reviewing performance of the SHEQ programme

through regular audits and assessments.

SHEQ trainingDuring the year a range of health and safety training at a cost of

R30 780 was conducted:

Fire Marshall 11

SHE representative 11

First aid 12


Our people

Health, safety and wellness continued

Employee wellnessEmployee wellness is a major component of Morvest’s SHEQ commitment.

The majority of permanent employees in underlying companies are provided with various health- and wellness-related benefi ts including:• medical aid;• trauma assurance; • lump sum disability; • disability income;• continuation options; • employee premium waivers; • mortgage protector;• dynamic spend protector;• global education protector; and • funeral benefi ts.

In addition to the above, Morvest employees have access to an employee wellness programme provided by ICAS (Independent Counselling and Advisory Services). The ICAS programme is a voluntary, confi dential service providing professional counselling and referral services designed to help employees with personal, work or family problems. Its purpose is to help employees identify, resolve and gain control over personal problems that may be interfering with work and daily life. All employees have access to a confi dential service 24 hours a day, 365 days a year provided by qualifi ed and experienced counsellors in multiple languages (Afrikaans, English, Sotho, Zulu, Xhosa Tswana, Pedi, Venda, Siswati and Tsonga) by telephone as well as face-to-face.

The counselling offered focuses on:• stress: work and personal;• fi nancial: money management and debt management;• legal: legal matters, maintenance, child custody, divorce law,

consumer rights etc;• relationships: family, work and partners• substance abuse: alcohol and drugs• family matters: child care, care for the elderly, education and

state benefi ts• health issues: AIDS counselling and support for chronic illness• work: stress management, career matters and harassment.

All employees and their immediate families have access to ICAS at the group’s expense.

This year Morvest and ICAS went on a promotional drive to encourage employees to enrol on the ICAS Elcare programme. This is an integrated online well-being service, comprising a comprehensive workplace wellbeing portal. Currently 406 Morvest staff have enrolled. The programme includes an extensive online wellness assessment, an “ask the professional” service that allows employees to submit a question and receive a personalised, same day response from a healthcare professional as well as

print material delivering health communication messages and

behaviour change programmes.

HIV/AIDSMorvest is committed to pro-actively addressing HIV/AIDS in a

positive, supportive and non-discriminatory manner with the

support and cooperation of all its employees. A formal HIV/AIDS

Policy is in place which ensures the fair, ethical and equitable

treatment of infected employees and demands confi dentiality

of employees’ status. The policy is reviewed every six months

to comply with the latest medical and legal guidelines and is

applicable to all employees and subsidiary companies.

Should an HIV-positive employee volunteer status information,

the relevant managers are appropriately briefed and informed to

enable them to manage the situation. Employees are encouraged

to seek medical treatment, counselling, ongoing testing and

assistance from support groups including ICAS. The Policy further

prohibits any discrimination based on employee’s HIV/AIDS

status, in particular when considering promotion of other career

opportunities.

Morvest acknowledges that education is one of the most important

issues relating to HIV/AIDS and has regular training on the

disease. Information is provided on an ongoing basis via email, the

intranet, posters and booklets. Morvest proudly supports World

AIDS day and on 1 December 2013 we again participated in the

AIDS week business bannerthon where posters, communiques

and condoms were distributed to staff. The day is used to reaffi rm

our commitment to fi ghting this epidemic. This year we received a

gold certifi cate of recognition for fi ve years of participation in the

AIDS bannerthon campaign.

Clinic at the PISA premisesAs part of a campaign to promote a healthy work environment, the

management of Premium Ideas SA together with the Department

of Health arranged for local clinic sisters to visit the premises. The

campaign ran for a period of three weeks to accommodate staff on

various shifts. The free service offered to the 400 plus staff included

voluntary AIDS tests, women’s health and family planning.

Morvest Travel is locally based and strives to build

and maintain exceptional relationships with clients

based on mutual understanding and respect. As an

accredited IATA and ASATA travel management

company it specialises in all aspects of corporate

travel, leisure travel, conferencing and events

management, and tailor-made inbound tours.

≥ Our social impact


Our social impact

Value-added statement

2014 2013

R’000 R’000

Turnover 1 100 757 956 164

Less: Cost of services (795 401) (658 218)

Value added 305 356 297 946

Indirect income 4 571 11 037

Total wealth created 309 927 308 983

Distributed as follows:

Employees contribution

Remuneration and benefi ts 151 897 139 094

Donations and CSI spending 956 2 395

Providers of capital

Dividend distribution 4 550 6 586

Providers of long term fi nance

Finance costs 15 286 11 189

Government

Taxation and Skills Development Levy 36 746 37 556

Retained to develop future growth 100 493 112 163

Value added 309 927 308 983

49%

6,4%

Reinvestment

Government

Capital providerEmployees

CSI

32,4%

11,9%

0,3%

45,0%

5,7%

Reinvestment

Government

Capital providerEmployees

CSI

36,3%

12,2

0,8%

2014 2013


Social and Ethics Committee report

The Social and Ethics Committee’s responsibilities encompass

monitoring and regulating the impact of the group on its

stakeholders. Although management is tasked with overseeing

the day-to-day operational sustainability of their respective

areas of business, and reporting thereon to the Social and Ethics

Committee, the board remains ultimately responsible for group

sustainability. The committee was established under the terms of

the Companies Act, 71 of 2008.

The committee is chaired by CEO Mohammed Varachia and

further comprises HR director Madoda Papiyana, CFO Suren

Singh, CLO Alex Evan and independent non-executive director

Yvonne Mhinga. The committee meets at least once a year. Details

of meeting attendance are set out on page 28 .

The Social and Ethics Committee operates within defined terms

of reference as set out in its Charter and the authority granted to

it by the board. Broadly, the committee is tasked with overseeing

the good corporate citizenship of the group on behalf of the board.

The committee’s role is to regularly monitor the group’s activities

with regard to any relevant legislation, other legal requirements or

prevailing codes of best practice, in respect of the following:

• Social and economic development, including the group’s

standing in terms of the:

– 10 principles set out in the United Nations Global Compact

Principles

– Anti-bribery and corruption legislation and best practice from

around the world including OECD

– Employment Equity Act

– Broad-Based Black Economic Empowerment Act

• Good corporate citizenship, including the group’s:

– promotion of equality, prevention of unfair discrimination, and

reduction of corruption

– contribution to development of the communities in which our

activities are predominantly conducted or within which our

products or services are predominantly marketed

– record of sponsorship, donations and charitable giving

• Environment, health and public safety, including the impact of

the group’s activities and its services

• Stakeholder relationships, including the group’s advertising,

public relations and compliance with consumer protection laws

• Labour and employment, including the group’s:

– standing in terms of the International Labour Organisation

Protocol on decent work and working conditions

– employment relationships, and our contribution towards the

educational development of our employees.

The Social and Ethics Committee examines the application of

the group’s Code of Conduct and Code of Ethics which sets a

framework of ethics across the group. It also monitors the group’s

application of BEE legislation in its South African operations and

the promotion of equality and prevention of unfair discrimination

throughout the global operations of Morvest.

The committee draws these matters to the attention of the

board and reports on them to shareholders at the annual general

meeting. Employment equity, B-BBEE, CSI and labour-related

issues as reviewed by the committee are reported on pages 38,

and 48 to 51 .

No human rights incidents were reported. In South Africa, aspects

such as prohibition of child labour, forced compulsory labour

and discriminatory practices are monitored by the Department of

Labour in addition to the committee.

No incidences of corruption were reported.

Mohammed Varachia

Social and Ethics Committee Chairman

29 August 2014


Our social impact

Transformation

2014 Highlights

Regained Level 2 status

Increased black ownership to over 77%

Increased black management ownership to 52%

Black executives personally invested in Morvest

Over R950 000 in CSI contributions

We have set clear targets for each area of the scorecard and progress in achieving these targets is measured twice yearly so that trouble spots can be identifi ed and redressed. Monthly monitoring of BEE targets at each business unit and a formal report thereon contribute to the progress assessment.

Our ultimate goal is to elevate to the optimal Level 1. Our formal policy documents codify processes and guiding principles to get us to this milestone, namely a: Procurement Policy, Recruitment and Selection Policy; Training and Development Policy; Skills Development Plans; and Social Responsibility Strategy.

OwnershipThe BVI empowerment transaction, approved during the year, increased direct black shareholding to 52%, with the added advantage of the black executive of the group becoming personally invested. BVI compromises key executive directors, non-executive directors and group executives of Morvest. The transaction secures their ongoing long-term commitment to the company.

In terms of the transaction, BVI acquired 290 million Morvestshares comprising 222 171 121 newly issued Morvest shares and 67 828 879 treasury shares, both issued at 16 cents per share. The transaction also addresses the impact of legislative requirements, including the Preferential Procurement Policy Framework Act, Act 5 of 2000 (PPPFA), which recognises only B-BEE ownership in relation to management, employees and staff who are shareholders and actively involved in the business of the company.

Black management controlMorvest board: 6/8 board members are blackSubsidiaries’ boards: at least 50% black directors Top management: 75% (2013: 80%) were blackSenior management: 39% (2013: 35%) were blackMiddle management 40% (2013: 31%) were black

B-BBEE scorecard

Code

August

2014

Scorecard

weighting

achieved

August

2013

Scorecard

weighting

achieved

Ownership 21,78 18,48Management control 10,13 10,29Employment equity 6,90 6,50Skills development 6,72 4,76Preferential procurement 20,00 20,00Enterprise development 15,00 15,00Socio-economic development 5,00 5,00

To accelerate development of management skill, suitable

candidates are identifi ed for development training and previously

disadvantaged candidates are prioritised wherever possible.

Employment equityA total of 69% (2013: 71%) of the group’s 914 permanent

employees are black.

A formal Employment Equity Policy is in place for all employees

and potential candidates, which promotes equal opportunities

by encouraging good practice in the recruitment and selection

process complying with the Employment Equity Act. The overall

aim is to identify the capacity of disadvantaged groups in our

underlying companies, advance skills levels through training

and development, and ensure the representation and active

involvement of previously disadvantaged individuals in all spheres

of business. Ensuring training and advancing employment equity

forms part of EXCO’s and management’s KPIs.

The policy therefore promotes equal opportunities by encouraging

good practices in the group’s centralised recruitment process, in

turn ensuring that we are compliant with the Employment Equity

Act. Ongoing employment equity is monitored monthly to ensure


that targets are met, and progress is communicated to staff via

internal email, the intranet and specifi c workplace forums.

Morvest is opposed to tokenism, and a key employment equity

objective is that suitably qualifi ed black individuals, women and

people with disabilities have appropriate equal employment

opportunities and are equitably represented in all occupational

categories and levels in the workplace.

When recruiting new employees Morvest tries, wherever possible,

to fi ll positions with appropriately qualifi ed candidates as above.

Recruitment is enhanced through internship and learnership

programmes where interns/learners are tutored on both theory

and operational practice and are later integrated into the group

(see Recruitment Policy).

In respect of promotions, existing employees are given preference

wherever possible. Where no suitable internal candidates can be

identifi ed, the position is sourced externally, subject to the same

employment equity criteria.

However it is of great importance to the group that the morale,

productivity and confi dence of existing staff should not be

adversely infl uenced by employment equity endeavours.

Therefore nothing in the policy establishes an absolute barrier

to the prospective or continued employment or advancement of

whites and males. Similarly, nothing in the Policy requires Morvest

to retrench any existing employee solely to facilitate compliance

with the policy.

Each subsidiary is required to achieve its employment equity

targets as determined and approved in the operation’s road map

and/or budget.

No incidences of discrimination or violations of the Employment

Equity Policy were reported during the year.

The group’s Recruitment Policy aligns with our Employment

Equity Policy, with key objectives to:

• encourage good practice in the recruitment and selection

process;

• gather together a body of good quality applicants from whom to

select and appoint suitable employees;

• ensure that ability, objectivity and fairness is part of the process;

• ensure compliance with the Employment Equity Act;

• align our recruitment strategy to our employment equity

numerical targets;

• ensure that recruitment is carried out within budget limitations;

and

• ensure that recruitment to any form of employment – permanent,

limited duration or temporary, third party contractors – and of

any new or existing position takes place under an approved

Staff Requisition Form (SRQ1) signed by all relevant signatories.

Preferential procurement A formal Morvest Preferential Procurement Policy refl ects the

group’s commitment to broadening our supplier base with

empowered enterprises on a preferred basis. Centralised

procurement vets all suppliers for their BEE status in order to

achieve targets. 80% (2013: 80%) of total group procurement

spend was allocated to local South African-based suppliers for

the year under review, of which 75% (2013: 89%) went to black

empowered businesses and 12,25% (2012: 5%) to SMMEs.

Enterprise developmentMorvest recognises that it is in the best interests of the group

to empower SMMEs, which in turn funnel their competence

and expertise back into Morvest. The group therefore remains

committed to encouraging black entrepreneurs to establish

and expand sustainable and commercially viable SMMEs.

Encouraging entrepreneurship accords with our internal culture

where initiative is rewarded. In this light Morvest has created an

incubator structure to nurture SMME development, which is vital

to sustainable socio-economic growth in South Africa.

Morvest invested R1,5 million in Eratis, a 100% black-owned

company with 40% ownership held by black women. Eratis

develops and implements ICT solutions for government

departments, municipalities and public enterprise organisations.

The funds were used to cover operational expenses. Morvest

further provided shared services support including fi nance, human

resources, legal, IT, company secretarial and legal services.

Social upliftmentAs part of our mission statement, Morvest pledges to actively

contribute towards social upliftment and environmental

sustainability. We are committed to investing and allocating

resources to aid development and improve the quality of life in

the communities in which we live and work. Morvest is engaged in

various long-term sustainable projects established and managed

by registered and qualifi ed non-profi table organisations. We

are committed to contributing a minimum of 1% of NPAT to

CSI initiatives. Accordingly during the year R956 580 (2013:

R895 476 million) was committed by the group to CSI initiatives.

The Social and Ethics Committee regularly reviews CSI requests

and benefi ciaries. All benefi ciary organisations must adhere

to legal compliance and registration in terms of the Guide to

the Non-Profi t Organisations Act, 71 of 1997, in order to be

considered. Further requirements of eligibility include the review

by the committee of the constitution, demographic information,

fi nancial statements and general management of the organisation

in question.

Employee participation in CSIOver and above fi nancial support Morvest believes in active and

hands on, passionate participation within our communities. Many

of our employees actively contribute to CSI by volunteering their

time and expertise which is something we encourage and support

as it engenders a culture of social responsibility.


Our social impact

2014 CSI/Social upliftment benefi ciaries included:

Kids HavenKids Haven is a registered non-profi t organisation founded in

1992 as a response to the increasing number of children on

the streets. Their mission is to reach out to children on the

streets and to provide them with shelter, therapy, training and

education. The objective is to reintegrate children back to their

communities so that they may take their rightful place in society.

Benefi ciaries during the year included school fees for 15

children for one year including school uniforms and resources

plus funding for additional meat and vegetable purchases. The

school fees covered are for eight learners at Willowmore High

School, 6 learners at Belvedere LSEN School, one learner at

Benoni West primary School and uniforms for three learners.

Contribution: R157 750 (2013: R95 652) – (6th year running)

Transformation continued

The South African Women’s Open Chess Tournament and Development project This project aims to teach chess to primary and high school

girls in the greater Johannesburg area and also hosts a series of

chess tournaments. The schools have noticed notable benefi ts

among participants in this programme such as increased

concentration skills, superior application to mental tasks and

greater empathy towards their fellow students.

Contribution: R50 000

Ubunye Educare CentreThe Danoon Educare centre is a Grade R school which works

with the children of the Danoon community to give children the

opportunity to develop their social and learning skills before

they reach school going age. The children are given classroom

instruction from certifi ed teachers who use the Department of

Basic Education curriculum. A daily meal is also provided to

the children. Morvest’s contribution in fi xed monthly payments

covers rent, utilities, salaries and helps ensure that the children

are given the best opportunity to succeed in their future

schooling.

Contribution: R480 000 (2013: R410 000).


EDeafEdeaf is a deaf-owned company established in 2007 to provide a holistic service to the employer and the deaf employee. eDeaf

offers several training courses and learnership programmes The deaf community are said to be the most marginalised group in

South Africa. As they cannot communicate freely with the hearing world they are often regarded as incompetent and not fi t to be

employed, which is far from the truth.

The group’s contribution helped fund three deaf students at the eDeaf Johannesburg Campus. The training is in Adult Education and

Training through the Media Works computer-based programme in South African sign language.

Contribution: R20 000 donation by Foster-Melliar and R150 000 donation by Premium Ideas

Suiderlig High School has 952 learners of which 99% are black.

The funds are used to develop rugby among the male learners.

More than 160 male learners are involved in rugby with Suiderlig

High now competing in the Medium School category. In the last

season one team made it to the quarter fi nals in the Falcons

League, one player was selected for the Craven week A team and

one player was selected to the Falcons under 16 Team.


Suiderlig High School

NOAH (Neighbourhood Old Age Homes)NOAH provides housing and service for the poor, needy and

vulnerable old people in South Africa. Its goal is to provide

health, homes and happiness and it addresses the need for

safe, affordable housing for the elderly. They have 13 homes for

the aged spread over eight areas in the Western Cape.

Contribution for a luncheon for 30 NOAH residents at the Rust en Vreugd Gardens: R61 517

AIDS Week Business BannerthonMorvest participates annually in the bannerthon, purchasing banners for all campuses. The money raised goes towards supporting

those living with HIV/AIDS. This year we received a Gold certifi cate of recognition for fi ve years of participation.


Key Base Training SolutionsR&S paid for the training for 16 unemployed youth to undergo an “Introduction to PC” training at Key Base Solutions for two days.



Our social impact

Our environment

Highlights

No fi nes or penalties for non-compliance

Morvest has a formal Environmental Policy which covers all group

companies and is in line with ISO 9001/2000. The group maintains

open communication channels with authorities, environmental

organisations, the public and any others physically affected by

Morvest’s operations. The policy is communicated to subsidiary

level through Morvest’s intranet and group notice boards. EXCO

annually evaluates application of the policy and environmental

procedures in the group. Although the impact is not consider a

material issue to the company, management nonetheless sets and

monitors targets for compliance with the policy.

Principles as embodied in the SHEQ Policy ensure we are an

environmentally responsible organisation. These include:

• conducting business operations in a manner that minimises

adverse impacts on the social, biophysical, cultural and

historical environment through management practices that

foster the protection of the environment;

• complying with all relevant environmental legislation, regulations

and other requirements to which the company may subscribe;

• preventing pollution; and

• continually improving the overall environmental performance of

our activities, products and services.

Waste management is monitored via a waste management system

and all waste is recycled. Reducing waste is one of the underlying

management’s core deliverables.


Independent assurance report on selected sustainability information to the directors of Morvest Business Group Limited

We have undertaken a limited assurance engagement on selected

sustainability information, as described below, and presented in

the 2014 integrated report of Morvest Business Group Limited

for the year ended 31 May 2014 (Report). This engagement was

conducted by a multidisciplinary team with experience in areas

including environmental, fi nancial, assurance and sustainability

reporting.

Subject matterWe are required to provide limited assurance on the group’s self-

declared C application level and the following key performance

indicators (KPIs) in accordance with Global Reporting Initiative’s

G3.1 Reporting Guidelines:

• number of permanent employees (page 36);

• staff turnover (page 38);

• gender split (number) (page 36);

• total training spend (Rands) (page 36); and

• total CSI & Donations spend (Rands) (pages 48 and 49).

Directors’ responsibilitiesThe directors are responsible for the selection, preparation,

and presentation of the sustainability information in accordance

with Global Reporting Initiative’s G3.1 Reporting Guidelines.

This responsibility includes the identifi cation of stakeholder and

stakeholder requirements, material issues, for commitments

with respect to sustainability performance and for the design,

implementation, and maintenance of internal control relevant to the

preparation of the Report that is free from material misstatement,

whether due to fraud or error.

Inherent limitationsNon-fi nancial data is subject to more inherent limitations than

fi nancial data, given both the nature and the methods used for

determining, calculating, sampling, or estimating such data.

Qualitative interpretations of relevance, materiality, and the

accuracy of data are subject to individual assumptions and

judgments. We have not conducted any work outside of the

agreed scope and therefore restrict our conclusion to the

assurance objectives set out above.

Our independence and quality controlWe have complied with the Code of Ethics for Professional

Accountants issued by the International Ethics Standards

Board for Accountants, which includes independence and other

requirements founded on fundamental principles of integrity,

objectivity, professional competence and due care, confi dentiality,

and professional behaviour.

In accordance with International Standard on Quality Control 1,

Grant Thornton, maintains a comprehensive system of quality

control including documented policies and procedures regarding

compliance with ethical requirements, professional standards,

and applicable legal and regulatory requirements.

Our responsibilityOur responsibility is to express a limited assurance conclusion on

the selected sustainability information based on the procedures

we have performed and the evidence we have obtained. We

conducted our limited assurance engagement in accordance with

the International Standard on Assurance Engagements (ISAE)

3000, Assurance Engagements other than Audits or Reviews

of Historical Financial Information, issued by the International

Auditing and Assurance Standards Board. This Standard requires

that we plan and perform our engagement to obtain limited

assurance about whether the selected sustainability information

is free from material misstatement.

Our work has been undertaken to enable us to express a limited

assurance conclusion on the selected sustainability information to

the Directors of Morvest Business Group Limited in accordance

with the terms of our engagement, and for no other purpose. We

do not accept or assume liability to any party other than Morvest

Business Group Limited, for our work, for this report, or for the

conclusion, we have reached.

Basis of work performed and limitationsThe procedures selected, assessed the risks of material

misstatement of the selected sustainability information whether

due to fraud or error, responding to the assessed risks as

necessary in the circumstances, and evaluating the overall

presentation of the selected sustainability information.

A limited assurance engagement is substantially less in scope

than a reasonable assurance engagement in relation to both

risk assessment procedures, including an understanding of

internal control, and the procedures performed in response to the

assessed risks.

Our report does not extend to providing assurance on any

other information specifi cally excluded from the scope of the

engagement.

The procedures were based on our professional judgement

and included inquiries, observation of processes performed,

inspection of documents, analytical procedures, evaluating the

appropriateness of quantifi cation methods and reporting policies,

and agreeing or reconciling records.

The information relating to the prior reporting periods has not

been subject to assurance procedures.

Our report does not extend to any disclosures or assertions

relating to future performance plans and/ or strategies disclosed

in the Report.

Assurance work performedGiven the purpose of the engagement, in performing the

procedures listed above, we:

• made enquiries of those responsible for the preparation of

the specifi ed sustainability information internal controls, risk


Our social impact

assessment process, and information systems relevant to

sustain the report process, as we considered necessary;

• tested the processes and systems to generate, collate,

aggregate, monitor and report the selected sustainability

information;

• performed walkthroughs;

• inspected supporting documentation on a sample basis and

performed analytical procedures to evaluate data generation

and reporting processes against the reporting criteria; and

• evaluated the reasonableness and appropriateness of

signifi cant estimates and judgments made by the directors in

the preparation of the sustainability information.

We believe that the evidence obtained as part of our limited

assurance engagement, is suffi cient and appropriate to provide

a basis for our fi ndings and our limited assurance conclusion

expressed below.

Other mattersThe maintenance and integrity of Morvest Business Group

Limited’s website is the responsibility of Morvest Business

Group Limited management. Our procedures did not involve

consideration of these matters and, accordingly we accept

no responsibility for any changes to either the information in

the Report or our independent assurance report that may have

occurred since the initial date of presentation on the Morvest

Business Group Limited website.

Limited assurance conclusionBased on the procedures we have performed and the evidence we

have obtained, nothing has come to our attention that causes us

to believe that the Group’s self- declared C application level and

the selected key performance indicators, as set out in the subject

matter paragraph, for the year ended 31 May 2014 is not prepared,

in all material aspects, in accordance with the Global Reporting

Initiative’s G3.1 Reporting Guidelines.

Grant Thornton Advisory Services (Pty) Ltd

Director: Andrew Hannington

Chartered Accountant (SA)

6 October 2014

137 Daisy Street

Sandton

2196

Morvest Pinnacle Solutions is a preferred

outsourcing partner in the warehousing, distribution

and transport and logistics sector in South Africa

offering staffi ng solutions, training and specialised

HR support.

≥ Annual fi nancial statementsDirectors’ responsibilities and approval

56

Declaration by company secretary 57

Audit and Risk Committee report 58

Report of the independent auditors

59

Directors’ report 60

Accounting policies 64

Group statement of comprehensive income

81

Group statement of fi nancial position

82

Group statement of changes in equity

83

Group statement of cash fl ows 84

Notes to the group fi nancial statements

85

Company statement of comprehensive income

120

Company statement of fi nancial position

121

Company statement of changes in equity

122

Company statement of cash fl ows 123

Notes to the company fi nancial statements

124


Annual fi nancial statements

56

Directors’ responsibilities and approval

The directors are responsible for the preparation, integrity and fair presentation of the fi nancial statements and other fi nancial

information included in this report. In presenting the accompanying fi nancial statements, International Financial Reporting Standards,

the SAICA Financial Reporting Guides, as issued by the Accounting Practices Committee and JSE Listings Requirements and the

Companies Act of South Africa have been followed; applicable accounting assumptions have been used while prudent judgements

and estimates have been made.

The going concern basis has been adopted in preparing the fi nancial statements. The directors have no reason to believe that the

company or the group will not be a going concern in the foreseeable future based on forecasts and available cash resources. The

fi nancial statements support the viability of the company and the group.

The fi nancial statements have been audited by the independent accounting fi rm, Mazars (Gauteng) Inc., which was given unrestricted

access to all fi nancial records and related data, including all resolutions and minutes of all meetings of the shareholders, and the

board of directors and committees of the board. The directors believe that all representations made to the independent auditors

during the audit were valid and appropriate.

The fi nancial statements were approved by the directors on 29 August 2014 and are signed on their behalf.

S Singh M Papiyana

CFO Executive director

Johannesburg

29 August 2014


Declaration by company secretary

In terms of section 88(2)(e) of the Companies Act of South Africa, I confirm that for the year ended 31 May 2014, Morvest Business

Group Limited has lodged with the Companies and Intellectual Property Commission all such returns and notices as are required of

a public company in terms of the Act and that all such returns and notices are true, correct and up to date.

NB January

Company secretary

Johannesburg

29 August 2014



58

Audit and Risk Committee report

In terms of Section 94 of the Companies Act of South Africa (the Act), the Audit and Risk Committee reports as follows on its

responsibilities performed.

ObjectiveThe objective of the Committee is to perform its statutory responsibilities regarding the appointment and independence of the

external auditor as per section 94 of the Act and to assist the board in discharging its corporate governance duties and responsibilities

relating to fi nancial reporting, auditing and the safeguarding of the company’s assets.

MembershipThe Audit and Risk Committee consists of directors who are in the opinion of the board considered to be independent. The members

of the committee are recommended by the board and confi rmed by the shareholders at the annual general meeting.

FunctioningThe Audit and Risk Committee met four times during the year and has performed its functions and responsibilities as set out in the

charter.

External auditThe Committee has satisfi ed itself that the auditor of Morvest Business Group Limited is independent as defi ned by the Act.

There is a formal procedure that governs the process whereby the audit fi rm is considered for non-audit services and the

engagement of the auditor for such work is reviewed and approved by the Committee. No complaints have been received by the

Committee relating to accounting practices and internal audit of the company, or to the content or auditing of the company’s fi nancial

statements, or to any related matter.

The Committee has nominated for approval at the annual general meeting, Mazars (Gauteng) Inc. as the external auditor for the 2015

reporting period.

Manoj Manilal is assigned by the fi rm Mazars (Gauteng) Inc. as the designated auditor for Morvest Business Group Limited.

Annual fi nancial statementsThe Committee has, based on the information provided to it by management and the external auditors, evaluated whether the

fi nancial statements are a true and fair view, in all material respects, and has subsequently recommended the fi nancial statements

for approval to the board. The board has subsequently approved the fi nancial statements which will be open for discussion at the

forthcoming annual general meeting.

Finance Function CompetencyAs required by the JSE Listings Requirements paragraph 3.84(h), the Audit and Risk Committee has satisfi ed itself that the group

Chief Financial Offi cer, Suren Singh, has appropriate experience and expertise. In line with King III, the Committee has also satisfi ed

itself as to the experience, expertise and resources of the fi nance function.

Professor Ben Marx

Chairman of the Audit and Risk Committee

Midrand

29 August 2014


Independent auditors’ report

To the shareholders of Morvest Business Group LimitedWe have audited the consolidated and separate fi nancial statements of Morvest Business Group Limited set out on pages 56 to 133,

which comprise the statements of fi nancial position as at 31 May 2014, and the statements of comprehensive income, statements

of changes in equity and statements of cash fl ows for the year then ended, and the notes, comprising a summary of signifi cant

accounting policies and other explanatory information.

Directors’ responsibility for the consolidated fi nancial statementsThe company’s directors are responsible for the preparation and fair presentation of these consolidated and separate fi nancial

statements in accordance with International Financial Reporting Standards, the SAICA Financial Reporting Guides, as issued by the

Accounting Practices Committee and the Financial Pronouncements as issued by Financial Reporting Standards Council 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 fi nancial statements that are free from material misstatement, whether due to fraud

or error.

Auditors’ responsibilityOur responsibility is to express an opinion on these consolidated and separate fi nancial statements based on our audit. We

conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical

requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated and separate fi nancial

statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the fi nancial statements.

The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the

fi nancial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant

to the entity’s preparation and fair presentation of the fi nancial statements 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 entity’s internal control. An audit

also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by

management, as well as evaluating the overall presentation of the fi nancial statements.

We believe that the audit evidence we have obtained is suffi cient and appropriate to provide a basis for our audit opinion.

OpinionIn our opinion, the consolidated and separate fi nancial statements present fairly, in all material respects, the consolidated and

separate fi nancial position of Morvest Business Group Limited as at 31 May 2014 and its consolidated and separate fi nancial

performance and consolidated and separate cash fl ows for the year then ended in accordance with International Financial Reporting

Standards, SAICA Financial Reporting Guides as issued by the Accounting Practices Committee and Financial Pronouncements as

issued by Financial Reporting Standards Council and the requirements of the Companies Act of South Africa.

Other reports required by the Companies Act As part of our audit of the consolidated and separate fi nancial statements for the year ended 31 May 2014, we have read the

Directors’ report, the Audit Committee’s report and the company secretary’s certifi cate for the purpose of identifying whether there

are material inconsistencies between these reports and the audited consolidated and separate fi nancial statements. These reports

are the responsibility of the respective preparers. Based on reading these reports we have not identifi ed material inconsistencies

between these reports and the audited consolidated and separate fi nancial statements. However, we have not audited these

reports and, accordingly, do not express an opinion on these reports.

Mazars (Gauteng) Inc.

Director: Manoj M Manilal

Registered Auditor

29 August 2014

Pretoria



60

Directors’ report

1. Nature of businessMorvest Business Group is a black empowered global diversifi ed investment holding group with an international footprint

spanning Africa (South Africa, Mozambique and Nigeria), India, UAE and USA. The group’s operations are aligned into three

key segments: Business and Industrial Services (including Professional Services and Outsourcing Solutions), ICT Solutions,

Retail and Other Investments.

2. Review of activities

Operational reviewThe South Africa and Nigerian markets continue to be challenging.

Good performance was achieved across the group with revenue up by 15,1% to R1,1 billion from the prior year. Business and

Industrial Services contributed 46% and the ICT Solutions division contributed the balance.

EBITDA amounted to R157 million (2013: R141 million) refl ecting an increase of 11,3% (2013: 15,4%) as a result in the growth

in revenue.

The group posted headline earnings of R46,6 million (2013: R40 million) translating into headline earnings per share of

10,23 cents (2013: 8,20 cents), up by 25%.

Share repurchaseDuring the year the company repurchased 12 491 195 shares with a value of R2,1 million, on the open market in terms of the

share repurchase programme. The company intends to continue repurchasing shares in the forthcoming years subject to the

Companies Act requirements.

3. Financial results and dividend The annual fi nancial results of the company and group for the year ended 31 May 2014 are set out in the fi nancial statements

and accompanying notes.

In October 2013, the board proposed and resolved to declare a gross dividend of 1 cent per share for the reporting period.

On 29 August 2014, the board declared a fi nal gross dividend of 1 cent per share for the year ended 31 May 2014.

4. Going concern The annual fi nancial statements have been prepared on the basis of accounting policies applicable to a going concern. This

basis assumes that funds will be available to fi nance future operations and that the realisation of assets and settlement of

liabilities, contingent obligations and commitments will occur in the ordinary course of business.

5. Share capital On 31 May 2014 the authorised share capital of the company comprised 1 500 000 000 ordinary shares, of which 880 000 000

were in issue.

The company’s unissued shares have been placed under the control of the directors.

During the year 12 491 195 shares acquired through the share repurchase programme have been cancelled from the issued

share capital of the company and 67 828 879 treasury shares were utilised by Business Venture Investments 1690 (Pty) Ltd on

15 October 2013.

The issued share capital after the cancellation of shares and the issue of 222 171 121 new shares to Business Venture

Investments 1690 (Pty) Ltd on 15 October 2013 is 880 000 000 ordinary shares.

For further details refer to note 19 of the fi nancial statements.

6. BEE transaction (“BVI”) On 15 October 2013 shareholders approved the BEE transaction in terms of which executive and non-executive directors of

Morvest will obtain a shareholding in Morvest.

The implementation of the new BEE transaction has signifi cantly improved the company’s BEE credentials over the next 12

months and will assist in maintaining a competitive advantage in both the private and public sector.


For further details of the new BEE scheme, refer to note 27 of the fi nancial statements.

7. Vendor obligationsThe following vendor obligations were discharged during the year:

Cash

R’000

Vendor

R and S Consulting 10 000

Isolve 1 200

11 200


8. Material changes in non-current assetsDuring the year, the group acquired assets amounting to R19,1 million, to maintain operations.

The group concluded the construction of the new offi ce building and costs incurred to complete the construction were

R93 415 411 including land.

On 30 May 2014 the group sold its investment in Mint Management Technologies (MMT) for R10,5 million to the MMT

management. The group’s net loss on the disposal amounted to R1,1 million. The disposal is line with the group’s strategy.

For further details on the non-current assets, refer to notes 10 to 15 of the fi nancial statements.

9. Directors The directors during the year and as at the date of this report are as follows:

Name Class

MS Varachia Executive

S Singh Executive

A Evan Executive

M Papiyana Executive

PS Molefe Independent non-executive#

NY Mhinga Independent non-executive#

B Marx Independent non-executive#

A Mohammadali-Haji Independent non-executive

NY Mhinga, B Marx and A Mohammadali-Haji will retire by rotation at the upcoming annual general meeting, and being eligible

will stand for re-election.

# PS Molefe is the Chairman of the board, B Marx is the Chairman of the Audit and Risk Committee and NY Mhinga is the Chairperson of

the Remuneration Committee.

10. Directors’ interests Directors’ interests in related parties are set out below:

Director Company

MS Varachia Morvest Retail (Pty) Ltd


11. Directors’ shareholdingDirectors’ shareholdings are set out in note 35.3 of the fi nancial statements.



62

12. Directors’ emolumentsDirectors’ emoluments are set out in note 35.1 of the fi nancial statements.

13. Company secretaryThe company secretary is Noelene Beryl January whose business and postal addresses, which are also the registered

addresses of the company, are set out below:

Business address:188 14th Road, Noordwyk, Midrand, 1685

Postal address:PO Box 4307, Halfway House, Midrand, 1685

14. Special resolutionsThe following resolutions were passed at the annual general meeting held on 29 November 2013:

14.1 A special resolution was granted to give authority to the company and its subsidiaries to repurchase Morvest shares in

the open market.

14.2 A special resolution was approved, in terms of section 45 of the Companies Act, 71 of 2008, whereby the company may at

any time from the approval of this resolution date, for two years, provide any direct or indirect fi nancial assistance to any

one person or more related or inter-related companies or corporations of the company.

14.3 A special resolution, was resolved that in terms of section 66(9) of the Companies Act, the company is authorised to pay

remuneration to its directors for services as directors.

14.4 A special resolution to adopt the new Memorandum of Incorporation was passed in accordance with section 16 (1)(c) of

the Companies Act.

The following resolutions were passed at the reconvened general meeting held on 15 October 2013:

14.5 A special resolution was passed approving the fi nancial assistance to Business Ventures Investments No 1690 (Pty) Ltd

in terms of section 44 of the Companies Act, No 71 of 2008, as amended.

14.6 A special resolution was passed approving the fi nancial assistance to Business Ventures Investments No 1690 (Pty) Ltd

in terms of section 45 of the Companies Act, No 71 of 2008, as amended.

14.7 A special resolution was passed approving the issue of the BEECO subscription shares in terms of sections 41(1) and

41(3) of the Companies Act.

15. Subsidiaries, associates and other investmentsInformation relating to the company’s fi nancial interest in its subsidiaries and other investments is set out in note 44 of the

fi nancial statements.

16. Aggregate net income and loss in subsidiaries

Net income/

(loss) R’000

SubsidiaryAggregate net income generated by subsidiaries 121 681 Aggregate net loss generated by subsidiaries (13 040)

Net income/(loss) in subsidiaries before non-controlling interest. 108 641

17. Borrowing limitations In terms of the MOI of the company, the directors may exercise all the powers of the company to borrow money, as they

consider appropriate.

18. Subsidiaries’ dividendsThe dividends already declared by subsidiaries and paid to shareholders during the year are as refl ected in the statement of

changes in equity.

Directors’ report continued


19. Auditors Mazars (Gauteng) Inc. were appointed in offi ce in accordance with section 90(6) of the South African Companies Act, 2008, and will continue in offi ce subject to shareholder approval at the upcoming annual general meeting.

20. Subsequent events Details of the subsequent events are set out in note 36 of the fi nancial statements.



64

1. Reporting entityMorvest Business Group Limited is a company domiciled in the Republic of South Africa. The consolidated fi nancial statements

of the company as at and for the year ended 31 May 2014 comprise the company and its subsidiaries (together referred to as

the group and individually as group entities) and the group’s interest in associates. The group’s operations are aligned into three

key divisions: Business and Industrial Services (including Professional Services and Outsourcing Solutions), ICT Solutions and

Retail and Other Investments (see note 1).

2. Basis of preparation(a) Statement of compliance

The consolidated fi nancial statements have been prepared in compliance with the Companies Act of South Africa, 2008,

International Financial Reporting Standards (IFRS), the SAICA Financial Reporting Guides as issued by the Accounting

Practices Committee, and the JSE Listings Requirements that are relevant to its operations and have been effective for the

annual reporting period ended 31 May 2014.

The consolidated fi nancial statements were authorised for issue by the board of directors on 29 August 2014.

(b) Basis of measurementThe consolidated and separate fi nancial statements have been prepared on the historical cost basis except for the following

items, which are measured on alternative basis on each reporting date:

Items Measurement bases

Financial instruments Accounted for in terms of IAS 39

Investment property Accounted for in terms of IAS 40

(c) Signifi cant estimates, judgements and assumptionsThe preparation of fi nancial statements in conformity with IFRS requires management to make judgements, estimates and

assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. The

estimates and associated assumptions are based on historical experience and various other factors that are believed to be

reasonable under the circumstances, the results of which form the basis of making the judgements about carrying amounts

of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are

recognised in the period in which the estimate is revised if the revision affects only that period or in the period of the revision

and future periods if the revision affects both current and future periods.

In particular, information about signifi cant areas of estimation, uncertainty and critical judgements in applying accounting

policies that have the most signifi cant effect on the amounts recognised in the fi nancial statements are also described in the

accounting policy notes that follow and the following fi nancial statement notes:

• Note 11 – Plant, property and equipment

• Note 12 – Goodwill

• Note 14 – Other fi nancial assets

• Note 15 – Deferred taxation

• Note 16 – Inventories

• Note 17 – Trade and other receivables

• Note 25 – Provisions

• Note 27 – Share-based payments

Measurement of fair valuesThe group has established a control framework with respect to the measurement of fair values. The CFO has overall

responsibility for overseeing all signifi cant fair value measurements, including Level 3 fair values.

The CFO regularly reviews signifi cant unobservable inputs and valuation adjustments.

Accounting policies


When measuring the fair value of an asset or liability, the group uses market observable 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 in Level 1 that are observable for the asset or liability, either directly (ie

as prices) or indirectly (ie derived from prices).

• Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).

If the inputs used to measure the fair value of an asset or liability might be categorised in different levels of the fair value

hierarchy, then the fair value measurement is categorised in its entirety in the same level of the fair value hierarchy as the

lowest level input that is signifi cant to the entire measurement.

The group recognises transfers between levels of the fair value hierarchy at the end of the reporting period during which the

change has occurred.

Further information about the assumptions made in measuring fair values is included in the following notes:

• Note 10 – Investment property

• Note 33 – Financial instruments

Impairment testingThe recoverable amounts of cash-generating units and individual assets have been determined based on the higher of value-

in-use calculations and fair values less costs to sell. These calculations require the use of estimates and assumptions. It is

reasonably possible that the revenue growth rates and operating margins assumptions may change, which may then impact

the estimations made and may then require a material adjustment to the carrying amount of goodwill and intangible assets.

The group reviews and tests the carrying amount of assets when events or changes in circumstances suggest that the

carrying amount may not be recoverable. In addition, goodwill is tested on an annual basis for impairment. Assets are

grouped at the lowest level for which identifi able cash fl ows are largely independent of cash fl ows of other assets and

liabilities. If there are indications that impairment may have occurred, estimates are prepared of expected future cash fl ows

for each group of assets. Expected future cash fl ows used to determine the value in use of goodwill and intangible assets are

inherently uncertain and could materially change over time. They are signifi cantly affected by a number of factors including

production estimates, supply demand, project demands, tender specifi c jobs, operating margins and long-term contracts

together with economic factors such as infl ation, interest rates, exchange rates and other industry specifi c factors.

TaxationJudgement is required in determining the provision for income taxes due to the complexity of legislation. There are many

transactions and calculations for which the ultimate tax determination is uncertain during the ordinary course of business.

The group recognises liabilities for anticipated tax audit issues based on estimates of whether additional taxes will be due.

Where the fi nal tax outcome of these matters is different from the amounts that were initially recorded, such differences will

impact the income tax and deferred tax provisions in the period in which such determination is made.

The group recognises the net future tax benefi t related to deferred income tax assets to the extent that it is probable that the

deductible temporary differences will reverse in the foreseeable future. Assessing the recoverability of deferred income tax

assets requires the group to make signifi cant estimates related to expectations of future taxable income. Estimates of future

taxable income are based on forecast cash fl ows from operations and the application of existing tax laws in each jurisdiction.

To the extent that future cash fl ows and taxable income differ signifi cantly from estimates, the ability of the group to realise

the net deferred tax assets recorded at the reporting date could be impacted.

(d) Functional and presentation currencyThese consolidated and separate fi nancial statements are presented in South African rand (ZAR), which is the company’s

functional currency. All fi nancial information presented in rand, has been rounded to the nearest thousand.

(e) Going concernThe consolidated and separate fi nancial statements are prepared on the going concern basis.



66

3. Financial reporting termsThese defi nitions of fi nancial reporting terms are provided to ensure clarity of meaning as certain terms may not always have the

same meaning or interpretation in all countries.

(a) General accounting terms

Associate An entity, in which the group has signifi cant infl uence, but not control or joint control.

Company A legal business entity registered in terms of the applicable legislation of that country.

Foreign operation An entity whose activities are based or conducted in a country or currency other than those of the

reporting entity (Morvest Business Group Limited).

Operation A component of the group

• that represents a separate major line of business or geographical area of operation; and

• is distinguished separately for fi nancial and operating purposes.

Group The group comprises Morvest Business Group Limited, its subsidiaries and its interest

in associates.

Subsidiary Any entity including structured entities which is controlled by the group.

Acquisition date The date on which the acquirer obtains control of the acquiree.

Cash-generating unit The smallest identifi able group of assets which can generate cash infl ows independently from

other assets or groups of assets.

Consolidated group

fi nancial statements

The fi nancial results of the group which comprise the fi nancial results of Morvest Business

Group Limited and its subsidiaries, the proportionate interest in the fi nancial results of its interest

in associates.

Control The group controls an entity when it is exposed to, or has rights to, variable returns from its

involvement with the entity and has the ability to affect those returns through its power over

the entity.

Discount rate The rate used for purposes of determining discounted cash fl ows defi ned as the yield on AAA

credit rated bonds (for entities outside South Africa) and relevant South African Government

bonds (for South African entities) that have maturity dates approximating the term of the related

cash fl ows. This pre-tax interest rate refl ects the current market assessment of the time value of

money. To the extent that, in determining the cash fl ows, the risks specifi c to the asset or liability

are taken into account in determining those cash fl ows, they are not included in determining the

discount rate.

Disposal date The date on which control in subsidiaries and signifi cant infl uence in associates ceases.

Fair value 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.

Functional currency The currency of the primary economic environment in which the entity operates.

Longterm A period longer than 12 months from the reporting date.

Net asset value The value of assets less the value of liabilities.

Net tangible

asset value The value of physical assets less the value of liabilities.

Other comprehensive

income

Comprises items of income and expense (including reclassifi cation adjustments) that are not

recognised in profi t or loss and includes the effect of translation of foreign operations and

available-for-sale fi nancial assets.

Power Existing rights that give the current ability to direct the relevant activities.

Accounting policies continued


Recoverable amount The amount that refl ects the greater of the fair value less costs to sell and value in use that can be

attributed to an asset as a result of its ongoing use by the entity. In determining the value in use,

expected future cash fl ows are discounted to their present values using the discount rate.

Related party Parties are considered to be related if one party directly or indirectly has the ability to control

or jointly control the reporting entity (Morvest Business Group Limited) or exercise signifi cant

infl uence over the reporting entity or is a member of the key management of the reporting entity.

Revenue Comprises turnover, dividends received and interest received.

Share-based payment A transaction in which an entity issues equity instruments, share options or incurs a liability to pay

cash based on the price of the entity’s equity instruments to another party as compensation for

goods received or services rendered.

Signifi cant infl uence The ability, directly or indirectly, to participate in, but not exercise control over, the fi nancial and

operating policy decisions of an entity so as to obtain economic benefi t from its activities.

Turnover Comprises revenue generated by operating activities and includes sales of products, services

rendered, licence fees and royalties, net of indirect taxes, rebates and trade discounts.

(b) Financial instrument termsEffective interest rate The rate that exactly discounts estimated future cash payments or receipts through the expected

life of the fi nancial instrument or when appropriate, a shorter period to the net carrying amount of

the fi nancial asset or fi nancial liability.

Equity instrument Any fi nancial instrument (including investments), that evidences a residual interest in the assets of

an enterprise after deducting all of its liabilities.

Financial asset Cash or cash equivalents, a contractual right to receive cash, an equity instrument or a contractual

right to exchange a fi nancial instrument under favourable conditions.

Financial liability A contractual obligation to pay cash or transfer other benefi ts or an obligation to exchange a

fi nancial instrument under unfavourable conditions. This includes debt.

Loans and receivables A fi nancial asset with fi xed or determinable repayments that are not quoted in an active market,

other than:

• a derivative instrument; or

• an available-for-sale fi nancial asset.

4. Signifi cant accounting policiesThe accounting policies set out below have been applied consistently to all periods presented in these consolidated fi nancial

statements, except as set out under “Changes in accounting policies” below, and have been applied consistently by

group entities.

4.1 Changes in accounting policiesThe group has adopted the following new standards and amendments to standards, including any inconsequential

amendments to other standards.

(a) IAS 19 Employee benefi tsThe amended standard outlines the accounting requirements for employee benefi ts, including short-term benefi ts (eg

wages and salaries, annual leave), post-employment benefi ts such as retirement benefi ts, other long-term benefi ts (eg

long service leave) and termination benefi ts. The new revised standard further establishes the principle that the cost of

providing employee benefi ts should be recognised in the period in which the benefi t is earned by the employee, rather

than when it is paid or payable, and outlines how each category of employee benefi ts are measured.

(b) IFRS 10 Consolidated fi nancial statementsThe objective of IFRS 10 is to establish principles for the presentation and preparation of consolidated fi nancial

statements when an entity controls one or more other entities. IFRS 10 introduces a new control model that focuses



68


on whether the group has power over an investee, exposure or rights to variable returns from its involvement with the investee and ability to use its power to affect those returns. It further sets out the accounting requirements for the preparation of consolidated fi nancial statements. Refer to “Basis of consolidation” (note 4.2) for the group’s revised accounting policy on subsidiaries.

The group concluded that the adoption of IFRS 10 did not result in any material change in the consolidation status of its subsidiaries.

(c) IFRS 11 Joint arrangementsThere are two types of joint arrangements: joint operations and joint ventures. A joint operation arises where a joint operator has rights to the assets and obligations relating to the arrangement and hence accounts for its interests in assets, liabilities, income and expenses. Joint ventures arise where the joint venturer has rights to the net assets of the arrangement and hence equity accounts for its interests.

The group does not have any joint arrangements.

(d) IFRS 12 Disclosure of interests in other entitiesAs a result of IFRS 12, the group has expanded its disclosures about its interests in subsidiaries (see note 31)

(e) IFRS 13 Fair value measurementIFRS 13 establishes a single framework for measuring fair value and making disclosures about fair value measurements when such measurements are required or permitted by other IFRSs. The standard defi nes fair value as 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. It replaces and expands the disclosure requirements about fair value. It replaces and expands the disclosure requirements about fair value measurements in other IFRSs, including IFRS 7. As a result the group has included additional disclosures in this regard (see note 33).

In accordance with the transitional provisions of IFRS 13, the group has applied the new fair value measurement guidance prospectively and has not provided any comparative information for new disclosures. Notwithstanding the above, the change had no signifi cant impact on the measurements of the group’s assets and liabilities.

(f) Presentation of items of other comprehensive incomeAs a result of amendments to IAS 1, the group has modifi ed the presentation of items of other comprehensive income in its statement of comprehensive income (a name change the group has elected not to adopt) to present separately items that would be reclassifi ed to profi t or loss. The group has foreign translation differences on foreign operations. Refer to statement of comprehensive income.

4.2 Basis of consolidation(a) Business combinations

The group accounts for business combinations using the acquisition method when control is transferred to the group. A business may comprise an entity, group of entities or an unincorporated operation including its operating assets and associated liabilities.

On acquisition date, the consideration transferred is generally measured at fair value, as are the identifi able net assets acquired. The consideration transferred is the fair value of the group’s contribution to the business combination in the form of assets transferred, shares issued, liabilities assumed or contingent consideration at the acquisition date. Any goodwill that arises is tested annually for impairment. Any gain on bargain purchase is recognised in profi t or loss immediately. Transaction costs are expensed as incurred, except if related to the issue of debt or equity securities.

The consideration does not include amounts related to the settlement of pre-existing relationships. Such amounts are generally recognised in profi t or loss.

Any contingent consideration payable is measured at fair value at the acquisition date. If the contingent consideration is classifi ed as equity, then it is not remeasured and settlement is accounted for within the equity. Otherwise, subsequent changes in the fair value of the contingent consideration are recognised in profi t or loss.

If the initial accounting for a business combination is incomplete by the end of the reporting period in which the combination occurs, the group reports provisional amounts for the items for which the accounting is incomplete. Those provisional amounts are adjusted during the measurement period, or additional assets or liabilities are recognised, to refl ect new information obtained about facts and circumstances that existed at the acquisition date that, if known, would have affected the amounts recognised at that date.


The measurement period is the period from the date of acquisition to the date the group obtains complete information

about facts and circumstances that existed as of the acquisition date – and is subject to a maximum of one year.

(i) Non-controlling interest (“NCI”)NCI is measured at their proportionate share of the acquiree’s identifi able net assets at the acquisition date.

Changes in the group’s interest in a subsidiary that do not result in a loss of control are accounted for as

equity transactions.

(ii) Loss of controlUpon the loss of control, the group derecognises the assets and liabilities of the subsidiary, any non-controlling

interests and the other components of equity related to the subsidiary. Any surplus or defi cit arising on the loss of

control is recognised in profi t or loss.

(b) ConsolidationThe consolidated fi nancial statements refl ect the fi nancial results of the group. All fi nancial results are consolidated

with similar items on a line by line basis except for investments in associates, which are included in the group’s results

as set out below.

Intra-group balances and transactions, and any unrealised income and expenses arising from intra-group transactions,

are eliminated. Unrealised gains arising from transactions with equity-accounted investees are eliminated against the

investment to the extent of the group’s interest in the investee. Unrealised losses are eliminated in the same way as

unrealised gains, but only to the extent that there is no evidence of impairment.

In respect of associates, unrealised gains and losses are eliminated to the extent of the group’s interest in these

entities. Unrealised gains and losses arising from transactions with associates are eliminated against the investment

in the associate.

(i) SubsidiariesSubsidiaries are entities controlled by the group. The group controls an entity when it is exposed to, or has rights

to, variable returns from its involvement with the entity and has the ability to affect those returns through its power

over the entity. The fi nancial results of subsidiaries are consolidated into the group’s results from acquisition date

until the date of loss of control.

Investments in subsidiaries in the company’s separate annual fi nancial statements are stated at cost less any

impairment losses. Transaction costs relating to the acquisition of a subsidiary are expensed during the year they

occur in profi t or loss.

(ii) AssociatesThe group’s interests in equity-accounted investees comprises interests in associates. Associates are those

entities in which the group has signifi cant infl uence, but not control, over the fi nancial and operating policies.

Investments in associates are accounted for using the equity method (equity-accounted investees) and are

recognised initially at cost. The cost of the investment includes transaction costs.

The consolidated fi nancial statements include the group’s share of the profi t or loss and other comprehensive

income, of equity-accounted investees, from the date that signifi cant infl uence commences until the date that

signifi cant infl uence ceases.

When the group’s share of losses exceeds its interest in an equity-accounted investee, the carrying amount of

that interest, including any long-term investments, is reduced to zero, and the recognition of further losses is

discontinued except to the extent that the group has an obligation or has made payments on behalf of the investee.

(iii) Acquisition of non-controlling interestsThe recognition of an increase and decrease in ownership interests in subsidiaries without a change in control

is accounted for as an equity transaction in the consolidated fi nancial statements. Accordingly, any premium or

discount on subsequent purchases of an equity instrument from the non-controlling interest is recognised directly

in the parent shareholders’ equity.



70


4.3 Foreign currency translationItems included in the fi nancial results of each entity are measured using the functional currency of that entity. The consolidated fi nancial results are presented in rand, which is Morvest Business Group Limited’s functional and presentation currency, rounded to the nearest thousand.

(a) Foreign currency transactionsTransactions in foreign currencies are translated to the respective functional currencies of group companies at exchange rates at the dates of the transactions.

Monetary assets and liabilities denominated in foreign currencies are translated to the functional currency at the exchange rate at the reporting date. Foreign currency differences are generally recognised in profi t or loss.

Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value are translated to the functional currency at the exchange rate at the date that the fair value was determined. Non-monetary items in a foreign currency that are measured in terms of historical cost are translated using the exchange rate at the date of the transaction. Foreign currency differences are generally recognised in profi t or loss.

(b) Foreign operationsThe assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on acquisitions, are translated into rand at the exchange rates at the reporting date. The income and expenses of foreign operations are translated into rand at the exchange rates at the dates of the transactions, at reporting date they are translated using average rates.

Foreign currency differences are recognised in other comprehensive income and accumulated in the translation reserve, except to the extent that the translation difference is allocated to non-controlling interest.

If settlement of a monetary item receivable from or payable to a foreign operation is neither planned nor likely to occur in the foreseeable future, then foreign currency differences arising from such an item form part of the net investment in the foreign operation. Accordingly, such differences are recognised in other comprehensive income and accumulated in the translation reserve.

Goodwill and fair value adjustments on identifi able assets and liabilities acquired arising on the acquisition of a foreign operation are treated as assets and liabilities of the foreign operation and translated at the rate of exchange prevailing at the end of each reporting period. Exchange differences arising are recognised in other comprehensive income.

4.4 Financial instrumentsAll fi nancial instruments are measured at fair value upon initial recognition when the group becomes party to the contractual terms of the instruments. Initial recognition of fi nancial instruments other than those carried at fair value through profi t and loss includes transaction costs. Subsequent to initial recognition, these instruments are measured as follows:

(a) Financial assetsThe group’s fi nancial assets are loans, trade and other receivables, cash and cash equivalents and available-for-sale fi nancial assets and investments.

Loans and receivablesLoans and receivables are fi nancial assets with fi xed or determinable payments that are not quoted in an active market. Such assets are recognised initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition, loans and receivables are measured at amortised cost using the effective interest method, less any impairment losses.

Appropriate allowances for estimated irrecoverable amounts are recognised in profi t or loss when there is objective evidence that the asset is impaired. Signifi cant fi nancial diffi culties of the debtor, probability that the debtor will enter bankruptcy or fi nancial reorganisation, and default or delinquency in payments (more than 60 days overdue) are considered indicators that the trade receivable is impaired. The allowance recognised is measured as the difference between the asset’s carrying amount and the present value of estimated future cash fl ows discounted at the effective interest rate computed at initial recognition.

Trade and other receivables carrying amount is reduced through the use of an allowance account, and the amount of the loss is recognised in profi t or loss within operating expenses. When a trade receivable is uncollectible, it is written


off against the allowance account for trade receivables. Subsequent recoveries of amounts previously written off are

credited against operating expenses in profi t or loss.

Loans and receivables comprise loans, trade receivables, cash and cash equivalents and other receivables.

For all fi nancial instruments carried at amortised cost where the effects of time value of money are not considered to

be material the instruments are not discounted as their face values approximate their amortised cost.

Cash and cash equivalentsSubsequent to initial recognition, cash and cash equivalents are measured at amortised cost. For statement of cash

fl ow purposes, bank overdrafts are offset against cash and cash equivalents. Cash and cash equivalents comprise

cash on hand and deposits held on call with banks.

(b) Financial liabilitiesThe group’s fi nancial liabilities are classifi ed as fi nancial liabilities at amortised cost. These liabilities consist of trade

and other payables, interest-bearing borrowings and non-interest-bearing borrowings.

Trade and other payablesAll trade and other payables are measured at amortised cost, using the effective interest method.

Interest-bearing borrowingsInterest-bearing borrowings are stated at amortised cost with any difference between cost and redemption value

being recognised in profi t or loss over the period of the borrowings on an effective interest basis.

Non-interest-bearing borrowingsNon-interest-bearing borrowings are stated at cost.

For all fi nancial instruments carried at amortised cost, where the effects of time value of money are not considered to

be material, the instruments are not discounted as their face values approximate their amortised cost.

(c) Derecognition of fi nancial instrumentsFinancial assets are derecognised if the group’s contractual rights to the cash fl ows from the fi nancial assets expire,

or if the group transfers the fi nancial assets to another party without retaining control or substantially all risks and

rewards of the asset.

Financial liabilities are derecognised if the group’s obligations specifi ed in the contract expire or are discharged or

cancelled.

4.5 Financial liabilities and equity instrumentsClassifi cation as debt or equityDebt and equity instruments issued by a group entity are classifi ed as either fi nancial liabilities or as equity in accordance

with the substance of the contractual arrangements, and the defi nitions of a fi nancial liability and an equity instrument.

Equity instrumentsAn equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its

liabilities. Equity instruments issued by the group are recognised as the proceeds received, net of direct issue costs.

4.6 Share capitalOrdinary sharesOrdinary shares are classifi ed as equity. Incremental costs directly attributable to the issue of ordinary shares are

recognised as a deduction from equity, net of any tax effects.

Repurchase, disposal and reissue of share capital (treasury shares)When share capital recognised as equity is repurchased, the amount of the consideration paid, which includes directly

attributable costs, net of any tax effects, is recognised as a deduction from equity. Repurchased shares are classifi ed

as treasury shares. When treasury shares are sold or reissued subsequently, the amount received is recognised as an

increase in equity, and the resulting surplus or defi cit on the transaction is presented in share premium.



72


4.7 DividendsDividends are recognised as a liability in the period in which they are declared.

4.8 Investment propertyInvestment property is initially measured at cost and subsequently at fair value with any change therein recognised in profi t or loss.

Investment property is property held to earn rental income and not for sale in the ordinary course of business, used in the production or supply of goods or services or for administrative purposes.

4.9 Property, plant and equipmentOwned assetsItems of property, plant and equipment are measured at cost less accumulated depreciation and accumulated impairment losses.

Cost includes expenditure that is directly attributable to the acquisition of the asset. The cost of self-constructed assets includes the cost of materials and direct labour, any other costs directly attributable to bringing the assets to a working condition for their intended use, and the costs of dismantling and removing the items and restoring the site on which they are located.

The gain or loss on disposal of an item of property, plant and equipment is determined by comparing the proceeds from disposal with the carrying amount of the property, plant and equipment, and is recognised net within other income/other expenses in profi t or loss.

Leased assetsLeases in terms of which the group assumes substantially all the risks and rewards of ownership are classifi ed as fi nance leases. Upon initial recognition, the leased asset is measured at an amount equal to the lower of its fair value and the present value of the minimum lease payments. Subsequent to initial recognition, the asset is accounted for in the same manner as owned items of property, plant and equipment.

Other leases are operating leases and the leased assets are not recognised in the group’s statement of fi nancial position.

Subsequent costsThe group recognises in the carrying amount of an item of property, plant and equipment, the cost of replacing part of such an item when that cost is incurred, it is probable that the future economic benefi ts embodied with the part will fl ow to the group and if its cost can be measured reliably, the carrying amount of the replaced part is derecognised. The costs of day-to-day servicing of property, plant and equipment are recognised in profi t or loss as incurred.

DepreciationDepreciation is based on the cost of an asset less its residual value.

Depreciation is recognised in profi t or loss on a straight-line basis over the estimated useful lives of each component of an item of property, plant and equipment. Leased assets are depreciated over the shorter of the lease term and their useful lives of the asset. If it is reasonably certain that the group will obtain ownership by the end of the lease term, the asset is then depreciated over the useful life of the asset.

The estimated useful lives for the current and comparative years are as follows:

Item Average useful life

Buildings 40 – 50 years

Plant and machinery 5 – 10 years

Motor vehicles 5 – 8 years

Computer equipment 3 – 6 years

Computer software 5 – 8 years

Furniture and fi ttings 10 – 13 years

Offi ce equipment 6 – 9 years

Security 5 years

Leasehold improvements 6 years

Study material 3 years

Signage 5 years


The residual value, useful life and depreciation methods for each asset are reviewed at the end of each fi nancial year and

adjusted if appropriate. Land is not depreciated.

Assets under construction are not depreciated and only depreciated when they are available for use. The estimation of

the useful lives of property, plant and equipment is based on historic performance as well as expectations about future

use and therefore requires a signifi cant degree of judgement to be applied by management. These depreciation rates

represent management’s current best estimate of the useful lives of the assets.

The gain or loss arising from the derecognition of an item of property, plant and equipment is included in profi t or loss

when the item is derecognised. The gain or loss arising from the derecognition of an item of property, plant and equipment

is determined as the difference between the net disposal proceeds, if any, and the carrying amount of the item.

4.10 GoodwillFor the measurement of goodwill at initial recognition, refer to accounting policy note 4.2 (a).

Goodwill is measured at cost less any accumulated impairment losses. In respect of equity-accounted investees, the

carrying amount of goodwill is included in the carrying amount of the investment, and an impairment loss on such

an investment is not allocated to any asset, including goodwill, that forms part of the carrying amount of the equity-

accounted investee. Impairments to investments in associates are allocated to the investment as a whole.

On disposal of the relevant cash-generating unit, the attributable amount of goodwill is included in the determination of

the profi t or loss on disposal. Impairments on goodwill are not reversed subsequently.

4.11 Intangible assetsIntangible assets are carried at cost less any accumulated amortisation and any impairment losses.

The amortisation period and the amortisation method for intangible assets are reviewed at the end of each fi nancial year

and adjusted if appropriate.

Amortisation is provided to write down the intangible assets, on a straight-line basis, over the fi nite useful life of the asset,

to zero as follows:

Item Useful life

Customer contracts 2–5 years

Patents 10 years

Amortisation methods, remaining useful lives and residual values are reassessed at the end of each reporting period and

adjusted if appropriate.

The amortisation of intangible assets is included in other operating expenses in profi t or loss.

The estimation of the useful lives of intangible assets is based on historic performance as well as expectations about

future use and therefore requires a signifi cant degree of judgement to be applied by management. These rates represent

management’s best estimate of the useful lives of these assets.

4.12 InventoriesInventories are measured at the lower of cost or net realisable value. The cost of inventories comprises all costs of

purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition.

The cost includes transport and handling costs, but excludes interest charges.

Costs are determined on the following bases:

• Raw materials are valued on a fi rst in, fi rst out (FIFO) basis

• Merchandise is valued on a weighted average basis

• Work in progress and fi nished goods on the weighted average basis

Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion

and selling expenses.

Write-downs to net realisable value and inventory losses are expensed in the period in which the write-downs or

losses occur.



74


The amount of any reversal of any write-down of inventories, arising from an increase in net realisable value, is recognised

as a reduction in the amount of inventories recognised as an expense in the period in which the reversal occurs. The

amount of the reversal of the inventory write-down is limited to the carrying amount of the inventory had no write-down

been recognised initially.

4.13 Impairment (a) Financial assets

A fi nancial asset is assessed at each reporting date to determine whether there is any objective evidence that it is

impaired. A fi nancial asset is considered to be impaired if objective evidence indicates that one or more events have

had a negative effect on the estimated future cash fl ows of that asset.

An impairment loss in respect of a fi nancial asset measured at amortised cost is calculated as the difference between

its carrying amount, and the present value of the estimated future cash fl ows discounted at the original effective

interest rate.

Individually signifi cant fi nancial assets are tested for impairment on an individual basis. The remaining fi nancial assets

are assessed collectively in groups that share similar credit risk characteristics.

An impairment loss is reversed if the reversal can be related objectively to an event occurring after the impairment

loss was recognised. For fi nancial assets measured at amortised cost the reversal is recognised in profi t or loss.

(b) Non-fi nancial assetsThe carrying amounts of the group’s non-fi nancial assets, other than inventories and deferred tax assets, are reviewed

at each reporting date to determine whether there is any indication of impairment. If any such indication exists, the

asset’s recoverable amount is estimated.

Goodwill is tested for impairment in terms of IAS 36 at least annually.

The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value less costs

to sell. In assessing value in use, the estimated future cash fl ows are discounted to their present value using a pre-tax

discount rate that refl ects current market assessments of the time value of money and the risks specifi c to the asset.

For the purpose of impairment testing, assets are grouped together into the smallest groups of assets that generate

cash infl ows from continuing use that are largely independent of the cash fl ows of other assets or groups of assets

(the “cash-generating unit”). The goodwill acquired in a business combination, for the purpose of impairment testing,

is allocated to cash-generating units that are expected to benefi t from the synergies of the combination.

An impairment loss is recognised whenever the carrying amount of an asset, or its cash-generating unit, exceeds its

recoverable amount. Impairment losses are recognised through profi t and loss.

Impairment losses recognised in respect of cash-generating units are allocated fi rst to reduce the carrying amount of

any goodwill allocated to cash-generating units (group of units) and then, to reduce the carrying amount of the other

assets in the unit (group of units) on a prorata basis.

The recoverable amount of the group’s non-fi nancial assets carried at amortised cost is calculated as the present

value of estimated future cash fl ows, discounted at the original effective interest rate (ie the effective interest rate

computed at initial recognition of these fi nancial assets).

The recoverable amount of other assets is the greater of their fair value less costs to sell and value in use. In assessing

value in use, the estimated future cash fl ows are discounted to their present value using a pre-tax discount rate that

refl ects current market assessments of the time value of money and the risks specifi c to the asset. For an asset that

does not generate largely independent cash infl ows, the recoverable amount is determined for the cash-generating

unit to which the asset belongs.

An impairment loss in respect of goodwill is not reversed.

In respect of other assets, impairment losses recognised in prior periods are assessed at each reporting date for any

indication that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change

in the estimates used to determine the recoverable amount.


An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.

4.14 ProvisionsA provision is recognised in the statement of fi nancial position when the group has a present legal or constructive obligation, that can be estimated reliably, as a result of a past event, and it is probable that an outfl ow of economic benefi ts will be required to settle the obligation. If the effect is material, provisions are determined by discounting the expected future cash fl ows at a pre-tax rate that refl ects current market assessments of the time value of money and, where appropriate, the risks specifi c to the liability.

The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation.

4.15 Income tax(a) Income tax expense

Income tax expense comprises current and deferred tax. Current tax and deferred tax is recognised in profi t or loss except to the extent that it relates to a business combination, or items recognised directly in equity or in other comprehensive income.

Current tax and deferred taxes are charged or credited directly to equity or other comprehensive income if the tax relates to items that are credited or charged, in the same or a different period, directly to equity or in other comprehensive income.

(b) Current taxationCurrent tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years.

Current tax for current and prior periods is, to the extent unpaid, recognised as a liability. If the amount already paid in respect of current and prior periods exceeds the amount due for those periods, the excess is recognised as an asset.

(c) Deferred taxationDeferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities in the fi nancial statements and the corresponding tax bases used in the computation of taxable profi t. Deferred tax liabilities are generally recognised for all taxable temporary differences. Deferred tax assets are generally recognised for all deductible temporary differences to the extent that it is probable that taxable profi ts will be available against which those deductible temporary differences can be utilised. Such deferred tax assets and liabilities are not recognised if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profi t/loss nor the accounting profi t/loss.

Deferred tax liabilities are not recognised for taxable temporary differences associated with investments in subsidiaries and associates, and interests in joint ventures, except where the group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary differences associated with such investments and interests are only recognised to the extent that it is probable that there will be suffi cient taxable profi ts against which to utilise the benefi ts of the temporary differences and they are expected to reverse in the foreseeable future.

The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that suffi cient taxable profi ts will be available to allow all or part of the asset to be recovered.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset realised, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period. The measurement of deferred tax liabilities and assets refl ects the tax consequences that would follow from the manner in which the group expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority, and the group intends to settle its current tax assets and liabilities on a net basis.



76


4.16 RevenueRevenue is measured at the fair value of the consideration received or receivable for the sales of goods and the rendering

of services in the ordinary course of the group’s activities. Revenue is shown net of indirect taxes, estimated returns,

rebates and trade discounts and after eliminating sales within the group.

Goods sold and services renderedRevenue from sale of goods and rendering of services is recognised when it is probable that the economic benefi ts

associated with the transaction will fl ow to the group and the amount of revenue, and associated costs incurred or

to be incurred, can be measured reliably. The amount of revenue is not considered to be reliably measurable until all

contingencies relating to the sale have been resolved.

(a) Sales of goods – packaging, printing and consumablesRevenue on sale of customised packaging, printing and consumables is recognised in profi t or loss when a signifi cant

portion of the risks and rewards of ownership have been transferred to the third party and the group no longer retains

managerial involvement or control over the goods.

(b) Rendering of servicesThe group provides Business Support Services (“BSS”) and Information Computer Technology (“ICT”) services.

Revenue from these services rendered is recognised in profi t or loss in proportion to the stage of completion of the

transaction at the reporting date. The stage of completion is assessed by reference to the percentage of completion

and service level agreements with customers.

(c) Rental incomeRental income from subleased property is recognised on a straight-line basis over the term of the lease in line with

IAS 17.

(d) Interest receivedInterest is recognised, in profi t or loss, using the effective interest rate method.

(e) Dividends receivedDividends are recognised, in profi t or loss, when the company’s right to receive payment has been established.

(f) Deferred incomeRevenue received before goods and services are delivered is recognised as deferred income and transferred to profi t

and loss once the goods are delivered and when the services have been performed.

4.17 Employee benefi tsShort-term employee benefi tsThe cost of short-term employee benefi ts are recognised in the period in which the service is rendered and are

not discounted.

The expected cost of compensated absences is recognised as an expense as the employees render services that

increase their entitlement, or in the case of non-accumulating absences, when the absence occurs.

The expected cost of profi t sharing and bonus payments is recognised as an expense when there is a legal or constructive

obligation to make such payments as a result of past performance.

Defi ned contribution plansPayments to defi ned contribution retirement benefi t plans are charged as an expense as related service is rendered. The

plan is governed by the Pension Funds Act.

Share-based paymentsThe group issues equity-settled share options to its executive employees and management The fair value of options

granted is recognised as an expense with a corresponding increase in equity. The fair value is measured at grant date

and is spread over the period during which the employees become unconditionally entitled to the option. Fair value is


measured using the binomial option-pricing model taking into account the terms and conditions upon which the options

were granted. The group revises at each reporting date its estimate of the number of options that are expected to vest

based on the non-market vesting conditions. The impact of the revision to original estimates, if any, is recognised in profi t

or loss with a corresponding adjustment to equity.

Share-based payments, granted that do not vest until the counterparty completes a specifi ed period of service, are

accounted for as the services rendered by the counterparty.

The key assumptions for staff turnover per annum, early-exercise multiple, risk-free rate, share price volatility and dividend

yield are based on management’s best estimate at the date of valuation.

Refer to note 27 of the fi nancial statements for further details.

4.18 ExpensesLeased payments(a) Operating lease payments

Payments made under operating leases are recognised in profi t or loss on a straight-line basis over the term of

the lease. Lease incentives received are recognised as an integral part of the total lease expense, over the term of

the lease.

(b) Finance lease paymentsMinimum lease payments are apportioned between the fi nance expense and the reduction of the outstanding liability.

The fi nance expense is 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.

(c) Interest paidThe interest expense component of fi nance lease payments is recognised in profi t and loss using the effective interest

rate method.

4.19 Investment income and fi nance costsFinance income comprises interest income on funds invested and dividend income.

Finance costs comprise interest expense on borrowings, fi nance leases and bank overdrafts.

Foreign currency gains and losses are reported on a net basis as either fi nance income or fi nance cost depending on

whether foreign currency movements are in a net gain or net loss position.

4.20 Borrowing costsBorrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets

that necessarily take a substantial period of time to get ready for their intended use or sale, are capitalised as part of the

costs of those assets when it is probable that they will result in future economic benefi ts for the group and the cost can be

reliably measured, until such time as the assets are substantially ready for their intended use or sale.

Investment income earned on the temporary investment of specifi c borrowings pending their expenditure on qualifying

assets is deducted from the borrowing costs eligible for capitalisation.

All other borrowing costs are recognised in profi t or loss in the period in which they are incurred.

4.21 Earnings per share and headline earnings per share(a) Earnings per share

The group presents basic and diluted earnings per share data for its ordinary shares. Basic earnings per share is

calculated by dividing the profi t or loss attributable to ordinary shareholders of the group by the weighted average

number of ordinary shares outstanding during the year, adjusted for own shares held. Diluted earnings per share is

determined by adjusting the profi t or loss attributable to ordinary shareholders and the weighted average number of

ordinary shares outstanding, adjusted for own shares held and for the effects of all dilutive potential ordinary shares.

(b) Headline earnings per shareHeadline earnings per share is calculated as per the rules set out in Circular 2/2013 – Headline Earnings.



78


4.22 Segment reportingAn operating segment is a component of the group that engages in business activities from which it may earn revenues and

incur expenses, including revenues and expenses that relate to transactions with any of the group’s other components.

All operating segments’ operating results are reviewed regularly by the group’s CEO to make decisions about resources

to be allocated to the segment and to assess its performance, and for which discrete fi nancial information is available.

Segment results that are reported to the CEO include items directly attributable to a segment as well as those that

can be allocated on a reasonable basis. Unallocated items comprise mainly corporate assets (primarily the company’s

headquarters), head offi ce expenses, and income tax assets and liabilities.

Segment capital expenditure is the total cost incurred during the year to acquire property, plant and equipment, and

intangible assets other than goodwill.

5. Determination of fair valuesA number of the group’s accounting policies and disclosures require the determination of fair value, for both fi nancial and non-

fi nancial assets and liabilities. Fair values have been determined for measurement and/or disclosure purposes based on the

following methods. When applicable, further information about the assumptions made in determining fair values is disclosed in

the notes specifi c to that asset or liability.

Business combinationsFair values of all identifi able assets and liabilities included in the business combination are determined by reference to market

values of those or similar items, where available, or by discounting expected future cash fl ows using the group’s discount rate

to present values.

Equity and debt securitiesThe fair value of equity and debt securities is determined by reference to their quoted closing bid price at the reporting date, or

if unquoted, determined using a valuation technique. Valuation techniques employed include market multiples and discounted

cash fl ow analysis using expected future cash fl ows and a market-related discount rate.

Loans and other receivablesThe fair value of loans and other receivables is estimated at the present value of future cash fl ows, discounted at the

market rate of interest at the reporting date. This fair value is determined for disclosure purposes or when acquired in a

business combination.

Other liabilities at amortised costFair value, which is determined for disclosure purposes, is calculated based on the present value of future principal and interest

cash fl ows, discounted at the market rate of interest at the reporting date. For fi nance leases the market rate of interest is

determined by reference to similar lease agreements.

Share-based paymentsFair value of the options is measured using the Black-Scholes option pricing models where applicable. The expected life used in

the models has been adjusted, based on management’s best estimate, for the effects of non-transferability, exercise restrictions

and behavioural considerations such as volatility, dividend yield and the vesting period. The fair value takes into account the

terms and conditions on which these incentives are granted.

6. New standards and interpretations6.1 Standards and interpretations in issue not yet effective

At the date of the authorisation of these fi nancial statements, the following standards and interpretations that may be

expected to impact the group were in issue but not effective:

IFRS 2: Share-based payment• Amendment: Defi nitions changed for vesting condition and service condition; defi nition added for performance

condition and service condition. Effective annual periods beginning on or after 1 July 2014 (prospective for transactions

with a grant date on or after this date).


IFRS 3: Business Combinations• Amendment: Contingent consideration shall be treated in accordance with the IFRS 9 (IAS 39) requirements where it

is a fi nancial instrument, or it shall be measured at fair value at each reporting date with changes recognised in profi t

or loss. Effective annual periods beginning on or after 1 July 2014 (prospective for business combinations occurring

on or after this date).

• Amendment: Accounting for the formation of joint arrangements in the fi nancial statements of the joint arrangement

itself is scoped out of IFRS 3. Effective annual periods beginning on or after 1 July 2014 (prospectively).

IFRS 8: Operating segments• Amendments: A brief description of the operating segments that have been aggregated in accordance with IFRS 8.12

and the economic indicators assessed in determining that the segments share similar economic characteristics must

be disclosed where this judgement is applied.

A reconciliation of reportable segments’ assets to the entity’s is only required if the segment assets are reported in

accordance with paragraph 23. Effective annual periods beginning on or after 1 July 2014.

IFRS 9: Financial instruments• New standard: Phase 1: Classifi cation and measurement of fi nancial assets and fi nancial liabilities and Phase 3: Hedge

accounting form the fi rst and second parts of a three-part project to replace IAS 39 Financial Instruments: Recognition

and measurement. This is currently open.

• Amendment: Fair value adjustments to investments in equity instruments through a contingent consideration on a

business combination may not be presented through other comprehensive income. Effective annual periods beginning

on or after 1 July 2014 (prospective for business combinations occurring on or after this date).

• Amendment: Financial liabilities raised due to contingent considerations in business combinations are subsequently

measured at fair value through profi t and loss. Effective annual periods beginning on or after 1 July 2014 (prospective

for business combinations occurring on or after this date).

IFRS 13: Fair value measurement• Clarifi cation: The portfolio exemption applies to all contracts within the scope of and accounted for in accordance with

IAS 39 or IFRS 9, regardless of whether they meet the defi nitions per IAS 32. Effective annual periods beginning on or

after 1 July 2014 (prospectively).

IFRS 15: Revenue from contracts with customers • New standard that establishes a single, comprehensive and robust framework for the recognition, measurement and

disclosure of revenue. Effective annual periods beginning on or after 1 January 2017 (prospectively).

IAS 19: Employee benefi ts• Amendment: Simplifi cation of accounting for contributions by employees which are independent of the number of years

for defi ned benefi t plans. Effective annual periods beginning on or after 1 July 2014 (prospectively).

IAS 24: Related party disclosures• The defi nition of related parties includes the entity, or any member of a group of which it is a part, that provides key

management personnel services to the reporting entity or its parent. Effective annual periods beginning on or after

1 July 2014.

• Details of the individual employee benefi ts do not need to be disclosed for an entity that provides key management

personnel services. Effective annual periods beginning on or after 1 July 2014.

• The amounts incurred for key management personnel services from an entity must be disclosed. Effective annual

periods beginning on or after 1 July 2014.

IAS 19: Employee benefi ts• Amendments to Defi ned Benefi t Plans: Employee Contributions whereby the requirements in IAS 19 for contributions

from employees or third parties that are linked to service have been amended. Effective for annual periods beginning

on or after 1 July 2014.



80


IAS 37: Provisions, contingent liabilities and contingent assets• Amendment: Contingent consideration of an acquirer in a business combination is now scoped out of IAS 37. Effective

annual periods beginning on or after 1 July 2014 (prospective for business combinations occurring on or after this date)

IAS 38: Intangible assets• Amendment: On revaluation the carrying amount of an asset is adjusted to that value in one of the following ways:

i. The gross carrying amount is adjusted consistently with the valuation (eg change the total or change the carrying

amount to that with accumulated depreciation adjusted proportionately).

ii. The accumulated depreciation is eliminated against the gross carrying amount of the asset. Effective for annual

periods beginning on or after 1 July 2014 (applicable to all revaluations recognised in annual periods beginning on or

after the date of initial application and in the immediately preceding annual period).

• Amendment: includes a rebuttable presumption that an amortisation method that is based on revenue is inappropriate.

Effective for annual periods beginning on or after 1 January 2016 (prospectively).

IAS 39: Financial instruments: recognition and measurement• Amendment: Contingent consideration of an acquirer in a business combination is classifi ed as a fi nancial liability

or fi nancial asset at fair value through profi t or loss. Effective for annual periods beginning on or after 1 July 2014

(prospective for business combinations occurring on or after this date).

IAS 40: Investment property• Clarifi cation of scope: When exercising judgement to determine whether an acquisition of a property is the acquisition

of an investment property or a business combination. The judgement is exercised within the scope of IFRS 3 Business

Combinations. Effective for annual periods beginning on or after 1 July 2014 (prospectively for acquisitions of

investment property occurring on or after this date)

The group is considering what the impact of these new standards on the group and company will be. All standards

and interpretations will be adopted at their effective dates (except for those standards and interpretations that are not

applicable to the entity).


for the year ended 31 May 2014

Statement of comprehensive income

Group

Notes 2014

R’000 2013

R’000

Revenue 2 1 100 757 956 164

Cost of sales (610 944) (427 351)

Gross profit 489 813 528 813

Other income 4 066 913

Other operating expenses (366 462) (475 505)

Operating (loss)/profit 3 127 417 54 221

Investment income 5 2 208 3 139

Finance costs 6 (15 286) (11 189)

Profit/(loss) on sale of business 7 (1 703) 6 985

Profit before taxation 112 636 53 156

Taxation 8 (40 563) (29 579)

Profit 72 073 23 577

Other comprehensive income/(loss) for the year

Items that may be reclassified to profit or loss

Foreign operations – foreign currency translation differences (732) 2 087

Total comprehensive income for the year 71 341 25 664

Profit attributable to:

Equity holders of the parent 35 563 11 643

Non-controlling interest 36 510 11 934

72 073 23 577

Total comprehensive income attributable to:

Owners of the parent 34 831 13 730


71 341 25 664

Earnings per share

– Basic (cents per share) 9 7,81 2,38

– Diluted (cents per share) 9 6,28 2,38



82

at 31 May 2014

Statement of fi nancial position

Group

Notes 2014

R’000 2013

R’000

Assets

Non-current assets 320 261 353 300

Investment property 10 2 331 –

Property, plant and equipment 11 141 153 143 735

Goodwill 12 133 562 150 680

Intangible assets 13 296 1 780

Other financial assets 14 3 306 –

Deferred taxation 15 39 613 57 105

Current assets 323 634 328 945

Inventories 16 19 198 30 455

Trade and other receivables 17 148 668 194 488

Other financial assets 14 11 184 5 534

Taxation receivables 7 721 15 095

Operating lease assets 16 242

Cash and cash equivalents 18 136 847 83 131

Total assets 643 895 682 245

Equity and liabilities

Capital and reserves 261 709 229 582

Share capital 19 287 435 287 435

Foreign currency translation reserve 20 (10 799) (10 067)

Retained earnings (19 855) (50 868)

Share-based payment reserve 4 928 3 082


Total equity 313 830 266 561

Non-current liabilities 94 114 87 141

Vendor liabilities 21 – 4 717

Other financial liabilities 22 68 608 56 991

Finance lease obligations 23 18 562 19 590


Current liabilities 235 951 328 543

Vendor liabilities 21 14 430 17 714

Other financial liabilities 22 42 941 27 892

Finance lease obligations 23 4 387 8 735

Trade and other payables 24 153 519 244 079

Provisions 25 180 180

Operating lease liabilities – 1 079

Current tax payables 19 289 28 864

Bank overdraft 18 1 205 –

Total equity and liabilities 643 895 682 245



Statement of changes in equity

Attributable to equity holders of the parent

Share capital

Share premium

Share-based

payment reserve

Foreign currency

trans-lation

reserve Retained earnings Total

Non-control-

ling interest

Total equity

R’000 R’000 R’000 R’000 R’000 R’000 R’000 R’000

Balance at 31 May 2012 52 296 356 1 889 (12 154) (57 432) 228 711 38 688 267 399

Profit for the year – – – – 11 643 11 643 11 934 23 577

Other comprehensive income for the year – – – 2 087 – 2 087 – 2 087

Total comprehensive income for the year – – – 2 087 11 643 13 730 11 934 25 664

Share-based payment expense – – 1 193 – – 1 193 – 1 193

Share repurchases (1) (8 972) – – – (8 973) – (8 973)

Start-up companies’ non-controlling interest – – – – – – 603 603

Subsidiaries’ acquired non-controlling interest – – – – – – 6 227 6 227

Dividends paid – – – – (5 079) (5 079) – (5 079)

Dividends to non-controlling interest – – – – – – (20 473) (20 473)

Balance at 31 May 2013 51 287 384 3 082 (10 067) (50 868) 229 582 36 979 266 561

Profit for the year – – – – 35 563 35 563 36 510 72 073

Other comprehensive incomefor the year – – – (732) – (732) – (732)

Total comprehensive income for the year – – (732) 35 563 34 831 36 510 71 341

Issue of share capital 22 35 525 – – – 35 547 – 35 547

Share repurchases (1) (2 126) – – – (2 127) – (2 127)

Cancelled shares 1 2 126 – – – 2 127 – 2 127

Share-based payment expense – – 1 846 – – 1 846 – 1 846

Shares issued for BEECo share scheme 7 10 846 – – – 10 853 – 10 853

Shares utilised for BEECO/MANCo share schemes (29) (46 371) – – – (46 400) – (46 400)

Disposal of subsidiary – – – – – – (6 695) (6 695)

Dividends paid – – – – (4 550) (4 550) – (4 550)

Dividends to non-controlling interest – – – – – – (14 673) (14 673)

Balance at 31 May 2014 51 287 384 4 928 (10 799) (19 855) 261 709 52 121 313 830

Notes 19 19 27 20



84


Statement of cash fl ows

Group

2014 2013

Notes R’000 R’000

Cash flows from operating activities

Cash generated by operations 28 122 526 138 533


Taxation paid 29 (27 751) (33 186)

Finance costs 6 (11 889) (9 147)

Net cash from operating activities 85 094 99 339

Cash flows from investing activities

Proceeds on disposal of property, plant and equipment 1 219 1 559

Acquisition of property, plant and equipment 11 (19 057) (82 638)

Acquisition of investment properties 10 (2 331) –

Business acquired – 5 657

(Loss)/proceeds on sale of business 30 (2 522) 17 290

Increase in financial assets 146 1 677

Net cash used in investing activities (22 545) (56 455)

Cash flows from financing activities

Share repurchase (2 127) (8 973)

Decrease in financial liabilities (16 847) (19 957)

Increase in financial liabilities 44 716 14 700

Decrease in finance lease liabilities (5 376) (13 703)

Decrease of vendor liabilities (11 180) (10 000)

Dividends paid (4 551) (5 079)

Dividends paid to non-controlling interest (14 673) (20 473)

Net cash (used in)/generated by financing activities (10 038) (63 485)

Net increase/(decrease) in cash and cash equivalents 52 511 (20 601)

Cash and cash equivalents at the beginning of the year 83 131 103 732

Cash and cash equivalents at the end of the period 18 135 642 83 131



Notes to the fi nancial statements

1. Segment reportThe group has three segments, as described below, which are the group’s strategic divisions. The strategic divisions offer different products and services, and are managed separately because they require different technology and marketing strategies. For each of the strategic divisions, the group’s CEO (the chief operating decision maker) reviews internal management reports on at least a quarterly basis. The following summary describes the operations in each of the group’s segments:

Segments Operations

Business and Industrial Services Consulting, professional services and outsourcing services

ICT Solutions Application, implementation and infrastructure services

Retail and Other Investments Retail, manufacturing, eCommerce, distribution and income generating property

The group started a new retail and other investments during the 2012 financial year. However, this segment does not meet the requirements of IFRS 8 for it to be reported separately and has been included in the ICT Solutions segment.

Information regarding the results of each reportable segment is included below. Performance is measured based on segment profit after income tax, as included in the internal management reports that are reviewed by the group’s CEO. Segment profit is used to measure performance as management believes that such information is the most relevant in evaluating the results of certain segments relative to other entities that operate within these industries.

Business and Industrial Services ICT Solutions Corporate Eliminations Total

2014 2013 2014 2013 2014 2013 2014 2013 2014 2013

R’000 R’000 R’000 R’000 R’000 R’000 R’000 R’000 R’000 R’000

Revenue

External revenues 510 281 560 927 589 819 395 237 657 – – – 1 100 757 956 164

Inter-segmental revenue 66 290 45 543 66 191 224 023 138 565 183 310 (271 046) (452 876) – –

Total segment revenue 576 571 606 470 656 010 619 260 139 222 183 310 (271 046) (452 876) 1 100 757 956 164

Interest income 390 1 294 1 011 1 659 9 163 707 (8 356) (521) 2 208 3 139

Interest expense (1 302) (1 094) (8 958) (1 013) (22 223) (13 029) 17 197 3 947 (15 286) (11 189)

Depreciation (9 380) (8 312) (5 720) (4 471) (1 199) (1 786) – – (16 299) (14 569)

Other material non-cash items:

– Impairments 12 325 23 785 – 9 680 – – – 12 325 33 465

Profit/(loss) for the year 38 955 15 009 63 537 41 448 3 824 65 553 (34 243) (98 433) 72 073 23 577

Other information

Capital expenditure 1 567 28 402 2 145 7 107 15 345 79 640 – – 19 057 115 149



86


Notes to the fi nancial statements continued

Business and Industrial Services ICT Solutions Corporate Eliminations Total

2014 2013 2014 2013 2014 2013 2014 2013 2014 2013

R’000 R’000 R’000 R’000 R’000 R’000 R’000 R’000 R’000 R’000

Segment report (continued)Statement of financial position

AssetsSegment assets 548 673 544 818 382 844 323 784 894 589 934 352 (1 182 211) (1 120 709) 643 895 682 245

Consolidated total assets 548 673 544 818 382 844 323 784 894 589 934 352 (1 182 211) (1 120 709) 643 895 682 245

LiabilitiesSegment liabilities 194 034 218 131 295 161 329 266 652 142 639 302 (811 272) (771 015) 330 065 415 684

Consolidated total liabilities 194 034 218 131 295 161 329 266 652 142 639 302 (811 272) (771 015) 330 065 415 684

The accounting policies of the reportable segments are the same as the group’s accounting policies. Segment profit represents the profit earned by each segment.

In presenting information on the basis of geographical segments, segment revenue is based on the geographical location of customers. Segment assets are based on the geographical allocation of the assets.

All assets are allocated to reportable segments. Goodwill, deferred tax and current tax receivable/payable is allocated to group services. Assets used jointly by reportable segments are allocated on the basis of the revenues earned by individual reportable segments; and all liabilities are allocated to reportable segments. Liabilities for which reportable segments are jointly liable are allocated in proportion to segment assets.

Geographical informationThe group operates in two main geographical areas:

• South Africa – the group derives revenue from consulting, professional services and outsourcing services as well as from application, implementation and infrastructure services. All group services are also included here.

• Rest of Africa – the group derives revenue from consulting, professional services and outsourcing services.

South Africa Rest of Africa Total

2014 2013 2014 2013 2014 2013

R’000 R’000 R’000 R’000 R’000 R’000

Geographical information

External revenue 1 031 416 919 720 69 341 36 444 1 100 757 956 164

Profit/(loss) for the year 65 666 22 573 6 407 1 004 72 073 23 577

Segment assets 605 558 661 213 38 337 21 032 643 895 682 245

Segment liabilities 318 560 399 785 11 505 15 899 330 065 415 684

Capital expenditure 18 923 114 214 134 935 19 057 115 149

The revenue from external parties and all other items of income, expenses, profits and losses reported in the segment report is measured in a manner consistent with that in the statement of comprehensive income.

Major customerRevenue from one customer of the group represented approximately R264 million (2013: R293 million) of the total revenue recognised in the current year and relates to the business support services segment.


Group

2014 R’000

2013 R’000

2. RevenueTotal revenue

Sale of goods 441 219 455 686

Rendering of services 659 538 500 478

1 100 757 956 164

3. Other operating expensesAmortisation 1 484 39 265

Impairments 12 325 33 465

Depreciation 16 299 14 569

Consulting fees 49 220 66 236

Directors’ emoluments 17 390 15 633

– Non-executive directors’ fees 1 083 1 063

Executive directors

– Salaries 7 121 6 775

– Bonuses 6 575 5 946

– Allowances and post-employment benefits 2 611 1 849

Foreign exchange (profit)/loss (1 554) 1 714

Profit on disposal of property, plant and equipment (284) (459)

Operating lease rentals 16 167 18 189

– Premises 12 611 16 816

– Equipment 3 556 1 373

Staff costs excluding directors’ emoluments 134 507 123 461

– remuneration (short term) 127 353 117 361

– provident fund contributions (post-employment benefits) 5 308 4 907

– equity-settled share-based payments expense 1 846 1 193

4. ImpairmentsImpairment of goodwill 12 325 33 465

12 325 33 465

Impairment of goodwill

Refer to note 12 for the details relating to the impairment of goodwill recognised in the current reporting period.

5. Investment income Interest received – bank 2 208 3 139

2 208 3 139

6. Finance costsFinancial and vendor liabilities 11 889 9 378

Finance leases 3 224 1 403

Bank 173 408

15 286 11 189



88



Group

2014 2013

R’000 R’000

7. (Loss)/profi t on sale of businessSAB and T Business Innovations Group – 6 985

Mint Management Technologies (1 703) –

(1 703) 6 985

Refer to note 30 for the details of the disposal.

8. TaxationSouth African normal tax

– Current year 15 285 42 301

– Capital gains tax 2 810 2 240

Foreign normal taxation

– Current year 7 455 810

Deferred taxation

– Temporary differences 15 013 (15 772)

40 563 29 579

Reconciliation of rate of taxation % %

South African normal tax rate 28,00 28,00

Non-deductible expenses 5,41 24,01

(Loss)/profit on sale of business 1,87 0,15

Differences in taxes for foreign operations 0,98 0,16

Assessed losses utilised previously not recognised (1,40) –

Assessed loss not recognised 1,15 3,33

Effective rate 36,01 55,65

9. Earnings per shareEarnings per share (cents) 7,81 2,38

Diluted earnings per share (cents) 6,28 2,38

Headline earnings per share (cents) 10,23 8,20

Diluted headline earnings per share (cents) 8,22 8,20

Net asset value per share (cents) 29,74 38,10

Net tangible asset per share (cents) 14,53 12,80

9.1 Earnings/headline earnings Earnings used in the calculation of basic and diluted earnings per share 35 563 11 643

Headline earnings attributable to ordinary shareholders 46 576 40 032


GrossR’000

Tax R’000

Non-controlling

interestR’000

NetR’000

9. Earnings per share (continued)9.2 Reconciliation between earnings and

headline earnings:2014

Profit attributable to ordinary shareholders 112 636 (40 563) (36 510) 35 564

Goodwill impairment 12 325 – – 12 325

Loss on disposal of Mint Management Technologies 1 703 (2 811) – (1 108)

Profit on disposal of property, plant and equipment (284) 80 – (204)

Headline earnings attributable to ordinary shareholders 126 380 (43 294) (36 510) 46 576

2013

Profit attributable to ordinary shareholders 53 156 (29 579) (11 934) 11 643

Goodwill impairment 33 465 – – 33 465

Profit on sale of subsidiary (6 985) 2 240 – (4 745)

Profit on disposal of property, plant and equipment (459) 128 – (331)

Headline earnings attributable to ordinary shareholders 79 177 (27 211) (11 934) 40 032

2014 2013

Shares Shares

’000 ’000

9.3 Weighted average number of shares and diluted weighted average number of sharesWeighted average number of shares 455 245 488 294

Diluted weighted average number of shares 566 359 488 294

Total shares in issue 880 000 679 159

Reconciliation between the number of shares used for earnings per share and diluted earnings per share:

Number of shares used for earnings per share 455 245 488 294

BEECo share scheme 29 613 –

MANCo share scheme 2 613 –

BVI share scheme 78 888 –

Number of shares used for diluted earnings per share 566 359 488 294

Group

2014 2013

R’000 R’000

10. Investment propertyReconciliation of carrying amount

Balance at 1 June 2013 – –

Acquisitions 2 331 –

Balance at 31 May 2014 2 331 –



90



10. Investment property (continued)Description of propertiesPhoenix View EstateThis property situated at Phoenix View Estate, Noordwyk extension 95 township, City of Johannesburg metropolitan was purchased on 7 June 2013 for R680 000. The fair value of the property was obtained from comparable selling value of property prices in Noordwyk area. The fair value of the property as at 31 May 2014 amounting to R680 000 is deemed to be the fair value of the property.

Frederick Drive propertyThe property situated at number 1 Frederick Drive, Noordwyk was purchased on 4 July 2013 for R1 651 257. The fair value of the property as at 31 May 2014 determined by using the fair value of the properties in Noordwyk amounts to R1 651 257.

Measurement of fair valueThe fair value of R2 331 257 as shown above has been categorised as a level 2 fair value based on the inputs to the valuation technique used.

Cost 2014

R’000

Accumu-lated

depre-ciation

2014R’000

Carrying amount

2014R’000

Cost 2013

R’000

Accumu-lated

depre-ciation

2013 R’000

Carrying amount

2013R’000

11. Property, plant and equipmentPlant and machinery 64 112 (27 747) 36 365 74 541 (32 369) 42 172

Under construction – – – 84 865 – 84 865

Land and buildings** 93 415 (1 773) 91 642 – – –

Furniture and fittings 7 345 (3 827) 3 518 7 136 (4 256) 2 880

Motor vehicles 9 880 (8 595) 1 285 9 425 (6 179) 3 246

Office equipment 3 702 (2 858) 844 4 599 (3 963) 636

Computer equipment 19 052 (13 308) 5 744 34 094 (26 808) 7 286

Leasehold improvement 7 264 (5 509) 1 755 9 930 (7 280) 2 650

204 770 (63 617) 141 153 224 590 (80 855) 143 735

Reconciliation of property, plant and equipment

Openingbalance

R’000 Additions

R’000 Disposals

R’000Transfers

R’000

Depre-ciationR’000

Closing balance

R’000

2014

Plant and machinery 42 172 1 772 (65) – (7 514) 36 365

Under construction 84 865 8 550 – (93 415) – –

Land and buildings – – – 93 415 (1 773) 91 642

Furniture and fittings 2 880 2 971 (1 218) – (1 115) 3 518

Motor vehicles 3 246 560 (785) – (1 736) 1 285

Office equipment 636 656 (111) – (337) 844

Computer equipment 7 286 4 548 (3 161) – (2 929) 5 744

Leasehold improvement 2 650 – – – (895) 1 755

143 735 19 057 (5 340) – (16 299) 141 153


Openingbalance

R’000

Additions business

combinations R’000

Disposals R’000

TransfersR’000

Depre-ciationR’000

Closing balance

R’000

11. Property, plant and equipment (continued)2013

Plant and machinery 9 273 – 39 951 (568) (6 484) 42 172

Under construction 21 703 – 63 162 – – 84 865

Furniture and fittings 2 831 77 878 (258) (648) 2 880

Motor vehicles 3 541 73 1 956 (302) (2 022) 3 246

Office equipment 1 045 116 586 (208) (903) 636

Computer equipment 4 638 534 5 958 (667) (3 177) 7 286

Leasehold improvement 1 135 104 2 658 – (1 247) 2 650

Study material 8 – – – (8) –

Signage 80 – – – (80) –

44 254 904 115 149 (2 003) (14 569) 143 735

* Disposals relate to Mint Management Technologies amounting to R3 618 000 and other disposals amounting to R1 722 000

(2013: R2 002 522) were disposed during the normal course of business.

Leased property, plant and equipmentThe group leases various classes of property, plant and equipment under a number of finance leases. At 31 May 2014, the net carrying amount of leased property, plant and equipment that is secured under finance leases is as follows:

Group

2014 2013

R’000 R’000

Plant and machinery 14 100 31 083

Motor vehicles 1 154 3 061

15 254 34 144

Property, plant and equipment under constructionDuring 2014, the group finalised construction of the new office building. The total cost incurred to complete the construction was R93 415 411 including land (2013: R84 865 248). A mortgage bond has been covered by Investec Bank Limited as described in note 22.

** The land is situated at number 188 14th Street, Stand 4052709, Randjesfontein, Midrand, 1685. The land was purchased on

14 November 2011 for R17 100 000.

A register with details of the land and building is available for inspection by shareholders or their duly authorised representatives at the registered office of the company and its respective subsidiaries.

Cost 2014

R’000

Accumu-lated

impair-ment 2014

R’000

Carrying amount

2014R’000

Cost 2013

R’000

Accumu-lated

impair-ment2013

R’000

Carrying amount

2013R’000

12. GoodwillGoodwill 200 329 (66 767) 133 562 200 329 (49 649) 150 680

200 329 (66 767) 133 562 200 329 (49 649) 150 680



92



Opening balance

R’000

Additions business

combinations R’000

Disposals R’000

Impairment R’000

Closing balance

R’000

12. Goodwill (continued)Reconciliation of goodwill

2014

Goodwill 150 680 – (4 793) (12 325) 133 562

150 680 – (4 793) (12 325) 133 562

2013

Goodwill 178 067 6 078 – (33 465) 150 680

178 067 6 078 – (33 465) 150 680

Cost 2014

R’000

Accumu-lated

impair-ment 2014

R’000

Carrying amount

2014R’000

2014

The aggregate cost of goodwill allocated to each unit is as follows:

Red Edge Solutions (Proprietary) Limited 65 121 – 65 121

Morvest Information Communication and Technology CGU 50 277 (29 273) 21 004

– Advocate Solutions (Proprietary) Limited 6 032 – 6 032

– Intergraph Systems Southern Africa (Proprietary) Limited 44 245 (29 273) 14 972

Morvest Mithratech (Proprietary) Limited 26 338 (17 438) 8 900

Mint Management Technologies (Proprietary) Limited 20 056 (20 056) –

R and S Consulting (Proprietary) Limited 32 459 – 32 459

iSolve Business Solutions (Proprietary) Limited* 6 078 – 6 078

200 329 (66 767) 133 562

2013

The aggregate cost of goodwill allocated to each unit is as follows:

Red Edge Solutions (Proprietary) Limited 65 121 – 65 121

Morvest Information Communication and Technology CGU 50 277 (29 273) 21 004

– Advocate Solutions (Proprietary) Limited 6 032 – 6 032

– Intergraph Systems Southern Africa (Proprietary) Limited 44 245 (29 273) 14 972

Morvest Mithratech (Proprietary) Limited 26 338 (5 113) 21 225

Mint Management Technologies (Proprietary) Limited 20 056 (15 263) 4 793

R and S Consulting (Proprietary) Limited 32 459 – 32 459

iSolve Business Solutions (Proprietary) Limited 6 078 – 6 078

200 329 (49 649) 150 680

* The provisional accounting for the acquisition of iSolve and SQLDB was finalised during the year. Management did not identify any changes

to the identifiable assets (including intangible assets) and identifiable liabilities and contingent liabilities.

Goodwill is reviewed annually at each reporting date for impairment, or more frequently when there are indicators that impairment may have occurred, by comparing the carrying amount to its recoverable amount. Impairment losses are included in other operating expenses in profit or loss.


12. Goodwill (continued)Key assumptions used in impairment testing for goodwill impaired in the current periodThe cash-generating capabilities of all cash-generating units (CGUs) were determined by discounting the future cash flows generated from continuing operations.

The recoverable amount of each operation’s goodwill is based on value-in-use calculations. The calculations are based upon discounting expected pre-tax cash flows at a risk adjusted interest rate appropriate to the cash-generating unit, the determination of both of which requires the exercise of judgement. The estimation of pre-tax cash flows is sensitive to the periods for which forecasts are available and to assumptions regarding the long-term sustainable cash flows. While forecasts are compared with actual performance and external economic data, expected cash flows naturally reflect management’s view of future performance.

The cash flow projections were based on the approved budgeted 2015 results, growth for a further three years thereafter and a reasonable growth rate is applied thereafter based on current market conditions. In assessing future cash flows, management has considered the assumptions relating to the sustainable growth, market opportunities as well as changes to the cost structures based on business plans.

The discount rates used in the discounted cash flow models are calculated using the principles of the capital asset pricing model, taking into account the current market conditions.

A pre-tax weighted-average cost-of-capital rate that ranges between 21% and 23% per annum was used in discounting the projected cash flows. Growth rates applied for the three-year period beyond the 2014 budget was 5% (2013: 5%). Perpetuity growth rates applied was 4,5% (2013: 4,5%). The growth rate does not exceed the long-term average growth rate for the markets in which the entity operates and is consistent with the long-term average of the industry.

The values assigned to the key assumptions represent management’s assessment of future trends in the industry and are based on both external sources and internal sources (historical data). Goodwill amounting to R4 793 000 allocated to Mint Management Technologies was disposed during the current year as part of the sale of Mint Management Technologies (Pty) Ltd. Please refer to note 30 for further details.

ImpairmentThe recoverable amount of the following cash-generating units were determined to be higher than the carrying amount and therefore no impairment charge emanated.

• Red Edge Solutions (Proprietary) Limited

• Advocate Solutions (Proprietary) Limited

• R and S Consulting (Proprietary) Limited

Goodwill impairment for the current year of R12 325 000 (31 May 2013: R33 465 000) reflects a write-down for the following subsidiaries:

2014 2013

R’000 R’000

Subsidiary

– Intergraph Systems Southern Africa (Proprietary) Limited – (9 680)

– SAB&T Ubuntu Holdings Limited – (18 672)

– Morvest Mithratech (Proprietary) Limited (12 325) (5 113)

(12 325) (33 465)

Impairment lossesThe carrying amount of Morvest Mithratech cash-generating unit was determined to be higher than the recoverable amount, based on value-in-use, and impairment losses of R12 325 000 was recognised, which was fully allocated to goodwill.

Goodwill allocationFor the purpose of impairment testing, goodwill is allocated to the group’s subsidiaries or group of subsidiaries which are each considered to be a cash-generating unit and represent the lowest level within the group at which the goodwill is monitored for internal management purposes. A cash-generating unit (CGU) is the smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from other assets or group of assets.



94



Cost 2014

R’000

Accumu-lated

amorti-sation and

impairment 2014

R’000

Carrying amount

2014R’000

Cost 2014

R’000

Accumu-lated

amorti-sation and

impairment 2014

R’000

Carrying amount

2014R’000

13. Intangible assetsCustomer contracts 98 638 (98 342) 296 98 638 (96 863) 1 775

Patents 14 (14) – 14 (9) 5

98 652 (98 356) 296 98 652 (96 872) 1 780

Reconciliation of intangible assets

Opening balance

2014 R’000

Amorti-sation

2014R’000

Closing balance

2014 R’000

Opening balance

2013 R’000

Amorti-sation2013

R’000

Closing balance

2013 R’000

Customer contracts 1 775 (1 479) 296 41 037 (39 262) 1 775

Patents 5 (5) – 8 (3) 5

1 780 (1 484) 296 41 045 (39 265) 1 780

The current remaining useful life of the intangible assets is estimated to be as follows:

2014 2013

Customer contracts 1 2

During the year the group reviewed the expected life of the customer contracts. One of the major customers has amended its contract renewal process which has resulted in the expected useful lives of these intangible assets to decrease.

Group

2014 2013

R’000 R’000

14. Other fi nancial assets Loans receivable

Loan receivable sale of SAB and T BIG 2 710 2 710

Loan receivable sale of Mint Management Technologies 9 788 –

Other loans and receivables* 1 992 2 824

Impairments – –

14 490 5 534

* Other loans and receivables consist of a number of smaller loans to unrelated third parties.

Non-current

Loans receivable 3 306 –

3 306 –

Current

Loans receivable 11 184 5 534

11 184 5 534

14 490 5 534


14. Other fi nancial assets (continued)Loan receivable sale of SAB and T BIGThe loan is unsecured, interest-free and is payable by 30 November 2014 in terms of the sale agreement. The entity has security in the form of a contractual right to claw back 100% of the equity in BIG if the purchaser fails to make the remaining payment.

Loan receivable sale of Mint Management Technologies The loan is unsecured, with 9% interest per annum and payable monthly over 36 months. There are 11 repayment instalments receivable during the next financial year

Loans and receivables impairedThe recoverability of the loans were assessed at reporting date and were not found to be impaired.

Fair values of fi nancial assetsThe above financial assets are measured at amortised cost using the effective interest rate method. The directors consider that the carrying amounts of financial assets recorded at amortised cost in the financial statements approximate their fair values.

Group

2014 2013

R’000 R’000

15. Deferred taxationRepresented by:

Accelerated allowances (6 861) (5 345)

Intangible assets (83) (498)

Provision for doubtful debts 9 147 9 954

Provision for obsolete stock 1 643 1 405

Leave pay 2 831 3 059

Bonus 5 505 6 273

Deferred income 1 857 18 505

Operating lease accrual – 234

Assessed loss 18 630 17 675

32 669 51 263

Represented by:

Deferred tax asset 39 613 57 105

Deferred tax liability (6 944) (5 843)

32 669 51 262

Opening balance (51 263) (36 479)

Deferred tax disposed 3 581 989

Deferred taxation temporary differences (note 8) (15 013) 15 772

The group considers it probable that sufficient taxable income will be available in the future to realise the deferred tax asset raised based on future income to be generated. The sufficiency of future taxable income was supported by budgets for the 2015 financial year as well as the historical trading results of the various subsidiaries within the group as well as the historical trading results of the company.

The amount of deductible temporary differences, unused tax losses and unused tax credits for which no deferred tax asset is recognised on the statement of financial position is R11 858 953 (2013: R8 294 011).



96



Group

2014 2013

R’000 R’000

16. Inventories

Raw materials 16 296 17 554

Work in progress 481 7 843

Finished goods 8 282 9 446

Merchandise 6 629

25 065 35 472

Inventory write-downs (5 867) (5 017)

19 198 30 455

The cost of inventories recognised as an expense during the period was R194 943 414 (2013: R175 763 761).

The cost of inventories recognised as an expense includes R850 458 (2013: R3 378 879) in respect of provision for write-downs of inventory to net realisable value.

An allowance is made to write stock down to the lower of cost or net realisable value. Management has made estimates of the selling price and direct cost to sell on certain inventory items. The write down is included in cost of sales.

Group

2014 2013

R’000 R’000

17. Trade and other receivablesFinancial instruments

Trade receivables 154 263 168 803

Deposits 1 566 4 499

Other receivables 8 320 10 428

Allowance for impairment (43 558) (47 400)

120 591 136 330

Non-financial instruments

Prepayments 19 929 44 182

VAT 8 148 13 976

28 077 58 158

Trade and other receivables 148 668 194 488

Currencies

The carrying amount of trade and other receivables are denominated in the following currencies:

Rand 102 647 127 336

US dollar 4 644 215

Nigerian naira 10 213 7 195

Mozambican metical 3 087 1 584

120 591 136 330

Trade receivables have been ceded to Investec Bank Limited to obtain the long-term financing as described in note 22.


17. Trade and other receivables (continued)Fair value of trade and other receivablesThe directors estimate the carrying amount of trade and other receivables approximate their fair value.

Trade receivables disclosed above are classified as loans and receivables and are therefore measured at amortised cost.

The average credit period on sales of goods/services rendered is 60 days. No interest is charged on the trade receivables for the first 60 days from the date of the invoice. Thereafter, interest is charged at 2% per annum on the outstanding balance.

Trade receivables disclosed above include amounts (see below for aged analysis) that are past due at the end of the reporting period, but against which the group has not recognised an allowance for doubtful receivables because there has not been a significant change in credit quality and the amounts are still considered recoverable.

The group assesses its trade and loans receivables for impairment at each reporting date. In determining whether an impairment loss should be recorded in the statement of comprehensive income, the group makes judgements as to whether there is observable data indicating a measurable decrease in the estimated future cash flows from a financial asset.

The impairment for trade and loans receivable is calculated on a specific basis, based on historical loss ratios, adjusted for national and industry specific economic conditions and other indicators present at the reporting date.

Exposure to credit riskThe carrying amount of trade and other receivables represents the maximum credit exposure.

The maximum exposure to credit risk for trade receivables at the reporting date by geographic region was:

Group

2014 2013

R’000 R’000

Domestic 115 129 185 709

Nigeria 2 375 7 195

Mozambique 3 087 1 584

120 591 194 488

The group’s most significant customer accounts for 35% of the trade receivables carrying amount at 31 May 2014 (2013: 32%).

Credit qualityThe following represents information on the credit quality of trade receivables that are neither past due nor impaired:

A 85% 90%

B 15% 10%

A – The debtors are of good credit quality and no default in payment is expected.

B – These debtors usually pay, but have previously paid late and therefore there is a possibility that these debtors will not be recoverable.

Please refer to note 34 for detailed information regarding the credit risk of trade and other receivables.



98



17. Trade and other receivables (continued)Trade and other receivables past due but not impairedTrade and other receivables amounting to R12 839 415 (2013: R11 361 950) which are less than three months past due are not considered to be impaired. The ageing of amounts past due but not impaired is as follows:

Group

2014 2013

R’000 R’000

1 month past due 9 943 8 379

2 months past due 1 042 872

3 months past due 1 854 2 111

Trade and other receivables impairedTrade and other receivables of R43 558 347 (2013: R47 399 824) were impaired and allowed for. The ageing of these balances is as follows:

Over 6 months 43 558 47 400

Reconciliation of allowance for impairment of trade and other receivablesOpening balance 47 400 47 621

Unused amounts reversed (3 842) (221)

43 558 47 400

The allowance for impairment is based on past experience and the prevailing trading conditions relating to specific reportable segments and individual debtors, where risk of non-payment is perceived to be high and where outstanding balances are dated.

18. Cash and cash equivalentsBank and cash balances 136 847 83 131

Bank overdraft (1 205) –

135 642 83 131

Cash and cash equivalents has been ceded to Investec Bank Limited to secure long-term financing as described in note 22.

The carrying amount of cash and cash equivalents represents the maximum credit exposure.

19. Share capitalAuthorised1 500 000 000 ordinary shares of R0,0001 each 150 150

Issued*455 000 000 (2013: 467 511 000) ordinary shares of R0,0001 each 51 51

Share premium 287 384 287 384

287 435 287 435

Reconciliation of number of shares issue (‘000)Reported as at 1 June 2013 467 511 516 369

New issue for group share scheme 222 171 –

Treasury shares issued for BVI share scheme 67 829 –

Shares utilised for group share scheme (290 000) –

Share repurchase (12 511) (48 858)

455 000 467 511

* This amount excludes intercompany shares. Please refer to the company disclosure for the total number of shares issued.


19. Share capital (continued)The unissued shares are under the control of the directors.

Treasury shares held by the group The total number of shares held by the group is nil (2013: 76 647 257).

21 329 734 shares were cancelled, the balance was used for the BVI share scheme.

Group

2014 2013

R’000 R’000

20. Foreign currency translation reserveTranslation reserve comprises exchange differences on consolidation of foreign subsidiaries.

Opening balance (10 067) (12 154)

Exchange differences arising on translating foreign operations (732) 2 087

Closing balance (10 799) (10 067)

21. Amounts due to vendorsSellers of iSolve and SQLDB 7 574 14 114

Sellers of R and S Consulting 6 856 8 317

Less: Current portion (14 430) (17 714)

Non-current portion – 4 717

1st yearR’000

1st to 2nd year

R’000

2nd to 3rd year

R’000Total

R’000

Minimum contingent payments 14 430 – – 14 430

Finance costs 1 229 – – 1 229

Total contingent consideration 15 659 – – 15 659

Total contingent consideration has been discounted using the risk-free rate. The risk-free rate was based on the South African long-term government bond rate in effect at the time of the acquisition.

Sellers of iSolve and SQLDBAn initial payment of R7,2 million was made on the effective transaction date. The remaining balance as at reporting date is payable based upon the achievement of annual profit after tax targets over a two-year period. The group estimates that the outcomes of the profit after tax targets over the two-year period to be fully achievable.

Seller of R and S ConsultingThe remaining balance as at reporting date is payable based upon the achievement of a profit after tax target for the next financial year. The group estimates that the outcome of the profit after tax target over the next year to be fully achievable.



100



Group

2014 2013

R’000 R’000

22. Other fi nancial liabilitiesInvestec Bank Limited – R86 Million 48 890 64 765

Investec Bank Limited – R50 Million 50 000 14 755

Other interest-bearing liabilities 5 000 –

Other non-interest-bearing liabilities 7 659 5 363

111 549 84 883

Interest-bearing liabilities 103 890 79 520

Non-Interest-bearing liabilities 7 659 5 363

Total amount outstanding 111 549 84 883

Less: Amount included in current liabilities (42 941) (27 892)

Long-term portion outstanding 68 608 56 991

Investec Bank Limited – R86 million The loan bears interest at Jibar +4,5% and is repayable in quarterly instalments of R5 632 057 commencing on 03 November 2011.

Investec Bank Limited – R50 million On 15 January 2014 Morvest drew an additional facility of R35 245 452 on the R50 million facility. Initially only interest is payable monthly at prime +1% for the first 18 months, thereafter the loan bears interest at 3MJibar +4,5% and 50% of the capital and interest is repayable in quarterly instalments of R743 734. The residual of the loan including interest will be payable at the expiry of the loan.

The following security has been provided for the above Investec loans:

• Cession of trade receivable for group entities*

• Cession of all bank accounts for group entities*

• Cession of all insurance policies for group entities*

• General notarial bond over movable property of Morvest Mithratech (Proprietary) Limited amounting to R70 million

• General notarial bond over movable property of Morvest Outsourcing Solutions (Proprietary) Limited amounting to R70 million

• Mortgage bond over property of Morvest Properties (Proprietary) Limited over Noordwyk Ext 94 for an amount of R63 million

• Guarantees by group entities* for punctual payment of all amounts due to Investec.

• Subordination of any shareholders’ loans and claims

Other non-Interest-bearing fi nancial liabilitiesThe above balance is made up of a number of smaller loans and are unsecured, interest-free and have an unconditional right to defer settlement to periods after 31 May 2014.

Fair values of fi nancial liabilitiesFinancial liabilities are measured at amortised cost using the effective interest rate method. The directors consider that the carrying amounts of financial liabilities recorded at amortised cost in the financial statements approximate their fair values.

The group’s borrowing powers are unlimited and the group has not exceeded the borrowing powers in terms of the MOI of the holding company and of the underlying subsidiaries.

* The group entities for which this security applies to include: Foster-Melliar (Proprietary) Limited, Intergraph System Southern Africa (Proprietary)

Limited, Cybernet Africa Logistics (Proprietary) Limited trading as Morvest Properties (Proprietary) Limited, Premium Ideas South Africa, Red

Edge Solutions (Proprietary) Limited, Morvest Human Capital Management (Proprietary) Limited, Applebox Franchising (Proprietary) Limited,

Morvest Outsourcing Solutions, Morvest Professional Services (Proprietary) Limited, and Morvest Mithratech (Proprietary) Limited.


Group

2014 2013

R’000 R’000

23. Finance lease obligationsTotal finance lease outstanding 22 949 28 325

Less: Amount included in current liabilities (4 387) (8 735)

Long-term portion outstanding 18 562 19 590

Reconciliation between the total minimum lease payments and their present value

Up to 1 year

2 to 5 years

More than 5 years Total

2014

Minimum lease payments 3 034 22 877 – 25 911

Finance cost (506) (2 456) – (2 962)

Present value 2 528 20 421 – 22 949

2013

Minimum lease payments 10 394 21 472 – 31 866

Finance cost (1 659) (1 882) – (3 541)

Present value 8 735 19 590 – 28 325

The finance lease agreements are repayable in 60 monthly instalments and bear interest at prime +1% to prime +2%.

The group’s obligations under finance lease arrangements are secured by the lessor’s charge over the financed fixed assets as disclosed in note 11.

Group

2014 2013

R’000 R’000

24. Trade and other payablesFinancial instruments

Trade payables 54 862 98 901

Other payables 6 963 8 081

61 825 106 982

Non-financial instruments

Bonus 19 659 22 405

Leave pay 10 112 10 925

VAT 6 886 9 331

Payroll accruals 12 814 13 638

Deferred income 21 748 70 940

Other accruals 20 475 9 858

91 694 137 097

Trade and other payables 153 519 244 079



102



Group

2014 2013

R’000 R’000

24. Trade and other payables (continued)Currencies

The carrying amount of trade and other payables are denominated in the following currencies:

Rand 59 492 101 024

US dollar 1 860 2 805

British pound 266 –

European euro 20 135

Nigerian naira – 2 877

Mozambican metical 187 141

61 825 106 982

Fair value of trade and other payablesThe average credit period on purchases of goods and services is 60 days. No interest is charged on the trade payables for the first 60 days from the date of the invoice. Thereafter, interest is charged at an average 2% per annum on the outstanding balance.

Due to the short-term nature of the group's trade and other payables, the carrying value approximates their fair value. Trade payables are subject to normal industry settlement terms.

Deferred incomeRevenue received in advance from customers for goods not yet delivered and services not yet rendered by the group. As at 31 May 2014, the group has deferred income of R22 952 358 (2013: R70 940 000).

Opening balance

R’000

Reversed during

the yearR’000

TotalR’000

25. ProvisionsReconciliation of provisions – group 2014

Legal claims 180 – 180

Reconciliations of provision – group 2013

Legal claims 250 (70) 180

Intergraph Systems Southern Africa is involved in litigation by a former reseller arising from the cancellation of the reseller agreement and is seeking damages of R5 400 000. The probable loss has been estimated at R150 000 and legal costs incurred to date amount to R1 106 600. The directors are of the opinion that the claim can be successfully resisted by the company.

Morvest Professional Services (Proprietary) Limited is involved in litigation with George Varden who is seeking damages of R1 329 000 resulting out of retrenchment for operational reasons. The probable loss has been estimated at R30 000 and legal costs incurred to date amount to R255 000. The directors are of the opinion the claim can be successfully resisted by the company.

A supplier instituted a claim against Morvest Mithratech for R754 787 in respect of payment of outstanding invoices arising from the supply of goods to Morvest Mithratech. The possible loss has been estimated at R500 000.


Group

2014 2013

R’000 R’000

26. CommitmentsGroup

The following operating lease charges are payable on equipment and premises:

– Due within one year 14 300 9 457

– Due within one to five years 21 709 12 459

36 009 21 916

Operating lease payments by the group represent rentals payable by the subsidiaries for certain of its office properties and equipment. All leases are negotiated for an average term of five years and rentals are fixed for an average of three years. No contingent rent is payable.

27. Share-based paymentsDuring the year the following share-based payment expenses were recognised in profit or loss regarding share-based payment arrangements that existed:

Equity-settled

Morvest BEECo 1 001 1 001

Morvest MANCo 192 192

Morvest BVI 653 –

1 846 1 193

Morvest BEECoThe BEECo share scheme participants acquired a shelf company which in turn acquired 57,9 million Morvest ordinary shares, which formed part of the treasury shares before the transaction. BEECo further subscribed for 56,9 million new ordinary shares by means of a fresh issue of shares by Morvest. BEECo participants will, via BEECo, beneficially own 17% of the issued ordinary share capital of Morvest.

Morvest facilitated the transaction by providing funding of R18,3 million to BEECo. This was achieved by Morvest subscribing to cumulative redeemable “Class A” preference shares in BEECo. The repayment of the preference shares shall be funded by BEECo out of dividends and other distributions received on the Morvest shares.

The redemption date of the “Class A” preference shares shall be on the seventh anniversary of the grant date and the redemption date of the “Class B” preference shares shall be on the fifth anniversary of the grant date.

The fair value of the equity settled share-based payment expense is calculated at grant date and expensed over the vesting period of the share options.

The BEECo share scheme participants have pledged 45 642 028 Morvest shares personally held by the BEE participants amounting to 40% of the BEECo subscription amount, and issued an unsecured financial guarantee to the value of 10% of the BEECo preference share subscription amount.

Morvest MANCoThe MANCo share scheme participants acquired a shelf company, which in turn subscribed for 20,2 million new ordinary shares by means of a fresh issue of shares by Morvest. MANCo will beneficially own 3% of the issued ordinary share capital of Morvest.

Morvest facilitated the transaction by providing funding of R3,2 million to MANCo. This was achieved by Morvest subscribing to cumulative redeemable “Class A” preference shares in MANCo. The repayment of the preference shares shall be funded by MANCo out of dividends and other distributions received on the Morvest shared.

The redemption date of the preference shares shall be on the seventh anniversary of the grant date.



104



27. Share-based payments (continued)Morvest BVIMorvest entered into certain agreements with Business Venture Investments No 1690 Proprietary Limited (BVI) in terms of which BVI subscribed for and acquired 290 000 000 new Morvest shares, representing 33% of the post-transaction issued share capital of Morvest, by means of the issue 222 171 121 new Morvest shares to BVI by means of a specific issue of shares for cash (the BVI issue) and the acquisition by BVI of 67 828 879 Morvest treasury shares (the BVI acquisition), respectively. The BVI participants in the BVI issue and BVI acquisition (collectively the BVI transaction) are selected key directors of Morvest and the ordinary shareholders of BVI.

BVI paid Morvest 10% of the total BVI transaction consideration, being R4 640 000, in cash. Morvest provided BVI with financial assistance to fund the balance of 90% of the BVI transaction consideration (preference share agreement “Class A”) amounting to R41 760 000.

The redemption date of the preference shares shall be on the seventh anniversary of the grant date.

The fair value of the equity-settled share-based payment expense is calculated at grant date and expensed over the vesting period of the share options.

BEECo share scheme

2014‘000

MANCo share scheme

2014‘000

BVI share scheme

2014‘000

Grant date 11 October 2010 11 October 2010 15 October 2013

Expiry date 10 October 2017 10 October 2017 14 October 2020

Number of share options granted 114 750 20 250 290 000

Options vesting period 5 years 7 years 7 years

Vesting condition Remain in service Remain in service Remain in service

Fair value at grant date (cents) 4 7 4

Average remaining contractual life (years) 1 3 6,5

Details of outstanding options for the year are as follows:

2014 2013

Number of options

Weighted average exercise

priceR

Number of options

Weighted average exercise

priceR

BEECo, MANCo and BVI share schemes

Outstanding at the beginning of the year 135 000 0,24 135 000 0,24

Granted 290 000 0,16 – –

Forfeited – – – –

Exercised – – – –

Outstanding at the end of the year* 425 000 0,14 135 000 0,24

Exercisable at the end of the year – – – –

The share-based payment expense was calculated using an option pricing model reflective of the underlying characteristics of each part of the transaction. It is calculated using the following assumptions at grant date.


BEECo** MANCo BVI***

2014 2014 2014

27. Share-based payments (continued)Valuation model: Black-Scholes option pricing model

Weighted average share price (cents) 16 16 16

Exercise price (cents) 23 27 16

Risk-free interest rate 8% 8% 7%

Expected volatility 40% 40% 30%

Expected dividend yield 0% 0% 6%

Vesting period 5 7 7

** BEECo participants have issued the guarantee to the value of 10% of the BEECo preference share subscription amount and have pledged

45,642,028 shares personally held by the BEECo participants (ie 40% of the BEECo preference share subscription amount, including

2 million notional shares). These pledges and guarantees have been valued using the Black-Scholes put option pricing model and have been

included in the calculation to determine the fair value of the options.

The risk-free rate for periods within the contractual term of the share rights was based on the South African long-term government bond rate in effect at the time of the grant.

The expected volatility in the value of the share rights granted was determined using the historical normalised volatility of the Morvest share price.

A dividend yield of 0,0% was determined as no discrete dividends were forecast for the foreseeable future at grant date.

*** A dividend yield of 5,6% was determined based on historical dividends paid out during the past two financial periods.

The valuation of the share-based payment expense requires a significant degree of judgement to be applied by management.

Group

2014 2013

R’000 R’000

28. Cash generated by operationsProfit before taxation 112 636 53 156

Adjustments for non-cash items:

– Depreciation 16 299 14 569

– Amortisation 1 484 39 265

– Impairment of goodwill 12 325 33 465

– Investment income (2 208) (3 139)

– Finance costs 15 286 11 189

– Loss/(profit) on sale of subsidiary 1 703 (6 985)

– Unrealised (profit)/loss on foreign exchange (1 554) 1 714

– Loss/(profit) on disposal of fixed assets (284) (459)

– Foreign currency translation movement (732) 2 087

– Operating lease accruals (39) 166

– Share-based payment expense 1 846 1 193

– Movement in provisions – (70)

Operating income/(loss) before changes in working capital 156 762 146 151

– Inventories 11 176 30 370

– Trade and other receivables 33 480 (46 724)

– Trade and other payables (78 892) 8 736

122 526 138 533



106



Group

2014 2013

R’000 R’000

29. Taxation paidBalance at the beginning of the year 13 769 1 604

Taxation charge as per statement of comprehensive income 40 563 29 579

Deferred taxation (15 013) 15 772

Balance at the end of the year (11 568) (13 769)

27 751 33 186

30. Disposal of businessesProperty, plant and equipment 3 618 904

Deferred taxation 3 581 989

Financial assets – 163

Inventory 81 4 224


Cash and cash equivalents 2 522 –

Trade and other payables (5 935) (4 455)

Total net assets disposed 13 394 13 015

Goodwill disposed 4 793 –

Non-controlling interest (6 695) –

11 492 13 015

(Loss)/profit on sale of business (1 703) 6 985

Total consideration 9 789 20 000

Consideration receivable (9 789) (2 710)

Cash 2 522 (17 290)

Net cash (outflow)/inflow (2 522) 17 290

Morvest Business Group disposed of its entire current shareholding in Mint Management Proprietary Limited, which comprised 9 871 ordinary shares (50,01% of all of the issued ordinary shares of Mint), and 10 “B” class shares (100% of all of the issued “B” class shares of Mint) (collectively, “Sale Shares”). The comparative figures relate to the disposal of SAB&T.

The Purchase Consideration will be settled with R4 983 621 paid by the Purchasers to Morvest on fulfilment or waiver of the conditions precedent in terms of the Sale Agreement and the balance of the Purchase Consideration, being R5 500 000, will be paid in 36 equal monthly payments, the first of which shall be payable 30 days after the fulfilment or waiver of the conditions precedent in terms of the Sale Agreement.


ICT Solutions

R’000 R and S

R’000 TotalR’000

31. Summarised fi nancial information of subsidiaries with material non-controlling interestsNCI percentage 49,99% 49,99%

2014

Principal place of business Gauteng Western Cape

Summarised financial information

Total assets 93 675 35 224 128 899

Total liabilities 34 426 9 862 44 288

Net assets 59 249 25 362 84 611

Carrying amount of NCI interests 29 619 12 678 42 297

Profit after tax 36 306 28 186 64 492

Profit allocated to NCI 18 117 14 065 32 182

Dividends paid to NCI 7 984 2 495 10 479

Contribution to net cash flow movement for the year (6 029) 4 558 (1 471)

2013

NCI percentage 49,99% 49,99%


Total assets 88 808 25 839 114 647

Total liabilities 36 710 23 661 60 371

Net assets 52 098 2 178 54 276

Carrying amount of NCI interest 25 997 1 089 27 086


Profit after tax 19 323 23 286 42 609

Profit allocated to NCI 9 642 11 620 21 262

Dividends paid to NCI 2 495 16 144 18 639

Contribution to net cash flow movement for the year (8 258) (6 399) (14 657)

32. Related partiesRelationshipsSubsidiaries Refer to note 44

Key senior managementThe directors are defined as key senior management. Details of the directors’ emoluments, shareholding and share options are disclosed in note 35.



108



32. Related parties (continued)Key management remuneration

Basic salary Bonus Allowances**

Post-employment

benefits Total

emoluments

R’000 R’000 R’000 R’000 R’000

2014

FM Varachia*** 840 588 – – 1 428

M Cajee* 1 062 – 25 53 1 140

1 902 588 25 53 2 568

* Key management personnel appointed in the current financial year.

** Allowances includes medical aid, entertainment and travel.

*** FM Varachia is a family member of MS Varachia.

Transactions with key senior managementGifts and Flowers Emporium (Proprietary) Limited formerly D and S Interiors and Gifting (Proprietary) LimitedSuren Singh’s spouse is shareholder and director of the above company that provides corporate gifting to the group. For the current year an amount of R285 267 (2013: R252 415) for these services was incurred by the group.

Morvest Retail (Proprietary) LimitedMS Varachia is a director and 49,9% indirect shareholder of Morvest Retail (Proprietary) Limited.

BEECo and BVI share schemesThe names and relevant details of the executives who are also considered to be related parties that are beneficiaries of the above share schemes have been disclosed in note 35.2.

During the year, certain related parties in the ordinary course of business entered into various loans and transactions with the group under arm’s length terms no less favourable than those arranged with third parties.

Loans and receivables

R’000

Financial liabilities at

amortised cost

R’000Total

R’000

33. Financial instruments 2014

Financial assets

Cash and cash equivalents 136 847 – 136 847

Trade and other receivables 120 591 – 120 591

Other financial assets 14 490 – 14 490

Total financial assets 271 928 – 271 928

Financial liabilities

Trade and other payables – 61 825 61 825

Other financial liabilities – 111 549 111 549

Bank overdraft – 1 205 1 205

Finance lease obligation – 22 949 22 949

Vendor liabilities – 14 430 14 430

Total financial liabilities – 211 958 211 958


Loans and receivables

R’000

Financial liabilities at

amortised cost

R’000Total

R’000

33. Financial instruments (continued)2013

Financial assets

Cash and cash equivalents 83 131 – 83 131

Trade and other receivables 136 330 – 136 330


Total financial assets 224 995 – 224 995



Other financial liabilities 84 883 84 883

Finance lease obligation 31 866 31 866

Vendor liabilities 22 431 22 431

Total financial liabilities 246 162 246 162

Financial assets and liabilities subject to offsettingThe group does not have any financial assets and liabilities that are subject to offsetting.

Financial instruments – fair value estimationThe group does not have any financial assets and liabilities that are measured at fair value.

34. Financial risk management Introduction and overview The group is exposed to a variety of financial risks from its use of financial assets and liabilities:

• Credit risk

• Liquidity risk

• Market risk

• Interest rate risk

• Foreign exchange risk

• Capital risk management

This note presents information about the group’s exposure to each of the above risks, the group’s objectives, policies and processes for measuring and managing risk, and the group’s management of capital. Further quantitative disclosures are included throughout these consolidated financial statements.

Risk management frameworkThe board of directors has overall responsibility for the establishment and oversight of the group’s risk management framework. The board has established the Audit and Risk Management Committee, which is responsible for developing and monitoring the group’s risk management policies. The Committee reports regularly to the board of directors on its activities.

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 activities. The group, through its training and management standards and procedures, aims to develop a disciplined and constructive control environment in which all employees understand their roles and obligations.



110



34. Financial risk management (continued) Risk management framework (continued)The group Audit and Risk Committee oversees how management monitors compliance with the group’s risk management policies and procedures, and reviews the adequacy of the risk management framework in relation to the risks faced by the group. The group Audit and Risk Committee is assisted in its oversight role by Internal Audit. Internal Audit undertakes both regular and ad hoc reviews of risk management controls and procedures, the results of which are reported to the Audit Committee.

There have been no changes to the objectives, policies and processes for managing the risk and methods used to manage the risk from prior year.

Credit risk Credit risk relates to the risk of financial loss to the group relating to customers, loans receivables and other financial instruments who fail to meet their contractual obligations. The potential exposure on these financial instruments is inherent in trade receivables, loans and bank.

Trade and other receivablesThe group’s exposure to credit risk is influenced mainly by the individual characteristics of each customer. However, management also considers the demographics of the group’s customer base, including the default risk of the industry and country in which customers operate, as these factors may have an influence on credit risk. Approximately 24% (2013: 31%) of the group’s revenue is attributable to sales transactions with a single multinational customer. However, geographically there is no concentration of credit risk.

The group 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.

More than 70% of the group’s customers have been transacting with the group for over four years, and no impairment loss has been recognised against these customers. In monitoring customer credit risk, customers are grouped according to their credit characteristics, including whether they are an individual or legal entity, whether they are a wholesale, retail or end-user customer, geographic location, industry, alging profile, maturity and existence of previous financial difficulties. Trade and other receivables relate to a wide spread of customers.

The group establishes an allowance for impairment that represents its estimate of incurred losses in respect of trade and other receivables. The main components of this allowance are a specific loss component that relates to individually significant exposures. The collective loss allowance is determined based on historical data of payment statistics for similar financial assets.

At the reporting date, the group did not consider there to be any significant concentration of credit risk which has not been adequately provided for.

The board has delegated the responsibility of managing the credit risk to the managing executives of each subsidiary, who are responsible for:

• Establishing the authorisation structure for the approval and renewal of credit facilities;

• Reviewing and assessing credit risk;

• Monitoring the financial position of customers on an ongoing basis; and

• Formulating credit policies in relation to the subsidiary’s business and customer base.

Cash and cash equivalents The group held cash and cash equivalents of R135 642 112 at 31 May 2014 (2013: R83 130 574), which represents its maximum credit exposure on these assets.


Group

2014 2013

R’000 R’000

34. Financial risk management (continued)Exposure

Financial assets exposed to credit risk at year-end were as follows:


Cash and cash equivalents 135 642 83 131

Financial assets 14 490 5 534

270 723 224 995

Liquidity risk Liquidity risk is the risk that the group will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. The group’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the group’s reputation.

Typically the group ensures that it has sufficient cash on demand to meet expected operational expenses for a period of 60 days, including the servicing of financial obligations; this excludes the potential impact of extreme circumstances that cannot reasonably be predicted, such as natural disasters.

An analysis of the group’s financial assets and liabilities into relevant maturity groupings based on the remaining period at the reporting date to contractual maturity date are as follows based on undiscounted cash flows:

<1 year 1 year –

5 years > 5 years Total

R’000 R’000 R’000 R’000

2014

Financial assets

Cash and cash equivalents 136 847 – – 136 847

Trade and other receivables 120 591 – – 120 591

Other financial assets 11 184 3 306 – 14 490

Total financial assets 268 622 3 306 – 271 928


Trade and other payables 61 825 – – 61 825

Other financial liabilities 42 941 68 608 – 111 549

Finance lease obligation 4 387 18 562 – 22 949

Bank overdraft 1 205 – – 1 205

Vendor liabilities 14 430 – – 14 430

Total financial liabilities 124 788 87 170 – 211 958

Net liquidity gap 143 834 (83 864) – 59 970



112



<1 year 1 year –

5 years > 5 years Total

R’000 R’000 R’000 R’000

34. Financial risk management (continued)Liquidity risk2013

Financial assets

Cash and cash equivalents 83 131 – – 83 131

Trade and other receivables 136 330 – – 136 330

Other financial assets 5 534 – – 5 534

Total financial assets 224 995 – – 224 995


Trade and other payables 106 982 – – 106 982

Other financial liabilities 27 892 56 991 – 84 883

Finance lease obligation 8 735 19 591 – 28 326

Vendor liabilities 17 714 4 717 – 22 431

Total financial liabilities 161 323 81 299 – 242 622

Net liquidity gap 63 672 (81 299) – (17 627)

Market riskMarket risk is the risk that changes in market prices, such as interest rates, equity prices, foreign exchange rates and credit spreads will affect the group's income or the value if its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimising the return on risk.

Interest rate riskThe group's cash flow interest rate risk is the risk that the future cash flows of a financial instrument will fluctuate owing to changes in the market interest rates. The fair value interest rate risk is the risk that the value of the financial instrument will fluctuate because of changes in the market interest rates. The group assumes exposure to the effects of fluctuations in the prevailing levels of market interest rates on both fair value and cash flow risks. The analysis below summarises the exposure to interest rate risk. Financial assets and liabilities are categorised by the earlier of contractual repricing or maturity dates.

<1 yearR’000

1 year – 5 years

R’000 > 5 years

R’000

Non-interest- bearing

R’000Total

R’000

2014

Financial assets

Cash and cash equivalents 136 847 – – – 136 847

Trade and other receivables 120 591 – – – 120 591

Other financial assets 6 482 3 306 – 4 702 14 490

Total financial assets 257 438 3 306 – 4 702 271 928


Trade and other payables 61 825 – – – 61 825

Other financial liabilities 42 941 68 608 – – 111 549

Finance lease obligation 4 387 18 562 – – 22 949

Bank overdraft 1 205 – – – 1 205

Vendor liabilities 14 430 – – – 14 430

Total financial liabilities 124 788 87 170 – – 211 958

Interest rate gap 132 650 (87 170) – 14 490 59 970


<1 yearR’000

1 year – 5 years

R’000 > 5 years

R’000

Non-interest- bearing

R’000Total

R’000

34. Financial risk management (continued)2013

Financial assets

Cash and cash equivalents 83 131 – – – 83 131

Trade and other receivables 136 330 – – – 136 330

Other fi nancial assets – – – 5 534 5 534

Total fi nancial assets 219 461 – – 5 534 224 995


Trade and other payables 106 982 – – – 106 982

Other fi nancial liabilities 27 892 56 991 – 5 363 90 246

Finance lease obligation 8 735 19 590 – – 28 325

Vendor liabilities 17 714 4 717 – – 22 431

Total fi nancial liabilities 161 323 81 298 – 5 363 247 984

Interest rate gap 58 138 (81 298) – 171 (22 989)

Interest rate sensitivity analysisAs at 31 May 2014, if the interest rate on variable rate assets and liabilities held at amortised cost and assets and liabilities accounted for at fair value had increased or decreased by 100 basis points with all other variables held constant, the impact in profit and loss would have been as set out in the table below:

2014 2013

Pre-taxR’000

Post-taxR’000

Pre-taxR’000

Post-taxR’000

Increase 1 102 1 586 2 712 1 953

Decrease (1 102) (1 586) (2 712) (1 953)

Foreign exchange risk The group operates internationally and is exposed to foreign exchange risk arising from various currency exposures, primarily with respect to the US dollar, British pound, Nigerian naira and Mozambican metical. Foreign exchange risk arises from commercial transactions, recognised assets and liabilities and net investments in foreign operations.

The group has set up policies that require group companies to manage their foreign exchange risk against their functional currency. The group companies are required to use derivative financial instruments for their foreign exchange risk exposure with financial institutions. To manage their foreign exchange risk arising from commercial transactions and recognised assets and liabilities, entities in the company use forward contracts, transacted with financial institutions. Foreign exchange risk arises when commercial transactions or recognised assets or liabilities are denominated in a currency that is not the entity’s functional currency.

The group has certain investments in foreign operations, whose net assets are exposed to foreign currency translation risk. This will have no effect on the post-tax profit as the effect of the translation is recognised directly in the foreign currency translation reserve. As at 31 May 2014, if the foreign entities local currencies (Mozambique new metical and Nigerian naira) had weakened or strengthened by 10% against the rand, with all other variables held constant, the impact on equity for the group would have been as follows:



114



2014 2013

Pre-taxR’000

Post-taxR’000

Pre-taxR’000

Post-taxR’000

34. Financial risk management (continued)Weakened 528 528 412 412

Strengthened (528) (528) (412) (412)

Summary of the group’s foreign currency exposure on its financial assets and liabilities in rand is as follows:

2014R’000

2013R’000

Financial assets

Cash and cash equivalents

– Mithratech Mozambique – 1 397

– Premium Ideas Nigeria 19 246 1 840

– Intergraph Nigeria 1 290 751

20 536 3 988

Trade and other receivables

– Mithratech Mozambique 3 087 1 584

– Premium Ideas Nigeria 2 045 6 036

– Intergraph Nigeria 331 1 159

5 463 8 779

Total financial assets 25 999 12,767

2014R’000

2013R’000


Trade and other payables

– Mithratech Mozambique 187 141

– Premium Ideas Nigeria – 2 088

– Intergraph Nigeria 97 789

– Other local subsidiaries 3 012 2 940

3 296 5 958

Finance lease obligation

– Premium Ideas Nigeria 454 494

Total financial liabilities 3 750 6 452

Closing Average

2014 2013 2014 2013

Exchange rates used for conversion of foreign items to rand were:

Currency

US dollar (USD) 10,47 9,89 10,32 8,70

British pound (GBP) 17,53 15,00 16,67 13,64

Mozambique new metical (MZN) 0,33 0,34 0,34 0,30

Nigerian naira (NGN) 0,06 0,06 0,06 0,05


34. Financial risk management (continued)Capital riskThe group’s objective when managing capital is to safeguard the entity’s ability to continue as a going concern, so that it can continue to provide returns for shareholders, benefits for others stakeholders and to provide an adequate return to shareholders by pricing products and services adequately with a moderate level of risk.

The capital structure of the group consists of debt, which includes the borrowings disclosed in note 22, equity attributable to equity holders of the parent, comprising issued capital, reserves and retained earnings; and cash and cash equivalents as disclosed in notes 18 and 19 respectively.

The group sets the amount of capital in proportion to risk. The group manages the capital structure and makes adjustments to it in light of changes in economic conditions and the risk characteristics of the underlying assets. In order to maintain or adjust the capital structure, the group may issue dividends to shareholders, issue new shares, or sell assets to reduce debt.

The group monitors capital on the basis of total debt to total equity ratio.

The group’s strategy is to maintain the debt to equity ratio of 60% debt, in order to secure access to finance at a reasonable cost. The debt to equity ratio is as follows:

2014R’000

2013R’000

Total debt 150 133 135 639

Total equity 261 709 229 582

Debt to equity ratio (target 60%) 57% 59%

From time to time the group purchases its own shares on the market; the timing of these purchases depends on market prices. Primarily the shares are intended to be used for issuing shares under the group’s share option programme. Buy and sell decisions are made on a specific transaction basis by the board and approved by the shareholders at the AGM.

35. Directors’ emoluments35.1 Directors’ emoluments

The directors emoluments of Morvest Business Group Limited for the year are set out below:

Fees Basic salary Bonuses

Allow-ances**

Post employ-

ment benefits

Total emolu-ments

R’000 R’000 R’000 R’000 R’000 R’000

Director

2014

Non-executive

B Marx 264 – – – – 264

NY Mhinga 243 – – – – 243

PS Molefe 323 – – – – 323

A Mohammadali-Haji 253 – – – – 253

Executive

M Papiyana – 907 894 549 67 2 417

A Evan – 1 080 1 064 203 80 2 427

S Singh – 1 454 1 257 484 108 3 303

MS Varachia – 3 680 3 360 568 552 8 160

1 083 7 121 6 575 1 804 807 17 390



116



Fees Basic salary Bonuses

Allow-ances**

Post employ-

ment benefits

Total emolu-ments

R’000 R’000 R’000 R’000 R’000 R’000

35. Directors’ emoluments (continued)35.1 Directors’ emoluments

(continued)2013

Non-executive

B Marx 254 – – – – 254

NY Mhinga 248 – – – – 248

PS Molefe 311 – – – – 311

A Mohammadali-Haji 250 – – – – 250

Executive

M Papiyana – 897 1 621 232 28 2 778

A Evan – 1 024 900 209 53 2 186

S Singh – 1 375 1 186 248 55 2 864

MS Varachia – 3 479 2 239 519 505 6 742

1 063 6 775 5 946 1 208 641 15 633

** Allowances include medical aid, entertainment and travel.

Name Strike

price Date of

issue Period granted

Number of shares

‘000 Exercised

Net gains on options exercised

R’000

35.2 Share options BEECo scheme issued on 11/10/2010

A Evan 23 11/10/10 5 years 9 114 – –

M Papiyana 23 11/10/10 5 years 3 590 – –

MS Varachia 23 11/10/10 5 years 77 190 – –

S Singh 23 11/10/10 5 years 13 809 – –

KJ Molefe 23 11/10/10 5 years 5 525 – –

NY Mhinga 23 11/10/10 5 years 2 761 – –

111 989 – –


Name Strike

price Date of

issue Period granted

Number of shares

‘000 Exercised

Net gains on options exercised

R’000

35. Directors’ emoluments (continued)35.2 Share options

BVI scheme issued on 15/10/2013

MS Varachia 16 15/10/13 7 years 228 125 – –

F Varachia 16 15/10/13 7 years 11 250 – –

S Singh 16 15/10/13 7 years 11 250 – –

A Evan 16 15/10/13 7 years 11 250 – –

M Papiyana 16 15/10/13 7 years 11 250 – –

NB January 16 15/10/13 7 years 5 625 – –

NY Mhinga 16 15/10/13 7 years 5 625 – –

KJ Molefe 16 15/10/13 7 years 5 625 – –

290 000 – –

Direct beneficial

Indirect beneficial

Held by associates Total

‘000 ‘000 ‘000 ‘000 %

35.3 Directors’ shareholding Director

As at 31 May 2014

MS Varachia – 357 908 – 357 908 40,67

NY Mhinga 2 000 8 387 – 10 387 1,18

S Singh 5 000 25 059 – 30 059 3,42

A Evan 3 300 20 364 – 23 664 2,69

M Papiyana 2 300 14 840 – 17 140 1,95

P Molefe 258 16 849 – 17 107 1,94

12 858 443 407 – 456 265 51,85

As at 31 May 2013

MS Varachia – 118 532 – 118 532 17,45

NY Mhinga 2 000 2 761 – 4 761 0,70

S Singh 5 000 13 809 – 18 809 2,77

A Evan 3 300 9 114 – 12 414 1,83

M Papiyana 2 300 3 590 – 5 890 0,87

P Molefe 258 11 224 – 11 482 1,69

12 858 159 030 – 171 888 25,31



118



36. Subsequent eventsSubsequent to year-end, the group has entered into the following business combinations:

SimmonsMorvest Retail (Proprietary) Limited, a 50,01% owned subsidiary of Morvest through its wholly owned subsidiary Whoohaa, has entered into an agreement with Simmons (South Africa) in terms whereof the Purchaser will acquire certain business assets and business liabilities (“the Business”) of Simmons for a total purchase consideration of R75 million, payable as follows:

• R40 000 000 payable on signing of the agreement and all conditions precedent have been met, 29 July 2014

• R15 000 000 payable within five days, after the determination of the warranted PAT as at 31 July 2015 of R18 000 000



• The purchase price calculated is R71 138 635 after discounting the purchase price to present value at 9% based on payment dates at set in the agreement.

Subsequent to the completion date, the effective shareholding of Whoohaa will be 75% held by Morvest Retail and 25% by previous owners of Simmons, in terms of the conditions set in the sale agreement.

Simmons manufactures and distributes beds, bed bases, linen, bedding and ancillary and associated products, and is the South African partner of Simmons Bedding Company, which markets and sells Simmons International’s products worldwide under the Simmons International guidelines. Simmons International has a 140 year history in manufacturing and selling high-quality mattresses to the premium markets.

Omman Investments (Ushaka Mall)Morvest Retail (Pty) Ltd a 50,01% owned subsidiary of Morvest, has entered into an agreement with Omman Investments (Pty) Ltd, in terms whereof the purchaser will acquire 50,05% of the share capital of Omman for a total purchase consideration of R2,5 million.

Omman is a property rental business whose sole property is Ushaka Mall situated in Stanger, Durban.

Morvest has identified the above businesses of Simmons and Omman to be in line with Morvest diversification strategy, as a strategic opportunity which could yield highly profitable returns and could create significant value for the retail portfolio of Morvest through Morvest Retail.

Simmons Omman

Group provisional

fair value adjustments

Provisional values on

acquisition

R’000 R’000 R’000 R’000

Fair value of assets acquired and liabilities assumed:

Property, plant and equipment 1 732 – – 1 732

Investment property – 54 691 – 54 691

Inventories 10 418 – – 10 418


Trade and other receivables 11 373 1 143 – 12 516

Cash and cash equivalents – 291 – 291

Other financial liability (9 517) (51 528) – (61 045)

Trade and other payables (12 777) (961) – (13 738)

Deferred tax – (3 021) – (3 021)

Non-controlling interest – (4 481) – (4 481)

Net identifiable assets and liabilities 1 229 4 489 – 5 718

Goodwill on acquisition 69 909 (1 989) – 67 920

Total consideration 71 138 2 500 – 73 638


Simmons Omman

Group provisional

fair value adjustments

Provisional values on

acquisition

R’000 R’000 R’000 R’000

36. Subsequent events (continued)Contingent consideration (refer to note 22) 31 138 – – 31 138

Consideration paid in cash 40 000 2 500 – 42 500

Total consideration 71 138 2 500 – 73 638

Consideration paid in cash – – – –

Cash acquired – 291 – 291

Net cash inflow – 291 – 291

The acquisition of the above subsidiaries are based on provisional fair values as the group has not yet determined the fair values of the identifiable assets, liabilities and/or contingent liabilities. The fair value of the subsidiary will be accurately determined by the next reporting date.

Disposal of R and S Consulting (Proprietary) LimitedIn an announcement dated 3 July 2014, shareholders were advised that Morvest had entered into the sale agreement in terms of which Morvest agreed to sell its 50,01% shareholding in R and S Consulting, to Zukubu (the purchaser).

In term of the Sale of Shares and Claims Agreement, Morvest (50,01%), Shehnaaz Kadwa (25%) (“Kadwa”) and Ebrahim Vally Investment PL (24,99%) intend to sell 100% of the shares of R and S to Zukubu for R126 666 667 and an agterskot payment of R15 000 000 on achieving certain milestones.

The proceeds for the disposal of R and S is as follows:

• R126 666 667 for 100% of the shareholding of R and S of which R95 000 000 cash payable immediately to Morvest (50,01%) and Kadwa (24,99%) based on R and S achieving more than a R28 000 000 profit after tax (PAT), as defined in the agreement. Ebrahim Vally Investment PL (24,99%) portion of the proceeds shall be settled by the issue of Zukubu Proprietary Limited shares. Both purchaser and seller have confirmed that the PAT has been achieved based on actual results of R and S as at 31 May 2014.

• R15 000 000 additional cash payable for the agterskot payment, after the conclusion of certain contracts being renewed, to Morvest (66,67%) and Kadwa (33,33%).

• Morvest’s portion of the anticipated proceeds to the sale is calculated to be R73 346 000 including the agterskot payment.

• R and S Consulting provides delivery, implementation and support of mobile and fixed line broadband and fixed mobile convergence technologies to Tier 1 telecommunication operators to assist with the rollout of their data strategies. Morvest believes that it is the appropriate time to dispose of its shareholding at an acceptable return on its initial investment. The cash proceeds will be utilised to explore certain alternative opportunities in line with Morvest’s diversified investment holding strategy.



120


Company statement of comprehensive income

Company

2014 2013


Income 37 58 988 50 736

Other operating expenses 38 (68 426) (56 480)


Finance costs 41 (11 514) (9 539)

Profi t before taxation (1 423) 10 449

Taxation 42 – (67)

Profi t/(loss) after taxation (1 423) 10 382

Other comprehensive income/(loss) for the year – –

Total comprehensive income after tax attributable to equityholders of the company (1 423) 10 382



Company statement of fi nancial position

Company

2014 2013


Assets

Non-current assets 460 479 434 545

Property, plant and equipment 43 2 574 1 056

Investments in subsidiaries 44 374 282 395 266

Other fi nancial assets 45 69 088 23 688



Trade and other receivables 47 43 504 34 241

Loans to group companies 48 168 578 156 764

Operating lease assets – 226

Other fi nancial assets 45 6 672 –

Cash and cash equivalents 49 13 609 5 697

Total assets 692 842 631 473

Equity and liabilities

Capital and reserves 174 219 150 969

Share capital 50 355 545 323 918

Retained earnings (186 254) (176 031)

Share-based payment reserve 4 928 3 082

Non-controlling interest – –

Total equity 174 219 150 969

Non-current liabilities 68 608 42 237

Other fi nancial liabilities 52 68 608 42 237

Current liabilities 450 015 438 267

Vendor liabilities 51 6 856 14 114

Other fi nancial liabilities 52 30 283 22 528

Loans from group companies 48 383 358 378 308

Trade and other payables 53 29 518 23 317

Total equity and liabilities 692 842 631 473



122


Company statement of changes in equity

Share capital

Sharepremium

Share-based

payment reserve

Available-for-sale reserve

Retained earnings

Total equity

R’000 R’000 R’000 R’000 R’000 R’000

Company

Balance at 31 May 2012 68 323 850 1 889 – (179 845) 145 962

Profi t for the year – – – – 10 382 10 382

Other comprehensive income for the year – – – – – –

Total comprehensive income for the year – – – – 10 382 10 382

Share-based payment expense – – 1 193 – – 1 193

Dividend paid – – – – (6 568) (6 568)

Balance at 31 May 2013 68 323 850 3 082 – (176 031) 150 969

Profi t for the year – – – – (1 423) (1 423)

Other comprehensive income for the year – – – – – –

Total comprehensive income for the year – – – – (1 423) (1 423)

Issue of share capital 22 35 547 – – – 35 569

Shares cancelled (2) (3 940) – – – (3 942)

Share-based payment expense – – 1 846 – – 1 846

Dividends paid – – – – (8 800) (8 800)

Balance at 31 May 2014 88 355 457 4 928 – (186 254) 174 219

Notes 50 50

* Amounts are below R1 000



Company statement of cash fl ows

Company

2014 2013


Cash fl ows from operating activities

Cash generated by operations 54 1 283 32 445


Dividends received – subsidiaries 40 10 502 12 765

Finance costs (8 334) (9 539)

Net cash from operating activities 12 478 40 963

Cash fl ows from investing activities

Acquisition of property, plant and equipment (2 237) (231)

Decrease in loans to group companies (10 725) (6 593)

Increase in loans from group companies 5 050

Decrease in fi nancial assets – 1 350

Net cash used in investing activities (7 912) (5 474)

Cash fl ows from fi nancing activities

(Decrease)/increase in fi nancial liabilities 22 146 (14 865)

Decrease in fi nance lease liabilities – (21)

Decrease of vendor liabilities (10 000) (10 000)

Dividends paid (8 800) (6 568)

Net cash (used in)/generated by fi nancing activities 3 346 (31 454)

Net increase/(decrease) in cash and cash equivalents 7 912 4 035

Cash and cash equivalents at the beginning of the year 5 697 1 662

Cash and cash equivalents at the end of the period 49 13 609 5 697



124


Notes to the company fi nancial statements

Company

2014 2013

R’000 R’000

37. RevenueTotal revenue

Rendering of services 58 539 47 883

Rental income 449 2 853

58 988 50 736

38. Operating profi t/(loss) before fi nance costs Impairments 6 315 17 000

Depreciation 719 483

Consulting fees 32 303 38 545

Operating lease rentals 4 969 3 877

Equity-settled share-based payments expense 1 846 1 193

Loss on sale of Mint Management Technologies 4 881 –

39. Impairments Impairment of investments in subsidiaries 6 315 17 000

6 315 17 000

Refer to note 44 for the details relating to the impairment of investment in subsidiaries recognised in the current period.

40. Investment income Interest received – bank 671 422

Interest received – other 8 356 4 870

Dividends received from subsidiaries 10 502 20 440

19 529 25 732

41. Finance costs Financial and vendor liabilities 11 514 9 539

11 514 9 539

42. Taxation South African normal tax

– Current year – –

Deferred taxation

– Temporary differences – 67

– 67

Reconciliation of rate of taxation % %

South African normal tax rate (28,00) 28,00

Non-taxable income (207,00) (54,77)

Non-deductible expenses 135,00 55,41

Assessed losses not recognised 100,00 –

Effective rate – 0,64


2014 2013

Cost R’000

Accumu-lated

depre-ciationR’000

Carrying amount

R’000 Cost R’000

Accumu-lated

depre-ciationR’000

Carrying amount

R’000

43. Property, plant and equipment Company

Furniture and fi ttings 1 911 (471) 1 440 750 (438) 312

Motor vehicles 160 (143) 17 138 (136) 2

Offi ce equipment 97 (35) 62 58 (20) 38

Computer equipment 2 804 (1 750) 1 054 1 788 (1 150) 638

Leasehold improvement 3 (2) 1 128 (62) 66

4 975 (2 401) 2 574 2 862 (1 806) 1 056

Reconciliation of property, plant and equipment

Openingbalance

R’000 Additions

R’000

Depre-ciation R’000

Closing balance

R’000

2014

Furniture and fi ttings 312 1 162 (146) 1 328

Motor vehicles 2 22 (7) 17

Offi ce equipment 38 38 (16) 60

Computer equipment 638 1 015 (485) 1 168

Leasehold improvement 66 – (65) 1

1 056 2 237 (719) 2 574

2013

Furniture and fi ttings 331 57 (76) 312

Motor vehicles 29 – (27) 2

Offi ce equipment 8 38 (8) 38

Computer equipment 853 136 (351) 638

Leasehold improvement 87 – (21) 66

1 308 231 (483) 1 056

The estimation of the useful lives of property, plant and equipment is based on historic performance as well as expectations

about future use and therefore requires a signifi cant degree of judgement to be applied by management. These depreciation

rates represent management’s current best estimate of the useful lives of the assets.



126


Company name Nature of business

Percentage ownership

2014(%)

Percentageownership

2013(%)

Company2014

R’000

Company2013

R’000

44. Investments in subsidiaries Morvest Shared Services (Proprietary) Limited

Shared services 100 100 1 1

Foster-Melliar (Proprietary) Limited Training + IT consulting 100 100 1 1

Morvest Human Capital Management (Proprietary) Limited

Resourcing consulting 100 100 20 647 20 647

Morvest Professional Services (Proprietary) Limited

Profesional services 100 100 2 503 2 503

ITQ Business Solutions (Proprietary) Limited

IT consulting + bespoked development

50 50 47 019 47 019

(Proprietary) Limited

Morvest Information Communication and Technology (Proprietary) Limited

IT investment company

100 100 88 203 88 203

Morvest Mithratech (Proprietary) Limited

IT manufacturing, sales and distribution

100 100 6 485 12 800

Premium Ideas South Africa (Proprietary) Limited

Manufacturing 100 100 104 427 104 427

SAB and T Ubuntu Holdings (Proprietary) Limited

Consulting + project management 100 100 53 742 53 742

R and S Consulting (Proprietary) Limited IT consulting 50 50 51 254 51 254

Mint Management Technologies (Proprietary) Limited

IT consulting 50 14 669

374 282 395 266

Investment in subsidiaries reconciliation

Gross 610 727 610 727

Impairment (221 776) (215 461)

Disposal (14 669)

Reversal of impairment – –

Net 374 282 395 266

Impairment of investment in subsidiariesDuring the annual impairment test for goodwill, the recoverable amounts of the CGU mentioned in note 12 as calculated in the

goodwill impairment test was lower than the carrying amount. The above test is therefore an indication of impairment, which

resulted in an impairment of R6 315 000 being recognised for the investment in subsidiaries.

Investment in subsidiaries impairment for the current year of R6 315 000 (31 May 2013: R17 000 000) refl ects a write-down for

the following subsidiaries:

R’000

Subsidiary

– Morvest Mithratech (Proprietary) Limited 6 315

6 315


Company

2014R’000

2013R’000

45. Other fi nancial assets Loans receivable

Preference shares – Pavati 20 526 20 091

Preference shares – Calaska 3 496 3 597

Preference shares – BVI 41 760 –

Loan receivable sale of Mint Management Technologies 9 978 –

75 760 23 688

Non-current

Loans receivable 69 088 23 688

69 088 23 688

Current

Loans receivable 6 672 –

75 760 23 688

Preference shares The preference dividends relate to the BEECo, MANCo and BVI share-based payment arrangement disclosed in note 27. The

preference dividends are calculated based on a variable coupon rate equal to 75% of the prevailing prime interest rate in

respect of BEECo share option scheme and BVI share option scheme and 80% of the prime interest rate in respect of MANCo

share option scheme. The redemption date of the preference shares will be on the fi fth anniversary of the subscription date

for redeemable participating “Class B” preference shares held at R1, and on the seventh anniversary of the subscription for

cumulative redeemable “Class A” preference shares. Refer to note 27 for further details of the schemes.

Company

2014R’000

2013R’000

46. Deferred tax Represented by:

Opening balance –

Accelerated allowances (129) (129)

Bonus 2 635 2 635

Assessed loss 12 029 12 029

14 535 14 535

Represented by:

Deferred tax asset 14 535 14 535

14 535 14 535

Operating (14 535) (14 601)

Deferred taxation temporary differences (note 42) – (67)

The company considers it probable that sufficient taxable income will be available in the future to realise the deferred tax asset raised based on future income to be generated. The sufficiency of future taxable income was supported by budgets for the 2015 financial year.



128


Notes to the company fi nancial statements continued

Company

2014R’000

2013R’000

47. Trade and other receivables Financial instruments

Trade receivables 35 489 22 438

Deposits – 1 066

Other receivables 4 572 4 855

40 061 28 359

Non-fi nancial instruments

VAT 3 443 5 882

3 443 5 882


Currencies

The carrying amount of trade and other receivables are denominated in the following currencies:

Rand 40 061 28 359

Trade receivables have been ceded to Investec Bank Limited to obtain the long-term fi nancing as described in note 52.

Fair value of trade and other receivablesThe directors estimate the carrying amount of trade and other receivables approximate their fair value.

Trade receivables disclosed above are classifi ed as loans and receivables and are therefore measured at amortised cost.

The average credit period on sales of goods/services rendered is 60 days. No interest is charged on the trade receivables

for the fi rst 60 days from the date of the invoice. Thereafter, interest is charged at 2% per annum on the outstanding balance.

Fair value of trade and other receivables (continued)Trade receivables disclosed above include amounts (see below for aged analysis) that are past due at the end of the reporting

period but against which the group has not recognised an allowance for doubtful receivables because there has not been a

signifi cant change in credit quality and the amounts are still considered recoverable.

The company assesses its trade and loans receivables for impairment at each reporting date. In determining whether an

impairment loss should be recorded in the statement of comprehensive income, the group makes judgements as to whether

there is observable data indicating a measurable decrease in the estimated future cash fl ows from a fi nancial asset.

The impairment for trade and loans receivable is calculated on a specifi c basis, based on historical loss ratios, adjusted for

national and industry specifi c economic conditions and other indicators present at the reporting date.

Exposure to credit riskThe carrying amount of trade and other receivables represents the maximum credit exposure.


Company

2014R’000

2013R’000

47. Trade and other receivables (continued)Domestic 40 061 28 389

40 061 28 359

The company’s most signifi cant customer accounts for 35% of the trade receivables carrying amount at 31 May 2014 (2013: 32%).

Credit quality

The following represents information on the credit quality of trade receivables that are neither past due nor impaired:

A 90% 90%

B 10% 10%

A – The debtors are of good credit quality and no default in payment is expected.

B – These debtors usually pay, but have previously paid late and therefore there is a possibility that these debtors will not be recoverable.

Trade and other receivables past due but not impairedTrade and other receivables amounting to R3 640 450 (2013: R11 361 950) which are less than three months past due are not

considered to be impaired. The ageing of amounts past due but not impaired are as follows:

Company

2014R’000

2013R’000

1 month past due 67 196

2 months past due 16 197

3 months past due 3 557 6 150

48. Loans to/(from) group companies Subsidiaries

Loans to group companies

Business and Industrial Services 21 595 21 126

ICT Solutions 167 144 159 062

Corporate 3 517 –

192 256 180 188

Loans from Group companies

Business and Industrial Services (302 005) (281 432)

ICT Solutions (56 907) (69 317)

Corporate (24 446) (27 305)

(383 358) (378 054)

(191 102) (197 866)

Impairments (23 678) (23 678)

(214 780) (221 544)


Current liabilities (383 358) (378 308)

(214 780) (221 544)

The above loans are unsecured, interest free with no fixed terms of repayment.



130



Company

2014R’000

2013R’000

49. Cash and cash equivalents Bank and cash balances 13 609 5 697

13 609 5 697

Cash and cash equivalents has been ceded to Investec Bank Limited to secure long-term fi nancing as described in note 22.

50. Share capital Authorised

1 500 000 000 ordinary shares of R0,0001 each 150 150

Issued

880 000 000 (2013: 679 158 612) ordinary shares of R0,0001 each 88 68

Share premium 355 457 323 850

Reconciliation of number of shares issued:

Reported as at 1 June 2013 679 159 679 159

Issue of ordinary shares 222 171 –

Treasury shares held cancelled (21 330) –

880 000 679 159

The unissued shares are under the control of the directors.

51. Amounts due to vendors Sellers of R and S Consulting 6 856 14 114

Less: Current portion (6 856) (14 114)

Non-current portion – –

1st yearR’000

TotalR’000

Minimum contingent payments 6 856 6 856

Finance costs 157 157

Total contingent consideration 7 013 7 013

Total contingent consideration has been discounted using the risk-free rate. The risk-free rate was based on the South African

long-term government bond rate in effect at the time of the acquisition.

Company

2014R’000

2013R’000

52. Other fi nancial liabilities Investec Bank Limited

Interest-bearing liabilities 98 891 64 765

Total amount outstanding 98 891 64 765

Current portion 30 283 22 528

Non-current portion 68 608 42 237

Refer to note 22 of the consolidated fi nanancial statements.


52. Other fi nancial liabilities (continued) Investec Bank Limited – R86 million (continued)The loan bears interest at Jibar +4,5% and is repayable in quarterly instalments of R5 632 057 commencing on

3 November 2011.

Investec Bank Limited – R50 millionOn 15 January 2014 Morvest drew an additional facility of R35 245 452 on the R50 million facility. Initially only interest is payable monthly of prime +1% for the fi rst 18 months, thereafter the loans bear interest of 3MJibar +4,5% and 50% of the capital and interest is repayable in quarterly instalments of R2 795 059. The residual of the loan including interest will be payable at the expiary of the loan.

The following security has been provided for the above Investec loans:

• Cession of trade receivable for group entities*

• Cession of all banks accounts for group entities*

• Cession of all insurance policies for group entities*

• General notarial bond over movable property of Morvest Mithratech (Proprietary) Limited amounting to R70 million

• General notarial bond over movable property of Morvest Outsourcing Solutions (Proprietary) Limited amounting to

R70 million

• Mortgage bond over property of Morvest Properties (Proprietary) Limited over Noordwyk Ext 94 for an amount of R63 million

• Guarantees by group entities* for punctual payment of all amounts due to Investec

• Subordination of any shareholders loans and claims

Fair values of fi nancial liabilities Financial liabilities are measured at amortised cost using the effective interest rate method. The directors consider that the

carrying amounts of fi nancial liabilities recorded at amortised cost in the fi nancial statements approximate their fair values.

Company

2014R’000

2013R’000

53. Trade and other payables Financial instruments

Trade payables 8 017 13 515

Other payables 309 339

8 326 13 854

Non-fi nancial instruments

Bonus 5 223 9 410

Other accruals 15 969 53

21 192 9 463


Currencies

The carrying amount of trade and other payables are denominated in the following currencies:

Rand 8 026 13 854

8 026 13 854

Fair value of trade and other payablesThe average credit period on purchases of goods and services is 60 days. No interest is charged on the trade payables for

the fi rst 60 days from the date of the invoice. Thereafter, interest is charged at 2% per annum on the outstanding balance.

Due to the short-term nature of the group’s trade and other payables, the carrying value approximates their fair value. Trade

payables are subject to normal industry settlement terms.



132



Company

2014R’000

2013R’000

54. Cash generated by operations Profi t before taxation (1 423) 10 449

Adjustments for non-cash items:

– Depreciation 719 483

– Impairment of investment in subsidiaries 6 315 17 000

– Investment income (9 027) (5 292)

– Dividend received (10 502) (12 765)

– Finance costs 11 514 9 539

– Loss on disposal of Mint Management Technologies 4 881 –

– Operating lease accruals 226 (310)

– Share-based payment expense 1 846 1 193

4 549 20 297

Operating income/(loss) before changes in working capital

– Trade and other receivables (9 467) (2 114)

– Trade and other payables 6 201 14 262

1 283 32 445

55. Financial risk management Introduction and overview Refer to note 35 of the group annual fi nancial statements for applicable accounting policy.

Credit risk

Financial instruments exposed to credit risk at reporting date are as follows:

Financial instrument



Other fi nancial assets 75 760 23 688

Loans to group companies 168 578 156 764

298 008 214 508

Refer to note 34 of the group annual fi nancial statements for applicable accounting policy on managing credit risk.

Liquidity risk

Refer to note 34 of the group annual fi nancial statements for applicable accounting policy on managing liquidity risk.

The following liquid resources are available:

Financial assets



Other fi nancial assets 75 760 23 688

129 430 57 744


<1 year 1 year –

5 years Total

55. Financial risk management (continued)The following are contractual maturities of fi nancial liabilities:

2014


Trade and other payables 8 326 – 8 326

Other fi nancial liabilities 30 283 68 608 98 891

Vendor liabilities 6 856 – 6 856

Total fi nancial liabilities 45 465 68 608 114 073

2013


Trade and other payables 13 854 – 13 854

Other fi nancial liabilities 22 528 42 237 64 765

Vendor liabilities 6 856 7 258 14 114

Total fi nancial liabilities 43 238 49 495 92 733

Market risk

Interest rate risk

Refer to note 34 of the group annual fi nancial statements for applicable accounting policy on managing interest rate risk.

At the reporting date the interest rate profile of the Company’s interest-bearing financial instruments was:

Interest bearing

R’000

2014

Financial assets

Other financial assets 75 760


Other financial liabilities 98 891

Vendor liabilities 6 856

2013

Financial assets

Other financial assets 23 688


Other financial liabilities 64 765

Vendor liabilities 14 114

Foreign currency risk Refer to note 34 of the Group annual financial statements for applicable accounting policy on managing foreign currency risk.

The company is not exposed to significant currency risk.

Premium Ideas is one of Africa’s largest specialised

telecom SIM card fulfi lment house with a 19 year track

record in in providing telcos with customised, superior

quality and cost-effective packaging solutions.

≥ Shareholder information


Number of shareholdings %

Number of shares %

Shareholder spread

1 – 1 000 shares 252 10,11 128 321 0,01

1 001 – 10 000 shares 952 38,19 4 698 326 0,53

10 001 – 100 000 shares 959 38,47 37 991 490 4,32

100 001 – 1 000 000 shares 268 10,75 85 994 129 9,77

1 000 001 shares and over 62 2,49 751 187 734 85,36

Totals 2 493 100,00 880 000 000 100,00

Distribution of shareholders

Banks 4 0,16 2 378 477 0,27

Close corporations 34 1,36 27 949 243 3,18

Empowerment 1 0,04 290 000 000 32,95

Endowment funds 7 0,28 258 500 0,03

Individuals 2 266 90,89 182 870 139 20,78

Investment companies 8 0,32 69 983 741 7,95

Management and staff 1 0,04 20 250 000 2,30

Mutual funds 3 0,12 28 130 951 3,20

Nominees and trusts 84 3,37 15 626 189 1,78

Other corporations 18 0,72 2 180 072 0,25

Own holdings 1 0,04 105 331 0,01

Private companies 48 1,93 222 599 224 25,30

Public companies 4 0,16 16 079 805 1,83

Share incentive scheme 1 0,04 19 267 0,00

Trust 13 0,52 1 569 061 0,18

Totals 2 493 100,00 880 000 000 100,00

Public/non-public shareholders

Non-public shareholders 13 0,52 485 024 626 55,12

Directors and associates of the company 9 0,36 174 650 028 19,85

Empowerment 1 0,04 290 000 000 32,95

Management and staff 1 0,04 20 250 000 2,30

Own holdings 1 0,04 105 331 0,01

Share incentive scheme 1 0,04 19 267 0,00

Public shareholders 2 480 99,48 394 975 374 44,88

Totals 2 493 100,00 880 000 000 100,00

Beneficial shareholders holding 5% or more

Business Venture Investments No 1690 (Pty) Ltd 290 000 000 32,95

Pavati Trading 63 (Pty) Ltd 114 750 000 13,04

Pruta Securities 64 100 000 7,28

Totals 468 850 000 53,28

as at 31 May 2014

Analysis of shareholders


Shareholder information

136

12 months to May 2014

JSE statistics

Traded price (cents per share)

Close 31

High 39

Low 14

Market capitalisation (R) 272 800 000

Value of shares traded (R) 30 875 411

Value traded as % of mktcap 11%

Volume of shares traded 140 069 719

Volume traded as % of number in issue 16%

PE ratio 3,27

Dividend yield 3,23

Earnings yield 30,58

Shares in issue shares 880 000 000

Number of shareholders 2 493

Financial year-end 31 May

Annual general meeting 21 November 2014

Announcement of interim results February

Announcement of annual results 29 August 2014

Posting of annual report 21 October 2014

Shareholders’ diary


The board is proposing that the company change its name from Morvest Business Group Limited to Morvest Group Limited.

The change of name is subject to the passing and registration of the required special resolution set out in the attached notice of

annual general meeting. For a period of not less than one year, Morvest Group Limited will refl ect the former name Morvest Business

Group Limited on all documents of title in brackets beneath the new name of Morvest Group Limited.

The proposed name of “Morvest Group Limited” has been approved and reserved by CIPRO. The change of name will be effective

on Friday, 12 December 2014, subject to CIPC registration being received by 3 December 2014.

The JSE alpha code will remain as MOR, the short name will remain as Morvest and the ISIN number will remain as ZAE000152567

from the commencement of business on Friday, 12 December 2014, therefore no surrender of existing share certifi cates is required.

Rationale for the change of nameThe rationale for the change of name is to simplify the company name.

Shareholders are referred to the salient dates below with regard to the proposed change of name.

2014

Record date in order to be eligible to receive the circular Friday, 10 October

Notice of annual general meeting posted on Tuesday, 21 October

Last day to trade in order to be eligible to vote Friday, 7 November

Record date in order to be eligible to vote Friday, 14 November

Receipt of forms of proxy in respect of the annual general meeting by 10:00 on Wednesday, 19 November

Annual general meeting at 10:00 on Friday, 21 November

Results of the annual general meeting released on SENS on Friday, 21 November

If CIPC registration is received by 3 December 2014, the following the dates will apply:

Finalisation announcement released on SENS on Thursday, 4 December

Last day to trade under the old name of Morvest Business Group Limited Thursday, 11 December

Shares trade under the new name of Morvest Group Limited, using the

existing short name of MOR and ISIN ZAE000152567 from the commencement of trading on Friday, 12 December

Record date in respect of the change of name (“Change of Name Record Date”) on Friday, 19 December

Notes:

1. All times indicated above are South African times.

2. Any changes to the dates will be released on SENS and published in the press.

3. The surrender of share certifi cates or updating of CSDP accounts are not required as the existing short name of MOR and ISIN

ZAE000152567 will be retained.

Proposed change of name from Morvest Business Group Limited to Morvest Group Limited



138

Morvest Business Group Limited

(Incorporated in the Republic of South Africa)

(Registration number 2003/012583/06)

JSE code: MOR

ISIN: ZAE000152567

(“Morvest” or “the company”)

Notice is hereby given to the shareholders of the company that the annual general meeting of the company will be held at

188 14th Road, Noordwyk, Midrand, at 10:00 on Friday, 21 November 2014 to: (i) consider and, if deemed fi t to pass, with or

without modifi cation, the following ordinary and special resolutions, in the manner required by the Companies Act, No 71 of 2008,

as amended from time to time, and all schedules and regulations published pursuant thereto (the “Companies Act”), as read

with the JSE Limited (“JSE”) Listings Requirements (“JSE Listings Requirements”); and (ii) deal with such other business as may

lawfully be dealt with at the meeting, which meeting is to be participated in and voted at by shareholders registered as such as at

Friday, 14 November 2014, being the record date to participate in and vote at the annual general meeting in terms of section 62(3)(a),

read with section 59(1)(b), of the Companies Act. The record date to receive notice of the annual general meeting in terms of section

59(1)(a) of the Companies Act is Friday, 10 October 2014. The last day to trade to be eligible to vote at the annual general meeting

is Friday, 7 November 2014.

Ordinary resolutionsOrdinary resolution 1: Adoption of annual fi nancial statements“Resolved that the annual fi nancial statements of the company for the year ended 31 May 2014, including the directors’ report and

the report of the Audit and Risk Committee, be and are hereby received and adopted.”

The percentage of voting rights required for this resolution to be adopted is at least 50% of the voting rights plus one vote exercised

on the resolution.

Ordinary resolution 2: Re-election of directorsIn terms of clause 108 of the company’s Memorandum of Incorporation (“MoI”), the following directors retire by rotation at the annual

general meeting, but being eligible, offer themselves for re-election:

2.1 Re-election of director“Resolved that NY Mhinga, who retires by rotation and who is eligible and available for re-election, be re-elected as a director

of the company.”

A brief curriculum vitae in respect of NY Mhinga is included on page 18 of the annual report of which this notice forms part.

2.2 Re-election of director“Resolved that B Marx, who retires by rotation and who is eligible and available for re-election, be re-elected as a director of

the company.”

A brief curriculum vitae in respect of B Marx is included on page 18 of the annual report of which this notice forms part.

2.3 Re-election of director“Resolved that A Mohammadali-Haji, who retires by rotation and who is eligible and available for re-election, be re-elected as

a director of the company.”

A brief curriculum vitae in respect of A Mohammadali-Haji is included on page 18 of the annual report of which this notice forms

part.

The election of each director who, among other things, retires by rotation is required at the company’s annual general meeting.

The election will be conducted by a series of votes, each of which is on the candidacy of a single individual to fi ll a single vacancy

as required under section 68(2) of the Companies Act.

The percentage of voting rights required for this resolution to be adopted is at least 50% of the voting rights plus one vote

exercised on the resolution.

Notice of annual general meeting


Ordinary resolution 3: Re-appointment of auditors“Resolved that Mazars (Gauteng) Inc. be and are hereby re-appointed as auditors of the company for the ensuing fi nancial year and

the directors be and are hereby authorised to fi x the remuneration of the auditors and to note that the individual registered auditor

who will undertake the audit during the fi nancial year ending 31 May 2015 will be [Manoj Manilal].”


on the resolution.

Ordinary resolution 4: Appointment of Audit and Risk Committee members“Resolved that shareholders elect, each by way of a separate vote, the following non-executive directors, as members of the

company’s Audit and Risk Committee in terms of section 94(2) of the Companies Act:

4.1 Appointment of B Marx as a member of the Audit and Risk Committee“Resolved that subject to the adoption of resolution 2.3, B Marx be and is hereby elected as a member of the Audit and Risk

Committee of the company,”

4.2 Appointment of NY Mhinga as a member of the Audit and Risk Committee“Resolved that subject to the adoption of resolution 2.2, NY Mhinga be and is hereby elected as a member of the Audit and Risk

Committee of the company,”

4.3 Appointment of A Mohammadali-Haji as a member of the Audit and Risk Committee“Resolved that subject to the adoption of resolution 2.4, A Mohammadali-Haji be and is hereby elected as a member of the Audit

and Risk Committee of the company,”

A brief curriculum vitae in respect of each of the above Audit and Risk Committee members is included on page 18 of the annual

report of which this notice forms part.

The percentage of voting rights required for this resolution to be adopted is at least 50% of the voting rights plus one vote

exercised on the resolution.

Ordinary resolution 5: General authority to allot and issue ordinary shares for cash“Resolved that pursuant to the MoI of the company, the directors of the company and/or of its subsidiaries be and are hereby

authorised, until the next annual general meeting of the company (when this authority shall lapse unless it is renewed at that annual

general meeting, provided that it shall not extend beyond 15 months from the date of this resolution), to:

• allot and issue, or issue any options in respect of all or any of the authorised but unissued ordinary shares in the capital of the

company; and/or

• sell or otherwise dispose of or transfer, or issue any options in respect of ordinary shares purchased by subsidiaries of the

company, for cash subject to the Listings Requirements of the JSE on the following basis:

(a) the allotment and issue of ordinary shares for cash shall be made only to persons qualifying as public shareholders as defi ned

in the Listings Requirements of the JSE, and not to related parties;

(b) the number of ordinary shares issued for cash shall not in the aggregate in any one fi nancial year of the company exceed

132 million shares being 15% of the number of shares in issue as at the date of this notice of annual general meeting excluding

treasury shares;

(c) the maximum discount at which ordinary shares may be issued for cash is 10% of the weighted average traded price on the

JSE of those ordinary shares over 30 business days prior to the date that the price of the issue is agreed between the issuer

and the party subscribing for the securities. The JSE must be consulted if the shares have not traded over such 30 day period;

(d) after the company has issued ordinary shares for cash which represent, on a cumulative basis within a fi nancial year, 5% or

more of the number of ordinary shares in issue prior to that issue, the company shall publish an announcement containing full

details of the issue, including the effect of the issue on the net asset value and earnings per share of the company;

(e) any shares issued under this authority during the period contemplated above, must be deducted from the number in paragraph

(b) above;

(f) in the event of a sub-division or consolidation of shares during the period contemplated above, the existing authority must be

adjusted accordingly to represent the same allocation ratio;

g) 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 as are convertible into a class already in issue; and

h) whenever the company wishes to use ordinary shares, held as treasury shares by a subsidiary of the company, such use must

comply with the JSE Listings Requirements as if such use was a fresh issue of ordinary shares.”



140

In terms of the Listings Requirements of the JSE, a 75% majority of the votes cast by shareholders present or represented by proxy

(excluding the designated advisor and the controlling shareholders together with their associates) at the annual general meeting

must be cast in favour of ordinary resolution number 5 for it to be approved.

Ordinary resolution 6: Remuneration policy“To approve, by way of a non-binding advisory vote, the remuneration policy of the company as set out on page 33 of this integrated

report.”


on the resolution.

Ordinary resolution 7: Signature of documentation“Resolved that any director or the company secretary of the company be and is hereby authorised to sign all such documents and

do all such things as may be necessary or incidental to the implementation of ordinary resolutions 1, 2, 3, 4, 5 and 6 and special

resolutions 1, 2, 3 and 4.”

Special resolutionsSpecial resolution 1: Repurchase of shares “Resolved as a special resolution that, subject to section 48 the Companies Act, the MoI, the JSE Listings Requirements and the

restrictions set out below, the repurchase of shares of the company either by the company or by any subsidiary of the company is

hereby authorised, on the basis that:

(a) The general authority given in terms of this resolution shall remain in force until the conclusion of the next annual general meeting

of the company or 15 months from the date on which this resolution is passed, whichever is the earlier date.

(b) The general authority in (a) shall provide authorisation to the board of directors to repurchase on behalf of the company, shares

in the issued share capital of the company as follows:

(i) it will be limited, in any fi nancial year of the company, to a maximum of 20% of the issued share capital of the company on

the date on which this special resolution is passed;

(ii) the repurchase of shares issued by the company may not be at a price which exceeds 10% of the weighted average of

the market value at which Morvest shares of the same class traded on the JSE for the fi ve business days immediately

preceding the date on which the transaction is effected;

(iii) any such repurchase will be implemented through the order book operated by the JSE trading system and done without any

prior understanding or arrangement between the company and the counterparty;

(iv) an announcement will be published as soon as the company has repurchased ordinary shares constituting, on a cumulative

basis, 3% of the number of ordinary shares in issue prior to the repurchase pursuant to which the aforesaid 3% threshold

was reached (and for each 3% in aggregate of the initial number of that class acquired thereafter). Such announcement

must contain full details of such acquisitions;

(v) the company (or any subsidiary) must be authorised to do so in terms of its MoI;

(vi) at any point in time, the company may only appoint one agent to effect any repurchase(s) on the company’s behalf;

(vii) a resolution by the board of directors that it has authorised the repurchase, that the company and its subsidiaries passed

the solvency and liquidity test and that since the test was performed there have been no material changes to the fi nancial

position of the group; and

(viii) repurchases may not take place during a prohibited period as defi ned in paragraph 3.67 of the JSE Listings Requirements

unless there is a repurchase programme in place and the dates and quantities of shares to be repurchased during the

prohibited period are fi xed and has been submitted to the JSE in writing. Morvest will instruct an independent third party,

which makes its investment decisions in relation to the company’s securities independently of and uninfl uenced by the

company prior to the commencement of the prohibited period to execute the repurchase programme submitted to the JSE.

(c) The exercise by the directors of the authority to procure the repurchase by the company’s subsidiaries of shares in terms of (b),

shall be subject, mutatis mutandis, to the same terms and conditions as those set out above.

(d) Having considered the aggregate effect of the maximum repurchase of 20% of the company’s issued share capital in any one

fi nancial year pursuant to the general authority to repurchase shares, the board of directors is of the opinion that, for a period of

12 months after the date of the repurchase:

(i) the company and the group will be able to repay their debts, in the ordinary course of business;

(ii) the company and the group’s assets will be in excess of the liabilities of the company and the group. 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 fi nancial statements;

Notice of annual general meeting continued


(iii) the company and the group’s ordinary share capital and reserves will be adequate for ordinary business purposes; and

(iv) the company and the group will have suffi cient working capital for the ordinary business purposes.”

(e) The board is of the opinion that this authority should be in place so as to enable the company, as and when the opportunity

presents itself, to repurchase shares.

The following additional information, some of which may appear elsewhere in the annual report of which this notice forms part, is

provided in terms of the JSE Listings Requirements for purposes of this general authority:

• major benefi cial shareholders – see page 135 of the integrated report; and

• share capital of the company – see page 60 of the integrated report.

Directors’ responsibility statement

The directors, whose names appear on pages 18 and 19 of the annual report of which this notice forms part, collectively and

individually, accept full responsibility for the accuracy of the information pertaining to this special resolution 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 special resolution contains all necessary

information contained in the Companies Act and the JSE Listings Requirements.

Material changes

Other than the facts and developments reported on in this annual report, there have been no material changes in the affairs or

fi nancial position of the company and its subsidiaries since the date of signature of the audit report and up to the date of this notice.

Reason and effect of special resolution number 1

The reason for the passing of special resolution number 1 is to authorise the company to repurchase shares issued by it and to

enable its subsidiary companies to acquire shares in its share capital.

The effect of the passing of special resolution number 1 is that the company is authorised to repurchase shares issued by it and

that the company’s subsidiary companies will be able to repurchase shares in the share capital of the company, as set out above.

The percentage of voting rights required for this resolution to be adopted is at least 75% of the voting rights exercised on the

resolution.

Special resolution number 2: Financial assistance

“Resolved that, as a special resolution, in terms of section 45 of the Companies Act, 71 of 2008, as amended (“the Companies Act”),

the shareholders of the company hereby approve of the company providing, at any time and from time to time during the period

of 2 (two) years commencing on the date of this special resolution, any direct or indirect fi nancial assistance as contemplated in

section 45 of the Companies Act to any 1 (one) or more related or inter-related companies or corporations of the company.

(a) (i) the recipient or recipients of such fi nancial assistance, and

(ii) the form, nature and extent of such fi nancial assistance, and

(iii) the terms and conditions under which such fi nancial assistance is provided, are determined by the board of directors of the

company from time to time; and

(b) the board of directors of the company may not authorise the company to provide any fi nancial assistance pursuant to this special

resolution unless the board meets all those requirements of section 45 of the Companies Act which it is required to meet in order

to authorise the company to provide such fi nancial assistance.”


resolution.



142


Special resolution number 3: Approval of non-executive directors’ remuneration“Resolved that in terms of section 66(9) of the Companies Act, the company be authorised to pay remuneration to its non-executive

directors for their services as directors as listed below.”

Proposed fee for the

year ending 31 May

2015

Approved fee for the

year ended 31 May

2014

Annual fee



Board member R254 400 R269 664

Meeting fee



Members of the board R1 325 R1 405

Chairman of Audit and Risk Committee R2 650 R2 809

Member of Audit and Risk Committee R1 325 R1 405

Chairman of all other committees R1 325 R1 405

Members of all other committees R1 060 R1 124

In terms of sections 66(8) and (9) of the Companies Act, remuneration only be paid to directors for their services as directors in

accordance with a special resolution approved by shareholders within the previous two years.

The reason for special resolution 3 is to obtain shareholder approval by special resolution for directors’ remuneration for services as

directors in compliance with the Companies Act.

It is noted that the remuneration payable to directors in their capacities as such and does not include salaries and other benefi ts

payable to directors in other capacities.


resolution.

Special resolution number 4: Change of name to Morvest Group Limited“Resolved that the company’s name be changed to Morvest Group Limited and that the company be and is hereby authorised to

amend its MoI to refl ect such name change.”


resolution.

The reason for and effect of special resolution number 4The reason for the proposed name change is to simplify the company name.

Salient dates2014

Record date in order to be eligible to receive the circular Friday, 10 October

Notice of annual general meeting posted on Tuesday 21 October

Last day to trade in order to be eligible to vote Friday, 7 November

Record date in order to be eligible to vote Friday, 14 November

Receipt of forms of proxy in respect of the annual general meeting by 10h00 on Wednesday, 19 November

Annual general meeting at 10h00 on Friday 21 November

Results of the annual general meeting published on SENS on Friday, 21 November


If CIPC registration is received by 3 December 2014, the following dates will apply:

Finalisation announcement announced on SENS Thursday, 4 December

Last day to trade under the old name of Morvest Business Group Limited Thursday, 11 December

Shares trade under the new name of Morvest Group Limited, using the existing short

name of MOR and ISIN ZAE000152567 from the commencement of trading on Friday, 12 December

Record date in respect of the change of name (“Change of Name Record Date”) on Friday, 19 December

Any matters raised by shareholders, with or without advance notice to the company.To deal, at the annual general meeting, with any matters raised by shareholders, with or without advance notice to the company.

Electronic participationIn terms of section 61(10) of the Companies Act, every shareholders meeting of a public company must be reasonably accessible

within South Africa for electronic participation by shareholders.

Shareholders wishing to participate electronically in the annual general meeting are required to deliver written notice to the company

at 188 14th Road, Noordwyk, Midrand (marked for the attention of the company secretary) by no later than 10:00 on Wednesday,

19 November 2014, that they wish to participate via electronic communication at the annual general meeting (the “electronic notice”).

In order for the electronic notice to be valid it must contain:

(a) if the shareholder is an individual, a certifi ed copy of his identity document and/or passport;

(b) if the shareholder is not an individual, a certifi ed copy of a resolution by the relevant entity and a certifi ed copy of the identity

documents and/or passports of the persons who passed the relevant resolution. The relevant resolution must set out who from

the relevant entity is authorised to represent the relevant entity at the annual general meeting via electronic communication;

(c) a valid email address and/or facsimile number (the “contract address/number”); and

(d) if the shareholder wishes to vote via electronic communication, set out that the shareholder wishes to vote via electronic

communication.

By no later than 24 hours before the time for the annual general meeting the company shall use its reasonable endeavours to notify

a shareholder at its contract address/number who has delivered a valid electronic notice of the relevant details through which the

shareholder can participate via electronic communication.

Voting and proxiesAll shareholders are encouraged to attend, speak and vote at the annual general meeting. On a show of hands, every shareholder of

the company present in person or represented shall have one vote only. On a poll, every shareholder present in person, by proxy or

represented shall have one vote for every share held.

A form of proxy is attached for the convenience of any Morvest shareholder holding certifi cated shares who cannot attend the

annual general meeting of Morvest shareholders or who wishes to be represented thereat. Forms of proxy may also be obtained

on request from the company’s registered offi ce. The completed forms of proxy must be deposited at or posted to the offi ce of the

transfer secretaries of the company to be received at least 48 hours prior to the meeting. Any member who completes and lodges

a form of proxy will nevertheless be entitled to attend and vote in person at the general meeting should the member subsequently

decide to do so.

Morvest shareholders who have already dematerialised their Morvest shares through a Central Securities Depository Participant

(“CSDP”) or broker and who wish to attend the general meeting of Morvest shareholders must instruct their CSDP or broker to issue

them with the necessary letter of representation to attend.

Dematerialised Morvest shareholders, who have elected own-name registration in the sub-register through a CSDP and who are

unable to attend, but wish to vote at the annual general meeting of Morvest shareholders, must complete and return the attached

form of proxy and lodge it with the transfer secretaries of the company at least 48 hours prior to the meeting.

Dematerialised Morvest shareholders, who have not elected own-name registration in the sub-register through a CSDP and who

are unable to attend but who wish to vote at the annual general meeting of Morvest shareholders should ensure that the person

or entity (such as a nominee) whose name has been entered into the sub-register maintained by a CSDP or broker completes and



144

returns the attached relevant forms of proxy in terms of which they appoint a proxy to vote at the annual general meeting of Morvest

shareholders.

Equity securities held by a share trust or scheme will not have their votes at general/annual general meetings taken into account for

the purposes of resolutions proposed in terms of the JSE Listings Requirements.

Unlisted securities (if applicable) and shares held as treasury shares may not vote.

NB: Section 63(1) of the Companies 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 licences and passports.

By order of the board

NB January

Company secretary

Registered office

188 14th Road, Noordwyk, Midrand, 1685

PO Box 4307, Halfway House, Midrand, 1685

Transfer secretaries

Computershare Investor Services Proprietary Limited

70 Marshall Street, Johannesburg, 2001

PO Box 61051, Marshalltown, 2107

29 August 2014



Morvest SAB&T provides large scale project and

programme management services to the public and

private sector. Core competencies include project

management, call centre, data capturing and stipend

payments. Our project management of the Kha Ri

Gude Mass Literacy Project, a Department of Basic

Education initiative, is an example of our specialised

ability and capacity for large scale projects.



146

Notes


Morvest Business Group Limited(Incorporated in the Republic of South Africa)(Registration number 2003/012583/06)JSE code: MORISIN: ZAE000152567(“Morvest” or “the company”)

For use by holders of certifi cated Morvest ordinary shares or holders of dematerialised Morvest ordinary shares who have selected own-name registration, at the annual general meeting of the company to be held at 188 14th Road, Noordwyk, Midrand, 1685, at 10:00 on Friday, 21 November 2014.

Additional forms of proxy are available from the transfer secretaries of the company.

Not for use by holders of the company’s dematerialised ordinary shares who have not selected own-name registration.

The CSDP or broker, as the case may be, of dematerialised Morvest ordinary shareholders who have not elected own-name registration, should contact such Morvest ordinary shareholders to ascertain the manner in which they wish to cast their vote at the general meeting and thereafter cast their vote in accordance with their instructions. Such instructions should be communicated to the CSDP or broker, as the case may be, in terms of the custody agreement between the Morvest ordinary shareholder and his/her CSDP or broker. If such dematerialised Morvest ordinary shareholder concerned has not been contacted, it would be advisable for them to contact their CSDP or broker, as the case may be, and furnish them with their instructions. Dematerialised Morvest ordinary shareholders who are not own-name dematerialised Morvest ordinary shareholders and who wish to attend the general meeting must obtain their necessary letter of representation from their CSDP or broker, as the case may be, and submit same to Morvest’s transfer secretaries to be received by no later than at least 48 hours prior to the meeting. This must be effected in terms of the custody agreement entered into between the dematerialised Morvest ordinary shareholder and his/her/its CSDP or broker. If the CSDP or broker, as the case may be, does not obtain instructions from such dematerialised Morvest ordinary shareholder, they will be obliged to act in terms of the mandate furnished to them, or, if the mandate is silent in this regard, to abstain from voting.

I/We (names in block letters)

of (address in block letters)

being the holder/s of shares in the company do

hereby appoint of

or failing him/her of

or failing him/her the Chairman of the annual general meeting as my/our proxy to act for me/us at the annual general meeting of the company to be held at188 14th Road, Noordwyk, Midrand, 1685, on Friday, 21 November 2014 and at any adjournment thereof, and to vote for me/us on my/our behalf in respect of the undermentioned resolutions.

Number of votes

For Against Abstain

Ordinary resolutions

1. To adopt the annual fi nancial statements of the company for the year ended 31 May 2014, including the directors’ report and the report of the Audit and Risk Committee

2. To re-elect directors:

2.1 NY Mhinga

2.2 B Marx

2.3 A Mohammadali-Haji

3. To re-appoint Mazars (Gauteng) Inc. as the auditors and Manoj Manilal as the individual registered auditor and to fi x their remuneration

4. To appoint members of the Audit and Risk Committee:

4.1 To appoint B Marx as a member of the Audit and Risk Committee

4.2 To appoint NY Mhinga as a member of the Audit and Risk Committee

4.3 To appoint A Mohammadali-Haji as a member of the Audit and Risk Committee

5. To allot and issue ordinary shares for cash

6. Approval of remuneration policy for non-executive directors

7. To authorise the directors or the company secretary to sign documentation

Special resolutions

1. To give directors general authority to repurchase company shares

2. Authorise Morvest to provide direct or indirect fi nancial assistance to one or more related or interrelated companies

3. Approval of non-executive directors’ remuneration

4. Approval of name change to Morvest Group Limited

Please read notes on the reverse side hereof.

Signed at on the day 2014

Signature Assisted by (where applicable)

Form of proxy



148

Notes to the form of proxy

1. A Morvest shareholder may insert the name of a proxy or the names of two alternative proxies of the shareholder’s choice in the space. The person whose name stands fi rst on the form of proxy and who is present at the Morvest annual general meeting of shareholders will be entitled to act as proxy to the exclusion of those whose names follow.

2. A proxy appointed by a Morvest shareholder in terms hereof may not delegate his authority to act on behalf of the Morvest shareholder to any other person.3. A Morvest shareholder’s instructions to the proxy must be indicated by means of a tick or a cross in the appropriate box provided. Failure to comply with

the above will be deemed to authorise the proxy to vote or to abstain from voting at the annual general meeting as he/she deems fi t in respect of all the Morvest shareholders’ votes exercisable thereat relating to the resolutions proposed in this form of proxy.

4. It is requested that forms of proxy be lodged at Computershare Investor Services Proprietary Limited, Ground Floor, 70 Marshall Street, Johannesburg, 2001 or posted to PO Box 61051, Marshalltown, 2107 so as to be at least 48 hours prior to the meeting. A Morvest shareholder shall never the less be entitled to ledge completed forms of proxy immediately prior to the commencement of the annual general meeting.

5. The completion and lodging of this form of proxy will not preclude the relevant Morvest shareholder from attending the annual general meeting and speaking and voting in person thereat to the exclusion of any proxy appointed in terms hereof, should such Morvest shareholder wish to do so. In addition to the aforegoing, a Morvest 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. The revocation of a proxy appointment constitutes a complete and fi nal

cancellation of the proxy’s authority to act on behalf of the Morvest shareholder as at the later of the date stated in the revocation instrument, if any; or the date on which the revocation instrument was delivered in the required manner.

6 The Chairman of the general meeting may reject or accept any form of proxy which is completed and/or received other than in compliance with these notes.7. Any alteration to this form of proxy, other than a deletion of alternatives, must be initialled by the signatory/ies.8. Documentary evidence establishing the authority of a person signing this form of proxy in a representative capacity must be attached to this form of proxy

unless previously recorded by the company.9. Where there are joint holders of Morvest shares:

9.1 any one holder may sign this form of proxy; and9.2 the vote of the senior (for that purpose seniority will be determined by the order in which the names of shareholders appear in the register of members)

who tenders a vote (whether in person or by proxy) will be accepted to the exclusion of the vote(s) of the other joint holder(s) of Morvest shares.10. This form of proxy may be used at any adjournment or postponement of the annual general meeting, including any postponement due to a lack of quorum,

unless withdrawn by the Morvest shareholder.


G3.1 Content Index – GRI Application Level C

Application Level C

Standard disclosures part I: Profi le disclosures

Report fully on the below selection of profi le disclosures or provide a reason for omission

G3

Profi le

disclosure Disclosure

Location of

disclosure

1. Strategy and

analysis

1.1 Statement from the most senior decision-maker of the organisation. pg. 10, 12

2. Organisational

profi le

2.1 Name of the organisation. pg. 155, 156

2.2 Primary brands, products, and/or services. pg. 1, 3,6

2.3 Operational structure of the organisation, including main divisions, operating

companies, subsidiaries, and joint ventures.

pg. 3,6

2.4 Location of organisation’s headquarters. pg. 156

2.5 Number of countries where the organization operates, and names of

countries with either major operations or that are specifi cally relevant to the

sustainability issues covered in the report.

pg. 4

2.6 Nature of ownership and legal form. pg. 1, 156

2.7 Markets served (including geographic breakdown, sectors served, and types

of customers/benefi ciaries).

pg. 4, 6

2.8 Scale of the reporting organisation. pg. 4, 6

2.9 Signifi cant changes during the reporting period regarding size, structure,

or ownership.

pg. 1, 3, 6

2.10 Awards received in the reporting period. pg. 9

3. Report

parameters

3.1 Reporting period (e.g., fi scal/calendar year) for information provided. pg. 1

3.2 Date of most recent previous report (if any). pg. 1

3.3 Reporting cycle (annual, biennial, etc.) pg. 1

3.4 Contact point for questions regarding the report or its contents. pg. 1

3.5 Process for defi ning report content. pg. 1

3.6 Boundary of the report (e.g., countries, divisions, subsidiaries, leased

facilities, joint ventures, suppliers). See GRI Boundary Protocol for

further guidance.

pg. 1

3.7 State any specifi c limitations on the scope or boundary of the report (see

completeness principle for explanation of scope).

pg. 1

3.8 Basis for reporting on joint ventures, subsidiaries, leased facilities,

outsourced operations, and other entities that can signifi cantly affect

comparability from period to period and/or between organisations.

pg. 1

3.10 Explanation of the effect of any re-statements of information provided

in earlier reports, and the reasons for such re-statement (e.g. mergers/

acquisitions, change of base years/periods, nature of business,

measurement methods).

pg. 1

3.11 Signifi cant changes from previous reporting periods in the scope, boundary,

or measurement methods applied in the report.

pg. 1

3.12 Table identifying the location of the Standard Disclosures in the report. pg. 149



150

G3.1 Content Index – GRI Application Level C continued

G3

Profi le

disclosure Disclosure

Location of

disclosure

4. Governance,

commitments,

and engagement

4.1 Governance structure of the organisation, including committees under the

highest governance body responsible for specifi c tasks, such as setting

strategy or organisational oversight.

pg. 18, 25

4.2 Indicate whether the Chair of the highest governance body is also an

executive offi cer.

pg. 18, 25

4.3 For organisations that have a unitary board structure, state the number and

gender of members of the highest governance body that are independent

and/or non-executive members.

pg. 18, 25

4.4 Mechanisms for shareholders and employees to provide recommendations or

direction to the highest governance body.

pg. 18, 25

4.14 List of stakeholder groups engaged by the organisation. pg. 22

4.15 Basis for identifi cation and selection of stakeholders with whom to engage. pg. 22

Standard disclosures part iii: Performance indicators

Report fully on 10 core or additional performance indicators – at least one from each dimension (economic, environmental, social)

G3 Indicator Disclosure

Location of

disclosure

Economic

Economic

performance

EC1 Direct economic value generated and distributed, including revenues,

operating costs, employee compensation, donations and other community

investments, retained earnings, and payments to capital providers

and governments.

pg. 46

EC2 Financial implications and other risks and opportunities for the organisation’s

activities due to climate change.

Not reported

EC3 Coverage of the organisation’s defi ned benefi t plan obligations. pg. 36

EC4 Signifi cant fi nancial assistance received from government. Not reported

Market presence EC5 Range of ratios of standard entry level wage by gender compared to local

minimum wage at signifi cant locations of operation.

Not reported

EC6 Policy, practices, and proportion of spending on locally-based suppliers at

signifi cant locations of operation.

pg. 50

EC7 Procedures for local hiring and proportion of senior management hired from

the local community at signifi cant locations of operation.

pg. 48

Indirect economic

impacts

EC8 Development and impact of infrastructure investments and services

provided primarily for public benefi t through commercial, in-kind, or

pro bono engagement.

Not reported

EC9 Understanding and describing signifi cant indirect economic impacts,

including the extent of impacts.

pg. 48



Location of

disclosure

Environmental

Materials EN1 Materials used by weight or volume. Not reported

EN2 Percentage of materials used that are recycled input materials. Not reported

Energy EN3 Direct energy consumption by primary energy source. Not reported

EN4 Indirect energy consumption by primary source. Not reported

EN5 Energy saved due to conservation and effi ciency improvements. Not reported

EN6 Initiatives to provide energy-effi cient or renewable energy-based products

and services, and reductions in energy requirements as a result of

these initiatives.

Not reported

EN7 Initiatives to reduce indirect energy consumption and reductions achieved. Not reported

Water EN8 Total water withdrawal by source. Not reported

EN9 Water sources signifi cantly affected by withdrawal of water. Not reported

EN10 Percentage and total volume of water recycled and reused. Not reported

Biodiversity EN11 Location and size of land owned, leased, managed in, or adjacent to,

protected areas and areas of high biodiversity value outside protected areas.

Not reported

EN12 Description of signifi cant impacts of activities, products, and services on

biodiversity in protected areas and areas of high biodiversity value outside

protected areas.

Not reported

EN13 Habitats protected or restored. Not reported

EN14 Strategies, current actions, and future plans for managing impacts

on biodiversity.

Not reported

EN15 Number of IUCN Red List species and national conservation list species with

habitats in areas affected by operations, by level of extinction risk.

Not reported

Emissions, effl uents

and waste

EN16 Total direct and indirect greenhouse gas emissions by weight. Not reported

EN17 Other relevant indirect greenhouse gas emissions by weight. Not reported

EN18 Initiatives to reduce greenhouse gas emissions and reductions achieved. Not reported

EN19 Emissions of ozone-depleting substances by weight. Not reported

EN20 NOx, SOx, and other signifi cant air emissions by type and weight. Not reported

EN21 Total water discharge by quality and destination. Not reported

EN22 Total weight of waste by type and disposal method. Not reported

EN23 Total number and volume of signifi cant spills. Not reported

EN24 Weight of transported, imported, exported, or treated waste deemed

hazardous under the terms of the Basel Convention Annex I, II, III, and VIII,

and percentage of transported waste shipped internationally.

Not reported



152


Location of

disclosure

Environmental

Emissions,

effl uents and waste

(continued)

EN25 Identity, size, protected status, and biodiversity value of water bodies

and related habitats signifi cantly affected by the reporting organisation’s

discharges of water and runoff.

Not reported

Products and

services

EN26 Initiatives to mitigate environmental impacts of products and services, and

extent of impact mitigation.

Not reported

EN27 Percentage of products sold and their packaging materials that are reclaimed

by category.

Not reported

Compliance EN28 Monetary value of signifi cant fi nes and total number of non-monetary

sanctions for non-compliance with environmental laws and regulations.

pg. 52

Transport EN29 Signifi cant environmental impacts of transporting products and other goods

and materials used for the organisation’s operations, and transporting

members of the workforce.

Not reported

Overall EN30 Total environmental protection expenditures and investments by type. Not reported

Social: Labor practices and decent work

Employment LA1 Total workforce by employment type, employment contract, and region,

broken down by gender.

pg. 36 – 38

LA2 Total number and rate of new employee hires and employee turnover by age

group, gender, and region.

pg. 36 – 38

LA3 Benefi ts provided to full-time employees that are not provided to temporary or

part-time employees, by major operations.

pg. 37

LA15 Return to work and retention rates after parental leave, by gender. Not reported

Labor/management

relations

LA4 Percentage of employees covered by collective bargaining agreements. pg. 38

LA5 Minimum notice period(s) regarding signifi cant operational changes, including

whether it is specifi ed in collective agreements.

Not reported

Occupational

health and safety

LA6 Percentage of total workforce represented in formal joint management-worker

health and safety committees that help monitor and advise on occupational

health and safety programmes.

Not reported

LA7 Rates of injury, occupational diseases, lost days, and absenteeism, and

number of work-related fatalities by region and by gender.

Not reported

LA8 Education, training, counselling, prevention, and risk-control programmes in

place to assist workforce members, their families, or community members

regarding serious diseases.

pg. 44

LA9 Health and safety topics covered in formal agreements with trade unions. Not reported

Training and

education

LA10 Average hours of training per year per employee by gender, and by

employee category.

pg. 39

LA11 Programmes for skills management and lifelong learning that support

the continued employability of employees and assist them in managing

career endings.

pg. 39

LA12 Percentage of employees receiving regular performance and career

development reviews, by gender.

pg. 38




Location of

disclosure

Social: Labor practices and decent work (continued)

Diversity and equal

opportunity

LA13 Composition of governance bodies and breakdown of employees per

employee category according to gender, age group, minority group

membership, and other indicators of diversity.

pg. 18, 19, 36

Equal remuneration

for women and men

LA14 Ratio of basic salary and remuneration of women to men by employee

category, by signifi cant locations of operation.

Not reported

Social: Human rights

Investment and

procurement

practices

HR1 Percentage and total number of signifi cant investment agreements and

contracts that include clauses incorporating human rights concerns, or that

have undergone human rights screening.

Not reported

HR2 Percentage of signifi cant suppliers, contractors and other business partners

that have undergone human rights screening, and actions taken.

Not reported

HR3 Total hours of employee training on policies and procedures concerning

aspects of human rights that are relevant to operations, including the

percentage of employees trained.

Not reported

Non-discrimination HR4 Total number of incidents of discrimination and actions taken. pg. 36

Freedom of

association and

collective bargaining

HR5 Operations and signifi cant suppliers identifi ed in which the right to exercise

freedom of association and collective bargaining may be violated or at

signifi cant risk, and actions taken to support these rights.

Not reported

Child labour HR6 Operations and signifi cant suppliers identifi ed as having signifi cant risk for

incidents of child labour, and measures taken to contribute to the effective

abolition of child labour.

Not reported

Forced and

compulsory labour

HR7 Operations and signifi cant suppliers identifi ed as having signifi cant risk for

incidents of forced or compulsory labour, and measures to contribute to the

elimination of all forms of forced or compulsory labour.

Not reported

Security practices HR8 Percentage of security personnel trained in the organisation’s policies or

procedures concerning aspects of human rights that are relevant

to operations.

Not reported

Indigenous rights HR9 Total number of incidents of violations involving rights of indigenous people

and actions taken.

pg. 38

Assessment HR10 Percentage and total number of operations that have been subject to human

rights reviews and/or impact assessments.

Not reported

Remediation HR11 Number of grievances related to human rights fi led, addressed and resolved

through formal grievance mechanisms.

pg. 49

Social: Society

Local communities SO1 Percentage of operations with implemented local community engagement,

impact assessments, and development programmes.

Not reported

SO9 Operations with signifi cant potential or actual negative impacts on

local communities.

Not reported

SO10 Prevention and mitigation measures implemented in operations with

signifi cant potential or actual negative impacts on local communities.

Not reported



154


Location of

disclosure

Social: Society (continued)

Corruption SO2 Percentage and total number of business units analysed for risks related

to corruption.

Not reported

SO3 Percentage of employees trained in organisation’s anti-corruption policies

and procedures.

Not reported

SO4 Actions taken in response to incidents of corruption. pg. 47

Public policy SO5 Public policy positions and participation in public policy development

and lobbying.

Not reported

SO6 Total value of fi nancial and in-kind contributions to political parties,

politicians, and related institutions by country.

Not reported

Anti-competitive

behaviour

SO7 Total number of legal actions for anti-competitive behaviour, anti-trust,

and monopoly practices and their outcomes.

pg. 30

Compliance SO8 Monetary value of signifi cant fi nes and total number of non-monetary

sanctions for non-compliance with laws and regulations.

pg. 30

Social: Product responsibility

Customer health

and safety

PR1 Life cycle stages in which health and safety impacts of products and services

are assessed for improvement, and percentage of signifi cant products and

services categories subject to such procedures.

Not reported

PR2 Total number of incidents of non-compliance with regulations and voluntary

codes concerning health and safety impacts of products and services during

their life cycle, by type of outcomes.

Not reported

Product and

service labelling

PR3 Type of product and service information required by procedures,

and percentage of signifi cant products and services subject to such

information requirements.

Not reported


codes concerning product and service information and labelling, by type

of outcomes.

Not reported

PR5 Practices related to customer satisfaction, including results of surveys

measuring customer satisfaction.

Not reported

Marketing

communications

PR6 Programmes for adherence to laws, standards, and voluntary codes

related to marketing communications, including advertising, promotion,

and sponsorship.

Not reported


codes concerning marketing communications, including advertising,

promotion, and sponsorship by type of outcomes.

Not reported

Customer privacy PR8 Total number of substantiated complaints regarding breaches of customer

privacy and losses of customer data.

Not reported

Compliance PR9 Monetary value of signifi cant fi nes for non-compliance with laws and

regulations concerning the provision and use of products and services.

pg. 30



Defi nitions

“AltX” Alternative Exchange of the JSE Limited, on which Morvest listed in 2004 prior to transferring to the JSE Main Board on 20 June 2011

“B-BBEE” Broad-Based Black Economic Empowerment

“BEE” Black Economic Empowerment

“B2B” Business-to-Business markets, in which Morvest initially focussed on

“B2C” Business-to-Consumer markets, into which Morvest has diversified (with a focus on Retail and Other investments)

“the board” The board of directors of Morvest Business Group Limited

“Business & Industrial”

Business segment including Professional Services and Outsourcing Solutions

“BVI” BVI Group Key Executives Scheme, a BEE initiative approved during the year to boost direct black shareholding

“BVI empowerment transaction”

BVI acquired 290 million Morvest shares, boosting black ownership in the group to 52%

“CEO” Chief Executive Officer, Mohammed Varachia

“CFO” Chief Financial Officer, Suren Singh

“CLO” Chief Legal Officer, Alex Evan

“the Codes” South African Department of Trade and Industry’s B-BBEE Codes of Good Practice

“the Companies Act” South African Companies Act, 71 of 2008, as amended

“the current year” The year ending 31 May 2015

“EXCO” Executive Committee of Morvest Business Group Limited

“ESG” Environment, Social and Governance

“GRI” Global Reporting Initiative

“the group” Morvest Business Group Limited, its subsidiaries and associates

“ICT” Information, Communication and Technology

“IFRS” International Financial Reporting Standards

“ISAE 3000” International Standards on Assurance Engagements

“JSE” Johannesburg Securities Exchange, part of JSE Limited and the main bourse in South Africa

“King III Report” King Report on corporate governance for South Africa, 2009

“MoI” Memorandum of Incorporation, as approved by shareholders at the annual general meeting in November 2013

“Omman” Omman Investments Proprietary Limited, a property company of which Morvest acquired 50,05% post year-end owning the Ushaka Mall in Stanger, KwaZulu-Natal

“Morvest” or “the company”

Morvest Business Group Limited, the group holding company listed on the Main Board of the JSE

“PPPFA” Preferential Procurement Policy Framework Act, No 5 of 2000

“PPP” Public-Private Partnership, a government service initiative which is funded and operated through a partnership between government and private sector

“the previous year” or “the prior year”

The year ended 31 May 2013

“SENS” The JSE’s real-time news dissemination service

“SHEQ” Safety, health, environment and quality

“Simmons” Simmons (South Africa) Proprietary Limited, a leading global bedding manufacturer and distributor whose business was acquired by Morvest in June 2014

“the year” or “the year under review”

The year ended 31 May 2014

Financial defi nitions

“EBITDA” Earnings Before Interest, Taxation, Depreciation and Amortisation

“HEPS” Headline Earnings Per Share

“NPAT” Net Profit After Tax

“PAT” Profit After Tax

“FY2014” Financial Year 2014



Corporate information

Company registration number 2003/012583/06

Country of incorporation: South Africa

Executive directors MS Varachia (Chief Executive Offi cer)

S Singh (Chief Financial Offi cer)

M Papiyana (Group HR director)

A Evan (Chief Legal Offi cer)

Registered offi ce and business address 188 14th Road, Noordwyk, Midrand, 1685

P.O. Box 4307, Halfway House, 1685

Tel: +27 11 231 1300

Fax: +27 11 234 8023

Company secretary Noelene January

Morvest Business Group Limited

188 14th Road, Noordwyk, Midrand, 1685

PO Box 4307, Halfway House, 1685

Tel: +27 11 231-1300

Fax: +27 11 234-8023

Auditors Mazars (Gauteng) Inc.

Erasmus Forum A

434 Rigel Avenue South, Erasmusrand

Pretoria, 0181

Tel: +27 12 347 3820

Fax: +27 12 347 3737

Enquiries Enquiries relating to shares should be directed

to the transfer secretaries.

Enquiries relating to the company should be

directed to the company secretary.

ISIN codeZAE 000152567

Share code: MOR

Non-executive directors PS Molefe (Chairman)*

B Marx*

NY Mhinga*

AM Haji*

* Independent non-executive director

Transfer secretaries Computershare Investor Services (Pty) Ltd

70 Marshall Street, Johannesburg, 2001

PO BOX 61051 Marshall Town 2107

Tel: +27 11 370 5000

Fax: +27 11 688 5248

Sponsor Sasfi n Capital, a division of Sasfi n Bank Limited

Registration number: 1951/002280/06

29 Scott Street, Waverly 2090

Johannesburg, PO Box 95104

Grant Park 2051

Commercial bankers First National Bank (a division of First Rand Bank Limited)

(Registration number 1966/010753/06)

267 AFGRI Building, Ground Floor, Centurion, 0157

Tel: +27 12 643 7758

Fax: 086 540 7751

Nedbank Limited (Registration number 1951/000009/06)

Nedbank House

12 Fredman Drive, Sandown 2196

(PO Box 1147 Sandton 2146) “

Tel: +27 11 294 0111

Fax: +27 11 294 0111

Mo

rvest Integrated rep

ort 2014

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