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Condensed Consolidated Financial Statements for the Year Ended 28 February 2015
Total Client Services Limited
Incorporated in the Republic of South Africa
(Registration number 1998/025018/06)
Share code: TCS ISIN: ZAE000116208
(“TCS” or “the Group” or “the Company”)
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 28 FEBRUARY 2015
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
% Audited Audited
Change Note Year ended Year ended
28 Feb 2015 28 Feb 2014
R'000 R'000
Revenue (32) 19 232 28 293
Cost of sales 36 (8 157) (12 681)
Gross Profit (29) 11 075 15 612
Other Income 1 7 380 15
Operating Expenses 23 (22 513) (29 423)
Loss from operations 71 (4 058) (13 796)
Investment revenue 4 57
Finance costs 57 (1 821) (4 284)
Loss before taxation 67 (5 875) (18 023)
Taxation 216 448 (387)
Loss for the period 71 (5 427) (18 410)
Other comprehensive income
Revaluation of equipment 1 602 -
Deferred tax on revaluation (448) -
Total comprehensive loss for the
year 77 (4 274) (18 410)
Loss attributable to:
Equity holders of the company 71 (5 427) (18 410)
Non-controlling interest - -
Total comprehensive loss
attributable to:
Equity holders of the company 77 (4 274) (18 410)
Non-controlling interest - -
Reconciliation of loss to headline
loss
Loss after tax 71 (5 427) (18 410)
Adjusted for:
Insurance Refund (978) -
Asset Impairment - 10
Loss on disposal of equipment 60 41
Tax effect of the above - -
Headline loss for the period 65 (6 344) (18 359)
Basic loss per ordinary share attributable
to the equity holders of the Company (cents) 73 (1.29) (4.76)
Weighted average number of ordinary shares
in issue in thousands 419 696 386 363
Headline loss per ordinary share (cents) 68 (1.51) (4.75)
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Audited Audited
Year ended Year ended
28 Feb 2015 28 Feb 2014
Notes R'000 R'000
ASSETS
Non-current assets 3 864 2 621
Property, Plant and Equipment 2 2 653 2 621
Intangible Assets 4 1 211 -
Current assets 4 737 5 905
Trade and other receivables 3 878 4 657
Cash and cash equivalents 859 1 248
TOTAL ASSETS 8 601 8 526
EQUITY AND LIABILITIES
Capital and reserves (31 368) (39 468)
Share Capital 3 19 122 18 122
Revaluation Reserve 1 829 1 044
Equity Portion of Loan Option 6 11 374 -
Retained earnings (63 693) (58 634)
Non-current liabilities 23 859 58
Borrowings 6 23 859 58
Current liabilities 16 111 47 936
Current tax payable 1 467 1 467
Borrowings 6 1 531 24 529
Trade and other payables 5 13 113 21 940
TOTAL LIABILITIES 39 969 47 994
TOTAL EQUITY AND LIABILITIES 8 601 8 526
Total number of ordinary shares in issue at the year-end
(in thousands) 423 467 390 135
Treasury shares (in thousands) (3 771) (3 771)
Total number of ordinary shares in issue excluding
treasury shares (in thousands) 419 696 386 363
Net asset value per ordinary share (cents) (6.45) (10.22)
Net tangible assets value per ordinary share (cents) (6.45) (10.22)
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
Audited Audited
Year ended Year ended
28 Feb 2015 28 Feb 2014
R’000 R’000
Cash flows from operating activities
Cash generated from operations (4 060) (2 998)
Investment revenue 4 57
Finance costs (12) (141)
Taxation paid - -
Net cash from operating activities (4 068) (3 082)
Cash flow from investing activities
Purchase of property, plant and equipment (166) (169)
Purchase of intangibles (1 253) -
Net cash from investing activities (1 419) (169)
Cash flow from financing activities
Loans received 4 155 -
Shares issued 1 000 -
Repayment of interest bearing borrowings (58) (64)
Net cash from financing activities 5 097 (64)
Total cash movement for the year (389) (3 315)
Cash at the beginning of the period. 1 248 4 563
Total cash at the end of the year 859 1 248
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Equity
Share Share BEE Revaluation Retained
portion of Total
Capital Premium Reserve Reserve Income
share R'000
R'000 R'000 R'000 R'000 R'000
options
Balance as at 1 March 2013 39 18 084 (9 923) 1 707 - (30 963) (21 058)
Loss for the period - - - - - (18 410) (18 410)
Realisation/reallocation of reserves - - 9 923 (663) - (9 260) -
Revaluation of equipment - - - - - - -
Balance as at 28 February 2014 39 18 084 - 1 044 - (58 634) (39 468)
Shares Issued 10 990 - - - - 1 000
Loss for the period - - - - - (5 427) (5 427)
Realisation of revaluation reserve - - - (368) - 368 -
Equity portion of share options - - - - 11 374 - 11 374
Revaluation of equipment - - - 1 153 - - 1 154
Balance as at 28 February 2015 49 19 074 - 1 829 11 374 (63 693) (31 368)
COMMENTARY ON THE GROUP RESULTS
OPERATIONAL PERFORMANCE
During the period under review, TCS continued to deal with the challenges at hand in order to take advantage
of opportunities in the market. Management’s focus during this period was to continue to consolidate the
existing contracts, improve the service offering and secure new business. The aim was to move away from
non-performing or unsustainable contracts and focus on sustainable business.
Although there are notable losses in the period under review, it needs to be understood that these losses
were compounded by the challenges brought about by the Business Rescue process in 2014. Although the
Business Rescue process added value and enabled the restructuring of the Company, the impact it had on
general operations should be taken into consideration when considering the performance. The negative
perception in the market had a definite impact on current and new business, and also allowed opportunity
for competitors to take advantage of the situation.
Following release from Business Rescue in August 2014, the Company faced further challenges in continuing
with the internal restructuring process, the re-alignment of the basic business model and the restoration of
faith amongst clients.
FINANCIAL PERFORMANCE
Revenue for the year under review compared to the previous year has decreased by 32% to R19.2 million.
This can be largely attributed to the Limpopo and Gauteng contracts coming to an end during the period.
The efforts by management to improve efficiency and the service offering started to deliver results with
certain cost reductions noted. Earnings before, interest, tax, depreciation and amortisation (“EBITDA”)
improved on the 2014 result, with a negative EBITDA of R2.0 million reported.
After deducting depreciation and finance costs, a loss before tax of R5.9 million has been recorded compared
to R18 million recorded in the prior year. Cost of sales reduced during the year by R4.5 million compared to
the corresponding year, this change reflects the decline in revenue, the results of cost containment efforts
and efficient deployment of resources.
The headline loss per share reduced to 1.51 cents compared to a loss of 4.75 cents for the prior year ending
28 February 2014.
The movement in non-current assets relates mainly to the valuation and addition of new developed software.
The reduction in current assets reflects the reduced cash balances and trade receivables at year end. Trade
and other payables of R13.1 million includes regular trade payables of R2.4 million and SARS liabilities of
R7.5 million. These SARS liabilities are those accumulated debts recorded during the Business Rescue period
(up to August 2014) and the accumulated taxes until year end. At the end of the year the Group’s closing
cash balance was R0.9 million.
PROSPECTS
The Administration Adjudication of Road Traffic Offences Project (“AARTO”) has been delayed and a new
date has not as yet been announced. It is anticipated that AARTO will enhance the Company’s revenue and
growth prospects. TCS has aligned its business strategy, products and services in accordance with the
requirements of AARTO and our systems are fully compliant.
The Company introduced, and aims to continue with, a more focussed approach based on superior software,
technology and equipment. The market provides sustainable targets for the TCS Group of companies with
the potential to achieve measured growth.
Achievements in this regard already include the introduction of new products to the market, being: own re-
engineered Artimas fixed radar camera, own new “TCS CAPTURE” mobile camera, handheld devices, new
Windows based Traffic Management System, the Pound Management System and the On Board Automatic
Number Plate recognition systems.
These products, together with other new innovations, will play a significant role in the re-focussed TCS.
NOTES TO THE CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
1. Other income:
The other income of R7.4 million recorded for the period under review, included the following
significant items:
• R5.0 million loan write-off in Total Client Services in accordance with the business rescue
plan.
• R1.4 million recovery of doubtful debt in Total Computer Services.
• R0.9 million related to an insurance refund received.
2. Property, plant and equipment
Opening Closing
Balance Additions Disposals Depreciation Impairment Revaluation Balance
Group 2015
Furniture and fittings 146 489 56 713 - (66 906) - - 136 296
Motor vehicles 242 143 - (48 995) (95 365) - - 97 783
Office equipment 78 830 - - (48 175) - - 30 655
IT equipment 454 308 109 212 (36 862) (224 116) - - 302 542
Camera Accessories 1 698 793 - - (1 215 116) - 1 601 707 2 085 384
Total 2 620 563 165 924 (85 857) (1 649 677) - 1 601 707 2 652 661
Group 2014
Furniture and fittings 217 500 - - (71 011) - - 146 489
Motor vehicles 340 974 - - (98 831) - - 242 143
Office equipment 128 184 - - (49 354) - - 78 830
IT equipment 497 872 169 486 - (213 050) - - 454 308
Camera Accessories 3 694 726 - (40 936) (1 954 997) - - 1 698 793
Total 4 879 256 169 486 (40 936) (2 387 243) - - 2 620 563
Revaluation assumptions:
Management performed a revaluation at February 2015 year end on camera equipment that were still in use.
The revaluation was based on the depreciated replacement cost approach, with the replacement cost
obtained from external suppliers and taking cognisance of the camera’s current and total expected useful
lives. This resulted in a gross increase in the camera carrying value of R2.3 million.
3. Share Capital
Figures in Rand
2015 2014
Authorised
500 000 000 (2014: 500 000 000) Ordinary shares of
R0.0001 (2014: R0.0001) each 50 000 50 000
Issued
391 134 690 (2014: 390 134 690) ordinary shares of
R0.0001 each 39 114 39 014
Share premium 19 276 000 18 276 000
Treasury shares (192 869) (192 869)
19 122 245 18 122 145
All shares are fully paid. 3 771 484 (2014: 3 771 484) of
the ordinary share capital of Total Client Services Limited
were held by their subsidiary, Total Computer Services
Proprietary Limited as at 28 February 2015.
Reconciliation of number of shares issued:
Shares in issue at the beginning of the year 390 134 690 390 134 690
Shares issued during the year 1 000 000 -
Closing Balance 391 134 690 390 134 690
4. Intangible assets
Reconciliation of Intangible Accumulated Accumulated Carrying
Additions
Assets Amortisation Impairment Value
Group 2015
Computer software
Internally generated 1 253 034 (41 768) - 1 211 266
Total 1 253 034 (41 768) - 1 211 266
5. Trade and other payables
Trade payables are obligations to pay for goods or services that have been acquired in the ordinary
course of business from suppliers. Trade payables are initially recognised at fair value, and are
subsequently measured at amortised cost, using the effective interest rate method.
Group
2015 2014
Trade payables 2 647 341 2 722 183
Amounts received in advance 1 304 489 1 398 613
Preference shares dividends and interest accrual - 11 270 000
SARS liabilities 8 552 844 5 800 646
Other payables - 207 814
Accrued leave pay 607 856 540 702
13 112 531 21 939 958
The accrual for dividends and interest on the preferential shares were adjusted in accordance with
the Business Rescue plan and now included in the Mvela borrowings balances (Refer note 6).
SARS liabilities reflects VAT and PAYE, as well as interest and penalties on these amounts. According
to the Business Rescue plan, repayment of this debt was due to start from 1 January 2015. The
Company engaged SARS prior to January 2015 to start negotiations for a more favourable settlement
of these debts. At the date of this report, settlement has been reached with SARS whereby the
Company is required to pay an amount of R500k as settlement for all debt up to, and including
March 2017. This settlement amount is payable before the end of June 2017.
6. Borrowings
Borrowings are initially recognised at fair value, and are subsequently measured at amortised cost,
using the effective interest rate method.
Group
Figures in Rand
2015 2014
Instalment sale agreements 29 062 87 013
Redeemable preference shares * - 24 500 000
Primary loan * 21 345 798
Other loans ** 4 014 888 -
25 389 748 24 587 013
Current
Instalment sale agreements 29 062 28 760
Redeemable preference shares - 24 500 000
Primary loan 1 502 151
Other loans - -
1 531 213 24 528 760
Non-Current
Instalment sale agreements - 58 253
Primary loan 19 843 647 -
Other loans 4 014 888 -
23 858 535 58 253
Interest Bearing Borrowings (continued)
Carrying value at
Amortised cost
Redeemable preference shares/Primary loans 2015
The Group issued 2 600 cumulative redeemable preference shares with a par value of R1 per
share on 29 November 2007. 150 Cumulative preference shares with a par value of R1 per share
were redeemed in March 2010 for R1 500 000. The remaining shares were mandatorily
redeemable on 29 November 2013, and accrued dividends at 12% annually. The dividend on the
preference shares for the year amounted to R2 940 000 (2014: R2 940 000) and has been
recorded as part of finance costs.
In November 2013, the Company entered Business Rescue. In terms of the Business Rescue Plan,
the outstanding redeemable preference shares will be dealt with as follows:
R5 000 000 was written off
R5 000 000 was converted to a senior loan, repayable over 3 years at 10% interest per annum. 4 595 799
Repayment of capital and interest was scheduled to commence from 1 March 2015. The Company
was not in a position to start with the repayments and renegotiated with the creditor. Repayment
of this loan remains suspended and the loan remains subordinated until the parties are in a
position to renegotiate the terms.
The remaining R 25 770 000 owing was converted to a subordinated loan, subordinated in favour
of other creditors. This loan was interest free for the first 12 months. Thereafter interest will
accrue at the prime interest rate and after the first 12 months, the loan becomes convertible, at
the option of the creditor, to ordinary shares at R0.01 per share. If not converted to ordinary
shares, the loan becomes repayable over 3 years commencing only once the senior loan of R5
million has been repaid. 16 749 999
At the initial conversion date these loans were assessed as compound instruments with
a liability and equity portion as it contains interest free periods as well as an embedded
option to convert to ordinary shares. The difference between the nominal value of the
loans and the fair value of the liabilities at initial recognition were accounted for within
equity (equity portion of compounded instrument). The liability portions are subsequently
measured at amortised cost, using the effective interest rate of 15%-18%.
Total – Primary loans 21 345 798
Other loans
The Group required and received funding to support its the recovery during the stabilising
period and following the business rescue process of 2014. This funding was provided in the
form of loans with suspended repayment terms and which are subordinated to other creditors.
The Company is not required to start repaying these loans until it has sufficient cash to do so.
These loans were provided by:
Mvelaphanda through its subsidiary RHW Southern Africa Holdings (Pty) Ltd 1 150 000
Repayment of this, in terms of the original loans, have been suspended by the financier until
the Company has the financial resources to start repayment, or until an alternative agreement
can be reached. This loan was interest free up to year end.
Slade Investments (Pty) Ltd
- As part of the Business Rescue Plan 859 439
This loan amounting to R1 000 000 was interest free for the first 12 months, whereafter the
provider of the loan would have the option to convert to ordinary shares at R0.01 per share.
Should this option not be exercised, the loan becomes repayable over 12 months and carry
interest at the prime interest rate. The loan was assessed as a compound instrument with a
liability and equity portion. The difference between the nominal value of the loan and the fair
value of the liability at initial recognition was accounted for within equity (equity portion of
compounded instrument). The liability portion is subsequently measured at amortised cost,
using the effective interest rate of 15%.
- Additional loans 2 005 449
Repayment of this, in terms of the original loans, has been suspended by the financier until the
Company has the financial resources to start repayment or until an alternative agreement can
be reached. At year end the loan was interest free, but in future the loan will accrue interest at
the prime interest rate.
Total – Other loans 4 014 888
BASIS OF PREPARATION
Statement of compliance
The condensed consolidated financial statements are prepared in accordance with the Listings Requirements
of the JSE Limited (“JSE Listings Requirements”) and the requirements of the Companies Act of South Africa,
2008 (Act 71 of 2008), as amended. The JSE Listings Requirements require reports to be prepared in
accordance with the framework concepts and the measurement and recognition requirements of International
Financial Reporting Standards (IFRS) and the SAICA Financial Reporting Guides as issued by the Accounting
Practices Committee and Financial Pronouncements as issued by Financial Reporting Standards Council and
to also, as a minimum, contain the information required by IAS 34 Interim Financial Reporting. The
accounting policies applied in the preparation of the condensed consolidated financial statements are in terms
of IFRS and consistent with those of the annual financial statements for the year ended 28 February 2013
and the condensed results for the year ended 29 February 2014, except for the adoption of new, improved
and revised standards and interpretations which became effective, which had no material effect on the
financial results.
These Condensed Consolidated Financial Statements are extracted from audited information but are not
themselves audited. The directors take full responsibility for the preparation of the financial information and
the financial information has been correctly extracted from the underlying financial information.
The annual financial statements have been prepared under the supervision of the Financial Director, Mr C Els
and have been audited by the Group’s auditors, BDO South Africa Incorporated, who’s modified audit report
is available for inspection at the registered office of the Company.
The auditor’s report does not necessarily report on all of the information contained in these Condensed
Consolidated Financial Statements. Shareholders are therefore advised that in order to obtain a full
understanding of the nature of the auditor’s engagement they should obtain a copy of the auditor’s report
together with the accompanying financial information from the issuer’s registered office.
The Disclaimer of Opinion and Report on Other Legal and Regulatory Requirements paragraphs as contained
in the audit report are set out below:
“Basis for Disclaimer of Opinion
As indicated in note 31 (going concern) to the financial statements as well as in the directors’ report, the
Group incurred a net loss for the year ended 28 February 2015 of R5,4 million and, as at that date its total
liabilities exceeded its total assets by R31,4 million. The going concern of the Group is significantly dependent
on the ongoing support of all its stakeholders, especially key staff and financiers including subordination and
non-repayment of certain loans for the foreseeable future, the Group securing new contracts, the successful
restructuring of its operational expenses in line with sales levels and the JSE listing to be re-instated. The
going concern note also indicates that these conditions, along with other matters, indicates the existence of
a material uncertainty which may cast significant doubt on the Group’s ability to continue as a going concern
and therefore it may be unable to realise its assets and discharge its liabilities in the normal course of
business. In these circumstances and as a result of the significance thereof, we have not been able to obtain
sufficient appropriate audit evidence to confirm or dispel whether it is appropriate to prepare the financial
statements on the going concern basis.
Disclaimer of opinion
Because of the significance of the matter described in the Basis for Disclaimer of Opinion paragraph, we have
not been able to obtain sufficient appropriate audit evidence to provide a basis for an opinion. Accordingly,
we do not express an opinion on the financial statements.
Report on other legal and regulatory requirements
In accordance with our responsibilities in terms of sections 44(2) and 44(3) of the Auditing Profession Act,
we report that we have identified reportable irregularities in terms of the Auditing Profession Act. We have
reported such matter to the Independent Regulatory Board for Auditors. The matters pertaining to the
reportable irregularities are as follows:
• The entity has submitted Income Tax returns, the Value Added Tax returns (VAT 201) and Employees
Tax returns (EMP 201) to the South African Revenue Services, but no payment has been made to settle
the outstanding liability.
• Contravention of Section 30 of the Companies Act by failing to prepare annual financial statements within
six months after its financial year end.
• Contravention of paragraph 3.19 of the JSE Listings Requirements which requires issuers to distribute a
notice of the Annual General Meeting and annual financial statements to all holders of securities and to
submit to the JSE Limited within six months after its financial year end.
• Contravention of Section 66(2)(b) of the Companies Act, by failing to have the minimum number of
directors as prescribed
• Contravention Section 94 (6) of the Companies Act, by failing appoint a person to fill any vacancy on the
audit committee within 40 business days after the vacancy arises.
• Potential contravention of Section 22 and Section 129 of the Companies Act, as the Company was unable
to settle its liabilities as it became due and it is technically insolvent.”
Business rescue process and subsequent events
As per the announcement released on SENS on 22 November 2013, the board of directors of TCS (“the
Board”) deemed TCS to be financially distressed as contemplated in Chapter 6 of the Companies Act, 71 of
2008, as amended (“the Companies Act”) and accordingly, on 21 November 2013 resolved that business
rescue proceedings commence, and that TCS be placed under supervision in terms of section 129 of the
Companies Act.
In this regard, Mr Piers Marsden of Matuson & Associates was appointed as the Company’s business rescue
practitioner (“Business Rescue Practitioner”) on 9 December 2013.
An announcement was released on SENS on 2 May 2014, informing shareholders of the publication of a
proposed business rescue plan (“Business Rescue Plan”) and included a notice of meeting of creditors, other
holders of a voting interest and shareholders to be held on 19 May 2014 to consider the Business Rescue
Plan.
As per the announcement released on SENS on 19 May 2014, the Business Rescue Plan was approved by the
requisite majority of creditors, other holders of a voting interest and shareholders. Subsequent to the
announcement released on SENS on 19 June 2014, wherein shareholders were advised that the Company
submitted its Schedule 13 application to the JSE to enable the Company to raise capital through the issue of
new shares, the application was approved by JSE Limited.
The Business Rescue Practitioner confirmed on 14 August 2014 that the Business Rescue Plan had been
substantially implemented and that the control of the Company effectively reverted back to the Board.
The Business Rescue Plan included the below restructuring of the Statement of Financial Position. The pro-
forma financial effects of the specific issue of shares as part of the business rescue and subsequent
restructuring was released in an announcement on 9 June 2016.
• Equity Injection - Slade Investments CC (“Slade”)
The Company required a cash injection. The amount injected into the Company would be used as
working capital. The Company’s financial model indicated a cash requirement of R2million. Slade
injected R2 million into the Company as follows:
1. R1 million by subscribing to 100 million shares at a fixed price of 1 cent per share. This
constituted 20.4% of the issued share capital post the issues of the new shares.
2. R1 million loan, which will be interest free for the first twelve months. Slade has the option
to convert the loan to ordinary shares at a fixed price of 1 cent per share after twelve
months, subject to all the JSE Listing Requirements and Companies Act regulations being
met at that date. Should the option to convert not be exercised the loan will become
repayable over 12 months at the prime interest rate.
• Debt Restructuring and Forgiveness - Mvelapanda Holdings Proprietary Limited (“Mvela”)
A total amount of R35.77 million was due and payable to Mvela relating to the preference shares
and accrued interest thereon. The repayment/distribution of the preference shares were subject to
section 46 of the Companies Act including the solvency and liquidity test. An amount of R5 million
was written off.
The remaining preference share capital and accrued interest were converted to loans as indicated
below which are not subject to section 46 of the Companies Act requirements.
• Terms and Repayment of Remaining Debt
The remaining debt of R30.77 million owing to Mvela was structured as follows:
R5 million to be a senior loan repayable monthly over 3 years at 10% interest per annum
with repayment of capital and interest commencing on 1 March 2015.
R25.77 million loan subordinated in favour of all creditors.
- Interest free for the first 12 months commencing on adoption of the Business
Rescue plan.
- After 12 months have the option to convert into ordinary shares at the fixed price
of 1 cent per share, subject to all the JSE Listing Requirements and Companies Act
regulations being met at that date.
- Should the option to convert not be exercised the loan will become repayable over
3 years commencing only once the senior loan has been repaid. Interest will accrue
at the prime interest rate.
• South African Revenue Services (SARS)
The tax debts of R7.9 million owing to SARS was addressed as follows:
The amount, including interest but excluding penalties, plus all tax debts up to the date of release
in August 2014, will be payable in equal instalments over 30 months starting on 1 January 2015.
After release from Business Rescue in August 2014, the Company engaged with SARS to reach
agreement on the final settlement amount and to seek relief on the payment terms. This process
was ongoing and not concluded at the end of the period under review.
At the date of this report the Company has received and accepted a final settlement offer from SARS,
which requires payment of R500,000 to settle all SARS outstanding amounts up to and including
March 2017.
Going Concern
During the term certain significant contracts came to an end which contributed to the Group making a loss
after tax of R5.4 million for the year. As at the year ended 28 February 2015, the Group had a negative
equity position of R31 million.
Also refer to notes 12 and 30 which provides additional information on the restructuring of the borrowings
and the favourable settlement of the SARS liabilities through the final settlement agreement.
Even though borrowings to the value of R22.5 million have been subordinated in favour of other creditors,
the Group’s Statement of Financial Position still reflects a technical insolvent position with liabilities exceeding
assets.
The Company was also not able to settle its borrowing repayments as they became due in terms of the
original agreements, but was able, after year end, to renegotiate and extend the repayment of the borrowings
with the financiers so that these loans have been subordinated in favour of other creditors and that repayment
would only be required once the Company has sufficient cash resources to be able to settle the loan
repayments as they become due. During the period after year end and up to the date of this report, the
primary shareholders provided capital to fund the operational losses and cash shortfalls when required. This
was done in support of the business and its restructuring initiatives during the transition period. There are
no indication that the Company will not continue to receive similar support if required for the foreseeable
future.
During the 2015 financial period, revenue continued to decline from prior periods, mainly due to the negative
effects of the Business Rescue process and the contracts for Limpopo Province and Gauteng Province coming
to an end. These contracts contributed approximately R10.8 million in annual revenue.
These losses, together with the operating restrictions experienced during, and after, the Business Rescue
process, continued to have a severe effect on the trading during the year from March 2014 until the date of
this report. Restrictions mainly relate to limited cash for operations, as well as reservations amongst existing
clients and new clients in the market to engage in, or increase business activities with the Company.
However, since the discharge from Business Rescue, as announced on SENS on 29 August 2014, the Company
has managed to restructure the business to a sustainable level. The Company also managed to secure new
profitable contracts, including full service contracts for Polokwane (September 2014), Tlokwe (May 2015)
and Buffalo City (December 2015). It also includes a relationship with the Namibian Police, whereby TCS will
be providing services and equipment to support the traffic law enforcement expansion in Namibia over the
next few years.
Focus will also remain on equipment technology advances and service delivery to improve income from
existing contracts and confidently pursue new markets and contracts.
In addition to the revenue initiatives, the cost saving processes started during the Business Rescue period
continued during 2015 and 2016, and will continue as part of an ongoing profitability improvement process.
The Board believes that as a result of the above, positive operating cash flows will be realised in the
foreseeable future. The Board determined the future cash flows of the Group when it assessed the going
concern status. Although due care has been exercised in the preparation of these forecasts, any forecast is
based on certain assumptions which may or may not materialise in future. Any forecast financial information
contained in the year end results has not been reviewed and reported on by the Group’s auditors in
accordance with paragraph 8.40(a) of the JSE Listings Requirements. However, the Board is of the opinion
that the mentioned positive developments, combined with management processes and initiatives
implemented, makes the forecasts realistic and achievable.
The Group has come through an extremely difficult trading period and cash flow remains under constant
pressure. The key components of the Group continuing as a going concern is the ability to provide
sophisticated management systems and equipment to the market, maintain a low cost base, selectively
approach new tenders, considering strategic partnerships and co-operation agreements, and ensuring
existing contracts are profitable.
The cashflow forecasts are based on the following assumptions:
- no deterioration in the current market conditions;
- municipalities continue to outsource the administration of traffic violations;
- the Company is able to reduce and maintain its operational expenses in line with sales levels;
- no deterioration in the payment and collection cycle;
- the Company continues to have the ongoing support of all its stakeholders, especially key staff and
financiers;
- no repayment of loans is required during the foreseeable future; and
- the Company’s JSE listing to be re-instated.
Significant negative change in these areas of assumptions will require swift action and adjustment by the
Company in order to continue as a going concern.
These conditions underline the ever-present uncertain and variable circumstances in the market. Failure by
the Company to effectively operate under these conditions will be detrimental to the business. These
conditions give rise to a material uncertainty which may cast significant doubt about the Company’s ability
to continue as a going concern and, therefore that it may be unable to realise its assets and discharge its
liabilities in the normal course of business.
The financial information has been prepared on a going concern basis which presumes that the Group will
generate sufficient cash flows to enable it to service its debts in the normal course of business as and when
they become payable.
Contingent liabilities
There are no contingent liabilities at the end of the reporting period.
DIRECTORATE
The following changes to the Board occurred during the year under review, up to and including the date of
this report:
Director Detail Date
Lucas Ramagaga Resignation 2 May 2014 (last working date)
Christo Els Appointment 8 May 2014
Nathi Chonco Resignation 11 December 2014
Piet Nieman Appointment 9 December 2015
Francois Smit Resignation 21 November 2018
Dumisani Mafu Passed away 9 July 2016
By order of the Board
P Nieman
Acting Non-Executive Chairman
18 December 2018
Directors as at year end:
L Sipoyo, (CEO), C Els (Executive: Financial Director), P Nieman**, F Smit*
(*Independent Non-executive)
(** Non-executive)
Registered office:
Futurum Office Park, Units C1A and D2A
Lenchen Avenue
Centurion, 0157
(P.O. Box 863, Wingate Park, 0153)
Company secretary: Auditors:
Merchantec Proprietary Limited BDO South Africa Incorporated
2nd Floor, North Block Summit Place Office Park
Hyde Park Office Towers 221 Garsfontein Road
Cnr 6th Road & Jan Smuts Ave Ashlea Gardens
Hyde Park, 2196 Pretoria, 0151
Designated Adviser:
Merchantec Capital
2nd Floor, North Block
Hyde Park Office Towers
Cnr 6th Road & Jan Smuts Ave
Hyde Park, 2196
Transfer secretaries:
Computershare Investor Services Proprietary Limited
Rosebank Towers, 15 Biermann Avenue, Rosebank, Johannesburg, 2196
(PO Box 61051, Marshalltown, 2107)
Company website:
www.tcsonline.co.za
www.viewfines.net
Date: 18/12/2018 04:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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