Wrap Text
Unaudited condensed consolidated interim financial statements for the period ended 30 September 2020
ETION LIMITED
("Etion" or "the Company" or "the Group")
(Incorporated in the Republic of South Africa)
(Registration Number: 1987/001222/06)
Share Code: ETO
ISIN: ZAE000097028
UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 SEPTEMBER 2020
Advancing Humanity Through Technology
Key features
30 September 2020 (1H20) compared to 20 September 2019 (1H19)
- Revenue decreased by 20% from R308.6 m to R247.4 m
- Gross profit margin stable at 34%
- Total contracted orderbook R890 m
- Profit before tax increased by 45% from R5.4 m to R7.9 m
Commentary
Group profile
Etion Limited is a diversified digital technology investment holding company.
During the previous financial year, we repositioned Etion as a technology investment company that invests in digital technologies that advance humanity.
This shift required that head office streamline its operations and that one of its business units, Etion Digitise (Digitise), be restructured.
Currently, the Group is invested in three businesses: Etion Connect (Connect), Etion Create (Create) and Etion Secure (Secure(formerly LAWTrust)). Digitise
remains a division within the holding company to provide ongoing support to its previous customers.
We have a proud electronic engineering heritage dating back over 30 years upon which we draw in making investment decisions and growing the underlying
businesses to create and unlock value.
Financial results
Statement of comprehensive income
Explanations on divisional results follow from page 03 to 06.
Revenue decreased by 20% to R247.4 million. This was mainly attributable to the R50 million decrease in Connect due to reduced customer demand over the
COVID-19 hard lockdown (end March and lasted until the end of May). Furthermore, when comparing performance of the comparable period, it should be noted
that in line with the group strategy Digitise has been scaled down significantly and is no longer a core business unit. This has resulted in a decrease in
revenue of R20.7 million.
Gross profit declined by R21 million but gross profit margin was maintained year-on-year at 34.6% (1H19: 34.6%).
The strategic restructures of Digitise in September 2019 and Connect in March 2020, realised cost savings of R6 million in Connect and R11.9 million in
Digitise. The cost savings in Digitise exclude the once-off restructuring cost of R3.7 million. In addition, the corporate office reduced its marketing and
human resource capabilities to align with the business strategy, which reduced corporate costs by R3.1 million. Furthermore, lower USD/ZAR volatility and
effective hedging contributed to lower forex losses. The net effect was an increase in operating profit of 13%.
As of January 2020, our 50% equity investment in the Electronic DNA (Proprietary) Limited joint venture is no longer in a loss-making position and is
making a modest profit.
Statement of financial position
Non-current assets
The most significant movements in non-current assets relate to the 18% decline in intangible assets compared to 1H19 and the 23% increase in the deferred
tax balance.
The reduction in intangibles follows the R34 million impairment of goodwill in Connect and intangible assets in Digitise at 31 March 2020. Development
costs capitalised of R5 million were partially offset by amortisation recorded for the six-month period.
Tax losses were recognised in both Connect and Create compared to 1H19. Management considers it highly probable that future taxable profits will be
realised against which the tax losses may be used.
Current assets
Refer to notes 2 and 3 to the Unaudited Condensed Consolidated Interim Financial Statements for detail regarding the movements recorded in inventory and
trade and other receivables.
In line with Create's investment in development projects, contract assets increased by 149% to R30 million.
A refund received from the tax authority in respect to FY2019 resulted in the lower tax receivable balance as at 1H20 compared to 1H19.
Liabilities
Liabilities were significantly impacted by the reclassification of interest-bearing borrowings from current liabilities to non-current liabilities in
comparison to 1H19. The result is a 65% movement in current liabilities to non-current liabilities following the condonement of the covenant breach from
Nedbank in November 2019. Refer to note 4 for further information.
Cash flow statement
While we continue to focus on those factors within our control - extracting operational efficiencies and costs - managing working capital during a pandemic
has reduced the cash and cash equivalents position to R59.3 million, a decrease of 17% from 1H19 and 28% from FY2020.
The net working capital movement for the period, at R40.2 million, was negatively impacted by significant payments to one of Connect's key suppliers. This
was necessitated by the overdue position and revision of credit terms by the supplier in response to COVID-19. This is reflected in the decrease in
creditor days to 47.1 days (FY2020: 88.9 days). The improved relationship with this key supplier has played a key role in stabilising the business outlook
for Connect.
Refer to note 6 of the financial statements for further detail and commentary.
OUR OPERATIONS
ETION SECURE
1H20 1H19 % change
Contribution to Group revenue 44% 37% 19%
Contribution to Group profit 87% 85% 2%
Segment revenue R109.4 million R114.2 million (4%)
Segment profit R20.6 million R20.9 million (1%)
Segment profit excluding head office recovery R23.2 million R24.9 million (1%)
Drivers of change
- Revenue decreased slightly from the comparable period due to initial lockdown impacts.
- The scalability of our products and services has increased annuity income, currently representing 59% of total revenue and maintaining profitability in
spite of the slight decline in revenue.
Progress on 1H20 ambitions
Secure set out to internationalise its products, retain talent, increase its annuity revenue and increase online services.
Digital sales and requests to partner with Secure have seen a sharp increase as COVID-19 emphasised the need for secure digital solutions and accelerated
the work-from-home trend. Secure has received increased partnership requests from African countries as well as from the USA, while Middle East market
demand continues to increase.
Secure developed methods for identity-proofing customers through web conference. This evolved into a customer lifecycle-manager tool used internally for
on-boarding customers easily via the web and apps using facial biometrics. Due to the wise application of the solution to any business required to on-board
their own customers, the internal solution was commercialised into a new product for the market.
Secure's focus on cyber security solutions has sharpened to specifically address the expiration of companies' cryptographic keys and digital certificates
which cause system outages. Secure focused maturity assessments for customers on SSL certificates and public key infrastructure against best practice.
Secure has expanded its training solutions to support all its product offerings.
Outlook
Total contracted order book R651 million
The total contracted order book, as at date of publication of the interim results, represents the contracted customer orders that have been received but
are still to be executed. This will realise over the current financial year and in future years.
COVID-19 has increased demand for Secure's digital signing and public key infrastructure solutions. Furthermore, as the pandemic drives mass digitalisation
in business, management foresees an uptick in interest for Secure's cyber security product offerings in the near future.
Secure continues to focus on building its own intellectual property and operations to increase US Dollar-based revenue from export or other global services
and on enabling the business unit to mitigate domestic market risk, while adapting quickly to changing markets or customer needs. We extended our sales
reach without increasing headcount or opening offices in international locations by:
- Selecting channel partners that are the right fit to take digital signature solutions to market
- Increasing our focus on online services that do not require physical market presence
- Limiting on-premise solutions and services to markets in the Middle East and Africa that offer relative proximity and similar time zones
ETION CREATE
1H20 1H19 % change
Contribution to Group revenue 34% 27% 26%
Contribution to Group profit (12%) 20% (160%)
Segment revenue R84.3 million R84.2 million 0%
Segment (loss)/profit (R2.9) million R4.9 million (159%)
Segment (loss)/profit excluding head office recovery (R0.2) million R9.3 million (102%)
Drivers of change
- An optimal product mix allowed for stable revenue compared to 1H19
- Profit was negatively impacted by the lower margins associated with projects executed in 1H20
Progress on 1H20 ambitions
Create set out to gain traction in the IoT market to spur growth, growth in its SOLIDguard range and geographical expansion. Retaining talent was key to
deliver against these ambitions.
Due to the global impacts of COVID-19, opportunities arising from the Middle East, South America and Southeast Asia within the IoT market proved
challenging to realise. As a result, project revenues have been delayed. However, development orders have been received from the Middle East and United
Arab Emirates.
Customers in the defence market have welcomed the CheetaNAV tactical navigation system. The system allows jamming-free situational awareness navigation
information. The product combines compass, GPS and inertial information.
Create applied its original design manufacturing capability to produce ventilators under licence, and it delivered the first units before the close of
1H20. Create has also registered with the South African Health Products Regulatory Authority.
Outlook
Total contracted order book R149 million
The total contracted order book, as at date of publication of the interim results, represents the contracted customer orders that have been received but
are still to be executed. This will realise over the current financial year and in future years.
The growth in the short-term order book indicates the demand within established and new geographic markets. Current spend into product and intellectual
property development is likely to convert to new orders in FY22/23.
The pandemic accelerated the Fourth Industrial Revolution, highlighting:
- Securing data against unauthorised access is critical to the safe operation of governments and businesses alike
- The increasing need for system integration and high-performance computing solutions to futureproof businesses that rely more on technology to carry
operations
- The need to embrace the Internet of Things (IoT) and digitalisation
These trends cement the need and opportunity for Create to develop customised electronic subsystems and products for customers across a range of sectors
including mining and industrial, defence and aerospace, IoT and sensors and cyber security. Create is sure to gain traction in the recently entered health
sector.
ETION DIGITISE
1H20 1H19 % change
Contribution to Group revenue 1% 7% (86%)
Contribution to Group profit (7%) (56%) (88%)
Segment revenue R1.6 million R22.3 million (92.8%)
Segment loss (R1.7) million (R13.9) million (88%)
Segment loss excluding head office recovery (R1.5) million (R12.5) million (88%)
Drivers of change
- Digitise has been restructured to only focus on the support of past clients and will not contribute significantly to the future revenue of the group.
- Product development capabilities have been integrated in Create however the underlying intellectual property continues to reside in Digitise and may result
in future royalty income being earned.
ETION CONNECT
1H20 1H19 % change
Contribution to Group revenue 21% 33% (36%)
Contribution to Group profit 7% (11.2%) 163%
Segment revenue R52.2 million R102.2 million (49%)
Segment profit/(loss) R1.7 million (R2.8) million 161%
Segment profit excluding head office recovery R3.5 million R3.2 million 31%
Drivers of change
- Profitability was improved following the strategic review of the business and implementation of cost savings initiatives.
- The decline in revenue has stabilised as new opportunities arise from changes in end-user consumption patterns.
Progress on 1H20 ambitions
Connect set out to change its form as necessary to ensure optimal value creation for shareholders.
Connect is completing an optimum stock level planning exercise to guard against any unnecessary inventory build-up. Progress towards monetising existing
inventory will continue as this is key for preserving liquidity and managing Connect's obligations to suppliers.
Through regular customer engagement, Connect has obtained six-month stock forecasts from the majority of its anchor customers, to assist with inventory
management. Connect was able to respond to a depressed market with competitive discounts to anchor customers in return for bulk sale orders, and it intends
to replicate this model to increase profitability in the second half of the year.
Outlook
Total contracted order book R90 million
The total contracted order book, as at date of publication of the interim results, represents the contracted customer orders that have been received but
are still to be executed. This will realise over the current financial year and in future years.
In general, Connect's growth trajectory is closely aligned with South Africa's GDP growth. This growth drives demand for bandwidth which influences network
operators' infrastructure investments. South Africa's sustained economic weakness has curtailed demand for FTTx, resulting in a continuous decline in
Connect's revenue since 2018. However, we are experiencing an uptick in demand as customers try to catch up with their networks build backlog created by
the lockdown, underpinned by the work-from-home trend.
COVID-19 has amplified the need for more and better connectivity globally. Specifically, in South Africa, in the period under review, we have noted the
following encouraging trends:
- Fibre connectivity and higher broadband Service Level Agreement levels remain in high demand
- Major telecoms have an appetite for new builds on the basis of extra spectrum being released
- FTTx operators see lower Living Standards Measure market segments as an opportunity
These positive trends cement the need and opportunity for Connect in the market, and the business is building a healthy order book going into H2.
Strategic update
Outlook
Even though the South African government has introduced various business initiatives and injected investments to reduce COVID-19's impact on the economy,
in the medium to long term, we expect the South African market to remain subdued.
Etion continues to explore various initiatives to further reduce costs, increase responsiveness to market conditions and re-focus business efforts to meet
these challenges. This has increased demand for Etion's digital signing and public key infrastructure solutions and increased orders for fibre to homes and
businesses (FTTx) as customers seek to catch up with the networks' build backlog created by the lockdown.
There is a clear demand for Create's and Secure's products and services in the global market. This indicates a positive outlook for the Group in the medium
term with the drive into the Middle East and Africa and other markets.
All businesses in the Group show healthy forward-looking order books, and we remain optimistic about the second half of the financial year.
Releasing shareholder value
The strategic repositioning of the group and the resultant restructuring activities has delivered improved performance in the current financial period.
However, the current share price of Etion does not reflect the underlying intrinsic value of the businesses in the Group. The Board of Directors (Board)
has initiated a process to unlock shareholder value. It is within this context that the discussions are being held between various interested parties and
Etion in respect of the potential acquisition of its operating subsidiaries.
By order of the Board,
Teddy Daka Elvin de Kock
Chief Executive Officer Chief Financial Officer
25 November 2020
Unaudited condensed consolidated interim financial statements
Unaudited Condensed consolidated interim statement of financial position
As at 30 September 2020
Notes 30 September 30 September 31 March
2020 2019 2020
(Unaudited) (Unaudited) (Audited)
R'000 Restated R'000
R'000
Assets
Non-current assets 268 608 300 384 263 841
Property, plant and equipment 45 776 45 326 43 339
Right-of-use assets 25 428 31 238 27 982
Intangible assets 156 041 190 806 155 304
Investments in joint venture 1 020 - 240
Deferred tax asset 39 368 32 058 36 001
Other financial asset 975 956 975
Current assets 239 972 315 646 286 241
Inventories 2 42 761 66 401 55 341
Loans to related company 2 304 2 330 2 304
Trade and other receivables 3 101 516 146 877 118 458
Contract assets 31 007 12 467 17 991
Other financial assets 29
Current tax receivable 2 996 9 150 9 469
Cash and cash equivalents 59 359 78 421 82 678
Total assets 508 580 616 030 550 082
Equity and liabilities
Equity 313 557 350 186 308 627
Share capital 259 541 259 541 259 541
Retained income 54 016 90 645 49 086
Non-current liabilities 84 718 70 446 83 432
Interest-bearing borrowings 4 53 186 31 371 51 585
Contract liabilities 355 274 355
Deferred tax 5 822 15 026 5 794
Lease liabilities 25 355 23 775 25 698
Current liabilities 110 305 195 398 158 023
Trade and other payables 5 69 534 120 399 116 429
Interest-bearing borrowings 14 059 39 612* 13 408
Contract liabilities 19 405 16 398 16 231
Current tax payable 1 270 2 554 4 761
Lease liabilities 3 424 8 470* 4 522
Provisions 2 600 1 242 2 600
Bank overdraft 13 6 723 72
Total equity and liabilities 508 580 616 030 550 082
* Interest-bearing borrowings as at 30 September 2019 have been restated to exclude lease liabilities. This has been separately disclosed on the
face of the statement of financial position
Unaudited condensed consolidated interim statement of comprehensive income
For the 6 months ended 30 September 2020
Notes 6 months ended 6 months ended Year ended
30 September 30 September 31 March
2020 2019 2020
(Unaudited) (Unaudited) (Audited)
R'000 R'000 R'000
Revenue 247 432 308 573 572 889
Cost of sales (161 796) (201 891) (379 749)
Gross profit 85 636 106 682 193 140
Other operating income 4 168 2 959 5 124
Other gains/(losses) 2 976 83 (6 269)
Movement in credit loss allowances (2 807) (3 123) (10 258)
Other operating costs (78 652) (96 624) (216 460)
Operating profit/(loss) 11 321 9 977 (34 723)
Finance income 411 1 126 2 718
Finance costs (4 631) (5 656) (11 225)
Income from equity accounted investment 781 - 240
Profit/(loss) before taxation 7 882 5 447 (42 990)
Taxation (2 947) (13) 6 862
Net profit/(loss) for the period 4 935 5 434 (36 128)
Other comprehensive income - -
Total comprehensive income/(loss) for the period 4 935 5 434 (36 128)
Per share information
Basic and diluted earnings/(loss) per share (cents) 1 0.87 0.97 (6.40)
Unaudited condensed consolidated interim statement of changes in equity
For the 6 months ended 30 September 2020
Issued share Accumulated Total
capital profit/(losses) R'000
R'000 R'000
Restated balance as at 1 April 2019 (Audited) 259 541 85 209 344 755
Movements during the period
Profit for the period - 5 434 5 434
Balance as at 30 September 2019 (Unaudited) 259 541 90 643 350 189
Movements during the period
Loss for the period - (41 562) (41 562)
Balance as at 1 April 2020 (Audited) 259 541 49 081 308 627
Movements during the period
Profit for the period - 4 935 4 935
Balance as at 30 September 2020 (Unaudited) 259 541 54 021 313 557
Unaudited Condensed consolidated interim statement of cash flows
For the 6 months ended 30 September 2020
Notes 6 months ended 6 months ended Year ended
30 September 30 September 31 March 2020
2020 2019 (Audited)
(Unaudited) (Unaudited) R'000
R'000 Restated
R'000
Cash flow from operating activities
Cash receipts from customers 259 252 326 617 622 637
Cash paid to suppliers and employees (264 025) (268 269) (534 401)
Cash (utilised in)/generated from operations 6 (4 773) 58 357 88 236
Interest income 411 1 126 2 718
Finance costs* (1 742) (3 147) (7 439)
Tax paid (3 303) (5 968) (10 384)
Net cash flow (utilised in)/generated from operating activities (9 407) 50 368 73 131
Cash flows from investing activities
Purchase of property, plant and equipment (5 806) (597) (2 368)
Sale of property, plant and equipment - 4 766
Cash paid on development of intellectual property (4 960) (5 258) (9 659)
Net cash flow utilised in investing activities (10 766) (5 851) (11 261)
Cash flows from financing activities
Repayment of interest-bearing borrowings** (3 942) (4 207) (11 497)
Proceeds from interest-bearing borrowings 4 620 - -
Finance costs* (1 315) (2 509) (3 816)
Payment on lease liabilities** (2 068) (3 238) (3 963)
Net cash flow utilised in financing activities (2 705) (9 954) (19 276)
Net (decrease)/increase in cash, cash equivalents and bank overdrafts (22 878) 34 563 42 594
Cash, cash equivalents and bank overdrafts at beginning of period 82 606 37 478 37 478
Unrealised foreign exchange adjustment (382) (343) 2 534
Cash, cash equivalents net of bank overdrafts at end of year 59 346 71 698 82 606
* The allocation of finance costs in 2019 has been restated as the finance costs on the fixed property were incorrectly included in financing
activities and not operating activities
** Repayment of interest-bearing borrowings in 2019 has been restated to exclude payments made in lease liabilities. This is separately disclosed on
the statement of cash flows
Unaudited Condensed consolidated interim segment report
For the 6 months ended 30 September 2020
6 months ended 6 months ended Year ended
30 September 30 September 31 March
2020 2019 2020
(Unaudited) (Unaudited) (Audited)
R'000 R'000 R'000
Segment revenue
Digitise: Safety and Productivity Solutions 1 588 22 312 29 558
Create: Original Design Manufacturing 84 288 84 210 165 465
Connect: Digital Network Solutions 52 159 102 173 163 010
Secure: Cyber Security Solutions 109 430 114 084 225 920
Eliminations (33) (14 206) (11 064)
Total 247 432 308 573 572 889
Segment profit
Digitise: Safety and Productivity Solutions (1 672) (13 973) (36 407)
Create: Original Design Manufacturing (2 984) 4 897 7 758
Connect: Digital Network Solutions 1 688 (2 783) (32 554)
Secure: Cyber Security Solutions 20 557 20 976 38 072
Eliminations 6 129 15 718 46 496
Sub-total 23 718 24 835 23 365
Corporate costs (12 444) (14 858) (58 088)
Finance costs 411 (5 656) (11 225)
Finance income 4 631 1 126 2 718
Income from equity accounted investment 781 - 240
Profit/(Loss) before taxation 7 882 5 447 (42 990)
Financial position
Assets 508 580 616 030 550 082
Digitise: Safety and Productivity Solutions 45 560 67 537 49 645
Create: Original Design Manufacturing 209 195 214 789 199 556
Connect: Digital Network Solutions 84 139 146 101 100 605
Secure: Cyber Security Solutions 134 516 149 684 166 302
Corporate 35 170 37 919 33 974
Liabilities 195 023 265 844 241 455
Digitise: Safety and Productivity Solutions 6 020 9 438 2 108
Create: Original Design Manufacturing 70 331 71 985 66 179
Connect: Digital Network Solutions 27 222 54 647 53 433
Secure: Cyber Security Solutions 32 785 53 488 56 088
Corporate 58 665 76 286 63 647
The table below shows the basis on which revenue is recognised:
Digitise: Create: Connect: Secure: Total
Safety and Original Digital Cyber R'000
Productivity Design Network Security
Solutions Manufacturing Solutions Solutions
R'000 R'000 R'000 R'000
6 months ended 30 September 2020
(Unaudited)
At a point in time 1 588 67 044 52 159 61 219 182 010
Over time - 17 225 - 48 197 65 422
1 588 84 269 52 159 109 416 247 432
6 months ended 30 September 2019
(Unaudited)
At a point in time 20 323 44 228 98 915 56 464 219 930
Over time 1 101 26 739 3 199 57 604 88 643
21 424 70 967 102 114 114 068 308 573
Year ended 31 March 2020
(Audited)
At a point in time 28 648 104 540 160 712 131 205 425 105
Over time - 50 800 2 298 94 686 147 784
28 648 155 340 163 010 225 891 572 889
Notes to the unaudited condensed consolidated interim financial statements
1. Headline earnings per share
for the 6 months ended 30 September 2020
6 months 6 months 12 months
ended ended ended
30 September 30 September 31 March
2020 2019 2020
(Unaudited) (Unaudited) (Audited)
R'000 R'000 R'000
Profit/(Loss) attributable to ordinary shareholders 4 935 5 434 (36 128)
Basic earnings per share (cents) 0.87 0.97 (6.40)
Diluted basic earnings per share (cents) 0.87 0.97 (6.40)
Reconciliation of headline earnings:
Profit/(Loss) attributable to ordinary shareholders 4 935 5 434 (36 128)
Profit on disposal of property, plant and equipment - 10 8
Impairment of goodwill - - 25 171
Write off of intangible assets - - 8 415
Total tax effect of adjustments - (3) (2 358)
Headline earnings/(loss) attributable to ordinary shareholders 4 935 5 441 (4 892)
Headline earnings/(loss) per share (cents) 0.87 0.97 (0.87)
Diluted headline earnings/(loss) per share (cents) 0.87 0.97 (0.87)
Weighted average number of shares in issue 564 411 033 558 082 266 564 411 033
2. Inventories
30 September 30 September 31 March
2020 2019 2020
(Unaudited) (Unaudited) (Audited)
R'000 R'000 R'000
Inventories comprise:
Finished goods 44 641 69 306 55 344
Work in progress 969 1 584 139
45 610 70 890 55 483
Provision for slow moving inventories (2 849) (4 489) (142)
42 761 66 401 55 341
The improvements made by Connect in its inventory management (refer page 5) resulted in a 36% decrease in inventories on hand at 1H20.
3. Trade and other receivables
30 September 30 September 31 March
2020 2019 2020
(Unaudited) (Unaudited) (Audited)
R'000 R'000 R'000
Trade receivables 93 024 139 275 104 101
Gross trade receivables 114 264 148 943 122 534
Loss allowance (21 240) (9 668) (18 433)
Deposits 1 033 1 034 1 033
Retention debtors - 51 -
Sundry debtors 918 1 090 1 075
Prepayments 6 068 4 574 11 722
Employee costs in advance 207 - 195
Value added tax 97 389 16
Other receivables 169 464 316
101 516 146 877 118 458
Gross trade receivables have decreased by 23% compared to the prior interim period. This is in line with the lower revenue performance in Connect and
Digitise. The provision for impairment has increased by R11.6 million due to a R9 million impairment of third-party debt at year-end. Etion continues to
pursue recovery of the debt through an external claims' management advisor.
Management continues to proactively monitor and manage debtors' days to improve the Group's working capital management.
4. Interest-bearing borrowings
30 September 30 September 31 March
2020 2019 2020
(Unaudited) (Unaudited) (Audited)
R'000 Restated* R'000
R'000
Non-current 53 186 31 371 51 585
Properties loan 28 220 28 822 28 214
Medium term loan for Secure transaction 21 021 - 22 246
Instalment sale agreements 3 945 2 549 1 125
Current 14 059 39 612 13 408
Properties loan 1 571 826 1 041
Medium term loan for Secure transaction 9 424 36 164 9 842
Instalment sale agreements 3 064 2 622 2 525
Total 67 245 70 983 64 993
Nedbank Properties loan 29 791 29 648 29 255
Nedbank medium term loan for Secure transaction 30 445 36 164 32 088
Instalment sale agreements 7 009 5 171 3 650
* Interest-bearing borrowings as at 30 September 2019 have been restated to exclude lease liabilities. This has been disclosed on the face of the
statement of financial position
Following the covenant breach, announced in the 31 March 2019 results, Nedbank advised that it had condoned the breach and elected not to exercise its
rights in terms of the breach but reserved all rights to still do so. This took effect from 25 November 2019 and, accordingly, the loan was classified
under current liabilities at 1H19.
Based on the financial year covenant compliance review conducted by management at year-end (31 March 2020) the Group is compliant with its covenants under
the Nedbank loan facility. This was confirmed by the bank during the credit review cycle concluded in September 2020. As a result, the facility has been
classified as non-current at interim reporting date.
5. Trade and other payables
30 September 30 September 31 March
2020 2019 2020
(Unaudited) (Unaudited) (Audited)
R'000 R'000 R'000
Trade creditors 41 793 88 032 80 845
Accrued leave 6 690 5 339 9 673
Sundry creditors 143 1 786 201
Value added tax 2 205 1 226 7 738
Advance payments - 3 311 -
Accruals 18 703 20 702 17 972
69 534 120 399 116 429
Over and above the Connect inventory planning resulting in lower stock purchases from suppliers, the business also repaid a significant outstanding balance
owing to a key supplier, resulting in an overall 42% decline in trade payables. This decrease, on the back of reduced revenues for the current period, has
directly influenced our cash balance at the end of the current interim period.
6. Cash generated from operations
30 September 30 September 31 March
2020 2019 2020
(Unaudited) (Unaudited) (Audited)
R'000 R'000 R'000
Profit/(loss) before taxation 7 882 5 447 (42 990)
Adjustments for:
Depreciation and amortisation 10 773 12 529 25 101
Interest income (411) (1 126) (2 718)
Finance costs 4 631 5 656 11 225
Increase in provision for slow moving and obsolete raw materials 2 707 943 (3 404)
Increase in provision for impairment of trade receivables 2 807 606 9 371
Loss on sale of property, plant and equipment - 10 8
Income from equity accounted investments (781) - (240)
(Decrease)/increase in provisions - (648) 710
Increase in provision for impairment of other financial assets - 54 887
Unrealised foreign exchange differences - cash and bank equivalents 382 343 (2 534)
Unrealised foreign exchange differences - debtors 634 (2 829) (392)
Unrealised foreign exchange differences - trade creditors 6 820 1 851 9 500
Inventory write down (net of salvage value) - - 13 010
Impairment of intangible assets - - 33 586
Changes in working capital:
Inventories 9 873 20 205 22 642
Contract assets (6 149) 6 460 108
Trade and other receivables 6 634 18 976 36 193
Trade and other payables (53 749) (11 601) (23 221)
Contract liabilities 3 174 1 480 1 394
(4 773) 58 357 88 236
Statement of compliance and basis of preparation
The unaudited condensed consolidated interim financial statements for the six months ended 30 September 2020 are prepared in accordance with the JSE
Limited Listings Requirements for interim financial statements and the Companies Act, where applicable to interim financial statements. The interim
financial statements were prepared in accordance with the framework concepts and the measurement and recognition requirements of International Financial
Reporting Standards (IFRS), IAS 34 Interim Financial Reporting (IAS 34), SAICA Financial Reporting Guides as issued by the Accounting Practices Committee,
Financial Pronouncements as issued by the Financial Reporting Standards Council (FRSC), and to also, as a minimum, contain the information required by IAS 34.
The condensed consolidated interim financial statements should be read in conjunction with the annual financial statements for the year ended 31 March
2020, which have been prepared in accordance with IFRS.
Preparer
These unaudited Condensed Consolidated Interim Financial Statements results were prepared by Nerishini Naidoo CA (SA) under the supervision of Elvin de
Kock FCMA, the Chief Financial Officer.
Going concern
The directors have reviewed the Group's budget and cash flow forecast for the year to September 2021. On this basis and in light of the Group's current
financial position, the directors are satisfied that the Group will continue to operate for the foreseeable future and have adopted the going concern basis
in preparing these reviewed provisional financial results.
Directorate
The following changes were made to the Board:
- T Daka resigned on 2 November as Group Chief Executive Officer and executive director of the Board with effect from 31 January 2021. T Daka will remain on
the Board as a non-executive director.
- Dr SJ Khoza resigned on 2 November as non-executive director and chairperson of the Board with effect from 31 December 2020.
- EC de Kock was appointed as Group Chief Executive Officer with effect from 1 February 2021.
Events subsequent to period-end
Other than the changes to the directorate, there are no events which are material to the financial affairs of the Group.
Any investment decision should be based on the announcement accessible from Wednesday, 25 November 2020, via the JSE link and also available on the Company’s
website at
http://www.etion.co.za/investor-relations/
Copies of the announcement may also be requested by contacting Elvin de Kock by email at elvin.dekock@etion.co.za and are available for inspection at the
Company’s
registered office at no charge, weekdays during office hours.
The JSE link is as follows:
https://senspdf.jse.co.za/documents/2020/jse/isse/etoe/INTER20.pdf
Additional information
Directors Company Secretary
CP Bester W Modisapodi
M Janse Van Rensburg Telephone: +27 12 749 1810
RC Willis Email: wyna.modisapodi@etion.co.za
SJ Khoza
T Daka (CEO)*
EC De Kock (CFO)*
* Executive
Registered office Postal address
85 Regency Drive PO Box 95361
Route 21 Corporate Park Waterkloof
Irene Pretoria
0157 0145
Tel: +27 12 749 1800
Email: IR@Etion.co.za
Website: www.Etion.co.za
Transfer secretaries Designated Sponsor
Computershare Investor Services (Proprietary) Limited Exchange Sponsors (2008) (Propriety) Limited
Rosebank Towers 44A Boundary Road
15 Biermann Avenue Illovo
Rosebank Sandton
2196 2196
011 880 2113
Date: 25-11-2020 09:56:00
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