TSEBO SOLUTIONS GROUP PROPRIETARY LIMITED
NOTES TO ANNUAL FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2020
1. ACCOUNTING POLICIES
1.1 Basis of preparation
The annual financial statements set out on pages 9 to 57 are prepared in accordance with, and
comply with IFRS and the South African Companies Act, 2008.
The financial statements are prepared in accordance with the going concern principle under the
historical cost basis adjusted for the fair valuing of certain financial assets and liabilities, as set
out in the accounting policies below.
1.2 Investment in subsidiaries
Investment in subsidiaries are initially recognised at cost, being the fair value of the
consideration given and include acquisition charges associated with the investment.
The carrying value of subsidiaries is reviewed for impairment where there are indications of
impairment. Where necessary, the value of the investment is written down to the recoverable
amount.
The difference between the net proceeds on disposal and the cost of the investment is taken to
statement of profit or loss.
Subsidiaries are carried at cost in the Company’s financial statements.
1.3 Business combinations and goodwill
Acquisitions are included in the Company’s financial statements using the acquisition method of
accounting, which involves allocating the cost of the business combination to the fair value of the
assets acquired and liabilities and contingent liabilities assumed at the date of acquisition.
Goodwill acquired in a business combination is initially measured at cost, being the excess of the
consideration paid over the Company’s interest in the net assets. If the consideration transferred
is less than the net assets of the subsidiary acquired, the difference is recognised in the statement
of profit or loss as a bargain purchase.
Following initial recognition, goodwill is measured at cost less any accumulated impairment
losses. Goodwill is reviewed for impairment, annually or more frequently if events or changes in
circumstances indicate that the carrying value may be impaired.
For the purpose of impairment testing, goodwill acquired in a business combination is, from the
acquisition date, allocated to each of the Company’s cash-generating units, that are expected to
benefit from the synergies of the combination, irrespective of whether other assets or liabilities of
the Company are assigned to those units.
Each unit to which goodwill is so allocated, represents the lowest level within the Company at
which the goodwill is monitored for internal management purposes.
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TSEBO SOLUTIONS GROUP PROPRIETARY LIMITED
NOTES TO ANNUAL FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2020
1. ACCOUNTING POLICIES
1.3 Business combinations and goodwill (continued)
Impairment of goodwill is determined by assessing the recoverable amount of the cash-
generating unit to which the goodwill relates. Where the recoverable amount of the cash-
generating unit is less than the carrying amount, an impairment loss is recognised. Impairment
losses relating to goodwill cannot be reversed in future periods. The Company performs its
impairment test annually.
Where goodwill forms part of a cash-generating unit and part of the operation within that unit is
disposed of, the goodwill associated with the operation disposed of is included in the carrying
amount of the operation when determining the gain or loss on disposal of the operation.
Goodwill disposed of in this circumstance, is measured based on the relative values of the
operation disposed of and the portion of the cash-generating unit retained.
When subsidiaries are sold, the difference between the selling price and the net assets plus
cumulative translation differences and goodwill, is recognised in profit and loss.
1.4 Revenue recognition
The Group is in the business of providing integrated workplace management solutions that
provide catering, facilities management, cleaning, energy, leasing and security services.
Performance obligations are met when control transfers. Revenue from contracts with customers
is recognised when control of the goods or services are transferred to the customer at an amount
that reflects the consideration to which the Group expects to be entitled in exchange for those
goods or services. The Group has generally concluded that it is the principal in its revenue
arrangements, because it typically controls the goods or services before transferring them to the
customer.
Turnover comprises of sales to customers, turnover from operations and pass-through costs
recovery charged to customers for management services rendered, net of value added tax.
The following specific recognition criteria must also be met before revenue is recognised:
Catering
Revenue earned from catering is recognised at the point in time when control of the asset is
transferred to the customer. Sales of goods are normally recognised once the goods are delivered
at the customer’s location.
Facilities Management and Cleaning services
The Company recognises revenue from contracts, which require the rendering of service, by
reference to the stage of completion at the reporting date when the outcome of a contract can be
estimated reliably.
The Company considers the outcome of a contract to be reliably estimated when:
(a) Total contract revenue can be measured reliably;
(b) It is probable that the economic benefits associated with the contract will flow to the
entity.
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TSEBO SOLUTIONS GROUP PROPRIETARY LIMITED
NOTES TO ANNUAL FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2020
1. ACCOUNTING POLICIES
1.4 Revenue recognition (continued)
Pass through costs recovery
Pass through costs are as a result of the Company performing the management function for the
relevant client. They represent items that are not identified as being covered by the monthly
management fee charged to the client. The Company is the primary obligor in the arrangement
with the customer and therefore recognises revenue on a gross basis.
Finance income
Finance income is recognised on the effective interest method.
1.5 Taxes
Current tax
The charge for current tax is the amount of income taxes payable in respect of the taxable profit
and loss for the current period. It is calculated using tax rates that have been enacted or
substantially enacted by the reporting date. Tax payable/(receivable) is based on the amount
expected to be paid over or recovered from the tax authorities.
Income tax relating to items recognised directly in equity is recognised in equity and not in the
statement of comprehensive income.
Deferred tax
Deferred tax is provided, using the liability method, on all temporary differences at the reporting
date between the tax bases of assets and liabilities and their carrying amounts for financial
reporting purposes.
The carrying amount of deferred tax assets is reviewed at each reporting period date and reduced
to the extent that it is no longer probable that sufficient taxable profit will be available to allow
all or part of the deferred tax asset to be utilised.
Unrecognised deferred tax assets are reassessed at each reporting period date and are recognised
to the extent that it has become probable that future taxable profit will allow the deferred tax
asset to be recovered.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the
period when the asset is realised or the liability is settled, based on tax rates (and tax laws) that
have been enacted or substantively enacted at the reporting date.
15
TSEBO SOLUTIONS GROUP PROPRIETARY LIMITED
NOTES TO ANNUAL FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2020
1. ACCOUNTING POLICIES
1.6 Property, plant and equipment
Property, plant and equipment is stated at cost less accumulated depreciation and any impairment
losses recognised. Cost includes the costs incurred subsequent to initial recognition to add to,
replace part of or service the item to the extent that it is probable that future economic benefits
will flow to the Company, and the cost can be reliably measured. Costs of day-to-day servicing
are expensed. If a replacement part is recognised in the amount of an item of property, plant and
equipment, the carrying amount of the replaced part is derecognised.
Property, plant and equipment is depreciated on the straight-line basis estimated to write each
asset down to estimated residual value over the term of its useful life. The residual value, useful
lives and depreciation methods of these assets are reviewed annually.
Where the estimated residual value is greater than the book value, depreciation is ceased on the
asset.
The estimated useful lives are as follows:
- Computer equipment 2 - 3 years
- Laptops 2 - 3 years
- Desktops and printers 2 - 5 years
- Application software 2 - 10 years
- Furniture and fittings 5 - 10 years
- Kitchen equipment 5 - 10 years
- Motor vehicles 3 - 5 years
- Investments at units over the life of the contract
- Leasehold improvements over the lease period
An item of property, plant and equipment is derecognised upon disposal or when no future
economic benefits are expected from its use or disposal. Any gain or loss arising on
derecognition of the asset (calculated as the difference between net disposal proceeds and the
carrying value of the asset) is included in the statement of profit or loss in the period the asset is
derecognised.
1.7 Inventories
Inventories comprising of raw materials, consumable stores and merchandise are valued at the
lower of cost, determined on the first-in, first-out basis, and net realisable value. Inventories
comprising of spare parts and tools are valued on the weighted average basis. Redundant and
slow moving inventory items are identified and written down to their estimated net realisable
Net realisable value is the estimated selling price in the ordinary course of business, less
estimated costs of completion and the estimated costs necessary to make the sale.
16
TSEBO SOLUTIONS GROUP PROPRIETARY LIMITED
NOTES TO ANNUAL FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2020
1. ACCOUNTING POLICIES
1.8 Retirement benefits
The Company provides retirement benefits in the form of defined contribution pension and
provident funds to their employees, the assets of which are held in separate funds.
Contributions to defined contribution plans are recognised as an expense when employees have
rendered service entitling them to the contributions. The entity does not have any further
obligation above the contributions to the funds.
1.9 Financial instruments
A financial instrument is any contract that gives rise to a financial asset of one entity and a
financial liability or equity instrument of another entity.
Financial Assets
Initial Recognition and Measurement
Financial assets are classified, at initial recognition, as subsequently measured at amortised cost
and fair value through profit or loss.
The classification of financial assets at initial recognition depends on the financial asset’s
contractual cash flow characteristics and the Company’s business model for managing them.
With the exception of trade receivables that do not contain a significant financing component or
for which the Company has applied the practical expedient, the Company initially measures a
financial asset at its fair value plus, in the case of a financial asset not at fair value through profit
or loss, transaction costs. Trade receivables that do not contain a significant financing component
or for which the Company has applied the practical expedient are measured at the transaction
price as disclosed in section 1.5 Revenue from contracts with customers.
In order for a financial asset to be classified and measured at amortised cost, it needs to give rise
to cash flows that are ‘solely payments of principal and interest (SPPI)’ on the principal amount
outstanding. This assessment is referred to as the SPPI test and is performed at an instrument
level. Financial assets with cash flows that are not SPPI are classified and measured at fair value
through profit or loss, irrespective of the business model.
The Company’s business model for managing financial assets refers to how it manages its
financial assets in order to generate cash flows. The business model determines whether cash
flows will result from collecting contractual cash flows, selling the financial assets, or both.
Financial assets classified and measured at amortised cost are held within a business model with
the objective to hold financial assets in order to collect contractual cash flows.
Purchases or sales of financial assets that require delivery of assets within a time frame
established by regulation or convention in the market place (regular way trades) are recognised
on the trade date, i.e., the date that the Company commits to purchase or sell the asset.
17
TSEBO SOLUTIONS GROUP PROPRIETARY LIMITED
NOTES TO ANNUAL FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2020
1. ACCOUNTING POLICIES
1.9 Financial instruments (continued)
Subsequent Measurement
Financial assets at amortised cost (debt instruments)
Financial assets at amortised cost are subsequently measured using the effective interest (EIR)
method and are subject to impairment. Gains and losses are recognised in profit or loss when the
asset is derecognised, modified or impaired.
The Company’s financial assets at amortised cost includes trade receivables, and loan to an
associate and loan to a director included under other non-current financial assets.
Financial assets at fair value through profit or loss
Financial assets at fair value through profit or loss are carried in the statement of financial
position at fair value with net changes in fair value recognised in the statement of profit or loss.
This category includes derivative instruments and listed equity investments which the Group had
not irrevocably elected to classify at fair value through OCI. Dividends on listed equity
investments are recognised as other income in the statement of profit or loss when the right of
payment has been established.
Derecognition
A financial asset (or, where applicable, a part of a financial asset or part of a Company of similar
financial assets) is primarily derecognised (i.e., removed from the Company’s consolidated
statement of financial position) when:
• The rights to receive cash flows from the asset have expired; or
• The Company has transferred its rights to receive cash flows from the asset or has assumed an
obligation to pay the received cash flows in full without material delay to a third party under a
‘pass-through’ arrangement; and either (a) the Company has transferred substantially all the
risks and rewards of the asset, or (b) the Company has neither transferred nor retained
substantially all the risks and rewards of the asset, but has transferred control of the asset.
When the Company has transferred its rights to receive cash flows from an asset or has entered
into a passthrough arrangement, it evaluates if, and to what extent, it has retained the risks and
rewards of ownership. When it has neither transferred nor retained substantially all of the risks
and rewards of the asset, nor transferred control of the asset, the Company continues to recognise
the transferred asset to the extent of its continuing involvement. In that case, the Company also
recognises an associated liability. The transferred asset and the associated liability are measured
on a basis that reflects the rights and obligations that the Company has retained.
Continuing involvement that takes the form of a guarantee over the transferred asset is measured
at the lower of the original carrying amount of the asset and the maximum amount of
consideration that the Company could be required to repay.
18
TSEBO SOLUTIONS GROUP PROPRIETARY LIMITED
NOTES TO ANNUAL FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2020
1. ACCOUNTING POLICIES
1.9 Financial instruments (continued)
Financial Liabilities
Initial Recognition and Measurement
Financial liabilities are classified, at initial recognition, as financial liabilities at fair value
through profit or loss, loans and borrowings, payables, or as derivatives designated as hedging
instruments in an effective hedge, as appropriate.
All financial liabilities are recognised initially at fair value and, in the case of loans and
borrowings and payables, net of directly attributable transaction costs.
The Company’s financial liabilities include trade and other payables, loans and borrowings
including bank overdrafts, and derivative financial instruments.
Subsequent Measurement
Financial liabilities at amortised cost (loans and borrowings)
This is the category most relevant to the Company. After initial recognition, interest-bearing
loans and borrowings are subsequently measured at amortised cost using the EIR method. Gains
and losses are recognised in profit or loss when the liabilities are derecognised as well as through
the EIR amortisation process.
Amortised cost is calculated by taking into account any discount or premium on acquisition and
fees or costs that are an integral part of the EIR. The EIR amortisation is included as finance
costs in the statement of profit or loss.
Derecognition
A financial liability is derecognised when the obligation under the liability is discharged or
cancelled or expires. Where an existing financial liability is replaced by another from the same
lender on substantially different terms, or the terms of an existing liability are substantially
modified, such an exchange or modification is treated as a derecognition of the original liability
and the recognition of a new liability, and the difference in the respective carrying amounts is
recognised in the statement of profit or loss.
1.10 Impairment of financial assets
The Company assesses at each balance sheet date whether there is any objective evidence that a
financial asset or Company of financial assets is impaired. Evidence of impairment may include
indications that the trade receivables or a Company of trade receivables is experiencing
significant financial difficulty, default or delinquency in interest or principal payments, the
probability that the trade receivable will enter bankruptcy or other financial re-organisation, and
continued losses or prolonged decline in the fair value of the investment below its cost.
Further disclosures relating to impairment of financial assets are also provided in the following
notes:
• Disclosure of significant judgements and estimates - Refer note 1.16
• Trade and other receivables - Refer note 18
19
TSEBO SOLUTIONS GROUP PROPRIETARY LIMITED
NOTES TO ANNUAL FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2020
1. ACCOUNTING POLICIES
1.10 Impairment of financial assets (continued)
The Company first assesses whether objective evidence of impairment exists individually for
financial assets that are individually significant, and individually or collectively for financial
assets that are not individually significant.
If it is determined that no objective evidence of impairment exists for an individually assessed
financial asset, whether significant or not, the asset is included in a Company of financial assets
with similar credit risk characteristics and that Company of financial assets is collectively
assessed for impairment.
The Company recognises an allowance for expected credit losses (ECLs) for all debt instruments
not held at fair value through profit or loss. ECLs are based on the difference between the
contractual cash flows due in accordance with the contract and all the cash flows that the
Company expects to receive, discounted at an approximation of the original effective interest
rate. The expected cash flows will include cash flows from the sale of collateral held or other
credit enhancements that are integral to the contractual terms.
ECLs are recognised in two stages. For credit exposures for which there has not been a
significant increase in credit risk since initial recognition, ECLs are provided for credit losses
that result from default events that are possible within the next 12-months (a 12-month ECL). For
those credit exposures for which there has been a significant increase in credit risk since initial
recognition, a loss allowance is required for credit losses expected over the remaining life of the
exposure, irrespective of the timing of the default (a lifetime ECL).
For trade receivables, the Company applies a simplified approach in calculating ECLs.
Therefore, apart from tracking significant changes in credit risk, the Company also recognises a
loss allowance based on lifetime ECLs at each reporting date. The Company has established a
provision matrix that is based on its historical credit loss experience, adjusted for forward-
looking factors specific to the trade receivables and the economic environment.
The Company considers a financial asset in default when contractual payments are 90 days past
due. However, in certain cases, the Group may also consider a financial asset to be in default
when internal or external information indicates that the Company is unlikely to receive the
outstanding contractual amounts in full before taking into account any credit enhancements held
by the Company. A financial asset is written off when there is no reasonable expectation of
recovering the contractual cash flows.
1.11 Derivative financial instruments
The Company uses interest rate swaps to hedge its interest rate risks. Such derivative financial
instruments are initially recognised at fair value on the date on which the contract is entered into
and are subsequently re-measured at fair value. Derivatives are carried as financial assets when
the fair value is positive and as financial liabilities when the fair value is negative.
Any gains or losses arising from changes in fair value on derivatives during the period that do not
qualify for hedge accounting, are taken directly to the statement of profit or loss.
The fair value of interest rate swap contracts is determined by reference to market values for
similar instruments.
20
TSEBO SOLUTIONS GROUP PROPRIETARY LIMITED
NOTES TO ANNUAL FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2020
1. ACCOUNTING POLICIES
1.12 Provisions
Provisions are recognised when the Company has a present obligation (legal or constructive) as a
result of a past event, it is probable that an outflow of resources embodying economic benefits
will be required to settle the obligation and a reliable estimate can be made of the amount of the
obligation. Where the Company expects some or all of a provision to be reimbursed, for example
under an insurance contract, the reimbursement is recognised as a separate asset but only when
the reimbursement is virtually certain. The expense relating to any provision is presented in the
statement of profit or loss, net of any reimbursement.
Leave pay
When an employee has rendered service to the Company during the accounting period, the
Company recognises the undiscounted amount of short term employee benefits expected to be
paid in exchange for that service:
a) as a liability (accrued expense);
b) as an expense.
The Company recognises the expected cost of short term employee benefits in the form of paid
absences in the case of accumulating paid absences, when the employees render service that
increases their entitlement to future paid absences. The policy of the Company is to provide for
accumulated leave pay based on the total cost of employment to the Company at current
employment costs limited to twenty days, unless under exceptional circumstances.
The Company measures the expected cost of accumulating paid absences as the additional
amount that the Company expects to pay as a result of the unused entitlement that has
accumulated at the end of the reporting period.
1.13 Contingent liability
A contingent liability is either a possible obligation arising from past events whose existence will
only be confirmed by the occurrence or non-occurrence of one or more uncertain future events
not wholly within the control of the entity; or a present obligation arising from past events that is
not recognised as either it is not probable that an outflow of resources will be required to settle
the obligation or the amount cannot be measured reliably. Contingent liabilities are not
recognised, but are disclosed, unless the possibility of an outflow of economic resources is
1.14 Government grants
Government grants towards staff training costs are recognised once it is reasonably certain that
the grant will be received and the requirements met.
1.15 Borrowing costs
Borrowing costs are recognised as an expense when incurred and measured using the effective
interest rate method.
21
TSEBO SOLUTIONS GROUP PROPRIETARY LIMITED
NOTES TO ANNUAL FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2020
1. ACCOUNTING POLICIES
1.16 Leases
The Company assesses at contract inception whether a contract is, or contains, a lease. That is, if
the contract conveys the right to control the use of an identified asset for a period of time in
exchange for consideration.
Company as a lessee
The Company applies a single recognition and measurement approach for all leases, except for
short-term leases and leases of low-value assets. The Company recognises lease liabilities to
make lease payments and right-of-use assets representing the right to use the underlying assets.
i) Right-of-use assets
The Company recognises right-of-use assets at the commencement date of the lease (i.e., the date
the underlying asset is available for use). Right-of-use assets are measured at cost, less any
accumulated depreciation and impairment losses, and adjusted for any remeasurement of lease
liabilities. The cost of right-of-use assets includes the amount of lease liabilities recognised,
initial direct costs incurred, and lease payments made at or before the commencement date less
any lease incentives received. Right-of-use assets are depreciated on a straight-line basis over the
shorter of the lease term and the estimated useful lives of the assets, as follows:
- Buildings and machinery 3 - 15 years
- Motor vehicles and other equipment 2 - 5 years
If ownership of the leased asset transfers to the Company at the end of the lease term or the cost
reflects the exercise of a purchase option, depreciation is calculated using the estimated useful
life of the asset. The right-of-use assets are also subject to impairment.
22
TSEBO SOLUTIONS GROUP PROPRIETARY LIMITED
NOTES TO ANNUAL FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2020
1. ACCOUNTING POLICIES
1.16 Leases (continued)
ii) Lease liabilities
At the commencement date of the lease, the Company recognises lease liabilities measured at the
present value of lease payments to be made over the lease term. The lease payments include fixed
payments (including in substance fixed payments) less any lease incentives receivable, variable
lease payments that depend on an index or a rate, and amounts expected to be paid under residual
value guarantees. The lease payments also include the exercise price of a purchase option
reasonably certain to be exercised by the Company and payments of penalties for terminating the
lease, if the lease term reflects the Company exercising the option to terminate. Variable lease
payments that do not depend on an index or a rate are recognised as expenses (unless they are
incurred to produce inventories) in the period in which the event or condition that triggers the
payment occurs.
In calculating the present value of lease payments, the Company uses its incremental borrowing
rate at the lease commencement date because the interest rate implicit in the lease is not readily
determinable. After the commencement date, the amount of lease liabilities is increased to reflect
the accretion of interest and reduced for the lease payments made. In addition, the carrying
amount of lease liabilities is remeasured if there is a modification, a change in the lease term, a
change in the lease payments (e.g., changes to future payments resulting from a change in an
index or rate used to determine such lease payments) or a change in the assessment of an option
to purchase the underlying asset.
The Company’s lease liabilities are included in Note 30.
iii) Short-term leases and leases of low-value assets
The Company applies the short-term lease recognition exemption to its short-term leases of
machinery and equipment (i.e., those leases that have a lease term of 12 months or less from the
commencement date and do not contain a purchase option). It also applies the lease of low-value
assets recognition exemption to leases of office equipment that are considered to be low value.
Lease payments on short-term leases and leases of low-value assets are recognised as expense on
a straight-line basis over the lease term.
Company as a lessor
The Company applies the short-term lease recognition exemption to its short-term leases of
machinery and equipment (i.e., those leases that have a lease term of 12 months or less from the
commencement date and do not contain a purchase option). It also applies the lease of low-value
assets recognition exemption to leases of office equipment that are considered to be low value.
Lease payments on short-term leases and leases of low-value assets are recognised as expense on
a straight-line basis over the lease term.
23
TSEBO SOLUTIONS GROUP PROPRIETARY LIMITED
NOTES TO ANNUAL FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2020
1. ACCOUNTING POLICIES
1.17 Changes in accounting policies
New and amended standards and interpretations
The Group applied for the first-time certain standards and amendments, which are effective for
annual periods beginning on or after 1 January 2020. The Group has not early adopted any other
standard, interpretation or amendment that has been issued but is not yet effective.
Amendments to IFRS 3: Definition of a Business
The amendment to IFRS 3 Business Combinations clarifies that to be considered a business, an
integrated set of activities and assets must include, at a minimum, an input and a substantive
process that, together, significantly contribute to the ability to create output. Furthermore, it
clarifies that a business can exist without including all of the inputs and processes needed to
create outputs. These amendments had no impact on the consolidated financial statements of the
Group, but may impact future periods should the Group enter into any business combinations.
Amendments to IFRS 7, IFRS 9 and IAS 39: Interest Rate Benchmark Reform
The amendments to IFRS 9 and IAS 39 Financial Instruments: Recognition and Measurement
provide a number of reliefs, which apply to all hedging relationships that are directly affected by
interest rate benchmark reform. A hedging relationship is affected if the reform gives rise to
uncertainty about the timing and/or amount of benchmark-based cash flows of the hedged item or
the hedging instrument. These amendments have no impact on the consolidated financial
statements of the Group as it does not have any interest rate hedge relationships.
Amendments to IAS 1 and IAS 8: Definition of Material
The amendments provide a new definition of material that states, “information is material if
omitting, misstating or obscuring it could reasonably be expected to influence decisions that the
primary users of general purpose financial statements make on the basis of those financial
statements, which provide financial information about a specific reporting entity.” The
amendments clarify that materiality will depend on the nature or magnitude of information, either
individually or in combination with other information, in the context of the financial statements.
A misstatement of information is material if it could reasonably be expected to influence
decisions made by the primary users. These amendments had no impact on the consolidated
financial statements of, nor is there expected to be any future impact to the Group.
Conceptual Framework for Financial Reporting issued on 29 March 2018
The Conceptual Framework is not a standard, and none of the concepts contained therein
override the concepts or requirements in any standard. The purpose of the Conceptual
Framework is to assist the IASB in developing standards, to help preparers develop consistent
accounting policies where there is no applicable standard in place and to assist all parties to
understand and interpret the standards. This will affect those entities which developed their
accounting policies based on the Conceptual Framework. The revised Conceptual Framework
includes some new concepts, updated definitions and recognition criteria for assets and liabilities
and clarifies some important concepts. These amendments had no impact on the consolidated
24
TSEBO SOLUTIONS GROUP PROPRIETARY LIMITED
NOTES TO ANNUAL FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2020
1. ACCOUNTING POLICIES
1.18 Significant accounting judgements, estimates and assumptions
In preparing the Company's financial statements, management is required to make estimates and
assumptions that affect reported income, expenses, assets, liabilities and disclosure of contingent
assets and liabilities. Use of available information and the application of judgement are inherent
in the formation of estimates. Actual results in the future could differ from these estimates which
may be material to the financial statements.
Judgements
Significant judgements made relate to the estimate of useful lives and residual values of property,
plant and equipment and intangible assets which are determined by management at acquisition
and subsequently reviewed annually. Management judgements also extend to the allowance for
doubtful debts which have been deducted in arriving at the trade receivables amount. This
judgement is usually based on expected write-offs.
Estimates and assumptions
The key assumptions concerning the future and other key sources of estimation uncertainty at the
reporting date, that have a significant risk of causing a material adjustment to the carrying
amounts of assets and liabilities within the next financial year, are described below. The
Company based its assumptions and estimates on parameters available when the consolidated
financial statements were prepared. Existing circumstances and assumptions about future
developments, however, may change due to market changes or circumstances arising that are
beyond the control of the Company. Such changes are reflected in the assumptions when they
occur.
Goodwill
In arriving at the goodwill value recorded on the statement of financial position, which is the
excess of the purchase price over the fair value of the assets purchased and liabilities and
contingent liabilities assumed, estimates and judgements were used by management in arriving at
these fair values.
The Company determines whether goodwill is impaired at least on an annual basis. The
impairment of goodwill was tested for each cash-generating unit in the Company using the
discounted cash flow method. Various assumptions pertaining to inflation rates and the discount
rate (Weighted Average Cost of Capital) had to be made based on the information available at the
time of doing the valuation.
Leases - Estimating the incremental borrowing rate
The Company cannot readily determine the interest rate implicit in the lease, therefore, it uses its
incremental borrowing rate (IBR) to measure lease liabilities. The IBR is the rate of interest that
the Company would have to pay to borrow over a similar term, and with a similar security, the
funds necessary to obtain an asset of a similar value to the right-of-use asset in a similar
economic environment.
25
TSEBO SOLUTIONS GROUP PROPRIETARY LIMITED
NOTES TO ANNUAL FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2020
1. ACCOUNTING POLICIES
1.18 Significant accounting judgements, estimates and assumptions (continued)
The IBR therefore reflects what the Company ‘would have to pay’, which requires estimation
when no observable rates are available (such as for subsidiaries that do not enter into financing
transactions) or when they need to be adjusted to reflect the terms and conditions of the lease (for
example, when leases are not in the subsidiary’s functional currency). The Company estimates
the IBR using observable inputs (such as market interest rates) when available and is required to
make certain entity-specific estimates (such as the subsidiary’s stand-alone credit rating).
Impairment of non-financial assets
Impairment exists when the carrying value of a cash generating unit exceeds its recoverable
amount, which is the higher of its fair value less costs of disposal and its value in use. The fair
value less costs of disposal calculation is based on available data from binding sales transactions,
conducted at arm’s length, for similar assets or observable market prices less incremental costs of
disposing of the asset. The value in use calculation is based on a DCF model. The cash flows are
derived from the forecast for the next five years and do not include restructuring activities that
the Company is not yet committed to or significant future investments that will enhance the
performance of the assets of the CGU being tested. The recoverable amount is sensitive to the
discount rate used for the DCF model as well as the expected future cash-inflows and the growth
rate used for extrapolation purposes. These estimates are relevant to goodwill.
The key assumptions used to determine the recoverable amount for the different CGUs, including
a sensitivity analysis, are disclosed and further explained in Note 10.
1.19 Correction of an error
The Investment in Lephalale Site Services Partnership include accumulated drawings which were
previously disclosed as part of Amounts due to group companies.
A reallocation has been done by restating the affected financial statement line items for the prior
year, as follows:
2019
Investments (59 280)
Total assets (59 280)
Amounts due to group companies (59 280)
Total liabilities (59 280)
Net impact on equity -
26
TSEBO SOLUTIONS GROUP PROPRIETARY LIMITED
NOTES TO ANNUAL FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2020
1. ACCOUNTING POLICIES
1.20 Standards issued but not yet effective
The new and amended standards and interpretations that are issued, but not yet effective, up to
the date of issuance of the Company’s financial statements are disclosed below. The Company
intends to adopt these new and amended standards and interpretations, if applicable, when they
become effective.
Amendments to IAS 1: Classification of Liabilities as Current or Non-current
In January 2020, the IASB issued amendments to paragraphs 69 to 76 of IAS 1 to specify the
requirements for classifying liabilities as current or non-current. The amendments clarify:
• What is meant by a right to defer settlement;
• That a right to defer must exist at the end of the reporting period;
• That classification is unaffected by the likelihood that an entity will exercise its deferral right;
• That only if an embedded derivative in a convertible liability is itself an equity instrument
would the terms of a liability not impact its classification.
The amendments are effective for annual reporting periods beginning on or after 1 January 2023
and must be applied retrospectively. The Group is currently assessing the impact the
amendments will have on current practice and whether existing loan agreements may require
Reference to the Conceptual Framework – Amendments to IFRS 3
In May 2020, the IASB issued Amendments to IFRS 3 Business Combinations - Reference to the
Conceptual Framework. The amendments are intended to replace a reference to the Framework
for the Preparation and Presentation of Financial Statements, issued in 1989, with a reference to
the Conceptual Framework for Financial Reporting issued in March 2018 without significantly
changing its requirements.
The Board also added an exception to the recognition principle of IFRS 3 to avoid the issue of
potential ‘day 2’ gains or losses arising for liabilities and contingent liabilities that would be
within the scope of IAS 37 or IFRIC 21 Levies, if incurred separately.
At the same time, the Board decided to clarify existing guidance in IFRS 3 for contingent assets
that would not be affected by replacing the reference to the Framework for the Preparation and
Presentation of Financial Statements.
The amendments are effective for annual reporting periods beginning on or after 1 January 2022
and apply prospectively.
27
TSEBO SOLUTIONS GROUP PROPRIETARY LIMITED
NOTES TO ANNUAL FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2020
1. ACCOUNTING POLICIES
1.20 Standards issued but not yet effective (continued)
Property, Plant and Equipment: Proceeds before Intended Use – Amendments to IAS 16
In May 2020, the IASB issued Property, Plant and Equipment — Proceeds before Intended Use,
which prohibits entities deducting from the cost of an item of property, plant and equipment, any
proceeds from selling items produced while bringing that asset to the location and condition
necessary for it to be capable of operating in the manner intended by management. Instead, an
entity recognises the proceeds from selling such items, and the costs of producing those items, in
profit or loss.
The amendment is effective for annual reporting periods beginning on or after 1 January 2022
and must be applied retrospectively to items of property, plant and equipment made available for
use on or after the beginning of the earliest period presented when the entity first applies the
amendment.
These amendments are not expected to have a significant impact on the Company’s financial
statements.
IFRS 9 Financial Instruments – Fees in the ’10 per cent’ test for derecognition of financial
As part of its 2018-2020 annual improvements to IFRS standards process the IASB issued
amendment to IFRS 9. The amendment clarifies the fees that an entity includes when assessing
whether the terms of a new or modified financial liability are substantially different from the
terms of the original financial liability. These fees include only those paid or received between
the borrower and the lender, including fees paid or received by either the borrower or lender on
the other’s behalf. An entity applies the amendment to financial liabilities that are modified or
exchanged on or after the beginning of the annual reporting period in which the entity first
applies the amendment.
The amendment is effective for annual reporting periods beginning on or after 1 January 2022
with earlier adoption permitted. The Group will apply the amendments to financial liabilities that
are modified or exchanged on or after the beginning of the annual reporting period in which the
entity first applies the amendment.
These amendments are not expected to have a significant impact on the Company’s financial
statements.
28
TSEBO SOLUTIONS GROUP PROPRIETARY LIMITED
NOTES TO ANNUAL FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2020
2020 2019
R’000 R’000
2. REVENUE
Set out below is the disaggregation of the Company’s revenue from contracts with customers:
Type of goods or service 1 502 842 2 243 824
- Catering 843 804 937 189
- Cleaning
- Facilities solutions 1 006 353 1 873 543
Total revenue from contracts with customers 3 352 999 5 054 556
Timing of revenue recognition 1 502 842 2 243 824
- Goods and services transferred at a point in time 1 850 157 2 810 731
- Goods and services transferred over time
3 352 999 5 054 556
Total revenue from contracts with customers
3. COST OF SALES 664 093 1 062 970
Included in cost of sales are the following: 1 100 348 1 307 614
74 587 79 005
Food costs and consumables used 7 522 12 055
57 566 73 494
Direct labour costs in respect of staff at contract sites: 4 043 10 950
- Salaries and wages 53 523 62 544
- Incentive bonuses
- Medical aid contribution 7 652 11 365
- Defined contribution plans 2 723 5 978
5 452
- Pension fund 11 707 24 473
- Provident fund 5 477 25 190
50 780
- Travel allowance 13 357 6 579
- Labour brokers 31 758 50 590
- Leave pay 11 067
- Payroll taxes 11 499
- Workman's compensation
- Overtime
- Staff meals and welfare
- Other*
* Other direct labour costs are made up of long service awards, recruitment charges, staff welfare, commissions, annual
conferences, training, staff relocation, uniforms and severance pay.
29
TSEBO SOLUTIONS GROUP PROPRIETARY LIMITED
NOTES TO ANNUAL FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2020
2020 2019
R’000 R’000
4. OTHER INCOME
SETA refund 1 2 130 583
Sundry income 2 10 986
6 949
Share of partnership profit 4 731 107
Profit on disposal of fixed assets 346 863
Rental income 941 28 829
ETI youth incentive 3 8 124
Dividends received 50 741
9 532
68 431 46 441
1 The SETA refund relates to government grant received for learnerships.
2 Sundry income is made up of immaterial items that occur in the normal course of business.
3 ETI youth incentive is a government incentive to employers to employ youth workers with little to no previous work
experience.
5. FINANCE COSTS
Bank overdraft and other 2 833 15 314
Finance leases - IFRS 16 4 819 5 946
Loans secured - Consortium of lenders 164 025 201 466
Interest rate swaps 41 459 19 471
Receiver of revenue
Loans from group companies - 320
Finance raising and facility fees 11 087 85
10 933 19 931
235 156 262 533
6. FINANCE INCOME 1 616 3 456
6 090 -
Bank 1 592
Interest rate swaps - MTM adjustments 23 347
Loans to group companies 9 298
26 803
30
TSEBO SOLUTIONS GROUP PROPRIETARY LIMITED
NOTES TO ANNUAL FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2020
7. LOSS BEFORE TAX 2020 2019
Loss before tax is arrived at after taking the following items into
account: R’000 R’000
Auditors’ remuneration 8 279 9 827
Fees for professional services 10 255 13 637
Depreciation 70 943 69 896
- Computer equipment 3 188 4 003
- Furniture and fittings 1 411 1 341
- Leasehold improvements 2 479 1 520
- Motor vehicles
- Investment at units 368 672
- Right-of-use assets 31 740 32 323
31 757 30 037
Expenses relating to once-off items and restructuring costs
46 155 21 048
Acquisition price adjusments
- 2 431
Fair value adjustments
303 -
Donations
1 320 2 361
Staff costs (excluding items disclosed under cost of sales)
- Salaries and wages 259 691 301 395
- Contributions to pension and provident funds 202 511 233 074
- Medical aid contributions 11 102 11 935
- Staff recruitment
- Payroll taxes 6 033 6 149
- Travel allowances 1 937 1 011
- Incentive bonuses 1 229 2 693
- Leave pay 34 039 42 376
- Training costs 17 435 18 921
(19 026) (22 898)
4 431 8 134
31
TSEBO SOLUTIONS GROUP PROPRIETARY LIMITED
NOTES TO ANNUAL FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2020
2020 2019
R’000 R’000
8. TAXATION - -
South African normal taxation 215 (400)
187
Normal tax 620
- Current year (2 923)
- Prior year over / (under) provision (5 544) (2 312)
70
Foreign withholding tax (8 065)
(2 022)
Deferred tax
- Current year
- Prior year (under) / over provision
The Company does not have assessed losses to be set off against future taxable income.
Reconciliation of tax rate % %
Effective tax rate 1,12 2,07
Permanent differences 20,64 24,52
Foreign withholding tax 0,03
Prior year over / (under) provision for normal tax 0,03 0,64
Loss not recognised for deferred tax 6,95 (0,41)
Prior year (under) / over provision for deferred tax (0,77)
1,11
Standard tax rate 28,00 0,07
28,00
32
TSEBO SOLUTIONS GROUP PROPRIETARY LIMITED
NOTES TO ANNUAL FINANCIAL STATEMENTS
AT 31 DECEMBER 2020
9. PROPERTY, PLANT AND EQUIPMENT
Investment at Land and Comput
units* buildings equipme
R’000
R’000 R’0
2020
Cost 124 498 54 458 54
13 906 3 621 58
At beginning of the year 3 482 (8 335) (1 39
Additions (65 402) (6 63
Transfers -
Disposals and assets scrapped 32
49 744
At end of the year 76 484
Accumulated depreciation (72 156) (19 573) (6 94
64 271 - 65
At beginning of the year 7 508 13
Disposals and assets scrapped 8 335
Transfers (31 740) (19 980) (5 99
Current charge
At end of the year (32 117) (31 218) (4 98
Net book value 44 367 18 526 (1 75
Included in Property, plant and equipment are Right-of-use assets. For the respective carrying value
Property, plant and equipment include fully depreciated assets that are still in use.
* Investment at units relates to capital expenditure on equipment when a new unit is opened.
** Work in progress relates to capital expenditure on assets which are not yet fully developed o
expenditure relates to all fixed assets which are not included in the other major asset classes.
33
ter Furniture Leasehold Motor WIP and
vehicles other**
ent and fittings improvements R’000 Total
R’000 R’000
000 R’000 R’000
418 4 323 5 369 26 882 12 903 233 851
838 319 - 2 848 23 063 49 595
96) - - (10 989) (17 238)
31) (1 157) - (76 746)
(783) (2 221) (552)
229 3 485 189 462
4 586 27 509 24 425
48) (312) (2 045) (10 536) -- 111 570
564 1 249 783 1 812 - 74 678
399 (4) - - - 17 238
95) (1 411) -- 70 943
(2 479) (9 338)
80) (478) -- 90 597
(3 741) (18 062)
51) 3 007 24 425 98 865
845 9 447
es, refer to Note 29.
or operational. These will be included in a specific asset category when in full use. Other capital
3
TSEBO SOLUTIONS GROUP PROPRIETARY LIMITED
NOTES TO ANNUAL FINANCIAL STATEMENTS
AT 31 DECEMBER 2020
9. PROPERTY, PLANT AND EQUIPMENT
Investment at Land and Comput
units* buildings equipme
R’000
R’000 R’0
2019
Cost 99 529 - 8
29 281 - 30
At beginning of the year -
Additions 2 438 54 458 -
Transfers - - 45
Right-of-use assets (3 03
Disposals and assets scrapped (6 750)
At end of the year 124 498 54 458 54
Accumulated depreciation (43 254) - (4 29
1 424 - 29
At beginning of the year 1 996 - -
Disposals and assets scrapped - (19 573)
Transfers - (1 62
Right-of-use assets (32 323) (4 00
Current charge
At end of the year (72 156) (19 573) (6 94
Net book value 52 342 34 885 (1 53
* Investment at units relates to capital expenditure on equipment when a new unit is opened.
** Work in progress relates to capital expenditure on assets which are not yet fully developed o
expenditure relates to all fixed assets which are not included in the other major asset classes.
34
ter Furniture Leasehold Motor WIP and
vehicles other**
ent and fittings improvements R’000 Total
R’000 R’000
000 R’000 R’000
844 3 688 4 308 4 010 19 514 131 893
081 1 599 1 489 20 2 408 37 877
(5 663)
- - - (8 101) 83 572
528 - - 24 586 -
35) (964) (428) (1 733) (13 828)
(918)
418 4 323 5 369 26 882 233 852
12 903
94) 65 (953) (2 666) - (51 102)
977 964 428 1 639 - 7 433
- - - 1 996
- - -
27) - (8 836) - (30 037)
04) (1 341) (1 520) (672) (39 859)
-
48) (312) (2 045) (10 536) (111 569)
12 903
30) 4 011 3 324 16 347 122 283
or operational. These will be included in a specific asset category when in full use. Other capital
4
TSEBO SOLUTIONS GROUP PROPRIETARY LIMITED 2020 2019
NOTES TO ANNUAL FINANCIAL STATEMENTS
AT 31 DECEMBER 2020 R’000 R’000
10. GOODWILL 879 404 879 404
Carrying value at beginning of period (270 564) -
Impairment of goodwill
Carrying value at end of year 608 840 879 404
The carrying value of goodwill can be reconciled as follows:
Cost Accumulated Net book
impairment value
R’000 R’000 R’000
2020 879 404 (270 564) 608 840
Goodwill
2019 879 404 - 879 404
Goodwill
Goodwill impairment testing
Goodwill acquired through business combinations have been allocated to three cash-generating units,
which are also reporting segments, for impairment testing as follows:
2020 2019
R’000 R’000
Catering Solutions cash generating unit 468 740 557 826
Cleaning Solutions cash generating unit 140 100 140 100
Facilities Solutions cash generating unit 181 478
-
Carrying value at end of year 879 404
608 840
The recoverable amount of the cash generating units has been determined based on a value in use
calculation using cash flow projections from financial budgets approved by the board of directors
covering a five-year period.
The post-tax discount rate applied to cash flow projections ranges from 12.82% - 14.71%, depending
on the cash generating unit.
35
TSEBO SOLUTIONS GROUP PROPRIETARY LIMITED
NOTES TO ANNUAL FINANCIAL STATEMENTS
AT 31 DECEMBER 2020
10. GOODWILL (Continued)
Key assumptions used in value-in-use calculations
The calculation of value-in-use for all cash generating units is most sensitive to the following
• Budgeted and forecast turnover and EBITDA growth;
• Discount rates; and
• Growth rate used to extrapolate cash flows beyond the budget period.
Budgeted and forecast turnover growth
Budgeted and forecast turnover growth is based on historic levels of growth achieved in the individual
units, as well as management’s understanding of future development of the market and client base.
• For the catering division, the projected growth between periods one and five ranges between
8.5% and 17.5% and the EBITDA margins range between 2.8% and 6.2%.
• For the cleaning division it ranges between 12.1% and 16.3%, while EBITDA margin ranges
between 7.2% and 8.4%.
• For the facilities management division, the projected growth between periods one and five ranges
between -14.0% and 7.4%, while the EBITDA margin ranges between 0.4% and 2.8%.
Discount rate
Discount rates reflect the current market assessment of the time value of money and risks specific to
each cash generating unit. The discount rates were estimated based on the average percentage of a
weighted average cost of capital for the Company, taking the market into account. These rates were
further adjusted to reflect the market assessment of any risk specific to the cash generating unit for
which future estimates of cash-flows have not been adjusted.
Terminal growth rate
The terminal growth rate of 5% is based on management’s and the board of directors’ assessment of the
current state of the base of clients within the company as well as the position of the market at present.
Sensitivity analysis
A 1% increase on the discount rate might result in an additional impairment on Catering (R61,539,727).
Impairment of goodwill
An impairment test was performed and impairment of R270,564,273 was required for the period ended
31 December 2020.
36
TSEBO SOLUTIONS GROUP PROPRIETARY LIMITED
NOTES TO ANNUAL FINANCIAL STATEMENTS
AT 31 DECEMBER 2020
11. INTANGIBLE ASSETS 2020 2019
Computer software R’000 R’000
Cost 32 161 19 693
Opening balance (9 864) 12 468
Movement during the period
Balance at end of year 22 297 32 161
Accumulated amortisation (15 241) 1 005
Opening balance (9 915) (16 246)
Amortisation 9 890
Other movements for the period -
Balance at end of year (15 266)
The carrying value of goodwill can be reconciled as follows: (15 241)
Net book value 7 031 16 920
Balance at end of year *
* The amount of intangibles is restated and does not correspond to the figures in 2019 financial statements since
reallocations were made in respect of Computer software. The total balance relates to Computer Software which
were reallocated from Property, plant and equipment to Intangible assets.
37
TSEBO SOLUTIONS GROUP PROPRIETARY LIMITED 2020 2019
NOTES TO ANNUAL FINANCIAL STATEMENTS R’000 R’000
AT 31 DECEMBER 2020
540 540
12. INVESTMENTS 4 998 3 790
3 790 3 749
Unlisted investments 4 731 6 949
Impilo Consortium (Pty) Ltd (3 523) (6 908)
9% interest
Lephalale Site Services Partnership 470 470
Opening Balance (Investment)
50% interest in partner's investment/capital 1 939 1 939
Drawings 7 947 6 739
Sethekgo Private Party (Pty) Ltd
15% interest
Tsela Tshwea (RF) (Pty) Ltd
10% interest
Total investments
These investments reflect the directors’ valuation of the fair value of the shares, are unlisted and not
actively traded and there is no intention to dispose of these investments in the near future.
13. LOANS RECEIVABLE 11 708 13 490
Non-current assets - 3 172
16 662
Tsela Tshwea (RF) (Pty) Ltd 11 708
Unsecured loan
Fedics Food Services Namibia (Pty) Ltd
Unsecured loan
Total non-current loans
Current assets 855 -
Fedics Food Services Namibia (Pty) Ltd
Unsecured loan - 1 958
855 1 958
DSFM Vuya Consortium (Pty) Ltd
Unsecured loan
The loan to DSFM Vuya Consortium (Pty) Ltd was settled in November 2020.
The loan to Fedics Food Services Namibia (Pty) Ltd was settled in January 2021.
The loan to Tsela Tshweu Private Company (RF) (Pty) Ltd is unsecured, bearing interest at 13% per
annum. The repayment terms are subject to available cash flows and lender approvals.
38
TSEBO SOLUTIONS GROUP PROPRIETARY LIMITED
NOTES TO ANNUAL FINANCIAL STATEMENTS
AT 31 DECEMBER 2020
14. INVESTMENT IN SUBSIDIARY COMPANIES
Name of Company Incorporated Percentag Shares Shares
Unlisted e held
% 2020 2019
Thorburn Security Solutions (Pty) Ltd South Africa 100 R’000 R’000
DSVH Facilities Management South Africa 70
Consortium (Pty) Ltd 50 668 231 204
51 * *
Mpilisweni Facilities Services South Africa
65 51 51
Consortium (Pty) Ltd
80 * *
Fedics Ilembe Hospitality Services (Pty) South Africa 60
70 * *
Ltd * *
100 * *
DSFM Vuya Consortium (Pty) Ltd South Africa
100 29 454 29 454
Umongi Facilities Services (Pty) Ltd South Africa 100 * *
70 * *
Umongi Facilities Management (Pty) Ltd South Africa 50 1 1
70 * *
Tirasano Facilities Management 60 * *
* *
(Pty) Ltd South Africa
80 175 260 710
Blue Crane Holdings SA (Pty) Ltd South Africa
Equality Protection Services (Pty) Ltd South Africa
Ilithe Hospitality Services (Pty) Ltd South Africa
Lephalale Site Services Partnership South Africa
Nemus Trade and Invest (Pty) Ltd South Africa
Tsebo Smart (Pty) Ltd South Africa
Although a 50% shareholding is held in certain companies, they are consolidated as subsidiaries at the
ultimate holding company level due to the fact that Tsebo Solutions Group (Pty) Ltd has control.
Further details of the Company’s interest in unlisted subsidiary companies are disclosed in note 30.
* Less than R1 000
39
TSEBO SOLUTIONS GROUP PROPRIETARY LIMITED
NOTES TO ANNUAL FINANCIAL STATEMENTS
AT 31 DECEMBER 2020
2020 2019
R’000 R’000
15. DEFERRED TAXATION 34 531 17 336
(10 793) (2 065)
Deferred tax assets
Deferred tax liabilities 23 738 15 271
Net deferred tax assets
The deferred tax assets are made up as follows: 12 219 4 871
7 675 11 340
Provisions (1 599) (1 891)
Leave pay provision
Prepayments 289 -
Donations 47 -
Property, plant and equipment 215 -
Income received in advance 22 -
Foreign exchange 3 883 -
Interest rate swaps 987 951
IFRS 16 lease and right-of-use
23 738 15 271
The movement on deferred tax is as follows: 15 271 13 029
Balance at beginning of the year 2 923 2 242
Statement of profit or loss 5 544
Prior year over provision -
23 738
Balance at end of the year 15 271
16. INVENTORIES 275 360
23 071 29 276
Spare parts and tools
Raw material 5 148
Uniform stock 11 066 18 512
Merchandise
34 417 48 296
There are no items included in inventory that are recorded at net realisable value. There was no
inventory written off during the current period.
40
TSEBO SOLUTIONS GROUP PROPRIETARY LIMITED 2020 2019
NOTES TO ANNUAL FINANCIAL STATEMENTS R’000 R’000
AT 31 DECEMBER 2020
320 741 414 362
17. TRADE AND OTHER RECEIVABLES 2 347 2 550
9 020 8 620
Trade receivables, net of impairment 36 832 63 421
Payments in advance 6 936 19 946
Deposits 82 1 138
Discount accrued 3 964 28 631
Income accrued
Prepaid insurance 379 922 538 668
Other receivables*
* Other receivables include inter alia prepayments, VAT recoverable, unbilled revenue and sundry debtors.
Allowance account for credit losses (individual and portfolio): (2 219) (1 916)
(4 560) (303)
Opening balance
Charge for the year (6 779) (2 219)
Trade receivables have been pledged as security for certain Group financing (refer Note 20). Both
trade and other receivables are receivable as analysed below and do not attract interest. The fair value
of the trade and other receivables approximates the carrying amount.
As at 31 December 2020, the ageing analysis of trade and other receivables is as follows:
Total Current Past due
30 - 60 60 - 90 > 90
days days days
2020 320 741 195 799 77 207 24 989 22 746
Trade receivables 59 181 20 859 14 565 7 394 16 363
Other receivables
379 922 216 658 91 772 32 383 39 109
41
TSEBO SOLUTIONS GROUP PROPRIETARY LIMITED
NOTES TO ANNUAL FINANCIAL STATEMENTS
AT 31 DECEMBER 2020
17. TRADE AND OTHER RECEIVABLES (continued)
As at 31 December 2019, the ageing analysis of trade and other receivables is as follows:
Total Current Past due
30 - 60 60 - 90 > 90
days days days
2019 414 362 215 584 122 241 39 010 37 527
Trade receivables 124 306 43 763 32 011 14 959,14 33 573
Other receivables
538 668 259 347 154 252 53 969 71 100
2020 2019
R’000 R’000
18. CASH AND CASH EQUIVALENTS 51 097 143 255
(46 122) (39 260)
Cash and bank
Bank overdraft 4 975 103 995
Cash at bank and on call earn interest at floating rates based on the daily bank deposit rate. The cash
held in bank has been pledged as security for certain Group financing (refer Note 20). Cash and cash
equivalents approximates its fair value.
Investec Bank Limited has provided Tsebo Solutions Group (Pty) Ltd with guarantee facilities to the
extent of ZAR75,000,000, and Nedbank Limited has provided a working capital facility of
ZAR75,000,000. As at the amount drawn was ZAR 46,121,903.
42
TSEBO SOLUTIONS GROUP PROPRIETARY LIMITED 2020 2019
NOTES TO ANNUAL FINANCIAL STATEMENTS R’000 R’000
AT 31 DECEMBER 2020
1 201 205 1 201 205
19. SHARE CAPITAL
872 434 -
Ordinary shares
Authorised 2 073 639 1 201 205
1 000 000 ordinary shares of no par value
1 482 382 1 482 382
Issued
Opening balance (1 482 382) -
500 000 ordinary shares of no par value
Increase in share capital - 1 482 382
100 ordinary shares of no par value
Closing balance
500 100 ordinary shares of no par value
Preference shares
Authorised
100 000 cumulative redeemable preference shares of no par value
Issued
Opening balance
100 000 cumulative redeemable preference shares of no par value
Redemption of preference shares
100 000 cumulative redeemable preference shares of no par value
Closing balance
43
TSEBO SOLUTIONS GROUP PROPRIETARY LIMITED 2020 2019
NOTES TO ANNUAL FINANCIAL STATEMENTS R’000 R’000
AT 31 DECEMBER 2020
1 594 709 1 738 273
20. SECURED LOANS
Consortium loan (872 434) (270 841)
At beginning of the period - -
Cash movements
Additional loans obtained (872 434) (270 841)
Repaid during the period
Non-cash movements 316 650 127 277
Prior period current portion 140 959 57 878
Commitment fees to be amortised over the loan term (1 369)
Interest charged - 201 466
Commitment fees amortised 164 025 10 261
Less: Current portion of interest bearing debt
At end of the period 11 666 (140 959)
-
1 594 709
1 038 925
Investec Bank Limited, Standard Chartered Bank, Nedbank Limited and Investec Asset Management
granted Tsebo Solutions Group (Pty) Ltd loan facilities of ZAR1,950,700,000 and USD16,600,000.
The revised terms of the loans are as follow:
Facility A:
ZAR925,000,000 drawn down on 31 January 2017, with a floating interest rate, which is the aggregate
of the JIBAR rate plus a margin of 3.75% nominal annual compounded quarterly in arrears. Capital
settlements were made in September 2017 and March 2018, and then bi-annually from March 2019
until the end of the loan term in March 2023. ZAR389,731,019 was settled on 21 December 2020. The
capital settlements due on 31 March 2020 and 30 September 2020 were deferred.
Facility B:
ZAR925,000,000 drawn down on 31 January 2017, with a floating interest rate, which is the aggregate
of the JIBAR rate plus a margin of 4.25% nominal annual compounded quarterly in arrears. This loan
has a 100% bullet facility, payable in March 2023. ZAR451,862,051 was settled on 21 December
2020.
Facility C:
ZAR100,700,000 was granted on 31 January 2017, and increased to ZAR500,000,000 on
21 August 2018. The loan carries a floating interest rate, which is the aggregate of the JIBAR rate plus
a margin of 4.75% nominal annual compounded quarterly in arrears. This loan has a 100% bullet
facility, payable in March 2023. ZAR30,841,099 was settled on 21 December 2020. The unutilised
portion of Facility C was cancelled effective 17 December 2019.
The quarterly interest payments for all the above Facilities were deferred during the 2020 financial
44
TSEBO SOLUTIONS GROUP PROPRIETARY LIMITED
NOTES TO ANNUAL FINANCIAL STATEMENTS
AT 31 DECEMBER 2020
20. SECURED LOANS (continued)
The following is a list of security provided for all the Consortium loans which will be called upon in
the event of default:
South Africa
• Security Cession entered into between Tsebo Holdings SA Proprietary Limited ("Tsebo
Holdings"), Tsebo Intragroup Proprietary Limited ("Tsebo Intragroup"), Tsebo Solutions Group
Proprietary Limited ("Tsebo Solutions Group") and K2016433179 (South Africa) (RF) Proprietary
Limited (the "Security SPV")*;
• Cession and Pledge Agreement entered into between Tsebo Holdings, Tsebo Intragroup, Tsebo
Solutions Group and the Security SPV;
• Subordination Agreement entered into between Tsebo Holdings, Tsebo Intragroup, Tsebo Solutions
Group and Tsebo Solutions Group AME;
• Counter Indemnity Agreement between Tsebo Holdings, Tsebo Intragroup, Tsebo Solutions Group,
Tsebo Solutions Group Holdings SA, Tsebo Solutions Group AME and the Security SPV;
• Debt Guarantee given by the Security SPV in favour of Investec Bank Limited (acting through its
Corporate and Institutional Banking division) (“Investec”), Nedbank Limited (acting through its
Nedbank Corporate and Investment Banking division) (“Nedbank”), Standard Chartered Bank
(Mauritius) Limited and Standard Chartered Bank Johannesburg Branch;
• General Notarial Bond by Tsebo Holdings in favour of the Security SPV;
• General Notarial Bond by Tsebo Intragroup in favour of the Security SPV;
• General Notarial Bond by Tsebo Solutions Group in favour of the Security SPV;
• Security Cession, Pledge Agreement and Limited Guarantee entered into between the trustees for
the time being of the Tsebo ESOP Trust and the Security SPV;
• Security Cession, Pledge Agreement and Limited Guarantee entered into between Tsebo Solutions
Group Holdings (SA) Proprietary Limited and the Security SPV;
• Security Cession, Pledge Agreement and Limited Guarantee entered into between Jaxson 800
Proprietary Limited and the Security SPV;
Mauritius
• Floating Charge Agreement/s entered into between Tsebo Solutions Group AME and Investec Bank
Limited (acting though its Corporate and Institutional Banking division);
• Pledge of Accounts Agreement between the Security SPV and Tsebo Solutions Group AME;
• Pledge of Accounts Agreement entered into between Tsebo Solutions Group Mauritius and the
Security SPV;
• Pledge of Accounts Agreement entered into between Tsebo Solutions Group International and the
Security SPV;
* K2016433179 (SA) (RF) (Pty) Ltd is a Special Purpose Vehicle that was created to house all the security for the
debt as per the debt agreement.
45
TSEBO SOLUTIONS GROUP PROPRIETARY LIMITED
NOTES TO ANNUAL FINANCIAL STATEMENTS
AT 31 DECEMBER 2020
20. SECURED LOANS (continued)
Mauritius
• Pledge of Accounts Agreement entered into between Tsebo Egypt Investments (Mauritius)
(formerly Tsebo Catering Mauritius) and the Security SPV;
• Share Pledge Agreement entered into between Tsebo Solutions Group AME, Tsebo Solutions
Group International and the Security SPV;
• Share Pledge Agreement between Tsebo Solutions Group AME, Tsebo Egypt Investments
(Mauritius) (formerly Tsebo Catering Mauritius) and the Security SPV;
• Share Pledge Agreement entered into between Tsebo Solutions Group AME, the Security SPV and
Tsebo Solutions Group Mauritius;
• Share Pledge Agreement entered into between Jaxson 800 Proprietary Limited and the Security
• Pledge of Receivables Agreement entered into between Tsebo Solutions Group AME and the
Security SPV;
• Pledge of Receivables Agreement entered into between Tsebo Solutions Group Mauritius and the
Security SPV;
• Pledge of Receivables Agreement entered into between Tsebo Solutions Group International and the
Security SPV;
• Pledge of Receivables Agreement entered into between Tsebo Egypt Investments (Mauritius)
(formerly Tsebo Catering Mauritius) and the Security SPV;
Sierra Leone
• Cession and Pledge Agreement entered into between Allterrain Services Inc, Martin Ryan and the
Security SPV;
Botswana
• Cession and Pledge Agreement entered into between Tsebo Solutions Group AME, Fedics Food
Services (Botswana) Proprietary Limited and the Security SPV;
BVI
• Equitable Share Mortgage in respect of the shares of Allterrain Services Inc entered into between
Tsebo Solutions Group AME and the Security SPV;
• Deed of Confirmation (relating to the Equitable Share Mortgage in respect of shares in Allterrain
Services Inc) entered into between Tsebo Solutions Group AME, Allterrain Services Inc and the
Security SPV;
Lesotho
• Cession and Pledge Agreement entered into between Tsebo Holdings and the Security SPV;
Swaziland
• Cession and Pledge Agreement entered into between Tsebo Holdings and the Security SPV.
46
TSEBO SOLUTIONS GROUP PROPRIETARY LIMITED 2020 2019
NOTES TO ANNUAL FINANCIAL STATEMENTS R’000 R’000
AT 31 DECEMBER 2020
65 477 66 315
21. AMOUNTS DUE TO GROUP COMPANIES
Non-current liabilities
Amounts due to:
- Subsidiaries and subsidiaries of holding companies
Amounts due to group companies include a loan of R91,171,967 which has been advanced by
Tsebo Holdings SA (Pty) Ltd. This loan carries interest at 13% per annum and is payable on demand.
22. TRADE AND OTHER PAYABLES
Trade payables 281 076 476 961
Accrued expenses 48 730 48 532
Payroll accruals 23 274 43 883
Sundry creditors 31 251 12 252
VAT 19 076 32 996
Other payables 6 416 37 554
409 823 652 178
The fair value of the trade and other payables approximates the carrying amount due to the short term
nature of these items.
23. CONTINGENT LIABILITIES
Performance guarantees 57 769 57 412
All performance guarantees have been issued by Investec Bank Limited on behalf of
Tsebo Solutions Group (Pty) Ltd. Guarantees are issued mainly in terms of contract obligations to
Facilities Solutions customers.
47
TSEBO SOLUTIONS GROUP PROPRIETARY LIMITED
NOTES TO ANNUAL FINANCIAL STATEMENTS
AT 31 DECEMBER 2020
24. PROVISIONS
Payment against Charged to the
Opening balance provision income statement Closing balance
R’000 R’000 R’000 R’000
2020 40 498 (10 104) (3 057) 27 337
15 708 (59 409) 70 616 26 915
Leave Pay 98,00 (4 877,36) 13 501 8 722
Bonus 5 423 (8 997) 9 709 6 135
Termination
Audit Fees 61 727 (83 387) 90 769 69 109
Payment against Charged to the
Opening balance provision income statement Closing balance
2019 41 865 (11 593) 10 226 40 498
11 164 (97 948) 102 492 15 708
Leave pay
Bonus - (71) 169 98
Termination 6 391 (11 689) 10 721 5 423
Audit Fees
59 420 (121 301) 123 608 61 727
The leave pay provision is raised in accordance with employment contracts. The leave pay provision
will be reversed as employees take leave.
The bonus provision is raised in accordance with employment contracts and with the bonus scheme of
the Group. It is expected that the bonus provision will be utilised by May 2021 whilst the leave pay
provision will reverse as employees take leave. This provision will reverse when the employee is paid.
The termination provision has been created to account for the costs incurred due to the imminent re-
tender process of contracts entered into by the Company. It is expected that this provision will be
utilised by June 2021.
Audit fees provision is raised in accordance with the decision taken by the Audit Committee. It is
expected that this provision will be utilised by May 2021.
Provisions are not discounted for the effect of passage of time.
48
TSEBO SOLUTIONS GROUP PROPRIETARY LIMITED
NOTES TO ANNUAL FINANCIAL STATEMENTS
AT 31 DECEMBER 2020
25. INTEREST RATE SWAP 2020 2019
Current portion
R’000 R’000
55 326 19 957
The terms of the interest rate swaps are as follows:
Interest rate swaps held with Nedbank Limited:
Notional amount of ZAR308,333,333, effective date 31 March 2017 and termination date
31 March 2021, subject to adjustment in accordance with the Modified Following Business Day
Convention. The JIBAR variable portion was fixed with Nedbank at 7.69%. The re-set dates for
both the floating and fixed rates are 31 December, 31 March, 30 June and 30 September (quarterly)
with an expiry date of 31 March 2021.
Notional amount of ZAR308,333,333, effective date 31 March 2017 and termination date
31 March 2021, subject to adjustment in accordance with the Modified Following Business Day
Convention. The JIBAR variable portion was fixed with Nedbank at 7.75%. The re-set dates for
both the floating and fixed rates are 31 December, 31 March, 30 June and 30 September (quarterly)
with an expiry date of 31 March 2021.
Interest rate swaps held with Standard Chartered Bank:
Notional amount of ZAR308,333,333, effective date 31 March 2017 and termination date
31 March 2021, subject to adjustment in accordance with the Modified Following Business Day
Convention. The JIBAR variable portion was fixed with Standard Chartered Bank at 7.69%. The re-
set dates for both the floating and fixed rates are 31 December, 31 March, 30 June and 30 September
(quarterly) with an expiry date of 31 March 2021.
Notional amount of ZAR308,333,333, effective date 31 March 2017 and termination date
31 March 2021, subject to adjustment in accordance with the Modified Following Business Day
Convention. The JIBAR variable portion was fixed with Standard Chartered Bank at 7.75%. The re-
set dates for both the floating and fixed rates are 31 December, 31 March, 30 June and 30 September
(quarterly) with an expiry date of 31 March 2021.
Interest rate swaps held with Investec Bank Limited:
Notional amount of ZAR308,333,333, effective date 31 March 2017 and termination date
31 March 2021, subject to adjustment in accordance with the Modified Following Business Day
Convention. The JIBAR variable portion was fixed with Investec at 7.69%. The re-set dates for both
the floating and fixed rates are 31 December, 31 March, 30 June and 30 September (quarterly) with
an expiry date of 31 March 2021.
Notional amount of ZAR308,333,333, effective date 31 March 2017 and termination date
31 March 2021, subject to adjustment in accordance with the Modified Following Business Day
Convention. The JIBAR variable portion was fixed with Investec at 7.75%. The re-set dates for both
the floating and fixed rates are 31 December, 31 March, 30 June and 30 September (quarterly) with
an expiry date of 31 March 2021.
49
TSEBO SOLUTIONS GROUP PROPRIETARY LIMITED
NOTES TO ANNUAL FINANCIAL STATEMENTS
AT 31 DECEMBER 2020
26. FINANCIAL RISK MANAGEMENT
The Company’s financial instruments consist mainly of deposits with banks, bank overdrafts, accounts
receivable and payable and secured loans from the Consortium.
Market risk
Foreign exchange rate exposure
The Company does not import or export goods, therefore their exposure to foreign exchange fluctuations
are insignificant.
Interest rate management
The Company's exposure to the risk of changes in market interest rates relates primarily to the
Company's long term debt obligations with floating interest rates. The Company uses interest rate swaps
to hedge its interest rate risk. Such derivative financial instruments are initially recognised at fair value
on the date on which the contract is entered into and are subsequently re-measured at fair value.
Derivatives are carried as financial assets when the fair value is positive and as financial liabilities when
the fair value is negative.
Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate
because of changes in market interest rates.
The interest rate profile of total borrowings is as follows:
Description Currencies Redemption and R’000
interest rate %
Secured loans ZAR 1 038 925
Bank overdrafts ZAR Refer Note 20 46 122
Refer Note 18
A 1% increase on the Consortium Loan interest rate will result in a R14.2m increase on annual finance
cost. The risk of interest rate fluctuations on the Consortium loan is however mitigated through the use
of interest rate swaps (refer Note 25).
The bank overdraft interest is managed by only drawing down on the overdraft facility as and when this
facility is required. A 1% increase in the interest rate would not result in a material increase in the
annual finance costs.
Other price risk
The catering division is highly susceptible to food price inflation. However, this is managed in most
instances by passing on the increase in food prices to clients in terms of the contracts entered into, after
clients have been informed of the price increase. This assists in maintaining the gross profit margins.
50
TSEBO SOLUTIONS GROUP PROPRIETARY LIMITED
NOTES TO ANNUAL FINANCIAL STATEMENTS
AT 31 DECEMBER 2020
26. FINANCIAL RISK MANAGEMENT (continued)
Credit risk
Credit risk management
Potential areas of credit risk consist of trade accounts receivable and short-term cash investments.
Trade accounts receivable consist mainly of a large widespread customer base. The Company monitors
the financial position of their customers on an ongoing basis. Contracts are mainly entered into with
reputable corporate clients, government, hospitals, etc. The facilities management operations have a
concentration of their credit risk in the government sector.
Proper credit rating procedures are followed e.g. ITC checks and checking of trade references to
minimise the Company’s exposure to credit risk.
Provision is made for specifically impaired and non-collectible debts and at the year-end management
did not consider there to be any material credit risk exposure that was not already covered by such
impairments. In addition, a large number of minor receivables are grouped into homogenous groups and
assessed for impairment collectively. The calculation is based on actual incurred historical data.
It is Company policy to deposit short-term cash investments with the major banks.
Maximum credit exposure
The maximum credit exposure of the Company is limited to the loan receivable (refer Note 13), trade
and other receivables (refer Note 17) and cash and cash equivalents and its guarantee exposure (refer
Note 18).
Liquidity risk
Liquidity risk management
The Company manages liquidity risk by monitoring forecast cash flows and ensuring that adequate
unutilised borrowings facilities are maintained. The Company’s liquidity is managed on a daily basis,
stock turnover is short and credit terms are managed optimally.
On demand Less than 1 1 - 5 years Beyond 5 Total
year years R'000
R'000 R'000 R'000 R'000
Interest bearing loans and borrowings - - 1 038 925 - 1 038 925
Trade and other payables (excl VAT) - 390 747
Lease liabilities (refer Note 29.) - 390 747 - - 39 348
- 27 575 11 773
Excessive risk concentration
The Company manages concentration risk by ensuring that their customer base is made up of a
diversified portfolio.
51
TSEBO SOLUTIONS GROUP PROPRIETARY LIMITED
NOTES TO ANNUAL FINANCIAL STATEMENTS
AT 31 DECEMBER 2020
26. FINANCIAL RISK MANAGEMENT (continued)
Capital management
The primary objective of the Company’s capital management is to ensure that it maintains a strong credit
rating and healthy capital ratios in order to support its business and maximise shareholder value.
The Covenanted Group consists of the South African, Mauritian, Botswana, Common Monetary Areas
scope entities and Egypt and are bound by its covenant targets which need to be achieved at each
measurement date in terms of which:
• The level of its adjusted net debt shall not exceed the earnings before interest, tax, depreciation and
amortisation (EBITDA) of the Covenanted Group plus all dividend income and cash receipts received by
associates, foreign subsidiaries and foreign joint ventures (so that no amount is added or deducted more
than once) (adjusted EBITDA) by 3.5 times for the measurement period ending 30 June 2020, and 3
times for the period ending 31 December 2020.
• The adjusted EBITDA divided by the Covenanted Group finance charges shall not be less than 2 times
for the measurement period ending 30 June 2020, and 2.25 times for the period ending 31 December
2020.
• The aggregate of the covenanted group cash flow, and the aggregate of all drawdowns under Facility C
and D for the measurement period, plus any net cash out for the measurement period plus any
shareholder injections divided by the Covenanted Group debt service for the measurement period shall
exceed 1.05.
• The aggregate of the covenanted group cash flow plus the average opening cash for the period, and the
aggregate of all drawdowns under Facility C and D for the measurement period, plus any net cash out for
the measurement period plus any shareholder injections divided by the Covenanted Group debt service
for the measurement period shall exceed 1.25.
The covenants were waived for the measurement periods ending 30 June 2020 and 31 December 2020.
The Company manages its capital structure and makes adjustments to it, in light of changes in economic
conditions. To maintain or adjust the capital structure, the Company have the discretion to make
dividend payments to shareholders, adjust the preference share rate, return capital to shareholders or
issue new shares. The Company redeemed the preference shares for Rnil on 21 December 2020. The
Company issued ordinary shares with no par value to the value of R872,434,168 on 21 December 2020
to its holding company, Tsebo Intragroup (Pty) Ltd.
No changes were made in the objectives, policies or processes during the period ended 31 December
2020.
The capital managed can be analysed as follows:
R’000
Share capital (refer Note 19) 2 073 639
Secured loans (refer Note 20) 1 038 925
52
TSEBO SOLUTIONS GROUP PROPRIETARY LIMITED
NOTES TO ANNUAL FINANCIAL STATEMENTS
AT 31 DECEMBER 2020
27. NOTES TO THE STATEMENT OF CASH FLOWS 2020 2019
R’000 R’000
27.1 Reconciliation of loss before tax to cash generated by operations
(718 837) (97 471)
Loss before tax 743 240 312 435
Adjustments to reconcile loss before tax to net cash flows: 262 534
Finance costs 235 156 (26 803)
Finance income (9 298)
Depreciation property, plant and equipment and right-of-use assets 70 943 69 896
Amortisation of intangible assets 16 246
Non-cash impact of IFRS16 9 915
Acquisition price adjustments (2 431)
Fair value adjustments - -
Net foreign exchange differences 0 49
Impairment of investments -
Impairment of goodwill 33 -
Dividends received 180 536
Profit on disposal of fixed assets 270 564 (107)
Share of partnership profit (9 532) (6 949)
Operating profit before working capital changes (346) 214 964
Working capital changes (4 731) (90 742)
Decrease / (increase) in inventories 24 403 (4 164)
Decrease in trade and other receivables (62 349) 15 071
Decrease in trade and other payables and provisions (101 648)
13 879
Cash generated from operations 158 746 124 222
(234 974)
27.2 Taxation paid
(37 945)
Opening balance
Normal tax charge (refer Note 8) 13 470 19 883
Closing balance (402) (220)
27.3 Cash and cash equivalents (13 688) (13 470)
Cash and cash equivalents at year-end consist of: (620) 6 193
Cash at bank and float
Bank overdraft 51 097 143 255
(46 122) (39 260)
4 975 103 995
53
TSEBO SOLUTIONS GROUP PROPRIETARY LIMITED
NOTES TO ANNUAL FINANCIAL STATEMENTS
AT 31 DECEMBER 2020
28. RELATED PARTY TRANSACTIONS
The financial statements of Tsebo Solutions Group (Pty) Ltd include the transactions with the
subsidiaries and related parties listed in the following table:
% Equity interest
Name 2020 2019
Allterrain Services Kenya Ltd **
Allterrain Services Inc **
Allterrain Services Cote D'ivoire Ltd **
Allterrain Services DRC Ltd **
Allterrain Services Gabon Ltd **
Allterrain Services Ghana Ltd **
Allterrain Services Mauritius Ltd **
Allterrain Services Senegal Ltd **
Allterrain Services Sierra Leone Ltd **
Allterrain Services Tanzania Ltd **
Allterrain Services Uganda Ltd **
Allterrain Services Zambia Ltd **
DSFM Vuya Consortium (Pty) Ltd 80 80
DSVH Facilities Management Consortium (Pty) Ltd 70 70
Fedics Food Services (Botswana) (Pty) Ltd **
Fedics Food Services (Lesotho) (Pty) Ltd **
Fedics Food Services (Swaziland) (Pty) Ltd **
Fedics Ilembe Hospitality Services (Pty) Ltd 65 65
Impilo Consortium (Pty) Ltd 99
Mpilisweni Facilities Services Consortium (Pty) Ltd 51 51
Nemus Trade and Invest (Pty) Ltd 70 70
Servco Catering Lda **
Sethekgo Consortium (Pty) Ltd 15 15
Thorburn Security Solutions (Pty) Ltd 100 100
Tirasano Facilities Management (Pty) Ltd 100 100
Tsebo Botswana **
Tsebo Cameroon **
Tsebo Egypt **
Tsebo Facilities Solutions Nigeria Ltd **
Tsebo Gambia **
Tsebo Intragroup (Pty) Ltd **
Tsebo Leasing Solutions (Pty) Ltd **
Tsebo Servcor Private Limited **
Tsebo Siyakhula Initiative (Pty) Ltd 49 49
Tsebo Smart (Pty) Ltd 60 70
Tsebo Solutions Group (Lesotho) (Pty) Ltd **
Tsebo Solutions Group AME **
Tsebo Solutions Group International **
Tsebo Solutions Group Mauritius **
Tsela Tshweu (RF) (Pty) Ltd 10 10
Umongi Facilities Management (Pty) Ltd 70 70
Umongi Facilities Services (Pty) Ltd 60 60
* Fellow subsidiary of ultimate holding company, Tsebo Solutions Group Holdings SA
54
TSEBO SOLUTIONS GROUP PROPRIETARY LIMITED
NOTES TO ANNUAL FINANCIAL STATEMENTS
AT 31 DECEMBER 2019
29. LEASES
Company as a lessee
The Company has lease contracts for various items of plant, machinery, vehicles and other equipment
used in its operations. Leases of buildings and machinery generally have lease terms between 3 and 15
years, while motor vehicles and other equipment generally have lease terms between 2 and 5 years. The
Company’s obligations under its leases are secured by the lessor’s title to the leased assets. Generally,
the Company is restricted from assigning and subleasing the leased assets and some contracts require
the Company to maintain certain financial ratios.
The Company also has certain leases of machinery with lease terms of 12 months or less and leases of
office equipment with low value. The Company applies the ‘short-term lease’ and ‘lease of low-value
assets’ recognition exemptions for these leases.
Set out below are the carrying amounts of right-of-use assets recognised during the period:
Buildings Equipment Motor Total
vehicles
R’000
As at 1 January 2020 R’000 R’000 R’000 53 535
Additions 11 399
Depreciation expense 34 885 2 901 15 749 (31 757)
Termination of leases 3 621 4 940 2 838
(19 980) (2 807) (8 970) (409)
(409)
- - 32 768
As at 31 December 2020 18 526 5 034 9 208
Set out below are the carrying amounts of lease liabilities (included under interest-bearing loans and
borrowings) and the movements during the period:
As at 1 January 2020 56 931
Additions 11 399
Accretion of interest 4 819
Payments (36 448)
Termination of leases (409)
As at 31 December 2020 36 292
Non-current portion 11 126
Current portion 25 165
The following are the amounts recognised in profit or loss: 36 449
Variable lease payments (included in other expenses) (31 757)
Depreciation expense of right-of-use assets (included in other expenses) (4 819)
Interest expense on lease liabilities (included in finance costs)
(127)
Total amount recognised in profit or loss
The Company had total cash outflows for leases of ZAR 36,448,971 in 2020.
55
TSEBO SOLUTIONS GROUP PROPRIETARY LIMITED
NOTES TO ANNUAL FINANCIAL STATEMENTS
AT 31 DECEMBER 2020
30 EVENTS AFTER THE REPORTING PERIOD
Following the acquisition of Tsebo Holdings SA (Pty) Ltd and Tsebo Solutions Group AME by
TSGH SA at the end of December 2020, the secured debt (refer to Note 20) is being refinanced,
with the introduction of a Mezzanine finance facility of R675 million, which will be utilised to pay
down the senior debt to R450 million and favourably position the business for its next phase of
growth
The covenants and debt service requirements will consequently be reset to the lower level of senior
debt. Furthermore, a revolving credit facility of R100 million will be introduced.
56
TSEBO SOLUTIONS GROUP PROPRIETARY LIMITED
NOTES TO ANNUAL FINANCIAL STATEMENTS
AT 31 DECEMBER 2020
APPENDIX
31. DIRECTORS’ EMOLUMENTS
This page of the AFS is available from the Company Secretary with the explicit approval of the Group
Financial Officer only.
57
23 November 2021
To whom it may Concern
Tsebo Solutions Group (Pty) Ltd (TSG)
Annual Financial Statements
Please find attached the following documents as requested:
• Audited Annual Financial Statements for the following periods:
o 12 months ending 31 March 2016
o 12 months ending 31 March 2017 (Old TSG – 10 months trading)
o 12 months ending 31 March 2017 (Tsebo Solutions Group (“New TSG”) – 2 months trading)
o 9 months ending 31 December 2017
o 12 months ending 31 December 2018 / 2019 / 2020
Change in shareholding, subsequent restructure and change in Financial Year end: 2017
On 31 January 2017 a shareholder consortium consisting of Euronext listed French private equity investor Wendel
SE (Wendel) (65%) and Capital Group Private Markets, an experienced emerging markets private equity affiliate of
the Capital Group of Companies (35%); acquired 100% of Tsebo Solutions Group from Rockwood Private Equity and
other minority shareholders for R5.25 billion.
As a consequence of this acquisition, the Tsebo Group underwent a restructure to facilitate the funding of the
transaction and facilitate the future plans of the new shareholders.
A new trading entity, Tsebo Solutions Group (Pty) Ltd (“New TSG’’ – previously called Main Street 1476 (Pty) Ltd)
acquired the shares in Tsebo Holdings (Pty) Ltd (the holding company of the Group prior to the shareholder change
and restructure) and the operations of Old TSG (previously known as Tsebo Solutions Group), where after all the
foreign subsidiaries were unbundled to Tsebo Solutions Group AME, a fellow subsidiary, domiciled in Mauritius. Tsebo
Solutions Group (Pty) Ltd’s ultimate holding company is Tsebo Solutions Group Holdings, also domiciled in Mauritius.
The acquisition of the Group was funded through debt and equity, with the full amount of the debt being held in
Tsebo Solutions Group. All once-off costs relating to the shareholder change and restructure are included in the
Tsebo Solutions Group AFS and are disclosed separately in the notes to the financial statements.
As a result of the above restructure, Tsebo Solutions Group’s results for the year ending 31 March 2017 were
presented in two sets of financial statements: the 10 months ending 31 January 2017’s trading results were included
in the Old TSG AFS as at 31 March 2017, and the 2 months ending 31 March 2017’s results (post-restructure) were
included in the Tsebo Solutions Group (New TSG) AFS as at 31 March 2017.
During 2017, Tsebo Solutions Group changed its financial year end from March to December in order to align with
the new holding company’s financial year end. Therefore, the AFS for year ended 31 December 2017 only includes
9 months of trading in the current period (and 2 months in the prior period due to the restructure on 31 January
2017).
Change in ultimate shareholders and Capital structure: 2020
The COVID-19 pandemic induced uncertainty felt across markets and has resulted in many organisations re-adjusting
their priorities. In line with this, Tsebo’s international shareholders, Wendel and Capital Group, jointly decided on a
strategic consolidation of their investment portfolio that has seen them reducing their African exposure.
The controlling shareholders of Tsebo Solutions Group Holdings (Tsebo) concluded a transaction with a consortium
of financial investors and management on 21 December 2020, which resulted in a change in ownership of the
company. The consortium consists of Investec Bank Ltd, Nedbank Ltd, Ninety One SA (Pty) Ltd, Standard Chartered
Bank Johannesburg and Standard Chartered Bank (Mauritius) Ltd.
The new shareholding consortium preserved Tsebo’s strong B-BBEE credentials, with the company having black
ownership of 53.7% and black woman ownership of 45.9%, while maintaining its Level 1 status following the
restructure.
Significantly, the transaction strengthened the company’s balance sheet by introducing R872 million of fresh equity
as well as a Mezzanine finance facility of R900 million, both of which were utilised to pay down the senior debt, which
reduced to R300 million and favourably position the business for its next phase of growth. Finance costs and related
fees will therefore reduce materially because of the new debt structure.
Furthermore, a revolving credit facility of R100 million was introduced.
If you have any questions with regards to the above please contact myself ([email protected]) or the Group FM,
Elsa de Jongh ([email protected]).
Regards
_____________________
TG Walters
Chief Executive Officer
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