a different kind of insight...profit attributable to shareholders was R5 million. It ended the year with a loan portfolio of R200 million, an increase of 31%. Operating margins were

a different kind of insight

INTEGRATED REPORT 2020

Contents

Business Overview

Chairman’s statement ............................................................................................................................. 4

Corporate governance ........................................................................................................................... 6

Annual Financial Statements

Directors’ responsibility and approval .................................................................................................. 20

Secretarial certificate ............................................................................................................................. 21

Directorate and administration .............................................................................................................. 22

Directors’ report ................................................................................................................................... 23

Independent auditor’s report ............................................................................................................... 25

Consolidated statement of financial position ........................................................................................ 31

Consolidated statement of comprehensive income .............................................................................. 33

Consolidated statement of changes in equity ...................................................................................... 34

Consolidated statement of cash flows ................................................................................................... 35

Accounting policies .............................................................................................................................. 36

Notes to the consolidated annual financial statements ........................................................................ 45

Company statement of financial position ............................................................................................ 102

Company statement of comprehensive income .................................................................................. 103

Company statement of changes in equity ........................................................................................... 103

Company statement of cash flows ..................................................................................................... 104

Notes to the company annual financial statements ............................................................................ 105

Shareholders’ profile ..............................................................................................................................121

Annual General Meeting

Notice of annual general meeting to shareholders .............................................................................. 124

Form of proxy ...................................................................................................................................... 132

Application for electronic participation at the annual general meeting .............................................. 135

01business overview

Mettle Investments Integrated Report 2020

4

Bus

ines

s O

verv

iew

/ A

nnua

l Fin

anci

al S

tate

men

ts /

Ann

ual G

ener

al M

eeti

ng Chairman’s statement

It was a year of mixed results for Mettle Investments Limited (“the Company” or “Mettle”)

Reward Finance GroupThis was the first opportunity for the results of our largest investment, Reward Investments (No.2) Ltd (“RIL”), to be included for the full financial year. Mettle owns 90% of RIL, which in turn owns 72.5% of Reward Finance Group (“Reward”). Reward contributed R261.1 million (£14 million) to revenue and R46.8 million (£2.5 million) to profit attributable to shareholders. Subsequent to year-end RIL increased its shareholding in Reward to 82.5%, meaning that Mettle’s effective shareholding in Reward has increased to 74.25%.

Reward targets the UK’s small and medium-sized enterprises that are not adequately serviced by traditional banks by providing asset secured loans and invoice discounting facilities ranging from £50 000 to £2 million. We are pleased to report that Reward posted its ninth year of consecutive growth with revenue increasing by 16% to £14 million and its lending portfolio growing to £78 million. The business is well capitalised and its current facility from Foresight Group is in place until September 2023.

Reward has continued to invest in its key personnel and information technology systems. This investment has served the business well and has enabled it to weather the storm created by the COVID-19 pandemic with minimal operational impact on its business. The continued instability in the UK banking sector driven by the potential of a ‘No-Deal’ Brexit has been compounded by the dramatic changes to working conditions imposed by COVID-19. Many alternative finance lenders have closed their doors during this crisis, but Reward has remained open for business. A home working environment, supported by its information technology, has made this possible.

The opening of an office in Manchester has provided the business with access to an additional market and demonstrated scalability.

We remain cautious of the potential impact of the economic slowdown as a result of the various lockdown strategies deployed globally and continue to monitor the impact on the credit portfolio and underlying sureties. In spite of this, we remain confident in Reward’s ability to deliver during these challenging times.

Mettle South AfricaOur South African businesses are focussed on business and consumer lending, investment management and advisory services and the financing of solar power solutions.

Christopher Finance

Christopher Finance, in which Mettle owns 49%, provides working capital finance to selected firms of attorneys specialising in road accident and medical negligence claims. Its revenue increased by 45% to R56m and its contribution to profit attributable to shareholders was R5 million. It ended the year with a loan portfolio of R200 million, an increase of 31%. Operating margins were significantly lower than expected as a result of pressure on lending margins as well as increased finance costs. The Road Accident Fund has remained a resilient payer, resulting in low credit losses and a continued focus on growth. We remain focussed on expanding the business’ suite of products and reducing its cost of funding.

Lendcor

Lendcor had another challenging year with continued credit losses from the pensioner portfolio following the discontinuation of SASSA debit orders and the introduction of a more aggressive write-off policy. This may be compounded by the economic contraction caused by the COVID-19 lockdown. Management is focussed on the implementation of a new software solution, which will improve credit scorecards and processes. In addition, more cost effective methods for the distribution of its offering are being implemented. This should result in cost reductions and we are confident that this will yield the necessary results.

Mettle Solar

During the course of the year Mettle Solar Investments (Pty) Ltd (“Mettle Solar”) secured an investment from Gridworks Development Partners LLP (“Gridworks”) of R107 million. The last draw down of this amount took place after year end, resulting in the Company’s shareholding in Mettle Solar diluting to 35%, with Gridworks now holding approximately 40%. In addition, CDC plc’s Resource Efficiency Fund (“CDC”) provided a facility of US$10 million to Mettle Solar’s Mauritius subsidiary, Mettle Solar Africa Limited.


5

Bus

ines

s O

verv

iew

/ A

nnua

l Fin

anci

al S

tate

men

ts /

Ann

ual G

ener

al M

eeti

ng

Apart from completing a number of projects on the African continent during the course of the year, Mettle Solar has also developed a healthy pipeline of projects and, with its available capital, is well positioned to execute on this pipeline in the medium term.

Mettle Solar’s financial results were impacted by once-off costs associated with the Gridworks and CDC transactions and historical shareholder guarantee fees in respect of facilities that were settled during the course of the year. Its income statement continues to be impacted by

the accelerated depreciation charges of new installations relative to the revenue lifetime of projects. Consequently, an equity accounted loss of R12.5 million was incorporated into the Company’s financial results.

Other businesses

Our 50% investment in Gray Swan, a wealth management firm, performed in line with expectations and has formulated a number of initiatives for growth and strategy expansion.

Hendrik van der Merwe ScholtzChairman17 June 2020

All in all, the South African results were disappointing and included the following items which contributed to the R39m variance to the budgeted profit of R16m:

Lendcor Impairment of investment in associate of R7.7m as well as additional bad debts of R3m due to a more aggressive write-off policy

R10.7m

Company Adjustment to the deferred contingent consideration relating to the acquisition of its 50% in Gray Swan in 2017

Professional fees relating to the Mettle Solar Gridworks transaction and the failed scheme of arrangement

R4.2m

R3.3m

Mettle Solar Costs and variances mostly relating to the Gridworks transaction R8.9m

Christopher Finance Increased funding costs and reduced revenue margins R6.7m

G-Pay Operating losses and impairment of loan R1.9m

Mettle Corporate Finance, Mettle Administrative Services, Mettle Specialised Finance and Mettle Credit Services continued to support our other business units and performed in line with budget.

Development of the business of the Company’s fintech investment, G-Pay, continues. Management is in the process of implementing a long-term strategic plan for the business.

Failed scheme of arrangementDuring the year, one of our shareholders made an offer to acquire all of the shares in the Company held by the minority shareholders, which would have resulted in a delisting of the Company. The offer was conditional upon no material adverse event occurring and, unfortunately, the COVID-19 pandemic and related economic disruption caused by the various lockdown strategies meant that the offer did not become unconditional.

The year ahead This will be a year of caution, whilst we focus on mitigating credit losses from our portfolios as a result of the global economic slowdown and disruptions caused by the COVID-19 pandemic. Looking ahead, the board and management will focus on streamlining the operations of the Company in order to create a scalable platform for the provision of services and solutions to the small and medium-sized enterprise market in the United Kingdom and South Africa.


6

Bus

ines

s O

verv

iew

/ A

nnua

l Fin

anci

al S

tate

men

ts /

Ann

ual G

ener

al M

eeti

ng Corporate governance

Mettle Investments Ltd is committed to the principles of effective corporate governance and the application of the highest ethical standards in the conduct of its business and affairs. During the year, the Company reviewed the principles contained in the King IV Report on Corporate Governance (“King IV”) and assessed their relevance and applicability to the group. In compliance with the regulations of the JSE, a complete list of the King IV principles and the Company’s compliance therewith appears on the Company’s website – www.mettleinvestments.com.

Board and board committees The board takes overall responsibility for managing the Mettle Group of Companies (“the group”). The board is responsible for the long-term success of the group, develops strategy, determines the nature and extent of significant risks, and approves major transactions.

The board has established the following board committees, which report on their activities to the board: audit and risk committee, remuneration committee and social and ethics committee.

The board has eight members:

Non-executive, non-independent chairman: leads the board and ensures it operates effectively, and maintains a culture of openness and debate and effective communication with stakeholders.

Lead independent director: acts as a sounding board for the chair, leads in his or her absence, leads the chair’s performance appraisal, helps to amplify the voice of other directors, and assists in addressing board dynamics.

Three executive directors: responsible for the day-to-day management of the group and implementation of strategy.

Five non-executive directors: the majority of which are independent, provide an independent, external perspective, work with and challenge the executive directors, and contribute with a broad range of experience and expertise.

The composition of the board is reviewed on a regular and ongoing basis.

The process for appointing new directors is performed by the board as a whole, and new directors are obliged to retire and offer themselves for re-election at the first annual general meeting following their appointment.

All directors are subject to the retirement and re-election provisions of the memorandum of incorporation, which require one third of the non-executive directors to retire per annum and, if they so wish, offer themselves for re-election at each annual general meeting. Due to the nature of the business, induction as well as ongoing training and development programmes for directors are implemented based on the experience and skills of the individual members of the board and are not driven through a pre-determined or formalised process.

The Board meets at a minimum of three times a year. The directors ensure that they allocate sufficient time to discharge their duties effectively.


7

Bus

ines

s O

verv

iew

/ A

nnua

l Fin

anci

al S

tate

men

ts /

Ann

ual G

ener

al M

eeti

ng

The table below outlines the composition of the board and the attendance of board meetings for the year from 1 March 2019 to 29 February 2020:

Name QualificationDate of

appointment Age Status

Meetings attended (out of 5)

Other significant

directorships

Hendrik van der Merwe Scholtz* BComm (Law) 14 August 2019 42

Non-independent non-executive

chairman 5

Genfin Holdings (Pty) Ltd, Business Fuel

(Pty) Ltd

Friedrich Hans Esterhuyse*

BAcc (Hons), MCom (Tax), CA

(SA)30 January

2008 50

Non-independent non-executive

director 5 Tradehold Ltd

Hendrik Frederik Prinsloo

BCom, LLB, LLM, HDip (Tax)

30 January 2008 58

Chief executive officer 5

Reward Investments (No.2) Ltd

Thomas More Flannery**

19 April 2018 59 Executive director 5

Reward Finance Group Ltd

Justin John RookledgeBBusSci Finance (Hons), CA (SA)

29 September 2016 43

Chief financial officer 5

Raymond David Fenner*

BComm (Hons), Grad Dip Tax,

MCom, CA (SA)18 September

2018 51

Lead independent non-executive

director 5

Table Mountain Aerial Cableway Company

Ltd

Marco Van Zyl Wentzel 19 April 2018 41Independent non-executive director 5

Transhex Group Ltd, Stellar Capital

Partners Ltd

Bruce Andrew Chelius CA (SA), CFA 19 April 2018 51Independent non-executive director 5

Eveready (Pty) Ltd, Nordland Lighting

(Pty) Ltd

* The board was chaired by Mr. Esterhuyse, who is a non-independent, non-executive director, due to the fact that he was involved in the day-to-day management of the Company during the 2018 financial year. Mr. Esterhuyse resigned as chairman with effect from 23 February 2020, which position has been filled by Mr. Scholtz, a material shareholder in Mettle. Mr. Fenner fulfills the role of the lead independent director. Mr. Esterhuyse resigned as a director of the Company with effect from 10 June 2020.

** Mr Flannery is a British national and is the managing director of Reward Finance Group Ltd.


8

Bus

ines

s O

verv

iew

/ A

nnua

l Fin

anci

al S

tate

men

ts /

Ann

ual G

ener

al M

eeti

ng Corporate governance (continued)

The board is satisfied that it has effectively discharged its statutory duties and oversight role and wishes to report that:

• it has and continues to maintain an approvals framework that allows it appropriate insight into and influence over significant business transactions within the group;

• the current compliance strategy followed is appropriate for the structure of the group and the board is not aware of any instances of non-compliance to applicable laws and regulations; and

• the IT infrastructure and strategy is appropriate for the structure of the group.

It is the board’s view that its performance and that of its members are directly correlated to the success of the group. The performance evaluation of the board, its committees and all directors are reflected upon during the annual review of the group’s performance.

The board is satisfied that the company secretary has the correct qualifications and experience and is competent for this role. The board can also confirm the relationship between the company secretary and the board is at arms-length.

Audit and risk committee report The audit and risk committee has submitted the following, as required by section 94 of the Companies Act of South Africa, 2008 (“the Companies Act”).

Functions of the audit and risk committeeThe audit and risk committee has adopted a formal charter, delegated to it by the board. This includes the statutory requirements of the Companies Act, the King IV Report on Corporate Governance for South Africa (“King IV”) as well as certain responsibilities delegated by the board.

The audit and risk committee wishes to report that it has:

• monitored the integrity of the financial statements and formal announcements relating to financial performance and considered significant financial reporting issues, judgements and estimates. This included reviews of the interim results and the year-end annual financial statements and also an assessment of the quality, consistency and integrity of the group’s financial reporting;

• held meetings with executive management to understand key issues;

• reviewed the external auditor audit plan and reports on the annual financial statements;

• held a meeting with the external audit partner and manager without management present;

• reviewed the system of internal controls and risk management by review of the risk management and internal control reports presented to it and through discussions held with executive management, to ensure that the group is identifying, considering and mitigating, as far as possible, the risks for the group;

• reviewed King IV and considered its recommendations and applicability to the group;

• reviewed the tax compliance and tax risk of the group;

• noted Mr JR de Villiers as the designated auditor and confirmed that both he and PricewaterhouseCoopers Inc. are accredited with the JSE Limited as required and that their appointment is in accordance with paragraph 3.84(g)(iii) of the JSE Listings Requirements;

• approved the audit fees and engagement terms of the external auditors;

• determined the nature and extent of allowable non-audit services and approved the contract terms for the provision of non-audit services by the external auditors; and

• considered the significant accounting judgements and estimates used in preparing the annual financial statements – namely, the classification of the various investments in subsidiaries, associates and joint ventures in terms of IFRS 10 Consolidated Financial Statements, the impairment of equity accounted investments and the measurement of expected credit loss allowances as further detailed on page 45.


9

Bus

ines

s O

verv

iew

/ A

nnua

l Fin

anci

al S

tate

men

ts /

Ann

ual G

ener

al M

eeti

ng

Members of the audit and risk committee and attendance at meetingsThe audit and risk committee aims to fulfil the roles and responsibilities as required by the Companies Act and King IV. The audit and risk committee consists of three members and meets at least twice a year as per its charter. In the current financial year, two meetings were held on 23 May 2019 and 27 November 2019.

Name Qualification Date of appointment Age Meetings attended

Raymond David Fenner CA (SA) 18 September 2018 51 2

Bruce Andrew Chelius CA (SA), CFA 19 April 2018 51 2

Marco Van Zyl Wentzel 19 April 2018 41 2

All members satisfied the requirements detailed in section 94 (4) of the Companies Act during the year.

The external auditors attended and reported to all meetings of the audit and risk committee. Members of executive management also attended the audit and risk committee meetings by invitation.

Independence of external auditorsThe audit and risk committee reviewed a representation by the external auditors and, after conducting its own review, confirmed the independence of the auditors and that they can conduct their audit functions without any influence from the group.

Internal auditThe audit and risk committee continues to assess the requirement for an internal audit function. Currently, the audit and risk committee is satisfied that the size and complexity of the group does not warrant an internal audit function.

Proactive monitoringThe audit and risk committee confirms that it has considered the findings contained in the JSE’s 2019 Proactive Monitoring report when preparing the annual financial statements for the year ended 29 February 2020.

Financial directorIn terms of JSE Listings Requirement paragraph 3.84(g)(i), the committee has considered the expertise and experience of the chief financial officer, JJ Rookledge, and are satisfied that these are appropriate for his role.

Internal financial controlsThe audit and risk committee continually monitors the efficiency of internal financial controls. The audit and risk committee reviewed the financial reports submitted for the group and through discussion with management and the external auditors herewith reports, in accordance with paragraph 3.84(g)(ii) of the JSE Listings Requirements, that internal financial controls were adequate and operated effectively for the financial year ended 29 February 2020.

Remuneration committee report The remuneration committee is a sub-committee of the board and consists of three members.

1. Functions of the remuneration committee

Its main functions are:

• setting the remuneration policy for executive directors;

• determining the total individual remuneration packages of the executive directors;

• monitoring the performance of directors against conditions attached to variable annual remuneration and long-term incentive awards;

• approving the selection, appointment and terms of reference of any independent remuneration consultants; and

• to make recommendations to the board regarding the fees to be paid to non-executive directors and the chairman.


10

Bus

ines

s O

verv

iew

/ A

nnua

l Fin

anci

al S

tate

men

ts /

Ann

ual G

ener

al M

eeti

ng

2. Members of the remuneration committee and attendance at meetings

Details of meetings held during the year are listed below:




Friedrich Hans EsterhuyseBAcc (Hons), MCom

(Tax), CA (SA) 19 April 2018 50 Chairman 1

Bruce Andrew Chelius CA (SA), CFA 19 April 2018 51 Member 1

Marco Van Zyl Wentzel 19 April 2018 41 Member 1

Certain executive members of management attended the remuneration committee meeting by invitation. The committee usually meets twice a year. Due to the general offer made to shareholders by Genfin Holdings (Pty) Ltd, which was withdrawn after year-end the committee only met once during the financial year.

3. Remuneration policy

The remuneration policy is to compensate executive directors and employees on a fair basis comparable with similar organisations, taking into consideration performance as an important factor in determining the remuneration of executive directors.

Remuneration is monitored and reviewed on an ongoing basis by the remuneration committee to ensure that the guaranteed and variable pay is market related and aligned with the group’s strategic objectives to create sustained value for all stakeholders.

When considering remuneration and increases, the remuneration committee measures executive remuneration and increases against those for employees across the group, by applicable jurisdiction.

The group has implemented an employee share option scheme, with the purpose of attracting, retaining, motivating and rewarding employees on a basis which aligns Company performance and the interests of mid-tier and senior employees with those of shareholders. The trustees of the scheme received their letters of authority from the Master of the High Court on 12 August 2019. During the course of the year 6 scheme participants accepted 3 600 000 options at a price of 92.285 cents per share. Refer to note 16.

The performance measures that determine the levels of variable pay for executive directors are fully aligned with the group’s business strategy and the long term interests

of shareholders and other stakeholders. These measures are linked to consistent growth in shareholder value. This means that in any year that the group delivers weaker growth, variable pay is lower, and if it delivers stronger performance, variable pay is higher.

Non-executive directors’ fees are based on their relative contributions to the activities of the board, and recognise the responsibilities of the director throughout the year.

Non-executive directors do not participate in the Company’s variable pay plans nor do they participate in the Company’s share option scheme in order to maintain their independence.

4. Implementation report

The remuneration committee has monitored the implementation of the remuneration policy and is of the view that there were no deviations from the remuneration policy in the 2020 financial year.

In determining the total guaranteed package increases for executive directors, the remuneration committee referred to market conditions as well as comparative industry benchmarking in the relevant jurisdictions and market sectors.

Corporate governance (continued)


11

Bus

ines

s O

verv

iew

/ A

nnua

l Fin

anci

al S

tate

men

ts /

Ann

ual G

ener

al M

eeti

ng

2020 Jurisdiction Salary Other

benefits Variable

remunerationShare option

expense Total

Hendrik Frederik Prinsloo South Africa 2 059 - 445 - 2 504

Thomas More Flannery United Kingdom 2 928 223 - - 3 151

Justin John Rookledge South Africa 1 610 55 360 97 2 122

2019 Jurisdiction Salary Other

benefits Variable

remuneration Total

Hendrik Frederik Prinsloo South Africa 1 851 110 82 2 043

Thomas More Flannery* United Kingdom 1 870 170 - 2 040

Justin John Rookledge South Africa 1 372 128 325 1 825

* Remuneration from 15 May 2018 (aquisition date of Reward Investments (No. 2) Ltd)

The table below presents an analysis of the fees of non-executive directors paid in 2020 compared to 2019, in R’000 (excluding VAT):

2020 Total

Friedrich Hans Esterhuyse (1) 250

Marco Van Zyl Wentzel 250

Bruce Andrew Chelius 360

Raymond David Fenner 360

Hendrik van der Merwe Scholtz (2) -

1 Paid to his employer, Collins Property Projects (Pty) Ltd2 Appointed 14 August 2019

2019 Directors’ fees Consulting fees Total

Friedrich Hans Esterhuyse 100 - 100

Raymond David Fenner 113 - 113

Marco Van Zyl Wentzel 100 - 100

Bruce Andrew Chelius 270 830 1 100

The table below presents an analysis of the remuneration of executive directors received in 2020 compared to 2019, in R’000:


12

Bus

ines

s O

verv

iew

/ A

nnua

l Fin

anci

al S

tate

men

ts /

Ann

ual G

ener

al M

eeti

ng

5. Shareholder engagement and voting

The Company will table its remuneration policy and implementation report for two separate non-binding advisory votes by shareholders at the AGM, in line with King IV. In the event that 25% or more of the shareholders vote against these resolutions, the remuneration committee will engage with such dissenting shareholders to ascertain the reasons for the dissenting votes, address all valid and reasonable concerns raised, and disclose the full shareholder engagement process, response and resolutions in the remuneration report of the next financial year.

Social and ethics committee report 1. Functions of the social and ethics committee

The social and ethics committee is a sub-committee of the board and consists of three members. The committee functions in accordance with a formal mandate adopted by

the board. The main task of the committee is to monitor any issues concerning the social and ethical behaviour of the Company as required in section 72(4) of the Companies Act no. 71 of 2008 read with Regulation 43 of the Companies Regulations, 2011.

The social and ethics committee has established a social and ethics governance framework for the group, and monitors compliance by the group’s subsidiaries.

2. Members of the social and ethics committee and attendance at meetings

The committee plans to meet at least twice a year. However as result of the general offer to shareholders made by Genfin Holdings (Pty) Ltd which was withdrawn after the financial year-end the committee only met once. The membership and members attendance of the committee is set out below:




Bruce Andrew Chelius CA (SA), CFA 19 April 2018 51 Chairman 1

Hendrik Frederik PrinslooBCom, LLB, LLM,

HDip (Tax) 19 April 2018 58 Member 1

Justin John RookledgeBBusSci Finance (Hons),

CA (SA) 19 April 2018 43 Member 1

3. Statement on social and ethics governance

The social and ethics committee wishes to report that it has reviewed the reports presented to it by executive management on social and ethics governance, which include policies and codes of conduct for social responsibility, health and safety, anti-bribery and corruption, anti-fraud, anti-money laundering, whistleblowing, procurement, gifts and conflicts of interest and compliance with relevant local legislation, as well as the implementation of such policies, and the monitoring of compliance with such codes of conduct, and it has also held discussions with management on these matters.

The social and ethics committee is satisfied that the group has adequate policies and procedures in place to prevent and detect non-compliance and unethical behaviour, and that no instances of unethical behaviour were detected during the year under review.

4. Social responsibility initiatives

The Gray Swan Charitable Trust (“the Trust”) was established in 2010 as a non-profit organisation. Its sole purpose is to enable Gray Swan Financial Services (Pty) Ltd and other companies and individuals to give generously to poor and vulnerable children so they too can dream of a better future. Everyone has the opportunity to express themselves in a charitable way – from giving smiles, volunteering services, or donating money. All are impactful and generous acts in their own way and necessary in our complex world.

The Trust successfully collected R1.2 million during the year ended 29 February 2020 (2019: R1.5 million) all of which was distributed to beneficiaries (2019: R1.4 million). The R1.2 million included R0.3 million from Mettle group companies.



13

Bus

ines

s O

verv

iew

/ A

nnua

l Fin

anci

al S

tate

men

ts /

Ann

ual G

ener

al M

eeti

ng

The Trust’s initiatives during the past financial year included the following:

• Walk with a Purpose project distributed a further 2,000 pairs of shoes;

• Danie Ackermann Primary School benefited from new laptops, branded rugby shorts for all their teams and funds to revamp their bathrooms;

• Kayamandi Primary School, who could not offer any sporting facilities, received two sets of soccer goal posts;

• Supported the Klein MA Getrain creche with stationery items for their 60 pupils;

• Donkersbos community benefited from essential items like school clothes and stationery items when a devastating fire destroyed most of their homes;

• Distributed sanitary products to high school girls not to miss out on precious school days;

• Sir Lowry’s Pass Primary School received tables for their new school hall;

• Macassar Primary School’s choir received branded shirts; and

• Distributed more than 2,000 pairs of socks to schools in Limpopo.

The Trust is filled with gratitude to have been able to make a difference in its community and see life from someone else’s perspective – their struggles and hardships, their triumphs and strengths. It is always a privilege to be a witness to another’s life and to gain appreciation and gratitude for your own.

Reward Finance Group Ltd presented £20,000 to two charities, either side of the Pennines, following a year of fundraising activities. Harrogate-based Just ‘B’, which offers bereavement support, and Reuben’s Retreat in Glossop, which provides a sanctuary for families caring for life limiting disabilities and illnesses, as well as bereavement counselling, each received a donation of £10,000. Both charities provide an invaluable service to children, young people, adults and families at an extremely distressing and difficult time and rely on public support and donations.

The money was raised by teams in the Leeds and Manchester offices from various events held throughout the year. These included hosting a quiz night attended by over 200 people, running several golf events and holding their first darts tournament – all well attended and supported by their key industry contacts. The teams also took part in bake offs, sponsored runs and bike rides.

Through the generosity of clients, colleagues, professional contacts and friends, the teams raised £10,000 for both charities. This amazing effort was matched by Reward Finance Group Ltd and then shared equally between the two chosen charities.

Just ‘B’ will use the money to ensure its experienced practitioners continue to provide both one-to-one and group sessions, including visits to schools and communities, which may have experienced a major crisis. Reuben’s Retreat will be able to add to their excellent facilities with its ambitious plans to build a hydrotherapy pool, sensory and chill zones and fully accessible family break out apartments.

Risk management and internal control The board is satisfied that the executive directors’ intimate involvement in the operations of the group, as well as the robust management structure of its United Kingdom and South African operations is sufficient to provide it with appropriate and relevant information on risk management activities performed, risks identified and action plans in place to mitigate material risks as well as on internal control measures in place.

The United Kingdom and South Africa business components are each headed by an experienced qualified chief executive, assisted by an experienced and qualified finance director. These executives are responsible for the implementation of internal control, risk management and financial reporting policies, procedures and monitoring in accordance with the group corporate governance framework set by the board.

Reports on risk management and internal controls are submitted to the audit committee, and key considerations are elevated to the board as and when appropriate.


14

Bus

ines

s O

verv

iew

/ A

nnua

l Fin

anci

al S

tate

men

ts /

Ann

ual G

ener

al M

eeti

ng

Risk management and internal control (continued)

The Corporate Risk Register (“CRR”) is a key document used to capture and report on key risks to the achievement by the Company of its strategic objectives. This register records the material risks which are specific to the Company and summarises key sources of assurance to help inform action planning and as context for risk assessments by the Company’s board of directors. It must be updated on an ongoing basis and provided to the audit and risk committee at each of its meetings for consideration and comment.

The audit and risk committee is requested to consider and comment on the latest version of the CRR as it must be reviewed regularly to ensure that it:

• remains current;

• reflects the key risks faced by the Company; and

• sets the context for the review of risks within the annual budget and business plan approval process.

Key risks Mitigation

1. Impact of COVID-19 • Implemented remote working arrangements across the group and ensured that all staff had the capabilities and means to work from home.

• Local management to draft revised workplace policies to ensure compliance with relevant legislation before returning to office.

• As the Government of the United Kingdom announced national lockdown in mid-March, Reward drew down £3m of additional funding from Foresight Group to provide short term liquidity.

• Reward board has been meeting daily to review all new deals – credit focus has been on serviceability, conservative loans to value limits and smaller deal size.

• Payment holidays (deferments) agreed with customers when requested.

• Reduced business activity has meant that there been a strong inflow of cash from the Reward Invoice Finance book - £8m cash balance at 30 April 2020.

• Foresight Group capital not repayable before September 2023 and Sandy Ltd capital (£8m) not repayable within a year.

• Lendcor and Mettle Administrative Services (“MAS”) only traded from lockdown level 3.

• Christopher Finance (“CF”) has operated during lockdown and has an unutilised R80m funding facility.

• Mettle Corporate Finance (“MCF”), Mettle Credit Services, Gray Swan and Mettle Specialised Finance (“MSF”) are service orientated businesses, can operate remotely and currently have sufficient cash resources. No issues noted with current customers/clients yet.



15

Bus

ines

s O

verv

iew

/ A

nnua

l Fin

anci

al S

tate

men

ts /

Ann

ual G

ener

al M

eeti

ng


2. Availability of funding • Reward currently has £6m available of the £60m Foresight Group facility, who have indicated a potential willingness to increase this in stages to £75m.

• Current reliance on one dominant funder brings its own risks. Intention would be to conduct process to identify other funding lines – seeking lower cost and covenant light debt with ability to support new products.

• MAS still waiting for approval of 3-year extension of SEFA1 funding but has other more expensive funding options.

• Lendcor waiting for NHFC2 board approval of covenant waiver and capital repayment moratorium.

• Lendcor still has R15m available in its R50m NHFC facility - cash balances at 30 April of R62m.

• Mettle Solar Investments has received the final R76.7m equity investment from Gridworks Development Partners LLP and has $6.5m available on the CDC plc debt facility.

• Head office currently has sufficient available overdraft facilities in place and there is no reason why these facilities will not be renewed this year.

3. Succession planning/appropriate human capital

• Reward founder directors (Tom Flannery and Dave Jones) have now sold their remaining 10% interest, whilst remaining financially and contractually committed to the business for at least 2 years.

• Nick Smith appointed as Reward Group MD, with new regional structure under Gemma Wright (Leeds) and Steve Noble (Manchester).

• Direct shareholdings in Reward by Nick Smith, Tim Stafford and David Harrop.

• Bonus arrangements per business unit.

• Share option scheme.

4. IT infrastructure and cybersecurity • Reward is fully cloud based, operating on the Office 365 platform and with full remote working capabilities.

• Reward partnered with an IT service provider with a real focus on cyber security and IT resilience. Quarterly renewals in place to review the existing IT infrastructure.

• Reward successfully renewed their Cyber Essentials Plus certification, the UK government-backed cyber security accreditation, in February 2020.

• The remainder of the group (excluding Lendcor) utilises an outsourced IT service provider with a dedicated call centre and the ability to assist users remotely.

• Lendcor will implement new credit management software to replace old legacy system.

1 Small Enteprise Finance Agency2 National Housing Finance Corporation


16

Bus

ines

s O

verv

iew

/ A

nnua

l Fin

anci

al S

tate

men

ts /

Ann

ual G

ener

al M

eeti

ng


5. Fraud • Robust due diligence of all new clients which includes meeting the individuals face-to-face.

• Minimum two-person sign-off of all new deals.

• All legal documentation completed at client’s solicitors.

• On-going monthly reviews and periodic audits of Invoice Finance clients.

• Strong internal controls in respect of making payment to clients and setting beneficiary account details on the banking systems.

6. Recovery of Reward’s old non-interest bearing loans

• Remaining three facilities are subject to monthly Reward board oversight.

• Assets are now being actively marketed for sale on all exposures (£2.7m).

7. Regulation

• Johannesburg Stock Exchange compliance

• National Credit Act (“NCA”)

• Financial Advisory and Intermediary Services Act (“FAIS”)

• Anti-money laundering legislation

• General Data Protection Regulation (“GDPR”)

• Designated advisor to review all proposed corporate and ad hoc transactions.

• Lendcor’s compliance with the NCA subject to external audit and ad hoc enquiries from the National Credit Regulator.

• MCF, MSF and Gray Swan all have external compliance officers to monitor FAIS compliance.

• Comply with regulatory responsibilities in relation to anti-money laundering legislation. Strict FICA3/KYC4 requirements in South Africa.

• Reward sought legal advice to address GDPR compliance and the impact on its business – its updated privacy policy is available on its website.

• Reward, CF and MAS operate in the unregulated market place in respect of their lending activities.

8. Brexit • Potential economic hit to UK economy from Brexit now overtaken by COVID-19 impact.

• Reward’s customers generally serve the local UK market and impact of departure from single market not perceived to be major issue.

3 Financial Intelligence Centre Act4 Know Your Clients

Risk management and internal control (continued)



17

Bus

ines

s O

verv

iew

/ A

nnua

l Fin

anci

al S

tate

men

ts /

Ann

ual G

ener

al M

eeti

ng

The board applies the following principal elements of internal control:

• an annual budgeting process, integrating both financial budgets and cash flow forecasts, together with the identification of risks inherent in each area of operation, which are subject to board approval;

• monthly preparation of individual component and consolidated management accounts, comparison of actual results with budgets and forecasts, and preparation of revised forecasts whenever deemed necessary, for review and consideration by the board;

• confirmation to the board of any changes in business, operational and financial risk in each area of the business;

• clearly defined authorisation procedures for capital expenditure and major corporate transactions established by the board, and

• limited authority levels designated to subsidiary board directors and senior management.

Integrity and ethics Mettle at all times endeavours to maintain the highest standard of integrity in dealing with its clients, staff, the authorities, shareholders, suppliers and the investor community and, in doing so, to ensure the largest measure of credibility, trust and stability. Structures and procedures are in place for the reporting of unethical behaviour. The chief executive of each business unit is responsible for ethical behavior within his organisation, and provides reports to the audit committee and social and ethics committee on the policies and procedures in place to monitor integrity and ethics. The board is of the opinion that a high level of standards was being maintained by the group and it is not aware of any instances of unethical behaviour during the year ended 29 February 2020.

Gender and race diversity Mettle supports the principles and aims of broader diversity at board level, specifically focusing on the promotion of the diversity attributes of gender, race, culture, age, field of knowledge, skills and experience and has adopted such a diversity policy. Should a vacancy on the board arise, or should there be a requirement for an additional board appointment, consideration will be given to the appointment of female and racially diverse director(s) so as to attain and maintain the voluntary target level of broader diversity.

Communications with stakeholdersThe Company is committed to ongoing and effective communication with stakeholders. It subscribes to a policy of open and timeous communication in line with JSE guidelines and sound corporate governance and manages these through an investor relations programme.

02annual financial statements


20

Bus

ines

s O

verv

iew

/ A

nnua

l Fin

anci

al S

tate

men

ts /

Ann

ual G

ener

al M

eeti

ng

The directors are required in terms of the Companies Act of South Africa, 2008 to maintain adequate accounting records and are responsible for the content and integrity of the consolidated and separate financial statements and related financial information included in this report. It is their responsibility to ensure that the consolidated and separate financial statements fairly present the state of affairs as at the end of the year and the results of its operations and cash flows for the year then ended, in accordance with International Financial Reporting Standards. The external auditors are engaged to express an independent opinion on the consolidated and separate financial statements.

The consolidated and separate financial statements are prepared in accordance with International Financial Reporting Standards and are based upon appropriate accounting policies consistently applied and supported by reasonable and prudent judgements and estimates.

The directors acknowledge that they are ultimately responsible for the system of internal financial control established by the company and place considerable importance on maintaining a strong control environment. To enable the directors to meet these responsibilities, the board sets standards for internal control aimed at reducing the risk of error or loss in a cost-effective manner. The standards include the proper delegation of responsibilities within a clearly defined framework, effective accounting procedures and adequate segregation of duties to ensure an acceptable level of risk. These controls are monitored throughout the company and all employees are required to maintain the highest ethical standards in ensuring the company’s business is conducted in a manner that in all reasonable circumstances is above reproach. The focus of

risk management in the company is on identifying, assessing, managing and monitoring all known forms of risk across the company. While operating risk cannot be fully eliminated, the company endeavours to minimise it by ensuring that appropriate infrastructure, controls, systems and ethical behaviour are applied and managed within predetermined procedures and constraints.

The directors are of the opinion, based on the information and explanations given by management, that the system of internal control provides reasonable assurance that the financial records may be relied on for the preparation of the consolidated and separate financial statements. However, any system of internal financial control can provide only reasonable, and not absolute, assurance against material misstatement or loss.

The directors have reviewed the cash flow forecast for the year ended 28 February 2021 and, in light of this review and the current financial position, they are satisfied that the company and group has or has access to adequate resources to continue in operational existence for the foreseeable future.

The external auditors are responsible for independently reviewing and reporting on the consolidated and separate financial statements. The consolidated and separate financial statements have been examined by the company’s external auditors and their report is presented on pages 25 to 30.

The consolidated and separate financial statements were approved by the Board of Directors on 29 May 2020 and are signed on their behalf by:

Directors’ responsibilities and approval

HF Prinsloo HvdM Scholtz


21

Bus

ines

s O

verv

iew

/ A

nnua

l Fin

anci

al S

tate

men

ts /

Ann

ual G

ener

al M

eeti

ngSecretarial certificate

In my capacity as Company Secretary, I hereby confirm, in terms of the Companies Act of South Africa, 2008, (“the Act”), that for the year ended 29 February 2020, Mettle Investments Ltd has filed all the required returns and notices in terms of the Act, and all such returns and notices are, to the best of my knowledge and belief, true, correct and up to date.

WD MaraisOn behalf of Mettle Corporate Finance (Pty) LtdCompany Secretary

29 May 2020


22

Bus

ines

s O

verv

iew

/ A

nnua

l Fin

anci

al S

tate

men

ts /

Ann

ual G

ener

al M

eeti

ng Directorate and administration

Directorate

HvdM Scholtz (42)BComm (Law)Non-executive chairman

RD Fenner (51)BCom Hons, Grad Dip (Tax), MCom Lead independent non-executive directorChairman of Audit and Risk Committee

MVZ Wentzel (41)Independent non-executive directorMember of Remuneration and Audit and Risk Committees

BA Chelius (51)CA (SA), CFAIndependent non-executive directorMember of Remuneration and Audit and Risk Committees Chairman of Social, Ethics and Transformation Committee

HF Prinsloo (58)BCom, LLB, LLM, HDip (Tax)Chief executive officer

TM Flannery (59)Executive director

JJ Rookledge (43)BBusSci Finance (Hons), CA (SA)Chief financial officer

Administration

Registered address1st Floor FedGroup PlaceWillie van Schoor AvenueBellville, 7530PO Box 3991Tygervalley, 7536Telephone: +27 21 915 3300

Company SecretaryMettle Corporate Finance (Pty) LtdPO Box 3991Tygervalley, 7536

Designated advisorQuestco Corporate Advisory (Pty) LtdYellowwood House Ballywoods Office Park33 Ballyclare DriveBryanston, 2191

Transfer secretariesComputershare Investor Services (Pty) LtdPO Box 61051Marshalltown, 2107Telephone: +27 11 370 5000

AuditorsPricewaterhouseCoopers Inc.


23

Bus

ines

s O

verv

iew

/ A

nnua

l Fin

anci

al S

tate

men

ts /

Ann

ual G

ener

al M

eeti

ngDirectors’ report

1. Nature of businessThe company is an investment holding company with trading subsidiaries, joint ventures and associates in the asset-backed short-term lending, debtor finance, working capital finance, corporate finance, incremental housing finance, solar energy and fintech markets. The group operates in South Africa, Namibia, Kenya and the United Kingdom.

The company capitalised its loans in Mettle Solar Investments (Pty) Ltd to facilitate the introduction of a new shareholder, namely Gridworks Development Partners LLP (refer to note 8).

2. Subsidiary companiesThe company owns 90% (2019: 90%) of Reward Investments (No. 2) Ltd in the United Kingdom. Reward Investments (No. 2) Ltd owns 72.5% (2019: 75%) of Reward Finance Group Ltd which has two 100% owned operating companies, namely Reward Capital Ltd and Reward Invoice Finance Ltd.

The company’s most significant subsidiary in South Africa is Mettle Administrative Services (Pty) Ltd.

The company’s principal subsidiaries are detailed in note 2.

3. Financial resultsThe group reports profit attributable to equity holders of the company of R23.5 million (2019: R15.4 million) and basic earnings per share of 9.52 (2019: 7.14) cents.

The consolidated and separate financial statements on pages 31 to 120 set out fully the financial position, results of operations and cash flows for the financial year ended 29 February 2020.

4. BorrowingsInterest-bearing borrowings are detailed in notes 17 and 18 and bank overdrafts are detailed in note 22.

5. DividendsNo dividends were declared or paid by the company during the year (2019: RNil).

6. Share capitalThe authorised share capital of the company remained unchanged at 500 million ordinary shares of no par value. The issued share capital at year-end was also unchanged at 247,174,375 ordinary shares of no par value. Refer to note 15.

7. Memorandum of incorporationThe company has complied with the terms of its memorandum of incorporation during the year.

8. Going concernThe directors consider that the company and group has adequate resources to continue operating for the foreseeable future and that it is appropriate to adopt the going concern basis in preparing the consolidated and separate financial statements. The directors have satisfied themselves that the company and group is in a sound financial position and that it has access to sufficient borrowing facilities to meet its foreseeable cash requirements.

9. Events subsequent to the year-endRefer to note 37 for a list of material events which have occurred between the end of the reporting date and the date of this report.

10. DirectorsHF PrinslooFH EsterhuyseJJ RookledgeTM Flannery MVZ Wentzel BA Chelius RD Fenner HvdM Scholtz appointed 14 August 2019

At 29 February 2020 the directors of Mettle Investments Ltd held a direct interest of 0.4% (2019: 0.3%) and an indirect, beneficial interest of 19.7% (2019: 6.2%) of the issued ordinary share capital of the company (refer to note 33).

There has been no change in the shareholding of directors between 29 February 2020 and the date of this report.

The directors present their report which forms part of the consolidated and separate financial statements for the year ended 29 February 2020.


24

Bus

ines

s O

verv

iew

/ A

nnua

l Fin

anci

al S

tate

men

ts /

Ann

ual G

ener

al M

eeti

ng

11. Holding companyThe company has no holding company at 29 February 2020. An analysis of the main shareholders of the company are disclosed on page 121.

12. Company SecretaryMettle Corporate Finance (Pty) Ltd continued to act as Company Secretary during the year under review.

13. AuditorsPricewaterhouseCoopers Inc. continued as external auditors in accordance with Section 90 (1) of the Companies Act.

14. LitigationThe directors are not aware of any legal or arbitration proceedings, that have commenced, are pending or have been threatened, that have or may have a material impact on the results of the group.

15. Registered officeFirst FloorFedGroup PlaceWillie van Schoor AvenueBellville7530

16. DomicileSouth Africa

Directors’ report (continued)


25

Bus

ines

s O

verv

iew

/ A

nnua

l Fin

anci

al S

tate

men

ts /

Ann

ual G

ener

al M

eeti

ngIndependent auditor’s reportTo the Shareholders of Mettle Investments Limited

Report on the audit of the consolidated and separate financial statements

Our opinionIn our opinion, the consolidated and separate financial statements present fairly, in all material respects, the consolidated and separate financial position of Mettle Investments Limited (the Company) and its subsidiaries (together the Group) as at 29 February 2020, and its consolidated and separate financial performance and its consolidated and separate cash flows for the year then ended in accordance with International Financial Reporting Standards and the requirements of the Companies Act of South Africa.

What we have audited

Mettle Investments Limited’s consolidated and separate financial statements set out on pages 31 to 120 comprise:

• the consolidated and company statements of financial position as at 29 February 2020;

• the consolidated and company statements of comprehensive income for the year then ended;

• the consolidated and company statements of changes in equity for the year then ended;

• the consolidated and company statements of cash flows for the year then ended; and

• the notes to the financial statements, which include a summary of significant accounting policies.

Basis for opinionWe conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the consolidated and separate financial statements section of our report.

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

Independence

We are independent of the Group in accordance with the sections 290 and 291 of the Independent Regulatory Board for Auditors’ Code of Professional Conduct for Registered Auditors (Revised January 2018), parts 1 and 3 of the Independent Regulatory Board for Auditors’ Code of Professional Conduct for Registered Auditors (Revised November 2018) (together the IRBA Codes) and other independence requirements applicable to performing audits of financial statements in South Africa. We have fulfilled our other ethical responsibilities, as applicable, in accordance with the IRBA Codes and in accordance with other ethical requirements applicable to performing audits in South Africa. The IRBA Codes are consistent with the corresponding sections of the International Ethics Standards Board for Accountants’ Code of Ethics for Professional Accountants and the International Ethics Standards Board for Accountants’ International Code of Ethics for Professional Accountants (including International Independence Standards) respectively.

Materiality

Key audit matters

Group scoping

Our audit approachOverview

Overall group materiality

• Overall group materiality: R 9,258,000, which represents 0.5% of consolidated total assets.

Group audit scope

• Full scope audits have been performed in respect of the Company, one significant subsidiary and one joint venture. For two associates, we performed specific audit procedures on the impairment of assets, based on our assessment of risk of material misstatement. In addition we performed analytical procedures over the remaining insignificant components.

Key audit matters

• Impairment of trade receivables; and

• Assessment of control, joint control or significant influence over investments


26

Bus

ines

s O

verv

iew

/ A

nnua

l Fin

anci

al S

tate

men

ts /

Ann

ual G

ener

al M

eeti

ng

As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the consolidated and separate financial statements. In particular, we considered where the directors made subjective judgements; for example, in respect of significant accounting estimates that involved making assumptions and considering future events that are inherently uncertain. As in all of our audits, we also addressed the risk of management override of internal controls, including among other matters, consideration of whether there was evidence of bias that represented a risk of material misstatement due to fraud.

Materiality

The scope of our audit was influenced by our application of materiality. An audit is designed to obtain reasonable assurance whether the financial statements are free from material misstatement. Misstatements may arise due to fraud or error. They are considered material if individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the consolidated financial statements.

Based on our professional judgement, we determined certain quantitative thresholds for materiality, including the overall group materiality for the consolidated financial statements as a whole as set out in the table below. These, together with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit procedures and to evaluate the effect of misstatements, both individually and in aggregate on the financial statements as a whole.

Overall group materiality R 9,258,000.

How we determined it 0.5% of consolidated total assets.

Rationale for the materiality benchmark applied We chose consolidated total assets as the benchmark because, in our view, it is the benchmark against which the performance of the Group is measured by users, and is the benchmark that is most representative of the Group’s operations. We chose 0.5% based on our professional judgement, considering the range of quantitative materiality thresholds that we would typically apply when using total assets to compute materiality for investment holding companies in this sector.

How we tailored our group audit scope

We tailored the scope of our audit in order to perform sufficient work to enable us to provide an opinion on the consolidated financial statements as a whole, taking into account the structure of the Group, the accounting processes and controls, and the industry in which the Group operates.

The Group consists of five subsidiaries and over twenty associates and joint ventures. Based on the relative contribution of the Company and each of the subsidiaries to the Group’s consolidated total assets, we performed full scope audits on the Company and one of its subsidiaries (Reward Investments (No.2) Limited). Additionally, a full scope audit was performed on one joint venture (Christopher Finance Proprietary Limited) as it has been scoped in due to the risk of material misstatement of the consolidated financial statements associated with it.

For two associates, being Lendcor Proprietary Limited and Mettle Solar Investments Proprietary Limited, we performed specific audit procedures on the impairment of assets based on our assessment of risk of material misstatement. In addition we performed analytical procedures over the remaining components, which are considered insignificant to the Group.

In establishing the overall approach to the Group audit, we determined the type of work that needed to be performed by us, as the Group engagement team, or component auditors from other PwC network firms operating under our instructions. Where the work was performed by component auditors, we determined the level of involvement we needed to have in the audit work at those components to be able to conclude whether sufficient appropriate audit evidence had been obtained as a basis of our opinion on the consolidated financial statements as a whole.

Independent auditor’s report (continued)


27

Bus

ines

s O

verv

iew

/ A

nnua

l Fin

anci

al S

tate

men

ts /

Ann

ual G

ener

al M

eeti

ng

Key audit mattersKey audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated and separate financial statements of the current period. These matters were addressed in the context of our audit of the consolidated and separate financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

Key audit matter How our audit addressed the key audit matter

Impairment of trade receivables

(Consolidated financial statements)The Group has recognised trade receivables to the value of R1.6 billion, which is reflected after considering a loss allowance of R35.3 million. The trade receivables balance attributable to Reward Capital is R1.3 billion, with a loss allowance of R26.3 million.

The Group applies the general model per International Financial Reporting Standard 9 - Financial Instruments (IFRS 9) to determine the loss allowance for Reward Capital, which requires expected credit losses (ECLs) to be recognised based on the stage of the debt either on 12-month expected losses, or on lifetime expected losses.

In assessing the expected credit loss on the Reward Capital trade receivables, management exercises judgement in determining the following:

• Significant increase in credit risk (SICR);

• Definition of default and credit-impaired assets;

• Forward-looking information incorporated in the ECL models; and

• Write off policy.

The impairment of the Reward Capital trade receivables was considered to be a matter of most significance to the current year audit due to the degree of judgement applied by management in determining the ECL.

Refer to note 1 for the significant accounting judgement and to note 13 to the consolidated financial statements for disclosure relating to impairment of the Reward Capital trade and other receivables.

Our audit addressed the impairment of trade receivables measured under the general model by testing the various factors that affect the judgement around the recoverability of the balance. Our testing included:

• Testing the amount of time that the balances have been outstanding, by recalculating the ageing of the balances with reference to their origination date;

• Selecting a sample of customers from the Risk Metrics report used by management and assessing whether or not it is appropriate that no specific lifetime provision is held against these customers. This Risk Metrics report contains customers that are in stage 1 (i.e. they have not reflected a SICR). This assessment was performed in light of the customers’ payment history and the customer’s individual circumstances. We noted no customers that reflected a SICR.

• Assessing the creditworthiness of the underlying debtors with reference to their historical recovery patterns.

• Assessing the value of the loans against the securities held against the loans. We obtained the breakdown of the outstanding balances by customers and the values of the security held against each loan. We selected a sample of property valuations and agreed them to external valuation reports. We found these valuations to be in line with the UK property market data.

• Applying a stress scenario to the valuation of the securities by considering the impact of COVID-19 on the security assets as part of the forward-looking information required in terms of IFRS 9, and noted no further impairment from this assessment.

• Assessing the overlays applied by management in the model in terms of the known market conditions. Based on our work performed we accepted the overlays.

We tested the relevant controls related to the processes over credit origination and credit extension.

We inspected a sample of legal agreements and underlying documentation to test existence and the legal right to the security for impaired trade receivables. No material differences were noted.


28

Bus

ines

s O

verv

iew

/ A

nnua

l Fin

anci

al S

tate

men

ts /

Ann

ual G

ener

al M

eeti

ng Independent auditor’s report (continued)

Key audit matter How our audit addressed the key audit matter

Assessment of control, joint control or significant influence over investments

(Consolidated financial statements)International Financial Reporting Standard 10 - Consolidated Financial Statements (IFRS 10), outlines the requirements for the preparation and presentation of consolidated financial statements, requiring entities to consolidate entities it controls. An investor controls an investee when it is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee.

The assessment of whether the Group has control, joint control or significant influence over its investments in accordance with IFRS 10, International Financial Reporting Standard 11 - Joint Arrangements (IFRS 11) and International Accounting Standard 28 - Investments in Associates and Joint Ventures (IAS 28) is a matter of significant judgement, and impacts how the investments are accounted for. As a result, this is considered a matter of most significance to our audit in the current year.

Investments in associates and joint ventures have a carrying amount of R87 million and R36 million, respectively, in the consolidated financial statements.

Refer to note 1 for the significant accounting judgement and to notes 2, 7 and 8 to the consolidated financial statements for the disclosure of the investments included in the Group.

We assessed the classification of the investments held by the Group in terms of IFRS 10, IFRS 11 and IAS 28. Our testing included evaluating the following:

• Board representation within the investees;

• Terms of the shareholder agreements;

• The ability to appoint directors to the board of investees;

• The relevant activities of the investee; and

• The ability to influence the decisions over the relevant activities of the investees.

We challenged management’s definition of control by inspecting the shareholder agreements with the investees to assess the ability of the Group to control the relevant activities of the entities.

We evaluated the disclosure of the judgements relating to the assessment of control, joint control and significant influence.

We have determined that there are no key audit matters to be reported on the separate financial statements.


29

Bus

ines

s O

verv

iew

/ A

nnua

l Fin

anci

al S

tate

men

ts /

Ann

ual G

ener

al M

eeti

ng

Other informationThe directors are responsible for the other information. The other information comprises the information included in the document titled “Mettle Investments Limited and its subsidiaries Annual Financial Statements for the the year ended 29 February 2020”, which includes the Directors’ Report, the Report of the Audit Committee and the Secretarial Certification as required by the Companies Act of South Africa, which we obtained prior to the date of this auditor’s report, and the other sections of the document titled “Mettle Investments Integrated Report 2020”, which is expected to be made available to us after that date. The other information does not include the consolidated or the separate financial statements and our auditor’s report thereon.

Our opinion on the consolidated and separate financial statements does not cover the other information and we do not and will not express an audit opinion or any form of assurance conclusion thereon.

In connection with our audit of the consolidated and separate financial statements, our responsibility is to read the other information identified above and, in doing so, consider whether the other information is materially inconsistent with the consolidated and separate financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated.

If, based on the work we have performed on the other information that we obtained prior to the date of this auditor’s report, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

Responsibilities of the directors for the consolidated and separate financial statementsThe directors are responsible for the preparation and fair presentation of the consolidated and separate financial statements in accordance with International Financial Reporting Standards and the requirements of the Companies Act of South Africa, and for such internal control as the directors determine is necessary to enable the preparation of consolidated and separate financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the consolidated and separate financial statements, the directors are responsible for assessing the Group and the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Group and/or the Company or to cease operations, or have no realistic alternative but to do so.

Auditor’s responsibilities for the audit of the consoli-dated and separate financial statementsOur objectives are to obtain reasonable assurance about whether the consolidated and separate financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated and separate financial statements.

As part of an audit in accordance with ISAs, we exercise professional judgement and maintain professional scepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of the consolidated and separate financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s and the Company’s internal control.

• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the directors.


30

Bus

ines

s O

verv

iew

/ A

nnua

l Fin

anci

al S

tate

men

ts /

Ann

ual G

ener

al M

eeti

ng Independent auditor’s report (continued)

• Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s and the Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the consolidated and separate financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group and / or Company to cease to continue as a going concern.

• Evaluate the overall presentation, structure and content of the consolidated and separate financial statements, including the disclosures, and whether the consolidated and separate financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.

We communicate with the directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide the directors with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with the directors, we determine those matters that were of most significance in the audit of the consolidated and separate financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

Report on other legal and regulatory requirements In terms of the IRBA Rule published in Government Gazette Number 39475 dated 4 December 2015, we report that PricewaterhouseCoopers Inc. has been the auditor of Mettle Investments Limited for 2 years.

PricewaterhouseCoopers Inc. Director: JR de VilliersRegistered Auditor Cape Town29 May 2020


31

Bus

ines

s O

verv

iew

/ A

nnua

l Fin

anci

al S

tate

men

ts /

Ann

ual G

ener

al M

eeti

ngConsolidated statement of financial position

Notes2020

R’000

Restated 2019

R’000

AssetsNon-current assetsProperty, plant and equipment 3 2 930 1 693

Right-of-use assets 4 7 029 -

Goodwill 5 2 905 5 595

Deferred taxation 6 1 774 1 644

Investments in joint ventures 7 36 032 29 020

Investments in associates 8 87 030 37 111

Loans due from joint ventures 9 8 740 24 768

Loans due from associates 10 - 47 647

Financial assets at fair value through profit or loss 11 - 10 932

Loan receivables 12 32 593 36 421

Total non-current assets 179 033 194 831

Current assetsTaxation 59 11

Financial assets at fair value through profit or loss 11 11 177 -

Loans due from joint ventures 9 564 -

Loans due from associates 10 24 21


Trade and other receivables 13 1 566 637 1 201 909

Cash and cash equivalents 14 90 702 109 648

Total current assets 1 672 635 1 337 580

Total assets 1 851 668 1 532 411

Equity and liabilitiesCapital and reservesStated capital 15 545 828 545 828

Share-based payment reserve 16 348 -

Retained income 67 910 38 765

614 086 584 593

Foreign currency translation reserve 58 177 28 572

Common control reserve (123 560) (123 560)

Capital and reserves attributable to the owners 548 703 489 605

Non-controlling interest 70 495 60 317

Total equity 619 198 549 922


32

Bus

ines

s O

verv

iew

/ A

nnua

l Fin

anci

al S

tate

men

ts /

Ann

ual G

ener

al M

eeti

ng

Notes2020

R’000

Restated 2019

R’000

Non-current liabilitiesDeferred taxation 6 1 247 771

Borrowings 17 960 225 731 098

Borrowings due to related parties 18 160 648 194 824

Lease liabilities 4 6 404 -

Other financial liabilities 19 8 218 2 611

Total non-current liabilities 1 136 742 929 304

Current liabilitiesTaxation 7 771 7 800

Borrowings 17 49 394 2 658

Lease liabilities 4 1 586 -

Provisions 20 7 782 4 884

Trade and other payables 21 11 408 18 602

Bank overdrafts 22 17 787 19 241

Total current liabilities 95 728 53 185

Total equity and liabilities 1 851 668 1 532 411

Consolidated statement of financial position (continued)


33

Bus

ines

s O

verv

iew

/ A

nnua

l Fin

anci

al S

tate

men

ts /

Ann

ual G

ener

al M

eeti

ngConsolidated statement of comprehensive income

Notes2020

R’000

Restated 2019

R’000

Revenue

- Interest income 23 211 539 141 651

- Fee and commission income 23 85 681 85 326

Other income 24 9 821 12 708

Loss allowance 25 (18 847) (11 565)

Operating expenses 26 (115 756) (95 409)

Profit from operations 172 438 132 711

Interest expense 27 (84 338) (56 975)

Fair value loss on other financial liabilities 19 (5 607) (2 611)

Impairment of goodwill 5 (2 690) (1 880)

Impairment of investment in joint venture 7 - (2 341)

Impairment of investments in associates 8 (7 715) (12 860)

Profit from joint ventures 7 3 945 1 379

Loss from associates 8 (9 751) (8 114)

Profit before taxation 66 282 49 309

Taxation 28 (20 124) (17 270)

Profit after taxation before non-controlling interest 46 158 32 039

Other comprehensive income

Items that may be subsequently reclassified to profit

Exchange difference on translation of foreign operation 35 261 33 807

Total comprehensive income 81 419 65 846

Profit attributable to:Equity holders of the parent 23 533 15 417


46 158 32 039

Total comprehensive income attributable to:Equity holders of the parent 53 355 43 989


81 419 65 846

Basic earnings per share (cents) 29 9.52 7.14

Diluted earnings per share (cents) 29 9.49 7.14


34

Bus

ines

s O

verv

iew

/ A

nnua

l Fin

anci

al S

tate

men

ts /

Ann

ual G

ener

al M

eeti

ng Consolidated statement of changes in equity

Stated capital R’000

Share- based

payment reserve

R’000

Retained income R’000

Foreign currency

translation reserve

R’000

Common control reserve

R’000

Non controlling

interest R’000

Total R’000

Equity at 28 February 2018 100 622 22 198 122 820

Issue of ordinary shares 445 206 445 206

Acquisition of subsidiary (123 560) 48 557 (75 003)

Profit after taxation 15 417 16 622 32 039

Profit on purchase of loan claim from related party (note 33) 1 150 1 150

Other comprehensive income 28 572 5 235 33 807

Dividends paid to non-controlling interest (10 097) (10 097)

Equity at 28 February 2019 545 828 38 765 28 572 (123 560) 60 317 549 922

Change in accounting policy (note 35) (214) (100) (314)

Transaction with non-controlling interest 5 826 (217) 2 479 8 088

Profit after taxation 23 533 22 625 46 158

Employee share scheme – value of employee services 348 348

Other comprehensive income 29 822 5 439 35 261


Equity at 29 February 2020 545 828 348 67 910 58 177 (123 560) 70 495 619 198

Notes 15 16


35

Bus

ines

s O

verv

iew

/ A

nnua

l Fin

anci

al S

tate

men

ts /

Ann

ual G

ener

al M

eeti

ngConsolidated statement of cash flows

Notes2020

R’0002019

R’000

Cash flow from operating activities (192 243) (61 656)

Net cash utilised in operations 30A (233 483) (133 715)

Interest received 146 316 140 860

Interest paid (83 726) (53 161)

Taxation paid 30B (21 350) (15 640)

Cash flow from investing activities 20 410 (349 152)

Acquisition of property, plant and equipment 3 (2 657) (1 053)

Proceeds on disposal of property, plant and equipment 147 94

Cash outflow on acquisition of subsidiaries - (318 097)

Cash outflow on disposal of subsidiary 30D (315) (1 853)

Additional investment in associate 8 (3 146) -

Acquisition of investments in joint ventures - (19 919)

Acquisition of loans to joint ventures - (21 250)

Disposal of financial assets at fair value through profit or loss 11 - 20 500

Loans repaid by associates 1 758 28 951

Loans advanced to associates (2 731) (43 975)

Loan repaid by joint venture 4 194 -

Loan advanced to joint venture (1 975) (430)

Loan receivables advanced 12 (10 690) (45 842)

Loan receivables recovered 35 444 51 598

Dividend received from joint venture 381 124

Dividend received from associate - 2 000

Cash flow from financing activities 150 278 488 508

Issue of ordinary shares - 403 206

Receipt of borrowings 17 249 480 72 336

Repayment of borrowings 17 (44 000) (11 255)

Receipt of borrowings due to related parties 18 93 400 54 252

Repayment of borrowings due to related parties 18 (139 579) (19 934)

Repayment of lease liabilities 4 (1 243) -


Net (decrease)/increase in cash and cash equivalents (21 555) 77 700

Effect of changes in exchange rate 4 063 7 784

Cash and cash equivalents at beginning of the year 90 407 4 923

Cash and cash equivalents at end of the year 14 72 915 90 407


36

Bus

ines

s O

verv

iew

/ A

nnua

l Fin

anci

al S

tate

men

ts /

Ann

ual G

ener

al M

eeti

ng Accounting policies

The principal accounting policies applied in the preparation of these consolidated and the company’s separate annual financial statements are set out below. These policies have been consistently applied to all years presented in relation to the group’s consolidated and the company’s separate annual financial statements except for the adoption of:

IFRS 16 Leases

IFRS 16 results in almost all leases being recognised on the statement of financial position by lessees, as the distinction between operating and finance leases is removed. Under the new standard, an asset (the right to use the leased item) and a financial liability to pay rentals are recognised. The only exceptions are short-term and low-value leases.

The group applied the standard from its mandatory adoption date of 1 March 2019. The group applied the simplified transition approach and did not restate comparative figures for the year prior to first adoption. Right-of-use assets for property leases were measured on transition as if the new rules had always been applied.

The group’s retained income at 1 March 2019 reduced by R0.2 million due to the following:

• right-of-use assets recognised of R5.4 million;

• lease liabilities recognised of R6 million; and

• release of an operating lease rent free payable of R0.4 million.

Refer to note 35 for the change in accounting policy disclosure.

The following amended standards and interpretations, effective for the first time in the current financial year, had no impact on the group:

• Amendments to IFRS 9 Financial Instruments on prepayment features with negative compensation and modification of financial liabilities

• Amendments to IAS 19 Employee benefits on plan amendment, curtailment or settlement

• Amendments to IAS 28 Investments in associates and joint ventures – long-term interests in associates and joint ventures

• IFRIC 23 Uncertainty over Income Tax Treatments

• Annual improvements cycle 2015 to 2017

Basis of preparationStatement of compliance

The consolidated and separate annual financial statements are expressed in South African Rand and have been prepared in accordance with International Financial Reporting Standards (IFRS), interpretations issued by the Interpretations Committee of the International Accounting Standards Board, the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee, the Financial Pronouncements as issued by the Financial Reporting Standards Council, the JSE Listing Requirements and the Companies Act of South Africa, 2008.

Preparation of the consolidated annual financial statements

The consolidated annual financial statements have been prepared under the historical cost convention, except for financial assets at fair value through profit or loss.

The preparation of consolidated annual financial statements in accordance with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the group’s accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the consolidated annual financial statements are disclosed in note 1.

Standards, interpretations and amendments that are not yet effective at 29 February 2020The group has not applied the following new and amended standards and interpretations that have been issued but are not yet effective, nor relevant to the group’s operations:

• Amendment to IAS 1 Presentation of Financial Statements and IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors on the definition of material

• Amendment to IFRS 3 Business Combinations – Definition of a business

• Amendments to IFRS 9 Financial Instrument, IAS 39 Financial Instruments: Recognition and Measurement and IFRS 7 Financial Instruments: Disclosure – Interest rate benchmark reform

• IFRS 17 Insurance contracts

ConsolidationSubsidiaries

Subsidiaries are all entities (including structured entities) over which the group has control. The group controls an entity when the group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Subsidiaries are fully


37

Bus

ines

s O

verv

iew

/ A

nnua

l Fin

anci

al S

tate

men

ts /

Ann

ual G

ener

al M

eeti

ng

consolidated from the date on which control is transferred to the group. They are deconsolidated from the date that control ceases.

The group uses the acquisition method of accounting to account for business combinations. The consideration transferred for the acquisition of a subsidiary is the fair values of the assets transferred, the liabilities incurred and the equity interests issued by the group. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement.

Subsequent changes to the fair value of the contingent consideration that is deemed to be an asset or liability is recognised in profit or loss. Contingent consideration that is classified as equity is not re-measured, and its subsequent settlement is accounted for in equity.

Acquisition-related costs are expensed as incurred. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. On an acquisition-by-acquisition basis, the group recognises any non-controlling interest in the acquiree either at fair value or at the non-controlling interest’s proportionate share of the acquiree’s net assets.

The excess of the consideration transferred, the amount of any non-controlling interest in the acquiree and the acquisition date fair value of any previous equity interest in the acquiree over the fair value of the group’s share of the identifiable net assets acquired is recorded as goodwill. If this is less than the fair value of the net assets of the subsidiary acquired in the case of a bargain purchase, the difference is recognised directly in profit or loss.

Non-controlling interests in the results and equity of subsidiaries are shown separately in the consolidated statement of profit or loss, statement of comprehensive income, statement of changes in equity and statement of financial position respectively.

Intercompany transactions, balances and unrealised gains on transactions between group companies are eliminated. Unrealised losses are also eliminated. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the group

Investments in subsidiaries are accounted for at cost less impairment in the annual financial statements of the company. Cost is adjusted to reflect changes in consideration arising from contingent consideration amendments. Cost also includes direct attributable costs of investment.

Common control transactions

The predecessor values method is used to account for common control transactions. The predecessor values method requires financial statements to be prepared using predecessor book values without any step up to fair value or restating comparatives. The difference between any consideration given and the aggregate book value of the assets and liabilities (at acquisition date) of the acquired entity are recorded as an adjustment to equity as a common control reserve. No additional goodwill is created by the transaction.

Disposal of subsidiaries

When the group ceases to have control or significant influence, any retained interest in the entity is re-measured to its fair value, with the change in carrying amount recognised in profit or loss. The fair value is the initial carrying amount for the purposes of subsequently accounting for the retained interest as an associate, joint venture or financial asset. In addition, any amounts previously recognised in other comprehensive income in respect of that entity are accounted for as if the group had directly disposed of the related assets or liabilities. This may mean that amounts previously recognised in other comprehensive income are reclassified to profit or loss.

Associates

An associate is an entity over which the group has significant influence and which is neither a subsidiary nor a joint venture. Significant influence is the power to participate in the financial and operating policy decisions of the investee, but is not control or joint control over those policies.

An investment in an associate is accounted for using the equity method, except when the investment is classified as held-for-sale in accordance with IFRS 5 Non-current Assets Held for Sale. Under the equity method, investments in associates are carried in the consolidated statement of financial position at cost adjusted for post-acquisition changes in the group’s share of net assets of the associate, less any impairment losses.

Losses in an associate in excess of the group’s interest in that associate are recognised only to the extent that the group has incurred a legal or constructive obligation to make payments on behalf of the associate.

Any goodwill on acquisition of an associate is included in the carrying amount of the investment, however, a gain on acquisition is recognised immediately in profit or loss.

Joint arrangements

Joint arrangements are those entities over whose activities the group has joint control, established by contractual agreement.


38

Bus

ines

s O

verv

iew

/ A

nnua

l Fin

anci

al S

tate

men

ts /

Ann

ual G

ener

al M

eeti

ng Accounting policies (continued)

Interests in joint arrangements are accounted for as either a joint venture or a joint operation as permitted by IFRS 11 Joint Arrangements. A joint arrangement is accounted for as a joint venture when the group, along with the other parties that have joint control of the arrangement, have rights to the net assets of the arrangement. Joint ventures are equity accounted in accordance with IAS 28 (revised). The equity method requires the group’s share of the joint venture’s post-tax profit or loss for the year to be presented separately in profit or loss and the group’s share of the joint venture’s net assets to be presented separately in the statement of financial position. Joint ventures with net liabilities are carried at zero value in the statement of financial position where there is no commitment to fund the deficit and any distributions are included in profit or loss for the year.

A joint arrangement is accounted for as a joint operation when the group, along with the parties that have joint control of the arrangement, have rights to the assets and obligations for the liabilities relating to the arrangement. Joint operations are accounted for by including the group’s share of the assets, liabilities, income and expenses on a line-by-line basis.

Intra-group balances and any unrealised gains and losses arising from intra-group transactions are eliminated in preparing the consolidated financial statements. Unrealised gains arising from transactions with joint ventures are eliminated to the extent of the group’s interest in the joint venture concerned. Unrealised losses are eliminated in the same way, but only to the extent that there is no evidence of impairment.

The annual financial statements of the associate or joint venture are prepared for the same reporting period as the group. When necessary, adjustments are made to bring the accounting policies in line with those of the group. After application of the equity method, the group determines whether it is necessary to recognise an impairment loss on its investment in its associate or joint venture. At each reporting date, the group determines whether there is objective evidence that the investment in the associate or joint venture is impaired. If there is such evidence, the group calculates the amount of impairment as the difference between the recoverable amount of the associate or joint venture and its carrying value, and then recognises the loss in profit or loss.

Upon loss of joint control over the joint venture, the group measures and recognises any retained investment at its fair value. Any difference between the carrying amount of the joint venture upon loss of joint control and the fair value of the retained investment and proceeds from disposal is recognised in profit or loss.

Investments in associates and joint ventures are accounted for at cost less provision for impairment in the annual financial statements of the company.

GoodwillGoodwill represents the excess of the cost of an acquisition over the fair value of the group’s share of the net identifiable assets of the acquired subsidiary at the date of acquisition. Goodwill on acquisitions of subsidiaries is disclosed separately on the face of the statement of financial position. Goodwill is tested annually for impairment in the respective subsidiary’s functional currency and carried at cost less accumulated impairment losses. Impairment losses on goodwill are not reversed. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold. Goodwill is allocated to cash-generating units for the purpose of impairment testing. The allocation is made to those cash-generating units or groups of cash-generating units that are expected to benefit from the business combination in which the goodwill arose.

Foreign currency translationFunctional and presentation currency

Items included in the consolidated annual financial statements of each of the group’s companies are measured using the currency of the primary economic environment in which each of the companies operate (the ‘functional currency’). The company’s presentation and functional currency is South African Rand.

Transactions and balances

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions or valuation where items are re-measured. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in profit or loss for the year.

Translation differences related to changes in amortised cost are recognised in profit or loss, and other changes in carrying amounts are recognised in other comprehensive income. Translation differences on non-monetary financial assets and liabilities such as equities held at fair value through profit or loss are recognised in profit or loss as part of the fair value gain or loss.

Group companies

The results and financial position of all the group companies that have a functional currency different from the presentation currency are translated into the presentation currency as follows:

• assets and liabilities for each statement of financial position presented are translated at the closing rate at the reporting date;

• income and expenses for each profit or loss are translated at average exchange rates (unless this average is not a reasonable approximation of the cumulative effect of the


39

Bus

ines

s O

verv

iew

/ A

nnua

l Fin

anci

al S

tate

men

ts /

Ann

ual G

ener

al M

eeti

ng

rates prevailing on the transaction dates, in which case income and expenses are translated at the rate on the dates of the transactions); and

• all resulting exchange differences are recognised as a separate component of equity in other comprehensive income.

On consolidation, exchange differences arising from the translation of the net investment in foreign entities, and of borrowings and other currency instruments designated as hedges of such investments, are taken to shareholders’ equity. When a foreign operation is partially disposed of or sold, such exchange differences are recognised in profit and loss as part of the gain or loss on sale.

Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the closing rate.

Property, plant and equipmentAll property, plant and equipment is stated at historical cost less depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the items.

Cost of an item of property, plant and equipment includes its purchase price and any directly attributable costs. Cost includes the cost of replacing part of an existing property, plant and equipment at the time that cost is incurred if the recognition criteria are met; and excludes the costs of day-to-day servicing of an item of property, plant and equipment.

Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the group and the cost of the item can be measured reliably. The carrying amount of those parts that are replaced is derecognised. All other repairs and maintenance are charged to profit or loss during the financial period in which they are incurred.

Depreciation is calculated on a straight-line basis to reduce the cost of an asset to its residual value over the asset’s useful life, as follows:

• Leasehold improvements term of the lease

• Office furniture and equipment 5 years

• Computer equipment and software 2 - 3 years

• Motor vehicles 5 years

An item of property, plant and equipment and any significant part initially recognised 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 the net disposal proceeds and the carrying amount of the asset) is included in profit or loss when the asset is derecognised.

The assets’ residual values, useful lives and depreciation method are reviewed, and adjusted if appropriate, at least at each financial year-end.

An asset’s carrying amount is written down immediately to its recoverable amount if its carrying amount is greater than its estimated recoverable amount.

Impairment of non-financial assetsAssets that have an indefinite useful life (goodwill) are not subject to amortisation and are tested annually for impairment. Assets that are subject to amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units). Non-financial assets other than goodwill that suffered impairment are reviewed for possible reversal of the impairment at each reporting date.

Financial assetsClassification

The group classifies its financial assets in the following measurement categories:

• those to be measured subsequently at fair value (either through other comprehensive income or through profit or loss), and

• those to be measured at amortised cost.

The classification depends on the group’s business model for managing the financial assets and the contractual terms of the cash flows.

For assets measured at fair value, gains and losses will either be recorded in profit or loss or other comprehensive income. For investments in equity instruments that are not held for trading, this will depend on whether the group has made an irrevocable election at the time of initial recognition to account for the equity investment at fair value through other comprehensive income.


40

Bus

ines

s O

verv

iew

/ A

nnua

l Fin

anci

al S

tate

men

ts /

Ann

ual G

ener

al M

eeti


The group reclassifies debt investments when and only when its business model for managing those assets changes.

Recognition and derecognition

Regular way purchases and sales of financial assets are recognised on trade-date, the date on which the group commits to purchase or sell the asset. Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or have been transferred and the group has transferred substantially all the risks and rewards of ownership.

Measurement

At initial recognition, the group 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 that are directly attributable to the acquisition of the financial asset. Transaction costs of financial assets carried at fair value through profit or loss are expensed in profit or loss.

Subsequent measurement of debt instruments depends on the group’s business model for managing the asset and the cash flow characteristics of the asset.

The group classifies its debt instruments at amortised cost:

• Assets that are held for collection of contractual cash flows where those cash flows represent solely payments of principal and interest are measured at amortised cost. Interest income from these financial assets is recognised using the effective interest rate method. Any gain or loss arising on derecognition is recognised directly in profit or loss and presented in other gains/(losses) together with foreign exchange gains and losses. Impairment losses are presented as separate line item in the statement of profit or loss.

The group subsequently measures all equity investments at fair value. Changes in the fair value of financial assets at fair value through profit or loss are recognised in the statement of profit or loss.

Impairment

The group assesses the expected credit losses associated with its debt instruments carried at amortised cost, on a forward-looking basis. The impairment methodology applied depends on whether there has been a significant increase in credit risk.

For trade receivables, the group applies a combination of the staging model and simplified approach permitted by IFRS 9, which requires expected credit losses to be recognised based on the stage of the debt, within the general model, or on expected lifetime losses from initial recognition of the receivables.

For trade receivables in relation to Reward Capital the group applies the general model. The group assesses at the end of each reporting period whether the credit risk on a financial instrument has increased significantly since initial recognition. Where there has been a significant increase in credit risk since initial recognition the group measures the loss allowance for a financial instrument at an amount equal to the lifetime expected credit losses. Where there has not been a significant increase in credit risk since initial recognition the group measures the loss allowance for that financial instrument at an amount equal to 12-month expected credit losses. For trade receivables in relation to Reward Invoice Financing and South Africa, the group applies the simplified approach permitted by IFRS 9, which requires expected lifetime losses to be recognised from initial recognition of the receivables.

The key judgements and assumptions adopted by the group in addressing the accounting requirements of the standard for expected credit loss measurement are detailed below:

Significant increase in credit riskThe group considers a financial instrument to have experienced a significant increase in credit risk since the time of initial recognition when one or more of the following quantitative and qualitative criteria has been met.

Quantitative criteria:

• where a customer has not met his or her minimum contractual obligations for at least one month

Qualitative criteria:

• where the loan to value is in excess of 100%, ie. the capital value of the contractual obligation is higher than the equity value of the security or fair value of other assets held as collateral

Definition of default and credit impaired assetsThe group defines a financial instrument as in default when it meets one or more of the following criteria:

• where a customer has not met the minimum contractual obligations for three consecutive months; or

• when the customer has applied for liquidation or is placed under administration; or

• any information that comes to management’s attention that would indicate that borrower is experiencing financial difficulty or has legal proceedings actioned against them.

Continuous assessment is required to determine whether the conditions that led to a financial asset being considered to be


41

Bus

ines

s O

verv

iew

/ A

nnua

l Fin

anci

al S

tate

men

ts /

Ann

ual G

ener

al M

eeti

ng

credit impaired (stage 3) still exist. Loans are cured either by bringing arrears up to date or by restructuring the loan which may involve additional security.

Forward-looking information incorporated in the expected credit loss modelsThe group deems the valuation of security held against the respective receivables to be of most importance. To incorporate this overlay into the expected credit loss models, management established a linear relationship between property market price fluctuations and expected credit losses. Three economic scenarios (negative, baseline and positive scenario) are taken into account when calculating future expected credit losses. The probability of each scenario is determined by management estimation. Refer to note 37 for expected impact of valuation of security held.

Write off policyThe group writes off financial assets, in whole or in part, when it has exhausted all practical recovery efforts and has concluded there is no reasonable expectation of recovery. This will be the case where the debtor has not met the minimum contractual obligations for at least six months and has not made any payment at all within the last six months.

The group recognises in profit or loss, as an impairment gain or loss, the amount of expected credit losses (or reversal) that is required to adjust the loss allowance at the end of the reporting period.

While cash and cash equivalents are also subject to the impairment requirements of IFRS 9, the identified impairment loss is insignificant.

Offsetting of financial instrumentsFinancial assets and financial liabilities are offset and the net amount is reported in the consolidated statement of financial position if there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, to realise the assets and settle the liabilities simultaneously.

Cash and cash equivalentsCash and cash equivalents includes cash in hand, deposits held at call with banks, other short-term highly liquid investments with original maturities of three months or less, and bank overdrafts.

Bank overdrafts are presented separately in current liabilities on the statement of financial position.

Cash and cash equivalents are initially and subsequently measured at fair value.

BorrowingsBorrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently measured at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption amount is recognised in profit or loss over the period of the borrowings using the effective interest method. Fees paid on the establishment of loan facilities are recognised as transaction costs of the loan to the extent that it is probable that some or all of the facility will be drawn down. In this case, the fee is deferred until the draw down occurs. To the extent there is no evidence that it is probable that some or all of the facility will be drawn down, the fee is capitalised as a prepayment for liquidity services and amortised over the period of the facility to which it relates.

Borrowings are removed from the statement of financial position when the obligation specified in the contract is discharged, cancelled or expired. The difference between the carrying amount of a financial liability that has been extinguished or transferred to another party and the consideration paid, including any non-cash assets transferred or liabilities assumed, is recognised in profit or loss as other income or finance costs. Borrowings are classified as current liabilities unless the group has an unconditional right to defer settlement of the liability for at least 12 months after the reporting date.

Trade and other payablesThese amounts represent liabilities for goods and services provided to the group prior to the end of financial year which are unpaid. The amounts are unsecured and are usually paid within 30 days of recognition. Trade and other payables are presented as current liabilities unless payment is not due within 12 months after the reporting period. They are recognised initially at their fair value and subsequently measured at amortised cost using the effective interest method.

Put option liabilityThe company has written a put option over the equity of an associate which permits the holder to put their shares in the associate to the company during a specified timeframe at a minimum price. The put option is initially recognised at fair value with subsequent changes in fair value recognised in profit or loss.

In the event that the put option expires unexercised, the liability is derecognised with a corresponding entry in profit or loss.

Put option liabilities are disclosed in other financial liabilities in the statement of financial position.


42

Bus

ines

s O

verv

iew

/ A

nnua

l Fin

anci

al S

tate

men

ts /

Ann

ual G

ener

al M

eeti


ProvisionsProvisions for legal claims are recognised when the group has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation and the amount can be reliably estimated. Provisions are not recognised for future operating losses.

Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. A provision is recognised even if the likelihood of an outflow with respect to any one item included in the same class of obligations may be small.

Provisions are measured at the present value of management’s best estimate of the expenditure required to settle the present obligation at the end of the reporting period. The discount rate used to determine the present value is a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. The increase in the provision due to the passage of time is recognised as interest expense.

Share capitalOrdinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds.

LeasesThe group has changed its accounting policy for leases where the group is a lessee (refer to note 35).

Assets and liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the net present value of the fixed lease payment. Lease payments to be made under reasonably certain extension options are also included in the measurement of the liability.

The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be readily determined, the lessee’s incremental borrowing rate is used, being the rate that the company would have to pay to borrow the funds necessary to obtain an asset of similar value to the right-of-use asset with similar terms, security and conditions. Subsequent to initial measurement lease liabilities increase as a result of interest charged at a constant rate on the balance outstanding and are reduced for lease payments made. Lease payments are allocated between principal and finance cost.

Right-of-use assets are measured at cost comprising the amount of the initial measurement of the lease liability, any lease payments made at or before the commencement date, any initial direct costs and restoration costs. Right-of-use assets

are generally depreciated over the shorter of the asset’s useful life and the lease term on a straight-line basis.

Until 28 February 2019, leases in which a significant portion of the risks and rewards of ownership were not transferred to the group as lessee were classified as operating leases. Payments made under operating leases were charged to the statement of comprehensive income on a straight-line basis over the period of the lease.

Employee benefitsShort-term obligations

Liabilities for wages and salaries, including non-monetary benefits, annual leave and accumulating sick leave that are expected to be settled wholly within 12 months after the end of the period in which the employees render the related service are recognised in respect of employees’ services up to the end of the reporting period and are measured at the amounts expected to be paid when the liabilities are settled.

Profit-sharing and bonus plans

The group recognises a liability and an expense for bonuses and profit-sharing where contractually obliged or where there is a past practice that has created a constructive obligation.

Share-based payments

Share-based compensation benefits are provided to employees via the Mettle Employee Share Option Scheme as detailed in note 16.

The fair value of options granted is recognised as an employee benefits expense, with a corresponding increase in equity. The total amount to be expensed is determined by the fair value of the options granted:

• including any market performance conditions (eg the company’s share price); and

• excluding the impact of any service and non-market performance vesting conditions (eg profitability).

The total expense is recognised over the vesting period, which is the period over which all of the specified vesting conditions are to be satisfied. At the end of each period, the group revises its estimates of the number of options that are expected to vest based on the non-market vesting and service conditions. It recognises the impact of the revision to original estimates, if any, in profit or loss, with a corresponding adjustment to equity.


43

Bus

ines

s O

verv

iew

/ A

nnua

l Fin

anci

al S

tate

men

ts /

Ann

ual G

ener

al M

eeti

ng

Revenue recognitionInterest income

Interest income from lending operations is recognised using the effective interest rate method. When a loan receivable is impaired, the group reduces the carrying amount to its recoverable amount, being the estimated future cash flow discounted at the original effective interest rate of the instrument, and continues unwinding the discount as interest income. Interest income on impaired loan receivables is recognised using the original effective interest rate.

Fee and commission income

Initial set up fee income is deferred and recognised over the average term of the loan.

Revenue is recognised at the amount of the transaction price that is allocated to that performance obligation excluding amounts collected on behalf of third parties. Revenue is recognised when (or as) the entity satisfies a performance obligation by transferring a promised good or service to a customer. An asset is transferred when (or as) the customer obtains control of that asset.


Recurring monthly minimum service fee income is recognised on a monthly basis. Ad hoc income is recognised when the specific performance obligation is satisfied.

Administration and management fee income

Administration and management services are performed throughout the period and are recognised when the services are provided. The consideration is due on a monthly basis as the services are rendered.

Fundraising fee income

Fundraising fee income is measured at the transaction price per the contract. The consideration is either due when the funding is available for draw down by the borrower or only when the funding is actually drawn down by the borrower. The fee income is recognised accordingly.

Corporate finance fee income

Success fees are recognised once the related transaction is unconditional. Revenue from providing recurring services on a retainer basis are recognised monthly.

Secretarial and sponsor services

Revenue from providing these services is recognised in the accounting period in which the services are rendered.

Discounting income

Discounting income for factoring transactions is spread over the term of each transaction.

Dividend income

Revenue is recognised when the right to receive payment is established.

Borrowing costsBorrowing costs are expensed in the period in which they are incurred unless it relates to a qualifying asset.

Income taxThe current tax expense or credit for the period is the tax payable on the current period’s taxable income based on the applicable income tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to temporary differences and to unused tax losses.

The current tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the end of the reporting period in the countries where the company and its subsidiaries and associates operate and generate taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.

Deferred tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. Deferred tax is also not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the end of the reporting period and are expected to apply when the related deferred income tax asset is realised or the deferred tax liability is settled. Deferred tax assets are recognised only if it is probable that future taxable amounts will be available to utilise those temporary differences and losses.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and liabilities and when the deferred tax balances relate to the same taxation authority. Current tax assets and tax liabilities are offset where the entity has a legally enforceable right to offset and intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously.


44

Bus

ines

s O

verv

iew

/ A

nnua

l Fin

anci

al S

tate

men

ts /

Ann

ual G

ener

al M

eeti


Current and deferred tax is recognised in profit or loss, except to the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case, the tax is also recognised in other comprehensive income or directly in equity, respectively.

Taxation rates

South Africa

The normal company tax rate used for the year ended 29 February 2020 is 28% (2019: 28%). Deferred tax assets and liabilities at 29 February 2020 have been calculated using 28% (2019: 28%), being the rate that the group expects to apply to the periods when the assets are realised or the liabilities are settled. Capital gains tax is included at 80% (2019: 80%) of the company tax rate.

United KingdomThe normal company tax rate used for the year ended 29 February 2020 is 19% (2019: 19%). Deferred tax assets and liabilities at 29 February 2020 have been calculated using 19% (2019: 19%), being the rate that the group expects to apply to the periods when the assets are realised or the liabilities are settled.

Sales tax

Expenses and assets are recognised net of the amount of sales tax, except:

• When the sales tax incurred on a purchase of assets or services is not recoverable from the taxation authority, in which case, the sales tax is recognised as part of the cost of acquisition of the asset or as part of the expense item, as applicable, or

• When receivables and payables are stated with the amount of sales tax included.

The net amount of sales tax recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the statement of financial position.

Segmental reportingOperating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. The chief operating decision maker is the person or group that allocates resources to and assesses the performance of the operating segments of an entity. The group has determined that its chief operating decision maker is the executive board of directors of the group.

Earnings per shareBasic earnings per share

Basic earnings per share is calculated by dividing the profit attributable to owners of the company, excluding any costs of servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding during the financial year.

Diluted earnings per share

Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account:

• the after income tax effect of interest and other financing costs associated with dilutive potential ordinary shares, and

• the weighted average number of additional ordinary shares that would have been outstanding assuming the conversion of all dilutive potential ordinary shares.


45

Bus

ines

s O

verv

iew

/ A

nnua

l Fin

anci

al S

tate

men

ts /

Ann

ual G

ener

al M

eeti

ngNotes to the consolidated annual financial statements

1. Significant accounting judgements, estimates and assumptions

The preparation of the annual financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the disclosure of contingent liabilities at the reporting date. However, uncertainty about these assumptions and estimates could result in outcomes that could require a material adjustment to the carrying value of the asset or liability affected in the future.

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 detailed below:

Consolidation decisions

Management assessed the classification of its various investments in subsidiaries, joint ventures and associates in terms of IFRS 10 Consolidated Financial Statements by determining whether the company is exposed, or has rights, to variable returns from its involvement in the investees and has the ability to affect those returns through its power.

These assessments including board representation and the terms of shareholder agreements are detailed in notes 7 and 8.

During the year, the company’s shareholdings in Mettle Solar Investments (Pty) Ltd and Mettle Solar Africa Ltd were greater than 50%. However, the company had no control over either investee as director and shareholder resolutions could only be approved with a 70% majority. As a result, these investees were not consolidated but rather equity accounted.

Impairment of investments in associates and joint ventures

Management reviewed the financial performance of all equity accounted investments to identify indications of impairment. This resulted in the following investments being tested for impairment for the reasons detailed below:

• Lendcor (Pty) Ltd – continued depressed financial results and uncertainty over future profitability

• Incatorque (Pty) Ltd – continued losses and has yet to trade profitably

• Mettle Solar Investments (Pty) Ltd – continued accounting losses

The recoverable amount was determined on a fair value less cost of disposal basis and compared to their carrying value. These calculations considered the investments’ current net asset value, approved future budgeted profitability and finally, the price that an external market participant would be prepared to transact at.

This resulted in the recognition of impairments being recognised against the group’s equity accounted investment in Lendcor (Pty) Ltd – refer to note 8.

In addition, a loss allowance was recognised against the loans advanced to Incatorque (Pty) Ltd – refer to note 9.

Gridworks Development Partners LLP invested its first R30 million in Mettle Solar Investments (Pty) Ltd in November 2019. Its remaining R76.7 million was invested in March 2020 resulting in its shareholding increasing to 40%. This transaction supports the group’s carrying value of its investment in Mettle Solar Investments (Pty) Ltd.

Measurement of expected credit loss allowance

The group assesses the expected credit losses associated with its debt instruments carried at amortised cost, on a forward-looking basis. The impairment methodology applied depends on whether there has been a significant increase in credit risk.

For trade receivables, the group applies a combination of the staging model and simplified approach permitted by IFRS 9, which requires expected credit losses to be recognised based on the stage of the debt, within the general model, or on expected lifetime losses from initial recognition of the receivables. The historical credit loss rates of the group have been low.

Management assesses impairment on a per customer basis. This assessment considers the current ageing of the balance, past payment history, remaining term and value of security held.

Management considered multiple scenarios incorporating the latest available information on the expected decline in United Kingdom property prices due to the COVID-19 pandemic. Other assets held by customers (outside the existing security) were also considered. These assets would be used to meet their obligations to the group in terms of their personal guarantees.

A 10% downturn in property prices was considered the most likely scenario – as a result, an additional R7.8 million loss allowance against the Reward Capital loan book was recorded.


46

Bus

ines

s O

verv

iew

/ A

nnua

l Fin

anci

al S

tate

men

ts /

Ann

ual G

ener

al M

eeti

ng

2. Group informationInformation about subsidiaries

All subsidiary undertakings are included in the consolidation. The proportion of the voting rights in the subsidiary undertakings held directly by the parent company do not differ from the proportion of ordinary shares held.

The principal subsidiaries at 29 February 2020 are detailed below:

Directly held

Name Principal activitiesCountry of

incorporation2020

%2019

%

Reward Investments (No. 2) Ltd Investment holding company United Kingdom 90% 90%

Mettle Administrative Services (Pty) Ltd Factoring and debtor finance South Africa 100% 100%

Indirectly held

The following subsidiaries are all effectively 72.5% (2019: 75%) owned by Reward Investments (No. 2) Ltd:

Name Principal activities Country of incorporation

Reward Finance Group Ltd Investment holding company United Kingdom

Reward Capital Ltd Asset backed lending United Kingdom

Reward Invoice Finance Ltd Invoice financing United Kingdom

Reward Investments (No. 2) Ltd sold 2.5% of its shares in Reward Finance Group Ltd to TCAS Investments Ltd in June 2019. TCAS Investments Ltd is controlled by Tim Stafford who is a director of Reward Finance Group Ltd. Reward Finance Group Ltd provided a loan of £0.43 million to TCAS Investments Ltd to facilitate the purchase. Refer to note 12 for the terms of the loan.

Non-controlling interest

The only non-controlling interest is in Reward Investments (No. 2) Ltd and its 72.5% (2019: 75%) held subsidiaries detailed above. Refer to the segment information (note 31) for disclosures on the statement of financial position, statement of comprehensive income and statement of cash flows of these United Kingdom group companies.

Notes to the consolidated annual financial statements (continued)


47

Bus

ines

s O

verv

iew

/ A

nnua

l Fin

anci

al S

tate

men

ts /

Ann

ual G

ener

al M

eeti

ng

3. Property, plant and equipment 2020

Cost

Balance at 1 March 2019

R’000Additions

R’000

Disposal of subsidiary

(note 30D) R’000

Foreign currency

translation movement

R’000Disposals

R’000

Balance at 29 February

2020 R’000

Leasehold improvements/fixtures and fittings 909 1 683 (6) 170 (184) 2 572

Computer equipment 1 635 943 (90) 170 (174) 2 484

Office equipment and furniture 568 31 (18) - (89) 492

Vehicles 69 - - - - 69

3 181 2 657 (114) 340 (447) 5 617

Accumulated depreciation


R’000Depreciation

R’000


(note 30D) R’000

Foreign currency


R’000Disposals

R’000


2020 R’000

Leasehold improvements/fixtures and fittings 516 419 (5) 56 (38) 948

Computer equipment 578 845 (79) 82 (164) 1 262

Office equipment and furniture 360 183 (18) - (98) 427

Vehicles 34 16 - - - 50

1 488 1 463 (102) 138 (300) 2 687

Net book value2020

R’0002019

R’000

Leasehold improvements/fixtures and fittings 1 624 393

Computer equipment 1 222 1 057

Office equipment and furniture 65 208

Vehicles 19 35

2 930 1 693

Equipment of R2.8 million (2019: R1.2 million) forms part of the security provided to Foresight Group (refer to note 17).


48

Bus

ines

s O

verv

iew

/ A

nnua

l Fin

anci

al S

tate

men

ts /

Ann

ual G

ener

al M

eeti

ng

3. Property, plant and equipment (continued)

2019

Cost


R’000Additions

R’000

Acquisition of subsidiaries

R’000


R’000

Foreign currency


R’000Disposals

R’000


2019 R’000

Leasehold improvements/fixtures and fittings 321 297 265 - 26 - 909

Computer equipment 307 699 682 (106) 77 (24) 1 635

Office equipment and furniture 587 57 50 (46) - (80) 568

Vehicles 84 - - - - (15) 69

1 299 1 053 997 (152) 103 (119) 3 181

Accumulated depreciation


R’000Additions

R’000

Acquisition of

subsidiaries R’000


R’000

Foreign currency


R’000Disposals

R’000


2019 R’000

Leasehold improvements/fixtures and fittings 147 369 - - - - 516

Computer equipment 199 407 - (17) - (11) 578

Office equipment and furniture 328 114 - (2) - (80) 360

Vehicles 33 16 - - - (15) 34

707 906 - (19) - (106) 1 488



49

Bus

ines

s O

verv

iew

/ A

nnua

l Fin

anci

al S

tate

men

ts /

Ann

ual G

ener

al M

eeti

ng

2020 R’000

4. LeasesThe note provides information for leases where the group is a lessee.

Amounts recognised in the statement of financial position

Rights-of-use assetsOffice buildings 7 029

Reconciliation

Initial application of IFRS 16 Leases 5 373

New office building lease concluded 3 027

Disposal of subsidiary (note 30D) (355)

Depreciation (1 495)

Foreign currency translation movement 479

7 029

Lease liabilitiesCurrent 1 586

Non-current 6 404

7 990

Reconciliation

Initial application of IFRS 16 Leases 6 040

New office building lease concluded 3 027

Interest expense 523

Disposal of subsidiary (note 30D) (380)

Repayments (capital) (1 243)

Repayments (interest) (523)

Foreign currency translation movement 546

At end of the year 7 990

Amounts recognised in the statement of profit or loss

Interest expense 523

Depreciation charge of right-of-use asset 1 495

Until 28 February 2019, leases of property and equipment were classified as either finance leases or operating leases. From 1 March 2019, leases are recognised as a right-of-use asset and a corresponding liability at the date at which the leased asset is available for use by the group. The United Kingdom incremental borrowing rate applied to the lease liability on 1 March 2019 was 6.50% while the South African rate was 11.25%.

A new office was opened in Manchester during the year and the lease term of five years was used in measuring the lease liability.

The existing Leeds office lease expires in October 2025. The group has the option to exit this lease in October 2020 but management does not currently intend exercising this option. As a result, the full 10-year lease term was used in calculating the lease liability.


50

Bus

ines

s O

verv

iew

/ A

nnua

l Fin

anci

al S

tate

men

ts /

Ann

ual G

ener

al M

eeti

ng Notes to the consolidated annual financial statements (continued)

2020 R’000

2019 R’000

5. GoodwillCostAt beginning and end of the year 18 623 18 623

Accumulated impairmentAt beginning of the year 13 028 11 148

Impairment recognised in profit or loss 2 690 1 880

At end of the year 15 718 13 028

Net book value 2 905 5 595

The goodwill is allocated to the following South African cash-generating units:

Administrative Services 2 905 2 905

Corporate Finance - 2 690

2 905 5 595

2020

The recoverable amounts of the cash-generating units were determined based on a fair value less cost of disposal calculation. The fair values used sustainable earnings before interest, tax, depreciation and amortisation and earnings multiples of one to four and are classified as level 3 in the fair value hierarchy. The valuation technique is unchanged from the prior year. The assumptions are consistent with external sources of information.

R’000

An impairment was recognised in the following cash-generating unit:Corporate Finance: Reduced deal flow due to macroeconomic conditions 2 690

2019

The recoverable amounts of the cash-generating units were determined based on a fair value less cost of disposal calculation. The fair values used sustainable earnings before interest, tax, depreciation and amortisation and earnings multiples of one and four and are classified as level 3 in the fair value hierarchy. The valuation technique is unchanged from the prior year. The assumptions are consistent with external sources of information.

R’000

An impairment was recognised in the following cash-generating unit:Specialised Finance: Resignation of key senior management 1 880


51

Bus

ines

s O

verv

iew

/ A

nnua

l Fin

anci

al S

tate

men

ts /

Ann

ual G

ener

al M

eeti

ng

2020 R’000

2019 R’000

6. Deferred taxationReconciliationAt beginning of the year 873 833

Acquisition of subsidiary - (68)

Disposal of subsidiary (note 30D) (992) -

Adoption of IFRS 16 Leases 65 -

Foreign currency translation movement 27 (14)

Temporary differences charged to profit or loss 554 122

At end of the year 527 873

AnalysisProvisions and payables 997 790

Trade receivables loss allowance 992 265

Calculated tax losses - 706

Financial assets at fair value through profit or loss (330) (261)

Property, plant and equipment (368) (100)

Right-of-use assets (164) -

Investment in associate (762) -

Loan due from joint venture - (508)

Lease liabilities 180 -

Prepayments (18) (19)

527 873

SplitAsset 1 774 1 644

Liability (1 247) (771)

527 873

Portion of deferred tax asset to be realised within twelve months 1 239 1 409

Calculated tax lossesAt end of the year 89 2 257

Applied in the creation of deferred taxation assets - (2 156)

89 101


52

Bus

ines

s O

verv

iew

/ A

nnua

l Fin

anci

al S

tate

men

ts /

Ann

ual G

ener

al M

eeti


2020 R’000

2019 R’000

7. Investments in joint venturesReconciliationAt beginning of the year 27 751 7 073

Acquisition of shares in joint venture - 21 764

Disposal of shares in joint venture 3 447 -

Dividend received (381) (124)

Allowance for impairment - (2 341)

Allowance for impairment now part of loss allowance (refer to note 9) 1 270 -

Share of profit 3 945 1 379


Split as follows on the consolidated statement of financial position:

Investments in joint ventures

• non-current 28 566 28 953

• allowance for impairment (1 071) (2 341)

• cumulative share of equity accounted profit 8 537 2 408

36 032 29 020

Loans due from joint ventures (refer to note 9)

• cumulative share of equity accounted loss - (1 269)

36 032 27 751

AnalysisIncatorque (Pty) Ltd (unlisted)

• subscription for 50.4% of ordinary shares 3 313 3 313


• cumulative share of loss (2 240) (972)

Gray Swan Financial Services (Pty) Ltd (unlisted)

• subscription for 50% of ordinary shares 4 000 4 000

• dividend received (505) (124)

• cumulative share of profit 2 120 1 016

Mettle Credit Services (Pty) Ltd (unlisted)

• 48.9% of ordinary shares 1 845 1 845

• cumulative share of profit 603 412

Mettle Solar Africa Ltd (unlisted)

• 0% (2019: 55%) of ordinary shares - 6

• cumulative share of loss - (6)

Christopher Finance (Pty) Ltd (unlisted)

• 49% of ordinary shares 19 912 19 912

• cumulative share of profit 6 986 1 959


53

Bus

ines

s O

verv

iew

/ A

nnua

l Fin

anci

al S

tate

men

ts /

Ann

ual G

ener

al M

eeti

ng

2020 R’000

2019 R’000

Mettle Specialised Finance (Pty) Ltd (unlisted)

• 50% of ordinary shares - -

• cumulative share of profit 1 069 -

36 032 29 020

Investments in joint ventures at 29 February 2020 include notional goodwill of R14.9 million (2019: R19.4 million).

Incatorque (Pty) Ltd

The company acquired the ordinary shares and loan claim in November 2016 for R3.3 million.

Incatorque (Pty) Ltd is a financial technology service provider providing bespoke payment technology solutions. It is a private company operating in South Africa.

The company and the other 49.6% shareholder both have the right to appoint 2 directors to the board. The operating plans of the joint venture need to be approved by 75% of shareholders.

An allowance for impairment has been recognised due to its continued operating losses. A loss of R2.5 million was incurred in the current year (2019: R0.8 million).

Gray Swan Financial Services (Pty) Ltd

The company subscribed for 50% of the ordinary shares for R4 million in June 2017. The company needs to make a further subscription in 2021 based on the profit after tax for the financial years ending 29 February 2020 and 28 February 2021. This future subscription amount is reduced by the R4 million. Refer to note 19.

Gray Swan Financial Services (Pty) Ltd is a leading independent investment advisory and wealth management company. It is a private company operating in South Africa.

The company and the other 50% shareholder both have the right to appoint an equal number of directors to the board. The operating plans of the joint venture need to be approved by both shareholders.

Mettle Credit Services (Pty) Ltd

Montsi Investments invested R1.8 million in Mettle Credit Services (Pty) Ltd on 31 May 2018 and became

a 51.1% shareholder. As a result, the company’s indirect shareholding diluted to 48.9%.

Mettle Credit Services (Pty) Ltd provides debt collection and administration services to third parties. It is a private company operating in South Africa.

Each shareholder has the right to appoint two directors to the board. The operating plans of the joint venture need to be approved by both shareholders.

Mettle Solar Africa Ltd

The company acquired the ordinary shares and loan claim in May 2018 for R13.7 million.

Mettle Solar Africa Ltd is incorporated in Mauritius and its principal activity is generating green energy as well as the direct rendering of green energy services. The green technology includes rooftop and ground mounted solar photovoltaic systems in Kenya and the Seychelles.

The company did not control Mettle Solar Africa Ltd as all director and shareholder resolutions could only be approved with a 70% majority.

The company swapped its shares in and loan claims against Mettle Solar Africa Ltd for additional shares in Mettle Solar Investments (Pty) Ltd at a valuation of R21 million. As a result, Mettle Solar Africa Ltd became a wholly owned subsidiary of Mettle Solar Investments (Pty) Ltd.

Christopher Finance (Pty) Ltd

The company acquired the ordinary shares and loan claim in November 2018 for R27.4 million.

Christopher Finance (Pty) Ltd is a niche financial services company providing working capital finance to selected firms of attorneys. The finance is secured by claims for costs the attorneys have against reputable third parties. It is a private company operating in South Africa.


54

Bus

ines

s O

verv

iew

/ A

nnua

l Fin

anci

al S

tate

men

ts /

Ann

ual G

ener

al M

eeti

ng

7. Investments in joint ventures (continued)

Each shareholder has the right to appoint one director to the board for every 17% owned. However, all material decisions require 75% approval. These decisions include approving the budget, operating plans, distribution policy and any change in the chief executive officer.

Mettle Specialised Finance (Pty) Ltd

Mettle Specialised Finance (Pty) Ltd provides specialised finance services including asset backed securitisations and fundraising. It is a private company operating in South Africa.

The company and the other 50% shareholder both have the right to appoint an equal number of directors to the board. The operating plans of the joint venture need to be approved by both shareholders.

The summarised financial information has been amended to reflect adjustments made by the company when using the equity method, including modifications for differences in accounting policies. The summarised financial information is detailed below:

2020 R’000

2019 R’000

Incatorque (Pty) LtdSummarised statement of financial positionCurrent

Cash and cash equivalents 404 313

Other assets 240 524

644 837

Other liabilities (59) (59)

Non-current

Other assets 171 1 247

Financial liabilities (including related party borrowings) (2 306) (1 055)

(2 135) 192

Net (liabilities)/assets (1 550) 970

Effective proportion of the group’s ownership 50.4% 50.4%

Group’s share of net (liabilities)/assets (782) 488

Goodwill 1 853 1 853

Allowance for impairment (1 071) (2 341)

Carrying amount of the investment - -

Summarised statement of comprehensive incomeRevenue 2 000 1 814

Interest expense (132) (4)

Depreciation and amortisation (207) (247)

Operating expenses (3 272) (2 729)

Loss before tax (1 611) (1 166)

Tax (908) 325

Loss for the year (2 519) (841)


Group’s share of the loss for the year (1 270) (424)



55

Bus

ines

s O

verv

iew

/ A

nnua

l Fin

anci

al S

tate

men

ts /

Ann

ual G

ener

al M

eeti

ng

2020 R’000

2019 R’000

Gray Swan Financial Services (Pty) LtdSummarised statement of financial positionCurrent

Cash and cash equivalents 2 938 5 588

Other assets 1 435 1 576

4 373 7 164

Other liabilities (including trade payables) (848) (308)

Non-current


Financial liability (related party borrowing) (4 000) (4 000)

1 641 (3 136)

Net assets 5 166 3 720


Group’s share of net assets 2 583 1 860

Goodwill 3 032 3 032

Carrying amount of the investment 5 615 4 892


Other income 646 382

Interest income 481 465

Depreciation and amortisation (247) 128


Equity accounted loss (155) -

Profit before tax 3 116 1 996

Tax (909) (580)

Profit for the year 2 207 1 416


Group’s share of the profit for the year 1 104 708


56

Bus

ines

s O

verv

iew

/ A

nnua

l Fin

anci

al S

tate

men

ts /

Ann

ual G

ener

al M

eeti

ng

2020 R’000

2019 R’000

7. Investments in joint ventures (continued)Mettle Credit Services (Pty) LtdSummarised statement of financial positionCurrent



5 618 5 065

Other current liabilities (including trade payables) (1 065) (532)

Non-current


Financial liabilities (2 380) -

Other liabilities - (20)

457 85

Net assets 5 010 4 618



Goodwill - -



Interest income 297 211

Interest expense (388) -

Depreciation and amortisation (821) (65)


Profit before tax 545 1 176

Tax (153) (333)

Profit for the year (2019: 9 months) 392 843


Group’s share of the profit for the year (2019: 9 months) 191 412



57

Bus

ines

s O

verv

iew

/ A

nnua

l Fin

anci

al S

tate

men

ts /

Ann

ual G

ener

al M

eeti

ng

2020 R’000

2019 R’000

Mettle Solar Africa LtdThis financial information is denominated in US Dollars and has been translated at an exchange rate of R14.49 (2019: R13.99). The group swapped its shares in and loan claims against Mettle Solar Africa Ltd for additional shares in Mettle Solar Investments (Pty) Ltd in June 2019.

Summarised statement of financial positionCurrent

Cash and cash equivalents 1 663

Other assets 7 456

9 119

Financial liabilities (49 684)

Other liabilities (including trade payables) (251)

(49 935)

Non-current

Other assets 57 374

Financial liabilities (27 060)

30 314

Net liabilities (10 502)

Effective proportion of the group’s ownership 55.0%

Group’s share of net liabilities (5 776)

Goodwill 4 501

Carrying amount (set off against investment in and loan to joint venture) (1 275)


Interest income - 7

Interest expense (1 670) (3 427)

Depreciation and amortisation (1 162) (1 985)


Loss before tax (3 960) (2 632)

Tax - 313

Loss for the 4 months (2019: 9 months) (3 960) (2 319)


Group’s share of the loss for the 4 months (2019: 9 months) (2 178) (1 275)


58

Bus

ines

s O

verv

iew

/ A

nnua

l Fin

anci

al S

tate

men

ts /

Ann

ual G

ener

al M

eeti

ng

2020 R’000

2019 R’000

7. Investments in joint ventures (continued)Christopher Finance (Pty) LtdSummarised statement of financial positionCurrent


Other assets 204 441 151 904

210 208 157 249

Other liabilities (including trade payables) (2 831) (103 561)

Non-current

Other assets 16 310 15 413

Financial liabilities (including related party borrowings) (189 314) (44 986)

(173 004) (29 573)

Net assets 34 373 24 115



Goodwill 10 055 10 055



Interest income 354 12 418


Loss allowance (3 834) -


Profit before tax 14 310 5 551

Tax (4 051) (1 553)

Profit for the year (2019: 4 months) 10 259 3 998


Group’s share of the profit for the year (2019: 4 months) 5 027 1 959



59

Bus

ines

s O

verv

iew

/ A

nnua

l Fin

anci

al S

tate

men

ts /

Ann

ual G

ener

al M

eeti

ng

2020 R’000

Mettle Specialised Finance (Pty) LtdSummarised statement of financial positionCurrent

Cash and cash equivalents 247

Other assets 2 377

2 624

Financial liability (related party borrowing) (564)

Other current liabilities (including trade payables) (689)

(1 253)

Non-current

Other assets 768

Net assets 2 139


Group’s share of net assets 1 069

Goodwill -

Carrying amount of the investment 1 069

Summarised statement of comprehensive incomeRevenue 5 834

Other income 261

Interest expense (18)

Loss allowance (266)

Depreciation (256)

Operating expenses (2 586)

Profit before tax 2 969

Tax (830)

Profit for the period (7 months) 2 139


Group’s share of the profit for the period (7 months) 1 069

Dividends of R0.4 million (2019: R0.1 million) were received from joint ventures (namely, Gray Swan Financial Services (Pty) Ltd) during the year.

There are no contingent liabilities relating to the group’s interests in joint ventures.


60

Bus

ines

s O

verv

iew

/ A

nnua

l Fin

anci

al S

tate

men

ts /

Ann

ual G

ener

al M

eeti


2020 R’000

2019 R’000

8. Investments in associatesReconciliationAt beginning of the year 21 899 45 813

Additional cash investment in associate 3 146 -

Additional investment in associate via swap of shares and loan claims 15 621 -

Capitalisation of loan claim 63 830 -

Share of loss (9 751) (8 114)


Disposal of investment in associate - (940)

Dividend received - (2 000)


Split as follows on the consolidated statement of financial position:

Investments in associates

• non-current 119 254 44 371

• share of equity accounted loss (32 224) (7 260)

87 030 37 111

Loans due from associates (refer to note 10)

• share of equity accounted loss - (15 212)

87 030 21 899

AnalysisMettle Solar Investments (Pty) Ltd 57 068 -

Lendcor (Pty) Ltd 35 412 34 977


Lendcor Holdings (Pty) Ltd 15 125 14 994


87 030 37 111


61

Bus

ines

s O

verv

iew

/ A

nnua

l Fin

anci

al S

tate

men

ts /

Ann

ual G

ener

al M

eeti

ng2020

Interest held

%

Total assets R’000

Total liabilities

R’000Revenue

R’000Profit/(loss)

R’000

Unlisted

Mettle Solar Investments (Pty) Ltd 49.2 118 011 61 626 10 647 (10 318)

Lendcor (Pty) Ltd 49.9 115 932 90 863 42 672 436

Lendcor Holdings (Pty) Ltd 49.9 7 534 22 - 131

241 477 152 511 53 319 (9 751)

2019

Interest held

%

Total assets R’000

Total liabilities

R’000Revenue

R’000Profit/(loss)

R’000

Unlisted

Gondotrix (Pty) Ltd 490 48

Mettle Solar Investments (Pty) Ltd 55.0 72 037 87 249 9 028 (7 903)

Lendcor (Pty) Ltd 49.9 108 454 83 821 42 996 (199)

Lendcor Holdings (Pty) Ltd 49.9 7 430 10 - (60)

187 921 171 080 52 514 (8 114)

The carrying value of the investment in Mettle Solar Investments (Pty) Ltd increased due to the following transactions which were conditions precedent to the Gridworks Development Partners LLP subscription detailed below:

• swapped its shares in and loan claims against Mettle Solar Africa Ltd for additional shares in Mettle Solar Investments (Pty) Ltd;

• capitalised its loan claims of R63.8 million (refer to note 10); and

• invested a further R3.1 million.

Gridworks Development Partners LLP invested its first R30 million in Mettle Solar Investments (Pty) Ltd in November 2019. As a result, the company’s shareholding diluted to 49%. Its remaining R76.7 million was invested in March 2020 resulting in its shareholding increasing to 40% and the company diluting further to 35%.

From November 2019, the Mettle Solar Investments (Pty) Ltd board of directors is constituted as follows:

• two representatives of Gridworks Development Partners LLP;

• one representative of the company;

• one representative of other shareholders holding 31% (diluted to 22% in March 2020);

• the chief executive officer (also a minority shareholder); and

• one independent non-executive director (another one still to be appointed).

Lendcor (Pty) Ltd provides unsecured loans for home improvements to the lower living standards measure (LSM) market through a network of building supply merchants. During the prior financial year, certain changes to the collection methodology relating to a segment of its lending book were imposed. Lendcor (Pty) Ltd adjusted its business rules to address these changes. However, this had a negative impact on the collectability of this portion of its lending book. As a result, Lendcor (Pty) Ltd incurred a R0.4 million loss for the year ended 28 February 2019 (2018: R12 million profit). Lendcor (Pty) Ltd generated a small profit of R0.9 million during the current year. No significant change in profitability is budgeted for the February 2021 year. As a result, a further allowance for impairment was recognised. The investment is now reflected at a slight discount to the group’s pro rata share of net asset value.

Investments in associates at 29 February 2020 include notional goodwill of R0.7 million (2019: R6.3 million).

The group’s share of the revenue, results, total assets and total liabilities of its associates, are as follows:


62

Bus

ines

s O

verv

iew

/ A

nnua

l Fin

anci

al S

tate

men

ts /

Ann

ual G

ener

al M

eeti

ng

8. Investments in associates (continued)

Material associates are determined by their contribution of profitability. Additional information on material associates is detailed below:

Gondotrix (Pty) Ltd

Mettle acquired the remaining 50% of Gondotrix (Pty) Ltd on 31 March 2018 for R1. Gondotrix (Pty) Ltd owned 100% of Mettle Credit Services (Pty) Ltd. Mettle Credit Services (Pty) Ltd is accounted for as a joint venture after the subscription for shares by Montsi Investments in May 2018.

The group received dividends of R2 million in March 2018. The group’s 50% interest in Gondotrix (Pty) Ltd was accounted for using the equity method in the consolidated annual financial statements until 31 March 2018. Gondotrix (Pty) Ltd was consolidated as a wholly owned subsidiary until its deregistration during the year.

The financial information is detailed below:

2019 R’000

Revenue 981

Operating expenses (849)

Profit before tax 132

Tax (37)

Profit for the month 95

Effective proportion of the group's ownership 50.0%

Group’s share of profit for the month 48

Lendcor Holdings (Pty) Ltd

Lendcor Holdings (Pty) Ltd owns 30.1% (2019: 30.1%) of Lendcor (Pty) Ltd which provides incremental housing finance. Lendcor (Pty) Ltd is a private company operating in South Africa.

The group received no dividends during the year (2019: RNil). As the other 50.1% shareholder controls Lendcor Holdings (Pty) Ltd, the group’s 49.9% (2019: 49.9%) interest is accounted for using the equity method in the consolidated annual financial statements.


2020 R’000

2019 R’000

Current assets - 1

Non-current assets 15 097 14 888

Current liabilities (43) (21)


Income/(loss) from associate 263 (120)

Tax - -

Profit/(loss) for the year 263 (120)


Group’s share of profit/(loss) for the year 131 (60)



63

Bus

ines

s O

verv

iew

/ A

nnua

l Fin

anci

al S

tate

men

ts /

Ann

ual G

ener

al M

eeti

ng

Lendcor (Pty) Ltd

Lendcor (Pty) Ltd provides incremental housing finance. Lendcor (Pty) Ltd is a private company operating in South Africa.

The group received no dividends during the year (2019: RNil).

The company has the right to appoint 4 of the 9 directors of Lendcor (Pty) Ltd. Its main funder, National Housing Finance Corporation SOC Ltd, has a 20% shareholding which entitles it to appoint 2 directors. It also has the right to veto any specially protected matters requiring 75% shareholder approval.

The group’s 49.9% (2019: 49.9%) interest in Lendcor (Pty) Ltd is accounted for using the equity method in the consolidated annual financial statements.


2020 R’000

2019 R’000

Current assets 161 782 144 222


Current liabilities (60 859) (33 660)

Non-current liabilities (121 230) (134 318)

Net assets 50 239 49 366



Goodwill 10 343 10 343



Revenue 85 516 86 164

Loss allowance (25 204) (31 153)



Profit/(loss) for year 52 (902)

Tax 821 502

Profit/(loss) for the year 873 (400)


Group’s share of the profit/(loss) for the year 436 (199)


64

Bus

ines

s O

verv

iew

/ A

nnua

l Fin

anci

al S

tate

men

ts /

Ann

ual G

ener

al M

eeti


8. Investments in associates (continued)

Mettle Solar Investments (Pty) Ltd

The Mettle Solar Investments (Pty) Ltd group installs, finances and operates solar photovoltaic systems. The Mettle Solar Investments (Pty) Ltd group companies are private companies operating in South Africa, Namibia, Kenya and Seychelles.

The group received no dividends during the year (2019: RNil). The group’s 49% (2019: 55%) interest is accounted for using the equity method in the consolidated annual financial statements.


2020 R’000

2019 R’000

Current assets 37 450 14 375


Current liabilities (29 209) (4 892)

Non-current liabilities (96 046) (153 744)

Net assets/(liabilities) 114 604 (27 659)


Group’s share of net assets/(liabilities) 56 385 (15 212)

Goodwill 683 -

Carrying amount of the investment (2019: set off against loan to associate) 57 068 (15 212)

Revenue 21 641 16 415

Other income 2 809 140




Equity accounted income/(loss) 1 185 (3 014)

Loss before tax (18 736) (14 560)

Tax (24) 191

Loss for the year (18 760) (14 369)

Effective proportion of group’s shareholding during the year 55.0% 55.0%

Group’s share of loss for the year (10 318) (7 903)

It has capital commitments of R13.7 million at year-end (2019: R9.2 million).


65

Bus

ines

s O

verv

iew

/ A

nnua

l Fin

anci

al S

tate

men

ts /

Ann

ual G

ener

al M

eeti

ng

2020 R’000

2019 R’000

9. Loans due from joint venturesIncatorque (Pty) Ltd - 430

• loan 1 781 430

• loss allowance (1 781) -

The unsecured loan accrues interest at prime from May 2019 and is subordinated in favour of other creditors of Incatorque (Pty) Ltd. The company has deferred repayment for at least a year.

Mettle Solar Africa Ltd - 16 507

• loan - 17 776

• share of equity accounted loss (refer to note 7) - (1 269)

The loan was US Dollar denominated and accrued interest at US prime plus 3% (which amounted to 8.5% at 28 February 2019). This loan was swapped for shares in Mettle Solar Investments (Pty) Ltd during the year.

Christopher Finance (Pty) Ltd 8 740 7 831

The unsecured loan accrues interest at prime plus 2% and is subordinated in favour of its other funders.

Mettle Specialised Finance (Pty) Ltd 564 -

The interest free loan is secured by cash and trade receivables balances and repayable by 28 February 2021.

9 304 24 768

Less non-current portion (8 740) (24 768)

564 -

A loss allowance has been recognised on the loan due from Incatorque (Pty) Ltd due to the continued operating losses being incurred. There are no other expected credit losses.

10. Loans due from associatesLendcor Holdings (Pty) Ltd 24 21

The unsecured loan accrues interest at prime and is repayable on demand.

Mettle Solar Investments (Pty) Ltd - 47 647

• loan - 62 859

• share of equity accounted loss (refer to note 8) - (15 212)

The unsecured loan accrued interest at prime plus 3% and was capitalised during the year.

24 47 668

Less: non-current portion - (47 647)

24 21

There are no expected credit losses on these loans due from associates.


66

Bus

ines

s O

verv

iew

/ A

nnua

l Fin

anci

al S

tate

men

ts /

Ann

ual G

ener

al M

eeti


2020 R’000

2019 R’000

11. Financial assets at fair value through profit or lossMandatorily at fair valueGray Swan Sanlam Collective Investments Cautious Fund of Funds 11 177 10 932

ReconciliationAt beginning of the year 10 932 31 234

Fair value adjustment 245 198

Disposals - (20 500)


The unit trust investment is valued at the year-end closing price and secures the overdraft detailed in note 22. The unit trust investment can be disposed of at any time from September 2020. The fair value is classified as level 1 in the fair value hierarchy.

12. Loan receivablesBridging financeMettle Administrative Services (Pty) Ltd is the general partner of the Mettle Debt Fund En Commandite Partnership. The following loans all have shared security with the limited partner. The general partner and the limited partner both have capital invested in these loans:

The loans accrued interest at 10.5% and were repayable in twenty instalments, with the last repayment due in June 2020. The borrower settled the loan in full in February 2020. - 9 774

The loan to Christopher Finance (Pty) Ltd (joint venture) accrued interest at prime plus 7% until June 2019 and at prime plus 5% until December 2019. From December 2019, the loan accrues interest at prime plus 4% and is repayable on 1 year's written notice. Interest is payable monthly. The loan is secured by a debtor's book and certain pledged proceeds. The repayment of the loan has also been guaranteed by various companies related to the borrower. 3 637 17 869

The loan accrues interest at prime plus 5% which is payable monthly. The capital is repayable in two (2019: three) annual instalments with the last repayment due in July 2021. The loan is secured by production rebate credit certificates (two times cover) and a reversionary cession over certain book debts. 1 306 2 041

Property development financeThe unsecured loan accrues interest at prime and will only be recovered when a property development is complete. This is expected to take place in the next year. 983 1 108


67

Bus

ines

s O

verv

iew

/ A

nnua

l Fin

anci

al S

tate

men

ts /

Ann

ual G

ener

al M

eeti

ng

2020 R’000

2019 R’000

Vehicle financeThe secured loans accrue interest rate at an average rate that is 11.00% (2019: 10.85%) above the prime interest rate which was 9.75% at year-end (2019: 10.25%). The average remaining term of these loans is 11.9 (2019: 20.1) months. 211 456

Key persons (related parties)EAF Investments Ltd 11 125 16 249

Reward Finance Group Ltd advanced £1.2 million to EAF Investments Ltd in April 2017 and £0.03 million in June 2019. EAF Investments Ltd is a shareholder in Reward Finance Group Ltd and the company is controlled by Nick Smith who is also a director of Reward Finance Group Ltd. The loan is repayable after 10 years and accrues interest at sterling three-month Libor plus 2.5%. Dividends payable to EAF Investments Ltd are used to repay the loan. EAF Investments Ltd received dividends of R7.4 million during the year (2019: R4 million). The loan is secured by its 10% shareholding in Reward Finance Group Ltd. Nick Smith has also guaranteed (as principal obligor) the repayment of the loan.

JE&K Ltd 10 114 12 665

Reward Finance Group Ltd advanced £0.76 million to JE&K Ltd in April 2018. JE&K Ltd is a shareholder in Reward Finance Group Ltd and the company is controlled by David Harrop who is also a director of Reward Finance Group Ltd. The loan is repayable after 10 years and accrues interest at sterling three-month Libor plus 2.5%. Dividends payable to JE&K Ltd are used to repay the loan. JE&K Ltd received dividends of R3.7 million during the year (2019: R2 million). The loan is secured by its 5% shareholding in Reward Finance Group Ltd. David Harrop has also guaranteed (as principal obligor) the repayment of the loan.

TCAS Investments Ltd 7 080 -

Reward Finance Group Ltd provided a loan of £0.43 million to TCAS Investments Ltd in June 2019. TCAS Investments Ltd is a shareholder in Reward Finance Group Ltd and the company is controlled by Tim Stafford who is also a director of Reward Finance Group Ltd. The loan is repayable after 10 years and accrues interest at sterling three-month LIBOR plus 2.5%. Dividends payable to TCAS Investments Ltd are used to repay the loan. TCAS Investments Ltd received dividends of R1.8 million during the year. The loan is secured by its 2.5% shareholding in Reward Finance Group Ltd. Tim Stafford has also guaranteed (as principal obligor) the repayment of the loan.

The sterling three-month Libor rate was 0.79% at 29 February 2020 (2019: 0.9%). Sterling Libor is to be replaced by another reference rate by the end of 2021. The group is assessing the impact of this change on the above Libor-linked loan receivables for future financial periods.


68

Bus

ines

s O

verv

iew

/ A

nnua

l Fin

anci

al S

tate

men

ts /

Ann

ual G

ener

al M

eeti


2020 R’000

2019 R’000

12. Loan receivables (continued)

Francois van Themaat (director of associate) 2 659 2 942

The loan accrued interest at prime less 2% and was repayable by 15 April 2019. The loan is limited recourse and secured by 172,170 Tradehold Ltd shares. The Tradehold Ltd closing share price was R9.50 (2019: R12.50). An additional loss allowance was recognised during the year due to the decline in the value of the security held.

37 115 63 104

Loss allowance:

Vehicle finance (27) (52)

Related parties (1 023) (640)

36 065 62 412

Less: non-current portion (32 593) (36 421)

Bridging finance (4 213) (7 298)

Vehicle finance (61) (209)

Related parties (28 319) (28 914)

3 472 25 991


Acquisition of subsidiary - 30 411

Advances 10 690 45 842

Non-cash transaction (refer to note 30C) 8 088 -

Interest income 4 549 5 453

Foreign currency translation movement 2 094 3 066

Receipts (including interest) (51 410) (61 405)

Write offs - (3 804)


Interest rate analysis

Fixed - 9 774

Variable 37 115 53 330

37 115 63 104

There is sufficient excess security for these loan receivables. As a result, there is a minimal loss allowance for expected credit losses.

The loss allowance is calculated on a specific basis per counterparty after taking security into account.


69

Bus

ines

s O

verv

iew

/ A

nnua

l Fin

anci

al S

tate

men

ts /

Ann

ual G

ener

al M

eeti

ng

Ageing of loan receivables

2020

Capital before loss

allowance R’000

Loss allowance R’000

Stage 1 34 456 27

Stage 2 - -

Stage 3 2 659 1 023

37 115 1 050

2019

Capital before loss

allowance R’000

Loss allowance R’000

Stage 1 63 095 683

Stage 2 9 9

Stage 3 - -

63 104 692

At 29 February 2020, loan receivables of R34.5 million were fully performing (2019: R63.1 million).

2020 R’000

2019 R’000

The movement in the loss allowance is as follows:

At beginning of the year 692 3 789

Impairment recognised in profit or loss 358 707

Loans written off - (3 804)

At end of the year 1 050 692

Loan receivables of R5.9 million (2019: R30.8 million) are pledged as security for the Small Enterprise Finance Agency SOC Ltd borrowings (refer to note 17).

Loan receivables of R28.3 million (2019: R28.9 million) form part of the security provided to Foresight Group (refer to note 17).


70

Bus

ines

s O

verv

iew

/ A

nnua

l Fin

anci

al S

tate

men

ts /

Ann

ual G

ener

al M

eeti


2020 R’000

2019 R’000

13. Trade and other receivablesTrade receivables

• South Africa 24 902 35 126

• Reward Capital 1 336 820 970 151

• Reward Invoice Financing 238 727 222 721

Loss allowance

• South Africa (4 429) (1 262)

• Reward Capital (26 288) (13 068)

• Reward invoice Financing (4 561) (13 663)

1 565 171 1 200 005

Other receivables 382 1 348

Fee accruals 26 483

Prepayments 1 046 69

Value added tax 12 4

1 566 637 1 201 909

Reward Capital2020

R’0002019

R’000

ReconciliationAt beginning of the year 970 151 -


Advances 835 236 549 326

Interest and fee income 211 338 134 201


Receipts (including interest and fees) (776 153) (556 445)

Reallocation to Invoice Financing (1 775) -

Write offs - (4 521)

At end of the year 1 336 820 970 151

Reward Invoice Financing2020

R’0002019

R’000



Advances 1 533 313 1 315 659

Interest and fee income 59 566 45 155


Receipts (including interest and fees) (1 583 264) (1 347 022)

Reallocation from Capital 1 775 -

Write offs (12 945) -



71

Bus

ines

s O

verv

iew

/ A

nnua

l Fin

anci

al S

tate

men

ts /

Ann

ual G

ener

al M

eeti

ng

The majority of the South African trade receivables relate to trade debtor factoring in the panel beating and medical industries.

Reward Finance Group Ltd provides asset secured short and medium-term loans and invoice discounting to the United Kingdom small and medium-sized enterprises (SME) market. Loan sizes are between £50 000 and £2 million and loan periods vary between 2 and 24 months. Reward Finance Group Ltd’s strategy is to target SME’s that are not adequately serviced by traditional banks.

Trade receivables are secured by a combination of properties, receivables, debentures and equity shares to the value of £198.2 million (2019: £157.6 million).

Trade receivables of R21.4 million (2019: R31.5 million) are pledged as security for the Small Enterprise Finance Agency SOC Ltd borrowings (refer to note 17).

Trade and other receivables of R1.56 billion (2019: R1.2 billion) forms part of the security provided to Foresight Group (refer to note 17).

Trade and other receivables include amounts of R138.2 million (2019: R98.8 million) that contractually fall due in excess of one year. These amounts are reflected as current as they form part of the normal operating cycle.

Ageing of South African trade receivables

Capital before loss allowance

2020 R’000

Loss allowance 2020

R’000


2019R’000

Loss allowance2019

R’000

Not past due 24 792 4 362 33 093 245

Past due 1 – 29 days 86 43 - -

Past due 30 – 59 days - - 880 137

Past due 60 – 89 days 24 24 - -

Past due > 180 days - - 1 153 879

24 902 4 429 35 126 1 261

The large increase in the loss allowance is attributable to one specific receivable with an outstanding balance of R5.8 million. This entity had misrepresented the identities of its customers so as to ensure that a group company would purchase its debts. All members of the entity signed guarantees for the obligations and liabilities of the entity. Management has since visited the entity’s trading premises as well as its significant customers, taken control of its banking accounts and is in the process of registering a special notarial bond over the entity’s stock. Based on the actions taken to date, the group expects to recover a significant portion of this balance within the next six months.

Reward Capital


2020 R’000

Loss allowance 2020

R’000


2019R’000

Loss allowance2019

R’000

Stage 1 1 104 428 8 856 848 101 4 191

Stage 2 59 951 822 11 135 55

Stage 3 172 441 16 610 110 915 8 822

1 336 820 26 288 970 151 13 068


72

Bus

ines

s O

verv

iew

/ A

nnua

l Fin

anci

al S

tate

men

ts /

Ann

ual G

ener

al M

eeti


13. Trade and other receivables (continued)

Reward Invoice Financing


2020 R’000

Loss allowance 2020

R’000


2019R’000

Loss allowance2019

R’000

Not past due 234 284 3 477 201 465 1 006

Past due less than 90 days 2 863 42 8 325 43

Impaired 1 580 1 042 12 931 12 614

238 727 4 561 222 721 13 663

Reward Capital

The movements in the various loss allowance stages are reconciled below:

Stage 1 2020

R’000

Stage 2 2020

R’000

Stage 3 2020

R’000

Total 2020

R’000

At beginning of the year 4 191 55 8 822 13 068

New receivables advanced 2 109 - - 2 109

Change in risk 1 921 710 6 593 9 224

Foreign currency translation movement 635 57 1 195 1 887

At end of the year 8 856 822 16 610 26 288

Reward Invoice Financing

The movements in the various loss allowance stages are reconciled below:

Not past due 2020

R’000

Past due less than 90 days

2020 R’000

Impaired 2020

R’000

Total 2020

R’000

At beginning of the year 1 006 43 12 614 13 663

New receivables advanced 1 023 - - 1 023

Change in risk 1 201 - 1 246 2 447

Write offs - (4) (12 942) (12 946)


At end of the year 3 477 42 1 042 4 561

2020 R’000

2019 R’000

Movement in the South African loss allowance is as follows:

At beginning of the year 1 262 83


Receivables written off - (311)



73

Bus

ines

s O

verv

iew

/ A

nnua

l Fin

anci

al S

tate

men

ts /

Ann

ual G

ener

al M

eeti

ng

Trade receivables without external credit rating:

Reward CapitalGroup 1 - new customers (less than 6 months) 352 954 276 316

Group 2 - existing customers with no past defaults 753 144 530 448

Group 3 - existing customers with some past defaults 204 434 150 319

1 310 532 957 083

Reward Invoice FinancingGroup 1 - new customers (less than 6 months) 76 397 48 335

Group 2 - existing customers with no past defaults 152 697 151 934

Group 3 - existing customers with some past defaults 5 072 8 789

234 166 209 058

14. Cash and cash equivalentsCash at bank and in hand 90 702 109 648

Cash and cash equivalents include the following for the purpose of the statement of cash flows:


Bank overdrafts (refer to note 22) (17 787) (19 241)

72 915 90 407

Cash and cash equivalents of R36.5 million (2019: R8.8 million) are pledged as security for the Small Enterprise Finance Agency SOC Ltd borrowings (refer to note 17).

Cash and cash equivalents of R52.4 million (2019: R95.4 million) forms part of the security provided to Foresight Group (refer to note 17).

2020 R’000

2019 R’000

Movement in the Reward Capital loss allowance is as follows:

At beginning of the year 13 068 -



Receivables written off - (4 521)



Movement in the Reward Invoice Financing loss allowance is as follows:

At beginning of the year 13 663 -



Receivables written off (12 946) -

Foreign currency translation movement 374 747



74

Bus

ines

s O

verv

iew

/ A

nnua

l Fin

anci

al S

tate

men

ts /

Ann

ual G

ener

al M

eeti

ng

2020 R’000

2019 R’000

15. Stated capitalOrdinary sharesAuthorised

500 million shares of no par value

Issued

247 174 375 fully paid shares of no par value 545 828 545 828


The following amendments to share capital took place in April 2018:• authorised and issued share capital was converted to

no par value; and

• authorised share capital was increased to 500 million no par value ordinary shares.

The following share issues to Tradehold Ltd took place during the prior year: • 40.2 million shares in settlement of borrowings

amounting to R42 million.

• 110.7 million shares for R403.2 million.

On 28 May 2018, Tradehold Ltd distributed its ordinary shares in the company to its shareholders.

16. Share-based payment reserveAn employee share option scheme, the Mettle Employee Share Option Scheme (“ESOP”), was adopted in the current year. The maximum number of shares that can be awarded under the ESOP is 12 358 718. The options granted under the ESOP are exercisable at the 30 trading day volume weighted average price at which the shares traded on the JSE at the close of the last trading day prior to the day on which the options were awarded to an employee by the company, in three equal tranches on the third, fourth and fifth anniversary, provided that the employee is still employed on such exercise date.

The fair value at the date of acceptance of the award by the employee (the “Grant Date”) is estimated using a binomial pricing model, taking into account the terms and conditions upon which the options were granted. If the exercise notice of any particular tranche of an option is not received by the company within 7 years of the Grant Date the option will automatically lapse. There is no cash settlement of the options.

A total of 3 600 000 share options were granted in August 2019 at an exercise price of R0.92 per share. At 29 February

2020, there are 8 758 718 shares available for utilisation under the ESOP.

The following options were granted to a director of the company in terms of the ESOP during the year:

On 30 August 2019 (the Grant Date), an award of 1 000 000 share options of R0.92 per share were accepted by JJ Rookledge, exercisable in three equal tranches on 30 August 2022, 30 August 2023 and 30 August 2024 respectively.

The following options were granted to a director of a major subsidiary in terms of the ESOP during the year:

On 29 August 2019 (the Grant Date), an award of 400 000 share options of R0.92 per share were accepted by G Wright, exercisable in three equal tranches on 29 August 2022, 29 August 2023 and 29 August 2024 respectively.

The following options were granted to a director of the company secretary in terms of the ESOP during the year:

On 27 August 2019 (the Grant Date), an award of 400 000 share options of R0.92 per share were accepted by WD Marais, exercisable in three equal tranches on 27 August 2022, 27 August 2023 and 27 August 2024 respectively.

The fair value of the options granted (R2.7 million) was estimated on the Grant Date using the following assumptions:

Dividend yield 0.00%Expected volatility 20.65%Risk-free interest rate 8.20%Expected life of share options 7 yearsWeighted average share price R1.40

The company has recognised a share-based payment expense in the statement of changes in equity of R348 050 during the current year.


75

Bus

ines

s O

verv

iew

/ A

nnua

l Fin

anci

al S

tate

men

ts /

Ann

ual G

ener

al M

eeti

ng

2020 R’000

2019 R’000

17. BorrowingsForesight Group 960 225 684 414

2020The borrowings accrue interest at the higher of 6.5% and 2.5% above the Bank of England base rate, which is payable quarterly. The facility limit is £60 million. £40 million is repayable in September 2023 with the balance repayable four years from each individual draw down. The Bank of England base rate was 0.75% at 29 February 2020.

2019

The borrowings accrued interest at a fixed rate of 6.5% which was payable quarterly. The facility limit was £45 million until 31 December 2018 and £50 million from 1 January 2019. The repayment date was four years from each individual draw down with the first repayment due in August 2021.

Foresight Group has a debenture over all assets of Reward Finance Group Ltd (including shares in its subsidiaries). The carrying value of these assets (equipment, loan receivables, trade and other receivables and cash and cash equivalents) amount to R1.6 billion at year-end. The amounts owed by Reward Finance Group Ltd to Reward Investments (No. 2) Ltd (R387.4 million) and Sandy Ltd (R160.6 million) are subordinated in favour of Foresight Group.

The financial covenant, which measures the Reward Finance Group Ltd consolidated net asset value plus subordinated debt as a percentage of the outstanding principal amount, must be at least 50% (2019: 60%). This covenant measured 65.9% (2019: 82.5%) at year-end.

There are two loan book covenants:

• less than 15% of the loan book must be in recovery phase (4.4% for the current year and 2.3% for the prior year); and

• bad debts must be less than 5% (0.9% for the current year and 0.4% for the prior year).

There have been no covenant breaches during the current or prior year.


76

Bus

ines

s O

verv

iew

/ A

nnua

l Fin

anci

al S

tate

men

ts /

Ann

ual G

ener

al M

eeti

ng

2020 R’000

2019 R’000

17. Borrowings (continued)Small Enterprise Finance Agency SOC Ltd 49 394 49 342

The borrowings accrue interest at prime plus 1%. Interest is payable semi-annually with capital repayable in March 2020. Repayments of R17.6 million have been made subsequent to year-end but the company is still waiting for possible refinancing terms. The company has access to sufficient cash balances should repayment be requested. The borrowings are secured by Mettle Administrative Services (Pty) Ltd's cash balances and loan and trade receivables of R64 million (2019: R71.1 million).

1 009 619 733 756

The company provided a guarantee for the Rand equivalent of $3.1 million to Investec Bank (Mauritius) Ltd (via Investec Bank Ltd) for its $5 million funding facility provided to Mettle Solar Africa Ltd. The company obtained these funds (R44 million) from the Mettle Debt Fund En Commandite Partnership at an effective interest rate of 13% and placed them on deposit at Investec Bank Ltd. This facility was refinanced in December 2019 and the company released from this guarantee obligation. The borrowings were then repaid.



Receipts 249 480 72 336

Interest expense 67 914 47 530


Capital repayments (44 000) (11 255)

Interest repayments (67 357) (43 828)

At end of the year 1 009 619 733 756

Maturity analysis

Within 1 year 49 394 2 658

2 to 5 years 960 225 731 098

1 009 619 733 756


Fixed 960 225 684 414

Variable 49 394 49 342

1 009 619 733 756



77

Bus

ines

s O

verv

iew

/ A

nnua

l Fin

anci

al S

tate

men

ts /

Ann

ual G

ener

al M

eeti

ng

2020 R’000

2019 R’000

18. Borrowings due to related partiesTradegro S.àr.l. (subsidiary of Tradehold Ltd) - 139 011

The borrowings were unsecured and accrued interest at sterling three-month Libor plus 6.5%. The capital and capitalised interest was repayable on 28 May 2020 but was settled in tranches in November 2019 and January 2020.

Sandy Ltd 160 648 55 813

The borrowings are unsecured and repayable on 31 January 2023, unless Sandy Ltd exercises its right to demand repayment on 1 year’s notice. £6 million accrues interest at a fixed rate of 7% and £2 million accrues interest at a fixed rate of 6.5%. Interest is paid monthly.

The borrowings are subordinated in favour of Foresight Group (refer to note 17). Sandy Ltd is connected to the Wiese family. The CH Wiese Family Trust holds shares in the Titan group of companies, which is a major shareholder of the company.

160 648 194 824



Receipts 93 400 54 252



Settlement via issue of ordinary shares - (42 000)

Capital repayments (139 579) (19 934)

Interest repayments (14 400) (8 366)



Fixed 160 648 55 813

Variable - 139 011

160 648 194 824

19. Other financial liabilitiesPut option contract 3 986 2 611

The remaining shareholder in Lendcor Holdings (Pty) Ltd can put their 50.1% shares to the company. The exercise price is the greater of a proportional share of six times the profit after tax for the year ending 28 February 2021 of Lendcor (Pty) Ltd and R12.9 million. This put option can only be exercised during the period from 1 June 2021 to 31 August 2021. The measurement of this liability considers the exercise period, exercise price and current net asset value (refer to note 8) of Lendcor (Pty) Ltd.

The company has a call option on the same terms as detailed above except that the profit after tax multiple is seven rather than six.


78

Bus

ines

s O

verv

iew

/ A

nnua

l Fin

anci

al S

tate

men

ts /

Ann

ual G

ener

al M

eeti

ng

2020 R’000

2019 R’000

19. Other financial liabilities (continued)Deferred contingent consideration 4 232 -

The company needs to make a further subscription in Gray Swan Financial Services (Pty) Ltd in 2021 based on a 7 price earnings multiple applied to 40% of the profit after tax for the financial year ended 29 February 2020 and 60% of the profit after tax for the year ending 28 February 2021 multiplied by its 50% shareholding. This future subscription amount is then reduced by the R4 million investment already made in 2017. The company has estimated the amount by using the latest available budget for the year ending 28 February 2021 and discounting at the prime rate.

8 218 2 611

Reconciliation At beginning of the year 2 611 -

Charged to profit or loss 5 607 2 611


20.ProvisionsBonus 7 782 4 884

ReconciliationAt beginning of the year 4 884 329

Acquisition of subsidiary - 826

Paid (8 011) (325)

Foreign currency translation movement 513 185



The bonus provision represents management's best estimate of the constructive obligation in respect of bonuses relating to the current year.



79

Bus

ines

s O

verv

iew

/ A

nnua

l Fin

anci

al S

tate

men

ts /

Ann

ual G

ener

al M

eeti

ng

2020 R’000

2019 R’000

21. Trade and other payablesTrade payables 715 985

Other payables and accruals 5 816 5 526

Receivables with credit balances 1 138 5 896

Cash security account 840 811

Deferred income 655 774

Value added tax 1 112 2 083

Bonuses 315 1 096

Audit fees 663 1 246

Leave pay 154 183

11 408 18 600

The leave pay accrual represents management's best estimate of the obligation in respect of leave pay that arose from prior services rendered.

The average credit period for purchases of goods and services is 30 days. No interest is charged on trade payables. The company has policies in place to ensure that trade payables are paid within the credit period time.

22. Bank overdraftsFirstRand Bank Ltd 6 10 928

The overdraft facility accrues interest at prime plus 1% which is settled monthly. This facility was secured by the unit trust investment. This facility decreased from R15 million to R5 million in October 2019 and the security was released to Nedbank Ltd. This facility is reviewed annually.

Nedbank Ltd 17 781 8 313

The unsecured overdraft facility accrues interest at prime which is settled monthly. This facility increased from R10 million to R25 million in October 2019 and is now secured by the unit trust investment (refer to note 11). This facility is reviewed annually.

17 787 19 241


Variable 17 787 19 241


80

Bus

ines

s O

verv

iew

/ A

nnua

l Fin

anci

al S

tate

men

ts /

Ann

ual G

ener

al M

eeti


2020 R’000

2019 R’000

23. RevenueInterest incomeLoan and trade receivables 206 893 132 907

Loan receivables – key persons 1 064 916

Loans due from joint venture 1 513 1 392

Loans due from associates 2 069 6 436

211 539 141 651

Interest income – financial assets measured at amortised cost 211 539 141 651

Split of interest income

• United Kingdom 204 472 129 166

• South Africa 7 067 12 485

211 539 141 651


Fee income (South Africa) 12 495 18 961

• Fundraising 4 943 5 750

• Management and administration 4 739 7 718

• Corporate finance 2 336 4 824

• Secretarial and sponsor services 477 669

Fee and commission income (United Kingdom) 56 575 50 299

• Initial set up 16 888 12 248

• Monthly 24 075 23 711

• Ad hoc 15 612 14 340

Discounting income (South Africa) 16 611 16 066

• Panel beaters 15 909 15 350

• Medical 702 716

85 681 85 326

Timing of revenue recognition

• At a point in time 22 113 21 140

• Over time 275 107 205 837

297 220 226 977


81

Bus

ines

s O

verv

iew

/ A

nnua

l Fin

anci

al S

tate

men

ts /

Ann

ual G

ener

al M

eeti

ng

2020 R’000

2019 R’000

24. Other incomeExpense recoveries 2 864 9 013

Interest income – cash and cash equivalents 1 485 723

Foreign exchange differences 1 822 1 815

Guarantee fee income – related party 3 287 -

Bargain purchase gain - 823

Loss on disposal of subsidiary - (85)

Profit on disposal of property, plant and equipment - 81

Fair value adjustment on financial assets at fair value through profit or loss 245 198

Bad debts recovered 93 49

Prescribed debt 25 91

9 821 12 708

25. Loss allowanceLoan receivables 358 707

Loan due from joint venture 519 -

Trade and other receivables

• South Africa 3 167 1 490

• Reward Capital 11 333 1 577

• Reward Invoice Financing 3 470 7 791

18 847 11 565

26. Operating expensesAuditors’ remuneration

• current year 1 762 1 491

• prior year underprovision 212 230

Legal, professional and consultancy fees 7 390 12 052

Securities transfer tax - 1 555

Depreciation – property, plant and equipment 1 464 906

Depreciation – right-of-use assets 1 495 -

Rental and utility costs 1 124 3 738

Salaries, bonus, wages and commissions 81 123 60 532

Share-based payment expense 348 -

Directors’ fees 1 220 682

Travel expenses 2 642 2 065

Information technology costs 2 066 2 474

Marketing and entertainment 5 543 3 689

VAT not recovered 1 426 626

Other expenses 7 941 5 369

115 756 95 409


82

Bus

ines

s O

verv

iew

/ A

nnua

l Fin

anci

al S

tate

men

ts /

Ann

ual G

ener

al M

eeti

ng

2020 R’000

2019 R’000

27. Interest expenseBorrowings 67 914 47 531

Borrowings due to related parties 14 400 8 697

Lease liabilities 523 -

Bank overdrafts 1 501 747

84 338 56 975

Interest expense – financial liabilities measured at amortised cost 84 338 56 975

28. TaxationCurrent taxation

• current year 19 728 17 387

• prior year underprovision 950 5

Deferred taxation

• current year 170 (122)

• prior year overprovision (724) -

20 124 17 270

Details of the group’s calculated tax losses are disclosed in note 6.

% %

Reconciliation of taxation rateTaxation as a percentage of profit before taxation 30.4 35.0

Loss from associates and joint ventures (2.5) (3.8)

Non-deductible operating expenses (4.2) (4.6)

Non-deductible goodwill impairment (1.1) (1.1)

Non-deductible impairment of investments in associates (3.3) (7.3)

Non-deductible impairment of investment in joint venture 0.0 (1.3)

Non-deductible fair value loss on other financial liabilities (2.4) (1.5)

Utilisation of taxation losses not previously recognised 0.0 0.3

No deferred tax asset created as future profits not probable (0.4) 0.0

IFRS exempt income (bargain purchase gain) 0.0 0.5

Prior year underprovision (0.3) 0.0

United Kingdom tax rate differential 11.8 11.8

Statutory tax rate 28.0 28.0

Cents per share Cents per share

29. Earnings per shareBasic earnings per share 9.52 7.14

Diluted earnings per share 9.49 7.14

Headline earnings per share 13.73 14.69

Diluted headline earnings per share 13.69 14.69



83

Bus

ines

s O

verv

iew

/ A

nnua

l Fin

anci

al S

tate

men

ts /

Ann

ual G

ener

al M

eeti

ng

2020 R’000

2019 R’000

Basic earnings per shareProfit attributable to owners of the company 23 533 15 417

’000 ’000

Weighted average number of ordinary shares for the year 247 174 215 868

Diluted earnings per share R’000 R’000

Profit attributable to owners of the company 23 533 15 417

’000 ’000


Share options granted in current year under the employee share option scheme 784 -

247 958 215 868

Headline earnings per shareHeadline earnings is calculated below:

Profit attributable to owners of the company 23 533 15 417

Bargain purchase gain - (823)

Loss on disposal of subsidiary - 85

Impairment of goodwill 2 690 1 880

Impairment of investment in joint venture - 2 341

Impairment of investments in associates 7 715 12 860

Profit on disposal of property, plant and equipment - (81)

Tax impact of adjustments - 22

33 938 31 701

’000 ’000


R’000 R’000

Diluted headline earnings per shareHeadline earnings 33 938 31 701

’000 ’000



84

Bus

ines

s O

verv

iew

/ A

nnua

l Fin

anci

al S

tate

men

ts /

Ann

ual G

ener

al M

eeti

ng

2020 R’000

2019 R’000

30. Notes to the statement of cash flowsA. Reconciliation of profit before taxation to cash utilised in operations

Profit before taxation 66 282 49 309

Loss allowance – trade receivables 17 970 10 946

Loss allowance – loan receivables 358 618

Loss allowance – loan due from joint venture 519 -

Depreciation – property, plant and equipment 1 464 906

Depreciation – right-of-use assets 1 495 -

Interest income (213 024) (142 373)



Foreign exchange differences (900) (1 815)

Bargain purchase gain - (823)

Loss on disposal of subsidiary - 85

Profit on disposal of property, plant and equipment - (81)

Fair value adjustment on financial assets at fair value through profit or loss (245) (198)

Fair value loss on other financial liabilities 5 607 2 611

Impairment of goodwill 2 690 1 880

Impairment of investment in joint venture - 2 341

Impairment of investments in associates 7 715 12 860

Prescribed debt (25) (91)

Profit from joint ventures (3 945) (1 380)

Loss from joint associates 9 751 8 114

Operating loss before working capital changes (19 602) (116)

Increase in trade and other receivables (210 127) (144 077)

Increase in provisions 2 385 3 603

(Decrease)/increase in trade and other payables (6 139) 6 875

(233 483) (133 715)

B. Taxation paidLiability at beginning of the year (7 789) (81)

Current taxation charge in profit or loss (20 678) (17 392)

Acquisition of subsidiaries - (5 607)

Disposal of subsidiary - 186

Withholding tax credit - 31

Foreign currency translation movement (595) (566)

Liability at end of the year 7 712 7 789

(21 350) (15 640)



85

Bus

ines

s O

verv

iew

/ A

nnua

l Fin

anci

al S

tate

men

ts /

Ann

ual G

ener

al M

eeti

ng

2020 R’000

C. Non-cash investing and financing activitiesNon-cash investing and financing activities disclosed in other notes are:

• acquisition of right-of-use assets (refer to note 4);

• swap of shares in and loan claims against Mettle Solar Africa Ltd for additional shares in Mettle Solar Investments (Pty) Ltd (refer to notes 7 and 8);

• capitalisation of loan claims due from Mettle Solar Investments (Pty) Ltd (refer to note 8);

• the sale of 2.5% in Reward Finance Group Ltd to TCAS Investments Ltd (refer to notes 2 and 12);

• dividends due to non-controlling interest of R12.5 million were set off against their loan accounts.

D. Subsidiary disposedMettle Specialised Finance (Pty) LtdThe company disposed of 50% of Mettle Specialised Finance (Pty) Ltd to EMC2 Investment (Pty) Ltd, which is connected to Werner Maree (a director of Mettle Specialised Finance (Pty) Ltd) in August 2019 for R1.

The subsidiary had the following assets and liabilities on disposal date:

Carrying amounts of assets and liabilities

Equipment 12

Right-of-use asset 355

Trade and other receivables 4 959

Deferred taxation 992

Cash and cash equivalents 315

Amount due to related party (4 008)

Lease liability (380)

Trade and other payables (2 245)

-

Fair value of retained equity interest -

Loss on disposal -

Cash flow on disposal of the subsidiary

Cash disposed with the subsidiary 315

Mettle Specialised Finance (Pty) Ltd is now equity accounted as a joint venture in the group (refer to note 7). The amount due to related party at year-end is R0.6 million and is included in loans due from joint ventures (refer to note 9).


86

Bus

ines

s O

verv

iew

/ A

nnua

l Fin

anci

al S

tate

men

ts /

Ann

ual G

ener

al M

eeti


31. Segment informationSegments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker (“CODM”). The CODM is the person or group that allocates resources to and assesses the performance of the operating segments of a company. The operating segments have been determined based on the reports reviewed by the executive board of directors in making strategic decisions. The results from the South Africa operations and the investments within South Africa have been combined into one segment as they have the same economic characteristics.

The executive board of directors monitor the business based on the United Kingdom and South Africa operating segments. There were no transactions between the operating segments.

The amounts provided to the board of directors in respect of total assets and total liabilities are measured in a manner consistent with that of the annual financial statements. These assets and liabilities are allocated based on the operations of the segment and the physical location of the asset. As all assets and liabilities have been allocated to the reportable segments, reconciliations of reportable segments’ assets to total assets, and of reportable segments’ liabilities to total liabilities, are not presented.

The segment information for the reportable segments for the year ended 29 February 2020 is detailed below:

2020United Kingdom

R’000South Africa

R’000Total

R’000

Condensed statement of comprehensive incomeRevenue 261 056 36 164 297 220

Other income 2 222 7 599 9 821

Loss allowance (14 803) (4 044) (18 847)

Operating expenses (87 929) (27 827) (115 756)

Fair value loss on other financial liabilities - (5 607) (5 607)

Impairment of goodwill - (2 690) (2 690)

Impairment of equity accounted investments - (7 715) (7 715)

Interest expense (73 593) (10 745) (84 338)

Profit/(loss) from operations 86 953 (14 865) 72 088

Loss from equity accounted investments - (5 806) (5 806)

Profit/(loss) before taxation 86 953 (20 671) 66 282

Taxation (17 483) (2 641) (20 124)

Profit/(loss) before non-controlling interest 69 470 (23 312) 46 158

Non-controlling interest (22 625) - (22 625)

Net profit/(loss) 46 845 (23 312) 23 533


87

Bus

ines

s O

verv

iew

/ A

nnua

l Fin

anci

al S

tate

men

ts /

Ann

ual G

ener

al M

eeti

ng

2020United Kingdom

R’000South Africa

R’000Total

R’000

Condensed statement of financial positionInvestments in joint venture - 36 032 36 032

Investments in associates - 87 030 87 030

Loans due from joint ventures - 9 304 9 304

Loans due from associates - 24 24

Loan receivables 28 319 7 746 36 065

Trade and other receivables 1 545 866 20 771 1 566 637

Cash and cash equivalents 52 407 38 295 90 702

Other assets 9 808 16 066 25 874

Total assets 1 636 400 215 268 1 851 668

Borrowings 960 225 49 394 1 009 619

Borrowings due to related parties 160 648 - 160 648

Lease liabilities 7 349 641 7 990

Bank overdrafts - 17 787 17 787

Other liabilities 23 891 12 535 36 426

Total liabilities 1 152 113 80 357 1 232 470

Capital and reserves attributable to the owners 413 792 134 911 548 703

Non-controlling interest 70 495 - 70 495

Total equity 484 287 134 911 619 198

Total assets include additions to the following non-current assets:

Property, plant and equipment 2 626 31 2 657

Statement of cash flowsCash flows from operating activities (198 649) 6 406 (192 243)

Cash flows from investing activities (3 257) 23 667 20 410

Cash flows from financing activities 150 641 (363) 150 278

(51 265) 29 710 (21 555)


88

Bus

ines

s O

verv

iew

/ A

nnua

l Fin

anci

al S

tate

men

ts /

Ann

ual G

ener

al M

eeti

ng

The segment information for the reportable segments for the year ended 28 February 2019 is detailed below:

2019United Kingdom

R’000South Africa

R’000Total

R’000

31. Segment information (continued)

Condensed statement of comprehensive incomeRevenue 179 462 47 515 226 977

Other income 1 416 11 292 12 708

Operating expenses (54 368) (41 041) (95 409)

Loss allowance (9 367) (2 198) (11 565)

Fair value loss on other financial liability - (2 611) (2 611)

Impairment of goodwill - (1 880) (1 880)

Impairment of equity accounted investments - (15 201) (15 201)

Interest expense (50 591) (6 384) (56 975)

Profit/(loss) from operations 66 552 (10 508) 56 044

Loss from equity accounted investments - (6 735) (6 735)

Profit/(loss) before taxation 66 552 (17 243) 49 309

Taxation (12 815) (4 455) (17 270)

Profit/(loss) before non-controlling interest 53 737 (21 698) 32 039

Non-controlling interest (16 622) - (16 622)

Net profit/(loss) 37 115 (21 698) 15 417

Condensed statement of financial positionInvestments in joint venture - 29 020 29 020

Investments in associates - 37 111 37 111

Loans due from joint ventures - 24 768 24 768

Loans due from associates - 47 647 47 647

Loan receivables 28 914 33 498 62 412

Trade and other receivables 1 167 338 34 571 1 201 909

Cash and cash equivalents 99 607 10 041 109 648

Other assets 1 190 18 706 19 896

Total assets 1 297 049 235 362 1 532 411

Borrowings 684 414 49 342 733 756

Borrowings due to related parties 194 824 - 194 824

Bank overdrafts - 19 241 19 241

Other payables 25 856 8 812 34 668

Total liabilities 905 094 77 395 982 489

Capital and reserves attributable to the owners 331 638 157 967 489 605

Non-controlling interest 60 317 - 60 317

Total equity 391 955 157 967 549 922

Total assets include additions to the following non-current assets:

Property, plant and equipment 849 204 1 053

Joint ventures - 21 764 21 764



89

Bus

ines

s O

verv

iew

/ A

nnua

l Fin

anci

al S

tate

men

ts /

Ann

ual G

ener

al M

eeti

ng

The other financial liabilities are measured at fair value (refer to note 19).

The group is exposed to market risk, credit risk and liquidity risk. The group’s senior management oversees the management of these risks and seeks to minimise the potential adverse effects on the group’s financial performance.

Market risk

Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes

in market prices. Market prices comprise three types of risk: currency risk, interest rate risk and price risk.

Currency riskThe group’s results can be significantly impacted by the Rand Pound Sterling exchange rate due to the contribution of the United Kingdom businesses to the group profit. The average exchange rate used to convert Pound Sterling denominated income and expenses was R18.68 (2019: R18.08).

2019United Kingdom

R’000South Africa

R’000Total

R’000

Statement of cash flowsCash flows from operating activities (65 190) 3 534 (61 656)

Cash flows from investing activities (320 359) (28 793) (349 152)

Cash flows from financing activities 477 372 11 136 488 508

91 823 (14 123) 77 700

32. Financial risk management Financial instruments by category

Financial assets

2020 Amortised cost

R’000

2019 Amortised cost

R’000

Loans due from associates 24 47 668

Loans due from joint ventures 9 302 24 768

Loan receivables 36 065 62 412

Trade and other receivables * 1 565 578 1 201 836


* Excludes value added taxation and prepayments as these are not financial assets

The financial assets at fair value through profit or loss are measured at fair value (refer to note 11).

Financial liabilities

2020 Amortised cost

R’000

2019 Amortised cost

R’000

Borrowings 1 009 619 733 756

Borrowings due to related parties 160 648 194 824

Lease liabilities 7 990 -

Bank overdrafts 17 787 19 241

Trade and other payables ** 9 636 15 743

** Excludes value added taxation and deferred income as these are not financial liabilities


90

Bus

ines

s O

verv

iew

/ A

nnua

l Fin

anci

al S

tate

men

ts /

Ann

ual G

ener

al M

eeti

ng

32. Financial risk management (continued)

A 5% (2019: 5%) change represents management’s assessment of the possible change in the average Rand Pound Sterling exchange rate during the year. If the Rand had strengthened/weakened by 5% (2019: 5%) against Pound Sterling, then the group’s profit attributable to equity holders of the parent for the year ended 29 February 2020 would have decreased/increased by R2 342 244 (2019: R1 856 175).

Refer to the segment information (note 31) for all Pound Sterling denominated assets and liabilities. The year-end exchange rate was R20.08 (2019: R18.60). Any change in the year-end exchange rate only impacts the foreign currency translation reserve and the non-controlling interest.

Cash flow interest rate riskThe group’s cash flow interest rate risk arises from borrowings issued at variable rates and cash and cash equivalents, loan receivables and loans due from associates and joint ventures held at variable rates.

The sensitivity analysis below has been determined based on the variable rate interest bearing borrowings, cash and cash equivalents and loan receivables of the group outstanding at the reporting date. A 100 (2019: 100) basis point increase or decrease represents management’s assessment of the reasonably possible change in interest rates.

If interest rates had been 100 (2019: 100) basis points higher/lower and all other variables were held constant, the group’s profit before tax for the year ended 29 February 2020 would decrease/increase by R140 101 (2019: R1 543 167).

Price riskThe group’s price risk arises from its financial assets at fair value through profit or loss. As this is an investment in a cautious fund of funds unit trust, there is less price risk due to the asset allocation composition of the unit trust.

Gray Swan Financial Services (Pty) Ltd (joint venture) manages these unit trust investments and provides performance feedback regularly.

Credit risk

Credit risk is the risk that a counterparty will not meet its obligations under a financial instrument or customer contract, leading to a financial loss. The group is exposed to credit risk from its operating activities (trade and loan receivables) and from its financing activities, including deposits with banks and financial institutions. The group


only deposits cash with major banks of high credit standing. The group uses Lloyds Banking Group in the United Kingdom and predominantly First National Bank Ltd and Nedbank Ltd in South Africa, all of which have a F1+ Fitch credit rating.

Each individual business unit assesses the credit quality of its customers by considering its financial position, past experience and other factors. Individual credit limits are set for high volume transaction businesses by the specific board. These credit limits are reviewed regularly and revised if necessary.

The principal activities of Reward Finance Group Ltd are to target the SME finance market and support SMEs in the United Kingdom with short-term asset-based funding and debt factoring services. The business model is to provide short-term capital to cash-strapped companies. Trade receivables are secured by a combination of properties, receivables, debentures and equity shares to the value of £198.2 million (2019: £157.6 million). The value of the underlying security is paramount in any lending decision. In addition, personal guarantees are also taken in support of facilities.

Credit policy is managed through credit limits defined at all stages of the customer life cycle, including new account sanctioning, customer management and collections and recovery activity as well as reviewing the security held. Customer lending decisions are managed principally through an affordability assessment which determines a customer’s ability to repay an outstanding credit amount. In the event of default, the security pledged is called upon.

No properties have yet been repossessed or transferred into the group’s name although these remain options. The preferred method is to work with the customer to obtain maximum value through a voluntary sale. Where action needs to be taken to enforce security, this is usually done by appointing a fixed charge receiver under the legal charge over a specific property or an administrator, where the group has debenture security over all the assets of the counterparty.

Pre-lending due diligence of all new facilities includes: assessment of the borrower’s financial standing, full credit reference searches, know-your-customer anti–money laundering checks, review of management and their previous directorships, together with an assessment of the security value backed up by professional valuations when required.

Invoice finance clients are subject to a further review of their financial systems, liquidity and book debts. New facilities are underwritten in accordance with delegated authorities


91

Bus

ines

s O

verv

iew

/ A

nnua

l Fin

anci

al S

tate

men

ts /

Ann

ual G

ener

al M

eeti

ng2020

Carrying value R’000

Within 1 year R’000

1 to 2 years R’000

More than 2 years R’000

Total payments

R’000

Borrowings 1 009 619 113 789 63 958 1 083 866 1 261 613

Borrowings due to related parties 160 648 11 045 160 648 - 171 693

Lease liabilities 7 990 2 074 2 135 4 572 8 781

Bank overdrafts 17 787 17 787 - - 17 787

Trade and other payables 9 636 9 636 - - 9 636

1 205 680 154 331 226 741 1 088 438 1 469 510

There is £11 million available in the Foresight Group facility. There is a further uncommitted £3 million available from Sandy Ltd.

The borrowings due to Small Enterprise Finance Agency SOC Ltd were repayable in March 2020. Repayments of R17.6 million have been made subsequent to year-end but the company is still waiting for possible refinancing terms. The company has access to sufficient cash balances should repayment be requested.

The bank overdrafts, with total facility limits of R30 million, are reviewed annually and there is currently no reason why these facilities will not continue.

which require a minimum of two experienced lenders to sanction them. Legal documentation is outsourced to external solicitors who provide written confirmation that security is in order prior to draw down of facilities.

All clients are subject to continual monitoring via a credit reference agency. Client facilities are subject to an internal monthly review and reporting regime to ensure they are performing within agreed parameters.

All loan facilities are reviewed at least annually. This is a full credit process including a consideration of the current security value and whether this security needs to be professionally valued. As the average loan duration is between one and one and a half years, professional valuations are uncommon.

Invoice finance clients are subject to periodic audits. Invoice finance debtor credit limits are set in accordance with credit reference agency ratings and supported by credit insurance where required, such limits are subject to on-going monitoring.

Early stage client defaults are overseen at director level, working with the client to rectify the position. Thereafter suitable professional advisors (accountants, solicitors, insolvency professionals) will be utilised to recover amounts due.

At the reporting date, the group did not consider there to be any significant concentration of credit risk, which has not been insured or adequately provided for. The maximum exposure to credit risk (after loss allowance) is R1.7 billion (2019: R1.45 billion).

Liquidity risk

Liquidity risk is the risk that the group will encounter difficulty in meeting obligations associated with financial liabilities. Liquidity risk arises from existing commitments associated with its borrowings and the requirement to raise funds in order to meet these commitments.

Cash flow forecasting is performed in the operating companies of the group and aggregated by group finance. Group finance monitors rolling forecasts of the group’s liquidity requirements to ensure it has sufficient cash to meet operational needs while maintaining sufficient headroom on its undrawn borrowing facilities at all times so that the group does not breach borrowing limits or covenants (where applicable).

The table below analyses the group’s non-derivative financial liabilities into relevant maturity groupings based on the remaining period at the reporting date to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows.


92

Bus

ines

s O

verv

iew

/ A

nnua

l Fin

anci

al S

tate

men

ts /

Ann

ual G

ener

al M

eeti

ng


2019Carrying value

R’000Within 1 year

R’0001 to 2 years

R’000

More than 2 years R’000

Total payments

R’000

Borrowings 733 756 52 458 96 626 741 618 890 702

Borrowings due to related parties 194 824 3 907 155 706 63 301 222 914

Bank overdrafts 19 241 19 241 - - 19 241


963 564 91 349 252 332 804 919 1 148 600

Fair value

The fair values of financial instruments are measured in accordance to the following fair value measurement hierarchy:

• Level 1: Quoted prices in active markets for identical assets or liabilities.

• Level 2: Inputs other than quoted prices that are observable for the asset or liability.

• Level 3: Inputs for the asset or liability that are not based on observable market data.

The level in the fair value hierarchy within which the fair value measurement is categorised in its entirety is determined on the basis of the lowest level input that is significant to the fair value measurement in its entirety. For this purpose, the significance of an input is assessed against the fair value measurement in its entirety. If a fair value measurement uses observable inputs that require significant adjustment based on unobservable inputs that measurement is a level 3 measurement. Assessing the significance of a particular input to the fair value measurement in its entirety requires judgement, considering factors specific to the asset or liability.

The determination of what constitutes observable market data requires significant judgement by the group. The group considers observable data to be such market data that is readily available, regularly distributed or updated, reliable and verifiable, not proprietary and provided by independent sources that are actively involved in the relevant market.


The fair value of financial assets and liabilities are determined as follows:

• Cash and cash equivalents, trade and other payables and bank overdraftsThe carrying amounts reported in the statement of financial position approximate fair values because of the short-term maturities of these assets and liabilities.

• BorrowingsThe carrying amounts reported in the statement of financial position approximate fair values. Fair values of borrowings are estimated using discounted cash flow models based on prevailing market rates for similar types of borrowings, with maturities consistent with those remaining for the borrowings being valued.

• Trade and loan receivables and loans due from joint ventures and associatesThe carrying amounts reported in the statement of financial position approximate fair values. Discounted cash flow models are used for trade and loan receivables. The discount yields in these models use calculated rates that reflect the return a market participant would expect to receive on instruments with similar remaining maturities, cash flow patterns, credit risk, collateral and interest rates.

The only financial assets measured at fair value are the financial assets at fair value through profit or loss (refer to note 11).

These financial assets are unit trust investments measured at quoted prices (level 1).

The only financial liability measured at fair value are the other financial liabilities (refer to note 19).


93

Bus

ines

s O

verv

iew

/ A

nnua

l Fin

anci

al S

tate

men

ts /

Ann

ual G

ener

al M

eeti

ng

2020 R’000

2019 R’000

The gearing ratio is as follows:

Total borrowings 1 196 044 947 822

Less: cash and cash equivalents (refer to note 14) (90 702) (109 648)

Net debt 1 105 342 838 174

Capital and reserves attributable to the owners 548 703 489 604

Total capital 1 654 045 1 327 778

Gearing ratio 66.8% 63.1%

The group has utilised available funding facilities during the year but remains well within its covenant requirements (refer to note 17).

33. Related partiesRelated parties of the Mettle Investments group include its directors, key management, shareholders, joint ventures and associates. Transactions are concluded on an arm’s length basis.

Transactions2020

R’0002019

R’000

Fee income from associates

Mettle Solar (RF) (Pty) Ltd - 204

Mettle Solar Operations (Pty) Ltd 2 038 73

Mettle Solar Investments (Pty) Ltd 2 461 240

Metdecci Energy Investment (Pty) Ltd - 1 010

Mettle Solar Africa Ltd 3 287 -

The company provided a guarantee for the Rand equivalent of $3.1 million to Investec Bank (Mauritius) Ltd (via Investec Bank Ltd) for its $5 million funding facility provided to Mettle Solar Africa Ltd. The company had to place the required funds on deposit at Investec Bank Ltd. The company earned a monthly guarantee fee of 1%. This facility was refinanced in December 2019 and the company was released from this guarantee obligation. The company made no net profit from this guarantee due to associated funding costs (refer to note 17).

The valuation of the put option considers the exercise period, exercise price, current net asset value and future profitability of the underlying company (level 3).

Capital risk management

The group’s objectives when managing capital are to safeguard the group’s ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital. In order to maintain or adjust the capital structure, the group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt.

The group monitors capital on the basis of the gearing ratio. This ratio is calculated as net debt divided by total capital. Net debt is calculated as total borrowings (including ‘current and non-current borrowings’, ‘borrowings due to related parties’, ‘lease liabilities’ and ‘bank overdrafts’ as shown in the consolidated statement of financial position) less cash and cash equivalents. Total capital is calculated as ‘total equity’ as shown in the consolidated statement of financial position less non-controlling interest plus net debt.


94

Bus

ines

s O

verv

iew

/ A

nnua

l Fin

anci

al S

tate

men

ts /

Ann

ual G

ener

al M

eeti

ng

2020 R’000

2019 R’000

33. Related parties (continued)

Fee income from joint ventures

Christopher Finance (Pty) Ltd 1 056 320


Fee income from other related parties

Tradehold Ltd (former holding company) 990 4 571

Imbali Props 21 (Pty) Ltd (Tradehold Ltd group company) 1 500 -

Mettle Debt Fund En Commandite Partnership relating to:

Christopher Finance (Pty) Ltd 1 943 431

Metdecci Energy Investment (Pty) Ltd 7 213

Mettle Solar Investments (Pty) Ltd 29 -

Interest income from associates

Lendcor Holdings (Pty) Ltd 2 4

Lendcor (Pty) Ltd - 9

Mettle Solar Namibia (Pty) Ltd - 316

Mettle Solar Investments (Pty) Ltd 2 067 6 107

Interest income from joint ventures

Christopher Finance (Pty) Ltd 995 285

Christopher Finance (Pty) Ltd (loan receivable) 1 802 992

Mettle Solar Africa Ltd 392 1 108

Incatorque (Pty) Ltd 126 -

Interest income from other related parties

Francois van Themaat (director of associate) (10) 228

Teniam Holdings (Pty) Ltd (company of former director of subsidiary) - (107)

EAF Investments Ltd (company of director of subsidiary) 502 456

JE&K Ltd (company of director of subsidiary) 393 340

TCAS Investments Ltd (company of director of subsidiary) 179 -

Dividends received

Associates

Gondotrix (Pty) Ltd - 2 000

Joint venture

Gray Swan Financial Services (Pty) Ltd 381 124

Interest expense to other related parties

Tradegro S.àr.l. 7 577 7 784

Sandy Ltd 6 823 241

Ms CH Wiese - 672

Fees and expenses paid to joint venture

Mettle Credit Services (Pty) Ltd 578 499




95

Bus

ines

s O

verv

iew

/ A

nnua

l Fin

anci

al S

tate

men

ts /

Ann

ual G

ener

al M

eeti

ng

2020 R’000

2019 R’000

Fees and expenses paid to other related parties

Moorgarth Properties (Luxembourg) S.àr.l 950 728

Moorgarth Group Ltd (Tradehold Ltd company) 729 362

Expense recoveries

Tradehold Ltd (former holding company) - 7 162

Collins Property Projects (Pty) Ltd (Tradehold company) - 144

Moorgarth Group Ltd (Tradehold company) 1 871 1 416

Mettle Solar (RF) (Pty) Ltd (associate) - 42

Key management personnel remuneration (including directors)

Salaries and other short-term employee benefits 22 526 12 320

The remuneration includes 8 (2019: 8) employees for on average 12 (2019: 8.5) months.

The company purchased the loan claim against Mettle Solar Africa Ltd from Tradehold Africa Ltd in May 2018 at a discount. This gain of R1.1 million was recorded in equity in the prior year.

Directors’ remuneration

2020

Non-executive fees

R’000Salary R’000

Other benefits

R’000

Share-based payment expense

R’000Bonus (4)

R’000Total

R’000

FH Esterhuyse (1) 250 - - - - 250

MVZ Wentzel 250 - - - - 250

BA Chelius 360 - - - - 360

RD Fenner 360 - - - - 360

HvdM Scholtz (2) - - - - - -

HF Prinsloo - 2 059 - - 445 2 504

TM Flannery (3) - 2 928 223 - - 3 151

JJ Rookledge - 1 610 55 97 360 2 122

1 220 6 597 278 97 805 8 997

1 Paid to his employer, Collins Property Projects (Pty) Ltd2 Appointed 14 August 20193 Translated at R18.68:£14 Bonuses paid during the financial year


96

Bus

ines

s O

verv

iew

/ A

nnua

l Fin

anci

al S

tate

men

ts /

Ann

ual G

ener

al M

eeti

ng

33.Related parties (continued)

2019

Non-executive fees

R’000

Consulting fees

R’000SalaryR’000

Other benefitsR’000

Bonus (9) R’000

Total R’000

FH Esterhuyse (1) 100 - - - - 100

JA Aitken (2) 20 - - - - 20

MVZ Wentzel (3) 100 - - - - 100

BA Chelius (3) (4) 270 830 - - - 1 100

HRW Troskie (3) (5) 79 - - - - 79

RD Fenner (6) 113 - - - - 113

HF Prinsloo - - 1 851 110 82 2 043

TM Flannery (3) (7) (8) - - 1 870 170 - 2 040

JJ Rookledge - - 1 372 128 325 1 825

WD Marais (2) - - 205 - - 205

W Maree (2) - - 219 - - 219

682 830 5 517 408 407 7 844

1 Paid to his employer, Collins Property Projects (Pty) Ltd2 Resigned 19 April 20183 Appointed 19 April 20184 Paid R0.2 million by Lendcor (Pty) Ltd (associate) and R0.6 million by Mettle Specialised Finance (Pty) Ltd (subsidiary)5 Resigned 12 September 20186 Appointed 18 September 20187 From 15 May 2018 (acquisition date of Reward Investments (No. 2) Ltd)8 Translated at R18.08:£19 Bonuses paid during the financial year


Directors’ interest in company’s shares

The interest of the directors in the issued shares in the company at 29 February 2020 and at the date of approval of these annual financial statements is as follows:

2020

Direct beneficial

’000

Indirect beneficial

’000Total ’000

HvdM Scholtz - 33 648 33 648

FH Esterhuyse 128 3 300 3 428

MVZ Wentzel - 668 668

BA Chelius - 1 371 1 371

HF Prinsloo - 9 592 9 592

TM Flannery 193 - 193

JJ Rookledge 683 - 683

1 004 48 579 49 583

FH Esterhuyse has pledged 3.3 million shares as security for a financial obligation due by a related party to Tradehold Ltd.


97

Bus

ines

s O

verv

iew

/ A

nnua

l Fin

anci

al S

tate

men

ts /

Ann

ual G

ener

al M

eeti

ng

2019

Direct beneficial

’000

Indirect beneficial

’000Total ’000

FH Esterhuyse - 3 300 3 300

MVZ Wentzel - 668 668

BA Chelius - 1 721 1 721

HF Prinsloo - 9 592 9 592

TM Flannery - 13 13

JJ Rookledge 683 - 683

683 15 294 15 977

Director’s interest in subsidiary’s shares

Truly Alternative Ltd owned 10% (2019: 10%) in Reward Finance Group Ltd at 29 February 2020 and received dividends of R7.4 million (2019: R4 million) during the year. TM Flannery co-owns and jointly controls Truly Alternative Ltd. These shares were sold after year-end – refer to note 37.

Balances2020

R’0002019

R’000

Loan receivable – Christopher Finance (Pty) Ltd 3 637 17 869

Receivable due by Metdecci Energy Investment (Pty) Ltd - 1 010

Refer to notes 7, 8, 9, 10 and 12 for terms of the investments in and loans due from related parties.

Refer to note 18 for the borrowings due to related parties.


98

Bus

ines

s O

verv

iew

/ A

nnua

l Fin

anci

al S

tate

men

ts /

Ann

ual G

ener

al M

eeti


2020 R’000

2019 R’000

34. Operating lease commitmentsFrom 1 March 2019, the group has recognised a right-of-use asset for these office leases:

Property rentals

• Due within one year - 2 070

• Due between one and five years - 4 368

- 6 438

35. Change in accounting policy The group has adopted IFRS 16 Leases retrospectively from 1 March 2019, but has not restated comparatives for the 2019 reporting period, as permitted under the specific transition provisions in the standard. The reclassifications and the adjustments arising from the new leasing rules are therefore recognised in the opening statement of financial position on 1 March 2019.

On adoption of IFRS 16, the group recognised a lease liability in relation to the lease which had previously been classified as an ‘operating lease’ under the principles of IAS 17 Leases. This liability was measured at the present value of the remaining lease payments, discounted using the incremental borrowing rate as of 1 March 2019. The United Kingdom incremental borrowing rate applied to the lease liability on 1 March 2019 was 6.50% while the South African rate was 11.25%. These rates were calculated with reference to current external funding rates being incurred in these jurisdictions.

The group had no finance leases at 1 March 2019.

Practical expedients applied

In applying IFRS 16 for the first time, the group has used the following practical expedients permitted by the standard:

• accounting for operating leases with a remaining lease term of less than 12 months as at 1 March 2019 as short-term leases; and

• using hindsight in determining the lease term where the contract contains options to extend or terminate the lease.

The group has also elected not to reassess whether a contract is, or contains a lease at the date of initial application. Instead, for contracts entered into before the transition date the group relied on its assessment made applying IAS 17 and IFRIC 4 Determining whether an Arrangement contains a Lease.


99

Bus

ines

s O

verv

iew

/ A

nnua

l Fin

anci

al S

tate

men

ts /

Ann

ual G

ener

al M

eeti

ng

2019 R’000

Measurement of lease liabilityOperating lease commitments disclosed as at 28 February 2019 6 438

Discounted using the lessee’s incremental borrowing rate at the date of initial application 6 040

Current lease liability 1 213

Non-current lease liability 4 827

Measurement of right-of-use assetThe right-of-use asset was initially measured at the amount equal to the lease liability.

Adjustments recognised in the statement of financial position on 1 March 2019The change in accounting policy affected the following items on 1 March 2019:

• Right-of-use assets increased by R5.4 million

• Lease liabilities increased by R6.0 million

• Operating lease rent free payable reversed of R0.4 million

• Non-controlling interest decreased by R0.1 million

The net impact on retained income on 1 March 2019 was a decrease of R0.2 million.

36. Correction of errorDeferred income of R7.5 million relating to the Reward Capital receivables book was incorrectly disclosed under trade and other payables in the prior year. This deferred income should be set off against the related trade and other receivables balance in accordance with IFRS 9 Financial Instruments.

The impact on the previously reported 28 February 2019 figures is detailed below:

Previouslyreported

R’000Restated

R’000Difference

R’000

Statement of financial positionTrade and other receivables 1 209 389 1 201 909 (7 480)

Trade and other payables 26 082 18 602 (7 480)

The correction had no effect on the previously reported profit or cash flows.

The split of revenue between interest income and fee and commission income is now disclosed on the face of the statement of comprehensive income. It was previously disclosed in the notes.


100

Bus

ines

s O

verv

iew

/ A

nnua

l Fin

anci

al S

tate

men

ts /

Ann

ual G

ener

al M

eeti


37. Events subsequent to the year-end

COVID-19

On 11 March 2020, the World Health Organisation (“WHO”) declared COVID-19 a pandemic. Both the South African and United Kingdom governments curtailed business activities in an attempt to reduce the spread of COVID-19. The group has evaluated the likely impact on its cash flow forecast, its assessment of expected credit losses and the valuations of security held against its loan and trade receivables.

The group considered the following in determining whether COVID-19 is an adjusting or non-adjusting subsequent event:

• the declaration of COVID-19 as a pandemic by the WHO;

• the dates on which various measures were taken by governments to curtail business activities;

• the first positive COVID-19 case in each jurisdiction;

• the first COVID-19 death in each jurisdiction; and

• the dates when scientific research was published outlining the likely effects of the disease on human life.

This determination is highly subjective but the group concluded that COVID-19 is an adjusting event in the United Kingdom but a non-adjusting event in South Africa.

The group remains cautious and continues to evaluate the impact of COVID-19 on its businesses as detailed below:

Going concern assessmentGoing concern is dependent on the group’s solvency and liquidity position in determining its ability to continue into the foreseeable future.

The availability of funding is fundamental to Reward Finance Group Ltd’s ability to trade. There is £6 million funding available from Foresight Group (after £5 million was drawn down in March to support liquidity). Reward Finance Group Ltd is comfortably covenant compliant in respect of this facility, which is only repayable from September 2023. Cash balances of £8m were held as at 30 April, mostly due to the Reward Invoice Finance book contracting.

New business for the first two months ended April was down significantly as a result of the lockdown as well as a more conservative credit policy and approximately 20% of borrowers entered into a temporary payment relief plan.

Mettle Administrative Services (Pty) Ltd traded as expected in March but did minimal trading in April as the majority of its customers were closed. Management focused on recovering all outstanding amounts. At 30 April, the outstanding receivables balance (not yet due) amounted to R3.2 million (excluding the customer against which a specific loss allowance was recorded, as detailed in note 13) with cash balances of R35.8 million.

Lendcor (Pty) Ltd is currently awaiting formal approval from its main funder, National Housing Finance Corporation SOC Ltd for a:

• 6-month capital repayment holiday; and

• 12-month waiver on its financial covenants.

Management are confident that the above will be granted which historically has been the case. The funder is looking to assist its various financial intermediaries.

Lendcor (Pty) Ltd advanced no loans in April and commenced lending on a conservative basis during May. Actual collections as a percentage of contractually due instalments declined by 6% from February to April with a further deterioration expected in May. Cash balances at 30 April amounted to R62 million.

Christopher Finance (Pty) Ltd has implemented a virtual office environment. Its cloud-based software system allows it to evaluate new claims, approve drawdowns and make payments. Whereas the Road Accident Fund is processing minimal new cases, it is processing payments due to attorneys on settled matters. To date cash collections are on budget. A R100 million external funding facility was secured prior to year-end and R20 million was drawn down in March.

Mettle Solar Investments (Pty) Ltd has significant cash balances due to the final share subscription of R76.7 million in March by Gridworks Development Partners LLP.

The corporate finance, advisory and wealth management group companies are all operating remotely, are adequately capitalised and have no external borrowings.

Based on the above and the group’s current cash flow forecasts, the directors consider that the company and group has adequate resources to continue operating for the foreseeable future and that it is appropriate to adopt the going concern basis in preparing the consolidated and separate financial statements.


101

Bus

ines

s O

verv

iew

/ A

nnua

l Fin

anci

al S

tate

men

ts /

Ann

ual G

ener

al M

eeti

ng

Expected credit loss assessmentThe impact on the calculation of the lifetime expected credit losses determined as part of the simplified approach for the South African and Reward Invoice Financing trade receivables was considered. The group assessed which customers had existing conditions which could impair their ability to settle their outstanding balances. There is currently no substantive reason to believe that there would be a material increase in the lifetime expected credit losses.

The United Kingdom government has provided significant support to the economy, particularly in the form of £50,000 “bounce back” loans to small business. Many borrowers have taken advantage of these loans to continue trading and to service their obligations.

Lendcor (Pty) Ltd used professional advisors to assist with the estimation of its expected credit losses. This assessment considered historical information, forward looking data and macroeconomic variables. An additional expected credit loss was recorded for the potential impact of COVID-19.

All Mettle Solar Investments (Pty) Ltd group South African and Namibian year-end debtors have been collected. One of the debtors has requested a temporary payment holiday and management are busy negotiating revised transaction terms to ensure the original project returns are still achieved. The external funder is supporting this proposed plan. A loss allowance of approximately R1.5 million was recognised at year-end.

Valuation of security heldThe adverse economic impact of the lockdown, implemented to counter COVID-19, affects the ability of Reward Capital’s borrowers to service their loans. The expected decline in United Kingdom property prices may also reduce Reward Capital’s security, thus increasing the risk of credit losses. Payment holidays requested by, and granted to, borrowers erode the security cover. Each month’s payment holiday granted equates to an estimated 1.5% erosion of security value which can be managed in the short term.

As a secured lender, Reward Capital is not exclusively reliant on borrowers trading successfully as it has demonstrated consistently that it is in most instances able to achieve full recovery from the underlying security, if necessary.

The year-end stress test assumed a 10% reduction in property values which resulted in the recognition of an additional specific COVID-19 loss allowance of £0.4 million.

Dilution of shareholding in Mettle Solar Investments (Pty) Ltd

Gridworks Development Partners LLP invested its remaining R76.7 million in Mettle Solar Investments (Pty) Ltd in March 2020 to increase its shareholding to 40%. The company’s shareholding diluted from 49% to 35%. The group realised a profit on disposal of approximately R10 million.

Purchase of non-controlling interest

On 2 April 2020 Reward Investments (No. 2) Ltd purchased Truly Alternative Ltd’s 10% shareholding in Reward Finance Group Ltd for £2 million. Truly Alternative Ltd is co-owned and jointly controlled by TM Flannery (a company director) and D Jones.

Truly Amazing Ltd, also co-owned and jointly controlled by TM Flannery and D Jones, advanced a loan of £0.6 million to Reward Investments (No. 2) Ltd. The loan is unsecured, accrues interest at 7% and is repayable in April 2022


102

Bus

ines

s O

verv

iew

/ A

nnua

l Fin

anci

al S

tate

men

ts /

Ann

ual G

ener

al M

eeti

ng Company statement of financial position

Notes2020

R’0002019

R’000

AssetsNon-current assetsInvestments in subsidiaries 2 399 801 417 505

Investments in associates 3 123 835 37 827

Investments in joint ventures 4 6 450 4 006

Financial assets at fair value through profit or loss 5 - 10 932

Amounts due from related parties 6 8 740 140 410

Total non-current assets 538 826 610 680

Current assetsFinancial assets at fair value through profit or loss 5 11 177 -

Amounts due from related parties 6 49 981 5 166


Total current assets 62 794 7 468

Total assets 601 620 618 148

Equity and liabilitiesCapital and reservesStated capital 8 545 828 545 828

Share-based payment reserve 9 348 -

Accumulated loss (22 212) (66)

Total shareholder’s funds 523 964 545 762

Non-current liabilitiesDeferred taxation 10 1 092 671

Borrowings 11 - 46 684

Other financial liabilities 12 8 218 2 611

Total non-current liabilities 9 310 49 966

Current liabilitiesBorrowings 11 49 394 2 657

Taxation 20 79

Provision 13 700 -

Trade and other payables 14 445 443

Bank overdrafts 25 17 787 19 241

Total current liabilities 68 346 22 420

Total equity and liabilities 601 620 618 148


103

Bus

ines

s O

verv

iew

/ A

nnua

l Fin

anci

al S

tate

men

ts /

Ann

ual G

ener

al M

eeti

ngCompany statement of comprehensive income

Notes2020

R’0002019

R’000

Revenue

- Interest income 15 9 808 14 203

- Dividend income 15 3 206 9 624

Other income 16 13 886 2 023

Interest expense 17 (11 226) (6 246)

Loss allowances 18 (2 188) (617)

Allowances for impairment 19 (19 714) (8 558)

Fair value loss on other financial liabilities 12 (5 607) (2 611)

Operating expenses 20 (9 512) (8 647)

Loss before taxation (21 347) (829)

Taxation 21 (799) (2 264)

Total comprehensive loss attributable to ordinary shareholders (22 146) (3 093)

Company statement of changes in equity

Stated capital R’000

Share-based payment

reserve R’000

Accumulated loss

R’000Total

R’000

Balance at 28 February 2018 100 622 1 877 102 499

Issue of ordinary shares 445 206 445 206


Profit on purchase of loan claim from related party (note 22) 1 150 1 150

Balance at 28 February 2019 545 828 (66) 545 762

Employee share scheme-employee services 348 348


Balance at 29 February 2020 545 828 348 (22 212) 523 964


104

Bus

ines

s O

verv

iew

/ A

nnua

l Fin

anci

al S

tate

men

ts /

Ann

ual G

ener

al M

eeti

ng Company statement of cash flows

Notes2020

R’0002019

R’000

Cash flow from operating activitiesNet cash generated by/(utilised in) operations 24A 4 011 (23 317)

Dividends received 2 981 9 624

Interest received 8 946 12 699

Interest paid (11 173) (6 209)

Taxation paid 24B (437) (1 833)

Net cash generated by/(utilised in) operations 4 328 (9 036)

Cash flow from investing activitiesDisposal of financial assets at fair value through profit or loss - 20 500

Acquisition of investments in subsidiaries - (407 215)

Acquisition of loan to subsidiary - (9 745)

Loan receivables recovered 272 673

Acquisition of loan to joint venture - (13 703)

Acquisition of investment in joint venture - (6)

Additional investment in associate (3 146) -

Net cash utilised in investing activities (2 874) (409 496)

Cash flow from financing activitiesIssue of ordinary shares - 403 206

Receipt of borrowings 44 000 -

Repayment of borrowings (44 000) (2 560)

Net cash generated by financing activities - 400 646

Net increase/(decrease) in cash and cash equivalents 1 454 (17 886)

Cash and cash equivalents at beginning of the year (19 241) (1 355)

Cash and cash equivalents at end of the year 25 (17 787) (19 241)


105

Bus

ines

s O

verv

iew

/ A

nnua

l Fin

anci

al S

tate

men

ts /

Ann

ual G

ener

al M

eeti

ngNotes to the company annual financial statements

1. Accounting policiesRefer to the accounting policies in the consolidated annual financial statements on pages 36 to 44.

2020 R’000

2019 R’000

2. Investments in subsidiariesUnlisted (at cost)Mettle Specialised Finance (Pty) Ltd – 50% (2019: 100%) ordinary shares - 3 001

• allowance for impairment - (3 001)

Mettle Corporate Finance (Pty) Ltd – 100% (2019: 100%) ordinary shares 1 990 1 990

Mettle Vehicle Finance (Pty) Ltd – 100% (2019: 100%) ordinary shares - -

Mettle Administrative Services (Pty) Ltd – 100% (2019: 100%) ordinary shares 8 300 8 300

Reward Investments (No. 2) Ltd – 90% (2019:90%) ordinary shares 389 511 389 511

Mettle Litigation Finance (Pty) Ltd (formerly Imali Medical Claims (Pty) Ltd) – 0% (2019: 100%) ordinary shares - 17 704

399 801 417 505

2020

The following took place during the year ended 29 February 2020:

• disposed of 50% of Mettle Specialised Finance (Pty) Ltd to EMC2 Investment (Pty) Ltd (connected to Werner Maree, a director of Mettle Specialised Finance (Pty) Ltd) for R1. The investment is now classified as a joint venture (refer to note 4).

• Gondotrix (Pty) Ltd was deregistered.

• submitted the deregistration documents for Mettle Litigation Finance (Pty) Ltd.

2019The following took place during the year ended 28 February 2019:

• acquired the remaining 50% ordinary shares in Gondotrix (Pty) Ltd for nominal value.

• R226.7 million subscription of ordinary shares in Reward Investments (No. 2) Ltd.

• R162.8 million purchase of a loan claim against Reward Investments (No. 2) Ltd which was then capitalised.

• acquired the ordinary shares and loan claim (refer to note 6) in Imali Medical Claims (Pty) Ltd.

The principal subsidiary investments are disclosed in note 2 in the consolidated annual financial statements.


106

Bus

ines

s O

verv

iew

/ A

nnua

l Fin

anci

al S

tate

men

ts /

Ann

ual G

ener

al M

eeti

ng

2020 R’000

2019 R’000

3. Investments in associatesUnlisted (at cost)Lendcor Holdings (Pty) Ltd

- 49.9% (2019: 49.9%) ordinary shares 20 686 20 686

- allowance for impairment (13 699) (13 098)


- 49% (2019: 55%) ordinary shares 95 278 7 260

- allowance for impairment (1 409) -

Lendcor (Pty) Ltd – 49.9% (2019: 49.9%) ordinary shares 22 979 22 979

123 835 37 827

The summarised financial information is disclosed in note 8 in the consolidated annual financial statements.

2020

The carrying value of the investment in Mettle Solar Investments (Pty) Ltd increased due to the following transactions which were conditions precedent to the Gridworks Development Partners LLP subscription detailed below:

• swapped its shares in and loan claims against Mettle Solar Africa Ltd for additional shares in Mettle Solar Investments (Pty) Ltd at a value of R21 million;

• capitalised its loan claims of R63.8 million (refer to note 6); and

• invested a further R3.1 million.

Gridworks Development Partners LLP invested its first R30 million in Mettle Solar Investments (Pty) Ltd in November 2019. As a result, the company’s shareholding diluted to 49%. Its remaining R76.7 million was invested in March 2020 resulting in its shareholding increasing to 40% and the company diluting further to 35%.

The allowance for impairment was calculated with reference to the value at which the above subscription took place.

2019 The company acquired the remaining 50% ordinary shares in Gondotrix (Pty) Ltd on 31 March 2018 for nominal value. The investment is now classified as a subsidiary (refer to note 2).

Notes to the company annual financial statements (continued)


107

Bus

ines

s O

verv

iew

/ A

nnua

l Fin

anci

al S

tate

men

ts /

Ann

ual G

ener

al M

eeti

ng

2020 R’000

2019 R’000

4. Investments in joint venturesUnlisted (at cost)Incatorque (Pty) Ltd

• subscription for 50.4% of ordinary shares 3 313 3 313


Gray Swan Financial Services (Pty) Ltd

• subscription for 50% of ordinary shares 4 000 4 000


• 0% (2019: 55%) ordinary shares - 6

Mettle Credit Services (Pty) Ltd

• 49% (2019: 0%) ordinary shares - -


• 49% (2019: 0%) ordinary shares 2 450 -


• 50% (2019: 0%) ordinary shares - -

6 450 4 006

The summarised financial information is disclosed in note 7 in the consolidated annual financial statements.

2020 R’000

2019 R’000

5. Financial assets at fair value through profit or lossMandatorily at fair valueGray Swan Sanlam Collective Investments Cautious Fund of Funds 11 177 10 932

The unit trust investment is valued at the year-end closing price and secures the overdraft detailed in note 25. The unit trust investment can be disposed of at any time from September 2020. The fair value is classified as level 1 in the fair value hierarchy.


108

Bus

ines

s O

verv

iew

/ A

nnua

l Fin

anci

al S

tate

men

ts /

Ann

ual G

ener

al M

eeti

ng Notes to the company annual financial statements (continued)

2020 R’000

2019 R’000

6. Amounts due from related partiesAmounts due from subsidiariesMettle Administrative Services (Pty) Ltd

From 1 March 2018, interest accrued at prime (settled monthly). The company received the loan repayment of R8.2 million in February 2020, resulting in the profit on loan settlement of R5.6 million (refer to note 16). - 2 633

The loan accrues interest at prime plus 1% (settled semi-annually) and was repayable in March 2020. Repayments of R17.6 million have been made subsequent to year-end. Mettle Administrative Services (Pty) Ltd has access to sufficient cash balances should repayment be requested. The loan is secured by Mettle Administrative Services (Pty) Ltd's cash balances and loan and trade receivables of R64 million (2019: R71.1 million). 49 393 49 341

Mettle Vehicle Finance (Pty) Ltd

The interest free loan was settled during the year. - 143

Mettle Litigation Finance (Pty) Ltd

The unsecured loan was acquired in November 2018 and was repayable once the amount due by Christopher Finance (Pty) Ltd to Mettle Litigation Finance (Pty) Ltd was recovered. R2.2 million of the loan was interest free with the balance accruing interest at prime plus 2%. The loan was settled during the year. - 10 030

Gondotrix (Pty) Ltd

The unsecured loan was interest free and written off during the year. - 10

Amounts due from associatesLendcor Holdings (Pty) Ltd

The unsecured loan accrues interest at prime and is repayable on demand. 24 21


The unsecured loan accrued interest at prime plus 3% and was capitalised during the year. - 62 859

Amounts due from joint venturesIncatorque (Pty) Ltd

Loan 1 781 430


The unsecured loan accrues interest at prime from May 2019 and repayment has been deferred for at least a year. A loss allowance has been recognised due to the continued operating losses being incurred.


The loan was US Dollar denominated and accrued interest at US prime plus 3% (which amounted to 8.5% at 28 February 2019). This loan was swapped for shares in Mettle Solar Investments (Pty) Ltd during the year. - 17 776


109

Bus

ines

s O

verv

iew

/ A

nnua

l Fin

anci

al S

tate

men

ts /

Ann

ual G

ener

al M

eeti

ng

2020 R’000

2019 R’000


The interest free loan is secured by cash and trade receivables balances and repayable by 28 February 2021. 564 2 333


The unsecured loan accrues interest at prime plus 2% and is subordinated in favour of its other funders. 8 740 -

58 721 145 576

Maturity analysis

Within 1 year 49 981 5 166

2 to 5 years 8 740 140 410

58 721 145 576

7. Loan receivableRelated partyFrancois van Themaat (director of associate) 2 659 2 942

• loss allowance (1 023) (640)

1 636 2 302

The loan accrued interest at prime less 2% and was repayable by 15 April 2019. The loan is limited recourse and secured by 172,170 Tradehold Ltd shares. The Tradehold Ltd closing share price was R9.50 (2019: R12.50).

The expected credit loss is calculated after taking security into account.

8. Stated capitalAuthorised

500 million shares of no par value

Issued

247 174 375 fully paid up shares of no par value 545 828 545 828

The following amendments to share capital took place in April 2018:

• authorised and issued share capital was converted to no par value; and

• authorised share capital was increased to 500 million no par value ordinary shares.

The following share issues to Tradehold Ltd took place during the prior year:

• 40.2 million ordinary shares in settlement of borrowings amounting to R42 million.

• 110.7 million ordinary shares for R403.2 million.

On 28 May 2018, Tradehold Ltd distributed its ordinary shares in the company to its shareholders.


110

Bus

ines

s O

verv

iew

/ A

nnua

l Fin

anci

al S

tate

men

ts /

Ann

ual G

ener

al M

eeti


9. Share-based payment reserve An employee share option scheme, the Mettle Employee Share Option Scheme (“ESOP”), was adopted in the current year. The maximum number of shares that can be awarded under the ESOP is 12 358 718. The options granted under the ESOP are exercisable at the 30 trading day volume weighted average price at which the shares traded on the JSE at the close of the last trading day prior to the day on which the options were awarded to an employee by the company, in three equal tranches on the third, fourth and fifth anniversary, provided that the employee is still employed on such exercise date. The fair value at the date of acceptance of the award by the employee (the “Grant Date”) is estimated using a binomial pricing model, taking into account the terms and conditions upon which the options were granted. If the exercise notice of any particular tranche of an option is not received by the company within 7 years of the Grant Date the option will automatically lapse. There is no cash settlement of the options.

A total of 3 600 000 share options were granted in August 2019 at an exercise price of R0.92 per share.

The following options were granted to a director of the company in terms of the ESOP during the year:

On 30 August 2019 (the Grant Date), an award of 1 000 000 share options of R0.92 per share were accepted by JJ Rookledge, exercisable in three equal tranches on 30 August 2022, 30 August 2023 and 30 August 2024 respectively.

The following options were granted to a director of a major subsidiary in terms of the ESOP during the year:

On 29 August 2019 (the Grant Date), an award of 400 000 share options of R0.92 per share were accepted by G Wright, exercisable in three equal tranches on 29 August 2022, 29 August 2023 and 29 August 2024 respectively. The following options were granted to a director of the Company Secretary in terms of the ESOP during the year: On 27 August 2019 (the Grant Date), an award of 400 000 share options of R0.92 per share were accepted by WD Marais, exercisable in three equal tranches on 27 August 2022, 27 August 2023 and 27 August 2024 respectively. The fair value of the options granted (R2.7 million) was estimated on the Grant Date using the following assumptions:

Dividend yield 0.00%Expected volatility 20.65%Risk-free interest rate 8.20%Expected life of share options 7 yearsWeighted average share price R1.40

The company has recognised a share-based payment expense in the statement of changes in equity of R348 050 during the current year.

At 29 February 2020, there are 8 758 718 shares available for utilisation under the ESOP.

2020 R’000

2019 R’000

10. Deferred taxationReconciliationAt beginning of the year 671 309

Temporary differences charged to profit or loss 421 362

At end of the year 1 092 671

AnalysisFinancial assets at fair value through profit or loss 330 261

Loan due from joint venture - 508

Investment in associate 762 -

Trade and other payables - (98)

1 092 671


111

Bus

ines

s O

verv

iew

/ A

nnua

l Fin

anci

al S

tate

men

ts /

Ann

ual G

ener

al M

eeti

ng

2020 R’000

2019 R’000

11. BorrowingsSmall Enterprise Finance Agency SOC Ltd 49 394 49 341

The borrowings accrue interest at prime plus 1%. Interest is payable semi-annually with capital repayable in March 2020. Repayments of R17.6 million have been made subsequent to year-end but the company is still waiting for possible refinancing terms. The company has access to sufficient cash balances should repayment be requested. The borrowings are secured by Mettle Administrative Services (Pty) Ltd's cash balances and loan and trade receivables of R64 million (2019: R71.1 million).

Maturity analysis

Within 1 year 49 394 2 657

2 to 5 years - 46 684

49 394 49 341

12. Other financial liabilitiesPut option contract 3 986 2 611

The remaining shareholder in Lendcor Holdings (Pty) Ltd can put their 50.1% shares to the company. The exercise price is the greater of a proportional share of six times the profit after tax for the year ending 28 February 2021 of Lendcor (Pty) Ltd and R12.9 million. This put option can only be exercised during the period from 1 June 2021 to 31 August 2021. The measurement of this liability considers the exercise period, exercise price and current net asset value (refer to note 8 in the consolidated annual financial statements) of Lendcor (Pty) Ltd.

The company has a call option on the same terms as detailed above except that the profit after tax multiple is seven rather than six.

Deferred contingent consideration 4 232 -

The company needs to make a further subscription in Gray Swan Financial Services (Pty) Ltd in 2021 based on a 7 price earnings multiple applied to 40% of the profit after tax for the financial year ended 29 February 2020 and 60% of the profit after tax for the year ending 28 February 2021 multiplied by its 50% shareholding. This future subscription amount is then reduced by the R4 million investment already made in 2017. The company has estimated the amount by using the latest available budget for the year ending 28 February 2021 and discounting at the prime rate.

8 218 2 611





112

Bus

ines

s O

verv

iew

/ A

nnua

l Fin

anci

al S

tate

men

ts /

Ann

ual G

ener

al M

eeti


2020 R’000

2019 R’000

13. ProvisionBonusAt beginning of the year - -

Charged to profit or loss 730 -

Paid (30) -

At end of the year 700 -

The bonus provision represents management's best estimate of the constructive obligation in respect of bonuses relating to the current year.

14. Trade and other payablesTrade payables 105 79

Audit fees 138 358

Leave pay 151 6

Value added tax 51 -

445 443

The leave pay accrual represents management's best estimate of the obligation in respect of leave pay that arose from prior services rendered.

The average credit period for purchases of goods and services is 30 days. No interest is charged on trade payables. The company has policies in place to ensure that trade payables are paid within the credit period time.

15. RevenueRelated partiesInterest income 9 808 14 203

Dividend income 3 206 9 624

13 014 23 827

Timing of revenue recognition

• At a point in time 3 206 9 624

• Over time 9 808 14 203

13 014 23 827

16. Other incomeProfit on loan settlement 5 555 -

Guarantee fee income – related party 3 287 -

Profit on disposal of joint venture 1 966 -

Fair value adjustment on financial assets at fair value through profit or loss 245 198

Foreign exchange differences 1 822 1 815

Management fee income – related parties 454 -

Interest income – cash and cash equivalents 557 10

13 886 2 023


113

Bus

ines

s O

verv

iew

/ A

nnua

l Fin

anci

al S

tate

men

ts /

Ann

ual G

ener

al M

eeti

ng

2020 R’000

2019 R’000

17. Interest expenseRelated parties 728 78

External parties 8 997 5 417

Bank overdrafts 1 501 751

11 226 6 246

18. Loss allowancesAmount due from joint venture 1 781 -

Amounts due from subsidiaries 24 -

Related party loan receivable 383 617

2 188 617

19. Allowances for impairmentInvestment in associates 2 010 4 695

Investment in joint venture - 3 313

Investment in subsidiary 17 704 550

19 714 8 558

20.Operating expensesDirectors’ emoluments (not for services as directors) 7 680 6 332

• paid by subsidiaries (6 709) (6 332)

Directors’ fees 1 220 682

Payroll costs 962 108


Professional and secretarial fees 3 455 3 257

Professional and secretarial fees – Mettle Corporate Finance (Pty) Ltd 736 800

Securities transfer tax - 1 555

Management fee expense – related parties 29 460

Audit fees – current year 575 580

Audit fees – prior year underprovision 56 230

Travel expenses 209 316

Other expenses 951 659

9 512 8 647

Individual directors’ remuneration is disclosed in note 33 in the consolidated annual financial statements


114

Bus

ines

s O

verv

iew

/ A

nnua

l Fin

anci

al S

tate

men

ts /

Ann

ual G

ener

al M

eeti


2020 R’000

2019 R’000

21. TaxationCurrent tax 378 1 902

Deferred tax 421 362

799 2 264

% %

Reconciliation of tax rateTaxation as a percentage of loss before taxation (3.7) (273.1)

Exempt income (4.2) (325.1)

Capital losses 23.2 0.0

Utilisation of capital losses not previously recognised (9.9) (16.9)

Non-deductible fair value loss on other financial liabilities 7.4 88.2

Non-deductible impairment of investment in subsidiary 0.0 18.6

Non-deductible impairment of investment in joint venture 0.0 111.9

Non-deductible impairment of amount due from joint venture 2.3 0.0

Non-deductible impairment of investment in associate 2.6 158.6

Non-deductible impairment of loan receivable 0.5 21.6

Non-deductible operating expenses 9.8 244.2

Statutory tax rate 28.0 28.0

R’000 R’000

22. Related partiesRelated parties include the company's directors, shareholders, subsidiaries, joint ventures and associates. Transactions are concluded on an arm’s length basis.

Transactions

Dividend income:

• Mettle Corporate Finance (Pty) Ltd (subsidiary) 2 500 2 500

• Mettle Administrative Services (Pty) Ltd (subsidiary) - 5 000

• Mettle Vehicle Finance (Pty) Ltd (subsidiary) 100 -

• Mettle Litigation Finance (Pty) Ltd (subsidiary) 225 -

• Gondotrix (Pty) Ltd (former associate) - 2 000

• Gray Swan Financial Services (Pty) Ltd (joint venture) 381 124

3 206 9 624


115

Bus

ines

s O

verv

iew

/ A

nnua

l Fin

anci

al S

tate

men

ts /

Ann

ual G

ener

al M

eeti

ng

2020 R’000

2019 R’000

Interest income:

• Mettle Solar Namibia (Pty) Ltd (associate) - 316

• Mettle Solar Investments (Pty) Ltd (associate) 2 067 6 107

• Lendcor Holdings (Pty) Ltd (associate) 2 4

• Lendcor (Pty) Ltd (associate) - 9

• Mettle Administrative Services (Pty) Ltd (subsidiary) 6 236 6 253

• Francois van Themaat (director of associate) (10) 228

• Teniam Holdings (Pty) Ltd (company of director of subsidiary) - (107)

• Mettle Solar Africa Ltd (joint venture) 392 1 108

• Mettle Litigation Finance (Pty) Ltd (subsidiary) 655 285

• Incatorque (Pty) Ltd (joint venture) 126 -

• Christopher Finance (Pty) Ltd (joint venture) 340 -

9 808 14 203

Guarantee fee income:

• Mettle Solar Africa Ltd (joint venture) 3 287 -

The company provided a guarantee for the Rand equivalent of $3.1 million to Investec Bank (Mauritius) Ltd (via Investec Bank Ltd) for its $5 million funding facility provided to Mettle Solar Africa Ltd. The company had to place the required funds on deposit at Investec Bank Ltd. The company earned a monthly guarantee fee of 1%. This facility was refinanced in December 2019 and the company was released from this guarantee obligation.

Management fee income

• Mettle Specialised Finance (Pty) Ltd (joint venture) 132 -

• Mettle Solar Operations (Pty) Ltd (associate) 122 -

• Mettle Administrative Services (Pty) Ltd (subsidiary) 200 -

454 -

Interest expense:

• Mettle Corporate Finance (Pty) Ltd (subsidiary) 175 78

• Mettle Administrative Services (Pty) Ltd (subsidiary) 553 -

728 78

The company paid interest at rates between prime and prime less 2.25% on borrowings from the above subsidiaries during the year.

Professional, advisory and secretarial fees:

• Mettle Corporate Finance (Pty) Ltd (subsidiary) 736 800

Management fee expense:

• Mettle Credit Services (Pty) Ltd (joint venture) 29 -

• Mettle Specialised Finance (Pty) Ltd (subsidiary) - 460

29 460


116

Bus

ines

s O

verv

iew

/ A

nnua

l Fin

anci

al S

tate

men

ts /

Ann

ual G

ener

al M

eeti

ng

2020 R’000

2019 R’000

22. Related parties (continued)The company purchased the loan claim against Mettle Solar Africa Ltd from Tradehold Africa Ltd in May 2018 at a discount. This gain of R1.1 million has been recorded in equity in the prior year.

Balances

The investments in group companies are disclosed in notes 2, 3 and 4.

The terms of the amounts due from related parties are disclosed in note 6.

The terms of the receivable are disclosed in note 7.

23. Financial risk managementFinancial instrument by categoryFinancial assets

At amortised cost

Amounts due from related parties 58 721 145 576

Loan receivables 1 636 2 302

60 357 147 878

At fair value

Financial assets at fair value through profit or loss 11 177 10 932

Financial liabilities

At amortised cost

Borrowings 49 394 49 341

Bank overdrafts 17 787 19 241

Trade and other payables 1 094 443

68 275 69 025

At fair value

Other financial liabilities 8 218 2 611



117

Bus

ines

s O

verv

iew

/ A

nnua

l Fin

anci

al S

tate

men

ts /

Ann

ual G

ener

al M

eeti

ng

The company is exposed to market risk, credit risk and liquidity risk. Senior management oversees the management of these risks and seeks to minimise the potential adverse effects on the company’s financial performance.

Market risk

Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices. Market prices comprise three types of risk: currency risk, interest rate risk and price risk.

Currency riskThe company is not exposed to currency risk on its financial instruments at 29 February 2020.

The company was exposed to Rand US Dollar currency risk on its loan due from Mettle Solar Africa Ltd (joint venture) at 28 February 2019. The risk was mitigated as the company is a 55% shareholder and the shareholders provide funding pro rata to their shareholding.

A 5% change in the Rand US Dollar exchange rate was considered reasonable. If the Rand had strengthened/weakened against the US Dollar by 5%, then the company’s loss before tax for the year ended 28 February 2019 would have decreased/increased by R888 801.

Interest rate riskInterest rate risk is the risk that the value of a financial instrument will fluctuate as a result of changes in interest rates. The company is exposed to cash flow interest rate risk on its floating rate borrowings, amounts due from related parties and its bank overdraft

The sensitivity analysis below has been determined based on all interest-bearing loan assets and liabilities at the reporting date. A 100 (2019: 100) basis point increase or decrease represents management’s assessment of the reasonably possible change in interest rates.

If interest rates had been 100 basis points higher/lower and all other variables were constant, the company’s loss before tax for the year ended 29 February 2020 would have increased/decreased by R90 257 (2019: loss decreased/increased by R625 969).

Price riskThe company’s price risk arises from its financial assets at fair value through profit or loss. As this is an investment in a cautious fund of funds unit trust, there is less price risk due to the asset allocation composition of the unit trust. Gray Swan Financial Services (Pty) Ltd (joint venture) manages these unit trust investments and provides performance feedback regularly.

Credit risk

Credit risk is the risk that a counterparty to a financial instrument will fail to discharge an obligation and cause the company to incur a financial loss. Credit risk arises on cash and cash equivalents, loan receivables, trade and other receivables and amounts due from related parties. The company only deposits cash with major banks of high credit standing. The maximum exposure to credit risk is R60.4 million (2019: R147.9 million).

Liquidity risk

Liquidity risk is the risk that the company will encounter difficulty in meeting obligations associated with financial liabilities. The company’s risk to liquidity is a result of the funds available to cover future commitments. The company’s exposure to liquidity risk relates to borrowings, the bank overdrafts and trade and other payables. The company manages liquidity risk through an ongoing review of future commitments and credit facilities.

The table below analyses the company’s non-derivative financial liabilities into relevant maturity groupings based on the remaining period at the reporting date to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows.


118

Bus

ines

s O

verv

iew

/ A

nnua

l Fin

anci

al S

tate

men

ts /

Ann

ual G

ener

al M

eeti

ng


2020Carrying value


R’000

Between 1 and 2 years

R’000After 2 years

R’000Total

R’000

Borrowings 49 394 49 831 - - 49 831

Bank overdrafts 17 787 17 787 - - 18 787


68 275 68 712 - - 68 712

The borrowings terms were amended subsequent to year-end. Repayments of R17.6 million have been made subsequent to year-end but the company is still waiting for possible refinancing terms. The company has access to sufficient cash balances should repayment be requested.

The bank overdrafts, with total facility limits of R30 million, are reviewed annually and there is currently no reason to believe that these facilities will not be renewed.

2019Carrying value


R’000

Between 1 and 2 years

R’000After 2 years

R’000Total

R’000

Borrowings 49 341 5 316 49 613 - 54 929

Bank overdrafts 19 241 19 241 - - 19 241

Trade and other payables 443 443 - - 443

69 025 25 000 49 613 - 74 613

Capital risk management

The company manages its capital to ensure that it will be able to continue as a going concern while enhancing the return to its shareholders. The capital structure of the company consists of equity, comprising issued ordinary share capital. Refer to note 8 for more detail.

The company is not subject to any externally imposed capital requirements, except that in terms of the Companies Act of South Africa, 2008, it must ensure that following any share repurchase or payments to shareholders, the assets of the company, as fairly valued, equal or exceed the liabilities of the company, as fairly valued, and it appears that the company will be able to pay its debts as they become due in the ordinary course of business for a period of twelve months after the date on which the test is considered.



119

Bus

ines

s O

verv

iew

/ A

nnua

l Fin

anci

al S

tate

men

ts /

Ann

ual G

ener

al M

eeti

ng

2020 R’000

2019 R’000

24. Notes to the statement of cash flowsA. Reconciliation of loss before taxation to cash generated by/(utilised in) operations

Loss for the year (21 347) (829)

Interest income (10 365) (14 212)

Dividend income (3 206) (9 624)


Profit on loan settlement (5 555) -

Profit on disposal of joint venture (1 966) -

Allowance for impairment of investment in subsidiary 17 704 550

Allowance for impairment of investment in joint venture - 3 313

Allowance for impairment of investments in associates 2 010 4 695

Loss allowance – amount due from joint venture 1 781 -

Loss allowance – amounts due from subsidiaries 24 -

Loss allowance – related party loan receivable 383 616

Fair value adjustment on financial assets at fair value through profit or loss (245) (198)

Foreign exchange differences (900) (1 815)

Fair value loss on other financial liabilities 5 607 2 611


Operating loss before working capital changes (4 501) (8 647)

Decrease/(increase) in amounts due from related parties 7 809 (15 002)

Decrease in trade and other receivables - 91

Increase in trade and other payables 703 241

4 011 (23 317)

B. Taxation paidLiability at beginning of the year (79) (43)

Tax charged in profit or loss (799) (2 264)

Movement in deferred taxation 421 362

Withholding tax credit - 33

Liability at end of the year 20 79

(437) (1 833)


120

Bus

ines

s O

verv

iew

/ A

nnua

l Fin

anci

al S

tate

men

ts /

Ann

ual G

ener

al M

eeti


2020 R’000

2019 R’000

25. Bank overdraftsNedbank Ltd 17 781 8 313

The unsecured overdraft facility accrues interest at prime which is settled monthly. This facility increased from R10 million to R25 million in October 2019 and is now secured by the unit trust investment (refer to note 5). This facility is reviewed annually.

FirstRand Bank Ltd 6 10 928

The overdraft facility accrues interest at prime plus 1% which is settled monthly. This facility was secured by the unit trust investment. This facility decreased from R15 million to R5 million in October 2019 and the security was released to Nedbank Ltd. This facility is reviewed annually.

17 787 19 241

26. Events subsequent to the year-endThe following has taken place subsequent to year-end:• outbreak of the COVID-19 pandemic resulting in, inter alia, a National lockdown.

The office is closed but staff can work effectively from their remote locations.

27. Going concern The annual financial statements have been prepared on the going concern basis, since the directors have every reason to believe that the company has adequate resources in place to continue in operation for the foreseeable future.

The company is adequately capitalised and has current facilities to operate for the forseeable future. Currently, no group companies, besides Incatorque (Pty) Ltd, should require shareholder funding in the upcoming financial year.


121

Bus

ines

s O

verv

iew

/ A

nnua

l Fin

anci

al S

tate

men

ts /

Ann

ual G

ener

al M

eeti

ngShareholders’ profile

The distribution of shareholders at 29 February 2020 is:

Number of shareholders

Percentage of shareholders

Number of shares held

Percentage of shares in issue

Non-public shareholdersDirectors and associates 11 0.7 49 581 007 20.1

Strategic holdings 7 0.5 175 555 997 71.0

Total non-public shareholders 18 1.2 225 137 004 91.1

Public shareholders 1 441 98.8 22 037 371 8.9

Total shareholders 1 459 100.0 247 174 375 100.0

The major shareholders at 29 February 2020 are:

ShareholderNumber of

shares heldPercentage

holding

Granadino Investments (Pty) Ltd 82 369 947 33.3

Genfin Holdings (Pty) Ltd 33 648 344 13.6

Titan Global Investments (Pty) Ltd 28 695 605 11.6

Teez Away Trading (Pty) Ltd 28 586 285 11.6

Cream Magenta 140 (Pty) Ltd 12 951 674 5.2

Metcap 14 (Pty) Ltd 12 685 834 5.1

03annualgeneralmeeting


124

Bus

ines

s O

verv

iew

/ A

nnua

l Fin

anci

al S

tate

men

ts /

Ann

ual G

ener

al M

eeti

ng

Mettle Investments Limited

(Incorporated in the republic of South Africa)(Registration number 2008/002061/06)JSE code: MLE ISIN: ZAE000257622(“Mettle” or “the Company”)

Notice is hereby given, in terms of section 62(1) of the Companies Act, 71 of 2008, as amended (“the Act”), that the annual general meeting (“AGM”) of the shareholders of Mettle (“Shareholders”) will be held by electronic means at 10 am on Friday, 14 August 2020.

Electronic attendance and voting by way of proxy onlyIn light of the continuing COVID-19 lockdown measures put in place by the South African Government, Shareholders are advised that the AGM will be held in electronic format only in accordance with the provisions of section 63(2) of the Act.

Shareholders who wish to attend such meeting are requested to complete the APPLICATION FOR ELECTRONIC PARTICIPATION AT THE ANNUAL GENERAL MEETING form that forms part of this notice (this “Notice”). This will entitle Shareholders or their proxies to attend but not vote by way of a telephone conference call or video conference.

Duly executed application forms including the relevant contact details, email address, cellular and landline numbers, as well as full details of the Shareholder’s title to the shares (“Shares”) issued by the Company and proof of identity, in the form of copies of identity documents and share certificates (in the case of certificated Shareholders), and (in the case of dematerialised Shareholders) written confirmation from the Shareholder’s appointed central securities depository participant (“CSDP”) confirming the Shareholder’s title to the dematerialised Shares, must reach the Company by no later than 10:00 on Friday, 14 August 2020 by submitting, by email to the company secretary of the Company (“Company Secretary”) at [email protected]. Prior to the meeting the Shareholder concerned will be provided with a link or other information regarding the electronic platform to be used for purposes of the AGM and instructions to access the electronic communication platform during the AGM.

Shareholders are advised that they will not be entitled to vote at the AGM if they participate via electronic means. If they wish to vote at the AGM they are required to complete the FORM OF PROXY that forms part of this Notice to ensure that their votes are included as part of the voting process. It will consequently not be possible for voting at the AGM to take place by a

show of hands and voting will be conducted by way of a poll. Shareholders must further note that access to the conference facility will be at the expense of the Shareholders who wish to utilise the conference facility.

In terms of section 59(1)(a) and (b) of the Act, the board of directors (“the Board”) has set the record date for the purpose of determining which Shareholders are entitled to:

• receive notice of the AGM, i.e. the notice record date (being the date on which a Shareholder must be registered in the Company’s share register in order to receive notice of the AGM) as Friday, 19 June 2020; and

• participate in and vote at the AGM, i.e. the meeting record date (being the date on which a Shareholder must be registered in the Company’s share register in order to participate in and vote at the AGM) as Friday, 7 August 2020.

Accordingly, the last day to trade in order to be registered in the Company’s share register on the meeting record date is Tuesday, 4 August 2020.

Purpose of the AGMThe purpose of the AGM is to consider and, if approved, pass the ordinary and special resolutions set out in this Notice, with or without modification.

Ordinary Resolution Number 1

That the Audited Annual Financial Statements of Mettle and its subsidiaries (“Group”) for the year ended 29 February 2020, incorporating the Directors’ Report, Independent Auditor’s Report, Audit and Risk Committee Report and Social and Ethics Committee Report, which have been distributed and accompany this Notice and are accordingly presented to Shareholders, be accepted and adopted.

Additional information

An electronic copy of the Integrated Report of which this Notice forms part (“the Integrated Report”) incorporating the Audited Annual Financial Statements, the Audit and Risk Committee Report, the Directors’ Report, the Independent Auditor’s Report and the Chairman’s Statement is available online at: www.mettleinvestments.com.

Voting requirement

Ordinary Resolution Number 1 will require the support of more than 50% (fifty percent) of the total number of votes exercisable by Shareholders represented by proxy, to be approved.

Notice of annual general meeting to shareholders


125

Bus

ines

s O

verv

iew

/ A

nnua

l Fin

anci

al S

tate

men

ts /

Ann

ual G

ener

al M

eeti

ng


That PricewaterhouseCoopers Inc, as nominated by the Company’s Audit and Risk Committee, be appointed as independent auditors of the Company to hold office until the conclusion of the next AGM of the Company. It is to be noted that Mr JR de Villiers is the individual and designated auditor who will undertake the Company’s audit for the financial year ending 28 February 2021.

Voting requirement



That Mr BA Chelius, who retires as director in terms of the Memorandum of Incorporation (“MOI”) and, being eligible, offers himself for re-election to the Board, be re-elected as a non-executive director.


Shareholders are referred to page 7 of the Corporate Governance report contained in the Integrated Report for a brief CV of all directors standing for re-election.

Voting requirement



That Mr HvdM Scholtz who was appointed as director with effect from 14 August 2019, be re-appointed as a non-independent non-executive director.


Shareholders are referred to page 7 of the Corporate Governance report contained in the Integrated Report for a brief CV of all directors standing for re-election.

Voting requirement



That, subject to the provisions of the Act and in accordance with the JSE Limited (“JSE”) Listings Requirements (“Listings Requirements”), the Board is hereby authorised to issue ordinary shares of no par value, or options or securities convertible into ordinary shares, for cash from time to time, subject to the following conditions:

• that this authority is valid until the Company’s next AGM, provided it shall not extend beyond 15 months from the date that this authority is given;

• that the equity securities which are the subject of the issue for cash must be of a class already in issue, or where this is not the case, must be limited to such securities or rights that are convertible into a class already in issue;

• that securities which are the subject of the issue for cash may not exceed 50% of the Company’s listed equity securities as at the date of this Notice (this number of shares being 123 587 187, excluding treasury shares);

• any ordinary shares issued under this authority during the period of its validity must be deducted from the above number of ordinary shares and the authority shall be adjusted accordingly to represent the same allocation ratio on the event of a subdivision or consolidation of ordinary shares during the same period;

• that in determining the price at which an issue of securities for cash may be made in terms of this authority, the maximum discount permitted will be 10% of the weighted average traded price as determined over the 30 business days prior to the date that the price of the issue is agreed between the Company and the party subscribing for the securities;

• that any such issue will only be made to public shareholders as defined by the Listings Requirements and not to related parties; and

• upon any issue of securities which, together with prior issues of securities during the validity period of this authority, will constitute 5% or more of the total number of ordinary shares in issue prior to that issue, the Company shall publish an announcement in terms of paragraph 11.22 of the JSE Listings Requirements, giving full details hereof, including (i) the number of ordinary shares issued, (ii) the average discount to weighted average traded price of the ordinary shares over the 30 business days prior to the date that the issue is agreed in writing between the Company and the party/ies subscribing for the shares; and, (iii) in respect of the issue of options and convertible securities issued for cash, the effects of the issue on net asset value per share, net tangible asset value per share, earnings per


126

Bus

ines

s O

verv

iew

/ A

nnua

l Fin

anci

al S

tate

men

ts /

Ann

ual G

ener

al M

eeti

ng

share, headline earnings per share and, if applicable, diluted earnings and headline earnings per share; or (iv) in respect of an issue of shares for cash, an explanation including supporting information (if any), of the intended use of funds.

Reason and effect

The reason and effect of this resolution is to empower the Board to issue shares, options or securities convertible into shares for cash or for acquisitions within the limits imposed by the above terms.

Voting requirement

In terms of the Listing Requirements, Ordinary Resolution Number 5 will require the support of more than 75% (seventy five percent) of the total number of votes exercisable by Shareholders represented by proxy, to be approved.


That the following independent directors of the Company be elected, each by way of separate resolutions, as members of the Audit and Risk Committee of the Company, until the conclusion of the next AGM of the Company:

6.1 The election of RD Fenner as a member of the Audit and Risk Committee of the Company;

6.2 The election of BA Chelius as a member of the Audit and Risk Committee of the Company, subject to the passing of Ordinary Resolution Number 3; and

6.3 The election of MVZ Wentzel as a member of the Audit and Risk Committee of the Company.

Reason and effect

The reason and effect of these resolutions is to appoint the Company’s Audit and Risk Committee, which will be valid until the next AGM.


Shareholders are referred to page 7 of the Corporate Governance report contained in the Integrated Report for a brief CV of all directors elected to serve on the Audit and Risk Committee.

Voting requirement



Resolved as a non-binding advisory vote that the remuneration policy of the Company, as set out on page 10 of the Integrated Report, be and is hereby endorsed through a non-binding advisory vote as recommended in terms of the King Code IV report on Corporate Governance for South Africa 2016 (“King Code IV”).

Reason and effect

In terms of principle 14 of the King Code IV, the Company’s remuneration policy should be tabled to the Shareholders for a non-binding advisory vote at the AGM. Accordingly, the Shareholders are requested to endorse the Company’s remuneration policy by way of a non-binding advisory vote in the same manner as an ordinary resolution.

Voting requirement

The approval of the Company’s remuneration policy is not a matter that is required to be resolved or approved by Shareholders and therefore no minimum voting threshold is required for the non-binding advisory vote.

Nevertheless, for record purposes, the non-binding advisory vote on the Company’s remuneration policy will require the support of more than 50% (fifty percent) of the total number of votes exercisable by Shareholders represented by proxy, to be approved. The Company’s remuneration policy contains the measures that the Company will take if 25% or more of votes are cast against the policy at the AGM. The Board will also take the outcome of the votes into consideration when considering the Company’s remuneration policy.


Resolved as a non-binding advisory vote that the remuneration implementation report of the Company, as set out on page 10 of the Integrated Report, be and is hereby endorsed through a non-binding advisory vote as recommended in terms of the King Code IV.

Reason and effect

In terms of principle 14 of the King Code IV, the Company’s remuneration implementation report should be tabled to the Shareholders for a non-binding advisory vote at the AGM. Accordingly, the Shareholders are requested to endorse the Company’s remuneration implementation report by way of a non-binding advisory vote in the same manner as an ordinary resolution.

Notice of annual general meeting to shareholders (continued)


127

Bus

ines

s O

verv

iew

/ A

nnua

l Fin

anci

al S

tate

men

ts /

Ann

ual G

ener

al M

eeti

ng

Voting requirement

The approval of the Company’s remuneration implementation report is not a matter that is required to be resolved or approved by Shareholders and therefore no minimum voting threshold is required for the non-binding advisory vote.

Nevertheless, for record purposes, the non-binding advisory vote on the Company’s remuneration implementation report will require the support of more than 50% (fifty percent) of the total number of votes exercisable by Shareholders represented by proxy, to be approved. The Company’s remuneration policy contains the measures that the Company will take if 25% or more of votes are cast against the policy at the AGM. The Board will also take the outcome of the votes into consideration when implementing the Company’s remuneration policy.


Resolved that any director of the Company or the Company Secretary of the Company be and is hereby authorised to do all such things, sign all such documents and take all such actions as may be necessary for or incidental to the implementation of the ordinary and special resolutions to be proposed at the AGM.

Reason and effect

The reason for Ordinary Resolution Number 9 is to authorise any director or the Company Secretary of the Company to attend to the necessary requirements to implement the special and ordinary resolutions passed at the AGM and to sign all documentation required to record that the Company will be authorised to attend to any matter regarding the implementation of the special and ordinary resolutions on behalf of the Company.

Voting requirement


Special Resolution Number 1

Resolved as a Special Resolution that the directors’ fees (excluding VAT) to be paid by the Company for services rendered during the reporting period from 1 March 2020 to 28 February 2021 be confirmed to be as follows:

RD Fenner: ...................................................................................... R360,000BA Chelius (or replacement): .................................................. R360,000MVZ Wentzel: ................................................................................ R250,000FH Esterhuyse: .............................................................................. R250,000HvdM Scholtz (if appointment confirmed) ...................... R360,000Any other non-executive director ........................................ R250,000

Reason and effect

In terms of section 66(8) and (9) of the Act, non-executive directors’ fees for their services to the Company, must be approved by way of a special resolution passed by Shareholders within the previous two years. Accordingly, the reason for and effect of Special Resolution Number 1 is to approve the payment of and the basis for calculating the remuneration payable by the Company to its non-executive directors for the year ending 28 February 2021.

Voting requirement:

Special Resolution Number 1 will require the support of more than 75% (seventy five percent) of the total number of votes exercisable by Shareholders represented by proxy, to be approved.


Resolved as a Special Resolution that the Company be and is hereby authorised, in terms of section 45(3)(ii) of the Act and the MOI of the Company, to, on the instructions of its Board, provide direct or indirect financial assistance to a director or prescribed officer of the Company or of a related or inter-related company, or to a related or inter-related company or corporation, or to a member of a related or inter-related company or corporation, or to a person related to any such company, corporation, director, prescribed officer or member.


If the Board provides the aforesaid financial assistance the Company will, in compliance with section 45(5) of the Act, provide written notice to all Shareholders and to any trade union representing its employees, within 10 business days after the Board adopts the resolution, if the total value of all loans, debts, obligations or assistance contemplated in this resolution, together with any previous such resolution during the financial year, exceeds one-tenth of 1% of the Company’s net worth at the


128

Bus

ines

s O

verv

iew

/ A

nnua

l Fin

anci

al S

tate

men

ts /

Ann

ual G

ener

al M

eeti

ng

time of the resolution; or within 30 business days after the end of the financial year, in any other case.

The Board considers that such a general authority should be put in place in order to assist the Company inter alia to make loans to persons, including subsidiaries, as well as to grant letters of support and guarantees in appropriate circumstances. The existence of a general authority would void the need to refer each instance to Shareholders for approval. This general authority would be valid up to and including the 2021 annual general meeting of the Company.

Section 45 Board resolution will be subject to and effective to the extent that Special Resolution Number 2 is adopted by Shareholders and the provision of any such direct or indirect financial assistance by the Company, pursuant to such resolution, will always be subject to the Board being satisfied that immediately after providing such financial assistance, the Company will satisfy the solvency and liquidity test as referred to in section 45(3)(b)(ii) of the Act and the terms under which the financial assistance is proposed to be given are fair and reasonable to the Company.

Reason and effect

The reason and effect of the Special Resolution Number 2 is to grant the Board the general authority to provide direct or indirect financial assistance to a director or prescribed officer of the Company or to a related or inter-related Company or members or persons related to such Company, director, prescribed officer or corporation.

Voting requirement



Resolved as a Special Resolution that the Company be and is hereby authorised, in terms of section 44(3)(ii) of the Act and the MOI of the Company, to, on the instructions of its Board, provide direct or indirect financial assistance by way of loan, guarantee, the provision of security or otherwise to any person for the purpose of or in connection with the subscription of any options or securities, issued or to be issued by the Company or a related or inter-related company or for the purchase of any securities of the Company or a related or inter-related company.


The Board considers that such a general authority should be put in place in order to assist the Company inter alia to make loans to persons, including subsidiaries as well as to grant letters of support and guarantees in appropriate circumstances, for the purpose of the subscription or purchase of shares in the capital of the Company. The existence of a general authority would avoid the need to refer each instance to Shareholders for approval. This general authority would be valid up to and including the 2021 AGM of the Company.

The section 44 Board resolution will be subject to and effective to the extent that Special Resolution Number 3 is adopted by Shareholders and the provision of any such direct or indirect financial assistance by the Company, pursuant to such resolution, will always be subject to the Board being satisfied that immediately after providing such financial assistance, the Company will satisfy the solvency and liquidity test as referred to in section 44(3)(b)(ii) of the Act; and that terms under which the financial assistance is proposed to be given are fair and reasonable to the Company.

Reason and effect

The effect of the Special Resolution and the reason therefor is to grant the Board the general authority to provide direct or indirect financial assistance by way of a loan, guarantee, the provision of security or otherwise to any person for the purpose of, or in connection with the subscription of any option, or any securities, issued or to be issued by the Company or a related or inter-related Company or for the purchase of any securities of the Company or a related or inter-related Company.

Voting requirement




129

Bus

ines

s O

verv

iew

/ A

nnua

l Fin

anci

al S

tate

men

ts /

Ann

ual G

ener

al M

eeti

ng


Resolved as a Special Resolution that the mandate given to the Company (or any of its wholly-owned subsidiaries) providing authorisation, by way of a general authority contemplated in the Listings Requirements and sections 46 and 48 of the Act, read with sections 114 and 115 of the Act, to acquire the Company’s own securities, upon such terms and conditions and in such amounts as the directors may from time to time decide, but subject to the provisions of MOI, the Act and the Listings Requirements, be extended, subject to the following terms and conditions:

• authorisation be given by the MOI;

• any repurchase of securities must be effected through the order book operated by the JSE trading system and done without any prior understanding or arrangement between the Company and the counter-party;

• this general authority will be valid until the Company’s next AGM, provided that it shall not extend beyond fifteen months from date of passing of this Special Resolution;

• a paid press announcement will be published as soon as the Company has cumulatively repurchased 3% of the initial number (i.e. the number of that class of share in issue at the time that the general authority is granted) of the relevant class of securities and for each 3% in aggregate of the initial number of that class acquired thereafter, containing full details of such repurchases in compliance with the Listings Requirements;

• repurchases by the Company in aggregate in any one financial year may not exceed 20% of the Company’s issued share capital as at the date of passing of this Special Resolution or 10% of the Company’s issued share capital in the case of an acquisition of shares in the Company by a subsidiary of the Company;

• repurchases may not be made at a price greater than 10% above the weighted average of the market value of the securities for the five business days immediately preceding the date on which the transaction is effected;

• repurchases may not be undertaken by the Company (or any of its wholly-owned subsidiaries) during a prohibited period; unless the Company has a share repurchase programme in place, the dates and quantities of shares to be traded during the relevant period are fixed and full details of the programme have been submitted to the JSE in writing prior to the commencement of the prohibited period. The Company must instruct an independent third party, which makes its investment decisions in relation to the issuer’s securities independently of, and uninfluenced

by, the Company, prior to the commencement of the prohibited period to execute the repurchase programme submitted to the JSE; and

• at any point in time, the Company may only appoint one agent to effect any repurchase.

The Board intends either to hold the shares purchased in terms of this authority as treasury shares or to cancel such shares, whichever may be appropriate at the time of the repurchase of shares.

The Board is of the opinion that, after considering the effect of the maximum repurchase permitted and for a period of fifteen months after the date of this Notice:

• the Company (or its subsidiary) and the Group will be able, in the ordinary course of business, to pay its debts as they become due;

• the assets of the Company (or its subsidiary) and the Group will be in excess of the liabilities of the Company and the Group, the assets and liabilities being recognised and measured in accordance with the accounting policies used in the latest audited annual financial statements;

• the working capital of the Company (or its subsidiary) and the Group will be adequate for ordinary business purposes;

• the share capital and reserves are adequate for the ordinary business purposes of the Company (or its subsidiary) and the Group; and

• a repurchase undertaken by the Company must be approved by a resolution of the Board confirming that it has authorised the repurchase, that the Company and its subsidiary/ies have passed the solvency and liquidity test and that, since the test was performed, there have been no material changes to the financial position of any company of the Group.

Reason and effect

The effect of Special Resolution Number 4 and the reason therefore is to extend the general authority given to the directors in terms of the Act and the Listings Requirements for the acquisition by the Company (or any of its subsidiaries) of its own securities, which authority shall be used at the directors’ discretion during the course of the period so authorised.


130

Bus

ines

s O

verv

iew

/ A

nnua

l Fin

anci

al S

tate

men

ts /

Ann

ual G

ener

al M

eeti

ng

Additional Information

In terms of the Listings Requirements, the following disclosures are required with reference to the general authority to repurchase the Company’s shares set out in Special Resolution Number 4, some of which are set out elsewhere in the Integrated Report:

• Major shareholders of the Company – refer page 121;

• Share capital – refer page 74.

Voting requirement



Resolved as a Special Resolution that, with effect from the date of filing of the notice of amendment with the Companies and Intellectual Property Commission, clause 20.4.1 of the MOI be and is hereby amended, as contemplated in section 16(1)(c) of the Act, by inserting the phrase “or by proxy” after the phrase “in person” where it appears in the second line of such clause. If such amendment is approved, clause 20.4.1 will read as follows:

“20.4 Quorum and Adjournment of Meetings20.4.1 The quorum for a Shareholders’ meeting to begin

or for a matter to be considered, shall be at least 3 Shareholders entitled to attend and vote and present in person or by proxy. In addition . . . .– ”

Reason and effect

The reason for and effect of Special Resolution Number 5 is to amend the MOI to include Shareholders present by proxy in addition to present in person at any general meeting for purposes of determining the quorum at a general meeting of the Company.

Voting requirement


Social and Ethics Committee

The chairperson of the social and ethics committee will give verbal feedback on the activities of this committee for the past period as required in terms of regulation 43(5)(c) of the Companies Regulations, 2011.

Directors’ Responsibility Statement

The directors, whose names are given on page 22 of the Integrated Report, collectively and individually, accept full responsibility for the accuracy of the information pertaining to the above Ordinary and Special Resolutions and certify that to the best of their knowledge and belief there are no facts that have been omitted which would make any statement false or misleading, and that all reasonable enquiries to ascertain such facts have been made and that the above Ordinary and Special Resolutions contain all information required by law and the Listings Requirements.



131

Bus

ines

s O

verv

iew

/ A

nnua

l Fin

anci

al S

tate

men

ts /

Ann

ual G

ener

al M

eeti

ng

Material change

Other than the facts and developments reported on in the Integrated Report, there have been no material changes in the affairs, financial or trading position of the Company and its subsidiaries since the signature date of the Integrated Report and the distribution date hereof.

Voting Requirements

In compliance with section 62(3)(c) of the Act and/or the Listings Requirements it is confirmed that a voting majority of 50% is required for the approval of Ordinary Resolutions Number 1 to 5, as well as 7 to 10. For Ordinary Resolution Number 6, a 75% voting majority is required by the Listings Requirements. The Special Resolutions require a 75% voting majority in terms of the MOI and the Listings Requirements.

Proxies

All registered Shareholders will be entitled to attend via electronic means but can only vote by proxy at the AGM. A form of proxy is attached for completion by certificated Shareholders and dematerialised Shareholders with own name registration. Shareholders are requested to deliver their forms of proxy to Computershare Investor Services Proprietary Limited, Rosebank Towers, 15 Biermann Avenue, Rosebank, 2196, South Africa (PO Box 61051, Marshalltown, 2107, South Africa) so as to arrive by no later than 48 hours before the commencement of the AGM, alternatively may be emailed to the Company Secretary at [email protected] prior to voting on the resolution or resolutions in question begins.

If the form of proxy is validly executed and received by the Company Secretary before voting commences on the resolution or resolutions in question, the chairman of the AGM is obliged to accept such proxy. Certificated Shareholders and Dematerialised Shareholders with own name registration who complete and lodge forms of proxy, will nevertheless be entitled to attend the AGM by electronic means, should they subsequently decide to do so.

Dematerialised Shareholders, other than own name registration, must inform their CSDP or broker of their intention to attend the AGM by electronic means and obtain the necessary authorisation (letter of representation) from the CSDP or broker to so attend the AGM. This must be done in terms of the agreement entered into between the Shareholder and the CSDP or broker concerned. They will however not be entitled to vote at the AGM by electronic means. To do so they must validly execute a proxy form and deliver it in the manner and within the time set out above.

By order of the Board

Mettle Corporate Finance (Pty) Ltd

Company Secretary17 June 2020Tygervalley7530


132

Bus

ines

s O

verv

iew

/ A

nnua

l Fin

anci

al S

tate

men

ts /

Ann

ual G

ener

al M

eeti

ng Form of proxy


(Incorporated in the Republic of South Africa) (Registration number 2008/002061/06)JSE share code: MLE ISIN: ZAE000257622(“Mettle” or the “Company”)

Where appropriate and applicable the terms defined in the notice of annual general meeting to which this Form of Proxy is attached forms part of and shall bear the same meaning in this Form of Proxy.

For use by the holders of Certificated Shares and/or Dematerialised Shares held through a CSDP or broker who have selected “own-name” registration, registered as such at the close of business on the voting record date, at the AGM to be held via electronic means at 10:00 on 14 August 2020, or any postponement or adjournment thereof. The Form of Proxy may also be handed to the Chairman of the AGM or adjourned AGM before the AGM is due to commence or recommence.

Dematerialised Shareholders who have not selected “own-name” registration must (i) inform their CSDP or broker timeously of their intention to attend and vote at the AGM or be represented by proxy thereat in order for the CSDP or broker to issue them with the necessary letter of representation to do so or (ii) provide the CSDP or broker timeously with their voting instruction should they not wish to attend the AGM in order for the CSDP or broker to vote in accordance with their instructions at the AGM.

I/We (FULL NAMES IN BLOCK LETTERS PLEASE) .........................................................................................................................................................................

of (ADDRESS) ...................................................................................................................................................................................................................................................

..................................................................................................................................................................................................................................................................................

Telephone work (...............) ............................................................................. Telephone home (...............) ..................................................................................

Cellphone number ............................................................................................ Email address ...........................................................................................................

being the holder/s of ................................. shares in Mettle Investments Limited, hereby appoint (see note 1):

1. ................................................................................................................................. or failing him/her,

2. ................................................................................................................................ of failing him/her,

3. the Chairman of the AGM,as my/our proxy to act for me/us on my/our behalf at the AGM in accordance with the following instructions (see note 2):


133

Bus

ines

s O

verv

iew

/ A

nnua

l Fin

anci

al S

tate

men

ts /

Ann

ual G

ener

al M

eeti

ng

Indicate with an X in the appropriate block:

Number of votes

*For *Against *Abstain

Ordinary Resolution Number 1 – Approval of Audited Annual Financial Statements

Ordinary Resolution Number 2 – Appointment of PricewaterhouseCoopers Inc as independent auditors

Ordinary Resolution Number 3 – Re-election of Mr BA Chelius to the board

Ordinary Resolution Number 4 – Re-appointment of Mr HvdM Scholtz to the board

Ordinary Resolution Number 5 – Authority to issue shares

Ordinary Resolution Number 6 – Appointment to Audit and Risk Committee – RD Fenner

Ordinary Resolution Number 6 – Appointment to Audit and Risk Committee – BA Chelius

Ordinary Resolution Number 6 – Appointment to Audit and Risk Committee – MVZ Wentzel

Ordinary Resolution Number 7 – Approval of remuneration policy (non-binding)

Ordinary Resolution Number 8 – Approval of remuneration implementation report (non-binding)

Ordinary Resolution Number 9 – Authority granted to Directors and Company Secretary

Special Resolution Number 1 – Approval of Directors’ Fees

Special Resolution Number 2 – Authority under section 45(3)(ii)

Special Resolution Number 3 – Authority under section 44(3)(ii)

Special Resolution Number 4 – Authority to acquire own securities

Special Resolution Number 5 – Amendment to the MOI

* One vote per Share held by Shareholders recorded in the Register on the voting record date.

Signed at ...................................................................................................................................... on........................................................................................................2020

Signature .....................................................................................................................................

Assisted by me (where applicable ...................................................................................


134

Bus

ines

s O

verv

iew

/ A

nnua

l Fin

anci

al S

tate

men

ts /

Ann

ual G

ener

al M

eeti

ng

Notes:1. A Shareholder may insert the name of a proxy or the names

of two alternative proxies of the Shareholder’s choice in the space(s) provided. The person whose name appears first on this Form of Proxy and who is present at the AGM will be entitled to act as proxy to the exclusion of those whose names follow.

2. A proxy appointed by a Shareholder in terms hereof may not delegate his authority to act on behalf of the Shareholder to any other person.

3. A Shareholder’s instructions to the proxy must be indicated by the insertion of the relevant number of votes exercisable by the Shareholder in the appropriate box provided. Failure to comply with the above will be deemed to authorise the proxy to vote or abstain from voting at the AGM as he deems fit in respect of all the Shareholder’s votes exercisable thereat.

4. Forms of proxy must be lodged at or posted to Computershare Investor Services Proprietary Limited, Rosebank Towers, 15 Biermann Avenue, Rosebank, 2196 or Private Bag X9000, Saxonwold, 2132 or emailed to: [email protected] to be received by not later than 10:00 on Wednesday, 12 August 2020 or not less than 48 hours before the recommencement of any adjourned or postponed meeting, or 10 minutes before the AGM is due to commence or recommence.

5. The completion and lodging of this Form of Proxy will not preclude the relevant Shareholder from attending the AGM and speaking and voting in person thereat to the exclusion of any proxy appointed in terms hereof, should such Shareholder wish to do so. In addition to the aforegoing, a Shareholder may revoke the proxy appointment by (i) cancelling it in writing or making a later inconsistent appointment of a proxy; and (ii) delivering a copy of the revocation instrument to the proxy, and to Mettle. The revocation of a proxy appointment constitutes a complete and final cancellation of the proxy’s authority to act on behalf of the Shareholder as at the later of the date stated in the revocation instrument, if any; or the date on which the revocation instrument was delivered in the required manner.

Form of proxy (continued)

6. The chairman of the AGM may reject or accept any Form of Proxy which is completed and/or received otherwise than in accordance with these notes, provided that, in respect of acceptances, he is satisfied as to the manner in which the Shareholder(s) concerned wish(es) to vote.

7. Each Shareholder is entitled to appoint one or more proxies (none of whom need be a member of Mettle) to attend, speak and vote in place of that Shareholder at the General Meeting.

8. Documentary evidence establishing the authority of a person signing this Form of Proxy in a representative capacity must be attached to this Form of Proxy unless previously recorded by Mettle or the transfer secretaries or waived by the chairman of the AGM.

9. Any alteration or correction made to this Form of Proxy must be initialled by the signatory(ies).

10. Where there are joint holders of shares:

10.1 any one holder may sign the Form of Proxy; and

10.2 the vote of the senior (for that purpose seniority will be determined by the order in which the names of Shareholders appear in the Register of members) who tenders a vote (whether in person or by proxy) will be accepted to the exclusion of the vote(s) of the other joint holder(s) of Shares.

11. This Form of Proxy may be used at any adjournment or postponement of the AGM, including any postponement due to a lack of quorum, unless withdrawn by the Shareholder.


135

Bus

ines

s O

verv

iew

/ A

nnua

l Fin

anci

al S

tate

men

ts /

Ann

ual G

ener

al M

eeti

ngApplication for electronic participation at the annual general meeting


(Incorporated in the Republic of South Africa) (Registration number 2008/002061/06)JSE share code: MLE ISIN: ZAE000257622(“Mettle” or the “Company”)

Where appropriate and applicable the terms defined in the notice of annual general meeting to which this application for electronic participation form is attached and forms part of shall bear the same meaning in this application form.

Instructions

Mettle Shareholders, or their proxies, will be given the right, as authorised in the MOI and provided for in the Act, to participate by way of electronic communication in the AGM. Shareholders or their duly appointed proxies who wish to participate by way of electronic communication must apply to the Company Secretary, by completing this application form and by emailing it to the Company Secretary at [email protected] as soon as possible but in any event, by no later than 14:00 on Wednesday, 12 August 2020.

Please note

Shareholders, or their proxies, may not vote electronically and must use the proxy form attached for this purpose if they wish to have their vote counted and are not able to attend the AGM in person and vote in person.

By no later than 17:00 on Thursday, 13 August 2020, Shareholders or their duly appointed proxies will be advised by email, telephone call or text message of the relevant telephone number and access code to allow them to dial in and participate electronically in the AGM.

The Company will bear the cost of establishing the electronic communication whilst the cost of the Shareholder (or its proxy) dialling in will be for its own account.

By signature of this form, the Shareholder or its proxy indemnifies and holds harmless against any loss, injury, damage, penalty or claim arising in any way from the use of the telecommunication lines to participate in the AGM or any interruption in the ability of the Shareholder or proxy to participate in the AGM via electronic communication, whether or not the problem is caused by any act or omission on the part of the Mettle Shareholder, proxy or anyone else, including without limitation Mettle and its employees.

Information required for participation by electronic communication at the AGM

Full names of Shareholder or authorised representative (for company or other legal entity): ....................................................................................

...................................................................................................................................................................................................................................................................................

Identity number or registration number of individual / entity: ....................................................................................................................................................

Email address: ..................................................................................................... Cell phone number: ...........................................................................................

Telephone number including dialling codes: ........................................................................................................................................................................................


136

Bus

ines

s O

verv

iew

/ A

nnua

l Fin

anci

al S

tate

men

ts /

Ann

ual G

ener

al M

eeti

ng

Documents required to be attached to this application form

1. In order to participate at the AGM, Shareholders are to appoint a proxy, which proxy may only participate at such AGM provided that a duly completed proxy form has been submitted in accordance with the instructions on that form, and as envisaged in the notice of the AGM, a copy of which proxy form is also to be attached to this application.

2. Documentary evidence establishing the authority of the named person, including any person acting in a representative capacity, who is to participate in the AGM, must be attached to this application.

3. A certified copy of the valid identity document/passport/driver’s licence of the person attending the AGM by electronic participation, including any person acting in a representative capacity, must be attached to this application.

Signed at ...................................................................................................................................... on........................................................................................................2020

Signature .....................................................................................................................................

Assisted by (where applicable ...........................................................................................

Applications to participate by electronic communication will only be considered if this form is completed in full, signed by the Shareholder, proxy or representative and delivered to the Company Secretary as aforesaid. Mettle may in its sole discretion accept any incomplete forms.

Application for electronic participation at the annual general meeting (continued)

mettleinvestments.com