Cambria Africa plc
Annual Report 2017

Plain-text annual report

Cambria Africa Plc Annual report 2017 Annual Report 2017 Table of Contents Results for the year Chief Executive Officer’s Statement Directors Statement of Directors’ Responsibilities Directors’ Report Report of the Independent Auditors, Baker Tilly Isle of Man LLC, to the members of Cambria Africa Plc. Consolidated Income Statement Consolidated Statement of Comprehensive Income Consolidated Statement of Changes in Equity Consolidated and Company Statement of Financial Position Consolidated Statement of Cash Flows Notes to the Financial Statements Corporate information Shareholder information 3 to 4 5 to 8 9 9 10 to 13 14 to 16 17 18 19 to 20 21 22 23 to 60 61 62 Cambria Africa plc is a long term, active investment company, building a portfolio of investments primarily in Zimbabwe. The Company does not have a particular sectoral focus. Its key objective is building a portfolio of companies that are well-positioned to benefit from Zimbabwe’s economic growth and from formalization and modernization of Zimbabwe’s economy. Moreover, Cambria seeks investments that have current sector leadership in Zimbabwe or, in Cambria’s view; will be able to achieve this. It has been listed on the AIM market of the London Stock Exchange since 2007. Until February 2012 the Company was known as LonZim plc. The Results and their comparatives have been restated to treat the closure of Payserv Zambia as discontinued operations. Therefore, Payserv Zambia’s losses of $218,000 in FY 2016 and $153,000 in FY 2017 have been Results for the year excluded from continuing operations. This has resulted in reporting increased earnings for FY 2016 and FY 2017 from continuing operations. Paynet Zimbabwe fully utilised its tax-loss carry-forward during FY 2016 and for the first time since dollarisation in FY 2009 the Company has paid significant corporate taxes. As a result, after tax profits were significantly impacted by a 66% increase in Group consolidated tax expenses from $397,000 in FY 2016 to $660,000 in FY 2017. FY 2017 results highlights: EBITDA from continuing operations nearly doubled, increasing by 97% to $1,245,000 from $632,000 in FY 2016. This increase included legal costs of $957,000 – comprising of the Consilium settlement of $223,000 and associated legal fees of $734,000 (FY 2016: $816,000). Excluding legal costs, EBITDA increased by 52% or $750,000 to $2.20 million from $1.45 million in 2016. All known legal costs associated with the Consilium Dispute have been accrued in FY 2017 leaving little or no carryover of associated legal costs to FY 2018. • • • • • Profit before Tax (PBT) increased by $856,000 to $716,000 from a loss of $140,000 in FY 2016. Profit after Tax (PAT) found itself in positive territory reaching $56,000 – a $593,000 increase in profitability compared to a loss of $537,000 in FY 2016. This increase in after-tax profitability was achieved despite a 66% ($263,000) increase in taxes to $660,000 from $397,000 in FY 2016 • Borrowings, which include capitalised interest, fell by $1.02 million (23%) to $3.41 million from $4.43 million in FY 2016. Following on from a significant rationalisation and reduction in 2016 which slashed non-legal central costs by 86% from $2 million to $280,000, Cambria’s central costs (excluding legal costs) have stabilised at $311,000. • Net finance costs were accordingly reduced by $285,000 (44%) to $356,000 from $641,000 in FY 2016. This was primarily a result of the VAL Loan Conversion and pay down of the CABS loan by Paynet Zimbabwe. PAGE 3 CAMBRIA AFRICA PLC FINANCIAL REPORT 2017Results for the year • Payserv Africa, Cambria’s largest subsidiary by revenue and profit, achieved Subsequent events: - 20% increase in revenues to $6.37 million, Subsequent to the end of the financial year notable events include: - 35% increase in Consolidated EBITDA to $2.65 million, Settlement of Consilium Dispute in October 2017. - 51% increase in profit before tax to $2.43 million, - 61% increase in profit after tax and after minority interests of $1.52 million. • Millchem, following the closure of its unprofitable subsidiaries in Malawi and Zambia, achieved - Positive cash flows from operations, - Significant reductions in overheads, - EBITDA loss paired by 39% to $143,000 from a loss of $234,000 in 2016. Trading update: The unaudited FY 2018 management accounts for the 4 months ended 31 December 2017 continue to exceed expectations compared to the same period in FY 2017: Payserv: • • • 18% increase in revenues to $2.54 million 71% increase in cash flow to $706,000 from $413,000 23% increase in EBITDA to $1,052,000 from $855,000 Millchem has begun to trade profitably after years of losses: • • • • • $650,000 in revenues - a reduction of 45% to achieve a more profitable product mix 30% gross profit margin – a nearly two-fold increase from 16% gross profit margin $130,000 turnaround in EBITDA to $90,000 from a loss of $40,000 $123,000 reduction (53%) in administrative expenses from $230,000 to $107,000 $131,000 turnaround in Profit After Tax to $84,000 from a loss of $47,000 • Both parties agreed to settle all claims against each • • other; Cambria paid Consilium $223,000; The security for costs previously lodged was released back to Cambria. Appointment of Sibert Dube as Payserv Zimbabwe CEO. Mr. Dube identified the following areas of growth for Cambria’s largest subsidiary by revenue and profit: • • • • Entry into the consumer market where its market share is minimal compared to its commanding position (90% market share) in the corporate trade and salary payments; Providing facilitation services to major players for distribution of inward international remittances; Capitalising on distributed ledger and other leading technologies to enhance its service; Expanding Tradanet’s payroll-based loan processing to also include insurance sales and loan origination. Prospects: The Company believes that the resignation of President Robert Mugabe and the inauguration of President Emmerson Mnangagwa, will result in a favourable business and investment climate. President Mnangagwa has announced new business- friendly policies which are intended to attract investment, protect investment, and bring with it international balance of payments support. These developments support Cambria’s focus on Zimbabwe as providing the best investment opportunities and returns in the region Changes to the board: The board remains unchanged. About  Cambria Africa Plc: Cambria Africa Plc, quoted on the AIM market of the London Stock Exchange, is a long term, active investment company, investing primarily in Southern Africa. PAGE 4 CAMBRIA AFRICA PLC FINANCIAL REPORT 2017 Chief Executive Officer’s Statement FY 2017 and subsequent systematic and non-systematic events have ushered in a new dawn for Zimbabwe and Cambria. Introduction: Since I took over as CEO in August 2015, I have extricated the group companies from loss-making regional operations in Malawi and Zambia. I have repeatedly expressed my conviction that “Zimbabwe provides the best regional opportunity for successful in- vestment and growth in the short to medium term.” The performance of Payserv and Millchem are testimony to the soundness of our investment philosophy. • EBITDA from continuing operations have nearly doubled to $1.24 million while PBT increased by $856,000 to $716,000 from a prior year loss of $140,000. • Despite an increase of 66% in taxes, Cambria achieved an after tax profit of $56,000 – a $593,000 increase in profitability compared to a loss of $537,000 in FY 2016. • Cambria settled with Consilium and accrued the cost of that settlement and associated legal fees in FY 2017. There should be little or no associated costs from this litigation in FY 2018 which should commensurately flow a savings of approximately $900,000 to Cambria’s bottom line. • Excluding legal costs, after slashing central costs by 80% in FY 2016 from $2 million to $280,000, these costs have stabilized at that level, increasing modestly in FY 2017 to $311,000. • Debt levels, interest expense, shareholder equity, cash flows, have all improved and have continued to improve subsequent to end of FY 2017. Divisional Review The Payserv Africa continued to achieve record revenues and profits in FY 2017. Payserv Africa PAYSERV AFRICA DIVISIONAL RESULTS US $ ‘000’S Revenues Gross profit Gross margin Overheads EBITDA Profit before interest and tax Interest Profit before tax Minority interest in PBT PBT (excluding minority interests) 2017 6,370 5,958 94% (3,310) 2,648 2,499 (71) 2,428 (340) 2,088 Restated 2016 5,319 5,028 95% (3,066) 1,962 1,855 (250) 1,605 (348) 1,257 Growth 20% 18% (2%) 8% 35% 35% 72% 51% (2%) 66% PAGE 5 CAMBRIA AFRICA PLC FINANCIAL REPORT 2017Chief Executive Officer’s Statement Paynet Zimbabwe is actively present in, transacting with and Paynet Zimbabwe contributing to, the profitability of all financial institutions in Zimbabwe. Whilst 80% of Paynet Zimbabwe’s revenue growth in FY 2017 was from existing corporate clients, where Paynet has an esti- mated market share of 90 - 95%, significant growth opportuni- ties remain from new initiatives. These include: • • Leveraging our technology and position of trust with financial institutions into the consumer market where Paynet’s market share is minimal; Exploring distributed ledger technologies to enhance transaction security and reduce transaction costs; • Developing non-transactional EDI products for the In- surance and Securities Industries; • • • Establishing our foothold as a last-mile service provider to multiple international remittance operations by im- proving their distribution channels and value addition; Establishing stronger cost controls on Paynet overheads to maximize the impact of increases in transaction vol- ume and minimize the impact of possible reversals in transaction volume as a result of competition, economi downturns, or a cut in public sector employment; Increasing revenues by rationalising transaction pricing which remains among the lowest in the industry, despite the commanding market position in our sector. In line with the closure of Millchem’s unprofitable subsidiaries Payserv Zambia (discontinued) in Zambia and Malawi in FY 2016, Payserv Africa closed its un- profitable Payserv Zambia subsidiary in FY 2017. After years of losses and unsuccessful bids for contracts and the reversal of successful bids by various actors, the Board decided if Zambia cannot sustain a cash flow positive operation it must be discon- tinued. This decision was consistent with Cambria’s announced strategy to focus on Zimbabwe and signaled the end of Cambria’s costly strategy of regional expansion where the Company had little if any strategic or competitive advantage. (Continued...) In line with International Financial Reporting Standards Payserv Zambia’s performance in FY 2016 and FY 2017 are reflected separately as a “discontinued operation” and excluded from the balance of Payserv’s & Cambria’s continuing operations. This resulted in showing a profit from continuing operations in FY 2017 and narrowing Cambria’s losses from continuing operations in FY 2016. Autopay has not achieved its full potential in the market. Nev- Autopay Zimbabwe ertheless, even handicapped by a lack of marketing and inno- vation, the division has maintained profitability. Payserv will be preparing segment reporting in the future to better identify the earning contribution of group company divisions. Despite standing on Paywell’s robust payroll software, Autopay has been plagued by declining private sector employment and increasing numbers of contract workers paid through wallets. The segments of Autopay consist of 1) full service Payroll Bu- reau; 2) Software and licensing to major corporates and 3) On- line SME payroll process. Autopay is in the process of realigning its strategy to increase its penetration into the SME market where it is poorly represent- ed, leveraging its integral relations with Paynet’s payment ser- vices and Tradanet’s loan services, and the possible acquisition and development of its supporting software architecture. Until her resignation on 8 March 2017, Frances Pickering, repre- Tradanet senting the minority shareholder of Tradanet with a 49% inter- est, was the Managing Director of Tradanet, which is Paynet’s majority-held subsidiary. When Mrs. Pickering resigned as Managing Director and subsequently as a Director of Tradanet, Cambria and Paynet took operational control of Tradanet. I was appointed as the Managing Director in March 2017 and nomi- nated Manfred Chaniwa, a veteran of the financial industry, to replace the outgoing general manager in July 2017. Tradanet’s performance improvements have since accelerated. There has been a recovery of loan volumes issued from the lows experienced mainly as a result of the termination of the Cred- it Partners program in April 2015. Since the reinstatement of Credit Partners in February 2017 and the introduction of other new products, particularly Flexicredit, loan volumes have recov- ered from $119 million in 2016 to $138 million in 2017. The recovery in volumes can be attributed 73% to Flexicredit, 12% to CPS and 10% to Retail Credit. Credit partner’s loans currently represent just 20% of their peak of $30 million in 2014. PAGE 6 CAMBRIA AFRICA PLC FINANCIAL REPORT 2017Chief Executive Officer’s Statement Further improvements in loan volumes are expected as the Credit Partner program recovers from its current level of $6,283,000 per annum. Tradanet also expects to increase its revenues through other new products it has received or is seeking approval from CABS: • • Flexicredit Hybrid – a product directed at employees of larger publicly held corporates which can be evaluated by reliance on publicly disclosed information; Insurance Premium Financing; • Automobile ownership financing. Following the resignations of Millchem’s Managing Director and Operations Manager, as Cambria’s CEO, I took an active and direct Millchem Zimbabwe role in controlling the operations of Millchem and deployed the services of Ambrose Consulting to oversee day-to-day activities and imports and manufacturing. MILLCHEM HOLDINGS DIVISIONAL RESULTS US $ ‘000’S Revenues Gross profit Gross margin Overheads EBITDA Loss before tax 2017 2,228 407 18% (550) (143) (169) 2016 3,193 525 16% (758) (233) (264) Growth (30%) (22%) 11% (27%) 38% 36% For the first time in four years, Millchem has recorded an after tax profit in the first four months of FY 2018 ending 31 December 2017. This result was helped in no small part by the cooperation of our bankers who provided the needed remittances to import raw materials. The results for the first four months of FY 2018 support a sustained recovery of Millchem: • • • • • $650,000 in revenues reduced by 45% to achieve a more profitable product mix, 30% gross profit margin – a nearly 2 fold increase from 16% gross profit margin, $128,000 turnaround in EBITDA to $90,000 from a loss of $40,000, $131,000 turnaround in Profit After Tax to $84,000 from a loss of $230,000, $123,000 reduction (53%) in administrative expenses from $230,000 to $112,000. The Consilium Dispute was settled in October 2017 subsequent to the financial year-end. However, all the settlement and legal costs Consilium Dispute directly associated with the dispute were accounted for in FY 2017. As this was a full and final settlement, Cambria will not be in- curring any further costs in relation to this matter in FY 2018. With the distraction of a major legal dispute and associated expenses behind us, we can direct our exclusive focus on investing in the “new Zimbabwe” by exploring organic and acquisitive opportunities. PAGE 7 CAMBRIA AFRICA PLC FINANCIAL REPORT 2017Chief Executive Officer’s Statement Cambria’s Directors and Payserv’s Executives have supported Board of Directors and Compensation my role as CEO providing direction and management support without compensation since my appointment in August 2015. As the ultimate beneficiary of over 65% of Cambria shares, I continue to serve without compensation. It is my intention that in FY 2018 we should begin compensating those who have ded- icated themselves with extraordinary conviction to Cambria. Proposals for the use of Cambria shares as compensation are being considered and will be presented in the near future. • • Zimbabwe should seek to join the Southern African Customs Union (SACU) and the Common Monetary Area (CMA) which includes its largest trading partner, South Africa, to bring about investor confidence and align its economy and competitive advantages with its largest neighbor while earning customs tariff revenue in a convertible currency; Tourism and agricultural are the most promising sectors for Greenfield foreign investment given President Mnangagwa’s policy initiatives. I expect to continue serving the Company without compensa- tion in FY 2018. If Zimbabwe meets the standards of a free, fair, and transparent election in July, significant international balance of payments support will be forthcoming. We believe that the new dispensation will provide a growing market for our current investments and investment opportunities which we are uniquely positioned to identify and act on. Cambria will soon be announcing an Open Offer to shareholders to capitalise on opportunities for expanding our current business units in Zimbabwe and the acquisition of new businesses. An Open Offer will give shareholders the right to match any debt-equity swaps or new subscriptions on the same terms and conditions in proportion to their shareholding. It will also allow shareholders of record to apply for unallocated shares over and above their own allocation. SAMIR SHASHA CHIEF EXECUTIVE OFFICER 26 FEBRUARY 2018 Inauguration of President Emmerson The most significant and material development for share- Dambudzo Mnangagwa holders of Cambria subsequent to the end of FY 2017, was the inauguration of Zimbabwe’s new President, Emmer- son Dambudzo Mnangagwa, on 21 November 2017 follow- ing the resignation of former President Robert Mugabe. President Mnangagwa has announced new business-friendly policies which are intended to attract investment, protect invest- ment, and bring with it international balance of payments sup- port. It vindicates management’s focus on Zimbabwe as provid- ing the best investment opportunities and returns in the region. During the lead up to the change in government and following the change, I was interviewed by CNBC Europe, Al Jazeera, and CNBC Online. In these interviews I expressed my confidence and opti- mism in Zimbabwe’s future, and made the following salient points: • • • Positive changes will come but they will not be overnight; Investors are well-advised to have patience and give the new government time to visualize and implement sound economic policies; Indigenisation laws would be rationalised - These laws required indigenisation of 51% of ownership in most industries and they significantly hindered investment. The President of Zimbabwe has since announced that this policy will only apply to natural resource based investments; PAGE 8 CAMBRIA AFRICA PLC FINANCIAL REPORT 2017 Directors Paul Turner, 71 Paul Turner is a Chartered Accountant and past President NON-EXECUTIVE CHAIRMAN of the Institute of Chartered Accountants of Zimbabwe. He is a highly respected and knowledgeable member of the Zimbabwean business community. He was a partner at Ernst & Young in Harare, Zimbabwe, for over thirty years and brings an unparalleled level of experience in the structure and operation of businesses in Zimbabwe. Initially appointed to the Cambria board on 1 July 2008, he was appointed as Chairman on 8 July 2015. Samir Shasha, 57 Samir Shasha started his involvement in Southern Africa with CHIEF EXECUTIVE OFFICER supplying and leasing trucks for the operations of a transport company focused on relief aid. In 1995 he established S. Shasha & Associates in Zimbabwe and introduced Freightliner Trucks in Southern Africa for the first time. In 2002, S. Shasha & Associates purchased Zimbabwe Online, an Internet Service Provider in Zimbabwe, and took on the role of CEO until 2006. The company was sold to Liquid Telecom in 2012. Mr. Shasha received his Bachelors from Vassar College with Honors in Economics in 1981. Following Ventures Africa Limited’s investment in the Company in April 2015, Mr Shasha was appointed to the Cambria board on 5 June 2015 and as CEO on 3 August 2015. Josephine Petra Watenphul, 37 Josephine Watenphul is a qualified Chartered Accountant NON-EXECUTIVE DIRECTOR (South Africa). She joined the UCS Group Limited (“UCS”), a Johannesburg-based investment holding company in technology and associated businesses listed on the Johannesburg Stock Exchange, in April 2004. In April 2009, Josie was appointed Group CFO, a position which she held until May 2015. During her tenure at UCS, which was later renamed Capitaleye Investments upon delisting in October 2011, Josie assisted in various corporate actions and restructurings. She was appointed to the Cambria board on 17 June 2015. Dipak Champaklal Pandya, 59 Dipak Pandya is a Chartered Accountant and has since March NON-EXECUTIVE DIRECTOR 2009 been the financial controller at Strauss Logistics Limited, a fuel trading and distribution company active in central and southern Africa.Prior to this, Dipak was the financial controller at Playwize Plc, a computer software development company. Dipak was appointed to the Cambria board on 26 June 2015. No changes to the board of directors has occurred during the Changes to the Board financial period under review and up to the date of this report. Directors’ Responsibility Statement in Respect of the Directors’ Report and the The Directors are responsible for preparing the Directors’ Report Financial Statements. and the financial statements in accordance with applicable law and regulations. The Directors have elected to prepare the Group and Parent Company financial statements in accordance with International Financial Reporting Standards as adopted by the European Union. The Group and Parent Company financial statements are required to give a true and fair view of the state of affairs of the Group and Parent Company and of the profit or loss of the Group for that period. In preparing these financial statements, the Directors are required to: • select suitable accounting policies and then apply them consistently; • make judgements and estimates that are reasonable and prudent; • • state whether they have been prepared in accordance with International Financial Reporting Standards as adopted by the European Union; and prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group and Parent Company will continue in business. The Directors are responsible for keeping proper accounting records that are sufficient to show and explain the Group and Parent Company’s transactions and disclose with reasonable accuracy at any time its financial position. They have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Group and to prevent and detect fraud and other irregularities. The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company’s website. Legislation governing the preparation and dissemination of financial statements may differ from one jurisdiction to another. PAGE 9 CAMBRIA AFRICA PLC FINANCIAL REPORT 2017 FOR THE YEAR ENDED 31 AUGUST 2017 The Directors of Cambria Africa Plc (the “Company”) and its subsidiaries (together the “Group”) submit their report, together with the audited financial statements for the year ended 31 August 2017. Directors’ Report During the year, the Group was an investment company with a Principal activities portfolio of investments in Zimbabwe. The Company’s investment objective is to provide Shareholders Investing policy with long term capital appreciation. While the Company does not have a particular sectoral focus, utilising the investment skills of the Directors and their advisors, the Company seeks to identify individual companies in sectors best positioned to benefit should there be radical improvements in Zimbabwe’s economy. The Company may make investments in the tourism, accommodation, infrastructure, transport, commercial and residential property, technology, communications, manufacturing, retail, services, leisure, agricultural and natural resources sectors. The Company may also make investments in businesses outside Zimbabwe and the countries surrounding Zimbabwe as well as the remainder of Sub-Saharan Africa, that have a significant exposure to assets, businesses or operations within the defined region. The Company will only be able to achieve its investment objective in the event the Zimbabwean economy radically improves. Whilst there will not be any limit on the number or size of investments the Company can make in any sector, the Directors seek to diversify the Company’s investments across various sectors in order to mitigate risk and to avoid concentrating the portfolio in any single sector. The Company’s interest in a proposed investment or acquisition may range from a minority position to full ownership. The Company intends to actively manage the operations of the companies it has invested in. Wherever possible the Company will seek to achieve Board control or financial control of its portfolio companies. legislation within Zimbabwe may, however, prevent the Company from acquiring or maintaining a majority control in a Zimbabwean business. Indigenisation The Directors believe that through their individual and collective experience of investing and managing acquisitions and disposals in Africa, they have the necessary skills to manage the Company and to source deal flow. Prior to any investment decisions being taken by the Board of the Company, a due diligence process is undertaken by the Company’s appointed specialist financial and legal advisors. investment strategy is dependent upon The Company’s future radical improvement in the economy of Zimbabwe and expansion into the immediate region. It is therefore possible that a significant period of time may elapse before an investment by the Company will produce any returns and there is no guarantee that the economy in Zimbabwe will improve. The Company Directors will comply as a matter of policy with the US Office of Foreign Assets Control and the European Union Council Regulation (EC) No. 314/2004 regulations. consolidated a operations tax, The Group made Results discontinued of $97,000 (2016: loss of $744,000) during the year and this has been set against reserves. loss minorities after and The Chief Executive’s review of operations contains information Business review and development on developments during the year and key potential future developments. The requirements of the enhanced business review in relation to strategy and progress thereon are contained in the Chief Executive’s review of operations. The principal risks and uncertainties relate to the revenue generation in the Group’s businesses which, being located in Africa, are subject to respective government policies, political stability, general economic conditions in the relevant country and exposure to foreign currency movements. The Group monitors cash flow as one of its primary key performance indicators. Given current global financial conditions, as well as current developments in Zimbabwe, the Directors are carefully monitoring cash resources within the Group and have instigated a number of initiatives to ensure funding will be available to meet obligations as they fall due and for planned projects and ongoing working capital support for its investments. PAGE 10 CAMBRIA AFRICA PLC FINANCIAL REPORT 2017For the year ended 31 August 2017 Directors’ Report Business review and development (con- If such funding cannot be secured, the projects will be delayed tinued) or cancelled to ensure that the Group can manage its cash resources for the foreseeable future. The Group also uses a number of other key performance indicators which are measured at different tiers in the operation. At the top level, the Group tracks revenues, gross profit, EBITDA and cash generation against budget of the underlying subsidiaries. Corporate Governance COMPLIANCE WITH THE UK CORPORATE GOVER- NANCE CODE The Directors recognise the value of the UK Corporate Governance Code (formerly the Combined Code on Corporate Governance) and, whilst under AIM rules full compliance is not required, the Directors are considering the recommendations and applicability in respect of the Company insofar as is practicable and appropriate for a public company of its size and will continue to implement appropriate compliance measures. The Directors mitigate risk by evaluation of every investment that is made and have therefore developed a risk analysis reporting procedure, which links into the Company’s Corporate Governance procedures. information regarding the Group’s policies and Further exposure to financial risk can be found in note 29 to the financial statements. Details of changes to the Company’s share capital and share Share capital premium during the financial year are contained in note 21 to the financial statements. Post statement of financial position Details of significant events since the reporting date are events contained in note 35 to the financial statements. BOARD OF DIRECTORS At the date of this report the Board of Directors comprises of one Executive Director, and three Non-Executive Directors, one of whom is the Chairman. The Directors are of the opinion that the Board comprises a suitable balance to enable the recommendations of the Code to be implemented to an appropriate level. The Board, through the Chairman and Chief Executive Officer in particular, maintains regular contact with its advisors, and institutional investors in order to ensure that the Board develops an understanding of the views of the major shareholders of the Group. The Board is responsible for formulating, reviewing and approving the Group’s strategy, financial activities and operating performance. Day-to-day management is devolved to the executive management who are charged with consulting the Board on all significant financial and operational matters. Consequently, decisions are made promptly following consultation amongst the Directors and managers concerned, where necessary and appropriate. All necessary information is supplied to the Directors on a timely basis to enable them to discharge their duties effectively and all Directors have access to independent professional advice at the Company’s expense, as and when required. is available The Chairman institutional shareholders to discuss any issues and concerns regarding the Group’s governance. The Non-Executive Directors can also attend meetings with major shareholders, if requested. to meet with The participation of both private and institutional investors at the Annual General Meeting is welcomed by the Board. PAGE 11 CAMBRIA AFRICA PLC FINANCIAL REPORT 2017For the year ended 31 August 2017 Directors’ Report Corporate Governance (continued) INTERNAL CONTROLS for the The Directors acknowledge their responsibility Company’s and the Group’s systems of internal control, which are designed to safeguard the assets of the Group and ensure the reliability of financial information for both internal use and external publication. Overall control is ensured by a regular detailed reporting system covering the state of the Group’s financial affairs. The Board has implemented procedures for identifying, evaluating and managing the significant risks that face the Group. Any system of internal control can provide only reasonable, and not absolute, assurance that material financial irregularities will be detected or that the risk of failure to achieve business objec- tives is eliminated. COMMITTEES The Board has established the following committees: AUDIT COMMITTEE The role of the Audit Committee is to oversee the nature and scope of the annual audit, management’s reporting on internal accounting standards and practices, financial information and accounting systems and procedures and the Company’s financial reporting statements. The Audit Committee’s primary objectives will include assisting the Directors in meeting their responsibilities in respect of the Company’s continuous financial disclosure obligations and overseeing the work of the Company’s external auditors. The Audit Committee will comprise Paul Turner (Chairman) and Dipak Pandya. REMUNERATION COMMITTEE The Remuneration Committee makes recommendations to the Board on the remuneration policy that applies to Executive Directors and senior employees. The Remuneration Committee will comprise Dipak Pandya (Chairman) and Paul Turner. NOMINATION COMMITTEE The Nomination Committee is responsible for identifying candidates to fill vacancies on the Board, as and when they arise, and nominate them for approval by the Board. The Nomination Committee will comprise Paul Turner (Chairman), Samir Shasha and Dipak Pandya. The Directors have been advised of the following shareholdings Substantial shareholdings at 16 February 2018 of holding 3 per cent or more of the Com- pany’s issued share capital: NUMBER OF SHARES PERCENT- AGE OF THE ISSUED CAPITAL Ventures Africa Ltd* 232,000,000 66.5% Consilium Investment Man- agement LLC 20,859,296 5.9% Russell Investments Ltd 14,252,663 4.0% * Ventures Africa Limited is beneficially owned by S Shasha, a director and the CEO of the Company. Biographical details of all Directors as well as dates of Directors appointment and resignation (if applicable) are set out on page 9. PAGE 12 CAMBRIA AFRICA PLC FINANCIAL REPORT 2017 For the year ended 31 August 2017 Directors’ Report Between 1 September 2016 and 31 August 2017 the share price Share price performance varied between a closing high of 1.75p and a low of 0.60p (2016 high of 1.64p and low of 0.35p). At 31 August 2017 the closing market price of the shares at close of business was 1.10p (2016: 0.63p). On 31 January 2018 the mid price of the shares was marked at 1.13p. A resolution to re-appoint Baker Tilly Isle of Man LLC and Auditors to authorise the Directors to fix their remuneration will be proposed at the Annual General Meeting. The Directors who held office at the date of approval of this Directors’ Report confirm that, so far as they are each aware, there is no relevant audit information of which the Company’s Auditors are unaware; and each Director has taken all the steps that he/she ought to have taken as a Director to make himself/ herself aware of any relevant audit information and to establish that the Company’s Auditors are aware of that information. ON BEHALF OF THE BOARD. PAUL TURNER CHAIRMAN 26 FEBRUARY 2018 The Directors’ who were in office at the beginning and end of Directors’ share interests the current financial year, had the following interests in the shares of the Company: DIRECTORS AT 31.08.17 NO. OF SHARES AT 31.08.16 NO. OF SHARES Samir Shasha* 232,000,000 107,000,000 Josephine Watenphul Dipak Pandya Paul Turner Total - - - - - - 232,000,000 107,000,000 * Held indirectly through Ventures Africa Limited. All of the above interests are recorded in the Company’s Register of Directors’ Share and Debenture Interests. No Director has a beneficial interest in the shares or debentures of any of the Company’s subsidiary undertakings. The Company has in place an Anti-Corruption and Bribery Anti-Corruption and Bribery Policy Policy which has been adopted by the Company across all divisions of the Group. The Board has overall responsibility for ensuring compliance by Directors, employees and other persons associated with the Group with applicable legal and ethical obligations. The Company’s Chief Executive Officer has primary and day-to-day responsibility for implementation of the policy. Management at all levels of the Group are responsible for ensuring those reporting to them are made aware of, and understand, the policy. The policy gives guidance on risk identification and the procedures to follow where a risk is identified, together with clear guidelines on gifts, entertainment and donations. PAGE 13 CAMBRIA AFRICA PLC FINANCIAL REPORT 2017 For the year ended 31 August 2017 Report of the Independent Auditors responsibilities in accordance with these requirements. We be- lieve that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Report of the Independent Auditors, Baker Tilly Isle of Man LLC, to the members of Cambria Africa Plc We have audited the financial statements of Cambria Africa Opinion Plc (the ‘parent company’) and its subsidiaries (the ‘group’) for the year ended 31 August 2017 which comprise the Consoli- dated Income Statement, the Consolidated Statement of Com- prehensive Income, the Consolidated Statement of Changes in Equity, the Consolidated and Company Statements of Financial Positon, the Consolidated Statement of Cash Flows and notes to the financial statements, including a summary of significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and Interna- tional Financial Reporting Standards (IFRSs) as adopted by the European Union. We have nothing to report in respect of the following matters Conclusions relating to going concern in relation to which the ISAs (UK) require us to report to you where: the directors’ use of the going concern basis of account- ing in the preparation of the financial statements is not appropriate; or • This report is made solely to the company’s members, as a body, in accordance with the terms of our engagement letter dated 9th January 2018. Our audit work has been undertaken so that we might state to the company’s members those mat- ters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company’s members as a body, for our audit work, for this report, or for the opinions we have formed. In our opinion the financial statements: • • give a true and fair view of the state of the group’s and of the parent company’s affairs as at 31 August 2017, and of the group’s loss for the year then ended; and have been properly prepared in accordance with IFRSs as adopted by the European Union. We conducted our audit in accordance with International Stan- Basis for opinion dards on Auditing (UK) (ISAs (UK)) and applicable law. Our re- sponsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the financial state- ments section of our report. We are independent of the group in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard, and we have fulfilled our other ethical • the directors have not disclosed in the financial state- ments any identified material uncertainties that may cast significant doubt about the group’s or the parent company’s ability to continue to adopt the going con- cern basis of accounting for a period of at least twelve months from the date when the financial statements are authorised for issue. The directors are responsible for the other information. The Other information other information comprises the information included in the annual report, other than the financial statements and our au- ditor’s report thereon. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon. In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsis- tent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether there is a material misstatement in the financial statements or a materi- al misstatement of the other information. If, based on the work we have performed, we conclude that there is a material mis- statement of this other information, we are required to report that fact. We have nothing to report in this regard. PAGE 14 CAMBRIA AFRICA PLC FINANCIAL REPORT 2017For the year ended 31 August 2017 Report of the Independent Auditors Report of the Independent Auditors, Baker Tilly Isle of Man LLC, to the members of Cambria Africa Plc (continued) Matters on which we are required to In the light of our knowledge and understanding of the group report by exception and the parent company and its environment obtained in the course of the audit, we have not identified material misstate- ments in the strategic report and the directors’ report. As part of an audit in accordance with ISAs (UK), we exercise professional judgment and maintain professional scepticism throughout the audit. We also: • As explained more fully in the directors’ responsibilities state- Responsibilities of directors ment [set out on page 9], the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the prepa- ration of financial statements that are free from material mis- statement, whether due to fraud or error. In preparing the financial statements, the directors are respon- sible for assessing the group’s and the parent company’s ability to continue as a going concern, disclosing, as applicable, mat- ters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the group or the parent company or to cease operations, or have no realistic alternative but to do so. Auditor’s responsibilities for the audit of Our objectives are to obtain reasonable assurance about the financial statements whether the financial statements as a whole are free from ma- terial misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable as- surance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always de- tect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individ- ually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or er- ror, 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 omis- sions, 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 pur- pose of expressing an opinion on the effectiveness of the group’s internal control. • Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the directors. • 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 or the parent company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are re- quired to draw attention in our auditor’s report to the related disclosures in the 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 or the parent company to cease to continue as a going concern. PAGE 15 CAMBRIA AFRICA PLC FINANCIAL REPORT 2017For the year ended 31 August 2017 Report of the Independent Auditors • Auditor’s responsibilities for the audit of Evaluate the overall presentation, structure and content the financial statements (continued) of the financial statements, including the disclosures, and whether the 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 ac- tivities 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 those charged with governance regard- ing, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant de- ficiencies in internal control that we identify during our audit. BAKER TILLY ISLE OF MAN LLC CHARTERED ACCOUNTANTS P O BOX 95 2A LORD STREET DOUGLAS ISLE OF MAN IM99 1HP 26 FEBRUARY 2018 PAGE 16 CAMBRIA AFRICA PLC FINANCIAL REPORT 2017 For the year ended 31 August 2017 Consolidated Income Statement *Restated Revenue Cost of sales Gross profit Operating costs Other income Net profits on disposal of investments and impairment of assets Operating profit Finance income Finance costs Net finance costs Profit/(loss) before tax Income tax NOTE 5 6 6 8 8 9 Profit/(loss) for the period from continuing operations Discontinued operations Loss for the year from discontinued operations, net of tax 5/10 Loss for the year Attributable to: Owners of the company Non-controlling Interests Loss for the year Loss per share - all operations Basic and diluted loss per share (Cents) Loss per share - continuing operations Basic and diluted loss per share (Cents) Loss per share - discontinued operations Basic and diluted loss per share (Cents) 11 11 11 2017 TOTAL US$’000 8,598 (2,233) 6,365 (5,307) 23 (9) 1,072 15 (371) (356) 716 (660) 56 (153) (97) (349) 252 (97) (0.12c) (0.07c) (0.05c) 2016 TOTAL US$’000 8,512 (2,958) 5,554 (5,056) (2) 5 501 16 (657) (641) (140) (397) (537) (207) (744) (1 010) 266 (744) (0.49c) (0.39c) (0.10c) The notes on pages 23 to 60 are an integral part of these consolidated financial statements. *Amounts have been restated due to the discontinued operations of Payserv Zambia Limited. (See note 2) PAGE 17 CAMBRIA AFRICA PLC FINANCIAL REPORT 2017For the year ended 31 August 2017 Consolidated Statement of Comprehensive Income Loss for the year Other comprehensive income Items that will not be reclassified to income statement: Foreign currency translation differences for overseas operations Total comprehensive loss for the year Attributable to: Owners of the company Non-controlling interest Total comprehensive loss for the year 2017 US$’000 (97) 1 (96) (348) 252 (96) *Restated 2016 US$’000 (744) 9 (735) (1 001) 266 (735) The notes on pages 23 to 60 are an integral part of these consolidated financial statements. *Amounts have been restated due to the discontinued operations of Payserv Zambia Limited. (See note 2) PAGE 18 CAMBRIA AFRICA PLC FINANCIAL REPORT 2017Balance at 1 September 2016 (Loss)/profit for the year Foreign currency translation differences for overseas operations - continuing & discontinued Total comprehensive profit for the year Contributions by and dis- tributions to owners of the Company recognised directly in equity Issue of ordinary shares Expiry of share options Dividends paid Total contributions by and distributions to owners of the Company Balance at 31 August 2017 - - - 17 - - 17 51 For the year ended 31 August 2017 Consolidated Statement of Changes in Equity ATTRIBUTABLE TO THE OWNERS OF THE COMPANY SHARE CAPITAL SHARE PREMIUM RE- VALUA- TION RESERVE FOREIGN EXCHANGE RESERVE SHARE BASED PAYMENT RESERVE RETAINED EARNINGS NDR TOTAL NON-CON- TROLLING INTERESTS TOTAL EQUITY US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 34 83,950 438 (10,628) 43 (76,247) 1,900 - - - 1,736 - - 1,736 - - - - - - - - 1 1 - - - - - - - - (43) - (43) (349) - (349) (5) 43 - 38 - - - 5 - - 5 (510) (349) (4) 252 (514) (97) 1 - 1 (348) 252 (96) 1,753 - - - - 1,753 - (149) (149) 1,753 (149) 1,604 85,686 438 (10,627) - (76,558) 1,905 895 99 994 The notes on pages 23 to 60 are an integral part of these consolidated financial statements. PAGE 19 CAMBRIA AFRICA PLC FINANCIAL REPORT 2017For the year ended 31 August 2017 Consolidated Statement of Changes in Equity ATTRIBUTABLE TO THE OWNERS OF THE COMPANY *Restated SHARE CAPITAL SHARE PREMIUM RE- VALUA- TION RESERVE FOREIGN EXCHANGE RESERVE SHARE BASED PAYMENT RESERVE RETAINED EARNINGS NDR TOTAL NON-CON- TROLLING INTERESTS TOTAL EQUITY US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 34 83,950 438 (10,532) 86 (75,385) 1,900 491 Balance at 1 September 2015 (Loss)/profit for the year Foreign currency translation differences for overseas operations Total comprehensive profit for the year Contributions by and dis- tributions to owners of the Company recognised directly in equity Disposal of subsidiary Expiry of share options Dividends paid Total contributions by and distributions to owners of the Company - - - - - - - - - - - - - - - - - - - - - - 9 9 (105) - - (105) - - - - (43) - (43) (1,010) - (1,010) 105 43 - 148 - - - - - - - 65 266 - 556 (744) 9 (1,010) 9 (1,001) 266 (735) - - - - - - - - (335) (335) (335) (335) Balance at 31 August 2016 34 83,950 438 (10,628) 43 (76,247) 1,900 (510) (4) (514) The notes on pages 23 to 60 are an integral part of these consolidated financial statements. *Amounts have been restated due to the discontinued operations of Payserv Zambia Limited. (See note 2) PAGE 20 CAMBRIA AFRICA PLC FINANCIAL REPORT 2017As at 31 August 2017 Consolidated and Company Statement of Financial Position *Restated NOTES GROUP 2017 COMPANY 2017 GROUP 2016 COMPANY 2016 US$’000 US$’000 US$’000 US$’000 Assets Property, plant and equipment Goodwill Intangible assets Investment in subsidiaries Total non-current assets Inventories Financial assets at fair value through profit or loss Trade and other receivables Cash and cash equivalents Discontinued operation Total current assets Total assets Equity Issued share capital Share premium account Revaluation reserve Share based payment reserve Foreign exchange reserve Non distributable reserves Retained losses Equity attributable to owners of company Non-controlling interests Total equity Liabilities Loans and borrowing Provisions Deferred tax liabilities Total non-current liabilities Current tax liabilities Loans and borrowings Trade and other payables Discontinued operation Total current liabilities Total liabilities Total equity and liabilities 12 13 14 15 16 17 18 19 5,10 21 21 20 20,22 20 20 23 24 25 27 23,26 27 5,10 2,727 717 27 - 3,471 233 86 1,730 1,045 29 3,123 6,594 51 85,686 438 - (10,627) 1,905 (76,558) 895 99 994 1,849 186 184 2,219 397 1,556 1,374 54 3,381 5,600 6,594 - - - - - - - 4,322 143 - 4,465 4,465 51 85,686 - - (13,186) - (73,243) (692) - (692) 1,565 - - 1,565 - 926 2,666 - 3,592 5,157 4,465 2,591 717 39 - 3,347 407 40 1,297 698 20 2,462 5,809 34 83,950 438 43 (10,628) 1,900 (76,247) (510) (4) (514) 2,965 193 152 3,310 308 1,469 1,210 26 3,013 6,323 5,809 - - - - - - - 6,374 - - 6,374 6,374 34 83,950 - 43 (13,186) - (71,765) (924) - (924) 2,929 - - 2,929 - 1,469 2,900 - 4,369 7,298 6,374 These financial statements were approved by the Board of Directors and authorised for issue on 26 February 2018. They were signed on their behalf by: MR S SHASHA EXECUTIVE DIRECTOR The notes on pages 23 to 60 are an integral part of these consolidated financial statements. *Amounts have been restated due to the discontinued operations of Payserv Zambia Limited. (See note 2) PAGE 21 CAMBRIA AFRICA PLC FINANCIAL REPORT 2017For the year ended 31 August 2017 Consolidated Statement of Cash Flows NOTES GROUP 2017 GROUP 2016 US$’000 US$’000 *Restated Cash generated from operations* Taxation paid Cash generated from operating activities Cash flows from investing activities Proceeds on disposal of property, plant and equipment Purchase of property, plant and equipment Proceeds on disposal of subsidiary Other investing activities Interest received Net cash used in investing activities Cash flows from financing activities Dividends paid to non-controlling interests Interest paid Proceeds from issue of share capital Loans repaid Proceeds from drawdown of loans Net cash generated/(utilised) by financing activities Net increase in cash and cash equivalents Cash and cash equivalents at 1 September Foreign exchange Net cash and cash equivalents at 31 August Cash and cash equivalents as above comprise the following: Cash and cash equivalents attributable to continuing operations Cash and cash equivalents attributable to discontinued operations Net cash and cash equivalents at 31 August 28 23/26 23/26 19 19 960 (539) 421 21 (291) - (2) 15 (257) (149) (85) 1,753 (2,660) 1,344 203 367 701 1 1,069 1,045 24 1,069 3,944 (313) 3,631 20 (170) 60 (39) 16 (113) (335) (267) - (7,146) 4,277 (3,471) 47 645 9 701 698 3 701 * All amounts include both continuing and discontinued operations. Cash flows from discontinued operations are set out in note 10, the effect of which were cash utilised of $55 in 2017 and $235 in 2016. The notes on pages 23 to 60 are an integral part of these consolidated financial statements. *Amounts have been restated due to the discontinued operations of Payserv Zambia Limited. (See note 2) PAGE 22 CAMBRIA AFRICA PLC FINANCIAL REPORT 2017For the year ended 31 August 2017 Notes to the Financial Statements Cambria Africa Plc (the “Company”) is a public limited company listed on the Alternative Investment Market (AIM) and incorpo- 1. Reporting entity rated in the Isle of Man under the Companies Act 2006. The consolidated financial statements of the Group for the year ended 31 August 2017 comprise the Company and its subsidiaries (together referred to as the “Group” and individually as “Group entities”). The majority shareholder is Ventures Africa Limited and the ultimate controlling entity is S Shasha and Associates. The financial statements were authorised for issue by the Directors on 26 February 2018. 2. Basis of preparation STATEMENT OF COMPLIANCE The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the E.U. On publishing the Company statement of financial position here together with the Group financial state- ments, the Company complies with the Isle of Man Companies Act 2006 under which there is no requirement to present a compa- ny only statement of comprehensive income in consolidated financial statements. RESTATEMENT OF COMPARATIVE NUMBERS During the period, the Group reclassified the operations of the wholly owned subsidiary Payserv Zambia Limited as a discontinued operation. The board is of the opinion that this business is not going to be successful or profitable and should be discontinued. Accordingly the information for the prior period has been restated such that comparative information given in respect of discon- tinued and continuing operations is consistent in each period. ADOPTION OF NEW AND REVISED INTERNATIONAL FINANCIAL REPORTING STANDARDS (“IFRS”) STANDARDS ADOPTED IN THE CURRENT PERIOD In the current year, the Group has adopted revised Standards, Amendments and Interpretations issued by the International Ac- counting Standards Board (IASB) and the International Financial Reporting Interpretations Committee (IFRIC) of the IASB that were relevant to its operations. The accounting policies adopted are consistent with those of the previous year. New and revised Stan- dards and Interpretations adopted are summarised next: PAGE 23 CAMBRIA AFRICA PLC FINANCIAL REPORT 2017For the year ended 31 August 2017 Notes to the Financial Statements STANDARD/ IN- TERPRETATION Non-current Assets Held for Sale and Discontinued Operations (Amendments resulting from September 2014 Annual Improvements to IFRSs) Financial Instruments: Disclosures (Amendments resulting from September 2014 Annual Improvements to IFRSs) Consolidated Financial Statements (Amendments regarding the application of the consolidation exception) Joint Arrangements (Amendments regarding the accounting for acquisitions of an interest in a joint operation) Disclosure of Interests in Other Entities (Amendments regarding the application of the consolidation exception) Regulatory Deferral Accounts (Original issue) Presentation of Financial Statements (Amendments resulting from the disclosure initiative) Property, Plant and Equipment (Amendments bringing bearer plants into the scope of IAS 16) Employee Benefits (Amendments resulting from September 2014 Annual Improvements to IFRSs) Separate Financial Statements (Amendments reinstating the equity method as an accounting option for investments in in subsidiaries, joint ventures and associates in an entity’s separate financial statements) EU EFFECTIVE DATE 1 January 2016 1 January 2016 1 January 2016 1 January 2016 1 January 2016 1 January 2016 1 January 2016 1 January 2016 1 January 2016 1 January 2016 Investments in Associates and Joint Ventures (Amendments resulting from May 2008 Annual Improvements to IFRSs) 1 January 2016 Interim Financial Reporting (Amendments resulting from September 2014 Annual Improvements to IFRSs) 1 January 2016 Intangible Assets (Amendments regarding the clarification of acceptable methods of deprecia-tion and amortisation) 1 January 2016 Agriculture (Amendments bringing bearer plants into the scope of IAS 16) 1 January 2016 IFRS 5 IFRS 7 IFRS 10 IFRS 11 IFRS 12 IFRS 14 IAS 1 IAS 16 IAS 19 IAS 27 IAS 28 IAS 34 IAS 38 IAS 41 NEW AND AMENDED STANDARDS EFFECTIVE FOR FUTURE PERIODS The following standards and interpretations were in issue but not yet effective and were not applied in these financial statements. STANDARD/IN- TERPRETATION IFRS 2 IFRS 3 IFRS 4 IFRS 7 IFRS 9 IFRS 11 IFRS 12 IFRS 15 IFRS 16 IFRS 17 IAS 7 IAS 12 IAS 23 IAS 28 IAS 39 Share-based Payment (Amendments to clarify the classification and measurement of share-based payment transac- tions) Business Combinations (Amendments resulting from Annual Improvements 2015–2017 Cycle (remeasurement of previously held interest)) Insurance Contracts (Amendments regarding the interaction of IFRS 4 and IFRS 9) Financial Instruments: Disclosures (Amendments resulting from September 2014 Annual Improvements to IFRSs) Financial Instruments (Amendments regarding prepayment features with negative compensation and modifications of financial liabilities) Joint Arrangements (Amendments resulting from Annual Improvements 2015–2017 Cycle (remeasurement of previ- ously held interest)) Disclosure of Interests in Other Entities (Amendments resulting from Annual Improvements 2014–2016 Cycle (clarify- ing scope)) Revenue from Contracts with Customers (Original issue) Leases (Original issue) Insurance Contracts (Original issue) Statement of Cash Flows (Amendments as result of the Disclosure initiative) Income Taxes (Amendments resulting from Annual Improvements 2015–2017 Cycle (income tax consequences of dividends)) Borrowing Costs (Amendments resulting from Annual Improvements 2015–2017 Cycle (borrowing costs eligible for capitalisation)) Investments in Associates and Joint Ventures Joint Ventures (Amendments resulting from May 2008 Annual Improve- ments to IFRSs) Financial Instruments: Recognition and Measurement (Amendments to permit an entity to elect to continue to apply the hedge accounting requirements in IAS 39 for a fair value hedge of the interest rate exposure of a portion of a portfolio of financial assets or financial liabilities when IFRS 9 is applied, and to extend the fair value option to certain contracts that meet the ‘own use’ scope exception) EU EFFECTIVE DATE 1 January 2018 1 January 2019 1 January 2018 1 January 2019 1 January 2019 1 January 2019 1 January 2017 1 January 2018 1 January 2019 1 January 2021 1 January 2017 1 January 2017 1 January 2019 1 January 2018 1 January 2019 IAS 40 Investment Property (Amendments to clarify transfers or property to, or from, investment property) 1 January 2018 PAGE 24 CAMBRIA AFRICA PLC FINANCIAL REPORT 2017For the year ended 31 August 2017 Notes to the Financial Statements 2. Basis of preparation (continued) BASIS OF MEASUREMENT The consolidated financial statements have been prepared on the historical cost basis except for the following: USE OF ESTIMATES AND JUDGEMENTS By their nature, these estimates and assumptions are subject to an inherent measurement of uncertainty and the effect on the Group’s financial statements of changes in estimates in future periods could be significant. GOING CONCERN The Group’s business activities and financial performance are set out in the Chief Executive’s Review on pages 5 to 8. In ad- dition, note 29 to the financial statements includes the Group’s objectives, policies and processes for managing its capital; its financial risk management objectives; details of its finan- cial instruments and its exposure to credit and liquidity risk. The Board has considered the cash flow forecasts for the ensuing 12 months including the maturity profile of its contractual debt obligations. The financial position of the Group has improved sig- nificantly as a result of the settlement of the Consilium litigation. Furthermore, as a result of the VAL Loan Conversion and posi- tive cashflows, external group debt was reduced to $3.41 mil- lion from $4.43 million at the end of the previous financial year. After making enquiries, the Directors have a reasonable expecta- tion that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the annual report and financial statements. • • land and buildings measured at revalued amounts. share-based payments measured at fair value. FUNCTIONAL AND PRESENTATION CURRENCY The consolidated financial statements are presented in United States Dollars, which is the Group’s presentational currency and the Company’s functional currency and all amounts have been rounded to the nearest dollar. USE OF ESTIMATES AND JUDGEMENTS The preparation of financial statements in conformity with IFRSs requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods. Information about critical judgements in applying accounting policies and assumptions and estimation uncertainties that have the most significant effect on the amounts recognised in the consolidated financial statements is included in the follow- ing notes: • Note 13 – Goodwill • Note 12 – Property, plant and equipment • Note 24 – Provisions PAGE 25 CAMBRIA AFRICA PLC FINANCIAL REPORT 2017 For the year ended 31 August 2017 Notes to the Financial Statements The following accounting policies have been applied consistent- 3. Significant accounting policies ly by the Group. (A) BASIS OF CONSOLIDATION The consolidated financial statements incorporate the financial statements of the Company and Group entities controlled by the Company (its subsidiaries). Control is achieved where the Company 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 financial state- ments of subsidiaries are included in the consolidated financial statements from the date that control commenced until the date that control ceases. The interest of non-controlling shareholders is stated at their proportion of the fair values of the assets and liabilities rec- ognised. Subsequently, losses applicable to the non-controlling interests are allocated against their interests even if doing so causes the non-controlling interests to have a deficit balance. The results of entities acquired or disposed of during the year are included in the consolidated income statement from the ef- fective date of acquisition or up to the effective date of dispos- al as appropriate. Where necessary, the financial statements of the subsidiaries are adjusted to conform to the Group’s ac- counting policies. All intra-group transactions, balances, income and expenses are eliminated on consolidation. BUSINESS COMBINATIONS The acquisition of subsidiaries is accounted for using the acqui- sition method. The cost of the acquisition is measured at the aggregate of the fair values at the date of exchange of assets given, liabilities incurred or assumed, and equity instruments issued by the Group in exchange for control of the acquiree. Acquisition related costs are expensed as incurred unless they relate to the cost of issuing debt or equity securities. The ac- quiree’s identifiable assets, liabilities and contingent liabilities that meet the conditions for recognition under IFRS 3 are rec- ognised at their fair values at the acquisition date, except for non-current assets that are classified as held for sale in accor- dance with IFRS 5, which are recognised and measured at fair value less costs to sell. Goodwill arising on acquisition is recognised as an asset at the date that control is assumed (the acquisition date) and initial- ly measured at cost, being the excess of the cost of the busi- ness combination over the Group’s interest in the fair value of the identifiable assets, liabilities and contingent liabilities rec- ognised. If, after reassessment, the Group’s interest in the net fair value of the acquiree’s identifiable assets, liabilities and contingent liabilities exceeds the cost of the business combination, the ex- cess is recognised immediately in the income statement. The interest of non-controlling shareholders in the acquiree is initially measured at the non-controlling interests’ proportion of the net fair value of the assets, liabilities and contingent lia- bilities recognised. (B) INTANGIBLE ASSETS GOODWILL Goodwill arising on consolidation is recognised as an asset. Following initial recognition, goodwill is subject to impairment reviews, at least annually, and measured at cost less accumulat- ed impairment losses. The recoverable amount is estimated at each reporting date. Any impairment loss is recognised immediately in the income statement and is not subsequently reversed when the carrying amount of the asset exceeds its recoverable amount. Any impairment losses recognised in respect of cash generating units are allocated first to reduce the carrying amount of any goodwill allocated to cash-generating units (groups of units) and then to reduce the carrying amount of other assets in the unit (groups of units) on a pro rata basis. On disposal of a subsidiary the attributable amount of goodwill is included in the determination of the gain or loss on disposal. OTHER INTANGIBLE ASSETS Other intangible assets are measured initially at cost and are amortised on a straight-line basis over their estimated useful lives. The carrying amount is reduced by any provision for im- pairment where necessary. On a business combination, as well as recording separable in- tangible assets already recognised in the statement of financial position of the acquired entity at their fair value, identifiable intangible assets that are separable or arise from contractual or other legal rights are also included in the acquisition statement of financial position at fair value. PAGE 26 CAMBRIA AFRICA PLC FINANCIAL REPORT 20173. Significant accounting policies (continued) (B) INTANGIBLE ASSETS (CONTINUED) Amortisation of intangible assets, disclosed under operating costs and in note 6, is charged over their useful economic life, as follows:- Software licences 3 years For the year ended 31 August 2017 Notes to the Financial Statements etary items, any exchange component of that gain or loss is also recognised directly in other comprehensive income. For the purpose of presenting consolidated financial state- ments, the assets and liabilities of the Group’s foreign opera- tions are translated at exchange rates prevailing at the report- ing date. Income and expenses are translated at the average exchange rates for the period, unless exchange rates fluctuate so as to have a material impact on the financial statements during that period, in which case the exchange rates at the date of transactions are used. (C) FOREIGN CURRENCIES The individual financial statements of each Group entity are presented in the currency of the primary economic environ- ment in which it operates (its functional currency). Exchange differences arising, if any, are recognised in other comprehensive income and are transferred to the Group’s for- eign currency translation reserve within equity. For the purpose of the consolidated financial statements, the results and financial position of each of the Group entities are expressed in United States Dollars, which is the functional cur- rency of the Company, and the presentational currency for the consolidated financial statements. In preparing the financial statements of the individual Group entities, transactions denominated in foreign currencies are translated into the respective functional currency of the Group entities using the exchange rates prevailing at the dates of transactions. Non-monetary assets and liabilities are translated at the histor- ic rate. Monetary assets and liabilities denominated in foreign currencies are translated into the functional currency at the rates of exchange ruling at the reporting date. Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value are retranslated to the functional cur- rency at the exchange rate at the date that the fair value was determined. Exchange differences arising on the settlement of monetary items, and on the retranslation of monetary items, are included in the income statement for the year, as either finance income or finance costs depending on whether foreign currency move- ments are in a net gain or net loss position. Exchange differences arising on the retranslation of non-mone- tary items earned at fair value are included within the income statement for the period except for differences arising on the retranslation of non-monetary items in respect of which gains and losses are recognised directly in equity. For such non-mon (D) TAXATION The tax expense represents the sum of current and deferred tax. CURRENT TAXATION Current tax is based on taxable profit for the period for the Group. Taxable profit differs from net profit in the income state- ment because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Group’s liability for current tax is calculated using tax rates that have been en- acted or substantively enacted by the reporting date. DEFERRED TAXATION Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabili- ties in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the tax profit nor the accounting profit. PAGE 27 CAMBRIA AFRICA PLC FINANCIAL REPORT 2017 For the year ended 31 August 2017 Notes to the Financial Statements 3. Significant accounting policies (continued) (D) TAXATION (CONTINUED) Deferred tax liabilities are recognised for taxable temporary dif- ferences arising on the investments in subsidiaries and associ- ates, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. previously recognised as an expense, in which case the increase is credited to the income statement to the extent of the decrease previously charged. A decrease in carrying amount arising on the revaluation of such asset is charged as an expense to the extent that it exceeds the balance, if any, held in the revaluation reserve relating to a previous revaluation of that asset. Depre- ciation on revalued assets is charged to the income statement. On subsequent sale or retirement of a revalued asset, the at- tributable revaluation surplus remaining is transferred directly to retained earnings. The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Depreciation is charged straight line so as to write off the cost or valuation of assets, other than land and buildings, over their estimated useful lives. The annual depreciation rates used for this purpose are: Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is re- alised. Deferred tax is charged or credited in the income state- ment, except when it relates to items charged or credited to eq- uity, in which case the deferred tax is also dealt with in equity. Freehold buildings Plant and machinery Motor vehicles 2% 10% 25% Deferred tax assets and liabilities are off set when there is a legally enforceable right to set off current tax assets against current tax liabilities, when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities on a net basis. (E) INVESTMENTS IN SUBSIDIARIES Investments in subsidiary undertakings are carried at cost with annual reviews undertaken for impairment. (F) OTHER INVESTMENTS Other asset investments are stated at fair value, adjusted for impairment losses. (G) PROPERTY, PLANT AND EQUIPMENT Land and buildings are stated at their revalued amounts, being the fair value at the date of revaluation, less any impairment losses. Revaluations are performed with sufficient regularity such that the carrying amount does not differ materially from that which would be determined using fair values at the report- ing date. Any revaluation increase arising on the revaluation of such assets is credited to the revaluation reserve, except to the ex- tent that it reverses a revaluation decrease for the same asset Fixtures and fittings 10% - 15% The gain or loss arising on the disposal of an asset is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in the income statement for the year. Assets held under finance leases are depreciated over their ex- pected useful lives on the same basis as owned assets, or where shorter, over the relevant lease term. No depreciation is provid- ed on land and buildings. Property, plant and equipment identified for disposal are reclas- sified as assets held for resale. (H) IMPAIRMENT OF ASSETS EXCLUDING GOODWILL At each reporting date, the Group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of any im- pairment loss. Where the asset does not generate cash flows that are independent from other assets, the Group estimates the recoverable amount of the cash-generating unit to which PAGE 28 CAMBRIA AFRICA PLC FINANCIAL REPORT 2017 For the year ended 31 August 2017 Notes to the Financial Statements 3. Significant accounting policies (continued) (H) IMPAIRMENT OF ASSETS EXCLUDING GOODWILL (CONTINUED) the asset belongs. Recoverable amount is the higher of fair val- ue less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value and the risks specific to the as- set for which the estimates of future cash flows have not been adjusted. If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised as an expense immediately, unless the relevant asset is carried at a revalued amount in which case the reversal of the impairment loss is treated as a revaluation decrease. Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the in- creased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognised as income immediately, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase. that are repayable on demand and form an integral part of the Group’s cash management are included as a component of cash and cash equivalents for the purpose of the statement of cash flows. TRADE RECEIVABLES Trade receivables are initially measured at fair value and are subsequently measured at amortised cost using the effective interest rate method. Appropriate allowances for estimated re- coverable amounts are recognised in profit or loss when there is objective evidence the asset is impaired. TRADE PAYABLES Trade payables are initially measured at fair value and are sub- sequently measured at amortised cost using the effective inter- est rate method. FINANCIAL LIABILITIES Financial liabilities are classified according to the substance of the contractual arrangements entered into. CAPITAL MANAGEMENT The new Board’s objective, following the poor results of the last few years, is to restore and rebuild the group’s capital base to maintain investor, creditor and market confidence and to sus- tain future development of the business. (I) FINANCIAL INSTRUMENTS Non-derivative financial instruments comprise investments in equity, trade and other receivables, cash and cash equivalents, loans and borrowings and trade and other payables. Financial assets and financial liabilities are recognised in the Group’s statement of financial position when the Group becomes a par- ty to the contractual provisions of the instrument. BANK BORROWINGS Interest bearing bank loans and overdrafts are recorded at the proceeds received, net of direct issue costs. Finance charges, in- cluding premiums payable on settlement or redemption and di- rect issue costs, are accounted for on an amortised cost basis to the income statement using the effective interest method and are added to the carrying amount of the instrument to the ex- tent that they are not settled in the period in which they arise. CASH AND CASH EQUIVALENTS Cash and cash equivalents comprise cash in hand and demand deposits and other short term highly liquid investments that are readily convertible to a known amount of cash and are sub- ject to an insignificant risk of changes in value. Bank overdrafts EQUITY INSTRUMENTS Equity instruments issued by the Company are recorded at the proceeds received, net of direct issue costs. PAGE 29 CAMBRIA AFRICA PLC FINANCIAL REPORT 2017 For the year ended 31 August 2017 Notes to the Financial Statements 3. Significant accounting policies (continued) (J) INVENTORIES Inventories are stated at the lower of cost and net realisable value. Cost comprises direct materials and where applicable di- rect expenditure and attributable overheads that have been in- curred in bringing the inventories to their present location and condition. Net realisable value represents the estimated selling price less all estimated costs of completion and costs to be in- curred in marketing, selling and distribution. (K) SHARE BASED PAYMENTS The Group provides benefits to certain employees (including senior executives) of the Group in the form of share based payments, whereby employees render services in exchange for shares or rights over shares (equity-settled transactions). The cost of these equity-settled transactions with employees is measured by reference to the fair value of the equity instru- ments at the date at which they are granted. The fair value is determined by using a Black-Scholes model. The dilutive effect, if any, of outstanding options is reflected as additional share di- lution in the computation of earnings per share. The grant date fair value of options granted to employees is rec- ognised as an employee expense with a corresponding increase in equity over the period the employees become uncondition- ally entitled to the options. (L) INTEREST-BEARING BORROWINGS Interest-bearing borrowings are recognised initially at fair value less attributable transaction costs. Subsequent to initial recog- nition, interest-bearing borrowings are stated at amortised cost with any difference between cost and redemption value being recognised in the income statement over the period of the bor- rowings on an effective interest basis. (M) PROVISIONS A provision is recognised in the statement of financial position when the Group has a present legal or constructive obligation as a result of a past event and it is probable that an outflow of economic benefits will be required to settle the obligation. If the effect is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability. (N) REVENUE RECOGNITION Revenue is derived from the sale of goods and services and is measured at the fair value of consideration received or receiv- able after deducting discounts, volume rebates, value-added tax and other sales taxes. A sale of goods and services is rec- ognised when recovery of the consideration is probable, there is no continuing management involvement with the goods and services and the amount of revenue can be measured reliably. A sale of goods is recognised when the significant risks and re- wards of ownership have passed to the buyer, the associated costs and possible return of goods can be estimated reliably. This is when title and insurance risk have passed to the custom- er and the goods have been delivered to a contractually agreed location. A sale of services is recognised when the service has been rendered. (O) LEASES Leases are classified according to the substance of the transac- tion. A lease that transfers substantially all the risks and rewards of ownership to the lessee is classified as a finance lease. All other leases are classified as operating leases. FINANCE LEASES Finance leases are capitalised at their fair value or, if lower, at the present value of the minimum lease payments, each deter- mined at the inception of the lease. The corresponding liabili- ty is shown as a finance lease obligation to the lessor. Leasing repayments comprise both a capital and finance element. The finance element is written off to the income statement so as to produce an approximately constant periodic rate of charge on the outstanding obligations. Such assets are depreciated over the shorter of their estimated useful lives and the period of the lease. OPERATING LEASES Operating lease rentals are charged to the income statement on a straight line basis over the period of the lease. PAGE 30 CAMBRIA AFRICA PLC FINANCIAL REPORT 20173. Significant accounting policies (continued) (P) EARNINGS/(LOSS) PER SHARE Basic earnings/(loss) per share is calculated based on the weighted average number of ordinary shares outstanding during the year. Diluted earnings/(loss) per share is based upon the weighted average number of shares in issue throughout the year, adjusted for the dilutive effect of potential ordinary shares. The only potential ordinary shares in issue are employee share options. (Q) SEGMENT REPORTING A segment is a distinguishable component of the Group that is engaged either in providing products or services (business seg- ment), or in providing products or services within a particular economic environment (geographical segment), which is sub- ject to risks and rewards that are different from those of other segments. (R) ASSETS HELD FOR SALE AND DISCONTINUED OPERATIONS ASSETS HELD FOR SALE Non-current assets, or disposal groups comprising assets and liabilities, are classified as held-for-sale or held-for-distribu- tion if it is highly probable that they will be recovered primarily through sale or distribution rather than through continuing use. Immediately before classification as held-for-sale or held-for-dis- tribution, the assets, or components of a disposal group, are remeasured in accordance with the Group’s other accounting policies. Thereafter, generally the assets, or disposal group, are mea- sured at the lower of their carrying amount and fair value less costs to sell. Any impairment loss on a disposal group is allo- cated first to goodwill, and then to the remaining assets and liabilities on a pro rata basis, except that no loss is allocated to inventories, financial assets, deferred tax assets, employee benefit assets, investment property or biological assets, which continue to be measured in accordance with the Group’s other accounting policies. Impairment losses on initial classification as held-for-sale or held-for-distribution and subsequent gains and losses on remeasurement are recognised in profit or loss. Gains are not recognised in excess of any cumulative impairment loss. For the year ended 31 August 2017 Notes to the Financial Statements Once classified as held-for-sale or held-for-distribution, intan- gible assets and property, plant and equipment are no longer amortised or depreciated, and any equity-accounted investee is no longer equity accounted. DISCONTINUED OPERATIONS A discontinued operation is a component of the Group’s busi- ness, the operations and cash flows of which can be clearly dis- tinguished from the rest of the Group and which: • • • represents a separate major line of business or geo- graphical area of operations; is part of a single co-ordinated plan to dispose of a sep- arate major line of business or geographical area of op- erations; or is a subsidiary acquired exclusively with a view to re- sale. Classification as a discontinued operation occurs on disposal or when the operation meets the criteria to be classified as held- for-sale, if earlier. When an operation is classified as a discontinued operation, the comparative statement of comprehensive income is re-present- ed as if the operation had been discontinued from the start of the comparative year. A number of the Group’s accounting policies and disclosures 4. Determination of fair values require the determination of fair value, for both financial and non-financial assets and liabilities. Fair values have been deter- mined for measurement and/or disclosure purposes based on the following methods. Where applicable, further information about the assumptions made in determining fair values is dis- closed in the notes specific to that asset or liability. INVENTORIES The fair value of inventories acquired in a business combination is determined based on the estimated selling price in the ordi- nary course of business less the estimated costs of completion and sale, and a reasonable profit margin based on the effort required to complete and sell the inventories. EQUITY AND DEBT SECURITIES The fair values of investments for equity and debt securities are determined with reference to their quoted closing bid price at the measurement date. Subsequent to initial recognition, the PAGE 31 CAMBRIA AFRICA PLC FINANCIAL REPORT 2017For the year ended 31 August 2017 Notes to the Financial Statements EQUITY AND DEBT SECURITIES (CONTINUED) fair values of held-to-maturity investments are determined for disclosure purposes only. ment for the financial statements given their own knowledge of the properties and in particular where there has been interest from third parties in purchasing the properties, the Directors may refer to amounts offered for purchase. TRADE AND OTHER RECEIVABLES The fair values of trade and other receivables are estimated at the present value of future cash flows, discounted at the mar- ket rate of interest at the measurement date. Short-term receiv- ables with no stated interest rate are measured at the original invoice amount if the effect of discounting is immaterial. Fair value is determined at initial recognition and, for disclosure purposes, at each annual reporting date. Segment information is presented in respect of the Group’s 5. Segment reporting business segments based on the Group’s management and in- ternal reporting structure. The results of the business segments are reviewed regularly by the Group’s CEO to make decisions about resources to be allocated to the segment and to assess its performance, and for which discrete financial information is available. PROPERTY, PLANT AND EQUIPMENT The fair value of property, plant and equipment recognised as a result of a business combination is the estimated amount for which property could be exchanged on the acquisition date between a willing buyer and a willing seller in an arm’s length transaction after proper marketing wherein the par- ties had each acted knowledgeably. The fair value of items of plant, equipment, fixtures and fittings is based on the market approach and cost approaches using quoted market prices for similar items when available and depreciated replacement cost when appropriate. Depreciated replacement cost reflects ad- justments for physical deterioration as well as functional and economic obsolescence. INVESTMENT PROPERTY An external independent valuation company having appropriate recognised professional qualifications and recent experience in the location and category of property being valued, values the Group’s property portfolio. The fair values are based on market values, being the estimated amount for which a property could be exchanged on the date of the valuation between a willing buyer and a willing seller in an arm’s length transaction after proper marketing wherein the parties had each acted knowl- edgeably. In the absence of current prices in an active market, the val- uations are prepared by considering the estimated rental val- ue of the property. A market yield is applied to the estimated rental value to arrive at the gross property valuation. When actual rents differ materially from the estimated rental value, adjustments are made to reflect actual rents. Due to the unique nature of a number of properties within the Group’s portfolio, external valuations are obtained, however the Directors also review the valuations and may determine the need for impair- Inter-segment pricing is determined on an arm’s length basis and inter-segment revenue is eliminated. Segment results that are reported to the CEO include items di- rectly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated items mainly inter- est-bearing loans, borrowings and expenses, and corporate as- sets and expenses primarily relating to Company’s head office. Segment capital expenditure is the total cost incurred during the period to acquire segment assets that are expected to be used for more than one period. GEOGRAPHICAL SEGMENTS Outsource and IT services, and industrial chemicals, now oper- ate solely in Zimbabwe. Separate geographical analysis is there- fore not presented. BUSINESS SEGMENTS For management purposes, continuing operations are organ- ised into three main business segments: • Outsource and IT services - includes payments systems and business process outsourcing and payroll services; • Industrial chemicals - includes the manufacture and dis- tribution of industrial solvents and mining chemicals; • Head office. In addition, the following segment is reported separately as a discontinued operation in respect of the 2017 financial year: Payserv Zambia Limited, previously in the Outsource and IT Ser- vices segment. PAGE 32 CAMBRIA AFRICA PLC FINANCIAL REPORT 2017 For the year ended 31 August 2017 Notes to the Financial Statements 5. Segment reporting CONTINUING OPERATIONS FOR THE YEAR ENDED 31 AUGUST 2017 Revenue Inter-segment revenue Revenue from external customers Cost of sales to external customers Gross profit Operating costs Other operating income Impairment of assets Depreciation Amortisation Operating profit/(loss) for the year Finance income Finance expense Income tax expense Profit/(loss) for the year EBITDA * CONTINUING OPERATIONS FOR THE YEAR ENDED 31 AUGUST 2016 Revenue Inter-segment revenue Revenue from external customers Cost of sales to external customers Gross profit Operating costs Other operating income Impairment of assets Depreciation Amortisation Operating (loss)/profit for the year Finance income Finance expense Income tax expense (Loss)/profit for the year EBITDA * INDUSTRIAL CHEMICALS OUTSOURCE AND IT SERVICES HEAD OFFICE US$’000 2,228 - 2,228 (1,821) 407 (618) - 61 (17) - (167) 3 (2) - (166) (150) US$’000 US$’000 6,373 (3) 6,370 (412) 5,958 - - - - - (3,333) (1,198) 23 - (128) (13) 2,507 12 (83) (660) 1,776 2,648 - (70) - - (1,268) - (286) - (1,554) (1,268) INDUSTRIAL CHEMICALS OUTSOURCE AND IT SERVICES HEAD OFFICE US$’000 3,193 - 3,193 (2,668) 525 (766) - - (22) (1) (264) 1 (2) - (265) (234) US$’000 US$’000 5,323 (4) 5,319 (291) 5,028 - - - - - (3,064) (1,096) (2) - (105) (1) 1,856 15 (265) (397) 1,209 1,962 - 5 - - (1,091) - (390) - (1,481) (1,091) * Earnings Before Interest, Taxation, Depreciation and Amortisation. Adjusted for depreciation that is included in cost of sales TOTAL US$’000 8,601 (3) 8,598 (2,233) 6,365 (5,149) 23 (9) (145) (13) 1,072 15 (371) (660) 56 1,230 Restated TOTAL US$’000 8,516 (4) 8,512 (2,959) 5,553 (4,926) (2) 5 (127) (2) (501) 16 (657) (397) (537) 638 PAGE 33 CAMBRIA AFRICA PLC FINANCIAL REPORT 2017For the year ended 31 August 2017 Notes to the Financial Statements 5. Segment reporting (continued) DISCONTINUED OPERATIONS FOR THE YEAR ENDED 31 AUGUST 2017 Revenue Inter segment revenue Revenue from external customers Cost of sales to external customers Gross profit Operating costs Depreciation Amortisation Operating loss Finance income Finance expense Income tax credit/(expense) Loss for the year EBITDA* OUTSOURCE AND IT SERVICES US$’000 47 - 47 - 47 (198) (2) - (153) - - - (153) (151) CONTINUING OPERATIONS (AS PREVIOUSLY STATED) FOR THE YEAR ENDED 31 AUGUST 2016 INDUSTRIAL CHEMICALS OUTSOURCE AND IT SERVICES HEAD OFFICE Revenue Inter-segment revenue Revenue from external customers Cost of sales to external customers Gross profit Operating costs Other operating income Depreciation Amortisation Operating profit/(loss) for the year Finance income Finance expense Income tax expense Profit/(loss) for the year EBITDA * US$’000 3,192 - 3,192 (2,667) 525 (766) - (22) (1) (264) 1 (2) - (265) (234) US$’000 US$’000 5,363 (3) 5,360 (295) 5,065 - - - - - (3,308) (1,096) 1 (104) (1) 1,653 15 (265) (396) 1,007 1,758 - - - (1,096) - (390) - (1,486) (1,096) * Earnings Before Interest, Taxation, Depreciation and Amortisation. Adjusted for depreciation that is included in cost of sales TOTAL US$’000 47 - 47 - 47 (198) (2) - (153) - - - (153) (151) TOTAL US$’000 8,555 (3) 8,552 (2,962) 5,590 (5,170) 1 (126) (2) 293 16 (657) (396) (744) 428 PAGE 34 CAMBRIA AFRICA PLC FINANCIAL REPORT 2017 For the year ended 31 August 2017 Notes to the Financial Statements 5. Segment reporting (continued) CONTINUING OPERATIONS - SEGMENT ASSETS & LIABILITIES FOR THE YEAR ENDED 31 AUGUST 2017 INDUSTRIAL CHEMICALS OUTSOURCE AND IT SERVICES HEAD OFFICE Segment assets Segment liabilities Capital expenditure FOR THE YEAR ENDED 31 AUGUST 2016 Segment assets Segment liabilities Capital expenditure US$’000 US$’000 US$’000 776 127 1 2,788 2,050 289 3,001 3,369 - INDUSTRIAL CHEMICALS OUTSOURCE AND IT SERVICES US$’000 1,181 306 17 US$’000 2,102 971 153 HEAD OFFICE US$’000 2,506 5,020 - CONTINUING OPERATIONS - SEGMENT ASSETS & LIABILITIES (AS PREVIOUSLY STATED) FOR THE YEAR ENDED 31 AUGUST 2016 OUTSOURCE AND IT SERVICES INDUSTRIAL CHEMICALS HEAD OFFICE Segment assets Segment liabilities Capital expenditure US$’000 1,181 306 17 US$’000 2,122 997 154 US$’000 2,506 5,020 - TOTAL US$’000 6,565 5,546 290 *Restated TOTAL US$’000 5,789 6,297 170 TOTAL US$’000 5,809 6,323 171 ASSETS AND LIABILITIES HELD FOR SALE FOR THE YEAR ENDED 31 AUGUST 2017 Property, plant and equipment Trade and other receivables Cash and cash equivalents Total assets held for sale Trade and other payables Provisions Deferred tax liabilities Total liabilities held for sale OUTSOURCE AND IT SERVICES US$’000 TOTAL US$’000 2 3 24 29 50 4 - 54 2 3 24 29 50 4 - 54 Net assets of disposal group held for sale (25) (25) No amounts were included in Assets and Liabilities held for sale in the prior year before the reclassification of the Payserv Zambia Limited business as a discontinued operation in the current year, requiring the restatement above. PAGE 35 CAMBRIA AFRICA PLC FINANCIAL REPORT 2017For the year ended 31 August 2017 Notes to the Financial Statements 6. Group net operating costs Cost of sales Administrative expenses Net operating costs Administrative expenses include management related overheads for operations and head office. NOTE 7 Operating costs include, inter alia: Depreciation of property, plant and equipment Depreciation of property plant and equipment in cost of sales Amortisation Operating lease rentals: Land and buildings Personnel expenses Gain on investments and subsidiaries disposed of Auditors remuneration Fees Payable to the Group Auditors for: Current year audit of the Group’s financial statements Prior year audit of the Group’s financial statements Total audit fees The aggregate remuneration comprised (including Executive Directors): 7. Personnel expenses Wages and salaries Compulsory social security contributions Total personnel expenses 2017 US$’000 2,233 5,307 7,541 Restated 2016 US$’000 2,958 5,056 8,014 2017 US$’000 Restated 2016 US$’000 145 7 13 166 2,528 - 82 - 82 125 7 2 191 2,418 - 98 - 98 2017 US$’000 2,366 162 2,528 Restated 2016 US$’000 2,264 154 2,418 PENSION FUNDS The group provides for pensions on the retirement of employees by means of the Zimbabwean National Social Security Authority (NSSA) fund and the Cambria Staff Pension Fund. PAGE 36 CAMBRIA AFRICA PLC FINANCIAL REPORT 2017For the year ended 31 August 2017 Notes to the Financial Statements 7. Personnel expenses (Continued) Contributions for the year were as follows: 2017 NSSA Cambria Staff Pension Fund Company US$’000 19 85 Employees US$’000 19 85 Total US$’000 38 170 Of which: Remuneration of Group Executive Directors and Key Personnel Directors’ emoluments (see note 34) The average number of employees (including Executive Directors) in continuing operations was: Outsource and IT services Industrial chemicals Head Office Total 8. Net finance costs Recognised in income statement: Bank interest receivable Loan interest receivable Finance income Bank interest payable Loan interest payable Finance costs Net finance costs 9. Taxation Income tax recognised in the income statement Current tax expense Current period Deferred tax credit Origination and reversal of temporary differences Total income tax charge in income statement 2017 Number 2016 Number 74 16 3 93 60 24 3 87 2017 US$’000 2016 US$’000 15 - 15 - (371) (371) (356) 16 - 16 - (657) (657) (641) 2017 US$’000 2016 US$’000 628 32 660 421 (24) 397 PAGE 37 CAMBRIA AFRICA PLC FINANCIAL REPORT 2017 For the year ended 31 August 2017 Notes to the Financial Statements 9. Taxation (continued) RECONCILIATION OF EFFECTIVE TAX RATE Profit/(loss) before tax Income tax using the Zimbabwean corporation tax rate 25.75% (2016: 25.75%) Net losses where no group relief is available Total income tax charge in income statement DEFERRED TAX Relating to temporary tax differences in subsidiaries Total 2017 US$’000 2016 US$’000 716 184 476 660 (140) (36) 433 397 2017 US$’000 2016 US$’000 32 32 (24) (24) Corporation tax is calculated as 25.75% (2016: 25.75%) of the estimated assessable profit for the year. Taxation for other jurisdic- tions is calculated at the rates prevailing in the respective jurisdictions. Deferred tax assets are only recognised to the extent that there are available & offsetting deferred tax liabilities, unless the entity is reasonably assured of earning sufficient future profits to offset against any future tax liabilities. The following entities were classified as held for disposal in the previous (2016) financial year: 10. Disposals and discontinued operations • Litigation Settlement proceeds on the Group’s Jet Claims. The Jet Claims relate to the Group’s Air Business, a distinct busi- ness that was reported on separately and discontinued. The following entities were reclassified as held for disposal in the period under review, 2017 financial year. As discussed in note 2 and note 5, the comparatives for the period ended 31 August 2016 are accordingly restated. • Payserv Zambia Limited, a subsidiary of Payserv Africa Limited. The financial effect of these discontinued operations on the profit or loss and financial position is shown in the operating segment disclosures in note 5 in respect of the 2016 financial year. CASH FLOWS FROM DISCONTINUED OPERATIONS Net cash (used in)/generated by operating activities Net cash used in investing activities Net cash generated from financing activities Net cash flows for the year Cash and cash equivalents held for sale 2017 US$’000 2016 US$’000 (55) (1) 77 21 24 3,240 (1) 231 3,470 3 PAGE 38 CAMBRIA AFRICA PLC FINANCIAL REPORT 2017 For the year ended 31 August 2017 Notes to the Financial Statements 10. Disposals and discontinued operations (continued) ASSETS AND LIABILITIES OF OPERATIONS DISCONTINUED DURING THE CURRENT YEAR: OUTSOURCE AND IT SERVICES 2017 OUTSOURCE AND IT SERVICES 2016 Property, plant and equipment Trade and other receivables Total assets of discontinued subsidiary Trade and other payables Provisions Total liabilities of discontinued subsidiary Cash and cash equivalents US$’000 US$’000 2 3 5 50 4 54 24 3 14 17 12 14 26 3 The calculation of basic and diluted loss per share at 31 August 2017 has been based on the loss attributable to ordinary share- 11. Loss per share holders for continuing and discontinued operations at the weighted average of ordinary shares outstanding during the period as detailed in the table below: LOSS ATTRIBUTABLE TO ORDINARY SHAREHOLDERS (Loss) for the purposes of basic loss and dilutive per share being net loss attributable to equity holders of the parent* - continuing operations - discontinued operations 2017 EARNINGS PER SHARE US$’CENTS (0.12) (0.07) (0.05) Restated 2016 EARNINGS PER SHARE US$’CENTS (0.49) (0.39) (0.10) 2017 US$’000 (349) (196) (153) *Restated 2016 US$’000 (1,010) (792) (207) WEIGHTED AVERAGE NUMBER OF ORDINARY SHARES Weighted average number of ordinary shares for the purposes of basic and dilutive loss per share for all calculations* NOTE 2017 000’S 2016 000’S 281,275 207,920 Actual number of shares outstanding at the end of the period 21 348,839 207,920 *In the current and prior year the effect of the share options (note 22) were anti-dilutive as the share options were, at all times, priced above the trading value of the shares. PAGE 39 CAMBRIA AFRICA PLC FINANCIAL REPORT 2017 For the year ended 31 August 2017 Notes to the Financial Statements 12. Property, plant and equipment 2017 GROUP FREEHOLD LAND & BUILDINGS US$’000 PLANT & MACHINERY US$’000 MOTOR VEHICLES US$’000 FURNITURE FIXTURES & FITTINGS US$’000 Cost or valuation At 1 September 2016 Additions in year Disposals in year Balance at 31 August 2017 Accumulated depreciation At 1 September 2016 Disposals in year Depreciation charge for the year Balance at 31 August 2017 Carrying amounts At 31 August 2017 At 31 August 2016 2016 GROUP Cost or valuation At 1 September 2015 Additions in year Disposals in year Balance at 31 August 2016 Accumulated depreciation At 1 September 2015 Disposals in year Depreciation charge for the year Balance at 31 August 2016 Carrying amounts At 31 August 2016 At 31 August 2015 2017 COMPANY Cost or valuation At 1 September 2016 Additions in year Disposals in year Balance at 31 August 2017 Accumulated depreciation At 1 September 2016 Additions in year Disposals in year 2,317 - - 2,317 (34) - - (34) 2,283 2,283 76 1 - 77 (55) - (6) (61) 16 21 526 247 (87) 686 (371) 85 (106) (392) 294 155 1,032 43 - 1,075 (900) - (41) (941) 134 132 FREEHOLD LAND & BUILDINGS US$’000 PLANT & MACHINERY US$’000 MOTOR VEHICLES US$’000 FURNITURE FIXTURES & FITTINGS US$’000 2,317 - - 2,317 (34) - - (34) 2,283 2,283 76 1 (1) 76 (49) - (6) (55) 21 27 580 105 (159) 526 (412) 129 (88) (371) 155 168 978 64 (10) 1,032 (868) 4 (36) (900) 132 110 FREEHOLD LAND & BUILDINGS US$’000 PLANT & MACHINERY US$’000 MOTOR VEHICLES US$’000 FURNITURE FIXTURES & FITTINGS US$’000 - - - - - - - - - - - - - - - - - - - - - 10 - - 10 (10) - - TOTAL US$’000 3,951 291 (87) 4,155 (1,360) 85 (153) (1,428) 2,727 2,591 Restated TOTAL US$’000 3,951 170 (170) 3,951 (1,363) 133 (130) (1,360) 2,591 2,588 TOTAL US$’000 10 - - 10 (10) - - PAGE 40 CAMBRIA AFRICA PLC FINANCIAL REPORT 2017 For the year ended 31 August 2017 Notes to the Financial Statements 12. Property, plant and equipment (continued) 2017 COMPANY Depreciation charge for the year Balance at 31 August 2017 Carrying amounts At 31 August 2017 At 31 August 2016 2016 COMPANY Cost or valuation At 1 September 2015 Additions in year Disposals in year Balance at 31 August 2016 Accumulated depreciation At 1 September 2015 Additions in year Disposals in year Depreciation charge for the year Balance at 31 August 2016 Carrying amounts At 31 August 2016 At 31 August 2015 FREEHOLD LAND & BUILDINGS US$’000 PLANT & MACHINERY US$’000 MOTOR VEHICLES US$’000 FURNITURE FIXTURES & FITTINGS US$’000 - - - - - - - - - - - - - (10) - - FREEHOLD LAND & BUILDINGS US$’000 PLANT & MACHINERY US$’000 MOTOR VEHICLES US$’000 FURNITURE FIXTURES & FITTINGS US$’000 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - TOTAL US$’000 - (10) - - TOTAL US$’000 10 - - 10 10 - - 10 (10) (10) - - - - - - (10) (10) - - - - Valuations LE HAR (PRIVATE) LIMITED VALUATION – PROPERTY An external, professional and independent valuer with appropriate and recognised qualifications, T.W.R.E. Zimbabwe (Pvt) Limited (“TWRE”) carried out a valuation of the freehold land and buildings as at 31 August 2013 with reference to observed market evidence. TWRE performed a desktop update of their valuation as at 31 August 2017. The directors having considered the TWRE updated report, consider this value to still be an accurate reflection of the fair value at 31 August 2017 being US$2.3 million (2016: US$2.3 million). The Directors consider the fair value at the reporting date to not be materially different from the carrying value. PAGE 41 CAMBRIA AFRICA PLC FINANCIAL REPORT 2017 For the year ended 31 August 2017 Notes to the Financial Statements THIS PAGE INTENTIONALLY LEFT BLANK PAGE 42 CAMBRIA AFRICA PLC FINANCIAL REPORT 2017For the year ended 31 August 2017 Notes to the Financial Statements As at 31 August 2017, the consolidated statement of financial position included goodwill of US$717,000 (2016: US$717,000). 13. Goodwill Goodwill is allocated to the Group’s cash-generating units (“CGUs”), or groups of cash-generating units, that are expected to benefit from the synergies of the business combination that gave rise to the goodwill as follows: CASH GENERATING UNIT (CGU) ORIGINAL COST COST AT 1 SEPTEMBER 2016 CARRYING VALUE AT 1 SEPTEMBER 2016 ACCELERATED WRITE-OFF CARRYING VALUE AT 31 AUGUST 2017 US$’000 US$’000 US$’000 US$’000 US$’000 Payserv Africa Limited (formerly Paynet Limited) Total 717 717 717 717 717 717 - - 717 717 ESTIMATES AND JUDGEMENTS The following assumptions are held in the assessment on the impairment or otherwise of goodwill: • Growth rates are based on a range of growth rates that reflect the products, industries and countries in which the relevant CGU or group of CGUs operate. Growth rates have been calculated based on management’s expected forecast volumes and cash generation in place at the date of this report and taking factors existing at that date into considerration. • • • • • The key assumptions on which the cash flow projections for the most recent forecast are based relate to discount rates, growth rates, expected changes in selling prices and direct costs. The cash flow projections have been discounted using rates based on the Group’s pre-tax weighted average cost of capital. The rate used was 15%. The growth rates applied in the value in use calculations for goodwill allocated to each of the CGUs or groups of CGUs that is significant to the total carrying amount of goodwill were in a range between 0% and 5%. Changes in selling price and direct costs are based on past results and expectations of future changes in the market. In respect of the value in use calculations, cash flows have been considered for both the conservative and the full forecast potential of future cash-flows with no impact to the valuation of goodwill. IMPAIRMENT LOSS The Group tests goodwill annually for impairment, or more frequently if there are indications that goodwill might be impaired. The Directors believe that the value of the Group’s investments significantly exceed the reported value thereof and that the re- spective book values do not adequately reflect the value of the Group’s investments and proprietary technologies. The Directors do not believe any impairment to goodwill is necessary in the current period. PAGE 43 CAMBRIA AFRICA PLC FINANCIAL REPORT 2017For the year ended 31 August 2017 Notes to the Financial Statements 14. Intangible assets Payserv software licences Total NET BOOK VALUE AT 1 SEPTEMBER 2016 US$’000 39 39 ORIGINAL COST US$’000 1,538 1,538 ADDITIONS DISPOSALS AMORTISATION US$’000 2 2 - - (14) (14) CLOSING BALANCE AT 31 AUGUST 2017 US$’000 27 27 AMORTISATION The amortisation charge is recognised within operating expenses (note 6) in the income statement. The Group tests other intangi- ble assets for impairment if there are indications that they might be impaired. The amortisation periods for intangible assets are: Software licences 3 years The Company has investments in the following subsidiaries which principally affect the profits and/or net assets of the Company. 15. Investments in subsidiaries and associates The direct investments in subsidiaries held by the Company are stated at cost. This is subject to impairment testing. CONTINUING OPERATIONS COUNTRY OF INCORPORATION OWNERSHIP INTEREST African Solutions Limited Autopay (Pvt) Limited Gardoserve (Pvt) Limited Le Har (Pvt) Limited LonZim Enterprises Limited LonZim Holdings Limited + Millchem Africa Limited Millchem Holdings Limited MillChem (Lilongwe) Limited MSA Chemicals (Pty) Limited MSA Sourcing BV Para Meter Computers (Pvt) Limited Paynet Zimbabwe (Pvt) Limited Payserv (Pvt) Limited Payserv Africa Limited (previously Paynet Limited) Payserv Zimbabwe (Pvt) Limited Payserv Zambia Limited Tradanet (Pvt) Limited Yellowwood Projects (Pvt) Limited + Held directly by Cambria Africa Plc. Mauritius Zimbabwe Zimbabwe Zimbabwe United Kingdom Isle of Man Isle of Man Isle of Man Malawi South Africa Netherlands Zimbabwe Zimbabwe Zimbabwe Mauritius Zimbabwe Zambia Zimbabwe Zimbabwe 2017 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 51% 100% 2016 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 51% 100% PAGE 44 CAMBRIA AFRICA PLC FINANCIAL REPORT 2017For the year ended 31 August 2017 Notes to the Financial Statements 15. Investments in subsidiaries and associates (continued) Ottonby Trading (Pvt) Ltd (address: Northridge Park, Northend Close, Harare, Zimbabwe) holds a 49% interest in Tradanet (Pvt) Ltd. NON-CONTROLLING INTERESTS (“NCI”) Tradanets salient financial information is as follows:- Profit attributable to NCI Dividends paid to NCI Accumulated NCI at year end Non-current assets Current assets Non-current liabilities Current liabilities Cash flow from operations Cash utilised in investing activities Cash utilised in financing activities (including dividends) Cash and cash equivalents 16. Inventory Raw materials and consumables Goods in transit Finished goods Total 2017 US$’000 252 (149) 99 74 390 2 261 462 (51) (316) 273 2016 US$’000 266 (335) (4) 44 208 1 261 549 (8) (674) 178 GROUP 2017 GROUP 2016 US$’000 US$’000 25 37 171 233 192 5 210 407 PAGE 45 CAMBRIA AFRICA PLC FINANCIAL REPORT 2017For the year ended 31 August 2017 Notes to the Financial Statements 17. Financial assets at fair value through profit or loss Quoted investments portfolio Total QUOTED INVESTMENTS PORTFOLIO: Balance at 1 September Acquired during the year Disposed during the year Gain/(loss) on fair valuation during the year Gain at end of the year GROUP 2017 GROUP 2016 US$’000 US$’000 86 86 40 40 GROUP 2017 GROUP 2016 US$’000 US$’000 40 - - 46 86 50 - - (10) 40 The portfolio is managed by an asset management company who makes all the decisions regarding the sale and purchase of listed shares. This investment is held at fair value. The portfolio, which was purchased in ‘payment’ of a trade vendor liability which could not be settled due to Zimbabwe foreign currency constraints at the time, is callable at the option of the vendor. See note 23. 18. Trade and other receivables Amounts owed by Group undertakings Trade receivables Other receivables Prepayments and accrued income Total No interest is charged on receivables. GROUP 2017 US$’000 - 824 674 232 1,730 COMPANY 2017 US$’000 3,763 - 559 - 4,322 *Restated GROUP 2016 US$’000 - 884 339 74 1,297 COMPANY 2016 US$’000 6,168 - 206 - 6,374 The Directors consider the carrying amount of trade and other receivables approximates their fair value. In determining the recoverability of the trade receivable, the Group considers any change in the credit quality of trade receivables from the date credit was initially granted up to the reporting date. The concentration of credit risk is limited due to the customer base being large and unrelated. Accordingly, the Directors believe that there is no further credit provision required in excess of the allowance for doubtful debts. CREDIT RISK The Group’s credit risk is primarily attributable to its trade receivables. The amounts presented in the statement of financial position are net of allowances for doubtful receivables. An allowance for impairment is made where there is an identified loss event which, based on previous experience, is evidence of a reduction in the recoverability of the cashflows. PAGE 46 CAMBRIA AFRICA PLC FINANCIAL REPORT 2017 For the year ended 31 August 2017 Notes to the Financial Statements 19. Cash and cash equivalents Bank balances Bank overdrafts Net cash and cash equivalents Net cash included in held for sale Total cash and cash equivalents in statement of financial position GROUP 2017 US$’000 1,045 - 1,045 24 1,069 COMPANY 2017 US$’000 143 - 143 - 143 Restated GROUP 2016 US$’000 698 - 698 3 701 COMPANY 2016 US$’000 - - - - - 20. Capital and reserves REVALUATION RESERVE The revaluation reserve relates to property, plant and equipment which has been revalued in the Zimbabwean subsidiaries Payserv Zimbabwe (Private) Limited (“Payserv”) and Le Har (Private) Limited, which holds the property from which Payserv operates. FOREIGN EXCHANGE RESERVE This reserve arises on translation of subsidiary entities where their functional currency is not United States Dollars, the presentational currency of the Group. The Company foreign exchange currency reserve relates to the translation of net assets due to a change in the functional currency of the Company from Pounds Sterling to United States Dollars as at 1 September 2011. SHARE BASED PAYMENT RESERVE The share based payment reserve comprises of the charges arising from the calculation of the share based payment posted to the income statement in 2011 and 2012, and released on expiration of options never exercised in 2013, 2016 and finally in the current year. NON DISTRIBUTABLE RESERVE The non distributable reserve arises on the restatement of the assets and liabilities on dollarisation in Zimbabwe. Amounts held within this reserve are ring fenced from retained earnings. Distributions can only be made from retained earnings and not from the non distributable reserve. Amounts transferred to the non distributable reserve are determined by the directors as necessary, unless specifically required to do so as part of any financing arrangements. PAGE 47 CAMBRIA AFRICA PLC FINANCIAL REPORT 2017For the year ended 31 August 2017 Notes to the Financial Statements 21. Share capital & share premium Issued and fully paid At 1 September Issued in period At 31 August ORDINARY SHARES 2017 ORDINARY SHARES 2016 SHARE CAPITAL US$’000 SHARE PREMIUM US$’000 SHARE CAPITAL US$’000 SHARE PREMIUM US$’000 NUMBER NUMBER 207,920,406 140,918,606 348,839,012 34 17 51 83,950 207,920,406 1,736 - 85,686 207,920,406 34 - 34 83,950 - 83,950 All shares issued are classed as Ordinary Shares with a par value of 0.01 pence each and are all ranked equally. There are no other classes of shares in issue. No warrants were granted during the current financial year and no warrants are outstanding. The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at meetings of the Company. All shares rank equally with regard to the Company’s residual assets. The Directors are authorised in any period between consecutive annual general meetings, or consecutive 12 month periods, to allot any number of ordinary shares on such terms as they shall, in their discretion, determine up to such maximum number as represents 50 per cent of the issued share capital at the beginning of such period. Further ordinary shares may also be allotted on terms determined by the Directors but subject to the pre-emption rights prescribed by Section 36 of the Isle of Man Companies Act 2006. SHARE PREMIUM The share premium represents the value of the premium arising on shares issued as follows: 22 February 2017 140,918,606 ordinary shares at a price of 1.0p per share (US$ 1,736,223) 17 April 2015 107,000,000 ordinary shares at a price of 0.85p per share (US$1,337,000) 6 March 2014 4,133,333 ordinary shares at a price of 7.5p per share (US$508,000). 4 March 2014 28,272,806 ordinary shares at a price of 7.5p per share (US$3,475,000 of which US$ 719,000 related to settle- ment of expenses and liabilities). 1 October 2012 8,615,115 ordinary shares at a price of 10p per share (US$1,400,000). 16 September 2011 3,988,439 ordinary shares at a price of 23p per share (US$1,448,000). 10 December 2010 17,813,944 ordinary shares at a price of 28p per share net of issue costs of £143,000 (US$7,646,000). 9 December 2009 4,255,525 ordinary shares at a price of 27.5p per share net of issue costs of £58,000 (US$1,820,000). 14 July 2009 Cost of purchasing and cancelling 4,374,000 shares at 30.5p per share (US$2,174,000). 11 December 2007 36,450,000 ordinary shares at a price of 100p per share net of issue costs of £2,753,000 (US$68,659,000). PAGE 48 CAMBRIA AFRICA PLC FINANCIAL REPORT 2017 For the year ended 31 August 2017 Notes to the Financial Statements All share options issued in prior years have now expired and were not exercised. The prior year details are included below for 22. Share options information purposes only. The following share options over ordinary shares had been granted over the last 5 years under an Un- approved Share Option scheme: NAME Edzo Wisman Edzo Wisman Total DATE OF GRANT 10.03.2011 10.03.2011 NUMBER OF SHARE OPTIONS GRANTED 500,000 500,000 1,000,000 EXERCISE PRICE 30p 30p PERIOD DURING WHICH EXERCISABLE 01.07.2011 – 30.06.2016 01.07.2012 – 30.06.2017 MARKET PRICE PER SHARE AT DATE OF GRANT 21.75p 21.75p In accordance with IFRS 2 ‘Share-based payments’ the equity settled share options granted have been measured (at the time of grant) at fair value and recognised as an expense in the income statement with a corresponding increase in equity (other reserves). The fair value of the options granted has been estimated at the date of grant using the Black-Scholes option pricing model. The estimated value of the options granted on 10 March 2011 was £53,000 (US$85,000). Options may be exercised in whole or in part until the expiry of the exercise period. Holders of the options are entitled to receive notice of certain proposed transactions or events of the Company which may dilute or otherwise affect their options, and may ex- ercise or be deemed to have exercised their options prior to the occurrence thereof. Ordinary Shares issued pursuant to an exercise of the options shall rank pari passu in all respects with the Company’s existing Ordinary Shares save as regards any rights attaching by reference to a record date prior to the receipt by the Company of the notice of exercise of options. The Company shall apply to admit to trading on AIM the Ordinary Shares issued pursuant to the exercise of options. The following assumptions have been used at the date of grant: Number of shares Share price at vesting date (Date of Grant) Exercise price Expected volatility Expected life Expected dividends Risk-free interest rate DATE OF GRANT 10 MARCH 2011 DATE OF GRANT 10 MARCH 2011 500,000 21.75p 30p 30.2% 5.4 years 0.00% 5.00% 500,000 21.75p 30p 30.2% 6.4 years 0.00% 5.00% Volatility has been calculated by reference to industry indices at vesting dates. All share options vested at date of grant and the basis of settlement is in shares of the company. The number and weighted average exercise price of share options are as follows: Outstanding and exercisable at 31 August 2016 Outstanding and exercisable at 31 August 2017 WEIGHTED AVERAGE EXERCISE PRICE PENCE 30 - NUMBER OF OPTIONS 500,000 - The Directors are authorised to grant options over the Ordinary Shares on such terms as they shall in their discretion determine up to such maximum number as represents 10 per cent of the number of Ordinary Shares in issue. PAGE 49 CAMBRIA AFRICA PLC FINANCIAL REPORT 2017For the year ended 31 August 2017 Notes to the Financial Statements 23. Loans and borrowings - long term GROUP 2017 US$’000 VAL Loan CABS Loan - long term portion Other trade payables Total 1,565 205 77 1,849 COMPANY 2017 US$’000 1,565 - - 1,565 GROUP 2016 US$’000 2,929 - 36 2,965 COMPANY 2016 US$’000 2,929 - - 2,929 The VAL Loan carries interest at 8% per annum retrospectively from the inception thereof. It is repayable after three years on 30 November 2019 with early repayment at the election of VAL, from any proceeds realised from a Liquidity Event. A Liquidity Event shall comprise the sale, whether partly or in full, of Cambria’s investments. The VAL Loan is secured through a pledge and cession over the Company’s shares in its subsidiaries. During the financial year, the Company announced the VAL Loan Conversion in terms of which VAL converted £1.25 million (ap- proximately $1.55 million) of the VAL Loan into 125 million ordinary shares at 1.00p per share. The result of the VAL Loan Conver- sion is incorporated into the figures above. Other non-current trade payables are in respect of historic Paywell software licence fees within the Payserv Group, which could not be remitted due to Zimbabwe foreign currency constraints at the time. The amounts due were invested into a listed portfolio (see note 17). 24. Provisions Provisions Total GROUP 2017 US$’000 186 186 COMPANY 2017 US$’000 - - *Restated GROUP 2016 US$’000 193 193 COMPANY 2016 US$’000 - - Provisions at 31 August 2017, are in respect of the maximum Leave Pay and Retirement Gratuity which may become payable by individual companies to employees on termination of their employment. 25. Deferred tax liability RECOGNISED DEFERRED LIABILITY The following are the major deferred tax liabilities recognised by the Group and movements thereon during the current year. GROUP At 1 September Recognised directly in reserves Other movements At 31 August 2017 ACCELERATED TAX DEPRECIATION US$’000 2016 TOTAL US$’000 ACCELERATED TAX DEPRECIATION US$’000 152 - 32 184 152 - 32 184 177 - (25) 152 Deferred tax assets off set against deferred tax liabilities in the period were US$ nil (2016:US$ nil). TOTAL US$’000 177 - (25) 152 PAGE 50 CAMBRIA AFRICA PLC FINANCIAL REPORT 2017 26. Loans and borrowings - short term VAL Bridging Loan CABS Loan - short term portion Total For the year ended 31 August 2017 Notes to the Financial Statements GROUP 2017 US$’000 COMPANY 2017 US$’000 GROUP 2016 US$’000 COMPANY 2016 US$’000 926 630 1,556 926 - 926 1,469 - 1,469 1,469 - 1,469 The Company previously announced on 18 October 2016 that Payserv’s wholly owned subsidiary, Paynet Zimbabwe (Pvt) Limited (“Paynet”), successfully concluded a $1.2 million loan facility agreement with Central Africa Building Society (“CABS Loan”). The CABS Loan currently bears interest at 9% per annum (previously 11%), an annual renewal fee of 1%, and is subject to an establish- ment fee of 2%. The loan is repayable over 24 months. As security, a mortgage has been registered in favour of CABS over one of two properties owned by Le Har (Pvt) Ltd, a wholly owned subsidiary of the Company. The remaining property remains unencum- bered. The CABS Loan was used by Paynet to repay in part its license fees and loan obligations to Payserv Africa. Payserv in turn used the funds to settle the remaining portion of the VAL Bridging Facility via Cambria. 27. Trade and other payables Trade payables Non trade payables and accrued expenses Total Current tax liability Total GROUP 2017 US$’000 807 567 1,374 397 1,771 COMPANY 2017 US$’000 730 1,936 2,666 - 2,666 *Restated GROUP 2016 US$’000 693 517 1,210 308 1,518 COMPANY 2016 US$’000 472 2,428 2,900 - 2,900 Trade payables and accruals principally comprise amounts outstanding for trade purchases and on-going costs. The Directors consider that the carrying amount of trade payables approximates to their fair value. PAGE 51 CAMBRIA AFRICA PLC FINANCIAL REPORT 2017For the year ended 31 August 2017 Notes to the Financial Statements 28. Notes to the statement of cash flows GROUP 2017 US$’000 Loss for the year Adjusted for *: Amortisation of intangible assets Depreciation of property, plant and equipment Loss/(Profit) on sale of property, plant and equipment Valuation adjustments to inventories, receivables and other assets Finance income Finance costs (Decrease)/increase in provisions Income tax charge Operating cash flows before movements in working capital Decrease in inventories (Increase)/decrease in trade and other receivables Increase/(decrease) in trade and other payables Cash generated from operations * All amounts include both continuing and discontinued operations. (97) 14 154 (19) (46) (15) 371 (16) 660 1,006 174 (421) 201 960 *Restated GROUP 2016 US$’000 (744) 2 132 4 1 (16) 657 25 396 457 305 4,623 (1,441) 3,944 The Group has exposure to the following risks from its use of financial instruments: 29. Financial instruments • • credit risk liquidity risk • market risk (comprises: foreign currency risk and interest rate risk) This note presents information about the Group’s exposure to each of the above risks, the Group’s objectives, policies and pro- cesses for measuring and managing risk, and the Group’s management of capital. Further quantitative disclosures are included throughout these consolidated financial statements. The Board of Directors has overall responsibility for the establishment and oversight of the Group’s risk management framework. RISK MANAGEMENT FRAMEWORK The Group’s risk management policies are established to identify and analyse the risks faced by the Group, to set appropriate risk limits and controls, and to monitor risks and adherence to limits. The Group’s risk management policies are established to identify and analyse the risks faced by the Group, to set appropriate risk limits and controls, and to monitor risks and adherence to limits. PAGE 52 CAMBRIA AFRICA PLC FINANCIAL REPORT 2017 For the year ended 31 August 2017 Notes to the Financial Statements 29. Financial instruments (continued) CREDIT RISK MANAGEMENT Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Group. The Group has adopted a policy of only dealing with creditworthy counterparties and obtaining sufficient collateral where appro- priate, as a means of mitigating the risk of financial loss from defaults. The Group’s exposure and the credit ratings of its counter- parties are regularly monitored and the aggregate value of transactions concluded is spread amongst approved counterparties. Trade receivables consist of a large number of customers, spread across diverse industries and geographical areas. Ongoing credit evaluation is performed on the financial condition of accounts receivable and, where appropriate, credit guarantee insurance cover is purchased. The Group does not have any significant credit risk exposure to any single counterparty or any group of coun- terparties having similar characteristics. The credit risk on liquid funds and derivative financial instruments is limited because the counterparties are banks with high credit- ratings assigned by international credit rating agencies. The carrying amount of financial assets recorded in the financial statements, net of any allowances for losses, represents the Group’s maximum exposure to credit risk without taking account of the value of any collateral obtained. At the reporting date, there were no significant credit risks. EXPOSURE TO CREDIT RISK The carrying amount of financial assets represents the maximum credit exposure. Therefore, the Group and Company’s maximum exposure to credit risk at the reporting date, being the total of the carrying amount of financial assets, excluding equity invest- ments is shown in the table below. Cash and cash equivalents Trade and other receivables Amounts owed by group undertakings Other investments Total NOTE 19 18 18 17 GROUP 2017 US$’000 1,069 1,730 - 86 2,885 COMPANY 2017 US$’000 143 559 3,809 - 4,511 GROUP 2016 US$’000 701 1,297 - 40 2,038 The maximum exposure to credit risk for trade and other receivables at the reporting date by geographic region was: United Kingdom Southern Africa Mauritius Europe Total GROUP 2017 US$’000 702 2,183 - - COMPANY 2017 US$’000 702 3,809 - - GROUP 2016 US$’000 206 1,832 - - 2,885 4,511 2,038 COMPANY 2016 US$’000 - 206 6,168 - 6,374 COMPANY 2016 US$’000 206 4,585 1,583 - 6,374 PAGE 53 CAMBRIA AFRICA PLC FINANCIAL REPORT 2017For the year ended 31 August 2017 Notes to the Financial Statements The maximum exposure to credit risk for trade and other receivables (excluding trade creditors which are linked to listed invest- 29. Financial instruments (continued) ments per contract with the supplier - see note 17 US$86,000 (2016: US$40,000)) at the reporting date by type of counterparty was: Trade customers and other receivables Amounts owed by Group undertakings Total GROUP 2017 US$’000 1,730 - 1,730 COMPANY 2017 US$’000 559 3,763 4,322 The ageing of trade and other receivables at the reporting date was: COMPANY 2016 US$’000 206 6,168 6,374 GROUP 2016 US$’000 1,297 - 1,297 GROUP Neither past nor impaired Past due 1-30 days Past due 31-60 days Past due 61-90 days Past due 91-days + Other receivables Total GROSS 2017 US$’000 IMPAIRMENT 2017 US$’000 TOTAL 2017 US$’000 692 132 19 20 126 894 1,883 - - (7) (20) (126) - (153) 692 132 12 - - 894 1,730 Based on the Group’s monitoring of customer credit risk, the Group believes that no further impairment allowance is necessary in respect of trade receivables not past due. LIQUIDITY RISK MANAGEMENT Liquidity risk is the risk that the Group will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash and another financial asset. Ultimate responsibility for liquidity risk management rests with the Board of Directors, which has built an appropriate liquidity risk management framework for the management of the Group’s short, medium and long term funding and liquidity management requirements. The new board plans to manage liquidity risk by raising adequate reserves, banking facilities and reserve borrowing facilities and by regularly monitoring forecast and actual cash flows and matching the maturity profiles of financial assets and liabilities. PAGE 54 CAMBRIA AFRICA PLC FINANCIAL REPORT 2017For the year ended 31 August 2017 Notes to the Financial Statements 29. Financial instruments (continued) LIQUIDITY RISK MANAGEMENT (CONTINUED) The following are the contractual, undiscounted maturities of financial liabilities, including estimated interest payments and ex- cluding the effect of netting arrangements: GROUP CONTRACTUAL CASH FLOWS 2017 Trade and other payables Loans and borrowings Total CARRYING AMOUNT US$’000 1 YEAR OR LESS US$’000 1,374 3,405 4,779 1,374 1,697 3,071 2 TO < 5 YEARS US$’000 - 1,930 1,930 *Restated CONTRACTUAL CASH FLOWS 2016 CARRYING AMOUNT US$’000 1 YEAR OR LESS US$’000 1,210 4,434 5,644 1,210 1,645 2,855 2 TO < 5 YEARS US$’000 - 3,163 3,163 COMPANY CONTRACTUAL CASH FLOWS 2017 CONTRACTUAL CASH FLOWS 2016 Trade and other payables Loans and borrowings Total CARRYING AMOUNT US$’000 1 YEAR OR LESS US$’000 2,666 2,491 5,142 2,666 1,009 3,660 2 TO < 5 YEARS US$’000 - 1,706 1,706 CARRYING AMOUNT US$’000 1 YEAR OR LESS US$’000 2,900 4,398 7,298 2,900 1,645 4,545 2 TO < 5 YEARS US$’000 - 3,163 3,163 FOREIGN CURRENCY RISK MANAGEMENT The Group is exposed to foreign currency risk on sales, purchases and borrowings that are denominated in a currency other than United States Dollars. The currencies giving rise to this risk are primarily the Pound Sterling, Euro, Zambian Kwacha, Malawian Kwacha and the South African Rand. In respect of other monetary assets and liabilities held in currencies other than United States Dollars, the Group ensures that the net exposure is kept to an acceptable level, by buying or selling foreign currencies at spot rates where necessary to address short-term imbalances. The following significant exchange rates applied during the year: Pounds Sterling (GBP) Euro (EUR) Zambian Kwacha (ZMW) South African Rand ( ZAR) Malawian Kwacha (MWK) AVERAGE RATE 2017 REPORTING DATE SPOT RATE 2017 AVERAGE RATE 2016 REPORTING DATE SPOT RATE 2016 0.79 0.91 13.39 9.48 718.94 0.77 0.84 13.01 9.05 719.33 0.70 0.90 14.79 10.85 666.36 0.76 0.90 14.67 9.52 721.75 PAGE 55 CAMBRIA AFRICA PLC FINANCIAL REPORT 2017 For the year ended 31 August 2017 Notes to the Financial Statements The Group does not account for any fixed rate financial assets or liabilities at fair value through profit or loss. At the reporting 29. Financial instruments (continued) date the interest rate profile of the Group’s interest bearing financial instruments was as follows : CARRYING VALUE FIXED RATE INSTRUMENTS Financial assets Financial liabilities Total VARIABLE RATE INSTRUMENTS Financial assets Financial liabilities Total 2017 US$’000 2016 US$’000 - (3,326) (3,326) 1,069 - 1,069 - (4,398) (4,398) 701 - 701 SENSITIVITY ANALYSIS In managing foreign currency risks the Group aims to reduce the impact of short and long-term fluctuations on the Group’s earn- ings. A 10 percent strengthening/weakening of the listed currencies against the USD at 31 August 2017 would have increased (de- creased) equity and profit or loss by the amounts shown below. This analysis assumes that all other variables, in particular interest rates, remain constant and ignores any impact of forecast sales and purchases. This analysis is performed on the same basis for 2015 and assumes that all other variables remain the same. The carrying amount of the Group’s foreign currency denominated monetary assets and monetary liabilities at the reporting date and their sensitivity is as follows: 31 AUGUST 2017 Pounds Sterling (GBP) Euro (EUR) South African Rand (ZAR) Zambian Kwacha (ZMW) 31 AUGUST 2016 Pounds Sterling (GBP) Euro (EUR) South African Rand (ZAR) Zambian Kwacha (ZMW) Malawian Kwacha (MWA) EXPOSURE IN FINANCIAL STATEMENT POSITION US$’000 STRENGTHENING PROFIT OR LOSS US$’000 WEAKENING PROFIT OR LOSS US$’000 (382) (23) (1) (27) (281) (20) (120) 9 12 27 2 - - 19 2 1 - - (27) (2) - - (19) (2) (1) - - INTEREST RATE RISK MANAGEMENT The Company does not believe it faces any risk from its interest rate exposure. The rates of interest it is exposed to are not ex- pected to change over the tenure of its borrowings. Currently the Company has only two lenders, Central African Building Society (CABS) Zimbabwe and Ventures Africa Limited (VAL) which holds 66.5% of the Company’s equity. As a percent of total borrowings, 75% is represented by VAL and 25% from CABS with a weighted average interest cost of 8.24%. PAGE 56 CAMBRIA AFRICA PLC FINANCIAL REPORT 2017 For the year ended 31 August 2017 Notes to the Financial Statements As a related party, VAL has established interest rates at levels which its funding was used to displaced former lenders and main- 29. Financial instruments (continued) tained parity with rates which the Company has been able to obtain funding at in Zimbabwe. However, VAL does not charge the Company establishment fees or anniversary fees. VAL has actively converted debt to equity to assist the company in reducing its interest rate exposure and has announced its intention for further debt to equity conversions. The rate of interest on the CABS loan is currently 9% which as a result of increased domestic liquidity has fallen from 11% in FY 2016. The Company expects this loan to be fully repaid by November 2018. CAPITAL MANAGEMENT The Board’s policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain future development of the business. Capital consists of ordinary shares, retained earnings and non-controlling interests of the Group. The Board of Directors monitors the return on capital, which the Group defines as net operating income divided by total shareholders’ equity, excluding non-redeemable preference shares and non-controlling interests. The Board of Directors also mon- itors the level of dividends to ordinary shareholders. Currently management is discussing alternatives for extending the Group’s share option programme beyond key management and other senior employees. No decisions have been made. The Board seeks to maintain a balance between higher returns that might be possible with high levels of borrowings and the advantages and security afforded by a sound capital position. FAIR VALUES The fair values of financial assets and liabilities, together with the carrying amounts shown in the statement of financial position are as follows: GROUP Cash and cash equivalents Trade and other receivables Quoted investment portfolio Trade and other payables Loans and borrowings Total GROUP Cash and cash equivalents Trade and other receivables Quoted investment portfolio Trade and other payables Loans and borrowings Total HIERARCHY Level 3 Level 3 Level 1 Level 3 Level 3 Level 3 Level 3 Level 1 Level 3 Level 3 CARRYING AMOUNT 2017 US$’000 FAIR VALUE 2017 US$’000 1,045 1,730 86 (1,374) (3,405) (1,918) 1,045 1,730 86 (1,374) (3,405) (1,918) CARRYING AMOUNT 2016 US$’000 *Restated FAIR VALUE 2016 US$’000 698 1,297 40 (1,210) (4,434) (3,609) 698 1,297 40 (1,210) (4,434) (3,609) PAGE 57 CAMBRIA AFRICA PLC FINANCIAL REPORT 2017For the year ended 31 August 2017 Notes to the Financial Statements 29. Financial instruments (continued) COMPANY CARRYING AMOUNT 2017 US$’000 FAIR VALUE 2017 US$’000 Cash and cash equivalents Trade and other receivables Trade and other payables Loans and borrowings Total COMPANY Cash and cash equivalents Trade and other receivables Trade and other payables Loans and borrowings Total Level 3 Level 3 Level 3 Level 3 Level 3 Level 3 Level 3 Level 3 143 4,322 (2,666) (2,491) (692) 143 4,322 (2,666) (2,491) (692) CARRYING AMOUNT 2016 US$’000 FAIR VALUE 2016 US$’000 - 6,374 (2,900) (4,398) (924) - 6,374 (2,900) (4,398) (924) THE FAIR VALUE OF ASSETS AND LIABILITIES CAN BE CLASSED IN THREE LEVELS. Level 1 Fair values measured using quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2 Level 3 Fair values measured using inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices). Fair values measured using inputs for the asset or liability that are not based on observable market data (i.e. unob- servable inputs). ESTIMATION OF FAIR VALUES The following summarises the major methods and assumptions used in estimating the fair values of financial instruments reflect- ed in the above table. CASH AND CASH EQUIVALENTS Fair value approximates its carrying amount largely due to the short-term maturities of this instrument. LOANS AND BORROWINGS Fair value has been derived from discounting future cash flows at the cost of debt. TRADE RECEIVABLES AND PAYABLES For receivables and payables with a remaining life of less than one year, the notional amount is deemed to reflect the fair value. QUOTED INVESTMENT PORTFOLIO Fair value has been derived from quoted prices. PAGE 58 CAMBRIA AFRICA PLC FINANCIAL REPORT 2017For the year ended 31 August 2017 Notes to the Financial Statements less than $100 thousand and General warranty claims shall not be less than $25 thousand for a single claim. To the date of the report, no formal warranty claim has been lodged. 30. Operating leases LEASES AS LESSEE At the reporting date, the Group had the following outstanding annual commitments for future minimum lease payments un- der non-cancellable operating leases: US$’000 34. Related parties Operating lease commitments Payable in next 12 months Payable in 1 to 5 years Payable thereafter (> 5 years) Total 68 5 - 73 During the year ended 31 August 2017, US$166,000 (2016: US$191,000) was recognised as an expense in the income state- ment in respect of operating leases. Operating lease payments represents rentals payable by the Group for certain of its prop- erties. Leases are negotiated for a minimum term of 1 year and rentals are fixed for the period. 31. Statement of comprehensive income There is no requirement under the Isle of Man Companies Act of Cambria Africa Plc 2006 to present a company only statement of comprehensive income. The loss for the year to 31 August 2017 was US$1.52 million (2016: US$1.54 million). The capital commitments at 31 August 2017 totalled US$nil 32. Capital commitments (2016: US$nil). 33. Contingent liabilities On 21 October 2014, the Group, pursuant to its disposal of Lonzim Hotels Limited, provided warranties relating to matters fairly disclosed to the Purchaser in terms of the relevant sale and purchase agreement and the related disclosure letter and/ or due diligence data. General warranties remained in force and effect until 31 August 2015 and Title warranties remained in force and effect until 21 October 2016. The liability of the Group in respect of the aggregate of all Title warranties shall not ex- ceed $2 000; and in respect of the aggregate of all General war- ranties, shall not exceed $350 thousand. The Group will have no liabiilty in respect of General warranty claims in aggregate IDENTITY OF RELATED PARTIES The Group has a related party relationship with its subsidiaries (see note 15) and with its Directors and executive officers. Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation and there is no requirement for them to be disclosed in this note. GROUP AND COMPANY At 31 August 2017, no amounts were due to Directors in respect of Directors fees, nor had any been paid in the year under re- view. VAL is the controlling shareholder of Cambria with a 66.5% in- terest as at 31 August 2017. Mr Samir Shasha is the ultimate beneficial owner of VAL and the CEO and Director of Cambria. VAL has provided loan funding to Cambria in the form of the VAL Loan and the VAL Bridging Facility as set out in notes 23 and 26 respectively. Interest accrued during the period amounted to US$180,000 in respect of the VAL Loan and $106,000 in respect of the VAL Bridging Facility. TRANSACTIONS WITH SUBSIDIARY ENTITIES WITHIN THE GROUP Paynet Zimbabwe (Private) Limited (“Paynet”), a 100% subsid- iary of the Group and provides services including payroll pro- cessing, software licensing, training and utility and property sublets to fellow subsidiaries which amounted to US$3,000 (2016: US$3,000). All charges were at market value and arms length rates. TRANSACTIONS WITH KEY MANAGEMENT PERSONNEL Key management personnel are the holding Company Directors and executive officers. None of the current active directors re- ceived any remuneration during the financial year. PAGE 59 CAMBRIA AFRICA PLC FINANCIAL REPORT 2017For the year ended 31 August 2017 Notes to the Financial Statements Total remuneration is included in “personnel expenses” (see 34. Related parties (continued) note 7). S Shasha P Turner JP Watenphul DC Pandya Total TOTAL 2017 US$000 TOTAL 2016 US$000 - - - - - - - - - - 35. Events after the reporting date Settlement of the Consilium dispute On 4 October 2017, the Company executed a settlement deed with Consilium, the terms of which provide that:- Cambria and Consilium agree to settle all claims against each other; Cambria will pay Consilium US$223,000 and each party grants the other and their respective directors and associated parties releases from claims relating to the matters that were in dispute; The money deposited at the Courts Funds Office by Cambria as security for costs in the sum of GBP381,342 shall, subject to an agreed amount being paid to Consilium by way of contribution to the settlement amount, be released in full back to Cambria; To protect the interests of Cambria and its shareholders situa- tions not related to Consilium or the present dispute have been excluded from the scope of the releases granted by Cambria. PAGE 60 CAMBRIA AFRICA PLC FINANCIAL REPORT 2017 For the year ended 31 August 2017 Corporate Information REGISTRARS Neville Registrars Limited Neville House 18 Laurel Lane Halesowen England BD63 3DA Tel: +44 (0) 12 1585 1131 PRINCIPAL GROUP BANKERS Barclays Corporate Level 27, 1 Churchill Place Canary Wharf London E14 5HP Tel: +44 (0) 20 7116 1000 REGISTERED OFFICE AND AGENT Peregrine Corporate Services Limited Burleigh Manor Peel Road Douglas Isle of Man IM1 5EP Tel: +44 (0) 1624 626586 NOMINATED ADVISOR AND BROKER WH Ireland Limited 24 Martin Lane London EC4R 0DR Tel: +44 (0) 20 7220 1666 AUDITORS Baker Tilly Isle of Man LLC 2a Lord Street Douglas Isle of Man IM99 1HP T: +44 (0) 1624 693900 PAGE 61 CAMBRIA AFRICA PLC FINANCIAL REPORT 2017For the year ended 31 August 2017 Shareholder Information Note: the shareholding analysis has been performed on 16 February 2018 incorporating changes since the year end of 31 August Analysis of ordinary shareholdings as at 16 February 2018 2017 Category of shareholder Private shareholder Banks, nominees and other corporate bodies Total Shareholding range 1 – 5,000 5,001 – 50,000 50,001 – 500,000 500,001 – 5,000,000 5,000,001 – 50,000,000 50,000,001 – 250,000,000 Total NUMBER OF HOLDERS % OF TOTAL HOLDERS NUMBER OF SHARES % OF TOTAL SHARES 84 118 202 62 48 49 36 6 1 202 41.6% 58.4% 100.0% 30.7% 23.8% 24.3% 17.8% 2.9% 0.5% 100.0% 19 958 998 332 614 770 352 573 768 145 516 968 951 9 484 537 56 821 896 53 152 868 232 000 000 352 573 768 5.7% 94.3% 100.0% 0.0% 0.3% 2.7% 16.1% 15.1% 65.8% 100.0% REGISTRARS All administrative enquiries relating to shareholdings, such as queries concerning dividend payments, notification of change of address or the loss of a share certificate, should be addressed to the Company’s registrars. UNSOLICITED MAIL As the Company’s share register is, by law, open to public inspection, shareholders may receive unsolicited mail from organisations that use it as a mailing list. Shareholders wishing to limit the amount of such mail should write to the Mailing Preference Society, Freepost 29 Lon20771, London W1E 0ZT. PAGE 62 CAMBRIA AFRICA PLC FINANCIAL REPORT 2017Cambria Africa Plc Burleigh Manor Peel Road Douglas IM1 5EP Tel: +44 (0) 203 287 8814 info@cambriaafrica.com www.cambriaafrica.com 

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