for the six months ended 30 September 2015
| Reviewed Six months ended 30 September 2015 |
|
|---|---|
| Rm | |
| Acquistion of subsidiary | |
| Business Connexion Group Limited (BCX) |
|
| On 25 August 2015, Telkom acquired the entire issued ordinary share capital and the entire issued "A" ordinary shares of Business Connexion Group (BCX). | |
| The total purchase consideration of R2.7 billion was funded through Telkom’s own cash resources. | |
| BCX provides innovative business solutions based on information and communication technology and runs ICT systems and manages products, services and solutions for a wide range of customers. | |
| The merger will enable Telkom to expand its existing offerings while, at the same time, providing scale in IT services, which will help reinforce Telkom’s core connectivity business and enhance Telkom’s convergence strategy. | |
| The acquisition has been accounted for using the acquisition method. The date of acquisition is 31 August 2015 and the condensed interim financial statements include the BCX results for the one month ended 30 September 2015. | |
| The fair value of the identifiable assets and liabilities at acquisition date were determined as follows: | |
| Assets | |
| Property, plant & equipment | 461 |
| Intangible assets | 652 |
| Investment in joint venture & associates and long term loan receivable | 74 |
| Deferred tax | 117 |
| Trade and other receivables | 1 882 |
| Inventories | 227 |
| Income tax receivable | 14 |
| Cash and cash equivalents | 399 |
| Total assets | 3 766 |
| Liabilities | |
| Long Term Debt | 300 |
| Non-current finance leases | 38 |
| Deferred taxation | 129 |
| Non-current provisions | 5 |
| Trade and other payables | 1 192 |
| Current portion of long term debt | 169 |
| Current portion of finance leases | 23 |
| Income tax payable | 23 |
| Current portion of provision | 158 |
| Contingent liability | 68 |
| Total liabilities | 2 105 |
| Total identifiable net assets at fair value | 1 661 |
| Non controlling interest at proportional share of net assets | 126 |
| Goodwill arising on acquisition (provisional) | 1 119 |
| Purchase consideration transferred | 2 654 |
| Analysis of cash flows at acquisition: | |
| Net cash acquired with the subsidiary (included in cash flows from investing activities) | |
| Cash paid | 2 654 |
| BCX cash at aqcuisition | (399) |
| Net cash flow on acquisition | 2 255 |
At the date of the acquisition, the fair value of the trade receivables approximated its carrying value. The gross amount of trade receivables is R1 424 million.
From the date of acquisition, BCX has contributed R491 million of revenue and R12 million to the net profit before tax from the continuing operations of the Group. If the acquisition had taken place at the beginning of the year, Telkom group revenue from continuing operations would have been R20 226 million and the Telkom group profit from continuing operations for the period would have been R231 million.
The goodwill recognised is primarily attributed to the expected synergies and other benefits from combining the assets and activities of BCX with those of the Group. The goodwill is not deductible for income tax purposes.
Transaction costs of R103 million, which includes issue costs, have been expensed since the inception of the acquisition. These expenses were recognised in service fees.
Fair values measured on a provisional basis
The fair value of intangible assets and goodwill has been measured on a provisional basis pending the completion of an independent valuation.
If new information is obtained within one year of the acquisition date on facts and circumstances that existed at the acquisition date, the above amounts will be revised.