During the year the group acquired various businesses that are individually immaterial for a total consideration of R86 million. The fair value of the total assets of R135 million exceeded the fair value of the total liabilities assumed of R116 million by R19 million, the non-controlling interests proportionate share of the net assets acquired amounted to R5 million.
Reasons for the acquisitions
The group acquired a 60% shareholding in Parcel Ninja (Proprietary) Limited in February 2021 for R70 million, resulting in goodwill of R54 million. Parcel Ninja is based in South Africa and is an e-commerce logistics business, offering South African e-tailors an outsourcing solution for their fulfilment needs.
The other businesses were acquired to complement and expand into the automotive industry and healthcare industry in South Africa, and expand offerings in Nigeria and Ghana.
Details of contingent consideration for acquisitions concluded during the year
The contingent consideration requires the group to pay the sellers an additional total amount of R12 million over three years if the entities’ revenue and net debt exceeds certain targets. At year-end the contingent consideration liability was reassessed based on what is expected to be paid, and no remeasurement was required.
Acquisition costs for acquisitions concluded during the year
Acquisition costs for business acquisitions concluded during the year amounted to R2 million and have been recognised as an expense in profit or loss in the “Remeasurement of financial liabilities and capital items” line.
Impact of the acquisitions on the results of the group for acquisitions concluded during the year
From the dates of acquisition, the businesses acquired during the year contributed revenue of R1 124 million and operating profit of R37 million. Intangible assets arising out of the business combinations were amortised by R1 million and the group incurred funding cost of R1 million calculated on the cash consideration paid on acquisitions.
Had all the acquisitions been consolidated from 1 July 2020, they would have contributed revenue of R1 983 million and operating profit of R90 million. The amortisation of intangible assets would have been R3 million and the funding cost R2 million.
Separate identifiable Intangible assets for acquisitions concluded during the year
As at the acquisition date the fair value of the separate identifiable intangible assets arising out of the Parcel Ninja acquisition amounted to R12 million. This fair value, which is classified as level 3 in the fair value hierarchy, was determined using the multi-year excess earnings method (MEEM) valuation technique for contract-based intangible assets. The valuation of the intangibles assets as well as the discount rates applied were determined by management with the assistance of a reputable independent expert independently from the group.
The significant unobservable valuation inputs used were discount rates of 23% to 24% and terminal growth rates of 4,9%.
The assumptions used in arriving at projected cash flows were based on past experience and adjusted for any expected changes.
Other details for acquisitions concluded during the year
Trade and other receivables had gross contractual amounts of R28 million with an insignificant amount considered doubtful. Non-controlling interests have been calculated based on their proportionate share in the acquiree’s net assets. None of the resulting goodwill is deductible for tax purposes.