Independent auditor's report

TO THE SHAREHOLDERS OF THE BIDVEST GROUP LIMITED
Report on the audit of the consolidated and separate financial statements

Opinion

We have audited the consolidated and separate financial statements of The Bidvest Group Limited (the Group) set out on pages 14 to 87, which comprise the statements of financial position as at 30 June 2017, and the income statement, the statements of other comprehensive income, the statements of changes in equity and the statements of cash flows for the year then ended, and notes to the financial statements, including a summary of significant accounting policies.

In our opinion, the consolidated and separate financial statements present fairly, in all material respects, the consolidated and separate financial position of the Group as at 30 June 2017, and its consolidated and separate financial performance and consolidated and separate cash flows for the year then ended in accordance with International Financial Reporting Standards and the requirements of the Companies Act of South Africa.

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Consolidated and Separate Financial Statements section of our report. We are independent of the Group in accordance with the Independent Regulatory Board for Auditors Code of Professional Conduct for Registered Auditors (IRBA Code) and other independence requirements applicable to performing audits of financial statements in South Africa. We have fulfilled our other ethical responsibilities in accordance with the IRBA Code and in accordance with other ethical requirements applicable to performing audits in South Africa. The IRBA Code is consistent with the International Ethics Standards Board for Accountants Code of Ethics for Professional Accountants (Parts A and B). We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Key audit matters

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

We have determined that there are no key audit matters to communicate in our audit report with regard to the separate financial statements of the Company for the period.

Key audit matter How the matter was addressed in the audit
Accounting for unlisted investments
Included in the Group's investments, is the Group's 6,75% interest in the Indian-based Mumbai International Airport Private Limited (MIAL).

The investment in MIAL is recorded in the consolidated financial statements at a fair value of R940 million (2016: R853 million). Fair value has been determined by the directors, in the absence of an observable market price. The valuation process is described in note 19 to the consolidated financial statements. The valuation is determined in US dollar and translated to the Group reporting currency rand, at the official year-end exchange rate. This valuation is a level 3 type valuation in accordance with IFRS 13 Fair Value Measurement, where the fair value is not based on observable market data.

The directors believe the recorded fair value to be appropriate within a reasonable range of fair values. In determining the range of values, the directors used an earnings before interest, tax, depreciation and amortisation (EBITDA) multiple. The directors obtained a corroborating high-level valuation from an industry expert and considered the value realised in the sale of a similar stake in MIAL five years ago.

We identified the valuation of MIAL as a key audit matter due to the significant judgements associated with determining the fair value of this material unlisted investment.

We agreed the data used in the directors valuation to external evidence. We agreed the MIAL EBITDA to their signed financial statements for the year ended 31 March 2017 and the median multiple used was agreed to publicly available industry data.

We assessed the competence, capabilities and objectivity of the directors' expert, verified his qualifications and assessed his experience. We discussed the scope of work and confirmed that no scope limitations were imposed upon him by the directors.

We confirmed that the valuation techniques used are materially consistent with industry accepted techniques and principles.

These valuations support the reasonableness of the range of values used by the directors to determine the fair value of the investment.

In addition, our audit procedures included a comparison between the consideration received for the 6.75% interest disposed of in 2011/2012, after an adjustment for a market-related control premium on that transaction, and the current directors' valuation.

We are satisfied that the recorded fair value for MIAL is within a supportable reasonable range of fair values and that the valuation utilises the appropriate exchange rate at year-end.

We concur with the directors' valuation for MIAL. We also found the disclosures relevant to the investment to be sufficient and appropriate in all material respects.


Key audit matter How the matter was addressed in the audit
Acquisition of Brandcorp
During the year, the Group concluded an agreement to acquire the entire equity and shareholder loans of the Brandcorp Group (Brandcorp) with effect from 1 October 2016.

A purchase price allocation (PPA) was performed in accordance with IFRS 3 Business Combinations (IFRS 3) by the directors with the assistance of an independent expert appointed by the directors.

The PPA resulted in the Group recognising and measuring significant tangible and intangible assets and R1,9 billion of external financial liabilities.

Included in the intangible assets acquired are assets with both finite and indefinite useful lives. This distinction and the related useful life assumptions are matters where judgement is exercised.

Goodwill of R437 million was recognised as a result of the acquisition along with intangible assets of R684 million.

This identification, classification and valuation of intangible assets is considered a key audit matter as it has a direct bearing on the amount of goodwill recognised on acquisition date by the Group and the quantum of intangible assets amortised annually.

We confirmed that the effective date of the acquisition was in compliance with IFRS 3 per inspection of the salient terms and conditions of the purchase agreement.

We engaged our internal corporate finance specialists to perform an independent assessment of the fair values of the identifiable assets acquired and liabilities assumed on the acquisition date specifically relating to the valuation and identification of intangible assets and the resultant goodwill to be recognised.

This independent assessment was evaluated against the directors' expert's assessment by performing the following procedures:

  • We assessed the competence, capabilities and objectivity of the directors' independent expert acquired and verified their qualifications.
  • We discussed the scope of work with the experts to determine that there were no matters affecting their independence and objectivity and that no scope limitations were imposed upon them.
  • We confirmed that the valuation techniques used are consistent with industry norms.
  • We confirmed that identifiable assets acquired and liabilities assumed were appropriately valued, in all material respects.
  • We assessed the reasonableness of the assumptions used in determining the useful lives of the intangible assets acquired against those determined by the directors' independent expert.
  • We confirmed that the goodwill and intangible assets recognised as a result of the PPA allocation are appropriate.

We concur with the directors' IFRS 3 acquisition date accounting treatment of the Brandcorp acquisition and the related at acquisition valuation of Brandcorp. We found that the disclosures required by IFRS 3 were sufficient and appropriate in all material respects.

Other information

The directors are responsible for the other information. The other information comprises the directors' report, the audit committee's report and the company secretary's certificate as required by the Companies Act of South Africa, which we obtained prior to the date of this report, and the annual integrated report, which is expected to be made available to us after that date. The other information does not include the consolidated and separate financial statements and our auditor's report thereon.

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

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

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

Responsibilities of the directors for the consolidated and separate financial statements

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

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

Auditor's responsibilities for the audit of the consolidated and separate financial statements

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

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

  • Identify and assess the risks of material misstatement of the consolidated and separate financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
  • Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group and Company'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 and Company's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the consolidated and separate financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause the Group and/or the Company to cease to continue as a going concern.
  • Evaluate the overall presentation, structure and content of the consolidated and separate financial statements, including the disclosures, and whether the consolidated and separate financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
  • Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the Group audit. We remain solely responsible for our audit opinion.

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

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

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

Report on other legal and regulatory requirements

In terms of the IRBA Rule published in Government Gazette Number 39475 dated 4 December 2015, we report that Deloitte & Touche has been the auditor of The Bidvest Group Limited for 10 years.

Deloitte & Touche
Registered Auditor

Per: Mark Hugh Holme
Partner
25 August 2017