COGNITION HOLDINGS LIMITED – Unaudited Consolidated Interim Results for the Six Months Ended 31 December 2018.

2019/03/15 10:15:00
SENS announcement for JSE listed company: CGN
                        

CGN 201903150019A
Unaudited Consolidated Interim Results for the Six Months Ended 31 December 2018.

COGNITION HOLDINGS LIMITED

Incorporated in the Republic of South Africa

(Registration number 1997/010640/06)

Share code: CGN ISIN: ZAE000197042

(‘Cognition’ or ?the Group’ or ‘the Company’)

UNAUDITED CONSOLIDATED INTERIM RESULTS for the six months ended 31 December 2018

COMMENTARY

The board of directors of Cognition (‘the Board’) present the unaudited condensed consolidated interim financial results for the six months ended 31 December 2018 (‘the period’ or

‘the interim period’), which should be read in conjunction with the audited annual financial statements for the year ended 30 June 2018.

The unaudited condensed consolidated interim financial results are available to be viewed on the Company?s website: http://www.cgn.co.za/pages/display/interim_results.

Despite difficult trading conditions, the Group?s Revenue for the interim period of R83.2 million was marginally higher than the R82.7million reported in the comparative period.

Gross Profit improved significantly by 14% to R56.1 million from R49.2 million for the comparative period.

Within the Active Data Exchange Services segment the Group was able to offset declines in traditional fax services with increased sales in MediaWorx resulting in a 19.2% increase

in Revenue from R31.6 million to R37.8 million and a significantly improved Gross Profit for this segment that increased by 28.9% from R20.4 million to R26.3 million. This

improvement can be attributed to the mix of services rendered within MediaWorx that had lower than normal costs.

The Knowledge Management segment has, for the first time since it?s been established, experienced a decline in Revenue of 10.9%, down to R45.6 million from R51.2 million. This is

mostly due to a reduction in Revenue from the Group?s research assets. Fortunately, the segment benefited from improved margins which, together with increased Incentive and

Loyalty services, resulted in a Gross Profit increase of 3.1% from R28.9 million to R29.8 million.

Operating Expenditure of the Group increased by 31%, from R9.9 million to R13.0 million, of which R2.4 million can be attributed to costs associated with the Private Property

transaction that was successfully concluded in February 2019. Staff expenditure increased by 12.6% from R26.4 million to R29.7 million. This increase was necessary to accommodate

for the increase in business activity and to ensure that the remuneration of staff is competitive within the Group?s operating segments and remains market related.

Profit Before Tax of the Group increased by 5.2% from R13.2 million to R13.9 million for the period. Profit after tax was marginally up on the comparative period at R9.4 million

(2017: R9.3 million) with the Group?s effective tax rate escalating to 32.6% due to corporate transaction fees that are not tax deductible. Earnings per share showed a marginal

increase of 1.3% to 6.8 cents per share (2017: 6.7 cents per share).

The Group?s Financial position remains healthy with limited long-term financial obligations and adequate Cash resources. The Group aims to use its Cash resources to pursue

investment opportunities and to use it as working capital to maintain the Group?s Revenue and Agency Revenue growth rate.

Net Asset Value per share increased by 4.7% from December 2017 and Net Tangible Asset Value per share increased by 10.7% to 78.49 cents per share when compared to December 2017.

OPERATIONAL OVERVIEW

The general market conditions for the period remained challenging with a discernible downturn in the economy resulting in a number of our traditional clients deploying fewer

campaigns, promotions or research projects.

ACTIVE DATA EXCHANGE SERVICES

Despite the downturn in the economy, and in particular the promotional environment, MediaWorx services, incorporating SMS, USSD and WhatsApp campaigns, still managed to attract a

number of blue-chip clients wanting to engage with consumers to build up much-needed consumer data.

During the period MediaWorx managed approximately 387 campaigns for a number of well-known brands such as: Ackermans, Pep, Cambridge, Amka, AVI, AfriSam, ABInBev, SABC, Defy,

Imana, Lucky Star, Lion Match, Unsgaard, Adapt IT, JAM Clothing, Premier Foods, Wi Group, Online, Multichoice, Deli Spices and Bokomo.

Because of the downturn in the economy and consumer disposable income coming under pressure, brands are becoming acutely aware that building rich, up-to-date consumer databases is

now more relevant than ever and that it is economically more viable to focus marketing initiatives on personalised offerings at reduced costs and return on effort. This new

reality is being galvanised by the recently launched General Data Protection Regulation (‘GDPR’) and the protracted process of implementing our own Protection of Personal

Information Act (‘POPIA’) which will shortly become a reality.

The Group?s ‘platform methodology’ of data building within the regulatory frameworks of the GDPR and POPIA will enable us to enhance these service offerings in the coming years

when personal databases become more valuable and necessary.

MediaWorx continues to provide a ‘one-stop presence’ in the Call2Action market by offering a range of integrated service offerings incorporating: campaign creation (either in

association with a digital agency or independently thereof), moderation, prize selection, fulfilment of prizes, web and mobile app development, coupled with consulting services.

DOCUMENT EXCHANGE

These services incorporate Fax2Email, Email2Fax and SecurDox. The anticipated decline in this format of document exchange has continued during the period.

During the period our automated faxing platform switched around 4.6 million minutes (faxing is measured in minutes) versus 7.6 million minutes for the comparable period. Although

the number of subscribers remained the same at around 90,000, the average rate per user (‘ARPU’) declined.

Whilst the decline is anticipated Fax2Email still remains profitable.

CHANNEL INCENTIVE AND LOYALTY

This division continues to exhibit good opportunities and growth in an environment where incentivising staff and consumers bodes well for encouraging much-needed growth.

The incentive platform, which is proprietary to the Group, provides turnkey solutions to corporates to incentivise staff, agents or third parties for selling their bespoke branded

products or solutions.

The platform is multi-dimensional and provides for a web, app and customer interface.

As at the end of the period, 10 339 debit cards are in issue reflecting growth of 24.5% over the comparative period

Good progress was made in the period to increase the number of clients with multiple face-to-face engagements and ‘test pilots’ having been undertaken. We hope to onboard some of

these new clients in the last quarter of the current financial year.

Incentivising staff and channel partners has become more of a reality in a market which is contracting and we therefore anticipate positive growth in this division.

KNOWLEDGE MANAGEMENT

Platform Technology

When trading conditions become more challenging and sectors within an economy contract, brands need to be more circumspect about their average cost to communicate or market to

consumers. Personalised niche marketing becomes more of a ‘necessity’ than a ‘luxury’. Coupled with the pressures around privacy regulations, brands need to build secure databases

with ‘volunteered’, self-curated personal data.

The Group continues to pursue platforms to secure these objectives and ‘guide’ clients to build long-term sustainable platforms that can meaningfully monetise the data in a

compliant manner. These initiatives continue to be fostered via our Knowledge 350? process and our Personal Information Management System platform which is aligned to our

MediaWorx engagement initiatives.

Research and Analytics

Our research assets comprise: BMi Research Proprietary Limited (‘BMi’), BMi Sport Proprietary Limited (‘BMi Sport’) and Livingfacts Proprietary Limited (‘Livingfacts’).

BMi offers the following services:

– Advanced Analytics – In-store Observation Services

– Category Quantification – In-store Observation Services (Africa)

– Commissioned – Mystery Shopping

– Consumer – Print Ads

These collective services are aimed at delivering strategic and tactical insights to assist clients in growing their businesses.

During the period, BMi experienced difficult trading conditions with many of its clients reducing their spend on the services offered by BMi. This resulted in a decline in revenue

and corresponding profitability. Good progress was made in the re-development of BMi?s Print Ads platform which incorporates: publication and subscription management, data

collection, processing and client management via an ‘on-line’ portal.

BMi Sport provides services that incorporate:

– Sports tracking and sponsorship evaluation

– Socio-economic and sporting impact valuation

– Strategic advertising evaluation

– PR & clippings (radio/TV/print/digital)

The interim period was similarly challenging with many large brands re-evaluating spend within certain sporting codes or looking to re-align spend in different disciplines, such

as direct consumer engagement. Many sporting codes have been challenged with internal rifts which have had a negative impact on sponsorships in general.

BMi Sport is currently evaluating the building of databases to support various sporting codes by building up data around spectators and participants to enable niche marketing and

engagement.

Livingfacts develops customised market research solutions to enable companies to develop intelligent strategies. Livingfacts? expertise and solutions offerings are orientated

around the following:

– Quantitative

– Qualitative

– Community

– Web and digital

– Secondary data

Livingfacts also experienced similar challenges in the market with budgets being deferred or reduced.

Prospects

Trading conditions will remain challenging and uncertain, particularly leading up to the election. Despite this the core operating divisions have continued to show resilience and

provide a much-needed connection between brands and consumers, particularly when niche marketing and communication becomes more relevant. These core assets will provide the

foundation for the changing nature of the Group?s future strategy.

During November 2018 shareholders were notified of the Group?s intention to acquire the 50.01% shareholding in Private Property from CTP Limited, a subsidiary of Caxton and CTP

Publishers and Printers Limited, as part of the Group?s changing strategy. Post the reporting period under review, shareholders were advised on 7 February 2019 that all the

conditions precedent had been fulfilled and the transaction had been concluded. Following the successful Private Property transaction, the Caxton Group effectively holds a 63%

stake in Cognition.

This is a very exciting phase in the Group?s journey as it is now better placed to exploit the digital economy with the opportunity to acquire appropriate ‘owner-managed’ digital

assets from third parties which, together with existing operational divisions, will result in the Group becoming a growth-focussed company within the digital sphere.

The forward-looking strategy will be to blend investments that offer innovative technology platforms with digital opportunities that can be collaborative, creative and flexible.

The opportunity for the Group in its ‘next chapter’ is thus to provide creative scope for each investment to be fully empowered and operate independently, whilst spontaneously

leveraging opportunities within the investment portfolio of the Group, with the intention of maximising value for all stakeholders.

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

Unaudited Unaudited Audited

as at as at as at

Growth 31 December 31 December 30 June

2018 2017 2018

R?000 R?000 R?000

ASSETS

Non-current assets -11.4% 61 564 69 519 65 320

Property, plant and equipment -12.1% 14 519 16 518 15 458

Intangible assets -23.2% 12 045 15 686 13 865

Goodwill 0.0% 30 332 30 332 30 332

Investment in associates 0.5% 4 343 4 321 4 606

Unlisted investment -100.0% – 1 807 –

Deferred tax asset -61.9% 325 855 1 059

Current assets 18.9% 152 619 128 334 156 480

Inventory -100.0% – 26 –

Current tax receivable 5.8% 202 191 159

Trade and other receivables 88.2% 73 497 39 045 51 930

Cash and cash equivalents -11.4% 78 920 89 072 104 391

Total assets 214 183 197 853 221 800

EQUITY AND LIABILITIES

Capital and reserves 4.7% 151 193 144 471 150 052

Share capital 0.0% 137 137 137

Share premium 0.0% 55 973 55 973 55 973

Accumulated profits 6.9% 107 175 100 301 106 081

Change in ownership 0.0% (12 892) (12 892) (12 892)

Attributable to the equity holders of the parent 4.8% 150 393 143 519 149 299

Non-Controlling interests -16.0% 800 952 753

Non-current liabilities -67.6% 2 502 7 715 3 078

Interest bearing liabilities -100.0% – 6 –

Other financial liabilities -81.4% 872 4 699 872

Deferred tax liability -45.8% 1 630 3 010 2 206

Current liabilities 32.5% 60 488 45 667 68 670

Trade and other payables 42.0% 56 400 39 707 64 125

Provisions -29.0% 1 774 2 500 1 880

Tax payable 2 100 2 425 2 106

Unclaimed dividends 16.0% 196 169 187

Current portion of other financial liabilities -97.9% 18 866 372

Total equity and liabilities 214 183 197 853 221 800

Net asset value per share (cents) 4.79% 109.28 104.29 108.49

Net tangible asset value per share (cents) 10.78% 78.49 70.85 76.37

Number of shares in issue 0.00% 137 615 798 137 615 798 137 615 798

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Unaudited Unaudited

six months six months Audited

Restated 31 Dec 31 Dec year ended

Growth ended ended 30 June

2018 2017 2018

R?000 R?000 R?000

Gross Revenue 5.1% 210 654 200 367 351 077

Less Agency Revenue 8.3% (127 415) (117 610) (193 193)

Revenue 0.6% 83 239 82 757 157 884

Cost of Sales -19.2% (27 074) (33 501) (62 244)

Gross profit 14.0% 56 165 49 256 95 640

Other operating income -10.2% 858 955 5 418

Staff costs 12.6% (29 703) (26 389) (52 587)

Depreciation and amortisation expense -6.2% (3 592) (3 828) (7 650)

Other operating expenses 31.4% (13 032) (9 917) (18 357)

Finance costs -77.2% ( 23) ( 101) ( 983)

Income from associates -12.7% 165 189 475

Investment income 0.3% 3 098 3 089 6 466

Profit before tax 5.1% 13 936 13 254 28 422

Income tax expense 15.4% (4 540) (3 935) (7 825)

Profit for the period 0.8% 9 396 9 319 20 597

Other comprehensive income

Total comprehensive income for the year 0.8% 9 396 9 319 20 597

Profit attributable to:

Non-controlling interest -50.0% 47 94 87

Owners of the parent 1.3% 9 349 9 225 20 510

Weighted average number of shares in issue 0.0% 137 615 798 137 615 79 137 615 798

Basic earnings per share (cents) 1.3% 6.79 6.70 14.90

Headline earnings per share (cents) 1.3% 6.79 6.70 14.88

Diluted earnings per share (cents) 1.3% 6.79 6.70 14.90

Diluted headline earnings per share (cents) 1.3% 6.79 6.70 14.88

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

Total Attributable Non-

Share Share Change in Share Retained to Equity Controlling Total

Capital Premium ownership Capital Income Holders Interest Equity

R?000 R?000 R?000 R?000 R?000 R?000 R?000 R?000

Audited balance at 1 July 2017 137 55 973 (12 892) 43 218 102 774 145 992 857 146 849

Changes in equity

Total comprehensive income for the period – – – – 9 225 9 225 95 9 320

Dividends – – – – (11 698) (11 698) – (11 698)

Total changes – – – – (2 473) (2 473) 95 (2 378)

Unaudited balance at 1 January 2018 137 55 973 (12 892) 43 218 100 301 143 519 952 144 471

Changes in equity

Total comprehensive income for the period – – – – 11 284 11 284 11 284

Sale of own/treasury shares – – – – – – ( 7) ( 7)

Dividends – – – – (5 504) (5 504) ( 192) (5 696)

Total changes – – – – 5 780 5 780 ( 199) 5 581

Audited balance at 1 July 2018 137 55 973 (12 892) 43 218 106 081 149 299 753 150 052

Changes in equity

Total comprehensive income for the period – – – – 9 349 9 349 47 9 396

Dividends – – – – (8 255) (8 255) – (8 255)

Total changes – – – – 1 094 1 094 47 1 141

Unaudited balance at 31 December 2018 137 55 973 (12 892) 43 218 107 175 150 393 800 151 193

CONSOLIDATED STATEMENTS OF CASH FLOWS

Unaudited Unaudited

six months six months Audited

31 Dec 31 Dec year ended

ended ended 30 June

2018 2017 2018

R?000 R?000 R?000

Cash flow from operating activities (16 029) 21 848 50 601

Net cash generated from operations (14 673) 21 347 52 772

Finance costs ( 23) (101) ( 983)

Investment income 3 098 3 089 6 466

Normal tax paid (4 431) (2 487) (7 654)

Cash flow from investing activities ( 833) (1 418) ( 514)

Purchase of property, plant and equipment ( 252) ( 723) (1 232)

Proceeds on disposal of property, plant and equipment – – 56

Purchase of intangible asset ( 581) ( 548) ( 998)

Sale of unlisted investment – – 1 807

Purchase of unlisted investment – ( 147) ( 147)

Cash flow from financing activities ( 354) ( 940) (9 599)

Dividends paid (8 255) (11 697) (17 376)

Net increase in cash and cash equivalents (25 471) 7 793 23 112

Cash and cash equivalents at beginning of the period 104 391 81 279 81 279

Cash and cash equivalents at the end of the period

78 920 89 072 104 391

The unaudited condensed consolidated interim results for the six months ended 31 December 2018 have been prepared in accordance with International Financial Reporting Standards

(‘IFRS’) and are presented in terms of the disclosure requirements set out in International Accounting Standards (‘IAS’) 34, as well as the SAICA Financial Reporting Guides as

issued by the Accounting Practices Committee and the Financial Reporting Pronouncements as issued by the Financial Reporting Standards Council, the Listings Requirements of the

JSE Limited and the requirements of the Companies Act 2008 (Act 71 of 2008), as amended. The unaudited condensed consolidated interim financial information should be read in

conjunction with the audited annual financial statements for the year ended 30 June 2018.

Accounting policies and computations are consistently applied as in the annual financial statements for the year ended 30 June 2018 except for the application of the following:

IFRS 9: Financial Instruments

The Group has applied the expected credit loss method as detailed in IFRS 9 by using the simplified approach. The application of a provision matrix to the Group?s trade

receivables based on historic default rates with an adjustment for forward looking events has not resulted in a different position from the previous standard.

The application of IFRS 9 has not resulted in the reclassification of any of the Group?s financial assets and liabilities.

IFRS 15: Revenue from Contracts with Customers.

The Group principally generates revenue by providing Active Data Exchange Services and Knowledge Management services. These services are typically delivered within a short-term

basis and revenue is recognised in the month that the service is rendered. Revenue is measured based on the consideration specified in the contract and sales terms and excludes

amounts collected in terms of agency services. The Group does disclose Gross Revenue including agency services for enhanced disclosure purposes. Upon adoption of this standard the

Group was not required to restate its retained earnings as at 30 June 2018.

These financial statements have been compiled under the supervision of the Financial Director, Pieter Scholtz.

The unaudited condensed consolidated interim results for the six months ended 31 December 2018 have not been reviewed by the Group?s auditor.

CASH GENERATED (USED IN) OPERATIONS

Unaudited Unaudited

six months six months Audited

31 Dec 31 Dec year ended

ended ended 30 June

2018 2017 2018

R?000 R?000 R?000

A RECONCILIATION OF PROFIT BEFORE TAXATION TO CASH GENERATED FROM OPERATIONS

Profit before taxation 13 936 13 254 28 422

Adjustments for: 674 (2 761) (2 379)

Depreciation 3 592 3 828 7 650

Provisions ( 106) (3 412) (4 033)

Finance costs 23 101 983

(Profit) on disposal of property, plant and equipment – – ( 38)

Dividend received from associates 428 – –

Income in associates ( 165) ( 189) ( 475)

Investment income (3 098) (3 089) (6 466)

Operating profit before working capital changes

Working capital changes (29 283) 10 854 26 729

Decrease in inventory – – 26

(Increase) / Decrease in trade and other receivables (21 567) 10 004 (2 881)

(Decrease) / Increase in trade and other payables (7 716) 850 29 584

Cash utilised in / generated from operations (14 673) 21 347 52 772

TRADE AND OTHER RECEIVABLES

Trade receivables 68 420 33 053 45 398

VAT – 469 516

Other receivables 271 212 665

Prepayments 560 1 106 1 207

Share loans to directors and staff 4 246 4 205 4 143

73 497 39 045 51 929

Expected credit loss:

The Group applies the IFRS 9 simplified model of recognising lifetime expected credit losses for all trade receivables as these items do not have a significant financing

component. The expected credit loss is determined on an individual customer basis. Amounts due over 60 days are assessed for recoverability. However, the Group reviews all debtors

individually, taking into account individual circumstances and past payment history.

The Group continuously monitors the credit quality of customers. Where available, external credit checks on customers are obtained and used. The Company?s policy is to deal only

with credit worthy counterparties. The credit terms are between 30 and 120 days depending the nature of the service rendered and the customer. The ongoing credit risk is managed

through regular review of ageing analysis.

31 December 2018 More than More than More than

Trade receivables days past due Current 60 days 90 days 120 days Total

R?000 R?000 R?000 R?000 R?000

Expected credit loss rate 0% 0% 0.00% 0.2%

Gross carrying amount 56 604 3 080 4 025 4 711 68 420

Life expected credit loss – – – 7 7

31 December 2017 More than More than More than

Trade receivables days past due Current 60 days 90 days 120 days Total

R?000 R?000 R?000 R?000 R?000

Expected credit loss rate 0% 0% 0.00% 0.1%

Gross carrying amount 31 255 1 327 1 470 33 053

Life expected credit loss – – – 1 1

30 June 2018 More than More than More than

Trade receivables days past due Current 60 days 90 days 120 days Total

R?000 R?000 R?000 R?000 R?000

Expected credit loss rate 0% 0% 0.00% 0.2%

Gross carrying amount 42 970 473 846 1 109 45 398

Life expected credit loss – – – 2 2

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision makers (the ‘CODM’). The CODM have been identified as

the executive committee members who make strategic decisions. The CODM have organised the operations of the Company based on its brands and this has resulted in the creation of

the following reportable segments:

– Active Data Exchange Services

– Knowledge Creation and Management

Unaudited Unaudited

six months six months Audited

31 Dec 31 Dec year ended

ended ended 30 June

2018 2017 2018

R?000 R?000 R?000

Gross Revenue

Active Data Exchange Services 67 877 106 411 137 867

Knowledge Creation and Management 142 777 93 956 213 210

210 654 200 367 351 077

Revenue Generated as agency service

Active Data Exchange Services (30 228) (74 835) (84 259)

Knowledge Creation and Management (97 187) (42 775) (108 934)

(127 415) (117 610) (193 193)

Revenue

Active Data Exchange Services 37 649 31 576 53 608

Knowledge Creation and Management 45 590 51 181 104 276

83 239 82 757 157 884

Cost of sales

Active Data Exchange Services (11 295) (11 175) (18 092)

Knowledge Creation and Management (15 779) (22 326) (44 152)

(27 074) (33 501) (62 244)

Gross profit

Active Data Exchange Services 26 354 20 401 35 516

Knowledge Creation and Management 29 811 28 855 60 124

56 165 49 256 95 640

The accounting policies applied to the operating segments are the same as those described in the basis of preparation paragraph above. Active Data Exchange Services are provided

within South Africa as well as in 36 African countries (‘Africa sales’). Within the period, 7.8% (2017: 1.8%) of the Company?s revenue can be attributed to Africa sales. The

Company allocates revenue to each country based on the relevant domicile of the client. All of the Company?s assets are located in South Africa.

Active Data Exchange Services currently generate 15.8% (2017: 27.2%) of its revenue through three large network service providers. The reconciliation of the Gross Profit to Profit

before Taxation is provided in the Statement of Comprehensive Income. The CODM reviews these income and expense items on a Group basis and not per individual segment. All assets

and liabilities are reviewed on a Group basis by the CODM.

Unaudited Unaudited

six months six months Audited

31 Dec 31 Dec year ended

ended ended 30 June

2018 2017 2018

R?000 R?000 R?000

The calculation of earnings per share is based on profits of R9.3 million attributable to

equity holders of the parent (2017: R9.2 million) and a weighted average of 137 615 798

(2017: 137 615 798) ordinary shares in issue during the period. 6.79 Cents 6.70 Cents 14.90 Cents

The calculation of headline earnings per share is based on profits of R9.3 million with no

adjustments in the current period (2017 adjusted: R9.2 million) and a weighted average of

137 615 98 (2017:137 615 798) ordinary shares in issue during the period. 6.79 Cents 6.70 Cents 14.88 Cents

There were no instruments issued during the current period that have a dilutive impact.

Reconciliation between earnings and headline earnings

Profit attributable to equity holders of the parent 9 349 9 225 20 510

After Tax effect on profit on disposal of property, plant and equipment: – – (28)

Headline earnings 9 349 9 225 20 482

The calculation of diluted earnings per share is based on profits of R9,3 million attributable

to equity holders of the parent (2017: R9,2 million) and a weighted average of 137 615 798

(2017: 137 615 798) ordinary shares in issue during the period. 6.79 Cents 6.70 Cents 14.90 Cents

There were no instruments issued during the current period that have a dilutive impact.

Tax Rate Reconciliation

Local income tax – Current period 4 446 3 455 8 337

Deferred tax – originating and reversing temporary differences 94 (480) ( 512)

4,540 3,935 7,825

Reconciliation between applicable tax rate and average effective tax rate.

Accounting profit 13 936 13 254 28 422

Tax at applicable rate (28%) 3 902 3 711 7 958

Permanent differences 803 413 342

Income from associates (165) (189) (475)

4 540 3 935 7 825

Effective Tax rate 32.58% 29.69% 27.53%

Included in the permanent differences for the period is the tax on an amount of R2,5 million that is not deductible as it relates to the Private Property transaction.

DIVIDEND POLICY

Although an interim dividend was declared in 2017 the Group traditionally only pays an annual dividend. The Board has decided to not declare an interim dividend and to rather

preserve cash for acquisition purposes.

DIRECTORATE

During the interim period, Dennis Lupambo was reclassified as an Independent Non-Executive Director. After the interim period, Trevor Ahier was reclassified as an Independent Non-

Executive Director. There were no further changes to the Board.

SUBSEQUENT EVENTS

Acquisition of subsidiary

On 7 December 2018 shareholders voted in favour of the Company acquiring 50.01% of the shareholding of Private Property South Africa Proprietary Limited held by CTP Limited, a

subsidiary of Caxton and CTP Publishers and Printers Limited. The transaction was finalised on 4 February 2019 when the Company issued 105 833 333 shares as a purchase

consideration to CTP Limited at R1.20 per share totalling R127 million.

Following on the finalisation of the transaction and the issue of the shares, Caxton and CTP Publishers and Printers Limited, directly and indirectly holds and controls 63.01% of

the shareholding in the Company.

The fair value of the net assets acquired amounted to R18 million, resulting in goodwill of R108.9 million at acquisition.

The fair values of the identifiable net assets and liabilities of Private Property as at the date of acquisition were:

R?000

Total Assets

Fixed assets 1 096

Cash 29 207

Debtors 2 535

Loans receivable 11 432

Deferred Taxation 668

44 938

Liabilities

Trade Creditors (8 782)

Net Asset Value 36 157

Non- controlling interest (18 075)

Net Fair Asset Value held by group 18 082

Goodwill 108 918

Purchase consideration by issue of shares 127 000

Buy back of shares pursuant to Section 164 of the Companies Act

Post the period and pursuant to section 164 of the Companies Act (No 71 of 2008) Cognition concluded a Settlement Agreement with shareholders holding 14 086 110 shares. In terms

of the Settlement Agreement Cognition has agreed to buy back 14 086 110 shares at a fair value to be determined by an independent expert. At the time of reporting the fair value

has yet to be determined. Cognition will pay the shareholders the fair value of the shares as determined by the independent expert and the shares will be cancelled.

APPRECIATION

We would like to thank our customers, partners, dealers, staff and other service providers for their continued support, loyalty and dedication.

For and on behalf of the Board

Ashvin Mancha Mark Smith Pieter Scholtz

Chairman Chief Executive Officer Financial Director

Johannesburg

15 March 2019

Directors: Ashvin Mancha#* – Chairman,

Mark Smith – Chief Executive Officer, Pieter Scholtz – Financial Director,

Gaurang Mooney#* (Botswana), Graham Groenewaldt – Sales Director,

Paul Jenkins#*, Roger Pitt#*, Marc du Plessis#, Piet Greyling#, Trevor Ahier#*, Dennis Lupambo#*

# Non-executive

* Independent

Website: www.cgn.co.za

Company Secretary: Stefan Kleynhans

Sponsor: Merchantec Capital

Transfer Secretaries: Computershare Investor Services Proprietary Limited

Date: 15/03/2019 10:15:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited (‘JSE’).
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
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indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on,
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