TIDMUHS
RNS Number : 1939Z
Umuthi Healthcare Solutions PLC
19 May 2021
19 May 2021
Umuthi Healthcare Solutions PLC
("Umuthi" or the "Company" or the "Group")
Financial statements for Lems Pharmaceutical Limited for the
years ended 28 February 2017, 28 February 2018, 28 February 2019
and 29 February 2020
Shareholders are referred to the RNS dated 14 May 2021 - which
set out the financial statements for the years ended 28 February
2017, 28 February 2018, 28 February 2019 and 29 February 2020
This RNS sets out the full annual reports for the years
mentioned above.
Shareholders should note that the audit reports contained in the
annual reports as referred to in the RNS of 14 May 2021 and
uploaded on the Umuthi website on 10 May 2021, have been updated in
this RNS, to confirm and clarify that the audit report in the 2020
Annual Report pertains to the statutory audits for both 28 February
2020 and February 2019 year ends. The 2018 Annual Report pertains
to the statutory audits for both 28 February 2018 and February 2017
year ends.
The reports that have also been published on NSM, follow
below.
LEMS Pharmaceutical Limited
(Registration Number 2014/170940/06)
Annual Financial Statements
for the year ended 29 February 2020
Audited Financial Statements
in compliance with the Companies Act of South Africa
General Information
Country of Incorporation South Africa
and Domicile
Registration Number 2014/170940/06
Nature of Business and The company supplies prescription and
Principal Activities other
medicines to medical practitioners and
health centres
with onsite dispensaries in rural and
non-rural areas of South Africa.
Directors P Grimes
G.P Viljoen
D.L Viljoen
Business Address Cnr Rautenbach & Sixth Street
Wynberg Sandton Gauteng 2196
Postal Address Postnet Suite 136
Private Bag X 19 Menlopark Gauteng 0102
Bankers First National Bank
SARS Reference Numbers
Tax number 9194521192
Auditors Mrwebi Auditors and Accountants Inc
Unit 9 Leogem Business Park 44 Richards
Drive
Halfway House, Midrand Gauteng
1685
Preparer Solly Morulane of Newend Professional
Services
Professional Accountant (SA) 2160 Arsenic
Street
Clayville Extension 26 Gauteng
1666
Directors' Responsibilities and Approval
The directors are required by the Companies Act of South Africa
to maintain adequate accounting records and are responsible for the
content and integrity of the annual financial statements and
related financial information included in this report. It is their
responsibility to ensure that the annual financial statements
satisfy the financial reporting standards with regards to form and
content and present fairly the statement of financial position,
results of operations and business of the company, and explain the
transactions and financial position of the business of the company
at the end of the financial year. The annual financial statements
are based upon appropriate accounting policies consistently applied
throughout the company and supported by reasonable and prudent
judgements and estimates.
The directors acknowledge that they are ultimately responsible
for the system of internal financial control established by the
company and place considerable importance on maintaining a strong
control environment. To enable the directors to meet these
responsibilities, the directors set standards for internal control
aimed at reducing the risk of error or loss in a cost-effective
manner. The standards include the proper delegation of
responsibilities within a clearly defined framework, effective
accounting procedures and adequate segregation of duties to ensure
an acceptable level of risk. These controls are monitored
throughout the company and all employees are required to maintain
the highest ethical standards in ensuring the company's business is
conducted in a manner that in all reasonable circumstances is above
reproach.
The focus of risk management in the company is on identifying,
assessing, managing and monitoring all known forms of risk across
the company. While operating risk cannot be fully eliminated, the
company endeavours to minimise it by ensuring that appropriate
infrastructure, controls, systems and ethical behaviour are applied
and managed within predetermined procedures and constraints.
The directors are of the opinion, based on the information and
explanations given by management, that the system of internal
control provides reasonable assurance that the financial records
may be relied on for the preparation of the annual financial
statements. However, any system of internal financial control can
provide only reasonable, and not absolute, assurance against
material misstatement or loss. The going-concern basis has been
adopted in preparing the financial statements. Based on forecasts
and available cash resources the directors have no reason to
believe that the company will not be a going concern in the
foreseeable future. The financial statements support the viability
of the company.
Signed:
P Grimes
G.P Viljoen
Directors
Independent Auditor's Report
To the Shareholder of LEMS Pharmaceutical Limited
Opinion
We have audited the financial statements of LEMS Pharmaceutical
Limited set out on pages 6 to 34, which comprise the statements of
financial position as at 28 February 2019 and 29 February 2020, and
the statements of profit or loss and other comprehensive income,
the statements of changes in equity and the statements of cash
flows for the years then ended, and notes to the financial
statements, including a summary of significant accounting
policies.
In our opinion, the financial statements present fairly, in all
material respects, the financial position of LEMS Pharmaceutical
Limited as at 28 February 2019 and 29 February 2020, and its
financial performance and cash flows for the years 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 Financial Statements section of our report. We
are independent of the company in accordance with the sections 290
and 291 of the Independent Regulatory Board for Auditors' Code of
Professional Conduct for Registered Auditors (Revised January
2018), parts 1 and 3 of the Independent Regulatory Board for
Auditors' Code of Professional Conduct for Registered Auditors
(Revised November 2018) (together the IRBA Codes) and other
independence requirements applicable to performing audits of
financial statements in South Africa. We have fulfilled our other
ethical responsibilities, as applicable, in accordance with the
IRBA Codes and in accordance with other ethical requirements
applicable to performing audits in South Africa. The IRBA Codes are
consistent with the corresponding sections of the International
Ethics Standards Board for Accountants' Code of Ethics for
Professional Accountants and the International Ethics Standards
Board for Accountants' International Code of Ethics for
Professional Accountants (including International Independence
Standards) respectively. We believe that the audit evidence we have
obtained is sufficient and appropriate to provide a basis for our
opinion.
Other Information
The directors are responsible for the other information. The
other information comprises the information included in the
document titled "LEMS Pharmaceutical Limited Annual Financial
Statements for the year ended 28 February 2019 and 29 February
2020", which includes the statement of Directors' Responsibilities
and Approval as required by the Companies Act of South Africa,
which we obtained prior to the date of this report, and the
supplementary information set out on pages 35 to 36.
The other information does not include the financial statements
and our auditor's report thereon.
Our opinion on the 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 financial statements, our
responsibility is to read the other information and, in doing so,
consider whether the other information is materially inconsistent
with the financial statements or our knowledge obtained in the
audit, or otherwise appears to be materially misstated. If, based
on the work we have performed, 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 Financial
Statements
The directors are responsible for the preparation and fair
presentation of the financial statements in accordance with
International Financial Reporting Standards 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
financial statements that are free from material misstatement,
whether due to fraud or error.
In preparing the financial statements, the directors are
responsible for assessing the 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 company or to cease
operations, or have no realistic alternative but to do so.
Auditor's Responsibilities for the Audit of the Financial
Statements
Our objectives are to obtain reasonable assurance about whether
the 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 ISAs 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 financial
statements.
As part of an audit in accordance with ISAs, we exercise
professional judgement and maintain professional scepticism
throughout the audit. We also:
- Identify and assess the risks of material misstatement of the
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 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 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 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 company to cease to continue as a going
concern.
- Evaluate the overall presentation, structure and content 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.
We communicate with the directors 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.
Mrwebi Auditors and Accountants Inc
Per: Masixole Mrwebi
Director / Partner
Registered Auditor
18 May 2021
Unit 9 Leogem Business Park
44 Richards Drive
Halfway House, Midrand
Gauteng
1685
LEMS Pharmaceutical Limited
(Registration Number 2014/170940/06)
Annual Financial Statements
for the year ended 29 February 2020
Statement of Financial Position
Figures in Great British Pound Sterling
(GBP) Notes 2020 2019
----------------------------------------- ------- ----------- -----------
Assets
Non-current assets
Property, plant and equipment 7 357,061 517,291
Loans to group companies 11 362,986 219,034
----------- -----------
Total non-current assets 720,047 736,325
Current assets
Inventories 8 9,527 24,745
Trade and other receivables 10 12,008 7,201
Cash and cash equivalents - 8
----------- -----------
Total current assets 21,535 31,954
----------- -----------
Total assets 741,582 768,279
----------- -----------
Equity and liabilities
Equity
Share capital 12 40,620 44,027
Share premium 12 679,025 735,982
Capital contribution 1,048,408 858,431
Accumulated loss (1,227,267) (1,089,709)
Currency translation difference (CTD) 25,110 9,978
----------- -----------
Total equity 565,896 558,709
Liabilities
Non-current liabilities
Other financial liabilities 16 151,676 164,398
----------- -----------
Total non-current liabilities 151,676 164,398
Current liabilities
Trade and other payables 14 24,010 45,172
----------- -----------
Total current liabilities 24,010 45,172
----------- -----------
Total liabilities 175,686 209,570
----------- -----------
Total equity and liabilities 741,582 768,279
----------- -----------
Statement of Profit or Loss and Other Comprehensive
Income
Figures in Great British Pound Sterling (GBP) Notes 2020 2019
---------------------------------------------------- ------- --------- ---------
Revenue 17 447,831 86,458
Cost of sales 18 (433,860) (65,622)
--------- ---------
Gross profit 13,971 20,836
Distribution costs 19 (965) (4,334)
Administrative expenses 20 (9,433) (9,170)
Other expenses 21 (234,778) (273,868)
--------- ---------
Loss from operating activities 22 (231,205) (266,536)
Finance income 23 - 14
--------- ---------
Loss for the year (231,205) (266,522)
--------- ---------
Statement of Changes in Equity
Foreign currency
translation
Share Capital Accumulated
Figures in GBP Issued capital Premium contribution reserve loss Total
-------------------------------- -------------- --------- ------------ ---------------- ------------- ---------
Balance at 1 March 2018 46,124 771,021 726,464 23,360 (741,305) 825,664
Changes in equity
Loss for the year - - - - (266,522) (266,522)
-------------- --------- ------------ ---------------- ------------- ---------
Total comprehensive income for
the year - - - - (266,522) (266,522)
Currency translation difference
(CTD) (2,097) (35,039) 131,967 (13,382) (81,882) (433)
-------------- --------- ------------ ---------------- ------------- ---------
Balance at 28 February 2019 44,027 735,982 858,431 9,978 (1,089,709) 558,709
-------------- --------- ------------ ---------------- ------------- ---------
Balance at 1 March 2019 44,027 735,982 858,431 9,978 (1,089,709) 558,709
Changes in equity
Loss for the year - - - - (231,205) (231,205)
-------------- --------- ------------ ---------------- ------------- ---------
Total comprehensive income for
the year - - - - (231,205) (231,205)
Currency translation difference
(CTD) 3,407 56,957 - 15,132 93,647 169,143
-------------- --------- ------------ ---------------- ------------- ---------
Balance at 29 February 2020 40,620 679,025 1,048,408 25,110 (1,227,267) 565,896
-------------- --------- ------------ ---------------- ------------- ---------
Statement of Cash Flows
Figures in Great British Pound Sterling (GBP) 2020 2019
--------------------------------------------------------- ----------- -----------
Cash flows used in operations Loss for the year (231,205) (266,522)
Adjustments to reconcile loss
Adjustments for finance income - (14)
Adjustments for decrease in inventories 15,218 90,363
Adjustments for (increase) / decrease in trade accounts
receivable (4,935) 36,509
Adjustments for decrease in other operating receivables 128 251
Adjustments for decrease in trade accounts payable (13,333) (125,808)
Adjustments for (decrease) / increase in other operating
payables (7,826) 13,578
Adjustments for depreciation and amortisation expense 129,709 123,010
Currency translation difference (CTD) (25,110) (9,978)
----------- -----------
Total adjustments to reconcile loss 93,851 127,911
----------- -----------
Net cash flows used in operations (137,354) (138,611)
Interest received - 14
----------- -----------
Net cash flows used in operating activities (137,354) (138,597)
----------- -----------
Cash flows from financing activities
Proceeds from buyback shares (60,364) (37,136)
Capital contribution introduced 189,977 131,967
Proceeds from other financial liabilities 7,733 30,904
----------- -----------
Cash flows from financing activities 137,346 125,735
----------- -----------
Net decrease in cash and cash equivalents (8) (12,862)
Cash and cash equivalents at beginning of the year 8 12,870
----------- -----------
Cash and cash equivalents at end of the year - 8
----------- -----------
Accounting Policies
1. General Information
LEMS Pharmaceutical Limited is a private company incorporated on
17 September 2014 and domiciled in South Africa. The address of the
registered office is Cnr Rautenbach & Sixth Street, Wynberg,
Sandton, Gauteng, 2196.
The activities of the Company are undertaken through LEMS
Pharmaceutical Limited ("the Company"). The Company operates in
South Africa. The core activities of the Company are warehousing
distribution with its focus on the healthcare sector.
2. Significant accounting policies
2.1 Significant judgements and sources of estimation
uncertainty
The preparation of financial information in conformity with IFRS
requires management, from time to time, to make judgements,
estimates and assumptions that affect the application of policies
and reported amounts of assets, liabilities, income and expenses.
These estimates and associated assumptions are based on experience
and various other factors that are believed to be reasonable under
the circumstances. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an on-
going basis. Revisions to accounting estimates are recognised in
the period in which the estimates are revised and in any future
periods affected.
Critical judgements in applying accounting policies
Management did not make critical judgements in the application
of accounting policies, apart from those involving estimations,
which would significantly affect the financial statements.
Key sources of estimation uncertainty
Provision for expected credit losses of trade receivables and
contract assets
The company is utilising the simplified approach in determining
the expected credit loss allowance. Under the simplified approach,
there is no need to calculate a 12-month Expected Credit Loss (ECL)
and assess whether a significant increase in credit risk has
occurred. A loss allowance is measured at initial recognition and
throughout the life of the receivable at an amount equal to
lifetime ECL's for the asset. A lifetime ECL is the amount of the
expected credit losses that result from all possible default events
over the expected life of the financial instrument. The company
assesses its trade and other receivables and loans and receivables
for impairment at initial recognition of the financial instrument
and at the end of each reporting period. In determining whether an
Expected Credit Loss (ECL) should be recorded in profit or loss,
the company assesses the receivables ability to make payment and if
there is observable data which indicates payment may not be
received and an Expected Credit Loss is recognised.
Allowance for slow moving, damaged and obsolete inventory
Management assesses whether inventory is impaired by comparing
its cost to its estimated net realisable value. Where impairment is
necessary, inventory items are written down to net realisable
value. The write down is included in cost of sales.
Fair value estimation
Assets and liabilities of the Company are either measured at
fair value or disclosure is made of their fair values.
Observable market data is used as inputs to the extent that it
is available. Qualified external valuers are consulted for the
determination of appropriate valuation techniques and inputs.
Useful lives of plant and equipment
Management assess the appropriateness of the useful lives of
plant and equipment at the end of each reporting period. The useful
lives of office equipment furniture and computer equipment are
determined based on Company replacement policies for the various
assets. Individual assets within these classes, which have a
significant carrying amount, are assessed separately to consider
whether replacement will be necessary outside of normal replacement
parameters.
When the estimated useful life of an asset differs from previous
estimates, the change is applied prospectively in the determination
of the depreciation charge.
2.2 Plant and equipment
An item of plant and equipment is recognised as an asset when it
is probable that future economic benefits associated with the item
will flow to the Company, and the cost of the item can be measured
reliably.
Plant and equipment is initially measured at cost. Cost includes
all of the expenditure which is directly attributable to the
acquisition or construction of the asset, including the
capitalisation of borrowing costs on qualifying assets.
The initial estimate of the costs of dismantling and removing an
item and restoring the site on which it is located is also included
in the cost of plant and equipment, where the Company is obligated
to incur such expenditure
Expenditure incurred subsequently for major services, additions
to or replacements of parts of plant and equipment are capitalised
if it is probable that future economic benefits associated with the
expenditure will flow to the Company and the cost can be measured
reliably. Day to day servicing costs are included in profit or loss
in the year in which they are incurred.
Plant and equipment is subsequently stated at cost less
accumulated depreciation and any accumulated impairment losses.
Depreciation of an asset commences when the asset is available
for use as intended by management. Depreciation is charged to write
off the asset's carrying amount over its estimated useful life to
its estimated residual value, using a method that best reflects the
pattern in which the asset's economic benefits are consumed by the
Company. Depreciation is not charged to an asset if its estimated
residual value exceeds or is equal to its carrying amount.
Depreciation of an asset ceases at the earlier of the date that the
asset is classified as held for sale or derecognised.
The useful lives of items of plant and equipment have been
assessed as follows:
Item Depreciation method Average useful
life
Furniture and Straight line 6 years
fixtures
Office equipment Straight line 3 years
IT equipment Straight line 3 years
Computer software Straight line 3 years
The residual value, useful life and depreciation method of each
asset are reviewed at the end of each reporting year. If the
expectations differ from previous estimates, the change is
accounted for prospectively as a change in accounting estimate.
Each part of an item of plant and equipment with a cost that is
significant in relation to the total cost of the item is
depreciated separately.
Impairment tests are performed on plant and equipment when there
is an indicator that they may be impaired. When the carrying amount
of an item of , plant and equipment is assessed to be higher than
the estimated recoverable amount, an impairment loss is recognised
immediately in profit or loss to bring the carrying amount in line
with the recoverable amount.
An item of plant and equipment is derecognised upon disposal or
when no future economic benefits are expected from its continued
use or disposal. Any gain or loss arising from the recognition of
an item of , plant and equipment, determined as the difference
between the net disposal proceeds, if any, and the carrying amount
of the item, is included in profit or loss when the item is
derecognised.
2.3 Financial instruments
Classification
Financial instruments held by the company are classified in
accordance with the provisions of IFRS 9 Financial Instruments.
The Company classifies financial assets and financial
liabilities into the following categories:
- Loans and receivables
- Financial liabilities measured at amortised cost
Classification depends on the purpose for which the financial
instruments were obtained / incurred and takes place at initial
recognition. Classification is re-assessed on an annual basis,
except for derivatives and financial assets designated as at fair
value through profit or loss, which shall not be classified out of
the fair value through profit or loss category.
Initial recognition and measurement
Financial instruments are recognised initially when the Company
becomes a party to the contractual provisions of the
instruments.
The Company classifies financial instruments, or their component
parts, on initial recognition as a financial asset, a financial
liability or an equity instrument in accordance with the substance
of the contractual arrangement.
Financial instruments are measured initially at fair value,
except for equity investments for which a fair value is not
determinable, which are measured at cost and are classified as
available-for-sale financial assets.
For financial instruments which are not at fair value through
profit or loss, transaction costs are included in the initial
measurement of the instrument.
Subsequent measurement
Loans and receivables are subsequently measured at amortised
cost, using the effective interest method, less accumulated
impairment losses.
Financial liabilities at amortised cost are subsequently
measured at amortised cost, using the effective interest
method.
Derecognition Financial assets
Financial assets are derecognised when the rights to receive
cash flows from the investments have expired or have been
transferred and the Company has transferred substantially all risks
and rewards of ownership. If the company neither transfers nor
retains substantially all the risks and rewards of ownership and
continues to control the transferred asset, the company recognises
its retained interest in the asset and an associated liability for
amounts it may have to pay. If the company retains substantially
all the risks and rewards of ownership of a transferred financial
asset, the company continues to recognise the financial asset and
also recognises a collateralised borrowing for the proceeds
received.
Financial liabilities
The company derecognises financial liabilities when, and only
when, the company obligations are discharged, cancelled or they
expire. The difference between the carrying amount of the financial
liability derecognised and the consideration paid and payable,
including any non-cash assets transferred or liabilities assumed,
is recognised in profit or loss.
Reclassification Financial assets
The company only reclassifies affected financial assets if there
is a change in the business model for managing financial assets. If
a reclassification is necessary, it is applied prospectively from
the reclassification date. Any previously stated gains, losses or
interest are not restated.
The reclassification date is the beginning of the first
reporting period following the change in business model which
necessitates a reclassification
Financial liabilities
Financial liabilities are not reclassified.
Loans receivable at amortised cost
Classification
Loans to group companies (note 22) are classified as financial
assets subsequently measured at amortised cost.
They have been classified in this manner because the contractual
terms of these loans give rise, on specified dates to cash flows
that are solely payments of principal and interest on the principal
outstanding, and the company's business model is to collect the
contractual cash flows on these loans.
Recognition and measurement
Loans receivable are recognised when the company becomes a party
to the contractual provisions of the loan. The loans are measured,
at initial recognition, at fair value plus transaction costs, if
any.
They are subsequently measured at amortised cost.
The amortised cost is the amount recognised on the loan
initially, minus principal repayments, plus cumulative amortisation
(interest) using the effective interest method of any difference
between the initial amount and the maturity amount, adjusted for
any loss allowance.
Impairment
The company recognises a loss allowance for expected credit
losses on all loans receivable measured at amortised cost. The
amount of expected credit losses is updated at each reporting date
to reflect changes in credit risk since initial recognition of the
respective loans.
The company measures the loss allowance at an amount equal to
lifetime expected credit losses (lifetime ECL) when there has been
a significant increase in credit risk since initial recognition. If
the credit risk on a loan has not increased significantly since
initial recognition, then the loss allowance for that loan is
measured at 12 month expected credit losses (12 month ECL).
Lifetime ECL represents the expected credit losses that will
result from all possible default events over the expected life of a
loan. In contrast, 12 month ECL represents the portion of lifetime
ECL that is expected to result from default events on a loan that
are possible within 12 months after the reporting date.
In order to assess whether to apply lifetime ECL or 12 month
ECL, in other words, whether or not there has been a significant
increase in credit risk since initial recognition, the company
considers whether there has been a significant increase in the risk
of a default occurring since initial recognition rather than at
evidence of a loan being credit impaired at the reporting date or
of an actual default occurring.
Borrowings and loans from related parties
Classification
Loan from group company, loans from shareholders and other
financial liabilities are classified as financial liabilities
subsequently measured at amortised cost.
Recognition and measurement
Borrowings and loans from related parties are recognised when
the company becomes a party to the contractual provisions of the
loan. The loans are measured, at initial recognition, at fair value
plus transaction costs, if any.
They are subsequently measured at amortised cost using the
effective interest method.
The effective interest method is a method of calculating the
amortised cost of a financial liability and of allocating interest
expense over the relevant period. The effective interest rate is
the rate that exactly discounts estimated future cash payments
(including all fees and points paid or received that form an
integral part of the effective interest rate, transaction costs and
other premiums or discounts) through the expected life of the
financial liability, or (where appropriate) a shorter period, to
the amortised cost of a financial liability.
Interest expense, calculated on the effective interest method,
is included in profit or loss in finance costs.
Borrowings expose the company to liquidity risk and interest
rate risk. Refer to note 4 for details of risk exposure and
management thereof.
Trade and other receivables
Classification
Trade and other receivables, excluding, when applicable, VAT and
prepayments, are classified as financial assets subsequently
measured at amortised cost. They have been classified in this
manner because their contractual terms give rise, on specified
dates to cash flows that are solely payments of principal and
interest on the principal outstanding, and the company's business
model is to collect the contractual cash flows on trade and other
receivables.
Recognition and measurement
Trade and other receivables are recognised when the company
becomes a party to the contractual provisions of the receivables.
They are measured, at initial recognition, at fair value plus
transaction costs, if any. They are subsequently measured at
amortised cost.
The amortised cost is the amount recognised on the receivable
initially, minus principal repayments, plus cumulative amortisation
(interest) using the effective interest method of any difference
between the initial amount and the maturity amount, adjusted for
any loss allowance.
Impairment
The company recognises a loss allowance for expected credit
losses on trade and other receivables, excluding VAT and
prepayments. The amount of expected credit losses is updated at
each reporting date.
The company measures the loss allowance for trade and other
receivables at an amount equal to lifetime expected credit losses
(lifetime ECL), which represents the expected credit losses that
will result from all possible default events over the expected life
of the receivable.
Measurement and recognition of expected credit losses
The company makes use of a provision matrix as a practical
expedient to the determination of expected credit losses on trade
and other receivables. The provision matrix is based on historic
credit loss experience, adjusted for factors that are specific to
the debtors, general economic conditions and an assessment of both
the current and forecast direction of conditions at the reporting
date, including the time value of money, where appropriate.
The customer base is widespread and does not show significantly
different loss patterns for different customer segments. The loss
allowance is calculated on a collective basis for all trade and
other receivables in totality.
An impairment gain or loss is recognised in profit or loss with
a corresponding adjustment to the carrying amount of trade and
other receivables, through use of a loss allowance account. The
impairment loss is included in other operating expenses in profit
or loss as a movement in credit loss allowance.
Trade and other payables
Classification
Trade and other payables, excluding VAT and amounts received in
advance, are classified as financial liabilities subsequently
measured at amortised cost.
Recognition and measurement
They are recognised when the company becomes a party to the
contractual provisions, and are measured, at initial recognition,
at fair value plus transaction costs, if any. They are subsequently
measured at amortised cost using the effective interest method.
The effective interest method is a method of calculating the
amortised cost of a financial liability and of allocating interest
expense over the relevant period. The effective interest rate is
the rate that exactly discounts estimated future cash payments
(including all fees and points paid or received that form an
integral part of the effective interest rate, transaction costs and
other premiums or discounts) through the expected life of the
financial liability, or (where appropriate) a shorter period, to
the amortised cost of a financial liability.
If trade and other payables contain a significant financing
component, and the effective interest method results in the
recognition of interest expense, then it is included in profit or
loss in finance costs.
Trade and other payables expose the company to liquidity risk
and possibly to interest rate risk. Refer to note 4 for details of
risk exposure and management thereof.
Cash and cash equivalents
Cash and cash equivalents comprise cash on hand and demand
deposits, and other short-term highly liquid investments that are
readily convertible to a known amount of cash and are subject to an
insignificant risk of changes in value.
Cash and cash equivalents are stated at carrying amount which is
deemed to be fair value.
Bank overdrafts
Bank overdrafts are initially measured at fair value, and are
subsequently measured at amortised cost, using the effective
interest rate method.
2.4 Tax
Current tax assets and liabilities
Current tax for current and prior periods is, to the extent
unpaid, recognised as a liability. If the amount already paid in
respect of current and prior periods exceeds the amount due for
those periods, the excess is recognised as an asset.
Current tax liabilities (assets) for the current and prior
periods are measured at the amount expected to be paid to
(recovered from) the tax authorities, using the tax rates (and tax
laws) that have been enacted or substantively enacted by the end of
the reporting period.
Deferred tax assets and liabilities
A deferred tax liability is recognised for all taxable material
temporary differences, except to the extent that the deferred tax
liability arises from the initial recognition of an asset or
liability in a transaction which at the time of the transaction,
affects neither accounting profit nor taxable profit (tax
loss).
A deferred tax asset is recognised for all material deductible
temporary differences to the extent that it is probable that
taxable profit will be available against which the deductible
temporary difference can be utilised. A deferred tax asset is not
recognised when it arises from the initial recognition of an asset
or liability in a transaction at the time of the transaction,
affects neither accounting profit nor taxable profit (tax
loss).
Deferred tax assets and liabilities are measured at the tax
rates that are expected to apply to the period when the asset is
realised or the liability is settled, based on tax rates (and tax
laws) that have been enacted or substantively enacted by the end of
the reporting period.
Tax expenses
Current and deferred taxes are recognised as income or an
expense and included in profit or loss for the period, except to
the extent that the tax arises from:
- a transaction or event which is recognised, in the same or a
different period, to other comprehensive income, or
- a business combination.
Current tax and deferred taxes are charged or credited to other
comprehensive income if the tax relates to items that are credited
or charged, in the same or a different period, to other
comprehensive income.
Current tax and deferred taxes are charged or credited directly
to equity if the tax relates to items that are credited or charged,
in the same or a different period, directly in equity.
2.5 Leases
Accounting policies applied from 1 January 2019
The Company uses office buildings and warehouse space based on
operating lease arrangements.
The lease terms are summarised below:
- Office buildings and warehouse has a non-cancellable lease
term of 12 months. The contract contains an option to renew the
lease annually. The lease payments are a fixed amount.
All leases are accounted for by recognising a right-of-use asset
and a lease liability except for:
- Leases of low value assets; and
- Leases with a term of 12 months or less.
The short-term lease exemption is applied consistently to all
underlying assets in the same class. The low value lease exemption
is applied on a lease-by-lease basis.
2.6 Leases
Accounting policies applied until 31 December 2018
A lease is classified as a finance lease if it transfers
substantially all the risks and rewards incidental to ownership. A
lease is classified as an operating lease if it does not transfer
substantially all the risks and rewards incidental to
ownership.
Operating leases - lessee
Operating lease payments are recognised as an expense on a
straight-line basis over the lease term. The difference between the
amounts recognised as an expense and the contractual payments are
recognised as an operating lease asset. This liability is not
discounted.
Any contingent rents are expensed in the period they are
incurred.
2.7 Inventories
Inventories are measured at the lower of cost and net realisable
value.
Net realisable value is the estimated selling price in the
ordinary course of business less the estimated costs of completion
and the estimated costs necessary to make the sale.
The cost of inventories comprises of all costs of purchase,
costs of conversion and other costs incurred in bringing the
inventories to their present location and condition.
The cost of inventories of items that are not ordinarily
interchangeable, and goods or services produced and segregated for
specific projects is assigned using specific identification of the
individual costs.
The cost of inventories is assigned using the FIFO cost formula.
The same cost formula is used for all inventories having a similar
nature and use to the entity.
When inventories are sold, the carrying amounts of those
inventories are recognised as an expense in the period in which the
related revenue is recognised. The amount of any write-down of
inventories to net realisable value and all losses of inventories
are recognised as an expense in the period the write-down or loss
occurs. The amount of any reversal of any write-down of
inventories, arising from an increase in net realisable value, are
recognised as a reduction in the number of inventories recognised
as an expense in the period in which the reversal occurs.
2.8 Impairment of assets
The Company assesses at each end of the reporting period whether
there is any indication that an asset may be impaired. If any such
indication exists, the Company estimates the recoverable amount of
the asset.
Irrespective of whether there is any indication of impairment,
the Company also:
- tests intangible assets with an indefinite useful life or
intangible assets not yet available for use for impairment annually
by comparing its carrying amount with its recoverable amount. This
impairment test is performed during the annual period and at the
same time every period
- tests goodwill acquired in a business combination for
impairment annually.
If there is any indication that an asset may be impaired, the
recoverable amount is estimated for the individual asset. If it is
not possible to estimate the recoverable amount of the individual
asset, the recoverable amount of the cash-generating unit to which
the asset belongs is determined.
The recoverable amount of an asset or a cash-generating unit is
the higher of its fair value less costs to sell and its value in
use.
If the recoverable amount of an asset is less than its carrying
amount, the carrying amount of the asset is reduced to its
recoverable amount. That reduction is an impairment loss.
An impairment loss of assets carried at cost less any
accumulated depreciation or amortisation is recognised immediately
in profit or loss. Any impairment loss of a revalued asset is
treated as a revaluation decrease.
An entity assesses at each reporting date whether there is any
indication that an impairment loss recognised in prior periods for
assets other than goodwill may no longer exist or may have
decreased. If any such indication exists, the recoverable amounts
of those assets are estimated.
The increased carrying amount of an asset other than goodwill
attributable to a reversal of an impairment loss does not exceed
the carrying amount that would have been determined had no
impairment loss been recognised for the asset in prior periods.
A reversal of an impairment loss of assets carried at cost less
accumulated depreciation or amortisation other than goodwill is
recognised immediately in profit or loss. Any reversal of an
impairment loss of a revalued asset is treated as a revaluation
increase.
2.9 Share capital and equity
An equity instrument is any contract that evidences a residual
interest in the assets of an entity after deducting all of its
liabilities.
This is disclosed as:
- Shares which constitute ordinary shares issued at par value
per share; and
- Share premium which represents the difference between the par
value and the price at which the share was issued.
2.10 Employee benefits
Short-term employee benefits
The cost of short-term employee benefits, (those payable within
12 months after the service is rendered, such as paid vacation
leave and sick leave, bonuses, and non-monetary benefits such as
medical care), are recognised in the period in which the service is
rendered and are not discounted.
The expected cost of profit sharing and bonus payments is
recognised as an expense when there is a legal or constructive
obligation to make such payments as a result of past
performance.
2.11 Revenue
IFRS 15 Revenue from Contracts with Customers
IFRS 15 Revenue from Contracts with Customers applies to all
contracts with customers and non-monetary exchanges between
entities in the same line of business to facilitate sales to
customers or potential customers.
The core principle of IFRS 15 is that an entity will recognise
revenue to depict the transfer of promised goods or services to
customers in an amount that reflects the consideration to which the
entity expects to be entitled in exchange for those goods or
services. This core principle is delivered in a five-step model
framework:
1. Identify the contract(s) with a customer
2. Identify the performance obligations in the contract
3. Determine the transaction price
4. Allocate the transaction price to the performance obligations
in the contract
5. Recognise revenue when (or as) the entity satisfies a
performance obligation.
Identify the contract with the customer
A contract with a customer will be within the scope of IFRS 15
if all the following conditions are met:
- the contract has been approved by the parties to the
contract;
- each party's rights in relation to the goods or services to be
transferred can be identified;
- the payment terms for the goods or services to be transferred
can be identified;
- the contract has commercial substance; and
- it is probable that the consideration to which the entity is
entitled to in exchange for the goods or services will be
collected.
If a contract with a customer does not yet meet all of the above
criteria, the entity will continue to re-assess the contract going
forward to determine whether it subsequently meets the above
criteria. From that point, the entity will apply IFRS 15 to the
contract.
Identify the performance obligations in the contract
The majority of the company's revenue is derived from selling
goods with revenue recognised at a point in time when control of
the goods has transferred to the customer. This is generally when
the goods are delivered to the customer. There is limited judgement
needed in identifying the point control passes: once physical
delivery of the products to the agreed location has occurred, the
company no longer has physical possession, usually will have a
present right to payment (as a single payment on delivery) and
retains none of the significant risks and rewards of the goods in
question.
Determine the transaction price
Most of the company's revenue is derived from fixed price
contracts and therefore the amount of revenue to be earned from
each contract is determined by reference to those fixed prices.
Allocate the transaction price to the performance obligations in
the contracts
Where a contract has multiple performance obligations, an entity
will allocate the transaction price to the performance obligations
in the contract by reference to their relative standalone selling
prices. If a standalone selling price is not directly observable,
the entity will need to estimate it.
Recognise revenue when (or as) the entity satisfies a
performance obligation
Revenue is recognised as control is passed at a point in
time.
Interest is recognised, in profit or loss, using the effective
interest rate method.
2.12 Translation of foreign currencies
Functional and presentation currency
Items included in the financial statements of the Company is
measured using the currency of the primary economic environment in
which the entity operates (functional currency).
This consolidated financial information is presented in Pounds
Sterling which is the Company presentation currency. The company
functional currency in ZAR (South African Rand)
Foreign currency transactions
A foreign currency transaction is recorded, on initial
recognition in Pounds, by applying to the foreign currency amount
the mid-rate exchange rate between the functional currency and the
foreign currency at the date of the transaction.
At the end of the reporting period:
- foreign currency monetary items are translated using the
closing rate;
- non-monetary items that are measured in terms of historical
cost in a foreign currency are translated using the exchange rate
at the date of the transaction; and
- non-monetary items that are measured at fair value in a
foreign currency are translated using the exchange rates at the
date when the fair value was determined.
Exchange differences arising on the settlement of monetary items
or on translating monetary items at rates different from those at
which they were translated on initial recognition during the period
or in previous consolidated and separate financial statements are
recognised in profit or loss in the period in which they arise.
When a gain or loss on a non-monetary item is recognised to
other comprehensive income and accumulated in equity, any exchange
component of that gain or loss is recognised to other comprehensive
income and accumulated in equity. When a gain or loss on a
non-monetary item is recognised in profit or loss, any exchange
component of that gain or loss is recognised in profit or loss.
Cash flows arising from transactions in a foreign currency are
recorded in Pounds by applying to the foreign currency amount the
exchange rate between the Pounds and the foreign currency at the
date of the cash flow.
3. New Standards and Interpretations
Standards and interpretations effective and adopted
IFRS 9: Financial instruments
IFRS 9 issued in November 2009 introduced new requirements for
the classification and measurements of financial assets.
IFRS 9 was subsequently amended in October 2010 to include
requirements for the classification and measurement of financial
liabilities and for derecognition, and in November 2013 to include
the new requirements for general hedge accounting.
Another revised version of IFRS 9 was issued in July 2014 mainly
to include a) impairment requirements for financial assets and b)
limited amendments to the classification and measurement
requirements by introducing a "fair value through other
comprehensive income" (FVTOCI) measurement category for certain
simple debt instruments.
Key requirements of IFRS 9:
- All recognized financial assets that are within the scope of
IAS 39 Financial Instruments: Recognition and Measurement are
required to be subsequently measured at amortised cost or fair
value. Specifically, debt investments that are held within a
business model whose objective is to collect the contractual cash
flows, and that have contractual cash flows that are solely
payments of principal and interest on the outstanding principal are
generally measured at amortised cost at the end of subsequent
reporting periods. Debt instruments that are held within a business
model whose objective is achieved by both collecting contractual
cash flows and selling financial assets, and that have contractual
terms of the financial asset give rise on specified dates to cash
flows that are solely payments of principal and interest on
outstanding principal, are measured at FVTOCI. All other debt and
equity investments are measured at fair value at the end of
subsequent reporting periods. In addition, under IFRS 9, entities
may make an irrevocable election to present subsequent changes in
the fair value of an equity investment (that is not held for
trading) in other comprehensive income with only dividend income
generally recognised in profit or loss.
- With regard to the measurement of financial liabilities
designated as at fair value through profit or loss, IFRS 9 requires
that the amount of change in the fair value of the financial
liability that is attributable to changes in the credit risk of the
liability is presented in other comprehensive income, unless the
recognition of the effect of the changes of the liability's credit
risk in other comprehensive income would create or enlarge an
accounting mismatch in profit or loss. Under IAS 39, the entire
amount of the change in fair value of a financial liability
designated as at fair value through profit or loss is presented in
profit or loss.
- In relation to the impairment of financial assets, IFRS 9
requires an expected credit loss model, as opposed to an incurred
credit loss model under IAS 39. The expected credit loss model
requires an entity to account for expected credit losses and
changes in those expected credit losses at each reporting date to
reflect changes in credit risk since initial recognition. It is
therefore no longer necessary for a credit event to have occurred
before credit losses are recognised.
- The new general hedge accounting requirements retain the three
types of hedge accounting mechanisms currently available in IAS 39.
Under IFRS 9, greater flexibility has been introduced to the types
of transactions eligible for hedge accounting, specifically
broadening the types of instruments that qualify for hedging
instruments and the types of risk components of non-financial items
that are eligible for hedge accounting. In addition, the
effectiveness test has been replaced with the principal of an
"economic relationship". Retrospective assessment of hedge
effectiveness is also no longer required. Enhanced disclosure
requirements about an entity's risk management activities have also
been introduced.
The effective date of the standard is for years beginning on or
after 1 January 2018.
IFRS 15: Revenue from Contracts with Customers
IFRS 15 supersedes IAS 11 Construction contracts; IAS 18
Revenue; IFRIC 13 Customer Loyalty Programmes; IFRIC 15 Agreements
for the construction of Real Estate; IFRIC 18 Transfers of Assets
from Customers and SIC 31 Revenue - Barter Transactions Involving
Advertising Services.
The core principle of IFRS 15 is that an entity recognises
revenue to depict the transfer of promised goods or services to
customers in an amount that reflects the consideration to which the
entity expects to be entitled in exchange for those goods or
services. An entity recognises revenue in accordance with that
core principle by applying the following steps:
1) Identify the contract(s) with a customer
2) Identify the performance obligations in the contract
3) Determine the transaction price
4) Allocate the transaction price to the performance obligations
in the contract
5) Recognise revenue when (or as) the entity satisfies a
performance obligation.
IFRS 15 also includes extensive new disclosure requirements.
The effective date of the standard is for years beginning on or
after 1 January 2018.
The adoption of this standard has not had a material impact on
the results of the company but has resulted in more disclosure than
would have previously been provided in the annual financial
statements.
IFRS 16: Leases
IFRS 16 Leases is a new standard which replaces IAS 17 Leases
and introduces a single lessee accounting model. The main changes
arising from the issue of IFRS 16 which are likely to impact the
company are as follows:
Company as lessee:
- Lessees are required to recognise a right-of-use asset and a
lease liability for all leases, except short term leases or leases
where the underlying asset has a low value, which are expensed on a
straight line or other systematic basis.
- The cost of the right-of-use asset includes, where
appropriate, the initial amount of the lease liability; lease
payments made prior to commencement of the lease less incentives
received; initial direct costs of the lessee; and an estimate for
any provision for dismantling, restoration and removal related to
the underlying asset.
- The lease liability takes into consideration, where
appropriate, fixed and variable lease payments; residual value
guarantees to be made by the lessee; exercise price of purchase
options; and payments of penalties for terminating the lease.
- The right-of-use asset is subsequently measured on the cost
model at cost less accumulated depreciation and impairment and
adjusted for any re-measurement of the lease liability. However,
right-of-use assets are measured at fair value when they meet the
definition of investment property and all other investment property
is accounted for on the fair value model. If a right-of-use asset
relates to a class of property, plant and equipment which is
measured on the revaluation model, then that right-of-use asset may
be measured on the revaluation model.
- The lease liability is subsequently increased by interest,
reduced by lease payments and re-measured for reassessments or
modifications.
- Re-measurements of lease liabilities are affected against
right-of-use assets, unless the assets have been reduced to nil, in
which case further adjustments are recognised in profit or
loss.
- The lease liability is re-measured by discounting revised
payments at a revised rate when there is a change in the lease term
or a change in the assessment of an option to purchase the
underlying asset.
- The lease liability is re-measured by discounting revised
lease payments at the original discount rate when there is a change
in the amounts expected to be paid in a residual value guarantee or
when there is a change in future payments because of a change in
index or rate used to determine those payments.
- Certain lease modifications are accounted for as separate
leases. When lease modifications which decrease the scope of the
lease are not required to be accounted for as separate leases, then
the lessee re- measures the lease liability by decreasing the
carrying amount of the right of lease asset to reflect the full or
partial termination of the lease. Any gain or loss relating to the
full or partial termination of the lease is recognised in profit or
loss. For all other lease modifications which are not required to
be accounted for as separate leases, the lessee re-measures the
lease liability by making a corresponding adjustment to the
right-of-use asset.
- Right-of-use assets and lease liabilities should be presented
separately from other assets and liabilities. If not, then the line
item in which they are included must be disclosed. This does not
apply to right-of- use assets meeting the definition of investment
property which must be presented within investment property. IFRS
16 contains different disclosure requirements compared to IAS 17
leases.
The effective date of the standard is for years beginning on or
after 1 January 2019
3.1 Standards and interpretations effective and adopted in the
current year
To all periods reported, the Company has adopted those standards
and interpretations that are effective and that are relevant to its
operations.
3.2 Standards and interpretations not yet effective
The company has chosen not to early adopt the following
standards and interpretations, which have been published and are
mandatory for the company's accounting periods beginning on or
after 1 March 2020 or later periods:
Presentation of Financial Statements: Disclosure initiative
The amendment clarifies and align the definition of 'material'
and provide guidance to help improve consistency
in the application of that concept whenever it is used in IFRS
Standards. The effective date of the amendment is for years
beginning on or after 1 January 2020. It is unlikely that the
amendment will have a material impact on the company's annual
financial statements.
Accounting Policies, Changes in Accounting Estimates and Errors:
Disclosure initiative
The amendment clarify and align the definition of 'material' and
provide guidance to help improve consistency in the application of
that concept whenever it is used in IFRS Standards. The effective
date of the amendment is for years beginning on or after 1 January
2020. It is unlikely that the amendment will have a material impact
on the company's annual financial statements.
4. Risk management
Capital risk management
The Company's objectives when managing capital are to safeguard
the Company's ability to continue as a going concern in order to
provide returns for shareholders and benefits for other
stakeholders and to maintain an optimal capital structure to reduce
the cost of capital.
In order to maintain or adjust the capital structure, the
Company may adjust the amount of dividends paid to shareholders,
return capital to shareholders, issue new shares or sell assets to
reduce debt.
Consistent with others in the industry, the Company monitors
capital on the basis of the gearing ratio.
This ratio is calculated as net debt divided by total capital.
Net debt is calculated as total borrowings (including 'current and
non-current borrowings' as shown in the statement of financial
position) less cash and cash equivalents. Total capital is
calculated as 'equity' as shown in the statement of financial
position plus net debt.
There are no externally imposed capital requirements.
There have been no changes to what the entity manages as
capital, the strategy for capital maintenance or externally imposed
capital requirements from the previous year.
The gearing ratio at 2020 and 2019 respectively
were as follows:
2020 2019
Total liabilities 175,686 209,570
Less: Cash and cash equivalents - (8)
Net debt 175,686 209,562
Total equity 565,896 585,709
Total capital 741,582 768,279
Gearing ratio 24% 27%
Liquidity risk
Cash flow forecasting is performed by the Company. Such
forecasting takes into consideration the Company's debt financing
plans, covenant compliance, compliance with internal statement of
financial position ratio targets and, if applicable external
regulatory or legal requirements - for example, currency
restrictions.
Cash flow forecasts are prepared, and adequate utilised
borrowing facilities are monitored.
The table below analyses the Company's financial liabilities and
net-settled derivative financial liabilities into relevant maturity
Company's based on the remaining period at the statement of
financial position to the contractual maturity date. The amounts
disclosed in the table are the contractual undiscounted cash flows.
Balances due within 12 months equal their carrying balances as the
impact of discounting is not significant.
Company
At 28 February 2020 Less than Between Between 2 Over 5
1 year 1 and 2 and 5 years years
years
Borrowings - 151,676 - -
Trade and other 24,010 - - -
payables
At 28 February 2019 Less than Between Between 2 Over 5
1 year 1 and 2 and 5 years years
years
Borrowings - 164,398 - -
Trade and other 45,172 - - -
payables
Credit risk
Credit risk is managed on a Company basis.
Credit risk consists mainly of cash deposits, cash equivalents,
derivative financial instruments and trade debtors.
LEMS only deposits cash with major banks with high quality
credit standing and limits exposure to any one counter-party.
Trade receivables comprise a widespread customer base.
Management evaluated credit risk relating to customers on an
on-going basis. If customers are independently rated, these ratings
are used. Otherwise, if there is no independent rating, risk
control assesses the credit quality of the customer, taking into
account its financial position, past experience and other factors.
Individual risk limits are set based on internal or external
ratings in accordance with limits set by the board. The utilisation
of credit limits is regularly monitored. Sales to retail customers
are settled in cash or using major credit cards. Credit guarantee
insurance is purchased when deemed appropriate.
No credit limits were exceeded during the reporting period, and
management does not expect any losses from non-performance by these
counterparties.
Foreign exchange risk
The Company operates internationally and is exposed to foreign
exchange risk arising from various currency exposures, primarily
with respect to the US dollar and the UK pound and RSA Rand.
Foreign exchange risk arises from future commercial transactions,
recognised assets and liabilities and net investments in foreign
operations.
The Company does not hedge foreign exchange fluctuations.
Exchange rates used for conversion 2020 2019
of foreign items were:
ZAR 0.04982 0.05668
5. Financial assets by category
The accounting policies for financial instruments have been
applied to the line items below:
As at 28 February Loans and receivables Total
2020 at amortised cost
Trade and other
receivables 12,008 12,008
Cash and cash -
equivalents
---------------------- -------
12,008 12,008
------------------- ---------------------- -------
As at 28 February Loans and receivables Total
2019 at amortised cost
Trade and other
receivables 7,201 7,201
Cash and cash
equivalents 8 8
---------------------- -------
7,209 7,209
------------------- ---------------------- -------
6. Financial liabilities by category
T he accounting policies for financial instruments have been
applied to the line items below:
As at 28 February 2020 Financial liabilities Total
at amortised cost
Other financial liabilities 151,676 151,676
Trade and other payables 24,010 24,010
---------------------- ----------
As at 28 February 2019 Financial liabilities Total
at amortised cost
Other financial liabilities 164,398 164,398
Trade and other payables 45,172 45,172
---------------------- ----------
209,570 209,570
----------------------------- ---------------------- ----------
7. Property, plant and equipment
Balances at year end and
movements for the year
All figures in GBP
Fixtures Office equipment Computer Computer
and fittings equipment software Total
-------------- ------------------ ----------- ---------- ----------
Reconciliation for the year
ended 29 February 2020
Balance at 1 March 2019
At cost 634,042 1,218 7,847 3,441 646,548
Accumulated depreciation (116,751) (1,218) (7,847) (3,441) (129,257)
------------------ ----------- ---------- ----------
Net book value 517,291 - - - 517,291
------------------ ----------- ---------- ----------
Movements for the year ended
29 February 2020
Depreciation (129,644) (65) - - (129,709)
Foreign currency revaluation
increase (decrease) (30,586) 65 - - (30,521)
------------------ ----------- ---------- ----------
Property, plant and equipment
at the end of the year 357,061 - - - 357,061
------------------ ----------- ---------- ----------
Closing balance at 29 February
2020
At cost 584,974 1,124 7,240 3,175 596,513
Accumulated depreciation (227,913) (1,124) (7,240) (3,175) (239,452)
------------------ ----------- ---------- ----------
Net book value 357,061 - - - 357,061
------------------ ----------- ---------- ----------
Reconciliation for the year
ended 28 February 2019
Balance at 1 March 2018
At cost 719,753 1,383 8,908 3,906 733,950
Accumulated depreciation (6,916) (922) (6,047) (2,604) (16,489)
------------------ ----------- ---------- ----------
Net book value 712,837 461 2,861 1,302 717,461
------------------ ----------- ---------- ----------
Movements for the year ended
28 February 2019
Depreciation (119,014) (398) (2,473) (1,125) (123,010)
Foreign currency revaluation
increase (decrease) (76,532) (63) (388) (177) (77,160)
------------------ ----------- ---------- ----------
Property, plant and equipment
at the end of the year 517,291 - - - 517,291
------------------ ----------- ---------- ----------
Closing balance at 28 February
2019
At cost 634,042 1,218 7,847 3,441 646,548
Accumulated depreciation (116,751) (1,218) (7,847) (3,441) (129,257)
------------------ ----------- ---------- ----------
Net book value 517,291 - - - 517,291
------------------ ----------- ---------- ----------
8. Inventories
Inventories comprise:
All figures in GBP 2020 2019
------ ------
Finished goods 9,527 24,745
------ ------
9,527 24,745
------ ------
9. Financial assets
10. Trade and other receivables
Trade and other receivables comprise:
All figures in GBP 2020 2019
Trade receivables 6,879 1,944
Deposits 5,129 5,257
------ ------
12,008 7,201
------ ------
Total trade and other receivables 12,008 7,201
------ ------
Categorisation of trade and other receivables
All trade and other receivables are categorised as financial
instruments at amortised cost in accordance with IFRS 9: Financial
Instruments.
Exposure to credit risk
Trade receivables inherently expose the company to credit risk,
being the risk that the company will incur financial loss if
customers fail to make payments as they fall due.
A loss allowance is recognised for all trade receivables, in
accordance with IFRS 9 Financial Instruments, and is monitored at
the end of each reporting period. In addition to the loss
allowance, trade receivables are written off when there is no
reasonable expectation of recovery, for example, when a debtor has
been placed under liquidation. Trade receivables which have been
written off are not subject to enforcement activities.
The company measures the loss allowance for trade receivables by
applying the simplified approach which is prescribed by IFRS 9. In
accordance with this approach, the loss allowance on trade
receivables is determined as the lifetime expected credit losses on
trade receivables. These lifetime expected credit losses are
estimated using a provision matrix, which is presented below. The
provision matrix has been developed by making use of past default
experience of debtors but also incorporates forward looking
information and general economic conditions of the industry as at
the reporting date.
Refer to note 4 Financial instruments and financial risk
management for details of credit risk exposure and management.
11. Loans to group Companies
2020 2019
362,986 219,034
12. Share Capital
Authorised and issued share capital
All figures in GBP 2020 2019
------------ ------------
Authorised Issued
Ordinary no par value shares 40,620 44,027
------------ ------------
40,620 44,027
Share premium 679,025 735,982
------------ ------------
719,645 780,009
------------ ------------
Share reconciliation
Shares outstanding - beginning of the period 90,000,000 90,000,000
------------ ------------
Shares outstanding - closing 90,000,000 90,000,000
------------ ------------
13. Reserves
Classification of reserves
Total non distributable reserves 25,110 9,978
------------ ------------
14. Trade and other payables
Trade and other payables comprise:
Trade creditors 18,258 31,594
Value added tax 5,752 13,578
------------ ------------
Total trade and other payables 24,010 45,172
------------ ------------
15. Financial liabilities
16. Other financial liabilities
16.1 Other financial liabilities comprise:
Loan: Chinyanta JN 151,676 164,398
------------ ------------
151,676 164,398
------------ ------------
The above loan is unsecured, bears no interest and has
no fixed terms of repayment.
16.2 Classification of other financial liabilities
Amortised cost 151,676 164,398
------------ ------------
151,676 164,398
------------ ------------
17. Revenue
Revenue comprises:
All figures in GBP 2020 2019
------- -------
Sale of goods 447,831 86,458
------- -------
Total revenue 447,831 86,458
------- -------
18. Cost of sales
Cost of sales comprise:
Sale of goods 433,860 65,622
------- -------
Total cost of sales 433,860 65,622
------- -------
19. Distribution costs
Distribution costs comprise:
Delivery expenses 965 4,334
------- -------
Total distribution costs 965 4,334
------- -------
20. Administrative expenses
Administrative expenses comprise:
Accounting fees 656 871
Bank charges 446 1,195
Computer expenses 7,491 6,252
Subscriptions 644 688
Telecommunication 196 164
------- -------
Total administrative expenses 9,433 9,170
------- -------
21. Other expenses
Other expenses comprise:
Cleaning 264 221
Consulting fees - (1,792)
Depreciation 129,709 123,010
Donations 4,148 3,095
Electricity and water 5,608 4,680
Employee benefit expenses 53,229 124,255
Entertainment - 16
General expenses 8 104
Insurance 319 481
Office Expenses 156 280
Operating leases 41,321 19,511
Printing and stationery 16 7
------- -------
Total other expenses 234,778 273,868
------- -------
22. Loss from operating activities
All figures in GBP 2020 2019
Loss from operating activities includes the following
separately disclosable items
Other operating expenses
Property plant and equipment
- depreciation 129,709 123,010
23. Finance income
All figures in GBP 2020 2019
Finance income comprises:
Interest received - 14
------ -----
Total finance Income - 14
------ -----
24. Related parties
24.1 Group Companies
Parent Company - Umuthi Healthcare Solutions PLC
24.2 Other related parties
Entity name Nature of relationship
G.P. Viljoen Majority shareholder and member of
key management
P.J Grimes Member of key management
24.3 Related party transactions and balances
All figures GBP Key management Total
personnel of
the entity or
its parent
--------------- ----------
Year ended 29 February
2020
Related party transactions
Capital contribution 1,048,408 1,048,408
Year ended 28 February
2019
Related party transactions
Transfers of research
and development to
entity 858,431 858,431
Outstanding loan accounts
Amounts payable 164,398 164,398
25. Fair Value
Information Fair value hierarchy
The table below analyses assets and liabilities carried at fair
value. The different levels are defined as follows:
Level 1: Quoted unadjusted prices in active markets for
identical assets or liabilities that the Company can access at
measurement date.
Level 2: Inputs other than quoted prices included in level 1
that are observable for the asset or liability either directly or
indirectly.
Level 3: Unobservable inputs for the asset or liability.
Transfers of assets and liabilities within levels of the fair
value hierarchy
There have been no transfers between fair value levels during
any of the periods within this Financial Information.
Valuation processes applied by the Company
The Company measures financial instruments such as derivatives,
and non-financial assets at fair value at each balance sheet date.
Fair value related disclosures for financial instruments and
non-financial assets that are measured at fair value or where fair
values are disclosed are summarised in the accounting policies
under note 1 as well as in the following notes: Trade and other
payables - Note 12 Other financial liabilities - Note 13
26. Forex gain and losses
Foreign currency monetary items shall be translated using the
closing rate; non-monetary items that are measured in terms of
historical cost in a foreign currency shall be translated using the
exchange rate at the date of the transaction; and non-monetary
items that are measured at fair value in a foreign currency shall
be translated using the exchange rates at the date when the fair
value was determined. Monetary items include trade payables and
trade receivables as well as cash
Non-monetary items include Inventory, plant and equipment, Share
capital and share premium.
Movement recognised in OCI 2020 2019
Exchange differences on translating foreign operations 25,110 9,978
Detailed Income Statement
Figures in GBP Notes 2020 2019
--------------------------------------------- ------- ----------- ----------
Revenue
Sale of goods 17 447,831 86,458
----------- ----------
Cost of sales
Sale of goods 18 (433,860) (65,622)
----------
Gross profit 13,971 20,836
----------- ----------
Distribution costs
Delivery expenses 19 (965) (4,334)
----------- ----------
Administrative expenses
Accounting fees 20 (656) (871)
Bank charges (446) (1,195)
Computer expenses (7,491) (6,252)
Subscriptions (644) (688)
Telecommunication (196) (164)
----------- ----------
(9,433) (9,170)
Other expenses
Cleaning 21 (264) (221)
Consulting fees - 1,792
Depreciation - property, plant and equipment (129,709) (123,010)
Donations (4,148) (3,095)
Electricity and water (5,608) (4,680)
Employee costs - directors (34,894) (89,419)
Employee costs - salaries (18,335) (34,836)
Entertainment - (16)
General expenses (8) (104)
Insurance (319) (481)
Office Expenses (156) (280)
Operating leases (41,321) (19,511)
Printing and stationery (16) (7)
----------- ----------
(234,778) (273,868)
----------- ----------
Loss from operating activities 22 (231,205) (266,536)
----------- ----------
Finance income
Interest received 23 - 14
----------
Loss for the year (231,205) (266,522)
----------- ----------
LEMS Pharmaceutical Limited
(Registration Number 2014/170940/06)
Annual Financial Statements for the year ended 29 February
2020
Income Tax Computation
Figures in Great British Pound Sterling (GBP) 2020 2019
------------------------------------------------------------ ----------- -----------
Loss before tax (231,205) (266,522)
----------- -----------
Computed income for the year (231,205) (266,522)
Assessed loss brought forward (654,141) (387,619)
----------- -----------
Taxable income (885,346) (654,141)
----------- -----------
Normal tax - -
LEMS Pharmaceutical Limited
(Registration Number 2014/170940/06)
Annual Financial Statements
for the year ended 28 February 2018
Audited Financial Statements
In compliance with the Companies Act of South Africa
General Information
Country of Incorporation South Africa
and Domicile
Registration Number 2014/170940/06
Nature of Business and The company supplies prescription and
Principal Activities other
medicines to medical practitioners and
health centres
with onsite dispensaries in rural and
non-rural areas of South Africa.
Directors P Grimes
G.P Viljoen
D.L Viljoen
Business Address Cnr Rautenbach & Sixth Street
Wynberg Sandton Gauteng 2196
Postal Address Postnet Suite 136
Private Bag X 19 Menlopark Gauteng 0102
Bankers First National Bank
SARS Reference Numbers
Tax number 9194521192
Auditors Mrwebi Auditors and Accountants Inc
Unit 9 Leogem Business Park 44 Richards
Drive
Halfway House, Midrand Gauteng
1685
Preparer Solly Morulane of Newend Professional
Services
Professional Accountant (SA) 2160 Arsenic
Street
Clayville Extension 26 Gauteng
1666
Directors' Responsibilities and Approval
The directors are required by the Companies Act of South Africa
to maintain adequate accounting records and are responsible for the
content and integrity of the annual financial statements and
related financial information included in this report. It is their
responsibility to ensure that the annual financial statements
satisfy the financial reporting standards with regards to form and
content and present fairly the statement of financial position,
results of operations and business of the company, and explain the
transactions and financial position of the business of the company
at the end of the financial year. The annual financial statements
are based upon appropriate accounting policies consistently applied
throughout the company and supported by reasonable and prudent
judgements and estimates.
The directors acknowledge that they are ultimately responsible
for the system of internal financial control established by the
company and place considerable importance on maintaining a strong
control environment. To enable the directors to meet these
responsibilities, the directors set standards for internal control
aimed at reducing the risk of error or loss in a cost-effective
manner. The standards include the proper delegation of
responsibilities within a clearly defined framework, effective
accounting procedures and adequate segregation of duties to ensure
an acceptable level of risk. These controls are monitored
throughout the company and all employees are required to maintain
the highest ethical standards in ensuring the company's business is
conducted in a manner that in all reasonable circumstances is above
reproach.
The focus of risk management in the company is on identifying,
assessing, managing and monitoring all known forms of risk across
the company. While operating risk cannot be fully eliminated, the
company endeavours to minimise it by ensuring that appropriate
infrastructure, controls, systems and ethical behaviour are applied
and managed within predetermined procedures and constraints.
The directors are of the opinion, based on the information and
explanations given by management, that the system of internal
control provides reasonable assurance that the financial records
may be relied on for the preparation of the annual financial
statements. However, any system of internal financial control can
provide only reasonable, and not absolute, assurance against
material misstatement or loss. The going-concern basis has been
adopted in preparing the financial statements. Based on forecasts
and available cash resources the directors have no reason to
believe that the company will not be a going concern in the
foreseeable future. The financial statements support the viability
of the company.
Signed:
P Grimes
G.P Viljoen
Directors
Independent Auditor's Report
To the Shareholder of LEMS Pharmaceutical Limited
Opinion
We have audited the financial statements of LEMS Pharmaceutical
Limited set out on pages 6 to 34, which comprise the statements of
financial position as at 28 February 2017 and 28 February 2018, and
the statements of profit or loss and 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 financial statements present fairly, in all
material respects, the financial position of LEMS Pharmaceutical
Limited as at 28 February 2017 and 28 February 2018, and its
financial performance and cash flows for the years 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 Financial Statements section of our report. We
are independent of the company in accordance with the sections 290
and 291 of the Independent Regulatory Board for Auditors' Code of
Professional Conduct for Registered Auditors (Revised January
2018), parts 1 and 3 of the Independent Regulatory Board for
Auditors' Code of Professional Conduct for Registered Auditors
(Revised November 2018) (together the IRBA Codes) and other
independence requirements applicable to performing audits of
financial statements in South Africa. We have fulfilled our other
ethical responsibilities, as applicable, in accordance with the
IRBA Codes and in accordance with other ethical requirements
applicable to performing audits in South Africa. The IRBA Codes are
consistent with the corresponding sections of the International
Ethics Standards Board for Accountants' Code of Ethics for
Professional Accountants and the International Ethics Standards
Board for Accountants' International Code of Ethics for
Professional Accountants (including International Independence
Standards) respectively. We believe that the audit evidence we have
obtained is sufficient and appropriate to provide a basis for our
opinion.
Other Information
The directors are responsible for the other information. The
other information comprises the information included in the
document titled "LEMS Pharmaceutical Limited Annual Financial
Statements for the year ended 28 February 2017 and 28 February
2018", which includes the statement of Directors' Responsibilities
and Approval as required by the Companies Act of South Africa,
which we obtained prior to the date of this report, and the
supplementary information set out on pages 35 to 36.
The other information does not include the financial statements
and our auditor's report thereon.
Our opinion on the 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 financial statements, our
responsibility is to read the other information and, in doing so,
consider whether the other information is materially inconsistent
with the financial statements or our knowledge obtained in the
audit, or otherwise appears to be materially misstated. If, based
on the work we have performed, 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 Financial
Statements
The directors are responsible for the preparation and fair
presentation of the financial statements in accordance with
International Financial Reporting Standards 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
financial statements that are free from material misstatement,
whether due to fraud or error.
In preparing the financial statements, the directors are
responsible for assessing the 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 company or to cease
operations, or have no realistic alternative but to do so.
Auditor's Responsibilities for the Audit of the Financial
Statements
Our objectives are to obtain reasonable assurance about whether
the 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 ISAs 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 financial
statements.
As part of an audit in accordance with ISAs, we exercise
professional judgement and maintain professional scepticism
throughout the audit. We also:
- Identify and assess the risks of material misstatement of the
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 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 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 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 company to cease to continue as a going
concern.
- Evaluate the overall presentation, structure and content 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.
We communicate with the directors 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.
Per: Masixole Mrwebi
Director / Partner
Registered Auditor
18 May 2021
Unit 9 Leogem Business Park
44 Richards Drive
Halfway House, Midrand
Gauteng
1685
Statement of Financial Position
Figures in Great British Pound Sterling
(GBP) Notes 2018 2017
----------------------------------------- ------- --------- ---------
Assets
Non-current assets
Property, plant and equipment 7 717,461 27,785
--------- ---------
Total non-current assets 717,461 27,785
Current assets
Inventories 8 115,108 59,791
Trade and other receivables 9 43,961 26,719
Cash and cash equivalents 10 12,870 128
--------- ---------
Total current assets 171,939 86,638
--------- ---------
Total assets 889,400 114,423
--------- ---------
Equity and liabilities Equity
Share capital 11 46,124 6
Share premium 11 771,021 -
Capital contribution 726,464 -
Accumulated loss (926,088) (680,849)
Currency translation difference (CTD) 23,360 (26,606)
--------- ---------
Total equity 640,881 (707,449)
Liabilities
Non-current liabilities
Other financial liabilities 13 133,494 4,624
--------- ---------
Total non-current liabilities 133,494 4,624
Current liabilities
Trade and other payables 12 115,025 16,148
Loan from shareholder 14 - 801,100
--------- ---------
Total current liabilities 115,025 817,248
--------- ---------
Total liabilities 248,519 821,872
--------- ---------
Total equity and liabilities 889,400 114,423
--------- ---------
Statement of Profit or Loss and Other Comprehensive
Income
Figures in Great British Pound Sterling (GBP) Notes 2018 2017
---------------------------------------------------- ------- --------- ---------
Revenue 15 100,349 134,026
Cost of sales 16 (79,497) (265,364)
--------- ---------
Gross profit / (loss) 20,852 (131,338)
Distribution costs 17 (3,526) (2,818)
Administrative expenses 18 (14,462) (6,468)
Other expenses 19 (166,552) (83,963)
--------- ---------
Loss from operating activities 20 (163,688) (224,587)
Finance income 21 331 325
--------- ---------
Loss for the year (163,357) (224,262)
--------- ---------
LEMS Pharmaceutical
Limited
(Registration Number
2014/170940/06)
Financial Statements
for the year ended
28 February 2018
Statement of Changes
in Equity
Foreign
currency
Share Capital translation Accumulated
Figures in GBP Issued capital premium contribution reserve loss Total
-------------------- ----------- -------------- ------- ------------ ------------ ------------- -----------
Balance at 1 March
2016 6 - - - (456,587) (456,581)
Changes in equity
Loss for the year - - - - (224,262) (224,262)
-------------- ------- ------------ ------------ ------------- -----------
Total comprehensive
income for the year - - - - (224,262) (224,262)
-------------- ------- ------------ ------------ ------------- -----------
Balance at 28 February
2017 6 - - - (680,849) (680,843)
-------------- ------- ------------ ------------ ------------- -----------
Balance at 1 March
2017 6 - - - (680,849) (680,843)
Changes in equity
Loss for the year - - - - (163,357) (163,357)
-------------- ------- ------------ ------------ ------------- -----------
Total comprehensive
income for the year - - - - (163,357) (163,357)
Increase through
other contributions
by shareholder - 771,021 726,464 - - 1,497,485
Issue of shares 46,118 - - - - 46,118
Currency translation
difference (CTD) - - - 23,360 (81,882) (58,522)
-------------- ------- ------------ ------------ ------------- -----------
Balance at 28 February
2018 46,124 771,021 726,464 23,360 (926,088) 640,881
-------------- ------- ------------ ------------ ------------- -----------
Notes 11 11 11
LEMS Pharmaceutical Limited
(Registration Number 2014/170940/06)
Financial Statements for the year ended
28 February 2018
Statement of Cash Flows
Figures in Great British Pound Sterling
(GBP) Note 2018 2017
---------------------------------------------- ------ ----------- -----------
Cash flows used in operations Loss for the
year (163,357) (224,262)
Adjustments to reconcile loss
Adjustments for finance income (331) (325)
Adjustments for increase in inventories (63,776) (9,726)
Adjustments for increase in trade accounts
receivable (17,275) (8,944)
Adjustments for decrease in other operating
receivables 33 -
Adjustments for increase / (decrease) in
trade accounts payable 98,877 (34,121)
Adjustments for depreciation and amortisation
expense 8,015 8,073
Currency translation difference (CTD) (23,360) 26,606
----------- -----------
Total adjustments to reconcile loss 2,183 (18,437)
----------- -----------
Net cash flows used in operations (161,174) (242,699)
Interest received 331 325
----------- -----------
Net cash flows used in operating activities (160,843) (242,374)
----------- -----------
Cash flows used in investing activities
Proceeds from sales of property, plant and 31 -
equipment
Purchase of property, plant and equipment (697,819) (36,425)
----------- -----------
Cash flows used in investing activities (697,788) (36,425)
----------- -----------
Cash flows from financing activities
Proceeds from issuing shares 817,139 -
Capital contribution introduced 726,464 -
Proceeds from other financial liabilities 128,870 338,801
Loans received from shareholders (801,100) (52,439)
----------- -----------
Cash flows from financing activities 871,373 286,362
-----------
Net increase in cash and cash equivalents 12,742 7,563
Cash and cash equivalents at beginning of
the year 128 (7,435)
----------- -----------
Cash and cash equivalents at end of the
year 10 12,870 128
----------- -----------
Accounting Policies
1. General Information
LEMS Pharmaceutical Limited is a private company incorporated on
17 September 2014 and domiciled in South Africa. The address of the
registered office is Cnr Rautenbach & Sixth Street, Wynberg,
Sandton, Gauteng, 2196.
The activities of the Company are undertaken through LEMS
Pharmaceutical Limited ("the Company"). The Company operates in
South Africa. The core activities of the Company are warehousing
distribution with its focus on the healthcare sector.
2. Significant accounting policies
2.1 Significant judgements and sources of estimation
uncertainty
The preparation of financial information in conformity with IFRS
requires management, from time to time, to make judgements,
estimates and assumptions that affect the application of policies
and reported amounts of assets, liabilities, income and expenses.
These estimates and associated assumptions are based on experience
and various other factors that are believed to be reasonable under
the circumstances. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an on-
going basis. Revisions to accounting estimates are recognised in
the period in which the estimates are revised and in any future
periods affected.
Critical judgements in applying accounting policies
Management did not make critical judgements in the application
of accounting policies, apart from those involving estimations,
which would significantly affect the financial statements.
Key sources of estimation uncertainty
Provision for expected credit losses of trade receivables and
contract assets
The company is utilising the simplified approach in determining
the expected credit loss allowance. Under the simplified approach,
there is no need to calculate a 12-month Expected Credit Loss (ECL)
and assess whether a significant increase in credit risk has
occurred. A loss allowance is measured at initial recognition and
throughout the life of the receivable at an amount equal to
lifetime ECL's for the asset. A lifetime ECL is the amount of the
expected credit losses that result from all possible default events
over the expected life of the financial instrument. The company
assesses its trade and other receivables and loans and receivables
for impairment at initial recognition of the financial instrument
and at the end of each reporting period. In determining whether an
Expected Credit Loss (ECL) should be recorded in profit or loss,
the company assesses the receivables ability to make payment and if
there is observable data which indicates payment may not be
received and an Expected Credit Loss is recognised.
Allowance for slow moving, damaged and obsolete inventory
Management assesses whether inventory is impaired by comparing
its cost to its estimated net realisable value. Where impairment is
necessary, inventory items are written down to net realisable
value. The write down is included in cost of sales.
Fair value estimation
Assets and liabilities of the Company are either measured at
fair value or disclosure is made of their fair values.
Observable market data is used as inputs to the extent that it
is available. Qualified external valuers are consulted for the
determination of appropriate valuation techniques and inputs.
Useful lives of plant and equipment
Management assess the appropriateness of the useful lives of
plant and equipment at the end of each reporting period. The useful
lives of office equipment furniture and computer equipment are
determined based on Company replacement policies for the various
assets. Individual assets within these classes, which have a
significant carrying amount, are assessed separately to consider
whether replacement will be necessary outside of normal replacement
parameters.
When the estimated useful life of an asset differs from previous
estimates, the change is applied prospectively in the determination
of the depreciation charge.
2.2 Plant and equipment
An item of plant and equipment is recognised as an asset when it
is probable that future economic benefits associated with the item
will flow to the Company, and the cost of the item can be measured
reliably.
Plant and equipment is initially measured at cost. Cost includes
all of the expenditure which is directly attributable to the
acquisition or construction of the asset, including the
capitalisation of borrowing costs on qualifying assets.
The initial estimate of the costs of dismantling and removing an
item and restoring the site on which it is located is also included
in the cost of plant and equipment, where the Company is obligated
to incur such expenditure
Expenditure incurred subsequently for major services, additions
to or replacements of parts of plant and equipment are capitalised
if it is probable that future economic benefits associated with the
expenditure will flow to the Company and the cost can be measured
reliably. Day to day servicing costs are included in profit or loss
in the year in which they are incurred.
Plant and equipment is subsequently stated at cost less
accumulated depreciation and any accumulated impairment losses.
Depreciation of an asset commences when the asset is available
for use as intended by management. Depreciation is charged to write
off the asset's carrying amount over its estimated useful life to
its estimated residual value, using a method that best reflects the
pattern in which the asset's economic benefits are consumed by the
Company. Depreciation is not charged to an asset if its estimated
residual value exceeds or is equal to its carrying amount.
Depreciation of an asset ceases at the earlier of the date that the
asset is classified as held for sale or derecognised.
The useful lives of items of plant and equipment have been
assessed as follows:
Item Depreciation method Average useful
life
Furniture and Straight line 6 years
fixtures
Office equipment Straight line 3 years
IT equipment Straight line 3 years
Computer software Straight line 3 years
The residual value, useful life and depreciation method of each
asset are reviewed at the end of each reporting year. If the
expectations differ from previous estimates, the change is
accounted for prospectively as a change in accounting estimate.
Each part of an item of plant and equipment with a cost that is
significant in relation to the total cost of the item is
depreciated separately.
Impairment tests are performed on plant and equipment when there
is an indicator that they may be impaired. When the carrying amount
of an item of , plant and equipment is assessed to be higher than
the estimated recoverable amount, an impairment loss is recognised
immediately in profit or loss to bring the carrying amount in line
with the recoverable amount.
An item of plant and equipment is derecognised upon disposal or
when no future economic benefits are expected from its continued
use or disposal. Any gain or loss arising from the recognition of
an item of , plant and equipment, determined as the difference
between the net disposal proceeds, if any, and the carrying amount
of the item, is included in profit or loss when the item is
derecognised.
2.3 Financial instruments
Classification
Financial instruments held by the company are classified in
accordance with the provisions of IFRS 9 Financial Instruments.
The Company classifies financial assets and financial
liabilities into the following categories:
- Loans and receivables
- Financial liabilities measured at amortised cost
Classification depends on the purpose for which the financial
instruments were obtained / incurred and takes place at initial
recognition. Classification is re-assessed on an annual basis,
except for derivatives and financial assets designated as at fair
value through profit or loss, which shall not be classified out of
the fair value through profit or loss category.
Initial recognition and measurement
Financial instruments are recognised initially when the Company
becomes a party to the contractual provisions of the
instruments.
The Company classifies financial instruments, or their component
parts, on initial recognition as a financial asset, a financial
liability or an equity instrument in accordance with the substance
of the contractual arrangement.
Financial instruments are measured initially at fair value,
except for equity investments for which a fair value is not
determinable, which are measured at cost and are classified as
available-for-sale financial assets.
For financial instruments which are not at fair value through
profit or loss, transaction costs are included in the initial
measurement of the instrument.
Subsequent measurement
Loans and receivables are subsequently measured at amortised
cost, using the effective interest method, less accumulated
impairment losses.
Financial liabilities at amortised cost are subsequently
measured at amortised cost, using the effective interest
method.
Derecognition Financial assets
Financial assets are derecognised when the rights to receive
cash flows from the investments have expired or have been
transferred and the Company has transferred substantially all risks
and rewards of ownership. If the company neither transfers nor
retains substantially all the risks and rewards of ownership and
continues to control the transferred asset, the company recognises
its retained interest in the asset and an associated liability for
amounts it may have to pay. If the company retains substantially
all the risks and rewards of ownership of a transferred financial
asset, the company continues to recognise the financial asset and
also recognises a collateralised borrowing for the proceeds
received.
Financial liabilities
The company derecognises financial liabilities when, and only
when, the company obligations are discharged, cancelled or they
expire. The difference between the carrying amount of the financial
liability derecognised and the consideration paid and payable,
including any non-cash assets transferred or liabilities assumed,
is recognised in profit or loss.
Reclassification Financial assets
The company only reclassifies affected financial assets if there
is a change in the business model for managing financial assets. If
a reclassification is necessary, it is applied prospectively from
the reclassification date. Any previously stated gains,
losses or interest are not restated.
The reclassification date is the beginning of the first
reporting period following the change in business model which
necessitates a reclassification.
Financial liabilities
Financial liabilities are not reclassified.
Loans receivable at amortised cost
Classification
Loans to group companies (note 22) are classified as financial
assets subsequently measured at amortised cost.
They have been classified in this manner because the contractual
terms of these loans give rise, on specified dates to cash flows
that are solely payments of principal and interest on the principal
outstanding, and the company's business model is to collect the
contractual cash flows on these loans.
Recognition and measurement
Loans receivable are recognised when the company becomes a party
to the contractual provisions of the loan. The loans are measured,
at initial recognition, at fair value plus transaction costs, if
any.
They are subsequently measured at amortised cost.
The amortised cost is the amount recognised on the loan
initially, minus principal repayments, plus cumulative amortisation
(interest) using the effective interest method of any difference
between the initial amount and the maturity amount, adjusted for
any loss allowance.
Impairment
The company recognises a loss allowance for expected credit
losses on all loans receivable, measured at amortised cost. The
amount of expected credit losses is updated at each reporting date
to reflect changes in credit risk since initial recognition of the
respective loans.
The company measures the loss allowance at an amount equal to
lifetime expected credit losses (lifetime ECL) when there has been
a significant increase in credit risk since initial recognition. If
the credit risk on a loan has not increased significantly since
initial recognition, then the loss allowance for that loan is
measured at 12 month expected credit losses (12-month ECL).
Lifetime ECL represents the expected credit losses that will
result from all possible default events over the expected life of a
loan. In contrast, 12-month ECL represents the portion of lifetime
ECL that is expected to result from default events on a loan that
are possible within 12 months after the reporting date.
In order to assess whether to apply lifetime ECL or 12-month
ECL, in other words, whether or not there has been a significant
increase in credit risk since initial recognition, the company
considers whether there has been a significant increase in the risk
of a default occurring since initial recognition rather than at
evidence of a loan being credit impaired at the reporting date or
of an actual default occurring.
Borrowings and loans from related parties
Classification
Loan from group company, loans from shareholders and other
financial liabilities are classified as financial liabilities
subsequently measured at amortised cost.
Recognition and measurement
Borrowings and loans from related parties are recognised when
the company becomes a party to the contractual provisions of the
loan. The loans are measured, at initial recognition, at fair value
plus transaction costs, if any.
They are subsequently measured at amortised cost using the
effective interest method.
The effective interest method is a method of calculating the
amortised cost of a financial liability and of allocating interest
expense over the relevant period. The effective interest rate is
the rate that exactly discounts estimated future cash payments
(including all fees and points paid or received that form an
integral part of the effective interest rate, transaction costs and
other premiums or discounts) through the expected life of the
financial liability, or (where appropriate) a shorter period, to
the amortised cost of a financial liability.
Interest expense, calculated on the effective interest method,
is included in profit or loss in finance costs.
Borrowings expose the company to liquidity risk and interest
rate risk. Refer to note 4 for details of risk exposure and
management thereof.
Trade and other receivables
Classification
Trade and other receivables, excluding, when applicable, VAT and
prepayments, are classified as financial assets subsequently
measured at amortised cost.
They have been classified in this manner because their
contractual terms give rise, on specified dates to cash flows that
are solely payments of principal and interest on the principal
outstanding, and the company's business model is to collect the
contractual cash flows on trade and other receivables.
Recognition and measurement
Trade and other receivables are recognised when the company
becomes a party to the contractual provisions of the receivables.
They are measured, at initial recognition, at fair value plus
transaction costs, if any.
They are subsequently measured at amortised cost.
The amortised cost is the amount recognised on the receivable
initially, minus principal repayments, plus cumulative amortisation
(interest) using the effective interest method of any difference
between the initial amount and the maturity amount, adjusted for
any loss allowance.
Impairment
The company recognises a loss allowance for expected credit
losses on trade and other receivables, excluding VAT and
prepayments. The amount of expected credit losses is updated at
each reporting date.
The company measures the loss allowance for trade and other
receivables at an amount equal to lifetime expected credit losses
(lifetime ECL), which represents the expected credit losses that
will result from all possible default events over the
expected life of the receivable.
Measurement and recognition of expected credit losses
The company makes use of a provision matrix as a practical
expedient to the determination of expected credit losses on trade
and other receivables. The provision matrix is based on historic
credit loss experience, adjusted for factors that are specific to
the debtors, general economic conditions and an assessment of both
the current and forecast direction of conditions at the reporting
date, including the time value of money, where appropriate.
The customer base is widespread and does not show significantly
different loss patterns for different customer segments. The loss
allowance is calculated on a collective basis for all trade and
other receivables in totality.
An impairment gain or loss is recognised in profit or loss with
a corresponding adjustment to the carrying amount of trade and
other receivables, through use of a loss allowance account. The
impairment loss is included in other operating expenses in profit
or loss as a movement in credit loss allowance.
Trade and other payables
Classification
Trade and other payables, excluding VAT and amounts received in
advance, are classified as financial liabilities subsequently
measured at amortised cost.
Recognition and measurement
They are recognised when the company becomes a party to the
contractual provisions, and are measured, at initial recognition,
at fair value plus transaction costs, if any.
They are subsequently measured at amortised cost using the
effective interest method.
The effective interest method is a method of calculating the
amortised cost of a financial liability and of allocating interest
expense over the relevant period. The effective interest rate is
the rate that exactly discounts estimated future cash payments
(including all fees and points paid or received that form an
integral part of the effective interest rate, transaction costs and
other premiums or discounts) through the expected life of the
financial liability, or (where appropriate) a shorter period, to
the amortised cost of a financial liability.
If trade and other payables contain a significant financing
component, and the effective interest method results in the
recognition of interest expense, then it is included in profit or
loss in finance costs.
Trade and other payables expose the company to liquidity risk
and possibly to interest rate risk. Refer to note 4 for details of
risk exposure and management thereof.
Cash and cash equivalents
Cash and cash equivalents comprise cash on hand and demand
deposits, and other short-term highly liquid investments that are
readily convertible to a known amount of cash and are subject to an
insignificant risk of changes in value.
Cash and cash equivalents are stated at carrying amount which is
deemed to be fair value.
Bank overdrafts
Bank overdrafts are initially measured at fair value, and are
subsequently measured at amortised cost, using the effective
interest rate method.
2.4 Tax
Current tax assets and liabilities
Current tax for current and prior periods is, to the extent
unpaid, recognised as a liability. If the amount already paid in
respect of current and prior periods exceeds the amount due for
those periods, the excess is recognised as an asset.
Current tax liabilities (assets) for the current and prior
periods are measured at the amount expected to be paid to
(recovered from) the tax authorities, using the tax rates (and tax
laws) that have been enacted or substantively enacted by the end of
the reporting period.
Deferred tax assets and liabilities
A deferred tax liability is recognised for all taxable material
temporary differences, except to the extent that the deferred tax
liability arises from the initial recognition of an asset or
liability in a transaction which at the time of the transaction,
affects neither accounting profit nor taxable profit (tax
loss).
A deferred tax asset is recognised for all material deductible
temporary differences to the extent that it is probable that
taxable profit will be available against which the deductible
temporary difference can be utilised. A deferred tax asset is not
recognised when it arises from the initial recognition of an asset
or liability in a transaction at the time of the transaction,
affects neither accounting profit nor taxable profit (tax
loss).
Deferred tax assets and liabilities are measured at the tax
rates that are expected to apply to the period when the asset is
realised or the liability is settled, based on tax rates (and tax
laws) that have been enacted or substantively enacted by the end of
the reporting period.
Tax expenses
Current and deferred taxes are recognised as income or an
expense and included in profit or loss for the period, except to
the extent that the tax arises from:
- a transaction or event which is recognised, in the same or a
different period, to other comprehensive income, or
- a business combination.
Current tax and deferred taxes are charged or credited to other
comprehensive income if the tax relates to items that are credited
or charged, in the same or a different period, to other
comprehensive income.
Current tax and deferred taxes are charged or credited directly
to equity if the tax relates to items that are credited or charged,
in the same or a different period, directly in equity.
2.5 Leases
Accounting policies applied from 1 January 2019
The Company uses office buildings and warehouse space based on
operating lease arrangements.
The lease terms are summarised below:
- Office buildings and warehouse has a non-cancellable lease
term of 12 months. The contract contains an option to renew the
lease annually. The lease payments are a fixed amount.
All leases are accounted for by recognising a right-of-use asset
and a lease liability except for:
- Leases of low value assets; and
- Leases with a term of 12 months or less.
The short-term lease exemption is applied consistently to all
underlying assets in the same class. The low value lease exemption
is applied on a lease-by-lease basis
2.6 Leases
Accounting policies applied until 31 December 2018
A lease is classified as a finance lease if it transfers
substantially all the risks and rewards incidental to ownership. A
lease is classified as an operating lease if it does not transfer
substantially all the risks and rewards incidental to
ownership.
Operating leases - lessee
Operating lease payments are recognised as an expense on a
straight-line basis over the lease term. The difference between the
amounts recognised as an expense and the contractual payments are
recognised as an operating lease asset. This liability is not
discounted.
Any contingent rents are expensed in the period they are
incurred.
2.7 Inventories
Inventories are measured at the lower of cost and net realisable
value.
Net realisable value is the estimated selling price in the
ordinary course of business less the estimated costs of completion
and the estimated costs necessary to make the sale.
The cost of inventories comprises of all costs of purchase,
costs of conversion and other costs incurred in bringing the
inventories to their present location and condition.
The cost of inventories of items that are not ordinarily
interchangeable, and goods or services produced and segregated for
specific projects is assigned using specific identification of the
individual costs.
The cost of inventories is assigned using the FIFO cost formula.
The same cost formula is used for all inventories having a similar
nature and use to the entity.
When inventories are sold, the carrying amounts of those
inventories are recognised as an expense in the period in which the
related revenue is recognised. The amount of any write-down of
inventories to net realisable value and all losses of inventories
are recognised as an expense in the period the write-down or loss
occurs. The amount of any reversal of any write-down of
inventories, arising from an increase in net realisable value, are
recognised as a reduction in the number of inventories recognised
as an expense in the period in which the reversal occurs.
2.8 Impairment of assets
The Company assesses at each end of the reporting period whether
there is any indication that an asset may be impaired. If any such
indication exists, the Company estimates the recoverable amount of
the asset.
Irrespective of whether there is any indication of impairment,
the Company also:
- tests intangible assets with an indefinite useful life or
intangible assets not yet available for use for impairment annually
by comparing its carrying amount with its recoverable amount. This
impairment test is performed during the annual period and at the
same time every period
- tests goodwill acquired in a business combination for
impairment annually.
If there is any indication that an asset may be impaired, the
recoverable amount is estimated for the individual asset. If it is
not possible to estimate the recoverable amount of the individual
asset, the recoverable amount of the cash-generating unit to which
the asset belongs is determined.
The recoverable amount of an asset or a cash-generating unit is
the higher of its fair value less costs to sell and its value in
use.
If the recoverable amount of an asset is less than its carrying
amount, the carrying amount of the asset is reduced to its
recoverable amount. That reduction is an impairment loss.
An impairment loss of assets carried at cost less any
accumulated depreciation or amortisation is recognised immediately
in profit or loss. Any impairment loss of a revalued asset is
treated as a revaluation decrease.
An entity assesses at each reporting date whether there is any
indication that an impairment loss recognised in prior periods for
assets other than goodwill may no longer exist or may have
decreased. If any such indication exists, the recoverable amounts
of those assets are estimated.
The increased carrying amount of an asset other than goodwill
attributable to a reversal of an impairment loss does not exceed
the carrying amount that would have been determined had no
impairment loss been recognised for the asset in prior periods.
A reversal of an impairment loss of assets carried at cost less
accumulated depreciation or amortisation other than goodwill is
recognised immediately in profit or loss. Any reversal of an
impairment loss of a revalued asset is treated as a revaluation
increase.
2.9 Share Capital and Equity
An equity instrument is any contract that evidences a residual
interest in the assets of an entity after deducting all of its
liabilities.
This is disclosed as:
- Shares which constitute ordinary shares issued at par value
per share; and
- Share premium which represents the difference between the par
value and the price at which the share was issued.
2.10 Employee benefits
Short-term employee benefits
The cost of short-term employee benefits, (those payable within
12 months after the service is rendered, such as paid vacation
leave and sick leave, bonuses, and non-monetary benefits such as
medical care), are recognised in the period in which the service is
rendered and are not discounted.
The expected cost of profit sharing and bonus payments is
recognised as an expense when there is a legal or constructive
obligation to make such payments as a result of past
performance.
2.11 Revenue
IFRS 15 Revenue from Contracts with Customers
IFRS 15 Revenue from Contracts with Customers applies to all
contracts with customers and non-monetary exchanges between
entities in the same line of business to facilitate sales to
customers or potential customers.
The core principle of IFRS 15 is that an entity will recognise
revenue to depict the transfer of promised goods or services to
customers in an amount that reflects the consideration to which the
entity expects to be entitled in exchange for those goods or
services. This core principle is delivered in a five-step model
framework:
1. Identify the contract(s) with a customer
2. Identify the performance obligations in the contract
3. Determine the transaction price
4. Allocate the transaction price to the performance obligations
in the contract
5. Recognise revenue when (or as) the entity satisfies a
performance obligation.
Identify the contract with the customer
A contract with a customer will be within the scope of IFRS 15
if all the following conditions are met:
- the contract has been approved by the parties to the
contract;
- each party's rights in relation to the goods or services to be
transferred can be identified;
- the payment terms for the goods or services to be transferred
can be identified;
- the contract has commercial substance; and
- it is probable that the consideration to which the entity is
entitled to in exchange for the goods or services will be
collected.
If a contract with a customer does not yet meet all of the above
criteria, the entity will continue to re-assess the contract going
forward to determine whether it subsequently meets the above
criteria. From that point, the entity will apply IFRS 15 to the
contract.
Identify the performance obligations in the contract
The majority of the company's revenue is derived from selling
goods with revenue recognised at a point in time when control of
the goods has transferred to the customer. This is generally when
the goods are delivered to the customer. There is limited judgement
needed in identifying the point control passes: once physical
delivery of the products to the agreed location has occurred, the
company no longer has physical possession, usually will have a
present right to payment (as a single payment on delivery) and
retains none of the significant risks and rewards of the goods in
question.
Determine the transaction price
Most of the company's revenue is derived from fixed price
contracts and therefore the amount of revenue to be earned from
each contract is determined by reference to those fixed prices.
Allocate the transaction price to the performance obligations in
the contracts
Where a contract has multiple performance obligations, an entity
will allocate the transaction price to the performance obligations
in the contract by reference to their relative standalone selling
prices. If a standalone selling price is not directly observable,
the entity will need to estimate it.
Recognise revenue when (or as) the entity satisfies a
performance obligation
Revenue is recognised as control is passed at a point in
time.
Interest is recognised, in profit or loss, using the effective
interest rate method.
2.12 Translation of foreign currencies
Functional and presentation currency
Items included in the financial statements of the Company is
measured using the currency of the primary economic environment in
which the entity operates (functional currency).
This consolidated financial information is presented in Pounds
Sterling which is the Company presentation currency. The company
functional currency in ZAR (South African Rand)
Foreign currency transactions
A foreign currency transaction is recorded, on initial
recognition in Pounds, by applying to the foreign currency amount
the mid-rate exchange rate between the functional currency and the
foreign currency at the date of the transaction.
At the end of the reporting period:
- foreign currency monetary items are translated using the
closing rate;
- non-monetary items that are measured in terms of historical
cost in a foreign currency are translated using the exchange rate
at the date of the transaction; and
- non-monetary items that are measured at fair value in a
foreign currency are translated using the exchange rates at the
date when the fair value was determined.
Exchange dfferences arising on the settlement of monetary items
or on translating monetary items at rates different from those at
which they were translated on initial recognition during the period
or in previous consolidated and separate financial statements are
recognised in profit or loss in the period in which they arise.
When a gain or loss on a non-monetary item is recognised to
other comprehensive income and accumulated in equity, any exchange
component of that gain or loss is recognised to other comprehensive
income and accumulated in equity. When a gain or loss on a
non-monetary item is recognised in profit or loss, any exchange
component of that gain or loss is recognised in profit or loss.
Cash flows arising from transactions in a foreign currency are
recorded in Pounds by applying to the foreign currency amount the
exchange rate between the Pounds and the foreign currency at the
date of the cash flow.
3. New standards and interpretations
Standards and interpretations effective and adopted
IFRS 9: Financial instruments
IFRS 9 issued in November 2009 introduced new requirements for
the classification and measurements of financial assets.
IFRS 9 was subsequently amended in October 2010 to include
requirements for the classification and measurement of financial
liabilities and for derecognition, and in November 2013 to include
the new requirements for general hedge accounting.
Another revised version of IFRS 9 was issued in July 2014 mainly
to include a)impairment requirements for financial assets and b)
limited amendments to the classification and measurement
requirements by introducing a "fair value through other
comprehensive income" (FVTOCI) measurement category for certain
simple debt instruments.
Key requirements of IFRS 9:
- All recognized financial assets that are within the scope of
IAS 39 Financial Instruments: Recognition and Measurement are
required to be subsequently measured at amortised cost or fair
value. Specifically, debt investments that are held within a
business model whose objective is to collect the contractual cash
flows, and that have contractual cash flows that are solely
payments of principal and interest on the outstanding principal are
generally measured at amortised cost at the end of subsequent
reporting periods. Debt instruments that are held within a business
model whose objective is achieved by both collecting contractual
cash flows and selling financial assets, and that have contractual
terms of the financial asset give rise on specified dates to cash
flows that are solely payments of principal and interest on
outstanding principal, are measured at FVTOCI. All other debt and
equity investments are measured at fair value at the end of
subsequent reporting periods. In addition, under IFRS 9, entities
may make an irrevocable election to present subsequent changes in
the fair value of an equity investment (that is not held for
trading) in other comprehensive income with only dividend income
generally recognised in profit or loss.
- With regard to the measurement of financial liabilities
designated as at fair value through profit or loss, IFRS 9 requires
that the amount of change in the fair value of the financial
liability that is attributable to changes in the credit risk of the
liability is presented in other comprehensive income, unless the
recognition of the effect of the changes of the liability's credit
risk in other comprehensive income would create or enlarge an
accounting mismatch in profit or loss. Under IAS 39, the entire
amount of the change in fair value of a financial liability
designated as at fair value through profit or loss is presented in
profit or loss.
- In relation to the impairment of financial assets, IFRS 9
requires an expected credit loss model, as opposed to an incurred
credit loss model under IAS 39. The expected credit loss model
requires an entity to account for expected credit losses and
changes in those expected credit losses at each reporting date to
reflect changes in credit risk since initial recognition. It is
therefore no longer necessary for a credit event to have occurred
before credit losses are recognised.
- The new general hedge accounting requirements retain the three
types of hedge accounting mechanisms currently available in IAS 39.
Under IFRS 9, greater flexibility has been introduced to the types
of transactions eligible for hedge accounting, specifically
broadening the types of instruments that qualify for hedging
instruments and the types of risk components of non-financial items
that are eligible for hedge accounting. In addition, the
effectiveness test has been replaced with the principal of an
"economic relationship". Retrospective assessment of hedge
effectiveness is also no longer required. Enhanced disclosure
requirements about an entity's risk management activities have also
been introduced.
The effective date of the standard is for years beginning on or
after 1 January 2018.
IFRS 15: Revenue from Contracts with Customers
IFRS 15 supersedes IAS 11 Construction contracts; IAS 18
Revenue; IFRIC 13 Customer Loyalty Programmes; IFRIC 15 Agreements
for the construction of Real Estate; IFRIC 18 Transfers of Assets
from Customers and SIC 31 Revenue - Barter Transactions Involving
Advertising Services.
The core principle of IFRS 15 is that an entity recognises
revenue to depict the transfer of promised goods or services to
customers in an amount that reflects the consideration to which the
entity expects to be entitled in exchange for those goods or
services. An entity recognises revenue in accordance with that core
principle by applying the following steps:
1. Identify the contract(s) with a customer
2. Identify the performance obligations in the contract
3. Determine the transaction price
4. Allocate the transaction price to the performance obligations
in the contract
5. Recognise revenue when (or as) the entity satisfies a
performance obligation.
IFRS 15 also includes extensive new disclosure requirements.
The effective date of the standard is for years beginning on or
after 1 January 2018.
The adoption of this standard has not had a material impact on
the results of the company but has resulted in more disclosure than
would have previously been provided in the annual financial
statements.
IFRS 16: Leases
IFRS 16 Leases is a new standard which replaces IAS 17 Leases
and introduces a single lessee accounting model. The main changes
arising from the issue of IFRS 16 which are likely to impact the
company are as follows:
Company as lessee:
- Lessees are required to recognise a right-of-use asset and a
lease liability for all leases, except short term leases or leases
where the underlying asset has a low value, which are expensed on a
straight line or other systematic basis.
- The cost of the right-of-use asset includes, where
appropriate, the initial amount of the lease liability; lease
payments made prior to commencement of the lease less incentives
received; initial direct costs of the lessee; and an estimate for
any provision for dismantling, restoration and removal related to
the underlying asset.
- The lease liability takes into consideration, where
appropriate, fixed and variable lease payments; residual value
guarantees to be made by the lessee; exercise price of purchase
options; and payments of penalties for terminating the lease.
- The right-of-use asset is subsequently measured on the cost
model at cost less accumulated depreciation and impairment and
adjusted for any re-measurement of the lease liability. However,
right-of-use assets are measured at fair value when they meet the
definition of investment property and all other investment property
is accounted for on the fair value model. If a right-of-use asset
relates to a class of property, plant and equipment which is
measured on the revaluation model, then that right-of-use asset may
be measured on the revaluation model.
- The lease liability is subsequently increased by interest,
reduced by lease payments and re-measured for reassessments or
modifications.
- Re-measurements of lease liabilities are affected against
right-of-use assets, unless the assets have been reduced to nil, in
which case further adjustments are recognised in profit or
loss.
- The lease liability is re-measured by discounting revised
payments at a revised rate when there is a change in the lease term
or a change in the assessment of an option to purchase the
underlying asset.
- The lease liability is re-measured by discounting revised
lease payments at the original discount rate when there is a change
in the amounts expected to be paid in a residual value guarantee or
when there is a change in future payments because of a change in
index or rate used to determine those payments.
- Certain lease modifications are accounted for as separate
leases. When lease modifications which decrease the scope of the
lease are not required to be accounted for as separate leases, then
the lessee re- measures the lease liability by decreasing the
carrying amount of the right of lease asset to reflect the full or
partial termination of the lease. Any gain or loss relating to the
full or partial termination of the lease is recognised in profit or
loss. For all other lease modifications which are not required to
be accounted for as separate leases, the lessee re-measures the
lease liability by making a corresponding adjustment to the
right-of-use asset.
- Right-of-use assets and lease liabilities should be presented
separately from other assets and liabilities. If not, then the line
item in which they are included must be disclosed. This does not
apply to right-of- use assets meeting the definition of investment
property which must be presented within investment property. IFRS
16 contains different disclosure requirements compared to IAS 17
leases.
The effective date of the standard is for years beginning on or
after 1 January 2019.
3.1 Standards and interpretations effective and adopted in the
current year
To all periods reported, the Company has adopted those standards
and interpretations that are effective and that are relevant to its
operations.
3.2 Standards and interpretations not yet effective
The company has chosen not to early adopt the following
standards and interpretations, which have been published and are
mandatory for the company's accounting periods beginning on or
after 1 March 2020 or later periods: Presentation of Financial
Statements: Disclosure initiative
The amendment clarifies and align the definition of 'material'
and provide guidance to help improve consistency in the application
of that concept whenever it is used in IFRS Standards.
The effective date of the amendment is for years beginning on or
after 1 January 2020.
It is unlikely that the amendment will have a material impact on
the company's annual financial statements.
Accounting Policies, Changes in Accounting Estimates and Errors:
Disclosure initiative
The amendment clarify and align the definition of 'material' and
provide guidance to help improve consistency
in the application of that concept whenever it is used in IFRS
Standards.
The effective date of the amendment is for years beginning on or
after 1 January 2020.
It is unlikely that the amendment will have a material impact on
the company's annual financial statements.
4. Risk management
Capital risk management
The Company's objectives when managing capital are to safeguard
the Company's ability to continue as a going concern in order to
provide returns for shareholders and benefits for other
stakeholders and to maintain an optimal capital structure to reduce
the cost of capital.
In order to maintain or adjust the capital structure, the
Company may adjust the amount of dividends paid to shareholders,
return capital to shareholders, issue new shares or sell assets to
reduce debt.
Consistent with others in the industry, the Company monitors
capital on the basis of the gearing ratio.
This ratio is calculated as net debt divided by total capital.
Net debt is calculated as total borrowings (including 'current and
non-current borrowings' as shown in the statement of financial
position) less cash and cash equivalents. Total capital is
calculated as 'equity' as shown in the statement of financial
position plus net debt.
There are no externally imposed capital requirements.
There have been no changes to what the entity manages as
capital, the strategy for capital maintenance or externally imposed
capital requirements from the previous year.
The gearing ratio at 2018 and 2017 respectively
were as follows:
2018 2017
Total liabilities 133,493 821,872
Less: Cash and cash equivalents (12,870) (128)
Net debt 133,493 821,744
Total equity 640,876 (707,449)
Total capital 774,369 114,423
Gearing ratio 17% (116)%
Liquidity risk
Cash flow forecasting is performed by the Company. Such
forecasting takes into consideration the Company's debt financing
plans, covenant compliance, compliance with internal statement of
financial position ratio targets and, if applicable external
regulatory or legal requirements - for example, currency
restrictions.
Cash flow forecasts are prepared, and adequate utilised
borrowing facilities are monitored.
The table below analyses the Company's financial liabilities and
net-settled derivative financial liabilities into relevant maturity
Company's based on the remaining period at the statement of
financial position to the contractual maturity date. The amounts
disclosed in the table are the contractual undiscounted cash flows.
Balances due within 12 months equal their carrying balances as the
impact of discounting is not significant.
Company
At 28 February 2018 Less than Between Between 2 Over 5
1 year 1 and 2 and 5 years years
years
Borrowings - 133,494 - -
Trade and other 115,025 - - -
payables
At 28 February 2017 Less than Between Between 2 Over 5
1 year 1 and 2 and 5 years years
years
Borrowings 805,724 - - -
Trade and other 16,148 - - -
payables
Credit risk
Credit risk is managed on a Company basis.
Credit risk consists mainly of cash deposits, cash equivalents,
derivative financial instruments and trade debtors.
LEMS only deposits cash with major banks with high quality
credit standing and limits exposure to any one counter-party.
Trade receivables comprise a widespread customer base.
Management evaluated credit risk relating to customers on an
on-going basis. If customers are independently rated, these ratings
are used. Otherwise, if there is no independent rating, risk
control assesses the credit quality of the customer, taking into
account its financial position, past experience and other factors.
Individual risk limits are set based on internal or external
ratings in accordance with limits set by the board. The utilisation
of credit limits is regularly monitored. Sales to retail customers
are settled in cash or using major credit cards. Credit guarantee
insurance is purchased when deemed appropriate.
No credit limits were exceeded during the reporting period, and
management does not expect any losses from non-performance by these
counterparties.
Foreign exchange risk
The Company operates internationally and is exposed to foreign
exchange risk arising from various currency exposures, primarily
with respect to the US dollar and the UK pound and RSA Rand.
Foreign exchange risk arises from future commercial transactions,
recognised assets and liabilities and net investments in foreign
operations.
The Company does not hedge foreign exchange fluctuations.
Exchange rates used for conversion 2018 2017
of foreign items were:
ZAR 0.06142 0.06189
The Company reviews its foreign currency exposure, including
commitments on an on-going basis.
5. Financial assets by category
The accounting policies for financial instruments have been
applied to the line items below:
As at 28 February Loans and receivables Total
2018 at amortised cost
Trade and other
receivables 43,961 43,961
Cash and cash
equivalents 12,870 12,870
---------------------- -------
56,831 56,831
------------------- ---------------------- -------
As at 28 February Loans and receivables Total
2017 at amortised cost
Trade and other
receivables 26,719 26,719
Cash and cash
equivalents 128 128
---------------------- -------
26,847 26,847
------------------- ---------------------- -------
6. Financial liabilities by category
The accounting policies for financial instruments have been
applied to the line items below:
As at 28 February 2018 Financial liabilities Total
at amortised cost
Other financial liabilities 133,494 133,494
Trade and other payables 115,025 115,025
---------------------- --------
284,519 284,519
----------------------------- ---------------------- --------
As at 28 February 2017 Financial liabilities Total
at amortised cost
Other financial liabilities 4,624 4,624
Trade and other payables 16,148 16,148
Loans from shareholders 801,100 801,100
---------------------- --------
821,
821, 872 872
----------------------------- ---------------------- --------
7. Property, plant and equipment
Balances at year end and
movements for the year
All figures in GBP
Fixtures Office equipment Computer Computer
and fittings equipment software Total
-------------- ------------------ ----------- ---------- --------
Reconciliation for the year
ended 28 February 2018
Balance at 1 March 2017
At cost 22,326 1,391 8,512 3,929 36,158
Accumulated depreciation (3,722) (464) (2,877) (1,310) (8,373)
------------------ ----------- ---------- --------
Net book value 18,604 927 5,635 2,619 27,785
------------------ ----------- ---------- --------
Movements for the year ended
28 February 2018
Additions from acquisitions 687,423 - 396 697,819
Depreciation (3,456) (425) (2,935) (1,199) (8,015)
Foreign currency revaluation
increase (decrease) 266 (33) (235) (95) (97)
Disposals - (8) - (23) (31)
------------------ ----------- ---------- --------
Property, plant and equipment
at the end of the year 712,837 461 2,861 1,302 717,461
------------------ ----------- ---------- --------
Closing balance at 28 February
2018
At cost 719,753 1,383 8,908 3,906 733,950
Accumulated depreciation (6,916) (922) (6,047) (2,604) (16,489)
------------------ ----------- ---------- --------
Net book value 712,837 461 2,861 1,302 717,461
------------------ ----------- ---------- --------
Reconciliation for the year
ended 28 February 2017
Balance at 1 March 2016
At cost - - - - -
Accumulated depreciation - - - - -
------------------ ----------- ---------- --------
Net book value - - - - -
------------------ ----------- ---------- --------
Movements for the year ended
28 February 2017
Additions 22,416 1,397 8,667 3,945 36,425
Depreciation (3,422) (464) (2,877) (1,310) (8,073)
Foreign currency revaluation
increase (decrease) (390) (6) (155) (16) (567)
------------------ ----------- ---------- --------
Property, plant and equipment
at the end of the year 18,604 927 5,635 2,619 27,785
------------------ ----------- ---------- --------
Closing balance at 28 February
2017
At cost 22,326 1,391 8,512 3,929 36,158
Accumulated depreciation (3,722) (464) (2,877) (1,310) (8,373)
------------------ ----------- ---------- --------
Net book value 18,604 927 5,635 2,619 27,785
------------------ ----------- ---------- --------
8. Inventories
Inventories comprise:
All figures in GBP 2018 2017
------- ------
Finished goods 115,108 59,791
------- ------
115,108 59,791
------- ------
9. Trade and other receivables
Trade and other receivables comprise:
All figures in GBP 2018 2017
Trade receivables 38,453 21,178
Deposits 5,508 5,541
------- ------
43,961 26,719
------- ------
Total trade and other receivables 43,961 26,719
------- ------
Categorisation of trade and other receivables
All trade and other receivables are categorised as financial
instruments at amortised cost in accordance with IFRS 9: Financial
Instruments.
Exposure to credit risk
Trade receivables inherently expose the company to credit risk,
being the risk that the company will incur financial loss if
customers fail to make payments as they fall due.
A loss allowance is recognised for all trade receivables, in
accordance with IFRS 9 Financial Instruments, and is monitored at
the end of each reporting period. In addition to the loss
allowance, trade receivables are written off when there is no
reasonable expectation of recovery, for example, when a debtor has
been placed under liquidation. Trade receivables which have been
written off are not subject to enforcement activities.
The company measures the loss allowance for trade receivables by
applying the simplified approach which is prescribed by IFRS 9. In
accordance with this approach, the loss allowance on trade
receivables is determined as the lifetime expected credit losses on
trade receivables. These lifetime expected credit losses are
estimated using a provision matrix, which is presented below. The
provision matrix has been developed by making use of past default
experience of debtors but also incorporates forward looking
information and general economic conditions of the industry as at
the reporting date.
Refer to note 4 Financial instruments and financial risk
management for details of credit risk exposure and management.
10. Cash and cash equivalents
Cash and cash equivalents included in current assets:
Cash equivalents
All figures in GBP 2018 2017
------- -----
Bank balances 12,870 128
------- -----
12,870 128
------- -----
The above cash balances were held in:
ZAR 210,269 2,080
------------------------------------------------------------ ------- -----
11. Share Capital
All figures in GBP 2018 2017
------------ ----------
Authorised and issued share capital
Authorised
Ordinary no par value shares 9,000,000 100
------------ ----------
9,000,000 100
------------ ----------
Issued
Ordinary no par value shares 46,124 6
------------ ----------
46,124 6
Share premium 771,021 -
------------ ----------
817,145 6
------------ ----------
Share reconciliation
Shares outstanding - beginning of the period 90,000,000 100
Issued - 89,999,900
------------ ----------
Shares outstanding - closing 90,000,000 90,000,000
------------ ----------
12. Trade and other payables
Trade and other payables comprise:
Trade creditors 115,025 16,148
------------ ----------
Total trade and other payables 115,025 16,148
------------ ----------
13. Other financial liabilities
13.1 Other financial liabilities comprise:
133,494
Loan: Chinyanta JN Other financial liabilities - - 4,624
------------ ----------
133,494 4,624
------------ ----------
The above loan is unsecured, bears no interest and has
no fixed terms of repayment.
13.2 Classification of other financial liabilities
Amortised cost 133,494 4,624
------------ ----------
133,494 4,624
------------ ----------
14. Loan from shareholder
14.1 Loan from shareholder comprises:
Loans from owner - 801,100
------------ ----------
- 801,100
------------ ----------
14.2 Additional disclosures
The above loan is unsecured, bears no interest and has
no fixed terms of repayment.
All figures in GBP 2018 2017
15. Revenue
Revenue comprises:
Sale of goods 100,349 134,026
------- -------
Total revenue 100,349 134,026
------- -------
16. Cost of sales
Cost of sales comprise:
Sale of goods 79,497 265,364
------- -------
Total cost of sales 79,497 265,364
------- -------
17. Distribution costs
Distribution costs comprise:
Delivery expenses 3,526 2,818
------- -------
Total distribution costs 3,526 2,818
------- -------
18. Administrative expenses
Administrative expenses comprise:
Accounting fees 2,616 334
Bank charges 965 215
Computer expenses 9,766 4,023
Subscriptions 1,000 801
Telecommunication 115 1,095
------- -------
Total administrative expenses 14,462 6,468
------- -------
19. Other expenses
Other expenses comprise:
Cleaning 232 294
Consulting fees 9,939 29,242
Depreciation 8,015 8,073
Donations 2,198 -
Electricity and water 4,440 5,279
Employee benefit expenses 116,097 19,303
Entertainment 80 -
General expenses 1,673 664
Insurance 437 -
Office Expenses 1,357 -
Operating leases 21,229 20,952
Printing and stationery 855 156
------- -------
Total other expenses 166,552 83,963
------- -------
20. Loss from operating activities
All figures in GBP 2018 2017
Loss from operating activities includes the following
separately disclosable items
Other operating expenses
Property plant and equipment
- depreciation 8,015 8,073
21. Finance income
All figures in GBP 2018 2017
Finance income comprises:
Interest received 331 325
----- -----
Total finance Income 331 325
----- -----
22. Related parties
22.1 Group Companies
Parent Company - Umuthi Healthcare Solutions PLC
22.2 Other related parties
Entity name Nature of relationship
G.P. Viljoen Majority shareholder and member of
key management
P.J Grimes Member of key management
D.L Viljoen Member of key management
22.3 Related party transactions and balances
All figures GBP Key management Total
personnel of
the entity or
its parent
--------------- --------
Year ended 28 February
2018
Related party transactions
Capital contribution 726, 464 726,464
Year ended 28 February
2017
Outstanding loan accounts
Amounts payable 805,724 805,724
23. Fair Value
Information Fair value hierarchy
The table below analyses assets and liabilities carried at fair
value. The different levels are defined as follows:
Level 1: Quoted unadjusted prices in active markets for
identical assets or liabilities that the Company can access at
measurement date.
Level 2: Inputs other than quoted prices included in level 1
that are observable for the asset or liability either directly or
indirectly.
Level 3: Unobservable inputs for the asset or liability.
Transfers of assets and liabilities within levels of the fair
value hierarchy
There have been no transfers between fair value levels during
any of the periods within this Financial Information.
Valuation processes applied by the Company
The Company measures financial instruments such as derivatives,
and non-financial assets at fair value at each balance sheet date.
Fair value related disclosures for financial instruments and
non-financial assets that are measured at fair value or where fair
values are disclosed are summarised in the accounting policies
under note 1 as well as in the following notes:
Trade and other payables - Note 12 Other financial liabilities -
Note 13
24. Forex gain and losses
Foreign currency monetary items shall be translated using the
closing rate; non-monetary items that are measured in terms of
historical cost in a foreign currency shall be translated using the
exchange rate at the date of the transaction; and non-monetary
items that are measured at fair value in a foreign currency shall
be translated using the exchange rates at the date when the fair
value was determined. Monetary items include trade payables and
trade receivables as well as cash. Non-monetary items include
Inventory, plant and equipment, Share capital and share
premium.
Movement recognised in OCI 2018 2017
Exchange differences on translating
foreign operations 23,360 (26,606)
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