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BUSINESS MODEL
AND STRATEGIC
OBJECTIVES
LEADERSHIP
GOVERNANCE
OPERATING
PERFORMANCE
SHAREHOLDERS’
INFORMATION AND
ADMINISTRATION
FINANCIAL
PERFORMANCE
BLUE LABEL INTEGRATED ANNUAL REPORT 2014
189
NOTES TO THE GROUP ANNUAL FINANCIAL STATEMENTS
CONTINUED
For the year ended 31 May 2014
26.
BUSINESS COMBINATIONS (continued)
26.1 Acquisition of subsidiary (continued)
In most business acquisitions, there is a part of the cost that is not capable of being attributed in accounting
terms to identifiable assets and liabilities acquired and is therefore recognised as goodwill. In the case of the
acquisition of Panacea Mobile Proprietary Limited, this goodwill is underpinned by a number of elements,
which individually cannot be quantified. Most significant among these is the synergy with other Group
companies.
The contingent consideration arrangement requires BLT to pay in cash the former owners of Panacea Mobile
Proprietary Limited an additional amount of up to R1.5 million (pro-rated) if the profit after tax for Panacea
Mobile Proprietary Limited’s 2013 financial year is no less than R4.2 million. An additional amount of up to
R1.5 million (payable over 10 equal periods, capped at R150 000 per period), based on the achievement of
certain criteria in respect of a customer contract being achieved by Panacea Mobile Proprietary Limited is also
payable.
The potential undiscounted amount of all future payments that the Group could be required to make under
this arrangement is between R1.5 million and R3 million.
The fair value of the contingent consideration arrangement of R2.3 million was estimated by applying the
income approach. The fair value estimates are based on a discount rate of 18.46% and assumed probability-
adjusted profit in Panacea Mobile Proprietary Limited of R4.2 million and R5.7 million respectively. Refer to
note 14.
26.2 Acquisition of non-controlling interest’s shareholding
Panacea
Proprietary
Limited
R’000
TicketPros
Proprietary
Limited
R’000
Africa
Prepaid
Services
Proprietary
Limited
R’000
Initial acquisition % acquired
51
60
72
Further acquisition
Date acquired
1 June
2013
1 June
2013
3 January
2014
% acquired
49
40
18
At 31 May 2014
Assets
28 990
21 869
720
Liabilities
21 119
20 155
109 829
Revenue
51 832
8 112
—
Profit/(loss) after tax since further acquisition
1 394
(3 392)
(6 688)
The fair value of the net assets approximated the assets acquired on acquisition date.