integrated report 31 august 2012 · the highest data centre resiliency, without compromising the...

I N T E G R A T E D R E P O R T 3 1 A U G U S T 2 0 1 2

CONTENTS Table of

GROUP OVERVIEW Page

Core values 2

Corporate profile 4

Group footprint 8

Group financial highlights 9

Group ownership structure 10

Operational overview 11

Group strategy 12

Board of directors 14

Executive committee 18

Chairman’s report 22

Chief executive officer’s report 26

Chief financial officer’s report 30

Group seven-year history 36

Value-added statement 38

OPERATIONAL REVIEWSServices division 40

UCS division 42

Technology division 44

Canoa division 45

Innovation division 46

Investment division 47

International division 48

GOVERNANCE, RISK AND SUSTAINABILITY

Page

Corporate governance report 50

Audit and compliance report 61

Risk management 63

Sustainability report 67

ANNUAL FINANCIAL STATEMENTSAnnual financial statements 81

OTHER INFORMATIONShareholder analysis 152

Definitions 156

SHAREHOLDER MEETING MATTERSNotice of annual general meeting 160

Map to the annual general meeting 170

Form of proxy Attached

Corporate information IBC

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WHEN ONE ENTITY IS ATTRACTED TO ANOTHER AND THEY JOIN, A COMPELLING CONNECTION OCCURS AND THE EFFECT IS EXTRAORDINARY. SOMETHING NEW IS CREATED AND POSSIBILITIES GROW ENDLESS. THIS IS THE AMPLIFYING POWER OF CONNECTIVE INTELLIGENCETM.

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VALUESCore

PROFILEBusiness Connexion is one of Africa’s largest black empowered informationand communications technology companies with offices in all majorSouth African centres, in six African countries, the United Kingdom and Dubai.

MISSION

To provide increasingly simple, content-rich and affordable knowledge solutions to Africa and the world.

VISION

Amplifying the power of Connective Intelligence.TM

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OUR VALUES

PassionInnovationTrustIntegrityExcellenceTeamworkMake a difference

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PROFILECorporate

troppuS etisnOtnemeganaM tcejorP

Data Centre Services

Application Development

Business Consulting

Managed Print Solutions

Content Distribution Services

Bandwidth and Internet Protocol services

Network Services

Hardware and Software

Hardware maintenance

ICT Outsourcing

Industrial Solutions

Global ServiceManagement Centre

WORKSPACE CONNEXION ZONE INNOVATION ZONE

Business Connexion

System Integration

With over 6 500 dedicated, knowledgeable and highly experienced employees across Africa, the UK and Dubai, and 33 years of operational experience, the group combines global ICT vendor partnerships, extensive technology resources and a passion to deliver high quality, high performance business solutions that meet the information management needs of today and the future.

The group has an extensive national and international footprint with more data centre capacity and cloud computing capability than any other service provider in South Africa.

With clients as its focus the group will continue to strive at providing excellent, effective and innovative solutions that strengthen and improve clients’ businesses.

Business Connexion is committed to conducting its business

in a manner that ensures long-term sustainability for the

benefit of communities and all stakeholders. Sustainability

is a continuous journey and requires a multi-disciplinary

approach. Good governance, sound risk management,

stakeholder engagement, corporate social investment,

minimising the group’s impact on the environment and

retaining, and improving on, its level 3 Broad-based Black

Economic Empowerment rating all form part of the group’s

vision to be a leading emerging markets ICT player. Further

details on the group’s sustainability measures can be found

in the Sustainability report on pages 67 to 79.

AbOUT bUSINESS CONNExION CONNECTIVE INTELLIGENCE™ IS ABOUT USING THE WORLD’S MOST ADVANCED INFORMATION AND COMMUNICATION TECHNOLOGY (ICT) PRODUCTS AND SERVICES, WITH THE SKILLS AND EXPERIENCE OF SOME OF THE WORLD’S BEST qUALIFIED INDIVIDUALS, TO PROVIDE INCREASINGLY SIMPLE, CONTENT-RICH AND AFFORDABLE KNOWLEDGE SOLUTIONS TO AFRICA AND THE WORLD.

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Business Connexion enhances the lives of citizens throughout South Africa and Africa with ICT solutions ranging from:• the data centre which holds a Tier IV design certification

from the Uptime Institute which translates to less than 27 minutes downtime per annum;

• ICT solutions to all enterprise retailers in South Africa; • efficiently handling over 4 million accounts from

87 municipalities every month;• generating 30% of South Africa’s payslips using the

group’s payroll solutions;• managing the South African government’s payroll

system; • providing the technology backbone for the delivery

of over 40% of the petrochemical industry’s liquid fuel requirements; to

• processing more than 16 million switching transactions, including garnishee orders and union member fees, per month.

Business Connexion’s passion to deliver high quality, high performance business solutions has given rise to a number of accolades including:• largest data centre operations in the South African

market with 27% market share (Frost and Sullivan);• first place in Custom Application Development for 2011

owning 20% share of the South African market (BMI-T);• Tactical Partner of the year 2011 awarded to CEB

Maintenance by a strategic retail client; • winner of the Sustainability Award at the Technology Top

100 accolades presented to Accsys;• 1st, and currently the only, JSE listed ICT company

accredited as an Eskom Energy Services Company (ESCo);

• Citrix’s 1st South African-based Systems Integrator partner;

• SAP Services Partner Excellence award and All-in-One Reseller of the year award in 2011;

• average maturity rating of 3.55 on seventeen ITIL V3 processes;

• Cisco Services Partner of the Year and Cisco Managed Services Partner of the Year 2011 for Africa and Middle East;

• top 3 provider for SAP Hosting Services and only provider of SAP Cloud Services in South Africa; and

• Frost & Sullivan 2012 South African Customer Value Enhancement Award.

The group’s solution offerings which are detailed below are provided through it divisional operations which include the:• Services division;• UCS division;• Technology division;• Canoa division;• Innovation division; • International division; and• Investment division

Details on the operations of these divisions are included in the Operational reviews on pages 40 to 49.

GROUP SOLUTION OFFERINGSCloud computing and virtualisation solutions: The group’s next generation cloud services leverage the highest data centre resiliency, without compromising the robust security, reliability and scalability attributes of an enterprise grade cloud solution.

Cloud services include:• Infrastructure as a Service – computing, storage, data

protection, network and VSAT • Platform as a Service – rapid application development

and business intelligence • Software as a Service – messaging, payroll, recruitment,

point of sale, sharepoint, learning solutions, talent management, web content and xAssess

Data centre services:The Tier IV-design certified data centre is the benchmark for hosted information systems and information. The group’s operational expertise combined with management skills and experience in client service enable it to deliver data and facilities management ensuring a connected world at all times. Through the data centre services the group hosts various systems and applications and provides cloud services to global clients.

The group is able to virtualise data centre computing and network environments for optimal efficiency and performance, creating a private cloud to maximise resource utilisation and reduce operating costs.

Communication services:The group provides secure, intelligent communications solutions for voice, data and video, facilitating flexible, high-performance interactions.

The group has taken aggressive action to adapt its business to better cope with the new economic environment and the realities of today.

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End to end communication solutions and infrastructure build:The group’s highly skilled solution architects, certified to the highest required levels, use the group’s strategic vendor relationships to develop enterprise-wide, business-critical ICT solutions.

Security solutions and assessments:Through its Information Security Forum membership the group can draw on a rich library of international best practice to advise its clients on all aspects of information security from consulting services, to products and solutions, and managed security services.

Advanced managed services:Business Connexion provides efficient and high technological standards and services when supporting existing technology platforms through key vendor relationships (including Microsoft, VMware, Citrix, BlackBerry, RightFax and Adobe). The group also provides software solutions and services required to install, operate and support in-store point-of-sale applications.

Collaborative workspace: Through its end-user device support services, the group provides a virtual workspace enabling employees to work at any time, from anywhere, with remote and onsite support from 650 support personnel located country-wide.

Global services management centre: Business Connexion is the single point of contact for managing service calls consistently and efficiently as part of a contact centre outsourcing model or through the establishment of a client defined in-house contact centre.

Service integration management:With an average maturity rating of 3.55 on seventeen ITIL V3 processes the group maintains a constant focus on improving service quality, increasing user satisfaction and delivering increased business value.

Application services:Application services focus on increasing workforce mobility through using latest mobile technology and developing innovative solutions to access new markets.

Knowledge and information management:Business Connexion’s management solutions can empower users to find and assimilate the correct information and make the right business decisions.

Enterprise resource management:Business Connexion has a proven track record as a SAP

implementation and support partner and has adopted the

RunSAP principles, SAP’s best-practice methodology, for

consistent high quality service delivery and the reduction

of operating costs in SAP support environments.

Systems integration:Business Connexion draws together disparate processes, systems and information, creating a more intelligent, more responsive enterprise, ensuring total interconnectivity.

Business continuity services:The group provides options that ensure the continuity of business and other supporting ICT services including a business continuity programme, ICT service continuity processes, alternate site recovery hosting, and continuity management and maintenance.

Industrial solutions:Business Connexion’s in-depth understanding of the industrial sector enables it to provide stable and reliable ICT environments that are effective and efficient, improving production, maintenance, quality, and inventory control.

Energy efficiency services:The group offers energy management solutions ranging from energy audits to assessments on plant performance which will translate into more efficient use of energy and lower overhead costs.

Business consulting:By understanding the client’s business, Business Connexion is able to offer smart ICT solutions that translate strategic intent into optimal business performance by applying best practices for ICT service life-cycle management.

UCS Solutions:Through its UCS Solutions subsidiary the group provides outsourced application hosting services, integrated service management services, SAP and JDA application software services and strategic and optimisation consulting services to the retail industry.

Content Distribution Solutions (CDS): This capability enables Business Connexion to be a primary provider of faster and cost effective connectivity and content distribution network services to facilitate web applications, content management, and video and acceleration services bundled with interactive advertising.

PROFILECorporate

continued

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Unified communications and managed network services:This service automates and collates all human and device communication into an integrated experience, linking all possible devices and communication modes, including instant messaging, telephony, video, email, short messaging and white boarding.

Multipurpose, intelligent print devices and related peripherals:With its Canon offering the group provides low cost, high efficiency document production facilities for corporations on a “pay-per-page” basis, optimizing costs and maintaining equipment, delivering convenient, low cost, highly reliable printing and other related services.

Transactional switch collection solutions:This intelligent web-based one-stop collection solution offers businesses, including banks, insurance companies, medical schemes and unions, automated pull-type payments and reconciliations for a number of payment streams including large corporate payrolls and bank channels.

Human capital management (time and attendance, payroll, human resources and salary administration):Through a unique integrated approach that combines world-class human capital management, time and attendance, access control and ERP solutions, Business Connexion is able to successfully implement integrated ICT solutions.

Learning solutions:The group offers SAP, Microsoft, Cisco, Project Management, CompTia, Adobe, Adult Basic Education Training, Soft Skills, Business Professional Certifications, Novell and Linux training. Custom-developed courses are also accommodated.

Organisational change management consulting:Business Connexion assists clients in achieving better performance through tailor-made business transformation solutions for all the stakeholder groups who are impacted by an IT change, through the delivery of specialised service offerings.

Project management:Successful project delivery is underpinned by effective project management aligned with the Prince2 Methodology. By studying business drivers, the group creates value propositions tailored to meet individual business requirements.

Technology finance ICT rental solutions:Business Connexion’s relationship with ICT vendors allows it to negotiate rental options on behalf of its clients. In addition, the group can implement a future migration plan for new technology equipment and assist clients with managing third-party rental agreements to maximise benefits and avoid unnecessary penalties.

Desk-top support:CEB Maintenance specialises in the provision of general computer hardware services, including implementation, rollout, support and maintenance services.

GLOBAL ICT PARTNERSBusiness Connexion has established relationships with the following global ICT partners:• CISCO: Gold certified and Managed Services Master

Channel partner. • Citrix: Citrix Gold Solution Advisor; first System Integrator

Partner in South Africa. • EMC²: Velocity Signature Solution Partner for EMEA

South Region; Vblock certified partner in Southern Africa; Authorised Services Partner.

• HP: leading Enterprise reseller in South Africa; Gold Service One Specialist Partner.

• IBM: Tier1/Premier Partner. • Infor.• Mendix.• Microsoft: Microsoft-Certified Partner. • NetApp: member of the NetApp FastPath Programme.• NorthgateArinso. • Novell: Novell Platinum Solutions Provider partner

for Identity and Security Management; Gold Solution Provider for Data Centre Solutions and End-User Computing.

• Oracle: Oracle Partner Network certified; UNIX based server specialists for Oracle and Sun Microsystems.

• SAP: National Services Alliance partner of SAP South Africa; SAP enterprise resource management solution provider.

• Symantec: Platinum certified partner; Enterprise Security Master Specialist .

• Synerion.• VMware: VMware Enterprise Solution Provider.

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Nigeria

South Africa

Zambia

NamibiaMozambique

Tanzania

Kenya

Swaziland

Lagos

Lusaka

Maputo

Windhoek

Nairobi

Dar-es-Salaam

Dubai

United KingdomLondon

FOOTPRINTGroup

South AfricaGauteng Johannesburg, Midrand, PretoriaWestern Cape Cape TownEastern Cape East London, Port ElizabethKwaZulu-Natal Durban

AfricaKenya NairobiMozambique MaputoNamibia WindhoekNigeria LagosTanzania Dar-es-SalaamZambia Lusaka

United Kingdom London

South Africa –Service centresBethlehemBloemfonteinGeorgeKimberleyKlerksdorpMiddelburg

South Africa –Points of presenceBethalJohannesburgLadysmithMmathathoPretoriaWitbank

Africa and Dubai –Points of presenceBotswana – GaboroneDubaiMozambique – Matola, TemaneNamibia – SwakopmundNigeria – AbujaSwaziland – Mbabane

MthathaNelspruitNewcastlePietermaritzburgPolokwane

SERVICECENTRES

REGIONALOFFICES

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FINANCIALGroup

highlights

REVENUE

0

100

200

300

400

500

600

700

800

900

May 06

SHARE PRICE

May 07 May 08 Aug 09* Aug 10 Aug 11 Aug 12 May 06 May 07 May 08 Aug 09* Aug 10 Aug 11 Aug 12

May 06 May 07 May 08 Aug 09* Aug 10 Aug 11 Aug 12 May 06 May 07 May 08 Aug 09* Aug 10 Aug 11 Aug 12

OPERATING PROFIT

HEADLINE EPS AND DIVIDEND PER SHARE

Headline EPS Dividend per share

0

10

20

30

40

50

60

70

80

0

50

100

150

200

250

300

0

1 000

2 000

3 000

4 000

5 000

6 000

EBITDA

May 06 May 07 May 08 Aug 09* Aug 10 Aug 11 Aug 120

100

200

300

400

500

600

• REVENUE INCREASED BY 35,1% TO R5 829,6 MILLION

• GROSS mARGIN ImPROVED FROM 30,9% TO 31,5%

• EbITDA INCREASED BY 59,6% TO R511,9 MILLION

• NORmALISED DILUTED

hEADLINE EARNINGS PER SHARE OF 54,3 CENTS

• DIVIDEND OF 20,0 CENTS

PER ShARE DELIVERING A 3,9% DIVIDEND YIELD

*15 month period

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STRUCTUREGroup ownership

# UK§ Previously known as Business Connexion Networks (Nigeria) Limited

Business Connexion Group Limited

Reg No. 1988/005282/06

Business Connexion International Holdings

Proprietary Limited

Reg No. 1996/007425/07

100%

Business ConnexionProprietary Limited

Reg No. 1993/003683/07

100%

Business ConnexionNamibia Proprietary Limited

Reg No. 89/291

75%

Business ConnexionTanzania Limited

Reg No. 39801

65%

Business ConnexionZambia Limited

Reg No. 46751

85%

Business ConnexionMozambique Limitada

Reg No. 400131406

100%

Business Connexion Limited#

Reg No. 3105853

100%

Business ConnexionICT Services Limited§

Reg No. RC 733524

100%

UCS Solutions Proprietary Limited

Reg No. 1996/014405/07

70%

BCX Kenya Limited

Reg No. CPR 2010/35954

70%

Nanoteq Proprietary Limited

Reg No. 1996/007480/07

75%

UCS Technology Services Proprietary Limited

Reg No. 1998/013893/07

100%

CEB Maintenance Africa Proprietary Limited

Reg No. 2005/014622/07

100%

Canoa Group Holdings Proprietary Limited

Reg No. 200/018444/07

50% + 1 share

Business Connexion Content Distribution Solutions

Proprietary Limited

Reg No. 1996/007491/07

100%

quad Automation Proprietary Limited

Reg No. 2001/023245/07

100%

Accsys Proprietary Limited

Reg No. 1998/011208/07

100%

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OVERVIEWOperational

Division Objective Performance Highlights

Services • ICT services integrator enabling our

clients’ businesses locally and globally

• Full service provider through

compliance with the most up to date

international design guidelines and

best practice for high availability

• Leader in deploying cloud

infrastructure services and solutions

• Leader in application and

development and management for

large corporates

• Largest revenue contributor to

the group – R1 982,6 million

• Operating profit margin improved

from 9,8% to 11,1%

• Growth and stability of annuity

revenue base

• Winner of the Frost & Sullivan

2012 South African Customer

Value Enhancement Award

• 20% market share in application

development

(BMI-T December 2011)

• Exclusive global partnership

with Rackspace

• Acquisition of Quad

Automation

UCS • Dominant ICT service provider in the

retail sector

• Enhance and extend data centre and

leveraged managed services offerings

• Total revenue of R1 093,2 million

• Operating profit margin of 10,7%

• Cross selling opportunities

identified and acted on

• Acquisition of Integr8 IT

• Successful integration of

UCS assets

• Provide 28% of sub-Saharan

African Retail IT services

(Gartner – 2012)

Technology • Full certification with all strategic

vendors

• Pan-African partner to strategic

vendors

• Multi-platform and device

development expertise

• “Top 3” player for strategic vendors

• Returned to profit despite revenue

decrease from R1 230,9 million to

R916,0 million

• R3,3 million operating profit

contribution; R11,0 million earned

in second half

• Regional sales force optimised

• Operating model redefined

Canoa • End-to-end client service offering

includes office automation

• Move into corporate client base

• Revenue of R860,5 million


• Over performance on profit

warrantees

• Successful role out of managed

print solution to key corporate

clients

• Retention of Canon exclusivity

for Southern Africa

Innovation • Intellectual property hub of the group

• On-going investment in intellectual

property through development and

enhancement of software solution

offerings

• Revenue growth to R496,5 million


• Proprietary solutions leveraged in

public sector

• White labelling of outsource

payroll solutions

• Successful conclusion of

Management Buy In transaction

in Nanoteq

• Integration of Accsys

• Improved debt collection from

municipalities

International • Support existing and future global

clients and partners wherever they

operate

• Service provider of choice in each of

its representative locations

• Revenue growth from R368,5 million

to R467,2 million


• Approved data centre investments

for Nigeria and Kenya

• Market penetration into Ghana

• One of the largest ICT groups in

Southern Africa

• Strong presence in East Africa

• Established presence in West

Africa

• Largest employer of ICT skill

in Africa

Investment • House group’s new ventures

• Currently only Content Distribution

Solutions (CDS)

• Successfully redefined content

distribution solution offering’s

strategic intent

• Revenue of R13,6 million

• Supply contracts renegotiated for

improved affordability

• CDS remains strategic enabler

of the group’s cloud strategy

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STRATEGYGroup

Consistent with Business Connexion’s strategy embarked upon in 2009, the group has made significant progress in realigning the business to the changing dynamics within the ICT industry.

The financial results clearly highlight the strong contribution of the group’s acquisitions in recent years, where the UCS subsidiaries and Canoa Group performed ahead of expectation.

The strength of the group’s balance sheet enabled further acquisitions in the current period to augment the group’s portfolio of offerings and to address new markets.

CLIENTSThe African continent continues to be a focal point for the group. The strategic intent remains to grow its global presence by providing ICT services across the continent. The 2012 Gartner report analysing ICT Services in sub-Saharan Africa confirms Business Connexion’s leading position in ICT Business Services. This report defines ICT Business Services as constituting IT outsourcing, implementation services, consulting and business process outsourcing. Overall, the group has 10.5% market share of ICT business services in sub-Saharan Africa.

Business Connexion’s current footprint is successfully tapping into opportunities in growth markets beyond South Africa, including Mozambique, Zambia, Namibia, Tanzania, Kenya, Nigeria and Ghana. The African ICT industry is benefitting from steady growth in multiple sectors, driven by demand for infrastructure, natural resources and increased consumer spending.

During the year the group secured a significant contract for data centre services in Ghana and successfully renewed the services contract for the Umoja financial switch in Tanzania, which services banks in that country.

The group’s strategy to focus on selected industry vertical markets has paid off during the year, with a solid performance from the UCS division which focuses on the retail and supply chain vertical markets. The recent Gartner report further highlighted that the group also maintained its leading position in ICT services within the retail, insurance, manufacturing and natural resources verticals for sub-Saharan Africa.

OUR OFFERINGSWhile the group looks forward to the maturing of public cloud technology, the greatest demand is still for secure private cloud services. Business Connexion partnered with Rackspace, an acknowledged global leader in cloud technology, to provide a unique service option for the group’s clients who place the greatest emphasis on security.

With 27% market share, the group maintained its leading position in the South African data centre market according to the recent Frost and Sullivan industry analysis. During the year the board also approved the establishment of data centre services capabilities in both Kenya and Nigeria. Research indicates these markets represent strong growth potential.

Industry trends are pointing to a convergence of traditional IT services, telecoms, energy infrastructure and industrial automation. In line with this trend, the group acquired Quad Automation Proprietary Limited during the year. Business Connexion now has the largest talent pool of industrial solutions engineers as a key differentiator within the manufacturing and mining and natural resources vertical client bases.

Intergr8 IT Proprietary Limited is the most recent acquisition for the group and complements the infrastructure solutions and services that the group currently provides, specifically positioning us with targeted offerings for the mid-tier corporate market.

The group has a portfolio of specialised business units and services that include private on-premise and off-premise cloud services, public cloud services, virtualisation, storage, routing, switching, security, hosting, connectivity, internet services and disaster recovery. These services are further complemented by strong professional services capabilities.

The rationale is to create a complementary platform of services which can provide mature, cost-effective services to those mid-market corporates not historically serviced by Business Connexion. Broader benefits also include expected synergies on infrastructure and software sales through the group’s Technology division.

It is expected that Integr8’s IT offerings will enhance the group’s ability to win ICT-managed services market share in the public sector and in Africa, where there is a great demand for mature, yet cost-effective offerings.

Within the Innovation division’s portfolio, the group released its new eGovernment solution to complement its offerings to local authorities. This solution holds strong potential for the rest of the continent.

The potential of mobile technology as a significant driver of IT services for the foreseeable future is generally accepted. Business Connexion also developed a number of innovative mobile applications during the year, utilising its market leading position in the application development space

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12where the group holds 20% market share, according to the

latest BMI-T statistics.

On the human capital solutions front, the group’s white label payroll offering holds significant potential to service the growing demand for a cost-effective cloud offering. One of South Africa’s major banks now markets this solution to its clients under its own brand.

OUR ORGANISATIONThe Technology division was successfully repositioned following initiatives that included leadership changes, operating model refinements and vendor alignment.

These initiatives yielded the expected results, with the Technology division returning to profitability once again. The Technology division is core to Business Connexion’s strategic plans and its focus includes sourcing, solutioning and financing of selected technologies.

The group also revisited its client engagement functions and optimised the regional sales force structures during the year for a more co-ordinated approach with client relationships.

In line with the group’s strategic intent to expand across

the continent, the group continues to invest in building the

right sales and technical capacity within the organisation to

support these growth initiatives.

TALENTThe group constantly endeavours to be an organisation

which attracts, retains and develops great talent. Its strategic

initiative relating to talent seeks to unlock the true potential

of its people by creating a high performance culture which

empowers people to perform, recognises achievement and

celebrates innovation. Business Connexion trained

650 trainees though its internship programme over the past

five years. Of the 142 trainees in 2012, the group achieved an

internal employment rate exceeding 70%.

To date a further 101 leaders have participated in the

group’s new leadership development programmes.

Business Connexion continues to embrace diversity and

remains committed to creating an environment that

maximises the potential of the group’s employees.

OUR PEOPLE

Attract, retain anddevelop talent

OURORGANISATION

OUROFFERINGS

• Premium Connexion Zone Convergence portfolio• Innovation Zone Own intellectual property

Flexible organisationstructure to achievegrowth strategy.

• Largest African presence• Global capabilty• Vertical industry focus: Retail and Supply Chain Mining Financial Services Oil and Gas Public Sector

OURCLIENTS

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DIRECTORSBoard of

SOUND GOVERNANCE PRACTICES ARE ESSENTIAL TO EARNING THE TRUST OF STAKEHOLDERS

ANTHONY (TONY) RUITERS

Independent non-executive chairman

BA (UCT), HDE (UCT), Executive Diploma Business Studies (Stanford University, USA)

During his career, Tony has co-founded nine start-ups that became significant companies in South Africa and Africa, including Krew Investments SA Proprietary Limited, Share Legend Proprietary Limited, Sentio Capital Management Proprietary Limited and African Harvest Proprietary Limited. He currently serves as director in all the companies he co-founded. Tony has travelled extensively representing South Africa in trade and investment meetings across the globe. He has also participated in numerous presidential and ministerial-led delegations abroad.

Tony is a member of the Remuneration and nominations committee and the Risk, sustainability, social and ethics committee.

Appointed to the board on 21 September 2007

BENJAMIN MOPHATLANE

Chief executive officer

BCom Accounting (University of Pretoria)

In 1996 Benjamin, with his twin brother Isaac, co-founded what was then known as Business Connection. Business Connection subsequently merged with Seattle Solutions in 2001.

Benjamin served as managing director until the company merged with Comparex Africa in 2004 and was renamed Business Connexion. He served as deputy chief executive officer until 2007 when he became chief executive officer of Business Connexion. Well-known within the information and communication technology industry, he has received numerous accolades

Benjamin is a member of the Black Management Forum, the Electronic Industries Federation of South Africa, the Black Information Technology Forum and the Western Cape Investment and

Trade Promotion Agency.

Appointed to the board on 2 February 2004

VANESSA OLVER

Deputy chief executive officer

BCom (Rhodes), HDip Acc (Rhodes), CA(SA), HDip Tax (Unisa), Life Management Institute Programme (USA), CPA (USA)

Vanessa joined Business Connexion on 1 August 2009 and was simultaneously appointed to the board.

Vanessa qualified as a chartered accountant by completing her articles at Deloitte & Touché. She worked for Deloitte LLP in Chicago, before moving to the UK where she held financial management positions with P&O Nedloyd and Aviva plc. (formerly CGNU plc.). Before joining Business Connexion, she was finance director of Standard Bank Africa.

Vanessa, in her capacity as deputy chief executive officer, is responsible for working with the chief executive officer to drive the overall business strategy. In her capacity as group executive: Services, division she is responsible for ensuring the success of the cloud services offerings, vertical sector solutions and application development.

Vanessa is a member of the South African Institute of Chartered Accountants, the Certified Public Accountants of Illinois, Chicago, USA as well as the Institute of Directors.

Appointed to the board on 1 August 2009

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LAWRENCE WEITZMAN

Chief financial officer

BCom (Hons) (University of Pretoria), CTA, CA(SA)

Lawrence has vast experience in finance, spanning well over 15 years, where he held several group financial management positions in the ICT and financial sectors.

He joined Business Connexion in February 2005 as a group financial manager, where he was responsible for key finance aspects of the business.

Lawrence is a member of the South African Institute of Chartered Accountants and the Institute of Directors.

Appointed to the board on 1 September 2011

JOHN JENKINS

Executive director

MDP SBL (Unisa), SEP (London Business School)

John has been a leader in the ICT services industry for many years and has gained considerable expertise in deal-making, contract structuring, service management and multi-sourcing arrangements.

He has specialised in ICT outsourcing and managed services, and is one of the founders of the outsourcing industry in South Africa. John is a widely recognised consultant, coach and mentor, drawing on more than three decades of experience in the ICT industry.

In his role as group executive: business development – private sector, John is responsible for developing new business, ensuring collaboration, integration and alignment across the divisions with a specific focus on the private sector. In addition, John is driving the strategic business development for the group in the Africa operations. Prior to taking on his current role, John served as group executive of the Services division for five years.

Appointed to the board on 31 August 2011

JENITHA JOHN

Independent non-executive director

Hons BCompt, CTA, CA(SA),

Senior Executive Programme

(Wits and Harvard), Diploma in

Company Direction

Jenitha is chief audit executive of the

FirstRand Group. She held various

financial and audit-related roles at,

inter alia, Discovery Holdings, Telkom SA,

Eskom, Toyota SA and RMBT Property

Services (Marriott Group) prior to joining

the FirstRand Group. Jenitha has served

on many boards and audit committees

and is currently a non-executive director

of Tongaat Hulett where she is also

chairperson of the audit and compliance

committee.

Jenitha is a member of the following

professional bodies: the South African

Institute of Chartered Accountants, the

Institute of Internal Auditors and the

Institute of Directors.

Jenitha is the group’s Audit and

compliance committee chairperson and

a member of the Risk, sustainability,

social and ethics committee.

Appointed to the board on 1 May 2010

16

DIRECTORSBoard of

continued

JOHN POLUTA


BCom, BAcc (Wits), CA(SA)

John worked at Deloitte & Touche locally and in the USA. In 1998 he joined Barnard Jacobs Mellet as a research analyst, later moving to a senior analyst role at JP Morgan in Johannesburg and London. He is currently an executive director of Mowana Investments Proprietary Limited.

John is a member of the Audit and compliance committee.

Appointed to the board on 2 April 2009

NKENKE (NAT) KEKANA

Non-executive director

Post-graduate Diploma in Telecommunications and Information Policy (Unisa), Diploma in Computer Programming (Globe)

Nkenke has a wide range of skills and

experience in communications and

has been involved in formulating

telecommunications and broadcasting

policies, laws and regulations. He has

held various positions during his career,

including group executive: regulatory

and public policy at Telkom. He was a

Member of Parliament and chairman of

the Parliamentary Portfolio Committee

on Communications. He is currently

the chief executive officer of MSIMA

Communications Proprietary Limited

and an executive director of Mowana

Investments Proprietary Limited.

He is the chairman of the group’s

Risk, sustainability, social and ethics

committee.

Appointed to the board on 2 March 2005

MAMOROKE LEHOBYE


BCom (UCT), HDAC (Wits), CA(SA)

Mamoroke serves on the audit

committee of the National Treasury.

Mamoroke serves on the group’s Audit

and compliance committee and she’s the

chairperson of the Remuneration and

nominations committee.

Mamoroke is a member of the following

professional bodies: the Institute

of Internal Auditors, the Institute of

Directors, and the South African Institute

of Chartered Accountants.


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DEAN SPARROW

Non-executive director

BCompt, CTA, CA(SA)


following the successful acquisition of

the UCS subsidiaries

Dean is currently the chief executive

officer of Capital Eye Investments

Limited (formerly UCS Group Limited),

a private equity investment business in

the technology sector. He completed

his articles at Deloitte & Touche South

Africa in 1999 and spent a short time

in the Deloitte New York office. He left

Deloitte in 2002 to join the listed UCS

Group where he performed various

roles over a 10 year period from chief

financial officer to deputy chief executive

officer and then chief executive officer.

In recent years his predominate focus

has been on investment activity driven

through mergers and acquisitions in the

technology sector.


18

SOUND GOVERNANCE PRACTICES ARE ESSENTIAL TO EARNING THE TRUST OF STAKEHOLDERS

COmmITTEEExecutive

VANESSA OLVER

DATE OF BIRTH: 22 July 1973

QUALIFICATIONS: BCom (Rhodes), HDip Acc (Rhodes), CA(SA), HDip Tax (Unisa), Life Management Institute Programme (USA), CPA (USA)

DESIGNATION: Deputy chief executive officer and group executive: Services division

EXPERIENCE: Vanessa joined Business Connexion on 1 August 2009 and was simultaneously appointed to the board.

Vanessa qualified as a chartered accountant by completing her articles at Deloitte & Touché. She worked for Deloitte LLP in Chicago, before moving to the UK where she held financial management positions with P&O Nedloyd and Aviva plc. (formerly CGNU plc.). Before joining Business Connexion, she was finance director of Standard Bank Africa.

Vanessa, in her capacity as deputy Chief executive officer, is responsible for working with the Chief executive officer to drive the overall business strategy. In her capacity as group executive: Services division, she is responsible for ensuring the success of the cloud Services divisions offerings, vertical sector solutions and application development.

Vanessa is a member of the South African Institute of Chartered Accountants, the Certified Public Accountants of Illinois, Chicago, USA as well as the Institute of Directors.

Appointed to the Executive committee on

1 August 2009

LAWRENCE WEITZMAN

DATE OF BIRTH: 10 April 1969

QUALIFICATIONS: B Com (Hons) (University of Pretoria), CTA, CA(SA) and Senior Management Programme (University of Pretoria)

DESIGNATION: Chief financial officer

EXPERIENCE: Lawrence has vast experience in finance, spanning well over 15 years, where he held several group financial management positions in the ICT and financial sectors.

He joined Business Connexion in February 2005 as a group financial manager, where he was responsible for key finance aspects of the business.

Lawrence is a member of the South African Institute of Chartered Accountants and the Institute of Directors.


1 September 2011

BENJAMIN MOPHATLANE

DATE OF BIRTH: 12 May 1973

QUALIFICATIONS: B Com Accounting (University of Pretoria)

DESIGNATION: Chief executive officer

EXPERIENCE: In 1996 Benjamin, with his twin brother Isaac, co-founded what was then known as Business Connection. Business Connection subsequently merged with Seattle Solutions in 2001.

He served as managing director until the company merged with Comparex Africa in 2004 and was renamed Business Connexion. He served as deputy chief executive officer until 2007 when he became chief executive officer of Business Connexion. Well-known within the information and communication technology industry, he has received numerous accolades

Benjamin is a member of the Black Management Forum, the Electronic Industries Federation of South Africa, the Black Information Technology Forum and the Western Cape Investment and Trade Promotion Agency.

Appointed to the Executive committee on 2 February 2004

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IAN BRYAN

DATE OF BIRTH:14 May 1967

QUALIFICATIONS: BCom (Honours) (University of Natal), CA(SA)

DESIGNATION: Group executive: Canoa division

EXPERIENCE: Ian has extensive knowledge in managed print solutions, and in his current role at Business Connexion heads up the Canoa division responsible for all Canon-related business. His responsibility is to ensure that the proof of concepts that are underway in the Business Connexion client base are finalised and that the pipeline of potential clients continues to grow.


1 September 2011

MATTHEW BLEWETT

DATE OF BIRTH: 8 December 1970

QUALIFICATIONS: B Com (Hons) (University of KwaZulu-Natal)

DESIGNATION: Chief operating officer

EXPERIENCE: Matthew formed Seattle Solutions, a focused Microsoft Solution Provider, which merged with Business Connection in 2001. As group executive: special projects, he led the integration process of Business Connection and Comparex Africa in 2004.

From 2006 Matthew consulted to Business Connexion on the formulation and initiation of the revitalisation programme prior to rejoining the group in September 2008 in an executive capacity with specific responsibility and accountability for the group’s revitalisation programme. Matthew, in his current capacity as chief operating officer, is responsible for mergers and acquisitions, marketing as well as special projects.

He is a former recipient of the Information Technology Person of the Year awarded by the Computer Society of South Africa.


1 September 2008

JOHN JENKINS

DATE OF BIRTH: 22 August 1953

QUALIFICATIONS: MDP SBL (Unisa), SEP (London Business School)

DESIGNATION: Group executive: business development – private sector

EXPERIENCE: John has been a leader in the ICT services industry for many years and has gained considerable expertise in deal-making, contract structuring, service management and multi-sourcing arrangements.

He has specialised in ICT outsourcing and managed services, and is one of the founders of the outsourcing industry in South Africa. John is a widely recognised consultant, coach and mentor, drawing on more than three decades of experience in the ICT industry.

In his role as group executive: business development – private sector, John is responsible for developing new business, ensuring collaboration, integration and alignment across the divisions with a specific focus on the private sector. In addition, John is driving the strategic business development for the group in the Africa operations. Prior to taking on his current role, John served as group executive of the Services division for five years.


8 May 2007

20

COmmITTEEExecutive

continued

THEMBA GUMBI

DATE OF BIRTH: 30 October 1975

QUALIFICATIONS: B Com Economics (University of Natal), Masters in Business Leadership (Unisa)

DESIGNATION: Group executive: business development – public sector

EXPERIENCE: Themba joined Business Connexion in 2004. He has a wealth of knowledge in ICT strategic sourcing and procurement as well as experience in the public sector which he acquired from SITA and Telkom.

He also has extensive strategic business development and planning experience, especially in sales and general management, which he gained from previous positions in the group, SITA, Telkom SA Limited and Daimler Chrysler SA. He has demonstrated an ability to manage and deliver in complex and demanding environments throughout his career and he has solid strategic relationships with clients, partners and suppliers.

As group executive: business development – public sector, Themba has overall responsibility for positioning Business Connexion as a significant player in the public sector.


1 September 2011

GRACE DIPALE

DATE OF BIRTH: 19 April 1972

QUALIFICATIONS: BA and BEd concurrent (English and Anthropology, York University, Toronto, Canada), Management Advancement Programme (Wits Business School), HR Management (Unisa), HR Management (Seneca College of Applied Arts, Toronto)

DESIGNATION: Group executive: human resources (HR)

EXPERIENCE: Grace has gained extensive local and international knowledge and hands-on experience across all disciplines of Human Resources (HR) with a career spanning more than 16 years in human resources in the technology and communications industry. Her expertise span across talent management spheres, including performance management, recruitment, HR project management and implementation, business partnering, strategic management, remuneration and compensation.

She has in-depth experience in the ICT arena, having worked for companies that include Sentech, Internet Solutions and UCS Solutions.

At Business Connexion, Grace leads the Human Resources Business Partnering, Human Capital Operations and Centre of Excellence teams. This group-wide executive role is prioritised by the group chief executive officer in recognition of the fundamental role that HR plays in talent management and the successful implementation of the employee value proposition in all operational divisions.

Combining international studies and work experience with local insight, Grace brings to bear theoretical knowledge with practical understanding to achieve the efficient alignment of HR and business.


1 September 2011

JANE CANNY


QUALIFICATIONS: Associate Member for the Institute of Chartered Secretaries & Administrators

DESIGNATION: Group executive: UCS division

EXPERIENCE: Jane has extensive business and ICT management experience. With a career which commenced in financial management, Jane has excelled in various IT management and consulting roles with a specific focus on the retail sector.

Prior to joining Business Connexion Jane held various executive positions within the UCS organisation, giving her wide exposure to the organisation’s operations and strategy. Over the years, she successfully delivered many complex internal and client projects while also taking ownership for end-to-end outsource contracts, ensuring common understanding and measurability between service provider and client.

This experience and her abilities are considered key attributes as she takes strategic responsibility for the direction of the UCS businesses as an integral component of Business Connexion.


1 September 2011

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RODWELL ZVARAYI

DATE OF BIRTH: 30 December 1965

QUALIFICATIONS: Currently working on a dissertation for his MBA

DESIGNATION: Group executive: International division

EXPERIENCE: Rodwell joined Business Connexion in 2009 as the managing executive responsible for the West Africa business. He has more than 20 years’ experience in the ICT industry. He spent over 14 years at Microsoft and has a deep appreciation of doing business outside the borders of South Africa. He is a member of the British Computer Society.

His portfolio at Business Connexion includes all Business Connexion operations outside of South Africa. He is responsible for driving sales, growth strategy and business development for new markets.


1 September 2010

DOUGLAS WOOLLEY

DATE OF BIRTH: 14 November 1968

QUALIFICATIONS: BCom (Honours) (Marketing) (Unisa)

DESIGNATION: Group executive: Technology division

EXPERIENCE: Doug Woolley joined Business Connexion as group executive: Technology division in March 2012. His experience in both vendor management and distribution on a group-wide basis will play an important role in our continuing focus on bringing the full strength and capabilities of Business Connexion to our clients.

Doug’s qualifications are complemented by the wealth of experience that he has accumulated over a decade in various ICT companies. The notable ones are the senior positions that he held during his tenure at WorkGroup that included being managing director and most recently, the chief executive officer at Axiz Workgroup.

Appointed to the Executive committee on15 March 2012

ISAAC MOPHATLANE


QUALIFICATIONS: Bachelor Degree (University of Pretoria)

DESIGNATION: Group executive: Innovation division

EXPERIENCE: In 1996 Isaac, with his brother Benjamin, co-founded the former Business Connection, a computer reseller focused on government and parastatals. Business Connection subsequently merged with Seattle Solutions in 2001. In 2004, the company merged with Comparex Africa and Isaac was appointed as group executive: client engagement - public sector.

In his current role, Isaac provides leadership and directions in the Innovation division which houses the group’s own software and packaged intellectual property.

Isaac is a member of the Black Management Forum, the Electronic Industries Federation of South Africa and the Black Information Technology Forum. He is the deputy non-executive chairman of the Catholic Education Investment Company.


2 February 2004

22

ChAIRmAN’Sreport

2012 PROVED TO BE A FRUITFUL YEAR AS THE FINANCIAL RESULTS STARTED TO SHOW THE BENEFITS FROM THE STRATEGIC PLANNING EFFORTS WE INITIATED IN 2008/2009. I STATED IN MY REPORT FOR THE 2008 YEAR THAT “… THE BOARD AND EXECUTIVE LEADERSHIP TOOK A DEEP INTROSPECTIVE LOOK AT WHAT NEEDED TO CHANGE WITHIN THE BUSINESS”. WE REVIEWED WHAT IT WOULD TAKE TO MAKE BUSINESS CONNEXION MORE RELEVANT TO OURSELVES, AS THE BOARD AND MANAGEMENT, AND OTHER STAKEHOLDERS (SHAREHOLDERS, CLIENTS AND STAFF). THIS INCLUDED POSITIONING THE GROUP SO THAT IT WOULD EVOLVE TO REMAIN RELEVANT IN AN EVER CHANGING ENVIRONMENT.

In 2009 the initial planning developed into a seven-year growth strategy and I reported in that year that “Our leadership team has defined a strategy for the business in conjunction with the board to focus on continued organic growth, complemented by strategic acquisitions of related businesses, which will make Business Connexion a dominant player in the ICT market in Africa”. This strategy has remained consistent in the main since then, although it has been refined through input from clients, staff, management and shareholders.

ELEMENTS OF OUR SEVEN-YEAR GROWTH STRATEGYThe seven-year growth strategy covered four main areas, namely:• Establishing the group as a convergence player with

capabilities in the distinct areas of content, printing, telecommunications and information technology.

• Focussing on specific vertical sectors and innovation.• Expanding into new markets and growing foreign

earnings.• Exploration and consideration of merger and acquisition

opportunities to complement our existing services portfolio and enhance our scale in high growth areas.

Further details of the growth strategy areas are included in the Chief executive officer’s report and the Strategy report on pages 26 to 29 and 12 to 13 respectively.

In developing and executing the strategy we incorporated the following elements:

LEADERSHIPThroughout the process it has been essential for the group to ensure that key leadership and shareholders understood the plan and bought into the strategies behind the plan. Critical to this process was an insistence by shareholders that the group get the correct leadership team in place to deliver the plan.

The group has continually evolved and, as I mentioned last year, some tough decisions were taken in certain underperforming business units.

We are now confident that – through a combination of management changes, new appointments and strong leaders that joined the group through the recent acquisitions – Business Connexion has built a strong and competent management team. This team, which includes the Executive committee and the other senior leaders, has the depth and breadth of skills needed to continue to execute on the group’s strategy and to grow the business further.

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EFFICIENCY AND ENHANCING DELIVERY TO CLIENTSThe strategy also required us to review the efficiency of our delivery and the relevance of our solutions. At the same time the group reviewed, together with input from clients, what it perceived was necessary for the future needs of our clients and potential new areas and markets to grow in.

To improve efficiency the group focussed inwardly on its structure and its costs. During the earlier years this focus lead to various changes to business units, delivering services to clients, outsourcing of certain non-core areas and consolidation of various functions to create economies of scale. It also set the group structure in place to allow for future acquisitions and their integration into the group.

At the same time efficiencies were implemented to enhance delivery to clients and processes removed if they reduced service delivery standards to clients.

ACqUISITIONThrough the acquisitions of the last two years the group has been able to bolster its business and strengthen its product offering to clients. The acquisitions also broadened the markets that the group served and allowed for vertical industry specialisation, expanded the product offering and strengthened the group’s depth of management. The group now has significant businesses servicing the retail and supply chain, mining, financial services, oil and gas and public sectors.

In particular, the acquisition of certain underlying subsidiaries of UCS Group Limited and 50% plus one share in the Canoa Group completed last year have proved very successful and now contribute significantly to the overall group results.

The agreement to purchase Integr8 IT, a leader of annuity based infrastructure management and managed services to the mid-market corporates throughout South Africa, will help the group expand into this growing market segment.

THE REST OF AFRICAThe group has identified that the rest of Africa is a key growth area, and building our capacity across Africa to better service our clients’ growing needs on the continent, remains a focus. The International division which includes our operations in Mozambique, Namibia, Nigeria, Tanzania, Zambia and Kenya as well as the groups UK operations is now profitable. With the group’s strong cloud based offering in South Africa and plans to develop data centres in Nigeria and Kenya, Business Connexion is in a unique position to deploy its infrastructure across Africa, thereby complying with in-country data protection laws that form a barrier to entry for many other players.

This expanded capacity in Africa has seen the group secure new business in both West and East Africa.

Both the acquisition strategy and expansion into the rest of Africa were needed to ensure that the group remained relevant to our clients who operate in South Africa and those that operate beyond the borders of South Africa. It has provided the group with the necessary scale and diversity. It has been particularly pleasing to see the return of certain work to Business Connexion where competitors have not been able to match the required needs, and service levels, demanded of them by clients. We believe that we are nearing the point where we have the capacity to service clients wherever they are.

INNOVATIONWhile the group continues to build its services related business it intends to enhance its offering in the Innovation division. The division improved its earnings during the year and the focus will be on new products, either solutions developed in-house or through acquisitions that enhance the group’s ability to provide essential new technology to meet clients’ needs as they evolve.

Tony RuitersIndependent non-executive chairman

24

ChAIRmAN’Sreport continued

THE FOUNDATION WE HAVE BUILTBusiness Connexion has an established presence in Africa with:• the group being one of the largest ICT groups in

Southern Africa – South Africa, Namibia, Mozambique, Zambia and Botswana;

• a strong presence in East Africa – Tanzania, Kenya; and• an established presence in West Africa – Nigeria.

The group is the largest employer of ICT skills in Africa with:• over 6 500 ICT skilled people in its workforce;• a multi-disciplined skill set; and• vast experience in delivering large projects throughout

Africa.

A strong annuity base of revenue with:• long-term outsourcing and support contracts;• 56,8% of group revenue coming from annuity based

contracts; and• a robust blue-chip client base.

An African leader in cloud services offerings being:• a leader in the South African market for data centre

services with a 27% market share according to Frost and Sullivan, 2011;

• a Tier IV certified data centre with multiple data centres throughout South Africa and Tanzania; and

• plans to develop further data centres in Nigeria and Kenya.

Business Connexion is the largest IT outsourcer in sub-Saharan Africa with:• over 33 years of experience as a leading full-service ICT

outsourcer;• an outsourcing market share in sub-Saharan Africa

according to Gartner of 15%; and• large multi-term contracts with global clients across

multiple industries.

The group has market leading applications development skills with:• a strong application development team; • multi-platform and device development expertise; and• the highest market share in application development,

20% of the South African market according to BMI-T.

The group now has a large distributed ICT support services capability :• arising from the merger with UCS and Canoa. Business

Connexion has the largest ICT support services footprint with in excess of 1000 skilled engineers based in multiple locations across Africa.

The group has developed proprietary niche ICT solutions:• with its own IP solutions within the Innovation, Services

and UCS divisions, including payroll, human resources, municipal management, retail management and financial switching; and

• these solutions can be leveraged in the public sector throughout Africa.

The group has market dominance in key African industry verticals with:• a strategic focus on key industry verticals – wholesale

and retail, manufacturing and resources, mining and natural resources, public sector, petrochemical and financial services; and

• a major dominance of 28% market share in the sub-Saharan retail industry sector subsequent to the merger with UCS.

Some key strategic partners include:• exclusive partnerships with the likes of Canon and

Rackspace; and• strategic partnerships with companies like Argility, IBM,

Cisco, Microsoft, EMC, HP, SAP, Oracle, NorthgateArinso.

ACKNOWLEDGEMENTSFirstly, I would like to sincerely thank Benjamin for the clarity of thought and direction he has shown to the business, often in times of severe stress and challenges, over the last five years. Benjamin has certainly played a major role in the reshaping of Business Connexion into the group it is today.

LEADERSHIP The group’s executive and its other top leaders have worked tirelessly to reshape the business and I thank them for their efforts. As the group executed its strategic growth plan it inevitably threw up a number of leadership challenges. These challenges and the poor performance in some divisions over the period led us to take decisive action at times. However, the core group of leaders, together with excellent managers from companies we have acquired, have formed a cohesive and effective management team. I thank you all.

STAFFOur staff have again performed admirably in these challenging times. We will continue to invest in your development to allow you to continue to give our clients the superior “Business Connexion service” we are proud of. I personally thank you for all that you have done to make Business Connexion the great company it is and the even better company it aspires to be.

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CLIENTSOnce again the board acknowledges the support of our many loyal clients and we value clients who have returned to the group. While we are looking to expand into other markets our key strategic growth initiatives have, and will continue to be, carried out primarily with these loyal clients in mind. We hope that your businesses continue to grow and thrive.

As I mentioned last year Business Connexion touches the lives of many people across the African continent through, amongst other areas: retailer operating systems, internet content distribution, smaller and medium sized municipalities systems, bank transactions, share transactions, tax payments, printing solutions, document storage and many other IT related services. We aim to continue to do so as the business grows and the areas of technology expand.

SHAREHOLDERSOver a number of years key shareholders have often engaged with the board. I am truly appreciative of the constructive and invaluable input from shareholders that has helped to shape our group. The group would not be in the position it is today without your support.

Your ongoing support as owners will be key to us growing your company further. We look forward to ongoing interaction and continuing to learn from your collective wisdom.

BOARDTo my fellow board members a warm thank you for the advice and support you have given me and your active participation, often over challenging decisions and issues that we have had to deal with, particularly in the past years.

CHANGES TO THE BOARDWe were sorry to see Felleng Sekha resigning from the board on 19 January 2012 after her service as a board member, a member of the Remuneration and nominations committee, and the Risk, sustainability, social and ethics committee. Felleng was appointed as a partner at Brunswick Group LLP in August 2011 and subsequently indicated that, due to a conflict of interest with clients and possible future clients, she would have to step down from the Business Connexion board. I take this opportunity to thank Felleng for her valued contribution to the group.

IN CONCLUSIONThe group is now certainly in a much stronger position than it has been for some time. The group now:• is a robust business with the necessary scale and diversity

of revenue streams and clients across varied industries, sizes of client and geographies to better weather changing and challenging economic environments;

• has a core group of leaders within its top 100 or so managers to effectively lead the business into the future and provide the depth of skills, diversity and succession planning needed for a sustainable business. This leadership team has been complimented by strong leadership in the companies we acquired over the years;

• has a happy and content staff compliment who enjoy coming to work, shown by the excellent service given to our clients, and the group is attracting some of the best IT skills in Africa;

• is established across sub-Saharan Africa with sufficient scale to grow and to service our clients’ needs across the continent; and

• is an established corporate citizen with focus across financial, social and environmental issues enhancing the group’s sustainability.

We have a firm foundation and will continue to cautiously make strategic acquisitions that enhance scale and further diversify the group’s product offerings. Care will be taken that the group seeks to be at the forefront of appropriate new technology through innovation or acquisition to ensure we continue to deliver the best solutions for the needs of our clients in the ever changing environment.

Our strategy must ensure that we continue to improve our return on shareholders’ equity (ROE). While we intend to continue to grow the business it will be done in such a way that it remains earnings enhancing and not ROE dilutive over the medium term.

Tony RuitersIndependent non-executive chairman

26

A RELENTLESS FOCUS ON OUR SEVEN-YEAR GROWTH STRATEGY, FIRST INTRODUCED IN 2009, WAS REWARDED WITH A FIRM RECOVERY ACROSS OUR BUSINESS IN SPITE OF CONTINUED CHALLENGING ECONOMIC TRADING CONDITIONS. THIS GROWTH STRATEGY INCLUDED DISTINCT CAPABILITIES WE WISHED TO ENTRENCH OR ESTABLISH, SECTORS TO SERVICE, INNOVATION, GROWTH IN NEW MARKETS AND OUR FOREIGN EARNINGS AND STRATEGIC MERGERS AND ACqUISITIONS TO COMPLEMENT OUR EXISTING SERVICES PORTFOLIO AND ENHANCE OUR SCALE IN HIGH GROWTH AREAS.

Our key financial metrics showed strong growth, a direct

result of the group’s seven-year growth strategy, and the

strategic acquisitions over the past two years that have

made significant contributions to the group’s results.

Importantly, the staff and operations of the acquired

companies have been fully integrated and Business

Connexion is functioning as a cohesive group in the market.

Last year, I expressed my confidence in the leadership

changes and I am happy to report that they have proved

effective with the turnaround seen in the Africa operations,

Innovation division and Technology division.

YOUR GROUPBusiness Connexion now employs more than 6 500

employees on the African continent. With revenue in excess

of R5,8 billion, the group is positioned as the largest listed

ICT services business in Africa. Business Connexion holds

the number one position in ICT outsourcing in sub-Saharan

Africa (Gartner 2011, March 2012) and is the leading South

African cloud-based services provider (Frost and Sullivan,

2011). Business Connexion was also recognised as the largest

application development company in South Africa with a

20% market share (BMI-T 2010, December 2011).

As a values driven and high performance organisation, the

group’s ability to attract, retain and develop talent is a key

differentiator in maintaining competitive advantage.

This financial year was another significant year with regards

to the group’s investment in people through our talent

management initiatives, succession planning, internship

programme and the launch of two new leadership

development programmes to enhance leadership

capabilities.

More than ever, African expansion presents a significant

opportunity for Business Connexion and accessing these

markets remains a key strategic focus. The continued

progress in Africa is pleasing with the group’s operations

across the continent maturing. This has translated into an

improved and less volatile financial performance with the

group taking market-leading positions in some key, high

growth African economies.

OPERATING RESULTSThe group generated diluted earnings per share (EPS)

of 37,2 cents for the financial year (2011: 27,6 cents)

and diluted headline EPS for the year of 38,8 cents

(2011: 17,2 cents). The group’s results, however, have been

complicated by the inclusion of earn-out payments, as a

result of good performances from companies acquired,

amortisation of intangibles and various transactional costs.

On a normalised basis (excluding these items mentioned

above) diluted headline EPS would be 54,3 cents

(2011: 44,0 cents).

Our return on equity (ROE) increased to 7,1% for 2012 from

4,3% in 2011. Tangible ROE increased from 7,5% to 13,8%,

ExECUTIVEChief

officer’s report

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which is closer to our target ROE. We understand that

increasing this ratio is key for the longer term sustainability

of the group and will, accordingly, continue to focus on

improving it.

Most of the divisions recorded improved performances:

• The Services division remains the largest contributor and

grew revenue by 9,7% for the year to R1 982,6 million.

• Last year the group invested R873,2 million in certain

underlying subsidiaries of UCS Group Limited and

50% plus one share in the Canoa Group. Both these

divisions exceeded their target earnings for the year.

The UCS division is now the second biggest division

and contributed revenue of R1 093,2 million with an

operating profit of R116,9 million. The Canoa division

contributed R860,5 million in revenue and R106,5

million in operating profit.

• It was particularly pleasing to see the refocused

Technology division returning to profitability in the

second half on slightly reduced revenue. The division’s

revenue remains muted as corporates are reluctant

to spend on infrastructure upgrades in the current

depressed economic conditions.

• The Innovation division increased revenue by 19,0%

to R496,5 million. This increase is attributed to QDD’s

restructure (as previously reported), the inclusion of

Accsys (the payroll business that formed part of the

acquired UCS subsidiaries) and Nanoteq’s improved

performance on the back of its international expansion.

• The International division showed strong growth of

26,8% and Africa is proving to be an area of good

growth potential. We have managed to secure some key

commitments and, on the back of this, we are setting up

data centres in Nigeria and Kenya.

The one area that disappointed, with results below our

expectations, was Content Distribution Solutions (CDS).

CDS delivers the group’s local and international connectivity

requirements, as well as enabling the delivery of Limelight

Networks content services in sub-Saharan Africa. Despite

this poor performance, CDS remains key to the group as an

enabler of our cloud strategy.

Further details on the group’s financial performance have

been set out in the Chief financial officer’s report on

pages 30 to 35.

SUSTAINABILITY AND TRANSFORMATION Business Connexion retained a level 3 B-BBEE rating during

the 2012 financial year.

The group’s transformation goals and scorecard cover

all aspects of transformation including ownership,

management control, employment equity, skills

development, preferential procurement, enterprise

development and corporate social investment. These issues

are covered in further detail in the Sustainability report on

pages 67 to 79.

The group continues to integrate sustainability into all

aspects of its business. Financial sustainability was enhanced

through the acquisition of the UCS subsidiaries and the

Canoa Group, and the changes to the management

structures during the last financial year and reported on

in my report in the 2011 integrated report. Environmental

sustainability remains a focus for the group with the group’s

efforts in this regard including reducing the number of

buildings it utilises thereby reducing its electricity and water

usage and ensuring its large data centres limit their impact

on the environment. Social sustainability is incorporated

within the group’s transformation initiatives as we believe it

is the most pressing area for ongoing growth of our country

as a whole.

Benjamin Mophatlane


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ExECUTIVEChief

officer’s reportcontinued

GROWTH STRATEGY I mentioned above that we set our growth strategy in 2009.

This strategy remains largely unchanged. Our ‘Connective

Intelligence’ vision is firmly centred on delivering a

complete set of managed services which meets the need

our clients have for efficient, low cost and high quality ICT.

The strategy focuses on four core areas:

• Establishing Business Connexion as a convergence player

with capabilities in the distinct areas of content, printing,

telecommunications and information technology.

Continued organic growth within the local market

through our existing services offering. Cloud computing

remains at the heart of the group’s services offering.

• Focusing on specific vertical sectors and innovation.

This strategy is working well and we now have

significant businesses servicing the retail and financial

services, mining and natural resources, petrochemical

manufacturing and public sectors.

• Expanding into new markets and growing foreign

earnings. The group has operations in Mozambique,

Namibia, Nigeria, Tanzania, Zambia and Kenya, where

the focus is on providing increasingly simple, content-

rich and affordable knowledge solutions. With our

growth across Africa we are now ready to develop data

centres in Nigeria and Kenya. Business Connexion is

busy rolling out the platform to launch its cloud-based

services offering throughout the rest of Africa. With a

significant share of the platform as a service market in

South Africa, it is poised to dominate this part of the

next IT revolution, as peers may still need to develop

and build their infrastructure. Business Connexion

is deploying this infrastructure across the continent

and can therefore comply with the in-country data

protection laws that form a barrier to entry for many

other players. Cloud services are changing the future

of IT, and Business Connexion is optimally positioned

with its consolidated approach to data centres, network

infrastructure and applications.

• Exploration and consideration of merger and acquisition

opportunities to complement our existing services

portfolio and enhance our scale in high growth areas.

I mentioned the success of this strategy and am pleased

with the ongoing growth and success of the acquisitions

made over the past two years. Post the year-end, Business

Connexion entered into an agreement to purchase

Integr8 IT Proprietary Limited (“Integr8 IT”), subject to

certain conditions. Further details follows in my report.

RECENT ACqUISITIONSThe two acquisitions made in 2011 have broadened the

group’s focus, contributed to improved profitability and

enhanced its ongoing sustainability.

To enhance the group’s penetration into the mid-market

corporates, the group has entered into a sale of shares,

repurchase and subscription agreement with Integr8 IT, in

terms of which it will purchase 100% of its issued

share capital.

Business Connexion’s current strategy around developing

the Connexion Zone is primarily focused on the enterprise

market. The acquisition of Integr8 IT enhances our

competitive advantage in the mid-market corporates,

creating a complementary platform of services and

broadens UCS Solutions’ historic retail-focused

infrastructure services.

Integr8 IT is one of the largest privately owned ICT

managed services companies. It was established in 2001

and is a leader of annuity-based infrastructure management

and managed services to the mid-market corporates

throughout South Africa. The company owns and operates

the Nerve CentreTM, a digital hub of people, technology

and process that regulates, monitors and maintains the

technology infrastructure for many leading corporations.

OUTLOOKThere is no doubt that our business is about scale and

diversity and I believe we have achieved both. Business

Connexion is benefiting from being a larger and more

diversified enterprise with an expanded client base.

Cross selling opportunities and synergies are contributing and

should continue to contribute positively to future results.

I believe that with the group’s growing African footprint,

broad client base, reputation and proven abilities, it is well

positioned to meet the challenges posed by the rapid

changes and consolidation in the ICT industry and take full

advantage of its market position.

In order to remain a trusted partner to our clients and

a responsible corporate citizen, we have and must

continue to tailor our services to the increasingly diverse

and sophisticated needs of our clients and adjust to the

ongoing changes and challenges of the communities and

environment in which we live and work.

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I said last year that it had become important to ensure that

the group optimises its structure to unlock the collective

strengths of the new enlarged group. We repositioned a

number of executives and made some key appointments

which have all proved successful and, together with their

committed teams, are well placed to continue growing the

business.

We have built a great breadth and depth of businesses,

revenue streams, skills and services across a diverse

geographic base. We also ended this year in the strongest

financial position that we have been in for the last eight years.

This sets a great platform from which to grow in the

years ahead.

APPRECIATIONWithin trying economic conditions, our people have

managed to do the very best for our clients with integrity,

ingenuity and persistence. Once again I thank you for your

effort and we look forward to your ongoing support.

Thank you to my Executive committee. The new team has

worked well together this year and I look forward to the

year ahead. Thank you to our chairman, Tony Ruiters, for his

leadership of the board and to my fellow directors for their

valuable guidance and business insight.

As always, in closing, I wish to thank our clients, suppliers

and shareholders for their continuing belief in, and support

of, Business Connexion.

Benjamin Mophatlane


30

BUSINESS CONNEXION HAS ENJOYED AN EXCELLENT YEAR IN WHAT HAS BEEN, AND CONTINUES TO BE, DIFFICULT ECONOMIC TRADING CONDITIONS.

Having successfully progressed in all the areas of the group’s

seven-year growth strategy, there is no doubt that the strong

growth in key financial measures has been a direct result of

this strategy.

It has been particularly pleasing to see the strategic

acquisitions we made over the past two years contribute

significantly to the group’s results.

FINANCIAL PERFORMANCEThe group continues to pursue its objectives of growing

sustainable earnings and in line with the trading statement

released on 25 October 2012, the group generated diluted

earnings per share (EPS) of 37,2 cents for the financial

year (2011: 27,6 cents) and diluted headline EPS for the

year of 38,8 cents (2011: 17,2 cents). On a normalised

basis (excluding earn-out payments for acquisitions and

amortisation of intangibles) diluted headline EPS would be

54,3 cents (2011: 44,0 cents).

On the back of the improved profitability, return on equity

increased to 7,1% (2011: 4,3%) and return on total assets

increased to 9,3% (2011: 5,3%). Tangible return on equity

was 13,8% (2011: 7,5%).

31 August 31 AugustR million 2012 2011

Revenue 5 829,6 4 314,2Cost of sales 3 996,1 2 979,1

Gross profit 1 833,5 1 335,1Gross profit margin (%) 31,5% 30,9%

Operating expenses 1 558,5 1 177,4

Operating profit 275,0 157,7Share of losses from

associates (0,5) (0,2)

Operating profit before

investment income 274,5 157,5Investment income 34,7 27,3

Profit before finance

costs 309,2 184,8Finance costs 27,5 18,1

Profit before tax 281,7 166,7Taxation 85,6 64,4Non-controlling interests 46,8 9,7

Profit attributable to

equity holders 149,3 92,6

Headline earnings 155,4 57,5

Revenue grew by 35,1% to R5 829,6 million for the

year, bolstered not only by the acquisitions of the UCS

subsidiaries and Canoa Group, but also from good growth

from the other divisions which collectively grew by 14,1%,

excluding the Technology division.

FINANCIALChief

officer’s report

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The group’s annuity revenue base remains intact with annuity revenue at 56,8% of total revenue.

The Services division’s revenue grew by 9,7% for the year to R1 982,6 million, compared to R1 806,9 million for the previous year. The growth in revenue is a consequence of the division’s dominant cloud services offering and its professional services business, specifically in the application development business which is developing innovative, fit for purpose services and solutions for clients. The Services division remains committed to developing unique and innovative solutions which will drive client business value.

The UCS division contributed R1 093,2 million to group revenue with an operating profit of R116,9 million while the Canoa division contributed R860,5 million in revenue and R106,5 million in operating profit. Both these performances are ahead of targeted forecasts on acquisition and demonstrate the synergistic benefits of the divisions within the group.

The refocus within the Technology division has generated positive results with the division returning to profitability and contributing R3,3 million to operating profit for the year. The division achieved an operating profit of R11,0 million in the second half of the year reflecting the ongoing improvement in earnings.

The Innovation division increased revenue by 19,0% to R496,5 million following the restructure previously reported in Q Data DynamiQue (QDD) and the inclusion of Accsys, the payroll business that formed part of the acquired UCS subsidiaries. All business units within the Innovation division have performed according to expectations with Q LINK continuing to perform in tough market conditions. Nanoteq’s improved performance is attributable to their international expansion.

The International division has seen revenue growth of 26,8% to R467,2 million for the year, demonstrating the exciting growth potential in Africa. With approved investments for setting up data centres in Nigeria and Kenya, the group is well positioned to extend its cloud service offerings to the rest of the African continent.

Business Connexion established Content Distribution Solutions (CDS) to deliver the group’s local and international connectivity requirements, as well as to enable the delivery of Limelight Networks content services in sub-Saharan Africa, the primary market being South Africa. Although the results are not what were expected, CDS enables Business Connexion’s cloud strategy. CDS is shown in the Investments division results.

Lawrence Weitzman


SEGMENTAL REVENUE ANALYSIS31 August

2012

31 August

2011R’000 % R’000 %

Services division 1 982,6 34,0 1 806,9 41,9UCS division 1 093,2 18,8 353,2 8,2Technology division 916,0 15,7 1 230,9 28,5Canoa division 860,5 14,8 136,1 3,2Innovation division 496,5 8,5 417,1 9,7International division 467,2 8,0 368,5 8,5Investment division 13,6 0,2 1,5 0,0

5 829,6 100,0 4 314,2 100,0

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FINANCIALChief


Gross profit margin improved to 31,5% for 2012, from

30,9% for 2011, mainly as a result of the higher margins

from the UCS and Canoa divisions, but also from improved

margins in the Services, Innovation and International

divisions.

Operating expenses continue to be well managed

and increased on a like-for-like basis (excluding the items

listed in the table below and the operating expenses

brought in with the acquisitions of the UCS subsidiaries

and Canoa Group) by 7,8% to R992,1 million for the year

(2011: R920,2 million).

The growth in revenue, improved margins and cost control

has resulted in strong growth in operating margin. Excluding

intangible asset amortisation, fair value adjustments and

event-related costs listed in the table below ,the normalised

operating profit margin grew from 4,3% in 2011 to 6,3%

in 2012.

2012 2011R’000 % R’000 %

Operating profit as reported 275,0 4,7 157,7 3,7Amortisation of intangible assets relating to

the UCS subsidiaries and Canoa Group 49,2 15,5Fair value adjustment on Canoa Group

earn-out payment 26,2Impairment of Hawkstone iSolutions 6,0 2,5Profit on sale of businesses (4,6) (74,3)Merger and acquisition costs 14,9 31,2Cost of restructuring 47,2Other 3,4 6,1

Normalised operating profit 370,1 6,3 185,9 4,3

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The key adjustments for 2012 listed in the table on page 32

comprise:

• Intangible assets created as a result of the acquisition

of the UCS subsidiaries and Canoa Group are amortised

over their useful lives, resulting in an amortisation charge

of R49,2 million for the year (2011: R15,5 million).

• Canoa Group exceeded their profit targets and as a result

Business Connexion was required to make an additional

earn-out payment of R26,2 million. In terms of IFRS 3,

this payment is deemed to be a fair value adjustment

of a liability and is recorded through the statement of

comprehensive income. A further earn-out payment

of R26,2 million will be made in 2013 contingent on

the profit target for the year ended 31 August 2013

being achieved.

• Business Connexion also impaired its remaining

investment in its associate, Hawkstone iSolutions

Proprietary Limited.

FINANCE COSTSFinance costs increased to R27,5 million on the back of

the R250,0 million term debt facility that was put in place

during the previous year.

TAXATIONThe effective tax rate for the group was 30,4% for the year.

The big movements in the group’s tax charge were primarily

as a result of the over provision for capital gains tax of

R30,3 million on the sale of Destiny e-Commerce to

VeriFone in the previous financial year, partially offset by

STC of R16,2 million on the special dividend paid in

January 2012.

STATEMENT OF FINANCIAL POSITION31 August 31 August

2012

R’000

2011

R’000

Property, plant and

equipment 442,0 453,9Goodwill and intangibles 930,2 934,0Other non-current assets 306,0 273,9Current assets (excluding

cash) 1 493,4 1 502,7Cash and cash equivalents 443,9 518,3

Total assets 3 615,5 3 682,8

Shareholders’ equity 2 105,7 2 144,6Non-controlling interests 95,8 48,5Non-current liabilities 237,7 319,5Current liabilities 1 176,3 1 170,2

Total equity and liabilities 3 615,5 3 682,8

Key elements of the statement of financial position include

the following:

PROPERTY, PLANT AND EqUIPMENTAdditions to fixed assets and software were mainly in

the data centre environment to meet existing and future

capacity demands from clients.

34

FINANCIALChief


GOODWILL AND INTANGIBLESGoodwill increased by R16,5 million following the

acquisition of Quad Automation Proprietary Limited,

effective 1 April 2012.

The increase in goodwill was partially offset by the

impairment of goodwill relating to SiloFX Enterprise

Integrators (“Silo FX”) of R4,9 million. Business Connexion is

impairing the goodwill created on SiloFX over three years as

its contracts come to an end after this period.

Amortisation of the intangible assets created through the

acquisition of the UCS subsidiaries and Canoa Group in the

previous financial year of R390,0 million and R204,7 million

respectively, amounted to R49,2 million for the year.

WORKING CAPITAL MANAGEMENTWorking capital management remains a key focus area

within the group and has reduced quite substantially as a

result of the ongoing focus.

Key movements in working capital include:

InventoryThe group’s investment in inventory increased mainly from

the Canoa division as it is in the final stages of delivering on

a large new managed print solutions contract.

Trade receivablesThe group has made good progress in collecting debts from

local municipalities. Average debtor days on the whole

book dropped to 54,6 days from 65,5 days in 2011.

The profile of trade receivables was as follows:

Other working capital balances remained at similar levels

to 2011.

CASH FLOWSThe group continues to generate strong cash flows from

operations, which increased from R258,5 million to

R520,8 million.

Capital expenditure, dividends and tax payments were the

main contributors to the cash outflows.

Before the payment of the special dividend, the group

generated R85,0 million in cash for the year.

31 August 31 August2012

R’000

2011

R’000

Operating cash flows 520,8 258,5Working capital changes (30,5) 162,9Capital expenditure (205,6) (252,5)Acquisition of subsidiaries (10,8) (250,0)Proceeds on sale of

investments 192,0Other financing activities (56,9) 188,7Other 25,2 (9,8)

242,2 289,8Taxation paid (101,4) (59,3)Dividend paid – ordinary (55,8) (71,0)

Increase in cash before

special dividend 85,0 159,5Dividend paid – special (159,4)

(Decrease)/increase in cash (74,4) 159,5

0

200

400

600

800

1 000

TRADE RECEIVABLES

May 08 Aug 09 Aug 10 Aug 11 Aug 12

>60 days

31 – 60 days

1 – 30 days

Current

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CORPORATE ACTIVITY In November 2012 Business Connexion entered into a sale

of shares, repurchase and subscription agreement with

Integr8 IT Proprietary Limited (“Integr8 IT”), in terms of

which it will purchase 100% of the issued share capital of

Integr8 IT.

Integr8 IT is one of the largest privately owned ICT-

managed services companies.

The consideration payable by Business Connexion is up to

R126,0 million in cash, and will be settled through an initial

payment of R56,0 million payable on the closing date and

three potential earn-out payments of up to a maximum of

R70,0 million payable on 15 October 2013, 15 October

2014 and 15 October 2015. Shareholders should refer

to the Chief executive officer’s report on pages 26 to 29

for further detail.

DIVIDENDSBusiness Connexion continues to pay a normal dividend

based on a dividend cover of between 2,5 and 3 times

normalised earnings. In line with this dividend policy, the

group has increased its dividend per share by 42,9% to

20,0 cents per share from 14,0 cents per share in the

previous financial year. This represents a 3,9% dividend yield

based on Business Connexion’s 30-day volume weighted

average share price.

OUTLOOK FOR 2013With the scale of operation that has been built over

the last couple of years, the group is well placed to

weather the challenging economic environment and

continue its growth in its existing markets. In addition, the

acquisition of Integr8 IT offers an exciting new market for

the group in infrastructure management and managed

services to the mid-market corporates throughout

South Africa.

The group will look to ways of further enhancing its

return on shareholders’ equity and will be considering the

possibility of share buy-backs at an opportune time, subject

to shareholder approval.

CONCLUSIONI take this opportunity to thank shareholders and

investment analysts for their continued support. I also

extend my thanks to the shared services team for their

ongoing contribution.

Lawrence Weitzman


36

SEVEN-YEARGroup

history31 August 31 August 31 August 31 August 31 August 31 May 31 May 31 May

2012 2012 2011 2010 2009 2008 2007 2006 5 yr CAGR 12 months 12 months 12 months 15 months 12 months 12 months 12 months

% Actual Actual Actual Actual Actual Actual Actual

Statement of comprehensive incomeRevenue 9,1 5 829 644 4 314 181 4 059 979 5 496 127 4 118 534 3 551 125 3 207 679 Cost of sales 7,2 3 996 112 2 979 118 2 899 924 4 036 713 3 030 566 2 536 463 2 229 381

Gross profit 1 833 532 1 335 063 1 160 055 1 459 414 1 087 968 1 014 662 978 298 Operating expenses 14,0 1 558 507 1 177 391 962 767 1 326 811 923 972 846 486 816 228

Operating profit 13,8 275 025 157 672 197 288 132 603 163 996 168 176 162 070 Share of losses from associates 495 217 2 231 Net investment income 7 211 9 253 27 098 52 369 48 889 33 343 21 942

Profit before tax 7,3 281 741 166 708 222 155 184 972 212 885 201 519 184 012 Taxation 85 618 64 400 76 087 80 256 84 811 34 232 46 040 Non-controlling interest 46 806 9 721 22 821 2 216 13 373 30 397 21 649

Attributable profit 6,8 149 317 92 587 123 247 106 932 114 701 136 890 116 323

Depreciation 152 297 119 384 87 473 121 731 81 907 75 997 48 707 Amortisation 84 627 43 569 25 394 28 191 22 665 35 975 21 854

EBITDA 511 949 320 625 310 155 282 525 268 568 280 148 232 631 EBITDA % 8,8% 7,4% 7,6% 5,1% 6,5% 7,9% 7,3%OP% 4,7% 3,7% 4,9% 2,4% 4,0% 4,7% 5,1%

Statement of financial positionNon-current assets: other 6,7 949 076 895 130 696 429 717 627 733 296 564 527 500 367 Non-current assets: intangible assets 47,5 729 108 766 666 145 575 145 575 154 093 112 505 113 505 Current assets excluding cash and cash equivalents 6,4 1 493 459 1 502 749 1 256 265 1 141 320 1 165 034 1 046 786 1 032 514 Cash and cash equivalents (4,1) 443 930 518 308 358 823 333 431 524 272 585 843 743 307

Total assets 8,8 3 615 573 3 682 853 2 457 092 2 337 953 2 576 695 2 309 661 2 389 693

Total equity 9,7 2 201 585 2 193 044 1 550 643 1 418 393 1 526 813 1 460 006 1 317 159 Non-current liabilities 19,1 237 685 319 526 40 760 41 321 117 970 157 021 155 365 Current liabilities 5,8 1 176 303 1 170 283 865 689 878 239 931 912 692 634 917 169

Total equity and liabilities 23,1 3 615 573 3 682 853 2 457 092 2 337 953 1 576 695 2 309 661 2 389 693

Working CapitalInventories 197 901 178 939 138 172 189 579 110 162 95 144 49 596 Trade receivables 971 334 970 084 771 394 686 274 840 243 746 851 544 573 Trade payables (425 323) (457 128) (318 250) (231 249) (349 627) (311 035) (217 584) Other receivables 239 034 250 604 242 282 166 676 118 865 110 745 106 307 Other payables (647 565) (622 384) (478 965) (564 775) (491 861) (337 982) (468 852)

335 381 320 115 354 633 246 505 227 782 303 723 14 040

Financial ratiosReturn on total equity 7,1% 4,3% 8,0% 6,8% 7,5% 6,7% 8,6%Return on total assets 9,3% 5,3% 10,4% 7,4% 8,9% 10,5% 10,7%Equity to total liabilities 155,7% 147,2% 171,1% 154,2% 145,4% 171,8% 122,8%Gross profit margin 31,5% 30,9% 28,6% 26,6% 26,4% 28,6% 30,5%Operating profit margin 4,7% 3,7% 4,9% 2,4% 4,0% 4,7% 5,1%Average debtor’s days 54,6 65,5 58,6 57,3 63,5 59,7 55,4 Net asset value per share (cents) 520,0 529,6 508,4 540,1 581,3 555,9 501,5 Tangible net asset value per share (cents) 339,9 336,4 460,1 483,6 520,8 511,4 452,7

Share PerformanceWeighted average number of shares (000) 398 550 331 689 260 854 257 300 254 806 251 601 247 867 Diluted weighted average number of shares (000) 401 097 335 172 307 636 261 082 259 577 260 327 260 758 Basic earnings per share (cents) 37,5 27,9 47,2 41,6 45,0 54,4 46,9 Diluted earnings per share (cents) 37,2 27,6 40,1 41,0 44,2 52,6 44,6Headline earnings per share (cents) 39,0 17,3 47,6 37,5 45,1 38,8 45,6Diluted headline earnings per share (cents) 38,8 17,2 40,3 36,9 44,3 37,5 43,3Shares in issue at period end (000) 404 972 404 972 303 729 262 637 262 637 262 637 262 637 “A” shares in issue (000) 100 133 100 133 75 100 Share price – ordinary (cents) 485 520 552 450 535 760 830Share price – “A” shares (cents) 71 70Normal dividend per share (cents) 14 23 18 18 15 15 20Special dividend per share (cents) 40 60 17

for periods ended 31 August and 31 May

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31 August 31 August 31 August 31 August 31 August 31 May 31 May 31 May2012 2012 2011 2010 2009 2008 2007 2006

5 yr CAGR 12 months 12 months 12 months 15 months 12 months 12 months 12 months% Actual Actual Actual Actual Actual Actual Actual

Statement of comprehensive incomeRevenue 9,1 5 829 644 4 314 181 4 059 979 5 496 127 4 118 534 3 551 125 3 207 679 Cost of sales 7,2 3 996 112 2 979 118 2 899 924 4 036 713 3 030 566 2 536 463 2 229 381

Gross profit 1 833 532 1 335 063 1 160 055 1 459 414 1 087 968 1 014 662 978 298 Operating expenses 14,0 1 558 507 1 177 391 962 767 1 326 811 923 972 846 486 816 228

Operating profit 13,8 275 025 157 672 197 288 132 603 163 996 168 176 162 070 Share of losses from associates 495 217 2 231 Net investment income 7 211 9 253 27 098 52 369 48 889 33 343 21 942

Profit before tax 7,3 281 741 166 708 222 155 184 972 212 885 201 519 184 012 Taxation 85 618 64 400 76 087 80 256 84 811 34 232 46 040 Non-controlling interest 46 806 9 721 22 821 2 216 13 373 30 397 21 649

Attributable profit 6,8 149 317 92 587 123 247 106 932 114 701 136 890 116 323

Depreciation 152 297 119 384 87 473 121 731 81 907 75 997 48 707 Amortisation 84 627 43 569 25 394 28 191 22 665 35 975 21 854

EBITDA 511 949 320 625 310 155 282 525 268 568 280 148 232 631 EBITDA % 8,8% 7,4% 7,6% 5,1% 6,5% 7,9% 7,3%OP% 4,7% 3,7% 4,9% 2,4% 4,0% 4,7% 5,1%

Statement of financial positionNon-current assets: other 6,7 949 076 895 130 696 429 717 627 733 296 564 527 500 367 Non-current assets: intangible assets 47,5 729 108 766 666 145 575 145 575 154 093 112 505 113 505 Current assets excluding cash and cash equivalents 6,4 1 493 459 1 502 749 1 256 265 1 141 320 1 165 034 1 046 786 1 032 514 Cash and cash equivalents (4,1) 443 930 518 308 358 823 333 431 524 272 585 843 743 307

Total assets 8,8 3 615 573 3 682 853 2 457 092 2 337 953 2 576 695 2 309 661 2 389 693

Total equity 9,7 2 201 585 2 193 044 1 550 643 1 418 393 1 526 813 1 460 006 1 317 159 Non-current liabilities 19,1 237 685 319 526 40 760 41 321 117 970 157 021 155 365 Current liabilities 5,8 1 176 303 1 170 283 865 689 878 239 931 912 692 634 917 169

Total equity and liabilities 23,1 3 615 573 3 682 853 2 457 092 2 337 953 1 576 695 2 309 661 2 389 693

Working CapitalInventories 197 901 178 939 138 172 189 579 110 162 95 144 49 596 Trade receivables 971 334 970 084 771 394 686 274 840 243 746 851 544 573 Trade payables (425 323) (457 128) (318 250) (231 249) (349 627) (311 035) (217 584) Other receivables 239 034 250 604 242 282 166 676 118 865 110 745 106 307 Other payables (647 565) (622 384) (478 965) (564 775) (491 861) (337 982) (468 852)

335 381 320 115 354 633 246 505 227 782 303 723 14 040

Financial ratiosReturn on total equity 7,1% 4,3% 8,0% 6,8% 7,5% 6,7% 8,6%Return on total assets 9,3% 5,3% 10,4% 7,4% 8,9% 10,5% 10,7%Equity to total liabilities 155,7% 147,2% 171,1% 154,2% 145,4% 171,8% 122,8%Gross profit margin 31,5% 30,9% 28,6% 26,6% 26,4% 28,6% 30,5%Operating profit margin 4,7% 3,7% 4,9% 2,4% 4,0% 4,7% 5,1%Average debtor’s days 54,6 65,5 58,6 57,3 63,5 59,7 55,4 Net asset value per share (cents) 520,0 529,6 508,4 540,1 581,3 555,9 501,5 Tangible net asset value per share (cents) 339,9 336,4 460,1 483,6 520,8 511,4 452,7

Share PerformanceWeighted average number of shares (000) 398 550 331 689 260 854 257 300 254 806 251 601 247 867 Diluted weighted average number of shares (000) 401 097 335 172 307 636 261 082 259 577 260 327 260 758 Basic earnings per share (cents) 37,5 27,9 47,2 41,6 45,0 54,4 46,9 Diluted earnings per share (cents) 37,2 27,6 40,1 41,0 44,2 52,6 44,6Headline earnings per share (cents) 39,0 17,3 47,6 37,5 45,1 38,8 45,6Diluted headline earnings per share (cents) 38,8 17,2 40,3 36,9 44,3 37,5 43,3Shares in issue at period end (000) 404 972 404 972 303 729 262 637 262 637 262 637 262 637 “A” shares in issue (000) 100 133 100 133 75 100 Share price – ordinary (cents) 485 520 552 450 535 760 830Share price – “A” shares (cents) 71 70Normal dividend per share (cents) 14 23 18 18 15 15 20Special dividend per share (cents) 40 60 17

38

31 August 31 August2012 2011

Notes R’000 % R’000 %

Revenue 5 829 644 4 314 181 Cost of services and products 3 184 854 2 039 655

Value added 2 644 790 99,7 2 274 526 98,8Investment income 34 695 1,3 27 329 1,2Fair value adjustment (26 185) (1,0)

Total wealth created 2 653 300 100 2 301 855 100

Distributed as follows:Employees– Employees costs 1 2 257 668 85,1 1 972 401 85,7Providers of capital– Financial costs 27 484 1,0 18 076 0,8Governments 2 170 768 6,4 157 047 6,8Retained in the group for future growth 197 380 7,4 154 331 6,7

– Depreciation and amortisation 236 924 8,9 162 953 7,0– Profit attributable to equity holders 149 317 5,6 92 587 4,0– Dividend paid (215 215) (8,1) (69 253) (3,0)– Foreign currency translation reserve 5 894 0,2 (252) 0,0– Deferred tax movement 20 460 0,8 (31 704) (1,3)

Total wealth distributed 2 653 300 100,0 2 301 855 100,0

Value-added ratiosAverage number of employees 6 548 6 453 Revenue per employee (R’000) 890 669 Wealth created per employee (R’000) 405 357

VALUE-ADDEDstatement

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31 August 31 August2012 2011

Notes R’000 R’000

1. Employee costsPaid to employees 2 124 067 1 782 749 Contributions paid on behalf of employees 133 601 189 652

2 257 668 1 972 401

2. GovernmentsTax 105 505 85 241 Skills development levies 15 123 15 259 Rates and taxes paid to local authorities 4 603 1 289 Customs duties, import surcharges and excise taxes 45 537 55 257

170 768 157 047

South African government 161 655 149 567 Other governments 9 114 7 480

170 768 157 047

3. Additional amounts collected on behalf of governmentsValue added tax 372 446 302 460 Employee tax deducted from remuneration paid 498 490 420 130

870 936 722 591

South African government 832 558 693 780 Other governments 38 378 28 810

870 936 722 591

Donations and community investments 4 858 4 164

COMMENTARYTotal revenue for the 12 months ended 31 August 2012 amounted to R5 829,6 million. The cost of sold services and products

amounted to R3 184,9 million. After interest income and the fair value adjustment relating to the acquisition of Canoa Group

Holdings, wealth created amounted to R2 653,3 million. This created wealth was distributed to employees in the form of

salaries amounting to R2 257,7 million, interest on borrowed funds of R27,5 million and taxes paid to governments-

of R170,8 million.

The balance of R197,4 million has been reinvested in the business for future growth.

40

SERVICESOperational review

division

Revenue

R1 982,6 mILLION34,0% OF GROUP REVENUE

34,0%

The Business Connexion Services division offers a full range

of ICT infrastructure services. The majority of these service

offerings are delivered from the most technologically

advanced, and reliable, data centres in Africa.

The Services division has continued to be successful

in renewing outsourcing contracts, extending existing

contracts and acquiring new clients. The division’s

regional footprint has expanded with new business in the

industrial sector.

The division has a diverse skills base as its foundation.

Further to this, the specialists within the division have

the flexibility to design services specific to client

requirements or, if appropriate, to provide traditional

ICT outsource services. The resultant benefit to

the client is an enhanced level of business performance,

enriched information application, and flexible information

technology which together talks to Connective

Intelligence. Creating value for our clients is at the heart

of Business Connexion’s overall strategy and winning the

2012 South African Client Value Enhancement Award

from Frost & Sullivan is testament that we are achieving this

strategic business intent.

The division has maintained the Tier IV status for the

Midrand data centre verifying that it is fully compliant with

the most up-to-date international design guidelines and

best practice for high availability. In 2011, the data centre

operations were awarded the Frost & Sullivan Market Share

Leader award which reflects the group owning 27% of the

South African data centre market compared to 23% in the

previous year and with the nearest competitors at 16% and

15% respectively.

Although the mobile data revolution is still in its infancy,

every day more people are getting connected to access

information, communicate and collaborate in the Internet

economy. Companies such as Google and Apple, together

with mobile network operators and content providers,

are fuelling the revolution to capitalise on this enormous

potential. The application development team has capability

31 August

2012

R’million

31 August

2011

R’million

Growth

%

% of

total

Revenue R1 982,6 R1 806,9 9,7 34,0Operating profit R219,3 R177,2 23,8 79,7Operating margin 11,1% 9,8%

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to develop applications and mobile solutions for the

various platforms and devices that are deployed in the

cloud. The solutions that have been developed have added

considerable value to client’s business and have helped to

modernise their application portfolios to take advantage of

new technologies. These unique integrated solutions help

clients build systems that enable them to enhance, and

grow, their business. According to BMI-TechKnowledge’s

SA IT Services Market Sizing and Forecast 2010 – 2015,

Business Connexion has 20% market share in application

development. The group’s expertise was further recognised

when it was awarded best android application at the MTN

Awards for its Dealer Guide Application.

The mobility phenomenon offers huge benefits for

end users and organisations but requires specialised

management. The division’s cloud-based Mobile Device

Management solution provides comprehensive information

security services and secure content management.

The security division was awarded the Symantec Partner

and the Symantec Commercial Partner of the year for 2012.

Business Connexion provides secure, intelligent

communications solutions for voice, data and video,

facilitating flexible high-performance interactions.

Furthermore, the group has a portfolio of services

which include international, national and metro-

ethernet connectivity services and cloud based web

infrastructure which allows for web applications and

content management and video and acceleration services

bundled with interactive advertising as well as monetisation

solutions. This offering enables our clients to tap into the

power of now-the business can now be mobilised to

collaborate with others in a real-time information exchange,

and to transform collective computing power into business

knowledge.

With the acquisition of Quad Automation, the Services

division has increased its capabilities in industrial solutions

offerings. Business Connexion now has the largest pool of

industrial solutions engineers amongst its competitors and

peer system integrators. This acquisition, together with the

accreditation by Eskom as an Energy Services Company

(ESCO), has positioned the division for future growth in all

sectors by facilitating the reduction in energy consumption.

For further details on the services offered by the Services

division refer to the Corporate profile on pages 4 to 7.

42

Revenue

R1 093,2 mILLION18,8% OF GROUP REVENUE

18,8%

UCSOperational review

division

Effective 11 May 2011 Business Connexion Group acquired

the following subsidiaries from UCS Group Limited

(now Capital Eye Proprietary Limited):

• UCS Solutions Proprietary Limited

• UCS Technology Services Proprietary Limited

• CEB Maintenance Africa Proprietary Limited

These subsidiaries have been successfully integrated into

Business Connexion to maximise synergies that existed

between the divisions and companies resulting in the

creation of the UCS division as a provider of:

• end user devise support services;

• in-store IT maintenance services, specialising in point

of sale (POS) systems for the retail industry;

• ERP, Switching and In-Store application support;

• infrastructure managed services;

• retail business consulting, and

• training.

Business Connexion, through its UCS and Services divisions

is the dominant IT Services player in the retail industry

sector in sub-Saharan Africa.

The division has an extensive services and product

offering with an experienced leadership team within the

South African retail industry. Its established track record

supports a strong annuity revenue base. The affiliation of

the UCS division with other Business Connexion divisions

has allowed significant cross selling opportunities and

optimisation of costs to enhance the competitiveness of the

division’s service and product offerings to its clients.

UCS Technology Services focuses on the in-store part

of retail, providing all services required to install, operate

and support IT elements required in stores. It is a value

added reseller of point-of-sale software targeted at the fuel,

clothing, pharmaceutical, building supplies, cellular, FMCG

and furniture retail verticals.

UCS Solutions provides managed services and business

consulting services, with a significant portion of its business

focused on the Tier 1 and Tier 2 retailers. UCS Solutions has

historically positioned itself strongly with partners SAP, UCS

Technology Services, HCL-Axon, JDA, Internet Solutions,

IBM and others.

31 August

2012

R’million

31 August

2011*

R’million

Growth

%

% of

total

Revenue R1 093,2 R353,2 >100 18,8Operating profit R116,9 R40,9 >100 42,5Operating margin 10,7% 11,6%

* Results for 4 months

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A sale of shares transaction was entered into transferring

a 30% ownership interest in the business from Business

Connexion to the management of UCS Solutions so as to

secure key talent retention and enhance future profitability

of the business.

CEB Maintenance is South Africa’s largest specialist point

of sale maintenance service provider and is well-positioned

in this competitive market having high service levels and

economical pricing. Its day-to-day point of sale support

service includes certified repair workshops, warehousing,

project management and point of sale equipment research

and development.

Business Connexion Learning Solutions provides

learning consulting services, SAP training material

development and end-user training, utilising various

learning approaches. It has a Learning Centre for Microsoft,

Cisco, Project Management (PMBok), CompTia, Adobe,

Adult Basic Education Training, SoftSkills, Business

Professional Certifications, Novell, Linux and custom

developed courses. It is SETA accredited, a Microsoft

training partner and an SAP education partner.

Globally, the retail industry has been significantly impacted

by the economic slowdown. South African retailers

proved resilient compared to their global counterparts,

however, economic forecast continue to look to reduced

growth. With an increase in retail competition, retailers are

acknowledging the competitive differentiation that stable

technology and mature retail processes bring placing

Business Connexion at an advantage.

The UCS division will continue to track the maturity of

South African retailers focussing on the retail value chain,

client analytics, supply chain management, mobile solution

offerings and disaster recovery. The division

aims to partner with its multinational clients to enable

client expansion using its world class solutions at

mid-tier prices perfectly suited to Africa.

In line with the group’s overall strategy of expansion into

Africa the division will focus research into the African

market to enable growth opportunities. In addition, on-

going research will focus on identifying new POS solution

offerings so as to remain “best-of-breed” and retain market

dominance.

44

Revenue

R916,0 mILLION15,7% OF GROUP REVENUE

15,7%

TEChNOLOGYOperational review

division

The Technology division delivers innovative technological

solutions to both private enterprise and the public sector.

The refocus within the Technology division during

the review period has generated positive results with

the division returning to profitability and contributing

R3,3 million to operating profit for the year. The division

achieved an operating profit of R11,0 million for the

six months to 31 August 2012 reflecting the on-going

improvement in earnings.

The refocus of the division was directed at three core

responsibilities:

• Sourcing

• Solutioning

• Financing

Sourcing is the ability to establish relationships with the

principals of leading technologies at best price, highest

possible accreditation and most efficient time-to-delivery

models.

Solutioning is the ability to architect and design

core infrastructure solutions with the best and most

experienced skills around selected technologies. The group’s

accreditation with leading global technology partners and

suppliers such as Cisco Systems, EMC, HP, IBM, VMware

and Oracle is testament to the group’s skills level.

Financing is the capability to offer selected technologies to

the client in the most attractive form.

The division is aligning itself with the changing IT market

and positioning itself to best serve the interests of the

group. It is mandatory that all technology be procured

through the Technology division. Further, in an effort

to avoid the impact of competing brands and products

between divisions the Technology division is also the only

entry point for all technology into the group.

Within the IT market outsourcing activity is expected to

continue to account for the largest portion of the total IT

spend and also reflects the fastest growth rate over a five-

year forecast period. IT expenditure will move increasingly

towards a services-based model as software and hardware

products become more commoditised and services provide

the only means of differentiation for many vendors. Further,

as the cost of hardware declines, software expenditure,

which is more stable in terms of pricing, will account for a

greater portion of total spend in the IT market.

By focusing on Sourcing, Solutioning and Financing the

Technology division can be viewed as the design, build,

optimise and maintain segment of the group. It is through

technology infrastructure provided by this division that the

group is able to drive comprehensive, value-adding, client-

specific, affordable solution offerings.

31 August

2012

R’million

31 August

2011

R’million

Growth

%

% of

total

Revenue R916,0 R1 230,9 (25,6) 15,7Operating profit R3,3 (R9,0) >100 1,2Operating margin 0,4% (0,7%)

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Revenue


14,8%

CANOA Operational review

division

Business Connexion’s acquisition of the Canoa Group

helped the group to fulfil its strategy on establishing it as

a convergence player with capabilities in the previously

distinct areas of content, printing, telecommunications and

information technology.

The division operates in a highly competitive price sensitive

environment. Traditionally the division’s strength has been

in the SME market but with the advent of the Business

Connexion transaction and the IT channel, more corporate

business is being done.

The market is changing considerably with the big

manufacturers placing more emphasis on growth in the

colour and higher volume copy, print and imaging units

and the smaller manufacturers competing for the high

volume low margin business. World trends are showing that

the dominant players are finding it increasingly difficult to

maintain profitability in the print market.

The South African landscape continues to show growth

opportunities, however, 80% of this market opportunity is

very price sensitive.

The Canoa Group, for the past 27 years, has exclusive

distribution rights for Canon copy, print and imaging

solutions in Southern Africa. Its diversified distribution

channel supports growth in annuity revenue through spares

and consumables across its large installed client base.

The group also has multibrand “break and fix” service

companies offering cost effective print solutions with a

presence in all major cities in South Africa. These services

are predominately performed over a 3 to 5 year contracts

on a cost per copy basis.

Managed Print Solutions (MPS) is considered an important

and growing area within the ICT workspace. These services

are an integral component of Business Connexion’s

managed solutions portfolio. The service comprises a cost

per page commercial model, proactive maintenance of

the equipment fleet and on-going optimisation of the

environment throughout the contract life. The corporate

MPS space continues to be a highly competitive market,

but the group has managed to secure a healthy pipeline

with solid learning experiences contributing to refined

solution offerings to enhance profitability.

While Canoa Group is a Canon importer, Business

Connexion will remain vendor-agnostic, providing solutions

from a range of manufacturers to meet the needs of its

many clients across Southern Africa and beyond.

31 August

2012

R’million

31 August

2011*

R’million

Growth

%

% of

total

Revenue R860,5 R136,1 >100 14,8Operating profit R106,5 R18,0 >100 38,7Operating margin 12,4% 13,2%

* Results for 3 months only

46

Revenue


8,5%

INNOVATIONOperational review

division

With business and ICT together developing at a lightning pace, the Innovation division focuses on taking the group and its solutions into the future. The primary activities of the Innovation division are centered on software or packaged intellectual property.

The Innovation division comprises six business units:• Accsys• LARA• Nanoteq• Persal• Q Data DynamiQue• Q LINK

The Innovation division increased revenue by 19,0% to R496,5 million following the restructure previously reported in Q Data Dynamique (QDD) and the inclusion of Accsys, the payroll business that formed part of the acquired UCS subsidiaries. All business units within the division performed according to expectations.

Q LINK continues to perform despite tough market conditions. The team successfully diversified its industry presence to offset the downward market trends in the insurance industry, and thus maintain growth.

Nanoteq’s improved performance is attributable to its international expansion. Furthermore, the group sold a 25% share of its equity holding in Nanoteq, effective 1 March 2012, to management in an effort to secure key skills within the business and enhance future business profitability.

During the previous reporting period QDD acquired the external payroll division from First National Bank (FNB). Immediately, Business Connexion became a reputable payroll outsource service provider with over 400 clients. The “Payroll as a Service” offering is now available in the market with FNB actively promoting a white labelled version of the solution as part of its electronic business banking suite.

Accsys, in recognition of the role it is playing in the development of women has been awarded the Top Gender Empowered Companies: Business, Education and Training Award, from Topco Media.

LARA remains the largest player in local government with a total market share of 27% with offerings in financial management and related systems. The roll out of SOLAR is a key initiative and is being well received in the market. Debt collection from the municipalities has improved significantly which has contributed positively to the group’s accounts receivable profile with a drop in group collection days to 54,6 days at 31 August 2012 (2011: 65,5 days).

Persal remains entrenched in public sector with its stable payroll and personnel systems offering and its data warehousing solution. Although a new solution offering has been developed the uptake within the public sector has been slower than expected.

As the intellectual property hub of the group the division is committed to managing on-going investments in intellectual property through the development and enhancement of software solution offerings.

The Innovation division’s strategy is clearly defined and the division is well positioned to take full advantage of revenue opportunities as government departments free up allocated budgets and the International division opens new opportunities as it expands the group’s African footprint.

31 August

2012

R’million

31 August

2011

R’million

Growth

%

% of

total

Revenue R496,5 R417,1 19,0 8,5Operating profit R67,6 R20,0 >100 24,6Operating margin 13,6% 4,8%

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0,0%

INVESTmENTOperational review

division

By way of the Investment division, Business Connexion

continues to make itself relevant in the market place

through its investment in emerging technologies and its

investment in entities that will complement its existing

service offerings.

The Investment division currently houses Business

Connexion Content Distribution Solutions Proprietary

Limited (CDS). CDS was established to deliver the group’s

local and international connectivity requirements,

as well as enable the delivery of Limelight Networks

content services in sub-Saharan Africa, the primary market

being South Africa. Although the financial results for the

period under review are not what were expected, CDS

remains an important enabler of the group’s cloud services

strategy.

31 August

2012

R’million

31 August

2011

R’million

Growth

%

% of

total

Revenue R13,6 R1,5 >100,0 0,2Operating profit (R28,3) R0,2 >100,0 <0,0Operating margin <0,0% 13,3%

48

Revenue


8,0%

INTERNATIONALOperational review

division

With a population of one billion people in 54 countries,

the African continent presents a key growth opportunity

for the group. The International division is responsible

for capturing that growth on the continent and beyond.

Business Connexion’s International business comprises the

group’s seven subsidiaries namely:

• BCX Kenya Limited

• Business Connexion Mozambique Limitada

• Business Connexion Namibia (Proprietary) Limited

• Business Connexion ICT Services Limited#

• Business Connexion Tanzania Limited

• Business Connexion Zambia Limited

• Business Connexion Limited*

# Nigeria

* United Kingdom

In addition to the group’s legal entities listed above the

group has points of presence in Botswana and the United

Arab Emirates and it has established a partner network

to cover the African countries where it does not have a

presence.

By taking the group’s Technology, Services, Innovation,

UCS and Canoa divisions’ offerings to the global market

the International division will drive the group’s key growth

strategy of achieving 30% of the group’s earnings from

outside South Africa by 2016.

Revenue in Business Connexion ICT Services Limited

in Nigeria has grown from R66,2 million to R126,8 million

(91,5%) with corresponding operating profit growth

from a loss of R2,2 million to a profit of R9,7 million.

The appointment of a new managing director with a keen

focus on existing client engagements, building opportunity

pipelines and instilling discipline within the company’s

operations have enabled the company to capitalise on

opportunities the Nigerian market offers. In addition, the

company has retained its Cisco Gold Certification.

Business Connexion Namibia and Business Connexion

United Kingdom (UK) are both stable entities.

A deputy managing director has been appointed

in Namibia to add depth to the management team.

Namibia continues to be profitable in a saturated ICT

market. The UK business, however, has been set back

significantly by the European economic crisis. Significant

steps have been taken to continually identify cost saving

opportunities for the UK market and the business has taken

steps to make itself more visible to the market by relocating

its sales force to London’s central business district.

Business Connexion Zambia experienced a challenging

business environment in 2012 due to national elections and

a change of government in the first half of the year.

31 August

2012

R’million

31 August

2011

R’million

Growth

%

% of

total

Revenue R467,2 R368,5 26,8 8,0Operating profit R11,7 (R7,8) >100 4,3Operating margin 2,5% (2,1%)

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Despite these challenges the company remains a strong

participant in the market with good contracts in the public,

mining and private sector. Following the national elections

the political risk profile has reduced. The business is now

focusing on growing its service revenue base using the

group’s own intellectual property housed in the Innovation

division.

Business Connexion Tanzania has positioned itself as

the only Payment System Infrastructure Service Provider

in Tanzania with a secure and growing annuity revenue

base. The Umoja ATM switch now has 23 banks with

161 ATMs registered. Business Connexion Tanzania’s data

centre services are also gaining significant momentum.

The International division, with its presence in both Kenya

and Tanzania, is well positioned to take advantage of

business opportunities in the growing East Africa Economic

Community where local governments are encouraging

foreign investment through government incentive policies.

BCX Kenya, although not showing revenue returns yet,

has invested in building client relationships and conducting

feasibility studies in support of the group’s data centre

investment in the East Africa region.

A key focus for Business Connexion Mozambique

has been to stabilise the business. The rapid growth and

expansion of the Mozambican economy in the north of

the country has shown significant growth opportunities

but also highlighted the shortage of technical skills and

the strain on the company’s operating infrastructure.

The investment in skills and increased footprint in response

to economic growth continue to be key focus areas.

Although the African penetration has been considered slow,

the past two years have shown a significant turnaround

in the International division from returning operating losses

to making a profit in the current year. The International

division’s focus on positioning its operating structures

and its resources to operate in the divergent and

challenging African market are now showing positive

financial returns.

50

GOVERNANCECorporate

reportINTRODUCTIONAs an ethical values-based, listed and proudly South African

black empowered ICT company, Business Connexion

group’s compliance and governance initiatives are driven by

more than mere minimum requirement, but rather the firm

belief that out operations depend on being a responsible

corporate citizen.

Governance in Business Connexion extends beyond

legislative and regulatory compliance. Management

strives to engender an enterprise-wide culture of good

governance linked to the group’s business philosophy

which incorporates its vision and values. The group’s

values and philosophies are the framework against which

it measures behaviour and practices so as to assess the

characteristics of good governance. Business Connexion’s

values require that directors and employees behave with

integrity, displaying consistent and uncompromising moral

strength and conduct in order to promote and maintain

trust. Sound corporate governance is implicit in the values,

culture, processes, functions and organisational structure.

Business Connexion is driven by its desire to always operate

as a responsible corporate citizen and recognises that an

ethical culture underpins corporate governance. Business

Connexion and its board of directors are committed to

ensuring ethical and sustainable business practices, guided

by its values. The board and management subscribe to

the philosophy that corporate governance built on an

ethical and values-based foundation permeates through

all business activities and enables the group to achieve

its short- and medium-term strategic objectives, while

contributing to reaching the Business Connexion vision

of becoming a major international player.

Business Connexion is committed to the application of

and compliance with corporate governance principles

as reflected in the King Report on Governance for South

Africa 2009 (“King III” or the code), the Companies Act

of South Africa, the Listings Requirements of the JSE and

any legislative requirements in countries where Business

Connexion has representation. It regards corporate

governance as an integral part of the group and its

operations and therefore the board, each business division

and every employee is responsible for acting in accordance

with sound corporate governance practices and to act in

the best interest of the group. The introduction of the King

III report emphasised the need for the board of directors to

lead the enterprise with integrity and according to generally

accepted best practices to ensure a sustainable business. In

an environment of increasing regulatory pressure, the group

acknowledges the need to maintain a balance between the

expectations of investors, regulators and other stakeholders

and the need to deliver competitive financial returns.

The board takes overall responsibility for the application

of the code and it is a focal point of the group’s corporate

governance system. However, the directors of specific

companies in the group are responsible for ensuring

compliance in respect of the companies of which they are

directors to encourage an ethical trading environment.

In its governance approach, the board believes that while

compliance with the formal standards of governance

practice is important, greater emphasis must be placed on

ensuring the effectiveness of the application of governance

practices on a daily basis. The board also seeks to ensure

that good governance is practised at all levels in the group

and that it is an integral part of Business Connexion’s daily

operations. Corporate governance requires effective and

responsible leadership to ensure that the company is run

ethically, in a transparent and accountable manner and that

it is the expression of the group’s values and standards.

The board operates on the understanding that sound

governance practices are fundamental to earning the trust

of stakeholders which is critical to sustaining performance

and preserving stakeholder value. The group’s governance

framework enables the board to balance its role of

providing risk oversight and strategic counsel as well

as ensuring adherence to regulatory requirements and

risk tolerance. The board is committed to upholding the

fundamental tenets of governance which include discipline,

independence, responsibility, fairness, social responsibility,

transparency and accountability of directors to all

stakeholders. The board’s approach to governance is to

embrace relevant local and international best practice. In all

jurisdictions, governance developments are monitored on

an ongoing basis to ensure that local requirements are met.

KING III AND COMPANIES ACT COMPLIANCE The directors believe that Business Connexion has materially complied with the requirements of King III and are mindful of the limitations of achieving the goal of a fully integrated basis of reporting. All entities in the group are required to subscribe to the spirit and principles of King III.

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The group went through a King III assessment in

conjunction with PWC, the group’s internal auditors, during

November 2009, and continually conducts detailed self-

assessments by using the Institure of Directors Governance

Assessment Instrument. This process enables the group to

identify the gaps and the mechanisms required to address

them.

All the outstanding matters identified in the gap analysis

were allocated to stakeholders within the group and

feedback is provided to the board at each meeting and

remains work in progress. Major progress has been made

in terms of the governance of information technology

through the ICT steering committee with the board being

sufficiently involved in the IT strategy and updated regularly

on governance. All acquisitions and disposals of IT goods

and services are reported to the ICT steering committee.

The board is committed to full compliance with the

Companies Act of South Africa and significant effort was

devoted to addressing the requirements:

• Directors are continuously briefed on new requirements

when specific decisions need to be made.

• It is confirmed that all current directors are eligible to

act as directors of the company and are not ineligible or

disqualified from appointment as directors or prescribed

officers for any reason.

• The Risk, sustainability, social and ethics committee

ensures compliance with section 76 of the Companies

Act of South Africa and was included for the first time in

the agenda at the meeting held on 14 June 2011.

• At the AGM of 19 January 2012, the required special

resolution was approved by shareholders to enable

Business Connexion to provide financial assistance to

subsidiary companies.

• The group memorandum of incorporation is in the

process of being revised and all South African subsidiary

companies’ memoranda of incorporation will be

amended, aiming to have all harmonised by

April 2013.

GOVERNANCE DEVELOPMENTS FOR THE PERIOD UNDER REVIEWThe governance process is reviewed continually and

enhanced to align with internal developments and to

ensure continual adherence to legislation and best practice.

During the period, the key governance developments were

as follows:

• Felleng Sekha retired at the AGM of 19 January 2012.

• Business Connexion complies with the additional

requirements for good corporate governance stipulated

in the JSE Socially Responsible Investment (SRI) Index,

and has again qualified for inclusion in the 2012 JSE’s SRI

Index.

• Business Connexion was awarded the Nkonki Top

100 Integrated Reporting accolade in the Technology

Sector at a ceremony held in Johannesburg. The Nkonki

Top 100 Integrated Reporting Awards honoured the

best Integrated Reports from the Top 100 JSE-Listed

companies and those listed on the SRI Index between

31 December 2010 and 30 November 2011.

BOARD OF DIRECTORS Board composition Business Connexion has a unitary board with a majority of

non-executive directors being independent. The chairman

of the Business Connexion board is an independent

non-executive director. The roles of chairman and chief

executive officer are separate, with Tony Ruiters and

Benjamin Mophatlane holding these positions respectively.

This division of responsibility ensures a balance of authority

with no individual director having unrestricted decision-

making authority. In subsidiary companies in the group, the

roles of chairperson and managing director do not vest in

the same person.

The board consists of six non-executive directors and four

executive directors. Four of the non-executive directors

are considered independent in terms of the King definition

whilst Nkenke Kekana is part of Gadlex Holdings Proprietary

Limited, Business Connexion’s empowerment partner and

is therefore not deemed as independent. Dean Sparrow

is also not deemed as independent as he is the chief

executive officer of Capital Eye Investments (formerly

UCS Group Limited) and holds a significant investment in

Business Connexion following the group’s transaction with

UCS Group Limited.

Board independence is determined by the board members’

independence in character and judgement, and whether

there are any relationships or circumstances which are likely

to affect, or could appear to, affect their judgement.

52

Considerable thought is given to board balance and

composition and collectively the board believes that the

current mix of skill, knowledge and experience meets

the present requirement to lead the company effectively.

However, this is continually reviewed in light of the strategic

objective and the vision of becoming a major international

player. The qualifications and experience of the

independent non-executive directors combined with the

fact that they have no material contractual relationship with

the group ensures that their judgement can be exercised

independently.

None of the non-executive directors has a director’s service

contract. Executive directors are full-time employees and

as such are subject to Business Connexion’s conditions of

service.

Skills, knowledge and experience of directors Any new appointment of a director is considered by the

board on the recommendation of the Remuneration

and nominations committee (ReNco). The selection

process involves consideration of the existing balance

of skills, knowledge and experience and a continual

process of assessing the needs to act in the best interest of

the company.

The directors bring a balanced mix of attributes to the

board, including:

• domestic and international experience;

• operational experience, including ICT;

• financial, legal and entrepreneurial skills; and

• expertise in risk management and internal financial

control.

The length of tenure of the directors on the Business

Connexion board is reflected in the graph below.

No directors have served for longer than nine years.

Board appointments and succession planning Directors are appointed by the board in a formal and

transparent manner. Non-executive directors do not have

a fixed term of appointment and one-third of the directors

retire by rotation annually in terms of the company’s

memorandum of incorporation (MOI). They are eligible

for re-election at the annual general meeting (AGM).

In addition, directors appointed during the course of any

financial year are required to be re-elected at the next AGM.

Executive directors retire at age 60 while non-executive

directors are required to retire at the AGM following their

70th birthday.

The ReNco considers non-executive director succession

planning and makes appropriate recommendations to

the board. The board collectively identifies and appoints

directors, including the chief executive officer and other

executive directors, on recommendation from the ReNco.

This committee fulfils the role of a nominations committee

and is responsible for identifying and nominating

candidates for approval of the board as additional directors

or to fill any board vacancies when they arise, taking skills,

experience, demographics, gender and racial diversity, as

well as diversity in business, geographical and academic

backgrounds into account. In addition, the committee

recommends directors, who retire in terms of the

company’s MOI, for re-election.

Ongoing education and new director inductionOngoing board education remains a focus. The directors

are kept abreast of all applicable legislation and regulations,

changes to rules, standards and codes, as well as relevant

sector developments that could affect the group and its

operations.

On appointment, each new director receives an induction

pack that includes all relevant governance information such

as mandates, management structures, significant reports,

important legislation and policies. One-on-one meetings

are scheduled with management to introduce new directors

to the company and its operations.

Board charter A formal documented charter regulates how business is

to be conducted by the board in accordance with the

principles of good corporate governance and sets out

GOVERNANCECorporate

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1

2

3

4

5

LENGTH OF TENTURE

1 – 2

3 – 4

5 – 6

6+

Number of directors

Year

s

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specific powers and responsibilities to be discharged

by board members collectively and the individual roles

expected of them.

Key features covered in the charter are as follows:

• the mission and credo of the board;

• acknowledgement of fiduciary responsibility;

• selection and composition of the board;

• conduct regarding conflicts of interest;

• determining of non-executive directors’ fees and

process;

• orientation of new directors;

• formal evaluation of directors performance; and

• board meetings and procedures.

The charter expresses the board’s philosophy in regard to

excellence in client satisfaction, quality of service, respect

for human dignity, being an exemplary corporate citizen

and fostering sound relationships with stakeholders and

regulators.

Board responsibilitiesThe board meets with the Executive committee annually

to agree on the proposed group strategy and to assess

progress to the set strategy as well as to consider long-

term issues facing Business Connexion. The directors are

responsible for the preparation, integrity and reliability

of Business Connexion’s annual financial statements

and all other information contained in the integrated

report. Certain responsibilities have been delegated to

sub-committees, but the board accepts that it remains

accountable for the performance and affairs of the group.

The board identifies and monitors key risk areas, key

performance areas and non-financial aspects relevant to

Business Connexion. The directors are entitled to obtain

independent professional advice on matters related to the

exercise of their duties and responsibilities at the group’s

expense, should they deem this necessary. In addition, the

board has unrestricted access to all company information,

records, documents and property to enable it to discharge

its responsibilities.

The board is responsible for the group’s internal financial

and operational control systems. The internal control

systems are designed to provide reasonable assurance

against material misstatement and loss.

The board has reviewed and approved the integrated

report, with assurances on the information having been

provided to the group Audit and compliance committee.

Strategy planningAs a key performance area of the board, group strategy is

mapped by the board in consultation with the Executive

committee of the group. The board ensures that the

strategy is aligned with the group’s values, performance

and sustainability objectives and that it addresses the

associated risks. The board appreciates the fact that strategy,

risk, performance and sustainability are inseparable and

annually reviews the strategy and finalises the group’s

business plan for the next year. The Executive committee

attends a two-day strategy session annually to determine

strategic direction with the board. Financial performance is

monitored through quarterly management reports.

Board meetingsThe board meets regularly, retains full and effective

control over all the companies in the group and monitors

executive management in implementing board strategies

and plans. Additional board meetings, apart from those

planned, are convened as circumstances dictate. The

number of meetings held during the year under review

(including meetings of board-appointed committees) and

the attendance of each director are set out on page 54 of

this report. Where directors are unable to attend a meeting

personally, video- and teleconferencing facilities are made

available to include them in the proceedings and allow

them to participate in the decision-making process.

The board meets at least four times per annum to

consider business philosophy and strategic issues, to

approve financial results and budgets, and monitor the

implementation of delegated responsibilities. At each

meeting, feedback from its committees is provided.

The board is supplied with all relevant information and

information needs are well defined and non-executive

directors have full access to management and the company

secretary. Specific issues which arise between board

meetings are dealt with via electronic communication and

where decisions are taken these are recorded by written

resolution requiring signature by all directors to be valid.

54

Directors are afforded the opportunity to propose additional matters for discussion at board meetings. Board meetings are

scheduled well in advance. Board documentation is provided to directors in a timely manner. The board agenda and meeting

structure is focused on strategy and performance monitoring, governance and related matters. This ensures that the board’s

time and energy is appropriately applied.

Non-executive directors have access to management and may meet separately with management without the attendance

of executive directors. Directors are kept appropriately informed of key developments affecting the group between board

meetings.

Meeting attendance including board sub-committees

Director

Board meetings

(including

2 special

meetings)

Audit and

compliance

(including

2 special

meetings)

Remuneration

and

nominations

(including

1 special

meeting

Risk,

sustainability,

social and ethics

J John 5/6 6/6 – 4/4NN Kekana 3/6 – – 4/4M Lehobye 6/6 2/6 5/5 –LB Mophatlane 6/6 – – –V Olver 6/6 – – –JM Poluta 6/6 5/6 – –AC Ruiters 6/6 – 5/5 4/4FL Sekha* 1/1 – 1/2 –D Sparrow 6/6 – 5/5 –J Jenkins 6/6 – – –LN Weitzman 6/6 – – –

* Retired at AGM held on 19 January 2012

Board performance assessment and effectiveness evaluationBoard evaluations are conducted annually during

November through a board effectiveness evaluation

process as well as an individual director self-evaluation

questionnaire. The board collectively considers the

outcomes of this process during the first board meeting

after the evaluation process has been concluded. The

outcomes are minuted as part of the formal board meeting

and these minutes are available for inspection to the

external auditors. The chairman of the board also has a

one-on-one discussion with each non-executive board

member thereafter. The performance of the group chairman

is evaluated by fellow directors. No major areas of concern

were highlighted during the reporting period.

The board evaluation process inter alia covers the following

key areas:

• board structure and composition;

• board processes and accountabilities;

• board committees;

• performance by the chairman of the board;

• performance by the company secretary;

• strategy and financial matters (performance against

strategic objectives set);

• relationship with stakeholders; and

• group structure, succession planning, management and

remuneration.

The evaluation process is also used to determine whether

the board will endorse a retiring director’s re-election.

Names and information of the directors standing for

re-election at the AGM are contained in the notice of AGM

on page 162.

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The board/individual director performance evaluation

assesses the following:

• the quantitative and qualitative aspects of the group’s

performance through reviews of the management

reporting which includes financial and non-financial

information, and strategic and operational updates from

management;

• review of key risk areas and key performance indicators;

• monitoring of the group’s compliance with all relevant

legislation and codes of business practice;

• monitoring of the procedures to ensure the group

maintains an effective system of internal control and risk

management; and

• reviews the group’s communications with its key

stakeholders.

Individual director performance is assessed against the

following criteria:

• time and availability;

• competence and commitment to performing the

function of a Business Connexion director;

• strategic thought and specific skills, knowledge and

experience brought to the board;

• the director’s views on key issues and challenges facing

the group;

• the director’s views on his/her own performance as a

board member;

• attendance over the past year; and

• other areas or roles where the director’s specific skills

could be used.

Board remunerationThe non-executive directors receive fees for their services

as directors and for serving on board committees. The

chairman of the board and chairmen of the respective

board committees receive an additional fee. These fees are

recommended by the executive directors and shareholders

who consider and approve the proposed remuneration

payable to directors at each AGM.

The fees proposed to be approved by shareholders at

the AGM for the 2013/2014 financial year are reflected in

the notice of the AGM on page 164.

None of the current non–executive board members

participate in any share incentive or option scheme.

Directors’ and officers’ insuranceDirectors and officers have the benefit of liability insurance

funded by the group. The cover excludes liability resulting

from criminal, reckless or fraudulent behaviour. The level of

cover is reviewed annually to ensure that it is appropriate

and in line with legislative parameters and any other

statutory provisions.

Board committees The board is authorised to establish board committees to

facilitate decision-making by the board in the execution of

its duties.

Business Connexion currently has three standing

committees, namely the Audit and compliance committee,

Remuneration and nominations committee and Risk,

sustainability, social and ethics committee. The members

and the chairmen of the committees are appointed by

the board. The names of the members of the Audit and

compliance committee are submitted to shareholders for

approval annually at the AGM. The proposed fee structure

for these committees is submitted to shareholders for

approval and forms part of the notice of the AGM as

contained on page 164 of this report.

The board recognises that it is ultimately accountable

and responsible for the performance and affairs of the

group, and that the use of delegated authorities to board

committees and management in no way mitigates or

dissipates the discharge by the board and its directors

of their duties and responsibilities.

Specific responsibilities have been delegated to these

committees which operate under written terms of

reference confirmed by the board. There is transparency

and full disclosure from board committees to the board.

In this regard, the minutes of committee meetings are

submitted to the group board for noting. In addition,

written summaries of key issues and decisions taken at

committee meetings are tabled at each board meeting, and

committee chairmen also provide the board with a verbal

report on recent committee activities. Board committees

are free to take independent outside professional advice

as and when deemed necessary. The office of the group

secretary provides secretarial services for each of the board-

appointed committees.

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Notwithstanding the establishment of the various board

committees and delegated authorities, the Business

Connexion board reserves to itself a range of key decisions

to ensure that it retains proper direction and control

of the group (supported by any recommendation that

may be made by the relevant board committee and/or

management).

Although the Business Connexion board still retains overall

responsibility for the affairs of the group, subsidiary boards

play an important role in the group’s overall governance

approach. Business Connexion directors have full access to

subsidiary board documentation. The level of detail dealt

with at subsidiary boards is generally greater than that dealt

with by the Business Connexion board (as well as being

specific to the relevant subsidiary).

The board is of the opinion that the board committees set

out below have effectively discharged their responsibilities

as contained in their respective terms of reference for the

year under review.

AUDIT AND COMPLIANCE COMMITTEE Members: Jenitha John (chairperson), Mamoroke Lehobye

and John Poluta. In terms of the recommendation in the

King III Report the chairman of the board should not be a

member of the audit committee. Tony Ruiters, the group

chairman, attends meetings on occasion. The board resolved

that Dean Sparrow attend the committee meetings due to his

knowledge and expertise. He is not a committee member as

he does not fulfil the defined independence requirements.

Composition and meeting procedures: The chairperson

and the members of the committee are all independent

directors. The appointment of the members of the

committee are also submitted to shareholders for approval

and forms part of the notice and proxy for AGM purposes

as contained on page 161 of this report. Meetings are

held at least four times per year and are attended by the

external and internal auditors, the chief executive officer,

deputy chief executive officer, chief financial officer, group

chief audit executive and, on invitation, members of

executive management. All members of the committee are

financially literate.

The internal and external auditors, as well as the group chief

audit executive, have unrestricted access to the committee,

which ensures that their independence is in

no way impaired. Internal and external audit have met with the committee without management being present during the financial year.

Oversight function of the Audit and compliance committee: The committee is a sub-committee of the board that is appointed to assist in the review of the group’s financial position, internal financial controls, fraud and IT risks relevant to financial reporting and to make recommendations to the board on all financial matters. This includes assessing the integrity and effectiveness of accounting, financial, compliance and other control systems.

The competence, suitability, skills and independence of the external auditors were considered and the committee is satisfied that KPMG meets all the requirements to fulfil the role of external auditors of Business Connexion. Business Connexion has an audit partner rotation process in accordance with the relevant legal and regulatory requirements which requires the lead partner to rotate every five years.

The committee is responsible for the oversight of the internal control framework, which are the group’s three lines of control defence overlaid by the group’s corporate governance framework. The three lines of defence model seek to separate the relevant duties and ensure independent reporting lines to underpin effective internal control and risk management.

Internal financial controls are in place to ensure the integrity of the group’s qualitative and quantitative financial information, which is used by a variety of stakeholders. The group chief financial officer is ultimately responsible for implementing and maintaining internal financial controls.

Assurance of the effectiveness of internal financial controls is achieved through: • management confirmation that the financial governance

controls and internal financial controls supporting the assertions in the financial statements operated effectively during the year; and

• the co-ordination of audit work by the internal and external auditors as part of their annual risk-based audit plans.

The group annually submits all non-audit fees to the committee for review and approval. This is done to ensure

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that the independence and objectivity of the auditors is not

impaired. The committee chairman approves, on a case-by-

case basis, all significant services outside the scope of the

pre-approved audit plan.

The committee reviews financial information to be

published by the group. In addition, the content of the

integrated report was reviewed by the committee and

recommended to the board. The committee receives

assurance on material issues from the external auditors.

The committee has also been mandated, in accordance

with King III, with the responsibility for overseeing the

implementation of integrated reporting and verification

procedures. This will also involve the further development

of the combined assurance model.

REMUNERATION AND NOMINATIONS COMMITTEE (RENCO)Members: Mamoroke Lehobye (chairperson), Tony Ruiters

and Dean Sparrow.

Composition and meeting procedures: The ReNCo

comprises non-executive directors of Business Connexion

and is chaired by an independent director. The chief

executive officer, the executive responsible for human

resources, and the chief financial officer attend the meetings

by invitation, but recuse themselves from discussions and

decisions regarding their remuneration and benefits. Four

meetings are held annually.

The ReNco also assists the board in governance matters

related to executive remuneration, succession planning and

identification of suitable candidates to serve on the board.

The committee has formal terms of reference approved

by the board and is responsible for the assessment and

approval of a broad remuneration strategy for the group.

In particular, it reviews and agrees on key performance

indicators and determines the remuneration packages

and incentive bonuses of the members of the Executive

committee, the fees for the non-executive directors and

recommends the granting of share options to executive

directors and senior employees. These details, together with

an overview of remuneration and incentive philosophies,

are set out in the Remuneration report on pages 87 to 95.

RISK, SUSTAINABILITY, SOCIAL AND ETHICS COMMITTEEMembers: Nkenke Kekana (chairman), Jenitha John and

Tony Ruiters.

Composition and meeting procedures: Meetings are held

at least four times per year and are attended by the chief

executive officer, chief financial officer, chief audit executive

and, on invitation, members of executive management.

Oversight function the Risk, sustainability, social and

ethics committe: The board is ultimately responsible

for risk and capital management. The main purpose of

the Risk, sustainability, social and ethics committee is to

provide independent and objective oversight of risk in the

group. The committee reviews and assesses the integrity

of risk control systems and ensures that risk policies

and strategies are managed effectively and contribute

to a culture of discipline and control that reduces the

opportunity for fraud. Assurance on the effectiveness of the

risk management processes is provided to the committee

through management reporting. More information on

risk management is contained in the Risk management

report on pages 63 to 66. During the year a Board Risk

Assessment workshop was held where the board identified

risk pertaining to the group from a board perspective. These

identified risks will be aligned with the risks as identified by

group Executive committee and business units.

The Risk, sustainability, social and ethics committee is

constituted as a sub-committee of the board of directors of

Business Connexion. The committee comprises of at least

three non-executive directors. Members of this committee

and its chairman are nominated by the board. At least one

member of the Audit and compliance committee will be an

ex officio member of this committee.

The role of the committee is to assist the board on the

following matters:

• Risk – To ensure that the group has implemented an

effective policy and plan for risk management that

will enhance the group’s ability to achieve its strategic

objectives, and to ensure that the disclosure regarding

risk management is comprehensive, accurate, and

relevant. For more information refer to the Risk

management report on pages 63 to 66.

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• Sustainability and sustainability reporting – To assess

key sustainability performance measures taking into

consideration economic, social and environmental

factors relevant to the group; to assess management’s

plans and strategies to ensure the sustainability of

the group and to ensure that sustainability issues

that are disclosed in the group’s integrated report are

accurate, comprehensive, relevant and reliable and

that no conflicts or differences arise when compared

with the financial results. The committee will review

and recommend to the board the approval of the

annual sustainability summary report and make

recommendations on specific actions or decisions

that the board should consider in order to maintain

the integrity of the annual sustainability report for the

integration into Business Connexion’s integrated report.

More information is contained in the Sustainability

report on pages 67 to 79.

• Health, Safety, Environmental and Community

matters – To ensure the effectiveness of Business

Connexion’s policies and systems for identifying and

managing material health, safety, environmental and

community matters. The committee will review the

effectiveness of Business Connexion’s policies and

systems for identifying and managing the health, safety,

environment and community matters that are material

to the achievement of the corporate objective.

• Transformation and/or other similar in country

requirements – To ensure the group’s target level of

compliance to the B-BBEE Codes of Good Practice and

to ensure progress in achieving the targets are monitored

by means of scorecards for each division of the group as

it relates to South African legislative requirements, and

to ensure that the group complies with any legislative

requirements in the countries in which it operates in

terms of indigenisation targets.

• IT governance – To ensure that the group’s ICT strategy

and plans are aligned with the business strategy, the

performance and the sustainability objectives of the

group. To assist directors in fulfilling their responsibility

of ensuring that there is an IT governance framework in

place throughout the group.

• Fraud risk assessment – To review the results of the

annual fraud risk assessment, determine root cause

and monitor implementation of corrective actions to

minimise fraud risks identified and refer any internal

control related fraud risks to the Audit and compliance

committee.

• Fraud prevention – To review and recommend to

the board the group’s fraud prevention policy, the

effectiveness of the fraud prevention strategies adopted

by the group and to monitor overall compliance with

the fraud prevention policy.

• Business continuity - To ensure that the group has

comprehensive business continuity plans in place that

are documented and communicated to all relevant

officials.

• Social and ethics –

(a) To monitor the group’s activities, having regard to

any relevant legislation, other legal requirements

or prevailing codes of best practice with regard to

matters relating to -

(i) Social and economic development.

(ii) Good corporate citizenship, including the

group’s -

(aa) promotion of equality, prevention of unfair

discrimination and reduction of corruption;

(bb) contribution to development of the

communities in which its activities are

predominately conducted or within which

its products or services are predominately

marketed; and

(cc) record of sponsorship, donations and

charitable giving:

(iii) The environment including the impact of the

group’s activities and of its products and services.

(iv) Consumer relationships, including the advertising,

public relations and compliance with consumer

protection laws.

(v) Labour and employment including

(aa) the group’s standing in terms of the

International Labour Organisation Protocol

on decent work and working conditions; and

(bb) the group’s employment relationships, and

its contribution towards the educational

development of its employees;

(b) To draw matters within its mandate to the attention

of the board as occasion requires.

(c) To report, through one of its members, to the

shareholders at the group’s AGM on the matters

within its mandate.

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EXECUTIVE DIRECTORS AND THE GROUP EXECUTIVE COMMITTEEThere are four executive directors on the board of Business

Connexion and a number of executive directors on the

boards of the group’s main subsidiaries. There is full

disclosure in the group remuneration report of various

remuneration matters in respect of the executive directors

of Business Connexion. Refer to the Remuneration report

on pages 87 to 95.

The board appoints executive management, taking into

account the recommendations of the chief executive officer

and the ReNCo. In addition, the ReNCo determines the

remuneration and benefits of executive management.

The Executive committee, chaired by the chief executive

officer, comprises the group’s four executive directors and

eight members of the executive management. It meets

once a month and deals with all material matters relating

to the implementation of the agreed board strategies and

plans, the monitoring of performance and the consideration

of group policies. The committee held 9 meetings during

the year, as well as a two-day strategic planning meeting

with the board.

The board has delegated specific authorities to the chief

executive officer. The Executive committee members are

responsible for specific areas related to the business model

of Business Connexion.

As a general rule, members of the Executive committee are

not permitted to hold external directorships. In exceptional

cases, such directorships are allowed only to the extent

that these do not interfere with the members’ immediate

management responsibilities and are approved by the chief

executive officer on an individual basis.

GROUP COMPANY SECRETARYAll directors have access to the advice and services of

the group company secretary who provides guidance to

the board as a whole and to individual directors with regard

to discharging their responsibilities in the best interests of

the group. The group company secretary also ensures the

induction of new directors and assists the chairman and

the chief executive officer in determining the board and

board sub-committee agendas, as well as formulating

governance and board-related issues.

At a board meeting held on 30 August 2012, the board

considered in terms of section 3.84(i) of the JSE Listings

Requirements the competence, qualifications and

experience of the company secretary. In terms of the

appropriateness of the group company secretary the

board has considered his experience and expertise and is

satisfied that Johan de Koker has the appropriate expertise,

experience, competence and skills to fulfil the role of group

company secretary of Business Connexion Group Limited,

and that the role is performed on an arm’s length basis.

SHARE DEALINGSIn terms of the group’s closed period policy, directors,

associates, officers, participants in the share incentive

scheme and employees who may have access to price

sensitive information are precluded from dealing in

Business Connexion shares prior to the end of the interim

and year-end financial periods until release of the group’s

interim and final results. Where appropriate, additional

closed periods, as well as the persons to whom such

periods apply, may be invoked by the board. Details

of directors’ dealings in Business Connexion shares are

disclosed to the board and the JSE Limited through the

Securities Exchange News Service (SENS). All directors

are required to obtain approval from the chairman prior

to trading.

Directors and all group employees are not permitted to deal

directly or indirectly in the shares of the company during:

• the period from the end of the interim and annual

reporting periods to the announcement of the interim

and annual results; or

• any period when they are aware of any negotiations or

details which may affect the share price; or

• the time declared as a prohibited period in terms of the

JSE Listings Requirements.

Directors are required to notify the company secretary in

writing immediately following any transaction involving

the company’s shares. The trades are timeously disclosed

to the JSE.

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INVESTOR RELATIONSManagement actively engages with local and international

shareholders and analysts to enable informed decisions to

be made on investing in Business Connexion. The investor

relations approach embraces the principle of transparency,

timely disclosure and equal access to information. The

approach is also aimed at ensuring compliance with

governance and disclosure regulations whilst limiting

reputational risk for the group.

The chief executive offider, deputy chief executive

officer and chief financial officer are designated investor

spokespersons and meet regularly with shareholders and

analysts.

STAKEHOLDER COMMUNICATION AND RELATIONSHIPSThe board recognises that effective communication is

integral in building stakeholder value and is committed

to providing meaningful, transparent, timely and accurate

financial and non-financial information to primary

stakeholders. The purpose is to assist these stakeholders

make meaningful assessments and informed investment

decisions about the group. In addition, management

regularly meet with major institutional investors and

analysts. The board acknowledges that the integrated

annual report should disclose the nature and outcome

of dealing with stakeholders and more detail on the

stakeholder management programme will be provided

in future.

Business Connexion’s stakeholders include shareholders,

employees, clients, communities, government, regulatory

bodies, the media and various resource/service providers.

The board recognises the importance of ensuring an

appropriate balance in meeting the diverse needs

and expectations of the group’s stakeholders, building

lasting relationships with them and reporting to them

in a transparent, balanced and comprehensible manner

that favours substance over form. Business Connexion

reports annually on the nature and extent of its social

transformation, ethical, safety, health (including HIV/Aids)

and environmental policies and practices.

The group recognises the need for full, equal and timely

disclosure to all shareholders, as prescribed by the Listings

Requirements and guidelines of the JSE. Apart from annual

and interim reports, it uses a broad range

of communication channels, including SENS, the print,

radio and television media and the Business Connexion

website, www.bcx.co.za, to achieve this.

The group recognises the importance of its shareholders’

attendance at its AGM. All shareholders are encouraged

to attend the AGM and to raise issues and participate in

discussions on items included in the notice of the meeting.

Such attendance offers an opportunity for shareholders to

raise issues and participate in discussions relating to items

included in the notice of meeting. Chairmen of the board

committees and the lead audit partner of the external

auditors of the company are required to attend annual

and general meetings of the company to answer questions

raised by shareholders. Explanatory notes setting out the

effects of all proposed resolutions accompany the notice of

meeting. Shareholders’ meetings are conducted on the basis

of a poll. The group proposes a separate resolution on each

substantially separate issue and does not bundle resolutions

together inappropriately. All resolutions are determined

on a poll. The results of shareholders’ meetings are posted

on SENS. Shareholders have access to the minutes of

such meetings in accordance with the stipulations of the

Companies Act.

Business Connexion’s relevance to the markets and societies

in which it operates depends on continued and meaningful

engagement with all stakeholders. This helps the group to

manage the expectations of society, minimise reputational

risk and form strong partnerships which all underpin

business sustainability.

Copies of SENS announcements, investor briefings,

presentations, interim and annual reports and other

relevant information are posted on the group’s website at

www.bcx.co.za.

GOVERNANCECorporate

reportcontinued

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COmPLIANCEAudit and

reportThe audit and compliance committee has the pleasure

of presenting its report for the group for the year ended

31 August 2012.

The Audit and compliance committee has adopted formal

terms of reference delegated to it by the board of directors.

The terms of reference are aligned with the Companies Act,

the King Report on Governance for South Africa 2009

(King III) and the JSE Listings Requirements.

COMPOSITION OF THE COMMITTEEThe Audit and compliance committee consists of only

non-executive directors, all of whom are financially literate.

The committee meets at least four times per annum in

accordance with its terms of reference. The members act

independently and are listed below:

• Jenitha John (chairperson)

• John Poluta

• Mamoroke Lehobye

• Dean Sparrow (attendee)

Business Connexion’s chief executive officer, deputy chief

executive officer, chief financial officer, chief audit executive,

external auditors, and other assurance providers attend

committee meetings in an ex officio capacity.

The Audit and compliance committee has discharged the

functions in terms of its charter, approved by the board,

and ascribed to it in terms of the Companies Act as follows:

• reviewed the interim, provisional and year-end financial

statements and integrated report, culminating in a

recommendation to the board to adopt them. In the

course of its review the committee:

• took the appropriate steps to ensure the financial

statements were prepared in accordance with

International Financial Reporting Standards (IFRS) and

in a manner required by the Companies Act;

• considered and, when appropriate, made

recommendations on internal financial controls;

• dealt with concerns or complaints on accounting

policies, internal audit, the auditing or content of

annual financial statements, and internal financial

controls;

• reviewed legal matters that could have a significant

impact on the organisation’s financial statements; and

• reviewed all adjustments resulting from the external

audit and accepted and adjusted audit differences as

not material to the fair presentation of the financial

statements;

• reviewed external audit reports on the annual financial

statements;

• reviewed and approved the internal audit plan;

• reviewed internal audit and risk management reports

and, where relevant, made recommendations to the

board;

• evaluated the effectiveness of risk management, controls

and governance processes;

• verified the independence of the external auditor,

nominated KPMG Inc. as auditor for 2012 and noted

the appointment of Mr Pierre Fourie as the designated

auditor;

• approved audit fees and engagement terms of the

external auditor;

• reviewed capital expenditure throughout the group for

adequate control, monitoring and reporting;

• reviewed the management and reporting of tax-related

matters;

• reviewed the management and reporting of treasury-

related matters;

• sought assurance from the chief information officer

on management of IT risks as it related to financial

reporting;

• considered, and deferred, the establishment of a

combined assurance committee at group level; and

• reviewed a documented assessment, including key

assumptions, prepared by management of the going

concern status of the company, and has accordingly

confirmed to the board that the company will be a

going concern for the foreseeable future.

INTERNAL AUDIT The Audit and compliance committee has oversight of

the group’s financial statements and reporting process,

including the system of internal financial control. It is

responsible for ensuring that the group’s internal audit

function is independent and has the necessary resources,

standing and authority in the organisation to discharge

its duties. The committee oversees cooperation between

internal and external auditors, and serves as a link between

the board of directors and these functions. The committee

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COmPLIANCEAudit and

reportaccordingly recommends the internal audit charter for

approval by the board and approves the annual internal

audit plan. The chief audit executive is responsible for

reporting on the findings of the internal audit work against

the agreed internal audit plan to the Audit and compliance

committee on a regular basis. The chief audit executive

reports functionally to the chair of the audit committee and

administratively to the chief financial officer.

During the year, internal audit performed a review of the

adequacy and effectiveness of the group’s internal control

environment, including its internal financial controls. Based

on the results of these reviews, internal audit confirmed

to the Audit and compliance committee that nothing has

emerged to indicate material weakness in the internal

control processes, including internal financial controls. The

written assessment by internal audit formed the basis for

the Audit and compliance committee’s recommendation to

the board in this regard.

RISK MANAGEMENTThe Risk management report on pages 63 to 66 provides

information on the review and assessment of the risks

identified through the risk management process, and an

evaluation of management’s mitigating plans and actions to

reduce the residual risk.

EXTERNAL AUDITThe competency, skills and experience of the external

auditors were considered and the committee is satisfied

that KPMG Inc. meets all the requirements to fulfil the

role of external auditors of Business Connexion. Business

Connexion has an audit partner rotation process (maximum

5 years) in accordance with the relevant legal and regulatory

requirements. The auditors, as well as the individual

designated auditor, are re-appointed annually for the

forthcoming year at the annual general meeting.

Fees paid to the auditors are disclosed in note 23 on

page 127.

APPROPRIATENESS AND EXPERTISE OF THE CHIEF FINANCIAL OFFICER AND FINANCE FUNCTIONThe Audit and compliance committee, at a meeting held

on 13 August 2012, considered the competence, skill and

experience of the chief financial officer in terms of section

3.84(h) of the JSE Listings Requirements, and was satisfied

that Lawrence Weitzman met all the requirements to fulfil

the role of chief financial officer for Business Connexion.

Following a review and meeting of the requirements of

each of the terms of reference, the Audit and compliance

committee, individually and combined, is satisfied that

the finance function of the group and its subsidiaries is

adequately skilled, resourced and experienced.

The Audit and compliance committee recommended

the approval of the unqualified audited annual financial

statements to the board. The board has subsequently

approved the financial statements which will be open for

discussion at the forthcoming annual general meeting.

The Audit and compliance committee will continue to

apply rigour in overseeing the group’s integrated reporting

process and the effectiveness of the internal control

environment, governance and risk management processes.

J John

Audit and compliance committee chairperson

continued

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mANAGEmENTRisk

BUSINESS CONNEXION IS COMMITTED TO CONDUCTING BUSINESS EMPLOYING SOUND BUSINESS PRACTICES WHICH ARE BEYOND REPROACH WITH ITS SUPPLIERS, BUSINESS PARTNERS AND CLIENTS. BUSINESS CONNEXION CONTINUES TO BUILD AND ENHANCE RISK MANAGEMENT POLICIES AND PROCEDURES THAT ASSIST IN DELIVERING THE GROUP’S OBJECTIVES.

The group has adopted an integrated risk management framework which includes the following areas:• Corporate governance and business ethics• Business process management• Environmental risk management• Sustainability• Internal audit• Occupational health and safety• Security management• Business continuity management• Enterprise risk management

The integrated report addresses the above areas in the Corporate governance report on pages 50 to 60, the Audit and compliance report on pages 61 to 62, this Risk management report and Sustainability report on pages 67 to 79.

Risk management within Business Connexion is a structured approach to managing uncertainty through risk

assessments, developing strategies to manage these risks

and mitigation of risk using managerial resources.

The risk management practices deployed within Business

Connexion are based on the following guides and standards

as best practices:

• The King report on Corporate Governance for South

Africa (King III).

• The JSE Limited’s Social Responsibility Investment Index.

• The Department of Trade and Industry’s codes of good

practice.

• The Committee of the Sponsoring Organisations of the

Treadway Commission (COSO) and its Enterprise Risk

Management Framework.

• AS/NZS 4360 Risk Management Standard.

• ISO 31000:2009 Risk Management – Principles and

guidelines.

64

Defining the risksRisks are defined within each business unit and at a strategic level. These are done through the conduct ofrisks assessments and as a result of internal audits.

1

Risks are based on their potential impact on the business (strategic, financial, market, political, country, environmental, operational, client relations, human resources, supplier relations and corporate governance). A classification of 1 is seen as insignificant and 5 as very significant.

2 Assessing the impact of the risks on the company should they occur

Risks are assessed based on their potential likelihood of occurring. A classification of 1 is seen as insignificant and 5 as very significant.

3 Assessing the likelihood of the risks occurring

The classification of risks is completed by logging the risks and the impact and likelihood values into Barnowl (the group’s risk management tool).

4 Classifying the risks

Once the risks have been logged and the required risk owners identified the monitoring process commences by the inclusion of the mitigation plan and the required actions associated to the plan. The reporting of the risks are completed quarterly to the board through the Risk, sustainability, social and ethics committee.

5Monitoring andreporting on risks

The risk management process is based on a 5 step approach:

mANAGEmENTRisk

continued

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RESPONSIBILITY FOR RISK MANAGEMENT The board of directors has overall responsibility for

the establishment and oversight of the group’s risk

management framework. The board has established the

Risk, sustainability, social and ethics committee which is

responsible for developing and monitoring the group’s risk

management standards, policies and procedures.

The committee reports quarterly to the board of directors

on its activities. For completeness, part of this report

relating to financial risks is also presented to the Audit and

compliance committee for noting, as risk management

forms part of the combined assurance framework.

RISK STRATEGY Business Connexion uses a two-way approach to identify

risk. Firstly, risks that impact on the group (strategic or

group risks) are identified and secondly, risks that impact on

divisions (operational level) or project risks are identified.

These risks are then consolidated into a total list which is

categorised into eleven risk categories:

• Strategic

• Financial

• Market

• Political

• Country

• Environmental

• Operational

• Client relations

• Human resources

• Supplier relations

• Corporate governance

Each category has been assigned a risk owner (group

Executive committee member) who is responsible for

reviewing the risks and implementing action plans to

address the risks.

RISK APPETITE The group takes on a level of risk in line with its risk appetite

and risk tolerance levels as determined by the board.

All risks that fall outside the risk appetite or risk tolerance

levels are addressed immediately or escalated by the

Risk, sustainability, social and ethics committee to group

Executive committee and, if necessary, to the group board

for noting and prioritisation.

RISK ASSESSMENT WORKSHOPS A qualitative technique of conducting half-yearly risk

assessment workshops across divisions is used to identify,

analyse and evaluate strategic risks. The same process is

used to identify operational risks within the divisions.

The risk assessment workshops involve the identification

of risks followed by their ranking, evaluation, formulation

of mitigation strategies and action plans.

RISK REPORTING Risk reports to the various stakeholders are prepared and

distributed as follows:

• BarnOwl Risk reports published monthly on the Business

Connexion workzone;

• quarterly report to the Risk, sustainability, social and

ethics committee; and

• a quarterly report to the Audit and compliance

committee.

Objectives Process/Management Action

Risks

Controls

Residual risk – after the assessment of controls

Inherent risk – before the assessment of controls

Inherent Residual

Risk management evaluation process

66

INTERNAL AUDITThe group acknowledges the importance of an independent

strategically aligned internal audit function to assist the

Audit and compliance committee in discharging its

responsibilities. The internal audit function is independent

of all other organisational functions, reports directly to

the committee and has free and unrestricted access to all

areas within the group, including management, personnel,

activities, locations and information.

Systematic and thorough annual internal audit coverage

plans are prepared together with management and

approved by the Audit and compliance committee.

All businesses within the group receive adequate coverage

by following a methodical risk-based audit approach.

The strategic focus of internal audit is to:

• improve risk-based alignment in order to provide

assurance on key risks that may prevent or effect the

realisation of strategic goals; and

• assist management in further developing the internal

financial control framework to identify financial

reporting risks and ensure controls are adequate to

address the risk of material misstatements of financial

results.

PWC has been appointed as internal auditors to Business

Connexion to provide independent and objective assurance

and reporting to an internally appointed group chief

audit executive. Internal audit has provided a systematic

and disciplined approach to evaluate and improve the

effectiveness of risk management, control and governance

processes within Business Connexion.

The internal audit process provides oversight to obtain

reasonable assurance regarding management assertions

that control objectives are met to achieve effectiveness and

efficiency of operations, reliability of financial information

and compliance with laws and regulations.

The purpose, authority and responsibility of the internal

audit function is formally defined in the function’s terms

of reference as approved by the Audit and compliance

committee.

BUSINESS CONTINUITY MANAGEMENTThe business continuity management practices deployed

within Business Connexion are based on the following

guides and standards:

• BS 25999-1:2006 BCM Code of Practice of the British

Standards Institution (BSI).

• BCI Good Practice Guidelines 2008.

• BCI 10 Standards of Professional Competence.

• ISO 22301: 2012.

Business continuity management is managed through a four

point plan:

• to proactively identify potential disruptions and disasters,

• to proactively improve Business Connexion’s resilience

against any disruptions and disasters;

• to provide a rehearsed method for restoring Business

Connexion’s ability to supply its key products and

services to an agreed level within an agreed timeframe in

reaction to a disruption or disaster; and

• to provide a proven capability to manage a disruption

or disaster in order to maximise the defense of Business

Connexion’s reputation and brand image and to

minimise/prevent the impact within and beyond

the group.

Business continuity management is enabled as follows:

• Each business area within Business Connexion has a

business disaster recovery plan in place covering all the

mission critical activities.

• Suppliers and outsource service providers of Business

Connexion are measured against the policy and

standards used by the group. Verifiable evidence of

business continuity management programmes and the

testing of these programmes are required from every

business partner.

• Contracts are revised or rewritten to impose penalties

over failure to meet obligations. Over-reliance on a

limited number of suppliers is eliminated as far as

possible.

mANAGEmENTRisk

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SUSTAINAbILITYreport

INTRODUCTIONThe group continues to be committed to conducting

its business in a manner that ensures the long-

term sustainability of the business for the benefit of

its employees, its suppliers, its clients and all other

stakeholders. Sustainability for the group is a continuous

journey and requires a multi-disciplinary approach. Longer-

term business sustainability is not only about minimising

our environmental impact and generating good returns to

shareholders. Good governance, sound risk management,

stakeholder engagement and the group’s corporate social

investment all form part of Business Connexion’s vision to

be a leading ICT player.

The group’s sustainability objectives remain unchanged and

it is on track to meet these objectives. Business Connexion

focuses on eight key sustainability objectives which seek to:

• encourage an ethical trading environment;

• deliver sustainable earnings growth and appropriate

returns to the group’s shareholders and stakeholders;

• ensure the creation of equal opportunities through

recruitment, training, promotions, development and

advancement of all employees and ensuring employees

are motivated to perform;

• develop and sustain fair, equitable and sustainable

business relationships with suppliers;

• assist in the empowerment and social upliftment of

communities surrounding the group’s operations;

• assist in minimising the group’s environmental footprint

through “greening” initiatives;

• comply with legislation and regulatory frameworks in a

proactive and positive manner; and

• ensure that risk management issues are addressed

throughout the organisation.

Business Connexion embarked on a process of

incorporating aspects of the Global Reporting Initiative

(GRI) G3 guidelines into its sustainability reporting.

While this predominantly focuses on issues that the group

and its stakeholders regard as being important and material,

it talks to 10 initiatives which comply with level C reporting.

The GRI items specifically relating to level C in

the report are:

✓✓ EC1 – Direct economic value generated and distributed,

including revenues, operating costs, employee

compensation, donations and other community

investments, retained earnings, and payments to capital

providers and governments.

✓✓ EC6 – Policy, practices, and proportion of spending

on locally-based suppliers at significant locations of

operation.

✓✓ EC7 – Procedures for local hiring and proportion of

senior management hired from the local community at

locations of significant operation.

✓✓ EN3 – Direct energy consumption by primary energy

source.

✓✓ EN5 – Energy saved due to conservation and efficiency

improvements.

✓✓ EN22 – Total weight of waste by type and disposal

method.

✓✓ EN28 – Monetary value of significant fines and

total number of non-monetary sanctions for non-

compliance with environmental laws and regulations.

✓✓ LA1 – Total workforce by employment type,

employment contract, and region.

✓✓ LA4 – Percentage of employees covered by collective

bargaining agreements.

✓✓ LA7 – Rates of injury, occupational diseases, lost days,

and absenteeism, and number of work- related fatalities

by region.

ENVIRONMENTAL IMPACTAs an ICT services group, the group’s impact on the

environment is minimal. It contributes positively to a

cleaner environment and seeks new opportunities to

preserve the environment. The group contributes towards

environmental protection through the installation of

movement sensors located throughout its offices which

detect movement and turn the lights on when an area is

used. This drastically reduces overall electricity consumption

which ultimately contributes towards resource conservation

which forms a large part of environmental protection.

A risk management process is utilised in conjunction with its

health and safety system to determine the impact of risk to

the environment based on waste management, paper and

ASSURANCE THROUGH LONG-TERM SUSTAINABLE BUSINESS PRACTICE

68

paper product usage (including recycled paper for printing

wherever possible), energy and water usage management.

It is a King III requirement for all companies to measure,

plan and reduce their carbon footprints and the

group is proud to be part of an initiative that believes

in a sustainable and environmentally sound e-waste

management system for the country.

EN 3 – Direct energy consumption by primary energy sourceIn support of Green IT, Business Connexion has joined the

e-Waste Association of South Africa (eWASA). The group

can now assist its staff and clients with the disposal of

electronic waste in a responsible manner in compliance

with the eWASA code of conduct.

The common definition for e-waste is anything that runs on

electricity. Therefore e-waste includes:

• ICT equipment (computers and peripherals).

• consumer electronics (mobile phones and

entertainment electronics);

• small and large household appliances; and

• less obvious items such as spent fluorescent tubes,

batteries and discarded battery-operated toys.

The group has identified its impact in relation to the ICT

environmental carbon footprint and has initiated plans to

manage and control its footprint.

The total national kW/h for the current financial year

that could be sourced from the information at hand was

24 393 924 kWh (2011:10 826 461) which, according

to the Heritage Eco Calculator represents, an equivalent

CO2 footprint or greenhouse gas impact of 24 393 924 kg

(2011:10 826 461 kg). These measures are not comparable

with the prior financial year due to the acquisition of the

UCS subsidiaries and Canoa Group.

The Energy Efficiency Journey

Active energyefficiencyaudits

Measure• MetersUse energy moreintelligently

BUSINESS CONNEXIONINDUSTRIALSOLUTIONS

Monitor• Maintain• Improve

• Electrical bill monitoring• Fix the basics • Use energy efficient lights• Add Insulation

Passive energyefficiencyaudits

Business Connexion

SUSTAINAbILITYreport continued

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EN5 – Energy saved due to conservation and efficiency improvementsThe diagram below reflects Business Connexion’s journey to

improve efficiency and thus save energy.

EN 22 – Total weight of waste by type and disposal methodData for the current reporting period shows that more

waste is being recycled compared to the prior period with

less waste going into the landfill.

The Heritage Eco Calculator represents an equivalent

negative CO2 footprint or greenhouse gas emission of

380 407 kg (2011: 309 430 kg). This negative footprint is

offset by the waste disposed through composting, recycling

and reuse which amounts to a positive 103 288 kg

(2011: 110 649 kg). The resultant net emissions amount

to 277 119 kg (2011: 198 781 kg) for the current

reporting period.

Business Connexion remains an Eskom-approved Energy

Services Company (ESCO) with strong operational

principals, methodologies and processes and through

the group’s industrial solutions entity, Quad Automation,

it holds strategic relationships with some of the strongest

global brands.

ORGANISATIONAL INTEGRITY AND ETHICSBusiness Connexion is committed to the application of high

ethical standards – a prerequisite when dealing with staff,

clients, suppliers and contractors. Business ethics are well

defined within the corporate regulations and policies of the

group. These include but are not limited to the following:

• delegation of signing authority and clearly defined

accountability;

• gift, gratification and invitation declaration policy;

• conflict of interest policy;

• tip-offs anonymous; and

• finders’ fees within the legal governance framework.

The board is ultimately responsible for ethics through

the Risk, sustainability, social and ethics committee.

The committee members are appointed by the board

and comprise 3 non-executive directors, 2 of whom are

independent non-executive directors. Communication

regarding ethics is on-going and is accessible by staff on

the group’s intranet site. All non-compliance issues are

logged, investigated, progress tracked and reported quarterly to the group’s Executive committee and the Risk, sustainability, social and ethics committee which, in turn, provided feedback to the board.

The group utilises the services of Deloitte to operate an independent Tip-Offs Anonymous process. During the period under review a total of 35 calls were made to the tip-off line of which 33 were either the wrong number or dropped calls. Of the two calls recorded, 1 incident was investigated and no irregularities could be found.

An employee, client, supplier, manager or shareholder can report dishonesty, fraud and inappropriate activities in Business Connexion in a safe, confidential and secure manner to Tip-offs Anonymous at the following.• www.bcxto.co.za• email – [email protected]• free call – 0800 003 316• free fax – 0800 007 788• free post – KZN 138, Umhlanga Rocks, 4320

The board ensures that the company’s ethics are managed effectively by building and sustaining an ethical corporate culture. It determines the ethical standards which are clearly articulated and ensures that the group takes measures to achieve adherence to them in all aspects of the business. Adherence to these ethical standards is measured by incorporating ethical risks and opportunities in the risk management process.

SUSTAINABLE EARNINGS GROWTHIn order to grow business profitability and sustainability, the group has to focus not only on maintaining margins but improving on them at the operating profit level. Margin growth will be achieved through on-going initiatives to improve efficiencies in all operating divisions and the corporate office, leveraging off its intellectual property, the group’s footprint on the African continent and capitalising on the synergies from the acquisition of the UCS subsidiaries, Canoa Group and, most recently, Integr8 IT.

The group continues to focus on its statement of financial position to increase return on equity. Business Connexion is considering the potential of a share buy back in an effort to improve the group’s return on equity.

Refer to the Chief financial officer’s report on pages 30 to 35 for further details on the group’s financial performance and focus on achieving improved profit margins in the medium term.

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BUSINESS PROCESS MANAGEMENTThe purpose of business process management in support of

the enterprise objectives is to be the enabler of excellence.

This is achieved through:

• policy and process design;

• policy and process implementation;

• policy and process sustainability;

• policy and process improvement; and

• change management.

Through the implementation, monitoring and

improvements of Business Connexion’s business process,

the highest level of skill and competency is identified.

Business process management within Business Connexion

is an ever changing, controlled environment which ensures

that best practices and the evolution of technology are

constantly defined and utilised to ensure a continual

improvement which allows for a competitive edge.

Deployment of these processes takes place within the

framework of a number of international standards and

frameworks as listed below:

• ISO 9001: Business Connexion is certified to

ISO 9001:2008, an international standard for

establishing and maintaining a quality management

system. ISO 9001:2008 standards contribute to making

the development, design and supply of products

and services more efficient, safer and cleaner, and

safeguarding clients and users of products and services.

This standard forms the basis of Business Connexion’s

Business Process Management system to which all

adopted internal standards have been aligned.

• Information technology infrastructure library (ITIL)

best practice: The group’s decision to align itself with the

ITIL methodology aims to familiarise management with

the underlying components and architecture

design of the information and communications

technology infrastructure standards and best

practice. By aligning with ITIL, the group experiences

improved quality of services rendered and enhanced

internal processes to maximise efficiencies and cost

containment.

HUMAN CAPITALBusiness Connexion has a total of 6548 (2011:6453) employees of which 6271 (96%) are employed within the borders of South Africa and the balance in the United Kingdom and across the African continent.

The group’s human resources strategy remains focused on the sourcing of key skills, promoting long-term talent and career development through career-related training and development with the primary focus being on technical skills development, ensuring competitive rewards, and fostering sound employee relations and cultural transformation. This enables the group’s on-going growth and sustainability agenda.

Performance excellence As a values driven and high performance organisation the group’s ability to attract, retain and develop talent is its key differentiator in maintaining its competitive advantage. The group strives for a performance orientated culture where performance is formally recognised through properly constituted incentive and recognition schemes. Each employee’s performance is measured via an electronic My Performance Contract (MPC). The MPC is utilised during the annual salary review to further embed a performance culture on a sustainable basis.

RecruitmentThe recruitment and on-going attraction of ICT expertise and skills remains a key focus area for Business Connexion to ensure that the group remains a leader within the technology arena.

Recruitment activity within our International division has increased during the period. Where possible suitable recruitment suppliers within the various African countries were utilised.

E-recruitment, recruitment automation and strategic resourcing are the key strategic initiatives which Human Resources will be focusing on in the future.

Training and development2012 was another significant year with regards to the investment in our people with an enhanced focus on bringing talent into the group through our internship programme as well as launching two new leadership development programmes to enhance our leadership capabilities.

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In excess of R21 million (2011: R12,4 million) was spent

on training for the reporting period. Training interventions

include end-user computer training, soft skills training,

management and sales training, specific skills development

programmes, certification programmes and internal training

programmes related to the group’s operations.

The group’s internship programme, now in its sixth year,

underpins its commitment to youth skills development.

During this period the group trained in excess of 650

information technology interns. For the period under

review the group trained 143 interns and placed 72% in

permanent positions. Of these interns 80% are black and

38% are female.

The internship programme continues to provide a future

talent pipeline for the group, whilst also contributing

towards alleviating unemployment and addressing the skills

shortage in the sector.

The internship programme not only provides technical or

industry-specific training and certification, but also soft skills

training to assist candidates in adapting to the workplace.

Specifically trained line managers are also appointed as

mentors and coaches to assist graduates with on-the-job

training and development.

Employee relationsAn employee communication forum, 1Voice, serves to

address collective concerns and provides input towards the

enhanced wellbeing of the group’s employees.

The 1Voice representatives are democratically elected and

meet regularly with senior management representatives in

each operating division to:

• promote the interests of all employees in the workplace;

• maximise efficiencies in the workplace through

recommendations to management with respect to the

perceptions, feelings and sentiments of employees;

• exchange information and discuss business-related

issues thereby contributing to the enhancement of the

quality of management decisions;

• participate in joint decision-making on certain

workplace matters aligned with the group’s business

practices; and

• provide input on the workplace skills plan and the skills

development plan to support the group employment

equity initiatives and endeavours.

The sustainability of open and transparent communication

channels between employees and management constitutes

a non-negotiable imperative. Normal communication

channels cater for both individual and collective

communication. However, 1Voice caters specifically for

structured collective communication outside the established

organisational communication processes.

The group supports the constitutional right of employees

to elect whether they wish to participate in organised

labour, and to join a union of their choice. Management

therefore neither obstructs nor favours any particular union,

but has created a climate in which employees have the

freedom to decide for themselves regarding any desired

representation.

There has been no strike action or negative financial impact

due to formal or informal collective industrial action during

the period under review.

The group has well established and communicated,

disciplinary and grievance policies and procedures to

facilitate interaction between employees and management.

Wellness, health and safetyAll employees have access to Wellness Connect - a multi-

faceted employee wellness programme, provided by ICAS

South Africa – an international leader in the Employee

Wellness field.

Employees and their immediate families gain access

to a 24/7 dedicated toll free support line, as well as face

to face counselling when required. Additional benefits

of this programme include access to an online, self-help

wellness website and access to life management services,

such as financial and legal advice. All ICAS services are

provided by trained professionals and psychologists, and

are provided to employees at no cost.

Wellness Connect also provides a managerial consulting

service for line managers, and provides support and advice

on any management issues being experienced.

Various Wellness initiatives and events have taken place at

Business Connexion during the period under review, with

highlights being the CANSA Shavathon and the Discovery

Health Wellness Days. Employees enjoyed these events and

the awareness and value of Employee Wellness has most

certainly increased across the organisation.

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Business Connexion continually reviews effectiveness of

health and safety systems aimed at reducing workplace

incidents and injuries and to ensure that the group complies

with all requirements. Annual safety audits are conducted

on group sites as well as client sites where the group

operates. Audit findings are discussed with management

and agreed action steps put in place to mitigate risks.

No major findings were reported during the period under

review.

Business Connexion implements a health and safety system

in compliance with the requirements of the Occupational

Health and Safety Assessment Series (OHSAS) 18001

standard which refers to the requirements of a behavioural

based safety management system to ensure that employee

behaviour drives improvement and the risk identification

of hazards.

The group has successfully maintained its International

Register of Certified Auditors (IRCA) rating for health

and safety management on two of its client sites and is

implementing this management system throughout

the group.

21 (2011: 20) injuries were reported for the period

September 2011 to August 2012. No diseases were

reported during the period.

Of these reported incidents the majority related to minor

injuries such as twisted ankles, minor cuts and bruising from

slipping on stairs and handling of equipment. The incidents

per category are listed in the table below.

The reported incidents amount to 55 lost man-days due to

injury with a remuneration cost of R 96 346.33.

The Average Recordable Case Rate (RCR) for the period

is 0.4624.

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Health and Safety Incident Statistics for period 01 September 2011 – 31 August 2012:

Injury types Breakdown Causes for incidents Near misses

Total Total Total Total

Amputation 0 Number of fatalities 0 Unsafe acts 15 Near hit incidents 17Concussion/internal

injuries

2 Number of lost work

days

55 Unsafe conditions 6 Damage 0

Fractures 1 Number of

recordable cases

21

Laceration or open

wounds

9

Sprain/strain 9Burns 0

Total 21

Recordable Case Rate per month for the period

Month

Average number

of hours

per month

Number of

Incidents Constant

RCR calculation

for period

September 11 200 3 200 000 0.7909October 11 200 1 200 000 0.2636November 11 200 1 200 000 0.2642December 11 200 0 200 000 0.0000January 12 200 3 200 000 0.7934February 12 200 2 200 000 0.5290March 12 200 2 200 000 0.5290April 12 200 3 200 000 0.7928May 12 200 1 200 000 0.2643June 12 200 2 200 000 0.5285July 12 200 2 200 000 0.5285August 12 200 1 200 000 0.2643

Total 21

Constant man-hour rate 200 000Average total employees 6 548Average man-hours worked per year 2 400

A health and safety management system, in compliance to the requirements of the Occupational Health and Safety

Assessment Series (OHSAS) 18001 standard, has been documented. This standard refers to the requirements of a behavioural

based safety management system to ensure that employee behaviour drives improvement in the risk identification of hazards.

The group has successfully maintained its International Register of Certified Auditors (IRCA) rating for health and safety

management at two of its client sites and is implementing this management system throughout the group.

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Human rightsThe human rights of employees are entrenched in the

Constitution of the Republic of South Africa and employee

rights relating to the work environment are protected by the

Basic Conditions of Employment Act, the Labour Relations

Act and the Occupational Health and Safety Act (OHASA).

The human resources policies comply with all South African

legislative frameworks. In foreign countries prevailing

legislation may not afford employees the necessary degree

of human rights protection. The group is aware that it has a

special duty of care to ensure that its own employees and

those of suppliers in foreign countries are afforded the right

level of human rights protection. This is particularly relevant

as the group expands its footprint into Africa. There were no

incidents of discrimination at any of the group’s operations

during the year.

HIV/Aids in the workplaceThe group has a Dread Disease Policy (inclusive of HIV/

AIDS). The purpose of the policy is to:

• provide guidelines on managing dread diseases in the

workplace;

• protect the legal rights of employees at work who are

living with a dread disease, and all other employees;

• ensure that employees who are living with a dread

disease are provided with the appropriate support

through the group’s employee wellness programme;

• encourage and facilitate counselling support services to

those employees who are affected by a dread disease, so

as to improve the overall health and wellbeing of these

employees;

• minimise, as far as possible, the spread of any

communicable dread diseases and the impacts thereof,

within the organisation and its stakeholders; and

• ensure that all affected employees are managed with

compassion, respect and without discrimination.

Employees have access to the Wellness Connect (ICAS)

HIV/AIDS management programme and the Discovery

Health HIV/AIDS benefit. ICAS provides affected employees

and their families with the necessary pre and post testing

support, counselling and information needed, when faced

with HIV/AIDS infection.

TRANSFORMATION: SOCIO-ECONOMIC SUSTAINABILITYBusiness Connexion is committed to promoting socio-

economic sustainability on the African continent where it

operates. Embracing sustainability in Africa is a business

imperative. The group is committed to supporting

sustainability policies of the African states aimed at

addressing the social imbalances created in the past.

The group embarked on a programme of transformation

nearly fifteen years ago – long before the B-BBEE legislation

was passed in 2003. Management recognised that the

group’s competitiveness and on-going success depend

upon its ability to carve a niche in the market. Sustainability,

tackled with passion and creativity, will create a platform

for business growth, which will further enhance stakeholder

value. Management also recognised that empowerment will

help the group attract and retain quality employees from all

cultural backgrounds.

The group believes that successful transformation begins

with its commitment to investing in the development

of South African society in a socially and economically

sustainable manner, while honouring the interests of all

the organisation’s stakeholders. To this end, the board has

established sustainability programs and structures, including

the National transformation committee.

National transformation committeeThe National transformation committee is a sub-committee

of the group Executive committee and is appointed to

oversee transformation within the group. This committee

has overall responsibility and accountability for the

transformation process. Its responsibilities are as follows:

• Formulating a strategy for transformation within

the group aligned with the board mandate and to

implement a structure and process to support the

mandate.

• Ensuring the establishment of Transformation

committees at business unit level.

• Recommend transformation targets for each pillar on an

annual basis to the group Executive committee.

• Recommend the key performance indicators and define

reporting requirements.

• Ensuring a culture of change is introduced and

maintained within the group, and

• Communicate to employees on transformation

processes and progress.

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The National transformation committee comprises of

members appointed by the chief executive officer from time

to time. The chief executive officer appoints the chairman

of the National transformation committee. Pillar owners

are members of the National transformation committee

responsible for driving pillar programs and strategies. Any

other member may be co-opted from time to time.

B-BBEE scorecardAs reflected in the scorecard alongside, Business Connexion

retained a level 3 B-BBEE rating following an external rating

and verification process conducted in December 2011.

The Business Connexion scorecard improved in 2012,

scoring 19.08 and 9.50 in the ownership and management

control elements respectively. This improvement is

attributable to Business Connexion’s commitment to

diversity and transformation.

Available

Externally

verified

Externally

verifiedpoints BCG BCG

DTI

Targets

Score –

2012

Score –

2011

Equity ownership 20 19,08 17,74Management control 11 9,50 7,71Employment equity 18 4,18 5,84Skills development 18 4,92 4,1Preferential

procurement 20 18,36 19,71Enterprise

development 15 15 15Socio-economic

development 5 5 5

Total score 107 76,03 75,1

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Seven-point frameworkIn line with the generic B-BBEE scorecard, the transformation programme of the group is based on a seven-point framework

structured as follows:

1. Equity ownershipBusiness Connexion recognises the importance of all

the elements of B-BBEE, especially equity ownership.

In line with legislation the board considers equity

ownership a priority element.

2. Management controlThe group is led by a board and an executive

leadership team that is reflective of the broader

South African population. Black people constitute

50% and 45% of the board and Executive committee

respectively.

3. Employment equityBusiness Connexion embraces diversity as reflected by

a diverse representation at all levels within the group

in terms of race, colour, gender, religious affiliation,

class or creed. Embracing and managing diversity is

critical to the future success of the organisation and

will drive business growth. The group will continue to

focus on creating equal opportunity in recruitment,

training, promotion, development and advancement

of all employees with the intention of bolstering its

current company-wide black ratio.

The objectives of the group’s employment equity plan

include the following:

• Increase the number of designated groups in order

to improve the group’s employment equity score

on the generic B-BBEE scorecard and strive to

bridge the representation gap.

• Alignment of human resource policies, processes,

practices and systems with employment equity

goals and objectives.

• Ensuring senior and executive management take

accountability for employment equity goals, plans

and targets.

• Promote a culture that embraces diversity,

employment equity and inclusion in the group.

• Review internal transformation education,

communication, monitoring and evaluation plans

and strategies, and

• Introduces measures to attract and retain talent, in

particular black talent.

Management control

Skills development

Preferential procurement

Enterprise development

Corporate social investment

Employment equity

Equity ownership

The Energy Efficiency Journey

Active energyefficiencyaudits

Measure• MetersUse energy moreintelligently

BUSINESS CONNEXIONINDUSTRIALSOLUTIONS

Monitor• Maintain• Improve

• Electrical bill monitoring• Fix the basics • Use energy efficient lights• Add Insulation

Passive energyefficiencyaudits

Business Connexion

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Employment equity statistical profile

ACI W F

Occupational Levels

2012

%

2011

%

2012

%

2011

%

2012

%

2011

%

Top management 45,45 55,56 54,55 44,44 20,00 22,22Senior management 17,32 22,12 82,68 77,88 19,68 18,58Middle management/

professionals 17,46 16,64 82,54 83,36 24,76 25,14Junior management/associate

professionals 43,11 40,65 56,89 59,35 32,92 32,29Semi-skilled 76,68 78,29 23,32 21,71 41,71 40,00

A = African; C = Coloured; I = Indian; W = White; F = Foreign National

Business Connexion believes that addressing the

imbalances of the past is not a once-off occurrence.

The group views its transformation as an on-going

process and uses several tools to monitor progress.

4. Skills developmentAs Africa’s leading ICT company, Business Connexion

is acutely aware that its expertise needs to be

reflected in all its diverse personnel. Systematic and

organised training efforts are implemented to ensure

that the development of employees from previously

disadvantaged backgrounds is not left to chance.

The development of skills in the ICT industry has been

identified as one of the priority areas to transform

the sector. Sustainable socio-economic growth in

South Africa and the developing world at large lies in

building a knowledge-based economy through the

development of a strong ICT sector and associated

ICT skills. This will help drive an economy that offers

society, previously disadvantaged communities

in particular, greater access to opportunities for

improving their quality of life in terms of knowledge

and skills acquisition.

Business Connexion is proud of its sound business

track record spanning over three decades in the

ICT sector. This track record has been underpinned

by huge investments in the field of education and

training. The focus areas of the group’s learning

and developing strategy include diversity training,

management development, ICT technical skills

development, and internship and learnership

programs.

5. Preferential procurementBusiness Connexion recognises that if transformation

and black economic empowerment in South Africa

are to be successful, big business must actively

support the development of smaller enterprises.

If successfully implemented, preferential procurement

will drive entrepreneurship, skills development and

job creation.

The Group achieved 18.36 (91,8%) of the 20 available

points on the DTI procurement scorecard during the

2011 external B-BBEE audit.

6. Enterprise developmentIt is the policy of the group and its wholly owned

South African subsidiaries to give small to medium

size businesses (including black owned and black

women owned concerns) practical opportunities to

participate in sub-contracting, enterprise development

and procurement at Business Connexion.

Business Connexion acknowledges that enterprise

development plays a vital role in the transformation of

the South African economy and can contribute to the

market share of Black Economic Empowerment (BEE)

companies. SMMEs are considered big contributors

towards economic growth and job creation.

The group’s enterprise development strategy as

summarised below, seeks to enhance the support

it gives to existing black owned, black empowered

and black engendered SMMEs and in so doing

contribute to the South African government’s job

creation agenda.

78


PILLAR 1 PILLAR 2 PILLAR 3

SMME

Connect Program

Supplier

Connect Program

Entrepreneur

Connect Program

Vision Bolster strategic and

business relationships with

SMMEs that provide related

or complimentary service

offerings.

Increase market accessibility

for designated suppliers

previously excluded from

the economic mainstream

through procurement and

business linkages.

Unlocking the potential of

emerging entrepreneurs.

Strategic Objectives Strengthen partnerships

with SMMEs that provide

related service and/or

product offerings.

Strengthen SMME access

to markets through

procurement and business

linkages.

Enhance awareness of the

value of entrepreneurship

to SMME suppliers, partners

and subcontractors.

Leverage SMME

partnerships to access

markets, public sector in

particular.

Increase the volume of

purchases from black

owned enterprises.

Implement a franchise

model where applicable.

Establish enterprise

development partnerships

with private and public

sector clients.

Enhance the group’s

Preferential procurement

score through increased

spend on suppliers

identified as enterprise

development projects.

Enable SMMEs to access

funding through business

associations, partnerships

and networks.

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7. Corporate Social ResponsibilityDuring the period under review, Business Connexion

continued with its Corporate Social Responsibility

(CSR) vision to be an innovative and inspirational

corporate citizen on the African continent where

the group. The group significantly exceeded the

minimum legislative requirements on CSR spending

by contributing more than R 4,9 million

(2011: R4,1 million) during the reporting period.

In line with the ICT Charter, Business Connexion’s

CSR mission is to empower young people to be able

to change their lives and those of their communities

through technology. The group’s CSR strategy is

therefore focused on technology within education

as technology is an important and powerful tool for

social connectivity and upliftment thus influencing the

African Web of Life.

Business Connexion is proud to have been, awarded

the national Gold Community Contributor status

for the second consecutive year by the National CSI

Registrar on behalf of the South African Department

of Social Development.

Under the Business Connexion initiative, letmelearn™

our Corporate Social Investment (CSI) and

Socioeconomic Development (SED) programmes

focus on driving positive social connectivity through

technology.

Business Connexion continued to focus on the

following national CSR programmes running under

letmelearn™ during the reporting period. These are:

• School development programme

• Soweto canoe and recreation club

• Rally to read

• IT Internship/learning programme

In addition to the above letmelearn™ programmes,

Business Connexion also contributed to a few

charitable organisations as part of its philanthropic

giving initiatives.

The main focus of Business Connexion’s letmelearn™

initiatives remains the school development

programme which involves providing support to these

schools and its educators on the technology used and

through the maintenance of the technology, software

and monthly internet access.

Business Connexion introduced an employee

volunteering programme called letmegive.

The letmegive programme is an opportunity for

employees to give either their time through volunteer

work and/or give money through payroll deductions.

These programmes are directed at supporting

developmental organisations.

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CONTENTSTable of

The reports and statements set out below comprise the consolidated and separate financial statements presented to shareholders:

Page

Directors’ responsibility statement 82

Certificate by company secretary 82

Responsibility for financial statement preparation 82

Directors’ report 83

Independent auditor’s report 86

Remuneration report 87

Statements of financial position 96

Statements of comprehensive income 97

Statements of changes in equity 98

Statements of cash flows 100

Accounting policies 101

Notes to the financial statements 114

Annexure AInvestment in subsidiaries 150

Level of assuranceThese financial statements have been audited in compliance with Section 30 of the Companies Act.

Published2 November 2012

82

statementRESPONSIBILITYDirectors’

The directors are responsible for the preparation and fair presentation of the consolidated and separate annual financial statements of Business Connexion Group Limited, comprising the statements of financial position at 31 August 2012, and the statements of comprehensive income, changes in equity and cash flows for the year then ended, and the notes to the financial statements, which include a summary of significant accounting policies and other explanatory notes, in accordance with International Financial Reporting Standards, and the requirements of the Companies Act of South Africa. In addition, the directors are responsible for preparing the directors’ report.

The directors’ are also responsible 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, and for maintaining adequate accounting records and an effective system of risk management.

The directors have made an assessment of the ability of the group and its subsidiaries to continue as a going concern and have no reason to believe the businesses will not be going concerns in the year ahead.

The auditor is responsible for reporting on whether the consolidated and separate annual financial statements are fairly presented in accordance with the applicable financial reporting framework.

APProvAL of grouP ConsoLIdATed And sePArATe fInAnCIAL sTATeMenTs The consolidated and separate annual financial statements of Business Connexion Group Limited, as identified in the first paragraph, were approved by the board of directors on 2 November 2012 and are signed by:

AC ruiters LB Mophatlane Ln WeitzmanChairman Chief executive officer Chief financial officer

statement preparationfINaNCIaL

Responsibility for

Mr Lawrence Weitzman CA(SA), the chief financial officer, is responsible for the financial statements and has supervised the preparation

thereof in conjunction with Mr Jan van den Handel CA(SA), the group financal manager.

COmPaNY SECRETaRYCertificate by

In terms of section 88(2) (e) of the Companies Act of South Africa, I certify that, to the best of my knowledge and belief Business Connexion

Group Limited has, in respect of the financial year reported upon, lodged with the Registrar of Companies all returns required

of a public company in terms of the abovementioned Act and that all such returns are true, correct and up to date.

J de Koker

Company secretary

2 November 2012

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reportDIRECTORS’

nATure of BusIness Business Connexion Group Limited (Business Connexion or the group or the company) is an information communications technology (ICT)

investment holding company incorporated in South Africa and listed on the JSE Limited. The group has a track record of 33 years as a leading

ICT company.

The group is a black empowered integrator of innovative business solutions based on information and communications technology, runs

mission-critical ICT systems and manages products, services and solutions for JSE listed and key public sector organisations, parastatal

enterprises and medium-sized companies.

CorPorATe governAnCe Business Connexion is committed to the principles of the Code of Corporate Practices and Conduct set out in the King Report on Corporate

Governance (King III). Further details are included in the Corporate governance report on pages 50 to 60.

oPerATIng resuLTs A review of operations of the group is provided in the Chief executive officer’s report and the Chief financial officer’s report on pages 26 to 29

and 30 to 35 respectively.

CAPITAL exPendITureCapital expenditure is closely monitored by the board. A total of R205,6 million (2011: R252,5 million) was spent on capital expenditure

with R129,0 million (2011: R179,7 million) related to income generating acquisitions. Of the R205,6 million spent, R147,7 million had been

committed as at 31 August 2011.

shAre CAPITAL Authorised share capital The company commenced the year with authorised share capital of 847 457 627 ordinary shares of R0,0059 each and 150 000 000 “A” shares

of R0,0059 each. This remained unchanged for the year under review.

Issued share capital The company commenced the year with issued share capital of 404 972 468 ordinary shares of R0,0059 each and 100 133 334 “A” shares

of R0,0059 each. This remained unchanged for the year under review.

The company’s share premium account has remained unchanged at R5,4 billion for the year under review.

InTeresTs of dIreCTors In shAres On 31 August 2012, the directors beneficially held in aggregate 1 655 381 (2011: 1 647 381) ordinary shares and 388 305 (2011: 388 305)

“A” shares in the company. The directors have an interest in 149 334 options (2011: 200 000 options) relating to Business Connexion shares.

The executive directors have 13 644 000 (2011: 6 822 000) “A” shares in the BCG Management “A” Share Trust.

No director of the group, other than Messrs LB Mophatlane and NN Kekana, hold, directly or indirectly, more than 1% of the issued share

capital of the company. For further details refer to the Remuneration report on pages 87 to 95.

shAre InCenTIve sCheMes The group operates a share trust and an executive share option scheme. The objectives are to incentivise the employees of the group by

enabling them to acquire shares in the company.

The trustees of the trust are Messrs JM Poluta, LC Marran and RS Hislop. The trustees have not changed during the year under review.

The trust is entitled to acquire shares from time to time, which it requires to meet its commitments, either by purchasing those shares on

the open market or by subscribing for new shares. At 31 August 2012, the trust held 1 701 630 shares (2011: 2 597 604 shares).

84

Share options related to this scheme are allocated to key individuals based on the following criteria:

• impact on the group’s employees;

• impact on key clients;

• impact on technology partners;

• impact on the community; and

• impact on the financial results.

The options can only be exercised provided that a minimum growth rate in total shareholder return is achieved over the vesting period.

The aggregate number of unissued shares that may be reserved for all option schemes is limited to 26 263 691 shares. Details of the options

granted in terms of the schemes are set out on pages 93 to 95 of the Remuneration report.

BCg MAnAgeMenT “A” shAre TrusT The ICT industry is faced with significant skills shortages and it is with this in mind that the BCG Management “A” Share Trust (the trust) was

established as part of the approved B-BBEE deal concluded in August 2010. The objective of the trust is to grant “A” shares to participating

employees to promote economic empowerment within the group as well as to encourage employees to drive growth and profitability within

the group.

The voting rights attached to the “A” shares held by the trust shall remain vested in the beneficiaries and will be exercised on their behalf by the

trust trustees. Therefore the trustees will not have any discretion over the “A” share votes.

The allocation of “A” shares to the participating employees is based on parameters defined in the Remuneration report on page 91:

dIvIdends The board declared normal dividend number 8 of 20 cents per share on 2 November 2012. Dividend number 7 of 14 cents per share

and the special dividend of 40 cents per share were paid on 16 January 2012.

sPeCIAL resoLuTIons Business Connexion passed the following special resolutions during the year for the purposes indicated below:

• a special resolution was passed at the annual general meeting to grant the company, or a subsidiary of the company, a general authority

to acquire ordinary shares in the issued share capital of the company;

• a special resolution was passed at a general meeting of the company to sanction the giving of financial assistance by the company in terms

of Section 45 of the Companies Act of South Africa;

• a special resolution was passed at the annual general meeting to approve non-executive remuneration for 2010/2011;

• a special resolution was passed at the annual general meeting to approve non-executive remuneration for 2012 and 2013; and

• a special resolution was passed at a general meeting of the company to amend the MOI to provide for electronic payments.

suBsIdIArIes Annexure A to this report sets out the principal subsidiaries that the directors consider appropriate for shareholders to gain a proper

appreciation of the group’s affairs. A full list of the companies forming the group will be made available to shareholders on written request to

the company secretary.

CorPorATe ACTIvITy Effective 1 March 2012, the group sold 25% of its equity holding in Nanoteq Proprietary Limited to a management consortium. The purpose

of the transaction was to secure the scarce skills required for the success of this business, promote economic empowerment and drive growth

and profitability in this sector of the market.

Effective 1 April 2012, the group acquired 100% of the issued share capital of Quad Automation Proprietary Limited (Quad) for a total cash

consideration of R20,8 million which was settled through an initial cash payment of R10,8 million and the remaining balance of R10,0 million

is payable contingent on Quad achieving its profit warranties for its 2013 financial year. Quad is an automation systems integration company

offering clients a single-source solution for fully integrated and advanced computer-based control systems in many industrial sectors.

Effective 1 April 2012 the group concluded a transaction to sell its Avaya business to ATIO Proprietary Limited (ATIO). Following the

transaction, ATIO is the exclusive partner to Business Connexion for all Avaya business in Africa.

report continuedDIRECTORS’

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dIreCTorATe And seCreTAry The board of directors in office at the date of this report is set out on pages 14 to 17. The company secretary is responsible for the duties

stipulated in Section 88 G (d) of the Companies Act of South Africa and has signed the appropriate declaration as contained on page 82.

The company secretary is J de Koker.

The address of the company secretary is that of the registered office, Business Connexion Park North, 789 16th Road, Randjespark,

Midrand, 1685.

suBsequenT evenTs Business Connexion entered into a sale of shares, repurchase and subscription agreement with Integr8 IT Proprietary Limited (“Integr8 IT”)

in November 2012, in terms of which it will purchase 100% of the issued share capital of Integr8 IT.

The consideration payable by Business Connexion is up to R126,0 million in cash, and will be settled through an initial payment of

R56,0 million payable on the closing date and three potential earn-out payments of up to a maximum of R70,0 million payable on

15 October 2013, 15 October 2014 and 15 October 2015.

86

reportaUDITOR’SIndependent

To The shArehoLders of BusIness ConnexIon grouP LIMITed We have audited the consolidated and separate annual financial statements of Business Connexion Group Limited, which comprise

the statements of financial position at 31 August 2012, and the statements of comprehensive income, changes in equity and cash flows

for the year then ended, and the notes to the financial statements which include a summary of significant accounting policies and other

explanatory notes as set out on pages 87 to 151.

dIreCTors’ resPonsIBILITy for The fInAnCIAL sTATeMenTs The company’s directors are responsible for the preparation and fair presentation of these 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.

AudITor’s resPonsIBILITy Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with

International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to

obtain reasonable assurance whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements.

The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial

statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s

preparation and fair presentation of the financial statements 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 entity’s internal control. An audit also includes evaluating

the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating

the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

oPInIon In our opinion, these financial statements present fairly, in all material respects, the consolidated and separate financial position of Business

Connexion Group Limited at 31 August 2012, and its consolidated and separate financial performance and consolidated and separate cash

flows for the year then ended in accordance with International Financial Reporting Standards and the requirements of the Companies Act

of South Africa

oTher rePorTs requIred By The CoMPAnIes ACT As part of our audit of the financial statements for the year ended 31 August 2012, we have read the Directors’ report, the Audit and

compliance committee report and the Certificate by the company secretary for the purposes of identifying whether there are material

inconsistencies between these reports and the audited financial statements. These reports are the responsibility of the respective preparers.

Based on reading these reports we have not identified material inconsistencies between these reports and the audited financial statements.

However, we have not audited these reports and accordingly do not express an opinion on these reports.

KPMg Inc.

Per LP fourie

Chartered Accountant (SA)

Registered Auditor

Director

2 November 2012

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reportREmUNERaTION

In preparing this report, Business Connexion conducted an analysis of the extent to which the group’s remuneration policies comply with

King III, and due regard has been given to these requirements.

Cognisant of the fact that the group has a presence in South Africa and six other countries on the African continent and an office in the United

Kingdom and Dubai, the Business Connexion remuneration and reward strategy strives to:

• align, enhance and reinforce individual and team performance;

• balance the application of financial and non-financial rewards; and

• ensure fairness and consistency commensurate with individual performance, the labour market and individual roles and responsibilities.

In realising the above, Business Connexion maintains a reward strategy that supports the group’s business strategies.

The remuneration policies are aimed at driving a high performance culture based on Business Connexion’s values and attracting, retaining

and developing key talent.

The design and implementation of executive reward policies are guided by the principle to include a strong link between pay and

performance, placing a significant portion of the remuneration ‘at risk’ measured at group, business unit and individual performance levels,

while not encouraging behaviour contrary to the group’s approach to risk management. The policies support the group in striving to be an

employer of choice in all markets within which it operates.

The objective with these remuneration principles is to position the group to be:

• market competitive in its respective labour markets;

• aligned in terms of performance in respect of remuneration relating to fixed and performance based remuneration, incentives

and recognition;

• objective in the quantification and weighting of the value-add of critical and scarce skills within job clusters.

The realisation of these remuneration principles supports the group’s strategic human resources imperatives. These are:

• the attraction, retention and engagement of the right calibre of talent;

• positioning the group as an investor in people and an employer of choice;

• equitably rewarding individual and team performance;

• supporting the realisation of the group vision; and

• focusing on both short-term and long-term incentives.

The reMunerATIon And noMInATIons CoMMITTee (renco) The ICT sector in which Business Connexion operates is characterised by rapid change and demands a high level of technical skills. The ideal

employees and executives are hard to find, extremely mobile and highly sought after, both locally and internationally. Keeping them motivated

and appropriately rewarded while balancing the financial concerns of shareholders is a continual challenge.

The ReNco operates as a sub-committee of the board. The focus of its activities is on the group’s remuneration policies, the determination

of remuneration levels, short-term and long-term incentives and retention plans.

The committee is committed to applying independent and objective oversight. Its overriding mission is to ensure that the remuneration

policies and practices enable the achievement of the business objectives. This is to be done without introducing additional risks.

In the application of agreed remuneration principles, the ReNco ensures that reward practices support a performance-oriented culture and are

aligned with the group’s fundamental belief in total accountability and transparency.

It has been an unprecedented year in that remuneration has been widely discussed by regulators, politicians and the public across the

jurisdictions in which Business Connexion operates. It is incumbent upon a listed company to reflect on these changes. The committee,

in addition to its regular business, has reviewed a comprehensive survey of the new remuneration trends and changing attitudes in all its

core geographies.

88

The ReNco has had a year with continued focus on ensuring alignment of the remuneration policies and stakeholder interests. Key

achievements include:

• the review and renewal of the group incentive scheme to ensure retention of key employees;

• the introduction of a key talent retention scheme;

• heightened focus on performance when determining remuneration structures to ensure consistency with sound risk management;

• embracing reasonable differentiation in remuneration for purposes of rewarding superior individual performance, attracting and retaining

scarce skills and promoting diversity; and

• approving a total rewards strategy and related future strategy.

roLe, PurPose And PrInCIPAL funCTIons The terms of reference were reviewed to ensure alignment with all corporate governance requirements, including the Companies Act of South

Africa, King III Code and JSE Listings Requirements.

The role, purpose and principal functions of the ReNco include:

• approving the group’s remuneration philosophy, principles and policies;

• annual review of executive and senior management remuneration ensuring that an appropriate balance exists between fixed

and performance-based remuneration;

• fulfilling the role of a nominations committee to ensure that suitably qualified persons are nominated to the board for appointment as

executive or non-executive directors;

• reviewing different methods of remunerating the executive directors, executive management and senior management and ensuring that it

is reasonable;

• reviewing publications of professional executive recruitment organisations and current industry practices to understand trends;

• reviewing existing or proposed incentive schemes across the group;

• reviewing fringe benefits across the group;

• reviewing related party transaction disclosure, if any;

• succession planning for executive directors and executive management and other strategic positions/roles;

• evaluating the performance of the chief executive officer and reviewing the evaluation of the performance of other executive directors; and

• reviewing principal matters relating to employment practices.

The chief executive officer, deputy chief executive officer, chief financial officer and the group executive responsible for human resources

attend meetings by invitation of the committee, when deemed appropriate. No invitees or members of management, irrespective of their

position, are allowed to take part in discussions regarding their own remuneration nor are they present in the meetings when such decisions

are taken.

In executing its responsibilities, the ReNco has access to independent external consultants to ensure it receives independent advice. In

addition, the committee regularly reviews external reports on developments in local and international remuneration trends and practices.

The committee considered remuneration policies and packages of the executive directors, persons discharging managerial responsibilities, a

number of other senior employees. Talent management, retention and succession of executives and senior management remained key items

on the committee’s agenda during the year. The group is conscious of the need to constantly refresh the means of incentivising its employees

in order to meet the pressures of competition in labour markets within the context of a much changed global landscape.

reMunerATIon And effeCTIve rIsK MAnAgeMenT Annual increases are determined in relation to market movements, inflation indicators, group performance and affordability. These are then

translated into individual increases taking into account the scope and nature of the employee’s role, market benchmarks for similar positions

and the employee’s personal performance and competence. The group applies a variable performance reward model which is closely linked

to business performance against pre-determined targets.

The committee is confident that the remuneration policies align executive and senior management’s interests with those of shareholders by

promoting and measuring performance that drives long-term growth thereby creating sustainable shareholder value.

report continuedREmUNERaTION

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The persons responsible for alignment of all stakeholder interests are the various group executives whose rewards are not only linked to

specific performance, but also on the overall performance of the group taking into consideration financial performance and compliance with

the desired culture and values.

The committee ensures that corporate governance and legal compliance requirements are considered when reviewing existing remuneration

practices or implementing new remuneration plans or policies. The committee furthermore ensures that, through the continuous assessment

of risk factors within the approved group risk framework, shareholder interests are protected, inappropriate behaviour is mitigated in the

construct of the reward systems, and remuneration practices are balanced and appropriately aligned to the group’s risk profile. The following

risk-mitigating controls are part of the design of the remuneration practices:

• Mix of remuneration elements

The committee determines each component of remuneration (as it forms part of total remuneration) both separately and in totality and

ensures that in total the guaranteed package, the short-term incentive and long-term incentive components provide for a balance driven

by sustainable business performance. The long-term incentive scheme is designed such that a balance is struck between retention and

performance over the long-term time horizons of the business development cycle.

• Performance measures

Financial and non-financial measures are used in the short-term incentive and long-term incentive schemes to ensure that performance-

related rewards are conditional upon achievement of a diverse mix of targets protecting shareholder interests over the short and long term.

• Other controls

The committee has an overriding discretion to approve short-term incentive payments in the event that there are unintended

consequences as a result of external factors influencing the organisation’s performance, or for other reasons as deemed appropriate

by the committee.

LooKIng forWArd The ReNco will continue to ensure that reward packages remain appropriately competitive, provide an incentive for performance, and take

due regard of the group’s culture, values, philosophies, business strategy, risk management and capital framework. The committee will continue

to review the existing remuneration arrangements, as discussed in this report, taking particular cognisance of any additional regulatory and

market-driven remuneration reform proposals.

reMunerATIon The group’s remuneration practices have been structured to be competitive in a globally complex and rapidly evolving industry whilst

recognising the importance of cost containment. This ensures that the group can attract, motivate and retain the right calibre of people

to achieve the group’s strategic business objectives. Executive remuneration is benchmarked to data provided in national executive

remuneration surveys.

The components of remuneration are designed to support and enable Business Connexion’s business strategy. These take account

of market realities and talent requirements in different geographic locations. Remuneration consists of:

• Base salary and benefits (referred to as total guaranteed package)

• Sales commission

• Short-term incentives

• Long-term incentives

The ratios within remuneration differ depending on different levels within the organisation and on geographic location. In order

to remain competitive, all elements of total remuneration, are subject to regular benchmarking exercises.

There is strong alignment between the types of benefits that are offered to all permanent employees. Defensible differentiation in

remuneration and benefits is applied in terms of market practice, the size and complexity of the position, the need to attract and retain certain

scarce skills and individual performance.

90

Total guaranteed package Total guaranteed packages, on average, are aligned with the median of the market as a general principle. Where scarce skills and key

employees are at risk, management can differentiate and has discretion to pay up to the 75th percentile of the market. There is a focused

endeavour to manage total guaranteed packages between specified market ranges. These market ranges are obtained from both national and

international salary survey houses on a bi-annual basis and applied as per current best reward practice.

Annual increases in the total guaranteed package are determined with reference to the scope and nature of an employee’s role, market

benchmarks, personal performance and competence, affordability, company performance, projected consumer price index figures

and projected movements in remuneration in the external market. Annual increases for most employees take effect from 1 September

and, in the case of executive directors and the chief executive officer, are approved on an individual basis by the board.

Contributions towards retirement, group life and disability and medical benefits are included in the total guaranteed package.

International employees are remunerated on a structure of basic salary plus benefits.

All legal entities within the group have established relationships with retirement funds. All employees, including the executive directors

are required, as a condition of service, to join the retirement fund affiliated to the legal entity for which they work. The retirement funds

are defined contribution schemes. Contributions to the retirement funds form part of the total guaranteed package. Normal retirement age

is 60 years for executive directors, other executives and employees.

Business Connexion offers participation in a nominated medical aid scheme. Membership of the scheme is a condition of service for all

permanent employees in South Africa unless they are covered by the medical aid scheme of their partner.

Business Connexion does not offer post-retirement medical benefits. A small group of employees acquired through acquisitions have a

post-retirement medical aid benefit.

short-term incentives The group’s annual short-term incentive scheme intends to recognise the achievement of a combination of group, business unit and individual

performance objectives against agreed targets. Short-term incentives are delivery specific and are considered to drive competitiveness

and performance.

ReNco has the final discretion in determining the individual amounts paid out under the group short-term incentive scheme considering

overall performance in relation to predetermined targets.

Long-term incentives Long-term incentives are intended to reward improved sustainable group business performance and to create alignment with shareholder

interests over the longer term. The long-term incentive provides management and employees with a stronger link to the continuing

performance of the group, thereby encouraging an equity culture. Long-term incentives are offered through participation in the share option

trust and an executive share option scheme whose objectives are to incentivise the employees of the group by enabling them to acquire

group shares as well as the BCG Management “A” Share Trust which incentivises executive and senior management.

The maximum amount of unissued shares to be utilised for all schemes (excluding the BCG Management “A” Share Trust) amounts to

26 263 691 shares. The group is authorised to buy any additional shares required on the open market.

Business Connexion group share Trust In terms of a general meeting of shareholders held on 28 April 2004, the meeting voted to create a trust called Business Connexion Group

Share Trust. At 31 August 2012, 1 067 794 (2011: 2 170 401) options were in issue in this trust.

Business Connexion (2009) executive share option scheme The Business Connexion (2009) Executive Share Option Scheme was approved by shareholders on 12 May 2009. The objective and purpose

of this scheme is to grant options to senior employees, to enable them to acquire fully paid shares in Business Connexion so as to promote

employee satisfaction and increase the continuous profitability by enhancing the performance of these employees and retaining their skills.


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Share options related to this scheme are allocated to key individuals based on the following criteria:

• Impact that the person has on the group’s staff

• Impact that the person has on key clients

• Impact that the person has on technology partners

• Impact that the person has in his/her community

• Impact that the person has towards the financial result

BCg Management “A” share Trust The ICT industry is faced with significant skills shortages and it is with this in mind that the BCG Management “A” Share Trust (the trust) was

established. The objective of the trust is to grant “A” shares to participating employees to promote economic empowerment within the group

as well as to encourage employees to drive growth and profitability within the group.

The trust allocated units (one unit in the trust equals one “A” share in the share capital of Business Connexion Group Limited) in the trust to

executives and senior management of the group. The allocation of units to participating employees was based on the following parameters:

• executive committee members with a division that generates revenue in excess of R500 million qualified for 3 411 000 units

(0,9% shareholding);

• executive committee members with a division that generates revenue less than R500 million qualified for 1 895 000 units

(0,5% shareholding); and

• the allocation to management in the E-upper grade with salaries in excess of R1,25 million was based on their level of contribution

to the business as a whole and ranged between 490 942 and 1 097 004 units (0,13% to 0,29%).

Participating employees cannot hold options in the Business Connexion (2009) Executive Share Option Scheme.

The “A” shares were issued with notional loan funding calculated in terms of the following formula:

NO (notional outstanding) – NA (notional amount of R5,78 increased by 80% of the prime rate) – ND (notional dividend) – OV (option value –

value of zero for BEE participants).

On the participation date the number of shares that each “A” shareholder will be entitled to will be calculated based on a formula taking into

account the notional outstanding (above formula) and the 30-day Business Connexion volume weighted traded price at that point in time.

The participation date is defined as the date when:

• the notional outstandings of the “A” shares equal zero; or

• the Unwind Buy-Back has been implemented, whichever occurs earliest in time.

The Unwind Buy-Back will occur when “A” shareholders holding 20% or more of the “A” shares in issue, demand Business Connexion to buy

back the “A” shares determined in terms of the formula. If the participation date has not occurred by the sixth anniversary of the effective date

(31 August 2010), then Business Connexion shall be entitled to invoke the Unwind Buy-Back at any time by delivering a written notice to that

effect (“Buy-Back Notice”) to all the holders of “A” shares.

The “A” shareholders signed a subscription agreement to lock them in for a period commencing on the effective date and ending on:

• the 5th anniversary of the effective date; or

• the participation date.

After the participation date, the “A” shares in issue shall rank pari passu with the ordinary shares in all respects.

non-exeCuTIve dIreCTors Non-executive directors are appointed to the Business Connexion board based on their ability to contribute insight and experience

appropriate to assisting the group to achieve its objectives. Consequently, fees are set at levels to attract and retain the calibre of director

necessary to contribute to a highly effective board.

They do not receive short-term incentives, nor do they participate in any long-term incentive schemes. No arrangement exists for emoluments

in respect of loss of office.

92

The annual fees payable to non-executive directors for the year commencing 1 September 2011 were approved by shareholders on

19 January 2012.

The board recommends the fees payable to the chairman and non-executive directors for approval by the shareholders. Proposals for fees are

prepared with the support of internal and external human resource experts for consideration by ReNco and the board. Consideration is given

to the increased responsibility placed on non-executive directors due to onerous legal and regulatory requirements and the commensurate

risk assumed. Benchmarking information of companies of similar size and complexity and projected inflation rate over the period are factors

considered when reviewing the annual fees.

reMunerATIon PAId for The yeArremuneration paid to non-executive directors for the 12 months ended 31 August 2012

directors’

fees

Chairman’s

fees

Additional

fees

Chairman

of

committee

Member of

committee

Total

2012

Total

2011

name Period r’000 r’000 r’000 r’000 r’000 r’000 R’000

AC Ruiters#& Sept 2011 – Aug 2012 481,5 398,8 92,5 972,8 936,0

JF Buchanan 172,5

FL Sekha#& Sept 2011 – 19 Jan 2012 55,9 35,8 91,7 336,4

JM Poluta* Sept 2011 – Aug 2012 144,5 132,5 85,6 362,6 427,4

NN Kekana& Sept 2011 – Aug 2012 144,5 62,5 100,0 307,0 188,8

M Lehobye*# Sept 2011 – Aug 2012 144,5 87,5 85,0 68,5 385,5 339,5

J John*& Sept 2011 – Aug 2012 144,5 115,0 220,0 50,0 529,5 292,2

DC Sparrow# Sept 2011 – Aug 2012 144,5 97,5 42,5 284,5 41,1

778,4 481,5 893,8 405,0 374,9 2 933,6 2 733,9

* Member of the Audit and compliance committee# Member of the Remuneration and nominations committee& Member of the Risk, sustainability, social and ethics committee

remuneration paid to executive directors for the 12 months ended 31 August 2012 Basic

salary

Performance

bonuses

Allowances

and benefits

Pension

contributions

Total

2012

Total

2011

name Period r’000 r’000 r’000 r’000 r’000 R’000

LB Mophatlane Sept 2011 – Aug 2012 4 682,1 2 281,1 77,7 7 040,9 5 001,5

V Olver Sept 2011 – Aug 2012 2 757,9 1 216,5 40,0 243,3 4 257,7 3 200,9

LN Weitzman Sept 2011 – Aug 2012 2 215,1 1 125,8 103,5 122,0 3 566,4

JR Jenkins Sept 2011 – Aug 2012 2 728,1 1 335,6 89,6 147,3 4 300,6

12 383,2 5 959,0 310,8 512,6 19 165,6 8 202,4

Executive directors are employed under local employment contracts for indefinite periods that require a notice of termination of 30 days on

either side. There are no restraints of trade nor are there any special severance payment arrangements. They are required to retire from the

group at the age of 60, unless requested by the board to extend his or her term. Employment contracts entitle executives to standard group

benefits, as well as participation in the group’s short-term and long-term incentive schemes.


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remuneration paid to prescribed officers for the 12 months ended 31 August 2012 Basic

salary

Performance

bonuses

Allowances

and benefits

Pension

contributions

Total

2012

Total

2011

name Period r’000 r’000 r’000 r’000 r’000 R’000

Prescribed officers Sept 2011 – Aug 2012 13 273,8 5 922,6 257,2 518,3 19 971,9 18 007,6

In line with the Companies Act of South Africa remuneration paid to prescribed officers are reflected above. The group considers executive

committee members, excluding members who are executive directors, to be prescribed officers. Members of the executive committee are

disclosed on page 18 to 21. The number of prescribed officers at 21 August 2012: 8 (2011: 7).

details of directors’ interests in securities at 31 August 2012 and as at 31 August 2011

2012 2011

name

direct

beneficial

Indirect

beneficial

held by

associates Total

% of

issued

shares

Direct

beneficial

Indirect

beneficial

Held by

associates Total

% of

issued

shares

Ordinary shares

JM Poluta 45 000 45 000 0,01 45 000 45 000 0,01

DC Sparrow 171 575 1 398 806 1 570 381 0,39 171 575 1 398 806 1 570 381 0,39

V Olver 32 000 32 000 0,01 32 000 32 000 0,01

LN Weitzman 8 000 8 000 0,00

211 575 1 398 806 45 000 1 655 381 0,41 203 575 1 398 806 45 000 1 647 381 0,41

“A” Ordinary

shares

DC Sparrow 42 425 345 880 388 305 0,39 42 425 345 880 388 305 0,39

LB Mophatlane and NN Kekana hold 25% and 20% equity interests in Gadlex Holdings Proprietary Limited respectively. Gadlex Holdings

Proprietary Limited owns 94,6% of the issued share capital of Gadlex Proprietary Limited which holds 38 600 000 Business Connexion ordinary

shares. Gadlex Holdings Proprietary Limited holds 18 200 000 Business Connexion “A” ordinary shares.

details of executive directors share options at 31 August 2012 and as at 31 August 2011

name scheme

31 August

2011

options

exercised “A” shares

31 August

2012

LB Mophatlane Business Connexion Group Share Trust 200 000 66 666 133 334

BCG Management “A” Share Trust 3 411 000 3 411 000

3 611 000 66 666 3 544 334

V Olver BCG Management “A” Share Trust 3 411 000 3 411 000

LN Weitzman Business Connexion Group Share Trust 24 000 8 000 16 000

BCG Management “A” Share Trust 3 411 000 3 411 000

24 000 8 000 3 411 000 3 427 000

JR Jenkins BCG Management “A” Share Trust 3 411 000 3 411 000

94

share options in issue at 31 August 2012 and as at 31 August 2011

Issue no

option

price

special

dividend

effective

option

price

offer

date

vesting

dates

expiry

date

options at

31 August

2012

Business Connexion Group Share TrustIssue 1 R5,37 R1,00 R4,37 7 Nov 2005 One-third Nov 2008 Nov 2011 –

One-third Nov 2009 Nov 2012 511 079 One-third Nov 2010 Nov 2013 556 695

Total share options in issue – Business Connexion Group Share Trust 1 067 774

Business Connexion (2009) Executive Share Option SchemeIssue 1 R3,26 R0,4 R2,86 1 June 2009 One-third June 2012 Sept 2012 107 992

One-third June 2013 Sept 2013 2 033 538 One-third June 2014 Sept 2014 2 033 538

4 175 068

Issue 2 R4,76 R0,4 R4,36 1 Nov 2009 One-third Nov 2012 Feb 2013 439 480 One-third Nov 2013 Feb 2014 439 481 One-third Nov 2014 Feb 2015 439 481

1 318 442

Issue 3 R5,51 R0,4 R5,11 1 Sept 2010 One-third August 2012 Nov 2012 2 799 105 One-third August 2013 Nov 2013 2 799 105 One-third August 2014 Nov 2014 2 799 105

8 397 315

Issue 4 R4,75 R4,75 8 Feb 2012 One-third Feb 2015 May 2015 2 966 533 One-third Feb 2016 May 2016 2 966 533 One-third Feb 2017 May 2017 2 966 533

8 899 599

Total share options in issue – Business Connexion (2009) Executive Share Option Scheme 22 790 424

Issue no

Option

price

Special

dividend

Effective

option

price

Offer

date

Vesting

dates

Expiry

date

Options at

31 August

2011

Business Connexion Group Share TrustIssue 1 R5,37 R0,6 R4,77 7 Nov 2005 One-third Nov 2008 Nov 2011 686 616

One-third Nov 2009 Nov 2012 686 729 One-third Nov 2010 Nov 2013 797 056

Total share options in issue – Business Connexion Group Share Trust 2 170 401

Business Connexion (2009) Executive Share Option SchemeIssue 1 R3,26 R3,26 1 June 2009 One-third June 2012 Sept 2012 2 586 133

One-third June 2013 Sept 2013 2 586 133 One-third June 2014 Sept 2014 2 586 134

7 758 400

Issue 2 R4,76 R4,76 1 Nov 2009 One-third Nov 2012 Feb 2013 439 480 One-third Nov 2013 Feb 2014 439 481 One-third Nov 2014 Feb 2015 439 481

1 318 442

Issue 3 R5,51 R5,51 1 Sept 2010 One-third August 2012 Nov 2012 3 528 071 One-third August 2013 Nov 2013 3 528 072 One-third August 2014 Nov 2014 3 528 072

10 584 215

Total share options in issue – Business Connexion (2009) Executive Share Option Scheme 19 661 057


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31 August

2012

31 August

2011

Movement in share optionsBusiness Connexion group share TrustOpening balance of options granted 2 170 401 2 697 768 Options forfeited (139 987) (10 067) Options exercised (962 640) (517 300)

Total options outstanding in Business Connexion Group Share Trust 1 067 774 2 170 401 Shares awaiting transfer 66 666Number of ordinary shares on hand in the trust (1 701 630) (2 597 604)

Surplus of ordinary shares held by the trust (567 190) (427 203)

Business Connexion (2009) executive share option schemeOpening balance of options granted 19 661 057 11 192 142 Options issued 9 374 600 11 904 215 Options replaced (650 000)Options forfeited (4 480 556) (3 435 300) Options exercised (1 114 676)

Total options outstanding in Business Connexion (2009) Executive Share Option Scheme 22 790 425 19 661 057 Number of ordinary shares on hand in Business Connexion Proprietary Limited (3 173 438) (4 228 114)

Shortfall of ordinary shares 19 616 987 15 432 943

uCs zero cost option schemeordinary sharesOpening balance of options granted 394 530Options acquired 394 530Options forfeited 3 492Options exercised 145 049

Total options outstanding in UCS zero cost option scheme 245 989 394 530Number of ordinary shares on hand in Business Connexion Proprietary Limited 249 481 394 530

Surplus of ordinary shares (3 492)

“A” sharesOpening balance of options granted 97 555Options acquired 97 555Options forfeited 863Options exercised 36 053

Total options outstanding in UCS zero cost options scheme 60 639 97 555Number of “A” shares on hand in Business Connexion Proprietary Limited 61 502 97 555

Surplus of “A” shares (863)

Total shortfall of ordinary shares 19 046 305 15 005 740

Total surplus of “A” shares (863)

details of options exercised during the yearBusiness Connexion Group Share Trust 962 640 517 300 Business Connexion (2009) Executive Share Option Scheme 1 114 676

2 077 316 517 300

Closing share price 31 August – ordinary shares 4,85 5,20 Fair value of Business Connexion Group Limited ordinary shares held (2012: 5 124 549, 2011: 7 220 248) 24 854 063 37 545 290

Closing share price 31 August – “A” shares 0,71 0,70Fair value of Business Connexion Group Limited “A” shares held (2012: 61 501, 2011: 97 555) 43 666 68 289

share based payment expense r’000 R’000

Issue 1 - Business Connexion (2009) Executive Share Option Scheme (1 874) 85 Issue 2 - Business Connexion (2009) Executive Share Option Scheme 292 291 Issue 3 - Business Connexion (2009) Executive Share Option Scheme 1 996 3 008 Issue 4 - Business Connexion (2009) Executive Share Option Scheme 928 “A” shares issued to BCG Management “A” Share Trust 12 133 12 100

13 475 15 484

96

FINANCIALStatements of

position at 31 August 2012

grouP CoMPAny

2012 2011 2012 2011

Notes r‘000 R‘000 r‘000 R’000

AsseTsnon-current assetsProperty, plant and equipment 1 390 566 396 949Capitalised leased assets 3 51 422 57 036Goodwill 4 566 925 555 318Intangible assets 5 363 271 378 652Investments in subsidiaries 6 2 674 498 2 662 365Investment in associates 7 5 487Long-term loans receivable 8 32 446 30 157Other investments 9 213 371 215 308 213 371 214 687Deferred tax assets 10 60 183 53 046 1 536

1 678 184 1 661 796 2 918 026 2 878 588

Current assetsAmounts owed by group companies 11 275 773 340 605Inventories 12 197 901 178 939Trade receivables 13 971 334 970 084Other receivables 14 239 034 250 604 15 341 56 684Prepayments 81 602 77 696 77 136Taxation prepaid 3 588 7 423 19Cash and cash equivalents 44 443 930 518 308 2 762 1 746Assets held for sale 15 18 003

1 937 389 2 021 057 293 972 399 171

Total assets 3 615 573 3 682 853 3 211 998 3 277 759

equITy And LIABILITIesCapital and reservesShare capital 16 2 358 2 346 2 389 2 389Share premium 1 126 900 1 126 900 5 416 576 5 416 576Foreign currency translation reserve (21 225) (27 826)Retained earnings/(accumulated loss) 916 157 975 336 (2 486 988) (2 295 066)Share-based payment reserve 81 554 67 793 86 533 74 400

Shareholders’ equity 2 105 744 2 144 549 3 018 510 3 198 299Non-controlling interests 95 841 48 495

Total equity 2 201 585 2 193 044 3 018 510 3 198 299

non-current liabilitiesInterest bearing long-term liabilities 17 179 467 250 679Post-retirement benefit obligations 18 10 614 7 920Deferred tax liabilities 10 47 604 60 927

237 685 319 526

Current liabilitiesAmounts owed to group companies 19 148 287 20 070Short-term liabilities 17 89 191 77 187Trade payables 425 323 457 128Other payables 20 647 565 622 384 45 201 58 196Provisions 21 1 296 892Taxation payable 12 928 12 692 1 194

1 176 303 1 170 283 193 488 79 460

Total liabilities 1 413 988 1 489 809 193 488 79 460

Total equity and liabilities 3 615 573 3 682 853 3 211 998 3 277 759

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Statements of

COmPREHENSIVE income for the year ended 31 August 2012

grouP CoMPAny

2012 2011 2012 2011

Notes r‘000 R‘000 r‘000 R’000

revenue 22 5 829 644 4 314 181

Cost of sales 3 996 112 2 979 118

gross profit 1 833 532 1 335 063

Operating expenses/(income) 1 558 507 1 177 391 (3 273) (80 255)

operating profit 23 275 025 157 672 3 273 80 255

Share of losses from associates 7 495 217

operating profit before investment income 274 530 157 455 3 273 80 255

Investment income 24 34 695 27 329 19 040 29 033

Profit before finance costs 309 225 184 784 22 313 109 288

Finance costs 25 27 484 18 076 3 222 10

Profit before tax 281 741 166 708 19 091 109 278

Taxation 26 85 618 64 400 (7 672) 36 974

Profit for the year 196 123 102 308 26 763 72 304

other comprehensive income:

Translation of foreign operations 5 894 (252)

Total comprehensive income for the year 202 017 102 056 26 763 72 304

Profit attributable to:

Equity holders 149 317 92 587 26 763 72 304

Non-controlling interests 46 806 9 721


Total comprehensive income attributable to:

Equity holders 155 211 92 335 26 763 72 304

Non-controlling interests 46 806 9 721

Total comprehensive income for the year 202 017 102 056 26 763 72 304

earnings per share

Basic earnings per share (cents) 27 37,5 27,9

Diluted earnings per share (cents) 27 37,2 27,6

98

in equityfor the year ended 31 August 2012

Statements of

CHaNGES

Share

capital

Share

premium

Total

share capital

Foreign currency

translation reserve

Share-based

payment reserve

Retained

earnings/

(accummulated

loss)

Total

reserves

Shareholders’

equity

Non-controlling

interests

Total

equity

R‘000 R‘000 R’000 R’000 R’000 R’000 R’000 R’000 R’000 R’000

grouPBalance at 31 August 2010 1 774 543 325 545 099 (27 574) 65 587 961 165 999 178 1 544 277 6 366 1 550 643

Profit for the year 92 587 92 587 92 587 9 721 102 308

Movement in foreign currency translation reserve (252) (252) (252) (252)

Non-controlling interests’ share of foreign currency translation reserve (2 198) (2 198) (2 198) 2 198

Movement in treasury shares and related reserves held by share purchase trusts (25) (25) (20 638) (20 638) (20 663) (20 663)

Share-based payments 15 879 15 879 15 879 15 879

Share-based payments reserve transferred to retained earnings (13 673) 13 673

Non-controlling interest in dividends received from subsidiaries (1 775) (1 775)

Issue of new shares for the acquisition of businesses 597 583 575 584 172 584 172 584 172

Sale of stake in business to management 31 985 31 985

Dividends paid (69 253) (69 253) (69 253) (69 253)

Total changes in equity 572 583 575 584 147 (252) 2 206 14 171 16 125 600 272 42 129 642 401

Balance at 31 August 2011 2 346 1 126 900 1 129 246 (27 826) 67 793 975 336 1 015 303 2 144 549 48 495 2 193 044


Movement in foreign currency translation reserve 5 894 5 894 5 894 5 894

Non-controlling interests’ share of foreign currency translation reserve 707 707 707 (707)

Movement in treasury shares and related reserves held by share purchase trust 12 12 6 719 6 719 6 731 6 731




Non-controlling interest effect on loan restructuring 18 18

Dividends paid (215 215) (215 215) (215 215) (215 215)

Total changes in equity 12 12 6 601 13 761 (59 179) (38 817) (38 805) 47 346 8 541

Balance at 31 August 2012 2 358 1 126 900 1 129 258 (21 225) 81 554 916 157 976 486 2 105 744 95 841 2 201 585

Dividend per share (cents) 54,0 (2011: 23,0)

CoMPAnyBalance at 31 August 2010 1 792 4 833 001 4 834 793 62 300 (2 297 512) (2 235 212) 2 599 581 2 599 581




Dividends paid (69 858) (69 858) (69 858) (69 858)

Total changes in equity 597 583 575 584 172 12 100 2 446 14 546 598 718 598 718

Balance at 31 August 2011 2 389 5 416 576 5 418 965 74 400 (2 295 066) (2 220 666) 3 198 299 3 198 299



Dividends paid (218 685) (218 685) (218 685) (218 685)

Total changes in equity 12 133 (191 922) (179 789) (179 789) (179 789)


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Share

capital

Share

premium

Total

share capital

Foreign currency

translation reserve

Share-based

payment reserve

Retained

earnings/

(accummulated

loss)

Total

reserves

Shareholders’

equity

Non-controlling

interests

Total

equity

R‘000 R‘000 R’000 R’000 R’000 R’000 R’000 R’000 R’000 R’000

grouPBalance at 31 August 2010 1 774 543 325 545 099 (27 574) 65 587 961 165 999 178 1 544 277 6 366 1 550 643


Movement in foreign currency translation reserve (252) (252) (252) (252)

Non-controlling interests’ share of foreign currency translation reserve (2 198) (2 198) (2 198) 2 198

Movement in treasury shares and related reserves held by share purchase trusts (25) (25) (20 638) (20 638) (20 663) (20 663)


Share-based payments reserve transferred to retained earnings (13 673) 13 673




Dividends paid (69 253) (69 253) (69 253) (69 253)

Total changes in equity 572 583 575 584 147 (252) 2 206 14 171 16 125 600 272 42 129 642 401

Balance at 31 August 2011 2 346 1 126 900 1 129 246 (27 826) 67 793 975 336 1 015 303 2 144 549 48 495 2 193 044


Movement in foreign currency translation reserve 5 894 5 894 5 894 5 894

Non-controlling interests’ share of foreign currency translation reserve 707 707 707 (707)

Movement in treasury shares and related reserves held by share purchase trust 12 12 6 719 6 719 6 731 6 731




Non-controlling interest effect on loan restructuring 18 18

Dividends paid (215 215) (215 215) (215 215) (215 215)

Total changes in equity 12 12 6 601 13 761 (59 179) (38 817) (38 805) 47 346 8 541

Balance at 31 August 2012 2 358 1 126 900 1 129 258 (21 225) 81 554 916 157 976 486 2 105 744 95 841 2 201 585

Dividend per share (cents) 54,0 (2011: 23,0)

CoMPAnyBalance at 31 August 2010 1 792 4 833 001 4 834 793 62 300 (2 297 512) (2 235 212) 2 599 581 2 599 581




Dividends paid (69 858) (69 858) (69 858) (69 858)

Total changes in equity 597 583 575 584 172 12 100 2 446 14 546 598 718 598 718




Dividends paid (218 685) (218 685) (218 685) (218 685)

Total changes in equity 12 133 (191 922) (179 789) (179 789) (179 789)


100

Statements offlows for the year ended 31 August 2012CaSH

grouP CoMPAny

2012 2011 2012 2011

Notes r’000 R’000 r’000 R’000

Cash flows from operating activities

Cash receipts from clients 5 819 430 4 115 491

Cash paid to suppliers and employees (5 329 152) (3 694 086) (5 428) (19 742)

Cash generated from/(used in) operations 40 490 278 421 405 (5 428) (19 742)

Interest received 16 618 9 002 46 755

Dividends received 17 980 3 034 17 692 12 919

Finance costs (22 322) (6 367) (10)

Dividends paid (215 215) (71 028) (218 685) (69 858)

Taxation (paid)/refunded 41 (101 434) (59 369) 8 033 (37 720)

Net cash inflows/(outflows) from operating activities 185 905 296 677 (198 342) (113 656)

Cash flows from investing activities

Acquisition of subsidiaries and business 42 (10 845) (250 000) (10 000)

Investments in, and advances to associates (542)

Purchase of treasury shares (20 972)

Additions to property, plant and equipment,

capitalised leased assets and intangible assets 43 (205 575) (252 516)

Proceeds from sale of subsidiary and business 45 4 857 192 489 192 489

Increase in other investments (9 797)

Proceeds from the sale of property, plant and equipment,

capitalised leased assets and intangible assets 8 098 5 641

Net cash (outflows)/inflows from investing activities (203 465) (325 900) 172 692

Cash flows from financing activities

Raising of long-term liabilities 23 594 262 036

Repayment of long-term liabilities (18 083)

Repayment of capital element of finance leases (29 275) (808)

Repayment of short-term liabilities (51 387) (54 437) (54 397)

Advances to/(repayments from) group companies 199 358 (4 558)

Proceeds from disposal of interest in subsidiary 250

Net cash (outflows)/inflows from financing activities (56 818) 188 708 199 358 (58 955)

(Decrease)/increase in cash and cash equivalents (74 378) 159 485 1 016 81

Cash and cash equivalents at beginning of year 518 308 358 823 1 746 1 665

Cash and cash equivalents at end of year 44 443 930 518 308 2 762 1 746

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PresenTATIon of fInAnCIAL sTATeMenTsThe principal accounting policies of the group and the company are set out below. These accounting policies are consistent with those applied

in the previous year. The consolidated financial statements of the company for the year ended 31 August 2012 comprise Business Connexion

Group Limited and its subsidiaries and the group’s interest in associates (together referred to as the group and individually as group entities).

1. BAsIs of PrePArATIonThe consolidated annual financial statements and separate annual financial statements are prepared under the historic cost convention

as modified by the valuation of certain financial instruments and investment properties to fair value. The financial statements are

prepared using the accounting policies set out below and are in accordance with the applicable International Financial Reporting

Standards (IFRS), the AC 500 series issued by the Accounting Practices Board or its successor and the requirements of the Companies

Act of South Africa. The accounting policies have been consistently applied by the group entities.

In the current year, the group adopted amendments to IAS 24 Related Party Disclosures,11 Amendments to 6 Standards: Improvements

to International Financial Reporting Standards 2011 and IFRS 7 Financial Instruments: Disclosures –Transfers of Financial Assets.

The adoption of these amendments and improvements did not have a material effect on the financial statements.

At the date of approval of these financial statements, the following standards, interpretations and amendments were in issue, but not yet

effective:

Accounting

standards Type

effective date

(financial years

beginning on or after)

IFRS 9 Financial Instruments New Standard 1 January 2015

IAS 19 Employee Benefits: Defined Benefit Plans Amendment 1 January 2013

IAS 27 Separate Financial Statements Amendment 1 January 2013

IAS 28 Investments in Associates and Joint Ventures Amendment 1 January 2013

IFRS 10 Consolidated Financial Statements New Standard 1 January 2013

IFRS 11 Joint Arrangements New Standard 1 January 2013

IFRS 12 Disclosure of Interests in Other Entities New Standard 1 January 2013

IFRS 13 Fair Value Measurement New Standard 1 January 2013

IFRS 7 Financial Instruments: Disclosures – Amendment

Offsetting Financial Assets and Financial Liabilities 1 January 2013

IAS 1 Presentation of Financial Statements Amendment 1 July 2012

Presentation of Items of Other Comprehensive Income

IAS 12 Deferred Tax: Recovery of Underlying Assets Amendment 1 January 2012

IAS 32 Financial Instruments : Presentation Amendment 1 January 2014

Offestting Financial Assets and Financial Liabilities

At 31 August 2012 the directors have not assessed the impact of the adoption of these standards, interpretations and amendments on

the future financial statements of the group and the company.

2. BAsIs of ConsoLIdATIonsubsidiariesEntities (including special purpose entities) in which the group, directly or indirectly, has the power to exercise control over the

operations are considered to be subsidiaries. Control is achieved where an entity in the group has the power to govern the financial

and operating policies of another entity to obtain the benefits of its activities. In assessing control, potential voting rights that currently

are exercisable are taken into account.

The investments in subsidiaries in the holding entity’s financial statements are carried at cost less any impairment losses.

The acquisition method of accounting is used to account for the acquisition of subsidiaries by the group. On acquisition, the identifiable

assets, liabilities and contingent liabilities of a subsidiary are measured at fair value at the date of acquisition, except for non-current

assets held for sale which are carried at fair value less costs to sell. Re-acquired rights and share-based payments are excluded from

the measurement requirements of IFRS 3, but are recognised as part of the acquisition accounting, if appropriate.

Accounting

POLICIES for the year ended 31 August 2012

102

2. BAsIs of ConsoLIdATIon (continued)subsidiaries (continued)The group measures goodwill at the fair value of the consideration transferred including the recognised amount of any non-controlling

interest in the acquiree, including previously held equity interests in the acquiree, less the net recognised amount (generally fair value)

of the identifiable assets acquired and liabilities assumed, all measured at the acquisition date.

Operating results of subsidiaries acquired are included from the date that effective control is transferred to the group. Operating results

of subsidiaries disposed of are included up to the effective date of disposal.

Upon the loss of control, the group derecognises the assets and liabilities of the subsidiary, any non-controlling interests and the other

components of equity related to the subsidiary. Any surplus or deficit arising on loss of control is recognised in profit or loss. If the group

retains any interest in the previous subsidiary, then such interest is measured at fair value at the date that control is lost. Subsequently

it is accounted for as an equity-accounted investee or as an available-for-sale financial asset depending on the level of influence

retained.

All significant inter-company transactions, balances and unrealised gains and losses are eliminated on consolidation.

Transactions with non-controlling shareholdersThe non-controlling interests are measured at their proportionate interest or at fair value in the identifiable net assets of the acquiree

at date of acquisition. The election is made on a transaction-by-transaction basis. Acquisitions or disposals of non-controlling interests,

when control is not lost, are accounted for as transactions with equity holders in their capacity as equity holders and, therefore, no

goodwill is recognised as a result of such transactions. Any difference between the compensation and the non-controlling interest is

recognised in retained earnings.

Losses applicable to the non-controlling interests, including negative “other comprehensive income”, are allocated to the non-

controlling interest even if doing so causes the non-controlling interest to be in a deficit position. The non-controlling interest is

presented within equity separately from the parent shareholder’s equity.

3. BusIness CoMBInATIons InvoLvIng enTITIes under CoMMon ConTroLA business combination involving entities or businesses under common control is a business combination in which the same parties

ultimately control all of the combining entities or businesses before and after the business combination.

In accounting for business combinations under common control, the assets and liabilities of the entities or businesses involved are

transferred at the carrying amounts recognised previously in the group controlling shareholder’s consolidated financial statements.

Any difference between the consideration paid and the carrying amounts of the assets and liabilities is recognised directly as a separate

component of equity.

4. InvesTMenT In AssoCIATesAssociates are entities in which the group exercises a significant influence through participation in the financial and operating policy

decisions of the entity, but in which it does not exercise control. Significant influence is presumed to exist when the group holds

between 20% and 50% of the voting power of another entity.

Investments in associates (equity accounted investees) are accounted for using the equity method and are recognised initially at cost.

The cost of the investment includes transaction costs. The group’s investment includes goodwill identified on acquisition. Goodwill

relating to associates forms part of the carrying amount of the associates. The consolidated financial statements include the group’s

share of the income and expenses and equity movements of equity-accounted investees, after adjustments to align the accounting

policies with those of the group, from the date that significant influence commences until the date that significant influence ceases.

When the group’s share of losses exceeds its interest in an equity-accounted investee, the carrying amount of that interest, including any

long-term investments, is reduced to nil, and the recognition of further losses is discontinued, except to the extent that the group has an

obligation or has made payments on behalf of the investee. The investment in the associate is accounted for at cost less accumulated

impairment in the separate financial statements. Where the associate’s year-end does not co-incide with the group’s year-end, the

associate’s most recent unaudited results are used.

Accounting

POLICIES for the year ended 31 August 2012 continued

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5. foreIgn CurrenCy TrAnsACTIonsfunctional and presentation currencyItems included in the financial statements of each of the group’s entities are measured using the currency of the primary economic

environment in which the entity operates (functional currency). The consolidated financial statements are presented in South African

Rand, which is the holding company’s functional currency and selected as the group’s presentation currency.

The results and financial position of all group entities that have a functional currency different from the presentation currency are

translated into the presentation currency, as follows:

• assets and liabilities are translated at the closing rate at the reporting date;

• income and expenses are translated at an average exchange rate which approximates actual; and

• all resulting exchange differences are recognised in other comprehensive income and presented as a separate component in

equity called foreign currency translation reserve (FCTR). When the operation is a non-wholly-owned subsidiary, then the relevant

proportionate share of the translation difference is allocated to the non-controlling interests.

group companiesOn consolidation, exchange differences arising from the translation of the net investment in a foreign operation, and of borrowings,

are recognised in other comprehensive income and presented as a separate component in equity called foreign currency translation

reserve (FCTR).

When a foreign operation is disposed of the cumulative amount in the translation reserve related to that foreign operation is reclassified

to profit or loss as part of the gain or loss on disposal. When the group disposes part of its interest in a subsidiary that includes the

foreign operation while retaining control, the relevant portion of the cumulative amount is re-attributed to non-controlling interest.

When an inter-company loan, which forms part of the net investment in a foreign operation, is repaid a proportion of the cumulative

amount of exchange differences recognised in the foreign currency translation reserve is transferred to profit or loss.

Goodwill and fair value adjustments arising on acquisition of a foreign operation are treated as assets and liabilities of the foreign

operation and translated at the closing rates.

Transactions and balancesForeign currency transactions are translated into the functional currency using the exchange rate prevailing at the dates of the

transactions. Foreign exchange gains and losses resulting from settlement of such transactions and from the translation at year-end

exchange rates of monetary assets and liabilities denominated in foreign currency are recognised in profit or loss, except for differences

arising on the translation of available-for-sale equity instruments, a financial liability designated as a hedge of the net investment in

a foreign operation, or qualifying cash flow hedges, which are recognised directly in other comprehensive income. When an equity

instrument is disposed of, all gains or losses in equity are transferred to profit or loss.

6. ProPerTy, PLAnT And equIPMenTProperty, plant and equipment represents tangible items that are held for use in the production or supply of goods or services, for rental

to others, or for administrative purposes and are expected to be used during more than one year.

Property, plant and equipment is stated at cost to the group less accumulated depreciation and any accumulated impairment loss.

Cost includes expenditure that is directly attributable to the acquisition of the asset. When parts of an item of property, plant and

equipment have different useful lives, they are accounted for as separate items (major components). Depreciation is calculated using the

straight-line method to write off cost less residual value over the expected useful lives of the assets.

The assets’ depreciation method, residual value and useful life are reviewed annually at each reporting date.

Leasehold improvements are depreciated over their lease period or useful life, whichever is the shorter. However, if at inception of the

lease it is reasonably certain that the lessee will obtain ownership of the asset by the end of the lease term, then the asset is depreciated

over the expected useful life of the asset.

Gains and losses on disposals of property, plant and equipment are determined by reference to their net carrying value at the date

of sale and the consideration received, and are taken into account in profit or loss.

104

6. ProPerTy, PLAnT And equIPMenT (continued)Subsequent expenditure on an item of property, plant and equipment is recognised as part of its cost only if it meets the general

recognition criteria.

The estimated useful lives for the current and comparative years are:

Property 50 years

Furniture and fittings 6 years

Equipment 3 to 6 years

Vehicles 4 to 5 years

Land is not depreciated as it is determined to have an indefinite useful life.

7. InvesTMenT ProPerTyInvestment property, which is property held to earn rentals and/or capital appreciation, is recognised at cost on initial recognition.

Cost includes expenditure that is directly attributable to the acquisition of the investment property. Subsequently the investment

property is stated at fair value at the reporting date. Gains or losses arising from changes in the fair value of investment property

are included in profit or loss for the year in which they arise.

8. LeAsed AsseTsLeases of property, plant and equipment where the group assumes substantially all the risks and rewards of ownership are classified as

finance leases. Finance leases are capitalised at the lower of the fair value of the leased asset or the net present value of the minimum

lease payments. The lease payments are allocated between the liability and finance charges to achieve a constant rate of return on the

outstanding finance lease balance. The outstanding lease obligation, net of finance charges and the following year’s liability, is included

as a long–term interest-bearing liability. The following year’s liability is included in short-term borrowings. Lease finance costs are

recognised as an expense as they accrue.

The depreciable amount of the asset is depreciated over the shorter of the lease period or the useful life of the asset. The useful life,

when longer than the lease period, is used where there is a reasonable prospect that ownership of the asset will pass to the group.

Leased assets, where the risks and rewards of ownership remain with the lessor, are classified as operating leases. Payments made under

operating leases are recognised in profit or loss on a straight-line basis over the term of the lease. When an operating lease is terminated

before the expiry of the lease, any penalty due is recognised immediately in profit or loss.

Where a lease contract is deemed to be onerous, a provision for the lower of the cost of fulfilling the lease and any compensation

or penalties arising from failure to fulfil it, is raised. A lease is considered to be onerous when the unavoidable costs of meeting the

obligation under the contract exceed the economic benefits receivable.

Where the group is the lessor, the rental income from the operating leases is recognised in profit or loss on a straight-line basis over the

term of the relevant lease. Amounts due from the lessee are recorded as receivables. If the period of the lease is for greater than one

year the receivable is treated as long term with the current portion reflected as trade receivables.

9. goodWILLGoodwill arises on the acquisition of a subsidiary or associate.

The group measures goodwill at the fair value of the consideration transferred including the recognised amount of any non-controlling

interest in the acquiree, including previously held equity interests in the acquiree, less the net recognised amount (generally fair value)

of the identifiable assets acquired and liabilities assumed, all measured at the acquisition date.

When the fair value of the identifiable assets and liabilities exceeds the consideration transferred, including non-controlling interest and

previously held equity interests in the acquiree, a bargain purchase gain is recognised immediately in profit or loss.

Accounting


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9. goodWILL (continued)Goodwill relating to subsidiaries is recognised as an asset and carried at cost less accumulated impairment losses. It is reviewed for

impairment at least annually or where there is an indication of impairment. Any impairment is recognised immediately in profit or loss

and is not subsequently reversed. For the purpose of impairment testing, goodwill is allocated to each of the group’s cash-generating

units expected to benefit from the synergies of the acquisition. If the recoverable amount of the cash-generating units are less than that

of the carrying amount of the units, the resulting impairment loss is allocated to goodwill and then to the other assets of the units

pro rata on the basis of the carrying amount of each asset in the unit.

On disposal of a subsidiary or associate, the attributable amount of goodwill is included in determining profit or loss on disposal.

10. InTAngIBLe AsseTsAn intangible asset is an identifiable, non-monetary asset without physical substance. It includes brands, client relationships, fair value

of contracts, capitalised development costs and certain costs of the purchase and installation of major information systems (including

packaged software).

Intangible assets are initially recognised at cost if acquired separately or internally generated or at fair value if acquired as part of a

business combination. If assessed as having an indefinite useful life, the intangible asset is not amortised but tested for impairment

annually and impaired if necessary. If assessed as having a finite useful life, the intangible assets are amortised over their useful lives using

the straight-line basis and tested for impairment if there is an indication that they may be impaired.

The residual values, amortisation method and useful lives are reviewed and adjusted if appropriate at each reporting date. Subsequent

expenditure is capitalised only when it increases the future economic benefits embodied in the specific asset to which it relates. All other

expenditure, including expenditure on internally-generated goodwill and brands, is recognised in profit or loss as incurred.

Expenditure that enhances and extends the benefits of computer software programs beyond their original specifications and useful

life, is recognised as a capital improvement and added to the original cost of the software and the useful life is re-assessed. Computer

software development costs recognised as assets are amortised over their useful lives using the straight-line method.

research and development costsExpenditure on research activities, undertaken with the prospect of gaining new scientific or technical knowledge and understanding, is

recognised in profit or loss as incurred.

Development activities involve a plan or design for the production of new or substantially improved products and processes.

Development expenditure is capitalised and recognised as assets if:

• a separately identifiable asset is created;

• it is probable that such expenditure has definite future economic benefits;

• the development costs can be reliably measured;

• the product or process is technically and commercially feasible;

• the group intends to and has sufficient resources to complete the development and to use or sell the asset.

The expenditure capitalised includes the cost of materials, direct labour, overheard costs that are directly attributable to preparing the

asset for its intended use, and capitalised borrowing costs and is classified as property, plant and equipment or intangible assets.

Development costs initially written-off as an expense are not recognised as an asset in a subsequent period.

The amortisation periods applicable to intangible assets are as follows:

Brands 10 years

Client relationships 3 to 6 years

Software 3 to 10 years

Fair value of contracts Life of the contract

106

11. IMPAIrMenTs of non-fInAnCIAL AsseTs (exCLudIng goodWILL)At each reporting date, the group reviews the carrying amounts of its non-financial assets, other than investment property, inventories

and deferred tax assets, to determine whether there is any indication that those assets may be impaired. If any such indication exists,

the recoverable amount of the asset is estimated. The recoverable amount is the higher of fair value less cost to sell and the value in use.

The value in use is determined using the estimated future cash flows discounted to their net present value using a pre-tax discount rate

that reflects the market assessments of the time value of money and the risks specific to the asset. Where it is not possible to estimate

the recoverable amount for an individual asset, the recoverable amount is determined for the cash-generating unit to which the

asset belongs.

Corporate assets do not generate separate cash inflows and are utilised by more than one cash-generating unit. Corporate assets are

allocated to the cash-generating units on a reasonable and consistent basis and tested for impairment as part of the testing of the cash-

generating unit to which the corporate asset is allocated.

If the recoverable amount of an asset or cash-generating unit is estimated to be less than the carrying amount, the carrying amount

of the asset or cash-generating unit is reduced to its recoverable amount. The impairment losses are recognised as an expense

immediately.

Where an impairment loss subsequently reverses, the carrying amount of the asset or cash-generating unit is increased to the revised

estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have

been determined had no impairment loss been recognised for the asset or cash-generating unit in prior years. A reversal of impairment

is recognised immediately in profit or loss.

12. AsseTs heLd for sALeNon-current assets classified as held for sale are disclosed at the lower of the carrying amount and fair value less cost to sell if the

carrying amount is recovered primarily through a sale transaction rather than through continuing use.

This condition is regarded as met only when the sale is highly probable and the assets (or disposal group) are available for immediate

sale which should be expected to qualify for recognition as a completed sale within one year from date of classification.

Immediately before classification as held for sale, the assets, or components of a disposal group, are remeausured in accordance with

the group’s accounting policies. Any impairment loss on a disposal group is first allocated to goodwill, and then to remaining assets and

liabilities on a pro rata basis, except that no loss is allocated to inventories, financial assets, deferred tax assets, employee benefit assets

and investment property, which continue to be measured in accordance with the group’s accounting policies.

Impairment losses on initial classification as held for sale and subsequent gains and losses on re-measurements are recognised in profit

or loss. Gains are not recognised in excess of any cumulative impairment losses.

13. fInAnCIAL InsTruMenTsFinancial instruments carried by the group on the statement of financial position include long-term loans receivable, cash and cash

equivalents, other investments, trade and other receivables, trade and other payables, and long and short-term liabilities. The particular

recognition and measurement policies adopted are disclosed in the accounting policy associated with the item.

Financial assets and liabilities are offset and the net amount presented in the statement of financial position when, and only when,

the group has a legal right to offset the amounts and intends either to settle on a net basis or to realise the asset and settle the liability

simultaneously.

financial assetsPurchases and sales of financial assets are recognised on trade-date, being the date on which the group commits to purchase or sell the

asset. Loans and receivables and deposits are recognised on the date that they are originated. Financial assets are initially recognised

at fair value plus transaction costs, except those carried at fair value through profit or loss where transaction costs are recognised

immediately through profit or loss.

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13. fInAnCIAL InsTruMenTs (continued)financial assets (continued)Financial assets are classified into the following categories: financial assets at fair value through profit or loss (FVTPL), loans and

receivables, available-for-sale financial assets and held-to-maturity investments. The classification depends on the purpose for which the

investments were acquired. Management determines the classification of its investments at initial recognition.

financial assets at fair value through profit or loss (fvTPL)This category has two sub-categories: financial assets held for trading, and those designated at fair value through profit or loss.

A financial asset is classified as held for trading if:

• it has been acquired principally for the purpose of selling in the near future; or

• it is part of an indentified portfolio of financial instruments that the group manages together and has a recent actual pattern of

short-term profit-taking; or

• it is a derivative that is not designated and effective as a hedging instrument.

A financial asset, other than a financial asset held for trading, may be designated at FVTPL upon initial recognition if:

• such designation eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise; or

• the financial asset forms part of a group of financial assets or financial liabilities, or both, which is managed and its performance

is evaluated on a fair value basis, in accordance with the group’s documented risk management or investment strategy, and

information about grouping is provided internally on that basis; or

• it forms part of a contract containing one or more embedded derivatives, and IAS 39 Financial Instruments: Recognition and

Measurement permits the entire combined contract (asset or liability) to be designated at FVTPL.

Financial assets at fair value through profit or loss are subsequently carried at fair value. Realised and unrealised gains and losses

from changes in the fair value of the “financial assets at fair value through profit or loss” category are included in profit or loss in

the period in which they arise. Assets in this category are classified as current assets if they are either held for trading or are expected

to be realised within 12 months of the reporting date.

Loans and receivablesLoans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market.

They arise when the group provides money, goods or services directly to a debtor with no intention of trading the receivable. Loans and

receivables are initially recognised at fair value and subsequently measured at amortised cost using the effective interest rate method less

any impairment.

Loans and receivables are included in current assets, except for maturities greater than 12 months after the reporting date. These

are classified as non-current assets. Loans and receivables comprise loans, trade receivables, other receivables and cash and cash

equivalents.

Available-for-sale financial assetsAvailable-for-sale financial assets are non-derivative financial assets that are either designated in this category or not classified in any of

the categories above. They are included in non-current assets unless management intends to dispose of the investment within

12 months of reporting date.

Available-for-sale financial assets are subsequently carried at fair value. The fair value of quoted securities is based on bid prices in an

active market. If the market for a financial asset is not active (as for example unlisted securities), the group establishes fair value by using

valuation techniques. These include the use of recent arm’s length transactions, reference to other instruments that are substantially

the same, discounted cash flow analysis, and option pricing models refined to reflect the issuer’s specific circumstances.

Gains and losses arising from changes in fair value are recognised in other comprehensive income, with the exception of impairment

losses, interest calculated using the effective interest method and foreign exchange gains and losses on monetary assets, which are

recognised directly in profit or loss.

When securities classified as available-for-sale are sold or impaired, the accumulated fair value adjustments in equity are transferred to

profit or loss.

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13. fInAnCIAL InsTruMenTs (continued)held-to-maturity investmentsHeld-to-maturity investments are non-derivative financial assets with fixed or determinable payments and fixed maturities that the

group’s management has the positive intention and ability to hold to maturity. Held-to-maturity investments are carried at amortised

cost using the effective interest method less any impairment, with interest recognised on the effective yield basis.

Cash and cash equivalentsCash 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

measured at amortised cost.

Impairment of financial assetsThe group assesses at each reporting date whether there is objective evidence that financial assets, other than those held at FVTPL, are

impaired. Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the

initial recognition of the financial asset, the estimated future cash flows of the investment have been impacted.

In the case of equity securities classified as available-for-sale, a significant or prolonged decline of the fair value of the security below

cost is considered in determining whether the securities are impaired.

For all other financial assets, objective evidence of impairment could include:

• significant financial difficulty of the issuer or counterparty; or

• default or delinquency in interest or principal payments; or

• it becoming probable that the borrower will enter bankruptcy or financial re-organisation.

Financial assets classified as loans or receivables or held-to-maturity that are assessed not to be impaired individually are subsequently

assessed for impairment on a collective basis. Objective evidence of impairment for a portfolio of receivables classified as loans or

receivables or held-to-maturity could include the group’s past experience of collecting payments, an increase in the number of delayed

payments in the portfolio past the average credit period, as well as observable changes in national or local economic conditions that

correlate with default on receivables.

For financial assets carried at amortised cost, the amount of the impairment is the difference between the asset’s carrying amount and

the present value of estimated future cash flows, discounted at the financial asset’s original effective interest rate.

The carrying amount of the financial asset is reduced by the impairment loss for all financial assets, with the exception of trade

receivables, where the carrying amount is reduced through the use of an impairment allowance account. When a trade receivable is

considered uncollectible, it is written-off against the allowance account. Subsequent reversals of impairment losses are credited against

the allowance account. Changes in the impairment allowance account are recognised in profit or loss.

With the exception of the available-for-sale equity instruments if, in a subsequent period, the amount of the impairment loss decreases

and the decrease can be related objectively to an event occurring after the impairment was recognised on the financial asset measured

at amortised cost, the previously recognised impairment loss is reversed through profit or loss to the extent that the carrying amount

of the financial asset at the date the impairment is reversed does not exceed what the amortised cost would have been had the

impairment not been recognised. In respect of available-for-sale equity securities, impairment losses previously recognised through

profit or loss are not reversed through profit or loss. Any increase in fair value subsequent to an impairment loss is recognised directly in

other comprehensive income.

derecognition of financial assetsThe group derecognises a financial asset only when the contractual rights to the cash flows from the asset expire, or it transfers the

financial asset and substantially all the risks and rewards of ownership of the asset to another entity. If the group neither transfers nor

retains substantially all the risks and rewards of ownership and continues to control the transferred asset, the group recognises its

retained interest in the asset and an associated liability for amounts it may have to pay. If the group retains substantially all the risks

and rewards of ownership of a transferred financial asset, the group continues to recognise the financial asset and also recognises a

collateralised borrowing for the proceeds received.

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13 fInAnCIAL InsTruMenTs (continued)derivative financial instrumentsThe group uses derivative financial instruments (primarily foreign currency forward exchange contracts) to manage its risks associated

with foreign currency fluctuations. Such derivatives are initially recorded at fair value and re-measured to fair value at subsequent

reporting dates with changes reflected in profit or loss.

The resultant gain or loss is recognised in profit or loss immediately unless the derivative is designated and effective as a hedging

instrument, in which event the timing of the recognition in profit or loss depends on the nature of the hedge relationship.

A derivative is presented as a non-current asset or a non-current liability if the remaining maturity of the instrument is more than

12 months and it is not expected to be realised or settled within 12 months. Other derivatives are presented as current assets or current

liabilities.

Derivatives are governed by the group’s policies approved by the board of directors and are not used for speculative purposes.

embedded derivativesDerivatives embedded in other financial instruments or non-derivative host contracts are treated as separate derivatives when their risks

and characteristics are not closely related to those of host contracts and the host contracts are not carried at fair value with unrealised

gains or losses reported in profit or loss. Changes in the fair value of separated embedded derivatives are recognised immediately in

profit or loss.

financial liabilitiesFinancial liabilities are classified as either financial liabilities ‘at FVTPL’ or ’other financial liabilities’.

financial liabilities at fvTPLFinancial liabilities are classified at FVTPL where the financial liability is either held for trading or it is designated at FVTPL.

A financial liability is classified as held for trading if:

• it has been incurred principally for the purpose of repurchasing in the near future; or

• it is a part of an identified portfolio of financial instruments that the group manages together and has a recent actual pattern of

short-term profit-taking; or

• it is a derivative that is not designated and effective as a hedging instrument.

A financial liability, other than a financial liability held for trading, may be designated at FVTPL upon initial recognition if:

• such designation eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise; or

• the financial liability forms part of a group of financial assets or financial liabilities, or both, which is managed and its performance

is evaluated on a fair value basis, in accordance with the group’s documented risk management or investment strategy, and

information about the grouping is provided internally on that basis; or

• it forms part of a contract containing one or more embedded derivatives, and IAS 39 Financial Instruments: Recognition and

Measurement permits the entire combined contract (asset or liability) to be designated at FVTPL.

Financial liabilities at FVTPL are stated at fair value, with any resultant gain or loss recognised in profit or loss. The net gain or loss

recognised in profit or loss incorporates any interest paid on the financial liability.

Trade and other payablesTrade payables are initailly measured at fair value, and are subsequently measured at amortised cost, using the effective interest method.

other financial liabilitiesOther financial liabilities, including borrowings, are initially measured at fair value, net of transaction costs and 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 through the expected life

of the financial liability or, where appropriate, a shorter period.

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13. fInAnCIAL InsTruMenTs (continued)derecognition of financial liabilitiesThe group derecognises financial liabilities when, and only when, the group’s obligations are discharged, cancelled or they expire.

14. InvenTorIesInventories are measured at the lower of cost and estimated net realisable value. Slow-moving inventory in excess of requirements or

obsolete inventory is written-down to net realisable value.

Cost is determined using the weighted average cost method.

The values of merchandise and work in progress include direct costs and, where appropriate, a proportion of overhead expenditure

(based on normal operating capacity). It excludes borrowing costs.

The basis of determining the net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs

of completion and selling expenses.

15. ProvIsIonsProvisions representing liabilities of uncertain timing or amount.

Provisions are recognised when the group has a present legal or constructive obligation, as a result of past events, for which it is

probable that an outflow of economic benefits will be required to settle the obligation, and a reliable estimate can be made of the

amount of the obligation.

Provisions are measured at the expenditure required to settle the present obligation. Where the effect of discounting is material,

provisions are measured at their present value using a pre-tax discount rate that reflects the current market assessment of the time value

of money and the risks for which future cash flow estimates have not been adjusted. The unwinding of the discount is recognised as a

finance cost.

onerous contractsPresent obligations arising under onerous contracts are recognised and measured as a provision. An onerous contract is considered

to exist where the group has a contract under which the unavoidable costs of meeting the obligations under the contract exceed the

economic benefits expected to be received under it. The provision is measured at the present value of the lower of the expected cost of

terminating the contract and the expected net cost of continuing with the contract.

restructuringA restructuring provision is recognised when the group has developed a detailed formal plan for the restructuring and has raised a valid

expectation in those affected business units that it will carry out the restructuring by starting to implement the plan or announcing its

main features to those affected by it. The measurement of a restructuring provision includes only the direct expenditure arising from

the restructuring, which are those amounts that are both necessarily entailed by the restructuring and not associated with the ongoing

activities of the entity.

WarrantiesProvisions for warranty costs are recognised at the date of sale of the relevant products, at the estimated expenditure required to settle

the group’s obligation.

16. deferred TAx AsseTs And LIABILITIesDeferred tax assets and liabilities are recognised on all temporary differences arising between the tax base of assets and liabilities and

their carrying amounts in the consolidated financial statements. Such assets and liabilities are not recognised if the temporary difference

arises from the initial recognition of goodwill or from the initial recognition (other than in business combinations) of other assets and

liabilities in a transaction that affects neither the tax profit nor the accounting profit or from investments in subsidiaries and associates to

the extent that it is probable that they will not reverse in the foreseeable future.

Deferred tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the temporary

differences can be utilised. A deferred tax asset for unutilised secondary tax on company credits, that arises from the distribution of

dividends before 1 April 2012 was recognised to the extent that it was probable that an entity would declare a dividend for which

secondary tax on company credits can be utilised.

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16. deferred TAx AsseTs And LIABILITIes (continued)Deferred tax assets are recognised for capital losses to the extent that future gains, against which the loss can be offset, will be available.

Deferred tax is recognised in profit or loss, except when it relates to items credited or charged directly in equity or other comprehensive

income, in which case the deferred tax is recognised in equity or other comprehensive income, respectively.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and liabilities, and they

relate to income taxes levied by the same taxation authority and the group intends to settle its current tax assets and liabilities on a net

basis or their tax assets and liabilities will be realised simultaneously.

Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax

benefit will be realised.

Deferred tax is measured at the tax rates that are expected to be applied when the temporary differences reverse that have been enacted

or substantively enacted by the reporting date.

17. eMPLoyee shAre oPTIonsThe group issues equity-settled share options to certain employees and black equity employee (BEE) participants. Equity-settled share

options are measured at fair value (excluding the effect of non-market-based vesting conditions) at the date of grant. The fair value

determined at the grant date of the equity-settled share options is expensed on a straight-line basis over the vesting period, based on

the group’s estimate of the shares that will eventually vest and is adjusted for the effect of non-market-based vesting conditions. The fair

value for granted options with no vesting conditions are expensed immediately.

A share-based payment reserve is created in equity in which share-based payments are recognised. Fair value is measured using the

Monte Carlo simulation model. The expected life used in the model has been adjusted, based on management’s best estimate,

for the effects of non-transferability, exercise restrictions and behavioural considerations.

The group subsidiaries issue cash-settled share-based options to certain employees which are based on the market price

of Business Connexion shares. Cash-settled share-based options are measured at fair value (excluding the effect of non-market-based

vesting conditions) at the date of grant. The cash-settled share-based options are recognised as an expense with a corresponding

liability over the period that the employees unconditionally become entitled to payment. The fair value of the liability is re-measured at

each reporting date and at settlement date. Changes in the fair value of the liability are recognised in profit or loss.

18. PosT-reTIreMenT BenefIT oBLIgATIonsretirement obligationA defined contribution plan is a post-employment benefit plan under which an entity pays fixed contributions into a separate trustee-

administrated fund and will have no legal or constructive obligation to pay further amounts.

The group operates a number of defined contribution retirement schemes in the territories in which it operates. The assets of these

schemes are generally held in separate trustee-administered funds. The schemes are generally funded by payments from the employees

and by the relevant group entities, taking into account the recommendations of independent actuaries. The group’s contributions to

these schemes are recognised in profit or loss when the services are rendered by employees.

Post-retirement healthcare obligationsA defined benefit plan is a post-employment benefit plan, other than a defined contribution plan.

For post-retirement healthcare obligations, the cost of providing benefits is determined using the projected unit credit method.

Costs in respect of vested past service are recognised in profit or loss. When past service costs have not vested, the past service

costs will be recognised as an expense on a straight-line basis over the average period until the benefits become vested.

The post-retirement obligations, in the statement of financial position, represent the present value of future obligations. The group

recognises all actuarial gains and losses arising from defined benefit plans directly in profit or loss.

112

19. shAre CAPITALordinary sharesOrdinary shares are classified as equity. Incremental costs directly attributable to the issue of ordinary shares and share options are

recognised as a deduction from equity, net of any tax effects.

repurchase of share capital (treasury shares)When share capital recognised as equity is repurchased, the amount of the consideration paid, which includes directly attributable costs

net of tax effects, is recognised as a deduction from equity. Repurchased shares are classified as treasury shares and are presented as a

deduction from equity. When treasury shares are sold or re-issued subsequently, the amount received is recognised as an increase in

equity, and the resulting surplus or deficit on the transaction is transferred to or from retained earnings.

20. dIvIdendsDividends to equity holders are included in the statement of changes in equity in the year in which they are declared.

21. revenueRevenue is measured at the fair value of the consideration received or receivable. Revenue is reduced for estimated client returns,

rebates and other similar allowances.

rendering of servicesRevenue from a contract to provide services is recognised by reference to the stage of completion of the contract.

The stage of completion of the contract is determined as follows:

• Installation fees are recognised by reference to the stage of completion of the installation, determined as the proportion of the total

time expected to install to the time that has elapsed at the reporting date.

• Servicing fees included in the price of products sold are recognised by reference to the proportion of the cost to the total cost of

providing the servicing for the product sold, taking into account historical trends in the number of services actually provided on past

goods sold.

• Revenue from time and material contracts is recognised at the contractual rates as labour hours are delivered and direct expenses

are incurred.

sales of goodsRevenue from the sale of goods is recognised when all of the following conditions are satisfied:

• The group has transferred to the buyer the significant risks and rewards of ownership of the goods.

• The group retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control

over the goods sold.

• The amount of revenue can be measured reliably.

• It is probable that the economic benefits associated with the transaction will flow to the entity.

• The costs incurred or to be incurred in respect of the transaction can be measured reliably.

dividend and interest receivedDividends received from investments are recognised when the shareholder’s right to receive payment has been established, which in the

case of quoted securities is when the dividend is declared.

Interest received is accrued on a time basis, by reference to the principal amount outstanding and at the effective interest rate

applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to that

asset’s net carrying amount.

The group generates revenue both in its capacity as an agent of certain clients and as a stand-alone principal.

Revenue earned in an agent relationship:

• the group acts as an agent on behalf of certain clients to procure services from third parties only to the extent that the client utilises

the services. In these cases revenue is recognised as the difference between invoice values issued and the supplier cost.

Revenue earned in a principal relationship:

• revenue arising from the rendering of services, which include computer processing services, implementation and support services,

and installation and maintenance charges, is recognised on the accrual basis based on the substance of the agreement.

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22. CosT of sALesWhen inventories are sold, the carrying amount is recognised as part of cost of sales. Any write-down of inventories to net realisable

value and any loss of inventory or reversals of previous write-downs or losses are recognised in cost of sales in the period the write-

down, loss or reversal occurs. Manpower costs, depreciation charges and any other expenses incurred in delivering a service are also

recognised as part of cost of sales.

23. BorroWIng CosTsThe group capitalises borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset as part of

the cost of that asset. Any other borrowing costs are recognised in profit or loss in the period in which they are incurred using

the effective interest method.

24. TAxATIonIncome tax expense represents the sum of current and deferred tax.

Income taxThe current tax charge is based on the taxable profit for the period. Taxable profit differs from net profit as reported in the statement

of comprehensive income because it excludes items of income or expense that are taxable or deductible in other years and it further

excludes items that are never taxable or deductible. The group’s liability for current tax is calculated using tax rates that have been

enacted or substantively enacted by the reporting date.

Adjustments to tax payable in respect of previous years are also recognised in current tax for the period.

Current tax is recognised in profit or loss, except to the extent that it relates to a business combination, or items recognised directly in

equity or in other comprehensive income.

secondary Tax on Companies (sTC)STC is recognised as part of the current tax charge when the related dividend was declared before 1 April 2012.

dividend Withholding Tax (dWT)DWT is a tax on shareholders receiving dividends and is applicable to all dividends declared on or after 1 April 2012.

Dividend tax is withheld on behalf of the shareholders at a rate of 15% on dividends declared. Amounts withheld are not recognised as

part of the tax charge but rather as part of the dividend paid recognised directly in equity.

Where withholding tax is withheld on dividends received, the dividend is recognised at the gross amount with the related withholding

tax recognised as part of the tax charge in the period in which the dividend is received.

25. segMenT rePorTIngAn operating segment is a component of the group that engages in business activities from which it may earn revenues and incur

expenses, including revenues and expenses that relate to transactions with any of the group’s other components.

An operating segment’s operating results are reviewed regularly by the chief executive officer to make decisions about resources to be

allocated to the segment and assess its performance, and for which discrete financial information is available. The group evaluates

the performance of its segments based on operating profit.

All inter-segment transactions are eliminated on consolidation.

26. eArnIngs Per shAreThe group presents basic, headline and diluted earnings per ordinary share. Basic earnings per share is calculated by dividing the profit

or loss attributable to ordinary shareholders of the group by the weighted average number of ordinary shares outstanding during the

year, adjusted for own shares held. Diluted earnings per share is determined by adjusting the profit or loss attributable to ordinary

shareholders and the weighted average number of ordinary shares outstanding for own shares held and for the effects of all potential

dilutive ordinary shares attributable to share options granted to employees.

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statements for the year ended 31 August 2012

Notes to the

fINaNCIaL

Property

Furniture

and fittings Equipment Vehicles

Rental

assets Total

R’000 R’000 R’000 R’000 R’000 R’000

1. ProPerTy, PLAnT And equIPMenTgrouPCost

Cost at 31 August 2010 161 225 57 742 539 514 2 539 5 451 766 471

Additions 46 813 8 982 112 426 2 683 32 170 936

Acquisition of businesses 10 969 14 254 70 677 19 041 114 941

Transfers (453) (5 705) (5 566) (11 724)

Asset re-allocations and scrapping 746 (2 256) (248 914) (12) (250 436)

Disposals (160) (788) (23 132) (1 025) (25 105)

Disposal of business (1 643) (971) (3 330) (2 591) (8 535)

Currency translation differences (189) 58 (1 239) 101 (1 269)

Cost at 31 August 2011 217 308 71 316 440 436 20 748 5 471 755 279

Additions 18 868 2 632 84 601 7 615 1 002 114 718

Acquisition of businesses 257 990 219 1 466

Transfers (11 032) (49) 10 653 148 (280)

Disposals (1 724) (1 171) (24 826) (730) (1 492) (29 943)

Disposal of business (326) (326)

Currency translation differences 1 450 415 3527 687 6 079

Cost at 31 August 2012 224 870 73 400 515 055 28 687 4 981 846 993

Accumulated depreciation


at 31 August 2010 26 626 42 014 382 962 1 391 5 220 458 213

Depreciation 13 259 5 857 82 203 1 355 132 102 806

Acquisition of businesses 6 405 9 346 49 934 8 251 73 936

Transfers 196 (2 187) 1 248 (743)

Asset re-allocations and scrapping 746 (2 256) (248 914) (12) (250 436)

Disposals (67) (765) (19 073) (190) (20 095)

Disposal of business (715) (409) (2 347) (1 359) (4 830)

Currency translation differences (27) 246 (769) 29 (521)


at 31 August 2011 46 423 51 846 245 244 9 477 5 340 358 330

Depreciation 14 923 6 769 91 795 4 837 219 118 543

Acquisition of businesses 209 894 170 1 273

Transfers (39) 1 015 141 1 117

Disposals (1 622) (1 124) (20 355) (575) (1 460) (25 136)

Disposal of business (281) (281)

Currency translation differences 97 482 1 810 192 2 581


at 31 August 2012 59 821 58 143 320 122 14 242 4 099 456 427

Carrying value at 31 August 2010 134 599 15 728 156 552 1 148 231 308 258



A list of land and buildings is available for inspection at the registered office of the group.

The carrying value of freehold land and buildings pledged as security for long-term liabilities amounts to R8,0 million

(2011: R7,2 million). Details of assets pledged as security for long-term liabilities are disclosed in note 17.

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2012 2011

r’000 R’000

2. InvesTMenT ProPerTygrouPFair value of investment property at beginning of year 8 200

Increase in fair value during the year 191

Reclassification of investment property as asset held for sale (8 391)

fair value of investment property at end of year

Furniture

and fittings Equipment Total

R’000 R’000 R’000

3. CAPITALIsed LeAsed AsseTsgrouPCost

Cost at 31 August 2010 967 42 464 43 431

Additions 22 090 22 090

Acquisition of businesses 50 580 50 580

Asset scrapping (1 585) (1 585)

Disposals (8 889) (8 889)

Currency translation differences 4 4

Cost at 31 August 2011 971 104 660 105 631

Additions 386 18 169 18 555

Transfers 1 434 (2 079) (645)

Disposals (222) (11 886) (12 108)

Currency translation differences 159 15 174

Cost at 31 August 2012 2 728 108 879 111 607


Accumulated depreciation at 31 August 2010 516 9 463 9 979

Depreciation 189 16 389 16 578


Asset scrapping (1 585) (1 585)

Reclassification to computer software 782 782

Disposals (6 741) (6 741)

Currency translation reserves 8 8

Accumulated depreciation at 31 August 2011 713 47 882 48 595

Depreciation 514 23 314 23 828

Transfers 864 (1 179) (315)

Disposals (221) (11 845) (12 066)

Currency translation differences 128 15 143

Accumulated depreciation at 31 August 2012 1 998 58 187 60 185

Carrying value at 31 August 2010 451 33 001 33 452



Capitalised leased assets are encumbered as reflected in note 17.

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grouP CoMPAny

2012 2011 2012 2011

r’000 R’000 r’000 R’000

4. goodWILLCarrying value at beginning of year 555 318 145 575


Disposals (111 122)

Impairment (4 863)

Carrying value at end of year 566 925 555 318

Goodwill acquired in a business combination is allocated,

at acquisition, to the cash generating units that are expected to

benefit from that business combination. The carrying amount

of goodwill has been allocated as follows:

Business Connexion Proprietary Limited

Cost at beginning of year 184 399 162 074

Additions 22 325

Accumulated impairment (21 362) (16 499)


uCs subsidiaries

Cost at beginning of year 227 471

Additions 338 593

Disposals (111 122)


Canoa group holdings Proprietary Limited

Cost at beginning of year 159 947

Additions 159 947


quad Automation Properietary Limited

Cost at beginning of year

Additions 16 470

Carrying value at end of year 16 470


The group tests goodwill annually for impairment, or more frequently, if there are indications that goodwill might be impaired.

The recoverable amount of a cash-generating unit is the higher of fair value less cost to sell and the value in use. The value in use is

determined using the estimated future cash flows discounted to their net present value using a pre-tax rate that reflects the

market’s assessments of the time value of money and the risks specific to the asset.

These calculations use cash flow projections based on historical information and financial budgets approved by management covering

a three to five year period. The projected cash flows are discounted to their net present value using the weighted average cost of capital.

The goodwill impairment test conducted for the period under review applied a weighted average cost of capital of 16,0% with a 0,5%

sensitivity and a perpetual growth rate of 4,0% with a 0,5% sensitivity. With the exception of the impairment of goodwill on SiloFX no

other impairment was required.

statements for the year ended 31 August 2012 continued

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Client Computer Fair value of

Brands relationships software contracts Total

R’000 R’000 R’000 R’000 R’000

5. InTAngIBLe AsseTsgrouPCost:

Cost at 31 August 2010 231 042 26 607 257 649

Additions 59 490 59 490

Acquisition of businesses 36 860 179 170 106 568 322 598

Transfers 11 724 11 724

Disposal of business (43 867) (43 867)

Disposals (228) (228)

Currency translation differences (592) (592)

Cost 31 August 2011 36 860 179 170 364 137 26 607 606 774

Additions 72 302 72 302

Acquisition of businesses 76 76

Transfers (267) (267)

Disposals (9 657) (9 657)

Currency translation differences 1 299 1 299

Cost at 31 August 2012 36 860 179 170 427 890 26 607 670 527

Accumulated amortisation:

Accumulated amortisation

at 31 August 2010 124 415 25 346 149 761

Amortisation 1 229 13 328 27 751 1 261 43 569


Transfers 743 743

Re-classification from capitalised leased assets (782) (782)

Disposal of business (22 534) (22 534)

Disposals (224) (224)

Currency translation differences (278) (278)

31 August 2011 1 229 13 328 186 958 26 607 228 122

Amortisation 3 686 42 786 38 155 84 627

Acquisition of businesses 76 76

Transfers (637) (637)

Disposals (5 733) (5 733)

Currency translation differences 801 801


at 31 August 2012 4 915 56 114 219 620 26 607 307 256

Carrying value at 31 August 2010 106 627 1 261 107 888

Carrying value at 31 August 2011 35 631 165 842 177 179 378 652

Carrying value at 31 August 2012 31 945 123 056 208 270 363 271

The intangible assets included above have finite useful lives, which are detailed in the accounting policy, over which the assets are

amortised. Intangible assets relating to the fair value of contracts and client relationships are contracts acquired on acquisition

of businesses and are amortised as and when the contract revenues are expected to be realised.

118

grouP CoMPAny

2012 2011 2012 2011

r’000 R’000 r’000 R’000

6. InvesTMenTs In suBsIdIArIes (Annexure A)Shares at cost 4 637 771 4 637 771

Increase in investment 12 133

Cost at end of year 4 649 904 4 637 771

Impairment of investments in subsidiaries (1 975 406) (1 975 406)

Carrying value at end of year 2 674 498 2 662 365

7. InvesTMenT In AssoCIATesShares at cost 3 674 3 674

Advances to associates 7 475 6 977

Investment in associates 11 149 10 651

Share of post-acquisition losses (3 159) (2 664)

Impairment (7 990) (2 500)

Carrying value at end of year 5 487

The advances to associates are interest-free, unsecured and

repayable on demand.

Hawkstone iSolutions Proprietary Limited:

Revenue 17 226 3 329

Loss 495 536

Total assets 6 613 9 368

Total liabilities (12 591) (14 590)

Managed Print Solutions Proprietary Limited:

Profit 319

The financial information provided represents the group’s share

of the financial position and results of the associates.

The investment in Hawkstone iSolutions Proprietary Limited

has been fully impaired as the entity is being liquidated.

8. Long-TerM LoAns reCeIvABLeUCS Solutions Proprietary Limited management loan 29 663 29 663

This loan is unsecured, bears interest at 80% of the ruling

prime interest rate per annum and is not repayable within the

next 12 months.

BEE “A” share shareholder loans 494 494

These loans are unsecured and are not repayable within the

next 12 months.

R0,433 million bears interest at 80% of the ruling prime interest

rate per annum. R0,061 million is interest free.

NTQ MBI Proprietary Limited 2 289

This loan is unsecured, bears interest at a rate of prime less 2%

per annum and is not repayable within the next 12 months.

32 446 30 157


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2012 2011 2012 2011

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9. oTher InvesTMenTsheld-to-maturity

Gadlex preference shares

Cost at beginning of year 214 687 204 890 214 687 204 890

“A” preference share (redemption)/dividends capitalised (1 316) 9 797 (1 316) 9 797

Cost at end of year 213 371 214 687 213 371 214 687

Available-for-sale

Capital Eye Investments Limited* ordinary shares 621

Total other investments at end of year 213 371 215 308 213 371 214 687

details of unlisted investments

Gadlex Proprietary Limited – “A” preference shares 120 273 121 589 120 273 121 589

Gadlex Proprietary Limited – “B” preference shares 15 810 15 810 15 810 15 810

Gadlex Holdings Proprietary Limited – “C” preference shares 77 288 77 288 77 288 77 288

Capital Eye Investments Limited* ordinary shares 621

213 371 215 308 213 371 214 687

* Capital Eye Investments Limited previously UCS Group Limited

gadlex Proprietary Limited – “A” preference shares10 000 “A” preference shares with a nominal value of R0.01 (one cent) each. The shares are redeemable, and cumulative and have

a coupon rate of 80% of the South African prime rate. The approximate redemption date changed from 7 June 2013 to

31 August 2015 as a result of the black economic empowerment (BEE) transaction concluded on 31 August 2010. In terms of

the shareholders’ agreement, 80% of all dividends declared by Business Connexion Group Limited to Gadlex Proprietary Limited

are to be utilised to pay the preference dividend due, and thereafter, the redemption of the preference shares.

gadlex Proprietary Limited – “B” preference shares1 000 “B” preference shares with a nominal value of R0.01 (one cent) each. The shares are redeemable, and cumulative and have a

coupon rate of 80% of the South African prime rate and rank after the “A” preference shares. The approximate redemption date changed

from 7 June 2013 to 31 August 2015 as a result of the BEE transaction concluded on 31 August 2010. In terms of the shareholders’

agreement, 80% of all dividends declared by Business Connexion Group Limited to Gadlex Proprietary Limited are to be utilised to pay

the preference dividend due, and thereafter, the redemption of the preference shares.

gadlex holdings Proprietary Limited – “C” preference shares10 000 “C” preference shares with a nominal value of R0,01 (one cent) each. The shares are redeemable, and cumulative and have

a coupon rate of 80% of the South African prime rate and rank after the “A” and “B” preference shares. The approximate redemption

date changed from 7 June 2013 to 31 August 2015 as a result of the BEE transaction concluded on 31 August 2010. In terms of

the shareholders’ agreement, 80% of all dividends declared by Business Connexion Group Limited to Gadlex Proprietary Limited

are to be utilised to pay the preference dividend due, and thereafter, the redemption of the preference shares.

Preference dividends accrued on the “A”, “B” and “C” preference shares of R15,3 million (2011: R15,4 million) have been included in

other receivables.

Capital eye Investments LimitedThe group held 1 149 731 Capital Eye Investments Limited shares at a market price of R0,54 (fifty-four cents). The shares were held for

the benefit of employees of UCS Technology Services Proprietary Limited, UCS Solutions Proprietary Limited, Accsys Proprietary Limited

and CEB Maintenance Africa Proprietary Limited, who had share options in a UCS Group Limited share option scheme. These shares

were sold for R0,55 (fifty-five cents) as part of the de-listing of UCS Group Limited.

120

grouP CoMPAny

2012 2011 2012 2011

r’000 R’000 r’000 R’000

10. deferred TAxDeferred tax assets at beginning of year 53 046 25 861 1 536 1 690 Deferred tax liabilities at beginning of year (60 927) (2 038)

Net deferred tax balance at beginning of year (7 881) 23 823 1 536 1 690 Recognised in profit or loss 19 887 20 841 (1 536) (154)Acquisition of businesses/subsidiaries 272 4 459 Disposal of subsidiary 6 501 Translation of foreign operations 301Recognised against intangible assets on acquisition

of businesses (63 505)

net deferred tax balance at end of year 12 579 (7 881) 1 536

Deferred tax assets at end of year 60 183 53 046 1 536 Deferred tax liabilities at end of year (47 604) (60 927)

12 579 (7 881) 1 536

The following are the major deferred tax assets and liabilities recognised by the group and the movements in the current and the

previous year:

Balance at

31 August 2010

Recognised in

profit or loss

(Acquisition)/

disposal of

businesses

Recognised

against intangible

assets on

acquisition of

businesses

Balance at

31 August 2011R’000 R’000 R’000 R’000 R’000

grouPSTC credits 1 690 (154) 1 536 Intangible assets 4 328 (63 505) (59 177)

Accelarated tax allowances (27 881) 3 357 (3 053) (27 577)Prepayments (3 950) 1 705 (799) (3 044)Capitalised leased assets and liabilities 10 098 (3 953) (255) 5 890Provisions 33 623 6 835 9 472 49 930 Calculated tax losses 5 084 5 084 Income received in advance 13 713 (2 037) 5 570 17 246Net share options balance (3 470) 5 676 25 2 231

Total 23 823 20 841 10 960 (63 505) (7 881)

Balance at

31 August 2011

recognised in

profit or loss

(Acquisition)/

disposal of

businesses

Translation

of foreign

operations

Balance at

31 August 2012r’000 r’000 r’000 r’000 r’000

STC credits 1 536 (1 536)Intangible assets (59 177) 13 766 (45 411)Accelarated tax allowances (27 577) 12 686 (14 891)Prepayments (3 044) (3 291) (6 335)Capitalised leased assets and liabilities 5 890 (8 320) 5 (2 425)Provisions 49 930 5 564 267 7 55 768 Calculated tax losses 5 084 7 302 294 12 680 Income received in advance 17 246 (760) 16 486 Net share options balance 2 231 (5 524) (3 293)

Total (7 881) 19 887 272 301 12 579


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Balance at Recognised in Balance at31 August 2010 profit or loss 31 August 2011

R’000 R’000 R’000

10. deferred TAx (continued)CoMPAnySTC credits 1 690 (154) 1 536

Balance at recognised in Balance at31 August 2011 profit or loss 31 August 2012

r’000 r’000 R’000

STC credits 1 536 (1 536)

At 31 August 2012 the group had unutilised tax losses of R214,4 million (2011: R138,0 million) available for offset against future taxable

profits. No deferred tax asset has been raised on unutilised tax losses amounting to 178,1 million (2011: R117,8 million) due to the

unpredictability of future taxable profit. If a deferred tax asset was to be raised, an amount of R49,2 million (2011: R33,0 million) would

be recognised in profit or loss.

At reporting date, the group had unutilised capital gains tax losses of R526,7 million (2011: R1 106,5 million). A deferred tax asset has

not been raised on this amount due to the uncertainty of future capital gains.

On 1 April 2012, Secondary Tax on Companies (STC) was replaced with a Dividend Withholding Tax (DWT). Subsequent to

1 April 2012, unutilised STC credits can be carried forward for a period of three years and may be utilised to reduce the liability for DWT

of the beneficial holder of the dividend. The group has not recognised deferred tax assets relating to STC at 31 August 2012.

grouP CoMPAny2012 2011 2012 2011

r’000 R’000 r’000 R’000

11. AMounTs oWed By grouP CoMPAnIesBusiness Connexion Proprietary Limited 240 969 300 903 The loan is unsecured, interest free and has no repayment terms.

Business Connexion Group Share Trust 15 908 15 848 The loan is unsecured, interest free and has no repayment terms.

UCS Technology Services Proprietary Limited 12 468 15 528 The loan is unsecured, interest free and has no repayment terms.

Accsys Proprietary Limited 4 064 4 064 The loan is unsecured, interest free and has no repayment terms.

CEB Maintenance Africa Proprietary Limited 2 263 4 262 The loan is unsecured, interest free and has no repayment terms.

UCS Solutions Proprietary Limited 101 The loan is unsecured, interest free and has no repayment terms.

275 773 340 605

12. InvenTorIesCostMaintenance, components and consumables 200 685 149 288 Merchandise 101 719 117 991 Work in progress 14 620 23 729

317 024 291 008

Write-down of inventoriesMaintenance, components and consumables 109 037 104 262 Merchandise 10 086 7 807

119 123 112 069


122

grouP CoMPAny

2012 2011 2012 2011

r’000 R’000 r’000 R’000

13. TrAde reCeIvABLesTrade receivables 997 555 985 842

Impairment allowance (26 221) (15 758)


Impairments are based on the objective evidence that the group will not be able to collect all the amounts due according to the

original terms of trade receivables. Balances not impaired are considered recoverable. The carrying amount of the trade receivables

approximates fair value because of the short period to maturity.

Standard credit terms are 30 days from date of invoice, unless otherwise stipulated in an agreement with clients. Based on historic

default rates, the group believes that no impairment is necessary in respect of trade receivables not past due.

Trade receivables amounting to R513,2 million (2011: R660,0 million) have been ceded to Rand Merchant Bank and R33,5 million

(2011: R15,0 million) to Nedbank. Refer to note 17.

No individual client represents more than 10% of the group’s trade receivables.

Details of the group’s credit risk management policies are set out in note 37.

Carrying

gross Impairment amount

r’000 r’000 ‘r000

Trade receivables ageing 31 August 2012

Not past due 797 690 797 690

Past due 30 days 83 044 83 044

Past due 60 days 37 390 (559) 36 831

Past due 90 days 20 414 (3 334) 17 080

Past due > 120 days 59 017 (22 328) 36 689

997 555 (26 221) 971 334

Trade receivables ageing 31 August 2011

Not past due 755 325 755 325

Past due 30 days 95 055 95 055

Past due 60 days 52 493 (336) 52 157

Past due 90 days 17 006 (2 004) 15 002

Past due > 120 days 65 963 (13 418) 52 545

985 842 (15 758) 970 084

grouP CoMPAny

2012 2011 2012 2011

r’000 R’000 r’000 R’000

Movement in the impairment of trade receivables

Balance at beginning of year 15 758 8 728

Amounts (utilised)/recovered (1 430) 426

Raised 12 656 8 264

Released (763) (1 660)

Balance at end of year 26 221 15 758


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2012 2011 2012 2011

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14. oTher reCeIvABLesAccrual for uninvoiced income 114 382 131 185 Asset finance residual values 33 530 19 175 UCS Solutions Proprietary Limited management loan 32 092 32 092 Deposits 2 988 4 797 Employee advances and loans 7 691 4 466 Fair value gain on forward exchange contracts 1 011 1 388 BEE “A” share shareholder loans 463 463 Preference dividend accrual 15 341 15 359 15 341 15 359 Receivable on disposal of properties 18 012 Other 46 079 41 679 8 770

239 034 250 604 15 341 56 684

The carrying amount of other receivables approximates

fair value because of the short period to maturity.

15. AsseTs heLd-for-sALe (refer to note 2)Balance at beginning of year 18 003 9 612 Transfer from investment property 8 391 Disposal of assets-held-for-sale (18 003)

Balance at end of year 18 003

grouP CoMPAnyNumber of

shares R’000

Number of

shares R’000

16. shAre CAPITALAuthorised share capital:ordinary shares31 August 2012 and 31 August 2011 ordinary shares

of 0,59 cent each 847 457 627 5 000 847 457 627 5 000

“A” shares31 August 2012 and 31 August 2011 “A” shares

of 0,59 cent each 150 000 000 885 150 000 000 885

Issued share capital:ordinary sharesOrdinary shares of 0,59 cent in issue at 31 August 2011 404 972 468 2 389 404 972 648 2 389 Less: Ordinary shares held at 31 August 2011 7 280 248 43

ordinary shares of 0,59 cent in issue at 31 August 2011 397 692 220 2 346 404 972 468 2 389 Ordinary shares utilised during year 2 155 699 12

ordinary shares of 0,59 cent in issue at 31 August 2012 399 847 919 2 358 404 972 468 2 389

“A” shares“A” shares of 0,59 cent in issue at 31 August 2011 100 133 334 100 133 334 Less: “A” shares held at 31 August 2012 61 502 61 502

“A” shares of 0,59 cent in issue at 31 August 2012 100 071 832 100 071 832

The “A” shares are legally issued but are not taken into account for accounting purposes as the substance of the transaction is

that Business Connexion Group Limited has granted a share option which is accounted for as an equity-settled share-based payment

in terms of IFRS2 Share -based Payment, i.e. they are still held by Business Connexion Group Limited pending their transfer to the

participants in the “A” share transaction at 31 August 2015.

Ordinary shares held by the Business Connexion Group Share Trust and Business Connexion Proprietary Limited at 31 August 2012

were 5 124 549 (2011: 7 280 248), representing 1,3% (2011: 1,8%) of the issued ordinary share capital.

“A” shares held by Business Connexion Proprietary Limited at 31 August 2012 were 61 502 (2011: 97 555) representing 0,04%

(2011: 0,06%) of the issued “A” share capital.

124

Less than Between oneone year and five years 2012 2011

r’000 r’000 r’000 R’000

17. InTeresT BeArIng Long-TerM LIABILITIesgrouPLiabilities under finance leases at 31 August 2012Future minimum lease payments 28 360 19 714 48 074 Lease finance charges (2 499) (1 528) (4 027)

Present value of minimum lease payments 25 861 18 186 44 047

Liabilities under finance leases at 31 August 2011Future minimum lease payments 29 515 33 765 63 280 Lease finance charges (2 043) (4 385) (6 428)

Present value of minimum lease payments 27 472 29 380 56 852

Liabilities under finance leases relate to assets with lease terms ranging from three to five years.

These liabilities bear interest at fixed interest rates ranging between 2% and 10,22%

(2011: 2% and 10,22%). A variable rate based on the base rate of the Bank of England

plus 2% applies to a lease in GBP.

The liabilities are in respect of the capitalised leased assets with a carrying value of R51,4 million

(2011: R57,0 million) as shown in note 3. The group has the option to purchase these assets at the

end of the lease term.

The fair values of the liabilities under finance leases approximates their carrying amounts.

LoansStanbic Tanzania 3 740 1 560 The loan bears interest at 8,5%, is secured by a guarantee from Business Connexion

Proprietary Limited, and is repayable over 60 months. The base currency for this loan is USD.

Akiba Tanzania 630 1 367 The loan bears interest at 9,0%, was secured by property, plant and equipment, and is repayable

over 36 months. The base currency for this loan is USD.

Nedbank 3 751 8 938 These loans are secured by a cession of trade receivables amounting to R33,5 million

(2011: R15,0 million) of CEB Maintenance Africa Proprietary Limited and bear interest at 6,5%

(2011: 8,5%). A portion of the loans was repaid on 1 November 2011 and the balance outstanding

at 31 August 2012 is repayable in December 2012. The base currency for these loans is ZAR.

Rand Merchant Bank 210 327 254 410 The loan is secured by a cession of the trade receivables amounting to R513,2 million

(2011: R660,0 million) of Business Connexion Proprietary Limited, and is repayable in quarterly

instalments, over 60 months. The loan bears interest at JIBAR plus 2%. An interest rate swap has

been taken out for three years to fix the rate at 9,02%. At 31 August 2012 Business Connexion

Proprietary Limited has complied with all the Rand Merchant Bank debt covenant requirements.

The base currency for this loan is ZAR.

Barclays Commercial Mortgage 5 195 4 739 The loan bears interest at the UK prime rate plus 1,25%, is secured by the freehold building at

4 Arlington Court, Arlington Business Park, Stevenage, and is repayable over 20 years. The base

currency for this loan is GBP. Refer to note 2 for the carrying value of freehold buildings.

Zambia 968 This loan bears interest at the Zambian prime rate less 1%, is secured by a swift guarantee of

R1,3 million from FNB South Africa. The loan is repayable over 35 months.The base currency

for this loan is USD.

Total interest bearing long-term liabilities 268 658 327 866 Transfer to short-term liabilities (89 191) (77 187)

179 467 250 679


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grouP2012 2011

r’000 R’000

18. PosT-reTIreMenT BenefIT oBLIgATIonsPost-retirement healthcare obligationsBalance at beginning of year 7 920 12 055 Amendment to accruals based on changes in beneficiaries, assumptions and known

increases in medical aid rates 1 703 (3 230)Interest 1 114 1 034 Current year service costs 358 329 Benefits paid (481) (2 268)


Amounts recognised in profit or lossAmendment to accruals based on changes in benefeciaries, assumptions and known

increases in medical aid rates 1 703 (3 230)Interest 1 114 1 034 Current year service costs 358 329

3 175 (1 867)

It is not the group’s policy to offer post-retirement healthcare benefits. At 31 August 2012,

32 individuals (31 August 2011: 30) have the right to post-retirement healthcare benefits as a result

of terms and conditions applicable in their employment contracts prior to becoming part of the

group.

It is the group’s policy to provide in full for the future liabilities where the individual is already

retired, and over the remaining period of employment, where the individual is currently employed.

These liabilities are unfunded.

The method used to value the liabilities is the projected unit credit method.

The most significant assumptions are outlined below:Healthcare cost inflation (%) 7,0 7,25Discount rate (%) 7,35 8,50Average retirement age for in-service members 63 63

grouP CoMPAny2012 2011 2012 2011

r’000 R’000 r’000 R’000

19. AMounTs oWed To grouP CoMPAnIesBusiness Connexion International Holdings Proprietary Limited 20 070 20 070 This loan is interest-free, unsecured and has no repayment terms.

Accsys Proprietary Limited 11 832 The loan bears interest at an average deposit rate that is earned

by the group on investment of funds, is unsecured and has no

repayment terms.

CEB Maintenance Africa Proprietary Limited 9 333 The loan bears interest at an average deposit rate that is earned


repayment terms.

UCS Solutions Proprietary Limited 58 302 The loan bears interest at an average deposit rate that is earned


repayment terms.

UCS Technology Services Proprietary Limited 48 750 The loan bears interest at an average deposit rate that is earned


repayment terms.


126

grouP CoMPAny

2012 2011 2012 2011

r’000 R’000 r’000 R’000

20. oTher PAyABLesAccruals 144 628 179 099 2 138 80

Vendor payment accrual 49 543 20 000 13 363 20 000

Accrual for leave pay 101 748 93 086

Income received in advance 83 175 91 967

Payroll creditors 160 174 127 319

VAT 51 960 53 166

Liability relating to the executive share option scheme 9 725 16 677

Interest rate swap 6 643 7 301

Other 49 694 50 446 19 975 21 439

647 565 622 384 45 201 58 196

Legal Warranties Total

R’000 R’000 R’000

21. ProvIsIonsgrouPBalance at 31 August 2010 285 1 997 2 282

Recognised in profit or loss (68) (1 322) (1 390)

Balance at 31 August 2011 217 675 892

Recognised in profit or loss (217) 621 404

Balance at 31 August 2012 1 296 1 296

The legal provision relates to possible claims on outstanding legal matters. Warranties relate to possible claims on products sold.

The amount is determined based on past experience.

grouP CoMPAny

2012 2011 2012 2011

r’000 R’000 r’000 R’000

22. revenueFor rendering services 3 822 517 2 593 885

Arising on sale of goods 2 007 127 1 720 296

5 829 644 4 314 181


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2012 2011 2012 2011

r’000 R’000 r’000 R’000

23. oPerATIng ProfIToperating profit is stated after:

Administration, management and other fees 13 920 21 951

Auditors’ remuneration

Audit fees

– Current year 11 420 7 287

– Prior year under provision 1 600 710

Fees for other services 22 593

13 042 8 590

depreciation and amortisation

Property, plant and equipment

– Property 14 923 13 259

– Furniture and fittings 6 769 5 857

– Equipment 91 795 82 203

– Vehicles 4 837 1 355

– Rental assets 219 132

118 543 102 806

Capitalised leased assets

– Furniture and fittings 514 189

– Equipment 23 314 16 389

23 828 16 578

Intangible assets

– Brands 3 686 1 229

– Client relationships 42 786 13 328

– Computer software 38 155 27 751

– Fair value of contracts 1 261

84 627 43 569

directors’ emoluments

Emoluments for services as directors of the company 22 100 10 936

Less: Paid by subsidiaries (19 166) (8 202)

2 934 2 734

Made up as follows:

– Salaries and other benefits 13 207 8 202

– Bonuses and performance-related payments 5 959

– Remuneration paid to non-executive directors 2 934 2 734

22 100 10 936

128

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2012 2011 2012 2011

r’000 R’000 r’000 R’000

23. oPerATIng ProfIT (continued)operating lease charges

– Land and buildings 97 876 43 920

– Equipment 44 669 23 764

– Vehicles 2 651 2 637

145 196 70 321

foreign exchange losses 7 588 9 348

research and development costs 30 797 16 111

employee costs

– Paid to employees 2 124 067 1 782 749

– Contributions paid on behalf of employees 133 601 189 652

2 257 668 1 972 401

Average number of employees 6 548 6 453

other disclosable items

Fair value of financial liability 433 (5 958) (6 951) (15 400)

(Loss)/profit on sale of subsidiary (144) 68 868 68 272

Impairment of investment in associate (5 985) (2 500)

Fair value adjustment to investment property 191

Share-based payment expenses (13 761) (15 879)

Loss on sale of associate (218)

Loss on sale of property, plant and equipment (720) (1 519)

Profit on sale of business 4 741

Impairment of goodwill (4 863)

Write-down of inventories (7 054) (16 308)

Reversal of loan impairment 1 418

24. InvesTMenT InCoMedividends received

Banks 1 703 3 034

Unlisted investments 15 341 15 359 15 341 15 359

Subsidiaries 2 333 12 919

Other 1 033

18 077 18 393 17 674 28 278

Interest income

Banks 14 707 4 879 76 25

Loans and advances 1 880 1 137 1 268 730

South African Revenue Services 31 2 920 22

16 618 8 936 1 366 755

34 695 27 329 19 040 29 033

25. fInAnCe CosTsInterest on liabilities 23 176 14 085 3 222 10

Interest on finance leases 4 012 3 991

Other 296

27 484 18 076 3 222 10


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grouP CoMPAny

2012 2011 2012 2011

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26. TAxATIonSouth African tax 78 881 57 197 (7 672) 36 974

Foreign tax 6 737 7 203

85 618 64 400 (7 672) 36 974

Comprising:

Normal tax

– current year 111 806 78 061 256 31 524

– prior year over provision (31 550) 3 (31 333)

Secondary Tax on Companies 21 924 5 296 21 869 5 296

Withholding tax 3 325 1 881

Current tax 105 505 85 241 (9 208) 36 820

Deferred tax

– current year (20 259) (19 620) 1 536 154

– prior year under provision 372 (1 221)

deferred tax (19 887) (20 841) 1 536 154

85 618 64 400 (7 672) 36 974

% % % %

reconciliation of effective tax rate

Reconciliation between applicable tax rate and average

effective tax rate:

Effective tax rate 30,4 38,6 (40,2) 33,8

Deferred tax raised on STC credits (0,5) (0,1) (8,0) (0,1)

Withholding tax and dividend withholding tax (1,2) (1,1) (114,5) (4,8)

STC (8,0) (3,2)

Differing tax rate (0,4) (0,7)

Capital gains tax (0,5) (18,8) (28,7)

Prior year adjustment 11,3 0,7 164,1

(Reduction)/increase in taxes due to exempt income,

allowances and estimated tax losses (3,1) 12,6 26,6 27,8

Exempt income (4,1) 25,0 36,3 28,7

Disallowed expenses 0,7 (12,9) (9,7) (0,9)

Calculated tax losses 0,3 0,5

statutory tax rate 28,0 28,0 28,0 28,0

South African income tax is calculated at 28% (2011: 28%) of the estimated taxable income for the period. Taxation in other jurisdictions

is calculated at rates prevailing in those relevant jurisdictions.

130

2012 2011

27. eArnIngs Per shAregrouPreconciliation of treasury shares

Number of treasury shares held by the share purchase trust and subsidiary at end of year 5 124 549 2 975 904

Weighted average number of options exercised during year in the share purchase trust 1 297 912 130 356

Weighted average number of treasury shares 6 422 461 3 106 260

Weighted average number of shares is calculated as follows:

Number of ordinary share in issue at end of year 404 972 468 404 972 468

Weighting of shares issued during year (70 176 737)

Weighted average number of treasury shares (6 422 461) (3 106 260)

Weighted average number of shares 398 550 007 331 689 471

Diluted weighted average number of shares is calculated as follows:


Potential dilutive options 2 059 028 3 451 349

Options issued and exercised during year that were dilutive for a portion of period 487 933 30 859

diluted weighted average number of shares 401 096 968 335 171 679

Profit attributable to equity holders (R’000) 149 317 92 578

Basic earnings per share (cents) 37,5 27,9

Diluted earnings per share (cents) 37,2 27,6

2012

r’000

2011

R’000

28. heAdLIne eArnIngs Per shAregrouPProfit attributable to equity holders 149 317 92 587

Fair value adjustment to investment property (191)

Loss on sale of property, plant and equipment, capitalised leased assets and other intangible assets 720 1 519

Loss/(profit) on sale of subsidiary 144 (68 868)

Loss on sale of associate 218

Impairment of investment in associate 5 985 2 500

Reversal of loan impairment (1 418)

Profit on sale of business (4 741)

Impairment of goodwill 4 863

Tax effect of headline earnings adjustments 563 29 751

headline earnings attributable to equity holders 155 433 57 516


Diluted weighted average number of shares 401 096 968 335 171 679

Headline earnings per share (cents) 39,0 17,3

Diluted headline earnings per share (cents) 38,8 17,2

The group is not able to ascertain the extent of the ultimate dilution in 2015 in respect of the “A” shares issued and, therefore, has not

included the potential dilution in diluted weighted average number of shares.


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grouP CoMPAny

2012 2011 2012 2011

r’000 R’000 r’000 R’000

29. CAPITAL CoMMITMenTsAuthorised – contracted 16 393 147 699

Authorised – not contracted 751

17 144 147 699

Capital commitments will be financed out of existing group resources.

The capital commitments relate to capital expenditure on equipment.

<1 year 2 to 5 years > 5 years Total

r’000 r’000 r’000 r’000

30. oPerATIng LeAse CoMMITMenTsgrouPAt 31 August 2012

Land and buildings 74 997 164 008 239 005

Equipment 13 275 29 821 18 115 61 211

Vehicles 119 206 325

Fixtures and fittings 190 190

88 581 194 035 18 115 300 731

At 31 August 2011

Land and buildings 64 456 127 686 33 341 225 483

Equipment 23 331 3 342 26 673

Vehicles 635 1 292 1 927

88 422 132 320 33 341 254 083

The operating lease commitments for land and buildings relate largely to rentals of office space at all the regional locations.

These leases have varying terms, escalation clauses and renewal periods.

There is no intention to purchase the equipment and vehicles reflected under operating lease commitments.

grouP CoMPAny

2012 2011 2012 2011

r’000 R’000 r’000 R’000

31. guArAnTees– Performance guarantees 91 838 39 609

– Other 34 910 35 493

– Asset finance deals with recourse to Business Connexion

Proprietary Limited 16 011 38 363

142 759 113 465

The performance guarantees relate mainly to contracts awarded in the Rest of Africa and will terminate upon conclusion

of the contracts.

Contracts generally do not extend beyond one year.

132

32. ConTIngenT LIABILITIesgrouPContingent consideration:

To the extent that Canoa Group Holdings Proprietary Limited’s profit after tax exceeds the warranted profit, the seller will earn additional

consideration amounting to R26,2 million, payable in the 2013 financial year.

CoMPAny The company has provided the following equal guarantees for Business Connexion Proprietary Limited in favour of Nedbank,

Standard Bank and First National Bank:

Multi-option facilityA multi-option facility for up to R25 million, which may be availed by means of one or more of the following instruments, namely:

Direct facilities:– Overdraft facility– Overnight loans– Foreign finance

Indirect facility:– Letters of credit

Indirect facility:An indirect facility for up to R20 million, which may be availed by means of letters of guarantee

Derivative facility:Forward exchange contracts for up to R6 million, being 10% of the amount of the forward exchange contract

grouP CoMPAny

2012 2011 2012 2011

r’000 R’000 r’000 R’000

33. reLATed PArTIesA related party is an entity or person where the group can

exercise significant influence, or which is controlled by

the group.

The group and company entered into the following transactions

with subsidiaries, associates and other related parties.

dividends receivedGadlex Proprietary Limited and

Gadlex Holdings Proprietary Limited 15 341 15 539 15 341 15 539 distribution receivedCH Share Purchase Trust 12 918

15 341 15 539 15 341 28 457

For transactions with subsidiaries and associates refer to notes 6, 7, 11 and 19.

For transactions with Gadlex Proprietary Limited and Gadlex Holdings Proprietary Limited refer to note 9.

The directors have certified that they did not have a material interest in any transaction of any significance with the group or any of its

subsidiaries.

The related party transactions entered into are on an arm’s length basis.

Refer to page 12 of the Remuneration report for details of remuneration paid to senior management

34. BorroWIng PoWersThe Memorandum of Incorporation of the company provides that the directors may, from time to time:

– borrow for the purpose of the company such sums they deem fit; or

– secure the payment of any such sums or any other sums, as they deem fit, whether by the creation and issue of debentures, mortgage

bonds or charge upon all or any of the properties of the company.

The borrowing powers are, therefore, considered to be unlimited.


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35. reTIreMenT InforMATIonThe group provides retirement benefits for all its employees by means of a number of independent defined contribution pension and

provident funds.

The funds are reviewed annually by actuaries at the funds’ year-end. At the last review dates, the funds were certified financially sound.

The amount recognised as an expense for defined contribution plans is R86,2 million (2011: R66,0 million).

36. segMenTAL AnALysIs Business Connexion’s segmental analysis is based on the following operating segments:

• Services division relates to the control and management of clients’ systems and services on an on-going basis. It includes

professional, cloud services, infrastructure services, workspace services and global service integration management.

• UCS division provides services in the retail IT services sector.

• Technology division provides clients with hardware and network equipment for their computing needs.

• Canoa division provides managed print services to clients.

• International division provides the services of the Services, Technology, UCS, Canoa and Innovation divisions outside the borders of

South Africa.

• Innovation division houses the group’s own intellectual property.

• Investment division houses the group’s investments in associates and other investments.

• Corporate office relates to group shared services, investments in corporate entities and treasury functions.

Revenue and expenses are based on the actual transactions of the division. Corporate costs are allocated based on a corporate cost

allocation model.

Due to the significant size of the UCS and Canoa divisions they are now managed separately and no longer form part of the Investment

division. The group has restated its segment report in line with the above.

134

2012 2011

r’000 R’000

36. segMenTAL AnALysIs (continued)Total revenue

Services division 1 988 359 1 807 900

UCS division 1 093 148 353 185

Technology division 919 925 1 261 844

Canoa division 860 536 136 106

Innovation division 498 714 418 280

International division 485 199 370 527

Investment division 24 036 1 528

Corporate office

Inter-segmental revenue (40 273) (35 189)

5 829 644 4 314 181

Inter-segmental revenue

Services division (5 770) (974)

UCS division

Technology division (3 909) (30 852)

Canoa division

Innovation division (2 235) (1 339)

International division (17 950) (2 024)

Investment division (10 409)

Corporate office

(40 273) (35 189)

Total external revenue

Services division 1 982 589 1 806 926

UCS division 1 093 148 353 185

Technology division 916 016 1 230 992





Corporate office

5 829 644 4 314 181

depreciation and amortisation

Services division 83 079 89 068

UCS division 31 153 12 091

Technology division 14 650 6 611

Canoa division 4 002 994



Investment division 5 778

Corporate office 74 443 44 083

226 998 162 953


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2012 2011

r’000 R’000

36. segMenTAL AnALysIs (continued)operating profit



Technology division 3 328 (9 031)



International division 11 695 (7 753)

Investment division (28 301) 181

Corporate office (221 981) (81 736)

275 025 157 672

Capital expenditure




Canoa division 2 567





205 575 740 635

Assets


UCS division 381 652 400 608






Corporate office 1 267 681 1 367 452

3 615 573 3 682 853

Liabilities









1 413 988 1 489 809

share of losses from associates

Investment division 495 217

136

37. fInAnCIAL InsTruMenTs (a) financial risk management

The group has exposure to the following risks from its use of financial instruments:

• Market risk

• Credit risk

• Liquidity risk

This note presents information about the group’s exposure to each of the above risks, the group’s objectives, policies and

processes for measuring and managing risk, and the group’s management of capital. Further quantitative disclosures are included

throughout these consolidated financial statements.

The board of directors has overall responsibility for the establishment and oversight of the group’s risk management framework.

The board has established the risk, sustainability, social and ethics committee, which is responsible for developing and monitoring

the group’s risk management policies. The committee reports regularly to the board of directors on its activities.

The group’s risk management policies are established to identify and analyse the risks faced by the group, to set appropriate risk

limits and control, and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to

reflect changes in market conditions and the group’s activities. The group, through its training and management standards and

procedures, aims to develop a disciplined and constructive control environment in which all employees understand their roles

and obligations.

The risk, sustainability, social and ethics committee oversees how management monitors compliance with the group’s risk

management policies and procedures, and reviews the adequacy of the risk management framework in relation to the risks faced

by the group. The risk, sustainability, social and ethics committee is assisted in its oversight roles by internal audit. Internal audit

undertakes both regular and ad hoc reviews of risk management controls and procedures, the result of which are reported to the

risk, sustainability, social and ethics committee.

The group’s financial instruments consist of cash and cash equivalents, other investments, loans and long-term receivables, trade

and other receivables, trade and other payables and liabilities, and long and short-term loans and borrowings.

significant accounting policiesDetails of the significant accounting policies and methods adopted, including the criteria for recognition, the basis of

measurement and the basis on which income and expenses are recognised, in respect of each class of financial asset and financial

liability are disclosed in note 13 of the accounting policies.

Treasury risk managementThe group’s treasury function provides the group with access to local money markets and the group entities with the benefits of

bulk financing and depositing.

Market riskMarket risk is the risk that changes in market prices, such as foreign currency exchange rates, or interest rates, will affect the

group’s profit or loss or the value of its holdings of financial instruments. The objective of market risk management is to manage

and control market risk exposures within parameters, while optimising the return on risk.

(b) Currency risk The group’s activities expose it primarily to the market risk of changes in foreign currency exchange rates. The group is exposed

to currency risk on sales, purchases and borrowings that are denominated in a currency other than the respective functional

currencies of group entities. The group’s policy is to take out forward cover for all trade commitments where this is possible and,

if not, the treasury holds currency to match the exposures. Each operation manages its own trade exposure in consultation with

the group treasury. The risk of having to close out the contracts is considered low and the amounts and currencies involved are set

out below. There are no forward exchange contracts for periods beyond 90 days.


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original

contract

fair

value

foreign

currency

value

r’000 r’000 r’000

37. fInAnCIAL InsTruMenTs (continued)(b) Currency risk (continued)

grouPUnited States Dollars (USD) 117 488 116 454 13 887

British Pound (GBP) 26 27 2

Euro (EUR) 554 576 54

forward exchange contracts at 31 August 2012 118 068 117 057

United States Dollars (USD) 179 137 180 493 25 371

Botswana Pula (BWP) 16 16 15

Euro (EUR) 2 557 2 589 221

New Zealand Dollar (NZD) 105 105 18

forward exchange contracts at 31 August 2011 181 815 183 203

The group exposure to significant currency risk was as follows:

usd Kes MZn euro ngn TZs gBP ZMK

‘000 ‘000 ‘000 ‘000 ‘000 ‘000 ‘000 ‘000

Gross exposure in the statement of

financial position at

31 August 2012 (684) 560 37 105 200 (92 403) 86 235 601 299 795

Cash and cash equivalents 3 371 560 37 105 290 (92 403) 86 235 644 299 795

Trade receivables 12 472 14 1

Trade payables (9 964) (84) (22)

Open purchase orders (6 563) (20) (22)

Foreign exchange contracts in place 13 887 54 2

net exposure 13 203 560 37 105 254 (92 403) 86 235 603 299 795

138

37. fInAnCIAL InsTruMenTs (continued)(b) Currency risk (continued)

USD TZS BWP MZN EURO NZD GBP NGN ZMK

‘000 ‘000 ‘000 ‘000 ‘000 ‘000 ‘000 ‘000 ‘000

Gross exposure in the statement

of financial position at

31 August 2011 (15 328) 184 671 (15) 63 063 (18) 203 8 376 3 441 791

Cash and cash equivalents 700 184 671 63 063 4 18 8 376 3 441 791

Trade receivables 10 742

Trade payables (15 647) (15) (4) (2)

Open purchase orders (11 123) (18) (219)

Foreign exchange contracts

in place 25 371 15 18 221

net exposure 10 043 184 671 63 063 18 8 376 3 441 791

The following exchange rates have been applied at year-end:

Average rates 2012 2011

ZAR/USD 8,04 8,40 7,02

ZAR/ZMK 0,0015 0,0017 0,0014

ZAR/BWP 1,07 1,08 1,05

ZAR/EURO 10,49 10,56 10,11

ZAR/NZD 6,42 6,74 6,01

ZAR/GBP 12,65 13,32 11,44

ZAR/KES 0,092 0,10 0,075

ZAR/MZN 0,32 0,29 0,27

ZAR/NGN 0,05 0,053 0,045

ZAR/TZS 0,0050 0,0054 0,0043

foreign currency sensitivity analysis

A 10% strengthening of the ZAR against the following currencies at 31 August 2012 would have (decreased)/increased profit

before tax by the amount shown below. The analysis assumes that all other variables, in particular interest rates, remain constant

and is applied against the gross statement of financial position exposure and foreign exchange contracts at the reporting date.

2012 2011

r’000 R’000

USD (10 515) (7 048)

KES (6)

MZN (1 094) (1 679)

EURO (593)

NGN 492 (38)

TZS (46) (80)

GBP (1 605) (21)

ZMK (161) (1 482)

(13 528) (10 348)

A 10% weakening in the ZAR against the above currencies at 31 August 2012 would have had the equal but opposite effect on the

above currencies to the amount shown above, on the basis that all other variables remain constant.


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37. fInAnCIAL InsTruMenTs (continued) (c) Interest rate risk

The sensitivity analysis below has been determined based on the exposure to interest rates as at the reporting date.

A 50 basis point increase or decrease represents management’s assessment of the reasonably possible change in interest rates.

If interest rates had been 50 basis points higher and all other variables were held constant, profit before tax for the year ended

31 August 2012 would increase by R2,1 million (2011: increase by R2,0 million). This is mainly attributable to the group’s exposure

to interest rates on its cash and cash equivalents and other investments. This analysis assumes that all other variables, in particular

foreign currency rates, remain constant. This analysis is performed on the same basis for 2011.

grouP CoMPAny

2012 2011 2012 2011

r’000 R’000 r’000 R’000

Long-term loans receivable 32 446 30 157

Other investments 213 371 214 678 213 371 214 687

Cash and cash equivalents 443 930 518 308 2 762 1 746

Interest bearing long-term liabilities (179 467) (250 679)

Short-term liabilities (89 191) (77 187)

421 089 405 120 246 290 216 433

(d) Credit risk Credit risk refers to the risk that the counterparty will default on its contractual obligations resulting in financial loss to the group.

Potential areas of credit risk consist of loans to associates, trade receivables, other receivables, cash and cash equivalents,

foreign exchange contracts and other investments.

Trade receivables consist mainly of a large, widespread client base. The group monitors the client base on an ongoing

basis and, where considered appropriate, or where necessary, an impairment allowance is made against the trade receivable.

At year-end management do not consider there to be any material exposure that has not been covered by impairment.

The risk of doing business in the Rest of Africa is mitigated through advance payments and the use of letters of credit.

It is group policy to deposit short-term cash with major banks of good standing.

The group has adopted a policy of only dealing with creditworthy counterparties and obtaining sufficient collateral, where

appropriate, as a means of mitigating the risk of financial loss from defaults. The group’s exposure, and the creditworthiness of its

counterparties, are continuously monitored. Credit exposure is reviewed in the business unit segment annually.

The ageing of trade receivables has been analysed in note 13.

grouP CoMPAny

2012 2011 2012 2011

r’000 R’000 r’000 R’000

The group’s and company’s total exposure to credit risk

is as follows:



Amounts owed by group companies 275 773 340 605

Trade receivables 971 334 970 084

Other receivables 231 343 250 604 15 341 56 684


1 892 424 1 953 683 537 404 613 722

140

37. fInAnCIAL InsTruMenTs (continued) (e) Liquidity risk

Liquidity risk is the risk that the group will not be able to meet its financial obligations as they fall due. The group’s approach to

managing liquidity risk is to ensure, as far as possible, that it will have sufficient liquidity to meet its liabilities when due without

incurring unacceptable losses or risking damage to the group’s reputation.

The group manages liquidity risk by monitoring forecasted cash flows and ensuring the unutilised borrowing facilities are

monitored.

The group has the following unutilised banking facilities:

• Overdraft facilities R196,7 million (2011: R154,8 million).

Maturity profile of financial instruments including finance lease liabilities

<1 year 2 to 5 years 2012

r’000 r’000 r’000

grouPfinancial assets

non-derivative financial assets


Other investments 213 371 213 371

Trade and other receivables 1 201 666 1 201 666

Cash and cash equivalents 443 930 443 930

derivative financial assets

Forward exchange contracts 1 011 1 011

1 646 607 245 817 1 892 424

Carrying

value

Contracted

outflows <1 year 2 to 5 years

Contracted

outflows

2012 2012 2012 2012 2012

r’000 r’000 r’000 r’000 r’000

financial liabilities

non-derivative financial liabilities

Interest bearing long-term and

short-term liabilities 268 658 311 170 107 056 203 934 311 170

Trade and other paybles 1 020 600 1 020 600 1 020 600 1 020 600

derivative financial liabilities

Interest rate swap 6 643 6 643 6 643 6 643

1 295 901 1 338 413 1 134 299 203 934 1 338 413

< 1 year 2 to 5 years 2011

R’000 R’000 R’000



Loans to associates 5 487 5 487


Trade and other receivables 1 219 300 1 219 300



Forward exchange contracts 1 388 1 388

1 738 996 220 795 1 959 791


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37. fInAnCIAL InsTruMenTs (continued)(e) Liquidity risk (continued)

Carrying

value

Contracted

outflows <1 Year 2 to 5 years

Contracted

outflows

2011 2011 2011 2011 2011

R’000 R’000 R’000 R’000 R’000



Interest bearing long and short term

liabilities 327 866 371 933 80 971 290 962 371 933

Trade and other payables 780 019 780 019 780 019 780 019



1 115 186 1 159 253 860 990 298 263 1 159 253


r’000 r’000 r’000

CoMPAnyfinancial assets





Trade and other receivables 15 341 15 341


293 876 243 528 537 404

Carrying

value

Contracted


Contracted

outflows

2012 2012 2012 2012 2012

r’000 r’000 r’000 r’000 r’000


non-derivative financial laibilities

Amounts owed to group companies 148 287 148 287 148 287 148 287



Derivative relating to group share

scheme 9 725 9 725 9 725 9 725

193 488 193 488 183 763 9 725 193 488

142

37. fInAnCIAL InsTruMenTs (continued)(e) Liquidity risk (continued)


R’000 R’000 R’000







399 035 214 687 613 722

Carrying

amount

Contracted


Contracted

outflows

2011 2011 2011 2011 2011

R’000 R’000 R’000 R’000 R’000



Loans owed to group companies 20 070 20 070 20 070 20 070



Derivative relating to group share

scheme 16 667 16 677 16 677 16 677

78 256 78 266 61 589 16 677 78 266

(f) fair valuesfair value Carrying value Fair value Carrying value

2012 2012 2011 2011

r’000 r’000 R’000 R’000



Loans and receivables


Loans to associates 5 487 5 487

Trade receivables 971 334 971 334 970 084 970 084



held-to-maturity investments


Available-for-sale financial assets

Other investments 621 621


Forward exchange contracts 1 011 1 011 1 388 1 388

1 892 424 1 892 424 1 959 791 1 959 791


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37. fInAnCIAL InsTruMenTs (continued)(f) fair values (continued)

fair value Carrying value Fair value Carrying value

2012 2012 2011 2011

r’000 r’000 R’000 R’000


non-derivatives financial liabilities

other financial liabilities:

Interest bearing long-term and short-term liabilities 268 658 268 658 327 866 327 866

Trade payables 425 323 425 323 457 128 457 128

Other payables 595 277 595 277 322 891 322 891



1 295 901 1 295 901 1 115 186 1 115 186



Loans and receivables


Amounts owed by group companies 275 773 275 773 340 605 340 605



Investments held-to-maturity


537 404 537 404 613 722 613 722



other financial liabilities:

Amounts owed to group companies 148 287 148 287 20 070 20 070

Other payables 45 201 45 201 58 196 58 196

193 488 193 488 78 266 78 266

estimation of fair values The following summarises the major methods and assumptions used in estimating the fair values of financial instruments reflected

in the tables above:

Loans and receivables The carrying value of loans and receivables which include cash and cash equivalents, with a remaining life of less than one year

approximates fair value due to the short-term period to maturity. The fair value of long-term receivables is calculated based on

the present value of future principal and interest cash flows.

Other financial liabilities The carrying value of other financial liabilities with a maturity of less than one year approximates fair value due to their short-term

nature. For longer maturities fair value is calculated based on the present value of future principal and interest cash flows.

144

37. fInAnCIAL InsTruMenTs (continued) (f) fair values (continued)

Forward exchange contracts and interest rate swapsThe fair value of forward exchange contracts is based on quoted market prices by comparing the contracted forward rate to the

present value of the current forward rate on an equivalent contract with the same maturity date. If a quoted price is not available,

then fair value is estimated by discounting the difference between the contractual forward price and the current forward price

for the residual maturity of the contract using a credit-adjusted risk-free interest rate (based on government bonds).The fair

value of interest rate swaps is based on broker quotes. Those quotes are tested for reasonableness by discounting estimated

future cash flows based on the terms and maturity of each contract and using market interest rates for a similar instrument at the

measurement date. Fair values reflect the credit risk of the instrument and include adjustments to take account of the credit risk of

the group and counterparty, when appropriate.

InvestmentsThe fair value of available-for-sale financial assets is based on the quoted market price. The fair value of held-to-maturity

investments is calculated based on the present value of future principal and dividend cash flows.

fair value hierarchy The table below analyses financial instruments carried at fair value, by valuation method. The different levels have been defined

as follows:

• Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.

• Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly

(i.e. as prices) or indirectly (i.e. derived from prices).

• Level 3: inputs for asset or liability that are not based on observable market data (unobservable inputs).

Level 1

r’000

Level 2

r’000

Level 3

r’000

Total

r’000

grouP31 August 2012Other investments 213 371 213 371 Forward exchange contracts 1 011 1 011

Total assets 1 011 213 371 214 382


Total liabilities 6 643 6 643

31 August 2011Other investments 215 308 215 308 Foreign exchange contracts 1 388 1 388

Total assets 1 388 215 308 216 696



CoMPAny31 August 2012Other investments 213 371 213 371

Total assets 213 371 213 371

Derivative relating to group share scheme 9 725 9 725


31 August 2011Other investments 214 687 214 687

Total assets 214 687 214 687

Derivative relating to group share scheme 16 677 16 677



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37. fInAnCIAL InsTruMenTs (continued) (g) Capital risk management

There were no changes in the group’s approach to capital management during the year.

Neither the company nor any of its subsidiaries are subject to externally imposed capital requirements.

The group manages its capital to ensure that entities in the group will be able to continue as going concerns while maximising the

return to shareholders through the optimisation of debt and equity.

The capital structure of the group consists of debt, which includes the liabilities disclosed in note 17, cash and cash equivalents

and shareholders’ equity, comprising issued capital, reserves and retained earnings.

38. CrITICAL JudgeMenTs In APPLyIng The ACCounTIng PoLICIesIn the process of applying the entity’s accounting policies, management has made judgements relating to receivables impairment,

allowances, inventory write-downs, recoverability of investments, the useful life of assets and impairment of assets that can have a

significant effect the amounts recognised in the financial statements.

39. Key sourCes of esTIMATIon unCerTAInTyThe key assumptions concerning the future, other key sources of estimation, and uncertainty at the reporting date, that have significant

risk of causing material adjustments to the carrying amounts of the assets and liabilities within the next financial year, are:

Impairment of goodwill Determining whether goodwill is impaired requires an estimation of the value in use of the cash-generating units to which goodwill

is allocated. The value in use calculation requires the entity to estimate the future cash flows expected to arise from the cash-generating

units and a suitable discount rate in order to calculate net present value.

146

grouP CoMPAny

2012 2011 2012 2011

r’000 R’000 r’000 R’000

40. reConCILIATIon of ProfIT Before TAx To CAsh generATed froM/(used In) oPerATIonsProfit before tax 281 741 166 708 19 091 109 278

Adjustments for:

Depreciation and amortisation 226 998 162 953

Dividends received (18 077) (17 674) (28 278)

Interest received (16 618) (27 329) (1 366) (755)

Finance costs 27 484 18 076 3 222 10

Loss on sale of associate 218

Movement in provisions 10 867 (8 420)

Loss on disposal of property, plant and equipment

capitalised leased assets and intangible assets 720 1 519

Profit on sale of subsidiary (68 868) (68 272)

Impairment of loans and advances, other investments

and goodwill (1 418) 1 490

Impairment of goodwill 4 863

Impairment of associate 5 985 2 500

Post-retirement obligations movement 2 694 (4 135)

Unrealised foreign exchange gains (12 964) (2 112)

Share-based payment expense 13 761 15 879

Fair value adjustment on investment properties (191)

Fair value of financial liability (433) (6 951) (15 400)

Share of losses from associates 217

Profit on sale of business (4 741)

operating cash flow before working capital changes 520 862 258 505 (3 678) (3 417)

Changes in working capital:

(Increase)/decrease in inventories (17 502) 19 063

Increase in trade receivables (4 453) (7 875)

Decrease/(increase) in other receivables 28 920 12 878 11 187 (22 887)

(Increase)/decrease in prepayments (3 906) 387 58 (29)

(Decrease)/increase in trade payables (32 256) 50 118

(Decrease)/increase in other payables (1 387) 88 329 (12 995) 6 591

Cash generated from/(used in) operations 490 278 421 405 (5 428) (19 742)

41. TAxATIon PAId Is reConCILed To The AMounT shoWn In ProfIT or Loss As foLLoWs:Amounts (unpaid and accrued for)/prepaid at beginning of year (5 269) 20 603 (1 194) 293

Recognised in profit or loss (85 618) (64 400) 7 672 (36 973)

Deferred tax recognised in profit or loss (19 887) (20 841) 1 536 154

Amounts paid/(unpaid and accrued for) at end of year 9 340 5 269 19 (1 194)

Taxation (paid)/refunded (101 434) (59 369) 8 033 (37 720)


Notes to the

fINaNCIaL

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grouP

2012 2011

r’000 R’000

42. ACquIsITIon of suBsIdIArIesProperty, plant and equipment and intangible assets 193 326 742 Goodwill 16 470 498 540 Deferred tax assets 272 4 459 Trade and other receivables 7 275 257 664 Inventories 1 460 65 188 Cash and cash equivalents 5 328 73 723 Intercompany loans 68 723 Deferred tax liabilities (63 505)Interest–bearing long-term liabilities (8 007) (51 028)Taxation payable (280) (16 544)Trade and other payables (1 871) (285 476)Non–controlling interest (5 258)

Net assets acquired 20 840 873 228

– Cash paid 10 845 250 000– Issue of ordinary shares 584 172– Issue of “A” shares and raising of associated liability 19 056– Accrual for vendor payments 20 000– Contingent consideration 9 995

Total consideration 20 840 873 228

Comprising:Canoa Holdings Group Proprietary Limited 240 000 UCS Technology Services Proprietary Limited 180 008 CEB Maintenance Africa Proprietary Limited 152 866 Destiny Electronic Commerce Proprietary Limited 123 390 UCS Solutions Proprietary Limited 125 674 Accsys Proprietary Limited 51 290 Quad Automation Proprietary Limited 20 840

Total consideration 20 840 873 228

On 10 April 2012, Business Connexion Group signed an agreement with Quad Automation Proprietary Limited to acquire 100% of the

issued share capital of Quad Automation Proprietary Limited. On 30 April 2012, the suspensive conditions pertaining to the agreement

with Quad Automation Proprietary Limited were fulfilled and the transaction was completed. A consideration of R10,8 million was paid

in cash at the time and the remaining balance of R10 million is payable to the extent that Quad Automation Proprietary Limited profit

after tax exceeds the warranted profits in the 2013 financial year. The financial year-end of Quad Automation Proprietary Limited is

February and it will be changed to 31 August in the 2013 financial year.

On 14 December 2010, Business Connexion Group Limited signed an agreement with UCS Group Limited to acquire a 100% interest in

UCS Technology Services Proprietary Limited, CEB Maintenance Africa Proprietary Limited, Accsys Proprietary Limited and 70% interest

in Destiny Electronic Commerce Proprietary Limited. In addition the group acquired a 100% interest in UCS Solutions Proprietary

Limited and subsequently sold a 30% interest back to management of UCS Solutions Proprietary Limited for a consideration of

R31,4 million.The total purchase consideration was R633,2 million. On 1 May 2011, the suspensive conditions pertaining to the

agreement with UCS Group Limited were fulfilled and the transaction was completed. The consideration was settled with the issuing of

R19,1 million (25 033 334) “A” shares, R584,1 million (101 243 118) ordinary shares and provisions for profit warranties of R30,0 million.

A total cash consideration of R10,0 million was paid against the vendor payment provision.

On 14 June 2011, Business Connexion Proprietary Limited signed an agreement with the trustees of Trawaral Trust, Canoa Group

Holdings Proprietary Limited and Dusty Moon Investments 333 Proprietary Limited, to acquire a 50% plus one share stake in the

trustees of Canoa Group Holdings Proprietary Limited, for a purchase consideration of R240,0 million. On 1 June 2011, the suspensive

conditions pertaining to the agreement with the trustees of the Trawaral Trust, Canoa Group Holdings Proprietary Limited and

Dusty Moon Investments 333 Properiatary Limited were fulfilled and the transaction was completed. A cash consideration

of R240,0 million was paid at that time.

148

grouP CoMPAny

2012 2011 2012 2011

r’000 R’000 r’000 R’000

43. AddITIons To ProPerTy, PLAnT And equIPMenT, CAPITALIsed LeAsed AsseTs And InTAngIBLe AsseTsReplacement 57 596 32 568

Expansion 147 979 219 948

205 575 252 516

44. CAsh And CAsh equIvALenTsCash and cash equivalents consist of:

Bank balances and cash 443 930 518 308 2 762 1 746

The group has the following unutilised bank facilities:

Overdraft facilities: R196,7 million (2011: R154,8 million).

45. dIsPosAL of suBsIdIAry And BusInessCarrying value of assets sold

Property, plant, equipment and intangible assets 45 25 038 25 038

Goodwill at acquisition 111 122 111 122


Inventory 71 5 357 5 357


Interest-bearing long-term liabilities (15 291) (15 291)

Deferred tax liability (6 501) (6 501)

Trade and other payables (111 270) (111 270)

Taxation liability (5 864) (5 864)

Profits after taxation accruing to

Business Connexion Group Limited (3 832) (3 832)

Non–controlling interest (5 258) (5 258)

Total net asset value 116 123 661 123 661

Total net asset value disposed of 116 123 661 123 661

Profit on disposal 4 741 68 868 68 868

Total consideration 4 857 192 489 192 489

The group concluded a transaction to sell its Avaya business to ATIO Proprietary Limited, effective 1 April 2012. The sale of Destiny

Electronic Commerce Proprietary Limited was concluded in July 2011.


Notes to the

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46. suBsequenT evenTs dividends A normal gross dividend of 20,0 cents per ordinary share (2011: 14,0 cents) has been declared from income reserves, payable to

shareholders for the year ended 31 August 2012. There are 4,4 cents STC credits available per share. The accrual regarding the dividend

has been recognised.

Corporate activityBusiness Connexion Group Limited entered into a sale of shares, repurchase and subscription agreement with Integr8 IT Proprietary

Limited (“Integr8 IT”) in November 2012 in terms of which it will purchase 100% of the issued share capital of Integr8 IT.

The consideration payable by Business Connexion Group Limited is up to R126,0 million in cash, and will be settled through an initial

payment of R56,0 million payable on the closing date and three potential earn–out payments of up to a maximum of R70,0 million

payable on 15 October 2013, 15 October 2014 and 15 October 2015.

150

investment in subsidiariesaNNEXURE a

Percentage

holding

number

of shares

Amount

invested

r’000

net amount

advanced

to/(by)

r’000

31 August 2012

direct holdings

south Africa

Business Connexion Proprietary Limited 100 57 836 1 618 330 240 969

Business Connexion International Holdings Proprietary Limited 100 100 601 645 (20 070)

UCS Technology Services Proprietary Limited 100 101 164 480 (36 283)

Accsys Proprietary Limited 100 1 000 47 226 (7 768)

UCS Solutions Proprietary Limited 70 7 000 126 145 (58 201)

CEB Maintenance Africa Proprietary Limited 100 100 148 603 (7 070)

Indirect holdings through


Business Connexion Content Distributions Solutions

Proprietary Limited 100 300 208 255

Business Connexion Solutions Holdings Proprietary Limited 100 372 944 107 071

Nanoteq Proprietary Limited 75 75 7 071 20 838

Canoa Group Holdings Proprietary Limited 50,4 61 240 000 1 466

Quad Automation Proprietary Limited 100 1 000 20 840 694

namibia

Business Connexion Namibia Proprietary Limited 75 2 625 7 079 (792)

united Kingdom

Business Connexion Limited 100 2 100 4 062

Tanzania

Business Connexion Tanzania Limited 65 1 650 42 497

Zambia

Business Connexion Zambia Limited 85 4 250 3 10 152

Mozambique

Business Connexion Mozambique Limitada 100 100 14 753 (171)

nigeria

Business Connexion ICT Services Limited* 100 152 177 108 7 683 6 330

Indirect holdings through Business Connexion International

holdings Proprietary Limited

BCX Kenya Limited – ordinary shares 70 700 000 2 075 4 375

BCX Kenya Limited – preference shares 23 000 000

* Previously known as Business Connexion Networks (Nigeria) Limited

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Percentage

holding

Number

of shares

Amount

invested

R’000

Net amount

advanced

to/(by)

R’000

31 August 2011

direct holdings

south Africa

Business Connexion Proprietary Limited 100 57 836 1 594 097 300 903

Business Connexion International Holdings Proprietary Limited 100 100 601 645 (20 070)

UCS Technology Services Proprietary Limited 100 101 164 480 15 528

Accsys Proprietary Limited 100 1 000 47 226 4 064

UCS Solutions Proprietary Limited 70 7 000 126 145

CEB Maintenance Africa Proprietary Limited 100 100 148 603 4 263

Indirect holdings through


Business Connexion Content Distributions Solutions Proprietary Limited 100 300 175 159

Business Connexion Solutions Holdings Proprietary Limited 100 372 944 170 071

Nanoteq Proprietary Limited 100 100 35 509 (1 852)

Canoa Group Holdings Proprietary Limited 50,4 61 240 000

namibia

Business Connexion Namibia Proprietary Limited 75 2 625 7 079 456

united Kingdom

Business Connexion Limited 100 2 100 4 062

Tanzania

Business Connexion Tanzania Limited 65 650 34 26 841

Zambia

Business Connexion Zambia Limited 85 4 520 3

Mozambique

Business Connexion Mozambique Limitada 100 100 14 753 (223)

nigeria

Business Connexion Networks (Nigeria) Limited 100 10 000 000 669 11 711

Indirect holdings through Business Connexion International

holdings Proprietary Limited

BCX Kenya Limited – ordinary shares 70 700 000 2 075

BCX Kenya Limited – preference shares 23 000 000

A full list of subsidiaries is available to shareholders, on written request, from the registered office of the company. The trading subsidiaries

have been listed above.

152

analysis continuedSHaREHOLDER

Company: Business Connexion group Limited

register date: 31 August 2012

Issued share capital: 404 972 468

shArehoLder sPreAdNumber of

shareholdings %

Number of

shares %

1 – 1 000 shares 3 453 64,51 805 191 0,20

1 001 – 10 000 shares 1 208 22,57 4 249 575 1,05

10 001 – 100 000 shares 384 7,17 13 727 447 3,39

100 001 – 1 000 000 shares 227 4,24 76 460 712 18,88

1 000 001 shares and over 81 1,51 309 729 543 76,48

Total 5 353 100,00 404 972 468 100,00

dIsTrIBuTIon of shArehoLders

Banks 42 0,78 12 581 823 3,11

Close corporations 80 1,49 2 897 169 0,72

Endowment funds 24 0,45 1 020 104 0,25

Individuals 4 450 83,12 27 467 919 6,78

Insurance companies 26 0,49 13 352 634 3,30

Investment companies 22 0,41 9 143 203 2,26

Medical schemes 11 0,21 1 700 179 0,42

Mutual funds 117 2,19 158 479 277 39,13

Nominees and trusts 345 6,44 36 116 695 8,92

Other corporations 32 0,60 348 589 0,09

Own holdings 1 0,02 3 422 919 0,85

Private companies 79 1,48 53 260 036 13,15

Public companies 9 0,17 170 698 0,04

Retirement funds 114 2,13 83 309 593 20,57

Share trust 1 0,02 1 701 630 0,42

Total 5 353 100,00 404 972 468 100,00

PuBLIC/non-PuBLIC shArehoLders

non-public shareholders 6 0,11 6 779 930 1,67

Directors and associates 4 0,07 1 655 381 0,41

Share trust 1 0,02 1 701 630 0,42

Own holdings 1 0,02 3 422 919 0,85

Public shareholders 5 347 99,89 398 192 538 98,33

Total 5 353 100,00 404 972 468 100,00

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Company: Business Connexion group Limited



BenefICIAL shArehoLders hoLdIng 5% or MoreNumber of

shares %

Gadlex Proprietary Limited 38 600 000 9,53

Old Mutual 35 623 212 8,80

Allan Gray 31 962 270 7,89

Government Employees Pension Fund 20 259 965 5,00

Total 126 445 447 31,22

fund MAnAgers hoLdIng 5% or More

Allan Gray Asset Management 58 386 697 14,42

Investec Asset Management 40 370 327 9,97

Old Mutual Investment Group 39 198 630 9,68

Coronation Fund Managers 29 506 978 7,29

Total 167 462 632 41,36

154

Company: Business Connexion group Limited A-class



shArehoLder sPreAdNumber of

shareholdings %

Number

of shares %

1 – 1 000 shares 626 68,79 188 202 0,19

1 001 – 10 000 shares 167 18,35 468 592 0,47

10 001 – 100 000 shares 69 7,58 2 334 284 2,33

100 001 – 1 000 000 shares 29 3,19 7 704 431 7,69

1 000 001 shares and over 19 2,09 89 437 825 89,32

Totals 910 100,00 100 133 334 100,00

dIsTrIBuTIon of shArehoLdersBanks 8 0,88 419 935 0,42

Close corporations 22 2,42 257 894 0,26

Endowment funds 13 1,43 10 077 265 10,06

Individuals 707 77,68 4 997 764 4,99

Insurance companies 9 0,99 22 130 0,02

Investment companies 3 0,33 1 037 311 1,04

Medical schemes 8 0,88 2 558 0,00

Mutual funds 25 2,75 6 977 631 6,97

Nominees and trusts 61 6,70 7 236 857 7,23

Other corporations 11 1,21 10 523 0,01

Own holdings 1 0,11 61 502 0,06

Private companies 19 2,09 27 646 509 27,61

Public companies 3 0,33 3 420 424 3,42

Retirement funds 19 2,09 65 031 0,06

Share trust 1 0,11 37 900 000 37,85

Totals 910 100,00 100 133 334 100,00

PuBLIC/non-PuBLIC shArehoLdersnon-public shareholders 5 0,55 56 549 807 56,47

Directors and associates 2 0,22 388 305 0,39

Share trust 1 0,11 37 900 000 37,85

Own holdings 1 0,11 61 502 0,06

Strategic holdings (more than 10%) 1 0,11 18 200 000 18,18

Public shareholders 905 99,45 43 583 527 43,53

Totals 910 100,00 100 133 334 100,00

BenefICIAL shArehoLders hoLdIng 3% or MoreBCG Management “A” Share Trust 37 900 000 37,85

Gadlex Holdings Proprietary Limited 18 200 000 18,18

Steyn Capital Management 4 008 072 4,00

Freewheel Trade And Invest 36 Proprietary Limited 3 800 000 3,79

YWCA Dube Charitable Trust 3 800 000 3,79

Totals 67 708 072 67,61

analysis continuedSHaREHOLDER

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shAre PrICe hIsTory And TrAde CoLuMnsYear Month High sale Low sale Number of deals Volume Value

2011 September 590 500 612 9 502 637 50 616 011

2011 October 530 480 526 4 808 404 25 059 299

2011 November 560 499 1 317 37 320 552 201 767 797

2011 December 565 528 758 16 297 602 90 194 240

2012 January 545 455 778 11 211 944 56 378 536

2012 February 480 440 429 4 292 232 19 523 994

2012 March 490 440 570 14 995 040 70 384 910

2012 April 480 456 469 22 214 760 103 273 598

2012 May 472 430 524 3 383 493 15 636 356

2012 June 463 443 579 4 095 006 18 505 178

2012 July 475 445 1 192 19 251 451 87 898 930

2012 August 500 451 2 126 15 913 910 75 783 081

MArKeT deTAILs12 months to 31 August 2012

Traded price (cents per share)

Close 485

High 590

Low 430

Market capitalisation 1 964 116 470

Value of shares traded 815 021 930

Value traded as % of mktcap 41%

Volume of shares traded 163 287 031

Volume traded as % of number in issue 40%

PE ratio 16,38

Dividend yield 2,67

Earnings yield 6,11

Period-end market price/NAV 0,93

Shares in issue net of treasury shares (millions) 399 847 919

Average no of shares in issue (millions) 398 550 007

Shares issued 404 972 468

Number of shareholders 5 353

156

DEfINITIONS

Key defInITIons used In The AnnuAL rePorT1. Accounting policies The specific principles, bases, conventions, rules and practices

applied in preparing and presenting the financial statements.

2. Amortised cost Part of the cost of an asset which is written off as amortisation

or depreciation in the group’s books of account, and

represents accumulated amortisation or depreciation to date.

3. Asset A resource controlled by the group as a result of a past event

from which future economic benefits are expected to flow.

4. Associate An entity over which the group has significant influence and

that is neither a subsidiary, nor an interest in a joint venture.

Significant influence is the power to participate in the financial

and operating policies of the entity but is not control or joint

control over those policies.

5. Available-for-sale assets Those assets which are designated as available-for-sale or

are not classified as loans and receivables, held-to-maturity

investments or financial assets at fair value through profit and

loss.

6. Average debtors days Average trade receivables adjusted for value added tax, divided

by revenue for the period, multiplied by the number of days

for the period.

7. Broad-based black economic empowerment (B-BBee)

Government defines BEE as an integrated and coherent socio-

economic process that directly contributes to the economic

transformation of South Africa and brings about significant

increases in the numbers of black people that manage, own

and control the country’s economy, as well as significant

decreases in income inequalities. The ICT Charter defines BEE

as the economic empowerment of all black people (Africans,

Coloureds, Indians who are South African citizens), including

women, workers, youth, people with disabilities and people

living in rural areas, through diverse but integrated socio-

economic strategies.

8. Carrying value The value at which an asset is recognised after deducting any

accumulated depreciation or amortisation and accumulated

impairment losses.

9. Cash flow a. Financing activities: activities that result in changes to the

capital structure of the group.

b. Investing activities: activities relating to the acquisition,

holding and disposal of property and equipment and long-

term investments.

c. Operating activities: activities that are not financing or

investing activities and arise from operations conducted by

the group.

10. Cash and cash equivalents Cash comprises cash on hand and demand deposits. Cash

equivalents are short-term, highly liquid investments that are

readily convertible to known amounts of cash and that are

subject to an insignificant risk of changes in value.

11. Cash-generating unit The smallest identifiable group of assets that generate cash

inflows that are largely independent of the cash inflows from

other assets or groups of assets.

12. Contingent liability A possible obligation that arises from past events and whose

existence will be confirmed only by the occurrence or non-

occurrence of one or more uncertain future events not wholly

within the control of the entity or a present obligation that

arises from past events but is not recognised because it is not

probable that an outflow of resources embodying economic

benefits will be required to settle the obligation, or the amount

of the obligation cannot be measured with sufficient reliability.

13. deferred tax assets Deferred tax assets are the amounts of income taxation

recoverable in future periods in respect of:

a. deductible temporary differences arising due to differences

between the taxation and accounting treatment of

transactions; and

b. the carry-forward of unused tax losses.

14. deferred tax liabilities Deferred tax liabilities are the amounts of income taxation

payable in future periods due to differences between the

taxation and accounting treatment of transactions.

15. depreciation or amortisation Depreciation refers to spreading a tangible asset’s cost over the

asset’s useful life. Amortisation refers to spreading an intangible

asset’s cost over that asset’s useful life.

16. diluted weighted average number of shares Weighted average number of shares in issue adjusted for

dilutive options for the period. Dilutive options are options

that have vested but have not yet been exercised.

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17. earnings per share (ePs) a. Basic EPS: profit attributable to equity holders for the

period divided by the weighted average number of

ordinary shares in issue during the period.

b. Headline EPS: headline earnings divided by the weighted

average number of shares in issue during the period.

c. Fully diluted EPS: the relevant earnings figure is divided by

the diluted weighted average number of shares in issue

for the period.

18. effective tax rate The taxation charge in the statement of comprehensive

income as a percentage of profit before taxation.

19. employee benefits All forms of consideration (excluding share options granted

to employees) given in exchange for services rendered by

employees.

20. fair value The amount for which an asset could be exchanged or a

liability settled, between knowledgeable and willing parties in

an arm’s length transaction.

21. finance costs Interest and other costs incurred in connection with the

borrowing of funds.

22. finance lease A lease that transfers substantially all the risks and rewards

incidental to ownership of an asset. Title may or may not

eventually be transferred.

23. financial instrument A contract that gives rise to a financial asset of one entity and

financial liability or equity instrument of another entity.

24. financial risk The risk of a possible future change in one or more of a

specific interest rate, financial instrument price, commodity

price, foreign exchange rate, index of prices and rates or

credit index or other variable, provided in the case of a non-

financial variable that the variable is not specific to a party to

a contract.

25. foreign exchange translation gains/losses The results and assets/liabilities of all foreign entities

controlled by the group are translated at the closing

exchange rate and the differences arising are recognised in

the statements of comprehensive income as translation of

foreign operations.

26. going concern basis The assumption that the entity will continue in operation for

the foreseeable future.

27. headline earnings Headline earnings account for all the profits and losses

from operational, trading, and interest activities, that have

been discontinued or acquired at any point during the year.

Excluded from this figure are profits or losses associated

with the sale or termination of discontinued operations,

fixed assets or related businesses, or from any permanent

devaluation or write off of their values.

28. Impairment loss The amount by which the carrying amount of an asset or a

cash-generating unit exceeds its recoverable amount.

29. Income taxation Direct taxation includes normal taxation on income and

capital gains tax (CGT).

30. Indirect taxation Value added tax (VAT) and other taxes, levies and duties paid

to Government, excluding income taxation.

31. Interest bearing liabilities to equity Interest bearing liabilities as a percentage of total equity.

32. International financial reporting standards The standards, as adopted by the International Accounting

Standards Board (IASB), the interpretations issued by the

International Financial Reporting Interpretations Committee

(IFRIC) of the IASB.

33. Jse Limited ( Jse) Previously the JSE Securities Exchange South Africa.

34. King III (the code) The King Report on Corporate Governance for South Africa

2009, which sets out the principles of good corporate

governance for South African companies and organisations.

35. Liability A present obligation of an entity arising from a past event,

the settlement of which is expected to result in an outflow

from the entity of resources embodying economic benefits.

36. Liquidity risk The risk that the group will not be able to meet its financial

obligations as they fall due.

158

37. Market risk The risk that changes in market prices, such as foreign

exchange rates, interest rates and commodity prices, will

affect the group’s profit or loss.

38. net asset value per share Shareholders’ equity divided by the number of shares

in issue.

39. net assets Net operating assets plus cash and cash equivalents.

40. normal dividend per share Dividends paid divided by the number of shares in issue.

41. operating expenses Expenses associated with running a business but not

considered directly applicable to the current line of goods

and services being sold. These include sales and marketing,

and general and administrative costs (including the salaries of

people working in these areas).

42. operating lease A lease other than a finance lease.

43. operating profit margin Operating profit for the period divided by revenue for

the period.

44. operational risk The risk of loss resulting from inadequate or failed internal

processes and systems, incompetence or external events.

45. Post-employment benefits Employee benefits (other than termination benefits) that are

payable after the completion of the contract of employment.

46. Present value A current estimate of the discounted value of future net cash

flows.

47. recoverable amount The higher of an asset’s fair value less costs to sell at its value

in use.

48. reputational risk The risk of impairment of the group’s image in the

community or the long-term trust placed in the group by

its stakeholders as a result of a variety of factors, such as the

group’s performance, strategy execution, ability to create

shareholder value, or an activity, action or stance taken by

the group. Such impairment could result in loss of business

and/or legal action.

49. residual value The estimated amount which an entity would currently

obtain from the disposal of the asset.

50. restructuring A programme that is planned and controlled by management

and materially changes either the scope of a business or the

manner in which that business is conducted.

51. return on equity Profit attributable to equity shareholders as a percentage of

total equity.

52. return on total assets Operating profit divided by total assets less cash and cash

equivalents and preference share investments.

53. revenue Increase in economic benefits in the form of inflows or

enhancements of assets or decrease of liabilities that result in

increases in equity.

54. seA system The SEACOM submarine cable linking Southern and East

Africa to Europe and East Asia.

55. secondary tax on companies (sTC) STC is a tax paid at company level on the net difference

between dividends paid and dividends received.

56. share-based payment transactions a. A cash-settled share-based payment transaction is the

acquisition of goods or services by incurring a liability

to transfer cash or other assets to the supplier of those

goods or services for amounts that are based on the

price (or value) of the entity’s shares or other equity

instruments.

b. An equity-settled share-based payment transaction is

a share-based payment transaction where goods or

services are received and settled in equity instruments of

the entity.

57. Tangible net asset value Shareholders’ equity, less goodwill and fair value of contracts,

divided by the number of shares in issue.

DEfINITIONS

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58. Tax base a. The tax base of an asset is the amount that is deductible

for tax purposes if the economic benefits from the asset

are taxable or is the carrying amount of the asset if the

economic benefits are not taxable.

b. The tax base of a liability is the carrying amount of the

liability less the amount deductible in respect of that

liability in future periods.

c. The tax base of revenue received in advance is the

carrying amount less any amount of the revenue that will

not be taxed in future periods.

59. Temporary differences The differences between the carrying amount of an asset or

liability and its tax base.

60. Total assets An entity’s non-current assets and current assets.

61. Total equity An entity’s shareholders’ equity.

62. Total liabilities An entity’s non-current liabilities and current liabilities.

63. Treasury shares An entity’s own equity instruments, held by the entity or

other members of the consolidated group.

64. useful life The period over which an asset is expected to be available

for use.

65. value in use The present value of the future cash flows expected to be

derived from an asset.

66. Weighted average number of shares The number of shares in issue increased by the shares issued

during the period, weighted on a time basis for the period

during which they participated in the income of the group.

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general meetingaNNUaLNotice of

Business Connexion Group Limited

(Incorporated in the Republic of South Africa)

(Registration number: 1988/005282/06)

(Share code: BCX ISIN: ZAE000054631)

(“the company” or “Business Connexion”)

Notice is hereby given, in terms of section 62(1) of the Companies Act, 71 of 2008, as amended (“the Companies Act”) that the ninth annual

general meeting of the company will be held in the Business Connexion Fundi Auditorium, Business Connexion Park North, 789 Sixteenth

Road, Randjespark, Midrand 1685, on Monday, 14 January 2013 at 11:00 to consider, and if approved, pass the following resolutions with or

without modification:

reCord dATeThis notice has been sent to shareholders of the company who were recorded as such in the Company’s securities register on Friday,

30 November 2012 being the notice record date set by the board of directors of the company (“board”) in terms of section 59 of the

Companies Act determining which shareholders are entitled to receive notice of the annual general meeting.

The record date for purposes of determining which shareholders of the Company are entitled to participate in and vote at the annual general

meeting is Friday, 4 January 2013. Accordingly, the last date to trade in order to be registered in the securities register of the Company and

therefore be eligible to participate in and vote at the annual general meeting is Thursday, 27 December 2012.

Shareholders are reminded that:

• a shareholder entitled to attend and vote at the annual general meeting is entitled to appoint a proxy (or more than one proxy) to attend,

participate in and vote at the annual general meeting in the place of the shareholder, and shareholders are referred to the proxy form

attached to this notice in this regard;

• a proxy need not also be a shareholder of the company; and

• in terms of section 63(1) of the Companies Act, any person attending or participating in a general meeting of shareholders must present

reasonably satisfactory identification and the person presiding at the general meeting must be reasonably satisfied that the right of any

person to participate in and vote (whether as shareholder or as proxy for a shareholder) has been reasonably verified.

eLeCTronIC PArTICIPATIon By shArehoLdersShould any shareholder (or a representative or proxy for a shareholder) wish to participate in the annual general meeting by way of electronic

participation, that shareholder should make an application in writing (including details as to how the shareholder or its representative

(including its proxy) can be contacted) to so participate, to the transfer secretaries, at their address provided in this notice, to be received by

the transfer secretaries at least 7 (seven) business days prior to the annual general meeting in order for the transfer secretaries to arrange for

the shareholder (or its representative or proxy) to provide reasonably satisfactory identification to the transfer secretaries for the purposes

of section 63(1) of the Companies Act and for the transfer secretaries to provide the shareholder (or its representative or proxy) with details

as to how to access the annual general meeting by means of electronic participation. Shareholders participating electronically will not be

able to vote electronically and must follow the standard voting arrangements. The company reserves the right not to provide for electronic

participation at the annual general meeting in the event that it determines that it is not practical to do so, or an insufficient number of

shareholders (or their representatives or proxies) request to so participate.

PresenTATIon of AnnuAL fInAnCIAL sTATeMenTsThe consolidated audited annual financial statements of the company and its subsidiaries (group), including the Directors’ report, Auditor’s

report and the report by the Audit and compliance, Remuneration and nominations and Risk, sustainability, social and ethics committees,

of the company and the group for the year ended 31 August 2012 (AFS) as approved by the board on 2 November 2012 is presented to

shareholders as required in terms of section 30(3)(d) of the Companies Act. The AFS are included in the integrated report of which this notice

forms part.

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ordInAry resoLuTIons1. re-appointment of external auditor

ordinary resolution number 1To re-appoint KPMG Inc (KPMG) as independent auditor of the company for the ensuing year.

“resolved that KPMG (as nominated by the company’s Audit and compliance committee and the board) be and are hereby re-

appointed as the independent external auditor of the company, to hold office for the ensuing period terminating on the conclusion of

the next annual general meeting of the company. It is noted that Mr Pierre Fourie from KPMG is the individual registered auditor who

will undertake the audit for the financial year ending 31 August 2013.”

The percentage of voting rights that is required for this ordinary resolution number 1 to be adopted is more than 50% (fifty percent) of

the voting rights exercised on the resolution.

Explanatory note:

In compliance with section 90(1) of the Companies Act, a public company must each year, at its annual general meeting, appoint an

independent external auditor. The Audit and compliance committee has recommended the re-appointment of KPMG as auditors.

2. election of independent Audit and compliance committeeordinary resolution numbers 2.1, 2.2 and 2.3To appoint an Audit and compliance committee to conduct the duties and responsibilities as outlined in section 94(7) of the Companies

Act. The board has recommended that Mrs J John, Mr JM Poluta and Ms M Lehobye be appointed, on an individual basis, as members

of the Audit and compliance committee.

ordinary resolution number 2.1Appointment of Mrs J John as a member of the Audit and compliance committee.

“resolved that Mrs J John be and is hereby elected as a member of the Audit and compliance committee of the company”.

ordinary resolution number 2.2Appointment of Mr JM Poluta as a member of the Audit and compliance committee.

“resolved that subject to the passing of ordinary resolution 4.2 Mr JM Poluta be and is hereby elected as a member of the Audit and

compliance committee of the company”.

ordinary resolution number 2.3Appointment of Ms M Lehobye as a member of the Audit and compliance committee.

“resolved that subject to the passing of ordinary resolution 4.1 Ms M Lehobye be and is hereby elected as a member of the Audit and

compliance committee of the company”.

The percentage of voting rights that is required for Ordinary Resolutions Numbers 2.1, 2.2 and 2.3 to be adopted is more than

50% (fifty percent) of the voting rights to be cast on the resolutions.

Additional information in respect of ordinary resolutions number 2.1, 2.2 and 2.3A brief CV of each of the independent non-executive directors mentioned above appears on pages 14 to 17 of the integrated report of

which this notice forms part. The committee members have the required qualifications and experience to fulfil their duties.

Explanatory note:

Section 94(2) of the Companies Act requires a public company, at each annual general meeting, to elect an audit committee comprising

at least three members unless (i) the company is a subsidiary of another company that has an audit committee and (ii) the audit

committee of that other company will perform the functions required under section 94 on behalf of the subsidiary company.

Section 94(4) of the Companies Act requires, among other things, that each member of the audit committee must be a director of the

company.

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general meeting continuedaNNUaLNotice of

3. election of group risk, sustianability, social and ethics committee ordinary resolution number 3To appoint a social and ethics committee, as provided in section 72(4) of the Companies Act 71 of 2008, as amended and regulation

43 of the Companies Regulations, 2011 (regulations), and that the members as set out below be and are hereby appointed in terms of

regulation 43(2) of the regulations to hold office until the next annual general meeting and to perform the duties and responsibilities

stipulated in regulation 43(5) of the regulations and to perform such other duties and responsibilities as may from time to time be

delegated by the board of directors of the company and all subsidiary companies. The board has recommended that Mr NN Kekana,

Ms J John and Mr AC Ruiters be appointed as members of the group Risk, sustainability, social and ethics committee.

ordinary resolution number 3.1Appointment of Mr NN Kekana as a member of the Risk, sustainability, social and ethics committee.

“resolved that Mr NN Kekana be and is hereby elected as a member of the Risk, sustainability, social and ethics committee”.

ordinary resolution number 3.2Appointment of Ms J John as a member of the Risk, sustainability, social and ethics committee.

“resolved that Ms J John be and is hereby elected as a member of the Risk, sustainability, social and ethics committee”.

ordinary resolution number 3.3Appointment of Mr AC Ruiters as a member of the Risk, sustainability, social and ethics committee.

“resolved that Mr AC Ruiters be and is hereby elected as a member of the Risk, sustainability, social and ethics committee”.

The minimum percentage of voting rights that is required for this resolution to be adopted is 50% of the voting rights plus one vote to

be cast on the resolution.

Additional information in respect of ordinary resolution number 3A brief CV of each of the independent non-executive directors mentioned above appears on pages 14 to 17 of the integrated report of

which this notice forms part. The committee members have the required qualifications and experience to fulfil their duties.

4. re-election of directors ordinary resolutions number 4.1 and 4.2To consider, and if deemed fit, to re-elect, on an individual basis, the following directors who retire in terms of the current

Memorandum of Incorporation (MOI) of the company but, being eligible, offer themselves for re-election as required under section

68(2) of the Companies Act. Accordingly, shareholders are requested to re-elect the directors named below by way of passing the

separate ordinary resolutions.

ordinary resolution number 4.1“resolved that Ms M Lehobye who is required to retire as a director of the company in terms of article 70 – 72 of the MOI and who,

being eligible, offers herself for re-election, be hereby re-elected as a director of the company”.

ordinary resolution number 4.2“resolved that Mr JM Poluta who is required to retire as a director of the company in terms of article 70 to 72 of the MOI and who,

being eligible, offers himself for re-election, be hereby re-elected as a director of the company.

The percentage of voting rights that is required for this ordinary resolutions numbers 4.1 and 4.2 to be adopted is more than 50%

(fifty percent) of the voting rights to be cast on the resolutions”.

Additional information in respect of ordinary resolutions number 4.1 and 4.2Articles 70 to 73 of the MOI provides that at each annual general meeting of the company one-third of the directors (or if there number

is not three, or a multiple of three, the number nearest to one-third) shall retire from office. The directors who shall retire are determined

in terms of Article 71 of the MOI. A brief CV of each of the directors mentioned above appears on pages 14 to 17 of the integrated

report of which this notice forms part.

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5. non-binding approval of group remuneration policiesordinary resolution number 5To approve the group’s remuneration policies by way of a non-binding advisory vote.

“resolved that the group’s remuneration policies, as set out in the Remuneration report on pages 87 to 95 of the integrated report

of which this notice forms part, is hereby approved by way of a non-binding advisory vote, as recommended in the King Code of

Governance for South Africa 2009, (“King III”).

6. general authority to place ordinary shares under control of the directorsordinary resolution number 6“resolved that, 2% (two percent) of the authorised, but unissued ordinary shares (16 949 152) (excluding the 26 263 691 shares

in terms of the Business Connexion (2009) Executive Share Option Scheme as approved by shareholders on 20 April 2009) in the

authorised share capital of the company be and are hereby placed under the control and authority of the directors of the company as a

general authority in terms of the MOI and that the board be and is hereby authorised and empowered to issue and otherwise dispose

of such shares to such person or persons on such terms and conditions and at such times as the board may from time to time and in

their discretion deem fit, subject to the provisions of the MOI”.

“resolved that, subject to the provisions of section 41 of the Companies Act and the Listings Requirements of the JSE Limited ( JSE)

(“JSE Listings Requirements“) the board be authorised to issue from the authorised, but unissued ordinary share capital of the company,

up to 16 949 152 shares (excluding the 26 263 691 shares in terms of the Business Connexion (2009) Executive Share Option Scheme

as approved by shareholders on 20 April 2009) in the authorised share capital of the company from time to time, such authority to

endure until the forthcoming annual general meeting of the company (whereupon this authority shall lapse, unless it is renewed at

the aforementioned annual general meeting, provided that it shall not extend beyond 15 (fifteen) months after the date of this annual

general meeting)”.

The percentage of voting rights that is required for this ordinary resolution number 6 to be adopted is more than 50% fifty percent) of

the voting rights to be cast on the resolution.

Explanatory note:

This ordinary resolution number 6 confirms the authority of the directors, subject to the JSE Listings Requirements to issue shares.

In terms of the Companies Act, directors are authorised to issue the unissued shares of the company, unless otherwise provided in the

company’s MOI or in instances as listed in section 41 of the Companies Act.

It is noted that any issue of shares or grant of options in terms of section 41(3) of the Companies Act and any issue of shares or grant of

options to (i) directors, future directors, prescribed officers, future prescribed officers, (ii) persons related or inter-related to the company

and (iii) nominees of the person referred to in (i) and (ii) must first be approved by way of a special resolution in terms of section 41 of

the Companies Act and is not authorised in terms of this ordinary resolution.

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sPeCIAL resoLuTIons7. Approval of non-executive directors’ remuneration – 2013/2014

special resolution number 1To resolve as a special resolution that the non-executive directors’ annual remuneration, in their capacity only as directors of the

company be approved.

“resolved that the following non-executive director’s fees be and is hereby approved in terms of sections 66(8) and 66(9) of the

Companies Act for their services as directors of the company for the financial year ending 31 August 2014 provided that only 60%

(sixty percent) of the respective fee per meeting shall be payable in the case of non-attendance of a meeting by a director:

Annual fee

for the

year ending

31 August

2013 Annual fee for the year ending

(approved at 31 August 2014 (proposed)

AgM of Attendance

19 January fixed/ fee per

Meeting 2012) retainer meeting Total

Chairman of the board 515 200 378 000 36 000 630 000

Member of the board 155 000 120 000 11 400 199 800

Chairperson: Audit and compliance committee 235 400 156 000 26 000 260 000

Member: Audit and compliance committee 91 600 60 000 10 000 100 000

Chairperson: Remuneration and nominations committee 91 000 60 000 10 000 100 000

Member: Remuneration and nominations committee 45 500 30 000 5 000 50 000

Chairperson: Risk, sustainability, social and ethics committee 107 000 80 000 10 000 120 000

Member: Risk, sustainability, social and ethics committee 53 500 36 000 6 000 60 000

Rate of R2500 per hour for all special meetings and additional

board mandated work Unchanged Unchanged Unchanged

The percentage of voting rights that is required for this special resolution number 1 to be adopted is at least 75% (seventy five percent)

of the voting rights exercised on the resolution.

Additional information in respect of special resolution number 1The reason for and the effect of this special resolution number 1 is to approve the basis for calculating the remuneration payable by

the company to its non-executive directors for their services as directors of the company for the period ending 31 August 2014. Further

details on the basis of calculation of the remuneration are included in the Remuneration report on pages 91 and 92 of the integrated

report of which this notice forms part.

Explanatory note:

In terms of sections 66(8) and (9) of the Companies Act, remuneration may only be paid to directors for their service as directors in

accordance with a special resolution approved by the shareholders within the previous 2 (two) years.

It is noted that the remuneration payable to directors in their capacities as such and for their services as directors, as set out in the above

special resolution number 1, reflects an increase of on average 10% (ten percent) compared to the remuneration in respect of the year

ended 31 August 2013 and is only in respect of remuneration payable to directors of the company in their capacities as such.


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8. general authority to repurchase sharesspecial resolution number 2To consider and, if deemed fit, to pass the following special resolution relating to the repurchase of shares.

“resolved that the company and its subsidiaries be and are hereby authorised, by way of a renewable general approval in terms

of the MOI and section 48 of the Companies Act to acquire, from time to time, the issued shares of the company, upon such terms

and conditions and in such amounts as the directors of the company may from time to time determine, but subject to the MOI, the

provisions of the Companies Act and the JSE Listings Requirements as amended from time to time, and provided that:

8.1 acquisitions by the company and its subsidiaries of shares in the share capital of the company may not, in the aggregate, exceed

in any one financial year 20% (or 10% where such acquisitions relate to the acquisition by a subsidiary) of the company’s issued

share capital;

8.2 in determining the price at which the company’s shares are acquired by the company or its subsidiaries in terms of this general

authority, the maximum price at which such shares may be acquired may not be greater than 10% above the weighted average of

the market price at which such shares are traded on the JSE, as determined over the five business days immediately preceding the

date of the acquisition of such shares by the company or its subsidiaries;

8.3 any such repurchase of securities will be effected through the order book operated by the JSE trading system and done without

any prior understanding or arrangement between the company and the counter party (reported trades are prohibited);

8.4 this general authority shall only be valid until the company’s next annual general meeting, provided that it shall not extend beyond

15 months from the date this special resolution is passed;

8.5 at any point in time, the company will only appoint one agent to effect any repurchase(s) on its behalf;

8.6 any such general repurchases are subject to exchange control regulations and approvals at that point in time, where relevant;

8.7 a resolution has been passed by the board and/or the board of any subsidiary of the company confirming that the board

and/or the board of the subsidiary of the company has authorised the repurchase, that the company and/or the subsidiary of the

company satisfied the solvency and liquidity test contemplated in the Companies Act, and that since the test was done there have

been no material changes to the financial position of the group;

8.8 the company and/or any subsidiary of the company may not repurchase securities during a prohibited period, as defined in the

JSE Listings Requirements, unless the company has a repurchase programme in place where the dates and quantities of securities

to be traded during the relevant period are fixed and not subject to any variation and full details of the programme have been

disclosed in an announcement over SENS (the Securities Exchange News Service) prior to the commencement of the prohibited

period; and

8.9 a press announcement will be published giving such details as may be required in terms of the JSE Listings Requirements as soon

as the company and/or any subsidiary has cumulatively repurchased 3% of the number of shares of that class in issue at the

time of granting of this general authority and for each 3% (three percent) in aggregate of the initial number of shares of that class

acquired thereafter.

The company will ensure that its sponsor has discharged its duties with regard to the company’s working capital in writing to the JSE in

terms of the JSE Listings Requirements, prior to entering the market to proceed with a repurchase”.


of the voting rights exercised on the resolution.

Additional information in respect of special resolution number 2The reason for and the effect of special resolution number 2 is to grant the board a general authority, up to and including the date of

the following annual general meeting of the company, to approve the company’s purchase of shares in itself, or to permit a subsidiary of

the company to purchase shares in the company. Please refer to the additional disclosure of information contained in this notice, which

disclosure is required in terms of the JSE Listings Requirements.

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sTATeMenT By The BoArd of dIreCTors regArdIng sPeCIAL resoLuTIon nuMBer 2The board is of the opinion that this authority should be in place should it become appropriate to undertake a share repurchase in the future,

in particular the repurchase of shares by a subsidiary of the company for purposes of employee share schemes. Pursuant to and in terms of

the JSE Listings Requirements, the board of directors of the company hereby states that:

(a) the intention of the directors of the company and/or any of its subsidiaries is to utilise the general authority to acquire shares in the

company if at some future date the cash resources of the company are in excess of its requirements or there are other good grounds

for doing so. In this regard the directors will take account of, inter alia, an appropriate capitalisation structure for the company, the long-

term cash needs of the company, and the interests of the company;

(b) the method by which the company and/or its subsidiaries intends to acquire its shares, the maximum number of shares to be re-

purchased and the date on which such acquisition will take place has not yet been determined. The directors of the company will only

make the acquisition if at the time of the acquisition they are of the opinion that:

• the company and the group will be able to pay its debts as they become due in the ordinary course of business for a period of

12 (twelve) months after the date of the general repurchase;

• the assets of the company and the group, fairly valued in accordance with International Financial Reporting Standards and

recognised and measured in accordance with the accounting policies used in the latest audited financial statements will be in excess

of the liabilities of the company and the group for a period of 12 (twelve) months after the date of the general repurchase;

• the issued share capital and reserves of the company and the group will be adequate for ordinary business purposes of the company

or any acquiring subsidiary for a period of 12 (twelve) months after the date of the general repurchase;

• the working capital available to the company and the group will be sufficient for ordinary business purposes for a period of

12 (twelve) months after the date of the general repurchase;

• a working capital statement will be obtained from the company’s sponsors as and when any acquisition of its shares is contemplated;

and .

• the company will provide its sponsor and the JSE with all documentation as required in Schedule 25 of the JSE Listings Requirements,

and will not commence any repurchase programme until the sponsor has signed off on the adequacy of its working capital, advised

the JSE accordingly and the JSE has approved this documentation.

Explanatory note:

The reason for this special resolution is to grant the company a general authority in terms of the MOI and Companies Act for the

acquisition by the company or any of its subsidiaries of shares issued by the company, which authority shall be valid until the earlier of

the next annual general meeting of the company or the variation or revocation of such general authority by special resolution by any

subsequent general meeting of the company, provided that the general authority shall not exceed beyond 15 (fifteen) months from the

date of this annual general meeting. The effect of the passing of this special resolution will be to authorise the company or any of its

subsidiaries to acquire shares issued by the company.

The directors are of the opinion that it would be in the best interests of the company to extend the current authority for the repurchase

of shares by the company or its subsidiaries, allowing the company or any of its subsidiaries to be in a position to repurchase or

purchase, as the case may be, the shares issued by the company through the order book of the JSE, should the market conditions and

price, as well as the financial position of the company, justify such action, as determined by the directors.

Repurchases or purchases, as the case may be, will only be made after careful consideration, where the directors consider that such

repurchase or purchase, as the case may be, will be in the best interests of the company and its shareholders.

9. Approval of new Memorandum of Incorporationspecial resolution number 3“Resolved that the existing MOI of the company be and is hereby substituted with the new MOI in accordance with the provisions of

section 16 (1)(c) of the Companies Act, with effect from the date of approval of this special resolution number 3”.

Explanatory note

The reason for special resolution number 3 is to adopt the new MOI that will be in line with the requirements of the Companies Act, the

JSE Listings Requirements and any applicable legislation which require a substantial number of changes to the existing MOI. Accordingly,

it is considered more appropriate to adopt the proposed new MOI. The new MOI will substitute the company’s existing MOI in its

entirety.


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Additional information in respect of special resolution number 3Copies of the complete new MOI may be obtained from the company secretary at the company’s registered address or by requesting a

copy at the telephone number or e-mail address provided in the corporate information section of the integrated report or an electronic

copy is available on the company’s website at www.bcx.co.za.

The following summary highlights some of the significant changes found in the proposed MOI. The changes listed below are not

exhaustive, shareholders are required to read the whole MOI for a full appreciation thereof:

• The board is authorised to provide financial assistance in terms of the Companies Act.

• In addition to the board being able to call shareholders meetings, the prescribed officers can do so if authorised by the board.

• Meetings of shareholders can now be convened on 15 business days’ notice.

• There is provision for the social and ethics committee to be appointed.

• Shareholders meetings may be conducted by electronic communication.

• The MOI allows written resolutions in terms of section 60 of the Companies Act in certain circumstances.

• The annual rotation of directors in terms of the MOI applies only to non-executive directors.

• The quorum for meetings has increased from two to a majority.

• Non-executive directors’ fees will be paid on the basis of a special resolution.

• Board approval of distribution/dividend payment will be subject to the solvency and liquidity tests.

• The board is authorised to determine record dates for the exercise of shareholders rights in terms of the Act and the JSE Listings

Requirements.

• Electronic participation at shareholders meetings is provided for.

• The making of rules as contemplated in section 15(3) of the Companies Act is prohibited.”


of the voting exercises on the resolution.

AddITIonAL dIsCLosure of InforMATIon In TerMs of seCTIon 11.26 of The Jse LIsTIngs requIreMenTsThe JSE Listings Requirements require the disclosure of the following information, some of which appears elsewhere in the integrated report of

which this notice forms part as set out below:

• directors and management

See pages 14 to 21 of the integrated report.

• Major shareholders of the company

See pages 152 to 155 of the integrated report.

• Material changes

There have been material changes in the financial or trading position of the company and its subsidiaries since the date of the statement of

financial position and the date of the notice.

• directors’ interests in securities

See page 93 of the integrated report.

• share capital of the company

See page 123 of the integrated report. This includes the share capital of the company in note 16. An analysis of the shareholders (including

beneficial shareholders – who hold 5% or more of the issued share capital of the company – and of which the company is aware, but who

are not registered shareholders) can be found on pages 152 to 155.

• Litigation statement

In terms of section 11.26 of the JSE Listings Requirements, the directors, whose names appear on pages 14 to 17 of the integrated report,

are not aware of any legal or arbitration proceedings, including proceedings that are pending or threatened, that may have or have had in

the recent past, being at least the previous 12 months, a material effect on the group’s financial position.

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• directors’ responsibility statement

The directors, whose names appear on pages 14 to 17 of the integrated report, collectively and individually accept full responsibility for

the accuracy of the information pertaining to special resolution numbers 3 and 4 and certify that to the best of their knowledge and

belief there are no facts that have been omitted which would make any statement false or misleading, and that all reasonable enquiries

to ascertain such facts have been made and that the annual report and this notice contains all information required by law and the JSE

Listings Requirements.

ATTendAnCe And voTIng By shArehoLders or ProxIesOn a poll, every shareholder of the company shall have one vote for every share held in the company by such shareholder.

All shareholders are encouraged to attend, speak and vote at the annual general meeting.

An ordinary shareholder entitled to attend and vote at the annual general meeting may appoint any individual (or two or more individuals)

as a proxy or as proxies to attend, participate in and vote at the AGM in the place of the shareholder. A proxy need not be a shareholder of

the company.

A proxy appointment must be in writing, dated and signed by the shareholder appointing a proxy, and, subject to the rights of a shareholder

to revoke such appointment (as set out below), remains valid only until the end of the AGM.

The appointment of a proxy is suspended at any time and to the extent that the shareholder who appointed such proxy chooses to act directly

and in person in the exercise of any rights as a shareholder.

Shareholders who have dematerialised their shares, other than those shareholders who have dematerialised their shares with own name

registration, should contact their Central Securities Depository Participant (CSDP) or broker in the manner and time stipulated in their

agreement, in order to furnish them with their voting instructions and to obtain the necessary authority to do so, in the event that they wish to

attend the annual general meeting.

Please note that if you are the owner of dematerialised shares (i.e. have replaced the paper share certificates representing the shares with

electronic records of ownership under the JSE’s electronic settlement system, Strate Limited (Strate)), held through a CSDP or broker and are

not registered as an ‘own name’ dematerialised shareholder you are not recorded as a registered shareholder of the company, but appear on

the sub-register of the company held by your CSDP. Accordingly, in these circumstances subject to the mandate between yourself and your

CSDP or broker, as the case may be:

• if you wish to attend the annual general meeting you must contact your CSDP or broker, as the case may be, and obtain the relevant letter

of representation from them; alternatively

• if you are unable to attend the annual general meeting but wish to be represented at the meeting, you must contact your CSDP or broker,

as the case may be, and furnish them with your voting instructions in respect of the annual general meeting and/or request them to

appoint a proxy. You must not complete the attached form of proxy. The instructions must be provided in accordance with the mandate

between yourself and your CSDP or broker, as the case may be, within the time period required by them.

CSDPs, brokers or their nominees, as the case may be, recorded in the company’s sub-register as holders of dematerialised shares held on

behalf of an investor/beneficial owner in terms of Strate should, when authorised in terms of their mandate or instructed to do so by the

owner on behalf of whom they hold dematerialised shares in the company, vote by either appointing a duly authorised representative to

attend and vote at the annual general meeting or by completing the attached form of proxy in accordance with the instructions thereon and

returning it to the company’s transfer secretaries not less than 24 hours before the time appointed for the holding of the meeting (excluding

Saturdays, Sundays and public holidays).

Shares held by a share trust or scheme will not have their votes at the annual general meeting taken into account for purposes of resolutions

proposed in terms of the JSE Listings Requirements. Shares held as treasury shares may also not vote. (The listed “A” shares created in terms of

the Black Economic Empowerment transaction will have full voting rights).

Shareholders of the company that are companies, that wish to participate in the annual general meeting, may authorise any person to act as

its representative at the annual general meeting.


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If you hold certificated shares (i.e. have not dematerialised your shares in the company) or are registered as an own name dematerialised

shareholder (i.e. have specifically instructed your CSDP to hold your shares in your own name on the company’s sub-register), then:

• you may attend and vote at the annual general meeting; alternatively

• you may appoint a proxy (who need not also be a shareholder of the company) to represent you at the annual general meeting by

completing the attached form of proxy and, for administrative reasons, returning it to the office of the company’s transfer secretaries,

Computershare Investor Services Proprietary Limited, 70 Marshall Street, Johannesburg, 2001, South Africa or posted to the transfer

secretaries at PO Box 61051, Marshalltown, 2107 (70 Marshall Street, Johannesburg 2001), South Africa, so as to be received by them

by not later than Thursday, 11:00 on 10 January 2013 (48 (forty-eight) hours (excluding Saturdays, Sundays and public holidays) in

the Republic of South Africa prior to the meeting. Any forms of proxy not received by this time must be handed to the chairperson of

the annual general meeting immediately prior to the AGM. Please also note that the attached form of proxy may be delivered to the

company at any time before the annual general meeting and must be so delivered before your proxy may exercise any of your rights as a

shareholder at the annual general meeting.

A proxy may delegate his/her authority to act on your behalf to another person, subject to the restrictions set out in the attached form of

proxy as stipulated in section 58(3)(b) of the Companies Act.

Shares held by a share trust or scheme will not have their votes at the annual general meeting taken into account for the purposes of the

resolutions proposed in terms of the JSE Listings Requirements.

Proof of IdenTIfICATIon requIredSection 63(1) of the Companies Act requires that a person wishing to participate in the annual general meeting (including any representative

or proxy) must provide satisfactory identification (such as identity documents, driver’s licences or passports) before they may attend or

participate at such meeting.

venuePlease take note that the annual general meeting will be held at the Business Connexion Fundi Auditorium, Business Connexion Park North,

789 Sixteenth Road, Randjespark, Midrand 1685, on Monday, 14 January 2013 at 11:00. A map and directions are included on page 170 of

the report.

By order of the board

J de Koker

Group company secretary

5 December 2012

Business Connexion Park North

789 Sixteenth Road

Randjespark, Midrand 1685

Republic of South Africa

170

Business Connexion Park North, 789 Sixteenth Road, Randjespark, Midrand

Tel: +27 (11) 266 5111 • Fax: +27 (11) 266 1088

suggested route

On the N1 towards Pretoria, take New Road offramp and turn right off the slipway, then first left into Sixteenth Road

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PROXYForm of

BusIness ConnexIon grouP LIMITed(Incorporated in the Republic of South Africa)(Registration number 1988/005282/06)ISIN: ZAE000054631 Share code: BCX(“the company” or “Business Connexion”)

This proxy form is only for use by:1. registered shareholders who have not yet dematerialised their shares in the company, and2. registered shareholders who have already dematerialised their shares in the company and are registered in their own names in the

company’s sub-register.

For use by registered shareholders of the company at the ninth annual general meeting of the company which will be held in the Business Connexion Fundi Auditorium, Business Connexion Park North, 789 Sixteenth Road, Randjespark, Midrand 1685 on Monday, 14 January 2013 at 11:00 and at any adjournment thereof.

I/We (please print name)

of

(Address in block letters)

being a holder of ordinary shares in the company and entitled to vote, do hereby appoint (refer to note 1):

1. or, failing him/her,

2. or, failing him/her,

the Chairman of the annual general meeting, as my/our proxy/ies to vote on a poll on my/our behalf at the annual general meeting of the company for the purpose of considering and, if deemed fit, passing, with or without modification, the resolutions to be proposed thereat and at each adjournment thereof and to vote for and/or against the resolution and/or abstain from voting in respect of the ordinary shares registered in my/our name/s in accordance with the instructions/notes overleaf.

Please indicate with an “X” or number of shares which you wish to vote in the spaces below how you wish your proxy to vote in respect of the resolutions to be proposed, as contained in the notice of the abovementioned annual general meeting.

*I/We desire my/our proxy to vote on the resolution to be proposed, as follows:for Against Abstain

ordinary resolutions

1.To re-appoint KPMG Inc. as external auditors and Pierre Fourie as the individual designated auditor of the company for the 2012/2013 financial year.

2.Election of independent Audit and compliance committee for the financial year commencing 1 September 2012 the members being:

2.1 J John

2.2 JM Poluta

2.3 M Lehobye

3. Election of group Risk, sustainability, social and ethics committee :

3.1 NN Kekana

3.2 J John

3.3 AC Ruiters

4. Re-election of directors:

4.1 M Lehobye

4.2 JM Poluta

5. Approval of group remuneration policies

6. General authority to place shares under control of the directors

special resolutions

1. Approval of non-executive directors’ remuneration – 2013/2014

2. General authority to repurchase shares

3. Approval of MOI

Signed by me/us this day of 2013

Signature

Assisted by me (where applicable) (refer to instruction 3)

Full name/s of signatory if signing in a representative capacity (refer to instruction 5)

* If this form of proxy is returned without any indication of how the proxy should vote, the proxy will exercise his/her discretion both as to how he/she votes and as to whether or not he/she abstains from voting.

NOTES

1. Every shareholder present in person or by proxy and entitled to vote at the annual general meeting of the company shall in the event of a poll be

entitled to one vote in respect of each ordinary share in the company held by him/her.

2. Shareholders who have dematerialised their shares in the company and are registered in their own names are shareholders who appointed

Computershare Custodial Services as their Central Securities Depository Participant (CSDP) with the express instruction that their uncertificated

shares are to be registered in the electronic sub-register of shareholders in their own names.

Instructions on signing and lodging the proxy form:

1. The form of proxy must only be used by shareholders who hold shares in certificated form or shareholders who hold dematerialised shares and

who are recorded on the sub-register in electronic form in “own name”.

2. All other beneficial owners who have dematerialised their shares through a CSDP or broker and wish to attend the annual general meeting must

provide the CSDP or broker with their voting instructions in terms of the relevant agreement entered into between them and the CSDP or broker.

3. A shareholder may insert the name of a proxy or the names of two alternative proxies of the shareholder’s choice in the space/s provided

overleaf, with or without deleting “the Chairman of the annual general meeting”, but any such deletion must be initialled by the shareholder.

Should this space be left blank, the Chairman of the annual general meeting will exercise the proxy. The person whose name appears first on the

proxy form and who is present at the annual general meeting will be entitled to act as proxy to the exclusion of those whose names follow.

4. A shareholder’s voting instructions to the proxy must be indicated by the insertion of an “X” or the number of votes exercisable by that

shareholder in the appropriate spaces provided. If an “X” has been inserted in one of the blocks to a particular resolution, it will indicate the

voting of all the shares held by the shareholder concerned. Failure to do this shall be deemed to authorise the proxy to vote or to abstain from

voting at the annual general meeting, as he/she thinks fit in respect of all the shareholder’s exercisable votes. A shareholder or his/her proxy is not

obliged to use all the votes exercisable by his/her proxy, but the total number of votes cast, or those in respect of which abstention is recorded,

may not exceed the total number of votes exercisable by the shareholder or by his/her proxy.

5. A minor or any person under incapacity must be assisted by his/her parent or guardian, as applicable, unless the relevant documents establishing

his/her legal capacity are produced or have been registered by the transfer secretaries of the company.

6. To be valid, the completed form of proxy must be lodged with the transfer secretaries of the company:

Computershare Investor Services Proprietary Limited,

70 Marshall Street, Johannesburg 2001, or posted to

PO Box 61051, Marshalltown, 2107

Republic of South Africa,

to reach the company on or before 11:00 on Thursday, 10 January 2013 (at least 48 (forty eight) hours (excluding Saturdays, Sundays and public

holidays) in the Republic of South Africa) before the time appointed for the holding of the annual general meeting.

7. Documentary evidence establishing the authority of a person signing this proxy form in a representative capacity must be attached to this proxy

form unless previously recorded by the transfer secretaries or waived by the Chairman of the annual general meeting.

8. The completion and lodging of this proxy form shall not preclude the relevant shareholder from attending the annual general meeting and

speaking and voting in person thereat to the exclusion of any proxy appointed in terms hereof, should such shareholder wish to do so.

9. The completion of any blank spaces overleaf need not be initialled. Any alterations or corrections to this proxy form must be initialled by the

signatory/ies.

10. The Chairman of the annual general meeting may reject or accept any proxy form which is completed other than in accordance with these

instructions provided that he is satisfied as to the manner in which a shareholder wishes to vote.

11. The Chairman of the meeting shall be entitled to decline or accept the authority of a person signing the proxy form:

(a) under a power of attorney; or

(b) on behalf of a company

unless his power of attorney or authority is deposited at the offices of the company or that of the transfer secretaries not later than 11:00 on

Thursday, 10 January 2013 (48 (forty eight) hours before the meeting).

12. Where there are joint holders of shares:

a) any one holder may sign the form of proxy;

b) the vote(s) of the senior shareholders (for that purpose seniority will be determined by the order in which the names of shareholders appear

in the company’s register of shareholders) who tenders a vote (whether in person or by proxy) will be accepted to the exclusion of the

vote(s) of the other joint shareholder(s).

13. A deletion of any printed matter and the completion of any blank space need not be signed or initialed. Any alteration or correction must be

signed and not merely initialed.

informationCORPORaTE

Designed by Published by

Business Connexion group LimitedIncorporated in the Republic of South Africa

Registration number 1988/005282/06

Company secretaryJ de Koker

registered office and business addressBusiness Connexion Park North

789 Sixteenth Road

Randjespark

Midrand, 1685

Postal addressPrivate Bag X48

Halfway House, 1685

Tel: + (27) 11 266 6630

Fax: + (27) 86 571 4020

Email: [email protected]

Websitehttp://www.bcx.co.za

Investor relationsThe chief executive officer, deputy chief executive officer and

chief financial officer are designated investor spokespersons

Business and postal addressBusiness Connexion Park North

789 Sixteenth Road

Randjespark

Midrand, 1685


Halfway House, 1685

Tel: + (27) 11 266 5111

Fax: + (27) 11 266 1088


Transfer secretariesComputershare Investor Services Proprietary Limited

Business address70 Marshall Street

Johannesburg, 2001

Postal addressPO Box 61051

Marshalltown, 2107

Tel: + (27) 11 370 5000

Fax: + (27) 11 688 5248

sponsorsOne Capital

Business address17 Fricker Road

Illovo

2196

Postal addressPO Box 784573

Sandton, 2146

Tel: + (27) 11 550 5000

Fax: 086 538 4299


AuditorsKPMG

Business addressKPMG Crescent

85 Empire Road

Parktown, 2193


Parkview, 2122

Tel: + (27) 11 647 5000

Fax: + (27) 11 647 6084

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