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BLUE LABEL
INTEGRATED ANNUAL REPORT 2017
Notes
to the Group annual financial statements
continued
For the year ended 31 May 2017
2.
Group composition
continued
2.2 Investment and loans to venture capital associates and joint venture continued
Fair value estimate continued
The discount rate and terminal growth rate used in calculating the fair values are 27% and 5% respectively.
Capital expenditure in Oxigen Services India and Oxigen Online is expected to range between R166 million and
R311 million on an annual basis.
Customer acquisition and engagement spend for Oxigen Services India and Oxigen Online increases aggressively from
R103 million to R2 575 million.
The fair value of the 2DFine Group is based on its share of the fair value of Oxigen Services India and Oxigen Online
less the liabilities of the 2DFine Group.
The finance department of the Group includes a team that outsources the valuations to qualified independent third
party valuation specialists required for financial reporting purposes, including level 3 fair values. This team reports
directly to the Financial Director (FD) and the Audit, Risk and Compliance Committee (ARCC). Discussions of
valuation processes and results are held between the FD, ARCC and the valuation team at least once every six
months, in line with the Group’s reporting periods.
The investments in our venture capital associates and joint venture are level 3 valuations in the fair value hierarchy.
The following table summarises the quantitative information about the significant unobservable inputs used in the
level 3 fair value measurement for this investment.
Change to inputs
Movement in fair value
Oxigen Services
India Private
Limited
Oxigen Online
Services Private
Limited
2DFine
Group
1
Unobservable inputs
%
R’000
R’000
R’000
Discount rate
+0.5%
-0.5%
(16 489)
17 575
(9 938)
10 573
(10 831)
11 531
Terminal growth rate
+1%
-1%
5 172
(4 625)
2 478
(2 203)
3 127
(2 791)
Customer acquisition and
engagement spend
+1%
-1%
(5 257)
5 257
(4 348)
4 348
(3 947)
3 947
Capital expenditure
+1%
-1%
(3 000)
3 000
(292)
292
(1 333)
1 333
1
2DFine Group consists of 2DFine Holdings Mauritius and 2DFine Investments Mauritius.
Loans to venture capital associate and joint venture
Interest
rate
2017
R’000
Oxigen Services India Private Limited
LIBOR + 1.50% 34 310
2DFine Holdings Mauritius*
10% 218 305
252 615
* Refer to note 8 for details on the surety relating to this loan.
The loans are neither past due nor impaired with a low risk of default.
The Group considers its maximum exposure in respect of these loans, without taking into account any collateral and
financial guarantees, to be as follows:
2017
R’000
Group 1
—
Group 2
252 615
Group 3
—
252 615