AFRICAN DAWN ANNUAL REPORT 2017 3 About us About us African Dawn Capital Limited (the “Company”, “Afdawn” or “Group”) was founded in 1998 as a micro finance business. Following its listing on the AltX in 2004, it grew into a niche finance provider specialising in micro finance, debtor discounting and structured property finance. As a result of its growth and corresponding increase in share price, Afdawn was able to acquire additional businesses and utilise shareholders’ funds to grow its loan books. By 2009 the Group had significant exposure to the property sector, mainly property developments that it had funded. The financial position of the Group then weakened in 2009 due to the collapse in the property markets and the associated increase in doubtful loans. This not only impacted the Group but also the majority of its executive management who, based on the increase in the share price, had entered into a highly geared single stock structure with Nedbank. The falling Afdawn share price triggered margin calls by Nedbank which, when not settled, led to Nedbank exercising its security and thereby becoming the single biggest shareholder in Afdawn. The majority of the executive directors were subsequently removed from the Board and from executive management. A new Board had to be constituted. The results of the forensic review have been handed over to the appropriate authorities and the process is in their hands. The current position Since the last annual report we have finalised both the Green Oaks and Elite transactions. The Greenoaks transaction was settled in May 2017. The Elite transaction was cancelled in May 2017 as the party could not come up with the funding. The impact of cancelling the Elite deal has required us to re - engage with SARS on our Compromise settlement agreement, which we hope to close out in the near future. . Our report Our current focus is on producing Annual Financial Statements and when the funds are available we will produce an Integrated Report. As far as possible the 2017 report is guided by the Global Reporting Initiative (GRI3) reporting guidelines as part of guiding the users to a conclusion on the quantitative (financial indicators) and qualitative (social, environmental and sustainability) events reported on for the 2017 period. Knife Capital The Knife Capital financial results were mixed. Revenue reached R10million, the highest level since the acquisition, but this was mostly driven by carried interest received from an exit of a third-party investee company. Most of the carried interest had to be distributed to the Knife Vendors in terms of the Knife Sales Agreement, signed in March 2014, and the Knife Settlement Agreement signed in June 2015. This resulted in significant increase in employment costs (refer to note 24). Knife Capital broadened its fund management activities and launched a third-party fund, KNF Ventures. This business will generate a revenue stream that will offset the revenue stream lost from the HBD management contract which has expired. Knife Capital will earn a management fee and also carried interest when the fund successfully exits investments. Grindstone Three was successfully launched and has many interesting candidates. Consideration is being given to restructuring Knife Capital so that Afdawn will take a direct stake in Grindstone and Yuedilligence. Grindstone has positioned itself as a very valuable asset that will assist in future deal flow and the capability to provide pre –and post investment interventions to investee companies. Yuedilligence has identified a new CEO who will drive the business as a separate entity and not just as a product of Knife Capital. Yuediligence will broaden its capacity to become a pure fintech platform company.
AFRICAN DAWN 2017
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