AFRICAN DAWN ANNUAL REPORT 2018 4 From the Chair Dear Shareholder, “ Never give in , never give in, never, never, never – in nothing, great or small, large or petty – never give in except to convictions of honour and good sense! Winston S Churchill This is the attitude and belief that describes the culture of Afdawn, its funders and current supporting shareholders. During the last four years this culture has bound us and kept us moving forward, sometimes slowly and even a step or two backwards, but we continue to push forward. Nothing has been easy and very tough decisions were made under difficult circumstances. We were forced to change strategy when the Dzothe transaction was cancelled in May 2017. The cancellation of the Dzothe transaction impacted the strategy for settling the SARS liability and the vision to establish Afdawn as a listed venture capital vehicle under the Knife Capital brand. It resulted eventually in the sale of the restructured Knife Capital Group in September 2017. This latter transaction made it possible for the Knife Capital team to move forward with their own strategy. Other relationships were formed after the sale of the remaining 50% of Grindstone to Thinkroom in January 2018. Elite Elite Group was negatively affected by the cancellation of the Dzothe transaction as the required funding did not materialize. The changes in regulation and legislation also had a negative effect on margins and the legal collection process which became much longer. Elite management responded by further reducing the cost base, shortening the duration of the debtors’ book, improving the lending granting process and accessing interim funding from close relationships. Sandown Capital also assisted Elite by lengthening the terms of repayment of its funding to Elite. Without these actions Elite would not have survived the year. The continual focus on reducing the cost per loan will benefit Elite in the future. Elite advanced R63.2million (2017- R66.8million) to its customers and received R81.9million (2017 - R88,9million) from them. Operating expenses excluding interest and bad debt provision was further reduced by R1.68million to R15.68million. Elite’s bad debts are between 3% - 5% of the amount advanced to its customers in the normal course of business. Prior to the settlement of the SARS liability in December 2017, capital providers had not been willing to provide funding to Elite because of the uncertainty of the liability. As a result, the duration of the lending book was shortened and net trade receivables decreased from R20,07million to R15,08million. Some key features of the Elite results are: • Revenue decreased by R3,76million to R16,99million due to lack of funding to grow the lending book • Other income was R0,316million mostly due to the non-recurrence of a once off settlement benefit in the previous period of R2,16million • Allowance for bad debts increased by R0,684million to R4,50million. This includes a R1,75million additional allowance on the legal book to reflect a more difficult collection process and a change in estimates applied by management.
AFRICAN DAWN 2018 Annual Report
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