RCS GROUP€¦ · The RCS Group constitutes RCS Investment Holdings Limited (registration number: 2000/017884/06) ... has appropriate expertise and experience; • Considered as part

RCS GROUPCONSOLIDATED

FINANCIALSTATEMENTS

2015

EXPANDINGOUR PARTNERNETWORK

Directors’ Responsibility Statement and Company Secretary Statement 02

Directors’ Report 03 – 04

Audit Committee Report 05

Independent Auditor’s Report 06 – 07

Consolidated Statement of Financial Position 09

Consolidated Income Statement 10

Consolidated Statement of Comprehensive Income 11

Consolidated Statement of Changes in Equity 12

Consolidated Statement of Cash Flows 13

Accounting Policies 15 – 24

Notes to the Consolidated Financial Statements 26 – 52

These financial statements represent the financial information of the RCS Group and have been audited in compliance with section 30 of the Companies Act of South Africa.

These financial statements have been prepared under the supervision of the finance & treasury executive: C de Wit Chartered Accountant (SA).

CONTENTS

2015 RCS GROUP CONSOLIDATED FINANCIAL STATEMENTS 01

DIRECTORS’ RESPONSIbIlITy STATEmENT

RCS GROUP CONSOLIDATED FINANCIAL STATEMENTS 201502

The directors are responsible for the preparation and fair presentation of the consolidated financial statements of RCS Investment

Holdings Limited, its subsidiaries and its associates (hereafter referred to as the “RCS Group”), comprising the consolidated

statement of financial position as at 31 December 2015, and the consolidated income statement, the consolidated statements of

comprehensive income, changes in equity and cash flows for the period then ended, and the notes to the consolidated 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

consolidated 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 RCS Group to continue as a going concern and have no reason to believe

that the businesses will not be a going concern in the year ahead.

The auditor is responsible for reporting on whether the consolidated financial statements are fairly presented in accordance with

the applicable financial reporting framework.

APPRovAl oF thE FINANCIAl StAtEmENtSThe consolidated financial statements of the RCS Group, as identified in the first paragraph, were approved by the board of directors

on 22 April 2016 and were signed by:

SW van der merweChief executive officer

I hereby confirm, in my capacity as company secretary of RCS Investment Holdings Limited, that for the period ended 31 December

2015, the company has filed all required returns and notices in terms of the Companies Act, 2008 and that all such returns and

notices are to the best of my knowledge and belief true, correct and up to date.

GS harkerCompany Secretary

COmPANy SECRETARy STATEmENT

DIRECTORS’ REPORT


1. BuSINESS ACtIvItIESThe RCS Group is an operationally independent consumer finance business that provides a broad range of financial services

under its own brand and in association with a number of retail entities in South Africa, Namibia and Botswana. The RCS

Group is structured into two main operating business units named Cards, which offers various utility card products through

participating merchants outlets, and Loans which offers individuals unsecured loans and insurance products (for more detail on

these segments refer to note 3 of the financial statements).

2. SuBSIDIARy ComPANIESThe RCS Group constitutes RCS Investment Holdings Limited (registration number: 2000/017884/06) and its subsidiaries, RCS

Botswana Proprietary Limited, RCS Cards Proprietary Limited, RCS Collections Proprietary Limited, RCS Home Loans Proprietary

Limited, RCS Investment Holdings Namibia Proprietary Limited and RCS Personal Finance Proprietary Limited (for more detail on

these subsidiaries refer to note 27 of the financial statements).

The financial statements for RCS Investment Holdings Limited are presented in a separate set of financial statements.

3. GENERAl REvIEW oF oPERAtIoNSThe results for the period ended 31 December 2015 are described in the accompanying consolidated financial statements.

4. ComPlIANCERCS Cards Proprietary Limited is a registered credit provider (NCR registration number NCRCP 38) and a registered service

provider with the financial services board (FSB registration number 44481).

5. CoRPoRAtE GovERNANCEThe directors endorse the Code of Corporate Practices and Conduct as suggested by King III. For the financial period ended 31

December 2015 the directors are satisfied that the group materially complies with King III, apart from the areas noted below.

The main areas of departure are accepted due to the fact that RCS Investment Holdings Limited is a wholly owned subsidiary of

the French listed bank, BNP Paribas Société Anonyme.

King III PrincipleNon-Application

Recommended PracticeNon-Application Comments

The board should comprise

a balance of power, with a

majority of non-executive

directors. The majority of non-

executive directors should be

independent.

The majority of non-executive

directors should be independent.

At least one third of the non-

executive directors should rotate

every year.

As the Group only has one shareholder, BNP Paribas Société

Anonyme, the only independent non-executive director is

the audit committee chairman, and the other non-executive

directors are senior executives of the shareholder.

As the Group only has one shareholder, BNP Paribas Société

Anonyme, the shareholder appoints the non-executive

directors.

the directors have pleasure in presenting their report for the period ended 31 December 2015:

DIRECTORS’ REPORT (continued)


6. ChANGE IN FINANCIAl yEAR ENDDuring the current financial period, the financial year has changed

from 31 March to 31 December to align with the reporting

requirements of the shareholder. The current period financial

results are therefore only representative of a 9 month period and

not comparative to the prior period.

7. EvENt AFtER thE REPoRtING PERIoDThe directors are not aware of any matters or circumstances arising

since the end of the financial period that may materially affect the

amounts and disclosure of these financial statements.

8. DIStRIButIoN to ShAREholDERA distribution to shareholder amounting to R250 million was declared

after the date of the reporting period but before the financial statements

were authorised for issue (31 March 2015: nil).

9. DIRECtoRSThe directors in office at the date of this report are:

Executive DirectorsSW van der merwe (Chief executive officer) South African

JJ Snyman (Chief financial officer) South African

RF Adams (Chief operating officer) South African

oPm Renard French

Non-executive directorsACPm van Groenendael French

BPS Cavelier French

vNA Kodjo Diop French

I Perret-Noto (Appointed 1 December 2015) French

E oblowitz (Independent) South African

10. ComPANy SECREtARyThe company secretary at the date of this report is GS Harker.

11. BuSINESS/REGIStERED ADDRESS Business Address

RCS Building

Golf Park

Raapenberg Road

Mowbray

7700

Postal addressPO Box 6523

Parow East

Cape Town

7501

12. holDING ComPANyThe RCS Group’s immediate holding company is BNP Paribas

Personal Finance Société Anonyme. The ultimate shareholder

is BNP Paribas Société Anonyme, incorporated in France and

listed on the Paris stock exchange.

13. AuDItoRSThe independent auditing firm, KPMG Inc., which was given

unrestricted access to all financial records and related

data, including minutes of all meetings of shareholders,

the board of directors and committees of the board, has

audited the financial statements. The directors believe that

all representations made to the independent auditors during

their audit were valid and appropriate. KPMG Inc.’s audit

report is presented on page 6 to 7.

The RCS audit committee is an independent statutory committee

appointed by the board of directors in terms of the Companies

Act (Act 71 of 2008) (“the Act”). The committee comprises of

one independent non-executive director, which is also the

chairman of the audit committee, and two non-executive

directors. The audit committee met twice during the period

ended 31 December 2015. In addition, the chairman of the audit

committee held various meetings with representatives of the

internal and external auditors during the period under review.

The committee’s responsibilities include statutory duties in terms

of the Act. The committee’s terms of reference are determined by

a board-approved charter. The committee conducted its affairs in

compliance with, and discharged its responsibilities in terms of,

its charter for the period ended 31 December 2015.

The committee performed the following, inter alia, duties during

the period under review:

• Satisfieditselfthattheexternalauditorisindependentofthe

group, as set out in section 94(9) of the Act;

• In consultation with executive management, agreed

to the terms, audit plan and budgeted fees for the

31 December 2015 financial period;

• Approved the nature and extent of non-audit services

that the external auditor may provide;

• Satisfied itself, based on the information and explanations

supplied by management and obtained through discussions

with the independent external auditor and internal auditors,

that the system of internal financials controls is effective and

forms a basis for the preparation of reliable financial statements;

• Reviewedtheaccountingpoliciesandthegroupfinancial

statements for the period ended 31 December 2015

and, based on the information provided to the committee,

considers that the group complies, in all material

respects, with the requirements of the Act and IFRS;

• Ensured that the group’s internal audit function is

independent and had the necessary resources and

authority to enable it to discharge its duties;

• Approvedtheinternalauditplan;

• Metwiththeexternalandinternalauditorswithoutmanagement

being present;

• Satisfieditselfthatthegroupfinancialdirectorandfinancefunction

has appropriate expertise and experience;

• Consideredaspartoftheapprovalofthefinancialstatements

any accounting treatments, significant unusual transactions,

or accounting judgements that could be contentious; and

• Reviewed management’s assessment of going concern

and sustainability and made a recommendation to the

board that the going concern concept be adopted by the group.

E oblowitz

Audit Committee Chairman

AUDIT COmmITTEE REPORT


INDEPENDENT AUDITOR’S REPORT


REPoRt oN thE FINANCIAl StAtEmENtSWe have audited the consolidated financial statements of RCS

Investment Holdings Limited, which comprise the consolidated

statement of financial position as at 31 December 2015, and the

consolidated income statement, the consolidated statements of

comprehensive income, changes in equity and cash flows for

the period then ended, and the accounting policies and notes to

the financial statements, as set out on pages 15 to 52.

DIRECtoRS’ RESPoNSIBIlIty FoR thEFINANCIAl StAtEmENtSThe company’s directors are responsible for the preparation

and fair presentation of these consolidated 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 consolidated financial statements

that are free from material misstatements, whether due to fraud

or error.

AuDItoR’S RESPoNSIBIlItyOur responsibility is to express an opinion on these consolidated

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

about whether the consolidated financial statements are free

from material misstatement.

An audit involves performing procedures to obtain audit

evidence about the amounts and disclosures in the consolidated

financial statements. The procedures selected depend on the

auditor’s judgement, including the assessment of the risks of

material misstatement of the consolidated 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 consolidated 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 consolidated financial statements.

We believe that the audit evidence we have obtained is sufficient

and appropriate to provide a basis for our audit opinion.

oPINIoNIn our opinion, the consolidated financial statements present

fairly, in all material respects, the consolidated financial position

of RCS Investment Holdings Limited as at 31 December 2015, and

its consolidated financial performance and its consolidated cash

flows for the period 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 ACtAs part of our audit of the consolidated financial statements

for the period ended 31 December 2015, we have read the

Directors’ Report, Audit committee Report and Company

Secretary Statement for the purpose of identifying whether

there are material inconsistencies between these reports and

the audited consolidated financial statements. These reports are

the responsibility of the respective preparers. Based on reading

the reports we have not identified material inconsistencies

between these reports and the audited consolidated financial

statements. However, we have not audited these reports and

accordingly do not express an opinion on these reports.

to the shareholder of RCS Investment holdings limited:


REPoRt oN othER lEGAl AND REGulAtoRy REquIREmENtSIn terms of the IRBA Rule published in Government Gazette

Number 39475 dated 4 December 2015, we report that KPMG

Inc. has been the auditor of RCS Investment Holdings Limited

for 16 years. We are independent of the group in accordance

with the Independent Regulatory Board for Auditors Code

of Professional Conduct for Registered Auditors and other

independence requirements applicable to performing audits of

financial statements in South Africa.

KPmG Inc.

Per: Patrick Farrand

Chartered Accountant (SA)

Registered Auditor

Director

22 April 2016

INDEPENDENT AUDITOR’S REPORT (continued)

A SOlID fINANCIAl fOUNDATION fOR fUTURE GROWTh

CONSOlIDATED STATEmENT Of fINANCIAl POSITION


31 December 31 March 2015 2015 Note R’000 R’000

ASSEtSCash and cash equivalents 4 551 918 446 787

Card and loan receivables 5 5 961 948 5 508 226

Other receivables 6 11 625 18 038

Amount receivable from insurer 7 94 850 94 919

Interest rate swaps – 15 249

Taxation 5 935 4 504

Property and equipment 8 68 491 62 970

Intangible assets 9 24 122 25 434

Goodwill 10 56 855 56 855

Deferred taxation 11 172 629 91 019

Amount owing from group company 12 – 81

Investments in associates 13 – 2 386

total assets 6 948 373 6 326 468

EquItyStated Capital 14 2 636 636 2 636 636

Accumulated loss (226 441 ) (424 281 )

Foreign currency translation reserve 15 9 298 1 673

Cash flow hedge reserve 16 – 10 960

total equity 2 419 493 2 224 988

lIABIlItIESFunding 17 4 082 400 3 770 300

Trade and other payables 18 446 480 331 153

Interest rate swaps – 27

total liabilities 4 528 880 4 101 480

total equity and liabilities 6 948 373 6 326 468

as at 31 December 2015

CONSOlIDATED INCOmE STATEmENT


9 months ended 12 Months ended 31 December 2015 31 March 2015 Note R’000 R’000

Interest earned 20 1 060 127 1 261 080

Interest expense (235 420 ) (271 344 )

Net interest income 824 707 989 736

Other income 21 526 376 674 861

Transaction fee expense (63 075) (72 864 )

Net trading income 1 288 008 1 591 733

Operating costs (570 859) (677 385)

Cost of risk 22 (439 335) (475 962 )

Income from operations 277 814 438 386

Profit from equity accounted associates – 1 977

Profit before taxation 23 277 814 440 363

Taxation 24 (79 974 ) (141 224 )

Profit for the period 197 840 299 139

for the period ended 31 December 2015

CONSOlIDATED STATEmENT Of COmPREhENSIvE INCOmE



Profit for the period 197 840 299 139

other comprehensive income, net of taxation

Items that are or may be reclassified to profit or loss:

Foreign currency translation differences for foreign operation 15 7 625 (36 )

Effective portion of changes in fair value of cash flow hedges 16 (712 ) (17 950 )

Cashflow hedges - reclassified to profit or loss (10 248 ) –

other comprehensive income for the period (3 335 ) (17 986 )

total comprehensive income for the period 194 505 281 153


CONSOlIDATED STATEmENT Of ChANGES IN EQUITy


Foreign Retained currency Cash flow income / total equity Stated translation hedge (accumulated attributable capital reserve reserve loss) to parent R’000 R’000 R’000 R’000 R’000

Balance at 1 April 2014 696 798 1 709 28 910 1 202 861 1 930 278

Total comprehensive income for the period – (36 ) (17 950 ) 299 139 281 153

Profit for the period – – – 299 139 299 139

Other comprehensive income, net of taxation:

Foreign currency translation differences for foreign operations – (36 ) – – (36 )

Effective portion of changes in fair value of cash flow hedges – – (17 950 ) – (17 950 )

Transactions with shareholders 1 939 838 – – (1 926 281 ) 13 557

Share issue 2 636 636 – – – 2 636 636

Share buy-back (696 798 ) – – (1 926 281 ) (2 623 079 )

Balance at 31 march 2015 2 636 636 1 673 10 960 (424 281 ) 2 224 988

Balance at 1 April 2015 2 636 636 1 673 10 960 (424 281 ) 2 224 988

Total comprehensive income for the period – 7 625 (10 960 ) 197 840 194 505

Profit for the period – – – 197 840 197 840

Other comprehensive income, net of taxation:

Foreign currency translation differences for foreign operations – 7 625 – – 7 625

Effective portion of changes in fair value of cash flow hedges – – (712 ) – (712 )

Disposal of cash flow hedge – – (10 248 ) – (10 248 )

Balance at 31 December 2015 2 636 636 9 298 – (226 441 ) 2 419 493


CONSOlIDATED STATEmENT Of CASh flOWS



CASh FloWS FRom oPERAtING ACtIvItIESCash utilised in operations 25 (38 117 ) (236 964 )

Taxation paid 26 (158 753 ) (211 220 )

Net cash outflow from operating activities (196 870 ) (448 184 )

CASh FloWS FRom INvEStING ACtIvItIESAcquisition of property and equipment (19 065 ) (53 051 )

Acquisition of intangible assets (7 352 ) (14 571 )

Proceeds from disposal of property and equipment 394 480

Proceeds from disposal of equity accounted investment 1 600 16 173

Net cash outflow from investing activities (24 423 ) (50 969 )

CASh FloWS FRom FINANCING ACtIvItIESProceeds from funding 3 699 977 1 399 500

Repayment of funding (3 387 877 ) (945 000 )

Funding provided to group companies – (19 495 )

Funding repaid by group companies 10 74 943

Decrease in amounts owing from group companies 81 503

Proceeds on disposal of interest rate swaps 14 233 –

Proceeds from share issue – 2 636 636

Share buy-back – (2 623 079 )

Net cash inflow from financing activities 326 424 524 008

Net increase in cash and cash equivalents 105 131 24 855

Cash and cash equivalents at beginning of the period 446 787 421 932

Cash and cash equivalents at end of the period 4 551 918 446 787


PASSIONATEAbOUT OUR CUSTOmERS& RETAIl


1. PRESENtAtIoN oF FINANCIAl StAtEmENtSThe holding company, RCS Investment Holdings Limited, is a

company domiciled in South Africa. The consolidated financial

statements as at and for the period ended 31 December 2015

comprise the company, its subsidiaries and its associates

(together referred to as the “RCS Group”). The company has

foreign subsidiaries operating in Namibia and Botswana.

The consolidated financial statements are prepared in

accordance with International Financial Reporting Standards

(IFRS) and the requirements of the Companies Act of South

Africa. The accounting policies have been consistently

applied with those adopted in the prior financial period.

During the current financial period, the financial year has

changed from 31 March to 31 December to align with the

reporting requirements of the shareholder. The current

period financial results are therefore only representative of

a 9 month period. The current and prior period results are

therefore not comparable.

1.1 Basis of PreparationThe consolidated financial statements have been prepared

on the basis that the RCS Group is a going concern and on

the historical cost basis.

The consolidated financial statements were authorised for

issue by the board of directors on 22 April 2016.

1.2 Functional and Presentation CurrencyThese consolidated financial statements are presented in

South African Rands which is RCS Investment Holdings

Limited’s functional and presentation currency. All amounts

have been rounded to the nearest thousand, unless otherwise

indicated.

1.3 Basis of ConsolidationSubsidiariesThe financial statements of subsidiaries are prepared for a

consistent reporting period using consistent accounting policies.

Business CombinationBusiness combinations are accounted for using the acquisition

method as at the acquisition date, which is the date on which

control is transferred to the group.

The group controls an entity when the group is exposed to,

or has rights to, variable returns from its involvement with

the entity and has the ability to affect those returns through

its power over the entity. Subsidiaries are fully consolidated

from the date on which control is transferred to the group.

They are consolidated until the date that control ceases.

The group measures goodwill at the acquisition date as:

• thefairvalueoftheconsiderationtransferred;plus

• therecognisedamountofanynon-controlling interest in

the acquiree; plus

• ifthebusinesscombinationisachievedinstages,thefair

value of the pre-existing equity interest in the acquiree; less

• the net recognised amount (generally fair value) of the

identifiable assets acquired and liabilities assumed.

When the excess is negative, a gain on bargain purchase is

recognised immediately in the income statement.

The consideration transferred does not include amounts

related to the settlement of pre-existing relationships. Such

amounts generally are recognised in profit or loss.

Transaction costs, other than those associated with the issue

of debt or equity securities, that the group incurs in connection

with a business combination are expensed as incurred.

Any contingent consideration payable is measured at fair

value at the acquisition date. If the contingent consideration is

classified as equity it is not remeasured. Otherwise, subsequent

changes in the fair value of the contingent consideration are

recognised in profit or loss.

ACCOUNTING POlICIES


ACCOUNTING POlICIES (continued)



1.3 Basis of Consolidation (continued)loss of controlOn the loss of control, the RCS Group derecognises the

assets and liabilities of the subsidiary, any non controlling

interest and the other components of equity related to the

subsidiary. Any surplus or deficit arising on the loss of

control is recognised in the income statement.

Investment in associatesAn associate is an entity over which the RCS Group has

significant influence and which is neither a subsidiary nor

a joint arrangement. Significant influence is the power to

participate in the financial and operating policy decisions of the

investee but is not control or joint control over those policies.

An investment in associate is accounted for using the equity

method, except when the investment is classified as held for

sale in accordance with IFRS 5 Non-current assets held-for-

sale and discontinued operations. Under the equity method,

investments in associates are carried in the consolidated

statement of financial position at cost adjusted for post

acquisition changes in the group’s share of net assets of the

associate, less any impairment losses.

Losses in an associate in excess of the RCS Group’s interest in

that associate are recognised only to the extent that the RCS

Group has incurred a legal or constructive obligation to make

payments on behalf of the associate.

Any goodwill on acquisition of an associate is included in

the carrying amount of the investment, however, a gain

on acquisition is recognised immediately in the income

statement.

Profits or losses on transactions between the RCS Group and

an associate are eliminated against the investment to the

extent of the RCS Group’s interest therein.

When the RCS Group reduces its level of significant influence

or loses significant influence, the RCS Group proportionately

reclassifies the related items which were previously

accumulated in equity through other comprehensive income

to profit or loss as a reclassification adjustment. In such cases,

if an investment remains, that investment is measured to fair

value, with the fair value adjustment being recognised in

profit or loss as part of the gain or loss on disposal.

Jointly controlled operationsA jointly controlled operation is a joint arrangement carried

on by each operator using its own assets in pursuit of the

joint operations. The consolidated financial statements

include the assets that the RCS Group controls and the

liabilities that it incurs in the course of pursuing the joint

operation, and the expenses that the RCS Group incurs and

its share of the income that it earns from the joint operation.

Jointly controlled venturesA joint venture is a joint arrangement whereby the joint

venturers that have joint control of the arrangement, have

rights to the net assets of the arrangement. A joint venturer

shall recognise its interest in a joint venture as an investment

and shall account for the investment by applying the equity

method.

1.4 use of Estimates and JudgementsThe preparation of consolidated financial statements

in conformity with IFRS, requires management to make

judgements, estimates and assumptions that may affect

the application of policies and reported amounts of assets

and liabilities, income and expenses. The estimates and

associated assumptions are based on historical experience

and various other factors that are believed to be reasonable

under the circumstances, the results of which form the basis

of making the judgements about carrying values of assets and

liabilities that are not readily apparent from other sources.

Actual results may differ from these estimates.


1.4 use of Estimates and Judgements (continued)The estimates and underlying assumptions are reviewed

on an ongoing basis. Revisions to accounting estimates are

recognised in the period in which the estimate is revised if

the revision only affects that period, or in the period of the

revision and future periods if the revision affects both current

and future periods.

Estimates and judgements made in applying the RCS Group’s

accounting policies, that potentially have a significant effect

on the amounts recognised in the consolidated financial

statements relate to the following:

(a) Card and loan receivables are disclosed net of any

accumulated impairment losses and future recoveries.

The calculation of the impairment amount is performed

using the internationally-recognised Markov model.

The Markov model uses delinquency roll rates on

customer balances to determine the inherent bad debt in

a receivables’ book. The directors believe that the card

and loan receivables balances are being measured fairly.

(b) The RCS Group reviews the goodwill for impairment

at least annually or when events or changes in

economic circumstances indicate that impairment may

have taken place. Impairment reviews are performed by

projecting future cash flows, based upon budgets and plans

and making appropriate assumptions about rates of

growth and discounting these using a rate that takes into

account prevailing market interest rates and the risks

inherent in the business. If the present value of the

projected cash flows is less than the carrying value of the

underlying net assets and goodwill, an impairment charge

is required to be recognised in the income statement.

This calculation requires the exercise of significant

judgment by management, if the estimates prove to

be incorrect or performance does not meet expectations,

which affects the amount and timing of future cash flows

and goodwill may become impaired in future periods.

Goodwill is disclosed in note 10.

1.5 Segmental ReportingAn operating segment is a component of the RCS 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. Operating segments’ operating results

are reviewed regularly by the board, identified as the chief

operating decision-maker, to make decisions about resources

to be allocated to the segment and assess its performance and

for which internal financial information is available.

Segment results that are reported to the board include items

directly attributable to a segment as well as those that can be

allocated on a reasonable basis.

Segment capital expenditure is the total cost incurred during

the period to acquire equipment and intangible assets.

Amounts reported in the group segmental analysis are

measured in accordance with International Financial

Reporting Standards.

Inter-segment pricing is determined on an arm’s length basis.

1.6 Financial InstrumentsA financial instrument is recognised when the RCS Group

becomes a party to the contractual provisions of the instrument.

Financial assets are derecognised if the RCS Group’s

contractual rights to the cash flows from the financial assets

expire or if the RCS Group transfers the financial asset to

another party without retaining control or substantially all

risks and rewards of the asset. Regular way purchases and

sales of financial assets are accounted for at trade date, being

the date that the RCS Group commits itself to purchase or

sell the asset. Financial liabilities are derecognised if the RCS

Group’s obligations specified in the contract expire or are

discharged or cancelled.






1.6 Financial Instruments (continued)Non-derivative financial instrumentsNon-derivative financial instruments recognised on the statement

of financial position include cash and cash equivalents, card, loan

and other receivables, funding, amounts owing from and to group

companies and trade and other payables.

Initial measurement

Financial instruments are initially recognised at fair value. For

those instruments not measured at fair value through profit

or loss, directly attributable transaction costs are included on

initial measurement.

Subsequent to initial recognition, these instruments are

measured as set out below:

Cash and cash equivalents

Cash and cash equivalents comprises cash on hand and

amounts held on deposit at financial institutions. Cash is

measured at amortised cost less impairment losses by using

the effective interest method.

Card and loan receivables

Card and loan receivables are classified as loans and other

receivables and are measured at amortised cost using the

effective interest method, less accumulated impairment

losses. An impairment allowance is made for card and

loan receivables which are estimated to be impaired at the

reporting date. This impairment allowance is estimated as

discussed in note 1.4.

Other receivables

Other receivables are carried at amortised cost using the effective

interest rate method less accumulated impairment losses.

Financial liabilities measured at amortised cost

Non-derivative financial liabilities including interest-bearing

funding and trade and other payables are recognised at

amortised cost comprising original debt less principal

repayments and amortisation.

Derivative financial instrumentsThe RCS Group uses derivative financial instruments to hedge

its exposure to interest rate risks arising from operational,

financing and investment activities. In accordance with

its treasury policy, the RCS Group does not hold or issue

derivative financial instruments for trading purposes.

Derivative financial instruments are subsequently measured

at fair value, with the gain or loss on remeasurement being

recognised immediately in the income statement. However,

where derivatives qualify for hedge accounting, recognition

of any gain or loss depends on the nature of the hedge (refer

to hedge accounting policy note).

The fair value of interest rate swaps is the estimated amount

that the RCS Group would receive or pay to terminate the

swap at the reporting date, taking into account current

interest rates and the current creditworthiness of the swap

counterparties.

Cashflow hedge accountingChanges in the fair value of a derivative hedging instrument

designated as a fair value hedge are recognised in the income

statement. The hedged item is adjusted to reflect changes

in its fair value in respect of the risk being hedged; the gain

or loss attributable to the hedged risk is recognised in the

income statement with an adjustment to the carrying amount

of the hedged item.

To the extent that they are effective, gains and losses from

remeasuring the hedging instruments relating to a cash

flow hedge to fair value are initially recognised directly in

other comprehensive income and presented in the hedging

reserve in equity. If the hedged firm commitment or forecast

transaction results in the recognition of a non-financial

asset or liability, the cumulative amount recognised in other

comprehensive income up to the transaction date is adjusted

against the initial measurement of the asset or liability. For

other cash flow hedges, the cumulative amount recognised


1.6 Financial Instruments (continued)Cashflow hedge accounting (continued)in other comprehensive income is included in the income

statement in the period when the hedged item affects the

income statement. The ineffective portion of any gain or loss

is recognised immediately in the income statement.

Where the hedging instrument or hedge relationship is

terminated but the hedged transaction is still expected to

occur, the cumulative unrealised gain or loss at that point

remains in equity and is recognised in accordance with the

above policy when the transaction occurs. If the hedged

transaction is no longer expected to occur, the cumulative

unrealised gain or loss is recognised in the income statement

immediately.

offsetFinancial assets and financial liabilities are offset and the

net amount reported in the statement of financial position

when the RCS Group has a legally enforceable right to set

off the recognised amounts, and intends either to settle on

a net basis, or to realise the asset and settle the liability

simultaneously.

1.7 Property and EquipmentRecognition and measurementItems of property and equipment are measured at cost less

accumulated depreciation and accumulated impairment losses.

Cost includes expenditure that is directly attributable to the

acquisition of the asset. Purchased software that is integral

to the functionality of the related equipment is capitalised as

part of that equipment.

When parts of an item of property and equipment have

different useful lives, they are accounted for as separate items

(major components) of property and equipment.

Gains and losses on disposal of an item of property and

equipment are determined by comparing the proceeds from

disposal with the carrying amount of property and equipment

and are recognised net within “operating costs” in the income

statement.

Subsequent costsThe cost of replacing part of an item of property and

equipment is recognised in the carrying amount of the item

if it is probable that the future economic benefits embodied

within the part will flow to the RCS Group and its cost can

be measured reliably. The carrying amount of the replaced

part is derecognised. The costs of the day-to-day servicing

of property and equipment are recognised in the income

statement as incurred.

DepreciationDepreciation is recognised in the income statement on a

straight-line basis over the estimated useful lives of each part

of an item of property and equipment.

The estimated depreciation rates for the current and

comparative periods are as follows:

– Computer hardware 33%

– Furniture and fittings 16% - 20%

– Leasehold property 10%

– Motor vehicles 20%

Depreciation methods, useful lives and residual values are

reviewed at each reporting date.

Depreciation of an item of property and equipment

commences when the item is available for use.

1.8 Reinsurance Contract issued in Cell Captive Arrangement

In-substance reinsurance contracts issued are those contracts

that transfer significant insurance risk from the insurer to the

respective company in a cell captive arrangement.






Insurance premiumsInsurance premiums received or receivable from the insurer

are recognised in the income statement when incurred.

ClaimsClaims incurred and reported are recognised in the income

statement when the loss events occur. Claims incurred but not

yet reported are estimated for compensation payable to the

insured and are recognised in the income statement.

Amount receivable from insurerThe amount receivable from the insurer is initially recognised at

the amount paid for the ordinary shares issued by the insurer.

The amount receivable from the insurer represents the right

to the residual interest in the cell captive and is after initial

recognition measured based on the net asset position of the

cell captive at the end of the reporting period. This amount is

reduced by dividends declared by the insurer.

The amount receivable from the insurer is assessed for

impairment at each reporting period. If there is objective

evidence that the amount receivable is impaired, the carrying

amount of the reinsurance asset is reduced to its recoverable

amount. The impairment loss is recognised in the income

statement.

1.9 GoodwillGoodwill is measured at cost less any accumulated impairment

losses. Goodwill is allocated to cash-generating units and is

not amortised, but tested annually for impairment and when

there is an indication of impairment.

1.10 Intangible AssetsIntangible assets that are acquired by the Group, which have

finite useful lives, are measured at cost less accumulated

amortisation and accumulated impairment losses.

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

the income statement as incurred.

Expenditure on research activities is recognised as an

expense in the period in which it is incurred. An internally-

generated intangible asset arising from development (or from

the development phase of an internal project) is recognised if,

and only if, all of the following have been demonstrated:

• theintentiontocompletetheintangibleassetanduseorsellit;

• theabilitytouseorselltheintangibleasset;

• how the intangible asset will generate probable future

economic benefits;

• the availability of adequate technical, financial and

other resources to complete the development and to use

or sell the intangible asset;

• theabilitytomeasurereliablytheexpenditureattributable

to the intangible asset during its development; and

• thetechnicalfeasibilityofcompletingtheintangibleasset.

The amount initially recognised for internally-generated

intangible assets is the sum of the expenditure incurred

from the date when the intangible asset first meets the

recognition criteria listed above. Where no internally-

generated intangible asset can be recognised, development

expenditure is recognised in the income statement in

the period in which it is incurred. Subsequent to initial

recognition, internally-generated intangible assets are

reported at cost less accumulated amortisation and

accumulated impairment losses, on the same basis as

intangible assets acquired separately.

Client listsClient lists acquired by the RCS Group are stated at historical

cost less accumulated amortisation and impairment losses.


1.10 Intangible Assets (continued)Client lists (continued)Amortisation is recognised in the income statement on a

straight-line basis over the estimated useful lives of the client

lists. The annual rate for the amortisation is 20%.

Computer softwareComputer software acquired by the RCS Group is stated at

historical cost less accumulated amortisation and impairment

losses. Amortisation is recognised in the income statement

on a straight-line basis over the estimated useful lives of

intangible assets. The annual rate for the amortisation is 33%.

The above amortisation rates are consistent with the

comparative period. Amortisation methods, useful lives and

residual values are reassessed at each reporting date.

1.11 ImpairmentNon-derivative financial assetsA financial asset not classified as at fair value through profit or

loss is assessed at each reporting date to determine whether

there is any objective evidence that it is impaired. A financial

asset is considered to be impaired if objective evidence

indicates that one or more events have had a negative effect

on the estimated future cash flows of that asset, that can be

reliably measured.

An impairment loss in respect of a financial asset measured

at amortised cost is calculated as the difference between its

carrying amount and the present value of the estimated future

cash flows discounted at the original effective interest rate.

Individually significant financial assets are tested for

impairment on an individual basis. Those found not to be

specifically impaired are then collectively assessed for any

impairment that has been incurred but not yet identified.

Assets that are not individually significant are collectively

assessed for impairment by grouping together assets with

similar credit risk characteristics.

All impairment losses are recognised in the income statement.

An impairment loss is reversed if the reversal can be related

objectively to an event occurring after the impairment loss

was recognised. For financial assets measured at amortised

cost the reversal is recognised in the income statement.

Non-financial assetsThe carrying values of the RCS Group’s non-financial

assets, other than deferred tax assets, are reviewed at each

reporting date to determine whether there is any indication

of impairment. If any such indication exists then the asset’s

recoverable amount is estimated. For goodwill and intangible

assets that have indefinite useful lives or that are not yet

available for use, the recoverable amount is estimated at each

reporting date.

An impairment loss is recognised if the carrying amount of

an asset or its cash-generating unit exceeds its recoverable

amount. A cash-generating unit is the smallest identifiable

asset group that generates cash flows that are largely

independent from other assets and groups. Impairment losses

are recognised in the income statement. Impairment losses

recognised in respect of cash-generating units are allocated

first to goodwill and then to reduce the carrying amount of the

other assets in the unit (group of units) on a pro rata basis.

The recoverable amount of an asset or cash-generating unit

is the greater of its value in use and its fair value less costs

to sell. In assessing value in use, the estimated future cash

flows are discounted to their present value using a pre-tax

discount rate that reflects current market assessments of the

time value of money and the risks specific to the asset.

An impairment loss in respect of goodwill is not reversed. In

respect of other assets, impairment losses recognised in prior

periods are assessed at each reporting date for any indications

that the loss has decreased or no longer exists. An impairment

loss is reversed if there has been a change in the estimates

used to determine the recoverable amount. An impairment

loss is reversed only to the extent that the asset’s carrying






amount does not exceed the carrying amount that would have

been determined, net of depreciation or amortisation, if no

impairment loss had been recognised.

1.12 Stated Capital and ReservesStated capitalOrdinary shares are classified as equity. Incremental costs directly

attributable to the issue of ordinary shares are recognised as a

deduction from equity, net of any taxation effects.

Foreign currency translation reserveGains and losses arising on translation of the assets, liabilities,

income and expenses of foreign operations are recognised

directly in equity as a foreign currency translation reserve.

Cash flow hedge reserveA non-distributable reserve arises as a result of the application

of hedge accounting gains or losses on interest rate swaps.

1.13 DividendsDividends and the related withholdings tax are accounted

for in the period when the dividend is declared. Dividends

declared on equity instruments after the reporting date, and

the related withholding taxation thereon, are accordingly

not recognised as liabilities at the reporting date.

1.14 Interest earnedRevenue comprises interest income. Interest is recognised

on a time-proportion basis taking account of the principal

outstanding and the effective interest rate over the period

to maturity, when it is probable that such income will accrue

to the RCS Group.

1.15 Interest expenseInterest expense comprises interest which has been incurred

on borrowings. All borrowing costs are recognised in the

income statement.

1.16 other incomeClub incomeClub income is recognised in the income statement when due.

Collection incomeCollection income is recognised in the income statement

when due.

Net insurance premiumsInsurance premiums are recognised, net of claims, in the

income statement when due.

merchant commission incomeMerchant commission income is recognised when the related

transaction on which the commission is earned has been

concluded.

Service and initiation fee incomeService and initiation fee income are recognised in the income

statement when due.

1.17 operating leaseLeases where the lessor retains the risks and rewards of

ownership of the underlying asset are classified as operating

leases. Payments made under operating leases are recognised

in the income statement on a straight-line basis over the term

of the lease.

1.18 taxationIncome taxation expense comprises current and deferred

taxation.

Income taxation expense is recognised in the income

statement except to the extent that it relates to a transaction

that is recognised directly in other comprehensive income or in

equity, in which case it is recognised in other comprehensive

income or equity as appropriate.


1.18 taxation (continued)Current taxation is the expected taxation payable/receivable,

calculated on the basis of taxable income for the period,

using the taxation rates enacted or substantively enacted at

the reporting date, and any adjustment of taxation payable/

receivable for previous periods.

Deferred taxation is recognised in respect of temporary

differences between the taxation base of an asset or liability

and its carrying amount. Deferred taxation is not recognised

for the following temporary differences: the initial recognition

of goodwill; the initial recognition of assets and liabilities

in a transaction that is not a business combination and that

affects neither accounting nor taxable profit; and temporary

differences relating to investments in subsidiaries to the

extent that they probably will not reverse in the foreseeable

future. Deferred taxation is measured at the taxation rates

that are expected to be applied to temporary differences when

they reverse, based on the laws that have been enacted or

substantively enacted by the reporting date.

Deferred taxation assets are recognised for all deductible

temporary differences and assessed losses to the extent that

it is probable that taxable profit will be available against

which such deductible temporary differences and assessed

losses can be utilised. Deferred taxation assets are reviewed

at each reporting date and are reduced to the extent that it is

no longer probable that the related taxation benefit will be

realised.

Deferred taxation assets and liabilities are off-set if there is a

legally enforceable right to off-set current taxation liabilities

and assets, and they relate to income taxes levied by the

same taxation authority on the same taxable entity, or on

different tax entities, but they intend to settle current taxation

liabilities and assets on a net basis, or their taxation assets

and liabilities will be realised simultaneously.

1.19 Employee benefitsShort-term employee benefitsThe cost of all short-term employee benefits are recognised

in the income statement during the period in which the

employee renders the related service.

The accruals for employee entitlements to wages, salaries,

annual and sick leave represent the amount which the

RCS Group has a present obligation to pay as a result of

employees’ services provided to the reporting date. The short-

term benefits have been calculated at undiscounted amounts

based on current wage and salary rates.

Defined contribution plansThe holding company and its subsidiaries contribute to

several defined contribution plans.

Post-employment benefits

A defined contribution plan is a post-employment benefit plan

under which an entity pays fixed contributions into a separate

entity and will have no legal or constructive obligation

to pay further amounts. Obligations for contributions to

defined contribution pension, provident and retirement

funds are recognised as an employee benefit expense in the

income statement as the related service is provided. Prepaid

contributions are recognised as an asset to the extent that

cash refund or a reduction in future payments is available.

medical aid schemes

The RCS Group contributes to medical aid schemes for the

benefit of permanent employees and their dependants.

The contributions to the schemes are recognised in the

consolidated income statement as the related service is

provided.






1.20 Foreign CurrenciesForeign currency transactionsTransactions in currencies other than the entity’s functional

currency are translated at the rates of exchange ruling on the

transaction date.

Monetary assets and liabilities denominated in such currencies

are translated at the rates ruling at the reporting date.

Non-monetary assets and liabilities denominated in such

currencies are translated using the exchange rate at the date

of the transaction.

Foreign currency gains and losses arising on translation are

recognised in the income statement.

Foreign operationsAs at the reporting date, the assets and liabilities of foreign

operations, including goodwill and fair value adjustments

arising on acquisition, are translated into the presentation

currency of the group at the rate of exchange ruling at the

reporting date and the income and expenses are translated

at the exchange rates at the dates of the transactions or the

average rates if it approximates the actual rates.

Gains and losses arising on translation of the assets, liabilities,

income and expenses of foreign operations are recognised in

other comprehensive income, and presented in the foreign

currency translation reserve in equity.

DElIvERING INNOvATIvE,

UNCOmPlICATED SOlUTIONS fOR

OUR CUSTOmERS

NOTES TO ThE CONSOlIDATED fINANCIAl STATEmENTS



2. NEW StANDARDS AND INtERPREtAtIoNS2.1 Standards and Interpretations not yet effective

There are standards and interpretations in issue that are

not yet effective. These include the following standards and

interpretations that are applicable to the company and may

have an impact on future financial statements:

Disclosure Initiative (Amendments to IAS 1)The amendments provide additional guidance on the

application of materiality and aggregation when preparing

financial statements. The amendments apply for annual periods

beginning on or after 1 January 2016 and early application is

permitted.

This amendment is not expected to impact the RCS Group.

IFRS 9 Financial InstrumentsIFRS 9 (2009) introduces new requirements for the

classification and measurement of financial assets. Under

IFRS 9 (2009), financial assets are classified and measured

based on the business model in which they are held and

the characteristics of their contractual cash flows. IFRS 9

(2010) introduces additions relating to financial liabilities.

In addition, the IFRS 9 impairment model has been changed

from an “incurred loss” model in IAS 39 to an “expected loss”

model. The final version of IFRS 9 was issued in July 2014 and

applies to an annual reporting period beginning on or after 1

January 2018 with retrospective application.

The RCS Group, with the assistance of the ultimate shareholder,

is currently doing an impact analysis for the group.

IFRS 15 Revenue from Contracts with CustomersIFRS 15 specifies how and when an entity will recognise

revenue as well as requiring such entities to provide users

of financial statements with more informative, relevant

disclosures. The standard contains a single model that applies

to contracts with customers and two approaches to recognising

revenue: at a point in time or over time. The model features a

contract-based five-step analysis of transactions to determine

whether, how much and when revenue is recognised. The

standard is effective for annual periods beginning on or after

1 January 2017.

The impact on the financial statements for the RCS Group is

not considered to be material.

IFRS 16 leasesIFRS 16 sets out the principles for the recognition,

measurement, presentation and disclosure of leases for

both parties to a contract, ie the customer (‘lessee’) and

the supplier (‘lessor’). IFRS 16 replaces the previous leases

Standard, IAS 17 Leases, and related Interpretations. IFRS 16

has one model for lessees which will result in almost all leases

being included on the Statement of Financial position.

The standard is effective for annual periods beginning on or

after 1 January 2019, with early adoption permitted only if the

entity also adopts IFRS 15.

The RCS Group is assessing the potential impact on the

financial statements resulting from the application of IFRS 16.


3. oPERAtING SEGmENtSThe RCS Group has two reportable segments, as described

below, which are the RCS Group’s strategic business units. The

strategic business units offer different products and services,

and are managed separately because they require different

technology and marketing strategies. For each strategic

business unit, the RCS Group’s board reviews internal

management reports on a monthly basis. The following

summary describes the operations in each of the RCS Group’s

reportable segments:

• Cards segment - a general utility and private label card

product offered to consumers, delivered via participating

merchant outlets in South Africa, Namibia and Botswana

and their related insurance products.

• Loans segment - short and medium-term loans offered

to consumers and related insurance products provided

to individuals.

• All other segments includes RCS Investment Holdings

Limited, RCS Home Loans Proprietary Limited, RCS

Collections Proprietary Limited and once-off corporate costs.

– RCS Investment Holdings Limited acts as the external

funding vehicle for the RCS Group. Commercial paper

and bonds are issued via this entity (see note 17).

– RCS Home Loans Proprietary Limited operations include

the servicing of current home loans.

– RCS Collections Proprietary Limited is a registered

debt collector.

– None of these segments meets any of the quantitative

thresholds for determining reportable segments in the

current or previous financial periods. The RCS

Group’s external customers and assets are

predominantly situated in South Africa, and no single

customer comprises 10% or more of revenue for the

RCS Group.

The accounting policies of the reportable segments are the

same as described in note 1.

NOTES TO ThE CONSOlIDATED fINANCIAl STATEmENTS (continued)





3. oPERAtING SEGmENtS (continued)Information regarding the results of each reportable segment

is included below. Certain costs including back office services

have not been allocated between the divisions for internal

reporting purposes. Performance is measured based on

segment profit before income tax, as included in the internal

Cards loans other total31 December 2015 R’000 R’000 R’000 R’000

Interest earned 837 217 222 910 – 1 060 127

Interest expense (197 487 ) (42 352 ) 4 419 (235 420 )

Net interest income 639 730 180 558 4 419 824 707

Inter-segmental credit income – – 17 370 17 370

Other income 438 335 87 177 864 526 376

Profit / (loss) before taxation 283 339 103 191 (108 716 ) 277 814

Depreciation and amortisation (16 761 ) (5 081 ) – (21 842 )

Capital expenditure 23 133 4 304 – 27 437

Segment assets 5 802 950 1 079 749 65 674 6 948 373

Segment liabilities (3 779 136 ) (703 180 ) (46 564 ) (4 528 880 )

31 March 2015

Interest earned 948 692 312 388 – 1 261 080

Interest expense (217 389 ) (55 705 ) 1 750 (271 344 )

Net interest income 731 303 256 683 1 750 989 736

Inter-segmental credit income – – 22 011 22 011

Other income 537 916 123 060 13 885 674 861

Share of profit from equity accounted investments – – 1 977 1 977

Profit / (loss) before taxation 324 234 186 459 (70 330 ) 440 363

Depreciation and amortisation (13 042 ) (6 016 ) – (19 058 )

Capital expenditure 55 286 12 336 – 67 622

Segment assets 5 133 251 1 145 417 47 800 6 326 468

Segment liabilities (3 312 641 ) (739 165 ) (49 674 ) (4 101 480 )

management reports that are reviewed by the RCS Group’s

board. Segment profit is used to measure performance as

management believes that such information is the most

relevant in evaluating the results of certain segments relative

to other entities that operate within these industries.


31 December 2015 31 March 2015 R’000 R’000

4. CASh AND CASh EquIvAlENtSBank balances 551 915 446 786

Cash on hand 3 1

551 918 446 787

5. CARD AND loAN RECEIvABlESDemand to one month 593 487 505 062

One to three months 988 647 879 874

Three months to one year 2 787 832 2 437 701

More than one year 2 196 677 2 213 697

Gross card and loan receivables 6 566 643 6 036 334

Less: allowance for impaired card and loan receivables (604 695 ) (528 108 )

Net card and loan receivables 5 961 948 5 508 226

Analysis of card and loan receivables by typeCard and private label receivables 5 066 143 4 544 436

Personal loans receivables 895 805 963 790

5 961 948 5 508 226

General card and private label receivables consist of a number of individual unsecured revolving card accounts as well as

amounts due for services delivered on credit. The accounts attract variable and fixed interest rates and terms vary from

revolving to 36 months. The average effective interest rate for the period under review is 21.24% (31 March 2015: 20.86%).

Personal loan receivables are comprised of a number of individual unsecured loans. The personal loans are charged at fixed

interest rates and terms vary from 12 to 60 months. The interest rate on each loan is determined when the loan is initially

advanced on the basis of the risk profile of the customer. The average effective interest rate for the period under review is

28.52% (31 March 2015: 29.07%).

The RCS Group’s management of, and exposure to, market and credit risk is disclosed in note 30.






5. CARD AND loAN RECEIvABlES (continued)The RCS Group monitors the ageing of its card and loan receivables on a contractual basis. The ageing of net card and loan

receivables at the reporting date was as follows: 31 December 2015 31 March 2015 R’000 R’000

Not past due 5 002 089 4 525 127

Past due demand to one month 644 194 653 584

Past due one to two months 177 255 197 534

Past due two to three months 78 015 77 386

Past due more than three months 60 395 54 595

5 961 948 5 508 226

The movement in the allowance for impairment in respect of card and loan receivables during the period was as follows:

Balance at beginning of period 528 108 465 523

Allowance for impairment raised 427 163 506 265

Impairment loss recognised (350 576 ) (443 680 )

Balance at end of period 604 695 528 108

As percentage of gross card and loan receivable book 9.21% 8.75%

Customers that are not past due and have a good track record with the RCS Group make up 76.23% of gross card and loan

receivables (31 March 2015: 74.33%).

Geographical concentration of customersThe RCS Group’s operating activities are situated in the South Africa, Namibia and Botswana. The geographical concentration

of gross card and loan receivables at the reporting date was as follows:

31 December 2015 31 March 2015

Botswana 1.18% 1.30%

Eastern Cape 5.58% 5.54%

Free State 4.22% 4.23%

Gauteng 35.08% 35.22%

KwaZulu-Natal 13.67% 13.48%

Limpopo 4.37% 4.37%

Mpumalanga 12.35% 12.01%

Namibia 1.12% 1.57%

North West 2.82% 2.74%

Northern Cape 2.49% 2.41%

Western Cape 17.12% 17.13%

100.00% 100.00%



6. othER RECEIvABlESOther receivables 3 117 12 266

Prepayments 8 508 5 772

11 625 18 038

7. AmouNt RECEIvABlE FRom INSuRERThe Group retails insurance products to customers. The principal risk that the insurance cells face is that the actual claims

and benefit payments, or the timing thereof, differ from expectations. This is influenced by the frequency of claims, severity

of claims, actual benefits paid and subsequent development of long-term claims. Therefore, the objective of the cells is to

ensure that sufficient reserves are available to cover these potential liabilities. The Group acts as intermediary between the

Cell Insurer and the RCS customers.

The risk structure per product is as follows:

Guardrisk Insurance Company limited (RCS Cards Proprietary limited Cell no. 160)The RCS Group sells short-term income protection insurance on behalf of Guardrisk to its customers. The RCS Group bears

100% of the re-insurance risk for all products.

Guardrisk life (RCS Cards Proprietary limited Cell no. 78)The RCS Group sells long-term insurance policies with death benefits on behalf of Guardrisk to its customers. The RCS Group

bears 100% of the re-insurance risk for all products.

The re-insurance asset consists of the following components:

Reconciliation of amount receivable from insurerBalance at beginning of period 94 919 88 552

Increase based on the shareholders funds of the cell captive 83 930 104 705

Dividend received from the insurer (83 999 ) (98 338 )


The balance at the end of the period comprises:

Cash and cash equivalents 120 446 134 762

Other receivables 14 769 13 375

Trade and other payables (18 889 ) (23 771 )

Taxation payable (21 476 ) (29 447 )

94 850 94 919







8. PRoPERty AND EquIPmENt 31 December 2015 31 March 2015

Accumulated Carrying Accumulated Carrying Cost depreciation value Cost depreciation value

R’000 R’000 R’000 R’000 R’000 R’000

Computer hardware 31 788 (19 099 ) 12 689 22 283 (15 025 ) 7 258

Furniture and fittings 60 795 (22 106 ) 38 689 64 803 (16 721 ) 48 082

Leasehold property 14 830 (1 609 ) 13 221 1 872 (534 ) 1 338

Motor vehicles 8 540 (4 648 ) 3 892 8 426 (2 134 ) 6 292

115 953 (47 462 ) 68 491 97 384 (34 414 ) 62 970

Reconciliation of carrying amounts: Carrying amount at Disposals/ Carrying amount beginning of period Additions transfers Depreciation at end of period

31 December 2015 R’000 R’000 R’000 R’000 R’000

Computer hardware 7 258 9 505 – (4 074 ) 12 689

Furniture and fittings 48 082 4 605 (8 457 ) (5 541 ) 38 689

Leasehold property 1 338 4 345 8 457 (919 ) 13 221

Motor vehicles 6 292 610 (366 ) (2 644 ) 3 892

62 970 19 065 (366 ) (13 178 ) 68 491

31 March 2015

Computer hardware 8 957 3 565 (1 ) (5 263 ) 7 258

Furniture and fittings 1 002 47 795 – (715 ) 48 082

Leasehold property 1 591 – – (253 ) 1 338

Motor vehicles 6 080 1 691 (613 ) (866 ) 6 292

17 630 53 051 (614 ) (7 097 ) 62 970

9. INtANGIBlE ASSEtS 31 December 2015 31 March 2015

Accumulated Carrying Accumulated Carrying Cost amortisation value Cost amortisation value

R’000 R’000 R’000 R’000 R’000 R’000

Client lists 1 980 (1 980 ) – 1 980 (1 980 ) –

Computer software 62 227 (38 105 ) 24 122 54 875 (29 441 ) 25 434

64 207 (40 085 ) 24 122 56 855 (31 421 ) 25 434


9. INtANGIBlE ASSEtS (continued) Reconciliation of carrying amounts: Carrying amount at Additions/ Carrying amount beginning of period transfers Disposals Amortisation at end of period

31 December 2015 R’000 R’000 R’000 R’000 R’000

Computer software 25 434 7 352 – (8 664 ) 24 122

25 434 7 352 – (8 664 ) 24 122

31 March 2015

Client lists 5 – – (5 ) –

Computer software 22 819 14 571 – (11 956 ) 25 434

22 824 14 571 – (11 961 ) 25 434


10. GooDWIllGoodwill 56 855 56 855

Goodwill acquired through business combinations has been allocated to three individual cash-generating units:


Cash-generating unitGeneral Purpose Card Division 12 917 12 917

Personal Loan Division 36 481 36 481

MDD Private Label Card Division 7 457 7 457

56 855 56 855

Goodwill is tested annually for impairment and once there is an indication of impairment. The recoverable amount of the cash-

generating units are based on the higher of the value in use, determined by a calculation which covers a five-year period, or the

fair value less costs to sell. The cash flows have been discounted at a rate of 11% (31 March 2015: 11%). Significant assumptions

applied when reviewing the goodwill impairment are that future profits were estimated using historical information and

approved budgets, anticipated growth in advances or turnover and expectations of future interest rates.

Based on this assessment management is of the opinion that for all of the cash-generating units the value in use exceeds the

carrying amount and therefore no impairment is recognised.







11. DEFERRED tAxAtIoNDeferred tax asset 172 629 91 019

172 629 91 019

Reconciliation of deferred tax asset:At beginning of the period 91 019 15 137

Income statement expense:

- Provisions 15 338 16 509

- Assessed loss 10 (109 )

- Capital allowances 750 71

- Allowance for impaired card and loan receivables 58 366 61 271

- Provision for recoveries 3 880 (8 735 )

- Unrealised gain (996 ) (105 )

Other comprehensive income

- Cash flow hedges 4 262 6 980


the balance at the end of period comprises temporary differences relating to:- Provisions 66 445 51 107

- Assessed loss 10 –

- Capital allowances 1 013 263

- Allowance for impaired card and loan receivables 141 137 82 771

- Provision for recoveries (34 529 ) (38 409 )

- Unrealised gains (1 447 ) (451 )

- Cash flow hedges transferred to profit or loss – (4 262 )

172 629 91 019

12. RElAtED PARtIES 31 December 2015 31 March 2015

ultimate shareholderBNP Paribas Société Anonyme 100% 100%

Amounts owing from group companyRedwood Third Party Processing Proprietary Limited – 81

– 81

Amounts owing from group company was unsecured, interest free and payable within 30 days of the invoice.

R’000 R’000



12. RElAtED PARtIES (continued)Funding owing from group companyOther receivables as disclosed in note 6 includes funding owing from the following group companies:

Redwood Third Party Processing Proprietary Limited – 10

– 10

The loan was denominated in Rands, bore interest at prime plus 1% and maturity was after three months to one year.

Related party transactionstransactions with BNP Paribas Société Anonyme Commitment fees (6 781 ) (5 893 )

transactions with Redwood third Party Processing Proprietary limitedInterest income – 201

Interest of directors in contractsNo directors directly or indirectly hold any shares in RCS Investment Holdings Limited. No directors have any interest in contracts

that are in contravention of section 75 of the Companies Act of South Africa.

loans to directorsNo loans have been made to directors.

Directors’ and key management compensationDirector emoluments

Executive fees 24 185 23 750

Key management compensationKey management personnel are those having authority and responsibility for planning, directing and controlling activities,

directly or indirectly, including any director of the RCS Group. Directors and executives of the RCS Group have been classified

as key management personnel. No key management personnel had a material interest in any contract of significance with any

group company during the period under review.

9 months ended 12 Months ended 31 December 2015 31 March 2015 R’000 R’000

Remuneration paid to key management personnel are as follows:Short-term benefits 40 112 42 035

Post-retirement benefits 1 623 2 001

Total remuneration 41 735 44 036







13. INvEStmENtS IN ASSoCIAtESThe RCS Group has the following equity investments, over which it exercised significant influence: Portion of Place of ownership incorporation interest and Principal Carrying Carrying and operation voting power held activity value value 31 December 2015 31 March 2015 R’000 R’000

Name of associates Redwood Third Party Consumer finance Processing Proprietary Limited South Africa 25% outsourcing – 2 386

– 2 386

The carrying amounts of associates were shown net of impairment losses and reversals.

During the current financial period the investment in Redwood was impaired with R786 thousand. The impairment is included

in note 23. Subsequent to the impairment, the investment in Redwood was sold for R1.6 million. No profit or loss was realised

on the sale.

The RCS Group’s share of the profit and loss was as follows:

Profit9 months ending 31 December 2015 R’000 Redwood Third Party Processing Proprietary Limited –

–

12 Months ending 31 March 2015

Redwood Third Party Processing Proprietary Limited 170

Retail Capital Proprietary Limited 1 807

1977


14. StAtED CAPItAlAuthorised

80 000 (31 March 2015: 80 000) Ordinary shares of no par value _ _

Issued

40 000 (31 March 2015: 40 000) Ordinary shares of no par value 2 636 636 2 636 636


9 months ended 12 Months ended 31 December 2015 31 March 2015

14. StAtED CAPItAl (continued)Reconciliation of number of sharesOpening balance 40 000 40 000

Share issue – 40 000

Share buy-back – (40 000 )

Closing balance 40 000 40 000

A distribution to shareholder amounting to R250 million was declared after the date of the reporting period but before

the financial statements were authorised for issue (31 March 2015: nil).

15. FoREIGN CuRRENCy tRANSlAtIoN RESERvEThe foreign currency reserve comprises gains and losses arising on translation of the assets, liabilities, income and expenses

of foreign operations in Botswana. 31 December 2015 31 March 2015 R’000 R’000


Foreign currency translation differences for foreign operation 7 625 (36)


16. CASh FloW hEDGE RESERvEThe cash flow hedge reserve comprises the effective portion of the cumulative net change in the fair value of cash flow hedging

instrument related to hedged transactions that have not yet occurred.


Effective portion of changes in fair value, net of taxation (712 ) (17 950 )

Disposal of cash flow hedge reserve, net of taxation (10 248 ) –

Balance at end of period – 10 960

Comprises as follows:

Interest rate swaps (assets) - fair value – 15 249

Interest rate swaps (liabilities) - fair value – (27 )

Total fair value of interest rate swaps – 15 222

Deferred taxation on interest rate swaps – (4 262 )

Total deferred taxation on interest rate swaps – (4 262 )

– 10 960

Interest rate swaps were disposed of during the year for R14,2 million. The reclassification of other comprehensive income

to profit or loss has been included in note 23.

Number of shares







17. FuNDINGBy maturityDemand to one month 2 700 109 000

One to three months 385 000 445 000

Three months to one year 1 150 000 775 000

More than a year 2 544 700 2 441 300

4 082 400 3 770 300

By natureDomestic medium-term note programme (a) 1 925 000 2 370 000

Term funding (b) 2 157 400 1 400 300

4 082 400 3 770 300

(a) The domestic medium-term notes are denominated in Rands, have a nominal value of R1,925 million (31 March 2015:

R2,370 million), are unsecured and bear interest at variable interest rates linked to 3 month JIBAR. Maturity as at the reporting

date is as follows: R500 million between three months and one year and R1,425 million after more than one year (31 March 2015:

R245 million within one to three months, and R500 million between three months and one year and R1,625 million after more than one year).

(b) Term funding is denominated in Rands, unsecured and bears interest at variable interest rates. Maturity as at the reporting

date is R2.7 million demand to one month, R385 million within one to three months, R650 million within three months

to one year and R1,119.7 million after more than one year (31 March 2015: R109 million demand to one month,

R200 million within one to three months, R275 million within three months to one year and R816.3 million after more than one year).

18. tRADE AND othER PAyABlESTrade and other payables 438 739 324 137

Leave pay accrual 4 585 4 374

VAT 3 156 2 642

446 480 331 153

19. oPERAtING lEASES, CommItmENtS AND CoNtINGENt lIABIlItIESoperating leasesThe RCS Group occupies the following properties:

liberty GrandeThis is a property leased from Precious Prospect Trading 50 Proprietary Limited effective 1 July 2014.

mowbray Business ParkThis is a property leased from Acucap Investments Proprietary Limited effective 1 November 2014.



19. oPERAtING lEASES, CommItmENtS AND CoNtINGENt lIABIlItIES (continued)operating leases (continued)The total future minimum lease payments under non-cancellable operating leases are as follows:

No later than 1 year 21 811 20 663

Between 1 and 5 years 53 456 53 654

Later than 5 years – 16 284

75 267 90 601

Capital commitmentsAuthorised 21 950 51 520

Committed 5 488 16 364

The group has sufficient funding to finance the authorised and committed capital commitments.

Contingent liabilitiesPerformance guarantee - SA Post Office 4 000 4 000


20. INtERESt EARNEDCard receivables 837 217 948 692

Loan receivables 222 910 312 388

1 060 127 1 261 080

21. othER INComEClub income 2 410 3 267

Collection income 39 874 50 275

Net insurance premiums 138 792 185 118

Merchant commission 53 015 62 605

Service and initiation fee income 287 707 354 406

Other income 4 578 19 190

526 376 674 861







22. CoSt oF RISKMovement in allowance for impaired card and loan receivables 74 795 63 469

Bad debts recovered (161 017 ) (182 326 )

Bad debts write-off 511 593 626 006

Movement in provision for future recoveries 13 964 (31 187 )

439 335 475 962

23. PRoFIt BEFoRE tAxAtIoNIncluded within profit before taxation are the following items:

Amortisation of intangible assets 8 664 11 961

Auditor’s remuneration - External 1 105 1 043

Consultancy fees 20 815 33 776

Depreciation of property and equipment 13 178 7 097

Donations 1 165 984

Foreign exchange loss 48 115

Legal fees 708 680

Impairment of investment in associate 786 –

(Profit) / loss on disposal of property and equipment (28 ) 134

Manpower costs

- Salaries 193 748 239 337

- Directors’ emoluments 24 185 23 750

Premises costs 35 292 28 860

Reclassification of cash flow hedge to profit 14 233 –

Profit on sale of investment in associate – 12 634

24. tAxAtIoNIncome taxation recognised in the income statement South African current taxation:

- Current period 155 402 197 659

- Prior period under provision – 1 460

Non-South African current taxation:

- Current period 1 613 3 327

- Prior period under provision – 776

- Withholdings taxation 307 346

Security transfer taxation

- Current period – 6 558

157 322 210 126



24. tAxAtIoN (continued) Income taxation recognised in the income statement (continued)

Deferred taxation:

- Current period (77 348 ) (68 902 )

(77 348 ) (68 902 )

79 974 141 224

Reconciliation of the taxation expenseStandard taxation rate 28.00% 28.00%

Non-South African taxation rate (0.22% ) (0.24% )

Non-deductible expenditure 0.90% 1.89%

Withholdings taxation 0.11% 0.08%

Prior period normal taxation under provision – 0.51%

Capital gains taxation – 0.34%

Securities transfer taxation – 1.49%

Current period’s charge as a percentage of profit before taxation 28.79% 32.07%

25. CASh utIlISED IN oPERAtIoNSProfit before taxation 277 814 440 363

Adjustments for:

- Amortisation of intangible assets 8 664 11 961

- Depreciation of property and equipment 13 178 7 097

- (Profit) / loss on disposal of equipment (28 ) (134 )

- Share of profit from equity accounted investments – (1 977 )

- Foreign currency exchange differences 7 625 (36 )

- Impairment of investment in associate 786 –

- Profit on sale of investment – (12 634 )

- Profit on sale of interest rate swaps (14 233 ) –

Changes in working capital:

- Increase in card and loan receivables (453 722 ) (763 222 )

- Decrease in other receivables 6 403 11 182

- Decrease / (increase) in amount receivable from cell insurer 69 (6 367 )

- Increase in trade and other payables 115 327 76 535

(38 117 ) (236 964 )







26. tAxAtIoN PAIDTaxation receivable at beginning of period 4 504 3 410

Current taxation charge (157 322 ) (210 126 )

Taxation receivable at end of period (5 935 ) (4 504 )

(158 753 ) (211 220 )

27. SuBSIDIARIESDetails of the RCS Group’s subsidiaries at 31 December 2015 are as follows: Portion of Place of ownership incorporation Registration interest and Principal and operation number voting power held activity

Name of subsidiary RCS Botswana Proprietary Limited Botswana 2008/3191 100% Retail credit

RCS Cards Proprietary Limited South Africa 2000/017891/07 100% Retail credit

RCS Collections Proprietary Limited South Africa 2008/002800/07 100% Collections

RCS Home Loans Proprietary Limited South Africa 2005/020504/07 100% Home Loans

RCS Investment Holdings Namibia Proprietary Limited Namibia 2008/0136 100% Retail credit

RCS Personal Finance Proprietary Limited South Africa 1968/008240/07 100% Dormant

28. INtERESt IN JoINt oPERAtIoNSRCS Home Loans Proprietary Limited, a 100% held subsidiary of RCS Investment Holdings Limited, has entered into a joint

operation partnership with SA Home Loans Proprietary Limited. A summary of the results of the joint operation for the current

and prior financial periods are as follows: 31 December 2015 31 March 2015

Proportion of ownership interest and voting power held 50% 50%

R’000 R’000

Current assets 21 732 28 893

Current liabilities 18 094 23 459

Income 1 774 4 784

Expenditure 4 204 4 449

29. EmPloyEE BENEFItS Retirement funds

Alexander Forbes Retirement Annuity: Defined contribution plan All permanent employees of RCS Botswana Proprietary Limited under normal retirement age are required to be members of

the Alexander Forbes Retirement Annuity. The employees and the employers make equivalent contributions in respect of the

retirement annuity benefits. In addition, the employers contribute to death and disability benefits, reinsurance, and administration

and management costs.


29. EmPloyEE BENEFItS (continued) Retirement funds (continued)

liberty life Pension Fund: Defined contribution plan All employees of the Massdiscounters credit business were transferred to the Liberty Life Pension Fund. The employees and the

employers make equivalent contributions in respect of pension fund benefits. In addition, the employers contribute to death and

disability benefits, reinsurance, and administration and management costs.

liberty life Provident Fund: Defined contribution plan The Liberty Life Provident Fund, which is governed by the provisions of the Pension Funds Act No. 24 of 1956, is a defined

contribution plan. It provides comprehensive retirement and associated benefits for members and their dependants. All permanent

employees of RCS Group, excluding those that are employed by RCS Botswana Proprietary Limited and RCS Namibia Proprietary

Limited, are members of the provident fund. The employer pays 14% contributions in respect of provident fund benefits. In

addition, the employers contribute to death and disability benefits, reinsurance, and administration and management costs.

Sanlam Retirement Annuity: Defined contribution plan All permanent employees of RCS Investment Holdings Namibia Proprietary Limited under normal retirement age are required to

be members of retirement annuities managed by Sanlam. The employees and the employers make equivalent contributions in

respect of retirement annuity benefits. In addition, the employers contribute to death and disability benefits, reinsurance, and

administration and management costs.

Number of members Contributions 9 months ended 12 Months ended 9 months ended 12 Months ended 31 December 2015 31 March 2015 31 December 2015 31 March 2015

Summary per fund R’000 R’000 Alexander Forbes Retirement Annuity 6 6 14 37

Sanlam Retirement Annuity 4 3 7 18

Liberty Life Provident Funds 1 070 901 16 111 18 411

Liberty Life Pension Fund 8 8 54 70

1 088 918 16 186 18 536

medical aid schemes Bomaid: Defined contribution plan All permanent staff of the RCS Botswana Proprietary Limited are required to become members of the medical plans of their choice

offered by BOMaid. Total membership currently stands at 2 (31 March 2015: 3) principal members. The total payments amounted

to R11 561 (31 March 2015: R18 580). The RCS Group has no obligation to fund medical aid contributions for current or retired

employees.




29. EmPloyEE BENEFItS (continued) medical aid schemes (continued)

Discovery health: Defined contribution plan All permanent staff of RCS Cards Proprietary Limited and RCS Home Loans Proprietary Limited are required to become members

of the medical plans of their choice offered by Discovery Health. Total membership currently stands at 602 (31 March 2015: 462)

principal members. The total payments amounted to R6 million (31 March 2015: R6.7 million). The RCS Group has no obligation

to fund medical aid contributions for current or retired employees.

All permanent staff of the RCS Collections Proprietary Limited are required to become members of the medical plans of their

choice offered by Discovery Health. Total membership currently stands at 47 (31 March 2015: 44) principal members. The total

payments amounted to R437 629 (31 March 2015: R434 439). The RCS Group has no obligation to fund medical aid contributions

for current or retired employees.

Nexus medical Aid: Defined contribution planAll permanent staff of the RCS Investment Holdings Namibia Proprietary Limited are required to become members of the medical

plans of their choice offered by Nexus Medical Aid. Total membership currently stands at 0 (31 March 2015: 0) principal member.

The total payments amounted to R0 (31 March 2015: R6 188). The RCS Group has no obligation to fund medical aid contributions

for current or retired employees.






30. RISK mANAGEmENt overview

The RCS Group has exposure to risks from its use of financial instruments. This note presents information about the group’s exposure to these

risks and the RCS Group’s objectives, policies and processes for measuring and managing risk. Further quantitative disclosures are included

throughout the financial statements.

The RCS Group business model focuses primarily on providing unsecured credit risk whilst trying to minimise or avoid all other risk types.

The RCS Group views risks as an inherent part of running a successful business. Risks are not only mitigated but are also analysed and

investigated for opportunities. Successful risk management therefore entails understanding which risks can enhance shareholder value and

which risks are incidental and potentially value destroying.

RCS Group’s risk management policies are established to identify and analyse the risks faced by the group to set appropriate risk limits and

controls, 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 RCS 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 RCS Group board of directors has overall responsibility for the establishment and oversight of the RCS Group’s risk management

framework. The board has established the Board Audit Committee (BAC), the Asset and Liability Committee (ALCO), the RCS Internal Risk

and Audit Forum, the Credit Risk Committee and the Social and Ethics Committee. The BAC is responsible for monitoring the internal and

external audit functions and regulatory compliance for the RCS Group. The ALCO Committee is responsible for developing and monitoring all

affairs pertaining to liquidity risk, interest rate risk, foreign currency risk and capital adequacy risk. The RCS Internal Risk and Audit Forum

is responsible for developing and monitoring the company’s risk management policies, as well as the audit, accounting, internal control and

financial reporting practices. The Credit Risk Committee is responsible for developing and monitoring credit risk within the group. The Social

and Ethics Committee is responsible for monitoring the RCS Group’s social and economic development. These committees report quarterly

to the board of directors on its activities. The risk management process established by the RCS Group continues and feeds into the risk

management process established by its holding company. The holding company’s risk management process is in turn managed by the RCS

Board Audit Committee.

The following subcommittees comprising executives and senior management have been established to deal with the following risks facing

the company:

(a) Assets and Liability Committee (ALCO) - liquidity, interest rate, foreign currency, and capital adequacy risk

(b) RCS Internal Risk and Audit Forum - technology, operational and reputational risk

(c) Compliance Forum - legal and compliance risk

(d) Credit Risk Committee - credit risk

(e) Social and Ethics Committee




30. RISK mANAGEmENt (continued) Credit risk

Credit risk is the risk of financial loss to the company if a customer or counterparty to a financial instrument fails to meet its contractual

obligations on card, loan and other receivables, amounts owing from group companies and cash and cash equivalents. The risk on cash

and cash equivalents is managed through dealing with well-established financial institutions with high credit standing. The risk arising on

card, loan and other receivables is managed through a stringent policy on the granting of credit limits, continual review and monitoring of

these limits. The risk on amounts owing from group companies are managed through monitoring the value of the amounts due and ensuring

regular settlement thereof.

The RCS Group does not consider there to be any significant concentration of credit risk in respect of which adequate impairment has not

been raised for the financial assets detailed below, in the credit risk exposure.

The RCS Group does not require collateral in respect of card and loan receivables.

The RCS Group establishes an allowance for impairment that represents its estimate of incurred losses in respect of card

and loan receivables. The allowance is calculated using the internationally-recognised Markov model and other statistical

indicators. Management aims to maintain a certain level of non-performing loan coverage, which can be influenced by the

delinquency and underlying performance of the card and loan receivables. The Markov model uses delinquency roll rates on

customer balances to determine the inherent bad debt in a card and loan book. The board of directors believe that card and

loan receivables balances are being measured fairly.

Credit risk exposureThe maximum exposure to credit risk is represented by the carrying amount of each financial asset in the statement of financial position.

The maximum exposure to credit risk at the reporting date was:


Cash and cash equivalents 551 918 446 787

Card and loan receivables 5 961 948 5 508 226

Other receivables 3 117 12 266

Amount receivable from insurer 94 850 94 919

Interest rate swaps – 15 249

Amounts owing from group company – 81

6 611 833 6 077 528

liquidity riskLiquidity risk is the risk that the RCS Group will not be able to meet its financial obligations as they fall due. The RCS Group’s

approach to managing liquidity is to ensure that it will always have sufficient liquidity to meet its liabilities when due, under

both normal and stressed conditions, without incurring unacceptable losses or risking damage to the RCS Group’s reputation.


30. RISK mANAGEmENt (continued) liquidity risk (continued)

This risk is managed through cash flow forecasts, stress testing scenarios on cash flow, the optimisation of daily cash management and by

ensuring that adequate borrowing facilities are maintained. The objective is to have positive liability to asset term matching with liabilities

carrying longer terms than the underlying book assets. The RCS Group has shareholder facilities in place to mitigate the roll over risk of

funding in issue. The RCS Group monitors and evaluates all financial covenants on a monthly basis to ensure that the RCS Group can oblige

to its commitments made to borrowers. In terms of the articles of association, the group’s borrowing powers are unlimited.

The RCS Group has available unutilised bank facilities to the value of R427.6 million (31 March 2015: R684.7 million) and has

a shareholder facility of R1.5 billion (31 March 2015: R1.5 billion) at the end of the financial period.

Liability cash flows are presented on an undiscounted basis.

Contractual maturitiesThe table below analyses liabilities of the RCS Group into relevant maturity groupings based on the remaining period at reporting date to the

contractual maturity date, including interest:

Carrying Demand to one to three three months more than amount one month months to one year one year total R’000 R’000 R’000 R’000 R’000 R’000

31 December 2015

liabilities

Non-derivative financial liabilities

Funding (4 082 400 ) (32 728 ) (441 643 ) (1 385 938 ) (2 676 683 ) (4 536 992 )

Trade and other payables (438 739 ) (189 114 ) – (100 731 ) (148 894 ) (438 739)

(4 521 139 ) (221 842 ) (441 643 ) (1 486 669 ) (2 825 577 ) (4 975 731 )

31 March 2015

Liabilities

Non-derivative financial liabilities

Funding (3 770 300 ) (135 415 ) (493 789 ) (958 394 ) (2 611 065 ) (4 198 663 )

Trade and other payables (328 511 ) (133 870 ) (72 026 ) (21 914 ) (100 701 ) (328 511)

(4 098 811 ) (269 285 ) (565 815 ) (980 308 ) (2 711 766 ) (4 527 174 )

Derivative financial liabilities

Interest rate swaps (27 ) – (27 ) – – (27 )

(27 ) – (27 ) – – (27 )

(4 098 838 ) (269 285 ) (565 842 ) (980 308 ) (2 711 766 ) (4 527 201 )






30. RISK mANAGEmENt (continued) market risk

Market risk is the risk that changes in market prices, such as foreign exchange rates and interest rates, will affect the RCS Group’s income or

the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures

within acceptable parameters, while optimising the return.

Currency riskThe RCS Group transacts in the local currency, Namibian Dollar and Botswana Pula. No foreign currency risk management exists relating to

transactions in Namibian Dollar as the exchange rate is one to one to the South African Rand. The RCS Group does not use forward exchange contracts

to hedge its currency risk as assets held in a foreign currency, such as Botswana Pula, comprise less than 3% of the total assets of the group.

Interest rate riskInterest rate risk is the sensitivity of the financial performance and/or the financial position of the RCS Group due to movements in the

interest rate. The RCS Group is exposed to interest rate risk as it both borrows and lends funds. The RCS Group occasionally enters into

interest rate swap contracts for the purposes of cash flow hedging. These interest rate swaps require the RCS Group to pay interest at various

fixed rates applied to notional amounts and entitle the RCS Group to receive various variable rates applied to the same notional amounts.

The swaps are used to hedge the risk that the RCS Group is exposed to as a result of the fact that a significant portion of the RCS Group’s

receivables bear interest at fixed rates (refer to note 5 for detail) whilst its borrowings bear interest at variable rates.

ProfileAt the reporting date the interest rate profile of the company’s interest-bearing financial instruments was:

Interest rate Carrying value 9 months ended 12 Months ended 31 December 31 March 31 December 2015 31 March 2015 2015 2015 % % R’000 R’000

Fixed rate instruments

Card and loan receivables 25.5 25.8 1 524 984 1 585 708

Financial assets 1 524 984 1 585 708

variable rate instruments

Card receivables 21.3 20.9 4 436 964 3 922 518

Bank balances 6.6 – 6.9 5.0 – 6.7 551 918 446 787

Other receivables (see note 12) – 8.3 – 13.3 – 10

Financial assets 4 988 882 4 369 315

Funding 7.2 – 11.3 6.9 – 11.1 4 082 400 3 770 300

Financial liabilities 4 082 400 3 770 300

Fair value sensitivity analysis for fixed rate instrumentsThe RCS Group does not account for any fixed rate financial assets and liabilities at fair value through the income statement, and the RCS

Group does not designate derivatives (interest rate swaps) as hedging instruments under a fair value hedge accounting model. Therefore a

change in interest rates at the reporting date would not affect profit or loss.


30. RISK mANAGEmENt (continued)Cash flow sensitivity analysis for variable rate instruments

A change of 100 basis points in interest rates for the duration of the financial period would have increased/(decreased) equity and the income

statement by the amounts shown below. This analysis assumes that all other variables remain constant. The sensitivity analysis reflects the

impact of a rate change immediately following the reporting date for all assets and liabilities accounted for at the reporting date. The analysis

is performed on the same basis as for the comparative period. Profit or (loss) 100 bp increase R’000

31 December 2015

Variable rate financial assets 46 791

Variable rate financial liabilities (39 264 )

Cash flow sensitivity net 7 527

31 March 2015

Variable rate financial assets 39 778

Variable rate financial liabilities (35 431 )

Interest rate swaps (1 018 )

Cash flow sensitivity net 3 329

A decrease of 100 basis points in interest rates for the duration of the financial period would have the equal but opposite effect

to the amounts shown above, on the basis that all other variables remain constant.

Capital managementCapital management is performed at a group level for RCS Group and its subsidiaries. The objective is to maintain sufficient levels of capital to

support the ongoing sustainability and viability of the business. Capital is retained in the business for the following main objectives:

(a) to provide a certain amount of cover or buffer should unexpected losses take place either due to market or operational risks,

(b) to provide a certain amount of cover or buffer should unexpected losses take place due to credit risks,

(c) to support the level of debt in the business as a first loss position and thereby to achieve a particular credit rating on the debt in the

business,

(d) as a tool that could be increased or decreased to ensure maintenance of an appropriate credit rating level in the future, and

(e) to facilitate the necessary asset growth objectives in the business.

It is the responsibility of the ALCO and the board to determine the appropriate level of capital taking into account the risks within the various

lines of business and the types of assets held within these business areas.

The board considers, amongst others, the following factors when determining the level of capital required to be held within a division and

against a particular class of assets:

(a) the historical losses that have taken place on the disposal of assets, bad debt write off and other operational losses,

(b) a view on factors going forward that could cause an asset or category of assets to be obsolete or have a reduction in value,






30. RISK mANAGEmENt (continued) Capital management (continued)

(c) concentration risks on asset classes, market sectors or particular customers should be considered and certain maximum exposure levels

from a line of business and group perspective will be determined,

(d) review the strategic portfolio of businesses and ensure that capital is allocated to achieve required returns whilst maintaining a balanced

portfolio with no line of business attracting an inappropriate amount of the capital,

(e) the length of track record that the business has in terms of using and managing a particular asset class and portfolios within that asset

class, and

(f) review and benchmarking against local and international peers in the financial services, non banking and banking sectors where applicable.

The ALCO reviews capital adequacy on a quarterly basis. The board will review the capital policy on an annual basis and make any amendments

to the requirements prior to making a final dividend declaration. The shareholder is made aware that the dividend policy is subject to sufficient

capital being maintained to achieve an adequate capital maintenance policy.

Any proposed reduction of the overall capital adequacy levels will be discussed and motivated with the rating agencies and certain of the

main banking relationships to ensure that a reduction in minimum capital would not have adverse consequences on the funding profile of the

business.

Fair values of financial instrumentsThe fair values together with the carrying amounts, net gains and losses recognised in the statement of comprehensive income, total interest

income and total interest expense of each class of financial instrument are as follows:

Net (expense) / gains recognised in statement of total interest Carrying comprehensive income / value Fair value income (expense) Impairment R’000 R’000 R’000 R’000 R’000

31 December 2015

Assets

Cash and cash equivalents 551 918 551 918 – – –

Card and loan receivables 5 961 948 5 961 948 – 1 060 127 (350 576 )

Other receivables 3 117 3 117 – – –

6 516 983 6 516 983 – 1 060 127 (350 576 )

liabilities

Funding (4 082 400 ) (4 082 400 ) – (235 420 ) –

Trade and other payables (438 739 ) (438 739 ) – – –

(4 521 139 ) (4 521 139 ) – (235 420 ) –


Net (expense) / gains recognised in statement of total interest Carrying comprehensive income / value Fair value income (expense) Impairment R’000 R’000 R’000 R’000 R’000

31 march 2015

Assets

Cash and cash equivalents 446 787 446 787 – – –

Card and loan receivables 5 508 226 5 508 226 – 1 261 080 (443 680 )

Other receivables 12 266 12 266 – 4 –

Interest rate swaps 15 249 15 249 (25 186 ) 26 053 –

Amounts owing from group company 81 81 – – –

5 982 609 5 982 609 (25 186 ) 1 287 137 (443 680 )

liabilities

Funding (3 770 300 ) (3 770 300 ) – (281 984 ) –

Trade and other payables (328 511 ) (328 511 ) – – –

Interest rate swaps (27 ) (27 ) 255 (15 412 ) –

(4 098 838 ) (4 098 838 ) 255 (297 396 ) –

Fair value hierarchyThe RCS Group measures fair values using the following fair value hierarchy that reflects the significance of the inputs used in making the

measurements:

Level 1 – Quoted prices (unadjusted) in an active market for an identical instrument.

Level 2 – Valuation techniques based on observable inputs, either directly (i.e. as prices) or indirectly (i.e. derived from prices).

This category includes instruments valued using: quoted market prices in active markets for similar instruments;

quoted prices for identical or similar instruments in markets that are considered less than active; or other valuation

techniques where all significant inputs are directly or indirectly observable from market data.

Level 3 – Valuation techniques using significant unobservable inputs. This category includes all instruments where the

valuation techniques includes inputs not based on observable data and the unobservable inputs have a significant

effect on the instrument’s valuation. This category includes instruments that are valued based on quoted prices for

similar instruments where significant unobservable adjustments or assumptions are required to reflect differences

between instruments.

30. RISK mANAGEmENt (continued) Fair values of financial instruments (continued)






30. RISK mANAGEmENt (continued) Fair value hierarchy (continued)

The fair values of financial instruments, measured at fair value at the end of the reporting period, analysed by the level in the fair value

hierarchy into which the fair value measurement is categorised are as follows:

level 1 level 2 level 3 total R’000 R’000 R’000 R’000

31 march 2015

Interest rate swaps asset – 15 249 – 15 249

Interest rate swaps liability – (27 ) – (27 )

– 15 222 – 15 222

ENAblING lIfESTylES, mAKING IT POSSIblE

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RCS GROUP€¦ · The RCS Group constitutes RCS Investment Holdings Limited (registration number: 2000/017884/06) ... has appropriate expertise and experience; • Considered as part