CFSL - Annual report 2018

EXPLANATORY NOTES 30 SEPTEMBER 2018 34. BUSINESS COMBINATION AND ACQUISITION OF NON CONTROLLING INTERESTS Acquisition of subsidiary In August 2018, the Group acquired 100% of the share capital and voting rights of Mauritian Eagle Leasing Company Limited (‘MELCO’) in view of the expansion of the Group’s operation. MELCO is an unlisted company based in Mauritius and operating in the leasing and deposit taking business. The following table summarises the purchase consideration and the fair value of the identifiable amounts of the assets acquired and liabilities assumed at the acquisition date: Consideration MUR m Cash Consideration 121.5 Payable 84.3 Total consideration 205.8 Fair value of net assets acquired (235.3) Net gain on business combination (29.5) Recognised amounts of identifiable assets acquired and liabilities assumed Cash and cash equivalents 70.4 Net investment in lease 639.8 Property, plant and equipment 333.9 Deposits with bank 51.4 Deferred tax asset 0.7 Other assets 5.2 Deposits from customers (788.8) Long term loans (33.3) Other liabilities (43.1) Current tax liabilities (0.2) Post employment benefit (0.7) 235.3 Net cash outflow on acquisition of subsidiary Consideration paid in cash 121.5 Cash and cash equivalent balances acquired with the subsidiary (70.4) 51.1 The fair value of the net investment in lease amounted to MUR 639.8m; the gross amount was MUR 771.1m, out of which MUR 55.8m is not expected to be collected. The net gain on business combination resulted from a higher fair value of the identifiable assets acquired and liabilities assumed compared to the acquisition costs. The net gain on business combination is presented separately on the statement of profit or loss. The transaction included a contingent element for equal risk sharing between the seller and the Group relating to the recovery of certain non performing leases over the recovery period agreed by both parties. The Group estimated that no settlement would be required at the end of the recovery period and therefore the fair value has been determined to be nil. From the date of the acquisition, MELCO contributed MUR 12.2m of revenue and MUR 2.2m of profit before tax from continuing operations. Had the acquired subsidiary been consolidated from 1 October 2017, the revenue from continuing operation of the Group would have been MUR 1,338.6m and the profit after tax from continuing operations would have been MUR 336.4m. Acquisition related costs of MUR 4.4m were recognised in operating expenses. Year ended 30 September 2017 Acquisition of non controlling interests in SWTD BIS LTD On 4 May 2017, the Group acquired the remaining 33.23% of the share capital of SWTD Bis Ltd and obtained full control of the subsidiary. The acquisition gave rise to an increase in the effective ownership in its underlying subsidiaries. The effective ownership in South West Safari Group Ltd increased from 36.3% to 53.6%, whilst that of CSBO 2 Ltd increased from 36.2% to 53.5%. MUR m Cash consideration paid to non controlling shareholders 69.3 Carrying value of additional interest acquired (72.5) Excess of non controlling interest acquired over consideration (3.2) Amount recognised in revaluation reserve 25.4 Amount recognised in retained earnings 22.2 128 CIM FINANCIAL SERVICES LTD ANNUAL REPORT 2018