General Capital Annual Report shows strong growth
General Capital Limited
Level 7, 12-26 Swanson Street,
PO Box 1314, Shortland Street,
Auckland, New Zealand. 1140.
Phone +64 9 304 0145
Fax +64 9 358 3858
General Capital Annual Report shows strong growth
General Capital, the NZX listed financial services Group, has today released its Annual
Report for the year ended 31 March 2020.
Managing Director, Mr. Brent King said, “We are very pleased with the growth over the
year and we are now well placed for the next stage of the Group’s development.”
For further information contact:
Mr. Brent King
Managing Director
+64 21 632 660
Brent.King@gencap.co.nz
21 July 2020
---
General Capital Limited
Annual Report
For the year ended 31 March 2020
Cont
ents
Dir
ectors’ Profiles 2-3
Ge
neral Finance Directors and Executive 4
Dir
ectors’ Report 5-9
Co
rporate Governance Statement 10-20
Inde
pendent Auditors’ Report 21-26
Con
solidated Financial Statements:
Con
solidated Statement of Comprehensive Income 27
Con
solidated Statement of Financial Position 28
Con
solidated Statement of Changes in Equity 29
Con
solidated Statement of Cash Flows 30
No
tes to the Consolidated Financial Statements 31-73
Sh
areholder and Statutory Information 74-80
Co
rporate Directory 81
1
Directors’ P rofiles
REWI HAMID BUGO B.Sc., M.Com.
Non-Executive Chairman
Rewi Hamid Bugo has been a Non-executive Director of General Capital Limited
since 13 June 2017 and was elected Chairman of the Board of Directors following
the acquisition of Corporate Holdings Limited in August 2018. Mr Bugo is a
graduate of the University of Canterbury, Christchurch, where he obtained a
Bachelor of Science in Management Science and a Master of Commerce in
Business Administration. He has business experience in several sectors including
oil and gas, property development, insurance broking and travel and tourism.
Mr Bugo sits on the Board of several private companies in Malaysia and New Zealand and is Vice Chairman of
the Sarawak Chapter of the Malaysia New Zealand Chamber of Commerce.
BRENT DOUGLAS KING, BCom, CA, CMA, RFA
Managing Director
Brent Douglas King has been the Managing Director of General Capital Li mited
and its subsidiaries since 3 August 2018. Prior to that date, Mr King was a non-
executive Director since 30 September 2011. He was also the founder and
Managing Director of the Dorchester Group of Companies for seventeen (17)
years until he resigned in 2005. He holds a number of public and private
directorships. He has more than twenty-five (25) years’ experience in financial,
investment banking, underwriting, capital raising and accounting areas and has
assisted a number of public and private companies.
HUEI MIN LIM, LLB (Hons), MNZM, CMInstD
Non-e xecutive Independent Director
Huei Min Lim (also known as Lyn Lim) is a Non-Executive Director of General
Capital Limited and has been since 21 December 2011. Lyn Lim is also on the
boards of the Auckland Regional Amenities Funding Board and Restaurant
Brands New Zealand Limited. She is also a trustee of the Asia New Zealand
Foundation.
Lyn has also served on the boards of Auckland University of Technology (AUT),
the New Zealand Shareholders' Association, Public Trust, the New Zealand
China Trade Association, the Hong Kong and New Zealand Business Association, was the Chair of the New
Zealand Chinese Youth Trust and held the positions of Trustee, Deputy Chair and Chair of Foundation North. She
has been a member of ANZ Private Bank External Advisory Board and has served as a council member of the
Auckland District Law Society Inc. In 2017, Lyn was appointed as a Member of the New Zealand Order of Merit
for her services to New Zealand-Asia relations and governance. Lyn is a Chartered Member of the New Zealand
Institute of Directors, a member of the New Zealand Law Society and a member and Vice Chair of the Women
in Business Committee of the Inter Pacific Bar Association.
2
Directors’ Profiles (Continued)
GRAEME IAIN BROWN BCom
Non-e xecutive Independent Director
Graeme Iain Brown is a graduate of the University of Otago where he obtained a
Bachelor of Commerce. He has over 20 years’ experience in the Malaysian
plantation industry. He has been the Managing Director of Keresa Plantations
Sdn. Bhd. since 1997. Keresa Plantations is one of just a few RSP0 certified
plantations in Sarawak. Graeme also founded Keresa Mill Sdn. Bhd. in 2005, which
has been a pioneer in the successful implementation of advanced milling
technologies for FFB processing. Graeme was also a co-founder in 2007 and joint
Chief Executive Officer of Asian Plantations Limited, which was sold to a
Malaysian corporation for RM1.2 billion in 2015.
Graeme has been an Executive Director of Sarawakiana Realty Sdn. Bhd., a property company, since 1996, and
Malesiana Tropicals Sdn. Bhd., a tissue culture company, since 2000 as well as being a Director of several private
companies, including Rajang Wood Sdn. Bhd., a plantation holding company, since 1996.
SIMON JOHN M
c
ARLEY LLB(Hons)
Non-e xecutive Independent Director
Simon John McArley graduated from Victoria University, Wellington in 1984
with an LLB (Hons). Simon is a lawyer by training who specialises in corporate
governance and risk.
After almost 20 years in private practice with Kensington Swan, specialising in
banking and securities law, Simon took up regulatory positions with NZX as
acting Head of Regulation and the (then) Securities Commission as acting
Director Primary Markets. Simon went on to join the Serious Fraud Office (SFO)
as General Manager Capital Markets and Corporate Fraud in 2011 where he had responsibility for the successful
investigation and prosecution of finance sector fraud uncovered by the GFC. After 12 months as acting Director
of the SFO, Simon left the SFO in late 2013 and has since been consulting with government and private sector
entities on governance and risk management issues. Simon has also held governance positions with commercial
and not for profit entities. Simon is a member of the New Zealand Law Society. Simon is also a keen sailor and
has extensive coastal and blue water experience.
3
General Finance Directors and Executive
DONALD FREDERICK HATTAWAY CA, ACIS
General Finance Limited Chairman and Independent Non-Executive Director
Don is a member of the Chartered Accountants Australia and New Zealand
(CAANZ) and has practised as a Chartered Accountant in public practice since
1980. He retired as a Partner in Price Waterhouse in 1996 and has specialised in
acting for small or medium sized enterprise businesses since then often fulfilling
the role of finance director for those companies. Don was the Chairman of listed
banking software technology company Finzsoft Solutions Ltd. Don is a previous
Chairman of the Board of Directors of the Auckland Cricket Association.
He is a Director of Sietec (NZ) Limited and has held a previous public company directorship with Cooks Global
Foods Ltd as well as directorships with a number of private companies
ROBERT GARRY HART LLB (Hons) Waikato University (1998), PG Dip
Management.
General Finance Limited Independent Non-Executive Director
Rob is a director of Waikato law firm Ellice Tanner Hart, who has practised law
for 16 years. In this role he has wide experience acting on finance and security
related matters involving various tiers of lenders. He also advises clients on
governance and insolvency related matters. Rob was previously a director of New
Zealand Cricket Incorporated and is currently deputy chair of Balloons Over
Waikato Trust which annually stages Waikato’s largest event.
Rob is a member of the New Zealand Sports Tribunal and has held directorships with a number of private
companies.
GREGORY JOHN PEARCE B. Com.
General Finance Limited Executive Director
Greg is a lending and credit specialist having held roles with large companies
(Telecom and Air New Zealand) and a senior role with Dorchester Finance Limited
being General Manager Lending and Credit from 1997 to 2008. Since that time,
he has consulted and contracted to receivers in relation to loan recoveries.
JONATHAN CLARK BCom, CA
General Capital Limited Chief Financial Officer
Jonathan is a Chartered Accountant and has been a member of the Chartered
Accountants Australia and New Zealand (CAANZ) since 2013. He has over 9 years
post-university working experience, including several years working on statutory
external audit engagements for a chartered accounting firm and other accounting
and finance roles for listed and unlisted companies.
4
Directors’ Report
The year to 31 March 2020 was a very positive year for General Capital Limited (“the Company”) and subsidiaries
(together “the Group”). We have seen strong growth in the Group.
Due to the looming Covid-19 crisis we slowed a little over late February and for March; however, the overall
growth in the year was strong.
In the Directors’ report on page 8 of last year’s Annual Report we set out the following objectives for the year
ended 31 March 2020:
➢ Increase total assets for the group to $50m ACHIEVED Total assets were $51.2m
➢ Increase total deposits to $38m ACHIEVED Total Deposits were $41.5m
➢ Increase Capital to $12m NOT ACHIEVED Total Capital was $9.4m
➢ Achieve a NPBT of $300k for the year NOT ACHIEVED NPBT was $190k
➢ To consider an acquisition in the second 6-months of the financial year.
We considered a number of acquisitions. After initial due diligence we came to the conclusion that none were
value for money and none would have increased the value of General Capital. We instead focused on organic
growth.
We didn’t hit all the objectives, but the Group made good progress.
All Shareholders will know the financial year ended in unprecedented circumstances. The lockdown created a
lack of confidence and effectively cost the Group around five weeks of normal trading. The result is that the big
targets (Assets and Deposits) were achieved and we built up significant cash to be able to meet all obligations
without any stress. We could have survived at least another twelve months without any cash inflows.
Raising lower capital than expected had an impact on profitability. We had issued warrants to shareholders
which we had expected to be exercised. Unfortunately, the exercise rate was exceptionally low, and we did not
receive the inflow we had expected.
This is disappointing for General Capital but is understandable as the issues around Covid-19 and lockdown
were foremost in investors’ minds. We will continue to consider options for capital raising over this year.
1.0 Recent History
We had a busy year building the Group.
The major items were as follows:
• 14 Jun 2019 Preliminary Results announced showing strong Growth
• 18 Jun 2019 New CFO appointed for the Group
• 25 Jun 2019 Warrants issued to Directors and Staff
• 01 Jul 2019 Migration to the Main Board
• 30 Aug 2019 Annual Meeting held all resolutions carried
• 16 Sep 2019 General Finance receives a BB- credit Rating with a positive outlook.
• 4 Nov 2019 Warrant tender process undertaken for non-eligible shareholders
• 19 Nov 2019 6-monthly Results announced showing further strong Growth
• 24 Jan 2020 General Finance Credit Rating confirmed
• 31 Mar 2020 GENWA Warrants Final Exercise Date - notice of securities issued given 2/4/20
5
Directors’ Report (Continued)
2.0 Result to 31 March 2020
The results for this financial year show the results of building the business.
We have had growth in virtually all aspects of the Group. The major factors are as follows:
• Total Assets UP 114% to $51.2m
• Net Revenue UP 48% to $2.0m
• Term Deposits UP 178% to $41.5m
• Cash UP 326% to $12.6m
• Net Profit after tax UP 128% to $130k
In summary, we are profitable, and we have had excellent growth. We are one of the exceptions. Companies
with high growth often cannot get near breakeven let alone achieve profits.
3.0 Accounts
The Auditors have completed their Audit and they are satisfied on all aspects bar one. The exception is the
carrying value of the goodwill and licenses allocated to our research and advisory cash generating unit (the
business of Group subsidiary, Investment Research Group Limited, “IRG”). The Auditors have concluded they
have insufficient audit evidence to support the assumptions we have made in valuing IRG and are thus unable
to determine if any adjustment to our figures are necessary.
954
127
1,081
8,753
15,155
23,908
9,382
41,782
51,164
-
2,500
5,000
7,500
10,000
12,500
15,000
17,500
20,000
22,500
25,000
27,500
30,000
32,500
35,000
37,500
40,000
42,500
45,000
47,500
50,000
52,500
55,000
Equity ($000)Total Liabilities ($000)Total Assets ($000)
Figure 1: Balance Sheet Growth
Mykco - 31 March 2018GCL - 31 March 2019GCL - 31 March 2020
31March 2019 and 31 March 2020 figures are extracted from the audited financial statements of General Capital
Limited (GCL). 31 March 2018 figures are extracted from the 31 March 2018 audited financial statements of Mykco
Limited. Refer to the notes to the financial statements for further details.
6
Directors’ Report (Continued)
The valuation of IRG is based on an estimation of the forecast earnings of the business over the next 5 years,
discounted at an appropriate rate. This involves complex and subjective estimation and judgement. It is not an
exact science and is always open to differing interpretations and uncertainties. In particular it is very hard to be
certain of the future cash flows an asset, like IRG will produce. That is the reality of this business, particularly at
this point of the economic cycle.
While we understand the Auditors reasoning, there are a number of factors outside strict audit evidence that
we believe justify the value we have adopted. For example:
For the first time IRG has two signed mandates in place at the beginning of the financial year, as well as
the prospect of further advisory work during the year. This reflects the strong networks the business
has built that are now bearing fruit.
IRG has only been under General Capital’s ownership and governance for a short time. During that time
significant management resource has been devoted to the finance company. With the finance company
now on track, more focus can now move to growing IRG.
While the current economic outlook is uncertain, the structural disruption we are experiencing in the
economy is likely to enhance demand for the small scale and innovative capital raising IRG specialises
in.
The current valuation is supported by the independent appraisal conducted at the time of purchase of
the business.
Based on the above and after carefully reviewing the history of the business and projections for the next 5-
years, the Directors believe that the carrying value of the asset is not impaired at 31 March 2020.
We will of course review the carrying value each 6-months to ensure that the Directors still believe the value is
appropriate based on the expected future cash flows from the business.
We have no doubt that there will be differing approaches between Auditors and Directors during these uncertain
times. The valuation challenges mentioned above are magnified by uncertainty in the wider economy. We
however believe in being positive and optimistic about the future. The challenges we face will provide greater
opportunity. The Directors believe it would be premature to simply write off IRG because of uncertainty, given
the many positive factors discussed above. That would not give the Shareholders a fair representation of the
value.
4.0 General Finance Limited
General Finance is the obvious star of the Group.
General Finance has the benefit of most of the Group’s capital and most of the resources. It has been a highly
successful year in all regards. The growth has now made the business into a profitable entity. We have been able
to increase market awareness of our products and to increase management support. General Finance has had
to bear increased costs such as the costs of obtaining a credit rating this year. We are now well past “critical
mass” and continued growth will add net revenue, but it will not add significant costs. We expect to see
increasing profits over the next year.
On a cautionary note, we have increased cash reserves. The carrying of surplus cash creates a cost. We will
continue to hold significant cash to allow a margin for the unexpected. We are currently working on increasing
our loan book which has reduced as we have had repayments and ceased new lending under lockdown. The
challenge for us is to rebuild our loan book to previous levels and to increase above that level whilst still
maintaining high quality loans. As always, we will approach this in a measured and planned manner.
7
Directors’ Report (Continued)
The Next Stage
We will continue to grow the General Finance business, but at a slower rate this year. Last year we achieved a
100% plus growth. This year we are planning for a 50% growth.
We expect that acquisition opportunities will present themselves and that the industry will see the benefits of
rationalisation so costs can be spread over a larger base. Whilst we cannot guarantee this will occur, we will be
seeking options that will enhance the value of the Group.
5.0 Investment Research Group
As noted above we are starting the financial year with two investment advisory mandates in place. These are in
the bioscience space (including medicinal Cannabis related entities). This is very promising, and we are expecting
to be able to announce further positive developments as the year progresses.
With the success of the finance company this year, we hope to be able to move some Management and Board
focus to growing the IRG business in the coming year. We believe the current economic disruption will produce
more opportunities for the services offed by IRG.
6.0 Caution
We all must have been surprised at the health, social and economic changes this last 6 months. No one knows
the future. The key for us all is to progress positively but cautiously. The Board are very aware of the volatility
and we are far more cautious than in previous periods.
We know that the unexpected can and will happen!
12,896
13,156
13,510
12,694
14,460
17,246
20,157
25,205
31,353
40,183
47,678
9,612
10,179
10,144
9,338
11,068
12,231
15,066
20,055
25,805
34,462
41,845
3,284
2,977
3,366
3,356
3,392
5,015
5,091
5,150
5,548
5,721
5,833
-
10,000
20,000
30,000
40,000
50,000
Sep-17Dec-17Mar-18Jun-18Sep-18Dec-18Mar-19Jun-19Sep-19Dec-19Mar-20
Figure 2: Growth in General Finance Limited (Subsidiary)
Total Assets ($000)Total Liabilities ($000)Equity ($000)
The 31 March 2020, 31March 2019 and 31 March 2018 figures have been extracted from the audited financial statements
of General Finance Limited. Other quarterly figures have been extracted from General Finance Limited's management
accounts.
8
Directors’ Report (Continued)
7.0 Thanks
The Board wishes to thank management, staff and Board Members of General Capital and its subsidiaries for a
tremendous performance this year. We think our performance would have been even better if we did not have
the Covid-19 impact.
We also thank the shareholders for their support. We understand the patience that you have shown. We hope
you can see the significant progress we have made. We are confident these great results will continue through
the coming year.
Rewi Hamid Bugo Brent Douglas King
Chairman Managing Director
9
Corporate Governance Statement
The Board of Directors (“Board”) and management of General Capital Limited (“the Company”) are committed
to ensuring that the Company adheres to best practice governance principles and maintains the highest ethical
standards. The Board regularly reviews and assesses the Company’s governance structures to ensure that they
are consistent, both in form and in substance, with best practice.
The Company was listed on the NZAX up to 30 June 2019 and migrated to the NZX main board on 1 July 2019.
The Board framework and governance practices for the year ended 31 March 2020 were compliant with the
requirements of the NZX rules.
The Board is currently updating the framework to be in line with the recommendations in the NZX Corporate
Governance Code released in 2019 (NZX Code). In this regard, there are several items which the Company is
progressing to ensure compliance with the NZX Code. The information in this report is current as at the date of
this report and has been approved by the Board. Key governance documents are available in a new corporate
governance section of the Company’s website: www.gencap.co.nz
. Further documents will be added as they are
finalised and formalised.
The NZX Corporate Governance Code can be found on the NZX Website at:
www.nzx.com/regulation/nzx-rules-
guidance/corporate-governance-code.
The Governance Code contains eight (8) principles and various recommendations for each principle. The Board
has reported on the Company’s compliance with each of the recommendations which are included below.
Principal 1 – Code of Ethical Behaviour
"Directors should set high standards of ethical behaviour, model this behaviour and hold management
accountable for these standards being followed throughout the organisation."
RECOMMENDATION 1.1
The board should document minimum standards of ethical behaviour to which the issuer’s directors and
employees are expected to adhere (a code of ethics).
The code of ethics and where to find it should be communicated to the issuer’s employees. Training should
be provided regularly. The standards may be contained in a single policy document or more than one policy.
The code of ethics should outline internal reporting procedures for any breach of ethics, and describe the
issuer’s expectations about behaviour, namely that every director and employee:
(a) acts honestly and with personal integrity in all actions;
(b) declares conflicts of interest and proactively advises of any potential conflicts;
(c) undertakes proper receipt and use of corporate information, assets and property;
(d) in the case of directors, gives proper attention to the matters before them;
(e) acts honestly and in the best interests of the issuer, shareholders and stakeholders and as required by law;
(f) adheres to any procedures around giving and receiving gifts (for example, where gifts are given that are of
value in order to influence employees and directors, such gifts should not be accepted);
(g) adheres to any procedures about whistle blowing (for example, where actions of a whistle blower have
complied with the issuer’s procedures, an issuer should protect and support them, whether or not action is
taken); and
(h) manages breaches of the code
Compliance with recommendation during the year ended 31 March 2020:
The Board has a strong belief that ethical behaviour is paramount to good corporate governance and underpins
the reputation of the Company. As such, the ethical principles that were applied by the Board (and required of
Management and employees) were in line with the recommendations above.
10
Corporate Governance Statement (Continued)
The Group’s code of ethics was updated during the year and complies with the recommendation in full.
Employees are required to read the code of ethics, and periodic training is provided. The code of ethics has been
published on the Company’s website.
RECOMMENDATION 1.2
An issuer should have a financial product dealing policy which extends to employees and directors.
Compliance with recommendation during the year ended 31 March 2020:
The Board had a securities trading policy in place for employees and directors during the year. This policy
requires prior approval of all transactions in General Capital Limited quoted securities and other restricted
securities, specifies blackout periods for trading and defines prohibited trading. The Company’s governance
policies and procedures are currently being reviewed and a draft revised securities trading policy is currently
with the Board for consideration. Once the majority of the Company’s governance policies and procedures have
been updated and finalised, they will be published to the Company’s website.
PRINCIPLE 2 – Board C omposition & Performance
“To ensure an effective board, there should be a balance of independence, skills, knowledge, experience and
perspectives.”
Board Composition
Board members who have a wide range of business, technical and financial background lead the Company. The
Board is responsible and accountable to shareholders and other stakeholders for the Company’s performance
and its compliance with applicable laws and standards.
The Board of Directors currently comprises five (5) directors, four (4) of which are Non-e xecutive Directors (Rewi
Hamid Bugo (Chairman), Huei Min Lim, Graeme Iain Brown and Simon John McArley) and one (1) Executive
Director (Brent Douglas King).
Huei Min Lim, Graeme Iain Brown and Simon John McArley are independent directors of the Company.
By virtue of being a significant product holder, Rewi Hamid Bugo has not been identified as an independent
director of the Company.
Refer to the Directors’ Profiles section of this Annual Report for further details.
Board Meetings
The Company’s Board meetings are conducted in accordance with proper process. This enables the Board to
peruse any board papers and review any issues to be deliberated at the Board meeting to enable Directors to
make informed decisions.
A total of 8 (eight) Board Meetings were held during the financial year under review. Board attendance has been
recorded as follows:
Board Members Board Audit Committee
Rewi Hamid Bugo (Chairman) 6 3
Brent Douglas King 6 N/A
Huei Min Lim 6 3
Graeme Iain Brown 6 3
Simon John McArley 6 3
The Board also met whenever necessary to deal with specific matters needing attention between scheduled
meetings.
11
Corporate Governance Statement (Continued)
The gender balance of the Group’s Directors and officers was as follows:
as at 31 March 2020 as at 31 March 2019
Directors Officers* Directors Officers*
Female 1 0 1 0
Male 4 1 4 1
Total 5 1 5 1
*Officers excludes any directors of the Company.
RECOMMENDATION 2.1
The board of an issuer should operate under a written charter which sets out the roles and responsibilities of
the board. The board charter should clearly distinguish and disclose the respective roles and responsibilities
of the board and management.
Compliance with recommendation during the year ended 31 March 2020:
The Board adopted an updated Board Charter during the year which sets out the roles and responsibilities of the
Board and Management and complies with the recommendation in full.
The Board Charter has been published on the Company’s website.
RECOMMENDATION 2.2
Every issuer should have a procedure for the nomination and appointment of directors to the board.
Compliance with recommendation during the year ended 31 March 2020:
There were no new directors appointed during the year (other than those re-elected at the Annual Meeting).
The Board follows the requirements of the NZX Rules as well as the commentary in the NZX Corporate
Governance Code when selecting new directors.
The Company’s governance policies and procedures are currently being reviewed and updated. A draft
Procedure for Nomination and Appointment of Directors is currently with the Board for consideration. This
document is expected to comply with the recommendation and once the majority of the Company’s governance
policies and procedures have been updated and finalised, they will be published to the Company’s website.
RECOMMENDATION 2.3
An issuer should enter into written agreements with each newly appointed director establishing the terms of
their appointment.
Compliance with recommendation during the year ended 31 March 2020:
There were no new directors appointed during the year (other than those re-elected at the Annual Meeting).
The Company intends to comply with this requirement for future newly appointed directors.
The Company’s governance policies and procedures are currently being updated and a draft Procedure for
Nomination and Appointment of Directors is currently with the Board for consideration. It is expected that this
will include a requirement for written agreements with newly appointed directors in line with the
recommendation. Once the majority of the governance policies and procedures have been finalised, they will
be published on the Company’s website.
12
Corporate Governance Statement (Continued)
RECOMMENDATION 2.4
Every issuer should disclose information about each director in its annual report or on its website, including a
profile of experience, length of service, independence and ownership interests and director attendance at
board meetings.
Compliance with recommendation during the year ended 31 March 2020:
All of the information detailed in the recommendation is included in the Annual Report and can be found in the
Directors Profiles, Corporate Governance Statement and Shareholder and Statutory Information sections.
RECOMMENDATION 2.5
An issuer should have a written diversity policy which includes requirements for the board or a relevant
committee of the board to set measurable objectives for achieving diversity (which, at a minimum, should
address gender diversity) and to assess annually both the objectives and the entity’s progress in achieving
them. The issuer should disclose the policy or a summary of it.
Compliance with recommendation during the year ended 31 March 2020:
Despite not having a formal written diversity policy in place during the year, the Board
recognises the wide-
ranging benefits that diversity brings to an organisation.
The gender composition of the Company’s directors and officers is included above.
The Company’s governance policies and procedures are currently being reviewed and updated. A draft Diversity
Policy is currently with the Board for consideration. This document is expected to comply with the
recommendation and once the majority of the Company’s governance policies and procedures have been
updated and finalised, they will be published to the Company’s website.
RECOMMENDATION 2.6
Directors should undertake appropriate training to remain current on how to best perform their duties as
directors of an issuer.
Compliance with recommendation during the year ended 31 March 2020:
The Company’s Board understand their obligations as Directors of a publicly listed Company and undertake
training when necessary to remain current on how to best perform their duties.
RECOMMENDATION 2.7
The board should have a procedure to regularly assess director, board and committee performance.
Compliance with recommendation during the year ended 31 March 2020:
Director and Board performance is considered crucial to the success of the Company and its subsidiaries. The
Board regularly reviews its performance and the performance of its members. This includes an assessment of
whether the composition of the board is adequate and whether any training is needed for Directors.
The Company’s governance policies and procedures are currently being reviewed and updated. A draft
Procedure for Assessing Director, Board and Committee Performance is currently with the Board for
consideration. This document is expected to comply with the recommendation and once the majority of the
Company’s governance policies and procedures have been updated and finalised, they will be published to the
Company’s website.
13
Corporate Governance Statement (Continued)
RECOMMENDATION 2.8
A majority of the board should be independent directors.
Compliance with recommendation during the year ended 31 March 2020:
As detailed in the Board Composition section above, 3 of the 5 Directors have been identified as Independent
Directors of the Company. Of the 2 remaining directors, 1 is a Non-executive Director.
The Board consider that the current composition of the Board during the year was satisfactory to make decisions
in the best interests of the Entity and its shareholders. In addition to this, Non-executive directors periodically
confer without executive directors or other senior executives present. Any directors who are conflicted on
certain matters are unable to participate in the decisions made in relation to those matters.
RECOMMENDATION 2.9
An issuer should have an independent chair of the board. If the chair is not independent, the chair and CEO
should be different people.
Compliance with recommendation during the year ended 31 March 2020:
Rewi Hamid Bugo is the Chair of the Company and Brent Douglas King is the Managing Director (CEO). By virtue
of being a significant product holder, Mr Bugo is not an independent director of the Company.
Principle 3 – Board Committees
“The board should use committees where this will enhance its effectiveness in key areas, while still retaining
board responsibility.”
Recommendation 3.1
An issuer’s audit committee should operate under a written charter. Membership on the audit committee
should be majority independent and comprise solely of non-executive directors of the issuer. The chair of the
audit committee should be an independent director and not the chair of the board.
Compliance with recommendation during the year ended 31 March 2020:
On 1 July 2019, to comply with the NZX Main Board Listing Rules, an Audit Committee was formalised as a sub-
committee of the Board with the following members:
Simon John McArley (Chair of Audit Committee, Independent Director)
Huei Min Lim (Independent Director)
Graeme Iain Brown (Independent Director)
Rewi Hamid Bugo (Non-executive Director)
Prior to the Company moving to the main board of the NZX on 1 July 2019, the Audit committee responsibilities
were dealt with by the full Board as General Capital Limited was listed on the NZAX during that period.
The audit committee responsibilities include the following:
1. Ensuring that processes are in place and monitoring those processes so that the board is properly and
regularly informed and updated on corporate financial matters;
2. Recommending the appointment and removal of the independent auditor;
3. Meeting regularly to monitor and review the independent and internal auditing practices;
4. Having direct communication with and unrestricted access to the independent auditor and any internal
auditors or accountants;
5. Reviewing the financial reports and advising all Directors whether they comply with the appropriate
laws and regulations; and
6. Ensuring that the Key Audit Partner is changed at least every 5 years.
14
Corporate Governance Statement (Continued)
The Audit, Finance and Risk Committee now comprises a majority of independent directors and no executive
directors. Simon John McArley has a financial background in accordance with the requirements of NZX Listing
Rule 2.13.1.
The Company’s Audit Committee Charter was updated during the year. The Audit Committee Charter has been
published on the Company’s website.
Recommendation 3.2
Employees should only attend audit committee meetings at the invitation of the audit committee.
Compliance with recommendation during the year ended 31 March 2020:
Non-committee members including employees only attend audit committee meetings at the invitation of the
audit committee.
Recommendation 3.3
An issuer should have a remuneration committee which operates under a written charter (unless this is carried
out by the whole board). At least a majority of the remuneration committee should be independent directors.
Management should only attend remuneration committee meetings at the invitation of the remuneration
committee.
Compliance with recommendation during the year ended 31 March 2020:
Remuneration committee responsibilities were dealt with by the full Board during the year ended 31 March
2020. Employees only attended meetings at the invitation of the Board.
The responsibilities included recommending remuneration packages for directors for consideration by
shareholders and to approve Managing Director and senior management remuneration. Any directors who
were conflicted on certain matters were unable to participate in the decisions made in relation to those
matters.
The Company’s remuneration policy is currently being updated as part of the Company’s governance policies
and procedures. A draft Remuneration Policy is currently with the Board for consideration. This document is
expected to comply with the recommendation and once the majority of the Company’s governance policies and
procedures have been updated and finalised, they will be published to the Company’s website.
Recommendation 3.4
An issuer should establish a nomination committee to recommend director appointments to the board (unless
this is carried out by the whole board), which should operate under a written charter. At least a majority of
the nomination committee should be independent directors.
Compliance with recommendation during the year ended 31 March 2020:
Nomination committee responsibilities were dealt with by the full Board during the year ended 31 March 2020.
The Company’s governance policies and procedures are currently being reviewed and updated. A draft
Procedure for Nomination and Appointment of Directors is currently with the Board for consideration. This
document is expected to comply with the recommendation and once the majority of the Company’s governance
policies and procedures have been updated and finalised, they will be published to the Company’s website.
Recommendation 3.5
An issuer should consider whether it is appropriate to have any other board committees as standing board
committees. All committees should operate under written charters. An issuer should identify the members of
each of its committees, and periodically report member attendance.
15
Corporate Governance Statement (Continued)
Compliance with recommendation during the year ended 31 March 2020:
The Board has not considered it necessary to have any other board committees during the year.
Recommendation 3.6
The board should establish appropriate protocols that set out the procedure to be followed if there is a
takeover offer for the issuer including any communication between insiders and the bidder. It should disclose
the scope of independent advisory reports to shareholders. These protocols should include the option of
establishing an independent takeover committee, and the likely composition and implementation of an
independent takeover committee.
Compliance with recommendation during the year ended 31 March 2020:
In the event of a takeover bid, the Board would have determined the appropriate actions to take including the
scope of independent advisory reports to shareholders, and whether an independent takeover committee
should be established.
The Company’s governance policies and procedures are currently being reviewed and updated. A draft Takeover
Response Procedure is currently with the Board for consideration. This document is expected to comply with
the recommendation and once the majority of the Company’s governance policies and procedures have been
updated and finalised, they will be published to the Company’s website.
PRINCIPLE 4 – Reporting & Disclosure
“The board should demand integrity in financial and non-financial reporting, and in the timeliness and balance
of corporate disclosures.”
Recommendation 4.1
An issuer’s board should have a written continuous disclosure policy.
Compliance with recommendation during the year ended 31 March 2020:
The Company’s Board is committed to keeping investors and the market informed of all material information
about the Company and its performance in line with the NZX listing rules and has done so throughout the period.
The Company’s governance policies and procedures are currently being reviewed and updated. A draft
Continuous Disclosure Policy is currently with the Board for consideration. This document is expected to comply
with the recommendation and once the majority of the Company’s governance policies and procedures have
been updated and finalised, they will be published to the Company’s website.
Recommendation 4.2
An issuer should make its code of ethics, board and committee charters and the policies recommended in the
NZX Code, together with any other key governance documents, available on its website.
Compliance with recommendation during the year ended 31 March 2020:
The Company’s Code of Ethics, Board Charter and Audit Committee Charter are available on the Company’s
website. The company’s governance policies and procedures are currently being reviewed and updated. Once
the majority of the Company’s governance policies and procedures have been updated and finalised, they will
be published to the Company’s website.
Recommendation 4.3
Financial reporting should be balanced, clear and objective. An issuer should provide non-financial disclosure
at least annually, including considering material exposure to environmental, economic and social
sustainability factors and practices. It should how operational or non-financial targets are measured. Non-
financial reporting should be informative, include forward looking assessments, and align with key strategies
and metrics monitored by the board.
16
Corporate Governance Statement (Continued)
Compliance with recommendation during the year ended 31 March 2020:
Financial Reporting
The Board is responsible for ensuring that the financial statements give a true and fair view of the financial
position of the Group and have been prepared using appropriate accounting policies, consistently applied and
supported by reasonable judgements and estimates and for ensuring all relevant financial reporting and
accounting standards have been followed.
For the financial year ended 31 March 2020, the Directors believe that proper accounting records have been
kept which enable, with reasonable accuracy, the determination of the financial position of the Company and
the Group and facilitate compliance of the financial statements with the Financial Reporting Act 1993.
The Managing Director and Chief Financial Officer have confirmed in writing to the Board that the Company’s
financial reports present a true and fair view in all material aspects.
Non-financial reporting
Due to its current size, the Company is in the early stages of considering how and to what extent it should report
on non-financial information such as environmental, social and governance matters (ESG). The Company does
not currently have a formal ESG reporting framework, however this is being considered by the Board with the
intention that the Company will report on these non-financial matters in the future.
PRINCIPLE 5 – Remuneration
“The remuneration of directors and executives should be transparent, fair and reasonable.”
Recommendation 5.1
An issuer should recommend director remuneration packages to shareholders for approval in a transparent
manner. Actual director remuneration should be clearly disclosed in the issuer’s annual report.
Compliance with recommendation during the year ended 31 March 2020:
Shareholders approved a total Directors’ remuneration fee pool of $300,000 per annum in the Special Meeting
of shareholders on 31 July 2018. Director remuneration is disclosed in the Shareholder and Statutory Information
section of the Annual Report.
Recommendation 5.2
An issuer should have a remuneration policy for remuneration of directors and officers, which outlines the
relative weightings of remuneration components and relevant performance criteria.
Compliance with recommendation during the year ended 31 March 2020:
Remuneration of directors has been determined in line with the process noted under recommendation 3.3
above and with the Company’s Corporate Governance Code.
The Company’s governance policies and procedures are currently being reviewed and updated. A draft
Remuneration Policy and a draft Procedure for Assessing Director, Board and Committee Performance is
currently with the Board for consideration. These documents are expected to comply with the recommendation
and once the majority of the Company’s governance policies and procedures have been updated and finalised,
they will be published to the Company’s website.
Recommendation 5.3
An issuer should disclose the remuneration arrangements in place for the CEO in its annual report. This should
include disclosure of the base salary, short term incentives and long-term incentives and the performance
criteria used to determine performance-based payments.
17
Corporate Governance Statement (Continued)
Compliance with recommendation during the year ended 31 March 2020:
Information in relation to the remuneration arrangements in place for Brent King (Managing Director) is included
in the Shareholder and Statutory Information section of the Annual Report.
PRINCIPLE 6 – Risk Management
“Directors should have a sound understanding of the material risks faced by the issuer and how to manage
them. The Board should regularly verify that the issuer has appropriate processes that identify and manage
potential and material risks.”
Recommendation 6.1
An issuer should have a risk management framework for its business and the issuer’s board should receive
and review regular reports. An issuer should report the material risks facing the business and how these are
being managed.
Compliance with recommendation during the year ended 31 March 2020:
The Company and its subsidiaries are committed to proactively managing risk and this has been the responsibility
of the entire Board with the assistance of the audit committee during the period. The Board delegates day to
day management of risks to the Managing Director. The executive team and senior management are required
to regularly identify the major risks affecting the business and develop structures, practices and processes to
manage and monitor these risks.
The Board is satisfied that the Group has in place a risk management process to effectively identify, manage and
monitor the Group’s principal risks. The Group maintains insurance policies that it considers adequate to meet
its insurable risks.
The Company’s Risk Management and Compliance framework is currently being reviewed and updated.
Recommendation 6.2
An issuer should disclose how it manages its health and safety risks and should report on its health and safety
risks, performance and management.
Compliance with recommendation during the year ended 31 March 2020:
The Group operates with a small number of employees in a relatively low health and safety risk office
environment. Despite this, the Board recognises that effective management of health and safety is essential for
the operation of a successful business, and endeavours to prevent harm and promote wellbeing for employees,
contractors and customers.
The Board is responsible for ensuring that the systems used to identify and manage health and safety risks are
fit for purpose, being effectively implemented, regularly reviewed and continuously improved. The Group has a
Health and Safety Policy in place. All new incidents, near misses, or hazards identified are reported to the Board.
PRINCIPLE 7 – Auditors
“The board should ensure the quality and independence of the external audit process.”
Recommendation 7.1
The board should establish a framework for the issuer’s relationship with its external auditors. This should
include procedures:
(a) for sustaining communication with the issuer’s external auditors;
(b) to ensure that the ability of the external auditors to carry out their statutory audit role is not impaired or
could be reasonably be perceived to be impaired;
18
Corporate Governance Statement (Continued)
(c) to address what, if any, services (whether by type or level) other than their statutory audit roles may be
provided by the auditors to the issuer; and
(d) to provide for the monitoring and approval by the issuer’s audit committee of any service provided by the
external auditors to the issuer other than in their statutory audit role.
Compliance with recommendation during the year ended 31 March 2020:
In accordance with the Company’s Board Charter and Audit Committee Charter, the Board in conjunction with
the Audit Committee were responsible for oversight of and communication with the external auditor and
reviewed the quality and cost of the audit undertaken by the Company’s external auditor. The Board in
conjunction with the Audit Committee also assesses the auditor’s independence on an annual basis.
For the financial year ended 31 March 2020, Baker Tilly Staples Rodway was the external auditor for the
Company. Baker Tilly Staples Rodway were automatically re-appointed under the Companies Act 1993 at the
Company’s 2019 annual meeting. The statutory audit services are fully separated from non-audit services to
ensure that appropriate independence is maintained. The amount of fees paid to Baker Tilly Staples Rodway for
audit and other services is identified in note 7 in the notes to the consolidated financial statements.
Baker Tilly Staples Rodway has provided the Board with written confirmation that, in their view, they were able
to operate independently during the year.
Recommendation 7.2
The external auditor should attend the issuer’s Annual Meeting to answer questions from shareholders in
relation to the audit.
Compliance with recommendation during the year ended 31 March 2020:
Baker Tilly Staples Rodway is invited to attend the annual meeting, and the lead audit partner is available to
answer questions from shareholders at that meeting. Baker Tilly Staples Rodway attended the 2019 annual
meeting.
Recommendation 7.3
Internal audit functions should be disclosed.
Compliance with recommendation during the year ended 31 March 2020:
The Company and its subsidiaries have internal controls in place including monitoring and checking that internal
controls are operating effectively. The Company d id not have a dedicated internal auditor role during the period.
Principle 8 – Shareholder Rights & Relations
“The board should respect the rights of shareholders and foster constructive relationships with shareholders
that encourage them to engage with the issuer.”
Recommendation 8.1
An issuer should have a website where investors and interested shareholders can access financial and
operational information and key corporate governance information about the issuer.
Compliance with recommendation during the year ended 31 March 2020:
Financial statements, NZX announcements and Directors’ profiles are included on the website at
www.gencap.co.nz
. Governance documents for the Company are under review, and once finalised will be
published on the Company’s website.
19
Corporate Governance Statement (Continued)
Recommendation 8.2
An issuer should allow investors the ability to easily communicate with the issuer, including providing the
option to receive communications from the issuer electronically.
Compliance with recommendation during the year ended 31 March 2020:
All shareholders are given the option to elect to receive electronic communications from the Company.
Recommendation 8.3
Quoted equity security holders should have the right to vote on major decisions which may change the nature
of the company in which they are invested in.
Compliance with recommendation during the year ended 31 March 2020:
Shareholders have been given the right to vote on all major decisions in line with the NZX Rules during the year
ended 31 March 2020.
Recommendation 8.4
If seeking additional equity capital, issuers of quoted equity securities should offer further equity security
holders of the same class on a pro rata basis and on no less favourable terms, before further equity securities
are offered to other investors.
Compliance with recommendation during the year ended 31 March 2020:
During the year ended 31 March 2020, the Company:
a. Issued warrants to directors and senior managers in accordance with the shareholder approval
obtained at the special meeting dated 29 November 2018.
b. Issued ordinary shares for GENWA warrants and GENWB warrants that were exercised by Shareholders
in accordance with the terms of the warrants.
No other capital raising activities were undertaken during the year.
Recommendation 8.5
The board should ensure that the notices of annual or special meetings of quoted equity security holders is
posted on the issuer’s website as soon as possible and at least 20 working days prior to the meeting.
Compliance with recommendation during the year ended 31 March 2020:
Due to time constraints, the notice of the 2019 Annual Meeting was released just short of the 20-working day
recommendation.
The Board encourages shareholder participation in meetings and understands that shareholders need sufficient
time to consider information prior to meetings. Future notices of Shareholder meetings are expected to be
provided at least 20 workings days prior to meeting dates.
20
21
Level 9, 45 Queen Street, Auckland 1010
PO Box 3899, Auckland 1140
New Zealand
T: +64 9 309 0463
F: +64 9 309 4544
E: auckland@bakertillysr.nz
W: www.bakertillysr.nz
INDEPENDENT AUDITOR’S REPORT
To the Shareholders of General Capital Limited
Report on the Audit of the Consolidated Financial Statements
Qualified Opinion
We have audited the consolidated financial statements of General Capital Limited and its subsidiaries ('the
Group') on pages 27 to 73, which comprise the consolidated statement of financial position as at 31 March
2020, and the consolidated statement of comprehensive income, consolidated statement of changes in equity
and consolidated statement of cash flows for the year then ended, and notes to the consolidated financial
statements, including significant accounting policies.
In our opinion, except for the effects of the matter described in the Basis for Qualified Opinion section of our
report, the accompanying consolidated financial statements present fairly, in all material respects, the
consolidated financial position of the Group as at 31 March 2020, and its consolidated financial performance
and its consolidated cash flows for the year then ended in accordance with New Zealand Equivalents to
International Financial Reporting Standards ('NZ IFRS') and International Financial Reporting Standards ('IFRS').
Our report is made solely to the Shareholders of the Group. Our audit work has been undertaken so that we
might state to the Shareholders of the Group those matters we are required to state to them in an auditor’s
report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the Shareholders of the Group as a body, for our audit work, for our report
or for the opinions we have formed.
Basis for Qualified Opinion
The Group’s goodwill and other indefinite life intangible assets allocated to its research and advisory cash-
generating unit (‘the research and advisory CGU’) , as disclosed in Note 13 of these consolidated financial
statements,
is carried at $1.06m on the Group’s consolidated statement of financial position as at 31 March
2020. We were unable to obtain sufficient appropriate audit evidence to support critical assumptions and
estimates used to determine the recoverable amount of the goodwill and other indefinite life intangible assets
allocated to the research and advisory CGU, specifically the achievability of forecast future revenue growth, the
associated cash flows and the discount rate applied. Consequently, we were unable to determine whether any
adjustments to these amounts were necessary.
22
We conducted our audit in accordance with International Standards on Auditing (New Zealand) ('ISAs (NZ)').
Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of
the Consolidated Financial Statements section of our report. We are independent of the Group in accordance
with Professional and Ethical Standard 1 (Revised) International Code of Ethics for Assurance Practitioners
(including International Independence Standards) (New Zealand) issued by the New Zealand Auditing and
Assurance Standards Board and the International Ethics Standards Board for Accountants’ Code of Ethics for
Professional Accountants (‘ IESBA Code’), and we have fulfilled our other ethical responsibilities in accordance
with these requirements and the IESBA Code. We believe that the audit evidence we have obtained is sufficient
and appropriate to provide a basis for our qualified opinion.
Other
than in our capacity as auditor, our firm carries out other assignments for General Capital Limited and its
subsidiaries in the area of taxation compliance services. The provision of these other services has not impaired
our independence.
Emphasis of Matter– Increased level of inherent uncertainty in the significant accounting estimates and
judgmentsapplied by Management in the preparation of these financial statements, arising from the
ongoing global pandemic of coronavirus disease 2019
We draw attention to note4.1 of the financial statements, which describes the impact of the ongoing global
pandemic of the novel coronavirus disease 2019 (‘COVID-19’) and Management’sassessment of and
responses to, this pandemic on theGroup. Since March 2020 the COVID-19 pandemic has lowered overall
economic activity and confidence, resulting in significant volatility and instability in financial markets and
economic uncertainty. Consequently, there has been an increase in the level of inherent uncertainty in the
critical accounting estimates and judgements applied by Management in the preparation of these financial
statements, described in notes4.2, 4.3, 4.4and4.5of the financial statements. As at the date of the signing of
these financial statements, all reasonably known and available information with respect to the COVID-19
pandemic has been taken into consideration in the critical accounting estimates and judgements applied by
Management, and all reasonably determinable adjustments have been made in preparing these financial
statements.
Our
opinion is not modified in respect of this matter.
Key Audit Matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit
of the consolidated financial statements of the current year. These matters were addressed in the context of
our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do
not provide a separate opinion on these matters. In addition to the matter described in the Emphasis of Matter
section, we have determined the matters described below to be the key audit matters to be communicated in
our report.
23
Key Audit Matter How our audit addressed the key audit matter
Applicability of the going concern basis of
accounting
As disclosed in Note 2 and 4.2 of the Group’s
financial statements, these financial
statements have been prepared on a going
concern basis, which contemplates continuity
of normal business activities and the
realisation of assets and the settlement of
liabilities in the ordinary course of business.
As described in our Emphasis of Matter
paragraph and Note 4.1 of the Group’s
financial statements, the ongoing COVID-19
pandemic, and the public health and social
measures and economic responses
implemented by governments, regulators and
industry sectors, have lowered economic
activity and confidence.
The application of the going concern basis of
accounting was significant to our audit due to
the subjectivity, complexity and uncertainty
inherent in assessing the impact the COVID-19
pandemic will have of the Group’s forecast
earnings, cash flow and financial position.
Management has prepared forecast earnings,
cash flows and financial position models as
part of its assessment of whether the Group’s
application of the going concern basis of
accounting was appropriate for the 31 March
2020 financial statements.
This assessment involves complex and
subjective estimation and judgement by
Management on the future performance,
cashflows and position of the Group.
Management have also performed sensitivity
analysis for reasonably possible changes in
key forecast assumptions.
Our
audit procedures among others included:
Evaluating Management’s assessment as to whether potential
impacts as a result of the implications of the COVID-19
pandemic could be material;
Evaluating Management’s response plan to the potential impacts
identified as a result of the implications of COVID-19 pandemic;
Evaluating Management’s assessment of the direct and indirect
financial impacts of the COVID-19 pandemic on the carrying
value of the Group’s reported assets and liabilities, and reported
amounts of revenues and expenses;
Evaluating Management’s assessment of the Group’s ability to
continue to apply the going concern basis of accounting, and the
appropriateness of this considering present economic
conditions;
Procedures included:
oEvaluating Management’s process regarding the
preparation and review of forecast financial statements
(balance sheet, income statement, and cash flow
statement);
oComparing Management’s forecasts to Board approved
forecasts;
oEvaluating the cash flow requirements of the Group for
twelve months from the date of signing the financial
statements based on Management’s forecasts;
oEvaluating the liquidity of existing financial assets on the
Group’s Statement of Financial Position;
oEvaluating the actual term deposit reinvestment and new
term deposit investment rates since March 2020 and
comparing them to Management’s forecasts;
oChallenging Management’s assumptions, estimates and
judgements used; and
oEvaluating Management’s sensitivity analysis for
reasonably possible changes in key assumptions, with an
emphasis on the potential downside scenarios and the
resultant impact on available funds.
Evaluating the disclosures related to the Group’s application of
the going concern basis of accounting and the impact of the
COVID-19 pandemic on the Group which are included in the
Group’s consolidated financial statements.
Valuation of loan receivables
As disclosed in Note 11 of the Group’s
financial statements, the Group has loan
receivable assets of $35.2m consisting on
short- and long-term loans secured by
residential property. Loan receivable assets
were significant to our audit due to the size of
the assets and the subjectivity, complexity and
uncertainty inherent in the timing of the
recognition of impairment in respect of loan
Our
audit procedures among others included:
Evaluating the design and operating effectiveness of the key
controls over loan receivable origination, ongoing administration
and impairment model data and calculations;
Selecting a representative sample of loan receivables and
agreeing these loan receivables to the loan agreement, client
acceptance documents, mortgage documents, and registered
valuations performed on acceptance;
24
Key Audit Matter How our audit addressed the key audit matter
receivables and the amount of that
impairment.
Management has prepared impairment
models to complete its assessment of
impairment for the Group’s loan receivables as
at 31 March 2020.
This assessment involves complex and
subjective estimation and judgement by
Management on credit risk and the future
cash flows of the loan receivables.
Examining the loan receivables individually assessed for
impairment and forming our own judgements as to whether the
impairment provision recognised by Management was
appropriate (including the consideration of the impact of the
COVID-19 pandemic on the impairment provision);
Testing the key inputs and the mathematical accuracy of the
calculations of the loan to value ratio analysis used to
individually assess the recoverability of loan receivables. We
have specifically challenged the valuation of the underlying
security and performed sensitivity analyses for reasonably
possible changes to the key inputs (including the consideration
of the impact of the COVID-19 pandemic on the valuation of the
underlying security);
For the 12 months expected credit loss provision, challenging
and evaluating the logic within Management’s model and key
assumptions used with our own experience (including the
consideration of the impact of the COVID-19 pandemic on key
assumptions used). Also, testing key inputs used in the collective
impairment models and the mathematical accuracy of the
calculations within the model; and
Evaluating the disclosures related to loan receivables and the
risk attached to them which are included in the Group’s
consolidated financial statements.
Impairment assessment of goodwill and other
indefinite life intangible assets
As disclosed in Note 13 of the Group’s
consolidated financial statements, the Group
has goodwill of $2.35m and indefinite life
intangible assets of $0.3m, allocated across
the two cash-generated units (‘CGU’s’).
Goodwill and other indefinite intangible assets
were significant to our audit due to the size of
the assets and the subjectivity, complexity and
uncertainty inherent in the measurement of the
recoverable amount of these CGU’s for the
purpose of the required annual impairment
test. The measurement of a CGU’s recoverable
amount includes the assessment and
calculation of its ‘value-in-use’.
Management has completed the annual
impairment test for each of the two CGU’s as
at 31 March 2020.
This annual impairment test involves complex
and subjective estimation and judgement by
Management on the future performance of the
CGU’s, discount rates applied to the future
cashflow forecasts and future market and
economic conditions.
In addition, the Basis for Qualified Opinion
section of our report describes that we were
unable to obtain sufficient appropriate audit
evidence to support critical assumptions and
estimates used to determine the recoverable
value of the goodwill and other indefinite life
intangible assets allocated to the research and
advisory CGU.
Our aud
it procedures among others included:
Evaluating management’s determination of the Group’s CGUs
based on our understanding of the nature of the Group’s
business and the economic environment. We also analysed the
internal reporting of the Group to assess how the CGU’s are
monitored and reported;
Challenging management’s assumptions and estimates used to
determine the recoverable value of its indefinite life intangible
assets, including those relating to forecasted revenue, cost,
capital expenditure and discount rates, by adjusting for future
events and corroborating the key market related assumptions to
external data (including the consideration of the impact of the
COVID-19 pandemic).
Procedures included:
oEvaluating the logic of the value- in-use calculations
supporting Management’s annual impairment test and
testing the mathematical accuracy of these calculations;
oEvaluating Management’s process regarding the
preparation and review of forecast financial statements
(balance sheet, income statement, and cash flow
statement);
oComparing forecasts to Board approved forecasts;
oEvaluating the historical accuracy of the Group’s
forecasting to actual historical performance;
oEvaluating the inputs to the calculation of the discount
rates applied;
oEngaging our own internal valuation experts to evaluate the
logic of the value-in-use calculation and the inputs to the
calculation of the discount rates applied;
25
Key Audit Matter How our audit addressed the key audit matter
oEvaluating Management’s sensitivity analysis for
reasonably possible changes in key assumptions; and
oPerforming our own sensitivity analyses for reasonably
possible changes in key assumptions, the two main
assumptions being: the discount rate and forecast growth
assumptions.
Evaluating the related disclosures about goodwill and other
indefinite life intangible assets which are included in the Group’s
consolidated financial statements.
Other Information
The Directors are responsible for the other information. The other information comprises the information
included in the Group’s annual report for the year ended 31 March 2020 (but does not include the consolidated
financial statements and our auditor’s report thereon).
Our opinion on the consolidated financial statements does not cover the other information and we do not
express any form of audit opinion or assurance conclusion thereon.
In c
onnection with our audit of the consolidated financial statements, our responsibility is to read the other
information and, in doing so, consider whether the other information is materially inconsistent with the
consolidated financial statements or our knowledge obtained in the audit or otherwise appears to be materially
misstated.
If
, based on the work we have performed, we conclude that there is a material misstatement of this other
information, we are required to report that fact. We have nothing to report in this regard.
Responsibilities of the Directors for the C onsolidated Financial Statements
The Directors are responsible on behalf of the Group for the preparation and fair presentation of the
consolidated financial statements in accordance with NZ IFRS and IFRS, and for such internal control as the
Directors determine is necessary to enable the preparation of the consolidated financial statements that are
free from material misstatement, whether due to fraud or error.
In p
reparing the consolidated financial statements, the Directors are responsible on behalf of the Group for
assessing the Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless the Directors either intend to liquidate the
Group or to cease operations, or have no realistic alternative but to do so.
26
Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a
whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that
includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit
conducted in accordance with ISAs (NZ) will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered material if, i ndividually or in the aggregate, they
could reasonably be expected to influence the economic decisions of users taken on the basis of these
consolidated financial statements.
A further description of the auditor’s responsibilities for the audit of the consolidated financial statements is
located at the External Reporting Board’s website at:
https://xrb.govt.nz/standards-for-assurance-practitioners/auditors-responsibilities/audit-report-3/
Matters Relating to the Electronic Presentation of the Audited Consolidated Financial Statements
This audit report relates to the consolidated financial statements of General Capital Limited and its subsidiaries
for the year ended 31 March 2020 included on General Capital Limited’s website. The Directors of General
Capital Limited are responsible for the maintenance and integrity of General Capital Limited’s website. We have
not been engaged to report on the integrity of General Capital Limited’s website. We accept no responsibility
for any changes that may have occurred to the consolidated financial statements since they were initially
presented on the website.
The audit report refers only to the consolidated financial statements named above. It does not provide an
opinion on any other information which may have been hyper linked to or from these consolidated financial
statements. If readers of this report are concerned with the inherent risks arising from electronic data
communication they should refer to the published hard copy of the audited consolidated financial statements
and related audit report dated 16 July 2020 to confirm the information included in the audited consolidated
financial statements presented on this website.
Legislation in New Zealand governing the preparation and dissemination of consolidated financial statements
may differ from legislation in other jurisdictions.
The engagement partner on the audit resulting in this independent auditor’s report is G K Raniga.
BAKER TILLY STAPLES RODWAY AUCKLAND
Auckland, New Zealand
16 July 2020
20202019
Note$$
Interest income
5 2,846,439 1,479,226
Interest expense
5 (1,441,213) (640,270)
Net interest income
1,405,226 838,956
Fee and commission income
5 553,686 281,176
Fee and commission expense
5 (128,699) (92,332)
Net fee and commission income
424,987 188,844
Revenue from contracts with customers
5 227,715 347,702
Cost of sales
5 (32,545) (24,368)
Gross profit from contracts with customers
195,170 323,334
Other income
12,761 28,163
Net revenue
2,038,144 1,379,297
Release / (increase) in allowance for expected credit losses
11
(54,999) 19,456
Personnel expenses
(746,680) (603,011)
Occupancy expenses
(117,373) (90,176)
Depreciation
(4,444) (3,493)
Amortisation of intangible assets
13
(22,793) (18,201)
Other expenses
7
(901,392) (603,152)
Acquisition expenses
- (103,927)
Loss on acquiring listed shell
21
- (405,280)
(1,847,681) (1,807,784)
Profit / (loss) before income tax expense
190,463 (428,487)
Income tax (expense) / benefit8
(60,907) (29,601)
Net profit / (loss) after income tax expense
129,556 (458,088)
Other comprehensive income
Items that will not be reclassified to profit or loss
14, 17(e)
(153,094) (14,862)
Income tax on these items8, 17(e)
43,273
-
Other comprehensive income / (loss) for the year, net of tax
(109,821) (14,862)
Total comprehensive income / (loss)
19,735 (472,950)
Earnings per share (cents per share)9
0.08 (0.46)
Diluted earnings per share (cents per share)9
0.08 (0.36)
The accompanying notes are an integral part of these financial statements.
GENERAL CAPITAL LIMITED
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 MARCH 2020
Changes in the fair value of equity investments at fair value
through other comprehensive income
27
GENERAL CAPITAL LIMITED
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 31 MARCH 2020
Equity
Share capital
Accumulated losses
Reserves
Total equity
Assets
Cash and cash equivalents
Accounts receivables
Related party receivables
Loan receivables
Other current assets
Income tax receivable
Deferred tax asset
Property, plant and equipment
Investments
Intangible assets and goodwill
Total assets
Liabilities
Accounts payable and other payables
Related party payables
Income tax payable
Term deposits
Total liabilities
Net assets
The accompanying notes are an integral part of these financial statements.
Net tangible assets (NTA) per share (cents per share)
Net assets (NA) per share (cents per share)
The financial statements are signed on behalf of the Board.
Rewi Bugo
Chairman
Authorised for issue on: \6 -:Su..� '.l.D'J-0
Note
17(a)
17(e)
10
18
11
8.2
14
13
18
15
2020
$
10,176,204
(676,417)
(117,780)
9,382,007
12,562,241
10,859
79,823
34,855,849
266,523
96,004
8,008
237,389
3,046,811
51,163,507
319,381
2,925
8,697
41,450,497
41,781,500
9,382,007
3.86
5.80
2019
$
9,573,495
(805,973)
(14,862)
8,752,660
2,949,317
19,246
17,277,204
114,844
45,450
38,408
6,176
190,483
3,266,556
23,907,684
246,624
7,942
14,900,458
15,155,024
8,752,660
3.54
5.69
28
GENERAL CAPITAL LIMITED
Note$$$$$
1,448,503 4,747,418 - (280,728) 5,915,193
- - - (19,119) (19,119)
- (1,167,314) - (48,038) (1,215,352)
1,448,503 3,580,104 - (347,885) 4,680,722
- - - (458,088) (458,088)
- - (14,862) - (14,862)
- - (14,862) (458,088) (472,950)
17(a)
5,080,104 (3,580,104) - - 1,500,000
17(a)
1,121,259 - - - 1,121,259
17(a)
1,923,629 - - - 1,923,629
8,124,992 (3,580,104) - - 4,544,888
9,573,495 - (14,862) (805,973) 8,752,660
- - - 129,556 129,556
14, 17(e)
- - (109,821) - (109,821)
- - (109,821) 129,556 19,735
17(a)
602,709 - - - 602,709
17(d), 19
- - 6,903 - 6,903
602,709 - 6,903 - 609,612
10,176,204 - (117,780) (676,417) 9,382,007
The accompanying notes are an integral part of these financial statements.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 MARCH 2020
Redeemable
Preference
Shares
Total transactions with owners in
their capacity as owners
Issue of warrants to directors and
senior managers
Balance at 31 March 2020
Share capitalReserves
Balance at 31 March 2019
Profit for the year
Other comprehensive income for
the year
- Change in accounting policy
- Impact of finalisation of
acquisition accounting
Restated total equity as at 1 April
2018
Conversion of redeemable
preference shares
Issue of shares on acquisition of
subsidiary
Total equity
Balance at 31 March 2018 as
originally presented
Contributions of equity net of
transaction costs
Loss for the year
Other comprehensive income for
the year
Total comprehensive income for
the year
Transactions with owners in their
capacity as owners:
Total transactions with owners in
their capacity as owners
Transactions with owners in their
capacity as owners:
Contributions of equity net of
transaction costs
Total comprehensive income for
the year
Accumulated
losses
29
GENERAL CAPITAL LIMITED
20202019
Note
$$
Cash flow from operating activities
Interest received
2,520,543 1,376,467
Receipts from customers
491,332 393,838
Other income
12,761 27,783
Payments to suppliers and employees
(2,041,737) (1,587,300)
Interest paid
(1,242,655) (585,614)
Income tax paid
(21,083) (142,421)
Finance receivables (net advances)
(17,091,608) (8,516,032)
Net cash (used in) / provided by operating activities 20
(17,372,447) (9,033,279)
Cash flow from investing activities
Acquisition of subsidiaries (net of cash acquired)
- 85,736
Purchase of property, plant and equipment
(6,276) (2,629)
Purchase of software
(4,444) (32,742)
Net cash provided by / (used in) investing activities
(10,720) 50,365
Cash flow from financing activities
Issue of ordinary shares
602,709 1,923,628
Term deposits (net receipts)
26,393,382 5,058,474
Net cash provided by financing activities
26,996,091 6,982,102
Reconciliation of cash and cash equivalents
2,949,317 4,950,129
9,612,924 (2,000,812)
10
12,562,241
2,949,317
The accompanying notes are an integral part of these financial statements.
Cash and cash equivalents at end of the reporting period
Net (decrease) / increase in cash and cash equivalents held
during the reporting period
Cash and cash equivalents at beginning of the reporting
period
CONSOLIDATED STATEMENT OF CASHFLOWS
FOR THE YEAR ENDED 31 MARCH 2020
30
NOTE 1: REPORTING ENTITY
The consolidated financial statements were authorised for issue by the directors on 16 July 2020.
NOTE 2: BASIS OF PREPARATION
NOTE 3: SIGNIFICANT ACCOUNTING POLICIES
3.1 New and amended standards adopted by the Group
(a) NZ IFRS 16 Leases
Thesefinancial statementshavebeenpreparedona goingconcernbasis, whichcontemplatescontinuityof normal business activitiesand
therealisationof assetsandthesettlementofliabilitiesin theordinary courseof business, in accordancewith historicalcost concepts, as
modified by the revaluation of certain assets and liabilities as identified in the accounting policies below.
AsignificanteventaroseinMarch2020,priortoreportingdate,namelytheglobalpandemicofcoronavirusdisease2019,thathashadand
isexpectedtocontinuetohaveanimpactontheGroup'searnings,cashflowsandfinancialposition.Refertonotes4.1and24 forfurther
information.TheDirectorsandManagementhavedeterminedthattheGroup’sapplicationofthegoingconcernbasisofaccountingremains
appropriate in light of this event, refer to note 4.2.
The financial statements are presented in New Zealand dollars which is the Group'scurrency. Unlessotherwise indicated, amounts inthe
financial statements these amounts have been rounded to the nearest dollar.
NZIFRS16,‘Leases’,replacesNZIAS17.UnderNZIFRS16,acontractis,orcontains,aleaseifthecontractconveystherighttocontrolthe
use of an identified asset for a period of time in exchange for consideration.
UnderNZIAS17,alesseewasrequiredtomakeadistinctionbetweenafinancelease(onbalancesheet)andanoperatinglease(offbalance
sheet).NZIFRS16nowrequiresalesseetorecognisealeaseliabilityreflectingfutureleasepaymentsanda‘right-of-useasset’forvirtually
all lease contracts. Lessors will also be affected by the new standard.
TheGrouphasnoleaseagreementsinplaceasat1April2019anduptothedateofsigningthesefinancialstatements.SinceJune2018,the
Group has been paying a share of office lease costs to Moneyonline Limited, a related company, based on an allocation of office space
utilised by the Group.
GENERAL CAPITAL LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2020
General Capital Limited ("the Company") is incorporated and domiciled in New Zealand. General Capital Limited is registered under the
Companies Act 1993.
General Capital Limited is a FMC reporting entity for the purposes of the Financial Markets Conduct Act 2013.
The consolidated financial statements of General Capital Limited and its subsidiaries (together "the Group") have been prepared in
accordance with the Companies Act 1993 and the Financial Markets Conduct Act 2013.
The Group is a for profit entity.
The Group's principal activities are:
- Finance (deposit taking and lending);
- Research and advisory (investment advisory and research provider).
These financial statements have been prepared in accordance with Generally Accepted Accounting Practice in New Zealand ("NZ GAAP").
They comply with New Zealand Equivalents to International Financial Reporting Standards ("NZ IFRS") and other applicable Financial
Reporting Standards, as appropriate for profit oriented entities. These consolidated financial statements also comply with International
Financial Reporting Standards ("IFRS").
The financial report has been prepared under the historical cost convention, as modified by revaluations for certain classes of assets and
liabilities to fair value as described in the accounting policies below.
Theaccountingpoliciessetoutbelowhavebeenappliedconsistentlytoallperiodspresentedintheseconsolidatedfinancialstatements,and
have been applied consistently by Group entities.
31
GENERAL CAPITAL LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2020
NOTE 3: SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(b) NZ IFRIC 23 Uncertainty over Income Tax Treatments
(c) Other
3.2 Basis of consolidation
The Group measures goodwill at the acquisition date as:
-the fair value of the consideration transferred; plus
-the recognised amount of any non-controlling interests in the aquiree; plus
-if the business combination is achieved in stages, the fair value of the pre-existing equity interest in the acquiree; less
-the net recognised amount of the identifiable assets acquired and liabilities assumed.
When an excess is negative, a bargain purchase gain is recognised immediately in profit or loss.
If the Group were to formalise a lease agreement with Moneyonline Limited, it would likely mirror the term and other conditions of
MoneyonlineLimited’sleaseagreementwithanexternalparty.Asat31March2020,thetotalremainingtermofthatofthatleasewas14
months,andthecurrentmonthlyallocationoftheleasecostspaidbytheGroupis$8,828,implyingtotalundiscountedremainingpayments
of $123,592 as at 31 March 2020.
ShouldanagreementbeformalisedwithMoneyonlineLimited,aleaseliabilityandaright-of-useassetwouldneedtoberecognisedonthat
date,representedbythepresentvalueoffutureleasepayments.Depreciationexpensewouldberecordedonastraight-linebasisoverthe
leaseterm, andinterestwillberecognisedontheleaseliabilityusingtheamortisedcost method.Thiswillresultinhigher expensesbeing
recorded at the start of the lease term than at the end (due to the liability being ‘wound down’ over the lease term).
This Interpretation sets out how to determine the accounting tax position when there is uncertainty over income tax treatments. The
Interpretationrequiresanentitytodeterminewhetheruncertaintaxpositionsareassessedseparatelyor asagroup(dependingonwhich
approachgivesabetterpredictionoftheresolutionoftheuncertainty),andassesswhetheritisprobablethatataxauthoritywillacceptan
uncertain tax treatment used, or proposed to be used, by an entity in its income tax filings.
If it isprobableataxauthoritywillacceptthetreatment, theentityshoulddetermineitsaccountingtax positionconsistentlywith thetax
treatmentusedorplannedtobeusedinitsincometaxfilings.Otherwise,theentityshouldreflecttheeffectofuncertaintyindetermining
its accounting tax position by estimating the tax payable (or receivable), using either the most likely amount or the expected value method.
Therearenonewdisclosurerequirements,howeverthereisageneralrequirementtoprovideinformationaboutjudgementsandestimates
made in preparing the financial statements.
The Group has no materially uncertain tax positions that have warranted such adjustments to its accounting tax position.
Other standards and amendments adopted include Amendments to NZ IFRS 9Prepayment Features with Negative Compensation; the
AnnualImprovementstoNZ IFRS Standards2015–2017Cycle, whichinclude amendmentsto four Standards, NZ IAS 12Income Taxes, NZ
IAS 23BorrowingCosts, NZIFRS 3Business Combinations,andNZIFRS 11JointArrangements.Theseamendmentswhileadopted,either
had no material impact or relate to standards not currently applied by the Group.
Reverse acquisition of Corporate Holdings Limited
AsdescribedinNote21,astheCompany'sacquisitionofCorporateHoldingsLimitedon3August2018isdeemedtobeareverseacquisition
foraccountingpurposes,thesefinancialstatementsrepresentacontinuationoftheconsolidatedfinancialstatementsofCorporateHoldings
Limited.
The financial information presented up to 3 August 2018 comprises Corporate Holdings Limited and its two subsidiaries. From 3 August
2018,thefinancialinformationcomprisestheconsolidatedresultsoftheCompany,CorporateHoldingsLimited,andthetwosubsidiariesof
Corporate Holdings Limited.
Business combinations
Business combinations are accounted for using the acquisition method as at the acquisition date, which is the date on which control is
transferredtotheGroup.Subsidiariesareallentities(includingstructuredentities)overwhichtheGrouphascontrol.TheGroupcontrolsan
entitywhentheGroupisexposedto,orhasrightsto,variablereturnsfromitsinvolvementwiththeentityandhastheabilitytoaffectthose
returns through its power over the entity.
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.
32
GENERAL CAPITAL LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2020
NOTE 3: SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
3.4 Revenue and expense recognition
Anycontingentconsiderationpayableismeasuredatfairvalueattheacquisitiondate.Ifthecontingentconsiderationisclassifiedasequity,
thenitisnotremeasuredandsettlementisaccountedforwithinequity.Otherwise,subsequentchangesinthefairvalueofthecontingent
consideration are recognised in profit or loss or other comprehensive income as appropriate.
Subsidiaries
Subsidiaries are all entities controlled by the Group. The financial statements of subsidiaries are included in consolidated financial
statements from the date that control commences until the date that control ceases.
Loss of control
On loss of control, the Group derecognises the assets and liabilities of the subsidiary, any non-controlling interests and the other
componentsofequityrelatedtothesubsidiary.Anysurplusor deficitarisingonlossof controlisrecognisedinprofit or loss.If theGroup
retainsaninterestintheprevioussubsidiary,theinterestismeasuredatfairvalueatthedatecontrolislost.Subsequentlyitisaccounted
for as an equity-accounted investee or as an available for sale asset depending on the influence retained.
Transactions eliminated on consolidation
Intra-group balances and transactions, and any unrealised income and expenses arising from intra-group transactions, are eliminated in
preparing the consolidated financial statements.
(a) Interest income and expense
Interest income and interest expense
Interest income and interest expense is recognised in profit or loss using the effective interest method. The effective interest method
calculates the amortised cost of a financial asset or liability and allocates the interest income and directly related fees (including loan
origination fees) and transaction costs (including commission expenses) that arean integral component ofthe effectiveinterest rateover
the expected life of the financial asset or liability.
Loan fees and commissions
Lendingfeeincome(suchasloanestablishmentfees)thatisintegraltotheeffectiveyieldofaloanheldatamortisedcostiscapitalisedas
partoftheamortisedcostanddeferredoverthelifeoftheloanusingtheeffectiveinterestmethod.Lendingfeesnotdirectlyrelatedtothe
originationofaloan(accountmaintenancefee)arerecognisedovertheperiodofservice.Incrementalanddirectlyattributablecosts(such
as commissions) associated with the origination of a financial asset (such as loans) and financial liabilities (such as term deposits) are
capitalised as part of the amortised cost and deferred over the life of the financial instrument using the effective interest method.
(b) Revenue from contracts with customers:
Advisory fee revenue
Advisorycontractsgenerallyspanaperiodofthreemonthstooneandahalfyears.Managementdeterminetheperformanceobligation(s)
inherentinthecontractatcontractinceptionandrecogniserevenueuponcompletionofeachoftheperformanceobligations.Performance
obligationsincludeadviceprovidedtotheentityandsometimesincludethesuccessofaproject. Therearespecificbillingmilestonesbuilt
into each contract and payment is generally due within 30 to 60 days of the milestone.
Yearbook and research sales
Thisincludesrevenuerelatedtothesaleofpublicationsandfeesforadvertisementsinthepublications.Theperformanceobligationforthe
advertising fees is satisfied when the publications are published and available to be purchased by customers, and include the contracted
advertisements. Payment is generally due within 30 to 60 days from production. The performance obligation relating to the sale of
publications is satisfied upon delivery of the publications. Payment is generally due within 30 to 60 days from delivery.
Other fee income
FeeschargedbyGeneralFinanceLimitedthatdonotrelatetotheoriginationoffinancereceivables(forinstanceloanholdingfees).These
fees are charged and recognised upon satisfaction of the conditions stipulated in the contract.
Assets and liabilities arising from revenue from contracts with customers
Accounts receivables are non-interest bearing and are generally on terms of 30 to 60 days. Contract assets are recognised for any
performanceobligationswhichhavebeensatisfiedinadvanceofbillingtoclients.Theamountsaretransferredtoaccountsreceivablewhen
billed to customers. Contract costs are capitalised in respect of directly attributable contract costs (such as directly related allocations of
personnel costs) which relate to revenue which has not been recognised. Costs are only recognised if the amounts are expected to be
recovered from customers, are amortised when the associated revenue is billed to the customer, and are subject to impairment testing.
Contract liabilities are recognised in respect of any amounts billed to customers in advance of satisfaction of the associated performance
obligations.
33
GENERAL CAPITAL LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2020
NOTE 3: SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
3.5 Financial instruments
Financial assets
All recognised financial assets are measured subsequently in their entirety at either amortised cost or fair value, depending on the
classification of the financial assets.
Classification of financial assets
Financial assets that meet the following conditions are measured subsequently at amortised cost:
- the financial asset is held within a business model whose objective is to hold financial assets in order to collect contractual cash flows; and
-thecontractualtermsofthefinancialassetgiveriseonspecifieddatestocashflowsthataresolelypaymentsofprincipalandintereston
the principal amount outstanding.
Financial assets that meet the following conditions are measured subsequently at fair value through other comprehensive income (FVTOCI):
- the financial asset is held within a business model whose objective is achieved by both collecting contractual cash flows and selling the
financial assets; and
-thecontractualtermsofthefinancialassetgiveriseonspecifieddatestocashflowsthataresolelypaymentsofprincipalandintereston
the principal amount outstanding.
By default, all other financial assets are measured subsequently at fair value through profit or loss (FVTPL).
Despite the foregoing, the Group may make the following irrevocable election/designation at initial recognition of a financial asset:
- the Group may irrevocably elect to present subsequent changes in fair value of an equity investment in other comprehensive income if
certain criteria are met; and
- theGroupmayirrevocablydesignatea financialassetthatmeetstheamortisedcostorFVTOCIcriteriaasmeasuredat FVTPLif doingso
eliminates or significantly reduces an accounting mismatch.
(i) Amortised cost and effective interest method
The effectiveinterest methodis amethod of calculating theamortised costof a financial asset and ofallocating interest income over the
relevant period.
For financial assets other than purchased or originated credit‑impaired financial assets (i.e. assets that are credit‑impaired on initial
recognition),theeffectiveinterestrateistheratethatexactlydiscountsestimatedfuturecashreceipts(includingallfeesandpointspaidor
received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) excluding expected
creditlosses, throughtheexpectedlifeofthefinancialasset, or, whereappropriate, ashorter period,tothegrosscarryingamountofthe
financialassetoninitialrecognition.Forpurchasedororiginatedcredit‑impairedfinancialassets,acredit‑adjustedeffectiveinterestrateis
calculatedbydiscountingtheestimatedfuturecashflows,includingexpectedcreditlosses,totheamortisedcostofthedebtinstrumenton
initial recognition.
The amortised cost of a financial asset is the amount at which the financial asset is measured at initial recognition minus the principal
repayments, plus the cumulative amortisation using the effective interest method of any difference between that initial amount and the
maturityamount, adjustedfor anylossallowance.Thegrosscarryingamount of a financialasset isthe amortisedcost of a financialasset
before adjusting for any loss allowance.
Interestincomeisrecognisedusingtheeffectiveinterestmethodforfinancialassetsmeasuredsubsequentlyatamortisedcost.Forfinancial
assets other than purchased or originated credit‑impaired financial assets, interest income is calculated by applying the effective interest
rate to the gross carrying amount of a financial asset, except for financial assets that have subsequently become credit
‑
impaired (see
below).
(c) Other
Other expense recognition
All other expenses are recognised in profit or loss as incurred.
Initial recognition
FinancialassetsandfinancialliabilitiesarerecognisedintheGroup’sstatementoffinancialpositionwhentheGroupbecomesapartytothe
contractual provisions of the instrument.
Financialassetsandfinancialliabilitiesareinitiallymeasuredatfairvalue.Transactioncoststhataredirectlyattributabletotheacquisition
orissueoffinancialassetsandfinancialliabilities(otherthanfinancialassetsandfinancialliabilitiesatfairvaluethroughprofitorloss)are
addedtoordeductedfromthefairvalueofthefinancialassetsorfinancialliabilities,asappropriate,oninitialrecognition.Transactioncosts
directlyattributabletotheacquisitionoffinancialassetsorfinancialliabilitiesatfairvaluethroughprofitorlossarerecognisedimmediately
in profit or loss.
34
GENERAL CAPITAL LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2020
NOTE 3: SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Stage 1
12-month ECL (past due 30 days or less)
Stage 2
Lifetime ECL not credit impaired (between 30 and 90 days past due)
Stage 3
Lifetime ECL credit impaired (greater than 90 days past due)
Forfinancialassetsthathavesubsequentlybecomecredit
‑
impaired,interestincomeisrecognisedbyapplyingtheeffectiveinterestrateto
the amortised cost of the financial asset. If, in subsequent reporting periods, the credit risk on the credit
‑
impaired financial instrument
improvessothatthefinancialassetisnolongercredit‑impaired,interestincomeisrecognisedbyapplyingtheeffectiveinterestratetothe
gross carrying amount of the financial asset.
Financial assets measured at amortised cost include cash and cash equivalents, loan receivables and trade receivables.
Where there has been no evidence of an increase in credit risk since initial recognition, ECLs that result from possible default
events within 12 months are recognised.
Where there has been a significant increase in credit risk, ECLs that result from all possible default events over the life of the
loan are recognised.
Where loans are in default or otherwise credit impaired, ECLs that result from all possible default events over the life of the
loan are recognised.
(ii) Financial assets at FVTOCI
Equity Instruments at FVTOCI
On initial recognition, the Group may make an irrevocable election (on an instrument by instrument basis) to designate investments in
equity instruments as at FVTOCI. Designation at FVTOCI is not permitted if the equity investment is held for trading or if it is contingent
consideration recognised by an acquirer in a business combination.
A financial asset is held for trading if:
- it has been acquired principally for the purpose of selling it in the near term; or
-on initial recognition it is part of a portfolio of identified financial instruments that the Group manages together and has evidence of a
recent actual pattern of short term profit taking; or
-it is a derivative (except for a derivative that is a financial guarantee contract or a designated and effective hedging instrument).
InvestmentsinequityinstrumentsatFVTOCIareinitiallymeasuredatfairvalueplustransactioncosts.Subsequently,theyaremeasuredat
fair value with gains and losses arising from changes in fair value recognised in other comprehensive income and accumulated in the
investments revaluation reserve. The cumulative gain or loss is not be reclassified to profit or loss on disposal of the equity investments,
instead, it is transferred to retained earnings. Fair value is determined in the manner described in note 14.
DividendsontheseinvestmentsinequityinstrumentsarerecognisedinprofitorlossinaccordancewithIFRS9,unlessthedividendsclearly
represent a recovery of part of the cost of the investment.
TheGrouphasdesignatedallinvestmentsinequityinstrumentsthatarenotheldfortradingasatFVTOCIoninitialapplicationofIFRS9(see
note 14).
Impairment of Financial Assets
The Group recognises a loss allowance for expected credit losses on financial assets that are measured at amortised cost. The amount of
expectedcredit lossesisupdatedat eachreportingdatetoreflect changesincredit risksinceinitialrecognitionoftherespectivefinancial
assets.
TheGrouprecogniseslifetimeECLfortradeandotherreceivables.Theexpectedcreditlossesonthesefinancialassetsareestimatedusinga
provision matrix based on the Group’s historical credit loss experience, adjusted for factors that are specific to the debtors, general
economicconditionsandanassessment ofboththecurrent aswellastheforecast directionof conditionsatthereportingdate,including
time value of money where appropriate.
Forloanreceivables,theGroupappliesathree-stageapproachtomeasuringECLs.Loansmaymigratethroughthefollowingstagesbasedon
their change in credit quality.
35
GENERAL CAPITAL LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2020
NOTE 3: SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
v) Measurement and recognition of expected credit losses
The measurement of expected credit losses is a function of the probability of default, loss given default (i.e. the magnitude of the loss if
thereisadefault)andtheexposureatdefault.Theassessmentoftheprobabilityofdefaultandlossgivendefaultisbasedonhistoricaldata
adjusted for forward‑looking information as described above.
As for the exposure at default, for financial assets, this is represented by the assets’ gross carrying amount at the reporting date.
Forfinancialassets,theexpectedcreditlossisestimatedasthedifferencebetweenallcontractualcashflowsthatareduetotheGroupin
accordancewiththecontractandallthecashflowsthattheGroupexpectstoreceive, discountedattheoriginaleffectiveinterest rate.In
instanceswheretheprobabilityofdefaulthasincreasedsignificantly(asignificantincreaseincreditrisk),orwheretheloanisindefault,the
expectedcredit loss(or lossgivendefault) maynot increasesignificantly dueto theGroup’s lendingcriteria whichprohibits lendingwhen
theloantovaluationratio(LVR)exceeds75%.ThismeansingeneralthattheGroupexpectsthatthepresentvalueofexpectedcashflows
fromaloanindefaulttoapproximatethecarryingvalueoftheloanpriortothedefaultevent,exceptincaseswheretheLVRhasincreased
considerably due to a reduction in the security property valuation or a significant increase in the loan balance.
(i) Significant increase in credit risk
Inassessingwhetherthecreditriskonafinancialassethasincreasedsignificantlysinceinitialrecognition,theGroupcomparestheriskofa
defaultoccurringonthefinancialassetatthereportingdatewiththeriskofadefaultoccurringonthefinancialassetat thedateofinitial
recognition. In making this assessment, the Group considers both quantitative and qualitative information.
ThenatureoftheGroup’sfinancereceivablesisshort-termresidentialpropertylendingwithapredominantfocusontheunderlyingsecurity
value of the finance receivable (i.e. the residential property value) in the credit assessment. Credit risk information is updated and
monitoredregularly.Loanreceivablesaresubjecttoregularscrutiny,asakeycomponentofcreditriskmanagement. Thisincludesareview
of the borrower’s repayment history and any interest arrears; any changes in the borrowers circumstances which could impact on their
ability to repay either interest or principal amounts on their due date; and any movement in the security value.
Irrespectiveoftheoutcomeoftheaboveassessment,theGrouppresumesthatthecreditriskonafinancialassethasincreasedsignificantly
since initial recognition when contractual payments are more than 30 days past due, unless the Group has reasonable and supportable
information that demonstrates otherwise.
TheGroupregularlymonitorstheeffectivenessofthecriteriausedtoidentifywhethertherehasbeenasignificantincreaseincreditriskand
revises them as appropriate to ensure that the criteria are capable of identifying significant increase in credit risk before the amount
becomes past due.
(ii) Definition of default
TheGroupconsiders thatdefaulthasoccurredwhenafinancialasset ismorethan90dayspastdueunlesstheGrouphasreasonableand
supportable information to demonstrate that a more lagging default criterion is more appropriate.
(iii) Credit
‑
impaired financial assets
A financial asset is credit‑impaired when one or more events that have a detrimental impact on the estimated future cash flows of that
financial asset have occurred. Evidence that a financial asset is credit‑impaired includes observable data about the following events:
a) an increase in loan to valuation ratio caused by either declining property security values or increases in the loan balance;
b) significant financial difficulty of the borrower; and
c) a breach of contract, such as a default or past due event (see (ii) above).
(iv) Write
‑
off policy
TheGroupwritesoffafinancialassetwhenthereisinformationindicatingthattheborrowerisinseverefinancialdifficultyandthereisno
realisticprospectofrecovery,forexampleanunsecuredfinancialassetwherebytheborrowerhasnorealisticabilitytomeettheirfinancial
obligationstotheGroup.FinancialassetswrittenoffmaystillbesubjecttoenforcementactivitiesundertheGroup’srecoveryprocedures,
taking into account legal advice where appropriate. Any recoveries made are recognised in profit or loss.
36
GENERAL CAPITAL LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2020
NOTE 3: SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
3.6 Cash and cash equivalents
3.7 Property, plant and equipment
3.8 Intangible assets
IftheGrouphasmeasuredthelossallowanceforafinancialassetatanamountequaltolifetimeECLinthepreviousreportingperiod,but
determines at the current reporting date that the conditions for lifetime ECL are no longer met, the Group measures the loss allowance at an
amount equal to 12‑month ECL at the current reporting date, except for assets for which simplified approach was used.
TheGrouprecognisesanimpairment gainorlossinprofit or lossfor allfinancial assetswith a correspondingadjustmentto their carrying
amount through a loss allowance account.
Financial Liabilities
Financial liabilities are classified into one of the following measurement categories:
- those to be measured subsequently at fair value through profit or loss (‘FVTPL'); and
- those to be measured at amortised cost.
At initial recognition financial liabilities are measured at fair value plus transaction costs that are directly attributable to the issue of the
financial liabilities. The amortised cost of a financial liability is the amount at which the financial liabilityis measuredat initial recognition
minustheprincipalrepayments,plusthecumulativeamortisationusingtheeffectiveinterestmethodofanydifferencebetweenthatinitial
amount and the maturity amount.
Theeffectiveinterestmethodisamethodofcalculatingtheamortisedcostofafinancialliabilityandofallocatinginterestexpenseoverthe
relevantperiod.Theeffectiveinterest rateistheratethatexactlydiscountsestimatedfuturecashpayments(includingallfeesandpoints
paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the
expected life of the financial liability, or (where appropriate) a shorter period, to the amortised cost of a financial liability.
The Group's financial liabilities measured at amortised cost include trade and other payables and term deposits.
The Group derecognises financial liabilities when, and only when, the Group’s obligations are discharged, cancelled or have expired. The
differencebetweenthecarryingamountofthefinancialliabilityderecognisedandtheconsiderationpaidandpayableisrecognisedinprofit
or loss.
Cashincludesdemanddepositswithanoriginaltermoflessthan183days
1
andotherhighlyliquidinvestmentsreadilyconvertibleintocash
used by the Group as part of day-to-day cash management.
1
Increased from 150 days in the prior year policy. There is no prior year impact resulting from this change in policy.
Intangible assets comprise goodwill, acquired licences, bartercard trade dollars and computer software.
Goodwillandacquiredlicencesareindefinitelifeintangiblessubjecttoannualimpairmenttesting.Goodwillisallocatedtocash-generating
unitsfor thepurposeof impairment testing.Theallocationismadetothosecash-generatingunitsor groups ofcash-generating unitsthat
are expected to benefit from the business combination in which the goodwill arose, identified according to the respective operating
segment. Refer to note 4.4 and note 13.
Derecognition of financial assets
TheGroupderecognisesafinancialassetonlywhenthecontractualrightstothecashflowsfromtheassetexpire,orwhenittransfersthe
financial asset and substantially all the risks and rewards of ownership of the asset to another entity. If the Group neither transfers nor
retainssubstantiallyalltherisksandrewardsofownershipandcontinuestocontrolthetransferredasset,theGrouprecognisesitsretained
interestintheassetandanassociatedliabilityforamountsitmayhavetopay.IftheGroupretainssubstantiallyalltherisksandrewardsof
ownership of a transferred financial asset, the Group continues to recognise the financial asset and also recognises a collateralised
borrowing for the proceeds received.
Onderecognitionofa financialassetmeasuredat amortisedcost, thedifferencebetweentheasset’scarryingamountandthesum ofthe
consideration received and receivable is recognised in profit or loss.
Property,plantandequipmentarerecognisedinthestatementoffinancialpositionatcostlessaccumulateddepreciationandimpairment
losses. Depreciation is calculated on property, plant and equipment on a straight-line basis to allocate the costs, net of any residual
amounts, over their useful lives. Office equipment is depreciated on a straight line basis using depreciation rates of 30% - 40% per annum.
37
GENERAL CAPITAL LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2020
NOTE 3: SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
3.9 Taxation
3.10 Impairment of non-financial assets
Licences acquired as part of business combinations are capitalised separately from goodwill as intangible assets if their value can be
measuredreliablyoninitialrecognitionanditisprobablethattheexpectedfutureeconomicbenefitsthatareattributabletotheassetwill
flow to the Group.
Intangible assets that have an indefinite useful life are not subject to amortisation and are tested for impairment annually or more
frequentlyifeventsorchangesincircumstancesindicatethattheymightbeimpaired.Intangibleassetsnotyetavailableforusearetested
for impairment annually or more frequently if events or changes in circumstances indicate that they might be impaired.
Other assets are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be
recoverable. The Group conducts an annual internal review of asset values, which is used as a source of information to assess for any
indicators of impairment. External factors, such as changes in expected future processes, technology and economic conditions, are also
monitored for indicators of impairment. If any indication of impairment exists, an estimate of the asset’s recoverable amount is calculated.
An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable
amount isthehigher of anasset’sfair valuelesscoststosellandvalueinuse.Valueinuseis determinedby estimatingfuture cashflows
from the use and ultimate disposal of the asset and discounting these to their present value using a pre-tax discount rate that reflects
currentmarketratesandtherisksspecifictotheasset.Forthepurposesofassessingimpairment,assetsaregroupedatthelowestlevelsfor
whichthereareseparatelyidentifiablecashflows(cash-generatingunits).Impairmentlossesdirectlyreducethecarryingamountofassets
and are recognised in profit or loss.
Non-financial assets other than goodwill that suffered impairment are reviewed for possible reversal of the impairmentat eachreporting
date.
BartercardTradeDollarsareunitsofelectroniccurrencyheldbytheGroupwhichcanbeusedtopayforproductsandservicesfromother
Bartercard members instead of paying in cash. They are non-monetary assets which are classified as indefinite life intangible assets. The
assetsarerecognisedatcostlessaccumulatedimpairmentlosses.Thetradedollarsareacquiredasearnedandconsumedasutilisedandare
testedatleastannuallyforimpairmentorwhenindicationofanimpairmentexist. Animpairmentlossisrecognisedwheneverthecarrying
amountofabartercardexceedsitsrecoverableamount.Theestimatedrecoverableamountofintangibleassets-BartercardTradeDollars
are the greater of their fair value less costs to sell or value in use. Trade debits arising from sales to customers and trade credits from
purchasesofservicesarerecognisedinthestatementofcomprehensiveincomeintheperiodinwhichthetransactionoccurs.Wheretrade
credits are used to purchase an asset, the asset is capitalised and recognised in the statement of financial position.
Computersoftwareisrecognisedinthestatementoffinancialpositionatcostlessaccumulatedamortisationandimpairmentlosses.Direct
costs associated with the purchase and installation of software licences and the development of software for internal use are capitalised
whereprojectsuccessisprobableandthecapitalisationcriteriaismet.Costassociatedwithplanningandevaluatingcomputersoftwareand
maintaining a system after implementation are expensed. Computer software costs are amortised on a straight-line basis (three years).
Incometaxfortheperiodcomprisescurrentanddeferredtax.Currentanddeferredtaxarerecognisedasanexpenseorincomeintheprofit
or loss,exceptwhentheyrelatetoitems thatarerecognisedoutsideprofit or loss(whether inothercomprehensiveincomeordirectlyin
equity), in which case the tax is also recognised outside profit or loss.
Currenttaxistheexpected taxpayable onthe taxableincome for the period, using tax rates enactedor substantivelyenacted at balance
dateaftertakingadvantageofallallowabledeductionsundercurrenttaxationlegislationandanyadjustmenttotaxliabilitiesinrespectof
previous years.
Deferred tax is provided using the liability method, providing for temporary differences between the amounts of assets and liabilities for
financial reporting purposes and the amounts used for taxation purposes. The amount of deferred tax provided is based on the expected
manner of realisation or settlement of the amount of assets andliabilities, usingtax ratesenacted or substantively enactedas at balance
date.
Deferredtaxationassetsarisingfromtemporarydifferencesorincometaxlosses,arerecognisedonlytotheextentthatitisprobablethata
future taxable profit will be available against which the asset can be utilised.
Deferredtaxationassetsarereducedtotheextentthatitisnolongerprobablethattherelatedtaxassetwillberealised.Anyreductionis
recognised in profit or loss.
38
GENERAL CAPITAL LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2020
NOTE 3: SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
3.11 Employee benefits
3.12 Statement of cash flows
3.13 Comparatives
NOTE 4: SIGNIFICANT ACCOUNTING ESTIMATES AND JUDGMENTS
There are a number of significant accounting treatments which include complex or subjective judgments and estimates that may affect the
reported amounts of assets in these financial statements. Estimates and judgments are continually evaluated and are based on historical
experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.
An explanation of the judgments and estimates made by the Group in the process of applying its accounting policies, that have the most
significant effect on the amounts recognised in the financial statements, are set out below.
Where necessary, comparative information has been reclassified and represented for consistency with current year.
4.1 Increased level of inherent uncertainty in the significant accounting estimates and judgments arising from the ongoing global
pandemic of coronavirus disease 2019
On 11 March 2020 the World Health Organization declared an ongoing global outbreak of a novel coronavirus, known as ‘coronavirus
disease 2019’ (‘COVID-19’), a pandemic.
In response the New Zealand Government has implemented a range of:
- public health and social measures to prevent and contain the transmission of COVID-19; and
- economic responses to provide financial stimulus and welfare support to mitigate the economic impacts of the pandemic.
Thepublichealthandsocialmeasuresimplementedincludedrestrictionsontravel/non-essentialmovement,entrybans/closureofborders,
quarantines, temporary closure of non-essential businesses and schools, and the cancellation of gatherings and events.
These public health and social measures have lowered overall economic activity and confidence, due to a reduced ability for many
businesses to operate, reduced demand for many goods and services, and resulted in significant volatility and instability in financial markets.
The New Zealand Government implemented a four-level COVID-19 alert system which specifies public health and social measures to be
takeninresponsetothepandemic.WithAlertLevel1beingtheleastrestrictiveandonerousandAlertLevel4beingthemost.Underthese
measures,theGroupwasclassifiedasaproviderofessentialservicesandwasabletoundertakeitsnormalbusinessactivitiesintheordinary
course of business.
The economic responses implemented by the New Zealand Government have mitigated some of the economic impacts. These responses
rangefromquantitativeeasingandreductionsinofficialinterestratesbythecentralbankstothereleaseofsignificantgovernmentfinancial
stimulus and welfare support packages.
Asaresultofthepandemic,theGroupanticipatesthattheloweredlevelsofeconomicactivityandconfidencewillcontinueforatleastthe
shorttomediumtermandwilllikelyresultinincreasedbusinessfailuresandunemploymentlevelsinNewZealand.Consequently,theGroup
hasconcludedtherebeenanincreaseinthelevelofinherentuncertaintyinthesignificantaccountingestimatesandjudgementsappliedby
Management in the preparation of these financial statements (refer note 4.2 and 4.3).
Wages, salaries and annual leave
Liabilitiesforwages,salariesandannualleavearerecognisedinrespectofemployees'servicesuptothereportingdate.Theyaremeasured
at the amounts expected to be paid when the liabilities are settled.
Superannuation plans
The Group pays contributions to superannuation plans, such as Kiwisaver. The Group has no further payment obligations once the
contributionshavebeenpaid.Thecontributionsarerecognisedasanemployeebenefitexpensewhentheyaredue.Prepaidcontributions
are recognised as an asset to the extent that a cash refund or a reduction in the future payments is available.
The statement of cash flows has been prepared using the direct approach modified by netting certain cash flows in order to provide more
meaningful disclosure. These include reverse loan receivables and term deposit liabilities. The advances to and repayments received from
borrowers in relation to loan receivables are considered operating activities and are reported on a net basis in the Statement of Cash Flows.
Proceeds from deposits issued and repayments to deposit investors are considered financing activities and are also reported on a net basis
in the Statement of Cash Flows.
39
GENERAL CAPITAL LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2020
NOTE 4: SIGNIFICANT ACCOUNTING ESTIMATES AND JUDGMENTS (CONTINUED)
4.2 Applicability of the going concern basis of accounting
Whilst the COVID-19 pandemic and measures implemented have lowered overall economic activity and confidence (described above),
Management have assessed and determined that the Group’s application of the going concern basis of accounting remains appropriate.
The Group has responded to the pandemic in the following ways:
- Undertook an analysis of its forecast cashflows to evaluate of the appropriateness of the Group’s continued application of the going
concernbasisofaccounting.ThisforecastcashflowstookintoconsiderationtheGroup’sexpectationof theimpactofthepandemiconits
earnings, cash flow and financial position.
-Assessedthedirectandindirectfinancialimpactsofthepandemiconthecarryingvalueofreportedamountsofassets,liabilities,revenues
and expenses.
- Implemented and enacted appropriate Health and Safety responses.
- Implemented cost saving measures and actively seeking further cost saving measures where possible.
Cashflow forecast and going concern
Whilst theCOVID-19 pandemicandmeasuresimplementedhavelowered overalleconomic activityand confidence(described above), the
Group'searnings,cashflowandfinancialpositionhavenotbeensignificantlyadverselyimpactedsincetheoutbreakbeganuptothedateof
the signing of these financial statements.
TheGrouphasdeterminedthatthemainpotentialdownsideimpactsofthepandemicontheGroup’searnings,cashflows,financialposition
and application of the going concern basis of accounting as at 31 March 2020 to be the following:
1) A reduction in term deposit reinvestment rates.
2) A reduction in new term deposit investments.
3) The inability for borrowers to make loan payments on their contractual repayment dates.
4) A reduction in loan security values (residential property values).
5) Reduced net cash flows from the research and advisory cash generating unit.
AttheendofMarch2020,theGrouppreparedrevisedforecastcashflowstakingintoconsiderationtheGroup’sexpectationoftheimpactof
the pandemic for the period 1 April 2020 to 30 June 2020 (12 months after the expected signing date) which incorporate highly stressed
scenarios of reduced reinvestment rates, reduced new term deposit investments and extensions of loan settlement dates.
Under the most stressed scenario the Group assumed:
1) A reduction in term deposit reinvestment rates from 79% actual for the 2020 financial year to 25%.
2) A reduction in new term deposit investments from an average of $2.4 million actual per month for the 2020 financial year to $Nil.
3)Anassumptionthat50%ofloansthatmaturearenotrepaidontheirexpectedrepaymentdate.Theexpectedrepaymentdatesalready
factored in expected delays due to the Covid-19 government restrictions.
4) A reduction in loan security values (residential property values) by 25%.
5) No cash inflows from the research and advisory cash generating unit.
DuetotheGroup’ssignificantlevelsof cash andcash equivalentsat 31 March 2020 ($12.6 million), and itswell securedloan book(refer
note4.3below), under therevisedcashflow forecastsandthestressedscenarios,showthattheGroupwillbeabletocontinueitsnormal
business activities and the realisation of assets and the settlement of liabilities in the ordinary course of business.
These financial statements have been prepared based upon conditions existing as at 31 March 2020 and consider those events occurring
subsequenttothatdatethatprovideevidenceofconditionsthatexistedattheendofthereportingperiod. AstheoutbreakoftheCOVID-
19pandemicoccurredbefore31March2020itsimpactsareconsideredaneventthatisindicativeofconditionsthatarosepriortoreporting
period.Accordingly,asatthedateofsigningthesefinancialstatements,allreasonablyknownandavailableinformationwithrespecttothe
COVID-19pandemichasbeentakenintoconsiderationinthecriticalaccounting estimatesandjudgementsappliedby Management(refer
note 4.2 and 4.3 below) and all reasonably determinable adjustments have been made in preparing these financial statements.
40
GENERAL CAPITAL LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2020
NOTE 4: SIGNIFICANT ACCOUNTING ESTIMATES AND JUDGMENTS (CONTINUED)
Direct and indirect financial impacts of the pandemic on the carrying value of reported amounts of assets and liabilities
Assets and LiabilitiesReportedDirect and indirect financial impacts
amount $
Assets
Cash and cash equivalents
12,562,241 No impact
Accounts receivables
10,859 No impact
Related party receivables
79,823 No impact
Loan receivables
34,855,849
No material impact - refer note 4.3.
Other current assets
266,523 No impact
Deferred tax asset
96,004 No impact
Property, plant and equipment
8,008 No impact
237,389
No material impact - refer note 4.5.
Intangible assets and goodwill
3,046,811
No material impact - refer note 4.4.
Total assets
51,163,507
Liabilities
Accounts payable and other payables
319,381 No impact
Related party payables
2,925 No impact
Income tax payable
8,697 No impact
Term deposits
41,450,497 No impact
Total liabilities
41,781,500
4.3 Allowance for expected credit losses
Since31March2020anduptothedateofthesigningofthesefinancialstatements,theGrouphasperformedbetterthanitsbaserevised
forecastcashflows.TheGroupinitiallysawareductionintermdepositreinvestmentrates,newtermdepositinvestmentsandanincreasein
loan arrears, in line with expectations. There has not yet been any notable adverse impact on residential property prices, however it is
anticipatedtooccurinthenext12monthsbyvariousNewZealandeconomists. PerformancesinceAlertlevel2hasbeensignificantlybetter
thanexpectedwithcashandcashequivalentsfurther increasing(to $20.4million on6 July2020) asa resultof loanrepayments andnew
term deposit investments.
Accordingly, Management have assessed and determined that the Group’s application of the going concern basis of accounting remains
appropriate.
Health and safety responses
Despite the Group being an essential services provider (Non-bank Deposit Taker) during Alert level 4 (and after year end, Alert level 3)
restrictions,theGroupimplementedstrictworkingfromhomemeasuresinlinewiththeNewZealandGovernmentguidelines.Thiswasnot
a significant issue as the Group already had remote working capability in place.
Other health and safety measures have been put into place including social distancing, contact tracing and cleaning.
Personal protective equipment (PPE) including masks, gloves and hand sanitiser was made available to employees from early March 2020.
Cost saving measures
1. Term deposit interest rates were further reduced in May 2020 in line with the global interest rate trends.
2. Employee costs were reduced where necessary as a result of COVID-19.
3. Other cost savings initiatives have been implemented where possible.
Significant increase in credit risk
Expectedcreditlosses(‘ECL’)aremeasuredasanallowanceequalto12monthECL,orlifetimeECLforassetswithasignificantincreasein
creditriskorindefaultorotherwisecreditimpaired.Anassetmovestodoubtfulwhenitscreditriskhasincreasedsignificantlysinceinitial
recognition.NZIFRS9doesnotdefinewhatconstitutesasignificantincreaseincreditrisk.Inassessingwhether thecreditriskofanasset
has significantly increased the Group takes into account qualitative and quantitative reasonable and supportable forward-looking
information.
Investments
41
GENERAL CAPITAL LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2020
NOTE 4: SIGNIFICANT ACCOUNTING ESTIMATES AND JUDGMENTS (CONTINUED)
Calculation of loss allowance
WhenmeasuringECLtheGroupusesreasonableandsupportableforwardlookinginformation,whichisbasedonassumptionsforthefuture
movement of different economic drivers and how these drivers will affect each other.
Loss given default is an estimate of the loss arising on default. It is based on the difference between the contractual cash flows due and
those that the Group would expect to receive, taking into account cash flows from collateral and integral credit enhancements.
ProbabilityofdefaultconstitutesakeyinputinmeasuringECL.Probabilityofdefaultisanestimateofthelikelihoodofdefaultoveragiven
time horizon, the calculation of which includes historical data, assumptions and expectations of future conditions.
The ECL is calculated on an individual loan basis by applying an expected loss factor to the loan balance. The expected loss factor is
determined from the Group historical loss experience data.
Historical loss experience data is reviewed by management and adjustments made to reflect current and forward looking economic and
credit conditions. In addition, management recognise that a certain level of imprecision exists in any model used to generate risk grading
and provisioning levels. As such an adjustment is applied for model risk.
Ininstanceswheretheprobabilityofdefaulthasincreasedsignificantly(asignificantincreaseincreditrisk),orwheretheloanisindefault,
the expected credit loss (or loss given default) may not increase significantly due to the Group’s lending criteria which prohibits lending
whentheloantovaluationratio(LVR)exceeds75%.ThismeansingeneralthattheGroupexpectsthatthepresentvalueofexpectedcash
flows from a loan in default to approximate the carrying value of the loan prior to the default event, except in cases where the LVR has
increased considerably due to a reduction in the security property valuation or a significant increase in the loan balance.
Management regularly reviews and adjusts its ECL estimates, judgements, assumptions, and methodologies as data becomes available.
Changes in these estimates, judgements, assumptions, and methodologies could have a direct impact on the level of credit provision and
credit impairment charge recorded in the financial statements (refer Note 11 Loan Receivables).
Ifthe12-monthECLrateforloanswithoutasignificantincreaseincreditriskincreased/(decreased)by0.2%higher/(lower)asat31March
2020, the loss allowance on finance receivables would have been $67,347 higher/(lower).
If the lifetime ECL rate for loans with a significant increase in credit risk and credit impaired loans increased/(decreased) by 1.0%
higher/(lower) as at 31 March 2020, the loss allowance on finance receivables would have been $15,163 higher/(lower).
Impact of COVID-19 on loan receivables / expected credit losses
TheCOVID-19AlertLevel4restrictionsimpactednegativelyonborrowers’abilitytopaymonthlyinterestand/ortorepaytheirloansbythe
due date because of the following:
1) Delays by banks in processing refinancing applications from our borrowers.
2) Borrowers were unable to effectively market their properties for sale.
3) In some cases, borrower income had reduced and impacted on their ability to service their loans.
These factors have improved since COVID-19 restrictions reduced to Alert Level 2 and 1 and are expected to continue to improve as
restrictions are further relaxed.
Theincomeof severalborrowers andtheir abilitytopayinterest maycontinuetobe adverselyaffected. However only asmall number of
loans are likely to be affected and no significant impact of cash flows is expected.
Repayment may be delayed for some borrowers; however, the delays are not expected toexceed 1-3 months. Thesedelays werefurther
stressed in the going concern cash flow forecast described above.
Thehighestloantovaluationratio(LVR)oftheGroup’sloanbookasat31March2020was77.0%(2019:74.1%)andtheweightedaverage
LVR of the loan book was 58.5% (2019: 55.2%), based on loan security valuations on origination of the loan. As at 31 March 2020,
approximately 90% of the Group’s loans receivables (both in number and dollar value terms) had security valuationswith valuationdates
beinglessthan12monthsold.Theremainingloansreceivablesecurityvaluationswereindividuallyassessedanddeterminedasmateriallyin
line with current property values.
TherehasbeennomeasurableeffectonLVRssofar.Nowthatthepropertymarketisabletofunctionnormallyagaintheeffectonproperty
valuesandLVRswillbeabletobeassessedincomingmonths.ItispossiblethattherewillbeasofteninginpropertyvaluesbuttheGroup
does not expect it to exceed a range of 5-12%.
42
GENERAL CAPITAL LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2020
NOTE 4: SIGNIFICANT ACCOUNTING ESTIMATES AND JUDGMENTS (CONTINUED)
4.4 Impairment analysis of goodwill and other indefinite life intangible assets
The carrying value of goodwill and indefinite life intangible assets (including licences and bartercard trade dollars) is assessed at least
annually to ensure that it is not impaired.
WithregardtoGoodwillandLicences,performingthisanalysisrequiresmanagementtoestimatefuturecashflowstobegeneratedbythe
cash-generating unit, which entails making judgements, including the expected rate of growth of revenues and expenditures, assets and
liabilities,andtheresultingcashflows.Judgementsalsoneedtobemadeabouttheappropriatediscountratetoapplywhenvaluingfuture
cash flows.
AsensitivityanalysisperformedbyManagementhashighlightedthatthecarryingvalueoftheGoodwillandotherassetsintheresearchand
advisory CGU are highly reliant on the achievement of revenue forecasts from advisory projects.
Management have performed a fair value less costs of disposal impairment test in relation to the carrying value of the bartercard trade
dollars asset at 31 March 2020.
Impact of COVID-19 on impairment analysis of goodwill and other indefinite life intangible assets
When completing the impairment analysis of goodwilland other indefinite life intagible assets, the Grouphas takeninto considerationall
reasonably known and available information with respect to the COVID-19 pandemic (as described in note 4.1).
Expected impact on cash-generating units
1. Finance CGU - The forecasted cash flows used in the impairment analysis factor in theexpected impactsof COVID-19.In particular the
Growth path that General Finance originally forecasted is now expected to be significantly delayed as a result of the pandemic and the
economic impact. Notwithstanding the impacts of the above, the results of the model show that there is still significant headroom in the
unit.
2.ResearchandAdvisoryCGU-IntheforecastedcashflowsusedintheCGUimpairmentanalysis,theGrouphasfactoredintheexpected
impacts on COVID-19 on the probability of sourcing advisory projects, the project milestones and the impact on timing of cashflows.
Notwithstanding the impacts of the above, the results of the impairment testing resulted in no impairment to the CGU.
Further information on the impairment analysis, assumptions and sensitivity analysis can be found in note 13.
Expected credit losses:
1) Based on the history of the Group loan book over the last 7 years, the average annual write-offs as a percentage of the average loan
receivable balance over the same period was 0.15%. This would be an appropriate basis for 12-month expected credit losses in ‘normal’
economic conditions.
2)TheGrouprecognisesthatNewZealand’seconomicforecastforthenext12monthsisunfavourableduetotheimpactsoftheCOVID-19
pandemic as described above. As a result, the Group has concluded that the probability of default has increased. However due to the
Group’swellsecuredloanbook(asdescribedabove),thelossgivendefaultandexpectedcreditlosseshaveincreasedbutnotbyamaterial
amount.Assuch,theGrouphasdeterminedthat0.31%(2019:0.31%)ofthegrossloanbalanceisamoreappropriateexpectationoflosses
for the next 12 months.
3) Lifetime ECL’s for loans with a significant increase in credit risk and for loans in default have been calculated based on the Group’s
expectations for discounted net cash flows from the respective loan receivables over the expected remaining life of the loans in light of
COVID-19.
Since31March2020anduptothedateofthesigningofthesefinancialstatements,therehasbeennoevidencewhichindicatesasoftening
of the residential property values in New Zealand that would have a material impact on the Group’s expected credit losses.
AccordingtosensitivityanalysisperformedontheresidentialpropertysecurityvaluationsunderlyingtheGroup’sloanreceivablesasat31
March 2020:
1) A 10% drop in property market values would result in no loan losses.
2) A 20% drop in property values would result in a loss in the range of $10,000 – $20,000.
3) A 25% drop in property values would result in a loss in the range of $200,000 – $250,000.
43
GENERAL CAPITAL LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2020
NOTE 4: SIGNIFICANT ACCOUNTING ESTIMATES AND JUDGMENTS (CONTINUED)
4.5 Valuation of equity securities classified as financial assets at FVTOCI
4.6 Business combinations
4.7 Classification of Bartercard Trade Dollars
The equity securities held by the Group are required to be carried at fair value. Fair value of the investments has been estimated using
inputs for the asset or liability that are not based on observable market data (Level 3 inputs).
Impact of COVID-19 on equity securities classified as financial assets at FVTOCI
WhencalculatingfairvalueofthethreeequitysecuritiescarriedatFVTOCI,theGrouphastakenintoconsiderationallreasonablyknownand
available information with respect to the COVID-19 pandemic (as described in note 4.1). The impact on each of the investments is as follows:
1.Investment in Barter Investments Limited- Theexpected impactof COVID-19 did nothave amaterial impacton theGroup's fair value
estimation.
2. Investment in Sports & Education Corporation Limited (SEC) investment - The lack of information released by SEC and trading halt
(described in note 14) combined with the expected impact of Covid-19 on volatility and risk as at 31 March 2020 has increased the risk
adjustment applied by management to 100%, resulting in a reduction in the fair value of the investment to $nil as at 31 March 2020.
3. Investment in Cannabis & Bioscience Corporation Limited (CBC) - COVID-19 is expected to have a minor impact on the timing of the
underlying investment activity in CBC but this did not have a material impact on the Group's fair value estimation.
Further information on the judgements made, assumptions and estimates are included in note 6.4 and note 14.
BartercardusesanelectroniccurrencycalledaBartercardTradeDollar.TheGroupearnsBartercardTradeDollars for the goodsit sellsto
customers(tradedebits)andusestheBartercardTradeDollarstomakepurchases(tradecredits)fromotherBartercardholders.Theassets
have been classified as indefinite life intangible assets.
Management have classified the Bartercard Trade Dollars as having an indefinite useful life based on the analysis of relevant factors
including:
- the participants in the Bartercard network;
- the availability of relevant goods and services in the Bartercard network;
- an assessment of the future viability of the Bartercard platform as a means of payment;
- the level of expenditure required to maintain a Bartercard account and the Group's intention to continue paying these maintenance fees.
Theuseful lifeof the intangibleassets arereviewed eachperiod todetermine whether events andcircumstances continueto support the
indefinite useful life estimate.
AsdescribedinNote21,astheCompany'sacquisitionofCorporateHoldingsLimitedon3August2018isdeemedtobeareverseacquisition
foraccountingpurposes,thesefinancialstatementsrepresentacontinuationoftheconsolidatedfinancialstatementsofCorporateHoldings
Limited.
With regard to the above transaction, Management have had to make judgements, including the following:
- Determining the entity which is the acquirer and the entity which is the acquiree.
- Whether the entity acquired constitutes a business.
- Determining the fair value of net assets acquired and identifiable net assets
- Determining the fair value of consideration paid in the business combination.
44
GENERAL CAPITAL LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2020
NOTE 5: SEGMENT REPORTING
$$$$$$
2,842,352 4,025 62 2,846,439 - 2,846,439
552,225 1,461 - 553,686 - 553,686
- 91,151 - 91,151 - 91,151
- 50,633 - 50,633 - 50,633
85,931 15,579 - 101,510 (15,579) 85,931
12,761 2,249 111,091 126,101 (113,340) 12,761
3,493,269 165,098 111,153 3,769,520 (128,919) 3,640,601
(1,440,704) (491) (18) (1,441,213) - (1,441,213)
(128,699) - - (128,699) - (128,699)
- (32,545) - (32,545) - (32,545)
1,923,866 132,062 111,135 2,167,063 (128,919) 2,038,144
(54,999) - - (54,999) - (54,999)
(603,058) (71,444) (72,178) (746,680) - (746,680)
(26,303) - (934) (27,237) - (27,237)
(60,892) 2,372 (2,387) (60,907) - (60,907)
441,716 (15,903) (296,257) 129,556 - 129,556
49,138,302 1,301,131 989,136 51,428,569 (265,062) 51,163,507
41,734,879 199,152 112,531 42,046,562 (265,062) 41,781,500
Acquisition of property, plant and equipment, intangible assets, and other non-current assets (excluding non-current finance receivables):
$$$$$$
- 13,108 - 13,108 - 13,108
4,444 - 206,276 210,720 - 210,720
- (13,108) 13,108 - - -
4,444 - 219,384 223,828 - 223,828
Other income
Fee and commission expense
(finance receivables)
Cost of sales
Net revenue
Personnel expenses
Income tax (expense) /
benefit
Corporate and
OtherYear ended 31 Mar 2020Finance
Research and
Advisory
Other
Transfers / reallocations
between segments
Revenue from contracts with
customers
- Advisory fee revenue
- Yearbook and research sales
Interest expense
Consolidated
- Other fee income
Depreciation and
amortisation
Release / (increase) in
allowance for expected credit
Revenue - fee income
(finance receivables)
Total Assets
Revenue - interest income
Total Liabilities
Acquired through settlement
of transactions / balances
Consolidated
ManagementhasdeterminedtheoperatingsegmentsbasedonthecomponentsoftheGroupthatengageinbusinessactivities,whichhave
discretefinancialinformationavailableandwhoseoperatingresultsareregularlyreviewedbytheGroup'schiefoperatingdecisionmaker.
The chief operating decision maker has been identified as the Board of Directors. The Board of Directors makes decisions about how
resources are allocated to the segments and assesses their performance.
Three reportable segments have been identified as follows:
- Finance
Deposittakingandresidentialmortgagelending(reportablesegmentcommencedon19December2017followingtheacquisitionofGeneral
Finance Limited).
- Research and Advisory
Providesinvestmentadvisoryservicesandproducesandsellsinvestmentresearchandpublications(reportablesegmentcommencedon19
December 2017 following the acquisition of Investment Research Group Limited).
- Corporate and Other
Corporate function and investment activities (the business of the Company was allocated to this reporting segment following the reverse
takeover transaction on 3 August 2018).
Year ended 31 Mar 2020Finance
Research and
Advisory
Corporate and
Other Total Segments Eliminations
Net Profit After Tax
Total revenue
Total Segments Eliminations
45
GENERAL CAPITAL LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2020
NOTE 5: SEGMENT REPORTING (CONTINUED)
$$$$$$
1,475,752 936 2,538 1,479,226 - 1,479,226
281,176 - - 281,176 - 281,176
- 280,320 - 280,320 - 280,320
- 43,967 - 43,967 - 43,967
23,415 - - 23,415 - 23,415
28,163 11,781 - 39,944 (11,781) 28,163
1,808,506 337,004 2,538 2,148,048 (11,781) 2,136,267
(592,791) - (47,479) (640,270) - (640,270)
(92,332) - - (92,332) - (92,332)
- (24,368) - (24,368) - (24,368)
1,123,383 312,636 (44,941) 1,391,078 (11,781) 1,379,297
19,456 - - 19,456 - 19,456
(486,670) (97,207) (19,133) (603,010) - (603,010)
(21,419) (275) - (21,694) - (21,694)
- - (103,927) (103,927) - (103,927)
- - (405,280) (405,280) - (405,280)
(34,705) - 5,103 (29,602) - (29,602)
124,765 93,971 (676,824) (458,088) - (458,088)
21,808,422 1,154,633 997,919 23,960,974 (53,290) 23,907,684
15,065,715 104,822 37,777 15,208,314 (53,290) 15,155,024
Acquisition of property, plant and equipment, intangible assets, and other non-current assets (excluding non-current finance receivables):
$$$$$$
- - 696,928 696,928 - 696,928
- 255,875 - 255,875 - 255,875
35,212 - - 35,212 - 35,212
6,924 (262,799) 255,875 - - -
42,136 (6,924) 952,803 988,015 - 988,015
Other
- Yearbook and research sales
Finance
- Advisory fee revenue
Revenue from contracts with
customers
Net revenue
Cost of acquiring listed shell
Research and
Advisory
Personnel expenses
Year ended 31 Mar 2019
Finance
Research and
Advisory
Corporate and
Other Total Segments Eliminations Consolidated
Business combinations
Acquired through settlement
of transactions / balances
- Other fee income
Corporate and
Other Total Segments Eliminations
Other income
Fee and commission expense
(finance receivables)
Cost of sales
Net Profit After Tax
Total Assets
Acquisition expenses
Revenue - interest income
Revenue - fee income
(finance receivables)
Total revenue
Income tax (expense) /
benefit
Total Liabilities
Year ended 31 Mar 2019
Consolidated
Depreciation and
amortisation
Release / (increase) in
allowance for expected credit
Interest expense
Transfers / reallocations
between segments
46
GENERAL CAPITAL LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2020
NOTE 6: RISK MANAGEMENT
6.1 Credit risk
20202019
$$
Northland
2,068,544 2,429,642
Auckland
18,012,270 7,140,043
Waikato
4,189,996 1,197,481
Tauranga
2,037,576 931,246
Wellington
4,398,852 2,785,633
Other North Island
2,672,401 2,279,399
Canterbury
1,810,227 696,825
Total
35,189,866 17,460,269
20202019
Number of
Exposures
Number of
Exposures
Less than $100,000
1 7
Between $100,000 and $250,000
17 19
Between $250,000 and $500,000
25 11
Between $500,000 and $1,000,000
17 12
Between $1,000,000 and $1,500,000
8 2
Between $1,500,000 and $2,000,000
1 -
Total No. of Exposures
69 51
Theconcentrationof thecreditexposuretothesixlargestexposuresis22.2% (March2019:30.7%)of thetotalloanportfolio. TheGroup
haselectedtodisclosethelargestsixexposuresasthisisconsideredtoprovidea meaningfulindicationofconcentrationofcreditrisk.An
exposure is calculated as the total of all loan exposures to a single borrower or group of linked borrowers. The size of loan exposures is
analysed further as follows:
The Group is exposed to a variety of financial risks comprising credit risk, liquidity risk, market risk (interest rate risk) and fair value risk.
Creditriskistherisk of financial lossto theGroup ifa counterpartyto afinancial instrument fails tomeet itscontractual obligations, and
arises principally from the Group's loan receivables, cash and cash equivalents and accounts receivable.
Asat31March2020theGroup’sloanadvancesaresecuredasfollows:firstmortgages96.1%(March2019: 86.8%),secondmortgages1.0%
(March 2019: 7.5%) and combined first and second mortgages 2.9% (March 2019: 5.8%).
Loan receivables credit exposures are concentrated in the residential property sector, particularly in the North Island and the Auckland
Market. As at 31 March 2020, advances by the Group in the North Island residential property sector represented 94.9% (March 2019:
96.0%)ofitstotalexposure,with51.2%(March2019:40.9%)beingintheAucklandmarket. Thegeographicalprofileofloanreceivablesis
analysed further as follows:
The maximum credit exposure of the Group, assuming a zero value for collateral is $48,565,201 (March 2019: 20,602,360). This includes
loans receivable of $35,189,866 (2019: $17,460,269), undrawn loan commitments of $742,412 (March 2019: $173,528), bank deposits of
$12,542,241(2019: $2,949,317), accountsreceivableof$10,859(2019: $19,246) andrelatedpartyreceivablesof $79,823 (2019: $nil). Of
thisexposure, 74.0%iscoveredbycollateralover propertiesasdisclosedinnote11 (2019: 85.6%)and25.8% isdeposited withregistered
New Zealand banks (2019: 14.3%).
TomanagecreditonfinancereceivablestheGroupperformscreditevaluationsonallcustomersrequiringadvances.Theapprovalprocess
considersanumberoffactorsincludingthevalueofthesecuritycomparedtothevalueoftheamounttobeborrowed("loantovaluation
ratio" or "LVR"), the creditworthiness of the borrower and their ability to repay.
TheGroupoperatesacreditrisk(lending)policywhichstipulatestheGroup'srequirementsregardingthesecurityandLVRoftheborrowing,
the credit worthiness of borrowers, geographical spread, maximum loan exposure size and credit approval authority levels. Decisions on
whether to approve or decline loans are made by the credit committee in line with the Group's credit risk policy. Loan receivables are
subjecttoregularscrutiny,asakeycomponentofcreditriskmanagement. Thisincludesareviewoftheborrower’srepaymenthistoryand
any interest arrears; any changes in the borrowers circumstances which could impact on their ability to repay either interest or principal
amounts on their due date and any movement in the security value.
47
GENERAL CAPITAL LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2020
NOTE 6: RISK MANAGEMENT (CONTINUED)
As shown in the aging analysis of past-due loans below, the balance comprises:
Stage 1
Stage 2
Stage 3
Aging analysis – past due but not considered under-performing loans:
20202019
$$
Up to 30 Days
3,905,889 449,898
31 - 60 Days
610,369 177,808
61 - 90 Days
- -
91 - 120 Days
546,788 -
120+ Days
359,168 -
Total
5,422,214 627,706
6.2 Liquidity risk
Liquidity risk is the risk that the Group will not be able to meet its obligations associated with financial liabilities as they fall due.
TheGroupisalsoexposedtocreditriskfromdepositsheldwithbanks.Asatbalancedate,theGroup'scashandcashequivalentsisheldin
NewZealandRegisteredBanksincluding99.3%withBankofNewZealand(2019:95.4%),0.2%withASBBank(2019:2.8%),0.5%withANZ
Bank New Zealand (2019: 0.2%) and 0.0% with Heartland Bank (2019: 1.5%).
Theprovisionforexpectedcreditlossesforperformingandunder-performingloansisdetailedandexplainedinnote11.Grosspastdueloan
receivables total $5,422,214 (March 2019: $627,706) which equates to 15.4% (March 2019: 3.6%) of total loan receivables.
TheGroupoperatesaliquidityriskpolicyandendeavourstomaintainsufficient fundstomeetitscommitmentsbasedon forecastedcash
flow requirements. Management has internal control processes and contingency plans to actively manage the lending and borrowing
portfoliostoensurethenetexposuretoliquidityriskisminimised.Theexposureisreviewedonanon-goingbasisfromdailyproceduresto
monthly reporting as part of the Group's liquidity management policies and processes.
12-month ECL
Grossloansreceivabletotalling$3,905,889(March2019: $627,706) werepastdueandtheGrouphasconcludedtherehas
notbeenasignificantincreaseincreditrisk.Ofthisbalance,$nil(March2019:177,808)loanswerepastduebygreaterthan
30 days.
Lifetime ECL not credit impaired
Grossloansreceivabletotalling$610,369 (March2019: $nil) werepast duebybetween30and90daysandtheGrouphas
concluded there has been a significant increase in credit risk.
Lifetime ECL credit impaired
Gross loans receivable totalling $905,956 (March 2019: $nil) were past due by greater than 90 days and the Group has
concluded there has been a significant increase in credit risk.
48
GENERAL CAPITAL LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2020
NOTE 6: RISK MANAGEMENT (CONTINUED)
Weighted
2020
Average
Total0 - 6 7 - 1213 - 24
24+
Interest
MonthsMonthsMonthsMonths
Rate
$$$$$
Financial assets
Bank deposits
1.26%
12,586,940 12,586,940 - - -
Other financial assets
0.00%
83,221 83,221 - - -
Loan receivables
9.31%
36,794,218 20,544,067 12,085,213 2,720,171 1,444,767
Totals
49,464,379 33,214,228 12,085,213 2,720,171 1,444,767
Financial liabilities
Term deposits
5.15%
43,666,922 13,544,847 14,189,421 11,776,984 4,155,670
Other payables
0.00%
76,217 76,217 - - -
Totals
43,743,139 13,621,064 14,189,421 11,776,984 4,155,670
Net cashflow
5,721,240 19,593,164 (2,104,208) (9,056,813) (2,710,903)
Weighted
2019
Average
Total0 - 6 7 - 1213 - 24
24+
Interest
MonthsMonthsMonthsMonths
Rate
$$$$$
Financial assets
Bank deposits
2.34%
2,975,929 2,975,929 - - -
Other financial assets
0.00%
19,246 19,246 - - -
Loan receivables
10.84%
18,328,573 11,026,087 6,219,791 743,271 339,424
Totals
21,323,748 14,021,262 6,219,791 743,271 339,424
Financial liabilities
Term deposits
5.53%
15,985,335 4,486,666 3,388,915 5,554,788 2,554,966
Other payables
0.00%
71,672 71,672 - - -
Totals
16,057,007 4,558,338 3,388,915 5,554,788 2,554,966
Net cashflow
5,266,741 9,462,924 2,830,876 (4,811,517) (2,215,542)
The following tables set out the undiscounted contractual cash flows, and the undiscounted expected cash flows, of the Group’s financial
assets and liabilities. Refer to notes 10, 11 and 15 for respective interest rates. No other monetary assets and liabilities are interest bearing.
Contractual Cash Flows
Contractual Cash Flows
49
GENERAL CAPITAL LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2020
NOTE 6: RISK MANAGEMENT (CONTINUED)
2020Total0 - 6 7 - 1213 - 24
24+
MonthsMonthsMonthsMonths
$$$$$
Financial assets
Bank deposits
12,620,950 12,620,950 - - -
Other financial assets
83,221 83,221 - - -
Loan receivables
38,437,399 10,990,318 6,819,638 17,822,591 2,804,852
Totals
51,141,570 23,694,489 6,819,638 17,822,591 2,804,852
Financial liabilities
Term deposits
44,968,870 11,235,268 7,439,464 7,856,748 18,437,390
Other payables
76,217 76,217 - - -
Totals
45,045,087 11,311,485 7,439,464 7,856,748 18,437,390
Net cashflow
6,096,483 12,383,004 (619,826) 9,965,843 (15,632,538)
2019Total0 - 6 7 - 1213 - 24
24+
MonthsMonthsMonthsMonths
$$$$$
Financial assets
Bank deposits
2,983,814 2,983,814 - - -
Other financial assets
19,246 19,246 - - -
Loan receivables
19,253,822 6,027,147 3,576,872 8,946,765 703,038
Totals
22,256,882 9,030,207 3,576,872 8,946,765 703,038
Financial liabilities
Term deposits
17,051,439 1,959,505 1,567,915 2,700,283 10,823,736
Other payables
71,672 71,672 - - -
Totals
17,123,111 2,031,177 1,567,915 2,700,283 10,823,736
Net cashflow
5,133,771 6,999,030 2,008,957 6,246,482 (10,120,698)
-Term deposit reinvestment rates assumptions:
-
25% for maturities up to 30 September 2020;
-
50% for maturities up to 31 March 2021; and
-
60% for maturities after 31 March 2021.
-
For March 2019 expected cash flows a 60% reinvestment rate was assumed.
-
Term deposit reinvestments are made for a weighted average 18-month term (March 2019: 24 months)
-
Expected Cash Flows
Expected Cash Flows
50%ofloans(March2019:50%)notpastduerepayonexistingcontractualmaturitydate,withthebalancerolledoverattheirexisting
interest rates and repaid after a further 12 months.
The table above shows management’s expected maturities of existing financial assets and liabilities. In determining the expected cash flow,
the following assumptions have been made based on management’s best estimate having regard to current market conditions and past
experience:
50
GENERAL CAPITAL LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2020
NOTE 6: RISK MANAGEMENT (CONTINUED)
6.3 Market risk
The table below summarises the sensitivity of the Group’s financial assets and liabilities to interest rate risk.
Carrying
2020
Amount -1% Profit -1% Equity +1% Profit +1% Equity
Financial Assets
$ $ $ $ $
Cash and cash equivalents
12,562,241 (125,622) (90,448) 125,622 90,448
Finance Receivables
35,189,866 (351,899) (253,367) 351,899 253,367
Financial Liabilities
Term Deposits
41,520,102 415,201 298,945 (415,201) (298,945)
Total increase / (decrease)
(62,320) (44,870) 62,320 44,870
Carrying
2019
Amount -1% Profit -1% Equity +1% Profit +1% Equity
Financial Assets
$ $ $ $ $
Cash and cash equivalents
2,949,317 (29,493) (21,235) 29,493 21,235
Finance Receivables
17,460,269 (174,603) (125,714) 174,603 125,714
Financial Liabilities
Term Deposits
14,928,161 149,282 107,483 (149,282) (107,483)
Total increase / (decrease)
(54,814) (39,466) 54,814 39,466
6.4 Assets carried at fair value
Level 1 Fair value is calculated using quoted prices in active markets.
Level 2
Level 3 Fair value is estimated using inputs for the asset or liability that are not based on observable market data.
2020
Note Level 1 Level 2 Level 3 Total
Fair value assets
$$
$ $
14
- - 237,389 237,389
2019
Level 1 Level 2 Level 3 Total
Fair value assets
$$
$ $
14
- - 190,483 190,483
Refer to the note annotated for more detail on the valuation methodology.
Market risk is the risk that changes in market prices, such as interest rates will affect the Group's income or the value of its holdings of
financial instruments.
InterestrateriskistheriskoflosstotheGrouparisingfromadversechangesininterestrates.TheGroup'sfinancingactivitiesareexposed
tointerestrateriskinrespectofitsinterestearningassetsandinterestbearingliabilities.ChangestointerestratescanimpacttheGroup's
financialresultsbyaffectingtheinterestspreadearnedontheseassetsandliabilities.Interestratesforfinancereceivables,termdeposits,
andbankdeposits(otherthanthoseoncall)arefixedfor thetermoftheir respectivecontracts.Interestratesarerepricedoncontractual
maturity dates of the financial instruments. There is a risk that different financial instruments (such as finance receivables and term
deposits) are repriced on different dates, i.e. a repricing risk (refer to contractual cash flows under liquidity risk for repricing dates).
Fair value is estimated using inputs other than quoted prices in level 1 that are observable for the assets or liability,
either directly (as prices) or indirectly (derived from prices).
Financial assets at fair value through other
comprehensive income - investment in equities
Financial assets at fair value through other
comprehensive income - investment in equities
51
GENERAL CAPITAL LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2020
NOTE 7: OTHER EXPENSES
Included in other expenses are the following amounts:
20202019
$$
Directors fees
152,808 118,783
Auditors Remuneration
- Audit and other assurance services
- Audit of financial statements
121,800 123,288
- Audit of quarterly trustee certificates
3,623 3,605
- Other Services
-Taxation compliance
9,592 12,813
Total remuneration paid to auditors
135,015 139,706
NOTE 8: TAXATION
8.1 Income tax
20202019
$$
Net operating profit / (loss) before taxation
190,463 (428,487)
Income tax (expense) / benefit at prevailing rates
(53,330) 119,976
Tax impact of expenses not deductible for tax purposes
(7,577) (160,961)
Recognition of previously unrecognised deferred tax in respect of timing differences
1
- 10,027
Over provision in prior year
- 1,357
Taxation expense per the statement of comprehensive income
(60,907) (29,601)
Comprising:
- Current tax
(75,230) (27,636)
- Deferred tax
14,323 (1,965)
(60,907) (29,601)
8.2 Deferred tax asset
20202019
$$
Balance at beginning of year
38,408 40,373
(Charged) / credited to profit or loss
Increase / (decrease) in impairment loss provision
15,400 (8,917)
Increase / (decrease) in accrued expenses
(1,077) (3,075)
Recognition of previously unrecognised deferred tax
- 10,027
14,323 (1,965)
(Charged) / credited to other comprehensive income
Changes in the fair value of equity investments at fair value through other comprehensive income
43,273 -
96,004 38,408
Deferred tax attributed to:
Impairment loss provision
30,424 15,024
Accrued expenses
22,307 23,384
Fair value of equity investments at fair value through other comprehensive income
43,273
-
96,004 38,408
1
Recognition of previously unrecognised deferred tax related to deferred tax not previously recognised by the Company (General Capital
Limited) in respect of accrued expenses. Deferred tax was recognised in the prior period on the basis that taxable losses incurred in the
Company can be offset with taxable income of other entities within the Group.
52
GENERAL CAPITAL LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2020
NOTE 8: TAXATION (CONTINUED)
8.3 Imputation credit account
20202019
$$
Balance at beginning of year
73,232 35,037
Tax Paid
19,988 142,451
Credits attached to dividends received
- 142
Imputation credits written off due to change in shareholder continuity
1
- (104,398)
93,220 73,232
NOTE 9: EARNINGS PER SHARE
20202019
CentsCents
0.08 (0.46)
0.08 (0.36)
20202019
Basic earnings per share
$$
129,556 (458,088)
129,556 (458,088)
20202019
NumberNumber
159,603,804 98,942,264
Adjustments for calculation of diluted earnings per share:
- Redeemable preference shares- 27,619,996
159,603,804 126,562,260
NOTE 10: CASH AND CASH EQUIVALENTS
20202019
$$
Cash
20,000 -
Bank deposit and current accounts
6,842,241 799,317
Short term bank deposit (original maturity of less than 183 days)
5,700,000 2,150,000
12,562,241 2,949,317
Interest Rates:
On Call: Between 0.00% and 1.60% (March 2019: Between 0.00% and 2.50%).
Short term bank deposits: Between 2.40% and 2.75% (March 2019: Between 2.94% and 3.23%).
Profit / (loss) attributable to the ordinary equity holders of the
Company used in calculating basic earnings per share:
Theweightedaveragenumber of sharesuptothedateof thereverseacquisitionon3 August 2018 (refer note21), isrepresented bythe
weightedaveragenumberofCorporateHoldingsLimitedsharesonissueduringthisperiod,multipliedbytheconversionratioof16.27.The
conversionratioisthenumberofordinarysharesthatwereissuedbytheCompanyforeachCorporateHoldingsLimitedshareacquiredon
the acquisition date. Diluted earnings per share up to the date of the reverse acquisition reflects the dilutive impact of the Corporate
HoldingsLimitedredeemablepreferencessharesthatwereissuedduringtheyearended31March2018.Theredeemablepreferenceshares
converted to ordinary shares in Corporate Holdings Limited on 3 Aug 2018 before being acquired by the Company.
Basic earnings per share attributable to the ordinary equity
holders
Profit / (loss) attributable to the ordinary equity holders of the
Company used in calculating diluted earnings per share:
Weighted average number of ordinary shares used as the
denominator in calculating basic earnings per share
1
Shareholder continuity breached by greater than 66% on conversion of redeemable preference shares in Corporate Holdings Limited (refer
to note 18).
Diluted earnings per share attributable to the ordinary equity
holders
Weighted average number of ordinary shares used as the
denominator in calculating diluted earnings per share
53
GENERAL CAPITAL LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2020
NOTE 11: LOAN RECEIVABLES
20202019
$$
First mortgage advances
33,806,493 15,152,307
Second mortgage advances
349,917 1,301,526
Combined first and second mortgage advances
1
1,033,456 1,006,436
35,189,866 17,460,269
Less deferred fee income and expenditure
(225,360) (129,407)
Less impairment allowance
(108,657) (53,658)
Net carrying value
34,855,849 17,277,204
Current portion
31,009,328 16,298,686
Non-current portion
3,846,521 978,518
34,855,849 17,277,204
Interest rate: Between 7.05% and 16.50% (2019: Between 8.95% and 16.50%).
Effective interest rate: Between 7.85% and 19.71% (2019: Between 10.04% and 20.34%).
For loans that are in default, additional interest of up to 10% is charged.
Borrower payment terms are profiled as follows:
20202019
$$
Interest only paid monthly
29,098,627 15,300,772
Interest capitalised
6,091,239 2,159,497
Total loan receivables
35,189,866 17,460,269
20202019
$$
Interest only paid monthly
282,068 137,944
Interest capitalised
427,987 281,176
Total loan receivables
710,055 419,120
1
Loanadvancesecuredbyfirstmortgageover onepropertyandsecondmortgageoveranother property. Classifiedasasecondmortgage
for the purposes of calculating General Finance Limited's (subsidiary entity) capital ratio in accordance with the Deposit Takers (Credit
Ratings, Capital Ratios, and Related Party Exposures) Regulations 2010.
Loanreceivablesrepresentloansatcommercialinterestrates. Currentloanreceivablesarecontractuallyrepayablewithin12months.Non-
current loan receivables are contractually repayable within 12 months to 3 years of balance date.
At year end there was $742,412 in outstanding loan commitments including future capitalised interest (March 2019: $173,528).
Loan fees (for all loans) and interest (for capitalised interest loans) are capitalised to the loan balances when charged and recognised over
the life of the loans using the effective interest method. The associated cash is received when the loans are repaid (or partially repaid).
Income recognised during the financial year from amounts capitalised to loan receivables were as follows:
The core lending activity of the Group is providing, through a broker network, short term and bridging finance secured by mortgage over
residentialproperty. Themajorityofloansareenteredintowithamaturitydatewithin12months,withaproposalthatrepaymentwillbe
fundedbythesaleofthesecuredpropertyorthroughrefinancingbytheborrower.TheGroup’slendingpolicyallowsforamaximum“loan
to security value” of 75% (excluding fees and charges) on advances.
At balance date, 37.1% (March 2019: 40.7%) of loans by number and 31.6% (March 2019: 31.4%) by value represent loans that have been
rolled over and are into their second or subsequent credit periods.
Where loans have been rolled over, their classification in these consolidated financial statements as current or non-current, or as past due, is
based on payment due dates as per the terms of the extended contract, and not as per the original or preceding contract.
54
GENERAL CAPITAL LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2020
NOTE 11: LOAN RECEIVABLES (CONTINUED)
Reconciliation of gross loan receivable balance movements through ECL stages:
Lifetime ECL Lifetime ECL
12 month not creditcredit
ECLimpaired impairedTotal
$$$$
Balance as at 31 March 2018
8,599,716 - 124,700 8,724,416
New loan advances
13,364,314 - - 13,364,314
Repayments
(4,503,761) - (112,312) (4,616,073)
Loan balances written off
- - (12,388) (12,388)
Balance as at 31 March 2019
17,460,269 - - 17,460,269
New loan advances
30,848,719 - - 30,848,719
Repayments
(13,119,122) - - (13,119,122)
Transfer to lifetime not credit impaired
(610,369) 610,369 - -
Transfer to lifetime credit impaired
(905,956) - 905,956 -
Balance as at 31 March 2020
33,673,541 610,369 905,956 35,189,866
Reconciliation of movements in impairment allowance by stage:
Lifetime ECL Lifetime ECL
12 month not creditcredit
ECLimpaired impairedTotal
$$$$
Balance as at 31 March 2018
26,554 - 58,949 85,503
New loan advances
41,010 - - 41,010
Repayments
(13,906) - (46,561) (60,467)
Loan balances written off
- - (12,388) (12,388)
Balance as at 31 March 2019
53,658 - - 53,658
New loan advances
95,252 - - 95,252
Repayments
(40,253) - - (40,253)
Transfer to lifetime not credit impaired
(1,885) 1,885 - -
Transfer to lifetime credit impaired
(2,797) - 2,797 -
Balance as at 31 March 2020
103,975 1,885 2,797 108,657
Ininstanceswheretheprobabilityofdefaulthasincreasedsignificantly(asignificantincreaseincreditrisk),orwheretheloanisindefault,
the expected credit loss (or loss given default) may not increase significantly due to the Group’s lending criteria which prohibits lending
whentheloantovaluationratio(LVR)exceeds75%.ThismeansingeneralthattheGroupexpectsthatthepresentvalueofexpectedcash
flows from a loan in default to approximate the carrying value of the loan prior to the default event, except in cases where the LVR has
increased considerably due to a reduction in the security property valuation or a significant increase in the loan balance.
TheLVRof loanswithasignificant increaseincreditriskor indefault wasina rangeof44.9%- 64.3%asat 31March2020,basedonthe
security property valuation at origination. As at 31 March 2019 there were no loans with a significant increase in credit risk or in default.
55
GENERAL CAPITAL LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2020
NOTE 12: INVESTMENT IN SUBSIDIARIES
Subsidiary
20202019
Corporate Holdings Limited (CHL)Holding company
100.0%100.0%
General Finance LimitedFinance
100.0%100.0%
Investment Research Group LimitedResearch and advisory
100.0%100.0%
Commercial and General Finance LimitedDormant
100.0%100.0%
General Finance & Investments LimitedDormant
100.0%100.0%
General Finance & Leasing LimitedDormant
100.0%100.0%
General Leasing LimitedDormant
100.0%100.0%
General Loan and Finance LimitedDormant
100.0%100.0%
Mykco Limited (previously named General Capital Limited) Dormant
100.0%100.0%
All subsidiaries have a 31 March balance date.
NOTE 13: INTANGIBLE ASSETS
Bartercard
Trade
GoodwillLicencesDollars SoftwareTotal
$$$$$
Year ended 31 March 2019
Opening net book amount
2,350,730 277,000 2,279 33,107
2,663,116
Additions
- - 5,795 32,742
38,537
- - 693,313 -
693,313
Disposals
- - (110,209) -
(110,209)
Amortisation charge
- - - (18,201)
(18,201)
Closing net book amount
2,350,730 277,000 591,178 47,648 3,266,556
At 31 March 2019
Cost
2,350,730 277,000 591,178 65,849 3,284,757
- - - (18,201) (18,201)
Net book amount
2,350,730 277,000 591,178 47,648 3,266,556
Bartercard
Trade
GoodwillLicencesDollars SoftwareTotal
$$$$$
Year ended 31 March 2020
Opening net book amount
2,350,730 277,000 591,178 47,648
3,266,556
Additions
- -
13,988
4,444
18,432
Disposals
- - (215,384) -
(215,384)
Amortisation charge
- - - (22,793)
(22,793)
Closing net book amount
2,350,730 277,000 389,782 29,299 3,046,811
At 31 March 2020
Cost
2,350,730 277,000 389,782 52,092 3,069,604
- - - (22,793) (22,793)
Net book amount
2,350,730 277,000 389,782 29,299 3,046,811
Accumulated amortisation and impairment
Ownership Interest Held
Reverse Acquisition (Note 21)
Accumulated amortisation and impairment
56
GENERAL CAPITAL LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2020
NOTE 13: INTANGIBLE ASSETS (CONTINUED)
Impairment testing for cash-generating units (CGU) containing brands and licences
Goodwill
Allocated to the finance CGU
1,323,729 1,323,729
Allocated to the research and advisory CGU
1,027,001 1,027,001
2,350,730 2,350,730
Licences with an indefinite useful life
Allocated to the finance CGU
247,000 247,000
Allocated to the research and advisory CGU
30,000 30,000
277,000 277,000
Finance CGU
31 March 2020 AssumptionsTotal Assets Total Liabilities Revenue ExpenditureFCFE
Year one growth assumptions-6.5%-7.8%18.1%27.1%-24.0%
Year two growth assumptions55.5%63.4%24.0%21.3%45.6%
Year three growth assumptions41.3%43.9%49.1%35.6%137.2%
Year four growth assumptions6.3%5.0%19.7%15.1%37.1%
Year five growth assumptions6.1%4.8%5.9%4.4%10.6%
Terminal growth beyond year 5
2.0%
Pre-tax discount rate 13.0%
31 March 2019 AssumptionsTotal Assets Total Liabilities Revenue ExpenditureFCFE
Year one growth assumptions62.5%80.4%81.0%58.2%283.7%
Year two growth assumptions18.0%18.6%35.0%22.5%84.9%
Year three growth assumptions7.9%6.3%11.5%8.3%19.8%
Year four growth assumptions7.6%5.9%6.3%4.9%9.5%
Year five growth assumptions5.0%2.8%4.7%3.8%6.6%
Terminal growth beyond year 5
2.0%
Pre-tax discount rate14.2%
The aggregate carrying amounts of goodwill and indefinite life licences are outlined above. Goodwill primarily relates to growth
expectations,expectedfutureprofitabilityandtheworkforceoftheCGU's.Managementhaveassessedthatthereisnoforeseeablelimitto
theperiodoftimeoverwhichthegoodwillandlicencesareexpectedtogeneratenetcashinflowsfortheGroupandassuchtheyhavebeen
assessed as having an indefinite useful life.
The recoverable amount of the CGUs has been determined based on value in use calculations. These calculations use pre-tax cash flow
projections based on financial budgets approved by management covering a five year period. Cash flows beyond the five year period are
extrapolated using the estimated long term growth rates stated below. The growth rate does not exceed the long term average for the
products, industries or country in which the CGUs operate. For each of the CGU's with goodwill and indefinite life licences, the key
assumptions, long term growth rate and discount rate used in the value in use calculations are as follows.
Pre-taxfreecashflowstoequityholders(FCFE)havebeenforecastedbasedongrowthinthenon-bankdeposittaking/residentiallending
business within the current constraints of the licence / trust deed. The forecasted growth in net cash flows is driven primarily by the net
interestandfeemarginfrom forecastedgrowthindepositfundingandtheloanbook.For referencepurposes, pre-taxFCFE was$613,698
(2019:173,925). SignificantexpenditurehasbeenincurredsincethebusinesswaspurchasedbytheGrouptoensurethatthebusinesshas
the capacity and resources to allow for the growth.
57
GENERAL CAPITAL LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2020
NOTE 13: INTANGIBLE ASSETS (CONTINUED)
Research and advisory CGU
31 March 2020 AssumptionsNet Revenue Expenditure
Working Capital
Movements
1
Pre-tax FCFF
Actual 31 March 2020 year
132,062 (152,586) (116,022) (136,546)
Forecast 2021
337,834 (175,935) 91,151 253,050
Forecast 2022
342,901 (178,574) - 164,327
Forecast 2023
348,045 (181,252) - 166,793
Forecast 2024
353,265 (183,971) - 169,294
Forecast 2025
358,564 (186,731) - 171,833
Terminal growth beyond year five
1.5%
Pre-tax discount rate15.5%
31 March 2019 Assumptions
Yearly growth in FCFF (years one - five)5.0%
Terminal growth beyond year five
2.0%
Pre-tax discount rate 16.0%
1
IntheMarch2020year,therewasanincreaseinreceivables(workingcapital)duetobillingslateinthefinancialyear.Thisisexpectedtobe
received in the 2021 financial year, hence the corresponding working capital decrease in the 2021 forecast.
Intheprioryearended31March2019,Managementhadforecastedpre-taxFCFFof$137,572fortheMarch2020financialyear.Amidyear
reviewof theforecast, whichconsidered a significant projectin progressat thattime, confirmedthat theforecast was still achievable(as
disclosedinthe30September2019halfyearresultsannouncement).Pre-tax FCFFultimatelyachievedintheyear endedMarch2020was
an outflow of $136,546 (including a working capital increase of $116,022). The impacts of the COVID-19 pandemic delayedefforts onkey
advisory projects leading up to the financial year end, particularly in relation to capital raising efforts for a key customer contract. This
impacted significantly on the revenue that was achieved in the March 2020 Financial Year compared to forecast.
In assessing the impairment of the goodwill and licences in the finance CGU, a sensitivity analysis for reasonable possible changes in
assumptions was performed. This included decreasing and increasing the years 1-5 forecasted cash flows (based on the above growth
assumptions)by25%,decreasingandincreasingtheterminalgrowthrateby0.5%,anddecreasingandincreasingthediscountrateby1%.
ThesereasonablypossiblechangesinassumptionsdidnotresultinanimpairmenttotheCGU (2019: thesame sensitivityanalysis didnot
result in an impairment to the CGU).
Growth assumptions inthe 2020 financial year impairment analysishave factoredin theGroup's expectationsof theimpact ofCOVID-19,
further details can be found in note 4.4.
Pre-tax free cash flows to the firm (FCFF) has been forecasted based on expected revenue and expenditure growth in the research and
advisory business.
In assessing the impairment of the goodwill and licences in the research and advisory CGU, a sensitivity analysis for reasonable possible
changesinassumptionswasperformed.Thisincludeddecreasingandincreasingtheyears1-5forecastcashflowsby100%,decreasingand
increasingtheterminalgrowthrateby0.5%,anddecreasingandincreasingthediscountrateby1%.Areductioninforecastedcashflowsby
100%wouldresultinanimpairmentof$1,057,001(2019:$1,057,001)totheCGU.Anincreaseinthediscountrateby1%wouldnotresultin
impairment (2019: impairment of $10,226) to the CGU. The other sensitivity movement did not result in an impairment (2019: no
impairment) to the CGU.
The forecasted cash flows in the March 2020 impairment anlaysis include assumptions around the probability of achieving certain
milestones in the two contracts that exist at 31 March 2020 as well as expectations around sourcing future advisory contracts and the
expected resulting cashflows.
Assumptionsinthe2020financialyearimpairmentanalysishavealsofactoredintheGroup'sexpectationsofthefutureimpactofCOVID-19.
Further details on the impacts of COVID-19 can be found in Note 4.4.
58
GENERAL CAPITAL LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2020
NOTE 13: INTANGIBLE ASSETS (CONTINUED)
Bartercard trade dollars
NOTE 14: INVESTMENTS
Note
20202019
$$
Investment in Barter Investments Limited1837,389 35,938
Investment in Sports & Education Corporation Limited18- 154,545
Investment in Cannabis and Bioscience Corporation Limited18200,000 -
237,389 190,483
Investment in Barter Investments Limited
Investment in Sports & Education Corporation Limited
The 3.72% stake in Barter Investments Limited is held by Investment Research Group Limited. The investment in the unlisted investment
holdingscompanyisclassifiedasafinancialassetatfairvaluethroughothercomprehensiveincome.Thisequityisnotquotedinanactive
market. The fair value of this equity security is based on the Group's share of the entity's net assets at reporting date as reported in the
entity'sfinancialstatements(valuationtechnique).Themajorityoftheentity'sassetsandliabilitiesarereportedintheirfinancialstatements
at either their fair value or their carrying value which approximates their fair value (the significant unobservable inputs). The inter-
relationshipbetweenkeyunobservableinputsandfairvaluemeasurementisthatanincrease/(decrease)inthenetassetswouldincrease/
(decrease)thefairvalueoftheinvestment.Againof$1,451hasbeenrecognisedinothercomprehensiveincomeduringtheyearinrelation
to the fair value of the investment (2019: a loss of $14,862).
Management have determined that a 100% reduction in forecasted cash flows is a reasonably possible change. This is because the cash
flowsoftheresearchandadvisorygrouprelymostsignificantlyonsecuringandcompletingoneormoreadvisoryprojectsperyear.Should
thisnotbeachieved,thenthenetcashflowsoftheCGUmaybebreakevenornegative(netcashoutflow)intheforecastyears.Theforecast
has been developed based on historical performance and current advisory opportunities. As at the date of signing there are no known
adverse factors which would impact on the ability of the CGU to achieve the forecasts.
The 0.96% stake in Sports & Education Corporation Limited (SEC) is held by Investment Research Group Limited and was acquired in late
March 2019 as a portion of revenue for the completion of an advisory project. The investment in the Unlisted Securities Exchange (USX)
listed company which owns various brands in the international sports and education sectors is classified as a financial asset at fair value
throughothercomprehensiveincome.TheequitysecuritiesarequotedontheUnlistedSecuritiesExchangeinNewZealand,howeverthere
has not been significant trading activity in the securities since it was listed in December 2018.
Fair value of SEC investment as at 31 March 2019
Thefairvalueoftheinvestmentwas estimatedbyManagementtobe$0.50persharebasedonthequotedprice(latesttradedprice)ofthe
security of $0.75 per share at 31 March 2019 (an observable input) and a risk adjustment of -33% per share (a significant unobservable
input).
The risk adjustment is estimated by management and represents the expected discount to the quoted price required for the significant
measurement uncertainty (the low level of trading in the security compared to other similar quoted securities). Management have
estimated the discount with reference to publicly available information including the 31 March 2018 financial statements and the listing
profileoftheentity.Theinter-relationshipbetweenthekeyunobservableinputandfairvaluemeasurementisthatanincrease/(decrease)
intheriskadjustment(anincreasebeingahigherdiscount)would(decrease)/increasethefairvalueoftheinvestment.Noamountswere
recognised in other comprehensive income during the year ended 31 March 2019 in relation to fair value movements of the investment.
Bartercard trade dollars comprise the balance of Bartercard Trade Dollars on hand at period end net of accumulated impairment losses.
Fortheyearsended31March2019and31March2020itwasdeterminedthatthefairvaluelesscostsofdisposaloftheBartercardtrade
dollarswasequivalenttothecarryingvalueoftheassets.Fairvaluelesscostsofdisposalwasdeterminedbasedonthefactthatallmarket
participants(beingotherBartercardmembers)acceptthetermsandconditionsofBartercardwhichstipulatethataBartercardTradeDollar
isequivalenttoaNewZealanddollaratthedateofexchangeinrespectoffuturepurchasesorgoodsandservices.Inaddition,asthereare
no significant disposal costs associated with settling transactions in Bartercard trade dollars, management have determined that the fair
value less costs of disposal are equal to the carrying value of bartercard trade dollars.
59
GENERAL CAPITAL LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2020
NOTE 14: INVESTMENTS (CONTINUED)
Investment in Cannabis and Bioscience Corporation Limited
NOTE 15: TERM DEPOSITS
20202019
$$
Gross term deposit liability
41,520,102 14,928,161
Less deferred commission expenditure
(69,605) (27,703)
Net carrying value
41,450,497 14,900,458
Contractual repayment terms:
On call
364,006 74,980
Within 12 months
26,053,028 7,253,613
Greater than 12 months
15,033,463 7,571,865
41,450,497 14,900,458
Repayment Terms:On call up to 5 years
Interest Rate:3.10% - 6.75% and 1.00% on call (March 2019: 3.75% - 6.75% and 2.00% on call)
Effective Interest Rate:3.10% - 6.75% and 1.00% on call (March 2019: 3.80% - 6.75% and 2.00% on call)
Security:
Fair value of SEC investment as at 31 March 2020
SEC was put into a trading halt on the USX on 1 August 2019 pending the release of its March 2019 Annual Report which still has not been
released up to the date of signing these financial statements. The Group has determined that the uncertainty inherent in the future cash
flows of the investment are so significant that it is unlikely that a market participant would pay a material amount for the equity stake held
by the Group. The Group has therefore determined that a risk adjustment of -100% per share (a signficant unobservable input) be applied.
This results in a fair value of $nil as at 31 March 2020. The inter-relationship between the key unobservable input and fair value
measurement is that an increase / (decrease) in the risk adjustment (an increase being a higher discount) would (decrease) / increase the
fair value of the investment. A fair value loss of $154,545 before tax has been recognised in other comprehensive income during the year in
relation to the fair value of the investment.
First ranking security interest over the assets and undertakings of General Finance Limited in favour of the
Trustee(subjectonlytoanypriorsecurityinterestspermittedbytheTrustDeedandpreferentialclaimsgiven
priority by operation of law).
TheGrouphasatotalof 471depositorsasat 31 March2020 (March2019: 222). Asatbalancedate,thelargestdeposit theGrouphasis
$1,401,819(March2019:$628,149)whichrepresents3.38%(March2019:4.21%)oftotaldeposits.Asatbalancedatethelargestaggregate
depositsunderasingledepositholdertotals$4,763,337(March2019:$2,633,389)whichrepresents11.47%(March2019:17.64%)oftotal
depositsandhaveaweightedaveragematuritydateof3.10monthsfrombalancedate(March2019:6.43monthsfrombalancedate).The
largest deposit holder at 31 March 2020 and 31 March 2019 is a director of the Company (refer to note 18).
The16.3% equitystakeinCannabisandBioscienceCorporationLimited(CBC)wasacquired inJanuary2020for thepayment of $200,000
bartercard trade dollars. CBC is an unlisted investment holdings company and is a related party by virtue of common directorship as
described in note 18. The investment has been classified as a financial asset at fair value through other comprehensive income.
The fair value of the investment was estimated by Management to be $0.08 per share as at 31 March 2020 with reference to the
subscriptionpricethattheGrouppaidforCBC'ssharesandwithreferencetootherthirdpartysubcriptionsatthesamepriceleadingupto
and subsequent to 31 March 2020. The subscription price was set based on expectation of returns from the underlying early stage
investmentswithinCBC.Theprobabilityweightedcompoundannualgrowthrateoftheinvestmentsis14.9%,expectedtoberealisedovera
5 year investment period and discounted back at a risk-adjusted discount rate of 24.5%. No amounts were recognised in other
comprehensive income during the year ended 31 March 2020 (2019: $nil) in relation to fair value movements of the investment.
Inter-relationship between the key unobservable inputs and fair value measurement:
-adecreaseinthecompoundannualgrowthrate(overthe5yearinvestmentperiod)by5%combinedwithanincreaseintheriskadjusted
discount rate by 2% would decrease the fair value by $40,000.
-anincreaseinthecompoundannualgrowthrate(overthe5yearinvestmentperiod)by5%combinedwithadecreaseintheriskadjusted
discount rate by 2% would increase the fair value by $50,000.
60
GENERAL CAPITAL LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2020
NOTE 15: TERM DEPOSITS (CONTINUED)
Further analysis of gross deposit funding is as follows:
Concentration of funding
20202019
$$
Northland
1,331,034 309,106
Auckland
17,905,252 5,862,445
Waikato
3,350,350 1,093,667
Bay of Plenty
4,259,303 1,387,313
Wellington
2,696,853 1,312,135
Other North Island
2,892,174 1,430,059
South Island
3,496,951 880,321
Overseas *
5,588,185 2,653,115
Total gross term deposit liability
41,520,102 14,928,161
*The largest deposit holder resides overseas and is a director of the Company (refer to note 18).
Contractual maturity of funding
20202019
$$
Maturing in 0 - 6 months12,872,1224,190,400
Maturing in 6 - 12 months13,561,0583,141,478
Maturing in 12 - 24 months11,171,2065,185,710
Maturing after 24 months
3,915,716
2,410,573
Total gross term deposit liability
41,520,102 14,928,161
Profile of deposit holders
2020202020192019
$$
Deposits over $200,000
38
19,755,073
12
6,165,149
Deposits $100,000 - $200,000
62
8,892,406
18
2,598,273
Deposits $50,000 - $100,000
102
7,040,426
44
3,159,596
Deposits $20,000 - $50,000
135
4,360,750
60
1,913,651
Deposits $10,000 - $20,000
70
1,017,019
48
775,251
Deposits under $10,000
64
454,428
40
316,241
Total gross term deposit liability
471
41,520,102
222
14,928,161
Reconciliation of liabilities arising from financing activities
Opening Opening
BalanceFinancingNon-cashBalance
1 AprilCash Flows
Changes
1
31 March
$$$$
For the year ended 31 March 2020
Term deposits14,928,161 26,393,382198,559 41,520,102
Total
14,928,161 26,393,382 198,559 41,520,102
For the year ended 31 March 2019
Term deposits9,862,540 5,058,4747,147 14,928,161
Total
9,862,540 5,058,474 7,147 14,928,161
1
Non-cash changes relate to the movement in unpaid interest in the term deposit balance.
NOTE 16: OTHER FINANCIAL LIABILITIES
Redeemable preference shares - type 2
20202019
$$
Balance at beginning of period
- 1,452,521
Unwind of discount- 47,479
Conversion to ordinary shares in Corporate Holdings Limited- (1,500,000)
- -
Refer to note 17 for further details on the terms of the type 2 redeemable preference shares.
61
GENERAL CAPITAL LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2020
NOTE 17: EQUITY
NoteNumber$Number$
Ordinary shares(a)
161,655,643 10,176,204 153,845,313 9,573,495
(a) Ordinary shares
Number$
Balance at 1 April 2018
19,616,874 1,448,503
Conversion of redeemable preference shares to ordinary shares - equity portion (note 17(b))
- 3,580,104
Conversion of redeemable preference shares to ordinary shares - financial liability portion (note 17(b))
- 1,500,000
Ordinary shares issued on reverse acquisition transaction (note 21)
1
104,323,240 1,121,259
27,502,221 1,856,400
2,402,978 162,200
Transaction costs arising on shares issued
- (94,971)
Balance at 31 March 2019
153,845,313 9,573,495
Exercise of warrants:
Ordinary shares issued on 30 September 2019 - exercise of GENWA Warrants
3
7,083,296 548,955
Ordinary shares issued on 30 September 2019 - exercise of GENWB Warrants
3
354 32
Ordinary shares issued on 31 March 2020 - exercise of GENWA Warrants
3
721,292 55,900
Ordinary shares issued on 31 March 2020 - exercise of GENWB Warrants
3
5,388 485
Transaction costs arising on shares issued
- (2,663)
7,810,330 602,709
Balance at 31 March 2020
161,655,643 10,176,204
(i)
Shareholder Purchase Plan
(ii)
Placements
-7,083,296GENWAWarrantswereexercisedon30September2019at$0.0775perwarrantforatotalexercisepriceof$548,955.This
included 6,630,780 GENWA warrants exercised by Key Management Personnel for a total exercise price of $513,885 (refer to note 18).
-5,388 GENWB Warrants were exercised on 31 March 2020 at $0.09 per warrant for a total exercise price of $485.
-721,292 GENWA Warrants were exercised on 31 March 2020 at $0.0775 per warrant for a total exercise price of $55,900.
2020
18,615,073 ordinary shares have been issued to wholesale investors for an aggregate subscription value of $1,256,518.
1,037,037ordinaryshareshavebeenissuedtoDirectorsandSeniorManagersforanaggregatesubscriptionvalueof$70,000.(referto
note 18)
7,850,111ordinaryshareshavebeenissuedtoBorneoCapitalLimited(Borneo)foranaggeratesubscriptionvalueof$529,883toallow
Borneo to maintain its current 26.25% shareholding in the Company. (refer to note 18)
2,402,978 ordinary shares have been issued to 39 shareholders with an aggregate subscription value of $162,200.
2
In the prior year ended 31 March 2019, the Company issued shares at 6.75 cents per share on 7 December 2018 in relation to a share
purchase plan and placement of shares. Further details of these transactions is included below:
Ordinary shares issued - placements
2
Ordinary shares issued - share purchase plan
2
1
As detailed in note 21, the acquisition of Corporate Holdings Limited was settled on 3 August 2018 by the issue of 104,323,240 ordinary
shares in General Capital Limited at a fair value of $1,121,259.
3
The following warrants were exercised during the 31 March 2020 Financial year (2019: none).
-354 GENWB Warrants were exercised on 30 September at $0.09 per warrant for a total exercise price of $32.
AllordinarysharesrankequallyandentitletheholdertoparticipateindividendsandtoshareintheproceedsofwindinguptheCompanyin
proportiontothenumber ofandamountspaidonthesharesheld.Onevoteisattachedtoeachfully-paidordinaryshare.Shareshaveno
par value. The Company was listed on the NZAX, the secondary market ofthe NewZealand StockExchange upto 1July 2019, the dateit
migrated to the NZX main board.
2019
Ordinary shares
As described in note 21, these consolidated financial statements have been prepared as a continuation of the financial statements of
CorporateHoldingsLimited(CHL),assuchthecarryingamountofsharecapitalreflectsthevalueofsharesissuedbyCHL(uptothedateof
thereverseacquisitiontransactiondescribedinnote21).HoweverasGeneralCapitalLimited(formerlyMykcoLimited)isthelegalparentof
theGroup, andthelistedentity, thenumber of ordinarysharesshownbelow representthe number of shareson issueby GeneralCapital
Limited.
62
GENERAL CAPITAL LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2020
NOTE 17: EQUITY (CONTINUED)
(b) Redeemable preference shares
Number$Number$
Balance at 1 April 2018
3,457,000 3,474,850 1,500,000 105,254
(3,457,000) (3,474,850) (1,500,000) (105,254)
Balance at 31 March 2019
- - - -
Balance at 31 March 2020
- - - -
(i) Redeemable preference shares - type 1
(ii) Redeemable preference shares - type 2
(d) Warrants
Number$Number$
Balance at 1 April 2018
- - -
-
153,845,313 - 307,690,626
-
Balance at 31 March 2019
153,845,313 - 307,690,626 -
Exercise of GENWA Warrants - 30 September 2019
2
(7,083,296) - -
-
Exercise of GENWB Warrants - 30 September 2019
2
- - (354)
-
Exercise of GENWA Warrants - 31 March 2020
2
(721,292) - -
-
Exercise of GENWB Warrants - 31 March 2020
2
- - (5,388)
-
Warrants lapsed on expiry date
3
(146,038,725) - -
-
- - 12,650,000
4,672
- - 400,000
2,231
Balance at 31 March 2020
3
2,000 - 320,734,884 6,903
1
On 11 December 2018 the Company issued the following warrants:
-
-
Redeemable preference shares -
type 2
Issue of Warrants - 11 December 2018
1
307,690,6262021warrants(GENWB)wereissued,292,053,229toeligibleshareholdersand15,637,084toaHoldingAccountmanaged
bytheCompany. Allwarrantswereissuedonabasisoftwowarrantsforeachshareheldonrecorddate.Thewarrantsareexercisable
on or before 30 November 2021 at 9.00 cents per share for each warrant held. Further details are in the offer document.
Conversion to ordinary shares
Corporate Holdings Limited issued 3,100,000 type 1 redeemable preference shares at an issue price of $1.00 per share on 15 December
2017 and a further 357,000 type 1 redeemable preference shares on 26 January 2018 at an issue price of $1.05 per share .
The terms of the subscription agreement entitled Corporate Holdings Limited to convert the preference shares into ordinary Corporate
HoldingsLimitedShares(ona1:1basis) or to repaythe holder. The Groupdid nothave acontractual obligation(including contingent) to
delivercashorotherfinancialassetstotheholdersoftheseredeemablepreferenceshares,assuchtheyhaveaccordinglybeenrecordedas
equity instruments. The shares were converted to ordinary shares in Corporate Holdings Limited on 3 August 2018 prior to the reverse
acquisition transaction described in note 21.
Corporate Holdings Limited issued 1,500,000 type 2 redeemable preference shares at an issue price of $1.00 per share on 15 December
2017.
ThetermsofthesubscriptionagreementallowedentitledCorporateHoldingsLimitedtoconvertthepreferencesharesintoordinaryshares
of Corporate Holdings Limited (ona 1:1basis) if the acquisitiondescribed innote 21was completedwithin 180days from the issuedate.
There was a contingent obligation to deliver cash to the holder if the Group did not complete its obligation to complete the acquisition
withinthattimeframe(whichwaslaterextended).Thetype2redeemablepreferenceshareshaveaccordinglybeenrecognisedasafinancial
liability at amortised cost (refer to note 16) and had a fair value on initial recognition of $1,394,746, with the balance of $105,254 being
recognised in equity. The shares were converted to ordinary shares in Corporate Holdings Limited on 3 August 2018 prior to the reverse
acquisition transaction described in note 21.
Redeemable preference shares -
type 1
GENWA WarrantsGENWB Warrants
Issue of GENWB warrants to directors and senior managers - 25
June 2019 (note 19)
153,845,3132020warrants(GENWA)wereissued,146,026,771toeligibleshareholdersand7,818,542toaHoldingAccountmanaged
bytheCompany.Allwarrantswereissuedonabasisofonewarrantforeachshareheldonrecorddate.Thewarrantswereexercisable
on or before 31 March 2020 at 7.75 cents per share for each warrant held. Further details are in the offer document.
Issue of GENWB warrants to directors and senior managers - 17
January 2020 (note 19)
63
GENERAL CAPITAL LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2020
NOTE 17: EQUITY (CONTINUED)
2
Refer to Note 17(a) for further details on warrants exercised.
(e) Reserves
Financial Assets Share-basedTotal
at FVOCIpaymentsReseves
Notes$$$
Balance at 1 April 2018
- -
-
14
(14,862) - (14,862)
Balance at 31 March 2019
(14,862) - (14,862)
14
(153,094) - (153,094)
8
43,273 -
43,273
Share-based payment expense
19
- 6,903
6,903
Balance at 31 March 2020
(124,683) 6,903 (117,780)
NOTE 18: RELATED PARTY BALANCES AND TRANSACTIONS
The Group had dealings with the following related parties during the reporting periods:
Related partyRelationship
Directors (Refer to Director Profiles)Directors
Alistair Ward
Director of Subsidiary (General Finance Limited) - up to 16 September 2019
Donald HattawayDirector of Subsidiary (General Finance Limited)
Garth Ward
Director of Subsidiary (Corporate Holdings Limited) - up to 14 September 2019
Gregory PearceDirector of Subsidiary (General Finance Limited)
Robert HartDirector of Subsidiary (General Finance Limited)
Almond Draw Limited
Common Director - up to 14 September 2019
Barter Investments LimitedCommon Director
Borneo Capital LimitedCommon Director
Campbell MacPherson LimitedCommon Director
Cannabis & Bioscience Corporation LimitedCommon Director
Ellice Tanner Hart LimitedCommon Director
Equity Investment Advisers LimitedCommon Director
Moneyonline LimitedCommon Director
Pegasus Golf Limited
Snowdon Peak LimitedCommon Director
Sports & Education Corporation Limited
2
Common Director
Atender processwassettledon30September 2019for 7,778,542GENWAwarrantsand15,557,084GENWB warrantsthathadoriginally
beenissuedtoaholdingaccountinrelationtothewarrantissueon11December2018describedabove.TheGENWAwarrantsweresoldto
tenderersfortotalproceedsof$4,068andtheGENWBsharesweresoldfortotalproceedsof$4,718.Aspartofthistransaction,7,540,601
GENWA warrants were purchased by Key Management Personnel for total proceeds of $3,013 and 15,357,084 GENWB warrants were
purchased by Key Management Personnel for total proceeds of $3,068.
3
The Group allowed a minor parcel of 2,000 GENWA warrants to be exercised after the 31 March 2020 expiry date (on 15 April 2020) as the
exercise form was received late due to mail delays.
Revaluation of financial assets at FVOCI
Revaluation of financial assets at FVOCI
Income tax arising on revaluation of financial assets at FVOCI
Major shareholders, directors, directors of subsidiaries and closely related persons or entities to them are considered related parties of the
Group.
Common Director with Sports & Education Corporation Limited
2
(parent company of
Pegasus Golf Limited)
64
GENERAL CAPITAL LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2020
NOTE 18: RELATED PARTY BALANCES AND TRANSACTIONS (CONTINUED)
Related party receivables:
20202019
$$
Cannabis & Bioscience Corporation Limited
79,823
-
79,823 -
Related party payables:
20202019
$$
Brent King
442
1,870
Equity Investment Advisers Limited
2,126
-
Moneyonline Limited
357
6,072
2,925 7,942
Other related party balances:
20202019
$$
Term deposits held by directors and subsidiary directors
5,623,275
2,834,450
Loan receivable exposure to Pegasus Golf Limited
-
389,564
Transactions with related parties
20202019
Related PartyTypeTransaction
$$
Expense 645,043
415,467
Expense 177,859
55,626
Expense
Recharge of expenses
107,075
36,035
Almond Draw Limited
Expense
Consultant fees
7,500
44,775
Ellice Tanner Hart Limited
Expense
Legal Fees
-
-
Equity Investment Advisers Limited
Expense
Recharge of salary costs
57,676
50,156
Expense
Brokerage paid
79,984
23,638
Expense
Recharge of expenses
4,830
-
Revenue
Advertising fees
1,500
-
Moneyonline Limited
Expense
Recharge of expenses
132,576
99,352
Revenue
Advertising fees
-
2,500
Pegasus Golf Limited
2
Revenue
Fees and interest capitalised to loan balance
15,506
13,036
Revenue
Advisory fees
91,151
-
Revenue Advisory fees
2
-
274,100
Key Management Personnel
1
Sports and Education
Corporation Limited
2
2
Since 30 November 2018, the date Sports & Education Corporation Limited became a related party by virtue of common directorship. The
related party relationship ceased on 10 October 2019.
1
Key Management Personnel includes the Company’s Directors since 3 August 2018, the date of the reverse acquisition (refer to note 21),
subsidiary company directors, and the Chief Financial Officer in the 31 March 2020 financial year.
Cannabis & Bioscience
Corporation Limited
Campbell MacPherson
Limited
Short term Remuneration
Interest paid or capitalised on term deposits
investments held
Asattheprior year ended31 March2019, thegroupalsohad $2,985 payable toEquity InvestmentAdvisers Limitedincluded inaccounts
and other payables on the statement of financial position (2020: $nil).
The above amounts payable to related parties are unsecured, interest-free and repayable on demand.
65
GENERAL CAPITAL LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2020
NOTE 18: RELATED PARTY BALANCES AND TRANSACTIONS (CONTINUED)
Other related party transactions:
NOTE 19: SHARE BASED PAYMENTS
(a) Warrants issued to directors and senior managers
NumberFair Value $
Balance at 1 April 2018
-
-
Balance at 31 March 2019
- -
12,650,000
4,672
400,000
2,231
Balance at 31 March 2020
13,050,000 6,903
As detailed in note 17(a), 6,630,780 GENWA warrants were exercised by Key Management Personnel on 30 September 2019 for a total
exercise price of $513,885.
Anissueofupto20millionGENWBwarrantstodirectorsandseniormanagers,tobeallocatedattheBoard'sdiscretion, wasapprovedby
shareholders at a special meeting dated 29 November 2018.
1
TheabovetableonlyincludesGENWBwarrantsissuedtoDirectorsandSeniorManagersinrespectoftheirservicesprovidedtotheGroup.
ItexcludesanywarrantsthatwereissuedtoDirectorsandSeniorManagersproratawithothershareholdersinrespectoftheirshareholding
at11December2018(refertonote17).FordetailsofDirectorstransactionsandbalancesinsharesandwarrantsrefertoShareholderand
Statutory Information.
As detailed in note 17(d), 7,540,601 GENWA warrants were purchased by Key Management Personnel for total proceeds of $3,013 and
15,357,084 GENWB warrants were purchased by Key Management Personnel for total proceeds of $3,068 on 30 September 2019.
Directors' and Senior Managers'
Warrants
1
Issue of GENWB warrants to directors and senior managers - 25
June 2019
Issue of GENWB warrants to directors and senior managers - 17
January 2020
The issue of warrants provides long-term incentives for directors and senior managers to deliver long-term shareholder value.
The warrants have the same terms as GENWB warrants that were issued to shareholders in December 2018. They are exercisable on or
before 30 November 2021 at 9.00 cents per share for each warrant held.
On 27 July 2018, an executive director of General Finance Limited contributed $150,000 towards a loan receivableof theGroup onequal
termswiththeGroupinrespectoftheproportioncontributed.TheloancontributionwasrepaidbytheGroupon11December 2018.The
proportionofinterestinrelationtothecontributiontotalled$5,039andtheproportionoffeeincomeinrelationtothecontributiontotalled
$2,000.
As detailed in note 17(a), on 7 December 2018 1,037,037 ordinary shares have been issued to Directors and Senior Managers for an
aggregatesubscriptionvalueof$70,000and7,850,111ordinaryshareshavebeenissuedtoBorneoCapitalLimited(Borneo)foranaggerate
subscription value of $529,883.
Duringtheyearended31March2020,atotalof13,050,000warrantswereissuedtoDirectorsandSeniorManagers,12,650,000on25June
2019 and a further 400,000 on 17 January 2020.
Directorsandotherrelatedpartiesreceivedwarrantsissuedon11December2018inthesameratioasallothershareholdersinrespectof
the ordinary shares that they owned at that date (refer to note 17(d)).
AllofthesharesofCorporateHoldingsLimited("CHL")(otherthanthosealreadyownedbytheCompany)wereultimatelyacquiredbythe
Company(byissuingtheCompany'ssharestoCHL'sshareholders)inthereverseacquisitiontransactionon3August2018describedinnote
21.Thisincludedthe100,000CHLsharesthatwereownedbyGarthWardpriorto1April2017(whichhadaparvalueof$0.01pershareat
1 April 2017). Refer to note 17 for further details on share capital and redeemable preference shares.
During the year ended 31 March 2018 2,000,000 CHL redeemable preference shares (type 1) were issued to Borneo Capital Limited for
consideration of $2,000,000. These redeemable preference shares were converted to ordinary CHL shares on 3 August 2018 and were
ultimatelypurchasedbytheCompany (byissuing theCompany'ssharestoCHL'sshareholders)inthereverseacquisitiontransactionon3
August 2018 described in note 21. Refer to note 17 for further details on share capital and redeemable preference shares.
66
GENERAL CAPITAL LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2020
NOTE 19: SHARE BASED PAYMENTS (CONTINUED)
Fair value of warrants issued to directors and senior managers
Inputs into model
25-Jun-1917-Jan-20
Warrants issued
12,650,000
400,000
Exercise price per warrant
9.00 cents
9.00 cents
6.00 cents
8.00 cents
15.13%20.00%
Risk free interest rate
0.84%0.99%
Fair value per warrant
0.0369 cents
0.5576 cents
Total fair value of warrants issued
3
4,672$ 2,231$
Warrants Issued
ThefairvalueatgrantdateofwarrantsissuedisdeterminedusingtheBlackScholesModelthattakesintoaccounttheexerciseprice,the
termofthewarrant,thesharepriceatgrantdateandexpectedpricevolatilityoftheunderlyingshare,theexpecteddividendyield,therisk
free interest rate for the term of the warrants.
3
The fair value of warrants on grant date is recorded as a share-based payments expense included within personnel expenses in the
Statement of Comprehensive Income and in reserves (refer note 17(e)).
Share price at grant date
Expected price volatility of the Company's shares
2
2
The expected price volatility is based on the historical volatility of the shares and adjusted for any expected changes to future volatlity.
Transactions in GENWB Warrants (which are also listed on the NZX) have also been considered when determining the expected price
volatility of the Company's shares at grant date.
67
GENERAL CAPITAL LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2020
NOTE 20: RECONCILIATION OF NET SURPLUS WITH CASH FLOWS FROM OPERATING ACTIVITIES
Note20202019
$$
Net profit / (loss) after tax
129,556 (458,088)
Adjustment for non-cash and other items
Bad debts written off - loan receivables
-
12,388
Movement in allowance for expected credit losses
54,999 (31,844)
Deferred tax movement through profit or loss
8
(14,323)
1,965
Depreciation and amortisation
27,237
21,694
Fair value of warrants issued to directors and senior managers
19
6,903
-
Income received in non-cash financial assets
- (165,600)
Expenses paid in non-cash financial assets
-
11,055
Loss on acquisition of listed shell
-
405,280
Interest on redeemable preference shares
-
47,479
Adjustment for movements in working capital
1
(Increase) / decrease in loan receivables (net advances)
(17,091,608) (8,516,032)
(Increase) / decrease in accrued interest on loans receivable
(112,604) (9,940)
(Increase) / decrease in capitalised loan fees
(306,999) (135,185)
(Increase) / decrease in capitalised interest
(213,292) (82,223)
(Increase) / decrease in accounts receivable
3,292 (5,440)
(Increase) / decrease in related party receivable
(79,823)
-
(Increase) / decrease in prepayments and other current assets
(151,679) (14,237)
(Increase) / decrease in prepaid commission
(41,901) (19,286)
(Increase) / decrease in bartercard trade dollars
2
1,396
104,414
Increase / (decrease) in income tax payable
54,147 (114,786)
Increase / (decrease) in deferred income
95,954
63,849
Increase / (decrease) in interest payable
198,558
7,177
Increase / (decrease) in related party payable
(5,017) (133,400)
Increase / (decrease) in accounts and other payables
72,757 (22,519)
Net cash (outflow) / inflow from operating activities
(17,372,447) (9,033,279)
1
Movements in the 2019 year are net of working capital amounts acquired in business combinations (note 21).
2
Movement in the 2020 year net of $200,000 bartercard trade dollars used for acquisition of an equity investment (note 14).
68
GENERAL CAPITAL LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2020
NOTE 21: BUSINESS COMBINATIONS (PRIOR YEAR)
Reverse acquisition of Corporate Holdings Limited
Details of the transaction were:
$
Fair value of consideration transferred
Shares issued as consideration
1,121,259
Total Consideration
1,121,259
Identified assets acquired and liabilities assumed
- Cash and cash equivalents
85,735
- Other current assets
22,809
- Intangible assets - bartercard trade dollars (note 14)
693,313
- Accounts and other payables
(85,878)
Net assets acquired
715,979
Loss on acquiring listed shell
405,280
1,121,259
Contribution to Group results
The primary reason for the business combination was to effect the reverse listing of Corporate Holdings Limited and its subsidiaries.
Since the acquisition date General Capital Limited has contributed revenue of $nil (2019: $2,538) and a loss after tax of $296,256 (2019:
$163,210) whichisincludedwithinthelossfor theGroup.Hadthecombinationoccurredfrom thebeginning of the year ended 31 March
2019,theoperatinglossforGeneralCapitalLimitedincludedintheGroupinthatyearwouldhavebeen$421,177andrevenuewouldhave
been $3,750.
On 3 August 2018, General Capital Limited, acquired Corporate Holdings Limited through the issue of 104,323,240 ordinary shares to the
vendors of Corporate Holdings Limited.
Under thetermsoftheSaleandPurchaseagreement dated28May 2018, that wasapproved byshareholders ata Special Meeting on31
July 2018, the acquisition of Corporate Holdings Limited was settled by 104,323,240 ordinary shares in General Capital Limited.
For financial reportingpurposesthedirectorshavedeterminedthatduetothenatureof thetransactionandthepartiesinvolvedthatthe
acquisition should be classified as a "reverse acquisition" where Corporate Holdings Limited is treated as the acquirer of General Capital
Limited. The consolidated financial statements prepared following a "reverse acquisition" are issued under the name of the legal parent,
General Capital Limited (the accounting acquiree), but are a continuation of the financial statements of Corporate Holdings Limited (the
accounting acquirer), a company that was incorporated and domiciled in New Zealand on 16 March 2017.
Under reverse acquisition accounting, the cost of the business combination is deemed to have been the incurred by the legal subsidiary,
Corporate Holdings Limited (the accounting acquirer) in the form of equity instruments issued to the owners of the legal parent, General
CapitalLimited,(theaccountingacquiree).Theconsiderationof$1,121,259isthefairvalueofthesharesthatwereissuedinrelationtothe
transaction.ThefairvalueofsharesissuediscalculatedasthepercentageofownershipofCorporateHoldingsLimitedforgonebyitsoriginal
shareholdersdividedbythepercentageofownershipofGeneralCapitalLimitedobtainedbyCHL'sshareholdersinthetransactionmultiplied
bythefairvalueofCorporateHoldingsLimitedonacquisitiondate.Thedifferencebetweenthedeemedvalueofthesharesissuedandthe
fair value of net assets acquired of $405,280 is recorded as a loss in the Statement of Comprehensive Income.
69
GENERAL CAPITAL LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2020
NOTE 22: COMPARISON TO PROSPECTIVE FINANCIAL INFORMATION
Consolidated statement of comprehensive income
Unaudited
prospective
Actualinformation*
Year endedYear ended
31 March31 March
20202020Variance
$$$
Interest income
2,846,439 4,363,475 (1,517,036)
Interest expense
(1,441,213) (1,860,370) 419,157
Net interest income
1,405,226 2,503,105 (1,097,879)
Fee and commission income
553,686 696,772 (143,086)
Fee and commission expense
(128,699) (50,000) (78,699)
Net fee and commission income
424,987 646,772 (221,785)
Revenue from contracts with customers
227,715 385,000 (157,285)
Cost of sales
(32,545) (25,000) (7,545)
Gross profit from contracts with customers
195,170 360,000 (164,830)
Other income
12,761 25,000 (12,239)
Net revenue
2,038,144 3,534,877 (1,496,733)
Release / (increase) in allowance for expected credit losses
(54,999) (100,000) 45,001
Personnel expenses
(746,680) (470,000) (276,680)
Occupancy expenses
(117,373) (90,000) (27,373)
Depreciation
(4,444) - (4,444)
Amortisation of intangibles
(22,793) - (22,793)
Other expenses
(901,392) (1,044,000) 142,608
Acquisition expenses
- - -
Loss on acquiring listed shell
- - -
(1,847,681) (1,704,000) (143,681)
Profit before income tax expense
190,463 1,830,877 (1,640,414)
Income tax (expense) / benefit
(60,907) (517,765) 456,858
Net profit after income tax expense
129,556 1,313,112 (1,183,556)
Other comprehensive income
(153,094) - (153,094)
43,273 -
43,273
Other comprehensive income for the year
(109,821) - (109,821)
Total comprehensive income
19,735 1,313,112 (1,293,377)
*Where applicable, amounts have been reclassified for consistency with 31 March 2020 consolidated financial statements.
Income tax on these items
Changes in the fair value of equity investments at fair value
through other comprehensive income
Prospective consolidated financial statements were prepared for the Group within the disclosure document dated 16July 2018 as part of
thespecialmeetingdated31July2018.Theprospectivefinancialstatementsfortheyearended31March2020arecomparedtotheactual
results achieved for that year.
70
GENERAL CAPITAL LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2020
NOTE 22: COMPARISON TO PROSPECTIVE FINANCIAL INFORMATION (CONTINUED)
Consolidated statement of financial position
Unaudited
prospective
Actualinformation*
as atas at
31 March31 March
20202020Variance
$$$
Equity
Share capital
10,176,204 8,282,353 1,893,851
Retained earnings
(676,417) 2,110,133 (2,786,550)
Other reserves
(117,780) - (117,780)
Total equity
9,382,007 10,392,486 (1,010,479)
Assets
Cash and cash equivalents
12,562,241 4,106,490 8,455,751
Accounts receivables
10,859 152,215 (141,356)
Related party receivables
79,823 - 79,823
Finance receivables
34,855,849 50,642,044 (15,786,195)
Other current assets
266,523 25,000 241,523
Income taxation receivable
- - -
Property, plant and equipment
8,008 - 8,008
Deferred tax asset
96,004 49,813 46,191
237,389 -
237,389
Intangible assets and goodwill
3,046,811 3,227,077 (180,266)
Total assets
51,163,507 58,202,639 (7,039,132)
Liabilities
Accounts and other payables
319,381 215,683 103,698
Related party payables
2,925 - 2,925
Income taxation payable
8,697 220,000 (211,303)
Term deposits
41,450,497 47,374,470 (5,923,973)
Total liabilities
41,781,500 47,810,153 (6,028,653)
Net assets
9,382,007 10,392,486 (1,010,479)
Consolidated summarised statement of changes in equity
Unaudited
prospective
Actualinformation*
Year endedYear ended
31 March31 March
20202020Variance
$$$
Total equity as at 1 April 2019
8,752,660 9,079,374 (326,714)
Total comprehensive income for the year
19,735 1,313,112 (1,293,377)
Transactions with owners
609,612 - 609,612
Balance at 31 March 2020
9,382,007 10,392,486 (1,010,479)
*Where applicable, amounts have been reclassified for consistency with 31 March 2020 consolidated financial statements.
Financial assets at fair value through other
comprehensive income
71
GENERAL CAPITAL LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2020
NOTE 22: COMPARISON TO PROSPECTIVE FINANCIAL INFORMATION (CONTINUED)
Consolidated statement of cash flows
Unaudited
prospective
Actualinformation*
as atas at
31 March31 March
20202020Variance
$$$
Cash flow from operating activities
Interest received
2,520,543 4,219,480 (1,698,937)
Receipts from customers
491,332 1,315,258 (823,926)
Other income
12,761 - 12,761
Payments to suppliers and employees
(2,041,737) (1,593,782) (447,955)
Interest paid
(1,242,655) (1,470,591) 227,936
Income tax paid
(21,083) (355,165) 334,082
Finance receivables (net advances)
(17,091,608) (27,356,005) 10,264,397
Net cash provided by operating activities
(17,372,447) (25,240,805) 7,868,358
Cash flow from investing activities
Acquisition of subsidiaries (net of cash acquired)
- - -
Purchase of property, plant and equipment
(6,276) - (6,276)
Purchase of software
(4,444) - (4,444)
Net cash provided by / (used in) investing activities
(10,720) - (10,720)
Cash flow from financing activities
Issue of ordinary shares
602,709 - 602,709
Issue of redeemable preference shares
26,393,382 - 26,393,382
Term deposits (net receipts)
- 25,595,496 (25,595,496)
Net cash provided by financing activities
26,996,091 25,595,496 1,400,595
Reconciliation of cash and cash equivalents
2,949,317 3,751,799 (802,482)
9,612,924 354,691 9,258,233
12,562,241 4,106,490 8,455,751
*Where applicable, amounts have been reclassified for consistency with 31 March 2020 consolidated financial statements.
Key drivers of variances:
Cash and cash equivalents at beginning of the reporting period
Net (decrease) / increase in cash and cash equivalents held during
the reporting period
Cash and cash equivalents at end of the reporting period
AsnotedintheGroup's31March2019annualreportwhichcomparedthe2019resultstothe2019 prospectivefinancial information,the
growth in the finance receivables book and term deposit liabilities was not as fast as was originally anticipated. Whilst the balance sheet
growthhasbeensignificantintheyearended31March2020,duetothedelayedgrowththeloanreceivablebookis$15.8mbehindforecast
asat31March2020andthetermdepositliabilitiesare$5.9mbehindforecastasat31March2020.This,combinedwithahigherproportion
of assets held in cash and cash equivalents at 31 March 2020 than forecasted, represents the majority of thevariance intotal assetsand
total liabilities.
Theslowerthananticipatedgrowthandhighproportionof cashandcashequivalentsinthebalancesheetresultedinalower netinterest
margin ($1.1 million lower than forecast) and net fee and commission income ($0.2 million lower than forecast).
72
GENERAL CAPITAL LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2020
NOTE 23: COMMITMENTS AND CONTINGENT LIABILITIES
The Group has no material commitments or contingent liabilities at reporting date (2019: none).
NOTE 24: EVENTS SUBSEQUENT TO REPORTING DATE
-
-the operations, in financial years subsequent to reporting date, of the Group, or
-the results of those operations, or
-the state of affairs, in financial years subsequent to reporting date, of the Group.
Therehasbeennoothermatterorcircumstance,whichhasarisensincereportingdatethathassignificantlyaffectedormaysignificantly
affect:
Note4.1ofthesefinancialstatementsdescribedtheimpactoftheongoingoutbreakofCOVID-19pandemicwhichoccurredbefore31
March 2020 and continues as at the date of the signing of these financial statements.
73
Ordinary shares
GENWA Warrants
GENWB Warrants
LARGEST HOLDERS OF QUOTED FINANCIAL PRODUCTS (as at 18 June 2020)
Ordinary Shares
Rank Registered Holder
Ordinary Shares
Held
%
1 Borneo Capital Limited
42,249,755
26.14%
2 Brent Douglas King
21,948,650
13.58%
3 CFS NBDT Interest Limited
16,270,000
10.06%
4 Belian Holdings Limited
12,377,869
7.66%
5 Owen Arvind Daji
7,030,463
4.35%
6 Grant Keith Baker & Donna Jean Baker & Lewis Thomas Grant
6,511,945
4.03%
7 Harrigens Trustees Limited
6,511,945
4.03%
8 Stephen John Sinclair & Jacqueline Margaret Sinclair & Roger Frederick Wallis
6,290,524
3.89%
9 John Tomson
6,289,722
3.89%
10 Bruce Gregory Speers & Fiorano Trust Limited
4,169,723
2.58%
11 Syed Hizam Alsagoff
4,000,000
2.47%
12 Barter Investments Limited
3,562,470
2.20%
13 Zhenhua Qian
3,030,303
1.87%
14 Bruce Gregory Speers
2,222,222
1.37%
15 Garth William Ward
1,672,455
1.03%
16 Justin Andrew Cunningham & Andrew Mark Scott
1,637,000
1.01%
17 Sii Yih Ting
1,480,000
0.92%
18 Koon Weng Lee
1,291,325
0.80%
19 Chu Kian Then
1,170,408
0.72%
20 Yada Holdings No 1 Limited
770,000
0.48%
150,486,779
93.09%
The Company had three classes of quoted financial products on issue during the year ended 31 March 2020, one of which expired on 31
March 2020:
General Capital Limited ("the Company") is a listed company on the NZX Main Board. Prior to1 July2019 theCompany waslisted onthe
New Zealand Alternative Market (NZAX).
GENERAL CAPITAL LIMITED
SHAREHOLDER AND STATUTORY INFORMATION
Allordinarysharesrankequallywithonevoteattachedtoeachordinaryshare.Ordinarysharesentitletheholdertoparticipateindividends
and the proceeds on the winding up of the Company in proportion to the number of shares held.
Thewarrantswereexercisableonorbefore31 March2020 at7.75centsper sharefor eachwarrantheld.Thewarrants didnot haveany
voting rights attached to them, nor do they have any entitlement to participate in dividends or the proceeds on the winding up of the
Company.
Warrantsareexercisableonorbefore30November 2021at9.00centspershareforeachwarrantheld.Warrantsdonothaveanyvoting
rights attached to them, nor do they have any entitlement to participate in dividends or the proceeds on the winding up of the Company.
74
GENERAL CAPITAL LIMITED
SHAREHOLDER AND STATUTORY INFORMATION
LARGEST HOLDERS OF QUOTED FINANCIAL PRODUCTS (as at 18 June 2020) (continued)
GENWB Warrants
Rank Registered Holder
GENWB
Warrants Held
%
1 Borneo Capital Limited
82,780,222
25.81%
2 Brent Douglas King
53,897,300
16.80%
3 CFS NBDT Interest Limited
32,540,000
10.15%
4 Belian Holdings Limited
18,755,738
5.85%
5 Owen Arvind Daji
14,060,926
4.38%
6 Grant Keith Baker & Donna Jean Baker & Lewis Thomas Grant
13,023,890
4.06%
7 Harrigens Trustees Limited
13,023,890
4.06%
8 Stephen John Sinclair & Jacqueline Margaret Sinclair & Roger Frederick Wallis
12,581,048
3.92%
9 John Tomson
12,579,444
3.92%
10 Bruce Gregory Speers & Fiorano Trust Limited
8,579,446
2.67%
11 Syed Hizam Alsagoff
8,000,000
2.49%
12 Barter Investments Limited
7,124,940
2.22%
13 Jonathan Brian Vijay Clark
6,505,232
2.03%
14 Zhenhua Qian
6,060,606
1.89%
15 Bruce Gregory Speers
4,444,444
1.39%
16 Garth William Ward
3,744,910
1.17%
17 Justin Andrew Cunningham & Andrew Mark Scott
3,274,000
1.02%
18 Robert Garry Hart & Sarah Dawn Wilkinson-Hart & Eth (Wilkinson-Hart) Trustees Limited
2,081,482
0.65%
19 Casrom Trustee Company Limited
1,198,446
0.37%
20 Yada Holdings No 1 Limited
1,140,000
0.36%
305,395,964
95.22%
SPREAD OF FINANCIAL PRODUCT HOLDERS (as at 18 June 2020)
Ordinary Shares
Size of Holding
Number of
Shareholders
%
Number of
Ordinary Shares
%
1 - 1,999
515
71.2%
31,407
0.0%
2,000 - 4,999
26
3.6%
72,609
0.0%
5,000 - 9,999
61
8.4%
455,593
0.3%
10,000 - 49,999
53
7.3%
1,153,960
0.7%
50,000 - 99,999
18
2.5%
1,120,275
0.7%
100,000 - 999,999
31
4.3%
9,107,020
5.6%
1,000,000 - 9,999,999
15
2.1%
56,870,505
35.2%
10,000,000 and over
4
0.6%
92,846,274
57.5%
723
100.0%
161,657,643
100.00%
Geographic Spread
New Zealand
620
85.7%
154,256,714
95.4%
Malaysia
67
9.3%
6,928,330
4.3%
Rest of World
36
5.0%
472,599
0.3%
723
100.0%
161,657,643
100.00%
75
GENERAL CAPITAL LIMITED
SHAREHOLDER AND STATUTORY INFORMATION
SPREAD OF FINANCIAL PRODUCT HOLDERS (as at 18 June 2020) (continued)
GENWB Warrants
Size of Holding
Number of Product
Holders
%
Number of GENWB
Warrants
%
1 - 1,999
501
80.5%
34,124
0.0%
2,000 - 4,999
8
1.3%
28,724
0.0%
5,000 - 9,999
6
1.0%
35,172
0.0%
10,000 - 49,999
36
5.8%
686,728
0.2%
50,000 - 99,999
11
1.8%
747,880
0.2%
100,000 - 999,999
39
6.3%
12,806,292
4.0%
1,000,000 - 9,999,999
12
1.9%
53,153,506
16.6%
10,000,000 and over
9
1.4%
253,242,458
79.0%
622
100.0%
320,734,884
100.00%
Geographic Spread
New Zealand
618
99.4%
319,732,668
99.7%
Rest of World
4
0.6%
1,002,216
0.3%
622
100.0%
320,734,884
100.00%
SUBSTANTIAL PRODUCT HOLDERS (at 31 March 2020)
The following information is provided pursuant to section 293 of the Financial Markets Conduct Act 2013.
Ordinary Shares
% of voting
(ordinary)
shares at
balance date
GENWB
Warrants
Borneo Capital Limited
42,249,755
26.14%
82,780,222
Brent Douglas King
21,948,650
13.58%
53,897,300
CFS NBDT Interest Limited
16,270,000
10.06%
32,540,000
Belian Holdings Limited
12,377,869
7.66%
18,755,738
92,846,274 187,973,260
As at 31 March 2020, the following shareholders are registered by the company as Substantial Product Holders in the Company, having
disclosed a relevant interest in quoted voting products under the Financial Markets Conduct Act 2013.
76
GENERAL CAPITAL LIMITED
SHAREHOLDER AND STATUTORY INFORMATION
DIRECTORS' REMUNERATION AND OTHER BENEFITS
Directors Fees
Other
Remuneration
1
$$
Rewi Hamid Bugo
25,500 -
Brent Douglas King
1
17,000 148,887
Huei Min Lim
17,000 -
Graeme Iain Brown
17,000 -
Simon John McArley
19,250 -
95,750 148,887
$
Base salary
127,772
Car allowance
12,000
Commission
2
9,115
148,887
DIRECTORS' REMUNERATION AND OTHER BENEFITS (Continued)
Other entitlements of the Managing Director:
2
Brent King is entitled to a commission payment of 10% of all fee income earned by the Group. For the avoidance of doubt, this
excludes any fees earned by General Finance Limited in relation to its lending business.
BrentKingisalsoentitledtoaprofitshareof8%ofanyamountbywhichtheGroup'snetprofitaftertaxexceedsthebenchmarkfor
thatyear.ThatbenchmarkisthetotalequityoftheGroupatthecommencementoftheyear,multipliedbytheOfficialCashRate(set
bytheReserveBankofNewZealand)plus10%perannum.Theseamountsaretobepaidquarterlybasedonestimatescalculatedby
the Group Chief Financial Officer. During the year ended 31 March 2020, there were no such payments made to the Managing Director.
1
Other remuneration paid to Brent King comprises salaries and other benefits paid to Brent King in his capacity as Managing Director of
General Capital Limited and its subsidiaries. Brent King's other remuneration is broken down further as follows:
77
GENERAL CAPITAL LIMITED
SHAREHOLDER AND STATUTORY INFORMATION
DIRECTORS DEALINGS IN QUOTED FINANCIAL PRODUCTS DURING THE YEAR ENDED 31 MARCH 2020
Date of
Transaction
Number of
Financial
Products
Acquired /
(disposed)
Consideration
(received) / paid
$
Relevant Interest
Rewi Hamid Bugo
1
25/06/2019 GENWB Warrants
2,000,000
Note 7Note 1
Brent Douglas King
2
25/06/2019 GENWB Warrants
2,000,000
Note 7Note 2
Graeme Iain Brown
3
25/06/2019 GENWB Warrants
600,000
Note 7Note 3
Huei Min Lim
4
25/06/2019 GENWB Warrants
600,000
Note 7Note 4
Simon John McArley
5
26/06/2019 GENWB Warrants
600,000
Note 7Note 5
Simon John McArley
6
25/06/2019 -
26/06/2019
Ordinary Shares
40,000 $2,589
Note 6
Huei Min Lim
4
17/07/2019 Ordinary Shares
33,590 $2,015
Note 4
Rewi Hamid Bugo
1
30/09/2019 Ordinary Shares
1,859,644
Note 8Note 1
Rewi Hamid Bugo
1
30/09/2019 GENWA Warrants
(1,859,644)
Note 8Note 1
Brent Douglas King
2
30/09/2019 Ordinary Shares
1,000,000
Note 8Note 2
Brent Douglas King
2
30/09/2019 GENWA Warrants
(1,000,000)
Note 8Note 2
Graeme Iain Brown
3
30/09/2019 Ordinary Shares
3,300,000
Note 8Note 3
Graeme Iain Brown
3
30/09/2019 GENWA Warrants
(3,300,000)
Note 8Note 3
Brent Douglas King
2
30/09/2019 GENWA Warrants
5,000,000
Note 9Note 2
Brent Douglas King
2
30/09/2019 GENWB Warrants
10,000,000
Note 10Note 2
The GENWA Warrants that were not exercised by Directors by their final exercise date of 31 March 2020 lapsed on 31 March 2020.
Relevant Interests
Other notes
3
Deemed relevant interest by virtue of Graeme Iain Brown owning more than 20% of the voting products of Belian Holdings Limited (the
registered holder).
Financial Product
1
Deemed relevant interest by virtue of Rewi Hamid Bugo owning more than 20% of the voting products of Borneo Capital Limited (the
registered holder).
2
Brent Douglas King as the registered holder and beneficial owner.
5
DeemedrelevantinterestbyvirtueofSimonJohnMcArleyowningmorethan20%ofthevotingproductsofBeaconsfieldNomineesLimited
(the registered holder).
7
Issue of GENWB warrants pursuant to the Warrant Offer Document - Directors and Senior Managers announced to the NZX on 4 December
2018.
4
Huei Min Lim as the registered holder and beneficial owner.
6
Deemedrelevantinterestbyvirtueof SimonJohnMcArleybeingatrusteeoftheProspectRoadFamilyTrust,thebeneficialownerofthe
shares issued by Prospect Road Investments Limited (the registered holder).
8
GENWA
Warrants exercised for ordinary shares at an exercise price of 9.00 cents per GENWA warrant on the transaction date.
9
5,000,000 GENWA Warrants purchased for total consideration of $2,000 as part of the warrant tender process announced to the NZX on 24
September 2019 that settled on 30 September 2020.
10
10,000,000 GENWB Warrants purchased for total consideration of $2,000 as part of the warrant tender process announced to the NZX on
24 September 2019 that settled on 30 September 2020.
78
GENERAL CAPITAL LIMITED
SHAREHOLDER AND STATUTORY INFORMATION
DIRECTORS QUOTED FINANCIAL PRODUCT HOLDINGS AT 31 MARCH 2020
Ordinary Shares
GENWB
Warrants
Rewi Hamid Bugo
1
42,249,755 82,780,222
Brent Douglas King
2
21,948,650 53,897,300
Brent Douglas King
3
3,562,470 7,124,940
Graeme Iain Brown
4
12,377,869 18,755,738
Huei Min Lim
33,590 600,000
Simon John McArley
5
40,000 -
Simon John McArley
6
- 600,000
80,212,334 163,758,200
Relevant Interests
OTHER DIRECTORSHIPS HELD BY DIRECTORS
Rewi Hamid Bugo
General Capital LimitedDidi Resources Sdn BhdReignvest Corporation Sdn Bhd
Thriven Global BerhadDidi Automotive Sdn BhdRekaruang Sdn Bhd
Aventura Properties LimitedEra Malindo Sdn BhdSantubong Properties Sdn Bhd
Bay of Islands Property LimitedGading Kapital Sdn BhdSantubong Suites Sdn Bhd
Borneo Capital LimitedSara Gemilang Sdn Bhd
Borneo Investments LimitedLamacipta Sdn BhdSarasiana Holdings Sdn Bhd
Corporate Holdings LimitedMesti Perkasa Sdn BhdSego Holdings Sdn Bhd
Global Dominance LimitedPacific Unit Sdn BhdSpace Craft Sdn Bhd
Inlet Contractors LimitedParklane Properties Sdn Bhd Strategen Services Sdn Bhd
Inlet Estate LimitedPetra Jaya Properties Sdn Bhd Telaga Air Resourses Sdn Bhd
Sego Holdings (NZ) LimitedPJP Dua Sdn BhdTransnational Insurance Brokers (M) Sdn Bhd
Selwyn Residential LimitedProfile Equity Sdn BhdTrombol Resort Sdn Bhd
Billion Jasa Sdn BhdWarble Resources Sdn Bhd
Delima Pelita Sdn Bhd
Graeme Iain Brown
Aventura Properties Limited Keresa Mill Sdn BhdSarawakiana Holdings Sdn
Belian Holdings Limited Keresa Plantations Sdn Bhd Sarawakiana Leisure Sdn Bhd
General Capital Limited Keresa Sdn Bhd Sarawakiana Management Sdn Bhd
Waddell Holding Ltd Malesiana Tropicals Sdn Bhd Sarawakiana Realty Sdn Bhd
Alkaz Sdn BhdPascali Sdn BhdTera Management Sdn Bhd
Asian Acids Pte LtdPesaka Energy Solutions Sdn Bhd Waddell Holding Sdn Bhd
Asian Corn Sdn Bhd PFS Energy (Malaysia) Sdn Bhd Waddell Holdings Pte Ltd
Borneo Plant Technology Sdn Bhd Premier Space Sdn Bhd
Yun Ming Wood Industries Sdn Bhd
Earth Energy Renewables LLC Pro-Formula Sdn Bhd
Grand Evermore Sdn BhdRajang Wood Sdn Bhd
2
Brent Douglas King as the registered holder and beneficial owner.
4
Deemed relevant interest by virtue of Graeme Iain Brown owning more than 20% of the voting products of Belian Holdings Limited (the
registered holder).
3
Deemed relevant interest by virtue of Brent Douglas King being a director of Barter Investments Limited (the registered holder).
1
Deemed relevant interest by virtue of Rewi Hamid Bugo owning more than 20% of the voting products of Borneo Capital Limited (the
registered holder).
Property Plus Marketing Services
Sdn Bhd
Ik Chin Travel Services (K) Sdn Bhd
5
Deemedrelevantinterestbyvirtueof SimonJohnMcArleybeingatrusteeoftheProspectRoadFamilyTrust,thebeneficialownerofthe
shares issued by Prospect Road Investments Limited (the registered holder).
6
DeemedrelevantinterestbyvirtueofSimonJohnMcArleyowningmorethan20%ofthevotingproductsofBeaconsfieldNomineesLimited
(the registered holder).
79
GENERAL CAPITAL LIMITED
SHAREHOLDER AND STATUTORY INFORMATION
OTHER DIRECTORSHIPS HELD BY DIRECTORS (Continued)
Brent Douglas King
A.I.S. LimitedEquity Investment Advisers LimitedKohaus Limited
Askridge Holdings LimitedGeneral Capital LimitedMoneyonline Limited
Barter Investments LimitedGeneral Finance LimitedMykco Limited
Cannabis & BioScience Corporation Limited General Finance & Leasing LimitedSharechat.co.nz Limited
CBC Manuka LimitedGeneral Finance & Investments LimitedSnowdon Peak Investments Limited
CBC Greenfern LimitedGeneral Leasing LimitedRed Hot Investments Limited
CBC Tetramed LimitedGeneral Loan & Finance LimitedTransaction Holdings Limited
Commercial and General LimitedInvestment Research Group Limited
Corporate Holdings LimitedKing Capital & Investment Corporation Limited
Huei Min Lim
General Capital LimitedRestaurant Brands New Zealand Limited
Hartajaya Investments Limited Asia New Zealand Foundation
Kaya Investments Limited Auckland Regional Amenities Funding Board
Simon John McArley
Beaconsfield Nominees Limited
General Capital Limited
Prospect Road Investments Limited
Prospect Road Services Limited
EMPLOYEE REMUNERATION
Remuneration Range20202019
$120,000 - $129,99901
$130,000 - $139,99901
$140,000 - $149,99900
$150,000 - $159,00000
$160,000 - $169,99920
NZX WAIVERS
Further details on class waivers issued by the NZX can be found on the NZX website.
The above class waiver was relied on by the Company in relation to the release of its 31 March 2020 Results Announcement and Annual
Report.
As part of relief given to listed entities impacted by the COVID-19 pandemic, a class waiver was issued by the NZX and Financial Markets
Authority in relation to periodic reporting requirements. The class waiver included:
-Awaiverfromrules3.5.1and3.6.1inrelationtothenormalduedatesforreleaseofResultsAnnouncementsandAnnualReports,provided
theresultsannouncementisreleasedwithin90daysfromtheendofthefinancialyearandtheAnnualReportisreleasedwithin5monthsof
the end of the financial year and other conditions are met.
-AwaiverfromthereleasedatesprescribedintheNZXMainBoardRulesdated1January2019inrelationtotheCompany's31March2019
results announcement and 31 March 2019 Annual Report provided the release dates prescribed in the NZAX listing rules are met.
Certain class waivers were issued by the NZX for migrating entities from the NZAX to the NZX Main Board. The waivers included:
-AwaiverfromtherequirementtoupdatetheCompany'sconstitutionfortherequirementsoftheNZXMainBoardrulesdated1January
2019 until the next Annual or Special Meeting, provided the Company complies with the Rules from migration date.
Duringtheyearended31March2020,thenumberofemployeesorformeremployeesoftheGroupnotbeingdirectorsofGeneralCapital
Limited(butincludingExecutiveDirectorsofSubsidiaries),whoreceivedremunerationandotherbenefitsintheircapacityasemployees,the
value of which exceeded $100,000 for the year was as follows:
Number of Employees
The above waivers were relied upon by the Company during the financial year. The Company's constitution was updated at the Annual
Meeting on 30 August 2019.
80
REGISTERED OFFICE:General Capital Limited
Level 7, Swanson House
12-26 Swanson Street
Auckland 1010
New Zealand
PO Box 1314
Shortland Street
Auckland 1010
New Zealand
Email:info@gencap.co.nz
Web:www.gencap.co.nz
Phone: (09) 526 5000
AUDITOR:Baker Tilly Staples Rodway
Level 9, Tower Centre
45 Queen Street
Auckland CBD
Auckland 1010
SHARE REGISTER:Computershare Investor Services Limited
Level 2, 159 Hurstmere Road
Takapuna
Auckland 0622
BANKERS:Bank of New Zealand
ANZ Bank New Zealand Limited
ASB Bank Limited
Westpac New Zealand Limited
Heartland Bank Limited
GENERAL CAPITAL LIMITED
CORPORATE DIRECTORY
81
IRG is a research house and it is also a örm of Investment Bankers.
IRG is an NZX Sponsor. Management of IRG have listed companies and or been a
Director of companies on all Equity Boards of NZX. This includes: NZSX, NZAX,
NCM, NXT.
IRG Investment Yearbook
Investment Research Group
Data sourced from publicly available filings. Our datasets may not be complete. Automated analysis can produce errors. If you believe any data on this page is incorrect, please contact us at hello@nzxplorer.co.nz. For informational purposes only. Not investment advice.
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