Equity-Accounted Investments And Other Long-Term Assets

6 Months Ended

Dec. 31, 2019

Equity-Accounted Investments And Other Long-Term Assets [Abstract]

Equity-Accounted Investments And Other Long-Term Assets

7. Equity-accounted investments and other long term assets

Refer to Note 9 to the Company’s audited consolidated financial statements included in its Annual Report on Form 10-K for the year ended June 30, 2019, for additional information regarding its equity-accounted investments and other long-term assets.

Equity-accounted investments

The Company’s ownership percentage in its equity-accounted investments as of December 31, 2019 and June 30, 2019, was as follows:

	December 31,		June 30,
		2019	2019
Bank Frick & Co AG (“Bank Frick”)		35%	35%
DNI		30%	30%
Finbond Group Limited (“Finbond”)		29%	29%
Carbon Tech Limited (“Carbon”), formerly OneFi Limited		25%	25%
Revix (“Revix”)		25%	-
SmartSwitch Namibia (Pty) Ltd (“SmartSwitch Namibia”)		50%	50%
V2 Limited (“V2”)		50%	50%
Walletdoc Proprietary Limited (“Walletdoc”)		20%	20%

DNI

During the three and six months ended December 31, 2019, the Company recorded earnings from DNI that resulted in the carrying value of DNI exceeding the amount that the Company could receive pursuant to the call option granted to DNI in May 2019. During the three and six months ended December 31, 2019, the Company has recorded an impairment loss of $0,8 million and $1,1 million, respectively, which represents the difference between the amount that the Company could receive pursuant to the call option and DNI’s carrying value.

Bank Frick

On October 2, 2019, the Company exercised its option to acquire an additional 35% interest in Bank Frick from the Frick Family Foundation. The Company will pay an amount, the “Option Price Consideration”, for the additional 35% interest in Bank Frick, which represents the higher of CHF 46.4 million ($46.5 million at exchange rates on October 2, 2019) or 35% of 15 times the average annual normalized net income of the Bank over the two years ended December 31, 2018. The shares will only transfer on payment of the Option Price Consideration, which shall occur on the later of (i) 180 days after the date of exercise of the option; (ii) in the event of any regulatory approvals being required, 10 days after receipt of approval (either unconditionally or on terms acceptable to both parties); and (iii) 10 days after the date on which the Option Price Consideration is agreed or finally determined.

Finbond

As of December 31, 2019, the Company owned 268 820 933 shares in Finbond representing approximately 29,1% of its issued and outstanding ordinary shares. Finbond is listed on the Johannesburg Stock Exchange and its closing price on December 31, 2019, the last trading day of the month, was ZAR 3,50 per share. The market value of the Company’s holding in Finbond on December 31, 2019, was ZAR 0,9 billion ($67,0 million translated at exchange rates applicable as of December 31, 2019). On August 2, 2019, the Company, pursuant to its election, received an additional 1,148,901 shares in Finbond as a capitalization share issue in lieu of a dividend.

V2 Limited

In August 2019, the Company made a further equity contribution of $1.3 million to V2 Limited (“V2”) and in January 2020 it made its final committed equity contribution of $1.3 million bringing the total equity contribution to $5.0 million. The Company has also committed to provide V2 with a working capital facility of $5.0 million, which is subject to the achievement of certain pre-defined objectives.

7. Equity-accounted investments and other long term assets (continued)

Equity-accounted investments (continued)

					DNI		Bank Frick		Finbond		Other⁽¹⁾		Total
Investment in equity
	Balance as of June 30, 2019				$	61 030	$	47 240	$	35 300	$	7 398	$	150 968
		Acquisition of shares				-		-		274		1 250		1 524
		Stock-based compensation				-		-		71		-		71
		Comprehensive income (loss):				1 108		469		2 718		(499)		3 796
			Other comprehensive loss			-		-		2 227		-		2 227
			Equity accounted earnings (loss)			1 108		469		491		(499)		1 569
				Share of net income		3 113		755		491		(499)		3 860
				Amortization of acquired intangible assets		(1 292)		(376)		-		-		(1 668)
				Deferred taxes on acquired intangible assets		361		90		-		-		451
				Impairment		(1 074)		-		-		-		(1 074)
		Dividends received				(1 110)		-		(274)		(338)		(1 722)
		Foreign currency adjustment⁽²⁾				137		453		300		(48)		842
	Balance as of December 31, 2019				$	61 165	$	48 162	$	38 389	$	7 763	$	155 479

Investment in loans:
	Balance as of June 30, 2019				$	-	$	-	$	-	$	148	$	148
		Loans granted				-		-		-		612		612
		Allowance for doubtful loans				-		-		-		(620)		(620)
		Foreign currency adjustment⁽²⁾				-		-		-		8		8
	Balance as of December 31, 2019				$	-	$	-	$	-	$	148	$	148

									Equity		Loans		Total
Carrying amount as of :
		June 30, 2019							$	150 968	$	148	$	151 116
		December 31, 2019							$	155 479	$	148		155 627

(1) Includes primarily Carbon, SmartSwitch Namibia, V2 and Walletdoc;
(2) The foreign currency adjustment represents the effects of the fluctuations of the South African rand, Swiss franc, Nigerian naira
and Namibian dollar, and the U.S. dollar on the carrying value.

Other long-term assets

Summarized below is the breakdown of other long-term assets as of December 31, 2019, and June 30, 2019:

		December 31,			June 30,
			2019		2019

Total equity investments		$	26 993	$	26 993
	Investment in 15% of Cell C, at fair value (Note 6)		-		-
	Investment in 13% of MobiKwik		26 993		26 993
Total held to maturity investments			-		-
	Investment in 7.625% of Cedar Cellular Investment 1 (RF) (Pty) Ltd 8.625% notes		-		-
Long-term portion of payments to agents in South Korea amortized over the contract period (Note 3)			6 530		9 564
Policy holder assets under investment contracts (Note 9)			587		619
Reinsurance assets under insurance contracts (Note 9)			1 159		1 163
Other long-term assets			5 875		5 850
	Total other long-term assets	$	41 144	$	44 189

Summarized below are the components of the Company’s equity securities without readily determinable fair value and held to maturity investments as of December 31, 2019:

				Cost basis		Unrealized holding		Unrealized holding		Carrying
				Cost basis		gains		losses		value
Equity securities:
	Investment in Mobikwik		$	26 993	$	-	$	-	$	26 993
Held to maturity:
	Investment in Cedar Cellular notes			-		-		-		-
		Total	$	26 993	$	-	$	-	$	26 993

Summarized below are the components of the Company’s equity securities without readily determinable fair value and held to maturity investments as of June 30, 2019:

				Cost basis		Unrealized holding		Unrealized holding		Carrying
				Cost basis		gains		losses		value
Equity securities:
	Investment in MobiKwik		$	26 993	$	-	$	-	$	-
Held to maturity:
	Investment in Cedar Cellular notes			-		-		-		-
		Total	$	26 993	$	-	$	-	$	-

No interest income from the Cedar Cellular note was recorded during the three and six months ended December 31, 2019. The Company recognized interest income of $1.2 million and $1.4 million, related to the Cedar Cellular notes during the three and six months ended December 31, 2018, respectively. Interest on this investment will only be paid, at Cedar Cellular’s election, on maturity in August 2022. The Company’s effective interest rate on the Cedar Cellular note was 24.82% as of December 31, 2018.

As of December 31, 2018, the Company did not expect to recover the entire amortized cost basis of the Cedar Cellular notes due to a reduction in the amount of future cash flows expected to be collected from the debt security. The Company did not expect to generate any cash flows from the debt security prior to the maturity date in August 2022, and expected to recover approximately $22.0 million at maturity. As of December 31, 2018, the Company calculated the present value of the expected cash flows to be collected from the debt security by discounting the cash flows at the interest rate implicit in the security upon acquisition (at a rate of 24.82%). The present value of the expected cash flows of $9.0 million was less than the amortized cost basis recorded of $11.8 million (before the impairment) as of December 31, 2018. Accordingly, the Company recorded an other-than-temporary impairment related to a credit loss of $2.7 million during the three and six months ended December 31, 2018.

7. Equity-accounted investments and other long term assets (continued)

Other long-term assets (continued)

Contractual maturities of held to maturity investments

Summarized below is the contractual maturity of the Company’s held to maturity investment as of December 31, 2019:

Cost basis

Estimated fair value⁽¹⁾

Due in one year or less

Due in one year through five years ⁽²⁾

Due in five years through ten years

Due after ten years

(1) The estimated fair value of the Cedar Cellular note has been calculated utilizing the Company’s portion of the security

provided to the Company by Cedar Cellular, namely, Cedar Cellular’s investment in Cell C.

(2) The cost basis is zero ($0.0 million).