Chobe : INDEPENDENT AUDITOR’S REPORT TO THE SHAREHOLDERS OF CHOBE HOLDINGS LIMITED

Overall group materiality

How we determined it

Rationale for the materiality benchmark applied

P 6 782 000

5% of the consolidated profit before tax.

We chose consolidated profit before tax as the benchmark because, in our view, it is the benchmark against which the performance of the Group is most commonly measured by users and is a generally accepted benchmark. We chose 5% which is consistent with quantitative materiality thresholds used for profit-oriented companies in this sector.

Key audit matter

Impairment assessment of goodwill and non-financial assets (consolidated and separate financial statements)

The Group's customers are predominantly from Europe and North America. These locations were impacted by COVID-19 in the three years preceding the current financial year. The lockdowns, travel restrictions and similar measures put in place by governments regionally and globally in order to restrict the spread of COVID-19 had a debilitating impact on the Group, with customers unable to travel to the Group's lodges, resulting in a significant decline in revenue.

While these measures have been lifted both regionally and globally, the economic consequences thereof, together with economic uncertainty resulting from conflict in Europe, may continue to impact on the Group's customer base.

Given that the Group operates on fixed term land

How our audit addressed the key audit

matter

We assessed the appropriateness of the valuation model applied by management with reference to market practice and the requirements of IAS 36. We also compared the model to that applied in prior years. We identified no inconsistencies, which would impact on the impairment assessments.

For each of the CGUs' impairment assessments performed by the Group and Company, we tested the mathematical accuracy of the value-in-use calculations, recalculated the recoverable amounts for significant CGUs and compared these to the respective net carrying values. Our procedures did not identify any exceptions.

We assessed the key judgements used by

Key audit matter

concession rights, circumstances which may impact the ability and spending power of its customer base, for which the duration and impact cannot be estimated reliably, are considered impairment triggers in terms of International Accounting Standard (IAS) 36 - Impairment of Assets ("IAS 36").

Accordingly, in addition to the annual assessment assessing goodwill on business combination for impairment, the Group performed impairment assessments of other material non-financial assets such as property, plant and equipment, right-of- use assets and intangible assets at a group level, and of the Company's investments in subsidiaries.

Goodwill recognised in the consolidated financial statements arises mostly from acquisition of the operating camps and related lease holding / concessionaire companies. The Group determines the goodwill to be attributable to Cash Generating Units ("CGUs") of the relevant concession which generates independent, separately identifiable cash flows. Therefore, the impairment assessment was performed at the relevant CGUs. The carrying values of the CGUs include property, plant and equipment, right-of-use assets and intangible assets included in the consolidated financial statements.

The carrying values of the investments in subsidiaries included in the separate financial statements were compared to the value of related CGUs to perform the impairment assessment for the Company.

The Group and Company used cash flow projections to estimate its value-in-use of CGUs. In determining the projected cash flows to be generated by each CGU, the Group applied judgement and made estimates. Some of the key judgements and estimates include:

• Sustainable base occupancy levels;
• Occupancy growth rates; and
• Discount rates.

With respect to aircrafts which do not form part of any particular CGU, the Group compared the

How our audit addressed the key audit matter

management in their value-in-use calculations by performing the following procedures:

• We agreed the cash flow projections to the approved financial budgets used by the Group and Company to manage and monitor the performance of the business;
• We assessed the reasonableness of the future cash flow forecasts by comparing historical forecasts to the related actual results and noted no material differences, which would indicate that forecasts are unreasonable;
• We assessed the reasonability of the occupancy base levels and growth rates by comparing these with actual performance achieved in prior years and performance achieved by similar camps in the Group. We found no material inconsistencies;
• We assessed the reasonability of the forecast period by comparing it to remaining land concession right periods, and found no matters requiring further consideration; and
• We calculated an independent range of discount rates by taking into account independently sourced data such as risk-free rates in the market, country risk premium, cost of debt, market risk premium, beta of comparable companies, capital structure of the industry's comparable companies and other macro- economic inputs. We compared our independently calculated discount rates to the discount rates used by management and found that the discount rates used by management fell within range.

For aircraft, we compared the Group's estimated market values to estimated selling prices obtained from external sources, and noted no material differences.

Key audit matter

carrying values against their estimated selling price at year-end to identify any impairment which should be recognised.

Based on the Group's and Company's assessments of the non-financial assets, as well as the underlying operations of the respective subsidiaries, no impairment provisions were required to be recognised.

The impairment assessment of goodwill and non- financial assets is considered to be a matter of most significance to the current year audit due to the level of judgement and assumptions made by management in determining future cash flows and the magnitude of the non-financial assets recorded in the consolidated and separate financial statements as at 28 February 2023.

Refer to the following disclosures in the consolidated and separate financial statements for detail:

• Critical accounting estimates and assumptions - Note 2 - Impairment of assets:
• 1. Goodwill impairment assessment; and
  2. Impairment assessment of non- financial assets other than goodwill;
• Note 9 - Property, plant and equipment;
• Note 10 - Goodwill;
• Note 11 - Intangible assets;
• Note 13 - Investments in subsidiaries; and
• Note 24 - Right-of-use asset.

How our audit addressed the key audit matter