Notes to the financial statements

for the year ended 30.6.2012

Group					Company
2012 R’000	2011 R’000				2012 R’000	2011 R’000
		11.	Property, plant and equipment
			11.1	Freehold land and buildings
				Cost
472 618	423 079			Balance at the beginning of the year	679	679
33 521	51 107			Additions capitalised
–	(1 090)			Transfer to assets classified as held-for-sale
(1 253)	–			Disposals
–	(478)			Impairment
504 886	472 618			Balance at the end of the year	679	679
				Accumulated depreciation
(153 773)	(140 043)			Balance at the beginning of the year	(12)	(11)
(15 443)	(14 387)			Depreciation for the year	(1)	(1)
632	–			Disposals
–	657			Transfer to assets classified as held-for-sale
(168 584)	(153 773)			Balance at the end of the year	(13)	(12)
				Carrying amounts
318 845	283 036			Balance at the beginning of the year	667	668
336 302	318 845			Balance at the end of the year	666	667
			11.2	Leasehold properties
				Cost
20 727	8 194			Balance at the beginning of the year
–	13 396			Additions capitalised
–	(631)			Disposals
805	(232)			Foreign exchange differences
21 532	20 727			Balance at the end of the year
				Accumulated depreciation
(1 688)	(1 632)			Balance at the beginning of the year
(465)	(343)			Depreciation for the year
–	241			Disposals
(66)	46			Foreign exchange differences
(2 219)	(1 688)			Balance at the end of the year
				Carrying amounts
19 039	6 562			Balance at the beginning of the year
19 313	19 039			Balance at the end of the year
			11.3	Plant, equipment and vehicles
				Cost
1 110 550	1 028 404			Balance at the beginning of the year	65	65
136 726	114 380			Additions capitalised
–	(43)			Transfer to assets classified as held-for-sale
(25 897)	(31 897)			Disposals
1 350	(294)			Foreign exchange differences
1 222 729	1 110 550			Balance at the end of the year	65	65
				Accumulated depreciation
(503 174)	(454 258)			Balance at the beginning of the year	(65)	(55)
(77 588)	(74 957)			Depreciation for the year	–	(10)
–	31			Transfer to assets classified as held-for-sale
18 963	25 911			Disposals
(253)	99			Foreign exchange differences
(562 052)	(503 174)			Balance at the end of the year	(65)	(65)
				Carrying amounts
607 376	574 146			Balance at the beginning of the year	–	10
660 677	607 376			Balance at the end of the year	–	–
			11.4	Total property, plant and equipment
				Cost
1 603 895	1 459 677			Balance at the beginning of the year	744	744
170 247	178 883			Additions capitalised
–	(1 133)			Transfer to assets classified as held-for-sale
(27 150)	(32 528)			Disposals	–	–
2 155	(526)			Foreign exchange differences
–	(478)			Impairment
1 749 147	1 603 895			Balance at the end of the year	744	744
				Accumulated depreciation
(658 635)	(595 933)			Balance at the beginning of the year	(77)	(66)
(93 496)	(89 687)			Depreciation for the year	(1)	(11)
–	688			Transfer to assets classified as held-for-sale
19 595	26 152			Disposals
(319)	145			Foreign exchange differences
(732 855)	(658 635)			Balance at the end of the year	(78)	(77)
				Capital work-in-progress
68 029	50 669			Balance at the beginning of the year
(638)	(1 286)			Foreign exchange differences
254 309	197 529			Additions: current year
(169 945)	(178 883)			Amounts capitalised
151 755	68 029			Balance at the end of the year
				Total property, plant and equipment including work-in-progress
				Carrying amounts
1 013 289	914 413			Total property, plant and equipment at the beginning of the year	667	678
1 168 047	1 013 289			Total property, plant and equipment at the end of the year	666	667
				The estimated fair value of property, plant and equipment at 30 June 2012 is R1 971,9 million (2011: R1 973,1 million).
				During the year under review the Group has written off or impaired plant and equipment to the value of R4,8 million (2011: RNil).
				The fair value of property, plant and equipment has been determined based on valuations performed by "The Property Partnership", an accredited independent valuer, as at 30 June 2012 and 30 June 2011 for the current and previous years respectively. "The Property Partnership" is an industry specialist in valuing property, plant and equipment. The fair value has been determined as follows:
				Land and buildings: This category has either been assessed on a capitalised rental income basis or, where specialised facilities are involved, by way of a depreciated replacement cost basis.
				Plant and machinery: This category has been assessed on a net current replacement cost/depreciated replacement cost basis.
				Registers containing details of land are available for inspection at the registered office. The carrying value of plant and equipment held under finance leases and hire purchase contracts at 30 June 2012 was R9,2 million (2011: R23,9 million). Additions during the year were R6,5 million (2011: RNil) of plant and equipment held under finance lease and hire purchase agreements. Leased assets and assets bought under hire purchase contracts are pledged as security for the related finance lease and hire purchase liabilities.

		12.	Investment properties
			Cost
2 379	2 379		Balance at the beginning of the year
2 379	2 379		Balance at the end of the year
			Accumulated depreciation
(1 418)	(1 369)		Balance at the beginning of the year
(46)	(49)		Depreciation for the year
(423)			Transfer to assets held-for-sale
(1 887)	(1 418)		Balance at the end of the year
			Carrying amounts
961	1 010		Balance at the beginning of the year
492	961		Balance at the end of the year
877	825		Rental income derived from investment properties
–	–		Direct operating expenses generating rental income
877	825		Net profit arising from investment properties carried at net book value
			The fair value of these properties is R4,7 million (2011: R5,4 million).
			The fair value of investment properties has been determined based on valuations performed by "The Property Partnership", an accredited independent valuer, for the current and previous years. "The Property Partnership" is an industry specialist in valuing investment properties. The fair value has been determined as follows: Land and buildings: This category has either been assessed on a capitalised rental income basis or, where specialised facilities are involved, by way of a depreciated replacement cost basis.

		13.	Intangible assets
			13.1	Goodwill
				Cost
304 785	255 398			Balance at the beginning of the year
–	49 387			Acquisitions
304 785	304 785			Balance at the end of the year
				Impairment losses
(1 311)	(1 311)			Balance at the beginning of the year
(1 311)	(1 311)			Balance at the end of the year
				Carrying amounts
303 474	254 087			Balance at the beginning of the year
303 474	303 474			Balance at the end of the year
			13.2	Trademarks, patents and software licences
				Cost
78 269	64 790			Balance at the beginning of the year
7 978	13 778			Acquisitions
(856)	(299)			Disposals
85 391	78 269			Balance at the end of the year
				Accumulated amortisation
(40 343)	(32 500)			Balance at the beginning of the year
(8 774)	(8 131)			Amortisation for the year
896	288			Disposals
(48 221)	(40 343)			Balance at the end of the year
				Carrying amounts
37 926	32 290			Balance at the beginning of the year
37 170	37 926			Balance at the end of the year
			13.3	Total intangible assets
				Cost
383 054	320 188			Balance at the beginning of the year
7 978	63 165			Acquisitions
(856)	(299)			Disposals
390 176	383 054			Balance at the end of the year
				Accumulated amortisation
(41 654)	(33 811)			Balance at the beginning of the year
(8 774)	(8 131)			Amortisation for the year
896	288			Disposals
(49 532)	(41 654)			Balance at the end of the year
				Capital work-in-progress
5 702	683			Balance at the beginning of the year
26	–			Foreign exchange differences
19 373	18 797			Additions
(7 978)	(13 778)			Amounts capitalised
17 123	5 702			Balance at the end of the year
				Carrying amount
347 102	287 060			Total intangible assets at the beginning of the year
357 767	347 102			Total intangible assets at the end of the year
			13.4	Impairment testing of goodwill
				An impairment test is done annually at the Group’s financial year-end on goodwill acquired through business combinations. The present value of future cash flows generated by the businesses is estimated for a five-year period and is based on:
				Current net profit before tax, projected forward for average growth of 6% and adjusted for non-cash items; an effective tax rate of 28%; required capital expenditure; movements in working capital; and a discount rate equal to the weighted average cost of capital of the business.

				Goodwill has been allocated to Clover Industries as the smallest separately identifiable cash-generating unit. As per note 5, assets, liabilities and overhead costs are managed on a group basis and are therefore not allocated to operating segments.
				Goodwill has been allocated to the following cash generating units for purposes of the impairment review:
302 530	302 530			– Clover Industries

		14.	Other financial assets and financial liabilities
			14.1	Other financial assets
				Financial instruments at fair value through profit or loss
				Derivatives not designated as hedges
173	750			Foreign exchange contracts
173	750			Total financial instruments at fair value
173	750			Total other financial assets
173	750			Total current
–	–			Total non-current
				Financial assets through profit or loss are those foreign exchange forward contracts the are not designated in hedge relationship as they are intended to reduce the level of foreign currency risk for expected sales and purchases.
				The Group uses foreign currency forward contracts to manage some of its transactions exposures.
			14.2	Other financial liabilities
				Financial liabilities at fair value through profit or loss
				Derivatives not designated as hedges
639	–			Diesel Zero Cost Collar hedges
3 669	–			Clover Industries forward share purchases
4 308	–			Total financial instruments at fair value
4 308	–			Total other financial liabilities
4 308	–			Total current
–	–			Total non-current

				Due to the Group being exposed to changes in the price of diesel, it has entered into a diesel hedge relationship for Zero Cost Collars. The forward contract does not result in physical delivery of diesel.
				The Group hedged 6 million litres of diesel, this is equal to its diesel usage for six months. The hedge commenced on 3 February 2012 and will expire on 26 July 2013.
				The Group entered into a forward contract to purchase 2 132 695 Clover Industries shares at R17,90 per share on 30 June 2014. This transaction was entered into to hedge a portion of the share appreciation rights issued to management.

Group
14.3 Fair value hierarchy
The Group uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation technique;
Level 1: quoted prices in active market for indentical assets or liabilities.
Level 2: other techniques for which all inputs that have a significant effect on the recorded fair value are observable, either directly or indirectly.
Level 3: techniques that use inputs that have a significant effect on the recorded fair value that are not based on observable market data.
As at 30 June, the Group held the following financial instruments carried at fair value in the statement of financial position:
		30 Junie 2012 R’000	Level 1 R’000	Level 2 R’000	Level 3 R’000
Assets measured at fair value
Derivatives not designated as hedging instruments:
	Foreign exchange contracts	173		173
Liabilities measured at fair value
Derivatives not designated as hedging instruments:
Diesel Zero Cost Collar hedges		639		639
Clover Industries forward share purchases		3 669		3 669
During the reporting period ending 30 June 2012, there were no transfers between Level 1 and Level 2 fair value measurements
		30 Junie 2011 R’000	Level 1 R’000	Level 2 R’000	Level 3 R’000
Assets measured at fair value
Derivatives not designated as hedging instruments:
	Foreign exchange contracts	750		750
During the reporting period ending 30 June 2011, there were no transfers between Level 1 and Level 2 fair value measurements

Group					Company
2012 R’000	2011 R’000				2012 R’000	2011 R’000
		15.	Deferred taxation
(28 755)	12 377		Balance at the beginning of the year		88	165
(87 703)	(41 132)		Movements during the year		(2)	(77)
(116 458)	(28 755)		Balance at the end of the year		86	88
			The balance is constituted as follows:
			Deferred tax assets
368	1 502		Bad debts provision		89	82
2 215	2 304		Provision: credit notes
106	1 920		Consumable stores
8 691	8 983		Long-service bonus
1 154	–		Provision: Special bonus
–	6		Property, plant and equipment		–	6
11 654	11 142		Leave pay provision
1 027	3 134		Share-based payments
786	964		In-plant building
1 785	–		Leases
5 680	4 421		Provisions
58	55 830		Assessed loss carried forward
465	3 522		Other
33 989	93 728		Total deferred tax assets		89	88
			Deferred tax liabilities
(148 250)	(120 323)		Property, plant and equipment
(379)	(2 142)		Prepayments		3	–
–	(138)		Provision: Rentals, straightline adjustments
(1 818)	120		Other
(150 447)	(122 483)		Total deferred tax liabilities		3	–
(116 458)	(28 755)		Net deferred tax liability		86	88
			Reflected in the statement of financial position as follows:
492	3 262		Deferred tax assets		86	88
(116 950)	(32 017)		Deferred tax liabilities
(116 458)	(28 755)		Net deferred tax liability		86	88
			In assessing the availability of sufficient future taxable profit for utilisation against unused tax losses, cognisance was taken of the Group’s vision, goals and strategies. The Board is of the opinion that future taxable profits would be adequate to utilise the unused tax losses.
			The statement of financial position disclosure for deferred tax assets is the total amount for all Group companies with net deferred tax assets. Likewise the deferred tax liability represents the total of all companies with net deferred tax liabilities. Note 15 however groups all deferred tax assets and liabilities in the Group, irrespective of the net position of individual Group companies.
			The asset and liability totals per this Note will therefore not agree to the statement of financial position disclosure although the net amount corresponds.

		16.	Inventories
5 800	5 800		Delivery agreements
91 120	76 374		Raw materials
50 017	43 033		Work-in-progress
60 595	46 678		Consumable stores
394 521	288 362		Finished goods
602 053	460 247		Total inventories
			The amount of the write-down of inventories recognised as an expense is R11,9 million (2011: R9,9 million). This expense is included in the cost of sales line item as a cost of inventories.

		17.	Trade and other receivables
874 476	754 049		Trade receivables
74 633	54 633		Other receivables and advance payments		771	1 650
57 874	66 772		Loans to Executive Directors and other Executives		57 874	66 772
			Intercompany loan: Clover SA		581 051	469 450
			Loan: CIL Share Purchase Plan Trust		1 480	1 438
(1 539)	(1 325)		Allowance for impairment		(317)	(317)
(8 449)	(8 404)		Credit note accrual
996 995	865 725		Total trade and other receivables		640 859	538 993
			The loans to Directors and Senior Personnel were made to finance ordinary shares in CIL issued to them on 31 May 2010. The terms of the loans are as follows: they will bear interest at 90% of the prime rate of Absa Bank, interest will be capitalised on a monthly basis, repayable by management on the sale of the ordinary shares or within two months of leaving the employ of Clover or within six months in the case of death. All proceeds of the ordinary shares are ceded to CIL as security for the loans in addition to all proceeds on the Clover Industries preference shares held by them. The loan agreements have been amended to make provision for a final repayment date of the respective loans linked to the normal retirement date for each of the executives. See note 29.4 for further detail.
			Clover SA securitised its trade debtors, excluding debtors generated from export sales, through a special-purpose entity, Clover Capital. Clover Capital was consolidated into the results of the Group.
			The payment terms for accounts receivable are 30 days after the end of the month in which the goods were delivered.
			See note 30.5 for age analysis on trade receivables and on credit risk of trade receivables to understand how the Group manages and measures credit quality of trade receivables that are neither past due nor impaired.
			Trade receivables are non-interest bearing and the payment terms are 30 days after the end of the month in which the goods were delivered.
			As at 30 June 2012, trade receivables of an initial value of R1,5 million (2011: R1,3 million) were impaired and fully provided for. See below for the movement in the provision for impairment of receivables.
1 325	2 198		Balance at the begining of the year		317	570
214	3 440		Charge for the year		–	(253)
–	(4 313)		Unused amounts or amounts written off reversed		–	–
1 539	1 325		Balance at the end of the year		317	317

		18.	Cash and short-term deposits
			Cash at bank earns interest at floating rates based on daily deposit rates. Short-term deposits are made for periods varying between one day and three months, depending on the immediate cash requirements of the Group, and earn interest at the respective short-term deposit rates. At 30 June 2012, the Group had available R240 million (2011: R240 million) of unutilised committed borrowing facilities in respect of which all conditions precedent had been met. The Group has an additional R75 milion facility available that is currently put in a shadow facility.
			For the purpose of the consolidated cash flow statements, cash and short-term deposits comprise the following:
			Cash at bank and on hand
272	221		On hand
119 591	30 569		Outstanding deposits
216 815	533 689		Call loans and money market investments
374 792	259 733		Cash in banks		42 955	2 232
711 470	824 212		Total cash and short-term deposits		42 955	2 232

Number of shares	Number of shares	19.	Share capital and share premium		Number of shares	Number of shares
Number of shares	Number of shares		19.1	Ordinary shares	Number of shares	Number of shares
				Authorised
				2 billion (2011:2 billion) ordinary shares with a par value of 5 cents (2011: 5 cents) each
				Share capital issued
				Number of ordinary shares issued
179 111 867	61 924 981			Ordinary shares in issue at the beginning of the year	179 111 867	61 924 981
				2 for 1 share split
–	61 924 981			At 4 November 2010	–	61 924 981
				Issued during the year
–	500 000			At 4 November 2010	–	500 000
–	47 619 048			At 14 December 2010	–	47 619 048
–	7 142 857			At 14 January 2011	–	7 142 857
179 111 867	179 111 867			Ordinary shares in issue at the end of the year	179 111 867	179 111 867
				Ordinary share capital
8 955	8 955			179,1 million (2011: 179,1 million) ordinary shares of 5 cents (2011: 5 cents) each	8 955	8 955
				Ordinary share premium
674 635	689 442			Ordinary share premium on 179,1 million (2011: 179,1 million) ordinary shares	674 635	689 442
–	(14 807)			Share issue cost	–	(14 807)
683 590	683 590			Total ordinary share capital and ordinary share premium	683 590	683 590
Number of shares	Number of shares		19.2	Preference shares	Number of shares	Number of shares
Number of shares	Number of shares			Authorised	Number of shares	Number of shares
				100 million redeemable cumulative preference shares with a par value of 10 cents each
				Share capital issued
89 442 022	89 442 022			Preference shares in issue at the beginning of the year	89 442 022	89 442 022
89 442 022	89 442 022			Preference shares in issue at the end of the year	89 442 022	89 442 022
				Preference share capital
8 944	8 944			89,4 million (2011: 89,4 million) preference shares at 10 cents each	8 944	8 944
				Preference share premium
251 146	251 146			Premium on 89,4 million preference shares (2011: 89,4 million)	251 146	251 146
(230)	(230)			Share issue cost	(230)	(230)
259 860	259 860			Total preference share capital and premium	259 860	259 860
				Holders of preference shares are entitled to a preference dividend payable on a quarterly basis, calculated over the dividend period at 90% of Absa’s prime rate multiplied by the subscription price of the preference share. On 8 June 2012 the preference shares dividend rate increased from 90% of Absa’s prime rate to 99% of ABSA’s prime rate multiplied by the subscription price of the preference share.
				The preference shares are redeemable on 2 June 2013. Preference shares have no voting rights
			19.3	Total issued ordinary and preference share capital
17 899	17 899			Total issued ordinary and preference share capital	17 899	17 899
(8 944)	(8 944)			Debt portion of preference share capital	(8 944)	(8 944)
8 955	8 955			Total ordinary share capital	8 955	8 955
925 551	925 551			Total ordinary and preference share premium	925 551	925 551
(250 438)	(250 438)			Total debt portion of preference share premium	(250 438)	(250 438)
675 113	675 113			Total share premium net of debt portion	675 113	675 113
				The total redeemable preference share capital and share premium are reflected as debt
				Shares were issued as follows during the year
				Ordinary shares:
–	2 763			Ordinary shares of Nil cents (2011: 5 cents) each	–	2 763
–	2 310			Ordinary share premium of RNil (2011: R4,62) per share	–	2 310
–	572 262			Ordinary share premium of RNil (2011: R10,45) per share	–	572 262
–	577 335			Total ordinary share capital raised during the year	–	577 335
			19.4	Debt portion of preference share capital
(259 382)	(259 382)			Debt portion of preference shares	(259 382)	(259 382)

		20.	Other reserves
52 681	41 291		Share-based payments reserve		25 485	14 094
209 480	218 466		Other capital reserves
262 161	259 757				25 485	14 094
(7 875)	(6 973)		Foreign currency translation reserve
254 286	252 784		Total at the end of the year		25 485	14 094

Notes to the financial statements

11.

Property, plant and equipment

11.1

Freehold land and buildings

11.2

Leasehold properties

11.3

Plant, equipment and vehicles

11.4

Total property, plant and equipment

12.

Investment properties

13.

Intangible assets

13.1

Goodwill

13.2

Trademarks, patents and software licences

13.3

Total intangible assets

13.4

Impairment testing of goodwill

14.

Other financial assets and financial liabilities

14.1

Other financial assets

14.2

Other financial liabilities

14.3 Fair value hierarchy

15.

Deferred taxation

16.

Inventories

17.

Trade and other receivables

18.

Cash and short-term deposits

19.

Share capital and share premium

19.1

Ordinary shares

19.2

Preference shares

19.3

Total issued ordinary and preference share capital

19.4

Debt portion of preference share capital

20.

Other reserves