Notes to the financial statements

for the year ended 30.6.2012

Group       Company
2012 2011       2012 2011
R'000 R'000       R'000 R'000
 

21.

Retained earnings

955 890 805 499      Retained profit at the end of the year 52 923 (83 510)
             
 

22.

Interest-bearing loans and borrowings

 

22.1

Secured liabilities

150 000 305 000     (a) Secured by securitisation of trade debtors (refer to note 17). Repayable 31 March 2013, fixed interest rate: 13,025%
(2011: 13,025%).
30 609 31 007     (b) Secured by plant and equipment with a book value of R44,5 million (2011: R32,9 million). Repayable in monthly instalments. Payments due within the next year are R8,9 million (2011: R7,5 million). Variable interest rate portion: 8,05% – 10,5% (2011: 8,05% – 10,5%). Maturity: between January 2013 and March 2022. Fixed interest rate portion 9,0% and 10,5% (2011: 9,6% and 11,5%).    
180 609 336 007   Total secured liabilities
       

22.2

Unsecured liabilities

   
259 382 259 382       (a) Debt portion of preference share capital: 259 382 259 382
            On 8 June 2012 the Memorandum of Incorporation of the Company was amended (by way of special resolution) to gross up the preference dividend rate, from 90% of the average prime rate, to 99% of the average prime rate. The preference shares are redeemable on 2 June 2013. The total amount outstanding on the preference shares is recognised as debt.    
625 8 095       (b) Bank overdraft
            Repayable on demand. The full outstanding amount is repayable within one year. Variable interest rate: 9% (2011: 10,5% – 9,0%).    
2 446 3 178       (c) Call loans    
            Variable interest rate: 6,25% – 7,35% (2011:8,5% – 6,2%).    
262 453 270 655         Total unsecured liabilities 259 382 259 382
443 062 606 662         Total secured and unsecured liabilities 259 382 259 382
            Current portion transferred to current liabilities:    
158 923 162 555        
  • Secured liabilities
   
262 453 11 274        
  • Unsecured liabilities
259 382
421 376 173 829         Total current portion transferred to current liabilities 259 382
21 686 432 833         Total non-current interest-bearing borrowings 259 382
443 062 606 662         Total current and non-current interest-bearing loans and borrowings 259 382 259 382
             
             
     

23.

Provisions

   
       

23.1

Long-service bonus

   
          The projected-credit method is used for the calculation of the long-service bonus provision. Payments are recognised as utilisations    
               
          The determination of the long-service bonus is based on the following assumptions:    
6 534 6 174       Active members    
7,7% 7,5%       Salary escalation ratio    
8,9% 9,0%       Discounting rate    
65 65       Normal retirement age    
32 096 30 295       Balance at the beginning of the year    
6 426 10 551       Amounts provided    
(7 489) (8 750)       Amounts utilised    
31 033 32 096       Total long-service bonus provision    
          Refer to note 34 for further detail on the long-service bonus provision    
       

23.2

Leave pay

   
          A provision for leave pay is recognised for the number of days leave due to employees at 30 June valued at a rate per day based on the basic salary of each employee at 30 June. Leave payments are recognised as utilisations.    
40 478 36 512       Balance at the beginning of the year    
7 269 8 585       Amounts provided    
(4 967) (4 615)       Amounts utilised    
42 780 40 482       Total leave pay provision    
       

23.3

Total provisions

   
61 637 62 526       Non-current portion    
12 176 10 052       Current portion transferred to current liabilities    
73 813 72 578       Total non-current and current provisions    
             
             
     

24

Trade and other payables

   
1 147 039 906 224     Trade payables 1 616 1 312
144 791 135 330     Other payables 1 793 1 429
8 802 3 887     Interest payable 8 802 3 887
23 066 36 752     Payable to joint ventures
    Inter company loan Clover SA 214 214
1 323 698 1 082 193     Total trade and other payables 12 425 6 842
6 904 13 357     Non-current portion transferred to non-current liabilities    
1 316 794 1 068 836     Current portion 12 425 6 842
1 323 698 1 082 193     Total trade and other payables 12 425 6 842
        The terms for trade payables range from seven days after date of invoice to 45 days after month-end. Interest is payable on a monthly basis. Payables to joint ventures range from 30 days to 45 days after the end of the month in which the transaction took place.    
             
     

25

Dividends declared

   
        Dividends paid to preference shareholders are recognised as finance cost (Refer to Note 6.6).

During the year equity dividends were declared as follows
   
53 734 58 720     To ordinary shareholders 53 734 58 720
53 734 58 720     Total dividends declared 53 734 58 720
Cents per
share
Cents per
share
      Cents 
per
share
Cents
 per
share
30,0 43,0     To ordinary shareholders 30,0 43,0
Group       Company
2012 2011       2012 2011
R’000 R’000       R’000 R’000
     

26

Notes to the statements of cash flows

   
       

26.1

Tax paid

   
(243) (1 368)       Amount unpaid at the beginning of the year 237 (3 143)
(49 948) (54 139)       Taxation charged in income statement, excluding deferred taxation (18 277) (15 064)
5 672 243       Amount due at the end of the year 333 (237)
(44 519) (55 264)       Total tax paid (17 707) (18 444)
             
     

27

Pensions and other post-employment benefit plans

   
       

27.1

Defined-benefit fund

   
          The fund is a defined-benefit fund and an actuarial valuation of the pension fund was done on 30 June 2012. The actuarial method used in determining the cost of the retirement benefits is the same as those used in previous calculations. The assumptions regarding deaths, interest rates, salary increases, retirements, resignations and administration cost were all based on generally accepted standards for the industry. The fair value of the assets of the fund of R13,62 million (2011: R12,95 million), exceeded the actuarial present value of promised retirement benefits of R6,86 million (2011: R6,68 million).

The surplus has not been accounted for, as it accrues to the members of the fund. The Group policy is to fund any deficit in accordance with the Pension Fund Act of 1956 and published regulations issued by the Registrar of Financial Services from time to time. The fund is subject to the same Act which requires an actuarial valuation every three years. Number of members on
1 July 2012: 7 (1 July 2011: 8). The fund closed for new entrants on 1 July 1994.
   
       

27.2

Defined-contribution funds

   
         

27.2.1

Clover SA pension fund

   
          This is a defined-contribution fund. The value of this fund determines the benefits which accrue to members. The Group has no obligation other than its normal contributions. Number of members on 30 June 2012: 983 (30 June 2011: 982).    
         

27.2.2

Clover SA provident fund

   
          This is a defined-contribution fund. The value of the fund determines the benefits which accrue to members. The Group has no obligation other than its normal contributions. Number of members on 30 June 2012: 5 643 (2011: 5 266)    
       

27.3

Amounts recognised in the statement of comprehensive income

   
          Contributions for the Group for the current year:    
104 106       Defined-benefit fund    
26 616 24 614       Pension fund    
40 598 35 881       Provident fund    
67 318 60 601       Total contributions recognised in statement of comprehensive income      
             
     

28

Commitments and contingencies

   
       

28.1

Commitments

   
         

28.1.1

Operating lease commitments – Group as lessee

   
          The Group entered into an outsourcing agreement whereby the Group is provided with distribution and milk collection vehicles. The Group also entered into commercial leases on motor vehicles and machinery. These leases have an average life of between three and ten years, with renewal options included on some of the contracts. There are no restrictions placed upon the lessee by entering into these lease contracts.
   
          Future minimum lease payments are as follows:    
229 985 248 147       Within one year    
804 429 426 739       After one year but not more than five years    
1 430 344 34 943       More than five years    
2 464 758 709 829       Total lease payments payable    
         

28.1.2

Operating lease commitments – Group as lessor

   
          The Group has entered into commercial property leases on its investment property portfolio, consisting of the Group’s surplus offices and manufacturing buildings. These non-cancellable leases have remaining terms of between one and six years. All leases include a clause to enable upward revision of the rental charge on an annual basis according to prevailing market conditions.

Future minimum rentals receivable under non-cancellable operating leases as at
30 June 2012 are as follows:
   
4 999 2 950       Within one year    
7 810 7 695       After one year, but not more than five years    
      More than five years    
12 809 10 645       Total minimum lease payments    
    Group Group
    2012 2011
    Minimum
payments
Present value
of payments
Minimum
payments
Present value
of payments
    R’000 R’000 R’000 R’000

28.1.3

Finance leases and hire purchase agreements

       
The Group has finance leases and hire purchase contracts for various items of plant, machinery and vehicles. These leases have no terms of renewal, purchase options or escalation clauses.

Future minimum lease payments with the present value of the net minimum lease payments are as follows:
       
Within one year 10 598 8 922 9 968 7 555
After one year but not more than five years 24 992 21 686 26 310 23 452
Total minimum lease payments 35 590 30 608 36 278 31 007
Less: amounts representing finance charges (4 982) (5 271)
Present value of minimum lease payments 30 608 30 608 31 007 31 007
Group           Company
2012 2011           2012 2011
R’000 R’000           R’000 R’000
       

 

28.1.4

Capital commitments

   
223 603 53 474         Capital expenditure authorised and contracted for    
41 558 577 817         Capital expenditure authorised but not contracted for    
265 161 631 291         Total capital commitments    
                  Commitments will be spent within the next three to four years. The capital expenditure will be funded from Group funds      
             
     

29.

Related party disclosure

   
        Transactions with related parties are made at market prices. Outstanding balances at the year-end are unsecured. No interest is paid on current accounts. Interest is payable on borrowings by the holding company from subsidiary companies at prime. Where the holding company lends money to subsidiary companies interest is charged at prime plus 1%. There have been no guarantees provided or received for any related party receivables or payables. No impairment was recorded for related parties
(2011: R Nil). This assessment is undertaken each financial year through examining the financial position of the related party and the market in which the related party operates.
   
       

29.1

With regard to operating activities with subsidiaries, associated companies and joint ventures, the following transactions took place during the year:

   
          (a) Fees earned by CIL for services rendered to Group Companies    
41 096 38 391       Clover SA 41 096 38 391
41 096 38 391       Total fees earned by CIL for services rendered to Group Companies 41 096 38 391
          (b) Fees earned by Clover SA for services rendered to Group Companies    
414 459       Clover Beverages    
3 749 817       Clover Botswana    
5 611 4 793       Clover Fonterra    
27 916 23 346       Clover Manhattan    
37 276 443 415       Total fees earned by Clover SA for services rendered to Group Companies      
          (c) Finance income received by Clover Beverages from Group Companies    
7 543       Clover SA    
7 543       Total finance income received by Clover Beverages from Group Companie    
          (d) Finance income received by Clover SA from Group Companies    
11 195       CIL 11 195
170 117       Clover Namibia    
170 11 312       Total finance income received by Clover SA from Group Companies 11 195
          (e) Amounts owing by Clover SA to Group Companies    
575 140 464 249       Clover Industries 575 140 464 249
37 255 13 498       Clover Fonterra    
96 107       Lactolab    
110       Clover Botswana    
10 408 14 544       Clover Manhattan    
544       Clover Swaziland    
623 443 492 508       Total amounts owing by Clover SA to Group Companies 575 140 464 249
          (f) Amounts due to Clover SA from Group Companies    
1 064 553 627 437       Clover Capital    
32 481 7 846       Clover West Africa    
4 458       Clover Zambia    
70 161       Lactolab    
164       Clover Swaziland    
8 103 3 339       Clover Fonterra    
27 220 31 565       Clover Botswana    
16 199 10 359       Clover Namibia    
9 067 1 207       Clover Manhattan    
1 157 693 686 536       Total amounts due to Clover SA from Group Companies    
          (g) Amounts due to CIL from Group Companies    
575 140 464 249       Clover SA 575 140 464 249
480 461       CIL Stabilisation Trust 480 461
1 480 1 438       CIL Share Purchase Trust 1 480 1 438
577 100 466 148       Total amounts due to CIL from Group Companies 577 100 466 148
          (h) Clover SA received the following dividends during the year from Group Companies:    
6 476 3 180       Clover Fonterra Ingredients    
339 123       Clover Beverages    
378 756       Lactolab    
1 000       Clover Swaziland    
2 443       Clover Manhattan    
9 297 344 059       Total dividends received by Clover SA from Group Companies     
          (i) CIL received the following dividends during the year from Group Companies    
190 000 461 012       Clover SA 190 000 461 012
190 000 461 012       Total dividends received by CIL from Group Companies 190 000 461 012
       

29.2

The following transactions regarding the securitisation of debtors took place during the year between Clover SA and Clover Capital:

   
27 550 39 869       Net finance cost paid by Clover SA to Clover Capital    
9 236 322 8 240 320       Debtors sold to Clover Capital    
(9 123 177) (8 210 730)       Receipts from Clover Capital    
       

29.3

With regard to business done with Directors and Senior Management, the following transactions took place:

   
          Milk purchased from the following Non-executive Directors by Clover SA    
4 467 4 182       JAH Bredin    
6 047 4 837       HPF Du Preez    
3 737 3 387       MG Elliott    
23 648 19 228       JC Hendriks    
17 818 16 616       WI Büchner    
2 705       JW Lotz (resigned 7 October 2010)    
858       FG Meyer (resigned 7 October 2010)    
6 958       MG Mackenzie (resigned 7 October 2010)    
11 722       VP Turner (resigned 10 March 2011)    
25 995 5 762       NA Smith (appointed 10 March 2011)    
81 712 76 255       Total milk purchased from Non-executive Directors    
          Refer to note 33 for more information regarding compensation of Directors and key management personnel    

29.4 Loans outstanding to Directors and senior management

  Group Group
  Company Company
  2012 2011
  R’000 R’000
Executive Director
JH Vorster R25 822 R26 509
HB Roode R11 621 R19 177
CP Lerm (Dr) R11 718 R12 037
LJ Botha R5 330 R5 636
Other Executives
H Lubbe R930 R1 001
JHF Botes (Dr) R2 453 R2 412
Total R57 874 R66 772
Refer to note 17 for more details around the terms of the loans    


30. Financial instruments

The Group treasury function does not operate as a profit centre, but rather provides financial services to the divisions and Group companies, coordinates access to credit and loan facilities and manages the financial risks relating to the Group’s operations. The Group’s objective in using financial instruments is to reduce the uncertainty over future cash flows arising from movement in currency and interest rates. Currency and interest rate exposure is managed within Board-approved policies and guidelines which restrict the use of derivatives to the hedging of specific underlying currency and interest rate exposures.

30.1 Financial risk management

The Group has exposure to the following risks from its use of financial instruments:

– credit risk
– liquidity risk
– market risk: foreign currency and interest rate risk

This note presents information about the Group’s exposure to each of the above risks, the Group’s objectives, policies and processes for measuring and managing risk and the Group’s management of capital. Further quantitative disclosures are included throughout these consolidated financial statements.

The Board of Directors has overall responsibility for the establishment and oversight of the Group’s risk management framework. The Audit and Risk Committee, is responsible for developing and monitoring the Group’s risk management policies. The Committee reports regularly to the Board of Directors on its activities.

The Group’s risk management policies are established to identify and analyse the risks faced by the Group, to set appropriate risk limits and controls and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Group’s activities. The Group, through its training and management standards and procedures, aims to develop a disciplined and constructive control environment in which all employees understand their roles and obligations.

The Audit and Risk Committee is assisted in its oversight role by Clover Risk Management, assisted by KPMG Services (Pty) Limited. Risk Management undertakes both regular and ad hoc reviews of risk management controls and procedures, the results of which are reported to the Committee.

(i) Credit risk management
Credit risk is the risk of financial loss to the Group if a customer or counter party to a financial instrument fails to meet its contractual obligations and arises principally from the Group’s receivables from customers and investment securities.

Credit risk primarily relates to potential exposure on bank and cash balances, investments and trade receivables. The Group limits its exposure arising from money market and derivative instruments by only dealing with well-established financial institutions of high credit standing. The Group is exposed to credit risk in the form of trade receivables. The maximum exposure is the carrying amount as disclosed in note 30.5. Historically, Group bad debts have been negligible and the management of debtors payment terms have been very successful. Trade receivables comprise a large number of debtors, but with significant concentration in value on the country’s major retail and wholesale chains, credit is extended in terms of the Group’s credit policies. In the opinion of the Board there was no significant credit risk at year-end which had not been adequately provided for.

The Group limits its exposure to credit risk by only investing in reputable institutions with high credit ratings.

The Group’s exposure to credit risk is influenced mainly by the individual characteristics of each customer. The demographics of the Group’s customer base, including the default risk of the industry and country in which customers operate, has less of an influence on credit risk. Approximately 71,4% (2011: 67,1%) of the Group’s credit sales is attributable to sales transactions with the major national chain stores of good credit standing. However, geographically there is no concentration of credit risk.

The responsibility for effective credit management rests with the Chief Financial Officer. The granting of credit is governed by a policy for the approval and authorisation levels for new credit applications and revision of credit limits.

A credit application, duly authorised, is required before any new account is opened. The original credit application is retained at branch level for safe keeping.

The credit policy requires that each new customer is analysed individually for creditworthiness before the Group’s standard payment and delivery terms and conditions are offered. Any variations in authorisation levels must be approved in terms of the credit policy. The review includes obtaining and evaluating trade references, bank codes, financial statements and trade history. Depending on the customer profile and credit limit required, further information on Directors and a credit bureau report will be obtained. With the exception of the major national chain stores, where credit risks are assessed as low, credit limits are established for each customer, which represents the maximum open amounts.

Most of the Group’s customers have been transacting with the Group for many years and the Group has had a steady customer base. In monitoring customer credit risk, customers are grouped accordingly to their credit characteristics, including whether they are chain stores, general trade or wholesalers.

Additional credit is withheld from customers, excluding the major national chain stores, that have defaulted on their payments, until the situation has been resolved

The Group establishes an allowance for impairment that represents its estimate of incurred losses in respect of trade and other receivables and investments. The main component of this allowance is a specific loss component that relates to individually significant exposures.

As a general rule, sureties must be obtained for all new accounts, unless the Group waives its rights in this regard, backed by a low credit risk assessment.

Foreign customers are managed by ensuring that all exports are paid for in cash up front or suitable guarantees must be provided for payment prior to shipping. The current year guarantees increased primarily due to additional guarantees being issued to foreign supplier on the import of capital equipment.

Guarantees 2012 2011
  Rm Rm
Muncipalities 6,91 5,35
Other 64,40 8,39
71,31 13,74

(ii) Liquidity risk management
Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group’s approach to managing liquidity is to ensure that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions.

The Group manages liquidity risk by monitoring actual and budgeted cash flows and ensuring that adequate borrowing facilities are maintained.

The Group ensures that it has sufficient cash on demand to meet expected operational demands, including the servicing of financial obligations; this excludes the potential impact of extreme circumstances that cannot reasonably be predicted, such as natural disasters. In addition the Group maintains the lines of credit as can be viewed in note 22.2

The Group monitors the liquidity risk using a recurring liquidity planning tool. This tool considers the maturity of both its financial investments and financial assets and projected cash flows from operations. The Group’s objective is to maintain a balance between continuity of funding and flexibility through the use of bank overdrafts, bank loans, preference shares, finance leases and hire purchase contracts. The Group’s policy is that not more than 25% (2011:25%) of long-term borrowings should mature in the next 12-month period, however due to the Group’s strong cashflow and borrowing facilities available the Group has not yet refinanced the borrowings maturing in the next 12 months. 95,1% (2011: 28,7%) of the Group’s long-term debt will mature in less than one year at year-end based on the carrying value of borrowings reflected in the financial statements.

Trade creditors form an important part of the short-term financing of the Group’s working capital. Careful management and control of trade creditors is applied to ensure maximum use of what is viewed as interest-free debt.

(iii) Market risk management
Market risk is the risk that changes in market prices such as foreign exchange rates and interest rates will affect the Group’s income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimising the return of risk.

The Group buys and sells derivatives in the ordinary course of business in order to manage market risks. All such transactions are carried out within the guidelines set by the Risk Management Policy.

(iv) Foreign currency risk management
The Group is exposed to currency risk on sales and purchases that are denominated in a currency other than the respective functional currencies of Group entities. Currencies primarily exposed to from time to time are the Euro, US Dollar, Botswana Pula and the British Pound. Certain exchange rate exposures are hedged through the use of forward exchange contracts. The Group has entered into certain forward exchange contracts on foreign commitments not yet due.
The Group hedges amounts greater than R200 000 denominated in a foreign currency. Forward exchange contracts are used to hedge currency risk, most with a maturity of less than one year from the reporting date. When necessary, forward exchange contracts are rolled over at maturity.

Foreign currency sensitivity
The following table demonstrates the sensitivity to a reasonably possible change in exchange rates of the Euro, US Dollar and the Pula. The Group’s exposure to foreign currency changes for all other currencies is not material.

Group 2012   Group 2011
Change
in rate
Effect on
profit before tax
Effect on
equity
    Change
in rate
Effect on
profit before tax
Effect on
equity
R’000 R’000   R’000 R’000
  Forward exchange contracts open on reporting date
+30%   Rand – strengthening +30%
  Profit on Euro 743
588   Profit on US Dollar 1 429
–30%   Rand – weakening -30%
  Loss on Euro (743)
(588)   Loss on US Dollar (1 429)
  Foreign subsidiaries – equity
+10%   Rand – strengthening +10%
5 496   Profit on Pulas 3 650
–10%   Rand – weakening -10%
(5 496)   Loss on Pula’s (3 650)
               
(v) Interest rate risk management
The Group’s exposure to the risk of changes in market interest rates relates primarily to the Group’s interest-bearing loans and borrowings with fixed and variable rates. The risk is managed by maintaining an appropriate mix of fixed and floating rates.
Group
2012
R’000
2011
R’000
At the reporting date the interest rate profile of the Group’s interest-bearing financial instruments was:
Fixed-rate instruments 158 196 306 914
Variable-rate instruments 284 866 299 748
443 062 606 662
Interest rate sensitivity
An increase/decrease of 100 basis points (2011: 100 basis points) in interest rates at the reporting date would have affected profit before taxation, by the amounts shown below. This analysis assumes that all other variables, in particular foreign currency rates, remain constant.
Increase of 100 basis points
Decrease in profit before tax 2 849 2 997
Decrease of 100 basis points
Increase in profit before tax 2 849 2 997
     
(vi) Share price risk management
The Group is affected by the movement in its share price due to the share appreciation rights issued to management. The Group entered into forward share purchases to hedge 2 132 695 of the share appreciation right issued to management. Refer to note 14 for more detail.
     

Forward share purchases sensitivity

An increase/decrease of 10% (2011: 10 percent) in the share price at the reporting date would have affected profit before taxation, by the amounts shown below. This analysis assumes that all other variables remain constant.
Increase of 10% in share price
Increase in profit before tax 2 922
Decrease of 10% in share price
Decrease in profit before tax (2 922)
     
(vii) Diesel price risk management
The Group is affected by the volatility of the diesel price. Its operating activities require the ongoing purchase of diesel for logistic puposes.
Based on a six month forecast of the required diesel supply, the Group hedged the purchase price of diesel using a Zero Cost Collar linked to the Rand Ice Gas Oil Price. The Group entered into a Zero Cost Collar for 1,67 million litres per month over a period of six month, beginning 3 February 2012 and ending 26 July 2012. At year end the Group had a total exposure, for the price movement, of 1,67 million litres.
Diesel zero cost colllar sensitivity
An increase/decrease of 10 percent (2011: 10 percent) in the diesel price at the reporting date would have affected profit before taxation, by the amounts shown below. This analysis assumes that all other variables remain constant.
Increase of 10 percent in diesel price
Increase in profit before tax 550
Decrease of 10 percent in diesel price
Decrease in profit before tax (940)
     

30.2 Capital management

Capital consists of ordinary and preference share capital, as well as ordinary and preference share premium.

A combination of retained earnings, senior debt, preference shares, term asset finance, commodity finance and general banking facilities are used to fund the business. The bulk of the Group’s debtors forms part of a securitisation programme. This programme came into effect during 2001. Senior debt raised by the programme currently amounts to R150 million (2011: R305 million). The securitisation provides access to senior debt equal to 74,5% (2011: 74,5%) of the debtors’ book.

The Board seeks to maintain a balance between the higher returns that might be possible with higher levels of borrowings. The Group’s target is to achieve a return on shareholders’ equity of at least 20% in the medium to long term. A return of 11,3% (2011: 12,9%) was achieved. In comparison the weighted average interest expense on interest-bearing borrowings was 9,99% (2011: 9,8%).

h4
Group Company
Carrying
amount
Fair value Carrying
amount
Fair value
2012 2012
R’000 R’000 R’000 R’000

30.3 Fair value

The fair value of financial assets and liabilities, together with the carrying amounts shown in the balance sheet, are as follows:
Financial assets
1 022 626 1 022 626 Loans and receivables 640 859 640 859
173 173 Derivatives not designated as hedges
711 470 711 470 Cash and short-term deposits 42 955 42 955
1 734 269 1 734 269 Total financial assets 683 814 683 814
Financial liabilities
1 766 761 1 766 760 Loans, trade and other payables 271 806 271 806
4 308 Derivatives not designated as hedges
1 771 069 1 766 760 Total financial liabilities 271 806 271 806
2011 2011
Financial assets
894 725 894 725 Loans and receivables 538 993 538 993
750 750 Derivatives not designated as hedges
824 212 824 212 Cash and short-term deposits 2 232 2 232
1 719 687 1 719 687 Total financial assets 541 225 541 225
Financial liabilities
1 688 853 1 688 853 Loans, trade and other payables 266 224 266 224
1 688 853 1 688 853 Total financial liabilities 266 224 266 224
The carrying amount of these financial assets and liabilities is a reasonable approximation of fair value.

Long-term fixed-rate variable-rate borrowings are evaluated by the Group based on parameters such as interest rates and repayment periods as at year-end, the carrying amounts of the borrowings are not materially different from the calculated fair value.
Group  
2012  
0-6 months 6-12 months 1-2 years 2-5 years 5 years Total  
R’000 R’000 R’000 R’000 R’000 R’000  
 

30.4 Liquidity risk

  Maturity profile of financial
  instruments
  The maturity profile of the financial instruments is summarised as follows for the Group:
  Financial liabilities
4 459 4 464 11 293 7 557 2 836 30 609   Secured loans
- 150 000 150 000   Secured by securitisation of trade debtors
- 259 382 259 382   Unsecured loans
3 072 3 072   Bank overdrafts
1 290 331 26 463 4 603 2 301 1 323 698   Trade and other payables
1 297 862 440 309 15 896 9 858 2 836 1 766 761   Total financial liabilities
2011  
  Financial liabilities
3 783 3 772 7 895 15 557 31 007   Secured loans
155 000 150 000 305 000   Secured by securitisation of trade debtors
259 382 259 382   Unsecured loans
11 273 11 273   Bank overdrafts
1 053 605 15 232 8 622 4 735 1 082 194   Trade and other payables
1 223 661 19 004 425 899 20 292 1 688 856   Total financial liabilities
Company  
2012  
0-6 months 6-12 months 1-2 years 2-5 years 5 years Total  
R’000 R’000 R’000 R’000 R’000 R’000  
 

30.4 Liquidity risk

  The maturity profile of the financial instruments is summarised as follows for the Company:
  Financial liabilities
259 382 259 382   Unsecured loans
12 424 12 424   Trade and other payables
12 424 259 382 271 806   Total financial liabilities
Company  
2011  
  Financial liabilities
259 382 259 382   Unsecured loans
6 842 6 842   Trade and other payables
6 842 259 382 266 224   Total financial liabilities
Group Company
Carrying
value
Carrying
value
Carrying
value
Carrying
value
2012
R’000
2011
R’000
2012
R’000
2011
R’000

30.5 Credit risk

Exposure to credit risk
The carrying amount of financial assets represents the maximum exposure to credit risk.
Financial assets per class
874 476 754 049 Trade receivables
128 580 141 426 Other receivables 640 859 538 993
711 470 824 212 Cash and short-term deposits 42 955 2 232
1 714 526 1 719 687 Total financial assets 683 814 541 225
Group Company
Carrying value Carrying value
2012
R’000
2011
R’000
2012
R’000
2011
R’000
Trade receivables
The maximum exposure to credit risk for trade receivables at the reporting date by customer type was as follows:
624 604 506 201 Retail chain stores Wholesale
88 123 90 880 Chain stores
161 749 156 968 Industrial/Catering/General trade
874 476 754 049 Total  
Group Company
2012
R’000
2011
R’000
2012
R’000
2011
R’000
The ageing of trade receivables at the reporting date is as follows:
837 845 728 035 Neither past due nor impaired
34 713 22 670 Past due, but not impaired 0 – 30 days
1 453 2 281 Past due, but not impaired 31 – 120 days
465 1 063 Past due, but not impaired 120 days
874 476 754 049 Total
The movement in the allowance for impairment in respect of trade receivables during the year was as folllows:
1 325 2 198 Balance at the beginning of the year
214 3 440 Increases in impairments
(4 313) Impairment loss written off
1 539 1 325 Balance at the end of the year
The allowance accounts in respect of trade receivables are used to record impairment losses unless the Group is satisfied that no recovery of the amount owing is possible; at that point the amount considered irrecoverable is written off against the financial asset directly.
      The impairment loss written off relates to customers defaulting on payments and being handed over to lawyers for recovery.