Annual financial statements

The audited financial statements contained in this section were prepared under the supervision of Louis Jacques Botha, CA(SA), in his capacity as Chief Financial Officer of the Group.

notes to the Consolidated financial statementsfor the year ended 30 June 2014

Group					Company
2014 R’000	2013 R’000				2014 R’000	2013 R’000
		11.	Property, plant and equipment
			11.1	Freehold land and buildings
				Cost
589 920	504 886			Balance at the beginning of the year	679	679
179 242	82 292			Additions capitalised
(13 117)	–			Government grant received
25 238	11 027			Acquisition of subsidiary
(6 757)	(3 274)			Transfer to assets classified as held-for-sale
–	(2)			Disposals
–	(5 009)			Transfer to investment property
774 526	589 920			Balance at the end of the year	679	679
				Accumulated depreciation and impairment
(180 901)	(168 584)			Balance at the beginning of the year	(14)	(13)
(18 145)	(15 531)			Depreciation for the year	(1)	(1)
(40)	–			Impairment
1	–			Disposals
–	2 940			Transfer to investment property
–	(1 695)			Acquisition of subsidiary
4 092	1 969			Transfer to assets classified as held-for-sale
(194 993)	(180 901)			Balance at the end of the year	(15)	(14)
				Carrying amounts
409 019	336 302			Balance at the beginning of the year	665	666
579 533	409 019			Balance at the end of the year	664	665
			11.2	Leasehold properties
				Cost
26 956	21 532			Balance at the beginning of the year
1 464	3 613			Additions capitalised
1 345	1 811			Foreign exchange differences
29 765	26 956			Balance at the end of the year
				Accumulated depreciation and impairment
(3 038)	(2 219)			Balance at the beginning of the year
(768)	(633)			Depreciation for the year
(150)	(186)			Foreign exchange differences
(3 956)	(3 038)			Balance at the end of the year
				Carrying amounts
23 918	19 313			Balance at the beginning of the year
25 809	23 918			Balance at the end of the year

Group				Company
2014 R’000	2013 R’000			2014 R’000	2013 R’000
		11.3	Plant, equipment and vehicles
			Cost
1 515 344	1 222 729		Balance at the beginning of the year	–	65
290 037	306 960		Additions capitalised
(18 989)	–		Government grant received
33 207	25 164		Acquisition of subsidiary
(56 323)	(42 675)		Disposals	–	(65)
(3 301)	–		Transfer to assets classified as held-for-sale
2 589	3 166		Foreign exchange translations
1 762 564	1 515 344		Balance at the end of the year	–	–
			Accumulated depreciation and impairment
(625 250)	(562 052)		Balance at the beginning of the year	–	(65)
(94 012)	(77 849)		Depreciation for the year
(11 875)	(3 803)		Impairment	–	–
–	(19 988)		Acquisition of subsidiary
50 166	38 828		Disposals	–	65
2 550	–		Transfer to assets classified as held-for-sale	–	–
(466)	(386)		Foreign exchange translations
(678 887)	(625 250)		Balance at the end of the year	–	–
			Carrying amounts
890 094	660 677		Balance at the beginning of the year	–	–
1 083 677	890 094		Balance at the end of the year	–	–

Group				Company
2014 R’000	2013 R’000			2014 R’000	2013 R’000
		11.4	Total property, plant and equipment
			Cost
2 132 220	1 749 147		Balance at the beginning of the year	679	744
470 743	392 865		Additions capitalised
(32 106)	–		Government grants received
(10 058)	(3 274)		Transfer to assets classified as held-for-sale
58 445	36 191		Acquisition of subsidiary
(56 323)	(42 677)		Disposals	–	(65)
3 934	4 977		Foreign exchange translations
–	(5 009)		Transfer to investment property
2 566 855	2 132 220		Balance at the end of the year	679	679
			Accumulated depreciation and impairment
(809 189)	(732 855)		Balance at the beginning of the year	(14)	(78)
(112 925)	(94 013)		Depreciation for the year	(1)	(1)
(11 915)	(3 803)		Impairment	–	–
6 642	1 969		Transfer to assets classified as held-for-sale
–	(21 683)		Acquisition of subsidiary
–	2 940		Transfer to investment property
50 168	38 828		Disposals	–	65
(617)	(572)		Foreign exchange translations
(877 836)	(809 189)		Balance at the end of the year	(15)	(14)
			Capital work-in-progress
194 202	151 755		Balance at the beginning of the year
(1 459)	961		Foreign exchange translations
374 988	434 351		Additions: current year
32 106	–		Government grants received
(470 743)	(392 865)		Amounts capitalised
129 094	194 202		Balance at the end of the year
			Total property, plant and equipment including work-in-progress
			Carrying amounts
1 517 233	1 168 047		Total property, plant and equipment at the beginning of the year	665	666
1 818 113	1 517 233		Total property, plant and equipment at the end of the year	664	665

Group			Company
2014 R’000	2013 R’000		2014 R’000	2013 R’000
		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 2014 was R7,5 million (2013: R8,8 million). Additions during the year were R Nil (2013: R1,1 million) 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.
		Government grants have been received in terms of the DTI’s Manufacturing Competitive Enhancement Programme for the purchase of certain items of property, plant and equipment. The Group can claim once more in the next financial year. There are no unfulfilled conditions or contingencies attached to these grants.
		Assets with an original cost price of R53,0 million are still in use, although it has been fully depreciated.

Group				Company
2014 R’000	2013 R’000			2014 R’000	2013 R’000
		12.	Investment properties
			Cost
6 096	2 379		Balance at the beginning of the year
–	5 009		Transfer from property, plant and equipment
–	(1 292)		Transfer to assets held-for-sale
6 096	6 096		Balance at the end of the year
			Accumulated depreciation
(4 093)	(1 887)		Balance at the beginning of the year
(623)	(114)		Depreciation for the year
–	(2 940)		Transfer from property, plant and equipment
–	848		Transfer to assets held-for-sale
(4 716)	(4 093)		Balance at the end of the year
			Carrying amounts
2 003	492		Balance at the beginning of the year
1 380	2 003		Balance at the end of the year
555	779		Rental income derived from investment properties
(171)	(98)		Direct operating expenses generating rental income
384	681		Net profit arising from investment properties carried at net book value
			The fair value of these properties is R3,4 million (2013: R3,4 million).
			The fair value of investment properties has been determined based on valuations performed by ‘The Property Partnership’, an accredited independent valuer, for the previous year. ‘The Property Partnership’ is an industry specialist in valuing investment properties.
			For the current year an internal desk valuation has been performed by management. It was determined by using the capitalisation of future rentals technique. It was based on a net annual rental income of R299 400 and a rental capitalisation into perpetuity factor of 8,8%.

Group					Company
2014 R’000	2013 R’000				2014 R’000	2013 R’000
		13.	Intangible assets
			13.1	Goodwill
				Cost
328 750	304 785			Balance at the beginning of the year
–	23 965			Acquisitions of a subsidiary
328 750	328 750			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
327 439	303 474			Balance at the beginning of the year
327 439	327 439			Balance at the end of the year
			13.2	Trademarks, patents and customer lists
				Cost
69 004	13 500			Balance at the beginning of the year
–	59 004			Acquisitions
(1)	(3 500)			Disposals
69 003	69 004			Balance at the end of the year
				Accumulated amortisation and impairment
(4 637)	(1 284)			Balance at the beginning of the year
(4 815)	(3 819)			Amortisation for the year
–	466			Disposals
(9 452)	(4 637)			Balance at the end of the year
				Carrying amounts
64 367	12 216			Balance at the beginning of the year
59 551	64 367			Balance at the end of the year

Group				Company
2014 R’000	2013 R’000			2014 R’000	2013 R’000
		13.3	Software licences
			Cost
85 109	71 891		Balance at the beginning of the year
2 150	17 766		Additions
(776)	(4 548)		Disposals
86 483	85 109		Balance at the end of the year
			Accumulated amortisation and impairment
(51 025)	(46 937)		Balance at the beginning of the year
(5 880)	(7 911)		Amortisation for the year
–	(574)		Impairment
671	4 397		Disposals
(56 234)	(51 025)		Balance at the end of the year
			Carrying amounts
34 084	24 954		Balance at the beginning of the year
30 249	34 084		Balance at the end of the year

Group				Company
2014 R’000	2013 R’000			2014 R’000	2013 R’000
		13.4	Total intangible assets
			Cost
482 863	390 176		Balance at the beginning of the year
2 150	100 735		Additions
(777)	(8 048)		Disposals
484 236	482 863		Balance at the end of the year
			Accumulated amortisation and impairment
(56 973)	(49 532)		Balance at the beginning of the year
(10 695)	(11 730)		Amortisation for the year
–	(574)		Impairment
671	4 863		Disposals
(66 997)	(56 973)		Balance at the end of the year
			Capital work-in-progress – Software
19 393	17 123		Balance at the beginning of the year
13 011	103 005		Additions
(2 150)	(100 735)		Amounts capitalised
30 254	19 393		Balance at the end of the year
			Carrying amounts
445 283	357 767		Total intangible assets at the beginning of the year
447 493	445 283		Total intangible assets at the end of the year
			An impairment test is done annually at the Group’s financial year end on goodwill acquired through business combinations. The value in use of the businesses are represented by the present value of future cash flows generated by the businesses estimated for a five-year period and is based on: Current net profit before tax, projected forward at an average growth of 6% (2013: 6%) and adjusted for non-cash items; an effective tax rate of 28%; required capital expenditure; movements in working capital; and a before tax discount rate of 19,24% (2013: 19,24%). Goodwill has been allocated to Clover Industries Group excluding Clover Waters and then to Clover Waters as the smallest separately identifiable cash-generating units due to income, cost, assets and liabilities not being able to be split into smaller cash-generating units. Goodwill has been allocated to the following cash-generating units for purposes of the impairment review:
303 473	327 439		Clover Industries
23 966	–		Clover Waters Iced Tea business
327 439	327 439		Clover Industries Group

Group

Company

2014
R’000

2013
R’000

2014
R’000

2013
R’000

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

–

132

Foreign exchange contracts

–

132

Total financial instruments at fair value

–

132

Total other financial assets

–

132

Total current

–

Total non-current

Financial assets through profit or loss are those foreign exchange forward contracts the are not designated in hedge relationships as they are intended to reduce the level of foreign currency risk for expected sales and purchases.

14.2 Other financial liabilities

Financial liabilities at fair value through profit or loss

Derivatives not designated as hedges

2 323

250

Clover Industries shares forward purchases

2 323

250

Total financial instruments at fair value

2 323

250

Total other financial liabilities

2 323

250

Total current

–

Total non-current

The Group had 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. At 3 June 2014 it was decided to roll the current hedge into a new hedge programme and was structured as follows:
The fair value of the shares forward purchases was determined by Investec Bank Limited. The fair value was determined by making use of the Black Scholes model.
Expiry date	Number of forwards	Forward price (Rand)
1 June 2015	158 937	19,19
1 July 2015	253 575	19,36
1 October 2015	308 500	19,80
1 June 2016	158 937	20,87
3 October 2016	308 500	21,40
1 June 2017	158 936	22,40
2 October 2017	308 500	23,20
3 June 2019	476 810	26,48
Total	2 132 695

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 identical 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 2014, the Group held the following financial instruments carried at fair value in the statement of financial position:
		Group
		30 June 2014 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	–	–	–	–
	Liabilities measured at fair value
	Derivatives not designated as hedging instruments:
	Clover Industries shares forward purchases	2 323	–	2 323	–
	During the reporting period ended 30 June 2014, there were no transfers between Level 1 and Level 2 fair value measurements.
		30 June 2013 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	132	–	132	–
	Liabilities measured at fair value
	Derivatives not designated as hedging instruments:
	Clover Industries shares forward purchases	250	–	250	–
	During the reporting period ended 30 June 2013, there were no transfers between Level 1 and Level 2 fair value measurements

Group				Company
2014 R’000	2013 Restated R’000			2014 R’000	2013 R’000
		15.	Deferred taxation
(130 591)	(116 459)		Balance at the beginning of the year	28	86
(39 513)	(14 132)		Movements during the year	49	(58)
(170 104)	(130 591)		Balance at the end of the year	77	28
			The balance is constituted as follows:
			Deferred tax assets
1 755	870		Doubtful debts provision	77	89
3 953	2 266		Credit note provision
7 385	8 096		Long-service bonus provision
16 645	14 095		Leave pay provision
–	608		In-plant building
1 767	1 814		Leases straight-lined
–	4 435		Incentive bonus provision
9 692	8 942		Individual performance bonus accrual
8 292	7 520		Guaranteed bonuses accrual
7 565	4 480		Income received in advance
8 200	5 810		Provisions – Other
14 625	6 635		Assessed loss carried forward
2 874	2 022		Other
82 753	67 593		Total deferred tax assets	77	89

Group			Company
2014 R’000	2013 Restated R’000		2014 R’000	2013 R’000
		Deferred tax liabilities
(244 419)	(194 591)	Property, plant and equipment	–	(2)
(2 240)	(3 102)	Prepayments	–	(59)
(2 666)	–	Consumable stores
(1 320)	–	Pension fund asset
(1 931)	–	Lease straight-lined
(281)	(491)	Other
(252 857)	(198 184)	Total deferred tax liabilities	–	(61)
(170 104)	(130 591)	Net deferred tax (liability)/asset	77	28
		Reflected in the statement of financial position as follows:
8 919	6 722	Deferred tax assets	77	28
(179 023)	(137 313)	Deferred tax liabilities
(170 104)	(130 591)	Net deferred tax (liability)/asset	77	28
		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.
		No deferred tax asset has been provided on the tax loss of entities which are loss making since inception of business to date. In addition no deferred tax asset has been provided on tax losses amounting to R39,3 million (2013: R61,3 million) which have no expiry date.

Group				Company
2014 R’000	2013 Restated R’000			2014 R’000	2013 R’000
		16.	Inventories
5 800	5 800		Delivery agreements
109 827	85 374		Raw materials
97 071	82 715		Work-in-progress
88 172	78 962		Consumable stores
267 022	430 308		Finished goods
567 892	683 159		Total inventories
			The amount of the write-down of inventories recognised as an expense is R19,6 million (2013: R18,9 million). This expense is included in the cost of sales line item as a cost of inventories.
		17.	Trade and other receivables
870 514	906 677		Trade receivables	3 837	–
153 730	80 130		Other receivables and advance payments	277	501
16 811	34 848		Loans to Executive Directors and other Executives	16 811	34 848
			Inter-company loan: Clover SA	398 088	380 789
			Loan: CIL Share Purchase Plan Trust	7	6
(3 849)	(3 309)		Allowance for impairment	(275)	(317)
(14 213)	(8 095)		Credit note accrual	–	–
1 022 993	1 010 251		Total trade and other receivables	418 745	415 827
			The loans to Directors and other Executives 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 employment 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 that were 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 28.4 for further details.
			Clover SA securitised its trade debtors, excluding debtors generated from export sales, through a special-purpose entity, Clover Capital. Clover Capital is consolidated into the results of the Group.

Group				Company
2014 R’000	2013 Restated R’000			2014 R’000	2013 R’000
			See note 29.5 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 2014, trade receivables of an initial value of R3,8 million (2013: R3,3 million) were impaired and fully provided for. See below for the movement in the provision for impairment of receivables.
3 309	1 397		Balance at the beginning of the year	317	317
2 428	2 555		Charge for the year	(42)	–
(1 888)	(643)		Impairment loss written off/Unused amounts reversed	–	–
3 849	3 309		Balance at the end of the year	275	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 2014, the Group had available R120 million (2013: R100 million) of unutilised committed borrowing facilities in respect of which all conditions precedent had been met.
			For the purpose of the consolidated cash flow statements, cash and short-term deposits comprise the following:
			Cash at bank and on hand
304	263		On hand
294 333	276 934		Outstanding deposits
78 459	28 275		Call deposits and money market investments	24 741	5 499
280 793	399 087		Cash in banks	10 496	16 499
653 889	704 559		Total cash and short-term deposits	35 237	21 998
			Included under Call deposits is R46 million relating to the deposit paid, into an attorney’s Escrow account, for the Dairybelle transaction. Refer to note 29.1 for guarantees issued.

Group					Company
2014	2013				2014	2013
Number of shares	Number of shares				Number of shares	Number of shares
		19.	Share capital and share premium
			19.1	Ordinary shares
				Authorised
				2 billion (2013:2 billion) ordinary shares with a par value of 5 cents (2013: 5 cents) each
				Shares issued
181 218 149	179 111 867			Ordinary shares in issue at the beginning of the year	181 218 149	179 111 867
–	2 106 282			Issued on 3 June 2013	–	2 106 282
1 260 440	–			Issued on 1 July 2013	1 260 440	–
182 478 589	181 218 149			Ordinary shares in issue at the end of the year	182 478 589	181 218 149

2014 R’000	2013 R’000				2014 R’000	2013 R’000
				Ordinary share capital
9 124	9 061			182,5 million (2013: 181,2 million) ordinary shares of 5 cents (2013: 5 cents) each	9 124	9 061
				Ordinary share premium
734 414	713 263			Ordinary share premium on 182,5 million (2013: 181,2 million) ordinary shares	734 414	713 263
743 538	722 324			Total ordinary share capital and ordinary share premium	743 538	722 324

Group				Company
2014	2013			2014	2013
Number of shares	Number of shares			Number of shares	Number of shares
		19.2	Preference shares
			Authorised
			100 million redeemable cumulative preference shares with a par value of 10 cents each
			Shares issued
–	89 442 022		Preference shares in issue at the beginning of the year	–	89 442 022
–	(89 442 022)		Redeemed on 3 June 2013	–	(89 442 022)
–	–		Preference shares in issue at the end of the year	–	–

2014 R’000	2013 R’000			2014 R’000	2013 R’000
			Preference share capital
–	–		Nil (2013: Nil) preference shares at 10 cents each	–	–
			Preference share premium
–	708		Premium on NIL preference shares (2013: Nil)	–	708
–	(478)		Transfer to other capital reserves	–	(478)
–	(230)		Share issue cost	–	(230)
–	–		Total preference share capital and premium	–	–
			Holders of preference shares were entitled to a preference dividend payable on a quarterly basis, calculated over the dividend period at 99% of Absa’s prime rate multiplied by the subscription price of the preference share.
			The preference shares were redeemed on 3 June 2013. The preference shares had no voting rights .

Group					Company
2014 R’000	2013 R’000				2014 R’000	2013 R’000
			19.3	Total issued ordinary and preference share capital
9 124	9 061			Total issued ordinary share capital	9 124	9 061
734 414	713 263			Total ordinary share premium	734 414	713 263
				Shares were issued as follows during the year
				Ordinary shares:
63	105			Ordinary shares of 0,5 cents (2013: 0,5 cents) each	63	105
21 151	38 629			Ordinary share premium of R16,78 (2013: R18,34) per share	21 151	38 629
21 214	38 734			Total ordinary share capital raised during the year	21 214	38 734
		20.	Other reserves
73 267	62 247		Share-based payments reserve		28 720	35 051
209 958	209 958		Other capital reserves		478	478
283 225	272 205		Total at the end of the year		29 198	35 529

Annual financial statements

notes to the Consolidated financial statementsfor the year ended 30 June 2014

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 customer lists

13.3

Software licences

13.4

Total intangible assets

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

20.

Other reserves