notes to the Consolidated financial statementsfor the year ended 30 June 2015

 

GROUP     COMPANY
2015  2014        2015  2014 
R’000  R’000        R’000  R’000 
   

11 

Property, plant and equipment

    
     

11.1 

Freehold land and buildings

    
       
Cost
    
774 526  589 920      Balance at the beginning of the year 679  679 
73 801  179 242      Additions capitalised    
(18 237) (13 117)     Government grant received    
23 983  25 238      Acquisition through business combinations    
(429) (6 757)     Transfer to assets classified as held-for-sale (429)  
(14) –      Disposals    
(286) –      Reclassification between asset classes    
853 344  774 526     
Balance at the end of the year
 250  679 
       
Accumulated depreciation and impairment
    
(194 993) (180 901)     Balance at the beginning of the year (15) (14)
(22 103) (18 145)     Depreciation for the year (1) (1)
–  (40)     Impairment    
8  1      Disposals    
(68) –      Reclassification between asset classes    
–  4 092      Transfer to assets classified as held-for-sale    
(217 156) (194 993)     Balance at the end of the year (16) (15)
        Carrying amounts    
579 533  409 019      Balance at the beginning of the year 664  665 
636 188  579 533    Balance at the end of the year 234  664 
     

11.2 

Leasehold properties

    
       
Cost
    
29 765  26 956      Balance at the beginning of the year    
1 032  1 464      Additions capitalised    
233  1 345      Foreign exchange translations    
31 030  29 765     
Balance at the end of the year
    
       
Accumulated depreciation and impairment
    
(3 956) (3 038)     Balance at the beginning of the year    
(1 160) (768)     Depreciation for the year    
(29) (150)     Foreign exchange translations    
(5  145) (3 956)    
Balance at the end of the year
    
       
Carrying amounts
    
25 809  23 918      Balance at the beginning of the year    
25 885  25 809    Balance at the end of the year    
     

11.3 

Plant, equipment and vehicles

    
       
Cost
    
1 762 564  1 515 344      Balance at the beginning of the year    
195 280  290 037      Additions capitalised    
(17 089) (18 989)     Government grant received    
56 314  33 207      Acquisition through business combinations    
298  –      Reclassification between asset classes    
(50 726) (56 323)     Disposals    
–  (3 301)     Transfer to assets classified as held-for-sale    
452  2 589      Foreign exchange translations    
1 947 093  1 762 564     
Balance at the end of the year
    
       
Accumulated depreciation and impairment
    
(678 887) (625 250)     Balance at the beginning of the year    
(137 227) (94 012)     Depreciation for the year    
–  (11 875)     Impairment    
(8) –      Reclassification between asset classes    
33 089  50 166      Disposals    
–  2 550      Transfer to assets classified as held-for-sale    
(90) (466)     Foreign exchange translations    
(783 123) (678 887)    
Balance at the end of the year
    
       
Carrying amounts
    
1 083 677  890 094      Balance at the beginning of the year    
1 163 970  1 083 677    Balance at the end of the year    
     

11.4 

Total property, plant and equipment

    
       
Cost
    
2 566 855  2 132 220      Balance at the beginning of the year 679  679 
270 113  470 743      Additions capitalised    
(35 326) (32 106)     Government grants received    
(429) (10 058)     Transfer to assets classified as held-for-sale (429)  
80 297  58 445      Acquisition through business combinations    
(50 740) (56 323)     Disposals –  – 
685  3 934      Foreign exchange translations    
12  –      Reclassification between asset classes    
2 831 467  2 566 855     
Balance at the end of the year
 250  679 
       
Accumulated depreciation and impairment
    
(877 836) (809 189)     Balance at the beginning of the year (15) (14)
(160 490) (112 925)     Depreciation for the year (1) (1)
–  (11 915)     Impairment –  – 
–  6 642      Transfer to assets classified as held-for-sale    
(76) –      Reclassification between asset classes    
33 097  50 168      Disposals –  – 
(119) (617)     Foreign exchange translations    
(1 005 424) (877 836)    
Balance at the end of the year
 (16) (15)
       
Capital work-in-progress
    
129 094  194 202      Balance at the beginning of the year    
121  (1 459)     Foreign exchange translations    
513 277  374 988      Additions: current year    
35 326  32 106      Government grants received    
(350 410) (470 743)     Assets brought into use    
327 408  129 094     
Balance at the end of the year
    
       
Total property, plant and equipment including work-in-progress
    
       
Carrying amounts
    
1 818 113  1 517 233      Total property, plant and equipment at the beginning of the year 664  665 
2 153 451  1 818 113      Total property, plant and equipment at the end of the year 234  664 
       

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 2015 was R31,9 million (2014: R30,5 million). Additions during the year were R27,3 million (2014: R Nil 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. There are no unfulfilled conditions or contingencies attached to these grants.

Assets with an original cost price of R83,1 million (2014: R53,0 million) are still in use, although it has been fully depreciated.

    
GROUP   COMPANY
2015  2014      2015  2014 
R’000  R’000      R’000  R’000 
   

12 

Investment properties

    
     
Cost
    
6 096  6 096    Balance at the beginning of the year    
(5 826) –    Transfer to assets held-for-sale    
270  6 096   
Balance at the end of the year
    
     
Accumulated depreciation
    
(4 716) (4 093)   Balance at the beginning of the year    
(132) (623)   Depreciation for the year    
76  –    Reclassification between asset classes    
4 525  –    Transfer to assets held-for-sale    
(247) (4 716)  
Balance at the end of the year
    
     
Carrying amounts
    
1 380  2 003    Balance at the beginning of the year    
23  1 380   
Balance at the end of the year
    
272  555    Rental income derived from investment properties    
–  (171)   Direct operating expenses generating rental income    
272  384   
Net profit arising from investment properties carried at net book value
    
 

The fair value of the property is R1,1 million (2014: R3,4 million).

The fair value of investment properties has been determined based on valuations performed by ‘The Property Partnership’, an accredited independent valuer, ‘The Property Partnership’ is an industry specialist in valuing investment properties.

The valuation was determined by using the capitalisation of future rentals technique. It was based on a net annual rental income of R157 376 and a rental capitalisation into perpetuity factor of 14% and is considered to be a level 3 fair value disclosure.

    
GROUP   COMPANY
2015  2014        2015  2014 
R’000  R’000        R’000  R’000 
   

13 

Intangible assets

    
     

13.1 

Goodwill

    
       
Cost
    
328 750  328 750      Balance at the beginning of the year    
46 455  –      Acquisition through business combinations    
375 205  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  327 439      Balance at the beginning of the year    
373 894  327 439    Balance at the end of the year    
     

13.2 

Trademarks, patents and customer lists

    
       
Cost
    
69 003  69 004      Balance at the beginning of the year    
69 054  –      Acquisitions through business combinations    
–  (1)     Disposals    
138 057  69 003     
Balance at the end of the year
    
       
Accumulated amortisation and impairment
    
(9 452) (4 637)     Balance at the beginning of the year    
(7 325) (4 815)     Amortisation for the year    
(16 777) (9 452)    
Balance at the end of the year
    
       
Carrying amounts
    
59 551  64 367      Balance at the beginning of the year    
121 280  59 551    Balance at the end of the year    
     

13.3 

Software licences

    
       
Cost
    
86 483  85 109      Balance at the beginning of the year    
44 161  2 150      Additions    
(417) (776)     Disposals    
(12) –      Reclassification between asset classes    
130 215  86 483     
Balance at the end of the year
    
       
Accumulated amortisation and impairment
    
(56 234) (51 025)     Balance at the beginning of the year    
(9 723) (5 880)     Amortisation for the year    
403  671      Disposals    
(65 554) (56 234)    
Balance at the end of the year
    
       
Carrying amounts
    
30 249  34 084      Balance at the beginning of the year    
64 661  30 249    Balance at the end of the year    
     

13.4 

Total intangible assets

    
       
Cost
    
484 236  482 863      Balance at the beginning of the year    
44 161  2 150      Additions    
115 509  –      Additions through business combinations    
(417) (777)     Disposals    
(12) –      Reclassification between asset classes    
643 477  484 236     
Balance at the end of the year
    
       
Accumulated amortisation and impairment
    
(66 997) (56 973)     Balance at the beginning of the year    
(17 048) (10 695)     Amortisation for the year    
403  671      Disposals    
(83 642) (66 997)    
Balance at the end of the year
    
       
Capital work-in-progress – Software
    
30 254  19 393      Balance at the beginning of the year    
137 138  13 011      Additions    
(159 670) (2 150)     Amounts capitalised    
7 722  30 254     
Balance at the end of the year
    
       
Carrying amounts
    
447 493  445 283      Total intangible assets at the beginning of the year    
567 557  447 493      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% (2014: 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 17,19% (2014: 19,24%).

Goodwill has been allocated to Clover Industries Group excluding Clover Waters and then to Clover Waters (Iced Tea business) as the smallest separately identifiable cash-generating units due to income, cost, assets and liabilities not being possible to be split into smaller cash-generating units. The calculated recoverable amount exceeds the carrying amount of the cash-generating unit.

No reasonably possible change will result in the carrying amount exceeding the recoverable amount of the cash-generating unit. Goodwill has been allocated to the following cash-generating units for purposes of the impairment review:

    
349 928  303 473      Clover Industries    
23 966  23 966      Clover Waters (Iced Tea business)    
373 894  327 439     
Clover Industries Group
    
GROUP   COMPANY
2015  2014        2015  2014 
R’000  R’000        R’000  R’000 
   

14 

Other financial assets and financial liabilities

    
     

14.1 

Other financial liabilities

    
       
Financial liabilities at fair value through profit or loss
    
        Derivatives not designated as hedges    
1 761  –      Diesel hedge    
3 625  2 323      Clover Industries shares forward purchases    
5 386  2 323     
Total financial instruments at fair value
    
5 386  2 323     
Total other financial liabilities
    
2 670  2 323      Total current    
2 716  –      Total non-current    
       
Clover Industries shares forward purchase

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. The following inputs were taken into consideration with applying the model, a dividend yield of 2,16%, a credit spread of 2,75%, a spot rate of R17,60 and a swap interest rate reflecting the term of each tranche of the hedge.

    
     
  2015  2014 
Expiry date Number of forwards Forward price per share (Rand) Number of forwards Forward price per share (Rand)
1 June 2015      158 937  19,19 
1 July 2015      253 575  19,36 
1 October 2015  308 500  19,80  308 500  19,80 
1 June 2016  158 937  20,87  158 937  20,87 
3 October 2016  308 500  21,40  308 500  21,40 
1 June 2017  158 936  22,40  158 936  22,40 
2 October 2017  308 500  23,20  308 500  23,20 
3 June 2019  476 810  26,48  476 810  26,48 
30 June 2017  158 937  22,29     
30 June 2017  253 575  22,46     
Total 2 132 695    2 132 695   
Diesel hedge

Due to the Group being exposed to changes in the price of diesel, it has entered into a diesel hedge with RMB in the form of a long-futures contract, at a forward price of R11,76 per litre. The futures contract does not result in physical delivery of diesel.

The Group hedged 18 150 000 litres of diesel, this equals its diesel usage for 11 months. The hedge commenced on 26 June 2015 and expires on 26 May 2016.
 
 

14.2 

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 2015, the Group held the following financial instruments carried at fair value in the statement of financial position:
   
  GROUP
  30 June 2015 
R’000 		 Level 1 
R’000 		 Level 2 
R’000 		 Level 3 
R’000 
Liabilities measured at fair value
        
Derivatives not designated as hedging instruments:        
Diesel hedge 1 761  –  1 761  – 
Clover Industries shares forward purchases 3 625  –  3 625  – 
During the reporting period ended 30 June 2015, there were no transfers between Level 1 and Level 2 fair value measurements.        
  30 June 2014 R’000  Level 1 R’000  Level 2 R’000  Level 3 R’000 
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
 
GROUP   COMPANY
2015  2014      2015  2014 
R’000  R’000      R’000  R’000 
   

15 

Deferred taxation

    
(170 104) (130 591)   Balance at the beginning of the year 77  28 
14 547  (39 513)   Movements during the year –  49 
(155 557) (170 104)   Balance at the end of the year 77  77 
     
The balance is constituted as follows:
    
     
Deferred tax assets
    
694  1 755    Doubtful debts provision 77  77 
5 818  3 953    Credit note accrual    
1 382  1 767    Leases straight-lined    
61 570  42 014    Employee related expenses that are only deductible when paid    
9 194  7 565    Income received in advance    
7 416  8 200    Other accruals    
40 709  14 625    Assessed loss carried forward    
624  –    Foreign tax credits    
1 854  2 874    Other    
129 261  82 753   
Total deferred tax assets
 77  77 
     
Deferred tax liabilities
    
(277 314) (244 419)   Property, plant and equipment –  – 
(3 873) (2 240)   Prepayments –  – 
(1 615) (2 666)   Consumable stores    
(1 320) (1 320)   Pension fund asset    
–  (1 931)   Lease straight-lined    
(696) (281)   Other    
(284 818) (252 857)  
Total deferred tax liabilities
 –  – 
(155 557) (170 104)  
Net deferred tax (liability)/asset
 77  77 
     
Reflected in the statement of financial position as follows:
    
32 696  8 919    Deferred tax assets 77  77 
(188 253) (179 023)   Deferred tax liabilities    
(155 557) (170 104)  
Net deferred tax (liability)/asset
 77  77 
      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 to the value of R69 million (2014: R73,5 million). In addition no deferred tax asset has been provided on tax losses amounting to Rnil million (2014: R39,3 million) which have no expiry date.    
   

16 

Inventories

    
5 800  5 800    Delivery agreements    
127 986  109 827    Raw materials    
100 422  97 071    Work-in-progress    
91 517  88 172    Consumable stores    
614 456  267 022    Finished goods    
940 181  567 892   
Total inventories
    
    The amount of the write-down of inventories recognised as an expense is R20,7 million (2014: R19,6 million). This expense is included in the cost of sales line item as a cost of inventories.    
   

17 

Trade and other receivables

    
1 137 640  870 514    Trade receivables 4 170  3 837 
86 406  153 730    Other receivables and advance payments 489  277 
15 644  16 811    Loans to Executive Directors and other Executives 15 644  16 811 
      Inter-company loan: Clover SA 502 298  398 088 
      Loan: CIL Share Purchase Plan Trust 9  7 
(2 525) (3 849)   Allowance for impairment (275) (275)
(21 586) (14 213)   Credit note accrual    
1 215 579  1 022 993   
Total trade and other receivables
 522 335  418 745 
      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. 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. 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.
    
      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 2015, trade receivables of an initial value of R2,5 million (2014: R3,8 million) were impaired and fully provided for. See below for the movement in the provision for impairment of receivables.    
         
         
3 849  3 309    Balance at the beginning of the year 275  317 
–  2 428    Charge for the year –  (42)
(1 324) (1 888)   Impairment loss written off    
2 525  3 849 
Balance at the end of the year
 275  275 
   

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 2015, the Group had available R30 million (2014: R120 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
    
255  304    On hand    
82 154  294 333    Outstanding deposits    
979  78 459    Call deposits and money market investments 590  24 741 
392 048  280 793    Cash in banks 39 425  10 496 
475 436  653 889   
Total cash and short-term deposits
 40 015  35 237 
      Included in prior year 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
2015  2014        2015  2014 
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 (2014: 2 billion) ordinary shares with a par value of 5 cents (2014: 5 cents) each    
       
Shares issued
    
182 478 589  181 218 149      Ordinary shares in issue at the beginning of the year 182 478 589  181 218 149 
5 252 549  –      Issued on 17 March 2015  5 252 549  – 
–  1 260 440      Issued on 1 July 2013  –  1 260 440 
187 731 138  182 478 589     
Ordinary shares in issue at the end of the year
 187 731 138  182 478 589 
             
2015 
R’000 		 2014 
R’000 		       2015 
R’000 		 2014 
R’000 
       
Ordinary share capital
    
9 387  9 124      187,7 million (2014: 182,5 million) ordinary shares of 5 cents (2014: 5 cents) each 9 387  9 124 
       
Ordinary share premium
    
838 363  734 414      Ordinary share premium on 187,7 million (2014: 182,5 million) ordinary shares 838 363  734 414 
847 750  743 538     
Total ordinary share capital and ordinary share premium
 847 750  743 538 
        Shares were issued as follows during the year    
        Ordinary shares:    
263  63      Ordinary shares of 0,5 cents (2014: 0,5 cents) each 263  63 
103 949  21 151      Ordinary share premium of R19,79 (2014: R16,78) per share 103 948  21 151 
104 212  21 214    Total ordinary share capital raised during the year 104 211  21 214 
   

20 

Other reserves

    
72 880  73 267    Share-based payments reserve 10 252  28 720 
209 957  209 958    Other capital reserves 478  478 
(209 957) –    Other capital reserves transferred to retained earnings (478) – 
72 880  283 225   
Total at the end of the year
 10 252  29 198