Annual financial statements

• Audit and risk committee report
• Approval of the financial statement
• Certificate by Company Secretary
• Independent Auditor’s report
• Directors’ report
• Consolidated statement of comprehensive income
• Consolidated statement of financial position
• Consolidated statement of changes in equity
• Consolidated statement of cash flows
• Notes to the consolidated financial statements
• Notes 1 - 10
• Notes 11 - 20
• Notes 21 - 30
• Notes 31 - 34
• Abbreviations
• Definitions

Directors’ report

The Directors present their report on the activities and the financial statements for Clover Industries Ltd (“CIL”) and the Group in respect of the year ended 30 June 2017.

Nature of business

The procurement, production, marketing, sales and distribution of branded consumer goods to customers on the African continent. 

Group results

The Group’s results for the year are as follows: 

	2017 R’m	2016 R’m
Revenue	10 058,6	9 818,7
Total comprehensive income attributable to equity holders of the parent Company	141,3	379,8

 

More detailed financial information can be found in the Financial Report which forms part of the Integrated Annual Report.

Subsidiary companies and interests in joint ventures

Details of subsidiary companies are reflected in note 31 to the financial statements and business combinations and interests in joint ventures in note 3 and 4 to the financial statements.

During the year under review, Clover S.A. Proprietary Limited (“CSA”) (a wholly-owned subsidiary of the Company) has acquired 51% of the issued share capital of Clover Pride (Pty) Ltd (“Clover Pride”). AECI Limited (“AECI”) sold its subsidiary’s business to Clover Pride for a consideration of R58 million, effective 1 April 2017 and in return holds an equity stake in Clover Pride of 49% of the issued share capital (see note 3.1). The business involves the manufacturing and importing of olive oils, extra virgin olive oils, balsamic vinegars and related products. Clover will provide all services including merchandising, marketing, sales and distribution to the new entity whilst Clover Pride will continue to distribute, market and sell products under the Olive Pride brand. The agreement provides for a Put Option against CSA exercisable after the third anniversary of the effective date and a Call Option in favour of CSA exercisable after the third anniversary of the effective date (see note 14.1 and 23).

In addition, CSA has acquired the remaining 49% of the issued share capital of Clover Frankies Proprietary Limited (“Clover Frankies”) effective 31 March 2017 for a cash consideration of R4.4 million. The business includes carbonated soft drinks (CSD) manufacturing, marketing, distribution, inventory and intellectual property. Refer to note 3.2 for more details on the acquisition of a non-controlling interest in a subsidiary.

These transactions are in line with the Company’s stated strategy to expand its portfolio of value added and branded consumer products.

Share capital

Details of the authorised and issued share capital are disclosed in note 19 to the financial statements.

A general authority to repurchase ordinary shares of the Company was granted to the Directors by way of a special resolution adopted on 28 November 2016 and is valid until 28 November 2017. Such authority is subject to the Companies Act and the Listings Requirements of the JSE. The Listings Requirements of the JSE limit repurchases during any one year to a maximum of 20% of the issued ordinary shares at the time.

On 1 September 2016 the Company issued 38 397 (2016: 2 583 212) ordinary Clover Industries shares to a retired member of senior management to settle part of its obligation under the Clover Share Appreciation Rights Plan (“SAR”).

As part of the Company’s interim dividend declaration, the company gave shareholders the option to select between a cash dividend or scrip distribution share. In terms of the scrip distribution, 482 617 new ordinary shares were issued on 24 April 2017 to shareholders who did not elect to receive a cash dividend in respect of all their shares.

Except for the above no shares were issued or repurchased during the year ending 30 June 2017. 

Dividends

Dividends declared and paid by CIL during the year: 

	2017 R’000	2016 R’000
Ordinary dividends
Declared and paid	114 802	108 755

The Board declared an interim dividend of R46,1 million (2016: R46,1 million) or 24,21 cents (2016: 24,21 cents) per ordinary share during February 2017. The cash paid in in relation to the interim dividend amounted to R36,9 million and R9,2 million by the issue of 482 617 scrip distribution shares.

During the consideration of the interim dividend for 1H17 the board decided to maintain the interim dividend in line with the prior year’s interim dividend and declared a dividend of 24,21 cents per share, although the interim headline earnings were 13.5% lower than the prior interim period’s results.

Although the Board communicated in the past that it will follow a progressive dividend policy whereby dividends are as minimum maintained or grown by at least the growth in the headline earnings per share, the Board has resolved not to declare a final dividend due to the current weak economic circumstance and the Group's growth funding requirements.

Directors and Company Secretary

Particulars of the present Directors and Company Secretary are listed here and here.

Share-based compensation

On 30 June 2017, 3 108 839 SARs were issued to executives at an issue price of R16,75. These SARs will vest three years after the issue date and are subject to vesting conditions. SARs not exercised will be cancelled five years after the allocation date.

On exercise executives will be entitled to a payment equal to the increase in the CIL ordinary share price over the allocation price of the SARs. Such payment can at the election of the Group be either in cash or by way of the issue to the member of a number of ordinary shares equal in value to such cash amount. Details of SAR issued and vested in terms of the plan are given in the Remuneration Policy and Remuneration Report contained in the Integrated Annual Report and note 32.

Insurance and risk management

The Group follows a policy of reviewing the risks relating to assets and commitments that might flow from the use thereof with its insurers on an annual basis. Wherever possible, assets are automatically included. There is also a continuous asset risk control programme, which is carried out in conjunction with the Group’s insurance brokers. For further information on the Group’s risk management process please refer to the Report on Governance, Risk and Compliance here. 

Property, plant and equipment

There was no change in the nature of the property, plant and equipment of the Group or in the policy regarding their use. Capital expenditure on tangible assets was R316,9 million (2016: R366,7 million) and R5,7 million (2016: R56,4 million) on intangible assets.

Events after the reporting period

As communicated on the SENS Clover transferred the non-value added dairy business to its wholly owned subsidiary, Dairy Farmers of South Africa (Pty) Ltd. (“DFSA”), under a written transfer of business agreement with effect from 1 April 2017. In exchange for the transfer of the non-value added dairy business as aforementioned, DFSA allotted and issued to Clover, shares in DFSA. The board of directors of Clover announced that the issue and allotment of the B shares in DFSA to the milk producers has been implemented with effect from 1 July 2017 and accordingly, the milk producers now hold all the B shares which constitute 74% of the voting rights of DFSA. Clover holds all the A shares which constitute 26% of the voting rights of DFSA.

Except for the above no significant events occurred subsequent to the year-end that would require disclosure or amendment to these financial statements.

Special resolutions

The following special resolutions were adopted at the Annual General Meeting of Clover Industries Limited held on 28 November 2016:

A general authority was given to the Board of Directors to repurchase shares in the Company subject to the Companies Act and the JSE Listings Requirements;

The remuneration of the Non-executive Directors with effect from 1 July 2016 was approved; and

The Company and/or subsidiaries was given authority by way of general authority to provide, from time to time, subject to section 45 of the Companies Act, financial assistance to related and inter-related companies on the terms and conditions that the Board of Directors deem appropriate.

Acknowledgements

We express our thanks and appreciation to:

• our shareholders for their support during the year; 
• our staff for their dedication to the Clover brand;
• all our suppliers for their support in reducing the costs in the supply chain;
• the retail and wholesale trade for their support; and
• the consumers who support the Clover brand. 

Werner Büchner Chairman 11 September 2017	Johann Vorster Chief Executive Officer