Annual financial statements

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2018

GROUP						COMPANY

2018 R’000	2017 R’000					2018 R’000	2017 R’000
		21	INTEREST-BEARINGS LOANS AND BORROWINGS
			21.1	Secured liabilities
920 135	900 000			(a)	Secured by securitisation of trade debtors (refer to note 16).The first tranche of R 400 million is repayable 30 June 2018 (which was settled on 2 July 2018), and is charged a fixed interest rate of 9,28% (2017: 9,28%). The second tranche of R 250 million is repayable on 30 September 2019, and is charged a floating rate of 220 bps above 3 month JIBAR. The third tranche of R 250 million is repayable 30 June 2020, and is charged a floating interest rate of 185 basis points above 3 month JIBAR. The funding is raised in the form of debentures issued to financial institutions and investment funds with specific redemption dates.
21 232	23 170			(b)	Secured by plant and equipment with a book value of R20,5 million (2017: R19,9 million). Repayable in monthly instalments. Payments due within the next year are R5,8 million (2017: R5,9 million). Variable interest rate portion: 8,5% – 10,5% (2017: 8,5% – 10,5%). Maturity: between July 2016 and March 2022. Fixed interest rate portion 9.0% and 10,5% (2017: 9,0% and 10,5%).
941 367	923 170				Total secured liabilities
			21.2	Unsecured liabilities
–	4 889			(a)	Credit financing agreements entered into with IBM Global Financing to fund the acquisition of certain software and consulting costs. Interest is charged at 3% with the final instalment due on 1 September 2017.
–	1 763			(b)	Bank overdraftRepayable on demand. The full outstanding amount is repayable within one year. Variable interest rate:10.25% - 10,5% (2017: 10.5%)
–	302 033			(c)	Call loansVariable interest rate: 8,1% – 9,0% (2017: 8,6% – 9,0%)
255 894	250 070			(d)	Debentures issued to financial institutions and investment funds with fixed redemption date, interest is charged at JIBAR plus 2.85% and is repayable on 1 October 2018.
153 489	–			(e)	Debentures issued to financial institutions and investment funds with fixed redemption date, interest is charged at JIBAR plus 2.55% and is repayable on 1 April 2021.
409 383	558 755				Total unsecured liabilities
1 350 750	1 481 925				Total secured and unsecured liabilities
					Current portion transferred to current liabilities:
426 308	405 899				• Secured liabilities
259 383	308 405				• Unsecured liabilities
685 691	714 304				Total current portion transferred to current liabilities
665 059	767 621				Total non-current interest-bearing borrowings
1 350 750	1 481 925				Total current and non-current interest-bearing loans and borrowings

GROUP				COMPANY

2018 R’000	2017 R’000			2018 R’000	2017 R’000
		22	Non-controlling interest put options liabilities
			The Group has entered into transactions with non-controlling interest equity holders whereby they are able to put their shareholding to the Group for a limited time period. Remeasurements of the liability are recorded in equity (refer to note 19 for more details).
23 226	57 088		Non-controlling interest put options
23 226	57 088		Total non-controlling interest put options
–	–		Current portion reflected under current liabilities
23 226	57 088		Non-current portion reflected under non-current liabilities

			Put option to acquire remaining shares in Clover Good Hope
			Clover granted Good Hope the irrevocable right to sell Good Hope’s 49% of the issued share capital in Clover Good Hope (“Put shares”). The put option may be exercised by Good Hope within three months after each 12-month period from the third anniversary of the effective date. The purchase price of the put shares will be determined by way of an earnings before interest tax depreciation and amortisation (EBITDA) multiple formula.
			((A - C) x B ) x 49% A – Average annual EBITDA of Clover Good Hope for the financial years preceding the put option B – EBITDA multiple. If Clover’s EBITDA multiple is 7 or lower the EBITDA multiple will be 6. If Clover’s EBITDA multiple is above 7 then the EBITDA multiple will be 7 C – Actual average net financing cost of Clover Good Hope for the two financial years preceding the put option The value of the put option was calculated by estimating the future EBITDA as per the contract and discounted given the remaining time period until the option becomes exercisable. The EBITDA estimates for purposes of the valuation of the put option was based on the following inputs; estimated annual free cash flow of R2,4 million; free cash flow growth per annum of between 5% to 10% and a discount rate of 17,98%. The fair value of the put was calculated by comparing the expected price as per the contract to a price calculated by using a discounted cash flow model. The resultant fair value based on this calculation is Rnil. This value is considered a level 3 valuation. Refer to note 29.1 for more details regarding the sensitivity of the valuation inputs.
			Put option to acquire remaining shares in Clover Pride
			Clover granted AECI the irrevocable right to sell AECI’s 49% of the issued share capital in Clover Pride (“Call shares”). The put option may be exercised by AECI within three months after each 12 month period from the third anniversary of the effective date. The purchase price of the put shares will be determined by way of an earnings before interest tax depreciation and amortisation (EBITDA) multiple formula.
			(A x B - C + D -E) x 49% A – 5.5 (EBITDA multiple) B – Average normalised EBITDA C – Clover Pride's debts D – Working capital on hand E – Normal working capital
			The value of the put option was calculated by estimating the future EBITDA as per the contract and discounted given the remaining time period until the option becomes exercisable. The EBITDA estimates for purposes of the valuation of the put option was based on the following inputs: estimated annual free cash flow of R9,8 million; free cash flow growth per annum of between 5% to 6% and a discount rate of 18.54%. The fair value of the put was calculated by comparing the expected price as per the contract to a price calculated by using a discounted cash flow model. The resultant fair value based on this calculation is Rnil. This value is considered a level 3 valuation. Refer to note 29.1 for more details regarding the sensitivity of the valuation inputs.

GROUP					COMPANY

2018 R’000	2017 R’000				2018 R’000	2017 R’000
		23	EMPLOYEE-RELATED OBLIGATIONS
			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:
7 202	7 754			Active members
6.4%	6.3%			Salary escalation ratio
7.7%	8.1%			Discounting rate
65	65			Normal retirement age
21 425	21 846			Balance at the beginning of the year
8 340	5 086			Amounts provided
(6 046)	(5 507)			Amounts utilised
23 719	21 425			Total long-service bonus provision
				Refer to note 33 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 and leave days taken are recognised as utilisations.
70 941	68 305			Balance at the beginning of the year
12 261	11 714			Amounts provided
(11 218)	(9 078)			Amounts utilised
71 984	70 941			Total leave pay provision
			23.3	Total employee-related obligations
75 424	82 595			Non-current portion
20 279	9 771			Current portion transferred to current liabilities
95 703	92 366			Total non-current and current employee-related obligations

GROUP				COMPANY

2018 R’000	2017 R’000			2018 R’000	2017 R’000
		24	TRADE AND OTHER PAYABLES
988 637	1 056 019		Trade payables	8 988	8 240
45 410	30 692		Other payables	1 650	1 773
95 024	126 322		Accrual for variable remuneration and other personnel related creditors
8 239	13 556		VAT creditor
1 908	4 065		Leases straight-lined
493 214	41 484		Payable to joint ventures and associates
55 192	28 054		Payable to NCI shareholders
1 687 624	1 300 192		Total trade and other payables	10 638	10 013
11 448	25 492		Non-current portion included in other payables transferred to non-current liabilities
1 676 176	1 274 700		Current portion	10 638	10 013
1 687 624	1 300 192		Total trade and other payables	10 638	10 013
			The terms for trade payables and other short-term 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.
			Non-current payables range from one to three years after the date of accrual

GROUP					COMPANY

2018 R’000	2017 R’000				2018 R’000	2017 R’000
		25	NOTES TO THE STATEMENT OF CASH FLOWS
			25.1	Tax paid
7 165	(9 893)			Amount receivable/(due) at the beginning of the year	(3 432)	928
(87 887)	(30 057)			Taxation charged in statement of comprehensive income and other adjustments, excluding deferred taxation	(2 998)	(13 544)
(3 702)	(7 165)			Amount (receivable)/due at the end of the year	356	3 432
(84 424)	(47 115)			Total tax paid	(6 074)	(9 184)

GROUP				COMPANY

2018 R’000	2017 R’000			2018 R’000	2017 R’000
		25.2	Movement in borrowings reconciliation
1 481 925	1 274 470		Opening balance
1 458 755	1 242 680		- Borrowings (secured and unsecured)
23 170	31 790		- Finance lease liabilities

(158 755)	216 073		Cash flow movements related to borrowings during the period:
(308 755)	(280 902)		- Repayment of borrowings
150 000	496 975		- Proceeds from borrowings

			Non-cash flow movements related to borrowings during the period:
29 518	–		- Accrued finance charges included in the closing balance

(1 938)	(8 618)		Movement in finance lease liabilities during the period:
(4 578)	(4 764)		- Payments made during the year
2 640	–		- New finance leases entered into - non-cash flow item
–	( 3 854)		- Cancellation of finance lease
–	–		- Finance charges included in the closing balance - non-cash flow item

1 350 750	1 481 925		Closing balance
1 329 518	1 458 755		- Borrowings (secured and unsecured)
21 232	23 170		- Finance lease liabilities

GROUP					COMPANY

2018 R’000	2017 R’000				2018 R’000	2017 R’000
		26	PENSIONS AND OTHER POST-EMPLOYMENT BENEFIT PLANS
			26.1	Defined-contribution funds
				26.1.1 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 2018: 994 (2017: 1 082).
				26.1.2 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 2018: 6 052 (2017: 6 752).
			26.2	Amounts recognised in profit or loss
				Contributions for the Group for the current year:

37 350	40 170			Pension fund
67 036	69 536			Provident fund
104 386	109 706			Total contributions recognised in profit or loss

GROUP					COMPANY

2018 R’000	2017 R’000				2018 R’000	2017 R’000
		27	COMMITMENTS AND CONTINGENCIES
			27.1	Operating lease commitments - Group as lessee
				The Group entered into an outsourcing agreement whereby the Group is provided with 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:
110 748	158 053			Within one year
171 344	217 014			After one year but not more than five years
22 157	23 305			More than five years
304 249	398 372			Total lease payments payable

GROUP				COMPANY

2018 R’000	2017 R’000			2018 R’000	2017 R’000
		27.2	Future contractual distribution and milk collection cost
			The Group entered into a multiyear outsourcing arrangement in respect of distribution and milk collection vehicles. In terms of the outsourcing arrangement the supplier shall acquire and supply vehicles based on functional specifications by the Group. The functional specifications don’t result in the vehicles becoming so customised to the extent that they cannot be repurposed, and used in other parts of the supplier’s fleet or alternatively sold. In addition, the supplier has the right to substitute any vehicle in the fleet at its sole discretion as long as it meets the functional speciation as agreed in the service level agreement. Management concluded that the right to substitute the vehicle and the economic incentive to do so, will result in a substantive substitution right by the supplier, and accordingly the outsourcing arrangement does not meet the definition of a lease.
			Future minimum contractual payments are as follows:
223 116	205 477		Within one year
615 413	762 505		After one year but not more than five years
5 197	158		More than five years
843 726	968 140		Total contractual payments payable

		27.3	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 five 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 are as follows:
2 841	2 654		Within one year
12 280	12 321		After one year, but not more than five years
15 121	14 975		Total lease payments receivable

GROUP 2018				GROUP 2017

Minimum payments R’000	Present value of payments R’000			Minimum payments R’000	Present value of payments R’000
Minimum payments R’000	Present value of payments R’000			Minimum payments R’000	Present value of payments R’000
		27.4	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:
7 699	5 843		Within one year	11 974	9 755
19 124	15 389		After one year but not more than five years	23 321	18 304
26 823	21 232		Total minimum lease payments	35 295	28 059
(5 591)	–		Less: Amounts representing finance charges	(7 236)	–
21 232	21 232		Present value of minimum lease payments	28 059	28 059

GROUP				COMPANY

2018 R’000	2017 R’000			2018 R’000	2017 R’000
		27.5	Capital commitments
21 685	40 908		Capital expenditure authorised and contracted for
72 626	43 424		Capital expenditure authorised but not contracted for
94 311	84 332		Total capital commitments
			Commitments will be spent within the next three to four years.

GROUP						COMPANY

2018 R’000	2017 R’000					2018 R’000	2017 R’000
		28	RELATED PARTY DISCLOSURE
			Transactions with related parties are made at market-related prices. Outstanding balances at the year-end are unsecured. No interest is paid on current accounts. There have been no guarantees provided or received for any related party receivables or payables. 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.
			28.1	With regard to operating activities with subsidiaries and joint ventures, the following transactions took place during the year:
				(a)	Fees earned by CIL for services rendered to Group Companies
					Clover SA – Subsidiary	18 734	51 812
					Total fees earned by CIL for services rendered to Group Companies	18 734	51 812
				(b)	Income earned by Clover SA for services rendered, royalties and interest to joint ventures and associate
1 228 925	–				DFSA – Associate
4 991	4 821				Clover Fonterra – Joint Venture
5 873	3 190				Clover Futurelife – Joint Venture
1 239 789	8 011				Total income earned by Clover SA for services rendered, royalties and interest to joint ventures and associate
				(c)	Amounts due to CIL from Group Companies
					Clover SA – Subsidiary	549 363	547 578
					Total amounts due to CIL from Group Companies	549 363	547 578
				(d)	Amounts due to Clover SA from joint ventures and associate
179 939	–				DFSA – Associate (trade receivable)
3 233	1 274				Clover Fonterra – Joint Venture
3 698	4 840				Clover Futurelife – Joint Venture
186 870	6 114				Total amounts due to Clover SA from joint ventures and associate
				(d)	Amounts owing by Clover SA to joint ventures and associate
426 886	–				DFSA – Associate
64 783	37 934				Clover Fonterra – Joint Venture
1 545	3 550				Clover Futurelife – Joint Venture
493 214	41 484				Total amounts owing by Clover SA to joint ventures and associate
				(e)	CIL received the following dividends during the year from Group Companies
					Clover SA – Subsidiary	50 686	80 000
					Total dividends received by CIL from Group Companies	50 686	80 000

GROUP				COMPANY

2018 R’000	2017 R’000			2018 R’000	2017 R’000
		28.2	Loans advanced to senior management outstanding
			Other executives
2 725	2 585		JHF Botes (Dr)	2 725	2 585
2 725	2 585		Total	2 725	2 585
			Refer to note 16 for more details around the terms of the loans.

29	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.
	29.1		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, interest rate and share price 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 and separate 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 Deloitte Risk Management. Risk management undertakes both regular and ad hoc reviews of risk management controls and procedures, the results of which are reported to the committee.
		a.	Credit risk management
			Credit risk is the risk of financial loss to the Group if a customer or counterparty 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, derivatives 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 29.5. 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 76,0% (2017: 76,7%) 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. 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 according 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 expected 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. In the current year the Group rendered services to DFSA in the ordinary course of business which is payable 30 days from statement. The Group also made available a revolving credit facility ("RCF"), as disclosed in note 13.1, in order for DFSA to fund its operations and the stock it initially acquired from the Group at the time the DFSA business was established. The facility has been made available to DFSA for an initial period of 20 years and the value of the facility will increase annually with CPI. The Group will not be able to call this facility unless certain default events occur. The maximum amount of the RCF was capped at R550 million for the current year however DFSA had at the end of the financial year only utilised R439 million of this facility The RCF was however fully impaired at year-end for reasons set out in note 13.1. As part of the Group's actions taken to mitigate credit risk a general notarial bond has been registered over the stock of DFSA. In addition, DFSA relies on the Group to collect its debtors on its behalf and in terms of the agreement between the parties, the Group may also set off the recovery of these debtors against any outstanding monies owing to the Group in the event of default. Due to the infant stage of DFSA, the Group has subordinated R100 million of the RCF to DFSA in favour of other creditors (which are mainly the milk producers supplying to DFSA). DFSA has successfully settled the trade debt account on a monthly basis and serviced the interest charges owing to the Group during the current financial year. As at year end the ageing of the trade account is in a healthy state and all amounts are neither past due nor impaired.
		b.	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. Refer to note 29.4 for detailed analysis of liquidity exposure. 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 21. 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, finance leases, funding through securitisation of debtors book and hire purchase contracts. The Group’s policy is that not more than 25% (2017: 25%) of long-term borrowings should mature in the next 12-month period. In less than one year, the Group’s long-term debt of 49% (2017: 27.3%) will mature at year-end based on the carrying value of borrowings reflected in the financial statements. However the Group was successful to secure the same level of funding for the next three years. 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. The following guarantees were in place:

Guarantees	2018 R'000	2017 R'000
Municipalities	18 136	15 642
Other*	329	329
	18 465	15 971

Primarily relates to major supplier in relation to the import of equipment which has been subsequently settled.

c.	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.
	(i)	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, British Pound and the Nigerian Naira. Certain exchange rate exposures are hedged through the use of forward exchange contracts. The Group hedges amounts greater than R2 million (2017: R2 million) denominated in a foreign currency. Forward exchange contracts are used to hedge currency risk, when applicable, 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 Naira and the Pula.
The Group’s exposure to foreign currency changes for all other currencies is not material.

GROUP 2018				GROUP 2017

Change in rate	Effect on profit before tax R’000	Effect on equity R’000		Change in rate	Effect on profit before tax R’000	Effect on equity R’000
Change in rate	Effect on profit before tax R’000	Effect on equity R’000		Change in rate	Effect on profit before tax R’000	Effect on equity R’000
			Foreign subsidiaries – equity
+10%			Rand – strengthening	+10%
		(21 577)	Loss on Pulas			(21 556)
		25	Profit on Naira			32
-10%			Rand – weakening	-10%
		21 577	Profit on Pulas			21 556
		(25)	Loss on Naira			(32)

(ii)	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				GROUP

2018 R’000				2017 R’000
		At the reporting date the interest rate profile of the Group's interest-bearing financial instruments was:
425 959		Fixed-rate instruments		400 000
924 791		Variable-rate instruments		1 081 925
1 350 750				1 481 925
		Interest rate sensitivity
		An increase/decrease of 100 basis points (2017: 100 basis points) in interest rates at the reporting date would affect profit before taxation by the amount shown below. This analysis assumes that other variables, in particular foreign currency rates, remain constant. The analysis is performed on the same basis for the prior year.
		Increase of 100 basis points
(9 248)		Decrease in profit before tax		(10 819)
		Decrease of 100 basis points
9 248		Increase in profit before tax		10 819

		(iii)	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 1 824 195 (2017: 2 132 695) of the share appreciation right issued to management. Refer to note 13 for more details.
			Forward share purchases sensitivity
			An increase/decrease of 10% (2017: 10%) 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
3 016			Increase in profit before tax	3 484
			Decrease of 10 % in share price
(3 016)			Decrease in profit before tax	(3 464)
		(iv)	Clover Good Hope - call and put options
			Call option Clover Good Hope
			Good Hope granted Clover the irrevocable right to purchase Good Hope’s 49% of the issued share capital in Clover Good Hope (“Call shares”). The call option may be exercised by Clover within three months after each 12 month period from the fifth anniversary of the effective date. Refer to note 13 for more information regarding the call option.
			Call option sensitivity
			An increase/decrease of 10 % in the terminal growth rate at the reporting date would have effected profit before taxation, by the amounts shown below. This analysis assumes that all other variables remain constant.
			Increase of 10% in terminal growth rate
(20)			decrease in profit before tax	1 195
			Decrease of 10% in terminal growth rate
20			Increase in profit before tax (limited to current option value)	(856)
			An increase/decrease of 10 % in the discount rate at the reporting date would have effected profit before taxation, by the amounts shown below. This analysis assumes that all other variables remain constant.
			Increase of 10 % in discount rate
(747)			Decrease in profit before tax (limited to current option value)	(856)
			Decrease of 10 % in the discount rate
1 036			Increase in profit before tax	4 547
			Put option Clover Good Hope
			Clover granted Good Hope the irrevocable right to sell Good Hope’s 49% of the issued share capital in Clover Good Hope (“Put shares”). The put option may be exercised by Good Hope within three months after each 12 month period from the third anniversary of the effective date. Refer to note 22 for more information regarding the put option.
			Put option sensitivity
			The sensitivity analysis indicates that there is no effect on profit before tax when the terminal growth rate is adjusted by 10% upwards or downwards.An increase/decrease of 10% in the discount rate at the reporting date would have effected profit before taxation, by the amounts shown below. This analysis assumes that all other variables remain constant.
			Increase of 10 % in discount rate
–			No effect	(2 480)
			Decrease of 10 % in the discount rate
–			No effect

		(v)	Clover Pride - call and put options
			Call option Clover Pride
			AECI granted Clover the irrevocable right to purchase AECI’s 49% of the issued share capital in Clover Pride (“Call shares”). The call option may be exercised by Clover within three months after each 12 month period from the third anniversary of the effective date. Refer to note 13 for more information regarding the call option.
			Call option sensitivity
			An increase/decrease of 10 % in the terminal growth rate at the reporting date would have effected profit before taxation, by the amounts shown below. This analysis assumes that all other variables remain constant.
			Increase of 10% in terminal growth rate
1 207			Increase in profit before tax	1 433
			Decrease of 10% in terminal growth rate
(1 119)			Decrease in profit before tax (limited to current option value)	–
			An increase/decrease of 10 % in the discount rate at the reporting date would have effected profit before taxation, by the amounts shown below. This analysis assumes that all other variables remain constant.
			Increase of 10 % in discount rate
(1 795)			Decrease in profit before tax	–
			Decrease of 10 % in the discount rate
4 427			Increase in profit before tax	5 619
			Put option Clover Pride
			Clover granted AECI the irrevocable right to sell AECI’s 49% of the issued share capital in Clover Pride (“Put shares”). The put option may be exercised by AECI within three months after each 12 month period from the third anniversary of the effective date. Refer to note 22 for more information regarding the put option.
			Put option sensitivity

			Increase of 10 % in discount rate
–			Decrease in profit before tax	(1 148)
			Decrease of 10 % in the discount rate
–			No effect on net profit before tax	–
	29.2	Capital management
		Capital consists of ordinary share capital, as well as ordinary share premium
		A combination of retained earnings, senior debt, 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 R900 million (2017: R900 million). The securitisation provides access to senior debt equal to 75% (2017: 75%) 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 13,9% (2017: 5,4%), which excludes exceptional items, was achieved. In comparison the weighted average interest expense on interest-bearing borrowings was 10,0% (2017: 10,6%).
	29.3	Fair value
		The carrying amount of financial assets and liabilities carried at amortised cost are a reasonable approximation of fair value due to the short-term maturities of these financial instruments, other than the put liabilities disclosed in note 22.
		These financial instruments are short-term in nature and includes trade receivables, trade payables, cash and cash equivalents.
		Long-term fixed-rate and 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. The credit rating remained unchanged at zaAA, as rated by Khanda Credit.

GROUP

2018
0 – 6 months R’000	6 – 12 months R’000	1 – 2 years R’000	2 – 5 years R’000	5 years R’000	Total R’000
						29.4	Liquidity risk profile
							Maturity profile of financial instruments
							The following tables summarises the maturity profile of Clover’s financial liabilities at 30 June 2018 and 30 June 2017, based on contractual undiscounted payments.
							Financial liabilities
3 850	3 850	5 843	13 281	–	26 824		Secured loans
442 876	22 336	527 788	–	–	993 000		Secured by securitisation of trade debtors
274 662	7 111	14 262	160 745	–	456 780		Unsecured loans
–	–	–	–	18 465	18 465		Guarantees
9 547	4 092	2 776	–	–	16 415		Financial liabilities
1 657 871	18 305	10 241	1 210	–	1 687 627		Trade and other payables
2 388 806	55 694	560 910	175 236	18 465	3 199 111		Total financial liabilities

GROUP

2017
0 – 6 months R’000	6 – 12 months R’000	1 – 2 years R’000	2 – 5 years R’000	5 years R’000	Total R’000
						Financial liabilities
7 987	3 370	7 790	14 284	–	33 431	Secured loans
42 256	441 900	46 834	529 055	–	1 060 045	Secured by securitisation of trade debtors
314 875	12 633	258 585	–	–	586 093	Unsecured loans
–	–	–	–	15 971	15 971	Guarantees
1 763	–	–	–	–	1 763	Bank overdrafts
6 141	–	9 683	–	–	15 824	Financial liabilities
1 230 532	44 168	17 995	7 497	–	1 300 192	Trade and other payables
1 603 554	502 071	340 887	550 836	15 971	3 013 319	Total financial liabilities

COMPANY

2018
0 – 6 months R’000	6 – 12 months R’000	1 – 2 years R’000	2 – 5 years R’000	5 years R’000	Total R’000
						The maturity profile of the financial instruments is summarised as follows for the Company:
						Financial liabilities
10 638	–	–	–	–	10 638	Trade and other payables
10 638	–	–	–	–	10 638	Total financial liabilities

COMPANY

2017
0 – 6 months R’000	6 – 12 months R’000	1 – 2 years R’000	2 – 5 years R’000	5 years R’000	Total R’000
						Financial liabilities
10 013	–	–	–	–	10 013	Trade and other payables
10 013	–	–	–	–	10 013	Total financial liabilities

GROUP				COMPANY

Carrying value 2018 R’000	Carrying value 2017 R’000			Carrying value 2018 R’000	Carrying value 2017 R’000
Carrying value 2018 R’000	Carrying value 2017 R’000			Carrying value 2018 R’000	Carrying value 2017 R’000
		29.5	Credit risk
			Exposure to credit risk
			The carrying amount of financial assets represents the maximum exposure to credit risk.
			Financial assets per class
1 181 770	1 182 775		Trade receivables
140 453	178 380		Other receivables	602 791	563 233
760 693	544 863		Cash and short-term deposits	29 034	63 241
179 940	–		Trade receivable from associate^#
2 262 856	1 906 018		Total financial assets	631 825	626 474
			Trade receivables
			The maximum exposure to credit risk for trade receivables at the reporting date by customer type was as follows:
854 294	906 736		Retail chain stores
203 989	123 878		Wholesale chain stores
123 487	152 161		Industrial/catering/general trade
1 181 770	1 182 775		Total
			The ageing of trade receivables at the reporting date is as follows:
1 116 180	1 127 639		Neither past due nor impaired*
50 018	41 753		Past due, but not impaired 0–30 days
8 129	5 940		Past due but not impaired 31–120 days
7 443	7 443		Past due but not impaired 120 days
1 181 770	1 182 775		Total
			The movement in the allowance for impairment in respect of trade receivables during the year was as follows:
6 517	3 847		Balance at the beginning of the year	275	275
(236)	4 978		(Decrease)/Increases in impairments
(424)	(2 308)		Impairment loss written off
5 857	6 517		Balance at the end of the year	275	275
			* The balance of these receivables mainly relate to well-known retail and wholesale chain stores and is considered to be of a high credit quality as is evident from the relative low impairment balance and zaAA credit ratings based on evaluations performed by independent credit valuation agencies.

GROUP			COMPANY

Carrying value 2018 R’000	Carrying value 2017 R’000		Carrying value 2018 R’000	Carrying value 2017 R’000
Carrying value 2018 R’000	Carrying value 2017 R’000		Carrying value 2018 R’000	Carrying value 2017 R’000
		# The balance of this receivable relates to DFSA and is owing to the Group for services rendered during the ordinary course of business. DFSA is still in its infant stage and is funding its working capital requirements via a revolving credit facility made available to it from the Group. The ageing of the trade account is in a healthy state and all amounts are neither past due or nor impaired. Refer to note 29.1 para (a) for more details about credit risk management.
		The allowance for impairment 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.

GROUP				COMPANY

2018 R’000	2017 R’000			2018 R’000	2017 R’000
		30.1	INVESTMENT IN SUBSIDIARY, JOINT VENTURES AND ASSOCIATE
			Investment in subsidiary company
			Clover SA	326 735	326 735
			Total investment in subsidiary	326 735	326 735
			Share of investment in joint ventures
–	–		Clover Futurelife
46 035	38 946		Clover Fonterra
46 035	38 946		Total of investment in joint ventures
			Share of investment in an associate
–	–		DFSA
–	–		Total of investment in a associate

			Effective interest in capital		Gross Investment in subsidiaries and joint ventures¹		Profit/(loss) after taxation³

			2018 %	2017 %	2018 R’000	2017 R’000	2018 R’000	2017 R’000
Clover SA²	South Africa	Dairy manufacturing, distribution, sales	100	100	326 735	326 735	342 390	171 180
Real Beverage Company	South Africa	Manufacturing and sales of fruit juices	100	100	403 958	466 958	80 823	(45 019)
Clover MilkyWay	South Africa	Dairy manufacturing and sales	100	100	75 000	80 000	10 141	(5 317)
Clover Frankies	South Africa	In the process of being liquidated	100	100	–	19 854	–	(3 851)
Clover Botswana	Botswana	Dairy manufacturing, distribution, sales	100	100	23 111	23 111	45 035	44 425
Clover Namibia	Namibia	Distribution and sales of dairy products in Namibia	100	100	*	*	(3 043)	2 494
Clover Swaziland	Swaziland	Distribution and sales of dairy products in Swaziland	100	100	1	1	2 376	1 306
Clover West Africa	Nigeria	In the process of being liquidated	100	100	468	468	(90)	(1 027)
Clover Waters	South Africa	Marketing, sales, distribution and production of water and iced tea	70	70	147 021	146 985	(7 324)	(3 536)
Clover Good Hope	South Africa	Manufactures, distributes, sells and markets a range of soy based milk alternatives	51	51	16 270	14 822	(1 747)	1 829
Clover Pride	South Africa	Manufactures, distributes, sells and markets a range of food products	51	51	33 025	31 768	2 268	1 007
Clover Fonterra^#	South Africa	Marketing, selling and distribution of dairy and related ingredient products	51	51	46 035	38 946	21 104	18 486
Clover Futurelife^#	South Africa	Manufactures, distributes, sells and markets a range of functional food products	50.1	50.1	*	*	(706)	(7)
Dairy Farmers of South Africa4	South Africa	Milk collection and dairy sales	–	100	*	405 311	–	(4 483)

#	Joint venture.
*	Amounts less than R1 000.
1	Held by Clover SA.
2	Held by CIL.
3	Before inter-company eliminations.
4	Clover will not share in any distributions of DFSA and accordingly no portion of the profits or equity will be attributed to the Group. The investment is accordingly carried at cost.

30.2	FINANCIAL STATEMENTS DETAILS OF SUBSIDIARIES WITH NCI

GROUP			COMPANY

2018 R’000	2017 R’000		2018 R’000	2017 R’000
		Clover Good Hope
		Subsidiary’s statement of financial position
18 737	29 878	Current assets including cash and cash equivalents of R1,8 million (2017: R9,7 million) and inventory of R5,8 million (2017: R7,7 million)
7 413	6 959	Non-current assets including property, plant and equipment of Rnil million (2017: Rnil million) and intangibles of R6,6 million (2017: R7 million)
–	(508)	Non-current liabilities including deferred tax R0 million (2017: R0.5 million)
(18 280)	(25 034)	Current liabilities including trade and other payables of R18 million (2017: R25 million)
(7 870)	(11 295)	Equity (net asset value)
51%	51%	Portion of the Group’s ownership
4 014	5 760	Net asset value of the investment
		Subsidiary’s revenue and (loss)/profit
74 891	90 405	Revenue
(70 038)	(73 663)	Cost of sales
(8 499)	(10 372)	Sales, marketing, distribution and administrative expenses
–	(283)	Other operating (expenses)/income
(1 111)	(1 090)	Net finance cost
(4 757)	4 997	Profit before taxation
1 332	(1 411)	Income tax expense
(3 425)	3 586	(Loss)/profit for the year
51%	51%	Portion of the Group’s ownership
(1 747)	1 829	Group’s share of (loss)/profit for the year
–	–	Dividend received

GROUP			COMPANY

2018 R’000	2017 R’000		2018 R’000	2017 R’000
		Clover Waters
		Subsidiary’s statement of financial position
96 686	53 894	Current assets including cash and cash equivalents R28,6m million (2017: R2,6 million) and inventory R24,3 million (2017: R24,5 million)
128 585	150 236	Non-current assets including property, plant and equipment R97 million (2017: R112 million) and deferred tax asset of Rnil (2017:R4,9 million)
(198 643)	(166 916)	Current liabilities including trade and other payables of R198 million (2017: R138,2 million)
(26 628)	(37 214)	Equity (net asset value)
70%	70%	Portion of the Group’s ownership
18 640	26 050	Net asset value of the investment
		Subsidiary’s revenue and (loss)/profit
233 045	252 564	Revenue
(158 435)	(163 763)	Cost of sales
(61 476)	(74 626)	Sales, marketing, distribution and administrative expenses
(4 032)	(14 140)	Other operating expenses
(14 710)	(12 605)	Net finance cost
(5 608)	(12 570)	Loss before taxation
(4 855)	7 518	Income tax
(10 463)	(5 052)	(Loss) for the year
70%	70%	Portion of the Group’s ownership
(7 324)	(3 536)	Group’s share of loss for the year
–	–	Dividend received

GROUP			COMPANY

2018 R’000	2017 R’000		2018 R’000	2017 R’000
		Clover Pride
		Subsidiary’s statement of financial position
29 953	23 096	Current assets including cash and cash equivalents of R0,4 million (2017: R0,4 million) and inventory R22,9 million (2017:R13,9 million)
56 915	59 493	Non-current assets including property, plant and equipment of R0,5 million (2017: 0.5 million( and intangibles R59,0 million (2017: 59,0 million)
(62)	(117)	Non-current liabilities including deferred tax R0,1 million (2017: 0,1 million)
(21 203)	(20 563)	Current liabilities including trade and other payables of R21.2 million (2017: R20,4 million)
(65 603)	(61 909)	Equity (net asset value)
51%	51%	Portion of the Group’s ownership
33 458	31 574	Net asset value of the investment
		Subsidiary’s revenue and profit
87 408	22 358	Revenue
(64 951)	(15 016)	Cost of sales
(15 069)	(3 562)	Sales, marketing, distribution and administrative expenses
–	(797)	Other operating (expense)/income
(1 226)	(241)	Net finance cost
6 162	2 742	Profit before taxation
(1 714)	(767)	Income tax expense
4 448	1 975	Profit for the year
51%	51%	Portion of the Group’s ownership
2 268	1 007	Group’s share of profit for the year
–	–	Dividend received

Refer to note 3.1 for the joint ventures namely Clover Fonterra Ingredients and Clover Futurelife and 3.2 for Dairy Farmers of South Africa