page 1 table of contents - sharedata
TRANSCRIPT
PAGE 1
table of contents
Group structure 2
Financial highlights and salient features 3
Chief executive’s review 4
Group sustainability report 7
Corporate governance 8
Index to annual financial statements 10
Notice of annual general meeting 66
Directorate and administration 70
Shareholders’ diary 70
Form of proxy 71
Notes to form of proxy 72
PAGE 3PAGE 2
GRoUP stRUctURe
KNJ IndustrialHoldings (Pty) Ltd
BroKrew Industrial (Pty) Ltd
Broseal Properties (Pty) Ltd
legend
Company Principal activity
1. Kairos Industrial Holdings Diversified industrial holding company 2. KNJ Industrial Holdings Management company3. BroKrew Industrial Mine ventilation and supplies4. Witbank Brickworks Brick enterprises5. Ten Cradock Avenue Coal reserves and investment property6. Kairos Coal and Exploration Coal prospecting and mining company7. Estlind Investments Investment property8. Broseal Properties Investment property
Witbank Brickworks (1961) (Pty) Ltd
Estlind Investments (Pty) Ltd
Ten Cradock Avenue (Pty) Ltd
Kairos Coal and Exploration
(Pty) Ltd
100% 100%
100%
100%
100%
100%
100% 100%
PAGE 3
fInancIal HIGHlIGHts
salIent fInancIal featUResfor the year ended 28 February 2010
2010 2009 Change
Revenue (R’000) 238 843 246 5 55 (7 712)
Operating (loss)/profit (R’000) (87 538) (8 743) (78 795)
Attributable loss to shareholders (R’000) (89 304) (1 583) (87 721)
Headline loss per share (cents) (40,65) (5,08) (35,57)
Basic loss per share (cents) (39,77) (0,70) (39,07)
Net asset value per share (cents) (8,47) 28,83 (37,30)
Net tangible asset value per share (cents) (9,58) 26,69 (36,27)
Year ended28 Feb 2010
R’000
Year ended
28 Feb 2009
R’000
Revenue 238 843 246 555
– Operating loss before accounting for the following: (84 308) (7 273)
– Investment income 3 785 3 908
– Fair value adjustments 5 203 11 300
– Impairment of goodwill (2 309) (1 565)
– (Loss)/profit on disposal of assets (921) 95
– Finance costs (12 100) (10 600)
Loss before taxation (90 650) (4 135)
Provision for taxation 1 346 2 552
Net loss attributable to shareholders (89 304) (1 583)
Note: Reconciliation of headline earningsNet loss as above (89 304) (1 583)
Impairment of goodwill 2 309 1 565
Fair value adjustments (5 203) (11 300)
Profit on disposal of fixed assets 921 (95)
Headline loss (91 277) (11 413)
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OVERVIEW OF RESULTS
Basis of preparation
The financial statements are presented on a going concern basis on the assumption that the group’s funding requirements will be met and that the restructuring proposal presented to creditors of Brokrew Industrial will be accepted and successfully implemented.
Financial highlights
The Kairos Group was not immune to the global economic downturn, which significantly affected all the world’s economies, particularly South Africa. The country’s gross domestic product showed negative growth for the first and second quarter of 6,4% and 3,0% respectively and only moderate economic recovery was experienced in the fourth quarter.
Against this background, Group consolidated revenue for the financial year under review decreased by 3,16% to R238,8 million from R246,6 million reported in the previous year. However, resulting from an extraordinary provision for a doubtful debt in one of the Group’s subsidiaries, the operating loss for the year increased to R87,5 million from the previous year’s operating loss of R8,7 million. Further details on this provision are detailed in the review of activities for Brokrew Industrial (Pty) Limited below.
Investment revenues at R3,8 million decreased from the previous year’s R3,9 million in line with the decline in investment rates and the current year’s finance costs of R12,1 million were up on those of the previous year of R10,6 million. In the last quarter, the Group was successful in negotiating a medium term loan with the Industrial Development Corporation for R30 million which influenced the increase in the finance costs.
The resultant Group loss for the year was R89,3 million compared to a loss of R1,6 million for the previous year.
As a result of the above losses, the net asset value per share decreased from 28,8 cents per share to (8,47) cents per share.
The headline loss per share increased to 40,65 cents from the previous year’s loss per share of 5,08 cents. The ordinary loss per share for the year was 39,77 cents. (2009: 0,70 cents per share).
REVIEW OF ACTIVITIES OF OPERATIONAL SUBSIDIARIES
Major operations
Witbank Brickworks (1961) (Pty) Ltd
Once again conditions in the brick manufacturing industry have been severely influenced by the poor economic conditions. The stringent lending policies dictated by the financial institutions have hampered new development and the secondary market for additions and alterations, a primary target for the company, have literally come to a standstill. Added to these poor trading conditions, margins were continuously under pressure resulting from price wars being waged in the industry. The market also showed a tendency towards lower end products which directly affected the average selling prices, adding further pressure to the company’s margins.
To protect the company’s margins, management has continued to look to and implement cost cutting measures and has been successful in managing down most of its major input costs. Headcounts at both facilities have been cut wherever possible to meet the lower revenue levels and break-even levels are now at an all time low, which augurs well should there be an upturn in the market.
Resulting from the poor market conditions described above, revenue for the year declined by 15% to R29,9 million and an operating loss of R2,76 million.
Since the last quarter of calendar 2009, there have been numerous signs that the worst of the economic recession is over. There are signals that the manufacturing sector, which has in the past year been severely affected, is starting to post improved results. Easing inflationary pressures and the declining interest rates have also provided customers with certain relief as debt servicing costs have resulted in improved levels of disposable income for households.
Considering the above, conditions should improve for the brick manufacturing businesses in the ensuing year. Recent increased activity on the Kusile Power Station, which falls within the company’s target market, should provide certain development opportunities for both the company’s brickyards.
cHIef eXecUtIVe’s ReVIeW
PAGE 4
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BroKrew Industrial (Pty) (Ltd)
The operations of this company are split into two distinctive divisions. The “standards” division is responsible for the manufacture of galvanised ventilation ducting primarily for the mining industry and the “specials” division which provides heavy duty steel fabrication for industry in general on a project basis.
During the year under review the standards division performed well ahead of budget arising from increased demand and improved orders from the mining houses. The company has vendor licenses with the majority of mines in South Africa and with supplier agreements in place, it has maintained its dominant position and solid order book throughout this recessionary period.
The Medupi project was mentioned in the annual report last year and this contract was housed in the specials division, referred to above. The contract, the largest undertaken by the company in its history, was for the fabrication and delivery of ducting for six air cooled condenser sections for the Medupi Power Station. Unfortunately the project was hampered with problems from its commencement, which included continuous and significant delays to the program and major changes to certain critical specifications together with continual disputes over contract pricing and invoicing. Notwithstanding these major issues, the division continued to manufacture product in terms of its contractual obligations and simultaneously invoiced its primary contractor for payment of delivered product. A dispute arose over the requested payments, resulting in numerous meetings seeking resolution to the situation. The parties could not come to any form of agreement and as a result Brokrew cancelled the contract.
The issue of non-payment of the relevant invoices was carefully considered by the Board and a decision was taken to provide in full for this outstanding debt. This provision has had a major effect on Brokrew’s results and the results of the Group. In the Group’s provisional reviewed preliminary results it was advised that the provision for doubtful debts on this contract totalled R69 million. Subsequent to that report, the Group has passed a credit note against the claim invoice of R45 million which has resulted in a decrease in the provision to R24 million. However this had no effect to the loss realised in the company.
In addition to the above, in terms of the contract, Brokrew had to provide guarantees for performance and advance payments to the primary contractor currently totaling R50,4 million which the primary contractor has attempted to call up. The company, together with its insurers, is defending this action vigorously. These guarantees have been noted as a contingent liability in the attached annual financial statements, refer to note 35.
As a result of the above contract cancellation, the results of this segment of the business are very disappointing. Revenue for the year of R200,9 million is down on that of the previous year by 4,4%. The effect of the provision for doubtful debt of R24 million and the reversal of the claim for R45 million has resulted in an operating loss of R94,4 million compared to a small operating profit of R0,1 million the previous year.
Significant management intervention has now taken place to refocus the business post the Medupi contract cancellation and strategies are now in place to secure the division’s dominant position in the mining standards arena with full support from all its major suppliers as well as its financiers. There is currently a balance sheet restructuring process being implemented with the company’s creditors being offered redeemable preference shares in Brokrew Industrial in lieu of their debt outstanding. The Group’s major bankers, being both Absa Bank Ltd and the Industrial Development Corporation of South Africa have been kept fully informed at all times and continue to support the Group.
Township Development
Feasibility studies have been completed on the Group’s land earmarked for township development in Witbank. This development will comprise 600 residential, 13 light industrial and 1 business stand. Application for proclamation and subdivision of the land is now being considered.
The outlook for residential housing in this area would appear to be good with the commencement of the Kusile Power Station and the Group will further benefit through the supply of bricks to this development.
cHIef eXecUtIVe’s ReVIeW CONTINUED
PAGE 6 PAGE 7
cHIef eXecUtIVe’s ReVIeW CONTINUED
STRATEGY
The company will continue with its existing strategy, in that it will focus its efforts on its core revenue-producing businesses – Witbank Brickworks (1961) (Pty) Ltd and BroKrew Industrial (Pty) Ltd ensuring that both the businesses are optimized. In terms of Brokrew, the company will focus on strengthening its position within the mining sector in respect of the standards products and re-enter that market with project based product where growth opportunities have been identified. The coal mining opportunities will now become strategic to the growth of the group and Kairos Coal & Mining (Pty) Limited continue exploiting the coal reserves currently owned by the group. In conjunction with this strategy the company will continue to investigate appropriate acquisitions as they might be identified.
APPRECIATION
I wish to record my appreciation and thanks to all management, staff and directors for their integral contribution, loyalty and support over the past 12 months.
Wouter L van Deventer
Chief executive
17 September 2010
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BROAD BASED BLACK ECONOMIC EMPOWERMENT (“BBBEE”) INITIATIVE
Kairos is mindful of its obligations and commitment to the BBBEE process, which forms an integral and essential part of the South African business environment. Kairos subscribes fully to the principles and processes of skills transfer and the economic empowerment of previously disadvantaged individuals (“PDIs”), such that both PDIs and the South African economy as a whole can meet their full potential. Kairos is fully committed to the challenges and developments of BBBEE, through the transformation of the fabric of human potential in South Africa, in such a way that all become active and contributing members of society.
Having investigated various options, the directors of Kairos concluded that a fundamental part of any empowerment transaction is to empower a broad base of beneficiaries, and have further concluded that such beneficiaries are adequately represented by the PDIs employed by the group.
Accordingly, Kairos introduced a BBBEE shareholder in the form of the Kairos BEE Trust, which acquired a 10% shareholding in Kairos with the ability of increasing its shareholding over time to 25,1%.
There are no restrictions on the trustees as to the manner in which the BBBEE shares are voted on behalf of the beneficiaries of the Trust nor are there any voting pool arrangements. The Trust is currently under the control of the company. The current trustees of the Trust have recognised that the Trust should be managed by an independent board of trustees. As a result the current trustees are in the process of identifying persons who are independent of the Board and the company and who will be able to replace the majority of the existing trustees of the Trust. The trustees are to apply the income and/or capital of the Trust for the benefit of the beneficiaries. In making any distribution of the capital of the Trust, the unanimous consent of the trustees shall be required.
This provision ensures that any distribution of capital of the Trust is to be in the best interest of both the beneficiaries of the Trust and the company. The appointment of trustees by the company ensures that as long as the Trust is indebted to the company, the Trust will not make any capital distributions, thus safeguarding the company’s loan to the Trust. The company’s appointees to the board of trustees are therefore safeguarded, and ensure the success of the company’s, and the shareholders’ investment in the BBBEE initiative.
SOCIAL RESPONSIBILITY
The effects of the recession and the major financial constraints put on the Group as a result of the Medupi contact precluded the Group from participating in any external social responsibility. However wherever possible various entities within the Group made various donations to a number of deserving charities.
EMPLOYMENT EQUITY
The group’s affirmative action policy is designed to enhance the prospects of all employees. The group’s operating entities report to the Department of Labour independently for the purposes of employment equity, with the overall management of employment equity being controlled by the Kairos Group head office.
A recessionary year was always going to be problematic for employment equity goals, as the required catalyst for this important social area is growth of employees within the Group. The hold on hiring employees within the Group and the retrenchment of employees in certain of the operations had a significantly negative effect on the employment equity results.
ENVIRONMENTAL IMPACT
The Group is aware that certain components of its business do have an impact on the environment. Where this is recognised, the Group has sufficient provisions and rehabilitation guarantees in place to mitigate and to restore any effects that its operations might have on the environment.
GRoUP sUstaInabIlItY RePoRt
PAGE 8 PAGE 9
Kairos supports the Code of Corporate Practices and Conduct contained in the King Report on Corporate Governance and the directors accordingly recognise the need to conduct the enterprise with integrity, accountability, openness and in accordance with generally accepted corporate practices.
The company is substantially compliant with King II and further work is being undertaken inter alia in the following areas to implement, or refine, the systems already in place:
• policy evidencing a clear division of responsibilities at board level; • formalise the audit committee and members thereof.
Since the introduction of King III followed so closely after the financial year end and is only required to be implemented by companies with financial years beginning on or after 1 March 2010, at the time of preparation of this report the Company has not set about assessing the changes recommended by King III and what changes, if any, it needs to make to specifically apply the principles of King III.
THE BOARD OF DIRECTORS
The company has a unitary Board of Directors with the roles of the Chairman and the Chief Executive Officer separated and their responsibilities clearly defined. The board comprises three executive directors and a non-executive chairman. During the year the Chairman, Mr JB Oosthuizen resigned and was replaced shortly after his departure by Mr VD Mazibuko. The directors contribute a broad range of experience and professional skills enabling them to retain full and effective control over the group as currently established.
The Board’s has formulated and adopted a Board Charter which is reviewed annually and embodies the following principles, amongst others:
• the Board is responsible for the proper management and ultimate control of the Company;• with regard to share dealing, all directors are required to apply through the Chief Executive for written permission
from the Chairman to deal in the Company’ s shares. All directors are required to advise the Company Secretary as soon as a deal has taken place so that the dealings are reported timeously. Directors share dealings are a permanent item on the Board agenda and shareholder movements are analysed monthly;
• review the strategies for achieving the company’s goals;• review and approve the annual budgets and business plans;• monitor operational performance and management;• identify and monitor key risk areas; • review the board’s performance, composition, structure and succession; • review remuneration policies and practices in general, including superannuation and incentive schemes for management.
Nominations for appointments to the Board are formal, transparent and considered by the Board as a whole. All executive employment contracts can be terminated by either party giving three month’s written notice.
No formal Board meetings have been held since the previous Annual General Meeting. The Board recognises the requirements of King II to hold regular Board Meetings and this will be formalised in the forthcoming financial year.
EXECUTIVE MANAGEMENT COMMITTEE
Members of the executive visit the operating subsidiaries on a regular basis and continuously monitor the performance of those subsidiaries.
The committee is responsible for making recommendations to the Board on all major strategic and policy issues, including the arrangements for the financing of the group’s activities.
BOARD COMMITTEES
The Board has two committees:
• Audit; • Remuneration.
Each Board Committee acts within formalised terms of reference which have been approved by the Board. They set out its purpose, duties and reporting procedures.
coRPoRate GoVeRnance
PAGE 8 PAGE 9
AUDIT COMMITTEE
An audit committee meets as often as may be necessary to review the adequacy of the group’s financial and other internal controls, accounting policies, financial management reporting and accounting records. Its membership includes the group financial director and the group financial manager.
The Committee reports to the Board to assist the Board in acknowledging its responsibility for the above matters.
As mentioned in the directors’ report the requirements of King II and the Listings Requirements of the JSE have not been met in terms of a properly constituted audit committee. Currently the committee is not chaired by an independent non-executive and does not comprise of a majority of independent non-executives. It also does not meet the requirement of a minimum of three members. This non-compliance has not been addressed by the Group as yet, but efforts will be made to have the situation rectified during the current financial year.
REMUNERATION COMMITTEE
This committee consists of the full board of directors. The committee currently comprises the following members:
WL van Deventer Chief executive JJ de W Mulder Director WA Lombard Director VD Mazibuko Non-executive chairman
The committee, under written terms of reference, determines and develops the group’s general policy on executive and senior management remuneration and the criteria to measure the performance of executive directors.
The remuneration committee does not comply to King II requirements and measures are in place to address the balance of non-executive directors.
Non-executive remuneration
Director’s fees are paid to the non-executive directors on the basis of attendance at Board and Committee meetings.
CORPORATE SECRETARIAT
All directors have direct access to the services of the group company secretary and are able to seek independent professional advice at the company’s expense.
coRPoRate GoVeRnance CONTINUED
InDeX to tHe annUal fInancIal stateMents
Directors’ responsibilities and approval 11
Company secretary’s statement 11
Report of the independent auditors 12
Directors’ report 14
Directors’ curriculum vitae 17
Statement of comprehensive income 18
Statement of financial position 19
Statement of changes in equity 20
Cash flow statements 21
Segmental analysis 22
Accounting policies 23
Notes to the annual financial statements 34
PAGE 10
coMPanY secRetaRY’s stateMent
PAGE 11
During the year under review, I conducted the duties of Company Secretary for Kairos Industrial Holdings Ltd. The secretarial matters are the responsibility of the Company’s directors. My responsibility is providing the directors collectively and individually with guidance as to their duties, responsibilities and powers.
I hereby certify that the Company has lodged with the Registrar of Companies all such returns as are required of a public company in terms of the Companies Act of South Africa, 1973, and that all such returns are true, correct and up to date.
L JonkerCompany secretary
17 September 2010
DIRectoRs’ ResPonsIbIlItIes anD aPPRoVal
coMPanY secRetaRY’s stateMent
The directors are required in terms of the Companies Act of South Africa, 1973 to maintain adequate accounting records and are responsible for the content and integrity of the annual financial statements and related financial information included in this report. It is their responsibility to ensure that the annual financial statements fairly present the state of affairs of the group as at the end of the financial year and the results of its operations and cash flows for the period then ended, in conformity with International Financial Reporting Standards. The external auditors are engaged to express an independent opinion on the annual financial statements.
The annual financial statements are prepared in accordance with International Financial Reporting Standards, the Companies Act of South Africa, 1973, listing requirements of the JSE Limited and are based upon appropriate accounting policies consistently applied and supported by reasonable and prudent judgments and estimates.
The directors acknowledge that they are ultimately responsible for the system of internal financial control established by the group and place considerable importance on maintaining a strong control environment. To enable the directors to meet these responsibilities, the board sets standards for internal control aimed at reducing the risk of error or loss in a cost effective manner. The standards include the proper delegation of responsibilities within a clearly defined framework, effective accounting procedures and adequate segregation of duties to ensure an acceptable level of risk. These controls are monitored throughout the group and all employees are required to maintain the highest ethical standards in ensuring the group’s business is conducted in a manner that in all reasonable circumstances is above reproach. The focus of risk management in the group is on identifying, assessing, managing and monitoring all known forms of risk across the group. While operating risk cannot be fully eliminated, the group endeavours to minimise it by ensuring that appropriate infrastructure, controls, systems and ethical behaviour are applied and managed within predetermined procedures and constraints.
The directors are of the opinion, based on the information and explanations given by management, that the system of internal control provides reasonable assurance that the financial records may be relied on for the preparation of the annual financial statements. However, any system of internal financial control can provide only reasonable, and not absolute, assurance against material misstatement or loss.
The directors have reviewed the group’s cash flow forecast for the year to 28 February 2011 and, in the light of this review and the current financial position, they are satisfied that the group has or has access to adequate resources to continue in operational existence for the foreseeable future.
The external auditors are responsible for independently reviewing and reporting on the group’s annual financial statements. The annual financial statements have been examined by the group’s external auditors and their report is presented on pages 12 and 13.
The annual financial statements set out on pages 14 to 65, which have been prepared on the going concern basis, were approved by the board on 17 September 2010 and were signed on its behalf by:
WL van Deventer WA LombardChief executive Group financial director
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RePoRt of tHe InDePenDent aUDItoRs
TO THE SHAREHOLDERS OF KAIROS INDUSTRIAL HOLDINGS LIMITED AND ITS SUBSIDIARIES
Report on the financial statements
We have audited the annual financial statements of Kairos Industrial Holdings Limited and its subsidiaries, which comprise the statement of financial position as at 28 February 2010, and the statement of comprehensive income, statement of changes in equity and statement of cash flows for the year then ended, and a summary of significant accounting policies and other explanatory notes, and the directors’ report, as set out on pages 14 to 65.
Directors’ responsibility for the annual financial statements
The company’s directors are responsible for the preparation and fair presentation of these annual financial statements in accordance with International Financial Reporting Standards, and in the manner required by the Companies Act of South Africa, 1973. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of annual financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.
Auditor’s responsibility
Our responsibility is to express an opinion on these annual financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the annual financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the annual financial statements. The procedures selected depend on the auditors’ judgment, including the assessment of the risks of material misstatement of the annual financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the annual financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the annual financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the annual financial statements present fairly, in all material respects, the financial position of Kairos Industrial Holdings Limited and its subsidiaries as at 28 February 2010, and its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards, and in the manner required by the Companies Act of South Africa, 1973.
Emphasis of matter
Without qualifying our opinion, we draw attention to the note on going concern in the directors’ report which indicate that the company has an accumulated loss of R210,135 million (2009: R210,001 million) for the year ended 28 February 2010.
In addition, the note on going concern in the directors’ report indicate that the group has an accumulated loss of R236,010 million (2009: R149,404 million) for the year ended 28 February 2010 and, as at that date, the group’s total liabilities exceeded its total assets by R19,019 million.
These conditions, as set forth in the directors’ report, indicate the existence of a material uncertainty which may cast significant doubt on the group’s ability to continue as a going concern.
Supplementary information
Without qualifying our opinion, we draw attention to the fact that supplementary information set out on pages 66 to 72 does not form part of the annual financial statements and are presented as additional information. We have not audited this information and accordingly do not express an opinion thereon.
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Report on other legal and regulatory requirements
In accordance with our responsibilities in terms of section 44(2) and 44(3) of the Auditing Profession Act, we report that we have identified certain unlawful acts or omissions committed by persons responsible for management which constitute reportable irregularities in terms of the Auditing Profession Act, and have reported such matters to the Independent Regulatory Board of Auditors.
The reportable irregularities pertains to:
Value added taxation that was under declared in Brokrew Industrial (Proprietary) Limited to the South African Revenue Services in respect of an invoice raised on the Medupi contract, because management had provided for the invoice in full as a bad debt. Subsequent to the reportable irregularity reported, the bad debt provision was reduced by an amount of R45 million, as management remedied the reportable irregularity by passing a credit note against the said invoice. As a result, the reportable irregularity was fully resolved, as the value added taxation has been correctly declared and fairly stated.
The group does not have an audit committee that consists of a minimum of two independent non-executive directors, as required by section 269A(3) of the Companies Act of South Africa, 1973.
Moore Stephens FRRS Incorporated Moore Stephens HouseChartered Accountants (S.A.) No. 6 Lakeside Place Registered Auditors Kleinfontein LakePer: LB Roberts Benoni, 1501
17 September 2010
RePoRt of tHe InDePenDent aUDItoRs CONTINUED
PAGE 14 PAGE 15
DIRectoRs’ RePoRt
The directors submit their report for the year ended 28 February 2010.
REVIEW OF ACTIVITIES
Main business and operations
The company is an industrial holding company focusing on the provision of supplies to the mining and construction industries.
The operating results and state of affairs of the group are fully set out in the annual financial statements and do not in our opinion require any further comment.
Net loss for the company was R0,134 million (2009: R1,795 million loss), after taxation.
Net loss for the group was R89,304 million (2009: R1,583 million loss), after taxation.
The current year loss is primarily as a result of a provision for bad debt of R24 million relating to the cancellation of the Medupi Contract in the group’s subsidiary Brokrew Industrial (Proprietary) Limited and the reversal of a claim against the debtor of R45 million. The directors considered these to be the prudent measures until such time as the matter has been settled by arbitration.
GOING CONCERN
We draw attention to the fact that at 28 February 2010, the company had accumulated losses of R210,135 million (2009: R210,001 million).
In addition, we draw attention to the fact that at 28 February 2010, the group had accumulated losses of R236,010 million (2009: R149,404 million) and that the group’s total liabilities exceeded its total assets by R19,019 million.
The annual financial statements have been prepared on the basis of accounting policies applicable to a going concern. This basis presumes that funds will be available to finance future operations and that the realisation of assets and settlement of liabilities, contingent obligations and commitments will occur in the ordinary course of business.
Management of Brokrew Industrial (Proprietary) Limited took action to ensure the continued existence of the company by enlisting the services of its designated advisors, Bridge Capital to look to means of protecting the company and its creditors. A creditors’ restructuring proposal was formulated where an offer is being made to the creditors to convert their debt to redeemable preference shares with a coupon rate of 6% payable from 2013 through to 2016. At this stage and almost without exception, most creditors are happy to accept this offer. The majority of creditors have signed the agreement, which negates any fear of smaller creditors filing for liquidation.
Simultaneous to this management have met with the two largest secured creditors being the Industrial Development Corporation of South Africa Limited and Absa Bank Limited and both parties have accepted the creditor’s proposal and offered their support to the company.
During February 2010, when the contract with Kentz (Proprietary) Limited was cancelled, the company amended the budget for the current financial year and forecasts to 2016 to appraise the viability of the business. The company took a prudent view to run standards product through to August 2010 and then to start phasing in its old Specials business.
At present negotiations are in hand for a further revolving credit loan with the Industrial Development Corporation of South Africa Limited of R20 million. This will allow the company to step up its production in the Standards Division and to erode the backlog of overdue orders which is in the region of R12 million. If a risk period could be identified it would be the periods currently through to December 2010. Thereafter management are confident that they will be able to achieve very sizeable orders for the Specials Division which will bolster profitability and cash flow.
Other factors include that Kairos Coal and Exploration (Proprietary) Limited is exploiting three open cast coal reserves:
Eenzaamheid – Prospecting, drilling and the geological reports have been completed and the company is now awaiting the mining permit which is anticipated in September 2010.
PAGE 14 PAGE 15
DIRectoRs’ RePoRt CONTINUED
Blesboklaagte – Prospecting, drilling and the geological reports have been completed and the company is now awaiting the mining permit which is anticipated in November 2010.
Uitspan Basin – Prospecting and drilling have taken place and the geological reports have been completed. Application for a mining right has been lodged, which if successful will only be received in 2013.
Management of Witbank Brickworks (1961) (Proprietary) Limited’s plans include an agreement between Kairos Coal and Exploration (Proprietary) Limited and a third party for the exploitation of 176 218 tons of coal on its property commencing October 2010, as well as a significant reduction in production and overhead expenses to reduce operating losses. A thermo char plant has been installed by a third party on the property, subsequent to year end, which produces additional heat to the brick production plant and will therefore assist in significantly reducing energy costs for the company.
EVENTS AFTER THE REPORTING PERIOD
Arising from the cancellation of the Medupi contract, the primary contractor has attempted to call up the performance bond and advance payment guarantee totalling R50 million. The company, together with its insurers, is defending this action vigorously. Refer note 35 – Contingencies.
Directors’ shareholdings as at 28 February 2010
Direct Indirect % shareholding
BeneficialNon-
beneficial BeneficialNon-
beneficial Total28 Feb
2010
28 Feb
2009
WL van Deventer – – 150 284 587 – 150 284 587 59,61 59,61
JJ de W Mulder – – – 5 978 994 5 978 994 2,37 2,37
VD Mazibuko 103 200 – – – 103 200 0,04 0,04JB Oosthuizen 300 000 – – – 300 000 0,12 0,12
Total 403 200 – 150 284 587 5 978 994 156 666 781 62,14 62,14
The company has not been informed of any material changes in these holdings from the previous year to the date ofthis report.
Shareholder Spread
Pursuant to the Listings Requirements of the JSE Limited and to the best knowledge of the directors the spread of shareholders at 28 February 2010 was as follows:
% shareholding
Number ofshareholders
28 Feb2010
28 Feb
2009
(i) directors of the company 3 62,14 62,14
(ii) trustees of the Kairos Share Incentive Trust 1 0,56 0,56
(iii) trustees of the Kairos BEE Trust 1 10,00 10,00 (iv) subsidiary companies 1 0,37 0,37
Total non-public shareholders 6 73,07 73,07 (v) public shareholders 529 26,93 26,93
Total 535 100,00 100,00
In so far as it is known, no shareholder, other than the directors, is directly or indirectly beneficially interested in 5% or more of any class of the company’s capital.
PAGE 16 PAGE 17
DIRectoRs’ RePoRt CONTINUED
AUTHORISED AND ISSUED SHARE CAPITAL
There were no changes in the authorised or issued share capital of the group during the year under review.
BORROWING LIMITATIONS
In terms of the Articles of association of the company, the directors may exercise all the powers of the company to borrow money, as they consider appropriate. At 28 February 2010 the group’s borrowings totalled R82,824 million (2009: R48,243 million).
NON-CURRENT ASSETS
During the year the group invested R6,910 million (2009: R14,092 million) in acquiring property, plant and equipment.
DIVIDENDS
No dividends have been declared for the current financial year. The board will review this policy as soon as the company returns to profitability.
DIRECTORS
The directors of the company during the year and to the date of this report are as follows:
Name Designation Changes
WL van Deventer Executive VD Mazibuko Non-Executive Chairman WA Lombard Executive JJ de W Mulder Executive JB Oosthuizen – Resigned 2 March 2010
SECRETARY
The secretary of the company is L Jonker of:
Business address
1111 Church Street, Hatfield, Pretoria 0083
Postal address
PO Box 11328, Hatfield, Pretoria 0028
HOLDING COMPANY
The company’s holding company is Shefa Equity Holdings (Proprietary) Limited.
AUDITORS
Moore Stephens FRRS Incorporated were appointed as auditors to the holding company and its subsidiaries and will continue in office in accordance with section 270(2) of the Companies Act. The audit services of SAB&T Chartered Accountants were terminated on 1 June 2010.
KAIROS SHARE INCENTIVE SCHEME
The object of the Scheme is to provide appropriate incentives to group employees for the continued growth and profitability of the group and to promote the retention of these employees.
Eight million issued and unissued shares in the share capital of the company have been placed under the control of the directors who are specifically authorised in terms of Section 221(2) of the Companies Act 1973 to sell or grant options to acquire or options to enter into agreements to acquire all or part of such shares to the Scheme. This position is unchanged from the previous annual general meeting. 1 409 294 (2009: 1 409 294) issued ordinary shares have been registered in the name of the Scheme but to date no options have been allocated.
Mr L Jonker was appointed as the compliance officer in terms of Section 144A of the Companies Act 1973 as amended.
DIRectoRs’ cURRIcUlUM VItae
PAGE 16 PAGE 17
RETIREMENT FUNDS
The majority of employees of the group are members either of the Momentum Funds@Work Retirement Fund or of funds established within the various industries in which they are employed. The scheme does not require a statutory actuarial valuation.
INTEREST IN SUBSIDIARIES
Details of the company’s investment in subsidiaries are set out in note 7 and page 45 of the annual financial statements.
CORPORATE GOVERNANCE
The directors subscribe to the values of good corporate governance as set out in the King II Report on Corporate Governance for the Republic of South Africa, with the exception of a formally constituted audit committee. By supporting this Code of Corporate Practices and Conduct, the directors have recognised the need to conduct the business with integrity and in accordance with generally accepted corporate practices. Specific matters have been addressed in the Corporate Governance report.
WL van Deventer WA Lombard Chief executive Group financial director
DIRectoRs’ RePoRt CONTINUED
DIRectoRs’ cURRIcUlUM VItae
DE WET MULDER
JJ De W Mulder (55) holds a BCom (Honours) degree in Business Economics. He commenced his career with Triomf Fertilisers and ICS Foods, after which he joined the Murray & Roberts group in 1980. He was appointed as chief executive officer of Murray & Roberts’ Mining Products division in 1989.
Mr Mulder was appointed as an executive director of Kairos in July 1996 and is currently chief executive of the Kairos’ subsidiary, BroKrew Industrial (Pty) Limited.
VUSI MAzIBUKO
VD Mazibuko (54) studied a BCom at the University of Fort Hare with majors in Business Economics and Industrial Psychology. He obtained a certificate from WITS doing their Management Development Program and a diploma on Corporate Governance from the Institute of Directors.
Since 1981 Mr Mazibuko has held senior marketing positions at IBM, SA Breweries, Eskom, Teljoy, Nedcor and the Department of Trade and Industry.
Mr Mazibuko was appointed as a director of Kairos in August 2004 and chairman in March 2010. He is also a trustee of the Kairos Black Economic Empowerment Trust.
PAGE 18 PAGE 19
for the year ended 28 February 2010
stateMent of coMPReHensIVe IncoMe
GROUP COMPANY
Notes
2010
R’000
2009
R’000
2010
R’000
2009
R’000
Revenue 23 238 843 246 555 338 300
Cost of sales 24 (266 168) (228 456) – –
Gross (loss)/profit (27 325) 18 099 338 300
Other income 1 767 686 – 26
Operating expenses (61 980) (27 528) (472) (2 121)
Operating (loss) 25 (87 538) (8 743) (134) (1 795)
Investment revenue 26 3 785 3 908 – –
Fair value adjustments 27 5 203 11 300 – –
Finance costs 28 (12 100) (10 600) – –
(Loss) before taxation (90 650) (4 135) (134) (1 795)
Taxation 29 1 346 2 552 – –
(Loss) for the year (89 304) (1 583) (134) (1 795)
Other comprehensive incomeGains on property revaluation 7 426 11 550 – –
Taxation related to components of other
comprehensive income (1 873) (3 086) – –
Other comprehensive income
for the year net of taxation 31 5 553 8 464 – –
Total comprehensive (loss) income (83 751) 6 881 (134) (1 795)
2010 2009 Change
Basic loss per share (cents) 40 39,77 0,70 39,07
Headline loss per share (cents) 41 40,65 5,08 35,57
PAGE 18 PAGE 19
GROUP COMPANY
Notes28 Feb 2010
R’000
28 Feb 2009
R’00028 Feb 2010
R’000
28 Feb 2009
R’000
ASSETS Non-current assetsInvestment properties 3 28 913 23 000 – –
Property, plant and equipment 4 65 066 57 584 – –
Goodwill 5 – 2 309 – –Intangible assets 6 2 500 2 500 – –
96 479 85 393 – –
Current assetsInventories 8 33 860 47 853 – –
Other financial assets 9 – 91 – 136
Current tax receivable 84 – – –
Trade and other receivables 10 27 249 51 547 26 38
Mining and exploration assets 11 331 2 666 – –Cash and cash equivalents 12 4 260 2 598 14 2
65 784 104 755 40 176
TOTAL ASSETS 162 263 190 148 40 176
EQUITY AND LIABILITIES EquityStated capital 14 200 741 200 741 210 147 210 147
Reserves 16 250 13 395 – –Accumulated loss (236 010) (149 404) (210 135) (210 001)
(19 019) 64 732 12 146
Liabilities Non-current liabilitiesOther financial liabilities 16 32 731 5 476 – –Instalment sale obligation 17 5 325 7 568 – –Deferred tax 18 6 160 5 600 – –
44 216 18 644 – –
Current liabilitiesLoans from shareholders 19 – 745 – –
Other financial liabilities 16 32 438 24 392 – –
Current tax payable – 138 – –
Instalment sale obligation 17 3 902 3 924 – –Trade and other payables 20 86 050 64 264 28 30
Provisions 21 6 248 4 573 – –Bank overdraft 12 8 428 8 736 – –
137 066 106 772 28 30
Total liabilities 181 282 125 416 28 30
TOTAL EQUITY AND LIABILITIES 162 263 190 148 40 176
at 28 February 2010
stateMent of fInancIal PosItIon
PAGE 20 PAGE 21
for the year ended 28 February 2010
stateMent of cHanGes In eQUItY
StatedcapitalR’000
Re-valuation
reserveR’000
Con-vertible in-struments
reserveR’000
Totalreserves
R’000
Accumu-latedloss
R’000
TotalequityR’000
GROUPBalance at 01 March 2008 200 741 5 615 460 6 075 (148 965) 57 851Changes in equity
Total comprehensive income (loss)
for the year – 8 464 – 8 464 (1 583) 6 881
Realisation of revaluation of assets sold – (242) – (242) 242 –
Realisation of revaluation reserve
through use – (902) – (902) 902 –
Total changes – 7 320 – 7 320 (439) 6 881
Balance at 01 March 2009 200 741 12 935 460 13 395 (149 404) 64 732Changes in equity
Total comprehensive income (loss)
for the year – 5 553 – 5 553 (89 304) (83 751)
Realisation of revaluation of assets sold – (1 280) – (1 280) 1 280 –
Realisation of revaluation reserve
through use – (1 418) – (1 418) 1 418 –
Total changes – 2 855 – 2 855 (86 606) (83 751)
Balance at 28 February 2010 200 741 15 790 460 16 250 (236 010) (19 019)
Note(s) 14 15 & 31 31
COMPANYBalance at 01 March 2008 210 147 – – – (208 206) 1 941Changes in equity
Total comprehensive loss for the year – – – – (1 795) (1 795)
Total changes – – – – (1 795) (1 795)
Balance at 01 March 2009 210 147 – – – (210 001) 146Changes in equity
Total comprehensive loss for the year – – – – (134) (134)
Total changes – – – – (134) (134)
Balance at 28 February 2010 210 147 – – – (210 135) 12
Note(s) 14 31
PAGE 20 PAGE 21
for the year ended 28 February 2010
casH floW stateMents
GROUP COMPANY
Notes
Year ended28 Feb 2010
R’000
Year ended
28 Feb 2009
R’000
Year ended28 Feb 2010
R’000
Year ended
28 Feb 2009
R’000
Cash flows from operating activities
Cash receipts from customers 300 585 237 807 346 313
Cash paid to suppliers and employees (316 009) (233 564) (582) (511)
Cash generated from (used in) operations 32 (15 424) 4 243 (236) (198)
Interest income 3 785 3 908 – –
Dividends received – – – –
Finance costs (10 840) (9 567) – –
Tax (paid) received 33 (189) (226) – –
Net cash from operating activities (22 668) (1 642) (236) (198)
Cash flows from investing activitiesPurchase of property, plant and equipment 4 (6 910) (14 092) – –
Sale of property, plant and equipment 273 1 668 – –
Purchase of financial assets – (281) – –
Sale of financial assets 575 – (16) (16)
Movement in mining and exploration assets (331) (1 201) – –
Net cash from investing activities (6 393) (13 906) (16) (16)
Cash flows from financing activitiesProceeds on other financial liabilities 35 301 3 203 – –
Decrease in loan payable – (444) – –
Proceeds on shareholders loan (745) (2 597) – –
Instalment sale obligations (3 525) 4 746 – –
Proceeds from loans from group companies – – 264 355
Repayment of loans from group companies – – – (158)
Net cash from financing activities 31 031 4 908 264 197
Total cash movement for the year 1 970 (10 640) 12 (17)
Cash at the beginning of the year (6 138) 4 502 2 19
Total cash at end of the year 12 (4 168) (6 138) 14 2
PAGE 22 PAGE 23
for the year ended 28 February 2010
seGMental analYsIs
Brickenterprises
R’000
Miningsupplies
R’000
Property &investment
divisionsR’000
GroupR’000
BUSINESS SEGMENTS2010Revenue 29 907 208 936 – 238 843Net (loss)/profit before interest and tax (2 120) (77 405) (8 013) (87 538)Fair value adjustments 1 203 – 4 000 5 203Interest received 139 3 617 29 3 785Finance costs (2 005) (9 798) (297) (12 100)Income tax (expense)/credit 1 919 – (573) 1 346
Net (loss)/profit for the year (864) (83 586) (4 854) (89 304)
Segment assets 37 073 77 733 44 957 159 763Intangible assets – 2 500 – 2 500
Total assets 37 073 80 233 44 957 162 263
Total liabilities 14 120 158 396 8 766 181 282
Depreciation and amortisation 2 324 2 550 76 4 950Capital expenditure 94 6 720 96 6 910
2009
Revenue 35 187 210 216 1 152 246 555
Net (loss)/profit before interest and tax (9 693) 1 038 (88) (8 743)
Fair value adjustments – – 11 300 11 300
Interest received 236 2 690 982 3 908
Finance costs (1 579) (7 794) (1 227) (10 600)
Income tax (expense)/credit 2 444 1 856 (1 748) 2 552
Net (loss)/profit for the year (8 592) (2 210) 9 219 (1 583)
Segment assets 38 357 120 291 26 689 185 337
Intangible assets – 4 809 – 4 809
Total assets 46 611 111 785 31 750 190,146
Total liabilities 15 235 99 505 10 674 125 414
Depreciation and amortisation 4 048 1 761 81 5 890
Capital expenditure 5 637 8 276 179 14 092
PAGE 22 PAGE 23
1 PRESENTATION OF ANNUAL REPORT
The annual financial statements have been prepared in accordance with International Financial Reporting Standards, and the Companies Act of South Africa, 1973. The annual financial statements have been prepared on the historical cost basis, and incorporate the principal accounting policies set out below. They are presented in South African Rands.
These accounting policies are consistent with the previous period.
1.1 Consolidation
Basis of consolidation
The consolidated annual financial statements incorporate the annual financial statements of the company and all entities, including special purpose entities, which are controlled by the company.
Control exists when the company has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities.
The results of subsidiaries are included in the consolidated annual financial statements from the effective date of acquisition to the effective date of disposal.
Adjustments are made when necessary to the annual financial statements of subsidiaries to bring their accounting policies in line with those of the group.
All intra-group transactions, balances, income and expenses are eliminated in full on consolidation.
1.2 Significant judgements and sources of estimation uncertainty
In preparing the annual financial statements, management is required to make estimates and assumptions that affect the amounts represented in the annual financial statements and related disclosures. Use of available information and the application of judgement is inherent in the formation of estimates. Actual results in the future could differ from these estimates which may be material to the annual financial statements. Significant judgements include:
Trade receivables and loans and receivables
The group assesses its trade receivables and loans and receivables for impairment at the end of each reporting period. In determining whether an impairment loss should be recorded in profit or loss, the group makes judgements as to whether there is observable data indicating a measurable decrease in the estimated future cash flows from a financial asset.
The impairment for trade receivables and loans and receivables is calculated on a portfolio basis, based on historical loss ratios, adjusted for national and industry-specific economic conditions and other indicators present at the reporting date that correlate with defaults on the portfolio. These annual loss ratios are applied to loan balances in the portfolio and scaled to the estimated loss emergence period.
Allowance for slow moving, damaged and obsolete stock
An allowance to write stock down to the lower of cost or net realisable value. Management have made estimates of the selling price and direct cost to sell on certain inventory items. The write down is included in the operating profit note.
Fair value estimation
The fair value of financial instruments traded in active markets (such as trading and available-for-sale securities) is based on quoted market prices at the end of the reporting period. The quoted market price used for financial assets held by the group is the current bid price.
The fair value of financial instruments that are not traded in an active market is determined by using valuation techniques. The group uses a variety of methods and makes assumptions that are based on market conditions existing at the end of each reporting period. Quoted market prices or dealer quotes for similar instruments are used for long-term debt. Other techniques, such as estimated discounted cash flows, are used to determine fair value for the remaining financial instruments. The fair value of interest rate swaps is calculated as the present value of the estimated future cash flows. The fair value of forward foreign exchange contracts is determined using quoted forward exchange rates at the end of the reporting period.
for the year ended 28 February 2010
accoUntInG PolIcIes
PAGE 24 PAGE 25
The carrying value less impairment provision of trade receivables and payables are assumed to approximate
their fair values. The fair value of financial liabilities for disclosure purposes is estimated by discounting the future contractual cash flows at the current market interest rate that is available to the group for similar financial instruments.
Impairment testing
The recoverable amounts of cash-generating units and individual assets have been determined based on the higher of value-in-use calculations and fair values. These calculations require the use of estimates and assumptions. It is reasonably possible that the assumption may change which may then impact our estimations and may then require a material adjustment to the carrying value of goodwill and tangible assets.
The group reviews and tests the carrying value of assets when events or changes in circumstances suggest that the carrying amount may not be recoverable. In addition, goodwill is tested on an annual basis for impairment. Assets are grouped at the lowest level for which identifiable cash flows are largely independent of cash flows of other assets and liabilities. If there are indications that impairment may have occurred, estimates are prepared of expected future cash flows for each group of assets. Expected future cash flows used to determine the value in use of goodwill and tangible assets are inherently uncertain and could materially change over time. They are significantly affected by a number of factors.
Provisions
Provisions were raised and management determined an estimate based on the information available. Additional disclosure of these estimates of provisions are included in note 21 – Provisions.
Expected manner of realisation for deferred tax
Deferred tax is provided for on the fair value adjustments of investment properties based on the expected manner of recovery, i.e. sale or use. This manner of recovery affects the rate used to determine the deferred tax liability. Refer note 18 – Deferred tax.
Taxation
Judgement is required in determining the provision for income taxes due to the complexity of legislation. There are many transactions and calculations for which the ultimate tax determination is uncertain during the ordinary course of business. The group recognises liabilities for anticipated tax audit issues based on estimates of whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the income tax and deferred tax provisions in the period in which such determination is made.
The group recognises the net future tax benefit related to deferred income tax assets to the extent that it is probable that the deductible temporary differences will reverse in the foreseeable future. Assessing the recoverability of deferred income tax assets requires the group to make significant estimates related to expectations of future taxable income. Estimates of future taxable income are based on forecast cash flows from operations and the application of existing tax laws in each jurisdiction. To the extent that future cash flows and taxable income differ significantly from estimates, the ability of the group to realise the net deferred tax assets recorded at the end of the reporting period could be impacted.
Useful life of intangible assets
All the patents and trademarks were purchased from external parties. As part of the purchase there is an agreement to renew the patents and trademark at no additional cost and within an unlimited time frame. Therefore management is of the opinion that the trademark can be used for an undetermined time frame and an indefinite useful life is used.
1.3 Investment property
Investment property is recognised as an asset when, and only when, it is probable that the future economic
benefits that are associated with the investment property will flow to the enterprise, and the cost of the
investment property can be measured reliably.
for the year ended 28 February 2010
accoUntInG PolIcIes CONTINUED
PAGE 24 PAGE 25
Investment property is initially recognised at cost. Transaction costs are included in the initial measurement.
Costs include costs incurred initially and costs incurred subsequently to add to, or to replace a part of, or service a property. If a replacement part is recognised in the carrying amount of the investment property, the carrying amount of the replaced part is derecognised.
Fair value
Subsequent to initial measurement investment property is measured at fair value.
A gain or loss arising from a change in fair value is included in net profit or loss for the period in which it arises.
1.4 Property, plant and equipment
The cost of an item of property, plant and equipment is recognised as an asset when:
• it is probable that future economic benefits associated with the item will flow to the company; and • the cost of the item can be measured reliably.
Property, plant and equipment is initially measured at cost.
Costs include costs incurred initially to acquire or construct an item of property, plant and equipment and costs incurred subsequently to add to, replace part of, or service it. If a replacement cost is recognised in the carrying amount of an item of property, plant and equipment, the carrying amount of the replaced part is derecognised.
The initial estimate of the costs of dismantling and removing the item and restoring the site on which it is located is also included in the cost of property, plant and equipment, where the entity is obligated to incur such expenditure, and where the obligation arises as a result of acquiring the asset or using it for purposes other than the production of inventories.
Property, plant and equipment is carried at revalued amount, being the fair value at the date of revaluation less any subsequent accumulated depreciation and subsequent accumulated impairment losses. Revaluations are made with sufficient regularity such that the carrying amount does not differ materially from that which would be determined using fair value at the balance sheet date.
Any increase in an asset’s carrying amount, as a result of a revaluation, is recognised to other comprehensive income and accumulated in the revaluation surplus in equity. The increase is recognised in profit or loss to the extent that it reverses a revaluation decrease of the same asset previously recognised in profit or loss.
Any decrease in an asset’s carrying amount, as a result of a revaluation, is recognised in profit or loss in the current period. The decrease is recognised in other comprehensive income to the extent of any credit balance existing in the revaluation surplus in respect of that asset. The decrease recognised in other comprehensive income reduces the amount accumulated in the revaluation surplus in equity.
Property, plant and equipment are depreciated on the straight line basis over their expected useful lives to their estimated residual value.
The useful lives of items of property, plant and equipment have been assessed as follows:
Item Average useful life
Clay reserves 4 years Furniture and fixtures 6 – 10 years Housing/Sheds 10 years IT equipment 3 years Land Indefinite Loose tools 5 years Motor vehicles 5 years Office equipment 3 – 5 years Plant and machinery 5 – 10 years
The residual value, useful life and depreciation method of each asset are reviewed at the end of each reporting period. If the expectations differ from previous estimates, the change is accounted for as a change in accounting estimate.
for the year ended 28 February 2010
accoUntInG PolIcIes CONTINUED
PAGE 26 PAGE 27
Each part of an item of property, plant and equipment with a cost that is significant in relation to the total cost of the item is depreciated separately.
The depreciation charge for each period is recognised in profit or loss unless it is included in the carrying amount of another asset.
The gain or loss arising from the derecognition of an item of property, plant and equipment is included in profit or loss when the item is derecognised. The gain or loss arising from the derecognition of an item of property, plant and equipment is determined as the difference between the net disposal proceeds, if any, and the carrying amount of the item.
1.5 Goodwill
Goodwill is initially measured at cost, being the excess of the business combination over the company’s interest of the net fair value of the identifiable assets, liabilities, and contingent liabilities.
Subsequently goodwill is carried at cost less any accumulated impairment.
The excess of the company’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities over the cost of the business combination is immediately recognised in profit or loss.
Internally generated goodwill is not recognised as an asset.
Goodwill is tested for impairment on an annual basis.
1.6 Intangible assets
An intangible asset is recognised when:
• it is probable that the expected future economic benefits that are attributable to the asset will flow to the entity; and
• the cost of the asset can be measured reliably.
Intangible assets are initially recognised at cost.
An intangible asset arising from development (or from the development phase of an internal project) is recognised when:
• it is technically feasible to complete the asset so that it will be available for use or sale.• there is an intention to complete and use or sell it.• there is an ability to use or sell it.• it will generate probable future economic benefits.• there are available technical, financial and other resources to complete the development and to use or
sell the asset.• the expenditure attributable to the asset during its development can be measured reliably.
Intangible assets are carried at cost less any accumulated amortisation and any impairment losses.
An intangible asset is regarded as having an indefinite useful life when, based on all relevant factors, there is no foreseeable limit to the period over which the asset is expected to generate net cash inflows. Amortisation is not provided for these intangible assets, but they are tested for impairment annually and whenever there is an indication that the asset may be impaired. For all other intangible assets amortisation is provided on a straight line basis over their useful life.
The amortisation period and the amortisation method for intangible assets are reviewed every period-end.
Amortisation is provided to write down the intangible assets, on a straight line basis, to their residual values as follows:
Item Useful life Patents and trademarks Indefinite
1.7 Investments in subsidiaries
Group annual financial statements
The group annual financial statements include those of the holding company and its subsidiaries. The results of the subsidiaries are included from the effective date of acquisition.
for the year ended 28 February 2010
accoUntInG PolIcIes CONTINUED
PAGE 26 PAGE 27
On acquisition the group recognises the subsidiary’s identifiable assets, liabilities and contingent liabilities at fair value, except for those assets classified as held-for-sale, which are recognised at fair value less cost to sell.
Company annual financial statements
In the company’s separate annual financial statements, investments in subsidiaries are carried at cost less any accumulated impairment.
The cost of an investment in a subsidiary is the aggregate of:
• the fair value, at the date of exchange, of assets given, liabilities incurred or assumed, and equity instruments issued by the company; plus
• any costs directly attributable to the purchase of the subsidiary.
An adjustment to the cost of a business combination contingent on future events is included in the cost of the combination if the adjustment is probable and can be measured reliably.
All intercompany transactions are at arm length. All intercompany transactions and balances are eliminated on consolidation.
1.8 Financial instruments
Classification
The group classifies financial assets and financial liabilities into the following categories:
• Financial assets at fair value through profit or loss – designated• Loans and receivables• Financial liabilities measured at amortised cost
Classification depends on the purpose for which the financial instruments were obtained / incurred and takes place at initial recognition. Classification is re-assessed on an annual basis, except for derivatives and financial assets designated as at fair value through profit or loss, which shall not be classified out of the fair value through profit or loss category.
Initial recognition and measurement
Financial instruments are recognised initially when the group becomes a party to the contractual provisions of the instruments.
The group classifies financial instruments, or their component parts, on initial recognition as a financial asset, a financial liability or an equity instrument in accordance with the substance of the contractual arrangement.
Financial instruments are measured initially at fair value, except for equity investments for which a fair value is not determinable, which are measured at cost and are classified as available-for-sale financial assets.
For financial instruments which are not at fair value through profit or loss, transaction costs are included in the initial measurement of the instrument.
Fair value determination
The fair values of quoted investments are based on current bid prices. If the market for a financial asset is not active (and for unlisted securities), the group establishes fair value by using valuation techniques. These include the use of recent arm’s length transactions, reference to other instruments that are substantially the same, discounted cash flow analysis, and option pricing models making maximum use of market inputs and relying as little as possible on entity-specific inputs.
Classifying fair value measurements can be made using the following hierarchy levels that reflects the significance of the inputs used in in making the measurements:
• Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities;• Level 2: Inputs other than quoted prices included within level 1 that are observable for the asset or liability,
either directly (ie as prices) or indirectly (ie derived from prices);• Level 3: Inputs for the asset or liability that are not based on observable market data (unobservable inputs).
The level in the fair value hierarchy within which the fair value measurement is categorised in its entirety shall be determined on the basis of the lowest level input that is significant to the fair value measurement in its entirety.
for the year ended 28 February 2010
accoUntInG PolIcIes CONTINUED
PAGE 28 PAGE 29
For this purpose, the significance of an input is assessed against the fair value measurement in its entirety. If a fair value measurement uses observable inputs that require significant adjustment based on unobservable inputs, that measurement is a Level 3 measurement. Assessing the significance of a particular input to the fair value measurement in its entirety requires judgement, considering factors specific to the asset or liability.
Financial instruments designated as at fair value through profit or loss
Investments are measured initially and subsequently at fair value, gains and losses arising from changes in fair value are included in profit or loss for the period.
Loans to (from) group companies
These include loans to (from) holding companies, fellow subsidiaries, subsidiaries, joint ventures and associates and are recognised initially at fair value plus direct transaction costs.
Subsequently these loans are measured at amortised cost using the effective interest rate method, less any impairment loss recognised to reflect irrecoverable amounts.
On loans receivable an impairment loss is recognised in profit or loss when there is objective evidence that it is impaired. The impairment is measured as the difference between the investment’s carrying amount and the present value of estimated future cash flows discounted at the effective interest rate computed at initial recognition.
Impairment losses are reversed in subsequent periods when an increase in the investment’s recoverable amount can be related objectively to an event occurring after the impairment was recognised, subject to the restriction that the carrying amount of the investment at the date the impairment is reversed shall not exceed what the amortised cost would have been had the impairment not been recognised.
Loans to (from) group companies are classified as loans and receivables.
Trade receivables
Trade receivables are measured at initial recognition at fair value, and are subsequently measured at amortised cost using the effective interest rate method. Appropriate allowances for estimated irrecoverable amounts are recognised in profit or loss when there is objective evidence that the asset is impaired. Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial reorganisation, and default or delinquency in payments are considered indicators that the trade receivable is impaired. The allowance recognised is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows discounted at the effective interest rate computed at initial recognition.
The carrying amount of the asset is reduced through the use of an allowance account, and the amount of the loss is recognised in profit or loss within operating expenses. When a trade receivable is uncollectable, it is written off against the allowance account for trade receivables. Subsequent recoveries of amounts previously written off are credited against operating expenses in profit or loss.
Trade and other receivables are classified as loans and receivables.
Trade and other payables
Trade payables are initially measured at fair value, and are subsequently measured at amortised cost, using the effective interest rate method.
Cash and cash equivalents
Cash and cash equivalents comprise cash on hand and demand deposits, and other short-term highly liquid investments that are readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value. These are initially and subsequently recorded at fair value.
Bank overdraft and borrowings
Bank overdrafts and borrowings are initially measured at fair value, and are subsequently measured at amortised cost, using the effective interest rate method. Any difference between the proceeds (net of transaction costs) and the settlement or redemption of borrowings is recognised over the term of the borrowings in accordance with the group’s accounting policy for borrowing costs.
Other financial liabilities are measured initially at fair value and subsequently at amortised cost, using the effective interest rate method.
accoUntInG PolIcIes CONTINUED
for the year ended 28 February 2010
PAGE 28 PAGE 29
1.9 TAX
Current tax assets and liabilities
Current tax for current and prior periods is, to the extent unpaid, recognised as a liability. If the amount already paid in respect of current and prior periods exceeds the amount due for those periods, the excess is recognised as an asset.
Current tax liabilities (assets) for the current and prior periods are measured at the amount expected to be paid to (recovered from) the tax authorities, using the tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period.
Deferred tax assets and liabilities
A deferred tax liability is recognised for all taxable temporary differences, except to the extent that the deferred tax liability arises from:
• the initial recognition of goodwill; or• the initial recognition of an asset or liability in a transaction which:
– is not a business combination; and – at the time of the transaction, affects neither accounting profit nor taxable profit (tax loss).
A deferred tax liability is recognised for all taxable temporary differences associated with investments in subsidiaries, branches and associates, and interests in joint ventures, except to the extent that both of the following conditions are satisfied:
• the parent, investor or venturer is able to control the timing of the reversal of the temporary difference; and• it is probable that the temporary difference will not reverse in the foreseeable future.
A deferred tax asset is recognised for all deductible temporary differences to the extent that it is probable that taxable profit will be available against which the deductible temporary difference can be utilised, unless the deferred tax asset arises from the initial recognition of an asset or liability in a transaction that:
• is not a business combination; and• at the time of the transaction, affects neither accounting profit nor taxable profit (tax loss).
A deferred tax asset is recognised for all deductible temporary differences arising from investments in subsidiaries, branches and associates, and interests in joint ventures, to the extent that it is probable that:
• the temporary difference will reverse in the foreseeable future; and• taxable profit will be available against which the temporary difference can be utilised.
A deferred tax asset is recognised for the carry forward of unused tax losses and unused STC credits to the extent that it is probable that future taxable profit will be available against which the unused tax losses and unused STC credits can be utilised.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period.
Tax expenses
Current and deferred taxes are recognised as income or an expense and included in profit or loss for the period, except to the extent that the tax arises from:
• a transaction or event which is recognised, in the same or a different period, to other comprehensive income, • a transaction or event which is recognised, in the same or a different period, directly in equity, or• a business combination.
Current tax and deferred taxes are charged or credited to other comprehensive income if the tax relates to items that are credited or charged, in the same or a different period, to other comprehensive income.
Current tax and deferred taxes are charged or credited directly to equity if the tax relates to items that are credited or charged, in the same or a different period, directly in equity.
for the year ended 28 February 2010
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Secondary tax on companies is provided in respect of expected dividend payments net of dividends received or receivable and is recognised as a taxation charge for the year.
1.10 Inventories
Inventories are measured at the lower of cost and net realisable value.
Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale.
The cost of inventories comprises all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition.
The cost of inventories is assigned using the first-in, first-out (FIFO) formula. The same cost formula is used for all inventories having a similar nature and use to the entity.
When inventories are sold, the carrying amount of those inventories are recognised as an expense in the period in which the related revenue is recognised. The amount of any write-down of inventories to net realisable value and all losses of inventories are recognised as an expense in the period the write-down or loss occurs. The amount of any reversal of any write-down of inventories, arising from an increase in net realisable value, are recognised as a reduction in the amount of inventories recognised as an expense in the period in which the reversal occurs.
1.11 Impairment of assets
The group assesses at each end of the reporting period whether there is any indication that an asset may be impaired. If any such indication exists, the group estimates the recoverable amount of the asset.
Irrespective of whether there is any indication of impairment, the group also:
• tests intangible assets with an indefinite useful life or intangible assets not yet available for use for impairment annually by comparing its carrying amount with its recoverable amount. This impairment test is performed during the annual period and at the same time every period.
• tests goodwill acquired in a business combination for impairment annually.
If there is any indication that an asset may be impaired, the recoverable amount is estimated for the individual asset. If it is not possible to estimate the recoverable amount of the individual asset, the recoverable amount of the cash-generating unit to which the asset belongs is determined.
The recoverable amount of an asset or a cash-generating unit is the higher of its fair value less costs to sell and its value in use.
If the recoverable amount of an asset is less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount. That reduction is an impairment loss.
An impairment loss of assets carried at cost less any accumulated depreciation or amortisation is recognised immediately in profit or loss. Any impairment loss of a revalued asset is treated as a revaluation decrease.
Goodwill acquired in a business combination is, from the acquisition date, allocated to each of the cash-generating units, or groups of cash-generating units, that are expected to benefit from the synergies of the combination.
An impairment loss is recognised for cash-generating units if the recoverable amount of the unit is less than the carrying amount of the units. The impairment loss is allocated to reduce the carrying amount of the assets of the unit in the following order:
• first, to reduce the carrying amount of any goodwill allocated to the cash-generating unit and• then, to the other assets of the unit, pro rata on the basis of the carrying amount of each asset in the unit.
An entity assesses at each reporting date whether there is any indication that an impairment loss recognised in prior periods for assets other than goodwill may no longer exist or may have decreased. If any such indication exists, the recoverable amounts of those assets are estimated.
The increased carrying amount of an asset other than goodwill attributable to a reversal of an impairmentloss does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset in prior periods.
accoUntInG PolIcIes CONTINUED
for the year ended 28 February 2010
PAGE 30 PAGE 31
A reversal of an impairment loss of assets carried at cost less accumulated depreciation or amortisation other
than goodwill is recognised immediately in profit or loss. Any reversal of an impairment loss of a revalued asset is treated as a revaluation increase.
1.12 Stated capital and equity
An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities.
If the group reacquires its own equity instruments, the consideration paid, including any directly attributable incremental costs (net of income taxes) on those instruments are deducted from equity until the shares are cancelled or reissued. No gain or loss is recognised in profit or loss on the purchase, sale, issue or cancellation of the group’s own equity instruments. Consideration paid or received shall be recognised directly in equity.
1.13 Employee benefits
Short-term employee benefits
The cost of short-term employee benefits, (those payable within 12 months after the service is rendered, such as paid vacation leave and sick leave, bonuses, and non-monetary benefits such as medical care), are recognised in the period in which the service is rendered and are not discounted.
The expected cost of compensated absences is recognised as an expense as the employees render services that increase their entitlement or, in the case of non-accumulating absences, when the absence occurs.
The expected cost of profit sharing and bonus payments is recognised as an expense when there is a legal or constructive obligation to make such payments as a result of past performance.
Defined contribution plans
Payments to defined contribution retirement benefit plans are charged as an expense as they fall due.
1.14 Provisions and contingencies
Provisions are recognised when:
• the group has a present obligation as a result of a past event;• it is probable that an outflow of resources embodying economic benefits will be required to settle the
obligation; and• a reliable estimate can be made of the obligation.
The amount of a provision is the present value of the expenditure expected to be required to settle the obligation.
Where some or all of the expenditure required to settle a provision is expected to be reimbursed by another party, the reimbursement shall be recognised when, and only when, it is virtually certain that reimbursement will be received if the entity settles the obligation. The reimbursement shall be treated as a separate asset. The amount recognised for the reimbursement shall not exceed the amount of the provision.
Provisions are not recognised for future operating losses.
If an entity has a contract that is onerous, the present obligation under the contract shall be recognised and measured as a provision.
Contingent assets and contingent liabilities are not recognised. Contingencies are disclosed in note 35.
1.15 Revenue
Revenue from the sale of goods is recognised when all the following conditions have been satisfied:
• the group has transferred to the buyer the significant risks and rewards of ownership of the goods;• the group retains neither continuing managerial involvement to the degree usually associated with ownership
nor effective control over the goods sold;• the amount of revenue can be measured reliably;
• it is probable that the economic benefits associated with the transaction will flow to the group; and
• the costs incurred or to be incurred in respect of the transaction can be measured reliably.
for the year ended 28 February 2010
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PAGE 32 PAGE 33
When the outcome of a transaction involving the rendering of services can be estimated reliably, revenue associated with the transaction is recognised by reference to the stage of completion of the transaction at the end of the reporting period. The outcome of a transaction can be estimated reliably when all the following conditions are satisfied:
• the amount of revenue can be measured reliably;• it is probable that the economic benefits associated with the transaction will flow to the group;• the stage of completion of the transaction at the end of the reporting period can be measured reliably; and• the costs incurred for the transaction and the costs to complete the transaction can be measured reliably.
When the outcome of the transaction involving the rendering of services cannot be estimated reliably, revenue shall be recognised only to the extent of the expenses recognised that are recoverable.
Revenue is measured at the fair value of the consideration received or receivable and represents the amounts receivable for goods and services provided in the normal course of business, net of trade discounts and volume rebates, and value added tax.
Interest is recognised, in profit or loss, using the effective interest rate method.
Dividends are recognised, in profit or loss, when the company’s right to receive payment has been established.
1.16 Cost of sales
When inventories are sold, the carrying amount of those inventories is recognised as an expense in the period in which the related revenue is recognised. The amount of any write-down of inventories to net realisable value and all losses of inventories are recognised as an expense in the period the write-down or loss occurs. The amount of any reversal of any write-down of inventories, arising from an increase in net realisable value, is recognised as a reduction in the amount of inventories recognised as an expense in the period in which the reversal occurs.
The related cost of providing services recognised as revenue in the current period is included in cost of sales.
Contract costs comprise:
• costs that relate directly to the specific contract;• costs that are attributable to contract activity in general and can be allocated to the contract; and• such other costs as are specifically chargeable to the customer under the terms of the contract.
1.17 Borrowing costs
All other borrowing costs are recognised as an expense in the period in which they are incurred.
1.18 Mining and exploration assets
A mining and exploration asset is recognised when:
• the entity controls the asset as a result of past events;• it is probable that future economic benefits associated with the asset will flow to the entity; and• the fair value or cost of the asset can be measured reliably.
Mining and exploration assets are initially recognised at cost.
Mining and exploration assets are carried at cost less any accumulated amortisation and any impairment losses.
Expenditures associated with finding specific resources are classified as mining and exploration assets when the existence, technical feasibility and commercial viability at extracting a mineral resource are demonstrable.
Expenditure related to the development of mineral resources are not capitalised but recognised in profit or loss when they are incurred. Amortisation is provided to write down the mining and exploration assets, on a straight line basis over 12 months.
1.19 Leases
A lease is classified as a finance lease if it transfers substantially all the risks and rewards incidental to ownership. A lease is classified as an operating lease if it does not transfer substantially all the risks and rewards incidental to ownership.
accoUntInG PolIcIes CONTINUED
for the year ended 28 February 2010
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accoUntInG PolIcIes CONTINUED
for the year ended 28 February 2010
Finance leases – lessee Finance leases are recognised as assets and liabilities in the statement of financial position at amounts equal to
the fair value of the leased property or, if lower, the present value of the minimum lease payments. The corresponding liability to the lessor is included in the statement of financial position as a finance lease obligation.
The lease payments are apportioned between the finance charge and reduction of the outstanding liability.The finance charge is allocated to each period during the lease term so as to produce a constant periodic rate of on the remaining balance of the liability.
Operating leases – lessee Operating lease payments are recognised as an expense on a straight-line basis over the lease term. The
difference between the amounts recognised as an expense and the contractual payments are recognised as an operating lease asset. This liability is not discounted.
Any contingent rents are expensed in the period they are incurred.
1.20 Post retirement medical aid contributions
The group has no commitments in respect of medical aid contributions of pensioners that retired after September 1994. Contributions are made in respect of pensioners prior to the above date currently amounting to R3 867 per month. The premium per member is a fixed amount irrespective of medical fund increases and is at all times payable in the sole discretion of the company.
1.21 Instalment sale obligation
Instalment sales are recognised as assets and liabilities in the statement of financial position at amounts equal to the fair value of the assets or, if lower, the present value of the minimum instalment sale payments. The corresponding liability to the borrower is included in the balance sheet as an instalment sale obligation.
The discount rate used in calculating the present value of the minimum instalment sale payments is the interest rate implicit in the instalment sale.
The instalment sale payments are apportioned between the finance charge and reduction of the outstanding liability. The finance charge is allocated to each period during the instalment sale term so as to produce a constant periodic rate of on the remaining balance of the liability.
1.22 Statement of cash flows
The statement of cash flows is prepared on the direct method, whereby the major classes of gross cash receipts and gross cash payments are disclosed.
For purposes of the statement of cash flows, cash and cash equivalents comprise cash on hand and deposits held on call with banks net of bank overdrafts, all of which are available for use by the company unless otherwise stated.
Investing and financing operations that do not require the use of cash and cash equivalents are excluded from the statement of cash flows.
2. NEW STANDARDS AND INTERPRETATIONS
2.1 Standards and interpretations effective and adopted in the current year
In the current year, the group and company have adopted the following standards and interpretations that are effective for the current financial year and that are relevant to its operations:
IAS 1 (Revised) Presentation of Financial Statements The main revisions to IAS 1:
• Require the presentation of non-owner changes in equity either in a single statement of comprehensive income or in an income statement and statement of comprehensive income.
• Require the presentation of a statement of financial position at the beginning of the earliest comparative period whenever a retrospective adjustment is made. This requirement includes related notes.
• Require the disclosure of income tax and reclassification adjustments relating to each component of other comprehensive income. The disclosures may be presented on the face of the statement of comprehensive income or in the notes.
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notes to tHe annUal fInancIal stateMents
• Allow dividend presentations to be made either in the statement of changes in equity or in the notes only.• Have changed the titles to some of the financial statement components, where the ‘balance sheet’ becomes
the ‘statement of financial position’ and the ‘cash flow statement’ becomes the ‘statement of cash flows.’ These new titles will be used in International Financial Reporting Standards, but are not mandatory for use in financial statements.
The effective date of the standard is for years beginning on or after 01 January 2009.
The group and company have adopted the standard for the first time in the 2010 annual financial statements.
The adoption of this standard has not had a material impact on the results of the group and company, but has resulted in more disclosure than would have previously been provided in the annual financial statements.
May 2008 Annual Improvements to IFRS’s: Amendments to IAS 36 Impairment of Assets
The amendment requires disclosures of estimates used to determine the recoverable amount of cash-generating units containing goodwill or intangible assets with indefinite useful lives. Specifically, the following disclosures are required when discounted cash flows are used to estimate fair value less costs to sell:
• The period over which management has projected cash flows;• The growth rate used to extrapolate cash flow projections; and• The discount rate(s) applied to the cash flow projections.
The effective date of the amendment is for years beginning on or after 01 January 2009.
The group and company have adopted the amendment for the first time in the 2010 annual financial statements.
The adoption of this amendment has not had a material impact on the results of the group and company, but has resulted in more disclosure than would have previously been provided in the annual financial statements.
Amendments to IFRS 7: Financial Instruments: Disclosures – Improving Disclosures about Financial Instruments
The amendment requires additional disclosures about fair value measurement, including separating fair value measures into a hierarchy. The amendments also require liquidity risk disclosure to be separated between non-derivative financial liabilities and derivative financial liabilities.
The effective date of the amendment is for years beginning on or after 01 January 2009.
The group and company have adopted the amendment for the first time in the 2010 annual financial statements.
The adoption of this amendment has not had a material impact on the results of the group and company, but has resulted in more disclosure than would have previously been provided in the annual financial statements.
2.2 Standards and interpretations not yet effective
The group and company have chosen not to early adopt the following standards and interpretations, which have been published and are mandatory for the group and company’s accounting periods beginning on or after 01 March 2010 or later periods:
IFRS 3 (Revised) Business Combinations
The revisions to IFRS 3 Business combinations require:
• Acquisition costs to be expensed.• Non-controlling interest to either be calculated at fair value or at their proportionate share of the net
identifiable assets of the acquiree.• Contingent consideration to be included in the cost of the business combination without further adjustment
to goodwill, apart from measurement period adjustments.• All previous interests in the acquiree to be remeasured to fair value at acquisition date when control is
achieved in stages, and for the fair value adjustments to be recognised in profit or loss.• Goodwill to be measured as the difference between the acquisition date fair value of consideration paid,
non-controlling interest and fair value of previous shareholding and the fair value of the net identifiable assets of the acquiree.
• The acquirer to reassess, at acquisition date, the classification of the net identifiable assets of the acquiree, except for leases and insurance contracts.
for the year ended 28 February 2010
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for the year ended 28 February 2010
• Contingent liabilities of the acquiree to only be included in the net identifiable assets when there is a present obligation with respect to the contingent liability.
The effective date of the standard is for years beginning on or after 01 July 2009.
The group and company expects to adopt the standard for the first time in the 2011 annual financial statements.
It is unlikely that the standard will have a material impact on the group and company’s annual financial statements.
IAS 27 (Amended) Consolidated and Separate Financial Statements
The revisions require:
• Losses of the subsidiary to be allocated to non-controlling interest, even if they result in the non-controlling interest being a debit balance.
• Changes in level of control without loss of control to be accounted for as equity transactions, without any gain or loss being recognised or any remeasurement of goodwill.
• When there is a change in the level of control without losing control, the group is prohibited from making reclassification adjustments.
• When control is lost, the net identifiable assets of the subsidiary as well as non-controlling interest and goodwill are to be derecognised. Any remaining investment is remeasured to fair value at the date on which control is lost, and a gain or loss on loss of control is recognised in profit or loss.
The effective date of the amendment is for years beginning on or after 01 July 2009.
The group and company expects to adopt the amendment for the first time in the 2011 annual financial statements.
It is unlikely that the amendment will have a material impact on the group and company’s annual financial statements.
IAS 7 Statement of Cash Flows: Consequential amendments due to IAS 27 (Amended) Consolidated and Separate
Financial Statements
Cash flows arising from changes in level of control, where control is not lost, are equity transactions and are therefore accounted for as cash flows from financing transactions.
The effective date of the amendment is for years beginning on or after 01 July 2009.
The group and company expects to adopt the amendment for the first time in the 2011 annual financial statements.
It is unlikely that the amendment will have a material impact on the group and company’s annual financial statements.
IAS 12 Income Taxes – consequential amendments due to IAS 27 (Amended) Consolidated and Separate Financial
Statements
The amendment is as a result of amendments to IAS 27 Consolidate and Separate Financial Statements. The amendment refers to situations where a subsidiary, on acquisition date, did not recognise a deferred tax asset in relation to deductible temporary differences, because, for example, there may not have been sufficient future taxable profits against which to utilise the deductible temporary differences. If the deferred tax asset subsequently becomes recognisable, the amendment now requires that the deferred tax asset should be recognised against goodwill (and profit or loss to the extent that it exceeds goodwill), only if it results from information in the measurement period about circumstances that existed at acquisition date. No adjustment may be made to goodwill for information outside of the measurement period.
The effective date of the amendment is for years beginning on or after 01 July 2009.
The group and company expects to adopt the amendment for the first time in the 2011 annual financial statements.
It is unlikely that the amendment will have a material impact on the group and company’s annual financial statements.
IFRIC 17 – Distribution of Non-cash Assets to Owners
The interpretation provides guidance on accounting for non-reciprocal distributions of non-cash assets to owners, or distributions where owners have a choice between a cash or non-cash distribution. The distribution is to be recognised as a dividend on the date that the dividend has been appropriately authorised and is no
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for the year ended 28 February 2010
longer subject to the discretion of the entity, and measured at the fair value of the assets to be distributed. The carrying amount of the dividend payable shall be reviewed at each reporting date and on settlement date to ensure it reflects fair value. Changes in measurement are recognised in equity as adjustments to the amount of the distribution. Additional disclosures are required.
The effective date of the interpretation is for years beginning on or after 01 July 2009.
The group and company expects to adopt the interpretation for the first time in the 2011 annual financial statements.
It is unlikely that the interpretation will have a material impact on the group and company’s annual financial statements.
IFRIC 18 – Transfers of Assets From Customers
The interpretation applies to circumstances where entities receive assets from customers to connect them to a network and/or to provide them with certain commodities, for example electricity, resulting from connection to the network. It also applies where the customer provides the entity with cash to construct such assets. It does not apply to government grants or to agreements within the scope of IFRIC 12 Service Concession Arrangements. If the item meets the definition of an asset to the entity, it is to be recognised at fair value. The corresponding credit shall be recognised as revenue and shall be allocated to the separately identifiable services which are provided, i.e the connection service and/or provision of access to commodities service. The revenue recognised for each service shall be based on the recognition criteria of IAS 18 Revenue.
The effective date of the interpretation is for years beginning on or after 01 July 2009.
The group and company expects to adopt the interpretation for the first time in the 2011 annual financial statements.
It is unlikely that the interpretation will have a material impact on the group and company’s annual financial statements.
2009 Annual Improvements Project: Amendments to IFRS 8 Operating Segments
Entities are only required to report segment assets if they are regularly reported to the chief operating decision maker.
The effective date of the amendment is for years beginning on or after 01 January 2010.
The group and company expects to adopt the amendment for the first time in the 2011 annual financial statements.
It is unlikely that the amendment will have a material impact on the group and company’s annual financial statements.
2009 Annual Improvements Project: Amendments to IAS 1 Presentation of Financial Statements
The amendment clarifies that a liability which could, at the option of the counterparty, result in its settlement by the issue equity instruments, does not affect its classification as current or non-current.
The effective date of the amendment is for years beginning on or after 01 January 2010.
The group and company expects to adopt the amendment for the first time in the 2011 annual financial statements.
It is unlikely that the amendment will have a material impact on the group and company’s annual financial statements.
2009 Annual Improvements Project: Amendments to IAS 7 Statement of Cash Flows
The amendment provides that expenditure may only be classified as ‘cash flows from investing activities’ if it resulted in the recognition of an asset on the statement of financial position.
The effective date of the amendment is for years beginning on or after 01 January 2010.
The group and company expects to adopt the amendment for the first time in the 2011 annual financial statements.
It is unlikely that the amendment will have a material impact on the group and company’s annual financial statements.
2009 Annual Improvements Project: Amendments to IAS 17 Leases
The amendment removes the guidance that leases of land, where title does not transfer, are operating leases.
The amendment therefore requires that lease classification for land be assessed in the same manner as for all
leases. The amendment is to be applied retrospectively, unless the information is not available. In these cases,
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for the year ended 28 February 2010
existing leases shall be reconsidered based on facts and circumstances existing at the date of adoption of the amendment. The lease asset and lease liability shall, in these cases be recognised at their fair values on that date, with any difference in those fair values recognised in retained earnings.
The effective date of the amendment is for years beginning on or after 01 January 2010.
The group and company expects to adopt the amendment for the first time in the 2011 annual financial statements.
It is unlikely that the amendment will have a material impact on the group and company’s annual financial statements.
2009 Annual Improvements Project: Amendments to IAS 36 Impairment of Assets
The amendment now requires that, for the purpose of goodwill testing, each group of units to which goodwill is allocated shall not be larger than an operating segment as defined in paragraph 5 of IFRS 8 Operating Segments. Thus the determination is now required to be made before operating segments are aggregated.
The effective date of the amendment is for years beginning on or after 01 January 2010.
The group and company expects to adopt the amendment for the first time in the 2011 annual financial statements.
It is unlikely that the amendment will have a material impact on the group and company’s annual financial statements.
2009 Annual Improvements Project: Amendments to IAS 38 Intangible Assets
The amendment provides guidance on the measurement of intangible assets acquired in a business combination.
The effective date of the amendment is for years beginning on or after 01 July 2009.
The group and company expects to adopt the amendment for the first time in the 2011 annual financial statements.
It is unlikely that the amendment will have a material impact on the group and company’s annual financial statements.
2009 Annual Improvements Project: Amendments to IAS 39 Financial Instruments: Recognition and Measurement
In terms of the amendment, forward contracts to buy or sell an acquiree that will result in a business combination in the future, are only exempt from the Standard if the term of the contract does not exceed that which is reasonably necessary to obtain the required approval and complete the transaction. The amendment further clarifies that in a cash flow hedge of a forecast transaction, gains or losses should be reclassified from equity to profit or loss in the period in which the hedged forecast cash flow affects profit or loss. The amendment also clarifies that a prepayment option is not closely related to the host contract unless the exercise price is approximately equal to the present value of the lost interest for the remaining term of the host contract.
The effective date of the amendment is for years beginning on or after 01 January 2010.
The group and company expects to adopt the amendment for the first time in the 2011 annual financial statements.
It is unlikely that the amendment will have a material impact on the group and company’s annual financial statements.
2009 Annual Improvements Project: Amendments to IFRIC 9 Reassessment of Embedded Derivatives
The amendment excludes from the scope of the Interpretation all embedded derivatives acquired in a business combination, in the combination of entities under common control or the formation of joint ventures.
The effective date of the amendment is for years beginning on or after 01 July 2009.
The group and company expects to adopt the amendment for the first time in the 2011 annual financial statements.
It is unlikely that the amendment will have a material impact on the group and company’s annual financial statements.
IFRS 9 Financial Instruments
New standard that forms the first part of a three-part project to replace IAS 39 Financial Instruments: Recognition and measurement.
The effective date of the standard is for years beginning on or after 01 January 2013.
The group and company expects to adopt the standard for the first time in the 2014 annual financial statements.
It is unlikely that the standard will have a material impact on the group and company’s annual financial statements.
IAS 10 Events after reporting period
Amendment resulting from the issue of IFRIC17.
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for the year ended 28 February 2010
The effective date of the amendment is for years beginning on or after 01 July 2009.
The group and company expects to adopt the amendment for the first time in the 2011 annual financial statements.
It is unlikely that the amendment will have a material impact on the group and company’s annual financial statements.
IAS 24 Related Party disclosures
Amendment resulting from the issue of IFRIC17.
Clarification of the definition of a related party.
The effective date of the amendment is for years beginning on or after 01 January 2011.
The group and company expects to adopt the amendment for the first time in the 2012 annual financial statements.
It is unlikely that the amendment will have a material impact on the group and company’s annual financial statements.
IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments
The effective date of the standard is for years beginning on or after 01 April 2010.
The group and company expects to adopt the standard for the first time in the 2012 annual financial statements.
It is unlikely that the standard will have a material impact on the company’s annual financial statements.
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for the year ended 28 February 2010
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2010
Carrying
value
R’000
2009
Carrying
value
R’000
2010
Carrying
value
R’000
2009
Carrying
value
R’000
3 INVESTMENT PROPERTIES
GroupInvestment properties 28 913 23 000 – –
Reconciliation of investment properties – Group 2010Opening
balance
R’000
Transfers
R’000
Fair value
adjustments
R’000
Total
R’000
Investment properties 23 000 710 5 203 28 913
Reconciliation of investment properties – Group 2009
Opening
balance
R’000
Fair value
adjustments
R’000
Total
R’000
Investment properties 11 700 11 300 23 000
GROUP COMPANYYear ended
28 Feb 2010
R’000
Year ended
28 Feb 2009
R’000
Year ended
28 Feb 2010
R’000
Year ended
28 Feb 2009
R’000
Details of property
Portion 41 and 93 (a portion of portion 29) of the farm Joubertsrust 310, Registration Division JS, Province of Mpumalanga, measuring 24,6372 hectares, held under title deed number T7859/1961Encumbered as security for a first mortgage bond in favour of Absa Bank Limited for the amount of R4 000 000.
Secured by a second surety mortgage bond in favour of the Industrial Development Corporation of South Africa Limited for the amount of R8 300 000.
– Costs and improvements before 1 October 2001 2 575 2 575 – –
– Fair value adjustment 2006 6 125 6 125 – –
– Fair value adjustment 2009 4 300 4 300 – –
13 000 13 000 – –
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GROUP COMPANY2010
R’000
2009
R’000
2010
R’000
2009
R’000
3 INVESTMENT PROPERTIES (continued)
Remaining extent the farm Uitspan 293, Registration Division JS, Mbombela Municipality, Province of Mpumalanga, measuring at 166,3489 hectares, held under title deed number T51310/1993
Encumbered by a first mortgage bond in favour of Absa Bank Limited for the amount of R6 300 000.
– Costs and revaluations before 1 October 2001 1 712 1 712 – –
– Fair value adjustment 2005 1 288 1 288 – –
– Fair value adjustment 2009 7 000 7 000 – –
– Fair value adjustment 2010 4 000 – –
14 000 10 000 – –
Remaining extent of portion 4 of the farmSpitskop 533, Kungwini Municipality,Province of Gauteng, measuring at173,8853 hectares, held under title deednumber T94138/2005
– Purchase price: 26 April 2005 710 – – –
– Fair value adjustment 2010 1 203 – – –
1 913 – – –
These assumptions are based on current market conditions known to directors.
A register containing the information required by paragraph 22(3) of Schedule 4 of the Companies Act is available for
inspection at the registered office of the company.
Details of valuation – Portion 4 of the farm Spitskop 533
The effective date of the revaluations was 21 May 2009. Revaluations were performed by an independent valuer,
Mr. HL Brandt (Professional Valuer), of Messrs. Herman Brandt Valuers Mpumalanga. Herman Brandt Valuers
Mpumalanga are not connected to the company and have recent experience in location and category of the investment
property being valued.
The valuation was based on open market value for existing use.
for the year ended 28 February 2010
notes to tHe annUal fInancIal stateMents CONTINUED
PAGE 40 PAGE 41
for the year ended 28 February 2010
notes to tHe annUal fInancIal stateMents CONTINUED
Group
Cost/
valuation
R’000
2010
Accumulated
depreciation
R’000
Carrying
value
R’000
Cost/
valuation
R’000
2009
Accumulated
depreciation
R’000
Carrying
value
R’000
4 PROPERTY, PLANT
AND EQUIPMENT
Buildings 26 938 (1 274) 25 664 12 223 (1 265) 10 958
Clay reserves 198 (198) – 198 (198) -
Furniture and fixtures 731 (495) 236 1 054 (583) 471
IT equipment 1 575 (979) 596 1 973 (1 243) 730
Land 8 817 – 8 817 17 981 – 17 981
Loose tools 6 (1) 5 202 (143) 59
Motor vehicles 1 921 (1 057) 864 2 187 (1 126) 1 061
Office equipment 166 (117) 49 115 (98) 17
Plant and machinery 46 057 (17 222) 28 835 40 873 (14 566) 26 307
Total 86 409 (21 343) 65 066 76 806 (19 222) 57 584
Reconciliation of property, plant and equipment – Group 2010OpeningBalance
R’000Additions
R’000Disposals
R’000Transfers
R’000
Revalua-tion
R’000
Depre-ciationR’000
TotalR’000
Buildings 10 958 – – 9 928 4 787 (9) 25 664Furniture and fixtures 471 – (112) – – (123) 236IT equipment 730 483 (105) – – (512) 596Land 17 981 – – (10 638) 1 474 – 8 817Loose tools 59 – (25) – – (29) 5Motor vehicles 1 061 236 (9) – – (424) 864Office equipment 17 51 – – – (19) 49Plant and machinery 26 307 6 140 (943) – 1 165 (3 834) 28 835
57 584 6 910 (1 194) (710) 7 426 (4 950) 65 066
Reconciliation of property, plant and equipment – Group 2009
OpeningBalance
R’000Additions
R’000Disposals
R’000Revaluation
R’000Depreciation
R’000Total
R’000
Buildings 5 159 23 – 5 910 (134) 10 958
Furniture and fixtures 535 65 – – (129) 471
IT equipment 907 348 – – (525) 730
Land 12 340 – – 5 641 – 17 981
Loose tools 92 6 – – (39) 59
Motor vehicles 1 360 88 – – (387) 1 061
Office equipment 27 3 – – (13) 17
Plant and machinery 18 985 13 559 (1 573) – (4 664) 26 307
39 405 14 092 (1 573) 11 551 (5 891) 57 584
PAGE 42 PAGE 43
for the year ended 28 February 2010
notes to tHe annUal fInancIal stateMents CONTINUED
GROUP COMPANY2010
R’000
2009
R’000
2010
R’000
2009
R’000
4 PROPERTY, PLANT AND
EQUIPMENT (continued)
Pledged as security
Brokrew Industrial (Proprietary) Limited Industrial Development Corporation of South Africa Limited: – Carrying value of plant and equipment to the value
of R7 000 000. Refer note 16 below.
Absa Bank Limited: – General notarial bond of R5 000 000 over all
moveable assets, excluding inventory.
Witbank Brickworks (1961) (Proprietary) LimitedNedbank Limited Security
R3 000 000 specific notarial bond with a general clause over all plant, equipment and inventory.
Revaluations
Witbank Brickworks (1961) (Proprietary) LimitedRevaluations were performed by an independent valuer, Mr HL Brandt, a qualified valuer, of Messrs Herman Brandt Valuers. Herman Brandt Valuers are not connected to the company and have recent experience in location and category of the investment property being valued.
These assumptions were based on current market conditions.
Details of properties
Portions 21, 38 and the remaining extent of portion 3 of the farm Eenzaamheid 534, Registration Division JR, Emalahleni Municipality, Province of Guateng, measuring at a total of 154,1759 hectares, held under title deed number T79856/2004
– Purchase price: 11 November 2003 8 300 8 300 – –
– Revaluation – 2009 1 850 1 850 – –
– Revaluation – 2010 6 261 – – –
16 411 10 150 – –
Remaining extent of portion 4 of the farm Spitskop 533
Remaining extent of portion 4 of the farm Spitskop 533, Registration Division JR, Kungwini Municipality, Province of Guateng, measuring at 173,8853 hectares, held under title deed number T94138/2005– Purchase price – 710 – –
PAGE 42 PAGE 43
for the year ended 28 February 2010
notes to tHe annUal fInancIal stateMents CONTINUED
GROUP COMPANY2010
R’000
2009
R’000
2010
R’000
2009
R’000
4 PROPERTY, PLANT AND
EQUIPMENT (continued)
Erf 189, Factoria Township, Registration Division IQ, Mogale City Municipality, Province of Gauteng, measuring 1,3220 hectares, held under title deed number T94138/2005
Encumbered as security for a first mortgage bond in favour of Nedbank Limited.
Encumbered as security for a second surety mortgage bond in favour of Industrial Development Corporation of South Africa Limited to the value of R14 000 000.
The fair value of this property, as per directors’ valuation, based on both current market value and future earnings was performed on 28 February 2010.
– Land at cost 710 710 – –
– Building at cost 1 453 1 453 – –
– Capitalised expenditure 2 837 2 837 – –
– Revaluation 2009 9 700 9 700 – –
14 700 14 700 – –
Erf 10 and 11 Factoria Township, Registration
Division IQ, Mogale City Municipality, Province
of Gauteng, measuring 8,192 square meters,
held under title deed number T94138/2005
Encumbered as security for a first mortgage bond
in favour of Nedbank Limited.
– Purchase price: 21 January 2008 2 620 2 620 – –
A register containing the information required by paragraph 22(3) of Schedule 4 of the Companies Act is available for
inspection at the registered office of the company.
PAGE 44 PAGE 45
GROUP
Cost
R’000
2010
Accumulated
impairment
R’000
Carrying
value
R’000
Cost
R’000
2009
Accumulated
impairment
R’000
Carrying
value
R’000
5 GOODWILL
Goodwill 2 309 (2 309) – 2 309 – 2 309
Reconciliation of goodwill – Group 2010
Opening
balance
R’000
Impairment
loss
R’000
Total
Goodwill 2 309 (2 309) –
Reconciliation of goodwill – Group 2009
Opening
balance
R’000
Impairment
loss
R’000
Total
Goodwill 3 874 (1 565) 2 309
BroKrew Industrial (Proprietary) Limited
Goodwill amounting to R2 308 774 (2009: R2 308 774) arose from the purchase of the trading operations of Airteknique
Africa (Proprietary) Limited.
The recoverable amount has been determined on the basis of value in-use calculations. The value in-use calculations use the cash flow projection method based on 2011 cash flow projections, discounted back at the weighted average cost of capital. The net asset value was then deducted from this value to give you the value in-use. Key assumptions used in the value in-use calculations include budgeted revenue streams. Such assumptions are based on historical results and adjusted for anticipated future growth.
Based on this calculation the recoverable amount was lower than the carrying value and was impaired in the current period.
GROUP
Cost/
valuation
R’000
2010
Accumulated
amortisation
R’000
Carrying
value
R’000
Cost/
valuation
R’000
2009
Accumulated
amortisation
R’000
Carrying
value
R’000
6 INTANGIBLE
ASSETS
Patents and trademarks
and other rights 2 500 – 2 500 2 500 – 2 500
Reconciliation of intangible assets – Group 2010Openingbalance
R’000TotalR’000
Patents and trademarks and other rights 2 500 2 500
for the year ended 28 February 2010
notes to tHe annUal fInancIal stateMents CONTINUED
PAGE 44 PAGE 45
GROUP
Opening
balance
R’000
Total
R’000
6 INTANGIBLE ASSETS (continued)
Reconciliation of intangible assets – Group 2009
Patents and trademarks and other rights 2 500 2 500
Other information
All patents, trademarks and other rights have been aquired and are still in use. There are no costs to be incurred
upon renewal of the assets and can be used indefinitely.
Name of company
%
holding
2010
%
holding
2009
Carrying
amount
2010
R’000
Carrying
amount
2009
R’000
7 INVESTMENTS IN SUBSIDIARIES
Witbank Brickworks (1961) (Proprietary) Limited 100 100 1 007 1 007
KNJ Industrial Holdings (Proprietary) Limited 100 100 47 035 47 035
Kairos Coal and Exploration (Proprietary) Limited 100 100 40 838 –
88 880 48 042
(88 880) (48 042)
Impairment of investment in subsidiaries – –
The carrying amounts of subsidiaries are shown net of impairment losses.
GROUP COMPANY2010
R’000
2009
R’000
2010
R’000
2009
R’000
8 INVENTORIES
Consignment stock 582 1 772 – –
Finished goods 4 756 5 982 – –
Inventories (write-downs) (600) (600) – –
Production supplies 802 885 – –
Raw materials, components 9 419 13 832 – –
Work in progress 18 901 25 982 – –
33 860 47 853 – –
A general provision for obsolescence and slow moving stock existed. There was no movement during the current
period as the provision is deemed adequate.
Inventory pledged as security
Witbank Brickworks (1961) (Proprietary) Limited
Nedbank Limited:
– R3 000 000 specific notarial bond with a general clause over all plant, equipment and inventory.
for the year ended 28 February 2010
notes to tHe annUal fInancIal stateMents CONTINUED
PAGE 46 PAGE 47
GROUP COMPANYYear ended
28 Feb 2010
R’000
Year ended
28 Feb 2009
R’000
Year ended
28 Feb 2010
R’000
Year ended
28 Feb 2009
R’000
9 OTHER FINANCIAL ASSETS
Loans and receivables
Nedbank Limited – 91 – –
Factoring loan secured with a discounting agreement over trade debtors in Brokrew Industrial (Proprietary) Limited.
Kairos Industrial Holdings Share Incentive Trust – – 152 136
The loan is unsecured, interest free and has no fixed terms of repayment.
– 91 152 136
Loans and receivables (impairments) – – (152) –
– 91 – 136
Current assets Loans and receivables – 91 – 136
Fair values of loans and receivablesLoans and receivables – 91 – 136
Loans and receivables impairedAs of 28 February 2010, loans and receivables of R152 (2009: R nil) were impaired and provided for
Less than 1 year – – 16 –
Over 5 years – – 136 136
Credit quality of other financial assetsThe credit quality of financial assets that are neither past due nor impaired can be assessed by reference to external credit ratings (if available) or to historical information about counterparty default rates.
Loans and receivablesCredit ratingLow – – – 136
for the year ended 28 February 2010
notes to tHe annUal fInancIal stateMents CONTINUED
PAGE 46 PAGE 47
GROUP COMPANYYear ended
28 Feb 2010
R’000
Year ended
28 Feb 2009
R’000
Year ended
28 Feb 2010
R’000
Year ended
28 Feb 2009
R’000
10 TRADE AND OTHER RECEIVABLES
Deposits 652 909 – –
Other receivables 33 83 – –
Prepayments 1 228 3 818 26 32
Sundry debtors – 109 – –
Trade receivables 45 763 46 469 – –
Value added taxation 4 246 1 049 – 3
Provision for doubtful debts (24 673) (890) – (3)
27 249 51 547 26 35
Trade and other receivables pledged as security
Brokrew Industrial (Proprietary) LimitedTrade debtors have been factored to Absa Bank Limited in order to obtain an invoice discounting facility to the value of R50 000 million. Refer note 16.
Witbank Brickworks (1961) (Proprietary) LimitedA cession in favour of Nedbank Limited, of all monies, present and future, owing by debtors.
A general cession in favour of Absa Limited of debtors.
Credit quality of trade and other receivablesThe credit quality of trade and other receivables that are neither past nor due nor impaired can be assessed by reference to historical repayment trends of the individual debtors.
None of the financial assets that are fully performing have been renegotiated in the last year.
Fair value of trade and other receivablesTrade and other receivables 27 249 51 547 26 35
Trade and other receivables past due but not impairedTrade and other receivables which are less than 3 months past due were reviewed by management and are not considered to be impaired. At 28 February 2010, R17 721 million (2009: R9 927 million) were past due but not impaired.
The ageing of amounts past due but not impaired is as follows:
1 month past due 7 622 2 611 – –
2 months past due 4 352 3 834 – –
3 months past due 5 747 3 482 – –
for the year ended 28 February 2010
notes to tHe annUal fInancIal stateMents CONTINUED
PAGE 48 PAGE 49
GROUP COMPANYYear ended
28 Feb 2010
R’000
Year ended
28 Feb 2009
R’000
Year ended
28 Feb 2010
R’000
Year ended
28 Feb 2009
R’000
10 TRADE AND OTHER RECEIVABLES (continued)
Trade and other receivables impairedAs at 28 February 2010, trade and other receivables of R24,673 million (2009: R890 000) were impaired and provided for.
Over 5 months 24 673 890 – –
Reconciliation of provision for impairment of trade and other receivablesOpening balance 890 238 – 3
Provision for impairment 23 783 705 – –
Unused amounts reversed – (53) – –
24 673 890 – 3
The creation and release of provision for impaired receivables has been included in operating expenses in profit or loss. Amounts charged to the allowance account are generally written off when there is no expectation of recovering additional cash.
11 MINING AND EXPLORATION ASSETS
Non-current assetOpening balance – 193 – –
Amortisation of cost capitalised – (193) – –
– – – –
Current assetOpening balance 2 666 1 271 – –
Costs capitalised in the current period 331 1 928 – –
Amortisation of cost capitalised (2 666) (533) – –
331 2 666 – –
12 CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist of:
Cash on hand 18 14 – –
Bank balances 3 934 2 584 14 2
Short term deposits 308 – – –
Bank overdraft (8 428) (8 736) – –
(4 168) (6 138) 14 2
Current assets 4 260 2 598 14 2
Current liabilities (8 428) (8 736) – –
(4 168) (6 138) 14 2
The group has been granted overdraft facilities of R10 million (2009: R10 million) from Absa Bank Limited.
Absa Bank Limited holds cross suretyship in certain subsidiary loans.
for the year ended 28 February 2010
notes to tHe annUal fInancIal stateMents CONTINUED
PAGE 48 PAGE 49
GROUP COMPANYYear ended
28 Feb 2010
R’000
Year ended
28 Feb 2009
R’000
Year ended
28 Feb 2010
R’000
Year ended
28 Feb 2009
R’000
12 CASH AND CASH EQUIVALENTS (continued)
The total amount of undrawn facilities available for
future operating activities and commitments 1 572 1 264 – –
Brokrew Industrial (Proprietary) LimitedAbsa Bank Limited
General notarial bond of R5 million over the moveable assets was pledged as security for overdraft facilities of R8 million
(2009: R8 million) of the company. At year end the overdraft amounted to R6,999 million (2009: R6,967 million).
Cross suretyship, including cessions of loan accounts between:
Kairos Industrial Holdings Limited;
KNJ Industrial (Proprietary) Limited;
Kairos Coal and Exploration (Proprietary) Limited;
Broseal Properties (Proprietary) Limited.
Witbank Brickworks (1961) (Proprietary) Limited
The company had the following arrangements with the banks:
Absa Bank Limited
The following secured facilities were granted to the company:
– Overdraft facility of R2 000 000.
– Absa Vehicle and Asset Finance Credit Line Facility of R4 991 000
– Term Loan of R4 000 000,
Secured as follows:
– 1st continuous covering mortgage bond for R4 000 000 over portion 41 and 93 of the farm Joubertsrust 310,
Registration Division JS, Province of Mpumalanga;
– General cession of debtors
– Limited surety for R6 000 000, including cession of loan account by Brokrew Industrial (Proprietary) Limited;
– Cross suretyship, including the cessions of loan accounts, in
Broseal Properties (Proprietary) Limited
Estlind Investments (Proprietary) Limited
Ten Cradock Avenue (Proprietary) Limited
Kairos Coal & Exploration (Proprietary) Limited
KNJ Industrial Holdings (Proprietary) Limited
Brokrew Industrial (Proprietary) Limited;
– Unlimited surety, including cession of loan account, by Kairos Industrial Holdings Limited;
– Unlimited surety, including cession of loan account, by KNJ Industrial Holdings Proprietary Limited;
– Cession of Royalty agreement between Kairos Coal & Exploration (Proprietary) Limited and Witbank Brickworks
(1961) (Proprietary) Limited for a minimum of R125 000 per month;
– Subordination of group loan accounts.
for the year ended 28 February 2010
notes to tHe annUal fInancIal stateMents CONTINUED
PAGE 50 PAGE 51
12 CASH AND CASH EQUIVALENTS (continued)
Nedbank Limited:
– Cession of debtors
– Cession of all plant, equipment and stock held at Witbank Brickworks, Old Middelburg Road.
– Unlimited suretyship's as follows:
Estlind Investments (Proprietary) Limited
Gedeelte 14 Van Elandspruit (Proprietary) Limited
Kairos Industrial Holdings Limited
Ten Cradock Avenue (Proprietary) Limited
Brokrew Industrial (Proprietary) Limited
– Limited suretyship’s as follows:
KNJ Industrial Holdings (Proprietary) Limited
– Other securities:
Pledge wholesale account of R135 741
– Guarantees:
Limited Guarantee of R103 100.
Credit quality of cash at bank and short term deposits, excluding cash on hand
The credit quality of cash at bank and short term deposits, excluding cash on hand that are neither past due
nor impaired can be assessed by reference to external credit ratings (if available) or historical information about
counterparty default rates.
GROUP COMPANYLoans and receivables Loans and receivables
Year ended
28 Feb 2010
R’000
Year ended
28 Feb 2009
R’000
Year ended
28 Feb 2010
R’000
Year ended
28 Feb 2009
R’000
13 FINANCIAL ASSETS BY CATEGORY
The accounting policies for financial instruments have
been applied to the line items below:
Other financial assets 91 136
Trade and other receivables 27 249 51 547 26 35
Cash and cash equivalents 4 260 2 598 14 2
31 509 54 236 40 173
for the year ended 28 February 2010
notes to tHe annUal fInancIal stateMents CONTINUED
PAGE 50 PAGE 51
GROUP COMPANYYear ended28 Feb 2010
R’000
Year ended28 Feb 2009
R’000
Year ended28 Feb 2010
R’000
Year ended28 Feb 2009
R’000
14 STATED CAPITAL
Authorised300 000 000 Ordinary no par value sharesReconciliation of number of shares issued:Reported as at 01 March 2009 252 107 252 107 252 107 252 107Treasury shares held by subsidiaries and special purpose entities (27 553) (27 553) – –
224 554 224 554 252 107 252 10747 892 974 unissued ordinary shares are under the control of the directors in terms of a resolution of members passed at the last annual general meeting. This authority remains in force until the next annual general meeting.
Carrying value of shares in issue
Ordinary 210 147 210 147 210 147 210 147Treasury shares held by subsidiaries and special purpose entities (9 406) (9 406) – –
200 741 200 741 210 147 210 147
15 REVALUATION RESERVE
Consists of the revaluation of property, plant and equipment
Property revaluation reserveOpening balance 8 963 499 – –
Witbank Brickworks (1961) (Proprietary) Limited 1 332 – – –Broseal Properties (Proprietary) Limited 7 631 499 – –
Revaluation 6 261 11 550 – –
Witbank Brickworks (1961) (Proprietary) Limited 6 261 1 850 – –Broseal Properties (Proprietary) Limited – 9 700 – –
Deferred tax on revaluation (1 547) (3 086) – –
Witbank Brickworks (1961) (Proprietary) Limited (1 547) (518) – –Broseal Properties (Proprietary) Limited – (2 568) – –
Closing balance 13 677 8 963 – –
Plant and machinery revaluation reserveOpening balance 3 972 5 116 – –
Witbank Brickworks (1961) (Proprietary) Limited 3 972 5 116 – –
Revaluation 1 165 – – –
Witbank Brickworks (1961) (Proprietary) Limited 1 165 – – –
Deferred tax on revaluation (326) – – –
Witbank Brickworks (1961) (Proprietary) Limited (326) – – –
Realisation due to assets disposed (1 280) (242) – –
Witbank Brickworks (1961) (Proprietary) Limited (1 280) (242) – –
Realisation through use (1 418) (902) – –
Witbank Brickworks (1961) (Proprietary) Limited (1 418) (902) – –
Closing balance 2 113 3 972 – –
Total revaluation reserves 15 790 12 935 – –
for the year ended 28 February 2010
notes to tHe annUal fInancIal stateMents CONTINUED
PAGE 52 PAGE 53
GROUP COMPANYYear ended
28 Feb 2010
R’000
Year ended
28 Feb 2009
R’000
Year ended
28 Feb 2010
R’000
Year ended
28 Feb 2009
R’000
16 OTHER FINANCIAL LIABILITIESHeld at amortised cost
Nedbank Limited 2 761 4 966 – –Secured by:Unrestricted surety incorporating a cession of loan by:– Broseal Properties (Proprietary) Limited– Estlind Investments (Proprietary) Limited– Kairos Industrial Holdings Limited– KNJ Industrial Holdings (Proprietary) Limited– Ten Cradock Avenue (Proprietary) Limited– Witbank Brickworks (1961) (Proprietary) Limited– Second mortgage bond for R3 000 000 over land
and buildings situated in Factoria, Krugersdorp.Repayable in monthly instalments of R230 058 (2009: R230 058), with a remaining period of 13 months, bearing interest at 10,50% (2009: 14,00%) linked to prime lending rate.
Absa Bank Limited 27 378 21 654 – –Factoring loan. This loan is secured with a discounting agreement over the trade debtors. Refer note 10.
Premium Credit SA (division of Insurance Outsourcing Managers (Proprietary) Limited) 455 390 – –Unsecured loan, bearing interest at 4,55% (2009: 5,20%) per annum and repayable in nine equal instalments of R76 410 (2009: R55 768).
Industrial Development Corporation of South Africa Limited 30 000 – – –Secured by:– Guarantee for the full value of the loan by Kairos
Industrial Holdings Limited.– Cession and pledge of shares in Brokrew Industrial
(Proprietary) Limited, held by Kairos Industrial Holdings Limited.
– General notarial bond over all the movable property of Brokrew Industrial (Proprietary) Limited for the amount of R7 000 000.
– Second surety mortgage bond over portion 41 and 93 of the Farm Joubertsrust 310, owned by Estlind Investments (Proprietary) Limited to the value of R8 300 000.
– Second surety mortgage bond over erf 189, Factoria, Krugersdorp, owned by Broseal Properties (Proprietary) Limited to the value of R14 000 000.
Repayable in 36 monthly instalments of R833 345, bearing interest at 1,5% above prime lending rate.
for the year ended 28 February 2010
notes to tHe annUal fInancIal stateMents CONTINUED
PAGE 52 PAGE 53
GROUP COMPANYYear ended
28 Feb 2010
R’000
Year ended
28 Feb 2009
R’000
Year ended
28 Feb 2010
R’000
Year ended
28 Feb 2009
R’000
16 OTHER FINANCIAL LIABILITIES (continued)
Held at amortised cost (continued)
Nedbank Limited Loan bears interest at prime overdraft rate less 1,5% calculated monthly in arrears. The first payment was due on 1 March 2009 and the remaining period of the loan is 96 months with monthly instalments of R22 556 per month. The loan is secured by a mortgage bond over Erf 10 and 11, Factoria, Krugersdorp, Registration Division IQ, Province of Gauteng.
1 537 1 658 – –
Absa Bank Limited – 1 200 – –
Loan bears interest at prime overdraft rate.
Absa Bank Limited Term Loan 3 038 – – –
Repayable in 42 monthly instalments of R119 311, with interest charged at prime overdraft rate plus 3% per annum.
65 169 29 868 – –
Non-current liabilitiesAt amortised cost 32 731 5 476 – –
32 731 5 476 – –
Current liabilitiesAt amortised cost 32 438 24 392 – –
32 438 24 392 – –
65 169 29 868 – –
Fair value of the financial liabilities
carried at amortised costBank loans 34 714 29 868 – –
Industrial Development Corporation
of South Africa Limited 30 000 – – –
Premium Credit SA (division of Insurance
Outsourcing Managers (Proprietary) Limited) 455 – – –
65 169 29 868 – –
for the year ended 28 February 2010
notes to tHe annUal fInancIal stateMents CONTINUED
PAGE 54 PAGE 55
GROUP COMPANYYear ended
28 Feb 2010
R’000
Year ended
28 Feb 2009
R’000
Year ended
28 Feb 2010
R’000
Year ended
28 Feb 2009
R’000
17 INSTALMENT SALE OBLIGATION
Minimum instalment sale payments due
– within one year 4 713 5 015 – –
– in second to fifth year inclusive 5 858 8 825 – –
10 571 13 840 – –
less: future finance charges (1 344) (2 348) – –
Present value of minimum instalment sale payments 9 227 11 492 – –
Present value of minimum instalment sale payments due
– within one year 3 902 3 924 – –
– in second to fifth year inclusive 5 325 7 568 – –
9 227 11 492 – –
Non-current liabilities 5 325 7 568 – –
Current liabilities 3 902 3 924 – –
9 227 11 492 – –
Brokrew Industrial (Proprietary) Limited
The average repayment term is 4 years and the average borrowing rate was 14,00% (2009:17,00%) linked to prime
lending rate. The average monthly payments were R219 915 (2009: R244 106).
The company's obligations under instalment sales are secured by assets with a book value of R8 448 313
(2009: R6 446 526). Refer note 4.
The company has a credit line of R7,0 million (2009: R7,0 million) with Absa Bank Limited.
Witbank Brickworks (1961) (Proprietary) Limited
The average repayment term was 3 – 5 years and the average borrowing rate ranged between 8,5% and 14,5%
(2009: 12,5% and 13,5%) linked to prime lending rate. The average monthly payments were R193 802
(2009: R221 025).
The company’s obligations under instalment sales are secured by assets with a book value of R4 940 586 (2009:
R5 597 567). Refer note 4
for the year ended 28 February 2010
notes to tHe annUal fInancIal stateMents CONTINUED
PAGE 54 PAGE 55
GROUP COMPANYYear ended
28 Feb 2010
R’000
Year ended
28 Feb 2009
R’000
Year ended
28 Feb 2010
R’000
Year ended
28 Feb 2009
R’000
18 DEFERRED TAX
Deferred tax asset/(liability)Revaluation, net of related depreciation (3 180) (2 620) – –
Recognised in other comprehensive income (2 980) (2 980) – –
(6 160) (5 600) – –
Reconciliation of deferred tax asset/(liability)At beginning of the year (5 600) (5 327) – –
Reduction due to rate change – 185 – –
Originating temporary differences (560) (1 130) – –
Tax losses utilised – 672 – –
(6 160) (5 600) – –
Recognition of deferred tax asset/liabilityAn entity shall disclose the amount of a deferred tax
asset and the nature of the evidence supporting its
recognition, when:
• the utilisation of the deferred tax asset is dependent
on future taxable profits in excess of the profits
arising from the reversal of existing taxable
temporary differences; and
• the entity has suffered a loss in either the current
or preceding period in the tax jurisdiction to which
the deferred tax asset relates.
Use and sales rateThe deferred tax rate applied to the fair value
adjustments of investment properties/ financial assets
is determined by the expected manner of recovery.
Where the expected recovery of the investment
property/financial assets is through sale the capital
gains tax rate of 14% (2009: 14%) is used. If the
expected manner of recovery is through indefinite use
the normal tax rate of 28% (2009: 28%) is applied.
19 LOANS FROM SHAREHOLDERS
Shefa Equity Holdings (Proprietary) Limited – (745) – –
for the year ended 28 February 2010
notes to tHe annUal fInancIal stateMents CONTINUED
PAGE 56 PAGE 57
GROUP COMPANYYear ended
28 Feb 2010
R’000
Year ended
28 Feb 2009
R’000
Year ended
28 Feb 2010
R’000
Year ended
28 Feb 2009
R’000
20 TRADE AND OTHER PAYABLES
Trade payables 66 551 43 754 25 30
Amounts received in advance 773 17 952 – –
Value added taxation 586 170 3 –
Accrued expenses – 1 485 – –
Payroll accruals 1 346 776 – –
Miscellaneous creditors 938 – – –
Deposits received 75 75 – –
Other payables 15 781 52 – –
86 050 64 264 28 30
Fair value of trade and other payablesTrade payables 86 050 64 264 28 27
In the ordinary course of business, management settle trade payables over 60 days, unless significant discounts
are offered.
Openingbalance Additions
Utilisedduring the
year Total
21 PROVISIONS
Reconciliation of provisions – Group 2010Workmen’s compensation 1 284 821 (802) 1 303Leave pay 3 289 4 081 (2 425) 4 945
4 573 4 902 (3 227) 6 248
Openingbalance Additions
Utilisedduring the
year
Reversedduring the
year Total
Reconciliation of provisions – Group 2009
Directors’ bonus 1 300 – (1 300) – –
Workmen's compensation 931 513 – (160) 1 284
Leave pay 3 228 3 964 – (3 903) 3 289
5 459 4 477 (1 300) (4 063) 4 573
for the year ended 28 February 2010
notes to tHe annUal fInancIal stateMents CONTINUED
PAGE 56 PAGE 57
GROUP COMPANYFinancial liabilities
at amortised cost
Financial liabilities
at amortised cost
Year ended
28 Feb 2010
R’000
Year ended
28 Feb 2009
R’000
Year ended
28 Feb 2010
R’000
Year ended
28 Feb 2009
R’000
22 FINANCIAL LIABILITIES BY CATEGORY
The accounting policies for financial instruments
have been applied to the line items below:
Other financial liabilities 65 169 29 868 – –
Trade and other payables 86 050 64 257 28 27
Bank overdraft 8 428 8 736 – –
Instalment sale obligation 9 227 11 492 – –
168 874 114 353 28 27
23 REVENUE
Sale of goods 238 843 246 555 – –
Rendering of services – – 338 300
238 843 246 555 338 300
24 COST OF SALES
Sale of goods
Cost of goods sold 192 579 138 469 – –
Manufacturing – depreciation and impairments 4 278 5 221 – –
Manufacturing – employee costs 41 175 56 751 – –
Manufacturing – expenses 28 136 28 015
266 168 228 456 – –
25 OPERATING LOSS
Operating loss for the year is stated after accounting
for the following:
Operating lease charges
Premises
• Contractual amounts 3 231 2 933 – –
Equipment
• Contractual amounts 3 473 3 027 – –
6 704 5 960 – –
(Loss)/profit on sale of property, plant and equipment (921) – 95 –
Impairment on businesses (subsidiaries, joint ventures
and associates) – – – 1 007
Impairment on loans to group companies – – – 578
Gain on write-off of loans to group companies – – (264) –
Impairment on other financial assets – – 152 –
Depreciation on property, plant and equipment 4 950 5 891 – –
Employee costs 62 815 74 571 6 40
for the year ended 28 February 2010
notes to tHe annUal fInancIal stateMents CONTINUED
PAGE 58 PAGE 59
GROUP COMPANYYear ended
28 Feb 2010
R’000
Year ended
28 Feb 2009
R’000
Year ended
28 Feb 2010
R’000
Year ended
28 Feb 2009
R’000
26 INVESTMENT REVENUE
Interest revenue
Bank 174 274 – –
Trade receivables 98 3 597 – –
Other interest 3 513 37 – –
3 785 3 908 – –
27 FAIR VALUE ADJUSTMENTS
Investment property (Fair value model) Refer to note 3. 5 203 11 300 – –
28 FINANCE COSTS
Bank 3 491 5 553 – –
Finance leases 1 260 1 033 – –
Late payment of tax 8 11 – –
Non-current borrowings 673 326 – –
Other interest paid 5 822 – – –
Other payables 182 – – –
Interest paid to shareholder 17 269 – –
Trade and other payables – 7 – –
Trade paybles 647 3 401 – –
12 100 10 600 – –
29 TAXATION
Major components of the tax (income) expenseCurrentLocal income tax – current period – 57 – –
Local income tax – recognised in current tax for prior periods (33) 205 – –
(33) 262 – –DeferredOriginating and reversing temporary differences (1 511) (2 708) – –
Changes in tax rates – (106) – –
Arising from prior period adjustments 198 – – –
(1 313) (2 814) – –
(1 346) (2 552) – –Reconciliation of the tax expenseReconciliation between accounting profit and tax expense.
Accounting loss (90 650) (4 135) (134) (1 795)
Tax at the applicable tax rate of 28% (2009: 28%) (25 382) (1 158) (38) (503)
Tax effect of adjustments on taxable incomeEffect of permanent differences 3 792 (1 082) – –
Effect of temporary differences not recognised 13 752 115 – –
Change in tax rate – (121) – –
Tax losses utilised/carried forward 6 525 (306) 38 503
Prior year adjustment (33) – – –
24 036 (2 552) – –
for the year ended 28 February 2010
notes to tHe annUal fInancIal stateMents CONTINUED
PAGE 58 PAGE 59
GROUP COMPANYYear ended
28 Feb 2010
R’000
Year ended
28 Feb 2009
R’000
Year ended
28 Feb 2010
R’000
Year ended
28 Feb 2009
R’000
30 AUDITORS' REMUNERATION
Fees 665 407 59 55
Expenses – 18 – –
665 425 59 55
Gross
R’000
Tax
R’000
Net
R’000
31 OTHER COMPREHENSIVE INCOME
Components of other comprehensive income – Group 2010Movements on revaluation
Gains on property revaluation 6 261 (1 547) 4 714Gains on plant and equipment valuation 1 165 (326) 839
7 426 (1 873) 5 553
Components of other comprehensive income – Group 2009
Movements on revaluation
Gains (losses) on property revaluation 11 550 (3 086) 8 464
32 CASH (USED IN) GENERATED FROM OPERATIONS
(Loss) profit before taxation (90 650) (4 135) (134) (1 795)
Adjustments for:Depreciation and amortisation 4 950 5 891 – –
Loss (profit) on sale of assets 921 (95) – –
(Profit) loss on foreign exchange (484) 190 – –
Interest received (3 785) (3 908) – –
Finance costs 12 100 10 600 – –
Fair value adjustments (5 203) (11 300) – –
Impairment loss (reversal) 2 309 1 565 (112) 1 585
Movements in provisions 1 675 (885) – –
Changes in working capital:Inventories 13 993 (12 357) – –
Trade and other receivables 24 229 (12 573) 9 12
Mining and exploration asset 2 666 – – –
Trade and other payables 21 785 31 250 1 –
(15 424) 4 243 (236) (198)
33 TAX (PAID) REFUNDED
Balance at beginning of the year (138) (102) – –
Current tax for the year recognised in profit or loss 33 (262) – –
Balance at end of the year (84) 138 – –
(189) (226) – –
for the year ended 28 February 2010
notes to tHe annUal fInancIal stateMents CONTINUED
PAGE 60 PAGE 61
34 COMMITMENTS
Authorised capital expenditure
There are no commitments for capital expenditure for the next 12 months as at 28 February 2010 (2009: R1,940 million).
35 CONTINGENCIESLitigation is in the process both against and on behalf of Brokrew Industrial (Proprietary) Limited relating to a dispute
with a contractor in relation to the lawfull cancellation of a contract, the result of which would determine where liability
will be assigned. The company's lawyers and management consider the likelihood of the action against the company
being successful as unlikely, and the case should be resolved within the next three years. To date no reliable estimate
could be made as to the possible asset/liability resulting from the law suite.
Arising from the cancellation of the Medupi Contract, the primary contractor has attempted to call up the performance
bond and advance payment guarantee totaling R50 million. The company, together with its insurers, is defending this
action vigorously.
36 RELATED PARTIES
RelationshipsHolding company
Subsidiaries
Shefa Equity Holdings (Proprietary) Limited
Brokrew Industrial (Proprietary) Limited
Brokrew (Proprietary) Limited
Broseal Properties (Proprietary) Limited
Construction and Mining Equipment Company
(Proprietary) Limited
Ekhaya Lethu Human Resources (Proprietary) Limited
Estlind Investments (Proprietary) Limited
Gedeelte 14 van Elandspruit (Proprietary) Limited
Kairos Coal & Exploration (Proprietary) Limited
KNJ Industrial Holdings (Proprietary) Limited
Ten Cradock Avenue (Proprietary) Limited
Witbank Brickworks (1961) (Proprietary) Limited
Key management (Refer note 37) WL van Deventer
MR Abrahams
E Brink
JJ de W Mulder
HJ Espach
DC Jacobs
JK Joubert
WA Lombard
VD Mazibuko
V Rex
TM Thomas
JJ vd Merwe
S Cronje
Special purpose entities Kairos BEE Employee Trust
Kairos Share Incentive Trust
for the year ended 28 February 2010
notes to tHe annUal fInancIal stateMents CONTINUED
PAGE 60 PAGE 61
GROUP COMPANYYear ended28 Feb 2010
R’000
Year ended28 Feb 2009
R’000
Year ended28 Feb 2010
R’000
Year ended28 Feb 2009
R’000
36 RELATED PARTIES (continued)
Related party balances
Loan accounts – Owing (to) by related partiesKairos Industrial Holdings Share Incentive Trust – – – 136
Brokrew Industrial (Proprietary) Limited – – – 40 940
KNJ Industrial Holdings (Proprietary) Limited – – – 26 667
Witbank Brickworks (1961) (Proprietary) Limited – – – 774
Kairos Coal and Exploration (Proprietary) Limited – – – 17
Shefa Equity Holdings (Proprietary) Limited – – – (745)
Related party transactions
Administration fees paid to (received from)
related partiesKNJ Industrial Holdings (Proprietary) Limited – – (337) (300)
Impairment of loan accounts
– Owing by related partiesBrokrew Industrial (Proprietary) Limited – – (103) 40 940
Kairos Coal and Exploration (Proprietary) Limited – – (17) (17)
KNJ Industrial Holdings (Proprietary) Limited – – (26 667) (26 667)
Witbank Brickworks (1961) (Proprietary) Limited – – (774) (151)
Kairos Industrial Holdings Share Incentive Trust – – (151) (338)
Impairment of investmentsWitbank Brickworks (1961) (Proprietary) Limited – – 1 007 1 007
EmolumentsR’000
AllowancesR’000
Companycontributions
R’000BonusR’000
TotalR’000
37 DIRECTORS’ EMOLUMENTS
Executive2010
MR Abrahams 659 147 142 – 948E Brink 1 557 107 66 667 2 397JJ de W Mulder 1 125 131 140 – 1 396HJ Espach (Resigned) 572 92 96 – 760DC Jacobs 870 42 1 – 913JK Joubert 560 170 1 – 731WA Lombard 942 120 274 – 1 336V Rex 993 168 144 42 1 347TM Thomas 560 113 154 – 827JJ vd Merwe 609 140 127 – 876WL van Deventer 2 226 84 262 – 2 572S Cronje 242 37 55 – 334
10 915 1 351 1 462 709 14 437
for the year ended 28 February 2010
notes to tHe annUal fInancIal stateMents CONTINUED
PAGE 62 PAGE 63
Emolu-mentsR’000
AllowancesR’000
Companycontri-
butionsR’000
BonusR’000
TotalR’000
37 DIRECTORS’ EMOLUMENTS (continued)
Executive
2009
MR Abrahams 631 164 126 131 1 052
E Brink 1 250 24 136 – 1 410
JJ de W Mulder 1 208 159 124 393 1 884
HJ Espach 664 129 125 30 948
DC Jacobs 490 75 – – 565
JK Joubert 777 132 16 – 925
WA Lombard 1 105 120 175 – 1 400
VD Mazibuko 539 110 193 37 879
V Rex 937 218 126 384 1 665
TM Thomas 541 113 144 216 1 014
JJ vd Merwe 597 186 112 216 1 111
WL van Deventer 2 244 84 275 – 2 603
10 983 1 514 1 552 1 407 15 456
Non-executive2010VD Mazibuko 6 – – 333 339
2009
JB Oosthuizen 40 – – – 40
Key managementThe directors are considered to be the only key management.
38 COMPARATIVE FIGURES
Certain comparative figures have been reclassified.
39 RISK MANAGEMENT
Capital risk managementThe group’s objectives when managing capital are to safeguard the group's ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital.
There have been no changes to what the entity manages as capital, the strategy for capital maintenance or externally imposed capital requirements from the previous year.
Financial risk managementThe group’s activities expose it to a variety of financial risks: market risk (fair value interest rate risk, cash flow interest rate risk), credit risk and liquidity risk.
The group’s overall risk management program focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the group’s financial performance. Risk management is carried out by a central treasury department (group treasury) under policies approved by the board. Group treasury identifies, evaluates and hedges financial risks in close co-operation with the group’s operating units. The board provides written principles for overall risk management, as well as written policies covering specific areas, such as foreign exchange risk, interest rate risk, credit risk, use of non-derivative financial instruments, and investment of excess liquidity.
for the year ended 28 February 2010
notes to tHe annUal fInancIal stateMents CONTINUED
PAGE 62 PAGE 63
39 RISK MANAGEMENT (continued)
Liquidity riskBoth liquidity and cash flow remains sacred to the survival of the group. The cancellation of the Medupi contract and the attributable legal commitments in pursuing the claims by Brokrew Industrial (Proprietary) Limited and the poor trading of Witbank Brickworks (1961) (Proprietary) Limited has placed a certain amount of cash flow and liquidity pressure on the Group, but the Group still has facilities available to continue trading into the foreseeable future. The commencement of coal mining will also bolster the cash reserves of the Group.
The group’s risk to liquidity is a result of the funds available to cover future commitments. The group manages liquidity risk through an ongoing review of future commitments and credit facilities.
The Group has very close relationships with its bankers and the bank is kept totally informed on a monthly basis on the cash flows of the Group.
The table below analyses the group’s financial liabilities and net settled financial liabilities into relevant maturity groupings based on the remaining period at the statement of financial position to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows. Balances due within 12 months equal their carrying balances as the impact of discounting is not significant.
Less than 1
yearR’000
Between1 and 2
yearsR’000
Between2 and 5
yearsR’000
Over5 years
R’000
GroupAt 28 February 2010
Overdraft facilities used (8 428) – – –Trade and other payables (86 050) – – –Other financial liabilities (32 438) (12 123) (20 608) –Instalment sale obligation (3 902) (2 939) (2 386) –
At 28 February 2009
Overdraft facilities used (8 736) – – –
Trade and other payables (64 262) – – –
Other financial liabilities (24 392) (5 248) (228) –
Instalment sale obligation (3 924) (3 301) (4 267) –
CompanyAt 28 February 2010
Trade and other payables (26 655) – – –
At 28 February 2009
Trade and other payables (24 862) – – –
Interest rate riskThere is always an element of uncertainty in managing interest rate risk in South Africa because of the history of its volatility. Management at the senior level evaluates the affordability of banking facilities taking into account the future business that will be generated. They keep abreast of news articles and banking information in respect of future predictions in interest rate movements.
In regard to the financing of equipment, both discounted cash flows and pay back models are done to ensure both the affordability of the equipment and to ensure that the return generated is sufficient to cover the funding costs.
The company’s interest rate risk arises from loans to and from group companies. Borrowings issued at variable rates expose the company to cash flow interest rate risk.
As the group has no significant interest bearing assets, the group’s income and operating cash flows are substantially independent of changes in market interest rates.
for the year ended 28 February 2010
notes to tHe annUal fInancIal stateMents CONTINUED
PAGE 64 PAGE 65
39 RISK MANAGEMENT (continued)
The group is exposed to interest rate risk in respect of variable rate borrowings and fixed and variable rate facility fees on monies borrowed. This risk is managed predominantly through monitoring and negotiation of interest rates by mangement on an ongoing basis with its financing suppliers.
Interest rate sensitivityThe sensitivity analyses has been determined on the exposure to interest rates at the statement of financial position date and the stipulated change taking place at the beginning of the financial year and held constant in the case of variable rate borrrowings. A 50 basis point increase or decrease has been used
2010
R’000
0,50%
R’000
2009
R’000
0,50%
R’000
Bank overdarft 8 428 42 8 736 44
Instalment sales 9 227 46 11 492 57
Other financial liabilities 65 169 326 29 868 149
Total 414 250
Cash flow interest rate risk
Current
interest
rate
Due in
less than
a year
Due in
one to
two years
Due in
two to
three
years
Due in
three to
four
years
Due
after
five
years
Financial instrument – – – –Trade and other receivables –
normal credit terms 10,50% 27 249Cash in current banking institutions 3,50% 4 260 – – – –Trade and other payables –
normal credit terms 10,50% (86 050) – – – –Instalment sale obligation 11,65% (3 902) (2 939) (2 017) – –Other financial liabilities 13,00% (32 438) (12 123) (11 441) (9 167) –Overdraft facilities used 11,25% (8 428) – – – –
Credit riskCredit risk is managed on a group basis.
Credit risk consists mainly of cash deposits, cash equivalents, financial instruments and trade debtors. The company only deposits cash with major banks with high quality credit standing and limits exposure to any one counter party. Trade receivables comprise a widespread customer base with no concentration of credit risk.
Throughout the group there is a stringent policy on vetting of all new customers and ongoing review of credit limits of existing customers. New customers are obliged to complete credit application forms and where possible provide personal suretyships. The group enlists the services of their bankers and a credit bureau to ensure creditworthiness of all new customers before senior management take a view on the risk and the allocation of credit limits.
for the year ended 28 February 2010
notes to tHe annUal fInancIal stateMents CONTINUED
PAGE 64 PAGE 65
GROUP COMPANYYear ended
28 Feb 2010
R’000
Year ended
28 Feb 2009
R’000
Year ended
28 Feb 2010
R’000
Year ended
28 Feb 2009
R’000
40 EARNINGS PER SHARE
The calculation of loss per share is based on losses
after tax of R89,304 million
(2009: loss R1,588 million) and 224,554 million
(2009: 224,554 million) weighted average ordinary
shares in issue during the year.
Loss for the year 89 304 1 583 – –
Reconciliation of the weighted average number of
ordinary shares
Balance at the beginning of the year 252 107 252 107 – –
Treasury shares (27 553) (27 553) – –
Balance at the year end 224 554 224 554 – –
Weighted average 224 554 224 554 – –
Loss per ordinary share (cents) 39,77 0,70 – –
GROUP COMPANYYear ended
28 Feb 2010
R’000
Year ended
28 Feb 2009
R’000
Year ended
28 Feb 2010
R’000
Year ended
28 Feb 2009
R’000
41 HEADLINE LOSS PER SHARE
The calculation of headline loss per share is based
on losses after tax of R91,277 million
(2009: loss of R11,413 million) and 224,554 million
(2008: 224,554 million) weighted average ordinary
shares in issue during the year.
Reconciliation between earnings and headline earnings
Loss for the year (89 304) (1 583) – –
Impairment of goodwill 2 309 1 565 – –
Profit on sale of assets 921 (95) – –
Fair value adjustments on investment properties (5 203) (11 300) – –
(91 277) (11 413) – –
Headline loss per ordinary share (cents) (40,65) (5,08) – –
for the year ended 28 February 2010
notes to tHe annUal fInancIal stateMents CONTINUED
PAGE 66 PAGE 67
KAIROS INDUSTRIAL HOLDINGS LIMITED
(Incorporated in the Republic of South Africa) (Registration number 1987/002927/06) JSE code: KIR ISIN: ZAE000011284 (“Kairos” or “the company”)
Notice is hereby given that the 22nd annual general meeting of members of Kairos Industrial Holdings Limited will be held at the Holiday Inn Garden Court, Pretorius Street, Hatfield, Pretoria on Friday 22 October 2010 at 11h00 for the following purposes:
1. To receive the annual financial statements of the company and of the group for the financial year ended 28 February 2010 including the Directors’ Report and the Report of the Auditors thereon.
2. The board of directors be discharged from their obligations in respect of the business year ended 28 February 2010.
3. To elect the following directors who, in terms of the company’s Articles of Association retire by rotation but offer themselves for re-election:
Mr VD Mazibuko Mr JJ de W Mulder
The curriculum vitae for these directors appear on page 17 of the annual report.
4. To approve the remuneration paid to the directors, as disclosed in the annual financial statements.
5. To re-appoint the auditors of the company.
6. SPECIAL BUSINESS
6.1 To consider and, if deemed fit, to pass with or without modification the following ordinary resolutions:
6.1.1 Ordinary resolution number 6 “Resolved that the ordinary shares in the share capital of the company not allotted or issued be and are
hereby placed under the control of the directors of the company until the next annual general meeting of members, for allotment and issue at the discretion of the directors in terms of and subject to the provisions of the company’s Memorandum and Articles of Association, the Companies Act of South Africa, 1973, and the rules, regulations and requirements of the Listings Requirements.”
6.1.2 Ordinary resolution number 7 “Resolved that 6 590 706 ordinary shares in the authorised and unissued share capital of the company be
and are hereby placed under the control of the directors of the company who are specifically authorised in terms of section 221(2) of the Companies Act of South Africa, 1973, to sell or grant options to acquire or options to enter into agreements to acquire, all or part of such shares to the Kairos Share Incentive Scheme and/or its nominee(s) in accordance with the terms and conditions of the Kairos Share Incentive Scheme and to allot and issue or transfer, as the case may be, all or any of such shares pursuant thereto.”
6.1.3 Ordinary resolution number 8 “Resolved that subject to the passing of Ordinary Resolution Number 7 and in terms of the Listings
Requirements, the directors are hereby authorised to issue ordinary shares for cash as and when suitable opportunities arise, subject to the following conditions:
• ordinary shares issued must be of a class already in issue;
• any such issue will only be made to public shareholders as defined in paragraphs 4.25 to 4.27 of the Listings Requirements and not to related parties as defined in paragraph 10.1 of the Listings Requirements;
• that this authority shall not extend beyond the next annual general meeting or 15 months from the date of this resolution, whichever date is the earlier;
• that a press announcement giving full details, including the impact on the net asset value and earnings per share, will be published at the time of any issue representing, on a cumulative basis within one year, 5 per cent or more of the number of shares in issue prior to the issue/s;
notIce of annUal GeneRal MeetInG
PAGE 66 PAGE 67
• that issues of ordinary shares for cash in any one financial year shall not exceed in the aggregate 15 per cent of the company’s issued ordinary share capital; and
• that, in determining the price at which an issue of ordinary shares will be made in terms of this authority, the maximum discount permitted will be 10 per cent of the weighted average traded price of the shares over the 30 days prior to the date that the price of the issue is determined or agreed to by the directors. In the event that the shares have not traded in the said 30-day period a ruling will be obtained from the Committee of the JSE.”
The approval of a 75 per cent majority of the votes cast by shareholders present or represented by proxy at the annual general meeting is required for this resolution to become effective.
6.2 To consider, and, if deemed fit, to pass, with or without modification, the following special resolution:
6.2.1 Special resolution number 1 To resolve as a special resolution that the company approves, as a general approval as contemplated in
Sections 85(2) and 85(3), the Companies Act of South Africa, 1973 (Act 61 of 1973), (“the Act”), the acquisition of shares issued by the company upon such terms and conditions and in such amounts as the directors may from time to time decide, but subject to the provisions of Section 85 to Section 89 of the Act, the Listings Requirements of the JSE namely that:
• The repurchase of securities may only be effected through the order book operated by the JSE trading system and done without any understanding or arrangement between the company and the counterparty;
• Authorisation thereto being given by the company’s articles of association;
• Approval by shareholders in terms of a special resolution of the company, which shall be valid only until the company’s next Annual General Meeting provided that it does not extend beyond 15 months from the date of the special resolution;
• At any point in time, the company will only appoint one agent to effect any repurchase(s) on the company’s behalf;
• In any one financial year the general authority to repurchase will be limited to a maximum of 20% of the company’s issued share capital of that class at the time authority is granted in that financial year;
• Repurchases may not be made at a price greater than 10% above the weighted average of the market value for the securities for the five business days immediately preceding the date on which the transaction is effected;
• The company makes an announcement in terms of paragraph 11.27 of the Listings Requirements; and
• Repurchases may not be made during a prohibited period as defined in paragraph 3.67 of the Listings Requirements.
The reason for and effect of special resolution number 1 is to grant the directors a general authority in terms of the Act, for the acquisition by the company of shares issued by it on the basis reflected in the special resolution.
notIce of annUal GeneRal MeetInG CONTINUED
PAGE 68 PAGE 69
Explanatory notes to special resolution number 1 Information required in terms of the Listings Requirements with regard to the general authority for the
company or any of its subsidiaries to repurchase the company’s securities appears in the annual financial statements, to which this notice of Annual General Meeting (“notice”) is annexed as indicated below:
• Directors and management: page 70 of the annual report;
• Major shareholders: page 15 of the annual financial statements;
• Directors’ interests in securities: page 15 of the annual financial statements;
• Share capital of the company: page 51 of the annual financial statements; and
• Litigation: there are no legal or arbitration proceedings other than reported in these financial statements, which, including any proceedings that are pending or threatened of which the company is aware, that may have or have had in the recent past, being at least the previous 12 months, a material effect on the group’s financial position.
The directors, whose names are given on page 16 of the annual report in which this notice was included collectively and individually accept full responsibility for the accuracy of the information given in this notice and certify that to the best of their knowledge and belief there are no facts that have been omitted which would make any statement false or misleading, and that all reasonable enquiries to ascertain such facts have been made and that the annual report and notice contains all information required by law and the Listings Requirements.
There has been no material change in the financial or trading position of the company and its subsidiaries that has occurred since 28 February 2010.
Pursuant to and in terms of the Listings Requirements, the directors of the company hereby state:
1. That the intention of the company and/or any of its subsidiaries is to utilise the general authority to repurchase securities if at some future date the cash resources of the company are in excess of its requirements. In this regard the directors will take account of, inter alia, appropriate capitalisation structures for the company, the long-term cash needs of the company, and will ensure that any such repurchases are in the interests of shareholders;
2. That the method by which the company and/or any of its subsidiaries intends to repurchase its securities and the date on which such repurchases will take place, has not yet been determined;
3. That after considering the effect of a maximum permitted general repurchase of securities, the company and its subsidiaries are, as at the date of this notice convening the Annual General Meeting of the company, able to fully comply with the Listings Requirements. Nevertheless, at the time that the contemplated general repurchase is to take place, the directors of the company will ensure that:
• The company and the group will be able, in the ordinary course of business, to pay its debts for a period of 12 months after the date of the notice of the Annual General Meeting;
• The assets of the company and the group will be in excess of the liabilities of the company and group for a period of 12 months after the date of the notice of the Annual General Meeting. For this purpose, the assets and liabilities will be recognised and measured in accordance with the accounting policies used in these annual group financial statements;
• The share capital and reserves of the company and group will be adequate for ordinary business purposes for a period of 12 months after the date of the notice of Annual General Meeting;
notIce of annUal GeneRal MeetInG CONTINUED
PAGE 68 PAGE 69
• The working capital of the company and group will be adequate for ordinary business purposes for a period of 12 months after the date of the notice of Annual General Meeting; and
• The company will provide its Sponsor and the JSE with all documentation as required in Schedule 25 of the Listings Requirements, and will not commence any repurchase programme until the Sponsor has signed off on the adequacy of its working capital, advised the JSE accordingly and the JSE has approved this documentation.
Notes: Any shareholders wishing to attend the Annual General Meeting who have already dematerialised their
shares in Kairos, and such dematerialised shares are not recorded in the electronic sub-register of Kairos in their own names, should request letters of representation from their duly appointed Central Securities Depository Participant (“CSDP”) or broker, as the case may be, to authorise them to attend and vote at the Annual General Meeting in person.
Any shareholders entitled to attend and vote at the Annual General Meeting are entitled to appoint proxies to attend, speak and vote at the Annual General Meeting in their stead. The proxies so appointed need not be members of the company.
If you have not yet dematerialised your shares in Kairos and are unable to attend the Annual General Meeting, but wish to be represented thereat, you must complete the attached form of proxy in accordance with the instructions therein and lodge it with the transfer secretaries of Kairos namely, Computershare Investor Services (Pty) Limited, 70 Marshall Street, Johannesburg, 2001 (PO Box 61051, Marshalltown, 2107) to be received by no later than 11h00 on Wednesday, 20 October 2010.
If you have already dematerialised your shares in Kairos:
• And such dematerialised shares are recorded in the electronic sub-register of Kairos in your own name and are unable to attend the Annual General Meeting, but wish to be represented thereat, you must complete the attached form of proxy in accordance with the instructions therein and lodge it with the transfer secretaries of Kairos namely, Computershare Investor Services (Pty) Limited, 70 Marshall Street, Johannesburg, 2001 (PO Box 61051, Marshalltown, 2107) to be received by no later than 11h00 on Wednesday, 20 October 2010; or
• Where such dematerialised shares are not recorded in the electronic sub-register of Kairos in your own name, you should notify your duly appointed CSDP or broker, as the case may be, in the manner and cut-off time stipulated in the agreement governing your relationship with your CSDP or broker of your instructions as regards voting your shares at the Annual General Meeting.
By order of the Board
L JonkerCompany secretary
17 September 2010
Pretoria
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PAGE 70 PAGE 71
KAIROS INDUSTRIAL HOLDINGS LIMITED
(Registration number 1987/002927/06) JSE code: KIR ISIN: ZAE000011284
Country of incorporation
South Africa
Holding company
Shefa Equity Holdings (Pty) Limited
Nature of business
Industrial Holding Company
Business address and registered office
1111 Church StreetHatfieldPretoria0083
PO Box 11328HatfieldPretoria0028
Telephone +27 12 342-1980Facsimile +27 12 342-1976
Website
www.kairos.co.za
Transfer secretaries
Computershare Investor Services (Pty) Limited70 Marshall StreetJohannesburg 2001
PO Box 61051Marshalltown 2107Telephone +27 11 370-5000
Directors
WL van DeventerJJ de W MulderWA LombardVD Mazibuko*
*non-executive
Company secretary
L Jonker
Auditors
Moore Stephens FRRS Incorporated Registered Auditors
Bankers
Absa Bank LimitedFirst National Bank Limited
Sponsors
Bridge Capital Advisors (Pty) Limited2nd Floor, 27 Fricker Road, Illovo 2196
Telephone +27 11 268-6231
DIRectoRate anD aDMInIstRatIon
22nd annual general meeting 22 October 2010
Interim report for the half year ended 31 August 2010 November 2010
Announcement of the audited results for the year ending 28 February 2011 May 2011
Annual report and financial statements for the year ending 28 February 2011 posted to shareholders May 2011
23rd annual general meeting June 2011
sHaReHolDeRs’ DIaRY
PAGE 70 PAGE 71
foRM of PRoXY
KAIROS INDUSTRIAL HOLDINGS LIMITED
(Incorporated in the Republic of South Africa) (Registration number 1987/002927/06) JSE code: KIR ISIN: ZAE000011284 (“Kairos” or “the company”)
For use by certificated and own-name dematerialised shareholders at the 22nd Annual General Meeting to be held at the Holiday Inn Garden Court, Pretorius Street, Hatfield, Pretoria on Friday, 22 October 2010 at 11h00.
I/We
(full name in block letters)
of
(address)
being a member/s of the above mentioned company, hereby appoint
1. or failing him/her
2. or failing him/her
3. the chairman of the annual general meeting
as my/our proxy to attend and speak for me/us and on my/our behalf at the annual general meeting to be held at the Holiday Inn Garden Court, Pretorius Street, Hatfield, Pretoria on Friday, 22 October 2010 at 11h00 and at any adjournment thereof, and to vote for, against or abstain from voting, as follows:
For Against Abstain
Ordinary resolution 1: to consider and adopt the annual financial statements
Ordinary resolution 2: to discharge the board of its obligations
Ordinary resolution 3.1: re-elect Mr VD Mazibuko
Ordinary resolution 3.2: re-elect Mr JJ de W Mulder
Ordinary resolution 4: approve directors’ fees
Ordinary resolution 5: re-appoint auditors
Special business
Ordinary resolution 6: placing unissued shares under control of directors
Ordinary resolution 7: placing unissued shares under control of directors for
Kairos Share Incentive Scheme
Ordinary resolution 8: general authority to issue shares for cash
Special resolution 1: general authority to repurchase shares
Number of ordinary shares held
Signed at on this day of 2010
Signature
Assisted by (where applicable)
See notes overleaf.
PAGE 72
notes to foRM of PRoXY
1. Each ordinary shareholder is entitled to appoint one or more proxies (none of whom need be a member of the company) to attend, speak, and in a poll, vote in place of that ordinary shareholder at the annual general meeting by inserting the name of a proxy or the names of two alternate proxies of the ordinary shareholder’s choice in the space provided, with or without deleting “the chairman of the annual general meeting”. The person whose name stands first on the form of proxy and who is present at the annual general meeting will be entitled to act as proxy to the exclusion of those whose names follow.
2. An ordinary shareholder’s instructions to the proxy must be indicated by the insertion of the relevant number of votes exercisable by that ordinary shareholder in the appropriate box/es provided. Failure to comply with the above will be deemed to authorise the chairman of the annual general meeting, if he is the authorised proxy, to vote in favour of the resolutions at the annual general meeting, or any other proxy to vote or to abstain from voting at the annual general meeting, as he deems fit, in respect of all the ordinary shareholder’s votes exercisable thereat.
3. An ordinary shareholder or his/her proxy is not obliged to vote in respect of all the ordinary shares held or represented by him/her but the total number of votes for or against the resolutions in respect of which any abstention is recorded may not exceed the total number of votes to which the ordinary shareholder or the proxy is entitled.
4. In order to be effective, duly completed proxy forms must be delivered to the transfer secretaries, Computershare Investor Services (Pty) Limited, 70 Marshall Street, Johannesburg 2001 (PO Box 61051, Marshalltown 2107), so as to reach this address not later than 11h00 on 20 October 2010. Proxies not deposited timeously shall be treated as invalid.
5. Dematerialised shareholders who wish to attend the annual general meeting have to contact their Central Securities Depository Participant (“CSDP”) or broker who will furnish them with the necessary authority by means of a letter of representation to attend the annual general meeting, or they have to instruct their CSDP or broker to vote by proxy on their behalf. This has to be done in terms of the agreement entered into between such shareholder and the CSDP or broker.