The definitions and interpretations commencing on page 6 of this Circular apply
to this Circular including this cover page.
RCL FOODS LIMITED
Previously known as Rainbow Chicken Limited
Incorporated in the Republic of South Africa
(Registration number 1966/004972/06)
Share Code: RCL
ISIN: ZAE000179438
(“RCL Foods” or the “Company”)
Circular to RCL Foods Shareholders regarding the proposed:
•
acquisition by RCL Foods of the entire issued share capital of TSB Sugar RSA and
TSB Sugar International from TSB Sugar Holdings and the issue of 230 946 882
RCL Foods Shares to TSB Sugar Holdings as consideration for the TSB Acquisition;
•
issue of 6 928 406 RCL Foods Shares to TSB BEE Co pursuant to the TSB BEE Transaction;
•
restructure of the Current RCL Foods BEE Structure involving the participation of the
RCL Foods Strategic Partners and the ESOP Trust, and in relation thereto:
– the unwinding of the Current RCL Foods BEE Structure through a specific repurchase
of 51 177 217 RCL Foods Shares held by Eagle Creek;
– the issue of 63 830 231 RCL Foods Shares pursuant to the New RCL Foods BEE
Transaction;
•
Equity Capital Raising in an amount of up to R2 500 000 000 to be implemented by way
of: (i) the Pro Rata Offer of 74 214 642 RCL Foods Shares to Qualifying RCL Foods Minority
Shareholders in the ratio of 53.10646 Pro Rata Offer Shares for every 100 RCL Foods
Shares held on the Record Date and (ii) the Placement; and
•
increase in the number of the Company’s authorised Shares and the corresponding
amendment to the Company’s MOI;
•
Revised Listing Particulars;
and including:
•
the notice of General Meeting;
•
a form of proxy (blue) (for use by Certificated Shareholders and Dematerialised
Shareholders with “own name” registration only); and
•
a Form of Acceptance (where applicable).
The distribution of the Circular or the making of the Pro Rata Offer in certain jurisdictions other
than South Africa may be restricted by law and a failure to comply with any of those restrictions
may constitute a violation of the securities laws of any such jurisdictions. Refer to Section C,
paragraph 2.2.9 of the Circular for further details.
Date of issue: 12 December 2013
Reporting Accountants and
Auditors
Independent Expert
Financial advisor and sponsor
to RCL Foods
Attorneys to RCL Foods
Attorneys to TSB Sugar
Holdings
CORPORATE INFORMATION AND ADVISORS
Company secretary and registered office
Independent Expert
JMJ Maher
RCL Foods Limited
Six The Boulevard
Westway Office Park
Westville, 3629
(PO Box 2734, Westway Office Park, 3635)
Deloitte & Touche
(Practice number 902276)
Deloitte Place, Building 6
The Woodlands
20 Woodlands Drive
Woodmead
Sandton, 2196
(Private Bag X 6, Gallo Manor, 2052)
Attorneys to RCL Foods
Reporting Accountants and Auditors
Cliffe Dekker Hofmeyr Inc.
(Registration number 2008/018923/21)
1 Protea Place
Sandton, 2196
(Private Bag X7, Benmore, 2010)
PricewaterhouseCoopers Inc.
(Registration number 1998/012055/21)
102 Stephen Dlamini Road
Berea, 4001
(PO Box 1049, Durban, 4000)
Transfer Secretary
Attorneys to TSB Sugar Holdings
Computershare Investor Services
Proprietary Limited
(Registration number 2004/003647/07)
70 Marshall Street
Johannesburg, 2001
(PO Box 61051, Marshalltown, 2107)
Webber Wentzel
10 Fricker Road
Illovo Boulevard
Johannesburg, 2196
(PO Box 61771, Marshalltown, 2107)
Financial advisor and sponsor to RCL Foods
Holding company of RCL Foods
Rand Merchant Bank
(A division of FirstRand Bank Limited)
(Registration number 1929/001225/06)
1 Merchant Place
Corner Fredman Drive and Rivonia Road
Sandton, 2196
(PO Box 786273, Sandton, 2146)
Remgro Limited
(Registration number 1968/006415/06)
Millennia Park
16 Stellentia Avenue
Stellenbosch, 7600
(PO Box 456, Stellenbosch, 7599)
Date of incorporation of RCL Foods
TSB Sugar Holdings, TSB Sugar RSA and
TSB Sugar International
17 June 1966
Place of incorporation of RCL Foods
South Africa
TSB Mill Office
Mhlati Farm
Malalane, 1320
(PO Box 47, Malalane, 1320)
The Circular is available in English only. Copies may be obtained from the registered offices of the Company,
the Transfer Secretary and Rand Merchant Bank at the addresses set out in the “Corporate Information and
Advisors” section of the Circular from Thursday, 12 December 2013 until Thursday, 16 January 2014, both
days inclusive.
ACTION REQUIRED BY SHAREHOLDERS
The Circular incorporates Revised Listing Particulars and is issued in compliance with the Listings
Requirements, for the purpose of providing information regarding the Company. Unless otherwise apparent
from the context, the definitions and interpretations commencing on page 6 of the Circular apply to this
section and throughout the Circular.
THE CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION
If you are in any doubt as to what action to take, please consult your Broker, CSDP, banker, attorney, accountant
or other professional advisor immediately. If you have disposed of all your RCL Foods Shares, please forward
the Circular to the person to whom you disposed of such Shares or to the Broker, CSDP, banker or other agent
through whom you disposed of such Shares.
1.
PLEASE TAKE NOTE OF THE FOLLOWING PROVISIONS REGARDING THE ACTION REQUIRED BY
SHAREHOLDERS IN RESPECT OF THE GENERAL MEETING:
A General Meeting of RCL Foods Shareholders will be held at the Company’s registered office, Six The
Boulevard, Westway Office Park, Westville, Durban at 13:30 on Thursday, 16 January 2014 for the purpose
of considering and, if deemed fit, passing, with or without modification, the ordinary and special
resolutions set out in the attached notice of General Meeting.
1.1
If you are a Dematerialised Shareholder without “own name” registration:
Voting at the General Meeting
Your CSDP or Broker should contact you to ascertain how you wish to cast your vote at the General
Meeting and thereafter cast your vote in accordance with your instructions.
If you have not been contacted, it would be advisable for you to contact your CSDP or Broker and
furnish it with your voting instructions.
If your CSDP or Broker does not obtain voting instructions from you, it will be obliged to vote in
accordance with the instructions (if any) contained in the agreement concluded between you and
your CSDP or Broker.
You must not complete the attached form of proxy (blue).
Attendance and representation at the General Meeting
In accordance with the agreement between you and your CSDP or Broker, you must advise your
CSDP or Broker if you wish to attend the General Meeting in person and your CSDP or Broker will
issue the necessary letter of representation in order to enable you to attend the General Meeting.
1.2
If you are a Certificated Shareholder or a Dematerialised Shareholder with “own name”
registration:
Voting, attendance and representation at the General Meeting
You may attend and vote at the General Meeting in person.
Alternatively, you may appoint a proxy to represent you at the General Meeting by completing the
attached form of proxy (blue) in accordance with the instructions contained therein, which form
must be delivered or posted to the Transfer Secretary so as to be received by no later than 13:30 on
Tuesday, 14 January 2014. Any form of proxy not delivered to the Transfer Secretary by this time
may be handed to the chairperson of the General Meeting at any time before the appointed proxy
exercises any of your Shareholder’s rights at the General Meeting.
2.
PLEASE TAKE NOTE OF THE FOLLOWING PROVISIONS REGARDING THE ACTION REQUIRED BY
SHAREHOLDERS IN RESPECT OF THE PRO RATA OFFER:
2.1
If you are a Qualifying Dematerialised Shareholder:
You will not receive a Form of Acceptance and you should receive notification from your CSDP or
Broker regarding your right to subscribe for Pro Rata Offer Shares in accordance with your
Entitlements.
You will be required to notify your CSDP or Broker whether you wish to subscribe for Pro Rata Offer
Shares and if so, the number of Pro Rata Offer Shares for which you wish to subscribe. If you wish
to subscribe for all or some of the Pro Rata Offer Shares to which you are entitled, you will be
required to notify your CSDP or Broker of your acceptance of the Pro Rata Offer in the manner and
1
within the time stipulated in the agreement governing the relationship between you and your CSDP
or Broker. If you are not contacted, you should contact your CSDP or Broker and provide them with
your instructions. If your CSDP or Broker does not obtain instructions from you, it is obliged to act
in terms of the mandate granted to them by you, or if the mandate is silent in this regard, it shall
not subscribe for Pro Rata Offer Shares on your behalf in terms of the Pro Rata Offer and your
Entitlements will lapse. RCL Foods does not accept responsibility and will not be held liable for any
failure on the part of your CSDP or Broker to notify you of the Pro Rata Offer and/or to obtain
instructions from you to subscribe for Pro Rata Offer Shares.
CSDPs effect payment in respect of Dematerialised Shareholders on a delivery versus payment basis.
You must ensure that you have sufficient funds in your account to settle the aggregate Pro Rata
Offer Subscription Price payable in respect of the Pro Rata Offer Shares for which you wish to
subscribe.
Applications for excess Pro Rata Offer Shares will not be permitted.
If you do not wish to subscribe for all or some of the Pro Rata Offer Shares to which you are entitled,
you will not be entitled to sell or renounce such Pro Rata Offer Shares and your Entitlements
will lapse.
2.2
If you are a Qualifying Certificated Shareholder:
A Form of Acceptance is enclosed with the Circular, and the relevant procedure for participation in
the Pro Rata Offer is set out below.
If you wish to subscribe for all or some of the Pro Rata Offer Shares to which you are entitled, you
must complete the enclosed Form of Acceptance in accordance with the instructions contained
therein and deliver it to the Transfer Secretary, to be received by the Transfer Secretary (at the
physical or postal address or at the fax number or e-mail address set out below), together with a
bank-guaranteed cheque, a bankers’ draft or an electronic funds transfer into the designated bank
account (refer to Section C, paragraph 2.2.5.1 for further details) for the aggregate Pro Rata Offer
Subscription Price payable in respect of the Pro Rata Offer Shares for which you wish to subscribe.
By hand or courier:
By post:
RCL Foods Limited – Pro Rata Offer
C/o Computershare Investor Services
Proprietary Limited
70 Marshall Street
Johannesburg 2001
RCL Foods Limited – Pro Rata Offer
C/o Computershare Investor Services
Proprietary Limited
PO Box 61763
Marshalltown 2107
By fax
By email
+27 11 688 5210
corporate.events@computershare.co.za
To the extent that you subscribe for Pro Rata Offer Shares, you will receive such Pro Rata Offer
Shares in certificated form. You will only be able to sell your Pro Rata Offer Shares on the JSE once
such Pro Rata Offer Shares have been Dematerialised.
If the required documentation and payment have not been received by the Transfer Secretary in
accordance with the instructions contained in the Circular and the Form of Acceptance by 12:00 on
Tuesday, 4 February 2014, then your right to subscribe for Pro Rata Offer Shares in accordance with
the Entitlements will be deemed to have been declined and your Entitlements will lapse.
Applications for excess Pro Rata Offer Shares will not be permitted.
If you do not wish to subscribe for all or some of the Pro Rata Offer Shares to which you are entitled,
you will not be entitled to sell or renounce such Pro Rata Offer Shares and your Entitlements
will lapse.
2
TABLE OF CONTENTS
Page
CORPORATE INFORMATION AND ADVISORS
Inside front cover
ACTION REQUIRED BY SHAREHOLDERS
1
SALIENT DATES AND TIMES
5
DEFINITIONS AND INTERPRETATIONS
6
CIRCULAR TO RCL FOODS SHAREHOLDERS
1.
2.
3.
4.
Introduction
Rationale
Purpose of the Circular
General Meeting
18
19
20
20
A.
1.
2.
3.
4.
5.
INFORMATION RELATING TO THE TSB TRANSACTIONS
Information on the Ancillary Transaction
Rationale for the TSB Acquisition
Information on TSB Sugar Holdings
Information on the TSB Acquisition
Information on the TSB BEE Transaction
21
21
21
22
23
24
B.
1.
2.
3.
4.
5.
6.
INFORMATION RELATING TO THE RCL FOODS BEE TRANSACTIONS
Details of the Specific Repurchase and unwinding of the Current RCL Foods BEE Structure
Details of the New RCL Foods BEE Transaction
ESOP Trust salient features
SPV 2 salient features
Estimated costs
Specific authority to issue the RCL Foods BEE Shares and to provide financial assistance to
the RCL Foods BEE Vehicles
28
28
28
33
34
34
C.
1.
2.
3.
INFORMATION RELATING TO THE PROPOSED EQUITY CAPITAL RAISING
Introduction and rationale
Pro Rata Offer
Placement
36
36
36
43
D.
1.
2.
3.
FINANCIAL INFORMATION RELATING TO THE TSB TRANSACTIONS AND
THE RCL FOODS BEE TRANSACTIONS
Adequacy of capital
Pro forma financial information
Transaction costs
44
44
44
46
E.
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
COMPANY INFORMATION
Background information
Financial information
Information on the Directors and executive management
Information on the Share Capital of the RCL Foods Group
Major Shareholders
Advisors’ interests
Additional information
Material acquisitions and disposals
Material change
History of changes
47
47
48
48
55
61
61
61
61
62
62
35
3
Page
11.
12.
13.
14.
15.
16.
17.
18.
19.
Promoters
Material contracts
Corporate Governance
Litigation statement
Third party management under contract or arrangement
Related parties
Directors’ responsibility statement
Consents
Documents available for inspection
62
62
63
63
64
64
64
64
64
ANNEXURE 1(a) Fairness opinion on the Related Party Acquisition
65
ANNEXURE 1(b) Independent Expert’s report on the Proposed Specific Repurchase
69
ANNEXURE 2
ANNEXURE 3
ANNEXURE 4
ANNEXURE 5
ANNEXURE 6
ANNEXURE 7
ANNEXURE 8
ANNEXURE 9
ANNEXURE 10
ANNEXURE 11
ANNEXURE 12
ANNEXURE 13
ANNEXURE 14
ANNEXURE 15
ANNEXURE 16
Pro forma statement of financial position and pro forma income statement
Independent Reporting Accountants’ Assurance Report
Trading history of RCL Foods Shares on the JSE
Historical financial information of TSB Sugar Holdings
Independent Reporting Accountants’ Audit Report on the
Consolidated Historical Financial Information of TSB Sugar Holdings
Historical financial information of RCL Foods
Material liabilities and commitments – RCL Foods
Material liabilities and commitments – TSB Sugar Holdings
Information on the Directors and executive management of RCL Foods
and its major subsidiaries
Extracts from the RCL Foods MOI relating to the Directors
Investments in subsidiaries
Principal immovable properties owned or leased
Corporate Governance
Table of Entitlement
Foodcorp vendor details
Notice of General Meeting
Form of proxy (blue)
Form of Acceptance
4
73
78
80
82
157
159
221
223
225
238
241
243
244
262
264
265
Attached
Enclosed
(where applicable)
SALIENT DATES AND TIMES
2013
Record date to determine which RCL Foods Shareholders are entitled to receive
the Circular on
Circular posted to RCL Foods Shareholders on or about
Friday, 6 December
Thursday, 12 December
2014
Last day to trade in RCL Foods Shares in order to be recorded in the Register in
order to participate in and vote at the General Meeting on
Record date to be entitled to participate in and vote at the General Meeting on
Last day to submit forms of proxy in respect of the General Meeting to the
Transfer Secretary by 13:30 on
Friday, 3 January
Friday, 10 January
Tuesday, 14 January
General Meeting to be held at the Company’s registered office,
Six The Boulevard, Westway Office Park, Westville, Durban at 13:30 on
Thursday, 16 January
Results of the General Meeting to be released on SENS on
Thursday, 16 January
Results of the General Meeting to be published in the press on
Friday, 17 January
Finalisation date for the Pro Rata Offer on
Friday, 17 January
Expected date for issue and listing of the TSB Consideration Shares on or around
Friday, 17 January
Expected date for implementation of the Specific Repurchase and the delisting of
the Current RCL Foods BEE Shares on
Monday, 20 January
Last day to trade in RCL Foods Shares in order to participate in the
Pro Rata Offer on
RCL Foods Shares trade ex-Entitlements on
Record Date at 17:00 on
Friday, 24 January
Monday, 27 January
Friday, 31 January
For Qualifying Certificated Shareholders wishing to subscribe for
Pro Rata Offer Shares, payment to be made and Forms of Acceptance to be
delivered to the Transfer Secretary by 12:00 on
Tuesday, 4 February
Pro Rata Offer closes at 12:00 on
Tuesday, 4 February
Expected issue and listing of Pro Rata Offer Shares on
Monday, 10 February
CSDP or Broker accounts in respect of Qualifying Dematerialised Shareholders
debited with the aggregate Pro Rata Offer Subscription Price due in terms of the
Pro Rata Offer and credited with Pro Rata Offer Shares, and Share certificates in
respect of the Pro Rata Offer Shares posted to Qualifying Certificated
Shareholders on or about
Monday, 10 February
Expected issue and listing of TSB BEE Shares on or around
Monday, 31 March
Expected issue and listing of RCL Foods BEE Shares on or around
Monday, 31 March
Notes:
1.
The abovementioned times are South African times and dates and are subject to change. Any such change will be released on SENS and
published in the South African press.
2.
Any form of proxy not delivered to the Transfer Secretary by the stipulated time may be handed to the chairperson of the General
Meeting any time before the appointed proxy exercises any of the Shareholder rights at the General Meeting.
3.
RCL Foods Shares may not be Dematerialised or rematerialised between Monday, 27 January 2014 and Friday, 31 January 2014, both
days inclusive.
4.
Qualifying Dematerialised Shareholders are required to notify their duly appointed CSDPs or Brokers of their acceptance of the Pro
Rata Offer Shares in the manner and within the time stipulated in the agreement governing the relationship between the them and their
CSDPs or Brokers.
5.
The CSDP or Broker accounts of Qualifying Dematerialised Shareholders will be automatically credited with Pro Rata Offer Shares to the
extent to which they have accepted the Pro Rata Offer.
6.
CSDPs effect payment in respect of Qualifying Dematerialised Shareholders on a delivery versus payment basis.
7.
If applicable, share certificates will be posted, by registered post, to Qualifying Certificated Shareholders at their own risk in respect of
the Pro Rata Offer Shares which have been subscribed for.
5
DEFINITIONS AND INTERPRETATIONS
Throughout the Circular, unless the context indicates otherwise, the words in the column on the left below
shall have the meaning stated opposite them in the column on the right below, reference to the singular shall
include the plural and vice versa, words denoting one gender include the other, and words and expressions
denoting natural persons include juristic persons and associations of persons:
“Ancillary Transaction”
the internal re-organisation and restructuring of Remgro’s
investment in RCL Foods and TSB Sugar Holdings, as more fully
described in Section A, paragraph 1 of the Circular;
“Announcement Date”
21 November 2013;
“Authorised Dealer”
a person authorised to deal in foreign exchange as contemplated in
the Exchange Control Regulations;
“BBBEE Act”
Broad-Based Black Economic Empowerment Act, No. 53 of 2003, as
amended;
“BEE”
black economic empowerment as contemplated in the BBBEE Act;
“BEE Codes”
the Codes of Good Practice on BBBEE as contemplated in section 9 of
the BBBEE Act;
“Black People”
shall have the meaning ascribed thereto in the BBBEE Act as read
together with the BEE Codes and “Black Person” shall have a
corresponding meaning;
“BlueBay”
BlueBay Asset Management LLP, a limited liability partnership
incorporated under the laws of England and Wales with registered
number OC370085 and whose registered office is 77 Grosvenor
Street, London W1K 3JR, United Kingdom;
“BlueBay Funds”
collectively, the following UK-based funds: BlueBay High Yield Bond
Fund; BlueBay Structured Funds; High Yield Enhanced Fund;
BlueBay Specialised Funds; Credit Opportunity (Master) Fund;
BlueBay Funds – BlueBay High Yield Corporate Bond Fund; The
BlueBay Distressed Opportunities (Master) Fund Limited; BlueBay
Funds – BlueBay High Yield Bond Fund and BlueBay Structured
Funds – High Yield Institutional Credit Select Fund;
“Board” or “Directors “
the board of directors of RCL Foods, which, as at the Last Practicable
Date, is comprised of the persons whose names appear on page 18 of
the Circular;
“Booker Tate”
Booker Tate Holdings Limited, registration number 4048624, a
company duly incorporated and registered with limited liability in
accordance with the laws of England and Wales, being a whollyowned subsidiary of TSB Sugar International;
“Broker”
a “stockbroker” as defined in the Financial Markets Act;
“Business Day”
any day other than Saturday, Sunday or any official public holiday
in South Africa;
“Capitau Holdings”
Capitau Holdings Limited, registration number 2006/030178/06, a
public company duly incorporated and registered with limited
liability in accordance with the laws of South Africa;
“Capitau Investment Management”
Capitau Investment Management Limited, registration number
2006/030161/06, a public company duly incorporated and registered
with limited liability in accordance with the laws of South Africa;
“Capitau Partnership”
Capitau Investment Management, in its capacity as the general
partner of Capitau SA Partnership, an en commandite partnership
established in South Africa;
6
“Capitau SPV”
Capitau FC Investment Proprietary Limited (previously Iningi
Investments 195 Proprietary Limited), registration number
2011/117650/07, a private company duly incorporated and registered
with limited liability in accordance with the laws of South Africa;
“Certificated Shareholders”
holders of Certificated Shares;
“Certificated Shares”
RCL Foods Shares that have not been Dematerialised, and are
represented by a share certificate;
“CIPC”
Companies and Intellectual Property Commission;
“Circular”
this document to RCL Foods Shareholders, dated 12 December 2013
including its annexures and incorporating the Revised Listing
Particulars, a notice of General Meeting, a form of proxy ( blue) and
enclosing a Form of Acceptance (where applicable);
“Common Monetary Area”
collectively, South Africa, the Republic of Namibia and the Kingdoms
of Lesotho and Swaziland;
“Companies Act”
Companies Act, No. 71 of 2008, as amended;
“CPIX”
consumer price index excluding interest rates on mortgage bonds;
“CSDP”
a “participant”, as defined in section 1 of the Financial Markets Act,
being a person authorised by a licenced central securities depository
to perform custody and administration services or settlement
services or both in terms of the central depository rules;
“Current RCL Foods BEE Shares”
the 51 177 217 (fifty one million one hundred and seventy seven
thousand two hundred and seventeen) RCL Foods Shares issued to
Eagle Creek pursuant to the Current RCL Foods BEE Structure;
“Current RCL Foods BEE Structure”
the RCL Foods BEE ownership structure, approved by RCL Foods
Shareholders in terms of a circular dated 25 February 2008, in
terms of which Eagle Creek subscribed for the Current RCL Foods
BEE Shares, which represented 15% (fifteen percent) of the issued
RCL Foods Shares at the time;
“Dematerialisation” or “Dematerialised”
the process by which securities which are evidenced by a certificate
are converted to securities that are held in collective custody by a
central securities depository or its nominee in a separate central
securities account and are transferrable by entry without a certificate
or written instrument;
“Dematerialised Shareholders”
holders of Dematerialised RCL Foods Shares;
“Distribution”
has the meaning set out in section 1 of the Companies Act;
“Eagle Creek” or “ECI”
Eagle Creek Investments 620 (Proprietary) Limited, registration
number 2006/030409/07, a private company duly incorporated and
registered with limited liability in accordance with the laws of South
Africa, the issued shares in which are owned by the Rainbow Trust
(42.7% (forty two point seven percent)) and the RCL Foods Strategic
Partners (57.3% (fifty seven point three percent));
“Eagle Creek Preference Shares”
51 177 217 (fifty one million one hundred and seventy seven thousand
two hundred and seventeen) cumulative redeemable preference
shares of R0.01 (one cent) each in the share capital of Eagle Creek,
subscribed for and held by RCL Foods pursuant to the Current RCL
Foods BEE Structure;
“Employer Companies”
RCL Foods and any other company, body corporate or other
undertaking in South Africa which is or would be deemed to be a
subsidiary or associate of RCL Foods in terms of the Listings
Requirements;
7
“Entitlements”
RCL Foods Minority Shareholders’ entitlements to subscribe for
Pro Rata Offer Shares in terms of the Pro Rata Offer, details of which
entitlements are tabled in Annexure 15 and calculated in the ratio of
53.10646 (fifty three point one zero six four six) Pro Rata Offer
Shares for every 100 (one hundred) RCL Foods Shares held on the
Record Date;
“EPS”
earnings per share;
“Equity Capital Raising”
collectively the Pro Rata Offer and the Placement by RCL Foods with
a view to raising additional capital in an amount of up to
R2 500 000 000 (two billion five hundred million Rand);
“ESOP Trust”
the RCL Employee Share Trust, Master’s reference number
IT1264/2013/(DBN), a BEE trust created by RCL Foods for the benefit
of all Qualifying Employees for purposes of the New RCL Foods BEE
Transaction, or the trustees for the time being of the said trust, as
the context may require;
“ESOP Trust Deed”
the trust deed establishing and governing the ESOP Trust;
“Exchange Control Regulations”
the Exchange Control Regulations, 1961, as amended, promulgated
in terms of section 9 of the South African Currency and Exchanges
Act, No. 9 of 1933, as amended;
“File”
shall have the meaning ascribed to “file” in the Companies Act;
“Financial Markets Act”
Financial Markets Act, No. 19 of 2012;
“Foodcorp”
New Foodcorp Holdings (Proprietary) Limited, registration number
2009/022279/07, a private company duly incorporated and registered
with limited liability in accordance with the laws of South Africa,
being a wholly-owned subsidiary of RCL Foods;
“Foodcorp Acquisition”
the initial acquisition by RCL Foods on 15 May 2013 of an effective
64.2% (sixty four point two percent) of the issued Foodcorp Shares,
and the subsequent acquisitions by RCL Foods of the remaining
Foodcorp Shares held by minorities which resulted in Foodcorp
becoming a wholly-owned subsidiary of RCL Foods;
“Foodcorp Shares”
ordinary shares in Foodcorp having no par value;
“Form of Acceptance”
a printed, personalised form of acceptance in respect of the Pro Rata
Offer on which Qualifying Certificated Shareholders are entitled to
subscribe for Pro Rata Offer Shares in accordance with their
Entitlements;
“General Meeting”
the general meeting of RCL Foods Shareholders to be held at the
Company’s registered office, Six The Boulevard, Westway Office
Park, Westville, Durban at 13:30 on Thursday, 16 January 2014 to
consider and, if deemed appropriate, pass (with or without
modification) the ordinary and special resolutions set out in the
notice of General Meeting forming part of the Circular, and including
any postponement or adjournment of such meeting;
“HEPS”
headline earnings per share;
“HL&H”
Hunt Leuchars & Hepburn Holdings (Proprietary) Limited,
registration number 1924/001164/07, a private company duly
incorporated and registered with limited liability in accordance with
the laws of South Africa, being an indirect wholly-owned subsidiary
of Remgro;
“IFRS”
International Financial Reporting Standards;
“IPI”
Industrial
Partnership
Investments
(Proprietary)
Limited,
registration number 1968/006415/07, a private company duly
incorporated and registered with limited liability in accordance with
the laws of South Africa, being a wholly-owned subsidiary of
Remgro;
8
“Income Tax Act”
the Income Tax Act, No. 58 of 1962, as amended;
“Independent Expert” or “Deloitte”
Deloitte & Touche, a professional partnership established in
accordance with the laws of South Africa with IRBA practice
number 902276;
“JIBAR”
Johannesburg Interbank Agreed Rate;
“JSE”
the securities exchange operated by the JSE Limited;
“JSE Limited”
JSE Limited, registration number 2005/022939/06, a public company
duly incorporated and registered with limited liability in accordance
with the laws of South Africa, and licensed to operate an exchange
in terms of the Financial Markets Act;
“King III Report”
the King III Report on Corporate Governance for South Africa 2009;
“Last Practicable Date”
Monday, 2 December 2013, being the last practicable date prior to the
finalisation of the Circular;
“Listings Requirements”
the JSE Limited Listings Requirements, as amended;
“MAI”
Massingir Agro Industrial SA, registration number 100333856,
a public limited company incorporated in accordance with the
company laws of Mozambique, being a wholly-owned subsidiary of
TSB Sugar International;
“MOI”
the memorandum of incorporation of RCL Foods adopted by
Shareholders at the annual general meeting of RCL Foods
Shareholders held on 20 November 2012;
“MTM Family Trust”
the MTM Family Trust, Master’s reference number IT8006/05, or the
trustees of the said trust, as the context may require;
“Net Asset Value Per Share” or
“NAV Per Share”
net asset value per share;
“New RCL Foods BEE Transaction”
the proposed BEE ownership transaction in terms of which the RCL
Foods Strategic Partners and the ESOP Trust will collectively
subscribe for the RCL Foods BEE Shares, which will collectively
constitute 6.68% (six point six eight percent) (post-issuance) of the
issued Shares of RCL Foods (prior to the Equity Capital Raising);
“Non-resident”
a person whose normal place of residence, domicile or registration is
outside of the Common Monetary Area;
“Participant”
a Qualifying Employee who has been allocated Units in the ESOP
Trust;
“Participation Percentage”
in respect of each Participant, the aggregate number of Units which
have been allocated to and are held by that Participant, divided by
the total number of Units which have been allocated and are held by
all Participants, expressed as a percentage;
“Placement”
the proposed placement of RCL Foods Shares to qualifying South
African and international investors, as part of the Equity Capital
Raising, details of which are set out in Section C, paragraph 3 of the
Circular;
“Placement Shares”
the new RCL Foods Shares to be offered for subscription pursuant to
the Placement;
“Placement Subscription Price”
in respect of the Placement, the subscription price payable in respect
of each Placement Share, to be determined in terms of an accelerated
bookbuild price;
“Prime Rate”
the publicly quoted basic rate of interest, compounded monthly in
arrears and calculated on a 365 (three hundred and sixty five) day
year, published by FirstRand Bank Limited as being its prime
overdraft rate from time to time;
9
“Project”
the greenfield sugar cane development project to be developed by
MAI, located in the Massingir District of Mozambique, c.310km from
Maputo, the feasibility study for which is being conducted by TSB
Sugar International and SIAL, as shareholders of MAI;
“Proposed RCL Foods Share Capital
Increase”
the proposed increase in the number of authorised RCL Foods Shares
from 1 000 000 000 (one billion) RCL Foods Shares to 2 000 000 000
(two billion) RCL Foods Shares by the creation of an additional
1 000 000 000 (one billion) RCL Foods Shares;
“Pro Rata Offer”
the proposed pro rata offer by RCL Foods to RCL Foods Minority
Shareholders in terms of which RCL Foods Minority Shareholders
will be entitled to subscribe for Pro Rata Offer Shares in the ratio of
53.10646 (fifty three point one zero six four six) Pro Rata Offer
Shares for every 100 (one hundred) RCL Foods Shares held on the
Record Date, in order to enable RCL Foods Minority Shareholders
to maintain their respective shareholding percentages in RCL Foods
post implementation of the TSB Acquisition;
“Pro Rata Offer Shares ”
a maximum of 74 214 642 (seventy four million two hundred and
fourteen thousand six hundred and forty two) new RCL Foods
Shares to be offered for subscription by RCL Foods pursuant to the
Pro Rata Offer;
“Pro Rata Offer Subscription Price”
in respect of the Pro Rata Offer, the subscription price payable in
respect of each Pro Rata Offer Share, to be announced on the
finalisation date for the Pro Rata Offer, which is expected to be
Friday, 17 January 2014;
“Prospectus Directive”
Directive 2003/71/EC on the prospectus to be published when
securities are offered to the public or admitted to trading and
Directive 2004/109/EC on the harmonisation of transparency
requirements in relation to information about issuers whose
securities are admitted to trading on a regulated market as amended
by Directive 2010/73/EU of the European Parliament and of the
council of 24 November 2010;
“Qualifying Certificated Shareholders”
Qualifying RCL Foods Minority Shareholders who hold Certificated
Shares;
“Qualifying Dematerialised
Shareholders”
Qualifying RCL Foods
Dematerialised Shares;
“Qualifying Employees”
persons who are permanently employed by an Employer Company
and who do not currently participate in any of RCL Foods’ other
share incentive schemes, other than the Rainbow Trust;
“Qualifying RCL Foods Minority
Shareholders”
RCL Foods Shareholders entitled to participate in the Pro Rata Offer,
being those RCL Foods Minority Shareholders that are recorded on
the Register on the Record Date;
“Quality Sugars”
Quality Sugars (Proprietary) Limited, registration number
2009/005469/07, a private company duly incorporated and registered
with limited liability in accordance with the laws of South Africa,
being a 25% (twenty five percent) held associate of The Royal
Swaziland Sugar Corporation Limited (Swaziland) and 75% (seventy
five percent) held by TSB Sugar International;
“Rainbow Farms” or “Rainbow”
Rainbow Farms Proprietary Limited, registration number
1960/002377/07, a private company duly incorporated and registered
with limited liability in accordance with the laws of South Africa,
being a wholly-owned subsidiary of RCL Foods;
“Rainbow Trust”
Rainbow Employee Trust, Master’s reference IT824/2008/PMB, the
employee share ownership trust established by the Company for
purposes of the Current RCL Foods BEE Structure;
“Rand” or “R” or “ZAR” and “cents”
South African Rand and cents, the official currency of South Africa;
10
Minority
Shareholders
who
hold
“Rand Merchant Bank”
Rand Merchant Bank, a division of FirstRand Bank Limited,
registration number 1929/001225/06, a public company duly
incorporated and registered with limited liability in accordance with
the laws of South Africa, and registered as a bank under the Banks
Act, 1990;
“RCL Foods BEE Common Shares”
13 962 863 (thirteen million nine hundred and sixty two thousand
eight hundred and sixty three) RCL Foods Shares to be issued to the
ESOP Trust, and 5 984 084 (five million nine hundred and eighty
four thousand and eighty four) RCL Foods Shares to be issued to
SPV 2 in terms of the New RCL Foods BEE Transaction, at a
subscription price of R17.32 (seventeen Rand and thirty two cents)
per RCL Foods Share;
“RCL Foods BEE Compulsory
Subscription Right”
the right of RCL Foods to, at any time during the RCL Foods BEE
Repurchase Option Period, require each relevant RCL Foods BEE
Vehicle to subscribe for a number of RCL Foods Shares, if the RCL
Foods BEE Notional Outstandings in respect of the RCL Foods BEE
Nominal Shares held by that RCL Foods BEE Vehicle is not equal to
zero at the end of the RCL Foods BEE Transaction Term, further
details of which are set out in Section B, paragraph 2.1.2.1 of the
Circular;
“RCL Foods BEE Implementation Date”
the later of: (i) the 5th (fifth) Business Day following the date on which
all of the conditions precedent to the RCL Foods BEE Relationship
Agreement (further details of which are set out in Section B,
paragraph 3 of the Circular) are fulfilled or waived, as the case may
be, and (ii) if RCL Foods Shareholders authorise the Pro Rata Offer,
the 1st (first) Monday following the date on which the Pro Rata Offer
closes;
“RCL Foods BEE Nominal Shares”
30 718 299 (thirty million seven hundred and eighteen thousand two
hundred and ninety nine) RCL Foods Shares to be issued to the
ESOP Trust and 13 164 985 (thirteen million one hundred and sixty
four thousand nine hundred and eighty five) RCL Foods Shares to be
issued to SPV 2 in terms of the New RCL Foods BEE Transaction, at
a nominal subscription price of R0.01 (one cent) per RCL Foods
Share;
“RCL Foods BEE Notional Amount”
the difference between the nominal subscription price paid in respect
of an RCL Foods BEE Nominal Share and the VWAP per RCL Foods
Share over the 30 (thirty) Business Days immediately preceding the
date on which the RCL Foods BEE Subscription Agreements were
executed, being an amount of R17.31 (seventeen Rand and thirty one
cents) per RCL Foods BEE Nominal Share;
“RCL Foods BEE Notional
Outstandings”
the RCL Foods BEE Notional Amount as increased and accumulated
with a notional interest rate equal to the Prime Rate from the RCL
Foods BEE Implementation Date until the end of the RCL Foods BEE
Transaction Term;
“RCL Foods BEE NVF”
the notional vendor facilitation to be provided by the Company to the
ESOP Trust and SPV 2 in order to facilitate the subscription for the
RCL Foods BEE Nominal Shares pursuant to the New RCL Foods
BEE Transaction;
“RCL Foods BEE Parties”
collectively, the RCL Foods Strategic Partners and: (i) in relation to
the Current RCL Foods BEE Structure, the beneficiaries of the
Rainbow Trust and (ii) in relation to the New RCL Foods BEE
Transaction, the beneficiaries of the ESOP Trust;
“RCL Foods BEE Preference Share
Subscription Agreements”
each of the agreements headed “Preference Share Subscription
Agreement” entered into between RCL Foods on the one hand and
each of SPV 1 and SPV 2 on the other, on 20 November 2013, in
terms of which RCL Foods will subscribe for the SPV 1 Preference
Shares and the SPV 2 Preference Shares, respectively, in order to
fund the subscription for the RCL Foods BEE Common Shares
pursuant to the New RCL Foods BEE Transaction;
11
“RCL Foods BEE Preference Shares”
the SPV 1 Preference Shares and the SPV 2 Preference Shares;
“RCL Foods BEE Relationship
Agreement”
the agreement headed “Relationship Agreement” entered into between
RCL Foods, the ESOP Trust, SPV 1, SPV 2 and the RCL Foods Strategic
Partners on 20 November 2013, in terms of which the relationship
between the RCL Foods BEE Parties, the RCL Foods BEE Vehicles and
RCL Foods and, in particular, the RCL Foods BEE NVF, shall be
governed;
“RCL Foods BEE Repurchase Option”
the option held by RCL Foods to, at any time during the RCL Foods
BEE Repurchase Option Period, repurchase from each relevant RCL
Foods BEE Vehicle a number of the RCL Foods BEE Nominal Shares
held by that RCL Foods BEE Vehicle, at a nominal amount, if the
RCL Foods BEE Notional Outstandings in respect of the RCL Foods
BEE Nominal Shares held by that RCL Foods BEE Vehicle is not
equal to zero at the end of the RCL Foods BEE Transaction Term,
further details of which are set out in Section B, paragraph 2.1.2.1 of
the Circular;
“RCL Foods BEE Repurchase
Option Period”
the period commencing at the end of the RCL Foods BEE Transaction
Term and ending on the 70th (seventieth) Business Day thereafter;
“RCL Foods BEE Shares”
collectively, the RCL Foods BEE Common Shares and the RCL Foods
BEE Nominal Shares;
“RCL Foods BEE Subscription
Agreements”
the agreements headed “Ordinary Share Subscription Agreement”
entered into between RCL Foods and each of the ESOP Trust and
SPV 2 on 20 November 2013, in terms of which the ESOP Trust and
SPV 2 will subscribe for the RCL Foods BEE Shares;
“RCL Foods BEE Subscription Option”
the option held by the relevant RCL Foods BEE Vehicles to, from
time to time and for so long as the RCL Foods BEE Notional Amount
in respect of the RCL Foods BEE Nominal Shares held by the relevant
RCL Foods BEE Vehicle does not equal zero, subscribe for additional
RCL Foods Shares in order to reduce the RCL Foods BEE Notional
Outstandings further details of which are set out in Section B,
paragraph 2.1.2.1 of the Circular;
“RCL Foods BEE Transaction
Agreements”
collectively, the RCL Foods BEE Relationship Agreement; the RCL
Foods BEE Subscription Agreements; the ESOP Trust Deed; the RCL
Foods BEE Preference Share Subscription Agreements; the SPV 2
reversionary pledge and cession in security envisaged in Section B,
paragraph 2.1.2.1.7 of the Circular; the RCL Foods Strategic Partners
pledge and cession in security envisaged in Section B, paragraph
2.1.2.1.8 of the Circular; the ESOP Trust guarantee and pledge and
cession in security envisaged in Section B, paragraph 2.1.2.2.4 of the
Circular; the SPV 1 cession in security of the SPV 1 bank account
envisaged in Section B, paragraph 2.1.2.2.4 of the Circular; the SPV
2 pledge and cession in security and the SPV 2 cession in security of
the SPV 2 bank account envisaged in Section B, paragraph 2.1.2.2.5
of the Circular, entered into on 20 November 2013;
“RCL Foods BEE Transactions”
collectively, the Specific Repurchase and the New RCL Foods BEE
Transaction;
“RCL Foods BEE Transaction Term”
a period of 8 (eight) years commencing on the RCL Foods BEE
Implementation Date;
“RCL Foods BEE Trigger Event”
if at any time during the RCL Foods BEE Transaction Term: (i) an
insolvency event occurs in respect of any of the RCL Foods BEE
Vehicles or any of the RCL Foods Strategic Partners; or (ii) in the
case of an RCL Foods Strategic Partner that is a natural person, that
RCL Foods Strategic Partner dies or is placed under curatorship or
(iii) any of the RCL Foods BEE Vehicles or any of the RCL Foods
Strategic Partners breaches certain BEE principles applicable to it,
as set out in the RCL Foods BEE Relationship Agreement;
“RCL Foods BEE Vehicles”
the ESOP Trust, SPV 1 and SPV 2, or any one or more of them as the
context may require;
12
“RCL Foods Group”
RCL Foods and all its subsidiaries and associates;
“RCL Foods Minority Shareholders”
all RCL Foods Shareholders excluding IPI, TSB Sugar Holdings and
ECI and, subject to certain exceptions, Restricted Shareholders;
“RCL Foods Shares” or “Shares”
ordinary shares of no par value in RCL Foods;
“RCL Foods Strategic Partners”
collectively, the following entities:
•
in respect of the Current RCL Foods BEE Structure, Imbewu
Consortium SPV 3 (Proprietary) Limited, registration number
2007/014778/07, a private company duly incorporated and
registered with limited liability in accordance with the laws
of South Africa, and in respect of the New RCL Foods BEE
Transaction, Imbewu SPV 8 Proprietary Limited, registration
number 2012/191568/07, a private company duly incorporated
and registered which will hold 69.76% (sixty nine point seven
six percent) of the shares in SPV 2 with limited liability in
accordance with the laws of South Africa; and
•
the trustees for the time being of the Ikamva Labantu
Empowerment Trust, Master’s reference number IT4485/2004,
which will hold 29.07% (twenty nine point zero seven percent) of
the shares in SPV 2;
•
Mrs
Manana
Margaret
Nhlanhla,
identity
number
5206090773084, who is a non-executive director of RCL Foods
and a Black Person who will hold 1.17% (one point one seven
percent) of the shares in SPV 2;
“Record Date”
the last day for RCL Foods Minority Shareholders to be recorded in
the Register in order to participate in the Pro Rata Offer, being close
of business on Friday, 31 January 2014;
“Redemption and Repurchase
Agreement”
the agreement headed “Preference Share Redemption and Share
Repurchase Agreement” entered into between RCL Foods and Eagle
Creek on 21 November 2013, in terms of which Eagle Creek agreed
to redeem the Eagle Creek Preference Shares and RCL Foods agreed
to repurchase the Current RCL Foods BEE Shares from Eagle Creek,
in order to unwind the Current RCL Foods BEE Structure;
“Register”
collectively, the register of Certificated Shareholders maintained by
the Transfer Secretary and the sub-register of Dematerialised
Shareholders maintained by the relevant CSDPs in accordance with
section 50 of the Companies Act;
“Relevant Member State”
each member state of the European Economic Area which has
implemented the Prospectus Directive;
“Remgro”
Remgro Limited, registration number 1968/006415/06, a public
company duly incorporated and registered with limited liability in
accordance with the laws of South Africa;
“Remgro Management Services”
Remgro Management Services Limited, registration number
1969/001100/06, a public company duly incorporated and registered
with limited liability in accordance with the laws of South Africa,
being an indirect wholly-owned subsidiary of Remgro;
“Reporting Accountants and Auditors”
PricewaterhouseCoopers Inc., registration number 1998/012055/21,
registered accountants and auditors, a private company duly
incorporated and registered with limited liabilityin accordance with
the laws of South Africa, with IRBA practice number 901121;
“Restricted Shareholders”
RCL Foods Minority Shareholders with registered addresses in, or
who are resident or located in, a Restricted Territory;
13
“Restricted Territories”
subject to certain exceptions, the United Kingdom, the European
Economic Area, Canada, the United States of America, Japan,
Australia and Hong Kong and any other jurisdiction wherein the
Pro Rata Offer Shares may not be offered, subscribed for or delivered,
and where to do so may constitute a violation of local securities laws
or regulations;
“Revised Listing Particulars”
the revised listing particulars of RCL Foods contained in the
Circular;
“SENS”
the Stock Exchange News Service of the JSE;
“Shareholders” or “RCL Foods
Shareholders”
registered holders of RCL Foods Shares;
“SIAL”
Sociedade de Investimentos Agroindustriais de Limpopo, SA
(registration number 100276879, a public limited company
incorporated in accordance with the company laws of Mozambique
and currently comprising a consortium of Mozambican investors
and incorporated as the local Mozambican investors in the Project;
“South Africa”
the Republic of South Africa;
“Specific Repurchase”
the proposed specific repurchase of the Current RCL Foods BEE
Shares by RCL Foods from ECI, at a repurchase price per Current
RCL Foods BEE Share equal to the VWAP per RCL Foods Share over
the 30 (thirty) trading days ending on the date on which the ECI
Preference Shares are redeemed in terms of the Redemption and
Repurchase Agreement;
“SPV 1”
Business Ventures Investments No 1762 Proprietary Limited,
registration number 2013/145414/07, a private company duly
incorporated and registered with limited liability in accordance with
the laws of South Africa, which will be wholly-owned by the ESOP
Trust;
“SPV 2”
Business Ventures Investments No 1763 Proprietary Limited,
registration number 2013/145777/07, a private company duly
incorporated and registered with limited liability in accordance with
the laws of South Africa, which will be wholly-owned by the RCL
Foods Strategic Partners;
“SPV 1 Preference Shares”
241 837 (two hundred and forty one thousand eight hundred and
thirty seven) cumulative, redeemable preference shares in the
authorised preference share capital of SPV 1 to be issued by SPV 1 to
RCL Foods in order to fund a portion of the New RCL Foods BEE
Transaction;
“SPV 2 Preference Shares”
103 645 (one hundred and three thousand six hundred and forty
five) cumulative, redeemable preference shares in the issued
preference share capital of SPV 2 to be issued by SPV 2 to RCL Foods
in order to fund a portion of the New RCL Foods BEE Transaction;
“Strate”
Strate Limited, registration number 1998/022242/06, a public
company duly incorporated and registered with limited liability in
accordance with the laws of South Africa, licensed to operate a
central securities depositary in terms of the Financial Markets Act;
“ Tangible Net Asset Value Per Share”
or “TNAV Per Share”
net asset value per RCL Foods Share excluding intangible assets and
goodwill;
“Transfer Secretary” or
“Computershare”
Computershare Investor Services (Proprietary) Limited, registration
number 2004/003647/07, a private company duly incorporated and
registered with limited liability in accordance with the laws of South
Africa;
“TSB Acquisition”
the acquisition by RCL Foods of the TSB Acquisition Shares
from TSB Sugar Holdings in exchange for the issue of the
TSB Consideration Shares in settlement of the TSB Acquisition
Consideration;
14
“TSB Acquisition Consideration”
R4 000 000 000 (four billion Rand), being the aggregate purchase
consideration for the TSB Acquisition Shares;
“TSB Acquisition Shares”
collectively, 100 (one hundred) ordinary shares in TSB Sugar
International held by TSB Sugar Holdings, constituting 100%
(one hundred percent) of the total issued share capital of TSB Sugar
International and 767 (seven hundred and sixty seven) ordinary
shares in TSB Sugar RSA held by TSB Sugar Holdings, constituting
100% (one hundred percent) of the total issued share capital of TSB
Sugar RSA;
“TSB BEE Exit Call Option”
the right of RCL Foods to, at any time after the TSB BEE Release
Date and for a period of 1 (one) calendar year thereafter, repurchase
all or some of the TSB BEE Shares from TSB BEE Co further details
of which are set out in Section A, paragraph 5.5 of the Circular;
“TSB BEE Co”
Malongoana Investment RF Proprietary Limited, registration
number 2013/030598/07, a private company duly incorporated and
registered with limited liability in accordance with the laws of South
Africa, being a wholly-owned subsidiary of the MTM Family Trust;
“TSB BEE Implementation Date”
the later of: (i) the 1st (first) Business Day after the date on which all
of the conditions precedent to the TSB Sale of Shares Agreement (as
set out in Section A, paragraph 5.8 of the Circular) are fulfilled or
waived, as the case may be, and (ii) if RCL Foods Shareholders
authorise the Pro Rata Offer, the 3rd (third) Business Day after the
date on which the Pro Rata Offer closes;
“TSB BEE Maturity Call Option”
the right of RCL Foods to, upon the expiry of the TSB BEE NVF Period,
repurchase a number of the TSB BEE Shares from TSB BEE Co at a
repurchase consideration of R0.01 (one cent) per TSB BEE Share,
further details of which are set out in Section A paragraph 5.5 of the
Circular;
“TSB BEE Notional Amount”
R120 000 000 (one hundred and twenty million Rand);
“TSB BEE Notional Outstandings”
the TSB BEE Notional Amount as increased and accumulated with a
notional interest equal to the Prime Rate plus 1% (one percent) from
31 July 2013 and notionally reduced by any Distributions in respect
of the TSB BEE Shares;
“TSB BEE NVF”
the notional vendor facilitation to be provided by the Company to
TSB BEE Co in order to facilitate the TSB BEE Transaction;
“TSB BEE NVF Period”
the period commencing on 1 July 2013 and terminating on
the 8th (eighth) anniversary thereof, being 1 July 2021;
“TSB BEE Pre-emptive Right”
the right of RCL Foods to, in the event that TSB BEE Co wishes to
dispose of a number of the TSB BEE Shares held by it to a third
party, repurchase that number of TSB BEE Shares from TSB BEE
Co, further details of which are set out in Section A, paragraph 5.5
of the Circular;
“TSB BEE Release Date”
in respect of the TSB BEE Transaction, the earlier of: (i) the date on
which the TSB BEE Notional Outstandings equal zero and (ii) the
date of implementation of the TSB BEE Maturity Call Option or the
TSB BEE Trigger Event Call Option;
“TSB BEE Shares”
6 928 406 (six million nine hundred and twenty eight thousand four
hundred and six) RCL Foods Shares to be issued to TSB BEE Co in
terms of the TSB BEE Transaction;
“ TSB BEE Subscription and
Relationship Agreement”
the agreement headed “Subscription and Relationship Agreement”
entered into between RCL Foods, the MTM Family Trust, Dr NM
Phosa and TSB BEE Co on 21 November 2013, in terms of which,
inter alia, TSB BEE Co agreed to subscribe for the TSB BEE Shares,
as amended;
“TSB BEE Transaction”
the proposed TSB BEE transaction whereby TSB BEE Co will
subscribe for the TSB BEE Shares;
15
“TSB BEE Trigger Event”
if at any time: (i) any of TSB BEE Co, the MTM Family Trust and/or
Dr NM Phosa breaches any of the warranties and/or undertakings
provided in the TSB BEE Subscription and Relationship Agreement;
(ii) an insolvency event occurs in respect of TSB BEE Co or TSB BEE
Co compromises with its creditors; (iii) any of TSB BEE Co or a
director thereof, the MTM Family Trust or a trustee thereof, or
Dr NM Phosa is found guilty of any offence involving theft or fraud
or any serious violation of any legislation applicable to it (including
the BBBEE Act and/or the BEE Codes), or (iv) Dr NM Phosa holds or
seeks political office or a position in local or national government on
behalf of any political party, as more fully set out in the TSB BEE
Subscription and Relationship Agreement;
“TSB BEE Trigger Event Call Option”
the right of RCL Foods to, in the event that a TSB BEE Trigger Event
occurs, repurchase the TSB BEE Shares from TSB BEE Co at a
discount, further details of which are set out in Section A,
paragraph 5.5 of the Circular;
“TSB Consideration Shares”
230 946 882 (two hundred and thirty million nine hundred and
forty six thousand eight hundred and eighty two) RCL Foods Shares
to be issued by RCL Foods to TSB Sugar Holdings in settlement of
the TSB Acquisition Consideration, the number of which was
determined by dividing the TSB Acquisition Consideration by the
TSB Transaction Share Price;
“TSB Land Claimants”
individuals or communities who have valid land claims in respect of
properties from which cane is delivered to any TSB Sugar RSA mills
pursuant to the restitution of land rights in terms of the Restitution
of Land Rights Act, No. 22 of 1994, as amended, but to whom land
cannot be or has not been restored;
“TSB Material Contracts”
the contracts to which TSB Sugar RSA or TSB Sugar International
are parties and which are material to the business of each of them,
as listed in Annexure 4 of the TSB Sale of Shares Agreement;
“TSB Sale of Shares Agreement”
the agreement headed “Sale of Shares Agreement” entered into
between RCL Foods and TSB Sugar Holdings on 20 November 2013,
regarding the TSB Acquisition;
“TSB Sugar Holdings”
TSB Sugar Holdings (Proprietary) Limited, registration number
1994/002412/07, a private company duly incorporated and registered
with limited liability in accordance with the laws of South Africa,
being an indirect wholly-owned subsidiary of Remgro;
“TSB Sugar International”
TSB Sugar International (Proprietary) Limited, registration number
2004/010444/07, a private company duly incorporated and registered
with limited liability in accordance with the laws of South Africa,
being a wholly-owned subsidiary of TSB Sugar Holdings;
“TSB Sugar RSA”
TSB Sugar RSA (Proprietary) Limited, registration number
1947/026583/07, a private company duly incorporated and registered
with limited liability in accordance with the laws of South Africa,
being a wholly-owned subsidiary of TSB Sugar Holdings;
“TSB Transaction Share Price”
R17.32 (seventeen Rand and thirty two cents), being the VWAP per
RCL Foods Share over the 30 (thirty) Business Days immediately
preceding the date on which the TSB Sale of Shares Agreement was
signed, being 20 November 2013;
“TSB Transactions”
collectively, the TSB Acquisition and the TSB BEE Transaction;
“Unit”
a unit in the ESOP Trust representing a vested right to receive: (i) a
portion of the Distributions received by the ESOP Trust in respect of
the RCL BEE Shares held by the ESOP Trust and (ii) a number of the
remaining RCL Foods BEE Shares held by the ESOP Trust after the
expiry of the RCL Foods BEE Transaction Term and once the SPV 1
Preference Shares have been redeemed and the RCL Foods BEE
Repurchase Option has been exercised, in accordance with the
Participant’s Participation Percentage;
16
“USD”
United States Dollar, the official currency of the United States of
America;
“U.S. Securities Act”
U.S. Securities Act of 1933, as amended;
“VAT”
value-added tax, payable in terms of the Value-Added Tax Act, No. 89
of 1991, as amended;
“Vector”
Vector Logistics (Proprietary) Limited, registration number
2002/009081/07, a private company duly incorporated and registered
with limited liability in accordance with the laws of South Africa,
being a wholly-owned subsidiary of RCL Foods; and
“VWAP”
volume-weighted average traded price on the JSE.
17
RCL FOODS LIMITED
Previously known as Rainbow Chicken Limited
Incorporated in the Republic of South Africa
(Registration number 1966/004972/06)
Share Code: RCL
ISIN: ZAE000179438
(“RCL Foods” or the “Company”)
DIRECTORS
Executive
Non-executive
M Dally (Chief Executive Officer)
RH Field (Chief Financial Officer)
JJ Durand (Chairman)
HJ Carse
PR Louw
JB Magwaza (Retired 18 November 2013)
GC Zondi
Independent non-executive
RV Smither (Lead Independent Director)
M Griessel (Retired 18 November 2013)
NP Mageza
DTV Msibi
MM Nhlanhla
GM Steyn
CIRCULAR TO RCL FOODS SHAREHOLDERS
1.
INTRODUCTION
On 21 November 2013 RCL Foods announced on SENS that it intended to acquire 100% (one hundred
percent) of the shares in TSB Sugar RSA and TSB Sugar International from TSB Sugar Holdings, an
indirect wholly-owned subsidiary of Remgro. On the date of implementation of the TSB Acquisition,
and subsequent to the implementation of the Ancillary Transaction (as outlined in Section A,
paragraph 1, of the Circular), TSB Sugar Holdings will hold 69.5% (sixty nine point five percent) of the
Shares in RCL Foods. RCL Foods will settle the full TSB Acquisition Consideration through the issue of
the TSB Consideration Shares to TSB Sugar Holdings. Simultaneously with the TSB Acquisition, RCL
Foods has agreed to enter into a BEE ownership transaction with TSB BEE Co, a special purpose vehicle
established for the benefit of the strategic equity partner of TSB Sugar Holdings.
In March 2008, RCL Foods implemented the Current RCL Foods BEE Structure which entailed the issue
of the Current RCL Foods BEE Shares to ECI, amounting to a 15% (fifteen percent) shareholding in RCL
Foods at the time, for the benefit of the RCL Foods BEE Parties. In terms of the Current RCL Foods BEE
Structure, the RCL Foods BEE Parties, through their investment vehicle ECI, obtained bridge funding
from an external funder to finance the subscription price of the Current RCL Foods BEE Shares. RCL
Foods subsequently subscribed for the Eagle Creek Preference Shares in order to enable ECI to settle the
external bridge funding. The Current RCL Foods BEE Structure is considered unlikely to deliver any
equity value to the RCL Foods BEE Parties and as such, RCL Foods intends to implement the New RCL
Foods BEE Transaction to sustain its BEE ownership and enable value creation for the RCL Foods BEE
Parties.
In line with RCL Foods’ strategy to build a diversified food business of scale in sub-Saharan Africa, the
Company seeks to raise up to R2 500 000 000 (two billion five hundred million Rand) via the Equity
Capital Raising in order to fund future growth and expansion projects.
18
2.
RATIONALE
2.1
TSB Acquisition
RCL Foods is a consumer-focused business that seeks to add value for consumers and customers
through its market leading brands. RCL Foods’ strategy is to build a diversified food business of
scale in sub-Saharan Africa with compelling brands that deliver to consumer and customer needs.
The Foodcorp Acquisition and the joint venture in Zambia with Zambeef are evidence of RCL Foods’
strategic intent. The TSB Acquisition provides a unique opportunity for RCL Foods to diversify
across the food industry value chain.
Upon the successful completion of the TSB Acquisition, the equity value of the RCL Foods Group
will be approximately R15 000 000 000 (fifteen billion Rand).
2.2
TSB BEE Transaction
In line with TSB Sugar Holdings’ long-term goal of value creation for shareholders, TSB Sugar
Holdings was in the process of finalising a BEE ownership transaction to appropriately empower
its shareholder base. TSB Sugar Holdings believes that this is in line with the spirit of the BBBEE
Act and the overriding objective of wealth redistribution.
TSB Sugar Holdings has been developing and negotiating a BEE ownership transaction with key
stakeholders for the past two years, in terms of which TSB BEE Co would be issued with c. 3% (three
percent) of the equity of TSB Sugar Holdings.
As negotiations between TSB BEE Co and TSB Sugar Holdings were at a final stage, RCL Foods has
undertaken to implement the TSB BEE transaction at the RCL Foods level, allowing TSB BEE Co to
become a shareholder at the listed company level.
2.3
RCL Foods BEE Transactions
Since the inception of the Current RCL Foods BEE Structure, the share price of RCL Foods has not
performed in line with original expectations in terms of capital appreciation and dividend flows. As
a result, the Current RCL Foods BEE Structure is unlikely to deliver any value to the RCL Foods
BEE Parties. Furthermore, in March 2013, RCL Foods concluded a rights offer, which resulted in
the dilution of the RCL Foods BEE Parties’ shareholding in RCL Foods from 15% (fifteen percent)
to 8.1% (eight point one percent).
The TSB Acquisition presents an opportune time to review the Current RCL Foods BEE Structure
to ensure that RCL Foods continues to deliver on its empowerment objectives, with an overriding
objective of creating long-term economic value for the RCL Foods BEE Parties. It also allows for the
inclusion of eligible Foodcorp and TSB Sugar RSA and TSB Sugar International employees.
2.4
Equity Capital Raising
RCL Foods is currently considering significant growth and expansion projects in South Africa and
the rest of sub-Saharan Africa in the broader food and fast moving consumer goods space. In order
to capitalise fully on these opportunities, RCL Foods has determined that it requires additional
capital.
The Board has accordingly resolved to propose an equity capital raising in an amount of up to
R2 500 000 000 (two billion five hundred million Rand) via a combination of the Pro Rata Offer to
Qualifying Minority Shareholders and the Placement.
2.5
The Proposed RCL Foods Share Capital Increase and the corresponding amendment to the MOI
The Board is proposing an increase in the number of the Company’s authorised shares from
1 000 000 000 (one billion) RCL Foods Shares to 2 000 000 000 (two billion) RCL Foods Shares as it
believes that the current number of authorised RCL Foods Shares is insufficient to allow RCL Foods
to raise adequate equity funding for strategic growth opportunities.
In order to give effect to the Proposed RCL Foods Share Capital Increase, it will be necessary for
RCL Foods Shareholders to approve an amendment to the MOI.
If approved by RCL Foods Shareholders, the Proposed RCL Foods Share Capital Increase will become
effective on the date on which the notice of amendment in respect of the corresponding amendment
to the MOI is Filed with the CIPC, as contemplated in section 16(9)(b)(i) of the Companies Act.
19
3.
PURPOSE OF THE CIRCULAR
The purpose of the Circular is to: (i) provide RCL Foods Shareholders with information regarding the
TSB Transactions, the RCL Foods BEE Transactions, the Proposed RCL Foods Share Capital Increase and
the Equity Capital Raising in order to enable RCL Foods Shareholders to make an informed decision as
to whether or not they should vote in favour of the ordinary and special resolutions to be proposed at the
General Meeting and (ii) convene the General Meeting in order to propose the necessary resolutions to
enable RCL Foods Shareholders to authorise:
3.1
the implementation of the TSB Acquisition and in relation thereto:
•
3.2
3.3
4.
the issue of the TSB Consideration Shares to TSB Sugar Holdings in settlement of the TSB
Acquisition Consideration;
the implementation of the TSB BEE Transaction and in relation thereto:
•
the specific issue of the TSB BEE Shares to TSB BEE Co;
•
the specific repurchase of TSB BEE Shares pursuant to the TSB BEE Maturity Call Option, the
TSB BEE Trigger Event Call Option, the TSB BEE Exit Call Option and/or the TSB BEE Preemptive Right; and
•
the provision of financial assistance by the Company to TSB BEE Co in terms of section 44 of the
Companies Act;
the implementation of the New RCL Foods BEE Transaction and in relation thereto:
•
the unwinding of the Current RCL Foods BEE Structure by implementing the Specific Repurchase;
•
the specific issue of the RCL Foods BEE Shares to the relevant RCL Foods BEE Vehicles;
•
the specific repurchase of the RCL Foods BEE Shares pursuant to the exercise of the RCL Foods
BEE Repurchase Option, the RCL Foods BEE Compulsory Subscription Right and or the RCL
Foods BEE Subscription Option;
•
the provision of financial assistance by the Company to the RCL Foods BEE Vehicles in terms of
section 44 of the Companies Act; and
•
the issue of additional RCL Foods Shares to the relevant RCL Foods BEE Vehicles pursuant to
the exercise of the RCL Foods BEE Compulsory Subscription Right;
3.4
the Equity Capital Raising; and
3.5
the Proposed RCL Foods Share Capital Increase and the corresponding amendment to the MOI.
GENERAL MEETING
The General Meeting of RCL Foods Shareholders to consider and, if deemed fit, pass with or without
modification the ordinary and special resolutions set out in the notice of General Meeting, will be held at
the Company’s registered office, Six The Boulevard, Westway Office Park, Westville, Durban at 13:30 on
Thursday, 16 January 2014.
The notice of General Meeting and a form of proxy (blue) for use by Certificated Shareholders and
Dematerialised Shareholders with “own name” registration who are unable to attend the General Meeting
in person, are attached to the Circular. A duly completed form of proxy (blue) must be received by the
Transfer Secretary by no later than 13:30 on Tuesday, 14 January 2014 or handed to the chairperson of
the General Meeting before the appointed proxy exercises any of the relevant Shareholder’s rights at the
General Meeting (or any postponement or adjournment of the General Meeting).
All the requisite resolutions are set out in the notice of General Meeting which forms part of the Circular.
20
A. INFORMATION RELATING TO THE TSB TRANSACTIONS
1.
INFORMATION ON THE ANCILLARY TRANSACTION
As part of Remgro’s strategy to re-organise its food interests under a common, well managed platform,
thereby simplifying its holding structures, IPI will, prior to the implementation of the TSB Acquisition,
dispose of all of its RCL Foods Shares to TSB Sugar Holdings. TSB Sugar Holdings will discharge the
consideration for the acquisition of the RCL Foods Shares through the issue of ordinary shares in TSB
Sugar Holdings to IPI. Following the Ancillary Transaction, IPI and HL&H together will hold 100% (one
hundred percent) of the ordinary shares of TSB Sugar Holdings which will, in turn, hold 69.5% (sixty
nine point five percent) of the RCL Foods Shares prior to the implementation of the TSB Transactions, the
Equity Capital Raising and the RCL Foods BEE Transactions.
The diagram below represents the resultant shareholding structure subsequent to the Ancillary
Transaction but prior to the implementation of the TSB Transactions, the Equity Capital Raising and the
RCL Foods BEE Transactions:
Remgro
100.0%
IPI
100.0%
65.3%
HL&H
34.7%
RCL Foods
minority
shareholders
TSB Sugar
Holdings
30.5%
69.5%
RCL Foods
100.0%
Rainbow
Farms
2.
100.0%
Foodcorp
100.0%
Vector
Logistics
100.0%
100.0%
TSB Sugar
International
TSB Sugar
RSA
49.0%
Zam Chick
Limted
51.0%
Zamhatch
Limited
RATIONALE FOR THE TSB ACQUISITION
RCL Foods is a consumer-focused business that seeks to add value for consumers and customers through
its market leading brands. RCL Foods’ strategy is to build a diversified food business of scale in subSaharan Africa that has compelling brands that deliver to consumer and customer needs. The Foodcorp
Acquisition and the joint venture in Zambia with Zambeef are evidence of RCL Foods’ strategic intent. The
TSB Acquisition provides a unique opportunity for RCL Foods to diversify across the food industry value
chain.
The TSB Acquisition will further consolidate RCL Foods’ platform from which to harness and grow within
the increasingly attractive African consumer food industry.
The TSB Acquisition represents an attractive opportunity for RCL Foods because it will, inter alia:
• create a more broadly diversified revenue stream out of the combined RCL Foods and TSB Sugar
Holdings operations;
• harness the selling, distribution and credit management synergies between Vector and Quality Sugars;
• provide potential to consolidate the Group’s resources towards a holistic and focused food strategy
with enhanced scale and critical mass; and
• establish an attractive, well capitalised agri-foods platform, which is well disposed to drive future subSaharan Africa expansion opportunities.
21
3.
INFORMATION ON TSB SUGAR HOLDINGS
TSB Sugar Holdings, through its operating subsidiaries, is engaged in the business of sugar cane
agriculture, sugar manufacturing, marketing, sales and distribution. TSB Sugar Holdings operates three
mills in South Africa at Malalane, Komati and Pongola, which are all situated in the Lowveld of South
Africa in close proximity to Mozambique. TSB Sugar Holdings has the capacity to produce 700 000 (seven
hundred thousand) tonnes of sugar per annum, directly employing more than 3 500 (three thousand five
hundred) people.
In addition, TSB Sugar Holdings supports c.1 800 (one thousand eight hundred) commercial and smallscale farmers on c.54 000 (fifty four thousand) hectares of irrigated land, from which farmers supply
c.85% (eighty five percent) of the sugar cane to TSB Sugar RSA’s mills. TSB Sugar Holdings is currently
the lowest-cost sugar producer in the South African sugar industry. In addition to its sugar expertise,
TSB Sugar Holdings produces animal feed from by-products of the sugar manufacturing process. During
the 2013 financial year TSB produced c. 294 000 (two hundred and ninety four thousand) tonnes of
animal feed.
3.1
Nature of the TSB Sugar Holdings business
TSB Sugar Holdings, through its subsidiaries, is one of South Africa’s leading producers of refined
and raw sugar. Sugar is marketed nationally by Quality Sugars under the Selati brand. TSB Sugar
Holdings also exports raw sugar through the South African Sugar Association and refined sugar
to regional markets. TSB Sugar Holdings further sells animal feed through the Molatek business.
3.2
TSB Sugar Holdings trading results
The following table sets out the summarised trading results from continuing operations for TSB
Sugar Holdings for the financial years ended 30 June 2011, 2012 and 2013:
R’000
Revenue
EBITDA1
Operating profit
Net finance costs
Profit after taxation
2013
5 021 848
455 816
328 914
(35 651)
348 100
2012
4 621 220
593 722
473 144
(37 078)
414 248
2011*
4 905 358
412 561
274 775
(53 907)
192 747
*Fifteen months
3.3
The Project
TSB Sugar International and SIAL have been awarded an exclusive right by the Government
of Mozambique to develop a sugar cane project in the Massingir District of Mozambique. TSB
Sugar International and SIAL are pursuing the Project using a newly established company, MAI.
TSB Sugar International currently holds 51% (fifty one percent) of the shares in MAI with SIAL
owning the balance.
The Project is a greenfield sugar cane development located in the Massingir District of Mozambique,
c.310km (three hundred and ten kilometers) from Maputo. MAI has been granted exclusive use of
approximately 31 300 (thirty one thousand three hundred) hectares of land by the Government of
Mozambique planned for development as a net 23 000 (twenty three thousand) hectares of sugar
cane over an eight-year period. The balance of the MAI land will be used for social infrastructure,
factory site, general roads and field layout. SIAL has applied for use of a further 14 500 (fourteen
thousand five hundred) hectares, for its own benefit from which a net 12 000 (twelve thousand)
hectares will be developed to produce sugar cane under a development agreement between MAI
and SIAL. Under the Project’s social responsibility programme, MAI will facilitate the development
of 2 500 (two thousand five hundred) net hectares of community land for sugar cane production
for the community farmers. The overall land to be developed is approximately 37 500 (thirty seven
thousand five hundred) net hectares of sugar cane.
With the assistance of Booker Tate as the Project’s technical expert, a detailed risk assessment for
the Project has been completed and the Project’s feasibility study is anticipated to be completed by or
about March 2014. In addition, the Project is expected to reach financial closure around November
2014. The Project is anticipated to produce sugar from sugar cane and ethanol from molasses for
local and regional markets and for export to European markets.
Funding for the Project is expected to be sourced in two phases. Phase I of the fund raising process
is expected to commence by mid-2014, whilst Phase II is expected to commence in 2018. Phase I is
intended to be funded by a combination of debt and equity. TSB Sugar International will need to
raise capital to fund its proportionate share of the equity required for Phase I. Conditional upon a
favourable feasibility report for the Project, part of the proceeds from the proposed Equity Capital
Raising (refer to Section C) will be utilised to fund Phase 1.1
1
22
The lower EBITDA in 2013 is due to the Project setup costs as well as lower throughput arising from the general transport strike in
September 2012 and adverse weather conditions that delayed harvesting
Subsequent to the funding process, it is expected that TSB Sugar International will hold controlling
shareholding in MAI, with the balance of the equity being held between SIAL and new equity
investors. The anticipated investment requirements for both phases of the Project (Phases I and II)
are currently estimated to be in excess of USD1 200 000 000 (one billion two hundred million USD).
4.
INFORMATION ON THE TSB ACQUISITION
4.1
TSB Sale of Shares Agreement
TSB Sugar Holdings and RCL Foods entered into the TSB Sale of Shares Agreement on 20 November
2013. In terms of the TSB Sale of Shares Agreement, subject to the fulfilment of certain conditions
precedent, RCL Foods will purchase the TSB Acquisition Shares.
4.2
TSB Acquisition Consideration
The TSB Acquisition Shares (230 946 882 RCL Foods Shares) will be purchased at the TSB Acquisition
Consideration which was calculated based on an independent valuation of TSB Sugar RSA and TSB
Sugar International, and negotiation with Remgro and IPI. The TSB Acquisition Consideration will
be settled through the issue of the TSB Consideration Shares. The number of RCL Foods Shares to
be issued to TSB Sugar Holdings was determined by dividing the TSB Acquisition Consideration by
the TSB Transaction Share Price.
4.3
TSB BEE Land Claimants
TSB Sugar RSA has been in discussions with the Department of Rural Development and Land
Reform and the Land Claims Commission in respect of a potential BEE ownership transaction with
the TSB Land Claimants in terms of which the acquisition by the TSB Land Claimants of up to 6%
(six percent) of the issued share capital of TSB Sugar Holdings was considered.
Although several presentations were made to the Land Claims Commission and Department of
Rural Development and Land Reform, no legal agreements have been concluded.
As part of the TSB Acquisition, RCL Foods has undertaken to implement the proposed transaction
with the TSB Land Claimants through the issuance of RCL Foods Shares. The transaction with the
TSB Land Claimants is still under discussion with key stakeholders and accordingly the time frame
for implementation is uncertain. Further information will be provided to RCL Foods Shareholders
when the BEE ownership transaction with the TSB Land Claimants is finalised.
4.4
Remgro management fee
Remgro Management Services provides management and support services to TSB Sugar RSA. As
consideration for services rendered, Remgro Management Services receives a management fee of
approximately R10 000 000 (ten million Rand) per annum.
Following the implementation of the TSB Acquisition, TSB Sugar RSA will continue to pay Remgro
Management Services an annual management fee of approximately R10 000 000 (ten million Rand)
as consideration for the management and support services provided. The management services
agreement can be cancelled by either party upon three months’ written notice.
4.5
Conditions precedent
The implementation of the TSB Sale of Shares Agreement is subject to the fulfilment of the conditions
precedent that:
•
•
4.6
by no later than 17:00 on Friday, 28 February 2014:
– RCL Foods Shareholders have passed all such resolutions as may be required to approve the
implementation of the TSB Acquisition;
– the counterparties to the TSB Material Contracts have, to the extent necessary, consented in
writing to the change of control in TSB Sugar RSA and TSB Sugar International;
– the Ancillary Transaction has been implemented; and
within 30 (thirty) days after the signature date of the TSB Sale of Shares Agreement, RCL Foods
has delivered to TSB Sugar Holdings a written notice stating that RCL Foods is satisfied with the
contents of the disclosure bundle prepared by TSB Sugar Holdings in respect of the warranties
given by it in terms of the TSB Sale of Shares Agreement.
Resultant structure post the TSB Acquisition
Post the implementation of the Ancillary Transaction, RCL Foods will, subject to the fulfilment of
the conditions precedent, acquire the TSB Acquisition Shares from TSB Sugar Holdings at the TSB
Acquisition Consideration, which will be discharged through the issue of the TSB Consideration
Shares.
23
The diagram below depicts the resultant shareholding structure post the TSB Acquisition but prior
to the implementation of the TSB BEE Transaction, the RCL BEE Transactions and the Equity
Capital Raising:
Remgro
100.0%
IPI
100%
HL&H
65.3%
34.7%
RCL Foods
minority
shareholders
TSB Sugar
Holdings
30.5%
69.5%
RCL Foods
100.0%
100.0%
TSB
Sugar RSA
4.7
TSB Sugar
International
100.0%
Rainbow
Farms
100.0%
Foodcorp
100.0%
Vector
Logistics
49.0
Zam Chick
Limited
51.0%
Zamhatch
Limited
Related party transaction and fairness opinion
Remgro is a material shareholder of both RCL Foods and TSB Sugar Holdings for purposes of the
Listings Requirements. As a result, the TSB Acquisition is categorised as a “related party transaction”
in terms of paragraph 10.1(b)(i) of the Listings Requirements. In terms of paragraph 10.4(f) of the
Listings Requirements, a fairness opinion is required from an independent professional expert,
acceptable to the JSE, indicating whether the terms of the TSB Acquisition are fair to RCL Foods
Shareholders.
In light of the above, Deloitte has been appointed as the independent professional expert to consider
the terms and conditions of the TSB Acquisition. Deloitte has performed an assessment and is of the
opinion that the terms and conditions of the TSB Acquisition, as contemplated above, are fair to RCL
Foods Shareholders. The Board has been advised accordingly and a copy of the Deloitte opinion in
this regard is attached as Annexure 1(a) to the Circular.
In terms of paragraph 10.4(d) of the Listings Requirements, the approval of Shareholders (excluding
related parties and their associates) is required in order to implement a “related party transaction”.
In this regard, the Company will seek Shareholder consent at the General Meeting to implement the
TSB Acquisition. IPI and its associates will be precluded from voting on the relevant resolutions.
4.8
Directors’ opinion
The Board has considered the opinion of the Independent Expert attached as Annexure 1(a) to the
Circular, and is of the opinion that the TSB Acquisition is in the interests of RCL Foods Shareholders
and is fair to all RCL Foods Shareholders and recommends that RCL Foods Shareholders vote in
favour of the relevant resolutions at the General Meeting.
5.
INFORMATION ON THE TSB BEE TRANSACTION
5.1
Introduction
In line with TSB Sugar Holdings’ long-term goal of value creation for shareholders, TSB Sugar
Holdings has developed a BEE ownership transaction to appropriately empower its shareholder
base. TSB Sugar Holdings has identified Dr Nakedi Mathews Phosa as a strategic partner to
participate in the TSB BEE Transaction. In terms of the negotiations between TSB Sugar Holdings
and TSB BEE Co, TSB BEE Co would be issued with c.3% (three percent) of the equity in TSB Sugar
Holdings.
24
As negotiations between TSB BEE Co and TSB Sugar Holdings were at a final stage, RCL Foods
has undertaken to implement the proposed TSB BEE Transaction simultaneously with the TSB
Acquisition at the RCL Foods level, allowing TSB BEE Co to become a shareholder at the listed
company level.
Subject to the terms and conditions of the TSB BEE Subscription and Relationship Agreement, RCL
Foods entered into the TSB BEE Transaction with the MTM Family Trust in terms of which it will
acquire RCL Foods Shares via TSB BEE Co, with a transaction value of R120 000 000 (one hundred
and twenty million Rand). The beneficiaries of the MTM Family Trust are Dr Nakedi Mathews Phosa
and his family. Dr. Phosa is a director of TSB Sugar Holdings and has been a key participant in
driving the strategic initiatives of TSB Sugar Holdings.
TSB BEE Co has been established for the sole purpose of subscribing for and holding TSB BEE
Shares on behalf of the MTM Family Trust, subject to the rights and restrictions stipulated in the
TSB BEE Subscription and Relationship Agreement.
5.2
Mechanism to implement the TSB BEE Transaction
On the TSB BEE Implementation Date, the Company will issue the TSB BEE Shares (6 928 406
RCL Foods Shares) to TSB BEE Co, the number of which was determined by dividing R120 000 000
(one hundred and twenty million Rand) by the TSB Transaction Share Price. The TSB BEE Shares
will be subscribed for at a nominal subscription price of R0.01 (one cent) per TSB BEE Share. The
value of the TSB BEE Shares (i.e. R120 000 000 (one hundred and twenty million Rand)) will be
notionally funded by RCL Foods through the TSB BEE NVF over the TSB BEE NVF Period.
5.2.1
Details of the TSB BEE NVF
5.2.1.1
The TSB BEE Notional Amount will accrue notional interest at a rate equal to the
Prime Rate plus 1% (one percent) from 1 July 2013 over the TSB BEE NVF Period.
The TSB BEE Notional Outstandings will be reduced by any Distributions made in
respect of RCL Foods Shares, subject to the waiver envisaged in paragraph 5.4.2
below.
5.2.1.2
At the end of the TSB BEE NVF Period, if the TSB BEE Notional Outstandings in
respect of the TSB BEE Shares does not equal zero, RCL Foods will have the right
to repurchase from TSB BEE Co at a nominal amount of R0.01 (one cent) per TSB
BEE Share, such number of TSB BEE Shares as is calculated in accordance with
the following formula:
N = NOA
Z
Where:
5.2.1.3
5.3
N=
the number of TSB BEE Shares to be repurchased by RCL Foods;
NOA =
the TSB BEE Notional Outstandings; and
Z=
the VWAP of an RCL Foods Share for the 30 Business Days immediately
prior to the date on which RCL Foods gives notice of its intention to
exercise the TSB BEE Maturity Call Option.
As security for the discharge by TSB BEE Co of its obligations under the TSB
BEE Subscription and Relationship Agreement, TSB BEE Co will pledge and cede
in security its TSB BEE Shares to RCL Foods by way of a pledge and cession in
security in favour of RCL Foods (“TSB BEE Pledge and Cession Agreement”).
Lock-in
TSB BEE Co may not dispose of or encumber the TSB BEE Shares during the TSB BEE NVF Period
other than pursuant to the TSB BEE Subscription and Relationship Agreement and the TSB BEE
Pledge and Cession Agreement.
5.4
Distributions
5.4.1
The TSB BEE Shares will, subject to the terms and conditions of the TSB BEE Subscription
and Relationship Agreement, rank pari passu with the other RCL Foods Shares and, as
such, would have, but for the waiver envisaged in paragraph 5.4.2 below, been entitled to
receive Distributions made by RCL Foods in respect of RCL Foods Shares from time to time.
5.4.2
In order to notionally reduce the TSB BEE Notional Outstandings, TSB BEE Co will, in
terms of the TSB BEE Subscription and Relationship Agreement, waive all its rights to
receive the Distributions which would otherwise have accrued to the TSB BEE Shares until
the TSB BEE Release Date.
5.4.3
From the TSB BEE Release Date, TSB BEE Co will be entitled to receive 100% (one hundred
percent) of the Distributions attributable to the balance of the TSB BEE Shares held by it.
25
5.5
TSB call options and pre-emptive rights
The Company has the option to repurchase TSB BEE Shares from TSB BEE Co in the following
instances:
5.6
5.5.1
in the event that a TSB BEE Trigger Event occurs, RCL Foods will have the option to repurchase
all the TSB BEE Shares at a repurchase consideration per Share equal to a discount of the
difference between the VWAP per RCL Foods Share over the 30 (thirty) Business Days prior
to the date of exercise of the option and the TSB BEE Notional Outstandings;
5.5.2
for a period of 1 (one) calendar year after the TSB BEE Release Date (“TSB BEE Exit Call
Option Period”), RCL Foods will be entitled to repurchase all or some of the TSB BEE Shares
held by TSB BEE Co at a repurchase price per TSB BEE Share equal to the VWAP per
RCL Foods Share over the 30 (thirty) Business Days prior to the date of exercise of the
repurchase option; and/or
5.5.3
in the event that TSB BEE Co wishes to dispose of a number of the TSB BEE Shares it holds
to a third party after expiry of the TSB BEE Exit Call Option Period, TSB BEE Co will be
obliged to first offer such TSB BEE Shares to RCL Foods and RCL Foods will have the
option to repurchase such TSB BEE Shares at a repurchase consideration equal to either
the closing price of the RCL Foods Shares on the JSE on the date on which the Company
accepts the offer to acquire the TSB BEE Shares from TSB BEE Co or at a price equal to the
third party offer (if any).
Voting
TSB BEE Co shall be entitled to exercise all the voting rights attached to the TSB BEE Shares held
by it from time to time.
5.7
Effective date
The TSB BEE Shares shall be issued to TSB BEE Co on the TSB BEE Implementation Date. However,
the TSB BEE NVF Period shall be calculated with reference to 1 July 2013 (being the date on which
TSB Sugar Holdings and the MTM Family Trust agreed to implement a BEE ownership transaction).
5.8
Conditions precedent
The implementation of the TSB BEE Transaction is subject to the fulfilment of the conditions
precedent that, by not later than Friday, 28 February 2014:
•
Shareholders approve:
o the provision of financial assistance by the Company TSB BEE Co for purposes of the TSB
BEE Transaction in accordance with the provisions of section 44 of the Companies Act;
o the issue of RCL Foods Shares to TSB BEE Co in accordance with the TSB BEE Subscription
and Relationship Agreement;
o the repurchase of RCL Foods Shares from TSB BEE Co pursuant to the TSB BEE Maturity
Call Option, the TSB BEE Trigger Event Call Option, the TSB BEE Exit Call Option and/or the
TSB BEE Pre-emptive Rights, as contemplated in the TSB BEE Subscription and Relationship
Agreement;
5.9
•
the TSB Sale of Shares Agreement is concluded and becomes unconditional in accordance with
its terms;
•
the MTM Family Trust, as sole shareholder of TSB BEE Co, passes a special resolution adopting the
new memorandum of incorporation of TSB BEE Co and such new memorandum of incorporation
is Filed with the CIPC; and
•
the TSB BEE Pledge and Cession Agreement (envisaged in paragraph 5.2.1.3 above) is concluded
and becomes unconditional in accordance with its terms.
Specific authority to issue the TSB BEE Shares and to provide financial assistance
The facilitation by the Company through the TSB BEE NVF will constitute the provision of financial
assistance by the Company in terms of section 44 of the Companies Act. The Board may not
authorise the provision of such financial assistance unless it is pursuant to a special resolution of
Shareholders adopted within the previous two years, which approved the provision of such financial
assistance either for a specific recipient or generally for a category of potential recipients and the
specific recipient falls within that category. The Company will seek the approval of Shareholders
at the General Meeting to provide financial assistance to TSB BEE Co by way of the TSB BEE NVF.
26
The issue of the TSB BEE Shares constitutes an issue for cash for which specific authority is required
from Shareholders in terms of paragraph 5.51(g) of the Listings Requirements. The Company will
seek Shareholder approval at the General Meeting to issue the TSB BEE Shares to TSB BEE Co.
5.10 Estimated economic costs
RCL Foods has estimated the economic cost of implementing the TSB BEE Transaction for the
Company to be approximately R25 000 000 (twenty five million Rand), as at the Announcement Date.
This represents approximately 0.23% (zero point two three percent) of the market capitalisation
of RCL Foods as at the Last Practicable Date (c. R10 851 293 420 (ten billion eight hundred and
fifty one million two hundred and ninety three thousand four hundred and twenty Rand)). This
figure was calculated with reference to the requirements of IFRS, including IFRS 2 – Share-Based
Payments.
IFRS 2 sets out the basis for calculating the economic cost shown above and the valuation uses the
following key inputs or assumptions:
•
the Black-Scholes model (option pricing model) for valuing options; and
•
the use of available market-sourced data and an estimation of future dividend yields at given
dates. This option pricing model determines expected future ordinary share prices.
27
B. INFORMATION RELATING TO THE RCL FOODS BEE TRANSACTIONS
1.
DETAILS OF THE SPECIFIC REPURCHASE AND UNWINDING OF THE CURRENT RCL FOODS BEE
STRUCTURE
RCL Foods proposes to unwind the Current RCL Foods BEE Structure by implementing a redemption of
the Eagle Creek Preference Shares and repurchasing the Current RCL Foods BEE Shares. Subject to RCL
Foods Shareholders approving the Specific Repurchase, RCL Foods will acquire from Eagle Creek all of
the Current RCL Foods BEE Shares for a purchase consideration per BEE Share equal to the VWAP per
RCL Foods Share over the 30 (thirty) trading immediately preceding the day on which the Eagle Creek
Preference Shares are redeemed, and will be funded out of sources other than contributed tax capital
and will not require any external funding. The consideration payable to ECI pursuant to the Specific
Repurchase will be utilised by ECI to settle the redemption amount payable in respect of the Eagle Creek
Preference Shares.
The Current RCL Foods BEE Shares are expected to be repurchased on or about Monday, 20 January
2014. The Current RCL Foods BEE Shares will, pursuant to the Specific Repurchase, be delisted from the
JSE and automatically cancelled in terms of section 35(5)(a) of the Companies Act.
1.1
Conditions precedent
The implementation of the Specific Repurchase is subject to the fulfilment of, inter alia, the
conditions precedent that, by not later than 17:00 on Friday, 28 February 2014:
•
•
1.2
RCL Foods Shareholders approve the unwinding of the Current RCL Foods BEE Structure
and, in particular, pass a special resolution in terms of section 48(8)(b) of the Companies Act
authorising the Specific Repurchase; and
the shareholders of Eagle Creek pass a special resolution pursuant to and in accordance with
the provisions of section 112 as read with section 115 of the Companies Act, approving the sale
of the Current RCL Foods BEE Shares by Eagle Creek to RCL Foods pursuant to the Specific
Repurchase.
Independent Expert opinion and Shareholder approval
The Specific Repurchase will amount to a repurchase of 6% (six percent) of the RCL Foods Shares
in issue post the TSB Acquisition and, as such, triggers the provisions of section 48(8) (read with
section 114) of the Companies Act. In the circumstances, the Company is required to obtain a
report from an independent expert concerning the Specific Repurchase and to obtain Shareholder
approval to implement the Specific Repurchase. Deloitte, in its capacity as the Independent Expert,
has considered the terms and conditions of the Specific Repurchase and is of the opinion that the
terms and conditions of the Specific Repurchase, as contemplated above, are fair to RCL Foods
Shareholders. Please refer to the Independent Expert’s report (Annexure 1(b)).
In terms of section 48(8)(b) of the Companies Act and paragraph 5.69(b) of the Listings Requirements,
the Specific Repurchase must be approved by Shareholders by way of a special resolution. The
Company will seek Shareholder approval at the General Meeting to implement the Specific
Repurchase. Eagle Creek will be precluded from voting on the relevant resolution.
1.3
Directors’ opinion
The Board has considered the report of the Independent Expert attached as Annexure 1(b) to the
Circular and the Specific Repurchase in light of the rationale as set out above and is of the opinion
that the Specific Repurchase is in the interests of RCL Foods Shareholders and that it is fair to
all RCL Foods Shareholders and recommends that RCL Foods Shareholders vote in favour of the
relevant resolutions at the General Meeting.
2.
DETAILS OF THE NEW RCL FOODS BEE TRANSACTION
Following the unwinding of the Current RCL Foods BEE Structure, RCL Foods wishes to, subject to
meeting the relevant conditions, implement a new BEE ownership transaction for the benefit of the
existing RCL Foods Strategic Partners, the current RCL Foods employees who are beneficiaries of the
Rainbow Trust, Foodcorp employees and future eligible RCL Foods Group employees (including eligible
TSB Sugar RSA and TSB Sugar International employees, should the TSB Acquisition be implemented).
28
2.1
General terms of the New RCL Foods BEE Transaction
2.1.1
Specific issue of the RCL Foods BEE Shares
The ESOP Trust and SPV 2 have been established for the purpose of, inter alia, subscribing
for and holding the RCL Foods BEE Shares on behalf of the relevant RCL Foods BEE Parties,
subject to the provisions of the RCL Foods BEE Transaction Agreements. The RCL Foods
BEE Vehicles will be regarded as non-public RCL Foods Shareholders for purposes of the
Listings Requirements.
2.1.2
Implementation mechanism
The New RCL Foods BEE Transaction will be facilitated by RCL Foods partly through
the RCL Foods BEE NVF and partly through conventional preference share funding on
commercial terms similar to those that would be required by third party debt providers.
The Company will issue two tranches of Shares to the relevant RCL Foods BEE Vehicles:
the RCL Foods BEE Nominal Shares at a nominal subscription price which will be funded
through the RCL Foods BEE NVF, and the RCL Foods BEE Common Shares at full market
value which will be facilitated through the subscription proceeds for the RCL Foods BEE
Preference Shares.
2.1.2.1
Details of the RCL Foods BEE NVF
2.1.2.1.1
The RCL Foods BEE Nominal Shares will be subscribed for by the
relevant RCL Foods BEE Vehicles at a nominal subscription price of
R0.01 (one cent). The difference between the nominal subscription
price of the RCL Foods BEE Nominal Shares and the market value of
an equivalent number of RCL Foods Shares (i.e. the VWAP per RCL
Foods Share over the 30 (thirty) Business Days immediately preceding
the date on which the RCL Foods BEE Subscription Agreements were
executed, being an amount of R17.31 (seventeen Rand and thirty one
cents) per RCL Foods BEE Nominal Share) will be notionally funded
by RCL Foods through the RCL Foods BEE NVF. The quantum of the
RCL Foods BEE NVF represents the residual amount that cannot be
funded through the issue of the RCL Foods BEE Preference Shares,
being an aggregate amount of R759 619 646 (seven hundred and fifty
nine million six hundred and nineteen thousand six hundred and
forty six Rand)
2.1.2.1.2
The RCL Foods BEE Notional Amount will accrue notional interest
equal to the Prime Rate from the RCL Foods BEE Implementation
Date until the end of the RCL Foods BEE Transaction Term and will
be reduced by the Distributions paid in respect of the RCL Foods BEE
Nominal Shares only once RCL Foods BEE Preference Shares have
been redeemed in full as detailed in Section A, paragraph 2.1.5 of the
Circular.
2.1.2.1.3
At the end of the RCL Foods BEE Transaction Term, if the RCL Foods
BEE Notional Outstandings in respect of the RCL Foods BEE Nominal
Shares does not equal zero, RCL Foods will have the right to, during
the RCL Foods BEE Repurchase Option Period, repurchase from the
relevant RCL Foods BEE Vehicles at a nominal amount of R0.01 (one
cent), such number of RCL Foods BEE Nominal Shares as is calculated
in accordance with the following formula:
N=
NO x A
MV
Where:
N=
the number of RCL Foods BEE Nominal Shares to be repurchased
by RCL Foods;
NO =
the RCL Foods BEE Notional Outstandings per RCL Foods BEE
Nominal Share held by the relevant RCL Foods BEE Vehicle;
MV = the VWAP per RCL Foods Share over the 30 (thirty) trading
days immediately preceding the date on which the RCL Foods
BEE Repurchase Option is exercised; and
A=
2.1.2.1.4
the number of RCL Foods BEE Nominal Shares held by the
relevant RCL Foods BEE Vehicle.
The exercise of the RCL Foods BEE Repurchase Option is subject to the
exercise of the RCL Foods BEE Subscription Option by each of the RCL
Foods BEE Vehicles.
29
2.1.2.2
30
2.1.2.1.5
In order to facilitate the notional settlement of the RCL Foods BEE
Notional Outstandings, the relevant RCL Foods BEE Vehicles will
have an option to, from time to time and for so long as the RCL Foods
BEE Notional Outstandings in respect of the RCL Foods BEE Nominal
Shares held by the relevant RCL Foods BEE Vehicle does not equal zero,
subscribe for additional RCL Foods Shares at a subscription price per
RCL Foods Share equal to the RCL Foods BEE Notional Outstandings
per RCL Foods BEE Nominal Share held by the RCL Foods BEE Vehicle
on the relevant date.
2.1.2.1.6
Upon exercise of the RCL Foods BEE Subscription Option by an RCL
Foods BEE Vehicle, RCL Foods will repurchase an equal number of
RCL Foods BEE Nominal Shares from the relevant RCL Foods BEE
Vehicle at a nominal amount of R0.01 (one cent).
2.1.2.1.7
As security for the discharge by SPV 2 of its obligations under the
RCL Foods BEE Relationship Agreement, RCL Foods and SPV 2 have
entered into an agreement headed “Reversionary Pledge and Cession”
in terms of which SPV 2 will pledge and cede in security its RCL Foods
BEE Shares in favour of RCL Foods.
2.1.2.1.8
As security for the discharge by each of the RCL Foods Strategic
Partners’ of their obligations under the RCL Foods BEE Relationship
Agreement, RCL Foods has entered into an agreement headed “Pledge
and Cession” with each of the RCL Foods Strategic Partners in terms
of which each RCL Foods Strategic Partner will pledge and cede in
security its shares in SPV 2 in favour of RCL Foods.
2.1.2.1.9
Furthermore, at the end of the RCL Foods BEE Transaction Term,
if the RCL Foods BEE Notional Outstandings in respect of the RCL
Foods BEE Nominal Shares on that date are not equal to zero, RCL
Foods shall have the right to, at any time during the RCL Foods BEE
Repurchase Option Period, demand that the relevant RCL Foods BEE
Vehicle subscribe for a certain number of RCL Foods Shares at a
subscription price per RCL Foods Share equal to the RCL Foods BEE
Notional Outstandings per RCL Foods BEE Nominal Share held by the
relevant RCL Foods BEE Vehicle on the relevant date. The number of
RCL Foods Shares which the relevant RCL BEE Vehicle will be required
to subscribe for will be limited by reference to the proceeds raised by
the RCL BEE Vehicle disposing of its RCL BEE Common Shares in the
open market.
Details of the RCL Foods BEE Preference Share funding
2.1.2.2.1
The RCL Foods BEE Common Shares will be subscribed for by the
relevant RCL Foods BEE Vehicles at full market value (i.e. the VWAP
per RCL Foods Share over the 30 (thirty) Business Days immediately
preceding the date on which the RCL Foods BEE Subscription
Agreements were executed). The subscription consideration payable
by each of the RCL Foods BEE Vehicles will be funded through the
issue of the RCL Foods BEE Preference Shares.
2.1.2.2.2
The RCL Foods BEE Preference Shares will be issued at a subscription
price of R1 000 (one thousand Rand) per RCL Foods BEE Preference
Share, equating to an aggregate subscription price of R345 482 000
(three hundred and forty five million four hundred and eighty two
thousand Rand).
2.1.2.2.3
Each RCL Foods BEE Preference Share shall confer on the holder
thereof the right to receive cumulative preferential cash dividends,
calculated at the Prime Rate on the issue price of the RCL Foods BEE
Preference Shares and payable on the 2nd (second) business day after
the receipt of a Distribution in respect of the relevant underlying RCL
Foods BEE Shares.
2.1.2.2.4
As security for the discharge by SPV 1 of its obligations under the
relevant RCL Foods BEE Preference Share Agreement: (i) RCL
Foods and the ESOP Trust have entered into an agreement headed
“Guarantee” in terms of which the ESOP Trust will guarantee the
performance by SPV 1 of its obligations under the relevant RCL Foods
BEE Preference Share Agreement; (ii) RCL Foods and the ESOP Trust
have entered into an agreement headed “Pledge and Cession” in terms
of which the ESOP Trust will pledge and cede in security its RCL Foods
BEE Shares in favour of RCL Foods as security for the performance of
its obligations under the aforesaid Guarantee; and (iii) RCL Foods and
SPV 1 have entered into an agreement headed “Cession of Redemption
Reserve Account” in terms of which SPV 1 will cede in security the
SPV 1 bank account in favour of RCL Foods.
2.1.3
2.1.2.2.5
As security for the discharge by SPV 2 of its obligations under the
relevant RCL Foods BEE Preference Share Agreement: (i) RCL Foods
and SPV 2 have entered into an agreement headed “Pledge and
Cession” in terms of which SPV 2 will pledge and cede in security its
RCL Foods BEE Shares in favour of RCL Foods; and (ii) RCL Foods and
SPV 2 have entered into an agreement headed “Cession of Redemption
Reserve Account” in terms of which SPV 2 will cede in security the
SPV 2 bank account in favour of RCL Foods.
2.1.2.2.6
The RCL Foods BEE Vehicles will be ring fenced for the duration of the
RCL Foods BEE Transaction Term and in particular, will be prohibited
from incurring any debt or other financial obligation other than
pursuant to the RCL Foods BEE Transaction or as permitted by RCL
Foods.
Lock-in
The RCL Foods BEE Vehicles may not dispose of or encumber the RCL Foods BEE Shares
during the RCL Foods BEE Transaction Term other than pursuant to the RCL Foods BEE
Transaction Agreements.
2.1.4
Allocation of equity interests to the RCL Foods BEE Vehicles
After the issue of the RCL Foods BEE Shares, the effective shareholding of the RCL Foods
BEE Vehicles in RCL Foods will be as follows:
Number of
Number of
RCL Foods
RCL Foods
BEE Common BEE Nominal
Total
Shares
Shares
2.1.5
ESOP Trust
RCL Foods Strategic Partners
(through SPV 2)
44 681 162
13 962 863
30 718 299
19 149 069
5 984 084
13 164 985
Total
63 830 231
19 946 947
43 883 284
Distributions
2.1.5.1
Subject to the terms and conditions of the RCL Foods BEE Transaction Agreements,
the RCL Foods BEE Shares will rank pari passu with the other RCL Foods Shares
and, as such, will be entitled to receive Distributions made by RCL Foods in respect
of RCL Foods Shares from time to time.
2.1.5.2
During the RCL Foods BEE Transaction Term, all Distributions paid in respect
of the RCL Foods BEE Shares will be utilised by the RCL Foods BEE Vehicles as
follows: (i) firstly, to pay for any tax liabilities incurred by the relevant RCL Foods
BEE Vehicle; (ii) secondly, to pay for operational expenses; (iii) thirdly, subject to
the relevant covenants under the RCL Foods BEE Preference Share Agreements
being met and to the extent that there is sufficient cash to service the RCL Foods
BEE Preference Shares, 20% (twenty percent) of the remaining cash will be
distributed as a trickle dividend to the RCL Foods BEE Parties; and (iv) thereafter,
any remaining cash will be used to pay accrued dividends on the RCL Foods BEE
Preference Shares and to redeem RCL Foods BEE Preference Shares.
2.1.5.3
If the Preference Shares are redeemed in full at any time during the RCL Foods
BEE Transaction Term, then that portion of the Distributions which would
otherwise be utilised to pay accrued dividends on, or to redeem, the RCL Foods BEE
Preference Shares, will be utilised for purposes of exercising the RCL Foods BEE
Subscription Option in order to settle the RCL Foods BEE Notional Outstandings.
31
2.1.5.4
2.1.6
Upon expiry of the RCL Foods BEE Transaction Term, the RCL Foods BEE Parties
will be entitled to receive 100% (one hundred percent) of the Distributions made in
respect of the remaining RCL Foods BEE Shares.
Voting
The RCL Foods BEE Vehicles will be entitled to exercise all voting rights attaching to the
RCL Foods BEE Shares held by them.
2.1.7
Effective date
The New RCL Foods BEE Transaction will be implemented with effect from the RCL Foods
BEE Implementation Date.
2.1.8
2.1.9
Corporate actions
2.1.8.1
In the event of a sub-division or consolidation of RCL Foods Shares, the RCL Foods
BEE Shares will be deemed to include such RCL Foods Shares as sub-divided or
consolidated and will be subject to the same rights and restrictions as the RCL
Foods BEE Shares as stipulated in the RCL Foods BEE Relationship Agreement.
2.1.8.2
In the event of RCL Foods making any non-elective capitalisation award of RCL
Foods Shares, the RCL Foods BEE Vehicles’ capitalisation shares will be subject to
the same rights and restrictions as the RCL Foods BEE Shares. In the event that
RCL Foods permits RCL Foods Shareholders to elect to receive a cash payment
instead of an award of capitalisation RCL Foods Shares, the RCL Foods BEE
Vehicles will not have the right to receive cash and will be required to elect to
receive capitalisation RCL Foods Shares, on the basis that such RCL Foods Shares
will be subject to the same rights and restrictions as the RCL Foods BEE Shares as
stipulated in the RCL Foods BEE Relationship Agreement.
2.1.8.3
In the event of a general buyback, the RCL Foods BEE Vehicles will not have the
right to elect to sell any of their RCL Foods BEE Shares to RCL Foods.
2.1.8.4
The RCL Foods BEE Vehicles will be entitled to participate in any rights offers
during the RCL Foods BEE Transaction Term on the basis that such rights offer
shares will be subject to the same rights and restrictions as the RCL Foods BEE
Shares stipulated in the RCL Foods BEE Relationship Agreement.
2.1.8.5
In the event that RCL Foods reasonably anticipates a delisting of the RCL Foods
Shares from the JSE or the acquisition of 100% (one hundred percent) of the issued
RCL Foods Shares, RCL Foods shall be entitled to accelerate the expiry date of the
RCL Foods BEE Transaction Term.
Conditions precedent
The implementation of the New RCL Foods BEE Transaction is subject to the fulfilment of,
inter alia, the conditions precedent that, by not later than 17:00 on Monday, 31 March 2014:
•
•
•
•
•
32
the board of directors of the relevant RCL Foods BEE Vehicles and the relevant RCL
Foods Strategic Partners and the trustees of the ESOP Trust approve the execution of
each of the relevant RCL Foods BEE Transaction Agreements;
each of the RCL Foods BEE Transaction Agreements is entered into and becomes
unconditional in accordance with its terms;
the ESOP Trust passes a special resolution adopting the new memorandum of
incorporation in respect of SPV 1 and such special resolution is Filed with the CIPC;
the RCL Foods Strategic Partners pass a special resolution adopting the new memorandum
of incorporation in respect of SPV 2 and such special resolution is Filed with the CIPC;
the RCL Foods Shareholders pass all the resolutions necessary to implement the RCL
Foods BEE Relationship Agreement and, in particular, approve:
•
the Proposed RCL Foods Share Capital Increase;
•
the allotment and issue of the RCL Foods BEE Shares to the relevant RCL Foods BEE
Vehicles;
•
the granting of financial assistance by the Company to the relevant RCL Foods BEE
Vehicles in the form of the RCL Foods BEE NVF and the RCL Foods BEE Preference
Share funding in terms of section 44 of the Companies Act;
•
the repurchase of RCL Foods BEE Shares from the relevant RCL Foods BEE Vehicles
pursuant to the exercise of the RCL Foods BEE Repurchase Option, the RCL Foods BEE
Compulsory Subscription Right or the RCL Foods BEE Subscription Option;
•
allotment and issue of additional RCL Foods Shares to the relevant RCL Foods BEE
Vehicles pursuant to the exercise of the RCL Foods BEE Compulsory Subscription Right
or the RCL Foods BEE Subscription Option; and
the Redemption and Repurchase Agreement is entered into and implemented.
3.
ESOP TRUST SALIENT FEATURES
3.1
Purpose of the ESOP Trust
The purpose of the ESOP Trust will be to provide a framework for the continued retention of,
and to provide an incentive to, Qualifying Employees within the RCL Foods Group by being the
vehicle through which a portion of the RCL Foods BEE Shares are held for the benefit of Qualifying
Employees.
The ESOP Trust will further provide for the promotion of BEE by RCL Foods and increase broadbased and effective participation in the equity of the Company by Black Persons.
3.2
Allocation of Units
In terms of the ESOP Trust Deed, Units will be allocated to Qualifying Employees.
At inception, all Qualifying Employees will receive the same number of Units regardless of race,
remuneration package or years of service. Thereafter, each year new Qualifying Employees will
receive a proportionately reduced number of Units determined by reference to the date on which
they became employed with an Employer Company until the 7th (seventh) anniversary of the RCL
Foods BEE Implementation Date.
The Participants will, through their Units, effectively enjoy RCL Foods Shareholder rights such as
dividend rights and voting rights (through the ESOP Trust trustees).
At the end of the RCL Foods BEE Transaction Term, once the SPV 1 Preference Shares have been
redeemed and the RCL Foods BEE Notional Outstandings has been settled, the remaining RCL
Foods BEE Shares held by the ESOP Trust will be distributed to the Participants in accordance with
their Participation Percentage, thereby enabling the Participants to become direct shareholders in
RCL Foods.
3.3
Termination of employment
Should a Participant’s employment with an Employer Company terminate prior to the date on
which the RCL Foods BEE Shares held by the ESOP Trust are distributed to Participants, then, in
the case of:
3.4
3.3.1
a Participant’s early retirement, resignation or dismissal (i.e. a “bad leaver”): all Units held
by the Participant will be immediately forfeited and the Participant shall forthwith cease to
be a Participant in the ESOP Trust; or
3.3.2
a Participant’s death, serious disability or incapacity, retrenchment for operational reasons,
retirement or the relevant Employer Company ceasing to be part of the RCL Foods Group
(i.e. a “good leaver”): the Participant shall be deemed to remain employed by the Group,
notwithstanding the cessation of the Participant’s employment and the Participant shall be
entitled to retain all the Units held by him.
Election and appointment of trustees
The ESOP Trust and trust property will be managed by the trustees of the ESOP Trust. Half of the
trustees will be elected by the Qualifying Employees in accordance with the nomination and election
process set out in the ESOP Trust Deed and the Company will be entitled to appoint the remainder
of the trustees.
RCL Foods appointed 2 (two) initial trustees for purposes of executing the relevant RCL Foods
BEE Transaction Agreements, implementing the New RCL Foods BEE Transaction and making the
initial allocation of Units to Qualifying Employees. Such trustees will facilitate the election of the
additional trustees by the Participants as soon as practicably possible after the initial allocation of
Units.
It is intended that half of the trustees will be independent from the management of the ESOP Trust
and in the event of a voting deadlock, an independent expert will be appointed to make a binding
determination. The decision of the independent expert will be final.
33
3.5
Distributions
All Distributions received by the ESOP Trust from time to time shall, until and including the date on
which the RCL Foods BEE Transaction Term expires, be applied in the following order of priority:
4.
•
firstly, to the full extent possible taking into account the amount of available cash, to pay
and/or provide for the tax liabilities of the ESOP Trust (if any) which have accrued as a result of
the relevant RCL Foods Distribution;
•
thereafter, subject to the relevant covenants under the RCL Foods BEE Preference Share
Agreements being met, 20% (twenty percent) of the remaining available cash will be distributed
as a trickle dividend to the Participants, provided that there is sufficient cash to service the
SPV 1 Preference Shares; and
•
thereafter, the remaining cash will be distributed to SPV 1 for purposes of servicing the SPV 1
Preference Shares and redeeming the SPV 1 Preference Shares. Once the SPV 1 Preference Shares
have been redeemed, the remaining cash will be utilised by the ESOP Trust to exercise the RCL
Foods BEE Subscription Option in order to settle the RCL Foods BEE Notional Outstandings.
SPV 2 SALIENT FEATURES
4.1
4.2
Information on the RCL Foods Strategic Partners
•
Imbewu Consortium is a broad-based consortium led by Imbewu Capital Partners Proprietary
Limited and comprises the following key parties: Imbewu Capital Partners Proprietary Limited,
Imogen Mkhize via Solegna, Monica Malunga, Omane Investments, J B Magwaza, Imbewu
Development Trust and Siza Enterprise Development Fund.
•
The Ikamva Labantu Empowerment Trust is a trust established for the benefit of the Ikamva
Labantu Charitable Trust, a non-profit, non-governmental organisation that seeks to redress the
damages of apartheid and support democracy in South Africa by providing educational means,
economic empowerment and self-sufficiency to South African township communities.
•
Mrs Manana Margaret Nhlanhla is a non-executive director of RCL Foods.
Allocation of shareholding in SPV 2
The shareholding of each of the Strategic Partners in SPV 2 has been determined in proportion to
their participation under the Current RCL Foods BEE Structure. Based on this criteria, the RCL
Foods Strategic Partners will hold the following shareholding percentages in SPV 2:
5.
•
Imbewu Consortium: 69.76% (sixty nine point seven six percent);
•
Ikamva Labantu Empowerment Trust: 29.07% (twenty nine point zero seven percent); and
•
Mrs Manana Margaret Nhlanhla: 1.17% (one point one seven percent).
ESTIMATED COSTS
RCL Foods has estimated the economic cost of implementing the New RCL Foods BEE Transaction for
the Company to be approximately R276 000 000 (two hundred and seventy six million Rand), as at the
Announcement Date, attributable to the RCL Foods BEE Vehicles as follows:
•
R193 000 000 (one hundred and ninety three million Rand) relating to the ESOP Trust and SPV 1, to
be amortised over the RCL Foods BEE Transaction Term; and
•
R83 000 000 (eighty three million Rand) relating to SPV 2, to be expensed in full on the RCL Foods
BEE Implementation Date
An accelerated charge of R16 900 000 (sixteen million nine hundred thousand Rand) will be incurred on
the unwinding of the Current RCL Foods BEE Structure.
This represents approximately 2.7% (two point seven percent) of the market capitalisation of RCL Foods
on the Last Practicable Date (c.R10 851 293 420 (ten billion eight hundred and fifty one million two
hundred and ninety three thousand four hundred and twenty Rand)). This figure was calculated with
reference to the requirements of IFRS, including IFRS 2 – Share-Based Payments.
IFRS 2 sets out the basis for calculating the economic cost shown above and the valuation uses the
following key inputs or assumptions:
34
•
the Black-Scholes model (option pricing model) for valuing options; and
•
the use of available market-sourced data and an estimation of future dividend yields at given dates.
This option pricing model determines expected future ordinary share prices.
6.
SPECIFIC AUTHORITY TO ISSUE THE RCL FOODS BEE SHARES AND TO PROVIDE FINANCIAL
ASSISTANCE TO THE RCL FOODS BEE VEHICLES
The subscription for the RCL Foods BEE Preference Shares by RCL Foods to enable the RCL Foods BEE
Vehicles to subscribe for the RCL Foods BEE Common Shares and the provision of the RCL Foods BEE
NVF to enable the RCL Foods BEE Vehicles to subscribe for the RCL Foods BEE Shares constitutes the
provision of financial assistance by RCL Foods in terms of section 44 of the Companies Act. The Board
may not authorise the provision of such financial assistance unless such financial assistance is pursuant
to a special resolution of Shareholders adopted within the previous 2 (two) years, which approved the
provision of such financial assistance either for a specific recipient or generally for a category of potential
recipients and the specific recipient falls within that category. The Company will seek the approval of
Shareholders at the General Meeting to provide financial assistance to the RCL Foods BEE Vehicles by
way of the RCL Foods BEE NVF and the RCL Foods BEE Preference Shares.
The issue of the RCL Foods BEE Shares constitutes an issue for cash for which specific authority is
required from Shareholders in terms of paragraph 5.51(g) of the Listings Requirements. The Company
will seek Shareholder approval at the General Meeting to issue the RCL Foods BEE Shares to the ESOP
Trust and SPV 2.
35
C. INFORMATION RELATING TO THE PROPOSED
EQUITY CAPITAL RAISING
1.
INTRODUCTION AND RATIONALE
RCL Foods is currently considering significant growth and expansion projects in South Africa and
the rest of sub-Saharan Africa in the broader food and fast moving consumer goods space. In order
to capitalise fully on these opportunities, RCL Foods has determined that it requires additional
capital.
The Board has accordingly resolved to propose an equity capital raising in the amount of up to
R2 500 000 000 (two billion five hundred million Rand) via a combination of a pro rata offer to
RCL Foods Minority Shareholders and a specific issue of new Shares via a placement to qualifying
investors.
It is the intention of the Board that the subscription proceeds from the Equity Capital Raising will
be applied, inter alia, towards the future growth and expansion of RCL Foods’ operations in South
Africa and sub-Saharan Africa.
2.
PRO RATA OFFER
In light of the anticipated dilution of RCL Foods Minority Shareholders’ relative shareholdings pursuant
to the implementation of the TSB Acquisition, the Company intends to make a pro rata offer to Qualifying
RCL Foods Minority Shareholders in order to afford them the opportunity to subscribe for that number of
Pro Rata Offer Shares as will enable them to maintain their respective shareholding percentages in RCL
Foods following the implementation of the TSB Acquisition.
2.1
Terms of the Pro Rata Offer
In terms of the Pro Rata Offer, the Company will offer 74 214 642 (seventy four million two hundred
and fourteen thousand six hundred and forty two) Pro Rata Offer Shares to RCL Foods Minority
Shareholders in the ratio of 53.10646 (fifty three point one zero six four six) Pro Rata Offer Shares
for every 100 (one hundred) Shares held by RCL Foods Minority Shareholders on the Record Date
for the Pro Rata Offer, which is expected to be Friday, 31 January 2014.
The final terms of the Pro Rata Offer, including the Pro Rata Offer Subscription Price will be
announced on the finalisation date of the Pro Rata Offer, which is expected to be Friday, 17 January
2014.
2.2
Offer mechanism
In terms of the Pro Rata Offer, Qualifying RCL Foods Minority Shareholders will be able to
subscribe for that number of Pro Rata Offer Shares as will enable them to maintain their respective
shareholding percentages in RCL Foods following the implementation of the TSB Acquisition.
2.2.1
Entitlement
The entitlement of each Qualifying RCL Foods Minority Shareholder under the Pro Rata
Offer will be determined by reference to the number of RCL Foods Shares held on the Record
Date and is set out in the Table of Entitlement in Annexure 15 to the Circular. Qualifying
RCL Foods Minority Shareholders holding less than 100 (one hundred) RCL Foods Shares,
or not holding a whole multiple of 100 (one hundred) RCL Foods Shares, will be entitled to
participate in the Pro Rata Offer in respect of such holdings, in accordance with the Table
of Entitlement in Annexure 15 to the Circular.
2.2.2
Fractional Entitlements
Pro Rata Offer Shares representing fractional Entitlements will not be issued to Qualifying
RCL Foods Minority Shareholders. Entitlements to Pro Rata Offer Shares of 0.5 (zero
point 5) or greater will be rounded up to the nearest whole number and Entitlements to
Pro Rata Offer Shares of less than 0.5 (zero point 5) will be rounded down to the nearest
whole number.
2.2.3
Lapsing of Entitlements
RCL Foods Minority Shareholders will not be entitled to sell or renounce their Entitlements
under the Pro Rata Offer and the Entitlements of RCL Foods Minority Shareholders that do
not elect to subscribe for Pro Rata Offer Shares will lapse.
36
RCL Foods Minority Shareholders that do not elect to subscribe for Pro Rata Offer Shares
in accordance with their Entitlements will continue to own the same number of RCL Foods
Shares, but their percentage holding in RCL Foods will be diluted as a consequence of the
issue of the TSB Consideration Shares and the acceptance of the Pro Rata Offer by other
Qualifying RCL Foods Shareholders.
2.2.4
Excess applications
There will be no right to apply for excess Pro Rata Offer Shares.
2.2.5
Procedures for the subscription for Pro Rata Offer Shares
2.2.5.1
Qualifying Certificated Shareholders
Qualifying Certificated Shareholders who wish to subscribe for all or some of
the Pro Rata Offer Shares to which they are entitled, must complete the Form
of Acceptance in accordance with the instructions contained therein and deliver
it, together with payment of the aggregate Pro Rata Offer Subscription Price in
respect of all the Pro Rata Shares for which they wish to subscribe, to the Transfer
Secretary at the postal or physical address or to the fax number or email address
set out in paragraph 2.2.6.1 below, so as to be received by the Transfer Secretary
by no later than 12:00 on Tuesday, 4 February 2014. Once received by the Transfer
Secretary, the acceptance of Pro Rata Offer Shares is irrevocable and may not be
withdrawn.
If payment is not received on or before 12:00 on Tuesday, 4 February 2014, the
Qualifying Certificated Shareholders concerned will be deemed to have declined
the Pro Rata Offer Shares for which they are entitled to subscribe and their
Entitlements will lapse.
Qualifying Certificated Shareholders are advised to take into consideration postal
delivery times when posting their Forms of Acceptance, as no late postal deliveries
will be accepted. Qualifying Certificated Shareholders are advised to deliver their
completed Forms of Acceptance together with payment to the Transfer Secretary
by hand or by courier, where possible.
2.2.5.2
Qualifying Dematerialised Shareholders
Qualifying Dematerialised Shareholders will not receive a Form of Acceptance.
Instead, they should receive notification from their CSDP or Broker regarding
their right to subscribe for Pro Rata Offer Shares in terms of the Pro Rata Offer in
accordance with their Entitlements.
Qualifying Dematerialised Shareholders who wish to subscribe for all or some of
the Pro Rata Offer Shares to which they are entitled are required to notify their
duly appointed CSDP or Broker of their acceptance of the Pro Rata Offer in the
manner and time stipulated in the agreement governing the relationship between
themselves and their CSDP or Broker. If your CSDP or Broker does not obtain
instructions from you, it is obliged to act in terms of the mandate granted to them
by you, or if the mandate is silent in this regard, it shall not subscribe for Pro Rata
Offer Shares on your behalf in terms of the Pro Rata Offer.
RCL Foods is not responsible and may not be held liable for any failure on the part
of any CSDP or Broker to notify Qualifying Dematerialised Shareholders of the
Pro Rata Offer and/or to obtain instructions from Qualifying Dematerialised
Shareholders to subscribe for the Pro Rata Offer Shares.
2.2.6
Payment of the Pro Rata Offer Subscription Price
The Pro Rata Offer Subscription Price payable in respect of all the Pro Rata Offer Shares
for which a Qualifying RCL Foods Minority Shareholder wishes to subscribe is payable
in Rand.
2.2.6.1
Qualifying Certificated Shareholders
Qualifying Certificated Shareholders must, together with their duly completed
Form of Acceptance, deliver a cheque (crossed, marked “not transferable” and
with the words “or bearer” deleted) or a bankers’ draft (drawn on a bank registered
in South Africa) made payable to “RCL Foods Limited – Pro Rata Offer” for the
aggregate Pro Rata Offer Subscription Price payable in respect of all the Pro Rata
Offer Shares for which they wish to subscribe to the Transfer Secretary, as follows:
37
By hand or courier:
By post:
RCL Foods Limited – Pro Rata Offer
C/o Computershare Investor Services
Proprietary Limited
70 Marshall Street
Johannesburg, 2001
RCL Foods Limited – Pro Rata Offer
C/o Computershare Investor Services
Proprietary Limited
PO Box 61763
Marshalltown, 2107
By fax
By email
+27 11 688 5210
corporate.events@computershare.co.za
so as to be received by the Transfer Secretary not later than 12:00 on Tuesday,
4 February 2014.
Alternatively, the aggregate Pro Rata Offer Subscription Price may be paid by way
of an electronic funds transfer into the designated bank account, details of which
are available from the Corporate Actions department of the Transfer Secretary,
contactable during ordinary business hours on +27 861 100 634 and quoting the
account number (as printed on page 1 of the Form of Acceptance) as the payment
reference.
Delivery of any bank guaranteed cheque or banker’s draft will be at the risk of the
Qualifying Certificated Shareholder concerned.
All bank-guaranteed cheques or bankers’ drafts received by the Transfer Secretary
will be deposited immediately for payment. Payment of the aggregate Pro Rata
Offer Subscription Price will constitute an irrevocable subscription by the
Qualifying Certificated Shareholder for the relevant number of Pro Rata Offer
Shares upon the terms set out in the Circular and in the Form of Acceptance.
In the event that any cheque, bankers’ draft or electronic funds payment is
dishonoured, RCL Foods may, in its sole discretion, treat the acceptance of Pro
Rata Offer Shares and the completed Form of Acceptance as void or may tender
delivery of the relevant Pro Rata Offer Shares to which such cheque banker’s draft
or electronic funds payment relates, against payment, in cash, of the aggregate
Pro Rata Offer Subscription Price in respect of such Pro Rata Offer Shares.
2.2.6.2
Qualifying Dematerialised Shareholders
Payment of the Pro Rata Offer Subscription Price payable by Qualifying
Dematerialised Shareholders in respect of the Pro Rata Offer Shares for which
they wish to subscribe will be effected on their behalf by their CSDP or Broker.
The CSDP or Broker will make payment in respect of Qualifying Dematerialised
Shareholders on a delivery versus payment basis. Qualifying Dematerialised
Shareholders must ensure that they place their CSDP or Broker in sufficient funds
so as to enable them to settle the aggregate Pro Rata Offer Subscription Price
payable in respect of the Pro Rata Offer Shares for which they wish to subscribe.
Qualifying Dematerialised Shareholders that have validly subscribed for Pro Rata
Offer Shares will have their accounts with their CSDP or Broker updated with the
Pro Rata Offer Shares to which they are entitled, on Monday, 10 February 2014.
2.2.7
Share certificates
New share certificates to be issued to Qualifying Certificated Shareholders in respect
of those Pro Rata Offer Shares for which they have subscribed, will be posted to
Qualifying Certificated Shareholders, by registered post, at their risk, on or about
Monday, 10 February 2014.
Qualifying Certificated Shareholders should note that Certificated Shares may not be traded
on the JSE until they have been Dematerialised.
2.2.8
Exchange Control Regulations
The information below is not intended as legal advice and it does not purport to describe all
of the considerations that may be relevant to Shareholders. Qualifying RCL Foods Minority
Shareholders who are Non-residents or emigrants from the Common Monetary Area should
seek further professional advice with regard to the subscription for Pro Rata Offer Shares.
2.2.8.1
Non-residents
In terms of the Exchange Control Regulations, Non-resident Qualifying RCL Food
Minority Shareholders, excluding former residents (emigrants) of the Common
38
Monetary Area, will be allowed to elect to participate in the Pro Rata Offer,
provided that payment is received in foreign currency or in Rand from a Nonresident Account.
All applications by Non-residents for the above purposes must be made through
an Authorised Dealer. In the case of Non-resident Certificated Shareholders,
certificates issued in respect of Pro Rata Offer Shares will be endorsed “nonresident” and in the case of Non-resident Dematerialised Shareholders, the
securities account maintained for such Non-resident by the relevant CSDP will be
designated as a “non-resident” account.
2.2.8.2
Emigrants
All applications by emigrants from the Common Monetary Area using blocked
Rand for the above purposes must be made through the Authorised Dealer
controlling such emigrant’s blocked assets.
In the case of Non-resident Certificated Shareholders, certificates issued in respect
of Pro Rata Offer Shares will be endorsed “non-resident”. Such restrictively endorsed
documents of title must be deposited with the Authorised Dealer controlling such
emigrant’s blocked assets. In the case of Non-resident Dematerialised Shareholders,
the securities account maintained for such emigrant by the relevant CSDP will be
designated as an “emigrant” account.
Funds which may not, in terms of the Exchange Control Regulations, be remitted
out of South Africa or paid into a bank account outside of South Africa (blocked
Rand) may be used for the subscription for Pro Rata Offer Shares. Any amounts
payable by RCL Foods in respect of the Pro Rata Offer Shares subscribed for
with blocked Rand will be deposited into such emigrant’s blocked Rand account
maintained by the relevant Authorised Dealer. Such proceeds and amounts are not
freely transferable from the Common Monetary Area and may only be dealt with
in terms of the Exchange Control Regulations.
2.2.9
Foreign Shareholders
The attention of Qualifying RCL Foods Minority Shareholders who are resident outside
of South Africa, is drawn to this paragraph and to paragraph 2.2.8 of the Circular.
This section is intended as a general guide only, and any person outside of South Africa who
is in doubt as to his position should consult his professional advisor without delay.
2.2.9.1
General
The making of the Pro Rata Offer and the distribution of the Circular and the Form
of Acceptance to certain persons who have registered addresses outside of South
Africa, or who are resident or located in, or who are citizens of, countries other
than South Africa, may be restricted by the laws of the relevant jurisdictions and
failure to comply with any of those restrictions may constitute a contravention of
the laws of any such territories. Persons outside of South Africa should consult
their professional advisors as to whether they require any governmental or other
consents or need to observe any other formalities to enable them to subscribe for
Pro Rata Offer Shares. It is the responsibility of any person (including, without
limitation, custodians, nominees and trustees) outside of South Africa wishing to
subscribe for Pro Rata Offer Shares to satisfy themselves as to the full observance of
the laws of any relevant territory in connection therewith, including the obtaining
of any governmental or other consents which may be required, the compliance
with other necessary formalities and the payment of any issue, transfer or other
taxes due in such territories.
Receipt of the Circular or the Form of Acceptance will not constitute an offer in
those jurisdictions in which it would be illegal to make an offer and, in those
circumstances, the Circular and the Form of Acceptance must be treated as being
sent for information purposes only and should not be copied or redistributed.
The Pro Rata Offer is not and will not be made to Restricted Shareholders, except
where RCL Foods is satisfied that such action would not result in a contravention
of any registration or other legal requirement in any jurisdiction.
No person receiving a copy of the Circular and/or Form of Acceptance may treat the
same as constituting an invitation or offer to him unless, in the relevant territory,
such an invitation or offer could lawfully be made to him or the letter of allocation
or Form of Acceptance could lawfully be used or dealt with without contravention
39
of any registration or other legal requirements. In such circumstances, the
Circular and the Form of Acceptance are to be treated as being sent for information
purposes only and should not be copied or redistributed.
Persons (including, without limitation, custodians, nominees and trustees)
receiving a copy of the Circular and/or a Form of Acceptance should not, in
connection with the Pro Rata Offer, distribute or send the same into any jurisdiction
where to do so would or might contravene local security laws or regulations,
including, but not limited to, the Restricted Territories. If a Form of Acceptance is
received by any person in any such territory, or by his agent or nominee, he must
not seek to subscribe for Pro Rata Offer Shares unless RCL Foods determines that
such action would not violate applicable legal or regulatory requirements. Any
person (including, without limitation, custodians, nominees and trustees) who
does forward this document or a Form of Acceptance into any such territories
(whether pursuant to a contractual or legal obligation or otherwise) should draw
the recipient’s attention to the contents of this paragraph and paragraph 2.2.8
above. The Company reserves the right to treat as invalid any subscription or
purported subscription for Pro Rata Offer Shares if:
(i)
it appears to RCL Foods or its agents to have been executed or effected in, or
dispatched from, a Restricted Territory or otherwise in a manner which may
involve a breach of the laws of any jurisdiction, or if it believes the same may
violate any applicable legal or regulatory requirement;
(ii)
in the case of a Form of Acceptance, it provides an address for delivery of
share certificates to a person who is a Restricted Shareholder or a Shareholder
whose registered address is in a Restricted Territory; or
(iii) the warranties required by paragraph 2.2.9.6 below are purported to be
excluded.
2.2.9.2
United States
The Pro Rata Offer Shares have not been approved by the U.S. Securities and
Exchange Commission, any state securities commission in the United States
(“U.S.”) or any other U.S. regulatory authority, nor have any of such regulatory
authorities passed upon or endorsed the merits of the Pro Rata Offer or the
accuracy or adequacy of the Circular. Any representation to the contrary is a
criminal offence in the U.S. The Pro Rata Offer Shares have not been and will not
be registered under the U.S. Securities Act nor with any securities regulatory
authority of any state or other jurisdiction of the U.S. and may not be offered,
sold, taken up, exercised, resold, renounced, transferred or delivered, directly or
indirectly, within the U.S., except pursuant to an exemption from or, in a transaction
not subject to, the registration requirements of the U.S. Securities Act and in
compliance with any applicable securities laws of any state or other jurisdiction
of the U.S. Accordingly, RCL Foods is not offering the Pro Rata Offer Shares, or
otherwise extending the Pro Rata Offer, into the U.S. unless an exemption from
the registration requirements of the U.S. Securities Act is available and, subject to
certain exceptions, the Circular does not constitute nor will it constitute an offer
or an invitation to apply for, nor an offer or an invitation to acquire, Pro Rata
Offer Shares in the U.S. Subject to certain exceptions, the Circular will not be sent
to any RCL Foods Shareholder in, or with a registered address in, the U.S.
Subject to certain exceptions, any person who acquires Pro Rata Offer Shares
will be deemed to have declared, warranted and agreed, by accepting delivery of
the Circular, subscribing for Pro Rata Offer Shares or accepting delivery of the
Pro Rata Offer Shares, that they are not, and that at the time of acquiring the
Pro Rata Offer Shares they will not be, in the U.S. or acting on behalf of, or for
the account or benefit of, a person on a non-discretionary basis in the U.S. or any
state of the U.S. In addition, until 40 (forty) days after the commencement of the
Pro Rata Offer, an offer, sale or transfer of the Pro Rata Offer Shares within the
U.S. by a dealer (whether or not participating in the Pro Rata Offer) may violate
the registration requirements of the U.S. Securities Act.
2.2.9.3
United Kingdom
The Circular and the Form of Acceptance (where applicable) are only being
distributed to and are only directed at:
(i)
persons who are outside the United Kingdom;
(ii)
investment professionals falling within Article 19(5) of the Financial
Services and Markets Act 2000 (Financial Promotion) Order 2005
(“Order”); or
40
(iii)
2.2.9.4
persons who are high net worth entities falling within Articles 49(2)(a)
to (d) of the Order (all such persons together being referred to as “Relevant
Persons”). The Form of Acceptance and the Pro Rata Offer Shares are only
available to, and any invitation, offer or agreement to subscribe, purchase or
otherwise acquire such Pro Rata Offer Shares will only be engaged in with,
Relevant Persons. Any person who is not a Relevant Person should not act
or rely on the Circular or the Form of Acceptance or any of their contents.
Member states of the European Economic Area
No prospectus which has been approved by the competent authority in a Relevant
Member State or, where appropriate, approved in another Relevant Member State
and notified to the competent authority in the Relevant Member State in accordance
with the Prospectus Directive, will be published in relation to the Pro Rata Offer
Shares. Accordingly, in relation to each Relevant Member State, with effect from
and including the date on which the Prospective Directive was implemented in
the Relevant Member State (“Relevant Implementation Date”), no Pro Rata Offer
Shares have been offered or will be offered pursuant to the Pro Rata Offer to the
public in that Relevant Member State except that, with effect from and including
the Relevant Implementation Date, offers of Pro Rata Offer Shares may be made to
the public in that Relevant Member State at any time:
(i)
to any person or legal entity which is a “qualified investor” as defined under
the Prospectus Directive;
(ii)
to fewer than 100 (one hundred), or, if the Relevant Member State has
implemented the relevant provisions of the 2010 PD Amending Directive,
150 (one hundred and fifty) natural or legal persons (other than qualified
investors as defined in the Prospectus Directive) in such Relevant Member
State subject to obtaining the prior consent of the Company; or
(iii)
in any other circumstances falling within Article 3(2) of the Prospectus
Directive, provided that no such offer of Pro Rata Offer Shares shall result in
a requirement for RCL Foods to publish a prospectus pursuant to Article 3 of
the Prospectus Directive or supplement a prospectus pursuant to Article 16
of the Prospectus Directive.
For the purposes of this provision, the expression “an offer of Pro Rata Offer
Shares” in relation to any Pro Rata Offer Shares in any Relevant Member State
means the communication in any form and by any means of sufficient information
on the terms of the Pro Rata Offer and the Pro Rata Offer Shares to be offered so
as to enable an investor to decide to subscribe for the Pro Rata Offer Shares, as the
same may be varied in that Relevant Member State by any measure implementing
the Prospectus Directive in that member state. In the case of any Pro Rata Offer
Shares being offered to a financial intermediary as that term is used in Article 3(2)
of the Prospectus Directive, such financial intermediary will be deemed to have
represented, acknowledged and agreed that the Pro Rata Offer Shares acquired
by it in terms of the Pro Rata Offer have not been acquired on a non-discretionary
basis on behalf of, nor have they been acquired with a view to their offer or
resale to, persons in a Relevant Member State in circumstances which may give
rise to an offer of any Pro Rata Offer Shares to the public other than their offer
or resale in a Relevant Member State to qualified investors as so defined or in
circumstances in which the prior consent of the Company has been obtained for
each such proposed offer or resale. The Company and its affiliates will rely upon
the truth and accuracy of the foregoing representation, acknowledgement, and
agreement. Notwithstanding the above, a person who is not a qualified investor
and who has notified the Company of such fact in writing may, with the consent
of the Company, be permitted to subscribe for Pro Rata Offer Shares pursuant to
the Pro Rata Offer.
2.2.9.5
Restricted Territories
Subject to certain exceptions, the Pro Rata Offer Shares may not be offered,
transferred, sold or delivered into or in the Restricted Territories. No offer of
Pro Rata Offer Shares is being made into the Restricted Territories by virtue of the
Circular or the Form of Acceptance. Although Forms of Acceptance may be posted
to RCL Foods Shareholders:
(i)
with a registered address, or resident, in one of the Restricted Territories; or
(ii)
who hold RCL Foods Shares on behalf of persons located in Restricted
Territories, such posting of the Form of Acceptance does not constitute an
41
offer to Restricted Shareholders and such Restricted Shareholders will not
be entitled to subscribe for Pro Rata Offer Shares unless such action would
not result in the contravention of any registration or other legal requirement
in the relevant jurisdictions.
2.2.9.6
Representations and warranties
Any person subscribing for Pro Rata Offer Shares represents and warrants to RCL
Foods that, except where proof has been provided to the Company’s satisfaction
that such person’s subscription for Pro Rata Offer Shares will not result in the
contravention of any applicable legal requirement in any jurisdiction, such person:
(i)
is not subscribing for Pro Rata Offer Shares from within a Restricted
Territory;
(ii)
is not in any jurisdiction in which it is unlawful to make or accept the
Pro Rata Offer or subscribe for Pro Rata Offer Shares;
(iii)
is not subscribing for Pro Rata Offer Shares for the account of a person
located within the U.S. unless:
(iv)
(a)
the instruction to accept or renounce was received from a person
outside the U.S.; and
(b)
the instructing person has advised such person that it has the authority
to give such instruction and that either it: (A) has investment discretion
or authority over such account or (B) is an investment manager or
investment company and that in the case of each of (A) and (B), is
acquiring the Pro Rata Offer Shares in terms of an exemption from the
registration requirements of the U.S. Securities Act;
is not acquiring Pro Rata Offer Shares with a view to the offer, sale, resale,
transfer, delivery or distribution, directly or indirectly, of any such Pro Rata
Offer Shares into a Restricted Territory.
The Company reserves the right to treat as invalid any subscription or purported
subscription for Pro Rata Offer Shares if it:
(i)
appears to the Company or its agents to have been executed or effected in, or
dispatched from, a Restricted Territory or otherwise in a manner which may
involve a breach of the laws of any jurisdiction or if it believes the same may
violate any applicable legal or regulatory requirement;
(ii)
provides a securities account in a Restricted Territory for the crediting of
Pro Rata Offer Shares or an address in a Restricted Territory for delivery
of share certificates evidencing Pro Rata Offer Shares; or
(iii)
purports to exclude the warranties required by this paragraph.
2.2.10 Tax consequences
Qualifying RCL Foods Minority Shareholders are advised to consult their tax and financial
advisors regarding any taxation implications pertaining to them regarding the acceptance
of their entitlements in terms of the Pro Rata Offer.
2.2.11 JSE listing
The Company will apply to the Issuer Regulation Division of the JSE for the listing of
a maximum of 74 214 642 (seventy four million two hundred and fourteen thousand six
hundred and forty two) Pro Rata Offer Shares with effect from the commencement of trade
on Monday, 10 February 2014.
2.3
Conditions precedent to the Pro Rata Offer
The implementation of the Pro Rata Offer is subject to the fulfilment of the conditions precedent
that:
42
•
the TSB Acquisition is implemented; and
•
Shareholders approve the specific issue of Shares in terms of the Pro Rata Offer.
3.
PLACEMENT
Market conditions permitting, it is the intention of the Board to offer the Placement Shares to qualifying
South African and international investors in order to raise the balance of the R2 500 000 000 (two billion
and five hundred million Rand) not raised pursuant to the Pro Rata Offer.
The quantum of the Placement will be determined post the implementation of the Pro Rata Offer and the
Placement Subscription Price will be determined by way of an accelerated bookbuild process.
The Placement is intended to diversify the RCL Foods shareholder base, further increase the free float and
improve liquidity in RCL Foods Shares.
3.1
Placement mechanism
The Placement Shares will be offered to new and existing qualifying investors by way of an
accelerated bookbuild process. Qualifying investors will be invited to submit their price and volume
indications into a book of demand. A single clearing price, being the Placement Subscription Price,
will be established in this manner.
Existing RCL Foods Shareholders who are qualifying investors will be able to participate in the
Placement.
No party has yet been approached to participate in the Placement.
3.2
Remgro participation in the Placement
Remgro is supportive of the Placement and the principles of increasing the free float and liquidity
in RCL Foods Shares.
Remgro, through TSB Sugar Holdings, will continue to support the Company as a capital provider
and, subject to the approval of RCL Foods Shareholders, may participate in the Placement.
If any Placement Shares are to be issued to TSB Sugar Holdings and if the Placement Subscription
Price is at a discount to the VWAP per RCL Foods Share over the 30 (thirty) Business Days prior to
the date on which the Placement Subscription Price is agreed, then the issue of Placement Shares to
TSB Sugar Holdings shall be subject to the Board confirming whether such issue is fair insofar as
other Shareholders are concerned based on the advice received from an independent expert which
is acceptable to the JSE.
3.3
Conditions precedent to the Placement
The implementation of the Placement is subject to Shareholders approving the specific issue of
Shares in terms of the Placement.
The issue of Placement Shares to TSB Sugar Holdings pursuant to the Placement is subject to
Shareholders approving the specific issue of Shares to TSB Sugar Holdings in terms of the Placement.
43
D. FINANCIAL INFORMATION RELATING TO THE TSB TRANSACTIONS
AND THE RCL FOODS BEE TRANSACTIONS
1.
ADEQUACY OF CAPITAL
The Directors have considered the effect of the TSB Acquisition, TSB BEE Transaction and RCL Foods
BEE Transactions and are of the opinion that the requirements of the Companies Act and the Listings
Requirements have been complied with and that:
•
the RCL Foods Group post the TSB Acquisition, TSB BEE Transaction and RCL Foods BEE Transactions
will be able, in the ordinary course of business, to pay its debts for a period of 12 (twelve) months
after the implementation of the above transactions (for this purpose the assets and liabilities were
recognised and measured in accordance with the accounting policies used in the latest audited
consolidated annual financial statements of RCL Foods);
•
the assets of the RCL Foods Group post the TSB Acquisition, TSB BEE Transaction and RCL Foods
BEE Transactions will be in excess of the liabilities of the RCL Foods Group for a period of 12 (twelve)
months after the implementation of the above transactions;
•
the share capital and reserves of the RCL Foods Group post the TSB Acquisition, TSB BEE Transaction
and RCL Foods BEE Transactions will be adequate for ordinary business purposes (excluding the
proposed Project) for a period of 12 (twelve) months after the implementation of the above transactions;
•
the working capital of the RCL Foods Group post the TSB Acquisition, TSB BEE Transaction and RCL
Foods BEE Transactions will be adequate for ordinary business purposes for a period of 12 (twelve)
months after the implementation of the above transactions.
The Directors of RCL Foods have also undertaken to submit a working capital pack to the Company’s JSE
sponsor prior to any repurchase resulting from the exercise of the RCL Foods BEE Repurchase Option,
the RCL Foods BEE Compulsory Subscription Right or the RCL Foods BEE Subscription Option in terms
of the RCL Foods BEE Relationship Agreement in terms of the New RCL Foods BEE Transaction and prior
to any repurchase resulting from the exercise of the TSB BEE Maturity Call Option, the TSB BEE Trigger
Event Call Option, the TSB BEE Exit Call Option or the TSB BEE Pre-emptive Right in terms of the TSB
BEE Subscription and Relationship Agreement.
2.
PRO FORMA FINANCIAL INFORMATION
The Company’s pro forma statement of financial position at 30 June 2013 and pro forma income statement
for the year ended 30 June 2013 are set out in Annexure 2 to the Circular.
The pro forma financial effects set out below have been prepared to assist Shareholders in assessing the
impact of the TSB Transactions,the RCL Foods BEE Transactions and the Equity Capital Raising on the
EPS, HEPS, NAV and TNAV Per Share. Due to the nature of these pro forma financial effects, they are
presented for illustrative purposes only and may not fairly present the Company’s financial position,
results of its operations, changes in equity or cash flows after the TSB Transaction and the RCL Foods
BEE Transactions.
The pro forma financial effects have been prepared in accordance with the Listings Requirements and
the Guide on Pro Forma Financial Information issued by The South African Institute of Chartered
Accountants. These pro forma financial effects are the responsibility of the Board and are provided for
illustrative purposes only. The pro forma financial effects set out below should be read in conjunction
with the independent reporting accountant’s assurance report, which is included as Annexure 3 to the
Circular.
44
45
231.0
231.0
231.0
231.0
391.1
392.2
574.3
182.1
168.5
625.4
(104.8)
(0.9)
2.5
1 174.5
46.9
4.6
(0.9)
2.5
46.0
53.0
4.3
7.1
52.1
6.8
–
–
–
6.9
(0.9)
(0.9)
–
(5.2)
(5.2)
–
(5.2)
(5.2)
805.3
623.2
622.1
863.3
349.7
1 068.8
1.6
46.3
47.9
1.6
52.1
53.7
40.2%
58.9%
59.1%
38.0%
107.5%
(9.0)%
(36.0)%
906.5%
574.7%
(36.0)%
1 111.6%
689.7%
Change
–
–
–
19.1
(0.3)
(0.3)
–
(13.7)
(13.7)
–
(13.7)
(13.7)
Reintroduction of
Strategic
Partners
–
–
–
(6.5)
(0.6)
(0.6)
–
(6.9)
(6.9)
–
(6.9)
(6.9)
805.3
623.2
622.1
875.9
348.8
1 067.9
1.6
25.7
27.3
1.6
31.5
33.1
Unwinding
of Current
BEE
Structure
and reintro- Pro forma
duction of
after TSB
an RCL
TransacFoods
tions and
Employee RCL Foods
Share
BEE
Ownership
TransacTrust
tions
RCL Foods BEE Transactions
40.2%
58.9%
59.1%
40.1%
107.0%
(9.1)%
(36.0)%
458.7%
284.5%
(36.0)%
632.6%
386.8%
Change
144.3
144.3
144.3
144.3
210.0
100.7
(0.3)
6.4
6.1
(0.3)
5.3
5.0
Adjustments for
the Equity
Capital
Raising
949.6
767.5
766.4
1 020.2
558.8
1 168.6
1.3
32.1
33.4
1.3
36.8
38.1
Pro forma
after TSB
Transactions, RCL
Foods BEE
Transactions
and the
Equity
Capital
Raising
65.4%
95.7%
96.0%
63.1%
231.6%
(0.5)%
(48.0)%
597.8%
370.4%
(48.0)%
755.8 %
460.3%
Change
The assumptions on which the pro forma financial effects are based are set out in the notes to the pro forma statement of financial position and pro forma income
statement presented in Annexure 2 to the Circular.
Number of Shares in
issue (millions)
Weighted average
number of Shares in
issue (millions)
Weighted average diluted
number of Shares in
issue (millions)
Number of Shares in
issue (net of treasury
shares) (millions)
Net asset value per share
(cents)
Tangible net asset value
per Share (cents)
Headline earnings per
Share (cents)
– Basic and diluted
– From continuing
operations
– From discontinued
operations
Earnings per Share
(cents)
– Basic and diluted
– From continuing
operations
– From discontinued
operations
Adjustments Adjustments Pro forma
relating to
for the
after the
Published
the TSB
TSB BEE
TSB
and audited Acquisition Transaction Transactions
TSB Transactions
3.
TRANSACTION COSTS
The estimated costs of the TSB Acquisition, TSB BEE Transaction, RCL Foods BEE Transactions and the
Equity Capital Raising (VAT exclusive) are set out below:
Service
Service provider
Merchant Bank and Sponsor
Legal
Independent Expert
Reporting Accountants
Publishing and printing
JSE listing fees
JSE documentation inspection fee
Transfer Secretary
Rand Merchant Bank
Cliffe Dekker Hofmeyr Inc.
Deloitte
PricewaterhouseCoopers Inc.
Ince (Pty) Ltd
JSE
JSE
Computershare
Total
Amount
(R’000)
17 000
2 500
1 050
850
350
671
97
143
22 661
There have been no preliminary expenses in relation to the proposed transactions incurred by RCL Foods
within the three years preceding the date of the Circular.
46
E. COMPANY INFORMATION
1.
BACKGROUND INFORMATION
1.1
Incorporation
RCL Foods was incorporated in South Africa in June 1966 as a limited liability private company.
RCL Foods was converted to a public company and its Shares were listed on the JSE in June 1989.
1.2
History and nature of business
RCL Foods is a subsidiary of Remgro. Remgro holds c.70% (seventy percent) of RCL Foods Shares via
its wholly-owned subsidiaries. It is the holding company of three principal operating subsidiaries,
Rainbow, Vector and Foodcorp.
Rainbow was founded by the late Stanley Methven on his father’s farm at Hammarsdale, outside
Durban, in 1960. He first sold from a stall in central Durban. Demand for Rainbow’s chicken grew
quickly, leading to the commissioning of the first processing plant at Hammarsdale in 1963. Today,
Rainbow is South Africa’s largest processor and marketer of chicken and operates in the local retail,
wholesale and foodservice channels. Its consumer brands are Rainbow and Farmer Brown and its
business/service brands are Rainbow FoodSolutions, Cobb and Epol.
Vector’s origins lie within I&J (an AVI Limited company) where it was positioned as an in-house
distribution arm. The growth of the distribution business was given significant impetus with the
conclusion of a distribution arrangement with Rainbow Farms in 1966, although at the time this
was limited to the Natal (KZN) area. Rainbow’s later expansion to sell and produce nationally had a
direct and positive impact on the growth of the I&J distribution business. In July 2001, AVI Limited
re-launched its distribution business as a separate company and it was subsequently renamed
Vector Logistics. RCL Foods acquired Vector in July 2004 with the strategic intent of controlling
and optimising Rainbow’s outbound supply chain. Vector’s key focus between 2004 and 2010 was
to optimise Rainbow’s outbound supply chain whilst simultaneously growing and diversifying its
menu of services with its existing customer base.
Foodcorp was delisted from the JSE in 1998 following a private equity buy-out and subsequently
sold to Pamodzi Investment Holdings, management and employees in April 2004. In March 2010,
Foodcorp completed a restructuring transaction whereby Pamodzi sold its entire interest to
BlueBay, a UK-based fund manager, Capitau Partnership, a South African-based fund manager and
to management and employees through a staff trust.
On 15 May 2013, RCL Foods acquired an effective 64.2% (sixty four point two percent) shareholding
in Foodcorp, which is South Africa’s third largest food producer, which brought a number of
leading brands into the RCL Foods stable. The remaining 35.8% (thirty five point eight percent)
was acquired post 30 June 2013, thereby making Foodcorp a wholly-owned subsidiary of RCL
Foods. Foodcorp manufactures, markets and distributes a diversified portfolio of food products
ranging from basic essentials to top-end desserts and convenience meals. Many of the products are
associated with South African tradition and heritage, and are therefore among the leading and best
recognised brands in South Africa.
No government protection or investor encouragement is applicable to RCL Foods.
1.3
Prospects of the RCL Foods Group
The challenging state of the global and local economy is unlikely to see sustainable improvement
in consumer sentiment and spending in the near future, which impacts across all operating
subsidiaries. The poultry industry is at crisis point and anti-dumping protection will be key to
the survival of the industry. The trading outlook for Vector is likely to remain under pressure,
particularly in the retail business where Vector’s principals are coming under increased pressure
from cheap imports. Vector will continue to seek new business to take advantage of the additional
capacity created in 2013.
Considering the local chicken supply and demand imbalance and that raw material commodity
prices are at record levels, the Board is of the view that operating margins are likely to remain
under pressure.
Despite these factors, growth opportunities continue to be explored by the Board to meet the RCL
Foods Group’s long-term strategic aspirations. The TSB Acquisition will help diversify the RCL
Foods Group’s earnings and further consolidate a well-funded platform for future acquisitions and
growth. This will further strengthen RCL Foods’ financial position and help lower the volatility in
its earnings going forward.
47
1.4
Trading history of RCL Foods Shares on the JSE
A table setting out the trading history of RCL Foods Shares on the JSE has been included in
Annexure 4 to the Circular.
2.
FINANCIAL INFORMATION
2.1
Historical financial information
The historical financial information of RCL Foods for the three financial periods ended 30 June 2011,
30 June 2012 and 30 June 2013 is included in Annexure 7 to the Circular.
The Directors are responsible for the accuracy of the relevant information extracted from the yearend annual financial statements.
2.2
Material liabilities and commitments
Details of all material liabilities and commitments are set out in Annexure 8 to the Circular.
2.3
Dividends and dividend policy
The Directors intend to declare a semi-annual dividend. The dividend policy will be reviewed by the
Directors from time to time in light of the prevailing circumstances and cash requirements of RCL
Foods.
All unclaimed dividends that are due to Shareholders shall be held by the Company in trust until
lawfully claimed by such Shareholders. If, after expiry of the relevant three-year period provided for
in terms of the Prescription Act, No 68 of 1969, as amended, such monies remain unclaimed, such
unclaimed monies may be declared by the Directors to be forfeited for the benefit of the Company.
The Directors may at any time annul such forfeiture upon such conditions (if any) as they deem fit.
2.4
Material change
The Foodcorp Acquisition is the only material change in RCL Foods’ business.
3.
INFORMATION ON THE DIRECTORS AND EXECUTIVE MANAGEMENT
The Directors have:
•
been appointed in terms of RCL Foods’ MOI;
•
confirmed that they do not have any conflict of interest between their duties as Directors and their
private interests; and
•
confirmed that they, collectively, have the appropriate expertise and experience for the management
of the RCL Foods Group’s business.
3.1
Details and experience of Directors and executive management
The full names, positions, dates of appointment, ages, nationalities, business addresses,
qualifications, experience and other directorships of the Directors and senior management of RCL
Foods and its major subsidiaries are set out in Annexure 10 to the Circular.
3.2
Directors’ and executive managements’ declarations
None of the Directors and executive managers of RCL Foods have:
48
•
ever been convicted of an offence resulting from dishonesty, fraud or embezzlement;
•
ever been declared bankrupt, insolvent or sequestrated in any jurisdiction;
•
at any time been a party to a scheme of arrangement or made any other form of compromise
with their creditors;
•
ever been found guilty in disciplinary proceedings by an employer or regulatory body, due to
dishonest activities;
•
ever been involved in any receiverships, compulsory liquidations or creditors’ voluntary
liquidations;
•
ever received public criticisms from statutory or regulatory authorities, including professional
bodies, and have ever been disqualified by a court from acting as a director of a company or from
acting in the management or conduct of the affairs of any company;
•
ever been barred from entry into a profession or occupation;
•
ever been convicted in any jurisdiction of any criminal offence;
•
ever been removed from an office of trust, on the grounds of misconduct and involving honesty;
•
ever been involved in compulsory liquidations, administrations or partnership voluntary
agreements of any partnerships where they were partners at the time of, or within the
12 (twelve) months preceding, any such event;
•
ever received a court order declaring the Director a delinquent or placing the Director under
probation in terms of section 162 of the Companies Act or prohibiting him to act as a director; or
•
ever been involved, as a director or in an executive function, in any business rescue plans and/or
resolution proposed by any entity to commence business rescue proceedings, application having
been made for any entity to begin business rescue proceedings, notices having been delivered in
terms of section 129(7) of the Companies Act, receiverships, compulsory liquidations, creditors’
voluntary liquidations, administrations, company voluntary arrangements or any compromise
or arrangement with creditors generally or any class of creditors of any company within the
last 12 (twelve) months.
All of the Directors have completed directors’ declarations in terms of Schedule 21 of the Listings
Requirements upon their appointment and nothing, relative to the above, has changed since their
appointment.
3.3
Qualification, remuneration, borrowing powers and appointment of Directors
3.3.1
Extracts from the RCL Foods MOI relating to the Directors
The relevant provisions of the MOI concerning the qualification, remuneration, borrowing
powers and appointment of the Directors are set out in Annexure 11 to the Circular.
3.3.2
Borrowing powers
The MOI does not impose any limitation on the borrowing powers of Directors. No subsidiary
of RCL Foods has exceeded its borrowing powers during the preceding three years.
The borrowing powers of the Directors are disclosed fully in Annexure 11 to the Circular.
The MOI does not impose any limitations on the Directors in relation to exchange control.
3.3.3
Directors’ emoluments
The total remuneration, benefits and fees received by Directors for the year ended
30 June 2013 were as follows:
2013
M Dally
RH Field
2012
M Dally
RH Field
Basic
salary
R’000
Pension
contribution
R’000
Other
benefits*
R’000
5 344
2 595
387
258
118
64
5 849
2 917
7 939
645
182
8 766
4 962
2 334
359
232
108
59
5 429
2 625
7 296
591
167
8 054
Total
R’000
* Other benefits include Company contributions to disability insurance, medical aid and UIF.
49
Non-executives (for services as a director)
Present directors
HJ Carse*
JJ Durand*
M Griessel
PR Louw*
NP Mageza
JB Magwaza
MM Nhlanhla
RV Smither
GC Zondi**
Past directors
CM van den Heever*
MH Visser*
Total
*
2013
R’000
2012
R’000
71
189
307
189
335
232
232
425
406
172
278
172
304
211
186
355
313
2 386
1 991
109
9
172
109
181
2 495
2 172
Paid to Remgro Management Services Limited.
** Paid to Imbewu Capital Partners Consulting Proprietary Limited.
There have been no fees paid or accrued as payable to a third party in lieu of Directors’ fees.
Other than disclosed above, no additional material benefits have been received by Directors
during the years ended 30 June 2012 and 30 June 2013. No commissions or gains were
received by Directors and no profit-sharing arrangements were in place relating to Directors
for the periods ended 30 June 2012 and 30 June 2013.
3.3.4
Directors’ emoluments paid by Remgro
Fees
R’000
Fixed pay 2013
Executive
HJ Carse1
JJ Durand
PR Louw
CM van den Heever2
50
213
Salaries
R’000
Retirement
fund
R’000
Other
benefits4
R’000
1 494
7 080
1 209
1 322
296
1 447
240
262
204
265
204
207
1 994
9 005
1 653
1 791
11 105
2 245
880
14 443
Total
R’000
Sub-total
213
Independent non-executive
NP Mageza
285
285
Sub-total
285
285
Total
498
11 105
2 245
880
14 728
Fixed pay 2012
Executive
MH Visser3
JJ Durand
PR Louw
CM van den Heever
166
199
7 311
5 030
1 118
1 233
1 696
1 037
222
245
534
248
192
192
9 707
6 514
1 532
1 670
Sub-total
365
14 692
3 200
1 166
19 423
Independent non-executive
NP Mageza
266
266
Sub-total
266
266
Total
631
14 692
3 200
1 166
19 689
Notes:
1.
Mr HJ Carse was appointed as a director on 19 February 2013. The remuneration reflected is for 12 months ended
30 June 2013.
2.
Mr CM van den Heever resigned as a director on 31 January 2013. The remuneration reflected is for 12 months
ended 30 June 2013.
3.
Mr MH Visser passed away on 26 April 2012.
4.
Other benefits include medical aid contributions and vehicle benefits.
RCL Foods paid amounts of R6 700 000 (six million seven hundred thousand Rand) and
R5 400 000 (five million four hundred thousand Rand) to Remgro for managerial and
administration services for the 2013 and 2012 financial periods, respectively.
The remuneration receivable by any of the Directors will not be varied in consequence of the
TSB Acquisition, the New RCL Foods BEE Transaction and/or the TSB BEE Transaction.
Terms of office and rights of RCL Foods Shareholders to appoint Directors are contained in
the MOI, an extract of which has been included in Annexure 11 to the Circular.
Executive Directors have no fixed term service contracts and conditions of employment are
governed by engagement letters. Executive Directors retire at the age of 60. Pension and
provident fund payouts are based on period of service and no provision is made for restraint
of trade payments or retrenchment packages.
The total remuneration, benefits and fees received by Directors for the years ended 30 June
2012 and 30 June 2013 are disclosed in Section E, paragraph 3.3.3 of the Circular.
The Audit Committee of RCL Foods is satisfied with the expertise and experience of the
Financial Director.
There are no contractual secretarial or technical fees payable.
51
52
3.4
3.4.1
46 976
17 961
2 680
1 419
34 292
CM van den Heever
1 159 693
30/10/2012
02/04/2013
8 860
46 976
03/04/2013
03/04/2013
03/04/2013
03/04/2013
26/04/2012
26/04/2012
9 058
54 118
7 572
4 220
542 424
486 465
Date
exercising
SARs
147.05
183.15
185.50
185.50
185.50
185.50
129.60
129.60
Share price
on exercise
date
65 221
5 431
1 263
1 098
5 801
834
434
34 769
15 591
841 060
17 961
2 680
1 419
34 292
6 830
27 432
22 646
26 995
235 895
271 258
7 066
20 613
2 933
1 624
38 062
7 546
108 236
7 572
12 231 523
270 992
898 518
10 762 613
299 400
It refers to the increase in value of the SAR Scheme shares of the indicated participants from the offer date to the date of payment and delivery. The share price used to calculate the
deemed increase in value for the late Mr Visser, is the Remgro share price on the date that he passed away, namely 26 April 2012.
65.50
97.55
78.30
75.38
82.60
97.55
147.25
78.30
75.38
82.60
97.55
147.25
63.97
64.23
65.50
40.62
97.55
147.25
31.43
78.30
75.38
82.60
97.55
147.25
Number
of SARs
exercised
2.
29/11/2012
29/11/2012
29/11/2012
29/11/2012
Offer date
Offer
price2
Rand
Grant date
fair value
of SARs
granted
during
the period
In terms of the rules of the SARs scheme, the executor of the estate of the late Mr MH Visser was entitled to exercise all the SARs granted to him at any time within 12 (twelve)
months after the date of his death, or before the expiry of the SARs period (being seven years from the grant date), whichever was the earlier. This right was exercised during the
year under review.
308 280
6 830
22 646
271 258
7 546
SARs
accepted
during
the period
Balance
of SARs
accepted
Increase
as at
in value2
R’000 30 June 2013
1.
1 692 473
7 066
9 058
26 995
8 860
27 432
PR Louw
Notes:
162 354
15 144
4 220
235 895
542 424
486 465
20 613
2 933
1 624
38 062
JJ Durand
H J Carse
Participant
Executive
MH Visser1
Balance
of SARs
accepted
as at
30 June 2012
Remgro Equity Settled Share Appreciation Rights (“SARs”) Scheme – 2013
Before the TSB Acquisition
Directors’ interests in Remgro shares
Interests of Directors
53
542 424
486 465
427 047
162 354
22 717
12 662
235 895
7 000
9 058
26 995
8 860
27 432
46 976
17 961
2 680
1 419
34 292
2 072 237
SARs
accepted
during the
period
Offer date
65.50
97.55
38.90
78.30
75.38
82.60
97.55
63.97
64.23
65.50
40.62
97.55
31.43
78.30
75.38
82.60
97.55
Offer price
Rand
2
26/10/2011
26/10/2011
7 573
8 442
443 062
26/10/2011
Date
exercising
SARs
427 047
Number
of SARs
exercised
117.75
117.75
117.75
Share
price on
exercise
date
34 161
258
230
33 673
Increase
in value3
R’000
162 354
15 144
4 220
235 895
7 000
9 058
26 995
8 860
27 432
46 976
17 961
2 680
1 419
34 292
1 629 175
542 424
486 465
Balance of
SARs
accepted
as at
30 June
2012
Grant date
fair value
of SARs
granted
during the
period
3. It refers to the increase in value of the SAR Scheme shares of the indicated participants from the offer date to the date of payment and delivery.
2. In terms of the rules of the SARs scheme, the offer price of SARs that were awarded prior to the unbundling of the investment in Impala Platinum Limited, was reduced by between
R7.58 and R13.19 (depending on the offer date) to ensure that the participants were placed in substantially the same position as they were prior to the unbundling.
1. In terms of the rules of the SARs scheme, the executor of the estate of the late Mr MH Visser was entitled to exercise all the SARs granted to him at any time within 12 (twelve)
months after the date of his death, or before the expiry of the SARs period (being seven years from the grant date), whichever was the earlier. This right was exercised during the
year under review.
Notes:
CM van den Heever
PR Louw
JJ Durand
Participant
Executive
MH Visser1
Balance
of SARs
accepted
as at
30 June
2011
Remgro Equity Settled Share Appreciation Rights (“SARs”) Scheme – 2012
54
46 976
17 961
2 680
1 419
34 292
CM van den Heever
6 830
308 280
22 646
271 258
7 546
SARs
accepted
during the
period
29/11/2012
29/11/2012
29/11/2012
29/11/2012
Offer date
65.50
97.55
78.30
75.38
82.60
97.55
147.25
78.30
75.38
82.60
97.55
147.25
63.97
64.23
65.50
40.62
97.55
147.25
31.43
78.30
75.38
82.60
97.55
147.25
Offer price
Rand
2
1 159 693
30/10/2012
02/04/2013
8 860
46 976
03/04/2013
03/04/2013
03/04/2013
03/04/2013
26/04/2012
26/04/2012
Date
exercising
SARs
9 058
54 118
7 572
4 220
542 424
486 465
Number
of SARs
exercised
147.05
183.15
185.50
185.50
185.50
185.50
129.60
129.60
Share
price on
exercise
date
65 221
5 431
1 263
1 098
5 801
834
434
34 769
15 591
Increase
in value2
R’000
17 961
2 680
1 419
34 292
6 830
841 060
27 432
22 646
26 995
235 895
271 258
7 066
20 613
2 933
1 624
38 062
7 546
108 236
7 572
Balance
of SARs
accepted
as at
30 June 2013
270 992
12 231 523
898 518
10 762 613
299 400
Grant date
fair value
of SARs
granted
during the
period
2. It refers to the increase in value of the SAR Scheme shares of the indicated participants from the offer date to the date of payment and delivery. The share price used to calculate the
deemed increase in value for the late Mr Visser, is the Remgro share price on the date that he passed away, namely 26 April 2012.
1. In terms of the rules of the SARs scheme, the executor of the estate of the late Mr MH Visser was entitled to exercise all the SARs granted to him at any time within 12 (twelve)
months after the date of his death, or before the expiry of the SARs period (being seven years from the grant date), whichever was the earlier. This right was exercised during the
year under review.
Notes:
7 066
9 058
26 995
8 860
27 432
PR Louw
1 692 473
162 354
15 144
4 220
235 895
542 424
486 465
20 613
2 933
1 624
38 062
JJ Durand
HJ Carse
Participant
Executive
MH Visser1
Balance
of SARs
accepted
as at
30 June 2012
Remgro Equity Settled Share Appreciation Rights (“SARs”) Scheme – 2013
After the TSB Acquisition
3.4.2
Directors’ interests in transactions
None of the Directors had any interest, direct or indirect, in any transaction effected by the
Company during the current or immediately preceding financial year or in an earlier year
and which remains in any respect outstanding or unperformed.
3.4.3
Directors’ interests in promotion and property of RCL Foods
None of the Directors had any interest, direct or indirect, in the promotion of RCL Foods
or in any property acquired or proposed to be acquired as a result of the TSB Acquisition
during the preceding three years and none of the Directors have any such interest currently.
No payments were made to, or have been agreed to be paid to, any Director or any company
in which he is beneficially interested, directly or indirectly, or of which he is a director or to
any partnership, syndicate or other association (an “Associate Company”) of which he is a
member either to induce him to become, or to qualify him as a director or otherwise for the
services rendered by him or by an associate Company in connection with RCL Foods within
the preceding three years.
4.
INFORMATION ON THE SHARE CAPITAL OF THE RCL FOODS GROUP
4.1
Authorised and issued RCL Foods Shares
The number of authorised and issued Shares as at the Last Practicable Date and the indicative effect
of the TSB Acquisition, Specific Repurchase and increase in authorised share capital, Equity Capital
Raising, TSB BEE Transaction and New RCL Foods BEE Transaction are set out below:
Before the TSB Acquisition, Specific Repurchase and Proposed RCL Foods Share Capital
Increase
Number of authorised RCL Foods Shares
1 000 000 000 ordinary shares of no par value
Number of issued RCL Foods Shares
574 622 251 ordinary shares of no par value
Number of treasury RCL Foods Shares
51 177 217 ordinary shares of no par value
Total
After the TSB Acquisition
Number of authorised RCL Foods Shares
1 000 000 000 ordinary shares of no par value
Number of issued RCL Foods Shares
805 569 133 ordinary shares of no par value
Number of treasury RCL Foods Shares
51 177 217 Ordinary shares of no par value
After the TSB Acquisition and Specific Repurchase
Number of authorised RCL Foods Shares
1 000 000 000 ordinary shares of no par value
Number of issued RCL Foods Shares
805 569 133 ordinary shares of no par value
Number of treasury RCL Foods Shares
0 Ordinary shares of no par value
55
After the TSB Acquisition, Specific Repurchase, Increase in Authorised Share Capital and the
Equity Capital Raising
Number of authorised RCL Foods Shares
2 000 000 000 ordinary shares of no par value
Number of issued RCL Foods Shares
949 910 934 ordinary shares of no par value
Number of treasury RCL Foods Shares
0 ordinary shares of no par value
After the TSB Acquisition, Specific Repurchase, Increase in Authorised Share Capital, the
Equity Capital Raising, TSB BEE Transaction and New RCL Foods BEE Transaction.
Number of authorised RCL Foods Shares
2 000 000 000 ordinary shares of no par value
Number of issued RCL Foods Shares
949 910 934 ordinary shares of no par value
Number of treasury RCL Foods Shares
70 758 637 ordinary shares of no par value
There are no other classes of securities listed and no securities of the Company are listed on any
stock exchanges other than the JSE. In excess of 20% (twenty percent) of RCL Foods Shares are held
by the public. Refer to Section E, paragraph 5 of the Circular for details of major beneficial
Shareholders.
No other classes of Shares exist which have any preferential conversion and/or exchange rights of
any securities.
No simultaneous issue of Shares will be issued in line with any specific issue of Shares in terms of
this Circular.
4.1.2
Listings requirements
Subject to Shareholder approval of the requisite special and ordinary resolutions at the
General Meeting and compliance with the relevant Listings Requirements, the JSE will
approve the listing and delisting of RCL Foods Shares as follows:
56
(i)
The listing of 230 946 882 Shares in terms of the TSB Acquisition;
(ii)
The repurchase and the delisting of 51 177 217 Shares in terms of the Specific
Repurchase;
(iii)
The listing of 144 341 801 Shares in terms of the Equity Capital Raising;
(iv)
The listing of 6 928 406 Shares in terms of the TSB BEE Transaction; and
(v)
The listing of 63 830 231 Shares in terms of New RCL Foods BEE Transaction.
4.2
Changes to the number of issued Shares
The changes to issued RCL Foods Shares, net of treasury RCL Foods Shares, during the three
financial periods ended 30 June 2011, 30 June 2012 and 30 June 2013 are summarised below:
Number of
Shares issued
and allotted
Changes to issued Shares
2013
Issued Shares at beginning of year
Rights issue
Shares issued in terms of share incentive plans
294 991 606
276 964 802
2 300 076
Issued Shares at end of year
574 256 484
2012
Issued Shares at beginning of year
Shares issued in terms of share incentive plans
293 925 607
1 065 999
Issued Shares at end of year
294 991 606
2011
Issued Shares at beginning of year
292 563 363
Shares issued in terms of share incentive plans
1 362 244
Issued Shares at end of year
293 925 607
365 767 (three hundred and sixty five thousand seven hundred and sixty seven) RCL Foods Shares
were issued by RCL Foods since 30 June 2013. As at the Last Practicable Date, no Shares have been
issued by RCL Foods since 2 December 2013.
No Shares have been issued by RCL Foods subsidiaries in the preceding three years. The only
Shares issued by RCL Foods during the preceding three years were as a result of the exercise of
Share options and Share appreciation rights by RCL Foods employees and the rights offer process
completed in March 2013.
No commissions, discounts or brokerages were incurred in connection with the issue of the RCL
Foods Shares as a result of the exercise of share options and share appreciation rights.
There have been no other offers or issues of any securities by RCL Foods or any of its subsidiaries
during the preceding three years.
There have been no Share repurchases, consolidations or sub-divisions by RCL Foods and its
subsidiaries during the preceding three years.
4.3
Interests of Directors in RCL Foods Shares
The aggregate direct and indirect beneficial holdings as at 30 June 2013 of those Directors holding
issued RCL Foods Shares are detailed below, including any directors of the Company having
resigned in the preceding 18 months:
2013
Direct
beneficial
Executive directors
M Dally
RH Field
2012
Indirect
beneficial
1 201 653
250 000
Non-executive directors
M Griessel
NP Mageza
JB Magwaza*
MM Nhlanhla*
GC Zondi*
Direct
beneficial
964 000
378 000
24 680
252
2 558 861
342 887
3 766 643
1 451 653
Indirect
beneficial
6 693 323
4 680
2 558 861
342 887
3 766 643
1 342 000
6 673 071
* Assumes 100% vesting in terms of BEE transaction.
There has been no change in the interests of the Directors in the stated capital of the Company since
the end of the financial year.
57
Refer to the RCL Foods rights offer circular dated 11 February 2013 for disclosure of Remgro
directors’ interest in RCL Foods Shares.
4.4
Share options and share appreciation rights
The Company has the following share plans which may be affected by the TSB Acquisition, the New
RCL Foods BEE Transaction, the TSB BEE Transaction and the Equity Capital Raising:
•
the RCL Foods Share Incentive Scheme;
•
the RCL Foods Share Appreciation Rights Scheme;
•
the RCL Foods Conditional Share Plan; and
•
the RCL Foods Employee Share Ownership Programme.
RCL Foods Share Incentive Scheme (“RFSIS”)
Within the limits imposed by Shareholders and the JSE, the Remuneration and Nominations
Committee approved and granted Share options on an annual basis, as well as periodically when
either an employee was promoted or a new appointment was made to an appropriate management
position. The Share options were granted at the ruling closing share price on the trading days
approved by the Remuneration and Nominations Committee.
Share options vest after stipulated periods and are exercisable up to a maximum of ten years from
the grant dates (if granted prior to 31 March 2005) or seven years from the grant dates (if granted
after 31 March 2005).
Share options granted vest as follows:
•
first third – second anniversary of grant date;
•
second third – third anniversary of grant date; and
•
final third – fourth anniversary of grant date.
On resignation, Share options which have not yet vested will lapse and share options which have
vested may be exercised before the last day of employment. On retirement, share options which have
not yet vested will lapse and Share options which have vested may be exercised within six months
from the date of retirement. On death, Share options which have not yet vested will lapse and Share
options which have vested may be exercised by beneficiaries within six months from the date
of death.
Options granted to executive directors and unexpired or unexercised as at 30 June 2013 are as
follows:
Options
exercisable
at 30 June
2012
M Dally
Issue price
Issue
prior to
price post
rights Options at
Rights
rightsissue
30 June
issue
issue*
Rand
2012 adjustment*
Rand
779 211
10.39
779 211
58 442
9.67
1 101 317
16.35
1 101 317
87 371
15.21
504 245
14.20
13.21
2 384 773
RH Field
Total
504 245
37 979
2 384 773
183 792
10.39
154 328
11 575
9.67
573 639
16.35
573 639
45 508
15.21
264 404
14.20
13.21
264 404
19 915
992 371
76 998
3 377 144
3 377 144
260 790
(837 653)
Exercise
price
Gain on
options
exercised
R’000
15.05
4 506
1 188 688
542 224
(837 653)
154 328
992 371
Options
exercised Options at
during
30 June
the year
2013
1 730 912
(165 903)
4 506
16.80
1 167
619 147
284 319
(165 903)
903 466
1 167
(1 003 556) 2 634 378
5 673
* The issue price and number of outstanding options were amended as a result of the rights issue in order to place the holders
in the same position as they were before the rights issue. These amendments have no financial effect for the Group as they
have placed the participants in the same economic position as they were before the rights issue.
No options were issued during the year, nor will any further options be issued under the RCL Foods
Share Incentive Scheme, as this scheme was replaced by the RCL Foods Share Appreciation Rights
Scheme approved at the 43rd annual general meeting of Shareholders held on 31 July 2009. The
scheme will be simply allowed to run its course in respect of existing options.
58
Options
exercisable
at 30 June
2011
M Dally
Issue
price prior
to rights
issue
Rand
Total
Options
exercised
during
the year
Options at
30 June
2012
464 000
6.65
464 000
779 211
10.39
779 211
779 211
734 211
16.35
1 101 317
1 101 317
336 163
14.20
2 313 585
RH Field
Issue
Options at price post30 June rights issue
2011
Rand
(464 000)
504 245
(464 000)
(128 000)
6.65
128 000
154 328
10.39
154 328
15.10
3 922
15.13
1 085
504 245
2 848 773
128 000
Exercise
price
Gain on
options
exercised
R’000
2 384 773
3 922
154 328
382 426
16.35
573 639
573 639
176 269
14.20
264 404
264 404
841 023
1 120 371
(128 000)
992 371
1 085
3 154 608
3 969 144
(592 000)
3 377 144
5 007
RCL Foods Share Appreciation Rights Scheme (“RFSARS”)
The new RFSARS provides executive directors and selected employees with conditional rights to
receive RCL Foods Shares, referred to as Share appreciation rights (“SARs”). Within the limits
imposed by Shareholders and the JSE, the Remuneration and Nominations Committee approves and
awards SARs on an annual basis, as well as periodically when either an employee is promoted or a
new appointment is made to an appropriate management position. Recipients of SARs become
entitled to RCL Foods Shares having a value equal to the increase in the market value of a number
of notional RCL Foods Shares. The market value of RCL Foods Shares for the purposes of determining
award prices and exercise prices is the VWAP per RCL Foods Share traded on the JSE for the 5 (five)
Business Days immediately preceding the award dates and exercise dates approved by the
Remuneration and Nominations Committee.
SAR awards vest after stipulated periods and are exercisable up to a maximum of seven years from
the award dates.
SAR awards vest as follows:
• first third – third anniversary of award date;
• second third – fourth anniversary of award date; and
• final third – fifth anniversary of award date.
On resignation, SAR awards which have not yet vested will lapse and SAR awards which have
vested may be exercised before the last day of employment. On retirement, unvested SAR awards
vest immediately and all SAR awards may be exercised within 12 months from the date of retirement.
On death, unvested SAR awards vest immediately and all SAR awards may be exercised by
beneficiaries within 12 (twelve) months from the date of death.
Share appreciation rights awarded to executive directors and unexpired or unexercised as at
30 June 2013 are as follows:
Rights
exercisable at
30 June
2012
M Dally
Issue
price
prior to
rights
issue
Rand
Issue
price
postrights
issue*
Rand
Rights
at
30 June
2012
Adjustment in
Rights
respect exercised Rights at
of rights
during
30 June
issue* the year
2013
15.34
14.27
845 679
63 266
908 945
15.83
14.73
865 465
63 791
929 256
17.68
16.45
665 120
49 452
714 572
14.19
13.20
2 376 264
RH Field
Rights
awarded
during
the year
714 404
53 713
768 117
1 984
714 404
230 222
3 320 890
1 984
15.34
14.27
397 932
29 770
427 702
15.83
14.73
401 989
29 629
431 618
17.68
16.45
339 739
25 260
364 999
14.19
13.20
1 139 660
Gain on
Exercise
rights
price exercised
Rand
R’000
Grant
date fair
value of
rights
awarded
during
the year
R’000
348 317
26 188
374 505
968
348 317
110 847
1 598 824
968
59
Total
3 515 924 1 062 721
Rights
Issue
exercisable price prior
at
to rights
30 June
issue
2011
Rand
M Dally
Rights at
30 June
2011
Total
4 919 714
Rights
exercised
during
the year
Number
of rights
30 June
2012
15.34
845 679
845 679
15.83
865 465
865 465
17.68
RH Field
Rights
awarded
during
the year
341 069
665 120
665 120
2 376 264
2 376 264
397 932
15.34
397 932
15.83
401 989
401 989
17.68
339 739
339 739
1 139 660
1 139 660
3 515 924
3 515 924
Exercise
price
Rand
2 952
Gain on
rights
exercised
R’000
Grant date
fair value
of rights
awarded
during
the year
R’000
* The issue price and number of outstanding rights were amended as a result of the rights issue in order to place the holders in
the same position as they were before the rights issue. These amendments have no financial effect for the Group as they have
placed the participants in the same economic position as they were before the rights issue.
RCL Foods Conditional Share Plan (“CSP”)
The salient features of the CSP were included in the 2012 annual report, and the adoption of the
additional incentive plan was approved by Shareholders on 20 November 2012. The CSP was introduced
to address the retention of executives in the RCL Foods Group. The CSP operates in conjunction with
the current Share Appreciation Rights Scheme. The Company only intends using the CSP to make
ad hoc allocations as and when the need arises to address retention or recruitment issues.
Under the CSP, participants will receive a conditional award of shares on the award date. Provided
that they remain in the employment of the Company over the vesting period, Shares will be settled
to the participants on the vesting date. Participants will have no Shareholder or dividend rights
before the vesting date.
Conditional Shares awarded to executive directors and unsettled as at 30 June 2013 are as follows:
Conditional
shares at
30 June 2012
Conditional
shares
awarded
during
the year
Adjustment
in respect of
rights issue*
Conditional
shares
settled
during
the year
Conditional
shares at
30 June 2013
M Dally
RH Field
628 659
316 517
46 888
23 607
675 547
340 124
Total
945 176
70 495
1 015 671
* The number of outstanding conditional Shares was amended as a result of the rights issue in order to place the holders in
the same position as they were before the rights issue. These amendments have no financial effect for the Group as they have
placed the participants in the same economic position as they were before the rights issue.
Grant date fair value of conditional Shares awarded represents the total fair value of rights awarded during the year. This cost
will be expensed over the right’s vesting period.
In terms of the rules of the CSP, the Remuneration and Nominations Committee may adjust the
outstanding awards under the CSP or take such other action so as to ensure that participants are
no worse off as a result of a rights offer.
The RCL Foods Employee Share Ownership Programme
Qualifying Employees will receive Units which will entitle the holders to a proportionate amount of
any income or capital which may be distributed to unit holders from time to time. The beneficiaries
will participate in any change in the fair value of the underlying Shares held by the Rainbow Trust
via ECI.
4.5
Commissions
No commissions were paid to any persons within the preceding three years in relation to any of the
transactions envisaged in the Circular or in relation to the issue of any RCL Foods securities.
An underwriting fee of R60 000 000 (sixty million Rand) was previously paid to Remgro for the
RCL Foods rights offer performed in March 2013.
60
4.6
Rights attaching to RCL Foods Shares and power to issue RCL Foods Shares
All the authorised and issued RCL Foods Shares are of the same class and rank pari passu in every
respect. Any variation of rights attaching to such RCL Foods Shares will require a special resolution
of Shareholders in a general meeting in accordance with the MOI. In accordance with the MOI, at
any general meeting, every Shareholder present in person or by proxy (or if a body corporate, duly
represented by an authorised representative) shall have one vote on a show of hands and on a poll
shall be entitled to exercise one vote for every RCL Foods Share held.
All the authorised but unissued RCL Foods Shares are under the control of the Directors.
5.
MAJOR SHAREHOLDERS
In so far as it is known to the Directors, the Shareholders (other than Directors) that, directly or indirectly,
are beneficially interested in 2% (two percent) or more of the issued Shares, together with the amount of
each such Shareholder’s interest as at the Last Practicable Date, are as follows:
Shareholder
Number of
Shares held
Direct
beneficial
holding
Indirect
beneficial
holding
Beneficial
shareholding
IPI
Oasis Asset Management Limited
436 553 868
68 457 752
69.5%
10.9%
–
–
69.5%
10.9%
51 177 217
8.2%
–
8.2%
Eagle Creek Investments 620
(Proprietary) Limited
After the TSB Acquisition, Specific Repurchase, TSB BEE Transaction and New RCL Foods BEE
Transaction (but before the Equity Capital Raising)
Major beneficial shareholdings post the TSB Acquisition, Specific Repurchase, TSB BEE Transaction and
New RCL Foods BEE Transaction (but before the Equity Capital Raising) will be as follows:
Shareholder
Number of
Shares held
Total
beneficial
holding
Indirect
beneficial
holding
Beneficial
shareholding
TSB Sugar Holdings
Oasis Asset Management Limited
ESOP Trust
665 822 208
68 457 752
44 681 162
75.9%
7.8%
5.1%
–
–
–
75.9%
7.8%
5.1%
As at the Last Practicable Date, IPI is the controlling Shareholder of RCL Foods. There will be no change
in the ultimate controlling Shareholder as a result of the TSB Acquisition, TSB BEE Transaction and New
RCL Foods BEE Transaction.
6.
ADVISORS’ INTERESTS
As at the Last Practicable Date, none of the advisors to the Company had any material interest in the
issued Shares.
7.
ADDITIONAL INFORMATION
7.1
Subsidiary companies
Details of RCL Foods’ principal subsidiary companies are set out in Annexure 12 to the Circular.
7.2
Principal immovable property
7.2.1
Principal immovable properties owned or leased
Details of the principal immovable properties owned or leased by RCL Foods and its
subsidiaries are set out in Annexure 13 to the Circular.
8.
MATERIAL ACQUISITIONS AND DISPOSALS
8.1
Material acquisitions
Apart from the Foodcorp Acquisition detailed in Section E, paragraph 1.2 of the Circular, no material
acquisitions were concluded by RCL Foods or any of its subsidiaries in the preceding three years.
The names of the vendors of the Foodcorp Shares are included in Section E paragraph 12 of the
Circular detailing the material contracts relating to the Foodcorp Acquisition, as well as the
purchase consideration payable for the Foodcorp Shares. The addresses of the vendors of the
Foodcorp Shares are disclosed in Annexure 16 to the Circular.
61
The vendors of the Foodcorp Shares have not guaranteed the book debts or other assets of Foodcorp
and standard warranties have been given in respect of the Foodcorp Shares. As a part of the Foodcorp
Acquisition, a restraint of trade payment was made to certain members of Foodcorp management.
No provisions for the settlement of any liability for accrued taxation have been included in the
agreements entered into in relation to the Foodcorp Acquisition. No promoter or Director had any
beneficial interest in the Foodcorp Acquisition. No amount in cash or securities has been transferred
to any promoter in terms of the Foodcorp Acquisition. The Foodcorp Shares have neither been
pledged nor ceded by RCL Foods.
Other than as stated above, there have been no material acquisitions effected by either RCL Foods
or TSB Sugar Holdings within the preceding three years, nor are any such acquisitions proposed.
8.2
Material disposals
There have been no material disposals effected by either RCL Foods or TSB Sugar Holdings within
the preceding three years, nor are any such disposals proposed (other than pursuant to the
TSB Acquisition).
9.
MATERIAL CHANGE
No material change in the financial or trading position of RCL Foods and its subsidiaries or TSB Sugar
Holdings and its subsidiaries has occurred since the end of the last financial period for which audited
financial statements have been published.
10. HISTORY OF CHANGES
No material change has occurred in the controlling Shareholders or trading objects of RCL Foods and its
subsidiaries during the preceding five years.
11. PROMOTERS
No amounts were paid, or accrued as payable, within the preceding three years, or were proposed to be
paid to any promoter, or to any partnership, syndicate or other association of which he/she/it is or was a
member.
No promoter had any material beneficial interest, direct or indirect, in the promotion of RCL Foods and
in any property acquired by RCL Foods as a result of the TSB Acquisition or during the three years
preceding the date of the Circular.
12. MATERIAL CONTRACTS
Other than the contracts entered into in the ordinary course of business and the contracts in relation to
the Foodcorp Acquisition and the TSB Acquisition, there were no material contracts entered into by RCL
Foods, either verbally or in writing, within the preceding two years. Further, there were no contracts
entered into at any time which contain an obligation or settlement that is material to RCL Foods or its
subsidiaries as at the date of the Circular.
Details of the material contracts in relation to the TSB Acquisition are given below:
TSB Sale of Shares Agreement
TSB Sugar Holdings and RCL Foods entered into a sale of shares agreement on 20 November 2013. In
terms of this agreement, subject to the fulfilment of certain conditions precedent, RCL Foods purchased
100 (one hundred) issued ordinary shares in TSB Sugar International, constituting 100% (one hundred
percent) of the total issued share capital of TSB Sugar International; and 767 (seven hundred and sixty
seven) issued ordinary shares in TSB Sugar RSA, constituting 100% (one hundred percent) of the total
issued share capital of TSB Sugar RSA; all of which are held by TSB Sugar Holdings, in exchange for the
issue of 230 946 882 (two hundred and thirty million nine hundred and forty six thousand eight hundred
and eighty two) RCL Foods Shares to TSB Sugar Holdings.
The implementation of the TSB Sale of Shares Agreement is subject to, inter alia, the fulfilment of the
conditions precedent that, by not later than 17:00 on Friday, 28 February 2014:
•
•
•
62
the RCL Foods Shareholders have passed all such resolutions as may be required to approve the
implementation of the TSB Acquisition;
the counterparties to the TSB Material Contracts have, to the extent necessary, consented in writing
to the change of control of TSB Sugar RSA and TSB Sugar International; and
the Ancillary Transaction is implemented.
Details of material contracts in relation to the Foodcorp Acquisition are set out below:
BlueBay Funds Sale
BlueBay (in its capacity as the general partner of the BlueBay Funds) and RCL Foods entered into a
sale of shares agreement on 13 November 2012. In terms of this agreement, subject to the fulfilment of
certain conditions precedent, RCL Foods purchased 378 751 (three hundred and seventy eight thousand
seven hundred and fifty one) Foodcorp Shares from the BlueBay Funds for an aggregate purchase
consideration of R690 million, payable in cash (“BlueBay Funds Sale”). Notwithstanding the completion
date, the effective date of the BlueBay Funds Sale was 1 September 2012. RCL Foods was entitled to assign
its rights and obligations under the BlueBay Funds Sale to an affiliated entity. The BlueBay Funds Sale
is not subject to any outstanding conditions precedent.
Foodcorp Staff Trust Sale
The Foodcorp Staff Trust and RCL Foods entered into a sale of shares agreement on 13 November 2012. In
terms of this agreement, subject to the fulfilment of certain conditions precedent, RCL Foods purchased
185 000 (one hundred and eighty five thousand) Foodcorp ordinary shares from the Foodcorp Staff Trust
for an aggregate purchase consideration of R337 million, payable in cash (“Foodcorp Staff Trust Sale”).
Notwithstanding the completion date, the effective date of the Foodcorp Staff Trust Sale was 1 September
2012. RCL Foods was entitled to assign its rights and obligations under the Foodcorp Staff Trust Sale to
an affiliated entity. The Foodcorp Staff Trust Sale is not subject to any outstanding conditions precedent.
Foodcorp Management Holdings Sale
Foodcorp Management Holdings Proprietary Limited and RCL Foods entered into a sale of shares
agreement on 13 November 2012. In terms of this agreement, subject to the fulfilment of certain conditions
precedent, RCL Foods purchased 23 810 (twenty three thousand eight hundred and ten) Foodcorp
ordinary shares from Foodcorp Management Holdings Proprietary Limited for an aggregate purchase
consideration of R43 million, payable in cash (“Foodcorp Management Holdings Sale”). Notwithstanding
the completion date, the effective date of the Foodcorp Management Holdings Sale was 1 September 2012.
RCL Foods was entitled to assign its rights and obligations under the Foodcorp Management Holdings
Sale to an affiliated entity. The Foodcorp Management Holdings Sale is not subject to any outstanding
conditions precedent.
Foodcorp Management Sale
Foodcorp Management Holdings Proprietary Limited and individual shareholders of Foodcorp (comprising
persons who were, at the time, or previously, members of management) and RCL Foods entered into sale
of shares agreements on 1 July 2013. In terms of these agreements, subject to the fulfilment of certain
conditions precedent, RCL Foods purchased the 23.9% stake in Foodcorp for a total cash consideration
of R393 million (“Foodcorp Management Sale”). The Foodcorp Management Sale is not subject to any
outstanding conditions precedent.
Capitau Sale
Post the implementation of the Foodcorp Management Sale, Capitau Holdings held 11.9% of Foodcorp
directly and via Capitau Investment Management (collectively known as the “Capitau Controlled
Entities”). The Capitau Controlled Entities and RCL Foods entered into a sale of shares agreement on
5 September 2013. In terms of this agreement, subject to the fulfilment of certain conditions precedent,
RCL Foods purchased the remaining Foodcorp Shares for a total cash consideration of R128 million. The
Capitau Sale is not subject to any outstanding conditions precedent.
Material contracts in terms of the RCL Foods BEE Transaction Agreements are outlined in Section B and
in the definitions and interpretations commencing on page 6 of the Circular.
No royalties or items of similar nature are payable in respect of the Company and its subsidiaries.
No material contracts have been entered into by TSB Sugar Holdings in the preceding two years.
13. CORPORATE GOVERNANCE
The Board accepts full responsibility for corporate governance and is committed to ensuring a high
standard of discipline, independence, ethics, responsibility, equity, social responsibility, accountability,
co-operation and transparency. The Board believes that the Group has complied in all material respects
with the principles of the King III Report and with the Listings Requirements.
Annexure 14 to the Circular contains further information on RCL Foods’ Corporate Governance and
disclosure of areas of non-compliance.
14. LITIGATION STATEMENT
There are no legal or arbitration proceedings, including any proceedings that are pending or threatened,
of which RCL Foods or TSB Sugar Holdings are aware, that may have or have had in the recent past,
being at least the previous 12 (twelve) months, a material effect on the financial position of the RCL Foods
Group or TSB Sugar Holdings or any of its subsidiaries.
63
15. THIRD PARTY MANAGEMENT UNDER CONTRACT OR ARRANGEMENT
The business of RCL Foods and its subsidiaries will not be managed by a third party under a contract or
arrangement.
16. RELATED PARTIES
IPI is classified as a related party to RCL Foods in terms of the Listings Requirements and, as such,
IPI and all of its subsidiaries or associates are precluded from voting at the General Meeting on certain
Shareholder resolutions.
17. DIRECTORS’ RESPONSIBILITY STATEMENT
The Directors, collectively and individually, accept full responsibility for the accuracy of the information
given in the Circular and certify that, to the best of their knowledge and belief, there are no facts, the
omission of which, would make any statement in the Circular false or misleading and that they have made
all reasonable inquiries to ascertain such facts and that the Circular contains all information required by
law and by the Listings Requirements.
18. CONSENTS
Each of the merchant bank and sponsor, reporting accountants and auditors, attorneys, communication
advisor and the Transfer Secretary, have consented and have not, prior to the Last Practicable Date,
withdrawn their written consent to the inclusion of their names and, where applicable, reports in the
form and context in which they appear in the Circular.
19. DOCUMENTS AVAILABLE FOR INSPECTION
Copies of the following documents will be available for inspection at the registered offices of RCL Foods,
the Transfer Secretary and Rand Merchant Bank at the addresses set out in the “Corporate Information
and Advisors” section of the Circular during normal business hours on Business Days from the date of
issue of the Circular up to and including Thursday, 16 January 2014:
• the Memoranda of Incorporation of RCL Foods and its major subsidiaries;
• the audited annual financial statements of RCL Foods for the three financial periods ended 31 March
2011, 30 June 2012 and 30 June 2013;
• the audited annual financial statements of TSB Sugar Holdings for the three financial periods ended
30 June 2011 (fifteen months), 30 June 2012 and 30 June 2013;
• a copy of the standard directors’ letter of engagement;
• a copy of the TSB Sale of Shares Agreement;
• a copy of the TSB BEE Transaction Agreements (including the TSB BEE Subscription and Relationship
Agreement);
• a copy of the Redemption and Repurchase Agreement;
• a copy of the RCL Foods BEE Transaction Agreements;
• a copy of the RCL Foods circular dated 25 February 2008 in respect of the Current RCL Foods
BEE Structure;
• a copy of the list of all material properties owned by RCL Foods;
• the signed independent reporting accountant’s report on the pro forma financial information of
RCL Foods;
• the material contracts referred to in Section E, paragraph 12 of the Circular;
• the written consents referred to in Section E, paragraph 18 of the Circular; and
• a signed copy of the Circular as approved by the JSE.
Signed at Durban by and on behalf of RCL Foods on 12 December 2013, in terms of the resolutions of the
Directors dated 19 November 2013.
For and on behalf of the Board
RCL Foods Limited
RH Field
Chief Financial Officer
Durban
12 December 2013
64
ANNEXURE 1(a)
FAIRNESS OPINION ON THE RELATED PARTY ACQUISITION
The Directors
RCL Foods Limited
Six The Boulevard
Westway Office Park
Westville
3629
4 December 2013
Dear Sirs
FAIRNESS OPINION ON THE RELATED PARTY ACQUISITION BY RCL FOODS LIMITED (“RCL FOODS”
OR “THE COMPANY”) OF THE ENTIRE ISSUED SHARE CAPITAL OF TSB SUGAR RSA PROPRIETARY
LIMITED AND TSB SUGAR INTERNATIONAL PROPRIETARY LIMITED FROM TSB SUGAR HOLDINGS
PROPRIETARY LIMITED (“TSB SUGAR HOLDINGS”), A SUBSIDIARY OF REMGRO LIMITED
(“REMGRO”), IN EXCHANGE FOR THE ISSUE OF 230 946 882 ORDINARY SHARES IN RCL FOODS
Introduction
On 21 November 2013, RCL Foods released on SENS that it intended to acquire the entire issued share capital
of TSB Sugar RSA Proprietary Limited (“TSB Sugar RSA”) and TSB Sugar International Proprietary Limited
(“TSB Sugar International”) from TSB Sugar Holdings, an indirect wholly-owned subsidiary of Remgro. RCL
Foods will settle the full purchase consideration of R4 000 000 000 (“the TSB Acquisition Consideration”)
through the issue of ordinary shares in RCL (“RCL Foods Shares”) to TSB Sugar Holdings.
The acquisition by RCL Foods of the 767 issued ordinary shares in TSB Sugar RSA and 100 issued ordinary
shares in TSB Sugar International (collectively, “the TSB Acquisition Shares”) in exchange for the issue of
230 946 882 RCL Foods Shares (“the TSB Consideration Shares”) in settlement of the TSB Acquisition
Consideration is hereafter referred to as “the TSB Acquisition”. The number of RCL Foods Shares to be issued
to TSB Sugar Holdings has been determined by dividing the TSB Acquisition Consideration of R4 000 000 000
by R17.32, being the volume weighted average price (“VWAP”) per RCL Foods Share over the 30 (thirty) days
immediately preceding 19 November 2013, the date on which the sale of shares agreement was signed (“the TSB
Transaction Share Price”).
Industrial Partnership Investments Proprietary Limited (“IPI”), a wholly-owned subsidiary of Remgro will,
prior to the TSB Acquisition, dispose of all its RCL Foods Shares to TSB Sugar Holdings, another whollyowned subsidiary of Remgro. TSB Sugar Holdings will discharge the consideration for the RCL Foods Shares
by the issue of additional ordinary shares in TSB Sugar Holdings.
Scope
Remgro is a material shareholder of RCL Foods and TSB Sugar Holdings for purposes of the JSE Limited
Listings Requirements, as amended (“the Listings Requirements”). As a result of Remgro being a related
party, the TSB Acquisition is categorised as a related party transaction in terms of Section 10.1(b)(i) of the
Listings Requirements. Under Section 10.4(f) of the Listings Requirements, a fairness opinion is required
from an independent professional expert, acceptable to the securities exchange operated by the JSE Limited
(“the JSE”), indicating whether or not the terms and conditions of the TSB Acquisition are fair to the
shareholders of RCL Foods.
The Board of directors of RCL Foods has appointed the Corporate Finance division of Deloitte & Touche to act
as the independent professional expert to provide the required opinion, indicating whether the terms and
conditions of the TSB Acquisition are fair to the shareholders of RCL Foods.
For purposes of our opinion, our assessment of fairness is primarily based on quantitative issues. The TSB
Acquisition would be considered fair to shareholders of RCL Foods if the number of TSB Consideration Shares
to be issued is within the range implied by the range of fair values of both the TSB Acquisition Shares and the
RCL Foods Shares.
Fairness opinions do not purport to cater for individual shareholders but rather the general body of shareholders.
Also, an individual shareholder’s decision may be influenced by such shareholder’s particular circumstances
and, accordingly, a shareholder should consult an independent advisor if in any doubt as to the merits or
otherwise of the TSB Acquisition.
65
Information considered
In arriving at our opinion we have considered the following information which has been provided by management
of RCL Foods and TSB Sugar Holdings or obtained from publicly available sources:
Information relating to TSB Sugar Holdings and its subsidiaries:
• information on TSB Sugar Holdings and its subsidiaries, including the history, nature of business,
products, key customers and competitor activity;
• audited financial information for TSB Sugar Holdings for the financial years ended 31 March 2010 to
30 June 2013;
• unaudited, abridged financial information for TSB Sugar Holdings for the period ended October 2013;
• projected financial information for TSB Sugar Holdings for the financial years ending 30 June 2014
to 30 June 2018 produced by Rand Merchant Bank (“Rand Merchant Bank”), a division of FirstRand Bank
Limited, and dated September 2013;
• recent share prices and other publicly available financial information on listed companies with operations
similar to those of TSB Sugar Holdings (“TSB peer companies”);
• recent analysts’ reports on Remgro and TSB peer companies;
• publicly available information regarding the pricing of recent transactions in significant equity interests
in unlisted companies with operations similar to those of TSB Sugar Holdings;
• other publicly available information relevant to the industry in which TSB Sugar Holdings operates.
Information relating to RCL Foods and its subsidiaries:
• information on RCL Foods and its subsidiaries, including the history, nature of business, products, key
customers and competitor activity;
• audited financial information for RCL Foods for the financial years ended 30 June 2010 to 30 June 2013;
• unaudited, abridged financial information for RCL Foods for the period ended October 2013;
• projected financial information for RCL Foods for the financial years ending 30 June 2014 to 30 June
2016;
• recent share prices and other publicly available financial information on RCL Foods and listed companies
with operations similar to those of RCL Foods (“RCL Foods peer companies”);
• recent analysts’ reports on RCL Foods and RCL Foods peer companies;
• publicly available information regarding the pricing of recent transactions in significant equity interests
in unlisted companies with operations similar to those of RCL Foods;
• other publicly available information relevant to the industry in which RCL Foods operates;
• vendor due diligence report by PricewaterhouseCoopers Advisory Services Proprietary Limited on Foodcorp
Proprietary Limited, an indirect subsidiary of RCL Foods (“Foodcorp Opco”), dated 31 August 2012;
• information and explanations obtained in discussions with management of RCL Foods and its subsidiaries.
Information regarding the TSB Acquisition:
• the agreement headed “Sale of Shares Agreement” between RCL Foods and TSB Sugar Holdings regarding
the TSB Acquisition (“the TSB Sale of Shares Agreement”);
• the SENS announcement of 21 November 2013;
• the circular to RCL Foods Shareholders of which this report forms a part.
Where practical, we have corroborated the reasonability of the information provided to us for the purpose of
our opinion, including publicly available information, whether in writing or obtained in discussion with the
management of RCL Foods, TSB Sugar Holdings or their subsidiaries.
Our approach to considering the TSB Acquisition and procedures performed
In considering the terms and conditions of the TSB Acquisition we have performed indicative, sum-of-the-parts
valuations of the ordinary shares of RCL Foods and the TSB Acquisition Shares at the most recent practicable
date, being 31 October 2013. We considered significant events which occurred in RCL Foods and TSB Sugar
Holdings and their subsidiaries subsequent to 31 October 2013 as discussed with management and we have
considered market and economic conditions up to the date of issue of this report.
For the purposes of our valuation analysis we used the income approach (discounted cash flow) as our primary
approach. In addition, we considered the market approach (based on publicly available financial data for
comparable publicly traded companies and for recent transactions in significant equity interests in comparable
companies) as an alternative valuation approach to support the results of our income approach analysis.
The valuation of RCL Foods was performed on a sum-of-the-parts basis, with separate income approach and
market approach valuations performed for Rainbow Farms Proprietary Limited (“Rainbow Farms”), New
Foodcorp Holdings Proprietary Limited (“Foodcorp”) and Vector Logistics Proprietary Limited, which are
wholly-owned subsidiaries of RCL Foods. Zam Chick Limited and Zamhatch Limited, in which RCL Foods has
49% and 51% interests, respectively, were valued included at the cost of RCL Foods’ recent investment in these
two entities. We also considered the net debt balances in other non-operating subsidiary companies of RCL
Foods.
66
We considered the fair value of RCL Foods’ debt and, in particular, the 8.75% Senior Secured Notes issued by
Foodcorp Proprietary Limited (“Foodcorp Opco”), a subsidiary of RCL Foods, which are listed on the Irish
Stock Exchange. We reviewed the market price history of the Senior Secured Notes and compared the income
yields to yields on comparable listed debt instruments of other issuers with the same credit rating. We also
considered the exchange rate between Euro and Rand and the sensitivity of our valuation of the RCL Foods
ordinary shares to this exchange rate.
The valuation of the TSB Acquisition Shares was performed on a sum-of-the-parts basis, with separate income
approach and market approach valuations performed for TSB Sugar RSA and TSB Sugar International.
In performing our valuation analysis of the RCL Foods Shares and the TSB Acquisition Shares, we considered
the sensitivity of the valuations to changes in assumptions around key value drivers. We found that the key
internal value drivers of the valuation of the ordinary shares of RCL Foods are estimates of revenue growth,
particularly product volumes and the selling prices of certain products, movements in net working capital, and
capital expenditure requirements. Free cash flow is sensitive to these assumptions. The key external value
drivers relate to the rates of economic growth and inflation and prevailing interest rates in South Africa as
well as market and industry conditions specific to the food processing sector, including the market’s expectations
around changes to poultry import tariffs. The expected commodity prices of wheat and maize internationally
are key external value drivers for Foodcorp Opco specifically as they impact expected volumes sold, input
prices, selling prices and the net investment required in working capital. Maize and soya are the key ingredients
in Rainbow Farms’ chicken feed and therefore these commodity prices impact the margins achieved by Rainbow
Farms.
We found that the key internal value drivers of the valuation of the TSB Acquisition Shares are forecast
production volumes, projected profit margins, movements in net working capital, and capital expenditure
requirements. The key external value drivers relate to the rates of economic growth and inflation in South
Africa and globally as well as market and industry conditions specific to the South African and Swazi sugar
production sectors, including the market’s expectations around changes to the European Union’s policies
around sugar production and imports. World market raw sugar prices and exchange rates are also key external
value drivers.
Our valuation results are also sensitive to the weighted average cost of capital applied in the discounted cash
flow valuation and sensitive to the enterprise value to EBITDA multiple applied under the market approach.
Finally, we compared the number of the TSB Consideration Shares to be issued to the number of shares implied
by our ranges of fair values of the TSB Acquisition Shares and fair values of the RCL Foods Shares and we
considered the terms and conditions of the TSB Sale of Shares Agreements.
Opinion
Based upon and subject to the foregoing, we are of the opinion that the terms and conditions of the TSB
Acquisition are fair to the shareholders of RCL Foods.
Our opinion is based upon the market, regulatory and trading conditions as they currently exist and can only
be evaluated as at the date of this letter. It should be understood that subsequent developments may affect our
opinion, which we are under no obligation to update, revise or re-affirm.
Limiting conditions
Forecasts relate to uncertain future events and are based on assumptions, which may not remain valid for the
whole of the forecast period. Consequently, forecast financial information cannot be relied upon to the same
extent as that derived from audited financial statements for completed accounting periods. We express no
opinion as to how closely actual results will correspond to the financial projections provided to us.
Our procedures and inquiries did not constitute an audit in terms of International Standards on Auditing.
Accordingly, we cannot express an audit opinion on the financial data or other information used in arriving at
our opinion.
Independence
We confirm that we have no financial interest in TSB Sugar Holdings and RCL Foods and in the outcome of
the TSB Acquisition. Furthermore, we confirm that our professional fees are not contingent upon the successful
conclusion of the TSB Acquisition.
67
Consent
We hereby consent to this letter being included in the circular to RCL Foods Shareholders to be dated on or
about 12 December 2013.
Yours faithfully
D McDuff
Partner
Deloitte & Touche
Corporate Finance
Registered Auditors
Woodlands Drive
Woodmead
Sandton
2196
68
ANNEXURE 1(b)
INDEPENDENT EXPERT’S REPORT ON THE
PROPOSED SPECIFIC REPURCHASE
The Directors
RCL Foods Limited
Six The Boulevard
Westway Office Park
Westville
3629
4 December 2013
Dear Sirs
INDEPENDENT EXPERT’S REPORT ON THE PROPOSED SPECIFIC REPURCHASE OF RCL FOODS
LIMITED (“RCL Foods”) ORDINARY SHARES HELD BY EAGLE CREEK INVESTMENTS 620
PROPRIETARY LIMITED (“Eagle Creek”)
Introduction
On 21 November 2013, RCL Foods released on SENS that it intended to restructure the current RCL Foods
black economic empowerment (“BEE”) ownership structure.
In terms of RCL Foods’ current BEE ownership structure implemented in March 2008, Eagle Creek subscribed
for 51 177 217 ordinary shares in RCL Foods, which represented 15% of the issued ordinary shares in RCL
Foods (“RCL Foods Shares”) at the time (“the Current RCL Foods BEE Structure”).
RCL Foods proposes to collapse and unwind the Current RCL Foods BEE Structure through a specific
repurchase of the 51 177 217 RCL Foods Shares issued pursuant to the Current RCL Foods BEE Structure
(“the Current RCL Foods BEE Shares”) and redemption of the 51 177 217 preference shares held by RCL Foods
as funding for the Current RCL Foods BEE Structure (“the Eagle Creek Preference Shares”).
The proposed specific repurchase and cancellation of the Current RCL Foods BEE Shares by RCL Foods will be
at a proposed repurchase price per Current RCL Foods BEE Share equal to the volume weighted average price
(“VWAP”) per RCL Foods Share over the 30 (thirty) days ending on the date on which the Eagle Creek Preference
Shares are redeemed (collectively, “the Specific Repurchase”). The consideration payable to Eagle Creek will be
funded out of sources other than contributed tax capital and will not require any external funding.
The Current RCL Foods BEE Shares are expected to be repurchased on or about Monday, 27 January 2014. The
Current RCL Foods BEE Shares will, pursuant to the Specific Repurchase, be delisted from the JSE and be
cancelled in terms of section 35(5) read with section 48 of the Companies Act, No 71 of 2008, as amended
(“the Companies Act”).
The Specific Repurchase will represent 5.9% of RCL Foods’ ordinary issued shares at the time and as such
triggers the requirements of section 48(8) (read with section 114) of the Companies Act.
In terms of section 48(8) (b) of the Companies Act, the proposed specific repurchase is subject to the requirements
of sections 114 and 115 of the Companies Act if the repurchase considered alone, or together with other
transactions in an integrated series of transactions, involves the acquisition of more than 5% of the issued
shares of any particular class of the Company’s shares. In this case the ordinary shares to be repurchased
exceed 5% of the total issued shares and, accordingly, there is a requirement for RCL Foods to retain an
independent expert in terms of sections 114(2), who is required to compile a report in accordance with
section 114(3), read with Regulation 90 of the Companies Regulations, 2011 (“Regulations”). It is required that
the independent expert’s report be addressed to the Board and distributed to all holders of the Company’s
securities.
We have been appointed by the Board of RCL Foods to act as the independent expert in accordance with the
requirements section 114 of the Companies Act.
Qualification and independence
For purposes of our appointment as the Independent Expert, we confirm that we meet the competence,
experience, and impartiality requirements of section 114(2)(a) of the Companies Act and we confirm that we
meet the independence requirements set out in section 114(2)(b) of the Companies Act and Regulation 90(3)(a).
Our aggregate fee payable for this engagement and for the provision of our separate fairness opinion on the
proposed Specific Repurchase amounts to R1 050 000 excluding value-added tax and is not contingent upon or
related to the outcome of the Specific Repurchase.
69
Scope of our work and report
Our report is provided to the Board of RCL Foods for the sole purpose of assisting the Board in forming and
expressing an opinion on the terms and conditions of the proposed Specific Repurchase for the benefit of
holders of ordinary shares in RCL Foods being the only type and class of security issued by RCL Foods and
affected by the Specific Repurchase.
Our work and the contents of our independent expert report are regulated by section 114(3) of the Companies
Act and Regulation 90. In short, we are required to consider the material effects that the proposed Specific
Repurchase will have on the ordinary shareholders of RCL Foods, any reasonably probable beneficial and
significant effect of the Specific Repurchase on the business and prospects of RCL Foods, material interests of
any director of RCL Foods and the effect of the Specific Repurchase on those interests and persons.
We are required to express an opinion on the fairness and reasonableness of the proposed Specific Repurchase.
Our assessment of fairness is primarily based on quantitative issues, whereas reasonableness includes a
consideration of qualitative aspects.
The terms and conditions of the proposed Specific Repurchase would be considered fair to RCL Foods
Shareholders if the measurable financial benefits of the transaction equal or exceed the cost thereof. Thus, the
proposed Specific Repurchase would be considered fair if the fair market values of RCL Foods Shares were
greater than or equal to the price per RCL Foods Share at which it is proposed they be repurchased. To form
this opinion we have undertaken a valuation of the RCL Foods Shares.
Those factors which are difficult to quantify, or are unquantifiable but nonetheless may affect a shareholder’s
assessment of the proposed specific share repurchase, are also taken into account in forming an opinion on the
reasonableness of the proposed Specific Repurchase.
Sources of information
In arriving at our opinion we have considered information, inter alia, from the following sources:
•
•
•
•
•
•
•
•
•
•
•
information on RCL Foods and its subsidiaries, including the history, nature of business, products, key
customers and competitor activity;
audited financial information for RCL Foods for the financial years ended 30 June 2010 to 30 June 2013;
unaudited, abridged financial information for RCL Foods for the period ended October 2013;
projected financial information for RCL Foods for the financial years ending 30 June 2014 to
30 June 2016;
recent share prices and other publicly available financial information on listed companies with operations
similar to those of RCL Foods (“RCL Foods peer companies”);
recent analysts’ reports on RCL Foods peer companies;
publicly available information regarding the pricing of recent transactions in significant equity interests
in unlisted companies with operations similar to those of RCL Foods;
other publicly available information relevant to the industry in which RCL Foods operates;
vendor due diligence report by PricewaterhouseCoopers Advisory Services Proprietary Limited on Foodcorp
Proprietary Limited (“Foodcorp Opco”), a subsidiary of RCL Foods, dated 31 August 2012;
information disclosed in the circular to RCL Foods Shareholders of which this report forms a part;
information and explanations obtained in discussions with management of RCL Foods and its subsidiaries.
Where practical, we have corroborated the reasonability of the information provided to us for the purpose of
our opinion, including publicly available information, whether in writing or obtained in discussions with
management of RCL Foods.
Procedures performed in arriving at our opinion
In order to assess the fairness and reasonableness of the terms and conditions of the Specific Repurchase, we
have performed, amongst other, the following procedures:
•
•
•
•
•
•
70
considered the background information on RCL Foods and its subsidiaries;
reviewed the historical and forecast financial information of RCL Foods and its subsidiaries;
considered information made available by and from discussions with management of RCL Foods and
certain of its subsidiaries;
prepared an indicative valuation of the ordinary shares of RCL Foods using a sum-of-the-parts approach;
conducted appropriate sensitivity analyses on the valuation outcome based on a reasonable range of key
assumptions;
reviewed the agreement headed Preference Share Redemption and Share Repurchase Agreement between
RCL Foods and Eagle Creek in terms of which Eagle Creek has agreed to redeem the Eagle Creek Preference
Shares and RCL Foods has agreed to repurchase the Current RCL Foods BEE Shares from Eagle Creek
(“the Redemption and Repurchase Agreement”);
•
•
considered the rationale for the Specific Repurchase;
considered qualitative aspects of the Specific Repurchase.
Valuation
In considering the terms and conditions of the Specific Repurchase, we performed an independent indicative
valuation at the most recent practical date, which was 31 October 2013. We considered significant events which
occurred in RCL Foods and its subsidiaries subsequent to 31 October 2013 as discussed with management and
we have considered market and economic conditions up to the date of issue of this report.
The valuation of RCL Foods was performed on a sum-of-the-parts basis, with separate income approach and
market approach valuations performed for Rainbow Farms Proprietary Limited (“Rainbow Farms”), New
Foodcorp Holdings Proprietary Limited (“Foodcorp”) and Vector Logistics Proprietary Limited, which are
wholly-owned subsidiaries of RCL Foods. Zam Chick Limited and Zam Hatch Limited, in which RCL Foods has
49% and 51% interests, respectively, were included at the cost of RCL Foods’ recent investment in these two
entities. We also considered the net debt balances in other non-operating subsidiary companies of RCL Foods.
Additionally, we performed sensitivity analyses by considering reasonable ranges for key assumptions in
arriving at our valuation range. We found that the key internal value drivers of the valuation of the RCL Foods
Shares are estimates of revenue growth, particularly product volumes and the selling prices of certain products,
movements in net working capital, and capital expenditure requirements. Free cash flow is sensitive to these
assumptions. The key external value drivers relate to the rates of economic growth and inflation and prevailing
interest rates in South Africa as well as market and industry conditions specific to the food processing sector,
including the market’s expectations around changes to poultry import tariffs. The expected commodity prices
of wheat and maize internationally are key external value drivers for Foodcorp specifically as they impact
expected volumes sold, input prices, selling prices and the net investment required in working capital. Maize
and soya are the key ingredients in Rainbow Farms’ chicken feed and therefore these commodity prices impact
the margins achieved by Rainbow Farms.
We considered the fair value of RCL Foods’ debt and, in particular, the 8.75% Senior Secured Notes issued by
Foodcorp Opco which are listed on the Irish Stock Exchange. We reviewed the market price history of the
Senior Secured Notes and compared the income yields to yields on comparable listed debt instruments of other
issuers with the same credit rating. We also considered the exchange rate between Euro and Rand and the
sensitivity of our valuation of the RCL Foods Shares to this exchange rate.
Our range of values for the business operations of Rainbow Farms is wide due to uncertainty over the outcome
of the anti-dumping application against certain European countries. This has resulted in a relatively wide
range of values for the shares of RCL Foods, compiled using our sum-of-the-parts approach.
Our valuation of RCL Foods resulted in an indicative valuation range of R16.00 to R18.40 per RCL Foods Share
and a core value of R17.60 per RCL Foods Share. Our core value was established by assigning probability
weightings to our low and high values for the business operations of Rainbow Farms and taking the simple
averages of our low and high values for the other business operations of RCL Foods and the group’s net debt.
The proposed transaction would be considered fair if the proposed repurchase price per RCL Foods Share fell
within our range of value for the RCL Foods Shares.
Assessment of qualitative and other factors
Our assessment of reasonableness includes considering the proposed repurchase price in relation to the
prevailing trading price as at the time of finalising our opinion. We note that the market price of RCL Foods
Shares closed on 3 December 2013 at R17.15 per RCL Foods Share.
We note that, due to unforeseen circumstances, RCL Foods management considers the Current RCL Foods BEE
Structure unlikely to deliver any equity value to its investors and therefore RCL Foods management intends to
implement a new BEE structure, pursuant to the Specific Repurchase, to sustain its BEE ownership and enable
value creation for BEE investors in RCL Foods.
Opinion and limiting conditions
Based upon and subject to the foregoing, and taking account of the market price of RCL Foods Shares on
3 December 2013, we are of the opinion that the terms and conditions of the proposed transaction are fair and
reasonable to the ordinary shareholders of RCL Foods. The proposed repurchase price will be established based
on the VWAP per RCL Foods Share over the 30 days ending on the date of the Specific Repurchase, which is
expected to be on or around Monday, 27 January 2014 and, accordingly, the repurchase price is not yet known.
However, it should be noted that if the repurchase price, when established, were to exceed the upper end of our
indicative valuation range, this would have no adverse effect on RCL Foods Shareholders as the entire
repurchase consideration will be used to redeem the Eagle Creek preference shares held by RCL Foods.
Our opinion is addressed to the general body of shareholders. Because each shareholder’s decision may be
influenced by their particular circumstances, we recommend that a shareholder should consult an independent
advisor if they are in any doubt as to the merits of the Specific Repurchase considering their personal
circumstances.
71
Our opinion is based upon the market, regulatory and trading conditions as they currently exist and can only
be evaluated as at the date of this letter. It should be understood that subsequent developments may affect our
opinion, which we are under no obligation to update, revise or re-affirm.
Forecasts relate to uncertain future events and are based on assumptions, which may not remain valid for the
whole of the forecast period. Consequently, forecast information cannot be relied upon to the same extent as
that derived from audited financial statements for completed accounting periods. We express no opinion as to
how closely actual results will correspond to projections made by the management of RCL Foods and made
available to us during the course of our review.
Our procedures and inquiries did not constitute an audit in terms of International Standards on Auditing.
Accordingly, we do not express an audit opinion on the financial data or other information used in arriving at
our opinion.
Other matters
In accordance with sections 114(3)(e) and (f) of the Companies Act, we confirm that Directors’ interests in RCL
Foods Shares are disclosed in the Circular, of which this report forms part, and from our enquiries we
understand that the proposed Specific Repurchase of RCL Foods Shares has the same effect on such Directors
that it has on other shareholders of RCL Foods.
Disclosure of statutory provisions for approval and relief
In accordance with the requirement of section 114(3)(g) of the Companies Act, we confirm that sections 115
and 164 of the Companies Act are included as Annexure “A” to the circular to RCL Foods Shareholders.
Consent
We hereby consent to the inclusion of this report and references thereto, in the form and context in which they
appear, in the circular to RCL Foods Shareholders, dated on or around 12 December 2013.
Yours faithfully
D McDuff
Partner
72
73
17 352
5
134
537
2 313
Total assets
1 020
–
505
–
2
2
–
1 322
537
2 112
130
362
32
450
Inventories
Biological assets
Trade and other receivables
Preference shares receivable
Derivative financial instruments
Tax receivable
Investment in money market fund
Assets of disposal group classified as
held for sale
Cash and cash equivalents
3 520
1 668
7 795
Current assets
1 852
1 270
318
141
–
107
2
14
9 557
3 647
–
129
4
–
–
5 777
TSB Sugar
Holdings
Audited
12 months
ended
30 June
20133
ASSETS
Non-current assets
Property, plant and equipment
Investment in associates
Investment in joint ventures
Deferred income tax asset
Biological assets
Long-term loans and receivables
Intangible assets
R’millions
Published
audited
12 months
ended
30 June
20132
(8)
(8)
(8)
(7)
(7)
(7)
20 857
542
2 432
2 342
537
2 617
130
364
34
450
9 448
11 409
4 917
318
270
4
107
2
5 791
Adjustments
relating
Pro forma
after TSB
to the TSB
TSB BEE
4, 6
7,8
Acquisition
Transaction Transactions
TSB Transactions
PRO FORMA STATEMENT OF FINANCIAL POSITION OF RCL FOODS
(2)
(2)
(2)
–
Reintroduction of
Strategic
Partners
(5)
(5)
(5)
Unwinding
of Current
RCL Foods
BEE
Structure
and reintroduction of an
ESOP Trust
20 850
542
2 425
2 342
537
2 617
130
364
34
450
9 441
11 409
4 917
318
270
4
107
2
5 791
Pro forma
after TSB
Transactions
and RCL
Foods BEE
Transactions
RCL Foods BEE Transactions9-13
The Directors of RCL Foods are responsible for the preparation of the pro forma statement of financial position and income statement.
2 497
2 497
2 497
14, 15
Adjustments
for the
Equity
Capital
Raising
23 347
542
4 922
2 342
537
2 617
130
364
34
450
11 938
11 409
4 917
318
270
4
107
2
5 791
Pro forma
after TSB
Transactions,
RCL Foods
BEE
Transactions
and Equity
Capital
Raising
The pro forma statement of financial position and income statement as set out below should be read in conjunction with the independent reporting accountants’
reasonable assurance report which is included as Annexure 3 to the Circular.
The pro forma statement of financial position at 30 June 2013 and income statement for the year ended 30 June 2013 of RCL Foods are set out below. The pro forma
statement of financial position and income statement have been prepared for illustrative purposes only to provide information on how the TSB Transactions, RCL
Foods BEE Transactions and the Equity Capital Raising might have impacted on the financial position and results of the RCL Foods Group. Because of their
nature, the pro forma statement of financial position and income statement may not fairly present the Group’s financial position, changes in equity, and results of
operations or cash flows after the TSB Transactions and the RCL Foods BEE Transactions.
PRO FORMA STATEMENT OF FINANCIAL POSITION AND PRO FORMA INCOME STATEMENT
ANNEXURE 2
74
2
20 857
(2)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(2)
–
(2)
(85)
83
(5)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(5)
–
(5)
(22)
17
20 850
11 937
23 347
11 937
179
1
3 254
933
5
27
179
1
4 399
5 635
1 547
73
62
221
7 538
11 410
313
11 097
11 576
310
(2 122)
1
1 332
3 254
933
5
27
2 497
2 497
2 497
2 497
4 399
5 635
1 547
73
62
221
7 538
8 913
313
8 600
9 079
310
(2 122)
1
1 332
The statement of financial position of TSB Sugar Holdings was extracted from its audited financial statements for the year ended 30 June 2013.
The purchase consideration for the TSB Acquisition is R4 billion which will be settled by the issuance of 230 946 882 Shares, at an issue price of R17.32 per share, being the 30-day volume weighted
average price per share to 19 November 2013.
3.
4.
TSB Acquisition
The pro forma statement of financial position was prepared on the assumption that the TSB Transactions, the RCL Foods BEE Transactions and the Equity Capital Raising were effective 30 June 2013.
(7)
11 937
179
1
3 254
933
5
27
4 399
5 635
1 547
73
62
221
7 538
8 920
313
8 607
9 079
210
(2 122)
1
1 439
14, 15
Adjustments
for the
Equity
Capital
Raising
The statement of financial position of RCL Foods was extracted from its audited financial statements for the year ended 30 June 2013.
(8)
(7)
(7)
(32)
25
Reintroduction of
Strategic
Partners
Pro forma
after TSB
Transactions
and RCL
Foods BEE
Transactions
Pro forma
after TSB
Transactions,
RCL Foods
BEE
Transactions
and Equity
Capital
Raising
1.
3 520
1 641
(8)
(8)
(2 122)
(1)
(1 885)
4 000
Adjustments
Pro forma
relating
TSB BEE
after TSB
to the TSB
4, 6
7,8
Acquisition
Transaction Transactions
Unwinding
of Current
RCL Foods
BEE
Structure
and reintroduction of an
ESOP Trust
RCL Foods BEE Transactions9-13
2.
Notes and assumptions:
17 352
Total equity and liabilities
–
179
1
10 296
21
3 119
2 631
297
5
6
Current liabilities
Trade and other payables
Interest-bearing liabilities
Preference share liabilities
Derivative financial instruments
Liabilities of disposal group classified
as held for sale
Current income tax liabilities
Total liabilities
1 280
5 515
1 409
73
24
156
623
636
120
138
–
38
65
7 177
361
1 879
Interest-bearing liabilities
Deferred income tax liabilities
Preference share liabilities
Trade and other payables
Retirement benefit obligations
7 056
1 877
1
1 876
TSB Sugar
Holdings
Audited
12 months
ended
30 June
20133
Non-current liabilities
LIABILITIES
Total equity
311
6 745
Equity attributable to equity holders
of the company
Non-controlling interests
1
1 480
5 079
185
EQUITY
Stated capital
Share-based payment reserve
Common control reserve
Other reserves
Retained earnings
R’millions
Published
audited
12 months
ended
30 June
20132
TSB Transactions
75
Transaction costs of R8 million have been assumed.
6.
Transaction costs of R7 million are assumed.
8.
The reintroduction of the RCL Foods Strategic Partners results in a total economic cost of R83 million derived using option pricing methodology. The key assumptions include a 30 -day VWAP of R17.32,
closing share price on 19 November 2013 of R18.50, RCL Foods dividend yield of 4%, share volatility of 28% and preference shares dividend yield based on prime interest rate. The portion of the deemed
option value attributable to the RCL Foods Strategic Partners, amounting to R83 million, will be expensed up-front. The actual IFRS 2 cost will be determined on the effective date of the RCL Foods BEE
Transaction.
15. Transaction costs of R3 million are assumed and capitalised to equity.
14. The effects of the Equity Capital Raising are based on the assumption that the full R2.5 billion will be taken up at an assumed price of R17.32 and results in an issue of 144 341 801 shares. The actual
number of shares and share issue price will be determined on the respective dates of the Pro Rata Offer and the Placement.
Equity Capital Raising
13. Transaction costs of R5 million are assumed.
12. The reintroduction of the ESOP Trust results in a total economic cost of R193 million derived using option pricing methodology. The key assumptions include a 30 -day VWAP of R17.32, closing share
price on 19 November 2013 of R18.50, RCL Foods dividend yield of 4%, share volatility of 28% and preference shares dividend yield based on prime interest rate. The deemed option value relating to the
new ESOP Trust is amortised equally over the vesting period of 8 years. The actual IFRS 2 cost will be determined on the effective date of the RCL Foods BEE Transaction.
11. An accelerated charge of R16.9 million will be incurred in relation to the ESOP Trust due to termination of the agreement pursuant to the New RCL Foods BEE Transaction. The accelerated charge is
based on an assumed remaining period for the vesting of the options from 1 July 2013 to 30 June 2018.
Unwinding of Current RCL Foods BEE Structure and re-introduction of an ESOP Trust
10. Transaction costs of R2 million are assumed.
9.
Re-introduction of RCL Foods Strategic Partners
RCL Foods BEE Transactions
In terms of IFRS 2, the fair value of the deemed option arising upon the TSB BEE Transaction is an expense which will be charged through the income statement of RCL Foods. The fair value of the
deemed option is assumed to be R25 million derived using option pricing methodology, based on the derived subscription price and the closing Share price on 19 November 2013 of R18.50. The actual
IFRS 2 cost will be determined on the effective date of the TSB BEE Transaction.
7.
TSB BEE Transaction
The TSB Acquisition is a transaction under common control and therefore excluded from the scope of IFRS 3. RCL Foods will apply the principles of predecessor accounting which results in the recording
of financial information being consolidated at historical book values and gives rise to an assumed common control reserve of approximately R2.1 billion.
5.
76
27
Attributable headline earnings
Attributable headline earnings from
discontinued operations
10
27
Headline earnings
311
311
348
(30)
(9)
1
3
(2)
348
6
26
1
348
(20)
26
Attributable to:
Non-controlling interests
Equity holders of the company
Reconciliation to headline earnings:
Profit/(loss) for the year
(Profit)/loss on disposal of PPE
Profit on sale of business
Net impairment of assets
Net impairment of biological assets
Insurance proceeds
348
15
Profit for the year from discontinued
operations
348
444
(96)
Profit for the year
(9)
66
(75)
329
(44)
8
30
121
456
(127)
444
(278)
166
(154)
54
5 022
TSB Sugar
Holdings
Audited
12 months
ended
30 June
20133
(8)
(8)
(8)
(8)
(8)
(8)
(8)
(8)
(8)
(8)
(32)
(32)
(32)
(32)
(32)
(32)
(32)
(32)
(32)
10
298
298
334
(29)
(9)
1
3
(2)
314
(20)
334
314
15
299
470
(171)
455
(198)
62
30
121
860
(405)
15 131
Adjustments
relating
Pro forma
TSB BEE
to the TSB
after TSB
Acquisition4, 5 Transaction6,8 Transactions
TSB Transactions14
10 109
Profit/(loss) for the year
Profit before tax
Income tax expense
Operating profit
Finance costs
Finance income
Share of profit from joint ventures
Share of profit from associates
Revenue
Operating profit before depreciation and
amortisation
Depreciation and amortisation
R’millions
Published
audited
12 months
ended
30 June
20132
PRO FORMA INCOME STATEMENT OF RCL FOODS
(85)
(85)
(85)
(85)
(85)
(85)
(85)
(85)
(85)
(85)
Introduction
of
Strategic
Partners9,10
(43)
(43)
(43)
(43)
(43)
(43)
(43)
(43)
(43)
(43)
10
170
170
206
(29)
(9)
1
3
(2)
186
(20)
206
186
15
171
342
(171)
327
(198)
62
30
121
732
(405)
15 131
Unwinding
of Current
RCL Foods
Pro forma
BEE
after TSB
Structure
Transactions
and reintroand RCL
duction of
Foods BEE
an ESOP
Trust11,13 Transactions
RCL Foods BEE Transactions14
86
86
86
86
86
86
86
120
(34)
120
15, 16
Adjustments
for the
Equity
Capital
Raising
10
256
256
292
(29)
(9)
1
3
(2)
272
(20)
292
272
15
257
462
(205)
327
(198)
182
30
121
732
(405)
15 131
Pro forma
after TSB
Transactions,
RCL Foods
BEE
Transactions
and the
Equity
Capital
Raising
77
The income statement of RCL Foods was extracted from its audited financial statements for the year ended 30 June 2013.
2.
The purchase consideration for the TSB Acquisition is R4 billion which will be settled by the issuance of 230 946 882 Shares, at an issue price of R17.32 per share, being the 30-day volume weighted
average price per Share to 19 November 2013.
Transaction costs of R8 million have been assumed and are once-off in nature.
4.
5.
The TSB BEE Transactions result in a once-off cost of R25 million. The actual IFRS 2 cost will be determined on the effective date of the TSB BEE Transaction.
Transaction fees of R7 million are assumed and are once-off in nature.
7.
8.
The reintroduction of the RCL Foods Strategic Partners results in a total economic cost of R83 million using the Black-Scholes option valuation method. The portion of the deemed option value attributable
to the RCL Foods Strategic Partners, amounting to R83 million, will be expensed up-front.
∆
16. It is assumed that the proceeds from the Equity Capital Raising will be invested with financial institutions at an interest rate of 4.8% resulting in interest income of R120 million for the year. The tax
expense in respect of the interest income was calculated based on a statutory tax rate of 28%.
15. The effects of the Equity Capital Raising are based on the assumption that the full R2.5 billion will be taken up. The Equity Capital Raising has been assumed to occur at the 30 day VWAP of R17.32 and
results in an assumed issue of 144 341 801 shares. The actual number of shares and share issue price will be determined on the transaction date.
14. The effects of the Equity Capital Raising are based on the assumption that the full R2.5 billion will be taken up at an assumed price of R17.32 and results in an issue of 144 341 801 shares. The actual
number of shares and share issue price will be determined on the respective dates of the Pro Rata Offer and the Placement.
Equity Capital Raising
13. Transaction fees of R5 million are assumed and are once -off in nature.
12. The reintroduction of an ESOP trust results in a total economic cost of R193 million using the Black-Scholes option valuation method. The deemed option value relating to the RCL Foods employee share
ownership Trust is amortised equally over the vesting period of 8 years.
11. An accelerated charge of R16.9 million will be incurred in relation to the ESOP Trust due to termination of the agreement pursuant to the New RCL Foods BEE Transactions. The accelerated charge is
based on an assumed remaining period for the vesting of the options from 1 July 2013 to 30 June 2018 and are once-off in nature. A reversal of an amount of R3,3 million in respect of the charge for the
2013 financial year was assumed.
Unwinding of Current BEE Structure and re-introduction of an ESOP Trust
10. Transaction costs of R2 million are assumed.
9.
Re-introduction of RCL Foods Strategic Partner
RCL Foods BEE Transactions
In terms of IFRS 2, the fair value of the deemed option is an expense which will be charged through the income statement of RCL Foods. The fair value of the deemed Option for the TSB BEE Transaction
is assumed to be R25 million using the Black-Scholes option valuation method.
6.
TSB BEE Transaction
The income statement of TSB Sugar Holdings was extracted from its audited financial statements for the year ended 30 June 2013.
3.
TSB Acquisition
The pro forma income statement was prepared on the assumption that the TSB Transactions, the RCL Foods BEE Transactions and the Equity Capital Raising were effective 1 July 2012.
1.
Notes and assumptions:
ANNEXURE 3
INDEPENDENT REPORTING ACCOUNTANTS’ ASSURANCE REPORT
The Board of Directors
RCL Foods Limited
Six The Boulevard
Westway Office Park
Westville
3629
4 December 2013
Dear Sirs
Independent reporting accountants’ assurance report on the compilation of pro forma financial information
of RCL Foods Limited and its subsidiaries (“RCL Foods” or “the Group”)
Introduction
The Group is issuing a circular to its shareholders (“the Circular”) regarding, inter alia, the proposed
acquisition of TSB Sugar International Proprietary Limited and TSB Sugar RSA Proprietary Limited
(“the TSB Acquisition”), a transaction with strategic BEE partners of TSB Sugar Holdings (“the TSB BEE
Transaction”), the restructure of the current RCL Foods BEE structure (“the RCL Foods BEE Transactions”)
and an Equity Capital Raising of up to R2 500 000 000 (collectively “the Proposed Transactions”).
At your request and for the purposes of the Circular to be dated on or about 12 December 2013, we present our
assurance report on the compilation of the pro forma financial information of the Group by the Directors. The
pro forma financial information, presented in Section D paragraph 2 and Annexure 2 to the Circular, consists
of the pro forma statement of financial position as at 30 June 2013, the pro forma income statement for the
12 months ended 30 June 2013 and the pro forma financial effects (“the pro forma financial information”). The
applicable criteria on the basis of which the Directors have compiled the pro forma financial information are
specified in the JSE Limited (“JSE”) Listings Requirements and described in Section D, paragraph 2 and
Annexure 2 to the Circular.
The pro forma financial information has been compiled by the directors to illustrate the impact of the Proposed
Transactions on the Group’s reported financial position as at 30 June 2013, on the basis that the Proposed
Transactions had taken place at that date and the Group’s financial performance for the period then ended, as
if the Proposed Transactions had taken place at 1 July 2012. As part of this process, information about the
Group’s financial position and financial performance has been extracted by the directors from the Group’s
financial statements for the period ended 30 June 2013, on which an auditor’s report was issued on
27 August 2013.
Directors’ Responsibility
The Directors of the Group are responsible for the compilation, contents and presentation of the pro forma
financial information on the basis of the applicable criteria specified in the JSE Listings Requirements and
described in Section D, paragraph 2 and Annexure 2 to the Circular. The Directors of the Group are also
responsible for the financial information from which it has been prepared.
Reporting Accountant’s Responsibility
Our responsibility is to express an opinion about whether the pro forma financial information has been
compiled, in all material respects, by the directors on the basis specified in the JSE Listings Requirements
based on our procedures performed. We conducted our engagement in accordance with the International
Standard on Assurance Engagements (ISAE) 3420, Assurance Engagements to Report on the Compilation of
Pro forma Financial Information Included in a Prospectus. This standard requires that we comply with ethical
requirements and plan and perform our procedures to obtain reasonable assurance about whether the pro forma
financial information has been compiled, in all material respects, on the basis specified in the JSE Listings
Requirements.
For purposes of this engagement, we are not responsible for updating or reissuing any reports or opinions on
any historical financial information used in compiling the pro forma financial information, nor have we, in the
course of this engagement, performed an audit or review of the financial information used in compiling the
pro forma financial information.
78
As the purpose of pro forma financial information included in a circular is solely to illustrate the impact of a
significant corporate action or event on unadjusted financial information of the entity as if the corporate action
or event had occurred or had been undertaken at an earlier date selected for purposes of the illustration, we do
not provide any assurance that the actual outcome of the event or transaction would have been as presented.
A reasonable assurance engagement to report on whether the pro forma financial information has been
compiled, in all material respects, on the basis of the applicable criteria involves performing procedures to
assess whether the applicable criteria used in the compilation of the pro forma financial information provides
a reasonable basis for presenting the significant effects directly attributable to the corporate action or event,
and to obtain sufficient appropriate evidence about whether:
• the related pro forma adjustments give appropriate effect to those criteria; and
• the pro forma financial information reflects the proper application of those adjustments to the unadjusted
financial information.
Our procedures selected depend on our judgment, having regard to our understanding of the nature of the
Group, the corporate action or event in respect of which the pro forma financial information has been compiled,
and other relevant engagement circumstances.
Our engagement also involves evaluating the overall presentation of the pro forma financial information.
We believe that the evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Opinion
In our opinion, the pro forma financial information has been compiled, in all material respects, on the basis of the
applicable criteria specified by the JSE Listings Requirements and described in Section D, paragraph 2 and
Annexure 2 to the Circular.
Yours faithfully
PricewaterhouseCoopers Inc.
Director: H Ramsumer
Registered Auditor
79
ANNEXURE 4
TRADING HISTORY OF RCL FOODS SHARES ON THE JSE
The trading history of RCL Foods Shares on the JSE, for each day over the 30 Business Days preceding and
including the Last Practicable Date, each month over the 12 months prior to the Last Practicable Date, and each
quarter over the 2 years prior to such 12-month period are set out below:
High
(cents)
Low
(cents)
Day ended
22/10/13
23/10/13
24/10/13
25/10/13
28/10/13
29/10/13
30/10/13
31/10/13
01/11/13
04/11/13
05/11/13
06/11/13
07/11/13
08/11/13
11/11/13
12/11/13
13/11/13
14/11/13
15/11/13
18/11/13
19/11/13
20/11/13
21/11/13
22/11/13
25/11/13
26/11/13
27/11/13
28/11/13
29/11/13
02/12/13
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
715
750
715
715
765
756
757
726
727
758
750
760
769
767
900
849
784
770
819
855
900
900
845
865
820
790
785
785
775
825
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
705
715
715
715
710
710
710
710
710
711
720
735
735
767
780
752
710
731
735
800
830
841
829
797
750
757
765
691
680
734
Month ended
31/12/12
31/01/13
28/02/13
31/03/13
30/04/13
31/05/13
30/06/13
31/07/13
31/08/13
30/09/13
31/10/13
30/11/13
1
1
1
1
1
1
1
1
1
1
1
1
500
715
650
750
640
751
635
800
720
770
832
900
1
1
1
1
1
1
1
1
1
1
1
1
318
455
400
424
462
485
470
525
560
585
610
680
80
Volume
traded Value traded
(shares)
(R’million)
28
42
63
3
81
4
26
6
26
25
21
22
125
4
5
2
5
6
2
3
3
2
2
4
2
38
41
28
5
41
170
402
524
100
61
187
22
10
583
276
710
142
328
797
544
680
185
284
806
505
223
791
189
163
312
388
818
886
390
212
550
298
751
845
772
708
250
966
971
279
873
0.48072
0.72764
1.09412
0.06078
1.40032
0.07228
0.45441
0.11658
0.45340
0.43845
0.37843
0.38672
2.19729
0.00551
0.70705
0.75218
0.50022
0.09506
0.73488
3.12815
7.47426
9.70206
1.84563
1.12824
3.37483
0.39749
0.19492
10.08606
4.74077
12.46989
696
027
661
312
318
979
879
104
497
922
463
718
325
905
081
428
631
299
241
786
939
448
354
267
65.16806
82.02578
40.29152
85.51202
96.95086
46.94346
61.11239
50.77380
41.37280
47.30092
76.01648
48.72158
Quarter ended
31/12/11
31/03/12
30/06/12
30/09/12
31/12/12
31/03/13
30/06/13
30/09/13
High
(cents)
Low
(cents)
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
650
599
560
499
500
750
751
800
489
400
400
300
249
400
462
525
Volume
traded Value traded
(shares)
(R’million)
3
3
2
7
12
13
13
8
883
822
449
656
201
001
177
525
616
077
523
317
387
414
171
173
61.04417
56.49005
36.31226
109.07547
165.70742
207.82932
205.00671
139.44752
Source: I-Net Bridge.
81
ANNEXURE 5
HISTORICAL FINANCIAL INFORMATION OF TSB SUGAR HOLDINGS
INTRODUCTION
The financial report for the period ended 30 June 2011 was for a period of 15 months due to a change in the
year-end from 31 March to 30 June.
The consolidated financial information of TSB Sugar Holdings for the three periods ended 30 June 2011 (fifteen
months), 30 June 2012 and 30 June 2013 is set out below. The annual financial statements of TSB Sugar
Holdings for the last three financial periods have been audited by PricewaterhouseCoopers Inc. An unqualified
audit opinion was issued in all three periods. The audited financial statements for the three periods ended
30 June 2011, 30 June 2012 and 30 June 2013 will be available for inspection as described in Section E
paragraph 19 of the Circular.
The Directors of RCL Foods are responsible for the preparation, contents and presentation of the Circular and
are responsible for ensuring that RCL Foods complies with the Listings Requirements. The Directors of
TSB Sugar Holdings are responsible for the preparation and fair presentation of the audited TSB Sugar
Holdings financial statements in accordance with International Financial Reporting Standards from which
this historical financial information of TSB Sugar Holdings has been prepared. No material fact or circumstance
has occurred between the latest financial year-end of TSB Sugar Holdings and the Last Practicable Date.
Whilst the TSB Acquisition entails the acquisition of the shares in TSB Sugar International and TSB Sugar
RSA, both held 100% by TSB Sugar Holdings, the consolidated financial information of TSB Sugar Holdings is
presented. However, TSB Sugar Holdings is an investment holding company and does not trade.
COMMENTARY ON FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2013
Salient features
•
Headline EBITDA decreased by 20.5% over the comparable 12 months in 2012 and increased by 44.2% over
the comparable 15 months in 2011.
•
Headline earnings decreased by 11.8% over the comparable 12 months in 2012 and increased by 88.7% over
the comparable 15 months in 2011.
•
Total dividends paid for the year amounted to R 372.2 million inclusive of a special dividend of R196 million.
(2012: R49.9 million; 2011: R38.4 million).
•
Net asset value of R1 878.9 million at 30 June 2013 (R1 911.6 million at 30 June 2012; R1 546.5 million
at 30 June 2011).
Commentary
Overview and market conditions
The year under review has not demonstrated any meaningful signs of recovery from the global recession.
Volatility, especially in the grains and oil markets, has increased significantly during this year. Oil is one of
the major risk factors plaguing the global recovery, with the price of oil having risen on the back of supply
concerns following the geopolitical disruptions in the Middle East and North Africa.
South Africa’s GDP grew modestly in calendar 2012. However, 2013’s second quarter growth was negatively
impacted by the widespread industrial action across the mining sector of the economy. Interest rates are at a
50 year low in an attempt to encourage growth and employment. The slowdown in international demand for
hard commodities such as platinum, a key contributor to South Africa’s GDP, has resulted in significant layoffs in the mining sector further exacerbating the high unemployment levels. Although the latest employment
statistics reflect that employment in the government sector has increased marginally, the resultant contribution
to economic growth is unlikely to be meaningful in the short-term. The relief from lower interest rates to debt
laden consumers is largely negated by higher fuel and electricity tariff increases, and the impact of higher
unemployment in the formal sector remains significant. At present market demand is typically impacted by a
fragile consumer with household consumption growth unlikely to materialise in the short to medium term.
The South African market is impacted upon by a high level of sugar imports at low prices. This is likely to
put margins and sugar sales under pressure. World market raw sugar prices have decreased to levels of
17 – 19 USc/lb from the 25 USc/lb prices seen a year ago.
82
Business overview
TSB Sugar Holdings’ headline earnings for the year under review amounted to R311 million (2012: R352 million;
2011: R187 million). This decrease in 2013 was mainly due to the negative impact of lower sugar production,
lower sales volumes and increased costs that resulted in lower margins. The TSB Sugar Holdings’ performance
was good considering the difficult market conditions. The increase in headline earnings from the 2011 to 2012
financial period was mainly driven by a positive price variance due to favourable exchange rates, domestic
market price increases and an increase in TSB Sugar Holdings’ production share in the South African Industry.
Turnover for the year under review increased by 8,6% to R 5 022 million (2012: R4 621 million; 2011:
R4 905 million). The increase in 2013 was mainly attributable to higher sugar prices and an increase in export
volumes. The decrease in 2012 from 2011 was partially due to the fact that the 2011 reporting period was a
fifteen-month period.
TSB Sugar Holdings’ raw sugar production for the season (April 2012 to March 2013) decreased by 8.9% to
560 244 tons (2011/2012 season: 615 046 tons) while the South African sugar industry’s total production for
the same period increased by 7.1% post the drought in the KwaZulu-Natal. This resulted in TSB Sugar Holdings’
production share decreasing from 33.7% in the 2011/2012 season to 28.7% in the 2012/2013 season. The decrease
in TSB’s production was mainly attributed to the countrywide transport strike and higher than normal rainfall
during the crushing season. During the first three months of the new season (April 2013 to June 2013) TSB
produced 246 282 tons of sugar compared to 233 684 tons in the comparative period for the previous year. This
was due to favourable climatic conditions and good factory performances.
TSB Sugar Holdings’ raw sugar production for the 2011/2012 season increased by 4.9% to 615,046 tons
(2010/2011 season: 586,239 tons) while the sugar industry’s total production for the season decreased by 4.5%
resulting in the TSB Sugar Holdings’ production share increasing from 30.7% in the 2010/2011 season to
33.7% in the 2011/2012 season. The international sugar prices remained strong during the 2012 financial year
and combined with a weaker Rand resulted in an increase in the export price of sugar. The 2011/2012 average
sugar price increased by 17.1% compared to the 2010/2011 season.
The contribution of the Molatek animal feeds division to TSB Sugar Holdings’ operating profit in 2013 increased
to 25.2% (2012: 16.1%; 2011: 34.5%) due to improved margins and volumes. The higher percentage in 2011 was
due to lower contributions from other divisions.
The Royal Swaziland Sugar Corporation’s contribution to TSB Sugar Holdings’ headline earnings for 2013
amounted to R121 million (2012: R73 million; 2011: R42 million) and was positively impacted over the three
years by an increase in production as well as better than anticipated sugar prices.
The company has shown consistent growth in profitability with headline earnings increasing from
R144.6 million in 2008 to R310.7 million in 2013 with a record high of R352.3 million in 2012.
Finance costs
The decrease in net finance cost of R1.4 million in 2013 is mainly a consequence of strict cash flow management
and the postponement of capital expenditure. Interest for 2011 was for a fifteen-month period.
Effective tax rate
The effective tax rate has decreased from 21.8% in 2012 to 21.7% in 2013 excluding the impact of Secondary
Tax on Companies, the effective taxation rate remains unchanged. The low level of the tax rate in the last two
years is ascribed to the income from associates and joint ventures reported net of tax. In the 2011 year the
relative contributions of the income from associates were smaller and thus the impact on the tax rate was lower.
Statement of financial position
Non-current assets
Fixed assets were increased by R50.2 million in 2013 and R24.2 million in 2012 mainly due the investment in
the mills to maintain production capacity.
Investments in associates increased with R54.7 million in 2013 and R26.8 million in 2012 due to the excellent
performance of the Royal Swazi Sugar Company and the increase in their retained profits.
There has been no major change in the nature of property, plant and equipment nor has there been any change
in policy regarding the use thereof.
Current assets
Current assets increased with R84.1 million in 2013 and R358.9 million in 2012 mainly due to a higher
investment in sugar stocks. The higher investment was due to bigger volumes as well as an increase in value
per ton.
There have been no material loan receivables.
83
Current liabilities
Current liabilities increased by R71.3 million to R1 279.4 million in 2013 (2012: R1 208.1 million; 2011:
R1 196.5 million).
Return on equity
Return on equity decreased in 2013 to 18.5% (2012: 21.6%) being impacted by the non-recurring profit on sale
of land with regards to the land restitution process in the previous year. The return on equity in 2011 was
14.0% due to the lower profitability.
Prospects for TSB Sugar RSA and TSB Sugar International
With its three sugar mills, cane supply from irrigated fields and it’s well known Selati brand TSB Sugar RSA
is well positioned to deliver value in the future. The northern irrigated area of the South African Sugar Industry,
where TSB Sugar RSA’s mills are situated, has the lowest cost of production in the Industry.
With the current levels of irrigation sources production of cane and sugar should exceed levels of the previous
year. Marketing is influenced by the high volumes of cheap sugar imports which impact on sales and margins.
Molatek, TSB Sugar RSA’s animal feed division, has shown consistent growth and is near the completion of an
expansion project which will contribute to further growth in volumes.
TSB Sugar International is also busy with the feasibility of the Massingir project in Mozambique which has the
potential to add considerable value in future if implemented.
The commentary presented on page 82 – 84 has not been audited.
84
CONSOLIDATED HISTORICAL FINANCIAL INFORMATION
STATEMENT OF FINANCIAL POSITION
30 June
2013
R’000
Group
30 June
2012
R’000
30 June
2011
R’000
6
8
9
10
11
12
13
14
15
1 269 710
–
13 646
106 912
–
1 555
318 489
141 077
–
1 851 389
1 219 528
–
13 696
98 896
–
1 555
263 766
118 534
6 000
1 721 975
1 195 285
1 866
13 746
130 917
–
1 555
236 921
107 809
7 457
1 695 556
16
17
26
28
1 019 826
505 297
–
2 387
1 819
133 660
1 662 989
4 651
1 667 640
3 519 029
954 543
485 636
–
3 560
–
135 159
1 578 898
46 704
1 625 602
3 347 577
665 257
457 697
8 880
3 599
–
84 521
1 219 954
175 205
1 395 159
3 090 715
19
20
29
*
693
1 876 479
1 877 172
1 765
1 878 937
*
18 508
1 891 406
1 909 914
1 730
1 911 644
*
26 384
1 519 699
1 546 083
398
1 546 481
21
22
23
24
138 091
64 997
37 608
120 000
360 696
137 042
55 265
34 794
–
227 101
148 355
49 418
–
150 000
347 773
24
22
26
28
50 786
–
585 500
20 560
–
622 550
1 279 396
232 000
–
310 400
4 473
7 313
653 923
1 208 109
412 000
54 885
148 200
2 379
2 519
576 478
1 196 461
–
1 279 396
1 640 092
3 519 029
723
1 208 832
1 435 933
3 347 577
–
1 196 461
1 544 234
3 090 715
Notes
ASSETS
Non-current assets
Property, plant and equipment
Investment property
Intangible assets
Biological assets
Interest in subsidiaries
Long-term loans and receivables
Investment in associates
Investment in joint ventures
Available-for-sale financial assets
Current assets
Inventories
Trade and other receivables
Amounts owing by Group companies
Derivative financial instruments
Taxation pre-paid
Cash and cash equivalents and restricted cash
Assets classified as held for sale
18
7
Total assets
EQUITY
Capital and reserves attributable to equity holders
Ordinary shares
Fair value and other reserves
Retained earnings
Non-controlling interest in equity
Total equity
LIABILITIES
Non-current liabilities
Deferred income tax
Retirement benefit obligations
Other non-current liabilities
Borrowings
Current liabilities
Current portion of borrowings
Retirement benefit obligations
Amounts owing to Group companies
Derivative financial instruments
Taxation payable
Trade and other payables
Liabilities directly associated with assets classified as
held for sale
Total liabilities
Total equity and liabilities
25
7
*Amounts less than R1 000
85
INCOME STATEMENTS
Group
Notes
Continuing operations
Revenue
Cost of sales
2.1
Gross profit
Other operating income
Fair value adjustments on biological assets
Administrative expenses
Selling and marketing costs
Other operating expenses
2.2
2.2
Operating profit
2.2
2.2
2.2
30 June
2013
R’000
30 June
2012
R’000
5 021 848
4 621 220
(3 982 285) (3 611 529)
1 039 563
160 586
67 853
(9 522)
(86 946)
(842 620)
1 009 691
115 098
91 050
(8 887)
(72 598)
(661 210)
15 months to
30 June
2011
R’000
4 905 358
(4 158 885)
746 473
151 413
122 643
(10 358)
(125 700)
(609 696)
328 914
473 144
274 775
Finance income
Finance costs
4
4
8 447
(44 098)
5 184
(42 262)
4 700
(58 607)
Finance costs – net
4
(35 651)
(37 078)
(53 907)
Share of profit of associates
Share of profit in joint ventures
13
14
120 897
30 493
73 357
20 961
42 044
17 368
5
444 653
(96 553)
530 384
(116 136)
280 280
(87 533)
348 100
414 248
192 747
–
–
23 767
Profit for the period
348 100
414 248
216 514
Attributable to:
Equity holders of the Company
Non-controlling interest
348 167
(67)
412 916
1 332
216 116
398
348 100
414 248
216 514
30 June
2013
R’000
Group
30 June 15 months to
2012 30 June 2011
R’000
R’000
348 100
414 248
Profit before income tax
Income tax expense
Profit for the year from continuing operations
Discontinued operations
Profit for the period from discontinued operations
7.2
STATEMENT OF OTHER COMPREHENSIVE INCOME
Profit for the period
Other comprehensive income:
Available-for-sale financial assets
Cash flow hedges – Charged to equity
Cash flow hedges – Realisation of reserve
Exchange differences on translating foreign operations
Other comprehensive expense for the year, net of tax
44
(13 085)
188
4 114
(8 739)
(1 706)
(188)
(1 881)
4 641
866
216 514
(1 404)
1 881
(8 908)
1 444
(6 987)
Total comprehensive income for the period
339 361
415 114
209 527
Attributable to:
Equity holders of the Company
Non-controlling interest
339 428
(67)
413 782
1 332
209 129
398
Total comprehensive income for the period
339 361
415 114
209 527
Items in the statement above are disclosed net of tax. The income tax relating to each component of other
comprehensive income is disclosed in Note 5.
86
87
–
–
–
1 444
(1 950)
3 278
(9 759)
(6 987)
(6 987)
–
–
–
–
–
–
–
–
–
26 384
–
4 641
(2 369)
1 468
(8 742)
(2 874)
(7 876)
(7 876)
–
–
–
*
*
–
–
–
–
–
–
–
–
–
–
*
Total transactions with owners
Balance at 30 June 2011
Balance at 1 July 2011
Comprehensive income:
Net profit for the year
Other comprehensive income:
Currency translation differences
Available-for-sale financial assets reserve
Deferred tax recognised in equity
Realisation of reserves
Cash flow hedge reserve
Total other comprehensive income
Total comprehensive income
Transactions with owners:
Dividends paid
Total transactions with owners
Balance at 30 June 2012
18 508
26 384
–
–
–
33 371
*
Share
capital
R’000
Fair value
and other
reserves
R’000
Dividends paid
Transactions with owners:
Balance at 1 April 2010 – Restated
Comprehensive income:
Net profit for the year
Disposal of business (Note 7.2)
Transfer to other reserves
Other comprehensive income:
Currency translation differences
Available-for-sale financial assets reserve
Deferred tax recognised in equity
Cash flow hedge reserve
Total other comprehensive income
Total comprehensive income
Group
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
1 891 406
(49 951)
(49 951)
–
–
–
8 742
–
8 742
421 658
412 916
1 519 699
1 519 699
(38 405)
(38 405)
–
–
–
–
–
215 715
216 116
–
(401)
1 342 389
1 909 914
(49 951)
(49 951)
4 641
(2 369)
1 468
–
(2 874)
866
413 782
412 916
1 546 083
1 546 083
(38 405)
(38 405)
1 444
(1 950)
3 278
(9 759)
(6 987)
208 728
216 116
–
(401)
1 375 760
1 730
–
–
–
–
–
–
–
–
1 332
1 332
398
398
–
–
–
–
–
–
–
(7 443)
398
(8 242)
401
7 841
Amount
attributable
NonRetained
to equity controlling
earnings
holders
interest
R’000
R’000
R’000
1 911 644
(49 951)
(49 951)
4 641
(2 369)
1 468
–
(2 874)
866
415 114
414 248
1 546 481
1 546 481
(38 405)
(38 405)
1 444
(1 950)
3 278
(9 759)
(6 987)
201 285
216 514
(8 242)
–
1 383 601
Total
R’000
88
4 114
61
(2 903)
–
4 999
(6 174)
(17 912)
(17 815)
(17 815)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
*
Group
Balance at 1 July 2012
Comprehensive income:
Net profit for the year
Other comprehensive income:
Currency translation differences
Available-for-sale financial assets reserve
Transferred to retained earnings
Capital invested by minorities
Deferred tax recognised in equity
Realisation of reserves
Cash flow hedge reserve
Total other comprehensive income
Total comprehensive income
Transactions with owners:
Dividends paid
Total transactions with owners
Balance at 30 June 2013
693
–
Share
capital
R’000
*
*Amounts less than R1 000
Fair value
and other
reserves
R’000
18 508
1 876 479
(372 171)
(372 171)
–
–
2 903
–
–
6 174
–
9 077
357 244
348 167
Retained
earnings
R’000
1 891 406
1 877 172
(372 171)
(372 171)
4 114
61
–
–
4 999
–
(17 912)
(8 738)
339 429
348 167
1 765
–
–
–
–
–
102
–
–
–
102
35
(67)
Amount
attributable
Nonto equity controlling
holders
interest
R’000
R’000
1 909 914
1 730
1 878 937
(372 171)
(372 171)
4 114
61
–
102
4 999
–
(17 912)
(8 636)
339 464
348 100
Total
R’000
1 911 644
STATEMENTS OF CASH FLOWS
Notes
Cash flow from operating activities
Net profit before income tax
Adjustment for:
Depreciation
Amortisation of intangible assets
Biological assets – Fair value gain
Biological assets charged to cost of sales
Increase in derivative financial instruments
Increase in post retirement liability
Net profit on disposal of property, plant and equipment and
assets classified as held for sale
Net profit on disposal of investment property
Net profit on disposal of available-for-sale financial asset
Net profit on disposal of business
Disposal and loss of control in associates
Deferred tax other movement
Deferred tax realised on disposal of available-for-sale
financial asset
Realisation of reserves on disposal of available-for-sale
financial asset
Loss of control in investment in joint venture
Impairment of available-for-sale financial assets
Impairment of assets classified as held for sale
Impairment of biological assets
Increase in other non-current liabilities
Increase in assets classified as held for sale:
Post-retirement medical asset
Dividends received
Interest received
Interest paid
Share of profit from joint ventures
Share of profit from associates
6
9
7, 10
10
22
2
33
30 June
2013
R’000
Group
30 June
2012
R’000
30 June
2011
R’000
444 653
530 384
309 019
126 852
50
(67 853)
51 776
(652)
11 884
120 528
50
(91 050)
89 369
(741)
8 094
137 723
63
(125 844)
102 573
(998)
50 422
(9 937)
–
–
(7 807)
–
–
(53 145)
(244)
–
–
–
–
196
–
(76)
(24 633)
272
75
2 459
7
10
4
4
Operating profit before working capital changes
Working capital changes:
Increase in inventory
Increase in trade and other receivables
(Decrease)/increase in trade and other payables
(8 781)
–
–
1 150
1 257
2 814
–
(3 636)
(8 447)
44 098
(30 493)
(120 897)
–
–
–
382
2 213
–
34 794
(104)
–
(5 184)
42 262
(20 962)
(73 357)
546
(1 950)
(315)
–
–
–
–
–
(325)
(5 676)
64 778
(17 368)
(42 044)
428 490
583 289
446 438
(65 467)
(19 661)
(16 783)
(289 470)
(27 937)
57 764
(339 043)
(223 638)
(122 475)
326 580
(44 098)
(102 096)
323 646
(42 262)
(121 187)
(238 718)
(64 778)
(73 334)
Net cash inflow from operating activities
180 386
160 197
(376 829)
Cash flow from investing activities
Purchase of property, plant and equipment
Proceeds on disposal of property, plant and equipment
Proceeds on disposal of investment property
Proceed on disposal of available-for-sale financial asset
Proceeds on disposal of biological assets
Proceed on disposal of business – net of cash
Additions to biological assets
Purchase of assets classified as held for sale
Proceeds on disposal of assets classified as held for sale
Proceed on mentorship agreement – restricted cash received
Restricted cash excluded from statement of cash flows
Capital invested by minorities
Post retirement contribution and settlement period
(191 304)
23 700
–
15 180
6 804
47 793
–
–
–
(6 539)
6 539
102
(2 152)
(138 477)
399
2 110
–
–
–
–
–
206 797
(20 220)
20 220
–
(56 946)
(229 989)
8 527
–
2 484
–
9 917
(11 561)
(4 294)
535
–
–
–
(2 417)
Cash generated from operations
Interest paid
Normal taxation paid
4
30
33
18
22
89
Notes
Decrease in loans to Group companies
Interest received
Dividends paid
Dividends received
4
Net cash (outflow)/inflow from investing activities
30 June
2013
R’000
Group
30 June
2012
R’000
30 June
2011
R’000
–
8 447
(372 171)
79 359
8 880
5 184
(49 951)
58 156
(4 010)
5 676
(38 405)
17 087
(384 242)
36 152
(246 451)
42 033
(36 914)
108
Cash flow from financing activities
Increase in long and short-term borrowings
Increase/(decrease) in loans from Group companies
Decrease in long-term loans and receivables
–
275 100
–
–
162 200
–
Net cash inflow from financing activities
275 100
162 200
71 244
32 939
2 153
358 547
(327 479)
1 871
(618 054)
288 875
1 700
106 335
32 939
(327 479)
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of the period
Effect of exchange differences
Cash and cash equivalents at end of the period
18
5 227
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The principal accounting policies applied in the preparation of these consolidated financial statements
are set out below. These policies have been consistently applied to both years presented, unless otherwise
stated.
1.1
Basis of preparation
These consolidated financial statements of TSB Sugar Holdings Proprietary Limited (the “TSB
Group”) and its subsidiaries have been prepared in accordance with International Financial
Reporting Standards (IFRS) and the Companies Act, as amended. The consolidated financial
statements have been prepared under the historical cost convention, as modified by the revaluation
of biological assets, available-for-sale financial assets and financial assets and financial liabilities
(including derivative instruments) at fair value through profit or loss.
The preparation of financial statements in conformity with IFRS requires the use of certain critical
accounting estimates. It also requires management to exercise its judgement in the process of
applying the Group’s accounting policies. The areas involving a higher degree of judgement or
complexity, or areas where assumptions and estimates are significant to the consolidated financial
statements, are disclosed in Note 1.21.
(a)
New and amended standards adopted by the group
The following new standards and amendments to standards are mandatory for the first time
for financial years beginning 1 July 2012:
Amendment to IAS 12, ‘Income Taxes’, on deferred tax: Currently IAS 12, ‘Income Taxes’,
requires an entity to measure the deferred tax relating to an asset depending on whether
the entity expects to recover the carrying amount of the asset through use or sale. It can be
difficult and subjective to assess whether recovery will be through use or through sale when
the asset is measured using the fair value model in IAS 40, Investment Property. Hence this
amendment introduces an exception to the existing principle for the measurement of deferred
tax assets or liabilities arising on investment property measured at fair value. As a result of the
amendments, SIC 21, ‘Income Taxes – Recovery of Revalued Non-depreciable Assets’, would no
longer apply to investment properties carried at fair value. The amendments also incorporate
into IAS 12 the remaining guidance previously contained in SIC 21, which is accordingly
withdrawn. Applicable to periods beginning on or after 1 January 2012. This amendment had
no impact on the Group.
Amendment to IAS 1, ‘Financial Statement Presentation’, regarding other comprehensive
income: The main change resulting from these amendments is a requirement for entities to
group items presented in ‘other comprehensive income’ (OCI) on the basis of whether they
are potentially reclassifiable to profit or loss subsequently (reclassification adjustments). The
amendments do not address which items are presented in OCI. Applicable to periods beginning
on or after 1 July 2012. This amendment had no impact on the Group.
90
(b)
New and amended standards, and interpretations mandatory for the first time for the financial
period beginning 1 July 2012 but not currently relevant to the Group (although they may affect
the accounting for future transactions and events).
New and amended standards, and interpretations mandatory for the first time for the financial
period beginning 1 July 2012 but not currently relevant to the Group (although they may
affect the accounting for future transactions and events) are considered to have no material
impact on the Group:
None
(c)
New standards, amendments and interpretations issued but not effective for the financial period
beginning 1 July 2012 and not early adopted.
Amendment to IAS 19, ‘Employee Benefits’: These amendments eliminate the corridor approach
and calculate finance costs on a net funding basis. Applicable to periods beginning on or after
1 January 2013. This amendment will have no impact on the Group.
Amendment to IFRS 1, ‘First-time Adoption’, on government loans: This amendment addresses
how a first-time adopter would account for a government loan with a below market rate of
interest when transitioning to IFRS. It also adds an exception to the retrospective application
of IFRS, which provides the same relief to first-time adopters granted to existing preparers
of IFRS financial statements when the requirement was incorporated into IAS 20 in 2008.
Applicable to periods beginning on or after 1 January 2013. This amendment will have no
impact on the Group.
Amendment to IFRS 7, ‘Financial Instruments: Disclosures’, on asset and liability offsetting:
This amendment includes new disclosures to facilitate comparison between those entities that
prepare IFRS financial statements to those that prepare financial statements in accordance
with US GAAP. Applicable to periods beginning on or after 1 January 2013. This amendment
will have no impact on the Group.
Amendment to IFRSs 10, 11 and 12 on transition guidance: These amendments provide
additional transition relief to IFRSs 10, 11 and 12, limiting the requirement to provide adjusted
comparative information to only the preceding comparative period. For disclosures related to
unconsolidated structured entities, the amendments will remove the requirement to present
comparative information for periods before IFRS 12 is first applied. Applicable to periods
beginning on or after 1 January 2013. This amendment will have no impact on the Group.
Annual improvements 2011: These annual improvements, address six issues in the 2009 –
2011 reporting cycle. It includes changes to:
•
IFRS 1, ‘First-time Adoption’
•
IAS 1, ‘Financial Statement Presentation’
•
IAS 16, ‘Property, Plant and Equipment’
•
IAS 32, ‘Financial Instruments; Presentation’
•
IAS 34, ‘Interim Financial Reporting’
Applicable to periods beginning on or after 1 January 2013. This amendment will have no
impact on the Group.
IFRS 10, ‘Consolidated Financial Statements’: The objective of IFRS 10 is to establish principles
for the presentation and preparation of consolidated financial statements when an entity
controls one or more other entity (an entity that controls one or more other entities) to present
consolidated financial statements. It defines the principle of control, and establishes controls as
the basis for consolidation. It sets out how to apply the principle of control to identify whether
an investor controls an investee and therefore must consolidate the investee. It also sets out the
accounting requirements for the preparation of consolidated financial statements. The Group
is yet to assess IFRS 10’s full impact and intends to adopt IFRS 10 no later than the accounting
period beginning on or after 1 July 2013.
IFRS 11, ‘Joint Arrangements’: IFRS 11 is a more realistic reflection of joint arrangements by
focusing on the rights and obligations of the parties to the arrangement rather than its legal
form. There are two types of joint arrangement: joint operations and joint ventures. Joint
operations arise where a joint operator has rights to the assets and obligations relating to the
arrangement and therefore accounts for its share of assets, liabilities, revenue and expenses.
Joint ventures arise where the joint venture has rights to the net assets of the arrangement
and therefore equity accounts for its interest. Proportional consolidation of joint ventures is no
longer allowed. The group is yet to assess IFRS 11’s full impact and intends to adopt IFRS 11
no later than the accounting period beginning on or after 1 July 2013.
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IFRS 12, ‘Disclosures of interests in other entities’: IFRS 12 includes the disclosure requirements
for all forms of interests in other entities, including joint arrangements, associates, special
purpose vehicles and other off-balance sheet vehicles. Applicable to periods beginning on or
after 1 January 2013. This new standard will have no impact on the Group.
IFRS 13, ‘Fair value measurement’: IFRS 13 aims to improve consistency and reduce complexity
by providing a precise definition of fair value and a single source of fair value measurement
and disclosure requirements for use across IFRSs. The requirements, which are largely
aligned between IFRS and US GAAP, do not extend the use of fair value accounting but provide
guidance on how it should be applied where its use is already required or permitted by other
standards within IFRSs or US GAAP. Applicable to periods beginning on or after 1 January
2013. This new standard will have limited impact on the Group.
IAS 27 (revised 2011), ‘Separate Financial Statements’: IAS 27 (revised 2011) includes the
requirements relating to separate financial statements. Applicable to periods beginning on or
after 1 January 2013. This revision will have no impact on the Group.
IAS 28 (revised 2011), ‘Associates and Joint Ventures’: IAS 28 (revised 2011) includes the
requirements for associates and joint ventures that have to be equity accounted following the
issue of IFRS 11. Applicable to periods beginning on or after 1 January 2013. This revision will
have no impact on the Group.
IFRIC 20, ‘Stripping Costs in the Production Phase of a Surface Mine’: This interpretation sets
out the accounting for overburden waste removal (stripping) costs in the production phase of
a surface mine. The interpretation may require mining entities reporting under IFRS to write
off existing stripping assets to opening retained earnings if the assets cannot be attributed to
an identifiable component of an ore body. Applicable to periods beginning on or after 1 January
2013. This interpretation is not relevant to the Group.
Amendment to IAS 32, ‘Financial Instruments: Presentation’, on asset and liability offsetting:
These amendments are to the application guidance in IAS 32, ‘Financial Instruments:
Presentation’, and clarify some of the requirements for offsetting financial assets and financial
liabilities on the balance sheet. Applicable to periods beginning on or after 1 January 2014.
This amendment will have no impact on the Group.
IFRS 9, ‘Financial Instruments’: IFRS 9 is the first standard issued as part of a wider project
to replace IAS 39. IFRS 9 retains but simplifies the mixed measurement model and establishes
two primary measurement categories for financial assets: amortised cost and fair value. The
basis of classification depends on the entity’s business model and the contractual cash flow
characteristics of the financial asset. The guidance in IAS 39 on impairment of financial assets
and hedge accounting continues to apply. Applicable to periods beginning on or after 1 January
2015. The group is yet to assess IFRS 9’s full impact and intends to adopt IFRS 9 no later than
the accounting period beginning on or after 1 July 2015.
There are no other IFRSs or IFRIC interpretations that are not yet effective that would be
expected to have a material impact on the Group.
1.2
Consolidation
(a)
Subsidiaries
Subsidiaries are all entities (including special purpose entities) over which the group has the
power to govern the financial and operating policies generally accompanying a shareholding
of more than one-half of the voting rights. The existence and effect of potential voting rights
that are currently exercisable or convertible are considered when assessing whether the Group
controls another entity. The Group also assesses existence of control where it does not have
more than 50% of the voting power but is able to govern the financial and operating policies
by virtue of de-facto control. De-facto control may arise in circumstances where the size of the
group’s voting rights relative to the size and dispersion of holdings of other shareholders give
the group the power to govern the financial and operating policies, etc.
Subsidiaries are fully consolidated from the date on which control is transferred to the Group.
They are deconsolidated from the date that control ceases.
The Group applies the acquisition method to account for business combinations. The
consideration transferred for the acquisition of a subsidiary is the fair values of the assets
transferred, the liabilities incurred to the former owners of the acquiree and the equity interests
issued by the Group. The consideration transferred includes the fair value of any asset or
liability resulting from a contingent consideration arrangement. Identifiable assets acquired
and liabilities and contingent liabilities assumed in a business combination are measured
initially at their fair values at the acquisition date. The Group recognises any non-controlling
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interest in the acquiree on an acquisition-by-acquisition basis, either at fair value or at the
non-controlling interest’s proportionate share of the recognised amounts of the acquiree’s
identifiable net assets.
Acquisition-related costs are expensed as incurred.
If the business combination is achieved in stages, the acquisition date fair value of the acquirer’s
previously held equity interest in the acquiree is remeasured to fair value at the acquisition
date through profit or loss.
Any contingent consideration to be transferred by the Group is recognised at fair value at the
acquisition date. Subsequent changes to the fair value of the contingent consideration that is
deemed to be an asset or liability is recognised in accordance with IAS 39 either in profit or loss
or as a change to other comprehensive income. Contingent consideration that is classified as
equity is not remeasured, and its subsequent settlement is accounted for within equity.
Goodwill is initially measured as the excess of the aggregate of the consideration transferred
and the fair value of non-controlling interest over the net identifiable assets acquired and
liabilities assumed. If this consideration is lower than the fair value of the net assets of the
subsidiary acquired, the difference is recognised in profit or loss.
Inter-company transactions, balances, income and expenses on transactions between Group
companies are eliminated. Profits and losses resulting from inter-company transactions that
are recognised in assets are also eliminated. Accounting policies of subsidiaries have been
changed where necessary to ensure consistency with the policies adopted by the Group.
(b)
Changes in ownership interests in subsidiaries without change of control
Transactions with non-controlling interests that do not result in loss of control are accounted
for as equity transactions – that is, as transactions with the owners in their capacity as owners.
The difference between fair value of any consideration paid and the relevant share acquired
of the carrying value of net assets of the subsidiary is recorded in equity. Gains or losses on
disposals to non-controlling interests are also recorded in equity.
(c)
Disposal of subsidiaries
When the Group ceases to have control any retained interest in the entity is re-measured to its
fair value at the date when control is lost, with the change in carrying amount recognised in
profit or loss. The fair value is the initial carrying amount for the purposes of subsequently
accounting for the retained interest as an associate, joint venture or financial asset. In addition,
any amounts previously recognised in other comprehensive income in respect of that entity are
accounted for as if the Group had directly disposed of the related assets or liabilities. This may
mean that amounts previously recognised in other comprehensive income are reclassified to
profit or loss.
(d)
Associates
Associates are all entities over which the Group has significant influence but not control,
generally accompanying a shareholding of between 20% and 50% of the voting rights.
Investments in associates are accounted for using the equity method of accounting. Under
the equity method, the investment is initially recognised at cost, and the carrying amount is
increased or decreased to recognise the investor’s share of the profit or loss of the investee after
the date of acquisition. The Group’s investment in associates includes goodwill identified on
acquisition.
If the ownership interest in an associate is reduced but significant influence is retained, only
a proportionate share of the amounts previously recognised in other comprehensive income is
reclassified to profit or loss where appropriate.
The Group’s share of post-acquisition profit or loss is recognised in the income statement,
and its share of post-acquisition movements in other comprehensive income is recognised in
other comprehensive income with a corresponding adjustment to the carrying amount of the
investment. When the Group’s share of losses in an associate equals or exceeds its interest in
the associate, including any other unsecured receivables, the Group does not recognise further
losses, unless it has incurred legal or constructive obligations or made payments on behalf of
the associate.
The Group determines at each reporting date whether there is any objective evidence that the
investment in the associate is impaired. If this is the case, the Group calculates the amount of
impairment as the difference between the recoverable amount of the associate and its carrying
value and recognises the amount adjacent to ‘share of profit/(loss) of an associate’ in the income
statement.
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Profits and losses resulting from upstream and downstream transactions between the Group
and its associate are recognised in the Group’s financial statements only to the extent of
unrelated investor’s interests in the associates. Unrealised losses are eliminated unless the
transaction provides evidence of an impairment of the asset transferred. Accounting policies of
associates have been changed where necessary to ensure consistency with the policies adopted
by the Group.
Dilution gains and losses arising in investments in associates are recognised in the income
statement.
(e)
Joint venture companies
Joint ventures are those entities over which the Group exercises joint control by way of a
contractual agreement between the Group and other ventures.
The Group’s interests in jointly controlled entities are accounted for by the equity method
of accounting and are initially recognised at cost. The Group’s investment in interests in
jointly controlled entities includes goodwill identified on acquisition, net of any accumulated
impairment loss. See Note 9 for the impairment of non-financial assets including goodwill.
The Group’s share of post-acquisition profits or losses in its interest in jointly controlled
entities are recognised in the income statement, and its share of post-acquisition movements
in reserves is recognised in reserves. The cumulative post-acquisition movements are adjusted
against the carrying amount of the investment. When the Group’s share of losses in a jointly
controlled entity equals or exceeds its interest in the jointly controlled entity, including any
other unsecured receivables, the Group does not recognise further losses, unless it has incurred
obligations or made payments on behalf of the jointly controlled entity.
Unrealised gains on transactions between the Group and its jointly controlled entities are
eliminated to the extent of the Group’s interest in the jointly controlled entities. Unrealised
losses are also eliminated unless the transaction provides evidence of an impairment of the
asset transferred.
Dilution gains and losses arising in interest in joint ventures are recognised in the income
statement.
Goodwill or discount at acquisition of an interest in jointly controlled entity is accounted for in
the same manner as with the consolidation of subsidiaries.
Dilutionary and anti-dilutionary effects of equity transactions by joint venture companies are
accounted for directly against reserves.
1.3
Property, plant and equipment
Industrial and office buildings, plant, machinery, vehicles and equipment, implements and furniture
are stated at cost, less subsequent depreciation and impairment, except for land, which is shown
at cost less impairment. Cost includes expenditure that is directly attributable to the acquisition
of the items. Cost may also include transfers from equity of any gains/losses on qualifying cash
flow hedges of foreign currency purchases of property, plant and equipment. Subsequent costs are
included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when
it is probable that future economic benefits associated with the item will flow to the Group and the
cost of the item can be measured reliably. The carrying amount of the replaced part is derecognised.
All other repairs and maintenance expenditures are charged to the income statement during the
financial period in which they are incurred.
Depreciation is not provided on land. Depreciation is calculated using the straight-line method to
allocate the cost of each asset to its residual value over its estimated useful life as follows:
Industrial and office buildings
Plant, equipment and furniture
Motor vehicles
Aircraft
Years
20 – 50
1 – 20
4 – 10
8 – 20
Major renovations are depreciated over the remaining useful life of the related asset or to the date of
the next major renovation, whichever is sooner.
The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each
statement of financial position date. An asset’s carrying amount is written down immediately to its
recoverable amount, if the asset’s carrying amount is greater than its estimated recoverable amount.
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Gains and losses on disposals are determined by comparing the disposal proceeds with the carrying
amount and are recognised within other (losses)/gains – net, in the income statement.
Borrowing costs directly attributable to the acquisition or construction of an asset that necessarily
takes a substantial period of time to prepare for its intended use is added to the cost of the asset,
until such time as the asset is substantially complete. Capitalisation is suspended during extended
periods in which active development is interrupted. During the current and prior year, no borrowing
costs have been capitalised.
1.4
Investment property
Investment properties are held to generate rental income and appreciate in capital value. Investment
properties are treated as long-term investments and are carried at cost less accumulated depreciation.
Buildings are depreciated to their estimated residual values on a straight-line basis over their
expected useful lives. Where assets are identified as being impaired the carrying amount is reduced
to its recoverable amount. Such written-off amounts are accounted for in the income statement.
Investment properties are being valued by external independent professional valuers every third
year.
1.5
Intangible assets
(a)
Trade names
A trade name, also called a brand name, is used to identify a commercial product or service,
which may or may not be registered as a trademark. Trade names are shown at fair value
on initial recognition and are subsequently measured at cost less accumulated amortisation.
Amortisation is calculated using the straight-line method to allocate the cost of the trade names
over their estimated useful lives (20 years).
The trade name recorded above was recognised in a prior year at fair value by the Group
in terms of IFRS 3 on acquisition of the shares in Booker Tate Limited. The fair value was
determined by independent valuation experts.
(b)
Customer contracts
Customer relationships are established through contractual and non-contractual relationships
with customers. These customer relationships, recognised as part of various business
combinations, were valued at fair value. Customer relationships which arise from contracts are
intangible assets that meet the contractual legal recognition criteria in terms of IAS 38. Where
a customer relationship does not arise from a legal contract, it is recognised as an intangible
asset apart from goodwill where it meets the separability criterion in terms of IAS 38. Customer
contracts are shown at fair value on initial recognition and are subsequently measured at cost
less accumulated amortisation. Amortisation is calculated using the straight-line method to
allocate the cost of customer contracts over their estimated useful lives on the following bases:
Customer contracts:
Greater than 5 years
3 to 5 years
1 to 3 years
Less than 1 year
(c)
Useful life:
10 years
5 years
3 years
1 year
Goodwill
Goodwill arises on the acquisition of subsidiaries, associates and joint ventures and represents
the excess of the consideration transferred over TSB Sugar Holding Proprietary Limited’s
interest in net fair value of the net identifiable assets, liabilities and contingent liabilities of the
acquiree and the fair value of the non-controlling interest in the acquiree.
For the purpose of impairment testing, goodwill acquired in a business combination is allocated
to each of the CGUs, or groups of CGUs, that is expected to benefit from the synergies of the
combination. Each unit or group of units to which the goodwill is allocated represents the
lowest level within the entity at which the goodwill is monitored for internal management
purposes. Goodwill is monitored at the operating segment level.
Goodwill impairment reviews are undertaken annually or more frequently if events or changes
in circumstances indicate a potential impairment. The carrying value of goodwill is compared
to the recoverable amount, which is the higher of value in use and the fair value less costs to
sell. Any impairment is recognised immediately as an expense and is not subsequently reversed.
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(d)
Trademarks
Separately acquired trademarks and licences are shown at historical cost. Trademarks and
licences acquired in a business combination are recognised at fair value at the acquisition
date. Trademarks and licences have a finite useful life and are carried at cost less accumulated
amortisation. Amortisation is calculated using the straight-line method to allocate the cost of
trademarks licences over their estimated useful lives of 20 years.
A trademark is a word, name, symbol or device, or a combination of them, used by commercial
enterprises to identify their services and distinguish them from services of competitors.
Virtually any supplier of any product or service has competition, and the role of a trademark
is to identify and distinguish brands and suppliers. Certain trademarks may be generic in
that they do not promote specific branded products, but rather the name and reputation of the
business as a whole.
1.6
Impairment of non-financial assets
Assets that have an indefinite useful life are not subject to amortisation and are tested annually for
impairment. Assets that are subject to depreciation or amortisation are reviewed for impairment
whenever events or changes in circumstances indicate that the carrying amount may not be
recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount
exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less
costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the
lowest levels for which there are separately identifiable cash flows (cash-generating units). Nonfinancial assets other than goodwill that suffered an impairment are reviewed for possible reversal
of the impairment at each reporting date.
1.7
Biological assets and produce
Biological assets are measured on initial recognition and at each statement of financial position
date at their fair values less costs to sell and any change in values are included in the net profit or
loss for the period in which it arises.
Bearer biological assets consist of sugar cane roots and banana plants. Consumable biological assets
are standing sugar cane and bananas.
The fair value of biological assets is determined with reference to the following:
1.8
•
estimated market prices adjusted for the expected quality and yields of the agricultural produce;
•
certain costs such as harvesting, transport, packing, point-of-sale and other cost; and
•
replacement cost and age of the bearer biological assets.
Financial instruments
The Group recognises a financial asset or a financial liability on its statement of financial position
when, and only when, the Group becomes a party to the contractual provisions of the instrument.
Financial assets are derecognised when the rights to receive cash flows from the financial asset have
expired or have been transferred and the Group has transferred substantially all risks and rewards
of ownership. Financial liabilities (or part of a financial liability) are removed from its statement of
financial position when, and only when, they are extinguished – i.e. when the obligation specified
in the contract is discharged or cancelled or expires.
Financial assets
The Group classifies its financial assets in the following categories: at fair value through profit or
loss, loans and receivables and available for sale. The classification depends on the purpose for which
the financial assets were acquired. Management determines the classification of its financial assets
at initial recognition.
(1)
Financial assets at fair value through profit or loss
Financial assets at fair value through profit or loss are financial assets held for trading.
A financial asset is classified in this category if acquired principally for the purpose of selling
in the short term. Derivatives are classified as held for trading unless they are designated as
hedges. Assets in this category are classified as current assets.
(2)
Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments
that are not quoted in an active market. They are included in current assets, except for maturities
96
greater than 12 months after the statement of financial position date. These are classified as
non-current assets. Loans and receivables comprise long-term loans, amounts owing by Group
companies, cash and cash equivalents and trade and other receivables (excluding pre-payments)
in the statement of financial position.
(3)
“Available-for-sale” financial assets
“Available-for-sale” financial assets are non-derivatives that are either designated in this category
or not classified in any of the other categories. They are included in non-current assets unless
management intends to dispose of the investment within 12 months of the statement of financial
position date.
Recognition and measurement
Regular purchases and sales of financial assets are recognised on trade-date – the date on which the
Group commits to purchase or sell the asset. Investments are initially recognised at fair value plus
transaction costs for all financial assets not carried at fair value through profit and loss. Financial
assets carried at fair value through profit or loss are initially recognised at fair value, and transaction
costs are expensed in the income statement. “Available-for-sale” financial assets and financial assets
at fair value through profit or loss are subsequently carried at fair value. Loans and receivables are
carried at amortised cost using the effective interest method.
Gains or losses arising from changes in the fair value of the ‘financial assets at fair value through
profit or loss’ category are presented in the income statement within other operating income and
other operating expenses in the period in which they arise. Dividend income from financial assets at
fair value through profit or loss is recognised in the income statement as part of other income when
the Group’s right to receive payments is established.
Changes in the fair value of financial assets classified as “available-for-sale” are recognised in the
statement of other comprehensive income. When securities classified as “available-for-sale” are sold
or impaired, the accumulated fair value adjustments recognised in the statement of other
comprehensive income are included in the income statement as other operating income or other
operating expenses.
Dividend income from “available-for-sale” financial assets are recognised in the income statement as
part of other operating income when the Group’s right to receive payments is established.
The Group assesses at each statement of financial position date whether there is objective evidence
that a financial asset or a group of financial assets is impaired. In the case of equity securities
classified as “available-for-sale”, a significant or prolonged decline in the fair value of the security
below its cost is considered as an indicator that the securities are impaired. If any such evidence
exists for “available-for-sale” financial assets, the cumulative loss – measured as the difference
between the acquisition cost and the current fair value, less any impairment loss on that financial
asset previously recognised in profit or loss – is removed from the statement of other comprehensive
income and recognised in the income statement. Impairment losses recognised in the income
statement on equity instruments are not reversed through the income statement.
Financial liabilities
The Group classifies its financial liabilities in the following categories: at fair value through profit or
loss (derivatives that are not designated as hedges) and financial liabilities at amortised cost
(borrowings, amounts owing to Group companies and trade and other payables, excluding deferred
income). Management determines the classification of its financial liabilities at initial recognition.
(1)
Financial liabilities at fair value through profit or loss
Financial liabilities at fair value through profit or loss are financial liabilities held for trading.
A financial liability is classified in this category if acquired principally for the purpose of
settling in the short term. Derivatives are classified as held for trading unless they are designated
as hedges. Assets in this category are classified as current liabilities. The Group does not
currently hold liabilities of this nature.
(2)
Financial liabilities at amortised cost
Financial liabilities at amortised cost are non-derivatives that are either designated in this
category or not classified in any of the other categories.
Financial liabilities at amortised cost are non-derivative financial liabilities with fixed or
determinable payments that are not quoted in an active market. They are included in current
liabilities, except for maturities greater than 12 months after the statement of financial position
date. These are classified as non-current liabilities.
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1.9
Inventories
Inventories are stated at the lower of cost or net realisable value. Cost is determined on the following
bases:
•
Raw materials are valued at average cost.
•
Consumables and maintenance stock are valued at average cost.
•
Finished goods are valued at average cost, which includes direct manufacturing costs and an
applicable proportion of manufacturing overhead expenses based on normal capacity.
Provision is made for obsolete and slow-moving stock, if necessary.
Net realisable value is the estimated selling price in the ordinary course of business, less applicable
variable selling expenses.
1.10 Current and deferred income tax
The current income tax charge is calculated on the basis of the tax laws enacted or substantively
enacted at the statement of financial position date in the countries where the Company and the
Company’s subsidiaries and associates operate and generate taxable income. Management periodically
evaluates positions taken in tax returns with respect to situations in which applicable tax regulations
are subject to interpretation and establishes provisions where appropriate on the basis of amounts
expected to be paid to the tax authorities.
Deferred income tax is provided in full, using the liability method, on temporary differences arising
between the tax bases of assets and liabilities and their carrying amounts in the consolidated
financial statements. However, deferred income tax is not accounted for if it arises from initial
recognition of an asset or liability in a transaction other than a business combination that at the time
of the transaction affects neither accounting nor taxable profit or loss. Deferred income tax is
determined using tax rates (and laws) that have been enacted or substantially enacted by the
statement of financial position date and are expected to apply when the related deferred income tax
asset is realised or the deferred income tax liability is settled.
Deferred income tax assets are recognised to the extent that it is probable that future taxable profit
will be available against which the temporary differences can be utilised.
Deferred income tax is provided on temporary differences arising on investments in subsidiaries and
associates, except where the timing of the reversal of the temporary difference is controlled by the
Group and it is probable that the temporary difference will not reverse in the foreseeable future.
South African resident companies are subject to a dual corporate tax system, one part of the tax
being levied on taxable income and the other, a secondary tax, on distributed income. A company
incurs Secondary Tax on Companies (“STC”) charges on the declaration or deemed declaration of
dividends to its shareholders. STC is not a withholding tax on shareholders, but a tax on companies.
The STC tax consequence of dividends is recognised as a taxation charge in the income statement in
the same period that the related dividend is accrued as a liability. The STC liability is reduced by
dividends received during the dividend cycle. Where dividends declared exceed the dividends received
during a cycle, STC is payable at the current STC rate on the net amount. Where dividends received
exceed dividends declared within a cycle, there is no liability to pay STC.
The potential tax benefit related to excess dividends received is carried forward to the next dividend
cycle as an STC credit. Deferred tax assets are recognised on unutilised STC credits to the extent that
it is probable that the Group will declare future dividends to utilise such STC credits.
STC was abolished effective 1 April 2012 and has been replaced by a new withholding tax which is
levied on the shareholder and not the company, with the exception of non-cash dividends. Existing
STC credits will expire on 1 April 2015 if not utilised.
Capital Gains Tax (“CGT”) is levied when capital assets is disposed off or deemed to be disposed off.
CGT is levied on the difference between the proceeds on the sale of capital assets and the base cost
(tax value) of the capital asset. The capital gain is included at a rate of 66.6% in the taxable income of
the company. Capital losses are ring fenced.
1.11 Foreign currency translation
(a)
Functional and presentation currency
Items included in the financial statements of each of the Group’s entities are measured using
the currency of the primary economic environment in which the entity operates (‘the functional
currency’). The consolidated financial statements are presented in Rand, which is the Company’s
functional and presentation currency.
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(b)
Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange
rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting
from the settlement of such transactions and from the translation at year-end exchange rates
of monetary assets and liabilities denominated in foreign currencies are recognised in profit or
loss, except when deferred in the statement of other comprehensive income as qualifying cash
flow hedges.
Translation differences on non-monetary financial assets and liabilities are reported as part
of the fair value gain or loss. Translation differences on non-monetary financial assets and
liabilities such as equities held at fair value through profit or loss are recognised in profit or
loss as part of the fair value gain or loss. Translation differences on non-monetary financial
assets such as equities classified as available-for-sale are included in the available-for-sale
reserve in the statement of other comprehensive income.
(c)
Group companies
The results and financial position of all the group entities (none of which has the currency of
a hyperinflationary economy) that have a functional currency different from the presentation
currency are translated into the presentation currency as follows:
(i) assets and liabilities for each statement of financial position presented are translated at the
closing rate at the date of that statement of financial position;
(ii) income and expenses for each income statement are translated at average exchange rates
(unless this average is not a reasonable approximation of the cumulative effect of the rates
prevailing on the transaction dates, in which case income and expenses are translated at
the dates of the transactions); and
(iii) all resulting exchange differences are recognised as a separate component of equity
through the statement of other comprehensive income.
On consolidation, exchange differences arising from the translation of the net investment
in foreign operations, and of borrowings and other currency instruments designated as
hedges of such investments, are taken to shareholders’ equity through the statement of other
comprehensive income. When a foreign operation is partially disposed of or sold, exchange
differences that were recorded in equity are recognised in the income statement as part of the
gain or loss on sale.
Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as
assets and liabilities of the foreign entity and translated at the closing rate.
1.12 Leased assets
Leases of plant, equipment and motor vehicles where the Group has substantially all the risks and
rewards of ownership are classified as finance leases. Finance leases are capitalised at the inception
of the lease at the lower of the fair value of the leased plant, equipment and motor vehicles or the
present value of the minimum lease payments. Each lease payment is allocated between the liability
and finance charges to achieve a constant rate on the finance balance outstanding. The corresponding
rental obligations, net of finance charges, are included in other long-term payables. The interest
element of the finance cost is charged to the income statement over the lease period so as to produce
a constant periodic rate of interest on the remaining balance of the liability for each period. The
plant and equipment acquired under finance leases is depreciated over the shorter of the useful life
of the asset or the lease term.
Leases in which a significant portion of all the risks and rewards of ownership are retained by the
lessor are classified as operating leases. Payments made under operating leases (net of any incentives
received from the lessor) are charged to the income statement on a straight-line basis over the period
of the lease.
When the operating lease is terminated before the lease period has expired, any payment required to
be made to the lessor by way of penalty is recognised as an expense in the period in which termination
takes place.
1.13 Revenue recognition
Revenue comprises the fair value of the consideration received or receivable for the sale of goods and
services in the ordinary course of the Group’s activities. Revenue is shown net of value-added tax,
returns, rebates and discounts and after eliminated sales within the Group. Revenue is recognised
as follows:
99
The Group recognises revenue when the amount of revenue can be reliably measured, it is probable
that future economic benefits will flow to the entity and specific criteria have been met for each of the
Group’s activities as described below. The amount of revenue is not considered to be reliably measurable
until all contingencies relating to the sale have been resolved. The Group bases its estimates on
historical results, taking into consideration the type of customer, the type of transaction and the
specifics of each arrangement.
(a)
Sales of goods
Sales of goods are recognised when the risk and rewards of ownership of the goods are
transferred to the buyer when the Group entity has delivered products to the customer, the
customer has accepted the products and collectability of the related receivables is reasonably
assured. Goods include sugar and sugar-related products and animal feeds.
(b)
Sales of services
Sales of services are recognised in the accounting period in which the services are rendered,
by reference to completion of the specific transaction assessed on the basis of the actual service
provided as a proportion of the total services to be provided. Sale of services include consulting,
cane transport and cane loading services.
(c)
Interest income
Interest income is recognised on a time-proportion basis using the effective interest method.
When a receivable is impaired, the Group reduces the carrying amount to its recoverable
amount, being the estimated future cash flow discounted at original effective interest rate of
the instrument, and continues unwinding the discount as interest income. Interest income on
impaired loans is recognised using the original effective interest rate.
(d)
Dividend income
Dividend income is recognised when the right to receive payment is established.
1.14 Financial risk management
(1)
Financial risk factors
The Group’s activities expose it to a variety of financial risks: market risk (including currency
risk, cash flow interest rate risk and price risk), credit risk and liquidity risk. The Group’s
overall risk management programme focuses on the unpredictability of financial markets and
seeks to minimise potential adverse effects on the Group’s financial performance. The Group
uses derivative financial instruments to hedge certain risk exposures.
Risk management is carried out by management under policies approved by the Board of
Directors. Group management identifies, evaluates and hedges financial risks in close cooperation with the Group’s operating units. The Board provides principles for overall risk
management.
In view of the volatility and uncertainty which currently exists in the markets in which the
Group operates, the directors are unable to accurately predict what movements will occur in the
ensuing 12 months and consider a 5% movement in relevant foreign exchange rates and quoted
prices and a 50 basis points interest movement as reasonably possible for the purpose of all
IFRS 7 sensitivity analyses.
(2)
Market risk
(i) Foreign exchange risk
The Group operates internationally and is exposed to foreign exchange risk arising from
various currency exposures, primarily with respect to the US Dollar (USD) (in respect of
exports of sugar and imports of consumables), the UK Pound (GBP) and the European Euro.
Other foreign exchange exposures include the Swaziland Lilangeni (E) and various African
and other Asian currencies. To manage the foreign exchange risk arising from future
commercial transactions and recognised assets and liabilities in foreign currencies, entities
in the Group use forward contracts. Foreign exchange risk arises when future commercial
transactions or recognised assets and liabilities are denominated in a currency that is not
the entity’s functional currency. Except for sugar exports, foreign exchange risk and hedging
is measured on an individual transaction level. All sugar exports foreign currency income
are hedged using cash flow hedges.
The Group has certain investments in foreign operations whose net assets are exposed to
foreign currency translation risk. Currency exposure arising from the net assets of the
Group’s foreign operations in the UK and Mozambique is managed primarily through
borrowings denominated in the relevant foreign currencies. Forward foreign exchange
100
contracts are not entered into in respect of the year-end translation of subsidiaries whose
functional and reporting currencies are not the Rand. Note that foreign currency translation
risk is excluded from the scope of IFRS 7 and hence the foreign exchange sensitivity analyses.
At 30 June 2013, if the Rand had weakened by 5% against the GBP with all other variables
held constant, using the available-for-sale financial assets denominated in GBP, the post-tax
effect on equity of the Group for the year would have been R0 (2012: R216 007; 2011:
R254 703) higher, as a result of foreign exchange gains/losses on translation of the GBPdenominated available-for-sale financial assets.
At 30 June 2013, if the Rand had weakened by 5% against the USD with all other variables
held constant, using the foreign trade receivable balance outstanding at the end of the year,
post-tax profits for the year would have been R1 741 876 (2012: R241 740; 2011: R254 703)
higher, as a result of translation of the USD-denominated trade receivable balances at yearend.
The Group did not have any USD trade payables on 30 June 2013, 30 June 2012 and
30 June 2011.
At 30 June 2013, if the Rand had weakened by 5% against the US Dollar with all other
variables held constant, using the USD -denominated cash and cash equivalents balance at
the year-end, post-tax profits for the year would have been R822 784 (2012: R79 513; 2011:
R1 017 618) higher, as a result of translation of the USD -denominated cash and cash
equivalents balance at year-end.
(ii) Price risk
Equity securities price risk
The Group is not exposed to equity securities price risk.
(iii) Cash flow and fair value interest rate risk
As the Group has significant interest-bearing assets, the Group’s income and operating cash
flows are impacted by changes in the market interest rates in this regard. The interest
bearing assets include long-term loans, amounts owing by Group companies and cash and
cash equivalents.
The Group’s interest rate risk also arises from long-term and short-term borrowings.
Borrowings issued at variable rates expose the Group to cash flow interest rate risk. During
2013, 2012 and 2011, the Group’s borrowings at variable rates were denominated in Rand.
There is no formal policy between fixed and variable rated borrowings.
The Group analyses its interest rate exposure on a dynamic basis. Various scenarios are
simulated taking into consideration refinancing, renewal of existing positions, alternative
financing and hedging. The scenarios are run only for liabilities that represent the major
interest-bearing positions. Based on the simulations performed, using the variable rate
borrowings, the impact on profit or loss before tax of a 50 basis point move in interest rates
would be a maximum increase/decrease of R3 781 430 (2012: R2 700 000; 2011: R535 000),
respectively, per year. The simulation is done on a regular basis to verify that the maximum
loss potential is within the limit given by management.
At 30 June 2013, if interest rates on Rand-denominated borrowings had been 50 basis points
higher with all other variables held constant, post-tax profit for the year would have been
R2 722 630 (2012: R1 944 000; 2011: R385 200) lower, mainly as a result of higher interest
expense on floating rate borrowings. It will not have any impact on other components of
equity, except for retained earnings (via the impact on profit). Refer to Notes 24 and 26 for
details regarding floating rate borrowings.
At 30 June 2013, if interest rates on cash in bank and on hand had been 50 basis points
higher with all other variables held constant, post-tax profit for the year would have been
R457 636 (2012: R413 780; 2011: R304 276) higher, mainly as a result of higher interest
income on floating rate borrowings. It will not have any impact on other components of
equity, except for retained earnings (via the impact on profit).
(iv) Credit risk
Credit risk is managed on a Group basis. Credit risk arises from cash and cash equivalents,
long-term loans, amounts owing by Group companies and derivative financial instruments,
as well as credit exposures to customers. The Group’s cash and cash equivalents are placed
with high credit quality financial institutions. Risk control assesses the credit quality of the
customer, taking into account its financial position, past experience and other factors. The
utilisation of credit limits is regularly monitored.
101
The gross carrying amounts of these financial assets in the statement of financial position
represent the Group’s maximum exposure to credit risk.
The table below shows the credit limit and balance of the major counterparties with
outstanding balances above R5 million at the statement of financial position date:
Counterparty
Rating
Counterparties
with external
credit rating
A3
Low risk
Customers
without
external credit
ratings
General
risk
High risk
30 June
2013
R’000
Credit
limit
1 020 000
R’000
Undrawn
facility
30 June
2012
R’000
Credit
limit
R’000
Undrawn
facility
30 June
2011
R’000
Credit
limit
R’000
Undrawn
Facility
1 181 300
1 370 000
958 000
R’000
30 June
2011
R’000
R’000
645 714
1 263 300
30 June
2013
R’000
R’000
30 June
2012
R’000
Credit
limit
Balance
receivable
288 135
142 602
206 635
144 299
190 214
140 563
65 250
–
51 588
–
12 600
11 250
16 497
9 055
26 000
5 000
23 229
7 487
353 385
194 191
230 485
169 851
221 214
171 279
Credit
Balance
limit receivable
Credit
Balance
limit receivable
Management does not expect material losses from non-performance by these counterparties.
Credit insurance via Lombard Insurance is in place on all debtor balances in excess of
R300 000. Any movements in credit exposures in excess of R3.5 million are covered by credit
insurance, subject to the terms and conditions of the policy. Credit insurance premiums are
paid on a monthly basis based on net invoiced sales.
Refer to Note 31 for further information regarding the credit quality of financial assets.
The Company does not have other significant exposure to any other individual customer or
counterparty.
(v) Liquidity risk
Prudent liquidity risk management includes maintaining sufficient cash and marketable
securities, the availability of funding from an adequate amount of committed credit facilities.
The Company aims at maintaining flexibility in funding by keeping committed credit limits
available.
Management monitors rolling forecasts of the Group’s liquidity reserve (comprises undrawn
borrowing facility and cash and cash equivalents) on the basis of expected cash flow on a
weekly basis.
The table below analyses the Group’s financial liabilities and net-settled derivative 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.
102
At 30 June 2013
Borrowings
Trade and other payables
Amounts owing to Group companies
Less than
1 year
R’000
61 554
622 550
585 500
Between 2 and
5 years
R’000
140 681
–
–
Over
5 years
R’000
–
–
–
At 30 June 2012
Borrowings
Trade and other payables
Amounts owing to Group companies
Less than
1 year
R’000
232 000
653 923
310 400
Between 2 and
5 years
R’000
–
–
–
Over
5 years
R’000
–
–
–
At 30 June 2011
Borrowings
Trade and other payables
Amounts owing to Group companies
Less than
1 year
R’000
422 503
576 478
148 200
Between 2 and
5 years
R’000
159 747
–
–
Over
5 Years
R’000
–
–
–
The Group will use its undrawn borrowing facilities and future operating profits to cover the
above obligations.
The table below analyses the Group’s derivative financial instruments which will be settled
on a gross basis 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.
At 30 June 2013
Forward foreign exchange contracts –
cash flow hedges
– Outflow
– Inflow
Forward foreign exchange contracts –
fair value hedges
– Outflow
– Inflow
Interest rate swap
– Outflow
At 30 June 2012
Forward foreign exchange
– Inflow
Forward foreign exchange contracts –
fair value hedges
– Outflow
– Inflow
Interest rate swap
– Outflow
At 30 June 2011
Forward foreign exchange contracts –
cash flow hedges
– Outflow
– Inflow
Interest rate swap
– Outflow
Less than
1 year
R’000
Between 2 and
5 years
R’000
Over
5 years
R’000
–
–
–
–
–
–
–
–
–
–
–
Less than
1 year
R’000
–
Between 2 and
5 years
R’000
–
Over
5 years
R’000
267 295
–
–
–
–
–
–
(14 055)
–
Less than Between 2 and
1 year
5 years
R’000
R’000
–
Over
5 years
R’000
(8 313)
462 245
(13 268)
–
–
190 656
(14 055)
–
–
(14 055)
–
–
–
103
(3)
Capital risk management
The Group’s objectives when managing capital are to safeguard the Group’s ability to continue
as a going concern in order to provide returns and benefits for shareholders and to maintain
an optimal capital structure to reduce the cost of capital. In order to maintain or adjust the
capital structure, the Group may adjust the amount of dividends paid to Shareholders, return
capital to Shareholders, issue new shares or sell assets to reduce debt or enter into further
financing as applicable. The Group is not subject to any external capital requirements.
The Group monitors capital on the basis of the gearing ratio. This ratio is calculated as net
debt divided by total capital. Net debt is calculated as total borrowings (including current and
non-current borrowings and amounts owing to Group companies) and sugar stock creditors
included in trade payables as shown in the consolidated statement of financial position less
cash and cash equivalents. Total capital is calculated as ‘equity’ as shown in the consolidated
statement of financial position plus net debt.
During 2013, the Group’s strategy, which was unchanged from 2012, was to maintain the
gearing ratio smaller than 50%. The gearing ratios at 30 June 2013 and 30 June 2012 were
as follows:
Total borrowings
Less: Cash and cash equivalents
30 June 2013
R’000
756 286
(133 660)
30 June 2011
R’000
710 200
(84 521)
Net debt
Total equity
622 626
1 878 937
407 241
1 911 644
625 679
1 546 481
Total capital
2 501 563
2 318 885
2 172 160
25%
18%
29%
Gearing ratio
(4)
30 June 2012
R’000
542 400
(135 159)
Fair value estimation
The table below analyses financial instruments carried at fair value, by valuation method. The
different levels have been defined as follows:
•
Quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1).
•
Inputs other than quoted prices included within level 1 that are observable for the asset
or liability, either directly (that is, as prices) or indirectly (that is, derived from prices)
(level 2).
•
Inputs for the asset or liability that are not based on observable market data (that is,
unobservable inputs) (level 3).
The following table presents the Group’s assets and liabilities that are measured at fair value
at 30 June 2013:
Assets
Derivatives used for hedging
Available-for-sale financial assets
– Equity securities
Total assets
104
Level 1
R’000
Level 2
R’000
Level 3
R’000
Total
balance
R’000
–
2 387
–
2 387
–
–
–
–
–
2 387
–
2 387
Liabilities
Derivatives used for hedging
–
(20 560)
–
(20 560)
Total liabilities
–
(20 560)
–
(20 560)
The following table presents the Group’s assets and liabilities that are measured at fair value
at 30 June 2012:
Level 1
R’000
Level 2
R’000
Level 3
R’000
Total
balance
R’000
–
3 560
–
3 560
–
–
6 000
6 000
Total assets
–
3 560
6 000
9 560
Liabilities
Derivatives used for hedging
–
(4 473)
–
(4 473)
Total liabilities
–
(4 473)
–
(4 473)
Assets
Derivatives used for hedging
Available-for-sale financial assets
– Equity securities
The following table presents the Group’s assets and liabilities that are measured at fair value
at 30 June 2011:
Level 1
R’000
Level 2
R’000
Level 3
R’000
Total
balance
R’000
–
3 599
–
3 599
–
–
7 457
7 457
Total assets
–
3 599
7 457
11 056
Liabilities
Derivatives used for hedging
–
(2 379)
–
(2 379)
Total liabilities
–
(2 379)
–
(2 379)
Assets
Derivatives used for hedging
Available-for-sale financial assets
– Equity securities
The fair value of financial instruments traded in active markets is based on quoted market
prices at the balance sheet date. A market is regarded as active if quoted prices are readily and
regularly available from an exchange, dealer, Broker, industry group, pricing service, or
regulatory agency, and those prices represent actual and regularly occurring market
transactions on an arm’s length basis. The quoted market price used for financial assets is the
current bid price. These instruments are included in level 1. Instruments included in level 1
comprise primarily listed equity investments classified as trading securities or available-forsale.
The fair value of financial instruments that are not traded in an active market (for example,
over the counter derivatives) is determined by using valuation techniques. These valuation
techniques maximise the use of observable market data where it is available and rely as little
as possible on entity specific estimates. If all significant inputs required to fair value an
instrument are observable, the instrument is included in level 2.
If one or more of the significant inputs is not based on observable market data, the instrument
is included in level 3.
Specific valuation techniques used to value financial instruments include:
•
Quoted market prices or dealer quotes for similar instruments.
•
The fair value of interest rate swaps is calculated as the present value of the estimated
future cash flows based on observable yield curves.
•
The fair value of forward foreign exchange contracts is determined using forward
exchange rates at the balance sheet date, with the resulting value discounted back to
present value.
•
Other techniques, such as discounted cash flow analysis, are used to determine fair value
for the remaining financial instruments.
The following table presents the changes in level 3 instruments for the year ended
30 June 2013:
105
Available-for-sale
financial assets
R’000
Total
Opening balance
Disposals
Gains or losses through profit and loss
Gains and losses recognised through the statement of
other comprehensive income
Closing balance
Total gains or losses for the year included in the statement
of other comprehensive income for assets held at the end of
the reporting period
Total
R’000
6 000
(5 943)
(9 237)
6 000
(5 943)
(9 237)
9 180
9 180
–
–
9 180
9 180
The carrying value of trade receivables and payables are assumed to approximate their fair
values due to the short-term nature of these financial instruments. 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.
For financial assets and liabilities with maturity of less than one year, the face value less any
estimated credit adjustments are assumed to approximate their fair values.
1.15 Employee benefits
Pension obligations
Group companies operate various pension schemes. The schemes are generally funded through
payments to insurance companies or trustee-administered funds, determined by periodic
actuarial calculations. The Group has both defined benefit and defined contribution plans.
A defined contribution plan is a pension plan under which the Group pays fixed contributions
into a separate entity. The Group has no legal or constructive obligations to pay further
contributions if the fund does not hold sufficient assets to pay all employees the benefits
relating to employee service in the current and prior periods. A defined benefit plan is a
pension plan that is not a defined contribution plan. Typically, defined benefit plans define an
amount of pension benefit that an employee will receive on retirement, usually dependent on
one or more factors such as age, years of service and compensation.
The liability recognised in the statement of financial position in respect of defined benefit
pension plans is the present value of the defined benefit obligation at the statement of financial
position date less the fair value of plan assets, together with adjustments for unrecognised
actuarial gains or losses and past service costs. The defined benefit obligation is calculated
annually by independent actuaries using the projected unit credit method. The present value
of the defined benefit obligation is determined by discounting the estimated future cash
outflows using interest rates of high-quality corporate bonds that are denominated in the
currency in which the benefits will be paid and that have terms to maturity approximating to
the terms of the related pension liability.
Actuarial gains and losses arising from experience adjustments and changes in actuarial
assumptions in excess of the greater of 10% of the value of plan assets or 10% of the defined
benefit obligation are charged or credited to income over the employees’ expected average
remaining working lives.
Past-service costs are recognised immediately in income, unless the changes to the pension
plan are conditional on the employees remaining in service for a specified period of time (the
vesting period). In this case, the past-service costs are amortised on a straight-line basis over
the vesting period.
For defined contribution plans, the Group pays contributions to privately administered pension
insurance plans on a contractual basis. The Group has no further payment obligations once
the contributions have been paid. The contributions are recognised as employee benefit expense
when they are due. Prepaid contributions are recognised as an asset to the extent that a cash
refund or a reduction in the future payments is available.
The group has established a number of pension schemes that substantially cover all employees.
One of the pension schemes is a post-retirement healthcare benefit plan and is funded. This
scheme is valued annually by independent actuaries using the projected unit credit method.
The latest actuarial valuation was carried out on 30 June 2013.
106
Post-retirement medical benefits
The Group provides post-retirement healthcare benefits to certain of its retirees. The entitlement
to post-retirement medical benefits is based on the employees remaining in service up to
retirement age and the completion of a minimum service period. The projected unit credit
method of valuation is used to calculate the liability for post-retirement medical benefits.
The expected costs of these benefits are expensed and the liabilities accumulated over the
period of employment, using accounting methodology similar to that for defined-benefit
pension plans. Independent qualified actuaries value these obligations. All appointments as
from 1 December 1998 are excluded from post-retirement medical benefits.
Bonus plans
A liability for employee benefits in the form of bonus plans is recognised in accruals when
there is no realistic alternative but to settle the liability and at least one of the following
conditions is met:
•
there is a formal plan and the amounts to be paid are determined before the time of issuing
the financial statements; or
•
past practices have created a valid expectation by employees that they will receive a bonus
and the amount can be determined before the time of issuing the financial statements.
Short-term benefits
Employee entitlements to leave are recognised when they accrue to employees involved.
A provision is made for the estimated liability for leave as a result of services rendered by
employees up to the statement of financial position date.
Termination benefits
Termination benefits are payable when employment is terminated by the group before the
normal retirement date, or whenever an employee accepts voluntary redundancy in exchange
for these benefits. The Group recognises termination benefits when it is demonstrably
committed to a termination when the entity has a detailed formal plan to terminate the
employment of current employees without the possibility of withdrawal. In the case of an offer
made to encourage voluntary redundancy, the termination benefits are measured based on the
number of employees expected to accept the offer. Benefits falling due more than 12 months
after the end of the reporting period are discounted to their present value.
1.16 Provisions
Provisions are recognised when the Group has a present legal or constructive obligation as a
result of past events; it is probable that an outflow of resources will be required to settle the
obligation; and the amount has been reliably estimated. Restructuring provisions comprise
lease termination penalties and employee termination payments. Provisions are not recognised
for future operating losses.
Where there are a number of similar obligations, the likelihood that an outflow will be required
in settlement is determined by considering the class of obligations as a whole. A provision is
recognised even if the likelihood of an outflow with respect to any one item included in the
same class of obligations may be small.
Provisions are measured at the present value of the expenditures expected to be required to
settle the obligation using a pre-tax rate that reflects current market assessments of the time
value of money and the risks specific to the obligation. The increase in the provision due to
passage of time is recognised as interest expense.
1.17 Cash and cash equivalents
Cash and cash equivalents includes cash in hand, deposits held at call with bank and bank
overdrafts. Bank overdrafts are included within borrowings in current liabilities on the
statement of financial position. For the purpose of the statement of cash flow, cash and cash
equivalents comprise cash on hand, deposits held with banks and net of bank overdrafts.
1.18 Trade receivables
Trade receivables are recognised initially at fair value and subsequently measured at amortised
cost using the effective interest method, less provision for impairment. A provision for
impairment of trade receivables is established when there is objective evidence that the Group
will not be able to collect all amounts due according to the original terms of the receivables.
107
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 amount of the provision is the difference between the
asset’s carrying amount and the present value of estimated future cash flows, discounted at
the original effective interest rate. The carrying amount of the asset is reduced through the
use of an allowance account, and the amount of the loss is recognised in the income statement
within other operating expenses. When a trade receivable is uncollectible, it is written off
against the allowance account for trade receivables.
Subsequent recoveries of amounts previously written off are credited against other operating
income or expenses in the income statement.
1.19 Borrowings
Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings
are subsequently stated at amortised cost; any difference between the proceeds (net of
transaction costs) and the redemption value is recognised in the income statement over the
period of the borrowings using the effective interest method.
Borrowings are classified as current liabilities unless the Group has an unconditional right to
defer settlement of the liability for at least 12 months after the statement of financial position
date. Amounts owing to group companies are also measured as set out above.
1.20 Trade and other payables
Trade payables are recognised initially at fair value and subsequently measured at amortised
cost using the effective interest method.
1.21 Critical accounting estimates and judgements
Estimates and judgements are continually evaluated and are based on historical experience
and other factors, including expectations of future events that are believed to be reasonable
under the circumstances.
The Group makes estimates and assumptions concerning the future. The resulting accounting
estimates will, by definition, rarely equal the related actual results. The estimates and
assumptions that have a significant risk of causing a material adjustment to the carrying
amounts of assets and liabilities within the next financial year are discussed below.
(a)
Customer contracts
Customer relationships are established through contractual and non contractual
relationships with its customers. These customer relationships were valued as part of a
business combination in a prior year. Customer relationships which arise from contracts
were recognised as intangible assets as they meet the contractual legal recognition
criteria in terms of IAS 38. Where a customer relationship did not arise from a legal
contract, it was recognised as an intangible asset apart from goodwill where it met the
separability criterion in terms of IAS 38. These intangible assets arising out of these
contracts were impaired in a previous financial period.
(b)
Trade name
A trademark is a word, name, symbol or device, or a combination of them, used by a
commercial enterprise to identify its services and distinguish them from services of
competitors. Virtually any supplier of any product or service has competition, and the
role of a trademark is to indentify and distinguish brands and suppliers. Certain
trademarks may be generic in that they do not promote specific branded products, but
rather the name and reputation of the business as a whole. A trade name, also called a
brand name, is used to identify a commercial product or service, which may or may not
be registered as a trademark. The Booker Tate trade name has significant value to the
continuing operations of the business. The Booker Tate brand name has a high degree
of recognition and assists in attracting and retaining customers. Accordingly the
Booker Tate trade name was valued as part of a business combination which occurred in
a previous financial year. These intangible assets were impaired in the prior financial
period.
(c)
Provision for sugar shortage
The provision relates principally to the sugar shortage at year- end. The purpose of the
provision is to calculate on an acceptable method the handling losses in those
stockholding areas where accurate stock counts can not be performed and reliance is
placed on the work of quantity surveyors.
108
(d)
Biological assets – standing cane and bananas
Standing cane is valued at its best-estimated recoverable value less harvesting, transport,
agricultural levies and other over the weighbridge costs. In determining the fair value
an estimate is made of the yield of the standing cane. This estimate can vary from the
actual yield when the cane is harvested. The yield is based on history and industry
statistics and experience.
Bananas are valued at their best-estimated fair value less harvesting and other estimated
point-of-sale costs. Point-of-sale costs includes transport, agricultural levies and other
costs.
(e)
Post-employment benefit obligations
Post-retirement benefit obligations are provided for certain existing and former
employees. Actuarial valuations are based on assumptions which include employee
turnover, mortality rates, the discount rate, the expected long-term rate of return of
retirement plan assets, healthcare costs, inflation rates and salary increases.
(f)
Valuations of financial instruments
The value of the derivative instruments fluctuates on a daily basis and the actual
amounts realised may differ materially from their value at the statement of financial
position date.
1.22 Share capital
Ordinary shares are classified as equity.
Incremental costs directly attributable to the issue of new shares or options are shown in
equity as a deduction, net of tax, from the proceeds.
1.23 Derivative financial instruments
Derivatives are initially recognised at fair value on the date a derivative contract is entered
into and are subsequently remeasured at their fair value. The method of recognising the
resulting gain or loss depends on whether the derivative is designated as a hedging instrument,
and if so, the nature of the item being hedged. The Group designates certain derivatives as
either: (a) hedges of the fair value of recognised assets or liabilities or a firm commitment (fair
value hedge); (b) hedges of a particular risk associated with a recognised asset or liability or
a highly probable forecast transaction (cash flow hedge) or (c) derivatives which are not
designated in effective hedge relationships are classified in the category at fair value through
profit or loss.
The Group documents, at the inception of the transaction, the relationship between hedging
instruments and hedged items, as well as its risk management objectives and strategy for
undertaking various hedging transactions. The Group also documents its assessment, both at
hedge inception and on an ongoing basis, of whether the derivatives that are used in hedging
transactions are highly effective in offsetting changes in fair values or cash flows of hedged
items. The full fair value of a hedging derivative is classified as a non-current asset or liability
when the remaining hedge item is more than 12 months; it is classified as a current asset or
liability when the remaining maturity of the hedged item is less than 12 months. Trading
derivatives are classified as a current asset or liability.
(a)
Fair value hedge
Changes in the fair value of derivatives that are designated and qualify as fair value
hedges are recorded in the income statement, together with any changes in the fair
value of the hedged asset or liability that are attributable to the hedged risk. The gain
or loss relating to the effective and ineffective portion is recognised in the income
statement within other operating income or expenses. If the hedge no longer meets the
criteria for hedge accounting, the adjustment to the carrying amount of a hedge item for
which the effective interest method is used is amortised to profit or loss over the period
to maturity. Also refer to Notes 1.14 and 28 to the financial statements.
(b)
Cash flow hedge
The effective portion of changes in the fair value of derivatives that are designated and
qualify as cash flow hedges are recognised in the statement of other comprehensive
income. The gain or loss relating to the ineffective portion is recognised immediately in
the income statement within other operating income or expenses.
109
Amounts accumulated in the statement of other comprehensive income are recycled in
the income statement in the periods when the hedged item affects profit or loss (for
example, when the forecast sale that is hedged takes place). The gain or loss relating to
the effective portion of forward foreign exchange contracts hedging export sales is
recognised in the income statement within sales. However, when the forecast transaction
that is hedged results in the recognition of a non-financial asset (for example, inventory
or fixed assets) or a non-financial liability, the gains and losses previously deferred in
the statement of other comprehensive income are transferred from equity and included
in the initial measurement of the cost of the asset or liability. The deferred amounts are
ultimately recognised in cost of goods sold in case of inventory, or in depreciation in
case of fixed assets.
When a hedging instrument expires or is sold, or when a hedge no longer meets the
criteria for hedge accounting, any cumulative gain or loss existing in equity at that time
remains in equity and is recognised when the forecast transaction is ultimately
recognised in the income statement. When a forecast transaction is no longer expected
to occur, the cumulative gain or loss that was reported in equity is immediately
transferred to the income statement within other operating income or expenses. Also
refer to Notes 1.14 and 28 to the financial statements.
(c)
Derivatives at fair value through profit or loss
Changes in the fair value of these derivative instruments that do not qualify for hedge
accounting are recognised immediately in the income statement within other operating
income or expenses.
Also refer to Note 28 to the financial statements.
1.24 Dividend distribution
Dividend distribution to the Company’s shareholders is recognised as a liability in the Group’s
financial statements in the period in which the dividends are approved by the Company’s
Shareholders.
1.25 Non-current assets (or disposal groups) held for sale
Non-current assets (or disposal groups) are classified as assets held for sale when their
carrying amount is to be recovered principally through a sale transaction and a sale is
considered highly probable. They are stated at the lower of carrying amount and fair value
less costs to sell if their carrying amount is to be recovered principally through a sale
transaction rather than through continuing use.
110
2.
REVENUE AND OPERATING PROFIT – INCOME AND EXPENSES BY NATURE
2.1
Revenue
Group
30 June
2013
R’000
Revenue consists of the following:
– Sales of goods
– Sales of services
2.2
15 months
to
30 June
30 June
2012
2011
R’000
R’000
4 947 566
74 282
4 548 240
72 980
4 807 650
97 708
5 021 848
4 621 220
4 905 358
3 370 678
86 946
178 812
3 036 840
72 598
38 575
3 431 011
125 700
95 405
Operating profit – income and expenses by nature
Operating profit is arrived at after taking into account the
following items of income and expenses by nature:
Raw materials and consumables used
Selling and marketing costs
Other expenses
Other operating income:
Net (profit)/loss on sale of property, plant and equipment
and assets classified as held for sale
Net profit on sale of business
Net profit on sale of investment property
Foreign exchange profits
Net profit on sale of biological assets
Profit from insurance proceeds
Realisation of reserves on disposal of
available-for-sale financial asset
Rental income
Service fees received
Management fee income
Electricity income
Bagasse income
Dividends received
Other income
Realisation of reserves on disposal of
available-for-sale financial asset
Foreign exchange losses
Fair value adjustment on interest rate swap
Repairs and maintenance expense
Managerial remuneration:
– Holding company
Auditor’s remuneration:
– Audit fees
– Other services and expenses
Staff costs (Note 3)
Directors’ remuneration:
– Executive directors
– Non-executive directors
Amortisation of intangible assets (Note 9)
Impairment of assets classified as held for sale
Impairment of available-for-sale financial assets
Impairment of Massingir project
Impairment of biological assets
(9 937)
(7 807)
–
–
(3 838)
(2 485)
(53 145)
–
(244)
–
–
(253)
196
–
–
(34 640)
–
(7 546)
(6 778)
(13 304)
(17 678)
(264)
(38 436)
(36 302)
(3 636)
(20 121)
–
(4 718)
(10 448)
–
(21 848)
(31 505)
–
7 063
–
(11 421)
(22 960)
(3 104)
(19 651)
(32 771)
(325)
(19 191)
(160 586)
(115 098)
(151 413)
–
18 904
(479)
212 674
–
20 371
(914)
193 230
(1 481)
–
(997)
198 695
9 522
8 887
10 358
5 548
1 424
6 624
1 308
7 926
1 667
6 972
7 932
9 593
726 832
711 790
766 472
37 333
1 773
22 955
1 680
18 511
1 703
39 106
24 635
20 214
50
1 150
–
11 825
1 257
50
2 213
382
13 484
–
63
–
–
–
–
111
Group
30 June
2013
R’000
Depreciation of fixed assets:
– buildings
– plant, equipment and furniture
– aircraft
– motor vehicles
Consulting fees paid
Fair value hedges (gains)/losses
Operating lease rentals:
– machinery and equipment
– land and buildings
– vehicles
– office equipment
– computer equipment
Biological assets – fair value gains
15 months
to
30 June
30 June
2012
2011
R’000
R’000
7 709
102 632
1 184
15 326
7 036
97 517
1 184
14 791
6 982
111 997
989
14 927
126 852
120 528
134 895
24 443
(173)
14 797
173
32 288
–
42 453
38 156
11 905
200
13 288
(67 853)
38 348
20 998
12 763
3 167
13 377
(91 050)
24 418
21 460
15 598
4 134
16 813
(122 643)
4 692 934
4 148 076
4 630 583
The above total consists of the following items: Cost of sales, Other operating income, Fair value
adjustments on biological assets, administrative expenses, selling and marketing costs and other
operating expenses.
3.
STAFF COSTS
Group
Wages and salaries
Pension costs – defined contribution plan
Pension costs – defined benefit plan
Post-retirement medical aid costs
Persons employed at year-end
4.
30 June
2013
R’000
30 June
2012
R’000
15 months
to 30 June
2011
R’000
672 331
42 617
–
664 038
39 658
–
671 251
44 594
39 798
11 884
8 094
10 829
726 832
711 790
766 472
3 102
2 990
2 981
FINANCE COSTS
Group
Interest received
– Group companies
– Other
Interest paid
– Group companies
– Other
Less: Amounts capitalised on qualifying assets
112
30 June
2013
R’000
30 June
2012
R’000
15 months
to 30 June
2011
R’000
1 391
7 056
537
4 647
2 872
1 828
8 447
5 184
4 700
(28 924)
(16 263)
1 089
(27 872)
(14 390)
–
(36 935)
(21 672)
–
(44 098)
(42 262)
(58 607)
(35 651)
(37 078)
(53 907)
5.
TAXATION
Group
Taxation for the year is calculated as follows:
South African normal taxation
– current year
– prior year
Deferred taxation
– current year
– prior year
Capital Gains Tax
Foreign tax
– current year
30 June
2013
R’000
15 months
30 June to 30 June
2012
2011
R’000
R’000
(83 335)
303
(108 433)
*
(55 851)
1 449
(3 589)
–
(1 096)
9 963
(118)
(10 251)
(29 087)
–
(292)
(8 836)
(7 297)
(3 752)
(96 553)
(116 136)
(87 533)
Reconciliation of standard rate of taxation to taxation charged:
Standard rate of taxation
Adjustments for:
Non-taxable income
Prior period adjustments
Associates’ and joint ventures’ results reported, net of tax
Other
Foreign taxation – current year
Capital Gains Tax
%
28
%
28
(31)
*
23
1
2
*
(19)
*
10
*
1
2
Tax charged
22
22
%
28
8
(1)
(6)
1
1
*
31
*Amounts less than R1 000 and percentages less than 1%
No charge for Dividend Tax on Companies arose on the dividend paid of R372 171 000 as the Group made
use of the election for exemption from Dividend Tax on Companies in terms of section 64F(1)(a) of the
Income Tax Act in South Africa.
No charge for Secondary Tax on Companies arose on the dividend paid of R49 951 000 (2011: R38 405 000)
during the previous year as the Group made use of the election for exemption from Secondary Tax on
Companies in terms of section 64B(5)(f) of the Income Tax Act in South Africa.
The standard rate of taxation has been provided by the South African Revenue Service.
113
The tax (charge)/credit relating to components of other comprehensive income is as follows:
30 June
2013
Before tax
R’000
30 June
2013
After tax
R’000
Fair value gains/(losses):
– Available-for-sale financial assets
Cash flow hedges
Currency translation differences
61
(17 912)
4 114
(17)
5 015
–
Other comprehensive income
(13 737)
4 998
(8 739)
Current tax
Deferred tax
–
(13 737)
–
4 998
–
(8 739)
(13 737)
4 998
(8 739)
30 June
2012
Before tax
R’000
Fair value gains/(losses):
– Available-for-sale financial assets
Cash flow hedges
Currency translation differences
44
(12 897)
4 114
Group
30 June
2012
Tax
30 June
(charge)/
2012
credit
After tax
R’000
R’000
(2 369)
(2 874)
4 641
663
805
–
Other comprehensive income
(602)
1 468
866
Current tax
Deferred tax
–
(602)
–
1 468
–
866
(602)
1 468
866
15 months
to 30 June
2011
Before tax
R’000
Fair value gains/(losses):
– Available-for-sale financial assets
Cash flow hedges
Currency translation differences
114
Group
30 June
2013
Tax
(charge)/
credit
R’000
(1 706)
(2 069)
4 641
Group
15 months
to 30 June
2011 15 months
Tax to 30 June
(charge)/
2011
credit
After tax
R’000
R’000
(1 950)
(9 758)
1 444
546
2 732
–
(1 404)
(7 026)
1 444
Other comprehensive income
(10 264)
3 278
(6 986)
Current tax
Deferred tax
–
(10 264)
–
3 278
–
(6 986)
(10 264)
3 278
(6 986)
6.
PROPERTY, PLANT AND EQUIPMENT
Opening
carrying
amount Additions
R’000
R’000
Group
Year ended
30 June 2013
Land and
buildings
Plant, equipment
and furniture
Aircraft
Motor vehicles
Capital work in
progress
Exchange
Disposals Depreciation Transfers differences
R’000
R’000
R’000
R’000
201 224
30 936
(7 405)
(7 709)
3 787
842 690
23 763
117 456
74 231
–
7 653
(4 058)
–
(2 834)
(102 632)
(1 184)
(15 326)
34 396
78 483
1 219 528
191 304
–
–
(14 296)
–
220 833
25 327
–
62
37
–
(10)
835 596
22 578
107 000
(29 176)
–
(126 852)
–
Cost
R’000
At 30 June 2013
Land and buildings
Plant, equipment and furniture
Aircraft
Motor vehicles
Capital work in progress
Closing
carrying
amount
R’000
83 703
26 1 269 710
Accumulated
Depreciation
R’000
Net book
value
R’000
299 697
1 838 026
25 341
174 896
83 703
(78 864)
(1 002 431)
(2 762)
(67 895)
–
220 833
835 596
22 578
107 000
83 703
2 421 662
(1 151 952)
1 269 710
No assets have been pledged as security for borrowings.
Included in land and buildings is land to the value of R26 195 183 (2012: R31 682 223; 2011:
R34 361 507).
A register of land and buildings is kept at the registered office of the Company and is open for inspection
by members or their duly authorised agents.
Material items included in capital work in progress are costs incurred in relation to the Molatek expansion
project, Turbine alternator refurbishment, Sugar Transport Trucks, Sugar Dust Extraction, B Seed
Receiver, Diffuser Repairs, Carbonated Liquor Press Filter, B Strike Receiver, Brown Sugar packaging
capacity increase, Food Safety Compliance, B Molasses storage tank, Sugar Sachet Stick Machine and
Road Feeder Table Chain.
No material items of property, plant and equipment were held under finance leases.
Refer to Note 2 for the lease payments included in the income statement for items leased under operating
leases.
Opening
Transferred
carrying
Exchange from assets
amount Additions Disposals Depreciation Transfers differences held for sale
R’000
R’000
R’000
R’000
R’000
R’000
R’000
Group
Year ended
30 June 2012
Land and
buildings
Plant, equipment
and furniture
Aircraft
Motor vehicles
Capital work in
progress
182 464
11 677
833 542
24 947
97 494
71 051
–
29 868
56 838
1 195 285
25 881
138 477
–
Closing
carrying
amount
R’000
(7 036)
7 291
–
6 827
201 224
(1 163)
–
(1 182)
(97 517)
(1 184)
(14 791)
34 967
–
6 066
66
–
–
1 745
–
–
842 690
23 763
117 456
–
(2 344)
–
(120 528)
(48 324)
–
–
66
–
34 396
8 572 1 219 528
Note 7
115
Cost
R’000
At 30 June 2012
Land and buildings
Plant, equipment and furniture
Aircraft
Motor vehicles
Capital work in progress
Opening
carrying
amount Additions Disposals Depreciation
R’000
R’000
R’000
R’000
Group
Year ended
30 June 2011
Land and
buildings
Plant,
equipment and
furniture
Aircraft
Motor vehicles
Capital work in
progress
176 325
20 150
(22 280)
(7 208)
828 416
8 043
83 016
76 267
25 341
44 875
(24 510)
–
(7 074)
(114 124)
(989)
(15 402)
66 375
63 356
(596)
1 162 175
229 989
(54 460)
–
(137 723)
7.
Net book
value
R’000
274 747
1 750 946
25 341
177 413
34 396
(73 524)
(908 255)
(1 578)
(59 958)
–
201 223
842 691
23 763
117 455
34 396
2 262 843
(1 043 315)
1 219 528
Transfers
R’000
Transferred
to assets
Exchange
held for
differences
sale
R’000
R’000
Closing
carrying
amount
R’000
15 477
–
63 942
566
(7 688)
7
–
–
(72 297)
–
56 838
7
(4 703) 1 195 285
–
Cost
R’000
At 30 June 2011
Land and buildings
Plant, equipment and furniture
Aircraft
Motor vehicles
Capital work in progress
Accumulated
depreciation
R’000
182 464
3 544
(8 014)
(233)
Accumulated
depreciation
R’000
833 542
24 947
97 494
Net book
value
R’000
232 327
1 644 627
25 341
144 518
56 838
(49 863)
(811 085)
(394)
(47 024)
–
182 464
833 542
24 947
97 494
56 838
2 103 651
(908 366)
1 195 285
ASSETS AND LIABILITIES CLASSIFIED AS HELD FOR SALE AND DISCONTINUED OPERATIONS
7.1
Assets and liabilities classified as held for sale
During the 2008 financial year, land claims on 6,056 hectares were lodged by the Matsamo
Communual Property Association. These claims, which initially were anticipated to have been
finalised during the 2009 financial year were settled by TSB Sugar RSA (Pty) Ltd on 6 June 2012.
Consequently all assets and liabilities subject to these disposal transactions have been derecognised.
The Middenin portion of the land claim consisting of 393 hectares was not disposed in the previous
year and consequently was transferred back into property, plant and equipment in the previous
year.
Friedshelf 920 (Pty) Ltd has disposed of its business to Sivunosetfu (Pty) Ltd according to the sale of
business agreement in place on 1 July 2012. Fiedshelf 920 (Pty) Ltd previously carried out farming
operations on the land of TSB Sugar RSA (Pty) Ltd, Shell Case 255 (Pty) Ltd and Break Even 76
(Pty) Ltd that was disposed to the Matsamo Communual Property Association. Consequently these
assets are separately disclosed in the financial statements as “held for sale” in compliance with the
requirements of IFRS 5 in the prior year and now disposed in the current year.
During a previous financial period a decision was taken to dispose of the old aircraft within
Sukramark (Pty) Ltd. The aircraft is actively marketed and consequently it is continued to be
separately disclosed in the financial statements as “held for sale” in compliance with the requirements
of IFRS 5.
116
Details of the assets and liabilities classified as held for sale are as follows:
Assets
Biological assets
Land and buildings
Plant, equipment and furniture
Post-employment medical benefits asset
Inventory
Aircraft
Motor vehicles
Liabilities
Post-employment medical benefits liability
Provision for leave pay
Rental deposits
Employees saving scheme
Movements during the period:
Assets
Opening balance
Transfers (to)/from property, plant and equipment,
biological assets, accounts receivable and inventory
Transfers to biological assets from assets classified
as held for sale
Additions to plant, equipment and furniture
Fair value adjustment on biological assets
Transferred from inventory
Transferred from post-employment medical benefits
asset
Impairment on aircraft
Transfer from biological assets to assets classified
as held for sale
Land and buildings transferred from plant,
equipment and furniture within assets classified as
held for sale
Plant, equipment and furniture transferred to land
and buildings within assets classified as held for
sale
Motor vehicles transferred to plant, equipment and
furniture within assets classified as held for sale
Plant, equipment and furniture transferred from
motor vehicles within assets classified as held for
sale
Disposals
Closing balance
Liabilities
Opening balance
Disposals
Transfers to assets classified as held for sale
Closing balance
30 June 2013
R’000
Group
30 June 2012
R’000
30 June 2011
R’000
–
–
–
–
–
4 651
–
40 081
–
–
104
184
5 802
533
47 367
62 838
56 453
–
–
8 014
533
4 651
46 704
175 205
–
–
–
–
(186)
(446)
(24)
(67)
–
–
–
–
–
(723)
–
46 705
175 205
166 810
–
(8 572)
4 703
–
–
–
–
(4 197)
–
(2 182)
184
(277)
4 571
(67)
–
–
(1 150)
104
(2 213)
–
–
–
40 081
–
–
–
4 622
–
–
(4 622)
–
–
(612)
–
(40 903)
4 651
(723)
723
–
–
–
(151 706)
46 705
612
(535)
175 204
–
–
(723)
–
–
–
(723)
–
117
7.2
Discontinued operations
On 1 April 2010, TSB Citrus Holdings (Pty) Ltd disposed of its 50% investment in Komati Fruits
(Pty) Ltd to Golden Frontiers Citrus (Pty) Ltd and as a result 24.5% of the original 50% investment
in Komati Fruits (Pty) Ltd was disposed of. TSB Citrus Holdings (Pty) Ltd still had a 25.5% indirect
investment in Komati Fruits (Pty) Ltd via its 51% subsidiary Golden Frontiers Citrus (Pty) Ltd. As
at 31 March 2011, TSB Citrus Holdings (Pty) Ltd disposed of its 51% investment in Golden Frontiers
Citrus (Pty) Ltd. As a result, the indirect investment in Komati Fruits (Pty) Ltd was also disposed of.
The assets and liabilities that relate to the disposal of Golden Frontiers Citrus (Pty) Ltd and Komati
Fruits (Pty) Ltd are the following:
30 June
2013
R’000
Group
30 June
2012
R’000
30 June
2011
R’000
ASSETS
Property, plant and equipment
Biological assets
Investment in associates
Investment in joint ventures
Inventories
Trade and other receivables
Taxation
Cash and cash equivalents
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
45 737
60 853
315
–
10 091
1 820
484
7 464
Total assets
–
–
126 764
LIABILITIES
Deferred income tax
Retirement benefit obligations
Borrowings
Current portion of borrowings
Trade and other payables
–
–
–
–
–
–
–
–
–
–
(20 384)
(2 049)
(16 281)
(82 748)
(2 817)
Total liabilities
–
–
(124 279)
Non-controlling interest in equity
–
–
(9 737)
Total net asset value disposed of
Proceeds
Cash disposed
–
–
–
–
–
–
(7 252)
9 917
7 464
Profit on sale of investment
–
–
24 633
Revenue
Cost of sales
–
–
–
–
310 151
(187 910)
Gross profit
Other operating income
Fair value adjustments on biological assets
Administrative expenses
Selling and marketing costs
Other operating income
–
–
–
–
–
–
–
–
–
–
–
–
122 241
1 785
3 201
–
(119 179)
1 210
Operating profit
–
–
9 258
Finance income
Finance costs
–
–
–
–
976
(6 171)
Finance costs – net
–
–
(5 195)
Share of profit in joint ventures
Share of profit of associates
–
–
–
–
Profit before income tax
Income tax expense
–
–
–
–
4 106
(1 013)
Profit for the period before non-controlling interest
Non-controlling interest
–
–
–
–
3 093
(1 495)
Analysis of results of discontinued operations and the results
recognised in profit or loss:
118
–
43
8.
30 June
2013
R’000
Group
30 June
2012
R’000
30 June
2011
R’000
Profit for the period
–
–
1 598
Profit on disposal of discontinued operations
Income tax expense
–
–
–
–
24 633
(2 464)
Profit for the period discontinued operations
–
–
23 767
Cash flows:
Operating cash flows
Investing cash flows
Financing cash flows
–
–
–
–
–
–
4 006
(19 468)
(6 747)
Total cash flows
–
–
(22 209)
30 June
2013
R’000
Group
30 June
2012
R’000
INVESTMENT PROPERTY
At beginning of period
Disposal
Exchange differences
–
–
–
At end of period
–
1 866
(1 866)
–
–
30 June
2011
R’000
1 888
–
(22)
1 866
The fair value of investment property amounted to R1 866 000 (2012: R1 866 000; 2011: R1 866 000)
upon date of disposal. This investment property has been disposed on 15 July 2011 for £171 500.
Investment property, principally comprising freehold office buildings, was held for long-term rental
yields and was not occupied by the Group. Investment property was carried at cost, less accumulated
depreciation and accumulated impairment losses.
9.
INTANGIBLE ASSETS
Trade
name:
Booker
Tate
Limited
Customer
contracts
Goodwill
R’000
Group
Year ended 30 June 2013
Opening net book amount
Amortisation charge
–
–
–
–
13 316
–
380
(50)
13 696
(50)
Closing net book amount
–
–
13 316
330
13 646
5 847
50 206
23 477
1 000
80 530
(5 847)
(50 206)
(10 161)
(670) (66 884)
At 30 June 2013
Cost
Accumulated amortisation and impairment
charges
Trademark:
Selati
R’000
Total
R’000
Net book amount
–
–
13 316
330
13 646
Year ended 30 June 2012
Opening net book amount
Amortisation charge
–
–
–
–
13 316
–
430
(50)
13 746
(50)
Closing net book amount
–
–
13 316
380
13 696
119
At 30 June 2012
Cost
Accumulated amortisation and impairment
charges
Trade
name:
Booker
Tate
Limited
Customer
contracts
Goodwill
R’000
Trademark:
Selati
R’000
Total
R’000
5 847
50 206
23 477
1 000
80 530
(5 847)
(50 206)
(10 161)
(620)
(66 834)
Net book amount
–
–
13 316
380
13 696
Year ended 30 June 2011
Opening net book amount
Amortisation charge
–
–
–
–
13 316
–
493
(63)
13 809
(63)
Closing net book amount
–
–
13 316
430
13 746
5 847
50 206
23 477
1 000
80 530
(5 847)
(50 206)
(10 161)
(570)
(66 784)
13 316
430
13 746
At 30 June 2011
Cost
Accumulated amortisation and impairment
charges
Net book amount
–
–
Impairment test for Booker Tate Holdings Limited goodwill
Goodwill of R10 161 000 was allocated to the Booker Tate Holdings Limited acquisition in previous years.
An impairment charge arose in the previous financial years on the goodwill and intangible assets of
Booker Tate Holdings Limited, as the value in use (recoverable amount) was lower than the carrying
amount. Impairment indicators were present as Booker Tate Holdings Limited forecasted negative cash
flows and operating losses due to the economic crisis in the world and consulting and management
projects were not assured. This resulted in all the intangible assets of Booker Tate Holdings Limited being
impaired in full in prior years. The circumstances have not improved for Booker Tate Holdings Limited
and the values of the intangible assets are still not considered to be recoverable and no reversal of the
impairment charges previously recognised is considered appropriate.
The recoverable amount of Booker Tate Holdings Limited is determined based on a value-in-use calculation.
This calculation uses pre-tax cash flow projections based on financial budgets approved by management
covering a five-year period. The growth rate does not exceed the long-term average growth rate for
Booker Tate Limited.
The key assumptions used for the value-in-use calculation are as follows:
Growth rate
Inflation rate
Discount rate
Tax rate
30 June
2013
30 June
2012
30 June
2011
2.7%
2.7%
13.97%
23%
2.8%
2.8%
13.97%
24%
4.2%
4.2%
13.97%
26%
Management determined the budgeted free cash flow based on past performance and its expectations
of market development. The weighted average growth rate used is consistent with the forecasts and
inflation. The discount rate used is pre-tax and reflects specific risks relating to Booker Tate Holdings
Limited.
Impairment test for TSB Sugar RSA (Pty) Ltd goodwill
During previous years TSB Sugar RSA (Pty) Ltd acquired the Pongola Mill from Illovo (Pty) Ltd. After
the completion of the purchase price allocation in terms of IFRS 3, goodwill arose to the amount of
R5 462 860.
The recoverable amount of TSB Sugar RSA (Pty) Ltd Pongola Mill division is determined based on a
value-in-use calculation. This calculation uses pre-tax cash flow projections based on financial budgets
approved by management covering a five-year period. The growth rate does not exceed the long-term
average growth rate for TSB Sugar RSA (Pty) Ltd.
Nkomazi Cane Carriers (Pty) Ltd goodwill of R4 101 633 was allocated to the acquisition of Komati
Transport Company in previous years. On 31 March 2012 this goodwill was sold to TSB Sugar RSA
(Pty) Ltd in terms of the disposal of business agreement.
120
The recoverable amount of the Transport Division is determined based on a value-in-use calculation.
This calculation uses pre-tax cash flow projections based on financial budgets approved by management
covering a five-year period. The growth rate does not exceed the long-term average growth rate for
TSB Sugar RSA (Pty) Ltd.
The key assumptions used for the value-in-use calculation are as follows:
Growth rate
Inflation rate
Discount rate
Tax rate
30 June
2013
30 June
2012
30 June
2011
5.6%
5.6%
12.38%
28%
5.7%
5.7%
13.74%
28%
4.6%
4.6%
15.66%
28%
Management determined the budgeted free cash flow based on past performance and its expectations
of market development. The weighted average growth rate used is consistent with the forecasts and
inflation. The discount rate used is pre-tax and reflects specific risks relating to TSB Sugar RSA (Pty) Ltd.
No impairment charge arose on the goodwill of TSB Sugar RSA (Pty) Ltd, as the value in use (recoverable
amount) is higher than the carrying amount.
Impairment test for Quality Sugars (Pty) Ltd goodwill
Goodwill of R3,751,388 was allocated to the Cape Sugars (Pty) Ltd acquisition in previous years. During
previous years, the goodwill was transferred to TSB Sugar RSA (Pty) Ltd’s local marketing division. On
1 April 2011 this goodwill was sold to Quality Sugars (Pty) Ltd, the marketing company of TSB Sugar
RSA (Pty) Ltd.
The recoverable amount of Quality Sugar (Pty) Ltd is determined based on a value-in-use calculation.
This calculation uses pre-tax cash flow projections based on financial budgets approved by management
covering a five-year period. The growth rate does not exceed the long-term average growth rate for
Quality Sugar (Pty) Ltd.
The key assumptions used for the value-in-use calculation are as follows:
Growth rate
Inflation rate
Discount rate
Tax rate
30 June
2013
30 June
2012
30 June
2011
5.6%
5.6%
12.38%
28%
5.7%
5.7%
13.74%
28%
4.6%
4.6%
15.66%
28%
Management determined the budgeted free cash flow based on past performance and its expectations
of market development. The weighted average growth rate used is consistent with the forecasts and
inflation. The discount rate used is pre-tax and reflects specific risks relating to Quality Sugar (Pty) Ltd.
No impairment charge arose on the goodwill of Quality Sugar (Pty) Ltd, as the value in use (recoverable
amount) is higher than the carrying amount.
121
10. BIOLOGICAL ASSETS
Banana
fruit
R’000
Group
Year ended 30 June 2013
Carrying amount
beginning of year
Transferred to cost of sales
Disposals
Impairment of biological
assets
Fair value adjustments
2 834
(2 834)
–
Cane Standing
roots
cane
R’000
R’000
Citrus
trees
R’000
Citrus
produce
R’000
Total
R’000
5 181
–
–
41 939
–
(5 959)
48 942
(48 942)
(845)
–
–
–
–
–
–
98 896
(51 776)
(6 804)
–
2 774
–
256
(1 257)
11 590
–
53 233
–
–
–
–
(1 257)
67 853
2 774
5 437
46 313
52 388
–
–
106 912
1 486
(1 486)
4 521
–
37 027
–
87 883
(87 883)
–
–
–
–
130 917
(89 369)
–
–
4 197
–
–
4 197
–
2 834
–
660
–
715
(40 081)
89 023
–
–
–
–
(40 081)
93 232
Carrying amount end of
year
2 834
5 181
41 939
48 942
–
–
98 896
Year ended 30 June 2011
Carrying amount
beginning of year
Transferred to cost of sales
Additions
Fair value adjustments
Disposals
6 045
–
–
(3 036)
(1 523)
1 352
–
–
3 169
–
29 821
–
–
7 206
–
75 403
(75 403)
–
87 883
–
Carrying amount end of
year
1 486
4 521
37 027
87 883
Carrying amount end of
year
Year ended 30 June 2012
Carrying amount
beginning of year
Transferred to cost of sales
Transferred from assets
classified as held for sale
Transferred to assets
classified as held for sale
Fair value adjustments
–
17 081
–
6 371
1 634
(25 086)
–
27 170
(27 170)
5 190
29 054
(34 244)
156 872
(102 573)
11 561
125 910
(60 853)
–
130 917
Banana
fruit
R’000
Banana
trees
R’000
Cane
roots
R’000
Standing
cane
R’000
Citrus
trees
R’000
Citrus
produce
R’000
Quantities at year-end:
30 June 2013
Area harvested
Tons harvested
Tons harvested/hectare
156 ha
5 288
33.90
156 ha
–
–
3,380 ha
–
3,380 ha
398 748
117.97
–
–
–
–
–
30 June 2012
Area harvested
Tons harvested
Tons harvested/hectare
141 ha
3 927
27.85
141 ha
–
–
3,939 ha
–
3,939 ha
442 328
112.29
–
–
30 June 2011
Area harvested
Tons harvested
Tons harvested/hectare
141 ha
3 730
26.45
141 ha
–
–
4,348 ha
–
8,105 ha
901 033
111.17
–
–
Valuation
method:
122
Banana
trees
R’000
Recoverable
value
Current
establishment
and
replacement
cost
–
–
–
Current Recoverable
establishment
value
and
replacement
cost
–
–
–
–
–
–
–
–
–
Current Recoverable
establishment
value
and
replacement
cost
TSB Sugar Holdings (Pty) Ltd make use of the standard costing system to account for inventory and the
fair value of the agricultural produce has been included in the cost of inventory.
11. INTEREST IN SUBSIDIARIES
All the companies form part of the TSB Sugar Holdings (Pty) Ltd Group and the same ultimate Group
holding company being Remgro Limited.
Nature of business
Direct
Sukramark (Pty) Ltd
TSB Sugar RSA (Pty) Ltd
TSB Citrus Holdings (Pty) Ltd
TSB Sugar International (Pty) Ltd
Aircraft flight services
Sugar production
(Impaired) Investment holding
International investments
30 June 2013
Issued share
Direct
capital
interest
R
%
200
8
–
100
100
100
100
100
30 June 2012
Direct
Sukramark (Pty) Ltd
TSB Sugar RSA Limited
TSB Citrus Holdings (Pty) Ltd
TSB Sugar International (Pty) Ltd
Aircraft flight services
Sugar production
(Impaired) Investment holding
International investments
200
8
–
100
100
100
100
100
30 June 2011
Direct
Sukramark (Pty) Ltd
TSB Sugar RSA Limited
TSB Citrus Holdings (Pty) Ltd
TSB Sugar International (Pty) Ltd
Aircraft flight services
Sugar production
Citrus operations
International investments
200
8
–
100
100
100
100
100
123
30 June
2013
R’000
Unlisted shares at cost
Direct
Sukramark (Pty) Ltd
– Shares at cost
– Loans
– Impairment of Sukramark (Pty) Ltd loan account
– Balance end of year
TSB Sugar RSA (Pty) Ltd
– Shares at cost
TSB Citrus Holdings (Pty) Ltd
– Shares at cost
– Impairment of TSB Citrus Holdings (Pty) Ltd investment
– Loans
– Balance end of year
TSB Sugar International (Pty) Ltd
– Shares at cost
– Loans
– Impairment of TSB Sugar International (Pty) Ltd loan
account
– Balance end of year
Total investment in subsidiaries
Impairment provision reconciliation:
– Balance beginning of year
– Reversal of previous impairment provisions
– Additional impairments provided for
– Balance end of year
Company
30 June
2012
R’000
30 June
2011
R’000
*
20 917
(13 962)
6 955
*
20 917
(14 014)
6 903
*
20 917
(10 528)
10 389
94 388
94 388
94 388
–
–
–
–
*
(*)
–
–
*
–
–
*
*
200 000
*
200 000
*
200 000
–
200 000
301 343
(27 590)
172 410
273 701
(54 339)
145 661
250 438
(64 867)
26 749
(3 486)
(41 604)
(12 900)
53
(52 020)
(64 867)
(41 604)
27 642
–
(13 962)
*Amounts less than R1 000.
The impairments arose as a result of the accumulated deficit balances recorded in the trading results of
Sukramark (Pty) Ltd and TSB Sugar International (Pty) Ltd. The impairment provision is provided for in
the balance of the recorded accumulated deficit balance. TSB Sugar Holdings (Pty) Ltd also impaired the
investment in TSB Citrus Holdings (Pty) Ltd during the previous financial year.
The loans are unsecured, interest free with no fixed repayment terms and payable on demand.
TSB Sugar Holdings (Pty) Ltd has subordinated its right to claim payment of the amounts owed by
Sukramark (Pty) Ltd in favour of present and future creditors of the subsidiary company until such time
the assets of the subsidiary company, fairly valued, exceed its liabilities. TSB Sugar Holdings (Pty) Ltd
has undertaken to provide continuing financial support to the subsidiary company.
Indirect
TSB Sugar RSA (Pty) Ltd has the following interests in subsidiaries as at 30 June 2013:
30 June 2013
Issued Direct and
share
indirect
capital
interest
R
%
Nature of business
Break Even 76 (Pty) Ltd
Friedshelf 920 (Pty) Ltd
Selati Sugar (Pty) Ltd
Nkomazi Cane Carriers (Pty) Ltd
Nzila Farming Services (Pty) Ltd
Laeveldse Suikermeule (Pty) Ltd
Middenin Ontwikkeling (Pty) Ltd
Quality Sugars (Pty) Ltd
TSB Sugar Marketing (Pty) Ltd
Shubombo Agricultural Services (Pty) Ltd
Shell Case 255 (Pty) Ltd
124
Property
Farming
Dormant
Cane transport
Farming
Dormant
Property
Marketing
Dormant
Farming
Property
(Impaired)
(Impaired)
(Impaired)
(Impaired)
(Impaired)
(Impaired)
100
300
300
–
–
–
6
100
1 000
100
100
100
100
100
100
100
100
100
75
100
100
100
TSB Sugar RSA (Pty) Ltd has the following interests in subsidiaries as at 30 June 2012:
30 June 2012
Issued Direct and
share
indirect
capital
interest
R
%
Nature of business
Break Even 76 (Pty) Ltd
Friedshelf 920 (Pty) Ltd
Selati Sugar (Pty) Ltd
Nkomazi Cane Carriers (Pty) Ltd
Nzila Farming Services (Pty) Ltd
Laeveldse Suikermeule (Pty) Ltd
Middenin Ontwikkeling (Pty) Ltd
Sivunosetfu (Pty) Ltd
Quality Sugars (Pty) Ltd
TSB Sugar Marketing (Pty) Ltd
Shubombo Agricultural Services (Pty) Ltd
Shell Case 255 (Pty) Ltd
Property
Farming
Dormant
Cane transport
Farming
Dormant
Property
Dormant
Marketing
Dormant
Farming
Property
(Impaired)
(Impaired)
(Impaired)
100
300
300
–
–
–
6
100
100
1 000
100
100
100
100
100
100
100
100
100
100
75
100
100
100
TSB Sugar RSA (Pty) Ltd has the following interests in subsidiaries as at 30 June 2011:
30 June 2011
Issued Direct and
share
indirect
capital
interest
R
%
Nature of business
Break Even (Pty) Ltd
Friedshelf 920 (Pty) Ltd
Selati Sugar (Pty) Ltd
Nkomazi Cane Carriers (Pty) Ltd
Nzila Farming Services (Pty) Ltd
Laeveldse Suikermeule (Pty) Ltd
Middenin Ontwikkeling (Pty) Ltd
Prozisync (Pty) Ltd
Quality Sugars (Pty) Ltd
TSB Sugar Marketing (Pty) Ltd
Shubombo Agricultural Services (Pty) Ltd
Shell Case 255 (Pty) Ltd
Property
Farming
Dormant
Cane transport
Farming
Dormant
Property
Dormant
Marketing
Dormant
Farming
Property
100
300
300
300
300
100
6
100
100
1 000
100
100
100
100
100
100
100
100
100
100
75
100
100
100
TSB Citrus Holdings Proprietary Limited disposed the following investment in a subsidiary on
31 March 2011:
Golden Frontiers Citrus (Pty) Ltd
Citrus Production
Booker Tate Holdings Limited
Investment holding
Greenfield Sugar Mill
Feasibility Project
Management Services
%
200
51
30 June 2013
Issued Direct and
share
indirect
capital
interest
Nature of business
TSB Sugar International (Pty) Ltd has
the following investments in
subsidiaries
as at 30 June 2013:
TSB Sugar Mozambique (Pty) Ltd
Massingir Agro Industrial Lda
R
R
R
100
207 578
100
51
GBP
13 067 846
100
TSB Sugar Mozambique (Pty) Ltd is incorporated in South Africa. Massingir Agro Industrial Lda is
incorporated in Mozambique. Booker Tate Holdings Ltd is incorporated in the United Kingdom.
125
30 June 2012
Issued Direct and
share
indirect
capital
interest
Nature of business
TSB Sugar International (Pty) Ltd has the
following investments in subsidiaries as at
30 June 2012:
Booker Tate Holdings Limited
Management Services
GBP
13 067 846
100
30 June 2011
Issued Direct and
share
indirect
capital
interest
Nature of business
TSB Sugar International (Pty) Ltd has the
following investments in subsidiaries as at
30 June 2011:
Booker Tate Holdings Limited
Management Services
GBP 13 067 846
100
30 June 2013 30 June 2012 30 June 2011
R’000
R’000
R’000
TSB Sugar Holdings (Pty) Ltd share of profits in
subsidiaries comprise the following:
– Subsidiaries
196 777
318 598
156 704
12. LONG-TERM LOANS AND RECEIVABLES
Group
30 June 2013 30 June 2012 30 June 2011
R’000
R’000
R’000
Long-term loans:
Loans beginning of year
Loans provided/(repaid) during the year
1 555
–
1 555
–
1 555
–
Loans end of year
1 555
1 555
1 555
Total long-term loans and receivables
1 555
1 555
1 555
Secured loans in the amount of R1 555 364 (2012: R1 555 364; 2011: R1 555 364) were made to black
owned medium scale growers which bear interest at the prime rate of interest. The loans are recoverable
over periods of 1 to 15 years, with no fixed repayment terms. The Group holds the following cession
agreements as security for the recoverability of these loans:
•
cession on sale of shares of Siyathuthuka Sugar Estate (Pty) Ltd (independent company) with the
value of R700; and
•
cession on sale of claims of the shareholders of Siyathuthuka Sugar Estate (Pty) Ltd with a value
of R5 307 866.
No amounts included above are past due or impaired.
Receivables
Guardrisk Self Insurance Investment Fund
Group
30 June 2013 30 June 2012 30 June 2011
R’000
R’000
R’000
At beginning of period
Underwriting fees
Claims paid by fund
Investment bonus received
Repayment received
–
–
–
–
–
–
–
–
–
–
At end of period
–
–
–
1 555
1 555
1 555
Total long-term loans and receivables
126
108
–
(108)
–
–
13. INVESTMENT IN ASSOCIATES
The Royal Swaziland Sugar Corporation Limited
Group
30 June 2013 30 June 2012 30 June 2011
R’000
R’000
R’000
At beginning of year
Dividend received – current year
Exchange differences
Share of net income – current year
263 766
(67 771)
1 597
120 897
236 921
(47 921)
1 409
73 357
208 775
(13 801)
(97)
42 044
At end of year
318 489
263 766
236 921
–
–
–
–
–
–
–
–
–
–
–
–
318 489
263 766
236 921
Komati Fruits (Pty) Ltd
At beginning of year
Loss of joint control – transferred from investment in
joint ventures
Share of net profit – current year
Disposal
At end of year
Total
139
43
(182)
TSB Sugar International (Pty) Ltd holds a total effective shareholding of 27.42% in The Royal Swaziland
Sugar Corporation Limited (“RSSC”) of which Booker Tate Holdings Limited holds 1.1328%. At year-end,
the shares were trading at E12.90 (2012: E12.90; 2011: E12.00) per share on the Swaziland Stock Exchange,
at a total market value for the Group’s investment in RSSC of R340 796 470 (2012: R340 796 470; 2011:
R317 019 972).
During the previous financial period TSB Citrus Holdings (Pty) Ltd disposed of its investment in
Komati Fruits (Pty) Ltd through the disposal of its 51% investment Golden Frontiers Citrus (Pty) Ltd.
Refer to Note 7.2.
The results of the associate and its aggregated assets and liabilities, are as follows:
Name
30 June 2013
Country of
incorporation
The Royal Swaziland
Sugar Corporation
Limited
The Kingdom of
Swaziland
30 June 2012
The Royal Swaziland
Sugar Corporation
Limited
30 June 2011
The Royal Swaziland
Sugar Corporation
Limited
The Kingdom of
Swaziland
The Kingdom of
Swaziland
Assets Liabilities
R’000
R’000
Revenues
R’000
%
Profit interest
R’000
held
2 464 038
(959 597) 2 869 923
440 904
2 464 038
(959 597) 2 869 923
440 904
2 294 887
(979 551)
2 895 901
267 529
2 294 887
(979 551)
2 895 901
267 529
2 054 931
(828 609)
2 297 487
153 331
2 054 931
(828 609)
2 297 487
153 331
27.42
27.42
27.42
14. INVESTMENT IN JOINT VENTURES
The equity investments of the jointly controlled entities at 30 June 2013 and 30 June 2012 and
30 June 2011 and for the periods then ended, which are included in the consolidated financial statements,
are as follows:
127
Group
30 June 2013 30 June 2012 30 June 2011
R’000
R’000
R’000
Komati Fruits (Pty) Ltd
At beginning of year
Disposal of 24.5% on 1 April 2011
Loss of control – transferred to investment in associates
–
–
–
–
–
–
At end of year
–
–
–
Sivunosetfu (Pty) Ltd
At beginning of year
Additions
Share of net income
–
*
14 640
–
–
–
–
–
–
At end of year
14 640
–
–
7 751
–
1 547
7 366
–
385
Akwandze Agricultural Finance (Pty) Ltd
At beginning of year
Dividend received
Share of net income
9 298
(440)
4 077
272
(133)
(139)
At end of year
12 935
9 298
7 751
Libuyile Farming Services (Pty) Ltd
At beginning of year
Dividend received
Share of net income
30 911
(1 679)
634
28 444
(3 123)
5 590
20 567
(2 146)
10 023
At end of year
29 867
30 911
28 444
Mgubho Farming Services (Pty) Ltd
At beginning of year
Dividend received
Share of net loss
19 929
–
(1 587)
21 448
(1 225)
(295)
18 181
(815)
4 082
At end of year
18 341
19 929
21 448
Mananga Sugar Packers (Pty) Ltd
At beginning of year
Dividend received
Share of net income
At end of year
58 397
(5 832)
12 729
65 294
50 166
(5 888)
14 119
58 397
47 288
–
2 878
50 166
Total
141 076
118 534
107 809
*Amounts less than R1 000.
The results of the joint ventures and their aggregated assets and liabilities, are as follows:
128
Assets Liabilities
R’000
R’000
Revenues
R’000
Profit/
%
(loss) interest
R’000
held
Name
30 June 2013
Country of
incorporation
Akwandze Agricultural
Finance (Pty) Ltd
Libuyile Farming Services
(Pty) Ltd
Mgubho Farming Services
(Pty) Ltd
Mananga Sugar Packers
(Pty) Ltd
Sivunosetfu (Pty) Ltd
South Africa
160 832
(144 833)
20 133
8 158
50
South Africa
146 006
(86 273)
157 287
1 268
50
South Africa
114 770
(78 088)
107 093
(3 174)
50
Swaziland
229 527
(99 135)
584 445
25 457
50
South Africa
111 587
(97 311)
96 785
29 280
50
762 722
(505 640)
965 743
60 989
Name
30 June 2013
30 June 2012
Akwandze Agricultural
Finance (Pty) Ltd
Libuyile Farming Services
(Pty) Ltd
Mgubho Farming Services
(Pty) Ltd
Mananga Sugar Packers
(Pty) Ltd
30 June 2011
Akwandze Agricultural
Finance (Pty) Ltd
Libuyile Farming Services
(Pty) Ltd
Mgubho Farming Services
(Pty) Ltd
Mananga Sugar Packers
(Pty) Ltd
Assets Liabilities
R’000
R’000
South Africa
95 447
(86 724)
8 233
2 850
50
South Africa
141 691
(79 872)
180 016
11 180
50
South Africa
106 157
(66 301)
131 280
Swaziland
162 313
(46 068)
535 913
28 248
505 608
(278 965)
855 442
41 687
South Africa
15 945
(10 318)
1 022
508
50
South Africa
117 218
(60 333)
191 472
20 821
50
South Africa
81 971
(39 073)
100 837
8 165
50
170 512
(70 747)
599 952
5 757
50
385 646
(180 471)
893 283
35 251
Swaziland
Revenues
R’000
Profit/
%
(loss) interest
R’000
held
Country of
incorporation
(592)
50
50
15. AVAILABLE-FOR-SALE FINANCIAL ASSETS
Group
30 June 2013 30 June 2012 30 June 2011
R’000
R’000
R’000
Available-for-sale financial assets
The unlisted available-for-sale financial assets at fair value
comprise the following:
Capespan Group Holdings Limited
– 1 910 546 ordinary shares
–
–
Carrying amount at beginning of the year
Fair value adjustments
Disposals
–
–
–
–
–
–
Carrying amount end of the year
–
–
–
Sukramark Air Services Partnership
– Capital account
–
–
111
4 953
4 953
4 953
6 000
338
8 842
(15 180)
7 075
1 294
(2 369)
–
7 219
(144)
–
–
Belize Sugar Industries Limited
– 4 399 998 ordinary shares at cost
Carrying amount at beginning of the year
Exchange difference
Fair value adjustments
Disposal
–
2 408
–
(2 408)
Carrying amount end of the year
–
6 000
7 075
New Komati Sugar Millers Partnership
– Capital accounts
– Working capital contributions
–
–
–
–
20
251
Carrying amount end of the year
–
–
271
Total carrying amount of unlisted investments at the end
of the year
–
6 000
7 457
Director’s valuation
Fair value
–
–
–
6 000
382
7 075
–
6 000
7 457
*Amounts less than R1 000.
129
During the current financial year the investment in Belize Sugar Industries Ltd was disposed for an
amount of R15 180 074.
During the previous financial year the investment in New Komati Sugar Millers Partnership to the value
of R271 000 and Sukramark Air Services Partnership to the value of R111 000 were impaired. There were
no impairment provisions on available-for-sale financial assets during 2011.
Group
30 June 2013 30 June 2012 30 June 2011
R’000
R’000
R’000
Available-for-sale financial assets (continued)
Available-for-sale financial assets include the following:
Unlisted securities:
– Equity shares – GBP
– Equity shares – Rand
Available-for-sale financial assets are denominated in the
following currencies:
GBP
Rand
–
–
6 000
–
7 075
382
–
6 000
7 457
–
–
6 000
–
7 075
382
–
6 000
7 457
The fair values of unlisted securities are based on directors valuation of unlisted securities.
The directors valuation techniques comprise the following:
–
–
–
–
Capespan Group Holdings Limited
Sukramark Air Services Partnership
Belize Sugar Industries Limited
New Komati Sugar Millers Partnership
Market value of shares in active market
Capital contribution made
Fair value – Multiple EBITDA method
Capital contribution made
No available-for-sale financial assets were pledged as collateral.
Currency risk
Group
30 June 2013 30 June 2012 30 June 2011
R’000
R’000
R’000
– Valuation of GBP investments on 5% movement in
currency conversion
– Amount profit affected
– Amount equity affected
Price risk
–
–
–
6 300
–
300
7 428
–
354
The unlisted investments are not exposed to price risk.
16. INVENTORIES
Finished goods
Provision for sugar shortage
Raw materials
Consumables and maintenance spares
Provision for obsolete consumables and maintenance spares
923 125
(2 015)
857 061
(7 413)
568 427
(4 798)
921 110
849 648
563 629
18 087
90 942
(10 313)
1 019 826
11 677
99 499
(6 281)
954 543
13 709
92 320
(4 401)
665 257
No inventory has been pledged as security for borrowings.
The cost of inventories recognised as expenses and included in cost of sales amounted to R3 853 859 769
(2012: R3 259 631 331; 2011: R3 801 200 589).
Provision for sugar shortage:
The provision relates to the sugar shortages inherent in the Group’s stockpile of sugar inventory at the
end of the year. The purpose of the provision is to calculate on an acceptable method, the handling losses
in those stockholding areas where accurate stock counts cannot be performed and the work of quantity
surveyors is used to test the reasonableness of the Group’s records.
130
17. TRADE AND OTHER RECEIVABLES
Group
30 June 2013 30 June 2012 30 June 2011
R’000
R’000
R’000
Trade and other receivables
Trade receivables (financial instruments)
Less: Impairment provision
433 729
(20 264)
400 358
(17 574)
375 891
(13 211)
Trade receivables – net
Other receivables (financial and non-financial instruments)
Pre-payments (non-financial instruments)
413 465
88 761
3 071
382 784
87 135
15 717
362 680
62 736
32 281
505 297
485 636
457 697
413 465
39 988
382 784
18 390
362 680
9 097
The fair values of trade and other receivables are as follows:
Trade receivables
Other receivables
Included in other receivables are non-financial instruments of R48 772 779 (2012: R68 744 546; 2011:
R53 639 044), respectively.
The above values of trade and other receivables approximate fair value.
There is limited concentration of credit risk with respect to trade receivables, as the Group has a large
number of customers, dispersed across different industries and geographical areas.
The Group’s historical experience in collection of accounts receivable falls within the recorded allowances.
Due to these factors, management believes that no additional credit risk beyond amounts provided for
collection losses is inherent in the Group’s trade receivables.
The Group does not hold any collateral as security.
No trade and other receivables were pledged as security.
Trade receivables that are less than six months past due are not considered impaired. As of 30 June 2013,
trade receivables of R76 898 490 (2012: R90 400 403; 2011: R40 573 004) were past due but not impaired.
These relate to a number of independent customers for whom there is no recent history of default. The
ageing analysis of these trade receivables is as follows:
Group
30 June 2013 30 June 2012 30 June 2011
R’000
R’000
R’000
Up to 3 months
3 to 6 months
58 665
18 234
64 925
25 475
28 368
12 205
76 898
90 400
40 573
The amount of the provision for impairment was R20 263 345 as at 30 June 2013 (2012: R17 574 053; 2011:
R13 210 587). The individually impaired receivables mainly relate to wholesalers, which are in unexpected
difficult economic situations. The ageing of these receivables is as follows:
Group
30 June 2013 30 June 2012 30 June 2011
R’000
R’000
R’000
Over 6 months
20 264
17 574
13 211
The carrying amounts of the Group’s trade and other receivables are denominated in the following
currencies:
Group
30 June 2013 30 June 2012 30 June 2011
R’000
R’000
R’000
Rand
USD
GBP
425 843
48 385
31 068
448 961
6 715
29 960
434 880
14 208
8 609
505 297
485 636
457 697
131
Movements on the Group provision for impairment of trade receivables are as follows:
Group
30 June 2013 30 June 2012 30 June 2011
R’000
R’000
R’000
At beginning of year
Provision for receivables impairment
Provision for receivables reversed
Receivables written off during the year as uncollectible
Exchange difference
17 574
3 235
(1 993)
(99)
1 547
13 211
7 861
(3 946)
(695)
1 143
13 313
6 776
(5 126)
(919)
(833)
At end of year
20 264
17 574
13 211
The creation and release of provision for impaired receivables have been included in ‘operating expenses’
in the income statement. Amounts charged to the allowance account are generally written off, when there
is no expectation of recovering additional cash.
The other classes within trade and other receivables do not contain past due or impaired assets.
18. CASH AND CASH EQUIVALENTS AND RESTRICTED CASH
Group
30 June 2013 30 June 2012 30 June 2011
R’000
R’000
R’000
Cash in bank and on hand
For the purpose of the statement of cash flow, the end of the
year cash and cash equivalents comprise of the following:
Cash and bank balances
Restricted cash
Bank overdraft – Note 24
Cash and cash equivalents includes amounts denominated
in the following currencies:
Rand
USD
GBP
EURO
Meticals
Indonesian Rupees
133 660
135 159
84 521
133 660
(6 539)
(20 786)
135 159
(20 220)
(82 000)
84 521
–
(412 000)
106 335
32 939
(327 479)
84 329
22 855
26 084
*
250
142
127 944
2 209
4 930
*
–
76
48 513
28 748
7 143
–
–
117
133 660
135 159
84 521
*Amounts less than R1 000
During the current financial year TSB Sugar RSA (Pty) Ltd received R6 583 907 (2012: R20 219 973;
2011: R0) from the National Department of Rural Development and Land Reform in terms of a
Mentorship Agreement. These funds are required to be administered and spent for the benefit of third
party beneficiaries in terms of the Mentorship Agreement and hence this cash, although physically in
possession of the Group is not available to the Group to conduct its operations.
This is restricted cash, as TSB Sugar RSA (Pty) Ltd is required to spend and manage this cash on behalf
of the approved beneficiaries.
19. ORDINARY SHARES
Company
30 June 2013 30 June 2012 30 June 2011
R’000
R’000
R’000
Ordinary shares
Authorised
4 000 ordinary shares of R1.00 each
4
4
4
Issued
100 ordinary shares of R1.00 each
*
*
*
*Amounts less than R1 000.
132
20. FAIR VALUE AND OTHER RESERVES
Group
30 June 2013 30 June 2012 30 June 2011
R’000
R’000
R’000
Fair value reserves
Balance beginning of the year
Realised reserves transferred to retained earnings on
disposal of property, plant and equipment
20 506
(6 174)
Balance end of the year
14 332
Available-for-sale financial assets reserve
Balance beginning of the year
Realisation of reserves
Charged to equity
Transferred to retained earnings
1 646
(8 781)
8 842
(1 707)
Balance end of the year
29 248
(8 742)
20 506
–
29 248
–
29 248
4 015
–
(2 369)
–
5 965
(1 950)
–
–
1 646
4 015
12 372
(12 372)
2 613
Cash flow hedge reserve
Balance beginning of the year
Realisation of reserve
Charged to equity
(261)
261
(18 173)
2 613
(2 613)
(261)
Balance end of the year
(18 173)
(261)
Exchange differences on translating foreign operations
Balance beginning of the year
Charged to equity
(12 752)
4 114
(17 393)
4 641
(18 837)
1 444
Balance end of the year
(8 638)
(12 752)
(17 393)
Deferred taxation reserve
Balance beginning of the year
Realisation of reserves
Charged to equity
Transferred to retained earnings
1 285
2 459
2 540
(1 196)
(183)
(732)
2 200
–
(3 461)
546
2 732
–
Balance end of the year
5 088
1 285
Other reserve
8 084
8 084
8 084
693
18 508
26 384
2 613
(183)
Fair value reserves: This includes the fair value adjustment on assets when IFRS was adopted.
Available-for-sale financial assets reserve: This includes the fair value adjustments on available-forsale financial assets that are recognised in equity.
Cash flow hedge reserve: This includes the fair value adjustments on cash flow hedges that are recognised
in equity.
Foreign currency translation reserve: This includes the cumulative net translation difference of foreign
subsidiaries results to the presentation currency on consolidation.
Other reserve: Other reserves includes reserves on consolidation of subsidiaries.
Deferred taxation reserve: This includes the deferred tax on the revaluation of the available-for-salefinancial assets and cash flow hedges.
133
21. DEFERRED INCOME TAX
Deferred income taxes are calculated on all temporary differences under the liability method using a
principal tax rate of 28% (2012: 28%; 2011: 28%).
The movement of the deferred income tax account is as follows:
30 June 2013 30 June 2012 30 June 2011
R’000
R’000
R’000
Balance at beginning of year
Charge per statement of other comprehensive income
(including discontinued operations)
Disposed – Refer to Note 7
Other
Charge to equity
137 042
Balance at end of the year
138 091
3 589
–
–
(2 540)
148 355
(9 845)
–
–
(1 468)
137 042
141 296
30 100
(20 384)
75
(2 732)
148 355
No deferred tax asset has been recognised for assessed losses amounting to R69 079 800 (2012: R45 470 275;
2011: R20 342 296) as it is not envisaged that the asset will be recovered in the foreseeable future.
Deferred income tax assets and liabilities are offset as the income taxes relate to the same fiscal authorities.
The following amounts are shown in the statement of financial position:
30 June 2013 30 June 2012 30 June 2011
R’000
R’000
R’000
Deferred tax assets
Deferred tax liabilities
134
(174 916)
313 007
(181 016)
318 058
(177 501)
325 856
138 091
137 042
148 355
135
Net deferred income tax liability
Deferred income tax assets
Provisions
Property, plant and equipment
Available-for-sale financial assets
Financial instruments
Other
Tax losses carry forward
Group
Deferred tax assets and liabilities are
attributable to the following items:
Deferred income tax liabilities
Property, plant and equipment
Available-for-sale financial assets
Investment in associates
Provisions
Other
Biological assets
Financial instruments
(9 845)
(2 869)
(177 501)
148 355
(9 535)
7 049
–
41
90
(515)
(6 975)
325 856
(31 652)
(126 993)
–
(666)
(292)
(17 898)
1 075
–
2 544
246
–
(11 006)
166
Charge/
(credited)
to income
statement
R’000
273 803
646
–
–
480
49 919
1 008
30 June
2011
Balance
beginning
of year
R’000
(1 468)
(645)
–
–
(17)
(628)
–
–
(823)
–
(646)
–
–
–
–
(177)
Charge/
(credited)
to equity
R’000
137 042
(181 016)
(41 187)
(119 944)
(17)
(1 253)
(202)
(18 413)
318 058
274 878
–
2 544
246
480
38 913
997
30 June
2012
Balance
end/
beginning
of year
R’000
3 589
8 478
(6 877)
17 375
(2 459)
350
90
(1)
(4 889)
(1 099)
–
5 313
42
–
(8 978)
(167)
Charge/
(credited)
to income
statement
R’000
(2 540)
(2 378)
–
–
2 476
(4 854)
–
–
(162)
–
–
–
–
–
–
(162)
Charge/
(credited)
to equity
R’000
138 091
(174 916)
(48 064)
(102 569)
–
(5 757)
(112)
(18 414)
313 007
273 779
–
7 856
288
480
29 935
668
30 June
2013
Balance
end of
year
R’000
Group
30 June 2013 30 June 2012 30 June 2011
R’000
R’000
R’000
Deferred income tax liabilities
– Deferred tax liability to be recovered after more than
12 months
– Deferred tax liability to be recovered within 12 months
Deferred income tax assets
– Deferred tax asset to be recovered after more than
12 months
– Deferred tax asset to be recovered within 12 months
317 804
(4 797)
325 670
(7 612)
272 866
52 990
313 007
318 058
325 856
(180 810)
5 894
(177 431)
(3 585)
(153 598)
(23 903)
(174 916)
(181 016)
(177 501)
64 997
–
55 265
–
49 418
54 885
64 997
55 265
104 303
11 884
–
8 094
–
10 974
39 798
11 884
8 094
50 772
22. RETIREMENT BENEFIT OBLIGATIONS
Statement of financial position obligations for:
Post-employment medical benefits
Pension benefits – current
Income statement charge for:
Post-employment medical benefits
Pension benefits
Pension schemes
The Group has established a number of pension schemes that substantially cover all employees. The
Booker Tate Holdings Limited pension schemes are defined benefit plans and are funded. These schemes
are valued annually by independent actuaries using the projected unit credit method. The latest actuarial
valuations were carried out on 30 June 2012. Booker Tate Holdings Limited separated the Booker Tate
Overseas Pension Scheme and the Booker Tate UK Pension Scheme from Booker Tate Holdings Limited,
resulting in the TSB Group being absolved from its obligations in this regard.
Group
30 June 2013 30 June 2012 30 June 2011
R’000
R’000
R’000
Current
Current
Current
The amounts recognised in the statement of financial
position are as follows:
Present value of funded obligation
Fair value of plan assets
136
–
–
–
–
429 203
(403 462)
–
–
25 741
Curtailment provision
Unrecognised actuarial losses
–
–
–
–
29 144
–
Liability in the statement of financial position
–
–
54 885
The amounts recognised in the income statement are
as follows:
Current service cost
Interest cost
Expected return on plan assets
Curtailment profit and provision
Actuarial losses recognised
–
–
–
–
–
–
–
–
–
–
–
34 480
(32 773)
(42 125)
80 216
–
–
39 798
Group
30 June 2013 30 June 2012 30 June 2011
R’000
R’000
R’000
Current
Current
Current
The movement in the net liability recognised in the
statement of financial position is as follows:
Opening net liability
Total expenses charged to the income statement
Foreign exchange differences
Settlement
–
–
–
–
End of year
–
Movement in liability
Opening liability
Interest cost
Settlement
Curtailment
Benefits paid
Foreign exchange differences
Actuarial losses
–
–
–
–
–
–
–
End of year
–
Movement in plan assets
Opening asset balance
Expected return on plan assets
Employer contributions
Member contributions
Settlement
Benefits paid
Foreign exchange differences
Actuarial losses
–
–
–
–
–
–
–
–
End of year
–
–
403 462
Scheme assets
Equities
Bonds
Other
–
–
–
–
–
–
–
308 938
94 524
Total assets at end of year
–
–
403 462
The actual return on plan assets is as follows:
Expected return on plan assets
Actuarial loss on plan assets
–
–
–
–
32 773
(10 831)
Actuarial return on plan assets
–
–
21 942
54 885
–
–
(54 885)
–
429 203
–
(429 203)
–
–
–
–
–
403 462
–
–
–
(403 462)
–
–
–
15 437
39 798
(350)
–
54 885
524 110
34 480
–
(71 269)
(31 446)
(4 686)
(21 986)
429 203
417 695
32 773
–
–
–
(31 446)
(4 729)
(10 831)
The amounts recognised in current and previous years are as follows:
30 June
2013
R’000
30 June
2012
R’000
30 June 31 March 31 March 31 March
2011
2010
2009
2008
R’000
R’000
R’000
R’000
Present value of funded obligation
Fair value of plan assets
–
–
–
–
429 203
(403 462)
524 110
(417 695)
525 410
(424 843)
663 104
(536 293)
Foreign exchange differences
Curtailment provision
Unrecognised actuarial losses
–
–
–
–
–
–
–
–
25 741
–
29 144
–
106 415
–
–
(90 978)
100 567
12 565
–
(104 912)
126 811
(5 304)
–
(30 923)
Liability in the statement of
financial position
–
–
54 885
15 437
8 220
90 584
137
Group
30 June 2013 30 June 2012 30 June 2011
%
%
%
The principal actuarial assumptions used for accounting
purposes were:
Discount rate
Expected return on plan assets
Future pension increases
Inflation rate
Future salary increases
Average worklife of employees
–
–
–
–
–
–
–
–
–
–
–
–
5.5
4.7
3.5
3.5
–
–
Post-employment medical benefits
The Group provides post-retirement healthcare benefits to certain of its retirees. The entitlement to
these benefits is usually conditional on the employee remaining in service up to retirement age and the
completion of a minimum service period.
The method of accounting is similar to that used for defined benefit schemes and actuarial valuations are
carried out annually by qualified actuaries.
The amounts recognised in the statement of financial position are as follows:
Group
30 June 2013 30 June 2012 30 June 2011
Present value of obligation
64 997
55 265
49 418
4 742
5 808
1 334
4 355
2 591
1 148
4 879
4 774
1 321
11 884
8 094
10 974
Movement in the liability recognised in the statement of
financial position:
At the beginning of the year
Total expenses as above
Disposal of business
Transferred to liabilities classified as held for sale
Contributions paid
55 265
11 884
–
–
(2 152)
49 418
8 094
–
(186)
(2 061)
42 910
10 974
(2 049)
–
(2 417)
Liability in the statement of financial position
64 997
55 265
49 418
6.41%
8.49%
6.41%
6.41%
6.41%
12.1
6.00%
8.75%
6.00%
6.00%
6.00%
12.2
6.00%
9.00%
6.00%
6.00%
6.00%
12.9
R’000
R’000
R’000
2 364
2 282
2 184
The amounts recognised in the income statement are as
follows:
Interest cost
Actuarial losses
Current service costs
The main actuarial assumptions were as follows:
– Long-term increase in health costs
– Discount rate
– Medical inflation
– Inflation rate
– Future salary increases
– Average worklife of employees
– Contributions expected to be paid to the plan during the
annual period beginning after the statement of financial
position date
The mortality rates used were as follows for the current and previous financial year:
The published SA1985-90 (light) mortality rates were used for male members in respect of the period
before retirement.
In case of female lives, mortality rates were reduced by 3 years to allow for longer life expectancy.
In respect of the period after retirement, the published PA90 – 2 mortality rates were used in the
calculations.
138
Of the total charge R11 884 000 (2012: R8 094 000; 2011: R10 974 000) was included in other operating
expenses.
The effect of a 1% movement in the assumed medical cost trend rate is as follows:
30 June 2013
Increase
Decrease
R’000
R’000
– Effect on the aggregate of the current service cost and interest cost
– Effect on the accumulated post-employment benefit obligation for medical
costs
1 063
(857)
10 400
(8 450)
30 June 2012
908
(743)
– Effect on the aggregate of the current service cost and interest cost
– Effect on the accumulated post-employment benefit obligation for medical
costs
8 290
(6 798)
30 June 2011
1 017
(825)
– Effect on the aggregate of the current service cost and interest cost
– Effect on the accumulated post-employment benefit obligation for medical
costs
7 314
(6 029)
The amounts recognised in current and previous years are as follows:
30 June
2013
R’000
30 June
2012
R’000
30 June
2011
R’000
31 March
2010
R’000
31 March
2009
R’000
31 March
2008
R’000
64 997
55 265
49 418
42 910
38 404
34 739
Other non-current liabilities relate to various deferred bonus and
retention schemes within the Group
37 608
34 794
–
150 000
(30 000)
–
–
150 000
–
120 000
–
150 000
–
–
150 000
– Present value of obligation
23. OTHER NON-CURRENT LIABILITIES
24. BORROWINGS
Non-current borrowings
Interest-bearing borrowings
Long-term loans
Capital outstanding
– Less: Current portion of interest-bearing borrowings
The long-term loans comprise the following:
Credit Suisse First Boston Finance (Pty) Ltd
R43 000 000 of the loan boar interest at 9.37% p.a. and R107 000 000 of the loan boar interest at prime less
3% p.a. with the interest payable in quarterly instalments. The capital was repaid early on 29 February
2012 and replaced with the new ABSA loan.
The loan was secured by a letter of comfort from Hunt Leuchars & Hepburn Holdings Limited.
First National Bank (FNB)
150 000
–
–
The FNB long-term loan is unsecured, bears interest at the Jibar rate (5.14% p.a.) + 2.3% p.a. and the
interest is payable in quarterly payments and the capital is repayable in five equal yearly instalments of
R30 000 000 on 15 April of each year starting on 15 April 2014.
Current borrowings
ABSA: Short-term loan
–
150 000
–
The ABSA loan is unsecured, bears interest at the Jibar rate (5.14%) + 1.2% p.a. and the interest is payable
in quarterly payments and repayable on 2 April 2013.
TSB Sugar RSA (Pty) Ltd obtained the ABSA loan as a replacement loan for the Credit Suisse First Boston
Finance (Pty) Ltd loan.
150 000
150 000
150 000
139
The maturity of non-current and current interest-bearing borrowings (Excluding finance charges):
Within 1 year
Between 2 and 5 years
Over 5 years
R’000
R’000
R’000
30 000
120 000
–
150 000
–
–
–
150 000
–
150 000
150 000
150 000
No default or breach has occurred.
Short-term borrowings
Total current borrowings consist of the following:
Group
30 June 2013 30 June 2012 30 June 2011
R’000
R’000
R’000
– Short-term portion of interest-bearing borrowings
– Bank overdraft and loans
30 000
20 786
150 000
82 000
–
412 000
50 786
232 000
412 000
The ABSA bank overdraft amounting to R0 (2012:
R82 000 000; 2011: R0) was obtained for the purpose of
working capital at the prime rate (8.5%) of interest per
annum in South Africa and is unsecured and payable on
demand
–
82 000
–
The Remgro Management Services Limited loan amounting
to R0 (2012: R0; 2011: R412 000 000) was obtained for the
purpose of working capital at the inter-company rate of
interest (5.58%) per annum and is unsecured and payable
on demand
–
–
412 000
The FNB bank overdraft amounting to R20 786 000 (2012:
R0; 2011: R412 000 000) was obtained for the purpose of
working capital at the prime rate (8.5%) less 2% of interest
per annum in South Africa and is unsecured and payable
on demand
20 786
–
–
20 786
82 000
412 000
50 786
120 000
–
232 000
–
–
412 000
150 000
–
170 786
232 000
562 000
Bank overdraft and loans
The exposure of the Group’s borrowings to interest rate
changes at the statement of financial position dates are as
follows:
Within 1 year
Between 2 and 5 years
Over 5 years
The carrying amounts and fair value of the non-current borrowings are as follows:
Group
Carrying amount
Bank borrowings
Group
Fair value
30 June
2013
R’000
30 June
2012
R’000
30 June
2011
R’000
30 June
2013
R’000
30 June
2012
R’000
30 June
2011
R’000
170 786
232 000
150 000
170 786
232 000
150 000
170 786
232 000
150 000
170 786
232 000
150 000
The fair value of current borrowings approximates their carrying amount, as the impact of discounting is
not significant.
140
Group
30 June 2013 30 June 2012 30 June 2011
R’000
R’000
R’000
The carrying amounts of the Group’s borrowings are
denominated in the following currency:
Rand
170 786
232 000
562 000
170 786
232 000
562 000
645 714
1 228 000
958 000
The Group has the following undrawn borrowing facilities:
Floating rate:
– Expiring within one year
The facilities expiring within one year are annual facilities subject to review at various dates during
the financial period. The other facilities have been arranged to help finance the operating activities of
the Group.
25. TRADE AND OTHER PAYABLES
Group
30 June 2013 30 June 2012 30 June 2011
R’000
R’000
R’000
Trade payables
Accruals
Deferred income
Other payables
406 448
173 827
1 086
41 189
418 365
199 986
1 072
34 500
390 875
163 723
934
20 946
622 550
653 923
576 478
Included in accruals and other payables above are non-financial instruments of R39 801 518 (2012:
R36 278 677; 2011: R32 917 084), respectively.
26. AMOUNTS OWING TO GROUP COMPANIES
Group
30 June 2013 30 June 2012 30 June 2011
R’000
R’000
R’000
Amounts owing by Group companies:
– Akwandze Agricultural Finance (Pty) Ltd
– (Joint venture)
– The Royal Swaziland Sugar Corporation Limited
– (Associate)
– Mananga Sugar Packers (Pty) Ltd – (Joint venture)
Amounts owing to group companies
– Remgro Management Services Limited
– TSB Sugar RSA (Pty) Ltd
– Khula-Akwandze Fund (Pty) Ltd
(Non-controlling interest)
–
–
891
–
–
–
–
*
7 989
–
–
8 880
(585 500)
–
–
(585 500)
(308 000)
–
(144 000)
–
(2 400)
(4 200)
(310 400)
(148 200)
*Amounts less than R1 000.
The Remgro Management Services Limited loan for the Pongila Mill acquisition R72 000 000 (2012:
R108 000 000; 2011: R144 000 000) is unsecured, bears interest at the Jibar rate (5.14% p.a.) + 3.5% p.a.
and the interest is payable in quarterly payments and repayable on 3 months’ notice.
The Remgro Management Services Limited working capital loan of R160 000 000 (2012: R200 000 000;
2011: R0) is unsecured, bears interest at the Jibar rate (5.14% p.a.) + 3.5% p.a. and the interest is payable
in quarterly payments and repayable on 3 months’ notice.
The Remgro Management Services Limited overdraft facility of R353 500 000 (2012: R0; 2011: R0) is
unsecured, bears interest at the rate of 5.5% p.a. and the interest is payable monthly in arrears and
repayable on demand.
141
Except for the loans mentioned above, all the other loans are unsecured, interest free with no fixed
repayment terms and payable on demand.
The concentration of credit risk with respect to amounts owing by/(to) Group companies are limited to the
amounts mentioned above. The Group does not hold any collateral as security.
No amounts included above are past due or impaired.
27. COMMITMENTS
Group
30 June 2013 30 June 2012 30 June 2011
R’000
R’000
R’000
Capital commitments:
Contracted, but not yet incurred
Authorised, but not yet contracted
75 361
73 886
18 062
52 230
23 974
28 952
149 247
70 292
52 926
27 090
22 877
–
21 285
19 481
1 989
13 669
20 437
3 510
49 967
42 755
37 616
75 000
50 000
–
The capital expenditure is to be financed by the Group
through internally generated funds and external credit
facilities.
Operating lease commitments
Not later than one year
Later than one year but not later than five years
Later than five years
The Group also has exposure to variable lease commitments
in relation to assets.
Guarantee:
Long-term Loan Guarantee for Land Bank on behalf of
Akwandze Agricultural Finance (Pty) Ltd
No losses are expected as the risk of default of debtors are limited due to the fact that some debtors are
joint ventures to the Group with no history of default. The loan of the debtor not relating to the Group is
supported by Crookes Brothers Limited.
28. DERIVATIVE FINANCIAL INSTRUMENTS
Group
30 June
30 June
2013
2013
Assets Liabilities
R’000
R’000
Forward foreign exchange
contracts – cash flow
hedges
Forward foreign exchange
contracts – fair value
hedges
Interest rate swap
Total
2 387
–
–
2 387
(20 560)
–
–
(20 560)
30 June
30 June
2012
2012
Assets Liabilities
R’000
R’000
30 June
30 June
2011
2011
Assets Liabilities
R’000
R’000
2 965
(3 226)
3 599
(986)
595
–
(768)
(479)
–
–
–
(1 393)
3 560
(4 473)
3 599
(2 379)
Trading derivatives are classified as a current asset or liability. The full fair value of a hedging derivative
is classified as a non-current asset or liability if the remaining maturity of the hedged item is more than
12 months and, as a current asset or liability, if the maturity of the hedge item is less than 12 months.
There was no ineffectiveness to be recorded from the cash flow hedges.
Forward exchange contracts that constitute designated hedges of currency risk at the end of the year are
summarised as follows:
142
Group
30 June
2013
Fair
value of
FEC
R’000
Average
contract Commitment
rate
R’000
Forward contracts to sell foreign currency
US Dollars
Current asset
10.36285
US Dollars
Current liability
9.45642
Forward contracts to buy foreign currency
Euro
Current asset
–
Euro
Current liability
11.92938
30 June
2012
Fair
value of
FEC
R’000
30 June
2011
Fair
value of
FEC
R’000
170 987
291 258
2 387
(19 686)
2 965
(3 226)
3 599
(986)
–
8 313
–
(874)
595
(768)
–
–
470 558
(18 173)
(434)
2 613
The hedges in respect of currency risk are expected to mature within approximately one year.
The fair value is the estimated amount that would be paid or received to terminate the forward exchange
contracts in arm’s length transactions at the statement of financial position date.
Period when cash flow expected to occur
When expected to effect profit
2014
2014
2013
2013
2012
2012
Group
30 June 2013 30 June 2012 30 June 2011
R’000
R’000
R’000
Interest rate swap
Fair value of the interest rate swap liability
Amount recognised in equity during the year – cash flow
hedge asset and liability
Amount recognised in profit/(loss) – fair value hedges
Amount recognised in profit/(loss) – interest rate swap
Amount removed from equity and recognised in
profit/(loss) – cash flow hedges
–
(18 173)
173
479
(479)
(1 393)
(261)
(173)
914
2 613
–
997
–
–
–
At 30 June 2013, if the Rand had weakened by 5% against the USD and European Euro, with all other
variables held constant, the revised fair values of the related derivatives, and the impact on post-tax
profits, equity, asset and liabilities, would be as follows:
Group
Asset value
R’000
Forward foreign exchange contracts – cash flow hedges
Forward foreign exchange contracts – fair value hedges
P&L effect Equity effect
R’000
R’000
(909)
–
–
–
(654)
–
At 30 June 2012, if the Rand had weakened by 5% against the USD, with all other variables held constant,
the revised fair values of the related derivatives, and the impact on post-tax profits, equity, asset and
liabilities, would be as follows:
Group
Asset value
R’000
Forward foreign exchange contracts – cash flow hedges
Forward foreign exchange contracts – fair value hedges
(13)
(9)
P&L effect Equity effect
R’000
R’000
–
(6)
(9)
–
143
At 30 June 2011, if the Rand had weakened by 5% against the USD with all other variables held constant,
the revised fair values of the related derivatives, and the impact on post-tax profits, equity, asset and
liabilities, would be as follows:
Group
Asset value
R’000
Forward foreign exchange contracts – cash flow hedges
P&L effect Equity effect
R’000
R’000
131
–
94
At 30 June 2013, 30 June 2012 and 30 June 2011, if the variable interest rate on the interest rate swap
contract had been 50 basis points higher with all other variables held constant, the impact on post-tax
profits, equity, asset and liabilities, would be as follows:
Group
Liability
value
R’000
Interest rate swap liability – 30 June 2013
Interest rate swap asset – 30 June 2012
Interest rate swap asset – 30 June 2011
–
(750)
(750)
P&L effect Equity effect
R’000
R’000
–
540
540
–
–
–
It will not have any impact on other components of equity, except for retained earnings (via the impact
on profit).
(a)
Forward foreign exchange contracts
The notional principal amounts of the outstanding forward foreign exchange contracts (cash flow
hedges) at 30 June 2013 were $47,300,000 (2012: $32,000,000; 2011: $27,400,000) and €696,866
(2012: €0; 2011: €0).
The notional principal amounts of the outstanding forward foreign exchange contracts (fair value
hedges) at 30 June 2013 were €0 (2012: €1,176,599; 2011: €0).
The hedged highly probable forecast transactions denominated in foreign currency are expected
to occur at various dates during the next 12 months. Gains and losses recognised on cash flow
hedges on forward foreign exchange contracts to hedge sugar sales are recognised in equity.
Gains and losses recognised on fair value hedges on forward foreign exchange contracts to hedge
currency risk for purchases/investments are recognised in the income statement in the period or
periods during which the hedged transaction affects the income statement. This is generally within
12 months from the statement of financial position date unless the gain or loss is included in the
initial amount recognised for the purchase of fixed assets, in which case recognition is over the
lifetime of the asset.
(b)
Interest rate swap
The notional principal amounts of the outstanding interest rate swap contract at 30 June 2013 were
R0 (2012: R150 000 000; 2011: R150 000 000).
At 30 June 2013, the fixed interest rate was 9.37% p.a. (2012:9.37% p.a.; 2011: 9.37% p.a.) and the
main floating rate was at the prime rate of interest (8.5% p.a.) in South-Africa less 3% p.a. being
5.5% p.a. (2012: 6% p.a.; 2011: 6% p.a.). Gains and losses on the interest rate swap contract are
recognised in the income statement.
29. RETAINED EARNINGS
Group
30 June 2013 30 June 2012 30 June 2011
R’000
R’000
R’000
Group retained earnings at the end of the year comprise:
– Company
– Subsidiary companies
144
(2 926)
1 879 405
(30 567)
1 921 973
(69 239)
1 588 938
1 876 479
1 891 406
1 519 699
30. NORMAL TAXATION PAID
Group
30 June 2013 30 June 2012 30 June 2011
R’000
R’000
R’000
Net balance refundable beginning of year
Taxation as per income statement
Disposal of business
Net balance (refundable)/payable at the end of the year
Taxation paid
31. (a)
(7 313)
(92 964)
–
(1 819)
(2 519)
(125 981)
–
7 313
(14 459)
(60 910)
(484)
2 519
(102 096)
(121 187)
(73 334)
Financial instruments by category
The accounting policies for financial instruments have been applied to the line items below:
Loans and
receivables
R’000
30 June 2013
Assets as per statement of financial
position
Available-for-sale financial assets
Long-term loans
Derivative financial instruments
Trade and other receivables
Cash and cash equivalents
Total
R’000
–
1 555
–
453 453
133 660
–
–
2 387
–
–
–
–
–
–
–
–
1 555
2 387
453 453
133 660
588 668
2 387
–
591 055
Financial
liabilities at
amortised
cost
R’000
Derivatives
R’000
Total
R’000
170 786
585 500
37 608
–
582 749
–
–
–
20 560
–
170 786
585 500
37 608
20 560
582 749
1 376 643
20 560
1 397 203
Liabilities as per statement of financial position
Borrowings (including bank overdrafts)
Amounts owing to Group companies
Other non-current liabilities
Derivative financial instruments
Trade and other payables
Loans and
receivables
R’000
30 June 2012
Assets as per statement of financial
position
Available-for-sale financial assets
Long-term loans
Derivative financial instruments
Trade and other receivables
Cash and cash equivalents
Group
AvailableDerivatives
for-sale
R’000
R’000
Group
AvailableDerivatives
for-sale
R’000
R’000
Total
R’000
–
1 555
–
401 174
135 159
–
–
3 560
–
–
6 000
–
–
–
–
6 000
1 555
3 560
401 174
135 159
537 888
3 560
6 000
547 448
145
Financial
liabilities at
amortised
cost
R’000
Derivatives
R’000
Total
R’000
232 000
310 400
34 794
–
617 644
–
–
–
4 473
–
232 000
310 400
34 794
4 473
617 644
1 194 838
4 473
1 199 311
Liabilities as per statement of financial position
Borrowings (including bank overdrafts)
Amounts owing to group companies
Other non-current liabilities
Derivative financial instruments
Trade and other payables
Loans and
receivables
R’000
30 June 2011
Assets as per statement of financial
position
Available-for-sale financial assets
Long-term loans
Derivative financial instruments
Trade and other receivables
Amounts owing by Group companies
Cash and cash equivalents
Total
R’000
–
1 555
–
371 777
8 880
84 521
–
–
3 599
–
–
–
7 457
–
–
–
–
–
7 457
1 555
3 599
371 777
8 880
84 521
466 733
3 599
7 457
477 789
Liabilities as per statement of financial position
Borrowings (including bank overdrafts)
Amounts owing to Group companies
Derivative financial instruments
Trade and other payables
(b)
Group
AvailableDerivatives
for-sale
R’000
R’000
Financial
liabilities at
amortised
cost
R’000
Derivatives
R’000
Total
R’000
562 000
148 200
–
543 561
–
–
2 379
–
562 000
148 200
2 379
543 561
1 253 761
2 379
1 256 140
Credit quality of financial assets
The credit quality of financial assets that are neither past due nor impaired can be assessed by
reference to the credit rating about the counterparty:
Group
30 June 2013 30 June 2012 30 June 2011
R’000
R’000
R’000
146
Trade receivables
Counterparties without external credit ratings as
rated by TSB Sugar Group internally:
– Low risk
– General risk
– High risk
315 069
108 241
10 419
298 079
84 325
17 954
276 078
81 995
17 818
Total trade receivables
433 729
400 358
375 891
Group
30 June 2013 30 June 2012 30 June 2011
R’000
R’000
R’000
Trade receivables
Counterparties without external credit ratings:
– New counterparties (less than 6 months)
– Existing (6 months+) with no defaults
– Existing (6 months+) with some defaults – all
recovered
– Existing (6 months+) with some defaults – not all
recovered
Total trade receivables
Cash at bank and shortterm deposits
ABSA
ABSA – Restricted cash
Barclays Bank Mozambique
First National Bank
Standard Chartered Bank
PT Bank CIMB Niaga TBK
Royal Bank of Scotland
External Credit
Rating (if available):
Moody’s rating:
Baa1
Baa1
Not available
Baa1
Not available
Baa3
Baa1
Derivative financial assets
Forward foreign exchange
contracts – cash flow hedges Effective hedge
Forward foreign exchange
contracts – fair value hedges Ineffective hedge
Interest rate swap
Ineffective hedge
1 940
426 649
4 456
394 306
1 669
327 999
5 140
1 429
29 826
–
167
16 397
433 729
400 358
375 891
41 854
6 539
250
57 546
1 264
142
26 065
109 760
20 220
–
–
1 165
78
3 936
76 781
–
–
–
480
117
7 143
133 660
135 159
84 521
(18 173)
–
–
(18 173)
(261)
2 613
(173)
(479)
–
(1 393)
(913)
1 220
Derivative financial instruments are held with the following financial institutions:
External credit rating
Moody’s rating:
ABSA
First National Bank
Standard Bank
Investec
Baa1
Baa1
Baa1
Baa1
None of the financial assets that are fully performing has been renegotiated in the last year.
No external or internal credit ratings exist for available-for-sale financial assets, long-term loans
and amounts owing by and to Group companies. The credit quality is analysed by the directors
interpretation of the financial asset as low risk. Available-for-sale financial assets are carried at fair
value and the risks associated with these investments are discounted for in the fair value valuations
performed. Long-term loans and amounts owing by and to Group companies are supported by their
respective statement of financial position.
Trade accounts receivable
Customers are allocated to the following risk categories as determined by management at the time
the credit application process is concluded:
Low risk – This category is only utilised for the national customers with low credit risk according
to credit policy.
General risk – This category is for all customers where a moderate credit risk is taken according to
credit policy.
High risk – This category is for all high-risk customers according to credit policy.
147
32. RELATED PARTY TRANSACTIONS
The Company is controlled by Hunt Leuchars & Hepburn Holdings Limited which owns 100% of the
Company’s shares. The ultimate holding company of the Group is Remgro Limited and is incorporated in
South Africa. Also refer to Note 11 for direct and indirect interests held in subsidiaries.
Group
30 June 2013 30 June 2012 30 June 2011
R’000
R’000
R’000
Outstanding balances
Loans receivable from group
companies
Refer to Note 26
Refer to Note 26
Loans payable to Group companies
Interest received from Group companies
Interest paid to Group companies
Managerial fees paid to
Remgro Management Services Limited
The following transactions were entered
into with the directors:
Directors’ remuneration:
– Executive directors
– Non-executive directors
–
(585 500)
1 391
(28 924)
–
(310 400)
537
(27 872)
8 880
(148 200)
2 872
(36 935)
9 522
8 887
10 358
37 333
1 773
22 955
1 680
18 511
1 703
39 106
24 635
20 214
The following transactions were entered into with parties that are related to the ultimate holding company
of the Group:
Related party
Sales to
Purchases
related from related
Trade
Trade
parties
parties
debtors
creditors
30 June 2013 30 June 2013 30 June 2013 30 June 2013
R’000
R’000
R’000
R’000
Falconair (Pty) Ltd
Remgro Management Services Limited
PG Glass (Pty) Ltd
Total South Africa (Pty) Ltd
–
–
–
–
2
9 522
128
8 763
–
–
–
–
–
(786)
–
–
Total for the year
–
18 415
–
(786)
Sales to
Purchases
related from related
Trade
Trade
parties
parties
debtors
creditors
30 June 2012 30 June 2012 30 June 2012 30 June 2012
R’000
R’000
R’000
R’000
Falconair (Pty) Ltd
Remgro Management Services Limited
PG Glass (Pty) Ltd
Total South Africa (Pty) Ltd
4
–
–
–
54
9 406
3
16 436
–
–
–
–
–
(421)
–
(419)
Total for the year
4
25 899
–
(840)
Sales to
Purchases
related from related
Trade
Trade
parties
parties
debtors
creditors
30 June 2012 30 June 2012 30 June 2012 30 June 2012
R’000
R’000
R’000
R’000
148
Falconair (Pty) Ltd
Remgro Management Services Limited
PG Glass (Pty) Ltd
Perstan (Pty) Ltd
Total South Africa (Pty) Ltd
Tosaco Commercial Services (Pty) Ltd
13
–
–
–
–
–
31
10 358
2
25 341
11 503
26 359
–
–
–
–
–
–
–
1 253
–
–
345
–
Total for the year
13
73 594
–
1 598
The above balances are not secured and are payable or receivable within normal operating terms and
conditions.
The following transactions were entered into with related associates and joint ventures within the group:
Sales to
associates and
joint ventures
30 June 2013
R’000
Purchases from
associates and
joint ventures
30 June 2013
R’000
3 012
–
366
–
(Joint venture)
217
–
68
–
(Joint venture)
41 280
80
5 408
13
(Joint venture)
32 453
1 318
4 057
378
(Joint venture)
(Joint venture)
4 164
51 379
502 495
722
2 118
1 672
33 516
–
132 505
504 615
13 689
33 907
Related party:
The Royal Swaziland
Sugar Corporation
Limited
Akwandze Agricultural
Finance (Pty) Ltd
Libuyile Farming
Services (Pty) Ltd
Mgubho Farming
Services (Pty) Ltd
Mananga Sugar
Packers (Pty) Ltd
Sivunosetfu (Pty) Ltd
(Associate)
Total for the year
Sales to Purchases from
associates and associates and
joint ventures
joint ventures
30 June 2012
30 June 2012
R’000
R’000
The Royal Swaziland
Sugar Corporation
Limited
Akwandze Agricultural
Finance (Pty) Ltd
Libuyile Farming
Services (Pty) Ltd
Mgubho Farming
Services (Pty) Ltd
Mananga Sugar
Packers (Pty) Ltd
(Associate)
–
1 612
76
(Joint venture)
213
3 289
60
–
(Joint venture)
43 913
403
6 946
14
(Joint venture)
39 007
1 697
6 477
1 149
(Joint venture)
2 068
517 827
853
36 901
91 923
523 216
15 948
38 140
Sales to Purchases from
associates and associates and
joint ventures
joint ventures
30 June 2011
30 June 2011
R’000
R’000
Total for the year
Trade
creditors
Trade debtors 30 June
30 June 2012
2012
R’000
R’000
6 722
Total for the year
The Royal Swaziland
Sugar Corporation
Limited
Akwandze Agricultural
Finance (Pty) Ltd
Libuyile Farming
Services (Pty) Ltd
Mgubho Farming
Services (Pty) Ltd
Mananga Sugar
Packers (Pty) Ltd
Trade
creditors
Trade debtors 30 June
30 June 2013
2013
R’000
R’000
(Associate)
Trade
creditors
Trade debtors 30 June
30 June 2011
2011
R’000
R’000
12 484
450
311
–
(Joint venture)
190
–
49
–
(Joint venture)
42 604
203
3 880
143
(Joint venture)
30 067
1 217
3 341
225
(Joint venture)
9 218
173 344
1 191
55 066
94 563
175 214
8 772
55 434
149
Group
30 June
2013
R’000
Interest received from associates and joint ventures:
Akwandze Agricultural Finance (Pty) Ltd
Libuyile Farming Services (Pty) Ltd
Mgubho Farming Services (Pty) Ltd
Mananga Sugar Packers (Pty) Ltd
Sivunosetfu (Pty) Ltd
30 June 15 months to
2012 30 June 2011
R’000
R’000
–
103
1 078
–
211
1 392
–
635
896
122
–
1 653
23
600
286
1
–
887
559
287
–
445
1 522
664
209
–
670
457
161
–
1 291
2 395
1 288
Mananga Sugar Packers (Pty) Ltd
1 166
1 258
1 875
Service fees received
Libuyile Farming Services (Pty) Ltd
Mgubho Farming Services (Pty) Ltd
Sivunosetfu (Pty) Ltd
5 611
5 656
6 411
5 244
5 204
–
6 190
6 143
–
17 678
10 448
12 333
36
–
–
36
–
–
34
42
–
34
42
–
Interest paid to associates and joint ventures:
Akwandze Agricultural Finance (Pty) Ltd
Libuyile Farming Services (Pty) Ltd
Mgubho Farming Services (Pty) Ltd
Sivunosetfu (Pty) Ltd
Management fees received
Rental income received
Mgubho Farming Services (Pty) Ltd
Rental paid
Mgubho Farming Services (Pty) Ltd
30 June
2013
R’000
Dividends received from associates and joint ventures:
The Royal Swaziland Sugar Corporation Limited
Akwandze Agricultural Finance (Pty) Ltd
Libuyile Farming Services (Pty) Ltd
Mgubho Farming Services (Pty) Ltd
Mananga Sugar Packers (Pty) Ltd
150
Group
30 June 15 months to
2012 30 June 2011
R’000
R’000
67 771
440
1 679
–
5 832
47 921
–
3 123
1 225
5 888
13 801
–
2 146
815
–
75 723
58 156
16 762
Key management compensation
Key management includes directors (executive and non-executive), members of the Executive Committee
and the Company Secretary. The compensation paid or payable to key management for employee services
is shown below:
Salaries and other short-term employee benefits
Incentive bonus and profit share
Other
30 June
2013
R’000
Group
30 June
2012
R’000
30 June
2011
R’000
35 716
19 762
10 665
33 019
708
9 722
37 122
10 946
7 330
66 143
43 449
55 398
33. DISPOSAL OF BUSINESS
Friedshelf 920 (Pty) Ltd disposed of its business to Sivunosetfu (Pty) Ltd in terms of a sale of business
agreement effective 1 July 2012. Friedshelf 920 (Pty) Ltd previously performed farming operations on
land owned by TSB Sugar RSA (Pty) Ltd, Shell Case 255 (Pty) Ltd and Break Even 76 (Pty) Ltd which has
now been disposed of to the Matsamo Communual Property Association.
TSB Sugar Holdings Group holds 100% of the issued shares in Friedshelf 920 (Pty) Ltd. TSB Sugar
Holdings Group has a 50% shareholding in Sivunosetfu (Pty) Ltd in terms of a joint venture agreement
together with the Matsamo Communual Property Association. The proceeds from the disposal were
calculated based on the purchase price payable calculation formula included in the sale of business
agreement.
The assets and liabilities disposed are the following:
30 June 2013
R’000
Assets
Biological assets
Post-employment medical benefits asset
Inventory
Motor vehicles
40 081
104
184
533
40 902
Liabilities
Post-employment medical liability
Provision for leave pay
Rental deposits
Employees saving scheme
(186)
(445)
(24)
(261)
(916)
Net assets disposed
39 986
Proceeds on disposal
47 793
Profit realised on disposal
7 807
151
34. ADDITIONAL INFORMATION
(a)
Refer to Notes 24 and 26 for details on material borrowings. Borrowing repayable within 12 months
will be repaid from operating cash flows.
The borrowing arose as follows:
Name of lender
Purpose of loan
Working capital
requirements
Acquisition of the
Remgro Management Pongola Mill
Services Limited
(purchase of assets)
Remgro Management Working capital
Services Limited
requirements
Overdraft facility:
Remgro Management Working capital
Services Limited
requirements
Working capital
ABSA
requirements
Overdraft facility:
Working capital
ABSA
requirements
Credit Suisse First
Boston Finance
Working capital
(Pty) Ltd
requirements
First National Bank
(b)
Balance
outstanding
30 June 2013
R’000
Balance
outstanding
30 June 2012
R’000
Balance
outstanding
30 June 2011
R’000
150 000
–
–
72 000
108 000
144 000
160 000
200 000
–
353 500
–
412 000
–
150 000
–
–
82 000
–
–
–
150 000
735 500
540 000
706 000
The Company has the following incentive schemes in place:
The Executive Long-term Incentive Scheme (ELTI) can be summarised by the following high-level
overview of the scheme:
(A)
The ELTI is a phantom unit scheme where Executives are awarded units that vest after 3, 4
and 5 years;
(B) A fixed number of units is used to determine the value of TSB Group for purposes of the ELTI;
(C)
The number of units available for use in the ELTI is capped as a % of the total units representing
the value of TSB Group;
(D) On an annual basis, the Human Resources Committee (HRC) will, at its discretion, and within
the Terms of Reference of the Committee, award units to Executives. Each annual award will
effectively be a separate ELTI scheme with its own 5-year cycle;
(E) The value of the units to be awarded will be determined by taking each Executive’s Guaranteed
Package x a %. The % in each year will be determined by the HRC in line with market
benchmarks. For 2nd tier participants (see section 7), the HRC may allocate different award
%’s to individual participants within each tier;
(F) The value of TSB Group for purposes of the ELTI at the award date will be determined by
applying a Price/Earnings (“PE”) multiple to the average Headline Earnings for the preceding
3 years;
(G) The value per unit will be determined by dividing the ELTI value of TSB Group by the number
of units;
(H) The number of units awarded to each Executive will thus be the value of the award under E
above divided by the value per unit under G above;
(I)
The units will force-vest as follows:
(a) 3 years after award – 331/3%;
(b) 4 years after award – 331/3%;
(c) 5 years after award – 331/3%;
(J)
The value of the units at the vesting dates will be determined on the same basis as when the
awards are made per F above, i.e. by applying a PE multiple to the average PAT for
the preceding 3 years;
(K) The value of the units at vesting per J above will be geared (upwards or downwards) based
upon Company (TSB Group) performance as measured by average Return on Shareholders’
Equity (“ROSE”) over the preceding 3 years compared to average ROSE Target for the
preceding 3 years.
152
The Senior Management Incentive Scheme (SMLTI) can be summarised by the following high-level
overview of the scheme:
(A)
The SMLTI is a bonus matching scheme where the annual incentives earned by Senior
Managers under the Senior Management Short Term Incentive Scheme (“SSMSTI”) are
matched for purposes of the SMLTI;
(B)
On an annual basis, the HRC will, at its discretion, and within the Terms of Reference of the
Committee, match the SSMSTI earnings according to a ratio that will be determined by
the HRC;
(C)
Each annual award will effectively be a separate SMLTI scheme with its own 5-year cycle;
(D)
The value of each SMLTI award will increase at the prevailing 12-month fixed deposit interest
prevailing at the time of the award, and will remain constant for the 5-year cycle; and
(E)
The SMLTI award, together with accrued interest, will force-vest as follows:
(a) 3 years after award – 331/3%;
(b) 4 years after award – 331/3%;
(c) 5 years after award – 331/3%.
(c)
Refer to Note 13 Investment in associates and Note 14 Investment in joint ventures for net profits/
(losses) in associates and joint ventures.
The subsidiaries profits/(losses) are as follows:
Profit/(Losses)
30 June 2013
R’000
Profit/(Losses)
30 June 2012
R’000
Profit/(Losses)
15 months to
30 June 2011
R’000
Sukramark (Pty) Ltd
TSB Sugar RSA (Pty) Ltd
TSB Citrus Holdings (Pty) Ltd
TSB Sugar International (Pty) Ltd
Break Even 76 (Pty) Ltd
Friedshelf 920 (Pty) Ltd
Golden Frontiers Citrus (Pty) Ltd
Selati Sugar (Pty) Ltd
Nkomazi Cane Carriers (Pty) Ltd
Nzila Farming Services (Pty) Ltd
Laeveldse Suikermeule (Pty) Ltd
Middenin Ontwikkeling (Pty) Ltd
Quality Sugars (Pty) Ltd
TSB Sugar Marketing (Pty) Ltd
Shubombo Agricultural Services (Pty) Ltd
Shell Case 255 (Pty) Ltd
TSB Sugar Mozambique (Pty) Ltd
Massingir Agro Industrial Lda
Booker Tate Holdings Limited
(1 406)
249 913
–
47 492
*
2 721
–
–
–
–
–
10 122
6 158
–
12 768
4
–
(3 279)
11 706
(2 867)
450 984
*
26 749
5 066
105
–
–
7 838
275
8 580
(42)
5 329
(1)
7 345
6 018
–
–
(9 125)
140
131 307
15 139
(52 020)
129
49
3 051
–
9 888
–
8 631
100
1 590
–
2 960
101
–
–
(20 677)
Total profits in subsidiaries
336 200
506 254
100 388
Subsidiary
153
(d)
Reconciliation of headline earnings for the latest financial year:
Headline earnings per share
2013
Net profit attributable to equity
holders
Subsidiaries
(Profit)/Loss on disposal of property,
plant and equipment
(Profit)/Loss on sale of investments
Net impairment of assets
Insurance proceeds
Associates
(Profit)/Loss on disposal of property,
plant and equipment
(Profit)/Loss on sale of investments
Net impairment of assets
Net impairment of biological assets
Insurance proceeds
Joint ventures
(Profit)/Loss on disposal of property,
plant and equipment
(Profit)/Loss on sale of investments
Net impairment of assets
Headline Earnings
2012
Net profit attributable to equity
holders
Plus/(Minus) – portion attributable to
equity holders from:
Subsidiaries
(Profit)/Loss on sale of PPE
Profit/(Loss) on sale of intangible
assets
Profit/(Loss) on sale of investment
properties
(Profit)/Loss on sale of investments
Net impairment of assets
Net impairment of investments
Net impairment of goodwill
Negative goodwill
Insurance proceeds
Associates
(Profit)/Loss on sale of PPE
Profit/(Loss) on sale of intangible
assets
Profit/(Loss) on sale of investment
properties
Profit/(Loss) on sale of investments
Net impairment of assets,
investments and goodwill
Negative goodwill
Insurance proceeds
154
Amount
before tax
R’000
Taxation
R’000
444 653
(24 601)
(96 553)
(15 181)
(17 744)
(6 778)
2 407
(2 485)
128
(12 745)
(2 459)
(674)
696
(38)
203
23
(857)
3 062
(857)
423 242
(112 630)
530 384
(51 131)
(53 389)
Taxation
R’000
(116 136)
(9 264)
(8 715)
Attributable
amount
R’000
67
–
348 167
(39 782)
–
(30 488)
(9 237)
(1 733)
(1 790)
90
(61)
(75)
3 062
Amount
before tax
R’000
Minorities
R’000
142
–
(53)
2 204
2 204
67
310 679
Minorities
R’000
Attributable
amount
R’000
(1 332)
–
412 916
(60 395)
(62 105)
–
–
2 213
299
–
–
(253)
–
(620)
–
(259)
6
78
(2)
–
–
1 593
299
71
(182)
–
(182)
4
–
–
–
–
–
(265)
–
–
80
–
–
(186)
2012
Joint Ventures:
(Profit)/Loss on sale of PPE
Profit/(Loss) on sale of intangible
assets
Profit/(Loss) on sale of investment
properties
Profit/(Loss) on sale of investments
Net impairment of assets,
investments and goodwill
Negative goodwill
Headline earnings
2011
Net profit attributable to equity
holders (including discontinued
operation)
Plus/(Minus) – portion attributable to
equity holders from:
Subsidiaries
(Profit)/Loss on sale of PPE
Profit/(Loss) on sale of intangible
assets
Profit/(Loss) on sale of investment
properties
(Profit)/Loss on sale of investments
Net impairment of assets
Net impairment of investments
Net impairment of goodwill
Negative goodwill
Insurance proceeds
Associates
(Profit)/Loss on sale of PPE
Profit/(Loss) on sale of intangible
assets
Profit/(Loss) on sale of investment
properties
Profit/(Loss) on sale of investments
Net impairment of assets,
investments and goodwill
Negative goodwill
Joint ventures:
(Profit)/Loss on sale of PPE
Profit/(Loss) on sale of intangible
assets
Profit/(Loss) on sale of investment
properties
Profit/(Loss) on sale of investments
Net impairment of assets,
investments and goodwill
Negative goodwill
Headline earnings
Amount
before tax
R’000
Taxation
R’000
Attributable
amount
R’000
Minorities
R’000
2
2
–
–
–
1
1
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
478 995
Amount
before tax
R’000
309 019
(33 461)
199
–
–
(125 322)
Taxation
R’000
(91 010)
–
–
(1 332)
Minorities
R’000
(1 893)
–
–
352 340
Attributable
amount
R’000
216 116
4 323
8
–
–
–
–
2 202
–
–
–
–
2 113
96
96
–
–
–
–
–
–
2 113
–
–
–
–
–
–
–
–
–
-
–
-
–
–
–
18
18
–
–
–
–
(43)
(43)
–
–
–
–
–
(26 114)
–
–
–
–
(7 546)
(320)
(320)
–
–
(62)
(62)
–
(29 138)
207
(23 912)
(5 433)
(224)
(224)
–
–
–
–
275 176
(86 573)
(1 893)
186 711
155
The net asset value and tangible net asset value per share comprise the following for the latest
financial year:
Net asset value per share
Tangible net asset value per share
Dividends per share
156
30 June
2013
Cents
30 June
2012
Cents
15 months to
30 June 2011
Cents
2 239 632 780
2 225 986 780
372 171 000
2 138 745 000
2 125 049 000
49 951 000
1 894 254 000
1 880 508 000
38 405 000
ANNEXURE 6
INDEPENDENT REPORTING ACCOUNTANT’S AUDIT REPORT ON THE
CONSOLIDATED HISTORICAL FINANCIAL INFORMATION
OF TSB SUGAR HOLDINGS
The Board of Directors
RCL Foods
Six The Boulevard
Westway Office Park
Westville
3629
Dear Sirs
Independent reporting accountant’s audit report on the Consolidated Historical Financial Information of
TSB Sugar Holdings Proprietary Limited (‘’TSB Sugar Holdings’’)
Introduction
RCL Foods Limited (“RCL Foods”) is issuing a circular to its shareholders (“the Circular”) regarding, inter alia,
the proposed acquisition of TSB Sugar International Proprietary Limited and TSB Sugar RSA Proprietary
Limited (“the TSB Acquisition”).
At your request and for the purpose of the Circular to be dated on or about 12 December 2013, we have audited
the Consolidated Historical Financial Information of TSB Sugar Holdings, which comprises the consolidated
statement of financial position as at 30 June 2013, 2012 and 2011 and the consolidated income statement and
consolidated statements of other comprehensive income, changes in equity and cash flows for the financial
periods then ended, and the notes, comprising a summary of significant accounting policies and other
explanatory information (“the Consolidated Historical Financial Information”), as presented in Annexure 5 to
the Circular.
Responsibility
Directors’ responsibility
The directors of RCL Foods are responsible for the preparation, contents and presentation of the Circular and
are responsible for ensuring that RCL Foods complies with the JSE Listings Requirements. The directors of
TSB Sugar Holdings are responsible for the preparation and fair presentation of the Consolidated Historical
Financial Information in accordance with International Financial Reporting Standards, and for such internal
controls as the directors of TSB Sugar Holdings determine is necessary to enable the preparation of Consolidated
Historical Financial Information that is free from material misstatement, whether due to fraud or error.
Reporting accountant’s responsibility
Our responsibility is to express an opinion on the Consolidated Historical Financial Information based on our
audits. We conducted our audits in accordance with International Standards on Auditing. Those standards
require that we comply with ethical requirements, and plan and perform the audits to obtain reasonable
assurance whether the Consolidated Historical Financial Information of TSB Sugar Holdings is free from
material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the
Consolidated Historical Financial Information of TSB Sugar Holdings. The procedures selected depend on the
auditor’s judgement, including the assessment of the risks of material misstatement of the Consolidated
Historical Financial Information, 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 Consolidated Historical
Financial Information 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 of TSB Sugar Holdings, as well as evaluating the overall presentation of the
Consolidated Historical Financial Information.
We believe that the audit evidence we obtained is sufficient and appropriate to provide a basis for our audit
opinion.
157
Opinion
In our opinion, the Consolidated Historical Financial Information of TSB Sugar Holdings as set out in
Annexure 5 to the Circular, presents fairly, in all material respects, the financial position of TSB Sugar
Holdings at 30 June 2013, 2012 and 2011 and its financial performance and cash flows for the financial periods
then ended in accordance with International Financial Reporting Standards and the relevant sections of the
JSE Listings Requirements.
PricewaterhouseCoopers Inc.
Director: D.B. von Hoesslin
Registered Auditor
Sunninghill
4 December 2013
158
ANNEXURE 7
HISTORICAL FINANCIAL INFORMATION OF RCL FOODS
INTRODUCTION
The consolidated financial information of RCL Foods for the three periods ended 30 June 2011, 30 June 2012
and 30 June 2013 is set out below. The annual financial statements of RCL Foods for the last three financial
periods have been audited by PricewaterhouseCoopers Inc. An unqualified audit opinion was issued in all three
periods. The audited financial statements for the three periods ended 30 June 2011, 30 June 2012 and
30 June 2013 will be available for inspection as described in Section E, paragraph 19 of the Circular.
This report on historical financial information is the responsibility of the directors of RCL Foods. No material
fact or circumstance has occurred between the latest financial year-end of RCL Foods and the Last Practicable
Date.
No adjustments concerning the correction of fundamental errors or application of changes in accounting
policies have been made in preparing the report of historical financial information. Non-material adjustments
have been made for comparative purposes only. There have been no subsidiaries, foreign subsidiaries included,
whose financial reports were not completed according to IFRS.
COMMENTARY ON FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2013
Salient features
•
Headline EBITDA decreased by 27.4% over the comparable 12 months in 2012
•
HEPS from continuing operations decreased by 94.8% over the comparable 12 months in 2012
•
Record chicken imports and feed raw material costs severely impacted the chicken market
•
Net asset value per ordinary share of 1 228.8 cents at 30 June 2013 (985.2 cents at 30 June 2012)
•
The Foodcorp Acquisition had a material impact on the statement of financial position
Commentary
The year under review has been a tumultuous one characterised by uncertainty and volatility. Evidence that
the global economy is on track for a sustained recovery proved elusive. Although crude oil prices declined
sharply in early calendar 2013 on the back of a lacklustre global economy, poor demand and higher stocks,
lingering geo-political concerns played their role in supporting prices.
South Africa posted a 2012 GDP growth rate of 2,5%, a figure that fell below aspirations as strife in the mining
sector, especially in the latter part of calendar 2012, hurt economic growth and rattled foreign investors. The
threat of protracted and violent industrial action continues to loom large. South Africa’s economic growth for
2013 is forecast at a meagre 1.8%, a growth number that can’t be expected to help South Africa’s worsening
unemployment figure of 25.6%.
Over the course of the last 12 months the Rand weakened, firstly in response to the Marikana incident and
then again sharply in the second quarter of calendar 2013 on concerns that the United States of America
(‘’U.S.’’) Federal Reserve was to curtail its bond buying programme. The weaker rand has made imports more
expensive, resulting in an already stressed consumer having to manage record fuel prices. Inflation has
remained within the Reserve Bank’s target band of 3% and 6%, though the full effect of higher fuel prices is
expected to push the consumer price index through the 6% level in the months ahead. Interest rates have
remained at record lows over the period. The Monetary Policy Committee finds itself in the unfortunate position
of having little room to manoeuvre, as further rate cuts to stimulate growth risk pushing inflation through
the 6% level, hurting economically depressed households further.
Exchange rate volatility has continued during the current year. The R/USD exchange rate increased from
R8.38 at the beginning of the current financial year to R9.95 at the end of June 2013, an 18.7% increase. The
average year-on-year increase was 15%. As RCL Foods’ entire soya requirements are imported, the foreign
exchange exposure is significant.
The acquisition of Foodcorp has meant that the Group now has significant exposure to the Euro through
Foodcorp’s Senior Secured Notes. Partial hedges are in place, however, the Rand depreciated against the Euro
in the two months since 1 May 2013 by 7.9% from 11.89 to 12.83 at year-end.
159
Soft commodity procurement
During the period all commodities experienced significant volatility and generally increasing price levels. Over
the past decade the pressure on global grain stocks has risen as a consequence of the switch to biofuels in the
U.S. and rising demand for food from the growing middle class in developing countries.
The drought in the US last year caused grain and oilseed prices to rise sharply. Higher food prices are part of
a structural change in the global economy. As expected, there was some rebalancing as farmers planted more
maize crops to take advantage of higher prices. Maize and soya are the key ingredients in Rainbow’s chicken
feed, and wheat in Foodcorp’s milling and baking operations, and are therefore covered below.
Maize
The consequences of the drought in the US from June 2012 onwards resulted in the record high price for corn
of $8,43 per bushel ($332 per ton) in August 2012 on CBOT. Although volatility remained high, the corn price
declined during the reporting period to end at $6,79 per bushel ($267 per ton).
The high corn price encouraged producers in the US to increase corn planting during the US spring in 2013,
resulting in the highest area planted to corn in decades.
Other areas in the world (South America and the former Soviet Union states) also increased plantings of corn.
The impact of the expected replenishment of corn stock will only be seen after the current reporting period.
South African maize producers increased maize plantings during the spring of 2012 to 2,78 million hectares,
up from the previous season’s figure of 2,69 million hectares. The maize crop experienced an excellent start
during the early part of the season, giving rise to expectations of a crop size in the order of 13 million tons.
Production conditions remained excellent in the eastern part of the South African production area, but a
drought in the western part of the Free State and the North West Province reduced the expected crop size to
the latest official figure of 11,39 million tons. This is down from the previous season’s crop size of 12,1 million
tons.
Despite the tight stock situation, maize exports continued during the reporting period. The price of yellow
maize peaked at R2 830/ton at the beginning of August 2012 and then subsequently declined to R2 220/ton at
the end of June 2013.
The average market price for maize over the reporting period was R2 368/ton, which compares with the average
market price of R2 246/ton for the previous period, an average increase of 5%.
Soya
The price of soybean meal as traded on CBOT commenced the financial year at a price of $427 per short ton,
increasing to a record high of $548 per short ton in August 2012 and then decreasing to $480 per short ton at
the end of June 2013. The average market price for soybean meal for this period was $455 per short ton
compared to the average market price of $351 per short ton over the previous 12-month period, an increase of
30%. The significant volatility in the international price of soybean meal was driven by the severe drought in
the US in 2012. More recently a record South American crop and the prospect of a record US crop later in the
year could see CBOT prices return to the low $300 range.
Wheat
Local wheat prices have been at high levels throughout the reporting period. The average market price for local
wheat for this period was R3 488/ton compared to the average market price of R2 849/ton over the previous
12-month period, an increase of 22%.
South Africa is a net importer of wheat and wheat prices are therefore correlated to international wheat prices
and the exchange rate.
INCOME STATEMENT
Revenue increased by 28,7% for the year ended 30 June 2013 largely due to the inclusion of Foodcorp’s results
for two months.
Despite the increase in revenue and inclusion of the Foodcorp results for two months, headline EBITDA
decreased by 27,4% reflecting the current difficult trading environment in the South African economy. Rainbow
has experienced a difficult year with high import volumes and record feed input costs decimating margins.
Whilst Rainbow’s added value products have delivered an acceptable performance, IQF products have sold
below cost for most of the financial year. Vector’s operating profit decreased by 15,1% to R143,3 million due to
investment in additional capacity and a slowdown in volumes in the second half of the year. Foodcorp’s operating
profit for the two months to June was R99,0 million but earnings were compromised due to a R70,9 million
negative adjustment on the Euro denominated debt arising from the depreciation in the exchange rate from
1 May to 30 June.
160
Finance cost
The increase in net finance cost to R99,8 million is mainly a consequence of the significant levels of debt in
Foodcorp.
Foodcorp debt and hedging profile
First priority Senior Secured Notes
On 4 March 2011, Foodcorp issued €390,0 million Senior Secured Notes with a coupon rate of 8,75% per annum
and a maturity date of 1 March 2018.
Payments under the 2018 Senior Secured Notes consist of two components, namely the principal due on
1 March 2018 and coupon payments due semi-annually on 1 September and 1 March. In order to hedge the
foreign currency exposure, the following foreign exchange contracts were entered into:
•
The principal was hedged 50% through a performance participating foreign exchange contract and 50%
through a vanilla forward exchange contract, both for six years maturing on 1 March 2017
•
The semi-annual coupon payments have been partially hedged (50%) at inception using forward exchange
contracts maturing on each coupon payment date, until 1 March 2017.
The mark-to-market effects of the hedging arrangements are accounted for in the income statement under
financing costs.
Payment-in-kind (PIK) note debt instrument
During May 2013 the Group repurchased and held a €52,9 million PIK note within the Foodcorp funding
structure. The principal amount and accrued interest are eliminated for the RCL Foods consolidated accounts.
Effective tax rate
The effective tax rate has increased from 35,0% to 113,5%. The abnormal tax rate is largely due to non-deductible
transaction costs (R45,6 million) and the non-allowance of certain funding costs and foreign exchange losses
(R83,0 million) within the Foodcorp holding structure.
STATEMENT OF FINANCIAL POSITION
The Foodcorp Acquisition during the current financial year has had a significant impact on the Group’s
statement of financial position with IFRS 3 (Statement of Business Combinations) requiring recognition of net
assets acquired at fair value. This resulted in assets and liabilities acquired on 1 May 2013 amounting to
R6,6 billion and R7,8 billion, respectively. The purchase price of the Foodcorp Acquisition was R1,0 billion
resulting in goodwill of R2,6 billion being recognised after the completion of a preliminary purchase price
allocation (PPA) exercise. The statement of financial position reflects an increase in working capital balances
due to the scale of the Foodcorp business. Certain key items are highlighted below.
Non-current assets
Property, plant and equipment (PP&E)
In addition to the R1 611,8 million of PP&E acquired as part of Foodcorp, capital expenditure for the 12-month
period was R477,0 million (2012: R451,0 million). Significant individual capex initiatives included the
Rustenburg and Bushvalley expansions (R137,0 million), conversion of chicken house heating from gas to coal
(R71,8 million) and investment in additional freezing and chilling capacity in Worcester (R44,2 million). All
expansion capex spend related to prior year approvals was completed in the current financial year.
Intangible assets
Trademarks and customer relationship intangible assets of R2,9 billion were recognised on the acquisition of
Foodcorp. The significant value of these intangibles acquired shows the wealth of the brands added to the
Group by the Foodcorp Acquisition. Capital expenditure relating to intangible assets amounted to R8,9 million
(2012: R29,9 million) and is mainly in respect of Rainbow’s continued investment in the SAP ERP system which
went live on 1 July 2012.
The investment in joint venture relates to the purchase of 49,0% of Zambeef’s shareholding in Zam Chick
Limited for US$14,25 million (R129,0 million) (‘’Zam Chick’’).
Current assets and current liabilities
The movement in inventories, trade and other receivables and trade and other payables are all largely attributable
to the inclusion of Foodcorp. The valuation of inventories and biological assets have also increased due to
higher raw material and feed prices and Vector’s take-on of the new Customer Secondary Distribution (“CSD”)
customers. Despite difficult economic conditions, trade debtors continue to be well managed across the Group.
161
The preference shares receivable of R130,3 million relates to amounts receivable from the Foodcorp management
share ownership structure, which has been settled subsequent to year-end as part of the acquisition of
management’s shares.
The sale agreement that has been entered into to dispose of the Fishing division of Foodcorp has resulted in
R536,6 million of assets and R178,7 million of liabilities being classified as held for sale. Completion of the
transaction is subject to the fulfilment of certain conditions, including approval by the South African competition
authorities.
The significant increase in derivative assets of R340,7 million primarily relates to the hedging arrangements
put in place in order to hedge the foreign currency exposure on the Foodcorp foreign debt.
Cash on hand and investment in money market fund has increased from R305,8 million in 2012 to
R2 763,2 million in 2013 as a result of the R3,9 billion rights offer in January 2013, offset by the Foodcorp and
Zam Chick investments.
Non-current liabilities
The deferred tax of R1 409,3 million (2012: R432,7 million) arises from numerous temporary differences across
the Group. The significant increase has arisen due to the inclusion of Foodcorp.
The post-retirement medical obligation of R155,4 million (2012: R108,6 million) arises from the actuarial
valuation of the Group’s potential liability arising from post-retirement medical aid contributions in respect of
current and future retirees. This liability is unfunded. The obligation of the RCL Foods Group to pay medical
aid benefits after retirement is no longer part of the conditions of employment for Rainbow employees engaged
after 1 October 2003 and for Vector employees engaged after 1 January 1997. Foodcorp provides post-retirement
medical benefits to certain retired employees. The Group has an unrecognised actuarial loss of R14,9 million
(2012: R14,2 million) which arises mainly due to differences in the actuarial assumptions applied from year to
year. This actuarial loss will be recognised to the extent that it is in excess of 10% of the obligation over the
remaining working lives of the participating employees.
The significant increase in interest-bearing liabilities primarily relates to Foodcorp’s €390,0 million Senior
Secured Notes. These liabilities are offset by a positive R340,7 million of derivative financial instruments
relating to the hedging structure.
Gearing and capital structure
Year-end gearing of 83,5% (interest-bearing liabilities to equity) is higher than management’s view of the
optimal capital structure. Net gearing, taking into account cash and cash equivalents and investment in money
market fund at the reporting date is 44,3%. The short-term focus will be to eliminate intragroup debt
inefficiencies within the funding structure and to assess capital requirements taking into account future
investment opportunities.
Minority interests
A minority interest of R331,4 million has been reflected in the statement of changes in equity and arose due to
the outside shareholding in Foodcorp by Foodcorp management and Capitau Investment Advisory (Proprietary)
Limited. The minority interest value has been determined on the basis of a minority interest stake with no
control premium included.
Cash flow and working capital
Cash generated by operations increased by 32,2% or R162,9 million in comparison to the prior period. The
increase in cash generation is attributable to the inclusion of the Foodcorp results for two months which has
been offset to a certain degree by the negative cash generation in Rainbow as a result of poor trading results.
The R117,3 million increase in inventories and biological assets was mainly impacted by Vector’s take-on of the
new CSD customers. The higher feed commodity prices also impacted the valuation of feed raw materials and
biological assets. Offsetting the inventory increase, trade and other payables were R160,7 million higher than
the comparative period.
The lower net tax outflow of R60,9 million is a function of the lower 2013 taxable profit base with Rainbow and
Foodcorp in a nil tax paying position.
162
Cash movement (including investment in money market funds) for the period is summarised as follows:
Rm
Opening balance
Operating profit adjusted for non-cash flow items
Working capital changes
Net finance income
Tax paid
Dividends paid
Capital expenditure (including intangibles)
Acquisition of subsidiary and joint venture
Issue of shares
Interest-bearing liabilities
Discontinued operation – net cash inflows
Other
305,8
516,8
152,5
43,4
(61,0)
(94,4)
(485,9)
(875,9)
3 881,0
(715,3)
52,4
43,8
Closing balance
2 763,2
Return on equity
Return on equity decreased to 0,5% (2012: 9,3%) being impacted by Rainbow’s poor operating performance.
163
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Note
ASSETS
Non-current assets
Property, plant and equipment
Intangible assets
Deferred income tax asset
Investment in joint venture
1
2
17
3
Current assets
Inventories
Biological assets
Trade and other receivables
Preference shares receivable
Derivative financial instruments
Tax receivable
Cash and cash equivalents
Investment in money market fund
Assets of disposal group classified as held for sale
5
6
7
4
8
9
Total assets
30 June
2013
R’000
30 June
2012
R’000
30 June
2011
R’000
9 557 596
2 141 390
1 887 452
3 647 206
5 777 108
4 327
128 955
1 824 072
317 318
1 600 008
287 444
7 794 864
3 054 901
2 880 851
1 322 055
537 059
2 111 849
130 275
361 505
32 325
2 313 191
450 000
536 605
873 040
476 427
1 347 671
664 804
445 226
1 259 552
20 811
31 160
305 792
41 773
469 496
17 352 460
5 196 291
4 768 303
5 079 194
185 188
1 041
1 479 480
6 744 903
311 306
1 198 253
160 724
1 189 684
138 788
1 547 382
2 906 359
1 527 861
2 856 333
EQUITY
Stated capital
Share-based payments reserve
Other reserves
Retained earnings
Equity attributable to equity holders of the company
Non-controlling interests
10
11
12
Total equity
7 056 209
2 906 359
2 856 333
LIABILITIES
Non-current liabilities
7 177 269
606 884
474 360
5 515 289
1 409 273
72 959
155 350
24 398
65 642
432 655
372 198
108 587
102 162
3 118 982
1 683 048
1 437 610
2 630 899
297 229
5 089
5 766
1 343
178 656
1 648 147
33 243
1 433 243
3
1 655
3 469
898
Total liabilities
10 296 251
2 289 932
1 911 970
Total equity and liabilities
17 352 460
5 196 291
4 768 303
Interest-bearing liabilities
Deferred income tax liabilities
Preference share liabilities
Retirement benefit obligations
Trade and other payables
15
17
13
14
16
Current liabilities
Trade and other payables
Interest-bearing liabilities
Preference share liabilities
Derivative financial instruments
Current income tax liabilities
Liabilities of disposal group classified as held for sale
164
16
15
13
8
9
CONSOLIDATED INCOME STATEMENT
Note
Continuing operations
Revenue
12 months
ended
30 June
2013
R’000
12 months
ended
30 June
2012
R’000
15 months
ended
30 June
2011
R’000
10 108 812
7 855 142
8 621 389
Operating profit before depreciation and amortisation
(EBITDA)
Depreciation and amortisation
18
444 321
(278 294)
614 510
(200 286)
762 617
(210 340)
Operating profit
Finance costs
Finance income
19
20
21
166 027
(153 675)
53 874
414 224
(11 358)
7 370
552 277
(1 808)
21 520
Profit before tax
Income tax expense
22
66 226
(75 148)
410 236
(143 469)
571 989
(188 139)
(8 922)
15 311
266 767
383 850
9
6 389
266 767
383 850
26 507
(20 118)
266 767
383 850
6 389
266 767
383 850
(Loss)/Profit after tax from continuing operations
Profit for the period from discontinued operation
Profit for the year
Profit for the period attributable to:
Equity holders of the company
Non-controlling interests
Earnings per share from continuing and
discontinued operations
attributable to equity holders of the company
Basic earnings per share
From continuing operations
(cents)
From discontinued operation
(cents)
23
4,3
2,5
88,3*
131,0
From profit for the period attributable to
equity holders of the company
(cents)
6,8
88,3
131,0
Diluted earnings per share
From continuing operations
From discontinued operation
(cents)
(cents)
4,3
2,5
88,1*
130,1
From profit for the period
(cents)
6,8
88,1
130,1
2013
R’000
2012
R’000
2011
R’000
Profit for the year
Other comprehensive income
Items that may be reclassified subsequently to profit or loss:
Cash flow hedges
Currency translation differences
6 389
266 767
383 850
Other comprehensive income for the year, net of tax
1 041
Total comprehensive income for the year
7 430
266 767
383 850
27 548
(20 118)
266 767
383 850
7 430
266 767
383 850
* Adjusted for the effects of the rights offer, refer to Note 23.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Total comprehensive income for the year attributable to:
Equity holders of the company
Non-controlling interests
1 019
22
165
CONSOLIDATED STATEMENT OF CASH FLOWS
12 months
ended
30 June
2013
R’000
Note
CASH FLOWS FROM OPERATING ACTIVITIES
Cash generated by operations
Finance costs paid
Finance income received
Net cash inflows from operating activities
– discontinued operation
Tax paid
A
B
12 months
ended
30 June
2012
R’000
15 months
ended
30 June
2011
R’000
Inflow/
(outflow)
Inflow/
(outflow)
Inflow/
(outflow)
669 279
(8 599)
51 980
506 369
(11 358)
7 370
643 331
(1 808)
21 520
53 293
(60 938)
(71 642)
(170 448)
Cash available from operating activities
705 015
430 739
492 595
Dividends paid
(94 409)
(247 246)
(222 540)
Net cash inflow from operating activities
610 606
183 493
270 055
Replacement property, plant and equipment
(298 083)
(305 354)
(169 251)
Expansion property, plant and equipment
Intangible asset additions
Acquisition of subsidiary
Acquisition of joint venture
Proceeds on disposal of property, plant and
equipment
Proceeds on preference shares receivable
Investment in money market fund
Net cash outflow from investing activities
– discontinued operation
(178 921)
(8 853)
(747 008)
(128 955)
(56 805)
(26 248)
(92 500)
(190 789)
2 581
41 264
(450 000)
26 256
CASH FLOWS FROM INVESTING ACTIVITIES
C
7 787
(759)
Net cash outflow from investing activities
(1 768 734)
(454 651)
(352 253)
(827 777)
112 472
3 880 941
98 885
8 569
12 627
CASH FLOWS FROM FINANCING ACTIVITIES
Repayments of interest-bearing liabilities
Advances of interest-bearing liabilities
Issue of shares
Net cash outflow from financing activities
– discontinued operation
(109)
Net cash inflow from financing activities
3 165 527
107 454
12 627
Net movement in cash and cash equivalents
Cash and cash equivalents
at the beginning of the year
2 007 399
(163 704)
(69 571)
Cash and cash equivalents at the end of the year
166
D
305 792
469 496
539 067
2 313 191
305 792
469 496
A.
CASH GENERATED BY OPERATIONS
Operating profit
Adjusted for:
Depreciation and amortisation
Loss on disposal of property, plant and equipment
Movement in retirement benefit obligations
Movement in derivative financial instruments
– non-cash flow hedges
Fair value adjustment in biological assets
Unrealised foreign exchange gains
Share-based payments – BEE charge
Share-based payments – Employee Share Option Scheme
Cash flow hedges released
Other non-cash items
Working capital changes:
Movement in inventories
Movement in biological assets
Movement in trade and other receivables
Movement in trade and other payables
B.
C.
D.
TAX PAID
Amount refundable at the beginning of the year
Acquisition of subsidiary
Charged to the income statement
Normal tax
Prior year over provision
Secondary Tax on Companies
Amount refundable at the end of the year
ACQUISITION OF SUBSIDIARY/BUSINESS
COMBINATION
Cash paid for subsidiary
Cash acquired from business
12 months
ended
30 June
2013
R’000
12 months
ended
30 June
2012
R’000
15 months
ended
30 June
2011
R’000
166 027
414 224
552 277
278 294
1 906
6 677
200 286
427
6 425
210 340
6 834
7 492
17 685
(1 513)
14 630
3 336
21 128
2 737
5 905
(24 277)
2 767
2 465
(10 500)
3 383
18 553
4 260
17 954
516 812
621 788
791 122
(58 176)
(59 119)
109 106
160 656
(208 236)
(33 968)
(88 119)
214 904
(126 391)
(11 928)
(104 905)
95 433
152 467
(115 419)
(147 791)
669 279
506 369
643 331
40 875
6 690
29 505
(149)
(59 312)
(59 157)
(155)
(30 982)
(83 012)
(60 930)
2 642
(24 724)
(29 505)
(136 263)
(131 979)
17 970
(22 254)
(40 875)
(60 938)
(71 642)
(170 448)
(1 026 225)
279 217
(92 500)
(747 008)
(92 500)
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include restricted balances of R39.2 million (2012: R29.7 million). Restricted
cash balances consist of initial margin balances with the JSE Limited which serve as collateral for
derivative positions held at year-end. This cash will only be accessible by the Group when the related
derivative positions are closed. Certain cash and cash equivalents have been pledged as security for certain
borrowings (refer to note 15).
The carrying amount of cash and cash equivalents approximates their fair value.
167
168
Balance at 30 June 2013
Profit for the year
Other comprehensive income
Ordinary dividend paid
Acquisition of subsidiary
BEE share-based payments charge
Rights issue
Employee share incentive scheme:
– proceeds from shares issued
– value of employee services
Balance at 1 July 2012
Total comprehensive income for the year
Ordinary dividends paid
BEE share-based payments charge
Employee share incentive scheme
– proceeds from shares issued
– value of employee services
Balance at 1 July 2011
Total comprehensive income for the year
Ordinary dividends paid
BEE share-based payments charge
Employee share incentive scheme
– proceeds from shares issued
– value of employee services
Balance at 1 April 2010
5 079 194
23 472
3 857 469
1 198 253
8 569
1 189 684
12 627
1 177 057
Stated
capital
R’000
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
1 041
1 041
185 188
21 128
3 336
160 724
18 553
3 383
138 788
17 954
4 260
116 574
1 479 480
(94 409)
26 507
1 547 382
266 767
(247 246)
1 527 861
383 850
(222 540)
1 366 551
6 744 903
23 472
21 128
3 336
3 857 469
26 507
1 041
(94 409)
2 906 359
8 569
18 553
266 767
(247 246)
3 383
2 856 333
12 627
17 954
383 850
(222 540)
4 260
2 660 182
Attributable to equity holders of the Company
Share-based
Other
payments
Retained
reserves
reserve
earnings
Total
R’000
R’000
R’000
R’000
311 306
331 424
(20 118)
Noncontrolling
interests
R’000
7 056 209
23 472
21 128
6 389
1 041
(94 409)
331 424
3 336
3 857 469
2 906 359
8 569
18 553
266 767
(247 246)
3 383
2 856 333
12 627
17 954
383 850
(222 540)
4 260
2 660 182
Total
R’000
ACCOUNTING POLICIES FOR THE YEAR ENDED 30 JUNE 2013
BASIS OF PREPARATION
The RCL Foods Group and Company financial statements have been prepared in accordance with International
Financial Reporting Standards (IFRS), IFRIC interpretations, SAICA Financial Reporting guides, the
requirements of the Companies Act of South Africa and the Listings Requirements of the JSE Limited under
the supervision of the Chief Financial Officer, Robert Field, CA(SA). The financial statements have been prepared
using the historical cost convention, except for biological assets and financial instruments at fair value through
profit and loss. The accounting policies comply with IFRS and have been consistently applied to all years
presented except for the amendments to IAS 1 (Presentation of Financial Statements) that became effective
1 July 2012. The adoption of this standard has no effect on the results, nor has it required any restatement of
the results.
The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting
estimates. It also requires management to exercise its judgement in the process of applying the Group’s
accounting policies. The areas involving a higher degree of judgement or complexity or where assumptions and
estimates are significant to the consolidated financial statements, are disclosed on page 178.
BASIS OF CONSOLIDATION
Subsidiaries
Subsidiaries are all entities (including special purpose entities) over which the Group has the power to govern
the financial and operating policies generally accompanying a shareholding of more than one half of the
voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible
are considered when assessing whether the Group controls another entity. The Group also assesses existence
of control where it does not have more than 50% of the voting power but is able to govern the financial and
operating policies by virtue of de facto control.
De facto control may arise in circumstances where the size of the Group’s voting rights relative to the size and
dispersion of holdings of other shareholders give the Group power to govern the financial and operating
policies.
Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date that control ceases.
The Group applies the acquisition method of accounting to account for business combinations. The consideration
transferred for the acquisition of a subsidiary is the fair values of the assets transferred, the liabilities incurred
and the equity interests issued by the Group. The consideration transferred includes the fair value of any asset
or liability resulting from a contingent consideration arrangement. Acquisition-related costs are expensed as
incurred. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination
are measured initially at their fair values at the acquisition date. On an acquisition-by-acquisition basis, the
Group recognises any non-controlling interest in the acquiree either at fair value or at the non-controlling
interest’s proportionate share of the acquiree’s net assets.
If the business combination is achieved in stages, the acquisition date fair value of the acquirer’s previously
held equity interest in the acquiree is re-measured to fair value at the acquisition date through profit or loss.
Any contingent consideration to be transferred by the Group is recognised at fair value at the acquisition date.
Subsequent changes to the fair value of the contingent consideration that is deemed to be an asset or liability
is recognised in accordance with IAS 39 either in profit or loss or as a change to other comprehensive income.
Contingent consideration that is classified as equity is not re-measured, and its subsequent settlement is
accounted for within equity.
Investments in subsidiaries are accounted for at cost less impairment. Cost is adjusted to reflect changes in
consideration arising from contingent consideration amendments. Cost also includes direct attributable costs
of investment.
The excess of the consideration transferred, the amount of any non-controlling interest in the acquiree and the
acquisition date fair value of any previous equity interest in the acquiree over the fair value of the Group’s
share of the identifiable net assets acquired is recorded as goodwill. If this is less than the fair value of the net
assets of the subsidiary acquired in the case of a bargain purchase, the difference is recognised in profit or
loss.
Inter-company transactions, balances, income and expenses on transactions between Group companies are
eliminated. Profits and losses resulting from inter-company transactions that are recognised in assets are also
eliminated. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with
the policies adopted by the Group.
169
Changes in ownership in subsidiaries without Group control
Transactions with non-controlling interests that do not result in loss of control are accounted for as equity
transactions, that is as transactions with the owners in their capacity as owners. The difference between fair
value of any consideration paid and the relevant share acquired of the carrying value of net assets of the
subsidiary is recorded in equity. Gains and losses on disposals to non-controlling interests are also recorded
in equity.
Disposal of subsidiaries
When the Group ceases to have control any retained interest in the entity is re-measured to its fair value at the
date when control is lost, with the change in carrying amount recognised in profit and loss. The fair value is
the initial carrying amount for the purpose of subsequently accounting for the retained interest as an associate,
joint venture or financial asset. In addition, any amounts previously recognised in other comprehensive income
in respect of that entity are accounted for as if the Group had directly disposed of the related assets or liabilities.
This may mean that amounts previously recognised in other comprehensive income are reclassified to profit
and loss.
Joint ventures
Entities that are jointly controlled through contractual arrangements between the Group and other parties are
classified as joint ventures and accounted for according to the equity method. Under the equity method, the
investment is initially recognised at cost, and the carrying amount is increased or decreased to recognise the
investor’s share of profit or loss of the investee after the date of acquisition.
The Group determines at each reporting date whether there is any objective evidence that the joint venture is
impaired. If this is the case, the Group calculates the amount of the impairment as the difference between the
recoverable amount of the joint venture and its carrying value and recognises the amount adjacent to share of
profit/(loss) of associates in the income statement.
Accounting treatment for subsidiaries in company financial statements
Dividend income from subsidiaries is recognised in the income statement when the right to receive payment is
established.
FOREIGN CURRENCY TRANSLATION
(Functional and presentation currency)
Items included in the financial statements of each of the Group’s entities are measured using the currency of
the primary economic environment in which the entity operates (“the functional currency”). The functional
currency of the Group and the presentation currency of the Group is Rand.
Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing
at the dates of the transactions or valuation where items are re-measured. Foreign exchange gains and losses
resulting from the settlement of such transactions and from the translation at year-end exchange rates of
monetary assets and liabilities denominated in foreign currencies are recognised in the income statement,
except when deferred in other comprehensive income as qualifying cash flow hedges and qualifying net
investment hedges. Foreign exchange gains and losses that relate to borrowings and cash and cash equivalents
are presented in the income statement within “finance income or costs”. All other foreign exchange gains and
losses are presented in the income statement within “other (losses)/gains”. Translation differences related to
changes in amortised cost are recognised in profit and loss, and other changes in carrying amount are
recognised in other comprehensive income.
Translation differences on non-monetary financial assets and liabilities such as equities held at fair value
through profit and loss are recognised in profit and loss as part of the fair value gain or loss. Translation
differences on non-monetary financial assets, such as equities classified as available for sale, are included in
other comprehensive income.
The results and financial position of all the Group entities (none of which has the currency of a hyperinflationary economy) that have a functional currency different from the presentation currency are translated
into the presentation currency as follows:
• assets and liabilities for each statement of financial position presented is translated at the closing rate at the
date of that statement of financial position;
• income and expenses for each income statement are translated at average exchange rates (unless this average
is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates,
in which case income and expenses are translated at the rate on the dates of the transactions); and
• all resulting exchange differences are recognised in other comprehensive income.
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PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at historical cost less accumulated depreciation less impairment
losses. Cost includes expenditure that is directly attributable to the acquisition of the assets. Subsequent costs
are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is
probable that future economic benefits associated with the item will flow to the Group and the cost of the item
can be measured reliably. The carrying amount of the replaced part is derecognised. All other repairs and
maintenance costs are charged to the income statement during the financial period in which they are incurred.
Depreciation is provided on property, plant and equipment at rates that reduce the cost thereof to estimated
residual values over the expected useful lives of the asset on a straight-line basis. The assets’ residual values
and useful lives are reviewed, and adjusted if appropriate, at each reporting date. Where assets are identified
as being impaired, that is when the recoverable amount has declined below its carrying amount, the carrying
amount is reduced to reflect the decline in value.
Gains or losses on disposals are determined by comparing proceeds with the carrying amount. These are
included in the income statement.
Depreciation is calculated over the following estimated useful lives:
Buildings
20 to 50 years
Leasehold improvements
period of lease
Plant and equipment
– capitalised and owned
3 to 25 years
Vehicles
– capitalised and owned
3 to 8 years
Furniture
10 to 20 years
Capital work in progress is not depreciated until such a time as the asset is available for use.
Land is not depreciated.
INTANGIBLE ASSETS
Trademarks and customer relationships
Separately acquired trademarks are shown at historical cost. Trademarks and customer relationships acquired
in a business combination are recognised at fair value at the acquisition date.
The useful lives of trademarks are assessed to be either finite or indefinite. The useful lives of customer
relationships are considered to be finite. Trademarks with finite lives and customer relationships are amortised
over the useful life on a straight-line basis and assessed for impairment whenever there is an indication that
the intangible asset may be impaired. Amortisation periods and amortisation methods are reviewed annually.
The useful lives of intangible assets are as follows:
Trademarks
Indefinite/15 years
Customer relationships
10 to 20 years
Trademarks with indefinite lives are not amortised but are reviewed annually to determine whether indefinite
life assessment continues to be supportable. If not, the change in the useful life assessment to a finite life is
made on a prospective basis. These tests are done either individually or at the cash-generating level. Factors
considered in reaching a conclusion include the economic viability of the asset itself and where it is a component
of a larger economic unit, the viability of that unit itself.
Goodwill
Goodwill arises on the acquisition of subsidiaries and represents the excess of the consideration transferred
over the Group’s interest in net fair value of the net identifiable assets, liabilities and contingent liabilities of the
acquiree and the fair value of the non-controlling interest in the acquiree. It is reported in the statement of
financial position as a non-current asset and carried at cost less accumulated impairment losses. Each unit or
group of units to which the goodwill is allocated represents the lowest level within the entity at which the
goodwill is monitored for internal management purposes. Goodwill is monitored at the operating segment
level. Goodwill impairment reviews are undertaken annually or more frequently if events or changes in
circumstances indicate a potential impairment. The carrying value of goodwill is compared to the recoverable
amount, which is the higher of value in use and the fair value less costs to sell. Any impairment is recognised
immediately as an expense and is not subsequently reversed. Gains and losses on the disposal of an entity
include the carrying amount of goodwill relating to the entity sold.
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Computer software
Costs associated with maintaining computer software programs are recognised as an expense as incurred.
Development costs that are directly attributable to the design and testing of identifiable and unique software
products controlled by the Group are recognised as intangible assets when the following criteria are met:
• it is technically feasible to complete the software product so that it will be available for use;
• management intends to complete the software product to use;
• there is an ability to use or sell the software product;
• the software product will generate probable future economic benefits;
• adequate technical, financial and other resources to complete the development and to use are available; and
• the expenditure attributable to the software product during its development can be reliably measured.
Directly attributable costs that are capitalised as part of the software product include the software development
employee costs and an appropriate portion of relevant overheads.
Other development expenditures that do not meet these criteria are recognised as an expense as incurred.
Development costs previously recognised as an expense are not recognised as an asset in a subsequent period.
Computer software development costs recognised as assets are amortised over their estimated useful lives,
which does not exceed 10 years and are stated at cost less accumulated amortisation.
IMPAIRMENT OF NON-FINANCIAL ASSETS
Assets that have an indefinite useful life, for example goodwill and certain trademarks, are not subject to
amortisation and are tested annually for impairment. Assets that are subject to amortisation are tested for
impairment whenever events or changes in circumstances indicate that the carrying amount may not be
recoverable. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. An
impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable
amount. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are
separately identifiable cash flows (cash-generating units). Non-financial assets other than goodwill, that were
impaired, are reviewed for possible reversal of the impairment at each reporting date.
DISPOSAL GROUPS HELD FOR SALE
Disposal groups are classified as assets and liabilities held for sale when their carrying amount is to be
recovered principally through a sale transaction and a sale is considered highly probable. They are stated at
the lower of carrying amount and fair value less cost to sell.
INVENTORIES
Finished goods, raw materials, ingredients and consumables are valued at the lower of cost, determined on a
first-in first-out basis, and net realisable value. Costs include expenditure incurred in acquiring the inventories
and bringing them to their present location and condition, all direct production costs and an appropriate
portion of overheads based on normal capacity. Slaughtered chickens are transferred to inventory at fair value
less estimated point-of-sale costs. Net realisable value is the estimated selling price in the ordinary course of
business, less estimated selling expenses.
BIOLOGICAL ASSETS
Live broiler birds and breeding stock are measured at fair value less estimated point-of-sale costs at reporting
dates. Fair value is determined based on market prices or, where market prices are not available, by reference
to sector benchmarks.
Breeding stock includes the Cobb grandparent breeding and the parent rearing and laying operations. Broiler
hatching eggs are included in breeding stock.
Gains and losses arising on the initial recognition of biological assets at fair value less estimated point-of-sale
costs and from a change in fair value less estimated point-of-sale costs are recognised in the income statement
in the period in which they arise.
STATED CAPITAL
Ordinary shares are classified as equity.
Incremental costs directly attributable to the issue of new ordinary shares or options are shown in equity as a
deduction, net of tax, from the proceeds.
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Treasury shares
Shares in the company held by the Group companies are classified as treasury shares and are held at cost.
These shares are treated as a deduction from the issued number of shares and taken into account in the
calculation of the weighted average number of shares. The cost price of the shares is deducted from the Group’s
equity.
CURRENT AND DEFERRED TAX
The tax expense for the period comprises current and deferred tax.
The current tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the
reporting date. Management periodically evaluates positions taken in tax returns with respect to situations in
which applicable tax regulations are subject to interpretation, and establishes provisions where appropriate on
the basis of amounts expected to be paid to tax authorities.
Tax is recognised in the income statement, except to the extent that it relates to items recognised in other
comprehensive income or directly in equity. In this case the tax is also recognised in other comprehensive
income or directly in equity, respectively.
Deferred tax is calculated using tax rates that have been enacted or substantively enacted at the reporting date
and that are expected to apply to the period when the liability is settled or asset realised. Deferred tax is
accounted for using the balance sheet liability method in respect of temporary differences arising from
differences between the carrying amount of assets and liabilities in the financial statements and the
corresponding tax value used in the computation of taxable income. Deferred tax assets are raised only to the
extent that their recoverability is probable.
A deferred tax liability is recognised for taxable temporary differences arising on investments in subsidiaries
and joint ventures except where the Group is able to control the reversal of the temporary difference and it is
probable that the temporary difference will not reverse in the foreseeable future. The carrying amount of
deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable
that sufficient taxable profits will be available to allow all or part of the asset to be recovered.
However, deferred tax liabilities are not recognised if they arise from the initial recognition of goodwill;
deferred income tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction
other than a business combination that at the time of the transaction affects neither accounting nor taxable
profit or loss.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets
against current tax liabilities and when they relate to income taxes levied by the same tax authority and the
Group intends to settle its current tax assets and liabilities on a net basis.
SECONDARY TAX ON COMPANIES (STC)
STC was provided on dividend payments made before 1 April 2012, net of dividends received, and was recognised
as a taxation charge. STC was abolished effective 1 April 2012 and has been replaced by a new withholding tax
which is levied on the shareholder and not the company, with the exception of non-cash dividends.
EMPLOYEE BENEFITS
Retirement funds
The Group has defined contribution plans. A defined contribution plan is a pension plan under which the Group
pays fixed contributions into a separate entity. The Group has no legal or constructive obligations to pay
further contributions if the fund does not hold sufficient assets to pay all employees the benefits relating to
employee service in current and prior periods.
The assets of the plans are held in separate trustee-administered funds. These plans are funded by payments
from the employees and the Group, taking into account recommendations of independent qualified actuaries.
The Group’s contributions to the defined contribution pension plans are charged to the income statement in the
period to which they relate.
Post-retirement medical benefits – Defined benefit plan
For Rainbow and Vector employees engaged pre-October 2003 and January 1997, respectively, the Group
provides post-retirement medical benefits to its retirees. Foodcorp provides post-retirement medical benefits to
certain retired employees. The entitlement to post-retirement medical benefits is based on the employees
remaining in service up to retirement age. The projected unit credit method of valuation is used to calculate
the liability for post-retirement medical benefits and is calculated annually by independent actuaries.
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If the cumulative unrecognised actuarial gains and losses at the end of the previous reporting period exceed
10% of the obligation, that excess is recognised in future periods over the expected average remaining working
lives of the participating employees in the income statement. Past service costs are recognised in the income
statement in the period that they arise.
Bonus plan
The Group recognises a liability where contractually obliged or where there is past practice that has created a
constructive obligation. Management participates in a bonus plan whereby bonuses are paid in respect of outperformance against targets. All bonuses are authorised by the Remuneration and Nominations Committee.
Share-based payments
The Group operates share-based compensation plans under which the Group receives services from employees
as consideration for equity instruments (options and rights) of the Group. The fair value of the employees’
services received in exchange for the grant of the options or rights is recognised as an expense. The total
amount to be expensed is determined by reference to the fair value of the options granted:
• including any market performance conditions;
• excluding the impact of any service and non-market performance vesting conditions; and
• including the impact of any non-vesting conditions.
Non-market performance and service conditions are included in assumptions about the number of options that
are expected to vest. The total expense is recognised over the vesting period, which is the period over which all
of the specified vesting conditions are satisfied.
The fair value determined at the grant date is expensed on a straight-line basis over the vesting period with a
corresponding increase in equity and is based on the Group’s estimate of options that will eventually vest. Fair
value is measured by the use of a binomial model excluding non-market vesting conditions. Non-market vesting
conditions are included in assumptions about the number of options and rights that are expected to vest.
At each reporting date, the Group revises its estimates of the number of options or rights that are expected to
vest based on non-market vesting conditions. The Group recognises the impact on the original estimates, if
any, in the income statement with a corresponding adjustment to equity.
When the options or rights are exercised, the company issues new shares. The proceeds, net of any directly
attributable transaction costs received, are credited to share capital when the options or rights are exercised.
The grant by the Group of options over its equity instruments to the employees of subsidiary undertakings in
the Group is treated as a capital contribution. The fair value of employee services received, measured by
reference to the grant date fair value, is recognised over the vesting period as an increase to investment in
subsidiary undertakings, with a corresponding credit to equity in the parent entity accounts.
BEE TRANSACTIONS
BEE transactions where the Group receives or acquires goods or services as consideration for the issue of
equity instruments of the Group are treated as share-based payment transactions.
BEE transactions where employees are involved are measured and accounted for on the same basis as sharebased payments as disclosed above.
Transactions in which share-based payments are made to parties other than employees are measured by
reference to the fair value of equity instruments granted if no specific goods or services are received. Vesting
of the equity instrument occurs immediately and an expense and related increase in equity is recognised on
the date that the instrument is granted. No further measurement or adjustments are required as it is presumed
that the BEE credentials are received upfront.
LEASES
Leases of property, plant and equipment where the Group assumes substantially all of the risks and rewards
of ownership are classified as finance leases. Finance leased assets are capitalised at the lease’s commencement
at the lower of the fair value of the leased asset and the present value of the future minimum lease payments.
Each lease payment is allocated between the liability and finance charges so as to achieve a constant rate on
the finance balance outstanding. The corresponding rental obligations, net of finance charges, are included in
non-current liabilities. The assets are depreciated over the shorter of the period of the lease or the period over
which the particular category of asset is otherwise depreciated. Lease finance charges are charged to the
income statement over the term of the relevant lease using the effective interest rate method.
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Leases where the lessor retains a significant portion of the risks and rewards of ownership are classified as
operating leases. Payments made under operating leases are charged to the income statement on a straight-line
basis over the period of the lease.
The Group ensures that the following two requirements are met in order for an arrangement transacted by the
Group to be classified as a lease:
• fulfilment of the arrangement is dependent on the use of an asset or assets, and this fact is not necessarily
explicitly stated by the contract but rather implied; and
• the arrangement in substance conveys a right to use the asset.
The Group’s assessment of whether an arrangement contains a lease is made at the inception of the arrangement,
with reassessment occurring in the event of limited changes in circumstances.
Where the Group concludes that it is impracticable to separate payments for the lease from other payments
required by the arrangement:
• in the case of a finance lease, the Group recognises an asset and a liability at an amount equal to the fair
value of the underlying asset. Subsequently the liability is reduced as payments are made and an imputed
finance charge on the liability is recognised using the Group’s incremental borrowing rate of interest; and
• in the case of an operating lease, all payments under the arrangement are treated as lease payments.
REVENUE
Revenue comprises the fair value of the consideration received or receivable for the sale of goods and services
in the ordinary course of the Group’s activities. Revenue is disclosed net of value added tax, returns, rebates
and discounts and after eliminating sales within the Group.
Sales of goods comprise the sale of milling, agricultural produce and consumer goods. Sales of services
comprise logistics and distribution services where the Group acts as an agent on behalf of a principal and earns
commission and fees.
Revenue is recognised when a Group entity has delivered products to the customer (in the case of services when
the underlying products have been delivered), the customer has accepted the products, the amount of revenue
can be reliably measured, and collectability of the related receivable is reasonably assured.
The Group bases its estimates of incentive rebates and settlement discounts on historical results.
Interest income
Interest income is recognised using the effective interest method. When a loan and receivable is impaired, the
Group reduces the carrying amount to its recoverable amount, being the estimated future cash flow discounted
at the original effective interest rate of the instrument, and continues unwinding the discount as interest
income. Interest income on impaired loans and receivables is recognised using the original effective interest
rate.
FINANCIAL INSTRUMENTS
Financial instruments recognised on the statement of financial position include investments, preference shares,
derivative instruments, trade and other receivables, cash and cash equivalents, investment in money market
funds, trade and other payables and interest-bearing debt. Financial instruments are recognised when the
Group is party to a contractual arrangement and are initially measured at fair value.
The Group classifies its financial assets at fair value through profit and loss and loans and receivables. The
classification depends on the purpose for which the financial assets were acquired. Management determines
the classification of its financial assets at initial recognition.
Financial instruments at fair value through profit and loss
Financial assets at fair value through profit and loss, which comprise derivative instruments, unless designated
as hedges, are financial assets held for trading. A financial asset is classified in this category if acquired
principally for the purpose of selling in the short-term. Assets in this category are classified as current assets.
Gains or losses arising from changes in the fair value of the financial assets at fair value through profit and
loss are recognised in the income statement in the period in which they arise.
Financial assets carried at fair value through profit and loss are initially recognised at fair value and transaction
costs are expensed in the income statement.
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Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not
quoted in an active market. They are included in current assets, except for maturities greater than 12 months
after the end of the reporting period. These are classified as non-current assets. The Group’s loans and
receivables comprise trade and other receivables, preference shares receivable and cash and cash equivalents in
the statement of financial position.
Investment in money market funds
Investment in money market funds relate to investments in shares in liquidity funds of which the underlying
investments have maturities of up to one year. The shares in these funds are callable on a daily basis.
Derecognition
Financial assets (or a portion thereof) are derecognised when the Group has substantially transferred all risks
and rewards of ownership. On derecognition, the difference between the carrying amount of the financial asset
and the proceeds receivable is included in the income statement.
Financial liabilities (or a portion thereof) are derecognised when the obligation specified in the contract is
discharged, cancelled or expires. On derecognition, the difference between the carrying amount of the financial
liability, including related unamortised costs, and any amount paid is included in the income statement.
Recognition and measurement
Regular purchases and sales of financial assets are recognised on the trade-date, the date on which the Group
commits to purchase or sell the asset. Investments are initially recognised at fair value plus transaction costs
for all financial assets not carried at fair value through profit and loss.
Accounting for derivative financial instruments and hedging activities
Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are
subsequently remeasured at their fair value. The method of recognising the resulting gain or loss depends on
whether the derivative is designated as a hedging instrument, and if so, the nature of the item being hedged.
The Group designates certain derivatives as hedges of highly probable forecast transactions (cash flow hedge).
The Group documents at the inception of the transaction the relationship between hedging instruments and
hedged items, as well as its risk management objective and strategy for undertaking various hedge transactions.
The Group also documents its assessment, both at hedge inception and on an ongoing basis, of whether the
derivatives that are used in hedging transactions are highly effective in offsetting changes in fair values or
cash flows of hedged items.
The fair values of various derivative instruments used for hedging purposes are disclosed in note 8. Movements
on the hedging reserve in shareholders’ equity are shown in the statement of changes in equity.
Trading derivatives are classified as a current asset or liability. The full fair value of a hedging derivative is
classified as a non-current asset or liability if the remaining maturity of the hedged item is more than 12 months
and, as a current asset or liability, if the maturity of the hedged item is less than 12 months.
Cash flow hedge
The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow
hedges are recognised in other comprehensive income. The gain or loss relating to the ineffective portion is
recognised immediately in the income statement.
Amounts accumulated in equity are recycled in the income statement in the periods when the hedged item will
affect profit and loss (for instance when the forecast sale that is hedged takes place). However, when the forecast
transaction that is hedged results in the recognition of a non-financial asset (for example, inventory) or a
liability, the gains and losses previously deferred in equity are transferred from equity and included in the
initial measurement of the cost of the asset or liability. When a hedging instrument expires or is sold, or when
a hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss existing in equity at
that time remains in equity and is recognised when the forecast transaction is ultimately recognised in the
income statement. When a forecast transaction is no longer expected to occur, the cumulative gain or loss that
was reported in equity is immediately transferred to the income statement.
Derivatives that do not qualify for hedge accounting
Certain derivative instruments do not qualify for hedge accounting and are accounted for at fair value through
profit and loss. Changes in the fair value of any derivative instruments that do not qualify for hedge accounting
are recognised immediately in the income statement.
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Forward commitments to purchase maize for own use and consumption are designated executory in nature,
and excluded from the fair value adjustment. Embedded derivatives are treated as separate derivatives when
their risk and characteristics are not closely related to those of the host contract.
Impairment of financial assets
Assets carried at amortised cost
The Group assesses at the end of each reporting date whether there is objective evidence that a financial asset
or group of financial assets is impaired. A financial asset or a group of financial assets is impaired and
impairment losses are incurred only if there is objective evidence of impairment as a result of one or more
events that occurred after the initial recognition of the asset (a loss event) and that loss event (or events) has an
impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably
estimated.
Evidence of impairment may include indications that the debtors or a group of debtors is experiencing
significant financial difficulty, default or delinquency in interest or principal payments, the probability that
they will enter bankruptcy or other financial reorganisation, and where observable data indicate that there is
a measurable decrease in the estimated future cash flows, such as changes in arrears or economic conditions
that correlate with defaults.
For the loans and receivables category, the amount of the loss is measured as the difference between the asset’s
carrying amount and the present value of estimated future cash flows (excluding future credit losses that have
not been incurred) discounted at the financial asset’s original effective interest rate. The carrying amount of
the asset is reduced and the amount of the loss is recognised in the income statement. If a loan or held-tomaturity investment has a variable interest rate, the discount rate for measuring any impairment loss is the
current effective interest rate determined under the contract.
If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related
objectively to an event occurring after the impairment was recognised (such as an improvement in the debtor’s
credit rating), the reversal of the previously recognised impairment loss is recognised in the income statement.
Fair value estimation
The fair value of financial instruments traded in active markets (such as publicly traded derivatives) is based
on quoted market prices at the statement of financialposition date. The quoted market price used for
financialassets held by the Group is the current market price; the appropriate quoted market price for financial
liabilities is the current ask price.
The fair value of financial instruments that are not traded in an active market (for example, over-the-counter
derivatives) is determined by using valuation techniques. The Group used a variety of methods and makes
assumptions that are based on market conditions existing at each statement of financial position date. 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 forward exchange contracts is determined using forward exchange market rates at the statement
of financial position date.
The nominal value less estimated credit adjustments 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.
Trade and other receivables
Trade receivables are amounts due from customers for merchandise sold or services performed in the ordinary
course of business. If collection is expected in one year or less (or in the normal operating cycle of the business
if longer), they are classified as current assets. If not, they are presented as non-current assets. Trade receivables
and preference shares are recognised initially at fair value and are subsequently measured at amortised cost
using the effective interest rate method, less accumulated impairment losses. A provision for impairment of
trade receivables is established when there is objective evidence that the Group will not be able to collect all
amounts due according to the original terms of the receivables. Significant financial difficulties or delinquency
in payments are considered to be indicators that trade receivables are impaired. The amount of the provision is
the difference between the asset’s carrying amount and the present value of estimated future cash flows
discounted at the original effective interest rate. The difference is recognised as an expense in the income
statement. When a trade receivable is uncollectable it is written off against the provision account for trade
receivables. Subsequent recoveries of amounts previously written off are credited in the income statement.
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Cash and cash equivalents
Cash and cash equivalents include cash on hand, deposits held on call with banks, other short-term highly
liquid investments with original maturities of three months or less and bank overdrafts.
Trade and other payables
Trade payables are obligations to pay for goods and services that have been acquired in the ordinary course of
business from suppliers. Trade payables are recognised initially at fair value and subsequently measured at
amortised cost using the effective interest rate method.
Accounts payable are classified as current liabilities if payment is due within one year or less (or in the normal
operating cycle of the business if longer). If not, they are presented as non-current liabilities.
Borrowings
Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently
carried at amortised cost; any difference between the proceeds (net of transaction costs) and the redemption
value is recognised in the income statement over the period of the borrowings using the effective interest
method.
Foreign borrowings are valued at spot rates at year-end and changes in fair value are accounted for in terms
of hedging accounting policy.
Preference shares
Preference shares are mandatorily redeemable on a specific date and are thus classified as liabilities. The
dividends on these preference shares are recognised in the income statement as finance costs.
Offset
Financial assets and financial liabilities are offset if there is a currently enforceable legal right to offset and
there is an intention either to settle on a net basis or to realise the asset and settle the liability simultaneously.
DIVIDEND DISTRIBUTION
Dividend distribution to the company’s shareholders is recognised as a liability in the Group’s financial
statements in the period in which the dividends are approved by the company’s Board.
OPERATING SEGMENTS
Operating segments are reported in a manner consistent with the internal reporting provided to the chief
operating decision-maker. The chief operating decision-maker, who is responsible for allocating resources and
assessing performance of the operating segments, has been identified as the Chief Executive Officer.
STATEMENT OF COMPREHENSIVE INCOME LINE ITEMS
The following additional line items, headings and subtotals are presented on the face of the income statement
as management believes them to be relevant to the understanding of the Group’s financial performance:
• operating profit before depreciation and amortisation, being the trading income of the Group.
CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY
The key assumptions and sources of estimation uncertainty at the reporting date that could have significant
risk of causing material adjustment to the carrying amounts of the assets and liabilities within the new
financial year:
Useful lives and residual values of assets
Items of property, plant and equipment are depreciated over their useful lives taking into account residual
values. Useful lives and residual values are reviewed annually, taking into account factors such as the expected
usage, physical output, market demand for the output of the assets and legal or similar limits on the assets.
Impairment of assets
In view of the losses being incurred in Rainbow, and in compliance with the requirements of IAS 36 (Impairment
of Assets), the Board of Rainbow and RCL Foods have considered the need for an impairment of assets. Based
on the outcome of the discounted cash flow model and the need to await the outcome of the application for antidumping protection, the Boards have decided that it would be inappropriate to impair poultry assets at this
point. It must however be stated that if there is not a notable improvement in operating margins within the next
12 months then an impairment of assets will become necessary.
178
Goodwill and trademarks
Goodwill and indefinite life trademarks are considered for impairment at least annually.
Determining whether goodwill is impaired requires an estimation of the value-in-use of the cash-generating
units to which goodwill has been allocated. The value-in-use calculation requires the entity to estimate the
future cash flows expected to arise from the cash-generating unit and a suitable discount rate in order to
calculate the present value of future cash flows. Management estimates the discount rate using pre-tax rates
that reflect current market assessments of the time value of money and risks specific to the cash-generating
units. The growth rates are based on industry and customer growth forecasts.
Determining whether trademarks are impaired requires an estimation of the value-in-use of the trademark.
The value-in-use calculation requires the entity to estimate the future cash flows expected to arise from the
trademark and a suitable discount rate in order to calculate the present value of future cash flows. Management
estimates the discount rate using pre-tax rates that reflect current market assessments of the time value of
money and risks specific to the cash-generating units. The growth rates are based on industry and customer
growth forecasts.
The key assumptions used in the calculations are disclosed in note 2 to the financial statements.
Fair value assessment of biological assets
The determination of fair value is based on active market values, where appropriate, or management’s assessment
of the fair value based on available industry data and benchmark statistics. The key assumptions used in the
calculation of the fair value are the day old chick prices and the market price of feed consumed.
Liability for post-retirement medical benefits
The liability is determined by annual actuarial assumptions. The key estimates and assumptions relating to
the actuarial calculation are disclosed in note 14 to the financial statements.
Business combinations
Critical accounting estimates and assumptions were also made during the purchase price allocation process in
accounting for acquisitions as business combinations in accordance with IFRS 3 (Business combinations).
These estimates and assumptions relate to the determination of useful lives of assets, discount rates, growth
rates and valuation of unlisted investments.
The key assumptions used in the calculations are disclosed in note 33 to the financial statements.
IMPACT OF FUTURE AMENDMENTS TO ACCOUNTING STANDARDS AND INTERPRETATIONS
Management has considered all standards, interpretations and amendments that are in issue but not yet
effective. The standards, interpretations and amendments that are relevant to the Group but which the Group
has not early adopted are as follows:
NUMBER TITLE AND SUMMARY
IAS 19 Amendments to employee benefits (1 January 2013) – Recognition of Actuarial Gains and Losses
(remeasurements)
“Actuarial gains and losses” are renamed “remeasurements” and will be recognised immediately in “other
comprehensive income” (OCI). Actuarial gains and losses will no longer be deferred using the corridor approach
or recognised in profit and loss; this is likely to increase statement of financial position and OCI volatility.
Remeasurements recognised in OCI will not be recycled through profit and loss in subsequent periods.
Recognition of past-service cost/curtailment
Past-service costs will be recognised in the period of a plan amendment; unvested benefitswill no longer be
spread over a future-service period. A curtailment now occurs only when there is a significant reduction in the
number of employees.
Curtailment gains/losses are accounted for as past-service costs.
Measurement of pension expense
Annual expense for a funded benefit plan will include net interest expense or income, calculated by applying
the discount rate to the net defined benefit asset or liability. This will replace the finance charge and expected
return on plan assets, and will increase benefit expenses for most entities. There will be no change in the
discount rate, which remains a high-quality corporate bond rate where there is a deep market in such bonds,
and a government bond rate in other markets.
179
Presentation in the income statement
There will be less flexibility in income statement presentation. Benefit cost will be split between (i) the cost of
benefits accrued in the current period (service cost) and benefit changes (past-service cost, settlements and
curtailments), and (ii) finance expense or income. This analysis can be in the income statement or in the notes.
Disclosure requirements
Additional disclosures are required to present the characteristics of benefit plans, the amounts recognised in
the financial statements, and the risks arising from defined benefit plans and multi-employer plans. The
objectives and principles underlying disclosures are provided; these are likely to require more extensive
disclosures and more judgement to determine what disclosure is required.
Distinction between “short-term” and “other long-term” benefits
The distinction between short- and long-term benefits for measurement purposes is based on when payment is
expected, not when payment can be demanded. An obligation measured as a long-term benefit could therefore
be presented as a current liability when it is expected to be settled after more than one year, but does not have
the unconditional ability to defer settlement for more than one year.
Treatment of expenses and taxes relating to employee benefit plans
Taxes related to benefit plans should be included either in the return on assets or the calculation of the benefit
obligation, depending on their nature. Investment management costs should be recognised as part of the
return on assets; other costs of running a benefit plan should be recognised as period costs when incurred.
This should reduce diversity in practice but might make the actuarial calculations more complex.
Termination benefits
Any benefit that has a future-service obligation is not a termination benefit. This will reduce the number of
arrangements that meet the definition of termination benefits. A liability for a termination benefit is recognised
when the entity can no longer withdraw the offer of the termination benefit or recognises any related
restructuring costs. This might delay recognition of voluntary termination benefits.
Risk or cost sharing features
The measurement of obligations should reflect the substance of arrangements where the employer’s exposure
is limited or where the employer can use contributions from employees to meet a deficit. This might reduce the
defined benefit obligation in some situations. Determining the substance of such arrangements will require
judgement and significant disclosure.
IAS 27 Separate Financial Statements (1 January 2013)
IAS 27 has been renamed “Separate Financial Statements”; it continues to be a standard dealing solely with
separate financial statements. The existing guidance for separate financial statements is unchanged.
IAS 28 Investments in Associates and Joint Ventures (1 January 2013)
This standard includes the requirements for joint ventures, as well as associates, to be equity accounted
following the issue of IFRS 11.
IFRS 10 Consolidated Financial Statements (1 January 2013)
IFRS 10 replaces all of the guidance on control and consolidation in IAS 27 “Consolidated and Separate
Financial Statements”, and SIC-12, “Consolidation – Special Purpose Entities”. IAS 27 is renamed “Separate
Financial Statements”; it continues to be a standard dealing solely with separate financial statements. The
existing guidance for separate financial statements is unchanged.
IFRS 10 changes the definition of control so that the same criteria are applied to all entities to determine
control. This definition is supported by extensive application guidance that addresses the different ways in
which a reporting entity (investor) might control another entity (investee). The changed definition and
application guidance is not expected to result in widespread change in the consolidation decisions made by
IFRS reporting entities, although some entities could see significant changes.
All entities will need to consider the new guidance. The core principle that a consolidated entity presents a
parent and its subsidiaries as if they are a single entity remains unchanged, as do the mechanics of consolidation.
IFRS 10 excludes guidance specifically for investment companies, as the IASB continues to work on a project
on accounting by investment companies for controlled entities.
180
The new standard also includes guidance on agent/principal relationships. An investor (the agent) may be
engaged to act on behalf of a single party or a group of parties (the principals). Certain power is delegated to
the agent − for example, to manage investments. The investor may or may not have control over the pooled
investment funds. IFRS 10 includes a number of factors to consider when determining whether the investor
has control or is acting as an agent.
IFRS 11 Joint Arrangements (1 January 2013)
Changes in the definitions have reduced the “types” of joint arrangements to two: joint operations and joint
ventures. The existing policy choice of proportionate consolidation for jointly controlled entities has been
eliminated. Equity accounting is mandatory for participants in joint ventures. Entities that participate in joint
operations will follow accounting much like that for joint assets or joint operations today.
The standard also provides guidance for parties that participate in joint arrangements but do not have joint
control.
IFRS 9 Financial Instruments (1 January 2015)
Financial Assets
IFRS 9 addresses classification and measurement of financial assets.
The standard replaces the multiple classification and measurement models in IAS 39 with a single model that
has only two classification categories: amortised cost and fair value.
Classification under IFRS 9 is driven by the entity’s business model for managing the financial assets and the
contractual characteristics of the financial assets. A financial asset is measured at amortised cost if two criteria
are met:
• the objective of the business model is to hold the financial asset for the collection of the contractual cash
flows; and
• the contractual cash flows solely represent payments of principal and interest.
The new standard removes the requirement to separate embedded derivatives from financial asset hosts. It
requires a hybrid contract to be classified in its entirety at either amortised cost or fair value. Most embedded
derivatives introduce variability to cash flows. This is not consistent with the notion that the instrument’s
contractual cash flows solely represent the payment of principal and interest. Most hybrid contracts with
financial asset hosts will therefore be measured at fair value in their entirety.
Two of the existing three fair value option criteria become obsolete under IFRS 9, as a fair value driven business
model requires fair value accounting, and hybrid contracts are classified in their entirety. The remaining fair
value option condition in IAS 39 is carried forward to the new standard – that is, management may still
designate a financial asset as at fair value through profit and loss on initial recognition if this significantly
reduces an accounting mismatch. The designation at fair value through profit and loss will continue to be
irrevocable.
IFRS 9 prohibits reclassifications except in rare circumstances when the entity’s business model changes; in
this case, the entity is required to reclassify affected financial assets prospectively.
There is specific guidance for contractually linked instruments that create concentrations of credit risk, which
is often the case with investment tranches in a securitisation. In addition to assessing the instrument itself
against the IFRS 9 classification criteria, management should also “look through” to the underlying pool of
instruments that generate cash flows to assess their characteristics. To qualify for amortised cost, the
investment must have equal or lower credit risk than the weighted-average credit risk in the underlying pool
of instruments, and those instruments must meet certain criteria. If “a look through” is impracticable, the
tranche must be classified at fair value through profit and loss.
IFRS 9 classification principles indicate that all equity investments should be measured at fair value. However,
management has an option to present in other comprehensive income unrealised and realised fair value gains
and losses on equity investments that are not held for trading. Such designation is available on initial recognition
on an instrument-by-instrument basis and is irrevocable. There is no subsequent recycling of fair value gains
and losses to profit and loss; however, dividends from such investments will continue to be recognised in profit
and loss.
The cost exemption for unquoted equities and derivatives on unquoted equities has been removed, but guidance
is provided on when cost may be an appropriate estimate of fair value.
Financial liabilities
The requirements in IAS 39 regarding the classification and measurement of financial liabilities have been
retained, including the related application and implementation guidance.
181
Under the new standard, entities with financial liabilities designated at fair value through profit and loss
(FVTPL) recognise changes in the fair value due to changes in the liability’s credit risk directly in OCI. There
is no subsequent recycling of the amounts in OCI to profit and loss, but accumulated gains or losses may be
transferred within equity.
However, if presenting the change in fair value attributable to the credit risk of the liability in OCI would create
an accounting mismatch in profit and loss, all fair value movements are recognised in profit and loss. An entity
is required to determine whether an accounting mismatch is created when the financial liability is first
recognised, and this determination is not reassessed. The mismatch must arise due to an economic relationship
between the financial liability and a financial asset that results in the liability’s credit risk being offset by a
change in the fair value of the asset.
Financial liabilities that are required to be measured at FVTPL (as distinct from those that the entity has
designated at FVTPL), including financial guarantees and loan commitments measured at FVTPL, will
continue to have all fair value movement recognised in profit and loss. Derivatives such as foreign currency
forwards and interest rate swaps, or a bank’s own liabilities that it holds in its trading portfolio, continue to
have all fair value movements recognised in profit and loss.
Derecognition of financial instruments
The requirements in IAS 39 for determining when financial instruments are derecognised from the statement
of financial position have also been relocated to IFRS 9 without change.
IFRS 7 Amendment to IFRS 7 Disclosures – Offsetting Financial Assets and Financial Liabilities
(1 January 2013)
The amended disclosures will require more extensive disclosures than are currently required under IFRS and
US GAAP. The disclosures focus on quantitative information about recognised financial instruments that are
offset in the statement of financial position, as well as those recognised financial instruments that are subject
to master netting or similar arrangements irrespective of whether they are offset.
IFRS 12 Disclosure of Interests in Other Entities (1 January 2013)
IFRS 12 sets out the required disclosures for entities reporting under the two new standards, IFRS 10
(Consolidated Financial Statements), and IFRS 11, (Joint Arrangements); it replaces the disclosure requirements
currently found in IAS 28, (Investments in associates).
IFRS 13 Fair Value Measurement (1 January 2013)
This standard aims to improve consistency and reduce complexity by providing a precise definition of fair value
and a single source of fair value measurement and disclosure requirements for use across IFRSs. The
requirements, which are largely aligned between IFRSs and US GAAP, do not extend the use of fair value
accounting but provide guidance on how it should be applied where its use is already required or permitted by
other standards within IFRSs or US GAAP.
IFRS 32 Offsetting Financial Assets and Financial Liabilities (1 January 2014)
The amendments do not change the current offsetting model in IAS 32, which requires an entity to offset a
financial asset and financial liability in the statement of financial position only when the entity currently has
a legally enforceable right of set-off and intends either to settle the asset and liability on a net basis or to realise
the asset and settle the liability simultaneously.
The amendments clarify that the right of set-off must be available today – that is, it is not contingent on a future
event. It also must be legally enforceable for all counterparties in the normal course of business, as well as in
the event of default, insolvency or bankruptcy.
Improvements to IFRS 2011
Amendment to IAS 1 Presentation of Financial Statements
The amendment clarifies the disclosure requirements for comparative information when an entity provides a
third statement of financial position either:
• as required by IAS 8 (Accounting Policies, Changes in Accounting Estimates and Errors); or
• voluntarily.
When an entity produces an additional statement of financial position as required by IAS 8, the statement of
financial position should be as at the date of the beginning of the preceding period – that is, the opening
position. No notes are required to support this statement of financial position.
182
When management provides additional comparative information voluntarily – for example, statement of profit
and loss, statement of financial position – it should present the supporting notes to these additional statements.
Amendment to IFRS 1 as a result of the above amendment to IAS 1
The consequential amendment clarifies that a first-time adopter should provide the supporting notes for all
statements presented.
Amendment to IAS 16 (Property, Plant and Equipment)
The amendment clarifies that spare parts and servicing equipment are classified as property, plant and
equipment rather than inventory when they meet the definition of property, plant and equipment.
The previous wording of IAS 16 indicated that servicing equipment should be classified as inventory, even if it
was used for more than one period. Following the amendment, this equipment used for more than one period
is classified as property, plant and equipment.
Amendment to IAS 32 (Financial Instruments: Presentation)
The amendment clarifies the treatment of income tax relating to distributions and transaction costs.
Prior to the amendment, IAS 32 was ambiguous as to whether the tax effects of distributions and the tax effects
of equity transactions should be accounted for in the income statement or in equity.
The amendment clarifies that the treatment is in accordance with IAS 12. Therefore, income tax related to
distributions is recognised in the income statement, and income tax related to the costs of equity transactions
is recognised in equity.
Amendment to IAS 34 (Interim Financial Reporting)
The amendment clarifies the disclosure requirements for segment assets and liabilities in interim financial
statements.
The amendment brings IAS 34 into line with the requirements of IFRS 8, (Operating Segments).
A measure of total assets and liabilities is required for an operating segment in interim financial statements if
such information is regularly provided to the CODM and there has been a material change in those measures
since the last annual financial statements.
Amendment to IAS 36 (Recoverable Amount Disclosures for Non-financial Assets)
This amendment addresses the disclosure of information about the recoverable amount of impaired assets if
that amount is based on fair value less costs of disposal.
Amendment to IAS 39 (Novation of Derivatives and Continuation of Hedge Accounting)
This amendment will allow hedge accounting to continue in a situation where a derivative, which has been
designated as a hedging instrument, is novated to effect clearing with a central counterparty as a result of
laws or regulation, if specific conditions are met (in this context, a novation indicates that parties to a contract
agree to replace their original counterparty with a new one). This relief has been introduced in response to
legislative changes across many jurisdictions that would lead to the widespread novation of over-the-counter
derivatives. These legislative changes were prompted by a G20 commitment to improve transparency and
regulatory oversight of over-the-counter derivatives in an internationally consistent and non-discriminatory
way. Similar relief will be included in IFRS 9 (Financial Instruments).
Adoption of these standards by the Group in future reporting periods is not expected to have a significant
impact on the financial statements of the Group or company, apart from the application of IAS 19. IAS 19
eliminates the option to defer the recognition of actuarial gains and losses. The remeasurement will be required
to be presented in other comprehensive income in full.
183
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 30 June 2013
1.
PROPERTY, PLANT AND EQUIPMENT
30 June 2013
Cost
At the beginning of
the year
Transfers out of
capital work-inprogress*
Acquisition of
subsidiary**
Additions
Disposals
At the end of the year
Land and
buildings
R’000
Plant,
equipment
and
furniture
R’000
1 192 144
1 910 666
Capitalised Capitalised
leased
leased
assets:
assets:
Vehicles
Plant
Vehicles
R’000
R’000
R’000
269 305
Leasehold
improvements
R’000
7 918
Capital
work-inprogress
R’000
Total
R’000
155 863
3 535 896
(63 458)
571 446
100 640
(1 078)
1 863 152
687 279
343 756
(25 989)
(63 458)
106 881
68 079
(15 425)
53 219
8 006
36 824
2 535
25 530
1 287
130 659
23 631
1 611 838
547 934
(42 492)
2 915 712
428 840
69 143
39 359
26 817
246 695
5 589 718
1 980
Accumulated
depreciation
At the beginning of
the year
Disposals
Depreciation
503 686
(841)
53 020
1 069 410
(17 389)
171 018
136 748
(12 304)
32 078
3 020
1 161
925
1 711 824
(30 534)
261 222
At the end of the year
555 865
1 223 039
156 522
5 000
1 161
925
1 942 512
1 307 287
1 692 673
272 318
64 143
38 198
25 892
1 077 483
1 743 582
244 381
92 660
164 328
35 355
Net book amount
30 June 2012
Cost
At the beginning of
the year
Transfers out of
capital
work-in-progress*
Additions
Acquired in a
business
combination**
Disposals
At the end of the year
35 000
(12 999)
1 192 144
Accumulated
depreciation
At the beginning of
the year
Disposals
Depreciation
466 034
(3 442)
41 094
At the end of the year
503 686
Net book amount
688 458
47 851
(45 095)
1 910 666
973 129
(35 276)
131 557
7 918
246 695
3 647 206
98 497
3 163 943
(98 497)
155 863
9 649
(20 080)
269 305
(98 497)
456 124
92 500
(78 174)
7 918
155 863
3 535 896
124 772
(12 773)
24 749
1 980
1 563 935
(51 491)
199 380
1 069 410
136 748
1 980
1 711 824
841 256
132 557
5 938
155 863
1 824 072
* Transfers out of capital work-in-progress have been disclosed within additions of each of the appropriate individual
categories.
** Refer to note 33 for details of business combinations.
184
1.
PROPERTY, PLANT AND EQUIPMENT continued
Depreciation expense charged in:
Cost of sales
Selling and marketing expenses
Administration expenses
Distribution expenses
Continuing operations
Capital commitments:
Contracted and committed
Approved but not contracted
2013
R’000
2012
R’000
188 836
7 543
23 918
40 925
142 383
1 769
32 832
22 396
261 222
199 380
110 702
184 529
186 831
73 703
295 231
260 534
There are no capital commitments for the discontinued operation.
The Group has reviewed the residual values and useful lives used in the calculation of the depreciation
charge for the year. The review did not highlight any requirement for an adjustment to the residual values
and useful lives.
Capital commitments include all projects for which specific Board approval has been obtained up to
reporting date. Projects for which specific Board approval has not yet been obtained are excluded. The
capital expenditure will be financed from available resources.
A register of land and buildings is available for inspection at the registered office of the Company.
The Group leases various office equipment, plant and machinery and vehicles under finance lease
arrangements. The lease term is five years. The net book value of the assets leased amounts to R102 341 000
(2012: R5 938 000).
Certain items of property, plant and equipment have been pledged as security for certain borrowings (refer
to Note 15).
Software
R’000
2.
Trademarks
R’000
Customer
relationships
R’000
Goodwill
R’000
1 864 389
978 471
287 444
2 617 860
1 864 389
1 914 889
(11 903)
966 568
978 471
2 905 304
2 905 304
Total
R’000
INTANGIBLE ASSETS
30 June 2013
Opening net book amount
Acquisition of subsidiary*
Additions
Amortisation charge
Closing net book amount
Cost
Accumulated amortisation
and impairment
Net book amount
29 874
7 289
8 853
(5 169)
40 847
46 922
(6 075)
40 847
30 June 2012
Opening net book amount
Transfer from work-inprogress
Additions
Amortisation charge
4 532
26 248
(906)
Closing net book amount
29 874
Cost
Accumulated amortisation
and impairment
30 780
Net book amount
29 874
(50 500)
1 864 389
(906)
(11 903)
966 568
317 318
5 468 009
8 853
(17 072)
5 777 108
5 845 586
(68 478)
2 905 304
5 777 108
287 444
287 444
4 532
26 248
(906)
50 500
287 444
317 318
287 444
368 724
(50 500)
(51 406)
287 444
317 318
* Refer to Note 33 for details of business combination.
185
2.
2013
2012
Software
Finite life/indefinite life
Amortisation period
Method of amortisation
Is intangible title restricted in any way
Finite life
3 – 10 years
Straight-line
yes
Finite life
10 years
Straight-line
no
Trademarks
Finite life
Finite life/indefinite life
Amortisation period
Method of amortisation
Is intangible title restricted in any way
Finite life
15 years
Straight-line
no
Finite life
15 years
Straight-line
no
INTANGIBLE ASSETS continued
Trademarks comprise: Farmer Brown, Bonny Bird, FarmFare and Epol,
all of which were acquired on acquisition of Bonny Bird Farms
Proprietary Limited and Epol Proprietary Limited in 1991.
Indefinite life
Finite life/indefinite life
Is intangible title restricted in any way
Indefinite
yes
Trademarks comprise: Ouma, Nola, Yum Yum, Nutso, Bobtail, Catmor,
Dogmor, Sunbake,Ultra dog, Canine Cuisine, Mageu, Monati , Optimizer,
Glenryk, 5 Star, Mnandi, Supreme, Tafelberg, Safari and Piemans, all of
which were acquired on acquisition of New Foodcorp Holdings
Proprietary Limited (indirectly Foodcorp)
(refer to note 33 for further details).
Customer relationships
Finite life/indefinite life
Amortisation period
Method of amortisation
Is intangible title restricted in any way
Finite life
10 – 20 years
Straight-line
yes
Goodwill
Goodwill relates to the acquisition of Vector Logistics Proprietary
Limited in 2005 and New Foodcorp Holdings Proprietary Limited
(indirectly Foodcorp) in the current financial year.
Goodwill is made up as follows:
Vector Logistics Proprietary Limited
New Foodcorp Holdings Proprietary Limited
186
287 444
2 617 860
287 444
2 905 304
287 444
2.
INTANGIBLE ASSETS continued
Goodwill relating to the acquisition of Vector Logistics Proprietary Limited
The recoverable amount of a cash-generating unit is determined based on value-in-use calculations. These
calculations use cash flow projections based on financial budgets approved by management and future
periods based on estimated growth rates. Cash flows beyond a five-year period are extrapolated using the
estimated growth rates stated below.
Key assumptions used in the goodwill impairment test:
Discount rate – pre-tax
Discount rate – post-tax
Perpetuity growth rate
Period
The perpetuity growth rate is consistent with long-term
inflation forecasts. The discount rate reflects specific
risks relating to the cash-generating unit.
No impairment was required in the current year or
prior year.
Sensitivity analysis of assumptions used in the goodwill
impairment test:
Discount rate
– movement
– impairment
Perpetuity growth rate
– movement
– impairment
2013
R’000
2012
R’000
(%)
(%)
(%)
(years)
20,8
15,0
5,0
5
17,3
12,3
5,5
5
(%)
+2
nil
+2
nil
(%)
(0,5)
nil
(2)
nil
Goodwill relating to the acquisition of New Foodcorp Holdings Proprietary Limited
Goodwill is allocated to the Group’s cash-generating unit (CGUs) identified according to business segment.
The recoverable amount of a CGU is determined based on value-in-use calculations. These calculations use
cash flow projections based on financial budgets approved by management and future periods based on
estimated growth rates. Cash flows beyond a five-year period are extrapolated using the estimated growth
rates stated below.
Key assumptions used in the goodwill impairment test:
2013
R’000
Discount rate – pre-tax
Discount rate – post-tax
Perpetuity growth rate
Period
The perpetuity growth rate is consistent with long-term
inflation forecasts. The discount rate reflects specific risks
relating to the CGUs.
No impairment was required in the current year.
Sensitivity analysis of assumptions used in the goodwill
impairment test:
Discount rate
– movement
– impairment
Perpetuity growth rate
– movement
– impairment
(%)
(%)
(%)
(years)
14,2
10,2
5,0
5
(%)
(Rm)
+2
700
(%)
R’m
(0,5)
1,764
2012
R’000
187
2.
INTANGIBLE ASSETS continued
Trademarks – indefinite useful life
The recoverable amount of each CGU is determined based on value-in-use calculations. These calculations
use cash flow projections based on financial budgets approved by management and future periods based
on estimated growth rates. Cash flows beyond a five-year period are extrapolated using the estimated
growth rates stated below.
Key assumptions used in the impairment test:
2013
R’000
Discount rate – pre-tax
Discount rate – post-tax
Perpetuity growth rate
Period
(%)
(%)
(%)
(years)
14,2
10,2
5,0
5
Discount rate
– movement
– impairment
(%)
R’m
+2
nil
Perpetuity growth rate
– movement
– impairment
(%)
R’m
(2)
nil
The perpetuity growth rate is consistent with long-term
inflation forecasts.
The discount rate reflects specific risks relating to the cashgenerating unit.
No impairment was required in the current year.
Sensitivity analysis of assumptions used in the goodwill
impairment test:
Certain intangible assets have been pledged as security for certain
borrowings (refer to note 15).
3.
4.
188
INVESTMENT IN JOINT VENTURE
Shares – at cost
Carrying value
Relates to 49,0% shareholding in Zam Chick Limited
(a company incorporated in Zambia).
The effective date of the transaction was 1 April 2013 and as Zam Chick
has a year-end of 31 March, the Group will equity account for Zam
Chick’s 12-month results to March 2014 in the Group’s 2014 financial
reporting period.
The purchase allocation is not considered to be final.
The Group’s share of the joint venture’s aggregate assets and liabilities
is as follows:
Assets
Liabilities
Interest held (%)
PREFERENCE SHARES RECEIVABLE
Preference shares in Foodcorp Management Holdings
(Proprietary) Limited
Preference shares are measured at amortised cost.
The investment in preference shares consist of shares in aggregate of
R1,00 each.
The preference shares are redeemable. The dividends are cumulative at a
dividend rate of 8,28%.
The preference shares receivable have been pledged as security for
certain borrowings (refer to note 15).
The preference shares receivable have been redeemed after year-end.
The carrying amount of the preference shares receivable approximates
their fair value.
128 955
128 955
48 708
8 335
49,0
130 275
2012
R’000
5.
2013
R’000
2012
R’000
493 768
751 123
77 164
556 411
260 879
55 750
1 322 055
873 040
184 295
31 821
135 335
31 637
254 912
853 918
(841 879)
5 045
224 095
777 803
(750 921)
3 935
271 996
254 912
INVENTORIES
Finished goods
Raw materials and ingredients
Consumables
At the end of the year
Amount of inventory written down to net realisable value
Amount included in inventory as write down to net realisable value
Certain inventories have been pledged as security for certain borrowings
(refer to note 15).
6.
BIOLOGICAL ASSETS
Breeding stock
At the beginning of the year at fair value
Gain arising from cost inputs
Decrease due to harvest
Fair value adjustment
At the end of the year at fair value
Broiler stock
At the beginning of the year at fair value
Gain arising from cost inputs
Decrease due to harvest
Fair value adjustment
221 515
3 756 212
(3 737 954)
25 290
221 131
3 562 041
(3 586 544)
24 887
At the end of the year at fair value
265 063
221 515
Total at the end of the year at fair value
537 059
476 427
189
2013
R’000
7.
2012
R’000
TRADE AND OTHER RECEIVABLES
Trade receivables
Less: Provision for impairment of trade receivables
1 933 349
(31 273)
1 234 904
(24 798)
Net trade receivables
Pre-payments
Other receivables
1 902 076
125 374
84 399
1 210 106
45 096
92 469
At the end of the year
2 111 849
1 347 671
yes
30
994 916
30 600
100
300
3 400
yes
30
994 237
43 000
990
800
3 000
1 029 316
1 042 027
Credit risk:
Collateral held/insurance
Terms (days)
Credit Guarantee Insurance Cover (CGIC)
Mortgage bonds – registered value
Notarial bonds – registered value
Cessions – book value
Bank guarantees – actual value
Provision for impairment movement
At the beginning of the year
Acquisition of subsidiary
Receivables impaired
Impairments utilised
Unused amounts reversed
(24 798)
(10 325)
(4 100)
586
7 364
(25 222)
At the end of the year
(31 273)
(24 798)
The other classes within trade and other receivables do not contain
impaired assets.
Trade receivables that are less than 30 days are not considered past due.
Receivables, not impaired, relate to a number of independent customers
for whom there is no recent history of default.
The ageing relating to these trade receivables is as follows:
30 to 90 days
Over 90 days
141 791
7 770
178 870
16 034
149 561
194 904
The individually impaired receivables relate mainly to customers in
unexpected difficult economic situations.
The ageing of these receivables is as follows:
30 to 90 days
Over 90 days
(7 377)
538
7 263
(9 459)
(21 814)
(1 612)
(23 186)
(31 273)
(24 798)
In the current year, 54% (2012: 84%) of the Group’s trade receivables have been covered by CGIC and other
collateral in the form of bonds and guarantees. The Group’s trade receivables that are not covered by CGIC
relate to a number of independent customers for whom there is no recent history of default. Other receivables
do not include any amounts that are past due or impaired.
All trade and other receivables are due within one year of the reporting date.
The carrying amount of trade and other receivables approximates their fair values.
Certain trade receivables have been pledged as security for certain borrowings (refer to Note 15).
190
2013
Assets
Liabilities
R’000
R’000
8.
2012
Assets
R’000
Liabilities
R’000
DERIVATIVE FINANCIAL
INSTRUMENTS
Derivative financial assets and
liabilities
Soya options
Soya oil options
Diesel hedge
Maize options
Forward exchange contracts
Euro participation hedge
7 296
336 849
15 767
Total
361 505
1 012
14 375
12
1 593
4 613
141
6 424
5 766
20 811
3
3
Gains and losses recognised in the hedging reserve in equity on forward foreign exchange contracts that
qualify for hedge accounting as of 30 June 2013 will be recognised in the income statement in the period
or periods during which the hedged forecast transaction affects the income statement.
There has been no ineffective portion recognised in profit or loss from the cash flow hedges.
191
9.
NON-CURRENT ASSETS HELD FOR SALE AND DISCONTINUED OPERATION
The assets and liabilities of the Fishing division, included in the Foodcorp segment, have been presented
as held for sale. The Group has concluded a heads of agreement with Oceana Group Limited.
Completion of the sale is subject to the fulfilment of certain conditions, including but not limited to,
approval from the Department of Agriculture, Forestry and Fishing and Competition Authorities.
The effective date of the transaction will be the first business day of the month, immediately following the
month during which the transaction becomes unconditional.
2013
R’000
Net cash inflow from operating activities
Net cash outflow from investing activities
Net cash outflow from financing activities
53 293
(759)
(109)
Total cash flows – discontinued operation
52 425
Assets of disposal group classified as held for sale
Property, plant and equipment
Goodwill
Trademarks and other intangibles
Investments
Inventory
Trade and other receivables
Trade receivables intercompany
Tax receivable
118 538
138 867
120 074
12
69 075
56 561
33 409
69
Total assets
536 605
Liabilities of disposal group classified as held for sale
Interest-bearing liabilities
Trade and other payables
Current income tax liabilities
Derivative financial instruments
Total liabilities
Non-controlling interest classified as held for sale
As the assets and liabilities presented as held for sale were acquired in a
business
combination, no income/expenses have been recognised in other
comprehensive income
relating to disposal group classified as held for sale.
Analysis of the result of the discontinued operation, and the result
recognised on the
measurement of assets or disposal group, is as follows:
Revenue
Expenses
178 656
5 490
122 039
(100 631)
Profit before tax
21 408
Income tax expense
(6 097)
Profit for the year
15 311
Attributable to:
Equity holders of the company
Non-controlling interests
192
1 876
85 425
1 648
89 707
9 821
5 490
2012
R’000
2013
R’000
2012
R’000
10. STATED CAPITAL
Authorised
1 000 000 000 (2012: 575 525 772) RCL Foods Shares.
Issued RCL Foods Shares:
Number
of shares
At the beginning of the year
Rights issue
Shares issued in terms of Share Incentive Plans
294 991 606
276 964 802
2 300 076
1 198 253
3 857 469
23 472
1 189 684
At the end of the year
574 256 484
5 079 194
1 198 253
Details pertaining to the rights issue
Proceeds from rights issue
Transaction costs
8 569
3 932 900
(75 431)
3 857 469
Statutory shares in issue
Less: Shares issued in terms of Current RCL Foods BEE
Structure*
625 433 701
Total
574 256 484
(51 177 217)
* On 30 July 2008, 51 177 217 Shares were issued to Eagle Creek Investments 620 Proprietary Limited in terms of the
Current RCL BEE Structure. For accounting purposes, these Shares are not treated as issued (refer to note 32 for
further details).
The unissued ordinary Shares are under the control of the directors until the forthcoming annual general
meeting.
RCL Share Incentive Scheme
Details of Share options granted under this plan are as follows:
Issue
price
prior
to rights
issue
(cents)
510
1 039
1 011
1 660
1 635
1 659
1 420
1 400
Issue
price
postrights Date
issue* Options
(cents) granted
Options at
Adjustment
30 June in respect of
2012 rights issue*
475
967
941
1 545
1 521
1 544
1 321
1 303
15 801
1 724 173
92 318
312 650
5 063 875
102 986
3 041 605
125 000
768
126 947
6 934
23 047
392 563
7 480
220 123
9 355
(12 811)
(1 851 120)
(99 252)
10 478 408
787 217
21 May 2004
25 May 2006
1 September 2006
1 April 2007
1 August 2007
23 November 2007
22 May 2008
1 February 2009
Options
exercised
during
the year
Options
forfeited
during
the year
(46 209)
(115 571)
(251 905)
(34 000)
(119 064)
(2 295 297)
(234 635)
Options at
30 June
2013
Options
exercisable
at
30 June
2013
3 758
3 758
335 697
5 294 658
110 466
2 890 759
100 355
335 697
5 294 658
110 466
2 890 759
100 355
8 735 693
8 735 693
* The issue price and number of outstanding options were amended as a result of the rights issue in order to place the holders in the
same position as they were before the rights issue. The amendments have no financial effect for the Group as they have placed the
participants in the same economic position before the rights issue.
2013
Rand
2012
Rand
14,66
14,53
10,19
15,26
15,82
14,08
14,66
8,04
16,14
15,29
The weighted average share prices were as follows:
Weighted
Weighted
Weighted
Weighted
Weighted
average
average
average
average
average
issue price of options in issue at the beginning of the year
issue price of options in issue at the end of the year
exercise price of options exercised during the year
issue price of rights forfeited during the year
share price at date options exercised during the year
193
10. STATED CAPITAL continued
RCL Share Appreciation Rights Scheme
Details of Share appreciation rights awarded under this plan are as follows:
Issue
price
prior to
rights
issue
(cents)
Issue
price
postrights Date
issue* rights
(cents) awarded
1 534
1 583
1 427
1 473
1 526
1 768
1 521
1 504
1 543
1 420
1 645
1 415
1 400
1 436
1 419
1 320
1 458
1 612
1 458
1 612
Rights
at
30 June
2012
1 August 2009
5 150 981
2 June 2010
5 458 275
1 September
2010
141 546
1 June 2011
5 594 913
1 December 2011
108 872
1 January 2012
166 223
1 April 2012
267 337
5 September
2012
27 February
2013
1 June 2013
16 888 147
Rights
awarded
during
the year
Adjustment
in respect
of
rights
issue*
376 797
394 251
5 641 697
Rights
exercised
during
the year
Rights
Rights exercisable
at
at
30 June
30 June
2013
2013
Rights
forfeited
during
the year
(60 015)
(161 963)
(150 489)
10 507
408 805
8 175
12 306
19 991
(152 053)
(307 323)
415 652
(259 222)
5 305 800
5 702 037
5 696 395
117 047
178 529
287 328
5 798 127
126 961
967 742
6 736 400
1 726 386
1 886 145
126 961
967 742
1 646 484
(60 015)
(1 031 050) 24 179 966
3 612 531
* The issue price and number of outstanding rights were amended as a result of the rights issue in order to place the holders in the
same position as they were before the rights issue. These amendments have no financial effect for the Group as they have placed the
participants in the same economic position before the rights issue.
The weighted average fair value of rights awarded during the year was R3,02 (2012: R3,80).
The weighted average share prices were as follows:
Weighted average issue price of rights in issue at the beginning
of the year
Weighted average issue price of rights in issue at the end of the year
Weighted average issue price of rights exercised during the year
Weighted average issue price of rights forfeited during the year
Weighted average award price of rights awarded during the year
Weighted average share price at date options exercised during the year
2013
Rand
2012
Rand
16,27
14,71
14,27
15,17
14,47
15,81
16,30
16,27
16,23
15,27
RCL Foods Conditional Share Plan
Details of the conditional share plan rights awarded under this scheme are as follows:
Conditional
shares
at
30 June
2012
Date
Conditional
shares
awarded
14 December 2012
Conditional
shares
awarded
during
the year
1 840 476
Adjustment
in respect of
rights issue*
Conditional
shares
exercised
during
the year
Conditional
shares
forfeited
during
the year
137 270
Conditional
shares
at
30 June
2013
Conditional
shares
exercisable
at 30 June
2013
1 977 746
* The number of outstanding conditional shares was amended as a result of the rights issue in order to place the holders in the same
position as they were before the issue. These amendments have no financial effect for the Group as they have placed the participants
in the same economic position as they were before the rights issue.
The weighted average fair value of conditional shares awarded during the year was R10,74 (2012: R nil).
The weighted average share prices were as follows:
Weighted
Weighted
Weighted
Weighted
Weighted
194
average
average
average
average
average
issue price of rights in issue at the beginning of the year
issue price of rights in issue at the end of the year
exercise price of rights exercised during the year
issue price of rights forfeited during the year
share price at date options exercised during the year
2013
2012
nil
nil
nil
nil
nil
nil
nil
nil
nil
nil
10. STATED CAPITAL continued
Expected volatility for all of the schemes was determined calculating the historical volatility of the share
price over the previous four years, adjusted for the impact on the share price of the offer by Remgro to
minorities in March 2007. The expected life used in the model has been adjusted, based on management’s
best estimate, for the effects of non-transferability, exercise restrictions and behavioural considerations.
These fair values were calculated using the binomial options pricing model. The inputs into the model
were as follows:
2013
2012
19,8 – 24,7
5,6 – 6,3
4,4
7 or 10
1,36
4,69
24,9 – 25,8
7,1 – 7,2
4,6
7 or 10
2,1
5,1
2013
R’000
2012
R’000
At the beginning of the year
Value of employee services expensed during the year
100 847
21 128
82 294
18 553
At the end of the year
121 975
100 847
BEE transaction
At the beginning of the year
Employee portion – recurring
59 877
3 336
56 494
3 383
At the end of the year
63 213
59 877
185 188
160 724
Expected volatility
Risk-free rate
Expected dividend yield
Contractual life
Weighted average contractual life – options
Weighted average contractual life – rights
(%)
(%)
(%)
(years)
(years)
(years)
11. SHARE-BASED PAYMENTS RESERVE
Employee share scheme
Total at the end of the year
12. OTHER RESERVES
Cash flow hedges
At the beginning of the year
Revaluation of cash flow hedges
Taxation impact
At the end of the year
797
222
1 019
Foreign currency translation reserve
At the beginning of the year
Currency translation on foreign subsidiary
22
At the end of the year
22
Total at the end of the year
1 041
There were no inefficiencies to be recorded from cash flow hedges (2012: R nil).
195
2013
R’000
13. PREFERENCE SHARE LIABILITIES
The preference share liabilities are made up as follows:
Preference shares issued at a par value of R0,00001
and a premium of R0,9999 per share – long term
Cumulative dividend
2012
R’000
30 000
5 089
35 089
The cumulative preferential cash dividend is calculated at a dividend rate
of 19,5% accrued on a semi-annual basis. The cumulative redeemable
preference shares are redeemable on or before 19 September 2018.
Preference shares issued at a par value of R1 737,51 per share – long term
The cumulative preferential cash dividend is calculated at a dividend rate
equal to prime accrued on a annual basis.
The cumulative redeemable preference shares are redeemable on or
before 10 May 2019.
The carrying amount of the preference share liabilities apprcximates
their fair values.
14. RETIREMENT BENEFIT OBLIGATIONS
Post-retirement medical benefits
42 959
155 350
108 587
108 587
15 116
102 162
10 461
Post-retirement medical obligation
The obligation of the Group to pay certain medical aid benefits after
retirement is no longer part of the conditions of employment for
Rainbow employees engaged after 1 October 2003 and for Vector
employees engaged after 1 January 1997. A number of pensioners and
current employees, however, remain entitled to this benefit. The
entitlement to this benefit is dependent upon the employee remaining in
service until retirement age. The Group also provides certain medical
aid benefits to certain retired employees of Foodcorp. The last valuation
date was 30 June 2013 for Rainbow, Vector and Foodcorp. The unfunded
liability for post-retirement medical aid benefits is determined
actuarially each year and comprises:
At the beginning of the year
Recognised as an expense in the current year
Interest costs
Current service costs
Actuarial loss/(gain) recognised
11 789
2 301
1 026
8 521
2 262
(322)
(8 439)
40 086
(4 036)
At the end of the year
Unrecognised past service costs
Unrecognised actuarial loss
155 350
(13 097)
28 081
108 587
(14 325)
28 549
Balance per actuarial valuation
170 334
122 811
8,60
8,10
*
**
8,25
7,75
*
**
Benefits paid
Acquisition of subsidiary
The principal actuarial assumptions are:
Discount rate (%)
Health care cost inflation (%)
Mortality – pre-retirement
Mortality – post-retirement
Impact of 1% movement in the assumed medical cost trend on:
– accrued liability increase
– accrued liability decrease
– current service and interest costs increase
– current service and interest costs decrease
Expected contributions for the years ended June
21 816
(19 861)
2 402
(1 959)
9 346
* SA85/90 (light) ultimate.
** PA(90) ultimate table rated down two years plus 1% improvement per annum from 2006.
196
19 081
(15 587)
2 122
(1 711)
4 839
14. RETIREMENT BENEFIT
OBLIGATIONS continued
Historical information
Present value of unfunded obligations
Experience (gain)/loss on plan liabilities
2013
R’000
170 334
(471)
2012
R’000
2011
R’000
122 811
3 422
105 676
2 991
2010
R’000
89 936
(5 746)
Retirement contribution plans
Pension and provident fund schemes
The Group contributes towards retirement funds for all permanent employees who are required to be a
member of a Group implemented scheme. These schemes, detailed below are governed by the Pension
Funds Act, 1956. Their assets consist primarily of listed shares, fixed income securities, property
investments and money market instruments and are held separately from those of the Group. The schemes’
assets are administered by a Board of trustees, each of which includes elected employee representatives.
The Rainbow Workers Provident Fund is a union fund, administrated by Negotiated Benefits Consultants
Proprietary Limited, and had no employer representatives on its Board of trustees. All members of the
Rainbow Workers Provident Fund re-joined the Rainbow Farms Provident fund with effect 1 May 2012.
The Pension Funds Second Amendment Bill was enacted with effect 7 December 2001. This Bill requires
that the actuarial valuations at 31 March 2004, together with a plan for the apportionment on a fair basis
to past and current members of the funds of any surplus established by this valuation date, must be
approved by the Financial Services Board (FSB). The FSB has approved a Nil Surplus Apportionment for
both the Rainbow Pension and Provident Funds and the Foodcorp Provident Fund.
Defined contribution pension and provident fund schemes
The latest audited financial information of the schemes that are administered by the Group all reflect a
satisfactory state of affairs. Amounts charged to the income statement are as follows:
Defined contribution pension and provident schemes:
– Rainbow Pension Fund
– Rainbow Provident Fund
– Rainbow Workers Provident Fund
– Namflex Pension Fund
– Foodcorp Funds:
– Alexander Forbes
– Liberty Life
– Sanlam Umbrella Fund
– NBC Provident Fund
– Old Mutual – SACCAWU
– Setshaba
– FAWU
– Metropolitan IMC Fund
2013
R’000
2012
R’000
24 644
59 944
22 692
51 077
4 703
341
354
6 835
134
303
628
907
158
475
391
94 773
78 813
197
2013
R’000
2012
R’000
15. INTEREST-BEARING LIABILITIES
Long term
Bank borrowings
Finance lease liabilities
Senior Secured Notes
Short term
Bank borrowings
Finance lease liabilities
Senior Secured Notes
46 940
5 468 349
61 828
3 814
5 515 289
65 642
115 723
39 228
142 278
30 833
2 410
297 229
33 243
Bank borrowings
The unsecured loan bears interest of between Jibar +1,5% and Jibar +1,65%. The outstanding loan together
with the accrued interest shall be repaid in quarterly instalments on the last day of the month.
The carrying amount of bank borrowings approximates their fair values.
Finance lease liabilities
The finance lease liabilities bear interest at a rate between 6,5% and 10,0%.
Finance lease liabilities are effectively secured as the rights to the leased assets revert to the lessor in the
event of default. The carrying amount of the finance lease liabilities approximates their fair values.
Senior Secured Notes
The Senior Secured Notes are listed on the Irish Stock Exchange, are Euro denominated and bear interest
at a fixed rate of 8,75%. The Senior Secured Notes have been translated at year-end at a spot rate of R12,86.
The Senior Secured Notes will mature in March 2018. The fair value of the Senior Secured Notes at yearend was R5,291 million.
The Group has provided financial institutions relating to the Senior Secured Notes with the following
security for its borrowing facilities:
•
A pledge and reversionary pledge of trade receivables for an amount of R856,6 million.
•
A pledge of inventory for an amount of R417,1 million.
•
A pledge of trademarks for an amount of R1 864,4 million.
•
A pledge of customer relationships for an amount of R966,6 million.
•
A pledge of software for an amount of R7,2 million.
•
Special notarial bond over plant and equipment for an amount of R400,0 million and R1,4 billion.
•
First covering mortgage bonds over certain specified immovable property for an aggregate amount of
R122,0 million and R2,8 billion.
•
General notarial bond over moveable assets for an amount of R200,0 million and R1,4 billion.
•
First deed of mortgage with the Registrar of Ships over certain fishing vessels for the amount of
R160,0 million.
•
Pledge and cession of the ordinary shares in Foodcorp and each of Foodcorp’s subsidiaries; and
•
Cash and cash equivalents have been pledged for an amount of R48,5 million.
All interest-bearing borrowings are approved by the Board.
198
2013
R’000
2012
R’000
16. TRADE AND OTHER PAYABLES
Long term
Trade payables
24 398
24 398
Short term
Trade payables
Accruals
Other payables
1 622 902
414 732
593 265
1 435 348
195 524
17 275
2 630 899
1 648 147
The carrying amount of trade and other payables approximates their fair values.
17. DEFERRED INCOME TAX
Deferred income tax liability movement:
At the beginning of the year
Acquisition of subsidiary*
Charge for the year – income statement
Charge for the year – other
Charge for the year – other comprehensive income
Prior year over provision
432 655
955 689
20 378
988
(222)
(215)
372 198
67 832
(7 375)
At the end of the year
1 409 273
432 655
Deferred income tax liability comprises:
Trademarks, property, plant and equipment
Inventories and biological assets
Provisions
Derivative financial instruments
Assessed loss
Disposal group classified as held for sale
Interest-bearing liabilities
Other
1 401 112
166 123
(93 074)
914
(158 719)
33 634
37 014
22 269
321 073
156 879
(50 457)
5 824
1 409 273
432 655
1 256 510
152 763
304 850
127 805
1 409 273
432 655
Deferred tax liability due after 12 months
Deferred tax liability due within 12 months
Deferred income tax asset movement:
At the beginning of the year
Charge for the year – income statement
4 327
At the end of the year
4 327
Deferred income tax asset comprises:
Provisions
4 327
(664)
4 327
Deferred tax assets due after 12 months
Deferred tax assets due within 12 months
4 327
* Refer to Note 33 for details on the acquisition of subsidiary.
** Deferred income tax assets are recognised for tax loss carry-forwards to the extent that the realisation of the related
tax benefit through future taxable profits is probable.
199
2013
R’000
2012
R’000
53 020
171 018
32 078
4 181
925
41 094
131 557
24 749
1 980
Amortisation – intangible assets
261 222
17 072
199 380
906
Total depreciation and amortisation
278 294
200 286
18. DEPRECIATION AND AMORTISATION
Buildings
Plant, equipment and furniture
Vehicles
Leased assets
Leasehold improvements
19. OPERATING PROFIT
Revenue
Cost of sales
Gross profit
Administration expenses
Selling and marketing expenses
Distribution expenses
Other income
Operating profit
10 108 812
(7 824 101)
7 855 142
(5 913 470)
2 284 711
(679 788)
(356 101)
(1 282 437)
199 642
1 941 672
(487 082)
(240 652)
(898 942)
99 228
166 027
414 224
30 355
102 472
66 815
28 822
67 868
1 572
100 424
67 383
77 463
18 497
4 464
50 760
13 907
2 716
Arrangements containing an operating lease*
660 713
632 888
– contract grower fees
– outsourced transport
224 554
436 159
172 682
460 206
Technical consultants’ and legal fees
Acquisition costs
Foreign exchange losses
Feed costs
Utilities
Loss on disposal of property, plant and equipment
Directors’ remuneration
Staff costs
51 713
45 599
58 321
3 149 169
571 323
1 906
11 289
1 572 952
34 629
5 268
2 507 748
494 797
427
10 226
1 269 554
–
–
–
–
–
1 260 169
23 508
94 773
15 116
179 386
1 099 174
18 553
78 813
10 461
62 553
Administration fee paid to Group holding company
Auditors’ remuneration
6 656
7 774
5 417
5 326
–
–
–
–
6 485
3
252
1 034
5 262
(976)
170
870
Disclosable items – income:
Fair value adjustment on biological assets
Fair value adjustment on derivatives
Foreign exchange gains
Disclosable items – expense:
Operating lease charges
– land and buildings
– plant and equipment
– other
salaries and wages
share-based payments
retirement benefit costs
other post-employment benefits
other
fees for the audit
prior year under/(over) provision
disbursements
fees for other services
* It is not practical to separate the lease element from the total costs paid in respect of these arrangements and
accordingly only total costs have been disclosed.
200
2013
R’000
2012
R’000
5 304
5 094
76 493
1 560
8 834
56 390
242
3 484
162
153 675
11 358
2 389
1 894
49 591
2 227
53 874
7 370
59 312
58 288
59 157
155
60 930
(2 642)
15 836
60 457
15 678
373
(215)
67 832
20. FINANCE COSTS
Interest – overdraft
Interest – other
Interest – interest-bearing liabilities
Interest – preference shares
Interest – Group company
Foreign exchange losses*
7 470
* Includes loss on re-measurement of Eurobonds at year-end spot rate of
R378 million (2012: R nil) and gains on re-measurement of forward exchange
contracts of R360 million (2012: R nil).
21. FINANCE INCOME
Interest – other
Interest – preference shares
Call funds with financial institutions and money market fund
5 143
22. INCOME TAX EXPENSE
Current tax
South African
Prior year under/(over) provision
Deferred tax
South African
Foreign
Prior year over provision
Secondary Tax on Companies
(7 375)
24 724
75 148
143 469
28,0
Reconciliation of tax rate:
Normal rate of tax
Adjusted for:
– secondary tax on companies
– prior year under/(over) provision – current
– prior year over provision – deferred
– tax loss utilised
– non-deductible items
(%)
28,0
(%)
(%)
(%)
(%)
(%)
0,2
(0,3)
0,3
85,3
Effective rate of tax
(%)
113,5
6,0
(0,5)
(1,8)
3,3
35,0
23. EARNINGS AND HEPS
Basic
Basic earnings per share is calculated by dividing the profit attributable to equity holders of the Company
by the weighted average number of shares in issue during the year.
Diluted
Diluted earnings are calculated using the fully diluted weighted average ordinary shares in issue. Dilution
is due to Shares offered, but not paid and delivered to participants in the Current RCL BEE Structure, the
RCL Share Appreciation Rights Scheme and RCL Conditional Share Plan (refer to Notes 10 and 11).
A calculation is performed to determine the number of shares that could have been acquired at fair value
based on the monetary value of the subscription rights attached to outstanding scheme shares. The number
of shares calculated below is compared with the number of shares that would have been issued assuming
the exercise of the share scheme options.
201
23. EARNINGS AND HEPS continued
2013
R’000
2012
R’000
Earnings
Profit from continuing operations attributable to equity holders of
the Company
Profit from discontinued operation attributable to equity holders of
the Company
16 686
266 767
Total
26 507
266 767
Weighted average number of ordinary shares in issue
Weighted average number of ordinary shares in issue – basic earnings
per share
Share option dilution impact
391 076
1 113
302 193*
683
Weighted average number of shares – diluted earnings per share
392 189
302 876*
Headline earnings
Headline earnings reconciliation – continuing operations:
Profit for the year attributable to equity holders of the Company
Loss on disposal of property, plant and equipment – net of tax of
R0.5 million (2012: R0.1 million)
16 686
266 767
1 373
307
Headline earnings
18 059
267 074
9 821
Headline earnings reconciliation – discontinued operation:
Profit for the year attributable to equity holders of the Company
9 821
Headline earnings
9 821
From continuing operations
Earnings per Share
– basic
(cents)
4,3
88,3*
(cents)
4,3
88,1*
(cents)
(cents)
4,6
4,6
88,4*
88,2*
Earnings per Share
– basic
– diluted
(cents)
(cents)
2,5
2,5
Headline earnings per Share
– basic
– diluted
(cents)
(cents)
2,5
2,5
– diluted
Headline earnings per Share
– basic
– diluted
From discontinued operation
* In January 2013, the Group embarked on a fully underwritten (by Remgro via Industrial Partnership Investments
Limited) R3,9 billion rights issue which was concluded in March 2013. The prior period weighted average number of
shares has been adjusted by a factor of 1,03 (the adjustment factor). The adjustment factor is calculated using the
Share price on 1 March 2013, being the Share price immediately prior to the rights issue (share price cum-rights)
divided by the theoretical ex-rights price (TERP). TERP is the number of new shares multiplied by the subscription
price plus the number of shares held multiplied by the ex-dividend Share price, all divided by the number of new
Shares plus the number of Shares held prior to the rights issue.
2013
R’000
2012
R’000
24. DIVIDENDS PER SHARE
Interim – paid: 0,0 cents (2012: 28,0 cents)
Final – declared: 0,0 cents (2012: paid 32,0 cents)
Total: 0,0 cents (2012: 60,0 cents)
202
82 568
94 397
176 965
2013
R’000
2012
R’000
111 121
166 703
81 670
205 634
277 824
287 304
233 542
34 316
9 966
246 619
32 908
7 777
277 824
287 304
25. LEASE COMMITMENTS
Continuing operations
Operating leases:
Due within one year
Due within two to five years
In respect of:
– property
– plant and equipment
– other
Discontinued operation
Operating leases:
Due within one year
Due within two to five years
3 636
2 055
5 691
In respect of:
– property
– plant and equipment
5 497
194
5 691
In addition, the Group has operating lease commitments with rentals
determined in relation to volumes of activity. It is not possible to
quantify accurately future rentals payable under such lease
arrangements.
26. CONTINGENCIES
Legal dispute
Contract grower guarantees
2 250
12 487
6 000
22 433
14 737
28 433
The Group has a contingent liability in respect of a legal claim for the dismissal of employees. The matter
is ongoing and legal counsel are of the opinion that the Group will be successful. The Directors have
concluded that it is highly unlikely that the Group will incur a financial loss.
The Group has contingencies in respect of contract grower arrangements whereby the Group has
guaranteed bank loans given to certain contract growers. These guarantees continue for a remaining
three years. It is not anticipated that any material liabilities will arise from these contingencies. However,
should they arise, the Group will acquire claims against the growers’ farms which would reduce the net
exposure.
203
27. OPERATING SEGMENTS
The Chief Executive Officer (CEO) is the chief operating decision-maker. The CEO assesses the performance
of the operating segments based on operating profit (EBIT).
The Rainbow segment is a vertically integrated chicken producer. The Vector segment is a specialist
frozen third-party logistics provider, providing integrated logistics. The Foodcorp segment is a food
producer and manufacturer with a diverse product basket that ranges from staples to some of South
Africa’s best-known consumer brands and ready-to-eat meals.
Revenue
Rainbow
Vector
Foodcorp
Sales between segments:
Vector to Rainbow
Vector to Foodcorp
204
2013
R’000
2012
R’000
10 108 812
8 143 587
1 476 888
1 217 505
7 855 142
7 196 632
1 339 580
(725 790)
(3 378)
(681 070)
Operating (loss)/profit
Rainbow
Vector
Foodcorp
Unallocated Group costs
(3 680)
143 303
99 010
(72 606)
245 487
168 737
Operating profit
Finance costs
Finance income
166 027
(153 675)
53 874
414 224
(11 358)
7 370
Profit before tax
66 226
410 236
Assets
Rainbow
Vector
Foodcorp
Unallocated segment
Investment in joint venture
Set-off of inter-segment balances
6 259 613
4 112 394
9 884 468
15 587
128 955
(3 048 557)
(1 521 253)
Total per statement of financial position
17 352 460
5 196 291
Liabilities
Rainbow
Vector
Foodcorp
Unallocated segment
Set-off of inter-segment balances
2 014 182
2 709 538
8 610 517
10 571
(3 048 557)
2 261 363
1 549 822
(1 521 253)
Total per statement of financial position
10 296 251
2 289 932
3 791 566
2 925 978
2013
R’000
2012
R’000
328 183
7 714
408 371
26 248
82 497
46 288
27. OPERATING SEGMENTS continued
Additions to property, plant and equipment and intangible assets
Rainbow
Property, plant and equipment
Intangible assets
Vector
Property, plant and equipment
Foodcorp
Property, plant and equipment
Intangible assets
Depreciation and amortisation
Rainbow
Vector
Foodcorp
Major customers
Revenue from the Group’s top five customers is:
– customer A
– customer B
– customer C
– customer D
– customer E
All of the above revenue is included in the Rainbow and Foodcorp segment.
Analysis of revenue
Sale of food products
Sale of feed
Sale of services
66 324
1 139
196 620
42 024
39 650
163 871
36 415
1 817 595
1 274 359
480 061
357 490
407 020
1 579 724
1 261 853
331 385
320 196
318 845
8 153 863
1 201 359
753 590
6 248 474
948 158
658 510
10 108 812
7 855 142
There is no significant revenue outside of South Africa.
28. FINANCIAL RISK MANAGEMENT
Financial risk factors
This note presents information about the Group’s exposure to financial risks, the Group’s objectives,
policies and processes for measuring and managing these risks and the Group’s management of capital.
The Group’s financial instruments consist primarily of cash resources with financial institutions,
derivatives, accounts receivable and payable, preferences shares receivable and interest-bearing liabilities.
In the normal course of business, the Group is exposed to credit, interest, liquidity and market risk. In
order to manage these risks, the Group may enter into transactions which make use of derivatives. They
include forward exchange contracts, options, interest rate swaps and commodity futures and options.
A separate committee is used to manage the risks and the hedging activities of the Group. The Group does
not speculate in derivative instruments. Certain of the Group’s forward exchange contracts qualify as
designated hedges for accounting purposes. Their fair values are disclosed in note 8.
The Board has overall responsibility for the establishment and oversight of the Group’s risk management
framework. The Board has established the Risk Committee which is responsible for developing and
monitoring the Group’s risk management policies. The Risk Committee reports regularly to the Board on
its activities.
The Group’s risk management policies are established to identify and analyse the risks faced by the Group,
to set appropriate risk limits and controls and to monitor risks and adherence to limits. Risk management
policies and systems are reviewed regularly to reflect changes in market conditions and the Group’s
activities. The Group, through its training, management standards and procedures, aims to develop a
disciplined and constructive control environment in which all employees understand their roles and
obligations.
Due to the recent acquisition of Foodcorp, the Board is currently assessing the impact of the acquisition
on the Group’s risk management framework.
205
28. FINANCIAL RISK MANAGEMENT continued
The Audit Committee oversees how management monitors compliance with the Group’s risk management
policies and procedures and reviews the adequacy of the risk management framework in relation to the
risks faced by the Group. The Audit Committee is assisted in its oversight role by internal audit. Internal
audit undertakes both regular and ad hoc reviews of risk management controls and procedures, the
results of which are reported to the Audit Committee.
Credit risk
Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument
fails to meet its contractual obligations. Credit risk primarily relates to trade receivables, cash investments,
preference shares receivable and derivative financial instruments.
The Group’s exposure to credit risk is influenced mainly by the individual characteristics of each customer
and there is no significant concentration of risk related to industry segments. The granting of credit is
controlled by well established criteria which are reviewed on an annual basis. The maximum exposure to
credit risk at the reporting date is the carrying amount of each class of financial asset and financial
guarantee amounting to R14,7 million (refer to note 26).
In the current year, 54% (2012: 84%) of the Group’s trade receivables have been covered by Credit Guarantee
Insurance Cover (CGIC) and other collateral in the form of bonds and guarantees. The insurance covers
90% of outstanding debt. The reduction in cover during the current year is due to the acquisition of
Foodcorp which has resulted in additional trade receivables of R793,5 million. Based on Foodcorp’s
stringent credit procedures and the fact that there is no significant concentration of risk related to the
customers, the Board is satisfied that the trade receivables are not covered by CGIC and other collateral.
The Board will reassess the need for cover in the next financial year. The credit policy requires each new
customer to be analysed individually for creditworthiness before delivery and payment terms are offered.
The Group’s review includes external ratings where available and in some cases bank references. Limits
are established for each customer which represents the maximum trading amount without requiring
further approval. These limits are reviewed on an ongoing basis. Customers that fail to meet the Group’s
benchmark creditworthiness may transact with the Group on a cash basis. Customers that default on
payments are closely monitored and put on “stop supply” if required.
The preference shares receivable are secured against shares in Foodcorp and have been settled subsequent
to year-end.
The Group deposits cash surpluses with financial institutions of high quality and standing. The following
table shows the cash and cash equivalents allocated in terms of bank rating. These ratings are based on
Moody’s bank ratings.
Rating
BAA1
Cash on hand
2013
R’000
2012
R’000
2 312 135
1 056
305 329
463
2 313 191
305 792
Investment in money market fund of R450 million relates to investments in Nedbank Limited. The
investment has an AA+ rating. The fund invests in call deposits, treasury bills, negotiable certificates of
deposit, fixed deposits, promissory notes and commercial paper. These instruments carry very low risk
and provides a 48 hour liquidity, but cannot be classified as cash and cash equivalents as the individual
instruments held by the fund do not meet the maturity criteria of IAS 7: (Statement of cash flow). These
instruments are considered to be equity instruments categorised as financial assets of fair value through
profit and loss.
The Group has minimal risk of illiquidity. Its unutilised borrowing capacity is R615 million (2012:
R470 million). Due to the dynamic nature of the underlying businesses, the Group maintains flexibility in
funding by maintaining availability under committed credit lines. Management monitors rolling forecasts
of the Group’s cash and cash equivalents on the basis of expected cash flow.
The Group’s derivative financial liabilities, and current trade and other payables are all due within one
year and the impact of discounting them is not significant.
206
28. FINANCIAL RISK MANAGEMENT continued
The table below summarises the maturity profile of the Group’s financial liabilities based on contractual
undiscounted payments:
Less than
one year
R’000
2013
Interest-bearing liabilities –
current
Interest-bearing liabilities –
non-current
Preference share liabilities
Trade and other payables
(excluding employee benefit
payables)
Derivative financial liabilities
2012
Interest-bearing liabilities –
current
Interest-bearing liabilities –
non-current
Trade and other payables
(excluding employee benefit
payables)
Derivative financial liabilities
One to
two years
R’000
Two to
three years
R’000
Greater than
three years
R’000
609 746
609 746
486 463
490 121
5 089
2 337 408
5 766
29 500
2 958 009
515 963
5 505 321
151 090
6 481 905
156 179
2 366 908
5 766
490 121
5 656 411
39 917
9 620 504
39 917
36 400
34 652
71 052
1 515 731
3
1 555 651
Total
R’000
1 515 731
3
36 400
34 652
1 626 703
Market risk
Interest rate risk
The Group is exposed to interest rate risk on its cash deposits and interest-bearing liabilities, which can
impact on the cash flows of these instruments. The exposure to interest rate risk is managed through the
Group’s cash management system which enables the Group to maximise returns whilst minimising risk.
The effective interest rate for the year was 8,04% (2012: 5,57%).
The post-tax impact on the income statement as at 30 June for fluctuations in variable interest rates, with
all other variables held constant, would have been as follows:
+3%
2013
R’000
2012
R’000
18 861
(4 469)
Foreign currency risk
In the normal course of business the Group enters into transactions denominated in foreign currencies.
Trade and other payables include net payables of R0,3 million (2012: R4,6 million), trade and other
receivables of R1,2 million (2012: R nil) in respect of sales and purchases in foreign currencies. The Group
also has substantial foreign currency Senior Secured Notes that are Euro denominated. The currencies
predominantly traded in by the Group are USD, GBP and EUR. As a result, the Group is subject to exposure
from fluctuations in foreign currency exchange rates. The Group utilises forward exchange contracts and
currency options to minimise foreign currency exchange risk in terms of its risk management policy. All
forward exchange contracts and currency options are supported by underlying transactions.
First priority Senior Secured Notes
On 4 March 2011, Foodcorp issued €390,0 million Senior Secured Notes with a coupon rate of 8,75% per
annum and a maturity date of 1 March 2018.
Payments under the 2018 Senior Secured Notes consists of two components, namely the principal due on
1 March 2018 and coupon payments due semi-annually on 1 September and 1 March. In order to hedge the
foreign currency exposure, the following foreign exchange contracts were entered into:
• the principal was hedged 50% through a performance participating foreign exchange and 50% through
a vanilla forward exchange contract, both for six years maturing on 1 March 2017;
• the semi-annual coupon payments have been partially hedged (50%) at inception using forward
exchange contracts maturing on each coupon payment date, until 1 March 2017; and
• in addition, the remaining portion of the coupon payment due on 1 September 2013 was recently
hedged using a vanilla forward exchange contract.
207
28. FINANCIAL RISK MANAGEMENT continued
The mark-to-market effects of the hedging arrangements are accounted for in the income statement under
financing costs.
A 10% appreciation or depreciation in the EUR will have a R565 million impact on the carrying amount of
the loan. Refer below for impact of the forward exchange contract (FEC) and participation hedge, which
offsets these adjustments.
Average
rate
R
Foreign
contract
amount
’000
30 June 2013
EUR FECs – assets*
EUR FECs – liabilities
USD FECs – assets
USD FECs – liabilities
AUD FECs – liabilities
13,97
11,7
9,5
9,4
9,4
263 250
296
12 412
1 280
189
30 June 2012
EUR FECs – liabilities
10,54
30
3
Foreign
option
amount
’000
Fair value
of options
R’000
30 June 2013
USD currency options – assets
USD currency options – liabilities
EUR currency options – assets
EUR currency options – liabilities
12 000
12 000
900
900
7 630
1 552
658
141
30 June 2012
USD currency options – assets
USD currency options – liabilities
53 000
35 000
7 685
6 941
Fair value
of FECs
R’000
336 847
(64)
7 023
894
77
* Relates to Senior Secured Notes.
30 June 2013
Euro participation hedge
Foreign currency amount
195 000
Currency
Sensitivity of future (post-tax) income statement impact arising on the maturity of currency option
contracts and trade payables:
Profit/(Loss) as a result of a movement of the USD and EUR at 30 June assuming the spot price remains
constant thereafter until the maturity of the contracts.
2013
R’000
10%
10%
10%
10%
increase in the value of the USD against the Rand
decrease in the value of the USD against the Rand
increase in the value of the EUR against the Rand
decrease in the value of the EUR against the Rand
23 239
(21 378)
653 857
(493 443)
2012
R’000
29 323
(29 323)
Commodity price and procurement risk
Commodity price risk arises from the risk of an adverse effect on current or future earnings from
fluctuations in the prices of commodities. To stabilise prices for the Group’s substantial commodity
requirements, derivative instruments including forward contracts, commodity options and futures
contracts are used to hedge its exposure to commodity price risk.
208
28. FINANCIAL RISK MANAGEMENT continued
The overriding directive is to procure commodities at the lowest cost to meet forecast requirements, both
internally and for external sales. Call and put options are utilised within this framework to manage
commodity requirements and supply. The use of written options is restricted to the hedging of existing
long positions and is limited to put options.
The overall procurement strategy and net positions are reported monthly to the Board and an oversight
committee. The oversight committee is responsible for the setting of the monthly company view with
regard to future price movements. The daily trading by the procurement team is restricted in terms of this
company view, unless prior approval is obtained from the Procurement Committee.
Maize and soya
Sensitivity of future (post-tax) income statement impact arising on the maturity of maize and soya
derivative contracts:
Profit/(loss) as a result of a movement in the spot price of maize and soya and resulting impact on tonnage
at 30 June, assuming the spot price remains constant thereafter until the maturity of the contracts.
Maize – 5% increase
Maize – 5% decrease
Soya – 15% increase
Soya – 15% decrease
2013
R’000
2012
R’000
510
(510)
1 745
(1 745)
19 194
(19 194)
28 225
(28 225)
Rainbow Farms Proprietary Limited has entered into contract grower agreements with various
counterparties to procure broiler chickens for the forthcoming financial year.
The commitment value as at 30 June 2013 was R80,6 million (2012: R19,9 million).
Capital risk management
The Board’s policy is to maintain a strong capital base so as to maintain shareholder, creditor and market
confidence and to sustain the future development needs of the business. The Board monitors both the
spread of shareholders and return on equity (which is defined as profit for the year expressed as a
percentage of average total equity) and the level of dividends paid to shareholders.
The Group’s target is to achieve a return on shareholders’ equity in excess of 25%. In 2013 the return was
0,5 % (2012: 9,3%). There were no changes to the Group’s approach to capital management during the year.
Fair value estimation
IFRS 7 requires disclosure of fair value measurements by level of the following fair value measurement
hierarchy:
–
quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1);
–
inputs other than quoted prices included within level 1 that are observable for the asset or liability,
either directly (that is, as prices) or indirectly (that is, derived from prices) (level 2); and
–
inputs for the asset or liability that are not based on observable market data (that is, unobservable
inputs) (level 3).
The following table presents the Group’s assets and liabilities that are measured at fair value at 30 June:
Level 1
R’000
Level 2
R’000
Level 3
R’000
Total
R’000
30 June 2013
Assets
Trading derivatives
361 505
361 505
Total assets
361 505
361 505
Liabilities
Trading derivatives
5 766
5 766
Total liabilities
5 766
5 766
209
Level 1
R’000
Level 2
R’000
Level 3
R’000
Total
R’000
30 June 2012
Assets
Trading derivatives
20 811
20 811
Total assets
20 811
20 811
Liabilities
Trading derivatives
3
3
Total liabilities
3
3
The fair value of financial instruments that are not traded in an active market (for example, over-thecounter derivatives) is determined by using valuation techniques. These valuation techniques maximise
the use of observable market data where it is available and rely as little as possible on entity specific
estimates. If all significant inputs required to fair value an instrument are observable, the instrument is
included in level 2.
29. FINANCIAL INSTRUMENTS BY CATEGORY
The accounting policies for financial instruments have been applied to the line items below:
Loans and
receivables
R’000
Assets at fair
value through
profit and loss
R’000
Derivatives
used for
hedge
accounting
R’000
Total
R’000
Assets per the statement of financial position
30 June 2013
Trade and other receivables
Preference shares receivable
Derivative financial instruments
Cash and cash equivalents
Investment in money market fund
At the end of the year
30 June 2012
Trade and other receivables
Derivative financial instruments
Cash and cash equivalents
At the end of the year
1 977 564
130 275
360 708
797
1 977 564
130 275
361 505
2 313 191
450 000
797
5 232 535
2 313 191
450 000
4 421 030
810 708
1 272 042
20 811
1 272 042
20 811
305 792
1 577 834
20 811
1 598 645
Other
financial
liabilities
R’000
Liabilities
at fair value
through
profit and loss
R’000
305 792
Derivatives
used
for hedge
accounting
R’000
Total
R’000
Liabilities per the statement of financial
position
210
30 June 2013
Interest-bearing liabilities – long term
Interest-bearing liabilities – short term
Preference share liabilities – long term
Preference share liabilities – short term
Derivative financial instruments
Trade and other payables
2 359 894
At the end of the year
8 250 460
5 515 289
297 229
72 959
5 089
5 766
30 June 2012
Interest-bearing liabilities – long term
Interest-bearing liabilities – short term
Derivative financial instruments
Trade and other payables
1 515 731
At the end of the year
1 614 616
5 766
65 642
33 243
3
3
5 515 289
297 229
72 959
5 089
5 766
2 359 894
8 256 226
65 642
33 243
3
1 515 731
1 614 619
30. RELATED PARTY TRANSACTIONS
Related party relationships exist between RCL Foods, its subsidiaries and Remgro and its subsidiaries,
associates and joint ventures. Remgro Management Services provides treasury services to the Group. In
addition, there is preference shares receivable of R130,3 million which relate to amounts receivable from
Foodcorp management share ownership structure.
Group
Interest paid to Remgro Management Services Limited*
Administration fee paid to Remgro Management Services Limited
Amount owing to Remgro Management Services Limited included in
payables
Underwriting fee paid to Industrial Partnership Investments Limited
Bank charges paid to First National Bank Limited
Corporate finance transaction costs paid to Rand Merchant Bank
Net interest received from First National Bank Limited
Purchases from Unilever South Africa Proprietary Limited
Amount owing to Unilever South Africa Proprietary Limited included
in payables
Purchases from Quality Sugars Proprietary Limited
Amount owing to Quality Sugars Proprietary Limited included
in payables
Purchases from Grindrod South Africa Proprietary Limited
Amount owing to Grindrod South Africa Proprietary Limited included
in payables
Purchases from PG Glass Proprietary Limited
Preference shares receivable – Foodcorp Management Holdings
Proprietary Limited
Preference shares dividend – Foodcorp Management Holdings
Proprietary Limited
Key management
Executive management and the senior leadership team are classified as
key management:
– short-term and post-employment benefits
– share-based payments
2013
R’000
2012
R’000
8 834
6 656
7 470
5 417
1 820
58 994
807
27 360
7 764
63 809
991
2 287
3 353
11 309
273
6 641
1 476
910
4 055
550
388
1
130 275
1 894
113 353
21 128
96 354
18 553
134 481
114 907
* There were no outstanding loans with Remgro Management Services at year-end.
31. DIRECTORS’ EMOLUMENTS
2013
M Dally
RH Field
2012
M Dally
RH Field
Basic
Salary
R’000
Pension
contribution
R’000
Other
benefits*
R’000
5 344
2 595
387
258
118
64
5 849
2 917
7 939
645
182
8 766
4 962
2 334
359
232
108
59
5 429
2 625
7 296
591
167
8 054
Total
R’000
* Other benefits include Company contributions to disability insurance, medical aid and UIF.
211
31. DIRECTORS’ EMOLUMENTS continued
2013
R’000
2012
R’000
71
189
307
189
335
232
232
425
406
172
278
172
304
211
186
355
313
2 386
1 991
109
9
172
109
181
2 495
2 172
Non-executives (for services as a director)
Present directors
HJ Carse*
JJ Durand*
Dr M Griessel
PR Louw*
NP Mageza
JB Magwaza
MM Nhlanhla
RV Smither
GC Zondi**
Past directors
CM van den Heever*
MH Visser*
Total
* Paid to Remgro Management Services.
** Paid to Imbewu Capital Partners Consulting Proprietary Limited.
Interests of directors of the Company in share options granted under the RCL Share Incentive Scheme
Options granted to executive directors and unexpired or unexercised as at 30 June 2013 are as follows:
M Dally
Options
exercisable
at 30 June
2012
Issue price
prior to
rights
issue
Rand
779 211
1 101 317
504 245
10,39
16,35
14,20
Total
15,05
4 506
2 384 773
183 792
154 328
573 639
264 404
11 575
45 508
19 915
992 371
992 371
76 998
(165 903)
903 466
1 167
3 377 144
3 377 144
260 790
(1 003 556)
2 634 378
5 673
10,39
16,35
14,20
(837 653)
Exercise
price
Gain on
options
exercised
R’000
58 442
87 371
37 979
154 328
573 639
264 404
9,67
15,21
13,21
Options at
30 June
2013
779 211
1 101 317
504 245
2 384 773
RH Field
Issue price
Options
Options at
Rights post-rights exercised
30 June
issue
issue* during the
2012 adjustment*
Rand
year
1 188 688
542 224
(837 653)
9,67
15,21
13,21
1 730 912
(165 903)
4 506
16,80
1 167
619 147
284 319
* The issue price and number of oustanding options were amended as a result of the rights issue in order to place the holders in the
same position as they were before the rights issue. These amendments have no financial effect for the Group as they have placed the
participants in the same economic position as they were before the rights issue.
212
31. DIRECTORS’ EMOLUMENTS continued
No options were issued during the year, nor will any further options be issued under the RCL Share
Incentive Scheme, as this scheme has been replaced by the RCL Share Appreciation Rights Scheme approved
at the 43rd annual general meeting of the shareholders held on 31 July 2009. The scheme will be simply
allowed to run its course in respect of existing options.
Options
exercisable
at 30 June
2011
Issue price
prior to
rights
issue
Rand
Options at
30 June
2011
464 000
779 211
734 211
336 163
6,65
10,39
16,35
14,20
464 000
779 211
1 101 317
504 245
(464 000)
2 848 773
(464 000)
128 000
154 328
573 639
264 404
(128 000)
841 023
1 120 371
(128 000)
992 371
1 085
3 154 608
3 969 144
(592 000)
3 377 144
5 007
M Dally
2 313 585
RH Field
128 000
154 328
382 426
176 269
Total
6,65
10,39
16,35
14,20
Issue price
post-rights
issue
Rand
Options
exercised
during the
year
Options at
30 June
2012
Exercise
price
Gain on
options
exercised
R’000
15,10
3 922
779 211
1 101 317
504 245
2 384 773
3 922
15,13
1 085
154 328
573 639
264 404
Interests of Directors of the Company in Share Appreciation Rights awarded under the RCL Share
Appreciation Rights Scheme
Share Appreciation Rights awarded to Executive Directors and unexpired or unexercised as at
30 June 2013 are as follows:
Rights
exercisable
at 30 June
2012
Issue price Issue price
prior to
postrights
rights
issue
issue*
Rand
Rand
M Dally
Rights Adjustment
Rights at
awarded in respect
30 June during the
of rights
2012
year
issue*
Rights at
30 June
2013
Gain on
rights
Exercise exercised
price
R’000
15,34
14,27
845 679
63 266
908 945
15,83
14,73
865 465
63 791
929 256
17,68
16,45
665 120
49 452
714 572
14,19
13,20
714 404
53 713
768 117
1 984
714 404
230 222
3 320 890
1 984
427 702
2 376 264
RH Field
Rights
exercised
during
the year
Grant date
fair value
of rights
awarded
during
the year**
R’000
15,34
14,27
397 932
29 770
15,83
14,73
401 989
29 629
431 618
17,68
16,45
339 739
25 260
364 999
14,19
13,20
348 317
26 188
374 505
968
1 139 660
348 317
110 847
1 598 824
968
3 515 924
1 062 721
341 069
4 919 714
2 952
Total
* The issue price and number of outstanding options were amended as a result of the rights issue in order to place the holders in the
same position as they were before the rights issue. These amendments have no financial effect for the Group as they have placed the
participants in the same economic position as they were before the rights issue.
Rights
exercisable
at 30 June
2011
M Dally
RH Field
Total
Issue price
prior to
rights
issue
Rand
Rights at
30 June
2011
15,34
15,83
17,68
845 679
865 465
665 120
845 679
865 465
665 120
2 376 264
2 376 264
397 932
401 989
339 739
397 932
401 989
339 739
1 139 660
1 139 660
3 515 924
3 515 924
15,34
15,83
17,68
Rights
awarded
during
the year
Rights
exercised
during
the year
Rights at
of rights
30 June
2012
Exercise
price
Gain on
rights
exercised
R’000
Grant date
fair value
of rights
awarded
during
the year
R’000**
213
31. DIRECTORS’ EMOLUMENTS continued
Interests of Directors of the Company in Conditional Shares awarded under the RCL Conditional
Share Plan
Conditional
Shares
awarded
during
the year
Conditional
Shares at
30 June
2012
Adjustment
in respect
of rights
issue*
Conditional
Shares
settled
during
the year
Conditional
Shares at
30 June
2013
M Dally
RH Field
628 659
316 517
46 888
23 607
675 547
340 124
Total
945 176
70 495
1 015 671
* The number of outstanding conditional shares were amended as a result of the rights issue in order to place the holders in the same
position as they were before the rights issue. These amendments have no financial effect for the Group as they have placed the
participants in the same economic position as they were before the rights issue.
** Grant date fair value of rights awarded represents the total fair value of rights awarded during the year. This cost will be expensed
over the right’s vesting period.
Interests of Directors of the Company in Stated Capital
The aggregate beneficial holdings as at 30 June 2013 of those Directors of the Company holding Shares
are detailed below:
Direct
beneficial
Executive directors
M Dally
RH Field
2013
Indirect
beneficial
1 201 653
250 000
Non-executive directors
Dr M Griessel
NP Mageza
JB Magwaza*
MM Nhlanhla*
GC Zondi*
Direct
beneficial
964 000
378 000
24 680
252
2 558 861
342 887
3 766 643
1 451 653
2012
Indirect
beneficial
6 693 323
4 680
2 558 861
342 887
3 766 643
1 342 000
6 673 071
* Assumes 100% vesting in terms of BEE transaction.
There has been no change in the interest of the Directors in the Stated Capital of the Company since the
end of the financial year to the date of this report.
Directors’ emoluments paid by Remgro Limited
Fixed pay
2013
Executive
HJ Carse1
JJ Durand
PR Louw
CM van den Heever2
Sub-total
Fees
R’000
213
213
Salaries
R’000
Retirement
fund
R’000
Other
benefits 4
R’000
1 494
7 080
1 209
1 322
296
1 447
240
262
204
265
204
207
1 994
9 005
1 653
1 791
11 105
2 245
880
14 443
Total
R’000
Independent nonexecutive
214
NP Mageza
285
285
Sub-total
285
285
Total
498
11 105
2 245
880
14 728
Fixed pay
Fees
R’000
Salaries
R’000
Retirement
fund
R’000
Other
benefits 4
R’000
166
199
7 311
5 030
1 118
1 233
1 696
1 037
222
245
534
248
192
192
9 707
6 514
1 532
1 670
365
14 692
3 200
1 166
19 423
Total
R’000
31. DIRECTORS’ EMOLUMENTS
continued
2012
Executive
MH Visser3
JJ Durand
PR Louw
CM van den Heever
Sub-total
Independent nonexecutive
NP Mageza
266
266
Sub-total
266
266
Total
631
1.
14 692
3 200
1 166
19 689
Mr HJ Carse was appointed as a Director on 19 February 2013. The remuneration reflected is for 12 months ended June 2013.
2.
Mr CM van den Heever resigned as a Director on 31 January 2013. The remuneration reflected is for 12 months ended 30 June 2013.
3.
Mr MH Visser passed away on 26 April 2012.
4.
Other benefits include medical aid contributions and vehicle benefits.
Variable pay – long-term incentive plans
Remgro Share Scheme June 2013 Ordinary shares
Participant
Executive
MH Visser1
Total
Balance
of shares
accepted
as at
30 June
2012
Shares
accepted
Date of
during acceptance
the period
of shares
172 681
68 230
Offer
price
Rand
135,00
186,70
240 911
Number
of shares
paid and
delivered1
Date of
payment
and
delivery
of shares2
172 861 26/04/2012
68 230 26/04/2012
Share price
on date of
payment
and
delivery
of shares2
Rand
Increase
in value2
R’000
Balance
of shares
accepted
as at
30 June
2013
129,60
129,60
240 911
1.
In terms of the rules of the Remgro Share Scheme, the executor of the estate of the late Mr MH Visser was entitled to effect payment
of all the shares offered to him within 12 months after the date of his death or before the expiry of the offer periods, whichever was
the earlier. Full payment of all shares offered was effected during the year under review.
2.
It refers to the increase in value of the scheme shares of the indicated participant from the offer date to the date of payment and
delivery. The share price used to calculate the deemed increase in value for the late Mr Visser, is the Remgro share price on the date
that he passed away.
Participant
Executive
MH Visser1
Total
Balance
of shares
accepted
as at
30 June
2011
172 681
68 230
240 911
Shares
accepted
during
the period
Date of
acceptance
of shares
Offer
price
Rand
135,00
186,70
Number
of shares
paid and
delivered1
Date of
payment
and
delivery
of shares2
Share price
on date of
payment
and
delivery
of shares2
Rand
Increase
in value2
R’000
Balance
of shares
accepted
as at
30 June
2012
172 681
68 230
240 911
1.
In terms of the rules of the Remgro Share Scheme, the executor of the estate of the late Mr MH Visser was entitled to effect payment
of all the shares offered to him within 12 months after the date of his death or before the expiry of the offer periods, whichever was
the earlier. Full payment of all shares offered was effected during the year under review.
2.
It refers to the increase in value of the scheme shares of the indicated participant from the offer date to the date of payment and
delivery. The share price used to calculate the deemed increase in value for the late Mr Visser, is the Remgro share price on the date
that he passed away, namely 26 April 2012.
215
31. DIRECTORS’ EMOLUMENTS continued
Remgro Equity Settled Share Appreciation Right Scheme (SARs) – 2013
Participant
Balance
of SARs
accepted
as at
30 June
2012
SARs
accepted
during
the period
Offer
date
Offer
price2
Rand
Number
of SARs
exercised
Date
exercising
SARs
Share
price on
exercise
date
Increase
in value2
R’000
Balance
of SARs
accepted
as at
30 June
2013
Grant
date fair
value of
SARs
granted
during
the period
Executive
MH Visser1
HJ Carse
542 424
65,50
542 424
26/04/2012
129,60
34 769
486 465
97,55
486 465
26/04/2012
129,60
15 591
20 613
78,30
2 933
75,38
2 933
1 624
82,60
1 624
97,55
38 062
38 062
7 546
JJ Durand
29/11/2012
162 354
7 546
54 118
03/04/2013
185,50
5 801
108 236
7 572
15 144
75,38
7 572
03/04/2013
185,50
834
4 220
82,60
4 220
03/04/2013
185,50
434
97,55
235 895
147,25
271 258
7 066
63,97
7 066
271 258
29/11/2012
9 058
64,23
26 995
65,50
8 860
40,62
27 432
22 646
CM van den
Heever
147,25
78,30
235 895
PR Louw
20 613
29/11/2012
9 058
03/04/2013
185,50
8 860
02/04/2013
183,15
299 400
10 762 613
1 098
26 995
1 263
97,55
27 432
147,25
22 646
46 976
31,43
17 961
78,30
17 961
2 680
75,38
2 680
1 419
82,60
1 419
34 292
97,55
34 292
147,25
6 830
270 992
841 060
12 231 523
6 830
1 692 473
29/11/2012
308 280
46 976
30/10/2012
147,05
898 518
1 159 693
5 431
65 221
1.
In terms of the rules of the SARs scheme, the executor of the estate of the late Mr MH Visser was entitled to exercise all the SARs
granted to him at any time within 12 months after the date of his death, or before the expiry of the SARs period (being seven years
from the grant date), whichever was the earlier. This right was exercised during the year under review.
2.
It refers to the increase in value of the SAR Scheme shares of the indicated participants from the offer date to the date of payment
and delivery. The share price used to calculate the deemed increase in value for the late Mr Visser, is the Remgro share price on the
date that he passed away, namely 26 April 2012.
Remgro Equity Settled Share Appreciation Right Scheme (SARs) – 2012
Participant
Balance
of SARs
accepted
as at
30 June
2011
SARs
accepted
during
the period
Offer
date
Offer
price2
Rand
Number
of SARs
exercised
Date
exercising
SARs
Share
price on
exercise
date
Increase
in value3
R’000
Balance
of SARs
accepted
as at
30 June
2012
Executive
MH Visser1
JJ Durand
PR Louw
CM van den
Heever
542 424
65,50
542 424
486 465
97,55
486 465
427 047
38,90
162 354
78,30
22 717
427 047
26/10/2011
117,75
33 673
75,38
7 573
26/10/2011
117,75
258
12 662
82,60
8 442
26/10/2011
117,75
230
235 895
97,55
235 895
7 000
63,97
7 000
9 058
64,23
9 058
26 995
65,50
26 995
8 860
40,62
8 860
27 432
97,55
27 432
46 976
31,43
46 976
17 961
78,30
17 961
2 680
75,38
2 680
1 419
82,60
1 419
34 292
97,55
34 292
2 072 237
216
162 354
443 062
34 161
15 144
4 220
1 629 175
Grant
date fair
value of
SARs
granted
during
the period
31. DIRECTORS’ EMOLUMENTS continued
1.
In terms of the rules of the SARs scheme, the executor of the estate of the late Mr MH Visser was entitled to exercise all the SARs
granted to him at any time within 12 months after the date of his death, or before the expiry of the SARs period (being seven years
from the grant date), whichever was the earlier. This right was exercised during the year under review.
2.
In terms of the rules of the SARs scheme, the offer price of SARs that were awarded prior to the unbundling of the investment in
Implats, was reduced by between R7,58 and R13,19 (depending on the offer date) to ensure that the participants were placed in
substantially the same position as they were prior to the unbundling.
3.
It refers to the increase in value of the SAR Scheme shares of the indicated participants from the offer date to the date of payment
and delivery.
32. BEE TRANSACTION
On 18 March 2008, shareholders approved the Current RCL BEE Structure. The participants in the Current
RCL BEE Structure are the RCL Strategic Partners.
Details of the transaction
In terms of the transaction a special purpose entity ECI, acquired an effective 15% of RCL Foods’ entire
issued share capital for R915,6 million on 30 July 2008. The purchase price was settled by issuing variable
rate (CPIX plus 6%) cumulative redeemable preference shares in Eagle Creek to RCL Foods.
Ordinary dividends paid to Eagle Creek will be applied immediately to reduce the outstanding redemption
amount.
The shares issued to Eagle Creek are also subject to restrictions on alienation and encumbrance until
30 July 2018. Should Eagle Creek be unable to pay the full redemption amount payable upon redemption
of the preference shares, RCL Foods is entitled to effect a buy-back in terms of section 48 of the Companies
Act of the number of shares whose value at that time is equivalent to the outstanding redemption amount.
At 30 June 2013 the outstanding redemption amount was R1426,6 million (2012: R1 292,7 million).
Accounting principles and assumptions
The terms of issuance of the ordinary shares and acquisition of the preference shares are deemed for
accounting purposes to constitute the issuance of an option in RCL Foods shares granted to Eagle Creek,
effective on 18 March 2008, when the shareholders’ approval was obtained. Accordingly, the issuance of
the shares and the subscription by RCL Foods to the Eagle Creek Preference Shares, has not been
recognised.
The RCL Foods Shares attributed to the Rainbow Employee Trust, net of any shares that may be bought
back by RCL Foods to settle the redemption amount, will be distributed to employees who are in service of
RCL Foods at the end of the 10-year period. The basis of apportionment of shares to employees is set out in
the trust deed and rewards longer service.
33. BUSINESS COMBINATIONS
New Foodcorp Holdings Proprietary Limited
On 1 May 2013 the Group acquired an effective holding of 64,18% in Foodcorp through the investment
vehicle Capitau Investment Management. The purchase consideration paid by Capitau Investment
Management was R1,026 billion, of which R997,6 million was paid by the Group. Foodcorp manufactures,
markets and distributes a diversified portfolio of food products ranging from basic essentials to top-end
desserts and convenience meals. Many of the products are associated with South African tradition and
heritage, and are therefore among the leading and best recognised brands in South Africa. The acquisition
is in line with the Group’s strategic growth plan.
Goodwill of R2,618 billion arose from the acquisition. Goodwill mainly represents the ability of the
combined business of sale to target consumer markets in sub-Saharan Africa. None of the goodwill
recognised is deductible for tax purposes.
The following table summarises the consideration paid, for the fair value of assets acquired, liabilities
assumed and the non-controlling interest at the acquisition date.
217
33. BUSINESS COMBINATIONS continued
2013
R’000
Consideration at 1 May 2013
Cash
1 026 225
Total consideration
1 026 225
Recognised amounts of identifiable assets acquired and liabilities
assumed
Cash and cash equivalents
Property, plant and equipment
Intangible assets
Preference shares receivable
Inventories
Net assets for a disposal group classified as held for sale
Derivative financial instruments
Current income tax liabilities
Trade and other receivables
Trade and other payables
Retirement benefit obligations
Interest-bearing liabilities
Deferred income tax liabilities
279 217
1 611 838
2 850 149
169 648
390 839
397 000
(16 349)
(149)
878 519
(845 062)
(40 086)
(5 980 086)
(955 689)
Total identifiable net liabilities
(1 260 211)
Non-controlling interest
Goodwill
331 424
2 617 860
2012
R’000
Acquisition-related costs of R44,6 million have been charged to administration expenses in the income
statement for the year ended 30 June 2013.
The fair value of the non-controlling interest, in the unlisted company, was estimated by using the
purchase price paid for the acquisition by Capitau Investment Management. This purchase price was
adjusted for the lack of control and lack of marketability that market participants would consider when
estimating the fair value of the non-controlling interest.
The revenue included in the income statement since 1 May 2013 contributed by Foodcorp was R1 217 million.
Foodcorp also contributed operating profit of R99,0 million over the same period. Had New Foodcorp
Holdings Proprietary Limited been consolidated from 1 July 2012, the income statement would show
pro forma revenue of R6 471,0 million and operating profit of R502 million.
The purchase allocation is not considered to be final.
BushValley Chickens
The Group acquired the fixed assets and poultry processing operations of BushValley Chickens, located
near Tzaneen in the Limpopo Province, for a purchase consideration in cash of R92,5 million. The
acquisition is in line with the Group’s strategic growth plan. The impact on the Group’s results are minimal
as the effective date of the acquisition was only 12 March 2012 and includes the following:
30 June
2013
R’000
218
30 June
2012
R’000
Revenue
Operating loss (including start-up costs)
57 049
(4 723)
The impact on the Group’s results, had the acquisition occurred on
1 July 2011, is not presented as it is not practical to calculate due to
different input costs prior to the acquisition. Details of net assets
acquired and the cost of the investment are as follows:
Land
Buildings
Plant and equipment
Vehicles
1 232
33 768
47 851
9 649
Net assets acquired
92 500
33. BUSINESS COMBINATIONS continued
Carrying value
As the Group acquired the assets and liabilities of this business rather than the shares of the legal entity
that previously owned such assets and liabilities, it is impractical to disclose the carrying amounts in the
accounting records of the previous owners prior to the acquisition. In these circumstances the Group does
not have access to such carrying values.
No goodwill arose from the acquisition as the purchase consideration determined in accordance with IFRS
is equal to the fair value. The purchase allocation has been performed and was considered final in the prior
financial year.
34. SHARE AND SHAREHOLDER INFORMATION
Stated capital
Authorised
Issued
Number of shareholders
Financial year-end
Annual general meeting
1 000 000 000
625 433 701*
5 457
June
November
Number of
shareholders
%
Number of
shares
%
Shareholder spread
1 – 1 000
1 001 – 10 000
10 001 – 100 000
100 001 – 1 000 000
1 000 001 and over
3 435
1 545
381
74
22
62,9
28,3
7,0
1,4
0,4
905 345
5 598 746
10 148 777
23 449 099
585 331 734
0,1
0,9
1,6
3,8
93,6
Total
5 457
100,0
625 433 701*
100,0
Distribution of shareholders
Holding company
Empowerment
Mutual funds
Pension funds
Individuals
Investment companies
Nominees and trusts
Insurance companies
Endowment funds
Private companies
Banks
Public companies
Medical aid schemes
Other corporations
Brokers
Close corporations
3
1
59
73
4 765
16
292
13
6
90
26
4
4
28
19
58
0,1
Total
5 457
1,1
1,3
87,3
0,3
5,4
0,2
0,1
1,7
0,5
0,1
0,1
0,5
0,4
1,1
436 553 868
51 177 217
54 407 467
31 548 363
14 290 844
20 342 853
6 133 568
2 833 857
252 095
1 832 811
3 218 184
60 995
259 078
105 507
1 571 828
845 166
69,7
8,1
8,7
5,0
2,2
3,3
1,0
0,5
0,1
0,3
0,5
0,1
0,1
0,1
0,2
0,1
100,0
625 433 701
100,0
* Includes 51 177 217 shares issued to Eagle Creek Investments 620 Proprietary Limited in terms of the BEE scheme
(refer to note 32 for details).
219
Number of
shareholders
%
Number of
shares
%
34. SHARE AND SHAREHOLDER
INFORMATION continued
Public and non-public Shareholders
Strategic holdings (more than 10%)
Empowerment
Directors and associates of the Company
holdings
3
1
0,1
436 553 868
51 177 217
69,7
8,1
6
0,1
1 557 850
0,4
Total non-public Shareholders
Public Shareholders
10
5 447
0,2
99,8
489 288 935
136 144 766
78,2
21,8
Total
5 457
100,0
625 433 701
100,0
436 553 868
51 177 217
30 235 064
10 621 762
21 640 268
69,7
8,1
4,8
3,4
1,7
Beneficial shareholders’ holding of 1% or more
Remgro Limited
Eagle Creek Investments 620 Proprietary Limited
Oasis Crescent Global Equity Fund
Government Employees Pension Fund
Investment Solutions Limited
35. SUBSEQUENT EVENTS
On 1 July 2013, RCL Foods Limited agreed with Foodcorp management to purchase their 23,9%
shareholding in New Foodcorp Holdings Proprietary Limited for a cash consideration of R393 million. No
other material change has taken place in the affairs of the Group between the end of the financial year and
the date of this report.
220
ANNEXURE 8
MATERIAL LIABILITIES AND COMMITMENTS – RCL FOODS
1.
BORROWINGS
Bank borrowings
RCL Foods has a short-term unsecured loan amounting to R116 million (one hundred and sixteen million
Rands) as at 30 June 2013. The unsecured loan bears interest of between JIBAR +1.5% and JIBAR +1.65%.
The outstanding loan together with the accrued interest shall be repaid in quarterly instalments on the
last day of the month.
Foodcorp Senior Secured Notes
The Foodcorp Senior Secured Notes are listed on the Irish Stock Exchange, are Euro denominated and
bear interest at a fixed rate of 8.75%. The Foodcorp Senior Secured Notes have been translated at yearend at a spot rate of R12.86. The Senior Secured Notes will mature in March 2018. The fair value of the
Foodcorp Senior Secured Notes at year-end was R5.291 billion (five thousand two hundred and ninety
one billion Rands).
The Group has provided financial institutions relating to the Foodcorp Senior Secured Notes with the
following security for its borrowing facilities:
2.
•
A pledge and reversionary pledge of trade receivables for an amount of R856.6 million.
•
A pledge of inventory for an amount of R417.1 million (four hundred and seventeen point one million
Rands).
•
A pledge of trademarks for an amount of R1 864.4 million (one thousand eight hundred and sixty
four million Rands) .
•
A pledge of customer relationships for an amount of R966.6 million (nine hundred and sixty six
million Rands).
•
A pledge of software for an amount of R7.2 million (Seven point two million Rands).
•
Special notarial bond over plant and equipment for an amount of R400.0 million and R1,4 billion (Four
hundred million and one point four billion Rands).
•
First covering mortgage bonds over certain specified immovable property for an aggregate amount
of R122.0 million and R2.8 billion (One hndred and twenty two million and two point eight billion
Rands).
•
General notarial bond over moveable assets for an amount of R200.0 million and R1.4 billion (Two
hundred million Rands and one point four billion Rands).
•
First deed of mortgage with the Registrar of Ships over certain fishing vessels for the amount of
R160.0 million (One hundred and sixty million Rands).
•
Pledge and cession of the ordinary shares in Foodcorp and each of Foodcorp’s subsidiaries.
•
Cash and cash equivalents have been pledged for an amount of R48.5 million (Forty eight point five
million Rands).
INTER-COMPANY FINANCING
There are no material inter-company loans between RCL Foods and Remgro or any other Remgro group
companies.
No loans were granted or security furnished by the Company or its subsidiaries to or for the benefit of
any third parties, including any Directors or managers or any associates of any Directors or managers
of the Company or its subsidiaries as at the Last Practicable Date.
221
3.
COMMITMENTS
Material commitments, lease payments and contingent liabilities as at 30 June 2013.
Lease commitments
30 June
2013
R’000
30 June
2012
R’000
Operating leases:
Due within one year
111 121
81 670
Due within two to five years
166 703
205 634
277 824
287 304
233 542
246 619
34 316
32 908
9 966
7 777
277 824
287 304
Due thereafter
In respect of:
– property
– plant and equipment
– other
In addition, the RCL Foods Group has operating lease commitments with rentals determined in relation
to volumes of activity. It is not possible to quantify accurately future rentals payable under such lease
arrangements.
Contingencies
Legal dispute
Contract grower guarantees
30 June
2013
R’000
30 June
2012
R’000
2 250
6 000
12 487
22 433
14 737
28 433
The RCL Foods Group has a contingent liability in respect of a legal claim for the dismissal of employees.
The matter is ongoing and legal counsel is of the opinion that the RCL Foods Group will be successful.
The Directors have concluded that it is highly unlikely that the RCL Foods Group will incur a financial
loss. The RCL Foods Group has contingencies in respect of contract grower arrangements whereby the
RCL Foods Group has guaranteed bank loans given to certain contract growers. These guarantees will
continue in place for a further three years. It is not anticipated that any material liabilities will arise from
these contingencies. However, should they arise the RCL Foods Group will acquire claims against the
growers’ farms which would reduce the net exposure.
There have been no material changes in commitments, lease payments and contingent liabilities between
30 June 2013 and the Last Practicable Date.
222
ANNEXURE 9
MATERIAL LIABILITIES AND COMMITMENTS – TSB SUGAR HOLDINGS
1.
BORROWINGS
TSB Sugar Holdings have a long-term loan in place with First National Bank, a division of FirstRand
Bank Limited, (‘’FNB’’) amounting to R150 million as at 30 June 2013 and a bank overdraft with FNB
amounting to R20.8 million (the ‘’FNB Long-term loan’’).
The FNB long-term loan is unsecured, bears interest at the JIBAR (5.14% p.a.) + 2.3% p.a. and the
interest is payable in quarterly payments and the capital is repayable in 5 equal yearly instalments of
R30 000 000 on 15 April of each year starting on 15 April 2014.
The FNB bank overdraft amounting to R20 786 000 (2012: R0) was obtained for the purpose of working
capital at the prime rate (8.5%) less 2% of interest per annum in South Africa and is unsecured and
payable on demand.
Subsequent to 30 June 2013 TSB Sugar Holdings obtained an additional R120 million as a long-term loan
from FNB.
2.
INTER-COMPANY FINANCING
TSB Sugar Holdings had the following material inter-company loans in place as at 30 June 2013:
The Remgro Management Services loan for the Pongola Mill acquisition R72 000 000 (2012: R108 000 000)
is unsecured, bears interest at JIBAR (5.14% p.a.) + 3.5% p.a. and the interest is payable in quarterly
payments and repayable on 3 months’ notice.
The Remgro Management Services working capital loan of R160 000 000 (2012: R200 000 000) is
unsecured, bears interest at JIBAR (5.14% p.a.) + 3.5% p.a. and the interest is payable in quarterly
payments and repayable on 3 months’ notice.
The Remgro Management Services overdraft of R353 500 000 (2012: R nil) is unsecured, bears interest at
the rate of 5.5% p.a. and the interest is payable monthly in arrears and repayable on demand.
3.
COMMITMENTS
Material commitments, lease payments and contingent liabilities as at 30 June 2013:
Capital commitments
30 June
2013
R’000
30 June
2012
R’000
Contracted, but not yet incurred
75 361
18 062
Authorised, but not yet contracted
73 886
52 230
149 247
70 292
The capital expenditure is to be financed by the TSB Sugar Holdings group through internally generated
funds and external credit facilities.
30 June
2013
R’000
30 June
2012
R’000
Due within one year
27 090
21 285
Due within two to five years
22 877
19 481
–
1 989
49 967
42 755
Lease commitments
Operating leases:
Due thereafter
Total
223
30 June
2013
R’000
30 June
2012
R’000
– property
30 605
25 973
– plant and equipment
12 757
9 893
6 605
6 889
49 967
42 755
75 000
50 000
In respect of:
– other
The TSB Sugar Holdings group also has exposure to variable lease
commitments in relation to assets.
Contingencies
Guarantee
TSB Sugar Holdings provided a long-term loan guarantee in favour of the Land Bank on behalf of
Akwandze Agricultural Finance Proprietary Limited. No losses are expected as the risk of default of
debtors are limited due to the fact that some debtors are joint ventures to the TSB Sugar Holdings group
with no history of default. The loan of the debtor not relating to the TSB Sugar Holding group is supported
by Crookes Brothers Limited.
224
ANNEXURE 10
INFORMATION ON THE DIRECTORS AND EXECUTIVE MANAGEMENT OF
RCL FOODS AND ITS MAJOR SUBSIDIARIES
DIRECTORS OF RCL FOODS LIMITED
JJ (Jannie) Durand
Position
Non-executive Chairman
Appointed
June 2012
Nationality
South African
Business address
Remgro Limited,
Stellenbosch, 7600
Qualifications
B.Acc. (Hons), M.Phil. (Management Studies), CA(SA)
Experience
Jannie is a Chartered Accountant and was previously the Chief
Investment Officer of Remgro. He was also previously the
Financial Director and Chief Executive Officer of VenFin
Limited. Prior to his appointment as Chairman, Jannie had
served as a non-executive Director of RCL Foods since March
2010.
Other directorships in the past five years
Capevin Investments Limited, Discovery Holdings Limited (and
various subsidiaries), Mediclinic International Limited, Distell
Group Limited, Unilever South Africa Holdings Proprietary
Limited, Grindrod Limited, Innovus Tegnologie Oordrag
Proprietary Limited, Leopard Creek Country Club Limited,
Leopard Creek Share Block Limited, Premier Team Holdings
Limited (UK), RCL Foods Limited, Remgro (Chief Executive
Officer) (and various subsidiaries), RMI Holdings Limited,
Retdur Properties Proprietary Limited, Saracens Limited (UK),
Stand 218 LC Properties Proprietary Limited, Stellenbosch
University.
Millennia
Park,
16
Stellentia
Avenue
Dr M (Munro) Griessel (Retired 18 November 2013)
Position
Independent non-executive Director
Member of the Audit Committee and the Risk Committee
Appointed
November 2002
Age
46
Nationality
South African
Business address
Villa 7512, San Lameer Estate, Southbroom, 4277
Qualifications
Ph.D. (Animal Science)
Experience
Munro has over forty years’ experience in the animal feed and
livestock industries. He is an honorary life member of the
Animal Feed Manufacturers Association and the South African
Poultry Association.
Other directorships in the past five years
None
225
NP (Peter) Mageza
Position
Independent non-executive Director
Member of the Audit Committee, Chairman of the Remuneration
and Nominations Committee
Appointed
September 2009
Age
58
Nationality
South African
Business address
Unit 6, Kintamani, 34 Pont Road, Bryanston, 2021
Qualifications
ACCA (UK)
Experience
Peter was formerly the Chief Operations Officer of the Absa
Group. He is a Chartered Certified Accountant and a fellow of
The Association of Chartered Certified Accountants (ACCA) UK.
He has gained extensive experience through holding various
executive positions in the audit, financial services and the
transport and logistics sectors.
Other directorships in the past five years
Bidvest Group Limited, Clover Industries Limited, MTN Group
Limited, Remgro Limited, Eqstra Holdings Limited and Sappi
Limited.
DTV (Derrick) Msibi
Position
Independent non-executive Director
Appointed
August 2013
Age
44
Nationality
South African
Business address
Building 1, Inanda Greens Office Park, 54 Wierda Road, West Wierda Valley, 2196
Qualifications
BBusSc, BCom (Hons), MCom, CA(SA)
Experience
Derrick has extensive business experience, having worked as a
manager at KPMG and subsequently as an Executive Director
of Old Mutual Asset Managers and Old Mutual Investment
Group (SA) Proprietary Limited. He also served as a director of
Foodcorp Proprietary Limited and Air Liquide Proprietary
Limited.
Other directorships in the past five years
Investment Solutions Holdings Limited (Managing Director).
226
MM (Manana) Nhlanhla
Position
Independent non-executive Director
Member of the Social and Ethics Committee
Appointed
May 2005
Age
61
Nationality
South African
Business address
Mion Investments Proprietary Limited, 77 Old Main Road,
Bothas Hill, 3610
Qualifications
B.Sc., M.A. (Information Science)
Experience
Manana is a former university lecturer in information science.
Over the past ten years Manana has been involved in building
Mion Holdings Limited, an investment company based in
KwaZulu-Natal. Manana’s business experience stems from
working for Thebe Investments Limited (“Thebe”), also serving
as non-executive director on Thebe’s various companies. In 2004
Manana was a founding member of the Batho Bonke Consortium
and in 2010 a founding member of the Manyoro consortium in
Foskor Proprietary Limited.
Other directorships in the past five years
Mion Investments Limited, Batho Bonke Limited,
Smit Amandla Marine and Manyoro Limited.
RV (Roy) Smither
Position
Independent non-executive Director
Chairman of the Audit Committee, member of the Risk
Committee and the Remuneration and Nominations Committee
Appointed
December 2008
Age
68
Nationality
South African
Business address
House No 7, 74 Mandeville Road, Bryanston, 2191
Qualifications
CA(SA)
Experience
Roy has a wealth of corporate experience, having served as a
director and Chief Executive Officer of the ICS Group from 1987
to 1998 and as an executive director of Tiger Brands Limited
from 1998 to 2006. Roy is also a member of the FirstRand Bank
Limited Credit Committee.
Other directorships in the past five years
Nampak Limited
227
GM (George) Steyn
Position
Independent non-executive Director
Appointed
August 2013
Age
54
Nationality
South African
Business address
VDA Capital Proprietary Limited, Corner of Church and
Ryneveld Streets, First Floor, Devonshire House, Stellenbosch,
7600
Qualifications
BA (Law) LLB
Experience
George has extensive experience in the retail sector, having
joined the Pepkor Group in 1986 and having served as an
Executive Director of Pep Retail Limited and Pepkor Retail
Limited from 1991 to 1994 and Managing Director from 2005
to 2011. He is actively involved in the broader community, and
has been an elected board and council member of Stellenbosch
University since 2010. He is currently the Chairman of Council,
and also serves on their Audit Committee.
Other directorships in the past five years
Du Toit Group Proprietary Limited, Kaap Agri Limited
(Chairman), Pepkor Holdings Proprietary Limited.
HJ (Hein) Carse
Position
Non-executive Director
Appointed
February 2013
Age
52
Nationality
South African
Business address
Remgro Limited, Millennia
Stellenbosch, 7600
Qualifications
M Ing (US), MBA (UP)
Experience
Hein joined Rupert International in 1996 and continued to serve
the Remgro group in the capacity of Investment Manager of
VenFin Limited until November 2009, when he assumed his
current position as an Investment Manager of Remgro Limited.
He has gained extensive knowledge through holding positions
on various boards and committees during his career.
Other directorships in the past five years
None
Park,
16
Stellentia
Avenue,
PR (Pieter) Louw
Position
Non-executive Director
Appointed
December 2008
Age
44
Nationality
South African
Business address
Remgro Limited, Millennia
Stellenbosch, 7600
Qualifications
CA(SA)
Experience
Pieter is a Chartered Accountant who qualified with
PricewaterhouseCoopers Inc. in Stellenbosch before joining the
Remgro group in 2001. He is currently the Remgro group
Financial Manager.
Other directorships in the past five years
Various wholly-owned subsidiaries within the Remgro group
228
Park,
16
Stellentia
Avenue,
JB (JB) Magwaza (Retired 18 November 2013)
Position
Non-executive Director
Member of the Remuneration and Nominations Committee
Appointed
November 2002
Age
71
Nationality
South African
Business address
42 Addison Avenue, La Lucia, 4051
Qualifications
MA (UK)
Experience
JB served as an industrial relations consultant to TongaatHulett Sugar from 1975 to 1988. Thereafter he held various
directorships within the Tongaat Group and was appointed an
executive director of The Tongaat-Hulett Group Limited in May
1994, a position he held until he retired in August 2003.
Other directorships in the past five years
Chairman of Tongaat-Hulett and Motseng Property Investment
Holdings and director of Richards Bay Minerals, Imbewu
Capital Partners, NPC-Cimpor and KAP International.
GC (Gcina) Zondi
Position
Non-executive Director
Chairman of the Risk Committee and the Social and Ethics
Committee
Appointed
July 2008
Age
40
Nationality
South African
Business address
Imbewu Capital Partners, Suite 5, Rydall Vale Office Park,
10 Rydall Vale Crescent, La Lucia Ridge Office Estate,
La Lucia, 4051
Qualifications
B.Compt. (Hons), AGA (SA)
Experience
Gcina is the founding chief executive and shareholder of Imbewu
Capital Partners. He is a qualified General Accountant and is an
associate of The South African Institute of Chartered
Accountants. He has more than ten years’ experience in the
private equity industry of which six years were spent with
Nedbank Capital Private Equity as a private equity specialist.
Prior to joining Nedbank Capital, Gcina completed his articles
of clerkship at KPMG Inc in Durban and has also worked for
Hulamin Limited in the finance division for two and a half
years prior to joining KPMG.
Other directorships in the past five years
Imbewu Capital Partners, Reebok South Africa, Isegen South
Africa, Container Conversions, Icon Construction, Bo Hire and
Sales and Autovest Limited, International Facilities Services
South Africa.
229
M (Miles) Dally
Position
Chief Executive Officer, executive Director
Member of the Risk Committee and the Social and Ethics
Committee
Appointed
February 2003
Age
56
Nationality
South African
Business address
RCL Foods Limited, Six The Boulevard, Westway Office Park,
Westville, 3629
Qualifications
B.Com.
Experience
Miles has 31 years’ experience in the consumer goods industry
and served as group Managing Director of Robertsons Holdings
Proprietary Limited from 1995 to 2002. After the unbundling
of Robertsons Holdings Proprietary Limited he accepted the
position of Chief Executive Officer at RCL Foods. He was
appointed non-executive Chairman of SC Johnson in June 2008.
Miles has previously served as Co-Chairman of the Consumer
Goods Council of South Africa (CGCSA).
Other directorships in the past five years
RCL Foods and its subsidiary companies and SC Johnson & Son
of South Africa Proprietary Limited.
RH (Rob) Field
Position
Chief Financial Officer, executive Director
Member of the Risk Committee and the Social and Ethics
Committee
Appointed
July 2004
Age
42
Nationality
South African
Business address
RCL Foods Limited, Six The Boulevard, Westway Office Park,
Westville, 3629
Qualifications
CA(SA)
Experience
Rob is a Chartered Accountant who qualified with Deloitte &
Touche in Durban. Prior to joining RCL Foods in May 2003 he
spent four years as Commercial Director of Robertsons
Homecare Proprietary Limited. During 2009 Rob was appointed
as a non-executive director of McCord Hospital.
Other directorships in the past five years
RCL Foods and its subsidiary companies and McCord Hospital.
230
EXECUTIVE MANAGEMENT OF RCL FOODS GROUP
TJ (Trevor) Harding
Position
Group IT Director
Appointed
August 2005
Age
51
Nationality
South African
Business address
RCL Foods Limited, Six The Boulevard, Westway Office Park,
Westville, 3629
Qualifications
B.Comm, Higher Diplomas in Accounting and Tax, CA(SA)
Experience
Trevor has over 25 years’ experience in information technology
and business systems process management. Prior to joining
RCL Foods, he held the positions of IT director of Unilever South
Africa and Robertsons. Following the Group restructure in
January 2011, Trevor was also appointed to the board of Vector.
Other directorships in the past five years
Rainbow Farms and Vector.
SB (Stephen) Heath
Position
Group Legal and Corporate Affairs Director
Appointed
August 2007
Age
57
Nationality
South African
Business address
RCL Foods Limited, Six The Boulevard, Westway Office Park,
Westville, 3629
Qualifications
B.A., L.L.B., Grad Dip Industrial Relations, Attorney of the High
Court of South Africa
Experience
Stephen spent 18 years with RCL Foods as Group Secretary and
Legal Advisor prior to his appointment to the board of Rainbow
Farms Proprietary Limited. Before joining the Group he gained
experience both as a public prosecutor in the Department of
Justice and subsequently as an attorney in private practice. He
was appointed Human Resource and Legal Director in August
2007 and subsequently Group Human Resources and Corporate
Affairs Director. Following the Group restructure in January
2011, Stephen was also appointed to the board of Vector.
Other directorships in the past five years
Rainbow Farms, Vector, Lifeline Durban and the South African
Agricultural Processors Association.
WS (Wayne) Hoare
Position
Group HR Director
Appointed
June 2013
Age
50
Nationality
South African
RCL Foods Limited, Six The Boulevard, Westway Office Park,
Westville, 3629
Business address
Qualifications
Experience
BA (Hons)
Wayne has over 25 years’ experience in human resources and
people and organisation management. Prior to joining RCL
Foods, he held various positions in HR locally and internationally
with Unilever and returned to South Africa in January 2013
after completing a UK-based assignment as Senior Vice president
of Leadership and Organisation Development.
231
EXECUTIVE MANAGEMENT OF RAINBOW FARMS PROPRIETARY LIMITED
DS (Scott) Pitman
Position
Managing director
Appointed
April 2007
Age
51
Nationality
South African
Business address
Rainbow Farms Proprietary Limited, One The Boulevard,
Westway Office Park, Westville, 3629
Qualifications
B.Bus.Sci
Experience
Scott has 19 years’ experience in marketing and sales where he
has headed up marketing for Robertsons, Distell and Unilever
and most recently as Customer Director at Unilever. Scott was
appointed Managing Director of Rainbow in January 2011.
Other directorships in the past five years
Current: None
PD (Paul) Cruickshank
Position
Commercial director
Appointed
January 2011
Age
39
Nationality
South African
Business address
Rainbow Farms Proprietary Limited, One The Boulevard,
Westway Office Park, Westville, 3629
Qualifications
CA(SA)
Experience
Paul is a Chartered Accountant who qualified with Deloitte &
Touche in Durban. He joined Rainbow Farms in 2004 as Group
Financial Manager and worked in this position until being
appointed to the Board in January 2011.
Other directorships in the past five years
None
WA (Wouter) de Wet
Position
Processing and milling director
Appointed
September 2006
Age
47
Nationality
South African
Business address
Rainbow Farms Proprietary Limited, One The Boulevard,
Westway Office Park, Westville, 3629
Qualifications
BA (Industrial Psychology)
Experience
Wouter has 14 years’ management consulting experience in
various industries. He served as consultant to Rainbow Farms
from 1997 to 2006, when he was appointed as National Supply
Chain Manager. His project experience in Rainbow Farms
covers the entire value chain. He was appointed Processing
Director in September 2006 and took on the additional
responsibility for feed milling during 2009. Wouter is also
responsible for the Group sustainability function.
Other directorships in the past five years
None
232
JB (Jason) Livesey
Position
Customer and marketing director
Appointed
April 2012
Age
38
Nationality
South African
Business address
Rainbow Farms Proprietary Limited, One The Boulevard,
Westway Office Park, Westville, 3629
Qualifications
B.Com.
Experience
Jason was appointed as Customer and Marketing Director on
1 April 2012. Prior to this appointment, Jason spent 16 years at
Unilever, of which 13 years were in the customer division (three
of these in Australia), and the last three years in the marketing
division. He has a wealth of experience in leading customer
initiatives in a multinational fast moving consumer goods
grocery environment, and more recently in heading up the
marketing of a division.
Other directorships in the past five years
None
DB (Bonga) Mavume
Position
Agriculture director
Appointed
November 2007
Age
39
Nationality
South African
Business address
Rainbow Farms Proprietary Limited, One The Boulevard,
Westway Office Park, Westville, 3629
Qualifications
BSc. Agric. (Hons), MBA (USB)
Experience
Bonga has over 10 years farm operations and business
management experience with Pioneer Foods Limited Agri
Business and Baking division. He joined Rainbow Farms as
Supply Chain Manager in February 2007 and was appointed
Breed Director in November 2007 and Agriculture Director in
April 2010. Bonga currently serves on the Board of the
South African Agricultural Processors Association and the
South African Poultry Association.
Other directorships in the past five years
None
DS (Daryl) Milne
Position
FoodSolutions director
Appointed
January 2011
Age
38
Nationality
South African
Business address
Rainbow Farms Proprietary Limited, One The Boulevard,
Westway Office Park, Westville, 3629
Experience
Daryl joined Rainbow in 2004 after working for Unilever in
their Foods division for eight years in various customer and
brand development roles. Following several years’ experience in
FoodSolutions marketing, Daryl was appointed as FoodSolutions
director on 1 January 2011.
Other directorships in the past five years
None
233
EXECUTIVE MANAGEMENT OF VECTOR LOGISTICS PROPRIETARY LIMITED
CD (Chris) Creed
Position
Managing director
Appointed
January 2011
Age
54
Nationality
South African
Business address
Vector Logistics Proprietary Limited, 30 The Boulevard,
Westend Office Park, Westville, 3629
Qualifications
IMM Dip (SA)
Experience
Prior to joining Rainbow Farms, Chris held various trade
marketing and sales roles within Bristol Myers Squibb and
Adcock Ingram and then was responsible for marketing and
sales of Capespan Proprietary Limited products in Europe and
served as a director of London based Capespan plc. Chris was
appointed as a director of Rainbow FoodSolutions in June 2005
and Distribution Director in March 2007. In January 2011,
Chris resigned from the Rainbow Farms board to concentrate
on his role as Managing Director of Vector.
Other directorships in the past five years
None
PE (Paul) Gibbons
Position
Customer director
Appointed
December 2011
Age
40
Nationality
South African
Business address
Vector Logistics Proprietary Limited, 30 The Boulevard,
Westend Office Park, Westville, 3629
Qualifications
B.Com., MBA
Experience
Paul joined Vector in 1998 and spent time in financial,
commercial and supply chain roles. In 2010, Paul was appointed
as Supply Chain Manager and in December 2011 he was
appointed as Customer Director.
Other directorships in the past five years
None
I (Ilse) Gravett-Hultzer
Position
Supply chain director
Appointed
January 2012
Age
41
Nationality
South African
Business address
Vector Logistics Proprietary Limited, 30 The Boulevard,
Westend Office Park, Westville, 3629
Qualifications
B.Soc.Sci. (Hons), ACMA, CGMA
Experience
Ilse started her career with Unilever and held various supply
chain
and
commercial
positions
during
her
12-year tenure, including Supply Chain Planning Director and
Works Director. She served as Managing Executive for
Manufacturing at Famous Brands Limited and then took up the
position of Managing Director for Fairfield Dairy in 2009. She
was appointed as Supply Chain Director of Vector in January
2012.
Other directorships in the past five years
None
234
BM (Bruce) Mackenzie (Resigned 30 November 2013)
Position
Financial Director
Appointed
January 2011
Age
52
Nationality
South African
Business address
Vector Logistics Proprietary Limited, 30 The Boulevard,
Westend Office Park, Westville, 3629
Qualifications
ACMA
Experience
Bruce has held various financial positions with the following
companies: Blue Bell Wrangler, Divpac (Nampak) and the last
20 years with I&J and Vector. In 2004, Bruce was appointed as
the KwaZulu-Natal Regional Operations Manager. In 2008,
Bruce moved back into finance to head up Vector’s finance
function and in January 2011 was appointed as Financial
Director of Vector.
Other directorships in the past five years
Current: None
GAS (Gary) King
Position
Financial Director
Appointed
December 2013
Age
37
Nationality
South African
Business address
Vector Logistics Proprietary Limited, 30 The Boulevard,
Westend Office Park, Westville, 3629
Qualifications
B.Com. (Hons), CA (SA)
Experience
Gary completed his Articles of Clerkship with Deloitte & Touche
in 2001 and remained with them as a Consultant and Manager
until 2004. After serving as Financial Manager at Super Group
Limited and Group Financial Manage at Astrapak Limited he
joined Tiger Brands Limited as Corporate Financial Executive
in 2008. Gary was Financial Executive – Snacks, Treats &
Beverages at TBL from March 2012 until joining Vector.
Other directorships in the past five years
None
RJ (Rory) Matthews
Position
Operations Director
Appointed
March 2013
Age
53
Nationality
South African
Business address
Vector Logistics Proprietary Limited, 30 The Boulevard,
Westend Office Park, Westville, 3629
Qualifications
BSc (Biochemistry/Genetics)
Management
Experience
Rory has held leadership positions in both Rainbow and Vector.
These positions covered human and industrial resource
management, Rainbow inbound and outbound supply chain
management, processing management and Vector operations
management.
Other directorships in the past five years
None
PGD
Industrial
Relations
235
S (Shun) Pillay
Position
IT director
Appointed
January 2011
Age
46
Nationality
South African
Business address
Vector Logistics Proprietary Limited, 30 The Boulevard,
Westend Office Park, Westville, 3629
Qualifications
B.Paed. (Sc) (Education)
Experience
Shun has more than 20 years’ experience in the retail and
logistics industry and served as Chief Information Officer of
Vector from 2002 to 2010. Shun was appointed as IT Director of
Vector in January 2011.
Other directorships in the past five years
None
236
EXECUTIVE MANAGEMENT OF FOODCORP PROPRIETARY LIMITED
CB (Cliff) Sampson
Position
Managing Director
Appointed
March 2008
Age
54
Nationality
South African
Business address
Foodcorp Proprietary Limited
Qualifications
MBA (Henley), MAP (Wits), Dip. Inst.
Experience
Cliff has been the managing Director of the Consumer Brands
Division since joining Foodcorp in January 2008. Prior to
joining Foodcorp he was Managing Director of National Brands
(AVI) for eight years.
Other directorships in the past five years
None
OJ (Ockert) Janse van Rensburg
Position
Chief Financial Officer
Appointed
May 2010
Age
40
Nationality
South African
Business address
Foodcorp Proprietary Limited
Qualifications
CA(SA), Higher Diploma in Corporate Law
Experience
Ockert joined Foodcorp in July 2007 in an executive financial
role. Ockert has served as the Chief Financial Officer and
member of the Foodcorp board since May 2010. Prior to joining
Foodcorp, Ockert held the position of partner and director of
PricewaterhouseCoopers.
Other directorships in the past five years
None
MSG (Mafahle) Mareletse
Position
Executive Director – Ready To Eat Division
Appointed
September 2007
Age
54
Nationality
South African
Business address
Foodcorp Proprietary Limited
Qualifications
BA, Certificate in Financial Analysis
Experience
Mafahle has served as the managing Director of the Ready To
Eat Division since January 2008. Prior to this Mafahle held the
position of Marketing Director. Before joining Foodcorp, he was
Managing Director at Cell C.
Other directorships in the past five years
None
237
ANNEXURE 11
EXTRACTS FROM THE RCL FOODS MOI RELATING TO THE DIRECTORS
Directors’ remuneration
The Company may pay remuneration to the Directors for their services as Directors in accordance with a
special resolution approved by the Shareholders within the previous 2 (two) years, as set out in sections 66(8)
and (9), and the power of the Company in this regard is not limited or restricted by this Memorandum of
Incorporation.
Any Director who:
•
serves on any executive or other committee; or
•
devotes special attention to the business of the Company; or
•
goes or resides outside South Africa for the purpose of the Company; or
•
otherwise performs or binds himself to perform services which, in the opinion of the Directors, are outside
the scope of the ordinary duties of a Director,
may be paid such extra remuneration or allowances in addition to or in substitution of the remuneration to
which he may be entitled as a Director, as a disinterested quorum of the Directors may from time to time
determine.
The Directors may also be paid all their travelling and other expenses necessarily incurred by them in
connection with:
•
the business of the Company; and
•
attending meetings of the Directors or of committees of the Directors of the Company.
The Board may, as contemplated in and subject to the requirements of section 45, authorise the Company to
provide financial assistance to a Director, Prescribed Officer or other person referred to in section 45(2), and
the power of the Board in this regard is not limited or restricted by this Memorandum of Incorporation.
Borrowing powers
Subject to the provisions of this Memorandum of Incorporation, the Directors may from time to time:
•
borrow for the purposes of the Company such sums as they think fit;
•
secure the payment or repayment of any such sums, or any other sum, as they think fit, whether by
the creation and issue of Securities, mortgage or charge upon all or any of the property or assets of the
Company.
The Board shall procure (but as regards subsidiaries of the Company only insofar as by the exercise of voting
and other rights or powers of control exercisable by the Company they can procure) that the aggregate principal
amount at any one time outstanding in respect of moneys so borrowed or raised by:
•
the Company; and
•
all the subsidiaries for the time being of the Company (excluding moneys borrowed or raised by any
of such companies from any other such companies but including the principal amount secured by any
outstanding guarantees or suretyships given by the Company of any of its subsidiaries for the time being
for the share capital or indebtedness of any other company or companies whatsoever and not already
included in the aggregate amount of the moneys so borrowed or raised),
shall not exceed the aggregate amount at that time authorized to be borrowed or secured by the directors of
the Company’s holding company (if any) in respect of that holding company and all the then subsidiaries of
that holding company, provided that no such sanction shall be required to the borrowing of any moneys
intended to be applied and actually applied within 90 (ninety) days in the repayment (with or without any
premium) of any moneys then already borrowed and outstanding and notwithstanding that new borrowing
may result in the abovementioned limit being exceeded.
Executive Directors
The Directors may from time to time appoint:
•
managing and other executive Directors (with or without specific designation) of the Company, subject to
the provisions of clause 27.3.6;
•
any Director to any other executive office with the Company,
as the Directors shall think fit, for a period as the Directors shall think fit, and may from time to time remove
or dismiss such persons from office and appoint another or others in his or their place or places.
238
Any Director appointed in terms of clause 30.1:
•
shall (subject to the provisions of the contract under which he is appointed) whilst he continues to hold that
position or office, be subject to retirement by rotation; and
•
shall be subject to the same provisions as to removal as the other Directors of the Company, and if he ceases
to hold office as a Director, his appointment to such position or executive office shall ipso facto terminate,
without prejudice to any claims for damages which may accrue to him as a result of such termination.
The remuneration of a Director appointed to any position or executive office in terms of clause 30.1:
•
shall be determined by a disinterested quorum of the Directors or a remuneration committee appointed by
the Directors;
•
shall be in addition to or in substitution of any ordinary remuneration as a Director of the Company, as the
Directors may determine;
•
may consist of a salary or a commission on profits or dividends or both, as the Directors may direct.
The Directors may from time to time entrust to and confer upon an executive Director for the time being such
of the powers exercisable in terms of this Memorandum of Incorporation by the Directors as they may think fit,
and may confer such powers for such time and to be exercised for such objects and purposes, and upon such
terms and conditions, and with such restrictions, as they think expedient; and they may confer such powers
either collaterally with or to the exclusion of and in substitution for all or any of the powers of the Directors in
that behalf, and may from time to time revoke, withdraw, alter or vary all or any of such powers.
Eligibility, resignation and retirement of Directors
Apart from satisfying the qualification and eligibility requirements set out in section 69 and subject to the
below mentioned provisions of this clause 27.4, a person shall not be required to hold any qualifying Shares or
to satisfy any eligibility requirements or qualifications to become or remain a Director or a Prescribed Officer
of the Company.
Subject to any provisions of clause 27.4.3, a Director shall vacate his office as Director if:
•
his estate is sequestrated or he surrenders his estate or enters into a general compromise with his creditors;
•
he is found to be or become of unsound mind;
•
a majority of his co-Directors sign a written notice in which he is requested to vacate his office and lodge it
at the principal place of business of the Company (which shall come into effect upon lodging thereof at the
principal place of business of the Company), but without prejudice to any claim for damages;
•
he is removed from office by a resolution of the Company of which proper notice have been given in term
of the Act, but without prejudice to any claim for damages;
•
he is, pursuant to the provisions of the Act or any order made thereunder, prohibited from acting as a
Director;
•
he resigns his office as Director by notice in writing to the Company;
•
he is absent from meetings of the Board for 6 (six) consecutive months without leave of the Directors while
not engaged in the business of the Company, and he is not represented at any such meeting during such
6 (six) consecutive months by an alternate Director; and the Directors resolve that his office be, by reason
of such absence, vacated, provided that the Directors shall have the power to grant to any Director leave of
absence for a definite or indefinite period.
No Director shall be appointed for life or for an indefinite period and the Directors shall rotate in accordance
with the following provisions:
•
at each annual general meeting referred to in clause 21.2.1, 1/3 (one-third) of the Directors for the time
being, or if their number is not 3 (three) or a multiple of 3 (three), the number nearest to 1/3 (one-third),
but not less than 1/3 (one-third), shall retire from office;
•
the Directors to retire in every year shall be those who have been longest in office since their last election,
but as between persons who were elected as Directors on the same day, those to retire shall, unless they
otherwise agree among themselves, be determined by lot;
•
notwithstanding the provisions of this clause, a Director who has already held his office for a period of
3 (three) years since his last election for appointment by the date of any annual general meeting shall
retire at such meeting, either as one of the Directors retiring according to the roster referred to above, or
over and above such Directors;
•
the length of time a director has been in office shall be computed from his last election, appointment or date
upon which he was deemed re-elected;
•
a Director retiring at a meeting shall retain office until the election of Directors at that meeting has been
completed;
•
a retiring Director shall be eligible for re-election;
239
•
the Company, at the general meeting at which a Director retires in the above manner, or at any other
general meeting, may fill the vacancy by electing a person thereto, and in default the retiring Director,
if willing to continue to act, shall be deemed to have been re-elected, unless it is expressly resolved at the
meeting not to fill such vacated office; or a resolution for the re-election of such Director was put to the
meeting and rejected, provided that the Company shall not be entitled to fill the vacancy by means of a
resolution passed in accordance with clause 26.
The Board shall, through its nomination committee (if such nomination committee has been constituted in
terms of clause 33.2), provide the Shareholders with a recommendation in the notice of the meeting at which
the re-election of a retiring Director is proposed, as to which retiring Directors are eligible for re-election,
taking into account that Director’s past performance and contribution.
Nomination and appointment of Directors
Except for the Directors appointed in terms of clause 30, all Directors shall be elected as such by an ordinary
resolution of the Shareholders at a general or annual general meeting of the Company and no appointment of
a Director in accordance with a resolution passed in terms of section 60 shall be competent.
Subject to the provisions of clauses 27.4 and 27.3.6, a person as envisaged in clause 27.3.1 shall only be eligible
for election as a Director if he is recommended by the Board or nominated in the manner referred to in
clause 27.3.3.
No person, other than a Director retiring at the meeting shall, unless recommended by the Board, be eligible
for election as a Director at any general meeting, unless:
•
not more than 28 (twenty-eight) days, but at least 7 (seven) clear days before the day appointed for the
meeting, there shall have been delivered at the principal place of business of the Company a notice in
writing by a Shareholder (who may be the proposed Director) duly qualified to be present and to vote at the
meeting for which such notice is given;
•
such notice sets out the Shareholder’s intention to propose a specific person for election as Director; and
•
notice in writing by the proposed person of his willingness to be elected is attached thereto (except where
the proposer is the same person as the proposed).
In any election of Directors:
•
the election is to be conducted as a series of votes, each of which is on the candidacy of a single individual
to fill a single vacancy, with the series of votes continuing until all vacancies on the Board have been filled;
and
•
in each vote to fill a vacancy:
•
•
each vote entitled to be exercised may be exercised once; and
•
the vacancy is filled only if a majority of the votes exercised support the candidate.
•
if the election process results therein that:
–
more nominees are elected as Directors than there are vacancies, those nominees (being a number of
the nominees that are equal to the number of vacancies) that received the highest majority of votes
will be the elected Directors, provided that in the event that a number of nominees that compete for
a lesser number of vacancies received an equal number of majority votes, the Director or Directors
elected to fill those vacancies will be determined by lot in the manner that the chairperson of the
meeting will determine;
–
less nominees are elected as Directors than there are vacancies, the remaining vacancies will remain
unless filled in terms of the provisions of the relevant clauses;
–
if no or insufficient candidates are nominated to fill the number of vacancies on the Board, the vacancies
so caused shall be regarded as interim vacancies which shall be filled in terms of the provisions of
clause 27.3.6.
Save as provided for in clauses 27.3.6 and 30, the Company shall only have elected Directors and there
shall be no appointed or ex offıcio Directors as contemplated in section 66(4).
The Board has the power to appoint or co-opt any person as Director, whether to fill any vacancy on the Board
on a temporary basis, as set out in section 68(3), or as additional Director, provided that such appointment must
be confirmed by the Shareholders, in accordance with clause 27.2.2 at the next annual general meeting of the
Company, as required in terms of section 70(3)(b)(i).
240
ANNEXURE 12
INVESTMENTS IN SUBSIDIARIES
Details of the principal subsidiary companies of RCL Foods as at 30 June 2013 are set out below:
Issued share
capital
Ownership
percentage
held
Voting
percentage
held
R
%
%
East End Court Proprietary Limited
Epol Proprietary Limited
1
100
100
78 000
100
100
Farmer Brown Proprietary Limited
1
100
100
New Foodcorp Holdings Proprietary Limited
1
100
100
Rainbow Chicken Foods Proprietary Limited
100
100
100
Rainbow Farms Proprietary Limited
40 000
100
100
Rainbow Farms Investments
Proprietary Limited
99 900
100
100
312
100
100
50
100
100
100
100
100
RCL Group Services
Proprietary Limited
Vector Logistics Proprietary Limited
Vector Logistics Limited
Rights held
by other
persons to
vary voting
rights
Details of all subsidiary companies of RCL Foods as at 30 June 2013 are set out below:
Name
Registration
number
Place and
Date it
date of
became a
incorporation subsidiary
Issued/
stated Percentage Nature of
capital
held business
R
%
East End Court Proprietary Limited
1983/002520/07
RSA
17/03/1983
06/03/1985
1
100 Dormant
Epol Proprietary Limited
1952/002660/07
RSA
23/10/1952
29/10/1997
78 000
100 Dormant
Farmer Brown Proprietary Limited
1994/001279/07
RSA
24/02/1994
24/02/1994
1
100 Dormant
New Foodcorp Holdings Proprietary Limited
2009/022279/07
RSA
17/11/2009
15/05/2012
1
100 Investment
holding
company
Rainbow Chicken Foods Proprietary Limited
2004/012689/07
RSA
14/05/2004
02/07/2004
100
100 Dormant
Rainbow Farms Proprietary Limited
1960/002377/07
RSA
23/06/1960
01/07/1966
40 000
100 Poultry
producer
Rainbow Farms Investments Proprietary Limited
1962/000300/07
RSA
03/02/1962
15/12/1983
99 900
100 Investment
holding
company
RCL Group Services Proprietary Limited
1957/004291/07
RSA
31/12/1957
01/03/1991
312
Vector Logistics Proprietary Limited
2002/009081/07
RSA
19/04/2002
03/12/2004
50
100 Logistics
provider
Vector Logistics Limited
06/01557/07
Namibia
25/04/1960
03/12/2004
100 000
100 Logistics
provider
100 Group
services
None of the above subsidiaries are listed.
241
Capitau Investment Management as well as all Foodcorp subsidiaries:
Name
Registration
number
Place and
date of
incorporation
Issued/
stated
capital
R
Effective
Percentage
held
%
Nature of
business
Capitau Investment Management 2006/030161/06
South Africa
2006/04/01
1 000
100 Investment holding company
New Foodcorp Holdings
2009/022279/07
South Africa
2009/11/17
1
100 Investment holding company
Astoria Bakery
1996/010419/07
South Africa
1996/08/07
100
100 Dormant
Bongolethu Fishing Enterprizes
1998/016997/07
South Africa
1998/08/28
100
100 Catching & processing of fish & fish
related products
Boot Nr 7 Belange
1999/015373/07
South Africa
1999/07/19
1 000
Emachibini Fisheries
1997/012114/07
South Africa
1997/07/25
100
98 Catching & processing of fish & fish
related products
Ezintlanzini Fishing
1996/009434/07
South Africa
1996/07/22
100
100 Catching & processing of fish & fish
related products
Ezolwandle Fishing
1996/009516/07
South Africa
1996/07/22
100
100 Catching & processing of fish & fish
related products
Firlig 5
1982/005432/07
South Africa
1982/06/07
100
100 Dormant
Firlig 6
1996/014694/07
South Africa
1996/10/25
1
100 Dormant
First Lifestyle Group
2007/003874/07
South Africa
2007/02/07
1
100 Dormant
First Lifestyle
2008/013996/07
South Africa
2008/06/30
1
100 Dormant
Foodcorp Anchovy
2009/006376/07
South Africa
2009/03/27
200
Foodcorp Consumer Brands
2008/026802/07
South Africa
2008/11/13
1
Foodcorp Fishing
2009/003155/07
South Africa
2009/02/18
200
100 Investment in fishing company
Foodcorp Hake
2009/006128/07
South Africa
2009/03/26
200
100 Investment in fishing company
Foodcorp Lobster
2009/006133/07
South Africa
2009/03/26
200
100 Investment in fishing company
Foodcorp Pilchards
2009/006124/07
South Africa
2009/03/26
200
100 Investment in fishing company
Foodcorp
2004/000743/07
South Africa
2004/01/15
1
Hammer Street Investments
1997/001660/07
South Africa
1997/02/06
1 000
100 Dormant
Jafprop
1996/007832/07
South Africa
1996/06/21
100
100 Dormant
Lexshell 652 Investments
2005/006949/07
South Africa
2005/03/08
100
100 Company that holds all of the security
for the Foodcorp Euro Bond
Maxitrade 102 General Trading
2007/003776/07
South Africa
2007/02/07
1
Mkhuhlu Bakery
1977/004038/07
South
Africa1977/12/05
NIB 5 Share Block
1998/011941/07
South Africa
1998/06/23
1
100 Dormant
NIB 6 Share Block
1998/012204/07
South Africa
1998/06/26
1
100 Dormant
Ntabeni Fishing
1968/000369/07
South africa
1968/01/12
200
Orgel Vismaatskappy
1999/006287/06
South Africa
1999/03/25
25 000
Pamodzi Foods
1997/015350/07
South Africa
1997/09/12
1
Sea-Ice Manufacturers
1998/006923/07
South Africa
1998/09/04
100
100 Catching & processing of fish & fish
related products
Siyasebenza Fishing
2000/025420/07
South Africa
2000/10/05
100
100 Catching & processing of fish & fish
related products
Trade Motto 106
2002/019136/07
South Africa
2002/08/07
1 000
100 Catching & processing of fish & fish
related products
Umfondini Fishing
1997/013991/07
South Africa
1997/08/22
100
100 Catching & processing of fish & fish
related products
Wark Investments
1996/006176/07
South Africa
1996/05/21
1
100 Dormant
Astoria Bakery Lesotho
1979/26
Lesotho
1979/03/14
L100
100 Dormant
Fed-Cape International Limited
104242
Jersey
2009/10/22
US$10,000
242
450 000
77 Operates fishing vessel
100 Investment in fishing company
100 Dormant
100 Company engaged primarily in the
production, marketing and distribution of
food.
100 Dormant
100 Bakery
74 Operates fishing vessel
100 Pilchard and Anchovy rights holder.
100 Dormant
100 Investment company
ANNEXURE 13
PRINCIPAL IMMOVABLE PROPERTIES OWNED OR LEASED
In the ordinary course of its business, RCL Foods is the registered owner of in excess of 300 individual
immovable properties. These individual properties have not been disclosed as the Company believes that the
disclosure thereof would not be meaningful to Shareholders. The full list of properties owned by RCL Foods
has been made available for inspection by Shareholders, (refer to Section E paragraph 19).
243
ANNEXURE 14
CORPORATE GOVERNANCE
Extracts from the 2013 integrated annual report
RCL Foods is committed to the highest level of corporate governance and ethical business behaviour. The
Directors recognise that good corporate governance is essentially about leadership and that there exists the
need to conduct the enterprise with integrity and in compliance with legislation, regulations and best practices
relevant to the Group’s business. Governance in the Group extends beyond mere legislative and regulatory
compliance and the Directors strive to entrench an enterprise wide culture of good governance and ethical
conduct. The Board therefore sets the tone and standards that must be consistently applied by executive
management and all employees. These standards are applicable to the day-to-day operations of the Group and
interactions with all stakeholders. Appropriate corporate governance structures, practices and processes are
in place and are actively monitored and revised periodically to reflect best practice.
1.
COMPLIANCE
For the 2013 financial year, the Board is of the opinion that the Group applied the requirements of
King III, except as disclosed in the King III Index provided below. The Board is further satisfied that it
met the requirements of the Companies Act, and the Listings Requirements unless otherwise explained.
The following provides an assessment of RCL Foods’ compliance with King III:
Key:
√ Compliant
¥ Partially compliant (refer to notes for explanation of non-compliance)
# Under review
• Not applicable
Ethical leadership and
corporate citizenship
The governance of information
technology
√ Effective leadership based on
an ethical foundation
√ Effective and independent
√ Responsible corporate citizen
√ Suitably skilled and experienced √ IT is aligned with the
performance and sustainability
independent non-executive
directors
objectives of the Company
√ Effective management of
Company’s ethics
√ Chaired by an independent
non-executive director
√ Management is responsible for
the implementation of an IT
governance framework
Boards and directors
√ Oversees integrated reporting
√ The Board monitors and
evaluates significant IT
investments and expenditure
√ The Board is responsible for
Information Technology (IT)
governance
√ The Board is the focal point for √ A combined assurance model is
and custodian of corporate
applied to improve efficiency in
governance
assurance activities
√ IT is an integral part of the
company’s risk management
√ Strategy, risk, performance and
sustainability are inseparable
√ Information assets are managed
effectively
• The Board should consider
business rescue proceedings
(BRP) when appropriate1
√ Directors act in the best interests
of the Company
244
Audit Committee
√ Satisfies itself of the expertise,
resources and experience of the
company’s finance function
√ The Risk Committee and Audit
Committee assist the Board in
carrying out its IT
responsibilities
The governance of risk
Ethical leadership and
corporate citizenship
¥ The Chairman of the Board is
an independent non-executive
director2
Audit Committee
√ Overseas internal audit
The governance of information
technology
√ The Board should be responsible
for the governance of risk and
setting levels of risk tolerance
√ Framework for the delegation of √ Integral to the risk management √ The Board should determine the
authority has been established
process
levels of risk tolerance
# The Board comprises a balance
of power, with a majority of
non-executive directors who are
independent3
√ The Risk Committee assists the
Board in carrying out its risk
responsibilities
√ Directors are appointed through √ Oversees the external audit
a formal process
process
√ The Board delegates the risk
management plan to
management
√ Formal induction and ongoing
training of directors is
conducted
√ The Board should ensure that
risk assessments and
monitoring are performed on a
continual basis
√ The Board is assisted by a
√ Reports to the Board and
competent, suitably qualified and
shareholders on how it has
experienced Company Secretary
discharged its duties
√ Frameworks and methodologies
are implemented to increase the
probability of anticipating
unpredictable risks
¥ Regular performance
evaluations of the Board, its
committees and the individual
Directors4
Compliance with laws, codes,
rules and standards
√ Management implements
appropriate risk responses
√ The Board receives assurance on
¥ Appointment of well-structured √ Reports to the Board and
shareholders on how it has
the effectiveness of the risk
committees and oversight of
discharged its duties Compliance management process
key functions5
with laws, codes, rules and
standards
√ A governance framework should √ The Board ensures that the
√ Sufficient risk disclosure to
be agreed between the Group
company complies with relevant
stakeholders
and its subsidiary boards
laws
√ Directors and executives are
fairly and responsibly
remunerated6
√ The Board and directors have a
working understanding of the
relevance and implications of
non-compliance
Integrated reporting and
disclosure
√ Remuneration of Directors and
prescribed officers disclosed
√ Compliance risk forms an
integral part of the Company’s
risk management process
√ Ensures the integrity of the
Company’s integrated report
√ The Company’s remuneration
policy is approved by its
shareholders7
Internal audit
√ Sustainability reporting and
disclosure is integrated with the
Company’s financial reporting
√ The Board has delegated to
# Sustainability reporting and
management the implementation disclosure is independently
of an effective compliance
assured9
framework and processes
√ Effective risk-based internal
audit
√ Written assessment of the
effectiveness of the Company’s
system of internal controls and
risk management
245
Ethical leadership and
corporate citizenship
Audit Committee
Governing stakeholder
relationships
√ Internal audit is strategically
positioned to achieve its
objectives
√ The Board has delegated to
management the implementation
of an effective compliance
framework and processes
Governing stakeholder
relationships
√ Appreciaton that stakeholders’
perceptions affect a Company’s
reputation
√ Management proactively deals
with stakeholder relationships
√ There is an appropriate balance
between its various stakeholder
groupings
√ Equitable treatment of
shareholders
√ Transparent and effective
communication to stakeholders
¥ Disputes are resolved effectively
and timeously8
246
The governance of information
technology
2.
Note
Explanation
Further reading
1.
The Board has however adopted a BRP policy
2.
The Chairman of the Board is not independent due to his
position as CEO of Remgro Limited who is the major
shareholder of RCL Foods. Mr RV Smither maintains his role
as RCL Foods’ lead independent director
Board structure and
composition on pages 12
and 13 of the RCL Foods
Annual Report
3.
The majority of the directors are currently not independent,
however, an appropriate balance of power exists where the
decision-making process cannot be dominated by one
individual or group of individuals
Board structure and
composition on pages 12
and 13 of the RCL Foods
Annual Report
4.
The Board and committees perform a self-evaluation annually,
but have decided not to disclose results and action plans in the
integrated report due to the potentially sensitive nature thereof
5.
The Chairman of the Risk and Social and Ethics Committees is
not independent. Other Committee directors however take
responsibility for ensuring that the Chairman encourages
proper deliberation of all matters requiring the Committee’s
attention
6.
The Board does not believe that directors should earn
attendance fees in addition to a base fee. Many directors add
significant value to the Group outside of the formal Board
and committee meetings
7.
The Board does not intend to ask the shareholders for a nonbinding approval for RCL Foods’ remuneration policy. The
rationale and basis for the Group’s executive remuneration policy
is carefully considered by the Remuneration and Nominations
Committee and is documented in the annual report
8.
The Board does not intend to institute a formal dispute resolution
process as it believes that the existing processes within the Group
operate satisfactorily and do not require a more formal and
separate mechanism. Shareholders have remedies in terms of the
Companies Act
9.
Independent assurance in respect of sustainability reporting
and disclosures will be considered for the 2014 annual report
Remuneration report on
page 39 of the RCL Foods
Annual Report
Internal assurance on page 52
of the RCL Foods Annual
Report
BOARD OF DIRECTORS
(a)
Board structure and composition
The Board is the highest governing authority within the Group and has ultimate responsibility
for governance. The Group has a unitary Board that comprises 11 (eleven) non-executive (6 (six) of
whom are independent) and two executive Directors.
The Chairman is not independent but the roles of Chairman and Chief Executive Officer are separate
and a clear division of responsibility exists. The non-executive Directors take responsibility for
ensuring that the Chairman encourages proper deliberation of all matters requiring the Board’s
attention, and the Board ensures that there is an appropriate balance of power and authority so
that no one individual or block of individuals can dominate the Board’s decision-making process.
To ensure good governance and as recommended by King III, Mr RV Smither maintains his role as
lead independent Director.
The executive Directors have overall responsibility for implementing the Group’s strategy. Nonexecutive Directors complement the skills and experience of the executive Directors and bring
judgement to bear, independent of management, on the Board’s deliberations and decisions through,
inter alia, their knowledge and experience.
247
(b)
Board responsibilities
The Board gives strategic direction to the Group under the chairmanship of Mr JJ Durand. The
Board retains full and effective control over the Group and monitors executive management in
implementing plans and strategies. Currently, the Board’s responsibility extends to all dependent
subsidiaries including Foodcorp. In the new year, the Board will review how it further incorporates
certain functions relating to Foodcorp into the relevant Board committees.
The roles and responsibilities of the Board and its committees are set out in formal charters which are
reviewed annually to ensure that they remain relevant. The Board and its committees are supplied
with complete and timely information which enables them to discharge their responsibilities
efficiently and effectively. Directors have unrestricted access to all Group information, records,
documents and property. Non-executive Directors have access to management and may meet
separately with management, without the attendance of executive Directors. The information needs
of the Board are well defined and regularly monitored. All Directors have access to the advice and
services of the Company Secretary, and Directors may obtain independent professional advice at the
Group’s expense, should they deem this necessary. In terms of the Board Charter, the Board has
responsibility for:
•
Acting as a focal point for, and custodian of, corporate governance
•
Providing strategic leadership, integrity and judgement and directing RCL Foods so as to achieve
its goals and objectives
•
Ensuring that RCL Foods is seen as a responsible corporate citizen by having due regard for
financial and non-financial aspects of its business
•
Ensuring that RCL Foods’ ethics are effectively managed
•
Ensuring that RCL Foods has an effective and independent Audit Committee
•
Ensuring the effective governance of risk
•
Ensuring the effective governance of Information Technology
•
Ensuring that RCL Foods complies with applicable laws, regulations and codes of business
practice
•
Ensuring that there is an effective risk based Internal Audit function
•
Ensuring the integrity of RCL Foods’ Integrated Report
•
Ensuring that individual Directors act in the best interest of RCL Foods
•
Defining levels of authority, reserving specific powers to itself and delegating other matters to
management
•
Establishing the Board committees’ terms of reference
•
Ensuring that the evaluation of the Board, its committees and individual Directors is performed
on an annual basis
To enable the Board to properly discharge its responsibilities and duties, certain responsibilities of
the Board have been delegated to Board committees.
(c)
Board committees and attendance
The Board has established four principal Board committees to assist in discharging its responsibilities.
The creation of Board committees does not reduce the Directors’ overall responsibilities and therefore
all committees must report and make recommendations to the Board. The Board committees are as
follows:
248
•
Audit Committee
•
Risk Committee
•
Remuneration and Nominations Committee
•
Social and Ethics Committee
FIGURE 1: BOARD AND SUB-COMMITTEE COMPOSITION
(d)
Board
Audit Committee
Executive Directors:
M Dally
RH Field
Dr M Griessel
NP Mageza
RV Smither
Non-executive Directors:
Risk Committee
JJ Durand
HJ Carse
PR Louw
JB Magwaza
GC Zondi
M Dally
RH Field
Dr M Griessel
RV Smither
GC Zondi
Independent non-executive Directors:
Remuneration and Nominations Committee
Dr M Griessel
NP Mageza
DTV Msibi
MM Nhlanhla
RV Smither
GM Steyn
NP Mageza
JB Magwaza
RV Smither
Social and Ethics Committee
M Dally
RH Field
MM Nhlanhla
GC Zondi
Governance structure: RCL Foods Board committees
Specific responsibilities have been formally delegated to the Audit Committee, the Risk Committee,
the Remuneration and Nominations Committee and the Social and Ethics Committee. Formal
documented charters define terms of reference, duration and functions, clearly agreed upon
reporting procedures and scope of authority for each committee. There is transparency and full
disclosure from the committees to the Board. Committees are free to obtain independent external
professional advice as and when necessary and are subject to evaluation by the Board to ascertain
their performance and effectiveness.
(e)
Directors’ independence
All independent non-executive Directors are subject to an independence evaluation by the Board.
The Board considers whether the Director is independent in character and judgement and whether
there are any relationships or circumstances which are likely to affect, or could appear to affect,
the Director’s independence. Having considered the responses, the Board is of the opinion that
Messrs NP Mageza, DTV Msibi, RV Smither, GM Steyn, Mrs MM Nhlanhla and Dr M Griessel
are independent. All other non-executive Directors are not considered independent due to their
capacities as Directors of either Remgro Limited or the RCL Foods Strategic Partners, who are
major shareholders in RCL Foods.
All Directors are required to declare, on an annual basis, any interest in proposed transactions or
arrangements with the Group. In addition, all other material interests are disclosed by Directors,
as and when they arise.
(f)
Company Secretary
The Board is cognisant of the duties imposed on the Company Secretary who is accordingly
empowered to properly fulfil those duties.
In addition to the statutory duties, the Company Secretary fulfils the following functions in line
with the Board Charter:
•
Induction of Directors
•
Provides the Board and Directors individually with guidance as to how their responsibilities
should be properly discharged in the best interests of the Group
•
Provides guidance to the Board on the duties of the Directors, matters of ethics and good
governance
•
Acts as the primary point of contact between Shareholders and the Group
249
(g)
Dealing in securities
The Group has a formal policy, established by the Board and implemented by the Company
Secretary, prohibiting dealing in securities by Directors, officers and other selected employees for
a designated period preceding the announcement of its financial results or in any other period
considered sensitive. The Chairman, through the Company Secretary, approves all dealings by
Directors during “open” periods.
(h)
Appointments to the Board
Procedures for appointment to the Board are formal and transparent and a matter for the
Remuneration and Nominations Committee. The Remuneration and Nominations Committee
consists of three non-executive Directors and meets at least twice a year. Mr NP Mageza is the
Chairman of the Remuneration and Nominations Committee. The other members during the year
were Messrs JB Magwaza and RV Smither. The Chief Executive Officer and Group HR Director also
attend meetings of the Remuneration and Nominations Committee.
The committee considers the Board’s composition, retirements and appointments of additional
and replacement Directors. Executive Directors are appointed to the Board on the basis of skill,
experience and level of contribution to the Group and are responsible for the running of the
business. Non-executive Directors are selected on the basis of industry knowledge, professional
skills and experience. On appointment to the Board, new Directors visit the Group’s businesses and
meet with senior management, as appropriate, to facilitate their understanding of the Group and
their fiduciary responsibilities. The Board has reviewed its required mix of skills and experience
and other qualities such as demographics and diversity in order to assess its effectiveness and that
of its committees and the contribution of each Director.
In accordance with the Memorandum of Incorporation, one-third of Directors are subject to
retirement and re-election by Shareholders on an annual basis. As a result of this requirement,
at the 2013 annual general meeting, the following Directors will retire by rotation but all offer
themselves for re-election: Mr JJ Durand, Mr PR Louw, Mrs MM Nhlanhla and Mr GC Zondi.
(i)
Remuneration
Annualised fees payable to Board and committee members are as follows:
RCL Foods Board
Audit Committee
Remuneration and Nominations Committee
Risk Committee
Social and Ethics Committee
Chairman
R
Member
R
193 600
154 000
72 600
72 600
72 600
193 600
77 000
43 560
43 560
43 560
The Remuneration and Nominations Committee determines the remuneration of Directors at levels
sufficient to attract, retain and incentivise individuals of quality. Only non-executive Directors
receive fees for their services on the Board and on Board committees. Executive Directors are
remunerated in terms of their contracts of employment with the Group. Except for executive
Directors’ employment contracts, there are no other contracts of service between any of the Directors
and any subsidiaries within the Group.
(j)
Board effectiveness
For the year ended 30 June 2013, the Company Secretary facilitated a performance evaluation of the
Board and its committees. Each director was requested to complete a questionnaire which assessed
the effectiveness of the following categories:
•
Board composition and meetings
•
Board committees
•
Board information
•
Board orientation and development
•
Board functioning and processes
•
Chairman
•
Personal evaluation
The results of the individual assessments are consolidated by the Company Secretary and
the Chairman of the Board is responsible for determining any actions required to enhance the
effectiveness of the Board.
250
3.
AUDIT COMMITTEE
The role of the Audit Committee is to review the Group’s financial position and make recommendations
to the Board on all financial matters, business risks, internal controls and compliance. This includes
assessing the integrity and effectiveness of related control systems to ensure that the Group’s business is
conducted in a proper and economically sound manner.
The responsibilities of the Audit Committee are incorporated into the committee’s charter which is
reviewed annually and approved by the Board. The committee has conducted its affairs in compliance
with this charter and has discharged its responsibilities contained therein.
(a)
Audit Committee membership and resources
The Audit Committee consists of three independent non-executive Directors. Mr RV Smither
chairs the committee and its other members are Dr M Griessel and Mr NP Mageza. All members
of the committee have the requisite financial knowledge and commercial skills and experience to
contribute effectively to committee deliberations.
The committee meets at least twice a year as per the Audit Committee charter. The Chairman of the
Board, Chief Executive Officer, Chief Financial Officer, Group Audit and Risk Manager (“GARM”)
and representatives from the external auditors attend meetings by invitation. Other members of the
Board and management team attend as required. The committee meets separately with the external
auditors and internal auditors at least once a year without management present, to ensure that all
relevant matters have been identified and discussed without undue influence.
(b)
Roles and responsibilities
The Audit Committee’s roles and responsibilities include its statutory duties per the Companies Act
of South Africa and the responsibilities assigned to it by the Board. The Audit Committee fulfils an
oversight role regarding financial reporting risks, internal financial controls and fraud risk and
Information Technology (“IT”) risks as it relates to financial reporting.
The Audit Committee has discharged its key responsibilities as follows:
•
•
•
•
•
•
•
•
(c)
Reviewed the interim results, period-end financial statements, sustainability disclosure and
integrated report, culminating in a recommendation to the Board. In the course of its review the
committee:
– took appropriate steps to ensure that the financial statements are prepared in accordance
with International Financial Reporting Standards (IFRS); and
– considered and, when appropriate, made recommendations on financial statements,
accounting practices and internal financial controls
Confirmed the Internal Audit charter and audit plan
Evaluated the effectiveness of risk management, controls and governance processes and satisfied
itself about the adequacy and effectiveness of the Group’s system of internal financial controls
Reviewed the appropriateness of the combined assurance model in addressing all significant
risks facing the Group
Considered and recommended to the Board the appointment and retention of external auditors
Evaluated the independence and effectiveness of the external auditors
Approved the audit fees and engagement terms of the external auditors
Determined the nature and extent of allowable non-audit services and approved the terms for the
provision of non-audit services by the external auditors
Expertise and experience of the CFO and finance function
As required by the Listings Requirements, the Audit Committee is satisfied that the CFO and his
management team have appropriate expertise and experience for the Group.
(d)
External audit
The reporting Accountants are the incumbent auditors for all the Group companies. The committee
continually monitors the independence and objectivity of the external auditors.
During the period, the reporting Accountants provided certain non-audit services, including tax
services and a review of Rainbow’s feed raw material procurement process. Total fees incurred
during the 2013 financial year to PWC were R7 800 000 (seven million eight hundred thousand
rand) of which R1 000 000 (one million Rand) related to non-audit services. During the course of the
year under review, the Audit Committee reviewed a report by the external auditors of relationships
they consider may have a bearing on their independence and objectivity. The Audit Committee
concluded that there were no areas of conflict.
251
The Audit Committee has nominated, for election at the annual general meeting, the reporting
Accountants as the external audit firm and Mr Harish Ramsumer as the designated auditor
responsible for performing the functions of auditor for the 2014 financial year. The Audit Committee
has satisfied itself that the audit firm and designated auditor are accredited as such on the JSE list
of auditors.
(e)
Risk management
The Board has assigned oversight of the Group’s risk management function to the Risk Committee.
The Chairman of the Audit Committee is also a member of the Risk Committee, thereby ensuring
that information relevant to these committees is transferred regularly.
(f)
Internal Audit function
Internal Audit is an independent, objective function that provides assurance on the Group’s activities
geared towards creating value and improving business processes. Internal Audit is responsible for:
•
Monitoring the adequacy and effectiveness of the Group’s risk management process
•
Evaluating the Group’s governance processes
•
Evaluating internal controls continuously to determine whether they are adequately designed,
operating efficiently and effectively and recommending improvements
•
Providing a source of information, as appropriate, for instances of fraud, corruption, unethical
behaviour and irregularities
Internal controls reviewed consist of strategic, operating, financial reporting and compliance
controls and include controls relating to:
•
The information management environment
•
The reliability and integrity of financial and operating information
•
The safeguarding of assets
•
The effective and efficient use of company resources
•
Compliance with relevant policies, procedures, laws and regulations
The purpose, authority and responsibility of the Internal Audit activity is defined and governed
by an Internal Audit Charter approved by the Audit Committee and Board. The activities of the
Internal Audit function are co-ordinated by the GARM. To ensure independence, the GARM reports
functionally to the Audit Committee and, only from an administrative perspective, to the CEO. The
GARM holds a senior position in the organisation and his appointment or dismissal is subject to
ratification by the Audit Committee. Internal Audit has free and unrestricted access to management,
employees, activities, physical locations and to all information considered necessary for the proper
execution of Internal Audit’s work, at the discretion of the GARM. Confidentiality of information is
maintained and information is not disclosed without proper authority.
The annual Internal Audit plan is based on an assessment of risk areas identified by management,
as well as focus areas highlighted by the Audit Committee and executive Directors which ensures
that a risk based audit approach is applied. The annual plan is also updated as appropriate to ensure
that it is responsive to changes in the business. A comprehensive report of Internal Audit findings
is presented to the Executive Management regularly and the Audit Committee when it meets.
Follow-up audits are performed in areas where control weaknesses are found. In addition to the
Internal Audit findings, the report to the Audit Committee includes an update on the progress made
against the audit plan, and statistics on follow-up audits conducted. Internal Audit is also involved
in IT throughout the Group to ensure satisfactory IT governance and assurance. All new major IT
projects are subject to pre- and/or post-implementation reviews.
Internal Audit co-ordinates its scope and efforts with External Audit in order to provide efficient
and effective assurance to the Audit Committee.
Internal Audit comprises a dedicated team of appropriately qualified and technically experienced
personnel. Where necessary certain audits are outsourced to consultants with appropriate skills
and technical expertise, for example specialised IT reviews.
The Audit Committee, External Audit and the GARM completed an assessment of the Internal Audit
function for the year. This assessment was supplemented by the results of the Audit Satisfaction
Questionnaires (“ASQ”) that were completed by management during the year. The Chairman of the
Audit Committee and the GARM are responsible for determining any actions required to enhance the
effectiveness of the Internal Audit function. The Audit Committee will commission an independent
quality assurance review at an appropriate future date.
252
(g)
Internal controls
The executive Directors are responsible for ensuring that internal control systems exist that
provide reasonable assurance regarding the safeguarding of assets and the prevention of their
unauthorised use or disposition, proper accounting records are maintained and the financial and
operational information used in the business is reliable.
Having considered:
•
The results of the formal documented review of the Group’s system of internal control and risk
management, including the design, implementation and effectiveness of the Group’s system of
internal financial controls conducted by the Internal Audit function during the year
•
Information and explanations given by management
•
Discussions with the External Auditors on the results of their audit
•
The report from the Audit Committee,
nothing has come to the attention of the Board that causes it to believe that the Group’s system of
internal controls and risk management is not effective and that the internal financial controls do not
form a basis for the preparation of reliable financial statements.
(h)
Going concern
The Audit Committee reviewed a documented assessment by management of the going concern
premise of the Group before concluding to the Board that the company will be a going concern in
the foreseeable future.
4.
RISK COMMITTEE AND MANAGEMENT
The Board considers risk management to be a key business discipline designed to balance risk and reward
and to protect the Group against uncertainties that could threaten the achievement of business objectives.
The Board has documented a corporate risk management policy.
The Risk Committee is responsible for overseeing the adequacy and overall effectiveness of the Group’s
risk management function and its implementation by management. The terms of reference of the Risk
Committee also includes oversight of sustainability within the Group.
(a)
Risk Committee membership
The Risk Committee comprises Messrs GC Zondi (Chairman), M Dally (Chief Executive Officer),
RH Field (Chief Financial Officer), RV Smither (Audit Committee Chairman) and Dr M Griessel. In
order to facilitate the effective assessment of risks at all levels in the Group, the GARM and director
in charge of sustainability attended the committee’s bi-annual meetings by invitation.
(b)
Responsibilities
The Committee Charter includes the following key responsibilities:
•
Risk management
•
Oversee the development and annual review of a policy and plan for risk management to
recommend for approval to the Board
•
Monitor implementation of the policy and plan for risk management taking place by means
of risk management systems and processes
•
Make recommendations to the Board concerning the levels of tolerance and appetite, and
monitoring that risks are managed within the levels of tolerance and appetite as approved
by the Board
•
Oversee that the risk management plan is widely disseminated throughout the Group and
integrated in the day-to-day activities of the Group
•
Ensure that risk management assessments are performed on a continuous basis
•
Ensure that frameworks and methodologies are implemented to increase the possibility of
anticipating unpredictable risks
•
Ensure that management considers and implements appropriate risk responses
•
Ensure that continuous risk monitoring by management takes place
•
Liaise closely with the Audit Committee to exchange information relevant to risk
•
Express the committee’s formal opinion to the Board on the effectiveness of the system and
process of risk management
253
•
•
Review reporting concerning risk management that is to be included in the integrated report
to ensure that it is timely, comprehensive and relevant
Sustainability
•
Make recommendations to the Board concerning key policies, strategies and performance
indicators
•
Provide appropriate guidance and strategic direction on sustainability issues affecting the
Group
•
Review the Group’s annual sustainability report prior to submission to the Board for approval
The Risk Committee is satisfied that it has carried out its responsibilities for the year in compliance
with its approved mandate.
(c)
Risk assessment
Formal risk assessments are performed bi-annually in May and November where existing risks
are re-assessed and new and emerging risks are identified through a combination of facilitated
workshops and interviews with Group executives and management.
The RCL Foods risk universe is the foundation for conducting the strategic risk assessment and
provides management with another filter to determine if any key business risk areas have been
overlooked which could make the organisation vulnerable. Risk reviews are proactive in not
only determining negative areas but also identifying areas of opportunity where effective risk
management can be turned into competitive advantage.
The Group risk register summarises the significant risks faced by the Group, taking into account
the likelihood of occurrence, the potential impact, velocity and the related mitigating factors and
compensating controls. Management’s treatment of risks are aligned to the risk appetite and
tolerance approved by the Board.
Appropriate risk response strategies in relation to the Group’s major risks have been developed
and implemented. The adequacy and effectiveness of these strategies are reviewed on an on-going
basis to ensure that they are responsive to changes in the dynamic environment in which the Group
operates.
(d)
Combined assurance
RCL Foods operates a combined assurance framework, which aims to optimise the assurance coverage
obtained from management, internal assurance providers and external assurance providers on the
risk areas affecting the Group.
RCL Foods’ combined assurance framework is integrated with the Group’s risk management
approach. Risks facing the Group are identified, evaluated and managed by implementing risk
mitigations. Assurance on the effectiveness of the internal controls is obtained from various
assurance providers in a co-ordinated manner, which avoids duplication of effort. The combined
assurance helps to identify gaps or improvement areas in the internal controls.
The Risk Committee considers the risks and the assurance provided through the combined
assurance framework and periodically advises the Board on the state of risks and controls in RCL
Foods’ operating environment. This information is used as the basis for the Board’s review, signoff and reporting to stakeholders via the annual integrated report, on risk management and the
effectiveness of internal controls within the Group.
(e)
Key risks
The table below provides a brief description of the key operational and strategic risks to which the
Group is exposed and the mitigating controls in place to manage these risks.
254
Business risk
Context
Risk response
Volatility in raw
material prices and
exchange rates
Significant increase in feed raw
material costs which cannot be
passed onto customers
•
Raw material procurement is
centralised
•
Clear strategy and policy defined
•
The Group Feed Procurement
Committee meets at least monthly
to review the market factors and
set mandates
Business risk
Context
Risk response
Recovery of required
realisations
Market demand and product price
fluctuations due to:
•
Regular management forecasts
and reviews that focus on actions
required to deliver desired
performance
•
Participation in industry bodies,
e.g. SAPA that represent the
interest of poultry producers
•
Building RCL Foods’ brands
through innovation and
marketing programmes
•
competition from other domestic
and international poultry
producers and processors
•
High levels of imports
•
Consumer disposal income and
spend
Level of injection cap
proposed by
government
The much publicised topic of poultry
meat injection and government’s
proposal to introduce a cap is
another issue facing the local
poultry industry. An injection cap is
likely to result in an erosion of IQF
profit margins across all poultry
producers, the extent of which will
only be determined once the
legislated injection level is
introduced
RCL Foods is playing an active role
in working with government and the
industry to adopt a responsible
approach to the injection of poultry
meat which is more in line with
RCL Foods’s current practice and
international best practice
Energy and water
security and pricing
The Group is aware of the need to
reduce the usage of both water and
electricity in light of constrained
availability and recent price
increases
•
•
•
Non-compliance with The Group’s operations are subject
laws and regulations to legislation and regulations by
authorities that oversee, including
but not limited to:
A sustainability framework is in
place for defining and reviewing
environmental objectives and
targets
Continual focus on waste water
reduction and introduction of
water re-use systems
Research into ways to reduce
energy consumption, e.g. use of
energy saving lighting on farms
and alternative energy sources, i.e.
chicken litter, wind and solar
energy
•
Legal compliance framework is
established
•
RCL Foods’s Total Integrated
Management System (TIMS)
facilitates the validation of
RCL Foods’ systems and product
information to ensure compliance
to South African regulatory and
statutory requirements
•
Financial standards
•
Food labelling requirements
•
Facility and product
requirements
•
Safety, health and environmental
•
requirements and standards for
staff, consumers and customers
•
•
Ongoing employee awareness
programmes
External assurance providers
Compliance is monitored and
tested on an ongoing basis by
Internal Audit, External Audit and
third party providers
255
Business risk
Context
Risk response
Disease outbreaks at
farms
The outbreak of poultry diseases
can impact negatively on the ability
to conduct operations and the
demand for RCL Foods’s products
The Group adheres to good farming
practices and extensive precautionary
measures are in place to ensure the
health of the flocks:
Fire at distribution
facilities, plants and
farms
Fires will affect the ability to
conduct operations which will
impact on financial results
Non- conforming food Products could potentially be
products
subjected to food hazards if not
managed within the supply chain.
As a result we may be subject to
product liability claims and product
recalls and consumer safety
256
•
Bio-exclusion procedures are in
place (physical access controls,
shower procedures, site clothes,
foot dip tanks, vehicle sprays at
key sites, insulated houses,
trained employees)
•
Testing of flocks every month for
Avian Influenza, Newcastle,
Salmonella and Infectious
Bronchitis
The Group works closely with
external risk assessors and insurers
to ensure that all facilities have the
highest level of fire detection and
prevention. Key controls include:
•
All equipment is subject to regular
Infrared Inspection (IRIS) audits
•
Fire hydrants and sprinkler
systems
•
CO2 systems for electrics
•
Fire teams and training
•
Fire alarms and smoke detectors
•
New panels are fire retardant
•
Flammable substances are stored
separately
•
These food safety risks are
controlled by introducing Hazard
Analysis and Critical Control
Points (HACCP) methodology
across the supply chain to manage
food risks from farm to fork
•
The Group’s TIMS allows the
Group to manage risks associated
with incoming material, minimise
and reduce risks during
production, transportation and
distribution to customers
Business risk
Context
Risk response
IT systems failure
The Group operations are dependent •
on reliable, secure, effective and
efficient IT systems
Business continuity plans and
security controls are reviewed and
tested regularly and updated
accordingly
•
Key centralised IT systems are
backed up and supported by a
suitable disaster recovery plan
•
Key applications are hosted out of
genuine data centre facilities
accompanied by appropriate UPS
and generator redundancy with
appropriate network redundancy
provided into the data centre
•
Physical security at the data
centre facilities are robust with
the required access and
environmental monitoring in
place
•
The targeted technology refresh
cycle is between three to five
years, thus ensuring key
applications run on supported
platforms
•
The Group’s wide area network
communications platform is
supported by a back-up virtual
private network (VPN)
The Group’s risk management processes and practises were independently assessed during the
2011 financial year and were categorised as “developed”. Opportunities for further enhancement
are evaluated on an ongoing basis.
(f)
Legal compliance
The Group has implemented an enterprise wide Legal Compliance Framework which is designed
to provide assurance to the Board that the risks posed by non-compliance with legislative and
regulatory obligations are being addressed.
The key elements of the framework include:
•
A comprehensive legal register which is updated on an ongoing basis
•
Divisional legal champions who ensure that their respective divisions monitor and comply with
all regulations and legislation
•
Legal compliance prevention and monitoring strategies
The Group attempts to keep up to date with all intended or promulgated legislation through regular
interaction with the Group’s corporate attorneys.
The audit and risk teams assess significant legal risks and the level of compliance as part of their
annual audit activities, and reports from the various functions are submitted to the Risk, Audit and
Social and Ethics Committees on a regular basis.
257
(g)
IT governance
IT is an integral part of RCL Foods’ business and is fundamental to the support, growth and
sustainability of the Group. IT within the Group is directed by a dedicated IT director and the overall
responsibility for IT governance lies with the Board. Through the IT strategy, the IT roadmap is
aligned to the Group’s business objectives to ensure that IT consistently enables sustainable value
driven solutions and services to the Group.
The Group has adopted Control Objectives for Information and Related Technology (“COBIT”) as
a guideline for establishing and maintaining effective internal controls, including compliance,
continuity management and risk. An IT Project Portfolio Management (“PPM”) tool is in place to
align and structure processes to better measure and manage the overall IT portfolio by ensuring that
appropriate project management principles are applied to all new IT projects. These frameworks
and associated IT policies and standards ensure that IT risks within the Group are minimised. The
IT risk management process is included into the Group combined assurance process. Back-up and
disaster recovery plans over key financial systems have been formalised and are tested on a regular
basis.
Internal Audit performed an assessment of IT governance processes against best practice principles
as espoused in King III which confirmed that the maturity of the Group’s IT processes are largely
aligned to its desired maturity levels. The Group’s current focus is on enhancing its IT platform to
deliver greater value and efficiency.
5.
SOCIAL AND ETHICS COMMITTEE
Responsibilities
The role of the Social and Ethics committee is to assist the Board with monitoring and reporting on
social, ethical and transformational practices that are consistent with good and responsible corporate
citizenship. The committee has adopted formal terms of reference which is subject to an annual review
by the Board. Responsibilities of the committee include the statutory duties as per the Companies Act.
The responsibility of monitoring sustainability, health and public safety practices remains with the Risk
Committee, however, the governance of ethics was transferred from the Audit Committee during the year
of review.
Committee membership and meetings
The Social and Ethics Committee comprises Messrs GC Zondi (Chairman), M Dally (CEO), RH Field (CFO)
and Mrs MM Nhlanhla. The Group Legal and Corporate Affairs Director and the GARM are permanent
invitees to this committee. The Committee met twice during the financial year with the objective of setting
out its annual work plan and reviewing the Group’s progress on key performance areas relating to:
•
Corporate social investment
•
Stakeholder relations
•
Broad-based black economic development
•
Labour relations and working conditions
•
Employment equity
•
Consumer relations; and
•
Ethics and compliance.
The committee’s role also includes the monitoring of the Group’s participation and results achieved in
various sustainability surveys and indices.
Code of corporate conduct and ethics
During the year under review, the Group reviewed and updated its Corporate Code of Conduct and Ethics
Policy to ensure alignment with statutory requirements and the business philosophy of the Group. RCL’s
induction programme educates new employees on the ethics, values and business culture of the Group.
It is a requirement that all employees sign an acknowledgement that they have read and understood
the contents of the policy and that contravention of the basic standards contained therein may result in
disciplinary action, including dismissal. The Corporate Code of Conduct and Ethics Policy is available to
all employees on the Group’s intranet.
The Corporate Code of Conduct and Ethics Policy promotes commitment to:
258
•
Applying the highest standards of integrity in all its dealings with all stakeholders
•
Carrying on of business through fair commercial competitive practices
•
Trading with customers and suppliers who subscribe to ethical business practices
•
Non-discriminatory employment practices and the promotion of employees to realise their potential
through training and development of their skills; and
•
Being proactive toward environmental and social sustainability issues.
•
Further, through the policy the Board is able to:
•
Clearly state acceptable and unacceptable practices
•
Guide policy by providing a set of ethical corporate standards
•
Encourage ethical behaviour of the Board, managers and employees at all levels
•
Guide ethical decision-making
•
Make ethical infringements easy to identify
•
Promote awareness of, and sensitivity to, ethical issues; and
•
Facilitate dispute resolution.
Tipp-Offs Anonymous hotline
In addition to the Group’s other compliance and enforcement activities, the Board recognises the need
for a confidential reporting mechanism covering fraud and other risks (whistle-blowing). The whistleblowing hotline, an anonymous toll-free number, is part of the Group’s anti-fraud and anti-corruption
efforts and is supported by the Corporate Code of Conduct. This hotline provides an impartial facility for
all stakeholders to report fraud, statutory malpractice, crime and deviations from policy.
In line with its commitment to transparency and accountability, the Group takes action against employees
and others who are guilty of fraud, corruption or other misconduct, or who are in breach of Group
policies. Procedures are in place for the independent investigation of matters reported and for appropriate
follow-up action.
During the 2013 financial year, 50% of calls that were classified as criminal were resolved resulting in
either resignations or disciplinary action against the relevant individuals. The balance of the calls were
closed due to either insufficient information supplied by the caller or that the allegations were found to
be untrue.
The following aspects also fall within the ambit of the Social and Ethics Committee but are dealt with in
more detail in the Abridged Sustainability Report included on pages 41 to 53.
•
Consumer relationships, including the company’s advertising, public relations and compliance with
consumer protection laws
•
Labour and Employment; and
•
Corporate Social Investment.
The Social and Ethics Committee is satisfied that it has carried out its responsibilities for the year in
compliance with its approved mandate.
The Chairman of the Social and Ethics Committee, Mr GC Zondi, will be available at the Annual General
Meeting to answer any questions relating to the statutory obligations of the committee.
6.
REMUNERATION AND NOMINATIONS COMMITTEE
The Remuneration and Nominations Committee is responsible for the assessment and approval of the
remuneration strategy for the Group, determination of short- and long-term incentive pay structures for
Group executives, positioning of senior executive pay levels relative to local and international industry
benchmarks and assessment and authorisation of specific reward proposals for the Group’s executive
Directors and management.
The objective of the remuneration strategy is to employ the necessary skills for the company to achieve
its business goals and to base remuneration on personal and company performance in accordance
with competitive market practices. The Remuneration and Nominations Committee operates under the
delegated authority of the Board and consists of three non-executive Directors and meets at least twice
a year. Mr NP Mageza is the Chairman of the Remuneration and Nominations Committee. The other
members during the year were Messrs JB Magwaza and RV Smither. The Chief Executive Officer and
Group HR Director attend meetings of the Remuneration and Nominations Committee but are excluded
from the review of their own remuneration.
The mandate of the Remuneration and Nominations Committee also includes:
•
Providing guidance on evaluating the performance of executive Directors
•
Reviewing and recommending to the Board the remuneration of executive Directors
•
Reviewing and approving general proposals for salary adjustments in the Group
259
•
Approving principles on which short-term incentives for all staff are based
•
Approving all awards pursuant to the RCL Foods Share Appreciation Rights Scheme
•
Approving the overall cost of remuneration increases awarded
•
Approving annual performance bonuses
•
Reviewing the executive succession plan
The committee considers the views of the Chief Executive Officer on the performance and remuneration
of his colleagues. The Chief Executive Officer and Group HR Director assist the Remuneration and
Nominations Committee with analysis of external market data and trends.
In applying agreed remuneration policies, the Remuneration and Nominations Committee is committed
to the principles of accountability and transparency and to ensuring that the reward arrangements are
linked to Group performance, and are market related and support the business strategies.
7.
GOVERNING STAKEHOLDER RELATIONSHIPS
The Group subscribes to a partnership approach in the way business is conducted. It seeks to constructively
engage its key stakeholders so as to understand and be able to respond to their needs. Interaction occurs
with key stakeholders in the business through a number of formal and informal channels, including
participation in industry forums, the investor relations function and consumer careline.
While shareholders are primarily concerned with value creation, government and local communities are
looking to the Group to create direct and indirect job opportunities, improve community infrastructures
and protect the environment. The Group’s stakeholder process is therefore underpinned by management’s
responsibility to remain visible and accessible to all its stakeholders and will continue to emphasise open
and transparent dialogue in order to anticipate trends and make changes where possible to the way it
currently operates.
The Board accepts its duty to present a balanced and understandable assessment of the Group’s position
in reporting to stakeholders and the greater demands for transparency and accountability regarding
non-financial matters. The quality of the information is based on the principles of openness and substance
over form. The integrated annual report seeks to address matters of significant interest and concern
to all stakeholders and to present a comprehensive and objective assessment of the Group, so that all
stakeholders with a legitimate interest in the Group’s affairs can obtain a complete, fair and honest
account of its performance.
The table below sets out the Group’s key stakeholders and a brief description of the nature of interactions:
Key
stakeholders
Dialogue channels and forms of
engagement
Shareholders and other
providers of capital
•
Business partners and
customers
Local community
•
•
Investor relations
•
Integrated annual report
•
Bi-annual results announcements
•
Websites
•
Trading updates
•
Face to face interventions
•
Regular meetings and workshops
•
Market, customer and in-store surveys
SENS releases
•
Selected projects as part of Corporate Social Investment
•
Regular meetings with municipalities and civic organisations
Government and
regulators
•
Corporate affairs, legal and investor relations functions
Industry
•
Southern African Poultry Association (“SAPA”)
Consumers
260
Annual general meeting
•
Consumer Goods Council of South Africa (“CGCSA”)
•
Animal Feed Manufacturers Association (“AFMA”)
•
South African Agricultural Processors Association (“SAAPA”)
•
Consumer careline
•
Consumer and product surveys
•
Advertising campaigns in print and
media
•
Consumer immersions
Key
stakeholders
Staff and unions
Suppliers
8.
Dialogue channels and forms of
engagement
•
Roadshows
•
Good to Great leadership journey
•
Performance reviews and career
planning
•
Intranet
•
Management and Union meetings
•
Staff meetings and training
•
Confidential hotline through
“Tip-Offs Anonymous”
•
Direct relationships with suppliers to enable partnerships
•
Face to face interventions
•
Regular meetings and workshops
ATTENDANCE OF MEETINGS
Board member
Meeting attendance
Board
Dr M Griessel
NP Mageza
MM Nhlanhla
RV Smither
HJ Carse
JJ Durand
PR Louw
JB Magwaza
CM van den Heever
GC Zondi
M Dally
RH Field
5/5
4/5
3/5
5/5
3/3
5/5
5/5
5/5
2/2
5/5
5/5
5/5
Audit
Committee
Remuneration
and
Risk Nominations
Committee
Committee
3/3
3/3
2/2
3/3
1/2
Social
and
Ethics
Committee
3/3
2/2
3/3
3/3
3/3
2/2
2/2
2/2
2/2
2/2
2/2
261
ANNEXURE 15
TABLE OF ENTITLEMENT
The number of Pro Rata Offer Shares to which Qualifying RCL Foods Minority Shareholders will be entitled is
set out below, on the basis that Qualifying RCL Foods Minority Shareholders will be entitled to 53.10646 (fifty
three point one zero six four six) Pro Rata Offer Shares for every 100 (one hundred) RCL Foods Shares held on
the Record Date. Shareholders’ entitlements will be rounded up or down, as appropriate in accordance with the
standard rounding convention with fractions of 0.5 (zero point five) and above being rounded up and fractions
of less than 0.5 (zero point five) being rounded down, and only whole numbers of Pro Rata Offer Shares will be
issued, in accordance with the Listings Requirements.
262
Shares held
Entitlement
Shares held
Entitlement
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
1
1
2
2
3
3
4
4
5
5
6
6
7
7
8
8
9
10
10
11
11
12
12
13
13
14
14
15
15
16
16
17
18
18
19
19
20
20
21
21
22
22
23
23
24
24
47
48
49
50
51
52
53
54
55
56
57
58
59
60
61
62
63
64
65
66
67
68
69
70
71
72
73
74
75
76
77
78
79
80
81
82
83
84
85
86
87
88
89
90
91
92
25
25
26
27
27
28
28
29
29
30
30
31
31
32
32
33
33
34
35
35
36
36
37
37
38
38
39
39
40
40
41
41
42
42
43
44
44
45
45
46
46
47
47
48
48
49
Shares held
Entitlement
Shares held
Entitlement
93
94
95
96
97
98
99
100
200
300
400
500
600
700
800
900
1 000
1 100
1 200
1 300
1 400
1 500
1 600
1 700
1 800
1 900
2 000
2 100
2 200
2 300
49
50
50
51
52
52
53
53
106
159
212
266
319
372
425
478
531
584
637
690
743
797
850
903
956
1 009
1 062
1 115
1 168
1 221
2 400
2 500
2 600
2 700
2 800
2 900
3 000
3 100
3 200
3 300
3 400
3 500
3 600
3 700
3 800
3 900
4 000
4 100
4 200
4 300
4 400
4 500
4 600
4 700
4 800
4 900
5 000
10 000
100 000
1 000 000
10 000 000
1 275
1 328
1 381
1 434
1 487
1 540
1 593
1 646
1 699
1 753
1 806
1 859
1 912
1 965
2 018
2 071
2 124
2 177
2 230
2 284
2 337
2 390
2 443
2 496
2 549
2 602
2 655
5 311
53 106
531 065
5 310 646
263
ANNEXURE 16
FOODCORP VENDOR DETAILS
Vendor Name
Description
Address
“BlueBay”
BlueBay Asset Management LLP, a limited
liability partnership incorporated under the
laws of England and Wales with registered
number OC370085
77 Grosvenor Street
London W1K 3JR
United Kingdom
“BlueBay Funds”
collectively, the following UK-based funds:
BlueBay High Yield Bond Fund; BlueBay
Structured Funds; High Yield Enhanced Fund;
BlueBay Specialised Funds; Credit
Opportunity (Master) Fund; BlueBay Funds
– BlueBay High Yield Corporate Bond Fund;
The BlueBay Distressed Opportunities (Master)
Fund Limited; BlueBay Funds – BlueBay High
Yield Bond Fund and BlueBay Structured
Funds – High Yield Institutional Credit Select
Fund
77 Grosvenor Street
London W1K 3JR
United Kingdom
“Capitau Holdings”
Capitau Holdings Limited, registration number
2006/030178/06, a public company duly
incorporated and registered with limited
liability in accordance with the laws of South
Africa
5 Viscount Road
Bedfordview, 2007
Johannesburg
South Africa
“Capitau Partnership”
Capitau General Partner Proprietary Limited,
in its capacity as the general partner of
Capitau SA Partnership, an en commandite
partnership established in South Africa
5 Viscount Road
Bedfordview, 2007
Johannesburg
South Africa
“Capitau SPV”
Capitau FC Investment Proprietary Limited
(previously Iningi Investments 195
Proprietary Limited), registration number
2011/117650/07, a private company duly
incorporated and registered with limited
liability in accordance with the laws of South
Africa
5 Viscount Road
Bedfordview, 2007
Johannesburg
South Africa
“Foodcorp Staff Trust”
The Trustees of the Foodcorp Employee Share
Trust, Master’s reference number IT7399
Parc Nicol
Building No. 1
3001 William Nicol Drive
Bryanston, 2021
South Africa
“Foodcorp Management Foodcorp Management Holdings (Proprietary)
Holdings”
Limited, registration number 2009/022279/07
Parc Nicol
Building No. 1
3001 William Nicol Drive
Bryanston, 2021
South Africa
Individual shareholders
of Foodcorp
Parc Nicol
Building No. 1
3001 William Nicol Drive
Bryanston, 2021
South Africa
264
AJ Williamson, MSG Mareletse, P Coetzer;
F Roetz; JA van Niekerk; C Gildenhuys; D
Heyneke and G Nel
RCL FOODS LIMITED
Previously known as Rainbow Chicken Limited
Incorporated in the Republic of South Africa
(Registration number 1966/004972/06)
Share Code: RCL
ISIN: ZAE000179438
(“RCL Foods” or the “Company”)
NOTICE OF GENERAL MEETING
Unless otherwise apparent from the context, the definitions and interpretations commencing on page 6 of the
Circular to which this notice of General Meeting is attached apply to this notice of General Meeting.
Notice is hereby given that a General Meeting of RCL Foods Shareholders will be held at 13:30 on Thursday,
16 January 2014 at the Company’s registered office, Six The Boulevard, Westway Office Park, Westville, Durban
for the purpose of considering and, if deemed fit, passing, with or without modification, the ordinary and
special resolutions set out in this notice.
TSB ACQUISITION
Ordinary Resolution Number 1
RESOLVED THAT, the acquisition by the Company of the TSB Acquisition Shares from TSB Sugar Holdings
at the TSB Acquisition Consideration, which will be discharged through the issue by RCL Foods of the TSB
Consideration Shares to TSB Sugar Holdings, be and is hereby approved as a related party transaction in terms
of paragraph 10.4(d) of the Listings Requirements, it being recorded that TSB Sugar Holdings is an associate
of IPI which is a “material” shareholder of the Company (as envisaged in the Listings Requirements) and TSB
Sugar Holdings is therefore a related party in respect of the Company.
* The percentage of voting rights that will be required for this ordinary resolution to be adopted is more than 50% (fifty percent) of the voting
rights exercised on the resolution excluding the votes of IPI and its associates.
Special Resolution Number 1
RESOLVED THAT, in accordance with section 41(1)(b) and section 41(3) of the Companies Act, the Company be
and is hereby authorised to issue the TSB Consideration Shares to TSB Sugar Holdings pursuant to the TSB
Acquisition.
*The percentage of voting rights that will be required for this special resolution to be adopted is at least 75% (seventy five percent) of the votes
exercised on the resolution excluding the votes of IPI and its associates.
TSB BEE TRANSACTION
Ordinary Resolution Number 2
RESOLVED THAT, in accordance with paragraph 5.51(g) of the Listings Requirements and clause 6.7 of the
MOI, the Company be and is hereby authorised, by way of a specific approval, to issue the TSB BEE Shares to
TSB BEE Co at a subscription price of R0.01 (one cent) per TSB BEE Share, in accordance with the provisions
of the TSB BEE Subscription and Relationship Agreement.
* The percentage of voting rights that will be required for this ordinary resolution to be adopted is a 75% (seventy five percent) majority of
the votes cast in favour of the resolution by all equity securities holders present in person or represented by proxy at the General Meeting.
Special Resolution Number 2
RESOLVED THAT, in accordance with section 44(3)(a)(ii) of the Companies Act, the Company be and is hereby
authorised to provide financial assistance:
(i)
to TSB BEE Co in terms of the TSB BEE NVF in order to enable TSB BEE Co to subscribe for the TSB BEE
Shares pursuant to the TSB BEE Subscription and Relationship Agreement and to provide any further
financial assistance which may be required pursuant to any of the other agreements or transactions
forming part of the TSB BEE Transaction; and
265
(ii) in the future in relation to the TSB BEE NVF, or in relation to the syndication or the refinancing of the
TSB BEE NVF, and whether through the granting of a loan, the issue of a guarantee, the granting of a
put or call option, the giving of security or in any other manner whatsoever.
* The percentage of voting rights that will be required for this special resolution to be adopted is at least 75% (seventy five percent) of
the votes exercised on the resolution.
Special Resolution Number 3
RESOLVED THAT, in accordance with paragraph 5.69(b) of the Listings Requirements, the Company be and
is hereby specifically authorised to repurchase TSB BEE Shares held by TSB BEE Co pursuant to the TSB BEE
Maturity Call Option, the TSB BEE Trigger Event Call Option, the TSB BEE Exit Call Option and/or the TSB
BEE Pre-emptive Right, in accordance with the provisions of the TSB BEE Subscription and Relationship
Agreement.
* The percentage of voting rights that will be required for this special resolution to be adopted is not less than 75% (seventy five percent) of
the voting rights exercised on the resolution and Shareholders holding at least 25% (twenty-five percent) of all the voting rights are present
at the General Meeting in person, by proxy or via electronic communication.
SPECIFIC REPURCHASE
Special Resolution Number 4
RESOLVED THAT, in accordance with section 48(8)(b) as read together with section 115(2) of the Companies
Act and paragraph 5.69(b) of the Listings Requirements, the Company be and is hereby specifically authorised
to repurchase the Current RCL Foods BEE Shares from ECI (which amount to more than 5% (five percent) of
the issued RCL Foods Shares as at the date on which the repurchase is implemented) pursuant to the Specific
Repurchase, which repurchase shall be funded out of sources other than the contributed tax capital of the
Company in accordance with the provisions of the Redemption and Repurchase Agreement.
Note: For purposes of this Special Resolution Number 4, please refer to Appendix A to this notice of General
Meeting for copies of sections 115 and 164 of the Companies Act.
* The percentage of voting rights that will be required for this special resolution to be adopted is not less than 75% (seventy five percent of
the voting rights exercised on the resolution and Shareholders holding at least 25% (twenty five percent) of all the voting rights are present
at the General Meeting in person, by proxy or via electronic communication excluding the votes of ECI and its associates.
RCL FOODS BEE TRANSACTION
Ordinary Resolution Number 3
RESOLVED THAT, in accordance with paragraph 5.51(g) of the Listings Requirements and clause 6.7 of the
MOI, the Company be and is hereby authorised, by way of a specific approval, to issue 44 681 162 (forty four
million six hundred and eighty one thousand one hundred and sixty two) RCL Foods Shares to the ESOP Trust
for an aggregate subscription consideration of R242 143 970.15 (two hundred and forty two million one hundred
and forty three thousand nine hundred and seventy Rand and fifteen cents), in accordance with the provisions
of the relevant RCL Foods BEE Subscription Agreement.
* The percentage of voting rights that will be required for this ordinary resolution to be adopted is a 75% (seventy five percent) majority of
the votes cast in favour of the resolution by all equity securities holders present in person or represented by proxy at the General Meeting.
Ordinary Resolution Number 4
RESOLVED THAT, in accordance with paragraph 5.51(g) of the Listings Requirements and clause 6.7 of the
MOI, the Company be and is hereby authorised, by way of a specific approval, to issue 19 149 069 (nineteen
million one hundred and forty nine thousand and sixty nine) RCL Foods Shares to SPV 2 for an aggregate
subscription consideration of R103 775 984.73 (one hundred and three million seven hundred and seventy five
thousand nine hundred and eighty four Rand and seventy three cents), in accordance with the provisions of
the relevant RCL Foods BEE Subscription Agreement.
* The percentage of voting rights that will be required for this ordinary resolution to be adopted is a 75% (seventy five percent) majority of
the votes cast in favour of the resolution by all equity securities holders present in person or represented by proxy at the General Meeting.
Special Resolution Number 5
RESOLVED THAT, in accordance with section 44(3)(a)(ii) of the Companies Act, the Company be and is hereby
authorised to provide financial assistance:
(i)
266
to each of SPV 1 and the ESOP Trust in terms of the RCL Foods BEE NVF and the SPV 1 Preference
Shares in accordance with the relevant RCL Foods BEE Relationship Agreement and the relevant RCL
Foods BEE Preference Share Subscription Agreement in order to enable the ESOP Trust to subscribe for
the relevant number of RCL Foods BEE Shares, and to provide any further financial assistance which
may be required pursuant to any of the other agreements or transactions forming part of the New RCL
Foods BEE Transaction; and
(ii) in the future in relation to the RCL Foods BEE NVF and the SPV 1 Preference Share funding, or in
relation to the syndication or the refinancing of any of the aforegoing, and whether through the granting
of a loan, the issue of a guarantee, the granting of a put or call option, the giving of security, the purchase
and/or subordination of any of the SPV 1 Preference Shares or in any other manner whatsoever.
* The percentage of voting rights that will be required for this special resolution to be adopted is at least 75% (seventy five percent) of
the votes exercised on the resolution.
Special Resolution Number 6
RESOLVED THAT, in accordance with section 44(3)(a)(ii) of the Companies Act, the Company be and is hereby
authorised to provide financial assistance:
(i)
to SPV 2 in terms of the RCL Foods BEE NVF and the SPV 2 Preference Shares in accordance with the
RCL Foods BEE Relationship Agreement and the relevant RCL Foods BEE Preference Share Subscription
Agreement in order to enable SPV 2 to subscribe for the relevant number of RCL Foods BEE Shares,
and to provide any further financial assistance which may be required pursuant to any of the other
agreements or transactions forming part of the New RCL Foods BEE Transaction; and
(ii) in the future in relation to the RCL Foods BEE NVF and the SPV 2 Preference Share funding, or in
relation to the syndication or the refinancing of any of the aforegoing, and whether through the granting
of a loan, the issue of a guarantee, the granting of a put or call option, the giving of security, the purchase
and/or subordination of any of the SPV 2 Preference Shares or in any other manner whatsoever.
* The percentage of voting rights that will be required for this special resolution to be adopted is at least 75% (seventy five percent) of
the votes exercised on the resolution.
Special Resolution Number 7
RESOLVED THAT, in accordance with paragraph 5.69(b) of the Listings Requirements, the Company be and
is hereby specifically authorised to repurchase RCL Foods BEE Shares held by the ESOP Trust pursuant to the
exercise by the Company of the RCL Foods BEE Repurchase Option or the RCL Foods BEE Compulsory
Subscription Right or pursuant to the exercise by the ESOP Trust of the RCL Foods BEE Subscription Option,
in accordance with the provisions of the RCL Foods BEE Relationship Agreement.
* The percentage of voting rights that will be required for this special resolution to be adopted is at least 75% (seventy five percent) of the
votes exercised on the resolution.
Special Resolution Number 8
RESOLVED THAT, in accordance with paragraph 5.69(b) of the Listings Requirements, the Company be and
is hereby specifically authorised to repurchase RCL Foods BEE Shares held by SPV 2 pursuant to the exercise
by the Company of the RCL Foods BEE Repurchase Option or the RCL Foods BEE Compulsory Subscription
Right or pursuant to the exercise by SPV 2 of the RCL Foods BEE Subscription Option, in accordance with the
provisions of the RCL Foods BEE Relationship Agreement.
* The percentage of voting rights that will be required for this special resolution to be adopted is at least 75% (seventy five percent) of the
votes exercised on the resolution.
Ordinary Resolution Number 5
RESOLVED THAT, in accordance with paragraph 5.51(g) of the Listings Requirements and clause 6.7 of the
MOI, the Company be and is hereby authorised, by way of a specific approval, to issue RCL Foods Shares to the
ESOP Trust at a subscription price per RCL Foods Share equal to the RCL Foods BEE Notional Outstandings
in respect of the RCL Foods BEE Nominal Shares held by the ESOP Trust, pursuant to the exercise of the RCL
Foods BEE Compulsory Subscription Right by RCL Foods or the RCL Foods BEE Subscription Option by the
ESOP Trust, in accordance with the provisions of the RCL Foods BEE Relationship Agreement.
* The percentage of voting rights that will be required for this ordinary resolution to be adopted is a 75% (seventy five percent) majority of
the votes cast in favour of the resolution by all equity securities holders present in person or represented by proxy at the General Meeting.
Ordinary Resolution Number 6
RESOLVED THAT, in accordance with paragraph 5.51(g) of the Listings Requirements and clause 6.7 of the
MOI, the Company be and is hereby authorised, by way of a specific approval, to issue RCL Foods Shares to
SPV 2 at a subscription price per RCL Foods Share equal to the RCL Foods BEE Notional Outstandings in
respect of the RCL Foods BEE Nominal Shares held by SPV 2, pursuant to the exercise of the
RCL Foods BEE Compulsory Subscription Right by RCL Foods or the RCL Foods BEE Subscription Option by
SPV 2, in accordance with the provisions of the RCL Foods BEE Relationship Agreement.
* The percentage of voting rights that will be required for this ordinary resolution to be adopted is a 75% (seventy five percent) majority of
the votes cast in favour of the resolution by all equity securities holders present in person or represented by proxy at the General Meeting.
267
PRO RATA OFFER
Ordinary Resolution Number 7
RESOLVED THAT, subject to and conditional upon the implementation of the TSB Acquisition, and in
accordance with paragraph 5.51(g) of the Listings Requirements and clause 6.7 of the MOI, the Company be
and is hereby authorised, by way of a specific approval, to issue up to 74 214 642 (seventy four million two
hundred and fourteen thousand six hundred and forty two) Pro Rata Offer Shares at the Pro Rata Offer
Subscription Price in the ratio of 53.10646 (fifty three point one zero six four six) Pro Rata Offer Shares for
every 100 (one hundred) RCL Foods Shares held on the Record Date to RCL Foods Minority Shareholders
registered as such on the Register on the Record Date, pursuant to the Pro Rata Offer.
* The percentage of voting rights that will be required for this ordinary resolution to be adopted is a 75% (seventy five percent) majority of
the votes cast in favour of the resolution by all equity securities holders present in person or represented by proxy at the General Meeting.
PLACEMENT
Ordinary Resolution Number 8
RESOLVED THAT, in accordance with paragraph 5.51(g) of the Listings Requirements and clause 6.7 of the
MOI, the Company be and is hereby authorised, by way of a specific approval, to issue so many RCL Foods
Shares as may be equal in value to the balance of R2 500 000 000 (two billion and five hundred million Rand)
not raised pursuant to the Pro Rata Offer, to qualifying investors, provided that the maximum discount at
which such shares may be issued in terms of this authority is 10% (ten percent) of the VWAP per RCL Foods
Share measured over the 30 (thirty) Business Days prior to the date on which the subscription price is agreed
to between the Company and the parties subscribing for the RCL Foods Shares pursuant to the Placement.
* The percentage of voting rights that will be required for this ordinary resolution to be adopted is a 75% (seventy five percent) majority of
the votes cast in favour of the resolution by all equity securities holders present in person or represented by proxy at the General Meeting.
Special Resolution Number 9
RESOLVED THAT, in accordance with section 41(1)(b) of the Companies Act, the Company be and is hereby
authorised to issue RCL Foods Shares to TSB Sugar Holdings pursuant to the Placement, provided that if the
Placement Subscription Price is at a discount to the VWAP per RCL Foods Share over the 30 (thirty) Business
Days prior to the date on which the Placement Subscription Price is agreed, then the issue of Placement Shares
to TSB Sugar Holdings shall be subject to the Board confirming whether such issue is fair insofar as other
Shareholders are concerned based on the advice received from an independent expert which is acceptable to the
JSE Limited.
* The percentage of voting rights that will be required for this special resolution to be adopted is at least 75% (seventy five percent) of the
votes exercised on the resolution excluding the votes of IPI and its associates.
PROPOSED RCL FOODS SHARE CAPITAL INCREASE
Special Resolution Number 10
RESOLVED THAT, in accordance with section 36(2)(a) as read together with section 16(1)(c) of the Companies
Act, the number of the Company’s authorised shares be and is hereby increased from 1 000 000 000 (one billion)
RCL Foods Shares to 2 000 000 000 (two billion) RCL Foods Shares by the creation of an additional 1 000 000 000
(one billion) RCL Foods Shares and that the MOI be and is hereby amended by the deletion of the phrase
“1 000 000 000 (one billion) ordinary shares” where it appears in clause 6.1.1 of the MOI and the substitution
thereof with the phrase “2 000 000 000 (two billion) ordinary shares”.
* The percentage of voting rights that will be required for this special resolution to be adopted is at least 75% (seventy five percent) of the
votes exercised on the resolution.
NOTES TO THE NOTICE OF GENERAL MEETING
Record date
The record date in terms of section 59 of the Companies Act for Shareholders to be recorded on the Register in
order to:
•
receive notice of the General Meeting is Friday, 6 December 2013; and
•
attend, participate in and vote at the General Meeting, is Friday, 10 January 2014 and, accordingly, the last
day to trade in order to be eligible to vote at the General Meeting is Friday, 3 January 2014.
268
Voting and proxies
Shareholders are reminded that:
•
a Shareholder entitled to attend and vote at the General Meeting is entitled to appoint a proxy (or more
than one proxy) to attend, participate in and vote at the General Meeting in place of the Shareholder
and Shareholders are referred to the attached form of proxy (blue);
•
a proxy need not also be a Shareholder of the Company; and
•
in terms of section 63(1) of the Companies Act, any person attending or participating in a meeting
of Shareholders must present reasonably satisfactory identification and the person presiding at the
General Meeting must be reasonably satisfied that the right of any person to participate in and vote
(whether as Shareholder or as proxy for a Shareholder) has been reasonably verified.
Certificated Shareholders and Dematerialised Shareholders with “own name” registration who are unable to
attend the General Meeting and who wish to be represented at the General Meeting, must complete and deliver
the attached form of proxy (blue) in accordance with the instructions contained therein, so as to be received by
the Transfer Secretary, Computershare Investor Services (Proprietary) Limited, 70 Marshall Street,
Johannesburg, 2001 (PO Box 61051, Marshalltown, 2107) by no later than 13:30 on Tuesday, 14 January 2014
or handed to the chairperson of the General Meeting before the appointed proxy exercises any of the relevant
Shareholder’s rights at the General Meeting (or any postponement or adjournment of the General Meeting).
Dematerialised Shareholders without “own name” registration who wish to attend the General Meeting in
person should request their CSDP or Broker to provide them with the necessary letter of representation in
accordance with the relevant custody agreement. Dematerialised Shareholders without “own name” registration
who do not wish to attend the General Meeting but wish to be represented at the General Meeting must advise
their CSDP or Broker of their voting instructions. Such Shareholders should contact their CSDP or Broker with
regard to the cut-off time for their voting instructions.
By order of the Board
RH Field
Chief Financial Officer
Durban
12 December 2013
Registered Office
Transfer Secretary
Six The Boulevard
Westway Office Park
Westville, 3629
(PO Box 2734, Westway Office Park, 3635)
Computershare Investor Services Proprietary Limited
70 Marshall Street
Johannesburg, 2001
(PO Box 61051, Marshalltown, 2107)
269
Appendix A
COPIES OF SECTIONS 115 AND 164 OF THE COMPANIES ACT
“115. Required approval for transactions contemplated in Part:
(1)
Despite section 65, and any provision of a company’s Memorandum of Incorporation, or any resolution
adopted by its board or holders of its securities, to the contrary, a company may not dispose of, or give
effect to an agreement or series of agreements to dispose of, all or the greater part of its assets or
undertaking, implement an amalgamation or a merger, or implement a scheme of arrangement, unless:
(a)
(b)
the disposal, amalgamation or merger, or scheme of arrangement:
(i)
has been approved in terms of this section; or
(ii)
is pursuant to or contemplated in an approved business rescue plan for that company, in
terms of Chapter 6; and
to the extent that Parts B and C of this Chapter, and the Takeover Regulations, apply to a company
that proposes to:
(i)
dispose of all or the greater part of its assets or undertaking;
(ii)
amalgamate or merge with another company; or
(iii)
implement a scheme of arrangement,
the Panel has issued a compliance certificate in respect of the transaction, in terms of
section 119(4)(b), or exempted the transaction in terms of section 119(6).
(2)
A proposed transaction contemplated in subsection (1) must be approved:
(a)
by a special resolution adopted by persons entitled to exercise voting rights on such a matter,
at a meeting called for that purpose and at which sufficient persons are present to exercise, in
aggregate, at least 25% of all of the voting rights that are entitled to be exercised on that matter,
or any higher percentage as may be required by the company’s Memorandum of Incorporation, as
contemplated in section 64(2); and
(b)
by a special resolution, also adopted in the manner required by paragraph (a), by the shareholders
of the company’s holding company if any, if:
(c)
(3)
(4)
(i)
the holding company is a company or an external company;
(ii)
the proposed transaction concerns a disposal of all or the greater part of the assets or
undertaking of the subsidiary; and
(iii)
having regard to the consolidated financial statements of the holding company, the disposal
by the subsidiary constitutes a disposal of all or the greater part of the assets or undertaking
of the holding company; and
by the court, to the extent required in the circumstances and manner contemplated in
subsections (3) to (6).
Despite a resolution having been adopted as contemplated in subsections (2) (a) and (b), a company may not
proceed to implement that resolution without the approval of a court if:
(a)
the resolution was opposed by at least 15% of the voting rights that were exercised on that resolution
and, within five business days after the vote, any person who voted against the resolution requires
the company to seek court approval; or
(b)
the court, on an application within 10 business days after the vote by any person who voted against
the resolution, grants that person leave, in terms of subsection (6), to apply to a court for a review
of the transaction in accordance with subsection (7).
For the purposes of subsections (2) and (3), any voting rights controlled by an acquiring party, a person
related to an acquiring party, or a person acting in concert with either of them, must not be included in
calculating the percentage of voting rights:
(a)
required to be present, or actually present, in determining whether the applicable quorum
requirements are satisfied; or
(b)
required to be voted in support of a resolution, or actually voted in support of the resolution.
(4A) In subsection (4), “act in concert” has the meaning set out in section 117(1)(b).
(5)
270
If a resolution requires approval by a court as contemplated in terms of subsection (3)(a), the company must
either:
(6)
(a)
within 10 business days after the vote, apply to the court for approval, and bear the costs of that
application; or
(b)
treat the resolution as a nullity.
On an application contemplated in subsection (3)(b), the court may grant leave only if it is satisfied that the
applicant:
(a)
is acting in good faith;
(b)
appears prepared and able to sustain the proceedings; and
(c)
has alleged facts which, if proved, would support an order in terms of subsection (7).
(7) On reviewing a resolution that is the subject of an application in terms of subsection (5)(a), or after granting
leave in terms of subsection (6), the court may set aside the resolution only if:
(8)
(9)
(a)
the resolution is manifestly unfair to any class of holders of the company’s securities; or
(b)
the vote was materially tainted by conflict of interest, inadequate disclosure, failure to comply
with the Act, the Memorandum of Incorporation or any applicable rules of the company, or other
significant and material procedural irregularity.
The holder of any voting rights in a company is entitled to seek relief in terms of section 164 if that person:
(a)
notified the company in advance of the intention to oppose a special resolution contemplated in this
section; and
(b)
was present at the meeting and voted against that special resolution.
If a transaction contemplated in this Part has been approved, any person to whom assets are, or an
undertaking is, to be transferred, may apply to a court for an order to effect:
(a)
the transfer of the whole or any part of the undertaking, assets and liabilities of a company
contemplated in that transaction;
(b)
the allotment and appropriation of any shares or similar interests to be allotted or appropriated as
a consequence of the transaction;
(c)
the transfer of shares from one person to another;
(d)
the dissolution, without winding-up, of a company, as contemplated in the transaction;
(e)
incidental, consequential and supplemental matters that are necessary for the effectiveness and
completion of the transaction; or
(f)
any other relief that may be necessary or appropriate to give effect to, and properly implement, the
amalgamation or merger.”
“164. Dissenting shareholders’ appraisal rights:
(1)
This section does not apply in any circumstances relating to a transaction, agreement or offer pursuant to
a business rescue plan that was approved by shareholders of a company, in terms of section 152.
(2)
If a company has given notice to shareholders of a meeting to consider adopting a resolution to:
(a)
amend its Memorandum of Incorporation by altering the preferences, rights, limitations or other
terms of any class of its shares in any manner materially adverse to the rights or interests of
holders of that class of shares, as contemplated in section 37(8); or
(b)
enter into a transaction contemplated in section 112, 113 or 114,
that notice must include a statement informing shareholders of their rights under this section.
(3)
At any time before a resolution referred to in subsection (2) is to be voted on, a dissenting shareholder may
give the company a written notice objecting to the resolution.
(4)
Within 10 business days after a company has adopted a resolution contemplated in this section, the
company must send a notice that the resolution has been adopted to each shareholder who:
(5)
(a)
gave the company a written notice of objection in terms of subsection (3); and
(b)
has neither:
(i)
withdrawn that notice; or
(ii)
voted in support of the resolution.
A shareholder may demand that the company pay the shareholder the fair value for all of the shares of the
company held by that person if:
(a)
the shareholder:
(i)
sent the company a notice of objection, subject to subsection (6); and
271
(ii)
(6)
in the case of an amendment to the company’s Memorandum of Incorporation, holds shares of
a class that is materially and adversely affected by the amendment;
(b)
the company has adopted the resolution contemplated in subsection (2); and
(c)
the shareholder:
(i)
voted against that resolution; and
(ii)
has complied with all of the procedural requirements of this section.
The requirement of subsection (5)(a)(i) does not apply if the company failed to give notice of the meeting, or
failed to include in that notice a statement of the shareholders rights under this section.
(7) A shareholder who satisfies the requirements of subsection (5) may make a demand contemplated in that
subsection by delivering a written notice to the company within:
(8)
(9)
(a)
20 business days after receiving a notice under subsection (4); or
(b)
if the shareholder does not receive a notice under subsection (4), within 20 business days after
learning that the resolution has been adopted.
A demand delivered in terms of subsections (5) to (7) must also be delivered to the Panel, and must state:
(a)
the shareholder’s name and address;
(b)
the number and class of shares in respect of which the shareholder seeks payment; and
(c)
a demand for payment of the fair value of those shares.
A shareholder who has sent a demand in terms of subsections (5) to (8) has no further rights in respect of
those shares, other than to be paid their fair value, unless:
(a)
the shareholder withdraws that demand before the company makes an offer under subsection (11),
or allows an offer made by the company to lapse, as contemplated in subsection (12)(b);
(b)
the company fails to make an offer in accordance with subsection (11) and the shareholder withdraws
the demand; or
(c)
the company, by a subsequent special resolution, revokes the adopted resolution that gave rise to
the shareholder’s rights under this section.
(10) If any of the events contemplated in subsection (9) occur, all of the shareholder’s rights in respect of the
shares are reinstated without interruption.
(11) Within five business days after the later of:
(a)
the day on which the action approved by the resolution is effective;
(b)
the last day for the receipt of demands in terms of subsection (7)(a); or
(c)
the day the company received a demand as contemplated in subsection (7)(b), if applicable, the
company must send to each shareholder who has sent such a demand a written offer to pay an
amount considered by the company’s directors to be the fair value of the relevant shares, subject to
subsection (16), accompanied by a statement showing how that value was determined.
(12) Every offer made under subsection (11):
(a)
in respect of shares of the same class or series must be on the same terms; and
(b)
lapses if it has not been accepted within 30 business days after it was made.
(13) If a shareholder accepts an offer made under subsection (12):
(a)
(b)
the shareholder must either in the case of:
(i)
shares evidenced by certificates, tender the relevant share certificates to the company or the
company’s transfer agent; or
(ii)
uncertificated shares, take the steps required in terms of section 53 to direct the transfer of
those shares to the company or the company’s transfer agent; and
the company must pay that shareholder the agreed amount within 10 business days after the
shareholder accepted the offer and:
(i)
tendered the share certificates; or
(ii)
directed the transfer to the company of uncertificated shares.
(14) A shareholder who has made a demand in terms of subsections (5) to (8) may apply to a court to determine
a fair value in respect of the shares that were the subject of that demand, and an order requiring the
company to pay the shareholder the fair value so determined, if the company has:
(a)
272
failed to make an offer under subsection (11); or
(b)
made an offer that the shareholder considers to be inadequate, and that offer has not lapsed.
(15) On an application to the court under subsection (14):
(a)
all dissenting shareholders who have not accepted an offer from the company as at the date of the
application must be joined as parties and are bound by the decision of the court;
(b)
the company must notify each affected dissenting shareholder of the date, place and consequences
of the application and of their right to participate in the court proceedings; and
(c)
the court:
(i)
may determine whether any other person is a dissenting shareholder who should be joined
as a party;
(ii)
must determine a fair value in respect of the shares of all dissenting shareholders, subject to
subsection (16);
(iii)
in its discretion may:
(aa)
appoint one or more appraisers to assist it in determining the fair value in respect of the
shares; or
(bb)
allow a reasonable rate of interest on the amount payable to each dissenting shareholder
from the date the action approved by the resolution is effective, until the date of payment;
(iv)
may make an appropriate order of costs, having regard to any offer made by the company,
and the final determination of the fair value by the court; and
(v)
must make an order requiring:
(aa)
the dissenting shareholders to either withdraw their respective demands or to comply
with subsection (13) (a); and
(bb)
the company to pay the fair value in respect of their shares to each dissenting shareholder
who complies with subsection (13)(a), subject to any conditions the court considers
necessary to ensure that the company fulfils its obligations under this section.
(15A) At any time before the court has made an order contemplated in subsection (15)(c)(v), a dissenting
shareholder may accept the offer made by the company in terms of subsection (11), in which case:
(a)
that shareholder must comply with the requirements of subsection 13(a); and
(b)
the company must comply with the requirements of subsection 13(b).
(16) The fair value in respect of any shares must be determined as at the date on which, and time immediately
before, the company adopted the resolution that gave rise to a shareholder’s rights under this section.
(17) If there are reasonable grounds to believe that compliance by a company with subsection (13)(b), or with a
court order in terms of subsection (15)(c)(v)(bb), would result in the company being unable to pays its debts
as they fall due and payable for the ensuing 12 months:
(a)
the company may apply to a court for an order varying the company’s obligations in terms of the
relevant subsection; and
(b)
the court may make an order that:
(i)
is just and equitable, having regard to the financial circumstances of the company; and
(ii)
ensures that the person to whom the company owes money in terms of this section is paid at
the earliest possible date compatible with the company satisfying its other financial obligations
as they fall due and payable.
(18) If the resolution that gave rise to a shareholder’s rights under this section authorised the company to
amalgamate or merge with one or more other companies, such that the company whose shares are the
subject of a demand in terms of this section has ceased to exist, the obligations of that company under this
section are obligations of the successor to that company resulting from the amalgamation or merger.
(19) For greater certainty, the making of a demand, tendering of shares and payment by a company to a
shareholder in terms of this section do not constitute a distribution by the company, or an acquisition of
its shares by the company within the meaning of section 48, and therefore are not subject to:
(a)
the provisions of that section; or
(b)
the application by the company of the solvency and liquidity test set out in section 4.
(20) Except to the extent:
(a)
expressly provided in this section; or
(b)
that the Panel rules otherwise in a particular case,
a payment by a company to a shareholder in terms of this section does not obligate any person to make a
comparable offer under section 125 to any other person.”
273
274
PRINTED BY INCE (PTY) LTD
REF. W2CF16939
RCL FOODS LIMITED
Previously known as Rainbow Chicken Limited
Incorporated in the Republic of South Africa
(Registration number 1966/004972/06)
Share Code: RCL
ISIN: ZAE000179438
(“RCL Foods” or the “Company”)
FORM OF PROXY
(FOR USE BY CERTIFICATED SHAREHOLDERS AND “OWN NAME” DEMATERIALISED
SHAREHOLDERS ONLY)
The definitions and interpretations commencing on page 6 of the Circular with which this form of proxy is enclosed apply to this form of proxy.
For use by Certificated Shareholders and Dematerialised Shareholders with “own name” registration only, at the General Meeting of Shareholders of the Company
to be held at 13:30 on Thursday, 16 January 2014 at the Company’s registered office, Six The Boulevard, Westway Office Park, Westville, Durban.
Dematerialised Shareholders without “own name” registration must not use this form of proxy. Dematerialised Shareholders who wish to attend the General
Meeting in person must inform their CSDP or Broker of their intention to attend the General Meeting and request their CSDP or Broker to issue them with the
necessary letter of representation to attend the General Meeting in person and vote or, should they not wish to attend the General Meeting in person, provide their
CSDP or Broker with their voting instructions..
Forms of proxy must be completed and delivered to the Company’s Transfer Secretary, by not later than 13:30 on Tuesday, 14 January 2014. Thereafter, forms of
proxy may be handed to the chairperson of the General Meeting at any time before the appointed proxy exercises any of the Shareholder rights at the General
Meeting.
I/We
(full name in BLOCK LETTERS)
of
(address)
being the holder(s) of
RCL Foods Shares, do hereby appoint (see note):
1.
or failing him/her;
2.
3.
or failing him/her;
the chairperson of the General Meeting,
as my/our proxy to attend, speak and vote on my/our behalf at the General Meeting (or any postponement or adjournment thereof ).
I/We desire to vote as follows:
Insert number of votes (one vote per RCL Foods Share)
For
Ordinary Resolution Number 1
Approval of the TSB Acquisition
Special Resolution Number 1
Specific authority to issue the TSB Consideration Shares to TSB Sugar Holdings
Ordinary Resolution Number 2
Specific authority to issue the TSB BEE Shares to TSB BEE Co
Special Resolution Number 2
Authorisation for the provision of financial assistance to TSB BEE Co
Special Resolution Number 3
Authorisation to repurchase TSB BEE Shares from TSB BEE Co
Special Resolution Number 4
Authorisation of the Specific Repurchase
Ordinary Resolution Number 3
Specific authority to issue RCL Foods Shares to the ESOP Trust
Ordinary Resolution Number 4
Specific authority to issue RCL Foods Shares to SPV 2
Special Resolution Number 5
Authorisation for the provision of financial assistance to the ESOP Trust and SPV 1
Special Resolution Number 6
Authorisation for the provision of financial assistance to SPV 2
Special Resolution Number 7
Specific authority to repurchase RCL Foods BEE Shares from the ESOP Trust pursuant
to the RCL Foods BEE Repurchase Option, the RCL Foods BEE Compulsory Subscription
Right and the RCL Foods BEE Subscription Option
Special Resolution Number 8
Specific authority to repurchase RCL Foods BEE Shares from SPV 2 pursuant to the
RCL Foods BEE Repurchase Option, the RCL Foods BEE Compulsory Subscription
Right and the RCL Foods BEE Subscription Option
Ordinary Resolution Number 5
Specific authority to issue RCL Foods Shares to the ESOP Trust pursuant to the
exercise of the RCL Foods BEE Compulsory Subscription Right or the RCL Foods BEE
Subscription Option
Ordinary Resolution Number 6
Specific authority to issue RCL Foods Shares to SPV 2 pursuant to the exercise of the
RCL Foods BEE Compulsory Subscription Right or the RCL Foods BEE Subscription
Option
Against
Abstain
Insert number of votes (one vote per RCL Foods Share)
For
Against
Abstain
Ordinary Resolution Number 7
Specific authority to issue the Pro Rata Offer Shares pursuant to the Pro Rata Offer
Ordinary Resolution Number 8
Specific authority to issue RCL Foods Shares pursuant to the Placement
Special Resolution Number 9
Specific authority to issue RCL Foods Shares to TSB Sugar Holdings pursuant to the
Placement
Special Resolution Number 10
Authorisation to increase the authorised share capital of RCL Foods and to amend the
MOI accordingly
Signed at
on
Signature
to be assisted by
2013/2014
Authority of signatory
(where applicable)
Please read the following summary of the rights contained in section 58 of the Companies Act and the following notes to this form of proxy.
SUMMARY OF RIGHTS CONTAINED IN SECTION 58 OF THE COMPANIES ACT
In terms of section 58 of the Companies Act:
•
a shareholder of a company may, at any time and in accordance with the provisions of section 58 of the Companies Act, appoint any individual
(including an individual who is not a shareholder) as a proxy to participate in, and speak and vote at, a shareholders’ meeting on behalf of such
shareholder;
•
a proxy may delegate her or his authority to act on behalf of a shareholder to another person, subject to any restriction set out in the instrument
appointing such proxy (see note 12 below);
•
irrespective of the form of instrument used to appoint a proxy, the appointment of a proxy is suspended at any time and to the extent that the relevant
shareholder chooses to act directly and in person in the exercise of any of such shareholder’s rights as a shareholder (see note 6 below);
•
any appointment by a shareholder of a proxy is revocable, unless the form of instrument used to appoint such proxy states otherwise;
•
if an appointment of a proxy is revocable, a shareholder may revoke the proxy appointment by: (i) cancelling it in writing, or making a later inconsistent
appointment of a proxy and (ii) delivering a copy of the revocation instrument to the proxy and to the relevant company;
•
a proxy appointed by a shareholder is entitled to exercise, or abstain from exercising, any voting right of such shareholder without direction, except
to the extent that the relevant company’s Memorandum of Incorporation, or the instrument appointing the proxy, provides otherwise (see note 3
below);
•
if the instrument appointing a proxy or proxies has been delivered by a shareholder to a company, then, for so long as that appointment remains in
effect, any notice that is required in terms of the Companies Act or such company’s Memorandum of Incorporation to be delivered to a shareholder must
be delivered by such company to:
•
the relevant shareholder; or
•
the proxy or proxies, if the relevant shareholder has: (i) directed such company to do so, in writing and (ii) paid any reasonable fee charged by
such company for doing so; and
•
if a company issues an invitation to its shareholders to appoint one or more persons named by the company as a proxy, or supplies a form of proxy
instrument:
•
the invitation must be sent to every shareholder entitled to receive the notice of the meeting at which the proxy is intended to be exercised;
•
the invitation or form of proxy instrument supplied by the company must:
•
bear a reasonably prominent summary of the rights established in section 58 of the Companies Act;
•
contain adequate blank space, immediately preceding the name(s) of any person(s) named in it, to enable a shareholder to write the name and,
if desired, an alternative name of a proxy chosen by the shareholder; and
•
provide adequate space for the shareholder to indicate whether the appointed proxy is to vote in favour of or against any resolution(s) to be
put to the meeting, or is to abstain from voting;
•
the Company must not require that the proxy appointment be made irrevocable; and
•
the proxy appointment remains valid only until the end of the meeting at which it was intended to be used, subject to the above.
NOTES TO THE FORM OF PROXY:
1. The form of proxy must only be used by Certificated Shareholders or Dematerialised Shareholders with “own name” registration.
2. Each Shareholder entitled to attend and vote at the General Meeting may appoint one or more persons as proxies to attend, participate in and vote at the General
Meeting in the place of the Shareholder. A proxy need not be a Shareholder.
3. A Shareholder is entitled to one vote on a show of hands and, on a poll, one vote in respect of each Share held. A Shareholder’s instructions to the proxy must
be indicated by inserting the relevant number of votes exercisable by the Shareholder on a poll in the appropriate box(es). Failure to comply with this will be
deemed to authorise the proxy to vote or to abstain from voting at the General Meeting as he/she deems fit in respect of all the Shareholder’s votes. Further,
should any further resolution(s) or any amendment(s) which may properly be put before the General Meeting be proposed, the proxy shall be entitled to vote as
he/she thinks fit.
4. A vote given in terms of an instrument of proxy shall be valid in relation to the General Meeting notwithstanding the death of the person granting it, or the
revocation of the proxy, or the transfer of the RCL Foods Shares in respect of which the vote is given, unless an intimation of such death, revocation or transfer
shall have been received by the Company or the Transfer Secretary before the commencement of the General Meeting or postponed or adjourned General
Meeting at which the proxy is used.
5. The chairperson of the General Meeting may reject or accept any form of proxy which is completed and/or received other than in compliance with these notes.
6. The completion and lodging of this form of proxy will not preclude the relevant Shareholder from attending the General Meeting and speaking and voting in
person thereat to the exclusion of any proxy appointed in terms hereof, should such Shareholder wish to do so.
7.
Documentary evidence establishing the authority of a person signing this form of proxy in a representative capacity must be attached to this form of proxy,
unless previously recorded by the Company or unless this requirement is waived by the chairperson of the General Meeting.
8. A minor or any other person under legal incapacity must be assisted by his/her parent or guardian, as applicable, unless the relevant documents establishing
her/her capacity are produced or have been registered by the Company.
9. Where there are joint holders of ordinary Shares:
(i) any one holder may sign this form of proxy;
(ii) the vote(s) of the senior Shareholders (for that purpose seniority will be determined by the order in which the names of Shareholders appear on the
Register) who tenders a vote (whether in person or by proxy) will be accepted to the exclusion of the vote(s) of the other joint Shareholder(s).
10. Forms of proxy should be delivered or mailed to Computershare Investor Services Proprietary Limited as follows:
Hand deliveries to:
Postal deliveries to:
Computershare Investor Services Proprietary Limited
Computershare Investor Services Proprietary Limited
70 Marshall Street
PO Box 61051
Johannesburg, 2001
Marshalltown, 2107
11.
12.
13.
14.
to be received by no later than 13:30 on Tuesday, 14 January 2014 (or 48 hours before any postponement or adjournment of the General Meeting which date, if
necessary, will be notified in the press). Any form of proxy not returned to Computershare Investor Services Proprietary Limited by such time may be handed
to the chairperson of the General Meeting any time before the appointed proxy exercises any of the Shareholder’s rights at the General Meeting (or any
postponement or adjournment thereof).
Any alteration or correction made to this form of proxy, other than the deletion of alternatives, must be initialled by the signatory/ies.
Any proxy appointed pursuant to this form of proxy may not delegate his/her authority to act on behalf of the relevant Shareholder.
In terms of section 58 of the Companies Act, unless revoked, an appointment of a proxy pursuant to this form of proxy remains valid only until the end of the
General Meeting or any postponement or adjournment of the General Meeting.
If the General Meeting is adjourned or postponed, valid forms of proxy submitted for the initial General Meeting will remain valid in respect of any adjournment
or postponement of the General Meeting.
RCL FOODS LIMITED
Previously known as Rainbow Chicken Limited
Incorporated in the Republic of South Africa
(Registration number 1966/004972/06)
Share Code: RCL
ISIN: ZAE000179438
(“RCL Foods” or the “Company”)
FORM OF ACCEPTANCE
IN RESPECT OF THE PRO RATA OFFER
(FOR USE BY QUALIFYING CERTIFICATED SHAREHOLDERS ONLY)
This Form of Acceptance should be read together with the Circular with which this Form of Acceptance is enclosed (“Circular”).
The definitions and interpretations commencing on page 6 of the Circular apply to this Form of Acceptance.
The making of the Pro Rata Offer and the distribution of the Circular and the Form of Acceptance to certain persons who have
registered addresses outside of South Africa, or who are resident or located in, or who are citizens of, countries other than South
Africa, may be restricted by the laws of the relevant jurisdiction and failure to comply with any of those restrictions may constitute
a contravention of the laws of any such territory. The Pro Rata Offer does not constitute an offer of RCL Foods Shares in any jurisdiction
in which it is illegal to make such an offer and in such circumstances, the Circular and this Form of Acceptance are sent for information
purposes only. Shareholders not resident in South Africa are referred to Section C paragraph 2.2.9 of the Circular for further
information regarding the restrictions applicable to them in terms of the Pro Rata Offer.
This Form of Acceptance is only for use by Qualifying Certificated Shareholders who elect to participate in the Pro Rata Offer in
respect of all or part of their RCL Foods Shares held at the close of business on the Record Date, being Friday, 31 January 2014.
Dematerialised Shareholders who wish to participate in the Pro Rata Offer are required to notify their duly appointed CSDP or Broker of their
acceptance in the manner and the time stipulated in the agreement governing the relationship between the relevant Dematerialised
Shareholders and their CSDP or Broker and must not complete this Form of Acceptance. Please refer to Section C, paragraph 2.2.5.2 of the
Circular with which this Form of Acceptance is enclosed.
This Form of Acceptance must be completed in its entirety and returned to the Transfer Secretary (at the physical or postal address
or the fax number or email address set out below) so as to be received by no later than 12:00 on Tuesday, 4 February 2014. Forms of
Acceptance received after this time and date will not be accepted.
Computershare Investor Services (Proprietary) Limited
(Registration number 2004/003647/07)
70 Marshall Street
Johannesburg 2001
South Africa
(PO Box 61763, Marshalltown, 2107)
Enquiries in connection with this Form of Acceptance should be
addressed to the Transfer Secretary by quoting the account number
printed below:
Account number
Telephone number: 0861 100 933
Email address:
corporate.events@computershare.co.za
SALIENT DATES AND TIMES
2014
Finalisation date for the Pro Rata Offer on
Last day to trade in RCL Foods Shares in order to participate in the Pro Rata Offer on
RCL Foods Shares trade ex-Entitlements on
Record Date at 17:00 on
For Qualifying Certificated Shareholders wishing to subscribe for Pro Rata Offer Shares, payment to be made
and Forms of Acceptance to be delivered to the Transfer Secretary by 12:00 on
Pro Rata Offer closes at 12:00 on
Expected issue and listing of Pro Rata Offer Shares on
CSDP or Broker accounts in respect of Qualifying Dematerialised Shareholders debited with the aggregate
Pro Rata Offer Subscription Price due, in terms of the Pro Rata Offer and credited with Pro Rata Offer Shares,
and Share certificates in respect of the Pro Rata Offer Shares posted to Qualifying Certificated Shareholders
on or about
Friday, 17
Friday, 24
Monday, 27
Friday, 31
January
January
January
January
Tuesday, 4 February
Tuesday, 4 February
Monday, 10 February
Monday, 10 February
Notes:
1.
The abovementioned times are South African times and dates and are subject to change. Any such change will be released on SENS and published in the South
African press.
2. RCL Foods Shares may not be Dematerialised or rematerialised between Monday, 27 January 2014 and Friday, 31 January 2014, both days inclusive.
3. Qualifying Dematerialised Shareholders are required to notify their duly appointed CSDP or Broker of their acceptance of the Pro Rata Offer Shares in the
manner and within the time stipulated in the agreement governing the relationship between the relevant Shareholder and his CSDP or Broker.
4. The CSDP or Broker accounts of Qualifying Dematerialised Shareholders will be automatically credited with Pro Rata Offer Shares to the extent to which they
have accepted the Pro Rata Offer.
5. If applicable, share certificates will be posted, by registered post, to Qualifying Certificated Shareholders at their own risk in respect of the Pro Rata Offer
Shares which have been subscribed for.
6. CSDPs effect payment in respect of Qualifying Dematerialised Shareholders on a delivery versus payment basis.
1
QUALIFYING CERTIFICATED SHAREHOLDERS ARE REQUIRED TO COMPLETE THE INFORMATION IN THE BLOCKS BELOW:
Name:
Address:
Contact telephone number: (
)
Name of RCL Foods Shareholder
Number of RCL Foods Shares held as at the Last Practicable Date,
deemed to be held by you on the Record Date
(A)
Expected number of Pro Rata Offer Shares for which you are
entitled to subscribe1
(B)
= (A) x 0.5310646
(The actual Pro Rata Offer entitlement as at the Record Date will be
calculated by the Transfer Secretary.)
Note 1: Should the number of RCL Foods Shares held on the Record Date differ from the number of RCL Foods Shares shown in Block (A) above, then the number of Pro Rata
Offer Shares for which you are entitled to subscribe as reflected in Block (B) above will be recalculated by the Transfer Secretary based on the actual number of RCL
Foods Shares held by you on the Record Date. If you do not hold any Shares on the Record Date, then you will not be entitled to subscribe for any Pro Rata Offer
Shares.
Number of Pro Rata Offer Shares in respect of which you wish to
accept the Pro Rata Offer (namely, all or part of your entitlement)
(C)
The maximum number of Pro Rata Offer Shares that can be subscribed
for is based on the entitlement ratio of 53.10646 (fifty three point one
zero six four six) Pro Rata Offer Shares for every 100 (one hundred)
RCL Foods Shares held on the Record Date
Applications for excess Pro Rata Offer Shares will not be permitted.
Aggregate Pro Rata Offer Subscription Price due (being the aggregate
Pro Rata Offer Subscription Price in respect of all the Pro Rata Offer
Shares for which you wish to subscribe).
(D)
= (C) x Pro Rata Offer Subscription Price
2
R
Note 2: The Pro Rata Offer Subscription Price will be announced on the finalisation date of the Pro Rata Offer, which is expected to be Friday, 17 January 2014. You are
advised not to complete this Form of Acceptance until such time as the Pro Rata Offer Subscription Price has been announced.
By completing this Form of Acceptance and subscribing for Pro Rata Offer Shares you hereby represent and warrant to RCL Foods that, except where
proof has been provided to the Company’s satisfaction that your subscription for Pro Rata Offer Shares will not result in the contravention of any
applicable legal requirement in any jurisdiction, you are not:
(i)
subscribing for Pro Rata Offer Shares from within a Restricted Territory;
(ii) in any jurisdiction in which it is unlawful to make or accept the Pro Rata Offer or subscribe for Pro Rata Offer Shares;
(iii) subscribing for Pro Rata Offer Shares for the account of a person located within the U.S. unless:
(a) the instruction to accept or renounce was received from a person outside the U.S; and
(b) the instructing person has advised such person that it has the authority to give such instruction and that either it: (A) has investment discretion
or authority over such account or (B) is an investment manager or investment company and that in the case of each of (A) and (B), is acquiring
the Pro Rata Offer Shares in terms of an exemption from the registration requirements of the U.S. Securities Act;
(iv) acquiring Pro Rata Offer Shares with a view to the offer, sale, resale, transfer, delivery or distribution, directly or indirectly, of any such Pro Rata
Offer Shares into a Restricted Territory.
The Company reserves the right to treat as invalid any subscription or proposed subscription for Pro Rata Offer Shares if it: (i) appears to the
Company or its agents to have been executed or effected in, or dispatched from, a Restricted Territory or otherwise in a manner which may involve a
breach of the laws of any jurisdiction or if it believes the same may violate any applicable legal or regulatory requirement; (ii) provides a securities
account in a Restricted Territory for the crediting of Pro Rata Offer Shares or an address in a Restricted Territory for delivery of Share certificates
evidencing Pro Rata Offer Shares or (iii) purports to exclude the warranties required by this paragraph.
Signed at
on
Assisted by (where applicable):
Signature:
Telephone numbers (including international and area codes):
Home: (
)
Work: (
)
Cellphone/mobile number:
2
2014
INSTRUCTIONS:
1. For the terms and conditions governing the Pro Rata Offer, refer to the Circular.
2. If you wish to subscribe for Pro Rata Offer Shares in respect of all or part of your shareholding, you must complete Blocks (C) and (D) above in
accordance with the instructions contained herein and deliver this completed Form of Acceptance, together with payment for the aggregate
Pro Rata Offer Subscription Price payable in respect of the Pro Rata Offer Shares for which you wish to subscribe as set out in Block (D) to the
Transfer Secretary (at the physical or postal address or the fax number of email address set out on page 2 of this Form of Acceptance) so as to be
received by no later than 12:00 on Tuesday, 4 February 2014.
3. Payment must be made by way of a bank-guaranteed cheque, a bankers’ draft or an EFT into the designated bank account (details of which is
available from the corporate actions department of the Transfer Secretary, contactable during ordinary business hours on +27 (0)11 713 0800)
and quoting the account number (as printed on page 1 of this Form of Acceptance).
4. If you do not wish to subscribe for any Pro Rata Offer Shares, no further action is required by you.
5. Should you have any queries as to the completion of this Form of Acceptance, please contact the Transfer Secretary.
NOTES:
(a) Invalid Forms of Acceptance: RCL Foods reserves the right, in its sole
discretion, to treat as invalid any Form of Acceptance not complying
with the instructions set out herein or with any instruction contained in
the Circular.
(b) Fractional entitlements: No fractional entitlements to Pro Rata Offer
Shares will arise, in accordance with standard rounding convention.
Namely, fractional entitlements will be rounded up to the nearest whole
number where the fraction is greater than or equal to 0.5 (zero point five)
and rounded down to the nearest whole number where the fraction is
less than 0.5 (zero point five).
(c) Minors and persons without legal capacity: The signature on this
Form of Acceptance of any person who is under legal capacity shall be
accompanied by the signature of such person’s parent or guardian or
legal representative, as the case may be.
(d) Alterations: Any alteration or correction made to this Form of
Acceptance must be initialled by the signatory(ies).
(e) Married persons: Married persons wishing to subscribe for Pro Rata
Offer Shares must comply with the provisions of the Matrimonial
Property Act (No 88 of 1984) and proof of such person’s capacity to
subscribe for Pro Rata Offer Shares may be required by the Transfer
Secretary.
(f) Powers of attorney: If this Form of Acceptance is signed under a power
of attorney, then the original, or certified copy thereof, must be sent to
the Transfer Secretary for noting unless it has already been noted by the
Company or the Transfer Secretary.
(g) Companies and close corporations: A company or close corporation
wishing to subscribe for Pro Rata Offer Shares must send the original
or certified copy of the directors’ or members’ resolution authorising
such subscription to the Transfer Secretary for noting.
(h) Joint holders: Where applicable, all joint holders of RCL Foods Shares
must sign the Form of Acceptance.
(i) Share certificates: New Share certificates in respect of those Pro Rata
Offer Shares for which you have subscribed, will be posted to you, by
registered post, at your own risk, on Monday, 10 February 2014. Shares
in companies listed on the JSE cannot be traded unless they have been
Dematerialised and are held in the Strate system. A Certificated
Shareholder may therefore wish to Dematerialise his/her/its
RCL Foods Share/s. A holder of Certificated Shares may contact
either a CSDP or Broker, details of which are available from Strate at
liaisondesk@strate.co.za or telephone +27 11 759 5300 or facsimile
+27 11 759 5503.
( j) Exchange Control Regulations: Shareholders are referred to Section C,
paragraph 2.2.8 of the Circular concerning Exchange Control
Regulations.
(k) Shareholders outside of South Africa: The attention of Shareholders
resident outside of South Africa is drawn to Section C, paragraph 2.2.9
of the Circular. It is the responsibility of all such persons (including
without limitation, nominees and trustees) wishing to subscribe for Pro
Rata Offer Shares to satisfy themselves of the full observance of the laws
of any relevant territory in connection therewith, including obtaining
any requisite governmental or other consents, observing any other
requisite formalities and paying any issue, transfer or other taxes in
connection therewith due in such territory.
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