| |
| |
|
|
2007
R million
(Reviewed) |
|
2006
R million
(Audited) |
|
| |
Note 1 |
|
|
|
|
|
| |
Operating profit before interest, dividends and abnormal items |
|
|
|
|
|
| |
Operating profit is stated after: |
|
|
|
|
|
| |
– Cost of sales |
|
6 763,1 |
|
5 647,9 |
|
| |
– Other expenses excluding depreciation and amortisation |
|
1 369,8 |
|
1 401,6 |
|
| |
– Other income |
|
(52,4) |
|
(15,7) |
|
| |
– Realised loss /(profit) on foreign exchange and derivative instruments |
|
106,9 |
|
(65,6) |
|
| |
– Unrealised profit on foreign exchange and derivative instruments |
|
(6,0) |
|
(67,7) |
|
| |
Note 2 |
|
|
|
|
|
| |
Net interest and dividend income |
|
|
|
|
|
| |
Interest received |
|
104,3 |
|
92,9 |
|
| |
– From RC&C Finance Company (Pty) Limited (RCCF) up to date of transfer (refer to note 14) |
|
43,5 |
|
57,2 |
|
| |
– External |
|
60,8 |
|
35,7 |
|
| |
Interest paid |
|
(57,2) |
|
(34,9) |
|
| |
Dividend income other than from associate companies |
|
7,7 |
|
6,9 |
|
| |
Total |
|
54,8 |
|
64,9 |
|
| |
Dividend income from associate companies included in share of associate companies’ profits |
|
146,0 |
|
56,0 |
|
| |
Note 3 |
|
|
|
|
|
| |
Abnormal items |
|
|
|
|
|
| |
Net surplus on dilution in (refer to note 14) and disposal of business |
|
118,1 |
|
5,0 |
|
| |
Surplus on sale of non-current assets to the ATC/Aberdare Joint Venture |
|
34,5 |
|
— |
|
| |
Black Economic Empowerment (BEE) expense - share-based payment (refer to note 11) |
|
(556,6) |
|
— |
|
| |
Share-based payment expense in terms of broad based scheme to group employees (refer to note 11) |
|
(42,2) |
|
— |
|
| |
Net impairments |
|
(1,4) |
|
(3,4) |
|
| |
Total before taxation |
|
(447,6) |
|
1,6 |
|
| |
Taxation |
|
14,7 |
|
— |
|
| |
Minority interest |
|
0,2 |
|
— |
|
| |
Total |
|
(432,7) |
|
1,6 |
|
| |
Note 4 |
|
|
|
|
|
| |
Taxation |
|
|
|
|
|
| |
The tax charge for 2006 includes Secondary Tax on Companies of R43,7 million in respect of the special dividend. |
|
|
|
|
|
| |
Note 5 |
|
|
|
|
|
| |
Number of shares used to calculate earnings per share |
|
|
|
|
|
| |
Weighted average number of shares in issue used to determine basic earnings, headline earnings and normalised headline earnings per share (millions of shares) |
|
176,7 |
|
175,1 |
|
| |
Adjusted by the dilutive effect of: |
|
|
|
|
|
| |
- Unexercised share options granted (millions of shares) |
|
1,5 |
|
1,5 |
|
| |
- The notional unencumbered Reunert Limited (Reunert) shares held by |
|
|
|
|
|
| |
Bargenel Investments Limited (Bargenel) (millions of shares)* |
|
1,1 |
|
— |
|
| |
Weighted average number of shares used to determine diluted basic, diluted headline, and normalised diluted headline earnings per share (millions of shares) |
|
179,3 |
|
176,6 |
|
| |
| * |
The notional unencumbered Reunert shares represent the number (based on the year end share price) of the 18,5 million treasury shares held by Bargenel that could be settled out of the year end equity value of Bargenel. |
|
|
|
|
|
|
| |
Note 6.1 |
|
|
|
|
|
| |
Headline earnings |
|
|
|
|
|
| |
Headline earnings are determined by eliminating the effect of the following items in attributable earnings: |
|
|
|
|
|
| |
Profit attributable to equity holders of Reunert – IAS 33 basic earnings |
|
639,3 |
|
922,8 |
|
| |
Net surplus on dilution in and disposal of business |
|
(118,1) |
|
(5,0) |
|
| |
Surplus on disposal of property, plant and equipment and intangible assets |
|
(35,2) |
|
(2,6) |
|
| |
Net impairments |
|
1,4 |
|
3,4 |
|
| |
Minority effect of adjustments (nil due to rounding) |
|
— |
|
— |
|
| |
Taxation effect of adjustments |
|
(6,1) |
|
— |
|
| |
Headline earnings |
|
481,3 |
|
918,6 |
|
| |
Note 6.2 |
|
|
|
|
|
| |
Normalised headline earnings are determined by eliminating the effect of the following items in attributable headline earnings: |
|
|
|
|
|
| |
Headline earnings |
|
481,3 |
|
918,6 |
|
| |
BEE expense – share-based payment |
|
556,6 |
|
— |
|
| |
Share-based payment expense in terms of broad based scheme to group employees |
|
42,2 |
|
— |
|
| |
BEE share of headline and normalised headline earnings adjustments |
|
8,2 |
|
— |
|
| |
Contribution by Reunert to employees of joint venture and associate |
|
2,1 |
|
— |
|
| |
Minority effect of adjustments |
|
(0,1) |
|
— |
|
| |
Taxation effect of adjustments |
|
(9,1) |
|
— |
|
| |
|
|
1 081,2 |
|
918,6 |
|
| |
Interest in profit that is economically attributable to BEE partners (refer to note 11) |
|
(73,5) |
|
(51,4) |
|
| |
Normalised headline earnings (basic and diluted) |
|
1 007,7 |
|
867,2 |
|
| |
Note 7 |
|
|
|
|
|
| |
Goodwill |
|
|
|
|
|
| |
Carrying value at the beginning of the year |
|
326,8 |
|
329,0 |
|
| |
Acquisitions of businesses and minority interests |
|
45,7 |
|
1,2 |
|
| |
Negative goodwill taken to profit in terms of IFRS 3 |
|
1,1 |
|
— |
|
| |
Impairments |
|
(0,8) |
|
(3,4) |
|
| |
Carrying value at the end of the year |
|
372,8 |
|
326,8 |
|
| |
Note 8 |
|
|
|
|
|
| |
Investments and loans |
|
|
|
|
|
| |
Unlisted associate companies - at cost plus equity-accounted earnings excluding goodwill
(refer to note 14) |
|
400,3 |
|
126,0 |
|
| |
Other unlisted investments – at cost |
|
7,0 |
|
0,3 |
|
| |
Loans – at cost |
|
54,5 |
|
22,5 |
|
| |
Long-term accounts receivable |
|
266,1 |
|
— |
|
| |
Total carrying value |
|
727,9 |
|
148,8 |
|
| |
Directors’ valuation of unlisted investments |
|
|
|
|
|
| |
– Unlisted associate companies |
|
908,0 |
|
520,0 |
|
| |
– Other unlisted investments |
|
7,0 |
|
0,3 |
|
| |
Note 9 |
|
|
|
|
|
| |
Long-term borrowings |
|
|
|
|
|
| |
Total long-term borrowings (including finance leases) |
|
386,9 |
|
115,9 |
|
| |
Less: Short-term portion (including finance leases) |
|
(130,4) |
|
(15,4) |
|
| |
|
|
256,5 |
|
100,3 |
|
| |
Loan repaid by BEE partner* |
|
22,3 |
|
14,5 |
|
| |
|
|
278,8 |
|
115,0 |
|
|
| |
The long-term borrowings in the current year is an obligation to RCCF, which is now owned by Quince Capital Holdings (Pty) Limited (Quince), an equity-accounted associate. Various operations in the group dealing in office equipment discounted debtors with RCCF on the basis that the risk of bad debts is carried by the Reunert group operations. In terms of current accounting practice, these debtors cannot be derecognised by the Reunert group operations, accordingly the long-term portion of the debtors are included in long-term accounts receivable (refer to note 8), the short-term portion in accounts receivable and the outstanding balance of cash received from RCCF in long-term borrowings.
The group entered into an agreement with Powerhouse Utilities (Pty) Limited (Powerhouse), whereby on 1 December 2004, 25,1% of the A shares of ATC were sold to Powerhouse at a cost of R130 million. IFRS requires that this transaction is not accounted for as a sale, since the loan has not been fully paid by Powerhouse and conditions are attached to the unpaid portion, notwithstanding that the economic reality of this transaction is, in fact, a sale.
The long-term borrowings in the prior year related to funding provided by Nedbank Limited (Nedbank) to Powerhouse for their purchase of 25,1% of the A shares of ATC. The loan was guaranteed by Reunert and in terms of current accounting practice for this transaction, was recognised on the Reunert balance sheet. The Nedbank loan was repaid by Reunert on 1 June 2007, with the effect that the loan is now payable by Powerhouse to Reunert and is disclosed as an investment in subsidiary.
|
|
| |
| * |
Loan repaid by the BEE partner represents a portion of the dividends paid by ATC to Powerhouse, which were used to repay a portion of the loan. In terms of current accounting practice, this is to be reflected as a long-term liability on the Reunert balance sheet. When the significant risks and rewards of ownership in the equity of ATC are deemed to have passed to the BEE partner, this portion of the loan repaid by Powerhouse will be transferred to minority interest. |
|
|
|
| |
Note 10 |
|
|
|
|
|
| |
Group cash resources/borrowings |
|
|
|
|
|
| |
Total RCCF borrowings at the end of the year (refer to note 14) |
|
— |
|
1 254,3 |
|
| |
Less: Funded out of other Reunert cash resources (see below) |
|
— |
|
(66,4) |
|
| |
RCCF bank borrowings at end of year (refer to note 14) |
|
— |
|
1 187,9 |
|
| |
Total Reunert net cash resources at the end of the year |
|
482,8 |
|
1 024,1 |
|
| |
Less: Utilised to fund RCCF (see above) (refer to note 14) |
|
— |
|
(66,4) |
|
| |
|
|
482,8 |
|
957,7 |
|
| |
Add: Bank overdrafts |
|
47,8 |
|
11,6 |
|
| |
Cash and cash equivalents |
|
530,6 |
|
969,3 |
|
|
| |
Note 11 |
|
| |
BEE Transactions |
|
| |
The BEE deal of Reunert was approved by shareholders on 6 February 2007. Due to the sale of Bargenel to the BEE partners, the shareholders of Peotona Group Holdings (Pty) Limited (Peotona) and the Rebatona Educational Trust, a share-based payment expense (IFRS 2) of R556,6 million has been recognised. The sale by Bargenel, which holds 18,5 million shares in Reunert was done at a 10% discount on the Reunert share price. This expense differs from the amount disclosed in the circular to shareholders issued on 13 December 2006 largely as a result of the movement in the Reunert share price up to the date of the approval of this transaction. IFRS requires that this disposal is not accounted for as a sale, since the preference shares issued by Bargenel to Reunert, financing the purchase of Bargenel, have not been fully repaid and conditions are attached to the unpaid portion, notwithstanding that the reality of this transaction is, in fact, a sale.
All employees in the Reunert group who did not participate in any other share incentive scheme were awarded 100 Reunert shares each which will be held in a trust for a period of five years. The employees will only be able to sell the shares after five years, but have full rights to receive all dividends declared during the five-year period. The resultant expense to the Reunert group has been raised on the difference between the fair value of a Reunert share on 6 February 2007 (R83,90) and its cost price of 10 cents each. A deferred tax asset has been raised as a result of the future tax deduction.
As referred to in note 9 certain BEE transactions involving the disposal of equity interests have not been recognised because the significant risks and rewards of ownership of the equity have been deemed not to have passed to the BEE partners. Accordingly, the equity interests in subsidiaries have not been recognised in the group income statement and balance sheet. |
|
|
| |
The effect of this has been to not recognise the following: |
|
|
|
|
|
| |
– Interest in current year profit that is economically attributable to BEE partners |
|
73,5 |
|
51,4 |
|
| |
– Balance sheet interest that is economically attributable to BEE partners |
|
161,8 |
|
106,3 |
|
|
| |
Note 12 |
|
| |
Basis of preparation |
|
| |
These condensed group financial statements have been prepared in terms of IAS 34 “Interim Financial Reporting” as well as in compliance with the Companies Act of South Africa, Act 61 of 1973, as amended and the Listing Requirements of the JSE Limited.
The group’s accounting policies as set out in the audited annual financial statements for the year ended 30 September 2006 have been consistently applied, with the following exception: The group’s share of the associate company’s retained earnings were previously transferred to a non-distributable reserve. This policy has been changed and the effect on the prior years’ retained earnings and non-distributable reserves have been shown in the statement of changes in equity. |
|
| |
Note 13 |
|
| |
Unconsolidated subsidiary |
|
| |
The financial results of Cafca Limited (Cafca), a subsidiary incorporated in Zimbabwe, have not been consolidated in the group results as the directors believe there is a lack of control as defined in IAS 27 “Consolidated and Separate Financial Statements”, and the amounts involved are not material to the group’s results. |
|
| |
Note 14 |
|
| |
Major corporate activity |
|
| |
ATC/Aberdare Joint Venture
A new joint venture was formed between the telecom cable divisions of ATC and Aberdare Cables (Pty) Limited (Aberdare), each holding a 50% share in the joint venture. ATC contributed all its property, plant and equipment (PPE) (R114 million) and intangible assets (R9 million) to the value of R123 million. Aberdare also contributed PPE (R106,2 million), intangible assets (R3,3 million) and cash (R13,5 million) to the value of R123 million. The balance sheet and income statement of the joint venture have been proportionately consolidated from the effective date (1 February 2007).
Acquisition of Nashua Franchises
With effect from 1 April 2007, Nashua Holdings Limited (Nashua) purchased 51% of the Eastern Cape Nashua franchise. Nashua provided R11,8 million of loan finance to the other shareholders. In addition, effective from 1 June 2007, Nashua acquired 51% of the Tshwane franchise. Nashua has provided loan finance of R10,8 million to the other shareholders.
Acquisition of EADS’s shares in Reutech Radar Systems (RRS)
With effect from 1 July 2007, Reunert bought the 36,5% shareholding EADS owned in RRS for R31,5 million making it a 100% owned subsidiary. |
|
|
| |
|
Aberdare
Rm |
Nashua
Franchises
Rm |
Reutech
Radar
Systems
Rm |
Group
Rm |
|
| |
Net assets acquired: |
|
|
|
|
|
| |
Property, plant and equipment |
53,2 |
15,9 |
— |
69,1 |
|
| |
Intangible assets |
1,6 |
— |
— |
1,6 |
|
| |
Goodwill |
10,7 |
25,7 |
10,2 |
46,6 |
|
| |
Inventory |
— |
4,7 |
— |
4,7 |
|
| |
Accounts receivable |
— |
12,9 |
— |
12,9 |
|
| |
Net cash |
6.8 |
1,4 |
— |
8,2 |
|
| |
Payables and provisions |
— |
(14,5) |
— |
(14,5) |
|
| |
Long-term loans |
— |
(24,1) |
— |
(24,1) |
|
| |
Receiver of Revenue |
— |
(0,3) |
— |
(0,3) |
|
| |
Deferred tax |
(10,7) |
0,5 |
— |
(10,2) |
|
| |
Outside shareholders’ interest |
— |
0,4 |
21,3 |
21,7 |
|
| |
Cost of investment |
61,6 |
22,6 |
31,5 |
115,7 |
|
| |
Profit since acquisition |
— |
3,6 |
— |
3,6 |
|
| |
Revenue for the full year ended 30 September 2007 as though the acquisition date had been 1 October 2006 |
— |
108,6 |
— |
108,6 |
|
| |
Profit for the full year ended 30 September 2007 as though the acquisition date had been 1 October 2006 |
— |
2,9 |
— |
2,9 |
|
|
| |
RCCF |
|
| |
With effect from 1 May 2007 RCCF became a wholly-owned subsidiary of Quince. In terms of the deal Reunert sold the entire share capital of RCCF to Quince, a then wholly-owned subsidiary of Reunert, at a value of R375 million in exchange for additional shares in Quince. Quince then issued further shares to PSG and individuals for cash which diluted the Reunert shareholding in Quince. This transaction has resulted in Reunert recognising a profit on dilution of its shareholding in Quince of R118,1 million. Quince is now regarded as an associate company and its results have been equity-accounted for in Reunert’s group results. Quince has been granted a bridging bank loan facility amounting to R1,4 billion and is finalising a securitisation facility of R5 billion. The bridging facility will lapse once the securitisation has been completed. Reunert has provided a guarantee to the bank for the bridging finance. |
|
|
| |
Financial effect of the RCCF transfer to Quince: |
Rm |
|
| |
Net assets transferred |
149,8 |
|
| |
Attributable portion of goodwill arising in Quince on this transaction |
107,1 |
|
| |
Surplus on dilution (refer to note 3) |
118,1 |
|
| |
Transfer value of shares in Quince |
375,0 |
|
|
| |
|
|
