69
ANNUAL REPORT 2009
A N N UA L RE P O R T 20 0 9Business address and registered office: 65 Voortrekker Road | Malmesbury 7300
who and what we areKaap agri is an agricultural services group which supplies a variety of products and services mainly to the agricultural sector, but also the general public, through:
• A range of Agrimark shops which supply general farming requisites, as well as tools, garden requisites, outdoor life, DIY and other related products
• A packaging material division which handles the distribution of packaging material and related items for the fruit industry
• A mechanisation division which sells implements and parts and also offers repair and manufacturing services
• A commodity division which supplies grain marketing services as well as handling and storage services
• A seed-processing division which supplies registered grain, potato and bean seed processing and seed-cleaning services
• Agriplas, an irrigation subsidiary, which manufactures and distributes dripper pipe and related irrigation equipment
• Financing of input costs and grain marketing through various financing products• Other support services to agricultural producers• A minority interest in RSA Agri Makelaars (Pty) Ltd, an insurance brokerage, which specialises in
short-term insurance
Kaap Agri’s infrastructure is widely spread and includes the Swartland, Boland, Wynland, Namaqualand, Orange River, Namibia and adjacent areas, as well as Limpopo, Mpumalanga and Gauteng. The 104 operating points stretch over 65 cities, towns and places mainly in the country districts, but include several branches in the bigger metropolitan areas, where the DIY enthusiast, gardener, outdoor enthusiast and the general public are served by Agrimark shops which offer a unique shopping experience.
The activities of agricultural customers are widely diversified and include small grain, pasturage, table and wine grapes, vegetables, stone fruit, citrus, meat, milk, wool, potatoes and other agricultural divisions.
Kaap Agri is also the largest shareholder (32%) in Pioneer Food Group Limited, a listed group that is involved in the manufacturing of food, beverages and related products for humans as well as products for animals. Pioneer Food Group’s well-known trademarks include White Star, Weet-Bix, Bokomo, Sasko, Ceres, LiquiFruit, Pepsi, Heinz and Safari.
www.kaapagri.co.za
CONTENTS2 Business profi le
4 Board of directors
5 Executive management
6 Chairman’s review
9 Financial review
12 Five-year fi nancial review
14 Social sustainability report
16 Corporate governance
21 Share statistics
22 Declaration of directors’ responsibility and approval
22 Declaration by the Company Secretary
23 Report of the audit committee
24 Report of the independent auditors
25 Directors’ report
26 Accounting policy
36 Balance sheet
37 Income statement
38 Statement of changes in equity
39 Cash fl ow statement
40 Notes to the annual fi nancial statements
61 Kaap Agri Limited – annual fi nancial statements and notes
63 Administration
65 Notice of annual general meeting
67 Form of proxy
BUSINESS PROFILE
TRADE MECHANISATION COMMODITIES IRRIGATION CORPORATE AND FINANCING
Services• Production inputs• Packing material• Hardware• Fuel• Outdoor life
• Tractors• Combine harvesters• Tilage• Parts• Workshops
• Grain receiving and grading• Grain marketing• Grain storage• Seed processing• Seed potatoes
• Dripper pipe• Pumps• Irrigation equipment• Filters• Automation
• Financing• Finances• Human resources and
Communication• Internal audit• IT services
PurposeProviding a complete range of production inputs and other goods to agricultural producers as well as the general public.
Providing a complete range of mechanisation equipment and services.
Providing a complete range of marketing and hedging options as well as handling grain products between producer and buyer
Manufacturing of dripper pipe and other irrigation equipment, as well as distribution of franchise and other irrigation parts
Providing support services for the group’s activities. Providing tailor-made fi nancing for producers.
Operations• 48 Agrimark shops• 14 Pakmark shops• Western Cape• Northern Cape• Limpopo• Mpumalanga• Namibia
• 7 Workshops• 10 Parts outlets• Western Cape
• 14 Silo complexes• 350 000 ton capacity• 2 Seed-processing plants• Western Cape
• 1 Factory• 5 Distribution points• Western Cape• Gauteng• Mpumalanga
• Head offi ce Malmesbury• 10 Regional credit offi ces
Financial 2009R’000
2008R’000
2009R’000
2008R’000
2009R’000
2008R’000
2009R’000
2008R’000
2009R’000
2008R’000
Income 1 792 765 1 707 605 120 375 148 234 279 406 443 708 74 756 61 649 6 789 1 898
Profi t before tax 90 057 93 381 1 525 1 506 29 793 24 862 3 074 (1 563) 9 928 17 238
Gross assets 452 074 445 096 48 930 34 409 41 508 44 152 28 164 28 148 799 750 773 218
Net assets 177 623 153 877 40 257 21 545 31 336 21 280 19 338 18 703 352 264 327 741
As percentage of total
Trade
Mechanisation
Commodities
Irrigation
Corporate
Income Profi t before tax
Gross assets Net assets
2 A N N U A L R E P O R T 2 0 0 9
67%1%
2%8%
22%
Gross assets
58%
2%3%
4%
33%
Net assets
57%
3%5%
6%
29%
79%
5%3%
12%
1%
TRADE MECHANISATION COMMODITIES IRRIGATION CORPORATE AND FINANCING
Services• Production inputs• Packing material• Hardware• Fuel• Outdoor life
• Tractors• Combine harvesters• Tilage• Parts• Workshops
• Grain receiving and grading• Grain marketing• Grain storage• Seed processing• Seed potatoes
• Dripper pipe• Pumps• Irrigation equipment• Filters• Automation
• Financing• Finances• Human resources and
Communication• Internal audit• IT services
PurposeProviding a complete range of production inputs and other goods to agricultural producers as well as the general public.
Providing a complete range of mechanisation equipment and services.
Providing a complete range of marketing and hedging options as well as handling grain products between producer and buyer
Manufacturing of dripper pipe and other irrigation equipment, as well as distribution of franchise and other irrigation parts
Providing support services for the group’s activities. Providing tailor-made fi nancing for producers.
Operations• 48 Agrimark shops• 14 Pakmark shops• Western Cape• Northern Cape• Limpopo• Mpumalanga• Namibia
• 7 Workshops• 10 Parts outlets• Western Cape
• 14 Silo complexes• 350 000 ton capacity• 2 Seed-processing plants• Western Cape
• 1 Factory• 5 Distribution points• Western Cape• Gauteng• Mpumalanga
• Head offi ce Malmesbury• 10 Regional credit offi ces
Financial 2009R’000
2008R’000
2009R’000
2008R’000
2009R’000
2008R’000
2009R’000
2008R’000
2009R’000
2008R’000
Income 1 792 765 1 707 605 120 375 148 234 279 406 443 708 74 756 61 649 6 789 1 898
Profi t before tax 90 057 93 381 1 525 1 506 29 793 24 862 3 074 (1 563) 9 928 17 238
Gross assets 452 074 445 096 48 930 34 409 41 508 44 152 28 164 28 148 799 750 773 218
Net assets 177 623 153 877 40 257 21 545 31 336 21 280 19 338 18 703 352 264 327 741
Geographical representation
NORTHERN CAPE
GAUTENG
LIMPOPO
NAMIBIA
WESTERN CAPE WESTERN CAPE
A N N U A L R E P O R T 2 0 0 9 3
BOARD OF DIRECTORSChairmanGD (George) Eksteen ▀
Vice-chairmanJH (Kosie) van Niekerk ▀
Non-executiveFA (Fran) du Plessis ◘ (Appointed: 12 February 2009)
BS (Bernhardt) du Toit ◘
CJ (Chris) du Toit ▀
JN (Johannes) Hamman (Retired: 12 February 2009)
IJ (Sakkie) Hugo ●
ASM (Mohammad) Karaan ◘
NC (Niko) Loubser ●
HS (Stanley) Louw ●
JF (Jannie) Mouton (Appointed: 12 February 2009)
CA (Chris) Otto ◘ ▀ (Appointed: 12 February 2009)
HM (Helgard) Smit ●
PJJ (Peet) van der Walt (Retired: 12 February 2009)
ExecutiveCA (Corwyn) Botha (Managing) ▀
JJ (James) Matthee (Financial) ●
S (Sean) Walsh (Operational)
◘ Audit Committee ● Finance Committee
▀ Human Resources Committee Nomination Committee
4 A N N U A L R E P O R T 2 0 0 94 A N N U A L R E P O R T 2 0 0 9
EXECUTIVE MANAGEMENT
Wian Beukes General Manager: Trade – Inland
Corwyn Botha Managing Director
Johan de Lange General Manager: Products
Philip Faure Managing Director: RSA Agri Makelaars
Kobus Jacobs General Manager: Trade – Namibia
Reinhard Köstens Group Secretary
Johan Liebenberg Director Human Resources: Kaap Agri Bedryf
Francois Loots General Manager: Trade – Northern Cape
James Matthee Financial Director
Ian Schooling General Manager: Agriplas
Hennie Smit General Manager: Procurement and Logistics
Francois Swanepoel General Manager: Trade – Coast
Dawie van Rensburg General Manager: Mechanisation
Gerhard Victor Group Manager: Finance
Sean Walsh Operational Director
Bertus Wolmarans Group Manager: Financing Services
A N N U A L R E P O R T 2 0 0 9 5
CHAIRMAN’S REVIEWIf 2008 was a year of two seasons in which global markets initially experienced record highs followed by record lows, then 2009 was indeed also one of two seasons for Kaap Agri. The fi nancial year started where the previous one ended with Kaap Agri continuing its strong growth and declaring candidly that it refused to participate in the recession. It was primarily due to the positive attitude of staff and clients that Kaap Agri enjoyed an outstanding fi rst six months.
The offi cial announcement after the fi rst quarter that South Africa had beyond doubt entered into a recession, probably contributed to a dramatic decline in business in the second half of the fi nancial year. However, there were other factors that led to a much weaker second half, amongst others, real reductions in prices of products such as fuel, fertiliser, steel, chemicals and wheat that harmed turnover, as well as low product prices that limited planting and expansions.
For this reason and despite a negative external environment, Kaap Agri is satisfi ed that it has managed to improve on its 2008 results, which showed exceptional growth on the 2007 results. Taking the effect of price reductions into account, Kaap Agri’s results were actually even better in real terms.
GeneralThe offi cial recession meant that South Africa’s economy showed negative growth during the fi rst three quarters of Kaap Agri’s reporting period. Even though there was a moderate improvement during the last quarter, growth over four quarters, and therefore over the entire reporting period, was negative.
Kaap Agri’s business does not necessarily follow the national economic business cycle, but the negative sentiment was felt nevertheless.
Over the period the Reserve Bank announced six interest rate cuts of 450 basis points in attempts to stimulate the economy. However, these measures have a lagging effect and the full outcomes are yet to be seen. An encouraging sign is that infl ation has dropped and is currently very close to Government’s top infl ation target of 6%.
The continuing strong rand causes product prices to remain under pressure. What is good for imported production inputs and capital goods, is negative for product prices that are subject to import and export parity.
AgricultureKaap Agri’s areas of operation can look back upon a very prosperous season. Suffi cient rain and cold at the right time and little damage due to the weather or pests made for satisfactory harvests and good prices in most industries. However, the wheat industry realised unrealistically low prices that were nearly 40% lower than two seasons ago.
6 A N N U A L R E P O R T 2 0 0 96 A N N U A L R E P O R T 2 0 0 9
The current wheat crop was established with input costs that were signifi cantly lower than the previous season. Due to the low price expectation, the area sown is smaller than in previous years and the long-term average. South Africa is already a net importer of wheat, and in view of the prevailing low prices, with specifi c reference to wheat, food security may be threatened. To exacerbate the problem even further, unseasonable rain for the crops that are currently being harvested, has jeopardised quality.
Kaap Agri’s traditional areas of operation are geographically and product-wise widely diversifi ed and spread. This diversifi cation means that risks that may threaten Kaap Agri’s continued existence are not concentrated. Negative events, unless of catastrophic magnitude, in a particular area or product can therefore not threaten Kaap Agri’s survival. The past season, however, consisted primarily of positive events and trends.
AcquisitionsKaap Agri opened six Pakmark branches in Limpopo and Mpumalanga and has established, or is in the process of doing so, another three branches in Namibia. Due to the high-volume but low-margin nature of Kaap Agri’s activities, its strategy remains focused on new opportunities in order to grow the business. This can be achieved by establishing new branches acquiring existing branches or through business combinations.
Share tradingKaap Agri’s shares are traded in-house over the counter, making use of a sophisticated trading system.
During the year approximately 5,2% of the shares traded at prices ranging between R6,73 and R4,46 compared to the previous year’s 3,8%. The weighted average price for the year was R5,53. These volumes include the shares acquired by Zeder Investments Limited in an offer to minorities of which shareholders received notice. The limited trading possibly demonstrates that shareholders probably realise that the prevailing prices do not refl ect the actual value of the company and therefore they do not sell at these prices.
Pioneer FoodsPioneer experienced an excellent year with growth of 33% in headline earnings. The growth in headline earnings per share was lower at 22% due to the increase in issued shares following the rights issue in the previous fi nancial year. Pioneer’s share price increased from R24,77 to R33,50, which means an increase of R485 million in the value of Kaap Agri’s investment in Pioneer.
Pioneer Foods increased its dividend per share for the full year by 30%.
EmpowermentKaap Agri supports black economic empowerment and has plotted its own map for achieving targets. These plans focus mainly on internal training, development and promotion, as well as assistance, aid and support to emerging farmers.
In practice the implementation and execution through appointments is sometimes problematic since agricultural businesses were traditionally not regarded as attractive employment opportunities, especially when competing for skills with the bigger companies in the metropoles. Kaap Agri is nevertheless pleased with its progress of empowering people through internal systems rather than external appointments, and is proud that it has already achieved the qualifying level for BEE during the current year, one year earlier than planned.
A N N U A L R E P O R T 2 0 0 9 7
8 A N N U A L R E P O R T 2 0 0 9
ResultsTurnover decreased marginally by 1%. Taking the effect of declining prices into account, there has nonetheless been a real increase in the extent of business done. However, it is a fact that the tighter economic circumstances referred to above have had a negative impact on business.
Headline earnings from operations increased by 7% to R98 million. The total equity-accounted headline earnings increased by 22% to R293 million.
The Board decided to increase the total dividend to R74 million. This amounts to a dividend of 30 cents per share, which is 30% higher than the previous year. This is in line with the Board’s intention to increase dividends progressively, subject to the Group’s own needs and circumstances.
DirectorsMr Sakkie Hugo has reached retirement age and is therefore retiring at the Annual General Meeting. Over the years Mr Hugo has made an enormous contribution in his capacity as director and chairman of the Financing Committee, which had to ensure that the fi nancing book was healthy and well managed.
Messrs Chris du Toit and George Eksteen retire by rotation. Both have indicated that they are eligible for re-election. Mr Jannie Mouton has indicated that he will resign as director at the Annual General Meeting.
The Board wishes to express its appreciation to the retiring directors for their contribution to the Group’s prosperity and success.
ProspectsThe current wheat crop does not satisfy the high expectations set earlier in the season, regarding volume, quality and price. It is therefore expected that decisions regarding the new planting season will have to be taken with circumspection and input costs will have to be limited to the minimum.
The fruit industry forecasts a more favourable season, with good harvests and acceptable prices. As a result of the widespread nature of Kaap Agri’s activities, we can only say that normal farming circumstances are expected across the total business.
It is, however, a fact that the economy is still under pressure, and that the general business environment is still tight. Kaap Agri is optimistic that it will be able to continue its year-on-year growth but most likely not at the same pace as in the preceding few years. However, should the economic environment improve, Kaap Agri is well placed to pursue the opportunities.
8 A N N U A L R E P O R T 2 0 0 9
CHAIRMAN’S REVIEW (CONTINUED)
8 A N N U A L R E P O R T 2 0 0 9
FINANCIAL REVIEWGROUP RESULTS
2009 2008 Change
Turnover R3 335,8 million R3 366,6 million (0,9%)
Adjusted headline earnings R292,7 million R240,4 million 21,8%
– Operations R97,7 million R91,7 million 6,5%
– Investments R195,0 million R148,7 million 31,1%
Adjusted headline earnings per share 119,0 cents 102,7 cents 15,9%
Dividend per share 30 cents 23 cents 30,4%
Turnover for the fi rst six months of the fi nancial year continued the growth of the previous period and was 16% higher than the corresponding period. The fact that the turnover for the full year is lower than the corresponding period, illustrates the negative impact that price reductions, as well as the negative economic climate, had during the last six months.
The total headline earnings for the year at R292,7 million, which includes Pioneer Foods on an equity-accounted basis, is 21,8% higher than the previous year. The smaller increase of 15,9% in the headline earnings per share is due to the rights issue in the previous year which brought about a dilution.
OPERATIONSIncome statementThe total value of business conducted, direct business included, declined by 0,9% to R3 336 million. It is estimated that cuts in the prices of fuel, fertiliser, steel, chemicals and wheat could have contributed as much as 12% to the decrease in turnover which means that there was, in fact, real growth of 11% over the year.
Net trading income, before tax, interest received and paid, declined by 2% to R99 million. This is in line with the decrease in turnover and income.
Finance charges increased by 29%. Although interest income increased by only 15%, the net interest amount remained virtually unchanged. The increase in interest paid and received can mainly be attributed to higher average levels of debtors and inventory that had to be fi nanced.
Earnings from own operations is marginally lower than the previous year, while headline earnings from operations, after adding back items of a capital and non-recurring nature, is 6,5% higher at R97,7 million.
Segment reportThe Trading division, which includes Agrimark outlets and the supply of packaging material, could not continue its strong growth of the past few years and was in fact 4% down on the previous year. The division nevertheless accounted for 66% of the Group’s operating profi t for the year. The division continued its infrastructure refurbishments during the year and several branches were upgraded and renewed. The fi ve Namibian branches that were acquired in the previous year, have yet to contribute to profi ts. Meanwhile six Pakmark branches were opened in Limpopo, Mpumalanga and one in the Langkloof, a new branch was opened in the Northern Cape and a further three branches have been or are being opened in Namibia.
A N N U A L R E P O R T 2 0 0 9 9
In the prevailing circumstances the Grain Handling and Marketing and the Seed divisions showed excellent growth of 20% in operating profi ts and contributed 22% to the Group’s operating profi t. This growth can be attributed mainly to signifi cantly higher throughput at the silos, as well as longer storage times, while the handling and storage tariffs remained unchanged.
The Mechanisation division’s profi t contribution was practically unchanged in comparison with the previous year. The Parts and Services departments performed well but the Farming implements department could not show a profi t.
The irrigation subsidiary, Agriplas, achieved excellent results by converting its loss of R1,6 million into a profi t of R3,1 million. The company is now structured correctly and should be able to continue its profi tability in the future.
The Corporate segment consists mainly of income from fi nancing activities and profi t on the disposal of assets and investments, less costs for support services. The decrease in net income is due to profi t on the partial disposal of the insurance subsidiary in the 2008 fi nancial year.
Balance sheetsThe increase in property, plant and equipment, after depreciation and disposals, was primarily due to the acquisitions and upgrades already referred to.
The moderate increase in inventories can be attributed to price reductions already referred to, which mostly offset the increase as a result of expansions and acquisitions.
Debtors and production loans also increased moderately, predominantly as a result of expansions and acquisitions. There was a decline in the quality of debtors and short-term loans because of the increase in carry-over debt due to the tighter farming circumstances. This follows a strong improvement in the quality during the previous fi nancial year.
The Board is aware of the risk involved in debtors and production fi nancing, and structures are in place to evaluate this risk continuously. The Board believes that provisions and reserves are adequate to cover the risks.
Creditors declined by 12%, mainly due to provisions for non-recurring payments and a general slowdown in the business. The increase in short-term loans must also be read in conjunction with creditors and income tax as the timing of payment renders these fi gures interdependent.
FINANCIAL REVIEW (CONTINUED)
10 A N N U A L R E P O R T 2 0 0 9
Net interest-bearing debt increased in line with the increase in short-term loans referred to above. The ratio of net interest-bearing debt to total assets remained practically unchanged at 11,7%. If only the total assets of the operations are taken into account, the ratio is 24,6%.
Cash fl ow from own activities was lower than the previous year, mainly due to a signifi cant tax payment. Cash outfl ow was further increased as a result of the fi rst payment of an interim dividend. Cash fl ow is nevertheless within planning and budget and the Group continues to maintain a sound balance between debt and available bank facilities.
INVESTMENTSThe results of Pioneer Foods are equity accounted in the fi nancial statements which means that a proportional share of the retained earnings of Pioneer Foods is shown as “Share in retained earnings of associate”. Kaap Agri’s voting interest in Pioneer Foods is 28,6%, but due to limited profi tsharing of certain classes of shares, the economic interest in the profi t is 31,5%. The actual dividend received is directly written off against the carrying value of the investment.
Pioneer Foods’ revenue increased by 9% to R16 283,9 million. The increase in sales volumes in practically the entire product range for the most part buffered the decline in selling prices. Cost recovery was also better than in the previous period and the operating margin increased from 5,8% to 7,1%. The results, together with cuts in prices of raw materials and therefore inventory, led to a decrease in debt, with a resultant saving in fi nance charges.
The lower increase in headline earnings per share as against the total headline earnings below, is due to the rights issue by Pioneer Foods in the previous year which had a dilutive effect.
The core fi gures of Pioneer Foods are as follows:
2009 2008 Increase
Income (R million) 16 283,9 14 884,4 9,4%
Headline earnings (R million) 620,9 468,3 32,6%
Headline earnings per share (cents) 355,4 292,4 21,5%
Dividend per share declared (cents) 125,0 96,0 30,2%
Dividend received by Kaap Agri (R million) 56,7 48,4 17,1%
Carrying value in Kaap Agri’s statements (R million) 1 543,6 1 431,9 7,8%
The market value of the Group’s interest in Pioneer Foods at the trading price of R33,50 per share at 30 September 2009, is R1 864 million.
ANNUAL FINANCIAL STATEMENTSFull particulars of cash fl ow, movements in equity, assets, liabilities, income and expenses and other statutory information are disclosed in the Group statements. This review must be read in conjunction with the directors’ report and the Group statements.
DIVIDENDA fi nal dividend of 22 cents per share is proposed. Together with the interim dividend paid, the total dividend for the year is 30 cents per share which is an increase of 30% on the previous year’s total dividend of 23 cents per share.
A N N U A L R E P O R T 2 0 0 9 11
FIVE-YEAR FINANCIAL REVIEWGROUP
2009 2008 2007 2006 2005R’000 R’000 R’000 R’000 R’000
Income statementRevenue 2 274 091 2 363 094 1 701 051 1 415 306 1 311 318Direct business 1 061 671 1 003 546 759 434 675 116 624 360Value of transactions 3 335 762 3 366 640 2 460 485 2 090 422 1 935 678
Adjusted headline earnings– Operations 97 697 91 669 60 793 46 580 30 956 – Investments 195 029 148 723 135 293 129 077 128 894 – Total 292 726 240 392 196 086 175 657 159 850
Adjusted headline earnings per share (cent)– Operations 39,71 39,16 31,20 24,69 16,40 – Investments 79,26 63,53 69,43 68,42 68,30 – Total 118,97 102,69 100,63 93,11 84,70
Dividend per share (cent) 30,00 23,00 15,00 11,00 7,50
Balance sheetGross assets– Operations 1 372 087 1 325 791 1 192 363 1 036 357 1 011 931 – Investments 1 543 622 1 431 926 1 255 830 736 230 601 759
2 915 709 2 757 717 2 448 193 1 772 587 1 613 690 Liabilities and loans (749 725) (784 050) (728 487) (667 045) (717 011)Shareholders’ equity 2 165 984 1 973 667 1 719 706 1 105 542 896 679
Net interest-bearing debt 356 586 307 280 308 598 314 070 442 894
Net asset value per shareAssociates included at the equity method– Operations R2,53 R2,20 R2,02 R1,97 R1,56– Investments R6,26 R5,83 R5,45 R3,92 R3,19– Total R8,79 R8,03 R7,47 R5,89 R4,75
Associates included at market value after deduction of capital gains tax R9,50 R7,49 R9,01 R7,26 R5,41
Shares issued (number – ’000) 246 340 245 890 230 148 187 798 188 736
RatiosTotal shareholders’ equity: Total assets employed 72,97% 70,95% 66,94% 59,13% 53,52%
Net interest-bearing debt: Total assets employed– Operations 24,61% 24,46% 27,94% 36,96% 45,43% – Total 11,70% 11,83% 14,75% 22,35% 29,20%
Adjusted headline earnings : Shareholders’ interest– Operations 16,78% 18,23% 14,59% 14,03% 11,25% – Investments 13,11% 11,07% 13,58% 19,29% 23,34% – Total 14,14% 13,02% 13,88% 17,55% 19,32%
Operating margin 2,93% 2,72% 2,47% 2,23% 1,60%
Ratios calculated on average balances
12 A N N U A L R E P O R T 2 0 0 9
Turnover
0
500 000
1 000 000
1 500 000
2 000 000
2 500 000
3 000 000
3 500 000
‘09‘08‘07‘06‘05‘05 ‘06 ‘07 ‘08 ‘09
Headline earnings
0
50 000
100 000
150 000
200 000
250 000
300 000
‘09‘08‘07‘06‘05‘05 ‘06 ‘07 ‘08 ‘09
Interest-bearing debt
0
100 000
200 000
300 000
400 000
500 000
’09’08’07’06’05’05 ’06 ’07 ’08 ’090
5,0
10,0
15,0
20,0
25,0
30,0
’09’08’07’06'05
Dividend
R’000
CentsR’000
R’000
A N N U A L R E P O R T 2 0 0 9 13
SOCIAL SUSTAINABILITY REPORTStakeholders The environment in which Kaap Agri conducts business brings about responsibility towards the environment and stakeholders. The environment includes the physical environment, social environment, economic environment and political environment.
Stakeholders are all those with whom Kaap Agri comes into contact, directly and indirectly. They therefore include customers, staff, shareholders, suppliers, fi nanciers, the State, competitors, rivals, the community and also all the stakeholders of these stakeholders. Kaap Agri’s business philosophy seeks a balance among all these stakeholders in order to ensure sustainable growth and prosperity.
Employment Kaap Agri strives to have greater representation of the designated category in the Group, especially on all levels of management. Clear targets have been set in this regard. Not only are new appointments and promotions effected in accordance with the minimum guidelines of the Employment Equity Act, but the Group’s policy determines that all such appointments and promotions must fi rst be measured against their compliance, or otherwise, with the targets set. At junior and middle management levels the Group is well positioned and within its targets, but on senior management level there is still room for improvement. There is no discrimination in the workplace or in terms of policy or conditions of service, and all staff have equal access to all benefi ts or schemes offered.
Remuneration Philosophy The objective of the remuneration policy is to establish and retain an above-average workforce. Staff receive market-related remuneration on a Total Cost of Employment (TCOE) basis and can themselves choose how their TCOE should be divided among benefi ts and schemes offered. The basic remuneration can be supplemented by profi tsharing, which is applicable to all staff, upon the achievement of predetermined challenging targets intended to serve as incentives for innovative actions and performance.
Training and DevelopmentKaap Agri’s policy is to fi rst develop potential and talent from within before positions are made available externally. A proactive process of identifying talent is followed, whereupon appropriate training and development programmes are structured around specifi c requirements, both internally and externally where necessary.
Training and development are further conducted according to a predetermined training plan that sets out to realise the needs of the Group and the employee, as well as the potential of the employee. These training programmes are not just focused on the needs of the Group and the task, but also endeavour to develop the individual as a person.
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The Group is an active participant in the AgriSETA, and has 101 assessors, 80 mentors and 20 moderators. Several learnerships are being run on a ongoing basis under the SETA and there are already more than 230 internal learnerships completed with a further 61 in process. The company recently qualifi ed as an accredited training services provider for AgriSETA and can therefore provide training for external people.
Self-development is also encouraged through the extension of funding for extramural study and the reimbursement of costs upon the attainment of qualifi cations. Kaap Agri also extends fi nancial support to twelve external students in the form of short- and long-term bursaries.
About 70% of the total training budget is spent on staff members from the designated category.
Black Economic Empowerment (BEE) Over the past three years, the Group has put structures in place to implement BEE actively according to a predetermined road map. Although considerable progress has been made in most of the aspects of the scorecard, not all inputs have qualifi ed as yet, as certain thresholds need to be reached before any qualifying points can be achieved.
Preliminary indications are that Kaap Agri already reached the level 8 BEE qualifi cation, one year earlier than the said road map. With some accelerated actions, it will be possible for Kaap Agri to reach the next level within the coming year and goals have been adjusted accordingly.
Kaap Agri academy Kaap Agri has founded an academy that provides training to developing farmers as well as farm workers. The fi rst group of 27 students already completed the Agriculture course, and several shorter training programmes are in the pipeline.
Health and Safety The management of health and safety is done in accordance with the Occupational Health and Safety Act at all operational points as part of the Risk Management Programme. Compliance with the requirements of the legislation is monitored strictly in order to ensure that a safe working environment is created and maintained.
Social Responsibility Various community projects, such as the De La Bat School for the Deaf, the Ligstraal School for learners with special education needs, the Camphill organisation for persons with learning disabilities and farming projects in previously disadvantaged communities, are supported through fi nancial contributions, job creation and indirect support. Kaap Agri is also involved in many other areas, on primary level, in agriculture and agricultural supporting activities and societies.
Environment The Group is aware of its impact on the environment and strives to maintain a socially acceptable environment. The requirements of local authorities are strictly complied with as part of the risk management programme.
Sustainability and Risk Management The Group’s focus is on sustainability and management measures are concentrated on ensuring sustainable business in the medium and long term. The Group acknowledges the inter-dependence of all role players and the fact that sustainable growth is only possible if all role players benefi t from it.
A N N U A L R E P O R T 2 0 0 9 15
CORPORATE GOVERNANCEKaap Agri is an unlisted public company which conducts business from operational units in the Western Cape, Northern Cape, Limpopo, Mpumalanga, Gauteng and Namibia. Its shareholders consist of listed companies, institutional investors, several smaller private investors and traditional agricultural producers.
Kaap Agri is aware of its role and responsibility in the broader community and therefore subscribes to the principles of good corporate governance as set out in the King II report. In implementing them, the Board of Directors commits itself to the principles of professionalism, discipline, transparency, empowerment, fairness, integrity and accountability to all stakeholders.
The Board is of the opinion that the Group complies, as far as practically possible, with all relevant and material principles and requirements of the Code of Corporate Practice and Conduct included in the King II report.
The Board is currently considering the further requirements of the King III code and intends to also comply with the more important requirements of this code.
Board The Board is responsible for the overall performance of the Group. The Board meets its responsibility by giving strategic leadership, appointing competent management, delegating responsibilities in a structured manner, assessing business plans and budgets and monitoring their implementation and results, and overseeing the risk management programme.
The Board consists of twelve elected non-executive directors and three executive directors appointed by the Board. The composition of the Board complies with the principles of the King II code. The terms of service of the executive directors are coupled to their terms of service as employees, whilst the non-executive directors rotate on a three-year basis. No director or employee has a fi xed term contract with the Group.
The remuneration of the non-executive directors consist of a fi xed annual honorarium as a director, an additional honorarium for duties on committees and reimbursement for travelling and other costs. The remuneration of executive directors consists of remuneration as employees and they receive no additional remuneration as directors.
The remuneration for non-executive directors for the coming year is as follows:
Chairman R292 258Vice-chairman R146 129Chairman Audit Committee R219 193Chairman other committees R146 129Audit Committee member R146 129Other committee members R109 597Director R87 677
16 A N N U A L R E P O R T 2 0 0 9
In conducting its responsibilities, the Board meets regularly and also makes use of the committees to advise it on auditing, human resources, fi nancing and investment matters. The committees function on the basis of clearly defi ned mandates that set out their duties, powers and responsibilities.
Details of the Board members and attendance at Board and committee meetings are as follows:
CommitteeBoard
AuditCommittee
Human Resources Committee
Finance Committee
Nomination CommitteeScheduled
Un-scheduled
Number of meetings 5 1 5 3 4 2
GD (George) Eksteen Chairman, Chairman HR Committee
5 1 3 2
JH (Kosie) van Niekerk Vice-chairman
5 3 2
CA (Corwyn) Botha* Managing Director 5 3
FA (Fran) du Plessis+ Chairman Audit Committee 3 1 3
BS (Bernhardt) du Toit 3 1 5
CJ (Chris) du Toit 5 1 3 1
JN (Johannes) Hamman+ 2 1
IJ (Sakkie) Hugo Chairman Finance Committee
5 1 4
ASM (Mohammad) Karaan 5 1 2
NC (Niko) Loubser 5 1 4
HS (Stanley) Louw 5 1 2 3
JJ (James) Matthee* Financial Director 5 1 4
JF (Jannie) Mouton+ 3 1
CA (Chris) Otto+ 3 1 3 2
HM (Helgard) Smit 5 1 2 2
PJJ (Peet) van der Walt+ 2 2 1
S (Sean) Walsh*Operational Director 5
* Executive
+ Not a member of the Board for the full year.
In all instances of absence apologies were offered in advance.
Audit Committee The Audit Committee consists of four non-executive directors of the Group. The Chairman of the committee is an independent director. The committee is responsible for ensuring that a proper system of internal control and risk management exists and is applied, and that the management information, accounting policy and reporting to shareholders and other interested parties meet appropriate standards and comply with relevant legislation. The external auditors and internal auditors have unrestricted access to the Chairman of the committee, which ensures that their independence is not impaired.
The Chairman and Vice-chairman of the Board, the Managing Director and the Financial Director attend meetings by invitation, and any other director may also attend the meetings if the director so requests.
A N N U A L R E P O R T 2 0 0 9 17
The committee meets with internal and external auditors on a regular basis, also without management and other directors being present, and considers their fi ndings and recommendations, as well as other information that may be relevant in carrying out their mandate or specifi c tasks entrusted to them by the Board.
Human Resources Committee The Human Resources Committee consists of four non-executive directors and the Managing Director. The Chairman of the Board is the chairman of the Human Resources Committee. The committee meets periodically to consider matters such as remuneration policy, the remuneration of executive management, succession planning, directors’ remuneration, incentive schemes and other human resource matters. The performance-linked remuneration philosophy of the Group makes provision for incentive schemes and is regularly rated against professional external remuneration surveys.
The Group supports and complies with the requirements of the Employment Equity Act (55 of 1998), which envisages the implementation of affi rmative measures and the elimination of unfair discrimination.
Chairman’s Committee The Chairman’s committee consists of the Chairman and Vice-chairman of the Board, together with two elected directors, depending on the matter under consideration. The Chairman’s Committee meets only on matters that are so important that they cannot stand over for consideration at a forthcoming Board meeting.
The Chairman’s Committee can also meet by way of circulated resolutions, on condition that all members of this committee sign such resolutions.
Nomination Committee The Nomination Committee consists of three non-executive directors.
The Nomination Committee assesses the effectiveness of the actions of the Board and its committees and also plays a leading role in recommendations on the composition of the Board in order to achieve the correct balance of expertise and distribution.
Finance Committee The Finance Committee consists of fi ve non-executive directors and the Financial Director and is supported by regional credit committees with local Board representation, as well as outside experts where necessary, and meets regularly.
18 ANNUAL REPORT 2 0 0 9
CORPORATE GOVERNANCE (CONTINUED)
The committee sets guidelines and policy for the granting of credit and production fi nance and monitors the implementation of such guidelines and policy according to clear decision-making powers. The committee is also ultimately responsible for overseeing the evaluation of the recoverability of debts and write-offs and provision against debtors.
Internal Control In order to accept responsibility for the correctness of the fi nancial statements, the Board relies on systems of internal control and accounting and information systems of which the objective is to provide a reasonable assurance that assets are being safeguarded and that the risk of errors, fraud or losses is effectively being kept to the minimum. These control measures, which are contained in written policy documents and procedures, include the delegation of responsibilities and powers within a clearly defi ned framework, effective accounting procedures and a separation of duties, and monitoring by a qualifi ed internal audit and risk management division. All material risks in the Group have been identifi ed and documented in a comprehensive risk framework.
The Audit Committee monitors the appropriateness of and compliance with the internal control and advises the board in this regard.
Nothing has come to the attention of the Board that indicates a material deterioration in the functioning of these control measures, procedures and systems during the fi nancial year.
Risk Management The Group is involved in the trading of grain products, mainly wheat. This involvement entails various risks, including delivery risk, storage risk and price risk. It is the Group’s policy to hedge these risks by way of legal contracts, good administration, insurance and price hedging.
By their very nature and extent, debtors entail certain risks. The Board makes use of a specialist Finance Committee to ensure that these risks are properly managed through the application of a structured credit policy and the acquisition of securities where this is considered appropriate.
The Financial Director acts as the Compliance offi cer, together with the underlying disciplines and responsible persons in the Group, with the object to make sure that all acts, regulations and rules which may be applicable, are identifi ed and complied with promptly.
Other operational risks are addressed by appropriate controls and procedures and compliance is monitored by an Internal Audit and Risk Management Team.
Related Party TransactionsA number of the non-executive directors are direct or indirect customers of the Group and do business with the Group on an ongoing basis. This business is in the ordinary course of events and takes place on an arm’s length basis through the normal operating points. No director’s business with the Group exceeds 1% of the total business.
The directors’ conduct in relation to any dealings with the Group is prescribed by an agreed written charter.
A N N U A L R E P O R T 2 0 0 9 19
Share Trading The Group’s shares trade over an internal counter through use of a system bought from an acknowledged stockbroker.
Trading by directors and identifi ed employees is subject to written policy that prescribes certain closed periods as well as specifi c approval for every transaction. In addition to the written policy, the Board regularly considers whether there are any circumstances or information to their knowledge that is not generally known and that might have an impact on the share price, which would therefore prohibit trading.
No director holds more than 1% of the Group’s shares, directly or indirectly.
Group Company Secretary The secretary is an integral part of the Group’s corporate governance process and sees to it that the affairs of the directorate and the Group of companies are administered in accordance with business ethics and relevant laws and regulations.
The secretary gives guidance to the directors in relation to compliance with their statutory responsibilities, and the directors have unrestricted access to the advice and services of the secretary in this regard.
Going Concern The annual fi nancial statements are compiled in accordance with International Financial Reporting Standards (IFRS) and the policy is implemented consistently.
The Board considers these fi nancial statements, as well as the forthcoming year’s business plan, budgets and the liquidity position in order to form its opinion on the Group’s ability to trade as a going concern.
The Board’s opinion pertaining to the appropriateness, validity and disclosure of the annual fi nancial statements and explanations are set out in the Declaration of directors’ responsibility and approval.
CORPORATE GOVERNANCE (CONTINUED)
20 ANNUAL REPORT 2 0 0 9
A N N U A L R E P O R T 2 0 0 9 21
Shareholders’ profile Number of Number ofShares shareholders shares Percentage 1 to 10 000 2 775 10 518 976 4,3%10 001 to 100 000 1 787 52 966 632 21,5%100 001 to 1 000 000 309 65 864 370 26,7%1 000 001 to 10 000 000 11 25 579 307 10,4%Above 10 000 000 1 91 410 429 37,1%
4 883 246 339 714 100,0%Treasury shares 1 8 807 982Total 4 884 255 147 696
Share transfersAverage price October 2008 R4,46Average price September 2009 R6,73Weighted average price – year R5,53Total value transferred R70 175 864Number of shares transferred 12 696 616Percentage transferred 5,15%
Shareholding of directors (direct and indirect)2009 2008
Botha CA – – Du Plessis FA – –Du Toit BS 131 651 131 651 Du Toit CJ 229 574 229 574 Eksteen GD 1 707 000 1 606 000 Hamman JN (Retired: 12 February 2009) – 106 962 Hugo IJ 425 728 425 728 Karaan ASM – –Loubser NC 19 178 19 178 Louw HS 34 000 34 000 Matthee JJ 130 000 80 000 Mouton JF – –Otto CA 10 696 –Smit HM 288 452 288 452 Van Niekerk JH 1 105 646 1 105 646 Walsh S 5 000 – Total 4 086 925 4 027 191
Percentage of issued shares 1,7% 1,6%
SHARE STATISTICS
22 A N N U A L R E P O R T 2 0 0 9
decLaRatioN BY the compaNY SecRetaRY
decLaRatioN of diRectoRS’ ReSpoNSiBiLitY aNd appRoVaLThe directors are responsible for the reasonable presentation of the annual fi nancial statements and annual group fi nancial statements of Kaap Agri Limited. In conducting this responsibility they rely on the information, assessments and estimates of management. The fair presentation and integrity of the fi nancial statements are also evaluated on the basis of accounting systems and internal fi nancial control measures which are monitored on an ongoing basis during the fi nancial period.
The fi nancial statements have been compiled in accordance with International Financial Reporting Standards (IFRS) and fairly present the position of the company and Group on 30 September 2009, as well as the results of activities and cash fl ows over the accounting period.
Based on the fi nancial statements, the present position of the Group, budgets for the coming year and available fi nancing facilities, the directors have no reason to believe that the company and Group will not be a going concern. The going concern principle is therefore accepted and applied in the preparation of the fi nancial statements.
The independent auditing fi rm, PricewaterhouseCoopers Inc, audited the fi nancial statements. The auditors had unrestricted access to all fi nancial records and related information, minutes of shareholders, directors and board committee meetings. The directors are of the opinion that all submissions and management declarations presented to the auditors were correct, valid and relevant.
The unqualifi ed report of the auditors appear on page 24.
The annual fi nancial statements and group annual fi nancial statements on pages 25 to 62 were approved by the board of directors on 7 December 2009 and signed on their behalf by:
GD eksteen CA BothaChairman Managing Director
In terms of section 268G(d) of the Companies Act, as amended, the Company Secretary hereby certifi es that all returns of the company and its subsidiaries, as prescribed by the said Act, have been submitted to the Companies and Intellectual Property Registration Offi ce (CIPRO) and that the said returns are true, correct and up to date.
Rh KöstensCompany Secretary
7 December 2009
A N N U A L R E P O R T 2 0 0 9 23
RepoRt of the audit committee to the members of Kaap agri Limited
composition and attendance of meetingsThe composition of the audit committee and attendance of meetings are set out on pages 4 and 17 of this annual report.
Key functions and responsibilitiesThe responsibilities of the audit committee are set out in a formal charter which is revised annually by the Board.
The committee has free access to the chairman of the board of directors and is empowered to consult independent experts unlimited at company cost.
In the execution of its duties according to its mandate and requirements of the Companies Act, the committee is responsible for the discussion and assessment of:
• theeffectivenessofinternalcontrolsystemsandriskmanagementaswellasqualityofmanagementinformation;
• theinternalauditors’auditplan,reportsandrecommendations;
• theindependence,conditionsofappointment,auditplanandremunerationoftheexternalauditors;
• theeffectivenessandreportsoftheexternalauditors;
• theGroup’sconformancetocorporatemanagementrules,riskmanagementandstatutoryrequirements;
• theappropriatenessofaccountingpolicyandanymattersrelatedtofinancialreporting;
• the separate and consolidated annual financial statements, before these annual financial statements are approved by theboardforrelease;
• anyotherprescribedfunctionsthecommitteeisrequiredtoperform.
internal auditThe internal audit function fulfils an important role to give assurance to the audit committee that sufficient control measures areinplaceandarefunctioningcorrectlysothatthecommitteecanformanopiniononkeyfunctionsandkeyresponsibilities.Therefore, the internal auditors have direct access to the chairman of the audit committee, and the audit committee is also responsible to ensure that the internal audit function is independent and that it has the necessary resources, status and authority to perform its duties.
The internal and external auditors attend all audit committee meetings. The committee also regularly meets together and separately in committee with the internal and external auditors in order to create the opportunity to exchange confidential information.
Theauditcommitteealsooverseestheco-operationbetweentheinternalandexternalauditorsandserveasalinkbetweentheboard and these functions.
opinionGiven the functions and responsibilities of the committee, as well as the procedures referred to above, the audit committee is of the opinion that:
• theGroup’sinternalcontrolmeasuresandriskmanagementaresufficient;
• theauditwasperformedwiththenecessaryindependenceandcompetence;
• the annual financial statements were prepared in accordance with International Financial Reporting Standards (IFRS) andcomplywiththesestandards;
• there are no other matters which are to be revealed to shareholders which have not been covered in the annual financial statements
FA du PlessisChairman: Audit committee
7 December 2009
24 A N N U A L R E P O R T 2 0 0 9
RepoRt of the iNdepeNdeNt auditoRSto the members of Kaap agri Limited
We have audited the annual financial statements and group annual financial statements of Kaap Agri Limited, which comprise thedirectors’report,balancesheetandtheconsolidatedbalancesheetasat30September2009,theincomestatementandconsolidated income statement, the statement of changes in equity and the consolidated statement of changes in equity, the cash flow statement and consolidated cash flow statement for the year then ended, and a summary of significant accounting policies and other explanatory notes, as set out on pages 25 to 62.
directors’ responsibility for the financial statementsThecompany’sdirectorsareresponsibleforthepreparationandfairpresentationofthesefinancialstatementsinaccordancewith International Financial Reporting Standards and in the manner required by the Companies Act of South Africa. This responsibility includes designing, implementing and maintaining internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error, selecting and applying appropriate accountingpolicies;andmakingaccountingestimatesthatarereasonableinthecircumstances.
auditor’s responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. Theproceduresselecteddependontheauditor’sjudgement,includingtheassessmentoftherisksofmaterialmisstatementofthefinancialstatements,whetherduetofraudorerror.Inmakingthoseriskassessments,theauditorconsidersinternalcontrolrelevanttotheentity’spreparationandfairpresentationofthefinancialstatementsinordertodesignauditproceduresthatareappropriateinthecircumstances,butnotforthepurposeofexpressinganopinionontheeffectivenessoftheentity’sinternalcontrol. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
opinion In our opinion, the annual financial statements and group annual financial statements present fairly, in all material respects, the financial position of the company and of the Group as at 30 September 2009, and their financial performance and their cash flows for the year then ended in accordance with International Financial Reporting Standards and in the manner required by the Companies Act of South Africa.
PricewaterhouseCoopers IncDirector: DG MalanRegistered AuditorPO Box 215Paarl, 7620
7 December 2009
A N N U A L R E P O R T 2 0 0 9 25
diRectoRS’ RepoRt30 September
Nature of activitiesKaap Agri is an agricultural services group which supplies a variety of products and services mainly to the agricultural sector, but also the general public, and is also the largest shareholder in Pioneer Food Group Limited, a company that is involved in the manufacturing of food, beverages and related products for humans as well as products for animals. The various operating activitiesarefurtherhighlightedintheChairman’sandFinancialreviewsonpages6to13.
financial results The profit after tax of the Group amounted to R274,2 million (2008: R242,5 million) while the gross assets increased to R2 915 million (2008: R2 757 million). The results of the Group are presented in detail in the financial statements and further informationisprovidedintheChairman’sandFinancialreviewsonpages6to13.
Share capitalThe authorised share capital consists of 400 000 000 ordinary shares of R0,01 each of which 255 147 696 are currently issued.
dividendsAinterimdividendof8centspersharewerepaidtoshareholdersforthefirsttimeinthecompany’sexistenceon30June2009.
A final dividend of R54,2 million (2008: R56,5 million) has been approved, representing 22 cents (2008: 23 cents) per share. Thedividendispayableon12February2010toshareholdersregisteredon29January2010(therecorddate)asshareholdersofthecompany.Thelastdateoftradecumdividendwillbe22January2010.
The total dividend for the year amounts to R73,9 million (2008: R56,5 million), representing 30 cents (2008: 23 cents) per share.
SubsidiariesThe interests in subsidiaries are presented on page 60 of the financial statements. The interest of the holding company in the profits and losses of subsidiaries after taxation is as follows:
2009 2008 R’000 R’000
Profits 99 823 102 248Losses (1 468) (3 303)
directorsFull details of the directors appear on page 4.
The term of Messrs GD Eksteen, CJ du Toit and IJ Hugo expires on the date of the Annual General Meeting. Atthesametime,MrJFMoutondecidedtoresignasadirector,effective11February2010.Detailsoftheelectionofdirectorsappear in the notice of the Annual General Meeting on page 65.
directors’ interestsThedirectors’interestinsharesofthecompanyappearonpage21.
post-balance sheet eventsThe directors are not aware of any matters or circumstances that occurred between the end of the financial year and the date on which the financial statements were approved that have not been dealt with in the report or group financial statements and which may have a significant influence on the activities of the Group or results of those activities.
26 A N N U A L R E P O R T 2 0 0 9
accouNtiNG poLicYto the financial statements for the year ended 30 September
1.1 Basis of preparation The annual financial statements have been compiled in accordance with International Financial Reporting Standards
(IFRS). The annual financial statements have been compiled on the historical cost basis, with the exception of Available-for-sale investments which are revalued to fair value.
The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. ItalsorequiresmanagementtoexerciseitsjudgementintheprocessofapplyingtheGroup’saccountingpolicies.Theareasinvolvingahigherdegreeofjudgementorcomplexity,orareaswhereassumptionsandestimatesaresignificanttothe consolidated financial statements, are disclosed in the notes to the annual financial statements.
1.2 Standards, interpretations and amendments to published standards that became effective for the first time during the current financial year
• IFRIC12–“Serviceconcessionarrangements”(effectivefrom1January2008) • IFRIC13–“Customerloyaltyprogrammes”(effectivefrom1July2008) • IFRIC14 – “IAS19 –The limit on adefinedbenefit asset,minimum funding requirements and their interaction”
(effectivefrom1January2008) • IFRIC16–“Hedgesofanetinvestmentinaforeignoperation”(effectivefrom1January2008) • IAS 39 (Amendment) – “Financial instruments: Recognition and measurement” and IFRS 7 (Amendment) –
FinancialInstruments:Disclosures–Reclassificationoffinancialassets”(effectivefrom1July2008)
1.3 Standards, interpretations and amendments to published standards that are not yet effective Certain new standards, amendments and interpretations to existing standards have been published that are mandatory
fortheGroup’saccountingperiodsbeginningonorafter1October2009orlaterperiods,butwhichtheGrouphasnotearly adopted voluntarily, and are as follows:
• IAS1(Revised)–“Presentationoffinancialstatements”(effectivefrom1January2009) • IAS23(Revised)–“Borrowingcosts”(RevisedMarch2007)(effectivefrom1January2009) • IAS27(Revised)–“Consolidatedandseparatefinancialstatements”(effectivefrom1July2009) • IAS32 (Amendment)– “Financial instruments:Presentation”and IAS1 (Amendment)– “Presentationof financial
statements–Puttablefinancialinstrumentsandobligationsarisingonliquidation”(effectivefrom1January2009) • IAS 39 (Amendment) – “Financial instruments: Recognition andmeasurement – exposures qualifying for hedge
accounting”(effectivefrom1July2009) • IFRS 1 (Amendment) – “First-time adoption of International Financial Reporting Standards” and
IAS 27 (Amendment) – “Consolidated and separate financial statements – cost of an investment inasubsidiary,associateorjointlycontrolledentity”(effectivefrom1January2009)
• IFRS 1 (Amendment) – “First-time adoption of International Financial Reporting Standards” (effective from1January2010)
• IFRS 2 (Amendment) – “Share-based payment – Vesting Conditions and Cancellations” (effective from1January2009)
• IFRS 2 (Amendment) – “Share-based Payment – Group cash-settled share-based payment transactions” (effectivefrom1January2010)
• IFRS3(Revised)–“Businesscombinations”(effectivefrom1July2009) • IFRS7(Amendment)–“Improvingdisclosuresaboutfinancialinstruments”(effectivefrom1January2009) • IFRS8–“Operatingsegments”(effectivefrom1January2009) • IFRIC9(Amendment)–“Reassessmentofembeddedderivatives”andIAS39(Amendment)–“Financialinstruments:
Recognitionandmeasurement”(effectivefrom30June2009) • IFRIC15–“Agreementsfortheconstructionofrealestate”(effectivefrom1January2009) • IFRIC17–“Distributionsofnon-cashassetstoowners”(effectivefrom1July2009) • IFRIC18–“Transfersofassetsfromcustomers”(effectivefrom1July2009) • AC503(Revised)–“AccountingforBlackEconomicEmpowermenttransactions”(effectivefrom1January2009) • AC504–“IAS19–Thelimitonadefinedbenefitasset,minimumfundingrequirementsandtheirinteractioninthe
SouthAfricanpensionfundenvironment”(effectivefrom1April2009)
A N N U A L R E P O R T 2 0 0 9 27
Management is in the process of evaluating the impact of these amendments to standards and interpretations on the Group’s reported resultsorfinancialposition.Management’s initialevaluation is that theamendmentswillnothaveamaterialeffectontheGroup’sreportedresultsorfinancialposition.
1.4 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. Subsidiaries are consolidated from the date on which control is transferred to the Group and are de-consolidated from the date that control ceases. The purchase method of accounting is used to account for the acquisition of subsidiaries.
Intercompany transactions, balances and unrealised gains on transactions between group companies are eliminated. Unrealised losses are also eliminated but are considered an impairment indicator of the asset transferred. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.
In the stand-alone financial statements of the companies which form part of the Group, the investments in subsidiary companies are stated at cost less accumulated impairments.
Foreign subsidiaries The results and financial position of all the group entities (none of the entities which has the currency of a hyper-inflationary
economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows:
• assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balancesheet;
• incomeandexpensesforeachincomestatementaretranslatedataverageexchangerates(unlessthisaverageisnot a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case incomeandexpensesaretranslatedattherateonthedatesofthetransactions);and
• allresultingexchangedifferencesarerecognisedasaseparatecomponentofequity.
Business combinations The cost of an acquisition is measured as the fair value of the assets given, equity instruments issued and liabilities
assumed at the date of exchange, plus costs directly attributable to the acquisition. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date, irrespective of the extent of any minority interest.
The excess of the cost of acquisition over the fair value of the net assets acquired in the subsidiary is recorded as goodwill. If the cost of acquisition is less than the fair value of the net assets of the subsidiary acquired, the difference is recognised directly in the income statement.
Transactions under common control A business combination involving entities or businesses under common control is a business combination in which all
of the combining entities or businesses are ultimately controlled by the same party or parties both before and after the business combination, and that control is not transitory.
During a transaction under common control, the result of operations for the period is presented as though the acquisition of its controlling interest through a transaction under common control had occurred in the earliest period presented. The effects of the intercompany transactions are eliminated in determining the results of operations for the period prior to the acquisition of the controlling interest, meaning that those results are on substantially the same basis as the results of operations for the period after the acquisition of the controlling interest. Similarly, the consolidated balance sheets with related notes have been presented as though the assets and liabilities of the combining entities had been transferred at the earliest reporting period.
28 A N N U A L R E P O R T 2 0 0 9
accouNtiNG poLicYto the financial statements for the year ended 30 September
During a transaction under common control the excess of the purchase price consideration over the net asset value of the acquiree is recognised in equity.
Transactions with minority shareholders The Group applies a policy of treating transactions with minority shareholders as transactions with parties external to
the Group. Disposals to minority shareholders result in gains and losses for the Group that are recorded in the income statement. Purchases from minority shareholders result in goodwill, being the difference between any consideration paid and the relevant share acquired of the carrying value of net assets of the subsidiary.
Associated companies 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 equitymethodofaccountingandareinitiallyrecognisedatcost.TheGroup’sinvestmentinassociatesincludesgoodwill(net of any accumulated impairment loss) identified on acquisition.
TheGroup’sshareof itsassociates’post-acquisitionprofitsor losses is recognised in the incomestatement,and itsshare of post-acquisition movements in reserves is recognised in reserves. The cumulative post-acquisition movements areadjustedagainstthecarryingamountoftheinvestment.WhentheGroup’sshareoflossesinanassociateequalsorexceeds its interest in the associate, including any other unsecured receivables, the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the associate.
The effects of dilutionary and anti-dilutionary equity transactions by associates are recognised directly in equity.
UnrealisedgainsontransactionsbetweentheGroupanditsassociatesareeliminatedtotheextentoftheGroup’sinterestin the associates. Unrealised losses are also 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.
TheacquisitionofassociatesinstagesisaccountedforinaccordancewithIFRS3“BusinessCombinations”.Goodwillis calculated at each stage of the acquisition based on the consideration and share of fair value of net assets at each stage. Any existing fair value reserve is reversed (in equity), restating the investment to cost. There is a step-up in retained earnings from the previously owned share of net assets to fair value.
In the stand-alone financial statements of the companies which form part of the Group, the investments in associated companies are stated at fair value.
Investments in associated companies are reviewed for impairment whenever events or changes in circumstances indicate thatthecarryingamountmaynotberecoverable.Animpairmentlossisrecognisedfortheamountbywhichtheasset’scarryingamountexceedsitsrecoverableamount.Therecoverableamountisthehigherofanasset’sfairvaluelesscoststo sell and value in use.
Goodwill The excess of the cost of an acquisition over the fair value of the net identifiable assets of the acquired subsidiary or
associate at the date of acquisition, is recorded as goodwill. Goodwill on acquisition of subsidiaries is included in Intangible assets. Goodwill on acquisitions of associates is included in Investment in associated companies. Separately recognised goodwill is reviewed annually for impairment and carried at cost less accumulated impairment losses. Impairment losses on goodwill are not reversed. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold.
Goodwill is allocated to cash-generating units for the purpose of impairment testing. The allocation is made to those cash-generating units or groups of cash-generating units that are expected to benefit from the business combination in which the goodwill arose. The group allocates goodwill based on the business segments in which it operates.
A N N U A L R E P O R T 2 0 0 9 29
1.5 Segment reporting Thegroup’sprimaryreportingsegmentisitsbusinesssegmentsandissetoutinnote36.TheGroupmainlyoperates
in the Western Cape, Lower Orange River area and Namibia. These regions are deemed to be one geographical region (Southern Africa) and therefore no secondary segment report is presented.
Abusinesssegmentisagroupofassetsandoperationsengagedinprovidingproductsorservicesthataresubjecttorisksandreturnsthataredifferentfromthoseofotherbusinesssegments.
1.6 property, plant and equipment Land and buildings mainly comprise retail outlets, offices and silos. Land and buildings were revalued during 2006 to fair
valuewhentheGroupmadethechoicetoapplythe“fairvalueasdeemedcost”–exemptionintermsofIFRS1“First-timeadoptionofInternationalFinancialReportingStatements”.Property,plantandequipmentisstatedathistoricalcostlessdepreciation.Historicalcostincludesexpenditurethatisdirectlyattributabletotheacquisitionoftheitems.Costmayalsoinclude transfers from equity of any gains/losses on qualifying cash flow hedges of foreign currency purchases of property, plant and equipment.
Subsequentcostsareincludedintheasset’scarryingamountorrecognisedasaseparateasset,asappropriate,onlywhen 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. All other repairs and maintenance are charged to the income statement during the financial period in which they are incurred.
Land is not depreciated. Depreciation on other assets is calculated using the straight-line method to write off the cost or revalued amounts to a value equal to the residual values over their estimated useful lives, as follows:
Buildings 50 years Grainsilosandbuildings 10–50years Machineryandequipment 5–10years Vehicles 4–5years Officefurnitureandequipment 5–10years Leasehold improvements Period of lease
Theassets’residualvaluesandusefullivesarereviewed,andadjustedifappropriate,ateachbalancesheetdate.
Anasset’scarryingamountiswrittendownimmediatelytoitsrecoverableamountiftheasset’scarryingamountisgreaterthan its estimated recoverable amount.
Gains and losses on disposals of fixed assets are determined by comparing proceeds with the carrying amounts. These are included in the income statement.
1.7 finance leased assets Where assets are acquired under finance lease agreements that substantially transfer all the risks and rewards of
ownershiptothelessee,thefinanceleasesarecapitalisedatthelease’scommencementatthelowerofthefairvalueof the leased property and the present value of the 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 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.
Property, plant and equipment acquired under finance leases are depreciated over the shorter of the useful life of the asset or the lease term.
30 A N N U A L R E P O R T 2 0 0 9
accouNtiNG poLicYto the financial statements for the year ended 30 September
1.8 impairment of non-financial assets Assets that are subject to 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’scarryingamountexceedsitsrecoverableamount.Therecoverableamountisthehigherofanasset’sfairvalueless 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). Non-financial assets other than goodwill that suffered an impairment are reviewed for possible reversal of the impairment at each reporting date.
1.9 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 investments. The classification depends on the purpose for which the financial assets were acquired. Management determines the classification of its financial assets at initial recognition and re-evaluates this designation at every reporting date.
Financial assets at fair value through profit or loss This category is divided into two sub-categories: financial assets held for trading and those designated as at fair value
through profit or loss at inception. A financial asset is classified in this category if acquired principally for the purpose of selling in the short term or if so designated by management. Derivatives are also categorised as held for trading unless they are designated as hedges. Assets in this category are classified as current assets if they are either held for trading or are expected to be realised within 12 months of the balance sheet date.
Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an
activemarket.Theyareincludedincurrentassets,exceptformaturitiesgreaterthan12monthsafterthebalancesheetdate.Theseareclassifiedasnon-currentassets.Loansandreceivablesareclassifiedas“tradeandotherreceivables”inthe balance sheet.
Available-for-sale financial assets Available-for-sale financial assets are non-derivatives that either meet the recognition criteria for this category
or were designated to this category or are 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 balance sheet date.
Regular purchases and sales of investments 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 or 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. Investments are derecognised when the rights to receive cash flows from the investments have expired or have been transferred and the Group has transferred substantiallyallrisksandrewardsofownership.Available-for-salefinancialassetsandfinancialassetsatfairvaluethroughprofitorlossaresubsequentlycarriedatfairvalue.Thefairvalueadjustmentstoavailable-for-salefinancialassetsarerecognised directly in equity.
Loans and receivables are carried at amortised cost using the effective interest rate method.
Gains or losses arising from changes in the fair value of financial assets at fair value through profit or loss, including interest and dividend income, are presented in the income statement in the period in which they arise.
Whensecuritiesclassifiedasavailable-for-salearesoldorimpaired,theaccumulatedfairvalueadjustmentsrecognisedin equity are included in the income statement as gains and losses from investment securities. Interest on available-for-sale securities calculated using the effective interest rate method is recognised in the income statement. Dividends on available-for-saleequityinstrumentsarerecognisedintheincomestatementwhentheGroup’srighttoreceivepaymentsis established.
A N N U A L R E P O R T 2 0 0 9 31
The fairvaluesof listed investmentsarebasedoncurrentbidprices. If themarket forafinancialasset isnotactive,including unlisted securities, the Group establishes fair value by using valuation techniques. These include the use of recentarm’slengthtransactions,referencetootherinstrumentsthataresubstantiallythesame,discountedcashflowanalyses,andoptionpricingmodelsmakingmaximumuseofmarketinputsandrelyingaslittleaspossibleonentity-specific inputs.
TheGroupassessesateachbalancesheetdatewhetherthereisobjectiveevidencethatafinancialassetoragroupof 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 equity and recognised in the income statement. Impairment losses recognised in the income statement on equity instruments are not reversed through the income statement.
1.10 deferred taxation Deferred taxation are provided, using the liability method, for all temporary differences arising between the tax bases of
assetsandliabilitiesandtheircarryingvalues.However,thedeferredincometaxisnotaccountedforifitarisesfrominitialrecognition 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 balance sheet date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled.
Deferred tax assets relating to unused tax losses are recognised to the extent that it is probable that future taxable profits will be available against which the unused losses can be utilised.
Deferred tax assets are recognised for unused STC credits to the extent that it is probable that dividends will be declared against which the unused STC credits 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.
1.11 inventory Workshopstock,merchandise,farmingrequisitesandrawmaterialsarevaluedatthelowerofcost,calculatedonthe
averagecostbasis,ornetrealisablevalue,takingintoaccountobsolescenceandsaleability.Implementstockisvaluedat the specific cost price or net realisable value, whichever is the lower. Finished goods are valued at the lower of cost, including cost of raw materials, direct costs and related production overheads, but excluding finance costs, determined on the average cost basis, or net realisable value. Net realisable value is the estimate of the selling price in the ordinary course of business, less the cost of completion and selling expenses.
1.12 trade accounts receivable Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective
interest rate method, less provision for impairment. A provision for impairment of trade receivables is established when thereisobjectiveevidencethattheGroupwillnotbeabletocollectallamountsdueaccordingtotheoriginaltermsofreceivables.Significant financial difficultiesof thedebtor, probability that thedebtorwill enterbankruptcyor financialreorganisation, and default or delinquency in payments are considered indicators that the trade receivable is impaired. Theamountoftheprovisionisthedifferencebetweentheasset’scarryingamountandthepresentvalueofestimatedfuture cash flows, discounted at the effective interest rate. The amount of the provision is recognised in the income statement.
Trade receivables against which a provision for impairment were made will be written off as soon as no further collections are possible. Trade receivables against which there were no previous provision for impairment, are written off directly to the income statement as soon as there are no further collections.
32 A N N U A L R E P O R T 2 0 0 9
accouNtiNG poLicYto the financial statements for the year ended 30 September
1.13 cash and cash equivalents Forthepurposesofthecashflowstatement,cashincludescashonhandandbankbalances.Bankoverdraftsareshown
within borrowings in current liabilities on the balance sheet.
1.14 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 rate 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 balance sheet date.
1.15 trade payables Trade payables are recognised initially at fair value. Trade payables are subsequently stated at amortised cost using
the effective interest rate method.
1.16 employee benefits Pension scheme arrangements The Group operates a pension fund consisting of a defined contribution plan registered in terms of the Pension Funds Act,
1956, and the assets are administered separately by trustees. Funding is in terms of conditions of employment by means of contributions by the participating subsidiaries in the Group as well as employees. The Group has no further obligations to the fund once the contributions have been paid. Contributions are recognised in the income statement when they are due.
Post-retirement medical benefits Monthly contributions are made to a savings plan that must provide for the financing of medical fund costs of certain
in-service members after retirement. Certain in-service members and retired staff are members of the post-retirement medicalsubsidyschemeoftheGroup.Thevaluationmethodusedtovaluetheliabilityistheprojectedunitmethod.Theexpected costs of these benefits are accrued over the period of employment, using an accounting methodology similar to thatfordefinedbenefitpensionplans.Valuationsoftheseobligationsarecarriedoutbyindependentqualifiedactuaries.Any actuarially determined profits or losses are recognised in the income statement.
IntermsoftheGroup’spresentpolicythebenefitsareonlyavailabletocertainin-servicemembersandretiredstaffandnot to future employees.
Profit sharing and bonus plans A liability for employee benefits in the form of profit sharing and bonus plans is recognised under accounts payable when
there is no realistic alternative but to settle the liability, and at least one of the following conditions is met: •thereisaformalplan;or •pastpracticehascreatedavalidexpectationbyemployeesthattheywillreceiveabonusorprofitshare.
It is expected that the liability will be paid within twelve months.
The Group also operates an incentive scheme based on phantom shares. The fair value of the liability incurred for employee services received is recognised as an expense. Until the liability is settled, the Group remeasures the fair value of the liability at each reporting date and at the date of settlement, with any changes in value recognised in profit or loss for the period.
1.17 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 derivatives are designated as hedging instruments and, if so, the nature of the item being hedged. The Group designates certain derivatives as either hedges of the fair value of recognised assets or liabilities (fair value hedge) or hedges of a particular riskassociatedwitharecognisedassetorliabilityorahighlyprobableforecasttransaction(cashflowhedge).
A N N U A L R E P O R T 2 0 0 9 33
The Group documents at the inception of the transaction the relationship between hedging instruments and hedged items,aswellasitsriskmanagementobjectivesandstrategyforundertakingvarioushedgetransactions.TheGroupalsodocuments 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.
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.
Ifthehedgenolongermeetsthecriteriaforhedgeaccounting,theadjustmenttothecarryingamountofahedgeditemfor which the effective interest rate method is used, is amortised to profit or loss over the period to maturity.
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 equity. 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 affects profit or loss.However,when the forecast transaction that ishedgedresults in the recognitionofanon-financialasset (forexample inventory) or a non-financial 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 the 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 at fair value through profit or loss and accounted for at fair value through profit or loss Certain derivatives do not qualify for hedge accounting. Changes in the fair value of any derivative instruments that do not
qualify for hedge accounting are recognised immediately in the income statement.
1.18 Leases Leaseswhereasignificantportionof the risksand rewardsofownershipare retainedby the lessorareclassifiedas
operating leases. Payments made under operating leases are charged to the income statement on a straight-line basis over the period of the lease.
1.19 Revenue recognition Revenue comprises the fair value of the consideration received or receivable for the sale of goods and services in the
ordinarycourseof theGroup’sactivities.TheGrouprecognisesrevenuewhentheamountof revenuecanbereliablymeasured and reasonable assurance exists that the economic benefits of the transaction will flow to the business. The amount of revenue is not considered to be reliably measurable until all contingencies relating to the sale have been resolved. Revenue is shown, net of value added tax, estimated returns, rebates and discounts and after elimination of sales within the Group. Revenue is recognised as follows:
Sales of goods and services Sales of goods and services comprise the net invoiced value of sales in respect of manufacturing, trading operations
and other services, excluding value added taxation, and are recognised upon delivery of goods and on the stage of completion of services. Only the finance margin earned on direct sales is recognised as income. The finance margin is recognised on delivery of products by the supplier to the customer.
Interest income Interest income is recognised on a time-proportion basis using the effective interest rate method. When a receivable
is impaired, the Group reduces the carrying amount to its recoverable amount, being the estimated future cash flow
34 A N N U A L R E P O R T 2 0 0 9
accouNtiNG poLicYto the financial statements for the year ended 30 September
discounted at original effective interest rate of the debtor. Interest on impaired debtors is recognised using the original effective interest rate.
Dividend income Dividend income is recognised when the right to receive payment is established.
1.20 foreign currency transactions Functional and presentation currency ItemsincludedinthefinancialstatementsoftheGroup’sentitiesaremeasuredusingthecurrencyoftheprimaryeconomic
environment in which the entity operates (the functional currency). The consolidated financial statements are presented in Rand,whichistheholdingcompany’sfunctionalandpresentationcurrency.
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 the income statement, except when deferred in equity as qualifying cash flow hedges.
1.21 Share capital Ordinary shares are classified as equity. Additional costs directly attributable to the issue of new shares or options are
shown in equity as a deduction, net of tax, from the proceeds.
Whereanycompany in theGrouppurchases thecompany’sequitysharecapital (treasuryshares), theconsiderationpaid, including any directly attributable additional costs (net of income taxes) is deducted from equity attributable to the Group’sequityholdersuntilthesharesarecancelled,reissuedordisposedof.Wheresuchsharesaresubsequentlysoldor reissued, any consideration received, net of any directly attributable additional transaction costs and the related income taxeffects,isincludedinequityattributabletotheGroup’sshareholders.
1.22 dividend distributions Dividenddistributionstothecompany’sshareholdersarerecognisedasaliabilityinthecompany’sfinancialstatementsin
the period in which the dividend is approved.
1.23 provisions Provisions are recognised when the Group has a present legal or constructive obligation as a result of past events, it is
morelikelythannotthatanoutflowofresourceswhichentaileconomicbenefitswillberequiredtosettletheobligation,and the amount has been reliably estimated. Provisions are not recognised for future operating losses.
Provisions are measured at the present value of the expenditures expected to be required to settle the obligation using a pre-taxratethatreflectscurrentmarketassessmentsofthetimevalueofmoneyandtherisksspecifictotheobligation.
1.24 financial guarantees Afinancialguaranteecontractisacontractthatrequirestheissuertomakespecifiedpaymentstoreimbursetheholderfor
alossitincurredbecauseaspecifieddebtorfailstomakepaymentwhendue.Financialguaranteesareinitiallymeasuredatfairvalue.SubsequentlyitismeasuredatthehigheroftheamountdeterminedinaccordancewithIAS37“Provisions,ContingentLiabilitiesandContingentAssets”andtheamountinitiallyrecognisedlesscumulativeamortisationrecognisedinaccordancewithIAS18“Revenue”.
1.25 Borrowing costs Borrowing costs are expensed in the income statement during the period in which they are incurred.
1.26 current income tax The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the balance
sheetdate.Managementperiodicallyevaluatespositionstakenintaxreturnswithrespecttosituationsinwhichapplicabletaxregulationsissubjecttointerpretationandestablishesprovisionswhereappropriateonthebasisofamountsexpectedto be paid to the tax authorities.
A N N U A L R E P O R T 2 0 0 9 35
1.27 Secondary tax on companies (Stc) SouthAfricanresidentcompaniesaresubjecttoadualcorporatetaxsystem.Onepartofthetaxbeingleviedontaxable
income and the other, secondary tax (STC), on distributed income. A company incurs a STC charge on the declaration or deemed declaration of dividends, as defined in the Income Tax Act, 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 dividends will be declared against which the unutilised STC credits will be utilised.
36 A N N U A L R E P O R T 2 0 0 9
BaLaNce Sheetat 30 September
GRouP
2009 2008Notes R’000 R’000
ASSeTSNon-current assetsProperty, plant and equipment 3 286 985 256 855 Investment in associated companies 4 1 543 622 1 431 926Available-for-sale investments 5 – 61 Deferred taxation 6 1 661 768
1 832 268 1 689 610
Current assetsInventory 7 356 767 348 937 Trade and other receivables 8 708 354 688 665 Financial instruments for hedging 9 770 10 672 Cash and cash equivalents 10 17 281 19 833 Income tax 269 –
1 083 441 1 068 107
Total assets 2 915 709 2 757 717
equITy AND LIABILITIeSCapital and reservesOrdinary share capital 11 2 551 2 551Share premium 659 371 659 371 Other reserves 12 746 335 636 832Retained profit 766 846 684 500Treasury shares 11 (9 119) (9 587)Total equity 2 165 984 1 973 667
Non-current liabilitiesDeferred taxation 6 117 2 173 Provisions for other liabilities and charges 14 19 232 19 168
19 349 21 341
Current liabilitiesTrade and other payables 15 351 017 397 367Financial instruments for hedging 9 770 10 672 Short-term portion of borrowings 13 – 136 Short-term portion of provisions for other liabilities and charges 14 5 004 4 354 Short-term borrowings 16 373 443 326 586 Income tax 142 23 594
730 376 762 709
Total liabilities 749 725 784 050
Total equity and liabilities 2 915 709 2 757 717
A N N U A L R E P O R T 2 0 0 9 37
iNcome StatemeNt for the year ended 30 September
GRouP
2009 2008Notes R’000 R’000
Revenue 21 2 274 091 2 363 094 Cost of sales (1 868 536) (1 982 048) Gross profit 405 555 381 046 Other operating income 22 95 794 97 888Distribution costs (37 237) (35 023)Administrative expenses (192 735) (186 594)Other operating expenses (100 156) (93 409)Operating profit 171 221 163 908Finance costs 25 (36 844) (28 484) Share in profit of associated companies 4 175 796 143 524Profit before tax 310 173 278 948Income tax 26 (36 022) (36 479)Profit attributable to ordinary shareholders 274 151 242 469
Earningspershare–basicanddiluted(cents) 27 111,43 103,58Dividend per share (cents) 28 30,00 23,00
38 A N N U A L R E P O R T 2 0 0 9
StatemeNt of chaNGeS iN eQuitYfor the year ended 30 September
GRouP
Share Share RevaluationFair
valueBusiness
combination Equity Retained Treasurycapital premium reserve reserve reserve reserve profit sharesR’000 R’000 R’000 R’000 R’000 R’000 R’000 R’000
Balance 1 october 2007 2 394 565 588 20 856 (237) 216 582 353 216 570 889 (9 582)Shares issued 157 93 783 – – – – – –Treasury shares – – – – – – – (5)Deferredtaxation–rate adjustment – – 501 – – – – –Reversed against property – – (106) – – – – –Dilution as a result of a decreased interest – – – – – (2 932) – –Movement in reserves of associated company – – – – – (45 762) – –Profit for the year – – – – – – 242 469 –Dividends paid – – – – – – (34 522) –Cash flow hedges – – – 373 – – – –Remeasurement to fair value – – – 5 – – – –Transfer between reserves – – (765) – – 95 101 (94 336) –
Balance 30 September 2008 2 551 659 371 20 486 141 216 582 399 623 684 500 (9 587)Treasury shares sold – – – – – – 1 530 468Dilution due to decrease in interest – – – – – (4 015) – –Movement in reserves of associated company – – – – – (3 344) – –Profit for the year – – – – – – 274 151 –Dividends paid – – – – – – (76 224) –Cash flow hedges – – – (247) – – – –Remeasurement to fair value – – – (2) – – – –Transfer between reserves – – (1 944) – – 119 055 (117 111) –Balance 30 September 2009 2 551 659 371 18 542 (108) 216 582 511 319 766 846 (9 119)
A N N U A L R E P O R T 2 0 0 9 39
caSh fLoW StatemeNtfor the year ended 30 September
GRouP
2009 2008Notes R’000 R’000
Cash flow from operating activities 47 073 85 965 Net cash profit from operating activities 29 167 690 179 749Workingcapitalchanges 30 (58 436) (68 356) Income tax paid 31 (62 181) (25 428)Cash flow from investment activities 14 724 (115 520) Purchase of property, plant and equipment (46 805) (25 167)Proceeds on disposal of property, plant and equipment 4 637 6 063 Proceeds on disposal of investments 151 42 Increase of investment in associated company – (129 666)Acquisition of operations 32 – (24 404)Proceeds on sale of operations 33 – 9 189 Dividends received 56 741 48 423 Cash flow from financing activities (64 349) 26 872 Shares issued – 93 935Proceeds on sale of Treasury shares 1 998 –Repayment of borrowings (136) (9 205)Increase in short-term loans 46 857 5 148Interest paid (36 844) (28 484) Dividend paid (76 224) (34 522)
Net decrease in cash and cash equivalents (2 552) (2 683) Cash and cash equivalents at the beginning of the year 19 833 22 516 Cash and cash equivalents at the end of the year 17 281 19 833
Comprising of:–Bankandcashonhand 17 281 19 833
40 A N N U A L R E P O R T 2 0 0 9
NoteS to the aNNuaL fiNaNciaL StatemeNtSfor the year ended 30 September
1. accounting policies The principal accounting policies incorporated in the preparation of these financial statements, are set out on pages
26 to 35. These policies have been consistently applied to all the years presented, unless stated otherwise.
2. critical accounting estimates and assumptions The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by
definition, seldom precisely equal the related actual results. The estimates and assumptions that have a significant riskofcausingamaterialadjustmenttothecarryingamountsofassetsandliabilitieswithinthenextfinancialyeararediscussed below.
Recognition of deferred tax assets A subsidiary of the holding company has a current year assessed tax loss of R9,9 million. The subsidiary incurred a
profit during the current financial year but during the previous four financial years the subsidiary incurred losses in three ofthesefinancialyears.Itisthejudgementofmanagementthatduetotheuncertaintyrelatingtofuturetaxableprofitsagainst which the assessed tax loss could be utilised, no deferred tax asset should be recognised for the tax loss. The GrouphasanSTCcreditofR87,7million.ItisthejudgementofmanagementthatthisSTCcreditwillinallprobabilitynotbe utilised in the foreseeable future, especially seen in the light of recent income tax act amendments, and accordingly no deferred tax asset is recognised.
Property, plant and equipment Property,plantandequipmentaredepreciatedovertheiruseful lives,taking intoaccounttheirresidualvaluesatthe
endoftheirusefullives.Theresidualvaluesandusefullivesarebasedonindustryknowledgeandpastexperiencewithsimilarassets.Refertonote1.6oftheGroup’saccountingpolicy.
Provision for impairment of trade receivables Inestimatingtheprovisionforimpairmentoftradereceivables,managementmakescertainestimatesandjudgements
relating to the estimated recovery rate of debtors who are deemed to be impaired and historical impairment rates based onriskfactorsspecifictotheindustry,suchaspricevolatilityofproducts,exchangerates,labourintensityofproductsand commodity prices.
Inventory provisions TheGroupmakescertainjudgementsrelatingtotherecoverabilityofinventory,basedonthefrequencyofmovementin
differentinventorytypes.Thesejudgementsareusedtodeterminetheextentofinventoryprovisions.
Post-retirement medical benefits Refertonote1.16oftheGroup’saccountingpoliciesaswellasnote14.
Share-based remuneration Refertonote1.16oftheGroup’saccountingpoliciesaswellasnote14.
A N N U A L R E P O R T 2 0 0 9 41
NoteS to the aNNuaL fiNaNciaL StatemeNtSfor the year ended 30 September
GRouP
2009 2008R’000 R’000
3. property, plant and equipment Cost/deemed cost Land and buildings 224 679 209 507 Other property 221 279 206 107 Investment property 3 400 3 400 Grain silos 39 242 38 274 Machinery and equipment 33 573 28 609 Vehicles 11 751 9 468 Office furniture and equipment 47 667 36 550 Leasedassets–Computerequipment – 2 236 Improvements to leasehold property 1 655 991 Assets under construction 10 490 5 241
369 057 330 876 Accumulated depreciationLand and buildings (6 429) (4 731) Other property (6 418) (4 720) Investment property (11) (11) Grain silos (23 345) (22 104) Machinery and equipment (19 111) (16 866) Vehicles (7 925) (7 451) Office furniture and equipment (24 648) (20 240) Leasedassets–Computerequipment – (2 122) Improvements to leasehold property (614) (507)
(82 072) (74 021)
Total carrying value 286 985 256 855
Reconciliation of movements in carrying valueCarrying value beginning of year 256 855 243 849 Additions 46 805 26 568 Disposals (4 398) (2 640)Improvements to leased premises written off (106) (71) Depreciation (12 171) (10 851) Carrying value at end of year 286 985 256 855 Depreciation has been allocated as follows in the income statement:Cost of sales (1 190) (1 006)Other operating expenses (10 981) (9 845)
(12 171) (10 851)
The leased assets served as security for capitalised lease agreements as set out in note 13.
A register of land and buildings, containing details as required by Schedule 4 of the Companies Act, is available for inspection at the registered offices of the company and the subsidiaries.
42 A N N U A L R E P O R T 2 0 0 9
GRouP
2009 2008R’000 R’000
4. investment in associated companiesBeginning of the year 1 431 926 1 255 830Additions – 129 689Dilution as a result of a decreased interest (4 015) (2 932) Share in reserves (3 344) (45 762) Share of profit 175 796 143 524Share in net profit 178 474 146 202 Amortisation of intangible assets and fixed assets revalued to fair value on acquisition of the additional interest (2 678) (2 678)Dividends received (56 741) (48 423) End of the year 1 543 622 1 431 926
Pioneer Food Group LimitedNumber of issued shares: 212 581 088 (2008: 213 783 698)Number of shares excluding issued shares which do not currently share in profit: 176 443 737 (2008: 174 630 907)Votinginterest:28,59%(2008:28,41%)Economic interest: 31,53% (2008: 31,85%)55 627 707 (2008: 55 627 707) Shares at fair value at date of acquisition 1 032 280 1 032 280Share in post-acquisition retained profit 511 319 399 623RSA Agri Makelaars (Pty) LtdNumber of issued shares: 500 (2008: 500)Shareholding: 20% (2008: 20%)100 (2008: 100) Shares at fair value at date of acquisition 23 23Share in post-acquisition retained profit – –
1 543 622 1 431 926Fairvalueatquotedmarketprice 1 863 551 1 377 921
The shares in Pioneer Food Group Limited is encumbered as security as set out in note 16.
Theshareintheassociate’sprofitfortheperiodiscalculatedbyusingtheeconomicinterest.Theeconomicinterestiscalculatedbydecreasingtheassociate’sissuedshare capital with its issued shares which do not currently share in profit.
The Group’s proportionate interest in assets and liabilities of the associatedcompanies are as follows:Non-current assets 1 214 339 1 192 725Current assets 1 340 837 1 369 289Total assets 2 555 176 2 562 014Non-current liabilities 552 860 560 256Current liabilities 540 941 643 695
Total liabilities 1 093 801 1 203 951
NoteS to the aNNuaL fiNaNciaL StatemeNtSfor the year ended 30 September
A N N U A L R E P O R T 2 0 0 9 43
GRouP
2009 2008R’000 R’000
TheGroup’sproportionateinterestinthecashflowoftheassociatedcompaniesare as follows:Cash flow from operating activities 527 211 101 005 Cash flow from investment activities (148 662) (209 904) Cash flow from financing activities (164 895) 368 499 Net increase in cash and cash equivalents 213 654 259 600
TheGroup’sproportionateinterestintherevenueandexpensesoftheassociatedcompanies are as follows:Revenue 5 185 095 4 807 025
Profit before taxation 284 884 202 526Income tax (106 410) (56 324) Profit attributable to ordinary shareholders 178 474 146 202
Contingent liability of associated companies:DuringJune2009,PioneerFoodGroupLimitedappearedinfrontoftheCompetitionTribunal on charges pertaining to non-competitive actions. Pioneer Food Group Limited admitted to certain facts on prohibited practices in the Western Cape, but denied all allegations with regards to transgressions on a national level. Following the initial hearing the Competition Commission has requested that the basis ofdetermininga finebechanged from local bread sales to theGroup’snationalsales. The maximum administrative fine which can be requested, can amount to R786 million. At the date of the approval of the financial statements, the Tribunal has not ruled on the amendment sought by the Commission and Pioneer Food Group Limited has not made any provision for any fine.
Pioneer Food Group Limited has a share incentive scheme, as well as class A shares issued in terms of an employee share scheme, which will have a potential dilutive effecton theKaapAgriGroup’seconomic interest.The totalpotentialdilutionof2,95%, which will occur as a result of the options being exercised, will be accounted for directly against equity.
5. available-for-sale investments Unlisted companies at fair value – 45 Balance beginning of year 45 41 Disposals (43) –Remeasurement to fair value (2) 4 Co-operatives at fair value – –Balance beginning of year – 1 Disposals – (1) Deferred bonus funds of co-operatives – 16 Balance beginning of year 16 16 Transferred to current assets (16) –
– 61
Thefairvaluesoftheinvestmentsarebasedonthequotedmarketpriceoftheshares.
The registers of investments are available for inspection at the registered offices of the respective companies.
44 A N N U A L R E P O R T 2 0 0 9
NoteS to the aNNuaL fiNaNciaL StatemeNtSfor the year ended 30 September
GRouP
2009 2008R’000 R’000
6. deferred taxation Movement of deferred taxationBalance beginning of year (1 405) (4 915) Income statement credit 2 438 3 064 Credit against reserves 511 446 Balance end of year 1 544 (1 405)
Due to the following timing differences:Property, plant and equipment (17 426) (17 206) Capitalised leased liabilities – 6 Currency translation differences 16 (26) Tax loss 1 075 –Provisions and accrued expenses 17 879 15 821
1 544 (1 405)
For the purposes of the balance sheet deferred taxation is presented as follows:Non-current assets 1 661 768 Non-current liabilities (117) (2 173)
1 544 (1 405)
7. inventoryMerchandise 351 862 341 694 Raw materials 4 010 5 716 Consumable goods 895 1 527
356 767 348 937 Inventory carried at net realisable value 9 460 8 086
Includedintheinventoryisaprovisionforslow-movingandobsoletestockof R7,3 million (2008: R5,9 million).
The inventory is encumbered as security as set out in note 16.
8. trade and other receivables Trade debtors 700 477 663 610 Provision for impairment (26 124) (21 553)
674 353 642 057 Sundry debtors 34 001 46 608
708 354 688 665
The carrying value of trade and other receivables approximates its fair value at the balance sheet date.
The trade debtors are encumbered as security as set out in note 16.
A N N U A L R E P O R T 2 0 0 9 45
GRouP
2009 2008R’000 R’000
9. financial instruments for hedging The fair values of Financial instruments at fair value through profit or loss and Derivative financial instruments on balance sheet date are:
Financial instruments at fair value through profit or lossFirmcommitment–GrainpurchasesLiabilities–Forwardpurchasecontracts (643) (10 502) –Options (127) (170)
(770) (10 672)
Forward purchase contracts and options The forward purchase contracts and options represent contracts with producers for the acquisition of physical commodities in the future, which will be delivered within the next twelve months after year-end.
Derivative financial instrumentsHedginginstrumentsAssets–Forwardsalecontracts 643 10 502 –Options 127 170
770 10 672
Forward sale contracts The forward sale contracts represent contracts with millers and SAFEX for the future sale of physical commodities.
Options Options represent derivative financial instruments originating from producers which will be recouped with the physical delivery of the commodities.
10. cash and cash equivalents Cash on hand 424 391 Bankbalances 16 857 19 442
17 281 19 833
11. ordinary share capital Authorised: 400 000 000 (2008: 400 000 000) ordinary shares of R0,01 each 4 000 4 000
Issued: 255 147 696 (2008: 255 147 696) ordinary shares of R0,01 each 2 551 2 551
Treasury shares: 8 807 982 (2008: 9 257 982) ordinary shares (9 119) (9 587)
All issued shares are fully paid.
46 A N N U A L R E P O R T 2 0 0 9
NoteS to the aNNuaL fiNaNciaL StatemeNtSfor the year ended 30 September
GRouP
2009 2008R’000 R’000
12. other reserves Revaluation reserve 18 542 20 486The revaluation reserve came into existence in 2006 when the Group revalued its landandbuildingstofairvalue.TheGroupmadethechoicetoapplythe“fairvalueasdeemedcost”–exemptionintermsofIFRS1“First-timeadoptionofInternationalReportingStandards”.
Fair value reserve (108) 141Available-for-sale investments are shown in the balance sheet at fair value. The remeasuring from initial cost to fair value is recognised directly in equity on the Fair value reserve. When these investments are sold or undergo an impairment, the accumulated fair value reserve in equity is recognised in the income statement.
Derivative financial instruments that are designated and qualify as cash flow hedges are shown in the balance sheet at fair value. The effective portion of changes in the fair value is recognised directly in equity on the Fair value reserve.
Business combination reserve 216 582 216 582The difference between the par value of shares issued during a transaction under common control and the fair value of the consideration received is recognised directly in equity on the Business combination reserve. For the following transactions under common control amounts were recognised against this reserve:–On31January2005thetradingcompaniesWPKenBolandAgriwerecombined
in a new interim holding company.–On31July2007theKaapAgriGroupwasrestructuredtocombineKaapAgriA
and Kaap Agri B in one holding company.–On1August2007theGroupobtainedafurtherinterestinPioneerFoodGroup
Limited in a share swap transaction.
equity reserve 511 319 399 623The share in profit of associated companies, less any dividends received, is transferred to the Equity reserve. The share in any other movements in reserves of associates, as well as the effect of dilutionary and anti-dilutionary equity transactions of associates, is recognised directly in the Equity reserve.
746 335 636 832
13. BorrowingsCapitalised lease agreements – 136 Short-term portion carried over to current liabilities – (136)
– –
The carrying value of borrowings approximates its fair value at the balance sheet date.
ThecapitalisedleaseagreementswassecuredbyleasedassetswithabookvalueofR113975,refernote3.
A N N U A L R E P O R T 2 0 0 9 47
GRouP
2009 2008R’000 R’000
14. provisions for other liabilities and chargesPost-retirement medical benefits 16 478 15 528Balance beginning of year 15 528 14 791 Interest costs recognised in the income statement 1 217 1 152 Actuarial loss 950 716 Contributions (1 217) (1 131)
Long-term incentive scheme 7 758 7 994Balance beginning of year 7 994 5 135Payment (3 283) –Interest costs recognised in the income statement 448 484 Actuarial loss/(profit) recognised in the income statement 61 (91)Current service cost 2 538 2 466
24 236 23 522Short-term portion carried over to current liabilities (5 004) (4 354)Post-retirement medical benefits (1 221) (1 134)Long-term incentive scheme (3 783) (3 220)
19 232 19 168
Existing provisions are based on the following important assumptions:Post-retirement medical benefits Cost of medical inflation (%) 7,75 7,75 Discount rate (%) 9,00 9,25Average retirement age (years) 65 65
R’000 R’000
Effect of a 1% movement in the assumed cost of medical inflation and discount rate: + 1% – 1%
Cost of medical inflation Aggregate of current service cost and interest cost 136 (119)Liability 1 487 (1 293)Discount rateLiability (1 366) 1 601
Effect of a 1-year movement in the assumed average retirement age: + 1 – 1
Average retirement ageLiability (30) 32
2009 2008 2007 2006 2005 Trend information: R’000 R’000 R’000 R’000 R’000Present value of liabilities 16 478 15 528 14 791 14 149 10 150Present value of plan assets – – – – –Present value of obligations above plan assets 16 478 15 528 14 791 14 149 10 150ExperienceadjustmentsPresent value of liabilities (588) (716) (495) (2 483) (184)Present value of plan assets – – – – –Actuarial loss before changes in assumptions (588) (716) (495) (2 483) (184)
48 A N N U A L R E P O R T 2 0 0 9
NoteS to the aNNuaL fiNaNciaL StatemeNtSfor the year ended 30 September
GRouP
2009 2008 Long-term incentive scheme Discount rate (%) 8,53 9,43Growthrateofphantom-sharevalue–yearending30September2009(%) 12,00 12,00 Growthrateofphantom-sharevalue–yearending30September2010(%) 11,00 11,00 Growthrateofphantom-sharevalue–yearending30September2011(%) 11,00 11,00Growthrateofphantom-sharevalue–yearending30September2012(%) 11,00 11,00Growthrateofphantom-sharevalue–yearending30September2013(%) 11,00 N/AForfeited phantom shares in future periods (number) 0 0
The Group operates an incentive scheme based on phantom shares. In terms of the scheme, phantom shares are allocated toseniormanagementandexecutivedirectorsatavaluebasedonthebidpriceoftheGroup’ssharepriceandtheprice/earnings ratio of the operations. The calculated increase on the value of the phantom shares is paid as a bonus over three, four and five years, one-third in each year, from the date in which the phantom shares were allocated. Participants in this scheme must be employed by the Group at the date of payment. The accrued liabilities in terms of the scheme are provided for on a time basis against income. At year-end 6 185 875 (2008: 2 944 775) phantom shares, were allocated at calculated values of between R3,00 and R7,36 per share.
GRouP
2009 2008R’000 R’000
15. trade and other payables Trade creditors 301 922 318 671 Other creditors 49 095 78 696
351 017 397 367
The carrying value of trade and other payables approximates its fair value at the balance sheet date.
16. Short-term borrowings AbsaBankLimited 368 967 324 909 RSAAgriMakelaars(Pty)Ltd 4 476 1 677
373 443 326 586
The carrying value of short-term loans approximates its fair value at the balance sheet date.
Thebankoverdraftfacilityisrenewedannuallyandthecurrentfacilitybearsinterestatprimeless1,85%.
TheloanfromRSAAgriMakelaars(Pty)Ltdisunsecuredandbearsinterestatratesdecidedonfromtimetotime.Thereare no specific repayment terms.
ThebankoverdraftfacilityofR603millionissecuredby:–AlimitedguaranteebyKaapAgriBeleggingsLimited(limitedtoR680million)forthefacilitiesofKaapAgriBedryfLimited.–AcessionoftradedebtorsandstockofKaapAgriBedryfLimited.–AnegativepledgeovertheassetsinthenameofKaapAgriBedryfLimitedanditssubsidiaries.–AcessionandpledgeovertheshareholdingofKaapAgriBeleggingsLimitedinAgriVoedselBeleggings(Pty)Ltd.–AcessionovertheloanaccountofKaapAgriBeleggingsLimitedtoAgriVoedselBeleggings(Pty)Ltd.–Anegativepledgeover55627707PioneerFoodGroupsharesinthenameofAgriVoedselBeleggings(Pty)Ltd.–AcessionoftradedebtorsofAgriplas(Pty)LtdaswellasalimitedguaranteebyKaapAgriBedryfLimited(limitedto
R6 million) for the facilities of Agriplas (Pty) Ltd.
A N N U A L R E P O R T 2 0 0 9 49
GRouP
2009 2008R’000 R’000
17. Related party transactions The companies in the Group sell products in the normal course of business to directors on terms and conditions applicable to all clients.
Transactions with directors and outstanding balancesSales 36 104 32 351Purchases 4 948 15 656Trade receivables 10 288 9 530
Transactions with associated companies and outstanding balances Also refer to note 4.Sales 35 322 34 661Purchases 28 187 23 033Interest paid 429 –Trade receivables 500 1 108Trade payables 2 245 2 324Loan 4 476 1 677
The relationships between the various companies in the Group are disclosed in note 35. Refer to note 16 for loans with related parties.
Refertoexecutivedirectors’remunerationasdisclosedinnote24forkeymanagementcompensation.
18. financial risk managementTheGroup’sactivitiesexpose it toavarietyof financial risks likemarket risk (includingcurrency risk, fairvalue interestrate riskandprice risk),credit risk, liquidity riskandcash flow interest rate risk.TheGroup’soverall riskmanagementprogrammefocusesontheunpredictabilityof financialmarketsandseekstominimisepotentialadverseeffectsontheGroup’sfinancialperformance.
The accounting policy for financial instruments are applied to the following line items according to the balance sheet: available-for-sale investments, trade and other debtors, financial instruments through profit or loss, derivative financial instruments, cash and cash equivalents, trade and other creditors and borrowings.
The carrying value according to the balance sheet differs from the values disclosed in this note because of items included in the carrying value according to the balance sheet which do not meet the definition of a financial instrument or which are excluded from the scope of IFRS 7: Financial instruments: Disclosures. These items include prepaid expenses of R349 236 (2008: R328 917), statutory receivable amounts of R19,7 million (2008: R28,3 million), statutory liabilities of R4,1 million (2008: R4,9 million) and liabilities in respect of employee benefits of R11,2 million (2008: R33,6 million).
Market risk:Foreigncurrencyrisk:TheGroupoperatesinternationallyandisexposedtolimitedforeignexchangeriskarisingfromvariouscurrencyexposures,primarilywith respect to theUSdollar and the euro. Foreign exchange risk primarily arises from inventory and assetpurchasesinothercountries.Forwardexchangecontractsareusedtomanagetheforeignexchangerisk.
ThereisalsoaconversionriskarisingfromtheconsolidationoftheresultsofforeignsubsidiariesinSouthAfricanrands,theGroup’sreportingcurrency.
Kaap Agri (Namibia) (Pty) Ltd is currently the only foreign subsidiary within the Group. The functional currency of Kaap Agri (Namibia) (Pty) Ltd is the Namibian dollar. The exchange rate between the Namibian dollar and South African rand is fixed at 1 Namibian dollar for 1 South African rand. Consequently no foreign exchange rate differences arises due to the translation of this foreign subsidiary.
50 A N N U A L R E P O R T 2 0 0 9
NoteS to the aNNuaL fiNaNciaL StatemeNtSfor the year ended 30 September
Cashflowandfairvalueinterestraterisk:TheGroup finances its operations through a combination of shareholders’ funds and bank borrowings. TheGroup’sinterest rate exposure and the effective interest rates can be summarised as follows:
At floating rates
Rate Amount Rate Amount
2009 2009 2008 2008
% R’000 % R’000Assets:Trade receivables 10,75 – 15,75 674 353 15,50–20,50 642 057 Other receivables – 14 038 – 17 955 Cash and cash equivalents 5,50 17 281 10,00 19 833
Liabilities:Capitalised lease agreements – – 16,75 136 Bankoverdraft 8,65 368 967 13,50 324 909 LoanRSAAgriMakelaars(Pty)Ltd 8,50 4 476 13,50 1 677Trade payables – 335 700 – 358 806
GRouP2009 2008
R’000 R’000ToillustratetheGroup’sexposuretointerestratechanges,theinfluenceofinterestrate changes on the carrying values of interest-bearing financial assets and financial liabilities and resulting profit after taxation, are illustrated as follows:Interest-bearing assets 717 759 683 443 Interest-bearing liabilities (373 443) (326 722) Net interest-bearing assets 344 316 356 721 Halfapercentagepointincreaseininterestrates 1 240 1 284 Halfapercentagepointdecreaseininterestrates (1 240) (1 284)
Price risk:TheGroupisexposedtoequitysecuritiespriceriskbecauseofinvestmentsheldbytheGroupandthatareclassifiedonthe consolidated balance sheet as available-for-sale.
The Group is involved in the trading of grain commodities in order to optimise the utilisation of its silo infrastructure. It is theGroup’s intent tohedgeanyprice riskarising from fluctuations incommoditypricesduring the tradingofgraincommodities. The Group uses commodity contracts, option contracts or other derivative financial instruments to hedge thecommoditypricerisk.Commoditiesarehedgedwithinthelimitsapprovedbytheboardofdirectors.Thehedgingpolicyissufficientlyflexibletoallowmanagementtorapidlyadjusthedgesfollowingpossiblechangesinthecommoditymarket.
A N N U A L R E P O R T 2 0 0 9 51
GRouP2009 2008
R’000 R’000To illustrate the Group’s exposure to commodity price risks, the influence offluctuations in price on the carrying values of financial assets and financial liabilities and resulting profit after taxation, are illustrated as follows:
Influence of an increase of R100 per ton in commodity prices on Financial assets at fair value through profit or loss 673 1 555Influence of an increase of R100 per ton in commodity prices on Derivative Financial instruments (673) (1 555)
– –
Influence of a decrease of R100 per ton in commodity prices on Financial assets at fair value through profit or loss (673) (1 555)Influence of a decrease of R100 per ton in commodity prices on Derivative Financial instruments 673 1 555
– –
Credit risk:Potentialconcentrationsofcreditriskconsistmainlywithincashequivalentinvestmentsandtradedebtors.
The Group limits its counterparty exposures arising from its term deposits by only dealing with well-established financial institutions of high-quality credit standing.
Trade debtors consist of a large number of clients. As a result of a strict credit policy, which includes the ongoing revision of credit limits, securities and credit evaluations of the financial position of these clients, the Group is of the opinion that thecreditrisksassociatedwiththesefinancialassetsarerelativelysmallundernormalcircumstances.Consideringthatthevastmajorityofthetradedebtorsareassociatedwiththeagriculturalsector,therecoverabilityofthesefinancialassetscanbe negatively influenced by natural disasters, consecutive poor production seasons and lower than expected commodity prices.Thecredit risksrelatedtotradedebtorsare limitedbytakingupsecurities, likemortgagebondsoverproperty,notarial bonds over movable property and cessions over expected crops. Trade debtors are presented net of the provision forimpairment.Interestontradedebtorsiscalculatedonabaserateplusafactorfortheriskassociatedwitheachclient.TheGroupisoftheopinionthatnosignificantconcentrationofriskexistedatyear-end,whichhadnotbeensecuredoradequately provided for.
Trade debtors are divided into the following categories: Debtors within terms, Debtors outside terms but not impaired, and Debtors which are impaired.
Grain Fruit Vegetables Other Total
R’000 R’000 R’000 R’000 R’000Debtors within terms (settlement date is not exceeded)30 September 2009Balance 201 903 212 380 60 987 75 867 551 137Securities at fair value (39 045) (19 221) (15 872) (1 856) (75 994)Exposuretocreditrisk 162 858 193 159 45 115 74 011 475 143
30 September 2008Balance 225 315 207 328 61 617 84 478 578 738Securities at fair value (36 317) (8 369) (10 016) (1 167) (55 869)Exposuretocreditrisk 188 998 198 959 51 601 83 311 522 869
Based on the payment history of Debtors within terms on year-end, management is of the opinion that the credit quality of this category of debtors is good.
52 A N N U A L R E P O R T 2 0 0 9
NoteS to the aNNuaL fiNaNciaL StatemeNtSfor the year ended 30 September
Grain Fruit Vegetables Other Total
R’000 R’000 R’000 R’000 R’000Debtors outside terms (settlement date is exceeded) but not impaired 30 September 2009Balance 42 402 62 883 6 121 5 746 117 152Portion within terms 26 763 25 070 2 932 4 018 58 78330 days outside terms – – – – –60 days outside terms – 93 – 11 10490 days outside terms 288 1 990 48 1 460 3 786120 days and more outside terms 15 351 35 730 3 141 257 54 479Securities at fair value (16 131) (11 811) (2 214) (1 836) (31 992)Exposuretocreditrisk 26 271 51 072 3 907 3 910 85 160
30 September 2008Balance 8 042 37 390 6 877 8 372 60 681Portion within terms 6 201 16 302 3 621 4 197 30 32130 days outside terms – – – – –60 days outside terms – – – – –90 days outside terms 80 1 144 83 1 508 2 815120 days and more outside terms 1 761 19 944 3 173 2 667 27 545Securities at fair value (3 968) (2 060) (5 127) (842) (11 997)Exposuretocreditrisk 4 074 35 330 1 750 7 530 48 684
Debtors which are impaired 30 September 2009Balance 5 684 8 381 2 491 15 632 32 188Provision for impairment (5 325) (5 590) (1 991) (13 218) (26 124)Balance beginning of year (2 125) (12 258) (1 379) (5 791) (21 553)Provision utilised 80 1 734 – 1 154 2 968Provisionwrittenback/(created) (3 280) 4 934 (612) (8 581) (7 539)Securities at fair value (359) (1 447) (500) (2 264) (4 570)Exposuretocreditrisk – 1 344 – 150 1 494
30 September 2008Balance 2 137 12 329 1 878 7 847 24 191Provision for impairment (2 125) (12 258) (1 379) (5 791) (21 553)Balance beginning of year (2 517) (16 171) (773) (2 682) (22 143)Provision utilised 2 153 1 341 – 1 238 4 732Provisionwrittenback/(created) (1 761) 2 572 (606) (4 347) (4 142)Securities at fair value – (7) (499) (1 907) (2 413)Exposuretocreditrisk 12 64 – 149 225
Liquidity risk:InordertomitigateanyliquidityriskthattheGroupmayface,theGroup’spolicyhasbeentomaintainsubstantialunutilisedbankingfacilitiesandreserveborrowingcapacity.TheGrouptendstohavesignificantfluctuationsinshort-termborrowingsdue to seasonal factors. Consequently the Group policy requires that sufficient borrowing facilities are available to exceed projectedpeakborrowings.
A N N U A L R E P O R T 2 0 0 9 53
GRouP2009 2008
R’000 R’000TheGroup’sunutilisedborrowingfacilitiesareasfollows:Total borrowing facilities 603 000 583 000 Net interest-bearing debt (356 586) (307 280)
246 414 275 720
ThecontractualperiodsoftheGroup’sliabilitiesatbalancesheetdateareasfollows:
1 to 6months
7 to 12 months
12 monthsand longer Total
R’000 R’000 R’000 R’00030 September 2009Trade and other payables 318 169 17 531 – 335 700Financialinstruments–Liabilities 770 – – 770Financialinstruments–Assets (770) – – (770)Short-term borrowings – 402 942 – 402 942
318 169 420 473 – 738 642
30 September 2008Borrowings 139 – – 139Trade and other payables 336 267 22 539 – 358 806Financialinstruments–Liabilities 10 672 – – 10 672Financialinstruments–Assets (10 672) – – (10 672)Short-term borrowings – 354 426 – 354 426
336 406 376 965 – 713 371
Fair value estimation: Investments and derivative financial instruments Thefairvalueoffinancialinstrumentswhichtradeinactivemarkets,isbasedonquotedmarketpricesatthebalancesheetdate.ThequotedmarketpriceusedforfinancialassetsheldbytheGroupisthecurrentbidprice.
Trade debtors and trade creditors The nominal value of trade receivables, less impairment provision, and trade payables is assumed to approximate their fair values.
Financial liabilities The fair value of financial liabilities for disclosure purposes is estimated by discounting the future contractual cash flows at thecurrentmarketinterestratethatisavailabletocompanieswithsimilarfinancialinstruments.
Capital maintenance: The company considers total equity, which includes share capital, share premium, reserves and treasury shares, as capital. Theratiobetweencapitalanddebt isthecapital ratio.TheGroup’sobjectivewiththemanagementofthecapital ratiois to ensure that the Group continues to trade as a going concern and to create wealth for its shareholders and other stakeholders.Theinfluenceonthecapitalratioisconsideredwithdecisionsonthedeclarationofdividends,repurchaseof shares, issue of shares, purchase and disposal of assets and investments and the acquiring or repayment of debt. The movement in capital is presented in the Statement of changes in equity on page 38 and the capital ratios on page 12.
54 A N N U A L R E P O R T 2 0 0 9
NoteS to the aNNuaL fiNaNciaL StatemeNtSfor the year ended 30 September
GRouP
2009 2008R’000 R’000
19. contingent liabilities Guarantees for personal loans 408 787KaapAgriBedryfLimitedguaranteescertainloansofstaffatAbsaBankLimited. The company is of the opinion that no financial loss would occur, as the company has guarantees from the staff.
Operating lease payments:Payable within one year 14 833 9 522 Payable between one and five years 28 377 21 450 Payable after five years 4 118 1 807
47 328 32 779
20. capital commitments Contracted 19 060 5 550 Not yet contracted 20 000 20 000
39 060 25 550
These commitments have been approved by the board of directors. The commitments will be financed by own and borrowed funds.
21. RevenueSupplying of requisites and services 2 222 221 2 308 401 Finance margin on direct transactions 51 870 54 693
2 274 091 2 363 094
22. other operating income Interest received 72 493 63 220–Tradedebtorsthatarenotimpaired 66 498 56 962–Tradedebtorsthatareimpaired 2 409 1 708–Other 3 586 4 550 Profit on sale of property, plant and equipment 707 3 571 Profit on sale of investments 107 9 253 Dividendsreceived–unlisted 17 1 Foreign exchange differences 57 29 Transport cost recovered 4 248 3 877Rent received 4 476 5 242 Decrease in provision for impairment of trade debtors – 3 026 Bad debts recovered 777 196 Other income 12 912 9 473
95 794 97 888
A N N U A L R E P O R T 2 0 0 9 55
GRouP
2009 2008R’000 R’000
23. expenses by nature Cost of products sold 1 858 143 1 971 106 –Costofsales 1 886 106 1 951 899–Netrealisedcost/(income)ofderivativefinancialinstruments (27 963) 19 207Depreciation 12 171 10 851 –Properties 1 850 1 469 –Grainsilos 1 257 1 847 –Machineryandequipment 2 848 2 339 –Vehicles 726 726 –Furnitureandofficeequipment 5 376 3 565 –Capitalisedleasedassets 114 905 Improvements on leased premises written off 106 71 Directors’emoluments–Executiveandnon-executive 10 824 11 984 Staff costs 192 444 183 833–Salaries,wagesandbonuses 170 012 164 107–Provisionforlong-termincentivescheme 678 1 258 –Employer’scontributiontopensionfund(definedcontributionplan) 15 401 13 299 –Employer’scontributiontomedicalbenefits 1 217 1 131 –Increaseinprovisionforpost-retirementmedicalbenefits 951 737 –Trainingexpenses 4 185 3 301 Auditor’sremuneration 2 010 2 098 –Foraudit 1 958 1 940 –Otherservices 70 98 –Under/(over)provisionpreviousyear (18) 60 Rent paid 15 827 11 622–Buildings 8 470 5 274–Vehicles 4 909 4 184 –Machineryandequipment 2 448 2 164Other occupancy costs 27 515 22 216 Computer expenses 9 050 7 459 Marketingcosts 17 110 17 031Transport/distribution 26 243 24 882 Bad debts written off 2 987 4 732 Increase in provision for impairment of trade debtors 4 571 2 436 Other expenses 19 663 26 753
2 198 664 2 297 074
NumberNumber of employees in service at year-end 1 514 1 390
56 A N N U A L R E P O R T 2 0 0 9
NoteS to the aNNuaL fiNaNciaL StatemeNtSfor the year ended 30 September
GRouP
2009 2008R’000 R’000
24. directors’ emolumentsPaid to directors for:Executivedirectors–remuneration 9 231 10 647 –Salaries 5 858 6 151 –Performancebonus 1 003 2 895 –Provisionforlong-termincentivescheme 2 370 1 601 Non-executivedirectors–remuneration 1 593 1 337 –Servicesasdirectors 1 500 1 250 –Othercosts 93 87
10 824 11 984
25. finance costsLong-term loans – 307 Finance lease obligations 3 102 Banksandother 36 841 28 075
36 844 28 484
26. income taxTax expenditure: Currenttaxation–currentyear 38 460 39 543 Deferredtaxation–currentyear (2 438) (3 064) Taxation for the year 36 022 36 479
Calculated tax loss:Calculated tax loss available for utilisation against future taxable income 13 006 14 246 Utilised against deferred taxation – (72) Net available for future utilisation 13 006 14 174 Tax relief calculated at current rates amounts to 3 857 3 969
% %ThetaxontheGroup’sprofitbeforetaxdiffersfromthetheoreticalamount that would arise using the statutory rate, as follows: Statutory tax rate 28,00 28,00Adjustedfor:Non-taxable income (0,16) (2,79)Temporary differences not provided for (0,06) 0,14Capital profit 0,14 0,65Rate change deferred taxation – 0,21Difference in tax rate of foreign subsidiary (0,05) 0,21Utilisation of assessed losses not previously recognised (0,39) –Assessed losses not recognised – 0,52Effectiverate–Operations 27,48 26,94Share in profit of associated company (15,87) (13,86)Effectiverate–Consolidated 11,61 13,08
R’000 R’000CalculatedSTCliabilityiftheGroup’stotalreserveswouldhavebeen declared as a dividend 136 733 119 250Unutilised STC credits (8 774) (10 416)Contingent liability 127 959 108 834
A N N U A L R E P O R T 2 0 0 9 57
GRouP
2009 2008R’000 R’000
27. earnings per share Basic Basic earnings per share is calculated by dividing the profit attributable to equity holders of the Group by the weighted average number of ordinary shares in issue during the year, excluding ordinary shares purchased by the Group and held as treasury shares.
Profit attributable to equity holders of the Group 274 151 242 469
Reconciliation between earnings and headline earnings:Net profit attributable to ordinary shareholders 274 151 242 469Net profit on disposal of assets (560) (3 306) Gross (707) (3 571)Tax effect 147 265Net profit on disposal of investments (98) (37) Gross (107) (41)Tax effect 9 4Net profit on disposal of share in subsidiary – (8 505)Gross – (9 212)Tax effect – 707Headlineearningsadjustmentforassociatedcompany 19 233 5 199Headlineearnings 292 726 235 820Liabilitytowardspensionfundasaresultofbackdatedactamendments – 4 572Gross – 6 350Tax effect – (1 778)
Adjustedheadlineearnings 292 726 240 392Weightedaveragenumberofordinaryshares(’000) 246 040 234 084 Earnings per share (cents) 111,43 103,58 Headlineearningspershare(cents) 118,97 100,74Adjustedheadlineearningspershare(cents) 118.97 102,69
Diluted earnings per share is not disclosed, as there are no potential dilutive instruments at balance sheet date.
28. dividend per share Interim 8,0 cents (2008: 0,0 cents) per share 19 707 –Final22,0 cents (2008: 23,0 cents) per share 54 195 56 517
73 902 56 517
Dividends payable are not accounted for until they have been declared by the board of directors. The Statement of Changes in Equity does not reflect the final dividend payable. The final dividend for the year ended 30 September 2009 will be accounted for as an appropriation of retained profit in the year ending 30 September 2010.
58 A N N U A L R E P O R T 2 0 0 9
NoteS to the aNNuaL fiNaNciaL StatemeNtSfor the year ended 30 September
GRouP
2009 2008R’000 R’000
29. Net cash profit from operating activities Operating profit per income statement 171 221 163 908Adjustedfor:–Depreciation 12 171 10 851 –Profitondisposalofproperty,plantandequipment (707) (3 571) –Profitondisposalofinvestments (107) (9 253) –Increase/(decrease)inprovisions (14 994) 17 743–Improvementsonleasedpremiseswrittenoff 106 71
167 690 179 749
30. Working capital changes Increase in inventory (9 230) (77 103)Increase in trade and other debtors (24 466) (79 345)Increase/(decrease) in trade and other creditors (24 740) 88 092
(58 436) (68 356)
31. income tax paid Balance owing at the beginning of the year 23 594 9 479Income tax expense in income statement 38 460 39 543Balance paid in advance/(owing) at the end of the year 127 (23 594)
62 181 25 428
32. acquisition of operationsNon-current assets – 1 401 Current assets – 23 250 Current liabilities – (222) Valueofassets – 24 429 Cash and cash equivalents – (25)
– 24 404
Refer to note 34 for more information.
33. proceeds on disposal of operationsOn1October2007an80%share in theshort-term insurancebrokersubsidiary,RSAAgriMakelaars(Pty)Ltd,wassoldtotheinsurancemarketers.Details of the transaction are as follows: Proceeds – 9 600Retained profit previously recognised – (52)Costs directly attributable to the sale – (336)
– 9 212Carrying value of 20% share in associate – (23)
– 9 189
A N N U A L R E P O R T 2 0 0 9 59
34. Business combinations 30 September 2008On1October2007theGroupacquiredtheassetsandbusinessofthefivetradingstoresofHardapCo-operativeLimited.
The assets and liabilities at the date of acquisition can be summarised as follows:
Carrying value As the Group acquired the assets of this business rather than the shares of the legal entity that previously owned such assets,itisunpracticaltodisclosethecarryingamountsinthebooksofthepreviousownerspriortotheacquisition.Inthese circumstances the Group does not have access to such carrying values.
GRouP
2009 2008R’000 R’000
Fair valueAssetsEquipment – 1 201Inventory – 11 429Trade receivables – 7 568 Cash and cash equivalents – 17 LiabilitiesOther payables – (189)Purchase consideration – 20 026
Apurchasepriceallocationas requiredby IFRS3 “BusinessCombinations”wasperformed and no material intangible assets or goodwill were identified.
On1 July 2008 theGroupacquired the assets andbusinessof the two tradingstores of Loeriesfontein Agricultural Co-operative Limited.
The assets and liabilities at the date of acquisition can be summarised as follows:
Carrying valueAs the Group acquired the assets of this business rather than the shares of the legal entity that previously owned such assets, it is unpractical to disclose the carrying amounts in the books of the previous owners prior to the acquisition. In thesecircumstances the Group does not have access to such carrying values.
Fair valueAssetsEquipment – 200 Inventory – 3 071 Trade receivables – 1 157 Cash and cash equivalents – 8 LiabilitiesOther payables – (33)Purchase consideration – 4 403
Apurchasepriceallocationasrequiredby IFRS3“BusinessCombinations”wasperformedandnomaterial intangibleassets or goodwill were identified.
60 A N N U A L R E P O R T 2 0 0 9
NoteS to the aNNuaL fiNaNciaL StatemeNtSfor the year ended 30 September
35. interest in subsidiaries Number of issued shares Shareholding (%)
Name of subsidiary 2009 2008 2009 2008
Kaap Agri Beleggings Limited 19 705 494 000 19 705 494 000 100,00 100,00
Kaap Agri Bedryf Limited 155 153 321 155 153 321 100,00 100,00
AgriVoedselBeleggings(Pty)Ltd 906 041 906 041 100,00 100,00
Kaap Agri (Namibia) (Pty) Ltd 400 400 100,00 100,00
Cerino Trading 25 (Pty) Ltd 120 120 100,00 100,00
Agri IT Limited 6 010 000 6 010 000 100,00 100,00
KaapAgriPakmateriaalLimited – 200 000 – 100,00
Intech Irrigation Limited – 100 – 100,00
Agriplas (Pty) Ltd 7 000 7 000 100,00 100,00
36. information about business segmentsSegment income and results Segment income Segment results
2009 2008 2009 2008R’000 R’000 R’000 R’000
Trade 1 792 765 1 707 605 90 057 93 381Mechanisation 120 375 148 234 1 525 1 506Products and seed processing 279 406 443 708 29 793 24 862Irrigation: manufacturing and retail 74 756 61 649 3 074 (1 563)
2 267 302 2 361 196 Corporate 6 789 1 898 9 928 17 238Investment in associated companies – – 175 796 143 524 Total income 2 274 091 2 363 094Profit before tax 310 173 278 948Income tax (36 022) (36 479)Profit attributable to ordinary shareholders 274 151 242 469
Segment balance sheet information Segment assets Segment liabilities
2009 2008 2009 2008R’000 R’000 R’000 R’000
Trade 452 074 445 096 274 451 291 219Mechanisation 48 930 34 409 8 673 12 864Products and seed processing 41 508 44 152 10 172 22 872Irrigation: manufacturing and retail 28 164 28 148 8 826 9 445Corporate 799 750 773 218 447 486 445 477 Investment in associated companies 1 543 622 1 431 926 – –Deferred taxation 1 661 768 117 2 173
2 915 709 2 757 717 749 725 784 050
other segment information Capital expenses Depreciation
2009 2008 2009 2008R’000 R’000 R’000 R’000
Trade 35 524 17 802 3 114 2 391 Mechanisation 1 254 868 291 266Products and seed processing 2 391 1 269 1 976 2 696Irrigation: manufacturing and retail 1 303 1 282 1 330 1 130Corporate 6 333 3 946 5 460 4 368
46 805 25 167 12 171 10 851
A N N U A L R E P O R T 2 0 0 9 61
Kaap aGRi Limited
CoMPANy
2009 2008
BALANCe SheeT at 30 September Notes R’000 R’000
ASSeTSNon-current assetsInvestment in subsidiary company 2 1 881 875 1 881 875
Current assetsLoan subsidiary company 3 479 230 479 230
Total assets 2 361 105 2 361 105
equITy AND LIABILITIeSCapital and reservesOrdinary share capital 4 2 552 2 552Share premium 2 358 553 2 358 553Total equity 2 361 105 2 361 105
Total equity and liabilities 2 361 105 2 361 105
CoMPANy
2009 2008
INCoMe STATeMeNT for the year ended 30 September R’000 R’000Investmentincome–KaapAgriBeleggingsLimited 79 100 35 911Other operating expenses (4) –Profit before taxation 79 096 35 911Income tax – –Net profit for the year 79 096 35 911
CoMPANy
STATeMeNT oF ChANGeS IN equITy Share capital Share premium Retained profitfor the year ended 30 September R’000 R’000 R’000Balance 1 october 2007 2 394 2 264 770 –Rights issue 158 93 783 –Net profit for the year – – 35 911Dividends paid – – (35 911)Balance 30 September 2008 2 552 2 358 553 –Net profit for the year – – 79 096Dividends paid – – (79 096)Balance 30 September 2009 2 552 2 358 553 –
62 A N N U A L R E P O R T 2 0 0 9
Kaap aGRi Limited
CoMPANy
2009 2008
CASh FLow STATeMeNT for the year ended 30 September R’000 R’000Cash flow from operating activitiesNet cash loss from operating activitiesOperating profit per income statement 79 096 35 911Adjustedfor:Investment income (79 100) (35 911)
(4) –Cash flow from investment activitiesIncrease in subsidiary loan – (93 941)Dividends received 79 100 35 911 79 100 (58 030)
Cash flow from financing activitiesShares issued – 93 941Dividend paid (79 096) (35 911)
(79 096) 58 030
Net increase in cash and cash equivalents – –Cash and cash equivalents at the beginning of the year – –Cash and cash equivalents at the end of the year – –
NoTeS To The FINANCIAL STATeMeNTS for the year ended 30 September1. accounting policies
The principal accounting policies incorporated in the preparation of these financial statements, are set out on pages 26 to 35. The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requiredmanagement toexercise its judgement in theprocessofapplying thecompany’saccountingpolicies.Therearenoareasinvolvingahigherdegreeofjudgementorcomplexity,orareaswhereassumptionsandestimatesaresignificant to the financial statements.
CoMPANy
2009 2008R’000 R’000
2. investment in subsidiary companyUnlisted Kaap Agri Beleggings Limited Number of issued shares: 19 705 494 000 (2008: 19 705 494 000) Shareholding: 100% (2008: 100%) Shares at cost 1 881 875 1 881 875
3. Loan subsidiary companyKaap Agri Beleggings Limited 479 230 479 230The carrying value of the loan approximates its fair value at the balance sheet date.
The loan is unsecured, interest free and there are no specific repayment terms.
4. ordinary share capitalAuthorised: 400 000 000 ordinary shares of R0,01 each 4 000 4 000Issued: 255 147 696 ordinary shares of R0,01 each (2008: 255 147 696 ordinary shares of R0,01 each) 2 552 2 552All issued shares are fully paid.
5. Related party transactionsRefer to notes 2 and 3.
A N N U A L R E P O R T 2 0 0 9 63
holding companyKaap Agri LimitedReg no 2007/015880/06
company secretary and registered officeRHKöstens65VoortrekkerRoad,Malmesbury,7300PO Box 22, Malmesbury, 7299Telephone number: 022 482 8000Fax number: 022 482 8008Internetaddress:www.kaapagri.co.za
auditorsPricewaterhouseCoopers Inc
Share transfer officeContactperson:LizelleBleekerPO Box 13, Porterville, 6810Telephone number: 022 931 8200Fax number: 086 636 7200E-mail:[email protected]
admiNiStRatioN
64 A N N U A L R E P O R T 2 0 0 9
Invitation
The Annual General Meeting
will be held on Thursday
11 February 2010 at 10:00
in the Kaap Agri Members’ Hall,
Voortrekker Road, Malmesbury.
Shareholders are cordially invited
to join the Board for tea after the
Annual General Meeting.
A N N U A L R E P O R T 2 0 0 9 65
Kaap aGRi LimitedRegistration number 2007/015880/0665VoortrekkerRoadPO Box 22MALMESBURY729919January2010
to the ShaRehoLdeRS of Kaap aGRi LimitedNoticeisherebygiventhattheAnnualGeneralMeetingofshareholdersofthecompanywillbeheldintheKaapAgriMembers’Hall,65VoortrekkerRoad,Malmesbury,onThursday11February2010at10:00forthefollowingpurposes:
1. To consider the annual financial statements of the Kaap Agri group for the period ended 30 September 2009, includingthedirectors’reportandthereportoftheindependentauditors.
2. To approve payment of a final dividend of 22 cents per share.
3. Toapprovethedirectors’remunerationfortheperiodended30September2009.
4. To approve the reappointment of the auditors PricewaterhouseCoopers Inc as the auditors for the following year, and to authorise the Board to determine the remuneration of the auditors.
5. To approve the decrease of the Board to 10 non-executive directors.
6. To elect and appoint directors in order to fill vacancies arising due to the retirement or resignation of directors, with theunderstanding that,subject to theapprovalof thedecision to reduce thesizeof theBoard,only twopostswill be filled.
Note: MessrsGDEksteen,CJduToit and IJHugo are retiringby rotation.MessrsEksteen andDuToit are available for
re-election.MrHugoisnotre-eligible.AtthesametimeMrJFMoutonhaddecidedtoresignon11February2010atthe annual general meeting.
Details of the candidates are as follows: 6.1MrGDEksteen(Born1942) Farmer Serves on the board of Kaap Agri Limited, currently as chairman of the Board. Serves on the board of Pioneer Food Group Limited. Serves on the board of Zeder Investments Limited. 6.2MrCJduToit(Born1946) Farmer Serves on the board of Kaap Agri Limited since 1997.
Notes: ThenominationofapersonforelectionasadirectorissubjecttotheprovisionsofArticles14and22ofthecompany’s
Articles of Association, which contain the following stipulations, among others:
1. Nooneotherthanaretiringdirector,exceptontheBoard’srecommendation,shallbeeligibletobeelectedasadirector at any general meeting, unless he is nominated as a director by at least two (2) members, which nomination shallbe inwritingand lodgedat thecompany’s registeredofficeat least fourteen (14)daysbefore themeeting at which the director stands to be elected, together with the consent of the nominee, unless the latter is also the proposer.
2. The nominated person must accept his nomination in writing, which acceptance must be attached to the nomination concerned.
Notice of aNNuaL GeNeRaL meetiNG
66 A N N U A L R E P O R T 2 0 0 9
Notice of aNNuaL GeNeRaL meetiNG
7. To approve the following special resolution “ResolvedthattheBoardofDirectorsbeauthorised,subjecttotherequirementsoftheCompaniesAct,bywayofa
general authorisation to approve the following: The purchase by the company or any subsidiary of the company of shares issued by the company, provided that: 1. thegeneralauthorityshallbevalidonlyuntilthecompany’snextannualgeneralmeeting,subjecttosuchannual
generalmeetingbeingheldnotlaterthan15monthsafterthedateofthisresolution; 2. thegeneralauthoritytorepurchasesharesshallbelimitedto10%ofthecompany’sissuedsharesatthedateon
whichsuchrepurchaseisapprovedbytheboardofdirectors; 3. the price at which the shares are purchased shall not be more than 5% above the average price at which the
sharesofthecompanytradedinthemonthprecedingtheapproval.”
Reasons and effect of the special resolution: The purpose of the special resolution is to grant the directors a general authority to repurchase shares that were issued
bythecompany.Thedirectorsintendtoexercisesuchauthorityshouldthecircumstancessorequire,butsubjecttothelimitations and requirements set out in section 85 of the Act, namely that shares may not be repurchased if:
(a) the company is, or would after the payment be, unable to pay its debts as they become due in the ordinary course ofbusiness;or
(b) the consolidated assets of the company, fairly valued, would after the payment be less than the consolidated liabilities of the company.
8. Conclude any other business that may be dealt with at an Annual General Meeting.
A shareholder of the company entitled to attend and vote at the meeting shall be entitled to appoint one or more proxies to attend,speakandvoteinhissteadatthemeeting.Aproxyneednotbeashareholderofthecompany.
Duly completed proxy forms must be lodged at the registered office of the company no later than 48 (forty-eight) hours (excluding Saturdays, Sundays and public holidays) before the time fixed for the commencement of the meeting.
By order of the board of directors.
R h KöSTeNSGroup secretary
A N N U A L R E P O R T 2 0 0 9 67
foRm of pRoxYI/We (full names) ________________________________________________________________________________________________
of (address) ____________________________________________________________________________________________________being a shareholder of KAAP AGRI LIMITED hereby appointed
_____________________________________________________ of ___________________________________________ or failing him
_____________________________________________________ of ___________________________________________ or failing him
_____________________________________________________ of ___________________________________________ or failing him
the Chairman of the meeting as my/our proxy to vote for me/us on my/our behalf at the Annual General Meeting of the company tobeheldonthe11thdayofFebruary2010andatanyadjournmentthereof,asfollows:
In favour of Against Abstain
1. Dividend
2. Directors’remuneration
3. Re-appointment of auditors
4. Decrease of the board
5. Election of directors
MrGDEksteen
MrCJduToit
6. Specialresolution–Repurchaseofshares
(Indicate instructions to proxy by way of a cross (X) in the appropriate space provided above.)
Unless otherwise instructed my proxy may vote as he deems fit.
Signed at ______________________________ this the _________________ day of _____________________________ 2010
________________________________________Signature
This proxy shall only be valid if it is returned to the Group Secretary, PO Box 22, Malmesbury, 7299 (fax number: 022 482 8008) at least 48 hours (excluding Saturdays, Sundays and public holidays) before the time fixed for the meeting.
Documentary evidence establishing the authority of a person signing this proxy form in a representative capacity must be attached to this proxy form.
Shareholderswhodonotholdsharesintheirownnamesshouldcontacttheirbrokerstomakearrangementstoattendandvoteatthe meeting.
Number of shares
