Financial results

Preliminary profit announcement, reviewed Group results
for the year ended 30 June 2015 and dividend declaration

Download the entire paid announcement 

Notes

1.   Basis of preparation and changes in accounting policy  
 

Basis of preparation   
The Preliminary Condensed Consolidated Financial Statements for the year ended 30 June 2015 have been prepared in accordance with IAS 34 Interim Financial Reporting, the Companies Act, 2008 (Act 71 of 2008), as amended, the SAICA Financial Reporting Guides, as issued by the Financial Reporting Standards Council and the Listings Requirements of the JSE. The Condensed Consolidated Financial Statements do not include all information on disclosures required in the Annual Financial Statements and should be read in conjunction with the Group’s Annual Financial Statements as at 30 June 2015. These results have been prepared under the supervision of Chief Financial Officer, Mr B Wood CA(SA).    

New standards, interpretations and amendments adopted
The accounting policies adopted and methods of computation are in terms of International Financial Reporting Standards (“IFRS”) and consistent with those of the previous financial year except for the adoption of new and amended IFRS and IFRIC interpretations which became effective during the current financial year. The application of these standards and interpretations did not have a significant impact on the Group’s reported results and cash flows for the year ended 30 June 2015 and the financial position at 30 June 2015.     
2.   Commitments and contingencies  
 

As previously disclosed, legal proceedings have been instituted against Majuba Aviation Proprietary Limited, a subsidiary company of the Group providing aircraft charter services, for which there is insurance cover.  

There are no material contingent assets or liabilities at 30 June 2015 in addition to the above.  
  (Rand millions)    30 June  
2015  		   30 June  
2014  
  Capital commitments         
  – Contracted     176     68  
  – Authorised but not contracted for     197     107  
  Total     373     175  
3.   Fair values of financial instruments  
  The Group does not fair value its financial assets or liabilities in accordance with quoted prices in active markets or market observables, as there is no difference between their fair value and carrying value due to the short-term nature of these items, and/or existing terms are equivalent to market observables. There were no transfers into or out of Level 3 during the period.  
4.   TopT Ceramics Proprietary Limited  
  The Group acquired the 20% non-controlling stake held by the previous business partner of TopT Ceramics Proprietary Limited at a cost of R11 million in the current period. A new business partner has been identified during the current period and subsequent to the financial year end, the Group sold a 10% stake in this entity to the business partner. This stake was sold at a cost of R7 million, and reduces the Group’s interest in this entity to 90%.  
5.   Italtile Mauritius Limited  
 

Following the local establishment of a holding company regime for exchange control purposes and changes in local income tax legislation related to taxation of royalty flows, the Group decided to liquidate its operations in Mauritius during the period. Italtile Mauritius Limited housed the Group’s non-South African trademarks and treasury function outside of South Africa.  

In accordance with IAS 21 The Effects of Changes in Foreign Exchange Rates, certain accumulated exchange differences related to this entity (recorded as foreign currency translation reserve) have been reclassified to income, resulting in a once-off gain of R19 million. As the transaction has been accounted for as a common control transaction, foreign currency translation reserves related to foreign investments distributed by the entity but retained by the Group are still recognised in foreign currency translation reserve.  
6.   SER-Export s.p.a.  
 

During the period the Group disposed of a 20% stake in SER-Export s.p.a. to its existing partner in this entity, reducing the Group’s effective shareholding to 30%. The disposal took place for a total cash consideration of R13 million, and has been accounted for as a change in control from a subsidiary to an associate resulting in a fair value gain of R14 million in accordance with IFRS 10 Consolidated Financial Statements.   

The carrying value of the identifiable assets and liabilities of SER-Export s.p.a. as at the date of disposal was:  
   
      Rand millions  
  ASSETS     
  Property, plant and equipment     7  
  Investments     8  
  Inventories     1  
  Trade and other receivables     24  
  Cash and cash equivalents     16  
      56  
  LIABILITIES      
  Trade and other payables     24  
  Total identifiable net assets     32  
  The gain on disposal is calculated as follows:      
  Consideration received     13  
  Fair value of residual value of investment     19  
  Foreign currency translation reserve     14  
  Less: Net assets disposed     (32) 
  Total gain on disposal     14  
  R12 million of the gain has been realised on the disposal (R2 million remains unrealised).      
7.   Discontinued operations  
  The Group disposed of the following non-core businesses in the prior period:

– Cladding Finance Proprietary Limited – the entity used to extend and manage credit to the contractors market;
– The seven store CTM retail operation in Australia; and
– Allmuss Properties Zambia Limited – a property holding company.  

The results of these businesses were thus recorded as discontinued operations in the comparative period. Cladding Finance Proprietary Limited and Allmuss Properties Zambia Limited’s contribution to Group earnings is immaterial, although R4 million profit was realised on the sale of the latter. The sale of the Australian retail operation was concluded via a management buyout, and was preceded by fixed asset impairment and other rationalisation costs totalling R9 million. A further consequence of the sale of the Australia retail operations was the derecognition of deferred taxation assets totalling R8 million, also included in the discontinued operations results in the prior comparative period.  
8.   Reclassification of Australian property  
  Given that the Group’s property in Australia is now leased to third parties, it has been reclassified from property, plant and equipment to investment property. The carrying value of this property is determined using the cost model per IAS 40, Investment Property, and was R97 million at 30 June 2015.  
9.   Staff Share Scheme  
 

During the prior comparative period, the Group implemented a share incentive scheme for all employees of the Group and its franchisees that had been in the employ of the Group and/or franchise network for a period of three uninterrupted years at each allotment date in August every year from the implementation date. As a result, 14,5 million of the Group’s shares net of forfeitures were held by qualifying staff members at 30 June 2015 (2014: 12,6 million). Until vesting, the shares will continue to be accounted for as treasury shares and have an impact on the diluted weighted average number of shares.  

The scheme is classified as an equity settled scheme in terms of IFRS 2 Share-based Payment, and has resulted in a charge of R12 million (2014: R17 million) to the Group’s income; R7 million (2014: R11 million) of this charge is an accelerated expense for franchise staff.  
           
      Reviewed  
year to  
30 June  
2015  		   Audited  
year to  
30 June  
2014  
10.   Earnings per share         
  Reconciliation of shares in issue (all figures in millions):          
  – Total number of shares issued     1 033     1 033  
  – Shares held by Share Incentive Trust     (21)    (24) 
  – BEE treasury shares     (88)    (88) 
  Shares in issue to external parties     924     921  
  Reconciliation of share numbers used for earnings per share calculations
(all figures in millions):  		        
  Weighted average number of shares     923     921  
  – Dilution effect of share awards     11     8  
  Diluted weighted average number of shares     934     929  
  Reconciliation of headline earnings (Rand millions):          
  – Profit attributable to equity shareholders     700     509  
  – Profit on sale of property, plant and equipment     (6)    (8) 
  – Impairment of Australian property, plant and equipment     –     29  
  – Fair value gain on SER-Export part disposal     (14)    –  
  – Reclassification of exchange difference to income     (19)    –  
  Headline earnings     661     530  
  Reconciliation of headline earnings for continuing operations (Rand millions):          
  – Profit attributable to equity shareholders     700     529  
  – Profit on sale of property, plant and equipment     (6)    (8) 
  – Impairment of Australian property, plant and equipment     –     20  
  – Fair value gain on SER-Export s.p.a. part disposal     (14)    –  
  – Reclassification of exchange difference to income     (19)    –  
  Headline earnings     661     541  
  No adjustments to earnings are required for diluted earning per share calculations, as the share awards do not have an impact on diluted earnings.