2014 Integrated Report

Transcription

I N T E G R AT E D R E P O RT 2 0 1 4
MISSION STATEMENT
Brimstone Investment Corporation seeks to be Profitable,
Empowering and to have a Positive Social Impact on the b
usinesses
and the individuals with whom it is involved, including shareholders,
em ployees, suppliers, customers and the greater community.
CORPORATE PROFILE
Brimstone is a black controlled and managed investment c ompany
i ncorporated and domiciled in the Republic of South Africa,
e mploying in excess of 3 400 employees in its s ubsidiaries and in
excess of 24 000 in its associates and i nvestments. Brimstone seeks
to achieve above average returns for its s hareholders by i nvesting
in wealth c reating businesses and entering into s trategic alliances
to which it contributes capital, i nnovative ideas, m
anagement
e xpertise, impeccable empowerment c redentials and a values
d riven corporate identity.
CONTENTS
OVERVIEW
2014
C O R P O R AT E
I N T E G R AT E D R E P O RT
CORPORATE OVERVIEW
Salient Financial Highlights. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Corporate Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Five Year Share Price Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Dividends Paid. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Chairman’s Review. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Board of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
S U S TA I N A B I L I T Y
Five Year Financial Review. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Executive Directors’ Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Group Profile . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
C O R P O R AT E
Social and Ethics Committee Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
GOVERNANCE
CORPORATE GOVERNANCE
S TAT E M E N T S
Integrated Sustainability Report. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
ANNUAL FINANCIAL
SUSTAINABILITY
Intrinsic Net Asset Value Report. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Remuneration Report. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
Audit and Risk Committee Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
AUDITED ANNUAL FINANCIAL STATEMENTS
Contents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Notes to the Annual Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
Notice of Annual General Meeting. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 146
Curriculum Vitae. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 150
Proxy Form . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 151
B R I M S T O N E I N V E S T M E N T C O R P O R AT I O N L I M I T E D 1
2014
SALIENT FINANCIAL HIGHLIGHTS
for the year ended 31 December 2014
2014
2013
Percentage
Change
2 221 054
101 858
286 238
7 933 066
2 086 376
64 386
460 581
6 799 593
6%
58%
-38%
17%
Weighted average number of shares in issue net of treasury shares (000’s)
Shares in issue at end of year net of treasury shares (000’s)
244 919
245 151
244 414
244 531
0%
0%
Performance per share (cents)
Headline Earnings
Net Asset Value
116.9
1 356.3
188.4
1 324.0
-38%
2%
R’000
Revenue
Operating Profit
Headline Earnings
Total Assets
FIVE YEAR FINANCIAL REVIEW
12 months
ended
31 December
2014
12 months
ended
31 December
2013
12 months
ended
31 December
2012
12 months
ended
31 December
2011
12 months
ended
31 December
2010
Operating results (R’ 000)
Revenue
Operating Profit
Headline Earnings
2 221 054
101 858
286 238
2 086 376
64 386
460 581
1 946 472
131 038
844 362
1 867 915
132 623
429 883
1 796 904
314 237
415 418
Balance Sheet (R’000)
Total Assets
Net Assets
7 933 066
3 434 405
6 799 593
3 372 120
5 725 464
2 929 986
4 604 804
2 113 630
3 619 830
1 673 122
116.9
30.0
20.0
1 356.3
1 979.4
188.4
30.0
10.0
1 324.0
1 708.8
346.0
25.0
—
1 153.1
1 473.7
176.3
18.0
—
819.6
981.0
172.7
15.0
—
643.9
774.0
Share statistics
Weighted average number of shares in issue
net of treasury shares
Shares in issue at end of year net of treasury shares
Closing share price: Ordinary (cents)
Closing share price: “N” ordinary (cents)
244 918 888
245 151 175
1 700
1 650
244 413 514
244 531 075
1 400
1 400
244 038 657
244 108 075
1 125
1 195
243 878 492
243 873 731
1 000
820
240 499 546
243 891 472
760
510
Market capitalisation: Ordinary shares (R’000)*
Market capitalisation: “N” ordinary shares (R’000)*
Total (R’000)
726 917
3 339 457
4 066 374
598 638
2 824 798
3 423 436
481 364
2 405 776
2 887 140
428 298
1 648 560
2 076 858
355 491
1 359 049
1 714 540
Performance per share (cents)
Headline Earnings
Dividend
Special dividend
Net Asset Value
Intrinsic Net Asset Value
*Net of treasury shares
2B R I M S T O N E
I N V E S T M E N T C O R P O R AT I O N L I M I T E D
2014
CORPORATE INFORMATION
Registered office
1st Floor, Slade House
Boundary Terraces
1 Mariendahl Lane, Newlands 7700
PO Box 44580, Claremont 7735
Telephone number
+27 21 683 1444
Fax number
+27 21 683 1285
www.brimstone.co.za
Non-Executive ^
Independent º
Executive †
Member: Audit and risk committee >
Member: Nominations committee #
Member: Remuneration committee •
Member: Investment committee *
Member: Social and ethics committee ∞
Facebook
www.facebook.com/BrimstoneInvestment
Twitter
@BrimstoneLtd
Email
info@brimstone.co.za
Company secretary
Bankers
Tiloshani Moodley BA (Law) LLB
Internal auditors
KPMG
Attorneys
C O R P O R AT E
Deloitte & Touche
Nedbank Capital
(A division of Nedbank Ltd)
135 Rivonia Road
Sandton 2196
PO Box 144, Johannesburg 2000
+27 11 295 8602
GOVERNANCE
Auditors
Sponsor
S TAT E M E N T S
Michael O’Dea BCom (CA)SA
ANNUAL FINANCIAL
Nedbank Ltd
First National Bank of Southern Africa Ltd
Chief financial officer
Cliffe Dekker Hofmeyr Inc.
Edward Nathan Sonnenbergs
Company registration number
Transfer secretaries
1995/010442/06
Computershare Investor Services (Pty) Ltd
70 Marshall Street, Johannesburg 2001
PO Box 61051, Marshalltown 2107
+27 11 370 7700
RESPONSIBILITY OF THE BOARD
The board acknowledges its responsibility to ensure the integrity of this integrated report, which in the board’s opinion addresses all
material issues and fairly presents the group’s integrated performance.
MA Brey
Chief Executive Officer
9 March 2015
Website
Membership of committees at 31 December 2014
F Robertson
Executive Chairman
OVERVIEW
F Robertson (60) (Executive Chairman) †∞
MA Brey (60) (Chief Executive Officer) †∞
LZ Brozin (59) (Financial Director) †
PL Campher (67) (Lead Independent Director) ^º*>#∞•
MJT Hewu (51) ^º#•
N Khan (58) ^º>*∞
KR Moloko (46) ^º>
MK Ndebele (65) ^º#•
LA Parker (61) ^º>*
FD Roman (51) ^º>
C O R P O R AT E
Directors
2014
FIVE YEAR SHARE PRICE PERFORMANCE
1 800
1 600
1 400
1 200
CENTS
1 000
800
600
400
200
14
7/
1/
20
14
1/
1/
20
13
7/
1/
20
13
1/
1/
20
12
1/
1/
7/
7/
20
1/
/2
1/
1/
1/
20
11
1
01
11
20
0
7/
1/
1/
1/
/2
20
01
10
0
B RT BRN
DIVIDENDS PAID
160
140
CENTS PER SHARE
120
100
80
60
40
20
SPECIAL DIVIDEND
4B R I M S T O N E
15
20
14
20
13
20
12
20
11
20
10
20
09
20
08
20
07
20
06
20
05
20
04
20
03
20
19
99
0
O R D I N A RY D I V I D E N D
2014
c ommitment to serve all stakeholders to the best of our ability.
A group like Brimstone can never exist in isolation nor can it ever
forget or lose touch with its roots. Profitability, empowerment, and
positive social impact is an integral part of our DNA. So when we
talk empowerment we address that which is deeply entrenched in
our corporate culture and raison d’être, reminding us constantly of
the transformative role we have to play in society.
OVERVIEW
C O R P O R AT E
According to the United Nations, the global economy expanded
during 2014 at a moderate and uneven pace. Legacies from the
global financial crisis continued to weigh on growth, while new
challenges have emerged, including geopolitical conflicts and
natural pandemics.
The United Nations forecasts trade growth to pick up
moderately with the volume of world imports of goods and
services projected to grow by 4.7% in 2015. Fiscal tightening is
expected to continue in most developed economies albeit at a
slower pace.
Among the developing countries, Africa’s overall growth
momentum is expected to continue, with GDP growth expected to
accelerate to 4.6% in 2015 and 4.9% in 2016. Many developing
countries and economies in transition appear vulnerable to a
tightening of global financial conditions, aggravation of
geopolitical tensions, escalation of the Ebola epidemic, high
current-account deficits and rapid credit growth. A broad-based
downturn in emerging economies, particularly a sharp slowdown
in China, would weigh on economic performance worldwide.
The extreme volatility in oil prices poses a risk to both oil
exporting and oil importing countries.
The South African economy experienced growth of 1.5% in
2014, down from 2.2% in 2013. The largest contributors to growth
were increased activity in general government services, finance,
real estate and business services. There was also growth in the
wholesale, retail, motor, catering, accommodation, transport,
storage and communications industries.
South Africa in contrast to many other emerging economies
has seen unemployment rise in 2014. The negative impact on
growth in the first three quarters of 2014 was in the main
GOVERNANCE
Macro-economic overview
S TAT E M E N T S
Brimstone’s existence is enshrined in a philosophy based on three
tenets. We have always aimed to be profitable, empowering, and
to have a positive social impact on society. If one were to just
pause and critically evaluate each of these three indicators as a
proxy for our being, the answers point to a track record of
success. Yet, these three indicators are so intricately linked and
intertwined that if any one exists without the other then this
journey cannot be defined as a success.
In terms of profitability, the Group again reported a profit for
this year, and declared a final and special dividend to shareholders.
This is the 13th consecutive year that the company will pay
dividends to shareholders. In terms of empowerment, 74.12% of
the company’s voting rights are vested in the hands of designated
black groups or individuals. Brimstone Empowerment Share Trust
continues to deliver to at least 26 NGO’s in turn support in excess
of 3.5 million beneficiaries on a daily basis.
Brimstone was founded on the Cape Flats in 1995 and this
year will celebrate its 20th anniversary. Today it has a shareholder
base spread across South Africa and beyond its borders. The
company was started with an initial capital base of R3 million. No
doubt, it was a tall order to raise R3 million in 1995 and the first
port of call was to raise funds from family, friends, and community
shareholders. The market capitalisation of Brimstone at the end of
2014 was approximately R4.8 billion (per Bloomberg).
The question is frequently posed about the role, relevance,
returns, and future of investment holding companies vis-à-vis
alternative investment vehicles. In terms of returns alone R6 250
invested in the JSE All Share Index in 1995 would have been
worth approximately R60 000 by 31 December 2014. In comparison, the same amount invested in Brimstone would have been
worth in excess of R1 400 000 (assuming the investor reinvested
dividends, followed all their rights in the period, and received Life
Healthcare shares). Brimstone has also experienced a narrowing
in the discount between its Intrinsic Net Asset Value and market
price over the past few years, suggesting an increasing level of
confidence in the company.
These are issues extensively evaluated and debated by the
analysts. But at the heart of Brimstone lies an unwavering
ANNUAL FINANCIAL
A track record of delivery
“Brimstone was founded with the support of
economically marginalised individuals.
Twenty years later, many of our initial investors
are still proud shareholders of Brimstone.”
C O R P O R AT E
CHAIRMAN’S REVIEW
2014
CHAIRMAN’S REVIEW (CONTINUED)
a ttributable to domestic labour issues. The last quarter saw a
return of major disruptions to power supply. The full effect of this
is expected to be realised in this year.
In his latest budget speech the Minister of Finance forecast a
growth rate of 2% for South Africa for 2015. South Africa still has
many historical and local structural issues plaguing its economy
and our communities. Lasting solutions can only be found if we
act as a collective and all participants in the economy have a role
to play when we commit to a t rajectory of real economic growth
and a better life for all in our society.
Strategic update
For the year under review Brimstone’s Total Assets increased by
R1.1 billion to R7.9 billion. Its Intrinsic Net Asset Value (INAV)
grew from R4.19 billion to R4.86 billion. Headline earnings per
share decreased from 188.4 cents per share to 116.9 cents per
share. It should be noted that the results for the year were
negatively influenced by the losses incurred by subsidiary Lion of
Africa, lower fair value gains on underlying investments, reduced
equity accounted earnings, and an impairment of an investment in
an associate. Despite the negative impact of these on the results,
the Group is still well resourced with assets of R7.9 billion and
total debt of R2.2 billion. It has cash resources and immediate
access to significant funding facilities, and will continue to pursue
opportunities that fit its criteria of strong cash flows, solid
management, real assets and socially responsible policies. We are
confident that the remedial action initiated at Lion of Africa will
yield the desired results.
During the year under review we celebrated the 50th
birthday of our subsidiary Sea Harvest. The business reported
very good results as it defended its market leading position in the
supply of white fish. We commend the team at Sea Harvest under
the leadership of Felix Ratheb for delivering a solid set of results.
Our primary objective remains to enhance and deliver value to our
shareholders. The group’s key investment sectors are the defensive
sectors of food, financial services, healthcare, and infrastructure.
Its investments in restricted BEE structures have grown to
approximately 7% of intrinsic gross asset value.
The Group has a proven track record of creating and
unlocking shareholder value, supported by an experienced team
with proven deal-making ability. The Group is defined by its bona
fide empowerment credentials, and its ability to enhance NAV and
pay dividends. It has proven its ability as a lead empowerment
partner of choice with a capacity to lead broad-based empowerment consortia. The Group will maintain a long-term view and
partnership approach to its underlying investments.
Corporate Social Responsibility
Our support programmes are primarily directed at developing and
empowering previously disadvantaged groupings. I am pleased to
advise that the Brimstone Empowerment Share Trust (BEST) has
awarded shares to three new beneficiaries during the year. The
recipients of these shares were: Mitchells Plain Education Forum
(Western Cape), Women and Men Against Child Abuse
(Gauteng) and South African National Zakah Fund (National).
To date BEST has allotted 1 315 000 Brimstone shares to
26 organisations across South Africa. The value of these shares at
year end was in excess of R22 million. These shareholders support
more than 3.5 million beneficiaries across South Africa.
In addition to this Brimstone supports many other social
interventions throughout the year.
Brimstone was founded with the support of economically
marginalised individuals. Twenty years later, many of our initial
investors are still proud shareholders of Brimstone. We are very
“South Africa still has many historical and local
structural issues plaguing its economy and our
communities. Lasting solutions can only be found
if we act as a collective and all participants in the
economy have a role to play when we commit to a
trajectory of real economic growth and a better
life for all in our society.”
6B R I M S T O N E
We remain cognisant that corporate governance should be an
integral part of the way we do business. For this reason we continuously review, modify or adapt our risk and governance policies to
ensure a sustainable, responsible business. Mr PL Campher
continues as lead independent non-executive director.
Dividend distribution
The board considered the results and approved a total dividend of
50 cents per share, comprising a final dividend of 30 cents per
share, and a special dividend of 20 cents per share payable to
shareholders on 23 March 2015. We are proud to advise that this
is the 13th consecutive year of dividend payments.
I would like to thank all Brimstone staff and executive directors,
especially Mustaq Brey and Lawrie Brozin for their continued
support and dedication. I also wish to thank the entire board of
directors for their invaluable counsel and continued d
edication to
excellence in corporate g overnance, always placing the interest
of our shareholders first. We have walked the path as a collective
for the past 20 years, amidst extreme challenges, but have emerged
with our integrity, credibility and dignity intact.
I thank all our shareholders who continue to support,
trust and believe in the Company’s ability to deliver to their
expectations. Thank you to the executive teams and staff of all
our subsidiaries and investee companies for their continued
delivery on our growth strategy. We look forward to making this,
the 20th anniversary year of Brimstone, another successful year
for all stakeholders.
F Robertson
Executive Chairman
OVERVIEW
C O R P O R AT E
C O R P O R AT E
Governance and the Board
Acknowledgements
GOVERNANCE
proud of the shareholders’ interest in the company. Our Annual
General Meeting attracts more than 300 attendees, and we value
our continuous engagement with them. The Brimstone AGM is
hailed as the AGM with the most attendees for a listed company in
South Africa.
S TAT E M E N T S
“Profitability, Empowerment, and Positive Social
Impact is an integral part of our DNA. So when
we talk empowerment we address that which is
deeply entrenched in our corporate culture and
raison d’être, reminding us constantly of the
transformative role we have to play in society.
2014
ANNUAL FINANCIAL
2014
BOARD OF DIRECTORS
Executive directors
F Robertson
MA Brey
LZ Brozin
Executive Chairman
Length of service
with the Company:
19 years
Directorships:
Non-executive chairman of
Lion of Africa Insurance
Company Ltd; Sea Harvest
Holdings (Pty) Ltd;
House of Monatic (Pty) Ltd
and serves on the boards
of Remgro Ltd;
Aon Re Africa (Pty) Ltd;
Old Mutual Emerging
Markets Ltd;
Novus Holdings Ltd.
Length of service
with the Company:
19 years
Directorships:
Non-executive chairman of
Oceana Group Ltd;
Life Healthcare Group
Holdings Ltd: and serves on
the boards of Nedbank Ltd;
Lion of Africa Insurance
Company Ltd; Aon Re
Africa (Pty) Ltd;
and The Scientific Group
(Pty) Ltd.
Financial Director
Length of service
with the Company:
18 years
Directorships:
The Scientific Group
(Pty) Ltd; Nandos Group
Holdings Ltd and Sea
Harvest Holdings (Pty) Ltd.
Independent non-executive directors
PL Campher
MJT Hewu
N Khan
KR Moloko
Lead Independent Director Date appointed to the Board:
7 March 2006
Qualification: BEcon
Directorships: Sun International Ltd; Strate
Ltd; Savings and Investments Association of
South Africa (ASISA); International
Investment Funds Association;
Equites Property Fund Ltd;
JSE Clear (SARCOM).
Date appointed to the Board:
15 September 1997
Qualification: BComm (Hons); B.Phil (Hons)
Directorships: Kayamnandi Investments;
Onyx Financial Services.
1 November 1995
Qualifications: BSc(QS); MAQS; AAArb
Directorships: Stonefountain Properties
(Pty) Ltd; Perthpark Properties (Pty) Ltd;
BTKM Inc and Proman Project Management
Services (Pty) Ltd; Business Park
Development Company (Pty) Ltd;
Equites Property Fund Ltd.
Date appointed to the board:
5 November 2013
Qualifications: NDip (Building Survey),
BSc (QS), BCom, PGDA, CA(SA)
Directorships: The Prescient Foundation;
KWV Holdings; Fairvest Property Holdings;
Inkari Basadi Investments; Prescient Limited;
ESOR Ltd; Holdsport Ltd; Ikamva Labantu
Charitable Trust.
8B R I M S T O N E
MK Ndebele
LA Parker
FD Roman
7 March 2006
Qualifications: BA (Economics);
MSW (Social Planning)
Directorships: Imam Abdullah Haron
Education Trust (trustee); Desmond Tutu
HIV Foundation (trustee); Anglican
Diocese of Cape Town (Lay Canon
and Chancellor).
1 November 1995
Directorships: FPG Group (Pty) Ltd;
Suburban Cigarette Distributors (Pty) Ltd;
Investbrands CC; Al Amien Foods CC
and is a member of the board of Red Cross
Childrens’ Hospital.
26 March 2008
Qualifications: BA; Post Graduate Secondary
Teacher’s Diploma
Directorship: Direng Investment Holdings;
Umlingo (Pty) Ltd; Distinct Few (Pty) Ltd.
2014
N Jogee
TJ Tapela
C Vanda
S Hamit
S Dhansay
P Sibanda
M O’Dea
L Ramgopaul
N Pangarker
E Visagie
T Moodley
M Brey
L Mangesi
W Sonday
T Mosia
I Khan
G Kotze
F Allie
C O R P O R AT E
D Masango
GOVERNANCE
S Patel
S TAT E M E N T S
T Lebasa
ANNUAL FINANCIAL
N Feleza
OVERVIEW
C O R P O R AT E
TEAM BRIMSTONE
2014
10
B R I M S T O N E I N V E S T M E N T C O R P O R AT I O N L I M I T E D
2014
EXECUTIVE DIRECTORS’ REPORT
Oceana
Total Assets increased by R1.1 billion to R7.9 billion at
31 December 2014. Intrinsic Net Asset Value (INAV) increased
16.1% from R4.19 billion in the previous year to R4.86 billion.
Investments in the food sector comprise 40% of intrinsic gross
asset value, followed by healthcare at 29%, financial services at
11%, infrastructure at 10% and restricted BEE structures at 7%.
The balance comprises smaller investments across various sectors.
The Company’s shares performed well during the year with the
Ordinary share price growing by 21.4% and the “N” ordinary
share price growing by 17.9% over the year.
Profit for the year under review decreased as a result of
losses incurred by subsidiary Lion of Africa Insurance Company,
lower fair value gains on underlying investments, reduced equity
accounted earnings and an impairment of an investment in an
associate.
The Company declared a final dividend of 30 cents per share
and a special dividend of 20 cents per share.
Oceana’s share price closed at R104.86 per share, up from R82.00
per share at 31 December 2013. Brimstone received dividends of
R75.8 million from Oceana during the year under review and
recorded R29.8 million in equity accounted earnings. Oceana
made a distribution to its staff share trust during the year.
Brimstone’s share amounting to R58.9 million was charged
directly to Retained Earnings.
Catches for 2014 were 18% ahead of prior year, driven by
improved vessel utilisation and increased catch rates. Both the wet
fish and freezer fleets performed well during the year. Sales were
strong both locally and internationally with continued demand for
hake. This resulted in reasonable price increases being achieved in
the local market and prices being maintained in the low
inflationary export markets, which further benefited from
favourable exchange rates. Revenue was 10% higher than last
year. Sea Harvest maintained its position as a market leader in the
South African frozen fish retail segment. Operating profit before
interest and exceptional items increased by 58% to R109 million.
Sea Harvest expanded its fleet with the acquisition of a new
vessel, Harvest Atlantic Peace at a cost of R130 million.
Brimstone’s rights to Tiger Brands shares, accounted for as
options, have been revalued at year end. The independently
calculated option valuation was based on a closing share price of
R368.06 per share, up from R266.93 per share at 31 December
2013. The investment was revalued upwards by R161 million.
These rights mature on 31 December 2017.
C O R P O R AT E
Food sector
Sea Harvest
Tiger Brands
GOVERNANCE
Investment Portfolio Review
During 2014, Taste Holdings concluded a Master Franchise
Agreement with Domino’s Pizza which enables it to develop the
Domino’s Pizza brand in seven Southern African countries.
This agreement will allow Taste Holdings to convert its existing
Scooters and St Elmo’s outlets into Domino’s Pizza outlets as well
as open new Domino’s Pizza outlets. Taste Holdings raised
R180 million through a rights issue to partly fund the Domino’s
Pizza rollout and to pursue other opportunities. Taste Holdings
acquired Arthur Kaplan Jewellers, a leading luxury watch and
jewellery retailer in the fourth quarter of 2014. Brimstone
acquired a further 13.2 million Taste Holdings shares during 2014
at R3 per share. The share price closed at R3.20, down from
R3.75 per share at 31 December 2013.
S TAT E M E N T S
Total assets increased by 16.7% from R6.8 billion to R7.9 billion in
the year under review. Net asset value increased by 2.6% from
R3.2 billion to R3.3 billion in the year under review.
INAV at 31 December 2014 calculated on a line-by-line basis,
totalled R4.86 billion, or R19.79 per share (31 December 2013:
R4.19 billion or R17.09 per share), representing an increase of
16.1% from 2013 (an increase of 15.8% on a per share basis).
On a fully diluted basis INAV per share is R18.58 or an increase
of 15% on the R16.16 reported at 31 December 2013.
As at 31 December 2014, Brimstone Ordinary shares were
trading at a discount of 14.1% to INAV (31 December 2013:
18.1%). Brimstone “N” ordinary shares traded at a discount of
16.6% to Brimstone’s INAV (31 December 2013: 18.1%).
The breakdown of INAV is available on the Company’s
website at www.brimstone.co.za.
Taste Holdings
ANNUAL FINANCIAL
Net asset value
OVERVIEW
Highlights
C O R P O R AT E
Financial Services Sector
Lion of Africa Holdings
Lion of Africa experienced another year of disappointing results,
reporting a loss from operations of R180 million which included a
charge of R86 million arising from the annual impairment review
of reinsurance assets. Brimstone introduced a further R50 million
in capital during the year under review. The investment has been
written down to R20 million from R140 million at the end of the
previous year. Remedial action has commenced with a strategic
and operational review of this investment.
Aon Re Africa
Aon Re Africa trading as Aon Benfield, is the leading reinsurance
broker licensed and operating in South Africa and the rest of the
continent. Aon Re Africa successfully secured new business across
all divisions with impressive organic growth specifically in Africa.
Brimstone received a dividend of R7.5 million from Aon Re Africa
and recorded R0.6 million in equity accounted earnings during the
year under review.
2014
EXECUTIVE DIRECTORS’ REPORT (CONTINUED)
Afena Capital
Afena Capital is an investment management firm that offers
specialist equity and balanced portfolios serving the Southern
African institutional market. Brimstone received a dividend of
R2.6 million from Afena during the year under review which
exceeded equity accounted earnings from Afena by R0.8 million.
Following the loss of certain assets under management, Brimstone
has impaired its investment in Afena by R28.3 million to R21 million.
Nedbank
Brimstone’s rights to Nedbank shares, accounted for as options,
have been revalued at year end based on the estimated number
of unencumbered shares Brimstone will retain subsequent to the
exercise by Nedbank of its call option, which was exercised on
23 February 2015. The valuation was based on a closing price of
R249.00 per share, up from R210.00 per share at 31 December
2013. The investment was revalued upwards by R151 million and
has been included in current assets.
Old Mutual plc
Brimstone’s rights to Old Mutual plc shares, accounted for as
options, have been revalued at year end, based on a closing price
of R34.70 per share, up from R33.79 per share at 31 December
2013. The investment was revalued upwards by R28.3 million.
This investment is included in current assets as the rights mature
on 1 May 2015.
Healthcare sector
Life Healthcare
Life Healthcare’s share price closed at R42.76 per share, up from
R41.86 per share at 31 December 2013. The investment was
revalued upwards by R47.3 million. Brimstone received dividends
amounting to R126.5 million during the year, which included a
special dividend of R52.5 million. Brimstone remains one of the
largest shareholders in Life Healthcare which will continue to
focus on its growth objectives in South Africa, India and Poland.
Infrastructure
Grindrod
Grindrod has evolved from being primarily focused on shipping
into an operationally integrated company providing end-to-end
solutions for the movement of cargo by road, rail and sea using
specialised assets and infrastructure focused on dry-bulk and
liquid-bulk commodities, vehicles and containers.
In July 2014 Brimstone, via a consortium of investors
including Calulo Investments Proprietary Limited and Solethu
Investments Proprietary Limited, subscribed for 64 million
Grindrod ordinary shares at a price of R25.00 per share, resulting
in the Consortium SPV having a shareholding in Grindrod of
approximately 8.4%. Brimstone has a shareholding of 59.2% in the
Consortium SPV, resulting in an effective indirect shareholding in
Grindrod of 4.97%.
Due to shared control in the structure, Brimstone accounts
for its share of the results in the Consortium SPV as a joint
venture.
Brimstone’s share of the consortium losses amounted to
R96 million. Grindrod’s share price closed at R22.40 at year end.
Restricted BEE structures
MTN Zakhele
MTN Zakhele is a Black owned investment company that holds
approximately 4% of MTN Group. The success of MTN Zakhele
depends on the share price performance of MTN Group as well as
the dividends paid by MTN Group as MTN Zakhele uses the
dividends received to reduce its funding obligations. During 2014,
MTN Zakhele shares started trading over the counter between
Black individuals and groups. Brimstone acquired a further
1.16 million MTN Zakhele shares during 2014 at an average price
of R99.10 per share. At year end Brimstone held 2.2 million MTN
Zakhele shares, which closed at R108.50 per share. The
investment was revalued downwards by a net R11.7 million.
Previously it was valued as an option which was priced at a
premium to the current traded value.
Brimstone, as part of the consortium that owns The Scientific
Group, has entered into an agreement with Ascendis Health
Limited in October 2014 for the disposal of 100% of the
diagnostics business of The Scientific Group, being the majority
of The Scientific Group’s business. The effects of this disposal will
be accounted for in 2015 as the final conditions precedent were
met in 2015. The consortium will retain the medical business of
The Scientific Group. Brimstone recorded R2.9 million in equity
accounted earnings from The Scientific Group for the year.
12
Phuthuma Nathi
Phuthuma Nathi is a Black owned investment company that holds
20% of MultiChoice South Africa and whose shares trade over the
counter. Multichoice South Africa comprises businesses that
operate pay-television subscriber platforms (DSTV), pay-television channels and internet and mobile platforms in South Africa.
Full-year consolidated revenues and core headline earnings both
grew by 15% for the year ended March 2014. The preference
share funding in Phuthuma Nathi has now been fully repaid.
Brimstone acquired a further 1.1 million Phuthuma Nathi shares
in 2014 at an average price of R126.94 per share. Brimstone
received dividends of R 19.8 million from Phuthuma Nathi. At
year end Brimstone held 2.1 million Phuthuma Nathi 1 shares and
Brimstone holds a 22% effective economic ownership in Rex
Trueform and African & Overseas Enterprises, which it acquired
in 2007. The market price of all classes of Rex Trueform and
African & Overseas Enterprises shares increased during the year
under review resulting in a upward revaluation of R4.8 million.
Environment and the community
This is Brimstone’s fourth integrated report which complies with
the guidelines and recommendations of the King Report on
Governance for South Africa 2009 (King III). The sustainability
report included in this integrated report is based on guidelines
provided by the Global Reporting Initiative (GRI).
The Group is proud to report continued improvement against
applicable benchmarks set by these guidelines, which are
continuously being refined and enhanced.
This integrated report provides a snapshot of the Group’s
activities and successes over the reporting year, not the least of
which is the impact of its social programmes and the empowerment
of communities. During the year under review, the Group
introduced an additional three beneficiaries to its share participation scheme, the Brimstone Empowerment Share Trust (BEST).
There are currently 26 beneficiaries in the trust, each with an
allocation of Brimstone “N” ordinary shares. These shares vest
over a period of five years, but beneficiaries have immediate
economic participation in the form of dividends. The net effects
are measurable, sustainable and far reaching social programmes
with a meaningful impact on society. Further information on
BEST may be found at www.best.za.com
Our strategic focus
The Group’s focused investment strategy remains in the defensive
sectors namely food, healthcare, financial services, infrastructure
and restricted BEE structures. Management is considering a
number of NAV enhancing and earnings enhancing options.
OVERVIEW
C O R P O R AT E
Rex Trueform and African & Overseas Enterprises
(Queenspark)
Looking ahead
This year marks the 20th anniversary of Brimstone and 17 years as
a JSE listed company. The Group was born on the Cape Flats and
today has a broad shareholder base spread across South Africa and
beyond its borders. Brimstone remains committed to creating value
for all its stakeholders.
The Group has a proven track record of creating and
unlocking shareholder value, supported by an experienced team
with proven deal-making ability. The Group is defined by its
ability to enhance NAV, pay dividends and true empowerment
credentials. It has proven its ability as an empowerment partner
of choice with a long term view and capacity to lead consortia.
Brimstone remains well capitalised to pursue value enhancing
transactions based on cash generative, quality assets. The Group
maintains a long-term view and partnership approach to its
underlying investments.
Thanks
The executive directors, Fred Robertson, Mustaq Brey and
Lawrie Brozin thank their fellow board members for their
continued guidance and good counsel, the executive team, staff,
shareholders and all stakeholders for contributing to Brimstone’s
track record of success.
C O R P O R AT E
House of Monatic’s turnover increased to R184 million while its
operating profit decreased by 31% to R7.2 million. House of
Monatic is continuing to increase its share of the corporate wear
market as well as expanding its C2 retail chain. Employment levels
remained stable throughout the year.
GOVERNANCE
House of Monatic
Brimstone’s board has declared a final dividend of 30 cents per
share for the year ended 31 December 2014 (2013: 30 cents per
share) and a special dividend of 20 cents per share for the year
ended 31 December 2014 (2013: 10 cents per share) payable on
Monday, 23 March 2015. The final dividend and the special
dividend have been declared out of income reserves.
The special dividend has been declared following the
conclusion of the Nedbank transaction. Therefore, after due
consideration and in celebration of Brimstone’s 20 years of
existence, the board of Brimstone has decided to pay a special
dividend to its shareholders.
S TAT E M E N T S
Other investments
Dividend
ANNUAL FINANCIAL
0.7 million Phuthuma Nathi 2 shares, which closed at R 131.51
and R 139.95 per share respectively. The investment was revalued
upwards by R81.5 million.
2014
14
C O R P O R AT E
GOVERNANCE
ANNUAL FINANCIAL
S TAT E M E N T S
OVERVIEW
C O R P O R AT E
2014
GROUP PROFILE
– Listed on the JSE
– Chief Executive Officer:
A Meyer
– Principal business is acute
hospital care and comprises
one of the widest geographic
spreads of acute care
hospitals and day surgical
centres in South Africa
– Investments in India and
Poland.
I N T E R E S T: 5 . 0 4 %
www.lifehealthcare.co.za
– Unlisted
S Landman
– Supplier of high quality
science and medical equipment.
I N T E R E S T: 2 8 . 2 %
– L
isted on the JSE
F Kuttel
– Oceana engages in the
catching, processing and
procurement of marine
species including pilchard,
sardine anchovy, redeye
herring, lobster,
horse mackerel, squid, tuna,
hake and other deep sea
species. Products are sold
through international and
local marketing channels. In
addition, Oceana provides
extensive cold storage and
fruit handling facilities.
I N T E R E S T: 1 6 . 8 1 %
www.scientificgroup.com
– L
isted on the JSE
C Gonzaga
– Taste Holdings invests in a
portfolio of mainly franchised, category specialist
and formula driven, quick
service restaurants and retail
brands, including St Elmos,
Maxis, Scooters Pizza, NWJ,
The Fish & Chips Co.;
Arthur Kaplan Jewellers
and Domino’s Pizza.
– Unlisted
– Managing Director:
M Maurer
– Company involved in the
design, marketing and
manufacturing of mens
and ladies clothing and
accessories.
– C2 retail stores
I N T E R E S T: 1 0 0 %
www.monatic.co.za
(Rex Trueform Clothing
Company Ltd and African
& Overseas Enterprises Ltd).
C Radowsky
– Group involved in the
marketing and retailing of
mens and ladies clothing
nationally and internationally.
I N T E R E S T: 3 3 %
I N T E R E S T: 5 8 . 4 4 %
16
I N T E R E S T: 1 4 . 4 1 %
RE AFRICA
www.rextrueform.com
– Unlisted
F Ratheb
– The principal business
of Sea Harvest is deep
sea trawling of hake.
– Largest employer on
the West Coast.
www.seaharvest.co.za
www.oceana.co.za
I N T E R E S T: 1 8 %
www.tasteholdings.co.za
– U
nlisted
S Chikumba
– Aon Re Africa is a leading
reinsurance and retrocession
intermediary in Sub Saharan
Africa, based in
Johannesburg, South Africa
with a subsidiary office in
Harare, Zimbabwe.
www.aon.com
plc
I N T E R E S T: 0 . 4 5 %
www.grindrod.co.za
– OTC market
– Black owned investment
company that holds 20%
of MultiChoice
South Africa
www.afenacapital.co.za
M Brown
– Nedbank Group Ltd is a
bank holding company,
which operates as one of the
four largest banking groups
in South Africa.
I N T E R E S T: 4 . 1 1 %
www.nedbankgroup.co.za
I N T E R E S T: 2 . 6 8 %
OVERVIEW
C O R P O R AT E
I N T E R E S T: 4 . 9 7 %
GOVERNANCE
I N T E R E S T: 0 . 7 8 %
www.tigerbrands.co.za
A Olivier
– Integrated company
providing end-to-end
solutions for the movement
of cargo by road, rail and
sea using specialised assets
and infrastructure focused
on dry-bulk and liquid-bulk
commodities, vehicles
and containers
www.lionsure.com
– Unlisted
T Naledi
– Afena Capital is an
investment asset manager.
They are active, valuation
driven long term investors
and generate returns by
adhering to a clearly defined
investment philosophy.
I N T E R E S T: 2 8 . 7 9 %
I N T E R E S T: 0 . 9 5 %
S TAT E M E N T S
I N T E R E S T: 1 0 0 %
– L
isted on the JSE
P Matlare
– A branded FMCG
(Fast Moving Consumer
Goods) company that
operates mainly in
South Africa and selected
emerging markets.
ANNUAL FINANCIAL
– Unlisted
A Samie
– Formed in August 1999,
Lion of Africa is an
established, growing
insurance brand on the
South African insurance
landscape. It is the only
Level 1 short-term BEE
Insurer. It represents a new
breed of insurer, founded on
the premise of transformation
and the provision of
innovative insurance
solutions for all
South Africans.
2014
C O R P O R AT E
www.phuthumanathi.co.za
– O
TC market
– Black owned investment
company that holds
approximately 4% of
MTN Group.
www.mtnzakhele.co.za
– Listed on the JSE and on
the London, Zimbabwe,
Namibia and Malawi Stock
Exchanges.
J Roberts
– Diversified financial services,
including life insurance,
investment management
and administration.
www.oldmutual.com
2014
INTEGRATED SUSTAINABILITY REPORT
This is the sixth integrated sustainability report prepared by
Brimstone and its subsidiaries. It has recorded considerations
from the Company and its three operating subsidiaries.
Brimstone acknowledges the requirements of the Integrated
Reporting Framework as issued by the International Integrated
Reporting Council and notes that one subsidiary has already
adopted it.
The guidelines provided by the Global Reporting Initiative
(GRI) Boundary Protocol was used in determining the parameters
of this report. Disclosure is therefore limited to the underlying
investments where the Company exercises control over the
financial and operating policies of these investments.
The King III Report on Corporate Governance (King III)
requires that the Company’s sustainability report be audited by an
independent external professional. Brimstone’s sustainability
report had not been audited but verification of certain key
sustainability metrics have been obtained through agreed upon
procedures performed by Deloitte & Touche. A copy of the agreed
upon procedures report is available at the registered office of the
Company.
Brimstone is committed to conducting all its businesses in an
environmentally, economically and socially responsible manner.
Strategy and analysis
As an investment holding company, Brimstone will continue
to create value for its wide range of shareholders by expanding on
the successful business model that has been followed since
inception. Its strategy will continue to be that of creating value for
its shareholders in an environmentally responsible way by giving
them exposure, either directly or indirectly, to a number of
businesses that display great development and growth potential
accompanied by good cash flows.
The Group structure referred to later in this report shows
the entities that Brimstone partners with as investments,
associates, joint ventures or subsidiaries. Brimstone will continue
to play a role in the development of these investments into fully
operational and meaningful businesses that contribute
environmentally, economically and socially. Each of these entities
are currently at different phases of this development cycle. At all
stages Brimstone will act in a responsible manner, while creating
value for all stakeholders. The focus of its strategy will continue
to be the creation of multiple exposures for its shareholders to a
variety of business sectors.
To enhance the above, Brimstone will continue to search for
solid businesses that generate strong cash flows in business sectors
that it prefers. Brimstone’s track record has proven that it is a
worthy partner in that it provides a network, management
expertise, an ethical culture and good corporate governance.
This culture and track record has ensured that the Company has
been able to secure a number of investments in large corporates in
the mainstream economy.
18
Organisational profile
Brimstone Investment Corporation Limited
Registration Number: 1995/010442/06
Head office: Newlands, Cape Town
Branch: Sandton, Johannesburg
The Company operates as a listed investment holding company in
South Africa. The Group comprises of three operating subsidiaries
and a number of associates, joint ventures, investments and
options. It operates with the highest levels of governance and
subscribes to the principles of King III. This ensures that it is
governed by a board of directors and the relevant sub committees.
Operationally it consists of an executive team which performs
governance, operational and evaluation roles in the Company and
its subsidiaries, associates and joint ventures. All operations are
South African although some of the investee companies serve
international markets.
The three operating subsidiaries are:
Sea Harvest Holdings
The effective percentage held is 58.44%. The principal business
of Sea Harvest is deep sea trawling of hake. Sea Harvest is the
largest employer on the West Coast of the Western Cape and
serves local and international markets. It is the leading supplier
of white fish in the country.
Lion of Africa Insurance Company
Lion of Africa is a wholly-owned subsidiary of Brimstone.
It is a midsized short-term insurance company and services the
corporate, commercial and parastatal market. It was founded on
the principle of transformation and premise of black ownership.
House of Monatic
House of Monatic is a wholly-owned subsidiary, of Brimstone.
It is a leading manufacturer of high quality mens formal wear in
South Africa. It owns and operates four C2 stores.
The business is over 100 years old and has developed wellknown brands such as Carducci and Viyella. It also manufactures
garments for leading local retailers and high-end fashion labels
currently being sold in South Africa.
2014
Investments
Life Healthcare Group Holdings Ltd
Rex Trueform Clothing Company Ltd
African & Overseas Enterprises Ltd
Taste Holdings Ltd
Phuthuma Nathi Investments Ltd
MTN Zakhele
Option Investments
Old Mutual plc
Nedbank Group Ltd
Tiger Brands Ltd
OVERVIEW
Associates and joint ventures
The Scientific Group (Pty) Ltd
Oceana Group Ltd
Aon Re Africa (Pty) Ltd
Afena Capital (Pty) Ltd
Grindrod Ltd
C O R P O R AT E
Other Investments
Scale of the operation
Market Capitalisation
Number of employees .................................................................3 417
Group revenue.................................................................. R2.2 billion
Market capitalisation* ..................................................... R4.1 billion
Total debt .......................................................................... R2.2 billion
Black beneficial economic interest.......................................... 57.49%
Black voting rights................................................................... 74.12%
The market capitalisation of Brimstone at the beginning of the
year was R3.4 billion. This has grown steadily during the year to
reach R4.1 billion at the year end. We believe that this steady
growth will continue as the market recognises Brimstone’s strategy
of value creation.
* Based on the total issued number of shares, net of treasury shares.
This report is for the year ended 31 December 2014. This is the
sixth integrated sustainability report produced by Brimstone.
It is intended to continue along this journey of integrated
reporting to enable the Company to refine the report to fully
comply with King III and the JSE Listings Requirements.
For any enquiries on this report please contact
Nisaar Pangarker (npangarker@brimstone.co.za),
Michael O’Dea (modea@brimstone.co.za) or Tiloshani Moodley
(tmoodley@brimstone.co.za) at the e-mail addresses provided
or telephone number +27 21 683 1444.
Ownership
Ownership
Ownership
58.44%
100%
100%
Number of
employees
2 422
Number of
employees
224
Number of
employees
746
C O R P O R AT E
Associates,
Joint Ventures,
Investments,
and Option
Investments
As an investment holding company Brimstone reports on
all businesses which it controls. Where it does not enjoy control,
it has chosen to influence the p
rinciples of sustainability within the
context of that business, but will however not report on the
landscape and progress. Brimstone currently has three operating
subsidiaries, i.e. Sea Harvest, Lion of Africa and House of
Monatic. These subsidiaries are unlisted and are operated and
managed as independent entities with autonomous boards of
directors. Data relating to investments where Brimstone does not
exercise operational control are not presented in this report.
This approach has been determined using the GRI guidelines
on boundary setting, as published.
GOVERNANCE
Report Scope and Boundary
S TAT E M E N T S
Below is a schematic presentation of Brimstone and its operating
subsidiaries, including information regarding their number
of employees and ownership interest. Only summarised
“non-financial” disclosures relating to the social and environmental
performance of Brimstone’s operating subsidiaries are provided
in this report.
Report Profile
ANNUAL FINANCIAL
Organisational Structure
Refer to Appendix 2 and Appendix 3 for a complete list of Investments in associate companies and joint ventures and investments.
2014
INTEGRATED SUSTAINABILITY REPORT (CONTINUED)
Stakeholders
Stakeholders are continually identified by a careful examination of
the businesses and the effects they have on the wider economy and
community. This is done at Group level and includes similar
assessments at subsidiary level. By engaging with these stakeholders common issues emerge and these have been consolidated
in the stakeholder table provided in this report. Brimstone
considers all issues to be important but has prioritised them by the
availability of the relevant resources and legislative deadlines.
This report is not restrictive and it endeavours to include all
areas raised in the economic, environmental and social spheres of
our Group. As an investment holding company, Brimstone
continues to emphasise the qualitative aspects of the triple bottom
line (economic, environmental and social) and has started to
develop measurement techniques on the quantitative measurements in the subsidiaries.
Governance, Commitments and Engagement
Governance
The highest governing body at Brimstone continues to be the
Board of Directors.
The Board remains fully committed to the principles of
integrity, transparency and accountability in its dealings with
all its stakeholders. It endorses good corporate governance and
ensures that the Company is compliant with the Code of
Corporate Practices and Conduct contained in the King III Report
on Corporate Governance (King III). Brimstone is an investment
holding company and accordingly all references to “the Group’’ in
this context denote the Company and its subsidiaries.
The Board is satisfied that Brimstone has met the principles of
King III as legislatively required throughout the year under review.
When a principle of King III has not been adhered to as specified,
this is explained where relevant. A summary of all the principles of
King III that were not applied is presented below:
–The Chairman of the Board, Mr F Robertson was appointed
as Executive Chairman effective 17 January 2013. In line
with good corporate governance, best practice and the Listing
Requirements of the JSE Limited, Mr PL Campher serves as
Lead Independent Director.
–The nominations committee and board perform evaluations
annually, but have decided not to disclose the overview of the
evaluation process, results and action plans in the integrated
report due to their potentially sensitive nature.
–The Board does not intend to institute a formal dispute
resolution processes as it believes that the existing processes
within the Group operate satisfactorily and do not require a
more formal and separate mechanism. Shareholders have
remedies in terms of the Companies Act.
–Non-executive directors board fees are not based on an
attendance fee per meeting. Attendance at board meetings has
20
generally been very good and where directors were unable to
attend a meeting, they nevertheless contributed to matters to
be considered at the relevant meeting.
–While the social and ethics committee comprises of both
executive and non-executive directors, it does not comprise of
a majority of non-executive directors. The Board is satisfied
however that the members possess the requisite knowledge
and expertise on matters to be considered by the committee in
the performance of its duties.
The Board is further satisfied that the Company has met the
requirements of the Companies Act and the JSE Listings
Requirements.
An index on the Company’s application of each King III principle
is published on the Company’s website at www.brimstone.co.za.
Board of Directors
The Board has a formal charter setting out, inter alia, its composition, meeting frequency, powers and responsibilities, particularly
with regard to financial, statutory, administrative, regulatory and
human resource matters.
Key responsibilities in terms of the charter include the following:
–Determining the Company’s vision, mission and key
objectives;
–Determining the Group’s values and incorporating them into
the Code of Conduct;
– Appointment of new directors;
–Providing strategic direction to the Company and taking
responsibility for the adoption of strategic plans;
–Monitoring compliance with laws and regulations and codes
of best business practice;
–Ensuring that relevant and accurate information is timeously
communicated to stakeholders; and
– Evaluating the Company and the Group as a going concern.
The Board is satisfied that it has discharged its duties and
obligations as described in the Board charter, during the past
financial year.
To ensure a balance with no individual having unfettered
powers of decision-making, a clear division of responsibilities
exists between the Board and executive management.
The Board provides effective leadership and vision, aiming
to enhance shareholder value and ensure long-term sustainable
development and growth of the Company for the benefit of
shareholders and stakeholders over time.
The Board meets at least four times a year. Additional
meetings are convened as and when necessary. All members of the
Board have unlimited access to the services of the Company
Secretary and senior management, as well as all Company records.
Company Secretary’s role and responsibilities
The composition of the Board reflects a balance of executive and
non-executive directors. Taking into account the size of the Board,
diversity and demographics, the majority of directors are
independent.
As at year end the Board consisted of three executive and
seven independent non-executive directors (one of whom is the
Lead Independent Director).
Non-executive directors are selected to serve on the Board
for their broader knowledge and experience and are expected to
contribute effectively to decision-making and the formulation of
policy. The independence of non-executive directors, who have
served on the Board for more than nine years, is subject to review
by the Board.
In terms of the MOI of the Company at least one third of the
directors must retire by rotation annually and may make
themselves available for re-election at an annual general meeting.
The roles and responsibilities of the Chairman of the Board
and the Chief Executive Officer are separated. One of the
principles of King III is that the Chairman of the Board be an
independent non-executive director. Mr F Robertson was
appointed Executive Chairman early in 2013. The Board believes
that Mr Robertson (who served as Executive Deputy-Chairman
from 2002) has the required level of expertise and e xperience to
act as Chairman of the Group and oversee the strategy of
unlocking shareholder value for the benefit of shareholders.
Mr PL Campher serves as Lead Independent Director, in
compliance with King III and the JSE Listings Requirements.
All directors have unlimited access to the services of the Company
Secretary, Mrs T Moodley, who is responsible to the Board for
ensuring that proper corporate governance principles are adhered
to and that Board orientation and training is provided where
appropriate. The Board has considered and satisfied itself on the
competence and qualifications of the Company Secretary.
The Company Secretary is not a director of Brimstone and
has an arm’s length relationship with the Board and the directors.
Brimstone strives to be an employer of choice that reflects the rich
potential of the whole of South African society.
At year-end the nominations committee comprised
Mr MJT Hewu (chairman of the committee), Mr PL Campher
(member) and Mrs M Ndebele (member).
The main objective of the nominations committee is to assist
the board in determining and regularly reviewing the size,
structure, composition and effectiveness of the board and its
subcommittees, in the context of the company’s strategy. The
committee meets at least twice a year. The committee is responsible for nominating directors for appointment and it annually
evaluates the performance of executive and non-executive
directors. Brimstone relies on the extensive experience and
networks that the members of the Board possess to recruit the
requisite skills for the Board. Directors do not have long-term
contracts or exceptional benefits associated with the termination of
services.
Remuneration committee
The committee comprises of three non-executive directors, all
of whom are independent. The committee is chaired by the Lead
Independent director, Mr PL Campher and meets at least twice a
year. The other members of the committee are Mr MJT Hewu
and Mrs MK Ndebele. The main purpose of the committee is to
discharge the board’s responsibilities in respect of strategic human
resources issues of the company, with special focus on executive
appointments, remuneration and succession and the management
of the company’s Code of Ethics.
C O R P O R AT E
To assist directors, the Board has established a formal orientation
programme for new directors which include background material,
meetings with executive directors and senior management and
visits to the various Group Companies’ locations. In addition,
new directors will also receive information on the JSE Listings
Requirements and the obligations they impose on directors.
Should circumstances arise where a non-executive director
needs to obtain independent professional advice in order to act in
the best interest of the Company, that director is encouraged to
seek such advice with all reasonable costs being borne by the
Company.
Nominations committee
GOVERNANCE
Induction of Directors
Specific responsibilities have been delegated to board committees
with defined terms of reference set out in their respective charters.
Copies of the Board and committee charters, which are reviewed
annually, are available on request from the Company Secretary.
The current subcommittees of the Board are the audit and risk
committee, investment committee, remuneration committee,
nominations committee and the social and ethics committee.
Notwithstanding the delegation of functions to board
committees, the Board remains ultimately responsible for the
proper fulfilment of such functions, except for the functions of the
audit and risk committee relating to the appointment, fees and
terms of engagement of the external auditor.
S TAT E M E N T S
The Board and subcommittees are evaluated annually by its
members. The results of these evaluations are not disclosed in the
integrated report, but the nomination for reappointment of
directors only occurs after the evaluation of the performance of
the Board.
Board committees
ANNUAL FINANCIAL
Evaluation of the Board, board committees and individual
directors
OVERVIEW
Composition of the Board
2014
C O R P O R AT E
2014
Audit and risk committee
The committee is governed by a mandate that includes the
recommendations of King III and the requirements of the
Companies Act. The committee consists of five independent nonexecutive directors, elected by shareholders on recommendation of
the Board. The committee is chaired by Mr N Khan. The other
members of the committee are Mr PL Campher, Mrs KR Moloko,
Mr LA Parker and Ms FD Roman.
The Board is satisfied it has an effective and independent
audit and risk committee. The governance activities undertaken
by the audit and risk committee, in terms of the Companies Act,
King III and as requested by the Board, are detailed in the audit
and risk committee report on pages 59 to 60.
–Assist the Board in monitoring the Group’s performance as
a responsible corporate citizen by the monitoring of its
sustainable development practices; and
–Perform the statutory duties of a social and ethics committee
in terms of the Companies Act and other functions assigned
to it by the Board.
The committee’s report describing how it has discharged its
statutory duties in terms of the Companies Act and its additional
duties assigned to it by the Board in respect of the financial year
ended 31 December 2014 is included in the integrated report on
page 53.
Policy on trading in company securities
Investment committee
The committee comprises of independent non-executive directors
Messrs PL Campher (chairman), N Khan (member) and
LA Parker (member).
Executive management makes recommendations to the
committee who then submit investment decisions to the Board for
approval. The committee meets at least twice a year and when the
need arises.
The duties and responsibilities of the committee are:
–To assist the directors in the discharge of their duties relating
to the development and recommendation of long-term
investment opportunities for the Company;
–The investment committee does not relieve the directors of
any of their responsibilities, but assists them in fulfilling those
responsibilities; and
–The investment committee does not perform any management
functions or assume any management responsibilities and
provides the Board with independent and objective oversight
and review of the information provided by executive
management around investment decisions and makes
recommendations to the Board for its consideration.
In accordance with the Listings Requirements of the JSE, the
Company has adopted a code of conduct for trading in shares by
directors and designated employees. Directors and designated
employees are prohibited from trading in Company securities
during prohibited and closed periods.
Directors and designated employees may only deal in the
Company’s securities outside the closed period, with the approval
of the Chairman, Chief Executive Officer or Lead Independent
Director.
Conflicts of interests
All directors of the Company and its subsidiaries and senior
management, are reminded of the requirement to submit, at least
annually, a list of all their directorships and interests in contracts
with Brimstone.
Directors are required to disclose their personal financial
interests and those of persons related to them, in contracts or
other matters in which Brimstone has a material interest or which
are to be considered at a Board or committee meeting. Where a
potential conflict exists; directors are expected to recuse
themselves from relevant discussions and decisions.
Risk management
Social and ethics committee
The committee comprises two executive directors and two
independent non-executive directors. The committee is chaired by
Mr F Robertson and comprises of Messrs PL Campher, N Khan
and MA Brey. The committee invites representatives from each of
its subsidiary companies as permanent attendees to all meetings.
The Board is satisfied that the current members of the social and
ethics committee have sufficient expertise and knowledge on
matters to be considered by the committee in the performance of
its duties under the Companies Act. The committee’s responsibilities are governed by a formal mandate as approved by the Board
and the main objectives of the committee are to:
22
The Board is responsible for overseeing governance and risk.
The Board charter outlines the directors’ responsibilities for
ensuring that an appropriate system and process of risk
management is implemented and maintained.
2014
Attended
—
—
—
—
—
—
2
2
LZ Brozin
4
3
—
—
—
—
—
—
—
—
—
—
MA Brey
4
4
—
—
—
—
—
—
—
—
2
2
PL Campher
4
4
3
3
5
5
4
4
2
2
2
2
MJ Hewu
4
4
—
—
—
—
4
4
2
2
—
—
N Khan
4
4
3
3
5
5
—
—
—
—
2
2
MK Ndebele
4
3
—
—
—
—
4
3
2
2
—
—
LA Parker
4
4
3
3
5
4
—
—
—
—
—
—
K Moloko
4
4
3
3
—
—
—
—
—
—
—
—
FD Roman
4
4
3
3
—
—
—
—
—
—
—
—
Communication
Mission Statement
The Board appreciates that it is required to provide timeous,
relevant and accurate information to all its stakeholders. To this
end it consistently strives to maintain direct dialogue with all
of those who have a relationship with Brimstone on any level.
Reports and announcements are conveyed to all audiences
through the media, SENS announcement, the Brimstone website,
social media and through direct correspondence. The Company
encourages transparent, objective and relevant communication
with its shareholders, with members of the investment community
and with its business associates and partners.
While board members are expected to attend Brimstone’s
annual general meetings, the Company encourages shareholder
attendance at annual general meetings. These meetings offer an
opportunity for shareholders to provide input into the running of
their company, to raise issues of concern and to participate in
discussions related to items included in the notice of meeting.
These meetings are very well attended. All investee organisations
are represented to enable the Company’s stakeholders to
understand investee company products and services.
Brimstone seeks to be Profitable, Empowering and to have a
Positive Social Impact on the businesses and the individuals with
whom it is involved, including shareholders, employees, suppliers,
customers and the greater community.
This is the way of conducting business at Brimstone. The
deep effects of this mission statement have now become part of the
ethos of the business. It is applied across all spheres together with
the mindset of ethical behaviour and complete honesty and
integrity. When examined carefully the elements of the triple
bottom line become very visible.
OVERVIEW
Possible
—
Attended
—
C O R P O R AT E
Possible
4
GOVERNANCE
Attended
4
S TAT E M E N T S
Possible
F Robertson
ANNUAL FINANCIAL
Attendance
by directors
Attended
Social and ethics
committee
Possible
Remuneration
committee
Attended
Nominations
committee
Possible
Investment
committee
Attended
Audit committee
Possible
Board
C O R P O R AT E
Directors’ attendance at meetings
2014
Stakeholder engagement
Stakeholders have been identified by involving all reporting subsidiaries.
The list below has been developed over the six year period that this report has been presented.
Issues identified have all been considered and the concept of materiality has not been applied. All stakeholder issues are important to
Brimstone and will be considered in the context of its business in one way or another.
24
Stakeholder
Engagement frequency
Type of engagement
Material issues
Response to issues
Shareholders
Annually
Quarterly
Weekly
Adhoc
AGM
Performance publications
Shareholder interaction
Report back meetings
Shareholder meetings
Value creation and maintenance
is foremost on our agenda
Dividend distribution is
part of our business model
Employees
Ongoing
Weekly
Monthly
Quarterly
Interactive feedback meetings
Memos
Performance evaluations
Workshops
Conferences
Unions
Monthly
Quarterly
Adhoc
Meetings – Collective and
individual
Value creation
Cash distributions
Strategic direction
Profitability and long-term
business existence
Marine and resource
sustainability
Employee wellbeing
Remuneration and benefits
Working conditions
Short time
Employment equity and equal
opportunity
Productivity incentive scheme
Economic performance
Labour relations
State of work continuity
Productivity incentive scheme
Providers of Capital
Annual reviews
Monthly submissions
Affordability
Business continuity
Government and Regulators
Regulators meetings
and inspections
Annual and quarterly returns
Investee Companies
Ongoing
Quarterly
Annually
Meetings
Providing cash flow information
monthly
Meetings
Submission of performance
returns
Site visits
Meetings
Workshops
Feedback evaluations
Customers/Clients
Daily
Ongoing
Suppliers
Ongoing
Telephonic
Meetings
Email
Personal visits
All interactions
Ratings agencies
Annually
Inspections
Meetings
Pricing
Quality
Delivery
Payment terms
Payment terms
Delivery schedules
Credit worthiness
Performance hurdle compliance
Credit rating
Partners/Business – associates
including international licensors
Quarterly
Annual
Industry challenges
Business expectations
Media
Ongoing
Meetings and workshops
Regular visits
Quality audits
Interviews
Presentations
Media announcements
Site visits
Communities
Ad-hoc
Marketing
CSI
Effectiveness of CSI spend
Completeness of levies and taxes
Compliance with governing laws
PI claims
Competitiveness Fund
Funding
BBBEE
Market and trading conditions
Financial results
Strategy and value creation
Honest feedback
Market related benefit surveys
Remuneration committees
governed at highest level
Honest and participative
feedback
Relationship building
Regular communication
with staff
Providing sufficient information
to overcome risks
Audits of financial
performance
Quality assurance audits
Compliance integration
Resolved speedily with holding
company executives feeding
back market intelligence
We provide feedback and
strategic direction regularly to
subsidiaries
Regular interaction and
assurance on these issues
Assurance interaction
Executive interaction on
inspections
Clarification of queries
Industry compliance
Delegation of responsibility
for performance
Detailed financial results
Extensive disclosure
Continuous demonstration of
value creation strategy
Management of media
relationship
Core part of company values
2014
Score
3.00
2.00
4.00
1.99
0.99
1.00
7.00
2.00
0.25
OVERVIEW
22.23
grammes, Brimstone has established The Brimstone Foundation
and the Brimstone Empowerment Share Trust to extend the
long-term reach and sustainable impact of its initiatives.
C O R P O R AT E
Brimstone’s social commitment is an extension of its mission
statement of being Profitable, Empowering and to have a Positive
Social Impact on the businesses and the individuals with whom it
is involved.
As reported on in this integrated report, the Group’s activities
and its impacts, be it corporate, social or environmental are
measured against these yardsticks to ensure long-term sustainability.
As the largest employer on the Cape West Coast – and one of
the largest in the Western Cape – Brimstone directly employes in
excess of 3 400 individuals in its subsidiaries and more than
24 000 through its associates and investments.
A large number of these employees have been shareholders in
Brimstone since its early start-up days two decades ago, which
makes the Group’s stakeholder community arguably unique
among JSE listed companies. This inevitably means that the
nature and scope of Brimstone’s involvement in the community
also requires a unique approach.
For this reason, Brimstone through its own corporate social
initiatives and those of its subsidiaries and investments is involved
in education, training and development, the arts and the support
of specific charitable and social campaigns.
Apart from its internal corporate social investment pro-
Achieved
74.12%
17.36%
57.49%
9.95%
2.48%
Fulfilled
53.74%
32.52%
2.48%
0.00%
0.00%
GOVERNANCE
Nature, scope and effectiveness of all programmes on
communities
Targets
25.10%
10.00%
25.00%
10.00%
2.50%
Fulfilled
10.00%
10.00%
10.00%
S TAT E M E N T S
Brimstone’s social commitment
Weighting
3
2
4
2
1
1
7
2
1
ANNUAL FINANCIAL
Ownership indicators
Black voting rights
Black female voting rights
Black economic interest
Black female economic interest
Designated groups economic interest
Ownership fulfilment
Net value
Bonus: Black new entrants
Black participants in employee ownership schemes
Black beneficiaries of broad based ownership schemes
Black participants in co-operatives
Total Score
The Board and management of Brimstone has a firm belief in BBBEE and supports and encourages its subsidiaries and investments to
subscribe to the principles of BBBEE. At Brimstone BBBEE is a core part of its mission which is to be Profitable, Empowering and to
have a Positive Social Impact.
During the period under review Brimstone engaged Empowerdex (Pty) Ltd to certify the “Equity Ownership” score of the Company.
Verification of BBBEE ownership is governed by the Codes of Good Practice on BBBEE which were gazetted on 9 February 2007 in terms
of Section 9(1) of the Broad-Based Black Economic Empowerment Act (No. 53 of 2003). The methodology followed for the verification
and certification of Brimstone’s contributions to BBBEE ownership was taken from the provisions of Code 100 of the Broad-Based Black
Economic Empowerment Codes of Good Practice. The BBBEE equity ownership scorecard is represented below.
C O R P O R AT E
Broad Based Black Economic Empowerment (BBBEE)
Brimstone Empowerment Share Trust (BEST)
BEST was established in 2005 with the intention of supporting a
broad range of NGOs and not-for-profit organisations through the
allotment of Brimstone shares. These shares have a vested value
and can be sold by the nominated beneficiaries after a period of
five years, in tranches of 20% per annum. The beneficiary organisations participate fully in any dividends declared by Brimstone
from the date of receipt of shares.
During the period under review three organisations were
awarded Brimstone shares. They are: Mitchells Plain Education
Forum (Western Cape), Women and Men Against Child Abuse
(Randburg, Gauteng) and South African National Zakah Fund
(National).
To date BEST has allotted 1 315 000 Brimstone shares to
26 organisations across South Africa. The market value of these
shares as at 31 December 2014 was in excess of R22 million.
These shareholders support more than 3.5 million beneficiaries
across South Africa.
Further information on BEST may be found at www.best.za.com
2014
Corporate Social Initiatives
Project Winter Warmth
On an annual basis the Brimstone Foundation embarks upon
Project Winter Warmth. In excess of 5 500 blankets (of which the
Foundation sponsored 1500) were distributed by Brimstone staff
to various organisations (including children’s homes, old aged
homes, crisis management organisations and shelters).
An amount of R117 000 was spent by the Brimstone
Foundation on this project.
Life Healthcare Nursing College
During the review period Brimstone agreed to assist a further
10 students who have commenced their first year of studying
towards Enrolment as a Nurse at the Life Healthcare Nursing
College. The course runs over two years and an amount of
R92 570 was spent on this project.
Brimstone is also proud to announce that in 2014, the
10 nurses whom the Company sponsored successfully completed
their two year Certificated for Enrolment as a Nurse, course.
Mitchells Plain Education Forum (“MPEF”)
Bursary Awards
On an annual basis bursaries are awarded by Brimstone to
deserving children of subsidiary company, House of Monatic
employees. The category of studies which the candidates embark
upon range from diplomas to post graduate degrees. Bursaries are
awarded in varied increments dependent upon the type of studies
and the year of study.
During the financial year, the total spend on bursaries was
R100 000.
Maths and Science Tuition Projects
During the period under review, Brimstone supported the Imam
Abdullah Haron Trust (www.iahet.com) which facilitates various
Maths and Science tuition projects in schools throughout the
Western Cape. The principal aim of the Trust is to provide
funding across the entire spectrum of education, ranging from the
provision of infrastructure for pre-primary educational institutions
to grants for post-graduate study.
An amount of R56 241 was spent on this project.
MPEF was established in 2010. The MPEF is a non-partisan
forum which tries to mobilize and support the Mitchells Plain
community in their struggle for quality education, skills development and opportunity for young people. Since 2010 MPEF has
reached approximately 6 500 people.
An amount of R50 000 was spent on this project.
Suid Oosterfees
Brimstone and Lion of Africa annually participate as sponsors of
the Suid Oosterfees.
During the review period Brimstone contributed R50 000
towards the event.
Mandela Day
Brimstone, in p
artnership with both Old Mutual and Nedbank
joined Habitat for Humanity, the Nelson Mandela Foundation and
other organisations, to build 67 houses for residents of Pelican
Park, in the Western Cape.
The total Brimstone spend was R65 000.
Mapungubwe Institute for Strategic Reflection (MISTRA)
African Scrabble Championship
Mapungubwe Institute for Strategic Reflection was founded by a
group of South Africans with experience in research, academia,
policy-making and governance who saw the need to create a
platform of engagement around strategic issues facing South Africa.
An amount of R50 000 was spent on this initiative. Brimstone supported the African Scrabble Championship hosted
by the City of Cape Town’s Department of Sport, Recreation and
Amenities.
Brimstone contributed R10 000 toward this event.
Yabonga
Western Cape Primary Science Programme
The Western Cape Primary Science Programme (PSP) is a
registered non-profit organisation and centre for excellence in
primary education. It aims at improving the quality of teaching
and learning of the critical subjects of Natural Sciences &
Technology, Mathematics, Language & Literacy, Social Sciences
and Environment in poor communities, through providing training
and comprehensive, ongoing support to primary school teachers.
The PSP was selected as the Global Best Award winner for
Category 3 – Science, Technology, Engineering and Maths in the
Africa Region by the International Education Partnership
Network (IPN): Global Best Awards 2014 which took place in
Brussels during September.
Brimstone sponsored an amount of R10 000 toward this
programme.
26
Brimstone contributed to the Yabonga HIV/Aids safe house for
abused children. Six children between the ages of 8 and 12 within
Yabonga’s children’s project have been identified and are been
accommodated.
During the financial year, Brimstone contributed R50 000
toward this organisation. Winter Warm Campaign
The Brimstone Foundation in partnership with the Nedbank
Foundation embarked upon the annual Winter Warm Campaign.
The Nedbank Foundation donated blankets and a monetary
amount of R50 000 to LIFE Community Services, based in
George. LIFE Community Services assists over 2000 disadvantaged and vulnerable children from birth to 18 years of age. Apart
Dialogue on Breast Cancer
Vuselela Sport and Lifeskills Development project
South African Disabled Golf Association
Vuselela Sport and Lifeskills Development is a partnership formalised between two young men from the Gugulethu area who are
passionate about making a sustainable and scalable difference in
their community.
The project focuses on using sport as an extramural activity
in primary schools in the Gugulethu area by creating and facilitating sporting activities for young learners and using this as a
foundation to integrate a wide range of life skills programmes.
A total amount of R50 000 was spent toward this project.
Brimstone sponsored 100 disabled children for the two days of the
Lion of Africa Golf Open which took place at the Royal Golf Club
during November 2014.
The children got an opportunity to play and watch golf
during this period.
The total spend on this initiative was approximately R30 000.
October is heralded as Breast Cancer Awareness month.
Brimstone (in partnership with Nedbank) once again commenced
with hosting dialogue sessions on creating awareness on breast
cancer. The event took place at the Nedbank Auditorium, Clock
Tower, Waterfront and featured a discussion with a breast cancer
survivor and engagement with various medical professionals and
members of the audience.
Brimstone spent approximately R60 000 on this initiative.
C O R P O R AT E
The District Six Museum has embarked upon the “Tafel
Conversations and Supper Club’’. The aim of which is to invite
people of interest to tell their stories in whichever way they want.
An amount of R25 000 was spent on this initiative.
GOVERNANCE
District Six Museum
Brimstone has further embarked upon a social drive to make a
difference in various avenues, by creating awareness campaigns
where individuals get the opportunity to interact in discussion
forums.
This organisation plays a vital role in supporting the poor and
vulnerable community of Mitchells Plain and has become the last
hope and resort for many who need assistance to change their lives
for the better. The MPCADP adds value not only at a personal
level but also to the community at large. Various services are
rendered on site by the MPCADP and to all walk-in clients in
need of support or direction.
Brimstone donated an amount of R50 000 toward the
Mitchells Plain Advice Centre.
OVERVIEW
Creating Awareness Campaigns
C O R P O R AT E
Siyakhana is at the forefront of ecological health promotion and
food security. Siyakhana provides individuals with skills to create
sustainable livelihoods.
Brimstone donated an amount of R25 000 toward this initiative.
S TAT E M E N T S
Mitchells Plain Community Advice and Development
Project (MPCADP)
Siyakhana (food gardens)
ANNUAL FINANCIAL
from providing hot meals to these children, LIFE Community
Services teaches them methods of eco-friendly home gardening
and recycling. The Brimstone Foundation donated 120 blankets
and food parcels to the value of R100 000.
Other beneficiaries of the Winter Warm Campaign who
received blankets and grocery vouchers included the Heart to
Heart Care Centre, based in Mossel Bay, Masande Educare a
foster home in Khayelitsha, Themba Labantwana Childrens Home
also in Khayelitsha and the Gift of the Givers Foundation a
national based initiative.
On a monthly basis Brimstone staff delivers groceries, fruits
and vegetables to the two Khayelitsha foster homes mentioned
above and to the Siyakuyenza Safe Home in Phillipi.
An amount of approximately R200 000 was spent on the
Winter warm Campaign.
2014
SEA HARVEST
28
2. Market Presence
Ratios of entry level wage and local minimum wage rates
The amendments to the wage agreement and wage increases for
the shore based employees are done annually at plant level
between management and the Food and Allied Workers’ Union
(FAWU). The company’s minimum wage for the shore based
employees is amended annually and was negotiated at R30.08 per
hour during the last annual wage negotiations (July, 2014).
Approximately 65.67% of the factory employees are currently on
this rate.
OVERVIEW
C O R P O R AT E
After initial disputes within the climate science community on the
anthropogenic effects on global climate change there is now a
general consensus that global climate change is a human enforced
consequence. As carbon dioxide (CO2) concentrations increase in
the atmosphere due to large anthropogenic forces, increased sea
and air temperatures are predicted around the planet. The
evidence of warming and amplified climate variability over the
past 3 decades is indisputable and the time has come for the
world-at-large to address the challenges imposed by global climate
change.
Anthropogenic practices since the industrial revolution are
continuing to affect the earth’s energy budget by increasing
emissions, resulting in unsustainable atmospheric concentrations
of ozone-depleting and albedo-altering greenhouse gases. The
most compelling evidence of climate change derives from Antarctic
ice cores records, dendochronology and in situ observations. The
fore-mentioned evidence illustrates that atmospheric concentrations of important greenhouse gases such as CO2, methane (CH4)
and nitrous oxides have increased over the past few centuries,
with at an accelerated rate since the start of the 20th century
[IPCC WGI Fifth Assessment Report 2013].
At the United Nations Conference COP17 held in Durban
(2011), South Africa announced its position on climate change: the
country expects a balance between climate and development initiatives and calls for a balance between mitigation and adaptation to
climate change. These interests will be better served by a legally
binding global action that ensures that temperature increases from
greenhouse gas emissions are kept below the 2°C average. South
Africa’s acceptance that climate change represents the most urgent
and far-reaching challenge of our time has resulted in proposed
legislation which will decrease the country’s greenhouse emissions
over the next few decades and pave the way towards a “green
economy”.
Sea Harvest acknowledges its responsibility to develop and
implement its own adaptive responses to the effects of climate
change. Sea Harvest’s efforts to mitigate climate change are
evident from our land-based operations where an emissions
management strategy supported by our annual carbon footprint
reports and a recently completed energy efficiency study, are
undertaken in an attempt to address our sustainable energy usage.
It is well-documented that fish stocks in the oceans are under
severe pressure from over-fishing and climate change. The risks
associated with potential climate change include but are not
limited to: sea level rise, ocean acidification and abiotic characteristic changes. For Sea Harvest the chief risk is ocean acidification
leading to coral bleaching and atmospheric wind shifts which are
the primary drivers of the ecosystem.
C O R P O R AT E
Climate change
GOVERNANCE
1. Core Performance Indicators for Subsidiaries
Sea Harvest’s primary responsibility is to ensure that the
disruption caused by humans on fish stocks is within manageable
parameters and for this reason it subscribes to an ecosystems
approach to fisheries (EAF) which ensures that science-based
decision making is at the forefront of all our fishing activities.
Since the adoption of EAF, South African fisheries now subscribe
to a concept of taking ecological considerations into account in
environmental resource management, which requires the
protection of fisheries and secures ecologically sustainable
development and use of natural resources, while promoting
justifiable economic and social development.
Sea Harvest’s participation in sustainable fishing practices are
under-pinned in the industry’s Marine Stewardship Council
(MSC) certification which will ensure that Cape Hake will be
available for future generations. The company’s increased
contribution and participation in bodies such as fisheries
management within the Department of Agriculture, Forestry and
Fisheries (DAFF) and the requisite scientific forums is in order to
be at the vanguard of dealing with issues that affect the s ustainable
utilisation of South Africa’s hake resources.
As a founding member of the Responsible Fisheries Alliance
(RFA), Sea Harvest together with other fishing companies and
environmental non-governmental organizations (NGOs) will
continue to meaningfully participate in strategic initiatives aimed
at strengthening its support in implementing the adopted EAF to
protect and enhance the marine ecosystem health as whole, on
which life and human benefits depend.
This fisheries management strategy combined with classic
management tools, inter alia, individual quota rights, annual Total
Allowable Catch (TAC), marine protected areas, fishing effort and
gear limitations are designed to promote and yield sustainability in
fish stocks alongside on-going fluctuations in environmental
conditions. This implies that the potential effects of climate change
are inherently ‘built-in’ to the fisheries management strategy.
The effects global climate change could have on the marine
ecological system cannot be quantified with absolute certainty as
our understanding of the systems are at their infancy stage.
However what is indisputable is that climate change impacts on
the availability of fish and ultimately impacts negatively on the
company’s financial performance.
S TAT E M E N T S
SEA HARVEST
2014
ANNUAL FINANCIAL
2014
The amendments to the wage agreement and wage increases
for the sea going employees are done annually at Bargaining
Council level between the various fishing companies represented
by the South African Fishing Industry Employer Organisation
and the various unions. Sea Harvest is currently paying above the
minimum rates in all the categories for the sea going employees.
Policy, practices and proportion of spending on locally
based suppliers
In terms of the recently revised Sea Harvest Procurement Policy,
preference is given to Saldanha based businesses with a particular
emphasis on black businesses in the region which are able to
provide the necessary services or products at the right price.
With regard to national services, a procurement manager evaluates
all suppliers and appoints service providers after taking into
account the reliability and speed of provision for perishable
products. Where possible, SMME/ black women-based businesses
are being afforded the opportunity to present their credentials to
systematically merge them into the cycle.
3. Labour Practices and Decent Work
Workforce Analysis
Employment type = 2 422 total
Salaried Employees
Occupation Level
01 – Top Management
02 – Senior Management
03 – Middle Management
04 – Junior Management
05 – Semi Skilled Employees
06 – Unskilled Employees
Grand Total
Waged Employees
Occupation Level
Grand Total
30
African
0
2
1
3
1
0
7
Male
Coloured
Indian
1
0
6
1
19
1
26
2
4
0
0
0
56
4
African
Male
Coloured
Indian
0
0
3
23
382
22
430
0
0
31
136
462
11
640
0
0
0
0
0
0
0
African
0
0
4
9
3
0
16
Female
Coloured
Indian
1
0
3
0
16
1
18
0
28
0
0
0
66
1
White
African
Female
Coloured
Indian
0
0
2
10
4
0
16
0
0
0
20
399
4
423
White
4
12
15
7
0
0
38
0
0
0
96
605
9
710
0
0
0
0
0
0
0
White
0
1
7
5
2
0
15
Grand
Total
6
25
64
70
38
0
203
White
Grand
Total
0
0
0
0
0
0
0
0
0
36
285
1 852
46
2 219
2014
0
0
4
29
277
4
314
Indian
0
0
0
0
0
0
0
Male
White
0
0
2
1
0
0
3
Indian
0
0
1
3
0
4
Male
White
13
15
18
6
2
54
Age Group
>55
46-55
36-45
26-35
<26
Grand Total
African
11
37
125
206
58
437
Coloured
34
158
160
221
123
696
African
0
0
0
0
125
0
125
African
4
28
124
225
58
439
1
3
16
113
437
9
579
White
0
0
1
0
0
0
1
0
1
7
5
2
0
15
6
25
92
332
1 282
36
1 773
Indian
0
0
0
0
0
0
0
Female
White
0
0
0
0
0
0
0
Grand
Total
0
0
8
23
608
10
649
Coloured
0
0
0
1
196
0
197
Indian
0
0
0
1
0
1
Female
White
2
9
3
1
0
15
Grand
Total
72
363
627
938
422
2 422
Coloured
8
116
196
275
181
776
OVERVIEW
African
4
12
15
16
4
0
51
Coloured
0
0
4
19
179
5
207
White
0
1
1
2
0
0
4
C O R P O R AT E
African
0
0
2
2
108
5
117
1
6
46
143
287
6
489
GOVERNANCE
0
2
2
24
275
17
320
Grand
Total
Female
Coloured
Indian
S TAT E M E N T S
Temporary Employees
Occupation Level
Temporary Total
African
Male
Coloured
Indian
ANNUAL FINANCIAL
Permanent Employees
Occupation Level
Perm Total
C O R P O R AT E
Employment contract = 2 422 total
2014
4. Employee Benefits
Employee Benefits
Funeral Assistance (Permanent Employees – Seagoing & Shore-based and Contract/Flexi Employees)
Insured Person
Primary Insured Person (employee)
Insured Spouse/Life Partner
Insured Child:
Aged 14yrs + (up to 21yrs or a full-time student under 25yrs)
Aged 6yrs + (younger than 14yrs)
Aged 2yrs + (younger than 6yrs)
Aged younger than 2yrs (excluding Stillborn)
Stillborn
Insured Amount
R20 000
R20 000
R20 000
R10 000
R5 000
R2 500
R2 500
Death and Disability Cover
Permanent Employees – Seagoing & Shore-based
Contract/Flexi Employees
Death Cover
Death Cover
– Death on board or in service-3 times annual income. –Death on board or in service due to an accident – a further 3
times annual income
R75 000.00 for the family when the employee dies in service
Disability Cover
For Seagoing Employees: Employees injured on board are covered by the Workman’s
Compensation Act as well as the Company Insurance. –Receives 75% of average remuneration during the first 2 years
if declared unfit for duty
–Will continue to receive 75% remuneration until retirement,
should they be declared unfit for duty in the open market after
this time
–Continuous contribution to the Provident Fund by the
Company to ensure a reasonable retirement income
Disability Cover
R75 000.00 for the employee if permanently disabled while in
service
For All Other Employees:
–Employees who are declared disabled – covered by the
Workman’s Compensation Act as well as the Company
Insurance
–3 times annual salary from Company Insurance
Provident/Pension Fund (Permanent Employees – Seagoing & Shore-based only)
Membership is compulsory and the company pays 7% of basic salary
Medical Aid (Permanent Employees – Seagoing & Shore-based only)
The employee has the option of two medical schemes*:
(a) Tiger Brands
(b) Fishmed (a low cost, Industry specific scheme)
*Company contributes 50% of the Medical Aid Contributions.
32
Percentage of employees covered by collective bargaining
agreements
Minimum Notice Periods
There are no set notice periods at Sea Harvest. The time frame
depends entirely on the issue. The notice periods for layoffs, short
time and retrenchments are set out in the Labour Relations Act for
the factory based employees and the Bargaining Council
agreement for the sea going employees.
Short time, change in conditions of employment and retrenchments all have very well documented procedures that need to be
followed before they are implemented. These procedures are
agreed to with the relevant unions and are adhered to.
Union Representation
At Sea Harvest the following is the breakdown of the union
representation:
Substance Abuse Rehabilitation Centre
Due to the good working relationship between Sea Harvest and
the Department of Social Development, employees of Sea
Harvest, on referral of the resident Social Worker, will receive free
counselling and treatment at any of the 8 state facilities available
within the West Coast area. The Vredenburg State Hospital will
be upgraded during 2015 and a new rehabilitation facility will be
built adjacent to the building.
%
53.47%
0.99%
0.21%
45.33%
As part of the Company strategy to be closer to and in contact
with employees, the Company embarked on a detailed programme
to ensure that all information is readily available and easily
accessible to individuals and departments. This is to assist
employees in making informed decisions that will improve overall
performance and productivity throughout the business.
The objective of this drive was to:
–Ensure that employees are aware of the business vision,
mission and goals
–Regularly update communication mediums with information
–Improve inter-departmental communication
–Regular communication of key messages to all Sea Harvest
employees
–Assist in building the Sea Harvest brand amongst internal
stakeholders
–Build and encourage unification within the business
–Assist in implementing a sense of pride amongst all Sea
Harvest employees
–Be aware of current communication trends and implement
these where applicable
–Assist departments with communication needs and ideas at all
times
OVERVIEW
This year Sea Harvest celebrated its 50th anniversary and there
were a variety of events held to mark this milestone, including a
“50-year Employee Celebration” where employees were treated to
a spit-braai, live band performances, a soccer tournament in which
Ajax Cape Town participated, as well as many lucky-draw gifts.
All sea-going employees who could not attend the function were
given a R200 Spur voucher. A special birthday bonus of R700
(after tax) was awarded to all employees and this was very well
received.
Internal Communications Strategy
55.35% of employees are unionised (refer Union representation
table below) and 91.04% is covered by Plant Level or Bargaining
Council Wage Agreements.
Union
Food and Allied Workers Union
Trawler and Line Fisherman Union
Independent Labour Union of South Africa
Not Unionised
50th Anniversary Celebrations
C O R P O R AT E
The industrial relations (IR) climate has continued to improve in
F14, building on the already improving IR environment and the
working relationship between the union and the company. A very
structured and wide-reaching engagement programme has been
developed for staff to maximise the positive impact in areas with
the greatest need. These initiatives range from parenting and
fatherhood workshops to a substance abuse programme, building
a Sea Harvest crèche and various educational initiatives. More
detail on these initiatives is set out in section 6.
Wage negotiations are a key indicator of the IR climate. In
July 2014 Sea Harvest entered into wage negotiations with both
its sea-going and land-based staff. The land based negotiations
were settled within 2 days with an agreed upon increase of 7.75%.
Sea-going negotiations were carried out as part of Bargaining
Council negotiations. These were more militant and a little more
protracted, but the industry settled on an 8.5% increase. Overall,
this was a very good result for Sea Harvest and the fishing
industry in general and is indicative of the current good IR
climate.
Sea Harvest believes that its comprehensive programme of
initiatives will further strengthen its relationship with employees.
During 2014 there was a continued focus on employee
engagement and communications in order to improve relationships
with our people and the unions.
C O R P O R AT E
Industrial Relations Climate
GOVERNANCE
6. Staff Wellness and Development
S TAT E M E N T S
5. Labour and Management Relations
2014
ANNUAL FINANCIAL
2014
Relationship Drive
In an endeavour to improve relations within the workplace
Sea Harvest has made a concerted effort to build a healthy
relationship with the union and with its officials. This relationship
is evident in the way the Company wage negotiations were
conducted as well as the support from the union to reach an
agreement on the Bargaining Council wage negotiation.
Besides having regular monthly union/management meetings,
the HR Management and fulltime shop-stewards meet on a weekly
basis to resolve any issues that could disturb a healthy working
relationship.
Employee Wellness
Sea Harvest has been instrumental in securing Social
Development Services in various areas of Saldanha Bay;
particularly within the communities where our employees and
their families reside. In addition to the initial office situated in the
Saldanha Main Road, a further 5 satellite offices are now

operational throughout Saldanha. During the first 8 months of
this year these offices have managed in excess of 600 cases.
Substance abuse and childcare as well as the removal of children
to foster care are the two areas with the highest cases.
The Sea Harvest onsite clinic, which is open twice a week,
has proven to be an invaluable asset as its focus areas mirror that
of the offices catering to the community.
The start of this initiative gave rise to social awareness amongst
employees and has become an important aspect which is addressed
by means of a range of programmes and workshops offered by the
Company:
–The Fatherhood Programme was specifically designed for
single fathers employed at Sea Harvest. The purpose of this
programme is to inform fathers (both single and married) of
their rights and responsibilities pertaining to their children
and partners.
–A Couples’ Enrichment Weekend will be arranged for all
employees who participate in the Fatherhood Programme.
Employees will attend a 3-day workshop together with their
spouse/partner.
–On 12th July 2014 a Parenting Workshop was presented at
Sea Harvest. Twenty-three employees attended this workshop
where topics such as: improving self-esteem; self-care; mental
& spiritual as well as physical and social wellbeing of the
child was offered to the parents.
– Family Enrichment programmes
– Rehabilitation Support Systems
– Health education
– Medical screening
– On site weight management and physical fitness programs
– Financial Wellness programmes
–Assistance and contributions to welfare organisations and
NGO’s (such as Relay for Life, CANSA Pink Drive and
Tekkie Tax)
Support Group – After Rehabilitation Care
Support group sessions have been established to assist all
employees who have attended alcohol and drug rehabilitation
programmes. These sessions take place on a weekly basis. The
families of the affected employees are allowed to attend as these
sessions are held afterhours. Eight employees have completed
the rehab programme this year.
Sea Harvest is assisted by the Department of Social
Development. All sessions will be held on the Company premises.
Physical Fitness
Many employees suffer from conditions such as high blood
pressure, cholesterol and fatigue. In March this year a fitness
programme was started. This programme is run twice a week and
is held after hours. The initial group consisted of 10 females and
1 male.
Men’s Health
All males within the Company were given the opportunity to have
Prostate Specific Antigen (PSA) testing done. This test measures
the amount of PSA present in the blood. Only 25 men took up the
opportunity.
Family Expo
On 3rd July 2014 a Family Expo was held at Dialrock Centre in
Saldanha Bay. Sea Harvest nominated 16 employees to attend.
The stakeholders at this expo were:
– Department of Social Development
– South African Police Services
– Dept of Cultural Affairs & Sport
– Correctional Services
– Mfesani HIV Aids Initiative
– Saldanha Bay Municipality
– Sea Harvest
– Hoedjiesbaai Home for the Disabled
It is important that the Company be actively involved in processes
which allow employees to take ownership of their social wellbeing.
Relay For Life
The Employee Wellness annual programme normally runs
concurrently with the events on the national wellness calendar.
Sea Harvest strives to support healthy behaviour in the workplace
and the employees’ health through a variety of activities such as:
This is an annual event where (a) loved ones pay tribute to those
relatives or friends who have passed on due to cancer and (b)
celebrate the survivors of cancer. The event is a 24-hour walking
marathon and starts on the Friday evening. Sea Harvest registered
2 teams this year.
34
To date, blankets have been distributed to the following
organisations:
– Vital Connection Old Age Club, Diazville
– Bersheba Old Age Club, White City
–Hoedjiesbaai Workshop for Persons with Physical Disabilities, White City
– Eiland Huis vir Gestremdes
– Siyabonga Care Village
– Siyabonga Huis Isabella & Huis Hadassa
– Siyabonga Shelter for vulnerable women & children
Blankets were also distributed to employees where this specific
need was identified.
7.Occupational Health, Safety and
Environment (OHSE)
A comprehensive land based Risk Management Program, which
focuses on health, safety, security, risk control, fire defence,
emergency planning and an Environmental Management Program
continues to be performed by Sea Harvest. These audits are
performed by Marsh Incorporated Risk Consulting. Sea Harvest
achieved the targets set for the last 3 years to date.
The OHSE audit scores for the past 3 years to date were as follows:
Safety
Year
& Health Environment
2012
96%
95%
2013
98%
93%
2014
97%
97%
Sea Harvest conducts medical assessments to all staff and costs
incurred are paid for by the company. In order to ensure that the
company complies with applicable standards and legislation,
monthly internal OHSE audits are performed. This process is
achieved by electing OHSE representatives, who participate in
monthly OHSE meetings. These representatives also form part of
the internal auditing team.
Health and safety topics covered in formal agreements
with trade unions
As a standard negotiated item with the union, safety remains Sea
Harvest’s priority in these negotiations. The agreement with the
union recognises the selection and training of safety representatives to ensure that injuries at the work place are prevented and
minimised and where possible be avoided from occurring.
Sea Harvest unfortunately suffered the loss of one employee
due to a work-related incident.
Average hours of training per year per employee
per category of employee
1.Candidates on Learnerships are deemed to be “on training”
throughout the period of the Learnerships.
2.Apprentices (Section 13) – same principle as above.
3.Tradehands targeting trade test within 2 years from date of
reporting same as above rating.
4.Cadets and all officers in training all duty and college days at
rate of 12 hours per day (due to onboard working hours).
5.For persons studying by distance learning/e-learning –
no training hours recorded.
6.All short courses actual classroom time is based on an 8 hour
classroom day.
7.Candidates on learning programmes differ in their job
categories.
Top Management
0
No formal training
Senior Management
160
Communication & IR training
Middle management
1 280
Junior Management
46 080
IR & Communication
training, Compliance
training
Learnerships/ FETC & IR
training, Compliance training
Certificate Learnerships/
Processing/ Food Safety,
Compliance training
Learnerships/ Basic Safety/
Food Safety, Compliance
training
Semi-Skilled Workers
Unskilled Workers
203 520
97 648
(Not included e-learning; Nated Classes (After hours attendance), Cadet and Intern experiential
training and learnership workplace training)
OVERVIEW
C O R P O R AT E
8. Training and Education
C O R P O R AT E
Sea Harvest received blankets as a donation from Brimstone.
These blankets were used to assist the Saldanha communitydriven organisations caring for the elderly and disabled who rely
on the generosity of donors to assist them. This drive will continue
throughout the year.
GOVERNANCE
Blanket Drive
This intervention strives to ensure that injuries to staff are
minimised as far as possible, (in particular disabling injuries
resulting in more than one shift being lost). Where such injuries
occur, these are investigated in an attempt to prevent re-occurrence. In addition to monthly OHSE meetings a Risk Steering
Committee meets on a quarterly basis to deal with all OHSE and
Risk issues that remain unresolved at a departmental level. These
meetings are chaired by the Operations Director and attended by
senior management.
S TAT E M E N T S
During August successful women within Sea Harvest were
profiled on the television screens in the canteens. On 8 August
2014 the Head of Departments (HOD’s) personally handed out
chocolate brownies to the females throughout the Company. This
gesture was appreciated and very positive feedback was received
from the factory floor. (i.e. number of employees involved)
ANNUAL FINANCIAL
Women’s Day Event
2014
2014
Programs for skills management and lifelong learning that support the continued employability of employees and assist them in
managing career endings
These training courses were presented:
Project
1.Compliance
(a) Fire Fighting
(b) First Aid Lvl2
(c) SHE Representative
(d) Labour Relations Training
(e) Able Bodied Seafarer
(f) First Aid at Sea
(g) Cooks Training
(h) Safety Officer
(i)PSSR
(j) Safety Familiarization
(k) Forklift and Reach Truck Drivers
(l) Induction and HACCP Refresher
2. Level 1 (GETC) – Food & beverages Processes
3.NQF Level 2 – National Certificate: Fish & Seafood
Processing
4. NQF Level 4, National Certificate: Production Management
Participants
20
18
41
13
16
20
2
5
2
1
33
All Staff
96
72
18
Objective
Ensure compliance with legislation regarding
employee and food safety.
Prepare new employees for effective participation
and personal development by growing their
communication (English), numeracy and food safety
awareness.
Further develop the processing skills, c ommunication
skills and safety awareness of staff in processing areas.
Develop a new stream of leaders for Supervisory
Management. Learners are screened for p
romotional
posts within the processing areas as well as the service
department
Workplace Exposure
8.2 National Fishing Forum
Interns and Graduate interns
They provide support for local maritime programmes. Sea Harvest
partners with project implementation.
Sea Harvest has placed 5 graduates and 12 interns from various
institutions to offer workplace exposure across the organization.
(S&M/Finance/Technical/HR)
Supporting Partnerships
Sea Harvest has partnered with a range of institutions to fulfil its
strategy for Learning and Development. Listed below are some of
the institutions:
8.1 West Coast Further Education Training College
Provide workplace exposure to their students. Sea Harvest
provides mentoring and coaching and career guidance. They
provide onsite training for staff for the NATED (NTC 1-3)
courses (Mathematics, Engineering Science, Electrical Trade
Theory, Fitting & Turning) and theory and workshop training for
apprentices.
8.3 FoodBev SETA
FoodBev SETA provides learnership and apprenticeship funding.
They provide PIVOTAL programme support. Sea Harvest
provides expertise for their board, executive committee, processing
chamber and partners on community development programmes.
8.4 Responsible Fishing Alliance
The alliance trains seagoing staff about conserving the marine
environment and sustainable fishing. World Wildlife Fund South
Africa (WWF) monitors the material development and co-ordinates the activities between the alliance partners (Oceana, Viking,
Irvin & Johnson, BirdLife SA and Sea Harvest). All partners pay
an annual levy to the RFA and purchase all learning material from
WWF.
Percentage of employees receiving regular performance
and career development reviews
At Sea Harvest 8% of employees (monthly & executive payrolls
only) receive performance and career reviews.
36
Gender Split
Total
Age Group
Total
Race Group
Male
Female
10
1
11
30 – 40
40 – 50
50 – 60
>60
3
4
2
2
11
African
White
Coloured
Indian
Total
2
6
2
1
11
9. Environmental Performance Indicators
Sea Harvest has contributed significantly to the South
African hake trawl fishery with the result that the hake deep-Sea
trawl industry is the only South African fishery to carry a MSC
certification. This initiative reinforces that our fisheries’ products
are from a well-managed and sustainable resource that meets
international standards.
OVERVIEW
The table below depicts the composition of the board of directors.
A complete analysis of the employees has been included in the
table LA1 and LA2 above.
Emissions, effluents and waste
Total direct and indirect greenhouse emissions by weight
Sea Harvest fishing vessels’ diesel usage for the year 2014 was
5,904,452 litres and in 2013 it was 14,877,535 million litres,
compared to 10,300,001 litres in 2012. The fuel usage by the
vessels is dependent on various factors such as: distance from the
fishing grounds; weather and fishing conditions. Even though it is
difficult to decrease fuel usage as it is inherently linked to fishing
effort, Sea Harvest is investigating modern vessel and trawling
technologies to keep its fuel usage under control.
In the coming years, climate sensitive practices at sea will
take centre stage and a company’s carbon accounts are going to be
scrutinised like financial accounts are today.
Composition of the highest governance body
2014
C O R P O R AT E
Location and size of land owned, leased, managed, or
adjacent to protected areas and areas of high biodiversity
value outside protected areas
Diversity
Sea Harvest operates in the south-east Atlantic Ocean (FAO 47)
along the southern and west coasts of South Africa at depths
between 200 and 800 metres. Sea Harvest continues to comply
with the General Policy for the Allocation and Management of
Fishing Rights in the Hake Deep Sea Trawl sector. The Policy
states that hake deep-sea trawlers may not fish at water depths of
less than 110 metres or within 20 nautical miles of the coast.
Trawling is generally restricted to areas where the sea bed is sandy
or muddy as to limit the effects on the benthic environment.
As a founding member of the South Africa Deep-Sea
Trawling Industry Association (SADSTIA) Sea Harvest continues
to observe and comply with the industry agreement that fishing be
restricted to “ring fenced” trawl grounds that have been trawled
since the early twentieth century in order to allow the ecosystem
to rehabilitate. Sea Harvest supports this self-imposed industry
initiative as it ensures continuous protection of the benthic habitat
outside the ring fenced areas.
Sustainable fishing
Sea Harvest is a responsible corporate citizen. Sea Harvest
conducts its business in a sustainable manner for the benefit of
present and future generations. Compliance with the regulations
and quota conditions and international standards is central to Sea
Harvest’s fishing practices. The central tenet to the company’s
sustainable fishing activities is the MSC certification first achieved
in 2004. The MSC certification is the gold standard in eco-label
and sustainable fishing thus illustrating our commitment to the
environment and the health of the sea-life in the oceans.
Since the launch of Responsible Fisheries Alliance in 2009,
Sea Harvest and other South African fishing companies together
with the WWF and Birdlife SA support the implementation of an
ecosystems approach to marine resource management aimed at
further promoting responsible fisheries practice in South African
maritime waters.
C O R P O R AT E
At Sea Harvest approximately 380,000 cubic meters (m3) per
annum of sea water is withdrawn from the sea. The water is
initially treated for contaminants and disinfected before being used
for slurry ice making and cleaning flumes within the processing area.
GOVERNANCE
Water
S TAT E M E N T S
The industrial effluent discharged into the sea amounts to an
average of 1307 m3 per working day.
ANNUAL FINANCIAL
Total water discharge by quality and destination
Total water withdrawal by source
2014
Total weight of waste (tons) by type and disposal method
Waste
Municipal waste
Building rubble
Heavy steel
Steel cables
Light steel
Stainless steel
Aluminium
210L Steel drums
Inner carton boxes
Outer carton boxes
Office paper
Plastic polyplanks
Bailed plastic
Gumboots
Miscellaneous plastic items eg
fish moulds, waste bins
20L Plastic drums
Nets & ropes
Wooden euro/frame pallets
Wooden pallets
Fluorescent tubes
E-Waste
Tyres
Foot rope rubbers
Cooking/Vegetable oil
Forklift battery cells
Asbestos sheeting
Fish Offval
Added Value dumped fish
Cold Store frozen dumped fish
2014
Oct
YTD
597
34
94
78
16
15
2
14
44
261
3
2
79
1
3
Year
2013
469
19
154
15
6
23
14
20
34
220
4
0
186
0.2
0
1.86
19
13
114
9
8
2
107
1
1
0.22
8
4
15
1
5562
864
0
0
1.34
0
0
0
0
3838
562
0
4 039
887
30
10
14
Year
2012
406
41
178
0
2
14
6
10
0
235
15
0
35
0
0
3
48
0
0
0
0
0
0
There were no significant spillages during 2014 at Sea Harvest.
Comments
Sold / Recycled
11 Sold for recycling purposes
0 Sold for recycling purposes
Total number and volume of significant spills
38
Disposal method
Municipal dumping site
Municipal dumping site
Sold / Recycled
Sold / Recycled
Sold / Recycled
Sold / Recycled
Sold / Recycled
Sold / Recycled
Sold / Recycled
Sold / Recycled
Sold / Recycled
Sold / Recycled
Sold / Recycled
Sold / Recycled
Sold / Recycled
Donated to employees /
members of community
Disposed to landfill site
Recycled
Sold / Recycled
Sold / Recycled
Sold for fishmeal production
Donated to farmer for
animal feed
Safe disposal c ertificates provided
Safe disposal c ertificates provide
Safe disposal c ertificate provided
Safe disposal c ertificate provided
Customer Health and Safety
Life cycle stages in which health and safety impacts of
products and services are assessed for improvement and
percentage of significant products categories subject to such
procedures
Food safety is a paramount focus across all Sea Harvest products.
To ensure strict compliance with food safety regulations the
following mitigating activities are in place:
1.Internal systems are in place to ensure continuous
maintenance of quality and safety systems.
2.Food systems that are currently in place include the
Compulsory Specifications for Frozen Fish, frozen marine
molluscs and frozen products derived therefrom,
(VC8017:2003), HACCP (audited by the NRCS), BRC, FSA
and EU regulations.
Total number of incidents on non-compliance with
regulations and voluntary codes concerning health and
safety impacts of products and services during the life
cycle by types of outcomes
There were no non-compliance incidents recorded for 2014.
Type of product and service information required by procedures and the percentage of significant products and procedures subject to such information requirement
The FSA audit is implemented at Sea Harvest, which ensures that
the following systems are in place:
1.Regulations governing general hygiene requirements for food
premises and the transport of food (R918). Food Safety
Management prerequisite program (PRP’s) requirements as
published by SABS. Supplemented by the Codex principles
of the HACCP system; GFSI guidance document; Applicable
laws, regulations and compulsory specification; Customer
Requirements.
Total number of incidents of non-compliance with
regulations and voluntary codes concerning product and
service information and labelling by types of customers
Sea Harvest did not have any such incidents in 2014.
Practices related to customer satisfaction, including results
of surveys measuring customer satisfaction
All hake caught by Sea Harvest are MSC certified. This ensures
that the fish resource is sustainably and responsibly fished. All
added value products are manufactured to the highest standards of
food safety as reflected in the multiple food safety certificates in
place. Integrated in these systems is an allergen management
policy and system. This system is validated on an annual basis to
ensure cross contamination of allergens does not occur with
OVERVIEW
C O R P O R AT E
It upholds exceptionally high standards via its subscription to:
1. European Union
2.South African Food and Associated Compulsory Specification
Standards
3. Responsible Fishing Alliance
4. Hazard Analysis Critical Control Point approval
5. MSC Certification
6. British Retail Consortium accreditation
C O R P O R AT E
Sea Harvest aims to maintain the highest business practice
standards and follows a very intensive methodology to ensure that
the standards covering safety, health, environment and quality are
achieved and maintained.
GOVERNANCE
Certifications
2.All systems are audited by accredited third party auditors.
3.All systems are backed up by an on-site, micro laboratory
which operates according to ISO 17025 standards. This
ensures products are only released if it complies with
specified microbial levels. Bi-annual inter laboratory verifications are done to ensure the results delivered by the laboratory are comparable to ISO 17025 accredited laboratories.
4.All food contact packaging material suppliers are certified
under either the BRC/IOP “Global Standard for Packaging
and Packaging Materials” or the ISO 22 000:2005 “Food
Safety Managements Systems”. Migration tests are done by
the packaging suppliers to ensure food safety can be assured
and food contaminations by inks are prevented. Packaging
suppliers supply Sea Harvest with declarations to ensure
packaging material is safe to use as food contact material.
5.All raw material suppliers are HACCP certified by an
accredited third party auditor. Additional to this, all suppliers
are audited on annual basis by a trained Sea Harvest auditor
as part of an integrated system. Specifications are set up and
approved by both the supplier and Sea Harvest to ensure
products supplied are safe.
6.Incoming microbial testing is done on all raw materials.
Only raw materials conforming to specification will be
released for production purposes.
7.All imported product is purchased from HACCP approved/
certified suppliers, which are audited by accredited 3rd party
auditors.
8.All liability claims are provided for by insurance cover.
9.A disaster recovery plan is in place, which includes a recall
strategy, as well as a notification and media engagement
strategy.
10.Management reviews of the systems are done on an annual
basis.
11.Annual audit is done on the Food safety system by an
independent internal auditor.
12.Review of the HACCP plan is annually done by the HACCP
Team.
S TAT E M E N T S
10.Product Responsibility
2014
ANNUAL FINANCIAL
2014
current control measures in place. All packaging for local product
complies with the South African food labelling act of 2012 (R146).
As part of an integrated food safety system monthly food
safety meetings are held. All incidents of non-compliance are
recorded, trended and action plans are reviewed at the same
forum.
Any incidents of non-compliance are recorded via the
customer care line or in the case of export (PnP and SFS) product
via the sales and marketing channel.
Each vessel in the fleet is subject to a NRCS inspection to ensure
food safety standards are met on board the vessel.
Community
Nature, scope and effectiveness of all programmes on
communities
Sea Harvest has engaged in community upliftment initiatives for
many years. For the period January 2014 to December 2014 an
amount of R614 000 was contributed to organisations and
institutions within the spheres of education, health, sports
development, community development and business development.
Health
An amount of R40 000 was granted towards various institutions
within the community.
Education
Numerous bursars benefitted in the amount of R40 000.
Bursaries are awarded to children of employees as well as to other
candidates based on their matric or tertiary results.
40
Sports Development
Sports development continues to be high on the agenda of
community development and donations to a number of sport codes
and clubs have continued. Sea Harvest continues to commit over
R100 000 in this regard.
Investment in school sports development continues to be
prioritised by the Sea Harvest Foundation as it can benefit large
numbers.
Community Development
Recipients that benefitted included churches, crèches and various
other institutions. An amount of R100 000 was made available
towards community development during 2014.
Business Development
The Sea Harvest Foundation partners with the West Coast
Business Development Centre in support of small business
development and support of R40 000 was granted last year.
The social investment program of Sea Harvest is managed by
the board of trustees of the Sea Harvest Foundation Trust.
The social investment program includes education, sports
development, health, business and community development with
an additional R50 000 in small donations to a variety of social
organizations.
C O R P O R AT E
GOVERNANCE
ANNUAL FINANCIAL
S TAT E M E N T S
HOUSE OF MONATIC
OVERVIEW
C O R P O R AT E
2014
HOUSE OF MONATIC (HOM)
Climate change
Most of the company’s raw materials are shipped in and the
weather can play an integral part on their timeous delivery.
During 2014 there were no such instances.
Financial assistance from government
House of Monatic participates in the subsidy grant by The
Department of Trade and Industry (DTI), in the form of a
Production Incentive which is part of an overall Clothing and
Textile Competitiveness Programme, administered on behalf of the
DTI by the Industrial Development Corporation.
The company received Upgrade of Capital Equipment Grant
funding during financial year 2014, which was used to purchase
some machinery namely: Automatic cutters, Button sew machines,
Dart automats and Bar tack machines.
Employment
(See table on following page.)
Employee Benefits:
Permanent employees above the
Bargaining council ceiling rate
– Pension Fund for monthly
employees: Membership is
compulsory for employees
who are not covered under
the bargaining council with
the employer contribution
thereto.
– Death Cover: three times
annual salary plus member
fund credit.
– Disability cover: for all
monthly staff employees
above the National
Bargaining council for the
clothing industry – three
times annual pensionable
salary plus member fund
credit.
– Medical Aid for monthly
employees: Discovery
Medical Aid ( two thirds
contribution by the
employer up to a maximum
determined by the employer
each year)
42
Employees under the
Bargaining council ceiling rate
–P
rovident Fund for weekly
employees is compulsory for
employees who fall under the
ambit of the National
Bargaining Council for the
Clothing Industry (6.75% of
basic salary contribution from
employer). This benefit can be
collected by the member at the
age of 55 whilst working, but
the member will be required
to continue to contribute until
the age of 65 or when
employment is terminated.
–D
isability benefit for
employees on the National
Bargaining Council: the
member will receive 1.5
times annual salary.
– Death benefit for e mployees
on the National Bargaining
Council: the member will
receive 1.5 times annual salary.
–H
ealth Care Fund for
weekly employees:
Employees on the National
Bargaining council contribute
to the Health care fund with
the employer contribution.
This is based on a sliding
scale depending on earning
categories.
Labour/management and relations
Percentage of employees covered by collective bargaining
agreements:
83.51% of House of Monatic staff are covered by the National
Bargaining Council for the Clothing Industry
Union membership total is 90.21 %.
Minimum Notice periods
There are no set notice periods. The time frame depends on the
various issues at hand, most of which are covered by the Labour
Relations Act or the Collective Agreement.
Short-time – Consultation with the union organiser takes place,
employees are informed well ahead of time, in order to prepare
themselves for the financial impact it might have on them. Short
time consultation is done according to the Clothing Industry Main
Agreement:
Change in conditions of employment: Depends on the issue, can
be 24hrs or 30 days.
Retrenchments: the company adheres to the procedure in the
Labour Relations Act.
Occupational Health and Safety (OHSE)
House of Monatic operates a comprehensive Health and Safety
programme which focuses on health & safety and fire. There are
5 safety committees at the company. Monthly safety committee
meetings are held as well as quarterly meetings with the Executive
Directors where issues are raised and addressed. An external audit
by SABS during 2014 was conducted and no findings were made.
Each retail store manager takes the responsibility of the
health and safety at the store level with oversight from head office.
The following number of Health and Safety reps, First Aiders and
Fire Fighters are used to monitor health and safety:
Health and Safety Reps. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
First Aiders. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Fire Fighters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Rates of Injury:
Rates of Injuries
Occupational Diseases
Lost days/absenteeism
Number of work
related fatalities
Workmen’s
Compensation (WCA)
cases for 2014
14 average pm (not serious)
None reported
41 days COIDA
0
17 cases
(Needle penetrations, Lacerations to
finger, Tearing of fingernails, Crushed
fingernail and hand, Sprained toe and
finger; Soft tissue injury to shoulder,
knee and arm.)
2014
Salaried
Employment type
Waged
0
0
746
90
12
640
4
147
19
12
112
4
0
528
0
12
640
4
Permanent
707
79
12
611
5
Temporary
39
10
0
29
0
746
89
12
640
5
Male
164
21
9
131
3
Female
582
69
2
509
2
<26
746
59
8
0
50
1
26-35
128
29
0
96
3
35-45
137
29
0
108
0
45-55
265
18
4
242
1
>55
157
6
8
143
0
746
90
12
639
5
716
87
3
622
4
Junior Management
12
2
1
9
0
Middle Management
11
0
3
8
0
Senior Management
7
0
6
1
0
746
89
13
640
4
Normal
Total
Education, training, counselling programmes in place
Some notes on the organisation’s activities on employees
wellbeing:
Discovery Wellness Day: Since 2010 the company has participated
in the Annual Discovery Wellness day, where the employee’s
overall health is assessed. A comprehensive report is handed to the
company’s management on the general health of employees.
Social Worker: The responsibility of the social worker is to
provide the employees with further assistance as well as to care for
the employee’s psychological and emotional wellbeing.
Cancer Awareness: the company invited CANSA to educate the
employees in assisting them to recognise early signs of cancer and
where they could seek medical assistance for the symptoms.
The session with CANSA proved successful as there were many
employees who made appointments for Screening thereafter.
Healthy Lifestyle Choices: during this awareness session the
4
employees were taught the importance of a balanced diet as it
helps to control body weight, heart rate and blood pressure.
HIV/AIDS & TB Prevention: educates the employees to take the
necessary precautions to prevent HIV/AIDS and TB and also to
encourage employees to get tested for HIV/AIDS and screened for
TB.
All testing is voluntary and made available by the company.
Where testing is done at the insistence of the employee, this will
be with his/her informed consent.
Health and safety topics covered in formal agreements with
trade unions: The Health and Safety issues are discussed formally
at quarterly safety meetings with management and minutes are
taken, filed and signed off. No formal agreements are in place.
OVERVIEW
1
71
Total
Level
1
90
Total
Age Group
2
599
Total
Gender Split
Indian
746
Total
Employment contract
Coloured
640
Total
White
11
C O R P O R AT E
Non SA
African
89
GOVERNANCE
Region
Total
744
S TAT E M E N T S
SA
ANNUAL FINANCIAL
2014
Headcount
C O R P O R AT E
Employment
2014
Training and Education
–
Total amount of training courses per category of employees
Training Programmes
Financial Life Skills Programme
HIV and AIDS in the Workplace
Quality Awareness
Substance Abuse Awareness Programme
Operational Multi-Skilling
Occupational Health and Safety Training
Computer Training
Pattern Engineering
Lectra System Training
Moderator Training Programme
Skills Development Facilitator Training
Programme
Copy Writing Course
Textile Testing
Retail training
No. of Staff
46
41
25
38
65
24
4
1
9
1
1
1
4
2
–Learnerships in CTFL Manufacturing Processes and
Garment Construction are offered to both House of Monatic
employees and unemployed individuals. The Training
Officers, who possess years of manufacturing experience and
expertise, provide invaluable knowledge and guidance to all
the learners. During the Learnership, learners are exposed to
Occupational Health and Safety best practices in accordance
with House of Monatic and Industry requirements. Learners
are extensively taught how to operate different sewing
machines and how to perform different operations in order to
construct a garment. Our Learnerships equip the learners
with invaluable skills in order to become more efficient in
their current jobs thus adding to our expertly skilled work
force. The company employed 75% of the unemployed
learners on the learnership thus providing them with a stable
income and a way to sustain themselves and their families.
–Skills Programmes in CTFL Manufacturing Processes and
Garment Construction are offered to unemployed individuals
and the Skills Programmes run for a period of 16 weeks.
Learners are also taught the basics on how to operate a
sewing machine and the basic skills required to construct a
garment. HOM has a 80% placement rate, thus providing
them with a stable income.
–Multi Skilling – production operations
–Apprenticeships – Mechanics
–Health and Safety and First Aid
–HIV/AIDS Awareness
–Information Technology
–Core Lean Training
–Leadership development
–Retail training
44
Internships and Workplace Experiential learning:
–Clothing Management Internships – 3 Cape Peninsula
University of Technology students were awarded an opportunity to do their Internship at House of Monatic as part of
their programme, in order to obtain their National Diploma
in Clothing Management. During their time at House of
Monatic the students were exposed to the entire life cycle of a
garment, they were involved in the entire process from
garment conception/design to the dispatch of the complete
suit to the respective clients.
– HOM also ran internships for 2 Fashion Design students
– 4 graduates were placed in workplace situations for 6 months.
–One student was placed on a workplace learning programme
in partnership with the union SACTWU.
Performance reviews are done on operators by their supervisors
and managers, as well as performance evaluations.
Skills assessments are conducted on employees who possess matric
certificates who show the potential to be developed, especially
when positions in the company becomes vacant.
Diversity and equal opportunity
Composition of the highest governance body
The table below depicts the composition of the Board of Directors:
Gender split
Age group
Race Group
Male
Female
40-50
51-60
>60
African
White
Coloured
7
1
2
3
3
1
3
4
–Return to work and retention rate after maternity leave: 100%
2014
–Regular feedback to the
employees.
–Employees understanding the
business and industry
–Employees change in perceptions and better understanding
of business principles
Assurance on these issues
Employees
As issues
arise daily,
Weekly, monthly
Meetings, memo’s
Attendance improvements/
Socio-economic issues/
Employee Wellness/
Transport/
Economic performance of
the company/load shedding
Customers
Daily basis by
admin, finance
and sales
Annual reviews/
monthly
submissions
Telephonic, meetings,
email, personal visits
Pricing/Delivery/Payment/
Quality
Telephone, meetings
Productivity Incentive
claims from the
Competitiveness fund
Suppliers
Ongoing
Pricing, Quality, Delivery
Partners/ International
Licensor / Licensee
Regular meetings/
e-communication
Formal visits twice a
year/
Telephone/
Emails
Visits to UK
Product Range/ advertising/ marketing/ suppliers/
pricing/ customers
Honest feedback
Shareholders
Ad hoc
Annually
Quarterly
Report back
meetings/
Value creation/ Strategic
direction/ Profitability and
sustainability/ Cash
distributions
Honest feedback
Strategic direction received
Government / DTI/
providers of capital
Environmental Issues
Energy
– Direct energy consumption by primary energy source
100%
–
Indirect energy consumption by primary source
0% (electrical supply)
–
Energy saved due to conservation and efficiency
improvements
House of Monatic is using 50\50 blend oil and have moved
away from using HFO. The annual boiler fuel usage amounted
to 203 000 litres with an average of 857 litres used daily.
Submission of claims for
government grants ie
Discretionary and Mandatory
Grants
–
Initiatives to provide energy efficient or renewable energy
based products and services and reductions in energy
requirements as a result of these initiatives
(a)CSIR conducted a survey and they have reported that
the company has reached optimum efficiency taking into
consideration the age of the infrastructure.
(b)A lighting replacement project was completed in 2014
whereby all 8ft fittings were replaced with more energy
efficient 5ft fittings.
OVERVIEW
Response to issues
Honest and participative feedback
Material issues identified
State of work continuity/
Attendance improvement
plans/ profitability and sustainability of the business
C O R P O R AT E
Type of engagement
Meeting – collective
and individuals
GOVERNANCE
Unions
Frequency
engaged
Monthly
Ad hoc
S TAT E M E N T S
Stakeholder
ANNUAL FINANCIAL
HOM recognises the importance of dialogue with all stakeholders on a regular basis and from staff to customers. The company has tried to
communicate the goals to increase their commitment to make the business successful. The key stakeholders are listed below in no order of
priority. These are ongoing engagements and forms part of the day to day operational tasks.
C O R P O R AT E
Stakeholder Management and Engagement
2014
Water
Emissions, Effluents and Waste
– Total water withdrawal by source
The total water used for the company’s boilers as at the end
of December 2014 = 876.1kltr. The hotwell tank on the boiler
was replaced due to leakage and this contributed towards
extra water usage for the boiler compared to 2013. The 2
boilers also had to be hydro tested which utilised a significant
amount of water.
– Total direct and indirect greenhouse emissions by weight
Total mass used is 203000 litres x 0.91 = 184730 Kg as at the
end of December 2014
–
Water sources significantly affected by the withdrawal of
water
This is supplied directly from the municipality
– Percentage and total volume of water recycled and reused
0% as the water is being turned into used steam
Biodiversity
ocation and size of land owned, leased, managed in, or
L
adjacent to protected areas and areas of high biodiversity
value outside protected areas
Not applicable as the company is located in an industrial area
and not in the proximity of any protected areas.
I nitiatives to reduce greenhouse gas emissions and the
reductions achieved
Due to the increases in electrical costs, it is cheaper to keep
running oil fired boilers.
–
–
NO, SO and other significant air emissions by type and
weight
Most emissions are compressed air or steam, they do not emit
NO or SO into the environment.
–
Total number and volume of significant spills
There have been no spills to date.
–
escription of significant impacts of activities, products
D
and services on biodiversity in protected areas and areas of
high biodiversity value outside protected areas
Boiler Gas emission is limited and is within environmental
guidelines. A sensor was installed on the boiler stacks which
monitors the CO2 emissions.
–
–
Weight of transported , imported, exported or treated
waste deemed hazardous under the terms of the Basel
Convention Annexure I,II, III and VIII and percentage of
transported waste shipped internationally
No hazardous waste is created in the manufacturing
processes.
–
Identity, size, protected status and biodiversity value of
water bodies and related habitats significantly affected by
the reporting organisation’s discharges of water and runoff
Not applicable as the company does not create harmful water
run offs.
Products and Services
– There are no initiatives to this effect
–The following are costed in the company’s trim component
cost and amounts to 1.5% of the product sold
Cardboard boxes
Plastic bags
Plastic hangers
Hanger Bars (for hanging suits)
46
C O R P O R AT E
GOVERNANCE
ANNUAL FINANCIAL
S TAT E M E N T S
LION OF AFRICA
OVERVIEW
C O R P O R AT E
2014
LION OF AFRICA
INSURANCE COMPANY
Scope and Boundary
size enterprises), marine operators and personal lines. Over 4 500
customers are serviced by a network of over 200 intermediaries
focusing mainly on corporate, commercial and municipal (local
authority) customers.
Reporting philosophy and approach
Strategic intent
Lion of Africa Insurance Company (Lion of Africa Insurance) has
proactively adopted the Integrated Reporting Framework as
issued by the International Integrated Reporting Council (IIRC).
This is the first year of implementation using the IIRC methodology and Lion of Africa Insurance recognises that integrated
reporting is a journey and will strive to enhance its processes and
disclosures as its integrated reporting process matures.
This report covers the financial year 1 January 2014 to
31 December 2014 of all the operations of Lion of Africa Insurance.
Assurance has been obtained on the annual financial statements and internal reviews on the completeness and accuracy of
non-financial information have taken place.
This abridged integrated report is based on the integrated
reporting processes of Lion of Africa Insurance. This abridged
integrated report does not contain all the requirements contained
in the International Integrated Reporting Framework because it is
only intended as a summary report. For a full appreciation of the
material matters, strategy performance and outlook of Lion of
Africa Insurance please refer to the full integrated report which is
available on the Lion of Africa Insurance website www.lionsure.com.
Forward looking statements
Certain statements within this Lion of Africa Insurance Company
abridged report may constitute ‘forward looking statements’. Such
forward looking statements involve known and unknown risks,
uncertainties and other important factors that could cause the
actual results, performance or achievements of Lion of Africa
Insurance to be materially different from future results, performance or achievements expressed or implied by such forward
looking statements. The company undertakes no obligation to
update publicly or release any revisions to these forward looking
statements to reflect events or circumstances after the date of this
document, or to reflect the occurrence of anticipated events. These
have not been reviewed or reported on by the auditors.
Organisational overview and business model
Lion of Africa Insurance is a South African non-life insurance
company, licensed by the Financial Services Board in terms of the
Short-Term Insurance Act. The Company is a wholly owned subsidiary of The Lion of Africa Holdings Company Proprietary
Limited, a company owned by Brimstone Investment Corporation
Limited, which is a broad-based black investment group listed on
the JSE. Lion of Africa Insurance offers a wide range of generic
short term insurance products administered by teams split to serve
the corporate market, local authorities (state owned), specialist
engineering businesses, the commercial market (small to medium
48
Material issues determination process
Lion of Africa Insurance defines materiality of issues for reporting
purposes as risks and opportunities affecting value creation or
preservation. These are the issues that are most material to the
business and which this report focuses on.
We have considered a variety of factors in deciding on the material
matters covered in this report, including:
–key risks identified by the Lion of Africa Insurance
Enterprise Risk Management Framework
–concerns raised by our stakeholders which are relevant to our
industry and business
–matters considered to be key to our strategy and our business
environment.
The material matters determination process of Lion of Africa
Insurance is largely informed by the International Integrated
Reporting Council (IIRC) guidance. Commentary on each of the
underlying factors which informed the material issues determination process, as well as the confirmed material issues, is
presented below.
Enterprise risk management
Lion of Africa Insurance recognises and acknowledges that risk
management and the systems of internal control are important to
support the firm in achieving its goals. The risk management
process encompasses:
1.
Risk identification: Identifying internal and external events
that may affect the achievement of an entity’s objectives,
distinguishing between risks and opportunities. This is
systematic and comprehensive enough to ensure that no risks
are excluded.
2.
Risk assessment: Assessing risks according to their likelihood
and impact as a basis of how they should be managed.
3.
Risk response: The process of selecting and implementing
measures to respond to risk which will be aligned to the
organisation’s risk tolerances and risk appetite. Risk
responses can include avoiding, optimising, transferring or
retaining the identified risk.
4.
Risk mitigation: Policies and procedures established and
implemented to ensure risk responses are effectively carried
out. This includes:
– Priorities and time plans
– Resource requirements
– Roles and responsibilities of all parties involved
For the purposes of enterprise risk management (ERM) and
solvency assessment and management (SAM), a risk appetite and
tolerance statement was formulated and approved by the board.
The risk appetite and tolerance statement sets out the amount of
risk that Lion of Africa Insurance is willing to take in pursuit of its
business objectives. This tool aids management and the board in
decision making. The risk appetite and tolerances are monitored
monthly through a risk matrix and reported to the board and
board committees quarterly.
Lion of Africa Insurance monitors and manages risk within its risk
tolerance levels for the following categories of risks:
–Insurance risk
–Compliance risk
–Operational risk
–Information technology
–Human resource risk
–Financial risk
–Governance risk
–Integrity risk
–Treating Customers Fairly
External environment
Lion of Africa considers technology an enabler to better connect
with customers, intermediaries and other supply chain partners,
and enable a platform to improve efficiency.
There have been many regulatory changes within the South
African short term insurance industry. The timing of these
changes, and the costs of implementation pose some challenges to
Lion of Africa Insurance.
The need to increase employee retention, and limit the
incidence of poaching by competitors, is key to maintaining the
necessary people, skills and expertise, for effective strategy
execution.
The high number of licensed insurance companies in South
Africa has increased and intensified competition among market
participants. This has caused a number of alternative and
disruptive go-to-market insurance products offered directly
through comparable pricing agents.
The large exposure to the corporate and commercial
industries makes Lion of Africa vulnerable to the economic trends
within the domestic and international economies in which we
operate. This includes the effects of GDP growth and foreign
exchange.
Customer risk and governance policies, procedures and
OVERVIEW
C O R P O R AT E
5.
Monitoring: An appropriate monitoring and review structure
to ensure that appropriate controls and risk responses remain
relevant and up to date.
practices affect the ability of Lion of Africa to manage the impact
of claims. As such, customer risk management has a direct impact
on insurance risk.
The reliability and adequacy of infrastructure (such as roads,
ports, electricity and water) impacts risk management and claims
as it determines the effectiveness with which customers can
manage their risks.
Increasing our African footprint poses an opportunity for
Lion of Africa to grow. The rest of Africa is growing at a rate
higher than South Africa and we are able to provide underwriting
expertise where some international insurers do not have the
necessary local skills and experience.
The evolving social and demographic trends in South Africa
provide Lion of Africa Insurance with an opportunity to leverage
its transformation credentials to position itself as the insurer of
choice for emerging black-owned businesses.
Lion of Africa’s current B-BBEE Level 1 status is a differentiator within the short term insurance industry as we are the only
B-BBEE Level 1 short term insurer. The revised Employment
Equity Act will pose a challenge to the maintenance of this rating.
The effect of climate change and weather patterns does not
have a significant impact on the current insurance portfolio.
However, as Lion of Africa grows, the impact of this material
matter will increase as the insurance portfolio develops.
The use of supply chain outsourced partners is low compared
to the short term insurance industry. The direct impact of supply
chain trends is not material to Lion of Africa.
Fraud and corruption caused by flawed ethics and questionable claims are inherent in the short term insurance industry.
The robust risk and governance processes and procedures within
Lion of Africa minimise the impact of fraud and corruption.
C O R P O R AT E
Performance measures
Reporting and monitoring requirements
GOVERNANCE
–
–
S TAT E M E N T S
2014
ANNUAL FINANCIAL
Strategic response
Overview of outcomes
Our strategy is robustly reviewed by the board on an ongoing
basis to ensure that it responds proactively to the most pressing
material matters, including risks and opportunities.
Our strategy seeks to ensure that Lion of Africa:
–Competes and is counted amongst the prominent insurance
companies
–Achieves and sustains a double digit return on equity
–Maintains a professional centre of operational excellence and
innovation
–Remains a socially relevant brand with diversified products
distributed through appropriate channels
–Is/becomes automated and technologically driven
–Is/Becomes an employer of choice in the short term insurance
industry
–Remains a trusted brand with long term relationships
2014
Strategic objectives
Lion of Africa Insurance is a small sized short term insurance
company in a market with large players with the longest amongst
these having been around for longer than 100 years. The
company’s strategic planning efforts have got to always be mindful
of external forces and perhaps even more importantly internal
forces. While external forces will never cease to force change, the
company has got to build capability internally that will allow for
that change to be met with acceptance and be seen as a challenge
and not debilitating.
The strategic direction that Lion of Africa has chosen for the
next three years revolves to a large extent around leveraging all
resources that will enable the organisation to cement its place as
an insurer to large corporates and municipalities and also to
restore its sustainability.
The short to medium term strategy is divided into two key
interlinking components:
–Leveraging the key enablers for Lion of Africa Insurance
–Restoring profitability, increasing return on capital and
increasing solvency ratios.
The use of technology plays a pivotal role in the ability of Lion of
Africa to achieve growth and optimisation and meet regulatory
requirements. Effective execution of the strategy also relies on the
attraction, development and retention of critical skills.
Optimisation of existing processes and integration of different
processes within Lion of Africa Insurance will enable the
achievement of efficiencies and improvement of stakeholder
service capabilities.
As one of the top five corporate insurers and the only
B-BBEEE Level 1 insurer in South Africa, Lion of Africa
Insurance intends to grow revenue through market penetration
and create a larger position in the market. To this end, we aim to
increase our solvency ratios and develop a capital structure that is
optimal for Lion of Africa Insurance.
Below is an illustration of our strategic objectives, with a brief
description of each demonstrating the key enablers for Lion of
Africa Insurance and the focus areas to restore profitability, return
on capital and the solvency ratio. The tables that follow demonstrate the material matters to which the strategic objectives
respond and as strategic themes by which the strategic initiatives
for each objective have been categorised for performance report
back later in the report.
Performance
Overview of current year’s performance
The short-term insurance industry is underperforming due to a
range of challenges. Intense competition in a saturated market is
placing considerable pressure on the pricing and profit margins of
short-term insurance companies. Lion of Africa’s earnings and
50
capital position deteriorated further during the year under review.
19 large claims (each in excess of R5 million) as well as an
increase in the incidence and severity of attritional claims resulted
in a continuation of underwriting losses. This, together with a
R21.8 million downward restatement of the reinsurance contract
asset carrying value in prior years, contributed to a further
reduction in the capital solvency ratio to 0.29 times. The steady
improvement in the underwriting trend is mirrored in a similar
slowdown in the top line business growth as we tighten the
acceptance criteria for new business. As such, written premiums
particularly in commercial and structured insurers have declined.
In September 2014, Standard & Poor’s Ratings Services
(S&P) confirmed its global scale long-term public issuer credit
rating of BB, national scale long-term public issuer credit rating of
zaBBB, and its financial strength rating of BB for Lion of Africa
Insurance, with a negative outlook. The downgrade was based on:
–A negative economic outlook for South Africa
–A negative outlook for the South African insurance industry
–The company’s current underwriting performance and
solvency ratio
The rating downgrade constrains Lion of Africa’s ability to
conduct business in its core corporate market. Lion of Africa
accepts that its current circumstances compel it to refocus its
strategy and implement certain necessary changes as outlined in
the strategy section presented earlier.
Below we have set out a summary of our performance during
the year against each strategic objective as well as the focus areas
going forward and the outcomes that Lion of Africa Insurance
expects to achieve from the successful execution of the refocused
strategy.
Outlook
We expect the external challenges of limited economic growth,
intense competition and costly regulatory changes to persist in
2015. Other factors that will influence our performance will be a
more promising outlook for inflation and some consolidation in
our industry, particularly of insurance intermediaries. These
factors have all been taken into account in our strategic planning
for the year ahead.
With determined and disciplined execution of our strategy,
we believe that Lion of Africa can start moving towards the
achievement of its short term targets of an improved underwriting
performance and a stronger solvency position. Some initiatives will
render results quickly and others will take time to achieve our
desired outcomes.
In the medium to long term, our targets include revenue
growth, an improved level of profitability and acceptable returns
on capital.
At Lion of Africa, we are determined to live our values and be
guided by a clear sense of ethics in all out business endeavours.
We believe it is essential that the integrity of our people, processes
and practices remain beyond reproach.
In its efforts to ensure that business is conducted with honesty and
integrity, the Company has subscribed to a service that will enable
all stakeholders to report anonymously on dishonest activities.
Lion of Africa has two processes for the reporting of dishonest
practices:
–Internal tip-offs, independently managed by Deloitte
–External tip-offs, independently managed by South African
Insurance Crime Bureau (SAICB).
IT governance
IT Governance at Lion of Africa is driven by the adoption of an
industry accepted Capability Maturity Model that measures our
maturity versus that of other relevant industry participants. In
addition, a Project Management Office (PMO) has been established to ensure that all projects that the organisation intends
embarking upon are justified and given a priority rating by
executive management based on the project’s strategic relevance.
The PMO manages all projects according to best practice project
methodologies. Monthly project steering committee meetings
provide feedback to executive management. Projects are tracked
against budgeted costs and planned schedules.
Corporate responsibility
Lion of Africa recognises that it needs to be a responsible
corporate citizen, given the relationship of trust it has with its
stakeholders.
OVERVIEW
C O R P O R AT E
Lion of Africa has engaged in community upliftment initiatives for
many years. Of significance this year are the following:
South African Insurance Association (SAIA) Industry
Consumer Education Initiative
The aim of this initiative is to help facilitate the consumer
education of the insurance industry. The ideal is that all participating insurance companies contribute 1% of their annual profits.
Even though the company suffered a loss in the year under review
a contribution of R5 000 was still made as we believe in the value
of this important initiative.
Ethics
Communities and corporate social investment (CSI)
Lion of Africa Half Marathon
We are the title sponsors to this initiative, this demonstrates our
commitment to the aims and objectives of the initiative. The main
objective is to pay school fees for 5 students to further their
tertiary education. Lion donates R70 000 which is used for setup
costs for the half marathon. The proceeds from this marathon are
used to pay for the school fees for the 5 students.
C O R P O R AT E
Being in the short term insurance financial services sector governance underpins everything that we do. The complexities of the
short term insurance industry and the relationship of trust that is
required between the insurer, intermediaries and customers
dictates that governance structures must be uncompromisingly
robust. To this end Lion of Africa endorses and subscribes to the
Code of Corporate Practices and Conduct contained in the King
III Report on Corporate Governance for South Africa. The
number and calibre of non-executive directors, who are independent of the day-to-day operations of the Company as defined
in the King III Report, sufficiently balance the Lion of Africa
Insurance Board in its deliberations and resolutions.
GOVERNANCE
Philosophy
Transformation is at the heart of South Africa’s future success and
fundamental to the development of the financial services sector,
where Lion of Africa plays a leading role. The sector codes have
been amended and Lion of Africa is positioned to maintain its lead
and grow its brand in the market as a transformed and empowered
insurer.
S TAT E M E N T S
Governance structures
Transformation
ANNUAL FINANCIAL
Governance
2014
Spartan Harrier development program
The aim of this initiative was to provide the Rocklands Primary
School with books and aid towards their school infrastructure for
their learners. Project spend was R5 000 and we were most
heartened that we were able to assist when the need arose.
Itheko Sports Athletic Club
The Lion of Africa Itheko Sports Athletic Club was setup to
promote a healthy lifestyle through running, by introducing the
activity to broader communities. We believe whole heartedly in
this initiative and we have demonstrated our commitment by going
as far as co-naming this initiative. The total spend for the year
under review was R250 000.
Yabonga children, HIV & Aids
The aim of this project is to assist the centre in its facilitation for
the mothers and children of Yabonga who live with HIV & AIDS.
The total spend was R20 000. Lion of Africa’s assistance in this
project was to provide funding to the centre.
Mandela Day – The Sithabile Children’s Home initiative was
our response to the Mandela day efforts. Our staff spent time at
the children’s home and they assisted with minding the kids, as
well as completing some home chores such as gardening and
painting. We also donated R2 000.
2014
Listed below are other initiatives that we consider to be credible
where we participated and offered our assistance:
Remuneration
Philosophy
Education
The Generation Impact initiative was started by one of its
graduates. The idea of the initiative is to provide 45 schools in the
Vhembe and Thulamela district with information on possible
careers in the market place. We donated R19 000 as well as
promotional items such 200 bags and pens.
We also assisted the Islamic Library and Red Cross
Children’s Hospital with funds for the purchase of reading
materials. Our spend for this initiative was R3 500.
Music and culture
The Suidoosterfees is designed to bring local arts to communities
and in so doing enrich those cultures. Our spend there was
R100 000.
The Lion of Africa Music Expressions initiative was
developed as a facilitation platform where local musicians that are
not yet established can share the spotlight with other well-known
artists and in so doing start to grow and develop their own brands.
Our spend in this initiative was R500 000 for the contractual fee
and R5 000 per spotlight artist.
Total CSI spend for the year amounted to well over
R1 million. We believe that we should continue to seek out other
credible and deserving causes where our assistance may be
required and will bring most meaning and relief.
Health, safety and environment
The short term insurance industry does not have a direct impact
on people’s health and safety, or the environment. However, the
management of health and safety impacts in our client base is of
fundamental importance as it affects the incidence of claims.
Therefore, the risk management practices of our customers are
carefully monitored and scrutinised in our underwriting processes.
52
Our remuneration seeks to incentivise performance against short,
medium and long term initiatives. Continuing advances are being
made to ensure that we align ourselves to the market, retain our
talented people and incentivise performance against strategy.
Progress made during the year
Salary review completed
This effort was deemed to be as a necessity in order to help curb
the high attrition rates. Recent market research had indicated that
Lion of Africa insurance salaries were somewhat below the
market’s 50th percentile which could have added to the attrition
rate. By assessing and addressing the salary rates we start to offer
our existing staff reasons to stay as well as give us the opportunity
to attract the right people for our existing vacancies.
Short and long term incentives schemes in development
Our incentive schemes will be receiving attention in 2015. We
needed to do this in order to be better aligned with other players
in the industry. It also made sense to develop these as they are the
single most effective intervention when it comes to talent retention.
Our plans are to develop schemes that are rewarding for all staff
levels.
2014
SOCIAL AND ETHICS COMMITTEE REPORT
Role
The committee fulfils an oversight role with accountability to the
Board. The main objective of the committee is to assist the Board
in monitoring the Group’s performance as a good corporate
citizen.
Responsibilities
The committee performs all the necessary functions to fulfil its role
as stated above, including the following statutory duties:
(a)Monitoring the Group’s activities, having regard to any
relevant legislation, other legal requirements or prevailing
codes of best practice, with regard to matters relating to:
–Social and economic development, including the Group’s
standing in terms of the goals and purposes of:
• The 10 principles set out in the United Nations Global
Compact Principles;
• The Organisation for Economic Co-Operation and
Development (“OECD”) recommendations regarding
corruption;
• The Employment Equity Act; and
• The Broad-Based Black Economic Empowerment
Act.
In addition, the committee performs the following duties delegated
by the Board:
–The Group’s integrated report contains a large amount of
information reviewed and considered during the course of the
committee’s activities. The committee will review the content
of the integrated report that is relevant to the committee.
Report to shareholders
The committee has reviewed and is satisfied with the content
in the integrated report that is relevant to the activities and
responsibilities of the committee.
OVERVIEW
C O R P O R AT E
The committee’s role and responsibilities
GOVERNANCE
For the period under review the committee consisted of executive
chairman, Mr F Robertson, lead independent director,
Mr PL Campher, non-executive director, Mr N Khan and
executive director, Mr MA Brey.
The chief executive officer and/or managing directors and/
or designated representatives of the Group’s three operating
subsidiary companies are invited to attend all committee meetings.
In terms of the committee’s mandate at least two meetings should
be held annually.
Good corporate citizenship, including the Group’s
• Promotion of equality, prevention of unfair
discrimination and reduction of corruption;
• Contribution to the development of the communities
in which its activities are predominantly conducted or
within which its products or services are predominantly marketed; and
• Record of sponsorship, donations and charitable
giving.
–The environment, health and public safety, including the
impact of the Group’s activities and of its products or
services;
–Consumer relationships, including the Group’s
advertising, public relations and compliance with
consumer protection laws; and
– Labour and employment, including:
• The Group’s standing in terms of the International
Labour Organisation Protocol on decent work and
working conditions; and
• The Group’s employment relationships and its
contribution toward the educational development of
its employees;
(b)Ensure that the Group’s ethics risks and opportunities are
assessed and that an ethics risk profile is compiled;
(c)Ensure that the ethical standards guiding the Group’s
relationships with internal and external stakeholders are
clearly identified;
(d)Ensure that the Group’s ethical standards are integrated into
all the Group’s strategies and operations;
(e)Ensure that the Group’s ethics performance is assessed,
monitored, reported and disclosed;
(f)To draw matters within its mandate to the attention of the
Board as may be required; and
(g)To report, through one of its members, to the shareholders at
the Company’s annual general meeting on matters within its
mandate.
S TAT E M E N T S
Composition of the committee
–
ANNUAL FINANCIAL
The social and ethics committee (“the committee”) was established
to assist in monitoring the Group’s performance as a good and
responsible corporate citizen and to perform the statutory
functions required of a social and ethics committee in terms of the
Companies Act, 71 of 2008, as amended (‘’the Companies Act’’).
This report is presented by the committee to describe how it has
discharged its duties in terms of the Companies Act as well as its
additional duties assigned to it by the Board in respect of the
financial year ended 31 December 2014.
C O R P O R AT E
2014
INTRINSIC NET ASSET VALUE REPORT
The Intrinsic Net Asset Value (Intrinsic NAV) of Brimstone at
31 December 2014 was R4 862.3 million (2013 – R4 187 million),
translating to 1 979 cents per share (2013 – 1 709 cents per share),
based on 245.6 million shares (2013 – 245.0 million shares) in
issue, net of treasury shares. Fully Diluted Intrinsic NAV per
share was 1 858 cents per share (2013 – 1 616 cents per share),
based on 263.4 million shares (2013 – 260.9 million) in issue, net
of treasury shares after taking into account the notionally realised
shares issued in terms of the circular to shareholders dated
18 November 2010 and fully diluted for outstanding share options.
The Book Net Asset Value (Book NAV) of
Brimstone on 31 December 2014 was R3 325.0 million
(2013 – R3 237.6 million), translating to 1 356 cents per share
(2013 – 1 324 cents per share), based on the respective number
of shares in issue.
The closing share prices on 31 December 2014 of Brimstone
Ordinary and “N” ordinary shares on the JSE Limited
(JSE) were 1 700 cents and 1 650 cents (2013 – 1 400 cents
and 1 400 cents) per share respectively.
Intrinsic NAV of Brimstone (R’m)
Book NAV (R’m)
Intrinsic NAV per share (cents)*
Fully Diluted Intrinsic NAV per share (cents)**
Book NAV per share (cents)
Market price per share (cents)
– Ordinary shares
– “N” ordinary shares
Discount to Intrinsic NAV:
– Ordinary shares
– “N” ordinary shares
31 Dec 14
4 862.3
3 325.0
1 979
1 858
1 356
31 Dec 13
4 187.0
3 237.6
1 709
1 616
1 324
1 700
1 650
1 400
1 400
14.1%
16.6%
18.1%
18.1%
* Based on 245.6 million shares (December 2013 – 245.0 million shares) in issue, net of treasury shares.
**Based on 263.4 million shares (December 2013 – 260.9 million shares) in issue, net of treasury shares after taking into account the notionally realised shares issued in terms of the circular to shareholders
dated 18 November 2010 and fully diluted for outstanding share options.
Sea Harvest
Life Healthcare
–The Intrinsic NAV of the 58.44% shareholding in Sea
Harvest was based on an equally weighted average value
using public market valuations as a proxy and the discounted
cash flow valuation methodology.
–For the public market valuation an EV/EBITDA multiple
of 6 times, representing a 56% discount to the average
EV/EBITDA multiple at which listed peers traded at
31 December 2014 was applied.
–The 5.04% interest was valued at the closing share price
of Life Healthcare on the JSE at 31 December 2014 of
R42.76 per share.
Lion of Africa
Nedbank Group
–The Intrinsic NAV of the 100% shareholding in Lion of
Africa was based on public market price: book multiples as
proxies.
–A price: book multiple of 1.00 times was used, which equates
to a 63% discount to the average price: book multiple at
which listed peers traded at 31 December 2014.
of Nedbank Group on the JSE at 31 December 2014 of
R249.00 per share.
Oceana
–The intrinsic NAV of the 20.1 million shares in Oceana was
based on the closing share price of Oceana on the JSE at
31 December 2014 of R104.86 per share.
54
Grindrod
of Grindrod on the JSE at 31 December 2014 of
R22.40 per share.
Old Mutual and Tiger Brands options
–These rights are carried as options and were valued as
disclosed in Appendix 4 to the annual financial statements.
Taste Holdings
of Taste Holdings on the JSE at 31 December 2014 of
R3.20 per share.
Phuthuma Nathi
of MTN Zakhele on the Over-the-Counter trading platform
at 31 December 2014 of R108.50 per share.
–The 4.11% interest was valued at the closing share price of
Phuthuma Nathi on the Over-the-Counter trading platform
at 31 December 2014 of R131.51 for PN 1 and R139.95 for
PN 2 per share.
OVERVIEW
MTN Zakhele
2014
C O R P O R AT E
Intrinsic NAV analysis by asset
3 298
3 087
(941)
(878)
(377)
(352)
1 979
1 858
* Based on 245.6 million shares (December 2013 – 245.0 million shares) in issue, net of treasury shares.
**Based on 263.4 million shares (December 2013 – 260.9 million shares) in issue, net of treasury shares after taking into account the notionally realised shares issued in terms of the circular to shareholders
dated 18 November 2010 and fully diluted for outstanding share options.
C O R P O R AT E
Intrinsic Net Asset Value per share (cents)*
Fully Diluted Intrinsic Net Asset Value per share (cents)**
Dec 2014
INAV
(R’000)
1 835 134
1 579 458
353 794
569 695
500 341
219 340
141 190
280 466
204 460
57 956
112 843
51 070
42 178
21 112
26 481
50 881
73 224
14 920
5 333
(1 277 559)
4 862 319
GOVERNANCE
Valuation basis
Market value per share
DCF & EV/EBITDA valuation
Option valuation
Option valuation
Price to book valuation
PE valuation
Discount to market cap rate
AUM & PE valuations
Book value
PV of a nticipated sale proceeds
Book value
Market value
Book value
CGT
(R’000)
(410 113)
(287 381)
19 038
(82 616)
(76 304)
(16 691)
(18 706)
(61 212)
(168)
38 019
(7 973)
(4 518)
(7 839)
(7 211)
5 542
11 347
(10 448)
9 401
(1 222)
(17 077)
(926 133)
S TAT E M E N T S
% held
5.04%
16.81%
4.97%
58.44%
0.46%
4.11%
2.68%
0.94%
0.35%
100.00%
14.21%
22% eco
18.00%
100.00%
28.79%
100.00%
28.20%
Various
Various
100.00%
Debt
(R’000)
—
(240 507)
(514 086)
—
—
(134 908)
(75 325)
—
—
—
—
—
—
(22 198)
—
—
—
—
—
(1 325 249)
(2 312 274)
ANNUAL FINANCIAL
Asset
Life Healthcare
Oceana
Grindrod
Sea Harvest
Nedbank
Phuthuma Nathi
MTN Zakhele
Tiger Brands option
Old Mutual option
Lion of Africa
Taste Holdings
A&O / Rex Trueform
Aon Re Africa
Investment properties
Afena Capital
House of Monatic
Other investments
Other BEE options
Funding
Gross Value
(R’000)
2 245 247
2 107 346
848 842
652 311
576 644
370 940
235 222
341 678
204 628
19 937
120 816
55 588
50 017
50 521
20 938
39 535
83 673
5 520
6 555
64 767
8 100 725
An analysis of the Intrinsic Net Asset Value (Intrinsic NAV) of Brimstone as at 31 December 2014 is set out below, including the valuation
basis of each asset. Where applicable, Intrinsic NAV is net of ring-fenced debt and potential CGT relating to that asset.
2014
REMUNERATION REPORT
This report deals with matters covered by the remuneration committee.
Remuneration policy
It is the policy of the Company to attract and retain employees of the highest calibre through its remuneration practices. The committee
annually reviews fixed remuneration to ensure that employees who contribute to the success of the Company receive market related
remuneration. Top and senior management receive short and long-term incentives. The incentive scheme sets targets for management and
focuses on growth in Intrinsic Net Asset Value, deal creation, achievement of strategic issues and cash management. The short-term
incentive, payable in cash, is limited to a maximum of 95% of annual cost to company depending on the level of performance and seniority
of the participant. Effective 1 January 2015, the long-term incentive was changed with approval from shareholders from share-option
awards to a forfeitable share plan. This plan is based on market best practice and aligns the objectives of the company and its employees.
Executive directors’ remuneration
The committee utilised the services of remuneration consultants to set the level of remuneration for executive directors. Their earnings
were benchmarked against recognised remuneration surveys.
2014
R’000
Paid by the Company
Name
MA Brey
F Robertson
LZ Brozin
Basic salary
2 238
2 276
2 325
6 839
Bonus
1 508
1 508
1 508
4 524
Other
benefits*
296
258
209
763
Paid by Subsidiaries
MA Brey
F Robertson
204
495
699
12 825
Total – Executive directors
2013
Paid by the Company
Name
MA Brey
F Robertson
LZ Brozin
MA Brey
F Robertson
Total – Executive directors
* Company contributions to retirement fund and medical aid.
56
Total
4 042
4 042
4 042
12 126
Basic salary
2 155
2 062
2 118
6 335
Bonus
1 499
1 499
1 499
4 497
Other
benefits*
311
263
191
765
Total
3 965
3 824
3 808
11 597
206
487
693
12 290
2014
2014
Paid by Company
Name
PL Campher
MJT Hewu
N Khan
MK Ndebele
KR Moloko
LA Parker
FD Roman
Board fees
Committee
fees
Total
268
125
125
125
125
125
125
1 018
260
87
156
75
38
88
38
742
528
212
281
200
163
213
163
1 760
OVERVIEW
To ensure that non-executive directors’ remuneration is in line with market practice, the Company engaged the services of remuneration
specialists PricewaterhouseCoopers (PwC). The PwC report revealed that the Company’s non-executive directors’ remuneration was not
in line with peers in the market. In an endeavour to align the remuneration with the market, the Company has recommended a 30%
increase in non-executive directors’ remuneration for the year ending 31 December 2015. The proposed increase is tabled in the Notice of
Annual General Meeting; special resolution number 1.This resolution will be presented to Shareholders at the Company’s upcoming
Annual General Meeting on 20 April 2015.
Non-executive directors receive fees for membership of the Brimstone Investment Corporation Limited Board. They also receive fees for
work done on committees of the Board.
C O R P O R AT E
Non-executive directors’ remuneration
2013
Paid by Company
Name
PL Campher
MJT Hewu
N Khan
MK Ndebele
KR Moloko
LA Parker
FD Roman
Board fees
Committee
fees
Total
174
116
116
116
—
116
116
754
210
47
156
35
—
94
35
577
384
163
272
151
—
210
151
1 331
PL Campher
N Khan
Total – Non-executive directors
Total – Directors’ remuneration
33
33
66
1 397
13 687
Prescribed officers
The Board has determined that there are no prescribed officers in the employ of the Company as defined by the Companies Act No.71 of 2008.
C O R P O R AT E
Total – Non-executive directors
Total – Directors’ remuneration
GOVERNANCE
34
34
68
1 828
14 653
S TAT E M E N T S
PL Campher
N Khan
ANNUAL FINANCIAL
2014
REMUNERATION REPORT (CONTINUED)
Share incentive scheme
Share option allocations to directors, top and senior managers are considered periodically. The Brimstone Investment Corporation Limited
Share Trust makes allowances for the granting of options to directors of the company who do not hold salaried employment or office to
acquire shares in the company. The options issued can only be exercised on the basis of a maximum of 20% per annum and must be
exercised within 6 years from date of grant.
Share Option details of executive directors
“N” ordinary Shares
2014
Name
MA Brey
LZ Brozin
F Robertson
Balance at
31 Dec 13
Number
Granted
during the
year
Number
505 780
455 160
455 160
1 416 100
99 700
99 700
99 700
299 100
Balance at
31 Dec 12
Number
Granted
during the
year
Number
456 720
411 060
411 060
1 278 840
152 500
137 200
137 200
426 900
Exercise
Price
Cents
1300
1300
1300
Date of
Grant Expiry Date
24 Feb 14
24 Feb 14
24 Feb 14
27 Feb 20
27 Feb 20
27 Feb 20
Exercised
during the
year
Number
Gain on
exercise
of share
options
R’000
Balance at
31 Dec 14
Number
Exercisable
at
31 Dec 14
Number
133 940
120 540
120 540
375 020
674
607
607
1 888
471 540
434 320
434 320
1 340 180
—
—
—
—
Exercised
during the
year
Number
Gain on
exercise of
share
options
R’000
Balance at
31 Dec 13
Number
Exercisable
at
31 Dec 13
Number
103 440
93 100
93 100
289 640
586
651
586
1 823
505 780
455 160
455 160
1 416 100
—
—
—
—
2013
Name
MA Brey
LZ Brozin
F Robertson
Exercise
Price
Cents
1250
1250
1250
Date of
Grant Expiry Date
27 Feb 13
27 Feb 13
27 Feb 13
27 Feb 19
27 Feb 19
27 Feb 19
Share Option details of staff
“N”
ordinary
shares
No
Exercise
price
Cents
The following options were granted to staff during 2014:
239 500
100 000
339 500
1300
1400
The following options were granted to staff during 2013:
376 300
1250
58
2014
AUDIT AND RISK COMMITTEE REPORT
Committee members and attendance at meetings
The Committee comprises five independent non-executive
directors (as set out in the table below) and is chaired by
Mr N Khan. All the committee members are suitably skilled and
experienced. The committee meets at least three times per year.
executive directors and consequently fulfils its responsibilities
independent of the committee.
Statutory duties
In the conduct of its duties, the committee has performed the
following statutory duties:
–Nominated Deloitte & Touche and Mr Lester Peter Cotten,
who in the opinion of the committee, are both independent of
the Company, for re-appointment as the external auditor for
the ensuing year to the shareholders;
–Determined the fees to be paid to the external auditor and
their terms of engagement;
–Ensured that the appointment of the external auditor
complies with the provisions of the Companies Act and any
other legislation relating to the appointment of auditors;
–Determined the nature and extent of any non-audit services;
and
–Pre-approved any proposed agreement with the auditors for
the provision of non-audit services.
OVERVIEW
The Brimstone audit and risk committee is a formal committee of
the Board. The responsibilities of the committee are outlined in its
written terms of reference which are reviewed annually and are in
line with the Companies Act, King III and the JSE Listings
Requirements. The committee has an independent role with
accountability to the Board and shareholders.
This report of the audit and risk committee is presented to the
shareholders in terms of section 94(7)(f) of the Companies Act
and as recommended by King III.
The members of the committee were recommended by the
Board and appointed by shareholders for the 2014 financial year.
Introduction
C O R P O R AT E
Composition of the committee
The executive directors and senior management make themselves
available to attend meetings and answer questions.
Representatives from Brimstone’s subsidiary companies
attend the meetings by invitation.
The audit committee chairman and Brimstone’s lead independent director are representatives at the subsidiaries finance
committees.
Roles and responsibilities
The committee has a charter approved by the Board. The charter
is reviewed annually and was updated during the year under
review.
The committee’s roles and responsibilities include its statutory
duties in accordance with the Companies Act, as well as the
responsibilities assigned to it by the Board.
The audit or finance committees of Brimstone’s operating
subsidiary companies, namely, Lion of Africa, Sea Harvest and
House of Monatic report to this committee at each meeting by
way of report backs via the respective chairperson of the subsidiary’s audit or finance committee or invited representatives.
In the case of Lion of Africa, Brimstone’s wholly-owned subsidiary, its own audit committee comprises three independent non-
Internal financial controls
Brimstone is responsible for ensuring that a sound system of
internal control exists to safeguard shareholders’ investments and
the assets of the Group. The Group’s internal controls, systems
and procedures are designed to provide reasonable, but not
absolute assurance as to the integrity and reliability of the annual
financial statements, that assets are adequately safeguarded against
C O R P O R AT E
3
3
3
3
3
The committee is satisfied that the Company’s external auditor,
Deloitte & Touche is independent of the Company and is able to
conduct their audit functions without any influence from the
Company. The committee has rules regulating the services and
conditions of use of non-audit services provided by the external
auditors.
In terms of its charter this committee is responsible for the
appointment of the Company’s internal auditors. KPMG
performed this function for the past year and were reappointed
as internal auditors for the 2015 financial year.
The committee meets at least three times a year with the
Company’s internal and external auditors together with management to review accounting, internal and external auditing,
internal control and financial reporting issues. Both the internal
and external auditors enjoy unrestricted access to the audit and
risk committee and vice versa.
The committee chairman meets at least three times per year
with both internal and external audit without management being
present.
The committee approves the fees and scope of external and
internal audit services. It is responsible for the maintenance of a
professional relationship with both the external and internal
auditors and oversees co-operation between these two parties.
GOVERNANCE
3
3
3
3
3
Appointment of External and Internal Auditors
S TAT E M E N T S
Number of
meetings
attended
ANNUAL FINANCIAL
Committee member
N Khan (Chairman)
PL Campher
KR Moloko
LA Parker
FD Roman
Number of
meetings held
2014
AUDIT AND RISK COMMITTEE REPORT (CONTINUED)
material loss and that transactions are properly authorised and
recorded.
Expertise and experience of the Financial Director and
finance function
The committee has satisfied itself of the appropriateness and
experience of the Financial Director, Mr LZ Brozin and the Chief
Financial Officer, Mr M O’Dea. The committee has furthermore
considered and has satisfied itself of the appropriateness of the
expertise and adequacy of resources of the Company’s finance
function and the experience of the senior members of management
responsible for the finance function.
Financial statements and going concern
The committee reviewed the annual financial statements and
Group annual financial statements and is satisfied that they
comply with International Financial Reporting Standards and the
Companies Act and that the accounting policies used are
appropriate.
The committee has also reviewed a documented assessment
by management of the going concern premise of the Company
before recommending to the Board that the Company will be a
going concern for the foreseeable future.
Risk management
In giving effect to risk management responsibilities the Group has
implemented a continuous risk management review programme to
ensure a coherent governance approach throughout the Group.
The Group has ensured that no undue, unexpected or unusual
risks have been undertaken in pursuit of reward.
Compliance
The committee is responsible for reviewing any major breach of
relevant legal, regulatory and other responsibilities. The committee
is satisfied with the Group’s compliance to these standards and
with the applicable laws and regulations. Furthermore, the
committee is satisfied that it has complied with all its legal, regulatory and other responsibilities during the year under review.
Recommendation of the integrated report for approval by
the Board
The committee has reviewed and considered the integrated report,
including the annual financial statements and has recommended it
for approval by the Board.
N Khan
Chairman of the audit and risk committee
60
CONTENTS
OVERVIEW
2014
C O R P O R AT E
Directors’ Approval of Annual Financial Statements, Preparation of Annual Financial Statements
Independent Auditor’s Report. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
Directors’ Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
Statements of Comprehensive Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
Statements of Financial Position. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
Statements of Changes in Equity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
and Certificate by Secretary. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
Statements of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
C O R P O R AT E
Investments in Associate Companies and Joint Ventures (Appendix 2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 139
GOVERNANCE
Interest in Subsidiaries (Appendix 1). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 138
S TAT E M E N T S
SUPPLEMENTARY REPORTS ON INVESTMENTS
ANNUAL FINANCIAL
Notes to the Annual Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
Investments (Appendix 3). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 140
Valuation of Options (Appendix 4). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 141
Directors’ Interests in Shares (Appendix 5). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 142
Shareholding Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 143
Notice of Annual General Meeting. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 146
Curriculum Vitae. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 150
Proxy Form . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 151
2014
DIRECTORS’ APPROVAL OF ANNUAL FINANCIAL STATEMENTS,
PREPARATION OF ANNUAL FINANCIAL STATEMENTS AND
CERTIFICATE BY SECRETARY
The directors of the Company are responsible for the preparation,
integrity and objectivity of the consolidated and separate annual
financial statements as well as for all other information contained
in this integrated report. To fulfil this responsibility, the Company
and Group maintain controls to provide reasonable assurance that
assets are safeguarded and that records accurately reflect the
transactions of the Company and Group.
The consolidated and separate annual financial statements
are prepared in terms of International Financial Reporting
Standards and have been examined by our auditors in
conformity with International Standards on Auditing. The
consolidated and separate annual financial statements for the year
ended 31 December 2014 which appear on pages 59 and 60 and
64 to 143 were approved by the Board and authorised for issue on
9 March 2015.
Certificate by secretary
In terms of section 88 (2)(e) of the Companies Act, I certify that
the Company has lodged with the Commissioner all such returns
and notices as are required by the Companies Act and that all
such returns and notices are true, correct and up to date.
T Moodley
Company Secretary
9 March 2015
On behalf of the Board:
F Robertson
MA Brey
Executive Chairman
Preparation of financial statements
The consolidated and separate annual financial statements of
Brimstone Investment Corporation Limited for the year ended
31 December 2014 have been prepared and supervised by
LZ Brozin (Financial Director) BCom BAcc CA(SA) and
M O’Dea (Chief Financial Officer) BCom CA(SA).
62
2014
INDEPENDENT AUDITOR’S REPORT
to the Shareholders of Brimstone Investment Corporation Limited
Our responsibility is to express an opinion on these consolidated
and separate 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 about 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. The procedures selected depend on the auditor’s judgment,
including the assessment of the risks of material misstatement of
the financial statements, whether due to fraud or error. In making
those risk assessments, the auditor considers internal control
relevant to the entity’s preparation and fair presentation of the
financial statements in order to design audit procedures that are
appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the entity’s internal
control. An audit also includes evaluating the appropriateness of
accounting policies used and the reasonableness of accounting
estimates made by management, as well as evaluating the overall
presentation of the 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 consolidated and separate financial statements
present fairly, in all material respects, the consolidated and
separate financial position of Brimstone Investment Corporation
Limited as at 31 December 2014, and its consolidated and separate
financial performance and consolidated and separate cash flows
for the year then ended in accordance with International Financial
Reporting Standards and the requirements of the Companies Act
of South Africa.
OVERVIEW
C O R P O R AT E
Per: L P Cotten
Partner
9 March 2015
1st Floor The Square
Cape Quarter
27 Somerset Road
Greenpoint, 8005
National Executive: *LL Bam Chief Executive;
*AE Swiegers Chief Operating Officer; *GM Pinnock Audit;
DL Kennedy Risk Advisory; *NB Kader Tax; TP Pillay Consulting;
*K Black Clients & Industries; *JK Mazzocco Talent &
Transformation; *MJ Jarvis Finance; *M Jordon Strategy;
S Gwala Managed Services; *TJ Brown Chairman of the Board;
*MJ Comber Deputy Chairman of the Board
Regional Leader: MN Alberts
A full list of partners and directors is available on request
*Partner and Registered Auditor
B-BBEE rating: Level 2 contributor in terms of the
Chartered Accountancy Profession Sector Code
Member of Deloitte Touche Tohmatsu Limited
C O R P O R AT E
Auditor’s Responsibility
Deloitte & Touche
Registered Auditor
GOVERNANCE
The company’s directors are responsible for the preparation and
fair presentation of these consolidated and separate financial
statements in accordance with International Financial Reporting
Standards and the requirements of the Companies Act of South
Africa, and for such internal control as the directors determine is
necessary to enable the p
reparation of financial statements that are
free from material m
isstatement, whether due to fraud or error.
As part of our audit of the consolidated and separate financial
statements for the year ended 31 December 2014, we have read
the directors’ report, the audit and risk committee report and the
certificate by the secretary for the purpose of identifying whether
there are material inconsistencies between these reports and the
audited consolidated and separate financial statements.
These reports are the responsibility of the respective
preparers. Based on reading these reports we have not identified
material inconsistencies between these reports and the audited
consolidated and separate financial statements. However, we have
not audited these reports and accordingly do not express an
opinion on these reports.
S TAT E M E N T S
Directors’ Responsibility for the Financial
Statements
Other reports required by the Companies Act
ANNUAL FINANCIAL
We have audited the consolidated and separate annual financial
statements of Brimstone Investment Corporation Limited as set
out on pages 66 to 142, which comprise the statements of financial
position as at 31 December 2014, and the statements of comprehensive income, statements of changes in equity, and statements of
cash flows for the year then ended, and the notes, comprising a
summary of significant accounting policies and other explanatory
information.
2014
DIRECTORS’ REPORT
Principal activities of the Group
Voting rights
Brimstone remains an investment holding company. The successful
model of active partnership with well established players in the
sectors of choice will continue to be the focus going forward.
Ordinary shares carry 100 votes per share, while “N” ordinary
shares carry one vote per share. “N” ordinary shares rank pari
passu with ordinary shares in all other respects, including receipt
of dividends and proceeds on the winding up of the Company.
Review of operations
The results for the year under review are set out in the attached
financial statements.
Dividend and special dividend
Brimstone’s board has declared a final dividend of 30 cents per
share for the year ended 31 December 2014 (2013: 30 cents per
share) and a special dividend of 20 cents per share for the year
ended 31 December 2014 (2013: 10 cents per share) payable on
Monday, 23 March 2015. The final dividend and the special
dividend have been declared out of income reserves.
The special dividend has been declared following the
conclusion of the Nedbank transaction. Therefore, after due
consideration and in celebration of Brimstone’s 20 years of
existence, the board of Brimstone has decided to pay a special
dividend to its shareholders.
In compliance with the requirements of Strate, the Company
has determined the following salient dates for the payment of the
final dividend and special dividend. The last day to trade cum
dividend for both the final dividend and the special dividend is
Friday, 13 March 2015.
The final dividend and the special dividend are payable to all
shareholders of Brimstone recorded in the books of the Company
at the close of business on Friday, 20 March 2015. Shares will
commence trading ex-dividend from Monday, 16 March 2015.
Shares may not be rematerialised or dematerialised from Monday,
16 March 2015 to Friday, 20 March 2015, both days inclusive.
The final dividend and the special dividend are subject to
dividend tax at 15%. In determining the dividend tax, secondary
tax on companies (“STC”) credits must be taken into account.
Brimstone has sufficient STC credits to cover the dividend tax and
the STC credits utilised as part of the final and the special dividend
declarations amount to R74 961 605, being 30 cents per share for
the final dividend and R49 974 403, being 20 cents per share, for
the special dividend, respectively. Consequently, no dividend tax is
payable by shareholders who are normally not exempt from
dividend tax. All shareholders will receive the final dividend of
30 cents per share and the special dividend of 20 cents per share.
The number of Brimstone Ordinary and “N” ordinary shares
eligible for both the final dividend and the special dividend at the
date of this declaration is 42 757 604 and 204 606 708 respectively
(this excludes 39 140 000 “N’’ ordinary shares held by The
Brimstone Black Executives Investment Trust, The Brimstone
General Staff Investment Trust and The Brimstone B
road-Based
BEE Trust which are not eligible to receive dividends) and the
Company’s tax reference number is 9397002719.
64
Share capital
The following share movements occurred during the year under
review:
Ordinary
“N” ordinary
Shares issued
1 April 2014
5 September 2014
Shares repurchased and
cancelled
1 May 2014
—
—
435 540
184 560
(3 629 700)
(21 898 143)
There were no changes to the authorised Ordinary and
“N” ordinary share capital.
The unissued shares are the subject of a general authority
granted to the directors in terms of the Companies Act, which
authority remains valid only until the forthcoming annual general
meeting.
General authority
The Board is proposing that the general authority granted at the
last annual general meeting held in May 2014, to permit the
Company or a subsidiary to acquire the Company’s own shares
and to permit the Company to issue shares for cash, be renewed at
the forthcoming annual general meeting. Full details are set out in
the notice to members on page 146.
Interest in and earnings of subsidiaries
Details of the Company’s interests in and share of aggregate
profits and losses of its subsidiaries are set out in Appendix 1
on page 138.
Directors’ interests in contracts
Details of relevant transactions during the year are included in
note 42 to the financial statements.
Interests of directors in the shares of the
Company
The details of directors’ interest in the shares of the Company are
set out on page 142. Details of the director’s interest in options
held in terms of the Company’s share incentive scheme are set out
on page 58.
Special resolution
At the annual general meeting held in May 2014, a special
resolution was passed to enable the Company and/or any
subsidiary to acquire its own issued shares from time to time on
such terms and conditions and in such amounts as the directors
from time to time decide, subject to certain statutory provisions
and the Listings Requirements of the JSE Limited.
The non-executive directors’ fees for the year ended
31 December 2014 were also approved by special resolution at the
annual general meeting held in May 2014.
Events subsequent to 31 December 2014
The group disposed of 1.8 million Nedbank Group Limited shares
for R442.5 million during March 2015.
The Company has made a commitment to increase the capital
of Lion of Africa Holdings Company (Pty) Ltd by R100 million.
All conditions precedent for the disposal of the diagnostics
business of the Scientific Group were met and the first payment of
R40.2 million was received on 6 March 2015.
Litigation
There is no material litigation outstanding for the Company or its
subsidiaries.
Going concern
OVERVIEW
The audit and risk committee report on the performance of its
duties in terms of section 94(7) of the Companies Act is set out on
pages 59 to 60 of the integrated report.
C O R P O R AT E
The Board utilises appropriate expertise in controlling and
managing material identified risks in asset holdings, borrowings
and foreign currency exposure both in the holding company and
in advising and assisting subsidiaries and associates.
Audit and risk committee report
Insurance, interest rate and currency risk
management
2014
The directors believe that the Group and Company will be a going
concern for the foreseeable future.
C O R P O R AT E
GOVERNANCE
S TAT E M E N T S
The names of the directors in office at the date of this report
appear on page 3. LZ Brozin, PL Campher, N Khan and
LA Parker are due to retire by rotation in terms of the Company’s
MOI and, being eligible, offer themselves for re-election.
The company secretary’s name and her business and postal
address appear on page 3.
ANNUAL FINANCIAL
Directors and secretary
2014
STATEMENTS OF COMPREHENSIVE INCOME
GROUP
R’000
Revenue
Sales and fee income
Dividends received
Operating expenses
Operating profit
Fair value gains
Exceptional items
Share of (losses)/profits of associates and joint ventures
Notes
2
3
2014
2 221 054
1 968 233
252 821
(2 119 196)
COMPANY
2013
2 086 376
1 930 997
155 379
(2 021 990)
2014
2013
438 284
24 743
413 541
(95 110)
78 137
18 713
59 424
(80 516)
101 858
463 967
(28 286)
(65 431)
64 386
557 402
7 828
13 204
343 174
356 252
(215 514)
—
(2 379)
83 024
—
—
472 108
23 028
(188 182)
(449)
642 820
23 037
(110 553)
(507)
483 912
9 967
(19 863)
—
80 645
14 034
(5 468)
—
306 505
(28 712)
554 797
(81 405)
474 016
52 045
89 211
(16 004)
Profit for the year
Other comprehensive income, net of tax
Items that may be reclassified subsequently to profit and loss
Cash flow hedges
Profit/(loss) arising during the year
Net value (loss)/gain on available-for-sale financial asset
277 793
17 991
473 392
7 592
526 061
—
73 207
—
—
—
—
—
Total comprehensive income for the year
295 784
480 984
526 061
73 207
259 050
18 743
277 793
464 111
9 281
473 392
269 739
26 045
295 784
468 523
12 461
480 984
105.8
90.4
189.9
162.2
Profit before net finance costs
Income from investments
Net finance costs
Outside unit holders’ interest
Net profit before taxation
Taxation
4
5
6
8
9
10
33 878
(15 887)
Profit attributable to:
Equity holders of the parent
Non-controlling interests
Total comprehensive income attributable to:
Equity holders of the parent
Earnings per share (cents)
Basic
Diluted
66
12
(7 711)
15 303
2014
STATEMENTS OF FINANCIAL POSITION
at 31 December 2014
18
TOTAL ASSETS
5 407 395
410 827
12 140
114 400
—
1 067 131
3 636 528
—
166 369
—
5 051 016
278 348
12 140
135 599
—
799 029
3 633 291
21 654
161 774
9 181
1 137 448
1 713
—
—
722 932
6 763
406 040
—
—
—
1 793 146
1 539
—
—
736 381
29 378
1 016 667
—
—
9 181
2 525 671
265 616
633 801
561 516
14 222
828 897
221 619
1 748 577
250 648
617 731
505 785
9 949
103 251
261 213
886 256
—
27 779
—
—
808 939
49 538
21 999
—
19 949
—
—
—
2 050
7 933 066
6 799 593
2 023 704
1 815 145
3 372 120
45
325 434
23 223
(4 847)
(11 839)
2 905 630
3 237 646
134 474
1 346 964
45
361 985
1 730
—
—
983 204
1 346 964
—
1 256 176
49
382 510
1 730
—
—
871 887
1 256 176
—
EQUITY AND LIABILITIES
Capital and reserves
Share capital
Capital reserves
Revaluation reserves
Cash flow hedging reserve
Changes in ownership
Retained earnings
Attributable to equity holders of the parent
27
3 434 405
45
342 032
14 143
14 922
(11 839)
2 965 681
3 324 984
109 421
Non-current liabilities
Long-term interest bearing borrowings
Interest in subsidiaries
Long-term provisions
Other financial liabilities
Insurance liabilities
Deferred taxation
28
16
29
30
22
31
2 930 119
2 040 451
—
23 103
3 490
223 695
639 380
1 764 025
936 765
—
22 211
—
168 749
636 300
617 651
—
537 995
—
3 490
—
76 166
488 328
—
352 469
—
—
—
135 859
1 568 542
130 700
14 815
548 646
106 251
732 794
16 145
220
18 172
799
1 663 448
260 770
49 604
575 358
92 731
634 817
18 848
14 123
16 992
205
59 089
—
11
6 129
52 729
—
—
220
—
—
70 641
—
32 890
1 803
33 412
—
—
2 536
—
—
7 933 066
6 799 593
2 023 704
1 815 145
1 356.3
245 151
1 324.0
244 531
Current liabilities
Short-term interest bearing borrowings
Bank overdrafts
Trade payables
Other payables
Short-term provisions
Taxation
TOTAL EQUITY AND LIABILITIES
NAV per share (cents)
Shares in issue at end of year (000’s)
23
24
25
26
32
33
22
30
29
OVERVIEW
2013
C O R P O R AT E
2014
20
21
22
2013
C O R P O R AT E
Current assets
Inventories
Trade and other receivables
Insurance assets
Taxation
Investments
Cash and cash equivalents
13
14
15
16
17
18
31
22
19
2014
GOVERNANCE
ASSETS
Non-current assets
Property, plant, equipment and vehicles
Goodwill
Intangible assets
Investments in associate companies and joint ventures
Investments
Deferred taxation
Insurance assets
Other financial assets
Notes
S TAT E M E N T S
R’000
COMPANY
ANNUAL FINANCIAL
GROUP
2014
STATEMENTS OF CHANGES IN EQUITY
R’000
GROUP
Balance at 1 January 2013
Attributable profit for the year ended
31 December 2013
Other comprehensive income
Total comprehensive income
Recognition of share-based payments
Dividend paid
Subsidiary’s accrual for preference
dividends
Issue of share capital
Repurchase of trust units
Disposal of treasury shares
Share of non-distributable reserves of
associates transferred directly to equity
Balance at 31 December 2013
Attributable profit for the year
ended 31 December 2014
Other comprehensive income
Total comprehensive income
Dividend paid
Subsidiary’s accrual for preference
dividends
Redemption of preference shares by
subsidiary
Share of distribution made by associate
Share of distribution made by
subsidiary for change in shareholding
Reduction of subsidiary’s share capital
Share of non-distributable reserves of
associates transferred directly to equity
COMPANY
Balance at 1 January 2013
Dividend paid
Dividend paid
Specific repurchase of shares
68
Cash
flow
hedging
reserve
Share
capital
Capital
reserves
Revaluation
reserves
45
310 132
14 331
(367)
—
—
—
—
—
—
—
—
10 076
—
—
8 892
8 892
—
—
—
(4 480)
(4 480)
—
—
Changes
in
ownership
Retained
earnings
Attributable to
equity
holders
of the
parent
(11 839) 2 502 581 2 814 883
—
—
—
—
—
464 111
—
464 111
—
(61 062)
464 111
4 412
468 523
10 076
(61 062)
Noncontrolling
interests
Total
115 103 2 929 986
9 281 473 392
3 180
7 592
12 461 480 984
—
10 076
(1 480) (62 542)
—
—
—
—
—
2 812
(187)
49
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
2 812
(187)
49
8 004
330
(84)
—
8 004
3 142
(271)
49
—
2 552
—
—
—
—
2 552
140
2 692
45
325 434
23 223
(4 847)
—
—
—
—
—
—
—
—
10 570
—
—
(9 080)
(9 080)
—
—
—
19 769
19 769
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(58 945)
—
(58 945)
(26 804)
—
(26 804)
(58 945)
—
—
—
—
—
—
—
—
—
—
—
—
(42 115)
—
—
—
(42 115)
—
4 597
(744)
(29 953)
(6)
—
651
(72 068)
(6)
4 597
(93)
—
—
—
—
—
—
4 597
(744)
(11 839) 2 905 630 3 237 646
259 050
—
259 050
—
(97 939)
—
259 050
10 689
269 739
10 570
(97 939)
—
18 743 277 793
7 302
17 991
26 045 295 784
—
10 570
(3 000) (100 939)
7 611
7 611
—
45
2 175
342 032
—
14 143
—
14 922
49
369 622
1 730
—
—
867 349 1 238 750
— 1 238 750
—
—
—
—
—
—
2 812
10 076
—
—
—
—
—
—
—
—
—
—
—
—
73 207
(68 669)
—
—
—
—
—
—
49
382 510
1 730
—
—
871 887 1 256 176
— 1 256 176
—
—
—
—
—
1 730
—
—
—
—
—
—
—
—
—
—
—
—
526 061
526 061
(110 086) (110 086)
(304 658) (340 354)
—
4 597
—
10 570
983 204 1 346 964
— 526 061
— (110 086)
— (340 354)
—
4 597
—
10 570
— 1 346 964
—
—
—
—
(4) (35 692)
—
4 597
—
10 570
45 361 985
—
—
2 175
(11 839) 2 965 681 3 324 984
134 474 3 372 120
73 207
(68 669)
2 812
10 076
403
2 578
109 421 3 434 405
73 207
(68 669)
2 812
10 076
2014
STATEMENTS OF CASH FLOWS
Cash generated from/(used in) operations
Interest received
Dividends received from associates and joint ventures
Dividends received from other equity investments
Dividends received from subsidiaries
Income taxes (paid)/refunded
34.1
Finance costs
34.2
Net cash from operating activities
Investing activities
Cash effect of change in investment in subsidiaries
34.3
Loan repayments and recoveries from associate and investments
Proceeds on disposal of investments
Proceeds on disposal of property, plant, equipment and vehicles
Acquisition of property, plant, equipment and vehicles
Acquisition of intangible assets
Acquisition of investments
Net cash (used in)/generated from investing activities
Financing activities
Dividends paid by company and subsidiaries
Repayments of borrowings
Loans raised
Shares sold
Shares repurchased
Proceeds on issue of trust units/shares
Shares repurchased by subsidiary
Redemption of non-controlling shareholder’s preference shares
Share of distribution made by subsidiary
Units/shares repurchased by subsidiaries
(Decrease)/increase in bank overdrafts
Net cash generated from/(used in) financing activities
Net (decrease)/increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
Bank balances and cash
277 793
473 392
526 061
73 207
(21 498)
(188 920)
(463 967)
28 286
22 355
188 182
28 712
71 325
10 570
2 072
(86 919)
(104 701)
(557 402)
356
22 368
110 553
81 405
62 483
10 076
2 016
—
(423 508)
(356 252)
—
—
19 863
(52 045)
682
10 570
—
—
(73 458)
(83 024)
—
—
5 468
16 004
628
10 076
—
547
(44 543)
(14 968)
30 983
(2 703)
(13 192)
(60 326)
152 923
(143)
13 484
(20 422)
(221 152)
4 353
303 872
(198 603)
186 706
—
(274 629)
—
(7 830)
—
23 643
—
—
—
(51 099)
—
7 019
—
3 052
—
—
48 174
23 028
86 929
165 892
—
(17 184)
(143 509)
163 330
68 238
23 037
73 715
81 664
—
(32 188)
(68 365)
146 101
(258 816)
9 967
—
2 066
411 475
(852)
(9 508)
154 332
(41 028)
5 765
—
7 985
51 439
2 151
(5 468)
20 844
—
3 253
48 701
542
(204 893)
(1 156)
(754 591)
(908 144)
—
6 163
44 602
2 021
(76 046)
(5 798)
(132 000)
(161 058)
192 179
3 129
198 947
—
(856)
—
(21 521)
371 878
56 502
5 995
365
—
(146)
—
(128 811)
(66 095)
(130 892)
(342 716)
1 275 813
—
—
4 597
(6)
(24 579)
(42 115)
(93)
(34 789)
705 220
(39 594)
261 213
(62 542)
(84 071)
69 672
49
—
3 142
—
—
—
(271)
34 170
(39 851)
(54 808)
316 021
(110 086)
—
—
—
(340 354)
4 597
—
—
—
—
(32 879)
(478 722)
47 488
2 050
(68 669)
—
—
—
—
2 812
—
—
—
—
32 890
(32 967)
(78 218)
80 268
221 619
261 213
49 538
2 050
OVERVIEW
2013
C O R P O R AT E
2014
2013
C O R P O R AT E
Operating activities
Net attributable profit
Adjustments for:
Share of profits of associates and joint ventures
Increase in fair value of investments
Impairment of investment in associate
Amortisation of intangible assets
Net finance costs
Taxation
Depreciation of property, plant, equipment and vehicles
Share-based payment expense
Increase in long and short-term provisions
Profit/(loss) on disposal of property, plant, equipment
and vehicles
Operating cash flows before movements in working capital
Increase in inventories
Decrease/(increase) in trade and other receivables
(Decrease)/increase in trade and other payables
Net increase in insurance assets
Net increase in insurance liabilities
2014
GOVERNANCE
Notes
S TAT E M E N T S
R’000
COMPANY
ANNUAL FINANCIAL
GROUP
2014
NOTES TO THE ANNUAL FINANCIAL STATEMENTS
1.Accounting policies and basis of preparation
The consolidated and separate annual financial statements are
prepared in accordance with International Financial Reporting
Standards (IFRS) of the International Accounting Standards
Board, the SAICA Financial Reporting Guides as issued by the
Accounting Practices Committee and the Financial Reporting
Standards Council, the requirements of the JSE Limited’s Listing
Requirements and the Companies Act of South Africa.
The financial statements have been prepared on the historical
cost basis except for the revaluation of certain financial instruments. The principal accounting policies set out below, have been
applied on a basis consistent with the p
revious year.
amount of the assets (including goodwill) and liabilities of the
subsidiary and any non-controlling interests. Amounts p
reviously
recognised in other comprehensive income in relation to the
subsidiary are accounted for (i.e. reclassified to profit or loss or
transferred directly to retained earnings) in the same manner as
would be required if the relevant assets or liabilities were disposed
of. The fair value of any investment retained in the former
subsidiary at the date when control is lost is regarded as the fair
value on initial recognition for subsequent accounting under lAS
39 Financial instruments: Recognition and Measurement or, when
applicable, the cost on initial recognition of an investment in an
associate or jointly controlled entity.
The principal accounting policies are:
1.2 Subsidiary companies
1.1 Basis of consolidation
The consolidated financial statements incorporate the financial
statements of the Company and entities (including special purpose
entities) controlled by the Company (its subsidiaries). Control is
achieved where the Company has the power to govern the
financial and operating policies of an entity so as to obtain benefits
from its activities.
The results of subsidiaries acquired or disposed of during the
year are included in the consolidated statement of comprehensive
income from the effective date of acquisition and up to the
effective date of disposal, as appropriate.
Where necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies in line with
those used by other members of the Group.
All intra-group transactions, balances, income and expenses
are eliminated in full on consolidation.
Non-controlllng interests in subsidiaries are identified
separately from the Group’s equity therein. The interests of noncontrolling shareholders may be initially measured either at fair
value or at the non-controlling interests’ proportionate share of the
fair value of the acquiree’s identifiable net assets. The choice of
measurement basis is made on an acquisition-by-acquisition basis.
Subsequent to acquisition, the carrying amount of non-controlling
interests is the amount of those interests at initial recognition plus
the non-controlling interests’ share of subsequent changes in
equity. Changes in the Group’s interests in subsidiaries that do not
result in a loss of control are accounted for as equity transactions.
The carrying amounts of the Group’s interests and the non-controlling interests are adjusted to reflect the changes in their relative
interests in the subsidiaries. Any difference between the amount
by which the non-controlling interests are adjusted and the fair
value of the consideration paid or received is recognised directly in
equity and attributed to owners of the Company.
When the Group loses control of a subsidiary, the profit or
loss on disposal is calculated as the difference between (i) the
aggregate of the fair value of the consideration received and the
fair value of any retained interest and (ii) the previous carrying
70
Subsidiary companies are valued at cost less amounts written off
when the directors believe that there has been a permanent diminution in value. On consolidation any write off is apportioned and
deducted from the underlying assets of the subsidiary.
The outside unit holders’ interest arising on consolidation of
the subsidiary relates to the third party share in the Special
Purpose Entities (SPEs) which are effectively demand deposits
and are consequently measured at fair value, i.e. the quoted unit
value as derived by the fund administrator with reference to the
rules of each particular fund. The outside unit holders’ interest
recognised in the statement of comprehensive income relates to the
third party share in gains or losses in the fair value of the SPEs.
1.3 Business combinations
Acquisitions of subsidiaries and businesses are accounted for using
the acquisition method. The consideration for each acquisition is
measured at the aggregate of the fair values (at the date of
exchange) of assets given, liabilities incurred or assumed and
equity instruments issued by the Group in exchange for control of
the acquiree. Acquisition-related costs are recognised in profit or
loss as incurred.
Where applicable, the consideration for the acquisition
includes any asset or liability resulting from a contingent
consideration arrangement, measured at its acquisition-date fair
value. Subsequent changes in such fair values are adjusted against
the cost of acquisition where they qualify as measurement period
adjustments. All other subsequent changes in the fair value of a
contingent consideration classified as an asset or liability are
accounted for in accordance with relevant IFRSs. Changes in the
fair value of a contingent consideration classified as equity are not
recognised.
Where a business combination is achieved in stages, the
Group’s previously held interests in the acquired entity are
remeasured to fair value at the acquisition date (i.e. the date the
Group attains control) and the resulting gain or loss, if any, is
recognised in profit or loss. Amounts arising from interests in the
acquiree prior to the acquisition date that have previously been
recognised in other comprehensive income are reclassified to profit
1.5 Interests in joint ventures
A joint venture is a contractual arrangement whereby the Group
and other parties undertake an economic activity that is subject to
joint control, that is, the s trategic financial and operating policy
decisions relating to the activities require the unanimous consent
of the parties sharing control.
The Group reports its interest in jointly controlled entities
using the equity method of accounting, except when the
investment is classified as held for sale, in which case it is
accounted for under IFRS 5 Non-current Assets Held for Sale
and Discontinued Operations.
When a group entity transacts with a jointly controlled entity
of the Group, unrealised profits and losses are eliminated to the
extent of the Group’s interest in the joint venture.
OVERVIEW
The acquiree’s identifiable assets, liabilities and contingent
liabilities that meet the conditions for recognition under IFRS 3
Business Combinations are recognised at their fair value at the
acquisition date, except that:
–deferred tax assets or liabilities and liabilities or assets related
to employee benefit arrangements are recognised and
measured in accordance with IAS 12 Income Taxes and IAS
19 Employee Benefits respectively;
–liabilities or equity instruments related to the replacement by
the Group of an acquiree’s share-based payment awards are
measured in accordance with IFRS 2 Share-based Payment;
and
–assets (or disposal groups) that are classified as held for sale
in accordance with IFRS 5 Non-current Assets Held for Sale
and Discontinued Operations are measured in accordance
with that Standard.
statement of financial position at cost less amounts written off
when the directors believe that there has been a permanent
diminution in value.
C O R P O R AT E
or loss, where such treatment would be appropriate if that interest
were disposed of.
2014
1.7 Negative goodwill
Negative goodwill represents the excess of the Group’s interest in
the fair value of the identifiable assets and liabilities of a subsidiary, associate or jointly controlled entity at the date of acquisition over the cost of the acquisition. Negative goodwill, after
reassessment, is recognised immediately in profit or loss.
1.8 Financial assets
All financial assets are recognised and derecognised on a trade
date where the purchase or sale of a financial asset is under a
contract whose terms require delivery of the financial asset within
the time frame established by the market concerned and are
initially measured at fair value, plus transaction costs, except for
those financial assets classified as at fair value through profit or
loss, which are initially measured at fair value.
Financial assets are classified into the following specified
categories: financial assets ‘at fair value through profit or loss’
C O R P O R AT E
An associate is an entity over which the Group has the ability to
exercise significant influence, but which it does not control or
jointly control.
The results and assets and liabilities of associates are incorporated in these financial statements using the equity method of
accounting. The carrying amount of such investments is reduced
to recognise any impairment in the value of individual investments.
When a group entity transacts with an associate of the Group,
unrealised profits and losses are eliminated to the extent of the
Group’s interest in the relevant associate, except where unrealised
losses provide evidence of an impairment of the asset transferred.
Where the Group’s share of losses of an associate exceeds the
carrying amount of the associate, the associate is carried at a
nominal amount. Additional losses are only recognised to the
extent that the Group has incurred obligations in respect of the
associate.
The Company’s interest in associates is carried in the
GOVERNANCE
1.4 Investments in associates
S TAT E M E N T S
Goodwill arising on consolidation represents the excess of the cost
of acquisition over the Group’s interest in the fair value of the
identifiable assets and liabilities of a subsidiary, associate or jointly
controlled entity at the date of acquisition. Goodwill is recognised
as an asset and is not amortised but subjected to an annual
impairment review.
Goodwill arising on the acquisition of an associate or jointly
controlled entity is included within the carrying amount of the
investment and is assessed for impairment as part of the
investment. Goodwill arising on the acquisition of a subsidiary is
presented separately in the statement of financial position.
On disposal of a subsidiary, associate or jointly c ontrolled
entity, the attributable amount of goodwill is included in the
determination of the profit or loss on disposal.
ANNUAL FINANCIAL
1.6Goodwill
If the initial accounting for a business combination is incomplete
by the end of the reporting period in which the combination
occurs, the Group reports provisional amounts for the items for
which the accounting is incomplete. Those provisional amounts
are adjusted during the measurement period, or additional assets
or liabilities are recognised, to reflect new information obtained
about facts and circumstances that existed as of the acquisition
date that, if known, would have affected the amounts recognised
as of that date.
The measurement period is the period from the date of acquisition to the date the Group obtains complete information about
facts and circumstances that existed as of the acquisition date –
and is subject to a maximum of one year.
2014
NOTES (CONTINUED)
(FVTPL), ‘held-to-maturity’ investments, ‘available-for-sale’
(AFS) financial assets and ‘loans and receivables’. The classification depends on the nature and purpose of the financial assets
and is determined at the time of initial recognition.
intent and ability to hold to maturity are classified as held-tomaturity investments. Held-to-maturity investments are recorded
at amortised cost using the effective interest method less
impairment, with revenue recognised on an effective yield basis.
Effective interest method
AFS financial assets
The effective interest method is a method of calculating the
amortised cost of a financial asset and of allocating interest income
over the relevant period. The effective interest rate is the rate that
exactly discounts estimated future cash receipts through the expected
life of the financial asset, or, where appropriate, a shorter period.
Income is recognised on an effective interest basis for debt
instruments other than those financial assets designated as at FVTPL.
Unlisted shares and linked loans held by the Group are classified
as being AFS and are stated at fair value based on the most recent
traded prices. Gains and losses arising from changes in fair value
are recognised directly in equity in the investments revaluation
reserve with the exception of impairment losses and interest calculated using the effective interest method, which are recognised
directly in profit or loss. Where the investment is disposed of or is
determined to be impaired, the cumulative gain or loss previously
recognised in the investments revaluation reserve is included in
profit or loss for the period.
Dividends on AFS equity instruments are recognised in profit
or loss when the Group’s right to receive the dividends is established.
Financial assets at FVTPL
Financial assets are classified as at FVTPL where the financial
asset is either held for trading or it is designated as at FVTPL.
A financial asset is classified as held for trading if:
–It has been acquired principally for the purpose of selling it in
the near future; or
–On initial recognition it is a part of an identified portfolio of
financial instruments that the Group manages together and
has a recent actual pattern of short-term profit taking; or
–It is a derivative that is not designated and effective as a
hedging instrument.
A financial asset other than a financial asset held for trading
may be designated as at FVTPL upon initial recognition if:
–Such designation eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise
arise; or
–The financial asset forms part of a group of financial assets or
financial liabilities or both, which is managed and its performance is evaluated on a fair value basis, in accordance with
the Group’s documented risk management or investment
strategy and information about the grouping is provided
internally on that basis; or
–It forms part of a contract containing one or more embedded
derivatives and IAS 39 Financial Instruments: Recognition
and Measurement permits the entire combined contract (asset
or liability) to be designated as at FVTPL.
Financial assets at FVTPL are stated at fair value, with any gains
or losses arising on remeasurement recognised in profit or loss.
The net gain or loss recognised in profit or loss incorporates any
dividend or interest earned on the financial asset. Fair value is
determined in the manner described in note 41.12.
Held-to-maturity investments
Bills of exchange and debentures with fixed or determinable
payments and fixed maturity dates that the Group has the positive
72
Loans and receivables
Trade receivables, loans and other receivables that have fixed or
determinable payments that are not q
uoted in an active market are
classified as ‘loans and receivables’. Loans and receivables are
measured at amortised cost using the effective interest method less
any impairment. Interest income is recognised by applying the
effective interest rate, except for s hort-term receivables where the
recognition of interest would be immaterial.
Impairment of financial assets
Financial assets, other than those at FVTPL, are assessed for indicators of impairment at each reporting date. Financial assets are
impaired where there is objective evidence that, as a result of one
or more events that occurred after the initial recognition of the
financial asset, the estimated future cash flows of the investment
have been impacted. For financial assets carried at amortised cost,
the amount of the impairment is the difference between the asset’s
carrying amount and the present value of estimated future cash
flows, discounted at the original effective interest rate.
The carrying amount of the financial asset is reduced by the
impairment loss directly for all financial assets with the exception
of trade receivables where the carrying amount is reduced through
the use of an allowance account. When a trade receivable is
uncollectible, it is written off against the allowance account.
Changes in the carrying amount of the allowance account are
recognised in profit or loss.
With the exception of AFS equity instruments, if, in a subsequent period, the amount of the impairment loss decreases and the
decrease can be related objectively to an event occurring after the
impairment was recognised, the previously recognised impairment
loss is reversed through profit or loss to the extent that the
carrying amount of the investment at the date the impairment is
reversed does not exceed what the amortised cost would have
been had the impairment not been recognised.
Classification as debt or equity
Debt and equity instruments are classified as either financial
liabilities or as equity in accordance with the substance of the
contractual arrangement.
Equity instruments
An equity instrument is any contract that evidences a residual
interest in the assets of an entity after deducting all of its liabilities.
Equity instruments issued by the Group are recorded at the
proceeds received, net of direct issue costs.
Financial liabilities at FVTPL are stated at fair value, with any
gains or losses arising on remeasurement recognised in profit or
loss. The net gain or loss recognised in profit or loss incorporates
any interest paid on the financial liability. Fair value is determined
in the manner described in note 41.12.
Compound instruments
The component parts of compound instruments (redeemable preference shares) issued by the Group are classified separately as
financial liabilities and equity in accordance with the substance of
the contractual arrangement. At the date of issue, the fair value of
the liability component is estimated using the prevailing market
interest rate for a similar redeemable instrument. This amount is
recorded as a liability on an amortised cost basis using the
effective interest method until the instrument’s redemption date.
The equity component is determined by deducting the amount of
the liability component from the fair value of the compound
instrument as a whole. This is recognised and included in equity,
net of tax effects and is not subsequently remeasured.
Other financial liabilities, including borrowings, are initially
measured at fair value, net of transaction costs.
Other financial liabilities are subsequently measured at
amortised cost using the effective interest method, with interest
expense recognised on an effective yield basis.
The effective interest method is a method of calculating the
amortised cost of a financial liability and of allocating interest
expense over the relevant period. The effective interest rate is the
rate that exactly discounts estimated future cash payments
through the expected life of the financial liability, or, where
appropriate, a shorter period, to the net carrying amount on initial
recognition.
Financial liabilities
Financial liabilities are classified as either financial liabilities at
FVTPL or other financial liabilities.
One of the purposes of insurance is to enable policyholders to
protect themselves against uncertain future events. This uncertainty as reflected in the financial statements of the insurer principally arises in respect of the insurance liabilities of the Group.
The estimation of the ultimate liability arising from claims made
under insurance contracts is a critical accounting estimate. There
Financial liabilities at FVTPL
Financial liabilities are classified as at FVTPL where the financial
liability is either held for trading or it is designated as at FVTPL.
OVERVIEW
C O R P O R AT E
1.9Financial liabilities and equity instruments issued
by the Group
A financial liability other than a financial liability held for trading
may be designated as at FVTPL upon initial recognition if:
–Such designation eliminates or significantly reduces a
measurement or recognition inconsistency that would
otherwise arise; or
–The financial liability forms part of a group of f inancial assets
or financial liabilities or both, which is managed and its
performance is evaluated on a fair value basis, in accordance
with the Group’s documented risk management or investment
strategy and information about the grouping is provided
internally on that basis; or
–It forms part of a contract containing one or more embedded
derivatives and IAS 39 Financial Instruments: Recognition
and Measurement permits the entire combined contract (asset
or liability) to be designated as at FVTPL.
C O R P O R AT E
The Group derecognises a financial asset only when the contractual rights to the cash flows from the asset expire; or it
transfers the financial asset and substantially all the risks and
rewards of ownership of the asset to another entity. If the Group
neither transfers nor retains substantially all the risks and rewards
of ownership and continues to control the transferred asset, the
Group recognises its retained interest in the asset and an associated liability for amounts it may have to pay. If the Group
retains substantially all the risks and rewards of ownership of a
transferred financial asset, the Group continues to recognise the
financial asset and also recognises a secured borrowing for the
proceeds received.
GOVERNANCE
Derecognition of financial assets
A financial liability is classified as held for trading if:
–It has been incurred principally for the purpose of repurchasing in the near future; or
–On initial recognition, it is a part of an identified portfolio of
financial instruments that the Group manages together and
has a recent actual pattern of short-term profit taking; or
–It is a derivative that is not designated and effective as a
hedging instrument.
S TAT E M E N T S
In respect of AFS equity securities, any increase in fair value
subsequent to an impairment loss is recognised directly in equity.
2014
ANNUAL FINANCIAL
2014
NOTES (CONTINUED)
are several sources of uncertainty that need to be considered in the
estimate of the liability that the Group will ultimately pay for such
claims. These sources of uncertainty include:
–Judicial decisions – courts may set new levels of award or
compensation for existing claim categories which may be
difficult to predict;
–Decisions relating to imprecise policy wordings may lead to
the admission of new claim types not c urrently allowed for in
pricing; and
–Changes in attitudes to policyholders claiming.
Refer to note 41.14 for the processes used to decide on assumptions for outstanding claims and claims incurred but not reported.
Derecognition of financial liabilities
The Group derecognises financial liabilities when and only when,
the Group’s obligations are discharged, c ancelled or they expire.
1.10 Derivative financial instruments
The Group enters into a variety of derivative financial instruments
to manage its exposure to interest rate and foreign exchange rate
risks, including foreign exchange forward contracts and interest
rate swaps.
Further details of derivative financial instruments are
disclosed in notes 18, 30 and 41.6.
Derivatives are initially recognised at fair value at the date a
derivative contract is entered into and are subsequently
remeasured to their fair value at each reporting date. The resulting
gain or loss is recognised in profit or loss immediately unless the
derivative is designated and effective as a hedging instrument, in
which event the timing of the recognition in profit or loss depends
on the nature of the hedge relationship.
(a) Hedge accounting
The Group designates certain hedging instruments, which include
derivatives, embedded derivatives and derivatives in respect of
foreign currency risk, as either fair value hedges, cash flow
hedges, or hedges of net investments in foreign operations. Hedges
of foreign exchange risk on firm commitments are accounted for
as cash flow hedges.
At the inception of the hedge relationship, the entity documents
the relationship between the hedging instrument and the hedged
item, along with its risk management objectives and its strategy for
undertaking various hedge transactions. Furthermore, at the
inception of the hedge and on an ongoing basis, the Group
documents whether the hedging instrument that is used in a hedging
relationship is highly effective in offsetting changes in fair values or
cash flows of the hedged item attributable to the hedged risk.
(b) Cash flow hedges
The effective portion of changes in the fair value of derivatives
that are designated and qualify as cash flow hedges are deferred in
74
equity. The gain or loss relating to the ineffective portion is recognised immediately in profit or loss.
Amounts previously recognised in other comprehensive
income and accumulated in equity are reclassified to profit or loss
in the periods when the hedged item is recognised in profit or loss,
in the same line of the statement of comprehensive income as the
recognised hedged item. However, when the forecast transaction
that is hedged results in the recognition of a non-financial asset or
a non-financial liability, the gains and losses previously recognised
in other comprehensive income and accumulated in equity, are
transferred from equity and included in the initial measurement of
the cost of the non-financial asset or liability.
Hedge accounting is discontinued when the Group revokes
the hedging relationship, the hedging instrument expires or is sold,
terminated, or exercised, or no longer qualifies for hedge accounting.
Any gain or loss recognised in other comprehensive income and
accumulated in equity at that time remains in equity and is
recognised when the forecast transaction is ultimately recognised
in profit or loss. When a forecast transaction is no longer expected
to occur, the gain or loss accumulated in equity is recognised
immediately in profit or loss.
1.11 Borrowing costs
Interest costs are charged against income in the period in which
incurred, unless they are directly attributable to the acquisition,
construction or production of a qualifiying asset, in which case they
are capitalised to the cost of the asset. Dividends on preference
shares, classified as liabilities, are recognised as finance costs.
1.12 Revenue recognition
Included in revenue are net invoiced sales, excluding VAT, to
customers for goods delivered, where title has passed.
Management fees, performance fees and royalties are recognised on an accrual basis in accordance with the substance of the
relevant agreements. Cash d
ividends and the full cash equivalent
of capitalisation share awards are recognised when the right to
receive payment or transfer is established. Interest is r ecognised
on a time proportion basis, taking account of the principal outstanding and the effective rate over the period to maturity, when it
is determined that such income will accrue to the Group.
Fee income from insurance contracts arises from administering alternative risk transfer policies. The income is recognised
in profit or loss, as the service is provided on a straight-line basis.
Fee income is included as part of the premium income.
1.13 Property, plant, equipment and vehicles
Fixed property utilised for manufacturing and administration is
stated at its deemed cost less accumulated depreciation. Plant,
equipment and vehicles are stated in the Group financial statements
at cost to the Group less accumulated depreciation. Depreciation is
calculated on the straight line method to write assets down to
estimated net residual values at the end of their useful lives at the
(a) Acquired computer software
The cost of acquired computer software licences consists of the
purchase price and any directly attributable costs of preparing the
asset for its intended use.
(b) Developed computer software
Development costs, other than research costs, that are directly
attributable to the design, implementation and testing of identifiable and unique software products controlled by the Group are
recognised as intangible assets when the following criteria are met:
–It is technically feasible to complete the software product so
that it will be available for use.
–Management intends to complete the software product and
use or sell it.
–Management is able to use or sell the software product.
–It can be demonstrated how the software product will
generate probable future economic benefits.
–Adequate technical, financial and other resources to complete
the development and to use or sell the software product are
available.
–The expenditure attributable to the software product during
its development and implementation can be reliably measured.
OVERVIEW
(d)Amortisation
Amortisation is calculated on the cost of the asset less its residual
value, from the date it is available for use.
1.16Assets acquired under suspensive
sale agreements
Finance costs are accrued and expensed annually, based on the
effective rate of interest applied consistently to the remaining
balance on the liability.
1.17 Impairment of assets
The carrying amounts of the Group’s assets are reviewed at each
reporting date to determine whether there is any indication of
impairment, except for goodwill and other intangible assets with
indefinite useful lives, which are tested for impairment annually.
If any such indication exists, the recoverable amount is estimated
as the higher of fair value less costs to sell and value in use.
In assessing value in use, the expected future cash flows are
discounted to their present value using a p
re-tax discount rate that
reflects current market assessments of the time value of money
and the risks specific to the asset. An impairment loss is recognised whenever the carrying amount of the cash-generating unit
exceeds its recoverable amount.
A previously recognised impairment loss is reversed if there
has been a change in the estimates used to determine the recoverable amount, however not to an amount higher than the carrying
amount that would have been determined (net of depreciation/
amortisation) had no impairment loss been recognised in
prior years. For goodwill a recognised impairment loss is not
reversed in a subsequent period.
1.18Inventories
Inventories are stated at the lower of cost and estimated net
realisable value. Cost is determined on the first-in, first-out basis.
C O R P O R AT E
1.15 Computer software
Subsequent costs are capitalised at cost only when they increase
the future economic benefits embodied in the specific asset to
which they relate. All other expenditure is recognised in profit or
loss when incurred.
Costs associated with maintaining computer software
products are recognised as an expense as incurred.
GOVERNANCE
Intangible assets acquired in a business combination are identified
and recognised separately from goodwill where they satisfy the
definition of an intangible asset and their fair values can be
measured reliably. The cost of such intangible assets is their fair
value at the acquisition date.
Subsequent to initial recognition, intangible assets with finite
useful lives, acquired in a business combination are reported at
cost less accumulated amortisation and accumulated impairment
losses and at cost less accumulated impairment losses in the case of
such assets with indefinite useful lives. Amortisation is charged on
a straight-line basis over the assets estimated useful lives. The
estimated useful lives and amortisation methods are reviewed at
the end of each reporting period, with the effect of any changes in
estimate being accounted for on a prospective basis.
(c) Subsequent costs
S TAT E M E N T S
1.14 Other intangible assets
Directly attributable costs, which are capitalised as part of the
software product, include the software development employee
costs and an appropriate portion of directly attributable overheads.
Other development expenditures that do not meet these criteria
are recognised as an expense when incurred. Development costs
previously recognised as an expense are not recognised as an asset
in a subsequent period. Developed computer software costs recognised as assets are amortised over their useful lives, which does
not exceed three years.
ANNUAL FINANCIAL
following rates: Fishing trawlers (including refits) 5.5% – 50%,
plant and machinery and computers 20% – 33.3%, office furniture
and equipment 10% – 17%, motor vehicles 20% and improvements
to leasehold premises 20%. The residual value of fixed property
utilised for manufacturing and administration is estimated and the
difference between cost and the estimated residual value is written
off on the straight line method at 10% per annum. The depreciation
methods, estimated remaining useful lives and residual values are
reviewed at each reporting date with the effect of any changes
accounted for on a prospective basis. The comments in 1.2 above
relating to write-downs in value of investments, apply here as well.
2014
C O R P O R AT E
2014
NOTES (CONTINUED)
Finished goods and work-in-progress include labour costs and
an appropriate portion of related fixed and variable overhead
expenses based on the normal level of activity. The comments in
1.2 above relating to write-downs in value of investments in
subsidiaries, apply here as well.
Government grants that are receivable as compensation for
expenses or losses already incurred or for the purpose of giving
immediate financial support to the Group with no future related
costs are recognised in profit or loss in the period in which they
become receivable.
1.19 Cash and cash equivalents
1.23Earnings per share
Actual bank balances are reflected. Outstanding cheques and
deposits are included in accounts payable and accounts receivable
respectively. For the purpose of the statement of cash flows, cash and
cash equivalents includes cash on hand and deposits held with banks.
Basic – is based on net attributable profit.
Headline – is based on basic earnings adjusted for c apital items
specified in Circular 2/2013 – Headline Earnings issued by the
South African Institute of Chartered Accountants.
The above earnings measures are calculated on the weighted
average number of shares in issue during the year.
1.20Taxation
The tax expense for the year comprises current and deferred tax.
Tax is recognised in profit or loss, except that tax attributable to
an item of income or expense recognised as other comprehensive
income is also recognised directly in other comprehensive income.
The current income tax charge is calculated on the basis of tax
rates and laws that have been enacted or substantively enacted by
the reporting date. Deferred taxation is provided for at the tax
rates that are expected to apply in the period in which the liability
is settled or the asset realised, based on tax rates (and tax laws)
that have been enacted or substantively enacted by the reporting
date. Full provision is made for all temporary differences between
the tax base of an asset or liability and its carrying amount. Where
the tax effects of temporary differences arising from computed tax
losses give rise to a deferred tax asset, the asset is recognised only
to the extent that it is probable that future taxable income will be
sufficient to realise the tax benefit of the losses.
1.21Retirement benefit costs
Payments to defined contribution retirement benefit plans are
charged as an expense as they fall due. Payments made to
industry-managed retirement benefit schemes are dealt with as
defined contribution plans where the Group’s obligations under
the schemes are equivalent to those arising in a defined
contribution retirement benefit plan.
1.22Government grants
Government grants are not recognised until there is reasonable
assurance that the Group will comply with the conditions
attaching to them and that the grants will be received.
Government grants are recognised in profit or loss on a
systematic basis over the periods in which the Group recognises as
expenses the related costs for which the grants are intended to
compensate. Specifically, government grants whose primary
condition is that the Group should purchase, construct or
otherwise acquire non-current assets are recognised as deferred
revenue in the consolidated statement of financial position and
transferred to profit or loss on a systematic and rational basis over
the useful lives of the related assets.
76
1.24Foreign currencies
Transactions denominated in foreign currencies are translated at
the rate of exchange ruling at the transaction date. Balances
denominated in foreign currencies are translated at the rate of
exchange ruling at the reporting date. Gains or losses arising on
translation are credited to or charged against income.
1.25Segment reporting
The primary business segments of the Group are fishing,
insurance, clothing and investments. The basis of segment
reporting is representative of the internal structure used
for management reporting purposes.
1.26Share-based payments
Equity-settled share-based payments to certain employees are
measured at fair value (excluding the effect of non market-based
vesting conditions) at the date of grant. The fair value determined
at the grant date of the equity-settled share-based payments is
expensed on a straight-line basis over the vesting period, based on
the Group’s estimate of the shares that will eventually vest and
adjusted for the effect of non market-based vesting conditions.
Fair value is measured using the Binomial Tree pricing model
and Finite Difference Method. The expected life used in the model
is adjusted, based on management’s best estimate, for the effects of
non-transferability, exercise restrictions and behavioural conditions.
For cash-settled share-based payments, a liability is recognised for the goods and services acquired, measured initially at the
fair value of the liability. At the end of each reporting period until
the liability is settled and at the date of settlement, the fair value
of the liability is remeasured, with any changes in fair value recognised in profit or loss for the year.
Fair value is measured using the Black Scholes method.
1.27 Operating leases
Rentals payable under operating leases are charged to profit or
loss on a straight-line basis over the term of the relevant lease.
1.29Insurance contracts
The Group issues insurance contracts where it accepts significant
insurance risk from another party by agreeing to compensate the
policyholder if a specified uncertain future event adversely affects
the policyholder. Insurance contracts entered into by the Group,
under which the contract holder is another insurer (inwards
reinsurance), are included with insurance contracts.
Insurance risk is risk other than financial risk, transferred
from the holder of a contract to the issuer.
Short-term insurance provides benefits under short-term policies,
which include engineering, liability, motor, property, marine and
miscellaneous business classes. Short-term insurance contracts are
further classified into the following categories:
–Personal insurance, consisting of insurance provided to
individuals and their personal property.
–Commercial insurance, providing cover on the assets and
liabilities of business enterprises.
The Group continues to apply its existing accounting policies for
the recognition and measurement of obligations arising from
insurance contracts and reinsurance that it holds. The Group
developed its accounting policies for insurance contracts before
the adoption of IFRS 4 Insurance Contracts (IFRS 4) and in the
absence of a specific standard for insurance contracts. The existing
accounting policies implemented by the Group are in accordance
with the policies for recognition and measurement of short-term
insurance contracts as outlined in Circular 2/2007 issued by the
South African Institute of Chartered Accountants and IFRS 4.
(b)Premiums
For all insurance contracts underwritten by the Group, premiums
are recognised as revenue over the period of coverage, which is in
line with the risk profile of the contracts. Premiums are shown
before deduction of commission.
Outward reinsurance premiums are recognised as an expense
in accordance with the pattern of indemnity received.
(c) Unearned premiums provision
The portion of premium received on in-force contracts that relates
to unexpired risks at the reporting date is reported as the
unearned premiums provision. Unearned premium is calculated
using the 365th method or released over the risk profile.
Premiums are recognised as revenue (earned premiums)
proportionally over the period of coverage. Premiums are shown
before deduction of commission and are gross of any taxes or
duties levied on premiums.
(d) Provision for unexpired risk
Where it is anticipated that unearned premiums will be insufficient
to cover future claims and expenses attributable to the unexpired
periods of policies in force at the reporting date, a provision is
raised for unexpired risks.
OVERVIEW
C O R P O R AT E
These contracts are casualty and property contracts. Casualty
insurance contracts protect the Group’s customers against the risk of
causing harm to third parties as a result of their legitimate activities.
Damages covered include both contractual and non-contractual
events. Property insurance contracts mainly compensate the
Group’s customers for damage suffered to their properties or for
the value of property lost. Customers who undertake commercial
activities on their premises could also receive compensation for the
loss of earnings caused by the inability to use the insured
properties in their business activities (business interruption cover).
Claims and loss adjustment expenses are charged to income
as incurred based on the estimated liability for compensation owed
to contract holders or third parties damaged by the contract
holders. They include direct claims settlement costs and arise from
events that have occurred up to the end of the reporting period
even if they have not yet been reported to the Group. The Group
does not discount its liabilities for unpaid claims other than for
disability claims. Liabilities for unpaid claims are estimated using
the input of assessments for individual cases reported to the Group
and statistical analyses for the claims incurred but not reported
and to estimate the expected ultimate cost of more complex claims
that may be affected by external factors (such as court decisions).
(a) Short-term insurance contracts
C O R P O R AT E
Management use their judgement in selecting an appropriate
valuation technique for financial instruments not quoted in an
active market. Valuation techniques commonly used by market
practitioners are applied. The estimation of fair value of unlisted
shares and options includes some assumptions not supported by
observable market prices, indicators or rates. In its fishing business,
management exercises judgment to determine the useful lives and
residual values used to calculate depreciation of property, plant and
equipment and amortization of intangible assets. In addition, refer
below for details of judgements made in the determination of
insurance liabilities and to note 40 for details of the assumptions
used in the post-retirement medical assistance plan.
Except for the aforegoing and as disclosed in the relevant
notes or appendices, management has not made any critical
judgements or estimations that have a significant effect on the
amounts recognised in the financial statements.
GOVERNANCE
Recognition and measurement
S TAT E M E N T S
1.28 K
ey sources of estimation uncertainty and
critical judgements
2014
ANNUAL FINANCIAL
2014
NOTES (CONTINUED)
(e) Claims incurred
(k) Reinsurance contracts held
Insurance claims and loss adjustment expenses are recognised in
profit or loss as incurred based on the estimated liability for
compensation owed to contract holders or third parties damaged by
the contract holders. The costs include direct claims s ettlement costs
and arise from events that have occurred up to the reporting date,
even if they have not yet been reported to the Group.
Contracts entered into with reinsurers, under which the Group is
compensated for losses on one or more contracts issued by the
Group and that meet the classification requirements for insurance
contracts, are classified as reinsurance contracts held.
The benefits to which the Group is entitled under its
reinsurance contracts held are recognised as reinsurance assets.
These assets consist of short-term balances due from reinsurers, as
well as longer term receivables that are dependent on the expected
claims and benefits arising under the related reinsured insurance
contracts. Amounts recoverable from or due to reinsurers are
measured consistently with the amounts associated with the
reinsured insurance contracts and in accordance with the terms of
each reinsurance contract. Reinsurance liabilities are primarily
premiums payable for reinsurance contracts and are recognised as
an expense when due.
The Group assesses its reinsurance assets for impairment on
an annual basis. The Group follows the same process adopted for
impairment of financial assets described in note 1.8.
Contracts that do not meet the classification requirements are
classified as financial assets.
(f) Provision for outstanding claims
Provision is made for the estimated final cost of all claims that had
not been settled by the reporting date, less amounts already paid.
Liabilities for unpaid claims are estimated using the input of assessments for individual cases reported to the Group and statistical
analyses to estimate the expected ultimate cost of more complex claims
that may be affected by external factors (such as court decisions). The
Group does not discount its liabilities for unpaid claims.
(g) Provision for claims incurred but not reported (IBNR)
Provision is also made for claims arising from insured events that
occurred before the end of the reporting period, but which had not
been reported to the Group at that date. Statistical analysis is used
to estimate the claims incurred but not reported.
Deterministic methods project the value of ultimate losses
with no probability of occurrence. Stochastic methods project a
range of ultimate losses with each value having a probability of
occurrence. IBNR reserves were projected using both claims paid
and incurred claims development patterns.
(h) Deferred acquisition costs (DAC)
Commissions and other acquisition costs that vary with and are
related to securing new contracts and renewing existing contracts
are capitalised as an intangible asset (DAC) and are amortised
over the term of the policies as premiums are earned. All other
costs are recognised as expenses when incurred.
(i) Income from reinsurance contracts
Commissions received on reinsurance contracts are deferred and
recognised as revenue evenly over the life of the reinsurance contract.
(l) Receivables and payables related to insurance contracts
Receivables and payables are recognised when due. These include
amounts due to and from agents, brokers and insurance contract
holders.
If there is objective evidence that the insurance receivable is
impaired, the Group follows the same process adopted for
impairment of financial assets described in note 1.8.
(m)Salvage and subrogation reimbursements
Insurance contracts allow the Group to sell property acquired
when settling a claim. The Group may also have the right to
pursue third parties for payment of some or all costs incurred in
the settlement of any claim. Recoveries of this nature are recognised as reimbursements and set off against claims incurred when
recoverable.
1.30Adoption of new and revised standards
(j) Liability adequacy test
At each reporting date, liability adequacy tests are performed to
ensure the adequacy of the contract liabilities net of related DAC.
In performing these tests, current best estimates of premiums to
be collected, outstanding claims and future claims handling and
administration expenses are discounted. Any deficiency is immediately recognised in profit or loss initially by writing off DAC and
by subsequently establishing a provision for losses arising from
liability adequacy tests. Any DAC written off as a result of this
test cannot subsequently be reinstated.
78
The following new and revised standards were adopted by the
Group or Company in the current year:
Amendments to IFRS 10: Investment Entities and c onsequential
amendments to IFRS 12: Disclosure of Investments in other
Entities and IAS 27 Separate Financial Statements
Amendments to IAS 32: Offsetting Financial Assets and Financial
Liabilities
Amendments to IAS 36: Recoverable Disclosure for
Non-Financial Assets
Amendments to IAS 39: Novation of Derivatives and
Continuation of Hedge Accounting
IFRIC 21: Levies
C O R P O R AT E
There was no impact on the amounts recognised in the c onsolidated
and separate annual financial statements in respect of the amendments to these standards. The application of IFRIC 21: Levies had
no impact on the consolidated and separate annual financial
statements.
C O R P O R AT E
GOVERNANCE
S TAT E M E N T S
The Group is in the process of evaluating the effects of these
standards. These standards will be effective for the year ending
December 2015 and subsequent years. The Group has decided not
to early adopt any of these new or revised standards.
ANNUAL FINANCIAL
At the date of approval of these financial statements, the following
relevant new or revised standards were in issue, but not yet
effective:
IFRS 1: First-time Adoption of International Financial Reporting
Standards (amendments)
IFRS 2: Share-based Payment (amendments)
IFRS 3: Business Combinations (amendments)
IFRS 5: Non-current Assets Held for Sale and Discontinued
Operations (amendments)
IFRS 7: Financial Instruments: Disclosures (amendments)
IFRS 8: Operating Segments (amendments)
IFRS 9: Financial Instruments (new)
IFRS 10: Consolidated Financial Statements (amendments)
IFRS 11: Joint Arrangements (amendments)
IFRS 13: Fair Value Measurement (amendments)
IFRS 14: Regulatory Deferral Accounts (new)
IFRS 15: Revenue from contracts with customers (new)
IAS 16: Property, Plant and Equipment (amendments)
IAS 19: Employee Benefits (amendments)
IAS 24: Related Party Disclosures (amendments)
IAS 27: Separate Financial Statements (amendments)
IAS 28: Investments in Associates and Joint Ventures (amendments)
IAS 34: Interim Financial Reporting (amendments)
IAS 38: Intangible Assets (amendments)
IAS 39: Financial Instruments: Recognition and Measurement
(amendments)
IAS 40: Investment Property (amendments)
IAS 41: Agriculture (amendments)
2014
OVERVIEW
2014
NOTES (CONTINUED)
GROUP
R’000
2.
COMPANY
2014
2013
2014
2013
1 532 384
18 572
1 284
695
1 943
1 554 878
1 411 459
15 929
932
326
—
1 428 646
—
22 038
—
762
1 943
24 743
—
17 864
—
849
—
18 713
Revenue
The Group’s revenue comprises sales of insurance products,
fish, formal and casual clothing, rentals, dividends, royalties
and management, performance and other fees received.
Revenue from industrial and other operations
Sales
Management and performance fees received
Rental income
Royalties for use of trademarks
Other
Total revenue from industrial and other operations
Revenue from insurance operations
Short-term insurance contracts
– Gross written premiums
– Change in unearned premium provision
Insurance premium revenue
Short-term reinsurance contracts
– Premiums payable
– Change in unearned premium provision
Premium ceded to reinsurers on insurance contracts issued
853 538
23 640
877 178
925 340
(66 521)
858 819
—
—
—
—
—
—
(537 007)
(35 771)
(572 778)
(576 878)
115 951
(460 927)
—
—
—
—
—
—
304 401
108 954
413 355
397 893
104 458
502 351
—
—
—
—
—
—
1 968 233
1 930 997
24 743
18 713
Dividends received:
– associate companies and joint ventures
– listed investments
– unlisted investments
–subsidiaries
98 884
132 081
21 856
—
73 715
73 320
8 344
—
—
—
2 066
411 475
—
3 141
4 844
51 439
Total dividends received
252 821
155 379
413 541
59 424
Net insurance premium revenue
Fee income from insurance contracts
Total revenue from insurance operations
Total sales and fee income
Business and geographic segments:
The clothing and fish products mentioned above are processed and manufactured in the Group’s factories in the Western Cape and
sold throughout South Africa, as well as the United States of America, Great Britain, Italy, Germany, the Netherlands, Spain,
Australia, France, the SADC countries and other parts of Africa. All other revenue is sourced from within South Africa. The table
below shows the geographical breakdown of the clothing and fish sales.
80
Expenses
Expenses for the acquisition of insurance contracts
Selling and administration expenses
Asset management services received
Total operating expenses insurance operations
Total operating expenses
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
478 696
1 043 213
1 521 909
414 175
982 810
1 396 985
95 110
—
95 110
80 516
—
80 516
288 271
793 670
312 112
701 024
—
—
—
—
(505 399)
(388 912)
—
—
146 460
160 535
2 021
597 287
154 478
156 240
2 175
625 005
—
—
—
—
—
—
—
—
2 119 196
2 021 990
95 110
80 516
15 761
406
340 085
356 252
(27 089)
(6 663)
116 776
83 024
Fair value gains
Changes in fair value of financial assets designated as at fair
value through profit or loss
– mark-to-market revaluation of listed investments
– mark-to-market revaluation of unlisted investments
– revaluation of options
135 224
(11 342)
340 085
463 967
403 306
(6 663)
160 759
557 402
OVERVIEW
871 263
26 291
9 167
3 318
147 930
74 363
16 209
33 019
160 841
37 388
31 670
1 411 459
C O R P O R AT E
964 700
34 550
7 879
3 909
206 422
65 621
31 818
23 657
109 427
39 176
45 225
1 532 384
2013
Operating expenses
Operating expenses industrial and other operations
Production, selling and administration expenses
Raw materials and consumables used
Total operating expenses industrial and other operations
Operating expenses insurance operations
Net insurance claims
Insurance claims and loss adjustment expenses
Insurance claims and loss adjustment expenses recovered
from reinsurers
4.
2014
C O R P O R AT E
3.
2013
GOVERNANCE
Sales revenue by geographical market:
South Africa
Other SADC countries
United States of America
Great Britain
Italy
Germany
Netherlands
Spain
Australia
France
Other
2014
S TAT E M E N T S
R’000
COMPANY
ANNUAL FINANCIAL
GROUP
2014
2014
NOTES (CONTINUED)
GROUP
R’000
5.
6.1
6.2
2014
2013
—
9 972
—
—
—
(28 286)
—
(28 286)
(28 286)
(1 788)
(356)
—
(2 144)
7 828
—
—
(215 514)
(215 514)
(215 514)
—
—
—
—
—
Profit before net finance costs
Profit before net finance costs includes the following items
of income and expenditure not shown separately in
the statement of comprehensive income:
Income
Profit on disposal of property, plant, equipment and vehicles
Foreign exchange gains
Write up of inventory to net realisable value
Government grants
– Production incentive
– Capital and interest subsidies
– Training refunds
—
2 926
—
143
—
578
—
—
—
—
—
—
—
5 216
1 029
8 924
—
2 287
—
—
—
—
4 650
219
506
5 375
4 866
685
159
5 710
975
142
426
1 543
1 238
429
114
1 781
71 325
22 355
547
—
62 483
22 368
—
26 664
682
—
—
—
628
—
—
—
15 097
12 005
548 380
14 413
11 859
476 771
2 160
—
38 043
1 179
—
27 713
28 153
3 213
26 890
4 276
1 657
—
1 560
—
418
42 072
3 443
367
26 162
1 627
417
9 885
—
367
9 619
—
—
Expenditure
Auditors’ remuneration
Fees – current year
– under provided previous year
Other services
Depreciation
Property, plant, equipment and vehicles
Amortisation of intangible assets
Loss on disposal of equipment and vehicles
Foreign exchange losses
Rentals under operating leases
Land and buildings
Plant, machinery and vehicles
Staff costs
Retirement benefit plan contributions
Defined contribution plans
Royalties paid for use of trademarks
Fees for services
Secretarial
Other professional
Write down of inventory to net realisable value
82
2013
Exceptional items
Gains
– insurance proceeds on loss of fishing trawler
Losses
– on disposal of fishing trawler
– impairment in value of investment in associate
– impairment of investment in subsidiary
Total losses
Net exceptional items
6.
COMPANY
2014
2014
2013
—
1 760
1 760
—
1 331
1 331
12 126
—
12 126
11 597
—
11 597
1 888
—
1 888
15 774
1 823
—
1 823
14 751
699
68
767
16 541
693
66
759
15 510
Directors’ emoluments
Directors’ emoluments
– Paid by Company
Fees for services as directors
Executive directors
Non-executive directors
Management and other services
Executive directors
Gain on exercise of options
Executive directors
Total paid by Company
Executive directors do not have fixed term contracts. They
have employment agreements with the Company which are
subject to a one month notice period by either party. Detailed
information appears in the remuneration report on page 56.
8.
9.
Interest rate swap
Interest received on bank deposits and loans
to associates and subsidiaries
Net finance costs
Interest on borrowings
Interest rate swap
Preference dividends
Interest on obligations under instalment sale agreements
—
—
—
8 269
23 028
23 028
23 037
23 037
9 967
9 967
5 765
14 034
40 264
10 355
137 540
23
188 182
38 411
(8 269)
80 411
—
110 553
9 508
10 355
—
—
19 863
5 468
—
—
—
5 468
C O R P O R AT E
Fees for services as directors
Executive directors
Total paid by subsidiary companies
Total paid by Company and subsidiaries
GOVERNANCE
– Paid by subsidiaries
S TAT E M E N T S
OVERVIEW
2013
ANNUAL FINANCIAL
7.
2014
C O R P O R AT E
R’000
COMPANY
GROUP
2014
2014
NOTES (CONTINUED)
GROUP
R’000
2014
COMPANY
2013
2014
2013
10. Taxation
10.1 Taxation charge
SA normal taxation
Current – current year
– over provision prior year
Deferred – current year
– (over)/under provision prior year
26 858
18 355
(6 704)
42 711
(27 504)
81 062
28 391
(147)
52 313
505
(52 896)
—
—
(629)
(52 267)
16 004
—
(151)
16 110
45
Dividends tax
652
333
—
—
Securities transfer tax
1 202
—
851
—
—
28 712
10
81 405
—
(52 045)
—
16 004
282 233
79 025
138 964
38 910
46 592
13 046
11 327
3 172
221 618
—
306 505
554 797
474 016
89 211
86 522
(34 208)
(627)
28 582
(149 023)
133
45 478
652
1 202
50 001
28 712
157 617
367
(3 443)
40 103
(208 321)
(1 663)
1 269
333
—
95 143
81 405
132 724
(52 267)
—
10 353
(155 399)
—
—
—
851
11 693
(52 045)
24 979
(105)
—
14 167
(40 070)
—
—
—
—
17 033
16 004
Secondary tax on companies
Current – under provision prior year
Unutilised computed tax losses carried forward
Saving in taxation attributable thereto at current rate
No deferred tax asset was raised in respect of estimated
tax losses in the insurance subsidiary of
10.2 Reconciliation of taxation charge
Net profit before taxation
Tax at statutory rates (28%-40%)
(Over)/under provided previous year
Tax effect of share of results of associates and joint ventures
Tax effect of non-deductible expenses
Tax effect of non-taxable income
Tax effect of utilisation of prior year losses
Deferred tax asset not raised
Dividends tax
Capital gains tax
Taxation charge
11. Dividends
On 29 April 2014, a cash dividend of 30 cents per share and a special dividend of 10 cents per share (total dividend R110 086 120)
was paid to shareholders. In April 2013, a final dividend only of 25 cents per share was paid (total dividend R68 669 185). In
respect of the current year, a dividend of 30 cents per share and a special dividend of 20 cents per share will be paid to shareholders
on 23 March 2015. The proposed dividend will be paid to shareholders recorded in the books of the company on 20 March 2015.
The total dividends paid will be R123 682 156. The company has unutilised STC credits of R227 941 997 which will be utilised for
the benefit of shareholders in accordance with the dividends tax rules.
84
2014
2013
259 050
464 111
12. Earnings per share
The following is a reconciliation of the profit
figures used in the earnings per share calculations:
Basic earnings
Net profit attributable to equity holders of the parent
2014
Gross
Headline earnings calculation
Net profit attributable to equity holders of the parent
Loss/(profit) on disposal of property, plant, equipment and vehicles
Adjustments relating to results of associates
Headline earnings
Net
259 050
240
28 286
(1 338)
286 238
334
28 286
(1 937)
26 683
Headline earnings per share (cents)
Diluted headline earnings per share (cents)
2013
Gross
(8 267)
356
(456)
(8 367)
OVERVIEW
2014
Net
464 111
(3 492)
290
(328)
460 581
116.9
99.8
188.4
160.9
R’000
C O R P O R AT E
GROUP
Weighted average number of shares on which earnings and headline earnings per share is based is 244 918 888 (2013 – 244 413 514)
244 918 888
41 783 956
286 702 844
499 068
244 413 514
41 758 620
286 172 134
703 098
C O R P O R AT E
2013
GOVERNANCE
Reconciliation of weighted average number of shares between
basic and diluted earnings per share and headline earnings and
diluted headline earnings per share.
Basic
Dilutive share options
Diluted
Number of share options treated as anti-dilutive
2014
S TAT E M E N T S
GROUP
R’000
ANNUAL FINANCIAL
Weighted average number of shares on which diluted earnings and diluted headline earnings per share is based is 286 702 844
(2013 – 286 172 134)
2014
NOTES (CONTINUED)
GROUP
R’000
COMPANY
2014
2013
2014
2013
24 567
24 682
(115)
(1)
24 566
24 682
(116)
24 567
24 682
(115)
—
24 567
24 682
(115)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
16 577
28 611
(12 034)
1 039
(61)
(3 275)
35
14 315
29 589
(15 274)
16 103
25 412
(9 309)
3 199
—
(2 725)
—
16 577
28 611
(12 034)
70 094
134 962
(64 868)
27 657
(4 281)
(14 065)
3 948
83 353
158 338
(74 985)
62 020
115 873
(53 853)
20 173
(1 084)
(12 064)
1 049
70 094
134 962
(64 868)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
152 743
344 923
(192 180)
167 773
(19)
(48 011)
14
272 500
512 677
(240 177)
150 546
306 744
(156 198)
46 329
(8 150)
(42 344)
6 362
152 743
344 923
(192 180)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
13. Property, plant, equipment and vehicles
13.1 Land and buildings – freehold
Carrying value 1 January
Deemed cost
Accumulated depreciation and impairment losses
Depreciation for the year
Carrying value 31 December
Deemed cost
Depreciation rate: Buildings 10%
13.2 Land and buildings – leasehold improvements
Deemed cost
Additions
Disposals
Accumulated depreciation on disposals
Deemed cost
Depreciation rate: 20%
13.3 Plant and machinery
Cost
Additions
Disposals
Cost
Depreciation rates: 20 – 33.33%
13.4 Fishing trawlers (including refits)
Cost
Additions
Disposals
Cost
Depreciation rates: 5.5 – 50%
86
170
757
(587)
403
—
(139)
—
434
1 160
(726)
269
757
(488)
—
—
(99)
—
170
757
(587)
Cost
Additions
Disposals
Cost
Depreciation rates: 10 – 17%
13.7 Motor vehicles
Cost
Additions
Disposals
Cost
Depreciation rate: 20%
Total property, plant, equipment and vehicles
Cost/deemed cost
Additions
Disposals
Cost/deemed cost
2 605
8 078
(5 473)
2 655
(46)
(1 747)
21
3 488
10 687
(7 199)
209
886
(677)
151
—
(147)
—
213
1 037
(824)
1 310
775
(535)
132
(21)
(163)
21
209
886
(677)
9 493
26 743
(17 250)
3 965
(651)
(3 553)
474
9 728
30 057
(20 329)
9 089
23 420
(14 331)
3 515
(191)
(3 081)
161
9 493
26 744
(17 251)
676
1 542
(866)
302
(16)
(245)
16
733
1 828
(1 095)
876
1 528
(652)
14
—
(214)
—
676
1 542
(866)
1 386
3 217
(1 831)
1 629
(815)
(516)
267
1 951
4 031
(2 080)
1 733
3 063
(1 330)
175
(21)
(522)
21
1 386
3 217
(1 831)
484
758
(274)
—
—
(151)
—
333
758
(425)
636
758
(122)
—
—
(152)
—
484
758
(274)
278 348
573 825
(295 477)
204 893
(5 842)
(71 325)
4 753
410 827
772 876
(362 049)
266 663
507 272
(240 609)
76 046
(9 492)
(62 483)
7 614
278 348
573 826
(295 478)
1 539
3 943
(2 404)
856
(16)
(682)
16
1 713
4 783
(3 070)
2 021
3 818
(1 797)
146
(21)
(628)
21
1 539
3 943
(2 404)
Details of land and buildings are contained in a register which is open for inspection by members or their duly authorised
representatives at the registered office of the Company.
Details of encumbered assets
Other items of property, plant, equipment and vehicles with a net book value of R365.4 million (2013 – R235.1 million) are
encumbered by a notarial bond (refer note 28).
OVERVIEW
3 488
10 687
(7 199)
2 830
(15)
(1 904)
15
4 414
13 502
(9 088)
C O R P O R AT E
2013
13.6 Office furniture and equipment
2014
C O R P O R AT E
Cost
Additions
Disposals
Cost
Depreciation rates: 20 – 33.33%
2013
GOVERNANCE
13.5 Computers
2014
S TAT E M E N T S
R’000
COMPANY
ANNUAL FINANCIAL
GROUP
2014
2014
NOTES (CONTINUED)
GROUP
R’000
14. Goodwill
Cost
COMPANY
2014
2013
2014
2013
12 140
12 140
—
—
124 615
198 437
(73 822)
(16 088)
108 527
198 437
(89 910)
140 702
198 437
(57 735)
(16 087)
124 615
198 437
(73 822)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
10 984
28 448
(17 464)
1 156
(6 267)
5 873
29 604
(23 731)
11 467
22 650
(11 183)
5 798
(6 281)
10 984
28 448
(17 464)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
135 599
226 885
(91 286)
1 156
(22 355)
114 400
228 041
(113 641)
152 169
221 087
(68 918)
5 798
(22 368)
135 599
226 885
(91 286)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
There have been no impairment losses since goodwill
was initially recognised.
Goodwill has been allocated for impairment testing purposes to
Lion of Africa Holdings Company (Pty) Ltd. The recoverable
amount of this investment is determined on a price:book
multiple of 1 times.
15. Intangible assets
Long-term fishing rights
Cost
Accumulated amortisation
Amortisation
Cost
Amortisation rate: 10 – 15 years
Computer software development
Cost
Additions
Amortisation
Cost
Amortisation rate: 1 – 3 years
Total intangible assets
Cost
Additions
Amortisation
Cost
88
2013
16. Interest in subsidiaries
Shares at cost less amounts written off
Loans owing by subsidiaries less amounts written off
Loans owing to subsidiaries
2014
2013
513 093
209 839
722 932
537 995
441 459
294 922
736 381
352 469
—
—
—
—
—
—
Plant and machinery
Inventory
2 623
14 477
17 100
2 623
14 477
17 100
Details of non-wholly owned subsidiaries that have material non-controlling interests
Name of subsidiary
Sea Harvest Holdings (Pty) Ltd
Brimsure (Pty) Ltd
Proportion of ownership interests and voting rights held by
non-controlling interests
2014
2013
%
%
41.6%
41.9%
40%
40%
C O R P O R AT E
Brimstone has written down its investment in the clothing
subsidiary to what it considers to be the recoverable amount.
For Group purposes, this write-down has been applied
proportionately to the subsidiary’s assets as follows:
GOVERNANCE
Refer to Appendix 1 for details of subsidiary companies.
S TAT E M E N T S
The loans owing by/to subsidiaries are interest free, unsecured
and have no fixed terms of repayment except for a loan of
R17.6 million (2013 – R19.6 million) from a subsidiary which
bears interest at the prime bank overdraft rate minus 1%. The
intention of the directors is not to call on these loans within the
next 12 months.
OVERVIEW
2014
ANNUAL FINANCIAL
R’000
COMPANY
C O R P O R AT E
GROUP
2014
2014
NOTES (CONTINUED)
16. Interest in subsidiaries (continued)
Summarised financial information in respect of each of the Group’s subsidiaries that has material non-controlling interests is set out
below. The summarised financial information below represents amounts before intragroup eliminations.
COMPANY
R’000
2014
2013
526 835
513 266
285 749
658 628
10 490
107 908
7 461
77 772
22 675
491 114
420 434
396 862
361 497
18 535
134 650
14 586
96 965
23 099
1 361 498
38 912
23 381
15 531
1 237 687
15 685
9 114
6 571
Other comprehensive income attributable to owners of the Company
Other comprehensive income attributable to the non-controlling interests
Other comprehensive income for the year
10 514
7 477
17 991
4 412
3 180
7 592
Total comprehensive income attributable to owners of the Company
Total comprehensive income attributable to the non-controlling interests
33 895
23 008
56 903
13 526
9 751
23 277
Dividends paid to non-controlling interests
72 068
—
Current assets
Non-current assets
Current liabilities
Equity attributable to owners of the Company
– Share of equity
– Preference shares
– Loan
Revenue
Profit for the year
Profit attributable to owners of the Company
Profit attributable to the non-controlling interests
Net cash inflow from operating activities
Net cash outflow from investing activities
Net cash inflow/(outflow) from financing activities
Net cash (outflow)/inflow
90
23 845
(195 527)
114 576
(57 106)
88 079
(53 461)
(32 864)
1 754
2014
—
—
—
—
—
—
Total comprehensive income attributable to owners of the Company
Total comprehensive income attributable to the non-controlling interests
4 817
3 212
8 029
4 065
2 710
6 775
Dividends paid to non-controlling interests
3 000
1 480
Other comprehensive income attributable to owners of the Company
Other comprehensive income attributable to the non-controlling interests
No details of cash flows have been supplied for Brimsure (Pty) Ltd as the company does not transact in cash. Any expenses
incurred and dividends declared are paid by the company’s holding company, Brimstone Investment Corporation Limited, via the
intercompany loan account. Any receipts of income are paid into the bank account of the company’s holding company and accounted for via the intercompany loan account.
Significant restrictions
–Brimstone has ceded and pledged all of its ordinary and preference shares in Oceana SPV (Pty) Ltd and all of its claims held in
and against the subsidiary as security for the A preference shares issued by Oceana SPV (Pty) Ltd (refer note 28).
–Brimstone has ceded its loan to a subsidiary of R29 736 067 (2013 – R29 039 501) as security for overdraft facilities g ranted to
the subsidiary (refer note 33).
Financial support
Refer to note 36 for details of financial support given by the Company to its subsidiaries.
GROUP
R’000
2014
17. Investments in associate companies and joint
ventures
Cost of investment in associate companies and joint ventures
Loans to associate companies
Share of non-distributable reserves of associates
Share of distribution made by associate
Share of post acquisition profit, net of dividends received
Less: Impairment in value of investment in associate
Total carrying value
Non-current
Current (included in investments)
COMPANY
2013
2014
2013
1 121 656
29 610
13 688
(58 945)
26 335
1 132 342
(28 286)
1 104 056
671 655
24 499
11 109
—
91 766
799 029
—
799 029
7 056
27 374
—
—
—
34 430
—
34 430
7 056
22 322
—
—
—
29 378
—
29 378
1 067 131
36 925
1 104 056
799 029
—
799 029
6 763
27 667
34 430
29 378
—
29 378
OVERVIEW
3 900
6 775
4 065
2 710
7 500
8 029
4 817
3 212
Revenue
Profit for the year
Profit attributable to owners of the Company
Profit attributable to the non-controlling interests
C O R P O R AT E
17
34 218
21
1
20 528
13 685
GOVERNANCE
17
35 779
23
23
21 450
14 300
Brimsure (Pty) Ltd
Current assets
Non-current assets
Current liabilities
Equity attributable to owners of the Company
S TAT E M E N T S
2013
ANNUAL FINANCIAL
2014
C O R P O R AT E
COMPANY
2014
NOTES (CONTINUED)
17. Investments in associate companies and joint ventures (continued)
Associates
Refer to Appendix 2 for full details of associate companies. The aggregate assets, liabilities and results of operations of associate
companies are summarised below:
17.1 Details of material associate
Details of the Group’s material associate are as follows:
Name of associate
Oceana Group Limited
The above associate is accounted for using the equity method in these consolidated financial
statements.
Proportion of ownership
interest and voting power
held by the Group
30 September 30 September
2014
2013
19.994%
20.013%
R’000
Non-current assets
Current assets
Total assets
859 640
2 115 657
2 975 297
814 277
2 019 292
2 833 569
Current liabilities
Total liabilities
439 403
788 988
1 228 391
180 577
863 621
1 044 198
69 536
60 761
The financial year end of Oceana Group Limited is 30 September. Brimstone does not have the
authority to change this date. For purposes of applying the equity method of accounting, the financial statements of Oceana Group Limited for the year ended 30 September 2014 have been used
and appropriate adjustments have been made for the effects of significant transactions between that
date and 31 December 2014. As at 31 December 2014, the fair value of the Group’s interest in
Oceana Group Limited, which is listed on the JSE, was R2 107 345 729 (2013 – R1 647 933 910)
based on the quoted market price available on the JSE, which is a level 1 input in terms of IFRS 13.
Revenue
Profit from continuing operations
Profit for the year
Other comprehensive (loss)/income for the year
Dividends received from the associate during the year
5 039 134
608 919
608 919
(1 141)
607 778
75 765
4 701 224
524 390
524 390
15 010
539 400
64 712
1 677 370
19.994
335 379
362 475
(61 995)
635 859
1 728 610
20.013
345 956
362 475
(44 615)
663 816
Reconciliation of the above summarised financial information to the carrying amount of the
interest in Oceana Group Limited recognised in the consolidated financial statements.
Net assets of the associate
Proportion of the Group’s ownership interest in Oceana Group Limited (%)
Share of net assets
Goodwill
Dividend accrued
Carrying amount of the Group’s interest in Oceana Group Limited
17.2 Aggregate information of associates that are not individually material
Group’s share of profit from continuing operations
Group’s share of post-tax profit from discontinued operations
Group’s share of other comprehensive income
Group’s share of total comprehensive income
Aggregate carrying amount of the Group’s interests in these associates
92
2 662
—
—
2 662
96 642
4 026
—
—
4 026
119 269
2014
—
1 464 630
2 198
1 466 828
—
—
—
Current liabilities
Total liabilities
868 784
101
868 885
—
—
—
243 226
—
8 704
(162 057)
(162 057)
—
(162 057)
1 036
—
—
—
—
—
—
597 943
59.211
354 045
—
—
—
Brimstone equity accounts for the results of Friedshelf 1534 (Pty) Ltd because, although it owns
59.2% of the company, there are certain matters contained in the shareholders’ agreement which
require a 75% majority vote in order to proceed. Brimstone therefore does not have majority
control over the company and is therefore not permitted to consolidate the subsidiary.
Friedshelf 1534 (Pty) Ltd holds 100% of the shares in Newshelf 1279 (Pty) Ltd, the company
which holds 64 million shares in Grinrod Limited, a company listed on the JSE. This investment
is fair valued in the books of Newshelf 1279 (Pty) Ltd based on the quoted market price
available on the JSE, which is a level 1 input in terms of IFRS 13.
Non-current assets
Current assets
Total assets
Revenue
Loss from continuing operations
Loss for the year
Total comprehensive loss for the year
Dividends received from the joint venture during the year
Reconciliation of the above summarised financial information to the carrying amount of the
interest in Oceana Group Limited recognised in the consolidated financial statements.
Net assets of the joint venture
Proportion of the Group’s ownership interest in Friedshelf 1534 (Pty) Ltd (%)
Carrying amount of the Group’s interest in Friedshelf 1534 (Pty) Limited
17.4 Aggregate information of joint venture that is not individually material
Group’s share of (loss)/profit from continuing operations
Group’s share of other comprehensive income
Group’s share of total comprehensive (loss)/income
Aggregate carrying amount of the Group’s interests in this joint venture
(1 909)
—
(1 909)
14 035
1 086
—
1 086
15 944
C O R P O R AT E
59.211%
GOVERNANCE
Friedshelf 1534 (Pty) Ltd
The above joint venture is accounted for using the equity method in these consolidated financial
statements.
S TAT E M E N T S
Name of joint venture
OVERVIEW
Proportion of ownership
interest and voting power held
by the Group
31 December
31 December
2014
2013
ANNUAL FINANCIAL
17.3 Details of material joint venture
C O R P O R AT E
Joint ventures
2014
NOTES (CONTINUED)
GROUP
R’000
COMPANY
2014
2013
2014
2013
27 483
27 483
46 954
46 954
2 218
2 218
2 154
2 154
Investments designated as at fair value through profit or loss
Listed investments:
Shares at fair value
Debt securities at fair value
Total listed investments
2 560 195
94 450
2 654 645
2 456 503
60 884
2 517 387
55 584
—
55 584
77 834
—
77 834
Unlisted investments:
Shares and units at fair value
Fixed deposit accounts at fair value
Money market investments at fair value
Options at fair value
Total unlisted investments
612 722
—
10 700
1 122 950
1 746 372
159 596
95 251
8 000
909 354
1 172 201
6 560
—
—
1 122 950
1 129 510
159 596
—
—
777 083
936 679
954 400
791 972
1 746 372
1 068 950
103 251
1 172 201
348 238
781 272
1 129 510
936 679
—
936 679
4 401 017
3 689 588
1 185 094
1 014 513
3 636 528
828 897
4 465 425
3 633 291
103 251
3 736 542
406 040
808 939
1 214 979
1 016 667
—
1 016 667
—
9 181
—
9 181
18. Investments
Available-for-sale investments
Unlisted investments:
Shares at fair value
Total available-for-sale investments
Unlisted investments
Non-current
Current
Total investments designated as at fair value through profit or loss
Total investments
Non-current
Current (including investment in associate)
Refer to Appendix 3 for full details of the investments.
19. Other financial assets
Financial assets carried at fair value through profit or loss:
Interest rate swap – not designated in hedge accounting
relationship
Interest rate swap agreements linked to prime and for a period of five years have been concluded to convert floating rates to fixed
rates. The notional value of the two swaps are R250 million and R121.03 million and the fixed rates are 9.737% and 9.187%
respectively.
94
2013
39 325
21 964
178 966
25 361
265 616
46 717
42 097
134 892
26 942
250 648
—
—
—
—
—
—
—
—
—
—
482 595
(5 642)
476 953
156 848
633 801
535 525
(5 591)
529 934
87 797
617 731
—
—
—
27 779
27 779
—
—
—
19 949
19 949
21. Trade receivables and other receivables
Amounts receivable from the sale of goods or insurance and
reinsurance contracts
Less: Allowance for irrecoverable amounts
Trade receivables
Other receivables
The average credit period on sales of goods is 67 days (2013 – 76 days). No interest is charged on the trade receivables within
agreed credit terms. Thereafter, interest is charged at prime bank overdraft rates on the overdue balance. The Group has provided
fully for all receivables over 180 days, except where recovery is considered probable and where recovery is considered doubtful
following investigations into the specific debtor whose debt is outstanding for less than 180 days. Before accepting any new
customer, the Group uses credit agency reports to assess creditworthiness together with reports from agents, visits to and interviews
with the customer when deemed necessary. Credit limits are set and debtor balances are reviewed monthly. In some instances,
security by way of personal surety, cession of debtors or notarial bond over assets is obtained. There are no uninsured customers
who represent more than 5% of the total balance of trade receivables.
Included in the Group’s trade receivable balance are r eceivables with a carrying value of R95 799 723 (2013 – R39 174 288) which
are past due at the reporting date for which the Group has not provided as there has not been a significant change in credit quality
and the amounts are still considered recoverable. The Group does not hold any collateral over these balances.
C O R P O R AT E
Inventories with a net book value of R187.6 million
(2013 – R181.1 million) are encumbered by a notarial bond
(refer note 28).
Inventories have been stated at the lower of cost and net
realisable value by the Group’s subsidiaries with a total
amount in their books of R32 692 928 (2013 – R31 139 103)
being shown at net realisable value.
OVERVIEW
2014
GOVERNANCE
Raw materials
Work in progress
Finished goods
Consumable stores
2013
S TAT E M E N T S
20. Inventories
2014
ANNUAL FINANCIAL
R’000
COMPANY
C O R P O R AT E
GROUP
2014
2014
NOTES (CONTINUED)
GROUP
R’000
COMPANY
2014
2013
2014
2013
69 613
1 512
8 569
16 106
95 800
14 373
2 989
9 048
12 764
39 174
—
—
—
—
—
—
—
—
—
—
—
—
—
5 642
5 642
—
—
—
5 591
5 591
—
—
—
—
—
—
—
—
—
—
5 591
(134)
—
185
5 642
5 919
(761)
(52)
485
5 591
—
—
—
—
—
—
—
—
—
—
21. Trade receivables and other receivables
(continued)
Age analysis of trade receivables past due but not provided for:
31 to 60 days
61 to 90 days
91 to 120 days
over 120 days
Age analysis of trade receivables past due and provided for:
31 to 60 days
61 to 90 days
91 to 120 days
over 120 days
Movement in the allowance for doubtful debts
Balance at beginning of the year
Amounts written off during the year
Amounts recovered during the year
Increase in allowance recognised in profit or loss
Balance at end of the year
In determining the recoverability of trade receivables, the Group considers any change in the credit quality of trade receivables
from the date credit was initially granted up to the reporting date. The concentration of credit risk is limited because of the
customer base being large and unrelated and large credit risks are insured against irrecoverability. Accordingly, the directors
believe that there is no further c redit provision required in excess of the allowance for d
oubtful debts.
Trade receivables with a value of R62 398 176 (2013 – R65 127 804) have been ceded as security for a d
iscounting facility
(refer note 32).
Trade receivables with a value of R170 372 001 (2013 – R145 568 302) are encumbered by a notarial bond (refer note 28).
96
573 416
79 597
303 476
956 489
392 250
84 200
327 116
803 566
—
—
—
—
—
—
—
—
Recoverable from reinsurers
Short-term insurance contracts:
– claims reported and loss adjustment expenses
– claims incurred but not reported
– unearned premiums provision
Total reinsurers’ share of insurance liabilities
447 989
34 823
203 238
686 050
343 438
34 371
239 008
616 817
—
—
—
—
—
—
—
—
50 742
43 971
(52 878)
41 835
50 524
50 494
(50 276)
50 742
—
—
—
—
—
—
—
—
166 369
561 516
727 885
161 774
505 785
667 559
—
—
—
—
—
—
223 695
732 794
956 489
168 749
634 817
803 566
—
—
—
—
—
—
Deferred acquisition costs
Commissions related to securing new insurance contracts and
renewing existing contracts are deferred when incurred and
recognised in profit or loss over the terms of the policies as
premiums are earned.
Balance at 1 January
Costs deferred during the year
Costs amortised during the year
Balance at 31 December
Assets
Non-current
Current
Liabilities
Non-current
Current
OVERVIEW
Insurance contract liabilities and reinsurance contract assets
Insurance contract liabilities
Short-term insurance contracts:
– claims reported and loss adjustment expenses
– claims incurred but not reported
– unearned premiums provision
Total gross insurance liabilities
22. Insurance assets and liabilities
C O R P O R AT E
2013
2014
C O R P O R AT E
2013
GOVERNANCE
2014
S TAT E M E N T S
R’000
COMPANY
ANNUAL FINANCIAL
GROUP
2014
2014
NOTES (CONTINUED)
22. Insurance assets and liabilities (continued)
22.1 Process used to estimate insurance liabilities
Insurance risks are unpredictable and the Group recognises that it is impossible to forecast with absolute precision, future claims
payable under existing insurance contracts. Over time the Group has developed methodologies that are aimed at establishing
insurance provisions that have a reasonable likelihood of being adequate to settle all its insurance obligations. These liabilities
comprise of reported claims not yet paid (outstanding claims), a provision for claims incurred but not yet reported (IBNR) and an
unearned premium provision at the reporting date.
Outstanding claims
Claims on insurance contracts are recognised on a claims-made basis. This means that the Group is liable for all insured events that
occurred and for which the claim is first made in writing, during the term of the contract. The outstanding liability in respect of
claims is the Group’s best estimate of the current commitment to its policyholders at any particular time.
The estimated cost of claims includes direct expenses to be incurred in settling claims, net of the expected subrogation value and
other recoveries. The Group takes all reasonable steps to ensure that it has appropriate information regarding its claims exposures.
However, given the uncertainty in establishing claims provisions, it is likely that the final outcome will prove to be different from
the original liability established.
Initial estimates of outstanding claims are based on historical trends per class of business and are updated as soon as new
information is available. The outstanding liability is reduced commensurate to any interim payments that may be made. On
settlement of the claim, the outstanding liability is reduced to nil.
Claims incurred but not reported (IBNR)
The IBNR reserve relates to the uncertainty concerning the eventual outcome of claims resulting from events which have taken
place, but of which the insurer has not received notices or reports of the loss.
The provision for claims IBNR is based on actuarially calculated deterministic methods, which are applied on a gross basis to
project the ultimate claims. The deterministic calculations provide a “best estimate” of the reserve by applying a combination of the
Chain Ladder and Bornhuetter-Ferguson methods to smoothed paid claims triangles.
The Chain Ladder method is based upon the assumption that the incurred losses will continue in a similar manner in the future for
all accident years whilst the Bornhuetter – Ferguson method is used in the modelling of very recent periods where there hasn’t been
sufficient claim development to rely on the chain ladder results.
A stochastic bootstrapping method is applied over the best estimate so that the IBNR reserves are held to be at least sufficient at
the 75th percentile. The outcomes results have been tested and found to be in line with the IBNR reserves calculated on a cost of
capital approach which aligns with the incoming Solvency Assessment Management (SAM) regulatory requirements.
This method takes into consideration the cost of capital risk margin methodology as per the SAM technical specifications issued by
the FSB.
Unearned premiums provision
The Group raises provisions for unearned premiums on a basis that reflects the underlying risk profile of its insurance contracts.
An unearned premiums provision is created at the commencement of each insurance contract and is then released as the risk under
the contract expires. The majority of the Group’s insurance contracts have an even risk profile and therefore the unearned
premiums provisions are released evenly over the period of insurance using the 365th time proportionate basis. For the remainder
of the insurance portfolio, for example the engineering class, the unearned premium is released on a basis consistent with the
increasing, decreasing or uneven risk profile of the contracts. The provisions for unearned premiums are first determined on a gross
level and thereafter the reinsurance impact is recognised.
98
2014
2013
2014
2013
500
10
510
500
10
510
500
10
510
500
10
510
47
47
47
47
(4)
—
(4)
—
43
47
43
47
2
2
2
2
—
—
—
—
—
—
—
—
2
2
2
2
23. Share capital
23.1 Authorised
500 000 000 ordinary shares of 0.1 cents each
1 000 000 000 “N” ordinary shares of 0.001 cents each
OVERVIEW
R’000
COMPANY
C O R P O R AT E
GROUP
2014
C O R P O R AT E
GOVERNANCE
S TAT E M E N T S
“N” ordinary shares
At beginning of year
267 144 624 (2013 – 266 728 564) “N” ordinary shares
of 0.001 cents each
Specific repurchase – repurchased and cancelled
(21 898 143) (2013 – nil) “N” ordinary shares of
of 0.001 cents each
Issued in terms of employee share option plan
620 100 (2013 – 416 060) “N” ordinary shares of
0.001 cents each
At end of year
of 0.001 cents each
ANNUAL FINANCIAL
Ordinary shares
46 775 135 (2013 – 46 775 135) ordinary shares of
0.1 cents each
Specific repurchase – repurchased and cancelled
(3 629 700) (2013 – nil) ordinary shares of
0.1 cents each
At end of year
43 145 435 (2013 – 46 775 135) ordinary shares of
0.1 cents each
23.2 Issued and fully paid
2014
NOTES (CONTINUED)
GROUP
R’000
2014
COMPANY
2013
2014
2013
23. Share capital (continued)
23.3 Held as treasury shares
Ordinary shares
4 015 311 (2013 – 3 987 231) ordinary shares of 0.1 cents each
Repurchased for cash
Nil (2013 – 28 080) ordinary shares of 0.1 cents each
Specific repurchase – sold to holding company
(3 629 700) (2013 – nil) ordinary shares of 0.1 cents each
At end of year
385 611 (2013 – 4 015 311) ordinary shares of
0.1 cents each
of 0.001 cents each
Sold for cash
Nil (2013 – (35 020)) “N” ordinary shares
of 0.001 cents each
Specific repurchase – sold to holding company
(21 898 143) (2013 – nil) ‘N” ordinary shares of 0.001 cents each
At end of year
of 0.001 cents each
Total at end of year
(4)
(4)
—
—
—
—
—
—
4
—
—
—
—
(4)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
45
45
45
49
437 218
594 298
604 960
838 800
200 000
200 000
764 140
898 120
695 300
790 500
100 000
—
538 600
3 340 218
—
3 321 718
23.4 Unissued shares (number)
Under option in terms of the Company’s share option scheme
“N” ordinary shares at 590 cents exercisable until 1 July 2016
“N” ordinary shares at 550 cents exercisable until
16 February 2017
31 December 2017
16 February 2018
16 February 2019
2 January 2020
24 February 2020
The directors are authorised, by resolution of the shareholders and until the forthcoming annual general meeting, to dispose of the
unissued shares for any purpose and upon such terms and conditions as they see fit.
A specific repurchase of 3 629 700 ordinary shares and 21 898 143 “N” ordinary shares was made from a subsidiary of the c ompany
during the year. These shares were previously treated as treasury shares and reverted to authorised shares upon r epurchase.
The average price paid was R13.53 for the ordinary shares and R13.30 for the “N” ordinary shares.
100
Share premium
Share issue expenses
Specific repurchase of shares
Decrease in treasury shares
269 986
4 609
(12)
—
(744)
—
273 839
267 312
2 824
(12)
Share options reserve
Transfer to share options exercised reserve
Share options exercised reserve
Transfer from share options reserve
Capital redemption reserve fund
Balance at 1 January and 31 December
Current year movement
Non-controlling shareholders’ share of reserves
Total capital reserves
(187)
49
269 986
340 634
4 609
(12)
(35 692)
—
—
309 539
337 822
2 824
(12)
—
—
—
340 634
25 875
10 570
(1 768)
34 677
16 972
10 076
(1 173)
25 875
25 875
10 570
(1 768)
34 677
16 972
10 076
(1 173)
25 875
16 001
1 768
17 769
14 828
1 173
16 001
16 001
1 768
17 769
14 828
1 173
16 001
3 655
3 655
—
—
—
—
—
—
361 985
—
—
—
—
382 510
—
—
9 917
2 578
(403)
12 092
342 032
7 365
2 692
(140)
9 917
325 434
25. Revaluation reserves
Properties revaluation reserve
Balance at 1 January and 31 December
Investments revaluation reserve
Less deferred taxation
Non-controlling shareholders’ share of reserve
Adjustment for change in non-controlling shareholders’ interest
Total revaluation reserves
26. Cash flow hedging reserve
Less deferred taxation
Non-controlling shareholders’ share of reserve
Adjustment for change in non-controlling shareholders’ interest
2 297
2 297
20 926
(19 535)
3 648
6 603
204
11 846
12 034
18 984
(3 681)
(6 411)
—
20 926
1 730
—
—
—
—
1 730
1 730
—
—
—
—
1 730
14 143
23 223
1 730
1 730
(4 847)
47 053
(13 175)
(14 081)
(28)
14 922
(367)
(10 709)
2 998
3 231
—
(4 847)
—
—
—
—
—
—
—
—
—
—
—
—
OVERVIEW
24. Capital reserves
C O R P O R AT E
2013
2014
C O R P O R AT E
2013
GOVERNANCE
2014
S TAT E M E N T S
R’000
COMPANY
ANNUAL FINANCIAL
GROUP
2014
2014
NOTES (CONTINUED)
GROUP
R’000
2014
27. Non-controlling interests
COMPANY
2013
2014
2013
Share of profit for the year
Share of other comprehensive income for the year
Dividend paid
Subsidiary’s accrual for preference shares and repurchase
of shares
(Reduction in)/issue of share capital
Sale/(repurchase) of trust units
transferred directly to equity
Redemption of preference shares by subsidiary
Share of distribution made by subsidiary for change in
shareholding
134 474
18 743
7 302
(3 000)
115 103
9 281
3 180
(1 480)
7 611
(6)
651
8 004
330
(84)
109 421
134 474
Loan from financial institution to the property owning
subsidiary secured by a first mortgage bond over the property.
The loan bears interest at a rate of .75% below prime and is
repayable by 1 June 2017. At 31 December 2014 the monthly
instalment payable was R273 541.
17 656
19 366
—
—
Loan from a financial institution to the property owning
subsidiary secured by a second mortgage bond over the
property. The loan bears interest at prime minus .75% and is
repayable by 1 June 2017. At 31 December 2014 the monthly
instalment payable was R63 544.
4 543
4 889
—
—
—
28 984
—
—
101 712
101 723
—
—
403
(26 804)
140
—
(29 953)
—
28. Long-term interest bearing borrowings
Issued by its subsidiary, Oceana SPV (Pty) Ltd, for
investment in Oceana Group Limited:
– Class A cumulative redeemable preference shares issued on 26
September 2006 and bear interest at an effective rate of 6.12%.
Brimstone has ceded and pledged all of its ordinary and preference
shares and all of its claims held in and against the subsidiary as
security for the A preference shares. The preference shares are
repayable as follows:
After the third anniversary of the issue date reduce to
R63 000 000;
After the fourth anniversary of the issue date reduce to
R59 000 000;
After the fifth anniversary of the issue date reduce to
R53 000 000;
After the sixth anniversary of the issue date reduce to
R47 000 000;
After the seventh anniversary of the issue date reduce to
R39 000 000;
After the eighth anniversary of the issue date reduce to Rnil.
(refer note 16)
– Class B cumulative redeemable preference shares issued on
26 September 2006. The preference shares have no specified
date of repayment and bear interest at a rate of 95% of the
prime interest rate. The preference shares are unsecured.
102
2014
2013
Interest free shareholders’ loans to subsidiary. The shareholders may vary such rate, provided it does not exceed the prime
rate. These loans are unsecured and are repayable only if and
to the extent that such payment is permissible under the Third
Party Funding Agreements and the directors resolve that they
shall be repaid. Based on the terms of the Third Party Funding
Agreement, these loans will not be repaid before 31 December
2015.
22 675
23 099
—
—
Loans from financial institutions to Sea Harvest Corporation
(Pty) Ltd
– Loan bearing interest at a fixed rate of 12.46% n.a.c.q. until
April 2010.
After April 2010 the fixed portion decreases in line with the
amortised capital balance until 1 June 2011 when R30 million
reverts to a variable interest rate of JIBAR plus 4.05%.
Repayments of R6.7 million are made quarterly in arrears until
this balance is fully amortised in May 2014. Overall the average quarterly repayment over the remaining term of the debt is
R9.5 million. The loan is secured by a general notarial bond
over all of Sea Harvest Corporation (Pty) Ltd’s moveable
assets (refer notes 13 and 20). The loan was repaid during the
year.
—
16 798
—
—
—
104 252
—
—
– Loan repayable in quarterly instalments, inclusive of interest,
as from 1 July 2012.
Until such time, interest payments are made quarterly in
arrears. Interest is charged at a variable rate linked to a 3
month JIBAR and matures on 29 May 2014. The loan is
secured by a general notarial bond over all of of Sea Harvest
Corporation (Pty) Ltd’s moveable assets (refer notes 13 and
20). The loan was repaid during the year.
—
10 799
—
—
as from 1 April 2014.
arrears. Interest is charged at a variable rate linked to a
3 month JIBAR and matures on 29 March 2019.The loan is
secured by a general notarial bond over all of Sea Harvest
20).
124 811
51 744
—
—
C O R P O R AT E
GOVERNANCE
S TAT E M E N T S
– Loan repayable in full on expiry thereof (4 May 2014),
interest payments are made quarterly in arrears.
On 1 October 2009, the interest rate was fixed at 17.3% until
June 2011, after which R50 million of the outstanding capital
will revert to a variable interest rate of JIBAR plus 8.5%
n.a.c.q. The loan is secured by a general notarial bond over all
of Sea Harvest Corporation (Pty) Ltd’s moveable assets (refer
notes 13 and 20).
The loan was repaid during the year.
OVERVIEW
2013
2014
ANNUAL FINANCIAL
R’000
COMPANY
C O R P O R AT E
GROUP
2014
2014
NOTES (CONTINUED)
GROUP
R’000
COMPANY
2014
2013
2014
2013
as from 1 April 2014.
arrears. Interest is charged at a variable rate linked to a
3 month JIBAR and matures on 29 March 2019.The loan is
secured by a general notarial bond over all of Sea Harvest
20).
197 000
—
—
—
– Instalment sale agreements repayable in monthly instalments,
inclusive of interest, as from 1 August 2014.
Until such time, interest payments are made monthly. Interest
is charged at a rate of 8.25% and matures on 1 October 2018.
542
—
—
—
– Instalment sale agreements repayable in monthly instalments,
inclusive of interest, as from 1 August 2014.
Until such time, interest payments are made monthly. Interest
is charged at a rate of 8.25% and matures on 1 September
2019.
320
—
—
—
Class D floating rate cumulative redeemable non-participating
preference shares of R100 million issued by a subsidiary,
Newshelf 831 (Pty) Ltd, on 15 December 2010. On
17 December 2013 the terms of preference shares which were
previously disclosed as Class D fixed rate cumulative redeemable non-participating preference shares of R100 million were
amended to Class D floating rate cumulative redeemable
non-participating preference shares and these together with
the existing Class D floating rate cumulative redeemable
non-participating preference shares have a redemption date of
13 November 2017. The dividend rate is 79% of the prime
bank lending rate. Preference share dividends are payable not
later than 4 business days following the payment of interim
and final dividends by Life Healthcare Group Holdings
Limited. The Class D floating rate preference shares (together
with the other preference shares issued by Newshelf 831 (Pty)
Ltd) are secured by a cession and pledge in security of
23 000 000 (2013 – 23 000 000) shares in Life Healthcare
Group Holdings Limited held by Newshelf 831 (Pty) Ltd.
168 913
173 669
—
—
(continued)
104
—
64 437
—
—
Class E floating rate cumulative redeemable non-participating
Newshelf 831 (Pty) Ltd, on 6 June 2011. The terms of preference shares which were previously disclosed as Class E fixed
rate cumulative redeemable non-participating preference
shares of R50 million were amended to Class E floating rate
cumulative redeemable non-participating preference shares
and have a redemption date of 13 November 2017. The dividend rate is 79% of the prime bank lending rate. Preference
share dividends are payable not later than 4 business days
following the payment of interim and final dividends by Life
Healthcare Group Holdings Limited. The Class E floating
rate preference shares (together with the other preference
shares issued by Newshelf 831 (Pty) Ltd) are secured by a
cession and pledge in security of 23 000 000 (2013 –
23 000 000) shares in Life Healthcare Group Holdings Limited
held by Newshelf 831 (Pty) Ltd.
48 763
—
—
—
Class F floating rate cumulative redeemable non-participating
Newshelf 831 (Pty) Ltd, on 1 October 2014 and have a
redemption date of 13 November 2017. The dividend rate is
79% of the prime bank lending rate. Preference share dividends are payable not later than 4 business days following the
payment of interim and final dividends by Life Healthcare
Group Holdings Limited. The Class F floating rate preference
shares (together with the other preference shares issued by
Newshelf 831 (Pty) Ltd) are secured by a cession and pledge
in security of 23 000 000 (2013 – 23 000 000) shares in Life
Healthcare Group Holdings Limited held by Newshelf 831
(Pty) Ltd.
78 020
—
—
—
OVERVIEW
Class E fixed rate cumulative redeemable non-participating
Newshelf 831 (Pty) Ltd, on 6 June 2011. The preference
shares are redeemable in full in 3 years and 1 day from date of
issue. The dividend rate is 10.13% nominal annual compounded semi-annually. Preference share dividends are payable on
15 January and 15 July of each year. The Class E fixed rate
preference shares (together with the other preference shares
issues by Newshelf 831 (Pty) Ltd) are secured by a cession
and pledge in security of 23 000 000 (2013 – 23 000 000)
shares in Life Healthcare Group Holdings Limited held by
Newshelf 831 (Pty) Ltd. The terms of the Class E preference
shares have changed as set out in the following paragraph.
C O R P O R AT E
2013
2014
C O R P O R AT E
2013
GOVERNANCE
2014
S TAT E M E N T S
R’000
COMPANY
ANNUAL FINANCIAL
GROUP
2014
2014
NOTES (CONTINUED)
GROUP
R’000
COMPANY
2014
2013
2014
2013
Variable rate cumulative redeemable preference shares of R390
million issued by a subsidiary, Newshelf 1063 (RF) (Pty) Ltd
on 21 December 2011. The preference shares are redeemable
in full on 26 June 2018. The dividend rate in respect of the
preference shares is 90% of the prime bank lending rate nominal annual compounded monthly. The company is not obliged
(but is entitled) to declare and pay any scheduled preference
share dividends that are deemed to accrue during the first
three years after the subscription date on 1 March and
1 September of these years. The company is obliged to declare
and pay any scheduled preference share dividends that are
deemed to accrue during the fourth and fifth years after the
subscription date on 1 March and 1 September of these years.
Brimstone has agreed to guarantee to the holders of the preference shares the due and full performance by the company of
the guaranteed liabilities and to pay all guaranteed amounts
and gross up amounts to the holders.
317 812
347 542
—
—
on 19 September 2013. The preference shares are redeemable
in full on 19 September 2018. The dividend rate in respect of
the preference shares is 90% of the prime bank lending rate
nominal annual compounded monthly. The company is not
obliged (but is entitled) to declare and pay any scheduled preference share dividends that are deemed to accrue during the
first three years after the subscription date on 1 March and
42 134
42 923
—
—
(continued)
106
2014
2013
Variable rate cumulative redeemable preference shares of
R25 million issued by a subsidiary, Newshelf 1063 (RF) (Pty)
Ltd on 12 November 2013. The preference shares are
redeemable in full in 5 years and 1 day from date of issue. The
dividend rate in respect of the preference shares is 101.75% of
the prime lending rate nominal annual compounded monthly
until 30 June 2014 and thereafter is 90% of the prime bank
lending rate nominal annual compounded monthly. The
company is not obliged (but is entitled) to declare and pay any
scheduled preference share dividends that are deemed to
accrue during the first three years after the subscription date
on 1 March and 1 September of these years. The company is
obliged to declare and pay any scheduled preference share
dividends that are deemed to accrue during the fourth and fifth
years after the subscription date on 1 March and 1 September
of these years. Brimstone has agreed to guarantee to the
holders of the preference shares the due and full performance
by the company of the guaranteed liabilities and to pay all
guaranteed amounts and gross up amounts to the holders.
—
25 263
—
—
Floating rate cumulative redeemable non-participating preference shares of R170m issued by a subsidiary, Newshelf 1064
(RF) (Pty) Ltd, on 1 November 2012. The preference shares
are redeemable in full on 1 November 2017. The dividend rate
is 97% of the prime bank lending rate. The preference shares
are secured by a cession and pledge of all present and future
investments of Newshelf (RF) 1064 (Pty) Ltd.
138 915
154 770
—
—
Class A floating rate cumulative redeemable non-participating
preference shares of R124.75m issued by a subsidiary,
Newshelf 1269 (RF) (Pty) Ltd, in tranches commencing on
22 April 2014. The preference shares are redeemable in full in
5 years from date of first issue. The dividend rate is 90% of
the prime bank lending rate. Newshelf 1063 (RF) (Pty) Ltd,
the sole shareholder of Newshelf 1269 (RF) (Pty) Ltd has
given the preference shareholder a limited recourse guarantee
secured by a pledge and cession of its shares and claims in and
against Newshelf 1269 (RF) (Pty) Ltd.
111 228
—
—
—
Class B participating redeemable preference share issued on
22 April 2014. The terms of the Class B preference share allow
for the Class B preference shareholder to receive one seventh
of any distribution payable to the ordinary shareholder of
Newshelf 1269 (Pty) Ltd as well as a Class B Final Preference
Dividend which is between 10% and 12.5% of the amount by
which the market value of the relevant assets in Newshelf 1269
(Pty) Ltd exceed the aggregate of the outstanding Class A
preference shares and all potential tax liabilities and costs in
Newshelf 1269 (Pty) Ltd.
23 682
—
—
—
OVERVIEW
2013
C O R P O R AT E
GOVERNANCE
S TAT E M E N T S
2014
ANNUAL FINANCIAL
R’000
COMPANY
C O R P O R AT E
GROUP
2014
2014
NOTES (CONTINUED)
GROUP
R’000
COMPANY
2014
2013
2014
2013
Floating rate cumulative redeemable non-participating
preference shares of R75m issued by a subsidiary, Friedshelf
1535 (RF) (Pty) Ltd, on 15 December 2014. The preference
shares are redeemable in full on 15 December 2018. The dividend rate is 107% of the prime bank lending rate. The preference shares are secured by a cession and pledge of the shares
and claims in and against Newshelf 1062 (RF) (Pty) Ltd, a
wholly-owned subsidiary of Friedshelf 1535 (RF) (Pty) Ltd.
75 325
—
—
—
on 4 March 2014. The preference shares are redeemable in full
on 4 March 2019. The dividend rate in respect of the preference shares is 90% of the prime bank lending rate nominal
annual compounded monthly. The company is not obliged (but
is entitled) to declare and pay any scheduled preference share
dividends that are deemed to accrue during the first three
years after the subscription date on 1 March and 1 September
of these years. The company is obliged to declare and pay any
scheduled preference share dividends that are deemed to
accrue during the fourth and fifth years after the subscription
date on 1 March and 1 September of these years. Brimstone
has agreed to guarantee to the holders of the preference shares
the due and full performance by the company of the guaranteed liabilities and to pay all guaranteed amounts and gross up
amounts to the holders.
100 319
—
—
—
R450 million issued by a subsidiary, Newshelf 1063 (RF)
(Pty) Ltd on 25 July 2014. The preference shares are redeemable in full on 25 July 2019. The dividend rate in respect of
the preference shares is 90% of the prime bank lending rate
nominal annual compounded monthly. The company is not
obliged (but is entitled) to declare and pay any scheduled preference share dividends that are deemed to accrue during the
first three years after the subscription date on 1 March and
461 792
—
—
—
(continued)
108
107 513
—
—
—
1 170 258
(233 493)
—
—
—
—
2 040 451
936 765
—
—
23 103
22 211
—
—
Short-term provisions
Product claims
Additional provision
Provision utilised
152
7
—
159
—
—
—
—
—
—
—
—
Bonus
Provision utilised
—
—
—
—
—
—
—
—
—
—
—
—
Leave pay
Provision utilised
Total carrying amount – short-term
159
172
(159)
172
—
—
—
—
16 833
15 827
(14 660)
18 000
16 153
13 222
(12 542)
16 833
—
—
—
—
—
—
—
—
18 172
16 992
—
—
C O R P O R AT E
2 143 675
(103 224)
29. Provisions
Long-term provisions
Post-retirement medical assistance
Present value of unfunded obligations
Refer to note 40 for details of the post-retirement medical
assistance plan.
OVERVIEW
2013
2014
GOVERNANCE
Total
Less: amount transferred to short-term borrowings (note 32)
2013
S TAT E M E N T S
R105 million issued by a subsidiary, Newshelf 1063 (RF)
(Pty) Ltd on 19 September 2014. The preference shares are
redeemable in full on 19 September 2019. The dividend rate in
respect of the preference shares is 90% of the prime bank lending rate nominal annual compounded monthly. The c ompany is
not obliged (but is entitled) to declare and pay any scheduled
preference share dividends that are deemed to accrue during
the first three years after the subscription date on 1 March and
and pay any scheduled preference share d
ividends that are
Brimstone has agreed to guarantee to the h
olders of the preference shares the due and full performance by the company of
2014
ANNUAL FINANCIAL
R’000
COMPANY
C O R P O R AT E
GROUP
2014
2014
NOTES (CONTINUED)
GROUP
R’000
COMPANY
2014
2013
2014
2013
—
11 587
—
—
3 710
2 536
3 710
2 536
3 710
14 123
3 710
2 536
3 490
220
3 710
—
14 123
14 123
3 490
220
3 710
—
2 536
2 536
—
639 380
639 380
(21 654)
636 300
614 646
—
76 166
76 166
—
135 859
135 859
52 331
45 192
124
115
(1 147)
28 260
30 032
(490)
(2 900)
(1 174)
18 228
34 477
(69)
—
3 830
2 668
7 478
2 668
30. Other financial liabilities
Financial liabilities carried at fair value through profit or loss
Forward exchange contracts – designated and effective in
hedge accounting relationship
Interest rate swap – not designated in hedge accounting
relationship
Non-current
Current
Refer note 19 for further disclosures regarding the interest rate
swap agreements.
31. Deferred taxation
Deferred taxation asset
Deferred taxation liability
Net deferred taxation liability
The major components of the deferred tax provision
together with movements during the year were as follows:
110
Difference between tax wear and tear allowances
and depreciation charges on assets
Difference between doubtful debt allowance and
amount allowable for tax purposes
Taxation allowance for future trawler repairs
Fair value adjustment on fishing rights
Other
Derivative instruments
Differences on revaluation of investments
(taken directly to equity)
Revaluation of properties (taken directly to equity)
Arising from cash flow hedging reserve
Prepayments
Investments
Provisions
Utilisation of estimated tax losses
9 931
298
549 214
(19 600)
(13 047)
(3 244)
912
560 442
(16 167)
(34 097)
—
—
96 323
(4 335)
(13 046)
—
—
141 052
(2 136)
(3 172)
Deferred tax liability – 31 December
639 380
614 646
76 166
135 859
—
—
—
—
(2 900)
—
—
—
—
—
—
—
—
—
32. Short-term interest bearing borrowings
Current portion of long-term borrowings (note 28)
Amount owing to bank resulting from the discounting
of a subsidiary company’s sales invoices to its
customers, secured by a cession of its debtors book
and limited guarantee (note 36) by the holding company and
bearing interest at the bank’s prime overdraft rate.
9 357
(13 518)
(107)
—
(6 423)
27
27 805
(228)
—
(3 119)
390
96 802
—
(6 796)
(2 199)
—
(10 976)
(3 648)
(5 598)
3 681
—
—
(5 598)
—
—
(2 998)
(28 720)
—
(6 847)
—
1 067
639 380
614 646
76 166
135 859
103 224
233 493
—
—
27 476
27 277
—
—
130 700
260 770
—
—
13 175
(7 332)
10
119 704
45
10
—
—
(2 001)
—
17 033
33. Bank overdrafts
The Company has an overdraft facility amounting to R60 million (2013 – R50 million). The facility bears interest at the bank’s
prime lending rate. As security for the facility, the Company’s wholly-owned subsidiary, Septen Investments (Pty) Ltd, has pledged
and ceded 3 570 000 Life Healthcare Group Holdings Limited shares (2013 – 1 799 700 Brimstone ordinary shares and 19 851 279
Brimstone “N” ordinary shares).
The Company has guaranteed the overdraft facility of a wholly-owned subsidiary to the extent of R21 500 000 and has also ceded
its loan to the subsidiary to the bank concerned as security for the overdraft. At the end of the year, the overdraft secured by this
guarantee was R14 804 138 (2013 – R16 713 971).
OVERVIEW
135 859
(27 285)
C O R P O R AT E
561 146
1 210
2013
614 646
(2 522)
2014
C O R P O R AT E
Reconciliation between deferred taxation opening and
and closing balances:
Deferred tax liability – 1 January
Under/(over) provided previous year
Statement of comprehensive income effect of temporary
differences in value of assets
Statement of comprehensive income effect of temporary
differences in doubtful debt allowance
Intercompany transfer
Provisions
Prepayments deducted for normal tax
Investments
Differences on revaluation of investments
Derivative instruments
Arising from cash flow hedging reserve
Estimated tax losses
2013
GOVERNANCE
2014
S TAT E M E N T S
R’000
COMPANY
ANNUAL FINANCIAL
GROUP
2014
2014
NOTES (CONTINUED)
GROUP
R’000
COMPANY
2014
2013
(9 733)
—
—
(9 733)
11 651
13 412
15 330
(6 123)
1
—
(6 122)
28 244
9 733
31 855
2014
2013
34. Notes to the cash flow statements
34.1 Taxation paid
Income tax
Prepaid at the beginning of the year
Other
Provided during year
Prepaid at the end of the year
Income tax paid/(refunded)
Dividends tax
Dividends tax paid
Securities transfer tax paid
STC
Prepaid at the beginning of the year
Provided during year
(Owing)/prepaid at the end of the year
STC paid
Total taxes paid/(refunded)
34.2 Finance costs
Finance costs recognised in profit or loss
Adjustment for non-cash items
Finance costs paid
34.3 Cash effect of change in investment in subsidiaries
Net decrease in investment
Adjustment for non-cash items
112
652
333
1 202
—
(2 000)
—
—
(2 000)
(151)
—
(2 151)
—
852
(11)
—
11
—
17 184
(21)
10
11
—
32 188
188 182
(44 673)
143 509
110 553
(42 188)
68 365
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
852
—
—
—
—
(2 151)
19 863
(10 355)
9 508
5 468
—
5 468
198 975
(6 796)
192 179
56 502
—
56 502
2014
Segment revenues and results
Segment revenue
Fishing
Insurance
Clothing
Investments
Total revenue
Segment profit/(loss) from operations
Fishing
Insurance
Clothing
Investments
Total profit from operations
Fair value gains
Exceptional items
Share of profits of associates and joint ventures
Net finance costs
Profit before taxation
109 251
(179 718)
7 202
165 123
101 858
463 967
(28 286)
(65 431)
23 028
(188 182)
(449)
306 505
69 062
(120 662)
10 460
105 526
64 386
557 402
7 828
13 204
23 037
(110 553)
(507)
554 797
OVERVIEW
1 237 687
505 246
179 600
163 843
2 086 376
Information reported to the Group’s operating decision makers for the purpose of resource
allocation and assessment of s egment performance is specifically focused on the individual e ntity
in which Brimstone has invested. The Group’s reportable segments under IFRS 8 are therefore
fishing, insurance, clothing and investments. Investments include investments in associates,
available-for-sale investments, investments at fair value through profit or loss, the Group’s
property portfolio and administrative head office.
C O R P O R AT E
1 361 498
417 569
183 824
258 163
2 221 054
35. Segmental information
GOVERNANCE
2013
S TAT E M E N T S
2014
ANNUAL FINANCIAL
R’000
C O R P O R AT E
COMPANY
GROUP
R’000
Segment assets and liabilities
Segment assets
Fishing
Insurance
Clothing
Investments
Intergroup balances
Other
Total segment assets
Segment liabilities
Fishing
Insurance
Clothing
Investments
Total segment liabilities
2014
Gross
Net
2013
Gross
Net
1 040 101
1 321 780
171 257
2 533 138
5 839 788
439 860
5 399 928
8 372 926
1 040 101
1 321 780
171 257
2 533 138
5 399 928
—
5 399 928
7 933 066
911 544
1 391 025
165 658
2 468 227
4 742 653
411 287
4 331 366
7 210 880
911 544
1 391 025
165 658
2 468 227
4 331 366
—
4 331 366
6 799 593
944 377
1 391 777
132 509
2 468 663
2 029 998
4 498 661
735 697
1 301 843
61 260
2 098 800
2 029 998
4 128 798
781 458
1 334 204
130 479
2 246 141
1 181 332
3 427 473
530 553
1 244 270
60 031
1 834 854
1 181 332
3 016 186
2014
NOTES (CONTINUED)
GROUP
R’000
COMPANY
2014
2013
Other segmental information
Depreciation and amortisation
Fishing
Insurance
Clothing
Investments
Total segment depreciation and amortisation
80 735
8 240
4 023
682
93 680
73 015
8 097
3 111
628
84 851
Additions to non-current assets
Fishing
Insurance
Clothing
Investments
Total segment additions to non-current assets
196 036
2 750
6 408
856
206 050
63 495
8 287
9 916
146
81 844
2014
2013
35. Segmental information (continued)
The Group’s revenue by geographical area is set out in note 2. All operations are based in the Republic of South Africa.
36. Contingent liabilities
The Company has irrevocably and unconditionally guaranteed the due and punctual payment and performance by Newshelf
1063 RF (Pty) Ltd for preference shares issued by Newshelf 1063 RF (Pty) Ltd to a financial institution.
The Company has subordinated its rights and claims of any nature against Newshelf 1269 (Pty) Ltd for the benefit and in favour of
funders and preference shareholders.
The Company has guaranteed the post-redemption obligations of Newshelf 1064 (RF) (Pty) Ltd, Oceana SPV (Pty) Ltd, Newshelf
1279 (Pty) Ltd, Newshelf 1269 (Pty) Ltd and Friedshelf 1535 (Pty) Ltd for preference shares issued by those subsidiaries.
The Company has guaranteed the invoice discounting facility operating in wholly-owned subsidiary, House of Monatic (Pty) Ltd,
to a maximum amount of R40 million (2013 – R40 million) but limited to any shortfall in collection of the debtors ceded in terms of
the facility. The amount owing on the facility at 31 December 2014 was R27 476 651 (2013 – R27 276 812).
The Company has issued a suretyship of R7.5 million in favour of a financial institution that has granted H Investments No 219
(Pty) Ltd a mortgage bond of R6.9 million over one of its properties. At 31 December 2014 the debt covered by this suretyship was
R4 542 528 (2013 – R4 889 695).
The company has issued a letter of support to the Financial Services Board in respect of its insurance subsidiary, stating its
willingness to capitalise this subsidiary should the need arise.
114
2014
2013
2014
2013
10 361
3 651
14 012
32 050
7 471
39 521
—
—
—
—
—
—
22 268
75 240
2 682
100 190
14 552
34 672
—
49 224
872
857
—
1 729
—
—
—
—
37. Capital commitments
Commitments for the acquisition of property, plant, equipment
and vehicles:
Contracted for but not provided in the financial statements
Authorised by directors but not contracted
Total commitments
OVERVIEW
R’000
COMPANY
C O R P O R AT E
GROUP
2014
38. Lease commitments
At the reporting date the Group and Company had
outstanding commitments under non-cancellable
operating leases with a term of more than one year,
which fall due as follows:
Within one year
In the second to fifth years inclusive
Beyond five years
The commitments will be funded from internal cash resources.
3 321 718
638 600
—
(620 100)
3 340 218
665 686
835
1 316
—
743
944
3 006 338
803 200
(35 260)
(452 560)
3 321 718
454 195
700
1 250
909
671
835
The options outstanding at the end of the year have a
weighted average remaining contractual life of 2.32 years
(2013 – 2.82 years).
The following options were awarded to executive directors
and staff during the year:
2 January 2014 – 1400 cents per share
24 February 2014 – 1300 cents per share
100 000
538 600
638 600
C O R P O R AT E
Outstanding at beginning of year
Awarded during year
Forfeited
Exercised during the year
Outstanding at end of year
Exercisable at the end of the year
GOVERNANCE
Details of share options outstanding are as follows:
S TAT E M E N T S
The Company has a share option scheme for its employees. Options are exercisable at a price equal to the middle market price of
the share on the most recent trading day on the JSE immediately preceding the date on which the option is granted. No options are
exercisable in the first year from the date of granting of the options. Thereafter, options up to a maximum of 20% may be exercised
annually. The sale arising from the exercise of options must be implemented by not later than 6 years from the date on which an
option is granted.
GROUP
2014
2013
Weighted
Weighted
average
average
Number of exercise price
Number of Exercise price
share options
(cents)
share options
(cents)
ANNUAL FINANCIAL
39. Share-based payments
2014
NOTES (CONTINUED)
39. Share-based payments (continued)
The estimated fair values of the options were calculated using the Binomial Tree option pricing model. The results of the
calculations and inputs into the model are set out below:
“N” ordinary
shares
Options issued 1 July 2010
Fair value (cents)
139
Exercise price (cents)
270
Expected volatility (%)
73%
Expected life
5.0
Risk free rate (%)
7.824
Dividend forecast (cents)
2011
10
2012
11
2013
12
2014
13
2015
14
Options issued 16 February 2011
Fair value (cents)
Expected life
Risk free rate (%)
2012
2013
2014
2015
2016
Options issued 31 December 2011
Fair value (cents)
Expected life
Risk free rate (%)
2012
2013
2014
2015
2016
Fair value (cents)
Expected life
Risk free rate (%)
2013
2014
2015
2016
2017
116
167
550
23.82
5.0
8.02
18
17
17
17
17
285
820
27.76
5.0
7.12
15
15
15
15
15
304
900
26.27
5.0
7.05
15
15
15
15
15
Fair value (cents)
Expected life
Risk free rate (%)
2015
2016
2017
2018
2019
462
1 400
22.19
5.0
7.77
25
25
25
25
25
473
1 300
26.34
5
8.25
25
25
25
25
25
OVERVIEW
19
19
19
19
19
C O R P O R AT E
Options issued 2 January 2014
Fair value (cents)
Expected life
Risk free rate (%)
2015
2016
2017
2018
2019
400
1 250
27.21
5.0
6.29
GOVERNANCE
Fair value (cents)
Expected life
Risk free rate (%)
2014
2015
2016
2017
2018
S TAT E M E N T S
“N” ordinary
shares
C O R P O R AT E
2014
ANNUAL FINANCIAL
2014
NOTES (CONTINUED)
39. Share-based payments (continued)
Expected volatility was determined calculating the historical volatility of the Company’s share price over the previous five years.
The expected life used in the model has been adjusted, based on management’s best estimate, for the effects of non-transferability,
exercise restrictions and behavioural considerations. The Company recognised total expenses of R16 772 034 (2013 – R15 275 794)
related to equity and cash-settled share-based payment transactions during the year.
On 31 December 2010, a new share scheme, Cocoon, was introduced for employees of Brimstone. In terms of the scheme,
participants subscribed for 39 140 000 newly issued Brimstone “N” ordinary shares at a subscription price of R0.5075 per share.
The scheme involves three distinct participants, namely:
1.The Brimstone Black Executives Investment Trust, an executive equity investment scheme established for the benefit of the
second tier management of Brimstone which holds 35 140 000 “N” ordinary shares;
2.The Brimstone General Staff Investment Trust, an employee equity investment scheme established in line with the requirements
of the BEE codes for the benefit of the broader staff of Brimstone which holds 1 500 000 “N” ordinary shares; and
3. The Brimstone Broad-based BEE Trust, a broad-based equity investment scheme, which holds 2 500 000 “N” ordinary shares.
The difference between the subscription price and the subscription VWAP (the volume weighted average price of traded securities
at the close of business on the day before any particular date) are notionally funded by Brimstone through notional vendor funding.
The outstanding balance accrues interest at the hurdle rate (8.5% fixed nominal rate) and any distributions received (including
interest, dividends and capital contributions) will be used to reduce the notional funding.
At the relevant fund date, Brimstone will, in terms of a call option, be entitled to repurchase that number of subscription shares
which, at the then market value, have a value equal to the then outstanding notional vendor funding. This will occur in three
tranches:
1. The first tranche comprises 50% of the subscription shares and has a final date of 31 October 2016;
2. The second tranche comprises 40% of the subscription shares and has a final date of 31 October 2017; and
3. The third tranche comprises 10% of the subscription shares and has a final date of 31 October 2018.
The participants will retain the balance of the subscription shares.
Fair value
R’000
2014
2013
Equity—
Brimstone Black Executives Investment Trust
Settled
42 049
42 049
Equity—
Brimstone General Staff Investment Trust
Settled
2 556
2 556
Brimstone Broad-based BEE Trust
Cash—Settled
26 659
20 457
The equity-settled schemes were valued at inception of the schemes, while the fair value of the cash-settled scheme
is re-measured each year. Fair value is measured using the Black Scholes method.
The value of the Brimstone Black Executive Investment Trust and the Brimstone General Staff Investment Trust is expensed over
the 6 year vesting period. The Brimstone Broad-based BEE Trust scheme has no vesting conditions, the full value was therefore
expensed immediately and any changes in fair value are expensed in the year of the change.
118
2014
Wholly-owned subsidiary, House of Monatic (Pty) Ltd, is a member of the Clothing Industry National Bargaining Council and as
such, it is compulsory for all qualifying employees to be members of the Clothing Industry Bargaining Council Provident Fund.
Employees of House of Monatic (Pty) Ltd who do not qualify for membership of the Provident Fund are members of the House of
Monatic Pension Fund. The fund is administered by Lion of Africa Administration Services (Pty) Ltd, in terms of the Pension
Funds Act, 1956. The assets of the fund are held separately from those of the company, under the control of the fund’s trustees.
The contributions payable to the funds by the employer in terms of the rules of the funds are charged against income and during
the year amounted to R4 177 840 (2013 – R3 746 081). The contributions vest immediately upon payment in the members of the
funds.
All permanent staff of Brimstone Investment Corporation Limited and its subsidiaries were members of a retirement fund.
Sea Harvest Old Mutual Superfund Provident Fund
This fund have been set up as a result of negotiations with employees. A total of 1 569 (2013 – 1 612) employees of the group
were members of these funds at the year end. This defined contribution fund is not exempt from actuarial valuations.
C O R P O R AT E
GOVERNANCE
Post-retirement medical assistance
The group has undertaken to subsidise a portion of medical aid subscriptions for certain employees who meet specific criteria.
The projected unit credit method was used to value the liability, as prescribed by IAS 19: Employee Benefits. The latest full
actuarial valuation was performed on 31 December 2013. The group has no separately identified plan assets to fund the liability.
At 31 December 2014 there were 45 (2013 – 47) employees who qualified for the benefit.
S TAT E M E N T S
The group transferred the Sea Harvest Provident Fund and the Sea Harvest Trawlermen’s Provident Fund to the Old Mutual
Superfund Provident Fund with effect from July 2011. The group also transferred the Management Provident Fund and
Defined Contribution Pension Fund from the Twilight Group Pension Fund and Provident Funds to the Old Mutual
SuperFund with effect from 1 October 2013.
ANNUAL FINANCIAL
Sea Harvest Twilight Group Management Provident Fund
The group has 31 (2013 – 29) employees who are members of this fund. This defined contribution fund is not exempt from
actuarial valuations.
Sea Harvest Twilight Group Pension Fund
The group has 114 (2013 – 113) employees who are members of this fund. This defined contribution fund is not exempt from
actuarial valuations.
OVERVIEW
Contributions payable to the fund and charged against income amounted during the year to R1 656 867 (2013 – R1 559 854).
The Company transferred the Brimstone Investment Corporation Limited Provident Fund from the Twilight Group Pension Fund
and Provident Funds to the Old Mutual SuperFund Provident Fund with effect from June 2014.
C O R P O R AT E
40. Retirement benefit plans
2014
NOTES (CONTINUED)
GROUP
R’000
2014
2013
178
1 926
—
2 104
168
1 552
(699)
1 021
22 211
178
1 926
—
(1 212)
23 103
20 882
168
1 552
699
(1 090)
22 211
40. Retirement benefit plans (continued)
Contributions paid
The contributions payable to these funds by the employer in terms of the rules of the
fund and that are charged against income d
uring the year amounted to R11 538 003
(2013 – R13 276 357).
Amounts recognised in profit or loss in respect of these defined benefit schemes are as follows:
Current service cost
Interest cost
Actuarial gain recognised
Changes in the present value of the defined benefit obligation are as follows:
Defined benefit obligation at beginning of year
Current service cost
Interest cost
Actuarial gain arising in the current year (due to experience adjustments)
Benefits paid
Defined benefit obligation at year end
The principal assumptions of the actuarial valuation are:
Discount rate (%)
Health care cost inflation (%)
Retirement age
8.25
7.9 – 8.4
63 or 65
8.25
7.9 – 8.4
63 or 65
The sensitivity analyses below have been determined based on reasonably possible changes of the respective assumptions above
occurring at the end of the reporting period, while holding all other assumptions constant.
–If the discount rate is 100 basis points higher (lower), the defined benefit obligation would decrease by R2 404 000
(increase by R2 926 000).
–If the expected healthcare cost inflation increases (decreases) by 1%, the defined benefit obligation would increase by
R2 847 000 (decrease by R2 378 000).
–If the expected retirement age increases (decreases) by one year for both men and women, the defined benefit obligation
would decrease by R366 000 (increase by R325 000).
The sensitivity analysis presented above may not be representative of the actual change in the defined benefit obligation as it is
unlikely that the change in assumptions would occur in isolation of one another as some of the assumptions may be correlated.
Furthermore, in presenting the above sensitivity analysis, the present value of the defined benefit obligation has been calculated
using the projected unit credit method at the end of the reporting period, which is the same as that applied in calculating the
defined benefit obligation liability recognised in the statement of financial position. There are no changes in the methods and
assumptions used in preparing the sensitivity analysis from prior years.
120
41. Financial instruments
41.1 Capital risk management
The Group manages its capital to ensure that entities within the group will be able to continue as a going concern while maximising
the return to stakeholders through the optimisation of the debt and equity balance.
The capital structure of the Group consists of debt, which includes the borrowings disclosed in notes 28 and 32, cash and cash
equivalents and equity attributable to equity holders of the parent, comprising issued capital, reserves as d
isclosed in notes 23 to 26,
and retained earnings.
The Group’s board reviews the capital structure on a regular basis and in particular when an acquisition of an investment is
planned. As a part of this review, the board considers the cost of capital and the risks associated with each class of capital. The
Group will balance its overall capital structure through the payment of dividends, new share issues and share buy-backs as well as
the issue of new debt or the redemption of existing debt.
The Group’s overall strategy remains unchanged from the previous year.
The Financial Services Board (FSB) sets and monitors capital requirements for short-term insurers registered in South Africa.
Effective 1 January 2012, the prescribed requirements for the calculation of the value of the assets, liabilities and the capital
adequacy requirement (CAR) of short-term insurers were amended in terms of Board Notice 169 of 2011. This was done as an
interim measure pending the final implementation of the FSB Solvency Assessment and Management (SAM) risk based capital
regime.
On a SAM Interim Measures basis, the group’s CAR at 31 December 2014 was 0.29 (2013 – 1.03).
41.2 Significant accounting policies
Details of the significant accounting policies and methods adopted, including the criteria for recognition, the basis of measurement
and the basis on which income and expenses are recognised, in respect of each class of financial asset, financial liability and equity
instrument are disclosed in note 1 to the financial statements.
OVERVIEW
Lion of Africa Holdings Company (Pty) Ltd
The group operates a pension scheme on a defined contribution basis. The group contributed to the Twilight Group Pension
Fund until March 2014 and then moved to the Quantum Pension Fund. This pension scheme is governed by the Pension Funds
Act,1956. A defined contribution plan is a pension plan under which the group pays fixed contributions into a separate entity.
The scheme is funded through payments to trustee-administered funds on a mandatory basis. The group has no legal or constructive obligations to pay further contributions once the contributions have been paid. The contributions are recognised as an
employee benefit expense when they are due. Contributions of R6 864 026 (2013 – R8 307 600) were paid during the year.
C O R P O R AT E
The Group expects to make a contribution of R1.3 million (2013 – R1.2 million) to the defined benefit plans during
the next financial year.
GOVERNANCE
The average duration of the benefit obligation at 31 December 2014 is 13.3 years (2013 – 13.1 years).
S TAT E M E N T S
The risks faced by the Group as a result of the post-retirement healthcare obligation can be summarised as follows:
– Inflation: The risk that future CPI inflation and healthcare cost inflation are higher than expected and uncontrolled.
–Longevity: The risk that pensioners live longer than expected and thus their healthcare benefit is payable for longer than expected.
–Open-ended, long-term liability: The risk that the liability may be volatile in the future and uncertain.
–Future changes in legislation: The risk that changes to legislation with respect to the post-employment liability may increase
the liability for the Group.
–Future changes in the tax environment: The risk that changes in the tax legislation governing employee benefits may increase
the liability for the Group.
–Perceived inequality by non-eligible employees: The risk of dissatisfaction of employees who are not eligible for a postemployment healthcare subsidy.
–Administration: Administration of this liability poses a burden to the Group.
–Enforcement of eligibility criteria.
C O R P O R AT E
2014
ANNUAL FINANCIAL
2014
NOTES (CONTINUED)
GROUP
R’000
COMPANY
2014
2013
2014
2013
4 401 017
3 689 588
1 185 094
1 014 513
—
885 030
633 801
221 619
29 610
—
27 483
9 181
903 443
617 731
261 213
24 499
—
46 954
—
104 691
27 779
49 538
27 374
209 839
2 219
9 181
44 321
19 949
2 050
22 322
294 922
2 154
2 840 863
—
1 915 228
—
58 869
537 995
68 105
352 470
3 710
—
3 710
—
41. Financial instruments (continued)
41.3 Categories of financial instruments
Financial assets
Designated as at fair value through profit or loss
Derivative not in a hedge accounting relationship carried
at fair value
Loans and receivables (including cash and cash equivalents)
Trade and other receivables
Loans to associates and investments less amounts written off
Loans owing by subsidiaries
Available-for-sale investments
Financial liabilities
Amortised cost (long and short-term borrowings, bank
overdrafts, trade and other payables)
Loans owing to subsidiaries
Derivative not in a hedge accounting relationship carried
at fair value
41.4 Financial risk management objectives
A committee consisting of executives of the holding company and of the Group’s subsidiaries monitors and manages the Group’s
financial risks relating to the operations of the Group. These risks include market risk (including currency risk, interest rate risk
and price risk), credit risk and liquidity risk. The recommendations of this committee are presented to the audit and risk committee
and, if necessary, the Board of Directors for approval. The Group does not enter into or trade in financial instruments, including
derivative instruments, for speculative purposes.
41.5 Market risk
The Group’s activities expose it primarily to the financial risks of changes in foreign exchange (see 41.6 below), interest rates
(see 41.7 below) and equity price risk (see 41.11 below).
There has been no change to the Group’s exposure to market risks or the manner in which it manages and measures the risk.
122
366
176
—
—
—
—
Current assets
Cash (United States Dollar, USD)
Rand equivalent of cash
Exchange rate used for conversion of foreign item
4 360
50 578
11.60
3 692
38 722
10.49
—
—
—
—
—
—
Cash (Euros)
Rand equivalent of cash
Exchange rate used and for conversion of foreign items
986
13 806
13.99
—
—
—
—
—
—
—
—
—
US $
Profit
Other equity
3 201
7 911
—
37
—
—
—
—
AUD
Profit
Other equity
9
—
—
—
—
—
—
—
UK £
Profit
Other equity
136
—
—
—
—
—
—
—
5 316
26 933
18
—
—
—
—
—
The Group undertakes certain transactions denominated in
foreign currencies which give rise to exchange rate fluctuations. The carrying amount of the Group’s uncovered foreign
currency denominated monetary assets and monetary liabilities
at the reporting date is as follows:
Liabilities
US $
European Union €
Foreign currency sensitivity analysis
The following table details the Group’s sensitivity to a 10%
increase and decrease in the Rand against the respective
foreign currencies. The sensitivity analysis includes only outstanding foreign currency denominated monetary items and
adjusts their translation at the year end for a 10% change in
foreign currency rates. A positive number indicates an increase
in profit where the Rand strengthens by 10% against the
relevant currency. For a 10% weakening in the Rand against
the relevant currency, there would be an equal and opposite
effect on the profit.
European Union €
Profit
Other equity
All profits or losses are attributable to the exposure on outstanding receivables and payables at year end in the group.
OVERVIEW
996
357
41.6 Foreign currency risk management
C O R P O R AT E
2013
2014
C O R P O R AT E
2013
GOVERNANCE
2014
S TAT E M E N T S
R’000
COMPANY
ANNUAL FINANCIAL
GROUP
2014
2014
NOTES (CONTINUED)
41.6 Foreign currency risk management (continued)
Forward exchange contracts
The Group enters into forward exchange contracts to buy and sell specified amounts of various foreign currencies in the future at a
predetermined exchange rate. The contracts are entered into to manage the Group’s exposure to fluctuations in foreign currency
exchange rates on specific transactions. The contracts are matched by anticipated future cash flows in foreign currencies, primarily
from sales. It is the Group’s policy to enter into forward exchange contracts for all net foreign currency trade or capital items.
Where a relatively short settlement period is involved and risk is minimal, no forward exchange contract is
entered into. There were open forward exchange contracts to the value of R471 826 047 (2013 – R455 298 361) at year end.
The Group does not use derivative financial instruments for speculative purposes.
The following table details the forward foreign currency contracts outstanding at the reporting date:
At 31 December 2014, the Group had contracted to buy the following amounts under forward exchange contracts in respect of
future receivables:
R’000
Average
contract
exchange rate
AUD
116 044
10.0691
EUR
GBP
364 817
1 360
15.9365
17.9926
USD
4 548
11.6005
Foreign currency
Contractual expiry dates
02 January 2015
— 31 March 2016
05 January 2015
— 29 February 2016
7 January 2015
16 January 2015
future receivables:
R’000
Average
contract
exchange rate
AUD
162 799
9.5439
EUR
358 110
14.0236
USD
3 926
10.3311
Foreign currency
124
02 January 2014
— 31 March 2015
03 January 2014
10 January 2014
14.72967
EUR
652
1.5106
USD
4 439
11.6005
future payables:
R’000
Average
contract
exchange rate
DKK
807
1.8442
EUR
1 114
13.7356
CAD
30
9.8328
SEK
1 306
1.5699
USD
7 661
10.3812
GBP
3 154
6.6033
R’000
Hedge accounting applied in respect of foreign currency risk
cash flow hedges
–Fair value of asset/(liability) – foreign currency forward on
exchange contracts
2014
2013
38 479
(11 587)
Foreign currency
31 January 2014
— 15 April 2014
03 January 2014
— 31 January 2014
17 December 2013
— 31 January 2014
03 January 2014
02 January 2014
03 January 2014
The foreign currency contracts have been acquired to hedge the underlying currency risk arising from firm commitments received
from customers for the purchase of goods as well as forecast sales. All cash flows are expected to occur and affect profit or loss
within the next twelve months.
41.7 Interest rate risk management
The Group is exposed to interest rate risk as entities in the Group borrow funds at both fixed and floating interest rates.
The Group’s exposure to interest rate risk on financial liabilities are detailed in the liquidity risk management section.
Interest rate sensitivity
The sensitivity analysis below has been determined based on the exposure to interest rates for non-derivative instruments at the
reporting date. For floating rate liabilities, the analysis is prepared assuming the amount of liability outstanding at the balance date
was outstanding for the whole year.
If interest rates had been 50 basis points higher/lower and all other variables were held constant, the Group’s profit for the year
would decrease/increase by R9 207 695 (2013 – decrease/increase by R3 854 910) in the Group and increase/decrease by R118 407
(2013 – decrease/increase by R166 530) in the Company as a result of their exposure to interest rates on their variable rate borrowings.
OVERVIEW
9 852
AUD
09 January 2015
— 07 August 2015
20 January 2015
— 27 March 2015
09 January 2015
C O R P O R AT E
R’000
GOVERNANCE
Foreign currency
Average
contract
exchange rate
S TAT E M E N T S
future payables:
C O R P O R AT E
2014
ANNUAL FINANCIAL
2014
NOTES (CONTINUED)
GROUP
R’000
2014
COMPANY
2013
2014
2013
41.8 Credit risk management
Credit risk refers to the risk that a counterparty will default on
its contractual obligations resulting in financial loss to the
Group. Financial assets which potentially subject the Group to
concentrations of credit risk consist of cash and receivables.
The Group’s cash is placed with recognised financial institutions. Trade receivables comprise a large, widely spread customer base, avoiding an excessive concentration of risk with a
small number of customers. The Company, prior to advancing
funds to subsidiaries, associates and investments, reviews
through its Investment Committee the entity’s ability to repay
the funds.
41.9 Liquidity risk management
Ultimate responsibility for liquidity risk management rests
with the Board of Directors, which has developed an
appropriate liquidity risk management framework for the
management of the Group’s short, medium and long-term
funding and liquidity management requirements. The Group
manages liquidity risk by maintaining adequate reserves,
banking facilities and reserve borrowing facilities by
continuously monitoring forecast and actual cash flows and
matching the maturity profiles of financial assets and liabilities.
Included below is a listing of additional undrawn facilities to
further reduce liquidity risk.
Unutilised banking facilities
Total banking and loan facilities
Facilities utilised
Interest-bearing borrowings
Less participating preference share not part of facilities
2 429 173
(2 162 284)
(2 185 966)
23 682
221 619
1 322 925
(1 247 139)
(1 247 139)
—
261 213
60 000
(11)
(11)
—
49 538
Unutilised banking facilities including cash and
cash equivalents
488 508
336 999
109 527
Cash and cash equivalents includes R90.3 million (2013 – R91.3 million) held by Lion of Africa which may only be utilised in
insurance activities.
126
50 000
(32 890)
(32 890)
—
2 050
19 160
1 – 5 years
R’000
Over 5 years
R’000
Total
R’000
2014
Assets
Loan to associate company
Participating preference shares held in
investment in associate
Debt securities included in investments
Trade receivables
Other receivables
Reinsurance contracts
25.00
23 511
—
—
23 511
3.6
Interest free
95% of prime
6.37
Interest free
Interest free
Interest free
Bank deposit rates
—
—
—
33 653
476 953
156 848
561 516
221 619
1 474 100
—
—
2 236
66 794
—
—
166 369
—
235 399
2 605
3 869
—
32 929
—
—
—
—
39 403
2 605
3 869
2 236
133 376
476 953
156 848
727 885
221 619
1 748 902
Liabilities
Trade payables
Other payables
Insurance contracts
Bank overdraft
8.18
Interest free
8.56
Interest free
Interest free
Interest free
Prime
95 115
—
100 814
548 646
106 251
732 794
14 815
1 598 435
2 527 639
—
—
—
—
223 695
—
2 751 334
—
22 675
—
—
—
—
—
22 675
2 622 754
22 675
100 814
548 646
106 251
956 489
14 815
4 372 444
2013
Assets
Debt securities included in investments
Interest bearing deposits included in
investments
Trade receivables
Other receivables
Reinsurance contracts
25.00
Prime
95% of prime
Interest free
8.46
—
1 771
—
—
19 458
17 622
—
2 177
—
21 217
—
—
—
3 000
47 150
17 622
1 771
2 177
3 000
87 825
5.58
Interest free
Interest free
Interest free
Bank deposit rates
95 127
529 934
87 797
505 785
261 213
1 501 085
10 496
—
—
161 774
—
213 286
—
—
—
—
—
50 150
105 623
529 934
87 797
667 559
261 213
1 764 521
Liabilities
Trade payables
Other payables
Insurance contracts
Bank overdraft
7.65
Interest free
13.06
Interest free
Interest free
Interest free
Prime
—
—
304 693
575 358
92 731
634 817
49 604
1 657 203
1 137 279
—
—
—
—
168 749
—
1 306 028
13 560
23 099
—
—
—
—
—
36 659
1 150 839
23 099
304 693
575 358
92 731
803 566
49 604
2 999 890
OVERVIEW
Less than
1 year
R’000
C O R P O R AT E
Weighted
average effective
interest rate
%
GOVERNANCE
The Group’s exposure to liquidity and interest rate risk and the effective rates of interest at reporting date are as follows:
S TAT E M E N T S
Liquidity and interest rate risk tables
The following tables detail the Group’s remaining contractual maturity for non-derivative financial liabilities and assets. The liability
tables have been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the liabilities can be repaid and includes both interest and principal cash flows. The asset tables have been drawn up based on the undiscounted contractual maturities of the financial assets including interest that will be earned on those assets except where it is anticipated that the cash flow will occur in a different period.
C O R P O R AT E
2014
ANNUAL FINANCIAL
2014
NOTES (CONTINUED)
41.9 Liquidity risk management (continued)
Liquidity and interest rate risk tables (continued)
The Company’s exposure to liquidity and interest rate risk and the effective rates of interest at reporting date are as follows:
2014
Assets
Participating preference shares held in
investment in associate
Loans to subsidiaries
Other receivables
Weighted
average effective
interest rate
%
Less than
1 year
R’000
1—5 years
R’000
Over 5 years
R’000
Total
R’000
25
23 511
—
—
23 511
3.6
Interest free
Interest free
Interest free
Bank deposit rates
—
—
—
27 779
49 538
100 828
—
—
—
—
—
—
2 605
3 869
209 839
—
—
216 313
2 605
3 869
209 839
27 779
49 538
317 141
Prime less 1%
Interest free
Interest free
Interest free
Prime
—
—
6 129
52 729
11
58 869
17 582
—
—
—
—
17 582
—
520 413
—
—
—
520 413
17 582
520 413
6 129
52 729
11
596 864
25.00
Prime
Interest free
Interest free
Interest free
Bank deposit rates
—
1 771
—
—
19 949
2 050
23 770
17 622
—
—
—
—
—
17 622
—
—
3 000
294 922
—
—
297 922
17 622
1 771
3 000
294 922
19 949
2 050
339 314
Prime less 1%
Interest free
Interest free
Interest free
Prime
—
—
1 803
33 412
32 890
68 105
19 566
—
—
—
—
19 566
—
332 903
—
—
—
332 903
19 566
332 903
1 803
33 412
32 890
420 574
Liabilities
Loans from subsidiaries
Trade payables
Other payables
Bank overdraft
2013
Assets
Loans to subsidiaries
Other receivables
Liabilities
Trade payables
Other payables
Bank overdraft
41.10 Interest rate management
The factors which would be considered in the decision on fixed versus floating interest rates in respect of the Group’s borrowings are:
– the perceived stage in the interest rate cycle
– the nature and characteristics of the borrowings concerned
– the nature of the assets financed by the borrowings in question
Interest rate swap contracts are entered into should conditions be such that it would be advantageous to switch from a fixed to a
variable rate or vice versa. Such contracts would not be entered into for speculative reasons.
128
2013
2014
2013
3 137 702
1 185 648
4 323 350
2 612 104
960 303
3 572 407
57 807
1 129 505
1 187 312
233 435
783 232
1 016 667
41.11 Equity Price Risk
The portfolio of listed equities and equities held through the
subsidiaries which are carried in the statement of financial
position at fair value, has exposure to significant equity price
risk, being the potential loss in market value resulting from an
adverse change in prices. The Group’s holdings are diversified
across more than one company. Material investments within
the portfolio are managed on an individual basis and all buy
and sell decisions are approved by the investment committee.
The primary goal of the Group’s investment strategy is to maximise investment returns without incurring undue market risk.
At 31 December, the exposure to equity price risk resulted
from the financial assets listed below:
Investments
Directly held equities
Indirectly held equities
OVERVIEW
2014
C O R P O R AT E
R’000
COMPANY
GROUP
2014
C O R P O R AT E
41.12 Fair value of financial instruments
GOVERNANCE
If equities had been 1% higher/lower, profit for the year would increase/decrease by R41 853 000 (2013 – R28 860 000) in the
Group and increase/decrease by R9 641 000 (2013 – R8 253 000) in the Company as a result of their exposure to movements in
equity prices.
S TAT E M E N T S
The sensitivity analysis below has been determined based on the exposure to equity price movements from listed and unlisted equities.
ANNUAL FINANCIAL
Equity price risk sensitivity
The estimated net fair values at 31 December 2014 have been determined using available market information and appropriate
valuation methodologies and are not necessarily indicative of the amounts that the Group could realise in the ordinary course of
business. The fair values of financial instruments in both the Group and the Company approximate the amounts reported in the
statements of financial position.
The following methods and assumptions were used by the Company in establishing fair values:
Investments
These investments are valued each 6 months on the basis considered most appropriate to the investment concerned.
The carrying amounts reported in the statements of financial position approximate fair values.
Trade receivables
The carrying value of trade receivables reported in the statements of financial position approximate fair values.
Other receivables
The carrying amounts reported in the statements of financial position
approximate fair values.
Trade and other payables
2014
NOTES (CONTINUED)
41
41.13.
Financial instruments (continued)
Fair value measurements
This note provides information about how the Group determines fair values of various financial assets and financial liabilities.
Fair value of the Group’s financial assets and financial liabilities that are measured on a fair value basis on a recurring basis
Some of the Group’s financial assets and financial liabilities are measured at fair value at the end of each financial reporting
period. The following table gives information about how the fair values of these financial assets and financial liabilities are
determined (in particular, the valuation technique(s) and inputs used).
The directors consider that the carrying amounts of financial assets and financial liabilities not measured at fair value on a recurring basis (but fair value disclosures are required) recognised in the consolidated financial statements approximate their fair values.
Group (R’000)
2014
Derivative financial assets
Listed shares
Unlisted shares and loan
Other investments
Available-for-sale financial assets
Unlisted shares
Unlisted shares
Total
Derivative financial liabilities
2013
Listed shares
Other investments
Unlisted shares
Unlisted shares
Total
130
Level 1
Level 2
Level 3
—
2 560 195
606 162
105 150
1 122 950
—
6 555
—
—
—
5¹
—
1 122 950
2 560 195
612 722
105 150
—
—
3 271 507
—
—
1 129 505
25 265²
2 218¹
27 488
25 265
2 218
4 428 500
—
3 710
—
3 710
Level 1
Level 2
Level 3
Total
—
2 456 503
153 442
68 884
918 535
—
6 149
—
—
—
5¹
—
918 535
2 456 503
159 596
68 884
—
—
2 678 829
—
—
924 684
44 800²
2 154¹
46 959
44 800
2 154
3 650 472
—
2 125
—
Total
2 125
1 122 950
—
6 555
—
—
5¹
1 122 950
55 584
6 560
—
55 584
—
1 129 505
2 218¹
2 223
2 218
1 187 312
—
3 710
—
3 710
Level 1
Level 2
Level 3
Total
—
77 835
153 442
786 264
—
6 149
—
—
5¹
786 264
77 835
159 596
—
231 277
—
792 413
2 154¹
2 159
2 154
1 025 849
—
2 125
—
2 125
The table provided analyses financial instruments that are measured subsequent to initial recognition at fair value, grouped in
Levels 1 to 3 based on the degree to which fair value is observable.
–Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets or
liabilities.
–Level 2 fair value measurements are those derived from inputs other than quoted prices included within Level 1 that are
observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).
Transfer from Level 2 to Level 1
Unlisted shares held in MTN Zakhele were transferred from Level 2 to Level 1 in the current year as this is deemed to be a more
appropriate classification for the asset, following the re-establishment of a trading platform.
–Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that
are not based on observable market data (unobservable inputs).
1. At cost or historical valuation.
2. Discounted cash flow method using a discount rate of 15% over 10 years.
Reconciliation of level 3 fair value measurements
Opening balance
Total gains or losses
– in other comprehensive income
Advances
Disposals
Closing balance
GROUP
COMPANY
2014
2013
46 959
28 250
(19 535)
64
—
18 984
90
(365)
27 488
46 959
2014
2013
2 159
2 434
—
64
—
2 223
OVERVIEW
—
55 584
—
C O R P O R AT E
Total
—
—
(275)
2 159
C O R P O R AT E
Level 3
GOVERNANCE
2013
Listed shares
Unlisted shares
Total
Level 2
S TAT E M E N T S
Level 1
ANNUAL FINANCIAL
Company (R’000)
2014
Listed shares
Unlisted shares
Total
2014
2014
NOTES (CONTINUED)
41
41.14 Risks that arise from insurance contracts
Insurance risk
The Group issues contracts that transfer insurance risk.
Underwriting is the term used to describe the process of transfer of risk from the insured to the insurer in return for payment of an
appropriate consideration, termed premium. This process carries the risk of incorrect or inappropriate assumptions leading to
drafting of incorrect insurance contracts.
The risk under any one insurance contract is the possibility that the insured event occurs and the uncertainty of the amount of the
resulting claim. By the very nature of an insurance contract, this risk is random and therefore unpredictable. Changing risk
parameters and unforeseen factors, such as patterns of crime, economical and geographical circumstances, may result in unexpectedly large claims. These risks are controlled through a system of underwriting mandates and guidelines more thoroughly described
below.
For a portfolio of insurance contracts where the theory of probability is applied to pricing and provisioning, the principal risk that
the Group faces under its insurance contracts is that the actual claims and benefit payments exceed the estimated amount of the
insurance liabilities. This could occur because the frequency or severity of claims and benefits are greater than estimated. Insurance
events are random and the actual number and amount of claims and benefits will vary from year to year.
Experience shows that the larger the portfolio of similar insurance contracts, the smaller the relative variability about the expected
outcome will be. In addition, a more diversified portfolio is less likely to be affected across the board by a change in any subset of
the portfolio.
The various types of insurance contracts, which can be grouped into a number of business classes, that have a material effect on the
amount, timing and uncertainty of future cash flows arising from insurance contracts in the Group are described below:
–Property: Property insurance contracts compensate the Group’s customers for damage suffered to their immovable or movable
properties or for the value of property lost. Customers who undertake commercial activities on their premises could also receive
compensation for the loss of earnings caused by the inability to use the insured properties in their business activities (business
interruption cover).
–Motor: Motor insurance contracts provide indemnity for loss or damage to the insured motor vehicle. This cover is normally on
an all risks basis providing a wide scope of cover following an accident or a theft of the vehicle but the insured can select
restricted forms of cover such as cover for fire and theft only. Legal liabilities arising out of the use or ownership of the motor
vehicle following an accident for damage to third party property or death or injury to a third party are also covered by this class
of business.
–Engineering: Engineering insurance contracts provide indemnity for loss suffered through the use of machinery and equipment
or the erection of buildings or structures. This type of contract includes contract works, removal of support, project delay,
construction plant, machinery breakdown, loss of profits, deterioration of stock, dismantling, transit and erection, works damage
and electronic equipment.
–Marine: Marine insurance contracts provide indemnity for both cargo and hull classes of business. Cargo covers physical loss of
or damage to cargo, with a project delay option. Hull covers loss or damage to pleasure craft or commercial vessels as a result of
accidents and also includes legal liability as a result of the accident.
–Liability: Liability insurance contracts provide indemnity for actual or alleged breach of professional duty arising out of the
insured’s activities, indemnify directors and officers of a company against court compensation and legal defence costs, provide
indemnity for the insured against damages consequent to a personal injury or property damage.
–Miscellaneous: These insurance contracts provide indemnity for any loss or damage in respect of insurance contracts that do not
fall into any of the above classes.
Management of insurance risk
This section summarises these risks and the way the Group manages them. An advanced internal model is applied to ensure appropriate and accurate implementation of acceptable risk levels with regard to underwriting, reserving, credit risk and concentration of
risk within the Group. This model has not changed since the previous year.
132
In the development of the Group’s IT platform for underwriting, many of these controls have been automated in the system. This
allows the Group even tighter control over the business underwritten and will be closely managed through the automatic production of exception reports generated by the system. These exception reports will be subjected to audit by the Group’s Quality
Assurance department.
Reinsurance strategy
The Group has an extensive proportional and non-proportional reinsurance programme, comprising share and surplus treaties and
FAC placements, which are aimed at reducing the volatility of the Group’s underwriting results and protecting its capital. The
Group purchases catastrophe reinsurance to protect itself from losses arising from major catastrophes. The level of catastrophe reinsurance purchased is based on the Group’s maximum possible loss and capital adequacy exercise, which is performed annually.
The Group selects its reinsurers from a panel of international and local reinsurers that meet criteria laid down by the Board of
Directors for their ability to meet their claims obligations in terms of the reinsurance treaties. In setting these criteria the Group
makes use of specialist consulting services of its reinsurance consultants as well as the reports issued by international rating agencies. The Group’s senior management meets with its reinsurance partners on a regular basis to discuss matters relating to the
Group’s underwriting accounts and to keep abreast with developments in the global reinsurance market.
In addition to the overall Group reinsurance treaty programme, individual business units are permitted to purchase additional reinsurance protection or to provide additional reinsurance capacity.
The Group’s reinsurance program is reviewed at least once annually and adjustments are made commensurate with the Group’s
ability to absorb additional risk for its own account.
OVERVIEW
Underwriters and sales staff are given various levels of mandates that specify which risks they may accept, the degree to which the
standard rates may be varied and the levels to which they may commit the Group’s reinsurance facilities. These mandates are set
after taking into account the staff member’s qualifications, seniority and experience in dealing with various insurance risks.
C O R P O R AT E
The Insurance Services Division issues underwriting guides for the use of both internal staff (when policies are issued) and sales
staff to utilise as guides when accepting risks or processing changes to policies already renewed with the Group. The underwriting
guidelines cover all lines of business underwritten by the Group and include such matters as:
–Rating tables;
–Reinsurance risk categories and limits;
–Standard endorsements;
–Acceptance criteria; and
–Details of undesirable risks or risks for which the Group
has no reinsurance facilities.
GOVERNANCE
Underwriting limits are in place to enforce appropriate risk selection criteria. For example, the Group has the right not to renew
individual policies, it can impose deductibles or it can impose special conditions that may require the insured to enforce certain risk
reduction measures (for example a burglar alarm) before it will accept the risk.
S TAT E M E N T S
Underwriting Strategy
The underwriting strategy seeks diversity to ensure a balanced portfolio in terms of type and amount of risk, industry and geography. The underwriting strategy is managed through exercising strict underwriting controls to ensure that the acceptance criteria for
which risks are accepted meet both its underwriting guidelines and fall within its reinsurance acceptance limits.
C O R P O R AT E
2014
ANNUAL FINANCIAL
2014
NOTES (CONTINUED)
41
41.14 Risks that arise from insurance contracts
Concentration of insurance risk and policies mitigating the concentrations
Factors that aggravate insurance risk include lack of risk diversification in terms of type and amount of risk, geographical location
and type of industry covered.
The Group’s insurance risks are well spread throughout South Africa and its exposure in one centre is relatively small and well
within the limitations of its reinsurance treaties for both catastrophes and losses arising from a single event. The Group’s exposure
to extreme losses arising out of concentration of risks is considered remote. Nonetheless, its actual exposure is measured at least
annually using statistics of its actual exposures as determined from the statistics of its live insurance policies in its IT database.
The Group has exposure to most major lines of insurance business with limited exposure to specialised areas of insurance, such as
marine and engineering. This exposure is consistent with the market and the Group’s reinsurance policy limits the losses in any one
class of business.
The above lines of business can be stratified into two groups based on the counterparty, namely commercial and personal. The commercial unit underwrites the risks of enterprises from small businesses to large corporations. The personal unit provides insurance
to the general public in their individual capacities.
The personal lines portfolio is small and well spread and thus the concentration risk is negligible.
The commercial unit does have individual risk representing significant values as well as aggregated sums insured from all risk
situations. The Group implements a conservative reinsurance policy and thus calculates its aggregated values at risk in any one area
or region. It also maintains a check on the highest values at an individual location with an area or region. The Group’s r einsurance
strategy takes these individual and aggregated values into account when purchasing reinsurance facilities to protect the Group’s
reserves in the event of losses emanating from these locations or risks.
Exposure relating to catastrophe events
The Group sets out the total aggregate exposure that it is prepared to accept in certain territories to a range of events such as natural catastrophes. The aggregate position is reviewed annually. The Group uses a number of modelling tools to monitor aggregation
and to simulate catastrophe losses in order to measure the effectiveness of the reinsurance programmes and the net exposure to the
Group.
The Group considers that its most significant exposure would arise in the event of an earthquake in the Gauteng region. This analysis has been performed through identifying key concentration of risks based on different classes of business exposed in the event of
such an incident. The Group’s policies for mitigation of catastrophe risk exposure include the use of both excess and catastrophe
coverage. The effect of such reinsurance arrangements is that the Group should not suffer total net insurance losses of more than
R10 000 000 (2013: R10 000 000) in any one insurance event.
134
Other risks and policies for mitigation of these risks
Insurance companies are exposed to the risk of false, invalid and exaggerated claims.
The Group has the right to reject the payment of a claim where the insured has not complied with any of the conditions specified in
the policy contract or where the claim is fraudulent in some aspect. Insurance contracts also entitle the Group to pursue third
parties for payment of some or all costs (i.e. subrogation). All claims are subject to reasonable investigation to establish that the loss
is indemnifiable and that the quantum of the claim is reasonable and is commensurate with the damage suffered or awarded.
OVERVIEW
2014
C O R P O R AT E
2013
%
2012
%
2011
%
2010
%
Pre 2010
%
610 523 737
580 838 605
457 006 142
564 099 413
448 442 019
445 103 514
3 106 013 430
100.0
47.0
53.0
6.6
46.7
46.7
1.3
6.1
37.0
55.6
0.0
13.3
11.4
34.3
41.0
100.0
100.0
100.0
100.0
100.0
0.3
0.7
2.2
10.3
30.7
55.8
100.0
210 130 247
274 360 968
269 435 745
357 918 076
237 394 918
153 301 333
1 502 541 287
100.0
64.4
35.6
5.2
67.1
27.7
0.8
7.3
54.5
37.4
0.0
27.5
20.3
32.6
19.6
100.0
100.0
100.0
100.0
100.0
0.3
0.2
1.8
11.2
25.0
61.5
100.0
Claims development
The Group is liable for all insured events that occur during the term of the contract, even if the loss is discovered after the end of
the contract term, subject to pre-determined time scales dependent on the nature of the insurance contract. The Group is therefore
exposed to the risk that claims reserves will not be adequate to fund historic claims (run-off risk). To manage run-off risk the
Group takes all reasonable steps to ensure that it has appropriate information regarding its claims exposures and adopts sound
reserving practices. Consequently, the Group has a history of positive claims development, i.e. the reserves created over time
proved to be sufficient to fund the actual claims paid.
C O R P O R AT E
Net
2014
2013
2012
2011
2010
Pre 2010
2014
%
GOVERNANCE
Gross
2014
2013
2012
2011
2010
Pre 2010
Total
R
S TAT E M E N T S
Claims paid in respect of accident year
ANNUAL FINANCIAL
Claims development triangles
The Group employs its own legal team to investigate claims involving third parties and has an internal procurement team to procure
replacement goods on terms that are fair and reasonable to both the Group and the insured. In addition the Group makes use of
external loss adjusters and attorneys for specialist or complex claims.
2014
NOTES (CONTINUED)
COMPANY
R’000
2014
2013
26 542
1 466
10 143
38 151
23 682
1 353
9 650
34 685
42. Related party transactions and directors’ interests
Compensation of key management personnel
The remuneration of executive directors and other key members of management during the
year was as follows:
Short-term benefits
Post-employment benefits
Share-based payments
F Robertson, an executive director of the Company, is the majority shareholder in two companies, acting as short-term insurance
brokers and employee benefits consultants respectively to the Company and certain of its subsidiaries. The services are performed
on a strictly market related arms’ length basis and total fees paid for the services during the year
amounted to R844 345 (2013 – R2 010 703).
The Lion of Africa Insurance Company Ltd owns the majority of the issued units in two collective investment schemes namely,
Lion of Africa – General Equity Fund and Lion of Africa – Real Return Fund, which are consolidated as they are deemed to
constitute special purpose entities and therefore these are related parties.
Brimsure (Pty) Ltd, which held a 30% stake in Aon South Africa (Pty) Ltd and holds a 30% stake in Aon Re Africa (Pty) Ltd,
is jointly controlled by Brimstone (60%) and Commlife Holdings (Pty) Ltd (40%), a company controlled by F Robertson.
Lion of Africa Fund Managers (Pty) Ltd, a wholly-owned subsidiary of Commlife Holdings (Pty) Ltd, is an investment
management company which manages the investment portfolio of Lion of Africa Insurance Company Ltd including its cash
investments.
The balances owing to/by subsidiaries are disclosed in Appendix 1 on page 138.
The balances owing by associate companies are disclosed in Appendix 2 on page 139.
The balances with subsidiaries and associates will be settled by the transfer of funds.
Related party transactions are concluded on an arm’s length basis.
136
2013
2014
2013
—
—
—
—
—
—
—
—
—
—
—
—
—
—
411 475
10 211
1 737
762
92
1 512
3 466
51 439
6 382
1 101
849
114
1 589
1 934
73 715
—
4 800
356
—
—
—
4 704
—
—
—
—
4 624
—
—
Transactions between the company, its subsidiaries and
associates:
Subsidiaries
Dividends received
Dividends paid (treasury shares)– subsidiary
– share trust
Royalties received
Interest received
Interest paid
Management fees received
Associates and Joint Ventures
Dividends received
Management fees refunded
Interest received
Impairment of loan to associate
98 884
(463)
4 894
—
28 286
OVERVIEW
2014
C O R P O R AT E
R’000
COMPANY
GROUP
2014
43. Group borrowing powers
C O R P O R AT E
GOVERNANCE
ANNUAL FINANCIAL
S TAT E M E N T S
In terms of the articles of the Company, borrowings of the Company and its subsidiaries are unlimited, subject to authorisation by
the Board of Directors of the holding company.
2014
SUPPLEMENTARY REPORTS ON INVESTMENTS
as at 31 December 2014
Appendix 1
Held directly
Company
Brimco (Pty) Ltd
Holds investments in Sea Harvest Holdings (Pty) Ltd
Manufacturer and distributor of clothing
Septen Investments (Pty) Ltd
Holds investment in Life Healthcare Group Holdings Limited
Brimstone Properties (Pty) Ltd
Dormant
Brimstone Commodities Trading (Pty) Ltd
Dormant
Brimstone Securities Trading (Pty) Ltd
Dormant
Brimbrands (Pty) Ltd
Dormant
Brimsure (Pty) Ltd
Holds investment in Aon Re Africa (Pty) Ltd
Newshelf 831 (Pty) Ltd
Oceana SPV (Pty) Ltd
Holds investment in Oceana Group Limited
H Investments No 219 (Pty) Ltd
Property owning
Lion of Africa Holdings Company (Pty) Ltd
Holds investment in short-term insurer Lion of Africa Insurance Company Ltd
Newshelf 1063 (RF) (Pty) Ltd
Holds investment in Newshelf 1064 (RF) (Pty) Ltd, Friedshelf 1535 (Pty) Ltd,
Newshelf 1168 (Pty) Ltd, Newshelf 1169 (Pty) Ltd, Friedshelf 1534 (Pty) Ltd
and Newshelf 1269 (Pty) Ltd
Issued share capital
2014
2013
R
R
1
1
30 572 408
30 572 408
1
1
Percentage holding Shares at cost/valuation
2014
2013
2014
2013
%
%
R’000
R’000
100
100
—
—
100
100
32 427
32 427
29 832
29 040
100
100
—
—
(200 909)
(143 161)
Consolidated special purpose entities
Brimstone Investment Corporation Limited Share Trust
The Brimstone Black Executives Investment Trust
The Brimstone General Staff Investment Trust
The Brimstone Broad-Based BEE Trust
95 029
100
100
100
100
—
—
—
—
100
100
100
—
—
—
—
100
100
100
100
—
—
—
—
1
1
100
100
—
—
—
—
100
100
60
60
—
—
15 335
15 335
98
98
258 283
258 283
24
(294 504)
100
100
100
100
39 000
39 000
22 041
22 019
100
100
100
18 646
18 646
(17 582)
(19 566)
1 100
1 100
100
100
—
95 509
19 937
89 934
167 163 234
20 002
100
100
167 163
20
43 024
(18 217)
100
100
100
100
515 519
(2 426)
443 885
(2 426)
(303 108)
(48)
(57 499)
(48)
513 093
441 459
(303 156)
(57 547)
—
—
—
15 335
15 335
2
2
—
—
—
—
17 000
100
100
—
—
—
—
1 000
1 000
58.4
58.1
—
—
—
—
100
100
100
100
—
—
—
—
1 000 000
1 000 000
100
100
—
—
—
—
N$100 000
N$100 000
100
100
—
—
—
—
1
1
100
100
—
—
—
—
1
1
100
100
—
—
—
—
1
1
100
100
—
—
—
—
1
—
100
—
—
—
(25 000)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(4 517)
9 715
—
—
1 973
9 622
—
—
277 010
(394 618)
2013
R’000
518 782
(105 991)
All subsidiaries are incorporated in the Republic of South Africa with the exception of Sea Harvest Corporation of Namibia (Pty) Ltd which is incorporated in Namibia.
—
17 000
2014
R’000
138
1
(171 526)
100
The company’s interest in the aggregate profits and losses after taxation of consolidated subsidiaries was as follows:
Profits
Losses
153 977
100
Less: Amounts written off
Held indirectly
Dormant
Newshelf 1064 (RF) (Pty) Ltd
Holds investment in Oceana Group Limited
Investment holding
Sea Harvest Corporation (Pty) Ltd
Deep sea fishing
Atlantic Trawling (Pty) Ltd
Dormant
Sea Harvest Corporation of Namibia (Pty) Ltd
Dormant
Holds investment in MTN Zakhele
Holds investment in Taste Holdings Limited
Holds investment in Afena Capital (Pty) Ltd
Holds investment in Newshelf 1062 (Pty) Ltd
Net indebtedness
2014
2013
R’000
R’000
2014
28.2
6 768
6 768
9 258
6 347
—
—
—
—
20 899
17 622
31 Mar.
25.0
—
—
—
—
—
—
—
—
—
3 475
—
28 Feb.
20.66
20.66
288
288
(288)
(288)
—
—
—
—
3 000
4 700
7 056
7 056
8 970
6 059
—
—
—
—
27 374
22 322
—
—
—
—
—
—
—
—
—
—
—
—
—
2 236
2 177
—
—
—
—
31 Dec.
18.0
18.0
13 359
13 359
18 431
17 878
3 989
2 981
30 Sept.
20.1
20.1
566 264
566 264
116 474
86 703
12 067
10 849
31 Dec.
49.8
49.8
36 432
36 432
—
—
28 Feb.
31.1
31.1
20 258
48 544
31 Dec.
59.2
—
450 000
—
(22 397) (20 488)
812
(95 955)
1 614
—
(2 368)
—
(58 946)
(2 721)
—
Total associates and joint ventures
held via subsidiaries
1 086 313
664 599
17 365
85 707
13 688
11 109
(58 946)
—
2 236
2 177
TOTAL GROUP
1 093 369
671 655
26 335
91 766
13 688
11 109
(58 946)
—
29 610
24 499
OVERVIEW
28.2
C O R P O R AT E
Indebtedness
2014
2013
R’000
R’000
30 Sept.
Total held by company
HELD INDIRECTLY:
– by subsidiaries:
Aon Re Africa (Pty) Ltd
(Insurance industry)
Oceana Group Limited*
(Food industry )
Vuna Fishing Company (Pty) Ltd
(Fishing and fish processing)
Afena Capital (Pty) Ltd
(Asset management)
(Holds investment in Grindrod Limited)
Share of
non-distributable
Share of
reserves since
distributions since
acquisition
acquisition
2014
2013
2014
2013
R’000
R’000
R’000
R’000
GOVERNANCE
Unlisted
HELD DIRECTLY:
– by Company:
The Scientific Group (Pty) Ltd
(Medical equipment distributors)
South African Enterprise Development
(Pty) Ltd
(Entrepreneurial investments)
Hot Platinum (Pty) Ltd
(Manufacturer of machinery for
jewellery industry)
Shares at
cost/valuation
2014
2013
R’000
R’000
Share of retained
income/(losses)
since acquisition
2014
2013
R’000
R’000
S TAT E M E N T S
Reporting
date
Effective
percentage
holding
2014
2013
%
%
ANNUAL FINANCIAL
Investments in associate companies and joint ventures
C O R P O R AT E
Appendix 2
Valuations are carried out every six months using bases considered appropriate to the underlying investment.
* At 31 December 2014 the fair value of the investment in Oceana Group Ltd. was R2 107.3 million (2013 – R1 647.9 million). 8.5 Million shares held in Newshelf 1064 (Pty) Ltd have been pledged as
stated in note 28. In addition a call option has been granted to Oceana Group Limited and is exercisable should a share cover ratio of two times not be maintained.
2014
SUPPLEMENTARY REPORTS ON INVESTMENTS (CONTINUED)
Appendix 3
Investments
Number of shares/units
2014
2013
Available-for-Sale Assets
Held by Company
Unlisted
African Legends Ltd
Held by Subsidiary
Desert Diamond Fishing (Pty) Ltd
3 075 844
2 829 798
12
12
Total Group
Valuation of shares
2014
2013
R’000
R’000
2 218
2 154
Valuation of loans
2014
2013
R’000
R’000
—
—
Total investment
2014
2013
R’000
R’000
2 218
2 154
25 265
44 800
—
—
25 265
44 800
27 483
46 954
—
—
27 483
46 954
Valuations are carried out every six months using bases
considered appropriate to the underlying investment.
Investments at fair value through profit or loss
Held by Company
Listed
Rex Trueform Clothing Company Limited Ordinary shares
Rex Trueform Clothing Company Limited “N” ordinary shares
African & Overseas Enterprises Limited Ordinary shares
African & Overseas Enterprises Limited “N” ordinary shares
Unlisted
Welkom Yizani Investments Limited
Phuthuma Nathi Investments Limited
Emthunzini BEE Business Partners Trust (Santam)
Galaxy Gold Mining Company Limited
241 962
1 537 254
254 026
2 536 257
242 554
2 646 254
254 026
3 684 257
3 037
19 216
3 048
30 283
2 790
27 786
3 048
44 210
—
—
—
—
—
—
—
—
3 037
19 216
3 048
30 283
2 790
27 786
3 048
44 210
430
—
73 508
16 000 000
430
1 704 916
73 508
16 000 000
5
—
6 555
—
5
153 442
6 149
—
—
—
—
—
—
—
—
—
5
—
6 555
—
5
153 442
6 149
—
—
—
—
—
—
—
204 628
576 644
341 678
172 333
424 119
180 631
—
—
—
—
—
—
204 628
576 644
341 678
172 333
424 119
180 631
1 185 094
1 014 513
—
—
1 185 094
1 014 513
—
—
—
—
—
—
38 850
28 241
1
1
1
1
92 026
2 219 548
60 884
95 251
8 000
—
—
Rights to acquire shares
Old Mutual plc
Nedbank Limited
Tiger Brands
Total Company
Held by Subsidiaries
Listed
Unit trust equity securities
Nedcor Limited
Rex Trueform Clothing Company Limited Ordinary shares
Rex Trueform Clothing Company Limited “N” ordinary shares
African & Overseas Enterprises Limited Ordinary shares
African & Overseas Enterprises Limited “N” ordinary shares
Taste Holdings Limited
Life Healthcare Group Holdings Ltd
Debt securities
Unlisted
Fixed deposit accounts
Money market
MTN Zakhele
Phuthuma Nathi Investments Limited
Rights to acquire shares
MTN Zakhele
—
134 481
100
1 109 100
100
1 148 100
37 754 941
53 021 681
—
—
134 481
100
100
100
100
24 540 099
53 021 681
—
56 143
32 867
1
13 863
1
13 708
120 816
2 267 212
94 450
38 850
28 241
1
1
1
1
92 026
2 219 548
60 884
—
—
—
—
—
—
—
—
—
—
—
56 143
32 867
1
13 863
1
13 708
120 816
2 267 212
94 450
—
—
2 167 945
2 776 569
—
—
—
—
—
10 700
235 222
370 940
95 251
8 000
—
—
—
—
—
—
—
—
—
—
—
10 700
235 222
370 940
—
—
—
132 271
—
—
—
132 271
Total Group
4 401 017
3 689 588
—
—
4 401 017
3 689 588
Total Investments
4 428 500
3 736 542
—
—
4 428 500
3 736 542
A register of investments is available for inspection at the registered office of the Company.
140
2014
Tiger Brands Limited
R204 627 533
R204 627 533
R204 627 533
Repayment terms
A portion of the debt will be settled by dividends and a portion of
performance fees. The balance at the exercise date will be settled
either by sale of certain of the Old Mutual shares or a refinancing
of the debt then outstanding.
Approximate value
– 19.17% volatility
Monte Carlo
1 813 613
R341 678 108
R368.06
7.02%
3.19%
24.17%
31 December 2017
R310 940 483
93.5% of prime n.a.c.m.
R338 771 153
R341 678 108
R346 582 926
Repayment terms
Vendor financing at date of transaction of R255 109 837 bearing
interest at a rate of 85% of prime compounded monthly (and
increasing to 93.5% of prime compounded monthly from 1 April
2012) and repayable from dividends which are split between
servicing the debt and a trickle dividend in the ratio of 85%:15%.
C O R P O R AT E
– 7.8% volatility
Method
Number of option shares
Fair value
Spot price per share
Risk free rate
Dividend yield
Volatility
Exercise date
Debt at reporting date
Interest rate on debt
GOVERNANCE
Approximate value
Black-Scholes
16 954 350
R204 627 533
R34.70
5.9% (naca)
3.0%
12.8%
1 May 2015
R377 954 758
8% compounded semi-annually plus
1.5% on subscription amount
S TAT E M E N T S
Method
Number of option shares
Fair value
Spot price per share
Risk free rate
Dividend yield
Volatility
Exercise date
Debt at reporting date
Interest rate on debt
ANNUAL FINANCIAL
Old Mutual plc
OVERVIEW
Brimstone acquired rights to shares that have been valued as options. The results of the calculations and inputs into the models are set out below:
Valuation of options
C O R P O R AT E
Appendix 4
Nedbank Group Limited
Brimstone’s rights to Nedbank shares, accounted for as options,
have been revalued at year end based on the estimated number
of unencumbered shares Brimstone will retain subsequent to the
exercise by Nedbank of its call option, which is expected to be
exercised by the end of February 2015. The valuation was based
on a closing price of R249.00 per share, up from R210.00 per
share at 31 December 2013.
Repayment terms
At the exercise date, 1 January 2015,, Nedbank Group Limited, in
terms of a call option, will have the right to acquire that number of
shares at the 30 day VWAP to 30 December 2014 that equates to
the notional terminal value.
2014
DIRECTORS’ INTERESTS IN SHARES
Appendix 5
As at 31 December 2014
Direct
Directors
Ordinary shares
MA Brey
LZ Brozin
F Robertson
M Hewu
N Khan
LA Parker
MA Brey
LZ Brozin
F Robertson
M Hewu
N Khan
MK Ndebele
LA Parker
Indirect
Beneficial
NonBeneficial
Beneficial
NonBeneficial
Total
1 299 039
58 714
485 414
103 000
128 136
—
2 074 303
—
—
—
—
—
—
—
3 592 243
1 828 001
4 948 823
—
126 712
403 000
10 898 779
117 664
—
300 000
—
—
—
417 664
5 008 946
1 886 715
5 734 237
103 000
254 848
403 000
13 390 746
414 617
91 756
73 742
212 650
123 227
102 554
—
1 018 546
—
—
—
—
—
—
—
—
16 045 838
13 387 740
14 544 415
—
1 062 039
—
2 103 366
47 143 398
181 028
—
100 000
5 000
—
—
—
286 028
16 641 483
13 479 496
14 718 157
217 650
1 185 266
102 554
2 103 366
48 447 972
As at 31 December 2013
Direct
Directors
Ordinary shares
MA Brey
LZ Brozin
F Robertson
M Hewu
N Khan
LA Parker
MA Brey
LZ Brozin
F Robertson
M Hewu
N Khan
MK Ndebele
LA Parker
Indirect
Beneficial
NonBeneficial
Beneficial
NonBeneficial
Total
1 299 039
58 714
485 414
103 000
128 136
—
2 074 303
—
—
—
—
—
—
—
3 494 543
1 823 997
4 923 883
—
126 712
403 000
10 772 135
65 164
—
300 000
—
—
—
365 164
4 858 746
1 882 711
5 709 297
103 000
254 848
403 000
13 211 602
414 617
91 756
73 742
212 650
123 227
102 554
—
1 018 546
—
—
—
—
—
—
—
—
15 911 898
13 392 650
14 423 875
—
1 062 039
—
2 103 366
46 893 828
238 870
—
100 000
5 000
—
—
—
343 870
16 565 385
13 484 406
14 597 617
217 650
1 185 266
102 554
2 103 366
48 256 244
The following changes in indirect beneficial holdings took place between the end of the financial year and the date of approval of the
annual financial statements:
Ordinary shares
2014
2013
2014
2013
MA Brey
27 700
70 000
153 880
—
LZ Brozin
24 020
—
140 480
—
F Robertson
24 940
—
140 480
—
142
2014
SHAREHOLDING INFORMATION
Public
Directors
Other
Total
1 263
6
—
1 269
99.53%
0.47%
0.00%
100%
No. of shareholders in S.A.
No.
%
2 452
7
5
2 464
99.51%
0.29%
0.20%
100%
12
—
—
12
100.00%
0.00%
0.00%
100%
No. of shareholders
other than in S.A.
No.
23
—
—
23
%
%
100.00%
0.00%
0.00%
100%
Total shareholders
No.
1 275
6
—
1 281
%
99.53%
0.47%
0.00%
100%
Total shareholders
No.
%
2 475
7
5
2 487
99.52%
0.28%
0.20%
100%
Ordinary
Shares
“N” ordinary
Shares
1 700
921
1 700
8 732 972
20.24%
126 362 640
723
1 700
711
1 650
28 688 677
11.67%
424 646 047
3 167
OVERVIEW
Public
Directors
Other
Total
No. of shareholders
other than in S.A.
No.
Ordinary shares
No. of shareholders in S.A.
No.
%
C O R P O R AT E
Shareholder spread
C O R P O R AT E
GOVERNANCE
S TAT E M E N T S
Market price per share (cents)
High
Low
Year-end
Volume of shares traded (number)
Volume of shares traded as a % of issued shares
Value of shares traded (R)
Number of transactions
ANNUAL FINANCIAL
Share trading statistics
2014
SHAREHOLDING INFORMATION (CONTINUED)
Combined ordinary and “N” ordinary shareholdings at 31 December 2014
Major shareholders
The Brimstone Black Executive Investment Trust (treasury shares)
MA Brey (direct and indirect beneficial and non-beneficial)
F Robertson (direct and indirect beneficial and non-beneficial)
LZ Brozin (direct and indirect beneficial and non-beneficial)
Estate late GJ Gerwel (direct and indirect beneficial and non-beneficial)
Ellerine Bros (Pty) Ltd
GEPF Mazi Capital Pty Ltd
36One Hedge Fund
Public vs Non-Public Shareholding
Ordinary Shares
Public shareholders
Non-public shareholders
Directors and associates
Treasury shares
Brimstone Investment Corporation Limited Staff Share Trust
Total
“N” ordinary Shares
Public shareholders
Non-public shareholders
Directors and associates
Treasury shares
Lion of Africa Insurance Company Limited
The Brimstone Black Executives Investment Trust
The Brimstone General Staff Investment Trust
The Brimstone Broad-Based BEE Trust
Brimstone Investment Corporation Limited Staff Share Trust
Total
144
Ordinary
“N” ordinary
Total
% of issued
share capital
—
5 008 946
5 734 237
1 886 715
1 185 804
—
—
—
13 815 702
35 140 000
16 641 483
14 718 157
13 479 496
12 626 186
10 785 000
8 319 183
7 069 316
118 778 821
35 140 000
21 650 429
20 452 394
15 366 211
13 811 990
10 785 000
8 319 183
7 069 316
132 594 523
12.15%
7.49%
7.07%
5.31%
4.78%
3.73%
2.88%
2.45%
45.86%
Number of
shares
% of issued
share capital
29 366 858
68.06
13 390 746
31.04
387 831
43 145 435
0.90
100
Number of
shares
% of issued
share capital
153 945 599
62.61
48 447 972
19.71
497 389
35 140 000
1 500 000
2 500 000
3 835 621
245 866 581
0.20
14.29
0.61
1.02
1.56
100
2014
Size of Holding
1 – 5 000
5 001 – 10 000
10 001 – 100 000
100 001 – 1 000 000
over 1 000 000
Major shareholders
African Monarch 710 Investment Holdings (Pty) Ltd
The Brimstone Black Executive Investment Trust
Ellerine Bros (Pty) Ltd
GEPF Mazi Capital Pty Ltd
36One Hedge Fund
SBSA ITF PSG Flexible Fund
GEPF Equity
Analysis of shareholders
Individuals
Nominee companies or trusts
Public companies
Close corporations and private companies
1
1
1
1
1
5
0.08
0.08
0.08
0.08
0.08
0.40
4 729 456
3 184 479
3 153 291
1 901 400
1 648 100
14 616 726
10.96
7.38
7.31
4.41
3.82
33.88
1 076
98
—
107
1 281
84.00
7.65
0.00
8.35
100
9 383 947
7 434 069
—
26 327 419
43 145 435
21.75
17.23
0.00
61.02
100
Number of
shareholders
1 761
232
328
123
43
2 487
% of total
shareholders
70.81
9.33
13.19
4.94
1.73
100
Number of
shares
2 607 653
1 763 534
11 705 981
39 937 976
189 851 437
245 866 581
% of shares
issued
1.06
0.72
4.76
16.24
77.22
100
1
1
1
1
1
1
1
7
0.04
0.04
0.04
0.04
0.04
0.04
0.04
0.28
50 405 508
35 140 000
10 785 000
8 319 183
7 069 316
5 397 983
5 024 415
122 141 405
20.50
14.29
4.39
3.38
2.88
2.20
2.04
49.68
2 019
315
7
146
2 487
81.18
12.67
0.28
5.87
100
23 224 921
120 909 867
4 645 529
97 086 264
245 866 581
9.45
49.18
1.89
39.49
100
OVERVIEW
% of shares
issued
3.78
2.93
11.23
39.65
42.41
100
Number of
shares
1 630 194
1 266 416
4 845 545
17 106 251
18 297 029
43 145 435
C O R P O R AT E
Analysis of shareholders
Individuals
Nominee companies or trusts
Public companies
Close corporations and private companies
% of total
shareholders
70.81
12.02
12.41
4.06
0.70
100
GOVERNANCE
Major shareholders
African Monarch 710 Investment Holdings (Pty) Ltd
Max Brozin Investment Corp
Segregation GSCO Equity Security Client
The Mushaky Family Trust
Commlife Holdings Pty Ltd
Number of
shareholders
907
154
159
52
9
1 281
S TAT E M E N T S
Size of Holding
1 – 5 000
5 001 – 10 000
10 001 – 100 000
100 001 – 1 000 000
over 1 000 000
ANNUAL FINANCIAL
Ordinary shares
C O R P O R AT E
Number of shareholders
2014
NOTICE OF ANNUAL GENERAL MEETING
Notice is hereby given that the nineteenth annual general meeting
of shareholders of Brimstone will be held at Old Mutual Business
School, Presentation Room, West Campus Building, Jan Smuts
Drive, Pinelands, Cape Town at 19h00, on Monday, 20 April 2015
to conduct the business set out below:
1.To receive, consider and adopt the consolidated and separate
annual financial statements, the Directors’ report, audit and
risk committee report and social and ethics committee report,
for the year ended 31 December 2014.
2.To confirm annual dividend number 14 and a special
dividend, in the amounts recommended by the directors of
30 (thirty) cents per share and 20 (twenty) cents per share
respectively, payable to those shareholders recorded in the
register of the Company on Friday, 20 March 2015.
The dividend will be paid on Monday, 23 March 2015.
3. Ordinary resolution number 1:
Re-election of directors
In terms of the Company’s memorandum of incorporation
(“MOI”), the following directors retire by rotation and, being
eligible, offer themselves for re-election.
3.1 LZ Brozin
3.2 PL Campher
3.3 N Khan
3.4 LA Parker
Each re-election will be put to shareholders in a separate
resolution. A brief CV of each director to be re-elected
appears on page 150 of this integrated report.
Appointment of members of the audit and risk
committee
To approve the appointment of the following members of
the audit and risk committee, each by way of a separate
resolution:
5.1N Khan (Chairman) (subject to his re-election as a
director)
5.2PL Campher (subject to his re-election as a director)
5.3 KR Moloko
5.4 LA Parker
5.5 FD Roman
5. Non-binding resolution number 3:
Remuneration policy
To approve, as a non-binding advisory vote in terms of the
recommendations of the King Report on Governance for
South Africa (“King III”), the remuneration policy of the
Company as set out in the Remuneration Report on pages 56
to 58 of this integrated report.
146
Reappointment of Auditors
To re-appoint Deloitte & Touche (with the designated auditor
being Mr Lester Peter Cotten) as auditors for the ensuing
year.
To place the unissued shares under the directors’ control
“RESOLVED THAT the entire authorised but unissued
ordinary and “N” ordinary share capital of the Company from
time to time be placed under the control of the directors of
the Company until the next annual general meeting, provided
it shall not extend beyond 15 (fifteen) months from the date
of passing of this ordinary resolution; with the authority to
allot and issue all or part thereof in their discretion, subject to
the Companies Act, No 71 of 2008, as amended (“the Act”)
and the JSE Limited (“JSE”) Listings Requirements.”
Approval to issue shares for cash
“RESOLVED THAT the directors of the Company be and
are hereby authorised by way of a general authority, to issue
all or any of the authorised but unissued ordinary and
“N” ordinary shares (“securities”) in the capital of the
Company for cash, as and when they in their discretion deem
fit, subject to the Act, the MOI of the Company, the JSE
Listings Requirements, when applicable and the following
limitations, namely that:
–the securities which are the subject of the issue for cash
must be of a class already in issue, or where this is not
the case, must be limited to such securities or rights that
are convertible into a class already in issue;
–any such issue will be made only to “public shareholders”
as defined in the JSE Listings Requirements and not
related parties, unless the JSE otherwise agrees;
–the number of securities issued for cash shall not in the
aggregate in any one financial year exceed 15% (fifteen
percent) of the Company’s issued share capital of
ordinary and “N” ordinary shares respectively, being an
equivalent of 42 759 824 ordinary shares (excluding
385 611 treasury shares) and 202 391 351 “N” ordinary
shares (excluding 43 475 230 treasury shares) as at the
date of the annual general meeting;
–Any securities issued in terms of this general authority
must be deducted from the initial number of securities
available under this general authority;
–In the event of a sub-division or consolidation of issued
securities during the period of this general authority,
the general authority must be adjusted accordingly to
represent the same allocation ratio;
Ordinary resolution number 6 is required, under the JSE
Listings Requirements, to be passed by achieving a 75%
majority of the votes cast in favour of such resolution by all
members present or represented by proxy and entitled to
vote, at the annual general meeting.
9. Special resolution number 1:
Non-executive directors’ fees
To approve the revised non-executive directors’ fees for the
year ending 31 December 2015 as set out below:
Non-Executive Directors r emuneration 2015
1/1/2015 to
31/12/2015
(approved)
1/1/2015 to
31/12/2015
(revised)
Board (Annual fee)
Chairman
Lead independent director
Member
—
253 000
131 012
—
328 900
170 316
Committees (Per meeting)
Audit committee
Chairman
Member
23 582
13 101
30 657
17 031
19 652
13 101
25 548
17 031
19 652
13 101
25 548
17 031
Investment committee
Chairman
Member
Nominations committee
Chairman
Member
25 548
17 031
Social and ethics committee
Chairman
Member
19 652
13 101
25 548
17 031
10.Special resolution number 2:
Approval to repurchase ordinary and “N” ordinary shares
“RESOLVED THAT, as a general approval contemplated in
Section 48 of the Act, the acquisition by the Company and/or
any subsidiary of the Company, from time to time of the
issued ordinary and “N” ordinary shares (“securities”) of the
Company, upon such terms and conditions and in such
amounts as the directors of the Company may from time to
time determine, but subject to the MOI of the Company, the
provisions of the Act and the JSE Listings Requirements,
where applicable and provided that;
a)the repurchase of securities will be effected through
the main order book operated by the JSE trading system
and done without any prior understanding or arrangement
between the Company and the counter party;
b)this general authority shall only be valid until the
Company’s next annual general meeting, provided that it
shall not extend beyond 15 (fifteen) months from the
date of passing of this special resolution;
c)in determining the price at which the Company’s
securities are to be acquired by the Company in terms of
this general authority, the maximum premium at which
such securities may be acquired will be 10% (ten
percent) of the weighted average of the market price at
which such securities are traded on the JSE, as determined over the 5 (five) trading days immediately
preceding the date of the repurchase of such securities
by the Company;
d)the acquisitions of securities in the aggregate in any one
financial year do not exceed 20% (twenty percent) of the
Company’s issued share capital of each class from the
date of the grant of this general authority;
e)the Company and the Group are in a position to repay
their debts in the ordinary course of business for a
period of 12 months from the Company first acquiring
securities under this general approval;
f)the assets of the Company and the Group, being fairly
valued in accordance with International Financial
Reporting Standards, are in excess of the liabilities of the
Company and the Group for a period of 12 months from
the Company first acquiring securities under this general
approval;
OVERVIEW
19 652
13 101
C O R P O R AT E
Remuneration committee
Chairman
Member
1/1/2015 to
31/12/2015
(revised)
C O R P O R AT E
1/1/2015 to
31/12/2015
(approved)
GOVERNANCE
–this authority be valid until the Company’s next annual
general meeting, provided that it shall not extend beyond
15 (fifteen) months from the date that this authority is given;
–a paid press announcement giving full details, including
the number of securities issued, the average discount to
the weighted average traded price of the securities over
the 30 business days prior to the date that the issue is
agreed in writing and the financial impact will be
published at the time of any issue representing, on a
cumulative basis within 1 (one) financial year, 5%
(five percent) or more of the number of ordinary or
“N” ordinary shares in issue prior to the issue; and
–in determining the price at which an issue of securities
may be made in terms of this authority, the maximum
discount permitted will be 10% (ten percent) of the
weighted average traded price on the JSE of the
relevant class of shares over the 30 (thirty) business days
prior to the date that the price of the issue is determined
or agreed to by the directors of the Company.
S TAT E M E N T S
2014
ANNUAL FINANCIAL
2014
NOTICE OF ANNUAL GENERAL MEETING (CONTINUED)
g)the ordinary capital and reserves of the Company and
the Group are adequate for a period of 12 months from
the Company first acquiring securities under this general
approval;
h)the available working capital is adequate to continue the
operations of the Company and the Group for a period
of 12 months from the Company first acquiring securities
under this general approval;
i)the Company or its subsidiaries will not repurchase
securities during a prohibited period as defined in
paragraph 3.67 of the JSE Listings Requirements unless
they have in place a repurchase programme where the
dates and quantities of securities to be traded during the
relevant period are fixed (not subject to any variation) and
full details of the programme have been disclosed to the
JSE prior to the commencement of the prohibited period;
j)when the Company has cumulatively repurchased 3% of
the initial number of the relevant class of securities and
for each 3% in aggregate of the initial number of that
class acquired thereafter, an announcement will be made;
k)the Company only appoints one agent to effect any
repurchase(s) on its behalf; and
l) prior to entering the market to repurchase the Company’s
shares, a company resolution passing the repurchase will
have been passed in accordance with the requirements of
the Act, stating that the board has applied the solvency
and liquidity test and has r easonably concluded that the
Company will satisfy the solvency and liquidity test
immediately after the repurchase.
The JSE Listings Requirements require the following
additional disclosure for purposes of this general authority,
some of which is disclosed in this report of which this notice
forms part as set out below:
– Major shareholders of Brimstone – page 144
– Share capital of Brimstone – page 99
Material change
There have been no material changes in the affairs or
financial position of Brimstone and its subsidiaries between
31 December 2014 and the date of the integrated report of
which this notice of annual general meeting forms part.
Directors’ responsibility statement
The directors, whose names appear on page 3 of the
integrated report, collectively and individually accept full
responsibility for the accuracy of the information pertaining
to Special resolution number 2 and certify that to the best of
their knowledge and belief there are no facts that have been
omitted which would make any statement false or misleading
and that all reasonable enquiries to ascertain such facts
have been made and that this resolution contains all such
information.
148
Reason for and effect of Special resolution number 2
The reason for and effect of the Special resolution number 2
is to authorise the Company and/or its subsidiaries and trusts
by way of a general authority to acquire its own issued
securities on such terms, conditions and such amounts
determined from time to time by the directors of the
Company, subject to the limitations set out above.
The directors of the Company have no specific intention
to effect the provisions of the Special resolution number 2
but will, however, continually review the Company’s position,
having regard to prevailing circumstances and market
conditions, in considering whether to effect the provisions
of the Special resolution number 2.
General authority for financial assistance in terms of
Section 44 of the Act
“RESOLVED THAT the Company is hereby authorised,
subject to compliance with its MOI and the applicable
provisions of the Act, including, but not limited to, the board
of the Company being satisfied that immediately after
providing the financial assistance, the Company would satisfy
the solvency and liquidity test (as contemplated in section 4 of
the Act) and that the terms under which the financial
assistance is proposed to be given are fair and reasonable to
the Company, to provide direct or indirect financial assistance
by way of loans, guarantees, the provision of security or
otherwise, to any person for the purpose of, or in connection
with, the subscription of any option, or any securities, issued
or to be issued by the Company or a related or inter-related
company, or for the purchase of any securities of the Company
or a related or inter-related company, such authority to endure
for a period of 2 (two) years from the date of this resolution.”
The reason for and effect of, Special resolution number 3 is to
permit the Company to provide direct or indirect financial
assistance in terms of Section 44 of the Act.
General authority for financial assistance in terms of
Section 45 of the Act
“RESOLVED THAT the board of directors of the Company
may, subject to compliance with the requirements of the
Company’s MOI and the applicable provisions of the Act,
including, but not limited to, the board being satisfied that
immediately after providing the financial assistance, the
Company would satisfy the solvency and liquidity test (as
contemplated in section 4 of the Act) and that the terms
under which the financial assistance is proposed to be given
such authority to endure for a period of 2 (two) years from
the date of this resolution.”
The reason for and effect of Special resolution number 4 is
to permit the Company to provide direct or indirect financial
assistance in terms of Section 45 of the Act.
Hand deliveries to: Ground Floor 70 Marshall Street Johannesburg 2001
13.To transact such other business as may be
transacted at an annual general meeting:
T Moodley
Company Secretary
Newlands
9 March 2015
Postal deliveries to:
PO Box 61051
Marshalltown 2107
to be received no later than 17h00 on Thursday,
16 April 2015.
By order of the board
Voting and proxies
OVERVIEW
C O R P O R AT E
Forms of proxy should be lodged with or mailed to
Computershare Investor Services (Pty) Ltd:
The record date in terms of Section 59 of the Act for
shareholders to be recorded on the securities register of the
Company in order to be able to attend, participate and vote
at the annual general meeting is Friday, 10 April 2015 and the
last day to trade in the Company’s shares in order to be
recorded on the securities register of the Company in order
The attached form of proxy is only to be completed by
those shareholders who are:
– holding shares in certificated form; or
– dematerialised with “own name” registration.
All other beneficial owners who have dematerialised their
shares through a Central Securities Depository Participant
(“CSDP”) or broker other than “own name” and who wish to
attend the annual general meeting, must instruct their CSDP
or broker to provide them with a Letter of Representation or
they must provide the CSDP or broker with their voting
instructions in terms of the relevant custody agreement
entered into between them and the CSDP or broker.
C O R P O R AT E
GOVERNANCE
to be able to attend, participate and vote at the annual general
meeting is Wednesday, 1 April 2015.
A member entitled to attend and vote at the annual
general meeting is entitled to appoint a proxy or proxies to
attend, speak and vote in his/her stead. A proxy need not be
a member of the Company. For the convenience of certificated members and dematerialised members with “own name”
registration of the Company, a form of proxy is enclosed
herewith. On a show of hands, every member of the
Company present in person or represented by proxy shall
have one vote only. On a poll, every member of the Company
present in person or represented by proxy shall have
100 votes for every ordinary share and 1 vote for every
“N” ordinary share held in Brimstone by such member.
S TAT E M E N T S
are fair and reasonable to the Company and the JSE Listings
Requirements, each as presently constituted and as amended
from time to time, authorise the Company to provide direct or
indirect financial assistance by way of loans, guarantees, the
provision of security or otherwise to:
–any of its present or future related or inter-related
(as contemplated in section 2 of the Act) companies or
corporations (the “Group”), or to any person related to
any such company or corporation, for any purpose;
–any of its present or future directors or prescribed
officers, or the present or future directors or prescribed
officers of any related or inter-related company, or to a
member of a related or inter-related company, or to any
person related to any such director, prescribed officer or
member, for any purpose; and
–any other person who is a participant in any of the
Company’s or Group’s share or other employee incentive
schemes, for the purpose of, or in connection with, the
subscription of any option, or any securities, issued or to
be issued by the Company or a related or inter-related
company, or for the purchase of any securities of the
Company or a related or inter-related company, where
such financial assistance is provided in terms of any such
scheme that does not satisfy the requirements of
section 97 of the Act,
–in as much as this Section 45 board resolution contemplates that such financial assistance will in the aggregate
exceed one-tenth of one percent of the Company’s net
worth at the date of adoption of such resolution, the
Company hereby provides notice of the Section 45 board
resolution to shareholders of the Company. Notice will
also be provided to any trade union representing any
employees of the Company, to the extent applicable,
2014
ANNUAL FINANCIAL
2014
CURRICULUM VITAE
Lawrie Zev Brozin
Lawrie completed his studies at the University of the Witwatersrand where he obtained his B.Comm B.Acc (CA) SA. He has been part of
the executive management team at Brimstone Investment Corporation Limited since October 1996. Lawrie has played a valuable role in the
growth of Brimstone Investment Corporation Limited. He was appointed Financial Director of Brimstone Investment Corporation Limited
in 2007. Lawrie is a non-executive director of Nando’s Group Holdings Limited and alternate director of The Scientific Group (Pty)
Limited and Sea Harvest Corporation (Pty) Limited. Lawrie also serves on the Board of Governors of various charitable institutions.
Philip Leon Campher
After graduating from Stellenbosch University, Leon joined Old Mutual in the Investment division in 1973. During the thirteen years with
Old Mutual he was an Investment Analyst and Portfolio manager. In 1985 he left Old Mutual to form Syfrets Managed Assets (Pty)
Limited where he was Portfolio Manager and CEO.
In 1993 Leon Campher left Syfrets Managed Assets (Pty) Limited and was one of the founding members of Coronation Holdings
Limited where he was CEO of Coronation Fund Managers (Pty) Limited and Executive Director of Coronation Holdings Limited. During
his time with Coronation he was one of the founders of African Harvest Limited and served as a Director of African Harvest Limited. In
2002 Leon retired due to ill health.
In 2003 Leon was instrumental in the formation of the Investment Management Association South Africa (IMASA) where he served
as CEO until 2008. In 2008 he was instrumental in the formation of the Association for Savings and Investment South Africa (ASISA) and
was appointed CEO on 1 October 2008.
Leon currently holds the following directorships, ASISA, ASISA Academy, International Investment Fund Association, Sun
International Limited, Brimstone Investment Corporation Limited, Equites Property Fund Limited, JSE Clearing Company (Pty) Limited
(SAFCOM) and STRATE Limited.
Nazeem Khan
Nazeem was educated at Athlone High School in the Cape and attended the University of Natal (Durban) where he obtained a B.Sc (QS)
degree. He has been in the profession for the past 35 years and has varied experience in all aspects of property development. He is
currently a director of the national firm Bham Tayob Khan Matunda (BTKM) Quantity Surveyors with offices throughout South Africa.
He serves on the boards of Stonefountain Properties (Pty) Limited, Perthpark Properties (Pty) Limited, Al Akhwan Investment
Corporation (Pty) Limited, Graceful Equity Two (Pty) Limited, and Equites Property Fund Limited. Nazeem also serves as the chairman
of the Brimstone Investment Corporation Limited Audit Committee and is chairman of the Equites Property Fund Limited Remuneration
Committee.
His current memberships include the Association of Arbitrators and the Royal Institution of Chartered Surveyors. He is a Council
Member of the South African Council for Quantity Surveyors, holds the office of Vice President and chairs the finance committee.
Liyaqat Parker
Liyaqat is a founder member and Chief Executive Officer of FPG Group (Pty) Limited, one of the leading privately owned commercial
property funds in the country. He is also a Director of Al Amien Foods CC, FPG Foods (Pty) Limited, a KFC franchisee and a Board
Member of the Friends of the Children’s Hospital Association.
150
2014
I/We................................................................................................................. .......................................................................(name/s in block letters)
of (address)....................................................................................................................................................................................................................
OVERVIEW
For use only by Brimstone ordinary and “N” ordinary certificated shareholders or ordinary and “N” ordinary dematerialised shareholders
with “own name” registration, at the annual general meeting of the Company, to be held at Old Mutual Business School, Presentation
Room, West Campus Building, Jan Smuts Drive, Pinelands, Cape Town at 19h00 on Monday, 20 April 2015 and at any adjournment
thereof.
Dematerialised ordinary and “N” ordinary shareholders holding shares other than with “own name” registration, must inform their
CSDP or broker of their intention to attend the annual general meeting and request their CSDP or broker to issue them with the
necessary Letter of Representation to attend the annual general meeting in person and vote or provide their CSDP or broker with their
voting instructions should they not wish to attend the annual general meeting in person, but who wish to be represented thereat. These
shareholders must not use this form of proxy.
C O R P O R AT E
PROXY FORM
........................................................................................................................................................................................................................................
being a shareholder/shareholders of Brimstone and holding......................................... “N” ordinary shares in the Company, do hereby appoint
1.................................................................................................................... of.................................................................................. or failing him/her
2.................................................................................................................... of.................................................................................. or failing him/her
3. the chairman of the annual general meeting,
as my/our proxy to act for me/us and on my/our behalf at the annual general meeting which will be held for the purpose of considering and,
if deemed fit, passing, with or without modification, the special and ordinary resolutions to be proposed thereat and at any adjournment
thereof; and to vote for and/or against the special and ordinary resolutions and/or abstain from voting in respect of the Brimstone ordinary
shares and “N” ordinary shares registered in my/our name(s), in accordance with the following instructions:
3. Ordinary resolution number 1: Re-election of directors
3.1 LZ Brozin
3.2 PL Campher
3.3 N Khan
3.4 LA Parker
C O R P O R AT E
2. To confirm annual dividend number 14 and the special dividend
GOVERNANCE
1.To receive, consider and adopt the consolidated and separate annual financial statements, the Directors’ report,
audit and risk committee report and social and ethics committee report for the year ended 31 December 2014
S TAT E M E N T S
Number of
“N” ordinary shares*
For
Against Abstain
ANNUAL FINANCIAL
Number of
ordinary shares*
For
Against Abstain
being a shareholder/shareholders of Brimstone and holding................................................................................ ordinary shares in the Company,
5. Ordinary resolution number 2: Appointment of members of the audit and risk committee
5.1 N Khan (Chairman)
5.2 PL Campher
5.3 KR Moloko
5.4 LA Parker
5.5 FD Roman
6. Non-binding resolution 3: Remuneration policy
7. Ordinary resolution number 4: Re-appointment of auditors
8. Ordinary resolution number 5: To place the unissued shares under the directors’ control
9. Ordinary resolution number 6: Approval to issue shares for cash
10. Special resolution number 1: Non-executive directors fees
11. Special resolution number 2: Approval to repurchase ordinary and “N” ordinary shares
12. Special resolution number 3: General authority for financial assistance in terms of Section 44 of the Act
13. Special resolution number 4: General authority for financial assistance in terms of Section 45 of the Act
* Please indicate with an “X” in the appropriate spaces above how you wish your votes to be cast. Unless otherwise instructed, my/our proxy may vote as he/she thinks fit.
Signed at (place)............................................................................................................... (on date) .................................................................... 2015
Please read the notes on the reverse side hereof
...........................................
Shareholder’s
signature
2014
PROXY FORM (CONTINUED)
Important Notes About the Annual General Meeting:
1.The annual general meeting will start promptly at 19h00. Shareholders wishing to attend are advised to be in the presentation
room no later than 18h45. The campus courtyard area will be open from 17h45, from which time refreshments will be served.
2.Shareholders and others attending the annual general meeting are asked to register at the registration desk at the entrance of the
campus courtyard area from 17h20 onwards. Registration of shareholders will close at 18h30.
3.This form of proxy must only be used by certificated ordinary and “N” ordinary shareholders or dematerialised ordinary and
“N” ordinary shareholders who hold dematerialised ordinary and “N” ordinary shares with “own name” registration.
4.Dematerialised ordinary and “N” ordinary shareholders are reminded that the onus is on them to communicate with their CSDP or
broker.
5.Each shareholder is entitled to appoint one or more proxies (who need not be a shareholder(s) of the Company) to attend, speak and,
on a poll, vote in place of that shareholder at the annual general meeting.
6.A shareholder may insert the name of a proxy or the names of two alternative proxies of the shareholder’s choice in the space provided,
with or without deleting “the chairman of the annual general meeting”. The person whose name stands first on the form of proxy and
who is present at the annual general meeting will be entitled to act as proxy to the exclusion of those whose names follow.
7.A shareholder’s instructions to the proxy must be indicated by the insertion of the relevant number of votes exercisable by that shareholder in the appropriate box(es) provided. Failure to comply with the above will be deemed to authorise the chairman of the annual
general meeting, if the chairman is the authorised proxy, to vote in favour of the ordinary and special resolutions at the annual general
meeting, or any other proxy to vote or to abstain from voting at the annual general meeting as he/she deems fit, in respect of all the
shareholder’s votes exercisable thereat.
8.Documentary evidence establishing the authority of a person signing this form of proxy in a representative capacity must be attached
to this form of proxy, unless previously recorded by the Company’s transfer office or waived by the chairman of the annual general
meeting.
9.The chairman of the annual general meeting may reject or accept any form of proxy which is completed and/or received other than in
accordance with these instructions, provided that he is satisfied as to the manner in which a shareholder wishes to vote.
10. Any alterations or corrections to this form of proxy must be initialled by the signatory(ies).
11.The completion and lodging of this form of proxy will not preclude the relevant shareholder from attending the annual general meeting
and speaking and voting in person thereat to the exclusion of any proxy appointed in terms hereof, should such shareholder wish to do
so.
12.A minor must be assisted by his/her parent guardian unless the relevant documents establishing his/her legal capacity are produced or
have been registered by the Company.
13. Where there are joint holders of any shares:
– any one holder may sign this form of proxy;
–the vote(s) of the senior shareholders (for that purpose seniority will be determined by the order in which the names of shareholders appear in the Company’s register of shareholders) who tenders a vote (whether in person or by proxy) will be accepted to
the exclusion of the vote(s) of the other joint shareholder(s).
14.Section 63 (1) of the Companies Act requires that a person wishing to participate in the annual general meeting (including any representative or proxy) must provide reasonably satisfactory identification before they may attend or participate at such annual general
meeting.
Forms of proxy should be lodged with or mailed to Computershare Investor Services (Pty) Ltd:
Hand deliveries to: Ground Floor 70 Marshall Street Johannesburg 2001
Postal deliveries to:
PO Box 61051
Marshalltown 2107
to be received no later than 17h00 on Thursday, 16 April 2015.
152
T H I S I N T E G R AT E D R E P O RT I S P R I N T E D O N C O C O O N O F F S E T.
100% RECYCLED AND 100% FSC CERTIFIED.
D E S I G N A N D L AY O U T: F R E S H I D E N T I T Y
Boundary Terraces, 1 Mariendahl Lane,
Newlands 7700, PO Box 44580, Claremont 7735
www.brimstone.co.za
BrimstoneInvestment
BrimstoneLTD