2015 Integrated Report

Transcription

1995 – 2015
20
YEARS
I N T E G R AT E D R E P O RT 2 0 1 5
MISSION STATEMENT
BRIMSTONE INVESTMENT C
ORPORATION LIMITED
SEEKS TO BE PROFITABLE, EMPOWERING AND
TO HAVE A POSITIVE SOCIAL IMPACT ON THE
BUSINESSES AND THE INDIVIDUALS WITH WHOM
IT IS INVOLVED, I NCLUDING SHAREHOLDERS,
EMPLOYEES, SUPPLIERS, CUSTOMERS
AND THE GREATER COMMUNITY.
ABOUT THIS REPORT
Report Profile
This report is for the year ended 31 December
2015. This is the seventh integrated 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 ([email protected]),
Michael O’Dea ([email protected])
or Tiloshani Moodley
([email protected]) at
the e-mail addresses provided or telephone number +27 21 683 1444.
Report Scope and Boundary
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. House of Monatic,
Lion of Africa and Sea Harvest. These
subsidiaries are unlisted and are operated and
managed as independent entities with autonomous boards of directors.
Materiality
In keeping with our mission statement, we
focus on material aspects that impact our
ability to be profitable, empowering and have
a positive social impact in the c ommunities in
which we operate. Material aspects are
defined as our material issues and any
significant developments that would influence
an assessment of Brimstone’s performance or
opportunities. In achieving our mission, various
capitals are consumed.
Primary Reporting Framework
This report is prepared under the
guidance of the International Integrated
Reporting <IR> Framework which has
been adopted by the Board.
Independent Assurance
Independent assurance and assessment has
been provided over our financial and nonfinancial information presented in this report.
Deloitte & Touche as our external auditors has
issued an unqualified audit opinion on our
consolidated and separate annual financial
statements. In addition, Deloitte & Touche has
performed an a udit-readiness assessment of
selected non-financial information as
presented. Empowerdex has issued certificates
verifying the B-BBEE ratings presented.
Report Approval
The Board believes that the Integrated
Annual Report has been prepared in
accordance with best practice, appropriately
addresses material aspects of Brimstone’s
business and is a fair representation of the
integrated performance of the Group.
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 S I L K .
1 0 0 % R E C Y C L E D ( P C W ) / F S C TM 1 0 0 % R E C Y C L E D C E R T I F I E D .
I N T E G R AT E D R E P O RT
2015
OUR BUSINESS
Brimstone is a black controlled and managed investment c ompany incorporated
and domiciled in the Republic of South Africa, e
mploying in excess of 3 500
employees in its s ubsidiaries and in excess of 24 000 in its associates and
investments. Brimstone seeks to achieve above average returns for its shareholders
by investing in wealth creating businesses and entering into s trategic alliances to
which it contributes capital, innovative ideas, m
anagement expertise, impeccable
empowerment credentials and a v
alues driven corporate identity.
CONTENTS
OUR HISTORY
Salient Financial Highlights. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Five Year Financial Review . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
20 Year Overview. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
OUR BUSINESS
Our Business Model. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
External Factors Impacting Our Business Model. . . . . . . . . 10
Managing Our Material Risks. . . . . . . . . . . . . . . . . . . . . . . . . . . 12
GOVERNANCE
Governance Report. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Social and Ethics Committee Report. . . . . . . . . . . . . . . . . . . 51
Remuneration Report. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Audit and Risk Committee Report . . . . . . . . . . . . . . . . . . . . . 55
AUDITED ANNUAL FINANCIAL
STATEMENTS
Contents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
GOVERNANCE
ABOUT THIS REPORT . . . . INSIDE FRONT COVER
OUR HISTORY
CORPORATE PROFILE
Notes to the Annual Financial Statements. . . . . . . . . . . . . . 66
Shareholding Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . 138
Team Brimstone. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Chairman’s Review. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Group Profile. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Executive Directors’ Report. . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Notice of Annual General Meeting . . . . . . . . . . . . . . . . . . . . 141
Curriculum Vitae. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 145
Corporate Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 146
Proxy Form. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 147
Intrinsic Net Asset Value Report. . . . . . . . . . . . . . . . . . . . . . . 27
Corporate Social Initiatives. . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Our People’s Stories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Subsidiary Reports. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
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
ANNUAL FINANCIAL STATEMENTS
Board of Directors. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
2015
OUR HISTORY
OUR BUSINESS
BRIMSTONE INVESTMENT
C ORPORATION LIMITED
GOVERNANCE
GROUP STRUCTURE
2
2015
OUR HISTORY
Sea Harvest
Lion of Africa Insurance
Shareholding: 100%
Number of employees: 144
GOVERNANCE
A schematic representation
of Brimstone and its operating
subsidiaries, including
information regarding their
number of employees and
ownership interest. Only
summarised disclosures
relating to the profitability,
empowerment and positive
social impact of Brimstone’s
operating subsidiaries are
provided in this report.
OUR BUSINESS
Shareholding: 58.44%
Number of employees: 2 545
House of Monatic
Shareholding: 100%
Number of employees: 841
Associates,
Joint Ventures,
Investments, and
Option Investments
Refer to pages 22 to 23 for a detailed Group profile
3
2015
SALIENT FINANCIAL HIGHLIGHTS
for the year ended 31 December 2015
2015
R’000
OUR HISTORY
2 208 137
185 743
(724 541)
7 652 595
Revenue
Operating Profit
Headline (Loss)/Earnings
Total Assets
2014
%
Change
2 221 054
101 858
286 238
7 933 066
(1)
82
(353)
(4)
OUR BUSINESS
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)
245 392
242 371
244 919
245 151
—
(1)
Performance per share (cents)
Net Asset Value
(295.3)
1 044.0
116.9
1 356.3
(353)
(23)
12 months
ended
31 December
2014
12 months
ended
31 December
2013
12 months
ended
31 December
2012
12 months
ended
31 December
2011
FIVE YEAR FINANCIAL REVIEW
12 months
ended
31 December
2015
GOVERNANCE
Operating results (R’000)
Revenue
Operating Profit
2 208 137
185 743
(724 541)
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
Financial Position (R’000)
Total Assets
Net Assets
7 652 595
2 530 310
7 933 066
3 324 984
6 799 593
3 237 646
5 725 464
2 814 883
4 604 804
1 998 752
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
Performance per share (cents)
Dividend
Special dividend
Net Asset Value (NAV)
Intrinsic Net Asset Value (INAV)
(295.3)
35.0
—
1 044.0
1 741.4
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)
245 392 252
242 370 966
1 350
1 270
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
Market capitalisation: Ordinary shares (R’000)*
Market capitalisation: “N” Ordinary shares (R’000)*
Total (R’000)
523 861
2 585 294
3 109 155
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
*Net of treasury shares
4
REVENUE
OPERATING PROFIT
R’000
200 000
2 500 000
185 743
2 208 137
OUR HISTORY
2 221 054
2 000 000
2 086 376
1 867 915
150 000
1 946 472
132 623
R’000
1 500 000
R’000
2015
1 000 000
131 038
100 000
101 858
64 386
50 000
500 000
0
2011
2012
2013
2014
2011
2015
TOTAL ASSETS
2012
2013
2014
NAV PER SHARE
1 500
8 000 000
7 933 066
7 652 595
7 000 000
1 324.0
6 799 593
1 356.3
1 200
6 000 000
1 153.1
5 725 464
1 044.0
900
4 604 804
CENTS
R’000
5 000 000
4 000 000
2015
OUR BUSINESS
0
3 000 000
819.6
600
2 000 000
GOVERNANCE
300
1 000 000
0
0
2012
2013
2014
2015
2011
INAV PER SHARE
2012
2013
2015
MARKET CAPITALISATION
5 000 000
1 979.4
2 000
1 741.4
1 708.8
4 000 000
1 500
2014
2011
4 066 374
1 473.7
3 423 436
1 000
3 109 155
2 887 140
R’000
CENTS
3 000 000
981.0
2 000 000
2 076 858
500
1 000 000
0
0
2011
2012
2013
2014
2015
2011
2012
2013
2014
2015
5
2015
20 YEAR REVIEW
OUR BUSINESS
1996
Incorporated
in October
Raised R13m
from shareholders
Restructure
of share
capital
Raised R85m Paid back
in various
150cps to all
share issues
shareholders
Total investments
R17.4m
First AGM
held
Asset base
R300m
Raised R45m
from previously disadvantaged
shareholders
Sold stake
in Norwich
at profit of
R21m
Raised initial
capital of
R3m from
community
shareholders
Acquired
stakes in
Plessey
Cellular, KFM
Radio and
Norwich
Holdings
Raised
R104m from
institutions
1998
Acquired
House of
Monatic
1999
Acquired
30% of Lion
of Africa
Prof Jakes
Gerwel
appointed as
Chairman of
board
Listed on JSE
2000
2001
Acquired
Received
stake in
empowerPeoples Bank ment deal
of the year
Sold stake in award for
KFM Radio
Peoples Bank
Started
Disposed
BrimEquity,
of property
a JV with
investments
Coronation
Capital
Acquisition
of further
shares in Sea
Harvest
Market
capitalisation drops to
below R40m
Sold off noncore assets
raising R62m
GOVERNANCE
Acquired
stake in Sea
Harvest
2002
Declared
maiden
dividend
of 4cps
2003
2004
200
165
155
170
96
105
137
120
64
80
58
56
42
40
32
32
34
29
55
55
60
60
52
50
1995
Acquired
stake in
Oceana for
R7.5m
1997
75
75
140
125
BRN
Share
Price
(cents)
380
377
580
475
OUR HISTORY
BRT
Share
Price
(cents)
2005
Disposed
of stake
in Nandos
Group
Acquired
stakes in Old
Mutual and
Nedbank
Acquired
25% in Lenco
Holdings for
R52m
Acquired 18%
stake in Life
Healthcare
Clawback
offer of
R110m
Doubled
stake in Sea
Harvest to
21.52% for
R85.3m
Specific
share repurchase
Paid maiden
dividend of
4cps
Acquired
stake in
Nandos
Group
Special Dividend (cents)
150
Ordinary Dividend (cents)
6
4
8
10
1 350
1 270
1 600
1 495
1 700
1 650
1 500
1 525
1 400
1 400
1 125
1 195
990
984
1 000
2008
2009
2010
Acquired
a further
10% stake in
Oceana for
R176m
Sold Lenco
stake for
R203m
10 years on
the JSE
Increased
stake in Sea
Harvest to
55.7%
Unbundled
Life
Healthcare to
shareholders
Increased
stake in Lion
of Africa to
74%
Acquisition
of remaining
26% of Lion
of Africa
Acquired
option to
subscribe for
1% of Tiger
Brands
Acquired
MTN Zakhele
shares
2011
Increased
stake in
Scientific
Group to
28.2%
Acquired
further 8.5m
shares in
Oceana for
R382m
OUR HISTORY
2012
2013
2014
Acquired
Total assets
12.3% of Taste increase by
Holdings
R1.1bn
Acquired
4.97% of
Grindrod
Disposed
of 4.5m
shares in Life
Healthcare
realising
R140m
Acquired
further 1.16m
MTN Zakhele
shares
Acquired
further 1.1m
Phuthuma
Nathi shares
Acquired
25.1% of
Afena Capital
2015
2016
Subscribed
for additional
2.8m shares
in Oceana
rights offer
OUR BUSINESS
2007
Increased
stake in Life
Healthcare to
21.9%
820
870
725
760
2006
Acquired
Acquired 18% Phuthami
stake in Aon Nathi shares
Re Africa
2015
510
450
400
400
510
560
530
810
780
865
670
850
779
725
685
600
490
1 125
1 125
1 350
1 375
Acquired
further 19.7m
shares in Taste
Holdings
Old Mutual
and Nedbank
transactions
matured
Disposed of
investment
in Scientific
Group at
a profit of
R44.8m
GOVERNANCE
Increased
shareholding
in Grindrod
to effective
6.62%
Acquired
further 1.96m
Phuthuma
Nathi shares
12
16
32
24
32
15
18
25
10
20
30
30
Acquired 10%
of Equites for
R350m
35
7
2015
OUR BUSINESS MODEL
OUR HISTORY
KEY INPUTS
HUMAN CAPITAL
– Market sensing investment team
– Strong and committed leadership and back office
– Professional service providers
SOCIAL AND RELATIONSHIP CAPITAL
OUR BUSINESS
–
–
–
–
–
Business networks
Unique and broad local shareholder profile
Long-term investment focus
Proven track record of successful partnering
Strong BEE credentials
INTELLECTUAL CAPITAL
–
–
–
–
Track record of adding value
Reputation for fair and ethical business practices
Balance sheet management expertise
Optimisation of financial capital
FINANCIAL CAPITAL
GOVERNANCE
–
–
–
–
Debt and equity funding
Vendor funding
Reinvestment of retained earnings
Available borrowing facilities
OUR
ACTIVITIES
IDENTIFY INVESTMENT OPPORTUNITIES
– Leveraging networks
– Researching publicly available information
–Approaches from investment banks and corporate
finance houses
–Approaches from businesses seeking BEE partner
–Restricted BEE equity ownership schemes
RIGOROUS EVALUATION OF OPPORTUNITIES
–Preferred sectors
–Good growth potential
–Strong cash flows and record of profitability
–Minimum hurdle rates met, including Positive Social Impact
–Minimise discount to INAV
–Listed vs unlisted and control vs non-control
–Ethical, competent and like-minded management team
–Board representation required where possible
ROBUST NEGOTIATION AND CONSIDER SOURCES
OF FUNDS
–Robust negotiation for the best terms
–Optimal funding and investment holding structure
–Involving necessary specialists in process
–Approvals framework adhered to
MONITORING INVESTMENT PERFORMANCE
–Board representation and committee involvement
–Contribution of management expertise to investee
–Providing strategic insight to investee
–Dedicated executives assigned to subsidiaries
–Regular review of performance
–Robust discussions with investee
8
2015
OUTPUT
OUR
BUSINESS
CONTEXT
OUR HISTORY
Financial returns
EXTERNAL
FACTORS
1 Lion of Africa profitability
2 Commodity price volatility
3Racial and gender profile of the
professional team
4Investment concentration in highly
regulated industries
5 Increase in tax rate and tax burden
6Sustained market shocks’ impact
on market variables
7Brimstone is a shareholder of
reference in some businesses
8Quality and succession plan
of management
9Potential loss of the
entrepreneurial culture/risk
appetite at Brimstone
10Compliance with ever-changing
legislation
Interest paid to financiers
3 557
35 cents per share
Total workforce in Group
Dividends declared to shareholders
R2 029 million
R2 143 million
Paid to employees and suppliers
Reinvested
R3 million
R4 229 million
CSI spend
Intrinsic Net Asset Value
OUR BUSINESS
Taxes paid to SARS
GOVERNANCE
OUR MATERIAL RISKS
KEY OUTCOMES
R174 million
R78 million
–Government’s revision of the
B-BBEE Codes of Good Practice
–Government’s Black Industrialist’s
Programme
–Macro-economic factors on
South African economy
–Increased volatility of equity
market
VALUE
DELIVERED
GOVERNANCE
9
2015
OUR HISTORY
OUR BUSINESS
GOVERNANCE
BRIMSTONE
IS WELL
POSITIONED TO
PURSUE VALUE
ACCRETIVE
DEALS IN THE
QUALIFYING
SECTORS.
Revision of the B-BBEE
Codes of Good Practice
Black Industrialist’s
Programme
Macro-Economic Factors
on South African Economy
Increased Volatility
of Equity Market
10
2015
EXTERNAL FACTORS IMPACTING OUR BUSINESS MODEL
The Broad-Based Black Economic Empowerment (B-BBEE) Amendment Act 2013 (“the Act”) was proclaimed into law on 24 October 2014 and
came into effect on 1 May 2015. The Act has significant implications for businesses.
OUR HISTORY
One of the consequences of the Act is that all actions that are not aligned to the letter of the Codes of Good Practice and the Sector Codes are
considered a punishable offence. A company may be fined up to 10% of its annual turnover.
The amended Codes are expected to significantly reduce current compliance levels of companies by two to three levels. The revisions identify
priority elements on which companies should concentrate: ownership, skills development and enterprise and supplier development. Failure to
comply with a 40% sub-minimum in any of these p
riority elements leads to an automatic reduction of one level in a company’s contribution
level. The procurement element is heavily weighted towards procuring from black-owned businesses as opposed to the highest-rated
businesses. As a result, Empowerdex has noted a trend of companies w
orking on new ownership transactions to ensure that they become
black-owned and thus be counted in the procurement scorecards of their c lients.
OUR BUSINESS
Brimstone with its strong black o
wnership credentials of more than 55% black economic interest and its 20 year track record of deal-making
is well placed to:
–partner with companies looking for a B-BBEE partner; and
–access funding for deals as banks and lending institutions are p
rioritising the funding of B-BBEE compliant companies.
The Black Industrialist’s Scheme offers a cost-sharing grant, ranging from 30% to 50%, to approved entities to a m
aximum of R50 million.
The quantum of the grant will depend on the level of black ownership and management c ontrol, the economic benefit of the project and
the project value.
In conventional terms, the concept of Black Industrialist’s refers to black p
eople directly involved in the o
rigination, creation, significant
wnership, management and operation of industrial enterprises that derive value from the m
o
anufacturing of goods and services on a large
scale; acting to unlock the p
roductive potential of our country’s capital assets for massive employment locally. The following are important
elements of being an “industrialist”:
–Significant influence in an enterprise or industry;
–Control of an enterprise through shareholding;
–Board and executive management control; and
–Production of products (goods and or services) with significant wide use.
GOVERNANCE
The term Black Industrialist, in a g
eneral sense refers to black South Africans who own and, through significant s hareholding, control an
nterprise whose products are significantly used and have significant impact on decent employment and create broad-based economic
e
opportunities. Economic Development Minister Ebrahim Patel announced in parliament in May 2015 that the Independent Development
Corporation would set aside R23 billion to fund the Black Industrialist’s Programme over the next five years.
Brimstone is well positioned to pursue value accretive deals in the qualifying sectors.
Economic activity in Sub-Saharan Africa decelerated from 4.6% in 2014 to 3.4% in 2015, the weakest performance since 2009, due to a
combination of external shocks and domestic constraints. In South Africa, the economy expanded by 1.3% in 2015 compared with 1.5% in 2014.
Power supply bottlenecks, compounded by a severe drought and difficult labour r elations, weighed h
eavily on growth.
Consumer price inflation remained moderate in South Africa, however, the weakness of the currency contributed to higher inflation. The SARB
raised interest rates by 25 basis points in November 2015 and another 50 basis points in January 2016 due to concerns about inflation.
The outlook for 2016 is that growth is expected to remain weak in South Africa, as inadequate power supply, low b
usiness confidence, difficult
labour relations and policy tightening slow activity.
While Brimstone’s subsidiaries and affiliates which are importers of raw materials are negatively impacted by the weak Rand, those subsidiaries
and affiliates exporting product and operating in foreign geographies are well positioned to cope with the weak commodity price cycle and
exchange rates. Where appropriate, foreign currency risk exposure is managed by way of forward cover. Higher interest rates negatively impact
the Group due to the level of interest-bearing borrowings.
Brimstone has s ignificant exposure to investments in listed companies. Consequently, f luctuations in the market price of shares result in
significant volatility in the income s tatement.
11
2015
MANAGING OUR MATERIAL RISKS
TOP 10 MATERIAL RISKS
(BY RESIDUAL RISK EXPOSURE)
HEAT MAPS
Catastrophic
6
Critical
7
1
Lion of Africa profitability
2
Commodity price volatility
3
Racial and gender p
rofile of
professional team
4
Investment concentration in highly
regulated industries
5
Increase in tax rate and tax burden
6
Sustained market shocks’ impact
on market variables
7
Brimstone is a shareholder of reference
in some businesses
8
Quality and succession plan of
management
9
Potential loss of the entrepreneurial
culture/risk appetite at Brimstone
Minor
Significant
OUR BUSINESS
1
8
2 3 4
9 10
5
Serious
IMPACT
OUR HISTORY
Inherent Risk Exposure
Rare
Unlikely
Possible
Likely
Almost certain
LIKELIHOOD
Residual Risk Exposure
Extreme
GOVERNANCE
Moderate
4 5
6
9
7
2
3
Low
10
8
Insignificant
INHERENT RISK EXPOSURE
High
1
Very good
Good
Satisfactory
Needs
improvement
Unsatisfactory
CONTROL EFFECTIVENESS
12
10
Compliance with ever-changing
legislation
–Significant losses incurred since the 2013 financial year
–Inadequate statutory solvency levels
–Further capitalise business
–Discontinue unprofitable business lines
–Form strategic alliance with a technical partner
–Replace management team and dedicate a Brimstone executive
to oversee remediation and transition
–Review and implement new control disciplines
–Develop and implement a new client acceptance and retention
programme
–Certain investments are significantly impacted by volatility
in commodity prices resulting in significant revaluations
–Continuously monitor debt covenants in respect of investments
negatively impacted by a fall in commodity prices
–Need to increase diversity of professional team in terms
of race and gender
–Appointment of female executive team member to the board of
subsidiary
–Appointment of suitably qualified employment equity candidates
–Group has interests in the fishing and insurance industries
which are subject to strict regulation
–Monitor policy and legislative changes, and engage actively with
relevant authorities on policy and legislative framework
–Geographic diversification of sources of revenue
–Increased CGT and other tax rates
–Consider impact of announced changes in tax rates on Group
in consultation with relevant experts
–Significant investments in listed companies exposes Group
to market volatility
–Market conditions in relation to interest rates and exchange
rates impacting negatively on subsidiaries
–Increase in interest rates driving up cost of capital
–Determine optimal mix of investments
–Increase exposure to unlisted investments
–Reduce debt where possible
–Monitor compliance with foreign exchange hedging policies
–Strategic preference for minority stakes in key investments
however, Brimstone has due to changing circumstances
become the majority shareholder
–Conduct of subsidiaries may negatively impact on Brimstone’s
reputation
–Continuous engagement with investee companies
–Avoid controlling stakes going forward and consider divesting from
controlling stakes
–Subsidiaries are very closely related to the Brimstone brand,
consequently any reputational damage impacts Brimstone
directly
–Succession planning for key management at subsidiaries
–Brimstone founding members and leadership retiring in a few
years, having developed significant business relationships over
the years
–Brimstone executive responsible for the subsidiary, together with
the subsidiary board to prevent reputational damage and ensure
appropriate staff development for succession
–Increased involvement of executive team in decision-making and
institutionalisation of relationships
–Succession planning to be a standing item on the remuneration
committee agenda
–Investment decision-making process is time consuming and
rigorous, which may result in the loss of profitable deals
–Open communication by leadership of the need to maintain the
entrepreneurial culture
–Consultative but agile decision-making process
–Increased cost of compliance with legislation relative to size
of the business
–Potential impact of revised B-BBEE Act and Codes on
Brimstone’s B-BBEE status
–Appointment of Compliance/Risk Officer
–Consultation with professional service providers
OUR BUSINESS
RESPONSE MEASURES
GOVERNANCE
RISK CONTEXT
OUR HISTORY
2015
13
2015
BOARD OF DIRECTORS
Executive directors
OUR HISTORY
OUR BUSINESS
GOVERNANCE
F Robertson
MA Brey
LZ Brozin
Executive Chairman
Chief Executive Officer
Financial Director
ength of service with the Company: 20 years
L
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
and Novus Holdings Ltd.
L
Directorships: Non-executive chairman of Oceana
Group Ltd; Life Healthcare Group Holdings Ltd and
serves on the boards of Lion of Africa Insurance
Company Ltd; Aon Re Africa (Pty) Ltd; House of
Monatic (Pty) Ltd and International Frontier
Technologies SOC Ltd.
L
Directorships: Nandos Group Holdings Ltd and
Sea Harvest Holdings (Pty) Ltd.
14
2015
PL Campher
MJT Hewu
N Khan
KR Moloko
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
and JSE Clear (SARCOM).
15 September 1997
Qualification: BCom(Hons); BPhil(Hons)
Directorships: Kayamnandi Investments
and Onyx Financial Services.
1 November 1995
Qualifications: BSc(QS); MAQS; AAArb
Directorships: Stonefountain Properties
(Pty) Ltd; Perthpark Properties (Pty) Ltd;
BTKM Inc; Proman Project Management
Services (Pty) Ltd; Business Park
Development Company (Pty) Ltd and
Equites Property Fund Ltd.
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
and Ikamva Labantu Charitable Trust.
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) and Anglican
Diocese of Cape Town (Lay Canon
and Chancellor).
1 November 1995
Directorships: FPG Group (Pty) Ltd;
FPG Investments (Pty) Ltd;
FPG Foods (Pty) Ltd; Suburban
Cigarette Distributors (Pty) Ltd;
Al Amien Foods (Pty) Ltd and is a member
of The Friends of the Children’s Hospital
26 March 2008
Qualifications: BA; Post Graduate
Secondary Teacher’s Diploma
Directorship: Direng Investment
Holdings; Umlingo (Pty) Ltd and Distinct
Few (Pty) Ltd.
GOVERNANCE
Lead Independent Director OUR BUSINESS
OUR HISTORY
Independent non-executive directors
15
2015
TEAM BRIMSTONE
OUR HISTORY
Nazeema Jogee
Takula Tapela
Tiloshani Moodley
Shameemah Hamit
Mike O’Dea
Sabira Dhansay
Mvikeli Hlope
Patience Sibanda
Nisaar Pangarker
Pinkie Njani
Lorraine Ramgopaul
OUR BUSINESS
Virginia Feleza
GOVERNANCE
16
2015
OUR HISTORY
Muhammad Brey
Lumka Mangesi
Iqbal Khan
Geoff Fortuin
Fatima Allie
Gerhard Kotze
Jeanette Mosia
Elke Visagie
Sisa Ralarala
Tamlyn Brink
Sebastian Patel
GOVERNANCE
OUR BUSINESS
Connie Vanda
17
2015
CHAIRMAN’S REVIEW
OUR HISTORY
Fred Robertson
Executive Chairman
OUR BUSINESS
GOVERNANCE
“Brimstone’s purpose is enshrined in a philosophy
based on three tenets. We aim to be profitable,
empowering and to have a positive social impact
on society. In a period of extreme uncertainty on
various fronts including economic, social, political,
technological and the natural environment it
becomes more challenging to deliver on this
philosophy.
A track record of delivery to stakeholders over a twenty year period
is certainly a major feat for a company that was created from grassroots in 1995 on the Cape Flats. When our first transaction, a
R7.5million investment in the Oceana Group, was concluded, little did
we imagine that this investment would be an anchor of our
investment portfolio twenty years later. Today Oceana is our single
largest investment with gross value in excess of R2 billion. By
comparison the purchase price of Oceana was 275 cents per share
back in 1995, and in 2015 the dividends received from Oceana was
365 cents per share.
18
Brimstone has proven its resilience in volatile markets and difficult
trading conditions. Over the long-term we have delivered real
growth and value to our shareholders. While Brimstone has stood
the test of time we remain acutely aware of our responsibility as a
good corporate citizen and our role as a leading Broad Based Black
Economic Empowerment group.
Macro-economic overview
Strategic update
According to the World Bank, global growth decreased to 2.4% in
2015 and is expected to recover at a slower pace than previously
envisioned. The disappointing performance was mainly due to a
continued deceleration of economic activity in emerging and
developing economies amid weakening commodity prices, global
trade, and capital flows. Their growth forecast is projected to reach
2.9% in 2016, as a modest recovery in advanced economies
continues and activity stabilizes among major commodity exporters.
A more protracted slowdown across large emerging markets could
have substantial spill-overs to other developing economies, and
eventually hold back the recovery in advanced economies.
Our primary objective is 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. Investments
in food and healthcare combined represent about 71% of our Intrinsic
Gross Asset Value. Its investments in restricted BEE structures have
increased to approximately 12% of Intrinsic Gross Asset Value.
While global risk factors continue to plague the domestic economy,
South Africa still has many local structural issues which will impact
the economy. The tumultuous end to 2015 have set the economy off
to a troubled start as evidenced in declining stock market prices,
pressure on the currency, and resultant prospects of a downgrade in
South Africa’s investment grade credit rating. These factors coupled
with increasing interest rates and higher inflation are bound to have
a negative impact on business confidence and consumer demand,
again adversely impacting the poorest of the poor.
OUR BUSINESS
The South African economy is reported to have grown by only
1.3% in 2015, down from 1.5% in 2014 and 2.2% in 2013, according to
preliminary estimates of real gross domestic product published by
Statistics SA. The main contributor to the slowdown in 2015 was
agriculture. Severe drought conditions saw the industry contracting
by 8.4%, the largest annual fall in agriculture production since 1995.
The decrease in 2015 was mainly due to a sharp drop in the production of field crops. The electricity, gas and water supply industry
also shrank in size while growth in manufacturing was almost flat in
2015.
The results were negatively impacted mainly by the downward
adjustments of listed investments Life Healthcare, Grindrod and
losses at subsidiary Lion of Africa Insurance Company. Despite the
negative impact of these on the results, the Group is still well
resourced with assets of R7.7 billion and total debt of R2.7 billion.
During the period under review we invested over R1.2 billion in
existing or new investments. This past year also saw dividend
income grow and exceed the R300 million for the first time. We
believe this is a indicator of sustainable future dividend income.
The period under review also saw the maturity of the Old Mutual
and Nedbank transactions. These transactions again bear testimony
to the long term view we have on investments and relationships.
Further to the maturity of these transactions after 10 years, the
partners have jointly committed to furthering the business relationships on various levels. I would like to thank the leadership of both
Old Mutual and Nedbank for an endearing business relationship
based on trust, dedication and real business principles which have
all played a part in making this partnership a celebrated one in the
landscape of empowerment transactions in South Africa.
During the year under review, two of our investments made international acquisitions, with our full support. Our subsidiary Sea Harvest
acquired a stake in Mareterram Limited, a vertically integrated agribusiness listed on the Australian Stock Exchange. Similarly, Oceana
Group acquired US-based Daybrook Fisheries, also a vertically integrated business. Both acquisitions signal the readiness of local
companies in the sector to expand globally as they explore new
diversified income streams.
The Group has a proven track record of creating and unlocking
shareholder value, supported by an experienced team with proven
deal-making ability. Brimstone is defined by its bona fide
empowerment credentials, and its ability to enhance Net Asset Value
and pay dividends. It has proven its ability as a 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.
19
GOVERNANCE
The World Bank predicts a challenging short term outlook for Sub
Saharan Africa. Commodity prices are expected to stabilize but
remain low through 2017. The major impediment to growth
according to them is electricity supply bottlenecks which are
expected to persist. They therefore predict a somewhat weaker
recovery in 2016. After slowing to 3.4% in 2015, growth is expected
to increase to just over 4% in 2016.
For the year under review Brimstone’s Total Assets decreased from
R7.9 billion to R7.7 billion. Its Intrinsic Net Asset Value (INAV)
decreased from R4.86 billion to R4.23 billion. Headline earnings per
share decreased from 116.9 cents per share to a loss of 295.3 cents
per share.
OUR HISTORY
2015
2015
CHAIRMAN’S REVIEW (CONTINUED)
OUR HISTORY
Corporate Social Responsibility
Acknowledgements
Our support programmes are primarily directed at developing and
empowering previously disadvantaged groupings and in such a
way contribute to the restoration of the well-being of marginalised
communities. I am pleased to advise that the Brimstone
Empowerment Share Trust (BEST) has awarded 50 000 shares to
the Buhle Farmers’ Academy from Mpumalanga.
I would like to thank my fellow executive directors, Mustaq Brey and
Lawrie Brozin for their continued support over the past 20 years.
Lawrie Brozin has been a member of the Brimstone team since
1996 and has seen the company grow from a small Cape-based
empowerment company with initial share capital of R3 million to a
truly South African company listed on the JSE with assets in excess
of R7 billion and a dividend income stream in excess of R300 million.
To date BEST has allotted 1 515 000 Brimstone shares to 27
organisations across South Africa. The value of these shares at year
end was in excess of R19 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). In addition to
this Brimstone supports many other social interventions throughout
the year.
OUR BUSINESS
We will continue to support and rely on these NGO’s and PBO’s who
go the extra mile in servicing the most marginalised communities.
These organisations are doing sterling work in delivering on a social
mandate and I would like to encourage all our stakeholders to
engage them and see how we can further collectively support their
efforts in bringing about positive social change.
Governance and the Board
This is our seventh integrated report and 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.
Lawrie will be retiring as Financial Director at the AGM on 9 May
2016. We value the significant contribution Lawrie has made to the
Group over the years. I wish him well in his retirement and am sure
that he will remain a loyal supporter of Brimstone for years to come.
We wish to thank Lawrie for his significant contribution to Brimstone
over the last 19 years.
I wish to thank the entire board of directors for their invaluable
good counsel and continued dedication to excellence in corporate
governance, always placing the interest of our shareholders first.
Thank you to our executive team and staff as well as the
management and staff of all our subsidiaries and investee
companies for their continued c ommitment in delivering on our
growth strategy.
I also thank all our shareholders and stakeholders who continue to
support, trust and believe in the Company’s ability to deliver to their
expectations. We look forward to growing the Company for the
benefit of all.
GOVERNANCE
Dividend distribution
The board considered the results and approved a dividend of
35 cents per share, up from 30 cents per share payable to shareholders on 25 April 2016. We are proud to advise that this is the
14th consecutive year that the Company will be paying a dividend.
20
Fred Robertson
Executive Chairman
21
OUR BUSINESS
GOVERNANCE
T HE GROU P
HAS A P ROVEN
T RA C K R ECORD
OF C R E AT I N G
A ND UN L OCKI N G
SH A R E H OL DER
VAL UE , SU P P ORT ED
B Y A N E XP ERI EN CED
T E A M W IT H P ROVEN
DEA L - M A KI N G
A B I L I T Y.
OUR HISTORY
2015
2015
GROUP PROFILE
OUR HISTORY
– 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.
INTEREST: 5.01%
www.lifehealthcare.co.za
OUR BUSINESS
– U
nlisted
– Joint managing Directors:
M Maurer and A Agnello
– Company involved in the design,
marketing and m
anufacturing
of mens and ladies clothing
and accessories.
– C2 and Carducci retail stores
INTEREST: 100%
GOVERNANCE
www.rextrueform.com
– U
nlisted
– Chief Executive Officer: F Ratheb
– The principal business
of Sea Harvest is deep sea trawling of hake.
– Largest employer on
the West Coast.
INTEREST: 58.44%
22
INTEREST: 16.9%
www.seaharvest.co.za
www.oceana.co.za
– Chief Executive Officer: 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.
www.monatic.co.za
– L
isted on the JSE (Rex Trueform
Clothing Company Ltd and African
& Overseas Enterprises Ltd).
– Chief Executive Officer:
C Radowsky
– Group involved in the marketing
and retailing of mens and
ladies clothing nationally and
internationally.
INTEREST:22%
– Chief Executive Officer: F Kuttel
– Oceana engages in the catching,
processing and p
rocurement 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.
INTEREST: 15.22%
RE AFRICA
INTEREST: 18%
www.tasteholdings.co.za
– Unlisted
S Chikumba
– Aon Re Africa is a leading
reinsurance and retrocession
intermediary in Sub Saharan Africa,
based in Johannesburg,
South Africa with a s ubsidiary
office in Harare, Zimbabwe.
www.aon.com
INTEREST: 100%
www.lionsure.com
INTEREST: 6.62%
– U
nlisted
– Chief Executive Officer: K Dlamini
– 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.
INTEREST: 28.79%
OUR HISTORY
– Chief Executive Officer: 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.grindrod.co.za
– OTC market
– Black-owned investment company
that holds 20% of MultiChoice
South Africa.
INTEREST: 7.02%
www.phuthumanathi.co.za
OUR BUSINESS
– U
nlisted
– Chief Executive Officer: B Madikiza
– Formed in August 1999, Lion of
Africa is an e
stablished, growing
insurance brand on the South
African insurance landscape. It is
the only Level 1 short-term B-BBEE
Insurer.
2015
www.afenacapital.co.za
– OTC market
– Black-owned investment company
that holds approximately 4% of
MTN Group.
INTEREST: 0.08%
A Taverna-Turisan
– A specialist logistics property
developer and landlord listed
as a REIT.
www.oldmutual.com
INTEREST: 10%
– L
isted on the JSE
– Acting Chief Executive Officer:
N Doyle
– A branded FMCG (Fast Moving
Consumer Goods) company that
operates mainly in South Africa
and selected emerging markets.
INTEREST: 0.94%
www.tigerbrands.co.za
www.mtnzakhele.co.za
GOVERNANCE
INTEREST: 2.71%
INTEREST: 25.07%
www.equites.co.za
– Unlisted
– Chief Executive Officer: S Landman
– A leading supplier of innovative
solutions to healthcare providers
and clinicians within sub Saharan
Africa
23
– L
isted on the JSE and on the
London, Zimbabwe, Namibia
and Malawi Stock Exchanges.
– Chief Executive Officer: B Hemphill
– Diversified financial services,
including life insurance, investment
management and administration.
2015
EXECUTIVE DIRECTORS’ REPORT
Introduction
OUR HISTORY
The Company reported a loss for the year under review of
R668.1 million compared to a profit of R277.8 million in the prior year.
The significant contributor to this reduction in earnings was the
downward revaluation of investments, the effect of which can be
found in both fair value a djustments and equity accounted losses of
associates and joint ventures. This was compounded by poor results
from operating subsidiary Lion of Africa. In the period under review
Brimstone invested in excess of R1.2 billion in new or existing investments and for the first time earned dividend income in excess of
R300 million.
OUR BUSINESS
Total assets decreased to R7.7 billion from R7.9 billion at
31 December 2014. Intrinsic Net Asset Value decreased to R4.2 billion
from R4.9 billion at 31 December 2014. The Company declared a final
dividend of 35 cents per share.
Net Asset Value
Total assets decreased by 3.5% from R7.9 billion to R 7.7 billion in the
year under review. Net asset value decreased by 23.9% from
R3.3 billion to R2.5 billion in the year under review.
INAV at 31 December 2015 calculated on a line-by-line basis, totalled
R4.23 billion, or R17.41 per share (31 December 2014 – R4.86 billion or
R19.79 per share), representing a decrease of 13% from 2014 (a
decrease of 12.0% on a per share basis). On a fully diluted basis INAV
per share is R16.48 representing a decrease of 11.3% on the R18.58
reported at 31 December 2014.
plant. In the last two years over R200 million has been invested in
vessels and plant upgrades. In December 2015, Sea Harvest acquired
a 19.9% stake in Mareterram Limited, a vertically integrated
agri-business which listed on the ASX in Australia thereby securing
its route to this critical market and providing a platform for future
international growth.
Lion of Africa
Lion of Africa’s poor performance continued during the year under
review, reporting a loss from operations of R179 million (2014 – loss
of R180 million). This loss is directly attributable to the following
factors:
– A significant decrease in premium income due to:
•the credit rating downgrade adversely affecting the
amount of corporate business written;
• the discontinuation of personal lines business; and
•the introduction of stricter underwriting parameters which
have been introduced to reduce claims going forward.
– Large and attritional claims and one-off charges incurred.
A new management team has been put in place. In addition to the
remedial action already commenced during the year, management
has developed a focused strategy to return the company to profitability over the next few years. Brimstone introduced R200 million in
capital during the year under review in order to maintain statutory
solvency while the turnaround strategy is taking effect. The
investment is carried at R40 million (2014 – R20 million) in the
books of Brimstone.
House of Monatic
GOVERNANCE
As at 31 December 2015, Brimstone Ordinary shares were trading at
a discount of 22.5% to INAV (31 December 2014 – 14.1%). Brimstone
“N” Ordinary shares traded at a discount of 27.1% to Brimstone’s
INAV (31 December 2014 – 16.6%).
Revenue increased by 17% to R214 million while net profit increased
to R6.4 million. Most of this increase is attributable to the growth of
the corporate and retail business.
Brimstone Portfolio
Another three retail stores were opened during the year with two
more planned in 2016. R6 million of new plant and machinery was
acquired during the year funded by way of the DTI capital subsidy
to improve productivity and quality. Employment levels remained
stable throughout the year.
Subsidiaries
Associates and joint ventures
Sea Harvest
Oceana
Sea Harvest delivered a solid financial performance for the year with
operating profit before interest increasing by 11% to R121.7 million,
and EBITDA up 9% to R205 million. Revenue was 1% higher than
prior year despite a 5% reduction in catch volumes. Fishing conditions were very challenging especially in the second half of the year.
Prices for hake remained strong, in addition to a 10% volume growth
in the export market where demand was high. Sea Harvest
continued with its capital investment programme by converting an
existing trawler to a freezer trawler as well as upgrading its fresh fish
Brimstone subscribed for an additional 2.8 million shares in a rights
offer for R211 million at R75 per share. During the year Oceana
acquired Louisiana-based Daybrook Fisheries for $450 million
further diversifying its business portfolio. Oceana’s share price
closed at R117.00 per share, up from R104.86 per share at
31 December 2014. Brimstone received dividends of R80.6 million
from Oceana during the year under review and recorded
R35.1 million in equity accounted earnings.
The breakdown of INAV is available on the Company’s website at
www.brimstone.co.za.
24
The Scientific Group/Obsidian Health
During the period under review Brimstone disposed of its
investment in The Scientific Group realising a profit on disposal of
R44.8 million. As part of the transaction, the medical division of The
Scientific Group was transferred to a new company Obsidian Health
in which Brimstone holds a 25.07% interest.
Following the maturity of the Nedbank transaction Brimstone held
2.3 million Nedbank shares. Brimstone sold all of these shares
realising R568.5 million.
Old Mutual
The Old Mutual transaction matured on 1 May 2015. After settlement
of debt in terms of the contract, Brimstone held 7.4 million Old
Mutual plc shares. Brimstone sold 3.4 million of these shares,
realising R131.4 million. The remaining 4 million shares were valued at
the closing market price of R41.45 per share and are carried in the
books at R165.8 million at 31 December 2015.
Subsequent to the year end, Brimstone sold the remaining 4 million
shares, realising R148.3 million.
Grindrod
Phuthuma Nathi
During the year Brimstone increased its shareholding in the Grindrod
Consortium SPV, which holds 64 million shares, from 59.2% to 72.4%.
Due to the shared control in the structure, Brimstone, in its
consolidated financial results, accounts for its share of the results in
the Consortium SPV as a joint venture. Brimstone also acquired
4.2 million Grindrod shares directly. Grindrod’s share price closed
at R11.29 at year end.
Full-year consolidated revenues and core headline earnings grew by
15% and 12% respectively for the year ended March 2015.
Investments
Equites
During the year Brimstone subscribed for 28 million shares in
Equites Property Fund Limited at R12.50 per share at a total cost
of R350 million, representing a 10.0% shareholding. Equites is a
specialist logistics property developer and landlord which is listed
on the JSE as a REIT.
Life Healthcare
Life Healthcare’s share price closed at R35.07 per share, down from
R42.76 per share at 31 December 2014. The investment was revalued
downwards by R403.8 million. Brimstone received dividends
amounting to R80.9 million during the year. Brimstone remains one
of the largest shareholders in Life Healthcare which will continue to
focus on its growth objectives in India and Poland.
MTN Zakhele
The share price of MTN Zakhele is affected by 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.
OUR HISTORY
Brimstone recorded R0.4 million in equity accounted earnings from
Afena Capital. Following the reduction in assets under management,
Brimstone has impaired its investment in Afena Capital by a further
R12 million to R9.7 million.
Nedbank
OUR BUSINESS
Afena Capital
At year end Brimstone held 2.2 million MTN Zakhele shares, which
closed at R73.90 per share, down from R108.50 at 31 December
2014. The investment was revalued downwards by R75.7 million.
Brimstone acquired a further 1.96 million Phuthuma Nathi shares in
2015 at an average price of R161.55 per share and received dividends
of R65.0 million from Phuthuma Nathi. At year end Brimstone held
3 million Phuthuma Nathi 1 shares and 1.7 million Phuthuma Nathi
2 shares, which closed at R165 and R163 per share respectively.
The investment was revalued upwards by R96 million.
Rex Trueform and African & Overseas Enterprises
(Queenspark)
The market price of all classes of Rex Trueform and African &
Overseas Enterprises shares decreased during the year under review
resulting in a downward revaluation of R5.1 million.
GOVERNANCE
Aon Re Africa successfully secured new business across all divisions
with impressive organic growth specifically in Africa. Brimstone
received dividends of R12.9 million (2014 – R4.5 million) from Aon Re
Africa and recorded R0.4 million in equity accounted losses during
the year under review.
Taste Holdings
During 2015 Taste Holdings concluded an exclusive development
agreement to roll out Starbucks Coffee outlets in South Africa. For
the first time in sub-Saharan Africa, Starbucks Coffee will open fullformat stores bringing the entire range of its food and beverages,
including its ethically sourced Arabica coffee, to South African
consumers.
Taste Holdings raised R226 million through a rights issue to partly
fund the Starbucks Coffee development and to pursue other opportunities. Brimstone acquired a further 19.7 million Taste Holdings shares
during 2015 at an average price of R3.02 per share. The share price
closed at R2.95, down from R3.20 per share at 31 December 2014.
25
Aon Re Africa
2015
2015
EXECUTIVE DIRECTORS’ REPORT (CONTINUED)
OUR HISTORY
Tiger Brands
Changes to the board of directors
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 R316.44 per
share, down from R368.06 per share at 31 December 2014. The
investment was revalued downwards by R91.7 million. These rights
mature on 31 December 2017.
Mr Lawrie Brozin, currently Financial Director of Brimstone will retire
as Financial Director at the annual general meeting on 9 May 2016.
Lawrie joined the Company in 1996 and has seen the Group grow
from a small unlisted Cape-based empowerment group with start-up
capital of R3 million to a JSE-listed company with assets of
R7.7 billion.
Share repurchases
The executive directors wish to thank Lawrie for his unwavering
commitment and dedication to the Company and wish him well for
the future.
Specific repurchase
OUR BUSINESS
During the review period Brimstone repurchased 387 831 Brimstone
Ordinary shares at R17.00 per share for a total consideration of
R6 593 127 and 3 835 621 Brimstone “N” Ordinary shares at R16.50
per share for a total consideration of R63 287 747. This specific
repurchase of shares was from the Brimstone Investment
Corporation Limited Share Trust, a trust controlled by Brimstone and
as such was done intra-group with no cash flow implications, except
for related expenses. The repurchased shares were listed as treasury
shares in Brimstone’s last annual financial statements and the
Company applied to the JSE for the cancellation of these shares,
which were duly cancelled and delisted on 12 March 2015.
Acquisition of treasury shares
During November and December 2015, Brimstone acquired, via a
wholly-owned subsidiary, 3.95 million Brimstone Ordinary shares and
0.05 million Brimstone “N” Ordinary shares in the open market for
an aggregate consideration of R52.3 million at an average price of
R13.06 per share including costs. These shares have been accounted
for as treasury shares.
GOVERNANCE
Dividend declared
Brimstone’s board has declared a final dividend of 35 cents per
share for the year ended 31 December 2015 (2014 – 30 cents per
share) payable on Monday, 25 April 2016. The final dividend has
been declared out of income reserves.
26
Mr Geoffrey George Fortuin will be appointed as Financial Director
and Mr Mohamed Iqbal Khan will be appointed as Chief Operating
Officer and Executive Director on 9 May 2016.
The executive directors wish Geoff and Iqbal well in their new roles
at the Company. Their detailed curriculum vitae can be found on
page 145 of this integrated report.
Prospects
The Group has a 20 year track record of creating and unlocking
shareholder value in a sustainable way and has the team with the
skills and experience to conclude value adding deals. The Group is
defined by bona fide empowerment credentials, and its ability to
enhance NAV and pay dividends. Brimstone has over the years
demonstrated its resilience to withstand tough economic conditions
and 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, executive team, all staff,
stakeholders and shareholders for contributing to the success of
Brimstone over the past year. We value the support of all shareholders many of whom have been shareholders for the past
20 years. We trust that we have lived up to their expectations of real
value creation over the 20 years and assure them that we will act in
their best interests at all times as we grow Brimstone while living our
credo of profitability, empowerment and positive social impact.
2015
INTRINSIC NET ASSET VALUE REPORT
INAV of Brimstone (R’m)
Book NAV (R’m)
INAV per share (cents)
Fully Diluted INAV per share (cents)
Book NAV per share (cents)
Market price per share (cents)
– Ordinary shares
– “N” Ordinary shares
Discount to INAV:
– Ordinary shares %
– “N” Ordinary shares %
31 Dec 15
31 Dec 14
4 229.4
2 530.3
1 741
1 648
1 044
4 862.3
3 325.0
1 979
1 858
1 356
1 350
1 270
1 700
1 650
22.5
27.1
14.1
16.6
Oceana
–The INAV of the 22.9 million shares in Oceana was based on the
closing share price of Oceana on the JSE at 31 December 2015
of R117.00 per share.
–The 6.07% interest in Grindrod held via the BEE Consortium
was valued at the closing share price of Grindrod on the JSE
at 31 December 2015 of R11.29 per share. Due to the limited
recourse nature of the Grindrod BEE funding structure,
Brimstone’s investment is shown at a minimum value of zero.
The directly held shareholding in Grindrod of 0.55% is valued
at the closing share price of Grindrod on the JSE at
31 December 2015 of R11.29 per share.
Equites
–The 10.00% interest was valued at the closing share price of
Equites Property Fund Limited on the JSE at 31 December 2015
of R12.75 per share.
–The rights to Tiger Brands shares are carried as an option which
was valued as disclosed in Appendix 4 to the annual financial
statements.
Taste Holdings
Taste Holdings on the JSE at 31 December 2015 of R2.95 per
share.
Old Mutual
–The 0.08% interest was valued at the closing share price of Old
Mutual plc on the JSE at 31 December 2015 of R41.45 per share.
MTN Zakhele
–The 2.71% interest was valued at the closing share price of MTN
Zakhele on the JSE at 31 December 2015 of R73.90 per share.
–The 5.01% interest was valued at the closing share price of Life
Healthcare on the JSE at 31 December 2015 of R35.07 per share.
Lion of Africa
Phuthuma Nathi on the Over-the-Counter trading platform at
31 December 2015 of R165.00 for PN 1 and R163.00 for PN 2
per share.
OUR HISTORY
Tiger Brands option
Life Healthcare
Phuthuma Nathi
Grindrod
OUR BUSINESS
The closing share prices on 31 December 2015 of Brimstone Ordinary
and “N” Ordinary shares on the JSE Limited (JSE) were 1 350 cents
and 1 270 cents (2014 – 1 700 cents and 1 650 cents) per share
respectively.
–The INAV 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 49% discount to the average
EV/EBITDA multiple at which listed peers traded at
31 December 2015 was applied.
GOVERNANCE
The Book Net Asset Value (Book NAV) of Brimstone on 31 December
2015 was R2 530.3 million (2014 – R3 325.0 million), translating to
1 044 cents per share (2014 – 1 356 cents per share), based on the
respective number of shares in issue.
Sea Harvest
–The INAV of the 100% shareholding in Lion of Africa was based
on a price: book multiple of 1.00 times, which equates to a 39%
discount to the average price: book multiple at which listed
peers traded at 31 December 2015.
27
The INAV of Brimstone at 31 December 2015 was R4 229.4 million
(2014 – R4 862.3 million), translating to 1 741 cents per share (2014 –
1 979 cents per share), based on 242.9 million shares (2014 – 245.6
million shares) in issue, net of treasury shares. Fully Diluted INAV per
share was 1 648 cents per share (2014 – 1 858 cents per share),
based on 258.0 million shares (2013 – 263.4 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
and invested forfeitable shares.
2015
INTRINSIC NET ASSET VALUE REPORT (CONTINUED)
INAV analysis by asset
An analysis of the INAV of Brimstone as at 31 December 2015 is set out below, including the valuation basis of each asset. Where applicable, INAV
is net of ring-fenced debt and potential CGT relating to that asset.
OUR HISTORY
OUR BUSINESS
Asset
Oceana
Life Healthcare
Phuthuma Nathi
Sea Harvest
Grindrod – BEE
Grindrod – direct
Equites
Tiger Brands option
Taste Holdings
Old Mutual
MTN Zakhele
Nedbank
Investment properties
Aon Re Africa
A&O / Rex Trueform
House of Monatic
Other investments
Lion of Africa
Afena Capital
Funding
% held
16.90%
5.01%
7.02%
58.44%
6.07%
0.55%
10.00%
0.94%
15.22%
0.08%
2.71%
0.00%
100.00%
18.00%
22% eco
100.00%
Various
100.00%
28.79%
100.00%
Valuation basis
Market value per share
DCF & EV/EBITDA valuation
Market value per share, min zero
Option valuation
Capitalisation rate
PE valuation
Book value
Book value + PV of proceeds
Price to book valuation
AUM & PE valuations
Book value
Gross Value
(R’000)
2 680 132
1 841 502
778 459
690 002
522 905
47 670
357 000
249 983
169 447
165 800
162 007
—
61 695
54 389
50 513
45 147
44 286
40 292
9 747
(2 400)
7 968 578
GOVERNANCE
INAV per share (cents)*
Fully Diluted INAV per share (cents)**
3 281
3 097
Debt (R’000)
(286 687)
—
(294 734)
—
(662 507)
—
(304 925)
—
—
—
(57 934)
—
(20 711)
—
—
—
—
—
—
(1 452 901)
(3 080 400)
CGT
(R’000)
(354 889)
(333 706)
(32 279)
(86 370)
119 226
2 361
(1 305)
(44 113)
(5 953)
(4 443)
(4 587)
—
(7 989)
(8 654)
(3 572)
10 660
(2 244)
71 328
7 668
(324)
(679 185)
(1 268)
(1 194)
(280)
(263)
Dec 2015
INAV (R’000)
2 038 557
1 507 797
451 446
603 632
—
50 031
50 770
205 870
163 494
161 357
99 486
—
32 995
45 735
46 942
55 807
42 042
111 620
17 415
(1 455 625)
4 229 370
1 741
1 648
* Based on 242.9 million shares (December 2014 – 245.6 million shares) in issue, net of treasury shares.
**Based on 258.0 million shares (December 2014 – 263.4 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 and invested forfeitable shares.
28
2015
CORPORATE SOCIAL INITIATIVES
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 presented in this integrated report,
the Group’s activities and its impact, 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 employs
in excess of 3 500 individuals in its
subsidiaries and more than 24 000 in 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 programmes, Brimstone has
established The Brimstone Foundation
and the Brimstone Empowerment Share
Trust to extend the long-term reach and
sustainable impact of its initiatives.
Brimstone Empowerment Share
Trust (BEST)
The Brimstone Empowerment Share Trust
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
OUR BUSINESS
Nature, scope and effectiveness of all programmes on c ommunities
OUR HISTORY
GOVERNANCE
BRIMSTONE HOSTED A DIALOGUE ON
CANCER FOCUSSING ON PROSTATE
CANCER, BREAST CANCER, AND BRAIN
TUMOURS
29
2015
CORPORATE SOCIAL INITIATIVES
(CONTINUED)
OUR HISTORY
OUR BUSINESS
TOP, LEFT: CAPE TOWN PHILHARMONIC
YOUTH ORCHESTRA PERFORMING AT THE
SUID OOSTERFEES, CO-SPONSORED BY
BRIMSTONE
LEFT: BRIMSTONE HOSTED A CLINIC FOR
DISABLED GOLFERS AT THE LION OF AFRICA
GOVERNANCE
CAPE TOWN OPEN
five years, in tranches of 20% per annum.
The beneficiary organisations p
articipate
fully in any dividends declared by
Brimstone from the date of receipt of the
shares.
During the year under review the Buhle
Farmers’ Academy (Mpumalanga) was
awarded Brimstone 50 000 “N” Ordinary
shares. Also, during the review period
3 existing beneficiary o
rganisations were
awarded a top up of 20 000 Brimstone
“N” Ordinary shares each. They are:
Port Elizabeth Sentraal Khayalethu Youth
Centre (Eastern Cape), Missionvale Care
Centre (Eastern Cape) and Cheshire Home
Summerstrand (Eastern Cape).
30
2015
OUR HISTORY
LEFT: MANDELA DAY 2015
BELOW: TO START THE 20 YEAR
ANNIVERSARY OF BRIMSTONE, THE GROUP
PACKED OVER 1 000 FOOD HAMPERS WHICH
WERE D
ISTRIBUTED TO COMMUNITIES
ACROSS THE WESTERN CAPE
Further information on BEST may be found
at www.best.za.com
Corporate Social Initiatives
During the period under review Brimstone
contributed to various social initiatives
covering the areas of Cultural, Education,
Health, Social Cohesion, Welfare and
Poverty Relief. Brimstone’s total CSI spend
was R1.7 million.
Beneficiaries: Suid Oosterfees and
Cape Town Festival.
Education
Beneficiaries: Life Healthcare Nursing
College, Spine Road High School,
University of Stellenbosch, Western Cape
Primary Science, Click Foundation Trust,
Progressive Principal Association and
Imam Abdullah Haron Education Trust.
GOVERNANCE
To date, BEST has allotted 1 515 000
Brimstone shares to 27 organisations
across South Africa. The market value of
these shares as at 31 December 2015 was in
excess of R19 million. These shareholders
support more than 3.5 million beneficiaries
across South Africa.
Cultural
Healthcare
Beneficiaries: Cochlear Implant at
Tygerberg Hospital, Mens Foundation of
South Africa (Movember) and Dialogue on
Cancer.
On 22 May 2015 Brimstone and the
trustees of BEST convened the second
discussion forum with the beneficiaries of
BEST. The session was well attended and
excellent ideas and thoughts were shared
between the parties. As a gesture of
goodwill, BEST awarded all the beneficiary
organisations that attended 5 000
Brimstone “N” Ordinary shares each.
OUR BUSINESS

Social cohesion
Beneficiaries: District Six Museum
Foundation, Human Rights Media Centre –
Albinism Anti-Discrimination Project and
Mapungubwe Institute.
Welfare and poverty relief
Beneficiaries: Family Life Centre, Mitchells
Plain Community Advice Centre, LLitha
Lethu Club in Khayelitsha, GH Starke Home
for the Elderly, Masanda Educare and
Themba Labantwana Children’s Home.
31
2015
OUR HISTORY
MAWABO MJEKULA
Apprentice Forklift Technician
NONKOLO VOORSLAG
Machinist Supervisor
NEVILLE NANNES
Specialist Cutter/
Supervisor – (Retired)
LUCINDA KRIGE
Learning and Development
Business Partner for Fleet
OUR BUSINESS
IN OUR 2015 INTEGRATED
R EPORT, WE F
OCUSSED ON SOME
GOVERNANCE
OF THE MANY PEOPLE WITHIN
OUR FAMILY WHO A
CTIVELY
PUT OUR MISSION STATEMENT
INTO ACTION E VERY DAY.
32
2015
OUR BUSINESS
OUR HISTORY
PROFILE
MAWABO MJEKULA
Apprentice Forklift Technician
When the call came to head to the other
side of the country Mawabo interrupted
his mechanical/technical studies in Port
Elizabeth and has not looked back since.
His introduction to forklifts opened a
whole new world for him. “You are
dealing with electronics and your mind
has to be working all the time – you
never stop thinking. It’s very, very
interesting.”
This desire to learn was rewarded in 2015
when Mawabo was declared Learner of the
Year at the Artisan Training Institute in
Gauteng after a three-month course in
Phase 1 Automotive Training. “The way he is
going he will definitely be a qualified forklift
technician,” says Venter.
Mawabo, who loves the peace of
Saldanha Bay, acknowledges how Sea
Harvest set him on a new path in life.
“I can now help with my sister’s fees for
her studies and contribute to the rest of
the family at home in the Eastern Cape.
I love my job. It is very challenging. I am
very happy to wake up in the morning
and to come to work. I know that every
day I am going to solve a different
problem.”
GOVERNANCE
Site maintenance manager, Johan Venter,
immediately recognised his young apprentice’s potential. “When he came here he
could not even change a wheel on a forklift
– but he came with a very nice attitude. He
had a hunger to learn, something that sets
him apart from many other young people.
And he is an exceptionally hard worker.”
Four years ago Mawabo
Mjekula (28) from Peddie
in the Eastern Cape was
an unemployed motor
mechanic with basic skills.
A suggestion by his
brother to send his CV to
Sea Harvest would change
his life.
Mawabo is aware of the responsibility that
comes with dealing with salt water, metal
materials and seafood products: “The
forklifts get rusted and need to be rebuilt
and resprayed. We cannot risk any
contamination.”
33
2015
PROFILE
OUR HISTORY
OUR BUSINESS
GOVERNANCE
34
2015
NONKOLO VOORSLAG
She was encouraged to believe in her
abilities as she had years of experience
now behind her. “I was advised to focus,
to listen carefully and to do what the
customer wants: that way we can always
be 100% correct in what we deliver. The
customer is the beginning and the end
of our existence!”
“I got a screwdriver, fixed it, threaded it and
made a bag,” she remembers. She obviously
made an impression and soon she was
working as a machinist, learning new skills
along the way, both on the factory floor and
in training courses.”
Nonkolo is determined to give back in
terms of the o
pportunity presented to
her: “I must always be an example and
must show that we are working as a
team. I must be a trusted supervisor and
listen to the ideas of others. It is most
important to be able to build up your
team.”
She appreciates the lift in life that House
of Monatic has given her. “I now have
something that is inside of me. I know
I can do this.” Nonkolo can now also
provide for the family who sent her,
many years ago, with their blessing to
seek work in Cape Town.
“I focussed on everything the manager told
me,” says Nonkolo. Her work ethic and
attitude did not go unnoticed and in 2015
her manager elected her to be a supervisor.
Nonkolo’s initial reaction was “Why me?
I am still new!” But she did not shy away
from the challenge (even though it meant
resigning as a shop steward as she was now
in a managerial position).
OUR BUSINESS
But another door opened when she left her
name and number at House of Monatic
while passing by looking for work. Nonkolo
received a call and went for an interview
where she was asked to make a bag from
material provided. But she immediately
realised there was no needle in the machine
provided.
GOVERNANCE
Nonkolo Voorslag had
skills, she had determination, but in 2005 she
didn’t have a job. The
seamstress/machinist had
left King Williams Town in
the Eastern Cape when
the jeans m
anufacturer
she was working for
closed its doors.
OUR HISTORY
Machinist Supervisor
35
2015
PROFILE
OUR HISTORY
OUR BUSINESS
GOVERNANCE
36
2015
NEVILLE NANNES
OUR HISTORY
Specialist Cutter/Supervisor – (Retired)
When 15-year-old Neville Nannes started work at IL Back
(the original name of House of Monatic) as a fabric
checker in 1966 he had no idea how long that journey
would last.
The young man moved on to
embroidery machines and from there
advanced to interlining cutting after the
cutting room manager saw his potential.
Neville was learning new skills along the
way: “I learnt the trade of cutting by
observing a colleague and stole with my
eyes,” he says.
OUR BUSINESS
With an unemployed father and several
siblings, Neville was forced to find work
at that early age. The R4.71 per week he
initially earned at the Parow East
factory helped support his family –
a wage which increased as his
responsibilities grew.
His almost half-century at House of
Monatic provided Neville with stability,
self-worth, company shares and a work
community he valued and which valued
him. “It was the friendliness and the
people around you who work with a
smile on their face,” he says. “It was such
a positive thing. As a family we had a
poor life. I would like to tell the youngsters about what life is worth: you have a
choice about where you want to be. Take
time to set a goal – that way you will
achieve a goal. If you don’t stick to a
goal a day you will run around like a
chicken without a head. And who wants
to be a chicken without a head!”
GOVERNANCE
It was a 49-and-a-half-year trip that saw
him move up through the ranks of one
of Cape Town’s most established brands
until his retirement in December 2015.
As the company moved to Belhar and
then Salt River Neville moved too,
gaining a wife and seven children along
the way – his son, Ryan Nannes, has now
been with House of Monatic for 23 years.
When the company faced retrenchments
in 1985 Neville was one of nine people
kept on. In 1986 he was promoted to
supervisor, specifically in the tricky area
of matching stripes and checks correctly.
He was also responsible for training and
developing all the cutters.
37
2015
PROFILE
OUR HISTORY
OUR BUSINESS
GOVERNANCE
38
2015
LUCINDA KRIGE
OUR HISTORY
Learning and Development Business Partner for Fleet
Lucinda Krige was working as a chamber maid in 2001
when her father showed her a Sea Harvest Corporation
job advert looking for engineering cadet trainees.
As a cadet she tackled technical and
theoretical subjects as well as maritime
studies. This prepared her for heading
to sea, with her first trip being on the
sophisticated trawler Harvest Lindiwe.
It was challenging on all fronts, and not
least the fact that she was the only
female on board.
“On my first trip on a wet-fish vessel I
was called up to the bridge by the vessel
chief and the engine room skipper.
They said this was the first time in
20 years they had a female on board,”
recalls Lucinda. “They wanted it to work
and welcomed me.”
OUR BUSINESS
She has since moved to land-based
operations and is in charge of
management training for seagoing
officers as well as being r esponsible for
new cadets. There is, however, a new
challenge on the horizon: Lucinda is
hoping to be selected to do a Master of
Science in Maritime Studies at the
renowned World Maritime University in
Sweden.
GOVERNANCE
“As a child I told my dad I wanted to be
a police officer, because I saw so few
women doing that job,” laughs Lucinda
who is based at the Saldanha Bay Sea
Harvest factory in the week and her
Kraaifontein home on weekends. “He
said he was sure there was something
else out there for me.” He was right.
Lucinda loved everything about marine
engineering even though she had never
had any technical or seagoing background. “I discovered my dream job
without even knowing it! I loved being
away and working with my hands as well
as problem-solving.”
Keith Smith, HR Manager: Learning &
Development says, “Lucinda is at the
forefront in representing the fishing
industry in terms of marine engineering.
She has also gained a great deal of
confidence operating at a managerial
level.”
Little did he know that this would be a
springboard to her becoming a Chief
Marine Engineer and breaking barriers in
terms of females in that tough seagoing
environment.
39
2015
SUBSIDIARY REPORTS
House of Monatic (Pty) Limited (“House of Monatic” or “HOM”)
Introduction
OUR HISTORY
House of Monatic was established in 1909 and is a leading
brand house incorporating the manufacture, distribution and
retailing of suits, jackets shirts and ties in South Africa. The
company currently employs 841 staff across all divisions, with
the head office and manufacturing plant based in Cape Town.
House of Monatic has a lifestyle offering in its retail stores
where consumers can experience the tailoring expertise shown
in its products.
Financial Performance
OUR BUSINESS
REVENUE
OPERATING PROFIT
250 000
12 000
200 000
183 824
16.8%
10 000
214 778
8 000
48.7%
R’000
R’000
150 000
7 202
10 707
2014
2015
6 000
100 000
4 000
50 000
GOVERNANCE
0
2 000
2014
2015
0
The increase in revenue is mainly due to an increase in retail sales from own stores of
R12 million and an increase in corporate sales of R17 million, resulting in an increase in
operating profit of R3.5 million.
Growth Strategy and Challenges
The company’s growth strategy is to
increase sales in the divisions of retail,
corporate wear and other branded
business. Each division has inherent risks
that need to be mitigated and are
addressed hereunder.
Corporate wear – the margins achieved
when tendering are under significant
pressure because of intense local competition in manufacturing. Inconsistent and
poor quality raw materials from local mills
are a challenge. These suppliers have a
monopoly in the local market and are thus
in a strong price making position.
40
Management at House of Monatic
mitigates these risks by meeting with
suppliers and building stronger relationships with them to improve the effectiveness and efficiency of the raw material
procurement process.
Branded business – As a high end
producer, House of Monatic endeavours to
maximise the manufacture of all top-end
formal wear brands in South Africa. This
entails short manufacturing runs, and a
wide variety of fabrics and components
which affects efficiency and lowers
productivity in the factory.
Retail – House of Monatic has embarked
on a retail expansion for their Carducci and
CSquared brands. The objectives of the
rollout are to increase visibility of the
brands, build brand equity and increase the
profitability of the company. The store
sites, footfall in the malls, disposable
income of consumers and retail competition from international brands as well as
high operating costs are risks that pose a
challenge. These risks are controlled by a
gradual rollout of stores in regional malls
after conducting careful market research.
The company currently has 5 branded
stores with plans to roll out 2 more in 2016.
Two clearing outlets help mitigate the risk
of holding excess or high fashion stock.
2015
The House of Monatic brands are Viyella
(under licence), Carducci, CSquared and
Monatic.
Carducci has been a much loved designer
brand in Southern Africa for the past 37
years. The brand was originally named
after Giosue Carducci, a flamboyant Italian
poet known for his fresh styles and creative
energy. This flamboyant spirit has been
translated into the Carducci clothing
Empowerment, CSI and
Social Impact
CSquared is South Africa’s latest formalwear brand. This brand is defined by its
style, individualism, chicness, tailoring and
bold array of colours worn in many ways
by people who want to stand out.
CSquared aims to capture the imagination
of the upwardly mobile young male
consumer who is extremely fashion
conscious and is experiencing a rapid
growth in his disposable income.
The significance of House of Monatic as a
textile industry employer:
–House of Monatic is one of the largest
suit manufacturers in the local
clothing industry and is a significant
employer in the Western Cape with a
staff complement of 841 at
31 December 2015. It is estimated that
each staff member supports an
average of 5 family members and
thus the overall reach supported by
HOM’s employment is circa 4 200
individuals. 77% of HOM’s employees
are women, many from the Cape Flats
who are breadwinners in their home.
House of Monatic plays a significant
role in bringing about stability into the
lives of staff and families.
–The local procurement of trims,
product and sundry services supports
the growth of small businesses in the
Western Cape. The use of local CMT
operators for products not manufactured in-house further supports the
employ of 400 people.
Viyella has been around since 1786,
originating as a unique fabric brand from
the English midlands. The brand has been
available in South Africa for nearly a
century, is synonymous with fine shirting
and has evolved to become a complete
lifestyle collection. The brand is known for
its luxurious fabrics, quirky take on the
classics and sits well in any gentleman’s
wardrobe. The clothing expresses itself
through its understated elegance, sophisticated designs and immaculate tailoring.
The Monatic brand is a classic brand for
the mature client who wants to project a
tailored and professional image. The brand
evolved from a shirt and sleepwear
product mix to a tailored suit. We are
expanding the offering by partnering with
the Merino Board to proudly make a truly
South African product.
House of Monatic is a Level 2 B-BBEE contributor with a total CSI spend of R166 933.
Initiatives over the years to decrease
dependence on Eskom:
–The new machinery is energy efficient
decreasing usage by 30%.
–Researching solar power to limit
energy consumption from Eskom.
41
GOVERNANCE
Our Brands
ranges. The brand is sold in over 300
outlets across Southern Africa and East
Africa, including Stuttafords stores across
Southern Africa.
Production Incentive – The Production
Incentive Scheme offered to the clothing
industry by the Department of Trade &
Industry has enabled the company to
invest R25 million in new plant and
machinery which stands it in good stead
for the foreseeable future.
OUR BUSINESS
OUR HISTORY
2015
SUBSIDIARY REPORTS (CONTINUED)
Sea Harvest Holdings Proprietary Limited (“Sea Harvest”)
Introduction
OUR HISTORY
Established in 1964 in the fishing village of Saldanha, Sea Harvest
has developed into one of the leading whitefish companies in
the Southern Hemisphere. The company’s principal business is
deep-sea trawling of the groundfish species called Hake
(Merluccius paradoxus & Merluccius capensis), processing of the
catch into frozen and chilled seafood and the marketing of these
products both locally and internationally.
OUR BUSINESS
In an effort to catch hake, Sea Harvest
currently operates 12 deep-sea trawler
vessels (8 fresh fish and 4 freezers) on the
shelf-edge break at distances of between
30 to 100 nautical miles off the South
African coast. The fishing grounds in which
Sea Harvest operates extends from the
Orange River mouth in the west to Algoa
Bay in the east off the coast of Port
Elizabeth.
The company has rights to approximately
26% of the available annual demersal hake
allowable catch allocated by the
Department of Agriculture, Forestry and
Fisheries (“DAFF”) and operates 2 factories
in Saldanha, have offices in Cape Town,
Durban and Johannesburg and employs
2 545 people who create a product that is
sold in over 22 different countries.
Financial Performance
OPERATING PROFIT
REVENUE
1 500 000
150 000
0.9%
1 361 498
1 373 457
120 000
1 200 000
121 653
2014
2015
90 000
R’000
900 000
R’000
GOVERNANCE
11.4%
109 251
600 000
60 000
300 000
30 000
0
2014
2015
In 2015 Sea Harvest consolidated the performance and operational improvements
made in 2014 by delivering solid profit
growth and significant progress against key
business transforming initiatives.
Despite lower catch rates in 2015, revenue
increased by about 1% through price
increases and effective forex hedging.
Consequently, the company has delivered a
solid operating profit margin of 8.9% off the
42
0
back of cost containment and lower fuel
prices.
Growth Strategy and Challenges
The company’s growth strategy going
forward can be summarised as follows:
–diversifying the earnings base through
acquisitions;
–the growth of earnings through operational efficiencies and the change of
the current business model in an effort
to create sustainable jobs; and
–diversifying the revenue line by
seeking opportunities in countries with
strong currencies and developed
markets.
All of the strategies are not without their
distinct challenges, such as, the leveraged
nature of the business which could hinder
acquisitions and the limited raw material
supply the company currently has which
would make it difficult to support retail
contracts in an attempt at seeking opportunities in developed markets. Even though
the growth strategies are affected by these
challenges, Sea Harvest has already begun
the process of putting the aforementioned
strategies in place such as the Moving to
Excellence Programme in order to improve
on business efficiencies and by selecting the
most profitable markets and geographies in
which to sell its catch. In the long-term, the
company will continue to seek opportunities
for growth and explore avenues which will
contribute to the continued sustainability of
the business.
Fishing Rights Allocation Process
(“FRAP”)
Critical to Sea Harvest’s continued sustainability is the ability to maintain its fishing
rights. There is a new FRAP 2015/16
currently underway for 9 species and is
being co-ordinated by DAFF. Based on the
most recent policies gazetted by DAFF,
there is now an added emphasis placed on:
Transformation Credentials, Employment
Equity, Job Creation and Rural Local
Development when scoring potential fishing
Sea Harvest’s commitment to the economic
and social transformation of South Africa
will never diminish and that is illustrated by
the company’s continued progression and
improvement on its B-BBEE scorecard. The
latest results of the 2015 B-BBEE rating
exercise reveal a significant overall increase
from 87.32% in 2014 to 96% in 2015 for Sea
Harvest. The company achieved 100% in the
areas of Ownership, Preferential
Procurement, Enterprise Development as
well as Socio-Economic Development, and
has successfully retained its status as a
Level 2 B-BBEE contributor.
Employee Share Scheme In line with the company’s economic transformation initiatives, in 2015, Sea Harvest
launched its second employee share
scheme. The company gave 4.3 million
shares to its employees resulting in
employee ownership of approximately 5%
of the company. This innovative share
scheme was created not only to increase
the circle of economic benefit of Sea
Harvest and align the interests of Sea
Harvest employees with all of those of all
other shareholders but ultimately to
promote empowerment and wealth-sharing
with employees.
Over the years Sea Harvest has always
displayed an appreciation and responsibility
to the community which it operates in.
From donations of fish product to financial
contributions of up to R20 000, Sea Harvest
continues to look for opportunities to
enhance the growth, development and
empowerment of Saldanha and the broader
West Coast community. This year, more
than R600 000 was invested in various
projects and initiatives in the areas of sport,
education, health, business and social
development throughout the area. It is
estimated that each one of the 2 545 staff
of Sea Harvest supports an average of 5
family members and thus the overall reach
supported by Sea Harvest’s employment is
circa 12 700 individuals, most of whom
reside on the West Coast.
Sustainability
Sea Harvest’s and the demersal hake
fishery’s participation in sustainable fishing
practices has been recently strengthened by
the industry’s recertification by the Marine
Stewardship Council (“MSC”) – the gold
standard in sustainability. This illustrates our
continued commitment to an ecosystems
approach to fishing and the efforts to
uphold the standards we have achieved
since our first certification in 2005. The
company’s increased contribution and participation in fishing for the future are further
highlighted where Sea Harvest as part of
the South African Deep-Sea Trawling
Industry Association have voluntarily
committed to various initiatives that go
above and beyond our MSC requirements
by ring-fencing previously trawled fishing
Sea Harvest’s electricity usage was relatively flat over the past year but there were
significant difficulties with the reliability of
supply as Saldanha underwent consistent
load shedding as part of Eskom’s grid stabilisation. Sea Harvest’s primary product is
perishable so cold storage is essential for
the sustainability of the business. The
company has installed a 700 KVA generator
at its main cold store to ensure that it can
maintain the integrity of its frozen stock
should there be extended power interruptions. There is also a contingency plan in
place for extended load shedding. In an
effort to reduce the company’s dependence
on Eskom there is a project in progress in
the Saldanha area for the installation of an
Open Cycle Gas Turbine Power Generating
facility utilising liquid natural gas for generating approximately 2.4 GW for feeding into
the grid. This in the future should enable the
West Coast area to run independent of the
Eskom generating facilities, but still utilising
the Eskom grid for distribution.
43
OUR HISTORY
OUR BUSINESS
Empowerment
CSI and Social Impact
grounds, and only fishing in those grounds
in an effort to prevent damage to the
benthic not previously trawled. Sea Harvest
will do its part and continue to ensure that
Cape Hake will be available for future generations. In support of its sustainability
activities on the water Sea Harvest continually tries to improve on its land-based sustainability. To date multiple plans are being
devised or are currently in place in an
attempt to reduce the company’s carbon
emissions primarily on its largest emitter –
its fishing vessels, recycle more and use less
water. As the annual quota of the company
decreases over the next couple of years it is
expected that the emissions will decrease
as it will have fewer vessels at sea. In the
interim, Sea Harvest is investigating modern
vessel and trawling technologies to keep its
fuel emissions under control. Recently a
Waste Economy Case Study undertaken on
Sea Harvest further reinforced what the
company already knew – its approach to
waste management reinforces its environmental conscience where the company
recycles approximately 60% of its waste.
GOVERNANCE
rights applicants. Sea Harvest currently
performs well in all these areas and the
company’s objective is to perform the same
if not better leading up to FRAP 2020 for
off-shore demersal hake. The company is
well placed to score favourably against the 4
pillars mentioned above in the FRAP 2020.
2015
2015
SUBSIDIARY REPORTS (CONTINUED)
Lion of Africa Insurance Company Limited
(“Lion of Africa” or “Lion”)
Introduction
OUR HISTORY
OUR BUSINESS
Lion of Africa is a South African non-life insurance company,
licensed by the Financial Services Board in terms of the
Short-Term Insurance Act No 53 of 1998 (“the Act”) on
23 August 1999. Since its inception, Lion of Africa has
dedicated itself to playing a leading role in empowerment and
transformation within the financial services sector, the
company is also the first South African short-term insurer to
achieve a Level 1 B-BBEE contributor status. Lion of Africa’s
short-term insurance activities have until recently c oncentrated
primarily in the corporate and commercial property, marine,
specialist engineering, casualty and personal lines markets.
It is the largest insurer to South Africa’s local authorities.
Lion’s Year Under Review
GOVERNANCE
Lion of Africa’s poor performance
continued during the year under review,
reporting a loss from operations of
R179 million (2014 – loss of R180 million).
In addition to challenging market
conditions, this loss is directly attributable
to a significant decrease in premium
income and large and attritional claims and
one-off charges incurred.
The significant decrease in premium
income is due to the following:
Credit rating downgrade
The credit rating downgrade by Standard
& Poor’s Ratings Services in the fourth
quarter of 2014 caused a reduction in the
corporate and large commercial business.
Most clients in these markets are required
to only place business with insurers that
hold a credit rating of above a certain level
and in the case of Lion of Africa the downgraded credit rating breached that
minimum. The impact of the credit rating
downgrade was not so severe in the local
authority market, where the company’s
Level 1 B-BBEE rating countenanced the
adverse credit rating. The company was
thus able to renew its full complement of
existing accounts.
44
Implementation of new Risk Appetite
Grid (“RAG”)
With a view of rebuilding the corporate
business in particular, the company has
established the Lion of Africa Underwriting
Company Limited which is underwritten by
Zurich Insurance Company South Africa
Limited. This enables Lion of Africa to write
corporate business on well rated paper in
terms of claims paying ability and continue
to leverage its strong B-BBEE credentials.
During the latter part of the 2015 financial
year a new RAG which improved underwriting acceptance criteria was developed
and implemented. The RAG provides
management with a clear and rigorous way
of identifying risks that fall outside of
Lion’s risk tolerance. This selection process
is applied upfront when selecting new risks
as well as at policy renewal stage. The
impact of the new RAG has already been
felt with the reduction in premium income
while claims volatility is expected to
decline markedly going forward.
Discontinuation of personal lines
business
Large and attritional claims and
one-off charges incurred:
The company decided to discontinue the
personal lines business during the 2015
financial year. The decision to exit this
market was taken due to the intense
competition, with the concomitant pricing
pressures, that now characterizes this
market and the cost of the required
technologies such as telematics. All plans
to discontinue this line of business were
discussed and accepted by the Financial
Services Board (“FSB”) as well as by the
broker partners. In fact, certain brokers
assisted the company with finding
alternative placement for the personal
lines business.
Claims
During the year under review, Lion had a
number of large claims in excess of
R5 million, with fire being the causal factor.
Although there was a reduction on the
previous year, once the reinsurance limit
has been reached the cost of reinstating
the reinsurance is significant. In addition,
a large number of attritional claims were
paid which is a remnant of past practices.
This unfortunate situation is expected to
continue for a while longer until the “tail”
of the unprofitable business previously
written has completely run-off. As
mentioned above, while this tail is runningoff new business is being written in terms
of strict underwriting parameters introduced by the new RAG.
2015
New Management Team
Following the departure of the Lion
executive team, either through resignation
or dismissal, Brimstone assigned one of its
executives and appointed a turnaround
team to stabilise the business and take
remedial action. This also entailed the
appointment of new external and internal
auditors. In addition, Brimstone introduced
R200 million in capital during the year
under review to maintain statutory
solvency while the turnaround strategy
is underway.
A new management team has been
appointed, comprising, Bongani Madikiza
(Chief Executive Officer), Anees Vazeer
(Chief Financial Officer) and Karin Kruger
(Chief Operating Officer).
CSI
The company’s CSI programme aspires to
cover and support the areas of education,
sport, social upliftment, health, and arts &
culture. Lion’s CSI spend for the financial
year amounted to approximately R50 000.
Engagement with the FSB
Skills Development
Lion realises the important role the FSB
plays in regulating the insurance industry
and ensuring compliance with the Act.
Consequently, a process of continuous
engagement with the FSB and sharing of
the company’s plans for returning the
business to profitability and ensuring
capital adequacy was embarked upon at
the inception of the turnaround process.
All role players are committed to not only
ensuring compliance with the Act but also
realise the importance of ensuring that
Lion as the only Level 1 B-BBEE rated
short-term insurer in the country succeeds
as a business.
Lion of Africa has, over the years,
supported skills development through
its offering learnership and graduate
programmes. Since inception, Lion has
trained over 200 learners. These learners
have now acquired technical skills in a
highly technical industry. They have gone
on to work for some of the larger insurance
companies as well as reinsurers in the
country. At its core, Lion’s philosophy is
one of transformation; and the up-skilling
of young minds delivers on that
philosophy.
45
OUR BUSINESS
In addition to the remedial action already
commenced by the turnaround team,
management has developed a focussed
strategy to return the company to profitability over the next few years. This strategy
does not only involve focussing the
business model and growth as discussed
below, but also the implementation of cost
saving initiatives without impairing Lion’s
ability to deliver a gold standard service
to clients.
GOVERNANCE
Significant effort was expended by the
turnaround team (discussed below),
including the Brimstone team, to clean up
the business and its accounting practices.
Consequently, a number of one-off charges
were processed to the income statement.
These expenses and impairments related
to software licences, retention bonuses for
key employees and the impairment of
software development costs and trade
receivables.
One-off charges
Lion has over the years made significant
inroads into the local authority market. It
is from this base that Lion is planning to
grow its market share further, including the
wider public sector. Management is also
acutely aware of Lion’s strong B-BBEE
credentials as a key differentiator in an
industry which is not adequately transformed. This not only positions Lion well
for growth in the public sector but will
enable the company to vigorously pursue
opportunities in the private sector, due to
the revision of the B-BBEE Codes of Good
Practice that places an increased emphasis
on procuring from black-owned businesses. Companies procuring from Lion is
able to claim 135% of spend in their own
B-BBEE score card.
OUR HISTORY
Growth Strategy
2015
GOVERNANCE REPORT
Governance and Stakeholder Engagement
Governance
OUR HISTORY
The highest governing body at Brimstone is 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.
OUR BUSINESS
GOVERNANCE
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,
but have decided not to disclose the overview of the evaluation
process, results and action plans in the integrated report due to
the 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
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, 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 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.
46
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 going concern status of the Company and the
Group.
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 other 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.
Composition of the Board
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.
The Board and subcommittees are evaluated 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.
Induction of directors
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 Companies Act and the JSE
Listings Requirements and the obligations it imposes 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.
Company Secretary’s role and responsibilities
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 member induction and training is provided where
appropriate. The Board has considered and satisfied itself on the
competence and qualifications of the Company Secretary.
OUR HISTORY
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.
Policy on trading in company securities
In accordance with the Listings Requirements, the Company has
adopted a Code of Conduct for insider trading. Directors and
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
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.
The Company Secretary is not a director of Brimstone and has an
arm’s length relationship with the Board and the directors.
OUR BUSINESS
Evaluation of the Board, board committees and
individual 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.
GOVERNANCE
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
previously served as Executive Deputy-Chairman since 2002) has
the required level of expertise and experience 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.
Board committees (see tables overleaf)
47
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.
2015
2015
GOVERNANCE REPORT (CONTINUED)
OUR HISTORY
Remuneration committee
OUR BUSINESS
Name
Role, purpose and principal functions
Key focus for the year under review
PL Campher
(chairman)
Appointed:
February 2012
–Determine, approve and develop the Company’s (a) general philosophy on
remuneration and (b) specific philosophy in respect of executive r emuneration
–Review and determine the remuneration packages of executives, including
bonus incentive schemes, increases and shares
–Prepare for inclusion in the Company’s integrated report a remuneration
report setting out the remuneration policy
–Review the general level of remuneration for directors of the Board, including
its committees. Put forward to the Board the necessary proposals in this
respect for final approval by shareholders at annual general meeting
–Approve appointments and promotions of senior executives
–Annually review the effectiveness of the Company’s Code of Conduct
–Evaluate cases of unethical behaviour by senior managers and executives of
the Company
–Regularly review the Company’s Code of E
thics
–The approval of amendments to the Brimstone Group’s share schemes
–Ensure the Company has proper succession p
lanning in place. Put forward to
the Board the necessary proposals
–Make recommendations to the Board in respect of senior management
succession and senior talent development and education
–Reviewed long-term and
short-term incentive payments
to executive directors and
management
–Reviewed bonus calculations
against approved targets
–Reviewed remuneration report
for inclusion in the integrated
report before recommending
to the Board for approval
–Reviewed management’s
recommendations on proposed increases to non-
executive directors fees for
review by the Board and then
approval by shareholders
–Approved annual salary
increases for staff
–The audit and risk committee shall provide an open avenue of communication
between the internal auditors, external auditors, and the Board
–Consider in consultation with external and internal auditors, their audit scope
and plans
–Review with the head of internal audit and the representative of the external
auditors the co-ordination of audit effort to ensure completeness of c overage,
reduction of redundant efforts and effective use of audit resources
–The audit and risk committee shall review with the internal and the external
auditors:
•The adequacy and effectiveness of the Company’s internal controls,
including computerised information system controls and security;
•The quality of financial information produced to ensure integrity and reliability;
•Compliance with the requirements for audit and risk committees as set out
by the King Report on Corporate Governance;
•Any related significant findings and recommendations of the internal and
external auditors together with management’s responses thereto;
• The effectiveness of the risk management process
•Oversee the external audit function and internal audit function
•Examine and review the interim and annual financial statements before
submission to the Board and prior to public announcements
–To review significant cases of employee conflicts of interest, misconduct or fraud
–Considers other topics as defined by the board of directors from time to time
and to investigate any activity which the audit and risk committee, in its sole
discretion, considers to fall within the scope of its powers
–Review the Risk Management Policy for approval by the Board annually
–Review policies and procedures with respect to senior executive discretionary
expenditure including their expense accounts, prerequisites and use of
corporate assets and consider the results of any review of these areas by the
internal or external auditors.
–Obtain the requisite resources for the effective discharge of its responsibilities.
–Review the expertise, resources and experience of the Company’s finance
function, including satisfying itself of the suitability, expertise and experience
of the Chief Financial Officer and disclose the results of the review in the
integrated report
–The committee also considers and satisfies itself of the suitability of the
expertise and experience of the Financial Director annually required by the
JSE Listings Requirements.
See the full audit and risk
committee report on page 55.
MJT Hewu
Appointed:
July 2013
MK Ndebele
Appointed:
February 2007
N Khan
(chairman)
Date first
appointed:
January 1999
GOVERNANCE
Audit and Risk Committee
PL Campher
Date first
appointed:
November 2006
48
LA Parker
Date first
appointed:
January 1999
KR Moloko
Date first
appointed:
November 2013
F Roman
Date first
appointed:
May 2009
Role, purpose and principal functions
Key focus for the year under review
MJT Hewu
(chairman)
Appointed:
July 2013
–Review the structure, size and composition of the Board
–Make recommendations to the Board with regard to the appointment of new
directors
–Identify and nominate candidates to fill board vacancies
–Ensure that formal succession plans for the Chairman, CEO, FD and senior
management are developed and implemented
–Review board charter and the committee charter
–Reviewed and monitored
implementation of s uccession
plans for executive directors
and senior management
–Reviewed profiles of directors
coming up for r e-election at
annual general meeting
–Reviewed composition of
board committees
–Provide advice to the Board regarding investment principles, objectives and
guidelines
–Considers and recommends to the Board proposals for the investment of
financial resources in new enterprises that are of strategic interest to the
Company
–Advises the Board on policy regarding borrowings, and recommend action to
be taken within established policy in relation to requirements per the
Company’s delegated levels of authority
–The investment committee, in carrying out its tasks under its terms of
reference, may obtain such independent professional advice as it considers
necessary to effectively carry out its duties
– Impact of investments on cash resources
–Considered and recommended
to the Board the annual yearend valuation of investments
–Considered and recommended
to the Board the Intrinsic Net
Asset Values of investments
–Considered and accepted
management’s recommendations for changes to delegated
levels of authority relating to
guarantees and borrowings for
recommendation to the Board
–Considered and approved further
capitalisation of Lion of Africa
–Considered the Company’s exit
from the Nedbank and Old
Mutual BEE transactions
–Considered and approved
proposals for participation in
Oceana Group Limited and
Taste Holdings Limited rights
offers
–Considered and approved
further investments in
Phutuma Nathi and Grindrod
–Monitored the Company’s
compliance with debt
covenants in respect of its
borrowing facilities
–Monitors the Company’s activities, having regard to any relevant legislation,
other legal requirements or prevailing codes of best practice
–Considers and ensures appropriate resources and committees are in place to
ensure transformation within the Group
–Ensures the promotion of equality, prevention of unfair discrimination and
reduction of corruption within the Group
–Monitors targets in respect of Broad-Based Black Economic Empowerment
Act within the Group
–Considers and ensures appropriate programmes are in place in respect of CSI
targets within the Group
–Assists the Board in ensuring that the Company’s ethical standards are
integrated into all the Company’s strategies and operations
See the full social and ethics
committee report on page 51.
PL Campher
Appointed:
February 2012
F Robertson
(chairman)
Appointed:
February 2013
MA Brey
Appointed:
November 2012
PL Campher
Appointed:
November 2012
N Khan
Appointed:
November 2012
GOVERNANCE
LA Parker
Appointed:
August 2013
OUR BUSINESS
MK Ndebele
Appointed:
February 2007
N Khan
Appointed:
February 2007
Investment committee
OUR HISTORY
Name
PL Campher
(chairman)
Appointed:
August 2006
Social and Ethics Committee
2015
Nominations committee
49
2015
GOVERNANCE REPORT (CONTINUED)
Directors’ attendance at meetings
Possible
Attended
Attended
Attended
F Robertson
5
5
—
—
—
—
—
—
—
—
2
2
LZ Brozin
5
5
—
—
—
—
—
—
—
—
—
—
MA Brey
5
5
—
—
—
—
—
—
—
—
2
2
PL Campher
5
5
3
3
4
4
3
3
3
3
2
2
MJ Hewu
5
4
—
—
—
—
3
3
3
3
—
—
N Khan
5
5
3
3
4
3
—
—
—
—
2
2
MK Ndebele
5
4
—
—
—
—
3
3
3
3
—
—
LA Parker
5
5
3
3
4
4
—
—
—
—
—
—
K Moloko
5
5
3
3
—
—
—
—
—
—
—
—
FD Roman
5
4
3
2
—
—
—
—
—
—
—
—
Possible
Possible
OUR BUSINESS
Attendance
by directors
Attended
Social and
Ethics Committee
Possible
Nominations
Committee
Attended
Remuneration
Committee
Possible
Investment
Committee
Attended
Audit Committee
Possible
OUR HISTORY
Board
Stakeholder Engagement
Prescribed engagement activities
JSE SENS announcements*
The publication of our interim and annual results in printed media
The distribution of our integrated report and notice of AGM
Posting of our interim and annual financial results on our website
Our AGM and other shareholder meetings
Targeted groupings
All
All
All
All
All ordinary shareholders
GOVERNANCE
*The JSE’s exchange includes an investor service to facilitate a listed company’s prescribed and voluntary disclosures to the general investor public. SENS is an acronym for
Stock Exchange News Service.
Proactive engagement activities
Bi-annual results presentations posted on our website
Actively participated at the SBG Securities Financials Group conference in 2015
Responded where necessary to analyst and media reports to improve accuracy
Press announcements, together with media interviews for interim and annual results
Our website provides a wide range of information, including dividend announcements, SENS
announcements, share price information and our integrated report
Target groupings
Institutional investors
Analysts and financial media
Asset managers and analysts
Analysts and financial media
All
All
2016 Investor diary
Ordinary shareholders
2015 Annual financial results
2015 Dividend payment
Annual general meeting
2016 Interim results
50
29 February
25 April
9 May
24 August
2015
SOCIAL AND ETHICS COMMITTEE REPORT
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.
The committee’s role and responsibilities
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.
–
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.
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.
Detailed information on the irregularities and fraud at Lion of Africa
appears on page 56.
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.
51
OUR BUSINESS
Composition of the committee
GOVERNANCE
The current members are as follows:
F Robertson (chairman)
MA Brey
PL Campher
N Khan
Membership
OUR HISTORY
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 2015.
2015
REMUNERATION REPORT
This report deals with matters covered by the remuneration committee.
Remuneration policy
OUR HISTORY
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. Executive directors, top and senior managers 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. In determining
the annual bonuses to be paid and forfeitable shares to be awarded, the Company utilises the services of external consultants and auditors to
compute or verify the correctness of payments or awards. These reports are presented to the Remuneration Committee for consideration. That
Committee in turn recommends payments or awards to the board of directors for final approval.
Executive directors’ remuneration
OUR BUSINESS
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.
2015
R’000
Paid by the Company
Name
MA Brey
F Robertson
LZ Brozin
Basic salary
2 431
2 482
2 537
7 450
Bonus
2 142
2 142
2 142
6 426
Other
benefits*
344
319
228
891
Paid by Subsidiaries – for services as directors
MA Brey
F Robertson
GOVERNANCE
215
512
727
15 494
Total – Executive directors
2014
Paid by the Company
Name
MA Brey
F Robertson
LZ Brozin
Paid by Subsidiaries – for services as directors
MA Brey
F Robertson
Total – Executive directors
* Company contributions to retirement fund and medical aid.
52
Total
4 917
4 943
4 907
14 767
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
Total
4 042
4 042
4 042
12 126
204
495
699
12 825
2015
Non-executive directors’ remuneration
2014
Paid by Company
Name
PL Campher
MJT Hewu
N Khan
MK Ndebele
K Moloko
LA Parker
F Roman
Paid by Subsidiaries
PL Campher
N Khan
Total – Non-executive directors
Total – Directors’ remuneration
38
38
76
1 425
—
—
—
943
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
34
34
68
1 086
—
—
—
742
34
34
68
1 828
14 653
Total
644
298
364
272
221
289
204
2 292
38
38
76
2 368
17 862
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.
53
OUR BUSINESS
Total – Non-executive directors
Total – Directors’ remuneration
Committee
fees
315
128
194
102
51
119
34
943
GOVERNANCE
Paid by Subsidiaries
PL Campher
N Khan
Board fees
329
170
170
170
170
170
170
1 349
2015
R’000
Paid by Company
Name
PL Campher
MJT Hewu
N Khan
MK Ndebele
K Moloko
LA Parker
F Roman
OUR HISTORY
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.
2015
REMUNERATION REPORT (CONTINUED)
Share incentive scheme
OUR HISTORY
The share option scheme was discontinued with effect from 1 January 2015. Up to this date, share option allocations to directors, top and senior
managers were considered periodically. The Brimstone Investment Corporation 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. The Company adopted a
forfeitable share plan which was approved by shareholders on 18 December 2014. In terms of the forfeitable share plan, executive directors, top
and senior managers will be awarded performance shares in the Company. The performance shares are linked to a requirement of continued
employment over the prescribed period, the Company’s performance and strategic, individual performance conditions which have to be met.
Share Option details of executive directors
“N” Ordinary Shares
2015
Name
OUR BUSINESS
MA Brey
LZ Brozin
F Robertson
2014
Name
GOVERNANCE
MA Brey
LZ Brozin
F Robertson
Balance at
31 Dec 14
Number
Granted
during the
year
Number
Exercise
Price
Cents
Date of
Grant
Expiry
Date
471 540
434 320
434 320
1 340 180
—
—
—
—
—
—
—
—
—
—
—
—
27 Feb 20
27 Feb 20
27 Feb 20
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
Exercise
Price
Cents
Date of
Grant
Expiry
Date
1 300 24 Feb 2014
1 300 24 Feb 2014
1 300 24 Feb 2014
27 Feb 20
27 Feb 20
27 Feb 20
“N”
Ordinary
shares
No.
Exercise
price
Cents
—
—
239 500
100 000
339 500
1 300
1 400
Share Option details of staff
There were no share options granted to staff during 2015.
The following options were granted to staff during 2014:
Shares awarded in terms of the forfeitable share plan
MA Brey
F Robertson
LZ Brozin
Staff
54
182 063
182 063
182 063
303 173
849 362
Exercised
during
the year
Number
Gain on
exercise
of share
options
R’000
Balance
at
31 Dec 15
Number
Exercisable
at
31 Dec 15
Number
181 580
164 500
165 420
511 500
1 983
1 854
1 830
5 667
289 960
269 820
268 900
828 680
—
—
—
—
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
—
—
—
—
2015
AUDIT AND RISK COMMITTEE REPORT
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.
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.
Composition of the committee and attendance
at meetings
Committee member
N Khan (chairman)
PL Campher
KR Moloko
LA Parker
FD Roman
Number of
meetings held
Number of
meetings
attended
3
3
3
3
3
3
3
3
3
2
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.
In the case of Lion of Africa, a wholly-owned subsidiary, its own
audit committee comprises three independent non-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 the external auditor;
–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.
Appointment of external and internal auditors
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’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.
OUR BUSINESS
Committee members and attendance at meetings
GOVERNANCE
The members of the committee were recommended by the Board
and appointed by shareholders for the 2015 financial year.
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.
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.
OUR HISTORY
Introduction
55
2015
AUDIT AND RISK COMMITTEE REPORT (CONTINUED)
OUR HISTORY
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.
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.
The committee chairman meets at least three times per year with
both internal and external audit without management being present.
Irregularities and fraud at Lion of Africa
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.
During the year under review it was discovered that fraud was being
perpetrated at Lion of Africa Insurance Company Limited. Five
executives were either dismissed or resigned and a turnaround team
was appointed. In addition, ENS Forensics (Pty) Limited was
appointed to carry out a forensic investigation.
Internal financial controls
OUR BUSINESS
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 material loss and that
transactions are properly authorised and recorded.
Expertise and experience of the Financial Director,
Chief Financial Officer and finance function
GOVERNANCE
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
consolidated annual financial statements and is satisfied that they
comply with International Financial Reporting Standards and the
requirements of the Companies Act, and that the accounting policies
used are appropriate.
The investigation revealed a number of irregularities and fraudulent
activities which gave rise to a duty to report in terms of the
Prevention and Combatting of Corrupt Activities Act. Consequently
cases have been opened with the South African Police Service. In
addition, recovery proceedings are underway to recover losses
suffered by the company from various parties.
Control weaknesses which were exploited in respect of the identified
irregularities have been addressed and the control environment at
Lion of Africa has been improved to prevent a recurrence of such
irregularities.
Compliance
The committee is responsible for reviewing any major breach of
relevant legal, regulatory and other responsibilities. The committee
is satisfied with the 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 consolidated annual
financial statements, and has recommended it for approval by the
Board.
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.
N Khan
Chairman of the Audit and Risk Committee
15 March 2016
56
2015
OUR HISTORY
CONTENTS
Directors’ Approval of Annual Financial Statements,
Preparation of Annual Financial Statements
Independent Auditor’s Report . . . . . . . . . . . . . . . . . . . . . . . . . 59
Directors’ Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
Statements of Other Comprehensive Income . . . . . . . . . . . 62
Statements of Financial Position. . . . . . . . . . . . . . . . . . . . . . . 63
Statements of Changes in Equity . . . . . . . . . . . . . . . . . . . . . . 64
Statements of Cash Flows. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
Notes to the Annual Financial Statements. . . . . . . . . . . . . . 66
SUPPLEMENTARY REPORTS ON
INVESTMENTS
Interest in Subsidiaries (Appendix 1) . . . . . . . . . . . . . . . . . . 132
GOVERNANCE
AUDITED
ANNUAL
FINANCIAL
STATEMENTS
Income Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
OUR BUSINESS
and Certificate by Secretary. . . . . . . . . . . . . . . . . . . . . . . . . . . 58
Investments in Associate Companies and
Joint Ventures (Appendix 2). . . . . . . . . . . . . . . . . . . . . . . . . . 134
Valuation of Option (Appendix 4). . . . . . . . . . . . . . . . . . . . . 136
Directors’ Interests in Shares (Appendix 5) . . . . . . . . . . . . 137
Shareholding Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . 138
Notice of Annual General Meeting . . . . . . . . . . . . . . . . . . . . 141
Curriculum Vitae. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 145
Corporate Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 146
Proxy Form. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 147
57
Investments (Appendix 3). . . . . . . . . . . . . . . . . . . . . . . . . . . . 135
2015
DIRECTORS’ APPROVAL OF ANNUAL FINANCIAL STATEMENTS,
PREPARATION OF ANNUAL FINANCIAL STATEMENTS AND
CERTIFICATE BY SECRETARY
OUR HISTORY
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 reported on by our auditors in
conformity with International Standards on Auditing. The
consolidated and separate annual financial statements for the year
ended 31 December 2015 which appear on pages 55 and 56 and
60 to 140 were approved by the Board and authorised for issue on
15 March 2016.
OUR BUSINESS
On behalf of the Board:
F Robertson
Executive Chairman
MA Brey
Chief Executive Officer
Preparation of financial statements
GOVERNANCE
The consolidated and separate annual financial statements of
Brimstone Investment Corporation Limited for the year ended
31 December 2015 have been prepared and supervised by LZ Brozin
(Financial Director) BCom BAcc CA(SA) and M O’Dea (Chief
Financial Officer) BCom CA(SA).
58
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
15 March 2016
2015
INDEPENDENT AUDITOR’S REPORT
to the Shareholders of Brimstone Investment Corporation Limited
Auditor’s Responsibility
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 judgement, 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 2015, 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.
OUR HISTORY
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.
Report on Other Legal and Regulatory Requirements
In terms of the Independent Regulatory Board for Auditors (IRBA)
Rule published in Government Gazette Number 39475 dated
4 December 2015, we report that Deloitte & Touche has been the
auditor or joint auditor of Brimstone Investment Corporation Limited
for 20 years. Deloitte & Touche and two other firms were the joint
auditors for 4 years from 1998 to 2001.
OUR BUSINESS
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
preparation of financial statements that are free from material
misstatement, whether due to fraud or error.
As part of our audit of the consolidated and separate financial
statements for the year ended 31 December 2015, 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.
Deloitte & Touche
Registered Auditor
Per: LP Cotten
Partner
GOVERNANCE
Directors’ Responsibility for the Financial Statements
Other reports required by the Companies Act
15 March 2016
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 *N Sing Risk Advisory
*NB Kader Tax TP Pillay Consulting S Gwala BPaaS *K Black Clients
and Industries *JK Mazzocco Talent and Transformation *MJ Jarvis
Finance *M Jordan Strategy *MJ Comber Reputation & Risk
*TJ Brown Chairman of the Board
Regional Leader: MN Alberts
We have audited the consolidated and separate annual financial
statements of Brimstone Investment Corporation Limited as set
out on pages 62 to 137, which comprise the statements of financial
position as at 31 December 2015, and the income statements,
statements of other 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.
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
Associate of Deloitte Africa, a Member of Deloitte Touche
Tohmatsu Limited
59
2015
DIRECTORS’ REPORT
OUR HISTORY
Principal activities of the Group
Share capital
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.
The following share movements occurred during the year under
review:
Ordinary “N” Ordinary
Review of operations
Dividend
Shares issued
9 March 2015
30 April 2015
17 June 2015
2 September 2015
Brimstone’s board has declared a final dividend of 35 cents per share
for the year ended 31 December 2015 (2014 – 30 cents per share)
payable on Monday, 25 April 2016. The final dividend has been
declared out of income reserves.
Shares repurchased
November 2015
December 2015
The results for the year under review are set out in the attached
financial statements.
OUR BUSINESS
In compliance with the requirements of Strate, the Company has
determined the following salient dates for the payment of the final
dividend:
Last day to trade cum dividend. . . . . . . . . . . . . . . . . . Friday, 15 April 2016
Shares commence trading ex dividend. . . . . . . . . Monday, 18 April 2016
Record date. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Friday, 22 April 2016
Payment date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Monday, 25 April 2016
Shares may not be rematerialised or dematerialised from Monday,
18 April 2016 to Friday, 22 April 2016, both days inclusive.
The final dividend is subject to a local Dividends Tax at 15%. The net
local dividend amount is 29.75 cents per share for s hareholders liable
to pay Dividends Tax and 35 cents per share for shareholders exempt
from paying Dividends Tax.
GOVERNANCE
The number of Brimstone Ordinary and “N” Ordinary shares eligible
for the final dividend at the date of this declaration is 42 757 604 and
204 963 200 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 BroadBased BEE Trust which are not eligible to receive dividends) and the
Company’s tax reference number is 9397002719.
Voting rights
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.
Shares repurchased and cancelled
12 March 2015
1 715 748
62 160
55 440
238 892
(624 367)
(3 328 720)
(387 831)
50 000
(3 835 621)
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 April 2015, 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
shareholders on page 141.
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 132.
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 137. Details of the director’s interest in options held in
terms of the Company’s share incentive scheme are set out on page 111.
Insurance, interest rate and currency risk management
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.
60
2015
Special resolution
Changes to the Board
At the annual general meeting held in April 2015, 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.
Mr Lawrie Brozin, currently Financial Director of Brimstone will not be
standing for re-election at the Company’s upcoming annual general
meeting on 9 May 2016 and will retire as Financial Director on that
day. Lawrie joined the Company in 1996 and has played a valuable
role in the growth of Brimstone.
Going concern
The directors believe that the Group and Company will be a going
concern for the foreseeable future.
Directors and secretary
The names of the directors in office at the date of this report appear
on page 146 of this integrated report. MA Brey, MJT Hewu,
MK Ndebele and FD Roman are due to retire by rotation in terms
of the Company’s MOI and, being eligible, offer themselves for
re-election.
Audit and risk committee report
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
55 to 56 of the integrated report.
Events subsequent to 31 December 2015
There are no significant subsequent events affecting these results.
Litigation
There is no material litigation outstanding for the Company or its
subsidiaries.
GOVERNANCE
The company secretary’s name and her business and postal address
appear on page 146 of this integrated report.
The following new appointments will be made, effective 9 May 2016:
–Mr Geoffrey George Fortuin will be appointed as
Financial Director
–Mr Mohamed Iqbal Khan will be appointed as Chief Operating
Officer and Executive Director
OUR BUSINESS
The non-executive directors’ fees for the year ended 31 December
2015 were also approved by special resolution at the annual general
meeting held in April 2015.
OUR HISTORY
61
2015
INCOME STATEMENTS
GROUP
OUR HISTORY
R’000
Notes
Revenue
Sales and fee income
Dividends received
Operating expenses
Operating profit
Fair value (losses)/gains
Exceptional items
Share of losses of associates and joint ventures
OUR BUSINESS
(Loss)/profit before finance costs
Income from investments
Finance costs
Outside unit holders’ interest
Net (loss)/profit before taxation
Taxation
2
3
4
5
6
8
9
10
(Loss)/profit for the year
(Loss)/profit attributable to:
Equity holders of the parent
Non-controlling interests
GOVERNANCE
(Loss)/earnings per share (cents)
Basic
Diluted
Year ended
31 December
2015
COMPANY
Year ended
31 December
2014
Year ended
31 December
2015
Year ended
31 December
2014
2 208 137
1 899 954
308 183
(2 022 394)
2 221 054
1 968 233
252 821
(2 119 196)
105 799
14 782
91 017
(73 926)
438 284
24 743
413 541
(95 110)
185 743
(429 562)
32 846
(341 545)
101 858
463 967
(28 286)
(65 431)
31 873
(25 516)
(125 545)
—
343 174
356 252
(215 514)
—
(552 518)
30 991
(224 237)
—
472 108
23 028
(188 182)
(449)
(119 188)
15 305
(1 658)
—
483 912
9 967
(19 863)
—
(745 764)
77 625
306 505
(28 712)
(105 541)
38 659
474 016
52 045
(668 139)
277 793
(66 882)
526 061
(698 978)
30 839
(668 139)
259 050
18 743
277 793
12
(284.8)
(284.8)
105.8
90.4
STATEMENTS OF OTHER COMPREHENSIVE INCOME
GROUP
R’000
Notes
(Loss)/profit for the year
Other comprehensive (loss)/income, net of tax
Items that may be reclassified subsequently to profit or loss
Cash flow hedges
(Loss)/profit arising during the year
Share of non-distributable reserves of associates
Net value loss on available-for-sale financial asset
Items that will not be reclassified subsequently to profit or loss
Total comprehensive (loss)/income for the year
Total comprehensive (loss)/income attributable to:
Equity holders of the parent
62
Year ended
31 December
2015
COMPANY
Year ended
31 December
2014
(668 139)
188
277 793
17 991
(98 115)
89 171
—
33 878
—
(15 887)
9 132
—
Year ended
31 December
2015
(66 882)
—
Year ended
31 December
2014
526 061
—
—
—
—
—
—
—
—
—
(667 951)
295 784
(66 882)
526 061
(657 955)
(9 996)
(667 951)
269 739
26 045
295 784
(66 882)
—
(66 882)
526 061
—
526 061
2015
STATEMENTS OF FINANCIAL POSITION
at 31 December 2015
Current assets
Inventories
Trade and other receivables
Insurance assets
Other financial assets
Taxation
Investments
Cash and cash equivalents
Year ended
31 December
2015
Year ended
31 December
2014
5 996 570
499 942
12 140
92 455
—
1 114 419
4 044 276
25 489
204 057
3 792
5 407 395
410 827
12 140
114 400
—
1 067 131
3 636 528
—
166 369
—
1 755 374
1 941
—
—
1 353 038
12 286
358 828
25 489
—
3 792
1 137 448
1 713
—
—
722 932
6 763
406 040
—
—
—
1 656 025
258 831
604 366
532 498
2 456
8 500
—
249 374
2 525 671
265 616
633 801
561 516
—
14 222
828 897
221 619
42 081
—
31 109
—
2 456
3 914
—
4 602
886 256
—
27 779
—
—
—
808 939
49 538
7 652 595
7 933 066
1 797 455
2 023 704
27
2 626 972
41
427 049
14 143
(42 414)
(11 839)
2 143 330
2 530 310
96 662
3 434 405
45
342 032
14 143
14 922
(11 839)
2 965 681
3 324 984
109 421
1 107 202
45
372 452
1 730
—
—
732 975
1 107 202
—
1 346 964
45
361 985
1 730
—
—
983 204
1 346 964
—
28
16
29
30
22
31
3 387 466
2 624 018
—
25 427
—
270 525
467 496
2 930 119
2 040 451
—
23 103
3 490
223 695
639 380
651 854
—
651 854
—
—
—
—
617 651
—
537 995
—
3 490
—
76 166
1 638 157
174 003
21 644
508 884
226 484
685 787
—
—
19 180
2 175
1 568 542
130 700
14 815
548 646
106 251
732 794
16 145
220
18 172
799
38 399
—
134
1 842
36 423
—
—
—
—
—
59 089
—
11
6 129
52 729
—
—
220
—
—
7 652 595
7 933 066
1 797 455
2 023 704
1 044.0
242 371
1 356.3
245 151
Notes
13
14
15
16
17
18
31
22
19
20
21
22
19
18
TOTAL ASSETS
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
Non-current liabilities
Long-term interest bearing borrowings
Interest in subsidiaries
Long-term provisions
Other financial liabilities
Insurance liabilities
Deferred taxation
Current liabilities
Short-term interest bearing borrowings
Bank overdrafts
Trade payables
Other payables
Short-term provisions
Taxation
TOTAL EQUITY AND LIABILITIES
Net asset value per share (cents)
Shares in issue at end of year (000’s)
23
24
25
26
32
33
22
30
29
63
OUR HISTORY
Year ended
31 December
2014
OUR BUSINESS
ASSETS
Non-current assets
Property, plant, equipment and vehicles
Goodwill
Intangible assets
Investments in associate companies and joint ventures
Investments
Deferred taxation
Insurance assets
Year ended
31 December
2015
GOVERNANCE
R’000
COMPANY
GROUP
2015
STATEMENTS OF CHANGES IN EQUITY
OUR HISTORY
Cash
flow
hedging
reserve
Retained
earnings
Attributable to
equity
holders
of the
parent
Noncontrolling
interests
Total
(11 839) 2 905 630
3 237 646
134 474
3 372 120
Changes
in
ownership
OUR BUSINESS
GOVERNANCE
Share
capital
Capital
reserves
Revaluation
reserves
Balance at 1 January 2014
Attributable profit for the year
ended 31 December 2014
Other comprehensive (loss)/income
Total comprehensive (loss)/income
Recognition of share-based payments
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 s ubsidiary for
change in shareholding
Reduction of subsidiary’s share capital
Issue of share capital
Repurchase of trust units
transferred directly to equity
45
325 434
23 223
(4 847)
—
—
—
—
—
—
—
—
—
—
—
10 570
—
—
—
—
—
(9 080)
(9 080)
—
—
—
—
—
—
19 769
19 769
—
—
—
—
—
—
—
—
—
—
—
—
—
259 050
—
259 050
—
(97 939)
—
—
(58 945)
259 050
10 689
269 739
10 570
(97 939)
—
—
(58 945)
18 743
7 302
26 045
—
(3 000)
7 611
(26 804)
—
277 793
17 991
295 784
10 570
(100 939)
7 611
(26 804)
(58 945)
(42 115)
—
—
—
(42 115)
—
4 597
(744)
(29 953)
(6)
—
651
(72 068)
(6)
4 597
(93)
Balance at 31 December 2014
Attributable (loss)/profit for the year
ended 31 December 2015
Other comprehensive income/(loss)
Total comprehensive income/(loss)
Dividend paid
Subsidiary’s accrual for preference dividends
Non-controlling interest arising on recognition
of subsidiary
Acquisition of non-controlling interest in subsidiary
Sale of trust units
Treasury shares acquired
Share of non-distributable reserves of
associates transferred directly to equity
R’000
GROUP
—
—
—
—
—
—
4 597
(744)
—
—
—
—
—
—
—
—
—
—
—
—
—
2 175
—
—
—
45
342 032
14 143
14 922
—
—
—
—
—
—
—
98 359
98 359
11 615
—
—
—
—
—
—
—
—
—
—
—
—
(4)
—
—
11 526
—
(51 958)
—
—
—
—
—
—
41
15 475
427 049
—
14 143
Balance at 1 January 2014
Attributable profit for the year ended
31 December 2014
Dividend paid
Specific repurchase of shares
49
382 510
1 730
—
—
871 887
—
—
(4)
—
—
—
—
(35 692)
4 597
10 570
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
526 061
(110 086)
(304 658)
—
—
Attributable loss for the year ended
31 December 2015
Dividend paid
45
361 985
1 730
—
—
983 204
—
—
—
—
—
45
—
—
(10 216)
9 068
11 615
372 452
—
—
—
—
—
1 730
—
—
—
—
—
—
—
—
—
—
—
—
—
(57 336)
(57 336)
—
—
—
—
—
—
—
—
(42 414)
—
2 175
403
2 578
(11 839) 2 965 681
3 324 984
109 421
3 434 405
—
—
—
—
—
—
—
—
—
—
—
(698 978)
—
(698 978)
—
(123 373)
—
—
—
—
—
—
—
—
(11 839) 2 143 330
(698 978)
41 023
(657 955)
11 615
(123 373)
—
30 839
(40 835)
(9 996)
—
(27 767)
7 983
(668 139)
188
(667 951)
11 615
(151 140)
7 983
—
—
11 526
—
(51 962)
123 078
(108 343)
1 748
538
—
123 078
(108 343)
13 274
538
(51 962)
15 475
2 530 310
—
96 662
15 475
2 626 972
1 256 176
—
1 256 176
COMPANY
64
526 061
(110 086)
(340 354)
4 597
10 570
1 346 964
(66 882)
(66 882)
(123 682) (123 682)
(59 665)
(69 881)
—
9 068
—
11 615
732 975 1 107 202
—
—
—
—
—
526 061
(110 086)
(340 354)
4 597
10 570
—
1 346 964
—
—
—
—
—
—
(66 882)
(123 682)
(69 881)
9 068
11 615
1 107 202
2015
STATEMENTS OF CASH FLOWS
34.1
34.2
34.3
Year ended
31 December
2014
(668 139)
277 793
(66 882)
526 061
231 397
(229 026)
429 562
—
11 994
23 396
214 279
(77 625)
80 741
11 615
(44 841)
3 332
(4 464)
(17 779)
6 785
(6 031)
(16 145)
(20 334)
(8 670)
(177)
(62 351)
30 991
110 148
198 035
—
(77 979)
(173 877)
24 967
(21 498)
(188 920)
(463 967)
—
28 286
22 355
188 182
28 712
71 325
10 570
—
2 072
547
(44 543)
(14 968)
30 983
(2 703)
(13 192)
(60 326)
152 923
48 174
23 028
86 929
165 892
—
(17 184)
(143 509)
163 330
—
(106 322)
25 516
179 644
—
—
1 658
(38 659)
721
11 615
(54 099)
—
(37)
(46 845)
—
(3 330)
—
(20 593)
—
—
(70 768)
5 347
—
13 409
77 608
(59 835)
(1 658)
(35 898)
—
(423 508)
(356 252)
—
—
—
19 863
(52 045)
682
10 570
—
—
—
(274 629)
—
(7 830)
—
23 643
—
—
(258 816)
9 967
—
2 066
411 475
(852)
(9 508)
154 332
—
21 756
955 628
7 080
(172 472)
(1 451)
(1 209 785)
(399 244)
—
3 253
48 701
542
(204 893)
(1 156)
(754 591)
(908 144)
(402 882)
21 756
632 742
140
(1 052)
—
(75 371)
175 333
192 179
3 129
198 947
—
(856)
—
(21 521)
371 878
(151 140)
(689 879)
1 274 372
(51 962)
13 812
—
—
—
—
6 829
402 032
27 755
221 619
(130 892)
(342 716)
1 275 813
—
4 597
(6)
(24 579)
(42 115)
(93)
(34 789)
705 220
(39 594)
261 213
(123 682)
—
—
(69 881)
9 068
—
—
—
—
123
(184 372)
(44 936)
49 538
(110 086)
—
—
(340 354)
4 597
—
—
—
—
(32 879)
(478 722)
47 488
2 050
249 374
221 619
4 602
49 538
65
OUR HISTORY
Year ended
31 December
2015
OUR BUSINESS
Operating activities
Net attributable (loss)/profit
Adjustments for:
Share of losses/(profits) of associates and joint ventures
Decrease/(increase) in fair value of investments
Impairment of loan to subsidiary
Impairment of investment in associate
Amortisation and impairment of intangible assets
Finance costs
Taxation
Depreciation of property, plant, equipment and vehicles
Share-based payment expense
Realised profit on disposal of associate
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
Decrease/(increase) in inventories
(Increase)/decrease in trade and other receivables
(Decrease)/increase in trade and other payables
Net increase in insurance assets
Net (decrease)/increase in insurance liabilities
Cash (used in)/generated from operations
Interest received
Dividends received from associates and joint ventures
Dividends received from other equity investments
Dividends received from subsidiaries
Income taxes paid
Finance costs
Net cash generated from/(used in) operating activities
Investing activities
Cash effect of change in investment in subsidiaries
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 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
Increase/(decrease) in bank overdrafts
Net cash generated from/(used in) financing activities
Net increase/(decrease) 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
Notes
Year ended
31 December
2014
GOVERNANCE
R’000
Year ended
31 December
2015
COMPANY
GROUP
2015
NOTES TO THE ANNUAL FINANCIAL STATEMENTS
1.Accounting policies and basis of preparation
OUR HISTORY
The consolidated (or “Group”) 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 Pronouncements issued by 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.
OUR BUSINESS
The principal accounting policies are:
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.
GOVERNANCE
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
non-controlling 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 m
easurement 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
66
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 amount of the assets (including
goodwill) and liabilities of the s ubsidiary and any non-controlling interests. Amounts p
reviously recognised in other
comprehensive income in relation to the s ubsidiary 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 s ubsidiary 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.
1.2 Subsidiary companies
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.
1.3 Business combinations
Acquisitions of subsidiaries and businesses are accounted
for using the acquisition method. The c onsideration 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. Acquisitionrelated 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 c ontingent 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.
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.
1.4 Investments in associates
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.
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.
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.
OUR BUSINESS
The Company’s interest in associates is carried in the
statement of financial position at cost less amounts
written off when the directors believe that there has been
a permanent d
iminution in value.
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.
1.6Goodwill
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 d
etermination of the profit or loss on disposal.
67
GOVERNANCE
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 sharebased 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.
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 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 r ecognised in profit or loss. Amounts arising from
interests in the acquiree prior to the acquisition date that
have previously been r ecognised in other comprehensive
income are reclassified to profit or loss, where such treatment
would be appropriate if that interest were disposed of.
2015
OUR HISTORY
2015
NOTES (CONTINUED)
1.7 Financial assets
OUR HISTORY
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.
OUR BUSINESS
Financial assets are classified into the following specified
categories: financial assets ‘at fair value through profit or
loss’ (FVTPL), ‘held-to-maturity’ investments, ‘availablefor-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.
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.
GOVERNANCE
A financial asset other than a financial asset held for
trading may be designated as at FVTPL upon initial
recognition if:
68
–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.
AFS financial assets
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 r ecognised in
profit or loss when the Group’s right to receive the dividends
is established.
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 u
ncollectible, it is written off against
the allowance account. Changes in the carrying amount of
the a llowance account are r ecognised in profit or loss.
Derecognition of financial assets
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.
1.8Financial liabilities and equity instruments issued
by the Group
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 c ontractual 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 are classified as either financial liabilities
at FVTPL, other financial liabilities or insurance liabilities.
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
financial assets or financial liabilities or both, which is
managed and its p
erformance 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 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
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.
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.
69
OUR BUSINESS
Financial liabilities
GOVERNANCE
In respect of AFS equity securities, any increase in fair
value subsequent to an impairment loss is recognised
directly in equity.
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.
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 r ecognised,
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 a mortised cost would
have been had the impairment not been recognised.
2015
OUR HISTORY
2015
NOTES (CONTINUED)
OUR HISTORY
The effective interest method is a method of c alculating
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 d
iscounts estimated
future cash payments through the expected life of the
financial liability, or, where a ppropriate, a shorter period, to
the net carrying amount on initial recognition.
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.
OUR BUSINESS
The estimation of the ultimate liability arising from claims
made under insurance contracts is a critical accounting
estimate. There 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
currently allowed for in pricing; and
–Changes in attitudes to policyholders claiming.
GOVERNANCE
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.
1.9 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 19, 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
70
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 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 r ecognised 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.
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.
1.12 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
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, e
stimated 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.
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.
1.14Assets 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.
1.15 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.
1.16Inventories
Inventories are stated at the lower of cost and estimated
net realisable value. Cost is determined on the first-in,
first-out basis. 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 s ubsidiaries, apply
here as well.
OUR HISTORY
1.11 Revenue recognition
1.13 Intangible assets
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.
OUR BUSINESS
1.17 Cash and cash equivalents
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.
71
GOVERNANCE
1.10Borrowing 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.
2015
2015
NOTES (CONTINUED)
1.18Taxation
OUR HISTORY
OUR BUSINESS
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.
1.19 Retirement 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 c ontribution retirement benefit
plan.
GOVERNANCE
1.20Government 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.
1.21 Earnings per share
Basic – is based on net attributable profit.
Headline – is based on basic earnings adjusted for c apital
items specified in Circular 2/2015 – 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.
1.22 Foreign 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.
1.23 Segment 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.
1.24Share-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 Monte Carlo 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.
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.
72
1.25Operating leases
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 amortisation of intangible assets. Deferred taxation assets are recognised to the
extent that management believes it is probable that the
asset will be realised. 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.
1.27Insurance 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.
Recognition and measurement
(a) Short-term insurance contracts
Insurance claims and loss adjustment expenses are recognised in profit or loss as incurred based on the estimated
liability for c ompensation owed to contract holders or third
parties damaged by the contract holders. The costs include
direct claims settlement costs and arise from events that
have occurred up to the reporting date, even if they have not
yet been reported to the Group. The Group does not
discount its liabilities for unpaid 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
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.
(e)
Claims incurred
Insurance claims and loss adjustment expenses are recognised in profit or loss as incurred based on the estimated
liability for c ompensation owed to contract holders or third
parties damaged by the contract holders. The costs include
direct claims settlement costs and arise from events that
have occurred up to the reporting date, even if they have not
yet been reported to the Group.
OUR HISTORY
1.26Key sources of estimation uncertainty and
critical judgements
(b)
Premiums
OUR BUSINESS
complex claims that may be affected by external factors
(such as court decisions).
(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 s tatistical 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.
73
GOVERNANCE
Rentals payable under operating leases are charged to
profit or loss on a straight-line basis over the term of the
relevant lease.
2015
2015
NOTES (CONTINUED)
(g)Provision for claims incurred but not reported
(IBNR)
OUR HISTORY
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)
OUR BUSINESS
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.
(j) Liability adequacy test
GOVERNANCE
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.
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.
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.
(k) Reinsurance contracts held
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.
74
(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.
(l)Receivables and payables related to insurance
contracts
1.28Adoption of new and revised standards
The following new and revised IFRSs have also been
adopted in these consolidated financial statements. The
application of these new and revised IFRSs has not had
any material impact on the amounts reported for the
current and prior years but may affect the accounting for
future transactions or arrangements:
Amendments to IAS 19 – Defined Benefit Plans: Employee
Contributions
Annual Improvements to IFRSs 2010 – 2012 Cycle and 2011
– 2013 Cycle.
2015
OUR BUSINESS
OUR HISTORY
At the date of approval of these financial statements, the
following relevant new or revised standards were in issue,
but not yet effective:
IFRS 9 Financial Instruments
IFRS 14 Regulatory Deferral Accounts
IFRS 15 Revenue from contracts with customers
IFRS 16 Leases
Amendments to IFRS II – Accounting for acquisitions of
Interest in Joint Operations
Amendments to IAS I – Disclosure Initiative
Amendments to IAS 16 and IAS 38 – Clarification of
Acceptable Methods of Depreciation and Amortisation
Amendments to IAS 16 and IAS 41 Agriculture – Bearer
Plants
Amendments to IAS 27 – Equity method in separate
financial statements
Amendments to IFRS 10 and IAS 28 Investment entities –
Applying the consolidation exception
Annual improvements to the 2012 – 2014 cycle
GOVERNANCE
The Group is in the process of evaluating the effects of
these standards. These standards will be effective for the
year ending December 2016 and subsequent years. The
Group has decided not to early adopt any of these new or
revised standards.
75
2015
NOTES (CONTINUED)
GROUP
2015
2014
2015
2014
1 579 559
7 938
1 450
355
4 132
1 593 434
1 532 384
18 572
1 284
695
1 943
1 554 878
—
10 650
—
—
4 132
14 782
—
22 038
—
762
1 943
24 743
623 647
149 686
773 333
853 538
23 640
877 178
—
—
—
—
—
—
(446 936)
(93 344)
(540 280)
(537 007)
(35 771)
(572 778)
—
—
—
—
—
—
233 053
73 467
306 520
304 401
108 954
413 355
—
—
—
—
—
—
1 899 954
1 968 233
14 782
24 743
– associate companies and joint ventures
– listed investments
– unlisted investments
–subsidiaries
110 148
128 081
69 954
—
98 884
132 081
21 856
—
—
8 474
4 935
77 608
—
—
2 066
411 475
Total dividends received
308 183
252 821
91 017
413 541
R’000
OUR HISTORY
2.
COMPANY
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
OUR BUSINESS
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
Net insurance premium revenue
Fee income from insurance contracts
Total revenue from insurance operations
Total sales and fee income
GOVERNANCE
Dividends received:
76
GROUP
COMPANY
2015
2014
2015
2014
936 212
39 226
17 304
572
181 435
57 701
31 348
90 625
112 783
28 241
64 093
14 998
5 021
1 579 559
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
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
447 594
1 085 821
1 533 415
478 696
1 043 213
1 521 909
73 926
—
73 926
95 110
—
95 110
195 738
779 060
288 271
793 670
—
—
—
—
(583 322)
(505 399)
—
—
122 582
170 237
422
488 979
146 460
160 535
2 021
597 287
—
—
—
—
—
—
—
—
2 022 394
2 119 196
73 926
95 110
OUR HISTORY
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, Portugal, Sweden, 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.
Sales revenue by geographical market:
South Africa
Other SADC countries
United States of America
Great Britain
Italy
Germany
Netherlands
Spain
Australia
France
Portugal
Sweden
Other
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
Expenses
Expenses for the acquisition of insurance contracts
Selling and administration expenses
Asset management services received
Total operating expenses insurance operations
Total operating expenses
4.
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
(435 879)
3 395
2 922
135 224
(11 342)
340 085
(31 833)
3 395
2 922
15 761
406
340 085
(429 562)
463 967
(25 516)
356 252
77
GOVERNANCE
Operating expenses
3.
OUR BUSINESS
R’000
2015
2015
NOTES (CONTINUED)
GROUP
R’000
OUR HISTORY
5.
COMPANY
2015
2014
2015
2014
44 841
—
54 099
—
Exceptional items
Gains
– on disposal of associate
Losses
– impairment in value of investment in associate1
– impairment in value of investment in subsidiary2
Net exceptional items
(11 994)
—
32 846
(28 286)
—
(28 286)
—
(179 644)
(125 545)
5 675
70 478
—
2 926
37
—
—
—
2 299
1 029
—
—
6 794
5 468
811
515
5 375
4 650
219
506
2 174
1 201
759
214
1 543
975
142
426
80 742
23 396
1 211
1 664
71 325
22 355
547
—
721
—
—
—
682
—
—
—
9 587
9 691
516 642
15 097
12 005
548 380
890
—
36 648
2 160
—
38 043
24 283
3 163
28 153
3 213
2 030
—
1 657
—
419
20 886
12
418
42 072
3 443
419
16 282
—
417
9 885
—
—
(215 514)
(215 514)
1. Impairment due to reduction in assets under management.
2. Impairment due to losses incurred.
6.
OUR BUSINESS
6.1
6.2
(Loss)/profit before finance costs
(Loss)/profit before finance costs includes the following items
of income and expenditure not shown separately in
the income statement:
Income
Profit on disposal of property, plant, equipment and vehicles
Foreign exchange gains
Government grants
– Training refunds
Expenditure
Auditors’ remuneration
Fees – current year
– under provided previous year
Other services
GOVERNANCE
Depreciation
Amortisation and impairment 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
78
GROUP
2015
2014
2015
2014
—
2 292
2 292
—
1 760
1 760
14 767
—
14 767
12 126
—
12 126
5 667
—
5 667
22 726
1 888
—
1 888
15 774
727
76
803
23 529
699
68
767
16 541
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
– Paid by subsidiaries
Fees for services as directors
Executive directors
Total paid by subsidiary companies
Total paid by Company and subsidiaries
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 52.
8.
9.
Interest rate swap
Interest received on bank deposits and loans
to associates and subsidiaries
Finance costs
Interest on borrowings
Interest rate swap
Preference dividends
Interest on obligations under instalment sale agreements
10 540
—
10 540
—
20 451
30 991
23 028
23 028
4 765
15 305
9 967
9 967
36 059
—
188 038
140
224 237
40 264
10 355
137 540
23
188 182
1 658
—
—
—
1 658
9 508
10 355
—
—
19 863
79
OUR BUSINESS
OUR HISTORY
Directors’ emoluments
GOVERNANCE
7.
COMPANY
R’000
2015
2015
NOTES (CONTINUED)
GROUP
2015
R’000
OUR HISTORY
10.
10.1
2014
2015
2014
Taxation
Taxation charge
SA normal taxation
Current – current year
– over provision prior year
Deferred – current year
– over provision prior year
–rate change
Dividends tax
OUR BUSINESS
Securities transfer tax
(81 286)
82 192
(776)
(161 311)
(1 866)
475
417
26 858
18 355
(6 704)
42 711
(27 504)
—
652
(39 309)
55 271
—
(92 714)
(1 866)
—
(52 896)
—
—
(629)
(52 267)
—
—
1 202
28 712
429 029
120 128
282 233
79 025
408 230
221 618
(745 764)
306 505
(105 541)
474 016
Tax at statutory rates (28% – 41%) (2014 – 28% – 40%)
Over provided prior year
Tax effect of change in tax rate
Tax effect of share of results of associates and joint ventures
Disposal of deferred tax
Tax effect of impairment of investment in associate/subsidiary
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
(210 259)
(2 642)
475
95 633
(3 485)
3 358
68 199
(106 179)
523
47 805
417
3 244
25 286
(77 625)
86 522
(34 208)
—
(627)
—
—
28 582
(149 023)
133
45 478
652
1 202
50 001
28 712
(29 551)
(1 866)
—
—
7 075
50 300
13 446
(40 632)
—
—
—
650
(38 081)
(38 659)
132 724
(52 267)
—
—
—
—
10 353
(155 399)
—
—
—
851
11 693
(52 045)
Reconciliation of taxation charge
650
(38 659)
—
3 244
(77 625)
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 amounting to
10.2
COMPANY
851
(52 045)
—
—
46 592
13 046
GOVERNANCE
*Non-deductible expenses consists primarily of preference dividends included in finance costs and the non-deductible portion of expenditure relating to an
investment holding company.
** Non-taxable income consists primarily of dividends received.
11.
80
Dividends
On 23 March 2015, a cash dividend of 30 cents per share and a special dividend of 20 cents per share (total dividend R123 682 156) was
paid to shareholders. In April 2014, a final dividend of 30 cents per share and a special dividend of 10 cents per share was paid (total
dividend R110 086 120).
In respect of the current year, a dividend of 35 cents per share will be paid to shareholders on 25 April 2016. The proposed d
ividend will
be paid to shareholders recorded in the books of the Company on 22 April 2016. The total dividend payable is estimated at R86 702 281.
2015
GROUP
2015
(Loss)/earnings per share
The following is a reconciliation of the (loss)/profit
figures used in the (loss)/earnings per share calculations:
Basic (loss)/earnings
Net (loss)/profit attributable to equity holders of the parent
(698 978)
259 050
2015
Gross
Headline (loss)/earnings calculation
Net (loss)/profit attributable to equity holders of the parent
Loss/(profit) on disposal of property, plant, equipment and vehicles
Realised profit on disposal of associate
Adjustments relating to results of associates
Headline (loss)/earnings
OUR HISTORY
12.
2014
2015
Net
(698 978)
(1 187)
(36 479)
11 994
109
(724 541)
(2 119)
(44 841)
11 994
66
No total
2014
Gross
334
—
28 286
(1 937)
No total
2014
Net
259 050
240
—
28 286
(1 338)
286 238
(295.3)
(295.3)
Headline (loss)/earnings per share (cents)
Diluted headline (loss)/earnings per share (cents)
116.9
99.8
Weighted average number of shares on which (loss)/earnings and headline (loss)/ earnings per share is based is 245 392 252
(2014 – 244 918 888)
OUR BUSINESS
R’000
Weighted average number of shares on which diluted (loss)/earnings and diluted headline (loss)/earnings per share is based is
245 392 252 (2014 – 286 702 844)
2014
245 392 252
—
245 392 252
41 748 046
244 918 888
41 783 956
286 702 844
499 068
Reconciliation of weighted average number of shares between
basic and diluted (loss)/earnings per share and headline (loss)/
earnings and diluted headline (loss)/earnings per share.
Basic
Dilutive instruments
Diluted
Number of instruments treated as anti-dilutive
2015
GOVERNANCE
GROUP
81
2015
NOTES (CONTINUED)
GROUP
R’000
OUR HISTORY
13.
13.1
OUR BUSINESS
13.2
13.3
GOVERNANCE
13.4
82
COMPANY
2015
2014
2015
2014
24 566
24 682
(116)
7 237
(221)
—
31 581
31 698
(117)
24 567
24 682
(115)
—
—
1
24 566
24 682
(116)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
14 315
29 589
(15 274)
3 071
—
(3 321)
—
14 065
32 660
(18 595)
16 577
28 611
(12 034)
1 039
(61)
(3 275)
35
14 315
29 589
(15 274)
83 353
158 338
(74 985)
33 302
(175)
(15 351)
175
101 304
191 465
(90 161)
70 094
134 962
(64 868)
27 657
(4 281)
(14 065)
3 948
83 353
158 338
(74 985)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
272 500
512 677
(240 177)
116 951
(2 500)
(56 069)
1 439
332 321
627 128
(294 807)
152 743
344 923
(192 180)
167 773
(19)
(48 011)
14
272 500
512 677
(240 177)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
Land and buildings – freehold
Carrying value 1 January
Deemed cost
Accumulated depreciation and impairment losses
Additions
Disposals
Depreciation for the year
Carrying value 31 December
Deemed cost
Depreciation rate: Buildings 10%
Land and buildings – leasehold improvements
Deemed cost
Additions
Disposals
Accumulated depreciation on disposals
Deemed cost
Depreciation rate: 20%
Plant and machinery
Cost
Additions
Disposals
Cost
Depreciation rates: 20 – 33.33%
Fishing trawlers (including refits)
Cost
Additions
Disposals
Cost
Depreciation rates: 5.5 – 50%
434
1 160
(726)
490
—
(171)
—
753
1 650
(897)
170
757
(587)
403
—
(139)
—
434
1 160
(726)
13.6
13.7
Office furniture and equipment
Cost
Additions
Disposals
Cost
Depreciation rates: 10 – 17%
Motor vehicles
Cost
Additions
Disposals
Cost
Depreciation rate: 20%
Total property, plant, equipment and vehicles
Cost/deemed cost
Additions
Disposals
Cost/deemed cost
2015
2014
4 414
13 502
(9 088)
1 425
(3 867)
(2 054)
2 936
2 854
11 060
(8 206)
3 488
10 687
(7 199)
2 830
(15)
(1 904)
15
4 414
13 502
(9 088)
213
1 037
(824)
308
—
(156)
—
365
1 345
(980)
209
886
(677)
151
—
(147)
—
213
1 037
(824)
9 728
30 057
(20 329)
9 846
(1 209)
(3 292)
909
15 982
38 694
(22 712)
9 493
26 743
(17 250)
3 965
(651)
(3 553)
474
9 728
30 057
(20 329)
733
1 828
(1 095)
254
—
(255)
—
732
2 082
(1 350)
676
1 542
(866)
302
(16)
(245)
16
733
1 828
(1 095)
1 951
4 031
(2 080)
641
(654)
(654)
551
1 835
4 018
(2 183)
1 386
3 217
(1 831)
1 629
(815)
(516)
267
1 951
4 031
(2 080)
333
758
(425)
—
(379)
(139)
276
91
379
(288)
484
758
(274)
—
—
(151)
—
333
758
(425)
410 827
772 876
(362 049)
172 473
(8 626)
(80 742)
6 010
499 942
936 723
(436 781)
278 348
573 825
(295 477)
204 893
(5 842)
(71 325)
4 753
410 827
772 876
(362 049)
1 713
4 783
(3 070)
1 052
(379)
(721)
276
1 941
5 456
(3 515)
1 539
3 943
(2 404)
856
(16)
(682)
16
1 713
4 783
(3 070)
Details of land and buildings are contained in a register which is open for inspection by shareholders 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 R443 million (2014 – R365.4 million) are encumbered
by a notarial bond (refer note 28).
83
OUR HISTORY
Computers
Cost
Additions
Disposals
Cost
Depreciation rates: 20 – 33.33%
2014
OUR BUSINESS
13.5
2015
GOVERNANCE
R’000
COMPANY
GROUP
2015
2015
NOTES (CONTINUED)
GROUP
R’000
OUR HISTORY
14.
Goodwill
Cost
COMPANY
2015
2014
2015
2014
12 140
12 140
—
—
108 527
198 437
(89 910)
(16 087)
92 440
198 437
(105 997)
124 615
198 437
(73 822)
(16 088)
108 527
198 437
(89 910)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
5 873
29 604
(23 731)
1 451
(1 382)
(5 927)
(1 826)
1 826
15
29 229
(29 214)
10 984
28 448
(17 464)
1 156
(6 267)
—
—
—
5 873
29 604
(23 731)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
114 400
228 041
(113 641)
1 451
(17 469)
(5 927)
(1 826)
1 826
92 455
227 666
(135 211)
135 599
226 885
(91 286)
1 156
(22 355)
—
—
—
114 400
228 041
(113 641)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
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
OUR BUSINESS
Cost
Accumulated amortisation
Amortisation
Cost
Amortisation rate: 10 – 15 years
Computer software development
GOVERNANCE
Cost
Additions
Amortisation
Impairment
Disposals
Accumulated amortisation on disposals
Cost
Accumulated amortisation and impairment
Amortisation rate: 1 – 3 years
Total intangible assets
Cost
Additions
Amortisation
Impairment
Disposals
Accumulated amortisation on disposals
Cost
84
2015
R’000
16.
COMPANY
2014
Shares at cost less amounts written off
Loans owing by subsidiaries less amounts written off
Loans owing to subsidiaries
2015
2014
762 978
590 060
1 353 038
651 854
513 093
209 839
722 932
537 995
—
—
—
—
—
—
OUR HISTORY
GROUP
2015
The loans owing by/to subsidiaries are interest free, unsecured
and have no fixed terms of repayment except for a loan of
R0.5 million (2014 – R17.6 million) from a subsidiary which bears
interest at the prime bank overdraft rate minus 1% and a loan to
a subsidiary of R50.6 million (2014 – nil) which bears interest at
the prime bank overdraft rate. The intention of the directors is
not to call on these loans within the next 12 months.
OUR BUSINESS
Refer to Appendix 1 for details of subsidiary companies.
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:
Plant and machinery
Inventory
2 623
14 477
17 100
2 623
14 477
17 100
Name of subsidiary
41.6
40
41.6
40
Sea Harvest Holdings (Pty) Ltd
Brimsure (Pty) Ltd
Proportion of ownership interests
and voting rights held by
non-controlling interests
2015
2014
%
%
GOVERNANCE
Details of non-wholly owned subsidiaries that have material non-controlling interests
85
2015
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.
OUR HISTORY
2015
R’000
Current assets
Non-current assets
Current liabilities
Equity attributable to owners of the Company
– Share of equity
– Preference shares
–Loan
OUR BUSINESS
Revenue
Profit for the year
Profit attributable to owners of the Company
Profit attributable to the non-controlling interests
Other comprehensive (loss)/income attributable to owners of the Company
Other comprehensive (loss)/income attributable to the non-controlling interests
Other comprehensive (loss)/income for the year
Total comprehensive (loss)/income attributable to owners of
the Company
Total comprehensive (loss)/income attributable to the
non-controlling interests
Total comprehensive (loss)/income for the year
Dividends paid to non-controlling interests
GOVERNANCE
Net cash inflow from operating activities
Net cash outflow from investing activities
Net cash inflow from financing activities
Net cash outflow
86
494 281
623 060
415 796
648 539
(19 138)
89 920
(13 611)
85 756
17 775
1 373 457
43 209
25 250
17 959
2014
526 835
513 266
285 749
658 628
10 490
107 908
7 461
77 772
22 675
1 361 498
38 912
23 381
15 531
(57 336)
(40 780)
(98 116)
10 514
7 477
17 991
(32 086)
33 895
(22 821)
(54 907)
23 008
56 903
—
178 165
(200 094)
7 077
(14 852)
72 068
23 845
(195 527)
114 576
(57 106)
2015
2014
Current assets
Non-current assets
Current liabilities
Equity attributable to owners of the Company
17
35 237
24
—
21 138
14 092
17
35 779
23
23
21 450
14 300
Revenue
Profit for the year
Profit attributable to owners of the Company
Profit attributable to the non-controlling interests
21 546
21 120
12 672
8 448
7 500
8 029
4 817
3 212
Total comprehensive income attributable to owners of the Company
Total comprehensive income attributable to the non-controlling interests
Total comprehensive income for the year
12 672
8 448
21 120
4 817
3 212
8 029
8 600
3 000
R’000
Brimsure (Pty) Ltd
Dividends paid to 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.
OUR HISTORY
2015
OUR BUSINESS
Significant restrictions
–Brimstone has ceded its loan to a subsidiary of R30 845 787 (2014 – R29 736 067) as security for overdraft facilities granted to the
subsidiary (refer note 33).
Financial support
Refer to note 36 for details of financial support given by the Company to its subsidiaries.
GOVERNANCE
Acquisition of subsidiary during the year
With effect from 1 May 2015, Brimstone acquired control over a 67% shareholding in Brimstone Mtha UK SPV Limited. Prior to the
completion of the transaction with Old Mutual plc, Old Mutual plc controlled Brimstone Mtha UK SPV Limited and therefore, even
though Brimstone owned 67% of the company, it was not permitted to consolidate the company. Old Mutual plc’s control was removed
on 1 May 2015 following Brimstone and its partner’s fulfilment of their obligations in terms of the contract with Old Mutual plc. Before
the settlement of the obligations in terms of the contract, Brimstone accounted for its share of the investment as an option. On settlement, Brimstone c onverted its option asset into an investment in a subsidiary. No goodwill arose on conversion to an investment in a
subsidiary. The non-controlling interest of 33% was measured at its proportionate share of the aquiree’s identifiable net assets and was
subsequently acquired by Brimstone. Brimstone Mtha UK SPV is a wholly-owned subsidiary at the reporting date.
Assets
Investment in Old Mutual
Current assets
Liabilities
Deferred taxation
Intercompany balances
Long-term liabilities
Current liabilities
R’000
447 894
570
448 464
10 559
43 182
21 257
503
75 501
87
The fair value of assets and liabilities acquired was as follows:
2015
NOTES (CONTINUED)
GROUP
2015
R’000
OUR HISTORY
17.
Investments in associate companies and joint
ventures
Cost of investment in associate companies and joint ventures
Loans to associate companies
Share of distribution made by associate
Share of post acquisition (loss)/profit, net of dividends received
Less: Impairment in value of investment in associate
Total carrying value
Non-current
Current (included in investments)
COMPANY
2014
2015
2014
1 397 459
13 187
127 466
(58 945)
(324 468)
1 154 699
(40 280)
1 114 419
1 121 656
29 610
13 688
(58 945)
26 335
1 132 344
(28 286)
1 104 058
1 542
10 744
—
—
—
12 286
—
12 286
7 056
27 374
—
—
—
34 430
—
34 430
1 114 419
—
1 114 419
1 067 131
36 927
1 104 058
12 286
—
12 286
6 763
27 667
34 430
OUR BUSINESS
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:
Proportion of ownership
interest and voting power
held by the Group
Name of associate
Oceana Group Limited
Principal
activity
Place of
i ncorporation
and operation
30 September
2015
30 September
2014
Fishing
South Africa
19.648%
19.994%
GOVERNANCE
The above associate is accounted for using the equity method in these consolidated financial statements.
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 f inancial statements of Oceana Group Limited for the year ended
30 September 2015 have been used and appropriate adjustments have been made for the effects of s ignificant transactions between
that date and 31 December 2015. As at 31 December 2015, the fair value of the Group’s interest in Oceana Group Limited, which is listed
on the JSE, was R2 680 132 221 (2014 – R2 107 345 729) based on the q
uoted market price available on the JSE, which is a level 1 input
in terms of IFRS 13.
88
Current liabilities
Total liabilities
Revenue
Profit from continuing operations
Profit for the year
Other comprehensive income/(loss) for the year
Total comprehensive income for the year
Dividends received from the associate during the year
30 September
2014
6 502 886
4 010 178
10 513 064
859 640
2 115 657
2 975 297
5 000 698
1 948 080
6 948 778
439 403
788 988
1 228 391
80 372
69 536
6 168 777
642 202
642 202
454 086
1 096 288
80 632
5 039 134
608 919
608 919
(1 141)
607 778
75 765
3 483 914
19.648%
684 516
362 475
(59 331)
987 660
1 677 370
19.994%
335 379
362 475
(61 995)
635 859
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
31 December
2015
R’000
Aggregate information of associates that are 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 these associates
(376)
—
(376)
118 900
31 December
2014
2 662
—
2 662
96 642
17.2
OUR HISTORY
Non-current assets
Current assets
Total assets
30 September
2015
GOVERNANCE
R’000
2015
OUR BUSINESS
89
2015
NOTES (CONTINUED)
17.
Investments in associate companies and joint ventures (continued)
Joint ventures
OUR HISTORY
Refer to Appendix 2 for full details of joint ventures. The aggregate assets, liabilities and results of operations of joint ventures are
summarised below:
17.3
Details of material joint venture
Principal
activity
Place of
incorporation
and operation
31 December
2015
31 December
2014
Investment
holding
South Africa
72.368%
59.211%
R’000
Non-current assets
Current assets
Total assets
722 560
48
722 608
1 464 630
2 198
1 466 828
Current liabilities
Total liabilities
915 509
129
915 638
868 784
101
868 885
—
243 226
Name of joint venture
Friedshelf 1534 (Pty) Ltd
OUR BUSINESS
The above joint venture is accounted for using the equity m
ethod in these consolidated financial
statements.
Brimstone equity accounts for the results of Friedshelf 1534 (Pty) Ltd because, although it owns
72.4% (2014 – 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 Grindrod 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.
GOVERNANCE
Other venturers’ interests
Revenue
Loss from continuing operations
Loss for the year
Other comprehensive income for the year
Total comprehensive loss for the year
Dividends received from the joint venture during the year
21 504
(789 325)
(789 325)
—
(789 325)
—
8 704
(162 057)
(162 057)
—
(162 057)
1 036
(193 030)
72.368%
—
597 943
59.211%
354 045
Reconciliation of the above summarised financial information to
the carrying amount of the interest in Friedshelf 1534 (Pty) Ltd
recognised in the consolidated financial statements.
Net (liabilities)/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) Ltd
17.4
90
Aggregate information of joint venture that is not individually material
Group’s share of loss from continuing operations
Group’s share of other comprehensive income
Group’s share of total comprehensive loss
Aggregate carrying amount of the Group’s interest in this joint venture
(6 176)
—
(6 176)
7 859
(1 909)
—
(1 909)
14 035
2015
2014
2015
2014
27 483
27 483
27 483
27 483
2 218
2 218
2 218
2 218
Listed investments:
Shares at fair value
Debt securities at fair value
Total listed investments
2 914 598
73 748
2 988 346
2 560 195
94 450
2 654 645
106 622
—
106 622
55 584
—
55 584
Unlisted investments:
Shares and units at fair value
Money market investments at fair value
Options at fair value
Total unlisted investments
778 464
—
249 983
1 028 447
612 722
10 700
1 122 950
1 746 372
5
—
249 983
249 988
6 560
—
1 122 950
1 129 510
1 028 447
—
1 028 447
954 400
791 972
1 746 372
249 988
—
249 988
348 238
781 272
1 129 510
4 016 793
4 401 017
356 610
1 185 094
4 044 276
—
4 044 276
3 636 528
828 897
4 465 425
358 828
—
358 828
406 040
808 939
1 214 979
6 248
—
6 248
—
3 792
2 456
6 248
—
—
—
3 792
2 456
6 248
—
—
—
R’000
18.
COMPANY
Investments
Available-for-sale investments
Unlisted investments:
Shares at fair value
Total available-for-sale investments
OUR HISTORY
GROUP
2015
Total investments
Non-current
Current (including investment in associate)
Refer to Appendix 3 for full details of the investments.
19.
Financial assets carried at fair value through profit or loss:
Interest rate swap – not designated in hedge accounting
relationship
Non-current
Current
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 three swaps are R250 million, R121 million and R150 million and the fixed rates are 9.737%, 9.187% and
7.38% respectively.
91
GOVERNANCE
Total investments designated as at fair value through
profit or loss
Unlisted investments
Non-current
Current
OUR BUSINESS
Investments designated as at fair value through profit or loss
2015
NOTES (CONTINUED)
GROUP
R’000
OUR HISTORY
20.
Inventories
Raw materials
Work in progress
Finished goods
Consumable stores
COMPANY
2015
2014
2015
2014
55 954
17 800
158 457
26 620
258 831
39 325
21 964
178 966
25 361
265 616
—
—
—
—
—
—
—
—
—
—
426 336
(16 442)
409 894
194 472
604 366
482 595
(5 642)
476 953
156 848
633 801
—
—
—
31 109
31 109
—
—
—
27 779
27 779
Inventories with a net book value of R168.9 million
(2014 – R187.6 million) are encumbered by a notarial bond
(refer note 28).
OUR BUSINESS
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 R19 202 910 (2014 – R32 692 928) being
shown at net realisable value.
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
Refer to page 129 for details of how the Group manages credit risk in its insurance business.
GOVERNANCE
The average credit period on sales of goods or insurance and reinsurance contracts is 65 days (2014 – 67 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 receivables with a carrying value of R51 615 844 (2014 – R95 799 723) 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.
92
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
Increase in allowance recognised in profit or loss
Balance at end of the year
2015
2014
2015
2014
27 389
11 999
1 980
10 248
51 616
69 613
1 512
8 569
16 106
95 800
—
—
—
—
—
—
—
—
—
—
508
—
88
15 846
16 442
—
—
—
5 642
5 642
—
—
—
—
—
—
—
—
—
—
5 642
—
10 800
16 442
5 591
(134)
185
5 642
—
—
—
—
—
—
—
—
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
credit provision required in excess of the allowance for doubtful debts.
OUR HISTORY
R’000
COMPANY
OUR BUSINESS
GROUP
2015
GOVERNANCE
Trade receivables with a value of R66 206 611 (2014 – R62 398 176) have been ceded as security for a discounting facility (refer note
32). Trade receivables with a value of R197 647 091 (2014 – R170 372 001) are encumbered by a notarial bond (refer note 28).
93
2015
NOTES (CONTINUED)
GROUP
R’000
OUR HISTORY
22.
COMPANY
2015
2014
2015
2014
721 750
80 772
153 790
956 312
573 416
79 597
303 476
956 489
—
—
—
—
—
—
—
—
563 692
40 962
109 893
714 547
447 989
34 823
203 238
686 050
—
—
—
—
—
—
—
—
41 835
21 620
(41 447)
22 008
50 742
43 971
(52 878)
41 835
—
—
—
—
—
—
—
—
204 057
532 498
736 555
166 369
561 516
727 885
—
—
—
—
—
—
270 525
685 787
956 312
223 695
732 794
956 489
—
—
—
—
—
—
Insurance assets and liabilities
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 insurance liabilities, gross
Insurance contract assets
OUR BUSINESS
Short-term insurance contracts:
– claims reported and loss adjustment expenses
– claims incurred but not reported
– unearned premiums provision
Total reinsurers’ share of insurance liabilities
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
GOVERNANCE
Non-current
Current
Liabilities
Non-current
Current
94
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 reported (IBNR) and an unearned p
remium
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.
OUR HISTORY
22.1
2015
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.
OUR BUSINESS
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 IBNR provisions have been calculated on an undiscounted basis. The deterministic calculations provide a “best
estimate” of the reserve by applying a combination of the Chain Ladder and Bornhuetter-Ferguson methods to paid claims triangles
with smoothed development factors.
GOVERNANCE
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.
To align with the new proposed solvency regulations, SAM, the risk margin has been calculated using a cost of capital approach rather
than the 75th percentile used at the previous valuation. Method three as set out in the SAM Quantitative Impact Study Technical
Specifications was applied. The rate used in the determination of the cost of providing that amount of eligible own funds is called
Cost-of-Capital rate. 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.
95
In addition to the above, the Group also establishes provisions for unallocated loss adjustment expenses on IBNR losses on an
undiscounted basis.
2015
NOTES (CONTINUED)
GROUP
R’000
OUR HISTORY
23.
23.1
23.2
COMPANY
2014
2015
2014
500
10
510
500
10
510
500
10
510
500
10
510
43
47
43
47
—
(4)
—
(4)
43
43
43
43
2
2
2
2
—
—
—
—
—
—
—
—
—
—
—
—
2
2
2
2
Share capital
Authorised
500 000 000 ordinary shares of 0.1 cents each
1 000 000 000 “N” Ordinary shares of 0.001 cents each
Issued and fully paid
Ordinary shares
At beginning of year
43 145 435 (2014 – 46 775 135) ordinary shares of
0.1 cents each
Specific repurchase – repurchased and cancelled
(387 831) (2014 – (3 629 700)) ordinary shares of
0.1 cents each
At end of year
42 757 604 (2014 – 43 145 435) ordinary shares of
0.1 cents each
OUR BUSINESS
2015
“N” Ordinary shares
GOVERNANCE
245 866 581 (2014 – 267 144 624) “N” Ordinary shares
of 0.001 cents each
Specific repurchase – repurchased and cancelled
(3 835 621) (2014 – (21 898 143)) “N” Ordinary shares
of 0.001 cents each
Issued in terms of forfeitable share plan
849 362 (2014 – nil) “N” Ordinary shares of
0.001 cents each
Issued in terms of employee share option plan
1 222 878 (2014 – 620 100) “N” Ordinary shares of
0.001 cents each
At end of year
of 0.001 cents each
96
2015
R’000
23.3
COMPANY
2014
2015
2014
Held as treasury shares
Ordinary shares
385 611 (2014 – 4 015 311) ordinary shares of 0.1 cents each
Repurchased for cash
3 955 307 (2014 – nil) ordinary shares of 0.1 cents each
Specific repurchase – sold to holding company
(387 831) (2014 – (3 629 700)) ordinary shares of 0.1 cents each
At end of year
3 953 087 (2014 – 385 611) ordinary shares of
0.1 cents each
—
(4)
—
—
(4)
—
—
—
—
4
—
—
(4)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
41
45
45
45
—
297 180
80 000
567 740
600 100
100 000
472 320
2 117 340
437 218
604 960
200 000
764 140
695 300
100 000
538 600
3 340 218
OUR HISTORY
GROUP
2015
Total at end of year
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
“N” Ordinary shares at 820 cents exercisable until 31 December 2017
“N” Ordinary shares at 1400 cents exercisable until 2 January 2020
23.4
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 387 831 o
rdinary shares
and 3 835 621 “N” Ordinary shares was made from the Brimstone Investment Corporation Limited Share Trust during the year. These
shares were previously treated as t reasury shares and reverted to authorised shares on r epurchase. The average price paid was R17.00
for the ordinary shares and R16.50 for the “N” Ordinary shares.
GOVERNANCE
of 0.001 cents each
Repurchased for cash
47 780 (2014 – nil) “N” Ordinary shares
of 0.001 cents each
Specific repurchase – sold to holding company
(3 835 621) (2014 – (21 898 143)) “N” Ordinary shares of
0.001 cents each
Forfeitable share plan shares
849 362 (2014 – nil) “N” Ordinary shares of 0.001 cents each
At end of year
of 0.001 cents each
OUR BUSINESS
97
2015
NOTES (CONTINUED)
GROUP
2015
R’000
OUR HISTORY
24.
Share issue expenses
Repurchase of trust units
Increase in treasury shares
Share options reserve
OUR BUSINESS
Forfeitable share plan share issue
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
GOVERNANCE
Current year movement
Non-controlling shareholders’ share of reserves
Total capital reserves
2014
273 839
25 769
(8)
—
—
(51 958)
247 642
269 986
4 609
(12)
—
(744)
—
273 839
309 539
23 311
(8)
(10 216)
—
—
322 626
340 634
4 609
(12)
(35 692)
—
—
309 539
34 677
11 615
(14 235)
(3 235)
28 822
25 875
10 570
—
(1 768)
34 677
34 677
11 615
(14 235)
(3 235)
28 822
25 875
10 570
—
(1 768)
34 677
17 769
3 235
21 004
16 001
1 768
17 769
17 769
3 235
21 004
16 001
1 768
17 769
3 655
3 655
—
—
—
—
—
—
372 452
—
—
—
—
361 985
—
—
12 092
113 778
56
125 926
427 049
9 917
2 578
(403)
12 092
342 032
2 297
2 297
Less deferred taxation
Non-controlling shareholders’ share of reserve
Adjustment for change in non-controlling shareholders’ interest
11 846
—
—
—
—
11 846
20 926
(19 535)
3 648
6 603
204
11 846
1 730
—
—
—
—
1 730
1 730
—
—
—
—
1 730
Total revaluation reserves
14 143
14 143
1 730
1 730
14 922
(136 271)
38 156
40 779
—
(42 414)
(4 847)
47 053
(13 175)
(14 081)
(28)
14 922
—
—
—
—
—
—
—
—
—
—
—
—
Balance at 1 January and 31 December
Investments revaluation reserve
98
2015
Revaluation reserves
Properties revaluation reserve
26.
2014
Capital reserves
Share premium
25.
COMPANY
Cash flow hedging reserve
Deferred taxation thereon
Non-controlling shareholders’ share of reserve
Adjustment for change in non-controlling shareholders’ interest
Share of profit for the year
Share of other comprehensive (loss)/income for the year
Dividend paid
Subsidiary’s accrual for preference shares and repurchase of shares
Issue /(reduction in) share capital
Sale of trust units
Share of non-distributable reserves of associates transferred
directly to equity
Redemption of preference shares by subsidiary
Share of distribution made by subsidiary for change in
shareholding
Acquisition of non-controlling interest in subsidiary
Non-controlling interest arising on recognition of subsidiary
—
—
2014
134 474
18 743
7 302
(3 000)
7 611
(6)
651
403
(26 804)
—
(108 343)
123 078
(29 953)
—
—
96 662
109 421
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 0.75% below prime and is
repayable by 1 June 2017.
At 31 December 2015 the monthly instalment payable was R271 251.
16 505
17 656
—
—
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 0.75% and is repayable
by 1 June 2017.
At 31 December 2015 the monthly instalment payable was R63 734.
4 206
4 543
—
—
—
101 712
—
—
17 775
22 675
28.
109 421
30 839
(40 835)
(27 767)
7 983
1 748
538
2015
OUR BUSINESS
27.
2014
–C
lass B cumulative redeemable preference shares issued on
26 September 2006. The preference shares were fully
redeemed during 2015.
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 2016.
Issued by its subsidiary, Oceana SPV (Pty) Ltd, for investment
in Oceana Group Limited:
GOVERNANCE
2015
R’000
COMPANY
OUR HISTORY
GROUP
2015
99
2015
NOTES (CONTINUED)
GROUP
2015
2014
2015
2014
Loans from financial institutions to Sea Harvest Corporation
(Pty) Ltd
–Loan repayable in full on expiry on 29 March 2019. The loan
is subject to a variable interest rate of Jibar plus 1.8% and is
effective from 31 March 2014. The average quarterley repayment is R8.7 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).
98 879
124 811
—
—
–The loan is repayable in full on expiry on 29 March 2019.
Interest payments are made quarterly in arrears and the
loan is subject to a variable interest rate of JIBAR plus 2.1%.
The loan is secured by a general notarial bond over all of
Sea Harvest Corporation (Pty) Ltd’s moveable assets (refer
to notes 13 and 20).
197 000
197 000
—
—
– Loan repayable in full on expiry on 29 March 2019.
Interest payments are made quarterly in arrears. Interest is
charged at 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 Corporation (Pty) Ltd’s
moveable assets (refer notes 13 and 20).
40 000
—
—
—
–Instalment sale agreements repayable in monthly instalments
of R13 256, 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.
394
542
—
—
of R6 824, inclusive of interest, as from 1 October 2014.
Until such time, interest payments are made monthly. Interest is
charged at a rate of 8.25% and matures on 1 September 2019.
263
320
—
—
of R8 425, inclusive of interest, as from 1 August 2014.
281
—
—
—
302
—
—
—
751
—
—
—
R’000
OUR HISTORY
28.
OUR BUSINESS
GOVERNANCE
100
COMPANY
(continued)
GROUP
COMPANY
2014
2015
2014
Class D floating rate cumulative redeemable non-participating
preference shares of R200 million issued by a subsidiary,
Newshelf 831 (RF) (Pty) Ltd, on 15 December 2010 with 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 (RF) (Pty) Ltd) are secured by a cession and pledge of
23 000 000 (2014 – 23 000 000) shares in Life Healthcare
Group Holdings Limited held by Newshelf 831 (RF) (Pty) Ltd.
161 221
168 913
—
—
Class E floating rate cumulative redeemable non-participating
Newshelf 831 (RF) (Pty) Ltd, on 7 June 2011 with 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 (RF)
(Pty) Ltd) are secured by a cession and pledge of 23 000 000
(2014 – 23 000 000) shares in Life Healthcare Group Holdings
Limited held by Newshelf 831 (RF) (Pty) Ltd.
46 543
48 763
—
—
Class F floating rate cumulative redeemable non-participating
Newshelf 831 (RF) (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 (RF) (Pty) Ltd) are secured by a cession and pledge of
23 000 000 (2014 – 23 000 000) shares in Life Healthcare
Group Holdings Limited held by Newshelf 831 (RF) (Pty) Ltd.
74 468
78 020
—
—
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 were reclassified as Class A3 variable rate cumulative redeemable preference
shares on 4 November 2015.
—
317 812
—
—
R42 million issued by a subsidiary, Newshelf 1063 (RF) (Pty) Ltd
on 19 September 2013. The preference shares were reclassified
as Class A3 variable rate cumulative redeemable preference
shares on 4 November 2015.
—
42 134
—
—
101
GOVERNANCE
OUR BUSINESS
OUR HISTORY
2015
R’000
2015
2015
NOTES (CONTINUED)
GROUP
2015
2014
2015
2014
Class A floating rate cumulative redeemable preference shares
of R285m issued by a subsidiary, Newshelf 1064 (RF) (Pty) Ltd,
on 4 December 2015. The preference shares are redeemable in
full on 4 December 2020. The dividend rate is 92.5% of the
prime bank lending rate. The preference shares are secured by
a cession and pledge of 9 688 652 shares in Oceana Group
Limited held by Newshelf (RF) 1064 (Pty) Ltd.
285 304
138 915
—
—
Class A floating rate cumulative redeemable non-participating
preference shares of R297.44m 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.
233 760
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 (RF) (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 (RF) (Pty) Ltd exceed the aggregate of the outstanding Class A preference shares and all potential tax liabilities and costs in Newshelf 1269 (RF) (Pty) Ltd. The preference
share is redeemable in full in 5 years from date of first issue.
59 925
23 682
—
—
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.
57 935
75 325
—
—
Ltd on 4 March 2014. The preference shares were reclassified as
Class A3 variable rate cumulative redeemable preference shares
on 4 November 2015.
—
100 319
—
—
R’000
OUR HISTORY
28.
OUR BUSINESS
GOVERNANCE
102
COMPANY
(continued)
2014
2015
2014
Ltd on 25 July 2014. The preference shares were reclassified as
on 4 November 2015.
—
461 792
—
—
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 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.
The preference shares were reclassified as class A3 variable rate
cumulative redeemable preference shares on 4 November 2015.
—
107 513
—
—
of R1 132.8 million issued by a subsidiary, Newshelf 1063 (RF)
(Pty) Ltd, which were previously designated as Class A1 and
and reclassified on 4 November 2015 and are redeemable in full
on 4 November 2020. The dividend rate in respect of the preference shares is 87% 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 4 November 2015 on 1 March and 1 September of these
fourth and fifth years after 4 November 2015 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
1 031 770
—
—
—
103
GOVERNANCE
OUR BUSINESS
2015
R’000
COMPANY
OUR HISTORY
GROUP
2015
2015
NOTES (CONTINUED)
GROUP
2015
2014
2015
2014
of R138 million issued by a subsidiary, Newshelf 1063 (RF) (Pty)
Ltd, on 12 November 2015 and are redeemable in full on
12 November 2020. The dividend rate in respect of the preference shares is 87% 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 12 November 2015 on 1 March and 1 September of these
fourth and fifth years after 12 November 2015 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
138 889
—
—
—
Term loan from financial institution repayable in full upon expiry
on 18 November 2020. Interest is charged at a variable rate
linked to 3 month Jibar. Interest is capitalised on a quarterly
basis and is payable upon receipt of distributions from the
underlying investment in Equites Property Fund Limited. The
loan is secured by a cession and pledge of 28 million shares in
Equites Property Fund Limited and 16.5 million shares in Life
Healthcare Group Holdings Limited.
303 246
—
—
—
R’000
OUR HISTORY
28.
(continued)
OUR BUSINESS
GOVERNANCE
Total
Less: amount transferred to short-term borrowings (note 32)
104
COMPANY
2 769 427
(145 409)
2 143 675
(103 224)
—
—
—
—
2 624 018
2 040 451
—
—
R’000
29.
COMPANY
2015
2014
2015
2014
25 427
23 103
—
—
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.
OUR HISTORY
GROUP
2015
Product claims
Additional provision
Provision utilised
Leave pay
Additional provision
Provision utilised
Total carrying amount – short-term
159
172
(159)
172
—
—
—
—
—
—
—
—
18 000
16 989
(15 809)
19 180
19 180
16 833
15 827
(14 660)
18 000
18 172
—
—
—
—
—
—
—
—
—
—
3 710
—
3 710
3 490
220
3 710
—
—
—
3 490
220
3 710
Financial liabilities carried at fair value through profit or loss
Interest rate swap – not designated in hedge accounting
relationship
—
—
—
—
Refer to note 19 for further disclosures regarding the interest rate swap agreements.
Non-current
Current
GOVERNANCE
30.
172
—
(172)
—
OUR BUSINESS
Short-term provisions
105
2015
NOTES (CONTINUED)
GROUP
2015
R’000
OUR HISTORY
31.
Deferred taxation
Deferred taxation asset
Deferred taxation liability
Net deferred taxation liability/(asset)
COMPANY
2014
(25 489)
467 496
442 007
—
639 380
639 380
71 564
52 331
(933)
29 913
25 586
(39)
2 844
3 830
2 668
(28 225)
420
357 205
(19 859)
(2 967)
442 007
(1 147)
28 260
30 032
(490)
(2 900)
3 830
2 668
9 931
298
549 214
(19 600)
(13 047)
639 380
639 380
(1 866)
475
614 646
(2 522)
—
2015
(25 489)
—
(25 489)
2014
—
76 166
76 166
The major components of the deferred tax provision
together with movements during the year were as
follows:
OUR BUSINESS
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 (taken directly to equity)
Prepayments
Investments
Provisions
Utilisation of estimated tax losses
Deferred tax liability/(asset) – 31 December
GOVERNANCE
Reconciliation between deferred taxation opening and
and closing balances:
Deferred tax liability – 1 January
Over provided previous year
Effects of change in tax rate – capital gains tax
Income statement effect of temporary differences in
value of assets
Income statement effect of temporary differences in
doubtful debt allowance
Intercompany transfer
Provisions
Prepayments deducted for normal tax
Investments
Differences on revaluation of investments (taken directly to equity)
Derivative instruments
Arising from cash flow hedging reserve (taken directly to equity)
Estimated tax losses
Deferred tax liability/(asset) – 31 December
106
20 819
—
(924)
—
(2 586)
129
(191 416)
—
5 744
(38 156)
10 408
442 007
9 357
(107)
—
(6 423)
27
27 805
(3 648)
(5 598)
13 175
(7 332)
639 380
147
—
—
—
—
2 844
—
—
—
—
(24 887)
(3 593)
—
(25 489)
76 166
(1 866)
—
23
—
—
742
—
(121 210)
—
5 744
—
14 912
(25 489)
124
—
—
—
—
(2 900)
—
—
—
—
96 323
(4 335)
(13 046)
76 166
135 859
(27 285)
—
10
—
(6 796)
(2 199)
—
(10 976)
—
(5 598)
—
(6 847)
76 166
R’000
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.
33.
2015
2014
2015
2014
145 409
103 224
—
—
28 594
27 476
—
—
174 003
130 700
—
—
—
55 271
3 914
59 185
—
—
—
—
652
—
—
—
3 244
(269)
2 975
—
1 202
—
1 202
—
650
—
650
—
852
—
852
(11)
11
—
77 979
(11)
11
—
17 184
—
—
—
59 835
—
—
—
852
Bank overdrafts
The Company has an overdraft facility amounting to
R60 million (2014 – R60 million).
OUR BUSINESS
32.
COMPANY
OUR HISTORY
GROUP
2015
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 (2014 – 3 570 000 Life Healthcare Group Holdings
Limited shares). The security was released after financial year
end.
Notes to the cash flow statements
34.1
Taxation paid
Income tax
Prepaid at the beginning of the year
Provided during year
Prepaid at the end of the year
Income tax paid
Dividends tax
Dividends tax paid
Unpaid at the beginning of the year
Provided during year
Unpaid at the end of the year
Securities transfer tax paid
STC
Prepaid at the beginning of the year
Prepaid at the end of the year
STC paid
Total taxes paid
(13 412)
81 416
6 583
74 587
417
(9 733)
11 651
13 412
15 330
107
34.
GOVERNANCE
The Company has guaranteed the overdraft facility of a whollyowned 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 R21 509 638 (2014 – R14 804 138).
2015
NOTES (CONTINUED)
GROUP
2015
R’000
OUR HISTORY
34.
34.2
34.3
COMPANY
2014
2015
2014
Notes to the cash flow statements (continued)
Finance costs
Finance costs recognised in profit or loss
Adjustment for non-cash items
Finance costs paid
Cash effect of change in investment in subsidiaries
Net (increase)/decrease in investment
Adjustment for non-cash items
224 237
(50 360)
173 877
—
—
—
188 182
(44 673)
143 509
—
—
—
1 658
—
1 658
(516 247)
113 365
(402 882)
19 863
(10 355)
9 508
198 975
(6 796)
192 179
GROUP
OUR BUSINESS
R’000
35.
2015
2014
1 373 457
310 303
214 778
309 599
2 208 137
1 361 498
417 569
183 824
258 163
2 221 054
Segmental information
Information reported to the Group’s operating decision makers for the purpose of resource
allocation and assessment of segment performance is specifically focused on the individual entity 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 and joint ventures, available-for-sale investments, investments at fair value through profit or loss, the Group’s
property portfolio and administrative head office.
Segment revenues and results
GOVERNANCE
Segment revenue
Fishing
Insurance
Clothing
Investments
Total revenue
Segment profit/(loss) from operations
Fishing
Insurance
Clothing
Investments
Total profit from operations
Exceptional items
Share of losses of associates and joint ventures
Finance costs
108
121 653
(178 676)
10 707
232 059
185 743
(429 562)
32 846
(341 545)
30 991
(224 237)
—
(745 764)
109 251
(179 718)
7 202
165 123
101 858
463 967
(28 286)
(65 431)
23 028
(188 182)
(449)
306 505
2015
Gross
2015
Net
2015
Gross
2014
Net
2014
1 117 341
1 300 444
193 775
2 611 560
5 854 165
813 130
5 041 035
8 465 725
1 117 341
1 300 444
193 775
2 611 560
5 041 035
—
5 041 035
7 652 595
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
1 064 334
1 525 085
148 628
2 738 047
2 287 576
5 025 623
838 091
1 260 151
76 317
2 174 559
2 287 576
4 462 135
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
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
GROUP
R’000
2015
2014
89 761
3 089
4 640
721
98 211
80 735
8 240
4 023
682
93 680
152 488
3 160
10 140
8 136
173 924
196 036
2 750
6 408
856
206 050
OUR BUSINESS
R’000
OUR HISTORY
GROUP
Depreciation and amortisation
Fishing
Insurance
Clothing
Investments
Total segment depreciation and amortisation
Additions to non-current assets
Fishing
Insurance
Clothing
Investments
Total segment additions to non-current assets
GOVERNANCE
Other segmental information
The Group’s revenue by geographical area is set out in note 2. All operations are based in the Republic of South Africa.
109
2015
NOTES (CONTINUED)
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.
OUR HISTORY
The Company has subordinated its rights and claims of any nature against Newshelf 1269 (RF) (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 (RF)
(Pty) Ltd, Newshelf 1269 (RF) (Pty) Ltd and Friedshelf 1535 (RF) (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 (2014 – 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 2015 was R28 594 283 (2014 – R27 476 651).
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 2015 the debt covered by this suretyship was R4 205 414
(2014 – R4 542 528).
OUR BUSINESS
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.
Subsequent to the year end, the company issued a letter of support in the amount of R6 million to Afena Capital (Pty) Ltd, to make
available a non-equity drawdown funding facility.
GROUP
R’000
37.
COMPANY
GOVERNANCE
2015
2014
2015
2014
9 989
18 716
28 705
10 361
3 651
14 012
—
—
—
—
—
—
18 994
38 256
—
57 250
22 268
75 240
2 682
100 190
857
—
—
857
872
857
—
1 729
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
The commitments will be funded from internal cash resources.
38.
110
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
GROUP
Details of share options outstanding are as follows:
2015
Number of
share options
Outstanding at beginning of year
Awarded during year
Exercised during the year
Outstanding at end of year
Exercisable at the end of the year
3 340 218
—
(1 222 878)
2 117 340
402 140
2 014
Weighted
average
exercise price
(cents)
944
—
742
1 060
Number of
share options
OUR HISTORY
Share-based payments
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
The share option scheme has been replaced by a forfeitable share plan, details of which are set out below.
Weighted
average
exercise price
(cents)
3 321 718
638 600
(620 100)
3 340 218
665 686
835
1 316
743
944
The options outstanding at the end of the year have a weighted average remaining contractual life of 1.81 years (2014 – 2.32 years).
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
OUR BUSINESS
39.
2015
Fair value (cents)
Exercise price (cents)
Expected volatility (%)
Expected life
Risk free rate (%)
Dividend forecast (cents)
2012
2013
2014
2015
2016
167
550
23.82
5.0
8.02
18
17
17
17
17
GOVERNANCE
Options issued 16 February 2011
Fair value (cents)
Expected life
Risk free rate (%)
2012
2013
2014
2015
2016
285
820
27.76
5.0
7.12
15
15
15
15
15
111
Options issued 31 December 2011
2015
NOTES (CONTINUED)
39.
Share-based payments (continued)
“N” Ordinary
shares
OUR HISTORY
Fair value (cents)
Expected life
Risk free rate (%)
2013
2014
2015
2016
2017
304
900
26.27
5.0
7.05
15
15
15
15
15
OUR BUSINESS
Fair value (cents)
Expected life
Risk free rate (%)
2014
2015
2016
2017
2018
400
1 250
27.21
5.0
6.29
19
19
19
19
19
Options issued 2 January 2014
GOVERNANCE
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
Fair value (cents)
Expected life
Risk free rate (%)
2015
2016
2017
2018
2019
112
473
1 300
26.34
5
8.25
25
25
25
25
25
2015
The Company adopted a forfeitable share plan which was approved by shareholders on 18 December 2014. In terms of the forfeitable
share plan, executive directors, top and senior managers will be awarded performance shares in the Company. The performance shares
are linked to a requirement of continued employment over the prescribed period, the Company’s perfomance and strategic, individual
performance conditions which have to be met.
"N" Ordinary shares
Outstanding at beginning of year
Awarded during year
Outstanding at end of year
2015
Number of
forfeitable
shares
2015
Weighted
average
issue price
(cents)
2014
Number of
forfeitable
shares
2014
Weighted
average
issue price
(cents)
—
849 362
849 362
—
1 676
1 676
—
—
—
—
—
—
The estimated fair values of the forfeitable shares were c alculated using a Monte Carlo model. The results of the calculations and inputs
into the model are set out below:
OUR BUSINESS
Forfeitable share plan
OUR HISTORY
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 R2 703 698 (2014 – R16 772 034)
related to share-based payment transactions during the year.
653
1 676
31,96
3
6.68
2.185
Share Incentive Scheme
On 31 December 2010, a 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;
3. The third tranche comprises 10% of the subscription shares and has a final date of 31 October 2018.
113
Forfeitable shares issued 9 March 2015
Fair value (cents)
Award price (cents)
Expected life (years)
Risk free rate (%)
Dividend yield %
GOVERNANCE
"N" Ordinary
shares
2015
NOTES (CONTINUED)
39.
Share-based payments (continued)
The participants will retain the balance of the subscription shares.
Fair value
2015
OUR HISTORY
R’000
Brimstone Black Executives Investment Trust
Brimstone General Staff Investment Trust
Brimstone Broad-based BEE Trust
Equity-Settled
Equity-Settled
Cash-Settled
42 049
2 556
17 747
2014
42 049
2 556
26 659
The equity-settled schemes were valued at inception of the schemes 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 change.
40.
Retirement benefit plans
OUR BUSINESS
The Company’s Provident Fund is administered by the Old Mutual SuperFund Provident Fund with effect from June 2014.
Contributions payable to the fund and charged against income during the year amounted to R2 030 470 (2014 – R1 656 867).
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 Fairsure Employee Benefits, 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 672 834 (2014 – R4 177 840). 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.
GOVERNANCE
Sea Harvest Old Mutual Superfund Provident Fund
This fund has been set up as a result of negotiations with employees. A total of 1 723 (2014 – 1 569) employees of the group were
members of the fund at the year end.
This defined contribution fund is not exempt from actuarial valuations.
Sea Harvest Twilight Group Management Provident Fund
The group has 27 (2014 – 31) employees who are members of this fund.
Sea Harvest Twilight Group Pension Fund
The group has 116 (2014 – 114) employees who are members of this fund.
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 v aluation
was performed on 31 December 2015. The group has no separately identified plan assets to fund the liability. At 31 December 2015 there
were 43 (2014 – 45) employees who qualified for the benefit.
114
2015
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 during
the year amounted to R17 579 576 (2014 – R11 538 003).
OUR HISTORY
Amounts recognised in profit or loss in respect of these defined benefit schemes are as follows:
GROUP
R’000
2015
2014
Current service cost
Interest cost
Actuarial loss recognised
195
1 993
1 495
3 683
178
1 926
—
2 104
23 103
195
1 993
22 211
178
1 926
1 495
(1 359)
25 427
—
(1 212)
23 103
10.7
9.8 – 10.3
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 636 020 (increase by
R3 201 364).
–If the expected healthcare cost inflation increases (decreases) by 1%, the defined benefit obligation would increase by R3 122 546
(decrease by R2 615 580).
–If the expected retirement age increase (decreases) by one year for both men and women, the defined benefit obligation would
decrease by R198 500 (increase by R89 521).
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.
GOVERNANCE
Defined benefit obligation at beginning of year
Current service cost
Interest cost
Actuarial loss 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
OUR BUSINESS
Changes in the present value of the defined benefit obligation
are as follows:
115
2015
NOTES (CONTINUED)
40.
Retirement benefit plans (continued)
Contributions paid (continued)
OUR HISTORY
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 post-employment healthcare subsidy.
– Administration: Administration of this liability poses a burden to the Group.
– Enforcement of eligibility criteria.
The average duration of the benefit obligation at 31 December 2015 is 13.1 years (2014 – 13.3 years).
OUR BUSINESS
The Group expects to make a contribution of R1.5 million (2014 – R1.3 million) to the defined benefit plans during the next financial year.
Lion of Africa Holdings Company (Pty) Ltd
The group operates a pension scheme on a defined contribution basis. 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 R7 291 094 (2014 – R6 864 026) were paid during the year.
41.
41.1
Financial instruments
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.
GOVERNANCE
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 and reserves as disclosed 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 raising 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 comprehensive implementation of the Solvency Assessment and Management (SAM) risk-based capital regime on 1 January 2017.
On a SAM Interim Measures basis, the Lion of Africa’s net assets at 31 December 2015 are R61.6 million, which is R3.7 million above CAR,
i.e. a CAR cover ratio of 1.06 times. This is above the FSB’s prescribed minimum of 1.0 times. The company’s CAR level decreased below
the minimum 1.0 times level during the 2015 financial year. As at 31 December 2015, the company did not meet the asset spreading
requirements and admitted assets were less than total liabilities. The asset spreading misalignment was primarily due to the large VAT
input due to the company, of which most has been refunded in January 2016. The solvency capital deficit was replenished through the
proceeds on the issue of share capital for a total consideration of R200 million during the 2015 financial year.
41.2
116
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.
R’000
41.3
COMPANY
2015
2014
2015
2014
4 016 793
4 401 017
356 610
1 185 094
6 248
866 927
604 366
249 374
13 187
—
27 483
—
885 030
633 801
221 619
29 610
—
27 483
6 248
46 455
31 109
4 602
10 744
590 060
2 218
—
104 691
27 779
49 538
27 374
209 839
2 218
3 555 033
—
—
2 840 863
—
3 710
38 399
651 854
—
58 869
537 995
3 710
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 owing by subsidiaries
Available-for-sale investments
OUR HISTORY
GROUP
2015
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
41.5
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.
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).
GOVERNANCE
41.4
OUR BUSINESS
Financial liabilities
There has been no change to the Group’s exposure to market risks or the manner in which it manages and measures the risks.
117
2015
NOTES (CONTINUED)
GROUP
2015
2014
Liabilities (United States $)
Rand equivalent of liabilities
Exchange rate used for conversion of foreign item
2 821
44 644
15.83
996
11 521
11.57
Liabilities (European Union €)
Rand equivalent of liabilities
254
4 382
17.25
357
5 013
14.04
4 726
72 784
15.40
4 360
50 578
11.60
US $
(Loss)/profit
Other equity
(2 814)
—
3 201
7 911
European Union €
Profit
Other equity
438
61 061
5 316
26 933
Australian $
Profit
Other equity
—
8 100
9
—
UK £
Profit
Other equity
—
—
136
—
R’000
OUR HISTORY
41.
41.6
Financial instruments (continued)
Foreign currency risk management
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
OUR BUSINESS
Current assets
Cash (United States $)
Rand equivalent of current assets
Foreign currency sensitivity analysis
GOVERNANCE
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 negative number indicates a decrease
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 loss.
All profits or losses are attributable to the exposure on outstanding receivables and payables at year end in the Group.
118
2015
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 R705 270 383 (2014 – R471 826 047) at year end.
The following table details the forward foreign currency contracts outstanding at the reporting date:
OUR HISTORY
Forward exchange contracts
R’000
Average
c ontract
exchange rate
AUD
102 820
10.3137
EUR
575 868
15.1854
NZD
934
8.7794
USD
5 987
15.2099
Foreign currency
Contractual expiry dates
4 January 2016
– 31 March 2017
8 January 2016
– 28 February 2017
2 February 2016
– 11 April 2016
29 January 2016
– 8 February 2016
OUR BUSINESS
At 31 December 2015, the Group had contracted to sell the following amounts under forward exchange contracts in respect of future
receivables:
R’000
Average
c ontract
exchange rate
AUD
116 044
10.0691
EUR
GBP
364 817
1 360
15.9365
17.9926
USD
4 548
11.6005
Foreign currency
2 January 2015
– 31 March 2016
5 January 2015
7 January 2015
16 January 2015
– 5 February 2015
GOVERNANCE
At 31 December 2014, the Group had contracted to buy the f ollowing amounts under forward exchange contracts in respect of future
receivables:
Foreign currency
R’000
Average
c ontract
exchange rate
EUR
29 971
16.9207
27 January 2016
119
At 31 December 2015, the Group had contracted to sell the following amounts under zero collar (options) contracts in respect of future
receivables:
2015
NOTES (CONTINUED)
41.
41.6
Foreign currency risk management (continued)
OUR HISTORY
Forward exchange contracts (continued)
At 31 December 2015, the Group had contracted to buy the following amounts under forward exchange contracts in respect of future
payables:
Foreign currency
R’000
Average
c ontract
exchange rate
EUR
3 931
15.6992
SEK
698
1.6971
USD
DKK
5 207
473
14.8852
2.0773
4 January 2016
– 15 March 2016
25 February 2016
– 29 March 2016
4 January 2016
– 2 March 2016
25 January 2016
OUR BUSINESS
At 31 December 2014, the Group had contracted to buy the following amounts under forward exchange contracts in respect of future
payables:
GOVERNANCE
Foreign currency
R’000
Average
c ontract
exchange rate
EUR
9 852
14.72967
SEK
652
1.5106
USD
4 439
11.6005
R’000
Hedge accounting applied in respect of foreign currency risk
cash flow hedges
–Fair value of (liability)/asset – foreign currency forward on
exchange contracts
2015
2014
(106 200)
9 January 2015
– 7 August 2015
20 January 2015
– 27 March 2015
9 January 2015
38 479
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.
The majority of 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 reporting 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 loss (2014: profit) for the year
would increase/decrease by R11 592 934 (2014 – decrease/increase by R9 207 695) in the Group and decrease/increase by R25 768
(2014 – increase/decrease by R118 407) in the Company as a result of their exposure to interest rates on their variable rate borrowings.
120
GROUP
2015
R’000
2014
2015
2014
60 000
(134)
(134)
—
60 000
(11)
(11)
—
OUR HISTORY
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.
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
OUR BUSINESS
41.9
COMPANY
3 312 087
(2 759 740)
(2 819 664)
59 924
2 429 173
(2 162 284)
(2 185 966)
23 682
249 374
221 619
4 602
49 538
Unutilised banking facilities including cash and cash equivalents
801 721
488 508
64 468
109 527
GOVERNANCE
41.8
2015
Cash and cash equivalents includes R165.6 million (2014 – R90.3 million) held by Lion of Africa which may only be utilised in insurance
activities.
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.
121
Liquidity and interest rate risk tables
2015
NOTES (CONTINUED)
41.
Liquidity and interest rate risk tables (continued)
The Group’s exposure to liquidity and interest rate risk and the effective rates of interest at reporting date are as follows:
OUR HISTORY
2015
Weighted
average
effective
interest
rate %
Less than
1 year
R’000
1 – 5 years
R’000
Over 5 years
R’000
Total
R’000
—
—
—
46 389
409 894
194 472
532 498
—
—
2 443
53 297
—
—
204 057
5 847
4 897
—
8 341
—
—
—
5 847
4 897
2 443
108 027
409 894
194 472
736 555
249 374
1 432 627
—
259 797
—
19 085
249 374
1 711 509
8.33
Interest free
8.62
Interest free
Interest free
Interest free
Prime
—
—
296 592
508 884
226 484
685 787
21 644
1 739 391
3 322 360
—
—
—
—
270 525
—
3 592 885
97 155
17 775
—
—
—
—
—
114 930
3 419 515
17 775
296 592
508 884
226 484
956 312
21 644
5 447 206
25
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
—
—
2 236
66 794
—
—
166 369
2 605
3 869
—
32 929
—
—
—
2 605
3 869
2 236
133 376
476 953
156 848
727 885
221 619
1 474 100
—
235 399
—
39 403
221 619
1 748 902
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
Assets
OUR BUSINESS
Participating preference shares held in
investment in associate
Loan to associate company
Debt securities included in investments
Trade receivables
Other receivables
Insurance assets
Liabilities
Trade payables
Other payables
Bank overdrafts
3.6
Interest free
95% of prime
6.74
Interest free
Interest free
Interest free
Bank deposit
rates
GOVERNANCE
2014
Assets
Debt securities included in investments
Trade receivables
Other receivables
Insurance assets
Liabilities
Trade payables
Other payables
Bank overdrafts
122
8.18
Interest free
8.56
Interest free
Interest free
Interest free
Prime
The Company’s exposure to liquidity and interest rate risk and the effective rates of interest at reporting date are as follows:
Weighted
average
effective
Less than
interest
1 year
1 – 5 years
Over 5 years
2015
rate %
R’000
R’000
R’000
Total
R’000
Assets
Loan to subsidiary
Loan to subsidiary
Loans to subsidiaries
Other receivables
Liabilities
Loans from subsidiaries
Trade payables
Other payables
Bank overdraft
3.6
Interest free
Prime
15.75
Interest free
Interest free
Bank deposit
rates
—
—
—
1 062
—
31 109
—
—
—
—
—
—
5 847
4 897
82 208
—
538 410
—
5 847
4 897
82 208
1 062
538 410
31 109
4 602
36 773
—
—
—
631 362
4 602
668 135
Prime less 1%
Interest free
Interest free
Interest free
Prime
506
—
1 842
36 423
134
38 905
—
—
—
—
—
—
—
651 349
—
—
—
651 349
506
651 349
1 842
36 423
134
690 254
25
23 511
—
—
23 511
3.6
Interest free
Interest free
Interest free
Bank deposit
rates
—
—
—
27 779
—
—
—
—
2 605
3 869
209 839
—
2 605
3 869
209 839
27 779
49 538
100 828
—
—
—
216 313
49 538
317 141
—
—
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
OUR HISTORY
2015
OUR BUSINESS
2014
Loans to subsidiaries
Other receivables
GOVERNANCE
Assets
Trade payables
Other payables
Bank overdraft
41.10
Prime less 1%
Interest free
Interest free
Interest free
Prime
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.
123
Liabilities
2015
NOTES (CONTINUED)
41.
41.11
Equity Price Risk
OUR HISTORY
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.
GROUP
COMPANY
2015
2014
2015
2014
3 695 280
275 248
3 970 528
3 168 580
1 154 770
4 323 350
108 845
249 983
358 828
57 807
1 129 505
1 187 312
At 31 December, the exposure to equity price risk resulted from
the financial assets listed below:
Investments
OUR BUSINESS
Directly held equities
Indirectly held equities
Equity price risk sensitivity
The sensitivity analysis below has been determined based on the exposure to equity price movements from listed and unlisted equities.
If equities had been 1% higher/lower, loss (2014: profit) for the year would decrease/increase by R37 956 000 (2014 – increase/decrease
R41 853 000) in the Group and decrease/increase R2 901 000 (2014 – increase/decrease R9 641 000) in the Company as a result of
their exposure to movements in equity prices.
41.12
Fair value of financial instruments
The estimated net fair values at 31 December 2015 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.
GOVERNANCE
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
Trade and other payables
124
41.13
2015
Fair value measurements
This note provides information about how the Group determines fair values of various financial assets and financial liabilities.
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.
Level 2
Level 3
Total
—
2 914 598
778 459
73 748
256 231
—
—
—
—
—
5¹
—
256 231
2 914 598
778 464
73 748
—
—
3 766 805
—
—
256 231
25 265²
2 218¹
27 488
25 265
2 218
4 050 524
There were no movements between levels of financial assets or liabilities during the current financial year.
2014
Financial assets at FVTPL*
Derivative financial assets
Listed shares
Unlisted shares and loan
Other investments
Available-for-sale financial assets
Unlisted shares
Unlisted shares
Total
Level 2
Level 3
Total
—
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
Financial liabilities at FVTPL*
Derivative financial liabilities
Level 1
OUR BUSINESS
Listed shares
Other investments
Unlisted shares
Unlisted shares
Total
Level 1
GOVERNANCE
GROUP (R'000)
2015
OUR HISTORY
Fair value of the Group's financial assets and financial liabilities that are measured on a fair value basis on a recurring basis
125
2015
NOTES (CONTINUED)
41.
41.13
Fair value measurements (continued)
OUR HISTORY
Fair value of the Group's financial assets and financial liabilities that are measured on a fair value basis on a recurring basis
(continued)
COMPANY (R'000)
2015
Listed shares
Unlisted shares
Total
OUR BUSINESS
2014
Listed shares
Unlisted shares
Total
Level 1
Level 2
Level 3
Total
—
106 622
—
256 231
—
—
—
—
5¹
256 231
106 622
5
—
106 622
—
256 231
2 218¹
2 223
2 218
365 076
—
—
—
—
Level 1
Level 2
Level 3
Total
—
55 584
—
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
GOVERNANCE
*FVTPL = Fair value through profit or loss
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).
–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).
Notes
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
GROUP
COMPANY
2015
2014
Opening balance
Total gains or losses
– in other comprehensive income
Advances
Closing balance
126
2015
2014
27 488
46 959
2 223
2 159
—
—
27 488
(19 535)
64
27 488
—
—
2 223
—
64
2 223
41.14
2015
Risks that arise from insurance contracts
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.
OUR HISTORY
Insurance risk
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.
GOVERNANCE
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.
OUR BUSINESS
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.
127
2015
NOTES (CONTINUED)
41.
41.14
Risks that arise from insurance contracts (continued)
OUR HISTORY
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.
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.
OUR BUSINESS
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.
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.
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
To manage the underwriting result and protect capital, the group has adopted a multifaceted reinsurance strategy consisting of a
proportional and non-proportional treaty programme as well as tailored facultative solutions.
GOVERNANCE
Reinsurance is not a substitute for the group's liability to its policyholders and if, for any reason, a reinsurer fails to honour its
obligations, the company remains liable in terms of the original policy.
The group therefore monitors closely and continuously the financial conditions of its reinsurers using public information, the evaluations
of local and international ratings agencies and the services of our specialist consultants. All reinsurers have at least an A- Standard and
Poor's rating or are subsidiaries of international reinsurers that are so rated and who have provided letters of comfort. The group's
senior management also meets regularly with its reinsurance partners to consider and respond to developments in the global
reinsurance markets.
The group’s reinsurance strategy is also monitored continuously and reviewed and adjusted annually to align with the company's risk
management and underwriting strategies.
Concentration of insurance risk and policies mitigating the concentrations
The group's portfolio comprises commercial insurances, ranging from small enterprises to large corporations, parastatals and local
authorities, and personal insurances which are insurances of individuals in their personal capacity.
The commercial portfolio has exposure to the major lines of business such as property, liability and motor and a limited exposure to the
specialist classes of engineering and marine.
The group's acceptance in terms of any one risk is restricted in accordance with the relevant underwriting and reinsurance strategies to
the prescribed limits. Furthermore, the portfolio is diversified both geographically and in terms of type and class of risk which limits the
exposure to any accumulation of losses arising out of a concentration or aggregation of risks.
128
2015
Exposure relating to catastrophe events
The treaty reinsurance programme purchased by the group includes protection against the aggregation of losses emanating from a
single event such as a natural catastrophe.
OUR HISTORY
The amount of protection which is purchased is determined using a number of internal and proprietary modelling tools to simulate a
range of catastrophic events and to measure the aggregate, net, exposure based on the group's overall reinsurance strategy.
Based on this analysis, the company considers that its greatest exposure would result from the occurrence of an earthquake affecting
Johannesburg and its environs.
The group is managing its exposure to concentration risk by tracking the exposure in accordance with the group risk appetite and
ensuring the group remains within acceptable credit ratings. The credit worthiness of reinsurers is considered quarterly by reviewing
their financial strength via several rating agencies prior to the finalisation of any contracts and during the year of coverage so as not to
invoke the downgrade clauses per treaty. The group’s largest reinsurance counterparties are Munich Re with 33.2% (2014 – 28.4%),
Africa Re with 21.0% (2014 – 15.8%) and Everest with 11.8 % (2014 – Hannover Re with 12.7%) exposure which represents 66.0% (2014 –
57.0%) of the group’s reinsurance counterparty risk. These are 3 of the top 5 global reinsurers based on AM Best global ratings on gross
written premiums. The remaining percentage is diversified across 11 most reputable reinsurers, with the overall exposure weighted credit
rating for the entire panel of reinsurers ranging between A to A- (AM Best). This exposure is monitored on a regular basis and reviewed
quarterly by the risk and capital management committee.
Credit risk
OUR BUSINESS
The risk management strategy also identifies the maximum net loss that the group is prepared to retain in respect of any one event
and, in this regard, the reinsurance strategy is designed around maximum net retention of R5 000 000 (2014 – R5 000 000) on any
one risk and R10 000 000 (2014 – R10 000 000) on any one insurance event.
The company determines counterparty credit quality by reference to ratings from independent ratings agencies, and where such r atings
are not available, by internal analysis. The company structures the level of credit risk it accepts by monitoring limits on its e
xposure to a
single counterparty, or counterparties and industry segments. Such risks are subject to an annual or more frequent review. Limits on the
level of credit risk by category are approved by the board of directors.
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.
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.
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 s ufficient to
fund the actual claims paid.
129
Other risks and policies for mitigation of these risks
GOVERNANCE
Exposures to individual policyholders, groups of policyholders and third parties are monitored as part of the credit control process.
More than 50% of customers have been transacting with the group over the last five years, and losses have occurred infrequently.
2015
NOTES (CONTINUED)
41.
41.14
Risks that arise from insurance contracts (continued)
OUR HISTORY
Claims development triangles
Gross
Reporting year
2015
2014
2013
2012
2011
OUR BUSINESS
Net
Reporting year
2015
2014
2013
2012
2011
Total
R
658 146 677
581 931 635
580 839 605
457 006 142
547 118 595
2 825 042 654
179 166 630
207 130 253
274 360 968
269 435 745
340 937 261
1 271 030 857
GOVERNANCE
130
Claims paid in respect of a
ccident year
2015
2014
2013
%
%
%
2012
%
2011
%
0,7
1,3
6,1
36,7
55,2
100,0
100,0
46,1
53,9
-0,6
44,3
56,3
1,8
6,5
45,8
45,9
100,0
100,0
100,0
100,0
100,0
28,9
71,1
-9,3
67,5
4,1
5,0
64,3
26,6
100,0
100,0
100,0
100,0
1,5
0,8
7,3
53,5
36,9
100,0
2015
R’000
42.
2015
2014
32 964
2 910
11 189
47 063
26 542
1 466
10 143
38 151
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
OUR HISTORY
COMPANY
Brimsure (Pty) Ltd holds a 30% stake in Aon Re Africa (Pty) Ltd which is jointly controlled by Brimstone (60%) and Commlife Holdings
(Pty) Ltd (40%), a company controlled by a trust of which F Robertson is a beneficiary.
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 the Lion of Africa Insurance Company Ltd including its cash investments.
The balances owing to/by subsidiaries are disclosed in Appendix 1 on page 132.
OUR BUSINESS
F Robertson, an executive director of the Company, is a beneficiary of a trust which is the ultimate controlling shareholder of an
insurance broker that provides services 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 R1 406 142 (2014 – R844 345).
The balances owing by associate companies are disclosed in Appendix 2 on page 134.
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.
2015
2014
2015
2014
—
—
—
—
—
—
—
—
—
—
—
—
—
—
77 608
249
60
—
906
811
2 712
411 475
10 211
1 737
762
92
1 512
3 466
—
—
1 018
—
—
—
4 704
—
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
43.
44.
Dividends received
Management fees refunded
Interest received
110 148
—
1 225
11 994
98 884
(463)
4 894
28 286
Group borrowing powers
In terms of the memorandum of incorporation of the Company, borrowings of the Company and its subsidiaries are unlimited, subject
to authorisation by the board of directors of the holding company.
Subsequent events
There are no significant subsequent events affecting these results.
131
GOVERNANCE
R’000
COMPANY
GROUP
2015
SUPPLEMENTARY REPORTS ON INVESTMENTS
as at 31 December 2015
Appendix 1
OUR HISTORY
Held directly
OUR BUSINESS
GOVERNANCE
COMPANY
Brimco (Pty) Ltd
Holds investments in Sea Harvest Holdings (Pty) Ltd
House of Monatic (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 (RF) (Pty) Ltd
Holds investments in Life Healthcare Group
Holdings Limited
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
Holds investment in Newshelf 1064 (RF) (Pty) Ltd,
Friedshelf 1535 (RF) (Pty) Ltd,
Newshelf 1168 (Pty) Ltd, Newshelf 1169 (Pty) Ltd,
Friedshelf 1534 (Pty) Ltd and Newshelf 1269 (RF)
(Pty) Ltd
Newshelf 1331 (Pty) Ltd
Holds investment in Equites Property Fund Limited
Business Venture Investments 933 (Pty) Ltd
Holds investment in Brimstone Mtha UK SPV Ltd
Issued share capital
2015
2014
R
R
Shares at cost/
valuation
2015
2014
R’000
R’000
Net indebtedness
2015
2014
R’000
R’000
1
1
100
100
—
—
95 049
95 029
30 572 408
30 572 408
100
100
32 427
32 427
30 894
29 832
1
1
100
100
—
—
100
100
100
100
—
—
—
—
100
100
100
100
—
—
—
—
100
100
100
100
—
—
—
—
1
1
100
100
—
—
—
—
100
100
60
60
—
—
(2)
24
15 335
15 335
98
98
258 283
258 283
100
100
100
100
39 000
39 000
100
100
100
100
18 646
18 646
1 100
1 100
100
100
—
—
40 293
19 937
167 163 234
167 163 234
100
100
167 163
167 163
155 715
43 024
1
—
100
—
—
—
50 588
—
67
—
100
—
249 885
—
—
(62 856)
—
Less: Amounts written off
132
Percentage
holding
2015 2014
%
%
765 404
(2 426)
762 978
515 519
(2 426)
513 093
(155 868) (200 909)
(329 869) (294 504)
217 569
(506)
22 041
(17 582)
41 007 (303 108)
(48)
(48)
40 959 (303 156)
Net indebtedness
2015
2014
R’000
R’000
100
100
100
100
—
—
—
—
15 335
15 335
2.2
2.2
—
—
—
—
17 000
17 000
100
100
—
—
—
—
1 000
1 000
58.4
58.4
—
—
—
—
100
100
100
100
—
—
—
—
100
—
100
—
—
—
—
—
100
—
100
—
—
—
—
—
1
1
100
100
—
—
—
—
1
1
100
100
—
—
—
—
1
1
100
100
—
—
—
—
167 143 233
167 143 233
100
100
—
—
—
—
1
—
100
100
—
—
64 417 697
—
100
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(25 000)
(25 000)
—
—
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
OUR HISTORY
Shares at cost/
valuation
2015
2014
R’000
R’000
OUR BUSINESS
COMPANY
Dormant
Holds investment in Life Healthcare Group
Holdings Limited
Holds investment in Oceana Group Limited
Investment holding
Sea Harvest Corporation (Pty) Ltd
Deep sea fishing
Cape Harvest Foods (Pty) Ltd
Dormant
SHC Retail Shops (Pty) Ltd
Sea Harvest international division holding company
Holds investment in MTN Zakhele
Holds investment in Taste Holdings Limited
Holds investment in Afena Capital (Pty) Ltd
Holds investment in Phuthuma Nathi
Investments Limited
Friedshelf 1535 (RF) (Pty) Ltd
Holds investment in Newshelf 1062 (RF) (Pty) Ltd
Brimstone Mtha UK SPV Ltd
Holds investment in Old Mutual plc
Percentage
holding
2015 2014
%
%
(75 743)*
9 176
—
—
(4 517)
9 715
—
—
GOVERNANCE
Held indirectly
Issued share capital
2015
2014
R
R
2015
Profits
Losses
2015
R’000
265 480
(987 004)
2014
R’000
277 010
(394 618)
All subsidiaries are incorporated in the Republic of South Africa with the exception of Brimstone Mtha UK SPV Ltd which is incorporated in the
United Kingdom.
* Included in this net balance is a loan liability of R77 753 000 which is included in the loans balances disclosed in note 16.
133
The Company’s interest in the aggregate profits and losses after taxation of consolidated subsidiaries was as follows:
2015
SUPPLEMENTARY REPORTS ON INVESTMENTS (CONTINUED)
Appendix 2
Investments in associate and joint venture companies
OUR HISTORY
Reporting
date
Unlisted
Effective
percentage
holding
2015
2014
%
%
Shares at
cost/valuation
2015
2014
R’000
R’000
Share of retained
income/(losses)
since acquisition
2015
2014
R’000
R’000
Share of
non-distributable
reserves since
acquisition
2015
2014
R’000
R’000
Share of
distributions since
acquisition
2015
2014
R’000
R’000
Indebtedness
2015
2014
R’000
R’000
Held directly
OUR BUSINESS
– by Company:
The Scientific Group (Pty) Ltd
(Medical equipment distributors)
Obsidian Health (Pty) Ltd
(Medical equipment distributors)
South African Enterprise
Development (Pty) Ltd
(Entrepreneurial investments)
Hot Platinum (Pty) Ltd
(Manufacturer of machinery for
jewellery industry)
Total held by Company
30 Sept.
—
28.2
—
6 768
30 Sept.
25.07
—
1 254
—
31 Mar.
25.0
25.0
—
—
28 Feb.
20.66
20.66
288
—
9 258
—
—
—
—
—
20 899
(362)
—
7 740
—
—
—
—
—
—
—
—
—
—
—
7 744
3 475
288
(288)
(288)
—
—
—
—
3 000
3 000
1 542
7 056
(650)
8 970
7 740
—
—
—
10 744
27 374
—
—
—
—
—
—
Held indirectly
GOVERNANCE
– by subsidiaries:
Aon Re Africa (Pty) Ltd
31 Dec.
(Insurance industry)
Oceana Group Limited*
30 Sept.
(Food industry )
Vuna Fishing Company (Pty) Ltd
31 Dec.
(Fishing and fish processing)
Mareterram Ltd
30 Jun.
(Food industry )
Afena Capital (Pty) Ltd
28 Feb.
(Asset management)
Friedshelf 1534 (Pty) Ltd
31 Dec.
(Holds investment in Grindrod
Limited)
Total associates and joint
ventures held via subsidiaries
TOTAL GROUP
18.0
18.0
13 359
13 359
18 027
18 431
3 849
3 989
19.6
20.0
777 040
566 264
151 525
116 474
118 040
12 067
49.8
49.8
36 432
36 432
(28 573)
(22 397)
—
—
—
—
—
—
19.9
—
54 542
—
—
—
—
—
—
—
—
—
31.1
31.1
8 264
20 258
1 203
812
—
—
2 443
2 236
72.4
59.2
466 000
450 000
(466 000)
(95 955)
—
—
—
—
1 355 637
1 357 179
1 086 313
1 093 369
(323 818)
(324 468)
17 365
26 335
2 443
13 187
2 236
29 610
(2 163)
(2 368)
—
—
119 726
127 466
13 688
13 688
(58 945)
(58 945)
(58 945)
(58 946)
(58 946)
(58 946)
Valuations are carried out every six months using bases considered appropriate to the underlying investment.
* At 31 December 2015 the fair value of the investment in Oceana Group Ltd. was R2 680.1 million (2014 – R2 107.3 million). The effective percentage holding is reflected net of treasury shares.
134
2015
Investments
Available-for-Sale Assets
Held by Company
Unlisted
African Legends Ltd
Held by Subsidiary
Desert Diamond Fishing (Pty) Ltd
Total Group
Number of shares/units
2015
2014
Valuation of shares
2015
2014
R’000
R’000
Total investment
2015
2014
R’000
R’000
3 075 844
3 075 844
2 218
2 218
2 218
2 218
12
12
25 265
27 483
25 265
27 483
25 265
27 483
25 265
27 483
242 062
1 537 354
254 126
2 536 357
4 222 300
2 521 568
560 660
38 569
241 962
1 537 254
254 026
2 536 257
—
—
—
—
2 907
16 911
2 795
27 900
47 670
1 130
—
7 309
3 037
19 216
3 048
30 283
—
—
—
—
2 907
16 911
2 795
27 900
47 670
1 130
—
7 309
3 037
19 216
3 048
30 283
—
—
—
—
430
—
—
430
73 508
16 000 000
5
—
—
5
6 555
—
5
—
—
5
6 555
—
—
—
—
—
—
—
—
—
249 983
356 610
204 628
576 644
341 678
1 185 094
—
—
249 983
356 610
204 628
576 644
341 678
1 185 094
—
134 481
—
1 109 000
—
1 148 000
57 439 579
53 035 166
4 000 000
28 000 000
2 192 249
—
—
134 481
100
1 109 100
100
1 148 100
37 754 941
53 021 681
—
—
—
—
43 588
25 364
—
12 199
—
12 628
169 447
1 859 943
165 800
357 000
162 007
73 748
56 143
32 867
1
13 863
1
13 708
120 816
2 267 212
—
—
—
94 450
43 588
25 364
—
12 199
—
12 628
169 447
1 859 943
165 800
357 000
162 007
73 748
56 143
32 867
1
13 863
1
13 708
120 816
2 267 212
—
—
—
94 450
—
—
4 738 561
—
2 167 945
2 776 569
—
—
778 459
4 016 793
4 044 276
10 700
235 222
370 940
4 401 017
4 428 500
—
—
778 459
4 016 793
4 044 276
10 700
235 222
370 940
4 401 017
4 428 500
OUR HISTORY
Appendix 3
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
Old Mutual plc
Equites Property Fund Limited
MTN Zakhele
Debt securities
Unlisted
Money market
MTN Zakhele
Phuthuma Nathi Investments Limited
Total Group
Total Investments
A register of investments is available for inspection at the registered office of the Company.
135
GOVERNANCE
Unlisted
Welkom Yizani Investments Limited
Emthunzini BEE Business Partners Trust (Santam)
Galaxy Gold Mining Company Limited
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
Grindrod Limited
Galane Gold Limited
Galane Gold Limited – common share purchase warrants
Santam Limited
OUR BUSINESS
Valuations are carried out every six months using bases
considered appropriate to the underlying investment.
2015
SUPPLEMENTARY REPORTS ON INVESTMENTS (CONTINUED)
Appendix 4
Valuation of option
OUR HISTORY
Brimstone acquired rights to shares that have been valued as an option. The results of the calculations and inputs into the model are set out below:
Tiger Brands Limited
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
OUR BUSINESS
Approximate value
– 28.05% volatility
Monte Carlo
1 813 613
R249 983 105
R316.44
8.12%
3.20%
33.05%
31 December 2017
R323 803 576
93.5% of prime n.a.c.m.
R244 022 456
R249 983 105
R257 080 900
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%.
GOVERNANCE
136
2015
DIRECTORS’ INTERESTS IN SHARES
Appendix 5
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
Beneficial
Direct
Non-Beneficial
Beneficial
Indirect
Non-Beneficial
1 299 039
58 714
485 414
103 000
128 136
—
2 074 303
—
—
—
—
—
—
—
3 817 893
2 029 954
5 193 713
—
126 712
403 000
11 571 272
117 664
—
—
—
—
—
117 664
5 234 596
2 088 668
5 679 127
103 000
254 848
403 000
13 763 239
42 757 604
414 308
91 756
73 742
212 650
123 227
102 554
—
1 018 237
—
—
—
—
—
—
—
—
16 199 718
13 411 153
15 184 895
—
1 062 039
—
2 103 366
47 961 171
181 028
—
—
5 000
—
—
—
186 028
16 795 054
13 502 909
15 258 637
217 650
1 185 266
102 554
2 103 366
49 165 436
Beneficial
Direct
Non-Beneficial
Beneficial
Indirect
Non-Beneficial
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
Total
OUR BUSINESS
Directors
OUR HISTORY
As at 31 December 2015
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
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:
Number of
“N” Ordinary
shares acquired
Date acquired
MA Brey
LZ Brozin
F Robertson
153 880
93 100
93 100
10 March 2016
10 March 2016
14 March 2016
137
Directors
GOVERNANCE
As at 31 December 2014
2015
SHAREHOLDING INFORMATION
Shareholder spread
OUR HISTORY
Ordinary shares
No. of shareholders in S.A.
No.
%
Public
Directors
Other
Total
1 302
6
1
1 309
99.46%
0.46%
0.08%
100%
No. of shareholders in S.A.
No.
%
OUR BUSINESS
Public
Directors
Other
Total
2 382
7
5
2 394
99.50%
0.29%
0.21%
100%
No. of shareholders
other than in S.A.
No.
16
—
—
16
%
100.00%
0.00%
0.00%
100%
No. of shareholders other than in
S.A.
No.
%
24
—
—
24
100.00%
0.00%
0.00%
100%
Total shareholders
No.
1 318
6
1
1 325
%
99.47%
0.45%
0.08%
100%
Total shareholders
No.
%
GOVERNANCE
2 406
7
5
2 418
99.50%
0.29%
0.21%
100%
Ordinary
Shares
“N” Ordinary
Shares
1 765
1 013
1 350
8 783 758
20.54%
122 074 698
429
1 795
1 035
1 270
23 319 729
9.55%
357 267 303
3 101
Share trading statistics
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
138
2015
Public vs Non-Public Shareholding
Ordinary Shares
Public shareholders
Non-public shareholders
Directors and associates
Treasury shares
Total
“N” Ordinary Shares
Total
% of issued
share capital
—
5 234 596
5 679 127
2 088 668
1 383 754
—
—
—
35 140 000
16 795 054
15 258 637
13 502 909
12 626 186
13 146 537
10 785 000
5 817 567
35 140 000
22 029 650
20 937 764
15 591 577
14 009 940
13 146 537
10 785 000
5 817 567
12.25%
7.68%
7.30%
5.44%
4.88%
4.58%
3.76%
2.03%
14 386 145
123 071 890
137 458 035
47.92%
Number of
shares
% of issued
share capital
25 041 278
58.57
13 763 239
32.19
3 953 087
42 757 604
9.24
100
Number of
shares
% of issued
share capital
155 250 375
63.60
49 165 436
20.15
497 389
50 000
35 140 000
1 500 000
2 500 000
244 103 200
0.20
0.02
14.40
0.61
1.02
100
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
Total
“N” Ordinary
OUR BUSINESS
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)
Jakes Gerwel Family Trust (direct and indirect, beneficial and non-beneficial)
Government Employees Pension Fund
Ellerine Bros (Pty) Ltd
36One Hedge Fund
Ordinary
GOVERNANCE
Major shareholders
OUR HISTORY
Combined Ordinary and “N” Ordinary shareholdings
139
2015
SHAREHOLDING INFORMATION (CONTINUED)
Number of shareholders
Ordinary shares
OUR HISTORY
Size of Holding
1 – 5 000
5 001 – 10 000
10 001 – 100 000
100 001 – 1 000 000
over 1 000 000
Number of
shareholders
% of total
shareholders
Number of
shares
% of shares
issued
938
154
173
53
7
1 325
70.79
11.62
13.06
4.00
0.53
100
1 619 139
1 246 155
5 560 902
16 990 167
17 341 241
42 757 604
3.79
2.90
13.01
39.74
40.56
100
1
1
1
1
1
1
6
0.08
0.08
0.08
0.08
0.08
0.08
0.48
3 953 087
3 538 104
3 208 499
1 983 151
1 945 919
1 901 400
16 530 160
9.25
8.27
7.50
4.64
4.55
4.45
38.66
1 117
131
2
75
1 325
84.30
9.89
0.15
5.66
100
8 728 562
11 843 718
569 953
21 615 371
42 757 604
20.42
27.70
1.33
50.55
100
Number of
shareholders
% of total
shareholders
Number of
shares
% of shares
issued
1 685
223
329
142
39
2 418
69.69
9.22
13.61
5.87
1.61
100
2 450 373
1 690 833
12 107 382
46 375 948
181 478 664
244 103 200
1.00
0.69
4.96
19.00
74.35
100
1
1
2
2
1
7
0.04
0.04
0.08
0.08
0.04
0.28
48 549 671
35 140 000
13 146 537
10 785 000
5 817 567
113 438 775
19.89
14.40
5.39
4.42
2.38
46.48
1 947
333
10
128
2 418
80.52
13.77
0.41
5.30
100
23 262 678
121 029 627
4 731 826
95 079 069
244 103 200
9.53
49.58
1.94
38.95
100
Major shareholders
OUR BUSINESS
Septen Investments Pty Ltd
Cape Monarch Investments
Max Brozin Investment Corp
African Monarch 710 Investment Hldgs
Commlife Holdings Pty Ltd
The Mushaky Family Trust
Analysis of shareholders
Individuals
Nominee companies or trusts
Public companies
Close corporations and private companies
GOVERNANCE
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
Cape Monarch Investments
The Brimstone Black Executive Investment Trust
Government Employees Pension Fund
Ellerine Bros (Pty) Ltd
36One Hedge Fund
Analysis of shareholders
Individuals
Nominee companies or trusts
Public companies
Close corporations and private companies
140
2015
NOTICE OF ANNUAL GENERAL MEETING
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 MA Brey
3.2 MJT Hewu
3.3 MK Ndebele
3.4 FD Roman
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 145 of this integrated report.
Election of directors appointed during the year
The board appointed Messrs GG Fortuin and MI Khan as
directors of the Company with effect from 9 May 2016. In terms
of the Company’s MOI, shareholders are required to ratify the
election of the newly appointed directors:
4.1 GG Fortuin
4.2 MI Khan
Each election will be put to shareholders in a separate resolution. A brief CV of each director to be elected appear on
page 145 of this integrated report. Appointment of members of the audit and risk committee
OUR HISTORY
To approve the appointment of the following members of
the audit and risk committee, each by way of a separate
resolution:
5.1 N Khan (Chairman)
5.2 PL Campher
5.3 KR Moloko
5.4 LA Parker
5.5 FD Roman (subject to her re-election as a director)
Reappointment of Auditors
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 38 804 517 ordinary shares (excluding 3 953 087
treasury shares) and 203 936 489 “N” Ordinary shares
(excluding 42 184 634 treasury shares) as at the date of
this notice;
141
OUR BUSINESS
To re-appoint Deloitte & Touche (with the designated auditor
being Mr Lester Peter Cotten) as auditors for the ensuing year.
GOVERNANCE
Notice is hereby given that the 20th 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, 9 May 2016 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 2015.
2.To confirm annual dividend number 15 , in the amount
recommended by the directors of 35 (thirty five) cents per
share, payable to those shareholders recorded in the register of
the Company on Friday, 22 April 2016. The dividend will be paid
on Monday, 25 April 2016.
Brimstone Investment Corporation Limited
(Incorporated in the Republic of South Africa)
(Registration number 1995/010442/06)
(“Brimstone” or “the Company”)
(ISIN Number: ZAE000015277
Share Code: BRT)
(ISIN Number: ZAE000015285
Share Code: BRN)
2015
NOTICE OF ANNUAL GENERAL MEETING (CONTINUED)
OUR HISTORY
OUR BUSINESS
–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;
–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.
GOVERNANCE
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 52 to 54 of this
integrated report.
10. Special resolution number 1:
Non-executive directors’ fees
To approve the revised non-executive directors’ fees for the
year ending 31 December 2016 as set out below:
142
1/1/2015 to
31/12/2015
(Approved)
1/1/2016 to
31/12/2016
(For approval)
Board (Annual fee)
Chairman
Lead independent director
Member
—
328 900
170 316
—
350 279
181 386
Committees (Per meeting)
Audit Committee
Chairman
Member
30 657
17 031
32 649
18 138
Chairman
Member
25 548
17 031
27 208
18 138
Nominations Committee
Chairman
Member
25 548
17 031
27 208
18 138
Remuneration Committee
Chairman
Member
25 548
17 031
27 208
18 138
Social and Ethics Committee
Chairman
Member
25 548
17 031
27 208
18 138
Investment Committee
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. Non-binding advisory vote:
Non-Executive Directors remuneration 2016
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;
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 139
– Share capital of Brimstone – page 96
Directors’ responsibility statement
The directors, whose names appear on page 146 of this
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.
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.”
OUR HISTORY
Material change
There have been no material changes in the affairs or financial
position of Brimstone and its subsidiaries between 31 December
2015 and the date of the integrated report of which this notice
of annual general meeting forms part.
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.
143
OUR BUSINESS
GOVERNANCE
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;
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 reasonably concluded that the
Company will satisfy the solvency and liquidity test immediately after the repurchase.
2015
2015
NOTICE OF ANNUAL GENERAL MEETING (CONTINUED)
General authority for financial assistance in terms of
Section 45 of the Act
OUR HISTORY
OUR BUSINESS
GOVERNANCE
“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 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,
such authority to endure for a period of 2 (two) years from the
date of this resolution.”
Voting and proxies
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, 29 April 2016 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
to be able to attend, participate and vote at the annual general
meeting is Thursday, 21 April 2016.
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.
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.
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
to be received no later than 17h00 on Thursday, 5 May 2016.
By order of the Board
T Moodley
Company Secretary
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.
144
14.To transact such other business as may be
transacted at an annual general meeting:
Postal deliveries to:
PO Box 61051
Marshalltown 2107
2015
CURRICULUM VITAE
Felicia Dawn Roman
Co-founder and Chief Executive Officer of Brimstone, Mustaq Brey is
a Chartered Accountant by profession. He currently serves as nonexecutive chairman of Oceana Group Limited and Life Healthcare
Group Holdings Limited, as well as non-executive director on the
boards of AON Re Africa (Pty) Limited, House of Monatic (Pty)
Limited, Lion of Africa Insurance Company Limited and International
Frontier Technologies SOC Limited.
Felicia’s employment record includes being the head of the regional
office of the Friedrich Ebert Foundation, the co-ordinator of the
Provincial Development Council, the Provincial Director of the
National Business Initiative and the Deputy CEO of WESGRO. She
joined KFM Radio (Pty) Limited in May 2001 as Managing Director. In
July 2006, Felicia joined Sun International (Pty) Limited as the
General Manager of The Golden Valley Casino in Worcester and was
promoted to a senior management level responsible for Enterprise
Development across the group. Since leaving Sun International at
the end of 2012, Felicia has acquired 100% of the equity of Umlingo
(Pty) Limited, a supplier to the casino industry and is the Managing
Director. Felicia is a shareholder and director in Distinct Few – a
boutique executive search firm.
Mzwandile Hewu is employed as the Chief Director for Community
and Partnership Development in the Western Cape Department of
Social Development. Within the Department of Social Development,
he is the senior manager responsible for service delivery co-ordination in all six regions of the Western Cape. He previously worked
as the Head of Ministry in the same Department for five years.
He is the former General Manager of the ruling party (ANC) in the
Parliament of the Republic of South Africa.
Having worked as a Head Master in two different schools he has
expertise in people and broader strategic management. He served
as the Provincial Head of the biggest Teacher’s Union in the country,
South African Democratic Teachers Union (SADTU), where he
managed to build a number of value adding networks.
His directorships and trusteeships include: Elevated 154 Property
Investments (Pty) Limited, The Lokoza Dywanisi Family Trust and
Lokoza Property Investment Family Trust.
He holds a BCom degree from the University of the Western Cape,
BCom (Hons) from University of South Africa and a BPhil from the
University of Stellenbosch.
Mpho Kathleen Ndebele
Mpho Ndebele attained a BA (Economics) from the University of
Botswana, Lesotho & Swaziland and an MSW (Social Planning) from
the University of Denver (USA).
New Appointments to the board of directors
(effective 9 May 2016)
Geoffrey George Fortuin (BCom(Acc) Cum Laude BCom
(Acc)(Hons) CA(SA))
Geoff was previously a partner of Deloitte & Touche for 15 years
during which time he was responsible for a number of South African
listed companies, including the audit of Brimstone up to
31 December 2012. He was also a member of the Deloitte South
Africa Board. Geoff is a non-executive director of Quantum Foods
Holdings Limited a company listed on the JSE and is currently the
Managing Executive (Finance) of Brimstone.
Mohamed Iqbal Khan (BCompt(Hons) CA(SA))
Iqbal qualified as a chartered accountant in 1992 and worked at SAA
for five years before re-joining the audit profession. He was a partner
at EY for 11 years and served as the audit partner of Brimstone for
7 years. He has worked at Brimstone in various roles over 7 years
which was interrupted by a two year period as Chief Operating
Officer of Old Mutual Investment Group. He serves on a number of
Brimstone group company boards and is an independent non-executive director of Cricket South Africa.
She is a past director of the Trans Caledon Tunnel Authority,
Siphumelele Investment Corporation, Impumelelo Social Innovations
Centre, the Black Sash Trust and the Social Change Assistance Trust.
She is currently a trustee of the Imam Abdullah Haron Education
Trust and the Desmond Tutu HIV/AIDS Foundation.
GOVERNANCE
Mzwandile John Terrold Hewu
OUR BUSINESS
Mustaq Ahmed Brey
OUR HISTORY
145
2015
CORPORATE INFORMATION
OUR HISTORY
OUR BUSINESS
Directors
Registered office
F Robertson (61) (Executive Chairman) †∞
MA Brey (61) (Chief Executive Officer) †∞
LZ Brozin (60) (Financial Director) †
PL Campher (68) (Lead Independent Director) ^º*>#∞•
MJT Hewu (52) ^º#•
N Khan (59) ^º>*∞
KR Moloko (47) ^º>
MK Ndebele (66) ^º#•
LA Parker (62) ^º>*
FD Roman (52) ^º>
1st Floor, Slade House
Boundary Terraces
1 Mariendahl Lane, Newlands 7700
PO Box 44580, Claremont 7735
Membership of committees at 31 December 2015
Website
Non-Executive ^
Independent º
Executive †
Member: Audit and risk committee >
Member: Nominations committee #
Member: Remuneration committee •
Member: Investment committee *
Member: Social and ethics committee ∞
www.brimstone.co.za
Company secretary
[email protected]
Tiloshani Moodley BA (Law) LLB
Chief financial officer
Telephone number
+27 21 683 1444
Fax number
+27 21 683 1285
Facebook
www.facebook.com/BrimstoneInvestment
Twitter
@BrimstoneLtd
Email
Bankers
GOVERNANCE
Michael O’Dea BCom (CA)SA
Nedbank Ltd
First National Bank of Southern Africa Ltd
Sponsor
Auditors
Nedbank Capital
(A division of Nedbank Ltd)
135 Rivonia Road
Sandton 2196
PO Box 144, Johannesburg 2000
+27 11 295 8602
Deloitte & Touche
Company registration number
1995/010442/06
Internal auditors
KPMG
Attorneys
Cliffe Dekker Hofmeyr Inc.
Edward Nathan Sonnenbergs
Transfer secretaries
Computershare Investor Services (Pty) Ltd
70 Marshall Street, Johannesburg 2001
PO Box 61051, Marshalltown 2107
+27 11 370 7700
146
2015
PROXY FORM
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, 9 May 2016 and at any adjournment thereof.
I/We............................................................................................................................................................................................................................................... (name/s in block letters)
of (address)....................................................................................................................................................................................................................................................................................
............................................................................................................................................................................................................................................................................................................
OUR HISTORY
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.
being a shareholder/shareholders of Brimstone and holding................................................................................................................ordinary shares in the Company,
being a shareholder/shareholders of Brimstone and holding............................................................... “N” Ordinary shares in the Company, do hereby appoint
1........................................................................................................................................................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:
Number of
ordinary shares*
For
Against Abstain
Number of
“N” Ordinary shares*
For
Against Abstain
OUR BUSINESS
2.......................................................................................................................................................of...........................................................................................................or failing him/her
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 2015
2. To confirm annual dividend number 15
3.1 MA Brey
3.2 MJT Hewu
3.3 MK Ndebele
3.4 FD Roman
4. Ordinary resolution number 2 : Election of directors
4.1 GG Fortuin
4.2 MI Khan
5. Ordinary resolution number 3: 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 (subject to her re-election as a director)
6. Ordinary resolution number 4: Re-appointment of auditors
7. Ordinary resolution number 5: To place the unissued shares under the directors’ control
8. Ordinary resolution number 6: Approval to issue shares for cash
9. Non-binding advisory vote: Remuneration policy
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) ......................................................................................... 2016
...........................................
Please read the notes on the reverse side hereof
Shareholder’s signature
147
GOVERNANCE
3. Ordinary resolution number 1: Re-election of directors
2015
PROXY FORM (CONTINUED)
Important notes about the annual general meeting:
OUR HISTORY
OUR BUSINESS
GOVERNANCE
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, 5 May 2016.
148
freshIdentity.co.za
Boundary Terraces, 1 Mariendahl Lane, Newlands 7700, South Africa
PO Box 44580, Claremont 7735, South Africa
www.brimstone.co.za
BrimstoneInvestment
BrimstoneLTD