Directors approval of the annual financial statements

Transcription

1 AUDITED ANNUAL FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2018

2 Contents Directors approval of the annual financial statements 1 Certificate from the company secretary 1 Independent auditor's report 2 Directors report 6 Audit committee report 9 Consolidated statement of: Profit or loss and other comprehensive income 11 Financial position 12 Cash flows 13 Changes in equity 14 Notes to the consolidated financial statements: General information 15 1 Amendments to IFRSs that are mandatorily effective for the current year 15 2 New and revised standards and interpretations in issue but not yet effective 15 3 Significant accounting policies 17 4 Critical accounting judgements and key sources of estimation uncertainty 23 5 Segment information 25 6 Revenue 28 7 Other gains and losses 28 8 Investment income 28 9 Finance costs (Loss)/profit for the year Income tax expense Earnings and headline earnings per share Dividends and distributions Property, plant and equipment Residential units held under reversionary sale and transfer obligations (RTO) Biological assets Other financial assets Subsidiaries Investments in joint venture and associates Inventories Trade and other receivables Unsecured loans Capital, reserves and shareholding interests Borrowings interest-bearing Other liabilities interest-free Cash and cash equivalents Trade and other payables Provisions Net post-employment obligation Employee share incentive scheme Financial instruments Fair value measurements Related party transactions Operating lease arrangements Proposed capital expenditure Comparative information Events after the reporting period 65

3 Directors approval of the annual financial statements The directors of the company are responsible for the integrity and objectivity of the annual financial statements, which have been prepared in accordance with International Financial Reporting Standards and in the manner required by the Companies Act of South Africa. In discharging this responsibility, the group maintains appropriate internal control systems designed to provide reasonable assurance that assets are safeguarded and transactions are executed and recorded in accordance with group policies. The directors, supported by the audit committee, are satisfied that such controls, systems and procedures are in place to minimise the possibility of material loss or misstatement. The directors believe that the group has adequate resources to continue in operation for the foreseeable future. Therefore, the annual financial statements have been prepared on a going-concern basis. The annual financial statements for the year ended 31 March 2018 have been prepared on behalf of Crookes Brothers Limited by Nigel Naidoo CA(SA), assisted by Melani De Castro CA(SA) under the supervision of Gregory Veale CA(SA), group financial director. The board of directors approved the annual financial statements on 5 June They are signed on its behalf by: John Barton Chairman Mount Edgecombe 5 June 2018 Guy Clarke Group managing director Certificate from the company secretary I hereby certify that the company has lodged with the Companies and Intellectual Property Commission, all such returns that are required of a public company in terms of the Companies Act, 2008, as amended, in respect of the year ended 31 March 2018 and that all such returns are true, correct and up to date. Highway Corporate Services (Pty) Ltd Company secretary Mount Edgecombe 5 June 2018 Crookes Brothers Limited Audited Annual Financial Statements 1

4 Independent auditor s report to the shareholders of Crookes Brothers Limited Report on the audit of the consolidated financial statements Opinion We have audited the consolidated financial statements of Crookes Brothers Limited ( the Group ) set out on pages 11 to 65, which comprise the consolidated statement of financial position as at 31 March 2018, the consolidated statement of profit or loss and other comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended, and notes to the financial statements, including a summary of significant accounting policies. In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Group as at 31 March 2018, and its consolidated financial performance and consolidated cash flows for the year then ended in accordance with International Financial Reporting Standards and the requirements of the Companies Act of South Africa. Basis for opinion We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the Auditor s Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are independent of the Group in accordance with the Independent Regulatory Board for Auditors Code of Professional Conduct for Registered Auditors (IRBA Code) and other independence requirements applicable to performing audits of financial statements in South Africa. We have fulfilled our other ethical responsibilities in accordance with the IRBA Code and in accordance with other ethical requirements applicable to performing audits in South Africa. The IRBA Code is consistent with the International Ethics Standards Board for Accountants Code of Ethics for Professional Accountants (Parts A and B). We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Key audit matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the consolidated financial statements of the current period. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. The below key audit matter applies to the consolidated financial statements. Key audit matter Biological assets Significant judgement and estimates are used in determining the fair valuation of biological assets. At 31 March 2018, the value of the biological assets (standing sugar cane and deciduous fruit) was R169,8 million and R18,8 million respectively which constitutes a significant balance on the statement of financial position. Given the value of the biological assets, together with the significant judgement and estimates that are required in determining the fair value, the valuation of biological assets is considered a key audit matter. Refer to note 16 for detailed information on biological assets. 2 Crookes Brothers Limited Audited Annual Financial Statements

5 Key audit matter Biological assets continued Standing sugar cane The value of standing sugar cane is based on the current estimated cane price for the following season and sucrose content less the estimated costs of harvesting and transport. Significant judgement is required in estimating the expected cane yield, the maturity of the cane, the estimated sucrose content and the forecast sucrose price for the various operating locations and is considered subjective since it is based on management and the directors experience and expectations and relevant current external factors. Deciduous fruit apples and pears The value of the deciduous fruit is based on the estimated yield (tons/packout percentage) from the current crop of unpicked varieties multiplied by the forecast price per crop less estimated costs of harvesting, transport, packing and point of sale costs. This amount is then adjusted by a factor determined by management and the directors to take into account the maturity of the fruit at reporting date. This valuation is considered subjective since it is based on management and the directors experience and expectations and relevant current external factors. How the matter was addressed in the audit Our procedures performed in considering the appropriateness of the valuation of standing sugar cane included the following: Sensitivities were performed to assess the impact of changes in the significant inputs. Reviewed the principles used in the valuation of standing sugar cane and analysed the key assumptions used in the valuation model. Detailed testing was performed on the key inputs into the standing sugar cane valuation model including estimated yields, estimated sucrose content and forecast price to confirm the validity, accuracy and completeness of the data by comparing the data to market and other external data where applicable. The forecast price was also agreed to external sources. The prior year estimated yields, estimated sucrose content and forecast price were also compared to the current year actuals attained to assess the reasonableness and accuracy of management and the directors estimates. The formulae per the model were reviewed and recalculated for accuracy. Based on our testing performed the standing sugar cane valuation appears to be reasonable. Our procedures performed in considering the appropriateness of the valuation of deciduous fruit included the following: Sensitivities were performed to assess the impact of changes in the significant inputs. Reviewed the principles used in the valuation of deciduous fruit and analysed the key assumptions used in the valuation model. Detailed testing was performed on the key inputs into the deciduous fruit valuation model including estimated yields, forecast prices including harvesting, transport, packing and point of sale costs and the estimated maturity of the deciduous fruit to confirm the validity, accuracy and completeness of the data by comparing the data to market and other external data where applicable. The forecasted prices was also agreed to external sources. The prior year estimated yields, forecast prices including harvesting, transport, packing and point of sale costs and factors used to assess the maturity were also compared to the current year actuals attained to assess the reasonableness and accuracy of management and the directors estimates. The formulae per the model were reviewed and recalculated for accuracy. Based on our testing performed the deciduous fruit valuation appears to be reasonable. Crookes Brothers Limited Audited Annual Financial Statements 3

6 Independent auditor s report continued Key audit matter How the matter was addressed in the audit Renishaw Property Developments (Pty) Ltd reversionary sale and transfer obligation accounting treatment As disclosed in note 15 of the consolidated financial statements, sales for certain properties include a reversionary sale and transfer obligation ( RTO ) clause. Reflected in note 15, is investment property at fair value of R11,4 million and other financial liabilities of R8,8 million. This clause states that the buyer purchases the property at a discounted price of between 25% to 30% of the cash selling price under the normal sale agreement. In addition, this clause then gives the company an option to repurchase the unit at the original discounted price paid by the buyer. Consequently, this clause alters the underlying nature of the sale transaction and the accounting treatment at transaction date (initial recognition) and subsequent measurement needed to be assessed against relevant accounting standards. It was determined by management and the directors that the existence of this clause altered this transaction from being a sale to a lease arrangement. As a result of the judgment required when assessing the transaction against the requirements of IAS 18: Revenue, IAS 17: Leases and IAS 40: Investment Property in setting the appropriate accounting treatment in the consolidated financial statements it is therefore considered a key audit matter. To address the key audit matter we have completed audit procedures which included: Inspecting the sales contracts containing the RTO clause to obtain an in-depth understanding of the transaction in order to evaluate the accounting treatment. Reviewing management and the directors assessment of the RTO accounting treatment transaction against the requirements of IAS 18: Revenue, IAS 17: Leases and IAS 40: Investment Property. Consulting with our internal accounting specialist to establish the suitability of the accounting treatment of the transaction. We concurred that the accounting treatment of the RTO transactions are in accordance with the provisions of IAS 18: Revenue, IAS 17: Leases and IAS 40: Investment Property and that the disclosure of these transactions in the consolidated financial statements were found to be adequate. Other information The directors are responsible for the other information. The other information comprises the Report of the Directors, the Report of the Audit Committee and the Compliance Statement by the Company Secretary as required by the Companies Act of South Africa which we obtained prior to the date of this report, and the Integrated Report, which is expected to be made available to us after that date. The other information does not include the consolidated financial statements and our auditor s report thereon. Our opinion on the consolidated financial statements does not cover the other information and we do not express an audit opinion or any form of assurance conclusion thereon. In connection with our audit of the consolidated financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the work we have performed on the other information obtained prior to the date of this auditor s report, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Responsibilities of the Directors for the Consolidated Financial Statements The directors are responsible for the preparation and fair presentation of the consolidated 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 consolidated financial statements that are free from material misstatement, whether due to fraud or error. In preparing the consolidated financial statements, the directors are responsible for assessing the Group s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Group or to cease operations, or have no realistic alternative but to do so. Auditor s Responsibilities for the Audit of the Consolidated Financial Statements Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements. 4 Crookes Brothers Limited Audited Annual Financial Statements

7 As part of an audit in accordance with ISAs, we exercise professional judgement and maintain professional scepticism throughout the audit. We also: Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Obtain an understanding of internal control relevant to the audit 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 Group s internal control. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the directors. Conclude on the appropriateness of the directors use of the going concern basis of accounting and based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor s report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor s report. However, future events or conditions may cause the Group to cease to continue as a going concern. Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation. Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion. We communicate with the directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide the directors with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards. From the matters communicated with the directors, we determine those matters that were of most significance in the audit of the consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. Report on Other Legal and Regulatory Requirements In terms of the IRBA Rule published in Government Gazette Number dated 4 December 2015, we report that Deloitte & Touche has been the auditor of Crookes Brothers Limited for 70 years. Deloitte & Touche Registered Auditor Per: Camilla Howard-Browne Partner 12 June Pencarrow Crescent Pencarrow Park La Lucia Ridge Office Estate La Lucia 4051 Docex 3 Durban Crookes Brothers Limited Audited Annual Financial Statements 5

8 Directors report The directors have pleasure in submitting the annual financial statements of the group for the year ended 31 March Nature of business Crookes Brothers Limited is an agricultural business growing sugar cane, bananas, deciduous fruit and macadamia nuts in South Africa, Swaziland, Mozambique and Zambia, and has a long-term property development in Scottburgh, South Africa. Share capital The authorised share capital at 31 March 2018 consisted of shares of 25 cents each (2017: ). The company has no unlisted securities. The number of issued shares is at 31 March 2018 (2017: ). The company holds no treasury shares and has not repurchased any of its own shares during the year under review. Financial results Group attributable loss for the year ended 31 March 2018 amounted to R7,6 million (2017: attributable profit R64,8 million), representing a loss per share of 49,7 cents (2017: earnings per share 424,7 cents). Headline loss per share amounted to 50,6 cents (2017: headline earnings per share 424,1 cents). Full details of the financial position and results of the group are set out in the annual financial statements. Going concern The directors believe that the group has adequate resources to continue in operation for the foreseeable future and the annual financial statements have therefore been prepared on a going-concern basis. Dividends Dividends per share declared for the 12 months ended 31 March 2018 are as follows: An ordinary interim dividend of 35,0 cents (2017: 50,0 cents) was declared in November 2017 and paid in January No ordinary final dividend declared for the year ended 31 March (2017: 115,0 cents). The aggregate distribution in respect of the year ended 31 March 2018 is therefore 35,0 cents (2017: 165,0 cents) per share. Changes to the board of directors Malcolm Rutherford was appointed as audit committee chairman on 24 August Rodger Stewart was appointed as risk committee chairman on 24 August Tasneem Abdool-Samad was appointed to the board on 6 June 2017 and Anthony Hewat retired from the board on 27 July Directorate Non-executive JR Barton (male) Chairman T Abdool-Samad (female) RGF Chance (male) TJ Crookes (male) TK Denton (male) P Mnganga (female) MT Rutherford (male) RE Stewart (male) G Vaughan-Smith (male) Executive GS Clarke (male) Group managing director GL Veale (male) Group financial director In terms of the company s memorandum of incorporation TJ Crookes, TK Denton, P Mnganga and MT Rutherford retire at the annual general meeting and, being eligible, offer themselves for re-election. 6 Crookes Brothers Limited Audited Annual Financial Statements

9 Interests of directors in share capital At 31 March 2018, the directors of the company held beneficial interests in of the company s issued ordinary shares. The register of interests of directors and managers in the share capital of the company is available for inspection at the registered office of the company. Details of the shares held per individual director, as at 31 March 2018, are listed below Director Direct Indirect Direct Indirect RGF Chance GS Clarke TJ Crookes In addition, at 31 March 2018, managers of the company held shares (2017: shares). Non-executive directors Gary Vaughan-Smith and Tim Denton represent the interests of Silverlands (SA) Plantations Sarl,which own shares representing 44.8% of the issued share capital of the company at year end (2017: ). There have been no changes to the directors interests between the financial year end and date of approval of the annual financial statements. Directors remuneration At the forthcoming annual general meeting, shareholders will be requested to pass a non-binding advisory vote approving the group s remuneration policy and a special resolution to approve director s fees payable to nonexecutive directors with effect from 1 April It is proposed that, given the difficult trading environment over the past year, director s fees are unchanged as follows. Proposed Rands per annum Current Rands per annum Board Chairman Other non-executive board members Audit committee Chairman Other members Remuneration committee Chairman Other members Nominations committee Chairman Other members Risk committee Chairman Other non-executive board members Social and ethics committee Chairman Other non-executive board members Retirement funds Chairman Crookes Brothers Limited Audited Annual Financial Statements 7

10 Directors report continued Subsidiary companies The names and financial information in respect of the interest of the company in its subsidiaries are disclosed in note 18 of the annual financial statements. Special resolutions adopted by the company and its subsidiary companies The company or its subsidiary companies have passed no special resolutions since the previous annual general meeting. Events after the reporting period Events after the reporting period that have a significant effect in the affairs or financial position of the company are disclosed in note 37 of the annual financial statements. Corporate information Company name: Crookes Brothers Limited Registered office: Mount Edgecombe, KwaZulu-Natal Postal address: PO Box 611, Mount Edgecombe, 4300 Telephone: info@cbl.co.za Website: Share code: CKS Company registration number: 1913/000290/06 Company secretary: Highway Corporate Services (Pty) Ltd Business address: 14 Hillcrest Office Park, 2 Old Main Road, Hillcrest Postal address: PO Box 1319, Hillcrest, 3650 Telephone: Telefax: Transfer secretaries: Computershare Investor Services (Pty) Ltd Business address: Rosebank Towers, 15 Biermann Avenue, Rosebank Postal address: PO Box 61051, Marshalltown, 2107 Telephone: Telefax: Auditors: Deloitte & Touche Attorneys: Livingston Leandy Inc. Bankers: FirstRand Bank Limited Investec Bank Limited Sponsor: Sasfin Capital (a member of the Sasfin group) 8 Crookes Brothers Limited Audited Annual Financial Statements

11 Audit committee report The audit committee is a committee of the board of directors. In addition to having specific statutory responsibilities in terms of the Companies Act of South Africa, it assists the board through advising and making recommendations on financial reporting, oversight of internal financial controls, external and internal audit functions and statutory and regulatory compliance of the company and the group. Terms of reference The audit committee has adopted formal terms of reference that have been approved by the board of directors. The committee has executed its duties during the past financial year in accordance with these terms of reference. Composition The committee consists of three independent non-executive directors. At 31 March 2018, the audit committee comprised: Malcolm Rutherford BCom, BAcc, CA(SA) Tasneem Abdool-Samad BCom, Dip Acc, CA(SA) Rodger Stewart BSc (Agric) The group managing director, group financial director, senior financial and IT executives of the group and representatives from the external and internal auditors attend the committee meetings by invitation. The auditors, both external and internal, have unrestricted access to the audit committee chairman or any other member of the committee as required. Meetings The audit committee held two meetings during the period under review and there was full attendance at both meetings. Statutory duties In execution of its statutory duties during the financial year under review, the audit committee: nominated for appointment as auditor, Deloitte & Touche, who, in its opinion, is independent of the company. determined the fees to be paid to Deloitte & Touche; determined Deloitte & Touche s terms of engagement; ensured that the appointment of Deloitte & Touche complied with the relevant provisions of the Companies Act of South Africa and King IV; pre-approved all non-audit service contracts with Deloitte & Touche; confirmed that there were no complaints relating to accounting practices and internal audit of the company, the content or auditing of its annual financial statements, the internal financial controls of the company and any other related matters; Considered all key audit matters, specifically the valuation assumptions of group biological assets as well as the accounting treatment of reversionary sale and transfer obligations ( RTO ) in the annual financial statements, and advised the board that, regarding matters concerning the group accounting policies, financial control, records and reporting, it concurs that the adoption of the going concern premise in the preparation of the annual financial statements is appropriate. Internal financial controls and internal audit In execution of its delegated duties in this area, the committee has: reviewed and recommended the internal audit charter for approval; evaluated the independence, effectiveness and performance of the internal audit function; reviewed the effectiveness of the company s system of key internal financial controls; reviewed the competence, qualifications and experience of the company secretary; reviewed significant issues raised by the external and internal audit process and the adequacy of corrective action in response to such findings; reviewed audit reports regarding the adequacy of accounting records; and reviewed policies and procedures for preventing and detecting fraud. The chief audit executive functionally reported to the audit committee, had unrestricted access to the audit committee chairman, and is of the opinion that significant internal financial controls operated effectively during the period under review. Based on the processes and assurances obtained, the audit committee believes that significant internal financial controls are effective. Crookes Brothers Limited Audited Annual Financial Statements 9

12 Audit committee report continued Regulatory compliance The audit committee has complied with all applicable legal, regulatory and other responsibilities. External audit Based on processes followed and assurances received, the committee is satisfied that Deloitte & Touche is independent of the group. The committee confirmed that no reportable irregularities were identified and reported by the external auditors in terms of the Auditing Professions Act, No 26 of Based on our satisfaction with the results of the activities outlined above, the audit committee has recommended to the board that Deloitte & Touche should be reappointed for 2019, with the designated audit partner being Camilla Howard-Browne. Finance function We believe that Gregory Veale CA(SA), the group financial director for the period under review, possessed the appropriate expertise and experience to meet his responsibilities in that position. We are also satisfied with the expertise and adequacy of resources within the finance function. In making these assessments we have obtained feedback from both external and internal audit. Based on the processes and assurances obtained we believe that the accounting practices are effective. Financial statements Based on the processes and assurances obtained we recommend that the current annual financial statements be approved by the board. On behalf of the audit committee Mount Edgecombe 4 June Crookes Brothers Limited Audited Annual Financial Statements

13 Consolidated statement of profit or loss and other comprehensive income for the year ended 31 March * Note R 000 R 000 Revenue Cost of sales ( ) ( ) Gross profit Other gains and losses Distribution expenses (57 257) (57 551) Operating and administrative expenses (96 826) (88 971) Operating profit before biological assets Change in fair value of biological assets Operating profit after biological assets Share of profit of joint venture and associate companies Investment income Finance costs 9 (16 700) (5 453) (Loss)/profit before tax (8 333) Income tax expense (34 655) (Loss)/profit for the year 10 (3 237) Other comprehensive (loss)/income, net of income tax Items that will not be reclassified subsequently to profit or loss: Remeasurement of defined benefit surplus 29.2 (211) Remeasurement of post-employment medical aid obligation 29.1 (514) 462 (514) 251 Items that may be reclassified subsequently to profit or loss: Net fair value loss on available-for-sale financial assets 23.2 (46) Exchange differences on translating foreign operations 23.3 (5 238) (5 238) Other comprehensive (loss)/income for the year, net of income tax (5 752) Total comprehensive (loss)/income for the year (8 989) (Loss)/profit for the year attributable to: Owners of the company (7 587) Non-controlling interests (3 237) Total comprehensive (loss)/income for the year attributable to: Owners of the company (13 339) Non-controlling interests (8 989) (Loss)/earnings per share Basic (cents) 12.1 (49,7) 424,7 Diluted (cents) 12.2 (49,7) 424,6 * Refer to note 36 for details of restatements to comparative information. Crookes Brothers Limited Audited Annual Financial Statements 11

14 Consolidated statement of financial position as at 31 March * Note R 000 R 000 ASSETS Non-current assets Property, plant and equipment Investment property Deferred tax assets Other financial assets Investments in joint venture and associates Unsecured loans Current assets Inventories Biological assets Trade and other receivables Current tax assets Other financial assets Retirement benefit surplus Unsecured loans Cash and bank balances Total assets EQUITY AND LIABILITIES Capital and reserves Share capital Share premium Investment revaluation reserve Foreign currency translation reserve 23.3 (29 002) (23 764) Share-based payment reserve Retained earnings Equity attributable to owners of the company Non-controlling interests Non-current liabilities Deferred tax liabilities Borrowings interest-bearing Other financial liabilities Obligation to restore leased farmland Post-employment medical aid obligation Current liabilities Trade and other payables Provisions Current tax liabilities Post-employment medical aid obligation Borrowings interest-bearing Outside shareholders loan Bank overdraft Total equity and liabilities * Refer to note 36 for details of restatements to comparative information. 12 Crookes Brothers Limited Audited Annual Financial Statements

15 Consolidated statement of cash flows for the year ended 31 March Note R 000 R 000 Operating activities Operating profit for the year Adjustment for non-cash items: Depreciation Change in fair value of biological assets 16.1 (2 600) (22 998) (Decrease)/increase in provisions 28 (7 207) Expense recognised in respect of equity-settled share-based payments Other non-cash items (1 076) Operating cash flows before movements in working capital Increase in inventories (6 837) (39 487) Increase in trade and other receivables (10 199) (30 863) (Decrease)/increase in trade and other payables (5 585) Cash generated from operations Interest received Interest paid (16 594) (5 453) Income taxes paid (17 171) (15 962) Net cash (used in)/generated by operating activities (9 450) Investing activities Investment in other financial assets (2 356) (236) Increase in unsecured loans (7 171) Proceeds on disposal of property, plant and equipment Investment in property, plant and equipment: replacement 14 (9 668) (9 065) expansion, improvement and development 14 (80 411) ( ) bearer asset replants 14 (65 138) (47 151) Investment in investment property 15 (11 449) Investment in joint venture and associate companies (2 525) (31 798) Other net investing activities (75) 24 Net cash used in investing activities ( ) ( ) Financing activities Net increase in borrowings Net increase in general banking facilities Net increase in other financial liabilities Cash dividends paid prior financial year final: ordinary shareholders 13 (17 554) (17 554) Cash dividends paid current financial year interim: ordinary shareholders 13 (5 342) (7 632) Cash dividends paid current financial year final: community partners 23.5 (10 895) (10 895) Net cash generated by financing activities Net decrease in cash and cash equivalents (44 161) (78 758) Cash and cash equivalents at beginning of the year Cash and cash equivalents at end of the year Crookes Brothers Limited Audited Annual Financial Statements 13

16 Consolidated statement of changes in equity for the year ended 31 March 2018 Share capital and premium R 000 Investment revaluation reserve R 000 Foreign currency translation reserve R 000 Sharebased payment reserve R 000 Retained earnings R 000 Attributable to owners of the company R 000 Noncontrolling interests R 000 Total R 000 Balance at 31 March (25 315) Net profit attributable to shareholders Other comprehensive income/(loss) (46) Total comprehensive income for the year (46) Dividends declared and paid (see note 13 and 23.5) (25 186) (25 186) (10 895) (36 081) Share-based payment expense (see note 23.4) Balance at 31 March (23 764) Net loss attributable to shareholders (7 587) (7 587) (3 237) Other comprehensive (loss)/income (5 238) (514) (5 752) (5 752) Total comprehensive loss for the year (5 238) (8 101) (13 339) (8 989) Dividends declared and paid (see note 13 and 23.5) (22 896) (22 896) (10 895) (33 791) Share-based payment expense (see note 23.4) Adjustments to noncontrolling interests (see note 23.5) (238) (238) Balance at 31 March (29 002) Note Crookes Brothers Limited Audited Annual Financial Statements

17 Notes to the consolidated financial statements for the year ended 31 March 2018 General information Crookes Brothers Limited (the group) is incorporated in the Republic of South Africa. The addresses of its registered office and principal place of business are disclosed in the Directors report. The principal activities of the group is described in the Directors report. Application of new and revised International Financial Reporting Standards (IFRSs) 1. Amendments to IFRSs that are mandatorily effective for the current year In the current year, the group has applied a number of new and revised IFRSs issued by the International Accounting Standards Board (IASB) that are mandatorily effective for an accounting period that begins on or after 1 January IAS 7 Disclosure initiative Refer to note 15 for a reconciliation between the opening and closing balances of the group s other financial liabilities as is required by this amendment. IAS 12 Recognition of deferred tax assets for unrealised losses The group already assesses the sufficiency of future taxable profits against which it can utilise a deductible temporary difference. Annual improvements to IFRS cycle. None of the group s interests in subsidiaries, its joint venture or associates are classified as held for sale, therefore this amendment has no effect on the group. 2. New and revised standards and interpretations in issue but not yet effective The directors of the group have assessed the impact of pertinent standards and interpretations in issue but not yet effective, and have not applied all of them, for the reasons summarised below: Effective for annual periods beginning on or after 1 January 2018 Amendments to IAS 40 investment property During the current reporting period, seven residential units that were previously developed for normal sale by the group s property division, underwent a change in use and was transferred to investment property (see note 15). The change in use was evidenced by the sale of these units to buyers at a 25% to 30% discount of the selling price of other similar units offered under normal sale. A RTO clause was inserted into the sale agreement, giving the group the option to repurchase these units at a later stage at the original discounted selling price. The group was thus able to hold these units for capital appreciation over the duration of the RTO term. IFRS 9 Financial instruments IFRS 9 uses more forward-looking information to recognise expected credit losses for all debt-type financial assets that are measured at amortised cost. The group has a number of available-for-sale financial assets and loans and receivables held at amortised cost (see note 17.2 and 17.3). The directors of the company have assessed that these financial assets have a low credit risk, hence expect to recognise 12-month expected credit losses for these assets. With regards to the group s trade and other receivables (see note 21), these consist mostly of deciduous fruit revenue accruals, for which a reliable estimate is made. The remainder of the group s trade receivables are immaterial rental and sundry debtors. Unsecured loans granted by the group (see note 22) carry a low credit risk, as these loans were advanced to the group s community partners in Mpumalanga. Settlement of these loans are against future lease rentals in the next 12-months, therefore recoverability is virtually certain, and risk of impairment unlikely. IFRS 15 Revenue from contracts with customers The group recognises revenue from the sale of sugar cane, deciduous fruit, bananas, macadamias and property on fulfilment of all performance obligations to its customers. These performance obligations include: Delivery of sugar cane to the mills, pack-out of deciduous fruit in favour of Two-A-Day, delivery of banana cartons to Lebombo Growers (Pty) Ltd, delivery of macadamias to Mayo Macs, and occupation of completed residential units by customers. The directors assessed that the fulfilment of these performance obligations results in the irrevocable passing of control to these customers, and that the group is then entitled to the transaction prices associated with these sales. Accordingly, the adoption of IFRS 15 is not expected to have any impact or change on the group s current revenue recognition and measurement principles. See note 3.4. Crookes Brothers Limited Audited Annual Financial Statements 15

18 Notes to the consolidated financial statements for the year ended 31 March New and revised standards and interpretations in issue but not yet effective continued Effective for annual periods beginning on or after 1 January 2019 IFRS 16 Leases During the current reporting period, the group undertook a review of all its contracts that were or potentially contained leases. A number of outsourcing arrangements with the group s logistic and IT service providers were identified, however none of these outsourcing arrangements afforded the group the exclusive supply of these goods and services. Furthermore, in the case of IT service providers, these providers were able to substitute alternative network infrastructure cabling and components at any time, at their discretion and to their economic benefit. Excluding short-term leases and leases of low value assets (printers, etc.), the group has identified two lease contracts currently classified as operating leases which are material. These are the leases of the Mawecro and Mthayiza farms in Mpumalanga (see note 34.1). Under IFRS 16, the group will have to recognise a right-of-use asset and corresponding liability. In addition, the pattern of the group s expenses will change. Instead of a lease expense included in other operating expenses, the group will recognise additional depreciation on the asset and an additional interest expense on the liability. The date of initial application is 1 January The group will apply what is referred to in the standard as a modified retrospective approach. Under this approach, the group will not restate comparative information. At the date of initial application, the group will recognise the cumulative effect of initial application as an adjustment to the opening balance of equity as of 1 April When compared to the current 2017/18 financial year, the impact on profit or loss in the 2019/20 financial year, is expected to be in the following range: Depreciation expense: Increase of between 25% and 35%. Interest expense: Increase of between 75% and 85%. Operating lease rental expense: Decrease of between 90% and 100%. Income tax expense: Increase of between 25% and 35%. When compared to the current 2017/18 financial year, the impact on the statement of financial position in the 2019/20 financial year, is expected to be in the following range: Right-of-use asset: Increase of 100%. Deferred tax asset: Increase of between 45% and 55%. Current tax asset: Decrease of between 35% and 45%. Lease liability: Increase of 100%. 16 Crookes Brothers Limited Audited Annual Financial Statements

19 3. Significant accounting policies 3.1 Basis of preparation The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS), Interpretations issued by the IFRS Interpretations Committee, the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee, the Financial Reporting Pronouncements as issued by the Financial Reporting Standards Council and the requirements of the Companies Act of South Africa. The historical cost convention is used except for investment property, biological assets and certain financial instruments that are stated at fair value. 3.2 Basis of consolidation Note 18 of the consolidated financial statements, lists the investees controlled by the group. On an annual basis, the group reassesses whether or not it controls these investees if facts and circumstances indicate that there are changes to one or more of the three elements of control listed below: the group has power over the investee; is exposed, or has rights, to variable returns from its involvement with the investee; and has the ability to use its power to affect its returns. At the end of the current reporting period, the group accounted for 12 investees as controlled subsidiaries (see note 18). Of these 12 investees, the group held the majority share capital and voting rights in nine of them, thus giving the group majority voting power to affect the operating and financial returns of these nine investees. With regards to the other three subsidiaries, Bellcro Farming (Pty) Ltd ( Bellcro ), Mthayiza Farming (Pty) Ltd ( Mthayiza ) and Mawecro Farming (Pty) Ltd ( Mawecro ), the non-controlling interests owned the majority of the issued share capital in these investees. Even though the group had less than a majority of the voting rights in these three investees, it was still able to demonstrate power over these investees and direct the relevant activities of these investees unilaterally. Refer to note 4.1.1, and for all relevant facts and circumstances that the group assessed, in making this judgement. Profit or loss and each component of other comprehensive income are attributed to the owners of the group and to the non-controlling interests. All intra-group assets and liabilities, equity, income, expenses and cash flows relating to transactions between members of the group are eliminated in full on consolidation. 3.3 Investments in joint venture and associates See note 19 for a list of material associates that the group has investments in. The group exerts significant influence over these associates, which is the power to participate in the financial and operating policy decisions of these investees, but does not have control or joint control over the policies of these investees. With respect to SMHL (see note 19.1), the group has acquired a joint venture, via a joint arrangement whereby the group shares joint control of the arrangement and has rights to the net assets of SMHL through this joint arrangement. The group has a contractually agreed sharing of control over the arrangement of SMHL s operations with SilverStreet Private Equity Strategies ( SilverStreet ), a subsidiary of the group s majority shareholder Silverlands (SA) Plantations S.A.R.L. a company incorporated in the United Kingdom. Any decisions regarding the relevant activities of SMHL require the unanimous consent of both the group and SilverStreet. The results and assets and liabilities of the group s joint venture and associates are incorporated in these consolidated financial statements using the equity method of accounting. Under this equity method, the group s investment in its joint venture and associates are initially recognised in the consolidated statement of financial position at cost and adjusted thereafter to recognise the group s share of the profit or loss and other comprehensive income. The group transacts with all the investees disclosed in note 19 on an arm s-length basis. Crookes Brothers Limited Audited Annual Financial Statements 17

20 Notes to the consolidated financial statements for the year ended 31 March Significant accounting policies continued 3.4 Revenue recognition Revenue arising from normal trading activities is measured at the fair value of the consideration received or receivable. Revenue comprises sales arising from normal trading activities excluding intra-group transactions. Revenue is recognised when the significant risks and rewards of ownership have been transferred to the buyer, the amount of revenue and related costs can be reliably measured and the entity retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold. Refer to note 6 for a summary of revenue by product and geographic region. The group s revenue is largely made up of farming revenue in the form of sugar cane, deciduous fruit, bananas and macadamias. In the case of sugar cane, revenue is recognised when the cane is delivered to the mills. In the case of deciduous fruit, this would be on receipt of a weighbridge bin delivery report from Two-A-Day ( TAD ) and Elgin Fruit Juices ( EFJ ). These reports contain details of the actual bins delivered which have been packed for sale vs. what is still left unpacked in bins (i.e. stock). These reports are then reconciled back to the group s harvest reports, with the bins that are packed then recognised as revenue. Banana revenue is recognised on delivery of packed banana cartons to Lebombo Growers (Pty) Ltd ( Lebombo ). Revenue from the sale of macadamias is recognised on delivery to Mayo Macs SA. Revenue from the sale of completed residential units is recognised on transfer of ownership to buyers through occupation of a completed unit. Other operations revenue comprises revenue from the sale of grain, rental income from leased buildings, tourism revenue and the sale of nursery plants, which is largely immaterial in isolation. Nevertheless, revenue on these operations is recognised in accordance with the principles of IAS 18 above. Dividend and interest income disclosed in note 8 is earned from the group s range of financial assets and positive bank balances respectively. 3.5 Foreign and functional currencies The functional currency of each entity within the group is based on the currency of the primary economic environment in which that entity operates. The functional currency is determined by assessing the primary economic environment of the revenue, operating and capital expenditure and financing cash flows of the group entity. For the purposes of the consolidated financial statements, the results and financial position or each entity are expressed in South African Rand, which is the functional currency of the group, and the presentation currency for the consolidated financial statements. During the prior financial year, due to changes in trading arrangements that meet the requirements of IAS 21:36, the functional currency of the group s Mozambique operations changed from Meticais (MZN) to Rands (ZAR). Transactions in currencies other than the entity s functional currency are recognised at the rates of exchange ruling on the date of the transaction. Monetary assets and liabilities denominated in such currencies are translated at the rates ruling at the date of the statement of financial position. Gains and losses arising on exchange differences are recognised in profit or loss. The financial statements of entities whose functional currencies are different from the group s presentation currency which, because of its primary operating activities, is South African Rand, are translated as follows: Assets and liabilities at exchange rates ruling at the date of the statement of financial position; Income and expense items at the average exchange rates for the period; and Equity items at the exchange rate ruling when they arose. Resulting exchange differences are classified as a foreign currency translation reserve and recognised in other comprehensive income. 18 Crookes Brothers Limited Audited Annual Financial Statements

21 3. Significant accounting policies continued 3.6 Employee benefits Retirement funds In South Africa, the group provides retirement benefits for its employees through the Crookes Brothers Retirement, Pension and Provident Funds. These funds are all defined contribution plans. The assets of the defined contribution schemes are held separately from those of the group and are administered and controlled by trustees. Contributions to these defined contribution retirement benefit plans are recognised as an expense when employees have rendered service entitling them to the contributions. See note The Crookes Brothers Pension Fund also operates an Employer Surplus Reserve Account. This surplus reserve arose from the allocations previously made in the defined benefit fund of the group. Since 1 January 2017, there has been no defined benefit underpin liability in the Pension Fund, as all members qualifying for the under-pin exited. The resultant employer surplus reserve arose from surplus apportionment, and the group may not derive any economic benefit from this surplus. To this end, the value in the employer surplus reserve as determined by the actuaries in January 2017 remains unchanged as at the end of the current reporting period. The employer surplus reserve can be utilised in accordance with Section 15E of the Pension Fund Act and will be used to extinguish the group s post-employment medical healthcare liability (see note 29.1). In other geographical locations in which the group operates Swaziland, Zambia and Mozambique, contributions are made to state-managed retirement benefit schemes. These schemes are dealt with as payments to defined contribution plans where the group s obligations under the plans are equivalent to those arising in a defined contribution retirement benefit plan. Additional severance liabilities in terms of legislative regulations are assessed annually and provided for. See note 28 for disclosure pertaining to severance allowance provisions. Post-retirement medical aid benefits Historically, qualifying employees have been granted certain post-retirement medical benefits. Although the post-retirement medical benefit option is now closed, a liability still exists in respect of current and retired employees to whom the benefit was granted. These costs are provided on the accrual basis, determined actuarially. Regarding current employees, the retirement benefit surplus will be used to fund the buyout of the obligation related to them. Thereafter they will be required to purchase an annuity, which will extinguish the group s obligation to them. The obligation to the retirees will continue. See note 29.1 for details. 3.7 Share-based payment arrangements The group issues equity-settled share-based payments to certain executives and senior employees of the company and its subsidiaries. Each employee share option converts into one ordinary share of the company on exercise. No amounts are paid or payable by the recipient on receipt of the option. The options carry neither rights to dividends nor voting rights. Options may be exercised at any time from the date of vesting to the date of their expiry. Options vest over a period of five years and all shares must be taken up by way of purchase and delivery by no later than 10 years after the date of grant. The exercise price of the option is not less than the market value of the ordinary shares on the day preceding the date of grant. IFRS 2 requires the fair value of equity instruments granted to be based on market prices, if available, and to take into account the terms and conditions upon which those equity instruments were granted. In the absence of market prices, fair value is estimated, using a valuation technique to estimate what the price of those equity instruments would have been on the measurement date in an arm s-length transaction between knowledgeable, willing parties. As employee share options are not traded, there is no market price available. Employees have been granted a call option in terms of the Scheme where the payoff on exercise is the difference between the market value of the company s shares at that time less the strike price. Fair value of the share options is therefore determined using an option pricing model. The share options have been valued using the widely accepted Black-Scholes-Merton model. This model is used to value options traded openly in the market. Equity-settled share-based payments are measured at fair value at the date of grant. The fair value 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, with a corresponding increase in equity. At the end of each reporting period, the group revises its estimate of the number of equity instruments expected to vest. The impact of the revision of the original estimates, if any, is recognised in profit or loss such that the cumulative expense reflects the revised estimate, with a corresponding adjustment to the equity-settled reserve. Crookes Brothers Limited Audited Annual Financial Statements 19

22 Notes to the consolidated financial statements for the year ended 31 March Significant accounting policies continued 3.8 Dividends and distributions Dividends declared by the company to its shareholders are charged against reserves in the period declared, and raised as an outstanding payable until settled. During the current reporting period, dividends and distributions were declared and paid to the group s ordinary shareholders (note 13), as well as to the group s community partners, who are also the non-controlling interests (note 23.5). 3.9 Taxation Income tax expense represents the sum of the current tax payable and deferred tax and is recognised in profit or loss, except when it relates to items that are recognised in other comprehensive income or directly in equity, in which case, the current and deferred tax are also recognised in other comprehensive income or directly in equity respectively. Current tax The tax currently payable is based on taxable profit for the period. Taxable profit differs from profit before tax as reported in the consolidated statement of profit or loss and other comprehensive income because of items of income or expense that are taxable or deductible in other periods and items that are never taxable or deductible. The group s current tax is calculated using tax rates that have been enacted or substantively enacted by the end of the reporting period. Deferred tax Deferred tax is recognised on differences between the carrying amounts of assets and liabilities in the consolidated financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are generally recognised for all taxable temporary differences. Deferred tax assets are generally recognised for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Deferred tax assets are raised in respect of the unused tax losses of an entity and offset against the deferred tax liability of that entity only where these losses may be utilised in the short term or will not expire in terms of applicable tax legislation Property, plant and equipment Property, plant and equipment are stated at cost less accumulated depreciation and any accumulated impairment losses. The cost of property, plant and equipment includes any other directly attributable costs incurred to bring the assets to the location and condition necessary for them to be capable of operating in the manner intended by management. Freehold land, leasehold land and assets under construction are carried at cost, less any impairment loss. Costs capitalised to bearer assets (sugar cane roots, banana palms, deciduous and macadamia trees) include all direct costs of land preparation and planting. Depreciation is recognised so as to write off the cost of assets (other than freehold land, leasehold land and assets under construction) to their residual value over their estimated useful lives, using the straightline method. Depreciation commences when the assets are ready for their intended use and is calculated at rates appropriate in terms of management s current assessment of useful lives and residual values. Depreciation ceases at the earlier of the date the asset is classified as held for sale or at the date it is derecognised. The varied nature of property, plant and equipment result in a range of different depreciation rates being applied to assets. Depreciation guidelines are defined for asset classes, however, individual consideration is given to the appropriateness of the useful life applied to each individual asset which reflects management s estimate of the consumption of economic benefits inherent in the value of the asset. During the year under review, property, plant, equipment was depreciated on the straight line basis using the rates set out below: Leasehold and land rights not depreciated Buildings and housing years Plant and other assets four 25 years Sugar cane roots seven nine years Banana palms nine years Deciduous fruit trees apples four years, pears six years Macadamia trees six years Depreciation is recognised directly in profit or loss. Management reviews the residual lives and depreciation methods annually, considering market conditions and projected disposal values. In the assessment of useful lives, maintenance programmes and technological innovations are considered. On the disposal or scrapping of property, plant, equipment and bearer assets, the gain or loss arising thereon is recognised in profit or loss. 20 Crookes Brothers Limited Audited Annual Financial Statements

23 3. Significant accounting policies continued 3.11 Investment property Residential units occupied by customers under RTO arrangements are recognised by the group as investment property. The customers in these cases are lessees, whilst the group is a lessor, who holds these properties for capital appreciation over the RTO term. RTO units are initially measured at cost, and subsequently at fair value, with gains and losses arising from changes in fair value being recorded in profit or loss in the period in which they arise Impairment At the end of each reporting period, the group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that the assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). The recoverable amount of assets is the higher of fair value less costs of disposal and value in use. Impairments expensed to profit or loss during the current reporting period related to a handful of available-for-sale financial assets held at cost and were immaterial Biological assets The group s biological assets comprise growing crops in the form of sugar cane, deciduous fruit, bananas and macadamias. Biological assets are measured at fair value, determined as at 31 March, based on current estimated market prices for the following season, less the estimated costs of harvesting, transport, packing and point-of-sale costs Inventories Inventories are stated at the lower of cost and net realisable value. Cost is calculated using the weighted average method. Net realisable value represents the estimated selling price less all estimated costs of completion or selling and distribution. Property development comprises land valued at cost and development expenditure attributable to unsold properties associated with the Renishaw Hills project. Agricultural produce represents deciduous fruit delivered to TAD (see note 3.4) which has not been packed for sale. Agricultural produce is measured at their fair value at date of harvesting, less the estimated cost of harvesting, transport, packing and point-of-sale costs incurred in bringing them to their present location and condition to be sold. Grain is an annual crop, most of which is harvested and sold prior to the end of the group s reporting period. There is no quoted commodity index in the geographical segment in which the group trades grain. Redundant and slow-moving inventories are identified and written down to their net realisable values where necessary Provisions The group has legal obligations to its employees in the form of leave pay, bonus and severance pay provisions at the end of the current reporting period. The provision for leave pay represents annual leave entitlements accrued by employees based on leave days not taken at financial year end multiplied by the applicable daily pay-rate. The provision for bonuses is payable to qualifying employees in terms of a balanced scorecard, which refers to a weighting of group and individual performance. The board has the discretion to reduce or cancel the payment if one or more of the aforementioned criteria has not being achieved. The provision for severance allowances is based on terms included in the collective agreements between the labour unions and the group s Swaziland and Zambia subsidiaries. The severance allowance is calculated based on number of years service, age of employee and the applicable daily pay-rate. Crookes Brothers Limited Audited Annual Financial Statements 21

24 Notes to the consolidated financial statements for the year ended 31 March Significant accounting policies continued 3.16 Financial instruments The group has a range of financial assets and financial liabilities, which are initially measured at fair value. Financial assets Financial assets are classified into the following specified categories: financial assets at fair value through profit or loss (FVTPL), available-for-sale (AFS) financial assets and loans and receivables. The classification depends on the nature and purpose of the financial assets and is determined at the time of initial recognition. Measurement During the course of the financial year, the group did not own any financial assets that were FVTPL or held to maturity. The group did however hold AFS financial assets in the form of a number of equity investments in certain deciduous fruit co-ops and agribusinesses in the Western Cape. Refer to note 17. The investment in Elgin Co-op Fruitgrowers is subsequently measured at fair value with changes in share price of this investment being recognised in other comprehensive income and accumulated under the heading of investment revaluation reserve. The remainder of the group s equity investments are not traded in an active market, and are subsequently measured at amortised cost. Interest income calculated using the effective interest method and dividends on AFS equity investments are recognised in profit or loss. The group has loans and receivables, in the form of trade and other receivables, unsecured loans, bank balances and cash. These financial assets are measured at amortised cost using the effective interest method, less any impairment. Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Interest income is recognised by applying the effective interest rate, except for short-term receivables when the effect of discounting is immaterial. Financial liabilities Financial liabilities are classified as either financial liabilities at FVTPL or other financial liabilities. Measurement The group has other financial liabilities, in the form of interest-bearing borrowings, RTO obligations, prepaid lease income, and trade and other payables. These other financial liabilities are initially measured at fair value and subsequently at amortised cost using the effective interest method. The receipt of cash proceeds (excl. VAT) associated with RTO sales, results in a RTO obligation and prepaid lease income, initially measured at fair value. The RTO obligation is initially measured by discounting these proceeds at the South African prime lending rate and the SARS prescribed mortality rate of the purchaser or his/her spouse. The RTO obligation is then annually unwound using this effective interest rate and subsequently measured at amortised cost. Prepaid lease income is initially measured at fair value, being the difference between the cash proceeds (excl. VAT) received and the RTO obligation raised. This prepaid lease income is then amortised over the mortality period of the purchaser or his/her spouse, with the current year portion of lease income recognised in profit or loss, and the carrying amount of prepaid lease income subsequently measured at amortised cost. 22 Crookes Brothers Limited Audited Annual Financial Statements

25 4. Critical accounting judgements and key sources of estimation uncertainty 4.1 Judgements made by management Preparing financial statements in accordance with IFRS requires estimates and assumptions that affect reported amounts and related disclosures. Certain accounting policies have been identified as involving complex or subjective judgements or assessments. The items for consideration have been identified as follows: Control over Mthayiza Farming (Pty) Ltd Note 18 describes Mthayiza Farming (Pty) Ltd ( Mthayiza ) as a subsidiary of the group although the group only owns a 45% equity share of Mthayiza. Through the provision of working capital finance, the group has the power to control the financial decision making of the company. In addition, the group also stands surety for the subsidiary s term loans, which Mthayiza is unable to raise on the strength of its own balance sheet. The group therefore has the power to control the financial decision making of Mthayiza and ultimately affect its returns. Therefore, the directors concluded that the group has control over Mthayiza and accordingly the entity has been recognised as a subsidiary into these consolidated financial statements Control over Mawecro Farming (Pty) Ltd Note 18 describes Mawecro Farming (Pty) Ltd ( Mawecro ) as a subsidiary of the group although the group only owns a 49% equity share of Mawecro. The group has the power to direct the relevant activities of Mawecro, through the provision of all working capital finance and the power and discretion to grant such finance. In addition, the group also stands surety for the subsidiary s revolving credit and term loans, which Mawecro is unable to raise on the strength of its own balance sheet. The group therefore has the power to control the financial decision making of Mawecro and ultimately affect its returns. Therefore, the directors concluded that the group has control over Mawecro and accordingly the entity has been recognised as a subsidiary into these consolidated financial statements Control over Bellcro Farming (Pty) Ltd Note 18 describes Bellcro Farming (Pty) Ltd ( Bellcro ) as a subsidiary of the group although the group only owns a 45% equity share of Bellcro. The group has the power to direct the relevant activities of Bellcro, through the provision of all working capital finance and the power and discretion to grant such finance. The group therefore has the power to control the financial decision making of Bellcro and ultimately affect its returns. Therefore, the directors concluded that the group has control over Bellcro and accordingly the entity has been recognised as a subsidiary into these consolidated financial statements Joint control over Silverlands Mozambique Holdings Limited ( SMHL ) Note 19.1 describes that SMHL is a joint venture of the group although the group only owns a 49.5% ownership interest in SMHL. The group has joint control over SMHL by virtue of a signed shareholder agreement with the other shareholder SilverStreet, which documents that the group has joint control over the financial and operating affairs of SMHL Investment property During the current reporting period, the group s property division entered into a number of RTO sale arrangements with customers, whereby customers were offered the alternative to purchase units at a 25% to 30% discount of the selling price of other similar units. Based on the fact that the group had an option to repurchase these properties at the original discounted selling price at a later stage, the directors assessed that the group would enjoy capital appreciation in the value of these properties over the RTO term and recognised these units as investment property. The directors assessed that the most appropriate measurement technique to fair value these units was the relevant selling price per square metre with respect to similar residential units Functional currency of Mozambique operations The functional currency of the group s Murrimo Mozambique operations is Rands (ZAR). The directors review the appropriateness of the functional currency on an annual basis, and was satisfied with ZAR as being the functional currency of the Murrimo operations for the current reporting period. Crookes Brothers Limited Audited Annual Financial Statements 23

26 Notes to the consolidated financial statements for the year ended 31 March Critical accounting judgements and key sources of estimation uncertainty continued 4.2 Key sources of estimation uncertainty Key assumptions concerning the future and other key sources of estimation uncertainty, could have a significant risk of causing a material adjustment to the carrying amounts of the assets and liabilities of the group within the next financial year. These are as follows: Property, plant and equipment residual values and useful lives Property, plant and equipment are depreciated over their useful lives taking into account residual values. The actual lives of the assets and residual values are assessed annually and are influenced by factors such as technological innovation, product life cycles and maintenance programmes. Residual value assessments consider issues such as market conditions, the remaining life of the asset and projected disposal values Post-retirement medical obligations Post-retirement medical obligations are provided for certain existing and former employees. See note Actuarial valuations are based on assumptions which include employee turnover, mortality rates, the discount rate, the expected long-term rate of return of plan assets, healthcare costs, inflation rates and salary increments Fair value measurements and the valuation process over biological assets and agricultural produce The group s biological assets and agricultural produce are held at fair value. Under the supervision and review of the Group Financial Director, an experienced and qualified team of management accountants determine the appropriate valuation techniques and inputs used to arrive at the fair value of biological assets and agricultural produce. In estimating the fair value of the biological assets and agricultural produce, the group uses marketobservable data to the extent it is available. Where Level 1 inputs are not available, the group engages suitable experts in the agricultural industry, which includes the South African Cane Growers Association and the group s co-ops Two-A-Day and Lebombo Growers (Pty) Ltd, to establish the appropriate valuation techniques and prices. Refer to note 16.2 for the valuation inputs applied in determining the fair value of biological assets at the end of the reporting period and note 32 for the fair value hierarchy of the group s biological assets and agricultural produce RTO obligations RTO obligations are measured based on assumptions which include the discount rate linked to the South African prime lending rate (a variable rate). Other assumptions include the mortality rates of the purchaser or his/her spouse, which is inherently uncertain Deferred tax assets Deferred tax assets are raised to the extent that it is probable that future taxable profit will be available against which the unused tax losses and unused tax credits can be utilised. Those entities, where unused tax losses and unused tax credits exist, are viable trading companies for which the going concern basis of preparation remains appropriate as assessed by management. A reconciliation of the deferred tax balance is included in note Crookes Brothers Limited Audited Annual Financial Statements

27 5. Segment information 5.1 Products and services from which reportable segments derive their revenues Information reported to the managing director for the purposes of resource allocation and assessment of segment performance, focuses on the types of goods or services delivered or provided, and in respect of the sugar cane, deciduous fruit, bananas, macadamias and property development operations, the information is further analysed based on the different classes of customers. The directors of the company have chosen to organise the group around differences in products and services across its farming and property development operations. Other revenue streams that have no direct bearing on crop or property development performance have been aggregated under other operations. 5.2 Information about customers The following is an analysis of revenue by customers. Sugar cane Deciduous fruit Bananas Macadamias Property development Other operations Total R'000 R'000 R'000 R'000 R'000 R'000 R'000 Year to 31 March 2018 RCL Foods Customer and Illovo Sugar Two-A- Day Lebombo Growers Mayo Macs Various Various Revenue Proportion of revenue to total group revenue (%) Year to 31 March 2017 RCL Foods Customer and Illovo Sugar Two-A- Day Lebombo Growers None None Various Revenue Proportion of revenue to total group revenue (%) Information about geographical areas Revenue attributable to South Africa and foreign countries is disclosed in note 6. Crookes Brothers Limited Audited Annual Financial Statements 25

28 26 Crookes Brothers Limited Audited Annual Financial Statements 5. Segment information continued 5.4 Segment results and balances The following is an analysis of the group s results and balances by reportable segment. Deciduous Property Other Sugar cane fruit Bananas Macadamias development operations Unallocated Total R'000 R'000 R'000 R'000 R'000 R'000 R'000 R'000 Year to 31 March 2018 Revenue Operating profit before unallocated overheads (19 197) (1 398) (974) (3 667) Profit on disposal of property, plant and equipment Corporate expenses (49 898) (49 898) Operating profit before biological assets (19 197) (1 398) (974) (3 667) (49 537) 460 Change in fair value of biological assets (4 684) (1 227) Operating profit after biological assets (20 424) (974) (3 667) (49 537) Share of profit of joint venture and associates Investment income Finance costs (16 700) (16 700) Loss before tax (20 424) (974) (3 667) (60 930) (8 333) Segment assets and liabilities Assets Segmental assets Investments and loans Corporate assets Consolidated total assets Liabilities Segmental liabilities Other information Capital expenditure on property, plant and equipment Depreciation Notes to the consolidated financial statements for the year ended 31 March 2018

29 5. Segment information continued 5.4 Segment results and balances continued Crookes Brothers Limited Audited Annual Financial Statements 27 Sugar Deciduous Property Other cane fruit Bananas Macadamias development operations Unallocated Total R 000 R 000 R 000 R 000 R 000 R 000 R 000 R 000 Year to 31 March 2017* Revenue Operating profit before unallocated overheads (5 083) (1 530) Profit on disposal of property, plant and equipment Corporate expenses (49 691) (49 691) Operating profit before biological assets (5 083) (1 530) (49 563) Change in fair value of biological assets (5 303) (6) Operating profit after biological assets (10 386) (1 530) (49 563) Share of profit of joint venture and associates Investment income Finance costs (5 453) (5 453) Profit before tax (10 386) (1 530) (43 856) Segment assets and liabilities Assets Segmental assets Investments and loans Corporate assets Consolidated total assets Liabilities Segmental liabilities Other information Capital expenditure on property, plant and equipment Depreciation * Prior year restated to split operating profit into operating profit before and after biological asset valuation. Refer to note 36 for details of restatements to comparative information.

30 Notes to the consolidated financial statements for the year ended 31 March Revenue The following is an analysis of the group s revenue for the year (excluding investment income, see note 8) R 000 R 000 Sugar cane Deciduous fruit Bananas Macadamias Property development Other operations (i) Attributable to: South Africa Foreign countries (i) Other operations revenue comprises revenue from the sale of grain, rental income from leased buildings, tourism revenue and the sale of nursery plants Other gains and losses Gain on disposal of property, plant and equipment Loss on disposal of available-for-sale financial assets held at cost (4) Impairment of investment premium (see note 25.2) (150) Net unrealised foreign exchange losses (625) Loss arising on changes in fair value of investment property (see note 15) (17) Income from the sale of sand and stone Income from utility services related to property development 236 Charter fee income from charter of aircraft Consultancy fee income Sundry income Investment income Interest received on loans and bank deposits Dividends received from unlisted equity investments Finance costs Interest on bank overdrafts and loans (excluding related parties) Interest on loan from Two-A-Day Group Interest on obligations under instalment sale agreements Interest on reversionary sale and transfer obligations 106 Other interest expense Crookes Brothers Limited Audited Annual Financial Statements

31 R 000 R (Loss)/profit for the year Loss/(profit) for the year is attributable to: Owners of the company (7 587) Non-controlling interests (Loss)/profit for the year has been arrived at after charging: (3 237) Depreciation Buildings and housing Plant and other assets Bearer assets Employee benefits expense Post-employment medical aid benefit expense (see note 29.1) Retirement benefit costs Retirement benefit contributions Defined benefit service and interest cost (see note 29.2) (797) Share-based payments (see note 23.4) Equity-settled share-based payments Total employee benefits expense Auditors remuneration Audit fees current year Audit fees prior year (52) Audit fees travel and disbursements Fees for other services Other operating and administrative expenses Legal and consulting fees Operating lease charges (see note 34.1) Crookes Brothers Limited Audited Annual Financial Statements 29

32 Notes to the consolidated financial statements for the year ended 31 March R 000 R Income tax expense 11.1 Income tax Current tax South Africa current year prior year 68 (79) Swaziland current year prior year (155) 363 Zambia current year prior year 12 Deferred tax South Africa current year (12 661) 292 prior year Swaziland current year (2 378) prior year (125) (81) Zambia current year prior year (10) (5 296) Attributable to: Income taxes recognised in profit or loss (5 096) Income taxes recognised in other comprehensive income (200) 97 Reconciliation of rate of tax Standard rate of tax (%) 28,0 28,0 The income tax expense for the year can be reconciled to the accounting (loss)/profit as follows: (Loss)/profit before tax adjusted for income recognised in other comprehensive income (9 047) Income tax calculated at 28% (2017: 28%) (2 533) Effect of dividend income, employee and agricultural incentive allowances that are exempt from tax (5 605) (6 804) Effect of legal fees and other consulting expenses of a capital nature that are not deductible in determining taxable profit Effect of unused tax losses and tax offsets not recognised as deferred tax assets Effect of different tax rates of subsidiaries operating in other jurisdictions 15 (1 800) Effect of capital gains tax at an inclusion rate of 80.0% (2017: 80.0%) (5 841) Adjustments recognised in the current year in relation to the current tax of prior years Income tax expense (5 296) The tax rate used for the 2018 and 2017 reconciliations above is the corporate tax rate of 28% payable by corporate entities in the Republic of South Africa on taxable profits under tax law in that jurisdiction. Effective rate of tax (%) 58,5 26,5 30 Crookes Brothers Limited Audited Annual Financial Statements

33 * R 000 R Income tax expense continued 11.2 Current tax Current tax assets Tax refund receivable Current tax liabilities Income tax payable Deferred tax Tax on temporary differences resulting from: Agricultural capital development allowances Property development infrastructure Property capital development allowances 30 Investment property Reversionary sale and transfer obligations (1 650) Prepaid lease income (813) Consumable stores Biological assets Other (provisions)/prepayments (3 117) (4 175) Tax losses (34 320) (13 082) Revaluation of available-for-sale financial assets The movement on the deferred tax balance for the year was as follows: Balance at beginning of year Recognised in other comprehensive income: Revaluation of available-for-sale financial assets during the year due to change of CGT inclusion rate 46 Recognised in profit or loss: Current year charge (14 675) Prior year charge 620 (78) Effect of foreign currency exchange differences (247) Included in the consolidated statement of financial position as: Deferred tax assets^ (6 044) Deferred tax liabilities * Refer to note 36 for details of restatements to comparative information. ^ Deferred tax assets are raised to the extent that it is probable that future taxable profits will be available against which the unused tax losses and unused tax credits can be utilised. Management has assessed those entities where unused tax losses exist, and has concluded these entities are viable trading companies for which the goingconcern basis of preparation remains appropriate and they are expected to generate future taxable profits. The group through its Mozambican subsidiaries has unused tax losses of R8.3 million for which no deferred tax asset is recognised. Tax losses in Mozambique may be carried forward subject to an expiry after five years, with R0.04 million expiring next year, R2.7 million expiring between two and five years and R5.6 million expiring in the fifth year. Crookes Brothers Limited Audited Annual Financial Statements 31

34 Notes to the consolidated financial statements for the year ended 31 March cents cents 12. Earnings and headline earnings per share 12.1 Basic (loss)/earnings per share From continuing operations (49,7) 424,7 Total basic (loss)/earnings per share (49,7) 424,7 R 000 R 000 The earnings used in the calculation of basic earnings per share are as follows: (Loss)/profit for the year (3 237) Adjusted for non-controlling interest (4 350) (31 380) (Loss)/earnings used in the calculation of basic earnings per share from continuing operations (7 587) Number of shares Number of shares Weighted average number of shares for the purposes of basic earnings per share The weighted average number of shares for the purposes of earnings per share are as follows: Number of shares in issue at the beginning of the year Number of shares for the purposes of basic earnings per share from continuing operations Diluted (loss)/earnings per share From continuing operations (49,7) 424,6 cents cents Total diluted (loss)/earnings per share (1) (49,7) 424,6 (1) Diluted loss per share is capped at the basic loss per share. See note R 000 R 000 The earnings used in the calculation of diluted earnings per share are as follows: (Loss)/profit for the year (3 237) Adjusted for non-controlling interest (4 350) (31 380) (Loss)/earnings used in the calculation of diluted earnings per share from continuing operations (7 587) Number of shares Number of shares Weighted average number of shares for the purposes of diluted earnings per share The weighted average number of shares for the purposes of diluted earnings per share reconciles to the weighted number of shares used in the calculation of basic earnings per share as follows: Weighted shares used in the calculation of basic earnings per share Shares deemed to be issued for no consideration in respect of employee share options (see note 30) Adjusted weighting based on average market price of options and average company share price for the year ( ) (28 133) Weighted average shares used in the calculation of diluted earnings per share Crookes Brothers Limited Audited Annual Financial Statements

35 R 000 R Earnings and headline earnings per share continued 12.3 Headline (loss)/earnings per share Reconciliation of headline (loss)/earnings: (Loss)/profit for the year attributable to owners of the company (7 587) Adjusted for: Gain on disposal of property, plant and equipment (361) (128) Loss on disposal of available-for-sale financial assets - held at cost 4 Impairment of investment premium 150 Loss arising on changes in fair value of investment property 17 Tax effect of the adjustments Headline (loss)/earnings (7 723) Headline (loss)/earnings per share (cents) (50,6) 424,1 Headline (loss)/earnings per share is derived from headline earnings, divided by the weighted average number of shares in issue during the year Diluted headline (loss)/earnings per share Headline (loss)/earnings per share (diluted) (cents) (50,6) 424,0 Headline (loss)/earnings per share (diluted) is derived from headline (loss)/earnings, divided by the weighted average number of shares in issue during the year after adjusting for the potentially dilutive shares, but is capped at the headline loss per share. See note Dividends and distributions Cash distributions Distribution number 201 of 115,0 cents per share (final 2016) paid 4 July Distribution number 202 of 50,0 cents per share (interim 2017) paid 9 January Distribution number 203 of 115,0 cents per share (final 2017) paid 10 July Distribution number 204 of 35,0 cents per share (interim 2018) paid 8 January Total dividends The directors have resolved to not declare a final dividend for the current financial year (2017 final: 115,0 cents per share). The total distribution for the year is therefore 35,0 cents per share (2017: 165,0 cents per share). Crookes Brothers Limited Audited Annual Financial Statements 33

36 Notes to the consolidated financial statements for the year ended 31 March R 000 R Property, plant and equipment Cost Freehold land Leasehold land/land rights Buildings Property development infrastructure Bearer assets Plant and other assets Plant and other assets under instalment sale agreements Accumulated depreciation and impairment Buildings Bearer assets Plant and other assets Plant and other assets under instalment sale agreements Net book value Reconciliation of net book value of property, plant and equipment Net book value at beginning of year Additions: Buildings Property development infrastructure Bearer assets Plant and other assets Plant and other assets under instalment sale agreements Depreciation (see note 10.1 for details by asset category) (49 290) (48 557) Adjustment to leased bearer assets (6 759) (6 583) Disposals: Freehold land (21) Plant and other assets (3 862) (1 614) Land and buildings transferred to inventory of property development business (2 159) Property development costs transferred to inventory (72) Effect of foreign currency exchange differences (3 299) Net book value at end of year Details of encumberances and assets pledged as security Refer to note 24.5 for details of assets encumbered. 34 Crookes Brothers Limited Audited Annual Financial Statements

37 R 000 R Residential units held under reversionary sale and transfer obligations (RTO) Investment property (1) Other financial liabilities (2) (8 797) Net current value of RTO right The group's property division primarily develops residential units for normal sale. As a separate arrangement to a normal sale, customers are also offered an alternative to use the property under a life right style arrangement, referred to as a reversionary sale and transfer obligation ( RTO ). Revenue from a normal sale is recognised upon control and title passing to the customer. In this instance, the unit's selling price is recognised as revenue upon transfer of ownership. In the case of a RTO, the transaction is treated similar to a lease arrangement, whereby the buyer is in subtance a lessee for the duration of his or her natural life. The essence of a RTO contract is that the buyer ( lessee ) acquires the unit at a discount of between 25% and 30% of the cash selling price of other similar units offered under normal sale, on the basis that the group has an option to repurchase the unit at the original discounted price paid by the lessee. (1) The property division under this RTO arrangement is therefore in substance a lessor. The property is held for the purpose of capital appreciation over the duration of the RTO term. The unit is therefore recognised as Investment Property, with fair value gains or losses in the unit's value recognised in profit or loss annually ( FVTPL ) as follows: Fair value at beginning of year Transfer from cost of sales related to property development Fair value adjustment through profit or loss (17) Fair value at end of year Refer to note 32 for details of the fair value hierachy of investment property. (2) The repurchase price under a RTO arrangement payable by the property division is disclosed in the consolidated financial statements as non-current other financial liabilities, and comprises the following two components: RTO obligations Prepaid lease income Refer to note 3.16 of the accounting policies for details of measurement of other financial liabilities Crookes Brothers Limited Audited Annual Financial Statements 35

38 Notes to the consolidated financial statements for the year ended 31 March R 000 R Biological assets 16.1 Growing crops Fair value Sugar cane Deciduous fruit Bananas Macadamias Livestock 921 Fair value at end of year Analysis of fair values of growing crops: Fair value at beginning of year Gains/(losses) arising from changes attributable to volume and price: Sugar cane Gain arising from physical growth (yield) Gain/(loss) arising from area under crop to be harvested (11 332) (Loss)/gain arising from price changes (41 040) Deciduous fruit Gain/(loss) arising from physical growth (yield) (626) (Loss)/gain arising from area under crop to be harvested (227) Loss arising from price changes (3 274) (5 681) Bananas Gain/(loss) arising from physical growth (yield) 923 (775) Gain/(loss) arising from area under crop to be harvested 203 (629) Gain arising from price changes Macadamias Gain arising from area under crop to be harvested Fair value changes attributable to births, deaths and ageing of livestock (5) (6) Transfer of livestock to inventory (see note 20) (916) Effect of foreign currency exchange differences (1 508) 752 Fair value at end of year In terms of IAS 41: Agriculture, growing crops, comprising sugar cane, deciduous fruit, bananas and macadamias are accounted for as a biological assets and are measured and recognised at fair value. Changes in the fair value are included in profit or loss. The fair value of growing crops is determined based on current market prices less estimated selling costs. 36 Crookes Brothers Limited Audited Annual Financial Statements

39 16. Biological assets continued 16.2 Biological asset valuations The following key assumptions have been used in determining the fair value of biological assets: Sugar cane Expected area to harvest after 31 March South Africa (ha) Swaziland (ha) Zambia (ha) Total area (ha) Estimated yields South Africa (tons/ha) 101,5 84,8 Swaziland (tons/ha) 108,3 108,0 Zambia (tons/ha) 120,9 130,0 Weighted average 105,1 95,8 Average maturity of cane at 31 March South Africa (%) Swaziland (%) Zambia (%) Estimated RV price South Africa (Rands) Estimated sucrose price Swaziland (Rands) Estimated ERC price Zambia (Rands) Deciduous fruit Expected area to harvest after 31 March (ha) Estimated yields (tons/ha) 56,9 57,0 Average maturity of crop at 31 March (%) 81,9 81,8 Estimated net price per kg apples and pears (Rands) 3,47 3,97 Estimated packout Class 1 (%) 31,8 41,6 Class 2 (%) 18,5 15,9 Class 3 (%) 11,9 9,1 Juice (%) 37,7 33,4 Bananas Expected area to harvest after 31 March (ha) Estimated yields (tons/ha) 55,3 52,6 Average maturity of crop at 31 March (%) 50,0 50,0 Estimated net price per carton (Rands) 139,73 134,64 Macadamias (1) Expected area to harvest after 31 March (ha) 382 Estimated yields (tons/ha) 0,4 Average maturity of crop at 31 March (%) 0,8 Estimated net price per ton (Rands) (1) A macadamia tree is expected to reach full peak production at an age of seven years. Trees under crop are presently five to six years old with limited production in the current year, which is year six. Crookes Brothers Limited Audited Annual Financial Statements 37

40 Notes to the consolidated financial statements for the year ended 31 March Number of Number of shares held shares held R 000 R Other financial assets 17.1 Available-for-sale: at fair value (1) Elgin Co-operative Fruitgrowers Villiersdorp Co-operative Available-for-sale: at cost less impairment losses (2) Two-A-Day Group Villiersdorp Co-operative Other farming co-operatives and agribusinesses Loans carried at amortised cost Komati Kortpad (Pty) Ltd Mayo Macs SA Delta Siera Limitada Included in the consolidated financial statements as: Non-current Current (1) Refer to note 32 for details of the fair value hierachy. (2) During the year, the group acquired shares and participation rights in an unlisted investment, in partnership with its Western Cape deciduous fruit co-op Two-A-Day. The group does not hold any collateral over these balances. 38 Crookes Brothers Limited Audited Annual Financial Statements

41 18. Subsidiaries Details of the group's subsidiaries at the end of the reporting period are as follows: Name of subsidiary Crookes Brothers Limited Crookes Brothers South Africa (Pty) Ltd Principal activity Ultimate holding company Place of incorporation and operation Proportion of ownership interest and voting power held by the group Shares and loans owing by/(to) subsidiaries R 000 R 000 South Africa N/A N/A N/A N/A Farming South Africa 100% 100% Bellcro Farming (Pty) Ltd Farming South Africa 45% N/A (4 159) Mthayiza Farming (Pty) Ltd Farming South Africa 45% 45% Mawecro Farming (Pty) Ltd Farming South Africa 49% N/A Mawecro Farming JV Farming South Africa N/A 49% (2 645) Renishaw Property Developments (Pty) Ltd Mozambique Farms (Pty) Ltd CBL Agri International (Pty) Ltd Property development and sale Agricultural holding company Agricultural holding company South Africa 85% 85% South Africa 100% N/A 686 South Africa 100% 100% CBL Agri Zambia Limited Farming Zambia 100% 100% Crookes Plantations Limited Farming Swaziland 100% 100% ( ) ( ) Bar J Limited Agricultural land holding company Swaziland 100% 100% (97) (97) Murrimo Macadamias Lda Farming Mozambique 100% 99% Murrimo Farming Lda Agricultural land holding company Mozambique 100% 99% Crookes Brothers Limited Audited Annual Financial Statements 39

42 Notes to the consolidated financial statements for the year ended 31 March Subsidiaries continued 18.1 Details of non-wholly-owned subsidiaries that have material non-controlling interests Summarised financial information of the group's subsidiaries that have a material non-controlling interest is set out in the table below. These amounts disclosed are eliminated intra-group in these consolidated financial statements. Bellcro Farming (Pty) Ltd Mthayiza Farming (Pty) Ltd Mawecro Farming (Pty) Ltd Summarised financial information R 000 R 000 R 000 R 000 R 000 R 000 Statement of financial position Current assets Non-current assets Current liabilities (6 149) (34 554) (26 789) (48 228) (60 392) Non-current liabilities (369) (35 500) (28 357) (63 007) (46 890) Equity attributable to owners of the company (14) (828) (2 298) (28 031) (20 994) Non-controlling interests (17) (1 011) (2 808) (29 175) (21 850) Statement of profit or loss Revenue Expenses (1 829) (41 584) (39 075) ( ) ( ) Profit before tax Income tax expense (7) (993) (1 314) (24 103) (19 125) Profit for the year Proportion of non-controlling interest 55% 0% 55% 55% 51% 51% Profit attributable to owners of the company Profit attributable to noncontrolling interests Change in the group s ownership interest in a subisidiary Bellcro Farming (Pty) Ltd During the current reporting period, the group disposed of its Bellview deciduous fruit farm in the Western Cape to the Department of Rural Development and Land Reform ( the Department ). Bellcro Farming (Pty) Ltd was then specially formed to acquire the operations of the Bellview farm, of which the group acquired 45% of the issued share capital, with the remaining 55% acquired by Bellview Agricultural Primary Co-operative ( BAPC ), an entity appointed by the Department and unrelated to the group. Murrimo Farming Lda and Murrimo Macadamias Lda During the current reporting period, the group undertook a strategic decision to buyout the 1% non-controlling interest in its two Murrimo Mozambique farms, through its wholly-owned subsidiary Mozambique Farms (Pty) Ltd, a company formed for this specific purpose, registered and incorporated in the Republic of South Africa Significant restrictions During the current reporting period, there were no restrictions on the group or its subsidiaries ability to access or use the assets and settle the liabilities of the group Financial support During the current reporting period, the group provided letters of continued financial support to subsidiary companies whose liabilities, exceeded its assets, fairly valued. These subsidiaries included Renishaw Property Developments (Pty) Ltd, Crookes Brothers South Africa (Pty) Ltd, Mozambique Farms (Pty) Ltd, CBL Agri International (Pty) Ltd and Murrimo Macadamias Lda. In the case of Murrimo Macadamias Lda, the group also subordinated its intra-group loan owing from Murrimo, in favour of Murrimo s other creditors. 40 Crookes Brothers Limited Audited Annual Financial Statements

43 R 000 R Investments in joint venture and associates Share of profit of joint venture and associate companies Investments in joint venture and associates Included in the group s portfolio of investments, is a joint venture and three associates, all accounted for using the equity method in these consolidated financial statements. There is no quoted market value for the investments in the joint venture and associates. Details of the group's material joint venture and associates at the end of the reporting period are as follows: 19.1 Silverlands Mozambique Holdings Limited ( SMHL ) (joint venture) As part of the group s investment into a 300 hectare banana project, on 7 September 2016, the group acquired a 49,5% share in Silverlands Mozambique Holdings Limited ( SMHL ). SMHL is incorporated in Mauritius and is the parent company of Quinta da Bela Vista Limitada ( QBV ), the wholly-owned operating entity incorporated in Mozambique. The remaining 50,5% ownership interest in SMHL is held by SilverStreet Private Equity Strategies ( SilverStreet ), a subsidiary of the group s majority shareholder Silverlands (SA) Plantations S.A.R.L. a company incorporated in the United Kingdom. Given the terms of the shareholders agreement between the group and SilverStreet, it is management s assessment that joint control exists and therefore SMHL is equity accounted for as a joint venture. Unlisted shares and loans Share of retained earnings (909) (939) Carrying value of joint venture company Principal activity: banana farming Percentage holding: 49,5% (2017: 49,5%). Summarised financial information in respect of the group's interest is set out below. The summarised financial information below represents amounts shown in the joint venture's unaudited financial statements prepared in accordance with IFRSs. Revenue 608 Expenses (547) (1 897) Profit/(loss) before tax 61 (1 897) Income tax expense _ Profit/(loss) for the year 61 (1 897) Other comprehensive income for the year Total comprehensive income/(loss) for the year 61 (1 897) Share of joint venture profit/(loss) 30 (939) There were Rnil dividends received during the year (2017: Rnil). Summarised assets and liabilities of the joint venture company and its subsidiaries as per the unaudited financial statements: (31 March 2018)** Non-current assets Current assets Total assets Non-current liabilities including shareholders loans Current liabilities (27 765) (2 362) Net assets ** Latest available financial information at the date of reporting. There are no restrictions on the ability of SMHL to transfer funds to the group in the form of cash dividends or to repay loans or advances made by the group, as or if the need arises. Crookes Brothers Limited Audited Annual Financial Statements 41

44 Notes to the consolidated financial statements for the year ended 31 March R 000 R Investments in joint venture and associates continued 19.2 Lebombo Growers (Pty) Ltd ( Lebombo )* (associate) Unlisted shares and loans Share of retained earnings Carrying value of associate company Principal activity: banana marketing and distribution Percentage holding: 29,88% (2017: 26,56%). Summarised financial information in respect of the group's interest is set out below. The summarised financial information below represents amounts shown in the associate s financial statements prepared in accordance with IFRSs. Revenue Expenses ( ) ( ) Profit before tax Income tax expense (6 336) (6 421) Profit for the year Other comprehensive income for the year Total comprehensive income for the year Equity accounting share of profit There were Rnil dividends received during the year (2017: Rnil). Summarised assets and liabilities of the associate company and its subsidiaries as per the audited financial statements: (31 March 2018)** Non-current assets Current assets Total assets Non-current liabilities including shareholders loans (85 896) (69 381) Current liabilities (60 376) (50 394) Net assets The group has a strategic interest in Lebombo, in that Lebombo is also the group s co-operative partner, to whom the group sells all of its banana crop. There are no restrictions on the ability of Lebombo to transfer funds to the group in the form of cash dividends or to repay loans or advances made by the group, as or if the need arises Mpambanyoni Construction Supplies (Pty) Ltd ( MCS )* (associate) Unlisted shares and loans Share of retained loss (3) Write-off of investment (760) Carrying value of associate company 757 Principal activity: manufacture of blocks, bricks, lintels, pavers and associated cement products Percentage holding: 23% (2017: 23%). The group had a strategic interest in MCS, in that MCS purchased river sand and quarry stone from the group s Renishaw farm (see note 7). In addition, MCS is also a supplier of bricks, blocks, paving stone and lintels to the group's property development division (see note 33.1). During the current reporting period, MCS s liabilities, exceeded its assets, fairly valued. MCS was accordingly unable to meet it s working capital and loan commitments as they became due. As at the end of the current reporting period, the company was in financial distress, with liquidation proceedings imminent. Accordingly, the group s directors have assessed the group's equity investment in MCS as irrecoverable and wrote-off the investment in MCS to Rnil. * Incorporated in South Africa ** Latest available financial information at the date of reporting. 42 Crookes Brothers Limited Audited Annual Financial Statements

45 R 000 R Inventories Cost Consumable stores Merchandise Livestock 916 Property for development and sale (1) Fair value Agricultural picked produce Agricultural grown produce Grain Total inventories During the current year, the cost of inventories recognised as an expense in profit or loss was R86,4 million (2017: R64,3 million). The cost of inventories written-down to net-realisable value in the current and prior years were immaterial. (1) During the current reporting period, 36 residential units relating to the group s property division were built, transferred and sold to buyers, as part of phase 1 and phase 2 sales (either normal or RTO, see note 15). Cost of sales allocated from inventory to the 36 completed and sold units was per the following stock costing basis: Direct costs allocated directly to the unit concerned Indirect costs allocated per the total number of units in the phase concerned, or total number of units expected to be completed over the entire Renishaw Hills project of 512 units. 21. Trade and other receivables Receivables trade and other (1) Less: Allowances for doubtful debts (347) (271) Net trade receivables Prepayments (2) Total trade and other receivables Reconciliation of allowances for doubtful debts: Balance at beginning of the year Impairment losses recognised on receivables Amounts written off during the year as uncollectable (3) (819) (126) Balance at end of the year (1) Trade and other receivables include deciduous fruit revenue accruals from Two-A-Day, VAT refunds owing and rental and sundry debtors. (2) Prepayments include prepaid rental of R13,2 million (2017: R12,6 million) to the Mawewe Communal Property Association for the lease of the Komati farms in Mpumalanga. (3 Amounts written off as uncollectable in the current and prior reporting periods were immaterial, individually and in aggregate. Included in the allowance for doubtful debts are individually immaterial impaired trade receivables, for which the group does not hold any collateral. The ageing of all impaired receivables in the current and prior year was 120 days and older. The directors consider that the carrying amounts of trade and other receivables approximate their fair value, and that the present allowance for doubtful debts is adequate. Disclosures concerning the management of credit risk have been provided in note Crookes Brothers Limited Audited Annual Financial Statements 43

46 Notes to the consolidated financial statements for the year ended 31 March R 000 R Unsecured loans 22.1 Interest-bearing Libuyile Community Trust (1) Mawewe Communal Property Association (2) Interest-free Kwacele Development Company (Pty) Ltd (3) 459 Mphenjwa Training and Development CC (3) Movements during the year Balance at beginning of year Advanced during the year Interest accrued 503 Repaid during the year (1 204) Written off during the year (540) Balance at end of year Included in the consolidated financial statements as: Non-current Current (1) During the current reporting period, a R4,3 million loan was advanced to the Libuyile Community Trust, an indirect non-controlling shareholder of the group s subsidiary Mthayiza Farming (Pty) Ltd. Per the signed loan agreement, interest is charged in advance at 3,00% below the prevailing South African prime lending rate on the capital balance outstanding at the end of each month. The loan together with any capitalised interest owing is repayable over five years, with a minimum annual repayment value of R0,9 million due on 1 April each year. During the current reporting period, interest of R0,3 million was charged, with the first annual repayment to be deducted against the lease rental owing for 2018/19 financial year. The loan is unsecured, however a condition precedent to the advancement of the loan, was a granting to the group of an extension to its lease agreement over the Mthayiza farms for a further 15 years from the date of original expiry. The term of the lease agreement was therefore extended to the end of September See note (2) During the current reporting period, a R3,5 million loan was advanced to the Mawewe Communal Property Association, the non-controlling shareholder of the group s subsidiary Mawecro Farming (Pty) Ltd. Per the signed loan agreement, interest is charged in advance at the prevailing South African prime lending rate on the capital balance outstanding at the end of each month. During the current reporting period, interest of R0,3 million was charged on the loan balance outstanding. The loan together with any capitalised interest owing was initially fully repayable against the lease rental owing for the 2018/19 financial year. During the current reporting period, capital and interest payments of R1,2 million were deducted against the lease rental owing for the 2018/19 financial year, leaving a balance of R2,5 million owing by the end of the current reporting period. The directors of the group agreed by written consent to roll over and convert this outstanding R2,5 million to a current portion to be deducted against the lease rental owing for the 2019/20 financial year. The remaining loan balance is unsecured, but considered fully recoverable by the group s directors. (3) Unsecured, interest-free loans were advanced to these companies during prior reporting periods, to enable them to acquire an empowerment shareholding in Mpambanyoni Construction Supplies (Pty) Ltd ( MCS ), the group s brick and block making associate company (see note 19.3). These loans were due for repayment by 31 March 2018, however by the end of the current reporting period, MCS was unable to meet its working capital and loan commitments, due to significant trading and cash flow losses suffered by its brick and block making business. The MCS investment and working capital loan, together with these associated loans were considered uncollectable (see note 19.3) and written off as irrecoverable in current year profit or loss. Fair value adjustments and the effects of discounting on these unsecured loans are considered immaterial. 44 Crookes Brothers Limited Audited Annual Financial Statements

47 R 000 R Capital, reserves and shareholding interests 23.1 Share capital and share premium Authorised (2017: ) ordinary shares of 25 cents (2017: 25 cents) each Issued (2017: ) ordinary shares of 25 cents (2017: 25 cents) each Share premium The share capital movement for the year was as follows: Balance at the beginning of the year Balance at the end of the year Number of shares Number of shares The shares in issue movement for the year was as follows: Balance at the beginning of the year Balance at the end of the year The shares in issue at the end of the current and prior year are fully paid up, carry one vote per share and a right to dividends. Under control of directors: for the purposes of the employee share option scheme: shares (2017: shares) R 000 R Investment revaluation reserve Balance at beginning of year Net loss arising on revaluation of available-for-sale financial assets (46) Balance at end of year Refer to accounting polices note 3.16 for recognition and measurement principles pertaining to the group s investment revaluation reserve. Crookes Brothers Limited Audited Annual Financial Statements 45

48 Notes to the consolidated financial statements for the year ended 31 March R 000 R Capital, reserves and shareholding interests continued 23.3 Foreign currency translation reserve Balance at beginning of year (23 764) (25 315) Exchange differences on translation of subsidiaries (5 238) Balance at end of year (29 002) (23 764) Exchange differences relating to the translation of the results and net assets of the group s foreign subsidiaries from their functional currency to the group s presentation currency (Rands) are explained in accounting polices note Share-based payment reserve Balance at beginning of year Share-based payment expense Balance at end of year Share options granted under the company s employee share option plan carry no rights to dividends and no voting rights. Further details of the employee share option plan are provided in accounting polices note 3.7 and note Non-controlling interests Balance at beginning of year Non-controlling interests arising on the acquisition of Bellcro Farming (Pty) Ltd (see note 18.2) 0,1 Non-controlling interests arising on the acquisition of Mawecro Farming (Pty) Ltd Adjustment to non-controlling interests in Renishaw Property Developments (Pty) Ltd (10) Adjustment to non-controlling interests in Murrimo Farming Lda and Murrimo Macadamias Lda through buyout of Whitebird interest (see note 18.2) 248 Share of profit for the year Dividend to Mthayiza Holdings (Pty) Ltd (3 245) (3 245) Dividend to Mawewe Communal Property Association (7 650) (7 650) Balance at end of year Crookes Brothers Limited Audited Annual Financial Statements

49 Security Note R 000 R Borrowings interest-bearing 24.1 Loans and demand facilities at amortised cost Call loan Two-A-Day Unsecured 24.5 (A) Demand facility Investec Bank Limited Unsecured 24.5 (B) Seasonal facility Rand Merchant Bank Secured 24.5 (B) Bank revolving credit loan Akwandze Agricultural Finance Secured 24.5 (C) Bank term-loans Akwandze Agricultural Finance Secured 24.5 (D) Bank term-loan Investec Bank Limited Unsecured 24.5 (E) Instalment sale agreements Secured 24.5 (F) Included in the consolidated financial statements as: Non-current Current Bank overdraft at amortised cost Bank overdraft FNB Swaziland Secured 24.5 (B) Total interest-bearing borrowings at amortised cost Loans, bank overdrafts and facilities (See note 24.1 and 24.2) Borrowing powers In terms of the memorandum of incorporation, the total permitted level of borrowings is limited to the equity of the ultimate holding company, and is as follows: Crookes Brothers Limited Summary of borrowing arrangements A The call loan of R10 million from the Two-A-Day Group ( TAD ), was advanced to the group to assist in the acquisition and purchase of the group s Vyeboom deciduous fruit farm in the Western Cape. The loan is unsecured, bears fixed interest at 10% per annum and is also linked to TAD s use of the Vyeboom packhouse and cold storage facility in the Western Cape. The loan has no fixed terms of repayment, however becomes fully and immediately repayable, should the group terminate its contract with TAD, in favour of another co-op to perform the purchase, marketing and distribution of the group s deciduous fruit. B) The bank overdraft and general banking facilities are repayable on demand and bear interest at variable market related interest rates. At the end of the current reporting period, the following facilities, subject to annual review, were available to the group: Financing institution Term Interest rate R 000 R 000 Investec Bank Limited (a) Demand facility Prime less 1,00% Rand Merchant Bank (b) Seasonal facility Prime less 1,00% First National Bank Swaziland (c) Overdraft Prime (a) The Investec Bank Limited ( Investec ) banking facility is an unsecured, uncommitted demand facility. The facility is unconditionally revocable and cancellable by Investec without penalty or prior written notice. (b) At 31 March 2018, the group had a seasonal facility with Rand Merchant Bank ( RMB ) to the value of R160 million, which will remain in effect until 31 May The facility will revert to R140 million from 1 June (c) The FNB Swaziland ( FNB ) overdraft facility is a secured by way of an unlimited general deed of suretyship by the group s wholly-owned Swaziland subsidiary BAR J Ltd, in favour of FNB for the obligations of Crookes Plantations Limited, Swaziland. Crookes Brothers Limited Audited Annual Financial Statements 47

50 Notes to the consolidated financial statements for the year ended 31 March Borrowings interest-bearing continued 24.5 Summary of borrowing arrangements continued In addition to the seasonal banking facility, the following other RMB facilities are available to the group: Type Term Utilisation R 000 R 000 Short-term direct Demand facility Corporate card Short-term contingent Demand facility Guarantees Settlement Demand facility Settlement The RMB facility is secured by way of: A suretyship for the amount of R60 million by the group s wholly-owned subsidiary Crookes Brothers South Africa (Pty) Ltd in favour of RMB for the obligations of the group; and 2. A first covering mortgage bond of R60 million registered over the Ouwerf, Vyeboom and Dennebos deciduous fruit farms situated in the Western Cape measuring 841,6241 hectares, plus an additional sum of R12 million for costs, charges and disbursements. C) The revolving credit loan with Akwandze Agricultural Finance ( Akwandze ), relates to a working capital loan for the group s Mawecro estate. The loan is current, bears fixed interest at prime less 3,75% and is fully repayable each year. The full loan of R35 million is refinanced annually at the discretion of the directors of the company. D) In addition to the revolving credit loan with Akwandze, the group's Mawecro and Mthayiza estates are the recipients of medium-term funding from the Land Bank, in the form of six loans bearing fixed interest at between 4% and 6,75% per annum and repayable at between one and six years. These loans are used to fund capital expenditure as well as to supplement working capital needs. During the current reporting period, repayments amounted to approximately R11,2 million over the nine month repayment period. Details of Akwandze security is as follows: 1. Akwandze has a cession over the gross sugar cane proceeds paid by the mill to Mawecro and Mthayiza, and deducts the loan repayments against the monthly cane proceeds received. 2. Crookes Brothers Limited, provides a deed of surety to Akwandze for the due and punctual performance of all of Mthayiza and Mawecro s obligations and the payment on demand of all amounts owing by Mthayiza and Mawecro to Akwandze. E) In September 2014, the group s Mozambique subsidiary, Murrimo Macadamias Lda ( Murrimo ) secured a USD 2 million five-year term-loan from Investec Bank (Mauritius) Limited ( Investec ), to fund its capital expansion and working capital requirements. The loan bore interest at USD Libor plus 4,00% per annum, payable quarterly. No capital repayments were due for the first three years, the first being due in September Crookes Brothers Limited, the South African holding company stood guarantee to Investec for this term-loan. On 31 July 2017 an agreement was concluded between Investec and the group, for the South African holding company Crookes Brothers Limited, to purchase the loan claim from Investec, thus converting the holding company s guarantee obligation to a direct shareholder s loan to Murrimo. The carrying value of the settlement amount and accrued interest at acquisition on 31 July 2017 was R26,3 million. During the current reporting period, capital and accrued interest repayments of R9,9 million were made to Investec. As at 31 March 2018 the loan was unsecured. F) The group has instalment sale agreements with Wesbank and ABSA, secured by vehicles with a net book value of R6,7 million (2017: R4,7 million). The agreements bear interest at between prime less 0,5% and prime less 1,0%, with monthly repayment terms. 48 Crookes Brothers Limited Audited Annual Financial Statements

51 R 000 R Other liabilities interest-free 25.1 Obligation to restore leased farmland Nicoskamp estate (1) Mawecro estate (2) Mthayiza estate (3) (1) This liability relates to the obligation to restore the leased Nicoskamp Farm in Mpumalanga to its original condition, on termination of the lease agreement with the Mpumalanga Department of Rural Development and Land Reform. The original lease term was for a period of 10 years. At the end of the current reporting period, one year of the lease term was left remaining, with the directors in discussions with the Department to transfer this portion of land to the Mawecro estate, by end of the next reporting period. (2) This liability relates to the obligation to restore the remaining leased Komatipoort farms in Mpumalanga to their original condition, on termination of the lease agreement with the Mawewe Communal Property Association ( MCPA ). The original lease term is for a period of 20 years. At the end of the current reporting period, 18 years of the lease term was left remaining. (3) This liability relates to the obligation to restore the leased Mthayiza Malelane farms in Mpumalanga to their original condition, on termination of the lease agreement with Mthayiza Holdings (Pty) Ltd ( MTH ). The original lease term was for a period of 15 years and due to expire at the end of September During the current reporting period, the lease was extended for a further 15 years up to September All of the liabilities above, relate to the valuation attributable to the carrying amount of bearer assets attached to the leased farms in these areas. At the end of the current reporting period, the amortised cost of these liabilities were opposite but equal to the carrying amount of the associated bearer sugar cane roots and banana palms. These liabilities are unsecured, interest-free and will be extinguished on handover of the bearer assets to the respective land owners, on termination of the leases, hence non-current Outside shareholders loan Whitebird International B.V. 597 Movements during the year Balance at beginning of year Repaid during the year (4) (555) Effect of foreign currency exchange differences (42) (63) Balance at end of year 597 (4) During the current reporting period, the group undertook a strategic decision to buyout the 1% non-controlling interest in its Mozambique Murrimo operations at a slight premium. The premium was immaterial and written off to profit or loss. Crookes Brothers Limited Audited Annual Financial Statements 49

52 Notes to the consolidated financial statements for the year ended 31 March Cash and cash equivalents For the purposes of the consolidated statement of cash flows, cash and cash equivalents include cash on hand and in banks, net of outstanding bank overdraft. Cash and cash equivalents at the end of the reporting period as shown in the consolidated statement of cash flows can be reconciled to the related items in the consolidated statement of financial position as follows: R 000 R 000 Cash and bank balances Bank overdraft (see note 24.2) (24 050) (9 883) Trade and other payables Trade payables and accruals Payroll accruals Trade payables and accruals principally comprise outstanding trade payables in respect of goods or services acquired. The group has financial risk management policies in place to ensure that all payables are paid within the pre-approved credit terms. The directors consider that the carrying amount of trade and other payables approximates their fair value Provisions Leave pay Bonuses Severance allowances Severance Leave pay Bonuses allowances Total Reconciliation of net movements R 000 R 000 R 000 R 000 Balance at 1 April Payments/reversals (1 404) (6 293) (7 697) Provisions raised Effect of foreign currency exchange differences Balance at 31 March Payments/reversals (775) (7 982) (8 757) Provisions raised Effect of foreign currency exchange differences (17) (5) (47) (69) Balance at 31 March Refer to accounting policies note 3.15 for details of the above provisions, which are all current. 50 Crookes Brothers Limited Audited Annual Financial Statements

53 R'000 R' Net post-employment obligation Post-employment medical aid obligation (see note 29.1) Retirement benefit surplus (see note 29.2) (10 212) (10 212) 122 (1 189) 29.1 Post-employment medical aid obligation Post-employment medical aid healthcare liability (1) Included in the consolidated financial statements as: Non-current Current As at the end of the current reporting period, an actuarial valuation was performed over the obligation due to: Current active employees of the group ("Actives") Past employees of the group referred to as Continuation and Widow(er) Members ( CAWMs ) (1) The group has undertaken a buyout exercise of its post-employment medical aid obligation. The retirement benefit surplus will be used to fund a portion of the buyout related to current employees. Thereafter, these Actives will be required to purchase an annuity, which will extinguish the group s obligation to them. The obligation to the CAWMs will continue. Valuation assumptions and methodology The post-employment healthcare liabilities have been valued using the projected unit credit discounted cashflow method. The key assumptions used are shown below: Economic assumptions Consumer Price Inflation ( CPI ) (%) 6,40 7,35 Healthcare cost inflation (%) 6,40 7,35 Discount rate (%) 8,99 9,85 Real discount rate (%) 2,43 2,33 Amounts recognised in comprehensive income in respect of the post-employment medical aid benefits are as follows: Service cost Interest cost Benefit payments (388) (335) Components of post-employment medical aid benefits recognised in profit or loss Remeasurement (loss)/gain of post-employment medical aid benefits recognised in other comprehensive income ( OCI ) (714) 641 Tax effect of remeasurement 200 (179) Components of post-employment medical aid benefits recognised in OCI, net of tax (514) 462 The amount included in the consolidated statement of financial position arising from the group's obligations in respect of post-employment medical aid is as follows: Net liability at beginning of year Service cost Interest cost Benefit payments (388) (335) Remeasurement loss/(gain) 714 (641) Net liability at end of year The effects of a 1% change in the healthcare cost trend rates have an immaterial effect on the aggregate of the service and interest costs, as well as the value of the obligation itself. The estimated contributions payable in the next financial year is likewise immaterial. Crookes Brothers Limited Audited Annual Financial Statements 51

54 Notes to the consolidated financial statements for the year ended 31 March Net post-employment obligation continued 29.1 Post-employment medical aid obligation continued Risks associated with the obligation There are no specific assets set aside to meet the obligation. Therefore, should the company be liquidated or no longer be able afford to subsidise the post-retirement medical scheme contributions, the retirees would not receive the subsidy they are entitled to. The employer is exposed to the risk of higher than expected inflation, which would increase the cash flow requirements to meet the subsidy payments. Effects the obligation may have on amount, timing and uncertainty of future cash flows of the company The obligation is based on a number of assumptions such as mortality, withdrawals before retirement, proportion married at retirement, future rate of increase of the medical scheme subsidy and the discount rate. While every effort is made to ensure that the assumptions are as realistic as possible, to the extent that actual practice differs from these assumptions, it could result in the actual obligation differing slightly from the initial value calculated. Regulatory framework The benefit is provided as part of the employment agreements with the individuals concerned, and is hence governed by the Basic Conditions of Employment Act and the Labour Relations Act of South Africa. Exposure to unusual, entity specific and any significant concentration risks of the obligation Given that the obligation is a fixed monetary amount which is linked to CPI, a large element of the uncertainty of the risk has been eliminated (i.e. as opposed to the subsidy being linked to a medical scheme contribution). As a result, there are no unusual, entity or plan specific or significant concentration risks. The subsidy is also related to a closed group of members which will decrease in the future, as members exit R 000 R Retirement benefit surplus Employer surplus reserve Refer to accounting policies note 3.6 for pension fund contribution details across the various geographical segments that the group operates in, as well as details of the employer surplus reserve. The entire surplus reserve is current. The IAS19 disclosures are as follows: Amounts recognised in profit or loss in respect of the defined benefit plans: Service cost Net interest (797) Components of defined benefit costs recognised in profit or loss (797) The current service cost and the net interest expense for the year are included in the employee benefits expense in profit or loss. Remeasurement of the net defined benefit asset: Return on plan assets (excluding amounts included in net interest expense) (293) Actuarial losses arising Components of defined benefit income recognised in OCI (293) Tax effect of remeasurements 82 Components of defined benefit income recognised in OCI, net of tax (211) The amount included in the consolidated statement of financial position arising from the company s obligations in respect of its defined benefit plans is as follows: Fair value of plan assets (10 212) (10 212) Funded status (10 212) (10 212) Restrictions on assets recognised Net assets arising from defined benefit obligation (10 212) (10 212) 52 Crookes Brothers Limited Audited Annual Financial Statements

55 29. Net post-employment obligation continued 29.2 Retirement benefit surplus continued Movements in the present value of the defined benefit obligation: R 000 R 000 Opening defined benefit obligation Interest cost 781 Actuarial losses arising Benefits paid Settlement (781) Closing defined benefit obligation Movements in the fair value of the plan assets: Opening fair value of plan assets Expected return on plan assets 858 Benefits paid Settlement of obligations (781) Actuarial gain 427 Closing fair value of plan assets Investment of the employer surplus reserve and restrictions imposed The plan assets are invested in the Strategic Investment Services Management Company Limited and S.A. Road Board Stocks and are in compliance with regulation 28. Regulatory framework and risks to the group The retirement fund operates within the regulatory framework of the Pension Funds Act 24, 1956 as amended (Pension Funds Act), of South Africa, with oversight by the Financial Services Board. In terms of IAS 19, there are no risks nor impacts affecting the plan or company as at 1 January 2017, due to the fact that there are no defined benefit liabilities in the plans anymore. Crookes Brothers Limited Audited Annual Financial Statements 53

56 Notes to the consolidated financial statements for the year ended 31 March Employee share incentive scheme See accounting policies note 3.7 for details of the group s employee share scheme, as well as the valuation methods applied in determining the fair value of the options at date of grant. See note 10.2 for the amount of share based payment expenses recognised in profit or loss in the current and prior reporting periods. A final annual share volatility of 32,85% (2017: 39,62%) was calculated, in predicting the possible future value of the company s share price, on exercise date for the options granted Share options granted and unexpired as at 31 March 2018 Options as at 31 March 2017 Options granted during the year Weighted average option price (cents) Options forfeited during the year Options exercised during the year Exercise price (cents) Options as at 31 March 2018 Executive directors GS Clarke GL Veale Prescribed officer AG Duncan Management Total Share options available at 31 March 2018 for further grants Number of shares Shares reserved for the share option scheme (1) Shares issued to the end of the financial year ( ) Options granted and unexpired as shown above ( ) Balance available (2) (1) During the current reporting period, the company s directors approved an additional share options to be reserved for the share option scheme. (2) The share options outstanding at the end of the year had a weighted average remaining contractual life of 831 days (2017: 920 days). 54 Crookes Brothers Limited Audited Annual Financial Statements

57 31. Financial instruments Financial instruments consist primarily of cash deposits with banks, short and medium-term investments, short and medium-term loans, trade and other receivables and other payables, bank borrowings and loans to and from associates and subsidiaries. Financial instruments are carried at cost, amortised cost or fair value Categories of financial instruments R 000 R 000 Financial assets Cash and bank balances Loans and receivables Other financial assets Investments in joint venture and associates Financial liabilities Bank overdraft Non-current borrowings: interest-bearing Current borrowings: interest-bearing Reversionary sale and transfer obligations Prepaid lease income Trade and other payables Outside shareholders loan Crookes Brothers Limited Audited Annual Financial Statements 55

58 Notes to the consolidated financial statements for the year ended 31 March Financial instruments continued 31.1 Interest rate risk management Taking cognisance of the seasonality of the group s cash flows and treasury risk, management positions the group s interest rate exposures according to expected movements in interest rates in the countries in which the group operates. Consolidated interest rate profile Less than one year Variable rate Greater than one year Less than one year Fixed rate Greater than one year Total borrowings 2018 Borrowings (R 000) Total borrowings (%) Borrowings (R 000) Total borrowings (%) Fluctuations in interest rates impact on the return on short-term cash investments and the cost of financing activities giving rise to cash flow interest rate risk. The exposure to interest rate risk is managed through the group s cash management system which enables the group to maximise returns while minimising risks. The group manages its interest rate risk by ensuring that demand deposit facilities are paid up regularly, to avoid treatment of the facilities as term loans by the financial institutions who provided the finance. The group has not entered into any interest rate derivatives during the year. Effective interest rate on borrowings Amounts due to local bankers (%) 9,00 9,50 Amounts due to foreign bankers (%) 10,00 10,00 Revolving credit loan Akwandze (%) 6,25 6,50 Term loans Akwandze (%) 6,00 5,00 Term loan Investec (%) 10,45 5,00 Instalment sale agreements (%) 9,75 10,00 Call loan Two-A-Day (%) 10,00 10,00 Based on year-end exposure to interest-bearing borrowings at variable rates, a 1,00% (100 basis points) change in interest rates will have a R2,7 million (2017: R0,3 million) effect on pre-tax profit or loss and a R1,9 million (2017: R0,2 million) impact on equity for the group. Based on year-end exposure to bank balances and cash investments with yields linked to variable interest rates, a 1,00% (100 basis points) change in interest rates will have an immaterial impact on current and prior year pre-tax profit or loss and equity for the group. 56 Crookes Brothers Limited Audited Annual Financial Statements

59 31. Financial instruments continued 31.2 Liquidity risk management The group manages liquidity risk by monitoring forecast cash flows and ensuring that adequate unutilised borrowing facilities are maintained. The group has access to financing facilities as described in notes 24.1 and 24.2, of which R21 million was undrawn at year end (2017: undrawn: R75 million). Current borrowings have been disclosed in note 24.1 to the financial statements. Trade and other payables have been disclosed in note 27 to the financial statements. All payables are due within a day period. The maturities of contractual liabilities are as follows: One to three months Four to 12 months Greater than 12 months Total One to three months Four to 12 months Greater than 12 months Total Sensitivity analysis R 000 R 000 R 000 R 000 R 000 R 000 R 000 R 000 Trade and other payables Outside shareholders loan Instalment sale agreements (1) Revolving credit and term-loan arrangements (1) Reversionary sale and transfer obligations Bank overdraft and facilities Call loan Two-A-Day (1) Adjusted to exclude the effects of discounting. The discounting effects of the other contractual liabilities were quantified and are immaterial. Subsequent to the end of the current reporting period, the group was advanced a R60 million three-year term-loan from Grindrod Bank Limited ( Grindrod ). The loan is secured by way of a Crookes Brothers Limited guarantee as well as shares. Interest is accrued at prime. The group is not obliged to make any repayments of interest or capital for the first two years. During this period, no part or full repayment of the loan can be called for by Grindrod. The loan including all capitalised interest becomes compulsorily and fully repayable in the third and final year of its term Credit risk management Credit risk consists mainly of short-term cash deposits, cash equivalent investments, trade receivables and loans. The group limits its exposure in relation to cash balances by only dealing with well established financial institutions of high quality credit standings and limits the amount of credit exposure to any one counterparty. The group s trade and other receivables comprise a widespread base, and group companies undertake on-going credit evaluations of the financial condition of the other parties. At 31 March 2018, the directors did not believe there is any significant concentration of credit risk which has not been adequately provided for. Past due, but not impaired trade receivables Included in trade receivables at the reporting date, are debtors which are past the original expected collection date (past due), but not impaired. At the end of the current financial year, management made an assessment of the ageing of past due, but not impaired debtors. The ageing of the majority of these debtors was older than three months, however the cumulative total of these past due, not impaired debtors was immaterial in both the current and prior financial years. An allowance for doubtful debts is assessed annually, on a debtor by debtor basis, considering the credit risk of the debtor and the likely recoverability of the receivable (see note 21). Crookes Brothers Limited Audited Annual Financial Statements 57

60 Notes to the consolidated financial statements for the year ended 31 March Financial instruments continued 31.4 Foreign currency risk management The group undertakes transactions denominated in foreign currencies; consequently, exposures to exchange rate fluctuations arise. Exchange rate exposure is currently not hedged though the use of forward exchange contracts, or any other derivative financial instruments, but rather managed by the board of directors. Besides the Republic of South Africa, the group also operates in Swaziland, Zambia and Mozambique, the local currencies being the Emalangeni (E), Kwacha (ZMW) and Metical (MZN) respectively. The Swazi Emalangeni ranks 1:1 with the South African Rand (ZAR), therefore no foreign currency translation differences arise when translating Swaziland monetary assets and monetary liabilities. The functional currency of the group s Mozambican operations changed to ZAR in the prior year, hence the shareholder loan accounts owing from these companies are also ZAR denominated, therefore not subject to foreign currency fluctuations. The Mozambique operations do however hold bank accounts, trade receivables and payables denominated in MZN, which are subject to foreign currency fluctuations against the ZAR. The carrying amounts of the group s foreign currency denominated monetary assets and monetary liabilities at the end of the reporting period are as follows: Liabilities Assets R 000 R 000 R 000 R 000 Bank accounts (USD) Bank accounts (MZN) Bank accounts (ZMW) Trade and other receivables (MZN) Trade and other receivables (ZMW) Interest-bearing bank loan (USD) Interest-bearing shareholder loan (ZMW) Trade and other payables (MZN) Trade and other payables (ZMW) Outside shareholder loan (USD) Sensitivity analysis The following table details the group s sensitivity to a 10% devaluation and appreciation in the Rand against the relevant foreign currencies. 10% is the sensitivity rate used when reporting foreign currency risk internally to key management personnel and represents management s assessment of the reasonably possible change in foreign exchange rates. The sensitivity analysis includes only outstanding foreign currency denominated monetary items and adjusts their translation at the period end for a 10% change in foreign currency rates. The sensitivity analysis includes external loans as well as loans to foreign operations within the group where the denomination of the loan is in a currency other than the functional currency of the lender or the borrower. A positive number below indicates an increase in profit or equity where the Rand strengthens 10% against the relevant currency. For a 10% weakening of the Rand against the relevant currency, there would be a comparable impact on the profit or equity, and the balances below would be negative. USD impact MZN impact ZMW impact R 000 R 000 R 000 R 000 R 000 R 000 Profit or loss and equity (4) 703 (2 286) (475) (80) (4) From the above table, it is evident that a 10% change in the value of the Rand against the other currencies, will not have a material impact on profit or loss and equity of the group. However, the sensitivity analysis is not a completely accurate representation of the inherent foreign exchange risk in the trading and economic environment of Mozambique during the current and prior financial years. This is because the reporting period end MZN spot rate does not reflect the extreme month on month fluctuations in the average MZN rate during the current and prior financial year. Conversely, the month on month average USD and ZMW exchange rates remained relatively stable against the ZAR throughout the current and prior financial year. 58 Crookes Brothers Limited Audited Annual Financial Statements

61 31. Financial instruments continued 31.5 Commodity price risk management The group is exposed to commodity price risk based on the various commodities it trades in and geographic territories it operates in. The sugar price in South Africa, Swaziland and Zambia are government protected and regulated prices, therefore cannot be hedged by the group. In South Africa, the sale of sugar on the world market, as well as the related hedging activities, is undertaken by the South African Sugar Association (SASA). Sugar cane price risk in Swaziland is not hedged by the group and neither is foreign currency fluctuations relating to sugar cane sales in Zambia. The group s deciduous crop is subject to price and foreign currency risk arising from foreign currency fluctuations, for which the group s marketing partner, Two-A-Day Group enters into currency contracts for its export sales. Commodity price risk arises from fluctuations in the prices for bananas sold in the local market. The group, through its association with Lebombo Growers (Pty) Ltd (see note 19.2), markets the sale of bananas to receive the best possible prices. The price of bananas per carton is largely driven by demand and supply, and cannot be hedged by the group. The group s macadamia development produced its first harvest of nuts during the current reporting period. Commodity price risk arises in the form of demand and supply, based on the changing appetites of consumers around the world due to the health benefits of macadamia nuts. Foreign exchange risk is hedged by the group s co-op partner Mayo Macs SA Capital management The group manages its capital to ensure that it will be able to continue as a going-concern while maximising the return to stakeholders through the optimisation of the debt and equity balance. The group s overall strategy is to maximise the internal rate of return associated with capital projects of an expansion, improvement and replacement nature, and remains unchanged from See note 35 for the proposed capital expenditure of the group. The capital structure of the group consists of net debt (bank overdraft and facilities and interest-bearing borrowings as detailed in note 24 offset by cash and bank balances) and equity (comprising issued share capital, reserves, retained earnings and non-controlling interests as detailed in note 23). The group is exposed to externally imposed capital requirements. See note 24.5 for details of financial institution imposed encumberances and requirements. The group risk committee reviews the capital structure of the company on a semi-annual basis, whilst the board of directors reviews the capital structure on an ongoing basis. As part of this review, the directors considers the cost of capital and the risks associated with each class of capital. The group has a target financial gearing ratio of 25% to 30%. This target financial gearing ratio is determined as interest-bearing debt, expressed as a percentage of shareholders funds. Gearing ratio The gearing ratio at the end of the reporting period was as follows: R 000 R 000 Debt (1) Cash and bank balances (2) (26 874) (56 868) Net debt Equity (3) Net debt to equity ratio (%) 25,49 6,24 (1) Debt comprises bank overdraft, facilities and interest-bearing debt (non-current and current) as disclosed in note 24. For the purposes of the gearing ratio, the interest-free loan relating to the obligation to restore leased farmland (see note 25.1) is excluded from debt, as this liability is offset by an opposite but equal bearer asset (see note 14). (2) Cash and bank balances include all bank balances, call and notice deposits. The group s cash balances in 2018 were lower than 2017, due to greater spend on the property development business and consequently less credit interest income earned on positive bank balances. (3) Equity includes all capital and reserves of the group that are managed as capital (see note 23). The gearing ratio at the end of the current reporting period of 25,49% (see above) was in line with the group s target range. Crookes Brothers Limited Audited Annual Financial Statements 59

62 Notes to the consolidated financial statements for the year ended 31 March Fair value measurements The directors are of the opinion that the book value of financial assets and liabilities does not exceed their approximate fair value. The following table provides an analysis of financial instruments that are measured subsequent to initial recognition at fair value, grouped into levels 1 to 3 based on the degree to which the 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 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 (i.e. unobservable inputs). Level 1 Level 2 Level 3 Total R 000 R 000 R 000 R Investment property Other financial assets Biological assets Inventories agricultural produce Other financial assets Biological assets Inventories agricultural produce The above assets are measured at fair value on a recurring basis There have been no material transfers between level 1 and 2 of any financial assets in the current financial reporting period. The following table gives information about how the fair values of these assets are determined (in particular, the valuation technique(s) and inputs used). Financial assets/ financial liabilities Investment property Other financial assets Biological assets Inventories agricultural produce Fair value as at 2018 Fair value as at 2017 Fair value hierarchy Valuation technique(s) and key input(s) Relevant selling price per square metre Level 2 None. with respect to similar residential units. Quoted bid prices in Level 1 an active market Discounted cash flow. Current estimated market prices for the following season, less Level 3 the estimated costs of harvesting, transport, packing and point-of-sale costs Discounted cash flow. Current estimated market prices for the following season, less Level 3 the estimated costs of harvesting, transport, packing and pointof-sale costs. None. Significant unobservable inputs to fair value Estimated price, yield and inflation is subject to fluctuation and change. Prices are not based on published or quoted market and commodity listings. Estimated price and packout is subject to fluctuation and change. Prices are not based on published or quoted market and commodity listings. None. None. Relationship of unobservable inputs to fair value In arriving at the fair value, the estimated price is applied against the expected area to harvest, together with the estimated yields and average maturity of the crop. In arriving at the fair value at the date of harvesting, the estimated price is applied against the estimated point of sale costs incurred, in bringing the produce to their present location and condition to be sold. 60 Crookes Brothers Limited Audited Annual Financial Statements

63 32. Fair value measurements continued The group s growing crops and agricultural produce are measured at fair value which is determined using estimated unobservable inputs and is categorised as level 3 under the fair value hierarchy. The unobservable inputs are disclosed in the above fair value hierarchy. The fair value of the group s grain approximates the actual direct, agricultural and allocated overhead costs allocated to it, hence fair value adjustments are considered immaterial, and there are no real unobservable inputs applied, in calculating the value of grain. The group s valuation policy and methodology are fully disclosed in the accounting policies in notes 3.13 and note The assumptions and valuation inputs are disclosed in note 16.2 and note 15. Changes in the fair value of biological assets are included in profit or loss, with an increase of R2.6 million (2017: increase of R23 million) being recognised in profit or loss in the current year. A reconciliation of the change in fair value for the year is included in note Sensitivity analysis R 000 R 000 The impact of a 1% change in the price or yield of biological assets will have the following effect on pre-tax profit or loss: Sugar cane Deciduous fruit Bananas Macadamias The impact of a 1% change in the price of agricultural produce will have the following effect on pre-tax profit or loss: Deciduous picked produce inventory The impact of a 1% change in the packout of biological assets from Class 1 to juice will have the following effect on pre-tax profit or loss: Deciduous fruit The impact of a 1% change in the packout of agricultural produce from Class 1 to Class 3 will have the following effect on pre-tax profit or loss: Deciduous fruit The impact of a 1% change in the price of a carton of bananas has a negligible effect on pre-tax profit or loss. Crookes Brothers Limited Audited Annual Financial Statements 61

64 Notes to the consolidated financial statements for the year ended 31 March Related party transactions Balances and transactions between the company and its subsidiaries, which are related parties of the company, have been eliminated on consolidation and are not disclosed in this note. Details of transactions between the group and other related parties are disclosed below Trading transactions During the current reporting period, the group entities entered into the following trading transactions with related parties that are equity accounted associates of the group. All trading transactions were at arm s-length, and there were no trading transactions with any other related parties that are not members of the group. Balances owing from/(to) Sale of goods and services Purchase of goods and services R 000 R 000 R 000 R 000 R 000 R 000 Silverlands Mozambique Holdings Limited Management fees received Loan to associate Lebombo Growers (Pty) Ltd Banana marketing and transport costs paid (32 492) (31 103) Current account (2 463) (1 722) Banana pool accrual Mpambanyoni Sand (Pty) Ltd Loan to associate Mpambanyoni Construction Supplies (Pty) Ltd Income from the sale of sand Purchase of bricks, blocks and lintels (1 660) Management fees received 10 Interest received Loan to associate 760 Details of material investments in associates are set out in note Crookes Brothers Limited Audited Annual Financial Statements

65 33. Related party transactions continued 33.2 Directors emoluments Executive directors and prescribed Salary Bonus Retirement and medical contributions Share options exercised Other benefits Total officer R 000 R 000 R 000 R 000 R 000 R 000 Year to 31 March 2018 GS Clarke GL Veale AG Duncan* Year to 31 March 2017 GS Clarke GL Veale AG Duncan* * Prescribed officer Directors fees Committee fees Non-executive directors R 000 R 000 R 000 R 000 T Abdool-Samad (i) JR Barton JAF Hewat (ii) P Mnganga MT Rutherford RE Stewart G Vaughan-Smith TJ Crookes RGF Chance TK Denton (i) Appointed 6 June (ii) Retired 28 July See note 30 for details of directors and management share options granted and unexpired as at 31 March Details of directors interests in share capital have been disclosed in the directors report. All directors of the company have confirmed that they were not materially interested in any contract of significance with the company or any of its subsidiaries which could have resulted in a conflict of interest during the year Shareholder information Number of shares Percentage of shares in issue Beneficial shareholders with a holding greater than 5% of the shares in issue Silverlands (SA) Plantations S.A.R.L ,8 Oasis Asset Management ,7 Ellingham Estate (Pty) Ltd , ,0 Crookes Brothers Limited Audited Annual Financial Statements 63

66 Notes to the consolidated financial statements for the year ended 31 March R 000 R Operating lease arrangements 34.1 Payments recognised as an expense Minimum lease payments (i) The group leases the Komati farms in Mpumalanga from the Department of Rural Development and Land Reform ( the Department ). A 10 year lease agreement was signed in July 2010, for an annual lease rental of R2 million, escalated at 7,00% annually in July. In July 2015, approximately 1 895,91 hectares out of a total land area of 2 494,76 hectares, was transferred to the neighbouring Mawewe Community, represented by the Mawewe Communal Property Association ( MCPA ). Refer to note (ii) below. The remaining 598,85 hectares relating to the Nicoskamp portion of the Komati farms is still leased from the Department at the original lease rental, escalated at 7,00%, but pro-rated for the area of farms under the Department s ownership. At the end of the current reporting period, one year of the 10 year lease term was left remaining, with the directors in discussions with the Department to transfer this portion of land to the Mawecro estate, by end of the next reporting period. (ii) Effective 1 April 2016, the group through its subsidiary Mawecro Farming, signed a lease agreement with the Mawewe Communal Property Association, who are the owners of approximately 1 895,91 hectares of the Komati estate, since transferred from the Department of Rural Development and Land Reform (see (i) above). The period of the lease is 20 years, and the lease rental is based on a fixed Rand rate per hectare under crop, escalated annually by the consumer price index. (iii) The group, through its subsidiary Mthayiza Farming, leases the Mthayiza Estate (sugar operation) from the Libuyile Community Trust (a joint venture partnership with the Libuyile community), based on a fixed Rand rate per hectare under crop, escalated annually by the consumer price index. The 15 year lease was due to expire in 2023, but renewed for a further 15 years during the current reporting period to September R 000 R The group s commitments in respect of operating leases are as follows: Not later than one year Later than one year and not later than five years Later than five years Proposed capital expenditure Contracted and anticipated: replacement expansion, improvement and development Authorised by the directors but not yet contracted: replacement expansion, improvement and development bearer asset replants The authorised capital expenditure proposed includes the following group capital requirements: R24 million for the continued macadamia expansion and development in Mozambique. R2,5 million relating to the development of the banana operation in southern Mozambique in partnership with the group s majority shareholder Silverlands (SA) Plantations Sarl. R5,5 million relating to improvements to the group s irrigation infrastructure to achieve better yields. R5,3 million relating to replacement of the group s farming vehicles, implements and other farming equipment necessary to achieve consistent yields and comply with safety standards. R16 million relating to planting costs associated with the group s cane fields and deciduous and banana orchards which which require replanting due to age. The above expenditure will be funded from the group s liquid resources, shareholder loans, property finance, short-term borrowing facilities, term loans and instalment sale agreements. 64 Crookes Brothers Limited Audited Annual Financial Statements

67 36. Comparative information During the current reporting period, the following restatements to comparative information were effected to more accurately reflect the economic substances of the underlying transactions and account balances. As previously reported Restated Difference R 000 R 000 R Consolidated statement of profit or loss and other comprehensive income Cost of sales ( ) ( ) (22 998) Change in fair value of biological assets Net effect ( ) ( ) 36.2 Consolidated statement of financial position Deferred tax assets (13 082) Deferred tax liabilities ( ) ( ) Net effect ( ) ( ) 37. Events after the reporting period Subsequent to end of the current reporting period, judgement was handed down in the group s favour regarding the long-running land claim over the group s Renishaw farm. The farm is now available for development and/or sale through the group s property division. Crookes Brothers Limited Audited Annual Financial Statements 65

68