Integrated annual report

Transcription

1 Integrated annual report

2 >> Contents 1 Financial highlights 2 Group at a glance 4 Board of directors 6 Joint report of the Chairman and CEO 8 Corporate structure 9 Humulani Investments Board 10 Operational structure 11 Map of BMG distribution network 12 Map of CEG distribution network 13 Map of BSG distribution network 14 Review of operations 26 Corporate governance report 41 Integrated report 45 Corporate information 46 Share information 48 Value added statement 49 Shareholders diary 51 Approval of the annual financial statements 51 Certification by the Group secretary 52 Report of the independent auditors 53 Report of the directors 56 Audit committee report 58 Statements of comprehensive income 59 Statements of financial position 60 Statements of changes in equity 61 Statements of cash flows 62 Notes to the annual financial statements 108 Notice of annual general meeting of shareholders Form of proxy (Attached) >> Profile Invicta Holdings Limited (Invicta) is an investment holding and management company, controlling and managing assets of R million (2012: R8 381 million). Its operations comprise: >> Bearing Man Group (BMG) Southern Africa s leading distributor of bearings, seals, power transmission components, drives, belting, fasteners, filtration and hydraulics. >> Capital Equipment Group (CEG) Northmec Distributor of a full range of leading agricultural machinery, implements and related spares. CSE Wholesale and retail distributor of light earthmoving machinery, turf-grooming machinery, golf cars, utility vehicles and related spares. New Holland Wholesale distributor of leading brand agricultural machinery, implements and related spares. Doosan SA Doosan SA supplies predominantely heavy earthmoving machinery for construction and mining applications. Criterion Importer and distributor of leading materials handling equipment and related spares. Equipment Spare Parts Africa (ESP) After-market replacement parts, ground engaging tools and undercarriage parts for earthmoving equipment. Kian Ann Engineering (Kian Ann) A large distributor of heavy earthmoving machinery parts and diesel engine components. >> Building Supply Group (BSG) Tiletoria A leading importer and distributor of tiles and related sanitary ware in the Western Cape, Gauteng and KwaZulu-Natal. The Tiletoria Group has expanded its operations to encompass laminated flooring in Gauteng. MacNeil Wholesale supplier of sanitary ware, brass ware, taps, plumbing fixtures, plastic piping and related products to the building material sector of South Africa and neighbouring countries.

3 1 >> Financial highlights for the year ended 31 March R 000 R 000 R 000 R 000 R 000 R 000 R 000 R 000 R 000 R 000 R 000 R 000 Revenue Operating profit before finance costs, interest and dividends received Profit for the year Equity attributable to the equity holders Dividends per share (cents) Earnings per share (cents) Diluted earnings per share (cents) Normalised earnings per share (cents) Share price at the year-end (cents) EPS/DPS (cents) Share price (cents) Earnings per share (cents) Dividends per share (cents) Share price at year-end (cents)

4 2 >> Group at a glance BEARING MAN GROUP (BMG) PROFILE BMG BEARINGS BMG SEALS BMG POWER TRANSMISSION BMG DRIVES BMG BELTING AUTOBAX BMG FASTENERS BMG FILTRATION BMG HYDRAULICS BMG TECHNICAL RESOURCES BMG SUBSIDIARIES

5 3 >> Group at a glance CAPITAL EQUIPMENT GROUP (CEG) BUILDING SUPPLY GROUP (BSG) NORTHMEC CSE DOOSAN SA NEW HOLLAND SA MACNEIL TILETORIA Distributor of leading agricultural machinery, implements and related spare parts. Distributor of construction and earthmoving machinery, turf grooming machinery, golf cars, utility vehicles and related spare parts. Distributor of excavators, wheel loaders, articulated dump trucks and hydraulic hammers. Importers and wholesaler of New Holland agricultural equipment and specialised Braud grape harvesters and related spare parts. Wholesale supplier of sanitary ware, brass ware, taps, plumbing fixtures, plastic piping and related products to the building material sector of South Africa and neighbouring countries. A leading importer and distributor of wall and floor tiles, laminated flooring and sanitary ware in the Western Cape, KwaZulu-Natal and Gauteng. LANDBOUPART Replacement spare parts for agricultural equipment. CRITERION ESP KIAN ANN Importer and distributor of leading materials handling equipment and related spare parts. Large distributor of heavy earthmoving equipment parts and diesel spares. After-market replacement parts, ground engaging tools and undercarriage parts for earthmoving equipment.

6 4 Board of directors Dr CH Wiese, 2. A Goldstone, 3. C Barnard, 4. AK Masuku, 5. JS Mthimunye, 6. DI Samuels, 7. LR Sherrell 8. AM Sinclair, 9. CE Walters, 10. Adv JD Wiese The Group has again delivered very good results despite markets which experienced mixed fortunes. 4 7

7 5 >> Board of directors 1Dr CH Wiese (71) Non-executive chairman BA, LLB, DCom(h.c.) Non-executive chairman of Invicta Holdings Limited from October 1997 to April 2000 and a non-executive director since April 2000, re-appointed non-executive chairman in January Chairman of Tradehold Limited, Shoprite Holdings Limited, and Pepkor Holdings Limited. 2A Goldstone (52) 3C Barnard (49) Chief executive officer Financial director BSc (Mech Eng), BCom (Hons), CA(SA) CA(SA), MBA, ACIS Worked as a management consultant at KPMG prior to joining the Invicta Group in January 1990 as financial manager. Appointed financial director in August Appointed chief executive officer of Invicta Holdings Limited in April AK Masuku (43) Alternate non-executive independent director to JS Mthimunye MCom, MDP (University of New York) Mr Masuku has ten years experience with both local and international banks (SCMB, JP Morgan and Real Africa Durolink) structuring and concluding transactions with some of South Africa s top 200 corporates, parastatals and BEE players. Appointed managing director of aloecap (Pty) Ltd in May Appointed nonexecutive director of Invicta Holdings Limited on 7 June 2007 and appointed alternate director to J Mthimunye on 31 July DI Samuels (73) Independent non-executive director CA(SA) 10 Adv JD Wiese (32) Non-executive director BA(Value and Policy Studies), LLB, MIEM (Bocconi, Italy) Joined Sappi as management accountant in 1993, joined Group Five in their commercial development subsidiary in 1996 and was appointed commercial manager in In 1998 joined the Invicta Group as financial manager, appointed director of CSE Equipment Company (Pty) Ltd in 1999 and company secretary of Invicta Holdings Limited in Appointed executive director of Invicta Holdings Limited on 7 June JS Mthimunye (48) Non-executive independent director CA(SA) Appointed financial accountant Department of Finance in A founding partner of Gobodo Inc and established the corporate advisory service in Appointed financial manager at Nampak Tissue in Appointed managing director of aloecap (Pty) Ltd and appointed executive chairman in May Appointed alternate director to AK Masuku on the Invicta Holdings Limited board on 7 June 2007 and appointed as non-executive director on 31 July Joined Trade and Industry Acceptance Corporation Limited in 1971 and was appointed director from 1980 to From 1989 to 2000 was managing director of Stenham (Pty) Limited. In 1996 was appointed non-executive director of Invicta Holdings Limited. Appointed non-executive director of Bearing Man Limited in 2001 and chairman in LR Sherrell (47) Non-executive director Appointed as alternate director to Mr RE Sherrell on 27 May 2009 and has been nominated as director of Invicta Holdings Limited with effect from 29 July 2010, upon the retirement of Mr RE Sherrell. Mr LR Sherrell studied commerce at UCT and has been involved in the hospitality and motor trade industries with interests in franchise dealerships. Mr LR Sherrell represented South Africa as a rugby player in AM Sinclair (58) Executive director Joined JI Case in 1982 and was appointed branch manager in Joined CSE in 1989 and was appointed a divisional managing director in In 1998 appointed managing director of CSE and in September 2006 appointed as an alternate director of Invicta Holdings Limited. Appointed executive director of Invicta Holdings Limited on 7 June Adv JD Wiese has been appointed as director of Invicta Holdings Limited with effect from 29 July Adv JD Wiese obtained his BA degree after which he worked at Lourensford Wine Estate, helping to initiate events partnerships. Adv JD Wiese subsequently obtained his Master s Degree in International Economics and Management and completed this degree as a participant in the MBA program. After returning to Lourensford for a brief period, Adv JD Wiese graduated as a Bachelor of Law student in In 2009 Adv JD Wiese completed his pupilage at the Cape Bar and was admitted as an Advocate of the High Court on 8 May CE Walters (45) Executive director BSC (Mech Eng), BCom, MDP (Harvard) Joined Anglo American Corporation in 1986 as corporate graduate engineering trainee where he held numerous positions in both the Anglo group and De Beers. Appointed marketing and sales manager Pulp for Mondi SA in 1996 and appointed managing director of Mondi Sales International in Appointed managing director of Bearing Man (Pty) Ltd in September Appointed alternate director to DI Samuels on the Invicta Holdings Limited board on 7 June 2007 and appointed as executive director on 31 July Ages as at year-end

8 6 Joint report of the Chairman and CEO >> Revenue grew by35% >> HEPS grew by 39% to 885 cents per share >> Final dividend 179 cents per share >> The only JSE Company ever to achieve TOP 100 status 18 years in a row MARKET OVERVIEW The Group has again delivered very good results despite markets which experienced mixed fortunes. Group revenue grew by 35% to R7 558 million, of which R1 026 million (18%) was from acquisitions. Operating profit, which included a once-off gain of R158 million, was 47% higher at R884 million. Excluding this once-off gain, operating profit was R726 million, an increase of 21%, which is reflective of the strong trading performance in market conditions which put pressure on gross margins and inflationary pressure on costs. R46 million of operating profit came from acquisitions. Profit (after tax) for the year increased by 55% to R744 million. A once-off gain resulted in headline earnings growing by 43% to R642 million. Normalised earnings per share grew by 14% from 647 cents per share to 737 cents per share. Working capital management was excellent, resulting in cash generated from operations of R732 million, up 50% from R489 million. Dr CH Wiese A Goldstone Non-Executive Chairman Chief Executive Officer Invicta is a robust business with proven management. The Group has a strong balance sheet, which will ensure that it is able to weather economic storms. The Group announced the acquisition of Kian Ann Engineering Limited (Kian Ann) on 15 October Kian Ann is a large distributor of heavy earthmoving equipment parts and diesel engine spares which was listed on the Singapore Stock Exchange, with an annual turnover of more than R1,1 billion. The acquisition was included in the Invicta results from 1 February The purchase price of Kian Ann was SGD192,6 million of which the founding management contributed SGD31,16 million for a 25% stake and the balance was entirely funded with debt.

9 7 >> Joint report of the Chairman and CEO The acquisition of Kian Ann takes the Group to the global stage of distribution of heavy earthmoving equipment parts and diesel engine spares as the company distributes to over 50 countries worldwide. Since June 2012 the markets serviced by Kian Ann have experienced challenging trading conditions, which are expected to continue for the short-term. Kian Ann is only expected to start making a meaningful contribution to Group profits over time as the debt for its acquisition is repaid. The Group to take advantage of domestic growth opportunities and made a number of strategic acquisitions totalling R223 million. The most significant of these was the acquisition by BMG of Man-Dirk, a leading industrial distributor of tools and equipment to the mining and industrial sector. In order to strengthen its balance sheet the Group issued perpetual preference shares for R750 million on 28 November BMG BMG experienced tough trading from the second quarter onwards. Strikes in the mining and freight transport industries had a negative knock-on effect on the manufacturing sector. Notwithstanding, it is most pleasing to report that BMG grew revenue by 25% to R3 425 million, of which 8% came from organic growth and 17% from acquisitions. BMG made two significant acquisitions in the period. OMSA, a leading player in lubrication and filtration systems with a strong field service presence was acquired with effect from 1 April Man-Dirk, a leading industrial distributor of tools and equipment to the mining and industrial sector was acquired with effect from 1 August Both these acquisitions strengthen BMG's product breadth and service depth. BMG continues to reposition its offering from one of product supply to one of technical value-added solutions and services for customers. It continues to be a leading player in the industries in which it operates and a significant core profit generator of the Group. CEG CEG has had another excellent trading year resulting in a strong performance for the year under review. Revenue grew by 37% to R3 503 million and operating profit grew by 38% to R339 million. Acquisitions contributed for 7% of both revenue and operating profit growth. Key ratios in CEG were all healthy and cash generation was good. CEG continues to outperform its benchmarks and to be a major contributor to the Invicta stable. BSG On 1 October 2012 the Invicta Group acquired an effective 53,4% of the issued shares of MacNeil (Pty) Ltd. MacNeil is a leading wholesale supplier of sanitary ware, brassware, taps, plumbing fixtures, plastic piping and related products to the building materials sector of South Africa and neighbouring countries. It operates through seven branches in South Africa. The combined annual revenue of Invicta building materials segment after this acquisition is expected to exceed R1 billion per annum. Invicta plans to grow further in this sector. PROSPECTS Invicta is a robust business with proven management. Invicta has a strong balance sheet, which will ensure that it is able to weather economic storms and to fund significant growth opportunities as they arise. Invicta has embarked on a path of growing its Rand hedge business with the acquisition of Kian Ann and by developing its business in Africa. Given the aforegoing, management s focus will be on containing costs, growing the Group s after-sales and spares business in South Africa, growing in the building materials industry, growing into Africa and developing Kian Ann s global business. Trading conditions are expected to be challenging in the coming year, but the Board remains confident of the success of the Group. Dr CH Wiese A Goldstone Chairman Chief Executive Officer 11 June 2013

10 8 >> Corporate structure 100% Bearing Man 1955 Ltd 33% 67% Invicta Offshore Holdings 75% Invicta Asian Holdings (Pte) Ltd 100% Humulani Empowerment Trust 100% 75% Humulani Investments (Pty) Ltd 5% 20% Theramanzi Investments (Pty) Ltd Humulani Employee Investment Trust Divisions 100% Operational 100% 60% Marketing (Pty) Ltd Goldquest Humulani Building International Marketing Supply Group Hydraulics SA (Pty) Ltd (Pty) Ltd (Pty) Ltd Man-Dirk (Pty) Ltd Disa Equipment (Pty) Ltd (Doosan SA) 60% Tiletoria Cape (Pty) Ltd Criterion Equipment (Pty) Ltd 89% MacNeil (Pty) Ltd Equipment Spart Parts (Africa) (Pty) Ltd Invicta Properties (Pty) Ltd

11 9 Humulani Investments Board << A Goldstone C Barnard >> << AK Masuku JS Mthimunye >> << DEL Zondo Trading conditions are expected to be challenging in the coming year, but the Board remains confident of the success of the Group.

12 10 >> Operational structure Bearing Man Group Capital Equipment Group Building Supply Group Charles Walters BMG Anthony Sinclair CEG Neil Malherbe BSG BMG DIVISIONAL DIRECTORS Abe Bekker Chief Operating Officer Wayne Taylor Chief Financial Officer Paul McKinlay Director: Bearings, Seals and Power Transmission Gavin Pelser Director: Hydraulics, OMSA, Wegezi and OST Dave Russell Director: Drives, Belting and Technical Resources Ian King Group Sales and Marketing Director CEG DIVISIONAL DIRECTORS Geoff Balshaw Financial Director Ben Grobler National Parts Director and Managing Director: Landbou Parts Johan van der Merwe Managing Director: Northmec Peter Askew Managing Director: New Holland SA Rod Watson Managing Director: Doosan SA Alex Ackron Managing Director: CSE Brenton Kemp Managing Director: Criterion Equipment Andrew Grobler Managing Director: ESP Steve Kite National Service Manager TILETORIA Patrick Thonissen Managing Director Allan Duckworth Financial Director Mohammud Mohuideen Operations Director MACNEIL Mark Russell Managing Director Kevin Diab Financial Director Shane Waters National Sales Director KIAN ANN Law Peng Kwee Managing Director Kevin Law Cher Chuan Group General Manager Loy Soo Chew Company General Manager

13 11 >> Map of BMG distribution network GAUTENG BMG branches BMG Engineering Hubs BMG Hydraulics OMSA Man-Dirk

14 12 >> Map of CEG distribution network GAUTENG CSE branches Northmec branches Northmec dealers New Holland SA branches New Holland SA dealers Doosan SA branches Doosan SA dealers Cartcom branches Criterion branches Criterion agents ESP branches

15 13 >> Map of BSG distribution network MacNeil wholesale distribution centres MacNeil manufacturing operation Tiletoria branches Tiletoria dealers

16 14 Review of operations >> BMG Bearing Man Group >> CE Walters Chief executive officer W Taylor >> Chief financial officer Bearing Man Group weathers a tough economic climate.

17 15 >> Review of operations BMG experienced a tougher year than normal. The year started off reasonably well, but from August 2012 conditions deteriorated when the mining and freight transport sectors were hurt by strikes, which had a negative knock-on effect on the manufacturing sector. Demand in the steel sector also declined. There was, however, modest growth in other sectors. The agricultural sector and African operations remain strong growth areas for BMG. BMG focuses on offering solutions for a large variety of engineering applications. Significant service capability was added to the BMG offering in the year to add value to the wide range of products supplied by the division. BMG continues to invest in skills development, both with customers and with staff. In this way, BMG delivers on its promise to customers to offer quality components, technical expertise and superior service. FINANCIAL REVIEW Market demand for BMG s products and services was impacted by strikes in the mining sector during the second half of calendar year Despite this, there was a modest improvement in volumes sold. Supplier price increases, together with Rand depreciation, resulted in significant increases in the landed cost of BMG products. Not all of these increases were able to be passed on to customers, leading to pressure on gross margins. Two significant acquisitions were made during the year, adding to turnover growth. Including acquisitions, turnover increased by 25% to R3,4 billion (2012: R2,7 billion). Organic growth in turnover was 8%. Expenses (including acquisitions) grew by 23% during the period, with organic growth in expenses being restricted to 7%. Including acquisitions, operating profit of R390 million (2012: R371 million) was achieved, a growth of 5% on the previous period. The operating margin reduced to 11,4% (2012: 13,5%). Inventory in existing businesses was closely managed and remained unchanged from the prior year despite supplier price increases and Rand depreciation. Including acquisitions, inventory increased 11%. Debtors increased at a slightly faster pace than sales reflecting the tough economic conditions. Despite this, the debtors book remains well managed. Net operational assets increased to R1,3 billion (2012: R1,2 billion) and operating return on capital employed dropped slightly to 30% (2012: 31%). STRATEGIC DEVELOPMENTS The acquisition of 100% of Operational Marketing (Pty) Ltd and OMSA Valves and Instrumentation (Pty) Ltd (OMSA) came into effect from 1 April OMSA adds a leading position in lubrication equipment, systems and field service to BMG. In addition it brings significant potential for BMG to expand in filtration, valves and instrumentation. BMG also acquired 100% of the Man-Dirk Group, a leading distributor of tools and equipment to the mining and industrial sectors. This transaction took effect on 1 August 2012 and presents significant cross-selling opportunities and synergies for BMG and Man-Dirk. Man-Dirk adds a further fifteen branches in South Africa, and three in

18 16 >> Review of operations Mozambique to the extensive BMG branch network. Plans are in place to grow Man-Dirk through product extensions and the sale of tools through the BMG distribution network. BMG s accreditation as a Level 3 Value Add Supplier displayed its commitment to government s Broad Based Black Economic Empowerment (BBBEE) codes. As part of its transformation strategy, all BMG subsidiaries will be audited to achieve organisationwide BBBEE compliance. BMG will continue its growth strategy into Africa as part of the overall plan to expand its distribution footprint. Excellent progress has been made in establishing representation in a number of strategic countries and the results will increase BMG s established presence as a value add supplier in Africa. Five new branches were added to BMG s sales network in the year, two branches locally in Ceres and Lichtenburg, a further two in Mozambique in Beira and Tete, and a dedicated projects branch to co-ordinate cross-division collaboration and integration of the Group s offering to project houses in South Africa and Africa. CONSUMABLE PRODUCTS DIVISION BEARINGS, SEALS, POWER TRANSMISSION PRODUCTS & FASTENERS BMG s Bearings division had an acceptable year with all product lines performing well. Usage from local steel producers declined as a result of poor global demand for their products and the unplanned closing of production facilities. The Bearings division remains the largest contributor to both sales and operating profit in BMG. Rand weakness created margin pressure, mitigated by modest price increases to customers. BMG s Power Transmission division, made up of Drive belts, Ironware and Chain delivered consistent results even though margins were under pressure. Ironware and Drive belts showed fair sales growth. The Chain business managed to grow volume sales, but found trading conditions tough in some sectors. Growth in the more specialised product lines of Kabelschlepp, Hutchinson and Gates was pleasing. The team will continue building on the successes in the agricultural sector. Sales growth in the BMG Seals division was modest. Contributing factors to the sales growth were the addition of rotary couplings and Loctite, which boosted annual adhesive sales. Specialised product development in the power generation sector will bear fruit in the coming year. BMG s Fasteners division had an exceptional year with good growth in revenue over the prior period. Margins were under pressure as a result of a change in product mix and the effects of provisional dumping duties which affected sales and volumes of these products. The weaker Rand also had a negative impact on margins. The new Tools and Equipment division is off to a good start with the opening of two branches in Pinetown and Kimberley. Inventory levels in the Consumable Products Division were well managed during the year under review. Supplier price increases were kept to a minimum during the year, and increases are expected to follow in the new year. ENGINEERED PRODUCTS DIVISION DRIVES, BELTING, ELECTRONICS AND TECHNICAL RESOURCES The Engineered Products businesses weathered the depressed trading conditions satisfactorily. After a promising first half of the year, the second half was negatively impacted by labour issues and extended plant stoppages at customers in key markets. Modest sales growth was achieved in a very competitive market. Management continues to apply tight cost and stock controls, which resulted in a good year-on-year performance from this operation. International merger activity in the geared motor sector resulted in ongoing market uncertainty. The division satisfactorily maintained its market position and improved its profitability through good cost management. BMG s Electric Motor division achieved revenue growth and a modest volume increase. Plans have been implemented to improve profitability in the new financial year. A new Synergy motor as well as improvements to BMG s existing motors have been launched which are aimed at strengthening the market position of this division. BMG s Belting division produced growth in revenue, margin and profitability. This pleasing result is attributable to steadfast focus on targeted market prospects and effective sales and cost strategies. Although no new product lines were introduced, opportunities which were identified in the prior year

19 17 >> Review of operations produced results in the current period. The Belting Division has been streamlined into light and heavy materials handling for the new financial year to further refine market segment focus. Continued growth in all performance metrics in the Electronics division was achieved. The expansion into new areas is a target for the coming year. The strategy to provide supporting on-site services has resulted in notable success in the differentiation of BMG as a process solutions provider to the customer base. Major maintenance projects, involving a broad range of group products were carried out in the mining, manufacturing and food sectors both locally and in African countries. The outlook for the Engineered Products businesses remains positive with management balancing business expansion opportunities with conservative cost management. FLUID POWER DIVISION HYDRAULICS, PNEUMATICS, FILTRATION BMG s Hydraulics division to build on the successes of the prior year. This was due not only to growth in sales of hydraulics products through BMG s distribution network, but also to continuous focus on streamlining workshop processes and working capital management. During the period, a strategic decision was taken to acquire 100% of the shares in Electro and Hydraulics Projects, a dedicated distributor of BMG Hydraulics based in Klerksdorp. The remaining minority shareholdings in Edmik Engineering (Pty) Ltd, Hi-Quip Hydraulics (Pty) Ltd and Turnkey Hydraulics (KZN) (Pty) Ltd were taken up, and these companies have been converted to wholly-owned branches within BMG Hydraulics. Hydraulics is seen as a key growth area for BMG. BMG will look to build on this year s strong performance. SUBSIDIARIES Wegezi Power Holdings (Wegezi) experienced a positive trading period with increased demand for their range of products, resulting in a good set of results. The Pump and Remanufacturing divisions delivered consistent results. Strong supplier and customer relationships and continuous staff development of technical personnel remain key focus areas for Wegezi. Oscillating Systems Technology (OST) had a difficult trading period as a consequence of weak project activity, resulting in falling volume sales. Original equipment manufacturers (OEM s) remain a key customer target market for OST and additional focus will be placed on the African export market, aftermarket sales and repairs of used equipment. OUTLOOK The coming year looks set to be another challenging one. BMG s management team remain focussed on two core objectives: Growth and Efficiency. With downsizing and threats of strike action in its customer base, increasing electricity and labour input costs, BMG is concerned that many of its customers have become uncompetitive. BMG will continue to work with its customers to support them and find ways to assist them in reaching their targets for production efficiency and plant reliability and availability. BMG will continue to provide Quality Components, Technical Expertise and Superior Service to its customers and strive to be Part of Their Process.

20 18 >> Review of operations >> CEG Capital Equipment Group >> A Sinclair Chief executive officer G Balshaw >> Chief financial officer The Capital Equipment Group has had another good trading year resulting in a solid performance for the year under review.

21 19 >> Review of operations The Capital Equipment Group comprises: Northmec: CaseIH Agricultural Equipment and other related implement brands New Holland SA: New Holland Agricultural Equipment and other related implement brands CSE: Case Construction Equipment, Club Car golf cars and Jacobsen/Ransomes Turf Equipment Doosan SA: Doosan Construction Equipment and Hammers Criterion Equipment: TCM Forklifts Cartcom: Golf car rental Landboupart: Replacement spare parts for agricultural equipment ESP: High quality aftermarket replacement parts for earthmoving equipment and repair of undercarriages for earthmoving machinery. Kian Ann: One of the world's largest independent distributors of heavy machinery parts, diesel engine components and the like for heavy earthmoving machinery and trucks. The products are used for excavators, bulldozers, wheel loaders, motor graders, trucks, trailers, power generation sets and marine engines. FINANCIAL RESULTS All the divisions generally enjoyed better market conditions than in the prior year. Gross margins were under pressure, but good management of expenses resulted in significant growth in operating profit and a very pleasing operating profit margin of 10%. CEG s revenue increased by 37% to R3,503 billion, with 7% of the growth coming from acquisitions. Currencies were volatile, resulting in a 21% depreciation of the ZAR against the US$ from the beginning of the trading year to the end, which required diligent pricing management to remain competitively priced. Operating profit increased by a healthy 38% to R339 million. The operating return on capital was good, as was cash generation. At year-end, levels of inventory and inventory values were healthy. CEG s good performance has resulted in the CEG being a significant contributor to Invicta s profit and cash flow during the year. QUALITY MANAGEMENT AND SOCIAL RESPONSIBILITY (CSR) CEG has maintained its standard of quality service, after sales support and internal controls, by complying with ISO9001 certification which is audited annually to ensure continuous compliance. The division is currently working toward ISO14001 environmental certification. In order to ensure stability and succession as well as up-skilling staff in the divisions, a focussed long term training program has been put in place which has resulted in over 350 staff members being trained this year alone. CEG is the second biggest apprentice trainer in the agricultural sector and has a university bursary scheme for tertiary education. CEG contributes, through the Community Outreach Program Trust (COP Trust), to a feeding scheme which reaches more than 200 children under the age of 8 years old every day. It has also invested in building class rooms, training Grade R teachers and providing bursaries for deserving children at high school and University. The focus is on education from the grass roots through to tertiary levels.

22 20 >> Review of operations OPERATIONAL REVIEW There has been a gradual recovery of volumes in the capital equipment markets, especially in the construction machinery sector. However the latter part of the trading year saw a decline in the demand for agricultural equipment. Market expectation is for volumes in this sector for calendar 2013 to be 5% to 10% below calendar Material re-handling markets were consistent but the turf equipment was significantly down compared to the prior year. All divisions performed well. Case construction equipment which trades predominately in the plant hire market, recovered well and is beginning to make the expected contribution to the group. Doosan has had another exceptional year. Criterion Equipment has performed well following its restructuring after being acquired by the Group, three years ago. All the agricultural machinery operations performed exceptionally as did ESP. AGRICULTURAL MACHINERY DIVISION Demand for tractors declined during the course of the year, with the total national tractor market volumes in South Africa decreasing by 3% (excluding exports) from units to units in the year under review. Combine harvester market volumes increased by 58% from 267 units to 423 units and the baler market has remained constant with a small growth. Demand for implements was good. Soft commodity prices, especially yellow maize, was R2 235 per ton at the beginning of the trading year reaching a high of R2 780 per ton and settling at R2 325 per ton at year-end. The decrease in the maize prices resulted in reduced farmer confidence during that period and the increase in the fuel and fertilizer prices as well as the possibility of a drought has created some further concern for the second half of calendar The agricultural companies in the group have intensified efforts to improve the support to the farmers on precision farming (or satellite farming), which is fast becoming a must for farming management to optimize returns on inputs while preserving resources. It relies on new technologies such as satellite imagery and geospatial tools. Precision farming has also aided farmers ability to locate their precise position in a field using satellite positioning systems like the GPS or other GNSS. Northmec CaseIH Agricultural Equipment and other related implement brands Northmec, predominantly a retail distributor of agricultural equipment and implements, performed above expectations with substantial growth in revenue and profits. The division enjoyed good market shares in all sectors in which it trades and retained its market share leadership in Combine Harvesters. At year-end, inventory was at an acceptable level and was well priced.

23 21 >> Review of operations Northmec is steadily increasing its market share in the small tractor sector, which accounts for 68% of the total tractors sold in South Africa. Northmec is particularly strong in the big tractor market with its flagship Case-IH brand, which is well supported by farmers due to the brand s reliability, quality and continuous upgrading of technology. An additional two branches were opened during the year, increasing the number of branches to fifteen, maintaining the after sales support for the increased volume of sales in certain areas. During the second half of the year Northmec established a separate division (G North) through which all implements will be sold to ensure greater focus on this range of products. New Holland SA New Holland Agricultural Equipment and other related brands New Holland is predominantly a wholesale distributor of agricultural equipment and has, during the year, concentrated on strengthening its distribution network and business related support structures to boost market penetration. New Holland also enjoyed significant growth in revenue and profits. Its market share in tractors declined slightly due to delays in incoming inventory, but it is expected that this will be made up in the new year. New Holland has recently acquired a number of implement franchises which has helped to offer a broader range of product to customers. An additional two spare parts outlets were opened during the year. Landboupart Landboupart is a wholesaler of spare parts which sources and sells replacement spare parts for agricultural equipment. Landboupart is a relatively small component of CEG, but grew substantially during the year under review. Management plans to grow the business materially. The Group has purchased a share in an offshore parts buying house which will help with future competitive sourcing. CONSTRUCTION AND TURF DIVISION The construction machinery industry has shown surprising growth off the low base which has prevailed since the 2010 financial year and early indications are that that this level of activity in the industry will continue. The turf grooming equipment markets are flat with very little demand for new equipment but golf courses in SA have to continue to maintain their existing fleets which has resulted an increase in spare parts demand.

24 22 >> Review of operations CSE Case Construction Equipment, Club Car and Jacobsen/Ransomes Turf Equipment The CSE construction equipment division showed a marked improvement on the last year, while the turf grooming equipment markets fared worse than last year. Total market volumes of construction machinery in which CSE operates in South Africa, increased by 11% with signs of recovery going forward. The CSE construction equipment division trades predominantly in the plant hire and construction sectors of the market, but it has now moved into other sectors. Revenue and profits were well up on last year. Despite the slowdown in golf course development, there is still a need for the replacement of golf car fleets and turf equipment. The golf course market is a replacement market with very few, if any, new golf course developments in progress or fleet upgrades. Doosan SA MATERIALS HANDLING Criterion TCM forklifts Criterion is the distributor of TCM forklift trucks imported from Japan. This is the third full trading year since acquisition and after many challenges to restore the company and brand confidence in the market in South Africa, the TCM brand is rapidly regaining its position as one of the leading forklift brands in the South African market. Revenue and profits increased satisfactorily, despite the strong Yen making it very difficult to compete against non-yen sourced product. Further restructuring was necessary during the year but the business is now in a very healthy state and is well positioned to improve performance. Income from the rental fleet has increased. All outlets around the country are profitable and the company has achieved the required return set by the Group. An internal rental finance facility has been put in place to finance sales of equipment. During the year, the strength of the Yen was a major concern as it affected the competitiveness of the product. However, with the weakening of the Yen towards year-end, product has become more competitive which has improved prospects for the coming year. Doosan excavators and loaders, Everdigm hammers Doosan SA performed well above expectations during the year under review and market trends going forward look positive. The company was acquired five years ago and has performed exceptionally well since then considering the prevailing market conditions. Good inventory turns and working capital management have generated healthy cash flow and have provided an excellent return on working capital throughout the year. Doosan s target market has traditionally been the mining and construction sectors. The focus is still on these markets but over the last two years there has been a shift toward other sectors. Doosan has increased its market share in both excavator and loader sales in the market in SA.

25 23 >> Review of operations PROSPECTS The performance this year has been as a direct result of a good sales performance, focused attention on all elements of the businesses and being able to adapt to the ever-evolving market conditions with a clear strategic vision. The markets in which the CEG trades have a tendency to be unpredictable but there are certain trends which indicate there is likely to be a slow down on the agricultural machinery side as a consequence of soft commodity prices and increased input costs. Contrasting this is the expectation of improved conditions in the earthmoving machinery markets. ESP This is the first full year of ESP being included in CEG s results, as it was acquired in February Despite the lack of growth in the mining and construction sectors, ESP managed to achieve excellent results. Management s efforts in controlling costs and working capital maintained a consistent cash flow. A new branch in Port Elizabeth has been added to the existing distribution network and is trading well. Management is cautious going into the new financial year because of the pressure on margins and the weakness and volatility of the Rand, but is confident of meeting the challenges. The CEG will continue to remain focussed on the core fundamentals of its business, namely profitable growth and cash generation. CEG will also continue seeking out acquisition opportunities. Management would like to thank all staff whose hard work and sacrifice contributed to these excellent results. Kian Ann (Singapore) Kian Ann was acquired in February this year and is Invicta s biggest single investment to date. It trades actively in over 30 countries globally, with a very strong base in South East Asia. It has offices in Singapore, Indonesia, China and Malaysia. This region has been affected by the slow down in the world s demand for hard commodities which has had a major impact on all companies trading in this region. This is likely to continue for the short term. The Group anticipates a significant contribution to the results over a period of time once the markets start to recover with great opportunities of growth in other emerging markets such as Southern Africa, Brazil and Australia.

26 24 >> Review of operations >> BSG Building Supply Group >> N Malherbe Chief executive officer K Diab >> Chief financial officer The consolidated group revenue of the Building Supply Group is expected to exceed R1 billion per annum.

27 25 >> Review of operations GROUP STRUCTURE Building Supply Group MacNeil Tiletoria Distribution Manufacturing Wholesale Retail Contracts MacNeil Established in 1996, MacNeil has developed into a reputable wholesaler, distributor and manufacturer of building supplies. It has an extensive base of well-established local and international suppliers for its broad range of taps, bathroom accessories, brassware, copper tubing, piping, baths, timber boards, doors and frames, and laminated flooring. MacNeil operates out of 6 distribution centres nationally and supplies a broad client base which includes corporate, independent and franchised retailers in South Africa and neighbouring countries. MacNeil manufactures a wide variety of plastic pipes and fittings for the housing, industrial, commercial, civil, electrical and irrigation sectors. The manufacturing operation has shown considerable growth over the past three years and a new manufacturing facility was commissioned during the year in the Western Cape. Products include pressure and sewer pipe, waste pipe and fittings, HDPE, LDPE pipes and fittings and Polypropylene pipes and fittings. Invicta acquired an effective 53,4% interest in MacNeil on 1 October Management owns the remaining interest. In the 5 months that MacNeil has been in the Invicta Group, its performance has been within expectations. The acquisition is in the process of being bedded down and should reach full potential in the medium-term. MacNeil s revenue exceeds R600m per annum. Tiletoria Tiletoria is a specialist tile, flooring and sanitary ware company. Established in 1995, it operates from 3 major outlets in Johannesburg, Cape Town and Durban. Tiletoria s route to market is evenly divided between wholesale, retail and contracts/specifications. It has been part of the Invicta group for the past 5 years. The 2013 year was a vast improvement on Revenue was up well above inflation, as was operating profit. Strong revenue growth came from the new branches in Durban and Johannesburg and the outlook remains very positive. The hard work of the past 3 years is paying off and Tiletoria looks set to build on it growing base. BUILDING SUPPLY GROUP OUTLOOK The consolidated group revenue of the Building Supply Group is expected to exceed R1 billion per annum. The group will focus on domestic and African markets. The next year will be one of consolidation of the base and the Group intends adding bolt-on acquisitions.

28 26 Corporate governance report INTRODUCTION The Group s policy is to conduct its business with honesty and integrity and with the highest standard of personal and corporate ethics. This includes the promotion, enhancement, development and protection of the business interests, reputation and goodwill of the Group. The Board remains responsible for corporate citizenship and accountability for the stewardship of Group assets, which have ensured sustainable returns. The Board continues to provide stakeholders with the assurance that the Group s business is managed responsibly. Invicta endorses the Code of Corporate Practices and Conduct, as well as the King Code of Governance for South Africa 2009 (King III) and its Code of Governance Principles, which were published in September 2009 (effective from 1 March 2010) and replacing King II. The South African Companies Act (Act 71 of 2008) (Companies Act) also contains governance requirements. King III has been adopted on an apply or explain approach. The Audit Committee continuously reviews and amends its corporate governance practices with a view to complying with the requirements of the Companies Act and the King III recommendations. Invicta will continue to adopt, as appropriate, existing and new principles, which advance good practical corporate governance and add value to the Group s business activities. KING III GAP ANALYSIS As required by the JSE Listings Requirements, the following table discloses the status of the Group s compliance with King III and reasons for non-compliance, if applicable. King III index Comply Ethical leadership and corporate citizenship Effective leadership based on an effective ethical foundation Responsible corporate citizen Effective management of ethics Assurance statement on ethics in the integrated report Yes Yes Yes Yes Board and directors The Board is the focal point for and custodian of corporate governance Strategy, risk, performance and sustainability are inseparable Directors act in the best interest of the company Yes Yes Yes The chairman of the board is an independent non-executive director (1) A framework for the delegation of authority has been established Yes The board comprises a balance of power, with a majority of non-executive directors who are independent (2) Directors are appointed through a formal process Formal induction and ongoing training of directors is conducted The board is assisted by a competent, suitably qualified and experienced company secretary Annual performance evaluations of the board, its committees and individual members Yes Yes Yes Yes

29 27 >> Corporate governance report King III index Comply Board and directors Appointment of well-structured committees An agreed governance framework between the group and its subsidiary boards is in place Yes Yes Directors and executives are fairly and responsibly remunerated Yes (3) Remuneration of directors and three most highly paid employees is disclosed (4) The company s remuneration policy is approved by the shareholders Yes Audit committee Effective and independent Suitably skilled and experienced independent non-executive directors Chaired by an independent non-executive director Oversees integrated reporting A combined assurance model is applied to improve efficiency in assurance activities Satisfies itself of the expertise, resources and experience of the company s finance function Oversees internal audit Integral to the risk management process Oversees the external audit process Reports to the board and shareholders on how it has discharged its duties Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Governance of risk The board is responsible for the governance of risk The board determines the levels of risk tolerance The Audit and Risk Committee assists the board in carrying out its risk responsibilities The board has delegated the process of risk management to management The board ensures that risk assessments are performed on a continual basis Frameworks and methodologies are implemented to increase the probability of anticipating unpredictable risks The board ensures that management implements appropriate risk responses The board receives assurance regarding the effectiveness of the risk management process Sufficient risk disclosure to stakeholders Yes Yes Yes Yes Yes Yes Yes Yes Yes Governance of information technology The board is responsible for the governance of Information Technology (IT) IT is aligned with the performance and sustainability objectives of the company Management is responsible for the implementation of an IT governance framework The board monitors and evaluates significant IT investments and expenditure IT is an integral part of the company s risk management IT assets are managed effectively The Audit and Risk Committee assists the board in carrying out its IT responsibilities Yes Yes Yes Yes Yes Yes Yes

30 28 >> Corporate governance report King III index Comply Compliance with laws, rules, codes and standards The board ensures that the company complies with applicable laws and considers adherence to non-binding rules, codes and standards The board and each individual director and senior manager has a working understanding of the effect of laws, rules, codes and standards applicable to the company and its business Compliance risk forms an integral part of the company s risk management process The implementation of an effective compliance framework and process has been delegated to management Yes Yes Yes Yes Internal audit The board ensures that there is an effective risk-based internal audit Internal audit follows a risk-based approach to its plan Internal audit provides a written assessment of the effectiveness of the company s system of internal controls and risk management The audit committee is responsible for overseeing internal audit Internal audit should be strategically positioned to achieve its directives Yes Yes Yes Yes Yes Governing stakeholder relationships The board appreciates that stakeholders perceptions affect the company s reputation Management proactively deals with stakeholder relationships There is an appropriate balance between its various stakeholder groupings Equitable treatment of shareholders Transparent and effective communication with stakeholders Disputes are resolved effectively, efficiently and as expeditiously as possible Yes Yes Yes Yes Yes Yes Integrated reporting and disclosure The board ensures the integrity of the company s integrated report Sustainability reporting and disclosure should be integrated with the company s financial reporting Yes Yes Sustainability reporting and disclosure should be independently assured (5)

31 29 >> Corporate governance report The Board is of the opinion that the Group has, in all material respects and where relevant, complied with King III during the year under review, and wishes to highlight the following: (1) The King III Report states that the chairman of the Board should be an independent nonexecutive director. Dr CH Wiese, who is a nonexecutive director, is the Chairman of the Board, but he is not independent. It is the view of the Board that the non-independence of the Chairman is a positive factor in ensuring the decisions taken by the Board are guided by a Chairman whose perspective is aligned with long-term interests of shareholders. Mr DI Samuels maintains his role as the Group s Lead Independent Director. In addition, to ensure good governance, and as recommended by King III, the chairmanship of two of the three Board Committees is held by Mr DI Samuels. (2) The Board does not have a majority of independent non-executives directors as required by King III. The majority of the non-executive directors are also shareholders, which, from a Group point of view, is beneficial to all stakeholders, as it aligns its interest with that of other shareholders and stakeholders. (3) The Board believes that the directors individually add significant value to the Group outside of the formal Board and Committee meetings, and interact with management as they think appropriate. The directors have a record of high attendance at Board and Committee meetings. (4) The King III Report requires that the salaries of the three most highly paid employees, who are not executive directors, should be disclosed. Due to their specialised skills, the highly competitive South African engineering and capital equipment environment and the employees value to the Company, the Board does not wish to disclose this information for each of the individuals but has instead disclosed the total salaries of the employees concerned on page 105. The Chairman of the Remuneration Committee is also Chairman of the Board. (5) The King III Report requires that the Company s sustainability report be audited by an independent external professional. The entire integrated report is reviewed by the Audit and Risk Committee and recommended to the Board. The Board has not found it necessary to obtain independent assurance for sustainability reporting as it is comfortable with the accuracy of the sustainability reporting. Environmental issues are not material in the Group or its operations, so no empirical data is considered necessary to be provided at this stage. BOARD OF DIRECTORS Composition The names and brief résumés of the directors appear on pages 4 and 5 of this 2013 Integrated Annual Report. The Board currently comprises four executive directors, three non-executive directors, two independent non-executive directors and one alternate independent non-executive director. The intention is to appoint a further independent non-executive director during the 2014 financial year. Board effectiveness reviews were conducted during the year and further reviews will be conducted at appropriate intervals going forward. The Board is satisfied that no one individual director or block of directors has undue power of decision-making and there is a clear division of responsibilities at board level to ensure an appropriate balance of power and authority. Annually, the Board considers each director s independence. The Committee feels that the following aspects are important in assessing a non-executive director s independence: the director had been employed in an executive capacity in the Group in the previous three years; the directors had served on the Board for longer than nine years. In this case, the Committee considers whether that director s independence, judgement and contribution to the Board s deliberation could be compromised, or may appear to be compromised, by this length of service; the director is a representative of a major shareholder; and the proportion of that director s shareholding in the Company or director s fees represented a material part of their wealth or income. The Company Secretary, Mr C Barnard, who is also the Financial Director, assists the Board in fulfilling its functions and is empowered by the Board to perform his duties. The Company Secretary, directly or indirectly: assists the Chairman and CEO with induction of new directors; assists the Board with director orientation, development and education; ensures that the Group complies with all legislation applicable/relevant to the Group; monitors the legal and regulatory environment and communicates new legislation and any changes to existing legislation relevant to the Board and divisions; and provides the Board with a central source of guidance and assistance.

32 30 >> Corporate governance report Chairman and CEO The roles of Chairman and Group CEO are separate. The Managing Directors and CEOs of the operating subsidiaries and divisions report to the Group CEO of Invicta, who in turn reports to the Board. Professional advice and access to information All directors have access to the Company Secretary and management and are entitled to obtain independent professional advice at the Company s expense, if required. The Board has unrestricted access to the Group s information, records, documents and resources to enable them to properly discharge their responsibilities. The Company and all its subsidiaries are compliant with the provisions of the Promotion of Access to Information Act. The manual in terms of this legislation is available from the registered office of the Company and on the Company s website. Board The Board meets regularly on a scheduled basis and at such other times as circumstances may require. The table of meetings and attendance is as follows: 5 Jun 21 Sep 9 Nov 15 Feb C Barnard^ A Goldstone^ AK Masuku* # x x x x JS Mthimunye # x x DI Samuels # LR Sherrell AM Sinclair^ CE Walters^ CH Wiese (Chairman) JD Wiese * Alternate Non-executive # Independent ^Executive Board papers are issued to all directors prior to each meeting and contain relevant detail to inform members of the financial and trading position of the Company and each of its operating subsidiaries, as well as covering material issues pertaining to the Group. Non-executive directors also maintain regular contact with executive directors to ensure that they are kept abreast of material matters that may require their input and guidance. Board appointments A third of the directors retire by rotation annually based on longest service. If eligible, available and recommended for re-election by the Remuneration Committee, their names are submitted for re-election at the annual general meeting. This year Dr CH Wiese, Mr DI Samuels, Mr JD Wiese and Mr JS Mthimunye retire in terms thereof. Messrs Samuels, Wiese, Mthimunye and Dr Wiese, being eligible and available, are recommended for re-election by the Remuneration Committee. The directors have considerable business experience and an excellent understanding of the Group s business. The Board selects and appoints directors, including the Chief Executive Officer and Executive Directors. Prior to appointment, potential Board appointees are subject to a fit and proper test as required by the JSE Listings Requirements. INTERNAL CONTROL The directors have responsibility for the Group s systems of internal controls. These are designed to provide reasonable assurance of effective and efficient operations, internal financial control and compliance with laws and regulations. Operational and financial responsibilities are delegated to CEOs, CFOs and executives of the principal operating divisions.

33 31 >> Corporate governance report The Group s system of internal controls is designed to provide reasonable, but not absolute, assurance against the risk of material errors, fraud or losses occurring. Furthermore, because of changing internal and external factors, the effectiveness of an internal control system may vary over time and must be continually reviewed and adapted. The system of internal controls is monitored throughout the Group by the Audit Committee, the Group internal audit department, management and employees as an integrated approach. The Board reports that: to the best of its knowledge and belief, no material malfunction of the Group s internal control system occurred during the period under review; it is satisfied with the effectiveness of the Group s internal controls and risk management; it has no reason to believe that the Group s code of ethics has been transgressed in any material respect; and to the best of its knowledge and belief, no material breaches have occurred during the period under review, of compliance with any laws and regulations applicable to the Group. INFORMATION TECHNOLOGY Compliance with legislative requirements contributes towards the protection of corporate information, but in itself only addresses a small part of the total number of threats posed to the business arising from its dependencies on information technology and the internet. Security policies and procedures for employees and the use of technologies such as enterprise and personal firewalls, antivirus systems, intrusion monitoring and detection are applied, as well as frequent application of software security patches issued by vendors as and when vulnerabilities are discovered. Ensuring proper system security, data integrity and business continuity are the responsibility of the Board, but are given effect by the Audit and Risk Committee. STAKEHOLDER COMMUNICATION Members of the Board meet on an ad hoc basis with institutional and other investors, investment analysts and members of the financial media. Discussions at such meetings are restricted to matters that are in the public domain. Shareholders are informed, by means of press announcements and releases in South Africa and/or printed matter sent to such shareholders, and/or announcements on SENS, of all relevant corporate matters and financial reporting as required in terms of prevailing legislation. In addition, such announcements are communicated via a broad range of channels in both the electronic and print media. The Group has also embarked on a more formal approach to providing feedback in respect of the year-end results with interviews scheduled for both radio and television after the relevant media and SENS announcements have been made. The Company maintains a corporate website containing financial and other information, including interim and annual results. The site has links to the websites of each major operating subsidiary company. The Group will continue to look at ways of allowing electronic shareholder participation with its transfer secretaries in the upcoming year as provided for in the new Companies Act. EMPLOYMENT EQUITY Invicta is committed to providing a working culture that is inclusive to all. It is Group policy to acknowledge and support South Africa s employment equity drive in ensuring that equal opportunities are directed at our staff, regardless of race, colour, sexual orientation, sex, religion, creed or national origin. The Group remains compliant with all aspects of the Employment Equity Act (Act 55 of 1998) by adhering to the requirements of the timeous submission of an online report and plan, consultation with employees and communication of the report and progress is monitored on an ongoing basis. Areas of strategic focus include the promotion of constitutional right of equality for all in the workplace, elimination of unfair discrimination where it may exist, redressing of the effects of past discrimination of employment practices, achieving equitable representation in occupational categories and levels, where possible, promoting the acquisition of skills by employees that will reflect qualifications and standards that is part of a national qualification framework and developing a culture in the Company of high quality lifelong learning. HR implements processes to address recruitment as well as the development of in-house talent through coaching, mentoring and succession planning. Included in this drive is a bursary programme directed at young black students who could potentially be groomed for future senior positions should they join the Group after graduation. The Group remains fully committed to providing equal opportunities to its employees (2012: employees).

34 32 >> Corporate governance report SUSTAINABILITY REPORT The Board is committed to creating long-term value for all its stakeholders by providing sustainable businesses in an integrated approach to the communities in which it operates. The role of the Social and Ethics Committee is to assist the Group with its responsibility towards sustainability with respect to practices that are consistent with good corporate citizenship. The Companies Act includes specific responsibilities including the Company s standing in terms of the United Nations Global Compact Principles, the OECD recommendations concerning corruption, the contribution to development within our communities, labour and employment and the environment and health and public safety. The Committee has the objective of reviewing the Group s Socially Responsible Investment Index, broad-based economic empowerment, and sustainability reporting performance. Performance in each of these areas is measured with reference to the JSE s Socially Responsible Investment Index criteria, the DTI s Broad-Based Black Economic Empowerment (B-BBEE) scorecard and the Global Reporting Initiatives III guidelines. Invicta has appointed Simanye to act as its consultants in terms of B-BBEE as well as The BEE Shop to re-certify the BEE status of its various operations. The Group maintained its BEE status at a Level Four contributor in terms of the Broad-Based Rating Scorecard. The sustainability objectives of the Group are: Acting in the best interests of Group shareholders and Group principals, by representing them in a manner which brings credit to their products and brands. Ensuring that customers receive an integrated and environmentally sound solution that meets their specific needs. Providing employees with a working environment and encouraging a culture which allows them to achieve as much as possible and to have a fulfilled working career. Delivering sustainable returns to shareholders which are not at the expense of the Group s ethical standards. The Group continues to measure its expenditure on non-renewable resources and to eliminate any unnecessary or inefficient processes. The primary areas of consumption in the Group continue to be transport, fuel and electricity. The Group continually looks at optimising its warehouse locations and inventory holdings in a bid to minimise transport cost and fuel consumption, with further strategic consolidation and expansion of certain locations planned for the short- to medium-term. As customers continue to search for more efficient and productive products, the Group, through its various operations, continues to develop these with its various principals around the world and to offer solutions to the market.

35 33 >> Corporate governance report The Board wishes to take this opportunity to thank all the stakeholders in the Group for their ongoing commitment and loyalty to the development of a sustainable business and relationships. Suitability of the Financial Director As required by the JSE, the Audit Committee and Board have considered the skills, qualifications and performance of the Financial Director, Craig Barnard, and are unanimously satisfied with his continuing suitability for the position. His résumé is detailed on page 5. TRAINING EDUCATION AND DEVELOPMENT OF STAFF In-house training and development: The Group s philosophy on training the right employee, at the right time provides returns not only for the employee, but also for the employer in increased productivity, knowledge, loyalty and contribution to the Group. Ongoing training and skills development also forms the basis of transformation. It is also imperative for any company aiming to develop a competitive edge. In order to create this passion within the Group s staff, Invicta needs to help its people reach their full potential through ongoing training and development. After the successful external re-branding by BMG, it has embarked on a Brand Ambassador training initiative that essentially transforms BMG employees to BMG Brand Ambassadors with a renewed heart and mind. CEG has also invested a great deal of money and time over the last two years in uplifting thashe skills of their whole goods and parts employees. CEG continues its focus on the grooming of qualified apprentices in various trades. The Group provides a broad range of initiatives, including technical, management and sales training, as well as softer skills programmes, with technical courses being delivered via e-learning. E-learning provides the major benefits of being practical and flexible. Staff can log in when practical whilst learning can be applied immediately and shared with colleagues. In addition, e-learning also enhances much has needed computer skills. All theoretical training is has finished off with practical training sessions delivered by the Group s various technical and other divisional resources available. Education and career development As part of the Group s holistic approach to employee development, it also offers educational assistance to employees who are keen to further their own qualifications on a part-time basis by completing work-related courses. Student bursaries The Group currently has two university bursary holders participating in the Invicta bursary scheme as well as twelve scholars in total from various institutions such as Jeppe, SACS, Kearsney College, Cornwall Hill and King Edward VII school. The Group is committed to partnering projects that are focused on developing its technical skills base as a requirement for its business, as well as for the country and the economy as a whole. BMG has a long-standing relationship with the Protec organisation. Protec s aim is to increase the country s technologically skilled human resource base through the provision of educator-based training and a Learner Excellence Programme (learner-based education) to under-resourced schools in South Africa. This holistic programme is aimed at Grade 10 learners who participate until they reach Grade 12 and they are supported through their tertiary education studies and beyond by their Protec mentors. Research results clearly indicate that the Protec branches are having a positive impact on the academic performance of beneficiaries from historically disadvantaged communities. At least 50% of learners from Protec passed with University passes, significantly more than the provincial averages. Protec has a long and consistent track record of helping learners improve their results and go on to successful careers. The expert staff and experienced leadership at Protec have shown great passion in implementing every project. BMG has been a long-term supporter of their branches in Tongaat and Inanda/Kwa Mashu in KwaZulu-Natal and have extended the Group s commitment to Protec by

36 34 >> Corporate governance report partnering them in the establishment and development of other branches in the key trading areas of Steelpoort, Carletonville and Kuruman more recently. Several of these students have made it onto our BMG trainee programme which is really taking our CSI work full circle. CORPORATE SOCIAL INVESTMENT (CSI) As a responsible South African citizen, the Group has focused on aligning its CSI spend with its core business objectives, thus allowing for true partnerships with its beneficiaries, the government and NGOs, in order to bring about long-term, sustainable change and development for the benefit of all. The Group carefully selects initiatives that will have the maximum impact on basic needs of South Africans and, where an immediate need arises, it also undertakes more ad hoc projects to address specific issues. Some examples of initiatives the Group undertook are as follows: The COP Trust is a non-profit organisation that provides an opportunity for schools, businesses and ordinary South Africans to make a lasting and meaningful difference to the lives of their fellow citizens. The COP Trust has undertaken a wide range of development projects, which are all aimed at uplifting our society and empowering historically disadvantaged individuals and communities. The Group has selected a house of safety (foster home), a crèche, a pre-school, as well as a primary and high school to support with the help of the COP Trust. Support is also provided for various safe houses and orphanages, with the main focus being abused and abandoned women and children, homes for pregnant young girls, as well as various other crèches that are not supported by the COP Trust. These include The Ark in Khayelitsha, St Francis, The New Life Centre, Solomon s Haven and The Homestead. The Group also supports the SA Medical and Educational Foundation. Their mission is to create an environment where quality health care and education can be available to everyone. They do this by supplying various medical services with the vital equipment that is needed to enhance the treatment that is offered to state patients. The SA Medical and Education Foundation supports mainly hospitals and clinics that rely solely on a state budget. A donation was also made towards The Sunflower Fund, to assist with getting donors on the registry from non-white ethnic race groups, as well as providing a home for a 4-year old leukaemia patient and her family. Education and career development As well as the extensive staff training which is dealt with elsewhere in this report, the Group sees education as a primary area of focus for the future growth of the country. Funding is provided to centres providing education to educators, which are based in 25 rural underresourced schools. A further major funding project is in respect of a non-profit technological career development programme, focusing on quality of mathematics and science. The Group acknowledges that a holistic approach is necessary, of which academic support is but one element.

37 35 >> Corporate governance report Sport development Within the Group, sponsorship as well as dedicated time is allocated to form a local soccer championship league consisting of players from the community as well as from the Company. By investing time and energy into this initiative, the Group strongly believes that people prefer to rather invest their energy in community-related events where they can create a sense of belonging rather than spending time on the streets. General All the Group operations, no matter how small, have contributed to supporting the destitute and underprivileged in the communities in which they exist and function. QUALITY MANAGEMENT AND OCCUPATIONAL HEALTH AND SAFETY The consistent supply of both quality products and service to customers is key to the Group s successes. To this end, the Group continues to focus on the ISO quality system to assist in achieving this. CEG has maintained their ISO certification with TUV Rheinland in all its divisions, including the Criterion Equipment Division and with ESP will endeavour to implement the system in that operation as well. The Autobax Division has maintained its ISO certification with Lloyds. BMG s Quality Management Systems (QMS) certified in 2003, is now well established, with their current ISO 9001:2008 standard only due for re-certification in November BMG s commitment to a safe and healthy working environment for customers and employees is demonstrated by the implementation of the OHSAS 18001:2007 standard. The Group continues to progress the development and implementation of the OHSAS Occupational Health and Safety Management System in its major operations. COMPLIANCE, TRANSPARENCY AND ACCOUNTABILITY Annual General Meeting The shareholders are encouraged to attend the annual general meeting, chaired by the Board Committee Chairperson. The notice for any general meeting of shareholders includes an explanation of the reason for, and the effects of, any proposed special resolutions. The Company Secretary attends every general meeting of shareholders to assist with the recording of shareholders attendance and to tally the votes. The Chairman confirms with the meeting that votes will be counted by way of poll, i.e. all votes are counted, rather than by way of a show of hands, if required. Restriction on trading in securities A formal policy, implemented some years ago, prohibits directors, officers and employees with access to financial information from dealing in the Company s securities, from the end of an interim reporting period until after the interim results have been published and similarly from the end of the financial year until after the audited annual results have been published. Directors and employees are reminded of this policy prior to the commencement of any closed period. In addition, no dealing in the Company s securities is permitted by any director, officer or employee whilst in possession of information which could affect the price of the Company s securities and which is not in the public domain. Directors of the Company and of its subsidiaries are required to obtain clearance from Invicta s chairman (and in the case of the chairman, or in the absence of the chairman, from the chairman of the Audit Committee), or his nominee, prior to dealing in the Company s securities, and to timeously disclose to the Company full details of any transaction for notification to and publication by the JSE.

38 36 >> Corporate governance report Where relevant, participants in the long-term equity-settled bonus share incentive scheme may not exercise these rights during a closed period. Corporate ethics The Group is committed to achieving high standards of ethical behaviour. The Ethics Hotline is independently run by Deloitte Tip-Offs Anonymous. Deloitte Tip-Offs Anonymous has been certified by the External Whistle-Blowing Hotline Services Provider Standard E This Hotline can be used by all stakeholders to report any suspected unethical behaviour. Calls are investigated by the Internal Audit Division. Further review and monitoring of the Group s legislative and legal responsibilities take place on an ongoing basis in conjunction with the company secretary and the Group s respective legal and other advisors, with special attention paid to labour matters and the well-being of staff in general. The key pillars of the code include adherence to the legal framework of the country and ensuring that the Group is not brought into disrepute, against the overriding background of transparency in all transactions. The Board adopted a formal code of ethics during 2004 and a Social and Ethics Committee was established during the previous financial year and consisting of: DI Samuels (Non-executive independent director) A Goldstone (Executive director) C Barnard (Executive director) Having regard for its responsibilities, the committee has commenced monitoring of the various projects undertaken by the operating divisions with respect to Corporate Social Investments spend and has requested the divisional executives to provided annual programs for consideration by this committee. Arnold Goldstone Chief Executive Officer Invicta Holdings Limited

39 37 >> Corporate governance report REMUNERATION REPORT Members of the Remuneration Committee during 2013 CH Wiese (Chairman) DI Samuels A Goldstone Attendance ex Officio All members of the Committee are non-executive directors. Role of the Remuneration Committee and terms of reference The Remuneration Committee is a committee of the Board of Directors and is responsible for: making recommendations to the Board on the general policy on executive remuneration, benefits, conditions of service and staff retention; determining the specific remuneration packages of executive directors and senior management of the Group including, but not limited to, basic salary, performance-based short- and long-term incentives, pensions and other benefits; and the design and operation of the Group s share incentive schemes. The Board has approved the mandate and terms of reference of the Committee, which is in compliance with the King III obligations. The Committee met twice during the 2013 financial year. The Chief Executive Officer attends the Committee meetings by invitation and assists the Committee in its deliberations, except when issues relating to his own compensation are discussed. No director is involved in deciding their own remuneration. The Company s auditors, Deloitte & Touche, have not provided advice to the Committee. However, in their capacity as Group auditors, they perform normal audit procedures on the remuneration of directors. The Remuneration Committee meets at least annually and the attendance at meetings held was as follows: 25 May 11 June 24 Aug 22 Oct 3 Mar 26 May 28 Mar 4 June 5 June 11 June CH Wiese DI Samuels A Goldstone JD Wiese (by invitation) Remuneration policy and executive remuneration Principles of executive remuneration The Group s remuneration policy aims to attract and retain high-calibre executives and to motivate them to develop and implement the Group s business strategy in order to optimise long-term shareholder value creation. The policy conforms with King III and is based on the following principles: Total rewards are set at levels that are competitive within the relevant market. Incentive-based rewards are earned through the achievement of demanding performance conditions consistent with shareholder interests over the short-, medium- and long-term. Incentive plans, performance measures and targets are structured to operate effectively throughout the business cycle. The design of long-term incentives is prudent and does not expose shareholders to unreasonable financial risk. In line with the principles stated above, the Remuneration Committee has authorised the implementation of a bonus bank scheme at senior and middle management level which entails management earning a performance-based bonus which is effectively paid out over the subsequent three years.

40 38 >> Corporate governance report Elements of executive remuneration The four elements of executive remuneration consist of a base salary, benefits, an annual incentive and long-term incentives. The Committee seeks to ensure an appropriate balance between the fixed and performance-related elements of executive remuneration and between those aspects of the package linked to short-term financial performance and those aspects linked to longer-term shareholder value creation. A further consideration has been the need to retain critical skills in the Group. The Committee considers each element of remuneration relative to the market and takes into account the performance of the Group and the individual executive in determining both quantum and design. The policy relating to each component of remuneration is summarised below: Base salary The base salary of the executives is subject to annual review. It is set to be competitive at the median level, with reference to market practice in companies comparable in terms of size, market sector and business complexity. Group and Company performance, individual performance and changes in responsibilities are also taken into consideration when determining annual base salaries. Benefits Benefits for executives include membership of a retirement fund and a medical aid, to which contributions are made by the executives and the Group. Short-term incentive All executives are eligible to participate in a short-term incentive with payment levels based on either corporate or individual performance or both. Key performance indicators are set on an individual basis each year. The incentive plan is contractual but not pensionable. The Committee retains the discretion to make positive adjustments to bonuses earned at the end of the year on an exceptional basis, taking into account both Group performance and the overall and specific contribution of individual executives to meeting the Group s objectives. The Committee reviews measures annually, to ensure that the targets set are appropriate, given the economic context and the performance expectations for the Group. Details of the Executive directors remuneration are detailed on pages 98 and 99. Long-term incentive Invicta long-term bonus and share incentive scheme In order to attract and retain key staff, the Group requires appropriate long-term incentive schemes. Many of the Group s operations require key technical skills which are often difficult to replace. In trying to address the critical factor, the Committee, in consultation with industry professionals, has designed a long-term bonus incentive scheme for key executives. In terms of the scheme, executives will be rewarded on their performance, with reference to the growth in the Invicta share price over a period of three to five years. The bonus, as determined by the formula, will be settled with equity in Invicta by the relevant operational entity. The bonus scheme will constantly be reviewed by the Committee for its effectiveness and will be amended from time to time, if necessary. Divisional senior executives and management are on a cash-based bonus system, which ensures they are rewarded for performance in those areas over which they have direct influence. Equity-settled bonus share incentive right scheme The Group employed a long-term bonus equity-settled share incentive right scheme (LBSIR scheme) for key executives in In terms of the LBSIR scheme executives are granted a bonus share incentive right (the bonus right) calculated with reference to a specified number of shares at a price equal to the weighted average five-day closing market price on the date of grant. The bonus right vests after a period of one year, (subject to the achievement of the performance conditions set for the executive), and the bonus right becomes exercisable after a further two-year period, after which the executive has a further two-year period in which to take up the bonus right before it lapses. The bonus right is determined based on the difference between the grant price and the weighted average five-day closing share price on the exercise date. The bonus, as determined by the formula, will be settled with Invicta shares.

41 39 >> Corporate governance report During the 2012 and 2013 financial years, some of the bonus rights were settled in cash and disclosed accordingly in note 37 on page 99 in the 2013 Integrated Annual Report. The remaining bonus rights will only be settled with Invicta shares. The bonus right expense has been calculated using a Black Scholes valuation model and is expensed over a three-year period from the grant date and is recorded in the Share Appreciation Reserve Weighted Weighted average average incentive incentive rights cost rights cost Number (Black Number (Black of Scholes) of Scholes) incentives Rand incentives Rand Outstanding at the beginning of the year Awarded during the year , ,13 Exercised during the year ( ) ( ) Cancelled ( ) Outstanding at the end of the year Tranche 1 Tranche 2 Tranche 3 Tranche 4 Tranche 5 Tranche 6 Tranche 7 Tranche 8 Tranche 9 Number of grants Cancelled (55 000) Grant date 13 Mar 06 1 Sep Mar Mar Sep Mar 09 2 Mar 10 1 Mar Jun 12 Grant price R17,20 R20,00 R27,97 R24,84 R26,87 R18,48 R24,37 R42,55 R66,14 3 years 3 years 3 years 3 years 3 years 3 years 3 years 3 years 3 years % % % % % % % % % Expected volatility (daily) 2,1 2,0 2,1 2,2 2,2 2,1 2,1 2,2 2,1 Dividend yield 5,6 5,3 6,4 3,5 3,8 4,2 4,9 5,3 4,5 Risk-free rate 7,2 8,17 8,17 9,4 8,7 6,43 8,68 7,39 5,35 Executive directors interests in the LBSIR scheme are set out in note 37 on page 99 of the 2013 Integrated Annual Report. In line with the principles stated above, the Remuneration Committee has authorised the implementation of a bonus bank scheme at senior and middle-management level which entails management earning a performance-based bonus, which is effectively paid out over the subsequent three years. A long-term loan scheme for executives on the Board of Directors of Invicta The purpose of the loan is to incentivise Invicta executives over the long-term by providing them with a mechanism to acquire a meaningful stake in Invicta, thereby aligning them with the interests of Invicta shareholders. The loans were granted in the 2012 financial year and is payable over seven years, bears interest at 6% per annum and is secured by Invicta shares at a ratio of 1.5:1. External appointments Executive directors are not permitted to hold external directorships or offices without the approval of the Board. If such approval is granted, directors may retain the fees payable from such appointments.

42 40 >> Corporate governance report Directors fees Directors payments for services as directors and other emoluments are set out in note 37 on pages 98 and 99 of the 2013 Integrated Annual Report. Members will be requested to consider an ordinary resolution approving these emoluments at the annual general meeting. Non-executive directors fees The annual fees payable to non-executive directors of the Company are based on a fee for attendance per meeting of the Board and, where applicable, per meeting of sub-committees. An additional fee is paid to the Chairman of both the Board and the Audit Committee. Non-executive directors do not participate in the Company s annual bonus plan, or in any of its share incentive schemes. Details of the non-executive directors fees are detailed on page 98. Directors and executive management s service contracts None of the directors are bound by service contracts. All executive directors, who are also directors of subsidiary companies, have an engagement letter which provides for a notice period of between one and three months to be given by either party. The Group Chief Executive Officer has no service contract. None of the non-executive directors have a contract of employment with the Group. A third of the directors retire by rotation annually based on longest service. If eligible, available and recommended for re-election by the Remuneration Committee, their names are submitted for re-election at the annual general meeting. The appointment of new directors during the year is required to be confirmed at the next annual general meeting and such new directors are required to retire at such annual general meeting, but may offer themselves for re-election. Approval This remuneration report has been approved by the Board of Directors of Invicta. Signed on behalf of the Remuneration Committee Dr CH Wiese Chairman of the Remuneration Committee

43 41 Integrated report The Board of Directors acknowledges its responsibility to ensure the integrity of the Integrated Report. The Board has accordingly applied its mind to the Integrated Report and, in the opinion of the Board, the Integrated Report addresses all material issues, and presents fairly the integrated performance of the organisation and its impacts. The Integrated Report has been prepared in line with appropriate best practices pursuant to the recommendations of the King III Code. REPORT SCOPE AND BOUNDARY The Integrated Report (the Report) covers in its scope both the legal entities and physically located branches making up the distribution, sales and administrative infrastructure of the Group. The Report covers the financial year ended on 31 March 2013, but due to the contiguous nature of business and reporting, the Report implicitly takes into cognisance the end of the previous and the first quarter of the subsequent financial year. The Group has always been run on an operationally decentralised basis due to the complementary, but often different nature of the main operational pillars making up the Group. Based on this principle of decentralised operations, the Group s role is that of providing a strategic, financial and strong directional role for operations, with the Managing Directors and the CEOs of the main operational pillars having direct reporting and executive responsibility on the Board. ORGANISATIONAL OVERVIEW, BUSINESS MODEL AND GOVERNANCE STRUCTURES The Group has always seen its distribution, sales and support network as a key strategic asset, enabling it to create value on a sustainable basis, while also constituting barriers of entry to competitors on a national basis. The extent and number of the Group operational outlets are highlighted on pages 11 to 13 of the 2013 Integrated Annual Report. Further to the above, the Group sees its management and staff as a key factor in a business which is effectively selling, supporting and advising on a wide range of industrial consumable products. The Group, besides having a Remuneration Committee and an Audit and Risk Committee at the Group level, has maintained these same management and governance disciplines at the main operational pillars to ensure policies and direction are effectively cascaded down, at the same time allowing for effective reporting up. Details of Group management and governance committees, are provided in more detail in the Corporate Governance Report (page 26), the Remuneration Report (page 37) and Audit Committee Report (page 56). OPERATIONAL CONTEXT The Group can be seen as an efficient proxy for the South African economy, with a clear delayed correlation between commodity and resources performance and the Group s outperformance thereof. The Group imports almost all of the products it supplies and thus the effects of exchange rate fluctuations need to be effectively managed through operational buying departments, under the Group s policy of hedging all material exchange rate exposures through the use of Forward Exchange Contracts. Employment and logistic costs are the main domestic cost elements that make up a significant element of the overhead base of the Group. STAKEHOLDER RELATIONSHIPS The Group continues to view its employees as a key stakeholder group, and endeavours to, on an ongoing basis, develop not only training, but improved communication processes within the operations. The Group has made a conscious effort to address its community and social responsibility spending by developing a more clearly focused programme of initiatives, which it supports. With the Group holding key agency and distribution agreements for world-class brands with international principals, ongoing relationship building with these suppliers is seen as a key element of the current and future success of the Group, as the network and range of suppliers increases. Shareholders, through their actions, continue to give the Board and management a mandate to run the Group, whose ongoing support and beneficiation is seen as the litmus test of superior performance by the Group.

44 42 >> Integrated report Stakeholders material issues The following table sets out the stakeholders identified, together with the material issues and communication to stakeholders: Stakeholders Relationship Material issues Communication forum Private shareholders and institutional investors Shareholders Share price, dividend policy, return on investment, profitability Management competence Growth strategy Acquisitions Management remuneration Integrated and interim reports Results presentations Website Annual general meeting Press interviews Bankers Financiers Statements of financial position, comprehensive income and cash flows End users of products Customers BEE credentials Brand Product quality Technical support Service turnaround Pricing Reputation Management of business Management Brands, association with quality products Synergies within Group Management and resource support from centre for growth Leadership succession planning, careers, knowledge management systems Remuneration Principals Suppliers Market shares Sales forecasts Stockholding and ordering processes Distribution strengths Customer base Credit-worthiness Integrated and interim reports Annual credit reviews Personal contact Product marketing Product technical specifications Service information bulletins BEE scorecard Operational websites Technical training forums Integrated report Management conferences Personal contact Internal news/information communication and divisional broadcasts and s Regular meetings Integrated report Operational websites Interactive electronic ordering and communication Employees at operational level Staff Career development Leadership succession planning Remuneration Skills retention and development BEE Integrated report Personal contact Retirement fund reports Wellness communication and interventions Internal news/information communication and divisional broadcasts and s

45 43 >> Integrated report STRATEGIC DIRECTION The Group continues to look for acquisitions which fit the distribution and sales model that it has successfully developed over the last decade. Further consideration will also be given to opportunities that are based outside South Africa, which not only fit with the Group s expertise, but which also provide a natural hedge against some of the currency exposures the Group faces. PERFORMANCE The Group continues to outperform its own return benchmarks and has, at a trading level, grown by more than 20% per annum cumulatively for more than seven years Rm Rm Rm Rm Rm Rm Rm Rm STATEMENTS OF COMPREHENSIVE INCOME Revenue Operating profit Net finance costs less dividends received and income from associate (65) (50) (54) (24) (22) 3 (25) (19) Profit before taxation Taxation (76) (72) (25) (64) (112) (63) (38) (54) Profit after taxation Non-controlling interest (28) (23) (72) (44) (50) (37) (2) Preference shareholders (22) Attributable earnings Items not included in headline earnings (51) (8) (6) (9) (2) (8) (24) 1 Headline earnings Weighted average number of ordinary shares ( 000) Earnings per share (cents) Headline earnings per share (cents) Normalised earnings per share (cents) Dividend per share (cents) STATEMENTS OF FINANCIAL POSITION Property, plant and equipment Goodwill Other intangible assets Financial instruments, finance lease and long-term receivables including current portion Guaranteed purchase liabilities including current portion (6) (11) (13) Defered taxation Inventories Trade and other receivables Trade and other payables and provisions (2 049) (1 802) (1 205) (1 020) (1 295) (1 267) (829) (450) Taxation (11) (25) 1 (13) 35 (26) (13) 2 Shareholders for dividends (29) (2) (7) (3) Net operating assets Investment in associate Financial investments including current portion Net financial liabilities (8) (2) (3) (3) (4) 2 Net cash (131) (79) Employment of capital Non-controlling interest Equity Long-term payables including current portion Total capital employed

46 44 >> Integrated report R 000 R 000 R 000 R 000 R 000 R 000 R 000 R 000 STATEMENTS OF CASH FLOWS Cash generated from trading (Increase)/ decrease in working capital (266) (191) (455) (96) 85 (123) Cash generated from operations Finance costs (652) (598) (545) (433) (383) (209) (163) (40) Dividends paid (198) (156) (115) (96) (113) (94) (55) (46) Taxation paid (161) (62) (48) (25) (194) (58) (25) (59) Interest and dividends received Net cash from operating activities (242) (26) Investment in property, plant and equipment (150) (105) (62) (47) (48) (17) 5 5 Investment in operations (2 537) (655) (627) (228) (346) (1450) 16 (1559) Net cash from investing activities (2 687) (760) (689) (275) (394) (1467) 21 (1554) Increase in long-term borrowings including guaranteed repurchase liabilities (9) 1204 Share appreciation rights (settled) issued (227) 9 Shares cancelled (10) Shares issued Net cash from financing activities (5) 1475 Net increase (decrease) in cash and cash equivalents (98) (341) (105) Key and carefully selected acquisitions as well as excellent management are the primary drivers of the Group s success. The Group continues to benchmark return on working capital as a key factor.

47 45 >> Corporate information Company registration number 1966/002182/06 Nature of business Investment holding and management company Secretary C Barnard PO Box 851, Isando, 1600 Business address 3rd Floor, Pepkor House, 36 Stellenberg Road Parow Industria, 7493 Postal address PO Box 6077, Parow East, 7501 Auditors Deloitte & Touche Registered Auditors Deloitte & Touche Place, The Woodlands Woodlands Drive, Woodmead, Sandton, 2196 Private Bag X6, Gallo Manor, 2052 Share transfer secretaries Computershare Investor Services (Pty) Ltd Ground Floor, 70 Marshall Street, Johannesburg, 2001 PO Box 61051, Marshalltown, 2107 Sponsors Deloitte & Touche Sponsor Services (Pty) Ltd Deloitte & Touche Place, The Woodlands Woodlands Drive, Woodmead, Sandton, 2196 Private Bag X6, Gallo Manor, 2052 Bankers Standard Bank of South Africa Limited Absa Bank Limited First National Bank (A division of FirstRand Bank Limited) Nedbank Limited Citibank HSBC DBS Bank Limited OCBC Bank Maybank Bank of China Standard Chartered Bank Attorneys Bernadt, Vukic, Potash and Getz 10th Floor, BP Centre, Thibault Square, Cape Town, 8001 PO Box 252, Cape Town, 8000 Website Audit Committee DI Samuels Chairman JS Mthimunye LR Sherrell JD Wiese (alternate to LR Sherrell and JS Mthimunye) Risk Committee DI Samuels Chairman JS Mthimunye LR Sherrell JD Wiese (alternate to LR Sherrell and JS Mthimunye) Remuneration Committee Dr CH Wiese Chairman DI Samuels A Goldstone (ex officio)

48 46 >> Share information as at 31 March 2013 ORDINARY SHAREHOLDER SPREAD Number of Number shareholding % of shares % shares , , shares , , shares 205 3, , shares 62 1, , shares and over 11 0, , , ,00 DISTRIBUTION OF SHAREHOLDERS Banks 20 0, ,79 Close corporations 86 1, ,30 Endowment funds 28 0, ,54 Individuals , ,10 Insurance companies 14 0, ,03 Investment companies 16 0, ,83 Medical aid scheme 3 0, ,04 Mutual funds 70 1, ,63 Nominees and trusts , ,96 Other corporations 48 0, ,51 Own holdings 2 0, ,94 Private companies 127 2, ,12 Public companies 3 0, ,07 Retirement funds 29 0, , , ,00 PUBLIC AND NON-PUBLIC SHAREHOLDERS Public shareholders , ,60 Non-public shareholders 37 0, ,40 Directors and associates of the Company 35 0, ,46 Treasury stock 2 0, , , ,00 Beneficial shareholders holding 5% or more Titan Shareholders ,65 Dorsland Diamante (Pty) Ltd ,39 The Sherrell Family Trust , ,39 JSE LIMITED STATISTICS Ordinary shares Traded High (cents) Low (cents) Market price at year-end (cents)

49 47 >> Share information as at 31 March 2013 PREFERENCE SHAREHOLDER SPREAD Number of Number shareholding % of shares % shares , , shares , , shares 52 5, , shares 16 1, , , ,00 DISTRIBUTION OF SHAREHOLDERS Close corporations 10 0, ,32 Endowment funds 30 2, ,75 Individuals , ,92 Insurance companies 6 0, ,33 Investment companies 2 0, ,87 Medical aid scheme 2 0, ,37 Mutual funds 28 2, ,57 Nominees and trusts , ,46 Other corporations 10 1, ,59 Private companies 38 3, ,01 Public companies 1 0, , , ,00 PUBLIC AND NON-PUBLIC SHAREHOLDERS Public shareholders , ,67 Non-public shareholders 7 0, ,33 Directors and associates of the Company 7 0, , , ,00 Beneficial shareholders holding 5% or more Liberty Group ,33 Titan Shareholders ,67 Nedbank Group ,63 Cadiz , ,45 JSE LIMITED STATISTICS Preference shares Traded High (cents) Low (cents) Market price at year-end (cents)

50 48 >> Value added statement for the year ended 31 March 2013 Group R 000 % R 000 % Income from goods and services Less: Cost of goods and services ( ) ( ) Value added from trading operations Add: Dividends received on investments Add: Interest received from investments Total value added , ,0 Utilised as follows: Employees Salaries and benefits , ,5 Providers of capital , ,7 Interest on borrowings Dividends to shareholders Government company tax , ,6 Current Foreign Deferred (44 490) (18 279) Secondary tax on companies , ,8 Retained for reinvestment Depreciation and amortisation , ,1 Income retained in the business , , , ,2 Total utilisation of value added , , % 4% 34% 32% 30% 26% 33% 38% Employees Providers of capital Government Retained for reinvestment

51 49 >> Shareholders diary Financial year-end 31 March 2013 Declaration of final dividend 11 June 2013 Publication of financial results for the year 11 June 2013 Last day to trade CUM dividend 28 June 2013 Trading EX dividend commences 1 July 2013 Record date 5 July 2013 Dividends payable 8 July 2013 Integrated Annual Report posted to shareholders 17 July 2013 Annual general meeting 16 August 2013 Publication of interim results November 2013

52 50 Contents to the annual financial statements 51 Approval of the annual financial statements 51 Certification by the Group secretary 52 Report of the independent auditors 53 Report of the directors 56 Audit Committee report 58 Statements of comprehensive income 59 Statements of financial position 60 Statements of changes in equity 61 Statements of cash flows 62 Notes to the annual financial statements

53 51 >> Approval of the annual financial statements TO THE SHAREHOLDERS OF INVICTA HOLDINGS LIMITED The directors of the company are responsible for the preparation of the annual financial statements and related financial information that fairly presents the state of affairs and the results of the Company and Group. The annual financial statements set out in this report have been prepared under the supervision of C Barnard CA(SA), Executive Director Financial and Commercial, in accordance with statements of International Financial Reporting Standards and in the manner required by the South African Companies Act. These are based on appropriate accounting policies, consistently applied, which are supported by reasonable and prudent judgements and estimates. The external auditors are responsible for carrying out an independent examination of the financial statements in accordance with International Standards on Auditing and in compliance with the Companies Act (Act 71 of 2008) and reporting their findings thereon. The auditors' report is set out on page 52. To enable the Board to meet its responsibilities, systems and internal control and accounting and information systems have been implemented. These are aimed at providing reasonable assurance that risk of error, fraud or loss is reduced. The Group's internal audit function, which has unrestricted access to the Group's Audit and Risk Management Committee, evaluates and, if necessary, recommends improvements to the systems of internal control and accounting practices, based on audit plans that take cognisance of the relative degrees of risk of each function or aspect of the business. The Audit and Risk Management Committee, together with the internal auditors, plays an oversight role in matters relating to financial and internal control, accounting policies, reporting and disclosures. To the best of its knowledge and belief, based on the above and after making enquiries, the Board of directors confirms that it has every reason to believe that the company and the Group have adequate resources in place to continue in operational existence for the foreseeable future. For this reason, it continues to adopt the going concern basis in preparing the annual financial statements. The annual financial statements for the year ended 31 March 2013, which appear on pages 53 to 107, were approved by the Board on 11 June 2013 for publication on 11 June 2013 and are signed on its behalf by: Dr CH Wiese Chairman A Goldstone Chief executive officer Cape Town 11 June 2013 >> Certification by the Group secretary In accordance with the provisions of section 88(2) of the Companies Act (Act 71 of 2008), I certify that, to the best of my knowledge and belief, the Company has filed for the financial year ended 31 March 2013 all such returns and notices as are required of a public company in terms of the said Act, and that all such returns notices appear to be true, correct and up to date. C Barnard Secretary Cape Town 11 June 2013

54 52 >> Report of the independent auditors TO THE SHAREHOLDERS OF INVICTA HOLDINGS LIMITED Report on the annual financial statements We have audited the Group annual financial statements and annual financial statements of Invicta Holdings Limited set out on pages 58 to 107, which comprise the consolidated and separate statements of financial position as at 31 March 2013, and the consolidated and separate statements of comprehensive income, the consolidated and separate statements of changes in equity and the consolidated and separate statements of cash flows for the year then ended, and a summary of significant accounting policies and other explanatory information. Directors Responsibility for the Financial Statements The Company s directors are responsible for the preparation and fair presentation of these financial statements in accordance with International Financial Reporting Standards and the requirements of the Companies Act of South Africa, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor s responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, these financial statements present fairly, in all material respects, the consolidated and separate financial position of Invicta Holdings Limited as at 31 March 2013, and its consolidated and separate financial performance and consolidated and separate cash flows for the year then ended in accordance with International Financial Reporting Standards and requirements of the Companies Act of South Africa. Other reports required by the Companies Act As part of our audit of the financial statements for the year ended 31 March 2013, we have read the Directors Report, the Audit Committee s Report and the Company Secretary s Certificate for the purpose of identifying whether there are material inconsistencies between these reports and the audited financial statements. These reports are the responsibility of the respective preparers. Based on reading these reports we have not identified material inconsistencies between these reports and the audited financial statements. However, we have not audited these reports and accordingly do not express an opinion on these reports. Deloitte & Touche Registered Auditors Per SBF Carter Partner 11 June 2013 Buildings 1 and 2, Deloitte Place, The Woodlands, Woodlands Drive, Woodmead, Sandton National executive: LL Bam (Chief Executive), AE Swiegers (Chief Operating Officer), GM Pinnock (Audit), DL Kennedy (Risk Advisory), NB Kader (Tax), TP Pillay (Consulting) K Black (Clients & Industries), JK Mazzocco (Talent & Transformation), CR Beukman (Finance), M Jordan (Strategy), S Gwala (Special Projects), TJ Brown (Chairman of the Board) and MJ Comber (Deputy Chairman of the Board) A full list of partners and directors is available on request. B-BBEE rating: Level 2 contributor in terms of the Chartered Accountancy Profession Sector Code Member of Deloitte Touche Tohmatsu Limited

55 53 >> Report of the directors INVICTA HOLDINGS LIMITED The directors have pleasure in presenting their annual report, which forms part of the annual financial statements and the 2013 Integrated Annual Report of the Group and of the Company for the year ended 31 March In the context of the financial statements, the term Group refers to the Company, its subsidiaries and associates. Nature of business The Company is an investment holding and management company. The various operations of the Group are summarised below with an expanded explanation of the various businesses detailed in the review of operations. Humulani Investments (Humulani) Operational holding company of all the South African Invicta Group operations. Humulani has 25% of its ordinary shares under the control of BEE parties. 20% of Humulani s ordinary shares are held by Theramanzi Investments (Pty) Limited, a wholly-owned subsidiary of The Humulani Empowerment Trust (HET). It is intended that the disbursements made by the HET will be in the areas of education initially in projects that are considered to create sustainable community improvements. The HET is structured in the form of what is considered to be a broad-based trust, with an enhanced empowerment status, its beneficiaries include not only Invicta employees, Invicta employees immediate families, but also persons living or working in the communities bordering or associated with the Group s business operations and other broad-based initiatives as determined by the trustees. 5% of Humulani s ordinary shares are held by the Humulani Employee Investment Trust (HEIT). The beneficiaries of the HEIT are all non-white employees of the Group (i.e. Black, Indian, Coloured and African) who do not participate in any other share incentive scheme of the Group. In terms of SIC 12, the ordinary issued share capital of Humulani Investments (Pty) Limited owned by the HEIT and Theramanzi Investments (Pty) Ltd (wholly-owned by the HET), has been consolidated. BMG Southern Africa s leading distributor of bearings, seals, power transmission components, drives, belting, fasteners, filtration and hydraulics. CEG Northmec Distributor of a full range of leading agricultural machinery, implements and related spares. CSE Wholesale and retail distributor of light earthmoving machinery, turf-grooming machinery, golf cars, utility vehicles and related spares. New Holland Wholesale distributor of leading brand agricultural machinery, implements and related spares. Doosan SA Doosan SA supplies predominantely heavy earthmoving machinery for construction and mining applications. Criterion Importer and distributor of leading materials handling equipment and related spares. ESP After-market replacement parts, ground engaging tools and undercarriage parts for earthmoving equipment. Kian Ann A large distributor of heavy earthmoving equipment parts and diesel spares.

56 54 >> Report of the directors for the year ended 31 March 2013 BSG Tiletoria A leading importer and distributor of tiles and related sanitary ware in the Western Cape, Gauteng and KwaZulu-Natal. The Tiletoria Group has expanded its operations to encompass laminated flooring in Gauteng. MacNeil Wholesale supplier of sanitary ware, brass ware, taps, plumbing fixtures, plastic piping and related products to the building material sector of South Africa and neighbouring countries. Compliance with accounting standards The Group s and the Company s annual financial statements comply with International Financial Reporting Standards, the South African Companies Act and the JSE Limited s (JSE) Listings Requirements. Group results R'000 R'000 Revenue Profit for the year Management philosophy Invicta adopts a hands-on approach to managing its subsidiaries. Each subsidiary is self-contained and has its own managing director and a complete complement of financial and administration infrastructure. The Invicta Group chief executive officer is, however, actively involved in the executive committees of all operations, with executive directors of the Group actively controlling and participating on the boards of subsidiaries. Cash flow is always a major focus of the Group. The Board aims to add value by providing expertise and guidance to subsidiary management teams where feasible, and by pooling best practices within the Group. Share capital and share premium The authorised share capital of the Company remained unchanged at ordinary shares of 5 cents each. During the year, the Company issued of its issued ordinary shares. This resulted in a increase in the share capital and share premium, which amounted to R The Company issued preference shares, which amounted to R Dematerialising of shares (Strate) Shareholders are again requested to note that, as a result of clearing and settlement of trades through the Strate system, the Company s share certificates are no longer good for delivery for trading. Dematerialisation of the Company s share certificates is now a prerequisite when dealing in its shares. Auditors Deloitte & Touche in office as auditors of the Company and its subsidiaries for At the annual general meeting, shareholders will be requested to reappoint Deloitte & Touche as auditors of Invicta Holdings Limited and to confirm that SBF Carter will be the designated audit partner for the 2014 financial year. Sponsor Deloitte & Touche Sponsor Services (Pty) Limited acts as sponsor to the Company in terms of the Listings Requirements of the JSE Limited. Transfer secretaries Computershare Investor Services (Pty) Limited serves as the registrar and transfer secretaries of the Company. Invicta Holdings long-term bonus and share incentive scheme and bonus bank scheme In order to attract and retain key staff the Group has implemented a long-term bonus and share incentive scheme as well as a bonus bank scheme. The Remuneration Report, included in the Integrated Annual Report, contains details of both schemes. Subsidiaries and associate Details of the Company s interests in its material subsidiaries and associates are set out in the attached annual financial statements in notes 16 and 17 on pages 85 to 87 of the 2013 Integrated Annual Report. Dividends Details of the ordinary dividends paid are reflected in note 24 on page 90 of the 2013 Integrated Annual Report. The Company s current dividend policy is to consider an interim dividend at a 3,5 times dividend cover ratio on normalised earnings per share, with a final dividend being considered to bring the annual dividend cover ratio on normalised earnings per share to no less than 2,75 times.

57 55 >> Report of the directors for the year ended 31 March 2013 Directors Details of the directors and company secretary during the year and at the date of this report are reflected on pages 4 and 5 and on page 45 of the 2013 Integrated Annual Report. Directors contracts No material contracts have been entered into between the Company or the Group and the directors during the year under review. Directors fees Directors payments for services as directors and other emoluments for the past year are set out in note 37 on pages 98 and 99 of the 2013 Integrated Annual Report. Members will be requested to consider a special resolution approving the remuneration of each non-executive director for the 2014 financial year and an ordinary resolution to endorse the remuneration policy and its implementation at the annual general meeting. Members will further be requested to approve the fees for services as directors for the forthcoming year as required by the Companies Act. Directors interest in shares in the Company The total direct and indirect interest declared by the directors in the issued share capital of the Company at 31 March 2013 was 64% (2012:61%). Repurchase of shares It makes sound business sense for a Company to acquire its own shares under certain circumstances. Thus, the directors consider it appropriate to secure a general authority for the Company to repurchase shares on the open market of the JSE in order to provide the Company with maximum flexibility regarding the repurchase of its own shares. The Group has over the years repurchased shares which are held at subsidiary level. The treasury shares are eliminated on consolidation and are thus treated as cancelled from a financial reporting perspective. The Company s Memorandum of Incorporation, allows the Company to purchase its own shares if shareholders have, by way of special resolution, given the Company a general authority to effect such purchase or a specific authority to effect a specific purchase of its own shares, subject to the requirements of the South African Companies Act and the JSE Listings Requirements. Notice of annual general meeting Notice to shareholders detailing all necessary resolutions relating to the Company affairs is set out on pages 108 to 116 of the 2013 Integrated Annual Report. Signed on behalf of the Board of Directors The total direct and indirect interest declared by the directors in the preference share capital of the Company at 31 March 2013 was 17% (2012:0%). The details of the directors shareholding are reflected in note 41 on page 104 of the 2013 Integrated Annual Report. Unissued share capital The unissued ordinary shares are the subject of a general authority granted to the directors in terms of the Companies Act and the JSE Listings Requirements. As this general authority remains valid only until the next annual general meeting, which is to be held on 16 August 2013, members will be requested at the meeting to consider an ordinary resolution placing the said ordinary shares under the control of the directors until the 2014 annual general meeting. Dr CH Wiese Chairman Cape Town 11 June 2013 A Goldstone Chief Executive Officer

58 56 >> Audit committee report for the year ended 31 March 2013 Background The Audit Committee is guided by a charter that is informed by the Companies Act and is approved by the Board as and when it is amended. The revised charter includes the specific requirements as set out in the Companies Act, pertaining to audit committees. Purpose The purpose of the Audit Committee is: To assist the Board in its evaluation of the overall adequacy and efficiency of the internal control systems, accounting practices, information systems and auditing processes applied in the management of the business in compliance with all applicable legal requirements, corporate governance and accounting standards. To provide a forum for communication between the Board, management, and the internal and external auditors. To review and confirm the independence objectively and effectiveness of the internal and external auditors, and to review and approve the engagement of the external auditors for non-audit work. To introduce such measures as in the Committee s opinion may serve to enhance the reliability, integrity and objectivity of financial information, statements and affairs of the Group. To provide support to the Board on the risk management of the Group through the establishment of a Risk Committee. To monitor the compliance of the Group with legal requirements and the Group s code of ethics. To ensure a high standard of Corporate Governance is adhered to at all times within the Group. To review and monitor the internal audit function. The Audit Committee has further established audit committees at all major operations which meet on a quarterly basis and which report back to the Audit Committee through the Group CEO and CFO. Membership The Committee was appointed at the annual general meeting on 14 August The Committee comprises solely of non-executive directors. The members are: DI Samuels (Chairman) JS Mthimunye LR Sherrell JD Wiese (alternate to LR Sherrell and JS Mthimunye) The Audit Committee members are considered to be independent of executive management. Shareholders will be requested to approve the re-appointment of the members of the Audit Committee at the annual general meeting scheduled for 16 August Attendance at meetings during the year was as follows: 18 Mar 8 Nov 20 Sep 15 Aug 4 Jun C Barnard x SBF Carter # x x x x A Goldstone G Herman^ x JS Mthimunye* x x DI Samuels* LR Sherrell* AM Sinclair x x C Walters x x x JD Wiese* x x * Members Group Directors # External Audit ^ Internal Audit In addition to members, the chairman may request personal or written representation from Group and Company directors as well as internal and external audit. External audit In terms of section 90 of the Companies Act, the Committee nominated Deloitte & Touche as the independent auditor and SBF Carter as the designated partner, who is a registered independent auditor, for appointment for the 2013 audit. This appointment was approved by shareholders at the annual general meeting on 14 August The Committee has satisfied itself through enquiry that the auditor of Invicta is independent as defined by the Companies Act, as amended or replaced, and as per the standards stipulated by the auditing profession. Requisite assurance was sought and provided by the auditor that internal governance processes within the audit firm support and demonstrate their independence. The Committee, in consultation with executive management, agreed to the engagement letter, terms, nature and scope of the audit function and audit plan for the 2013 financial year. The budgeted fee is considered appropriate for the work that could reasonably have been foreseen at that time. The final fee will be agreed on completion of the audit. Audit fees are disclosed in note 4 on page 73 of the 2013 Integrated Annual Report. There is a formal procedure that governs the process whereby the auditor is considered for non-audit services, and each engagement letter for such work is reviewed and approved by the Committee. Meetings are held with the auditor where management is not present and no matters of concern were raised. The Committee has again nominated, for approval at the annual general meeting, Deloitte & Touche as the external auditor and SBF Carter as the designated auditor for the 2014 financial year. The Committee confirms that the auditor and designated auditor are accredited by the JSE.

59 57 >> Audit committee report for the year ended 31 March 2013 Risk Committee Report Background Responsibility for managing the Group risk lies ultimately with the Board. However, the boards of subsidiary companies, executive committees and management at operational level assist the Board in discharging its responsibilities in this regard by identifying, monitoring and managing risk on an ongoing basis. Risk management specifically includes the consideration of: the risk profile and management of strategic and operational risk within the Group; the risk profile and risk management of major projects and acquisitions; the adequacy of self-insurance and external insurance programs; and the risk profile and management of information technology. Risk management The Board through the Risk Committee, which is a sub-committee of the Audit Committee, has identified a number of key risk areas which it believes require monitoring and detailing to stakeholders, these are summarised below Strategic risk review The Group has internally held further strategic risk evaluations at both Group and divisional levels. The results of this exercise have allowed management and the Board to reprioritise risks and consequentially the actions taken to mitigate these. The Committee monitors the progress of the implementation of the above processes, with written submissions and presentations being done by management at least annually. The Risk Committee continues to monitor and evaluate the risk reports provided by the various operational risk committees and to report on these plus any Group risks and Group strategies formulated to the Audit Committee and the Board. Exchange rate fluctuations Most of the Group s businesses involve the importation of product and, accordingly, changes in exchange rates can and do significantly affect the performance of operations. To date the Board has adopted the policy of hedging all its material foreign exchange exposures, increased volatility in the Rand value has further confirmed that this approach adopted is the correct one in the current environment. Product supply Based on the highly competitive markets in which the Group operates, specific focus is given to sourcing competitively priced quality products around the world. Directors and senior management have specific programmes on an annual basis, including the visiting of selected international trade fairs and supplier functions, to benchmark existing product ranges and to source new lines. The Group has established permanent buying as well as quality assessment operations in sourcing regions which are material to the Group s purchases. Distribution network and infrastructure The distribution of the Group s products is critical to its sales performance and takes place through a wide and entrenched network of its own outlets as well as third party distributors. The support, communication and business model used to govern these relationships, enjoys primary focus at the operating entities executive committee meetings, and may involve direct liaison with the relevant parties by the non-executive directors of the Board where appropriate. The efficiency and viability of these different distribution arrangements are continuously monitored and are restructured as appropriate. Trade and funding facilities The availability of both trade and funding facilities are strategic to the ongoing performance and success of the Group. The Board monitors and controls these on an ongoing basis. The Group has undertaken a number of transactions to raise capital during the year and will continue to do so based on funding requirements. Annual financial statements In view of the Audit Committee having fulfilled its mandate, it recommended the financial statements for approval to the Board. The Board subsequently approved the financial statements, which will be open for discussion at the forthcoming annual general meeting. Group financial director As required by the JSE Listings Requirements, the committee confirms that the Group and Company s finance director, Mr C Barnard, has the necessary expertise and experience to carry out his duties. DI Samuels Chairman of the Audit Committee 11 June 2013

60 58 >> Statements of comprehensive income for the year ended 31 March 2013 Group Company Restated Notes R 000 R 000 R 000 R 000 Revenue Cost of sales ( ) ( ) Gross profit Selling, administration and distribution costs ( ) ( ) (3 515) Operating profit (loss) before finance costs, interest and dividends received (3 515) Finance costs 5 ( ) ( ) Dividends received from subsidiaries Dividends received from financial investments Negative goodwill Share of profits of associates Interest received Profit before taxation Taxation 7 (75 224) (71 921) (1 028) (593) Profit for the year Other comprehensive income Exchange differences on translating foreign operations Total comprehensive income for the year Profit attributable to: Owners of the company Non-controlling interest Preference shareholders Total comprehensive income attributable to: Owners of the company Non controlling interest Dividends per share (cents) Basic earnings per share (cents) Diluted earnings per share (cents) Normalised earnings per share (cents)

61 59 >> Statements of financial position as at 31 March 2013 Group Company Restated Notes R 000 R 000 R 000 R 000 R 000 ASSETS Non-current assets Property, plant and equipment Investment in subsidiaries Investment in associates Financial investments Goodwill Other intangible assets Financial asset Finance lease receivables Long-term receivables Deferred taxation Current assets Loans to subsidiaries Held for sale assets Inventories Trade and other receivables Current portion of finance lease receivables Current portion of financial investments Current portion of long-term receivables Taxation prepaid Bank balances and cash TOTAL ASSETS EQUITY AND LIABILITIES Capital and reserves Ordinary share capital Share premium Treasury shares 23 (80 098) (93 931) ( ) Preference shares Share appreciation reserve Revaluation reserve Equity reserve ( ) Foreign currency translation reserve (2 335) (6 674) Retained earnings Equity attributable to the equity holders Non-controlling interest SHAREHOLDERS EQUITY Non-current liabilities Long-term borrowings Guaranteed repurchase liabilities Financial liabilities Deferred taxation Current liabilities Trade and other payables Provisions Taxation liabilities Shareholders for dividends Share appreciation rights liability Current portion of long-term borrowings Current portion of guaranteed repurchase liabilities Bank overdrafts TOTAL LIABILITIES TOTAL EQUITY AND LIABILITIES

62 60 >> Statements of changes in equity for the year ended 31 March 2013 Foreign Attribu- Share currency table to Non- Pre- appre- Re- trans- equity control- Share Share Treasury ference ciation valuation Equity lation Retained share- ling capital premium shares shares reserve reserve reserve reserve earnings holders interest Total R 000 R 000 R 000 R 000 R 000 R 000 R 000 R 000 R 000 R 000 R 000 R 000 Group Balance at 1 April 2011 as originally reported ( ) (6 674) Restatement of the opening balance due to modification of the treatment of share appreciation rights (27 096) (52 033) (79 129) (79 129) Restated balance ( ) (6 674) Cancellation of issued shares (18) (10 395) (10 413) (10 413) Restated profit for the year Exchange differences on translating foreign operations Acquisition of non-controlling interest ( ) ( ) Treasury shares disposed in terms of directors' loan scheme Treasury shares utilised to settle share appreciation rights Dividends paid ( ) ( ) (5 149) ( ) Share appreciation rights issued Share appreciation rights exercised (7 844) (18 900) (26 744) (26 744) Treasury share purchased (7 985) (7 985 ) (7 985) Balance at 31 March (93 931) (2 335) Profit for the year Preference dividends paid (21 912) (21 912) (21 912) Exchange differences on translating foreign operations Ordinary shares issued Preference shares issued Treasury shares utilised to settle share appreciation rights Ordinary dividends paid ( ) ( ) (9 730) ( ) Share appreciation rights issued Share appreciation rights exercised (17 361) ( ) ( ) ( ) Put option on non-controlling interest ( ) ( ) ( ) Non-controlling interest arising on acquisition of controlling interests (12 128) (12 128) Treasury shares purchased (38 125) (38 125) (38 125) Balance at 31 March (80 098) ( ) Company Balance at 1 April Cancellation of issued shares (18) (10 395) (10 413) (10 413) Mark to market on treasury shares (4 814) (4 814) (4 814) Total comprehensive income for the year Dividends paid ( ) ( ) ( ) Balance at 31 March Ordinary shares issued Preference shares issued Profit for the year Ordinary dividends paid ( ) ( ) ( ) Preference dividends paid (21 912) (21 912) (21 912) Balance at 31 March

63 61 >> Statements of cash flows for the year ended 31 March 2013 Group Company Restated Notes R 000 R 000 R 000 R 000 CASH FLOWS FROM OPERATING ACTIVITIES Cash generated from operations Finance costs ( ) ( ) Dividends paid to group shareholders 33 ( ) ( ) ( ) ( ) Dividends paid to non-controlling interest (9 730) (5 149) Taxation paid 34 ( ) (62 466) (1 955) (599) Interest and dividends received Net cash inflow (outflow) from operating activities ( ) CASH FLOWS FROM INVESTING ACTIVITIES Proceeds on sale of property, plant and equipment Expansion to property, plant and equipment ( ) (58 848) Replacement of property, plant and equipment (24 088) (46 600) Additions to intangible assets (2 116) (3 828) Acquisition of subsidiaries 43 ( ) ( ) (1 375) Acquisition of associates (2 068) Acquisition of non-controlling interest ( ) Dividend received from associate Increase in long-term receivables ( ) ( ) Net decrease (increase) in financial investments (77 197) Increase in current portion of financial investments, long-term and finance lease receivables ( ) (26 107) (66 974) (9 746) Increase in loans to subsidiaries ( ) ( ) Net cash outflow from investing activities ( ) ( ) ( ) ( ) CASH FLOWS FROM FINANCING ACTIVITIES Increase in long-term borrowings Decrease in guaranteed repurchase liabilities (3 357) (4 336) Decrease in loan from subsidiary (420) (Decrease) increase in share appreciation rights liability (78 289) Settlement of share appreciation rights ( ) (69 432) Cancellation of issued shares (10 413) (16 011) Ordinary shares issued Preference shares issued Increase in current portion of long-term borrowings and guaranteed repurchase liabilities Net cash inflow (outflow) from financing activities (16 431) Net (decrease) increase in cash and cash equivalents (98 290) (133) (8 974) Cash and cash equivalents at the beginning of the year Cash and cash equivalents at the end of the year

64 62 >> Notes to the annual financial statements for the year ended 31 March ADOPTION OF NEW AND REVISED INTERNATIONAL FINANCIAL REPORTING STANDARDS During the year, the Group adopted all of the new and revised Standards and Interpretations issued by the International Accounting Standards Board (the IASB) and the International Financial Reporting Interpretations Committee (IFRIC) of the IASB that are relevant to its operations and effective for the Group s reporting period. The adoption of IFRS 3 Business Combinations (amendments), IFRS 7 Financial Instruments: Disclosures (amendments) and related amendments to IAS 1 Presentation of Financial Statements, IAS 24 Related Party Disclosures, IAS 27 Consolidated and Separate Financial Statements and IAS 34 Inter Financial Reporting has not resulted in any significant changes to the Group and Company s accounting policies and the effects on the amounts reported for the current or prior years have been disclosed. At the date of authorisation of these financial statements, the following Standards applicable to the Group and Company were in issue but not yet effective: Standards: Effective date: IFRS 7 Financial Instruments Disclosures Annual periods beginning on or after 1 January 2013 IFRS 9 Financial Instruments Classification and Measurement Annual periods beginning on or after 1 January 2013 IFRS 10 Consolidated Financial Statements Annual periods beginning on or after 1 January 2013 IFRS 12 Disclosure of Interest in Annual periods beginning on or after 1 January 2013 Other Entities IFRS 13 Fair value measurement Annual periods beginning on or after 1 January 2013 IAS 1 Presentation of Financial Statements Annual periods beginning on or after 1 January 2013 IAS 16 Property, Plant and Equipment Annual periods beginning on or after 1 January 2013 IAS 19 Employee Benefits Annual periods beginning on or after 1 January 2013 IAS 27 Separate Financial Statements Annual periods beginning on or after 1 January 2013 IAS 28 Investments in Associated and Annual periods beginning on or after 1 January 2013 Joint Ventures IAS 32 Financial Instruments: Presentation Annual periods beginning on or after 1 January 2013 IAS 34 Interim Financial Reporting Annual periods beginning on or after 1 January 2013 The directors anticipate that the adoption of these Standards in future periods will have no material impact on the financial statements of the Group and Company. 2. SIGNIFICANT ACCOUNTING POLICIES The financial statements have been prepared in accordance with International Financial Reporting Standards and the requirements of the Companies Act of South Africa. The financial statements have been prepared on the historical cost basis, except for the fair valuing of financial instruments. The principal accounting policies adopted are set out below. 2.1 Basis of consolidation The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company (its subsidiaries). Control is achieved where the Company has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. The results of subsidiaries acquired or disposed of during the year are included in the consolidated statements of comprehensive income from the effective date of acquisition or up to the effective date of disposal, as appropriate.

65 63 >> Notes to the annual financial statements for the year ended 31 March 2013 Where necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with those used by the Group. All intra-group transactions, balances, income and expenses are eliminated on consolidation. The non-controlling interests in the net assets of consolidated subsidiaries are identified separately from the Group s equity therein. The non-controlling interests consist of the amount of those interests at the date of the original business combination and the non-controlling shareholders share of changes in equity since the date of the combination. Losses applicable to the non-controlling shareholder in excess of the non-controlling interests share in the subsidiary s equity are allocated against the interests of the Group except to the extent that the non-controlling shareholder has a binding obligation and is able to make an additional investment to cover the losses. 2.2 Business combinations The acquisition of subsidiaries is accounted for using the purchase method. The cost of the acquisition is measured at the aggregate of the fair values, at the date of exchange, of assets given, liabilities incurred or assumed, and equity instruments issued by the Group in exchange for control of the acquiree, plus any costs directly attributable to the business combination. The acquiree s identifiable assets, liabilities and contingent liabilities that meet the conditions for recognition under IFRS 3 are recognised at their fair values at the acquisition date, except for non-current assets (or disposal groups) that are classified as held for sale in accordance with IFRS 5 Non-Current Assets Held for Sale and Dis Operations, which are recognised and measured at fair value less costs to sell. Goodwill arising on acquisition is recognised as an asset and initially measured at cost, being the excess of the cost of the business combination over the Group s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities recognised. If, after reassessment, the Group s interest in the net fair value of the acquiree s identifiable assets, liabilities and contingent liabilities exceeds the cost of the business combination, the excess is recognised immediately in profit or loss. The interest of non-controlling shareholders in the acquiree is initially measured at the noncontrolling shareholders proportion of the net fair value of the assets, liabilities and contingent liabilities recognised. 2.3 Goodwill Goodwill arising on the acquisition of a subsidiary or a jointly controlled entity represents the excess of the cost of acquisition over the Group s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities of the subsidiary or jointly controlled entity recognised at the date of acquisition. Goodwill is initially recognised as an asset at cost and is subsequently measured at cost less any accumulated impairment losses. For the purpose of impairment testing, goodwill is allocated to each of the Group s cash-generating units expected to benefit from the synergies of the combination. Cash-generating units to which goodwill has been allocated are tested for impairment annually, or more frequently when there is an indication that the unit may be impaired. If the recoverable amount of the cash-generating unit is less than the carrying amount of the unit, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro rata on the basis of the carrying amount of each asset in the unit. An impairment loss recognised for goodwill is not reversed in a subsequent period. On disposal of a subsidiary or a jointly controlled entity, the attributable amount of goodwill is included in the determination of the profit or loss on disposal.

66 64 >> Notes to the annual financial statements for the year ended 31 March Investments in associates The results of associates are incorporated in the consolidated financial statements using the equity method of accounting. Under the equity method, investments in associates are carried in the consolidated statement of financial position at cost as adjusted for post-acquisition changes in the Group s share of the net assets of the associate, less any impairment in the value of individual investments. Losses of an associate in excess of the Group s interest in that associate (which includes any long-term interests that, in substance, form part of the Group s net investment in the associate) are recognised only to the extent that the Group has incurred legal or constructive obligations or made payments on behalf of the associate. 2.5 Revenue recognition Revenue is measured at the fair value of the consideration received or receivable and represents amounts receivable for goods and services provided in the normal course of business, net of discounts and sales-related taxes. Sales of goods are recognised when goods are delivered and title has passed. Interest income is accrued on the time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to that asset s net carrying amount. Dividend income from investments is recognised when the shareholders rights to receive payment have been established. 2.6 Leasing Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases. The Group as lessor When assets are leased out under finance leases, the present value of the lease payments is recognised as a receivable. Finance income is recognised over the term of the lease using the net investment method, which reflects a constant periodic rate of return. Rental income from operating leases is recognised on the straight-line basis over the term of the relevant lease. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognised on the straight-line basis over the lease term. Payments received in advance is recognised as deferred income and recognised in revenue over the term of the agreement. The Group as lessee Assets held under finance leases are recognised as assets of the Group at their fair value at the inception of the lease or, if lower, at the present value of the minimum lease payments. The corresponding liability to the lessor is included in the statements of financial position as a finance lease obligation. Lease payments are apportioned between finance charges and a reduction of the lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are charged to profit or loss. Rentals payable under operating leases are charged to profit or loss on the straight-line basis over the term of the relevant lease. Benefits received and receivable as an incentive to enter into an operating lease are also spread on the straight-line basis over the lease term. 2.7 Foreign currencies The individual financial statements of each Group entity are presented in the currency of the primary economic environment in which the entity operates (its functional currency). For the purpose of the consolidated financial statements, the results and financial position of each entity are expressed in currency units, which are the functional currency of the Company, and the presentation currency for the consolidated financial statements.

67 65 >> Notes to the annual financial statements for the year ended 31 March 2013 In preparing the financial statements of the individual entities, transactions in currencies other than the entity s functional currency (foreign currencies) are recorded at the rates of exchange prevailing on the dates of the transactions. At each statement of financial position date, monetary items denominated in foreign currencies are retranslated at the rates prevailing on the statements of financial position date. Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing on the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated. Exchange differences arising on the settlement of monetary items, and on the retranslation of monetary items, are included in profit or loss for the period. Exchange differences arising on the retranslation of non-monetary items carried at fair value are included in profit or loss for the period except for differences arising on the retranslation of non-monetary items in respect of which gains and losses are recognised directly in equity. For such non-monetary items, any exchange component of that gain or loss is also recognised directly in equity. In order to hedge its exposure to certain foreign exchange risks, the Group enters into forward contracts and options. For the purpose of presenting consolidated financial statements, the assets and liabilities of the Group s foreign operations are expressed in currency units using exchange rates prevailing on the statements of financial position date. Income and expense items are translated at the average exchange rates for the period, unless exchange rates fluctuated significantly during that period, in which case the exchange rates at the dates of the transactions are used. Exchange differences arising, if any, are classified as equity and transferred to the Group s translation reserve. Such translation differences are recognised in profit or loss in the period in which the foreign operation is disposed of. Goodwill and fair value adjustments arising on the acquisition of a foreign operation are treated as assets and liabilities of the foreign operation and translated at the closing rate. 2.8 Borrowing costs All borrowing costs are recognised in profit or loss in the period in which they are incurred. Borrowing costs directly attributable to the acquisition or construction of assets that necessarily take a substantial period of time to get ready for their intended use are added to the cost of those assets, until such time as the assets are substantially ready for their intended use. 2.9 Government grants Government grants towards staff re-training costs are recognised in profit or loss over the periods necessary to match them with the related costs and are deducted in reporting the related expense Retirement benefit costs Defined contribution pension and provident funds Current contributions to the defined contribution pension and defined contribution provident funds registered in terms of the Pension Fund Act, 1956 are based on current service and current salaries and are charged against income for the year. Payments to defined contribution retirement benefit plans are charged as an expense as they are incurred. Other post retirement obligations The Group provides a post-retirement medical aid subsidy to some of its retirees. The entitlement to these benefits is conditional on the employee having pensionable service from a particular date and continuous medical aid membership of a qualifying scheme from the same date. The expected costs of these benefits are accrued over the period of employment.

68 66 >> Notes to the annual financial statements for the year ended 31 March Taxation Income tax expense represents the sum of the tax currently payable and deferred tax. The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit as reported in the statements of comprehensive income because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Group s liability for current tax is calculated using tax rates that have been enacted or substantively enacted at the statement of financial position date. Deferred tax is recognised on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and are accounted for using the statement of financial position liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit. Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries and associates, and interests in joint ventures, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. The carrying amount of deferred tax assets is reviewed at each statements of financial position date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset realised. Deferred tax is charged or credited to profit or loss, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity. Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off tax assets against tax liabilities and when they relate to income taxes levied by the same taxation authority and the Group intends, and is able to, settle its tax assets and liabilities on a net basis Property, plant and equipment Land is stated at cost whilst other fixed assets are stated at cost, less accumulated depreciation and any accumulated impairment losses. Buildings are stated at cost less accumulated depreciation and any accumulated impairment losses, with the exception of certain buildings which are stated at deemed cost less accumulated depreciation and accumulated impairment losses. Deemed cost was determined in terms of an election made as permitted by IFRS 1. Assets held under finance leases are depreciated over their expected useful lives on the same basis as owned assets or, where shorter, the term of the relevant lease. Depreciation is calculated on the straight-line basis, so as to write the cost of the assets down to their residual values, at the following per annum rates, which are considered to approximate the estimated useful lives of the assets concerned. Buildings 1 10% Plant and equipment 10 20% Leasehold improvements Over the period of the lease Motor vehicles 20 25% Furniture and fittings 20% Office equipment 10 33,3% Computer equipment 20 33,3% Golf cars 20% Forklifts 25%

69 67 >> Notes to the annual financial statements for the year ended 31 March 2013 The gain or loss arising on the disposal or retirement of an item of property, plant and equipment is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in profit or loss. Golf cars, forklifts and equipment rental fleets are accounted for as part of property, plant and equipment and are depreciated over their relevant contractual rental terms Other intangible assets Other intangible assets consist of computer software which is amortised on the straight-line basis over a period of three years. Re-acquired agency rights, which are calculated with reference to the agency s forecast trading results to the end of the contracted lease term are amortised over the remaining contractual term of the agency agreement. Intangible assets relating to distribution agreements, trademarks, brands and customer relationships arising on the acquisition of subsidiaries are amortised over a period of five to seven years Impairment of tangible and intangible assets excluding goodwill At each statement of financial position date, the Group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those 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). Where it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs. Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease. Where an impairment loss subsequently reverses, the carrying amount of the asset (cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase Inventories Inventories are stated at the lower of cost and net realisable value. Cost comprises direct materials and, where applicable, direct labour costs and those overheads that have been incurred in bringing the inventories to their present location and condition. Cost is calculated using the first-in first-out method. Net realisable value represents the estimated selling price less all estimated costs of completion and costs to be incurred in marketing, selling and distribution Financial instruments Financial assets and financial liabilities are recognised on the Group s statements of financial position when the Group becomes a party to the contractual provisions of the instrument.

70 68 >> Notes to the annual financial statements for the year ended 31 March 2013 Trade receivables Trade receivables are measured at initial recognition at fair value, and are subsequently measured at amortised cost using the effective interest rate method as reduced by appropriate allowances for estimated irrecoverable amounts. These allowances are recognised in profit or loss when there is objective evidence that the asset is impaired. The allowance recognised is measured as the difference between the asset s carrying amount and the present value of estimated future cash flows discounted at the effective interest rate computed at initial recognition. Investments Investments are recognised and derecognised on a trade date basis where the purchase or sale of an investment is under a contract whose terms require delivery of the investment within the timeframe established by the market concerned, and are initially measured at fair value, plus directly attributable transaction costs. At subsequent reporting dates, debt securities that the Group has the expressed intention and ability to hold to maturity (held-to-maturity debt securities) are measured at amortised cost using the effective interest rate method, less any impairment loss recognised to reflect irrecoverable amounts. An impairment loss is recognised in profit or loss when there is objective evidence that the asset is impaired, and is measured as the difference between the investment s carrying amount and the present value of estimated future cash flows discounted at the effective interest rate computed at initial recognition. Impairment losses are reversed in subsequent periods when an increase in the investment s recoverable amount can be related objectively to an event occurring after the impairment was recognised, subject to the restriction that the carrying amount of the investment at the date the impairment is reversed, shall not exceed what the amortised cost would have been had the impairment not been recognised. Investments other than held-to-maturity debt securities are classified as either investments held for trading or as available-for-sale, and are measured at subsequent reporting dates at fair value. Where securities are held for trading purposes, gains and losses arising from changes in fair value are included in profit or loss for the period. For available-for-sale investments, gains and losses arising from changes in fair value are recognised directly in equity, until the security is disposed of or is determined to be impaired, at which time the cumulative gain or loss previously recognised in equity is included in the profit or loss for the period. Impairment losses recognised in profit or loss for equity investments classified as available-for-sale are not subsequently reversed through profit or loss. Impairment losses recognised in profit or loss for debt instruments classified as available-for-sale are subsequently reversed if an increase in the fair value of the instrument can be objectively related to an event occurring after the recognition of the impairment loss. Cash and cash equivalents Cash and cash equivalents comprise cash on hand and demand deposits, and other short-term highly liquid investments that are readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value. Financial liabilities and equity Financial liabilities and equity instruments issued by the Group are classified according to the substance of the contractual arrangements entered into and the definitions of a financial liability and an equity instrument. An equity instrument is any contract that evidences a residual interest in the assets of the Group after deducting all of its liabilities. The accounting policies adopted for specific financial liabilities and equity instruments are set out below.

71 69 >> Notes to the annual financial statements for the year ended 31 March 2013 Bank borrowings Interest-bearing bank loans and overdrafts are initially measured at fair value, and are subsequently measured at amortised cost, using the effective interest rate method. Any difference between the proceeds (net of transaction costs) and the settlement or redemption of borrowings is recognised over the term of the borrowings in accordance with the Group s accounting policy for borrowing costs. Trade payables Trade and other payables are initially measured at fair value, and are subsequently measured at amortised cost, using the effective interest rate method. Equity instruments Equity instruments issued by the Company are recorded at the proceeds received, net of direct issue costs. Guaranteed repurchase liability Guaranteed repurchase liabilities are initially and subsequently measured at present value using the effective interest rate method. Minority put option The minority put option is initially and subsequently measured at present value using the effective interest rate method. Derivative financial instruments and hedge accounting The Group s activities expose it primarily to the financial risks of changes in foreign exchange rates and interest rates. The Group uses derivative financial instruments (primarily foreign currency forward contracts and interest rate swaps) to hedge its risks associated with foreign currency fluctuations relating to certain firm commitments, forecast transactions and interest rate fluctuations relating to bank loans. The use of financial derivatives is governed by the Group s policies approved by the board of directors, which provide written principles on the use of financial derivatives consistent with the Group s risk management strategy. The Group does not use derivative financial instruments for speculative purposes. Derivative financial instruments are initially measured at fair value on the contract date, and are remeasured to fair value at subsequent reporting dates. Derivatives embedded in other financial instruments or other non-financial host contracts are treated as separate derivatives when their risks and characteristics are not closely related to those of the host contract and the host contract is not carried at fair value with unrealised gains or losses reported in profit or loss Provisions Provisions are recognised when the Group has a present obligation as a result of a past event, and it is probable that the Group will be required to settle that obligation. Provisions are measured at the directors best estimate of the expenditure required to settle the obligation at the statements of financial position date, and are discounted to present value where the effect is material. The warranty provision represents warranty income that has been deferred and which is recognised on a systematic basis over the warranty term. It is expected that the majority of warranty claims will be incurred within two years after the reporting period.

72 70 >> Notes to the annual financial statements for the year ended 31 March Share-based payments The Group issues equity-settled share-based payments to certain employees. Equity-settled share-based payments are measured at fair value (excluding the effect of non-market-based vesting conditions) at the date of the grant. The fair value determined at the grant date of the equity-settled share-based payments is expensed on the straight-line basis over the vesting period, based on the Group s estimate of the shares that will eventually vest and is adjusted for the effect of nonmarket-based vesting conditions. Fair value is measured using the Black-Scholes pricing model. The expected life used in the model is adjusted, based on management s best estimate, for the effects of non-transferability, exercise restrictions and behavioural considerations. The Group modified its accounting for share-based payments originally treated as equity-settled due to the extent of share-based payments settled in cash from 1 April 2011 until 31 March Share-based payments to be settled after 31 March 2013 have been treated as equity-settled Key judgements made by management Preparing financial statements in conformity with IFRS requires judgements and assumptions that affect reported amounts and related disclosures. Actual results could differ from these estimates. Certain accounting policies have been identified as involving particularly complex or subjective judgements or assessments as follows: Asset lives and residual values Property, plant and equipment is depreciated over its useful life taking into account residual values, where appropriate. The actual lives of the assets and residual values are assessed annually and may vary depending on a number of factors. In reassessing asset lives, factors such as technological innovation, product life cycles and maintenance programmes are taken into account. Residual value assessments consider issues such as future market conditions, the remaining life of the asset and projected disposal values. Intangible assets other than goodwill Intangible assets other than goodwill arising as a result of business combinations are valued using specific valuation methodologies pertaining to the underlying nature of the intangible and are amortised over their useful lives. The actual lives of the intangible assets are assessed annually and may vary depending on a number of factors. In reassessing intangible asset lives, factors such as technological innovation are taken into account. Warranty provisions Management bases their estimation for warranty provision on the number of products under warranty at year-end, the age of these products and the remaining period under warranty. Actual warranty costs may vary depending on a number of factors. Valuation of derivatives Derivatives valuations are determined by discounting the contractual stream of payments/receipts using appropriate discount rates at the valuation date. Valuation of investments Investments are carried at cost or fair value. The directors determine the fair value on an annual basis by assessing the future cash flows associated with the investment.

73 71 >> Notes to the annual financial statements for the year ended 31 March BUSINESS SEGMENTS 3.1 Segment revenues and operating profit The following is an analysis of the Group s revenue and operating profit by reportable segments: Segment revenue Segment operating profit Restated 2013 Restated R 000 R 000 R 000 R 000 Engineering consumables Capital equipment Building supplies Group, financing and other operations (31 287) The accounting policies of the reportable segments are the same as the Group's accounting policies. Revenue and operating profit are the measures reported to the chief operating decision maker for the purposes of assessment of segment performance. The comparative information has been restated to include the Building supplies segment due to the segment now becoming material in the current financial year as a result of acquisitions. 3.2 Segment assets and liabilities Restated R 000 R 000 Segment assets Engineering consumables Capital equipment Building supplies Group, financing and other operations Total assets Segment liabilities Engineering consumables Capital equipment Building supplies Group, financing and other operations Total liabilities For the purposes of monitoring segment performance and allocating resources between segments: all assets are allocated to reportable segments other than investments in associates and tax assets. all liabilities are allocated to reportable segments other than current and deferred tax liabilities.

74 72 >> Notes to the annual financial statements for the year ended 31 March BUSINESS SEGMENTS 3.3 Other segment information Depreciation and amortisation Additions to property, plant and equipment and intangible assets Restated 2013 Restated R 000 R 000 R 000 R 000 Engineering consumables Capital equipment Building supplies Group, financing and other operations Total Geographical segments The Group has not reported segment information by geographical location as the operations occur substantially within Southern Africa. The Singapore operations have been included in the Capital equipment segment and accounts for 47% of the total assets and 41% of the total liabilities in that segment. Customers The Group has not reported segment information by customer as no customer contributes in excess of 10% of the Group's total revenue.

75 73 >> Notes to the annual financial statements for the year ended 31 March OPERATING PROFIT (LOSS) BEFORE FINANCE COSTS, INTEREST AND DIVIDENDS RECEIVED Operating profit (loss) before finance costs, interest and dividends received is arrived at after taking into account the following items: Group Company Restated R 000 R 000 R 000 R 000 Income Profit on disposal of property, plant and equipment Realised and unrealised net profits on money market investments Gain on modification of terms of financial investment Gain on partial derecognition of financial investment Negative goodwill recognised on acquisition of subsidiary Release of deferred profit on issue of shares by subsidiary Credit default swap derivative gain Interest rate swap derivative gain 946 Expenses Auditors remuneration audit fees Current year Prior year 150 Other services Depreciation* Buildings Plant and equipment Leasehold improvements Motor vehicles Furniture and fittings Office equipment Computer equipment Amortisation of intangible assets Put option and interest rate swap derivatives Impairment of property, plant and equipment Goodwill impairment Loss on disposal of property, plant and equipment Employment costs Operating lease expenses Premises Equipment Motor vehicles Other 224 Pension and provident fund contributions Share options expense * This excludes depreciation charge relating to the forklift, golf car and equipment rental fleets disclosed in cost of sales of R (2012: R ).

76 74 >> Notes to the annual financial statements for the year ended 31 March FINANCE COSTS Group Company Restated R 000 R 000 R 000 R 000 Bank overdrafts and loans Foreign exchange premiums Finance leases Guaranteed repurchase liabilities Long-term borrowings Total INTEREST RECEIVED Bank balances and cash Finance leases Foreign exchange gains Long-term receivables Total TAXATION South African normal taxation Current taxation current year prior year (9 315) (700) Deferred taxation current year (42 465) (18 418) prior year (2 025) 139 Secondary taxation on companies Foreign taxation Total Reconciliation of taxation rate % % % % Statutory taxation rate 28,0 28,0 28,0 28,0 Permanent differences and exempt income (18,8) (17,2) (25,9) (27,9) Secondary taxation on companies 0,2 Recognition of deferred taxation on taxation losses not previously recognised (0,7) Utilisation of taxation losses (0,3) Prior year under provision 1,0 Foreign taxation 1,2 Capital gains taxation 0,9 Effective taxation rate 9,2 13,1 2,1 0,1 Estimated tax losses in the Group amount to R (2012: R ). A deferred tax asset of R (2012: R ) has been raised with respect of certain of these tax losses due to the uncertainty in estimating the remaining tax losses.

77 75 >> Notes to the annual financial statements for the year ended 31 March 2013 Group Company Restated R 000 R 000 R 000 R TAXATION 7.1 Deferred taxation Net balance at the beginning of the year (784) Restatement due to modification of share appreciation rights (refer note 44) Arising on acquisition of subsidiaries (10 020) (793) Arising on fair valuation of treasury shares 784 Charge from the statement of comprehensive income Net balance at the end of the year Comprising: Capital allowances (25 780) (6 448) Tax losses Provisions Other temporary differences (2 605) Total Disclosed as: Deferred taxation asset Deferred taxation liability (25 256) (4 767) Total EARNINGS PER SHARE Basic earnings per share (cents) Diluted earnings per share (cents) Normalised earnings per share (cents) Basic earnings per share The earnings and weighted average number of ordinary shares used in the calculation of basic earnings per share are as follows: Profit for the year attributable to owners of the Company Weighted average number of ordinary shares for the purposes of basic earnings per share

78 76 >> Notes to the annual financial statements for the year ended 31 March 2013 Group Company Restated R 000 R 000 R 000 R EARNINGS PER SHARE 8.2 Diluted earnings per share The earnings used in the calculation of diluted earnings per share are as follows: Profit for the year attributable to owners of the Company Weighted average number of ordinary shares used in the calculation of diluted earnings per share Reconciliation of weighted average number of ordinary shares Basic number of ordinary shares Share appreciation rights Put granted to directors in terms of the loan scheme (535) Diluted number of ordinary shares Normalised earnings per share This calculation is based on the weighted average number of ordinary shares in issue during the year. It is derived, after taxation and non-controlling interest, as follows: Group Attributable Preference to equity Gross Taxation Minorities dividends holders R 000 R 000 R 000 R 000 R Earnings attributable to ordinary shareholders (75 224) (28 468) (21 912) Adjusted for: Gain on partial derecognition of financial investment ( ) ( ) Normalised earnings for purposes of normalised earnings per share (75 224) (28 468) (21 912) Group Restated Cents Cents Normalised earnings for the year Weighted average number of ordinary shares for the purposes of basic earnings per share

79 77 >> Notes to the annual financial statements for the year ended 31 March EARNINGS PER SHARE 8.4 Headline earnings per share This calculation is based on the weighted average number of (2012: ) ordinary shares in issue during the year. It is derived, after taxation and non-controlling interest, as follows: Group Attributable Preference to equity Gross Taxation Minorities dividends holders R 000 R 000 R 000 R 000 R Earnings attributable to ordinary shareholders (75 224) (28 468) (21 912) Adjusted for: Net profit on disposal of property, plant and equipment (3 551) (1 799) Impairment of property, plant and equipment 18 (5) (11) 2 Impairment of goodwill Negative goodwill (52 066) (52 066) Headline earnings for purposes of headline earnings per share (74 235) (27 721) (21 912) Restated Earnings attributable to ordinary shareholders (71 921) (23 032) Adjusted for: Release of deferred profit on issue of shares by subsidiary (11 610) (9 738) Profit on disposal of investments (5 914) 828 (5 086) Net profit on disposal of property, plant and equipment (2 625) 735 (1 890) Impairment of goodwill Impairment of property, plant and equipment (3 780) (1 800) Headline earnings for purposes of headline earnings per share (72 266) (24 832) Group Restated R 000 R 000 Headline earnings for purpose of diluted headline earnings per share Headline earnings per share (cents) Diluted headline earnings per share (cents)

80 78 >> Notes to the annual financial statements for the year ended 31 March 2013 Group R 000 R PROPERTY, PLANT AND EQUIPMENT Land and buildings Gross carrying amount Accumulated depreciation and impairment Plant and equipment Gross carrying amount Accumulated depreciation and impairment Leasehold improvements Gross carrying amount Accumulated depreciation and impairment Motor vehicles Gross carrying amount Accumulated depreciation and impairment Furniture and fittings Gross carrying amount Accumulated depreciation and impairment Office equipment Gross carrying amount Accumulated depreciation and impairment Computer equipment Gross carrying amount Accumulated depreciation and impairment Rental assets Golf cars Gross carrying amount Accumulated depreciation and impairment Rental assets Forklifts Gross carrying amount Accumulated depreciation and impairment Rental assets Equipment Gross carrying amount Accumulated depreciation and impairment Net carrying value Total gross carrying amount Total accumulated depreciation and impairment Details of land and buildings A register containing details of land and buildings is available for inspection during business hours at the registered office of the Company by members or their duly authorised agents. 9.2 Encumbrances The Group has encumbered land and buildings, motor vehicles and golf cars having a carrying value of R273 million (2012: R199 million) to secure mortage bonds and finance lease liabilities as detailed in note 27.

81 79 >> Notes to the annual financial statements for the year ended 31 March PROPERTY, PLANT AND EQUIPMENT 9.3 Reconciliation of movement in carrying value Group R 000 R 000 Land and buildings Balance at the beginning of the year Additions Acquisitions of subsidiaries Impairment raised (13 500) Depreciation for the year (6 121) (4 230) Disposals (1 418) Foreign currency translation Balance at the end of the year Plant and equipment Balance at the beginning of the year Additions Acquisitions of subsidiaries Impairment raised (18) Depreciation for the year (8 678) (5 637) Adjustment 279 Disposals (392) (612) Foreign currency translation 41 Balance at the end of the year Leasehold improvements Balance at the beginning of the year Additions Acquisitions of subsidiaries Depreciation for the year (2 487) (2 295) Disposals (57) Foreign currency translation 87 Balance at the end of the year Motor vehicles Balance at the beginning of the year Additions Acquisitions of subsidiaries Impairment raised (54) Depreciation for the year (12 452) (7 218) Disposals (4 302) (1 872) Foreign currency translation 55 Balance at the end of the year Furniture and fittings Balance at the beginning of the year Additions Acquisitions of subsidiaries Reclassification to office equipment (302) Depreciation for the year (8 127) (2 319) Adjustment 260 Disposals (30) Foreign currency translation 19 Balance at the end of the year

82 80 >> Notes to the annual financial statements for the year ended 31 March 2013 Group R 000 R PROPERTY, PLANT AND EQUIPMENT 9.3 Reconciliation of movement in carrying value Office equipment Balance at the beginning of the year Additions Acquisitions of subsidiaries Reclassification from furniture and fittings 302 Depreciation for the year (2 637) (5 995) Adjustment (223) Disposals (204) (233) Foreign currency translation 22 Balance at the end of the year Computer equipment Balance at the beginning of the year Additions Acquisitions of subsidiaries Depreciation for the year (8 216) (5 364) Disposals (96) (219) Foreign currency translation 55 Balance at the end of the year Rental assets Golf cars Balance at the beginning of the year Additions Depreciation for the year (3 764) (4 100) Disposals (855) (806) Balance at the end of the year Rental assets Forklifts Balance at the beginning of the year Additions Depreciation for the year (12 537) (13 763) Adjustment Disposals (8 668) (7 402) Balance at the end of the year Rental assets Machinery Balance at the beginning of the year Additions Depreciation for the year (7 315) (4 152) Disposals (979) Balance at the end of the year Total Balance at the beginning of the year Additions Acquisitions of subsidiaries Net impairment raised (18) (13 554) Depreciation for the year* (72 334) (55 073) Other Disposals (17 001) (11 144) Foreign currency translation Balance at the end of the year * Depreciation relating to the forklift hire fleet, golf cars fleet and equipment is included in cost of sales.

83 81 >> Notes to the annual financial statements for the year ended 31 March PROPERTY, PLANT AND EQUIPMENT 9.4 Assets classified as held for sale Group R 000 R 000 Property, plant and equipment Investment properties Total As at 31 March 2013, certain property, plant and equipment and investment properties of the Group were presented as assets held for sale following the intention of the Group s management to sell the property, plant and equipment and investment properties. These assets area carried in the financial statements at their net book value. Group Company R 000 R 000 R 000 R FINANCIAL INVESTMENTS Unlisted securities Business Venture Investments No 1048 (Pty) Ltd redeemable non-cumulative preference shares The preference shares are redeemable from 8 August 2011 until 8 February 2016 in semi-annual instalments. The present value of future dividend obligations was declared and paid on 8 August 2012 and were invested in promissory notes. The preference shares are pledged to Standard Bank as security for its obligations under a credit default swap (refer note 27). Business Venture Investments No 1057 (Pty) Ltd redeemable non-cumulative preference shares The preference shares are redeemable from 8 August 2011 until 8 February 2016 in semi-annual instalments. The present value of future dividend obligations was declared and paid on 8 August 2012 and were invested in promissory notes. The preference shares are pledged to Standard Bank as security for its obligations under a credit default swap (refer note 27). Gryphon Financial Engineering (Pty) Ltd preference shares The preference shares are redeemable on 15 August The preference shares are redeemable on 15 August The present value of future dividend obligations was declared and paid on 28 March 2013 and were invested in ordinary shares (refer note 15). A put option has been granted to a Group company as security for the investment for which Gryphon Support Services (Pty) Ltd ceded Government bonds as collateral to secure their performance obligations under the put option granted (refer note 28).

84 82 >> Notes to the annual financial statements for the year ended 31 March 2013 Group Company R 000 R 000 R 000 R FINANCIAL INVESTMENTS Unlisted securities Business Venture Investments No (Pty) Ltd Promissory Notes The promissory notes are redeemable from 8 August 2012 until 7 August 2014 in semi-annual instalments. Interest is received at a rate of 6,96% per annum compounded semi-annually. These promissory notes are secured by a credit default swap. FirstRand Bank listed bonds FRB These bonds earn interest at Jibar plus 2,9% payable quarterly and are tradable on the Johannesburg Stock Exchange. Other Total Current portion of financial investments ( ) ( ) ( ) (46 072) Long-term portion of financial investments Directors valuation GOODWILL Goodwill arising on acquisition of subsidiaries Group R 000 R 000 At the beginning of the year Gross value Accumulated impairment (5 217) (4 080) Acquisition of subsidiaries Goodwill impaired during the year (2 791) (1 137) At the end of the year Gross value Accumulated impairment (8 008) (5 217) The directors assess the carrying value of goodwill with reference to the future cash flows of the cashgenerating unit. The goodwill has been assessed for impairment and no further impairment is required.

85 83 >> Notes to the annual financial statements for the year ended 31 March 2013 Group R 000 R OTHER INTANGIBLE ASSETS Computer software Gross carrying value Accumulated amortisation (16 497) (12 414) Foreign currency translation 149 Re-acquired agency rights Gross carrying value Accumulated amortisation (4 278) (2 044) Distribution agreements Gross carrying value Accumulated amortisation (260) Trademarks, house brands and non-compete intangibles Gross carrying value Accumulated amortisation (667) Contractual and non-contractual customer relationships Gross carrying value Accumulated amortisation (7 236) Total Gross carrying value Accumulated amortisation (28 938) (14 458) Foreign currency translation 149 Net carrying value Reconciliation of movement in carrying value Balance at the beginning of the year Acquisition of subsidiaries Additions Disposals (350) Amortisation for the year (14 480) (6 292) Foreign currency translation 149 Balance at the end of the year FINANCIAL ASSET Credit default swap derivative Serec Capital (Pty) Ltd (note 27.1) The fair value of the credit default swap derivative was determined by discounting the contractual stream of payments using the zero swap curve at the valuation date.

86 84 >> Notes to the annual financial statements for the year ended 31 March 2013 Group R 000 R FINANCE LEASE RECEIVABLES Due within one year Due in the second to fifth years inclusive Unearned interest on finance leases (2 946) (277) Net investment in finance leases Net investment in finance leases can be analysed as follows: Due within one year Due in the second to fifth years inclusive Net investment in finance leases The Group entered into finance lease agreements for certain of its equipment and forklifts. The average term of finance leases entered into is 5 years. The interest rate inherent in the leases is fixed at the contract date for the entire lease term. The average effective interest rate contract is prime-linked. 15. LONG-TERM RECEIVABLES Serec Capital (Pty) Ltd This amount relates to fees and interest receivable on the credit default swap relating to the Serec loan, which has a fixed date of repayment of 15 August Pixiu Optimal Investments (Pty) Ltd ordinary shares The financial investment does not have a redemption date nor a determinable redemption amount. The returns on the investment are variable and need to be reinvested. The investment is secured by a put option against Gryphon Support Services (Pty) Ltd which is in turn secured by South African Government Bonds of an equivalent value in terms of a Credit Support Annexure to the ISDA Master Agreement. Directors loans to acquire Invicta Holdings Limited shares The loans earn interest of 6% per annum. Invicta Holdings Limited shares have been provided as security at a ratio of 150% of the initial loans provided. The directors have a put option equal to 75% of the initial loan value which can be exercised during the seven year loan period. All regulatory approvals have been obtained for this transaction. Term loan to a foreign group company supplier The term loan bears interest at 6% per annum and is repayable by December The supplier has given notice that the loan may be repaid by 31 October 2013 and should this not occur the loan is convertible at the discretion of the group company into equity of the foreign supplier, the value of which exceeded the loan at the year-end. Other loans Total Current portion of long-term receivables (2 633) Long-term portion of long-term receivables

87 85 >> Notes to the annual financial statements for the year ended 31 March INVESTMENT IN SUBSIDIARIES Details of the Company s subsidiaries at 31 March are as follows: Group R 000 R 000 Shares at cost Total Group Proportion of ownership interest and voting power held Place of Name of subsidiary Principal activity operation % % Direct holdings Bearing Man 1955 Ltd Investment holding company South Africa October Winds Trading 48 (Pty) Ltd Investment holding company South Africa Humulani Investments (Pty) Ltd* Investment holding company South Africa Invicta Offshore Holdings** Investment holding company Mauritius 67 0 Indirect holdings Bearing Man (Botswana) (Pty) Ltd Trading company Botswana Bearing Man (Namibia) (Pty) Ltd Trading company Namibia Bearing Man (Swaziland) (Pty) Ltd Trading company Swaziland Bearing Man (Mozambique) Lda Trading company Mozambique Bearing Man (Zambia) (Pty) Ltd Trading company Zambia Bearing Man (Maputo) (Pty) Ltd Trading company Maputo Equipment Spare Parts (Africa) (Pty) Ltd Trading company South Africa Invicta Properties (Pty) Ltd Property holding company South Africa Salestalk 452 (Pty) Ltd Property holding company South Africa Oscillating Systems Technology Africa (Pty) Ltd Trading company South Africa Erf 29 Samcor Park (Pty) Ltd Property holding company South Africa Screen Doctor (Pty) Ltd Trading company South Africa Disa Equipment (Pty) Ltd Trading company South Africa Criterion Equipment (Pty) Ltd Trading company South Africa Goldquest International Hydraulics SA (Pty) Ltd Trading company South Africa Humulani Marketing (Pty) Ltd Trading company South Africa Farmmac SA (Pty) Ltd Trading company South Africa Tiletoria Cape (Pty) Ltd Trading company South Africa Spring Lights 149 (Pty) Ltd Trading company South Africa Wegezi Power Holdings (Pty) Ltd Trading company South Africa Wegezi Transformers (Pty) Ltd Trading company South Africa Trendy Property Investments (Pty) Ltd Trading company South Africa SET Agency (Pty) Ltd Trading company South Africa Alpha Bearings (Pty) Ltd Trading company South Africa Turnkey Hydraulics (KZN) (Pty) Ltd Trading company South Africa Rumiset (Pty) Ltd Trading company South Africa 100 0

88 86 >> Notes to the annual financial statements for the year ended 31 March INVESTMENT IN SUBSIDIARIES Group Proportion of ownership interest and voting power held Place of Name of subsidiary Principal activity operation % % Indirect holdings Hi-Quip Hydraulics (Pty) Ltd Trading company South Africa Humulani Marketing (Mozambique) Lda Trading company South Africa Edmik Engineering (Pty) Ltd Trading company South Africa Smart Taps (Pty) Ltd Trading company South Africa Man-Dirk (Pty) Ltd Trading company South Africa MRO Produtos Industriais Lda Trading company Mozambique 80 0 Nova Vida Limitada Trading company Mozambique 80 0 Makona Hardware & Industrial (Pty) Ltd Trading company South Africa 67 0 Makona Hardware & Industrial (Mpumalanga) (Pty) Ltd Trading company South Africa 67 0 GK-IT Environmental Services (Pty) Ltd Trading company South Africa 67 0 Tool and Electric Distributors (Pty) Ltd Trading company South Africa General Electrical Mechanical Tool & Engineering Manufacturers (Pty) Ltd Trading company South Africa Metric and Imperial Tool Systems (Pty) Ltd Trading company South Africa Gem Tool Company (Pty) Ltd Trading company South Africa Man-Dirk East (Pty) Ltd Trading company South Africa 74 0 Operational Marketing (Pty) Ltd Trading company South Africa Invicta Offshore Holdings** Investment holding company Mauritius 33 0 Invicta Asian Holdings (Pte) Ltd Investment holding company Singapore 75 0 Kian Ann Engineering (Pte) Ltd Trading company Singapore 75 0 Kian Ann Engineering Trading (Shanghai) Co. Ltd Trading company Singapore 75 0 Kian Ann Districentre (Pte) Ltd Trading company Singapore 75 0 PT. Haneagle Heavyparts Indonesia Trading company Indonesia 74 0 Kian Ann Investment (Pte) Ltd Trading company Singapore 75 0 Transmec Engineering (Pte) Ltd Trading company Singapore 38 0 Kian Chue Hwa (Industries) (Pte) Ltd Trading company Singapore 60 0 PT. Allegiance Primaparts Indonesia Trading company Singapore 60 0 Aptopart (Pty) Ltd Investment holding company South Africa 60 0 MacNeil (Pty) Ltd Trading company South Africa 53 0 MacNeil George (Pty) Ltd Trading company South Africa 53 0 MacNeil Plastics (Pty) Ltd Trading company South Africa 53 0 MacNeil Profiles (Pty) Ltd Trading company South Africa 53 0 MacNeil Bloemfontein (Pty) Ltd Trading company South Africa 53 0 MacNeil Durban (Pty) Ltd Trading company South Africa 53 0 MacNeil JHB (Pty) Ltd Trading company South Africa 51 0 MacNeil Eastern Cape (Pty) Ltd Trading company South Africa 27 0 Upfront Agencies (Pty) Ltd Trading company South Africa 13 0 * The 5% and 20% of the ordinary issued share capital of Humulani Investments (Pty) Ltd owned by the Humulani Employee Investment Trust and Theramanzi Investments (Pty) Ltd (owned by the Humulani Empowerment Trust) respectively, have been consolidated in terms of SIC12. Refer the Directors' Report on page 53 of the 2013 Annual Report for further details. ** The 33% of the ordinary issued share capital of Invicta Offshore Holdings is owned by Bearing Man 1955 Limited.

89 87 >> Notes to the annual financial statements for the year ended 31 March INVESTMENT IN SUBSIDIARIES The Group acquired 74,5% of the share capital of Kian Ann Engineering (Pte) Ltd, effective 1 February 2013, 100% of the share capital of Man-Dirk (Pty) Ltd effective 1 August 2012, 100% of the share capital of Operational Marketing (Pty) Ltd effective 1 April 2012, and 53% of the share capital of MacNeil (Pty) Ltd effective 1 October Further details pertaining to these acquisitions are noted in Acquisition of subsidiaries note 43. The Company s attributable interest in the aggregate profits and losses (after taxation and non-controlling interest) of its subsidiaries is as follows: Group Restated R 000 R 000 Profits Losses INVESTMENT IN ASSOCIATES Proportion of ownership interest and voting power held Place of incorporation Name of associates Principal activity and operation % % Compact Computers Solutions (Pty) Ltd Trading company South Africa Commercial Car Components Logistics Ltd Trading company England 25 0 D&D Lifting and Crane Services (Pty) Ltd Trading company South Africa 48 0 Summarised financial information in respect of the Group s associates is set out below. Group R 000 R 000 Total assets Total liabilities (7 689) (1 437) Net assets Revenue for the year Profit for the year Group s share of profits of associates Reconciliation of carrying amount: Original investment in associate Acquisition of associate (part of acquisition of subsidiary) 312 Acquisition of associate Equity accounted earnings, net of taxation (cumulative since acquisition) Dividends received (cumulative since acquisition) (2 925) (2 500) Foreign currency translation (748) Carrying value at the end of the year

90 88 >> Notes to the annual financial statements for the year ended 31 March LOANS TO SUBSIDIARIES Group Company R 000 R 000 R 000 R 000 Bearing Man 1955 Limited Humulani Investments (Pty) Limited Humulani Marketing (Pty) Limited The loans are unsecured, bear no interest and no fixed terms of repayment have been negotiated. 19. INVENTORIES Merchandise Work-in-progress Total The cost of inventories recognised as an expense in respect of write-downs of inventory to net realisable value Cost of inventory recognised in the statement of comprehensive income TRADE AND OTHER RECEIVABLES Trade receivables Provision for doubtful debts ( ) (39 000) Prepayments Other receivables Total The directors consider that the carrying value of trade and other receivables approximates fair value at year-end. Movement in provision for doubtful debts Opening balance Acquisition of subsidiaries Amounts written off during the year, net of recoveries (1 216) (1 011) Net provision raised during the year Closing balance

91 89 >> Notes to the annual financial statements for the year ended 31 March TRADE AND OTHER RECEIVABLES Group Company R 000 R 000 R 000 R 000 Trade receivables past due and not impaired All past due receivable balances have been assessed for recoverability and it is believed that their credit quality remains intact. A significant portion of the balance relates to Kian Ann (Pte) Ltd ( Kian Ann ), whose policy is to provide in full for trade receivables older than 12 months as well as those who have not paid for two consecutive months on the basis that 70% of their trade receivables have been their customers for 5 years and longer. 60 days days More than 120 days Total Trade receivables past due and impaired 60 days days More than 120 days Total ORDINARY SHARE CAPITAL Authorised (2012: ) ordinary shares of 5 cents each Issued (2012: ) ordinary shares of 5 cents each at the beginning of the year ordinary shares of 5 cents each cancelled during the prior year (18) (18) ordinary shares of 5 cents each issued during the year (2012: ) ordinary shares of 5 cents each at the end of the year Number of shares Number of shares Unissued shares The unissued ordinary shares are under the control of the directors in terms of a resolution of members passed at the last annual general meeting. This authority remains in force until the next annual general meeting At the Company s annual general meeting held on 14 August 2012, a special resolution was passed giving the directors general authority to repurchase shares not exceeding 20% of the issued share capital on the open market. This authority remains in force until the next annual general meeting.

92 90 >> Notes to the annual financial statements for the year ended 31 March 2013 Group Company R 000 R 000 R 000 R SHARE PREMIUM The ordinary share premium is made up as follows: Balance at the beginning of the year Ordinary shares cancelled during the year (10 395) (10 395) Ordinary shares issued during the year Balance at the end of the year TREASURY SHARES (2012: ) ordinary shares of 5 cents each (73) (99) Share premium on (2012: ) ordinary shares (44 420) (58 227) Shares not derecognised as a result of the put option on the directors loans (35 605) (35 605) Balance at the end of the year (80 098) (93 931) 24. ORDINARY DIVIDENDS* Final 177 cents paid on 9 July 2012 (2012: 126 cents) to shareholders registered in the books of the Company on 6 July Interim 89 cents paid on 10 December 2012 (2012: 77 cents) to shareholders registered in the books of the Company on 7 December Dividends received on treasury shares (4 232) (5 511) Total * In accordance with IAS 10 the final dividend of 179 cents per share (2012: 177 cents) proposed by the directors has not been reflected in the financial statements as it had not been declared at the year-end. 25. PREFERENCE SHARES Authorised cumulative, non-participating preference shares of no par value Issued cumulative, non-participating preference shares of no par value The Group has no contractual obligation to redeem the preference shares and dividends are only payable if declared by the Group. The unissued preference shares are under the control of the directors in terms of the resolution of members passed at the extraordinary general meeting held on 12 November This authority remains in force for 18 months from this date.

93 91 >> Notes to the annual financial statements for the year ended 31 March GUARANTEED REPURCHASE LIABILITIES Group Company R 000 R 000 R 000 R 000 Present value at the beginning of the year Interest accrued during the year Liabilities settled during the year (5 465) (3 780) Present value at the end of the year Guaranteed repurchase liability can be analysed as follows: Due within one year Due within the second to fifth years inclusive The Group has entered into repurchase undertakings with financial institutions over certain forklifts sold to customers. The Company will repurchase these forklifts from the financial institution at a predetermined value at the end of the customers' rental term with the respective financial institution. The directors consider that the carrying value of the residual value liability approximates fair value. 27. LONG TERM BORROWINGS Secured borrowings Finance lease agreements The lease agreements are repayable between 36 and 60 months and bear interest at fixed rates between 10,5% and 11,5% per annum. The leases are repaid in equal monthly instalments. No arrangements have been entered into for contingent rental payments. The borrowings are secured by certain motor vehicles and golf cars as detailed in note 9.2. Mortgage bonds The mortgage bonds are repayable over 120 months. The mortgage bonds attract interest at Jibar plus 2,05% per annum. The capital on the Jibar linked bonds are repayable from the third year onwards. The Jibar linked variable rates bonds have been swapped for fixed rate loans for a period of two years. These bonds are secured by certain land and buildings as referred to in note 9.2. Balance carried forward

94 92 >> Notes to the annual financial statements for the year ended 31 March LONG TERM BORROWINGS Group Company R 000 R 000 R 000 R Secured borrowings Balance brought forward Debentures The debentures bear interest at 12,5% per annum and are redeemable in semi-annual instalments from 8 August 2011 to 8 February The rights of the debenture holders to the repayment of interest and capital are subordinated in favour the claims of the creditors of certain of the group s companies. The debentures are secured by certain preference share investments by means of a credit default swap transaction entered into with Standard Bank of South Africa Limited as detailed in note 10. Serec Capital (Pty) Ltd loan The loan bears interest at a compounded quarterly fixed rate of 11,73% per annum. The fixed date of repayment is 15 August The Group may however elect to repay the loan at an earlier date without premium or penalty. The loan is secured by a credit default swap as detailed in note 13. Industrial Development Corporation loans The loans bear interest at a rate between the prime rate less 3% and 6% per annum until 31 March 2015 and thereafter the interest rate reduces to a rate between 0,4% and 0,7% below the prime rate. The loans are redeemable in 48 to 120 monthly instalments. These loans are secured by sureties provided by Group companies. Preference shares issued to Depfin Investments (Pty) Ltd The preference shares were settled in the current year. Preference shares issued to Standard Bank The preference shares mature in 2018 and have a dividend coupon rate of Jibar plus 2%, and the dividends are payable semi-annually. Domestic Medium term Note Program The note mature between 2014 to 2017 and bears interest at three month Jibar plus 2,2% to 2,5% per annum payable quarterly. These notes are secured by cross-sureties provided by Group companies. Balance carried forward

95 93 >> Notes to the annual financial statements for the year ended 31 March LONG TERM BORROWINGS Group Company R 000 R 000 R 000 R Secured borrowings Balance brought forward Short-term loan from Southchester RF (Pty) Ltd The loan bears interest at Jibar plus 0,75% and is repayable on 3 June The loan is secured by an investment in FirstRand Bank bonds (FRB11) (refer note 10). Short-term loan from DBS Bank and OCBC Bank The loan bears interest at an aggregate of the variable swap offer rate and the applicable margin rate which varies between 2,75% and 3% per annum. The loan is repayable on 6 August This loan is secured by cross-sureties provided by Group companies. Short-term loan from Standard Bank The loan bears interest at Jibar plus 2% and is repayable on 1 August The loan is secured by a Swap entered into with HSBC. Loan from UOB Singapore The amounts payable are secured, bears interest at 2,1% per annum. The loan is repayable in 36 monthly instalments. The monthly instalments commenced in April 2012 and will mature in March As at year-end the covenant on the loan had been breached and remedied subsequent to year-end. Consequently the loan has been reclassified as a current liability Unsecured borrowings Other borrowings The amounts payable are unsecured, interest free and no fixed repayment terms have been set. The loans are long-term in nature. Other borrowings The amounts payable are unsecured, bear interest at a range of 2,2% to 2,9% per annum. The loans are repayable in 10 to 16 equal quarter to semi-annual instalments by March Balance carried forward

96 94 >> Notes to the annual financial statements for the year ended 31 March LONG TERM BORROWINGS Group Company R 000 R 000 R 000 R Unsecured borrowings Balance brought forward Financial liability arising on minority put option Financial liability arising as a result of a contractual put option on the non-controlling interest in Invicta Asian Holdings (Pte) Ltd. Gryphon Financial Engineering (Pty) Ltd This amount relates to fees and interest payable on the put option relating to the Gryphon preference shares, which has a fixed date of repayment of 15 August NSM Holdings (Pty) Ltd The loan bears interest at prime overdraft plus 2% is unsecured and no fixed repayment term have been set. Trust receipts and bills payables Trust receipts and bills payable are unsecured, bear interest at a range of 1,2% to 2,2% per annum and have an average maturity of 3 months from the end of the reporting period. Contractual earn-out liabilities The amounts payable are interest-free and have been determined on the basis of the underlying contractual arrangements. No fixed repayment terms have been set. Invicta Share Trust loan The loan is unsecured, interest free and there are no fixed terms of repayment. The loan is long term in nature. Total borrowings Current portion of long term borrowings ( ) ( ) Long term portion of long-term borrowings Borrowings are repayable as follows: Due within one year Due within second to fifth years inclusive After five years Total There is no limit on the Group s borrowings and guarantees in terms of the Company s Memorandum of Incorporation.

97 95 >> Notes to the annual financial statements for the year ended 31 March 2013 Group Company Restated R 000 R 000 R 000 R FINANCIAL LIABILITIES Put option derivative on the Gryphon Financial Engineering (Pty) Ltd preference shares (refer note 10) Interest rate swap derivative The fair values of the put options and the interest rate swap derivative were determined by discounting the contractual stream of payments using the zero swap curve at the valuation date. 29. SHARE APPRECIATION RIGHTS LIABILITY Opening balance Restated due to modification to share appreciation rights (refer note 44) Share appreciation rights exercised ( ) (56 892) Share appreciation rights charged to statement of comprehensive income Closing balance TRADE AND OTHER PAYABLES Trade payables Other payables Deferred income Total PROVISIONS Employee benefit provisions Warranties and service provisions Total Movements in provisions Employee benefit provisions Balance at the beginning of the year Charged (credited) to income (7 900) Acquisition of subsidiaries (included in Trade and other payables) Balance at the end of the year Warranties and service provisions Balance at the beginning of the year (Credited) charged to income (34 141) Balance at the end of the year The provision has been recognised for expected warranty claims on certain products sold during the last three financial years.

98 96 >> Notes to the annual financial statements for the year ended 31 March 2013 Group Company Restated R 000 R 000 R 000 R RECONCILIATION OF PROFIT BEFORE TAXATION TO CASH GENERATED FROM OPERATIONS Profit before taxation Adjusted for: Depreciation Amortisation of intangible assets Impairment of property, plant and equipment Interest rate swap and put option gain Net profit on disposal of property, plant and equipment (3 551) (2 625) Finance costs Dividends received ( ) ( ) (40 589) ( ) Share of profits of associate (3 018) (1 022) Interest received ( ) ( ) (4 399) (253) Adjustment to property, plant and equipment (3 371) Movement in foreign currency translation reserve Negative goodwill (52 066) Goodwill impaired Cash generated (utilised) before movements in working capital (3 515) Working capital changes: ( ) ( ) Decrease (increase) in inventories ( ) (Increase) decrease in trade and other receivables ( ) ( ) (Decrease) increase in trade and other payables and provisions ( ) Cash generated from operations DIVIDENDS PAID TO GROUP SHAREHOLDERS Amounts unpaid at the beginning of the year Final dividend paid 9 July 2012 (2012: 11 July 2011) Interim dividend paid 10 December 2012 (2012: 5 December 2011) Preference dividends accrued Dividends received on treasury shares (4 232) (5 511) Amounts unpaid at the end of the year (28 733) (2 262) (22 270) (852) Total

99 97 >> Notes to the annual financial statements for the year ended 31 March 2013 Group Company R 000 R 000 R 000 R TAXATION PAID Amounts unpaid (prepaid) at the beginning of the year (1 098) Acquisition of subsidiary Charged to the statement of comprehensive income Amounts (unpaid) prepaid at the end of the year (11 368) (24 634) 243 (684) Total CASH AND CASH EQUIVALENTS Bank and cash balances Bank overdrafts ( ) (55 083) Total Group Bank Trading R 000 R 000 Banking and trading facilities Gross facility balances Facilities utilised Facilities available These facilities are callable on notice being given by the facility provider. These facilities are secured by cross sureties provided by Group companies. The directors are of the view that there are adequate facilities in place to operate for the next twelve months. 36. CONTINGENT LIABILITIES The Group has no contingent liabilities in the current year. In the prior year the Group had guaranteed certain finance facilities granted to customers of ABSA Bank amounting to R

100 98 >> Notes to the annual financial statements for the year ended 31 March DIRECTORS EMOLUMENTS 2013 Audit Total and Perfor- before Remu- mance shareneration Salary Retire- related based Directors Committee and ment remune- payfees fees benefits benefits ration ments R 000 R 000 R 000 R 000 R 000 R 000 Executive directors C Barnard A Goldstone AM Sinclair CE Walters Non executive directors CH Wiese JS Mthimunye DI Samuels JD Wiese LS Sherrell Total Executive directors C Barnard A Goldstone* AM Sinclair CE Walters Non executive directors CH Wiese JS Mthimunye DI Samuels JD Wiese LR Sherrell Total * A Goldstone elected to receive LBSIRs in lieu of a greater bonus for LBSIRs were granted on 11 June 2012 at a weighted average cost of R66,14.

101 99 >> Notes to the annual financial statements for the year ended 31 March DIRECTORS EMOLUMENTS Share appreciation rights exercised by the directors in 2013: Out- Average standing Outstan- weighted rights Granted Taken up ding prices on beginning Strike during during rights end Date rights of year price the year the year of year granted taken up 2013 A Goldstone , Mar-08 77, , Mar-09 96, , Mar-10 94, , Mar-11 66, Jun-12 C Barnard , Mar-09 96, , Mar-10 94, , Mar-11 CE Walters , Mar-08 69, , Mar , , Mar-10 93, , Mar-11 AM Sinclair , Mar-08 74, , Mar-09 93, , Mar-10 93, , Mar A Goldstone , Mar 08 53, , Mar , Mar 10 42, Mar 11 C Barnard , Mar 07 42, , Mar 08 42, , Mar , Mar 10 42, Mar 11 CE Walters , Sep 06 47, , Mar 07 50, , Mar , Mar , Mar 10 42, Mar 11 AM Sinclair , Mar 07 53, , Mar , Mar , Mar 09 42, Mar 11 The share appreciation rights exercised by the directors in 2012 amounted to R35 million.

102 100 >> Notes to the annual financial statements for the year ended 31 March RETIREMENT BENEFITS The Group contributes to a defined contribution pension plan and a defined contribution provident plan which are governed by the Pension Fund Act, 1956 and equivalent funds outside South Africa. No actuarial valuation of the plans is required. All staff are members of a fund and the costs of providing retirement benefits are charged to the statement of comprehensive income as they are incurred. Group Company R 000 R 000 R 000 R COMMITMENTS Commitments in respect of unexpired rental agreements for premises: Payable within twelve months Payable thereafter Total Commitments in respect of unexpired rental agreements for motor vehicles: Payable within twelve months Payable thereafter Total Commitments in respect of unexpired rental agreements for office equipment: Payable within twelve months Payable thereafter Total Commitments in respect of contracted capital expenditure Expenditure will be financed from existing cash facilities.

103 101 >> Notes to the annual financial statements for the year ended 31 March FINANCIAL RISK MANAGEMENT The Group is considered to be exposed to interest rate, credit, liquidity and foreign currency risk. Interest rate management The interest rate profile of total borrowings is as follows: Redemption Interest Description Currency period rate % p.a. R 000 R 000 Bank overdrafts ZAR N/A 8,25 10, Fixed rate borrowings ZAR ,00 13, Fixed rate borrowings SGD , Variable rate borrowings ZAR ,50 14, Variable rate borrowings SGD ,20 3, The Group is exposed to interest rate risk on its variable rate borrowings. The exposure to interest rate risk is managed using derivatives, where it is considered appropriate, and through a closely monitored cash management system. The impact of a change in the interest rate of 2% will have an effect of approximately R42 million (2012: R11 million) on the statement of comprehensive income. Credit risk management Potential areas of credit risk consist of trade accounts receivable and short-term cash investments. Trade accounts receivable consist of a widespread customer base. Group companies monitor the financial position of their customers on an on-going basis. Where considered appropriate, use is made of credit guarantee insurance. The granting of credit is controlled by application and account limits. Provision is made for specific bad debts and at the year end management did not consider there to be any material credit risk exposure that was not already covered by credit guarantee or a bad debt provision (refer to note 20 for further detail in this regard). It is group policy to deposit short-term cash investments with only the major banks. Liquidity risk management The Group manages liquidity risk by monitoring forecast cash flows and ensuring that adequate unutilised borrowing facilities are maintained. The following table details the Group s contractual maturities on its financial liabilities (excluding the credit default swap, put option and interest rate swap derivatives): Less than 2 to 5 More than 1 year years 5 years Total R 000 R 000 R 000 R Mortgage bonds Serec Capital loan Debentures Preference shares Domestic medium term note program Loans Financial liability arising on minority put option Finance lease liabilities and unsecured borrowings Guaranteed repurchase liability Trade and other payables Total Restated Mortgage bonds Serec Capital loan Debentures Preference shares Domestic medium term note program Finance lease liabilities and unsecured borrowings Share appreciation rights liability Guaranteed repurchase liabilities Trade and other payables Total

104 102 >> Notes to the annual financial statements for the year ended 31 March FINANCIAL RISK MANAGEMENT Foreign currency risk management The majority of the Group's monetary assets and liabilities are denominated in South African Rand. The Kian Ann monetary assets and liabilities are denominated in Singapore Dollar together with the assets and liabilities of the BMG foreign entities which are denominated in various foreign currencies. ZAR SGD OTHER TOTAL Foreign currency monetary assets and liabilities R'000 R'000 R'000 R'000 Total assets Total liabilities ( ) ( ) ( ) ( ) The Group utilises currency derivatives to eliminate or reduce the exposure to its foreign currency denominated assets and liabilities, and to hedge future transactions. The Group has entered into certain forward exchange contracts in various currencies which will be utilised for the settlement of orders placed on suppliers and which are due for payment in the coming year. It is the Group's policy not to speculate in foreign exchange contracts. At year-end, open forward exchange contracts are marked-to-market and the profits and losses arising on the contracts are recognised in the statement of comprehensive income. The estimated net fair values have been determined at the year end, using available market information and appropriate valuation methodologies. As at year-end, no uncovered foreign exchange denominated transactions were in existence. The forward exchange contracts in place at the year-end to cover current and future inventory purchases, are as follows: Foreign Average currency exchange Rand 000 rate US Dollar , Euro , Yen , British Pound , US Dollar , Euro , Yen , British Pound , These forward exchange contracts mature within twelve months. Hedging of net investments in Kian Ann Bearing Man 1955 Limited had a firm commitment to invest SGD81,8 million in Invicta Offshore Holdings (Pte) Ltd on 1 February 2013 as a result of the Scheme of arrangement approved by Kian Ann shareholders. Humulani Marketing (Pty) Ltd entered into FEC transactions totalling SGD60 million to hedge the movement in the foreign currency risk. The hedging relationship effectiveness is measured using the movement in the foreign currency for the FEC transactions compared to the movement in the foreign currency up to date of payment, which was 1 February February 2013 Fair value R'000 FEC transactions Net investment in Kian Ann Management considers the hedge as being effective.

105 103 >> Notes to the annual financial statements for the year ended 31 March FINANCIAL RISK MANAGEMENT Capital risk management Capital is managed to ensure that operations are able to continue as a going concern, whilst maximising return to stakeholders through an appropriate debt and equity structure. The capital structure of the Group consists of debt, which includes borrowings, cash and cash equivalents, preference shares, debentures, a credit default swap and equity. Capital risk was reviewed in detail by the board in the corporate restructure process and assessment of new acquisitions. Financial instruments Financial instruments as disclosed in the statement of financial position include trade receivables and payables, other receivables and payables, long-term debtors, overdrafts and short-term borrowings, long-term borrowings and shareholders for dividend. Group Restated R 000 R 000 Categories of financial instruments Financial assets Investments at amortised cost Financial investments Financial assets at fair value Financial asset Loans and receivables at amortised cost Finance lease receivables Long-term loans Trade and other receivables Bank balances and cash Total Financial liabilities Financial liabilities at fair value Financial liabilities Financial liabilities at amortised cost Borrowings Guaranteed repurchase liabilities Trade and other payables Bank overdrafts Total

106 104 >> Notes to the annual financial statements for the year ended 31 March FINANCIAL RISK MANAGEMENT Fair value disclosure The following is an analysis of the financial instruments that are measured subsequent to initial recognition at fair value. They are grouped into levels 1 to 3 based on the extent to which the fair value is observable. The levels are classified as follows: Level 1 fair value is based on quoted prices in active markets for identical financial assets or liabilities Level 2 fair value is determined using directly observable inputs other than Level 1 inputs Level 3 fair value is determined on inputs not based on observable market data 31 March 2013 Level 1 Level 2 Level 3 Financial assets at fair value Financial asset Financial liabilities at fair value Financial liabilities Trade and other payables March 2012 Level 1 Level 2 Level 3 Financial assets at fair value Financial asset Financial liabilities at fair value Financial liabilities Trade and other payables DIRECTORS INTEREST IN THE SHARES OF THE COMPANY Number of shares held Direct Indirect Direct Indirect interest interest interest interest Ordinary shares C Barnard A Goldstone DI Samuels LR Sherrell AM Sinclair CE Walters CH Wiese Preference shares C Barnard A Goldstone LR Sherrell AM Sinclair JS Mthimunye CH Wiese JD Wiese

107 105 >> Notes to the annual financial statements for the year ended 31 March RELATED PARTY TRANSACTIONS Transactions between the Company and its subsidiaries, which are related parties, are limited to dividends received from subsidiaries of R59 million (2012: R766 million). Remuneration of key management personnel The remuneration of key management personnel of the Group, is set out below: Group R 000 R 000 Long- and short-term employee benefits Retirement benefits Total Services provided by Bravura Equity Services ( Bravura ) Bravura is a related entity to one of the directors and major shareholders in the group. Bravura has provided financial services to the group with regard to its BEE transaction in 2006, giving rise to certain investments and borrowings (refer notes 10 and 27 respectively). During the current and prior year, Bravura provided financial services to the counterparty in the transaction giving rise to the investments and derivative instruments (refer note 10 and13) and borrowings (refer note 27 and 28). 43. ACQUISITION OF SUBSIDIARIES The significant acquisitions undertaken in the current year related to Man-Dirk (Pty) Ltd, Operational Marketing (Pty) Ltd, Kian Ann Engineering (Pte) Ltd and MacNeil (Pty) Ltd. These subsidiaries are all operational within the same segments as the current Group, thus the board identified these businesses based on their ability to assist the group with its expansion and growth. The goodwill and negative goodwill are based on the provisional fair values of the assets and liabilities, including identifiable intangible assets at acquisition date. Refer to note 16 for effective dates and holdings. Effective control was obtained through the purchase of the majority equity of these subsidiaries. Non-controlling interest is measured as a percentage of the equity of the subsidiary. The transaction costs for these acquisitions amounted to an aggregated number of R50 million. Subsidiary Industry Man-Dirk (Pty) Ltd Operational Marketing (Pty) Ltd MacNeil (Pty) Ltd Kian Ann Engineering (Pte) Ltd Industrial distributor of tools and equipment to the mining and industrial sector Lubrication and filtration systems with a strong field service presence Wholesale supplier of sanitary ware, brass ware, taps, plumbing fixtures, plastic piping and related products to the building material sector of South Africa and neighbouring countries A large distributor of heavy earthmoving machinery parts and diesel engine components

108 106 >> Notes to the annual financial statements for the year ended 31 March ACQUISITION OF SUBSIDIARIES Group R 000 R 000 Fair value of net assets acquired: Property, plant and equipment Assets held for resale Intangible assets Long-term receivable Financial assets Investment in associates 312 Other assets 367 Bank and cash (11 077) Inventories Trade and other receivables Deferred taxation (10 020) (793) Long-term borrowings ( ) Trade and other payables ( ) (46 909) Current portion of long-term borrowings ( ) Taxation liabilities (28 157) (1 295) Non-controlling interest ( ) (47) Net tangible asset value Non-controlling interest acquired in existing subsidiaries Fair value of net assets acquired Bank and cash ( ) Net fair value of net assets acquired Cash outflow on acquisitions Fair value of net assets acquired Total goodwill Positive goodwill Negative goodwill (52 066) Profit after taxation since acquisition date included in the consolidated results for the year Revenue since acquisition date included in the consolidated results for the year Profit after taxation should the business combinations have been included for the entire year Revenue should the business combinations have been included for the entire year MODIFICATION OF THE TREATMENT OF SHARE APPRECIATION RIGHTS During the 2012 financial year and 2013 financial year certain share appreciation rights (SAR s) were settled in cash at the discretion of the board. IFRS 2 paragraph 41 states that the entity has a present obligation to settle in cash if the choice of settlement in equity instruments has no commercial substance, or the entity has a past practice or a stated policy of settling in cash, or generally settles in cash whenever the counterparty asks for cash settlement. The board made the decision to modify the accounting treatment for the SAR s settled in cash based on the past practice of settling in cash, which results in a present obligation for the relevant SAR s.

109 107 >> Notes to the annual financial statements for the year ended 31 March MODIFICATION OF THE TREATMENT OF SHARE APPRECIATION RIGHTS Statement of financial position Restate- Effect of Total Opening ment restate- effects of Closing balance as of ment restate- balance as Restated originally opening during ment originally balance stated at balance at 2012 to 2012 stated at as at 1 April 1 April financial financial 31 March 31 March year year R 000 R 000 R 000 R 000 R 000 R 000 Assets Deferred taxation Equity Share appreciation rights reserve (27 096) (17 635) Retained earnings (52 033) (39 471) Liabilities Share appreciation rights liability (21 076) Statement of comprehensive income Share appreciation rights expense (33 504) (33 504) Taxation (2 349) (2 349) EARNINGS PER SHARE Basic earnings per share (cents) 50,92 Diluted earnings per share (cents) 47,54 Weighted average number of ordinary shares for the purposes of basic earnings per share Weighted average number of ordinary shares used in the calculation of diluted earnings per share RESTATEMENT OF OTHER COMPREHENSIVE INCOME In the 2012 annual financial statements, the following disclosures were made, which do not meet the definition of other comprehensive income, as per IAS 1. Subsequently, these have been excluded from other comprehensive income. Group 2012 R'000 Profit on treasury shares utilised to settle share appreciation rights Profit on disposal of treasury shares to directors Gain on change in control in subsidiaries EVENTS AFTER THE REPORTING PERIOD There were no events to report from the reporting period to the date of this report

110 108 >> Notice of annual general meeting Invicta Holdings Limited (Registration number 1966/002182/06) (Incorporated in the Republic of South Africa) Share code: IVT Ordinary Share ISIN: ZAE IVTP Preference Share ISIN: ZAE ( Invicta or the Company or the Group ) NOTICE OF ANNUAL GENERAL MEETING OF SHAREHOLDERS FOR THE YEAR ENDED 31 MARCH 2013 Notice is hereby given that the annual general meeting of shareholders of Invicta Holdings Limited will be held in the boardroom, Invicta Holdings Limited, 3rd Floor, Pepkor House, 36 Stellenberg Road, Parow Industria, Cape Town on Friday, 16 August 2013 at 10:00. The record date on which shareholders must be recorded as such in the register maintained by the transfer secretaries of the Company for the purposes of being entitled to attend and vote at the meeting is Thursday, 8 August 2013 and last date of trade is Thursday, 1 August Record date for determining which shareholders are entitled to receive the annual general meeting notice is Friday, 5 July All meeting participants will be required to provide identification. Compatible forms of identification include valid identity documents, driver s licences and passports. The purpose of the meeting is to transact the business set out below and to consider and, if deemed fit, to pass, with or without modification, the resolutions set out below. Note: i. For the special resolutions numbers 1 to 4 to be adopted, the support of 75% of the total number of votes exercised by shareholders, present in person or by proxy, is required. ii. For the ordinary resolutions numbers 1 to 4 and numbers 6 and 7 to be adopted, the support of more than 50% of the total number of votes exercised by shareholders, present in person or by proxy, is required. iii. For ordinary resolution number 5 to be adopted, the support of 75% of the total number of votes exercised by shareholders, present in person or by proxy, is required. Special Resolution 1 RESOLVED THAT, the Company and/or any subsidiary of the Company be and is hereby authorised by way of a general approval as contemplated in section 48 of the Companies Act 71 of 2008, as amended ( Act ), to acquire from time to time any of the issued ordinary shares of the Company, upon such terms and conditions and in such amounts as the directors of the Company may from time to time determine, but subject to the Memorandum of Incorporation of the Company, the provisions of the Act and the Listings Requirements of the JSE Limited ( JSE ), when applicable (each as presently constituted and amended from time to time). It is recorded that, as at the date of this report, the Listings Requirements of the JSE provide, inter alia, that the Company or any subsidiary of the Company may only make a general repurchase of the ordinary shares of the Company subject to the following: the repurchase of securities will be effected through the order book operated by the JSE trading system and done without any prior understanding or arrangement between the Company and the counterparty; authorisation thereto being given by the Memorandum of Incorporation of the Company; this general authority shall only be valid until the Company s next annual general meeting, provided that it shall not extend beyond 15 (fifteen) months from the date of passing of this special resolution; in determining the price at which the Company s ordinary shares are acquired by the Company in terms of this general authority, the maximum premium at which such ordinary shares may be acquired will be 10% (ten percent) of the weighted average of the market price at which such ordinary shares are traded on the JSE, as determined over the 5 (five) trading days immediately preceding the date of the repurchase of such ordinary shares by the Company; the acquisitions of ordinary shares in the aggregate in any one financial year do not exceed 20% (twenty percent) of the Company s issued ordinary share capital from the date of the grant of this general authority;

111 109 >> Notice of annual general meeting a resolution by the Board of Directors that has authorised the repurchase, that the Company and its subsidiary/ies have passed the solvency and liquidity test and that, since the test was performed, there have been no material changes to the financial position of the Group; the Company or its subsidiaries will not repurchase securities during a prohibited period as defined in paragraph 3.67 of the JSE Listings Requirements; when the Company has cumulatively repurchased 3% of the initial number of the relevant class of securities, and for each 3% (three percent) in aggregate of the initial number of that class acquired thereafter, an announcement will be made; and the Company only appoints one agent to effect any repurchase(s) on its behalf. Other disclosure in terms of the JSE Listings Requirements sections and 11.27, required for special resolution 1. Additional disclosure in terms of the JSE Listings Requirements section The JSE Listings Requirements require the following disclosure, some of which are elsewhere in the Integrated Annual Report of which this notice forms part as set out below: Directors and management pages 4 and 5; Major beneficial shareholders pages 46 and 47; Directors interests in ordinary shares page 104; and Share capital of the Company page 89. Litigation statement In terms of section of the JSE Listings Requirements, the directors, whose names are given on pages 4 and 5 of the Integrated Annual Report of which this notice forms part, are not aware of any legal or arbitration proceedings, including proceedings that are pending or threatened, that may have or have had in the recent past, being at least the previous 12 (twelve) months, a material effect on the Group s financial position. Directors responsibility statement The directors, whose names are given on pages 4 and 5 of the Integrated Annual Report, collectively and individually accept full responsibility for the accuracy of the in formation pertaining to this special resolution and certify that to the best of their knowledge and belief there are no facts that have been omitted which would make any statement false or misleading, and that all reasonable enquiries to ascertain such facts have been made and that these special resolutions contain all information required by law and the JSE Listings Requirements. Material changes Other than the facts and developments reported on in the Integrated Annual Report, there have been no material changes in the affairs or financial position of the Company and its subsidiaries since the date of signature of the audit report and the date of this notice. Statement of Board's intention The Board, at the date of this Integrated Annual Report, has no definite intention of repurchasing shares in Invicta on the open market of the JSE. It is, however proposed, and the Board believes it to be in the best interest of Invicta, that shareholders pass a special resolution granting the Company a general authority to acquire its own shares and permit subsidiary companies of Invicta to acquire shares in the Company. Pursuant to a general repurchase other than shares repurchased by one or more of the subsidiary companies to be held as treasury stock, application will be made to the JSE for the cancellation and delisting of the shares in question. The cancellation of the shares will be effected by way of a reduction of the ordinary share capital. Statement of directors The Company's directors undertake that after considering the effect of such maximum repurchase, for a period of 12 (twelve) months following the date of this notice of the annual general meeting: a. the Company and the Group will be in a position to repay their debts in the ordinary course of business;

112 110 >> Notice of annual general meeting b. the assets of the Company and the Group, being fairly valued in accordance with International Financial Reporting Standards, will be in excess of the liabilities of the Company and the Group; c. the share capital and reserves of the Company and the Group will be adequate for ordinary business purposes; d. the working capital will be adequate to continue the ordinary business purposes of the Company and the Group; and e. before entering the market to proceed with the repurchase, the Company's sponsor will confirm to the JSE in writing the adequacy of the Company s and the Group's working capital for the purposes of undertaking a repurchase of shares. Special Resolution 2 RESOLVED THAT, the remuneration of each nonexecutive director of the Company be approved, each by way of a separate vote, as a special resolution in terms of section 66 of the Act, for the 2014 financial year as follows: 2.1 Chairman of the Invicta Board R per annum 2.2 Chairman of the Audit Committee R per annum 2.3 Members of the Invicta Board R per meeting 2.4 Members of the BMG Board R per meeting 2.5 Members of the Humulani Board R per meeting 2.6 Members of the Audit Committee R per meeting 2.7 Members of Remuneration Committee R per annum Special Resolution 3 "RESOLVED THAT in terms of section 44(3)(a)(ii) of the Act, the provision from time to time of financial assistance (whether by way of loan, guarantee, the provision of security or otherwise) by the Company to any person, for the purposes of, or in connection with, the subscription of any option, or any securities, issued or to be issued by the Company or a related or inter-related company of the Company, or for the purchase of any securities of the Company or a related or inter-related company of the Company, be and is hereby approved. Such approval shall be in place for a period of two years from the date of adoption of this special resolution number 3 and be subject further to section 44(3)(b) of the Act which states that the board may not authorise such financial assistance unless the board is satisfied that (i) immediately after providing such financial assistance, the Company would satisfy the solvency and liquidity test contemplated in section 4 of the Act; and (ii) the terms under which the financial assistance is proposed to be given are fair and reasonable to the Company. Special Resolution 4 RESOLVED THAT in terms of section 45(3)(a)(ii) of the Act, the provision from time to time of financial assistance by the Company to any related or inter-related company of the Company, be and is hereby approved. Such approval shall be in place for a period of two years from the date of adoption of this special resolution number 4 and be subject further to section 45(3)(b) of the Act which states that the board may not authorise such financial assistance unless the board is satisfied that (i) immediately after providing such financial assistance, the Company would satisfy the solvency and liquidity test contemplated in section 4 of the Act; and (ii) the terms under which the financial assistance is proposed to be given are fair and reasonable to the Company.

113 111 >> Notice of annual general meeting Ordinary Resolution 1 To receive and consider the directors report, annual financial statements and the Group annual financial statements, as well as the Audit Committee report for the year ended 31 March Ordinary Resolution 2.1 to 2.4 To re-elect, each by way of a separate vote, the following directors who retire by rotation at the annual general meeting, but being eligible, offer themselves for re-election: 2.1 CH Wiese 2.2 DI Samuels 2.3 JD Wiese 2.4 JS Mthimunye Abbreviated biographical details of the above directors are set out on page 5 of this Integrated Annual Report. Ordinary Resolution 3 RESOLVED THAT shareholders endorse, through a non-binding advisory vote required by King III to ascertain the shareholder s view on the Company s remuneration policy and its implementation. The Company s remuneration report is set out on pages 37 to 40 of this Integrated Annual Report. Ordinary Resolution 4 RESOLVED THAT the authorised but unissued shares in the capital of the Company be and are hereby placed under the control and authority of the directors of the Company and that the directors of the Company be and are hereby authorised and empowered to allot, issue and otherwise dispose of such shares to such person or persons on such terms and conditions and at such times as the directors of the Company may from time to time and in their discretion deem fit, subject to the provisions of the Act, the Memorandum of Incorporation of the Company and the JSE Listings Requirements, where applicable (each as presently constituted and amended from time to time), such authority to remain in force until the next annual general meeting. Ordinary Resolution 5 RESOLVED THAT the directors of the Company be and they are hereby authorised by way of a general authority, to issue all or any of the authorised but unissued ordinary shares in the capital of the Company, or to allot, issue and grant options to subscribe for, all or any of the authorised but unissued ordinary shares in the capital of the Company, for cash, as and when they in their discretion deem fit, subject to the providers of the Act, the Memorandum of Incorporation of the Company, the Listings Requirements of the JSE, where applicable (each as presently constituted and ended from time to time). It is recorded that, as at the date of this report, the Listings Requirements of the JSE provide, inter alia, that the Company may only undertake a general issue for cash subject to the following: the equity securities which are the subject of the issue for cash must be of a class already in issue, or where this is not the case, must be limited to such securities or rights that are convertible into a class already in issue; any such issue will only be made to public shareholders as defined in the JSE Listings Requirements and not related parties, unless the JSE otherwise agrees; the number of shares issued for cash shall not in the aggregate in any one financial year exceed 15% (fifteen percent) of the Company s issued share capital of ordinary shares. The number of ordinary shares which may be issued shall be based on the number of ordinary shares in issue, added to those that may be issued in future (arising from the conversion of options/convertibles) at the date of such application, less any ordinary shares issued, or to be issued in future arising from options/ convertible ordinary shares issued during the current financial year, plus any ordinary shares to be issued pursuant to a rights issue which has been announced, is irrevocable and fully underwritten, or an acquisition which has had final terms announced;

114 112 >> Notice of annual general meeting this authority shall be valid until the Company s next annual general meeting, provided that it shall not extend beyond 15 (fifteen) months from the date that this authority is given; a paid press announcement giving full details, including the impact on the net asset value and earnings per share, will be published at the time after any issue representing, on a cumulative basis within 1 (one) financial year, 5% (five percent) or more of the number of shares in issue prior to the issue; and in determining the price at which an issue of shares may be made in terms of this authority, the maximum discount permitted will be 10% (ten percent) of the weighted average traded price on the JSE of those shares over the 30 (thirty) business days prior to the date that the price of the issue is determined or agreed by the directors of the Company. In terms of the JSE Listings Requirements, 75% (seventy-five percent) of the votes cast by shareholders present or represented by proxy at the annual general meeting must be cast in favour of ordinary resolution 5 for it to be approved. Ordinary Resolution 6 RESOLVED THAT the reappointment of Deloitte & Touche, Registered Auditors, as independent auditors of the Company and to appoint SBF Carter as the designated audit partner for the following year be confirmed. Ordinary Resolution 7.1 to 7.4 RESOLVED THAT, subject to the passing of ordinary resolution 2.2 to 2.4, the following independent non-executive directors be elected, each by way of a separate vote, as members of the Audit Committee of the Company for the period from 1 April 2013 until the conclusion of the next annual general meeting of the Company in July 2014: 7.1 DI Samuels (Chairman) 7.2 JS Mthimunye 7.3 LR Sherrell 7.4 JD Wiese (alternate to LR Sherrell and JS Mthimunye) Abbreviated biographical details of the above directors are set out on pages 4 and 5 of this Integrated Annual Report. Voting instructions In terms of the Act, any member entitled to attend and vote at the above meeting may appoint one or more persons as proxy, to attend and speak and vote in his stead. A proxy need not be a member of the Company. Forms of proxy must be deposited at the office of the transfer secretaries not later than 48 hours before the time fixed for the meeting (excluding Saturdays, Sundays and public holidays). If your Invicta shares have been dematerialised and are held in a nominee account, then your Participant, previously named Central Securities Depository Participant or broker, as the case may be, should contact you to ascertain how you wish to cast your vote at the annual general meeting and thereafter cast your vote in accordance with your instructions. If you have not been contacted it would be advisable for you to contact your Participant or broker, as the case may be, and furnish them with your instructions. If your Participant or broker, as the case may be, does not obtain instructions from you, they will be obliged to act in terms of your mandate furnished to them, or, if the mandate is silent in this regard, to abstain from voting. Dematerialised shareholders whose shares are held in a nominee account must not complete the attached form of proxy. Unless you advise your Participant or broker timeously in terms of the agreement between yourself and your Participant or broker by the cut-off time advised by them that you wish to attend the annual general meeting or send a proxy to represent you at the annual general meeting, your Participant or broker will assume you do not wish to attend the annual general meeting or send a proxy. If you wish to attend the annual general meeting, your Participant or broker will issue the necessary letter of representation to you to attend the annual general meeting. Shareholders who have dematerialised their shares through a Participant or broker, other than own name registered dematerialised shareholders, who wish to attend the annual general meeting, must

115 113 >> Notice of annual general meeting request their Participant or broker to issue them with a letter of representation, or they must provide the Participant or broker with their voting instructions in terms of the relevant custody agreement/mandate entered into between them and the Participant or broker. Shareholder rights In terms of the Act, shareholders have the right to be represented by proxy as stated herein. 1. At any time, a shareholder of the Company may appoint any individual, including an individual who is not a shareholder of the Company, as a proxy to: a. participate in, and speak and vote at, a shareholders meeting on behalf of the shareholder; or b. give or withhold written consent on behalf of the shareholder to a decision contemplated in section 60; provided that the shareholder may appoint more than one proxy to exercise voting rights attached to different shares held by the shareholder. 2. A proxy appointment: a. must be in writing, dated and signed by the shareholder; and b. remains valid for: i. one year after the date on which it was signed; or ii. any longer or shorter period expressly set out in the appointment, unless it is revoked in a manner contemplated in subsection (4)(c), or expires earlier as contemplated in subsection (8)(d). 3. Except to the extent that the Memorandum of Incorporation of the Company provides otherwise: a. a shareholder of the Company may appoint two or more persons concurrently as proxies, and may appoint more than one proxy to exercise voting rights attached to different securities held by the shareholder; b. a proxy may delegate the proxy s authority to act on behalf of the shareholder to another person, subject to any restriction set out in the instrument appointing the proxy; and c. a copy of the instrument appointing a proxy must be delivered to the Company, or to any other person on behalf of the Company, before the proxy exercises any rights of the shareholder at a shareholders meeting. 4. Irrespective of the form of instrument used to appoint a proxy: a. the appointment is suspended at any time and to the extent that the shareholder chooses to act directly and in person in the exercise of any rights as a shareholder; b. the appointment is revocable unless the proxy appointment expressly states otherwise; and c. if the appointment is revocable, a shareholder may revoke the proxy appointment by: i. cancelling it in writing, or making a later inconsistent appointment of a proxy; and ii. delivering a copy of the revocation instrument to the proxy, and to the Company. 5. The revocation of a proxy appointment constitutes a complete and final cancellation of the proxy s authority to act on behalf of the shareholder as of the later of: a. the date stated in the revocation instrument, if any; or b. the date on which the revocation instrument was delivered as required in subsection (4)(c)(ii). 6. If the instrument appointing a proxy or proxies has been delivered to the Company, as long as that appointment remains in effect, any notice that is required by this Act or the Company s Memorandum of Incorporation to be delivered by the Company to the shareholder must be delivered by the Company to a. the shareholder; or b. the proxy or proxies, if the shareholder has i. directed the company to do so, in writing; and ii. paid any reasonable fee charged by the company for doing so.

116 114 >> Notice of annual general meeting 7. A proxy is entitled to exercise, or abstain from exercising, any voting right of the shareholder without direction, except to the extent that the Memorandum of Incorporation, or the instrument appointing the proxy, provides otherwise. 8. If the company issues an invitation to shareholders to appoint one or more persons named by the Company as a proxy, or supplies a form of instrument for appointing a proxy: a. the invitation must be sent to every shareholder which is entitled to notice of the meeting at which the proxy is intended to be exercised; b. the invitation, or form of instrument supplied by the company for the purpose of appointing a proxy, must: i. bear a reasonably prominent summary of the rights established by this section; ii. contain adequate blank space, iii. provide adequate space for the shareholder to indicate whether the appointed proxy is to vote in favour of or against any resolution or resolutions to be put at the meeting, or is to abstain from voting; c. the Company must not require that the proxy appointment be made irrevocable; and d. the proxy appointment remains valid only until the end of the meeting at which it was intended to be used, subject to subsection (5). 9. Subsection (8)(b) and (d) do not apply if the Company merely supplies a generally available standard form of proxy appointment on request by a shareholder. By order of the Board C Barnard Company Secretary Johannesburg 17 July 2013

117 >> Form of proxy INVICTA HOLDINGS LIMITED Registration number 1966/002182/06 Incorporated in the Republic of South Africa Share code: IVT Ordinary Share ISIN: ZAE Share code: IVTP Preference Share ISIN: ZAE ('Invicta or 'the Company ) For use of shareholders who are: 1. Registered as such and who have not dematerialised their Invicta ordinary shares; or 2. Hold dematerialised Invicta ordinary shares in their own name at the Invicta annual general meeting to be held in the boardroom, Invicta Holdings Limited, 3rd Floor, Pepkor House, 36 Stellenberg Road, Parow Industria, Cape Town on Friday, 16 August 2013 at 10:00 ( the annual general meeting ). Dematerialised shareholders holding shares other than with own name registration, must inform their Participant or broker of their intention to attend the annual general meeting and request their Participant or broker to issue them with the necessary letter of representation to attend the annual general meeting in person and vote or provide their Participant or broker with their voting instructions should they not wish to attend the annual general meeting in person. These shareholders must not use this form of proxy. I/We (please print name in full) of (address) being a shareholder(s) of Invicta and holding ordinary shares hereby appoint (name in block letters) 1. or failing him 2. or failing him 3. the annual general meeting as my/our proxy to act for me/us at the annual general meeting which will be held on Friday, 16 August 2013 at 10:00 in the boardroom of Invicta Holdings Limited at 3rd Floor, Pepkor House, 36 Stellenberg Road, Parow Industria, Cape Town for the purposes of considering and, if deemed fit, passing with or without modification, the resolutions to be proposed thereat and at each adjournment or postponement thereof, and to vote for and/or against the resolutions and/or abstain from voting in respect of the shares in the issued share capital of the Company registered in my/our name(s) (see note 2). Number of votes (one per share) For Against Abstain Special resolution 1 General authority to repurchase shares Special resolution 2 Remuneration of non-executive directors Special resolution 3 Approval of financial assistance to any person for the purposes of, or in connection with, the subscription of any option, or any securities, issued or to be issued by the Company or a related or inter-related company of the Company Special resolution 4 Approval of financial assistance to any company which is related or inter-related to the Company Ordinary resolution 1 To receive and consider the directors report, annual financial statements and the Group annual financial statements, as well as the Audit Committee report for the year ended 31 March 2013 Ordinary resolution 2.1 To re-elect as director Dr CH Wiese Ordinary resolution 2.2 To re-elect as director Mr DI Samuels Ordinary resolution 2.3 To re-elect as director Adv JD Wiese Ordinary resolution 2.4 To re-elect as director Mr JS Mthimunye Ordinary resolution 3 Approval of the remuneration policy and its implementation Ordinary resolution 4 To place the authorised but unissued shares under the control of the directors Ordinary resolution 5 To authorise the directors to issue shares for cash

118 >> Form of proxy Ordinary resolution 6 To confirm the reappointment of Deloitte & Touche as independent auditors of the Company and SBF Carter as the designated audit partner for the following year Ordinary resolution 7.1 To elect as Audit Committee member Mr DI Samuels (Chairman) Ordinary resolution 7.2 To elect as Audit Committee member Mr JS Mthimunye Ordinary resolution 7.3 To elect as Audit Committee member Mr LR Sherrell Ordinary resolution 7.4 To elect as alternate Audit Committee member Adv JD Wiese Please indicate with an X in the appropriate spaces above how you wish your votes to be cast. Unless otherwise instructed, my/our proxy may vote as he/she thinks fit. Number of votes (one per share) For Against Abstain Signed at on 2013 Signature Assisted by (where applicable) Number of shares Each shareholder is entitled to appoint one or more proxies (who need not be a shareholder of the Company) to attend, speak and vote in place of that shareholder at the annual general meeting. Please read the notes below. >> Notes to the proxy form 1. A shareholder may insert the name or names of two alternative proxies of the shareholder s choice in the space provided, with or without deleting 'the chairman of the annual general meeting but any such deletion must be initialled by the shareholder. 2. A shareholder s instruction to the proxy must be indicated by the insertion of the relevant number of votes exercisable by that shareholder in the space provided. Failure to comply with the above will be deemed to authorise the proxy to vote or abstain from voting at the annual general meeting as he deems fit in respect of all the shareholder s votes exercisable thereat. A shareholder or his proxy is not obliged to use all the votes exercisable by the shareholder or his proxy, or cast them in the same way. 3. Any alteration or correction made to this form must be initialled by the signatory/ies. 4. Documentary evidence establishing the authority of a person signing this form of proxy in a representative capacity must be attached to this form unless previously recorded by the transfer secretaries or waived by the chairman of the annual general meeting. 5. The completion and lodging of this form will not preclude the relevant shareholder from attending the annual general meeting and speaking and voting in person thereat to the exclusion of any proxy appointed in terms thereof, should such shareholder wish to do so. 6. The chairman of the annual general meeting may reject or accept any form of proxy which is completed and/or received other than in accordance with these instructions, provided that he is satisfied as to the manner in which a shareholder wishes to vote. 7. A minor must be assisted by his/her parent/guardian unless the relevant documents establishing his/her legal capacity are produced or have been registered by the Company. 8. Where there are joint holders of any shares: any one holder may sign this form of proxy; the vote(s) of the senior shareholders (for that purpose seniority will be determined by the order in which the names of shareholders appear in the company's register of shareholders) who tenders a vote (whether in person or by proxy) will be accepted to the exclusion of the vote(s) of the other joint shareholder(s). 9. Forms of proxy must be lodged with or posted to the Company s transfer secretaries offices in Johannesburg (Computershare Investor Services (Pty) Limited, Ground Floor, 70 Marshall Street, Johannesburg, 2001; PO Box 61051, Marshalltown, 2107) to be received by 10:00 on Wednesday, 14 August 2013.

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