PBT GROUP LIMITED (formerly Wooltru Limited) 2010 Annual Report

Transcription

1 PBT GROUP LIMITED (formerly Wooltru Limited) 2010 Annual Report

2 Contents General Information 1 Chairman s Review 2 Directorate 3 Corporate Governance 5 Certificate by the Company Secretary 7 Report of the Independent Auditors 8 Directors Responsibilities and Approval 9 Directors Report 10 Consolidated Financial Statements Statements of Financial Position 12 Statements of Comprehensive Income 13 Statements of Changes in Equity 14 Statements of Cash Flows Segment Report 56 Registered Shareholders 57 Notice of Annual General Meeting 58 Form of Proxy attached

3 General Information Name of company PBT Group Limited (formerly Wooltru Limited) Country of incorporation and domicile South Africa Nature of business and principal activities Investment holding and computer software consulting and solution implementation Directors HC Steyn M Kaplan PJ de Wet AM Louw MH Rennhackkamp KN Wood N Vallabh Domicile and registered office Unit 3, Knowledge Park 3 Cnr Century Boulevard and Heron Crescent Century City 7441 South Africa Postal address PO Box 276 Century City 7446 Telephone number Fax number Principal bankers The Standard Bank of South Africa Limited Auditors LDP Inc. Registered Auditors Secretary B Pieters Company registration number 1936/008278/06 Share code PBT ISIN ZAE Transfer secretaries Computershare Investor Services (Proprietary) Limited 70 Marshall Street Johannesburg 2001 South Africa Sponsor Bridge Capital Advisors (Proprietary) Limited PBT Group Limited Annual Report

4 Chairman s Review Acquisition of PBT Group With effect from 1 March 2010, Wooltru acquired 100% of the equity in PBT Group, 100% of the equity in Stricklands Tetra Cape and 51% of the equity in PBT Insurance Technologies ( the acquisition ), resulting in the reverse listing of PBT Group Limited on the JSE Limited ( JSE ). Nature of business The PBT Group conducts business intelligence and information management services to large national and international clients in South Africa, Africa, Middle East and Australia. In addition, the PBT Group provides specialist healthcare management solutions and services. Prescient Business Technologies (PBT) was established as an Information Technology company in PBT Group (SA) has remained focused in achieving its vision to be the preferred business intelligence and information management service provider to large national and international clients. Prospects PBT is trading according to expectations and all indications are that the profit before tax warranty of R32 million for the 12 months ending 28 February 2011 will be achieved. Change of name The name of Wooltru Limited was changed to PBT Group Limited on 6 December 2010 and the listing transferred to the Computer and Software Services sector on the Main Board of the JSE. Change of year-end In order to facilitate the acquisition of the PBT Group and to align the reporting period with that of the PBT Group, the group s financial year-end was changed from 30 June to 31 August, resulting in a reporting period of 14 months. Group results The group recorded a profit before taxation of R12.2 million (2009: R0.6 million) for the 14-month period ending 31 August These figures include the results of PBT Group for six months. Taxation amounted to (R7.8 million) (2009: R0.3), resulting in an after-tax profit of R20 million (2009: R0.2 million). Earnings per share (EPS) for the 14 month period amounted to 4.10 cents (2009: 0.04 cents) while headline earnings per share (HEPS) amounted to 3.79 cents (2009: 0.04 cents). Board composition Mr A Groll and Dr JC van der Horst resigned from the board with effect from 29 October 2010, respectively as executive and non-executive director. I wish to extend my sincere gratitude for their contribution to the group over the years. I have been appointed as non-executive chairman of the board with effect from 29 October 2010, replacing Mr Monty Kaplan, who remains on the board as non-executive director. The executive directors, appointed with effect from 29 October 2010, are Pierre de Wet (chief executive officer), Martin Rennhackkamp, Ken Wood and Nitesh Vallabh. Murray Louw remains the financial director of the group. Dividend A special dividend of 10 cents per N and ordinary share (total payment: R47.1 million) was paid on 28 September Taxation It is important to read note 10 to the financial statements carefully in order to get a thorough understanding of the effect of the acquisition on the group s taxation credit. Earnings and headline earnings per share Certain events after the reporting period will have a significant effect on earnings and headline earnings per share. The directors report deals extensively with these events. The onceoff effect of the taxation credit should also be considered. HC Steyn Chairman 14 December PBT Group Limited Annual Report 2010

5 Directorate The brief profiles of the PBT directors are detailed below: Executive directors: Pierre de Wet (48) BAcc, CFA (SA) Chief executive officer Pierre de Wet started his career at Anglo American Corporation s head office as a scholarship holder. When an opportunity arose at stockbroking firm Huysamer Stals, Pierre was lured away and spent the next three years at the JSE gaining valuable experience in both the equity and capital markets. In 1992 he joined District Securities Bank in the capital market division, trading and broking capital market instruments, before co-founding PBT in Adriaan Murray Louw (65) BCom, CTA, MLB Financial director Murray has worked as an independent consultant dealing with various South African corporate companies. He managed Gensec s foreign operations up to December 2003 and served as a non-executive director of Wooltru Limited since March 2004 and as an executive director after 1 July Murray is currently a non-executive director of Trematon Capital Investments Limited. Martin Rennhackkamp (49) MSc Computer Science Chief operating officer Martin Rennhackkamp is a practising information specialist. He focuses on business intelligence strategy; technical and information architectures; and business intelligence analysis, design and implementation. Published in over 60 international publications, Martin is an internationally recognised author and speaker. He has published a textbook, was a contributing editor to DBMS Magazine for three years and has written feature articles for various international IT journals, and regularly presents papers at local and international conferences. He is a member of the Computer Society of South Africa and an alumni member of The Data Warehousing Institute. Ken Wood (49) BIuris (UNISA) Executive director Ken Wood has 27 years experience in the ICT sector. He has gained extensive experience within all facets of the industry as developer, analyst, designer, project and programme manager, both as client and independent consultant. In 1996 Ken moved into the services business development arena joining a company called PQ Africa. His understanding and experience of the industry saw him accelerating quickly in this field and he was appointed by BCX as a business development manager and soon after that promoted to divisional manager responsible for services sales throughout the Western Cape region. In 2002 Ken joined PBT as sales director, specialising in information management services. The sales division has grown from a regional sales office in the Western Cape to an international organisation covering Gauteng, Australia, the United Kingdom, the Middle East and several other African countries where the group is currently active. Ken has worked in various industries such as financial, insurance, telecommunications, retail and petroleum. Nitesh Vallabh (40) BSc, MBA Executive director Nitesh joined PBT s team of highly skilled professionals as a director in 2004 and brought with him 12 years worth of telecommunications and ICT experience. Nitesh has had exposure at multiple levels of technical and business aspects and has worked on various large multi-million Rand projects. Nitesh has also tutored as an associate lecturer at Open University (UK)/UNISA on their MBA programme. Nitesh is part of the PBT s Gauteng branch and is responsible for account management and PBT s marketing portfolio. PBT Group Limited Annual Report

6 Directorate Independent non-executive directors: Monty Kaplan (82) CA(SA) Independent non-executive director Monty was the previous chairman and chief executive officer of Cape of Good Hope Bank Limited and was also previously a director of Spearhead Property Group Limited and chairman of Ingenuity Property Investments Limited. He is currently chairman of Trematon Capital Investments Limited and Mazor Group Limited. Hermanus Christiaan Steyn (49) BSc Actuarial Science, Statistics (Hons) and Econ (UCT) BBusSc (Hons) Independent non-executive chairman Herman has been involved in the investment management industry since 1985, having held senior management positions in several established asset management companies. He began his investment management career when awarded a bursary from Old Mutual, studying a BBusSci majoring in Actuarial Science, Statistics (Honours) and Economics at the University of Cape Town, completing his BBusSci (Hons) in After a period at Old Mutual, he cofounded an asset management company. In 1993 Herman started the first index tracker fund, the Composite Unit Trust, in South Africa. He later sold the unit trust management company to Investec, joining Investec Asset Management in 1995 where he established Investec Asset Management s international fund management capability, setting up their fund structures in Dublin. He was also responsible for the quantitative fund management that included local and international index funds, bonds, derivatives and asset allocation. In 1998 Herman and Guy Toms founded Prescient Investment Management, which specialises in quantitative investment management. Prescient applies its quantitative techniques to cash, bonds, equities, balanced portfolios and asset allocation. 4 PBT Group Limited Annual Report 2010

7 Corporate Governance Introduction The group is committed to sound corporate governance principles and adheres to the Code of Corporate Practices and Conduct ( the Code ) as set out in King Report III, except for the composition of the board and all its committees. The directors will continue to seek to identify and mitigate significant risks and ensure that there is continuous improvement on operation and corporate business practices. Proposed board composition and structure The previous Wooltru board structure comprised two executive directors, namely Messrs Allan Groll and Adriaan Murray Louw and two independent nonexecutive directors, namely Mr Monty Kaplan and Dr Johannes C van der Horst. Following the implementation of the acquisition, Messrs Johannes C van der Horst and Allan Groll resigned as directors of Wooltru and new directors have subsequently been appointed to comprise two independent non-executive directors and five executive directors. The roles of the executive and non-executive directors are separated to ensure that no director can exercise unrestricted powers of decision-making. The chairman provides leadership and guidance to the board and encourages proper deliberation on all matters requiring the board s attention while obtaining input from other directors. The executive directors are primarily responsible for implementing strategy and operational decisions in respect of the day-to-day operations while non-executive directors contribute their independent and objective knowledge and experience to board deliberations. All non-executive directors are sufficiently qualified to contribute industry skills and their expertise. The directors are fully cognisant that the new board composition does not meet the King III Report recommendations, which puts emphasis on majority nonexecutive directors, and that this recommendation will be considered in future board appointments. Herman Steyn was appointed as the new independent nonexecutive chairman with effect from 29 October 2010 and Pierre de Wet is the group s chief executive officer ( CEO ). The responsibilities of the Chairman and CEO are separate. Adriaan Murray Louw is the financial director and his appointment has been recommended by the audit committee. In compliance with the JSE Listings Requirements, the audit committee has considered the expertise and experience of the financial director and hereby confirm satisfaction of his performance to the shareholders. In accordance with the provisions of the company s articles of association, one-third of the directors shall retire from office. Board functioning All directors have ready and direct access to the company secretary in relation to the affairs of the company and are entitled to obtain independent professional advice regarding company matters at the company s expense. On request, board members have access to company information, records, documents and property. New appointments New board appointees will be identified and nominated by the remuneration and nomination committee. The appointment process will be conducted in a formal and transparent manner and level of experience and blend of skills shall be taken into account in making new appointments. Board committees The board committees comprises the audit committee and the remuneration and nomination committee. Audit committee The audit committee comprises Messrs HC Steyn, M Kaplan and B van der Walt. In line with King III recommendations, the committee shall meet at least four times per year. The audit committee will specifically have oversight of the following functions: financial reporting risks; internal financial controls; monitoring compliance with codes of conduct and the ethical conduct of the company; evaluating the independence and effectiveness of the external auditors and recommending their appointment; reviewing the annual financial statements and interim reports; approval of any non-audit services performed by the external auditors and the policy in this regard; determining the key risk areas facing the group and recommending risk mitigation measures; and advising and updating the board on issues ranging from accounting standards to published financial information. PBT Group Limited Annual Report

8 Corporate Governance The appointment of external auditors for non-audit services is recommended by the audit committee. The audit committee will have a separate meeting with the external auditors in the absence of management at least annually. Remuneration and nomination committee The remuneration and nomination committee, comprises Messrs HC Steyn and M Kaplan, who shall meet at least three times per year. The primary responsibilities of this committee will include the following: to ensure that the company s chairman, directors and senior executives are rewarded for their contributions in accordance to individual performance; to ensure the retention of key personnel through benchmarking executive remuneration against industry norms and taking individual and company performance targets into account in determining executive remuneration; to align annual bonuses with company performance while share options align executives interests with those of shareholders; and to ensure appropriate human resources strategies, policies and practices. Following the implementation of the acquisition, the directors considered and adopted new corporate governance policies in line with the recommendations of King III. It is the objective of the company to comply with the following principles: the role and function of the board and its committees; the composition and performance evaluation of the board and its committees; the board appointment process; and the remuneration of directors and senior executives. Board compensation and service contracts None of the non-executive directors have service contracts with the company. Stakeholder communication The group strives in its communications with stakeholders, particularly the investment community, to present a balanced and understandable assessment of the group s position. Consequently, in its financial reporting, formal announcements, media releases, annual meetings, presentations and dialogue with analysts and institutional shareholders, the group s objectives are to be clear, open, prompt and balanced, and to communicate in substance rather than in form. Internal control The group strives to maintain internal controls of a standard aimed at ensuring that the systems of financial reporting contain complete, accurate and reliable information and safeguard the group s assets. The external auditors report to the board and have ready access to the chairman and the directors. Due to the limited number of transactions, the group does not consider an internal audit function to be beneficial. It is the policy of the board not to engage the external auditors for any non-audit services. Nothing has come to the attention of the directors to suggest that the accounting records and systems of internal control were not appropriate or satisfactory, neither has any material loss, exposure or misstatement arising from a material breakdown in the functioning of the systems of internal control or accounting been reported to the directors in respect of the period under review. Risk management The group has minimised the risk of any external event occurring which would have a significant impact on the continuation of its activities. It has processes in place which ensure that the group could continue operationally, should such an event occur. The directors are of the view that all insurable risks have been adequately covered. Dealings in company shares The group has a written policy in terms of which dealings in the company s shares by directors and employees are prohibited during closed periods which commence on 31 January and 31 August and end after the public announcement of the group s interim or annual results. 6 PBT Group Limited Annual Report 2010

9 Certificate by the Company Secretary I certify that in respect of the year under review, the company has lodged with the Registrar of Companies all returns required of a public company in terms of the Companies Act, 2008 (Act 71 of 2008) and that all such returns are true, correct and up to date. B Pieters Company Secretary 14 December 2010 PBT Group Limited Annual Report

10 Report of the Independent Auditors To the members of PBT Group Limited We have audited the accompanying consolidated financial statements of PBT Group Limited, which comprise the directors report, the statements of financial position as at 31 August 2010, the statements of comprehensive income, the statements of changes in equity and statements of cash flows for the period ended, a summary of significant accounting policies and other explanatory notes, as set out on pages 10 to 55. Directors responsibility for the financial statements The company s directors are responsible for the preparation and fair presentation of these consolidated financial statements in accordance with International Financial Reporting Standards, and in the manner required by the Companies Act, 2008 (Act 71 of 2008). This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. Auditors responsibility Our responsibility is to express an opinion on these consolidated 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 whether the consolidated financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditors judgement, including the assessment of the risks of material misstatement of the consolidated 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 consolidated 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 the directors, as well as evaluating the overall presentation of the consolidated financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the company as of 31 August 2010, and of its financial performance and its cash flows for the period ended in accordance with International Financial Reporting Standards, and in the manner required by the Companies Act. LDP Inc. Registered Auditors Per: PJ Bestbier Stellenbosch Chartered Accountant (SA) Registered Auditor Director 14 December 2010 De Waterkant Building, 10 Helderberg Street Stellenbosch 8 PBT Group Limited Annual Report 2010

11 Directors Responsibilities and Approval The directors are required in terms of the Companies Act, 2008 (Act 71 of 2008) to maintain adequate accounting records and are responsible for the content and integrity of the consolidated financial statements and related financial information included in this report. It is their responsibility to ensure that the consolidated financial statements fairly present the state of affairs of the group as at the end of the financial period and the results of its operations and cash flows for the period then ended, in conformity with International Financial Reporting Standards. The external auditors are engaged to express an independent opinion on the consolidated financial statements. The consolidated financial statements are prepared in accordance with International Financial Reporting Standards and are based upon appropriate accounting policies consistently applied and supported by reasonable and prudent judgements and estimates. The directors acknowledge that they are ultimately responsible for the system of internal financial control established by the group and place considerable importance on maintaining a strong control environment. To enable the directors to meet these responsibilities, the board sets standards for internal control aimed at reducing the risk of error or loss in a costeffective manner. The standards include the proper delegation of responsibilities within a clearly defined framework, effective accounting procedures and adequate segregation of duties to ensure an acceptable level of risk. These controls are monitored throughout the group and all employees are required to maintain the highest ethical standards in ensuring the group s business is conducted in a manner that in all reasonable circumstances is above reproach. The focus of risk management in the group is on identifying, assessing, managing and monitoring all known forms of risk across the group. While operating risk cannot be fully eliminated, the group endeavours to minimise it by ensuring that appropriate infrastructure, controls, systems and ethical behaviour are applied and managed within predetermined procedures and constraints. The directors are of the opinion, based on the information and explanations given by management, that the system of internal control provides reasonable assurance that the financial records may be relied on for the preparation of the consolidated financial statements. However, any system of internal financial control can provide only reasonable, and not absolute, assurance against material misstatement or loss. The directors have reviewed the group s cash flow forecast for the period to 31 August 2011 and, in the light of this review and the current financial position, they are satisfied that the group has or has access to adequate resources to continue in operational existence for the foreseeable future. The external auditors are responsible for independently reviewing and reporting on the group s consolidated financial statements. The consolidated financial statements have been examined by the group s external auditors and their report is presented on page 8. The consolidated financial statements set out on pages 10 to 55, which have been prepared on the going concern basis, were approved by the board on 14 December 2010 and were signed on its behalf by: PJ de Wet Chief Executive Officer AM Louw Financial Director PBT Group Limited Annual Report

12 Directors Report The directors submit their report for the period ended 31 August Incorporation The company was incorporated on 8 July 1936 and obtained its certificate to commence business on the same day. Review of activities Main business and operations The group is engaged in investment holding and computer software consulting and solution implementation and operates in South Africa, Australia and the Africa/Middle East region. (Refer to the segment report on page 56.) The operating results and state of affairs of the company are fully set out in the attached consolidated financial statements and do not, in our opinion, require any further comment. Net profit of the group was R (2009: R profit), after taxation of (R ) (2009: R ). Going concern The consolidated financial statements have been prepared on the basis of accounting policies applicable to a going concern. This basis presumes that funds will be available to finance future operations and that the realisation of assets and settlement of liabilities, contingent obligations and commitments will occur in the ordinary course of business. Events after the reporting period The following transactions occurred on or after 29 October 2010: PBT Group Limited ordinary shares were issued at 4.51 cents per share; a bonus issue to PBT Group Limited shareholders in the ratio of 10 ordinary shares for every 100 ordinary shares held; the conversion of N ordinary shares to one class of ordinary shares; the reduction of par value; the increase in authorised share capital; the consolidation of the company s ordinary share capital on a 1-for-20 basis; the adoption of new articles of association; the conversion of non-redeemable 6% preference shares into redeemable 6% preference shares and the redemption thereof on 15 November 2010; and the conversion of non-redeemable 6.75% preference shares into redeemable 6% preference shares and the redemption thereof on 15 November Directors shareholding There are no directors interest in contracts. The interests of directors in the shares of the company at 31 August 2010 were as follows: M Kaplan Non-executive AM Louw Executive A Groll Executive Beneficial Beneficial Non-beneficial Beneficial Indirect Direct Indirect Indirect Direct Wooltru ordinary shares Wooltru N ordinary shares % and 6.75% cumulative preference shares The interests of directors in the shares of the company at 30 June 2009 were as follows: M Kaplan Non-executive AM Louw Executive A Groll Executive Beneficial Beneficial Non-beneficial Beneficial Indirect Direct Indirect Indirect Direct Wooltru ordinary shares Wooltru N ordinary shares % and 6.75% cumulative preference shares PBT directors shareholdings The PBT directors interest in PBT, before and after the acquisition, is set out below: Indirect Before the acquisition Beneficial After the acquisition Direct Before the acquisition Beneficial After the acquisition Holdings KN Wood 14.7% 13.4% N Vallabh 4.25% 3.9% PJ de Wet 2.2% 2.0% MH Rennhackkamp 1.9% 1.7% AM Louw 5.6% 5.6% 0.12% 0.12% Total 7.8% 7.6% 20.97% 19.12% 10 PBT Group Limited Annual Report 2010

13 Directors Report Authorised and issued share capital There were no changes in the authorised or issued share capital of the group during the period under review other than the result of the reverse listing. (Refer to note 32 to the financial statements.) Dividends declared The dividends already declared and paid to shareholders during the period are as reflected in the attached statements of changes in equity. Directors The directors of the company during the period and to the date of this report are as follows: Name Designation Changes HC Steyn Independent non-executive chairman Appointed 29 October 2010 M Kaplan Independent non-executive director PJ de Wet Chief executive officer Appointed 29 October 2010 AM Louw Financial director MH Rennhackkamp Executive director Appointed 29 October 2010 KN Wood Executive director Appointed 29 October 2010 N Vallabh Executive director Appointed 29 October 2010 A Groll Executive director Resigned 29 October 2010 Dr JC van der Horst Non-executive director Resigned 29 October 2010 Secretary Mr AL Winkler resigned as secretary of the company on 29 October 2010 and Mrs B Pieters was appointed in his stead on the same date. Auditors PKF (CPT) Incorporated resigned as auditors of the company during October 2010 and LDP Inc. was appointed in their place. Bank balances and cash equivalents A bank guarantee was issued in favour of Johnnic Book Retail Limited ( Johnnic ) (formerly CNA Gallo Limited) for possible post-retirement medical aid claims for an amount of R2.32 million. This guarantee lapses during December The guarantee is secured by a cash deposit of the same amount which is included in cash and cash equivalents. The cash cannot be used for any other purpose for as long as the guarantee is in place. Audit committee The audit committee comprise Mr HC Steyn, Mr M Kaplan and for the purposes of the meeting on 14 December 2010, Mr B van der Walt co-opted. In line with King III recommendations, the committee shall meet at least four times per year. The audit committee will specifically have oversight of the following functions: financial reporting risks; internal financial controls; monitoring compliance with codes of conduct and the ethical conduct of the company; evaluating the independence and effectiveness of the external auditors and recommending their appointment; reviewing the annual financial statements and interim reports; approval of any non-audit services performed by the external auditors and the policy in this regard; determining the key risk areas facing the group and recommending risk mitigation measures; and advising and updating the board on issues ranging from accounting standards to published financial information. The appointment of external auditors for non-audit services shall be recommended by the audit committee. The audit committee will have a separate meeting with the external auditors in the absence of management at least annually. Borrowing powers In terms of the articles of association the borrowing powers are unlimited. PBT Group Limited Annual Report

14 Statements of Financial Position as at 31 August 2010 GROUP COMPANY Figures in Rand Notes ASSETS Non-current assets Property, plant and equipment Goodwill Intangible assets Investments in subsidiaries Loans to group companies Other financial assets Deferred tax Current assets Inventories Current tax receivables Trade and other receivables Other financial assets Cash and cash equivalents Total assets EQUITY AND LIABILITIES Equity Share capital Non-distributable reserves Accumulated profit (loss) ( ) ( ) ( ) Non-controlling interest Liabilities Non-current liabilities Loans from group companies Other financial liabilities Current liabilities Trade and other payables Provisions Bank overdraft Total liabilities Total equity and liabilities Net asset value per share c 12.40c 12 PBT Group Limited Annual Report 2010

15 Statements of Comprehensive Income GROUP COMPANY Figures in Rand Notes Revenue Cost of sales ( ) Gross profit Other income Operating expenses ( ) ( ) ( ) ( ) Medical aid settlement 23 ( ) ( ) Operating (loss) profit ( ) ( ) Investment income Fair value adjustments Finance costs 26 ( ) (95 100) ( ) (95 100) Profit (loss) before taxation Taxation ( ) Profit (loss) for the period Other comprehensive income Total comprehensive income (loss) Profit (loss) attributable to: Owners of the parent Non-controlling interest Total comprehensive income (loss) attributable to: Owners of the parent Non-controlling interest Earnings per share Basic earnings per share c 0.04c Headline earnings per share c 0.04c Diluted earnings per share c 0.04c Diluted headline earnings per share c 0.04c PBT Group Limited Annual Report

16 Statements of Changes in Equity GROUP Figures in Rand Share capital Share premium Total share capital Balance at 1 July Profit (loss) for the period Transfer to non-distributable reserve Total changes Balance at 1 July Profit (loss) for the period Business combination 32 ( ) ( ) ( ) Dividends declared 31 Total changes ( ) ( ) ( ) Balance at 31 August Notes COMPANY Balance at 1 July Profit (loss) for the period Total changes Balance at 1 July Profit (loss) for the period Dividends declared Total changes Balance at 31 August Notes PBT Group Limited Annual Report 2010

17 Nondistributable reserves Accumulated (loss) profit Total attributable to equity holders of the group/ company Non-controlling interest Total equity ( ) ( ) ( ) ( ) ( ) ( ) ( ) ( ) ( ) ( ) ( ) ( ) ( ) ( ) ( ) ( ) ( ) ( ) PBT Group Limited Annual Report

18 Statements of Cash Flow GROUP COMPANY Figures in Rand Notes Cash flows from operating activities Cash receipts from customers Cash paid to suppliers and employees ( ) ( ) ( ) ( ) Cash used in operations 29 ( ) ( ) ( ) ( ) Interest income Dividends received Finance costs ( ) (95 100) ( ) (95 100) Tax paid 30 ( ) Net cash from operating activities ( ) ( ) ( ) Cash flows from investing activities Purchase of property, plant and equipment increase in operating capacity 3 ( ) Purchase of other intangible assets 5 ( ) Business combinations 32 ( ) Purchase of financial assets ( ) Sale of financial assets Net cash from investing activities ( ) Cash flows from financing activities Reduction of equity on business combination Proceeds from other financial liabilities Dividends paid 31 ( ) ( ) Proceeds from loans from group companies Repayment of loans from group companies ( ) Net cash from financing activities ( ) ( ) ( ) Total cash movement for the period ( ) ( ) Cash at the beginning of the period Total cash at the end of the period PBT Group Limited Annual Report 2010

19 ACCOUNTING POLICIES 1. CORPORATE INFORMATION AND PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS Corporate information The consolidated financial statements of PBT Group Limited were authorised for issue in accordance with a resolution of the directors on 14 December The company is a listed company incorporated and domiciled in South Africa whose shares are publicly traded. Basis of preparation The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards, the JSE Listings Requirements and the Companies Act, 2008 (Act 71 of 2008). The consolidated financial statements have been prepared on the historical cost basis, except for certain financial instruments carried at fair value and inventory measured at the lower of cost of fair value less costs to complete and sell, and incorporate the principal accounting policies set out below. The functional and presentation currency of the company is South African Rand. These accounting policies are consistent with the previous period except for the adoption of IAS 1 and IFRS Consolidation Basis of consolidation The consolidated financial statements incorporate the financial statements of the company and all entities which are controlled by the company. Control exists when 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 are included in the consolidated statement of comprehensive income from the effective date of acquisition to the effective date of disposal. Adjustments are made when necessary to the financial statements of subsidiaries to bring their accounting policies in line with those of the group. All intra-group transactions, balances, income and expenses are eliminated in full on consolidation. Non-controlling interests in the net assets of subsidiaries are identified and recognised separately from the group s interest therein, and are recognised within equity. Total comprehensive income of subsidiaries attributable to non-controlling interests are allocated to the non-controlling interest even if this results in a deficit balance being recognised for non-controlling interest. The interests of non-controlling shareholders may be initially measured either at fair value or at the noncontrolling interests proportionate share of the fair value of the acquiree s identifiable net assets. The choice of measurement basis is made on an acquisitionby-acquisition basis. Subsequent to acquisition, the carrying amount of non-controlling interests is the amount of those interests at initial recognition plus the non-controlling interests share of subsequent changes in equity. Changes in the group s interests in subsidiaries that do not result in a loss of control are accounted for as equity transactions. The carrying amounts of the group s interests and the non-controlling interests are adjusted to reflect the changes in their relative interests in the subsidiaries. Any difference between the amount by which the non-controlling interests are adjusted and the fair value of the consideration paid or received is recognised directly in equity and attributed to owners of the company. Where a subsidiary is disposed of and a non-controlling shareholding is retained, the remaining investment is measured to fair value with the adjustment to fair value recognised in profit or loss as part of the gain or loss on disposal of the controlling interest. Business combinations The group accounts for business combinations using the acquisition method of accounting. The cost of the business combination is measured as the aggregate of the fair values of assets given, liabilities incurred or assumed and equity instruments issued. Costs directly attributable to the business combination are expensed as incurred, except the costs to issue debt which are amortised as part of the effective interest and costs to issue equity which are included in equity. The acquiree s identifiable assets, liabilities and contingent liabilities which meet the recognition conditions of IFRS 3 Business Combinations are recognised at their fair values at acquisition date. PBT Group Limited Annual Report

20 Deferred tax assets or liabilities and liabilities or assets related to employee benefit arrangements are recognised and measured in accordance with IAS 12 Income Taxes and IAS 19 Employee Benefits respectively. Liabilities or equity instruments related to the replacement by the group of an acquiree s share-based payment awards are measured in accordance with IFRS 2 Share-based Payment. Assets (or disposal groups) that are classified as held for sale in accordance with IFRS 5 Non-current Assets Held for Sale and Discontinued Operations are measured in accordance with that standard. Contingent liabilities are only included in the identifiable assets and liabilities of the acquiree where there is a present obligation at acquisition date. On acquisition, the group assesses the classification of the acquiree s assets and liabilities and reclassifies them where the classification is inappropriate for group purposes. Non-controlling interest arising from a business combination is measured either at their share of the fair value of the assets and liabilities of the acquiree or at fair value. The treatment is not an accounting policy choice, but is selected for each individual business combination and disclosed in the note for business combinations. If the initial accounting for a business combination is incomplete by the end of the reporting period in which the combination occurs, the group reports provisional amounts for the items for which the accounting is incomplete. Those provisional amounts are adjusted during the measurement period (see below), or additional assets or liabilities are recognised, to reflect new information obtained about facts and circumstances that existed as of the acquisition date that, if known, would have affected the amounts recognised as of that date. The measurement period is the period from the date of acquisition to the date the group obtains complete information about facts and circumstances that existed as of the acquisition date and is subject to a maximum of one year. Goodwill Goodwill is determined as the consideration paid, plus the fair value of any shareholding held prior to obtaining control, plus non-controlling interest and less the fair value of the identifiable assets, liabilities and contingent liabilities of the acquiree. The goodwill is included within the carrying amount of the investment and is assessed for impairment as part of that investment. Any excess of the group s share of the net fair value of the identifiable assets, liabilities and contingent liabilities over the cost of acquisition, after reassessment, is recognised immediately in profit or loss as a gain on a bargain purchase. Goodwill arising in a business combination is recognised as an asset at the date that control is acquired (the acquisition date). Goodwill is measured as the excess of the sum of the consideration transferred, the amount of any non-controlling interests in the acquiree, and the fair value of the acquirer s previously held equity interest in the acquiree (if any) over the net of the acquisition date amounts of the identifiable assets acquired and the liabilities assumed. If, after reassessment, the group s interest in the fair value of the acquiree s identifiable net assets exceeds the sum of the consideration transferred, the amount of any non-controlling interests in the acquiree and the fair value of the acquirer s previously held equity interest in the acquiree (in any), the excess is recognised immediately in profit or loss as a bargain purchase gain. When goodwill is tested for impairment at the reporting date, goodwill is allocated to each of the group s cashgenerating 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 its carrying amount, 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, the attributable amount of goodwill is included in the determination of the profit or loss on disposal. Goodwill is not amortised but is tested on an annual basis for impairment. If goodwill is assessed to be impaired, that impairment is not subsequently reversed. 18 PBT Group Limited Annual Report 2010

21 1.2 Significant judgements and sources of estimation uncertainty In preparing the consolidated financial statements, management is required to make estimates and assumptions that affect the amounts represented in the consolidated financial statements and related disclosures. Use of available information and the application of judgement is inherent in the formation of estimates. Actual results in the future could differ from these estimates which may be material to the consolidated financial statements. Significant judgements include: Trade and other receivables and loans receivable The company and group assess its trade and other receivables and loans receivable for impairment at the end of each reporting period. In determining whether an impairment loss should be recorded in profit or loss, the group makes judgements as to whether there is observable data indicating a measurable decrease in the estimated future cash flows from a financial asset. Additional disclosure of these estimates of trade and other receivables and loans receivable are included in note 12 Trade and other receivables. Discounting of loans Management determined a discount rate for related party loan accounts with no repayment terms. Impairment testing The company and group review and test the carrying value of assets when events or changes in circumstances suggest that the carrying amount may not be recoverable. Assets are grouped at the lowest level for which identifiable cash flows are largely independent of cash flows of other assets and liabilities. If there are indications that impairment may have occurred, estimates are prepared of expected future cash flows for each group of assets. Expected future cash flows used to determine the value in use of tangible assets are inherently uncertain and could materially change over time. No impairment was recognised during the year. Provisions Provisions were raised and management determined an estimate based on the information available. Additional disclosure of these estimates of provisions are included in note 17 Provisions. Taxation Judgement is required in determining the provision for income taxes due to the complexity of legislation. There are many transactions and calculations for which the ultimate tax determination is uncertain during the ordinary course of business. The company and group recognise liabilities for anticipated tax audit issues based on estimates of whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the income tax and deferred tax provisions in the period in which such determination is made. The company and group recognise the net future tax benefit related to deferred income tax assets to the extent that it is probable that the deductible temporary differences will reverse in the foreseeable future. Assessing the recoverability of deferred income tax assets requires the company and group to make significant estimates related to expectations of future taxable income. Estimates of future taxable income are based on forecast cash flows from operations and the application of existing tax laws in each jurisdiction. To the extent that future cash flows and taxable income differ significantly from estimates, the ability of the company and group to realise the net deferred tax assets recorded at the end of the reporting period could be impacted. Additional disclosure of these estimates of taxation are included in note 27 Taxation. Residual values and useful lives of property, plant and equipment and componentisation The company and group assess what the estimated expected useful life and residual value is for of each item of property, plant and equipment when the item is initially recognised and ready for use as management intends, as well as at the end of each reporting period. In determining whether a change has occurred in the expected useful life or residual value, the group makes judgements as to whether there is observable data indicating a measurable change in the estimates. Impairment of goodwill Determining whether goodwill is impaired requires an estimation of the value in use of the cash-generating units to which goodwill has been allocated. The value in use calculation requires the directors to estimate the future cash flows expected to arise from the cashgenerating unit and a suitable discount rate in order to calculate present value. PBT Group Limited Annual Report