Consolidated Financial Statements for the year ended 30 June Expanding into Africa

Transcription

1 Consolidated Financial Statements for the year ended 30 June 2013 Expanding into Africa

2 Contents Vision 1 Profile 1 Annual financial statements Approval of annual financial statements 2 Statement by the board of directors 3 Certificate by the company secretary 4 eport by the audit committee 5 Independent auditors report 7 Directors report 8 Consolidated statement of financial position 10 Consolidated statement of comprehensive income 11 Consolidated statement of changes in equity 12 Consolidated statement of cash flows 14 Notes to the consolidated statement of cash flows 15 Accounting policies 16 Notes to the consolidated annual financial statements 33 Company statement of financial position 60 Company statement of comprehensive income 61 Company statement of changes in equity 62 Company statement of cash flows 63 Notes to the company statement of cash flows 64 Notes to the company financial statements 65 Analysis of ordinary shareholders 80 General information 82 Country Bird Holdings Consolidated Financial Statements 2013

3 Vision CBH aspires to be the number one household name in the protein industry throughout southern Africa. We are consumer-led in providing quality protein products at affordable prices. Profile Country Bird Holdings Limited (CBH) is a focused African poultry group comprising: Integrated poultry and stock feed operations in South Africa trading as Supreme Poultry and Nutri Feeds; Poultry breeding, broiler and stock feed operations in the southern Africa region trading as oss Africa and Master Farmer; and South African retail and distribution operations trading as Long Irons Meats, Supreme Distributors and Ama Chick Chick. CBH currently operates in Botswana, the DC, Malawi, Mozambique, Namibia, South Africa, Zambia and Zimbabwe. Country Bird Holdings Consolidated Financial Statements

4 Approval of annual financial statements These financial statements have been audited by our external auditors, PricewaterhouseCoopers Inc. The financial statements were supervised by MJC Antunes (CA(SA)). The annual financial statements and group annual financial statements of Country Bird Holdings Limited for the year ended 30 June 2013, set out on pages 8 to 79, were approved by the board of directors on 26 August 2013 and are signed on its behalf: BH Kent Chairman MP Stander Chief executive officer 2 Country Bird Holdings Consolidated Financial Statements 2013

5 Statement by the board of directors The directors are required by the South African Companies Act, 2008, to maintain adequate accounting records and are responsible for the content and integrity of the financial statements and related financial information included in this report. It is their responsibility to ensure that the financial statements fairly present the state of affairs of the group as at the end of the financial year and the results of its operations and cash flows for the period then ended, in conformity with International Financial eporting Standards (IFS). The external auditors are engaged to express an independent opinion on the financial statements. The financial statements are prepared in accordance with IFS 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 of directors 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 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 year to 30 June 2014 and, in light of this review and the current financial position, they are satisfied that the group has access to adequate resources to continue in operational existence for the foreseeable future. The financial statements have been audited by the independent auditors, PricewaterhouseCoopers Inc., who has been given unrestricted access to all financial records and related data, including minutes of all meetings of shareholders, the board of directors and committees of the board. The directors believe that all representations made to the independent auditors during their audit were valid and appropriate. PricewaterhouseCoopers Inc. s unmodified audit report is presented on page 7. The financial statements set out on pages 8 to 79, which have been prepared on the going-concern basis, were approved by the board of directors on 26 August 2013 and are signed on its behalf by: BH Kent Chairman MP Stander Chief executive officer Country Bird Holdings Consolidated Financial Statements

6 Certificate by the company secretary I hereby certify that in respect of the year ended 30 June 2013, the company has lodged with the egistrar of Companies all such returns as are required of a public company in terms of section 88(2)(e) of the Companies Act of 2008, and that all such returns are true, correct and up to date. MJC Antunes Company secretary 26 August Country Bird Holdings Consolidated Financial Statements 2013

7 eport by the audit committee The audit committee is pleased to present this report for the financial year ended 30 June 2013 as required by section 94(7)(f) of the Companies Act of 2008, and the recommendations of the King III eport on Corporate Governance. The audit committee is an independent statutory committee appointed by the shareholders and performs its functions on behalf of Country Bird Holdings Limited and its subsidiary companies. Audit committee terms of reference The audit committee has adopted a formal terms of reference that has been approved by the board of directors. The committee has conducted its affairs in compliance with its terms of reference and has discharged its responsibilities contained therein. Audit committee members, meeting attendance and assessment The audit committee is independent and consists of three independent non-executive directors, IWM Isdale (chairman), BH Kent and Gibbison, and non-executive director GP Heath. The audit committee meets at least four times per annum, with authority to convene additional meetings as circumstances require. Executive directors, non-executive directors, external auditors, internal auditors, financial management and other assurance providers attend meetings by invitation only. During the year under review, four meetings were held and attended as follows: Name of member 10 September 22 November 25 February May 2013 Mr IWM Isdale Present Present Present Present Chairman* Independent non-executive Appointed 10 February 2010 Qualifications: BA LLB (Natal), EDP (Wits) *Appointed as chairman of the committee on 25 February 2013 Mr BH Kent Present Present Present Present Independent non-executive* Appointed 1 January 2007 Qualifications: BCom, CA(SA), FCMA, HDipTax, HDip *esigned as chairman of the committee on 25 February 2013 Mr Gibbison Absent Present Absent Present Independent non-executive Appointed 9 February 2010 Mr GP Heath Present Present Present Present Non-executive Appointed 23 March 2005 Qualifications: BCom, CA(Z) Country Bird Holdings Consolidated Financial Statements

8 eport by the audit committee continued ole and responsibilities The audit committee carried out its functions through the attendance of audit committee meetings and discussions with executive management, internal audit and external advisers. Statutory duties The audit committee s role and responsibilities include statutory duties per the Companies Act, 2008, and further responsibilities assigned to it by the board. The audit committee executed its duties in terms of the requirements of King III and instances where the King III requirements have not been applied, have been explained in the corporate governance statement included in the integrated report. The audit committee is satisfied that it has complied with its legal, regulatory and other responsibilities. External auditor appointment and independence In terms of the provisions of section 78(7)(a) of the Companies Act, the audit committee has satisfied itself that the external auditors, PricewaterhouseCoopers Inc., are independent of the company and its subsidiaries and has ensured that the appointment of the auditor complied with the Companies Act and any other legislation relating to the appointment of auditors. The committee, in consultation with executive management, agreed to the engagement letter, terms, audit plan and budgeted fees for the year ended 30 June Financial statements and accounting practices The audit committee has reviewed the accounting policies and the financial statements of the company and is satisfied that they are appropriate and comply with International Financial eporting Standards, the Companies Act, 2008, and the JSE Listings equirements. Internal financial controls The audit committee has overseen a process by which internal audit performed an assessment of the effectiveness of the company s system of internal control, including internal financial controls. The audit committee is satisfied with the effectiveness of the company s internal financial controls. Duties assigned by the board In addition to the statutory duties of the audit committee, as reported above, the board of directors has determined further functions for the audit committee to perform. These functions include the following: Integrated reporting and combined assurance The audit committee fulfils an oversight role regarding the company s integrated report and the reporting process and considers the level of assurance coverage obtained from management, internal and external assurance providers in making its recommendation to the board. Going concern The audit committee reviews the going-concern status of the company at each meeting and makes recommendations to the board. Governance of risk The audit committee fulfils an oversight role regarding financial reporting risks, internal financial controls, fraud risk as it relates to financial reporting and information technology risks as it relates to financial reporting. A risk committee has been established during the year and reports to the committee on a quarterly basis in order to assist the committee with the risk management function and its oversight role with regard to the governance of IT risks. Internal audit The audit committee is responsible for ensuring that the company s internal audit function is independent and has the necessary resources, standing and authority within the company to enable it to discharge its duties. The audit committee considered and recommended the internal audit charter for approval by the board. The internal audit function s annual audit plan was approved by the audit committee. Evaluation of the expertise and experience of the financial director and finance function The audit committee has satisfied itself that the financial director has appropriate expertise and experience. The audit committee has considered, and has satisfied itself of, the appropriateness of the expertise and adequacy of resources of the finance function and experience of the senior members of management responsible for the finance function. IWM Isdale Chairman of the audit committee 26 August Country Bird Holdings Consolidated Financial Statements 2013

9 Independent auditors report To the shareholders of Country Bird Holdings Limited We have audited the consolidated and separate financial statements of Country Bird Holdings Limited set out on pages 8 to 79, which comprise the statements of financial position as at 30 June 2013, and the statements of comprehensive income, statements of changes in equity and statements of cash flows for the year then ended, and the notes, comprising a summary of significant accounting policies and other explanatory information. Directors responsibility for the financial statements The company s directors are responsible for the preparation and fair presentation of these consolidated and separate financial statements in accordance with International Financial eporting Standards and the requirements of the Companies Act of South Africa, and for such internal control as the directors determine is necessary to enable the preparation of consolidated and separate financial statements that are free from material misstatement, whether due to fraud or error. Auditors responsibility Our responsibility is to express an opinion on these consolidated and separate financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated and separate 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 auditors judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the consolidated and separate financial statements present fairly, in all material respects, the consolidated and separate financial position of Country Bird Holdings Limited as at 30 June 2013, and its consolidated and separate financial performance and its consolidated and separate cash flows for the year then ended in accordance with International Financial eporting Standards and the requirements of the Companies Act of South Africa. Other reports required by the Companies Act As part of our audit of the consolidated and separate financial statements for the year ended 30 June 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 consolidated and separate financial statements. These reports are the responsibility of the respective preparers. Based on reading these reports we have not identified material inconsistencies between these reports and the audited consolidated and separate financial statements. However, we have not audited these reports and accordingly do not express an opinion on these reports. PricewaterhouseCoopers Inc. Director: L ossouw egistered Auditor 26 August 2013 Country Bird Holdings Consolidated Financial Statements

10 Directors report The directors present their annual report, which forms part of the audited financial statements of the group and of the company for the year ended 30 June Nature of business Country Bird Holdings Limited is a holding company incorporating integrated poultry and stock feed business operations in South Africa, operating as Supreme Poultry (Pty) Ltd and Nutri Feeds (Pty) Ltd and poultry breeding operations in the region operating as oss Africa Limited. Country Bird Holdings Limited currently operates in South Africa, Botswana, Zambia and Namibia. Operations in Zimbabwe and Mozambique are in the start-up phases. Operations in Mozambique commenced during the current financial year and operations in Zimbabwe are only expected in Operating and financial review The profit attributable to the owners of the parent for theyear ended 30 June 2013 amounted to (: ). This translates into a basic earnings of 25,63 cents per share (: 30,79 cents per share) based on the shares in issue during the year. The financial statements on pages 8 to 79 set out fully the financial position, results of operations and cash flows of the group and the company for the year ended 30 June Trading weeks The reporting period for the poultry segment as well as the animal nutrition segment ends on the last Sunday of the financial year, resulting in a 52 weeks reporting period for 2013 (: 52 weeks). Acquisitions The group established the company Crispy Chicken estaurants (Pty) Ltd in order to operate in Zimbabwe and Supreme Meat Processors in order to house the processing operations of the poultry business of the group. efer to note 31 for further detail. Segmental analysis Information on segment reporting is set out in note 1 to the consolidated financial statements. Capital commitments and contingencies Details of commitments are set out in note 29 of the financial statements. As at the financial year-end, there are no known contingencies. Events subsequent to the reporting period The directors are not aware of any other matter or circumstance arising since the end of the financial year that would significantly affect the operations of the group and the company or the results of its operations. Share capital The authorised share capital of the company is shares of 1 cent each. The issued share capital of the company is (: ) ordinary shares of 1 cent each. The company s authorised share capital remained unchanged during the year. efer to note 12 for further details on shares issued during the year. Capital distribution A final capital repayment of nil (nil cents per share) and interim capital repayment of nil was declared and paid during the year (: final capital repayment of and 10,84 cents per share and interim capital repayment of and 5,98 cents per share). efer to note 27. Capital repayments are paid out of share premium. Subsidiaries Details of Country Bird Holdings Limited s interest in its subsidiaries are set out in note 31. The attributable interest of the company in the profits and losses of its subsidiaries for the year ended 30 June 2013 is as follows: 2013 Subsidiaries Total profit after tax Total loss after tax ( ) ( ) Directors remuneration Details of directors remuneration are included in note 32. Special resolutions The company passed the following special resolutions at its annual general meeting held on 16 November : hh Granting to the company or any of its subsidiaries general authority for the acquisition by the company or any subsidiary, of ordinary shares in the company in accordance with the requirements of the memorandum of incorporation, the Act and the JSE Listings equirements. hh esolving the remuneration payable to non-executive directors in terms of the company s memorandum of incorporation and section 66(8) and (9) of the Companies Act. hh Granting the company authority to provide direct or indirect financial assistance to any one or more related or inter-related companies or corporations of the company and/or to any one or more members of such related or inter-related company or corporation related to any such company or corporation as outlined in section 2 of the Act, and on such terms and conditions as the board may deem fit. hh esolving the adoption of the proposed memorandum of incorporation (MOI) as the new MOI, the new MOI to apply in substitution for and to the exclusion of the company s existing memorandum of incorporation and articles of association. 8 Country Bird Holdings Consolidated Financial Statements 2013

11 None of the subsidiaries of the company passed any special resolutions, the nature of which might be significant to members in their appreciation of the state of affairs of the group. Directors shareholding At the date of this report, the directors in aggregate had indirect beneficial interests in ordinary shares and direct beneficial interests in shares. efer to note 32 for details of the directors shareholdings. Directors and secretary The names of the directors and company secretary are listed on page 82. The directors to the board are as follows: BH Kent MP Stander (Appointed 1 July 2013) Gibbison GP Heath IWM Isdale KW James CD Stein MB le oux (esigned 16 August 2013) JD Wright (esigned 30 June 2013) In terms of the company s articles of association, Mr BH Kent, Mr Gibbison, Mr IWM Isdale, Mr C Stein and Mr GP Heath retire by rotation at the annual general meeting of shareholders, but are all eligible for re-election. No material contract in which the directors have an interest were entered into during the current year, other than the transactions detailed in note 28 to the consolidated financial statements. Phantom Share Incentive Scheme efer to note 16 for the options granted to and exercised by directors and employees during the financial year. Auditors PricewaterhouseCoopers Inc. will continue in office in accordance with section 90(6) of the Companies Act. At the annual general meeting shareholders will be requested to appoint PricewaterhouseCoopers Inc. as the group s auditors for the 2014 financial year and it is noted that L ossouw will be the individual registered auditor who will undertake the audit. Country Bird Holdings Consolidated Financial Statements

12 Consolidated statement of financial position as at 30 June 2013 Note 2013 Assets Non-current assets Property, plant and equipment Intangible assets Financial assets and other investments Deferred income tax assets Current assets Inventories Biological assets Trade and other receivables Derivative financial instruments Current income tax receivable Cash and cash equivalents Total assets Equity Total equity Ordinary shares Share premium Other reserves etained earnings Common control reserve 14 ( ) ( ) Equity attributable to the owners of the parent Non-controlling interest Liabilities Non-current liabilities Borrowings Employee share scheme liability Deferred income tax liabilities Current liabilities Trade and other payables Current income tax liabilities Borrowings Provision for other liabilities and charges Total liabilities Total equity and liabilities The notes on pages 15 to 59 are an integral part of these consolidated financial statements. 10 Country Bird Holdings Consolidated Financial Statements 2013

13 Consolidated statement of comprehensive income for the year ended 30 June 2013 Note 2013 evenue Cost of sales 20 ( ) ( ) Gross profit Other expenses 20 ( ) ( ) Other gains and losses Operating profit Finance income Finance costs 21 ( ) ( ) Profit before income tax Income tax expense 22 ( ) ( ) Profit for the year Other comprehensive income: Items that may be reclassified subsequently to profit or loss: Currency translation differences Total comprehensive income for the year Profit attributable to: Owners of the parent Non-controlling interest Total comprehensive income attributable to: Owners of the parent Non-controlling interest There is no income tax effect relating to each component of other comprehensive income. Other comprehensive income items are not recyclable. Earnings per share (cents) attributable to the owners of the parent during the year: basic 26 25,63 30,79 diluted 26 25,63 30,79 The notes on pages 15 to 59 are an integral part of these consolidated financial statements. Country Bird Holdings Consolidated Financial Statements

14 Consolidated statement of changes in equity for the year ended 30 June 2013 Note Share capital Share premium Other reserves Balance at 1 July Total comprehensive income Transactions with owners Proceeds from shares issued Shares to be issued related to business combination Employee share scheme transfer to retained earnings ( ) Capital distribution to shareholders 27 ( ) Non-controlling interest arising on business combination Total transactions with owners ( ) Balance at 30 June Balance at 1 July Total comprehensive income Transactions with owners Proceeds from shares issued Shares to be issued related to business combination 13 ( ) Capital distribution to shareholders 27 ( ) Total transactions with owners ( ) Balance at 30 June The notes on pages 15 to 59 are an integral part of these consolidated financial statements. Note Country Bird Holdings Consolidated Financial Statements 2013

15 etained earnings Common control reserve Total Non-controlling interest Total equity ( ) ( ) ( ) ( ) ( ) ( ) ( ) ( ) ( ) ( ) ( ) ( ) Note 14 Country Bird Holdings Consolidated Financial Statements

16 Consolidated statement of cash flows for the year ended 30 June 2013 Note 2013 Cash flows from operating activities Cash generated from operating activities Cash receipts from customers Cash paid to suppliers and employees ( ) ( ) Cash generated from operations A Interest paid ( ) ( ) Income tax paid B ( ) ( ) Cash flows from investing activities Net cash used in investing activities ( ) ( ) Purchases of property, plant and equipment ( ) ( ) Proceeds from sale of property, plant and equipment Acquisition of subsidiaries, net of cash acquired ealisation of financial assets and investments Purchases of financial assets and investments ( ) Interest received Cash flows from financing activities Net cash used in financing activities ( ) ( ) Proceeds from the issuance of ordinary shares Share issue and listing expenses (5 737) Proceeds from borrowings epayments of borrowings ( ) ( ) Capital repayments to shareholders ( ) ( ) Net increase/(decrease) in cash and cash equivalents ( ) Cash and cash equivalents at the beginning of the year ( ) Exchange gains/(losses) on cash and cash equivalents ( ) Cash and cash equivalents at the end of the year ( ) The notes on pages 15 to 59 are an integral part of these consolidated financial statements. 14 Country Bird Holdings Consolidated Financial Statements 2013

17 Notes to the consolidated statement of cash flows for the year ended 30 June A. econciliation of net profit/(loss) before tax to cash generated from operations Cash generated from operations Profit before income tax Adjustment for: Depreciation and amortisation Finance income ( ) ( ) Finance costs Profit on disposal of assets ( ) ( ) Gain on bargain purchase ( ) Foreign exchange differences ( ) Fair value adjustment to biological assets ( ) ( ) Loss on remeasurement of investment in associate ( ) Fair value gains on derivative financial instruments ( ) Share-based payment ( ) Provision for liabilities and other charges ( ) Changes in working capital: Decrease/(increase) in inventory ( ) ( ) Decrease/(increase) in biological assets ( ) ( ) Decrease/(increase) in trade and other receivables ( ) ( ) Increase/(decrease) in trade and other payables B. Taxation payable Taxation paid during the year Balance owing at the beginning of the year ( ) Current tax for the year Acquisition of subsidiary ( ) Interest payable on current income tax (10 473) Secondary tax on companies Balance recoverable/(payable) at the end of the year ( ) ( ) Country Bird Holdings Consolidated Financial Statements

18 Accounting policies 1. General information Country Bird Holdings Limited ( the company ) and its subsidiaries ( together, the group ) incorporate an integrated poultry and stock feed business operation in South Africa operating as Supreme Poultry (Pty) Ltd and Nutri Feeds (Pty) Ltd and poultry breeding operations in the Africa region operating as oss Africa Limited. Country Bird Holdings Limited currently operates in South Africa, Botswana, Zambia, Mozambique and Namibia. During the year, the group established the company "Supreme Meat Processors (Pty) Ltd" in order to house the processing operations of the poultry business of the group and the company "Crispy Chicken estaurants (Pvt) Ltd" in order to facilitate the operation of various KFC franchises in Zimbabwe. The company is a public company which is listed on the JSE Securities Exchange (JSE) and incorporated and domiciled in the epublic of South Africa. The address of its registered office is 8 Melville oad, Illovo, Johannesburg, South Africa. 2. Summary of significant accounting policies The principal accounting policies applied in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated. 2.1 Basis of preparation The consolidated financial statements of Country Bird Holdings Limited have been prepared in accordance with International Financial eporting Standards (IFS), IFIC Interpretations and the requirements of the South African Companies Act of The financial statements have been prepared under the historical cost convention, as modified by financial assets and financial liabilities (including derivative financial instruments at fair value through profit and loss) and certain biological assets. The preparation of financial statements in conformity with IFS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the group s accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements, are disclosed in accounting policy note Going concern As a result of increased focus on cost reduction and focus on working capital, the group has improved both its short-term and medium-term liquidity position, despite significant additional debt arising from acquisitions and capex in the last three years. Interest is 2,20 times covered by operating profit and comfortably within the targets set by the board. The group s forecasts and projections, taking account of reasonably foreseeable changes in trading performance, show that the group should be able to operate within the level of its current financing. After making enquiries, the directors have a reasonable expectation that the group has adequate resources to continue in operational existence for the foreseeable future. The group therefore continues to adopt the going-concern basis in preparing its financial statements and consolidated financial statements. 2.2 Consolidation Business combinations IFS 3 The cost of an acquisition, which is within the scope of IFS 3 Business Combinations, is measured as the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange, plus costs directly attributable to the acquisition. Any excess of the cost over the group s share in the fair value of the assets, liabilities and contingent liabilities acquired is recognised as goodwill and any excess of the fair value of the assets, liabilities and contingent liabilities over the cost is recognised in the income statement (see accounting policy 2.7). Common control transactions The predecessor values method is used to account for common control transactions. The predecessor values method requires financial statements to be prepared using predecessor book values without any step up to fair value. The difference between any consideration given and the aggregate book value of the assets and liabilities (as of the date of the transaction) of the acquired entity are recorded as an adjustment to equity as a common control reserve. No additional goodwill is created by the transaction. 16 Country Bird Holdings Consolidated Financial Statements 2013

19 Subsidiaries Subsidiaries are all entities (including specialpurpose entities) over which the group has the power to govern the financial and operating policies generally accompanying a shareholding of more than one-half of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the group controls another entity. The group also assesses existence of control where it does not have more than 50% of the voting power but is able to govern the financial and operating policies by virtue of de facto control. De facto control may arise in circumstances where the size of the group s voting rights relative to the size and dispersion of holdings of other shareholders give the group the power to govern the financial and operating policies, etc. Subsidiaries are fully consolidated from the date on which control is transferred to the group. They are deconsolidated from the date that control ceases. The group applies the acquisition method of accounting to account for business combinations. The consideration transferred for the acquisition of a subsidiary is the fair values of the assets transferred, the liabilities incurred to the former owners of the acquiree and the equity interests issued by the group. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. The group recognises any non-controlling interest in the acquiree on an acquisition-by-acquisition basis, either at fair value or at the non-controlling interest s proportionate share of the acquiree s net identifiable assets. Acquisition-related costs are expensed as incurred. If the business combination is achieved in stages, the acquisition date fair value of the acquirer s previously held equity interest in the acquiree is remeasured to fair value at the acquisition date through profit or loss. Contingent consideration that is classified as equity is not remeasured, and its subsequent settlement is accounted for within equity. Goodwill is initially measured as the excess of the aggregate of the consideration transferred and the fair value of non-controlling interest over the net identifiable assets acquired and liabilities assumed. If this consideration is lower than the fair value of the net assets of the subsidiary acquired, the difference is recognised in profit or loss. Inter-company transactions, balances, income and expenses on transactions between group companies are eliminated. Profits and losses resulting from inter-company transactions that are recognised in assets are also eliminated. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the group. Changes in ownership interests in subsidiaries without change of control Transactions with non-controlling interests that do not result in loss of control are accounted for as equity transactions that is, as transactions with the owners in their capacity as owners. The difference between fair value of any consideration paid and the relevant share acquired of the carrying value of net assets of the subsidiary is recorded in equity. Gains or losses on disposals to non-controlling interests are also recorded in equity. Disposal of subsidiaries When the group ceases to have control, any retained interest in the entity is remeasured to its fair value at the date when control is lost, with the change in carrying amount recognised in profit or loss. The fair value is the initial carrying amount for the purposes of subsequently accounting for the retained interest as an associate, joint venture or financial asset. In addition, any amounts previously recognised in other comprehensive income in respect of that entity are accounted for as if the group had directly disposed of the related assets or liabilities. This may mean that amounts previously recognised in other comprehensive income are reclassified to profit or loss. Any contingent consideration to be transferred by the group is recognised at fair value at the acquisition date. Subsequent changes to the fair value of the contingent consideration that is deemed to be an asset or liability is recognised in accordance with IAS 39 either in profit or loss or as a change to other comprehensive income. Country Bird Holdings Consolidated Financial Statements

20 Accounting policies continued 2.2 Consolidation (continued) Associates Associates are all entities over which the group has significant influence but not control, generally accompanying a shareholding of between 20% and 50% of the voting rights. Investments in associates are accounted for using the equity method of accounting. Under the equity method, the investment is initially recognised at cost and the carrying amount is increased or decreased to recognise the investor s share of the profit or loss of the investee after the date of acquisition. The group s investment in associates includes goodwill identified on acquisition, net of any accumulated impairment loss. See note 2.7 for the impairment of non-financial assets including goodwill. If the ownership interest in an associate is reduced but significant influence is retained, only a proportionate share of the amounts previously recognised in other comprehensive income is reclassified to profit or loss where appropriate. The group s share of post-acquisition profit or loss is recognised in the statement of comprehensive income, and its share of post-acquisition movements in other comprehensive income is recognised in other comprehensive income with a corresponding adjustment to the carrying amount of the investment. When the group s share of losses in an associate equals or exceeds its interest in the associate, including any other unsecured receivables, the group does not recognise further losses, unless it has incurred legal or constructive obligations or made payments on behalf of the associate. The group determines at each reporting date whether there is any objective evidence that the investment in the associate is impaired. If this is the case, the group calculates the amount of impairment as the difference between the recoverable amount of the associate and its carrying value and recognises the amount adjacent to share of profit/(loss) of an associate in the statement of comprehensive income. Profits and losses resulting from upstream and downstream transactions between the group and its associates are recognised in the group s financial statements only to the extent of unrelated investor s interests in the associates. Unrealised losses are eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of associates have been changed where necessary to ensure consistency with the policies adopted by the group. Dilution gains and losses arising in investments in associates are recognised in the statement of comprehensive income. 2.3 Segment reporting Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the group executive committee. Management has determined the reportable segments based on the reports reviewed by the executive committee that are used to make strategic decisions. The group s primary format for reporting segmental information is determined in accordance with the nature of business and its secondary format is determined with reference to the geographical location of the operations. The executive committee assesses the performance of the reportable segments based on operating profit. Intersegment transfers Segment revenue, segment expenses and segment results include transfers between business segments and between geographical segments. Such transfers are accounted for at arm s length prices. These transfers are eliminated on consolidation. Segmental revenue and expenses All segment revenue and expenses are directly attributable to the segments. Segment revenue and expenses are allocated to the geographic segments based on the location of the operating activity. Segment assets All operating assets used by a segment, principally property, plant and equipment, investments, inventories, biological assets, and receivables (net of allowances) and cash and cash equivalents. Segment assets are allocated to the geographic segments based on where the assets are located. Segment liabilities All operating liabilities of a segment, principally accounts payable and external interestbearing borrowings. 2.4 Foreign currency translation Functional and presentation currency Items included in the financial statements of each of the group s entities are measured using the currency of the primary economic environment in which the entity operates (the functional currency). The consolidated financial statements are presented in South African rand (), which is the group s presentation currency and the company s presentation currency. 18 Country Bird Holdings Consolidated Financial Statements 2013

21 Transactions and balances Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions or valuation where items are remeasured. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the statement of comprehensive income. Foreign exchange gains and losses that relate to borrowings and cash and cash equivalents are presented in the statement of comprehensive income within finance income or cost. All other foreign exchange gains and losses are presented in the statement of comprehensive income within other (losses)/gains net. Changes in the fair value of monetary securities denominated in foreign currency classified as available-for-sale are analysed between translation differences resulting from changes in the amortised cost of the security, and other changes in the carrying amount of the security. Translation differences related to changes in amortised cost are recognised in profit or loss, and other changes in carrying amount are recognised in other comprehensive income. Translation differences on non-monetary financial assets and liabilities such as equities held at fair value through profit or loss are recognised in profit or loss as part of the fair value gain or loss. Translation differences on non-monetary financial assets, such as equities classified as available-forsale, are included in other comprehensive income. Group companies The results and financial position of all the group entities (none of which has the currency of a hyper-inflationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows: hh Assets and liabilities for each statement of financial position presented are translated at the closing rate at the date of that statement of financial position. hh Income and expenses for each statement of comprehensive income are translated at the average exchange rates (unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the rate on the dates of the transactions). hh All resulting exchange differences are recognised in other comprehensive income. Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the closing rate. Exchange differences arising are recognised in equity. 2.5 Property, plant and equipment Land and buildings comprise mainly broiler and breeder operations, processing plants and offices. Land and buildings are shown at historical cost less subsequent depreciation for buildings. All other property, plant and equipment is stated at historical cost less depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the items. Subsequent costs are included in the asset s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the group and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognised. All other repairs and maintenance are charged to the statement of comprehensive income during the financial period in which they are incurred. Land is not depreciated. Depreciation on other assets is calculated using the straight-line method to allocate their cost to their residual values over their estimated useful lives, as follows: Buildings and improvements 5 50 years Plant and equipment 2 25 years Furniture 5 10 years Computer hardware 1 to 5 years Vehicles 5 years The assets residual values and useful lives are reviewed, and adjusted if appropriate, at each reporting period. An asset s carrying amount is written down immediately to its recoverable amount if the asset s carrying amount is greater than its estimated recoverable amount (note 2.7). Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognised within other gains and losses in the statement of comprehensive income. Work in progress constitutes buildings, sites and chicken houses under construction. These are capitalised to property, plant and equipment when the specific project is completed. No depreciation is provided until the assets are available for use as intended by management. Borrowing costs that are directly attributable to the acquisition, construction or production of an asset that necessarily takes a substantial period of time (more than 12 months) to get ready for its intended use, form part of the cost of that asset. Other borrowing costs are recognised as an expense. Country Bird Holdings Consolidated Financial Statements

22 Accounting policies continued 2.6 Intangible assets Goodwill Goodwill arises on the acquisition of subsidiaries, associates and joint ventures and represents the excess of the consideration transferred over Country Bird Holdings Limited s interest in the net fair value of the net identifiable assets, liabilities and contingent liabilities of the acquiree and the fair value of the non-controlling interest in the acquiree. For the purpose of impairment testing, goodwill acquired in business combination is allocated to each of the cash-generating units or groups of cash-generating units that are expected to benefit from the synergies of the combination. Each unit or group of units to which the goodwill is allocated represents the lowest level within the entity at which the goodwill is monitored for internal management purposes. Goodwill is monitored at the operating segment level. Goodwill impairment reviews are undertaken annually or more frequently if events or changes in circumstances indicate a potential impairment. The carrying value of goodwill is compared to the recoverable amount, which is the higher of value in use and the fair value less costs to sell. Any impairment is recognised immediately as an expense and is not subsequently reversed. Brand names Acquired brand names are shown at historical cost. Brand names have a finite useful life and are carried at cost less accumulated amortisation. Amortisation is calculated using the straight-line method to allocate the cost of the brand names over their estimated useful lives (20 years). Customer relationships Customer relationships acquired in a business combination are recognised at fair value at the acquisition date. The customer relations have a finite useful life and are carried at cost less accumulated amortisation. Amortisation is calculated using the straight-line method over the expected useful life of the customer relationship (20 years). 2.7 Impairment of non-financial assets Assets that have an indefinite useful life, for example goodwill or intangible assets not ready to use, are not subject to amortisation and are tested annually for impairment. Assets that are subject to amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units). Non-financial assets other than goodwill that suffered an impairment are reviewed for possible reversal of the impairment at each reporting date. 2.8 Biological assets Biological assets comprise live broiler chicks, hatching eggs and breeding stock (including parents in lay and in rear). Live broiler chicks and hatching eggs, which include both at own premises and at contract grower premises, are measured at fair values less costs to sell based on estimated pre-tax net cash flows. The calculation is based on active markets, where appropriate, or management s assessment of the fair value based on available data, which includes selling price of live birds, costs incurred and mortality ratios. Breeding stock is capitalised at cost at the beginning of its productive cycle and is amortised on a straight-line method over the anticipated productive cycle, to its estimated net realisable value. At reporting dates, breeding stock is measured at their fair value less estimated point-of-sale costs. The determination of fair value is based on active markets, where appropriate, or management s assessment of the fair value based on available data, which includes selling price of live birds, costs incurred and mortality ratios. Costs to sell include the incremental selling costs. Gains and losses arising from changes in the fair values are recorded in net profit or loss for the period in which they arise. All the expenses incurred in establishing and maintaining the assets are expensed as incurred. The costs incurred in acquiring biological assets are capitalised. Finance charges are not capitalised. Live broiler chicks are transferred to the processing plant at fair value less estimated point-of-sale costs. These chicks are then further processed when slaughtered. Once slaughtered, the biological assets are transferred to finished goods. 20 Country Bird Holdings Consolidated Financial Statements 2013

23 2.9 Financial assets Classification The group classifies its financial assets in the following categories: at fair value though profit or loss and loans and receivables. The classification depends on the purpose for which the financial assets were acquired. Management determines the classification of its financial assets at initial recognition. (a) Financial assets at fair value through profit or loss Financial assets at fair value through profit or loss are financial assets held for trading. A financial asset is classified in this category if acquired principally for the purpose of selling in the short term. Derivatives are also categorised as held for trading unless they are designated as hedges. Assets in this category are classified as current assets if expected to be settled within 12 months; otherwise, they are classified as non-current. (b) Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, except for maturities greater than 12 months after the end of the reporting period. These are classified as non-current assets. The group s loans and receivables comprise trade and other receivables and cash and cash equivalents in the statement of financial position (notes 2.16 and 2.17) ecognition and measurement egular purchases and sales of financial assets are recognised on the trade date the date on which the group commits to purchase or sell the asset. Investments are initially recognised at fair value plus transaction costs for all financial assets not carried at fair value through profit or loss. Financial assets carried at fair value through profit or loss are initially recognised at fair value, and transaction costs are expensed in the statement of comprehensive income. Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or have been transferred and the group has transferred substantially all risks and rewards of ownership. Financial assets at fair value through profit and loss are subsequently carried at fair value. Loans and receivables and held-to-maturity financial assets are carried at amortised cost using the effective interest method. Gains or losses arising from changes in the fair value of the financial assets at fair value through profit or loss category, are presented in the statement of comprehensive income within other gains and losses, in the period in which they arise. Dividend income from financial assets at fair value through profit or loss is recognised in the statement of comprehensive income as part of other income when the group s right to receive payments is established Offsetting financial instruments Financial assets and liabilities are offset and the net amount reported in the statement of financial position when there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis, or realise the asset and settle the liability simultaneously Impairment of financial assets Assets carried at amortised cost The group assesses at the end of each reporting period whether there is objective evidence that a financial asset or a group of financial assets is impaired. A financial asset or a group of financial assets is impaired and impairment losses are incurred only if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a loss event ) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated. Evidence of impairment may include indications that the debtors or a group of debtors is experiencing significant financial difficulty, default or delinquency in interest or principal payments, the probability that they will enter bankruptcy or other financial reorganisation, and where observable data indicate that there is a measurable decrease in the estimated future cash flows, such as changes in arrears or economic conditions that correlate with defaults. For the loans and receivables category, the amount of the loss is measured as the difference between the asset s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset s original effective interest rate. The carrying amount of the asset is reduced and the amount of the loss is recognised in the consolidated statement of comprehensive income. If a loan or held-tomaturity investment has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate determined under the contract. As a practical expedient, the group may measure the impairment on the basis of an instrument s fair value using an observable market price. Country Bird Holdings Consolidated Financial Statements

24 Accounting policies continued 2.11 Impairment of financial assets (continued) Assets carried at amortised cost (continued) If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised (such as an improvement in the debtor s credit rating), the reversal of the previously recognised impairment loss is recognised in the consolidated statement of comprehensive income. Impairment testing of trade receivables is described in note Derivative financial instruments Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently remeasured at their fair value. The method of recognising the derivatives is at fair value through profit or loss. Changes in the fair value of these derivative instruments is recognised immediately in other income Current and deferred income tax The tax expense for the period comprises current and deferred tax. Tax is recognised in the statement of comprehensive income, except to the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case, the tax is also recognised in other comprehensive income or directly in equity respectively. The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the reporting date in the countries where the company and its subsidiaries and associates operate and generate taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulations are subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities. Deferred income tax is recognised, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. However, deferred tax liabilities are not recognised if they arise from the initial recognition of goodwill; deferred income tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the reporting date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled. Deferred income tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised. Deferred income tax is provided on temporary differences arising on investments in subsidiaries and associates, except for deferred income tax liability where the timing of the reversal of the temporary difference is controlled by the group and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred income tax assets and liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities where there is an intention to settle the balances on a net basis Dividends tax (DT) DT is a tax imposed on shareholders at a rate of 5% on receipt of dividends. The DT is categorised as a withholding tax, as the tax is withheld and paid to the South African evenue Service by the company paying the dividend or by a regulated intermediary and not the person liable for the tax Inventories Cost method for each category of inventory is determined as follows: Finished goods Inventories are stated at the lower of cost and net realisable value. Cost is determined using the first-in first-out basis or weighted average cost. The cost of finished goods comprises raw materials, direct labour, other direct costs and related production overheads (based on normal operating capacity). It excludes borrowing costs. Net realisable value is the estimated selling price in the ordinary course of business, less applicable variable selling expenses. Slaughtered chickens or livestock and by-products are included in finished goods; consumer inventory under consumables and other purchased products under raw materials and consumables. Slaughtered chickens In accordance with a formula at the weighted average cost, the cost of broilers is increased with handling, slaughter and freezing costs and the by-products are offset at the net realisable value against cost. The cost of finished goods comprises raw materials, direct labour, other direct costs and related production overheads (based on normal operating capacity). It excludes borrowing costs. Slaughtered chickens are classified as finished goods under inventories. 22 Country Bird Holdings Consolidated Financial Statements 2013

25 Consumer inventory and raw materials At cost on a first-in first-out basis. Consumer inventory is classified as consumables and raw materials are classified as raw materials under inventories. Other purchased products At the weighted average cost or first-in first-out basis. Other purchased products are classified as consumables under inventories. Other livestock and carcasses Inventories consist of the produce of biological assets and are therefore initially recognised at fair value less costs to sell. At year-end, the inventory is stated at the lower of cost and net realisable value. Other livestock and carcasses are classified as finished goods under inventories Trade receivables Trade receivables are amounts due from customers for merchandise sold or services performed in the ordinary course of business. If collection is expected in one year or less (or in the normal operating cycle of the business if longer), they are classified as current assets. If not, they are presented as non-current assets. Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment Cash and cash equivalents In the consolidated statement of cash flows, cash and cash equivalents include cash in hand, deposits held at call with banks, other short-term highly liquid investments with original maturities of three months or less, and bank overdrafts. In the consolidated statement of financial position, bank overdrafts are shown within borrowings in current liabilities Share capital Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new ordinary shares or options and initial listing expenses are shown in equity as a deduction, net of tax, from the proceeds. Where any group company purchases the company s equity share capital (treasury shares), the consideration paid, including any directly attributable incremental costs (net of income taxes) is deducted from equity attributable to the company s equity holders until the shares are cancelled or reissued. Where such shares are subsequently reissued, any consideration received, net of any directly attributable incremental transaction costs and the related income tax effects, is included in equity attributable to the company s equity holders Borrowings Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently carried at amortised cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognised in the statement of comprehensive income over the period of the borrowings using the effective interest method. Fees paid on the establishment of loan facilities are recognised as transaction costs of the loan to the extent that it is probable that some or all of the facility will be drawn down. In this case, the fee is deferred until the drawdown occurs. To the extent that there is no evidence that it is probable that some or all of the facility will be drawn down, the fee is capitalised as a prepayment for liquidity services and amortised over the period of the facility to which it relates Borrowing costs General and specific borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale. Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalisation. All other borrowing costs are recognised in profit or loss in the period in which they are incurred Compound financial instruments Compound financial instruments issued by the group comprise convertible notes that can be converted to share capital at the option of the holder, and the number of shares to be issued does not vary with changes in their fair value. The liability component of a compound financial instrument is recognised initially at the fair value of a similar liability that does not have an equity conversion option. The equity component is recognised initially at the difference between the fair value of the compound financial instrument as a whole and the fair value of the liability component. Any directly attributable transaction costs are allocated to the liability and equity components in proportion to their initial carrying amounts. Subsequent to initial recognition, the liability component of a compound financial instrument is measured at amortised cost using the effective interest method. The equity component of a compound financial instrument is not remeasured subsequent to initial recognition except on conversion or expiry. Country Bird Holdings Consolidated Financial Statements

26 Accounting policies continued 2.22 Employee benefits Pension obligations Group companies operate various pension schemes. The schemes are generally funded through payments to insurance companies or trustee-administered funds, determined by periodic actuarial calculations. The group only has defined contribution plans. A defined contribution plan is a pension plan under which the group pays fixed contributions into a separate entity. The group has no legal or constructive obligations to pay further contributions if the fund does not hold sufficient assets to pay all employees the benefits relating to employee service in the current and prior periods. For defined contribution plans, the group pays contributions to publicly administered pension insurance plans on a voluntary basis. The group has no further payment obligations once the contributions have been paid. The contributions are recognised as employee benefit expense when they are due. Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in the future payments is available. Termination benefits Termination benefits are payable when employment is terminated by the group before the normal retirement date, or whenever an employee accepts voluntary redundancy in exchange for these benefits. The group recognises termination benefits when it is demonstrably committed to a termination when the entity has a detailed formal plan to terminate the employment of current employees without possibility of withdrawal. In the case of an offer made to encourage voluntary redundancy, the termination benefits are measured based on the number of employees expected to accept the offer. Benefits falling due more than 12 months after the end of the reporting period are discounted to their present value. Profit-sharing and bonus plans The group recognises a liability and an expense for bonuses and profit-sharing, based on a formula that takes into consideration the profit attributable to the company s shareholders after certain adjustments. The group recognises a provision where contractually obliged or where there is a past practice that has created a constructive obligation. The profit-sharing and bonus plans are approved annually by the board Share-based payments The group operates a cash-settled, share-based compensation plan which is the Phantom Share Scheme. In the case of the Phantom Share Scheme, a cash bonus is paid to employees based on the difference between the exercise price and the fair value of the shares on exercise date. The liability recognised for the Phantom Share Scheme is remeasured at each reporting date to the fair value of the share options as at the reporting date. The adjustments are recognised directly in the statement of comprehensive income Trade payables Trade payables are obligations to pay for goods and services that have been acquired in the ordinary course of business from suppliers. Accounts payable are classified as current liabilities if payment is due within one year or less (or in the normal operating cycle of the business if longer). If not, they are presented as non-current liabilities. Trade payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method Provisions Provisions for restructuring costs and legal claims are recognised when the group has a present legal or constructive obligation as a result of past events; it is probable that an outflow of resources will be required to settle the obligation; and the amount has been reliably estimated. Provisions are not recognised for future operating losses. Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. A provision is recognised even if the likelihood of an outflow with respect to any one item included in the same class of obligations may be small. Provisions are measured at the present value of the expenditures expected to be required to settle the obligation using a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the obligation. The increase in the provision due to passage of time is recognised as interest expense. 24 Country Bird Holdings Consolidated Financial Statements 2013

27 2.26 evenue recognition evenue is measured at the fair value of the consideration received or receivable, and represents amounts receivable for goods supplied, stated net of discounts, returns and value added taxes. The group recognises revenue when the amount of revenue can be reliably measured; when it is probable that future economic benefits will flow to the entity and when specific criteria have been met for each of the group s activities, as described below. The group bases its estimate of return on historical results, taking into consideration the type of customer, the type of transaction and the specifics of each arrangement. (a) Sales of goods wholesale The group manufactures and sells a range of poultry and stock feed products in the wholesale market. Sales of goods are recognised when a group entity has delivered products to the wholesaler, the wholesaler has full discretion over the channel and price to sell the products, and there is no unfulfilled obligation that could affect the wholesaler s acceptance of the products. Delivery does not occur until the products have been shipped to the specified location, the risks of obsolescence and loss have been transferred to the wholesaler, and either the wholesaler has accepted the products in accordance with the sales contract, the acceptance provisions have lapsed or the group has objective evidence that all criteria for acceptance have been satisfied. Sales are recorded based on the price specified in the sales contracts, net of the estimated settlement discounts at the time of sale. Accumulated experience is used to estimate and provide for the settlement discount. No element of financing is deemed present as the sales are made with a credit term of between seven and 31 days, which is consistent with the market practice. (b) Sales of goods retail The group operates retail outlets for selling of poultry and stock feed products. Sales of goods are recognised when a group entity sells a product to the customer. etail sales are mainly in cash. The group does not operate any loyalty programmes. (c) Other income Other income is recognised when the right to receive payment is established Interest income Interest income is recognised using the effective interest method. When a loan and receivable are impaired, the group reduces the carrying amount to its recoverable amount, being the estimated future cash flow discounted at the original effective interest rate of the instrument, and continues unwinding the discount as interest income. Interest income on impaired loans and receivables is recognised using the original effective interest rate Dividend income Dividend income is recognised when the right to receive payment is established Leases Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are charged to the statement of comprehensive income on a straight-line basis over the period of the lease. The group leases certain property, plant and equipment. Leases of property, plant and equipment, where the group has substantially all the risks and rewards of ownership, are classified as finance leases. Finance leases are capitalised at the lease s commencement at the lower of the fair value of the leased property and the present value of the minimum lease payments. Each lease payment is allocated between the liability and finance charges so as to achieve a constant rate on the finance balance outstanding. The corresponding rental obligations, net of finance charges, are included in other long-term payables. The interest element of the finance cost is charged to the statement of comprehensive income over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. The property, plant and equipment acquired under finance leases are depreciated over the shorter of the useful life of the asset and the lease term. Each lease payment is allocated between the liability and finance charges. The corresponding rental obligations, net of finance charges, are included in other long-term payables. The interest element of the finance cost is charged to the statement of comprehensive income over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. The property, plant and equipment acquired under finance leases are depreciated over the shorter of the useful life of the asset and the lease term. Country Bird Holdings Consolidated Financial Statements

28 Accounting policies continued 2.30 Dividend distributions Dividend distributions to the company s shareholders are recognised as a liability in the group s financial statements in the period in which the dividends are approved by the company s shareholders Capital distributions Capital distributions to the company s shareholders are recognised as a liability in the group s financial statements in the period in which the distributions are approved by the company s shareholders. Unless determined by the board in light of the company s performance, it is group policy to declare a capital distribution of one-third of headline earnings per share to the company s shareholders. Capital distributions are not subject to dividends tax Exceptional items Exceptional items are disclosed separately in the financial statements where it is necessary to do so to provide further understanding of the financial performance of the group. They are material items of income or expense that have been shown separately due to the significance of their nature or amount. 3. Financial risk management 3.1 Financial risk factors The group s activities expose it to a variety of financial risks: market risk (including currency risk, fair value interest rate risk, cash flow interest rate risk and price risk), credit risk and liquidity risk. The group s overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the group s financial performance. The board provides written principles for overall risk management, as well as written policies covering specific areas, such as foreign exchange risk, interest rate risk, credit risk, use of derivative financial instruments and non-derivative financial instruments, and investment of excess liquidity. (a) Market risk (i) Foreign exchange risk The group operates internationally and is exposed to foreign exchange risk arising from various currency exposures, primarily with respect to the Botswanan pula, Zambian kwacha, Mozambican new metical and US dollar. The group also has translation risk arising from the consolidation of foreign entities into South African rand. Foreign exchange risk arises from future commercial transactions, recognised assets and liabilities and net investments in foreign operations. The group has certain investments in foreign operations, whose net assets are exposed to foreign currency translation risk. Currency exposure arising from the net assets of the group s foreign operations is managed primarily through borrowings denominated in the relevant foreign currencies. At 30 June 2013, if the currency had weakened/strengthened by 1% against the Zambian kwacha with all other variables held constant, post-tax profit for the year would have been (: ) higher/lower, mainly as a result of the foreign exchange gains/losses on translation of foreign denominated trade receivables, payables and borrowings. At 30 June 2013, if the currency had weakened/strengthened by 1% against the Botswanan pula with all other variables held constant, post-tax profit for the year would have been (: ) higher/lower, mainly as a result of the foreign exchange gains/losses on translation of foreign denominated trade receivables, payables and borrowings. At 30 June 2013, if the currency had weakened/strengthened by 1% against the US dollar with all other variables held constant, post-tax profit for the year would have been (: ) higher/lower, mainly as a result of the foreign exchange gains/losses on translation of US dollar denominated trade receivables, payables and borrowings. At 30 June 2013, if the currency had weakened/strengthened by 1% against the Mozambican new metical with all other variables held constant, post-tax profit for the year would have been (: nil) higher/lower, mainly as a result of the foreign exchange gains/losses on translation of Mozambican new metical denominated trade receivables, payables and borrowings. At 30 June 2013, if the currency had weakened/strengthened by 1% against the Zambian kwacha with all other variables held constant, equity would have been (: ) higher/lower as a result of the foreign exchange translation reserve. At 30 June 2013, if the currency had weakened/strengthened by 1% against the Botswanan pula with all other variables held constant, equity would have been (: ) higher/lower as a result of the foreign exchange translation reserve. 26 Country Bird Holdings Consolidated Financial Statements 2013

29 (ii) At 30 June 2013, if the currency had weakened/strengthened by 1% against the Mozambican new metical with all other variables held constant, equity would have been (: nil) higher/lower as a result of the foreign exchange translation reserve. At 30 June 2013, if the currency had weakened/strengthened by 1% against the US dollar with all other variables held constant, equity would have been (: nil) higher/lower as a result of the foreign exchange translation reserve. Price risk The group is not exposed to significant price risk since the group does not hold material investments which are classified as at fair value through profit or loss. The price risk for investments carried at cost is not calculated since they are not significant to the group. (iii) Cash flow and fair value interest rate risk The group s interest rate risk arises from long-term borrowings. Borrowings issued at variable rates expose the group to cash flow interest rate risk, which is partially offset by cash held at variable rates. Borrowings issued at fixed rates expose the group to fair value interest rate risk. The group analyses its interest rate exposure on a dynamic basis. Various scenarios are simulated taking into consideration refinancing, renewal of existing positions and alternative financing. Based on these scenarios the group calculates the impact on profit and loss of a defined interest rates shift. For each simulation, the same interest rate shift is used for all currencies. The scenarios are run only for liabilities that represent the major interest-bearing positions. Based on the simulations performed, the impact on post-tax profit of a 1% shift in interest rates would be a maximum increase/ decrease of (: ). (iv) Contract growers The group utilises a number of contract growers who grow a substantial portion of broilers which is supplied to its processing operations. The performance of the contract growers is monitored by a dedicated team who advises and is consulted by the contract growers on various issues, ie feed, housing, medication, vaccination and best practices, to ensure continuous and maximum delivery of broilers to the processing plants. (v) Commodity price risk Commodity price risk arises from the company s significant consumption of agricultural commodities and its use of derivative financial instruments linked to underlying agricultural commodity prices. The prices of commodities used by the company can fluctuate widely and in a competitive market it is not always possible to recover material commodity price increases from broiler customers. This can impact the company s profitability. The company may suffer financial loss when a fluctuating price contract obligation is entered into and the commodity prices increase or when a fixed price agreement is entered into and commodity prices fall. Commodity price fluctuations are normally caused by factors such as supply conditions, weather, exchange rate fluctuations and other economic conditions. These risks are managed through an established process whereby the various conditions which influenced commodity prices are monitored on a daily basis. Decisions on the procurement of raw materials as well as the utilisation of derivative instruments to hedge against these risks are taken by executive management within board- approved mandates given. Detailed statements of raw material contracts and hedging positions are prepared on a monthly basis. (b) Credit risk Credit risk is managed on a group basis, except for credit risk relating to accounts receivable balances. Each local entity is responsible for managing and analysing the credit risk for each of its new clients before standard payment and delivery terms and conditions are offered. Credit risk arises from cash and cash equivalents, derivative financial instruments and deposits with banks and financial institutions, as well as credit exposures to wholesale and retail customers, including outstanding receivables and committed transactions. For banks and financial institutions, only banking institutions that are reputable and well-known in the industry are used by the group. Therefore, the credit risk that arises from here is not considered significant. If wholesale customers are independently rated, these ratings are used. If there is no independent rating, the credit quality of the customer is assessed, taking into account its financial position, past experience and other factors. Individual risk limits are set in accordance with limits set by the board. The utilisation of credit limits is regularly monitored. Sales to retail customers are settled in cash. Except for one retailer who makes up about 5% (: 9%) of the accounts receivable, the group has no significant concentrations of credit risk. It has policies in place to ensure that wholesale sales of products are made to customers with an appropriate credit history. Should customers default with payments, alternative steps are taken to ensure collection of the outstanding balance is not at risk. Credit limits are followed up and monitored regularly. Country Bird Holdings Consolidated Financial Statements

30 Accounting policies continued 3.1 Financial risk factors (continued) (c) Liquidity risk Cash flow forecasting is performed in the operating entities of the group and is aggregated by the group. olling forecasts of the group s liquidity requirements are monitored to ensure that it has sufficient cash to meet operational needs while maintaining sufficient headroom on its undrawn committed borrowing facilities at all times so that the group does not breach borrowing limits or covenants on any of its borrowing facilities. Such forecasting takes into consideration the group s debt financing plans, covenant compliance, compliance with internal statement of financial position ratio targets and, if applicable, external regulatory or legal requirements, for example, currency restrictions. The table below analyses the group s non-derivative financial liabilities and net-settled derivative financial liabilities into relevant maturity groupings based on the remaining period at the reporting date to the contractual maturity date. Derivative financial liabilities are included in the analysis if their contractual maturities are essential for an understanding of the timing of the cash flows. The amounts disclosed in the table are the contractual undiscounted cash flows Borrowings Less than 1 year Between 1 and 2 years Between 2 and 5 years Over 5 years Trade and other payables Less than 1 year Bank overdraft Less than 1 year The group had unutilised borrowing facilities of 20 million at 30 June All undrawn borrowing facilities are renewable annually and none have a fixed interest rate. 3.2 Capital management The group s objectives when managing capital are to safeguard the group s ability to continue as a going concern in order to provide returns for shareholders and to maintain an optimal capital structure to reduce the cost of capital. In order to maintain or adjust the capital structure, the group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt. Consistent with others in the industry, the group monitors capital on the basis of the gearing ratio. This ratio is calculated as net debt divided by total capital. Net debt is calculated as total borrowings (including current and non-current borrowings as shown in the consolidated statement of financial position) less cash and cash equivalents. Total capital is calculated as equity as shown in the consolidated statement of financial position plus net debt. Financial covenants that the group is required to comply with for bank borrowings are monitored on a quarterly basis by the board in order to ensure compliance. The following covenants are to be maintained, namely, gearing ratio not to exceed 1,25, general banking facility not to be less than 2 times covered by inventory and accounts receivable, minimum interest cover of 3 times, debt service cover ratio of no less than 1,3 times and tangible net asset value divided by net debt shall be at least 1 times. The group currently complies with all covenants except for the interest cover ratio and the debt service cover ratio. The group is currently renegotiating the covenants with the bank. During 2013, the group s strategy, which was unchanged from, was to maintain the gearing ratio within 30% to 40%. The gearing ratios at 30 June 2013 and were as follows: 2013 Total borrowings (note 15) Less: Cash and cash equivalents (note 11) ( ) ( ) Net debt Total equity Total capital Gearing ratio (%) Country Bird Holdings Consolidated Financial Statements 2013

31 3.3 Fair value estimation Below is the analysis of financial instruments carried at fair value, by valuation method. The different levels have been defined as follows: hh Quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1). hh Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices) (level 2). hh Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs) (level 3). The following table presents the group s assets and liabilities that are measured at fair value at 30 June 2013: Level 1 Level 2 Total balance Assets Financial assets at fair value through profit or loss Trading derivatives The following table presents the group s assets and liabilities that are measured at fair value at 30 June : Level 1 Level 2 Total balance Assets Financial assets at fair value through profit or loss Trading derivatives The fair value of financial instruments traded in active markets (such as trading and available-forsale securities) is based on quoted market prices at the reporting date. A market is regarded as active if quoted prices are readily and regularly available from an exchange, dealer, broker, industry group, pricing service or regulatory agency, and those prices represent actual and regularly occurring market transactions on an arm s length basis. The quoted market price used for financial assets held by the company is the current bid price. These instruments are included in level 1. Instruments included in level 1 comprise primarily white maize, yellow maize and soya agricultural derivatives classified as trading derivatives. The fair value of financial instruments that are not traded in an active market (for example over-thecounter derivatives) is determined by using valuation techniques. These valuation techniques maximise the use of observable market data where it is available and rely as little as possible on entity-specific estimates. If all significant inputs required to fair value an instrument are observable, the instrument is included in level 2. If one or more of the significant inputs are not based on observable market data, the instrument is included in level 3. Specific valuation techniques used to value financial instruments include: hh Quoted market prices or dealer quotes for similar instruments. hh Other techniques, such as discounted cash flow analysis, are used to determine fair value for the remaining financial instruments. 4. Critical accounting estimates and judgements Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. The group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below. Estimated impairment of goodwill The group tests annually whether goodwill has suffered any impairment, in accordance with the accounting policy stated in note 2.7. The recoverable amounts of cash-generating units have been determined based on discounting of future cash flows. These calculations require the use of estimates. Income taxes The group is subject to income taxes in numerous jurisdictions. Significant judgement is required in determining the worldwide provision for income taxes. There are many transactions and calculations for which the ultimate tax determination is uncertain. The group recognises 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 current and deferred income tax assets and liabilities in the period in which such determination is made. Country Bird Holdings Consolidated Financial Statements

32 Accounting policies continued 4. Critical accounting estimates and judgements continued Fair value of biological assets In measuring fair value of biological assets, management s estimates and judgements are required for the determination of fair value. These estimates and judgements relate to the market prices, average weight and quality of animals and mortality rates. The fair value of biological assets is determined with reference to the net realisable value of assets at year-end and making use of assumptions that are mainly based on market conditions existing at each reporting date. These assumptions are made according to a formula, where the cost of broilers and other by-products is adjusted to the fair value at each financial year-end. The determination of fair value is based on management s assessment of the fair value based on available data, which includes selling price of live birds, costs incurred and mortality ratios. Treatment of contract growers Contract growers are not regarded to be special-purpose entities and are therefore not consolidated into the group. The contract growers retain the majority of the residual or ownership risks related to its assets or entities in order to obtain benefits from its activities. Furthermore, the following are clear indicators that the contract growers retain ownership risks: hh The group does not provide financing or guarantees to the contract growers. hh The land and buildings of the contract growers are the property of the contract grower and the contract grower enjoys unfettered rights of control and usage of the property. The group therefore has no claim against any land or buildings of the contract growers. hh The contract growers are responsible for the continuous maintenance and upkeep of the broiler houses and equipment, and therefore the risk of ownership remains with the contract grower. Furthermore, all business risks remain with the contract grower and the group cannot be held liable therefor. ecognition of deferred tax asset Deferred tax assets are recognised to the extent that it is probable that taxable income will be available in future against which they can be utilised. Business plans and forecasts are prepared annually and approved by the boards of the company. These plans and forecasts include estimates and assumptions regarding economic growth, interest rates, inflation and competitive forces. These plans contain profit forecasts and cash flows and these are utilised in the assessment of the recoverability of deferred tax assets. Management also exercises judgement in assessing the likelihood that business plans will be achieved and that the deferred tax assets are recoverable. Accruals and provisions The inclusion of accruals and provisions for the reporting period are based on a number of estimates due to the short timeframe from the end of the reporting period to the publication of the annual financial statements. Fair value of accounts receivable efer to note 2.16 of the accounting policies as well as note 10 of the financial statements. 5. Impact of future amendments Standards, amendment and interpretations effective in 2013 The following amendments and interpretations to standards are mandatory for the group s accounting periods beginning on or after 1 January : IAS 12 (amendment) Income taxes effective 1 January. This amendment introduces an exception to the existing principle for the measurement of deferred tax assets or liabilities arising on investment property measured at fair value. As a result of the amendments, SIC 12 Income taxes recovery of revalued nondepreciable assets would no longer apply to investment properties at fair value. The amendment is not applicable to the group. The following amendments and interpretations to standards are mandatory for the group s accounting periods beginning on or after 1 July : IAS 1 (amendment) Presentation of Financial Statements effective 1 July. The main change resulting from this amendment is a requirement for entities to group items presented in other comprehensive income (OCI) on the basis of whether they are potentially reclassifiable to profit or loss subsequently (reclassification adjustments). The amendment does not address which items are presented in OCI. The following amendments and interpretations to standards have been issued, but are not yet effective for 30 June 2013 year-ends: Improvements to IFS (issued May ). This is a collection of amendments to IFS. These amendments are the result of conclusions the IASB reached on proposals made in its annual improvements project. IFS 1 (amendment) First-time adoption of international financial reporting standards effective 1 January This amendment clarifies that an entity may apply IFS 1 more than once under certain conditions. The amendment clarifies that an entity can choose to adopt IAS 23 Borrowing costs either from its date of transition or from an earlier date. The consequential amendment clarifies that a first-time adopter should provide the supporting notes for all statements presented. The impact of the new standard on the financial statements is still to be assessed. 30 Country Bird Holdings Consolidated Financial Statements 2013

33 IAS 1 (amendment) Presentation of financial statements effective 1 January This amendment clarifies the disclosure requirements for comparative information when an entity provides a third balance sheet either as required by IAS 8 Accounting policies, changes in accounting estimates and errors or voluntarily. The impact of the new standard on the financial statements is still to be assessed. IAS 16 (amendment) Property, plant and equipment effective 1 January This amendment clarifies that spare parts and servicing equipment are classified as property, plant and equipment rather than inventory when they meet the definition of property, plant and equipment. The impact of the new standard on the financial statements is still to be assessed. IAS 32 (amendment) Financial instruments: Presentation effective 1 January This amendment clarifies the treatment of income tax relating to distributions and transaction costs the amendment clarifies that the treatment is in accordance with IAS 12. Income tax related to distributions is recognised in the income statement, and income tax related to the costs of equity transactions is recognised in equity. The impact of the new standard on the financial statements is still to be assessed. IAS 34 (amendment) Interim financial reporting effective 1 January This amendment brings IAS 34 into line with the requirements of IFS 8 Operating segments. A measure of total assets and liabilities is required for an operating segment in interim financial statements if such information is regularly provided to the CODM and there has been a material change in those measures since the last annual financial statements. The impact of the new standard on the financial statements is still to be assessed. IFIC 20 Stripping costs in the production phase of a surface mine effective 1 January The interpretation clarifies there can be two benefits accruing to an entity from stripping activity: usable ore that can be used to produce inventory and improved access to further quantities of material that will be mined in future periods. The interpretation considers when and how to account separately for these two benefits arising from the stripping activity, as well as how to measure these benefits both initially and subsequently. The interpretation is not applicable to the group. Standards, amendments and interpretations to existing standards that are not yet effective and have not been early adopted by the group The following standards, amendments and interpretations to existing standards have been published and are mandatory for the group s accounting periods beginning on or after 1 January 2013 or later periods, but the group has not early adopted them: IFS 1 (amendment) First-time adoption on government loans effective 1 January This amendment addresses how a first-time adopter would account for a government loan with a below-market rate of interest when transitioning to IFS. It also adds an exception to the retrospective application of IFS, which provides the same relief to first-time adopters granted to existing preparers of IFS financial statements when the requirement was incorporated into IAS 20 in The amendment is not applicable to the group. IFS 7 (amendment) Financial Instruments: Disclosure effective 1 January The IASB has published an amendment to IFS 7 Financial instruments: Disclosure reflecting the joint requirements with the FASB to enhance current offsetting disclosures. This amendment will facilitate comparison between those entities that prepare IFS financial statements to those that prepare financial statements in accordance with US GAAP. The amendment is not applicable to the group. IAS 12 (amendment) Income taxes effective 1 January. This amendment introduces an exception to the existing principle for the measurement of deferred tax assets or liabilities arising on investment property measured at fair value. This amendment will not impact the group financial statements. IAS 1 (amendment) Presentation of Financial Statements effective 1 July. This amendment changes the disclosure of items presented in other comprehensive income in the statement of comprehensive income to still permit profit or loss and other comprehensive income to be presented in either a single statement or in two consecutive statements. This amendment will not impact the group financial statements. IAS 19 (amendment) Employee benefits effective 1 January This amendment makes significant changes to the recognition and measurement of defined benefit pension expense and termination benefits, and to the disclosures for all employee benefits. The impact of the new standard on the financial statements is still to be assessed. Country Bird Holdings Consolidated Financial Statements

34 Accounting policies continued 5. Impact of future amendments continued IFS 9 Financial instruments effective 1 January This standard addresses classification and measurement of financial assets and replaces the multiple classification and measurement models in IAS 39 with a single model. The impact of the new standard on the financial statements is still to be assessed. IFS 9 Financial instruments effective 1 January This standard has been updated to relocate the accounting and presentation for financial liabilities and for derecognition of financial instruments from IAS 39 Financial instruments: ecognition and measurement without change, except for financial liabilities that are designated at fair value through profit or loss. The impact of the new standard on the financial statements is still to be assessed. IFS 9 (amendment) Financial instruments effective 1 January This amendment confirms the importance of allowing entities to apply the requirements of all the phases of the project to replace IAS 39, Financial instruments: ecognition and measurement at the same time. The requirement to restate comparatives and the disclosures required on transition have also been modified. The impact of the new standard on the financial statements is still to be assessed. IFS 10 Consolidated financial statements effective 1 January This standard provides additional guidance to assist in determining control where this is difficult to assess. The impact of the new standard on the financial statements is still to be assessed. IFS 11 Joint arrangements effective 1 January This standard provides for a more realistic reflection of joint arrangements by focusing on the rights and obligations of the arrangement, rather than its legal form. The new standard will not impact the group financial statements. IFS 12 Disclosures of interests in other entities effective 1 January This standard includes the disclosure requirements for all forms of interests in other entities, including joint arrangements, associates, special-purpose vehicles and other off-balance sheet vehicles. The impact of the new standard on the financial statements is still to be assessed. IFS 13 Fair value measurement effective 1 January This standard aims to improve consistency and reduce complexity by providing a precise definition of fair value and a single source of fair value measurement and disclosure requirements for use across IFS. The impact of the new standard on the financial statements is still to be assessed. IAS 27 Separate financial statements effective 1 January This standard includes the provisions on separate financial statements that are left after the control provisions of IAS 27 have been included in the new IFS 10. The impact of the new standard on the financial statements is still to be assessed. IAS 28 Associates and joint ventures effective 1 January This standard includes requirements for joint ventures, as well as associates, to be equity accounted following the issue of IFS 11. The impact of the new standard on the financial statements is still to be assessed. IAS 32 (amendment) Financial Instruments: Presentation effective 1 January This standard includes amendments to the application guidance in IAS 32, Financial instruments: Presentation that clarify some of the requirements for offsetting financial assets and financial liabilities on the statement of financial position. The impact of the amendment on the financial statements is still to be assessed. IFS 10 (amendment), Consolidated financial statements, IFS 11 (amendment), Joint Arrangements, and IFS 12 (amendment), Disclosure of interests in other entities effective 1 January The amendment clarifies that the date of initial application is the first day of the annual period in which IFS 10 is adopted. Entities adopting IFS 10 should assess control at the date of initial application; the treatment of comparative figures depends on this assessment. The amendment also requires certain comparative disclosures under IFS 12 upon transition. The impact of the amendment on the financial statements is still to be assessed. IFS 10 (amendment) Consolidated financial statements, IFS 12 (amendment), Disclosure of interests in other entities and IAS 27 (amendment) Separate financial statements effective 1 January The amendments mean that many funds and similar entities will be exempt from consolidating most of their subsidiaries. Instead they will measure them at fair value through profit or loss. The amendments give an exception to entities that meet an investment entity definition and which display particular characteristics. Changes have also been made in IFS 12 to introduce disclosures that an investment entity needs to make. The impact of the amendments on the financial statements is still to be assessed. 32 Country Bird Holdings Consolidated Financial Statements 2013

35 Notes to the consolidated annual financial statements for the year ended 30 June Segment information Management has determined the operating segments based on reports reviewed by the executive committee that are used to make strategic decisions. The committee considers the business from both a geographic and product perspective. Geographically, management considers the performance in South Africa and other Africa regions. These segments are then segregated into poultry, animal nutrition, and retail and distribution. The executive committee assesses the performance of the operating segments based on operating profit. This measurement basis excludes discontinued operations and the effects of non-recurring expenditure from the operating segments, such as restructuring costs, legal expenses and goodwill impairments, when the impairment is the result of an isolated, non-recurring event. The measure also excludes the effects of equity-settled sharebased payments and unrealised gains/losses on financial instruments. Interest income and expenditure are not allocated to segments. evenue Operating profit Poultry South Africa ( ) Intersegment revenue ( ) ( ) Other Africa Intersegment revenue ( ) ( ) Animal nutrition South Africa Intersegment revenue ( ) ( ) Other Africa Intersegment revenue ( ) ( ) etail and distribution ( ) South Africa ( ) Intersegment revenue ( ) ( ) Other Africa ( ) Intersegment revenue ( ) The revenue from external parties reported to the executive committee is measured in a manner consistent with that in the statement of comprehensive income. Assets Liabilities Poultry South Africa Other Africa Animal nutrition South Africa Other Africa etail and distribution South Africa Other Africa The amounts provided to the executive committee with respect to total assets are measured in a manner consistent with that of the financial statements. These assets are allocated based on the operations of the segment and the physical location of the asset. Country Bird Holdings Consolidated Financial Statements

36 Notes to the consolidated annual financial statements continued for the year ended 30 June 2013 Capital expenditure Depreciation and amortisation Segment information continued Poultry South Africa Other Africa Animal nutrition South Africa Other Africa etail and distribution South Africa Other Africa evenues of approximately (: ) are derived from a single external customer. These revenues are attributable to the South African Poultry segment. 1.1 eclassification of comparative figures In the prior annual financial statements, intersegment revenue in the segment report was only shown for the Poultry segment, the Animal nutrition segment and the Beef segment. In order to more fairly present the intersegment revenue between both the primary and geographical segments, the intersegment revenue is disclosed separately for each of Poultry South Africa, Poultry Other Africa, Animal nutrition South Africa, Animal nutrition Other Africa and etail and distribution South Africa. This has resulted in the restatement of the prior period figures. Furthermore, the Beef segment has now been renamed etail and distribution. This segment will now include all the retail and distribution operations of the group. 30 June Audited Condensed segment report as previously disclosed Poultry South Africa Other Africa Intersegment revenue ( ) Animal nutrition South Africa Other Africa Intersegment revenue ( ) Beef South Africa Intersegment revenue ( ) Disclosure as per condensed segment report for the year ended 30 June 2013 Poultry South Africa Intersegment revenue ( ) Other Africa Intersegment revenue ( ) Animal nutrition South Africa Intersegment revenue ( ) Other Africa Intersegment revenue ( ) etail and distribution South Africa Intersegment revenue ( ) 34 Country Bird Holdings Consolidated Financial Statements 2013

37 Land and buildings Plant and equipment Furniture and computers Vehicles Work in progress 2. Property, plant and equipment Year ended 30 June Carrying value at the beginning of the year Cost price Accumulated depreciation ( ) ( ) ( ) ( ) ( ) Exchange differences ( ) Cost price ( ) Accumulated depreciation ( ) ( ) ( ) ( ) Additions Acquisition of subsidiaries Disposals (23 039) ( ) (29 725) ( ) ( ) Cost price (24 199) ( ) ( ) ( ) ( ) ( ) Accumulated depreciation Depreciation ( ) ( ) ( ) ( ) ( ) eclassification ( ) (28 845) Cost price ( ) (28 845) Accumulated depreciation ( ) Carrying value at the end of the year Cost price Accumulated depreciation ( ) ( ) ( ) ( ) ( ) Year ended 30 June 2013 Carrying value at the beginning of the year Cost price Accumulated depreciation ( ) ( ) ( ) ( ) ( ) Exchange differences ( ) Cost price Accumulated depreciation ( ) ( ) ( ) ( ) Additions Disposals ( ) ( ) (20 769) ( ) ( ) ( ) Cost price ( ) ( ) ( ) ( ) ( ) ( ) Accumulated depreciation Depreciation ( ) ( ) ( ) ( ) ( ) eclassification Cost price Accumulated depreciation Carrying value at the end of the year Cost price Accumulated depreciation ( ) ( ) ( ) ( ) ( ) A general notarial bond to the value of (: ) is registered over land and buildings and (: ) is registered over loose assets as security for facilities granted to the group. Certain movable assets with a book value of (: ) are encumbered as security for instalment sales agreements as stated in note 15. Depreciation expense of (: ) has been charged in cost of goods sold and (: ) in other operating expenses. Lease rentals amounting to (: ) relating to the lease of machinery, property and office equipment are included in the statement of comprehensive income (note 20). A register of land and buildings is available for inspection at the registered office of the group in accordance with the Companies Act. Total Country Bird Holdings Consolidated Financial Statements

38 Notes to the consolidated annual financial statements continued for the year ended 30 June 2013 Customer Brand name Goodwill relationships Total 3. Intangible assets Year ended 30 June Carrying value at the beginning of the year Cost price Accumulated amortisation ( ) ( ) ( ) Acquisition of subsidiaries Exchange differences Amortisation charge ( ) ( ) ( ) Carrying value at the end of the year Cost price Accumulated amortisation ( ) ( ) ( ) Year ended 30 June 2013 Carrying value at the beginning of the year Cost price Accumulated amortisation ( ) ( ) ( ) Acquisition of subsidiaries (note 30) ( ) Exchange differences Amortisation charge ( ) ( ) ( ) Carrying value at the end of the year Cost price Accumulated amortisation ( ) ( ) ( ) Amortisation of (: ) is included in other expenses in the statement of comprehensive income. Impairment tests for goodwill Goodwill is monitored by the management at the operating segment level. The following is a summary of goodwill allocation for each operating segment: 2013 A summary of goodwill by segment is as follows: Animal nutrition South Africa Poultry South Africa Other Africa etail and distribution South Africa The recoverable amount of the relevant cash-generating units has been determined based on value-in-use calculations. These calculations use pre-tax cash flow projections based on financial budgets and strategic plan forecasts approved by management covering one financial year. These plans are revisited every year and are compiled after considering market conditions and the strategic positioning of the business units within the markets in which they operate. 36 Country Bird Holdings Consolidated Financial Statements 2013

39 Intangible assets continued Key assumptions used for value-in-use calculations are as follows: Growth rate 1 Animal nutrition 3% 3% Poultry 3% 5% 6% etail 3% 6% 5% Discount rate 2 Animal nutrition 13,3% 16,4% Poultry 18,7% 17,2% 20,8% etail 11,4% 18,7% 11,5% 1 Weighted average growth rate used to extrapolate cash flows beyond the budget period. 2 Pre-tax discount rate applied to the cash flow projections. ates varied from 11,4% to 18,7%. These assumptions have been used for the analysis of each CGU within the operating segment. Goodwill is not considered to be impaired based on the value-in-use calculations performed using the assumptions as described above. Management determined budgeted gross margin based on past performance and its expectations for the market development. The weighted average growth rates used are consistent with the forecasts included in industry reports. The discount rates used are pre-tax and reflect specific risks relating to the relevant operating segments Financial assets and other investments Total financial assets and other investments Unlisted shares at cost price Vetlab Limited Farmarama Limited Loan accounts Other loans The fair value of the shares in Vetlab Limited and Farmarama Limited could not be determined reliably because it is not openly traded and therefore the market value cannot be determined. Furthermore, these companies are in new markets in Zambia and are not operating at a significant profit. The unlisted shares are measured at cost. Included in other loans are loans to these two entities to the value of , which form part of the group s investment in the two entities. The price risk for investments carried at cost is not calculated since they are not significant to the group. Loans are classified as loans and receivables and are measured at amortised cost. Other loans do not carry interest. No fixed terms of repayment have been set and no security was provided for the repayment of the loans. Changes in fair values of financial assets at fair value through profit or loss are recorded in Other gains and losses in the statement of comprehensive income (note 21). None of these financial assets are either past due or impaired. The maximum exposure of the loan account to credit risk at the reporting date is the carrying value of the financial assets. Country Bird Holdings Consolidated Financial Statements

40 Notes to the consolidated annual financial statements continued for the year ended 30 June Derivative financial instruments Commodity derivative instruments Agricultural derivatives Trading derivatives are classified as a current asset or liability. Agricultural derivatives represent derivative financial instruments receivable from Standard Bank which are based on the fair value of the underlying agricultural commodity (white maize, yellow maize and soya) in the open market a. Financial instruments by category The accounting policies for financial instruments have been applied to the line items below: Loans and receivables Assets per statement of financial position Trade and other receivables Financial assets and other investments Cash and cash equivalents Available-for-sale financial assets Assets per statement of financial position Financial assets and other investments Assets at fair value through profit or loss Assets per statement of financial position Derivative financial instruments Other financial liabilities at amortised cost Liabilities per statement of financial position Borrowings Trade and other payables excluding statutory liabilities b. Credit quality of financial assets The credit quality of financial assets that are neither past due nor impaired can be assessed by reference to external credit ratings (if available) or historical information about counterparty default rates. Credit quality is maintained by ensuring that most significant customers are adequately insured. The current value of insured debt amounts to Credit is only provided in terms of the ratings provided by the insurance. Furthermore, internal credit checks are performed to ensure that the credit quality can be relied upon. All defaults are monitored and followed up. Adequate payment arrangements are performed should the default be justified Trade receivables Counterparties without external credit rating Group Group Group Group Total trade receivables hh Group 1: new customers/related parties (less than six months). hh Group 2: existing customers/related parties (more than six months) with no defaults in the past. hh Group 3: existing customers/related parties (more than six months) with some defaults in the past. All defaults were fully recovered. hh Group 4: existing customers (more than six months) with defaults and the balance is considered to be impaired. 38 Country Bird Holdings Consolidated Financial Statements 2013

41 2013 6b. Credit quality of financial assets continued None of the loans to related parties are past due but not impaired. Cash and cash equivalents Moody s investor service A BBB Standard and Poor s A BBB Fitch atings BBB Derivative financial instruments Moody s investor service A BBB Deferred income tax Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred income taxes relate to the same fiscal authority. The offset amounts are as follows: Deferred income tax liabilities (net) ( ) ( ) Deferred income tax assets Deferred tax asset to be recovered after more than 12 months Deferred tax asset to be recovered within 12 months Deferred income tax liabilities ( ) ( ) Deferred tax liability to be recovered after more than 12 months ( ) ( ) Deferred tax liability to be recovered within 12 months ( ) ( ) Deferred income taxes are calculated on all temporary differences under the liability method using a principal tax rate of 28% (: 28%). The movements on the deferred tax account are as follows: Closing net deferred tax asset/(liability) ( ) ( ) At the beginning of the year ( ) ( ) Change in tax rate in foreign tax (60 627) Acquisition of subsidiary ( ) Exchange rate differences ( ) ( ) Charged to statement of comprehensive income (note 22) ( ) Capital allowances ( ) Fair value adjustments ( ) ( ) Estimated tax losses Other ( ) ( ) Country Bird Holdings Consolidated Financial Statements

42 Notes to the consolidated annual financial statements continued for the year ended 30 June Deferred income tax continued The deferred tax assets and liabilities are attributable to the following items: Deferred tax assets Capital allowances ( ) Fair value adjustments Estimated tax losses Other Deferred tax liabilities ( ) ( ) Capital allowances ( ) ( ) Fair value adjustments ( ) ( ) Other ( ) ( ) Deferred income tax liabilities (net) ( ) ( ) Deferred income tax assets are recognised for tax loss carry-forwards to the extent that the realisation of the related tax benefit through the future taxable profits is probable. Knowledge and expertise of key management is being utilised at the loss-making subsidiaries in order to ensure that these companies return to profitability. Further expansion into new markets and production of new product is also being implemented to return certain loss-making companies profitable. Therefore, the probability of the future tax profits is ensured and it is expected that assessed losses will be utilised before expiry thereof Inventories Total inventories aw materials Finished goods Consumables Included in the inventory balance at year-end is inventories carried at net realisable value of nil (: ). Supreme Poultry (Pty) Ltd determines net realisable value with reference to current product prices in an active market. This value is compared to actual purchase prices to determine the lower of cost and net realisable value. The cost of inventories recognised as expense and included in cost of sales amounted to (: ) (note 20). 40 Country Bird Holdings Consolidated Financial Statements 2013

43 Biological assets Total biological assets Breeding stock* At the end of the year at fair value At the beginning of the year Increase due to established costs Decrease due to harvest and sales ( ) ( ) Exchange rate differences Gain arising from changes in fair values due to physical changes less point-of-sale cost * Birds kept for the purposes of producing hatching eggs. Broiler stock** At the end of the year at fair value At the beginning of the year Increase due to established costs Decrease due to harvest and sales ( ) ( ) Exchange rate differences Gain arising from changes in fair values due to physical changes less point-of-sale cost ** Birds that are grown to be harvested. Egg stock*** At the end of the year at fair value At the beginning of the year Increase due to established costs Decrease due to harvest and sales ( ) ( ) Exchange rate differences Gain arising from changes in fair values less point-ofsale cost (80 147) *** Eggs to be hatched. The group is exposed to financial risks arising from changes in commodity prices. These risks are managed through an established process whereby the various conditions which influenced commodity prices are monitored on a daily basis. Decisions on the procurement of raw materials as well as the utilisation of derivative instruments to hedge against these risks are taken by executive management within board-approved mandates given. The fair value of biological assets are determined with reference to the fair value less cost to sell at year-end and making use of assumptions that are mainly based on market conditions existing at each reporting date. efer to note 20. Country Bird Holdings Consolidated Financial Statements

44 Notes to the consolidated annual financial statements continued for the year ended 30 June Trade and other receivables Trade receivables Less: Provision for impairment of trade receivables ( ) ( ) Trade receivables net Pre-payments Other receivables The time value of money was taken into consideration for trade receivables where extended credit terms (on average 30 to 45 days) were granted. The effect of this adjustment was recognised as other income (note 21). The carrying amounts of trade and other receivables approximate their fair values. As of 30 June 2013, trade receivables of (: ) were fully performing. Trade receivables that are less than three months past due are not considered impaired as these customers have no prior history of defaults or have made specific arrangements for repayment of the amount due. As at reporting date, trade receivables of (: ) were past due but not impaired. The ageing analysis of these trade receivables is as follows: Up to 3 months to 6 months Longer than 6 months The carrying amounts of the group s trade and other receivables are denominated in the following currencies: SA rand US dollar Botswanan pula Zambian kwacha Mozambican new metical As of 30 June 2013, trade receivables of (: ) were impaired. The amount of the provision was as of 30 June 2013 (: ). The individually impaired receivables mainly relate to customers who are in unexpectedly difficult economic situations or specific customers who dispute the amount owed. It was assessed that a portion of the receivables is expected to be recovered due to insurance taken out on customers. The ageing of these receivables is as follows: Up to 3 months to 6 months Longer than 6 months Country Bird Holdings Consolidated Financial Statements 2013

45 Trade and other receivables continued Movements on the group provision for impairment of trade receivables are as follows: At 1 July Provision for receivables impairment eceivables written off during the year as uncollectable ( ) ( ) Unused amounts reversed ( ) ( ) Exchange difference At 30 June The creation and release of provision for impaired receivables have been included in Other expenses in the statement of comprehensive income (note 20). Unwind of discount is included in Other income in the statement of comprehensive income (note 19). Amounts charged to the provision account are generally written off when there is no expectation of recovering additional cash. The other classes within trade and other receivables do not contain impaired assets. The maximum exposure to credit risk at the reporting date is the carrying value of each class of receivable mentioned above. The group does not hold any collateral as security. Trade receivables are ceded as security for facilities granted to the group as stated in notes 11 and Cash and cash equivalents Bank balances Cash on hand Cash and cash equivalents include the following for the purposes of the cash flow statement: Cash and cash equivalents per cash flow ( ) Cash and cash equivalents Bank overdrafts (note 15) ( ) ( ) Bank overdrafts bear interest at the South African, Botswanan and Zambian prime rate. Banking facilities are secured by a first legal mortgage over immovable and movable assets, cross-guarantees, letters of suretyship granted to some subsidiaries by the holding company, foreign currency loan agreements, general indemnity, deed of hypothecation over tangible and intangible assets, cession of book debts and a negative pledge over assets. The facilities also require that certain covenants be maintained, namely, gearing ratio not to exceed 1,25, debt service ratio not to be less than 2 times and minimum interest cover of 3 times. Country Bird Holdings Consolidated Financial Statements

46 Notes to the consolidated annual financial statements continued for the year ended 30 June Share capital and share premium Authorised shares ordinary shares of 1 cent per share Ordinary shares ordinary shares of 1 cent per share Additional shares issued during the year ( shares of 1 cent per share) (note 30) Shares held as treasury shares issued in terms of business combination (note 30) Proceeds from shares issued in terms of employee share scheme ( shares of 1 cent per share) Issued share capital is fully paid up. The group issued shares during the year to the previous shareholders of enidroc (Pty) Ltd which was acquired by the group on 1 January. efer to note 30 for further detail. Share premium At the end of the year At the beginning of the year Capital distribution (note 27) ( ) ( ) Shares issued during the year Other reserves Translation reserve At the end of the year ( ) Balance at the beginning of the year ( ) ( ) Currency translation differences The translation reserve was recognised by the group due to the foreign exchange differences incurred on conversion of the foreign subsidiaries into rand. Share-based payment reserve At the end of the year Opening balance Transfer to retained earnings ( ) Share options exercised by employees ( ) Proceeds from shares issued in terms of employee share scheme Shares to be issued reserve At the end of the year Opening balance Shares to be issued in equity transaction ( ) The shares to be issued reserve represents the fair value of the number of shares to be issued to the previous shareholders of enidroc (Pty) Ltd. This company was acquired by the group on 1 January. efer to note Country Bird Holdings Consolidated Financial Statements 2013

47 Common control reserve At the end of the year ( ) ( ) Opening balance ( ) ( ) The common control deficit is in terms of the predecessor method of accounting in terms of which the difference between the purchase consideration and the carrying value of the net assets acquired is recorded directly in equity. The common control deficit was first accounted for in 2007 when the group was formed and listed on the JSE. 15. Borrowings Secured loans Bank borrowings Instalment sale agreements Other short-term borrowings Bank overdraft Unsecured loans Other borrowings Total borrowings Current portion of borrowings Bank borrowings Bank overdraft Instalment sale agreements Non-current portion of borrowings Bank borrowings Bank borrowings bear interest at varying interest rates linked to the South African (8,5%), Botswanan (9%) and Zambian (8,55%) prime rate. Borrowings to the value of bear interest at LIBO plus 8% margin. Borrowings to the value of bear interest at JIBA plus 3% margin. The bank borrowings are secured by the following: cession of all present and future debtors, cession of loan and creditor loan accounts, limited and unlimited suretyships, general notarial bond over movable assets, first and second covering mortgage bonds over certain properties and subordination of certain loan accounts. The loans are repayable over periods varying from 2 to 6 years. Furthermore, certain loans are subject to certain financial covenants with regard to the debt/ebitda ratios and interest cover ratio being within certain stated parameters. efer to note 11 for further disclosures on bank borrowings. Country Bird Holdings Consolidated Financial Statements

48 Notes to the consolidated annual financial statements continued for the year ended 30 June Borrowings continued Instalment sale agreements The instalment sale agreements are secured by vehicles and equipment with a carrying value of (: ). The effective interest rates at the reporting date varied according to South African prime rate and the loans are repayable over periods varying from two to five years. Monthly instalments vary from and Instalment sale agreements minimum payments: Not later than 1 year Later than 1 year and not later than 5 years Future finance charges on instalment sale agreements ( ) ( ) Present value of liabilities Present value of liabilities: Not later than 1 year Later than 1 year and not later than 5 years Present value of liabilities Other borrowings Other borrowings bear interest at South African prime rate. Other borrowings do not have specified repayment dates but are not required to be repaid within the next financial year. No guarantees were given on other borrowings. The fair values of borrowings equal their carrying amount, as the impact of discounting is not significant. The fair values are based on cash flows discounted using a rate based on the borrowing rate of 8,5% (: 9%). No limit has been placed in the articles of association on the borrowing powers of the company. Terms on other borrowings also require that certain covenants be maintained, namely, gearing ratio not to exceed 1,25, debt service ratio not to exceed 3 times and minimum debtor cover of 2 times. 46 Country Bird Holdings Consolidated Financial Statements 2013

49 Employee share scheme liability Cash-settled share based compensation plan Phantom share options are granted to selected directors and employees who are eligible for participation in the scheme. Awards of phantom shares may result in the payment of bonuses in cash. The scheme is merely a mechanism to calculate a cash bonus and does not equate to equity in the company. The exercise price of the options granted is equal to the fair market value of the share price on the award date. Options are conditional on the employee completing three years service (the vesting period). The options are exercisable over three tranches, starting three years from the award date. The exercise period is a period of 90 days immediately following the release date for that tranche and has a contractual option term of five years. The release date is the date that the group results are released. The cash bonus payable is paid by the employer company in relation to each employee. Movements in the number of share options outstanding and their related exercise prices are as follows: Exercise price in per share (average) Phantom options At 1 July Granted 4, Forfeited 3,37 ( ) Forfeited 2,50 ( ) Forfeited 4,94 ( ) At 30 June At 1 July Granted 3, Forfeited 3,37 ( ) Forfeited 2,50 ( ) Forfeited 4,94 ( ) Forfeited 3,27 (73 000) Exercised 3,37 ( ) Expired At 30 June Country Bird Holdings Consolidated Financial Statements

50 Notes to the consolidated annual financial statements continued for the year ended 30 June Employee share scheme liability continued Share options outstanding at the end of the year have the following expiry dates and exercise prices: Expiry date Exercise price in per share (average) Phantom options 25 August 3, August , August , August , August , August , August , August , August , At 30 June August , August , August , August , August , August , August , August , August , August , August , At 30 June The weighted average fair value of options granted during the period as determined using the binomial tree option valuation model was 0,61, 1,50, 0,002 and 1,14 (: 1,27, 2,06 and 0,25) per option. The significant inputs into the model were: hh share price of 3,80 (: 4,55) at reporting date; hh exercise price of 3,27 (: 4,94) per option; hh volatility of 2% (: 6%); hh dividend yield of 0,61% (: 3,62%); hh an expected option life of three years (: three years); and hh an annual risk-free interest rate of 7% (: 7%). The volatility was measured at the standard deviation of continuously compounded share returns as based on analysis of the daily share price over the 12 months. See note 23 for the total expense recognised in the statement of comprehensive income for share options granted to directors and employees. 48 Country Bird Holdings Consolidated Financial Statements 2013

51 Trade and other payables Trade payables Accrued expenses Other payables The time value of money was taken into consideration for trade payables where extended credit terms (on average 30 days) were received and adjustments were made against other expenses (note 20). The carrying amounts of trade and other payables approximate their fair values. 18. Provision for other liabilities and charges Total provision Opening balance Charged to the statement of comprehensive income Additional provisions ( ) Amounts settled or paid ( ) ( ) Consisting of: Product liability claims Product liability claims This provision relates to claims instituted against the group for alleged damages suffered by the customers as a result of feed supplied. The claims are being addressed by management via quality control procedures and are expected to be settled within the next financial year. There are uncertainties as to the validity of these claims and therefore need to be considered by management through their quality control procedures. The provisions reversed are as a result of claims settled or resolved during the financial year. 19. Other gains and losses Profit from sale of property, plant and equipment Gain on bargain purchase Fair value gain on financial assets at fair value through profit or loss ( ) Interest earned on debtors Foreign exchange gain/(loss) Management fees ental income Seta recoveries Sundry income Country Bird Holdings Consolidated Financial Statements

52 Notes to the consolidated annual financial statements continued for the year ended 30 June Expenses by nature Total cost of sales and other expenses Changes in inventory of finished goods and work in progress aw materials and consumables used Gain arising from changes in fair values less point-ofsale cost ( ) ( ) Depreciation and amortisation Employee benefit expense Maintenance Transportation costs Operating leases Other expenses Finance income and costs Finance income Bank Investment income Finance costs ( ) ( ) Long-term loans ( ) ( ) Bank loans, medium-term loan and overdrafts ( ) ( ) Other ( ) ( ) Net finance costs ( ) ( ) 22. Income tax expense ( ) ( ) Current tax ( ) ( ) Change in tax rate in foreign tax (60 629) Secondary tax on companies ( ) Deferred tax (note 7) ( ) Capital gains tax ( ) The tax on the group s profit before tax differs from the theoretical amount that would arise using the weighted average tax rate applicable to profits on the consolidated entities as follows: 2013 % % Effective rate of taxation 20,70 31,29 Standard rate of taxation applicable to profits in the respective countries 28,00 28,00 Adjusted for: Foreign tax rate differential (8,32) (5,98) Net non-taxable and non-deductible items 0,86 8,83 Prior year over/(under) provision 0,02 0,01 Capital gain 0,14 0,01 Secondary tax on companies 0,00 0,11 Assessed losses forfeited 0,00 0,30 The weighted average applicable tax rate was 28% (: 28%). Estimated assessable losses for set-off against future taxable income is (: ). 50 Country Bird Holdings Consolidated Financial Statements 2013

53 Employee benefit expense Salaries and wages Defined contribution plans (8 718) Share options granted to directors and employees ( ) Leave and bonus pay accrual Other employee benefits Other employee benefits consist, inter alia, of the following expenses: Motor allowances, motor running costs, staff catering and protective clothing. 24. Directors remuneration Executive directors Salary Performance-related bonus Other benefits and allowances Share option expense/(reversal of share option expense) ( ) Non-executive directors fees These emoluments relate to all amounts paid by both the company and its subsidiaries. efer to the directors remuneration report for a detailed analysis of amounts paid to directors. 25. Auditors remuneration Audit fees Other Country Bird Holdings Consolidated Financial Statements

54 Notes to the consolidated annual financial statements continued for the year ended 30 June Earnings per share (a) Basic Basic earnings per share is calculated by dividing the profit attributable to the owners of the parent by the weighted average number of ordinary shares in issue during the year excluding ordinary shares held as treasury shares. Profit attributable to equity holders of the company Weighted average number of ordinary shares in issue Basic earnings per share (cents) 25,63 30,79 (b) Diluted Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all dilutive potential ordinary shares. The company has one category of dilutive potential ordinary shares; via share options. A calculation is performed to determine the number of shares that could have been acquired at fair value (determined as the average annual market share price of the company s shares) based on the monetary value of the subscription rights attached to the outstanding share options. The number of shares calculated above is compared with the number of shares that would have been issued assuming the exercise of the share options. Profit for the year attributable to equity holders of the company Weighted average number of ordinary shares in issue Adjusted for share options Weighted average number of ordinary shares for diluted earnings per share Diluted earnings per share (cents) 25,63 30,79 (c) Headline Headline earnings reconciliations Headline earnings Profit for the year attributable to the owners of the parent Profit on sale of property, plant and equipment ( ) ( ) Gain on bargain purchase ( ) Taxation on profit or loss Weighted average number of ordinary shares in issue during the year for calculating headline earnings per share Headline earnings per share (cents) 25,51 24,93 Diluted headline earnings per share (cents) 25,51 24, Capital distribution The capital repayment paid in 2013 was nil (nil cents per share). In a capital repayment of (16,82 cents per share) was paid. Capital repayment was declared by the board of directors on 26 August Country Bird Holdings Consolidated Financial Statements 2013

55 Note 28. elated-party transactions Common directors Interest in subsidiaries Sales/(purchases) from related parties Interest received/(paid) from/(by) related parties Loans to/(from) shareholders Shareholders analysis Directors interest in ordinary shares Directors interest in share option scheme Key management compensation (a) Common director/related to director AS Dada (subsidiary director) AS Dada (subsidiary director) AS Dada (subsidiary director) KW James (related to director) KW James (related to director) KW James (related to director) KW James (related to director) KW James (related to director) KW James GP Heath GP Heath a b c d e f g h i elated party Tswana Pride (Pty) Ltd AIDC (Pty) Ltd Coldline (Pty) Ltd Supreme Distributors Kimberley (Pty) Ltd Vuvuzela Investments 7 (Pty) Ltd Supreme Distributors Bloemfontein (Pty) Ltd Arbor Acres South Africa (Pty) Ltd Buzby Trust Synapp International Limited Arbor Acres South Africa (Pty) Ltd Synapp International Limited (b) Interest in subsidiaries efer to note 31 Interests in subsidiary companies. (c) Sales/(purchases) from related parties Transaction value Balance outstanding Sale/(purchases) of goods and services: ( ) (73 920) Arbor Acres South Africa (Pty) Ltd ( ) ( ) ( ) ( ) Tswana Pride (Pty) Ltd Buzby Trust ( ) Coldline (Pty) Ltd AIDC (Pty) Ltd ( ) The payables/receivables to/from related parties arise mainly from purchase transactions and are subject to the same terms and conditions applicable to all customers. The payables bear no interest. Country Bird Holdings Consolidated Financial Statements

56 Notes to the consolidated annual financial statements continued for the year ended 30 June elated-party transactions continued (d) Interest received/(paid) from/(by) related parties Interest paid ( ) ( ) Synapp International Limited ( ) ( ) Arbor Acres South Africa (Pty) Ltd ( ) (e) Loans to/(from) related parties Loan from Synapp International Limited ( ) ( ) At the beginning of the year ( ) ( ) Loans (advanced)/repaid during the year Interest accrued on loan account ( ) ( ) The loan from Synapp International Limited bears interest at the South African prime rate. No fixed terms of repayment have been set and no security was provided for the repayment of the loan. (f) Shareholders analysis efer to page 80 of the Integrated Annual eport. (g) Directors interest in ordinary shares efer to note 32 Directors remuneration. (h) Directors interest in share option scheme efer to note 32 Directors remuneration. (i) Key management compensation Key management compensation Basic salary Bonuses and performance-related payments Other allowances and fringe benefits Medical aid contributions Other etirement benefit contributions Share option expense Directors of subsidiary companies fulfil the role of key management. 54 Country Bird Holdings Consolidated Financial Statements 2013

57 Commitments Other commitments aw material purchases contracted for at the reporting date but not yet incurred are as follows: Inventories These commitments will be financed from working capital generated within the group. Operating lease commitments The group leases various land and buildings, plant and machinery and office equipment under non-cancellable operating lease agreements. The leases have varying terms, escalation clauses and renewal rights. The lease expenditure charged to the statement of comprehensive income for the year is disclosed under note 20. Within 1 year Within 2 to 5 years After 5 years Year ended 30 June 2013 Minimum lease payments with regard to: Land and buildings and other equipment Minimum lease payments receivable with regard to: Land and buildings and other equipment Year ended 30 June Minimum lease payments receivable with regard to: Land and buildings and other equipment Year ended 30 June Minimum lease payments with regard to: Land and buildings and other equipment Country Bird Holdings Consolidated Financial Statements

58 Notes to the consolidated annual financial statements continued for the year ended 30 June Business combinations (a) enidroc (Pty) Ltd The following table summarises the consideration paid for enidroc (Pty) Ltd, the fair value of assets acquired, liabilities assumed and the non-controlling interest at the acquisition date: Consideration at 1 January Equity instruments ( ordinary shares at fair value) Total consideration transferred ecognised amounts of identifiable assets acquired and liabilities assumed Intangible assets including goodwill Cash and cash equivalents Property, plant and equipment Inventories Trade and other receivables Trade and other payables ( ) Borrowings ( ) Current tax liability ( ) Deferred tax liability ( ) Total identifiable net assets The equity instruments could not be issued in the prior year when the acquisition took place, since the group was in a closed period, as defined by the JSE Listings equirements. The equity instruments were measured at their fair value on the acquisition date and adjusted in the current year for the adjustments made to the shareholder loans. This adjustment impacted the amount of goodwill recognised Country Bird Holdings Consolidated Financial Statements 2013

59 31. Interests in subsidiary companies Details of the principal subsidiary companies of Country Bird Holdings Limited are as follows: Unlisted investments Nature of business Issued ordinary shares Effective percentage holding Company s interest Directly held Incorporated in South Africa Country Bird (Pty) Ltd j Webram Thirty Two (Pty) Ltd j Supreme Poultry (Pty) Ltd b Silverblade Imports (Pty) Ltd j Nutri Feeds (Pty) Ltd f Hollyberry Props 40 (Pty) Ltd j Long Iron Meats (Pty) Ltd i Silver Blade Abattoir (Pty) Ltd i CBH Share Incentive Scheme k CBH estaurants (Pty) Ltd j enidroc (Pty) Ltd l Supreme Distributors Kimberley (Pty) Ltd l Supreme Fisherman s Deli (Pty) Ltd l Supreme Meat Processors (Pty) Ltd m Incorporated in the epublic of the Seychelles oss Africa Limited a Incorporated in Namibia oss Breeders (Namibia) (Pty) Ltd d Supreme Poultry (Namibia) (Pty) Ltd d Indirectly held Incorporated in Botswana Master Farmer Feeds (Pty) Ltd d, f, g Incorporated in Zambia oss Breeders Zambia Limited e Master Farmer Zambia Limited f Incorporated in Mozambique Supreme Poultry Mozambique Lda f Incorporated in Zimbabwe Crispy Chicken estaurants (Pty) Ltd n Country Bird Holdings Consolidated Financial Statements

60 Notes to the consolidated annual financial statements continued for the year ended 30 June Interests in subsidiary companies continued Nature of business a Investment holding. b Integrated poultry farming and production operation including breeder sites, hatcheries, broiler sites and processing plants. c Sale of imported goods. d Production and sale of day-old broilers and hatching eggs. e Broiler genetics and broiler breeding production. f Feed producer. g Production operation including broiler sites and processing plants. h ental company. i Beef abattoir. j Dormant. k Group share scheme. l Distribution of frozen products to retail and wholesale market. m Housing of the poultry processing operations. n KFC franchising in Zimbabwe. The group established the company Supreme Meat Processors (Pty) Ltd in order to house the processing operations of the poultry business of the group as well as the company Crispy Chicken estaurants (Pty) Ltd in order to facilitate the operation of various KFC franchises in Zimbabwe. The directors valuation of the investments in associates is not less than their carrying values. 32. Directors and prescribed officers remuneration Salary Performancerelated bonus Other benefits and allowances Total 2013 Total Emoluments Executive directors For managerial services JD Wright J Taylor* KW James MB le oux Non-executive directors fees For services as directors BH Kent C Stein GP Heath IWM Isdale Gibbison**** **** No fees are paid to Gibbison as his employer does not permit him to receive remuneration for participating on the board. 58 Country Bird Holdings Consolidated Financial Statements 2013

61 32. Directors and prescribed officers remuneration continued Salary Performancerelated bonus Other benefits and allowances Total 2013 Total Prescribed officers remuneration For managerial services JD Wright J Taylor* MB le oux** KW James JM Searle D Spengler*** JDG van Heerden * esigned 31 March. ** Appointed 1 April. *** esigned 21 February Share incentive scheme interests Number of options Options outstanding Grant date Exercise price Exercise date Total 2013 Total Phantom Share Scheme MB le oux 1 Dec 10 3,37 25 Aug MB le oux 1 Dec 10 2,50 25 Aug MB le oux 1 Dec 11 4,94 25 Aug MB le oux 30 Nov 12 3,27 30 Nov * As MB le oux resigned effective 16 August 2013, the outstanding options as at 30 June 2013 have been forfeited phantom shares have been exercised during the current year and the increase in value between the share price on exercise date and exercise price was paid out as a cash benefit. All options in terms of the Phantom Share Scheme are exercisable over three years in three tranches which start on the exercise date as mentioned above. Issued share capital interest Beneficial interests Position Directly held shares Indirectly held shares KW James Executive director GP Heath Non-executive director JD Wright Chief executive officer MB le oux Finance director Other directors and prescribed officers Country Bird Holdings Consolidated Financial Statements

62 Company statement of financial position as at 30 June 2013 Note 2013 Assets Non-current assets Property, plant and equipment Intangible assets Investment in subsidiaries Other financial instruments Deferred income tax assets Current assets Trade and other receivables Current income tax receivable Cash and cash equivalents Total assets Equity Total equity Ordinary shares Share premium Other reserves etained earnings Liabilities Non-current liabilities Borrowings Employee share scheme liability Deferred income tax liabilities Current liabilities Trade and other payables Current income tax liabilities Borrowings Total liabilities Total equity and liabilities The notes on pages 64 to 79 are an integral part of these financial statements. 60 Country Bird Holdings Consolidated Financial Statements 2013

63 Company statement of comprehensive income for the year ended 30 June 2013 Note 2013 evenue Other income/other gains/(losses) ( ) Other expenses 14 ( ) ( ) Operating profit Finance income Finance costs 15 ( ) ( ) Profit before income tax Income tax expense 16 ( ) ( ) Profit for the year Other comprehensive income Total comprehensive income for the year The notes on pages 64 to 79 are an integral part of these financial statements. Country Bird Holdings Consolidated Financial Statements

64 Company statement of changes in equity for the year ended 30 June 2013 Note Share capital Share premium Other reserves etained earnings Total equity Balance at 1 July Total comprehensive income Transactions with owners Shares issued to employees Transfer between reserves ( ) Shares to be issued Capital distribution to shareholders ( ) ( ) Total transactions with owners ( ) Balance at 30 June Balance at 1 July Total comprehensive income Transactions with owners Shares issued during the year Share issue expenses Shares to be issued ( ) ( ) Capital distribution to shareholders 20 ( ) ( ) Total transactions with owners ( ) ( ) Balance at 30 June The notes on pages 64 to 79 are an integral part of these financial statements. 62 Country Bird Holdings Consolidated Financial Statements 2013

65 Company statement of cash flows for the year ended 30 June 2013 Note 2013 Cash flows from operating activities Net cash generated from operating activities ( ) ( ) Cash receipts from customers Cash paid to suppliers and employees ( ) ( ) Cash generated from operations A Interest paid ( ) ( ) Income tax paid B ( ) ( ) Cash flows from investing activities Net cash used in investing activities Purchases of property, plant and equipment ( ) (60 586) Proceeds from sale of property, plant and equipment ealisation of investment in associate Acquisition of financial assets and investments ( ) ( ) ealisation of financial assets and investments Interest received Cash flows from financing activities Net cash used in financing activities ( ) ( ) Proceeds from the issuance of ordinary shares Share issue and listing expenses Proceeds from borrowings epayments of borrowings ( ) ( ) Capital repayments to shareholders ( ) ( ) Net increase/(decrease) in cash and cash equivalents Cash and cash equivalents at the beginning of the year ( ) ( ) Foreign exchange gains/(losses) Cash and cash equivalents at the end of the year 8 ( ) ( ) The notes on pages 64 to 79 are an integral part of these financial statements. Country Bird Holdings Consolidated Financial Statements

66 Notes to the company statement of cash flows for the year ended 30 June A. econciliation of net profit/(loss) before tax to cash generated from operations Cash generated from operations Profit before income tax Adjustment for: Depreciation and amortisation Finance income ( ) ( ) Finance costs Foreign exchange (gains)/losses ( ) (Profit)/loss on disposal of property, plant and equipment (54 917) Fair value gains on remeasurement of financial asset Share-based payment (41 932) Changes in working capital: Decrease/(increase) in trade and other receivables Increase/(decrease) in trade and other payables B. Taxation payable Taxation paid during the year Balance owing/(recoverable) at the beginning of the year Current tax for the year Balance recoverable/(payable) at the end of the year ( ) 64 Country Bird Holdings Consolidated Financial Statements 2013

67 Notes to the company financial statements for the year ended 30 June Accounting policies The group and company apply the same accounting policies. These policies are to be found within the consolidated financial statements. The company has also prepared consolidated financial statements in accordance with IFS for the company and its subsidiaries ( the group ). In the consolidated financial statements, subsidiary undertakings which are those companies in which the group directly or indirectly has an interest of more than half of the voting rights or otherwise has power to exercise control over the operations have been fully consolidated. The consolidated financial statements can be obtained from 48 President Steyn Street, Westdene, Bloemfontein. Users of these stand-alone financial statements should read them together with the group s consolidated financial statements as at and for the year ended 30 June 2013 in order to obtain full information on the financial position, financial performance and changes in financial position of the group as a whole. 2. Property, plant and equipment Furniture and computers Vehicles Work in progress Total Year ended 30 June Carrying value at the beginning of the year Cost price Accumulated depreciation ( ) ( ) ( ) Additions Depreciation ( ) ( ) ( ) Carrying value at the end of the year Cost price Accumulated depreciation ( ) ( ) ( ) Year ended 30 June 2013 Carrying value at the beginning of the year Cost price Accumulated depreciation ( ) ( ) ( ) Additions Disposals (65 083) (65 083) Cost price ( ) ( ) Accumulated depreciation Depreciation (49 542) ( ) ( ) Carrying value at the end of the year Cost price Accumulated depreciation ( ) ( ) ( ) Depreciation expense of (: ) has been charged in other expenses (note 14). Lease rentals amounting to (: ) relating to the lease of machinery, property and office equipment are included in the statement of comprehensive income (note 14). Country Bird Holdings Consolidated Financial Statements

68 Notes to the company financial statements continued for the year ended 30 June 2013 Brand name Total 3. Intangible assets Year ended 30 June Carrying value at the beginning of the year Cost price Accumulated amortisation (47 904) (47 904) Amortisation charge (23 963) (23 963) Carrying value at the end of the year Cost price Accumulated amortisation (71 867) (71 867) Year ended 30 June 2013 Carrying value at the beginning of the year Cost price Accumulated amortisation (71 867) (71 867) Amortisation charge (23 963) (23 963) Carrying value at the end of the year Cost price Accumulated amortisation (95 830) (95 830) Amortisation is included in Other expenses in the statement of comprehensive income (note 14) Investment in subsidiaries Nutri Feeds (Pty) Ltd oss Africa Limited Supreme Poultry (Pty) Ltd Supreme Poultry (Namibia) (Pty) Ltd oss Breeders (Namibia) (Pty) Ltd Silver Blade Abattoir (Pty) Ltd ( ) Long Iron Meats (Pty) Ltd enidroc (Pty) Ltd Crispy Chicken estaurants (Pty) Ltd % % The percentage shareholdings in the subsidiaries are as follows: Country Bird (Pty) Ltd Webram Thirty Two (Pty) Ltd Nutri Feeds (Pty) Ltd Hollyberry Props 40 (Pty) Ltd oss Africa Limited Supreme Poultry (Pty) Ltd Silver Blade Imports (Pty) Ltd Supreme Poultry (Namibia) (Pty) Ltd oss Poultry Breeders (Namibia) (Pty) Ltd Long Iron Meats (Pty) Ltd Silver Blade Abattoir (Pty) Ltd enidroc (Pty) Ltd Crispy Chicken estaurants (Pty) Ltd Country Bird Holdings Consolidated Financial Statements 2013

69 Other financial instruments Loan accounts: oss Africa Limited Nutri Feeds (Pty) Ltd Supreme Poultry (Pty) Ltd Supreme Poultry (Namibia) (Pty) Ltd Long Iron Meats (Pty) Ltd oss Breeders (Namibia) (Pty)Ltd Silver Blade Abattoir (Pty) Ltd Crispy Chicken estaurants (Pty) Ltd Non-current loans have no set terms and are intended to provide the subsidiary with a long-term source of additional capital. As a result, the loans are considered to be an investment in the subsidiary companies. The loans are accounted for under IAS 27 and are carried at cost. Other loans bear interest at the South African prime rate plus 1%. No fixed terms of repayment have been set and no security was provided for the repayment of the loans. The parent s intention, as communicated to the subsidiary, is that the loan is only recalled when the subsidiary has surplus cash and the parent requires the cash for other purposes, such as to make alternative investments. The parent does not expect any such events to occur in the foreseeable future. Changes in fair values of financial assets at fair value through profit or loss are recorded in Other income in the statement of comprehensive income (note 13). None of these financial assets are either past due or impaired. The maximum exposure to credit risk at the reporting date is the carrying value of the financial assets and other investments. The loan to oss Africa Limited; Long Iron Meats Limited and Silver Blade Abattoir (Pty) Ltd, was subordinated to the values of , and respectively, in favour of other payables of the company, both present and future. The fair value of all securities are based on their current bid prices in an active market Financial instruments by category The accounting policies for financial instruments have been applied to the line items below: Loans and receivables Assets per statement of financial position Trade receivables Other financial assets Cash and cash equivalents Available-for-sale financial assets Assets per statement of financial position Financial assets and other investments Other financial liabilities at amortised cost Liabilities per statement of financial position Borrowings Trade payables excluding statutory liabilities Country Bird Holdings Consolidated Financial Statements

70 Notes to the company financial statements continued for the year ended 30 June Credit quality of financial assets The credit quality of financial assets that are neither past due nor impaired can be assessed by reference to external credit ratings (if available) or historical information about counterparty default rates. Credit quality is maintained by ensuring that most significant customers are adequately insured. Credit is only provided in terms of the ratings provided by the insurance. Furthermore, internal credit checks are performed to ensure that the credit quality can be relied upon. All defaults are monitored and followed up. Adequate payment arrangements are performed should the default be justified. Trade receivables Counterparties without external credit rating Group Group Total unimpaired trade receivables hh Group 1: new customers/related parties (less than six months). hh Group 2: existing customers/related parties (more than six months) with no defaults in the past. hh Group 3: existing customers/related parties (more than six months) with some defaults in the past. All defaults were fully recovered. None of the loans to related parties are past due but not impaired. 6. Deferred tax Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred income taxes relate to the same fiscal authority. The offset amounts are as follows: Deferred income tax assets (net) Deferred income tax assets Deferred tax asset to be recovered after more than 12 months Deferred tax asset to be recovered within 12 months Deferred income tax liabilities (79 760) (12 332) Deferred tax liability to be recovered after more than 12 months (16 303) (12 332) Deferred tax liability to be recovered within 12 months (63 456) Deferred income taxes are calculated on all temporary differences under the liability method using a principal tax rate of 28% (: 28%). 68 Country Bird Holdings Consolidated Financial Statements 2013

71 Deferred tax continued The movements on the deferred tax account are as follows: Closing net deferred tax asset/(liability) At the beginning of the year Charged to statement of comprehensive income ( ) (1 079) Capital allowances (3 971) (3 028) Provisions (54 445) Other ( ) The deferred tax assets and liabilities are attributable to the following items: Deferred tax assets and liabilities Capital allowances (16 303) (12 332) Provisions Other (63 457) Deferred income tax assets are recognised for tax loss carry-forwards to the extent that the realisation of the related tax benefit through the future taxable profits is probable. The probability of the future tax profits is based on certain plans and strategies that management has put into place in order to utilise these assessed losses. 7. Trade and other receivables Trade receivables Trade receivables from related parties Trade receivables net Prepayments Other receivables The time value of money was taken into consideration for trade receivables where extended credit terms (on average 30 to 45 days) were granted. The carrying amounts of trade and other receivables approximate their fair values. As at statement of financial position date, trade receivables of (: ) were fully performing. Country Bird Holdings Consolidated Financial Statements

72 Notes to the company financial statements continued for the year ended 30 June Trade and other receivables continued Trade receivables that are less than three months past due are not considered impaired. As at statement of financial position date, trade receivables of (: nil) were past due but not impaired. These relate to a number of independent customers for whom there are no recent history of default or with whom specific repayment plans had been entered into. Up to 3 months 3 to 6 months Longer than 6 months As at statement of financial position date, trade and other receivables do not contain impaired receivables. The maximum exposure to credit risk at the reporting date is the fair value of each class of receivable mentioned above. The company does not hold any collateral as security. 8. Cash and cash equivalents Cash on hand Cash and cash equivalents include the following for the purposes of the cash flow statement: Cash and cash equivalents per cash flow ( ) ( ) Cash and cash equivalents Bank overdrafts (note 10) ( ) ( ) The general bank facility of the company is secured by a cession and subordination of loan account with Supreme Poultry (Pty) Ltd, limited surety from Nutri Feeds (Pty) Ltd supported by first covering bond for 20 million over portion 6 (remaining extent) and portion 19 of the farm endesvous 398, district Viljoenskroon, and portion 1 of the farm Panbit 485, district Viljoenskroon, unlimited surety by Supreme Poultry (Pty) Ltd supported by first covering mortgage bond for 30 million over portion 3 (remaining extent) and portions 16, 17 and 22 of the farm Dyssels s ust 2841, district Bloemfontein, and portions 10 and 11 of the farm Melorami 1547, district Bloemfontein. 70 Country Bird Holdings Consolidated Financial Statements 2013

73 Share capital and share premium Authorised shares ordinary shares of 1 cent per share Ordinary shares ordinary shares of 1 cent per share Share options exercised by employees Shares issued during the year Issued share capital is fully paid up. Share premium At the end of the year At the beginning of the year Capital distribution (note 22) ( ) ( ) Shares issued to employees Shares issued during the year Share issue expenses The company issued shares during the year to the previous shareholders of enidroc (Pty) Ltd. Country Bird Holdings Consolidated Financial Statements

74 Notes to the company financial statements continued for the year ended 30 June Borrowings Secured loans Bank borrowings Other short-term borrowings Bank overdraft Unsecured loans Other borrowings Total borrowings Current portion of borrowings Bank borrowings Bank overdraft Non-current portion of borrowings Bank borrowings The general bank facility of the company is secured by a cession and subordination of loan account with Supreme Poultry (Pty) Ltd, limited surety from Nutri Feeds (Pty) Ltd supported by first covering bond for 20 million over portion 6 (remaining extent) and portion 19 of the farm endesvous 398, district Viljoenskroon, and portion 1 of the farm Panbit 485, district Viljoenskroon, unlimited surety by Supreme Poultry (Pty) Ltd supported by first covering mortgage bond for 30 million over portion 3 (remaining extent) and portions 16, 17 and 22 of the farm Dyssels s ust 2841, district Bloemfontein, and portions 10 and 11 of the farm Melorami 1547, district Bloemfontein. The Investec loan of the company is secured by a general notarial bond of over movable assets of Supreme Poultry (Pty) Ltd, first and second ranking mortgage bonds of and respectively over property of Supreme Poultry (Pty) Ltd, as well as a cession over the debtors of Supreme Poultry (Pty) Ltd. The Investec loan of the company is further secured by a general notarial bond of over movable assets of Nutri Feeds (Pty) Ltd, first and second ranking mortgage bonds of and respectively over property of Nutri Feeds (Pty) Ltd, as well as a cession over the debtors of Nutri Feeds (Pty) Ltd. Other borrowings Other borrowings consist of borrowings from Long Iron Meats (Pty) Ltd, Supreme Distributors Bloemfontein t/a, endiroc (Pty) Ltd, Synapp International Limited, Country Bird (Pty) Ltd, Webram Thirty Two (Pty) Ltd and Hollyberry Props 40 (Pty) Ltd. The loan from Synapp International Limited was provided at South African prime interest rate (9%). The loans from Long Iron Meats (Pty) Ltd, Supreme Distributors Bloemfontein t/a, endiroc (Pty) Ltd, Country Bird (Pty) Ltd, Webram Thirty Two (Pty) Ltd and Hollyberry Props 40 (Pty) Ltd bear no interest. Other borrowings do not have specified repayment dates but are not required to be repaid within the next financial year. No guarantees were given on other borrowings. The fair value of borrowings equals their carrying amount, as the impact of discounting is not significant. The fair values are based on cash flows discounted using a rate based on the borrowing rate of 8,5% (: 9%). No limit has been placed in the articles of association on the borrowing powers of the company. 72 Country Bird Holdings Consolidated Financial Statements 2013

75 Employee share scheme liability Cash-settled share-based compensation plan Phantom share options are granted to selected directors and employees who are eligible for participation in the scheme. Awards of phantom shares may result in the payment of bonuses in cash. The scheme is merely a mechanism to calculate a cash bonus and does not equate to equity in the company. The exercise price of the options granted is equal to the fair market value of the share price on the award date. Options are conditional on the employee completing three years service (the vesting period). The options are exercisable over three tranches, starting three years from the award date. The exercise period is a period of 90 days immediately following the release date for that tranche and has a contractual option term of five years. The release date is the date that the group results are released. The cash bonus payable is paid by the employer company in relation to each employee. Movements in the number of share options outstanding and their related exercise prices are as follows: Exercise price in per share (average) Phantom options At 1 July Granted 4, Granted transferred from another company within CBH group 3, Granted transferred from another company within CBH group 2, Forfeited resigned during the year 3,37 ( ) Forfeited resigned during the year 2,50 ( ) Forfeited resigned during the year 4,94 ( ) Forfeited transferred to another company within CBH group 3,37 ( ) Forfeited transferred to another company within CBH group 2,50 ( ) At 30 June At 1 July Granted 3, Exercised during the year 3,37 (97 333) At 30 June Share options outstanding at the end of the year have the following expiry dates and exercise prices: 25 August , August , August , August , August , August , August , August , August , August , August , At 30 June Country Bird Holdings Consolidated Financial Statements

76 Notes to the company financial statements continued for the year ended 30 June Employee share scheme liability continued The weighted average fair value of options granted during the period as determined using the binomial tree option valuation model was 0,61, 1,50, 0,002 and 1,14 (: 1,27, 2,06 and 0,25) per option. The significant inputs into the model were: hh share price of 3,80 (: 4,55) at reporting date; hh exercise price of 3,27 (: 4,94) per option; hh volatility of 2% (: 6%); hh dividend yield of 0,61% (: 3,62%); hh an expected option life of three years (: three years); and hh an annual risk-free interest rate of 7% (: 7%). The volatility was measured at the standard deviation of continuously compounded share returns as based on analysis of the daily share price over the 12 months. See note 18 for the total expense recognised in the statement of comprehensive income for share options granted to directors and employees Trade and other payables Trade payables Trade payables due to related parties Accrued expenses Other payables The time value of money was taken into consideration for trade payables where extended credit terms (on average 30 days). The carrying amounts of trade and other payables approximate their fair values. 13. Other income/other gains/(losses) ( ) Profit/(loss) from sale of fixed assets Fair value gains on remeasurement of financial asset ( ) Foreign exchange gain/(loss) Sundry income Expenses by nature Total cost of sales and other expenses Auditors remuneration Depreciation, amortisation and impairment costs Directors remuneration Employee benefit expense Legal fees (13 795) Listing-related expenses Maintenance Travel, accommodation and entertainment Operating leases Consulting fees Other expenses Country Bird Holdings Consolidated Financial Statements 2013

77 Finance income and costs Finance income Bank Investment income Finance costs ( ) ( ) Long-term loans ( ) ( ) Bank loans, medium-term loan and overdrafts ( ) ( ) Other (9) Net finance costs ( ) 16. Income tax expense ( ) ( ) Current tax ( ) ( ) Deferred tax (note 7) ( ) (1 079) The tax on the company s profit before tax differs from the theoretical amount that would arise using the weighted average tax rate applicable to profits on the consolidated entities as follows: 2013 % % Effective rate of taxation 44,1% 97,8% Standard rate of taxation applicable to profits in the respective countries 28,0% 28,0% Adjusted for: Non-taxable and non-deductible items 16,1% 69,8% The weighted average applicable tax rate was 28% (: 28%). 17. Employee benefit expense Salaries and wages Share options granted to directors and employees (41 932) Other employee benefits Other employee benefits consist, inter alia, of the following expenses: Motor allowances, motor running costs, staff catering and protective clothing. Country Bird Holdings Consolidated Financial Statements

78 Notes to the company financial statements continued for the year ended 30 June Directors and prescribed officers remuneration Executive directors JD Wright Salaries Fringe benefits and other allowances Performance bonus Share option expense KW James Salaries Fringe benefits and other allowances MB le oux Salaries Fringe benefits and other allowances Performance bonus Share option expense J Taylor Salaries Fringe benefits and other allowances Performance bonus Share option expense Non-executive directors fees Directors fulfil the role of key management. Prescribed officers remuneration For managerial services JD Wright KW James MB le oux J Taylor Auditors remuneration Audit fees Other Capital distribution A final capital repayment of nil (nil cents per share) and interim capital repayment of nil (nil cents per share) were declared and paid during the year (: final capital repayment of ; 10,84 cents per share and interim capital repayment of ; 5,98 cents per share). 76 Country Bird Holdings Consolidated Financial Statements 2013

79 Note 21. elated-party transactions Common directors Interest in subsidiaries Management fees from related parties Interest received/(paid) from/(by) related parties Loans to/(from) related parties Loans to/(from) shareholders Key management compensation (a) Common directors/related to director KW James GP Heath KW James GP Heath a b c d e f g Synapp International Limited Synapp International Limited Arbor Acres South Africa (Pty) Ltd Arbor Acres South Africa (Pty) Ltd (b) Interest in subsidiaries efer to note 4 Investment in subsidiaries (c) Management fees from related parties Management fees received Nutri Feeds (Pty) Ltd Supreme Poultry (Pty) Ltd Outstanding balances arising from expenses redistributed and management fees: ( ) Long Iron Meats (Pty) Ltd Master Farmer (Pty) Ltd Nutri Feeds (Pty) Ltd Oistins (Pty) Ltd 50 oss Africa Limited oss Breeders Zambia Limited enidroc (Pty) Ltd Silver Blade Abattoir (Pty) Ltd Supreme Distributors Kimberley (Pty) Ltd Supreme Fisherman's Deli (Pty) Ltd Supreme Poultry (Pty) Ltd ( ) Arbor Acres South Africa (Pty) Ltd ( ) Vuvuzela Investments 7 (Pty) Ltd (d) Interest received/(paid) from/(by) related parties Finance income received Long Iron Meats (Pty) Ltd Nutri Feeds (Pty) Ltd oss Africa Limited Supreme Poultry (Pty) Ltd Finance costs paid Arbor Acres South Africa (Pty) Ltd Synapp International Limited Country Bird Holdings Consolidated Financial Statements

80 Notes to the company financial statements continued for the year ended 30 June elated-party transactions continued (e) Loans to/(from) related parties Loans to related parties oss Africa Limited At the beginning of the year Loans advanced/(repaid) during the year ( ) ( ) Interest accrued on loan account Nutri Feeds (Pty) Ltd At the beginning of the year Loans advanced/(repaid) during the year ( ) Interest accrued on loan account Supreme Poultry (Pty) Ltd At the beginning of the year Loans advanced/(repaid) during the year ( ) ( ) Interest accrued on loan account Supreme Poultry (Namibia) (Pty) Ltd At the beginning of the year Loans advanced/(repaid) during the year ( ) Long Iron Meats (Pty) Ltd At the beginning of the year Loans advanced/(repaid) during the year Interest accrued on loan account Silver Blade Abattoir (Pty) Ltd At the beginning of the year Loans advanced/(repaid) during the year ( ) Crispy Chicken estaurants (Pty) Ltd Loans advanced/(repaid) during the year Loans from related parties Arbor Acres South Africa (Pty) Ltd ( ) Loans repaid/(advanced) during the year ( ) Interest accrued on loan account ( ) ( ) Long Iron Meats (Pty) Ltd ( ) ( ) At the beginning of the year ( ) ( ) Webram Thirty Two (Pty) Ltd (100) (100) At the beginning of the year (100) (100) Country Bird (Pty) Ltd ( ) ( ) At the beginning of the year ( ) ( ) Hollyberry Props 40 (Pty) Ltd (100) (100) At the beginning of the year (100) (100) enidroc (Pty) Ltd ( ) Loans advanced/(repaid) during the year ( ) (f) Loans to/(from) shareholders Synapp International Limited ( ) ( ) At the beginning of the year ( ) ( ) Loans repaid/(advanced) during the year Interest accrued on loan account ( ) ( ) The loan from Synapp International Limited bears interest at the South African prime rate per annum. No fixed terms of repayment have been set and no security was provided for the repayment of the loan. (g) Key management compensation Directors fulfil the role of key management. efer to note 18 Directors remuneration. 78 Country Bird Holdings Consolidated Financial Statements 2013

81 22. Commitments Operating lease commitments The company leases various office equipment under non-cancellable operating lease agreements. The leases have varying terms, escalation clauses and renewal rights. The lease expenditure charged to the statement of comprehensive income for the year is disclosed under note 14. Within 1 year Within 2 to 5 years After 5 years Year ended 30 June 2013 Minimum lease payments with regard to: Land and buildings and other equipment Year ended 30 June Minimum lease payments with regard to: Land and buildings and other equipment Country Bird Holdings Consolidated Financial Statements

82 Analysis of ordinary shareholders An analysis of holdings extracted from the register of ordinary shareholders at 30 June 2013 is listed below: Number of shareholders % Number of shares % Shareholder spread shares , , shares , , shares , , shares 23 2, , shares and over 12 1, ,9 Distribution of shareholders Private companies 42 3, ,4 etail shareholders , ,2 Collective investment schemes 4 0, ,3 Stockbrokers and nominees 4 0, ,4 Trusts 66 5, ,6 Assurance companies 1 0, ,9 Hedge funds 2 0, ,7 Custodians 5 0, ,2 Close corporations 17 1, ,1 Investment partnerships 9 0, ,1 Organs of state 1 0, ,0 etirement benefit funds 1 0, ,0 Foundations and charitable funds 1 0, ,0 Unclaimed scrip 1 0, , Country Bird Holdings Consolidated Financial Statements 2013

83 Number of shareholdings % Number of shares % Public/non-public shareholders Non-public shareholders 11 0, ,00 Directors and associates (direct holding) 9 0, ,04 Synapp International Ltd (indirect holding) 2 0, ,96 Public shareholders , , Beneficial shareholders with a holding greater than 3% of the shares in issue Synapp International ,96 Sanlam Group ,97 Total number of shareholdings Total number of shares in issue ,92 Share price performance Opening price 2 July 4,56 Closing price 28 June ,80 Closing high for the period 4,69 Closing low for the period 3,14 Number of shares in issue Volume traded during period atio of volume traded to shares in issue (%) 9,60 Country Bird Holdings Consolidated Financial Statements

84 General information egistration number 2005/008505/06 JSE share code CBH ISIN ZAE Country of incorporation epublic of South Africa Directors BH Kent (non-executive chairperson) MP Stander (chief executive officer) Gibbison (independent non-executive) GP Heath (non-executive) IWM Isdale (independent non-executive) KW James (executive) CD Stein (independent non-executive) Secretary MJC Antunes Postal address PO Box 6851 Bloemfontein 9300 egistered office/street address 8 Melville oad Illovo Johannesburg 2196 Postal address PO Box Johannesburg 2196 Transfer secretaries Computershare Investor Services (Pty) Ltd 70 Marshall Street Johannesburg 2001 Bankers Absa Bank Limited Attorneys Fluxmans Inc. Auditors PricewaterhouseCoopers Inc. Business address 48 President Steyn Street Westdene Bloemfontein Country Bird Holdings Consolidated Financial Statements 2013

85