| Wed 26 Sep 2007, 15:43 | | SER/SRN - Seardel Investment Corporation Limited - |
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SER SRN
SER
SER/SRN - Seardel Investment Corporation Limited - Audited results for the year
ended 30 June 2007
Seardel Investment Corporation Limited
Registration no. 1968/011249/06
(Incorporated in the Republic of South Africa)
JSE Code: SER & ISIN Code: ZAE000029815
JSE Code: SRN & ISIN Code: ZAE000030144
AUDITED RESULTS FOR THE YEAR ENDED 30 JUNE 2007
FINANCIAL HIGHLIGHTS YEAR ENDED 30 JUNE
Rand thousands unless
otherwise indicated
2007 2006 % Change
Revenue 3 793 357 3 583 702 +5,9
Profit before taxation 51 617 105 258 -51,0
Capital and reserves 1 541 093 1 373 205 +12,2
Total tangible assets 2 853 994 2 473 202 +15,4
(excluding cash)
Return on total tangible 3,8% 6,1% -
assets
Return on shareholders` 3,3% 6,2% -
interest
Ratio of borrowings to 31% 22% -
capital and reserves
STATISTICS PER SHARE
In cents, where applicable 2007 2006 % Change
Headline earnings 22,7 73,0 -68,9
Earnings 55,8 81,2 -31,3
Proposed dividend 12,0 27,0 -55,5
Proposed dividend cover on 1,9 2,7 -29,6
headline earnings
Operating cash flow (150) 134 -211,9
Tangible net asset value 1 703 1 502 +13,4
Market price - 30 June 2007
Ordinary 750 700
N Ordinary 750 670
Price range - High
Ordinary 810 700
N Ordinary 825 700
Price range - Low
Ordinary 651 365
N Ordinary 600 350
CONSOLIDATED INCOME STATEMENTS
For year ended 30 June
Rand thousands 2007 2006
Restated
Revenue 3 793 357 3 583 702
Cost of revenue (3 009 541) (2 703 840)
Gross profit 783 816 879 862
Other income 133 203 127 012
Other operating income 101 661 127 012
Disposal of portion of division 31 542 -
Distribution costs (349 642) (420 986)
Administrative and other expenses (455 709) (433 612)
Operating profit before finance costs 111 668 152 276
Finance income 21 494 15 419
Finance expenses (78 572) (61 991)
Share of losses from joint venture (2 973) (446)
Profit before taxation 51 617 105 258
Taxation (855) (18 841)
Profit for the year 50 762 86 417
Attributable to:
Shareholders 50 770 85 471
Minority interest (8) 946
Profit for the year 50 762 86 417
Basic earnings per share - cents 55,78 81,23
Diluted earnings per share - cents 55,65 80,63
CONSOLIDATED BALANCE SHEETS
At 30 June
Rand thousands 2007 2006
Restated
ASSETS
Non-current assets 1 261 451 1 115 621
Property, plant and equipment 1 071 578 945 744
Intangible assets 3 915 -
Interest in subsidiary companies - -
Interest in joint ventures 16 473 10 896
Investments 2 352 1 801
Long-term receivables 55 504 57 463
Deferred taxation 111 629 99 717
Current assets 1 861 565 1 639 044
Inventories 788 119 728 028
Trade and other receivables 893 225 701 529
Non-current assets held for sale 26 743 27 741
Cash and cash equivalents 153 478 181 746
TOTAL ASSETS R3 123 016 R2 754 665
EQUITY AND LIABILITIES
Total equity 1 547 899 1 377 229
Share capital and share premium 6 130 6 262
Treasury shares (13 042) (4 740)
Reserves 1 548 005 1 371 683
Total equity attributable to equity 1 541 093 1 373 205
holders
Minority interest 6 806 4 024
Non-current liabilities 600 702 555 571
Interest-bearing liabilities 275 383 238 662
Deferred liabilities 70 400 68 074
Deferred taxation 254 499 243 022
Operating lease accruals 420 5 813
Current liabilities 974 415 821 865
Interest-bearing liabilities 307 129 217 496
Trade and other payables 528 841 497 355
Provisions 86 506 79 351
Bank overdrafts 42 357 22 159
Taxation payable 9 566 5 487
Dividend to shareholders 16 17
TOTAL EQUITY AND LIABILITIES R3 123 016 R2 754 665
Net asset value (excluding intangible R1 537 178 R1 373 205
assets)
Net asset value per share after treasury 1 703 1 502
shares - cents
CONSOLIDATED CASH FLOW STATEMENTS
for year ended 30 June
Rand thousands 2007 2006
Restated
Net cash flow from operating (161 019) 128 246
activities
Cash generated from operations 163 997 200 271
Working capital changes (228 571) (4 772)
Finance income 21 494 15 419
Finance expenses (78 572) (61 991)
Taxation paid (10 833) (4 535)
Dividend paid (24 914) (12 744)
Contributions for post employment (3 620) (3 402)
medical benefits
Net cash flow from investing (4 629) 4 560
activities
Additions of property, plant and (70 509) (63 800)
equipment
Proceeds on disposal of property, 73 933 89 915
plant and equipment
Decrease/(increase) in long-term 1 959 (10 310)
receivables
Investment income 147 97
Proceeds on disposal of 134 -
investments
Acquisition of/increase in joint (8 550) (11 342)
venture
Acquisition of interest in (6 695) -
subsidiary/division
Change in minority holding 4 952 -
Increase in loans in subsidiary - -
companies
Net cash flow from financing 117 182 (158 703)
activities
Increase in long-term borrowings 36 721 43 715
Increase/(decrease) in short-term 89 633 (92 409)
borrowings
Proceeds on share options 2 180 1 580
exercised
Share repurchases (11 317) (3 784)
Cancellation of shares (35) (107 805)
Net (decrease)/increase in cash (48 466) (25 897)
and cash equivalents
Cash and cash equivalents at 159 587 185 484
beginning of year
Cash and cash equivalents at end R111 121 R159 587
of year
STATEMENTS OF CHANGES IN EQUITY (GROUP)
(first section)
Share Share Treasury
Capital Premium Shares
Balance 30 June 2005 6 719 187 (5 420)
Share repurchases (3 784)
Cancellation of shares (644) 2 884
Share options exercised 1 580
Balance 30 June 2006 6 075 187 (4 740)
Share repurchases (11 317)
Cancellation of shares (132) 835
Share options exercised 2 180
Balance 30 June 2007 R5 943 R187 (R13 042)
STATEMENTS OF CHANGES IN EQUITY (GROUP)
(second section of table, showing totals)
Other Retained Minority
Reserves Income Interest Total
Balance 30 June 2005 70 534 1 329 584 3 213 1 404 817
As previously stated 1 322 762
Prior year adjustments 6 822
Sale of revalued land (29 754) 38 027 8 273
and buildings
Revalued amount (38 027) 38 027
released
Deferred tax 8 273
Revaluation of 469 469
investments
Share repurchases (3 784)
Cancellation of shares (110 045) (107 805)
Share options exercised 1 580
Profit for the year 85 471 946 86 417
As previously stated 86 681 118
Prior year adjustments (1 210) 828
Dividend (12 603) (135) (12 738)
Balance 30 June 2006 41 249 1 330 434 4 024 1 377 229
Sale of revalued land (3 241) 4 432 1 191
and buildings
Revalued amount (4 432) 4 432
released
Deferred tax 1 191 -
Revaluation of land and 149 188 149 188
buildings
Amount revalued 165 977
Deferred tax (16 789)
Revaluation of 599 599
investments
Share repurchases (11 317)
Cancellation of shares (738) (35)
Share options exercised 2 180
Dilution of 3 015 3 015
shareholding
Profit for the year 50 770 (8) 50 762
Dividend (24 688) (225) (24 913)
Balance 30 June 2007 R187 795 R1 360 210 R6 806 R1 547 899
RECONCILIATION OF EARNINGS AND HEADLINE EARNINGS
2007
Profit Number of Per share
R000`s shares cents
000`s
Net number of shares in issue 90 286
Number of shares in issue - 30 June 92 050
2007
Number of treasury shares in issue - (1 764)
30 June 2007
Weighted average number of shares 91 015
Diluted weighted average number of 91 229
shares
Weighted average number of shares 91 015
Share options granted, not yet 214
exercised
Basic earnings
Profit attributable to shareholders 50 770 91 015 55,8
Diluted earnings
Profit attributable to shareholders 50 770 91 229 55,7
Headline earnings
Reconciliation between earnings and
headline earnings
Profit attributable to shareholders 50 770
Negative goodwill (330)
Impairment of property, plant and 7 353
equipment
Surplus on disposal of portion of (31 542)
division
Insurance claim (153)
Surplus on disposal of investments (86)
Surplus on disposal of property, (12 107)
plant and equipment
Profit on dilution of shareholding in (1 937)
minority
Loss on disposal of property, plant 2 100
and equipment
Loss on share options exercised 1 537
Tax effect of adjustments 5 095
Headline Earnings R20 700 91 015 22,7
Diluted headline earnings R20 700 91 229 22,7
RECONCILIATION OF EARNINGS AND HEADLINE EARNINGS (continued)
2006
Profit Number of Per share
R000`s shares cents
000`s
Net number of shares in issue 91 412
Number of shares in issue - 30 June 92 579
2006
Number of treasury shares in issue - (1 167)
30 June 2006
Weighted average number of shares 105 224
Diluted weighted average number of 105 997
shares
Weighted average number of shares 105 224
Share options granted, not yet 773
exercised
Basic earnings
Profit attributable to shareholders 85 471 105 224 81,2
Diluted earnings
Profit attributable to shareholders 85 471 105 997 80,6
Headline earnings
Reconciliation between earnings and
headline earnings
Profit attributable to shareholders 85 471
Impairment of goodwill 542
Insurance claim - loss of profits (34)
Reversal of impairment of property, (6 190)
plant and equipment
Surplus on disposal of property, (12 077)
plant and equipment
Profit on share options exercised (24)
Tax effect of adjustments 9 155
Headline earnings R76 843 105 224 73,0
Diluted headline earnings R76 843 105 997 72,5
ACCOUNTING POLICIES
Seardel Investment Corporation Ltd (the company) is a company domiciled in
South Africa. The consolidated financial statements of the company for the year
ended 30 June 2007 comprise the company, its subsidiaries and interest in
jointly controlled entities (together referred to as the group).
The financial statements were authorised for issue by the directors on 25
September 2007.
STATEMENT OF COMPLIANCE
The consolidated financial statements have been prepared in accordance with
International Financial Reporting Standards (IFRS) and its interpretations
adopted by the International Accounting Standards Board (IASB), as well as the
South African Companies Act and IAS 34.
BASIS OF PREPARATION
The financial statements are presented in South African Rand, which is the
company`s functional currency, rounded to the nearest thousand. They have been
prepared on the going concern and historical cost bases under IFRS, except for
those assets and liabilities which are stated at fair value as disclosed in the
notes to the financial statements.
The preparation of financial statements in conformity with IFRS requires
management to make judgements, estimates and assumptions that affect the
application of policies and reported amounts of assets and liabilities, income
and expenses. The estimates and associated assumptions are based on historical
experience and various other factors that are believed to be reasonable under
the circumstances, the results of which form the basis of making judgements
about carrying values of assets and liabilities that are not readily apparent
from other sources. Actual results may differ from these estimates.
The assumptions and estimates are reviewed on an ongoing basis. Revisions to
accounting estimates are recognised in the period in which the estimate is
revised if the revision affects only that period, or in the period of the
revision and future periods if the revision affects both current and future
periods.
In particular, information about significant areas of estimation, uncertainty
and critical judgements are described in the following notes as disclosed in
the annual financial statements, forming part of the annual report of the
company which is to be posted on or about Friday, 28 September 2007:
- Revaluations (refer: note 6)
- Utilisation of tax losses (refer: note 12)
- Measurement of post-employment medical benefits (refer: note 29)
- Valuation of intangible asset (refer: note 7)
- Provisions (refer: note 20)
- Contingencies (refer: note 38)
- Impairment of property, plant and equipment (refer: note 6)
- Assessment of useful lives and residual values (refer: note 6)
The accounting policies have been applied consistently by the
group entities and to all periods prescribed in these consolidated financial
statements.
These results have been audited by the independent auditors, KPMG Inc. Their
unqualified audit report is available for inspection at the company`s
registered office.
BASIS OF CONSOLIDATION
Subsidiaries
The group financial statements include the financial statements of the company
and its subsidiaries. Subsidiaries are entities controlled by the company.
Control exists when the company has the power, directly or indirectly, to
govern the financial and operating policies of an entity so as to obtain
benefits from its activities. In assessing control, potential voting rights
that presently are exercisable or convertible are taken into account. The
financial statements of subsidiaries are included in the consolidated financial
statements from the date that control commences until the date that control
ceases.
The group has elected to recognise dilution in shareholding gains and losses
and gains and losses on change of shareholdings directly in profit and loss.
The Seardel Investment Corporation Limited Employee Incentive Scheme 2001 has a
28th February year end. Its results are adjusted accordingly.
In view of the uncertainty relating to the group`s investment in its Zimbabwean
subsidiary, the directors maintain their decision not to consolidate its
results or financial position, which are not material to group results. Income
is accounted for on a cash dividend received basis and the investment in the
subsidiary has been written down to a nominal value.
Joint ventures are accounted for using the equity method. The consolidated
financial statements include the group`s share of the income and expenses of
equity accounted investees, from the date that significant influence of joint
control commences until the date that significant influence or joint control
ceases. When the group`s share of losses exceeds its interest in an equity
accounted investee, the carrying amount of that interest (including any long-
term investments) is reduced to nil and the recognition of further losses is
discontinued except to the extent that the group has an obligation or has made
payments on behalf of the investee.
Transactions eliminated on consolidation
Intra-group balances and any unrealised gains and losses or income and expenses
arising from intra-group transactions, are eliminated in preparing the
consolidated financial statements. Unrealised losses are eliminated in the same
way as unrealised gains, but only to the extent that there is no evidence of
impairment.
Goodwill and negative goodwill
All business combinations are accounted for by applying the purchase method.
Goodwill represents amounts arising on acquisition of subsidiaries and joint
ventures, and is the difference between the cost of the acquisition and the
fair value of the identifiable assets, liabilities and contingent liabilities
acquired.
Goodwill is stated at cost less any accumulated impairment
losses. Goodwill is allocated to cash-generating units and is no longer
amortised but is tested annually for impairment (see accounting policy on
impairment below).
Negative goodwill arising on an acquisition is recognised directly in the
income statement.
PROPERTY, PLANT AND EQUIPMENT
Owned assets
Land is not depreciated while buildings are depreciated over their estimated
useful lives. Land and buildings are revalued to approximate fair value.
Other items of property, plant and equipment are stated at historical cost less
accumulated depreciation and accumulated impairment losses. The cost of
replacing part of an item of property, plant and equipment is recognised in the
carrying amount of the item if it is probable that the future economic benefit
embodied within the part will flow to the group and its cost can be measured
reliably.
Where an item of property, plant and equipment is comprised of major components
with different useful lives, the components are accounted for as separate items
of property, plant and equipment. For plant and equipment, depreciation is
provided on a straight line basis over the estimated useful lives of the
assets. The group recognises in the carrying amount of an item of property,
plant and equipment the cost of replacing part of such an item when that cost
is incurred if it is probable that the future economic benefits embodied with
the item will flow to the group and the cost of the item can be measured
reliably. All other costs are recognised in the income statement as an expense
is incurred.
Estimates of useful lives, residual values and methods of depreciation are
reviewed annually. Any changes are accounted for prospectively as a change in
accounting estimate. If the expected residual value of an asset is equal to or
greater than its carrying value, depreciation on that asset is ceased.
Depreciation is resumed when the expected residual value falls below the
asset`s carrying value.
NON-CURRENT ASSETS HELD FOR SALE
Non-current assets are classified as held for sale when their carrying amounts
will be recovered principally through sale and are measured at the lower of
carrying amount and fair value less costs to sell. Comparatives are not
restated when an asset is classified as held for sale.
IMPAIRMENT
The carrying amount of the group`s assets, other than inventories and deferred
tax assets are reviewed at each balance sheet date to determine whether there
is any indication of impairment. If such indication exists, the asset`s
recoverable amount is estimated.
For goodwill, assets that have an indefinite useful life and intangible assets
that are not yet available for use, the recoverable amount is estimated at each
balance sheet date.
An impairment loss is recognised whenever the carrying amount of an asset or
its cash generating unit exceeds its recoverable amount. Impairment losses are
recognised in the income statement.
Impairment losses recognised in respect of cash-generating units are allocated
first to reduce the carrying amount of any goodwill allocated to cash-
generating units and then, to reduce the carrying amount of the other asset in
the unit on a pro rata basis.
The recoverable amount of the group`s investment in held-to-maturity securities
and receivables carried at amortised cost is calculated as the present value of
estimated future cash flows, discounted at the original effective interest
rate.
The recoverable amount of other assets is the greater of their net selling
price and value in use. In assessing value in use, the estimated future cash
flows are discounted to their present value using a pre-tax discount rate that
reflects current market assessments of the time value of money and the risks
specific to the asset. For an asset that does not generate largely independent
cash flows, the recoverable amount is determined for the cash-generating unit
to which the asset belongs.
An impairment loss in respect of a held-to-maturity security or receivable
carried at amortised cost is reversed if the subsequent increase in recoverable
amount can be related objectively to an event occurring after the impairment
loss was recognised.
An impairment loss in respect of goodwill and available-for-sale assets is not
reversed.
When a decline in the fair value of an available-for-sale asset has been
recognised directly in equity and there is objective evidence that the asset is
impaired, the cumulative loss that has been recognised directly in equity is
charged to the income statement. The amount of the cumulative loss that is
recognised in the income statement is the difference between the acquisition
cost and the current fair value, less any impairment loss previously recognised
in the income statement.
In respect of other assets, an impairment loss is not reversed if there has
been a change in the estimates used to determine the recoverable amount.
An impairment loss is reversed only to the extent that the asset`s carrying
amount does not exceed the carrying amount that would have been determined, net
of depreciation or amortisation, if no impairment loss had been recognised.
INCOME TAX
Income tax on the profit or loss for the year comprises current and deferred
tax. Income tax is recognised in the income statement except to the extent that
it relates to items recognised directly in equity, in which case it is
recognised in equity.
Current tax is the expected tax payable on the taxable income for the year,
using tax rates enacted at the balance sheet date, and any adjustment to tax
payable in respect of previous years.
Deferred tax is provided using the balance sheet liability method, providing
for temporary differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts used for taxation
purposes. The following temporary differences are not provided for: goodwill
not deductible for tax purposes, the initial recognition of assets or
liabilities that affect neither accounting nor taxable profit, and differences
relating to investments in subsidiaries to the extent that they will probably
not reverse in the foreseeable future. The amount of deferred tax provided is
based on the expected manner of realisation or settlement of the carrying
amount of assets and liabilities, using tax rates enacted or substantively
enacted at the balance sheet date.
A deferred tax asset is recognised only to the extent that it is probable that
future taxable profits will be available against which the associated unused
tax losses and deductible temporary differences can be utilised. Deferred tax
assets are reduced to the extent that it is no longer probable that the related
tax benefit will be realised.
Secondary tax on companies (STC) paid on net dividends paid is recognised as a
tax charge in the year it is incurred. STC is provided for at a rate of 12,5%
on the amount by which dividends declared by the company exceed dividends
received. STC is recognised as part of the current tax charge in the income
statement when the related dividend is declared. Deferred tax on unutilised STC
credits is recognised to the extent that STC payable on future dividend
payments is likely to be available for set-off.
INVENTORY
Raw materials and consumables, work-in-progress and finished goods are stated
at the lower of cost and net realisable value. Net realisable value is the
estimated selling price in the ordinary course of business, less the estimated
costs of completion and selling expenses. Cost is determined on the first-in,
first-out principle and includes direct material costs together with
appropriate allocations of labour and overheads based on normal operating
capacity.
PROVISIONS
Provisions are recognised when the group has a present legal or constructive
obligation as a result of past events, for which it is probable that an outflow
of economic benefits will occur, and where a reliable estimate can be made of
the amount of the obligation. Where the effect of discounting is material,
provisions are discounted.
The discount rate used is a pre-tax rate that reflects current market
assessments of the time value of money and, where appropriate, the risks
specific to the liability. Provisions are reviewed at each balance sheet date
and adjusted to reflect the current or best estimate.
FINANCIAL INSTRUMENTS
Measurement
Financial instruments are initially measured at cost, which includes
transaction costs. Subsequent to initial recognition these instruments are
measured as follows:
Investments
Listed investments classified as available-for-sale financial assets are
carried at market value, which is calculated by reference to stock exchange
quoted selling prices at the close of business at the balance sheet date.
Unlisted investments are shown at fair value, unless their fair value cannot be
reliably determined, in which case they are shown at cost less accumulated
impairment losses. Gains and losses are recognised directly in equity in a
revaluation reserve except for impairment losses, which are expensed in the
income statement.
Investments that meet the criteria for classification as held-to maturity
financial assets are carried at amortised cost.
In the company financial statements investments/investments in subsidiaries are
carried at cost less impairment.
Trade, long term and other receivables
Trade and other receivables originated by the group are stated at amortised
cost less impairment losses (see accounting policy on impairment).
Trade and other payables
Trade and other payables are stated at amortised cost.
Cash and cash equivalents
Cash and cash equivalents comprises cash balances and call deposits and are
measured at fair value.
Finance income and cost
Finance income and costs comprise interest payable on borrowings, interest
received on funds invested, dividend income, foreign exchange gains and losses
and gains and losses on hedging instruments that are recognised in the income
statement.
Interest income is recognised in the income statement as it accrues, using the
effective interest method. Dividend income is recognised in the income
statement on the date the entity`s right to receive payments is established.
The interest expense component of finance lease payments is recognised in the
income statement using the effective interest rate method.
Financial liabilities
Non-derivative financial liabilities are recognised at amortised cost,
comprising original debt less principal payments and amortisations.
Derivative instruments
Derivative instruments are measured at fair value.
Hedging Instruments
Gains and losses from measuring the hedging instruments relating to
a fair value hedge at fair value are recognised immediately in net profit or
loss.
Gains and losses from remeasuring the hedging instruments relating to a cash
flow hedge to fair value are initially recognised directly in equity. If the
hedged firm commitment or forecast transaction results in the recognition of an
asset or a liability, the cumulative amount recognised in equity up to the
transaction date is adjusted against the initial measurement of the asset or
liability. Where the hedging instrument or hedge relationship is terminated but
the hedged transaction is still expected to occur, the cumulative unrealised
gain or loss at that point remains in equity and is recognised in accordance
with the above policy when the transaction occurs. If the hedged transaction is
no longer expected to occur, the cumulative unrealised gain or loss is
recognised in the income statement immediately.
Offset
In the instance that the group has a legal right to apply an amount due from a
third party against the amount due to a creditor, provided that there is an
agreement among the three parties that clearly establishes the contractual
right to set-off, and the group intends either to settle on a net basis, or to
realise the asset and settle the liability simultaneously, the related amounts
are offset and the net amounts reported in the balance sheet.
REVENUE
Group revenue comprises, in the main, net invoiced sales excluding value added
tax, operating and finance lease income and is stated net of transactions with
group companies. Company revenue comprises dividends received.
Revenue recognition
Turnover is recognised when the significant risks and rewards of ownership have
been transferred to the buyer.
Interest income is accrued on a time basis, by reference to the principal
amounts outstanding and the interest rate applicable.
Dividend income from investments is recognised when the right to receive
payment is established.
Dividend income from Harven Manufacturing Company (Pvt) Limited is accounted
for only when received, due to the difficulties in remitting dividends from
Zimbabwe.
EARNINGS PER SHARE
Basic earnings per share is based on earnings attributable to shareholders and
is calculated on the weighted average number of shares in issue during the
financial year. Headline earnings per share is based on profit attributable to
shareholders, excluding any non-trading, capital items and the tax effect
thereon, and is calculated as above. Diluted earnings per share is determined
by adjusting the profit or loss attributable to ordinary shareholders and the
weighted average number of ordinary shares outstanding for the effects of all
dilutive potential ordinary shares.
FOREIGN CURRENCY TRANSACTIONS
Transactions in foreign currencies are translated at the foreign exchange rate
ruling at the transaction date. Monetary assets and liabilities denominated in
foreign currencies are translated into South African Rand at rates of exchange
ruling at the balance sheet date. Translation gains and losses, whether
realised or unrealised, are taken to income.
LEASES
Finance leases
Leases that transfer substantially all the risks and rewards of ownership of
the underlying asset to the group are classified as finance leases. Assets
acquired in terms of finance leases are capitalised at the lower of fair value
and the present value of the minimum lease payments at inception of the lease,
and depreciated over the estimated useful life of the asset. The capital
element of future obligations under the leases is included as a liability in
the balance sheet. Lease payments are allocated using the effective interest
rate method to determine the lease finance cost, which is charged against
income over the lease period, and the capital repayment, which reduces the
liability to the lessor.
Operating leases
Leases where the lessor retains the risks and rewards of ownership of the
underlying asset are classified as operating leases. Payments made under
operating leases are charged against income on a straight line basis over the
period of the lease.
EMPLOYEE BENEFITS
Short-term employee benefits
The cost of all short-term employee benefits is recognised during the period in
which the employee renders the related service. The provisions for employee
entitlements to wages, salaries, annual and sick leave represent the amount
that the group has a present obligation to pay as a result of employees`
services provided to the balance sheet date. The provisions have been
calculated at undiscounted amounts based on current wage and salary rates.
Retirement fund
The group contributes to several defined contribution plans. Contributions to
defined contribution funds are charged against income as incurred.
Medical aid
Where the group has an obligation to provide post retirement medical aid
benefits to employees, the group recognises the costs of these benefits in the
year in which the employees render the service.
Actuarial gains or losses in respect of the defined benefit medical plan are
recognised as income or expense in the year which they arise.
Past service costs are recognised as an expense on a straight line basis over
the average period until the benefits become vested. To the extent that the
benefits are already vested, past service costs are recognised immediately.
Equity compensation benefits
The group grants share options to certain employees under an employee share
plan. Other than costs incurred in administering the schemes, which are
expensed as incurred, the scheme does not result in an expense to the group.
DIVIDENDS TO SHAREHOLDERS
Dividends and related STC charges are accounted for in the period in which the
dividends are declared.
TREASURY SHARES
Shares in the company held by group entities are classified as treasury shares.
These shares are treated as a deduction from the weighted average number of
shares and the cost price of the shares is deducted from equity in the
statement of changes in equity. Dividends received on treasury shares are
eliminated on consolidation.
INTEREST-BEARING BORROWINGS
Interest-bearing borrowings are recognised initially at fair value less
attributable transaction costs. Subsequent to initial recognition, interest-
bearing borrowings are stated at amortised cost with any difference between
cost and redemption value being recognised in the income statement over the
period of the borrowings on an effective interest basis.
SEGMENTAL REPORTING
The group`s main activities are the manufacture of textiles and men`s, women`s
and children`s apparel. Its other activities are comprised of the distribution
of toys and consumer electronics. It also has travel and property investment
interests related to its manufacturing divisions. On a primary basis the group
is organised into five major operating divisions:
- Textiles and household textiles, comprising the manufacture of woven and
knitted fabrics;
- Apparel, comprising the manufacture of clothing and household textiles;
- Office automation and consumer electronics, comprising the distribution of
office automation products and consumer electronic products;
- Toys, comprising the distribution of toys;
- Industrial products.
Geographical markets are reported on a secondary basis. Segment results include
revenue and expenses directly attributable to a segment, and head office
expenses that can be allocated on a reasonable basis to a segment. Segment
assets comprise those operating assets that are directly attributable to the
segment or can be allocated to the segment on a reasonable basis. Segment
liabilities comprise those operating liabilities that are directly attributable
to the segment on a reasonable basis. Segment assets and liabilities do not
include income tax items. Capital expenditure represents the total costs
incurred during the year to acquire segment assets that are expected to be used
during more than one period, i.e. property, plant and equipment.
INTANGIBLES
Intangible assets
Intangible assets that are acquired by the group, which have finite useful
lives, are measured at cost less accumulated amortisation and accumulated
impairment losses.
Amortisation
Amortisation is recognised in profit or loss on a straight-line basis over the
estimated useful lives of intangible assets, from the date that they are
available for use.
NEW STANDARDS AND INTERPRETATIONS NOT YET ADOPTED
A number of new standards, amendments to standards and interpretations are not
yet effective for the year ended 30 June 2007, and have not been applied in
preparing these consolidated financial statements:
IFRS 7 Financial Instruments: Disclosures, and amendments to
IAS 1: Presentation of Financial Statements (Capital Disclosures) -
Effective for periods beginning 1 January 2007
These standards and amendments to standards will require extensive disclosures
concerning the significance of financial instruments for the group`s financial
position and performance, as well as qualitative and quantitative disclosures
on the nature and extent of risk.
IFRIC 10 Interim Financial Reporting and Impairment - Effective for periods
ended 31 October 2007 onwards. This standard will prevent the reversal of an
impairment loss recognised in a previous interim period in respect of goodwill,
an investment in an equity instrument or a financial asset carried at cost.
These statements will be applied in the 2008 financial year.
IFRS 8 (AC 145) - Segmental Reporting
IFRS 8 (AC 145) will be adopted for the first time for the financial reporting
period ending 30 June 2010.
In terms of this IFRS, segment reporting will be based on the information that
management uses internally for evaluating segment performance and when deciding
how to allocate resources to operating segments. Such information may be
different from what is used to prepare the income statement and balance sheet.
The operating segments of the group are the same as the current business
segments based on IAS 14 (AC 115).
The accounting policies of these operating segments are the same as those
described in the summary of significant accounting policies except that pension
expense for each operating segment is recognised and measured on the basis of
cash payments to the defined pension plan.
This difference relating to pensions will be recorded in the reconciliation
between the information in the operating segments and the IFRS income statement
and balance sheet of the group for the year ended 30 June 2010.
CIRCULAR 8/2007 - Headline Earnings
The aim of the revised circular is to render Headline Earnings
more consistent across all companies. The effective date for the application is
for financial periods (interim or annual) ending on or after 31 August 2007.
The circular focuses on re-measurements - whether realised or unrealised - as
opposed to all capital items, providing a more consistent mechanism for
determining headline earnings in the IFRS context.
FINANCIAL CALENDAR
Annual General Meeting
23 October 2007 at 10:00 at the company`s registered office.
Dividend
Dividend of 12 cents per share proposed.
Last day to trade cum. dividend Friday 9 November 2007.
Ex dividend trades from Monday 12 November 2007.
Record date: Friday 16 November 2007.
Payment date: Monday 19 November 2007
Share certificates may not be dematerialised or
rematerialised between Monday 12 November 2007 and
Friday 16 November 2007, both days inclusive.
Reports 2008
Interim for six months ending 31 December 2007 published March 2008.
Annual for year ending 30 June 2008 published September 2008.
Administration
Registered office: 2nd Floor, Seardel House, Alphen Park, Constantia Main Road,
Constantia 7806, Cape Town.
Registration number: 1968/011249/06
Postal address: Private Bag X8, Constantia 7848
Telephone: +27-21-7943600
Telefax: +27-21-7942009
E-mail: lyndac@seardel.co.za
Internet: http://www.seardel.co.za
Transfer secretaries
Computershare Investor Services 2004 (Pty) Limited
70 Marshall Street
Johannesburg 2001
P O Box 61051 Marshalltown 2107
Telephone: +27-11-3705000
Auditors: KPMG Inc.
Attorneys: Edward Nathan Sonnenbergs
Secretary and registered office:
L A Clohessy
2nd Floor, Seardel House, Alphen Park,
Constantia Main Road, Constantia 7806, Cape Town.
Date: 26/09/2007 15:43:25 Produced by the JSE SENS Department.
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