Annual financial statements

DIRECTORS' REPORT

The Directors present their report on the activities and the financial statements for Clover Industries Ltd (“CIL”) and the Group in respect of the year ended 30 June 2016.

Nature of business

The procurement, production, marketing, sales and distribution of branded consumer goods to customers on the African continent.

Group results

The Group's results for the year are as follows:

	2016	2015
	R'm	R'm
Revenue	9 818,7	9 266,3
Total comprehensive income attributable to equity holders of the parent Company	379,8	353,6

More detailed financial information can be found in the Financial Report which forms part of the Integrated Annual Report.

Subsidiary companies and interests in joint ventures

Details of subsidiary companies are reflected in note 30 to the financial statements and business combinations and interests in joint ventures in note 3 and 4 to the financial statements.

During the year under review, Clover S.A. Proprietary Limited (“CSA”) (a wholly-owned subsidiary of the Company) has acquired 51% of the issued share capital of Clover Good Hope Proprietary Limited (“Clover Good Hope”). Good Hope International Beverages (SA) Proprietary (“GHIB”) sold its business to Clover Good Hope for a consideration of R5 million, effective 1 May 2016 and in return holds an equity stake in Clover Good Hope of 49% of the issued share capital (see note 3.1). The business includes soy based fluid products and other beverages. The agreement provides for a Put Option against CSA exercisable after the third anniversary of the effective date and a Call Option in favour of CSA exercisable after the fifth anniversary of the effective date (see note 14.1).

In addition, Clover S.A. Proprietary Limited (“CSA”) (a wholly-owned subsidiary of the Company) has acquired 51% of the issued share capital of Clover Frankies Proprietary Limited (“Clover Frankies”). Frankies Close Corporation (“Frankies”) sold its business to Clover Frankies for a consideration of R12,96 million, effective 1 November 2015 and in return holds an equity stake in Clover Frankies of 49% of the issued share capital (see note 3.2). The business includes carbonated soft drinks (CSD) manufacturing, marketing and distribution business (“CSD Business”), inventory and intellectual property. The agreement provides for a Put Option against CSA and a Call Option in favour of CSA, both are exercisable after 30 June 2019 (see note 14.1).

These transactions are in line with the Company's stated strategy to expand its portfolio of value added and branded consumer products.

Share capital

Details of the authorised and issued share capital are disclosed in note 19 to the financial statements.

A general authority to repurchase ordinary shares of the Company was granted to the Directors by way of a special resolution adopted on 27 November 2015 and is valid until 28 November 2016. Such authority is subject to the Companies Act and the Listings Requirements of the JSE. The Listings Requirements of the JSE limit repurchases during any one year to a maximum of 20% of the issued ordinary shares at the time.

During the period 1 December 2015 to 22 June 2016 the Company issued 2 583 212 (2015: 5 252 549) ordinary Clover Industries shares to members of senior management to settle part of its obligation under the Clover Share Appreciation Rights Plan.

Except for the above no shares were issued or repurchased during the year ending 30 June 2016.

Dividends

Dividends declared and paid by CIL during the year:

The Board declared and paid an interim cash dividend of R46,1 million (2015: R42,4 million) or 24,21 cents (2015: 22,6 cents) per ordinary share during March 2016. It further declared a final dividend of R77,9 million or 40,94 cents per ordinary share, bringing the total dividend for the year to R124 million (2015: R105,1 million) or 65,15 cents (2015: 56,0 cents) per ordinary share.

	2016	2015
	R'000	R'000
Ordinary dividends
Declared	108 755	71 624
Paid	108 755	71 624

Declaration of dividend number 13

Notice is hereby given that the directors have declared a final gross cash dividend of R77,9 million or 40,94000 cents (34,79900 cents net of dividend withholding tax) per ordinary share for the year ended 30 June 2016.

The dividend has been declared from income reserves.

A dividend withholding tax of 15% will be applicable to all shareholders who are not exempt.

The Company income tax number is 9657/002/71/4.

The issued share capital at the declaration date is 190 314 350 ordinary shares. The salient dates will be as follows:

Last day to trade to receive a dividend	Tuesday, 11 October 2016
Shares commence trading “ex” dividend	Wednesday, 12 October 2016
Record date	Friday, 14 October 2016
Payment date	Monday, 17 October 2016

Share certificates may not be dematerialised or rematerialised between Wednesday, 12 October 2016 and Friday, 14 October 2016, both days inclusive.

Directors and Company Secretary

Particulars of the present Directors and Company Secretary are listed here and here.

Share-based compensation

On 30 June 2016, 2 679 262 SARs were issued to executives at an issue price of R18,44. These SARs will vest three years after the issue date and are subject to vesting conditions. SARs not exercised will be cancelled five years after the allocation date.

On exercise executives will be entitled to a payment equal to the increase in the CIL ordinary share price over the allocation price of the SARs. Such payment can at the election of the Group be either in cash or by way of the issue to the member of a number of ordinary shares equal in value to such cash amount. Details of SAR issued and vested in terms of the plan are given in the Remuneration Policy and Remuneration Report contained in the Integrated Annual Report and note 32.

Insurance and risk management

The Group follows a policy of reviewing the risks relating to assets and commitments that might flow from the use thereof with its insurers on an annual basis. Wherever possible, assets are automatically included. There is also a continuous asset risk control programme, which is carried out in conjunction with the Group's insurance brokers. For further information on the Group's risk management process please refer to the Report on Governance, Risk and Compliance here.

Property, plant and equipment

There was no change in the nature of the property, plant and equipment of the Group or in the policy regarding their use. Capital expenditure on tangible assets was R366,7 million (2015: R468,1 million) and R56,4 million (2015: R21,6 million) on intangible assets.

Events after the reporting period

No significant events occurred subsequent to the year-end that would require disclosure or amendment to these financial statements.

Special resolutions

The following special resolutions were adopted at the Annual General Meeting of Clover Industries Limited held on 27 November 2015:

A general authority was given to the Board of Directors to repurchase shares in the Company subject to the Companies Act and the JSE Listings Requirements;

The remuneration of the Non-executive Directors with effect from 1 July 2015 was approved; and

The Company and/or subsidiaries was given authority by way of general authority to provide, from time to time, subject to section 45 of the Companies Act, financial assistance to related and inter-related companies on the terms and conditions that the Board of Directors deem appropriate.

Acknowledgements

We express our thanks and appreciation to:

our shareholders for their support during the year;
our staff for their dedication to the Clover brand;
all our suppliers for their support in reducing the costs in the supply chain;
the retail and wholesale trade for their support; and
the consumers who support the Clover brand.

Werner Büchner
Chairman

12 September 2016

Johann Vorster
Chief Executive Officer

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