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CLOVER INDUSTRIES LIMITED - Audited consolidated financial statements for the twelve months ended 30 June 2014 and cash dividend declaration

Release Date: 16/09/2014 07:05
Code(s): CLR     PDF:  
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Audited consolidated financial statements for the twelve months ended 30 June 2014 and cash dividend declaration

Clover Industries Limited
Registration number: 2003/030429/06
Ordinary share code: CLR       
ISIN: ZAE000152377

SUMMARISED AUDITED CONSOLIDATED FINANCIAL STATEMENTS
for the twelve months ended 30 June 2014
and cash dividend declaration

FINANCIAL KEY INDICATORS

       REVENUE
8,9%   Increased to
       R8,5 billion

       HEPS
14,3%  Decreased to
       102,7 cents

       OPERATING PROFIT
24,0%  Decreased to
       R282,3 million

       HEADLINE EARNINGS
12,8%  Decreased to
       R187,5 million

       PROFIT FOR THE YEAR
21,2%  Decreased to
       R189,0 million

       OPERATING MARGIN
3,3%   Decreased from 4,7%

       TOTAL DIVIDEND PER SHARE FOR THE YEAR
0,0%   Maintained at
       32 cents

* The results of the corresponding previous period have been restated as explained in the commentary
  section of this report.

COMMENTARY

OPERATIONAL REVIEW
The year under review proved exceptionally challenging for consumers, producers and the dairy industry as a whole. Against a backdrop of a
weakening rand, rising CPI and high food inflation, these systemic issues were further impacted by one of the most protracted series of industrial
actions in our democracy's history.

The net effect was a decrease in earnings per share of 30,8 cents, down 23,1% and a decrease in headline earnings per share of 17,2 cents, some
14,3% lower than the comparative year.

For Clover, the following factors impacted on the business:

   - Costs: We experienced strong overall inflationary cost pressures, especially on packaging and ingredient costs (which are dollar-based).
     In addition, we increased the price we pay for raw milk to ensure on-farm sustainability.
     These cost increases could not immediately be recovered due to a very constrained trading environment and weakened discretionary
     consumer spend which necessitated a gradual price increase strategy.
   - Lower sales volumes as a result of further selling price increases;
   - The erosion of sales volumes due to rising inflation, especially in the non-alcoholic beverages segment; and
   - A milk shortage during the winter following Clover's rebalancing of its milk purchasing agreements in preparation for its exit from
     supplying raw milk at cost to Danone Southern Africa on 1 January 2015.

Headline earnings decreased by 12,8% from R214,9 million at 30 June 2013 to R187,5 million for the year under review. This decrease in headline
earnings constitutes a 19,9% reduction in headline operating profit (R69,0 million), a 23,7% (R11,1 million) increase in net finance costs, a 47,6%
(R47,1 million) decrease in headline income tax and a 87,8% (R1,1 million) increase in non-controlling interests.

Revenue increased by 8,9% to R8 530 million from R7 833 million, whilst operating profit was lower at R282,3 million from R371,6 million in the
prior year, representing a contraction of 24,0% for the year under review. Operating margin decreased from the 4,7% reported in the prior year
to 3,3%.

Revenue from sale of product increased by 8,9% with average price inflation for the year of 11%. Overall sales volumes declined by 0,8%.

Excluding the effect of the exit from the Famous Brands bulk mozzarella cheese business during the comparative period, and the Nestle Pure
Life water volumes, which only contributed to the current year volumes, sales volumes declined by 2,7%.

Clover's Margin on Material (MOM) for the dairy fluids product group (mostly UHT and fresh milk which make up the bulk of its raw milk
usage) has weakened as a result of Clover's strategy to gradually recover farm gate milk price and packaging cost increases in the prevailing
environment to minimise market share losses in the process. The UHT and fresh milk market conditions during the second half of the year
required a cautious approach to selling price increases.

Interest-bearing debt for the year ended only R37,6 million higher than the previous year although the average debt levels throughout the year
were consistently higher than in the previous year. The reduction in profitability was largely offset by non-cash expenditure and a release of cash
from working capital, mainly from much lower inventory levels following the milk shortage during the last quarter of the year. Consequently the
increase in net finance charges was contained to R11,1 million.

The effective tax rate reduced from 29,2% to 20,9%. Included in profit before tax is the gain by Clover Waters on the acquisition of the Nestlé
water business. In terms of IFRS this amount of R20,7 million is disclosed after tax and the related deferred tax expense is therefore not included
in the tax expense. This reduced the effective tax rate by 2,4%. The effective tax rate was reduced by a further 2,6% through the recognition of
a deferred tax asset relating to the assessed loss in the Real Beverages Company not previously recognised. In terms of IFRS, the Group's share
of Clover Fonterra Ingredients net after tax income is now equity accounted and has to be shown above the profit before tax line although it
represents an after tax profit. This contributed to a 1,7% reduction in the effective tax rate. In addition, prior year tax adjustments accounted for
a further 1,5% reduction in the effective tax rate.

INVESTMENT AND FUNDING
The raw milk shortage experienced during the last quarter of the year under review depleted UHT and cheese stocks to a large extent.
Inventory levels accordingly dropped by R115,3 million. Trade receivables increased by only 1,3% despite the growth in revenue. With effect
from 1 June 2013 Danone Southern Africa began to take over the credit control of its major customers that were previously managed by Clover
and this process was completed in the 2013/14 financial year. For that reason, as well as, the milk shortage and resulting lower sales towards the
end of the year, accounts receivable did not grow in line with the growth in revenue.

The 38,6% gearing level at 30 June 2014 was lower than the 39,7% at 30 June 2013. The Group's gearing is well within its ability to service interest
and repayments and it has capacity to extend its gearing considerably to fund future growth.

Cash generated from operations, before working capital changes, was R338,4 million compared to R396,8 million reported in the prior year.
This lower cash generation followed mostly from the lower profit for the year. However, during the year under review, working capital released
R64,6 million of cash compared to the cash absorption of R177,6 million in the prior year. Final cash from operations increased by 83,9% to
R403,1 million.

Investment activities consumed R351,7 million in cash compared to R515,8 million in the previous year. The final capital expenditure on project
Cielo Blu amounted to R64,5 million. The total capital expenditure for the year came to R388,0 million against which government grants of
R32,1 million were received.

PROSPECTS
We expect the current subdued operating environment to continue for the foreseeable future, given the current cycle of interest rate increases,
a low growth economy, rising unemployment and the aftermath of the protracted labour actions that have to work their way through the
economy.

Despite some of the most challenging trading conditions in recent history, we will continue to deliver on our targets which include volume and
market share growth, the reduction of overall costs, especially in the supply chain.

As demonstrated by the success of our new platforms in difficult economic conditions, the successful execution of our expansion plans for new
value-added products and platforms is imperative. This will allow us to leverage our iconic brand and production capacity as well as expanding
our business further into sub-Saharan Africa.

Management will continue to deliver against the Group's strategy of identifying and consolidating long-term growth opportunities that will
ensure a sustainable return on investment.

Some important initiatives in the year ahead include:
- Continued research and development of new products
- Re-entry into the yoghurt and custard market
- A methodical upgrade of our ageing IT infrastructure
- Maximising our collaboration with the trade – which is dependent on an upgraded IT system
- Continued focus on safety, health and the environment, especially with regards to emissions, waste and water consumption.

Consumer spending is expected to increasingly come under pressure, which along with inflationary costs pressures will see further market
consolidation.

We believe that the anticipated industry consolidation will play an important role in ensuring a robust market that will continue to deliver against
the growing needs of consumers and contribute to regional food security.

The discontinuation of the Danone services will have some financial implications on Clover, which will be managed by a combination of
reducing costs, replacing some of the lost business with other third party services and Clover's own growth. However, in the short term there
may be a delay in replacing the lost fee income.

For a number of years now, some retail groups have indicated that they would like to perform their own distribution services to their own stores,
which is currently been done by Clover. Nothing to this effect has happened yet, but there are constant discussions with some retail groups in
this regard. If they persist, this could lead to a further loss in fee income for Clover, but could be managed more easily than the exit from the
Danone services as the direct costs associated with not servicing an entire channel are easier to eliminate.

DIVIDEND DECLARATION
Notice is hereby given that the directors have declared a final gross cash dividend of 16,00000 cents (13,60000 cents net of dividend withholding
tax) per ordinary share for the year ended 30 June 2014, payable in South African currency on Monday, 13 October 2014.

The company declared and paid an interim dividend of 16,00000 cents per share during April 2014 which together with the final dividend, will bring
the total dividend for the current financial year to 32,00000 cents. This is equal to the dividend paid in the previous financial year which is in line
with the company's dividend policy to at least maintain dividends in the event of HEPS ending lower than the prior financial year.

The dividend has been declared from income reserves. The company did not have any Secondary Tax on Companies credits to reduce the
dividend withholding tax liability.

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 ordinary share capital at the declaration date is 182 478 589 ordinary shares.

The salient dates will be as follows:
Last day to trade "cum' the ordinary share dividend                 Friday, 3 October 2014
Shares commence trading "ex' the ordinary share dividend            Monday, 6 October 2014
Record date on                                                     Friday, 10 October 2014
Payment date on                                                    Monday, 13 October 2014

Share certificates may not be dematerialised or rematerialised between Monday, 6 October 2014 and Friday, 10 October 2014, both days
inclusive.

On behalf of the Board

WI Büchner               JH Vorster
Chairman                 Chief Executive

15 September 2014

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the year ended                                                                           30 June       30 June   
                                                                                                2014          2013   
                                                                                                          Restated   
                                                                                               R'000         R'000 
  
Sales of products                                                                          7 192 650     6 605 356   
Rendering of services                                                                        822 040       801 755   
Sale of raw milk                                                                             511 485       420 508   
Rental income                                                                                  4 062         5 292   
Revenue                                                                                    8 530 237     7 832 911   
Cost of sales                                                                            (6 291 191)   (5 712 404)   
Gross profit                                                                               2 239 046     2 120 507   
Other operating income                                                                        48 916        61 860   
Selling and distribution costs                                                           (1 770 510)   (1 558 404)   
Administrative expenses                                                                    (195 567)     (204 018)   
Restructuring expenses                                                                      (16 036)      (35 750)   
Other operating expenses                                                                    (23 573)      (12 571)   
Operating profit                                                                             282 276       371 624   
Finance income                                                                                 7 234         9 715   
Finance cost                                                                                (65 043)      (56 432)   
Share of profit in a joint venture after tax                                                  14 306        13 974   
Profit before tax                                                                            238 773       338 881   
Taxes                                                                                       (49 791)      (99 022)   
Profit for the year                                                                          188 982       239 859   
Other comprehensive income                                                                                           
Other comprehensive income to be reclassified to profit of loss in subsequent periods:                               
Exchange differences on translations of foreign operations                                     2 565         (272)   
Total comprehensive income for the year, net of tax                                          191 547       239 587   
Profit attributable to:                                                                                              
Equity holders of the parent                                                                 186 666       238 626   
Non-controlling interests                                                                      2 316         1 233   
                                                                                             188 892       239 859   
Total comprehensive income attributable to:                                                                          
Equity holders of the parent                                                                 189 231       238 354   
Non-controlling interests                                                                      2 316         1 233   
                                                                                             191 547       239 587   

HEADLINE EARNINGS AND HEADLINE EARNINGS PER SHARE CALCULATION

For the year ended                                                                           30 June       30 June   
                                                                                                2014          2013   
                                                                                               R'000         R'000   
Headline earnings calculation                                                                                        
Profit for the period attributable to equity holders of the parent company                   186 666       238 626   
Gross remeasurements excluded from headline earnings                                           2 516      (24 050)   
Loss/(profit) on sale and scrapping of property, plant and equipment                           5 102      (11 680)   
Gain on fair valuing of existing investment in joint venture due to gaining control                –      (16 747)   
Discount on acquisition of PPE by Clover Waters through issue of shares                     (20 716)             –   
Non-controlling interest's portion in discount on acquisition off PPE by Clover Waters                               
through issue of shares                                                                        6 215             –   
Impairment of plant and equipment                                                             11 915         4 377   
Taxation effects of remeasurements                                                           (1 718)           318   
Headline earnings attributable to shareholders of the parent company                         187 464       214 894   
Issued ordinary shares                                                                   182 478 589   181 218 149   
Number of ordinary shares used in the calculation of:                                                                
Earnings per share                                                                                                   
– weighted average                                                                       182 478 589   179 267 674   
Diluted earnings per share                                                                                           
– weighted average                                                                       191 767 408   192 750 186   
Earnings per share attributable to ordinary equity holders of the parent                                             
Earnings per share (cents)                                                                     102,3         133,1   
Diluted earnings per share (cents)                                                              97,3         123,8   
Headline earnings per share (cents)                                                            102,7         119,9   
Diluted headline earnings per share (cents)                                                     97,8         111,5   

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

As at                                                                            30 June     30 June       30 June   
                                                                                    2014        2013          2012   
                                                                                            Restated      Restated   
                                                                                   R'000       R'000         R'000   
Assets                                                                       
Non-current assets                                                           
Property, plant and equipment                                                  1 818 113   1 517 233     1 168 047   
Investment properties                                                              1 380       2 003           492   
Intangible assets                                                                447 493     445 283       357 767   
Share of investment in a joint venture                                            35 066      32 963        22 987   
Deferred tax assets                                                                8 919       6 722           124   
                                                                               2 310 971   2 004 204     1 549 417   
Current assets                                                               
Inventories                                                                      567 892     683 159       568 355   
Trade and other receivables                                                    1 022 993   1 010 251       964 587   
Prepayments                                                                       16 194      15 273        25 631   
Other current financial assets                                                         –         132           173   
Income tax receivables                                                            33 877           –             –   
Cash and short-term deposits                                                     653 889     704 559       709 114   
                                                                               2 294 845   2 413 374     2 267 860   
Assets classified as held-for-sale                                                 3 776         359           423   
Total assets                                                                   4 609 592   4 417 937     3 817 700   
Equity and liabilities                                                                    
Equity                                                                                    
Issued share capital                                                               9 124       9 061         8 955   
Share premium                                                                    734 414     713 263       675 113   
Other reserves                                                                   283 225     272 205       262 161   
Foreign currency translation reserve                                             (5 582)     (8 147)       (7 875)   
Retained earnings                                                              1 231 089   1 126 734       955 890   
Equity attributable to equity holders of the parent                            2 252 270   2 113 116     1 894 244   
Non-controlling interests                                                         20 471       2 309         1 796   
Total equity                                                                   2 272 741   2 115 425     1 896 040   
Liabilities                                                                               
Non-current liabilities                                                                   
Interest-bearing loans and borrowings                                            662 357     666 640        21 686   
Provisions                                                                        67 615      60 814        61 637   
Deferred tax liability                                                           179 023     137 313       116 950   
Trade and other payables                                                           4 351       9 267         6 904   
                                                                                 913 346     874 034       207 177   
Current liabilities                                                                       
Trade and other payables                                                       1 186 674   1 218 848     1 271 366   
Interest-bearing loans and borrowings                                            214 495     172 646       421 376   
Other current financial liabilities                                                2 323         250         4 308   
Income tax payable                                                                     –      16 723         5 604   
Provisions                                                                        20 013      20 011        11 829   
                                                                               1 423 505   1 428 478     1 714 483   
Total liabilities                                                              2 336 851   2 302 512     1 921 660   
Total equity and liabilities                                                   4 609 592   4 417 937     3 817 700   

SUMMARISED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the year ended                                                                           30 June       30 June   
                                                                                                2014          2013   
                                                                                               R'000         R'000 
  
Balance at 1 July                                                                          2 115 425     1 896 040   
Profit for the year                                                                          188 982       239 859   
Other comprehensive income                                                                     2 565         (272)   
Total comprehensive income                                                                   191 547       239 587   
Share-based payment reserve accrued                                                           17 351        18 407   
Share appreciation rights exercised, net of tax                                             (24 551)      (37 134)   
Ordinary shares issued                                                                        21 214        38 734   
Non-controlling interest allocated in Clover Waters acquisition                               16 807             –   
Discount on acquisition of Clover Waters                                                       4 218             –   
Dividends of subsidiaries – non-controlling interest                                           (961)         (720)   
Dividends                                                                                   (69 342)      (41 912)   
Dividends forfeited                                                                            1 033         2 423   
Balance at end of the year                                                                 2 272 741     2 115 425   
Consists of:                                                                              
Share capital and premium                                                                    743 538       722 324   
Other capital reserves                                                                       277 643       264 058   
Retained earnings                                                                          1 231 089     1 126 734   
Shareholder equity                                                                         2 252 270     2 113 116   
Non-controlling interest                                                                      20 471         2 309   
Total equity                                                                               2 272 741     2 115 425   

SUMMARISED CONSOLIDATED STATEMENT OF CASH FLOWS

For the year ended                                                                           30 June       30 June   
                                                                                                2014          2013   
                                                                                                          Restated   
                                                                                               R'000         R'000   
Operating activities                                                                                 
Profit before tax                                                                            238 773       338 881   
Adjustment for non-cash items                                                                179 885       118 654   
Working capital adjustments                                                                   64 648     (177 638)   
Income tax paid                                                                             (80 239)      (60 699)   
Net cash flow from operating activities                                                     403 067       219 198   
Investing activities                                                                                 
Proceeds from sale of property, plant and equipment                                            1 166        17 599   
Interest received                                                                              7 234         9 715   
Acquisition of non-controlling interest                                                            –      (24 700)   
Acquisition of subsidiary                                                                          –      (70 556)   
Government grant received recognised against property, plant and equipment                    32 106             –   
Capital expenditure: Tangible and intangible assets                                        (387 999)     (454 400)   
Net other investing activities                                                               (4 241)         6 532   
Net cash flows used in investing activities                                                (351 734)     (515 810)   
Financing activities                                                                                 
Interest paid                                                                               (65 043)      (56 432)   
Dividends paid                                                                              (69 342)      (41 912)   
Repayment of preference share liability                                                            –     (259 382)   
Net increase/(repayment) of borrowings                                                        37 566       655 605   
Net other financing activities                                                                 (961)         (720)   
Net cash flows (used in)/from financing activities                                          (97 780)       297 159   
Net (decrease)/increase in cash and cash equivalents                                        (46 447)           547   
Net foreign exchange differences                                                             (4 223)       (5 101)   
Cash and cash equivalents at the beginning of the year                                       704 559       709 113   
Cash and cash equivalents at the end of the year                                             653 889       704 559   

ACCOUNTING POLICIES AND NOTES

1.   Corporate information and basis of preparation
     These summarised consolidated financial statements have been prepared in accordance with the framework concepts and the measurement and
     recognition requirements of International Financial Reporting Standards (IFRS), its interpretations issued by the IFRS Interpretations Committee,
     the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee and Financial Pronouncements as issued by the Financial
     Reporting Standards Council, presentation and disclosure as required by IAS 34 Interim Financial Reporting, the JSE Listings Requirements and the
     requirements of the Companies Act of South Africa. The accounting policies are consistent in all material respects with those of the previous financial
     period, except for:

     - IAS 19: Employee Benefits (effective 1 January 2013)
     - IFRS 10: Consolidated Financial Statements (effective 1 January 2013)
     - IFRS 11: Joint Arrangements (effective 1 January 2013)
     - IFRS 12: Disclosure of Interest in Other Entities (effective 1 January 2013)
     - IFRS 13: Fair Value Measurement (effective 1 January 2013)

     Only IFRS 11 required restatement, the effect of the restatement is set out in note 2.

2.   Share of investment in joint ventures
     Clover Industries indirectly holds a 51% interest in Clover Fonterra through Clover SA. Clover Fonterra is involved in the marketing and distribution of
     dairy-related products.

     The Group has classified the interest in Clover Fonterra as a joint venture despite the fact that the Group owns more than 50% of the issued share
     capital. The shareholders' agreement is set out in such a way that unanimous consent between the two shareholders is required for any decisions
     regarding the relevant activities of the investee. Therefore the Group concluded that they have joint control over the investee.

     Under IAS 31 Investment in Joint Ventures (prior to the transition to IFRS 11), the Group's share of the assets, liabilities, revenue, income and expenses
     were proportionally consolidated in the consolidated financial statements. Upon adoption of IFRS 11, the Group has determined its interest to be a
     joint venture and it is required to be accounted for using the equity method. As a result Clover had to restate its comparative figures.

     Up to 31 October 2012, Clover Industries indirectly held a 50,1% interest in Clover Manhattan (Pty) Ltd. Effective 1 November 2012, Clover Manhattan
     (Pty) Ltd became a full subsidiary of Clover SA. Clover Manhattan, was involved in the manufacture, marketing and distribution of iced tea. With
     effect from 1 January 2013 the Clover Manhatten business was transferred into Clover SA by way of a dividend and Clover Manhattan (Pty) Ltd was
     subsequently applied for to be deregistered.

     The Group has classified the interest in Clover Manhattan as a joint venture despite the fact that the Group owns more than 50% of the issued share
     capital. The shareholders' agreement is set out in such a way that unanimous consent between the two shareholders is required for any decisions
     regarding the relevant activities of the investee. Therefore the Group concluded that they have joint control over the investee.

     Under IAS 31 Investment in Joint Ventures (prior to the transition to IFRS 11), the Group's share of the assets, liabilities, revenue, income and expenses
     were proportionally consolidated in the consolidated financial statements. Upon adoption of IFRS 11, the Group has determined its interest to be a
     joint venture and it is required to be accounted for using the equity method. As a result Clover had to restate its comparative figures.

     The effect of applying IFRS 11 is as follows:

Clover Fonterra
                                                               For the year ended     For the year ended
                                                                     30 June 2013           30 June 2012
Impact on the statement of consolidated comprehensive income                R'000                  R'000

Decrease in reported revenue                                            (146 268)              (168 816)
Decrease in cost of sales                                                 116 075                142 031
Decrease in gross profit                                                 (30 193)               (26 785)
(Decrease)/increase in other operating income                                (79)                     28
Decrease in selling and distribution costs                                 10 508                  9 510
Decrease in operating profit                                             (19 764)               (17 247)
Decrease in finance income                                                      –                   (44)
Decrease in finance costs                                                      12                    212
Increase in share of profits of joint venture                              14 221                 12 297
Decrease in profit before tax                                             (5 531)                (4 782)
Decrease in income tax expense                                              5 531                  4 782
Net impact on profit after tax                                                  –                      –

                                                                            As at                  As at
                                                                     30 June 2013           30 June 2012
Impact on the statement of consolidated financial position                  R'000                  R'000

Increase in investment in joint venture                                    32 963                 22 038
Decrease in deferred tax asset (non-current)                                (727)                  (370)
Decrease in inventories and trade receivables (current)                  (35 062)               (57 763)
Decrease in cash and short-term deposits (current)                       (13 503)                (2 357)
Decrease in trade and other payables (current)                             15 247                 38 032
Decrease in income tax payable (current)                                      674                     70
Decrease in provisions (current)                                              408                    350
Net effect on equity                                                            –                      –

                                                               For the year ended     For the year ended
                                                                     30 June 2013           30 June 2012
Impact on the consolidated statement of cash flows                          R'000                  R'000

Operating                                                                  14 221               (12 297)

Clover Manhattan
                                                               For the year ended    For the year ended
                                                                     30 June 2013          30 June 2012
Impact on the statement of consolidated comprehensive income                R'000                 R'000

Decrease in reported revenue                                             (17 282)              (37 546)
Decrease in cost of sales                                                  11 770                25 056
Decrease in gross profit                                                  (5 512)              (12 490)
Decrease in other operating income                                              –                 (282)
Decrease in selling and distribution costs                                  5 514                10 896
Increase/(decrease) in operating profit                                         2               (1 876)
Decrease in finance income                                                    (1)                   (4)
(Decrease)/increase in share of profits of joint venture                    (248)                 1 120
Decrease in profit before tax                                               (247)                 (760)
Decrease in income tax expense                                                247                   760
Net impact on profit after tax                                                  –                     –
                                                                            As at                 As at
                                                                     30 June 2013          30 June 2012
Impact on the statement of consolidated financial position                  R'000                 R'000

Increase in investment in joint venture                                         –                   949
Decrease in inventories and trade receivables (current)                         –               (8 171)
Decrease in trade and other payables (current)                                  –                 7 222
Net effect on equity                                                            –                     –
                                                               For the year ended    For the year ended
                                                                     30 June 2013          30 June 2012
Impact on the consolidated statement of cash flows                          R'000                 R'000

Operating                                                                     248               (1 120)

3.   Segment reporting
     The following information regarding the Group's product groups, for which no discrete financial information is available, are presented on voluntary
     basis.

     The Group comprises the following main product groups:

     - dairy fluids product group is focused on providing the market with quality dairy fluid products;
     - the dairy concentrated products consist of cheese, butter, condensed milk and retail milk powders;
     - the ingredients products consist of bulk milk powders, bulk butter, bulk condensed milk, bulk creamers, calf feed substitutes, whey powder and
       buttermilk powder;
     - the non-alcoholic beverages product group focuses on the development and marketing of non-alcoholic, value-added branded beverages; and
     - other consists of Clover's holding company and Lactolab Proprietary Limited that renders laboratory services.

For the year ended                          30 June     30 June   
                                               2014        2013   
                                                       Restated   
                                              R'000       R'000   
External revenue from sale of products*                           
Dairy fluids                              3 858 841   3 404 737   
Dairy concentrated products               1 128 758   1 054 741   
Ingredients                                 265 599     264 344   
Non-alcoholic beverages                   1 930 094   1 870 962   
Other                                         9 358      10 572   
                                          7 192 650   6 605 356   
Margin on material                                                
Dairy fluids                              1 439 256   1 311 959   
Dairy concentrated products                 319 659     327 440   
Ingredients                                  68 878      56 710   
Non-alcoholic beverages                     973 475     981 427   
Other                                         7 346       8 157   
                                          2 808 614   2 685 693   

*External revenue excludes revenue from the sale of raw milk.
Assets, liabilities and overheads are managed on a Group basis and are therefore not allocated to the product groups.
The Group operates mainly in the geographical area of South Africa. The revenue and assets of the operations outside South Africa are insignificant.

4.   Earnings per share
     The difference between earnings per share and diluted earnings per share is due to the impact of unexercised share appreciation rights.

5.   Property, plant and equipment and intangible assets
     During the year under review the Group acquired property, plant and equipment to the value of R375,0 million and also acquired intangible assets at
     a cost of R13,0 million.

6.   Share capital and share premium
     The share premium account increased by R21,2 million from the prior financial year after the settlement of vested executive management share
     appreciation rights by the issue of new ordinary shares.

7.   Acquisition of interest in Clover Waters Proprietary Limited
     Clover entered into an agreement with Nestle (South Africa) Proprietary Limited to form a new entity, Clover Waters Proprietary Limited, that acquired
     Nestle's Gauteng-based Doornkloof property, bottled water manufacturing facility and water rights. This newly formed entity will have the right
     by way of licence, to manufacture, distribute, market and sell bottled mineral water under Nestle's Pure Life, Valvita and Schoonspruit brands as
     well as ice tea under the Nestea brand. These brands will complement Clover SA's Aquartz bottled water and Manhattan ice tea brands which will
     also be manufactured, distributed, marketed and sold by Clover Waters.

     Clover SA effectively holds 70% of the shares in Clover Waters and Nestle (South Africa) 30%. The effective date of the transaction was 1 August 2013,
     and was funded by means of an assets for share swap arrangement to the value of R35,0 million.

     The Group has elected to measure the non-controlling interest in Clover Waters Proprietary Limited at fair value.

     Non-controlling interest has been classified as a level 3 fair value.

     The fair value of non-controlling interest has been determined by obtaining an independent valuation on the property, plant and equipment and by
     utilising the discounted cash flow (DCF) method to value the intangible assets.

     The independent valuators ("The Property Partnership') determined the fair value of land and buildings by using the capitalisation of future rentals
     technique. It was based on an expected net annual rental income of R3,7 million and a rental capitalisation into perpetuity factor of 12,5%.

     The plant and machinery's fair values were determined by calculating the net replacement value of the plant and machinery. This was calculated by
     obtaining gross replacement values for the plant and machinery and adjusting it to take into consideration the expected useful lives of the plant and
     machinery and its current condition.

     The discounted cash flow valuation of the intangible assets were based on the following inputs: estimated annual free cash flow of R3,9 million, free
     cash flow growth per annum of 7,5% and a discount rate of 15,36%.

     The fair value of the identifiable assets and liabilities of Clover Waters Proprietary Limited as at the date of acquisition was:

                                                     R'000   
Assets                                                       
Property, plant and equipment                       58 445   
Intangible assets                                   39 287   
                                                    97 732   
Liabilities                                                  
Deferred tax liability                            (14 009)   
Income tax payable                                 (6 985)   
                                                  (20 994)   
Total identifiable net assets at fair value         76 738   
Non-controlling interest measured at fair value   (21 025)   
Discount on acquisition                           (20 716)   
Purchase consideration transferred                  34 997   
Purchase consideration transferred                           
Net cash acquired with subsidiary                        –   
Net assets transferred as consideration             34 997   
Total consideration                                 34 997   

No goodwill was recognised on the acquisition; however, expected synergies include supply chain efficiencies, administration and shared service
efficiencies, optimisation of sourcing arrangements and distribution channels.

8.   Fair value of financial instruments
     For financial instruments traded in an active market (Level 1), fair value is determined using stock exchange quoted prices. For other financial
     instruments (Level 2), appropriate valuation techniques, including recent market transaction and other valuation models, have been applied and
     significant inputs include market yield curves and exchange rates. There is no difference between the fair value and carrying value of financial assets
     and liabilities not presented below due to either the short-term nature of these items, or the fact that they are priced at variable interest rates.

                                                                  30 June                                       
Financial instruments carried at fair value in the statement of      2014                                       
financial position:                                               (R'000)   Level 1 (R'000)   Level 2 (R'000)   
Financial liabilities at fair value through profit or loss                                                      
Clover Industries shares forward purchases                          2 323                               2 323   
Liabilities measured at fair value                                  2 323                               2 323   
Fair value hierarchy                                                                                            
                                                                  30 June                                       
Financial instruments carried at fair value in the statement of      2013                                       
financial position:                                               (R'000)   Level 1 (R'000)   Level 2 (R'000)   
Financial assets at fair value through profit or loss                                                           
Foreign exchange contracts                                            132                                 132   
Assets measured at fair value                                         132                                 132   
Financial liabilities at fair value through profit or loss                                                      
Clover Industries shares forward purchases                            250                                 250   
Liabilities measured at fair value                                                                              

There were no transfers between Level 1 and Level 2 fair value measurements during the year ended 30 June 2014 and no transfers into or out of
Level 3.

The fair value of the shares forward purchases was determined by Investec Bank Limited. The fair value was determined by making use of the Black
Scholes model.

9.  Events after the reporting period
    With effect 1 July 2014 Clover SA bought the remaining 48% issued ordinary shares of Lactolab from Taurus Stock Improvement Co-operative Ltd for
    an amount of R5,5 million.

    Other than the above, no significant events occurred subsequent to the year-end.

10. Contingencies
    Clover SA Proprietary Limited is currently party to a contractual dispute, which is subject to arbitration. The outcome of arbitration is expected during
    October 2014. The estimated potential exposure to the company amounts to R24 million, if unsuccessful in arbitration.

11. Going concern
    The Directors are satisfied that the Group is a going concern and has therefore continued to adopt the going concern basis in preparing the
    summarised consolidated financial statements.

12. Preparation of summarised consolidated financial statements
    These summarised consolidated financial statements are extracted from audited information, but are not itself audited. The directors take full
    responsibility for the preparation of the summarised consolidated financial statements and ensured that the financial information has been accurately
    extracted from the underlying audited consolidated annual financial statements, which is available on the Clover website: www.clover.co.za.

    The audited financial statements summarised in this section were prepared under the supervision of Louis Jacques Botha, CA(SA), in his capacity as
    Chief Financial Officer of the Group.

13. Independent audit by auditors
    The annual financial statements from which the summarised consolidated financial statements were derived, have been audited by the Group's
    independent auditors, Ernst & Young Inc. A copy of their unmodified report is available for inspection at the company's registered office.

14. Annual General Meeting
    The Annual General Meeting of the company will be held at 200 Constantia Drive, Constantia Kloof, Roodepoort, 1709 on Friday, 28 November 2014,
    at 10:00 to transact the business as stated in the Annual General Meeting notice which will be distributed to shareholders on 26 September 2014.

    Record date to determine which shareholders are entitled to receive the notice of Annual General Meeting          Friday, 19 September 2014
    Last day to trade in order to be eligible to attend and vote at the Annual General Meeting                         Friday, 14 November 2014
    Record date to determine which shareholders are entitled to attend and vote at the Annual General Meeting          Friday, 21 November 2014
    Forms of proxy for the Annual General Meeting to be lodged by 10:00 on*                                          Thursday, 27 November 2014

    * Any proxies not lodged by this time must be handed to the Chairperson of the Annual General Meeting immediately prior to the Annual General
      Meeting.

DIRECTORATE AND STATUTORY INFORMATION

Directors: Non-executive
WI Büchner (Chairman)
TA Wixley# (Lead Independent)
SF Booysen (Dr)#
JNS du Plessis#
MG Elliott**
JC Hendriks (Dr)***
NP Mageza**
N Mokhesi*#
B Ngonyama*#
NA Smith
PR Griffin****

#     Independent
*     Directors who were appointed on 26 November 2013
**    Directors who have retired/resigned on 26 November 2013
***   Director who has retired/resigned 13 March 2014
****  Director who was appointed on 13 March 2014

Directors: Executive
JH Vorster (Chief Executive)
LJ Botha (Chief Financial Officer)
CP Lerm (Dr)

Company Secretary
J van Heerden

Ordinary share code: CLR       ISIN: ZAE000152377
Registered office: 200 Constantia Drive, Constantia Kloof, 1709

Postal address: PO Box 6161, Weltevredenpark, 1715

Telephone: (011) 471 1400

Registration number: 2003/030429/06
Tax number: 9657/002/71/4

Transfer secretary:
Computershare Investor Services Proprietary Limited
70 Marshall Street, Johannesburg, 2001

Auditors: Ernst & Young Inc.

Bankers: The Absa Group, First National Bank, Investec Bank

Sponsor: Rand Merchant Bank (a division of FirstRand Bank Limited)

Released on 16 September 2014
Date: 16/09/2014 07:05:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE'). 
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
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