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Abridged Annual Financial Report for the year ended 31 March 2015
RECM AND CALIBRE LIMITED
Incorporated in the Republic of South Africa
(Registration number 2009/012403/06)
Preference share code: RACP
ISIN: ZAE000145041
(“RAC” or “the Company”)
ABRIDGED ANNUAL FINANCIAL REPORT
for the year ended
31 March 2015
Shareholders’ letter
To our fellow shareholders
RECM and Calibre (“RAC”) is a long-term investment vehicle that was set up in a very specific way in order to achieve the best
possible outcome for its shareholders – both ordinary and preferred – over time.
Control of the Company vests with three partners – Piet Viljoen, Theunis de Bruyn and Jan van Niekerk. Our investment
landscape is broad, our capital is patient and we do not plan to pay any dividend any time soon. Our main objective is to
increase the Net Asset Value (“NAV”) per share at a high rate over a long period of time.
We understand that some of our fellow shareholders might have time horizons or liquidity preferences that differ from ours.
We have therefore listed the Participating Preference shares of RAC on the JSE to facilitate choice and opportunity for
shareholders to make their own investment decisions. We will provide you with the appropriate information so that you can
make informed decisions around the value of your shares. The price at which you transact is up to you.
During the past financial year, our NAV, for both the ordinary and the Participating Preference shares, grew by 50,5% on a per
share basis. By comparison, the total return generated by the JSE All Share Index (“ALSI”), with dividends included, was
13,8%. Since listing in June 2010, our NAV per share has grown by 85,4%, while the ALSI total return index has grown by
121,8% over that same period. As such, we find ourselves a bit behind our primary goal of outperforming the average listed
company, but we have caught up somewhat after our slow start.
The following chart shows our progression against our benchmark (the JSE All Share Index, including dividends):
Date RAC Index FTSE/JSE ALL SHARE - TOT RETURN IND CPI
30-Jun-10 100.00 100.00 100.00
30-Sep-10 100.00 106.41 100.80
31-Mar-11 102.63 118.18 103.75
30-Sep-11 105.92 114.56 106.59
31-Mar-12 111.20 129.40 110.00
30-Sep-12 112.56 141.84 112.39
31-Mar-13 118.34 159.64 116.48
30-Sep-13 118.52 180.35 119.09
31-Mar-14 123.20 194.97 123.52
30-Sep-14 125.90 206.90 126.14
31-Mar-15 185.40 221.79 128.52
The NAV per share growth of 50,5% over the last year implies an increase of R311 million. The composition of this increase
is as follows:
2015 2014
R R
Interest and dividends 30 720 051 19 234 657
Realised profits on sale of assets 17 149 208 24 818 928
Adjustments to fair value of assets 296 264 098 (4 712 301)
Less: Operating expenses 10 140 930 8 943 652
Less: Tax paid and provided for 22 967 057 6 082 040
Net increase in NAV 311 025 370 24 315 592
There are a number of factors that have held back our NAV growth relative to the market. Some of them are moderating
somewhat, while others remain. These factors are:
• Our valuation policy whilst at fair value tends to be conservative.
Appraising the value of a business is not a straight-forward operation, and does not deliver indisputable single point
solutions. When one values a business, you are expressing an opinion, and in our experience, one should hold such
opinions lightly.
Being an investment entity, our valuation rules are simple: if a company we own is listed, we use the market price. If it
is unlisted, but there is an active secondary market, we will use that price. We might not always agree with valuations
derived from observable transactions, but it is an objective, arm’s length appraisal. Anything we might come up with is
at best an educated guess, and at worst a subjective, emotional stab in the dark.
For the shares in some of our businesses, there is no secondary market, yet accounting rules now force us to come up
with exactly such a stab. At RAC, we will account for our activities as accurately and conservatively as we can. In some
instances, our estimate of fair value does not deviate much from the price we were willing to pay to initially acquire the
business. However, some of our investments have shown such strong earnings growth over time, that we have had no
choice but to reflect an increased value.
As a result, the first point to remember when judging the growth of RAC’s NAV against that of the stock market is that
well over half of our NAV (i.e. the unlisted investments) are held within a valuation range that tends to be consistently
conservative.
• Valuations for listed companies are arguably less conservative.
Valuations in the stock market are arguably less conservative, and have become even less so over the past year. As we
pointed out last year, market valuations today are influenced by two stories. One goes that you can’t pay a high enough
price for a good quality business that has a growing dividend stream, mainly on account of the low level of interest
rates. The second story goes that in a world where growth is scarce, you can’t pay enough for it.
In our opinion, story stocks have driven market valuations significantly above levels which could be considered
conservative, to levels where the margin of safety is unsatisfactory.
Therefore, when judging our NAV growth against the growth of the market, it is important to bear in mind that the market
has possibly outstripped its underlying fundamentals. We have no doubt this will be, in due course, corrected – a
correction which will have significantly less effect on the NAV of RAC. And possibly present us with some compelling
investment opportunities.
• Our NAV is calculated after all taxes have been accounted for.
When an investment is successful that means it is worth – hopefully a lot – more than you paid for it. But it also means
that you owe capital gains tax to the government. Like death, taxes are inevitable – unless you are a really poor investor!
Any valuation exercise worth more than the paper it is written on should include this very real liability. Our valuations for
the purpose of calculating NAV very definitely includes the amount we have set aside for deferred tax liabilities. The
returns from investing in the index are also taxable, but not included in the calculation, as different investors have different
tax rates.
Last year we said we found investing in unlisted companies increasingly appealing. The reasons are simple – when dealing
with like-minded partners in the underlying businesses, we have better access to information, transactions are conducted at
more realistic valuations, and the management teams are not unduly influenced by day-to-day share price movements. We
have thus followed our own advice and over the last year have been actively moving away from investing in listed companies.
Today, 70% of our balance sheet is invested in private business, where there is no secondary market activity, either over the
counter or on formal exchanges.
As a public company, we comply with IFRS accounting standards. The abridged accounts for RAC are set out on pages 8 to
14 of this report. We understand the need for uniformity in financial reporting. But despite the best intentions of those that
compiled these standards, we find that sometimes the picture is less clear once it has been IFRS’ed. As they say – the road
to hell is paved with good intentions! The following describes some of the difficulties we have encountered!
RAC was originally set up as a single company that housed all of our investments. Some were held directly and others –
mostly our listed investments – were held through a dedicated Unit Trust. As the underlying investments have changed from
being primarily listed shares to primarily unlisted assets, the Unit Trust has been removed.
During the past year, we established a 100% subsidiary called RAC Investment Holdings (Pty) Ltd (“RIH”). All of our current
investments will be transferred to this company, leaving RAC, the listed entity as a holding company. At year-end, though, this
process had not been completed. The only investment that was held by RIH at year-end was Goldrush. RIH was funded
through a loan account, which confuses some of the financial results for RAC.
In order to sensibly address this issue, we include additional information to elaborate on the accounts and activities of RAC.
This information is presented in a slightly different way and should shed further light on our activities and the way we think.
OUR BUSINESS AND INTRINSIC NET ASSET VALUE
% Book Directors’ % of
Owner- value value(1) net asset
Investment Note ship Rm Rm value
Goldrush 2 34,5 114,1 313 30,3
Mining and Engineering 3 150,5 239,1 23,1
Transhex 25,0 94,2 84,2 8,1
West Coast Resources 27,2 38,4 122,2 11,8
ELB Group 2,2 17,9 32,7 3,2
Retail 4 103,4 190 18,4
Fledge Holdings
Safari & Outdoor 27,0
Food and Beverage 5 74,6 102,8 10,6
Sovereign Food 11,3 38,7 71,4 7,4
KWV 4,9 31,1 21,7 2,2
KLK Landbou 5,6 4,8 9,7 1,0
Other long-term investments 6 55,7 107,8 11,2
The American Homes 1,3 28,6 41,2 4,3
Conduit Capital 7,0 12,4 40,1 4,2
Excellerate Holdings 5,5 14,7 26,5 2,7
Held-for-sale investments 7 27,1 12,7 1,2
Total investments 525,4 965,4 93,4
Cash 71,3 6,6
Net asset value 1 036,7
Liabilities 109,8
Intrinsic net asset value 926,9
Intrinsic net asset value per
ordinary and preference share 18,54
Notes:
1. As mentioned above, IFRS requires RAC, as an investment entity, to place a fair value on all its assets. Where possible,
we used market prices, either listed or over the counter. Where these were not available, we used our own estimate of fair
value. Due to the uncertainty around valuation, our best estimates of fair value generally tend to be conservative.
2. During the past year, RAC concluded transactions that increased our ownership to an effective 34,5% of Goldrush, the
second largest operator of Limited Payout Machines (LPMs) and Bingo games in the country. Goldrush is still very early
in its growth phase. Over the past year, revenue grew by over 30% and operating profits more than doubled. The company
is expanding into wider areas of gaming and has now also expanded into Africa, having been awarded a casino license
and is developing an online sports betting business. Its retail sports betting outlets are already operating both in South
Africa and in other African countries with LPMs. The group has been awarded further Bingo, LPM and sports betting
licenses during the year that are in the process of being rolled out. We have agreements in place which will allow us to
increase our shareholding to around 50% over time. Jan van Niekerk serves on the board.
The valuation of Goldrush is based on an earnings multiple for the existing operating business, plus an acknowledgement
of the market value of the non-operational licenses and an adjustment for the balance sheet structure.
3. Over the past twelve months we have increased our ownership of Transhex to just over 25%. We know Transhex well, as
Theunis has served on the board for a number of years. We have a high regard for the management team, as they have
produced commendable results over the past five years. Make no mistake, Transhex operates in a tough industry, and its
own situation is not easy – but in Llewellyn Delport they operate under the stewardship of one of the best diamond miners
in town, and will no doubt continue to make progress.
The Transhex acquisition of Namakwa Diamonds was finalised during the period under review. Subsequent to the
acquisition, it was renamed West Coast Resources (“WCR”). RAC owns 27,2% of WCR while Transhex owns 40%, while
the latter has a management contract to manage the mine. We believe the mine has strong prospects. The area was
comprehensively surveyed by its previous owner De Beers, and its diamond reserves are well documented. Processing
of tailings dumps has started and mining will commence later this year. Positive cash flows are expected within 12 months.
Transhex has published its valuation of WCR on its website, while we have valued WCR at a combination of the capital
we provided, plus RAC’s share of the net assets owned by WCR on the date of acquisition.
RAC owns 2,2% in ELB Group, a well-managed engineering business. During the past 12 months we (marginally) increased
our stake by tendering our holding of B&W Instrumentation shares into the scheme of arrangement whereby ELB acquired
the entire shareholding of B&W. The ELB group has a fortress balance sheet and conservative accounting, both necessary
but not sufficient for success in a cyclical industry. To increase the chance of success you also need a good management
team, which ELB has in spades. Theunis de Bruyn serves on their board.
4. RAC owns 27% of Safari and Outdoor (“S&O”). This business consists of three stores, in Stellenbosch, Pretoria and
Rivonia. S&O is the premier retailer of hunting and outdoor equipment in South Africa. Revenue and EBIT have grown by
over 50% for the financial year ended February 2015. The growth was driven primarily by the opening of the new store in
Rivonia, but same store sales were also up. Theunis de Bruyn serves on their board.
S&O has been valued at the same earnings multiple at which the business was purchased. The increase in value indicates
the growth in underlying profitability.
We own an effective indirect 2,5% shareholding in Dischem. This is held through a leveraged structure, Fledge Holdings.
Dischem is privately owned and is a leading South African pharmaceutical retailer. The business has experienced solid
growth, through an expanding footprint and market share gains. The change in value for the year reflects the increase in
the underlying profitability of Dischem, plus the benefit of judicial leverage in the structure. No change was applied to the
valuation multiples.
5. RAC owns 11,3% of Sovereign Foods, a listed poultry producer in the Eastern Cape area. Management is doing a good
job in running the business efficiently and growing its product range. Earnings have been under pressure, but we think
that Sovereign will be a major beneficiary of the tough times the industry endured over the past few years. The weaker
competitors have gone out of business or have been acquired; the irrational and continuous industry capacity expansion
has been stymied and the weak rand is making imports less competitive. We expect strong earnings from Sovereign over
the next few years; earnings for which one is not paying very much at all at the current valuation. We have used the current
market price to value this investment.
RAC owns 4,9% of KWV, an unlisted wine and spirits producer. KWV is priced at around a third of its book value – a book
value which is slowly growing. Last year, KWV returned to marginal profitability, and if management can successfully add
product and improve sales execution both locally and globally, it can earn substantially more. We don’t know if this will
happen, but we have a high regard for the management team – and if the prizes their products are winning are any
indication, the odds favour success. KWV has been named as one of the World’s Top 50 Most Admired Wine Brands for
four years running – and is the only South African wine brand to attain this global accolade. Their brandies are regularly
voted best in the world. Over the past year, we have continued to add to our holding. We have valued this investment at
its over-the-counter trading price.
We have a 5,6% investment in KLK Landbou, an unlisted farming co-op headquartered in Upington. Their main lines of
business include meat processing, fuel sales and motor dealerships. It is a well-run business, and profitability has grown
over the past few years. Two years ago RAC tendered an offer to purchase an influential stake in the business.
Unfortunately, we only ended up with our current holding, and were not able to progress further. However, we are very
happy with this passive minority investment, and look forward to further supporting the management team in their
endeavours. We have valued this investment at its over-the-counter trading price.
6. Our other long-term investments are a diverse group.
RAC owns 7% of Conduit Capital, a specialist insurance business. There have been some recent developments on the
shareholder front, with the net result that the CEO, Jason Druian left the group. His position has been filled – in an acting
capacity – by the previous CFO, Lourens Louw. Sean Riskowitz, a large shareholder, who led the changes backed by a
majority of shareholders, has taken the position of Chief Investment Officer. Although Jason had done a good job of
developing Conduit from a small investment company 6 years ago, Sean has more ambitious plans for the business. In
short, he intends to place more emphasis on growing the insurance side of the business, and also on simplifying the
investment operations. Sean has reconstituted the board, and filled many of the seats with people who have insurance
expertise. We support him and his team in these endeavours.
We own 5,5% of Excellerate Holdings, an unlisted industrial services company. Despite the tough economic environment,
revenue grew by 16%, and net profits by almost 50%. This management team punches way above their weight, and we
can’t wait to see what they come up with over the next few years. Over the past year, our interest in the business has
increased due to the company buying back 10% of its shares in issue.
At year-end we also owned 1,3% of The American Home (TAH), a single family residential Real Estate Investment Trust
(“REIT”), based in Atlanta, Georgia. Subsequent to year-end, TAH was sold to a listed REIT for an amount slightly in excess
of our cost price. Given the travails of this business (well documented in last year’s report) we are happy with this outcome.
The one thing that our investment in TAH proved – as if it still needs proving – is that even if a business does less well than
you anticipate, you can still earn a decent return if you pay a low enough price, and it is run by honest people. And those
two we got right here.
Just before year-end, RAC acquired 32,4m shares in Sentula on the open market, and added to this by buying another
76,6m just after year-end.
7. Our held-for-sale investments have reduced even further over the past year.
We completely exited from some holdings where our investment was too small to make a difference, or for various reasons,
we couldn’t see an avenue open to acquire a meaningful stake. We prefer to focus our resources in places where we can
make a difference. In some other cases we made mistakes in evaluating the economics of the business or the quality of
management.
As reported last year, when one exits from unwanted positions, it generally happens that the good ones go first, and the
bad ones tend to linger for much longer than you would want them to. Much like those boring dinner guests you should
never have invited – and never will again. We are still part owner of three companies in this category and, as is always the
case, we ended up keeping the worst for last. Their valuations relative to cost show this clearly.
8. During the year, RAC invested a net amount of R44m as some of our newer investments were funded from realisations of
other assets. This left us with cash of R71m at year-end. Some of this cash is held to fund further investments in our
existing assets, which means that we have now fully invested the original capital raised for RAC.
RAC adjusted Statement of Cash Flows
2015 2014
R R
Aggregate cash and cash equivalents at beginning of the year 98 733 652 152 150 888
Plus interest and dividends received 34 149 015 16 980 798
Less: Cash operating expenses (9 637 731) (8 841 721)
Less: Cash tax paid (7 650 927) (4 205 398)
Less: Cash applied to investments (44 273 050) (57 350 915)
Aggregate cash and cash equivalents at end of the year 71 320 959 98 733 652
We are raising further capital for investment through a R150 million funding arrangement from ABSA, which is in the
process of being concluded subsequent to year-end.
Due to the competitive environment in which our private businesses operate, the management teams of the businesses
consider it unwise to disclose much financial information. We share their view. Over time, this situation should resolve itself,
and we look forward to sharing more detailed financial information with you in future.
RAC is now fully invested for the first time since listing. A year ago, we pointed out that we were in a position where the heavy
lifting would be done by our investee companies, which would be reflected in a higher growth rate of our NAV per share. This
has turned out to be the case. We have no current plans to sell any of our existing businesses, except for the few remaining
ones in our held-for-sale category. We look forward to doing everything we can to assist these businesses in compounding
their success in the years to come.
In line with this, we firmly believe that the intrinsic value of RAC is increasing at a much faster pace than the accounting NAV,
and have again added significantly to our personal holding of preference shares. In total, we acquired 800 000 preference
shares, for a consideration of R10m. The three of us continue to own all the outstanding ordinary shares which represent a
10% economic interest in the business. We now own 6,2% of the preference shares. None of us have ever received free or
discounted shares, and we have no share option scheme in place. Every share we own has been bought with our own money.
We believe this is true skin in the game, and aligns us properly with our fellow shareholders
During the course of the year, we said good-bye to two of our non-executive directors, Gerrit “Boel” Pretorius and Vernon
Davis. They contributed much to our Board discussions, and had some very good investment insights and ideas. For this we
thank them. Given the unique structure of RAC, our non-executive directors really have to like what they do to take on the
responsibility. In this regard we have no doubt our incoming non-executive directors, Trent Rossini and Zanele Matlala, are
exceptionally well qualified.
Today, RAC finds itself in a good position, with a portfolio of attractive assets and available capital for further investments. As
our first five years of existence has shown – finding good companies with good management at good prices is a patient but
worthwhile endeavour.
In this regard, please bear in mind our investment strategy. If you are involved in any business that meets these criteria and
that needs capital or a responsible owner with a long-term orientation, please give one of us a call. We can’t promise you a
deal, but we can promise you a quick answer.
SHAREHOLDERS’ MEETING
We will hold our annual meeting for all shareholders, immediately following the conclusion of the annual general meeting. This
meeting is scheduled to take place on 20 August 2015 at the Southern Sun hotel in Newlands, Cape Town, at 11:00. At this
meeting, all three of us will be available to discuss our investment operations, and also to answer as many questions as you
like. There is an invitation enclosed with this annual report, and we would appreciate it if you would let us know if you will be
attending.
Piet Viljoen Theunis de Bruyn Jan van Niekerk
Chairman
Cape Town
1 June 2015
Statement of financial position at 31 March 2015
2015 2014
Notes R R
ASSETS
Non-current assets 883 595 786 525 909 430
Investments 4 714 253 898 505 987 018
Loans and other receivables 169 341 888 19 922 412
Current assets 74 418 456 105 919 966
Investments 4 67 971 006 98 631 775
Loans and other receivables 3 097 497 7 186 314
Cash and cash equivalents 3 349 953 101 877
Total assets 958 014 242 631 829 396
EQUITY AND LIABILITIES
Equity 926 973 445 615 948 075
Share capital – ordinary shareholders 50 000 000 50 000 000
Share capital – preference shareholders 450 000 000 450 000 000
Reserves 79 950 251 55 334 324
Retained income 347 023 194 60 613 751
Liabilities
Non-current liabilities 29 196 620 12 424 971
Deferred tax 29 196 620 12 424 971
Current liabilities 1 844 177 3 456 350
Trade and other payables 1 704 985 1 861 639
Current tax payable 139 192 1 594 711
Total equity and liabilities 958 014 242 631 829 396
Net asset value
Net asset value attributable to ordinary shareholders 92 697 345 61 594 807
Net asset value attributable to preference shareholders 834 276 101 554 353 268
Net asset value per ordinary share (cents) 1 854 1 232
Net asset value per preference share (cents) 1 854 1 232
Statement of comprehensive income for the year ended 31 March 2015
2015 2014
Notes R R
Revenue 30 720 051 19 234 657
Operating expenses (10 140 930) (8 943 652)
Operating profit 20 579 121 10 291 005
Other income 17 149 208 24 818 928
Fair value gains on subsidiaries and associates 287 223 959 –
Impairments recycled through profit and loss (21 225 692) (6 143 738)
Profit before taxation 303 726 596 28 966 195
Taxation (17 317 153) (5 814 995)
Profit for the year 286 409 443 23 151 200
Other comprehensive income:
Items that may be reclassified subsequently to profit or loss:
Net gain on available-for-sale financial instruments 26 189 347 20 106 627
Realised gain on sale of available-for-sale investments recycled
to profit or loss (17 149 208) (24 818 928)
Impairment loss reclassified 21 225 692 6 143 738
Taxation related to components of other comprehensive income (5 649 904) (267 045)
Other comprehensive income for the year net of taxation 24 615 927 1 164 392
Total comprehensive income 311 025 370 24 315 592
Earnings and headline earnings per share
Per share information (ordinary and preference) Restated
Basic and diluted earnings per share (cents) 5 573 46
Basic and diluted headline earnings per share (cents) 5 579 16
Statement of changes in equity for the year ended 31 March 2015
Fair value
adjustment
assets Total
Preference Ordinary available- share-
share share for-sale Retained holders’
capital capital reserve income equity
R R R R R
Balance at 31 March 2013 450 000 000 50 000 000 54 169 932 37 462 551 591 632 483
Profit for the year – – – 23 151 200 23 151 200
Other comprehensive income – – 1 164 392 – 1 164 392
Balance at 31 March 2014 450 000 000 50 000 000 55 334 324 60 613 751 615 948 075
Balance at 31 March 2014 450 000 000 50 000 000 55 334 324 60 613 751 615 948 075
Profit for the year – – – 286 409 443 286 409 443
Other comprehensive income – – 24 615 927 – 24 615 927
Balance at 31 March 2015 450 000 000 50 000 000 79 950 251 347 023 194 926 973 445
Statement of cash flows for the year ended 31 March 2015
2015 2014
R R
Cash flows from operating activities
Cash utilised in operations (9 637 731) (8 841 721)
Interest income 13 125 860 13 691 554
Dividends received 21 023 155 3 289 244
Tax paid (7 650 927) (4 205 398)
Net cash inflow from operating activities 16 860 357 3 933 679
Cash flows from investing activities
Loans to investees (149 419 476) (19 922 412)
Purchase of other financial investments (81 758 828) (161 150 403)
Proceeds on disposal of financial investments 217 566 023 177 020 472
Net cash outflow from investing activities (13 612 281) (4 052 343)
Net movement in cash and cash equivalents 3 248 076 (118 664)
Cash and cash equivalents at beginning of the year 101 877 220 541
Cash and cash equivalents at the end of year 3 349 953 101 877
Selected notes to the annual financial statements
1. BASIS OF PREPARATION
The summary financial statements are prepared in accordance with the requirements of the JSE Limited Listings
Requirements for abridged reports, and the requirements of the Companies Act applicable to summary financial
statements. The Listings Requirements require abridged reports to be prepared in accordance with the framework
concepts and the measurement and recognition requirements of International Financial Reporting Standards (IFRS), the
SAICA Financial Reporting Guides as issued by the Accounting Practices Committee and Financial Pronouncements as
issued by the Financial Reporting Standards Council, and to also, as a minimum, contain the information required by IAS
34 Interim Financial Reporting. The accounting policies applied in the preparation of the financial statements, from which
the summary financial statements were derived, are in terms of International Financial Reporting Standards and are
consistent with the accounting policies applied in the preparation of the previous annual financial statements, other than
as more fully set out below.
IFRS 8 – Operating Segments has not been applied. Operating decisions of the Company are not made based on
Segments, but rather by looking at each investment individually.
The summary financial statements do not contain all the disclosures required by International Financial Reporting Standards
and the requirements of the Companies Act of South Africa as applicable to annual financial statements.
Reading the summary financial statements, therefore, is not a substitute for reading the audited financial statements of
RECM and Calibre Limited.
2. SIGNIFICANT ACCOUNTING POLICIES
Assessment as investment entity
Entities that meet the definition of an investment entity within IFRS 10 are required to measure their subsidiaries at fair
value rather than consolidate them. The criteria which define an investment entity are, as follows:
• An entity that obtains funds from one or more investors for the purpose of providing those investors with investment
services;
• An entity that commits to its investors that its business purpose is to invest funds solely for returns from capital
appreciation, investment income or both;
• An entity that measures and evaluates the performance of substantially all of its investments on a fair value basis
Based on the above, the Company is considered to meet all three conditions of the definition and, hence, qualifies as an
investment entity.
Investment entities with interests in associates and joint ventures may elect to account for those investments at fair value
provided they meet the criteria of IAS 28 and IAS 39. Such election must be applied consistently as a matter of accounting
policy choice. The Company reports to its investors via annual and semi-annual results and to its management, via internal
management reports, on a fair value basis. All investments are reported at fair value to the extent allowed by IFRS in the
Company’s annual reports.
The Board has also concluded that the Company meets the additional characteristics of an investment entity, in that it
has more than one investment; the investments are predominantly in the form of equities and similar securities; and its
investors are not related parties. The Board has concluded that the Company meets the definition of an investment entity.
These conclusions will be reassessed on an annual basis, if any of these criteria or characteristics change.
3. AUDIT OPINION
This abridged report is extracted from audited information, but is not itself audited. The annual financial statements were
audited by Ernst & Young Inc., who expressed an unmodified opinion thereon. The audited annual financial statements
and the auditor’s report thereon are available for inspection at the company’s registered office. The directors take full
responsibility for the preparation of the abridged report and that the financial information has been correctly extracted
from the underlying annual financial statements.
The audited financial statements, which were prepared under the supervision of the FD, Jan van Niekerk, are available for
inspection at the company’s registered office and will be included in the Integrated Annual Report 2015 to be posted to
stakeholders on or about 1 June 2015.
2015 2014
R R
4. INVESTMENTS
Fair value hierarchy of financial assets
Level 1
Class 1 – Listed shares – Quoted – available-for-sale 241 132 347 139 546 424
Class 2 – Unlisted shares – Quoted – available-for-sale 31 390 404 33 393 135
272 522 751 172 939 559
Level 2
Class 3 – Unit trusts 34 956 206 275 624 310
Listed investments held by unit trust – available-for-sale – 72 062 485
Cash held by unit trust – available-for-sale 34 956 206 203 561 825
Class 4 – Call accounts – available-for-sale 33 014 800 25 360 823
67 971 006 300 985 133
Level 3
Class 5 – Unlisted shares – Unquoted – available-for-sale 70 999 261 50 818 664
Class 5 – Unlisted shares – Unquoted – fair value through profit or loss 370 731 886 79 875 437
441 731 147 130 694 101
Total financial assets at fair value 782 224 904 604 618 793
Non-current assets 714 253 898 505 987 018
Financial assets – available-for-sale 343 522 012 426 111 581
Financial assets – fair value through profit or loss 370 731 886 79 875 437
Current assets
Financial assets – available-for-sale 67 971 006 98 631 775
Total investments 782 224 904 604 618 793
Management classifies cash as current and other investments
as non-current.
Level 3 reconciliation
Opening balance 130 694 101 46 238 454
Purchases 6 632 549 79 875 437
Sales – –
Gains on investments recognised in other comprehensive income 17 180 537 4 580 210
Gains on investments recognised in profit and loss 287 223 960 –
Closing balance 441 731 147 130 694 101
In the prior year, investments to the value of R79 875 437 were incorrectly disclosed as part of available-for-sale
investments. The prior period disclosure has been amended to correctly disclose the investments as at fair value through
profit or loss. This had no effect on the statement of financial position or statement of comprehensive income as no fair
value movements had been recognised due to the fact that the investments were purchased close to the end of the
prior year.
Level 1
Class 1 available-for-sale financial assets are valued at the listed price per the exchange on which they trade.
Class 2 available-for-sale financial assets are valued at the quoted price based on the latest over the counter trades.
Level 2
Class 3 available-for-sale financial assets are valued at the net asset value of the unit trust.
Class 4 available-for-sale financial assets are valued by taking the following market observable data into account and
applying them to the holdings:
• credit spread of the institution at which the funds are held
• any difference in the interest rate earned and what is available in the market
Level 3
Class 5 unlisted unquoted shares are valued using a number of valuation techniques based on the following unobservable
market data as relevant to each investment:
• Net profit of investee • Price/Earnings ratio
• Equity and net debt of investee • Expected cash flows
• Return on capital • Earnings multiple
Management uses the above information in multiple valuation techniques as well as profitability valuation techniques by
comparing the investee information to similar type entities in the listed market. The nature of the fair value calculations
means that the calculated fair values could potentially range greatly and are sensitive to indirect and direct quantifiable
and unquantifiable inputs. Factors that we took into account in all valuations include the current market conditions, the
invested market segment and interest rate certainty. The market for these instruments often has significant barriers to
entry, making the comparison pool of similar entities very shallow. Specifically, the retail pharmaceutical industry and
hunting equipment industry have few market entrants with little reliable comparative data. Like all our investments, we
plan on seeing the value of the business grow over a number of years to realize their true potential. Where we have influence
over our investee companies we plan to play an active role in the long term strategy of the company, ensuring that our
interests are aligned.
2015 2014
R R
5. EARNINGS AND HEADLINE EARNINGS PER SHARE
Earnings and headline earnings per shares are based on the profit
attributable to ordinary and preference shareholders in issue during
the year.
Number of shares in issue
Ordinary shares 5 000 000 5 000 000
Preference shares 45 000 000 45 000 000
Earnings
Net profit after tax 286 409 443 23 151 200
Adjusted to headline earnings as follows:
Profit on asset disposal (17 149 208) (24 818 928)
Impairment 21 225 692 6 143 738
Tax adjustment (760 944) 3 486 210
Headline earnings 289 724 983 7 962 220
Restated
Basic and diluted earnings per ordinary and preference shares (cents) 573 46
Headline earnings per ordinary and preference shares (cents) 579 16
The prior year earnings per share figures were amended to include both preference and ordinary shares. In the prior
year, earnings per share was calculated based on the number of ordinary shares of 5 000 000. Earnings per share should
have been calculated on the total number of ordinary and preference shares (i.e. 50 000 000 million shares) as both
classes of share have an equal right to participate in the residual interest and profits of the Company. As a result, the
earnings per share for the year ended 31 March 2014 changed from 463 cents per share to 46 cents per share for basic
and diluted earnings per share and from 159 cents per share to 16 cents per share for headline earnings per share.
6. SUBSEQUENT EVENTS
The directors are not aware of any matter or circumstance arising since the end of the financial year.
1 June 2015
Cape Town
Sponsor
Questco (Pty) Ltd
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