Directors’ report

for the year ended 30 June 2016

NATURE OF BUSINESS

Assore Limited was incorporated in South Africa in 1950 and is a mining holding company engaged principally in ventures involving base minerals and metals. The company’s shares are listed on the JSE Limited (the JSE) under “Assore” in the general mining sector and its ultimate holding company is Oresteel Investments Proprietary Limited. Assore’s principal investment is a 50% (2015: 50%) interest in Assmang Proprietary Limited (Assmang), which it controls jointly with African Rainbow Minerals Limited (ARM), which is also listed on the JSE. Assmang mines iron and manganese ores, and produces manganese and chrome alloys. In addition, the group mines chrome ore at Dwarsrivier Chrome Mine (refer note 36 to the consolidated financial statements) located near Steelpoort in the Lydenburg district. It also mines Wonderstone (a type of pyrophyllite), a portion of which is beneficiated to produce high-precision components, and wear and acid-resistant tiles, which are installed in various mining and industrial applications. The group, through its wholly owned subsidiary, Ore & Metal Company Limited, is responsible for marketing all products produced by its joint venture and subsidiary companies, the bulk of which is exported and the remainder either used in the group’s beneficiation processes or sold locally. Details of the group’s activities are set out, by activity, in the operational review and commentary.

FINANCIAL RESULTS

The financial results of the group for the year ended 30 June 2016 are summarised below:

Year ended 30 June
2016  2015 
R’000  R’000 
Turnover 2 027 813  2 526 096 
Profit/(loss) before joint-venture entity and foreign listed associate 223 927  (25 501)
Share of profit from joint-venture entity, after taxation 1 281 000  1 317 138 
Share of loss in foreign listed associate (7 286) (1 197)
Profit for the year 1 497 641  1 290 440 
Add back: Loss attributable to non-controlling shareholders 41 722  112 931 
Profit attributable to the shareholders of the holding company 1 539 363  1 403 371 
Dividends relating to the group’s activities for the year under review (722 449) (619 242)
Interim dividend No 118 of 200 cents (2015: 300 cents) per share – declared on 18 February 2016  279 214  418 821 
Final dividend No 119 of 500 cents (2015: 300 cents) per share – declared on 6 September 2016  698 035  418 821 
Less: Dividends attributable to treasury shares (254 800) (218 400)
Profit for the year after dividends 816 914  784 129 
The attributable interest of the company in the aggregate net profit and losses after taxation of subsidiary companies was as follows:
– Profits 405 361  401 219 
– Losses (181 434) (426 720)

 

CONTROL OVER FINANCIAL REPORTING

The directors of the company are responsible for the preparation and fair presentation of the financial statements and related financial information included in this report. The external auditors, Ernst & Young Inc., whose report is set out here, are responsible for expressing an opinion on the financial statements based on their audit.

The financial statements included in this report are based on judgements and estimates which are intended to be both reasonable and prudent and have been prepared by management in accordance with International Financial Reporting Standards (IFRS). The accounting policies are consistent with those of the previous year.

The financial statements have been prepared on a going concern basis and the directors have no reason to believe that the group will not be a going concern in the year ahead. With regard to the valuation of assets, the directors are of the opinion that the carrying amount of all assets included in the statement of financial position are appropriately valued.

In order to discharge their responsibilities with regard to the financial statements, the directors ensure, through the group’s appointed Audit and Risk Committee, that management maintains adequate accounting records and systems of internal control which are developed and reviewed for effectiveness on an ongoing basis. The systems of internal control are established organisational structures, policies and procedures, including budgeting and forecasting disciplines and are managed and controlled by suitably trained personnel who are organised in structures with appropriate segregation of authorities and duties. While internal controls are intended to adequately safeguard the group’s assets and prevent and detect material misstatements and loss, these systems can only be expected to provide reasonable, and not absolute, assurance as to the reliability of the financial information included in this report. The internal financial controls were assessed by the group’s outsourced internal audit function and were found to be satisfactory.

JOINT-VENTURE ENTITY

Assore holds a 50% interest in Assmang, which it controls jointly with ARM in terms of a long-standing shareholders’ agreement. In accordance with IFRS, Assmang is accounted for on the equity accounting basis, and Assore has disclosed its share of Assmang’s profit as “share of profit from joint-venture entity, after taxation”. Set out below are the financial statements of Assmang in abridged format, which combine its continuing and discontinued operations. The “Assets held for distribution” in Assmang refers to the sale of Dwarsrivier (refer “Acquisition of remaining 50% of Dwarsrivier” on the following page and note 36 to the consolidated financial statements).

ABRIDGED CONSOLIDATED COMPREHENSIVE INCOME STATEMENT OF ASSMANG

Year ended 30 June
2016  2015 
R’000  R’000 
Turnover 20 654 063  21 121 497 
Profit before taxation 3 649 115  3 703 280 
Taxation (993 758) (1 044 057)
Earnings 2 655 357  2 659 223 
Other comprehensive income 206 442  – 
Dividends declared during the year (1 750 000) (3 000 000)
Total comprehensive income/(loss) for the year after dividends paid 1 111 799  (340 777)

 

ABRIDGED CONSOLIDATED STATEMENT OF FINANCIAL POSITION OF ASSMANG

At 30 June
2016  2015*
R’000  R’000 
Assets
Non-current assets 24 918 898  23 728 211 
Current assets
Inventories 3 712 093  4 448 860 
Trade and other receivables 3 557 556  3 532 558 
Financial assets 71 450  85 017 
Cash resources 4 798 476  4 942 638 
Assets held-for-sale 1 843 269  1 585 709 
Total assets 38 901 742  38 322 993 
Equity and liabilities
Equity 30 041 495  28 929 696 
Non-current liabilities
Deferred taxation liability 5 097 914  5 035 202 
Long-term provisions 802 695  959 828 
Trade and other payables 96 381  92 344 
Current liabilities
Trade and other payables 1 320 541  1 857 782 
Short-term provisions 698 627  608 367 
Taxation 213 125  369 778 
Liabilities directly associated with the assets held-for-sale 630 964  469 996 
Total liabilities 8 860 247  9 393 297 
Total equity and liabilities 38 901 742  38 322 993 
Capital expenditure 2 974 678  3 836 808 
Capital commitments 3 521 805  5 035 856 

 

ACQUISITION OF REMAINING 50% OF DWARSRIVIER

On 24 June 2015, the group announced the acquisition from ARM of its 50% indirect share of Dwarsrivier Chrome Mine (held in Assmang) for a consideration of R450 million, which was completed on 29 July 2016. The purchase consideration, inclusive of interest accrued of R34,9 million has been disclosed in the consolidated statement of financial position as at 30 June 2016 as “Restricted cash”. Refer notes 8 and 36 to the consolidated financial statements.

DIRECTORS’ EMOLUMENTS

Other
Directors’ Contri- fringe
fees butions benefits
(refer Bonuses to pension (refer
note 1) Salaries (refer note 2) scheme note 3) Total
R’000  R’000  R’000  R’000  R’000  R’000 
2016 
Executive
Desmond Sacco (Chairman) 110  4 264  355  –  289  5 018 
CJ Cory (Chief Executive Officer) 96  5 246  10 405  1 329  838  17 914 
PE Sacco (Group Marketing Director – appointed 1 March 2016) 56  2 117  5 378  536  489  8 576 
AD Stalker (resigned 29 February 2016) 67  1 848  6 742  444  5 868  14 969 
BH van Aswegen (Group Operations and Growth Director) 96  2 674  7 098  677  604  11 149 
Non-executive
EM Southey (Deputy Chairman and lead independent director) 650  650 
TN Mgoduso 325  325 
S Mhlarhi 350  350 
IN Mkhari (resigned 26 May 2016) 226  226 
WF Urmson 550  550 
2 526  16 149  29 978  2 986  8 088  59 727 
2015 
Executive
Desmond Sacco (Chairman) 110  4 264  355  –  274  5 003 
CJ Cory (Chief Executive Officer) 96  4 950  14 225  1 249  368  20 888 
AD Stalker (Group Marketing Director) 96  2 615  9 703  650  308  13 372 
BH van Aswegen (Group Technical Director) 96  2 522  9 643  636  354  13 251 
Non-executive
EM Southey (Deputy Chairman and lead independent director) 535  535 
RJ Carpenter (resigned 15 June 2015) 205  205 
TN Mgoduso (appointed 2 February 2015) 104  104 
S Mhlarhi 295  295 
IN Mkhari (appointed 2 February 2015) 104  104 
WF Urmson 455  455 
Alternate
PE Sacco 36  1 862  7 213  470  267  9 848 
2 132  16 213  41 139  3 005  1 571  64 060 
Notes:
1. Directors’ fees include fees received from Assmang.
2. Due to the shareholding structure the company is unable to offer directors remuneration by way of share incentive or option arrangements, and bonuses are determined based on the group’s results for the year and the achievement of its long-term objectives. Directors owning shares in the group do so in their own right and disclosure thereof is made in this report.
3. Other fringe benefits include medical aid contributions, car scheme allowances, life insurance contributions, group life contributions, use of assets and unemployment insurance fund contributions. In 2016, other fringe benefits paid to Mr Stalker included an ex gratia payment made on his retirement after 21 years of service in the group.

For more detail relating to the group’s remuneration policy and structure, refer “Remuneration“.

DIRECTORS’ INTERESTS IN SHARES OF THE COMPANY

Interests of the directors in the ordinary shares of the company at 30 June 2016 were as follows:

Direct Indirect Direct Indirect
beneficial beneficial beneficial beneficial
number of number of number of number of
shares shares shares shares
2016  2016  2015  2015 
Executive directors
Desmond Sacco 960 000  32 430 489  960 000  32 430 489 
CJ Cory 50 000  –  50 000  – 
PE Sacco (2015: alternate director) 227 580  –  227 580  – 
AD Stalker (resigned 29 February 2016) –  – 
BH van Aswegen 4 505  –  4 505  – 
Non-executive directors
EM Southey –  –  –  – 
TN Mgoduso –  –  –  – 
S Mhlarhi –  –  –  – 
IN Mkhari (resigned 26 May 2016) –  – 
WF Urmson –  –  –  – 
1 242 085  32 430 489  1 242 085  32 430 489 

 

DIRECTORATE AND SECRETARY

The names of the directors, at the date of this report, and details of the Company Secretary, including its business and postal addresses, are set out on the inside back cover of this report.

Subsequent to the date of the previous integrated annual report and up to the date of this report the following changes were made to the Assore board:
29 February 2016 – AD Stalker resigned as Group Marketing Director
1 March 2016 – PE Sacco was appointed as Group Marketing Director
26 May 2016 – IN Mkhari resigned as a non-executive director

In terms of the Memorandum of Incorporation (MoI), Messrs TN Mgoduso and S Mhlarhi are required to retire by rotation at the forthcoming Annual General Meeting (AGM). The aforementioned directors, being eligible, offer themselves for re-election and a brief curriculum vitae for each of these directors is included in the notice of the AGM (refer here).

DIVIDENDS

2016  2015 
R’000  R’000 
Dividends declared during the year
Final dividend No 117 of 300 cents (2015: 550 cents) per share – declared 26 August 2015  418 821  767 839 
Interim dividend No 118 of 200 cents (2015: 300 cents) per share – declared on 18 February 2016  279 214  418 821 
Less: Dividends attributable to treasury shares (182 000) (309 400)
516 035  877 260 
Dividends relating to results of the group for the year under review
Interim dividend No 118 of 200 cents (2015: 300 cents) per share – declared on 18 February 2016  279 214  418 821 
Final dividend No 119 of 500 cents (2015: 300 cents) per share – declared on 6 September 2016  698 035  418 821 
Less: Dividends attributable to treasury shares (254 800) (218 400)
722 449  619 242 

 

ANALYSIS OF SHAREHOLDING

The following analysis of shareholders, in accordance with the JSE Listings Requirements, has been established, based on an examination of the company’s share register at 30 June 2016. The directors are not aware of any material changes to this analysis between the year-end and the date of this report.

2016  2015 
Number Number
of shares % of shares %
Shareholder spread
Shares held by the public/non-public
Non-public*
– Holders in excess of 10% of the share capital 105 021 450  75,23  105 021 450  75,23 
– Directors of the company (direct and beneficial) 1 242 085  0,89  1 242 085  0,89 
106 263 535  76,12  106 263 535  76,12 
Public shareholders 33 343 465  23,88  33 343 465  23,88 
139 607 000  100,00  139 607 000  100,00 
Major shareholders
Oresteel Investments Proprietary Limited 73 190 000  52,43  73 190 000  52,43 
Main Street 460 Proprietary Limited (RF) (held 100% by Main Street 350 Proprietary Limited (RF) which is held 51% and 49% by the Boleng Trust and Assore Limited respectively)# 15 367 000  11,01  15 367 000  11,01 
Main Street 904 Proprietary Limited (RF) (held 51% and 49% by the Fricker Road Trust and The Assore Employee Trust respectively)# 16 464 450  11,79  16 464 450  11,79 
105 021 450  75,23  105 021 450  75,23 
Directors of the company 1 242 085  0,89  1 242 085  0,89 
Others – less than 5% 33 343 465  23,88  33 343 465  23,88 
139 607 000  100,00  139 607 000  100,00 
* As defined by Rule 4.25 of the JSE Listings Requirements.
# Refer “Black economic empowerment status report“.

 

SPECIAL RESOLUTIONS

The following special resolution was passed on 27 November 2015:

“That the board may authorise the company to directly or indirectly provide financial assistance to any present or future subsidiary or inter-related companies of Assore as contemplated in section 45 of the Companies Act, as amended.”

EVENTS AFTER THE REPORTING PERIOD

–  On 29 July 2016, the group acquired the entire issued share capital of Dwarsrivier Chrome Mine Proprietary Limited from Assmang. Refer note 36 to the consolidated financial statements for more detail.
–  On 6 September 2016, the board declared a final dividend of 500 cents per share, amounting to a R698,0 million, which was paid to shareholders on 3 October 2016.