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Financial statements

Directors’ report

for the year ended 30 June 2011

Nature of business

Assore Limited, which was incorporated in 1950, is a mining holding company principally engaged 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.

The group’s principal investment is a 50% (2010: 50%) interest in Assmang Limited (Assmang) which it controls jointly with African Rainbow Minerals Limited (ARM). Assmang mines iron, manganese and chrome ores and produces manganese and chrome alloys.

In addition, the group mines chrome ore and Wonderstone (a type of pyrophyllite), a portion of which is beneficiated to produce high- precision components, and wear- and acid-resistant tiles.

The group, through its wholly owned subsidiary, Ore & Metal Company Limited, is responsible for marketing all products produced by its joint-venture entities 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 review of operations.

Financial results

The financial position of the group and company and their results for the year ended 30 June 2011 are set out in the annual financial statements of the group and company included in this report (the financial statements).

The financial results of the group for the year ended 30 June 2011 are summarised below:

  2011 2010
  R’000 R’000
Turnover 10 547 806 7 085 669
Profit for the year 3 249 686 1 511 497
Attributable to:    
Shareholders of the holding company 3 219 754 1 479 524
Non-controlling interests 29 932 31 973
As above 3 249 686 1 511 497
     
Profit attributable to the shareholders of the holding company (as above) 3 219 754 1 479 524
Dividends relating to the group’s activities for the year under review (refer dividends below) 538 522 406 883
Interim dividend No 108 of 200 cents (2010: 100 cents) per share – declared on 16 February 2011 279 214 139 607
Final dividend No 109 of 250 cents (2010: 240 cents) per share – declared on 24 August 2011 349 018 335 057
Less: Dividends attributable to treasury shares (89 710) (67 781)
     
Profit for the year after dividends 2 681 232 1 072 641
The attributable interest of the company in the aggregate net profit and losses after taxation of group companies was as follows:    
     
Jointly controlled entity – 50% (2010: 50%) share    
– Profit for the year 1 880 714 853 489
     
Subsidiary companies    
– Profit 284 456 276 998
– Losses 11 395 47 880
     

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 appears within this report, 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) based on appropriate accounting policies which, unless otherwise indicated, have been applied consistently with the previous year.

The financial statements have been prepared on a going-concern basis and the directors have no reason to believe that any of the businesses in the group, except for the synthetic diamond operation, Xertech, in 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 amounts of all assets included on 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 duly 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 based on 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 misstatement 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.

Jointly controlled entity – Assmang

The group owns 50% (2010: 50%) of the ordinary share capital of Assmang. In accordance with IFRS, the results of Assmang are accounted for by Assore using the proportionate consolidation method and the financial information set out below has been extracted from the audited financial statements of Assmang and its subsidiary companies for the year ended 30 June 2011.

The calculation of profit for consolidation purposes was based on the profit of Assmang for the year ended 30 June 2011 and dividends declared during that period, which are summarised as follows:

  2011 2010
  R’000 R’000
Abridged consolidated income statement for the year ended 30 June     
Turnover 19 074 942 12 869 713
Profit before taxation and State’s share of profit  8 560 999 4 161 748
Taxation and State’s share of profit 2 774 192 1 429 526
Earnings 5 786 807 2 732 222
Dividends declared during the year 2 000 000 1 000 297
Profit for the year after dividends paid 3 786 807 1 731 925
  2011 2010
  R’000 R’000
Abridged consolidated statement of financial position at 30 June     
Assets     
Non-current assets 14 765 942 11 707 434
Current assets 9 647 584 7 864 229
Total assets 24 413 526 19 571 663
Equity and liabilities     
Total equity 17 507 225 13 720 518
Non-current liabilities 4 387 812 3 540 775
Current liabilities    
– interest-bearing 4 717 7 224
– non-interest-bearing 2 513 772 2 303 146
Total equity and liabilities 24 413 526 19 571 663
Capital expenditure (R’million) 4 097 3 336
Capital commitments (R’million) 5 374 5 874
     
             

Directors’ emoluments

            
  Fees
(refer note 1 below)		 Salary Bonuses
(refer note 2 below)		 Contributions
to pension
scheme		 Other fringe
benefits
(refer note 3 below)		 Total
  R’000 R’000 R’000 R’000 R’000 R’000
2011             
Executive             
Desmond Sacco (Chairman) 110 4 264 355 – 543 5 272
CJ Cory (Chief Executive Officer) 96 3 886 12 809 969 307 18 067
PC Crous (Technical and Operations) 96 3 414 12 589 851 226 17 176
Non-executive             
EM Southey (Appointed Deputy Chairman and            
lead independent director 10 November 2011) 217         217
RJ Carpenter (retired as executive director            
28 February 2011) 114 2 838 11 355 697 17 077 32 081
BM Hawksworth (resigned 27 August 2010) 27         27
DM J Ncube (appointed 3 May 2011) 25         25
MC Ramaphosa (resigned 19 August 2011) 150         150
WF Urmson (appointed 1 October 2010) 113         113
Dr JC van der Horst 150         150
Alternate             
NG Sacco (resigned 8 March 2011) – 858 45 72 119 1 094
PE Sacco 36 1 024 514 244 179 1 997
R Smith (resigned 19 August 2011) –         –
  1 134 16 284 37 667 2 833 18 451 76 369
2010             
Executive             
Desmond Sacco (Chairman) 110 3 806 317 – 508 4 741
RJ Carpenter (Deputy Chairman) 96 3 800 11 363 863 228 16 350
CJ Cory (Chief Executive Officer) 96 3 469 11 244 788 248 15 845
PC Crous (Technical and Operations) 96 3 048 11 093 692 217 15 146
Non-executive             
BM Hawksworth 175         175
MC Ramaphosa 150         150
EM Southey 150         150
JC van der Horst 150         150
Alternate             
JW Lewis (resigned 31 August 2009) – 231 – 53 35 319
NG Sacco – 883 36 86 45 1 050
PE Sacco 36 432 36 90 115 709
R Smith –         –
  1 059 15 669 34 089 2 572 1 396 54 785
   
Notes:
1. Directors’ fees for executives include fees received from Assmang Limited.
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 results for the year. 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, leave paid out, study loan benefits, use of assets and unemployment insurance fund contributions and increased substantially in the current year due to the ex-gratia payment made to Mr Carpenter on his retirement after 47 years of service in the group.

Directors’ interests in shares of the company

Interests of the directors in the ordinary shares of the company at 30 June 2011 were as follows, and other than mentioned below, the company is unaware of any material change in these interests between year-end and the date of this report.

  Direct beneficial Indirect beneficial
  Number of shares Number of shares
  2011 2010* 2011 2010*
Executive directors         
Desmond Sacco 868 500 837 500 32 430 490 32 430 490
CJ Cory 50 000 50 000 – –
PC Crous 16 000 15 000 – –
Non-executive directors         
RJ Carpenter 112 000 112 000 – –
BM Hawksworth (resigned 27 August 2010)   5 000   –
DM J Ncube –   –  
MC Ramaphosa – – 5 054 585 5 054 585
EM Southey – – – –
WF Urmson –   –  
Dr JC van der Horst – – – –
Alternate directors         
JW Lewis (resigned 31 August 2009)   12 500   –
NG Sacco (resigned 8 March 2011) 192 250 170 250 – –
PE Sacco 198 750 176 750 – –
R Smith – – – –
         
  1 437 500 1 379 000 37 485 075 37 485 075
         
* The comparative numbers have been restated for the five-for-one sub-division of ordinary shares on 10 September 2010.
         

Directorate and secretary

The names of the directors at the date of this report are set out here and here of this report.

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 at the previous annual report and up to the date of this report the following changes were made to the Assore board:

  • 11 November 2010 – Mr RJ (Bob) Carpenter stood down as Deputy Chairman, after 47 years of service with the group, and on 28 February 2011 resigned as an executive director, remaining on the board in a non-executive capacity.
  • 11 November 2010 – Mr EM (Ed) Southey was appointed as Deputy Chairman and Lead Independent Director.
  • 8 March 2011 – Mr NG Sacco resigned as an alternate director.
  • 3 May 2011 – Mr DMJ (Don) Ncube was appointed as an independent non-executive director.
  • 19 August 2011 – following the conclusion of the first phase of the third empowerment transaction,
    Mr MC (Cyril) Ramaphosa (and his alternate, Mr RM Smith) resigned as non-executive director.
  • 7 October 2011 – Ms ZP Manase was appointed as an independent non-executive director.
  • 14 October 2011 – Messrs AD Stalker and BH (Tiaan) van Aswegen were appointed alternate directors to Mr CJ Cory and Mr PC Crous respectively.

In terms of the Memorandum of Incorporation, Messrs Desmond Sacco, PC Crous, DMJ Ncube and ZP Manase are required to retire by rotation at the forthcoming Annual General Meeting. All of the above aforementioned directors, being eligible, offer themselves for re-election (refer to the “Notice to members” for a brief curriculum vitae for each of these directors).

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 2011. Except for the purchase of the interest held by Shanduka Resources (Proprietary) Limited, through Main Street 343 (Proprietary) Limited by Main Street 904 (Proprietary) Limited (refer “Events after the reporting period”), the directors are not aware of any material changes to this analysis between the year-end and the date of this report.

  2011 2010
  % %
Shareholder spread     
Shares held by the public/non-public    
Non-public*    
– Holders in excess of 10% of the share capital 75,23 75,23
– Directors of the company 0,89 0,98
  76,12 76,21
Public 1 008 (2010: 1 008) shareholders 23,88 23,79
  100,00 100,00
* As defined by Rule 4.25 of the JSE Listings Requirements.    
     
Major shareholders     
Oresteel Investments (Proprietary) Limited 52,43 52,43
Main Street 460 (Proprietary) Limited (a wholly owned subsidiary of Assore Limited) 11,01 11,01
Main Street 343 (Proprietary) Limited (a wholly owned subsidiary of Shanduka Resources 11,79 11,79
(Proprietary) Limited)    
  75,23 75,23
Others – less than 5% 24,77 24,77
  100,00 100,00
     

Dividends

The table below reflects the dividends included in respect of the profit for the year in the financial results for the year, and respectively. Following the stronger financial results, the board doubled the level of the interim dividend for the year to 200 cents (2010: 100 cents) per share. Due to the sustained level of earnings in the second half of the year, a final dividend of 250 cents (2010: 240 cents) per share was declared, resulting in the total dividend per share for the year amounting to 450 cents (2010: 340 cents).

The dividends declared during the year are as follows:    
  2011 2010
  R’000 R’000
Interim dividend No 108 of 200 cents (2010: 100 cents) per share – declared on 16 February 2011 279 214 139 607
Final dividend No 109 of 250 cents (2010: 240 cents) per share – declared on 24 August 2011 349 018 335 057
Less: Dividends attributable to treasury shares (89 710) (67 781)
  538 522 406 883
In accordance with the accounting policy for dividends declared and paid, the following dividends are included in the financial statements:    
Final dividend No 107 of 240 cents (2010: 200 cents) per share – declared on 1 September 2010 335 057 275 717
Interim dividend No 108 of 200 cents (2010: 100 cents) per share – declared on 16 February 2011 279 214 139 607
Less: Dividends attributable to treasury shares (87 716) (56 309)
  526 555 359 015
     
     

Special resolution

On 10 September 2010, shareholders approved that the ordinary share capital of the company be sub-divided by a factor of five, resulting in the authorised and issued ordinary share capital increasing to 200 000 000 (2010: 40 000 000) and 139 607 000 (2010: 27 921 400) shares respectively.

 

Events after the reporting period

The following significant corporate events occurred subsequent to the year-end but, in the opinion of the board of directors, do not require any adjustments to the financial statements at 30 June 2011:

  • On 10 August 2011, in order to effect the first phase of the third empowerment transaction (refer “Black Economic Empowerment Status report”), authority was granted to the directors, in terms of section 44 of the Companies Act, to enter into and implement agreements in order to provide financial assistance to Main Street 904 (Proprietary) Limited;
  • On 19 August 2011, following the conclusion of the first phase of the third empowerment transaction, Mr MC Ramaphosa (and his alternate, Mr RM Smith) resigned as non-executive director; and
  • On 26 August 2011, Assmang reached settlement with its local insurers on the insurance claim submitted following the explosion at No 6 furnace at Cato Ridge Works in 2008. The portion attributable to the group amounts to approximately R70 million. This transaction has not been recognised in the group’s financial statements.
 

Holding company

The company’s holding company is Oresteel Investments (Proprietary) Limited.

Johannesburg
14 October 2011

ASSORE Integrated Annual Report 2011