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Directors’ report
for the year ended 30 June 2012

Nature of business

Assore Limited was incorporated in South Africa in 1950 and 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% (2011: 50%) interest in Assmang Limited (Assmang) which it controls jointly with African Rainbow Minerals Limited (ARM) which is also listed on the JSE. Assmang mines iron, manganese and chrome ores and produces manganese and chrome alloys. In addition, the group 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 entity 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 position of the group and company and their results for the year ended 30 June 2012 are set out in the annual financial statements of the group (refer here) and company (refer here) included in this report (the financial statements).

The financial results of the group for the year ended 30 June 2012 are summarised below:

  2012  2011 
  R’000  R’000 
Turnover 12 947 766  10 547 806 
Profit for the year 4 047 034  3 249 686 
Attributable to:    
Shareholders of the holding company 4 033 013  3 219 754 
Non-controlling interests 14 021  29 932 
As above 4 047 034  3 249 686 
Profit attributable to the shareholders of the holding company as above 4 033 013  3 219 754 
Dividends relating to the group’s activities for the year under review (refer dividends) 567 639  538 522 
Interim dividend No 110 of 250 cents (2011: 200 cents) per share – declared on 16 April 2012  349 018  279 214 
Final dividend No 111 of 300 cents (2011: 250 cents) per share – declared on 31 August 2012  418 821  349 018 
Less: Dividends attributable to treasury shares (200 200) (89 710)
     
Profit for the year after dividends 3 465 374  2 681 232 
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% (2011: 50%) share    
– Profit for the year 2 429 520  1 880 714 
Subsidiary companies    
– Profit 283 691  284 456 
– Losses (299 210) (11 395)


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 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) 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, 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% (2011: 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 2012. With effect from the 2014 financial year, the board is aware that, in order to comply with changes to IFRS, Assmang’s results will have to be equity accounted (refer here).

The calculation of profit for consolidation purposes was based on the profit of Assmang for the year ended 30 June 2012 and dividends declared during that period, and the financial statements are presented in summarised format below:

  2012  2011 
  R’000  R’000 
Abridged consolidated income statement of Assmang for the year ended 30 June
   
Turnover 23 688 390  19 074 942 
Profit before taxation 9 468 517  8 560 999 
Taxation 2 584 529  2 774 192 
Earnings 6 883 988  5 786 807 
Dividends declared during the year 2 000 000  2 000 000 
Profit for the year after dividends paid 4 883 988  3 786 807 
     
  2012  2011 
  R’000  R’000 
Abridged consolidated statement of financial position of Assmang at 30 June
   
Assets    
Non-current assets 17 937 554  14 765 942 
Current assets 12 269 155  9 647 584 
Total assets 30 206 709  24 413 526 
Equity and liabilities    
Total equity 22 391 314  17 507 225 
Non-current liabilities 5 121 923  4 387 812 
Current liabilities    
interest-bearing 4 717 
non-interest-bearing 2 693 472  2 513 772 
Total equity and liabilities 30 206 709  24 413 526 
Capital expenditure 4 517 412  4 097 432 
Capital commitments 6 669 108  5 373 626 


Directors’ emoluments

          Contributions Other fringe  
    Fees Salaries Bonuses to pension benefits  
    (refer note 1)   (refer note 2) scheme (refer note 3) Total
    R’000  R’000  R’000  R’000  R’000  R’000 
2012
             
Executive            
Desmond Sacco (Chairman) 110  4 264  355  582  5 311 
CJ Cory (Chief Executive Officer) 96  4 196  14 894  1 078  359  20 623 
PC Crous (Technical and Operations) 96  3 688  14 422  947  231  19 384 
Non-executive            
EM Southey (Deputy Chairman and lead            
independent director) 300          300 
RJ Carpenter 150          150 
ZP Manase (appointed 7 October 2011/resigned            
1 November 2011) 11          11 
DMJ Ncube (resigned 3 May 2012) 125          125 
MC Ramaphosa (resigned 19 August 2011) 20          20 
WF Urmson 200          200 
Dr JC van der Horst (resigned 31 December 2011) 75          75 
Alternate            
PE Sacco 36  1 426  6 277  351  232  8 322 
RM Smith (resigned 19 August 2011)        
AD Stalker (appointed 14 October 2011) 36  1 730  8 503  444  243  10 956 
BH van Aswegen (appointed 14 October 2011) 1 669  8 468  423  259  10 819 
    1 255  16 973  52 919  3 243  1 906  76 296 
               
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 
DMJ Ncube (appointed 3 May 2011) 25          25 
MC Ramaphosa 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 
RM Smith        
    1 134  16 284  37 667  2 833  18 451  76 369 
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 below.
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. In 2011, the amount includes 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 2012 are set out in the table below. There have been no material changes in these interests between year-end and the date of this report.

  Direct beneficial Indirect beneficial
  Number of shares Number of shares
  2012  2011  2012  2011 
Executive directors
       
Desmond Sacco 868 500  868 500  32 430 490  32 430 490 
CJ Cory 50 000  50 000 
PC Crous 16 000  16 000 
Non-executive directors        
EM Southey
RJ Carpenter 25 000  112 000 
ZP Manase
DMJ Ncube
MC Ramaphosa 5 054 585 
WF Urmson
Dr JC van der Horst
Alternate directors        
NG Sacco 192 250 
PE Sacco 198 750  198 750 
RM Smith
AD Stalker
BH van Aswegen 4 505 
  1 162 755  1 437 500  32 430 490  37 485 075 


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 here in this report.

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

  • 1 November 2011 – Ms ZP Manase resigned as an independent non-executive director;
  • 31 December 2011 – Dr JC (Johannes) van der Horst resigned, after serving on the board for 17 years;
  • 3 May 2012 – Mr DMJ Ncube resigned as an independent non-executive director;
  • 31 August 2012 – Mr PC (Phil) Crous resigned as Group Technical and Operations Director, after serving on the board for 19 years;
  • 1 September 2012 – Mr AD (Alastair) Stalker was appointed to the board as Group Marketing Director, and Mr BH (Tiaan) van Aswegen was appointed as Group Technical and Operations Director, both of whom had been appointed as alternate directors on 14 October 2011; and
  • 15 October 2012 – Mr S (Sydney) Mhlarhi was appointed as an independent non-executive director and as a member of the Audit and Risk Committee.

In terms of the Memorandum of Incorporation (MOI), Messrs EM Southey and RJ Carpenter are required to retire by rotation at the forthcoming Annual General Meeting (AGM). Messrs S Mhlarhi, AD Stalker and BH van Aswegen were appointed subsequent to the previous AGM and in terms of section 68(3) of the Companies Act are required to be re-appointed at the next AGM. All of 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 which was sent to members by registered mail on 29 October 2012.

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 2012. The directors are not aware of any material changes to this analysis between the year-end and the date of this report.

  2012  2011 
  % %
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 0,83  0,89 
  76,06  76,12 
Public 2 108 (2011: 1 008) shareholders 23,94  23,88 
  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 (RF) 11,01  11,01 
Main Street 904 Proprietary Limited (RF) (held 51% and 49% by the Fricker Road Trust and the Assore Employee Trust respectively) 11,79 
Main Street 343 Proprietary (RF) Limited (a wholly owned subsidiary of Shanduka Resources Proprietary Limited) 11,79 
  75,23  75,23 
Others – less than 5% 24,77  24,77 
  100,00  100,00 
     
Dividends    
Earnings for the year were at record levels which enabled the board to increase dividends for the current year as follows:    
     
  2012  2011 
  R’000  R’000 
Dividends recognised in the financial results    
Final dividend No 109 of 250 cents (2011: 240 cents) per share – declared on 9 September 2011  349 018  335 057 
Interim dividend No 110 of 250 cents (2011: 200 cents) per share – declared on 16 April 2012  349 018  279 214 
Less: Dividends attributable to treasury shares (182 000) (87 716)
  516 036  526 555 
Dividends relating to activities for the year under review    
Interim dividend No 110 of 250 cents (2011: 200 cents) per share – declared on 16 April 2012  349 018  279 214 
Final dividend No 111 of 300 cents (2011: 250 cents) per share – declared on 31 August 2012  418 821  349 018 
Less: Dividends attributable to treasury shares (200 200) (89 710)
  567 639  538 522 


Special resolutions

The following special resolutions were passed during the year under review:

  • 10 August 2011 – pursuant to the first phase of the third empowerment transaction (refer “Black economic empowerment status report”) that the company provide financial assistance to Main Street 904 Proprietary Limited (RF) (MS 904) for the purpose of the acquisition by MS 904 of 16 464 450 of the company’s ordinary shares (the sale shares) from Main Street 343 Proprietary Limited (RF) (MS343);
  • 13 January 2012 – pursuant to the second phase of the third empowerment transaction:
    • that the company provide financial assistance to MS 904 for the purpose of the acquisition by MS 904 of the sale shares from MS 343;
    • that the company cancel the previous unissued par value preference shares;
    • that the company create no par value preference shares in the share capital of the company;
    • that the company’s Memorandum of Incorporation be altered to record the alterations to its share capital, and that the company’s Memorandum of Incorporation incorporates the rights, terms and privileges of the no par value preference shares; and
    • that the board be authorised to provide financial assistance to any special-purpose company in relation to the no par value preference shares in favour of the Standard Bank of South Africa Limited.

Event after the reporting period

On 31 August 2012, the board declared a final dividend of 300 cents per share amounting to R418,8 million, which was paid to shareholders on 1 October 2012.