Notes to the Group Annual Financial Statements for the year ended 30 June 2009


 
                                       2009        2008 
                                       Rm        Rm 

11.

 

Other investments and loans

 		               
   Investments                
   Listed at market value     735        1 635 
   Unlisted at fair value     106        309 
                                       841        1 944 
   The above are categorised as follows:                
   – Held for trading     832        1 636 
   – Designated at fair value through profit and loss     420        772 
   – Classified as held for trading     412        864 
   – Available for sale     9        308 
         841        1 944 
   A schedule of investments is available for inspection by members or their authorised agents at the registered office of the company.                
   Loans                
   Share incentive trust receivables – at amortised cost less impairments     177        184 
   Other loans – at amortised cost     118        192 
         295        376 
   Total other investments and loans     1 136        2 320 
   Collateral held over the share incentive trust receivable                
   Fair value of collateral held     177        184 
   Shares in Imperial Holdings and Eqstra Holdings are held as collateral over the receivable.                
   Maturity analysis of the share incentive trust receivable                
   – Maturing within one year     132          
   – Maturing after one year but within five years     45        184 
         177        184 
   Maturity analysis of other loans                
   – Maturing within one year     10        76 
   – Maturing after one year but within five years     103        28 
   – Maturing after five years     5        88 
         118        192 
   Maturity analysis of total loans                
   – Maturing within one year     142        76 
   – Maturing after one year but within five years     148        212 
   – Maturing after five years     5        88 
         295        376 
   Effective interest rates                
   Share incentive trust receivables     10,7%        11,4% 
   Other loans     5,8% – 12,0%        5,0% – 14,0% 
                    

12.

 

Other non-current financial assets

 		               
   Reinsurance debtors – held at amortised cost     203        313 
   Cross currency swap – hedging instrument, classified as held for trading              17 
         203        330 
                    

13.

 

Inventories

 		               
   New vehicles     2 702        3 349 
   Used vehicles     1 820        1 994 
   New and used aircraft     205        164 
   Spares, accessories and finished goods     726        724 
   Petrol and oil     45        115 
   Merchandise     45        53 
   Work in progress     49        43 
                                       5 592        6 442 
   Inventories carried at net realisable value included above     2 606        2 565 
   Net amount of inventory writedown expensed in the income statement     103        109 
   Certain inventories have been encumbered as security for interest-bearing borrowings (note 22).                
                    

14.

 

Trade and other receivables

 		               
   Trade     5 296        6 631 
   Prepayments and other     315        181 
   Derivative financial instruments – hedging instrument     22        9 
         5 633        6 821 
                    

15.

 

Cash resources

 		               
   Deposits and funds at call     3 883        1 694 
   Cash on hand and at bank     772        1 454 
         4 655        3 148 
   Effective interest rates     1,0% – 9,0%        3,9% – 10,8% 
                                                  

16.

 

Discontinued operations

 		               
   Click to enlarge

  
   Tourism
Tourism Investment Corporation Limited (Tourvest) is a company previously listed on the JSE Limited in which the group held a 66% interest. The directors were of the opinion that it is not a core business and our interest has been sold.

Commercial vehicles
Commercial Vehicle Holdings relinquished its distribution rights for International and DAF trucks due to our conclusion that this business model led to mispricing and overstocking. This led to the decision to discontinue this line of business.

Aviation
This business including Safair, Safair Lease Finance, Naturelink and the Air Contractors Group was considered by the board as capital-intensive and not giving the required returns. Air Contractors and the Safair Group has been sold.

Leasing and Capital Equipment
This capital-intensive division was unbundled to shareholders in May 2008.
  
                                       2009        2008 
                                       Rm        Rm 

17.

 

Share capital

 		               
   Authorised share capital                
   394 999 000 (2008: 394 999 000) ordinary shares of 4 cents each     15        15 
   50 000 000 (2008: 50 000 000) deferred ordinary shares of 4 cents each     2        2 
   15 000 000 (2008: 15 000 000) preferred ordinary shares of 4 cents each     1        1 
   1 000 (2008: 1 000) redeemable preference shares of 4 cents each                
   40 000 000 (2008: 40 000 000) non-redeemable, non-participating preference shares of 4 cents each     2        2 
         20        20 
   Issued share capital                
   212 129 870 (2008: 212 129 870) ordinary shares of 4 cents each     8        8 
   16 781 968 (2008: 16 781 968) deferred ordinary shares of 4 cents each     1        1 
   14 516 617 (2008: 14 516 617) preferred ordinary shares of 4 cents each     1        1 
   4 540 041 (2008: 4 540 041) non-redeemable, non-participating preference shares of 4 cents each (see note 20)               
                                       10        10 
   Deferred ordinary shares
The deferred ordinary shares will convert to ordinary shares when certain predetermined growth rates in headline earnings are achieved during the period July 2004 to June 2018.

If the deferred ordinary shares have not converted by 2018 then 500 000 deferred ordinary shares will convert annually until the converted deferred ordinary shares equate to 10,1% of total ordinary shares in issue net of treasury shares.

The salient features of the conversion are:

During the first seven years
  • Base headline earnings hurdles established to calculate the number of preferred ordinary shares converted have been amended with the unbundling of the Leasing and Capital Equipment division (Eqstra Holdings Limited).
  • With effect from the financial period ended 30 June 2008 the base headline hurdle for Imperial has been revised to R2 178 million.
  • The amount will be escalated annually at a compound growth rate of 13% until 2011.
  • A portion of earnings in excess of the base headline earnings hurdles would equate to the notional value that is attributed to Ukhamba Holdings, the holders of the deferred ordinary shares.
  • The portion attributable to Ukhamba will be calculated as follows:
    • Earnings within a 13% to 15% growth rate on the previous year’s base headline earnings hurdle: 25% attributed to Ukhamba.
    • Earnings within a 15% to 17% growth rate on the previous year’s base headline earnings hurdle: 50% attributed to Ukhamba.
    • Earnings in excess of 17% growth rate on the previous year’s base headline earnings hurdle: 75% attributed to Ukhamba.
  • At the end of each financial year, the amount calculated as value attributed to Ukhamba will be translated into a number of ordinary shares based on a five-month volume-weighted average share price.
  • It will be this number of shares that will become ordinary shares on an annual basis.
  • The maximum number of deferred ordinary shares that can convert in any one year is 2,5% of the weighted number of ordinary shares in issue.
  • Earnings within a 10% to 13% growth rate will give rise to a minimum of 1 million ordinary shares being converted, reduced by the ratio of the ordinary shares in issue net of treasury shares at the start date of the transaction over the current ordinary shares in issue net of treasury shares.

During the next seven years
  • To the extent that there remain deferred ordinary shares that have not converted into ordinary shares, then the remaining deferred ordinary shares will convert on a non-cumulative basis as follows:
    • If headline earnings per share growth over the previous financial year equals or exceeds:
      10% then 500 000 deferred ordinary shares will convert into ordinary shares.
      11% then 750 000 deferred ordinary shares will convert into ordinary shares.
      12% then 1 000 000 deferred ordinary shares will convert into ordinary shares.
      13% then 1 250 000 deferred ordinary shares will convert into ordinary shares.
      If headline earnings per share growth over the previous financial year is lower than 10%, there will be no conversion of deferred ordinary shares into ordinary shares.
Thereafter
  • To the extent that there are deferred ordinary shares that have not converted into ordinary shares, 500 000 of the remaining deferred ordinary shares will convert annually until the converted deferred ordinary shares equate to 10,1% of the total ordinary shares in issue net of treasury shares.
To the end of the current financial year a total to date of 5 973 421 (2008: 5 973 421) deferred ordinary shares were converted into ordinary shares. Based on the minimum conversion for the year ended 30 June 2009, 886 269 shares will convert in July 2009.

Preferred ordinary shares
On 27 June 2005, 14 516 617 preferred ordinary shares were issued to Lereko Mobility at a total premium of R805 393 660.

The salient terms and conditions of the preferred ordinary shares are as follows:
  
   Group share schemes 
                                       Number of shares 
   Total rights authorised and currently allocated in terms of group share schemes     2009        2008 
   Imperial Holdings Share Incentive Trust     138 600        138 600 
   Imperial Executive Share Purchase Scheme     2 773 000        3 307 000 
   Share option scheme     23 000        183 050 
   Imperial Bonus Rights Scheme     272 800        876 900 
   Share appreciation rights scheme     15 313 524        11 328 556 
   Deferred bonus plan     417 865        482 064 
   Total shares currently allocated in terms of group share schemes     18 938 789        16 316 170 
   Share scheme details are as follows:                
   Imperial Holdings Share Incentive Trust                
   Shares allocated at beginning of year     138 600        5 040 100 
   Shares settled by participants              4 901 500 
   Shares still to be settled by participants     138 600        138 600 
   Imperial Executive Share Purchase Scheme                
   Shares still to be settled at beginning of year     3 307 000        3 932 000 
   Shares not taken up and transferred to subsidiary as treasury shares              (660 000)
   Shares allocated during the year              35 000 
   Shares transferred on unbundling     (534 000)         
   Shares still to be settled by participants     2 773 000        3 307 000 
                                                  
                              2009  2008 
                                 Weighted              Weighted 
                                 average              average 
                                 exercise              exercise 
                              Number of  price     Number of        price 
                              shares  (Rand)    shares        (Rand)
   Share option scheme                      
   Options granted at beginning of year  183 050  41,15     260 050        42,22 
   Options exercised during the year  (118 150) 36,88     (77 000)       46,46 
   Options forfeited during the year  (41 900) 40,08                
   Unexercised options at end of year  23 000  55,62     183 050        41,15 
   Imperial Holdings Share Purchase Scheme                      
   Options granted at beginning of year           762 500        57,51 
   Options exercised during the year           (756 500)       57,52 
   Options forfeited during the year           (6 000)       62,30 
   Unexercised options at end of year                      
   Imperial Bonus Rights Scheme                      
   Rights to ordinary shares granted at beginning of year  876 900  116,26     637 500        100,78 
   Rights to ordinary shares granted during the year           292 400        150,08 
   Rights to ordinary shares forfeited during the year  (604 100) 105,11     (53 000)       109,11 
   Ordinary shares still available under the scheme  272 800  150,08     876 900        116,26 
   Share appreciation rights scheme                      
   Rights granted at beginning of year  11 328 556  49,48     11 328 556        49,48 
   Rights allocated during the year  4 405 183  55,32                
   Rights forfeited during the year  (420 215) 49,48                
   Unexercised rights at end of year  15 313 524  51,11     11 328 556          
   Deferred bonus plan                      
   Rights granted at beginning of year  482 064        482 064          
   Rights exercised during the year  (182 994)                  
   Rights forfeited during the year  (36 546)                  
   Prior year rights carried forward  262 524        482 064          
   Rights allocated during the year  155 341                   
   Unexercised rights at end of year  417 865        482 064          
                                                  
                                 Number  Average price          
   Grant date     of options     (Rand)       Expiry date 
   Share option scheme – details of unexercised options by year of grant                   
   July 1999 to June 2000  23 000     55,62  July 2009 to
 June 2010 
   Bonus rights scheme – details of rights by year of grant                   
   July 2007  272 800     150,08        June 2011 
   Share appreciation rights scheme – details of shares by year of grant                   
   June 2008  10 908 341     49,48        May 2015 
   June 2009  4 405 183     55,32        June 2016 
   Total unexercised rights at end of year  15 313 524                
                                                  
   Total weighted average price        51,11          
   Share option scheme – details of unexercised options by year of grant continued

Upon exercise by participants the group will settle the value of the difference between the exercise and grant price by delivering shares, alternatively as a fall-back provision only by settling the value in cash.

No dilution is expected as it is intended to acquire the necessary shares in the market and appropriate hedges have been established.

Deferred bonus plan – details of shares by year of grant#
  
                                       Number          
   Grant date     of rights        Expiry date 
   June 2008     262 524     September 2012 
   June 2009     155 341     September 2012 
   Total unexercised rights at end of year     417 865          
                                                  
   Deferred bonus plan – details of rights taken up#                
                                       Number          
   Rights taken up     of rights        Vesting date 
   July 2008     182 994     September 2011 
  
*  Rights entitle participants to invest a portion of their after-tax bonus in Imperial shares, which, if held for three years, will be matched by the company on a one-for-one basis by the allocation of an equal number of Imperial shares for no consideration. 
 
                                                  
   Directors’ Interests in issued share capital
At year-end the aggregate shareholdings of the directors in the issued ordinary share capital of the company were as detailed below.  
                              2009     2008 
                              Beneficial  Non-beneficial     Beneficial     Non-beneficial 
                              number  number     number        number 
   Director  of shares  of shares     of shares        of shares 
   Non-executive                      
   MJ Leeming     928              928 
   RJA Sparks  40 000        40 000          
   Y Waja  927        927          
      40 927  928     40 927        928 
   Executive                      
   OS Arbee  158 783        150 336          
   HR Brody#  193 732        175 000          
   MP de Canha  1 115 571        879 937          
   RL Hiemstra  193 773        180 000          
   N Hoosen*           169 500          
   AH Mahomed  157 056        371 509        6 444 
      1 818 915        1 926 282        6 444 
                              1 859 842  928     1 967 209        7 372 
   # HR Brody in addition holds a beneficial interest in 3 700 preference shares.
*No longer a director at 30 June 2009.

As a result of the implementation of the Lereko Mobility BEE transaction MV Moosa being a shareholder of Lereko Mobility holds a beneficial interest in 1 331 145 (2008: 1 331 145) preferred ordinary shares. 
                                                  
                                       2009        2008 
                                       Rm        Rm 

18.

 

Shares repurchased

 		               
   23 864 456 (2008: 23 864 456) ordinary shares at an average of R76,09 (2008: R76,09) each     (1 816)       (1 816)
         (1 816)       (1 816)
                    

19a.

 

Other reserves

 		               
   Share-based payment reserve     (146)       (64)
   Hedging reserve     (103)       38 
   Statutory reserves     227        304 
   Translation reserve     210        757 
   Valuation reserve     92        238 
         280        1 273 
   Refer to the statement of changes in equity for detailed analysis of the movements in other reserves.

The fair values for the share-based payment reserves were calculated using a Black-Scholes pricing model.

The inputs into the model established at the grant dates and which have not changed were as follows:
  		               
   Share option scheme                
   Volatility (%)    10,43          
   Weighted average share price (Rand)    58,12          
   Weighted average exercise price (Rand)    58,12          
   Expected life (years)    4          
   Average risk-free rate (%)    6,69          
   Expected dividend yield (%)    4,33          
   Bonus rights scheme – July 2007                
   Volatility (%)    32,50          
   Weighted average share price (Rand)    141,49          
   Weighted average exercise price (Rand)    150,08          
   Expected life (years)    4          
   Average risk-free rate (%)    10,26          
   Expected dividend yield (%)    4,50          
   Share appreciation rights scheme – June 2008                
   Volatility (%)    35,00          
   Weighted average share price (Rand)    50,90          
   Weighted average exercise price (Rand)    49,48          
   Expected life (years)    3,28          
   Average risk-free rate (%)    12,37          
   Expected dividend yield (%)    5,68          
   Deferred bonus plan – June 2008                
   Volatility (%)    35,00          
   Weighted average share price (Rand)    50,90          
   Weighted average exercise price (Rand)               
   Expected life (years)    3,28          
   Average risk-free rate (%)    12,37          
   Expected dividend yield (%)    5,68          
                    
   Share appreciation rights scheme – June 2009                
   Volatility (%)    40,00          
   Weighted average share price (Rand)    55,32          
   Weighted average exercise price (Rand)    55,32          
   Expected life (years)    3,25          
   Average risk-free rate (%)    8,35          
   Expected dividend yield (%)    2,76          
   Deferred bonus plan – June 2009                
   Volatility (%)    40,00          
   Weighted average share price (Rand)    55,32          
   Weighted average exercise price (Rand)               
   Expected life (years)    3,25          
   Average risk-free rate (%)    8,35          
   Expected dividend yield (%)    2,76          
   The volatilities were determined by calculating the historical volatility of the company’s share price over the previous five years. The expected life is determined by the rules of the schemes which dictate the expiry date.

The current financial year’s movement raised in the income statement is detailed in note 28.

Lereko transaction

Imperial entered into a black economic empowerment transaction with Lereko Mobility (Pty) Limited. The substance of this transaction was to grant the Lereko Consortium a call option over the delivery of a variable number of shares on 15 June 2015. This would be determined by the amount by which the value of 14 516 617 Imperial Holdings Limited ordinary shares exceeded the settlement of the funding.

The Monte Carlo simulation method was used to value this call option evaluating 100 000 potential outcomes for the call option granted on 15 June 2005 and vesting on 15 June 2015. The start price was R96,85.
  		               

19b.

 

Translation reserves

 		               
   Opening balance at beginning of year     757        490 
   Movements in translation reserves                
   Intangible assets     (37)       112 
   Investments, loans, associates and joint ventures     (15)       67 
   Property, plant and equipment     (262)       294 
   Transport fleet     (136)       128 
   Leasing assets              95 
   Vehicles for hire     (1)       1 
   Deferred taxation     (11)       15 
   Inventories     (164)       170 
   Current taxation     13        (17)
   Trade and other receivables     (255)       469 
   Cash resources     (169)       344 
   Minorities     14        (21)
   Retirement benefit obligations     34        (63)
   Interest-bearing borrowings     148        (890)
   Insurance and investment contracts     2        (2)
   Provisions for liabilities and other charges     40        (52)
   Trade and other payables     247        (437)
         205        703 
   Direct transfer from retained earnings     5          
   Unbundled to shareholders              54 
   Closing balance at end of year     210        757 
                    

20.

 

Non-redeemable, non-participating preference shares

 		               
   Non-redeemable, non-participating preference shares     441         441 
   4 540 041 preference shares were issued during the 2007 financial year and are listed on the JSE under specialist securities – preference shares sector.

These shares are entitled to a preference dividend being 75% of the prime interest rate. The company is obligated to pay any arrear dividends within five years from the proceeds raised by issuing new ordinary shares within six months prior to such payment. Because of the cumulative nature of these preference shares, they are classified as debt with no repayment terms.

The coupon is payable semi-annually in March and September and annually this amounts to R49 million (2008: R51 million) based on current rates of interest.