Directors' report
for the year ended 30 June 2019
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% (2018: 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 alloys. In addition, the group mines chrome ore at Dwarsrivier Chrome Mine 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 chief executive officer's report , 2019 integrated annual report.
FINANCIAL RESULTS
The financial results of the group for the year ended 30 June 2019 are summarised below:
| Year ended 30 June | |||||||
| 2019 R'000 |
2019 R'000 |
||||||
|---|---|---|---|---|---|---|---|
| Turnover | 6 301 572 | 6 305 587 | |||||
| Profit after taxation, before joint-venture entity and associates | 1 450 853 | 1 666 926 | |||||
| Share of profit from joint-venture entity, after taxation | 4 536 396 | 3 524 287 | |||||
| Share of losses in associates | (23 317) | (16 211) | |||||
| Profit for the year | 5 963 932 | 5 175 002 | |||||
| Profit attributable to non-controlling shareholders | (31 895) | (55 673) | |||||
| Profit attributable to the shareholders of the holding company | 5 932 037 | 5 119 329 | |||||
| Less: Dividends relating to the group's activities for the year under review | 2 475 478 | 2 270 554 | |||||
| Interim dividend No 124 of 1 000 cents (2018: 1 000 cents) per share – declared on 25 February 2019 | 1 396 070 | 1 396 070 | |||||
| Final dividend No 125 of 1 400 cents (2018: 1 200 cents) per share – declared on 4 September 2019 | 1 954 498 | 1 675 284 | |||||
| Less: Dividends attributable to treasury shares | (875 090) | (800 800) | |||||
| Profit for the year after dividends | 3 456 559 | 2 848 775 | |||||
| The attributable interest of the company in the aggregate net profit and losses after taxation of subsidiary companies was as follows: | |||||||
| – Profits | 1 416 066 | 1 505 909 | |||||
| – Losses | (165 585) | (39 757) | |||||
CONTROL OVER FINANCIAL REPORTING
The directors of the company are responsible for the preparation and fair presentation of the annual financial statements and related financial information included in this report. The external auditors, Ernst & Young Inc., whose report is set out in the Independent auditors' report to the shareholders of Assore Limited, are responsible for expressing an opinion on the annual financial statements based on their audit.
The annual 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 except for IFRS 9: Financial Instruments and IFRS 15: Revenue from Contracts with Customers, which the group adopted with effect from 1 July 2018.
The annual 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 annual 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 previously discontinued operations.
Abridged consolidated comprehensive income statement of Assmang
| Year ended 30 June | ||||||
| 2019 R'000 |
2019 R'000 |
|||||
|---|---|---|---|---|---|---|
| Turnover | 35 613 171 | 27 548 235 | ||||
| Profit before taxation | 12 920 245 | 9 994 479 | ||||
| Taxation | (3 822 504) | (2 920 956) | ||||
| Earnings | 9 097 741 | 7 073 523 | ||||
| Other comprehensive income | 18 631 | 265 267 | ||||
| Dividends declared and paid during the year | (6 630 000) | (6 000 000) | ||||
| Total comprehensive income for the year after dividends | 2 486 372 | 1 338 790 | ||||
Abridged consolidated statement financial position of Assmang
| At 30 June | ||||||
| 2019 R'000 |
2019 R'000 |
|||||
|---|---|---|---|---|---|---|
| Assets | ||||||
| Non-current assets | 27 153 112 | 26 509 377 | ||||
| Current assets | ||||||
| Inventories | 4 961 281 | 4 392 486 | ||||
| Trade and other receivables | 7 473 455 | 5 522 327 | ||||
| Financial assets | 187 845 | 228 367 | ||||
| Cash resources | 6 104 583 | 5 014 065 | ||||
| Total assets | 45 880 276 | 41 666 622 | ||||
| Equity and liabilities | ||||||
| Equity | 34 371 037 | 31 884 665 | ||||
| Non-current liabilities | ||||||
| Deferred taxation liability | 6 358 502 | 5 809 009 | ||||
| Long-term provisions | 1 079 186 | 897 397 | ||||
| Trade and other payables | 84 519 | 89 217 | ||||
| Current liabilities | ||||||
| Trade and other payables | 2 664 249 | 1 819 476 | ||||
| Short-term provisions | 983 207 | 960 674 | ||||
| Taxation | 308 326 | 206 184 | ||||
| Financial liabilities | 31 250 | — | ||||
| Total liabilities | 11 509 239 | 9 781 957 | ||||
| Total equity and liabilities | 45 880 276 | 41 666 622 | ||||
| Capital expenditure | 4 407 332 | 3 082 204 | ||||
| Capital commitments | 3 847 951 | 2 844 692 | ||||
DIRECTORS' EMOLUMENTS
| Directors' fees | Remuneration* | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Other group companies R'000 |
Group companies R'000 |
Salaries R'000 |
Bonuses (refer note 1) R'000 |
Contributions to pension scheme R'000 |
Other fringe benefits (refer note 2) R'000 |
Total R'000 |
||||
| 2019 | ||||||||||
| Executive | ||||||||||
| Desmond Sacco (Chairman) | — | 60 | 4 264 | 355 | — | 337 | 5 016 | |||
| CE Walters (Chief executive officer) | 36 | 60 | 6 258 | 14 417 | 1 340 | 1 517 | 23 628 | |||
| PE Sacco (Deputy chief executive officer and Marketing Director) | 36 | 60 | 2 968 | 10 084 | 752 | 1 042 | 14 942 | |||
| RA Davies (Chief financial officer) | — | 60 | 2 610 | 4 833 | 661 | 1 006 | 9 170 | |||
| BH van Aswegen (Technical and operations director) | 36 | 60 | 3 306 | 10 322 | 837 | 1 140 | 15 701 | |||
| Non-executive# | ||||||||||
| EM Southey (Deputy Chairman and lead independent director) | 825 | 825 | ||||||||
| DN Aitken | 325 | 325 | ||||||||
| TN Mgoduso | 450 | 450 | ||||||||
| S Mhlarhi | 450 | 450 | ||||||||
| WF Urmson | 675 | 675 | ||||||||
| 108 | 3 025 | 19 406 | 40 011 | 3 590 | 5 042 | 71 182 | ||||
| 2018 | ||||||||||
| Executive | ||||||||||
| Desmond Sacco (Chairman) | — | 73 | 4 264 | 711 | — | 310 | 5 358 | |||
| CE Walters (Chief executive officer – appointed 1 July 2017) | 36 | 60 | 5 904 | 12 526 | 1 234 | 1 422 | 21 182 | |||
| RA Davies (Chief financial officer – appointed 20 February 2018) | — | 22 | 1 026 | 3 016 | 258 | 397 | 4 719 | |||
| PE Sacco (Group Marketing Director) | 36 | 60 | 2 800 | 9 255 | 709 | 987 | 13 847 | |||
| BH van Aswegen (Technical and operations director) | 36 | 60 | 3 119 | 10 512 | 790 | 1 093 | 15 610 | |||
| Non-executive# | ||||||||||
| EM Southey (Deputy Chairman and lead independent director) | 750 | 750 | ||||||||
| DN Aitken | 300 | 300 | ||||||||
| TN Mgoduso | 400 | 400 | ||||||||
| S Mhlari | 400 | 400 | ||||||||
| WF Urmson | 600 | 600 | ||||||||
| 108 | 2 725 | 17 113 | 36 020 | 2 991 | 4 209 | 63 166 | ||||
Notes:
- 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 (refer below).
- Other fringe benefits include medical aid contributions, car scheme allowances, life insurance contributions, group life contributions, use of assets and unemployment insurance fund contributions.
| * | Remuneration is paid to directors of the holding company by subsidiary companies of the group. |
| # | Non-executive directors are subject to re-election to the board every three years. |
DIRECTORS' INTERESTS IN SHARES OF THE COMPANY
Interests of the directors in the ordinary shares of the company at 30 June 2019 were as follows:
| Direct beneficial number of shares 2019 |
% | Indirect beneficial number of shares 2019 |
% | Direct beneficial number of shares 2018 |
% | Indirect beneficial number of shares 2018 |
% | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Executive directors | |||||||||||||||
| Desmond Sacco | 990 000 | 0,71 | 32 430 489 | 23,23 | 990 000 | 0,71 | 32 430 489 | 23,23 | |||||||
| CE Walters | — | — | — | — | — | — | — | — | |||||||
| PE Sacco | 227 580 | 0,16 | — | — | 227 580 | 0,16 | — | — | |||||||
| RA Davies | — | — | — | — | — | — | — | — | |||||||
| BH van Aswegen | 6 305 | — | — | — | 6 305 | — | — | — | |||||||
| Non-executive directors | |||||||||||||||
| EM Southey | — | — | — | — | — | — | — | — | |||||||
| DN Aitken | — | — | — | — | — | — | — | — | |||||||
| TN Mgoduso | — | — | — | — | — | — | — | — | |||||||
| S Mhlari | — | — | — | — | — | — | — | — | |||||||
| WF Urmson | — | — | — | — | — | — | — | — | |||||||
| 1 223 885 | 0,87 | 32 430 489 | 23,23 | 1 223 885 | 0,87 | 32 430 489 | 23,23 |
| Note: | No changes in directors' interest have occurred between 30 June 2019 and the date of issue of this report. |
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.
In terms of the Memorandum of Incorporation (MoI), Messrs EM Southey and WF Urmson 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 notice to shareholders of the integrated annual report 2019).
DIVIDENDS
| 2019 R'000 |
2018 R'000 |
||||||
|---|---|---|---|---|---|---|---|
| Dividends declared during the year | |||||||
| Final dividend No 123 of 1200 cents (2018: 800 cents) per share – declared 5 September 2018 | 1 675 284 | 1 396 070 | |||||
| Interim dividend No 124 of 1 000 cents (2018: 1 000 cents) per share – declared on 25 February 2019 | 1 396 070 | 1 396 070 | |||||
| Less: Dividends attributable to treasury shares | (802 095) | (656 207) | |||||
| 2 269 259 | 1 856 719 | ||||||
| Dividends relating to results of the group for the year under review | |||||||
| Interim dividend No 124 of 1 000 cents (2018: 1 000 cents) per share – declared on 25 February 2019 | 1 396 070 | 1 396 070 | |||||
| Final dividend No 125 of 1 400 cents (2018: 1 200 cents) per share – declared on 4 September 2019 | 1 954 498 | 1 675 284 | |||||
| Less: Dividends attributable to treasury shares | (875 090) | (800 800) | |||||
| 2 475 478 | 2 270 554 | ||||||
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 2019. The directors are not aware of any material changes to this analysis between the year-end and the date of this report.
| 2019 | 2018 | ||||||||
|---|---|---|---|---|---|---|---|---|---|
| Number of shares |
% | Number 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) | 1 223 885 | 0,88 | 1 223 885 | 0,88 | |||||
| 106 245 335 | 76,11 | 106 245 335 | 76,11 | ||||||
| Public shareholders | 33 361 665 | 23,89 | 33 361 665 | 23,89 | |||||
| 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 | 1 223 885 | 0,88 | 1 223 885 | 0,91 | |||||
| Others – less than 5% | 33 361 665 | 23,89 | 33 361 665 | 23,86 | |||||
| 139 607 000 | 100,00 | 139 607 000 | 100,00 | ||||||
| * | As defined by Rule 4.25 of the JSE Listings Requirements. |
| ^ | Holding 5% or more of the issued share capital. |
| # | Refer “Black economic empowerment status report” of the integrated annual report 2019. |
SPECIAL RESOLUTIONS
The following special resolution was passed on 30 November 2018:
"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."
EVENT AFTER THE REPORTING PERIOD
On 4 September 2019, the board declared a final dividend of 1 400 cents per share, amounting to R1 954,5 million, which was paid to shareholders on 30 September 2019.
On 10 September 2019, a dividend of R2 billion was received from Assmang.