NOTES (21-30) TO THE FINANCIAL STATEMENTS



 PRINCIPAL SUBSIDIARY COMPANIES AND JOINT OPERATIONS (Rmillion)
21. TAX (Rmillion)   Consolidated Company
      2015  2014  2015  2014 
  Earnings before capital profits:        
  Current   260  507  13  10 
  Deferred   161  16  (17) 33 
  Rate change adjustment (deferred)   (4)    
  Prior years   1  1     
      422  520  (4) 43 
             
  Capital profits:          
  Current   5     
  Deferred   3  13  3  13 
      3  18  3  13 
             
  Tax charge for the year   425  538  (1) 56 
             
  Foreign tax included above   405  183  13  10 
             
  Tax charge at normal rate of South African tax   412  494  145  113 
  Adjusted for:          
  Non-taxable income and permanent allowances/deductions (56) (14) (164) (77)
  Assessed losses of foreign subsidiaries 10  (7)    
  Non-allowable expenditure 33  29  9  2 
  Foreign tax rate variations 12  11     
  Foreign withholding tax 10  10  6  5 
  Rate change adjustment (deferred)   (4)    
  Capital gains 3  18  3  13 
  Prior years   1  1     
  Tax charge   425  538  (1) 56 
             
  Normal rate of South African tax   28,0%  28,0%  28,0%  28,0% 
  Adjusted for:          
  Non-taxable income and permanent allowances/deductions (3,8) (0,8) (31,7) (19,1)
  Assessed losses of foreign subsidiaries 0,7  (0,4)    
  Non-allowable expenditure 2,2  1,7  1,7  0,5 
  Foreign tax rate variations 0,8  0,6     
  Foreign withholding tax 0,7  0,6  1,2  1,2 
  Rate change adjustment (deferred)   (0,2)    
  Capital gains 0,2  1,0  0,6  3,2 
  Prior years 0,1       
  Effective rate of tax   28,9%  30,5%  (0,2%) 13,8% 
             
             
22. HEADLINE EARNINGS (Rmillion) Consolidated    
      2015  2014     
             
  Profit attributable to shareholders 989  1 155     
             
  Less after tax effect of: (44) (49)    
  Capital profit on disposal of land and buildings (48) (66)    
  Capital profit on other items (2)      
  Loss/(surplus) on disposal of property, plant and equipment 4  (1)    
      (46) (67)    
  Tax charge on capital profit on sale of land 3  18     
  Tax charge on disposal of other fixed assests (1)      
             
  Headline earnings 945  1 106     
             
  Headline earnings per share (cents)        
  Basic   826,1  990,5     
  Diluted   826,1  978,9     
             
             
23. EARNINGS PER SHARE
  Earnings per share are calculated using the weighted average number of relevant ordinary shares and qualifying preferred ordinary shares in issue during the year. In the case of basic earnings per share, the weighted average number of shares in issue during the year was 114 388 093 (2014: 111 655 446). In respect of diluted earnings per share, the weighted average number of shares is 114 388 093 (2014: 112 979 644) and includes nil shares (2014: 941 010 shares) that relate to employee share award schemes and nil shares (2014: 383 188) that relate to BEE schemes.
             
             
24. DIVIDENDS (Rmillion) Consolidated Company
      2015  2014  2015  2014 
  Ordinary share capital        
  Final for previous year, paid 26 June 2014: 210 cents (2014: 190 cents) 231  206  231  206 
  Interim for current year, paid 5 February 2015: 170 cents (2014: 150 cents) 229  34  229  34 
             
  A preferred ordinary share capital        
  Interim for current year, paid 30 June 2014: 223 cents (30 June 2013: 223 cents) 28  56  28  56 
  Final for current year, paid 31 December 2014: Nil (31 December 2013: 223 cents)   56    56 
  Accrued for three months to 31 March 2015: Nil (2014: 223 cents)   28    28 
             
      488  380  488  380 
             
  Less dividends relating to BEE SPV consolidation shares (71) (140)    
      417  240  488  380 
             
  The final ordinary dividend for the year ended 31 March 2015 of 210 cents per share, declared on 21 May 2015 and payable on 25 June 2015, has not been accrued.
             
             
25. FINANCIAL RISK MANAGEMENT (Rmillion)
             
  Financial instruments consist primarily of cash deposits with banks, unlisted investments, derivatives, accounts receivable and payable, and loans to and from associates and others. Financial instruments are carried at fair value or amounts that approximate fair value.
             
  Categories of financial instruments Consolidated Company
      2015  2014  2015  2014 
             
  Financial assets        
  Derivative instruments in designated hedge accounting relationships 1  16  1  16 
  Unlisted shares 27  18     
  Loans and receivables at amortised cost 5 476  4 402  1 405  1 356 
      5 504  4 436  1 406  1 372 
             
  Financial liabilities          
  Derivative instruments in designated hedge accounting relationships 28  1  28  1 
  Financial liabilities at amortised cost 8 688  8 124  6 687  6 268 
  Non-recourse equity-settled BEE borrowings 654  691     
    9 370  8 816  6 715  6 269 
             
  Risk management is recognised as being dynamic, evolving and integrated into the core of running the business. The approach to risk management in Tongaat Hulett includes being able to identify and describe / analyse risks at all levels throughout the organisation, with mitigating actions being implemented at the appropriate point of activity. The very significant, high impact risk areas and the related mitigating action plans are monitored at a Tongaat Hulett risk committee level. Risks and mitigating actions are given relevant visibility at various appropriate forums throughout the organisation.
             
  In the normal course of its operations, Tongaat Hulett is inter alia exposed to capital, credit, foreign currency, interest, liquidity and commodity price risks. In order to manage these risks, Tongaat Hulett may enter into transactions which make use of derivatives. They include forward exchange contracts (FECs), interest rate swaps, commodity futures and options. Separate committees are used to manage risks and hedging activities. Tongaat Hulett does not speculate in or engage in the trading of derivative instruments. Since derivative instruments are utilised for risk management, market risk relating to derivative instruments will be offset by changes in the valuation of the underlying assets, liabilities or transactions being hedged. The overall risk strategy remains unchanged from previous years.
             
  Capital risk management
  Tongaat Hulett's overall strategy around capital structure remains unchanged from previous years and is continually reviewed in budgeting and business planning processes. Tongaat Hulett manages its capital to ensure that its operations are able to continue as a going concern, while maximising the return to stakeholders through an appropriate debt and equity balance. The capital structure of Tongaat Hulett consists of debt, which includes borrowings (long-term and short-term bank debt and bonds issued in the debt capital market), cash and cash equivalents and equity.
             
  Credit risk
  Financial instruments do not represent a concentration of credit risk because Tongaat Hulett deals with a variety of major banks, and its accounts receivable and loans are spread among a number of major industries, customers and geographic areas. The credit risk on liquid funds and derivative financial instruments is limited, because the counterparties are banks with high credit ratings assigned by international credit-rating agencies. In addition, appropriate credit committees review significant credit transactions before consummation. Where considered appropriate, use is made of credit guarantee insurance. A suitable provision is made for doubtful debts. Financial guarantee contracts are accounted for as insurance arrangements.
             
  Past due trade receivables
  Included in trade receivables are debtors which are past the expected collection date (past due) at the reporting date and no provision has been made, as there has not been a significant change in credit quality and the amounts are still considered recoverable. No collateral is held over these balances. A summarised age analysis of past due debtors is set out below.
             
      Consolidated Company
      2015  2014  2015  2014 
             
  Less than 1 month 41  41  25  32 
  Between 1 to 2 months 13  12  2  4 
  Between 2 to 3 months 6  9    2 
  Greater than 3 months 319  240  3  15 
  Total past due 379  302  30  53 
             
  Provision for doubtful debts        
  Set out below is a summary of the movement in the provision for doubtful debts for the year:        
  Balance at beginning of year 21  20  1  2 
  Currency alignment 2  2     
  Increase/(decrease) in allowance recognised in profit or loss 2  (1) 1  (1)
  Balance at end of year 25  21  2  1 
             
  Foreign currency risk
  In the normal course of business, Tongaat Hulett enters into transactions denominated in foreign currencies. As a result, Tongaat Hulett is subject to transaction and translation exposure from fluctuations in foreign currency exchange rates. A variety of instruments are used to minimise foreign currency exchange rate risk in terms of its risk management policy. In principle, it is the policy to cover foreign currency exposure in respect of liabilities and purchase commitments and an appropriate portion of foreign currency exposure on receivables. There were no speculative positions in foreign currencies at year end. All foreign exchange contracts are supported by underlying transactions. Tongaat Hulett is not reliant on imported raw materials to any significant extent. The fair values of the forward exchange contracts were established by reference to quoted prices and are categorised as level 1 under the fair value hierarchy.
             
  Forward exchange contracts that constitute designated hedges of currency risk at year end are summarised as follows:
 
 
  Consolidated   Company
      2015 2014        2015  2014 
  Average
contract
rate		 Commitment
(Rmillion)		 Fair value
of FEC
(Rmillion)		 Fair value
of FEC
(Rmillion)		   Average
contract
rate		 Commitment
(Rmillion)		 Fair value
of FEC
(Rmillion)		 Fair value
of FEC
(Rmillion)
 
 
Imports                  
US dollar 12,05  48  1      12,05  48  1   
Exports                  
US dollar 12,07  163  (4) (1)   12,07  163  (4) (1)
Net total   (3) (1)       (3) (1)
   
  The hedges in respect of imports and exports are expected to mature within approximately one year.
   
  The fair value is the estimated amount that would be paid or received to terminate the forward exchange contracts in arm's length transactions at the date of the statement of financial position.
   
  Forward exchange contracts that do not constitute designated hedges of currency risk at year end are summarised as follows:
   
 
  Consolidated Company
      2015 2014        2015  2014 
  Average
contract
rate		 Commitment
(Rmillion)		 Fair value
of FEC
(Rmillion)		 Fair value
of FEC
(Rmillion)		   Average
contract
rate		 Commitment
(Rmillion)		 Fair value
of FEC
(Rmillion)		 Fair value
of FEC
(Rmillion)
Imports                  
US dollar 12,27  6        12,27  6     
Euro 13,10  1        13,10  1     
UK pound 18,46  1        18,46  1     
Exports                  
US dollar 11,49  3        11,49  3     
Net total   - -       - -
   
  Although not designated as a hedge for accounting purposes, these forward exchange contracts represent cover of existing foreign currency exposure.
   
  Tongaat Hulett has the following uncovered foreign receivables:
   
 
  Consolidated       Company
  Foreign
amount
(million)		 2015
(Rmillion)		 2014
(Rmillion)		       Foreign
amount
(million)		 2015
(Rmillion)		 2014
(Rmillion)
US dollar 1  8  63        1  8  63 
Australian dollar 5  42  47        5  42  47 
New Zealand dollar   3  2             
    53  112        50  110   
   
  The impact of a 10% strengthening or weakening of the Rand on the uncovered Australian dollar receivable will have a R4 million (2014: R5 million) impact on profit before tax and a R3 million (2014: R3 million) impact on equity. The impact of a 10% strengthening or weakening of the Rand on the uncovered US dollar receivable will have a R1 million (2014: R6 million) impact on profit before tax and a R1 million (2014: R5 million) impact on equity.
   
  Commodity price risk
  Commodity price risk arises from the risk of an adverse effect on current or future earnings resulting from fluctuations in the prices of commodities. To hedge prices for Tongaat Hulett's substantial commodity requirements, commodity futures and options are used, including fixed and spot-defined forward sales contracts and call and put options.
   
  Tongaat Hulett Starch has secured its maize requirements for the current maize season to 31 May 2015 and a significant portion of its requirements for the period to 31 May 2016 by using a combination of unpriced procurement contracts and purchases and sales of maize futures.
   
  The fair value of the commodity futures contracts, which are set out below, were established by reference to quoted prices and are categorised as level 1 under the fair value hierarchy.
   
 
  Consolidated   Company
      2015 2014        2015  2014 
  Tons Contract
value
(Rmillion)		 Fair
value
(Rmillion)		 Fair
value
(Rmillion)		   Tons Contract
value
(Rmillion)		 Fair
value
(Rmillion)		 Fair
value
(Rmillion)
Futures - hedge accounted:                  
Maize futures sold 24 800  64  (32) 19    24 800  64  (32) 19 
Maize futures purchased 11 900  29  8  (3)   11 900  29  8  (3)
      (24) 16        (24) 16 
                   
Period when cash flow is expected to occur 2015/16  2014/15        2015/16  2014/15 
When expected to affect profit or loss 2015/16  2014/15        2015/16  2014/15 
Loss recognised in equity during the year 2          2   
Loss transferred from equity and recognised in profit or loss   4          4 
   
  Growing crops fair value measurement
  Growing crops, comprising roots and standing cane, are measured at fair value, which is determined using unobservable inputs and is categorised as Level 3 under the fair value hierarchy. The fair value of roots is determined on a current amortised cost basis, which is adjusted for cost increases, and the amortisation takes place over the life of the roots (between 6 and 12 years). The fair value of standing cane is determined by the growth of the cane, an estimate of the yield of the standing cane, sucrose content, selling prices, less costs to harvest and transport, over-the-weighbridge costs and costs into the market. Changes in the fair value are included in profit or loss, with a benefit of R96 million (2014: charge of R153 million) being recognised in profit or loss in the current year. A reconciliation of the change in fair value for the year is included in note 2.
   
  The effect of an increase in yield or in selling prices will result in an increase in the fair value of the standing cane. The key unobservable inputs, used in determining fair value, and which are not interrelated, are yield of the standing cane of 83 tons per hectare (2014: 87 tons per hectare), and prices. For commercial reasons, selling prices cannot be disclosed. A change in yield of one ton per hectare would result in a R25 million (2014: R26 million) change in fair value, while a change of one percent in the cane price would result in a R26 million (2014: R24 million) change in fair value.
   
  Interest rate risk
  Tongaat Hulett is exposed to interest rate risk on its fixed rate loan liabilities and accounts receivable and payable, which can impact on the fair value of these instruments. Tongaat Hulett is also exposed to interest rate cash flow risk in respect of its variable rate loans and short-term cash investments, which can impact on the cash flows of these instruments. The exposure to interest rate risk is managed through the cash management system, which enables Tongaat Hulett to maximise returns while minimising risks. The impact of a 50 basis point move in interest rates will have a R21 million (2014: R23 million) effect on profit before tax and a R15 million (2014: R17 million) impact on equity.
   
  Liquidity risk
  Tongaat Hulett manages its liquidity risk by monitoring forecast cash flows on a weekly basis. There are unutilised established banking facilities of R2,55 billion (2014: R2,84 billion). Tongaat Hulett continues to meet the covenants associated with its long-term unsecured South African debt facilities.
   
  Borrowings inclusive of interest projected at current interest rates:
   
 
Consolidated Weighted average
effective interest rate		 Due
within 1 year		 1 to 2 years 2 to 5 years After
5 years		 Interest
adjustment		 Total
2015              
Bank loans 8,0%  1 699  1 749  2 754    (1 023) 5 179 
Foreign loans 10,1%  303  61  182    (73) 473 
Other borrowings 7,4%  255        (9) 246 
Financial lease liability 9,2%  2  1  2    (1) 4 
Other non-interest bearing liabilities   2 782      4    2 786 
Net settled derivatives   28          28 
Total for Tongaat Hulett   5 069  1 811  2 938  4  (1 106) 8 716 
               
Non-recourse equity-settled BEE borrowings   666        (12) 654 
Total including SPV debt   5 735  1 811  2 938  4  (1 118) 9 370 
               
2014              
Bank loans 7,3%  1 346  2 228  2 075    (810) 4 839 
Foreign loans 10,2%  330  61  61  183  (107) 528 
Other borrowings 7,0%  359        (12) 347 
Financial lease liability 7,3%  2  1  1    (1) 3 
Other non-interest bearing liabilities   2 403      4    2 407 
Net settled derivatives   1          1 
Total for Tongaat Hulett   4 441  2 290  2 137  187  (930) 8 125 
               
Non-recourse equity-settled BEE borrowings   947      (256) 691 
Total including SPV debt   5 388  2 290  2 137  187  (1 186) 8 816 
   
   
26.  
             
        Interest of holding company  
  Name Principal activity Equity     Indebtedness
      2015 2014  2015 2014 
  Tongaat Hulett Starch (Pty) Limited Wet maize milling, starch & glucose manufacturing operation 15  15  35  37 
             
  Tongaat Hulett Developments (Pty) Limited Land & property development activities     (922) (857)
  Tongaat Hulett Estates (Pty) Limited Estate agency        
             
  Tongaat Hulett Sugar Limited Raw sugar refining, packaging and production of liquid & dry speciality sugars 4 238  4 238  646  576 
  Tambankulu Estates Limited (Swaziland)          
  Tongaat Hulett Acucareira de Mocambique, SA (Mozambique) (85%)          
  Tongaat Hulett Acucareira de Xinavane, SA (Mozambique) (88%)          
  Tongaat Hulett Acucar Limitada (Mozambique)          
  Triangle Sugar Corporation Limited (Zimbabwe)          
  Triangle Limited (Zimbabwe)          
  Hippo Valley Estates Limited (Zimbabwe) (50,3%)          
             
  The Tongaat Group Limited   54  54  (59) (59)
      4 307  4 307  (300) (303)
             
  Except where otherwise indicated, effective participation is 100%.
  A full list of all subsidiaries and joint operations is available from the company secretary on request.
             
  Non-wholly owned subsidary with material non-controlling interests: Hippo Valley Estates Limited (Zimbabwe)
               
  Hippo Valley Estates Limited is listed on the Zimbabwe Stock Exchange. It is engaged in the growing and milling of sugarcane and other farming operations.
             
               
      Consolidated    
  Summarised financial information as consolidated in Tongaat Hulett's financial statements: 2015  2014     
  Non-current assets   3 378  2 920     
  Current assets   1 260  1 079     
  Non-current liabilities   (1 672) (1 522)    
  Current liabilities   (231) (182)    
  Equity attributable to Tongaat Hulett   (1 356) (1 141)    
  Non-controlling interests   1 379  1 154     
             
             
  Revenue   1 621  1 380     
             
  Profit attributable to Tongaat Hulett   37  41     
  Profit attributable to non-controlling interests 36  40     
  Profit for the year   73  81     
             
  Other comprehensive income attributable to Tongaat Hulett 178  143     
  Other comprehensive income attributable to non-controlling interests 176  141     
  Other comprehensive income for the year 354  284     
           
  Total comprehensive income attributable to Tongaat Hulett 215  184     
  Total comprehensive income attributable to non-controlling interests 212  181     
  Total comprehensive income for the year 427  365     
           
  Net cash inflow from operating activities 389  300     
  Net cash outflow from investing activities (406) (313)    
  Net cash inflow from financing activities 24  279     
  Net cash inflow for the year 7  266     
           
   
         
27. GUARANTEES AND CONTINGENT LIABILITIES (Rmillion) Consolidated Company
  2015  2014  2015  2014 
  Guarantees in respect of obligations of Tongaat Hulett and third parties 33  113  6  6 
  Contingent liabilities   3     
  33  116  6  6 
         
          
28. LEASES (Rmillion)   Consolidated Company
      2015  2014  2015  2014 
  Amounts payable under finance leases          
  Minimum lease payments due:          
  Not later than one year   2  2  2  2 
  Later than one year and not later than five years 3  2  3  2 
      5  4  5  4 
  Less future finance charges   (1) (1) (1) (1)
  Present value of lease obligations   4  3  4  3 
             
  Payable:          
  Not later than one year   1  1  1  1 
  Later than one year and not later than five years 3  2  3  2 
      4  3  4  3 
             
  Operating lease commitments, amounts due:        
  Not later than one year   30

65  27  61 
  Later than one year and not later than five years 52  63  48  56 
      82  128  75  117 
  In respect of:          
  Property   39  84  33  75 
  Plant and machinery   3  6  4  5 
  Other   40  38  38  37 
      82  128  75  117 
             
             
             
29. CAPITAL EXPENDITURE COMMITMENTS (Rmillion) Consolidated Company
    2015  2014  2015  2014 
  Contracted   163  74  74  22 
  Approved but not contracted   478  152  388  124 
      641  226  462  146 
             
  Funds to meet future capital expenditure will be provided from retained net cash flows and debt financing.
             
             
30. RELATED PARTY TRANSACTIONS (Rmillion)
             
  During the year, Tongaat Hulett, in the ordinary course of business, entered into various related party sales, purchases and investment transactions. These transactions occurred under terms that are no less favourable than those arranged with third parties. Intra-group transactions are eliminated on consolidation.
      Consolidated Company
      2015  2014  2015  2014 
             
  Goods and services:          
  Transacted between operating entities within the company       1  1 
  Between the company and its subsidiaries       605  761 
  Transacted between subsidiaries within Tongaat Hulett   836  795     
             
  Administration fees and other income:          
  Transacted between operating entities within the company       3  6 
  Between the company and its subsidiaries       188  513 
  Transacted between subsidiaries within Tongaat Hulett   111  108     
  Transacted with/between joint operations within Tongaat Hulett 2  5     
  Paid to external related parties   5  5     
             
  Interest received/paid:          
  Transacted between operating entities within the company       510  474 
  Paid by the company to its subsidiaries       113  76 
  Received by the company from its subsidiaries         1 
  Transacted between subsidiaries within Tongaat Hulett   131  95     
  Transacted with/between joint operations within Tongaat Hulett 4  5     
             
  Sales of fixed assets:          
  Between the company and its subsidiaries       93  107 
  Transacted between subsidiaries within Tongaat Hulett   76  52     
             
  Loan balances:          
  Between operating entities within the company       6 243  5 816 
  Between the company and its subsidiaries       300  303 
  Pension Fund loan - employer surplus account   79  73  79  73 
             
  Dividends received:          
  Between the company and its subsidiaries       425  148 
  Transacted between subsidiaries within Tongaat Hulett   390  140     
             
  Other related party information:          
  Total dividends paid - refer to note 24    
  Directors - refer to here and here of the Remuneration Report
  Tongaat Hulett Developments is a guarantor on Tongaat Hulett Limited's South African long-term unsecured loan facility.
   

 

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