genesis international holdings nv

Transcrição

GENESIS INTERNATIONAL HOLDINGS N.V.
(Incorporated in the Netherlands)
(Registration number 63570173)
Share code: SNH
ISIN: NL0011375019
(“the Company”)
PROSPECTUS
The definitions and interpretations commencing on page 4 of this Prospectus apply to this entire document, including the cover page,
except where the context indicates a contrary intention.
A scheme of arrangement in terms of section 114 of the Companies Act has been proposed by the Steinhoff Board between Steinhoff and the Steinhoff Shareholders, pursuant to
which, if implemented, the Company will acquire all of the Steinhoff Shares from the Scheme Participants. Each Scheme Participant shall receive the Scheme Consideration on the
basis that each Scheme Participant shall, subject to the provisions of paragraph 11.3 of the Scheme Circular, which provisions are duplicated in section 2, paragraph 3.1.2 of this
Prospectus, be entitled to receive 1 (one) Ordinary Share for each Steinhoff Share transferred to the Company, resulting in the Company holding all of the issued Steinhoff Shares,
Steinhoff becoming a wholly owned subsidiary of the Company, and the Scheme Participants becoming Shareholders.
Upon implementation of the Scheme, the Steinhoff Shares will be delisted from the Main Board of the JSE, and the Ordinary Shares will be listed on the prime standard of the FSE,
as a primary listing, and the Main Board of the JSE, by way of a secondary listing.
Prior to the implementation of the Scheme, the name of the Company will be changed to “Steinhoff International Holdings N.V.”.
The offer to the Scheme Participants in terms of the Scheme to receive the Scheme Consideration could constitute an offer to the public in terms of section 95(1)(h) of the
Companies Act. This Prospectus is therefore issued in terms of section 99(2) of the Companies Act.
This Prospectus is issued in compliance with the Companies Act, the Companies Regulations and the Listings Requirements for purposes of giving information to the Scheme
Participants, and is accompanied by the Scheme Circular.
Transaction Sponsor to the Company
Bankers to the Company
Independent Sponsor to the Company
Reporting Accountants to the Company
on the pro forma financial information
Joint South African Legal Advisors to the Company
International Legal Advisors to
the Company and Steinhoff
Reporting Accountants to the Company on the
historical financial information of the Company
Date of issue: 7 August 2015
This Prospectus is only available in English. Copies of this Prospectus may be obtained from the registered office of the Company or the transfer secretaries whose addresses are
set out in the “Corporate Information” section of this Prospectus from 11 August 2015 to 7 September 2015 and on the website.
Please refer to the “Important Information” section of this Prospectus for information on the share capital of the Company and the directors’ responsibility statements.
CORPORATE INFORMATION
Registered office
Genesis International Holdings N.V.
Herengracht 466
1017 CA Amsterdam
The Netherlands
Company Secretary
Steinhoff Africa Secretarial Services Proprietary Limited
(Registration number 1992/004646/07)
28 Sixth Street
Wynberg
Sandton
Johannesburg
2090
(PO Box 1955, Bramley, 2018)
Joint South African Legal Advisors to the Company
Cliffe Dekker Hofmeyr Incorporated
1 Protea Place
Sandton
Johannesburg
2196
(Private Bag X40, Benmore, 2010)
Werksmans Incorporated
18th Floor
1 Thibault Square
Cape Town
8001
(PO Box 1474, Cape Town, 8000)
Independent Sponsor to the Company
PSG Capital Proprietary Limited
1st Floor, Building 8
Inanda Green Business Park
54 Wierda Road West
Wierda Valley
Sandton
Johannesburg
2196
(PO Box 650957, Benmore, 2010)
and at
1st Floor, Ou Kollege
35 Kerk Street
Stellenbosch
7599
(PO Box 7403, Stellenbosch, 7599)
Transaction Sponsor to the Company
ABSA Bank Limited
(acting through its Corporate and Investment Banking Division)
15 Alice Lane
Sandton
Johannesburg
2196
(Private Bag X10056, Sandton, 2146)
International Legal Advisors to the Company and Steinhoff
Linklaters LLP
One Silk Street
London, EC2Y 8HQ
United Kingdom
WTC Amsterdam
Zuidplein 180, 1077 XV Amsterdam
The Netherlands
Reporting Accountants to the Company on the pro forma
financial information
Deloitte & Touche
River Walk Office Park, Block B
41 Matroosberg Road
Ashlea Gardens X6
Pretoria
0081
(PO Box 11007, Hatfield, 0028)
Reporting Accountants to the Company on the historical financial
information of the Company
Baker Tilly Greenwoods
24th Floor
ABSA Centre
2 Riebeek Street
Cape Town
8001
(PO Box 3311, Cape Town, 8000)
Bankers to the Company
Commerzbank AG
Strawinskylaan 2501
NL–1077 ZZ Amsterdam
(Postbus 75444 NL–1070 AK Amsterdam)
Transfer Secretaries
Computershare Investor Services Proprietary Limited
Ground Floor
70 Marshall Street
Johannesburg
2001
(PO Box 61051, Marshalltown, 2107)
Telephone: +27 11 370 5000
Facsimile: +27 11 688 5210
Place and date of incorporation of the Company
Incorporated in the Netherlands on 22 June 2015
TABLE OF CONTENTS
Page
CORPORATE INFORMATION
Inside front cover
IMPORTANT INFORMATION
3
DEFINITIONS AND INTERPRETATIONS
4
SECTION 1: INFORMATION ABOUT THE COMPANY
7
1. NAME, ADDRESS, AND INCORPORATION
7
2. DIRECTORS, OTHER OFFICE HOLDERS, OR MATERIAL THIRD PARTIES
3. HISTORY, STATE OF AFFAIRS AND PROSPECTS OF THE COMPANY
7
16
4. SHARE CAPITAL OF THE COMPANY
27
5. OPTIONS OR PREFERENTIAL RIGHTS IN RESPECT OF ANY SHARES
31
6. COMMISSIONS PAID OR PAYABLE IN RESPECT OF UNDERWRITING
32
7. MATERIAL CONTRACTS
32
8. INTERESTS OF DIRECTORS AND PROMOTERS OF THE COMPANY
32
9. LOANS
32
10. SHARES ISSUED OTHERWISE THAN FOR CASH
33
11. PROPERTY ACQUIRED, TO BE ACQUIRED AND PROPERTY DISPOSED OF OR TO BE DISPOSED OF
33
12. AMOUNTS PAID OR PAYABLE TO PROMOTERS
33
13. PRELIMINARY EXPENSES AND ISSUE EXPENSES
33
SECTION 2: INFORMATION ABOUT THE OFFERED SECURITIES
34
1. PURPOSE OF THE OFFER
34
2. TIME AND DATE OF THE OPENING AND OF THE CLOSING OF THE OFFER
34
3. PARTICULARS OF THE OFFER
34
4. MINIMUM SUBSCRIPTION
37
SECTION 3: STATEMENTS AND REPORTS RELATING TO THE OFFER
38
1. ADEQUACY OF CAPITAL
38
2. MATERIAL CHANGES
38
3. LISTING OF THE SHARES
38
4. REPORT BY THE AUDITOR WHERE BUSINESS UNDERTAKING IS TO BE ACQUIRED
38
5. REPORT BY THE AUDITOR IN RESPECT OF THE ACQUISITION OF STEINHOFF
38
6. REPORT BY AUDITOR OF THE COMPANY
38
SECTION 4: ADDITIONAL MATERIAL INFORMATION
39
1. DOCUMENTS AVAILABLE FOR INSPECTION
39
2. LITIGATION STATEMENT
39
3. RISK FACTORS
39
4. IMPLICATIONS OF A SECONDARY LISTING OF THE COMPANY ON THE JSE
39
5. CROSS REFERENCE TABLE
39
SECTION 5: INAPPLICABLE OR IMMATERIAL MATTERS
40
SIGNATURE PAGE
41
ANNEXURE 1:
STEINHOFF’S HISTORICAL FINANCIAL RESULTS FOR THE FISCAL YEARS ENDED 30 JUNE 2012, 30 JUNE 2013 AND 30 JUNE 2014 42
ANNEXURE 2:
UNAUDITED AND UNREVIEWED INTERIM FINANCIAL STATEMENTS OF STEINHOFF AS AT 31 DECEMBER 2014
127
ANNEXURE 3:
6 (SIX) MONTHS’ UNAUDITED AND UNREVIEWED HISTORICAL FINANCIAL INFORMATION ON GENESIS INVESTMENT HOLDING GMBH
FOR THE HALF YEAR ENDED 31 DECEMBER 2014
136
ANNEXURE 4: PRO FORMA STATEMENT OF FINANCIAL POSITION AND INCOME STATEMENT OF THE COMPANY SUBSEQUENT TO
THE IMPLEMENTATION OF THE SCHEME, AS IF FOR THE STATEMENT OF FINANCIAL POSITION PURPOSES THE SCHEME HAD
BEEN IMPLEMENTED ON 31 DECEMBER 2014, AND FOR INCOME STATEMENT PURPOSES ON 1 JULY 2014
138
ANNEXURE 5: HISTORICAL FINANCIAL INFORMATION OF THE COMPANY FOR THE PERIOD ENDED 30 JUNE 2015
143
ANNEXURE 6: REPORTING ACCOUNTANTS’ REPORT ON THE PRO FORMA FINANCIAL INFORMATION INCLUDED IN THIS PROSPECTUS
151
ANNEXURE 7: REPORT BY THE AUDITOR IN TERMS OF REGULATION 78 OF THE COMPANIES REGULATIONS
152
ANNEXURE 8:
REPORTING ACCOUNTANTS’ REPORT ON THE HISTORICAL FINANCIAL INFORMATION OF THE COMPANY
154
ANNEXURE 9: CONSENT LETTERS OF THE COMPANY’S REPORTING ACCOUNTANTS, JOINT SOUTH AFRICAN LEGAL ADVISORS, INTERNATIONAL
LEGAL ADVISORS, THE TRANSACTION SPONSOR, THE INDEPENDENT SPONSOR, THE COMPANY’S BANKER, COMPANY SECRETARY
AND THE TRANSFER SECRETARIES
156
ANNEXURE 10: DETAILS OF THE INCORPORATION DIRECTORS, THE PROPOSED DIRECTORS AND THE PROPOSED MEMBERS OF
SENIOR MANAGEMENT
166
ANNEXURE 11: RISK FACTORS
180
ANNEXURE 12: SIGNED POWERS OF ATTORNEY BY THE INCORPORATION DIRECTORS AND STEINHOFF DIRECTORS AUTHORISING EACH
RESPECTIVE SIGNATORY TO SIGN FOR AND ON BEHALF OF THE BOARD AND THE STEINHOFF BOARD
191
1
IMPORTANT INFORMATION
The definitions and interpretations commencing on page 4 of this Prospectus apply to this section on “Important Information”, except where the context indicates a contrary intention.
SPECIAL NOTE IN REGARD TO THE PROSPECTUS
This Prospectus has been prepared on the assumption that the Scheme Resolutions proposed in the notice convening the Scheme Meeting forming part of the Scheme Circular,
which accompanies this Prospectus, will be passed at the Scheme Meeting. These Scheme Resolutions include, but are not limited to, the approval of the Articles of Association,
as amended by the Deeds of Amendment, and the inward listing of the Company as a secondary listing on the JSE.
SHARE CAPITAL OF THE COMPANY
Prior to the implementation of the Scheme, the authorised share capital of the Company will consist of 450,000 (four hundred and fifty thousand) shares, with a nominal value of
€0.50 (fifty Euro cents) each. The issued share capital of the Company consists of 90,000 (ninety thousand) shares, with a nominal value of €0.50 (fifty Euro cents) each, being
the Incorporation Shares.
Subsequent to the execution of the Deeds of Amendment, and on the implementation of the Scheme, the authorised share capital of the Company will consist of 17,500,000,000
(seventeen billion five hundred million) Ordinary Shares, with a nominal value of €0.50 (fifty Euro cents) each and 20,000,000,000 (twenty billion) Preference Shares, with a nominal
value of €0.01 (one Euro cent) each. The issued share capital of the Company, subsequent to the acquisition and/or cancellation of the Incorporation Shares, and the implementation of
the Scheme, will, on the basis of the number of Steinhoff Shares on the Last Practicable Date, consist of 3,667,476,771 (three billion six hundred and sixty seven million four hundred
and seventy six thousand seven hundred and seventy one) Ordinary Shares, with a nominal value of €0.50 (fifty Euro cents) each, being the Scheme Consideration.
As at the date of this Prospectus, no Shares are held in treasury.
As at the Last Practicable Date, based on the prevailing market capitalisation of Steinhoff, the future share premium of the Company is estimated to be approximately R250,000 million
(two hundred and fifty billion Rand).
The Ordinary Shares comprising the Scheme Consideration will, upon issue, be fully paid-up and freely transferable. Such Ordinary Shares will rank pari passu in all respects. The Ordinary
Shares comprising the Scheme Consideration are not subject to any convertibility or redemption provisions.
RESPONSIBILITY STATEMENT
The directors of the Company, being the persons set out in section 1, paragraph 2.1.1, read with Annexure 10, of this Prospectus, accept full responsibility for the accuracy
of the information provided in this Prospectus (but only insofar as it relates to the Company and only to the extent that they are required to accept such responsibility in terms of the
Companies Act or the Listings Requirements) and certify that to the best of their knowledge and belief there are no facts relating to the Company that have been omitted which
would make any statement relating to the Company false or misleading, and that all reasonable enquiries to ascertain such facts have been made and that this Prospectus contains all
information relating to the Company required by law and the Listings Requirements.
The directors of Steinhoff, being the persons set out in section 1, paragraph 2.1.7 of this Prospectus, collectively and individually accept full responsibility for the accuracy of
the information provided in this Prospectus (but only insofar as it relates to Steinhoff and only to the extent that they are required to accept such responsibility in terms of the Companies
Act or the Listings Requirements) and certify that to the best of their knowledge and belief there are no facts relating to Steinhoff that have been omitted which would make any
statement relating to Steinhoff false or misleading, and that all reasonable enquiries to ascertain such facts have been made and that this Prospectus contains all information relating
to Steinhoff required by law and the Listings Requirements.
The sole director of Genesis Investment Holding GmbH, being the person listed on page 5 of this Prospectus in the definition of “kika-Leiner”, individually accepts full responsibility for the
accuracy of the information provided in this Prospectus (but only insofar as it relates to kika-Leiner and only to the extent that he is required to accept such responsibility in terms of the
Companies Act or the Listings Requirements) and certify that to the best of his knowledge and belief there are no facts relating to kika-Leiner that have been omitted which would make any
statement relating to kika-Leiner false or misleading, and that all reasonable enquiries to ascertain such facts have been made and that this Prospectus contains all information relating to
kika-Leiner required by law and the Listings Requirements.
FORWARD-LOOKING STATEMENTS
This Prospectus contains statements about Steinhoff and the Company that are or may be forward-looking statements. All statements, other than statements of historical fact,
are, or may be deemed to be, forward-looking statements, including, without limitation, those concerning: strategy; the economic outlook for the industry; production; cash costs
and other operating results; growth prospects and outlook for operations, individually or in the aggregate; liquidity and capital resources and expenditure and the outcome and
consequences of any pending litigation proceedings. These forward-looking statements are not based on historical facts, but rather reflect current expectations concerning future
results and events and generally may be identified by the use of forward-looking words or phrases such as “believe”, “aim”, “expect”, “anticipate”, “intend”, “foresee”, “forecast”,
“likely”, “should”, “planned”, “may”, “estimated”, “potential” or similar words and phrases.
Examples of forward-looking statements include statements regarding a future financial position or future profits, cash flows, corporate strategy, anticipated levels of growth,
estimates of capital expenditure, acquisition strategy, and expansion prospects for future capital expenditure levels and other economic factors, such as, inter alia, interest rates.
By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future.
Steinhoff and the Company caution that forward-looking statements are not guarantees of future performance. Actual results, financial and operating conditions, liquidity and the
developments within the industry in which Steinhoff and the Company operate may differ materially from those made in, or suggested by, the forward-looking statements contained
in this Prospectus.
All these forward-looking statements are based on estimates and assumptions, as regards Steinhoff and the Company, made by Steinhoff and the Company as communicated in
publicly available documents issued by Steinhoff and the Company, all of which estimates and assumptions, although Steinhoff and the Company believe them to be reasonable,
are inherently uncertain. Such estimates, assumptions or statements may not eventuate. Factors which may cause the actual results, performance or achievements to be materially
different from any future results, performance or achievements expressed or implied in those statements or assumptions include other matters not yet known to Steinhoff and the
Company or not currently considered material by Steinhoff and the Company.
Shareholders should keep in mind that any forward-looking statement made in this Prospectus or elsewhere is applicable only at the date on which such forward-looking statement is made.
New factors that could cause the business of Steinhoff and the Company not to develop as expected may emerge from time to time and it is not possible to predict all of them. Further, the extent
to which any factor or combination of factors may cause actual results to differ materially from those contained in any forward-looking statement are not known. Steinhoff and the Company
have no duty to, and do not intend to, update or revise the forward-looking statements contained in this Prospectus after the date of issue of this Prospectus, except as may be required by law.
FOREIGN SHAREHOLDERS AND APPLICABLE LAWS
This Prospectus has been prepared for the purposes of complying with the Companies Act, the Companies Regulations and the Listings Requirements, and the information disclosed may
not be the same as that which would have been disclosed if this Prospectus had been prepared in accordance with the laws and regulations of any jurisdiction outside of South Africa
or the listings requirements of any securities exchange other than the JSE.
The Scheme may be affected by the laws of the relevant jurisdictions of Steinhoff Shareholders not resident in South Africa. Such non-resident Steinhoff Shareholders should
inform themselves about, observe, and advise Steinhoff in writing of, any applicable legal requirements of such jurisdictions. Any failure to comply with such applicable requests or
requirements may constitute a violation of the laws of such jurisdiction. It is the responsibility of any non-resident Steinhoff Shareholder to satisfy itself as to the full observance of the laws
and regulatory requirements of the relevant jurisdiction in connection with the Scheme, including the obtaining of any governmental, exchange control or other consents or the making
of any filings which may be required, the compliance with other necessary formalities, the payment of any issue, transfer or other taxes or other requisite payments due in
respect of such jurisdiction.
2
This Prospectus and any accompanying documentation are not intended to, and do not constitute, or form part of, an offer to sell or an invitation to purchase or subscribe for any
securities or a solicitation of any vote or approval in any jurisdiction in which it is unlawful to make such an offer, invitation or solicitation, or such offer, invitation or solicitation
would require Steinhoff or the Company to comply with disproportionately onerous filing and/or other disproportionately onerous regulatory obligations. In those circumstances
or otherwise if the distribution of this Prospectus and any accompanying documentation in jurisdictions outside of South Africa are restricted or prohibited by the laws of such
jurisdiction, this Prospectus and any accompanying documentation are deemed to have been sent for information purposes only and should not be copied or redistributed. Steinhoff
Shareholders who are not resident in South Africa must satisfy themselves as to the full observance of the laws of any applicable jurisdiction concerning their election to receive the
Scheme Consideration, including any requisite governmental or other consents, observing any other requisite formalities and paying any transfer or other taxes due in
such other jurisdictions and are required to advise Steinhoff of all such filing or regulatory obligations as Steinhoff or the Company may be required to comply with in
such jurisdictions in relation to the Scheme and the Listing. Steinhoff, the Company and their respective boards of directors accept no responsibility for the failure
by a Steinhoff Shareholder to inform itself about, or to observe, any applicable legal requirements in any relevant jurisdiction, or for any failure by Steinhoff or the
Company to observe the requirements of any jurisdiction.
The Scheme and this Prospectus are governed by the laws of South Africa (excluding the conflicts of laws rules of that jurisdiction to the extent such rules indicate the application
of the laws of any other country) and is subject to applicable South African laws and regulations, including the Companies Act, the Company Regulations and the Listings
Requirements.
Any Steinhoff Shareholder who is in doubt as to its position, including, without limitation, tax status and effects, should consult an appropriate independent professional adviser in the relevant
jurisdiction without delay.
NOTICE TO US SHAREHOLDERS
This Prospectus is not an offer of securities for sale in the United States. The Ordinary Shares to be issued under the Scheme will not be, and are not required to be, registered under
the Securities Act, and will be issued in reliance upon the exemption from the registration requirements of the Securities Act provided by Section 4(a)(2) thereof, which is available
for an offer and sale of securities not involving any public offering in the United States.
Accordingly, the Ordinary Shares to be issued under the Scheme will be issued to US Shareholders only if such US Shareholders have demonstrated that they are QIBs and agree
to certain transfer restrictions applicable to the Ordinary Shares issued to US Shareholders. Each US Shareholder that wishes to receive Ordinary Shares in the Scheme will be
required to execute a US Investor Letter, and deliver such letter to their CSDP or broker.
Any US Shareholder that is not a QIB or does not deliver a US Investor Letter will be deemed to be an “Excluded US Shareholder”, and the Ordinary Shares to which such person
is entitled shall be sold in the market on such person’s behalf at the best price which can reasonably be obtained at the time of the sale and the net proceeds of such sale be paid
to the person entitled thereto.
The Ordinary Shares have not been and will not be listed on a US securities exchange or quoted on any inter-dealer quotation system in the United States. The Company does not
intend to take any action to facilitate a market in the Ordinary Shares in the United States. Consequently, it is unlikely that an active trading market in the United States will develop
for the Ordinary Shares.
The Ordinary Shares have not been approved or disapproved by the United States Securities and Exchange Commission, any state securities commission in the United States or
any other regulatory authority in the United States, nor have any of the foregoing authorities passed comment upon, or endorsed the merit of, the Scheme or the accuracy or the
adequacy of this Prospectus or the Scheme Circular. Any representation to the contrary is a criminal offence in the United States.
US Shareholders should consult their own legal and tax advisers with respect to the legal and tax consequences of the Scheme in their particular circumstances.
CONSENTS
Each of the professional advisors to the Company have given and have not, prior to the date of issue of this Prospectus, withdrawn their written consents to the inclusion in this Prospectus of
their names and, where applicable, their reports, in the form and context in which they appear.
DATES AND TIMES
The dates and times referred to in this Prospectus are subject to change. Any such changes will be published on SENS. All dates and times referred to in this Prospectus are South African dates
and times.
INFORMATION INCLUDED IN RESPECT OF THE STEINHOFF GROUP
Due to the relative size of Steinhoff in relation to kika-Leiner, the Group will substantially consist of Steinhoff. In this regard, as Steinhoff has been listed on the JSE for an extensive period of time,
the majority of the information required for disclosure herein is in the public domain. This Prospectus will, where possible, incorporate the required information in terms hereof by reference to the
relevant public documents wherein the applicable information regarding the Steinhoff Group can be located. Please refer to the cross reference table in section 4, paragraph 5 of this Prospectus.
3
DEFINITIONS AND INTERPRETATIONS
In this Prospectus, unless the context indicates otherwise, reference to the singular shall include the plural and vice versa and words denoting one gender shall include the other.
Expressions denoting natural persons include juristic persons and associations of persons and vice versa and the words in the first column have the meanings stated opposite
them in the second column, as follows:
“African Operations”
the operations undertaken by the Group set out in section 1, paragraph 3.1.4.2 of this Prospectus;
“AFM”
Dutch Authority for the Financial Markets (Stichting Autoriteit Financiële Markten);
“Articles of Association”
the articles of association of the Company as at the date of issue of this Prospectus;
“Audit and Risk Committee”
the committee of the Supervisory Board contemplated in section 1, paragraph 3.11.1.2.4 of this Prospectus;
“Board”
the management board of directors of the Company which, as at the Last Practicable Date, is comprised of the Incorporation Directors
identified in section 1, paragraph 2.1.1 of this Prospectus, and, subsequent to the implementation of the Scheme, will be comprised of the
Management Board and the Supervisory Board;
“Broker”
any person registered as a broking member (equities) in terms of the rules of the JSE made in accordance with the Financial Markets Act;
“Business Day”
any day other than a Saturday, Sunday or any other day on which the JSE is closed;
“CIPC’’
the Companies and Intellectual Property Commission established by section 185 of the Companies Act;
“Companies Act”
the Companies Act, 2008, as amended;
“Companies Regulations’’
or “Reg”
the Companies Regulations, 2011, promulgated under the Companies Act, as amended;
“Company”
Genesis International Holdings N.V., registration number 63570173, a limited liability company (naamloze vennootschap) duly incorporated in
the Netherlands, with its corporate seat (statutaire zetel) in Amsterdam, the Netherlands and its registered office at Herengracht 466, 1017 CA
Amsterdam, the Netherlands;
“Conditions Precedent”
the conditions precedent to which the Scheme is subject, as set out in paragraph 11.3 of the Scheme Circular, which conditions precedent are
duplicated in section 2, paragraph 3.1.2 of this Prospectus;
“Conforama”
Conforama Holdings S.A., registration number 582 014 445, with its registered office at 8 Boulevard du Mandinet, being a wholly owned
subsidiary of Steinhoff;
“Convertible Bonds”
the €164,800,000 (one hundred and sixty four million eight hundred thousand euro), 6.375% (six point three seven five percent), 4 (four) and
a half year convertible bond due in May 2017, the €467,500,000 (four hundred and sixty seven million five hundred thousand euro), 4.5% (four
point five percent), 7 (seven) year guaranteed convertible bond due in March 2018, and the €465,000,000 (four hundred and sixty five million
euro), 4% (four percent), 7 (seven) year senior unsecured guaranteed convertible bond due in January 2021, each issued by Steinhoff Finance
Holding GmbH to international investors and listed on the Freiverkehr section of the FSE;
“Corporate Governance
Report”
the 2014 corporate governance report published by Steinhoff on its Website;
“CSDP”
a person that holds in custody and administers securities or an interest in securities and that has been accepted in terms of the Financial
Markets Act by a central securities depository as a participant in that central securities depository, being a “participant” as defined in the
Financial Markets Act;
“DCC”
Dutch Civil Code (Burgerlijk Wetboek);
“Deeds of Amendment”
the draft deeds of amendment to the Articles of Association;
“Dissenting Shareholders”
Steinhoff Shareholders who validly exercise their appraisal rights in terms of section 164 of the Companies Act, by objecting to and voting
against the special resolution approving the Scheme set out in the Scheme Circular, demanding, in term of sections 164 of the Companies
Act, that Steinhoff pay them the fair value of their Steinhoff Shares and who have not withdrawn such demand in terms of section 164(9) of the
Companies Act;
“euro” or “€”
the official currency of the Eurozone;
“EU Prospectus”
the prospectus submitted by the Company to the AFM and to be passported into Germany for admission to trading and listing of the Ordinary
Shares on the regulated market of the FSE;
“Eurozone”
the region comprising those member states of the European Union that have adopted the single currency in accordance with the Treaty
establishing the European Community (signed in Rome on 25 March 1957), as amended by the Treaty on the EU (signed in Maastricht on
7 February 1992) and the Amsterdam Treaty of 2 October 1997, as further amended from time to time;
“E xchange Control
Regulations”
the Exchange Control Regulations, 1961, promulgated in terms of section 9 of the Currency and Exchanges Act, 1933, as amended;
“Excluded US Shareholder”
a US Shareholder who is not a QIB or who has not delivered a completed US Investor Letter;
“Executive Committee”
the committee contemplated in section 1, paragraph 3.11.1.2.7 of this Prospectus;
“Financial Markets Act”
the Financial Markets Act, 2012, as amended;
“Fiscal Year”
the financial year of the Company or any of its subsidiaries;
“Foundation”
Stichting Genesis International, commercial register number 63429217, registered as a foundation (stichting) under the laws of the Netherlands;
“FSE”
the Frankfurt Stock Exchange (Frankfurter Wertpapierbörse);
“General Meeting”
the general meeting, being the corporate body or, where the context so requires, the physical meeting of shareholders of the Company;
“Group”
the Company and, subsequent to the implementation of the Scheme and the implementation of the kika-Leiner Sale Agreement, the Steinhoff
Group and kika-Leiner;
“Human Resources and
Remuneration Committee”
4
“Incorporation Directors”
the appointed directors of the Company whose details are set out in section 1, paragraph 2.1.1 of this Prospectus, read with Annexure 10;
“Incorporation Shares”
90,000 (ninety thousand) shares issued to the Foundation on the incorporation of the Company;
“Integrated Report”
the 2014 integrated annual report published by Steinhoff on its Website;
“International Operations”
the operations undertaken by the Group set out in section 1, paragraph 3.1.4.1 of this Prospectus;
“JD Group”
JD Group Limited, registration number 1981/009108/06, a limited liability public company duly incorporated in South Africa;
“JSE”
JSE Limited, registration number 2005/022939/06, a limited liability public company duly incorporated in South Africa, and licensed as an
exchange under the Financial Markets Act;
“KAP Industrial”
KAP Industrial Holdings Limited, registration number 1978/000181/06, a limited liability public company duly incorporated in South Africa
and listed on the JSE;
“kika-Leiner”
Genesis Investment Holding GmbH, registration number FN 392734a, a limited liability private company duly incorporated in the Republic of
Austria, whose sole director is Siegmar Schmidt, and its subsidiaries;
“kika-Leiner Acquisition”
the independent acquisition by Genesis Investment Holding GmbH of the trading businesses and certain fixed properties of kika-Leiner,
facilitated by the Steinhoff Group, as set out in section 1, paragraph 3.2.1.3.3.9 of this Prospectus;
“k ika-Leiner Sale
Agreement”
the share purchase agreement to be entered into by the Company in terms of which the Company will acquire all of the shares in Genesis
Investment Holding GmbH the effective date for which shall prior to the implementation of the scheme;
“King III”
King Report and Code on Corporate Governance, 2009;
“Last Practicable Date”
29 July 2015, the last practicable date before this Prospectus was finalised;
“Listing”
the proposed listing of the Company on the Main Board of the JSE and on the basis that such listing constitutes a “secondary listing” as
contemplated by the Listings Requirements;
“Listings Requirements”
or “LR”
the listings requirements of the JSE, as amended from time to time;
“Management”
the management of the Company;
“Management Board”
the management board of the Company which comprises its Managing Directors;
“Management Board Rules”
the proposed rules of the Management Board, available for inspection and which will be placed on the Website;
“Managing Directors”
persons appointed to the Management Board from time to time;
“Nominations Committee”
“Ordinary Shares”
Ordinary Shares with a nominal value of €0.50 (fifty Euro cents) each in the capital of the Company;
“Pacific Rim”
Australia, New Zealand, China and the far east;
“Pepkor”
Pepkor Holdings Proprietary Limited, registration number 2003/020009/07, a limited liability private company duly incorporated in
South Africa, being a wholly owned subsidiary of Steinhoff;
“Pepkor Acquisition”
the acquisition by Steinhoff of 100% (one hundred percent) of the equity share capital of Pepkor;
“Pepkor Circular”
the circular posted to Steinhoff Shareholders on 15 December 2014 regarding the acquisition of 92.34% (ninety two point three four percent) of
the equity share capital contemplated in the Pepkor Acquisition;
“Pepkor Group”
Pepkor and its subsidiaries;
“Preference Shares”
financing non-cumulative Preference Shares with a nominal value of €0.01 (one Euro cent) each in the capital of the Company;
“Prospectus”
this bound prospectus, dated 7 August 2015, issued in terms of section 99(2) of the Companies Act, and containing the pre-listing particulars
of the Shares as required in terms of Section 6 of the Listings Requirements;
“PSG Group”
PSG Group Limited, registration number 1970/008484/06, a limited liability public company duly incorporated in South Africa and listed on
the JSE;
“QIB”
qualified institutional buyer” (as such term is defined in the Securities Act);
“Rand” or “R”
the official currency of South Africa;
“Rights Offer”
the rights offer launched on 2 July 2014, published by Steinhoff on SENS and on its Website;
“RoA”
Rest of Africa – the Pepkor Group’s operations in Angola, Malawi, Mozambique, Nigeria, Zambia and Zimbabwe;
“Scheme”
the acquisition by the Company of all of the Steinhoff Shares, by way of a scheme of arrangement in terms of section 114 of the Companies Act,
proposed by the Steinhoff Board between Steinhoff and the Steinhoff Shareholders upon the terms and subject to the Conditions Precedent set
out in paragraph 11.3 of the Scheme Circular, which Conditions Precedent are duplicated in section 2, paragraph 3.1.2 of this Prospectus, and
which, if implemented, will result in the Company acquiring the Steinhoff Shares from the Scheme Participants and the Scheme Participants
receiving the Scheme Consideration, the terms of which are more fully set out in the Scheme Circular (subject to any modification or amendment
made thereto to which Steinhoff and the Company may agree in writing (and which the TRP and the JSE approve, to the extent that the TRP’s or
the JSE’s approval is required));
“Scheme Circular”
the circular to Steinhoff Shareholders in respect of the Scheme, which circular was provided to Steinhoff Shareholders together with a copy of
this Prospectus;
“Scheme Consideration”
the issue of 1 (one) Ordinary Share to each Scheme Participant for every Steinhoff Share transferred to the Company pursuant to the Scheme;
“Scheme Meeting”
the meeting of Scheme Participants to be held at Steinhoff’s registered office at 28 Sixth Street, Wynberg, Sandton, 2090 at 12:00 on Monday,
7 September 2015 (subject to any adjournment, postponement or cancellation thereof) to consider and, if deemed fit, approve the Scheme
Resolutions. A notice convening such meeting is attached to, and forms part of, the Scheme Circular;
“Scheme Participants”
refers to the Steinhoff Shareholders registered as such on the Scheme Record Date, other than the Dissenting Shareholders;
“Scheme Record Date”
the date on, and time at which, a person must be recorded in the Steinhoff Register in order to be eligible to participate in the Scheme and receive
the Scheme Consideration, which is expected to be 17:00 on 4 December 2015;
5
“Scheme Resolutions”
the resolutions to be proposed at the Scheme Meeting, the details of which are set out in the notice of the Scheme Meeting attached to the
Scheme Circular;
“Securities Act”
the US Securities Act of 1933;
“SENS”
the stock exchange news service of the JSE;
“Shareholders”
holders of Shares;
“Shares”
the Ordinary Shares and the Preference Shares;
“South Africa”
the Republic of South Africa;
“Steinhoff”
Steinhoff International Holdings Limited, registration number 1998/003951/06, a limited liability public company duly incorporated in
South Africa and listed on the JSE;
“Steinhoff Board”
the board of directors of Steinhoff, from time to time;
“Steinhoff Group”
Steinhoff and its subsidiaries;
“Steinhoff MOI”
the memorandum of incorporation of Steinhoff;
“Steinhoff Register”
(i) the register of Steinhoff Shareholders (including the relevant sub-registers of the CSDPs administering the sub-registers of Steinhoff
(as contemplated in the Financial Markets Act)); and
(ii) the register of disclosures of Steinhoff;
“Steinhoff Shares”
ordinary no par value shares in Steinhoff;
“Steinhoff Shareholders”
the holders of Steinhoff Shares;
“Steinhoff UK”
Steinhoff UK Holdings Limited, registration number 3738136, a limited liability company duly incorporated in England;
“Supervisory Board”
the supervisory board of the Company which comprises the Supervisory Directors;
“Supervisory Board Rules”
the proposed rules of the Supervisory Board, which will be available on the Website;
“Supervisory Directors”
persons appointed to the Supervisory Board from time to time;
“Thibault”
Thibault Square Financial Services Proprietary Limited, registration number 1992/004170/07, a limited liability private company duly
incorporated in South Africa;
“Titan”
Titan Premier Investments Proprietary Limited, registration number 1979/000776/07, a limited liability private company duly incorporated in
South Africa;
“TRP”
the Takeover Regulation Panel established by section 196 of the Companies Act;
“USCS”
Unitrans Supply Chain Solutions Proprietary Limited, registration number 1967/010920/07, a limited liability private company duly incorporated
in South Africa;
“US Investor Letter”
an investor letter in the format set out in annexure 8 of the Scheme Circular that US Shareholders wishing to receive Ordinary Shares will be
required to execute;
“US Shareholders”
Steinhoff Shareholders with a registered address in the United States;
“Voting Pool Agreement”
the voting pool agreement between the Voting Pool Parties as described in the Pepkor Circular;
“Voting Pool Parties”
Titan, Thibault, Brait Mauritius Limited, and several directors and members of the management of Steinhoff and Pepkor (including their family
interests); and
“Website”
Steinhoff’s website at http://www.steinhoffinternational.com.
6
SECTION 1: INFORMATION ABOUT THE COMPANY
1.
NAME, ADDRESS AND INCORPORATION
1.1
Name and registration number
Genesis International Holdings N.V., registration number 63570173.
1.2
1.3
Address of the Company’s registered office
1.2.1
Registered office address – Herengracht 466, 1017 CA Amsterdam, the Netherlands.
1.2.2
Address of the office of the Company’s transfer agent, Computershare Investor Services Proprietary Limited – Ground Floor, 70 Marshall Street,
Johannesburg, 2001.
Date of incorporation of the Company
22 June 2015
1.4
Name of the foreign jurisdiction in which the Company is incorporated
The Netherlands
1.5
Date on which the Company filed its memorandum of incorporation and list of directors in terms of section 99(1)(b) of the Companies Act
1 July 2015
2. DIRECTORS, OTHER OFFICE HOLDERS, OR MATERIAL THIRD PARTIES
2.1
Directors, proposed directors and prescribed officers of the Company and Steinhoff
2.1.1
As at the date of this Prospectus, the Company has 3 (three) appointed directors, the Incorporation Directors, whose details are as follows:
Robert Harmzen
Nationality:
Dutch
Identity number:
Passport number: NXDHDDB69
Business address:
Herengracht 466, 1017 CA Amsterdam, the Netherlands
Physical address:
Achter Sint Aagten 12, 2161 KA Liss, the Netherlands
Postal address:
PO Box 15803, 1001 NH Amsterdam
Date of appointment
2015/06/23
Date of birth:
1952/12/01
Qualifications:
NBA (Nederlandse Beroepsorganisatie van Accounts)
Occupation/Position:
Director
Term of office:
Indefinite
Telephone number (business):
+31 (0)20 420 0600
Fax number:
+31 (0)20 624 1007
Email address:
[email protected]
Stephanus Hilgard Muller
Nationality:
South African
Identity number:
6102025216084
Business address:
6A Athole Avenue, Craighall, 2196, South Africa
Physical address:
Postal address:
Date of appointment
2015/07/24
Date of birth:
1961/02/02
Qualifications:
BComm Acc Hon, CA(SA)
Director
Term of office:
Indefinite
+27 11 781 0316
Fax number:
+27 11 781 0316
Email address:
[email protected]
7
2.1.2
Johannes Lodewicus Coetzer
Nationality:
South African
Identity number:
6003205160086
Business address:
13 Algarve, 161 San Juan Avenue, Northcliff, 2195, South Africa
Physical address:
Postal address:
Date of appointment
2015/07/24
Date of birth:
1960/03/20
Qualifications:
CA(SA)
Director
Term of office:
Indefinite
+27 83 411 9771
Email address:
[email protected]
The Articles of Association, as amended by the Deeds of Amendments, will provide for a two-tier board structure consisting of the Management Board and the
Supervisory Board. Subsequent to the execution of the Deeds of Amendment, the following proposed directors will have been appointed to the Management
Board and the Supervisory Board, and the Incorporation Directors will have resigned as directors of the Company:
2.1.2.1
8
Management Board
Markus Johannes Jooste
Nationality:
South African
Identity number:
6101225005081
Business address:
28 Sixth Street, Wynberg, Sandton 2018
Physical address:
Jonkersdrift Farm, Jonkershoek, Stellenbosch, 7600
Postal address:
PO Box 1955, Bramley, 2018
Date of birth:
1961/01/22
Qualifications:
BAcc, CA(SA)
Chief Executive Officer
Term of office:
Not more than 4 (four) years
+27 21 808 0700
Fax number:
+27 21 808 0800
Email address:
[email protected]
Daniël Maree van der Merwe
Nationality:
South African
Identity number:
5805215066082
Business address:
28 Sixth Street, Wynberg, Sandton 2018
Physical address:
Postal address:
Date of birth:
1958/05/21
Qualifications:
BComm, LLB
Chief Operating Officer
Term of office:
+27 21 808 0700
Fax number:
+27 21 808 0800
Email address:
[email protected]
Andries Benjamin la Grange
Nationality:
South Africa
Identity number:
7409195075086
Business address:
Block D, DeWagenweg Office Park, Stellentia Road, Stellenbosch, 7600
Physical address:
49 Brandwacht Street, Brandwacht Dalsig, Stellenbosch, 7600
Postal address:
PO Box 122, Stellenbosch, 7599
Date of birth:
1974/09/19
Qualifications:
BComm (Law), CA(SA)
Chief Financial Officer
Term of office:
+27 21 808 0700
Fax number:
+27 21 808 0800
Email address:
[email protected]
2.1.2.2
Supervisory Board
Deenadayalen Konar
Nationality:
South African
Identity number:
5402195036085
Business address:
52 Corlett Drive, Wanderers Office Park, @Grant Thornton Building, Illovo, 2196
Physical address:
52 Corlett Drive, Wanderers Office Park, @Grant Thornton Building, Illovo, 2196
Postal address:
Villa Toscana, 25 Melville Road, Hyde Park, 2196
Date of birth:
1954/02/19
Qualifications:
BComm, MAS, DComm, CA(SA)
Independent Supervisory Director
Term of office:
+27 21 808 0700
Fax number:
+27 21 808 0800
Email address:
[email protected]
Stefanes Francois Booysen
Nationality:
South African
Identity number:
6206175106084
Business address:
17 Pencarrow Lane, Cornwall Hill Estate, Irene, 0157
Physical address:
17 Pencarrow Lane, Cornwall Hill Estate, Irene, 0157
Postal address:
PO Box 104, Cornwall Hill, 0178
Date of birth:
1962/06/17
Qualifications:
BCompt (Hons) (Accounting), MCompt, DComm (Accounting), CA(SA)
Term of office:
+27 21 808 0700
Fax number:
+27 21 808 0800
Email address:
[email protected]
David Charles Brink
Nationality:
South African
Identity number:
3908095004082
Business address:
34 Ormonde Street, Bryanston, 2191
Physical address:
34 Ormonde Street, Bryanston, 2191
Postal address:
PO Box 68133, 2021
Date of birth:
1939/08/09
Qualifications:
MSc Eng (Mining), DComm (hc), Graduate Diploma in Company Direction
Term of office:
+27 21 808 0700
Fax number:
+27 21 808 0800
Email address:
[email protected]
Claas Edmund Daun
Nationality:
German
Identity number:
German Passport number: C2F5WX19R
Business address:
Bahnhofstr 21, 26180 Rastede, Germany
Physical address:
Postal address:
Date of birth:
1943/01/26
Qualifications:
BAcc, CA
Term of office:
+27 21 808 0700
Fax number:
+27 21 808 0800
Email address:
[email protected]
9
10
Thierry Louis Joseph Guibert
Nationality:
French
Identity number:
French Passport number 14CZ75376
Business address:
Lacoste SA – Devanlay SA – MFIS/6 rue de la Chaussée d’Antin/75009 Paris/France
Physical address:
Lacoste SA – Devanlay SA – MFIS/6 rue de la Chaussée d’Antin/75009 Paris/France
Postal address:
Ibis Rue De Volontaires, 92140 Clamart, France
Date of birth:
1970/11/26
Qualifications:
MBA(FR)
Supervisory Director
Term of office:
+27 21 808 0700
Fax number:
+27 21 808 0800
Email address:
[email protected]
Marthinus Theunis Lategan
Nationality:
South African
Identity number:
5702265013082
Business address:
13 Palala Road, Westcliff, 2193
Physical address:
13 Palala Road, Westcliff, 2193
Postal address:
PO Box 7791, Johannesburg, 2000
Date of birth:
1957/02/26
Qualifications:
BAcc (Hons), MCompt, DComm (Accounting), CA(SA), Advanced Diploma Banking Law
Term of office:
+27 21 808 0700
Fax number:
+27 21 808 0800
Email address:
[email protected]
Johannes Fredericus Mouton
Nationality:
South African
Identity number:
4610025045081
Business address:
35 Kerk Street, Ou Kollege, Stellenbosch, 7600
Physical address:
Klein Gustrouw Estate, Jonkershoek, Stellenbosch, 7600
Postal address:
Date of birth:
1946/10/02
Qualifications:
BComm (Hons), CA(SA), AEP
Term of office:
+27 21 808 0700
Fax number:
+27 21 808 0800
Email address:
[email protected]
Heather Joan Sonn
Nationality:
South African
Identity number:
7110200080083
Business address:
18 Orphan Street c/o Bree Street and Orphan Street, Cape Town 8001
Physical address:
Postal address:
18 Orphan Street c/o Bree Street and Orphan Street, Cape Town 8001
11 Bosman Street, Landudno, Cape Town, 8001
Date of birth:
1971/10/20
Qualifications:
BA (Political Science), MSc (International Business)
Term of office:
+27 21 808 0700
Fax number:
+27 21 808 0800
Email address:
[email protected]
Bruno Ewald Steinhoff
Nationality:
German
Identity number:
German Passport number C2F6K1C6H
Business address:
Langebrugger Strasse 5, 26655 Westerstede, Germany
Physical address:
Am Melmenkamp 1a 26655, Westerstede, Germany
Postal address:
Langebrugger Strasse 5, 26655 Westerstede, Germany
Date of birth:
1937/11/26
Qualifications:
Founder of the Steinhoff Group
Non-executive Supervisory Director
Term of office:
+27 21 808 0700
Fax number:
+27 21 808 0800
Email address:
[email protected]
Paul Denis Julia van den Bosch
Nationality:
Belgian
Identity number:
Belgian Passport number EJ425262
Business address:
Metaalweg 15, 5527 AE Hapert, the Netherlands
Physical address:
Nethestraat 46, 3941 Hechtel-Eksel, Belgium
Postal address:
Posbus 10, 5527 Zg Hapert, the Netherlands
Date of birth:
1962/09/20
Qualifications:
VEcon, MBA
Term of office:
+27 21 808 0700
Fax number:
+27 21 808 0800
Email address:
[email protected]
Christoffel Hendrik Wiese
Nationality:
South African
Identity number:
4109105008085
Business address:
36 Stellenberg Road, Parow Industria, 7490
Physical address:
98 The Ridge, Fourth Beach, Clifton, 8001
Postal address:
PO Box 6100, Parow East, 7501
Date of birth:
1941/09/10
Qualifications:
BA, LLB, DComm (hc)
Term of office:
+27 21 808 0700
Fax number:
+27 21 808 0800
Email address:
[email protected]
Angela Krüger-Steinhoff
Nationality:
German
Identity number:
Business address:
Physical address:
German Passport number C2F6TPJCH
Langebrugger Strasse 5, 26655 Westerstede, Germany Grüne Strasse 36, 26655
Westerstede, Germany, 0000
Grüne Strasse 36, 26655 Westerstede, Germany
Postal address:
Grüne Strasse 36, 26655 Westerstede, Germany
Date of birth:
1971/07/16
Qualifications:
BComm (Economic Science)
Term of office:
+27 21 808 0700
Fax number:
+27 21 808 0800
Email address:
[email protected]
11
2.1.3
12
On the implementation of the Scheme, the following persons will form part of the senior management of the Company:
Johannes Nicolaas Stephanus Du Plessis
Nationality:
South African
Identity number:
4910025118080
Business address:
Block D, DeWagenweg Office Park, Stellentia Road, Stellenbosch, 7600
Physical address:
9 Cross Street, Fernkloof, Hermanus, 7200
Postal address:
Date of appointment
2006/03/15
Date of birth:
1949/10/02
Qualifications:
BComm, LLB
Member of senior management
Term of office:
Not specified
+27 21 808 0700
Fax number:
+27 21 808 0800
Email address:
[email protected]
Karel Johan Grové
Nationality:
South African
Identity number:
4905285049082
Business address:
28 Sixth Street, Wynberg, Sandton, 2018
Physical address:
464 Pearl Valley Golf Estate, Paarl, 7646
Postal address:
Date of appointment
2008/02/04
Date of birth:
1949/05/28
Qualifications:
AMP (Oxford)
Term of office:
Not specified
+27 21 808 0700
Fax number:
+27 21 808 0800
Email address:
[email protected]
Mariza Nel
Nationality:
South African
Identity number:
7301030022086
Business address:
Physical address:
5A Rowan Avenue, Mostertsdrift, Stellenbosch, 7600
Postal address:
Date of appointment
2011/05/30
Date of birth:
1973/01/03
Qualifications:
BComm, ACMA(UK)
Term of office:
Not specified
+27 21 808 0700
Fax number:
+27 21 808 0800
Email address:
[email protected]
Hendrik Johan Karel Ferreira
Nationality:
South African
Identity number:
5506025016081
Business address:
Physical address:
2 Vallee Lustre, Paradyskloof, Stellenbosch, 7600
Postal address:
Date of appointment
2009/05/01
Date of birth:
1955/06/02
Qualifications:
BCompt (Hons), CA(SA)
Term of office:
Not specified
+27 21 808 0700
Fax number:
+27 21 808 0800
Email address:
[email protected]
2.2
Stephanus Johannes Grobler
Nationality:
South African
Identity number:
5909075029089
Business address:
Physical address:
9 Akker Street, Anesta, Paradyskloof, Stellenbosch, 7600
Postal address:
Date of appointment
2009/05/01
Date of birth:
1959/09/07
Qualifications:
BComm (Hons) (Economics), LLB
Term of office:
Not specified
+27 21 808 0700
Fax number:
+27 21 808 0800
Email address:
[email protected]
Frederick Johannes Nel
Nationality:
South African
Identity number:
5908225019081
Business address:
Physical address:
Postal address:
Date of appointment
1998/08/26
Date of birth:
1959/08/22
Qualifications:
BCompt (Hons), CA(SA)
Term of office:
Not specified
+27 21 808 0700
Fax number:
+27 21 808 0800
Email address:
[email protected]
2.1.4
As at the date of this Prospectus, there are no prescribed officers of the Company.
2.1.5
The further details of the Incorporation Directors, the proposed directors and proposed members of senior management listed above are contained in
Annexure 10.
2.1.6
As the Company has been incorporated for less than 5 (five) years, the details of the founder of the Company, being the Foundation, are as follows –
2.1.6.1
Full name – Stichting Genesis International;
2.1.6.2
Business address – Herengracht 466, 1017 CA Amsterdam, the Netherlands; and
2.1.6.3
Function in the Group – the founder does not have any function or involvement in the Company.
2.1.7
The Steinhoff Board consists of the persons listed as proposed directors to be appointed to the Company’s Management Board and Supervisory Board in
section 1, paragraph 2.1.2 of this Prospectus, read with Annexure 10, and the members of senior management of the Company in section 1, paragraph 2.1.3
of this Prospectus, read with Annexure 10.
2.1.8
No director of the Company or Steinhoff, the founder or member of Steinhoff’s senior management has –
2.1.8.1
been the subject of any bankruptcies, insolvencies or individual voluntary compromise arrangements;
2.1.8.2
been party to or associated with any business rescue plans and/or resolution proposed by any entity to commence business rescue proceedings,
application having been made for any entity to begin business rescue proceedings, notices having been delivered in terms of Section 129(7) of the
Companies Act, receiverships, compulsory liquidations, creditors’ voluntary liquidations, administrations, company voluntary arrangements or
any compromise or arrangement with creditors generally or any class of creditors of any company, where such person is or was a director, with an
executive function within such company at the time of, or within the 12 (twelve) months preceding, any such event(s);
2.1.8.3
been party to or associated with any compulsory liquidations, administrations or partnership voluntary arrangements of any partnerships where
such person is or was a partner at the time of or within the 12 (twelve) months preceding such event(s);
2.1.8.4
been party to or associated with any receiverships of any asset(s) of such person or of a partnership of which the person is or was a partner at the
time of, or within the 12 (twelve) months preceding, such event;
2.1.8.5
been the subject of any public criticisms of such person by statutory or regulatory authorities, including recognised professional bodies, and
whether such person has ever been disqualified by a court from acting as a director of a company or from acting in the management or conduct of
the affairs of any company;
2.1.8.6
been found guilty of any offence involving dishonesty committed by such person;
2.1.8.7
been removed from an office of trust, on the grounds of misconduct and involving dishonesty; and/or
2.1.8.8
been declared by court order to be a delinquent or, been placed under probation in terms of Section 162 of the Companies Act and/or section 47
of the Close Corporations Act, 1984, as amended, or been disqualified to act as a director in terms of Section 219 of the Companies Act, 1973,
as amended.
Name and business address of the Company’s reporting accountants
The details of the Company’s reporting accountants are set out in the section headed “Corporate Information” on the inside front cover of this Prospectus. The consent letters
by the reporting accountants of the Company, as contemplated in section 102(2) of the Companies Act are attached hereto in Annexure 9.
13
2.3
Name and address of the Company’s joint South African legal advisors
The details of the Company’s joint South African legal advisors are set out in the section headed “Corporate Information” on the inside front cover of this Prospectus.
The consent letters by the joint South African legal advisors of the Company, as contemplated in section 102(2) of the Companies Act, are attached hereto in Annexure 9.
2.4
Name and address of the Company’s and Steinhoff’s International legal advisors
The details of the Company’s and Steinhoff’s international legal advisors are set out in the section headed “Corporate Information” on the inside front cover of this Prospectus.
The consent letter by the international legal advisors of the Company and Steinhoff, as contemplated in section 102(2) of the Companies Act, is attached hereto in Annexure 9.
2.5
Name and address of the Company’s transaction sponsor
The details of the Company’s transaction sponsor are set out in the section headed “Corporate Information” on the inside front cover of this Prospectus. The consent letter by
the transaction sponsor of the Company, as contemplated in section 102(2) of the Companies Act, is attached hereto in Annexure 9.
2.6
Name and address of the Company’s independent sponsor
The details of the Company’s independent sponsor are set out in the section headed “Corporate Information” on the inside front cover of this Prospectus. The consent letter
by the independent sponsor to the Company, as contemplated in section 102(2) of the Companies Act, is attached hereto in Annexure 9.
2.7
Name and address of the Company’s banker
The details of the Company’s banker are set out in the section headed “Corporate Information” on the inside front cover of this Prospectus. The consent letter by the banker to
the Company, as contemplated in section 102(2) of the Companies Act, is attached hereto in Annexure 9.
2.8
Name and address of company secretary
The details of the company secretary are set out in the section headed “Corporate Information” on the inside front cover of this Prospectus. The professional qualifications of
the company secretary are as follows: it utilises the services of 3 (three) qualified attorneys (one of which is a notary), 1 (one) qualified chartered accountant and a number
of qualified secretarial staff.
2.9
The Company does not have any stockbrokers or underwriters.
2.10 Appointment of directors of the Company
2.10.1 The Incorporation Directors were appointed for an indefinite term of office but will have resigned by the operative date of the Scheme.
2.10.2 The General Meeting appoints the Managing Directors. The Managing Directors may be appointed upon a non-binding nomination by the Supervisory Board.
A resolution to appoint a Managing Director requires an absolute majority of the votes cast, if adopted upon the non-binding nomination by the Supervisory
Board. A resolution by the General Meeting to appoint a Managing Director other than upon such non-binding nomination requires a majority of two-thirds
of the votes cast representing at least one-third of the Company’s issued share capital.
2.10.3 The General Meeting appoints the Supervisory Directors. The Supervisory Directors may be appointed upon a non-binding nomination by the Supervisory
Board. A resolution to appoint a Supervisory Director requires an absolute majority of the votes cast, if adopted upon the non-binding nomination by the
Supervisory Board. A resolution by the General Meeting to appoint a Supervisory Director other than upon such non-binding nomination requires a majority
of two-thirds of the votes cast representing at least one-third of the Company’s issued share capital. The Supervisory Board shall appoint one of the
Supervisory Directors as chairman of the Supervisory Board and one of the Supervisory Directors as vice-chairman.
2.11 Qualification of directors
2.11.1
The Articles of Association, as amended by the Deeds of Amendment, do not contain any provision relating to the qualification of directors. Notwithstanding
the aforementioned, the Supervisory Board will draw up a profile for its size and composition taking into account the nature of the business of the Company
and its subsidiaries, and the desired expertise, background, age and gender of the Supervisory Directors. The Supervisory Board shall discuss the profile at
the occasion of each amendment thereof in the relevant General Meeting.
2.11.2 The qualification requirements for directors of Steinhoff are detailed in Steinhoff’s MOI, which is in the public domain, and will be available for inspection
at the registered office of the Company on request from the date of this Prospectus to the date of the Listing. The memoranda of incorporation for the
subsidiaries of Steinhoff, detailing any qualification requirements, will be available for inspection at Steinhoff’s registered office on request from the date of
this Prospectus to the date of the Listing.
2.12 Remuneration and proposed remuneration of directors of the Company and the Steinhoff Group
2.12.1 Company
The Incorporation Directors are entitled to remuneration of €10,000 (ten thousand Euro) each in their capacity as Incorporation Directors. Subsequent to the
implementation of the Scheme, the following remuneration will be applicable:
2.12.1.1 Remuneration of the Management Board
2.12.1.1.1 The Supervisory Board will establish the remuneration of the individual Managing Directors, based on the recommendations of the
Human Resources and Remuneration Committee in accordance with the Management Board remuneration policy as adopted by the
General Meeting, and arrangements for remuneration in the form of Ordinary Shares or rights to subscribe for Ordinary Shares as
approved by the General Meeting upon proposal by the Supervisory Board. No Managing Directors’ service contracts will include
predetermined compensation as a result of termination exceeding 18 (eighteen) months’ salary and benefits.
2.12.1.1.2 The compensation package for the Management Board will consist of the following fixed and variable components which are discussed
in more detail below:
2.12.1.1.2.1 base salary;
2.12.1.1.2.2 annual bonus;
2.12.1.1.2.3 long-term (share based) incentive plan; and
2.12.1.1.2.4 benefits.
2.12.1.2 Remuneration policy components
2.12.1.2.1 Base salary
2.12.1.2.1.1 The base salary of the Managing Directors is a fixed cash compensation paid on a monthly basis.
2.12.1.2.1.2 The base salary is subject to annual review. It is set to be competitive at the median level with reference to market
practice in companies comparable in size, market sector, business complexity and international scope.
2.12.1.2.1.3 In determining the base salary of the Managing Directors, Company performance, individual performance and changes
in responsibilities are taken into account. In addition, the Supervisory Board will take into account the impact of the
base salary on the pay differentials within the Company.
14
2.12.1.2.1.4 The Supervisory Board determines an appropriate level for the base salary per Managing Director with the aid of
external reference data issued by independent remuneration experts.
2.12.1.2.2 Annual bonus
2.12.1.2.2.1 The Managing Directors will be entitled to an annual performance related bonus payment. The objective of the annual
performance related bonus payment is to incentivise and reward strong short-term financial and personal performance,
the implementation of strategic imperatives such as meeting growth targets while continuing to be focused on
sustainable results which are aligned with the long-term strategy of the Group.
2.12.1.2.2.2 On an annual basis, performance conditions will be set by the Supervisory Board on or before the beginning of the
relevant Fiscal Year. The annual bonus is based on a percentage of the annual base salary.
2.12.1.2.2.3 Performance targets include financial, operational and transformation targets, representing in excess of 80% of the
potential annual bonus. Where performance criteria are supplemented by personal performance objectives, such
personal performance objectives represent on average less than 20% (twenty percent) of the potential bonus that can
be achieved. The Supervisory Board shall review the performance targets annually to ensure that these are appropriate,
given the economic context and the performance expectations for the Company or relevant division.
2.12.1.2.2.4 Annual bonuses are determined and recorded in the Fiscal Year following that to which the performance relates.
The Supervisory Board shall have the discretion to defer all or part of the annual bonus payment on terms to be
agreed on an annual basis and dependent on the performance criteria applicable to such bonuses and the longer-term
measurement that could be implied by such performance criteria.
2.12.1.2.3 Long-term (share based) incentive plan
2.12.1.2.3.1 The Managing Directors will be eligible to participate in the long-term share based incentives of the Company.
The long-term share based incentives are intended to be offered to Managing Directors and senior management and
other senior staff within the Group, based on the discretion of the Human Resources and Remuneration Committee.
2.12.1.2.3.2 The allocation of such incentives will be evaluated by the Human Resources and Remuneration Committee, based on
the following eligibility criteria:
2.12.1.2.3.2.1 involving individuals who are key to driving the Group’s long term business strategy;
2.12.1.2.3.2.2 retention of key talent/scarce skills; and
2.12.1.2.3.2.3 talent management strategy and succession plans.
2.12.1.2.3.3 The targets for these incentives will be set with reference to industry and market benchmark performance. Such
benchmarks are determined annually by measuring operational performance against those of peer group companies
(in comparable industries and markets) in local currencies. Furthermore, the application and rules of the long-term
incentive plans are evaluated annually to ensure compliance with applicable legislative and regulatory requirements.
Benchmark performance criteria will be aligned with the Group’s long-term strategy priorities.
2.12.1.2.4 Benefits
Benefits provide security for Managing Directors and their families and include membership of retirement funds and medical aid
schemes, to which contributions are made by employees and the employer company.
2.12.1.2.5 Adjustments to variable remuneration
2.12.1.2.5.1 Pursuant to Dutch law and the Dutch Corporate Governance Code, the remuneration of Managing Directors may be
reduced or Managing Directors may be obliged to repay (part of) their variable remuneration to the Company if certain
circumstances apply.
2.12.1.2.5.2 Pursuant to the Dutch Corporate Governance Code, should any variable remuneration component conditionally awarded
to a member of the Management Board in a previous Fiscal Year, in the opinion of the Supervisory Board, produce an
unfair result due to extraordinary circumstances during the period in which the predetermined performance criteria
have been or should have been applied, the Supervisory Board will have the power to adjust the value downwards or
upwards. In addition, the Supervisory Board will have the authority under the Dutch Corporate Governance Code and
Dutch law to recover from a Managing Director any variable remuneration awarded on the basis of incorrect financial
or other data (claw back).
2.12.1.2.5.3 Pursuant to Dutch law, the Supervisory Board may furthermore adjust the variable remuneration (to the extent that it
is subject to reaching certain targets and the occurrence of certain events) to an appropriate level if payment of the
variable remuneration were to be unacceptable according to requirements of reasonableness and fairness.
2.12.1.2.5.4 In addition, Dutch law prescribes that, should the value of the Ordinary Shares or rights to subscribe for such Ordinary
Shares granted by the Company to the respective Managing Directors as part of their remuneration increase during a
period in which a public takeover bid is made for the Ordinary Shares, the remuneration of that respective Managing
Director may be reduced by the amount by which the value of the Ordinary Shares or rights to subscribe for Ordinary
Shares so granted by the Company to such member has increased. Similar provisions apply in the situation of an
intended legal merger or demerger, or if the Company intends to enter into certain transactions that are of such
significance to the Company that the Management Board requires the approval of the General Meeting pursuant to
Dutch law.
2.12.1.2.6 Remuneration for the Management Board in Fiscal Year 2014
The remuneration of the Managing Directors who were members of the Steinhoff Board during Fiscal Year 2014 was comprised of a
fixed and variable part and included base salary, a bonus, post-employment benefits, long term incentive plan benefits and other long
term benefits. The remuneration report for the Steinhoff Board is set out in note 34 to the Steinhoff annual financial statements for the
Fiscal Year ended 30 June 2014, annexed hereto as Annexure 1.
2.12.1.3 Remuneration of the Supervisory Board
2.12.1.3.1 The General Meeting will determine the remuneration of the Supervisory Directors. The remuneration of the Supervisory Board cannot
be dependent on the Company’s results.
2.12.1.3.2 None of the Supervisory Directors may receive Ordinary Shares or rights for Shares as part of their remuneration.
2.12.1.3.3 The General Meeting will resolve upon the remuneration for the Supervisory Board annually or for the entire term of their appointment,
effective from the date of the appointment. In accordance with this resolution, the chairman of the Supervisory Board will receive
a fixed compensation of R1,662,000 (one million six hundred and sixty two thousand Rand) for the Fiscal Year 2015, the vice chairman
a fixed compensation of R813,000 (eight hundred and thirteen thousand Rand) for the Fiscal Year 2015 and each ordinary member of
the Supervisory Board a fixed compensation of R415,000 (four hundred and fifteen thousand Rand) for the Fiscal Year 2015.
15
2.12.1.3.4 In addition, specific remuneration will be granted for members of the Audit and Risk Committee and the Nomination Committee. The
chairman of the Audit and Risk Committee will receive an additional fixed compensation of R353,000 (three hundred and fifty three
thousand Rand) for the Fiscal Year 2015 and each member of the Audit and Risk Committee will receive a remuneration of R182,000
(one hundred and eighty two thousand Rand) for the Fiscal Year 2015. The chairman of the Nomination Committee will be entitled to
an additional fixed compensation of R34,600 (thirty four thousand six hundred Rand) for the Fiscal Year 2015 and each member of
this committee to an additional fixed compensation of R17,300 (seventeen thousand three hundred Rand) for the Fiscal year 2015.
2.12.1.3.5 Remuneration for the Supervisory Board in Fiscal Year 2014
2.12.1.3.5.1 The remuneration report for the Steinhoff Board is set out in note 34 to the Steinhoff annual financial statements for the
Fiscal Year ended 30 June 2014, annexed hereto as Annexure 1.
2.12.1.3.5.2 At the date of this Prospectus, the Company has not provided any personal loans, advances or guarantees to
Supervisory Directors.
2.12.1.3.6 Pensions for the Supervisory Board
At the date of this Prospectus, there are no amounts reserved or accrued by the Company to provide pension, benefit, retirement or
similar benefits for the Supervisory Directors.
2.12.2 Steinhoff Group
2.12.2.1 The provisions regulating the remuneration of directors of Steinhoff and any power enabling the directors to vote on remuneration to themselves or
any member of the Steinhoff Board are detailed in the Steinhoff MOI, the Corporate Governance Report and the Integrated Report, which are in the
public domain and are available on the Website except for the MOI. The memoranda of incorporation for Steinhoff and the subsidiaries of Steinhoff,
detailing the provisions relating to the remuneration of directors and any power enabling the directors to vote on remuneration to themselves or any
member of their board, will be available for inspection at Steinhoff’s registered office on request.
2.12.2.2 The remuneration report for the Steinhoff Board is set out in note 34 to the Steinhoff annual financial statements for the Fiscal Year ended 30 June
2014, annexed hereto as Annexure 1 and the remuneration of the Steinhoff Board is detailed in the Integrated Report. The strike price in respect of
the share options is half a South African cent per share option.
2.12.2.3 Save as disclosed in note 34 to the Steinhoff annual financial statements for the Fiscal Year ended 30 June 2014, annexed hereto as Annexure 1, the
Integrated Report and the Pepkor Circular, no remuneration or benefits have been paid or accrued as payable to any director of Steinhoff in respect
of management, consulting, technical or other fees paid for such services rendered, any other material benefits received, contributions paid under
any pension scheme or any commission, gain or profit-sharing arrangements.
2.13 Remuneration and benefits paid to directors and third parties in lieu of directors’ fees in the last financial period
Save as disclosed in section 1, paragraph 2.12, no remuneration or benefits have been paid or have accrued as payable to any director or proposed director of the Company,
or to any third party in lieu of directors’ fees, from the date of incorporation of the Company to the date of this Prospectus. In addition, no remuneration or benefits have been
paid or accrued as payable to any director or proposed director of the Company in respect of management, consulting, technical or other fees paid for such services rendered,
nor have any other material benefits been received, contributions been paid under any pension scheme or any commission, gain or profit-sharing arrangements been made
by or with any director.
2.14 Variation of the Company’s directors’ remuneration
Following the implementation of the Scheme, and the appointment of the Managing Directors and the Supervising Directors proposed in section 1, paragraph 2.1.2 of this
Prospectus, the directors of the Company will be remunerated as contemplated in section 1, paragraph 2.12 of this Prospectus. The remuneration receivable by directors of
the Company will therefore change in consequence of the Scheme as the Incorporation Directors are not entitled to any remuneration in their capacity as directors whereas the
Managing Directors and Supervisory Directors will, on their appointment, be remunerated as contemplated in section 1, paragraph 2.12 of this Prospectus.
2.15 Borrowing powers of directors of the Company and the Steinhoff Group
2.15.1 The Articles of Association, as amended by the Deeds of Amendment, do not provide for any restrictions on the borrowing powers that can be exercised by
the Management Board, and one of the objectives of the Company is to borrow, to lend and to raise funds, including the issue of bonds, debt instruments or
other securities or evidence of indebtedness as well as to enter into agreements in connection with the aforementioned activities.
2.15.2 The Articles of Association, as amended by the Deeds of Amendment, may be amended as set out in section 1, paragraph 4.5 of this Prospectus.
2.15.3 Under Dutch law, there is no exchange control or other restrictions on the borrowing powers of the Company.
2.15.4 The borrowing powers of the directors of the Company have not been exceeded or varied from its incorporation to the date of this Prospectus.
2.15.5 The borrowing powers of Steinhoff exercisable by the directors of Steinhoff, and the manner in which such borrowing powers may be varied, are detailed
in the Steinhoff MOI and in the Corporate Governance Report, both of which are in the public domain, and, in respect of the Corporate Governance Report,
is available on the Website. The memoranda of incorporation for the subsidiaries of Steinhoff, detailing the borrowing powers exercisable by directors and
the manner in which such borrowing powers may be varied, will be available for inspection at Steinhoff’s registered office on request from the date of this
Prospectus to the date of the Listing. The aforementioned borrowing powers have not been exceeded during the previous 3 (three) years.
2.15.6 The borrowing powers of the various members of the Steinhoff Group are restricted by the exchange control regulations of the jurisdictions in which they are
registered and incorporated, including, inter alia, the Exchange Control Regulations.
2.16 Retirement or non-retirement of directors under an age limit
2.16.1 Managing Directors will not have any restrictions applicable in respect of retirement at a certain age limit.
2.16.2 It is proposed that the rotation schedule to be adopted by the Supervisory Board shall provide that if a member of the Supervisory Board has reached the age
of 71 (seventy one) years, such member shall retire from office at the first General Meeting thereafter but shall be eligible for re-appointment. A Supervisory
Director who has reached the age of 71 (seventy one) years, can only be appointed or re-appointed for a term of one (1) year each time, subject to a maximum
of such number of terms of 12 (twelve) years in aggregate.
2.17 Number and value of debentures created in terms of a trust deed and the number and value to be issued or agreed to be issued
Save for the Convertible Bonds, there are no debentures created, issued or agreed to be issued by the Company in terms of any trust deed.
2.18 Business carried on by third parties
The business of the Company and the Steinhoff Group, or any part thereof, is not managed or proposed to be managed by a third party under a contract or otherwise.
3. HISTORY, STATE OF AFFAIRS AND PROSPECTS OF THE COMPANY
3.1
General description of the business carried on or to be carried on by the Company and the Group
3.1.1
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The Company is an investment holding company that will, subsequent to the implementation of the Scheme and the kika-Leiner Sale Agreement, carry on
business through the Group, which will include the Steinhoff Group and kika-Leiner. The degree of government protection or investment encouragement law
affecting the business of the Group is negligible.
3.1.2
The Group is an integrated retailer servicing the value-conscious consumer in Continental Europe, the United Kingdom, Sub-Saharan Africa and the Pacific
Rim. The Group’s integrated business model is based upon a strategy of sourcing and manufacturing products at low-cost and distributing them through
Group-owned and third-party retailers. The Group has significant investments in retail, industrial and warehouse properties, primarily with Group entities
as tenants.
3.1.3
The Group was founded in 1964 and was listed on the JSE in 1998, with an initial market capitalisation of R2.6 billion (two billion six hundred million Rand)
and a current market capitalisation, as at the Last Practicable Date, of R280 billion (two hundred and eighty billion Rand) and employs approximately 100,000
(one hundred thousand) employees located across Continental Europe, the United Kingdom, Sub-Saharan Africa and the Pacific Rim.
3.1.4
The Group is currently managed through two distinct operating units, namely International Operations and African Operations, the details associated with
such operations are set out below.
3.1.4.1
International Operations
3.1.4.1.1
The Group’s International Operations division manages a vertically integrated furniture and household goods retail business in
Continental Europe, the United Kingdom and the Pacific Rim. This business is supported by a Group-owned integrated global supply
chain responsible for the sourcing, manufacturing, warehousing and distribution of furniture and household goods to Group-owned
and third-party retailers. According to Möbelmarkt, the Group is the second largest household goods retailer in Europe, by turnover,
with a focus on value-conscious consumers. It differentiates itself from its competitors through its ability to supply products to the
market at low prices, primarily due to its integrated global supply chain consisting of Group-owned sourcing and manufacturing
operations and its integrated logistics infrastructure. This efficient manufacturing and logistics infrastructure also gives the Group
the ability to provide after-sales service to customers, further enhancing its customer service capabilities. Detail of the international
operations of the newly acquired Pepkor Group is reported as part of the Pepkor division in section 1, paragraph 3.1.4.2.4 of this
Prospectus.
3.1.4.1.2
The Group’s properties division and corporate services are also housed within the International Operations division. The properties
division comprises the Group’s retail, industrial and warehouse real estate assets throughout the jurisdictions in which it operates,
with assets totalling R45,6 billion (forty five billion six hundred million Rand) as at 31 December 2014. In Fiscal Year 2014, the
properties division accounted for 2.5% (two point five percent) of the Steinhoff Group’s revenue from continuing operations and 21.1%
(twenty one point one percent) of the Steinhoff Group’s operating profit before capital items from continuing operations. Corporate
services comprises of the Group’s central treasury and other corporate functions.
3.1.4.1.3
In Fiscal Year 2014, the Steinhoff Group’s International Operations division contributed gross revenue from continuing operations
before intersegment revenue eliminations of R106,643 million (one hundred and six billion six hundred and forty three million Rand)
and operating profit before capital items from continuing operations of R9,030 million (nine billion and thirty million Rand).
3.1.4.1.4
Retail
3.1.4.1.4.1
The Group’s International Operations retail division focuses on the retailing of furniture, beds, kitchens, household
appliances, electronic products, décor items, related homeware and household products in Continental Europe, the
United Kingdom and the Pacific Rim, and has operations in, inter alia, Australia, Austria, Belgium, Croatia, Czech
Republic, France, Germany, Hungary, Italy, Luxembourg, the Netherlands, New Zealand, Poland, Portugal, Romania,
Serbia, Slovakia, Spain, Switzerland and the United Kingdom. The business model of the Group’s International
Operations division supports a diverse, multi-brand strategy that is managed in order to ensure that the Group’s brands
and products remain relevant to local consumers and customers. Many of the Group’s brands are household names
in the markets in which they are sold, which has supported the division’s performance and market share gains in
recent years. The Group’s International Operations retail division has also implemented various e-commerce initiatives
resulting in an omni-channel sales approach. The Group’s International Operations retail division is managed across its
three broad geographic regions, being Continental Europe, the United Kingdom and the Pacific Rim.
3.1.4.1.4.2
In Fiscal Year 2014, the Steinhoff Group’s International Operations retail division contributed revenue from continuing
operations of R73,262 million (seventy three billion two hundred and sixty two million Rand) and operating profit before
capital items from continuing operations of R4,579 million (four billion five hundred and seventy nine million Rand).
Continental Europe
3.1.4.1.4.3
The Group’s retail business in Continental Europe focuses on the retailing of furniture and home-ware, and comprises:
(i) Conforama; (ii) the European Retail Management division (“ERM”); and (iii) kika-Leiner.
3.1.4.1.4.4
Conforama is a leading European retailer of furniture and household goods. Its core product lines include furniture,
decoration and large homeware appliances. Conforama employs a multi-style product strategy and carries a large
product range.Conforama also operates an online sales platform via a “click and collect” model, which is supported
by its physical store network. As at 31 December 2014, Conforama operated a network of 294 (two hundred and
ninety four) stores, of which 211 (two hundred and eleven) are located in France making it France’s second largest
furniture and household goods retailer by market share, according to Euromonitor. In addition, as at 31 December 2014,
Conforama operated 83 (eighty three) stores located in 6 (six) other Continental European countries: 29 (twenty nine) in
Spain and Portugal, 15 (fifteen) in Italy, 31 (thirty one) in Switzerland, 7 (seven) in Croatia and 1 (one) in Luxembourg.
3.1.4.1.4.5
The ERM division has an extensive retail footprint across Germany, Poland and Switzerland. The ERM division operates
through primarily large scale, discount stores offering a full range of furniture and household goods. The ERM retail
network comprises 224 (two hundred and twenty four) stores, including: (i) 106 (one hundred and six) large format
furniture and homeware goods stores in Germany and 1 (one) in Poland; (ii) 95 (ninety five) ABRA stores in Poland; and
(iii) 22 (twenty two) Lipo furniture stores in the German-speaking regions of Switzerland.
3.1.4.1.4.6
In 2013, the Group acquired (i) all 19 (nineteen) Fly stores in Switzerland, (ii) 3 (three) Atlas stores in France (including
the properties), and (iii) the trading assets and leases of 7 (seven) Atlas stores in France. Of the 19 (nineteen) Fly stores
in Switzerland, 9 (nine) stores have been rebranded as Conforama (3 (three) stores) and Lipo (6 (six) stores). 8 (eight)
of the Atlas stores in France have been rebranded as Conforama.
3.1.4.1.4.7
kika-Leiner is a leading furniture retailer operating in the Continental European retail market. The kika-Leiner
Acquisition will expand the Group’s footprint in Continental Europe, as it will allow the Group to enter the Austrian
retail market, while expanding its presence in Central and Eastern Europe. kika-Leiner features strong, local brands
and, consistent with the Group’s property strategy, owns the majority of its retail locations. As at 31 December 2014,
kika-Leiner operated out of 71 (seventy one) stores (50 (fifty) in Austria, 7 (seven) in the Czech Republic, 9 (nine) in
Hungary, 1 (one) in Romania and 4 (four) in Slovakia).
United Kingdom
3.1.4.1.4.8
The Group’s retail division in the United Kingdom operates through Steinhoff UK and focuses on the retailing of
beds, furniture and homeware. Steinhoff UK currently has 3 (three) retail chains in the United Kingdom: Bensons for
Beds, Harveys and Cargo, all of which operate through a network of retail stores and an online platform. With 472
(four hundred and seventy two) stores, Steinhoff UK is the largest bed retailer and, according to Euromonitor, the ninth
largest furniture retailer in the United Kingdom.
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3.1.4.1.4.9
Bensons for Beds is the United Kingdom’s largest bed retailer, according to management estimates, offering customers
a wide range of mattresses, divans, bed frames, children’s beds and bedroom furniture. Bensons for Beds was named
the United Kingdom’s leading bed retailer in 2013 by the National Bed Federation for the second consecutive year.
As at 31 December 2014, Bensons for Beds operated 267 (two hundred and sixty seven) stores in the United Kingdom.
Harveys is a speciality furniture retailer in the United Kingdom, with a focus on lounge and dining furniture in the
value segment of the market. As at 31 December 2014, Harveys operated 159 (one hundred and fifty nine) stores in
the United Kingdom. Cargo is a furniture and homeware retailer, with a focus on the value segment of the market. As at
31 December 2014, Cargo operated 46 (forty six) stores in the United Kingdom.
Pacific Rim
3.1.4.1.4.10 The Group’s retail division in the Pacific Rim focuses on the retailing of beds, furniture and homeware. The Group
currently has three retail chains in Australia and New Zealand: Freedom, Snooze and POCO Australia, all of which
operate through a network of retail stores and an online platform. With 140 (one hundred and forty) stores, the Group is
the third largest furniture retailer in Australia and New Zealand, according to Euromonitor.
3.1.4.1.4.11 Freedom is a retailer of an extensive collection of leather sofas, fabric sofas, dining furniture, bedroom furniture and
homeware. As at 31 December 2014, Freedom operated 63 (sixty three) stores in Australia and New Zealand. Snooze
is predominantly a franchise mattress and bedding specialist. As at 31 December Snooze operated 65 (sixty five)
franchises and 11 (eleven) company owned stores. POCO Australia is a one-stop, home solution superstore offering
a wide range of consumer goods at low prices. The brand and concept originated in Germany, however, the product
offering at POCO Australia is tailored to the Australian consumer. As at 31 December 2014, POCO Australia operated
1 (one) store in Australia.
3.1.4.1.5
Manufacturing, sourcing and logistics
3.1.4.1.5.1
The Group’s European manufacturing, sourcing and logistics division focuses on the sourcing and manufacturing
of raw materials and household goods, which it sells to other Group-owned companies and third-party retailers.
Management believes that the Group’s European manufacturing, sourcing and logistics division’s proximity to large
European household goods markets, its ability to assemble furniture sourced from Asia and Europe and its ability to
replace and/or repair products subject to stringent European warranty requirements are key competitive advantages.
3.1.4.1.5.2
In Fiscal Year 2014, the Steinhoff Group’s European manufacturing, sourcing, logistics and corporate service divisions
contributed revenue from continuing operations of R33,381 million (thirty three billion three hundred and eighty one
million Rand) and operating profit before capital items from continuing operations of R4,451 million (four billion four
hundred and fifty one million Rand).
Sourcing and logistics
3.1.4.1.5.3
The sourcing and logistics division focuses on the sourcing of upholstery, case goods, homeware, mattresses, beds,
bedroom furniture, and small and large home appliances (including televisions). These products are sourced from more
than 44 (forty four) countries. While this division does not invest in production capacity or assets, it, instead, employs
experts in supplier and product sourcing, product development and design, negotiation, quality control, supply chain
management and product mutualisation. Many of these experts work on-site with suppliers in order to ensure that the
manufacturing and sourcing activity taking place is in compliance with the Group’s stringent demands, such as quality
control, sustainable sourcing practices and environmental policies. Accordingly, the sourcing and logistics division
functions as a service provider to the Group.
3.1.4.1.5.4
Management believes that the use of specialised third-party suppliers in conjunction with the Group’s manufacturing
operations adds scale, flexibility, efficiencies and cost advantages to the Group’s buying operations.
3.1.4.1.5.5
The sourcing and logistics division operates through 8 (eight) sourcing offices across Eastern Europe and Asia, with a
primary objective of creating competitive advantages for the Group by providing speed-to-market of exclusive, quality
products at competitive prices. The division operates 50 (fifty) distribution centres across Continental Europe and the
United Kingdom. Management believes that these central distribution centres provide the Group with a more efficient
distribution platform and, consequently, reduced lead times and increased customer service levels.
Manufacturing
3.1.4.1.5.6
The Group’s manufacturing operations include integrated furniture and household goods manufacturing operations in
Continental Europe and the United Kingdom. As at 31 December 2014, manufacturing operations were carried out in
16 (sixteen) facilities.
Continental Europe
3.1.4.1.5.7
The majority of the Group’s European manufacturing capacity is primarily located in Eastern Europe where facilities in
Hungary and Poland focus on upholstered furniture for lower- and middle-end products.
3.1.4.1.5.8
Hungary – the Group operates 2 (two) manufacturing facilities in Hungary. One facility focuses on manufacturing
mid- to up-market leather upholstered furniture for Continental Europe and the local market. The other facility primarily
manufactures leather dining room chairs.
3.1.4.1.5.9
Poland – the Group operates 6 (six) manufacturing facilities in Poland which manufacture a variety of upholstered
furniture. The Group’s manufacturing facilities in Poland have historically been one of the leading suppliers in
Continental Europe for volume-driven, mass-market and mail order retailers.
3.1.4.1.5.10 In addition, the Group has a manufacturing facility in Germany which specialises in the manufacturing of bathroom
furniture which it sells to the German market and for export. The Group has also recently acquired a kitchen
manufacturing facility adjacent to the bathroom furniture manufacturing facility.
United Kingdom
3.1.4.1.5.11 Manufacturing operations in the United Kingdom are carried out by Relyon, Pritex, Steinhoff UK Beds Limited and
Steinhoff UK Upholstery. The Group manufactures beds at 5 (five) UK-based manufacturing facilities, such as Relyon,
Dunlopillo, Myers, Slumberland and Staples brands, as well as customer own label products and sells to the majority
of major retailers throughout the United Kingdom. Pritex is a Wellington based manufacturer of acoustic insulation
products for the automotive and industrial markets. Steinhoff UK Upholstery is a dedicated supplier for the Harveys
Furniture division. It operates from 1 (one) manufacturing facility in Bridgend, Wales.
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3.1.4.1.6
Properties
3.1.4.1.6.1
The Properties division comprises all of the Group’s retail, industrial and warehouse properties in Continental
Europe, the United Kingdom, Sub-Saharan Africa and the Pacific Rim. All of the Group’s properties are managed by
centralised property teams, which provide a wide range of specialised services to the Group, including management
of the internally and externally leased property portfolio; development of existing and new properties; centralised
management of sustainable energy, water and waste; management of risk, security and insurance costs; and
management of maintenance costs.
3.1.4.1.6.2
In addition, in Europe, the licence to retail household goods is often attached to a particular property. Therefore, the
long-term occupation of these retail sites is an important factor in protecting the Group’s revenue stream.
3.1.4.1.6.3
The Group derives property rental income from Group-owned companies and third-party customers. The Group’s
real estate investments have a positive impact on its balance sheet and help to reduce costs associated with property
leasing, which positively impacts the Group’s strategy of improving operating margins through cost reduction. The
Group’s property investments also enable it to mitigate future lease liabilities and lease rate escalations.
3.1.4.1.6.4
As at 31 December 2014, the Steinhoff Group’s properties division had assets totalling R45,629 million (forty five
billion six hundred and twenty nine million Rand). The Group continues to acquire retail property, especially in light of
recent market consolidation and uncertainty in the discretionary retail environment.
3.1.4.1.6.5
In Fiscal Year 2014, the Steinhoff Group’s Properties division contributed revenue from continuing operations of
R2,911 million (two billion nine hundred and eleven million Rand) and operating profit before capital items from
continuing operations of R2,730 million (two billion seven hundred and thirty million Rand). On 30 June 2014, Steinhoff
acquired the Austrian property portfolio of kika-Leiner. The results of operations of kika-Leiner will be consolidated
with the results of operations of the Group from the implementation date of the Scheme.
3.1.4.1.6.6
None of the properties are individually principal to the Group. The following table provides examples of the properties
held by the Group that have a high monetary value.
Location
Vienna, Austria
Graz, Austria
Meyrin,
Switzerland
Bussigny,
Switzerland
Saint Ouen,
France
Westerstede,
Germany
Leinefelde,
Germany
Derendingen,
Schwiez
Nowe n/wisla,
Poland
Goscicino,
Poland
3.1.4.1.7
Address
Mariahilferstrasse 18, 1070 Vienna
Annenstrasse 63, 8020 Graz
Rue de Entreprises 14, 1217 Meyrin
Type of facility
Retail store
Retail store
Retail store
Tenure
Freehold
Freehold
Freehold
Size of
the property
(square metres)
57,185
26,741
15,593
Route de Genève 5, 1030 Bussigny
Offices and retail store
Freehold
15,219
5 Avenue du Capitaine Glarner,
Retail store
93400 Saint-Ouen
Langebrügger Strasse 3-5, D-26655 Warehouse and
administrative building
Boschstrasse 11-19, D-37327
Warehouse
Freehold
8,910
Freehold
87,079
Freehold
83,162
Freehold
80,267
Manufacturing property Freehold
45,583
Manufacturing property Freehold
36,444
Fabrikstrasse 18/20 CH-4552
Derendingen
ul. Fabryczna 5, 86-170 Nowe
Pomorska
ul. Fabryczna 1, 84-241 Goscicino
Warehouse
Corporate Services
The Group’s operations are supported by its corporate services division comprising: (i) corporate; and (ii) central treasury (which
manages treasury, financing and hedging activities).
3.1.4.2
African Operations
3.1.4.2.1
The Group’s African Operations division comprises: (i) 100% (one hundred percent) ownership interest in JD Group, an emerging
market retailer of furniture and household goods, motor vehicles and do-it-yourself (DIY) products; (ii) 100% (one hundred percent)
ownership interest in the Pepkor division, which comprises the on-going operations of the Pepkor Group, a leading South Africanbased retailer selling primarily clothing, footwear, household goods, personal accessories and cellular products and services, and
providing financial services; (iii) a 43% (forty three percent) associate investment in KAP Industrial, a JSE-listed industrial group
predominantly located in, and focused on, industrial business operations in emerging Sub-Saharan African markets; and (iv) a 25%
(twenty five percent) shareholding in PSG Group, a JSE-listed investment company.
3.1.4.2.2
In Fiscal Year 2014, the Steinhoff Group’s African Operations division contributed revenue from continuing operations of
R30,587 million (thirty billion five hundred and eighty seven million Rand) and before capital items operating profit from continuing
operations of R1,186 million (one billion one hundred and eighty six million Rand). As the Pepkor Acquisition was only completed on
31 March 2015, Pepkor’s proportionate contribution will only be accounted for in the Fiscal Year 2015.
3.1.4.2.3
JD Group
3.1.4.2.3.1
JD Group is one of the largest furniture and household goods retailers in Southern Africa. It offers a diversified
mix of products, including furniture, household appliances, consumer electronic and technology goods, building
materials and do-it-yourself (DIY) products, new and pre-owned motor vehicles, auto parts, insurance, accessories,
servicing and car rental. JD Group has been a subsidiary of the Group since April 2012, and the Group has been
represented on JD Group’s board of directors since June 2012. For Fiscal Year 2014, JD Group reported revenue from
continuing operations of R30,587 million (thirty billion five hundred and eighty seven million Rand) and operating
profit from continuing operations of R537 million (five hundred and thirty seven million Rand). The Group increased its
shareholding in JD Group from 86% (eighty six percent) to 100% (one hundred percent) in Fiscal Year 2015 through
a scheme of arrangement.
19
Retail
3.1.4.2.3.1.1
JD Group’s retail division operates through a multi-branded retail network representing 8 (eight)
furniture brands, 2 (two) consumer electronics and appliances brands and 4 (four) building materials
and do-it-yourself (DIY) brands. As at 31 December 2014, the Group’s African Operations retail
division operated 1,216 (one thousand two hundred and sixteen) retail stores in Southern Africa.
Automotive
3.1.4.2.3.1.2
3.1.4.2.4
JD Group’s automotive division operates Unitrans Automotive, Unitrans Insurance and Hertz Rental
car hire. Unitrans Automotive represents a number of international automotive brands and services
its customers from its network of 85 (eighty five) dealerships located throughout Southern Africa,
while Unitrans Insurance Limited is a fully licensed, short-term insurance and vehicle warranty
company. Hertz Rental car hire conducts its business through 39 (thirty nine) locations in Namibia
and South Africa
Pepkor division
3.1.4.2.4.1
The Pepkor division comprises the operations of the Pepkor Group, following the completion of its acquisition by the
Group on 31 March 2015.
3.1.4.2.4.2
Founded in 1965 and headquartered in Cape Town, Pepkor is a leading South African based global retailer selling
mainly clothing, footwear, homewares, personal accessories, cellular products and providing financial services.
Pepkor serves discount and value-orientated cash customers. Operating in 16 (sixteen) countries across three
continents, Pepkor retails from 1.8 million (one point eight million) square metres of retail space in approximately
4,000 (four thousand) stores, employing more than 30,000 (thirty thousand) people as at 31 December 2014.
3.1.4.2.4.3
Pepkor operates through well-known retail brands with 59% of revenue being generated within the discount segment of
the market, followed by 39% in the value segment and 2% in the specialty market segment.
3.1.4.2.4.4
The principal retailing businesses of Pepkor are:
3.1.4.2.4.4.1
Discount
South Africa and rest of Africa
3.1.4.2.4.4.2
Trading through more than 2,044 (two thousand and forty four) stores as at 31 December 2014 and
with an annual turnover of approximately R18.6 billion (eighteen point six billion Rand) for the Fiscal
Year 2014, Pep group, sells a discount range of merchandise including clothing, footwear, homewares
and cellular. Today Pep is one of South Africa’s top three retail names in terms of brand recognition
among consumers of all income groups. The Pep Group also includes 111 (one hundred and eleven)
homeware format stores (Pep Home) and 290 (two hundred and ninety) dedicated cellular concept
stores (Pep Cell).
3.1.4.2.4.4.3
In addition to this, through its involvement with “flash” more than 64,000 (sixty four thousand) flash
devices are operative in the informal discount sector, selling airtime and electricity and providing bill
payment facilities as at 31 December 2014.
3.1.4.2.4.4.4
Pep expanded its footprint into Africa following its success in South Africa by opening its first store
in Zambia in 1990. Staying close to the solid foundation in South Africa and keeping the brand
positioning consistent, Pep’s African expansion accelerated and now spans more than 98,000 (ninety
eight thousand) square metres of retail space through 251 (two hundred and fifty one) stores situated
in Zambia, Mozambique, Malawi, Angola, Nigeria and Zimbabwe as at 31 December 2014.
Eastern Europe
The Group’s fastest growing division Pepco was founded in 2000. Pepco is the number one
non-food retailer in Poland serving customers with a diverse product range comprising clothing,
footwear, homewares and a core range of basic household consumables. Pepco’s shops are mainly
located in small to medium sized cities in Poland and recently expanded the concept to Slovakia and
Czech Republic with approximately 630 (six hundred and thirty) stores as at 31 December 2014.
3.1.4.2.4.4.5
Value
South Africa
Founded in 1916, Ackermans is the oldest African retail brand in the Group and predominantly sells
clothing, footwear, homewares, clothing accessories and cellular products at affordable prices.
At 31 December 2014 there were 464 (four hundred and sixty four) stores located in urban areas
across Southern Africa.
3.1.4.2.4.4.6
Speciality
South Africa
The speciality retail division consist of four well known retail chains focused on a diverse customer
base ranging from premium branded menswear (John Craig), the urban youth market (Jay-Jays),
a mid market fashion retailer (Dunns) and the value driven Shoe City. The speciality retail division
provide customers with clothing, footwear, accessories and cellular products, and trades through
500 (five hundred) stores located in South Africa, Namibia, Botswana, Lesotho and Swaziland as at
31 December 2014.
Australasia
20
3.1.4.2.4.4.7
This portfolio comprises 334 (three hundred and thirty four) stores as at 31 December 2014 and
consist of a host of speciality brands (Best&Less, Harris Scarfe, Mozi, Store & Order and Postie) that is
located in towns and cities across Australia and New Zealand. The largest concepts within the portfolio
include Best&Less and Harris Scarfe, both focussed on a value offering in the clothing, footwear and
housewares markets.
3.1.4.2.4.4.8
Best&Less trades store concepts in conveniently located shopping malls across Australia, while
Harris Scarfe typically trades from bigger stores – offering a comprehensive range of men’s and ladies’
apparel and homewares, as well as smaller home stores.
3.1.4.2.4.4.9
Support Services
3.1.4.2.4.4.10 Pepkor’s operations are supported by sourcing offices in China as well as group services comprising
credit, IT, property management, treasury, logistics and quality control. Through its decentralised
business model (supported by central group services), Pepkor focuses on supply chain optimisation,
to protect and enhance its discount positioning.
3.1.4.2.4.4.11 Pepkor also operates a 22,000 m2 (twenty two thousand square metres) factory in Cape Town
that manufactures school uniforms (approximately 9 (nine) million units per annum) and employs
approximately 1,600 (one thousand six hundred) employees.
3.1.4.2.4.4.12 PPS
Pepkor product solutions (PPS) supports group retail brands with specialised services connecting
suppliers with buyers. With offices in Shangai and Shenzen, and dedicated employees in Hong Kong,
Taiwan, Bangladesh and India, this division oversees all functions in the sourcing supply chain
3.1.4.2.5
KAP Industrial
3.1.4.2.5.1
KAP Industrial delivers services and manufactured products to a wide customer base, through specialised contractual
logistics, passenger transport services, integrated timber facilities and industrial manufacturing. As at 30 June 2013,
the Group held a 62% (sixty two percent) ownership interest, however, on 23 June 2014, the Group decreased its
investment to a 45% (forty five percent) associate investment. The Group has a 43% (forty three percent) associate
investment in KAP Industrial. For Fiscal Year 2014, KAP Industrial reported revenue from continuing operations of
R14,748 million (fourteen billion seven hundred and forty eight million Rand) and operating profit before capital items
of R1,472 million (one billion four hundred and seventy two million Rand).
KAP: Diversified Logistics division
3.1.4.2.5.1.1
KAP Industrials’ diversified logistics division consists of a specialised contractual logistics and
passenger transport division. The specialised contractual logistics division comprises a specialised
and diverse supply chain business that designs, implements and manages supply chains and
logistics services in the petrochemical, food, mining and infrastructure, agriculture and specialised
warehousing sector. The passenger division is a diversified transport business serving the personnel
and commuter, intercity and tourism markets. It primarily offers long-term, contractual passenger
transport solutions.
KAP: Diversified Industrial division
3.1.4.2.6
3.1.4.2.5.1.2
The diversified industrial division of KAP consists of integrated timber operations, integrated bedding
operations, automotive component manufacturing and chemical manufacturing operations.
3.1.4.2.5.1.3
The integrated timber division operates through PG Bison, a South African manufacturer and
distributor of sawn timber, poles, wood-based panel products, decorative laminates and solid
surfacing materials. PG Bison owns 91,000 (ninety one thousand) hectares of forestry land, of which
approximately 43,000 (forty three thousand) hectares are planted, yielding approximately 1,100,000
(one point one million) tons of wood fibre per annum on a sustainable basis, primarily for consumption
in PG Bison’s manufacturing facilities.
3.1.4.2.5.1.4
KAP Industrial’s integrated bedding division manufactures foam, mattress ticking, springs and
assembles mattresses for the bedding and furniture industry in South Africa, with a view to expand
into neighbouring countries.
3.1.4.2.5.1.5
The automotive division operates through Feltex which comprises six business units that supply
components, directly and indirectly, to the South African Original Equipment Manufacturers (OEMs)
which are used in the assembly of vehicles.
3.1.4.2.5.1.6
The chemical division consists of Hosaf and Woodchem. Hosaf is the only producer of virgin
polyethylene terephthalate (PET) in South Africa, which is used in the beverages and packaging
industries. Woodchem SA is Sub-Saharan Africa’s largest producer of formaldehyde and a broad
range of urea formaldehyde resins.
PSG Group
PSG Group is an investment company listed on the JSE, with a market capitalisation of R42,200 million (forty two billion two hundred
million Rand) as at the Last Practicable Date. PSG Group consists of underlying investments that operate across a diverse range of
industries which include financial services, banking, private equity, agriculture and education. As at 31 December 2014, the Group
owned 17% (seventeen percent) of PSG Group and increased its holding in PSG Group to 25.04% (twenty five point zero four percent)
at the end of the 2015 Fiscal Year.
3.2
General history of the Group, the Company and the Steinhoff Group
3.2.1
Group
3.2.1.1
For the purposes of this general history, it has been assumed that the Scheme and the kika-Leiner Sale Agreement will be implemented, and the
Steinhoff Group and kika-Leiner will form part of the Group.
3.2.1.2
The Group was founded in 1964. Between 1964 and 1988, the European business developed as a distributor of furniture produced in Eastern
Europe for sale in Western Europe following the merger of the European and South African furniture and household goods business, Steinhoff was
listed on the JSE in 1998.
3.2.1.3
The Group has acquired a number of businesses in its history:
3.2.1.3.1
the manufacturing years:
3.2.1.3.1.1
in 1999, the Group expanded its furniture manufacturing operations in Southern Africa through the acquisition of
Cornick Group Limited;
3.2.1.3.1.2
in 2000, the Group acquired certain manufacturing facilities in Germany, Hungary and Poland strengthening its
furniture manufacturing capabilities in Europe;
3.2.1.3.1.3
in 2001, the Group acquired the entire issued share capital of Relyon Group Plc, a UK mattress manufacturer, and
entered the Australian market through the acquisition of Marshall furniture and the manufacturing facilities of the
furniture retailer, Freedom Group Limited;
3.2.1.3.1.4
in 2002, the Group made further investments in German furniture brands;
21
3.2.1.3.2
3.2.1.3.3
3.2.1.3.1.5
in 2003, the Group acquired Puris Bad in Germany and Sprung Slumber in the United Kingdom;
3.2.1.3.1.6
in 2005, the Group acquired a 34% (thirty four percent) interest in KAP Industrial, a JSE-listed, diversified industrial
holding company; and
3.2.1.3.1.7
in 2007, the Group’s Southern African furniture manufacturing division was sold to facilitate the expansion of the
Group’s African Operations retail division.
integrating the manufacturing and sourcing divisions:
3.2.1.3.2.1
in 2004, the Group acquired the entire issued share capital of PG Bison. In the same year, the Group established sourcing
headquarters in China and other countries in Asia, with the ultimate goal of supplementing its own manufacturing
capabilities with products manufactured by third parties; and
3.2.1.3.2.2
in 2005, the Group acquired a 61% (sixty one percent) controlling interest in Unitrans Limited and increased its
holdings in Unitrans to 100% (one hundred percent) in 2007.
establishing the retail operations:
3.2.1.3.3.1
in 2003, the Group entered the Australian retail market by privatising the then-publicly listed Freedom Group Limited;
3.2.1.3.3.2
in 2005, the Group entered the UK retail market through the acquisition of a controlling interest in Homestyle Group Plc;
3.2.1.3.3.3
in 2006, the Group expanded its relationship with the Pohlmann family, which, in 2008, led to the establishment of the
European Retail Management division, or ERM. In the same year, the Group acquired the remaining interest in Steinhoff
Asia Pacific (previously Freedom Group);
3.2.1.3.3.4
in 2007, the Group’s Southern African furniture manufacturing division was sold to facilitate the expansion of the
Group’s African Operations retail division. In the same year, the Group acquired the remaining minority shareholding in
Homestyle Group Plc and de-listed the company from the London Stock Exchange;
3.2.1.3.3.5
in 2008, the Group’s ERM division was founded, and, in the same year, Hemisphere Properties was established as part
of the Group’s strategy to increase property investments and ownership. In the same year, the Group introduced a black
economic empowerment scheme through a repurchase of 40,000,000 (forty million) Steinhoff Shares for the benefit of
all of its approximately 19,000 (nineteen thousand) South African managers and employees at the time;
3.2.1.3.3.6
in 2011, the Group acquired Conforama. In the same year, Steinhoff reached an agreement with JD Group in terms of
which JD Group acquired all of the Group’s Southern African retail interests, which resulted in Steinhoff acquiring a
minority interest in JD Group. Steinhoff also acquired a 20% (twenty percent) shareholding in PSG Group in 2011;
3.2.1.3.3.7
in 2012, the Group disposed of its timber operations (PG Bison), supply chain management operations (Unitrans
Limited) and raw materials subsidiaries to KAP Industrial in exchange for an increased shareholding in KAP Industrial
(for an 88% (eighty eight percent) aggregate shareholding). Steinhoff simultaneously reduced its shareholding in
KAP Industrial to 62% (sixty two percent) and acquired a 50.1% (fifty point one percent) controlling interest in JD Group;
3.2.1.3.3.8
in 2013, the Group purchased the Slumberland, Myers, Dunlopillo and Staples bedding brands and manufacturing
facilities in the United Kingdom;
3.2.1.3.3.9
in 2013, Steinhoff facilitated the independent acquisition by Genesis Investment Holding GmbH of kika-Leiner.
The kika-Leiner group of companies are a leading furniture retail group in Austria and certain Central and Eastern
European countries, operating through the kika and Leiner brands;
3.2.1.3.3.10 in 2014, Steinhoff increased its shareholding in JD Group to 86% (eighty six percent) and decreased its 62% (sixty two
percent) investment in KAP Industrial to a 45% (forty five percent) associate investment;
3.2.1.3.3.11 on 31 March 2015, Steinhoff completed the Pepkor Acquisition. The Pepkor Group manages a portfolio of retail chains
and brands. Following the completion of the Pepkor Acquisition, the ongoing operations of the Pepkor Group comprise
one of the Group’s operating units, with a focus on the value segment of the retail market across Southern Africa, RoA,
Eastern Europe, France, the United Kingdom and the Pacific Rim;
3.2.1.3.3.12 with effect from 30 June 2015, Steinhoff increased its shareholding in JD Group to 100% (one hundred percent)
through a scheme of arrangement; and
3.2.1.3.3.13 on 23 July 2015, Steinhoff extended an offer to acquire the entire issued share capital of Iliad Africa Limited (“Iliad”)
in terms of a scheme of arrangement for a cash consideration of R1,341 million (one billion three hundred and forty
one million Rand), which offer is still subject to various conditions precedent, including acceptance of the offer by the
requisite majority of Iliad shareholders and competition authorities approval.
3.2.2
Company
3.2.2.1
The Company was incorporated as a public company with limited liability on 22 June 2015.
3.2.2.2 On the implementation of the kika-Leiner Sale Agreement, the Company will acquire kika-Leiner by way of a share purchase of all of the issued
share capital of Genesis Investment Holding GmBH resulting in Genesis Investment Holding GmbH becoming a wholly owned subsidiary of the
Company.
3.2.2.3 On the implementation of the scheme, on the basis of the number of Steinhoff Shares on the Last Practicable Date, the Company will issue
3,667,476,771 (three billion six hundred and sixty seven million four hundred and seventy six thousand seven hundred and seventy one) Ordinary
Shares to the scheme Participants, and will at the same time or as soon as reasonably possible therafter acquire and/or cancel the Incorporation
Shares. Subsequent to implementation of the scheme, Steinhoff will become a wholly owned subsidiary of the Company.
3.2.3
Steinhoff Group
The Listing does not coincide, directly or indirectly, with the acquisition by the Steinhoff Group of securities in, or the business undertaking of, any other
company in consequence of which that company or business undertaking will become a subsidiary of or part of the business of the Steinhoff Group.
3.3
Material changes
3.3.1
3.4
As the Company was only incorporated on 22 June 2015, there have been no material changes in the business of the Company during the past 5 (five) years.
3.3.2
Up to the Last Practicable Date, there has been no material change in the nature of the financial or trading position of the Company since its incorporation.
3.3.3
Save for the Pepkor Acquisition, as detailed in the Pepkor Circular, no material change in the financial or trading position of the Steinhoff Group has occurred
since the date of the interim financial statements of Steinhoff as at 31 December 2014, annexed hereto as Annexure 2.
New trading objects of the Company
As at the date of this Prospectus, the Company has no new trading objects.
22
3.5
3.6
3.7
Prospects of the businesses
3.5.1
The Board and the Steinhoff Board are of the opinion that the acquisition of Steinhoff by the Company, and the listing of the Company’s Ordinary Shares on
a major European Stock Exchange, will more accurately reflect the geographic location of Steinhoff’s revenues, customers and store locations and enhance
the Company’s ability to access global capital markets, to further support the expansion of its European operations and growth opportunities available in
the international markets.
3.5.2
Against the perspective of Steinhoff’s continuous international expansion plans, the Board and the Steinhoff Board is of the opinion that enhanced access
to international capital markets on terms which are better reflective of Steinhoff’s spread of activities and profits, is a pre-requisite to sustain its continued
growth and development in its existing and possible new markets. A listing on the FSE should facilitate access to a wider investor base.
3.5.3
The Company’s listing on the FSE is expected to raise the international profile of the Group and may increase the demand for its shares from international
investors who are precluded from investing in emerging markets. Accordingly, the Company’s accessible investor universe could expand substantially.
3.5.4
In addition, the acquisition of kika-Leiner is expected to facilitate the expansion of the retail operations of the Group into Austria and Central and Eastern
Europe, which geographical areas Steinhoff did not previously have a footprint in. The Steinhoff Board is of the opinion that kika-Leiner was built on solid
foundations and has secured its future via the ownership of its owned properties, strong local brands and focus on maximising value to the end consumer.
State of affairs
3.6.1
The Company is a recently formed, public company, which has not traded and has no operating history. The Company does not have any subsidiaries at the
date of this Prospectus.
3.6.2
The Ordinary Shares will, on the implementation of the Scheme, be listed on the prime standard of the FSE, as a primary listing, and on the main board of
the JSE, as a secondary listing.
3.6.3
Details of the share capital of the Company are set out in section 1, paragraph 4 of this Prospectus.
3.6.4
Details of the Incorporation Directors, and the proposed directors of the Company, are set out in section 1, paragraph 2.1 of this Prospectus, read with
Annexure 10.
Immovable property
The Company does not hold or occupy any immoveable property, or lease any property, as at the date of this Prospectus. None of the immoveable properties held by the Steinhoff
Group are principal. Examples of immoveable property held by the Steinhoff Group with a high monetary value are listed in section 1, paragraph 3.1.4.1.6.6 of this Prospectus.
3.8
Commitments for construction or purchase of building
The Company does not have any commitments for the purchase, construction or installation of buildings, plant or machinery.
3.9
Financial information
The Company is a recently formed, public company, which has not traded. It has no operating history, no turnover and it has never declared any dividends. The annual financial
statements of the Company ended 30 June 2015 are annexed hereto as Annexure 5 and set out the minimal profit and losses of the Company derived from the minimal cash
generated from the issue of the Incorporation Shares, and certain minor general and administrative expenses associated with the incorporation of the Company.
3.10 Material inter-company financial and other transactions
As at the date of this Prospectus, there are no material inter-company financial or other transactions in respect of the Company.
3.11 Corporate governance, structures and practices
3.11.1
Application of the King Code
3.11.1.1 The Company is incorporated in the Netherlands, and will be listed on the prime standard of the FSE as a primary listing, and is therefore bound
to apply the Dutch Corporate Governance Code. The Company fully endorses the underlying principles of the Dutch Corporate Governance Code,
and is committed to adhering to the best practices of such code in as far as is possible. It is however expected that the Company will not comply
with a number of provisions of the Dutch Corporate Governance Code. The Board is committed to applying best practice in terms of the principles
of corporate governance, confirms its commitment to the principles of fairness, accountability, responsibility and transparency in accordance with
Dutch law and the Dutch Corporate Governance Code.
3.11.1.2 A summary of the relevant sections in the Articles of Association (as amended by the Deeds of Amendment), the Management Board Rules and the
Supervisory Board Rules, all of which will be in force by or subsequent to the date of implementation of the Scheme, illustrating the adoption and
application of the corporate governance principles enunciated in King III, to the extent possible, is set out below. The summaries of certain sections
of the Articles of Association (as amended by the Deeds of Amendment), the Management Board Rules, the Supervisory Board Rules and Dutch law
included in this Prospectus do not purport to give a complete overview and should be read in conjunction with, and are qualified in their entirety
by reference to, the Articles of Association (as amended by the Deeds of Amendment), the Management Board Rules, the Supervisory Board Rules
and the relevant provisions of Dutch law in force at the date of this Prospectus.
3.11.1.2.1 Management Board
3.11.1.2.1.1
Powers, responsibilities and functioning
3.11.1.2.1.1.1
The Management Board is the executive body and is entrusted with the management of the Company’s
operations and strategy as well as the operations of the Group, subject to the supervision by the
Supervisory Board. The Management Board’s responsibilities include, among other things, setting
and achieving the Company’s objectives, determining the Company’s strategy and associated risk
profile, the ensuing delivery of results and corporate social responsibility issues that are relevant
to the Company. The Management Board may perform all acts necessary or useful for achieving
the Company’s objectives, with the exception of those acts that are prohibited by law or by the
Articles of Association. Pursuant to the Articles of Association and the Management Board Rules,
the Management Board may assign duties and powers to individual Managing Directors and/or
committees. In performing their duties, the Managing Directors must act in accordance with the
interests of the Company and the business connected with it, taking into consideration the interests
of the Group’s stakeholders (which includes but is not limited to its customers, its employees and the
Shareholders).
3.11.1.2.1.1.2
The Management Board must provide the Supervisory Board in due time with the information required
for the performance of its duties. The Management Board is required to inform the Supervisory Board
in writing of the main aspects of the strategic policy, the general and financial risks and the Company’s
management and auditing systems, at least once per year. Certain important resolutions of the
Management Board are subject to the approval of the Supervisory Board and the General Meeting.
3.11.1.2.1.1.3
Subject to certain statutory exceptions, the Management Board is authorised to represent the
Company. In addition, any 2 (two) Managing Directors, acting jointly, have the authority to represent
the Company. Pursuant to the Articles of Association, the Management Board is authorised to appoint
23
officers who are authorised to represent the Company within the limits of the specific delegated powers
provided to them.
3.11.1.2.1.2 Management Board Rules
Pursuant to the Articles of Association, the Management Board may establish rules regarding its working methods and
decision-making process. The Management Board Rules will become effective upon the Scheme becoming operative.
3.11.1.2.1.3 Composition, appointment, removal and suspension
3.11.1.2.1.3.1
The Articles of Association provide that the number of Managing Directors is determined by the
Supervisory Board. The Supervisory Board may resolve to designate one of the Managing Directors
as chief executive officer (CEO), one of the Managing Directors as chief financial officer (CFO), one of
the Managing Directors as chief operating officer (COO) and grant other titles to Managing Directors.
It is contemplated that subsequent to the implementation of the Scheme, the Management Board will
consist of 3 (three) members. Only natural persons may be appointed as members of the Management
Board.
3.11.1.2.1.3.2
The General Meeting appoints the Managing Directors. The Managing Directors may be appointed
upon a non-binding nomination by the Supervisory Board. A resolution to appoint a Managing Director
requires an absolute majority of the votes cast, if adopted upon the non-binding nomination by the
Supervisory Board. A resolution by the General Meeting to appoint a Managing Director other than
upon such non-binding nomination requires a majority of two-thirds of the votes cast representing at
least one-third of the Company’s issued capital.
3.11.1.2.1.3.3
The General Meeting may at any time suspend or remove a Managing Director. The Managing Directors
may be suspended or removed upon a proposal by the Supervisory Board. A resolution to suspend
or remove a Managing Director requires adoption by at least an absolute majority of the votes cast, if
adopted upon a proposal by the Supervisory Board. A resolution by the General Meeting to suspend or
remove a Managing Director other than upon such proposal requires adoption by at least a two-thirds
majority of the votes cast representing at least one-third of the Company’s issued capital.
3.11.1.2.1.3.4
Any suspension may be extended one or more times but may not last longer than three months in
aggregate. If, at the end of that period, no decision has been taken on termination of the suspension
or on removal of the Managing Director, the suspension shall end. A Managing Director may not be
suspended or removed by the Supervisory Board.
3.11.1.2.1.4 Term of appointment
The Managing Directors are appointed for a term of not more than 4 (four) years. A member of the Management Board
may be re-appointed for a term of no more than 4 (four) years at a time. There is no maximum aggregate term for
Managing Directors.
3.11.1.2.1.5 Board meetings and decisions
3.11.1.2.1.5.1
Pursuant to the Management Board Rules, the Managing Directors shall endeavour to achieve that
resolutions are as much as possible adopted unanimously. Where unanimity cannot be reached and
the law, and the Articles of Association or the Management Board Rules do not prescribe a larger
majority, resolutions of the Management Board are adopted by an absolute majority of the Managing
Directors entitled to vote.
3.11.1.2.1.5.2
The Management Board must obtain the approval of the General Meeting for resolutions entailing
a significant change in the identity or character of the Company or its business. This includes in
any case: (i) the transfer of (nearly) the entire business of the Company to a third party; (ii) entering
into or terminating long-term co-operations with another legal entity or company or as a fully liable
partner of a limited partnership or a general partnership, if this cooperation or termination is of major
significance to the Company; and (iii) acquiring or disposing by the Company or any of its subsidiaries
of a participating interest in the capital of a company with a value equal to at least one-third of the
sum of the assets of the Company as shown in its consolidated balance sheet with explanatory notes
according to the most recently adopted annual accounts of the Company. Certain other resolutions
of the Management Board, as identified in the Articles of Association and Management Board Rules,
require the approval of the Supervisory Board. The Management Board Rules may be amended by the
Management Board at any time except that changes to the resolutions of the Management Board which
require the approval of the Supervisory Board as set out in the Management Board Rules require the
approval of the Supervisory Board.
3.11.1.2.1.5.3
Resolutions of the Management Board can also be adopted without holding a meeting, provided the
proposal concerned is submitted to all Managing Directors who are entitled to vote and none of them
has objected to this manner of adopting resolutions.
3.11.1.2.1.5.4
In each of the abovementioned situations, the lack of approval (whether from the General Meeting or
from the Supervisory Board) does not affect the authority of the Management Board or the Managing
Directors to represent the Company.
3.11.1.2.1.5.5
The majority of the Management Board meetings will be held in South Africa.
3.11.1.2.1.6 Conflict of interest
3.11.1.2.1.6.1
24
Dutch law provides that a managing director of a Dutch public limited liability company, such as the
Company, may not participate in the discussions and decision-making by the Management Board if
he or she has a direct or indirect personal interest conflicting with the interests of the Company and
the business connected with it. Such a conflict of interest only exists if in the situation at hand the
Managing Director is deemed to be unable to serve the interests of the Company and the business
connected with it with the required level of integrity and objectivity. Pursuant to the Articles of
Association and the Management Board Rules, each Managing Director shall immediately report any
(potential) personal conflict of interest to the Company and/or the chairman of the Supervisory Board
and to the other Managing Directors and shall provide all relevant information.
3.11.1.2.1.6.2
If no resolution can be adopted by the Management Board as a consequence of such a personal conflict
of interest, the resolution shall be adopted by the Supervisory Board. All transactions in which there
are conflicts of interests with Managing Directors will be agreed on terms that are customary in the
sector concerned and disclosed in the Company’s annual report.
3.11.1.2.1.6.3
Resolutions to enter into transactions in which there are conflicts of interest with Managing Director(s)
that are of material significance to the Company and/or the relevant Managing Director(s) require the
approval of the Supervisory Board.
3.11.1.2.1.6.4
The existence of a (potential) personal conflict of interest does not affect the authority to represent
the Company.
3.11.1.2.2 Supervisory Board
3.11.1.2.2.1 Powers, responsibilities and functioning
3.11.1.2.2.1.1
The Supervisory Board supervises the management of the Management Board and the general
course of affairs of the Company and the business connected with it. The Supervisory Board is
accountable for these matters to the General Meeting. The Supervisory Board also provides advice to
the Management Board. In performing its duties, the Supervisory Directors are required to be guided
by the interests of the Company and its business enterprise, taking into consideration the interests
of the Group’s stakeholders (which includes but is not limited to its customers, its employees and the
Shareholders). The Supervisory Board will also observe the corporate social responsibility issues that
are relevant to the Group. The Supervisory Board is responsible for the quality of its own performance.
The Supervisory Board may, at the Company’s expense, seek the advice which it deems desirable for
the correct performance of its duties.
3.11.1.2.2.1.2 The Supervisory Board will draw up a profile for its size and composition taking into account the nature
of the business of the Company and its subsidiaries, and the desired expertise, background, age and
gender of the Supervisory Directors. The Supervisory Board shall discuss the profile at the occasion
of each amendment thereof in the General Meeting.
3.11.1.2.2.2 Supervisory Board Rules
The Supervisory Board may establish rules regarding its working methods and decision-making process.
The Supervisory Board Rules will become effective upon the Scheme becoming operative.
3.11.1.2.2.3 Composition, appointment, removal and suspension
3.11.1.2.2.3.1
The Articles of Association provide that the Supervisory Board must consist of a minimum of 3 (three)
Supervisory Directors, with the number of Supervisory Directors to be determined by the Supervisory
Board. It is contemplated that subsequent to the implementation of the Scheme, the Supervisory
Board will consist of 12 (twelve) Supervisory Directors. Only natural persons may be appointed as
Supervisory Directors.
3.11.1.2.2.3.2 The General Meeting appoints the Supervisory Directors. The Supervisory Directors may be appointed
upon a non-binding nomination by the Supervisory Board. A resolution to appoint a Supervisory
Director requires an absolute majority of the votes cast, if adopted upon the non-binding nomination
by the Supervisory Board. A resolution by the General Meeting to appoint a Supervisory Director
other than upon such non-binding nomination requires a majority of two-thirds of the votes cast
representing at least one-third of the Company’s issued capital. The Supervisory Board shall appoint
one of the Supervisory Directors as chairman of the Supervisory Board and one of the Supervisory
Directors as vice-chairman.
3.11.1.2.2.3.3 The General Meeting may at any time suspend or remove a Supervisory Director. The Supervisory
Directors may be suspended or removed upon a proposal by the Supervisory Board. A resolution to
suspend or remove a Supervisory Director requires an absolute majority of the votes cast if adopted
upon a proposal by the Supervisory Board. A resolution by the General Meeting to suspend or remove
a Supervisory Director other than upon such proposal requires a majority of two-thirds of the votes
cast representing at least one-third of the Company’s issued capital.
3.11.1.2.2.3.4 Any suspension may be extended one or more times, but may not last longer than 3 (three) months in
the aggregate. If, at the end of that period, no decision has been taken on termination of the suspension
or on removal of the Supervisory Director, the suspension shall end. A Supervisory Director may not
be suspended or removed by the Supervisory Board.
3.11.1.2.2.4 Term of appointment
The Supervisory Board Rules provide that each member of the Supervisory Board shall be appointed for a period of
4 (four) years. The members of the Supervisory Board must retire periodically in accordance with a rotation plan drawn
up by the Supervisory Board. A Supervisory Director may be appointed for a total of 3 (three), 4 (four) year terms, or
12 (twelve) years in total. Supervisory Directors who have reached the age of 71 (seventy one) years shall retire from
office at the first General Meeting but shall be eligible for reappointment for a term of 1 (one) year each time, subject to
a maximum of such number of terms of 12 (twelve) years in aggregate.
3.11.1.2.2.5 Meetings and decisions
3.11.1.2.2.5.1 The Supervisory Board shall meet at least 4 (four) times a year and, furthermore, as often a 1 (one)
or more of the Supervisory Directors or the Management Board deems necessary. The Supervisory
Board shall meet with the Management Board as often as the chairman, the vice-chairman, the
Company secretary or Management Board deems necessary.
3.11.1.2.2.5.2 Pursuant to the Supervisory Board Rules, the Supervisory Directors shall endeavour to achieve that
resolutions are as much as possible adopted unanimously. Where unanimity cannot be reached and
the law, the Articles of Association or the Supervisory Board Rules do not prescribe a larger majority,
resolutions of the Supervisory Board are adopted by an absolute majority of the Supervisory Directors
entitled to vote.
3.11.1.2.2.5.3 The Supervisory Board is only entitled to adopt resolutions if at least a majority of its members are
present or represented.
25
3.11.1.2.2.5.4 The Supervisory Board may also adopt resolutions without holding a meeting, provided that the
proposal concerned is submitted to all Supervisory Directors who are entitled to vote and none of
them has objected to this manner of adopting resolutions.
3.11.1.2.2.5.5 The majority of the Supervisory Board meetings will be held in South Africa.
3.11.1.2.2.6 Conflict of interest
3.11.1.2.2.6.1
Similar to the rules that apply to the Managing Directors as described above, Dutch law also provides
that a supervisory director of a Dutch public limited liability company, such as the Company, may not
participate in the discussions and decision-making by the Supervisory Board if he or she has a direct
or indirect personal interest conflicting with the interests of the Company and the business connected
with it.
3.11.1.2.2.6.2 Each Supervisory Director (other than the chairman of the Supervisory Board) shall immediately
report any (potential) personal conflict of interest to the chairman of the Supervisory Board and the
other Supervisory Directors and must provide all relevant information. In case the chairman of the
Supervisory Board has a (potential) personal conflict of interest he shall immediately report such
potential conflict to the vice-chairman of the Supervisory Board and the other Supervisory Directors
and shall provide all relevant information.
3.11.1.2.2.6.3 If as a result of such a personal conflict of interest all Supervisory Directors are unable to participate
in the deliberations and the decision-making process and no resolution of the Supervisory Board can
be adopted, the resolution shall be adopted by the General Meeting.
3.11.1.2.2.6.4 All transactions in which there are conflicts of interests with Supervisory Directors will be agreed
on terms that are customary in the sector concerned and disclosed in the Company’s annual report.
Resolutions to enter into transactions in which there are conflicts of interest with Supervisory
Director(s) that are of material significance to the Company and/or the relevant Supervisory Director(s)
require the approval of the Supervisory Board. Resolutions to enter into transactions that are of
material significance to the Company and/or the relevant Supervisory Directors require the approval
from the Supervisory Board.
3.11.1.2.3 Supervisory Board Committees
The Supervisory Board will establish an Audit and Risk Committee, a Nominations Committee, and a Human Resources and
Remuneration Committee. Each of the committees has a preparatory and/or advisory role to the Supervisory Board. In accordance
with the Supervisory Board Rules, the Supervisory Board will adopt regulations for each committee, which regulations will become
effective upon the Scheme becoming operative. The committees consist of Supervisory Directors. They report their findings to the
Supervisory Board, which remains collectively responsible for all decisions prepared and/or taken by these committees.
3.11.1.2.4 Audit and Risk Committee
3.11.1.2.4.1 The duties of the Audit and Risk Committee include the supervision and monitoring as well as advising the Management
Board regarding the operation of the Company’s internal risk management and control systems. The Audit and
Risk Committee prepares the decision-making of the Supervisory Board in respect of matters which fall within the
committee’s responsibilities and advises the Supervisory Board on the exercise of certain of its duties and prepares
nominations and reviews for the Supervisory Board in this regard. The Audit and Risk Committee also supervises the
submission of financial information by the Company, the compliance with recommendations of internal and external
accountants, the role and functioning of the internal audit department, the role and functioning of the chief financial
officer, the Company’s policy on tax planning, the Company’s financing arrangements, assists the Supervisory Board
with the Company’s information and communications technology. It furthermore maintains regular contact with and
supervises the external accountant and it advises the Supervisory Board on the nomination of an external accountant for
appointment by the General Meeting and makes a proposal to the Supervisory Board on the remuneration of the external
accountant. The Audit and Risk Committee also issues preliminary advice to the Supervisory Board regarding the
approval of the annual accounts and the annual budget and major capital expenditures. The Audit and Risk Committee
discusses the major financial risks and the steps taken to monitor and control such risks with the Management Board.
Moreover, the Audit and Risk Committee prepares negotiations and resolutions of the Supervisory Board, in particular
with respect to investments and medium-term investment planning. Further, the Audit and Risk Committee co-ordinates
the co-operation between the Supervisory Board and the Management Board and consults with the Management Board
on issues including strategy, planning, business development, M&A projects and risk management.
3.11.1.2.4.2 The Audit and Risk Committee meets at least 4 (four) times a year.
3.11.1.2.4.3 It is proposed that the Audit and Risk Committee will consist of Dr Booysen (chairman), Mr Brink and Dr Lategan.
3.11.1.2.4.4 The rules for the Audit and Risk Committee will be published on the Website. These rules will include the consideration
and satisfaction, on an annual basis, by the Audit and Risk Committee, of the appropriateness and expertise of the
financial director. The undertaking of this consideration and satisfaction will be reported to the Shareholders annually.
3.11.1.2.5 Nominations Committee
3.11.1.2.5.1 The Nominations Committee advises the Supervisory Board on its duties regarding the selection and appointment
of Managing Directors and Supervisory Directors and prepares the decision making of the Supervisory Board in
respect of the matters which fall within the committee’s responsibilities. The duties of the Nominations Committee
include preparing the selection criteria and appointment procedures for Managing Directors and Supervisory
Directors, and proposing the profile for the Supervisory Board. It also annually assesses the scope and composition
of the Management Board, the Supervisory Board and its committees, and the functioning of the individual directors.
The Nominations Committee also proposes on appointments and reappointments and the making of any non-binding
nominations. It supervises the Management Board’s policy on selection criteria and appointment procedures for the
senior management. The Nominations Committee meets at least twice a year.
3.11.1.2.5.2 It is proposed that the Nominations Committee will consist of Dr Konar (chairman), Dr Booysen and Dr Wiese.
3.11.1.2.5.3 The rules for the Nominations Committee will be published on the Website.
3.11.1.2.6 Human Resources and Remuneration Committee
3.11.1.2.6.1 The Human Resources and Remuneration Committee supervises and advises on the Company’s human resources
and remuneration practices and prepares the decision making of the Supervisory Board in respect of the matters
which fall within the committee’s responsibilities. In particular, the Human Resources and Remuneration Committee
is responsible for: (i) making proposals to the Supervisory Board for the remuneration policy (and material changes
thereto) to be submitted to the General Meeting; (ii) making proposals for the remuneration of individual Managing
26
Directors and senior executives (and changes to such remuneration) to be submitted to the Supervisory Board;
(iii) preparing the Company’s remuneration report, (iv) appointing trustees and compliance officers for and approving
amendment to the Company’s share based incentive schemes; (v) approving appointments of senior executives and
their terms and conditions of employment; (vi) reviewing incidents of unethical behaviour by Managing Directors
and senior executives; (vii) annually reviewing the Company’s code of conduct and propose amendments thereto
to the Management Board; (viii) annually appraising the Managing Directors and the Supervisory Directors and
reporting thereon to the Supervisory Board; (ix) reviewing its own effectiveness annually and reporting thereon to the
Supervisory Board and (x) annually reviewing the regulations of remuneration committees of the Company’s significant
subsidiaries. The Human Resources and Remuneration Committee meets at least twice a year.
3.11.1.2.6.2 It is proposed that the Human Resources and Remuneration Committee will consist of Mr Brink (chairman), Dr Konar
and Dr Lategan.
3.11.1.2.6.3 The rules for the Human Resources and Remuneration Committee will be published on the Website.
3.11.1.2.7 Executive Committee
It is proposed that the Company has an Executive Committee which consists of the Managing Directors and selected senior executive
officers. The Executive Committee members who are not Managing Directors will be heads of divisions and will be appointed by the
Management Board. It is envisaged that the Management Board may at any time suspend and dismiss a member of the Executive
Committee who is not also a Managing Director. The Management Board will retain the authority to adopt resolutions within the
scope of authority of the Executive Committee without the participation of the members of the Executive Committee who are not also
members of the Management Board. The Management Board adopts management resolutions of the Company. These management
decisions of the Management Board may be prepared in meetings of the Executive Committee.
3.11.1.2.8 Diversity
3.11.1.2.8.1 Dutch law requires large Dutch companies to pursue a policy of having at least 30% (thirty percent) of the seats on
both the management board and supervisory board held by men and at least 30% (thirty percent) of the seats on the
management board and supervisory board held by women, each to the extent these seats are held by natural persons.
Under Dutch law, this is referred to as a well balanced allocation of seats. This allocation of seats will be taken into
account in connection with the following actions: (i) the appointment, or nomination for the appointment, of Managing
Directors and Supervisory Directors; (ii) drafting the criteria for the size and composition of the Management Board
and Supervisory Board, as well as the designation, appointment, recommendation and nomination for appointment
of Supervisory Directors; and (iii) drafting the criteria for the Supervisory Directors. These statutory rules on gender
diversity will automatically lapse on 1 January 2016.
3.11.1.2.8.2 The Company currently does not meet these gender diversity targets. The Company will explain in its annual report for
the Fiscal Year 2016 (i) why the seats are not allocated in a well-balanced manner as aforesaid; (ii) how the Company
has attempted to achieve a well-balanced allocation; and (iii) how the Company aims to achieve a well-balanced
allocation in the future.
3.11.2 Compliance with specific requirements concerning corporate governance
3.11.2.1 Appointed chief executive officer and chairman of the Company
3.11.2.1.1 On the implementation of the scheme, the following persons are proposed to be appointed as the chief executive officer and chairman
of the Company:
3.11.2.1.1.1
Markus Johannes Jooste to be appointed as chief executive officer; and
3.11.2.1.1.2 Deenadayalen Konar to be appointed as the chairman.
3.11.2.1.2 Dr Konar is an independent non-executive director who will sit on the Supervisory Board.
3.11.2.2 Directors’ CVs and their capacities
The brief curriculum vitae and the respective capacities for each director and proposed director of the company is set out in section 1, paragraph 2.1
of this Prospectus, read with Annexure 10.
3.11.2.3 Executive financial director of the company
3.11.2.4 On the implementation of the scheme, Andries Benjamin la Grange has been proposed to be appointed as the executive financial director of the
company.
3.11.2.5 Consideration of the competence, qualification and expertise of the company secretary
3.11.2.5.1 The company secretary will be subjected to an annual evaluation by the Board wherein the Board will satisfy itself as to the competence,
qualifications and experience of the company secretary, and the execution of this responsibility will be reported to the Shareholders
in the company’s annual report.
3.11.2.5.2 The company secretary is the current company secretary for Steinhoff and has acted in such position for the past 4 (four) years.
3.11.2.6 Arm’s length relationship of the company secretary
3.11.2.6.1 The company secretary is a juristic person and therefore is not a member of the Board. The Board is of the opinion that an arm’s length
relationship exists between the company secretary and the Board as none of the shareholders or directors of the company secretary
sit on the Board.
3.11.2.6.2 The Management Board, in terms of the Articles of Association, as amended by the Deeds of Amendments, has the authority to
appoint the company secretary, and replace the company secretary at any time. Resolutions of the Management Board in relation
to the appointment, replacement or duties of the company secretary require the approval of the Supervisory Board. In addition, the
Articles of Association, as amended by the Deeds of Amendment, provide that the company secretary will only hold the duties and
powers vested in him pursuant to such articles of association, the Management Board Rules or a resolution of the Management Board.
4. SHARE CAPITAL OF THE COMPANY
4.1
Authorised and issued share capital of the Company
4.1.1
In terms of the Articles of Association, as amended by the Deeds of Amendment, the authorised and issued share capital of the Company before and
subsequent to the implementation of the scheme is set out in the table below:
27
Number
Value
450,000
90,000
€225,000
€45,000
17,500,000,000
20,000,000,000
€8,750,000,000
€200,000,000
PRIOR TO THE IMPLEMENTATION OF THE SCHEME
Authorised shares with a nominal value of €0.50 (fifty Euro cents) each
Issued shares with a nominal value of €0.50 (fifty Euro cents) each
SUBSEQUENT TO THE IMPLEMENTATION OF THE SCHEME
Authorised Ordinary Shares
Authorised Preference Shares
Issued Ordinary Shares
(on the basis of the number of Steinhoff Shares on the Last Practicable Date)
Issued Preference Shares
4.2
4.3
4.1.2
As at the date of this Prospectus, no Shares are held in treasury.
4.1.3
The Company was incorporated with the authorised share capital listed above as the share capital of the Company prior to the implementation of the Scheme.
The authorised share capital of the Company, subsequent to the implementation of the Scheme, will be created through the approval and execution of the
Deeds of Amendment.
Controlling shareholders of the Company and history of any change in the trading object of the Company
4.2.1
The Foundation, as the holder of the Incorporation Shares, being the sole Shareholder of the Company, is the controlling Shareholder of the Company prior to
the implementation of the Scheme. On or as soon as reasonably possible after the implementation of the Scheme, the Incorporation Shares will be acquired
and/or cancelled, and the Scheme Participants will hold 100% (one hundred percent) of the issued Ordinary Shares.
4.2.2
On the implementation of the Scheme, the Voting Pool Parties, by virtue of the Voting Pool Agreement, will collectively hold or control approximately 33%
(thirty three percent) of the Ordinary Shares.
4.2.3
As the Company is newly incorporated, there has been no change in its trading objects during the past 5 (five) years.
4.2.4
On the implementation of the Scheme and the kika-Leiner Sale Agreement, the Steinhoff Group and kika-Leiner will form part of the Group, and the trading
objects undertaken by the Steinhoff Group and kika-Leiner will form part of the trading objects of the Group. In addition, prior to the implementation of the
Scheme, the name of the Company will be changed to “Steinhoff International Holdings N.V.”.
Shareholders with a beneficial interest of 5% (five percent) or more in Shares
4.3.1
The holder of the Incorporation Shares, being the sole Shareholder of the Company, will be the controlling Shareholder of the Company prior to the
implementation of the Scheme. On or as soon as reasonably possible after the implementation of the Scheme, the Incorporation Shares will be acquired
and/or cancelled, and the Scheme Participants will hold 100% (one hundred percent) of the Shares.
4.3.2
On the implementation of the Scheme, and on the basis of the shareholding in Steinhoff as at 26 June 2015, the following persons, other than the directors of
the Company, will hold a direct or indirect beneficial interest of 5% (five percent) or more of the Shares as at the Last Practicable Date.
Name
Public Investment Corporation
Brait Mauritius Limited
Coronation Asset Management (Proprietary) Limited
Christoffel Hendrik Wiese
Bruno Ewald Steinhoff
4.4
3,667,476,771 €1,833,738,385.50
0
€0
Interest held
Direct and indirect shareholding of 345,776,460 (three hundred and fourty five million seven
hundred and seventy six thousand four hundred and sixty) Ordinary Shares in the Company
constituting 9.43% (nine point four three percent) of the issued Ordinary Shares
Direct shareholding of 190,000,000 (one hundred and ninety million) Ordinary Shares in the
Company constituting 5.18% (five point one eight percent) of the issued Ordinary Shares
Direct and indirect shareholding of 194 011 890 (one hundred and ninety four million eleven
thousand eight hundred and ninety) Ordinary Shares in the Company constituting 5.29% (five point
two nine percent) of the issued Ordinary Shares
Indirect shareholding, through Titan and Thibault, of 654,874,971 (six hundred and fifty four million
eight hundred and seventy four thousand nine hundred and seventy one) Ordinary Shares in the
Company constituting 18.3% (eighteen point three percent) of the issued Ordinary Shares
Direct shareholding of 9,100,000 (nine million one hundred thousand) Ordinary Shares and an
indirect shareholding of 182,750,000 (one hundred and eighty two million seven hundred and fifty
thousand) Ordinary Shares in the Company constituting 5.2% (five point two percent) of the
issued Ordinary Shares
Preferential, conversion and/or exchange rights, voting rights, rights to dividends, profits or capital, including redemption rights and rights
on liquidation or distribution of capital assets
4.4.1
The Articles of Association will be amended through the execution of the Deeds of Amendment. The information below is based on the rights attaching to
Shares after the execution of the Deeds of Amendment.
4.4.2
Ordinary Shares
There are no restrictions on the transferability of the Ordinary Shares. Save as set out below, there are no prohibitions or restrictions on disposals with respect
to the transferability of the Ordinary Shares. However, persons located or resident in, or citizens of, or who have a registered address in countries other than
Germany and the Netherlands, who wish to transfer their Ordinary Shares into jurisdictions other than Germany and the Netherlands may be subject to specific
regulations or restrictions.
4.4.2.1
28
Preferential, conversion, redemption and/or exchange rights
4.4.2.1.1
Save for any preferences in respect of dividends or rights on liquidation as set out below, the Articles of Association do not provide for
any (automatic or upon request) conversion or exchange rights of 1 (one) class of shares into another class. Shares can be converted
by way of an amendment of the Articles of Association. An amendment of the Articles of Association requires a resolution of the
General Meeting and is effected by the execution of a notarial deed of amendment in the presence of a Dutch civil law notary.
4.4.2.1.2
Subject to Dutch law and the Articles of Association, the General Meeting may resolve (on proposal of the Management Board with
approval of Supervisory Board) to reduce the Company’s issued share capital by (i) cancellation of Shares held by the Company,
(ii) cancellation with repayment of all Ordinary Shares and all Preference Shares; or (iii) reducing the nominal value of Shares to be
effected by an amendment of the Articles of Association.
4.4.2.2
4.4.2.3
4.4.2.1.3
A reduction of the nominal value of Shares, whether without repayment or against partial repayment on the Shares or upon release from
the obligation to pay up the Shares, must be made pro rata on all Shares of the particular class concerned. This pro rata requirement
may be waived if all Shareholders of the particular class so agree. In addition, a resolution to reduce the share capital shall require the
prior or simultaneous approval of each group of holders of Shares of a similar class (if any) whose rights are prejudiced.
4.4.2.1.4
A resolution of the General Meeting to reduce the issued share capital requires a majority of at least two-thirds of the votes cast, if less
than half of the issued and outstanding share capital is present or represented at the General Meeting.
4.4.2.1.5
In addition, Dutch law contains detailed provisions regarding the reduction of capital. A resolution to reduce the issued share capital
shall not take effect as long as creditors have legal recourse against the resolution.
Right to dividends
4.4.2.2.1
The Company may only make distributions to its Shareholders if and insofar the Company’s equity exceeds the aggregate of the
issued capital plus any reserves required to be maintained by Dutch law or the Company’s articles of association from time to time.
A distribution of profits other than an interim distribution is only allowed after the adoption of the Company’s (i.e. non-consolidated)
annual financial statements, and the information therein will determine if the distribution of profits is legally permitted for the relevant
Fiscal Year. The Management Board, with the prior approval of the Supervisory Board, may decide to allocate all or part of the profits
to reserves. In deciding so, the Management Board will take into account the financial condition, earnings, cash needs, capital
requirements (including requirements of its subsidiaries) and any other factors that the Management Board and the Supervisory Board
deem relevant in making such a determination.
4.4.2.2.2
The allocation of profits remaining after any additions to the reserves as described above will be determined by the General Meeting.
The Management Board, with the prior approval of the Supervisory Board, will make a proposal for the allocation of such profits.
Part of that proposal shall be that the Company makes a distribution to the holders of Preference Shares if any are outstanding and to
the holders of Ordinary Shares.
4.4.2.2.3
All of the Ordinary Shares issued and outstanding on the day following the Scheme becoming operative will rank equally and will be
eligible for any profit or other payment that may be declared on the Ordinary Shares after the date the Scheme becomes effective.
4.4.2.2.4
The Management Board may, with the approval of the Supervisory Board, resolve that distributions to Shareholders be made at the
expense of one or more of the Company’s reserves. Distributions from the reserves may also be made to holders of a particular class
of Shares only.
4.4.2.2.5
Subject to Dutch law and the Articles of Association, the Management Board may, with the prior approval of the Supervisory Board,
resolve to make an interim distribution of profit insofar as the Company’s equity exceeds the aggregate of the issued capital plus any
reserves required to be maintained by Dutch law or the Company’s Articles of Association from time to time. For this purpose, the
Management Board must prepare an interim statement of assets and liabilities. Interim distributions may also be made to holders of
a particular class of Shares only. No interim distribution is required to be made on the Preference Shares if an interim distribution is
made on the Ordinary Shares.
4.4.2.2.6
Payment of any dividend in cash will be made in euro unless otherwise determined by the Management Board in its sole discretion.
According to the Articles of Association, payments of profit and other payments are payable from a date to be set by the Management
Board.
4.4.2.2.7
A claim for any declared dividend and other distributions lapses 5 (five) years after the date those dividends or distributions were
released for payment. Any dividend or distribution that is not collected within this period will be considered to have been forfeited to
the Company.
4.4.2.2.8
Pursuant to Dutch law, it is not allowed to exclude a Shareholder from any profit entitlements and, in light thereof, there is no
arrangement under which future dividends are waived or agreed to be waived.
4.4.2.2.9
In respect of the Company’s dividend policy, the Company intends to target a dividend pay-out ratio in line with listed international
retailers from time to time, provided the Group’s business remains stable.
Voting rights
Each Ordinary Share confers the right to cast 1 (one) vote at a General Meeting, unless Preference Shares are in issue, in which case each Ordinary
Share confers the right to cast 50 (fifty) votes at a General Meeting. To the extent that the laws of the Netherlands and the Articles of Association
do not provide otherwise, resolutions of the General Meeting are adopted by a simple majority of the votes cast without a quorum being required.
Pursuant to Dutch law and subject to limited exceptions, no votes may be cast at a General Meeting in respect of Shares which are held by the
Company or one of its subsidiaries.
4.4.2.4
Pre-emptive rights
4.4.2.4.1
Upon issue of Ordinary Shares or grant of rights to subscribe for Ordinary Shares, each holder of Ordinary Shares shall have a
pre-emptive right in proportion to the aggregate nominal amount of his or her Ordinary Shares. Holders of Shares do not have
pre-emptive rights in respect of (i) Shares issued against contribution in kind, (ii) Shares issued to employees of the Company or
another member of the Group, (iii) Shares issued to persons exercising a previously granted right to subscribe for Shares or (iv) issues
of Shares of another class.
4.4.2.4.2
Pre-emptive rights may be limited or excluded by a resolution of the General Meeting, which may only be taken upon a proposal of the
Management Board which has been approved by the Supervisory Board. The Management Board is authorised, without the approval
of the Supervisory Board, to resolve on the limitation or exclusion of the pre-emptive right if and to the extent the Management Board
has been designated by the General Meeting to do so. The designation must be proposed by the Management Board and such proposal
must be approved by the Supervisory Board, and will only be valid for a specific period and may from time to time be extended by the
General Meeting, in each case not exceeding 5 (five) years. Unless provided otherwise in the designation, the designation cannot be
cancelled.
4.4.2.4.3
Effective as per the execution of the Deeds of Amendment, the Management Board will have been designated as the corporate body
authorised to issue Ordinary Shares, to grant rights to subscribe for Ordinary Shares and/or limit or exclude statutory pre-emptive
rights in relation to the issuances of Ordinary Shares or the granting of rights to subscribe for Ordinary Shares. Said designation of the
Management Board is limited to (i) up to 10% (ten percent) of the total nominal issued share capital of the Company immediately after
the Scheme has become operative, which authorisation may be used for all purposes, including the granting of stock options, financing
mergers and acquisitions and issuing new convertible bonds plus (ii) up to an additional 10% (ten percent) of the total nominal issued
share capital of the Company as of immediately after the Scheme has become operative, which additional authorisation may only be
used in connection with or on the occasion of mergers and acquisitions and strategic alliances.
4.4.2.4.4
Separately from and in addition to the foregoing authorisations, effective as per the execution of the Deeds of Amendment, the
Management Board will have been designated as the corporate body authorised to grant rights to subscribe for Ordinary Shares
and/or Preference Shares and to limit or exclude statutory pre-emptive rights in relation to any such grant. This designation of the
Management Board is limited to up to 10% (ten percent) of the total nominal issued share capital of the Company immediately after
the Scheme has become operative, and can only be used for the purpose of issuing new convertible bonds.
29
4.4.2.5
4.4.2.4.5
Furthermore, effective as per the execution of the Deeds of Amendment, the General Meeting will have designated the Management
Board as the corporate body authorised to issue Preference Shares, grant rights to subscribe for Preference Shares and/or limit or
exclude statutory pre-emptive rights in relation to the issue of Preference Shares or the grant of rights to subscribe for Preference
Shares. Said designation of the Management Board is limited to 10% (ten percent) of the total Preference Shares that may be issued
under the Articles of Association, being 2,000,000,000 (two billion) Preference Shares. This authorisation may be used for all
purposes, including the granting of stock options, financing mergers and acquisitions and issuing new convertible bonds.
4.4.2.4.6
Each of the foregoing authorisations will be valid for a period of 5 (five) years following the date of execution of the Deeds of
Amendment. If these authorisations are used during a particular year, then the Management Board is expected to propose to the
General Meeting that the Management Board is designated with additional authorities so that as of the date of the annual General
Meeting at which this proposal is put to a vote the ability to issue or grant is restored back to the (up to) 10% (ten percent) for each of
the purposes set out above.
4.4.2.4.7
In addition, it is contemplated that the General Meeting will designate the Management Board as the corporate body authorised and,
accordingly, the Management Board will resolve (i) to issue such number of Ordinary Shares as are needed for the Scheme, (ii) to
grant such number of rights to subscribe for Ordinary Shares as are needed for the purposes of replacing the rights to acquire Steinhoff
Shares under existing Steinhoff stock options and convertible bonds with rights to acquire Ordinary Shares, and (iii) to exclude all
statutory pre-emptive rights in relation thereto. As a result, the designations set out in the preceding paragraphs remain available.
Rights on liquidation
Any balance remaining after the payment of the debts of the dissolved Company and, if possible, any distribution to the holders of Preference
Shares contemplated in section 1, paragraph 4.4.3.5 of this Prospectus, will be distributed to the holders of Ordinary Shares in proportion to the
aggregate nominal value of the Ordinary Shares held by each.
4.4.3
Preference Shares
There are no restrictions on the transferability of the Preference Shares.
4.4.3.1
4.4.3.2
4.4.3.3
Preferential, conversion, redemption and/or exchange rights
4.4.3.1.1
Save for any preferences in respect of dividends or rights on liquidation as set out below, the Articles of Association do not provide for
any (automatic or upon request) conversion or exchange rights of 1 (one) class of shares into another class. Shares can be converted
by way of an amendment of the Articles of Association. An amendment of the Articles of Association requires a resolution of the
General Meeting and is effected by the execution of a notarial deed of amendment in the presence of a Dutch civil law notary.
4.4.3.1.2
Subject to Dutch law and the Articles of Association, the General Meeting may resolve (on proposal of the Management Board with
approval of Supervisory Board) to reduce the Company’s issued share capital by (i) cancellation of Shares, held by the Company,
(ii) cancellation with repayment of all Ordinary Shares and all Preference Shares; or (iii) reducing the nominal value of Shares to be
effected by an amendment of the Articles of Association.
4.4.3.1.3
A reduction of the nominal value of Shares, whether without repayment or against partial repayment on the Shares or upon release from
the obligation to pay up the Shares, must be made pro rata on all Shares of the particular class concerned. This pro rata requirement
may be waived if all Shareholders of the particular class concerned so agree. In addition, a resolution to reduce the share capital shall
require the prior or simultaneous approval of each group of holders of Shares of a similar class (if any) whose rights are prejudiced.
4.4.3.1.4
If all issued Preference Shares are cancelled, an amount equal to the nominal value of the Preference Shares as well as any share
premium paid and not repaid on the Preference Shares shall be paid to each holder of such Preference Shares.
4.4.3.1.5
A resolution of the General Meeting to reduce the issued share capital requires a majority of at least two-thirds of the votes cast, if less
than half of the issued and outstanding share capital is present or represented at the General Meeting.
4.4.3.1.6
In addition, Dutch law contains detailed provisions regarding the reduction of capital. A resolution to reduce the issued share capital
shall not take effect as long as creditors have legal recourse against the resolution.
Right to dividends
4.4.3.2.1
From the profit realised, and after any addition to the reserves as described in section 1, paragraph 4.4.2.2.1 of this Prospectus, and
the adoption of the proposal described in section 1, paragraph 4.4.2.2.2 of this Prospectus, a distribution shall, to the extent possible,
be made to the holders of Preference Shares in an amount per Preference Share equal to the amount as is distributed on an Ordinary
Share plus an additional premium of 1% (one percent) over such distribution. This premium may be increased by the Management
Board, at its absolute discretion, at the time of issue to a maximum of 10% (ten percent) if considered appropriate by the Management
Board in view of the prevailing market conditions. If Preference Shares are issued during the course of a Fiscal Year, the distribution
on the Preference Shares concerned shall be proportionally decreased until the day of issue. The distribution entitlement of the
Preference Shares is not cumulative.
4.4.3.2.2
The provisions of section 1, paragraphs 4.4.2.2.2 and 4.4.2.2.4 to 4.4.2.2.9 apply, mutatis mutandis, to the dividend rights attaching
to the Preference Shares, save that no interim distribution is required to be made on the Preference Shares if an interim distribution
is made on the Ordinary Shares.
Voting rights
Each Preference Share confers the right to cast 1 (one) vote at a General Meeting. If there are Preference Shares in issue the other classes of
Shares will have the right to cast 50 (fifty) votes per share at a General Meeting. Accordingly, the voting rights of the Preference Shares will not
materially impact on the voting at General Meetings. To the extent that the laws of the Netherlands and the Articles of Association do not provide
otherwise, resolutions of the General Meeting are adopted by a simple majority of the votes cast without a quorum being required. Pursuant to
Dutch law and subject to limited exceptions, no votes may be cast at a General Meeting in respect of Shares which are held by the Company or
one of its subsidiaries.
4.4.3.4
4.4.3.5
Pre-emptive rights
4.4.3.4.1
Upon issue of Preference Shares, each Shareholder shall have a right of pre-emption in proportion to the aggregate nominal value of
his or her Preference Shares. Holders of Shares do not have pre-emptive rights in respect of (i) Shares issued against contribution
in kind, (ii) Shares issued to employees of the Company or another member of the Group, (iii) Shares issued to persons exercising a
previously granted right to subscribe for Shares or (iv) issues of Shares of another class.
4.4.3.4.2
The provisions of section 1, paragraphs 4.4.2.4.2 and 4.4.2.4.4 to 4.4.2.4.6 of this Prospectus apply, mutatis mutandis, to the
pre-emptive rights attaching to Preference Shares.
Rights on liquidation
Any balance remaining after payment of the debts of the dissolved Company will be distributed firstly, insofar as is possible, to the holders of
Preference Shares in an amount per Preference Share equal to the nominal value of each Preference Share plus any additional share premium
paid and not repaid on such Preference Share or, if the balance is insufficient, in proportion to these holders’ entitlements in the absence of such
deficiency.
30
4.5
Consents necessary for the variation of rights attaching to the Shares
The General Meeting may resolve to amend the Articles of Association, as amended by the Deeds of Amendment, upon a proposal of the Management Board, which has been
approved by the Supervisory Board. A resolution of the General Meeting to amend the Articles of Association which has the effect of reducing the rights attributable to holders
of Shares of a particular class, is subject to approval of the meeting of holders of Shares of that class.
4.6
Founders’, management or deferred shares and special rights attaching to such shares
There are no founders’, management or deferred shares currently in issue in the Company.
4.7
Particulars of alteration of capital during the preceding 3 (three) years:
The Company has not altered its share capital during the preceding 3 (three) years as it was only incorporated on 22 June 2015.
4.8
Summary of offers of securities of the Company to the public for subscription or sale during the preceding 3 (three) years
Save for the Ordinary Shares offered to the scheme Participants in terms of the scheme, no offers to subscribe for, or purchase, securities in the Company have been made to
the public in the preceding 3 (three) years.
4.9
Summary of any issues or offers of securities of the Company and the Steinhoff Group during the preceding 3 (three) years
4.9.1
Save for the Steinhoff Shares offered to the scheme Participants in terms of the scheme and the issue of the Incorporation Shares, no issues or offers of
securities of the Company have been made in the preceding 3 (three) years.
4.9.2
As at 30 June 2014 the number of issued Steinhoff Shares amounted to 2,109,880,692 (two billion one hundred and nine million eight hundred and eighty
thousand six hundred and ninety two). During the last 12 (twelve) months Steinhoff has issued:
4.9.3
4.9.2.1
350,000,000 (three hundred and fifty million) Steinhoff Shares for R52 (fifty two Rand) per Steinhoff Share to the Steinhoff Shareholders in
proportion to their holdings, save for the Renounced Shares (as such term is defined in the Rights Offer), in terms of an accelerated bookbuild using
the Steinhoff Shares that were attributed to the Renounced Shares, pursuant to the Rights Offer which was launched on 2 July 2014;
4.9.2.2
925,601,074 (nine hundred and twenty five million six hundred and one thousand and seventy four) Steinhoff Shares for R57 (fifty seven Rand)
per Steinhoff Share to Thibault, Brait and the Pepkor Management (as such term is defined in the Pepkor Circular), under specific authority, on
31 March 2015 for the acquisition of the Pepkor Group as detailed in the Pepkor Circular. The value of the Pepkor Group is detailed in the Pepkor
Circular;
4.9.2.3
225,490,375 (two hundred and twenty five million four hundred and ninety thousand three hundred and seventy five) Steinhoff Shares, under
specific authority, pursuant to the conversion, at the election of holders of Convertible Bonds in respect of the 2016 and 2017 Convertible Bonds,
as disclosed in the Steinhoff annual financial statements for the Fiscal Year ended 30 June 2014, annexed hereto as Annexure 1, and in section 1,
paragraph 5.1.4 of this Prospectus. The prices at which these issues were made are disclosed in section 1, paragraph 5.1.4 of this Prospectus;
4.9.2.4
45,437,446 (forty five million four hundred and thirty seven thousand four hundred and forty six) Steinhoff Shares, under general authority, for the
acquisition of a further 7.73% (seven point seven three percent) interest in PSG Group on 30 June 2015. The interest in the PSG Group acquired
through this issue is valued at R196.18 (one hundred and ninety six Rand and eighteen cents) per share; and
4.9.2.5
11,067,184 (eleven million sixty seven thousand one hundred and eighty four) Steinhoff Shares pursuant to the share incentive schemes operated
by Steinhoff, the details of which are disclosed in the Integrated Report and section 1, paragraph 5.1.2 of this Prospectus.
Steinhoff has not concluded any share repurchases in the preceding 3 (three) years.
4.10 Summary of any consolidations or subdivisions of securities during the preceding 3 (three) years
There have been no consolidations or sub-divisions of securities in the Company during the preceding 3 (three) years.
4.11 Statement on the control of the issue or disposal of the authorised but unissued securities
4.11.1
The information below is based on the Articles of Association, as amended by the Deeds of Amendment.
4.11.2 Pursuant to the Articles of Association, the General Meeting may resolve to issue Shares or grant rights to subscribe for Shares. The Articles of Association
further provide that the General Meeting may, upon a proposal of the Management Board which is approved by the Supervisory Board, designate the
Management Board as the body authorised to issue Shares or grant rights to subscribe for Shares. Pursuant to the Articles of Association and Dutch law,
the period of designation may not exceed 5 (five) years but may be renewed by a resolution of the General Meeting for periods of up to 5 (five) years. If not
otherwise stated in the resolution approving the designation, such authority is irrevocable. The resolution designating such authority to the Management
Board must specify the number of Shares which may be issued and, if applicable, any conditions to the issuance.
4.11.3 No resolution of the General Meeting or, if designated, the Management Board and the Supervisory Board is required for an issue of Shares pursuant to the
exercise of a previously granted right to subscribe for Shares. The Company may not subscribe for its own Shares on issue.
4.11.4 Detail regarding the control of the Ordinary Shares, effective on the execution of the Deeds of Amendment, is set out in section 1, paragraphs 4.4.2.4.3 to
4.4.2.4.6 of this Prospectus.
4.12 Statement of the other classes of securities of the Company which are listed and on which stock exchange
Save for the contemplated listing of the Ordinary Shares on the FSE and the JSE, the Company does not have any other securities listed on any stock exchange.
5. OPTIONS OR PREFERENTIAL RIGHTS IN RESPECT OF ANY SHARES
5.1
The following options and/or preferential rights to subscribe for Ordinary Shares are proposed to be granted as at the Last Practicable Date:
5.1.1
the offer to scheme Participants of the option to subscribe for Ordinary Shares as contemplated in the scheme, the details of which are set out in section 2,
paragraph 3 of this Prospectus;
5.1.2
under the 2010 Steinhoff share rights scheme, approved by Steinhoff’s shareholders at the annual general meeting held on 6 December 2010 (“the Steinhoff
2010 share rights scheme”), participants have been granted rights in respect of Steinhoff Shares. Steinhoff Shares granted under such scheme have been
made pursuant to approval by the Steinhoff Group’s remuneration committee, and they vest on the 3rd (third) anniversary of the grant date, subject to
performance conditions and minimum shareholding requirements set by the remuneration committee. At 30 June 2014, there were approximately 36,000,000
(thirty six million) outstanding share rights. Upon the scheme becoming effective, the rights previously granted under such incentive scheme will entitle the
holders thereof to receive Ordinary Shares on the basis of the applicable conditions to vesting;
5.1.3
Managing Directors and senior management may be granted rights in respect of a further 114,000,000 (one hundred and fourteen million) Ordinary Shares
under the Steinhoff 2010 share rights scheme, being the Group’s long term share incentive scheme (which, in the aggregate, will not exceed 10% (ten percent)
of the Company’s share capital in issue from time to time) as contemplated in section 1, paragraph 2.12.1.1 of this Prospectus. The Supervisory Board will be
authorised on the implementation of the scheme to grant such rights under the Steinhoff 2010 share rights scheme; and
31
5.1.4
5.2
between March 2011 and January 2014, Steinhoff Finance Holding GmbH, a subsidiary of Steinhoff, issued 3 (three) series of Convertible Bonds with
maturity dates falling between May 2017 and January 2021. It is proposed that the Convertible Bonds will, following the scheme, be convertible into Ordinary
Shares at the election of the bondholders. The Convertible Bonds were issued exclusively to international investors and are listed on the Freiverkehr of the
FSE. All amounts payable in respect of the Convertible Bonds are unsecured and Steinhoff undertook to procure the due and punctual delivery of Steinhoff
Shares, which, following the scheme, will entitle the respective holders to Ordinary Shares, pursuant to the terms and conditions of the Convertible Bonds.
The following table sets out certain information relating to the Convertible Bonds, including their dates of issue and maturity, principal amount, conversion
price and interest payable as at the Last Practicable Date:
(unaudited)
Issue date
2017 Convertible Bond (remaining)
2018 Convertible Bond
2021 Convertible Bond
September 2012
March 2011
January 2014
Amount
(€ million)
26 May 2017
31 March 2018
30 January 2021
Coupon
(%)
164.8
467.5
465
Conversion
price
(Rand per
share)
6.38
4.5
4.0
33,841
30,858
58,113
Number
of Ordinary
Shares on
conversion
(million)
52.64
144.3
119.4
Save for the Steinhoff share incentive schemes and convertible bonds referred to in section 1, paragraphs 5.1.2 and 5.1.4 of this Prospectus, and in the Steinhoff annual
financial statements for the Fiscal Year ended 30 June 2014, annexed hereto as Annexure 1, the Steinhoff Group has not, as at the Last Practicable Date, given any
option or preferential right to any person to subscribe for any securities in any company within the Steinhoff Group.
6. COMMISSIONS PAID OR PAYABLE IN RESPECT OF UNDERWRITING
7.
6.1
No commissions have been paid or are payable by the Company in respect of underwriting.
6.2
No commissions, discounts, brokerages or other special terms have been granted by the Company in the 3 (three) years preceding this Prospectus in connection with
the issue or sale of any securities, stock or debentures.
MATERIAL CONTRACTS
7.1
The Company has not entered into, and it is not proposed that it will enter into, any contracts relating to the directors’ and managerial remuneration, royalties,
secretarial and technical fees and restraint payments payable by the Company as at the date of this Prospectus.
7.2
The details relating to the directors’ and managerial remuneration, secretarial and technical fees payable by Steinhoff are detailed in the Steinhoff annual financial
statements for the Fiscal Year ended 30 June 2014, annexed hereto as Annexure 1, as well as in the Integrated Report and notice of the 2014 annual general meeting.
No royalties are payable in respect of the Steinhoff Group.
7.3
The Company has not entered into any material contracts within the 2 (two) years immediately prior to the date of this Prospectus, including restrictive funding
arrangements, other than contracts entered into in the ordinary course of business carried on or proposed to be carried on by it. Save for the Pepkor Acquisition, the
details of which are contained in the Pepkor Circular, and as may otherwise be disclosed herein, the Steinhoff Group has not entered into any material contracts within
the 2 (two) years immediately prior to the date of this Prospectus, including restrictive funding arrangements, other than contracts entered into in the ordinary course
of business carried on or proposed to be carried on by it.
7.4
The Company and the Steinhoff Group have not entered into any material contract which is out of the ordinary course of business, which contains an obligation or
settlement that is material to the Company or the Steinhoff Group at the date of this Prospectus.
8. INTERESTS OF DIRECTORS AND PROMOTERS OF THE COMPANY
8.1
No consideration has been paid by any person, within the preceding 3 (three) years before the date of issue of this Prospectus to a director or a related person, or
any company in which a director is beneficially interested or of which such director is also a director, nor to any partnership, syndicate or other association of which
the director is a member, to induce such director, related person or company to become a director, or to qualify as a director, or for services rendered by a company,
partnership, syndicate or other association in connection with the promotion or formation of the Company.
8.2
No director or promoter has any direct or indirect material interest in:
8.2.1
the promotion of the Company;
8.2.2
any property proposed to be acquired by the Company; or
8.2.3
any property acquired or proposed to be acquired by the Company during the 3 (three) years immediately before the date of this Prospectus.
8.3
No director of the Company, including any director who has resigned during the last 18 (eighteen) months, has any direct or indirect beneficial interest in the share
capital of the Company.
8.4
No director of the Company, including any director who has resigned during the last 18 (eighteen) months, has any direct or indirect beneficial interest in any transaction
effected by the Company since its incorporation. Save for the material beneficial interest of Dr Christoffel Hendrik Wiese in respect of the Pepkor Acquisition, disclosed
in the Pepkor Circular, in terms of which Dr Christoffel Hendrik Wiese acquired 609,145,624 (six hundred and nine million one hundred and forty five thousand six
hundred and twenty four) Steinhoff Shares at R57 (fifty seven Rand) per Steinhoff Share, no director of the Steinhoff Group, including any director who has resigned
during the last 18 (eighteen) months, has any direct or indirect beneficial interest in any transaction effected during the current or immediately preceding Fiscal Year.
9. LOANS
9.1
Material loans made or debentures issued to the Company and to the Steinhoff Group
9.1.1
As at the date of this Prospectus, no material loans have been made, or debentures issued, to the Company.
9.1.2
Save as disclosed in the Pepkor Circular, no material loans have been made, or debentures issued to Steinhoff.
9.2
Material loans made by the Company and the Steinhoff Group other than in the ordinary course of business
9.3
As at the Last Practicable Date, no material loans have been advanced by the Company or the Steinhoff Group out of the ordinary course of business. As at the date
of this Prospectus, no loans have been advanced, or security furnished, by the Company or the Steinhoff Group to or for the benefit of any director or manager or any
associate of any director or manager of the Company.
9.4
Particulars relating to debentures or debenture stock
The Company does not have any debentures or debenture stock in issue.
9.5
32
Details of all material commitments, lease payments and contingent liabilities
9.5.1
The Company does not have any material commitments, lease payments or contingent liabilities at the date of this Prospectus.
9.5.2
Save as disclosed in the Pepkor Circular and save for changes in borrowings due to the implementation of the Pepkor Acquisition and the Rights Offer which
closed on 1 August 2014, the material borrowings have not changed since the date of the Integrated Report.
9.6
Loan capital outstanding
No loan capital is outstanding in respect of the Company as at the date of this Prospectus.
10. SHARES ISSUED OTHERWISE THAN FOR CASH
Save for the Ordinary Shares which will be issued to the Scheme Participants in terms of the Scheme should it be implemented, within the 3 (three) years immediately before
the date of issue of this Prospectus, the Company did not issue or agree to issue any securities to any person other than for cash.
11. PROPERTY ACQUIRED, TO BE ACQUIRED AND PROPERTY DISPOSED OF OR TO BE DISPOSED OF
11.1 Acquisition or proposed acquisition of immoveable property, moveable property and/or other fixed assets
The Company and the Steinhoff Group have not in the 3 (three) years preceding the date of this Prospectus, and do not propose to, acquire any material immovable property,
any other material fixed asset or option to acquire any such properties, and have not entered into any agreement to acquire any material immovable property or other material
fixed assets.
11.2 Acquisition or proposed acquisition of securities in, or the business undertakings of any other companies or business enterprises within the
last 3 (three) years
11.2.1 On the implementation of the Scheme, the Company will acquire all of the Steinhoff Shares from Scheme Participants in accordance with the Scheme, the
terms of which are set out in section 2 of this Prospectus.
11.2.2 Save for the Pepkor Acquisition, the details of which were disclosed in the Pepkor Circular, the Steinhoff Group has not concluded a material acquisition,
within the past 3 (three) years, of any securities in, or the business undertaking of, any other company or business enterprise, and does not propose to
conclude any such acquisition.
11.3 Disposals, or proposed disposals, of material property by the Company and the Steinhoff Group in the past 3 (three) years
As a newly incorporated company, the Company has not disposed of any material property in the past 3 (three) years. The Steinhoff Group has not disposed of any material
property in the past 3 (three) years, and does not propose to dispose of any such material property.
11.4 Vendors
Save for vendors referred to in section 1, paragraph 11.2 of this Prospectus and the vendors detailed in the Pepkor Circular, the Company and the Steinhoff Group do not
have any vendors of material assets.
12. AMOUNTS PAID OR PAYABLE TO PROMOTERS
In the 3 (three) years preceding the date of issue of this Prospectus, the Company did not pay or propose to pay any amount to any promoter, or to any partnership, syndicate
or other association of which any such promoter is or was a member.
13. PRELIMINARY EXPENSES AND ISSUE EXPENSES
13.1 The Company has not incurred any preliminary expenses in the 3 (three) years preceding this Prospectus.
13.2 The following expenses are expected, or have been provided for in connection with the Listing and the Scheme Circular, all of which are exclusive of VAT:
Service
South African Legal Advisors
South African Legal Advisors
International Legal Advisors
Independent Sponsor
Transaction Sponsor
Independent Expert
CIPC registration of Prospectus
Documentation inspection fees
TRP fees
Reporting accountants
Printing
Sundry costs
Transfer secretarial services
Total
Service provider
Cliffe Dekker Hofmeyr Inc
Werksmans Inc
Linklaters LLP
PSG Capital Proprietary Limited
ABSA Bank Limited
PricewaterhouseCoopers Corporate Finance Proprietary Limited
CIPC
JSE
TRP
Deloitte & Touche
Ince
–
Computershare Investor Services Proprietary Limited
R’000
2,500
1,100
38,000
100
500
700
7
85
50
500
750
4,700
250
49,242
33
SECTION 2: INFORMATION ABOUT THE OFFERED SECURITIES
This section 2 contains a summary of the terms of the Scheme and is not intended to create an independent source of rights or obligations with respect to the Scheme. Full terms of
the Scheme are set out in the Scheme Circular.
If any conflict or inconsistency arises between the provisions of this section 2 and the provisions of the Scheme as contained in the Scheme Circular, the provisions of the Scheme as
contained in the Scheme Circular shall prevail to the extent of such conflict or inconsistency.
1.
PURPOSE OF THE OFFER
1.1
It was announced on SENS on 2 July 2014 that Steinhoff received approval from the Financial Surveillance Department of the South African Reserve Bank to facilitate
the inward listing of the Company on the JSE, accompanied by a listing on the prime standard of the FSE, and that the Company would use its shares for the purposes
of acquiring the entire issued ordinary share capital of Steinhoff.
1.2
Subsequent hereto, it was further announced on SENS on 7 August 2015 that the Steinhoff Board had been informed of the firm intention of the Company to make an
offer to acquire all of the Steinhoff Shares held by Steinhoff Shareholders by way of the Scheme.
1.3
The Steinhoff Board has proposed the Scheme, in terms of section 114 of the Companies Act between Steinhoff and Scheme Participants. If the Scheme becomes
operative, the Company will acquire the Steinhoff Shares and the Scheme Participants shall, subject to the terms in the Scheme Circular, be entitled to receive the
Scheme Consideration.
1.4
The Scheme Consideration will be settled by the issue of 1 (one) Ordinary Share for each Steinhoff Share transferred to the Company in terms of the Scheme.
1.5
Upon implementation of the Scheme, the Company will become the registered and beneficial owner of the entire issued ordinary shares capital of Steinhoff.
1.6
Steinhoff shall apply to the JSE for approval for the suspension of the listing of the Steinhoff Shares from the main board of the JSE with effect from 30 November 2015
and, subject to the Scheme becoming operative, the termination of the listing of the Steinhoff Shares from the main board of the JSE with effect from 7 December 2015.
1.7
The purpose of this Prospectus is to facilitate the implementation of the Scheme by allowing for the Ordinary Shares which comprise the Scheme Consideration to be
issued to the Scheme Participants, in the manner contemplated in section 2, paragraph 3 of this Prospectus, in exchange for their Steinhoff Shares. In terms of the
Scheme, a Scheme Participant will not be required to pay any cash consideration to the Company.
1.8
The Company is not seeking to raise any funds in connection with the issue of the Ordinary Shares comprising the Scheme Consideration.
1.9
The Scheme is being proposed by the Steinhoff Board as a mechanism to enable the Company to acquire all of the issued Steinhoff Shares. Given that the majority of
Steinhoff’s revenues are generated outside South Africa, a listing on a major European stock exchange through the Company as contemplated would more accurately
reflect the geographic location of Steinhoff’s revenues, customers and store locations, accompanied by an enhanced ability to access global capital markets,
1.10 The Company’s listing on the prime standard of the FSE together with an inward listing on the JSE is expected to raise the international profile of Steinhoff. The
Steinhoff Board is of the opinion that enhanced access to international capital markets on terms which are better reflective of its spread of activities and revenues is
a prerequisite to sustain and grow its business. By virtue of its equity being traded on the FSE and JSE, the Company will become accessible to a wider investor base
that could include emerging and developed market investors, and be able to adapt Steinhoff’s existing share incentive schemes to become more relevant, appropriate
and valuable for its participating senior European executives.
2. TIME AND DATE OF THE OPENING AND OF THE CLOSING OF THE OFFER
Date
Date on which the offer contemplated in this Prospectus will be open is the same date on which the Scheme Circular is issued to
Steinhoff Shareholders
Date at which the Ordinary Shares admitted to listing on the JSE
Scheme Record Date
Operative date of the Scheme
Ordinary Shares admitted to listing on the FSE
7 August 2015
30 November 2015
4 December 2015
7 December 2015
7 December 2015
3. PARTICULARS OF THE OFFER
3.1
Particulars of the offer
In terms of section 114(1) of the Companies Act, the Steinhoff Board has proposed the scheme, as set out in paragraph 11 of the Scheme Circular, extracts of which are
duplicated in this paragraph 3. The reference to “Genesis” in this paragraph 3 is in reference to the Company as contemplated in this Prospectus.
3.1.1
The scheme
3.1.1.1
The scheme is proposed by the Steinhoff Board between Steinhoff and the scheme participants pursuant to which Genesis will acquire ownership
of all of the Steinhoff shares from scheme participants for the scheme consideration of 1 (one) Genesis share for 1 (one) Steinhoff share, and a
subsequent delisting of Steinhoff from the main board of the JSE. In addition to this, Genesis will be listed, as an inward listing, on the main board
of the JSE.
3.1.1.2
A scheme of arrangement proposed between a company and its shareholders or any class of them will, subject to section 164 of the Companies Act,
becomes binding on that company and the relevant holders of its securities (irrespective of whether or not any such holder supports the scheme)
if, amongst other things:
3.1.1.3
34
3.1.1.2.1
a special resolution approving the scheme is adopted at a meeting of scheme members; and
3.1.1.2.2
all conditions precedent for the implementation of the scheme have been fulfilled or waived (where appropriate).
Subject to the scheme becoming unconditional, scheme participants shall be deemed with effect from the operative date of the scheme to have:
3.1.1.3.1
disposed of (and shall be deemed to have undertaken to transfer) all of the Steinhoff shares held by them to Genesis, which shall
acquire ownership of such shares, free of encumbrances, in exchange for the scheme consideration;
3.1.1.3.2
authorised Steinhoff and/or the transfer secretaries on its behalf to transfer the scheme shares into the name of Genesis; and
3.1.1.3.3
authorised the transfer secretaries on its behalf to collect from Genesis the scheme consideration for delivery to the scheme
participants and all risk and benefit in the scheme shares will pass from the scheme participants to Genesis.
3.1.1.4
3.1.2
Should the scheme become unconditional and be implemented, scheme participants shall:
3.1.1.4.1
be entitled to receive the scheme consideration in respect of the scheme shares and the transfer secretaries will administer and procure
the transfer of the scheme consideration to the scheme participants.
3.1.1.4.2
against the surrender by certificated scheme participants of their documents of title and the specification of a valid account with a
CSDP or broker into which the scheme consideration is to be transferred, receive the scheme consideration; and
3.1.1.4.3
in terms of the custody agreement entered into between the dematerialised scheme participants concerned and their CSDP or broker,
dematerialised scheme participants will have their scheme shares transferred to Genesis and the scheme consideration transferred to
their CSDP or broker who should credit their account with the scheme consideration.
3.1.1.5
The rights of the scheme participants to receive the scheme consideration in respect of the scheme shares held by them will be rights enforceable
by scheme participants against Genesis only.
3.1.1.6
The effect of the scheme will be that, with effect from the operative date, the scheme shares of the scheme participants will be acquired by Genesis,
resulting in Genesis owning 100% (one hundred percent) of the issued ordinary share capital of Steinhoff.
3.1.1.7
Furthermore, upon the implementation of the scheme, Genesis will be listed on the prime standard of the FSE and on the main board of the JSE as
an inward secondary listing, and Steinhoff will delist from the main board of the JSE.
3.1.1.8
With effect from the operative date of the scheme, each and every director of the transfer secretaries and/or Steinhoff or any other person nominated
by Steinhoff will irrevocably be deemed to be the attorney and agent in rem suam of the scheme participants to implement the transfer of the scheme
shares and to sign any instrument of transfer in respect thereof or any other documents and to do any other acts required or desirable to implement
the scheme and the delisting and to take all steps necessary to procure electronic delivery of scheme shares which are dematerialised.
3.1.1.9
It is noted that in terms of the Steinhoff executive share rights scheme (“share scheme”), if Steinhoff is taken over or delisted during certain
measurement periods as stated in the share scheme rules, the rights under the share scheme shall be exchanged for equivalent rights in Steinhoff’s
successor (as determined and approved by the remuneration committee of the Steinhoff board), provided that all the performance criteria have
been duly achieved. The beneficiaries of the share scheme shall accordingly acquire comparable consideration in the form of equivalent rights in
Genesis, in compliance with the provisions of Regulation 87 of the Companies Regulations. In this regard Steinhoff shareholders are referred to
paragraph 23 of this circular and the second report of the independent expert attached to this circular as Annexure 3.
Conditions precedent
3.1.2.1
The implementation of the scheme is subject to the fulfilment or, if capable of waiver, waiver of the following Conditions Precedent which are
outstanding as at the Last Practicable Date:
3.1.2.1.1
the scheme resolution having been approved by the requisite majority of shareholders at the scheme meeting, in accordance with
section 115(2) (a) read with section 115(4) of the Companies Act;
3.1.2.1.2
if the provisions of section 115(2)(c) of the Companies Act apply:
3.1.2.1.2.1
the scheme being approved by the Court unconditionally, or subject to conditions and the person on whom such
conditions are imposed approves such conditions and undertakes in writing to comply therewith; and, if applicable
3.1.2.1.2.2
Steinhoff not treating the scheme resolution as a nullity in terms of section 115(5)(b) of the Companies Act;
3.1.2.1.3
within the period prescribed by section 164(7) of the Companies Act, no demands having been received by Steinhoff or valid demands
having been received by Steinhoff in terms of that section read with section 115(8) of the Companies Act which in aggregate represent
less than 5% of the scheme shares as at the date of the scheme meeting;
3.1.2.1.4
the secondary listing of Genesis on the JSE having been approved by an ordinary resolution of shareholders at the scheme meeting;
3.1.2.1.5
the general meeting of Genesis having resolved to amend Genesis’ Articles of Association substantially in accordance with the Deeds
of Amendment;
3.1.2.1.6
any third party consents having been obtained, to the extent required by Steinhoff, arising from contractual obligations which become
applicable in the event of a change of control in Steinhoff, including the consent of Steinhoff’s bankers and relevant licensors, lessors
and suppliers;
3.1.2.1.7
the Panel having issued a compliance certificate in relation to the scheme as required by section 115(1)(b) read with section 119(4)
(b) and section 121(b) of the Companies Act;
3.1.2.1.8
the AFM having approved the EU Prospectus under Dutch law and the EU Prospectus having been passported into Germany in
accordance with applicable laws and regulations;
3.1.2.1.9
all other relevant and applicable approvals from the AFM having been obtained;
3.1.2.1.10 the FSE having acknowledged to Genesis or its agent (and such acknowledgment not having been withdrawn) that the Genesis shares
will be admitted to trading on the prime standard of the FSE;
3.1.2.1.11 the JSE having granted a secondary listing by way of an introduction of all the issued Genesis shares on the main board of the JSE,
with effect from the commencement of trading on the JSE on 30 November 2015; and
3.1.2.1.12 no adverse change (including in market conditions) and no circumstance having arisen which would or might be expected to result
in any adverse change in the business, assets, financial or trading position or profits or prospects or operational performance of any
member of the Group which is material in the context of the Group. For purposes of this condition precedent, to be material in the
context of the Group, the adverse change or circumstance in question must result (or be reasonably expected to result) in a decrease
of 5% or more in the Steinhoff share price on the JSE from the closing price on the 29 July 2015, being the practicable date.
3.1.3
3.1.2.2
An announcement will be released on SENS as soon as possible after the fulfilment, waiver or non-fulfilment, as the case may be of the conditions
precedent.
3.1.2.3
To the extent that any condition precedent is capable of waiver, such condition precedent may be waived in whole or in part of by agreement in
writing between Genesis and the Independent Board.
Scheme consideration
3.1.3.1
The scheme consideration is one Genesis share for each Steinhoff share held. As at the operative date , Genesis will have sufficient unissued shares
in its authorised share capital in order to issue so any Genesis shares as may be required to fully satisfy the scheme consideration.
3.1.3.2
For each Steinhoff share, Genesis will issue a Genesis share in its capital at par. The obligation, under Dutch law, to pay up the nominal value per
newly issued ordinary share in the capital of Genesis, shall in aggregate be fulfilled by the (non-cash) contribution of all of the Steinhoff shares
to Genesis. The contribution of all of the Steinhoff shares shall be fulfilled and settled by virtue of the scheme becoming operative with effect that
by operation of South African law, with effect from the operative date, all of the Steinhoff shares shall be transferred to and shall be acquired by
Genesis. The amount by which the value of all of the Steinhoff shares so contributed to Genesis, upon the scheme becoming operative, exceeds
the amount of the aforementioned aggregate obligation to pay shall, under Dutch law, be non-stipulated share premium and shall be added to the
share premium reserve maintained in the books of Genesis.
35
3.1.3.3
3.1.4
The independent board believes that the scheme consideration reflects fair and reasonable value for the Steinhoff shares. In this regard Steinhoff
shareholders are referred to paragraph 22 of this circular and the first report of the independent expert attached to this circular as Annexure 3.
Effects of the scheme
The effect of the scheme will be that Genesis will, with effect from the operative date, become the registered and beneficial owner of all of the scheme shares.
3.1.5
3.1.6
3.1.7
Treatment of Convertible Bonds
3.1.5.1
Between March 2011 and January 2014, Steinhoff Finance, a subsidiary of Steinhoff, issued three series of convertible bonds (together, the
“Convertible Bonds”) with maturity dates falling between May 2017 and January 2021. As at the date of this circular, the Convertible Bonds are
convertible into Steinhoff shares at the option of the holders.
3.1.5.2
The Convertible Bonds are expected, with effect from the scheme (which is an “Exempt Newco scheme”, as defined in the terms of the Convertible
Bonds) becoming operative and subject to certain amendments to the terms and conditions being effected at the same time, to be convertible
into Genesis shares at the election of the bondholders, with conversion prices and adjustments referenced in Euro. A copy of this circular and the
Prospectus will be provided to the trustees of the Convertible Bonds for information purposes only.
3.1.5.3
Any exercise of conversion rights where the conversion date falls up to and including Friday, 20 November 2015 will be satisfied by the delivery
of Steinhoff shares in accordance with the terms of the Convertible Bonds and where the conversion date falls on Friday 20 November 2015, the
delivery of Steinhoff shares will be made by Friday, 27 November 2015, being the last day to trade Steinhoff shares on the JSE in order to be
recorded in the register to receive the scheme consideration. As Steinhoff shares will be suspended from listing from the JSE at commencement of
trading on Monday, 30 November 2015, any exercise of conversion rights where the conversion date falls on or after Monday, 30 November 2015
will be satisfied by the delivery of Genesis shares from Monday, 7 December 2015, being the scheme operative date.
Restricted jurisdictions
3.1.6.1
The legality of the offer to non-resident shareholders may be affected by the laws of any jurisdiction relevant to them. Such shareholders should
inform themselves about any applicable legal requirements, which they are obliged to observe. It is the responsibility of any such shareholder to
satisfy himself/herself as to the full observance of the laws of any relevant jurisdiction in connection with the scheme.
3.1.6.2
The information contained in this circular is restricted and, subject to certain exceptions, is not for release, publication or distribution, directly or
indirectly, in whole or in part, in, into or from the United States, Australia, Canada, Japan or any other jurisdiction in respect of which the release,
publication or distribution, directly or indirectly, of this circular would constitute a violation of the relevant laws of such jurisdiction or in respect
of which the scheme contemplated in this circular are unlawful.
3.1.6.3
To the extent that the circular is nevertheless distributed in such jurisdictions outside South Africa where the distribution thereof may be restricted
or prohibited by the laws of such foreign jurisdiction then this circular is deemed to have been provided for information purposes only and none
of Steinhoff nor Genesis, nor their respective boards of directors, accept any responsibility for any failure by scheme Participants to inform
themselves about, and to observe, any applicable legal requirements in any relevant foreign jurisdiction.
3.1.6.4
Shareholders who complete the form of election, surrender and transfer (blue) or the form of election (pink) are deemed to represent and warrant
to Steinhoff that they have not received or sent copies or originals of this document, the form of election, surrender and transfer (blue) or the form
of election (pink) or any related documents in, into or from a restricted jurisdiction and have not otherwise utilised in connection with the scheme,
the mails, or any means or instrumentality (including, without limitation, telephonically or electronically) of interstate or foreign commerce of, or
any facility of a national securities exchange of, a restricted jurisdiction, and that the form of election, surrender and transfer (blue) or the form of
election (pink) has not been mailed or otherwise sent in, into or from a restricted jurisdiction and such Shareholder is accepting the scheme from
outside a restricted jurisdiction by completing the form of election, surrender and transfer (blue) or the form of election (pink).
Dissenting shareholders’ appraisal rights
3.1.7.1
Section 164 of the Companies Act provides that:
3.1.7.1.1
at any time before the scheme resolution is to be voted on, a shareholder may give Steinhoff a written notice objecting to the scheme
resolution (“notice of objection”);
3.1.7.1.2
within 10 (ten) business days after Steinhoff has adopted the scheme resolution, Steinhoff must send a notice that the scheme
resolution has been adopted to each Shareholder who gave Steinhoff a notice of objection and has neither withdrawn the notice of
objection nor voted in favour of the scheme resolution;
3.1.7.1.3
a shareholder may demand in writing within 20 (twenty) business days after receipt of the notice referred to in paragraph 11.9.1.2 that
Steinhoff pay the Shareholder the fair value for all the shares of Steinhoff held by that person if:
3.1.7.1.4
the shareholder sent Steinhoff a notice of objection;
3.1.7.1.3.2
Steinhoff has adopted the scheme resolution; and
3.1.7.1.3.3
the shareholder voted against the scheme resolution and has complied with all of the procedural requirements of
section 164 of the Companies Act;
the demand sent by the shareholder to Steinhoff as provided in paragraph 11.9.1.3 above must set out:
3.1.7.1.4.1
the shareholder’s name and address;
3.1.7.1.4.2
the number of Steinhoff shares in respect of which the shareholder seeks payment; and
3.1.7.1.4.3
a demand for payment of the fair value of those shares. The fair value of the Steinhoff shares is determined as at the date
on which, and the time immediately before, Steinhoff adopted the scheme resolution.
3.1.7.1.5
Any shareholder that is in doubt as to what action to take must consult their legal or professional advisor in this regard. A copy of
section 164 of the Companies Act is attached to this circular as Annexure 7.
3.1.7.1.6
Before exercising their rights under section 164 of the Companies Act, or Steinhoff shareholders exercise such rights shareholders
should have regard to the following factors relating to the scheme:
3.1.7.1.7
36
3.1.7.1.3.1
3.1.7.1.6.1
the first report of the independent expert set out in Annexure 3 to this circular concludes that the terms of the scheme
are fair and reasonable; and
3.1.7.1.6.2
the court is empowered to grant a costs order in favour of, or against, a dissenting shareholder, as may be applicable.
It should be noted that one of the conditions of the scheme is that within 30 (thirty) business days following the scheme meeting,
no Steinhoff shareholders exercise appraisal rights in terms of section 164 of the Companies Act or Steinhoff shareholders exercise
such rights by giving valid demands in terms of section 164(7) of the Companies Act, in respect of less than 5% (five percent) of
the issued ordinary shares of Steinhoff, provided that, in the event that Steinhoff shareholders give notice objecting to the scheme
in terms of section 164(3) of the Companies Act and vote against the resolutions proposed at the scheme meeting in respect of less
than 5% (five percent) of the issued ordinary shares of Steinhoff, this condition shall be deemed to have been fulfilled at the time of
the scheme meeting.
3.1.7.1.8
3.2
In the event that any of the circumstances contemplated in section 164(9)(a) and (b) of the Companies Act occur, then a dissenting
shareholder shall:
3.1.7.1.8.1
if such event takes place on or before the scheme record date, be deemed to be a scheme participant and be subject to
the provisions of the scheme; and
3.1.7.1.8.2
if such event takes place after the scheme record date, be deemed to have been a shareholder as at the operative date,
provided that settlement of the scheme consideration and transfer of that dissenting shareholder’s Steinhoff shares
to Genesis shall take place on the later of: (i) the operative date; (ii) the date which is 5 (five) business days after that
dissenting shareholder so withdrew its demand or allowed Genesis’s offer to lapse, as the case may be; and (iii) if
that dissenting shareholder is a certificated Shareholder, the date which is 5 (five) business days after that dissenting
shareholder surrendered its documents of title and completed a form of surrender and transfer (pink) accepting the
offer to the transfer secretaries.
Debentures issued or offered in terms of the scheme
No debentures are being issued or offered in terms of the Scheme.
3.3
Issue of securities by the Company during the 3 (three) years preceding the date of this Prospectus
The Company has only issued the Incorporation Shares during the 3 (three) years preceding the date of this Prospectus. The Incorporation Shares were issued on 22 June 2015
to the Foundation at their nominal value of €0.50 (fifty Euro cents) per Incorporation Share.
3.4
Issue of securities by the Company for a premium during the 3 (three) years preceding the date of this Prospectus
The Company has not issued any securities for a premium during the 3 (three) years preceding the date of this Prospectus.
4. MINIMUM SUBSCRIPTION
The Ordinary Shares constituting the scheme consideration are being issued as consideration for the purchase of the Steinhoff Shares. Accordingly, no minimum amount for
subscription, as contemplated in section 108(2) of the Companies Act, read with Regulation 73, will apply.
37
SECTION 3: STATEMENTS AND REPORTS RELATING TO THE OFFER
1.
ADEQUACY OF CAPITAL
1.1
The Board is of the opinion that the issued capital of the Company will be adequate for the purposes of the business of the Company, and of meeting the aforementioned
financial obligations of the Company over the next 12 (twelve) twelve months.
1.2
As at the Last Practicable Date, Steinhoff and kika-Leiner will not be subsidiaries of the Company, but will become subsidiaries of the Company if the Scheme becomes
operative and if the kika-Leiner Sale Agreement becomes unconditional and is implemented in accordance with its terms. However, the Board has engaged with the
executive management of Steinhoff and kika-Leiner, and as a consequence is of the opinion that:
1.3
1.2.1
each of the Company, kika-Leiner and the Steinhoff Group will be able in the ordinary course of business to pay its debts for a period of 12 (twelve) months
after the date of this Prospectus;
1.2.2
the assets of the Company, kika-Leiner and the Steinhoff Group will be in excess of the liabilities of the Company, kika-Leiner and the Steinhoff Group, as
applicable, and this will likely continue for a period of 12 (twelve) months after the date of this Prospectus;
1.2.3
the share capital and reserves of each of the Company, kika-Leiner and the Steinhoff Group are adequate for ordinary course of business purposes and this
appears likely to continue for a period of 12 (twelve) months after the date of this Prospectus; and
1.2.4
the working capital of each of the Company, kika-Leiner and the Steinhoff Group will be adequate for the ordinary course of business purposes of the
Company, kika-Leiner and the Steinhoff Group, as applicable, for a period of 12 (twelve) months after the date of this Prospectus.
The Board is of the opinion that should the Scheme become operative and the kika-Leiner Sale Agreement become unconditional and is implemented in accordance
with its terms, that the issued capital of the Company and its subsidiary companies will be adequate for the purposes of the business of the Company and its
subsidiaries and meeting the financial obligations of the Company and its subsidiaries over the next 12 (twelve) months, and that the working capital available to the
Company and its subsidiary companies is sufficient for the ordinary course of business for the next 12 (twelve) months after the date of this Prospectus.
2. MATERIAL CHANGES
The Board reports that, other than in the ordinary course of business and in terms of this Prospectus, there have been no material changes in the assets and liabilities of the
Company that occurred between its incorporation and the date of this Prospectus.
3. LISTING OF THE SHARES
The Shares comprising the Scheme Consideration will upon implementation of the Scheme be listed on the FSE, and the Company has submitted an application for the Shares
to be listed on the main board of the JSE. The approval of such application is a Condition Precedent to the Scheme.
4. REPORT BY THE AUDITOR WHERE BUSINESS UNDERTAKING IS TO BE ACQUIRED
The Company will not receive any cash proceeds from the issue of the Scheme Consideration to Scheme Participants in terms of the Scheme, and the Company does not intend
to apply any funds derived from the issue of Ordinary Shares in terms of the Scheme in order to acquire any business undertaking.
5. REPORT BY THE AUDITOR IN RESPECT OF THE ACQUISITION OF STEINHOFF
Historical financial information in respect of:
5.1
Steinhoff and its subsidiaries for the preceding 3 (three) years is available on the Website, and are annexed hereto as Annexure 1;
5.2
Steinhoff in the form of unaudited and unreviewed interim financial statements as at 31 December 2014 is available on the Website, and are annexed hereto as
Annexure 2,
and the report of Deloitte & Touche thereon, as required by Regulation 78 of the Companies Regulations, is set out in Annexure 7 of this Prospectus.
6. REPORT BY AUDITOR OF THE COMPANY
No report by the auditor of the Company has been prepared as contemplated in terms of Regulation 79 of the Companies Regulations as the Company is a newly incorporated
company with no assets or liabilities, save for the minimal cash generated from the issue of the Incorporation Shares, and certain minor general and administrative expenses
associated with the incorporation of the Company, as at the date of this Prospectus.
38
SECTION 4: ADDITIONAL MATERIAL INFORMATION
1.
DOCUMENTS AVAILABLE FOR INSPECTION
The following documents will be available for inspection at the Company’s registered office and the office of the Company’s sponsor, ABSA Bank Limited (being 15 Alice Lane,
Sandton, Johannesburg, 2196) from the date of this Prospectus until the 10th (tenth) Business Day following the Scheme Record Date:
• the Articles of Association;
• the Deeds of Amendment;
• the Management Board Rules;
• the Supervisory Board Rules;
• the memorandum of incorporation of Steinhoff;
• a summary of the service agreements with directors, managers, secretaries and vendors entered into by the Steinhoff Group during the last 3 (three) years;
• Steinhoff’s historical financial results for the Fiscal Years ended 30 June 2012, 30 June 2013 and 30 June 2014;
• Unaudited and unreviewed interim financial statements of Steinhoff as at 31 December 2014;
• 6 (six) months’ unaudited and unreviewed historical financial information on kika-Leiner for the half year ended 31 December 2014;
• pro forma statement of financial position and income statement of the Company subsequent to the implementation of the Scheme, as if for statement of financial position
purposes the Scheme had been implemented on 31 December 2014, and for income statement purposes on 1 July 2014;
• historical financial statements for the Company ended 30 June 2015;
• reporting accountants’ report on the historical financial information of the Company;
• reporting accountants’ report on the pro forma financial information included in this Prospectus;
• report by Deloitte & Touche in terms of Regulation 78 of the Companies Regulations;
• the written consent of each of the persons referred to in section 1, paragraphs 2.2 to 2.8 of this Prospectus;
• the powers of attorney annexed hereto as Annexure 12; and
• a signed copy of this Prospectus.
2. LITIGATION STATEMENT
There are no legal or arbitration proceedings, including any proceedings that are pending or threatened involving the Company or the Steinhoff Group, of which the Company
or Steinhoff is aware, that may have or have had in the recent past, being at least the previous 12 (twelve) months, a material effect on the Company and the Steinhoff Group’s
financial position.
3. RISK FACTORS
The risk factors relating to the Company as at the date of this Prospectus, the Group’s business, regulatory, political and economic developments, and the Shares and
admission, are set out in Annexure 11 of this Prospectus.
4. IMPLICATIONS OF A SECONDARY LISTING OF THE COMPANY ON THE JSE
4.1
On the implementation of the Scheme, the Steinhoff Shares will be delisted from the Main Board of the JSE, and the Ordinary Shares will be listed on the prime standard
of the FSE, as a primary listing, and the Main Board of the JSE, by way of a secondary listing.
4.2
Secondary listing status means that the Company will only be required to comply with the listings requirements of the exchange where it has a primary listing, being
the FSE, save in respect of the following Listings Requirements which must be complied with by the Company:
4.2.1
the annual financial statements of the Company and any other communication with Shareholders must state where the primary and secondary listings of the
Company’s Shares are;
4.2.2
when the Company wishes to release any information on another exchange, it must ensure that such information is also released on SENS and that such
release takes place no later than the equivalent release on any other exchange provided that, if the JSE is not open for business, it must ensure that such
information is released through SENS at the commencement of business on the next business day. The announcement must be submitted via the Company’s
sponsor, albeit that the announcement does not require the approval of the sponsor;
4.2.3
the Company must publish, in its interim and year-end results, headline earnings per Share and diluted headline earnings per Share together with an itemised
reconciliation between headline earnings and the earnings used in the calculation;
4.2.4
the Company is required to advise, and obtain approval from, the JSE with regard to the timetables for corporate actions stipulated in Schedule 18 of the
Listings Requirements. The Company must ensure that the JSE is notified in advance in order to ensure that the JSE can accommodate the processing of
these corporate actions for Shareholders on the South African share register;
4.2.5
the Company must submit to the JSE, together with the Company’s annual financial statements, details of the volume and value of Shares traded (over the
previous 12 (twelve) months), on all exchanges where it has a listing, in order for the JSE to consider the Company’s continued secondary listing status;
4.2.6
if both the volume and value of Shares traded on the JSE exceeded 50% (fifty percent) of the total volume and total value of those Shares (over the previous
12 (twelve) months) traded on all exchanges where the Company has a listing, then the Company’s listing status on the JSE in respect of those Shares may be
converted to a primary listing. The converse would apply when both the volume and value of Shares traded on the JSE was 50% (fifty percent) or below; and
4.2.7
the Company must advise its Shareholders, by releasing an announcement on SENS, each time that its listing status is changed.
5. CROSS REFERENCE TABLE
The below listed documentation has been incorporated by reference in this Prospectus. Such documentation shall be available for inspection, at no charge and during
business hours, at the Company’s registered office and the office of the Company’s sponsor, ABSA Bank Limited (being 15 Alice Lane, Sandton, Johannesburg, 2196) from
the date of this Prospectus until the 10th (tenth) Business Day following the Scheme Record Date. Such documentation can also be accessed on the Website as per the links
specified below.
DOCUMENT
WEBSITE LINK
Corporate Governance Report
Integrated Report
Rights Offer Circular
Pepkor Circular
http://www.steinhoffinternational.com/downloads/2014/steinhoff_corp_gov_2014.pdf
http://www.steinhoffinternational.com/downloads/2014/steinhoff_ir_2014.pdf
http://www.steinhoffinternational.com/downloads/2014/RightsOfferCircular.pdf
http://www.steinhoffinternational.com/downloads/2014/Steinhoff%20Circular_Dec%202014.pdf
39
SECTION 5: INAPPLICABLE OR IMMATERIAL MATTERS
For purposes of this Prospectus the following provisions of the Regulations are not applicable:
Regulation number
Regulation heading
57(1)(b)(i)
Name, address and incorporation
57(2)(b)(i)
57(3)
58(3)(d)
Directors, other office holders, or material third parties
59(3)(f)
History, state of affairs and prospects of Company
59(4)
History, state of affairs and prospects of the Company
60(a)(iii)
Share capital of the Company
62
Commissions paid or payable in respect of underwriting
64
Interest of directors and promoters
68
Amounts paid or payable to promoters
70(b )
Purpose of the offer
72(2)
72(3)
73
Minimum subscription
74(2)(b)
Statement as to adequacy of capital
75
Report by directors as to material changes
77
Report by auditor where business undertaking to be acquired
79
Report by the auditor of the Company
80
Requirements for prospectus of mining company
40
SIGNATURE PAGE
41
Annexure 1
STEINHOFF’S HISTORICAL FINANCIAL RESULTS FOR THE FISCAL YEARS ENDED 30 JUNE 2012, 30 JUNE 2013 AND
30 JUNE 2014
In accordance with Listings Requirement 8.1, the Steinhoff Board hereby take responsibility for the historical financial information contained in this Annexure.
STEINHOFF INTERNATIONAL HOLDINGS LIMITED
GROUP ANNUAL FINANCIAL STATEMENTS
30 JUNE 2014
Contents
Page
Directors’ report
42
Audit committee report
46
Income statement
47
Statement of comprehensive income
48
Statement of changes in equity
49
Statement of financial position
51
Statement of cash flows
52
Segmental reporting
53
Summary of accounting policies
55
Notes to the annual financial statements
63
Preparation supervised by: Frikkie (FJ) Nel CA(SA), Financial director
DIRECTORS’ REPORT
The directors have pleasure in presenting the group annual financial statements of Steinhoff International Holdings Limited (Steinhoff or group), for the year ended 30 June 2014.
Steinhoff is a holding company invested predominantly in household goods and diversified related industries with interests in continental Europe, the Pacific Rim, the United
Kingdom and southern Africa. With revenue from continuing operations of R117 billion (2013: R98 billion; 2012: R69 billion), Steinhoff employs a vertically integrated and
geographically diverse business model, covering the full spectrum from raw material to retail outlet across an extensive product offering.
The results for the year under review are fully set out in the attached annual financial statements.
The Board has declared a cash dividend from retained earnings of 150 cents per share payable to Shareholders registered at the close of business on Friday, 14 November 2014.
MAJOR TRANSACTIONS
Redemption of convertible bond due 2015
On 30 October 2013, Steinhoff announced that it intended to exercise its option to redeem all of the outstanding convertible bonds due 2015. 68 million Ordinary Shares of Steinhoff
were issued and R12.9 million was paid in cash.
Issue of convertible bond due 2021
On 23 January 2014, Steinhoff Finance Holding GmbH issued a seven-year, euro-denominated, convertible bond (the bond) to raise €465 million (before expenses). The bond
pays interest semi-annually in arrears at a fixed rate of 4.00% per annum (pa) and is convertible into 117 million Steinhoff Ordinary Shares at an initial conversion price of R59.11
per share (representing an initial conversion premium of 30% to the prevailing underlying volume-weighted average (VWAP) share price at the date of pricing). The issue and
redemption price of the bond is 100%. The bond is convertible into shares at the election of the bondholders. The company holds, subject to conditions, rights on early redemption.
The bond was issued exclusively to international investors and is listed on the Open Market (Freiverkehr) of the Frankfurt Stock Exchange. All amounts payable in respect of the
bond are guaranteed by Steinhoff and Steinhoff undertook to procure the due and punctual delivery of the Shares pursuant to the terms and conditions of the bond.
Mobilier Européen
Conforama Holdings S.A. concluded an agreement with the owners of the Fly, Atlas and Crozatier businesses in France and Switzerland, in terms of which Conforama acquired all
of the nineteen Fly stores in Switzerland; three Atlas stores (including the properties) in France; and assumed the leases and acquired the trading assets of a further seven Atlas
stores in France. As an integral part of this transaction a co-operation agreement was concluded in terms of which the remaining Fly, Atlas and Crozatier businesses could conduct
their buying activities through the Steinhoff sourcing platform – an initiative which should significantly benefit both groups in terms of margin enhancement. In addition, Conforama
obtained an option exercisable at its election to acquire the remaining Fly stores within five years at a fixed purchase price.
Offer by Steinhoff to increase its stake in JD Group Limited (JD Group)
On 18 March 2014, Steinhoff made an offer to JD Group’s minority shareholders to acquire their shares at a purchase price of R27.77 per share which represented a 38% premium
to the five-day VWAP of R20.11 on that date, in exchange for Steinhoff Shares.
On 20 June 2014, JD Group completed a rights offer in terms of which 40 million new JD Group Ordinary Shares were offered to qualifying shareholders. Steinhoff acquired a further
35 million shares at a subscription price of R25.00 per rights offer.
Steinhoff had increased its beneficial interest in JD Group to 86% (2013: 56%).
PSG Group Limited (PSG) is derecognised as an associate
On 13 June 2014, PSG completed an accelerated book build and issued 9.6 million new Ordinary Shares. This resulted in Steinhoff’s percentage holding in PSG reducing to 18.6%
which no longer provided Steinhoff with significant influence over PSG. The derecognition of the associate investment in PSG resulted in a once off capital profit of R1.1 billion.
Steinhoff’s investment in PSG is now recognised as an available for sale financial asset.
Sale of shares in KAP Industrial Holdings Limited (KAP)
On 23 June 2014, Steinhoff announced the launch of a bookbuild of up to 400 million of its KAP shares. The shares were successfully placed with investors at a price of R3.85 per
share. Effective 30 June 2014, Steinhoff’s shareholding in KAP decreased to 44.7% of the issued Ordinary Shares, and Steinhoff assessed that it no longer controls KAP in terms
of IFRS 10 – Consolidated Financial Statements. KAP has therefore been disclosed as a discontinued operation and the 44.7% interest has been recognised on 30 June 2014 as an
investment in an associate. From 30 June 2014, KAP will be equity accounted.
42
JD Group Limited Financial Services division
On 30 June 2014, the JD Group received an offer, subject to due diligence and conditions precedent, to dispose of the JD Consumer Finance division (excluding insurance
companies), which provided instalment sale financing on furniture products and unsecured products. The disposal of the JD Consumer Finance division is consistent with
JD Group’s long-term turnaround strategy. At 30 June 2014, this division is shown as a discontinued operation in the income statement and as a disposal group held for sale in
the statement of financial position.
kika-Leiner
Steinhoff facilitated the independent acquisition by Genesis Investment Holding GmbH (Genesis) of the kika-Leiner group of companies. The transaction became unconditional
on 28 November 2013. The facilitation was done through an investment of €375 million (through the issue of 120 million Steinhoff shares as vendor consideration placement
in December 2013). During the year, a decision was taken by kika-Leiner’s Shareholder and management to split the operations between the property portfolio and the retail
operations. On 30 June 2014, Steinhoff acquired the Austrian property portfolio for €452 million.
Global Trademarks and Steinhoff Retail
The group entered into an arrangement to sell GT Global Trademarks, registered in Switzerland, at its carrying value of €488 million. The agreement makes provision for the
continued use by the group of the trademarks as well as potential future benefits resulting from the wider marketing of the trademarks by the management company. Steinhoff Retail
made payment of a contingent purchase consideration in respect of previously acquired businesses that resulted in additional goodwill of €430 million which was treated in terms
of IFRS 3 – Business Combinations (2004).
Syndicated loan facility
Steinhoff Europe refinanced its existing terms and syndicated loan facilities through the conclusion, on 26 June 2014, of a new €1.8 billion five-year syndicated revolving facility with 18 banks,
at improved terms and conditions.
RESTATEMENT AND RECLASSIFICATIONS
During the 2014 financial year, the group adopted new and revised accounting standards that required retrospective application namely IFRS 10 – Consolidated Financial
Statements, IFRS 11 – Joint Arrangements, IAS 28 – Investments in Associates and Joint Ventures and IAS 19 – Employee Benefits (Revised). Please refer to the accounting policies
and note 35 for details and effects of the standards adopted. For the purposes of this set of financial statements the earliest date that these accounting standards were applied was
1 July 2012. The statement of financial position disclosed for 2012 has been restated to reflect the balances on 1 July 2012.
The 2012 and 2013 results have been re-presented for discontinued operations. The 2013 cash flow has been re-presented to separately reflect the cash flows related to the unsecured
instalment sale and loan receivables. Cash flow relating to the secured instalment sale and loan receivables is now included in changes in working capital while the unsecured instalment sales
receivables are reflected separately under cash flows from operating activities.
FINANCIAL INFORMATION OF LISTED SUBSIDIARY, ASSOCIATE COMPANIES AND INVESTMENTS
Detailed disclosure of listed subsidiaries, associate companies and investments is available on their websites:
www.jdg.co.za
www.kap.co.za
www.psggroup.co.za
SHARE CAPITAL
The company’s authorised share capital comprises R15 million, divided into 3 000 000 000 ordinary shares of 0.5 cents each and 1 000 000 000 cumulative, non-redeemable,
non-participating, variable rate preference shares of 0.1 cent each.
The following ordinary shares were issued during the year:
Date
Redemption of convertible bond due 2015
2010 Share incentive Scheme 2
Vendor consideration3
Partial redemption of convertible bond due 20174
1
4 to 25 November 2013
1 December 2013
24 December 2013
24 February 2014
17 March 2014
20 March 2014
Number
of shares
Rm
68 088 254
9 741 951
120 000 000
872 089
40 525 162
34 499 040
1 770
–
5 239
38
1 818
1 820
Notes:
1. Issued under general authority: convertible instruments annual general meeting on 7 December 2007 and due to adjustments, general authority granted at annual
general meetings on 1 December 2008, 7 December 2009, 6 December 2010 and 5 December 2011.
2. Issued under specific authority granted on 7 December 2009.
3. Issued under general authority granted on 3 December 2012.
4. Issued under general authority granted at annual general meeting on 5 December 2011.
5. Issued under general authority granted at annual general meeting on 3 December 2013.
At year-end, subsidiaries and special-purpose vehicles of the group held 9 963 800 (2013: 11 053 042; 2012: 13 863 094) shares in the company which have been netted off against issued
ordinary share capital as treasury shares. In addition, the company has reserved for the allocation and potential issue on conversion 529 416 368 (2013: 481 911 689; 2012: 404 544 723)
ordinary shares under its obligations to the holders of convertible bonds. Due to the rights issue announced on 2 July 2014, an additional 12 591 744 shares have been reserved for the allocation
and potential issue on conversion of the convertible bonds.
CONTRACTS
No contracts, other than those disclosed in note 33.6, in which directors and officers of the company had an interest and that significantly affected the affairs or business of the company or any
of its subsidiaries or which could have resulted in a conflict of interest, were entered into during the year.
EVENTS AFTER THE REPORTING DATE
The directors are not aware of any significant events after the reporting date that will have a material effect on the group’s results or financial position as presented in these financial
statements.
On 2 July 2014, Steinhoff announced a rights offer including an accelerated book build of cum rights shares to international institutional investors. The accelerated book build was fully
subscribed and 150 million Steinhoff ordinary shares were issued at R52.00 per share, amounting to R7.8 billion of capital raised which was paid to Steinhoff in a combination of euro and
US dollars. A further approximately 200 million rights were taken up by investors at R52.00 per share, bringing the total capital raised to R18.2 billion.
43
DIRECTORATE
The executive directors in office during the financial year and date of this report were:
Markus Johannes Jooste – Chief executive officer
Hendrik Johan Karel Ferreira
Stephanus Johannes Grobler
Thierry Louis Joseph Guibert (French)
Andries Benjamin la Grange – Chief financial officer
Fredrik Johannes Nel – Financial director
Daniël Maree van der Merwe – Chief operating officer
The non-executive directors in office during the financial year and date of this report were:
Dr Deenadayalen Konar 1 – Chairman
Dr Stefanes Francois Booysen1
David Charles Brink 1
Yolanda Zoleka Cuba1 (retired 3 December 2013)
Claas Edmund Daun1 (German)
Dr Marthinus Theunis Lategan1
Johannes Fredericus Mouton1
Dr Franklin Abraham Sonn1 (retired 3 December 2013)
Heather Joan Sonn1 (appointed 3 December 2013)
Bruno Ewald Steinhoff (German)
Paul Denis Julia van den Bosch (Belgian)
Christoffel Hendrik Wiese1
1. Independent non-executive director
The alternate directors in office during the financial year and date of this report were:
Johannes Nicolaas Stephanus du Plessis
Karel Johan Grové
Angela Krüger-Steinhoff 2 (German)
Mariza Nel
2. Non-executive director
DIRECTORS’ SHAREHOLDING
At 30 June 2014, the present directors and key management of the company held direct and indirect interests in 332,594,878 (2013: 322,032,795; 2012: 260,868,891) or 15.8%
(2013: 17.5%; 2012: 14.7%) of the Company’s issued ordinary shares.
There have been no changes to directors’ shareholding between year-end and the date of this report. Details of the individual holdings are disclosed in note 34.
CORPORATE GOVERNANCE
The group complies with the listings requirements of the JSE Limited (JSE) and in all material respects with the Code of Corporate Practice and Conduct published in the King Report on
Corporate Governance.
SECRETARY
Steinhoff Africa Secretarial Services Proprietary Limited acts as secretary to the company. The board of directors has assessed the shareholders, directors and employees of
Steinhoff Africa Secretarial Services Proprietary Limited who perform the company secretary function and have concluded that an arms’ length relationship has been maintained
between themselves and Steinhoff.
Business address
28 Sixth Street
Wynberg
2090
Postal address
PO Box 1955
Bramley
2018
APPROVAL OF THE ANNUAL FINANCIAL STATEMENTS
It is the directors’ responsibility to ensure that the annual financial statements fairly present the state of affairs of the group. The external auditors are responsible for independently
auditing and reporting on the financial statements.
The directors are also responsible for the systems of internal control. These are designed to provide reasonable, but not absolute, assurance on the reliability of the financial
statements, to adequately safeguard, verify and maintain accountability of assets, and to prevent and detect material misstatement and loss. The systems are implemented and
monitored by suitably trained personnel with an appropriate segregation of authority and duties. Nothing has come to the attention of the directors to indicate that any material
breakdown in the functioning of these controls, procedures and systems has occurred during the year under review.
The financial statements set out in this report have been prepared by management on the basis of appropriate accounting policies which have been consistently applied except
where stated otherwise. The financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS).
The directors reasonably believe that the group has adequate resources to continue in operation for the foreseeable future, and the annual financial statements have therefore been
prepared on the going-concern basis.
The annual financial statements for the year ended 30 June 2014, which appear on pages 47 to 126, were approved by the board and signed on its behalf on 9 September 2014.
Dr Deenadayalen Konar
Independent non-executive chairman
44
Markus Johannes Jooste
Chief executive officer
SECRETARY CERTIFICATION
We certify, in accordance with section 88(2)(e) of the South African Companies Act, 71 of 2008, as amended (the Act) that the company has lodged with the Companies and
Intellectual Properties Commission all such returns as are required for a public company in terms of the Act and that all such returns are true, correct and up to date.
Company secretary
45
AUDIT COMMITTEE REPORT
for the year ended 30 June 2014
BACKGROUND
The Steinhoff audit committee is pleased to present our report for the financial year ended 30 June 2014 as recommended by the King Report on Corporate Governance and in line
with the South African Companies Act, 71 of 2008, as amended (the Act).
The committee’s operation is guided by a formal detailed charter that is in line with the Act and is approved by the board as and when it is amended. The committee has discharged
all its responsibilities as contained in the charter. This process is supported by the audit subcommittees which are in place for all significant operating divisions and subsidiaries.
These subcommittees meet in terms of formal mandates and deal with all issues arising at the operational division or subsidiary level. These subcommittees then elevate any
unresolved issues of concern to the committee.
OBJECTIVE AND SCOPE
The overall objectives of the committee are as follows:
•
To review the principles, policies and practices adopted in the preparation of the accounts of companies in the group and to ensure that the annual financial statements of
the group and any other formal announcements relating to the financial performance comply with all statutory, regulatory and Steinhoff requirements as may be required.
•
To ensure that the consolidated interim abridged financial statements of the group, in respect of the first six-month period, comply with all statutory, regulatory and Steinhoff
requirements.
•
To ensure that all financial information contained in any consolidated submissions to Steinhoff is suitable for inclusion in its consolidated financial statements in respect of
any reporting period.
•
To annually assess the appointment of the auditors and confirm their independence, recommend their appointment to the annual general meeting and approve their fees.
•
To review the work of the group’s external and internal auditors to ensure the adequacy and effectiveness of the group’s financial, operating, compliance and risk management controls.
•
To review the management of risk and the monitoring of compliance effectiveness within the group.
•
To perform duties that are attributed to it by the Act, the JSE and the King Report.
The committee performed the following activities:
•
Received and reviewed reports from both internal and external auditors concerning the effectiveness of the internal control environment, systems and processes.
•
Reviewed the reports of both internal and external auditors detailing their concerns arising out of their audits and requested appropriate responses from management resulting
in their concerns being addressed.
•
Made appropriate recommendations to the board of directors regarding the corrective actions to be taken as a consequence of audit findings.
•
Considered the independence and objectivity of the external auditors and ensured that the scope of their additional services provided was not such that they could be seen
to have impaired their independence.
•
Reviewed and recommended for adoption by the board of directors such financial information that is publicly disclosed which for the year included:
–– the integrated report for the year ended 30 June 2014;
–– the consolidated results for the year ended 30 June 2014; and
–– the interim results for the six months ended 31 December 2013.
•
Considered the effectiveness of internal audit, approved the one-year operational strategic internal audit plan and monitored adherence of internal audit to its annual plan.
•
Meetings were held with the internal and external auditors where management was not present, and no matters of concern were raised.
•
Considered the appropriateness of the experience and expertise of the group financial director and concluded that these were appropriate.
•
Considered the expertise, resources and experience of the finance function and concluded that these were appropriate.
The audit committee is of the opinion that the objectives of the committee were met during the year under review.
Where weaknesses in specific controls had been identified, management undertook to implement appropriate corrective actions to mitigate the weakness identified.
MEMBERSHIP
During the course of the year, the membership of the committee comprised solely independent non-executive directors. They are:
•
Dr Stefanes Francois Booysen – Chairman
•
David Charles Brink
•
Dr Marthinus Theunis Lategan
For the members’ qualifications refer to the Integrated Report and the company’s website.
EXTERNAL AUDIT
The committee has satisfied itself through enquiry that the auditors of Steinhoff are independent as defined by the Act.
The committee, in consultation with executive management, agreed to the audit fee for the 2014 financial year. The fee is considered appropriate for the work that could reasonably
have been foreseen at that time. Audit fees are disclosed in note 2.2 to the financial statements.
There is a formal procedure that governs the process whereby the external auditor is considered for the provision of non-audit services, and each request for additional services is
considered in accordance with our set policy and procedure.
Meetings were held with the auditor where management was not present, and no matters of concern were raised.
The committee has reviewed the performance of the external auditors and nominated, for approval at the annual general meeting, Deloitte & Touche as the external auditor for the 2015 financial
year, and Mr Xavier Botha as the designated auditor. This will be his third year as auditor of the company.
ANNUAL FINANCIAL STATEMENTS
The committee has evaluated the group annual financial statements for the year ended 30 June 2014 and considers that it complies, in all material aspects, with the requirements
of the Act and International Financial Reporting Standards. The committee has therefore recommended the group annual financial statements for approval to the Board. The Board
has subsequently approved the financial statements which will be open for discussion at the forthcoming annual general meeting.
Dr Stefanes Francois Booysen
Audit committee chairman
9 September 2014
46
INCOME STATEMENT
Notes
2014
Rm
2013#
Rm
2012#
Rm
Continuing operations
Revenue
Cost of sales
117 364
(75 446)
97 938
(63 542)
68 874
(43 297)
Gross profit
Other operating income
Distribution expenses
Other operating expenses
Capital items
1
41 918
1 404
(7 060)
(23 640)
1 500
34 396
1 238
(5 491)
(20 361)
(323)
25 577
681
(4 964)
(14 431)
(185)
2
3
3
13
14 122
(3 486)
1 491
290
9 459
(2 624)
998
240
6 678
(2 247)
1 039
334
4
12 417
(1 954)
8 073
(983)
5 804
(641)
10 463
7 090
5 163
859
880
9 863
7 949
6 043
10 090
(227)
7 296
653
5 655
388
9 863
7 949
6 043
6
6
496.8
510.2
385.7
355.6
309.3
264.6
6
6
444.3
455.2
344.3
320.6
282.3
246.6
6
6
443.5
461.7
390.6
359.4
312.4
273.2
6
6
6
6
402.0
416.7
479.6
430.6
347.9
323.3
376.2
336.5
284.9
253.5
285.9
263.8
Operating profit
Finance costs
Income from investments
Share of profit of equity accounted companies
Profit before taxation
Taxation
Profit from continuing operations
Discontinued operations
(Loss)/profit from discontinued operations
5
Profit for the year
Profit attributable to:
Owners of the parent
Non-controlling interests
22
Profit for the year
Earnings per share (cents)
Basic earnings per share
From continuing and discontinued operations
From continuing operations
Diluted earnings per share
Headline earnings per share (cents) (refer to note 6 for definition)
Basic headline earnings per share
Diluted headline earnings per share
Adjusted headline earnings per share from continuing operations
Adjusted diluted headline earnings per share from continuing operations
#
(600)
Prior year figures have been restated and re-presented. Refer to the directors’ report and note 35.
47
STATEMENT OF COMPREHENSIVE INCOME
Profit for the year
Other comprehensive income/(loss)
Items that will not be reclassified subsequently to profit or loss:
Actuarial (losses)/gains on defined benefit plans
Deferred taxation
Items that may be reclassified subsequently to profit or loss:
Exchange differences on translation of foreign operations
Net fair value (loss)/gain on cash flow hedges and other fair value reserves
Deferred taxation
Other comprehensive income of equity accounted companies, net of deferred taxation
Total other comprehensive income for the year
2014
Rm
2013#
Rm
2012#
Rm
9 863
7 949
6 043
(145)
43
103
(25)
(284)
63
(102)
78
(221)
5 959
(124)
32
1
6 279
(41)
(3)
(1)
2 331
76
(22)
–
5 868
6 234
2 385
5 766
6 312
2 164
Total comprehensive income for the year
15 629
14 261
8 207
Total comprehensive income attributable to:
15 844
(215)
13 542
719
7 655
552
15 629
14 261
8 207
#
48
49
Balance at 30 June 2012
Restatement (note 35)
Balance at 1 July 2011
Net shares issued
Proceeds on sale of shares net of capital gains taxation
Capital distribution
Redemption of preference shares
Profit for the year
Other comprehensive income for the year
Preference dividends
Dividends paid
Introduced and acquired on acquisition of subsidiaries
Discount on introduction and premium on acquisition of
non-controlling interests
Shares bought from non-controlling interests
Share-based payments
Convertible bonds issued – equity portion net of
deferred taxation
Transfers and other reserve movements
–
–
–
–
29 616
(42)
–
–
39
–
–
–
9 898
–
24 271
–
–
–
–
5 655
5 655
–
(349)
–
–
Distributable
reserves
Rm
8 474
2 700
35
(1 311)
–
–
–
–
–
–
–
Ordinary share
capital and
premium
Rm
STATEMENT OF CHANGES IN EQUITY
974
–
51
–
–
–
–
923
–
–
–
–
–
–
–
–
–
–
Convertible
and
redeemable
bonds reserve
Rm
1 720
(2)
–
(6)
–
–
–
(441)
–
–
–
–
2 167
–
2 167
–
–
–
Foreign
currency
translation
reserve
Rm
637
–
–
–
–
–
45
592
–
–
–
–
–
–
–
–
–
–
447
–
–
–
684
–
–
(70)
–
–
–
–
(167)
–
(167)
–
–
–
Share-based
payment
reserve Other reserves
Rm
Rm
43 292
(44)
51
(6)
684
–
84
33 749
2 700
35
(1 311)
–
7 655
5 655
2 000
(349)
–
–
Total ordinary
equity
attributable to
owners of the
parent
Rm
3 837
–
–
–
–
–
–
4 056
–
6
–
(225)
–
–
–
–
–
–
Preference
share capital
and premium
Rm
47 129
(44)
51
(6)
684
–
84
37 805
2 700
41
(1 311)
(225)
7 655
5 655
2 000
(349)
–
–
Total equity
attributable to
owners of the
parent
Rm
6 508
170
–
8
–
(3 152)
–
3 025
–
–
–
–
552
388
164
–
(111)
6 186
Noncontrolling
interests
Rm
53 637
126
51
2
684
(3 152)
84
40 830
2 700
41
(1 311)
(225)
8 207
6 043
2 164
(349)
(111)
6 186
Total
Rm
50
Net shares issued
Profit for the year
Dividends paid
Released on derecognition of subsidiary
Introduced and acquired on acquisition of subsidiaries
Net shares bought from/sold to non-controlling interests
Convertible bonds issued and redeemed – equity
portion net of deferred taxation
Net shares issued
Purchase of shares
Profit for the year
Dividends paid
Convertible bonds issued and redeemed – equity
portion net of deferred taxation
46 637
–
1 429
–
–
20 507
–
–
–
–
–
–
–
198
–
–
36 786
–
–
–
10 090
10 090
–
(152)
(1 516)
–
–
–
–
–
–
–
–
9 801
10 685
21
–
–
–
–
–
–
–
–
29 574
–
–
–
–
–
7 296
7 296
–
(282)
–
Distributable
reserves
Rm
9 898
1 518
(131)
206
(1 690)
–
–
–
–
–
–
Ordinary share
capital and
premium
Rm
1 430
351
–
–
–
–
1 079
–
–
–
–
–
–
–
–
–
–
105
–
–
–
–
974
–
–
–
–
–
–
–
–
–
–
Convertible
and
redeemable
bonds reserve
Rm
13 784
–
(28)
–
–
–
7 865
–
–
–
5 947
–
5 947
–
–
–
–
–
(66)
–
–
–
1 718
–
–
–
–
–
6 213
–
6 213
–
–
Foreign
currency
translation
reserve
Rm
1 011
–
(56)
–
–
431
636
–
–
–
–
–
–
–
–
–
–
–
(148)
–
–
147
637
–
–
–
–
–
–
–
–
–
–
(515)
–
(999)
228
–
–
–
–
–
449
–
–
–
(193)
–
(193)
–
24
(55)
–
–
447
–
–
–
–
–
33
–
33
–
–
Share-based
payment
reserve Other reserves
Rm
Rm
82 854
351
346
228
–
431
56 616
10 685
21
–
15 844
10 090
5 754
(152)
(1 516)
–
–
105
8
(55)
–
147
43 248
1 518
(131)
206
(1 690)
–
13 542
7 296
6 246
(282)
–
Total ordinary
equity
attributable to
owners of the
parent
Rm
3 381
–
–
–
–
–
3 497
–
380
(496)
–
–
–
–
–
–
–
–
–
–
–
–
3 837
–
–
58
–
(398)
–
–
–
–
–
Preference
share capital
and premium
Rm
86 235
351
346
228
–
431
60 113
10 685
401
(496)
15 844
10 090
5 754
(152)
(1 516)
–
–
105
8
(55)
–
147
47 085
1 518
(131)
264
(1 690)
(398)
13 542
7 296
6 246
(282)
–
Total equity
attributable to
owners of the
parent
Rm
1 541
–
10
(251)
(1 768)
–
6 655
–
–
–
(215)
(227)
12
–
(208)
(2 814)
132
–
(32)
97
(442)
–
6 678
–
–
–
–
–
719
653
66
–
(365)
Noncontrolling
interests
Rm
87 776
351
356
(23)
(1 768)
431
66 768
10 685
401
(496)
15 629
9 863
5 766
(152)
(1 724)
(2 814)
132
105
(24)
42
(442)
147
53 763
1 518
(131)
264
(1 690)
(398)
14 261
7 949
6 312
(282)
(365)
Total
Rm
STATEMENT OF FINANCIAL POSITION
as at 30 June 2014
ASSETS
Non-current assets
Goodwill
Intangible assets
Property, plant and equipment
Investment property
Consumable biological assets
Investments in equity accounted companies
Investments and loans
Deferred taxation assets
Trade and other receivables
Notes
2014
Rm
2013#
Rm
2012#
Rm
8
9
10
11
12
13
14
15
16
27 810
38 306
53 995
427
–
4 223
10 399
1 390
70
18 850
41 585
44 897
480
1 761
2 634
1 124
730
3 174
15 572
33 834
34 942
472
1 656
2 341
868
697
2 619
136 620
115 235
93 001
534
17 921
18 112
5 928
16 341
455
16 447
20 039
3 228
9 249
372
14 539
15 534
1 710
8 057
58 836
6 865
49 418
364
40 212
98
65 701
49 782
40 310
202 321
165 017
133 311
21
20 507
62 347
3 381
9 801
46 815
3 497
9 898
33 350
3 837
22
86 235
1 541
60 113
6 655
47 085
6 678
87 776
66 768
53 763
55 580
868
10 878
1 603
388
45 041
722
9 652
2 609
231
33 858
705
7 763
2 094
218
69 317
58 255
44 638
34 222
750
1 213
6 411
2 436
29 747
888
1 012
5 117
3 162
25 451
846
895
5 192
2 090
45 032
196
39 926
68
34 474
436
45 228
39 994
34 910
202 321
165 017
133 311
3 946
3 102
2 463
Current assets
Vehicle rental fleet
Inventories
Short-term loans receivable
Cash and cash equivalents
17
18
16
14
Assets and disposal groups classified as held for sale
19
Total assets
EQUITY AND LIABILITIES
Capital and reserves
Ordinary share capital and premium
Reserves
Preference share capital and premium
Total equity attributable to equity holders of the parent
20
Total equity
Non-current liabilities
Interest-bearing loans and borrowings
Employee benefits
Deferred taxation liabilities
Provisions
Trade and other payables
23
24
15
25
26
Current liabilities
Employee benefits
Provisions
Bank overdrafts and short-term facilities
26
24
25
23
Liabilities and disposal groups classified as held for sale
19
Total equity and liabilities
Net asset value per ordinary share (cents)
#
6
51
STATEMENT OF CASH FLOWS
2014
Rm
2013#
Rm
2012#
Rm
21 317
(385)
(1 818)
(1 842)
(1 592)
12 698
(2 090)
(696)
(1 599)
(1 093)
10 368
(523)
(225)
(1 020)
(771)
Net cash inflow from operating activities
15 680
7 220
7 829
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property, plant and equipment and investment property
Additions to intangible assets
Proceeds on disposal of property, plant and equipment, investment property and intangible assets
Acquisition of subsidiaries and businesses, net of cash on hand at acquisition
Disposal of subsidiaries and businesses, net of cash on hand at disposal
(Increase)/decrease in investments and loans
Decrease in treasury shares
Increase in short-term loans receivable
Net decrease/(increase) in investments in equity accounted companies
Transactions with non-controlling interests
Cash-settled share-based payments
(4 948)
(381)
451
(6 473)
1 955
(5 078)
284
(2 211)
1
29
–
(6 748)
(368)
302
(379)
(13)
(122)
65
(969)
47
(465)
–
(5 254)
(5 646)
274
921
86
3 867
48
(143)
(390)
(3 111)
(55)
(16 371)
(8 650)
(9 403)
(2)
(378)
–
(443)
11 206
(3 722)
(1)
(398)
(318)
8
7 325
(5 365)
–
(225)
(133)
(1 983)
6 592
(1 213)
Net cash inflow from financing activities
6 661
1 251
3 038
NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS
Cash and cash equivalents at beginning of the year
Effects of exchange rate translations on cash and cash equivalents
5 970
9 249
1 122
(179)
8 057
1 371
1 464
6 321
226
16 341
9 249
8 011
46
Notes
CASH FLOWS FROM OPERATING ACTIVITIES
Cash generated from operations
Net movement in unsecured instalment sale and loan receivables
Net dividends paid
Net finance charges
Taxation paid
Net cash outflow from investing activities
CASH FLOWS FROM FINANCING ACTIVITIES
Share issue expenses
Preference shares redeemed
Capital distribution paid
(Decrease)/increase in bank overdrafts and short-term facilities
Increase in long-term interest-bearing loans and borrowings
Decrease in short-term interest-bearing loans and borrowings
CASH AND CASH EQUIVALENTS AT 30 JUNE
CASH AND CASH EQUIVALENTS AT 1 JULY
# Prior year figures have been restated and re-presented. Refer to the directors’ report and note 35.
52
27
28
29
8 057
SEGMENTAL REPORTING
REVENUE – CONTINUING OPERATIONS
Retail activities
– International operations
– African operations
Manufacturing, sourcing, logistics and corporate services
Properties
Intersegment revenue eliminations
OPERATING PROFIT BEFORE CAPITAL ITEMS – CONTINUING OPERATIONS
Retail activities
Properties
2014
Rm
2013#
Rm
2012#
Rm
73 262
30 587
57 449
29 153
52 459
6 882
33 381
2 911
24 932
2 134
21 203
1 658
140 141
(22 777)
113 668
(15 730)
82 202
(13 328)
117 364
97 938
68 874
4 579
862
3 040
1 361
2 478
535
4 451
324
2 730
3 341
303
2 040
2 212
257
1 638
12 946
10 085
7 120
RECONCILIATION BETWEEN OPERATING PROFIT PER INCOME STATEMENT AND OPERATING PROFIT
BEFORE CAPITAL ITEMS PER SEGMENTAL ANALYSIS
Operating profit per income statement
Capital items (note 1)
Add: KAP equity accounted earnings at 45%
14 122
(1 500)
324
9 459
323
303
6 678
185
257
Operating profit before capital items per segmental analysis
12 946
10 085
7 120
79 958
13 787
63 164
14 960
52 439
12 846
19 419
4 041
45 401
17 221
4 041
31 324
12 905
4 041
22 867
162 606
130 710
105 098
RECONCILIATION BETWEEN TOTAL ASSETS PER STATEMENT OF FINANCIAL POSITION AND TOTAL ASSETS
PER SEGMENTAL ANALYSIS
Total assets per statement of financial position
Less: Cash and cash equivalents
Less: Investments in equity accounted companies1
Add: 45% investment in KAP
Less: Investments and loans
Less: Short-term loan receivable
Less: Assets of discontinued operations and assets held for sale 2
202 321
(16 341)
(4 223)
4 041
(10 399)
(5 928)
(6 865)
165 017
(9 249)
(2 634)
4 041
(1 124)
(3 228)
(22 113)
133 311
(8 057)
(2 341)
4 041
(868)
(1 710)
(19 278)
Total assets per segmental analysis
162 606
130 710
105 098
TOTAL ASSETS
Retail activities
Properties
#
Prior year figures have been re-presented to reflect the continuing operations of the group. Refer to the directors’ report and note 35.
1. The 2013 and 2012 figures have been adjusted to include the 45% associate investment in KAP to provide comparability.
2. The prior year numbers include the assets of companies discontinued and classified as held for sale during the 2014 financial year.
53
SEGMENTAL REPORTING
GEOGRAPHICAL ANALYSIS
Revenue – continuing operations
Continental Europe
Pacific Rim
Southern Africa
United Kingdom
Non-current assets
Continental Europe
Pacific Rim
Southern Africa
United Kingdom
#
2014
Rm
2013#
Rm
2012#
Rm
73 850
4 094
30 572
8 848
59 107
2 855
29 135
6 841
52 390
2 924
6 790
6 770
117 364
97 938
68 874
106 627
2 222
17 730
10 041
81 376
1 769
24 879
7 211
62 790
1 633
22 873
5 705
136 620
115 235
93 001
Prior year figures have been restated to reflect the continuing operations of the group. Refer to the directors’ report and note 35.
Basis of segmental presentation
The segmental information has been prepared in accordance with IFRS 8 – Operating Segments (IFRS 8) which defines requirements for the disclosure of financial information of an
entity’s operating segments. The standard requires segmentation based on the group’s internal organisation and reporting of revenue and operating income based upon internal accounting
methods.
Identification of segments
The group discloses its operating segments according to the entity components regularly reviewed by the chief operating decision-makers. The components comprise various operating
segments located globally. The revenue and non-current assets are further disclosed within the geographical areas in which the group operates. Segmental information is prepared in
conformity with the measure that is reported to the chief operating decision-makers. These values have been reconciled to the consolidated financial statements. The measures reported by
the group are in accordance with the accounting policies adopted for preparing and presenting the consolidated financial statements.
Segment revenue excludes value added taxation and includes intersegment revenue. Net revenue represents segment revenue from which intersegment revenue has been eliminated. Sales
between segments are made on a commercial basis. Segment operating profit before capital items represents segment revenue less segment expenses, excluding capital items included in
note 1. Segment expenses include distribution expenses and other operating expenses. Depreciation and amortisation have been allocated to the segments to which they relate.
The segment assets comprise all assets of the different segments that are employed by the segment and that are either directly attributable to the segment, or can be allocated to the segment
on a reasonable basis.
Operational segments
Retail – International operations
Revenue in this segment is derived through retailing furniture, beds, related homeware and household products in continental Europe, the United Kingdom and the Pacific Rim. This
segment incorporates all the retail operations of Steinhoff Asia Pacific, Steinhoff UK Holdings in the United Kingdom and Steinhoff Retail and Conforama in the European Union.
Retail – African operations
Revenue in JD Group is derived from a differentiated retailer in furniture, household appliances, consumer electronic goods, home entertainment, office automation and building supplies,
and retailer of motor vehicles, vehicle servicing and parts.
This segment hosts Steinhoff’s manufacturing and sourcing interests. In continental Europe, revenue is generated from manufactured and imported/sourced household goods and related
homeware. Revenue also includes the importing operations in the Netherlands, the manufacturing and sourcing operations in Germany, the low-cost manufacturing operations in Hungary
and Poland, and the manufacturing of household goods and automotive products in the United Kingdom, while in the Pacific Rim revenue is derived from the manufacturing operations in
Australia and sourcing from the East.
This segment includes the specialised distribution and warehousing services delivered to the group and external parties through our distribution and warehouse companies situated in
continental Europe, the United Kingdom and the Pacific Rim.
In Africa, KAP is an investment company with a portfolio of diverse industrial business. Revenue is derived from the timber operations, the manufacturing and supply of raw materials, a
specialist supply chain business and a comprehensive passenger transport solution.
Steinhoff’s various global corporate offices provide strategic direction and services to the decentralised operations globally, adding value through identifying and implementing our various
strategies across the globe. Activities include the managing of our own brands and trademarks, all group treasury-related income in various currencies, volume rebates, trade commissions,
fee income, discounts and similar activities.
Properties
Revenue is derived from property rental income from internal and external customers through properties held by Steinhoff Properties and Hemisphere.
Geographical segments
The group’s operations are principally located in continental Europe, the Pacific Rim, southern Africa and the United Kingdom.
Major customers
No single customer contributes 10% or more of the group’s revenue.
54
SUMMARY OF ACCOUNTING POLICIES
Steinhoff is a South African registered company. The group annual financial statements of Steinhoff for the year ended 30 June 2014 comprise Steinhoff and its subsidiaries (together referred
to as the Steinhoff Group) and the group’s interest in associate companies and joint-venture companies.
Statement of compliance
The group annual financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS), the interpretations adopted by the International Accounting
Standards Board (IASB), the IFRS Interpretations Committee of the IASB (IFRIC), the requirements of the South African Companies Act, 71 of 2008, as amended (the Act) and have been audited
in compliance with all the requirements of section 29(1) of the Act, as required.
Adoption of new and revised standards
During the current year, the group has adopted all the new and revised standards and interpretations issued by the IASB and the IFRIC that are relevant to its operations and effective for annual
reporting periods beginning on 1 July 2013. The adoption of these new and revised standards and interpretations has resulted in changes to the group’s accounting policies. The effect of these
new and revised standards are disclosed in note 35.
The group adopted the following standards, interpretations and amended standards during the year:
IFRS 7
Financial Instruments: Disclosures: Set-off
IFRS 10
Consolidated Financial Statements including amendments to transition guidance and exception for Investment Entities
IFRS 11
Joint Arrangements including amendments to transition guidance
Joint Arrangements: Accounting for acquisitions of interests in joint operations
IFRS 12
Disclosure of Interests in Other Entities including amendments to transition guidance and disclosure for Investment Entities
IFRS 13
Fair Value Measurement
IFRS 14
Regulatory Deferral Accounts
IAS 16
Property, Plant and Equipment: Bearer plants
Property, Plant and Equipment: Clarification of acceptable methods of depreciation and amortisation
IAS 19
Employee Benefits (revised) including scope and Employee Contributions amendments
IAS 27
Consolidated and Separate Financial Statements (revised) including amendment for Investment Entities
IAS 28
Investments in Associates and Joint Ventures
IAS 32
Financial Instruments: Presentation
IAS 38
Intangible Assets: Clarification of acceptable methods of depreciation and amortisation
IAS 41
Agriculture: Bearer plants
The group adopted the following Annual Improvements to IFRS:2010-2012 Cycle during the year:
IFRS 2
Share-based Payment: Definition of vesting condition
IFRS 3
Business Combinations: Accounting for contingent consideration in a business combination
IFRS 8
Operating Segments: Aggregation of operating segments; Reconciliation of the total of the reportable segment’s assets to the entity’s assets
IFRS 13
Fair Value Measurement: Short-term receivables and payables
IAS 16
Property, Plant and Equipment: Revaluation method – proportionate restatement of accumulated depreciation
IAS 24
Related Party Disclosures: Key management personnel
IAS 38
Intangible Assets: Revaluation method – proportionate restatement of accumulated amortisation
The group adopted the following Annual Improvements to IFRS:2011-2013 Cycle during the year:
IFRS 3
Business Combinations: Scope exceptions for joint ventures
IFRS 13
Fair Value Measurement: Scope of paragraph 52 (portfolio measurement)
IAS 40
Investment Property: Clarifying the interrelationship between IFRS 3 and IAS 40 when classifying property as investment property or owner-occupied property
55
Basis of preparation
The annual financial statements are prepared in millions of rand (Rm) on the historical-cost basis, except for certain assets and liabilities which are carried at amortised cost, and
certain financial instruments, and consumable biological assets which are stated at their fair value.
The preparation of financial statements in conformity with IFRS requires management to make judgements, estimates and assumptions that may affect the application of policies
and reported amounts of assets, liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are
believed to be reasonable under the circumstances, the results of which form the basis of making the judgements about carrying values of assets and liabilities that are not readily
apparent from other sources.
The estimates and underlying assumptions are reviewed on an on-going basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if
the revision only affects that period, or in the period of the revision and future periods if the revision affects both current and future periods.
Judgements made by management in the application of IFRS that have a significant effect on the financial statements and estimates with a significant risk of material adjustment
in the next financial year are discussed under ‘Judgements and estimates’.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, regardless
of whether that price is directly observable or estimated using another valuation technique. In estimating the fair value of an asset or a liability, the group takes into account the
characteristics of the asset or liability if market participants would take those characteristics into account when pricing the asset or liability at the measurement date. Fair value
for measurement and/or disclosure purposes in these annual financial statements is determined on such a basis, except for share-based payment transactions that are within the
scope of IFRS 2 – Share-based Payments, leasing transactions that are within the scope of IAS 17 – Leases, and measurements that have some similarities to fair value but are not
fair value such as net realisable value in IAS 2 – Inventories or value in use in IAS 36 – Impairment of Assets.
In addition, for financial reporting purposes, fair value measurements are categorised into level 1, 2 or 3 based on the degree to which the inputs to the fair value measurements
are observable and the significance of the inputs to the fair value measurement in its entirety, which are defined as follows:
•
Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can assess at the measurement date.
•
Level 2 inputs are inputs, other than quoted prices included in level 1, that are observable for the asset or liability, either directly or indirectly.
•
Level 3 inputs are unobservable inputs for the asset or liability.
The material accounting policies applied by the group as well as accounting policies where IFRS allows choice, are set out below and have been applied consistently to the periods
presented in these group annual financial statements, except where stated otherwise. For further information please refer to the directors’ report.
The accounting policies have been applied consistently by all group entities.
Basis of consolidation
Subsidiaries
Subsidiaries are entities controlled by the group (including structured entities). An investor controls an investee when the investor is exposed, or has rights, to variable returns
from its involvement with the investee and has the ability to affect those returns through its power over the investee. In assessing control, substantive rights relating to an investee
are taken into account. For a right to be substantive, the holder must have the practical ability to exercise that right.
On acquisition, the assets, liabilities and contingent liabilities of a subsidiary are measured at their fair value at the date of acquisition. Any difference between the cost of
acquisition and the group’s share of the net identifiable assets, liabilities and contingent liabilities, fairly valued, is recognised and treated in terms of the group’s accounting policy
for goodwill.
Non-controlling interests in the net assets (excluding goodwill) of consolidated subsidiaries are identified separately from the group’s equity therein. Non-controlling interests
consist of the amount of those interests at the date of the original business combination and the non-controlling interests’ share of changes in equity since the date of the combination.
Subsequently, any losses applicable to the non-controlling interests are allocated to the non-controlling interests even if this results in the non-controlling interests having deficit balances.
Associate companies
An associate company is an entity over which the group is in a position to exercise significant influence, through participation in the financial and operating policy decisions of the
entity, but which it does not control or jointly control. The group applies equity accounting to its associates.
Dilution gains and losses arising on the investment in associate companies are recognised in other comprehensive income.
Joint arrangements
A joint arrangement is defined as an arrangement of which two or more parties have joint control. Joint control is the contractually agreed sharing of control of an arrangement,
which exists only when decisions about the relevant activities require the unanimous consent of the parties sharing control. There are two types of joint arrangements, namely
joint operation and joint venture.
Joint operation is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the assets, and obligations for the liabilities, relating to the
arrangement. Joint operators recognise and measure the assets and liabilities (and recognise the related revenues and expenses) in relation to its interest in the arrangement in
accordance with the relevant IFRSs applicable to the particular assets, liabilities, revenues and expenses.
A joint venture is a joint arrangement whereby the parties that have control of the arrangement have rights to the net assets of the arrangement. A joint venturer recognises an investment and
accounts for that investment using the equity method.
Contingent consideration
Where a structured business combination contains a puttable instrument on the interest of an apparent non-controlling shareholder, the acquirer will classify the obligation to pay
contingent consideration that meets the definition of a financial instrument as a financial liability or as equity on the basis of the definitions of an equity instrument and financial
liability in IAS 32 Financial Instruments: Presentation.
Contingent consideration is measured at fair value at each reporting date and changes in fair value are recognised in profit or loss.
If the puttable arrangement is not exercised and settled, the derecognition of the financial liability is treated as a disposal of the anticipated interest in the subsidiary in accordance with the
group’s accounting policy for common control transactions.
Common control transactions and premiums and discounts arising on subsequent purchases from, or sales to non-controlling interests in subsidiaries
When a purchase price allocation has been performed for separate financial statements it is reversed for group consolidated accounts. Any increases or decreases in ownership interest in
subsidiaries without a change in control are recognised as equity transactions. The carrying amounts of the group’s interests and the non-controlling interests are adjusted to reflect the changes
in their relative interests in the subsidiaries. Any differences between the amount by which the non-controlling interests are adjusted and the fair value of the consideration paid or received is
recognised directly in equity and attributed to owners of the company.
Goodwill
All business combinations are accounted for by applying the purchase method. Goodwill arising on the acquisition of a subsidiary, associate company or joint-venture company
represents the excess of the aggregate consideration transferred, non-controlling interest in the acquiree and in business combinations achieved in stages, the acquisition-date
56
fair value of the acquirer’s previously held equity interest in the acquiree, over the group’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities of
the subsidiary, associate company or joint-venture company recognised at the date of acquisition. Goodwill is initially recognised as an asset at cost and is subsequently measured
at cost less any accumulated impairment losses. An impairment loss in respect of goodwill is not reversed.
Goodwill is allocated to cash-generating units (CGUs) and is tested annually for impairment or more frequently when there is an indication that the unit may be impaired. If the
recoverable amount of the CGU is less than the carrying amount of the unit, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit
and then to the other assets of the unit pro rata on the basis of the carrying amount of each asset in the unit.
On disposal of a subsidiary, associate company or joint-venture company, the attributable amount of goodwill is included in the determination of the profit or loss on disposal.
Gains on bargain purchases arising on acquisition are recognised directly as capital items in profit or loss.
Intangible assets
Intangible assets that are acquired by the group are stated at cost less accumulated amortisation and impairment losses. If an intangible asset is acquired in a business combination,
the cost of that intangible asset is measured at its fair value at the acquisition date.
Expenditure on internally generated goodwill and brands is recognised in profit or loss as an expense as incurred.
Subsequent expenditure
Subsequent expenditure on capitalised intangible assets is capitalised only when it increases the future economic benefits embodied in the specific asset to which it relates. All other expenditure
is expensed as incurred.
Amortisation
Amortisation of intangible assets is recognised in profit or loss on a straight-line basis over the assets’ estimated useful lives, unless such lives are indefinite. An intangible asset
is regarded as having an indefinite useful life when, based on analysis of all relevant factors, there is no foreseeable limit to the period over which the asset is expected to generate
net cash inflows. Intangible assets with indefinite useful lives and intangible assets not yet available for use are not amortised but are tested for impairment annually or more often
when there is an indication that the asset may be impaired. Other intangible assets are amortised from the date they are available for use.
The amortisation methods, estimated useful lives and residual values are reassessed annually, with the effect of any changes in estimate being accounted for on a prospective basis.
Owned assets
Property, plant and equipment are stated at cost to the group, less accumulated depreciation and impairment losses. The cost of self-constructed assets includes the costs of materials, direct
labour, the initial estimate, where relevant, of the cost of dismantling and removing the items and restoring the site on which they are located, borrowing costs capitalised and an appropriate
proportion of production overheads.
Leased assets
Leases that transfer substantially all the risks and rewards of ownership of the underlying asset to the group are classified as finance leases. Assets acquired in terms of finance
leases are capitalised at the lower of fair value and the present value of the minimum lease payments at inception of the lease.
The capital element of future obligations under the leases is included as a liability in the statement of financial position. Lease payments are allocated using the effective-interest method to
determine the lease finance costs, which are charged against income over the lease period, and the capital repayment, which reduces the liability to the lessor.
Subsequent costs
The group recognises in the carrying amount of an item of property, plant and equipment the cost of replacing part of such an item when the cost is incurred, if it is probable that additional future
economic benefits embodied within the item will flow to the group and the cost of such item can be measured reliably. Costs of the day-to-day servicing of property, plant and equipment are
recognised in profit or loss as an expense when incurred.
Depreciation
Depreciation is recognised in profit or loss on a straight-line basis at rates that will reduce the book values to estimated residual values over the estimated useful lives of the assets.
Land is not depreciated. Leasehold improvements on premises occupied under operating leases are written off over their expected useful lives or, where shorter, the term of the
relevant lease.
The depreciation methods, estimated useful lives and residual values are reassessed annually, with the effect of any changes in estimate being accounted for on a prospective basis.
Assets held under finance leases are depreciated over their expected useful lives on the same basis as owned assets or, where shorter, the term of the relevant lease.
Investment property
Investment property is land and buildings which are held to earn rental income or for capital appreciation, or both.
Investment property is initially recognised at cost, including transaction costs, when it is probable that future economic benefits associated with the investment property will flow to
the group and the cost of the investment property can be measured reliably. The cost of a purchased investment property comprises its purchase price and any directly attributable
expenditure. The cost of a self-constructed investment property is its cost at the date when the construction development is complete.
Investment property is accounted for under the cost model and the accounting treatment after initial recognition follows that applied to property, plant and equipment.
The group’s timber plantations and livestock are classified as consumable biological assets. These assets are measured on initial recognition and at each reporting date at their fair value less
estimated costs to sell. Costs to sell include all costs that would be necessary to sell the assets, excluding costs necessary to get the assets to the market. Gains and losses arising from changes
in the fair value of the plantations less estimated costs to sell are recorded in profit or loss.
Taxation
Current taxation
Income taxation on the profit or loss for the year comprises current and deferred taxation. Income taxation is recognised in profit or loss except to the extent that it relates to items
recognised directly in other comprehensive income or equity, in which case it is recognised directly in other comprehensive income or equity.
Current taxation is the expected taxation payable on the taxable income for the year, using taxation rates enacted or substantially enacted at the reporting date, and any adjustment to taxation
payable in respect of previous years.
Deferred taxation
Deferred taxation is provided for using the statement of financial position liability method in respect of temporary differences arising from differences between the carrying amount
of assets and liabilities for financial reporting purposes and the amounts used in the computation of taxable income. The following temporary differences are not provided for:
goodwill not deductible for taxation purposes, the initial recognition of assets or liabilities that affect neither accounting nor taxable profit, and differences relating to investments
in subsidiaries to the extent that they will not reverse in the foreseeable future.
57
Deferred taxation liabilities are recognised for taxable temporary differences arising on investments in subsidiaries and associate companies and interest in joint-venture companies,
except where the group is able to control the reversal of the temporary differences and it is probable that the temporary differences will not reverse in the foreseeable future.
Deferred taxation assets and liabilities are offset when there is a legally enforceable right to set off current taxation assets against current taxation liabilities and when they relate
to income taxes levied by the same taxation authority and the group intends to settle its current taxation assets and liabilities on a net basis.
Deferred taxation assets and liabilities are measured at the taxation rates that are expected to apply in the period in which the liability is settled or the asset realised, based on the
taxation rates (and taxation laws) that have been enacted or substantively enacted by the reporting date. The measurement of deferred taxation liabilities and assets reflects the
taxation consequences that would follow from the manner in which the group expects, at the reporting date, to recover or settle the carrying amount of its assets and liabilities.
A deferred taxation asset is recognised only to the extent that it is probable that future taxable profits will be available against which the asset will be utilised. Deferred taxation assets are reduced
to the extent that it is no longer probable that the related taxation benefit will be realised.
Inventories
Inventories are stated at the lower of cost and net realisable value. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of
completion and selling and distribution expenses.
The cost of harvested timber is its fair value less estimated costs to sell at the date of harvest, determined in accordance with the accounting policy for consumable biological
assets. Any change in fair value at the date of harvest is recognised in profit or loss. The cost of other inventories includes expenditure incurred in acquiring the inventories and
bringing them to their existing location and condition. In the case of manufactured inventories and work-in-progress, cost includes an appropriate share of overheads based on
normal operating capacity.
Development properties comprise land valued at cost and development expenditure attributable to unsold properties.
Where necessary, the carrying amounts of inventory are adjusted for obsolete, slow-moving and defective inventories.
Non-current assets held for sale and discontinued operations
Non-current assets and disposal groups are classified as held for sale if their carrying amount will be recovered principally through a sale transaction rather than through
continuing use. This condition is regarded as met only when the sale is highly probable and the asset (or disposal group) is available for immediate sale in its present condition.
Management must be committed to the sale, which should be expected to qualify for recognition as a completed sale within one year from the date of classification. These assets
may be a component of an entity, a disposal group or an individual non-current asset. Upon initial classification as held for sale, non-current assets and disposal groups are
recognised at the lower of their carrying amount and fair value less costs to sell.
A discontinued operation is a component of the group’s business that represents a separate major line of business or geographical area of operation or a subsidiary acquired exclusively with a
view to resell. Classification as a discontinued operation occurs upon disposal or when the operation meets the criteria to be classified as held for sale.
Share capital
Preference shares
Preference shares are classified as equity if they are non-redeemable and any dividends are discretionary, or are redeemable but only at the group’s option. Dividends on preference
share capital classified as equity are recognised as distributions within equity.
In order to calculate earnings attributable to ordinary shareholders, the amount of preference dividends for cumulative preference shares required for that period, whether or not
declared, is deducted from profit attributable to equity holders in determining earnings per ordinary share.
The amount of preference dividends for the period used to calculate earnings per ordinary share does not include the amount of any preference dividends for cumulative preference
shares paid or declared during the current period in respect of previous periods.
Preference share capital is classified as a liability if it is redeemable on a specific date or at the option of the shareholders or if dividend payments are not discretionary. Dividends thereon are
recognised in accordance with the group’s dividend policy.
Treasury shares
When shares recognised as equity are purchased by group companies in their holding company and by the employee share trusts, the amount of the consideration paid, including directly
attributable costs, is recognised as a change in equity. When treasury shares are sold or reissued subsequently, the amount received is recognised as an increase in equity, and the resulting
surplus or deficit on the transaction is transferred to/from share premium.
Dividends
Non-discretionary dividends on preference shares are recognised as a liability and recognised as an interest expense using the effective-interest method. Other dividends are
recognised as a liability in the period in which they are declared.
Dividends received on treasury shares are eliminated on consolidation.
Share-based payment transactions
Equity-settled
The fair value of the deferred delivery shares and the share rights granted to employees is recognised as an employee expense with a corresponding increase in equity. The fair value is measured
at grant date and is expensed over the period during which the employees are required to provide services in order to become unconditionally entitled to the equity instruments. The fair value
of the instruments granted is measured using generally accepted valuation techniques, taking into account the terms and conditions upon which the instruments are granted. The amount
recognised as an expense is adjusted to reflect the actual number of deferred delivery shares and the share rights that vest, except where forfeiture is only due to share prices not achieving the
threshold for vesting.
Group share-based payment transactions
Transactions in which a parent grants rights to its equity instruments directly to the employees of its subsidiaries are classified as equity-settled in the financial statements of the
subsidiary, provided the share-based payment is classified as equity-settled in the consolidated financial statements of the parent.
The subsidiary recognises the services acquired with the share-based payment as an expense and recognises a corresponding increase in equity representing a capital contribution
from the parent for those services acquired. The parent recognises in equity the equity-settled share-based payment and recognises a corresponding increase in the investment
in subsidiary.
A recharge arrangement exists whereby the subsidiary is required to fund the difference between the exercise price on the share right and the market price of the share at the time of
exercising the right. The recharge arrangement is accounted for separately from the underlying equity-settled share-based payment as follows upon initial recognition:
•
The subsidiary recognises a share scheme settlement provision at fair value, using cash-settled share-based payment principles, and a corresponding adjustment against
equity for the capital contribution recognised in respect of the share-based payment.
•
The parent recognises a corresponding share scheme settlement asset at fair value and a corresponding adjustment to the carrying amount of the investment in the subsidiary.
58
Subsequent to initial recognition, the recharge arrangement is remeasured at fair value at each subsequent reporting date until settlement date to the extent vested. Where the settlement
provision recognised is greater than the initial capital contribution recognised by the subsidiary in respect of the share-based payment, the excess is recognised as a net capital distribution to
the parent. The amount of the settlement asset in excess of the capital contribution recognised as an increase in the investment in subsidiary is deferred and recognised as dividend income by
the parent when settled by the subsidiary.
Convertible bonds
Bonds which are convertible to share capital, where the number of shares to be issued does not vary with changes in their fair value, are accounted for as compound financial instruments.
Transaction costs that relate to the issue of a compound financial instrument are allocated to the liability and equity components in proportion to the allocation of the proceeds. The equity
component of the convertible bonds is calculated as the excess of the issue proceeds over the present value of the future interest and principal payments, discounted at the market rate of interest
applicable to similar liabilities that do not have a conversion option. The interest expense recognised in profit or loss is calculated using the effective-interest method.
Provisions
Provisions are recognised when the group has a present constructive or legal obligation as a result of a past event, and it is probable that it will result in an outflow of economic
benefits that can be reasonably estimated.
If the effect is material, provisions are determined by discounting the expected future cash flows that reflect current market assessments of the time value of money and, where appropriate, the
risks specific to the liability.
Warranties
A provision for warranties is recognised when the underlying products or services are sold. The provision is based on historical warranty data and a weighting of all possible outcomes against
their associated probabilities.
Restructuring
A provision for restructuring is recognised when the group has approved a detailed and formal restructuring plan, and the restructuring either has commenced or has been announced publicly.
Future operating costs are not provided for.
Onerous contracts
A provision for onerous contracts is recognised when the expected benefits to be derived by the group from a contract are lower than the unavoidable cost of meeting the obligation under the
contract.
Foreign currency
Foreign currency transactions
Transactions in currencies other than the functional currency of entities are initially recorded at the rates of exchange ruling on the dates of the transactions. Monetary assets and liabilities
denominated in such currencies are translated at the rates ruling on the reporting date. Foreign exchange differences arising on translation are recognised in profit or loss. Non-monetary
assets and liabilities that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of the transaction. Non-monetary assets and liabilities
denominated in foreign currencies that are stated at fair value are translated at rates ruling at the dates the fair value was determined.
Financial statements of foreign operations
The assets and liabilities of all foreign operations, including goodwill and fair value adjustments arising on consolidation, are translated at rates of exchange ruling at the reporting
date. The revenues and expenses of foreign operations are translated at rates approximating the foreign exchange rates ruling at the date of the transactions.
Foreign exchange differences arising on translation are recognised in other comprehensive income and aggregated in the foreign currency translation reserve (FCTR). The FCTR applicable to
a foreign operation is released to profit or loss as a capital item upon disposal of that foreign operation.
Net investment in foreign operations
Exchange differences arising from the translation of the net investment in foreign operations, and of related hedges, are recognised in other comprehensive income and accumulated in the
FCTR. They are released to profit or loss as a capital item upon disposal of that foreign operation.
Financial instruments
Initial recognition
Financial assets and financial liabilities are recognised on the group’s statement of financial position when the group becomes a party to the contractual provisions of the instrument.
Initial measurement
All financial instruments are initially recognised at fair value, including transaction costs that are incremental to the group and directly attributable to the acquisition or issue of the financial asset
or financial liability, except for those classified as fair value through profit or loss where the transaction costs are recognised immediately in profit or loss.
Subsequent measurement
Financial instruments at fair value through profit or loss consist of items classified as held for trading or where they have been designated as fair value through profit or loss.
All financial liabilities, other than those at fair value through profit or loss, are classified as financial liabilities at amortised cost.
Loans and receivables are carried at amortised cost, with interest recognised in profit or loss for the period using the effective interest method.
Available for sale financial assets are measured at fair value, with any gains and losses recognised directly in equity along with the associated deferred taxation. Any foreign currency gains or
losses, dividend income or interest revenue, measured on an effective-yield basis, are recognised in profit or loss.
Embedded derivatives
Certain derivatives embedded in financial host contracts, are treated as separate derivatives and recognised on a standalone basis, when their risks and characteristics are not closely related
to those of the host contract and the host contract is not carried at fair value, with gains and losses reported in profit or loss.
Derecognition
The group derecognises a financial asset when the rights to receive cash flows from the asset have expired or have been transferred and the group has transferred substantially all
risks and rewards of ownership.
A financial liability is derecognised when, and only when, the liability is extinguished, i.e. when the obligation specified in the contract is discharged, cancelled or has expired.
Impairment of financial assets
An impairment loss for loans and receivables is recognised in profit or loss when there is evidence that the group will not be able to collect all amounts due according to the original
terms of the receivables.
When there is objective evidence that an available for sale financial asset is impaired, the cumulative unrealised gains and losses recognised in equity are reclassified to profit or loss
even though the financial asset has not been derecognised. Impairment losses are only reversed in a subsequent period if the fair value increases due to an objective event occurring
since the loss was recognised. Impairment reversals other than available for sale debt securities are not reversed through profit or loss but through other comprehensive income.
59
The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets, with the exception of trade and other receivables, where the carrying
amount is reduced through the use of an allowance account. When trade and other receivables (excluding JD Group’s instalment sale and loan receivables) are considered
uncollectible, they are written off against the allowance account. Changes in the carrying amount of the allowance account are recognised in profit or loss.
Instalment sale and loan receivables, such as up to date and early stage delinquent trade receivables, i.e. assets that are assessed not to be impaired individually, are subsequently assessed for
impairment on a collective basis. Objective evidence of impairment for a portfolio of receivables includes the level of arrears of a customer, part payment of instalments or missed instalments,
as well as observable changes in national or economic conditions that correlate with defaults on receivables.
Effective-interest method
The effective-interest method is a method of calculating the amortised cost of a financial instrument and of allocating interest income over the relevant period. The effective interest rate is the rate
that exactly discounts estimated future cash receipts (including all fees on points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums
or discounts) through the expected life of a financial instrument, or, where appropriate, a shorter period.
Hedge accounting
The group designates certain hedging instruments, which include derivatives, embedded derivatives and non-derivatives in respect of foreign currency risk, as either fair value hedges, cash
flow hedges, or hedges of net investments in foreign operations. Hedges in foreign exchange risk on firm commitments are accounted for as cash flow hedges.
Fair value hedges
Changes in fair value of derivatives that are designated and qualify as fair value hedges are recorded in profit or loss immediately, together with any changes in fair value of the hedged item that
are attributable to the hedged risk.
Cash flow hedges
The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges are deferred in other comprehensive income. The gain or loss
relating to the ineffective portion is recognised immediately in profit or loss.
Amounts deferred in other comprehensive income are recycled to profit or loss in the periods when the hedged item is recognised in profit or loss, and it is included in the same
line of the income statement as the recognised hedged item.
Hedges of net investments in foreign operations
Hedges of net investments in foreign operations are accounted for similarly to cash flow hedges. Any gain or loss on the hedging instrument relating to the effective portion of the
hedge is recognised in other comprehensive income in the FCTR. The gain or loss relating to the ineffective portion is recognised immediately in profit or loss.
Gains and losses deferred in the FCTR are recognised in profit or loss on disposal of the foreign operation.
Insurance contracts
Classification of contracts
Contracts under which the group accepts significant insurance risk from another party (the policyholder) by agreeing to compensate the policyholder or other beneficiary if a specified uncertain
future event (the insured event) adversely affects the policyholder or other beneficiary are classified as insurance contracts. Insurance risk is risk other than financial risk. Financial risk is the
risk of a possible future change in one or more of a specified interest rate, security price, commodity price, foreign exchange rate, index of prices or rates, a credit rating or credit index or other
variable, provided in the case of a non-financial variable it is not specific to a party to the contract. Insurance contracts may also transfer some financial risk.
Premiums
Written premiums comprise the premiums on contracts (including inward reinsurance) entered into during the year, irrespective of whether they relate in whole or in part to a later
accounting period. Premiums are disclosed gross of commission payable to intermediaries and exclude value added taxation.
The earned portion of premiums received is recognised as revenue. Premiums are earned from the date of attachment of risk, over the indemnity period, based on the pattern of risks
underwritten.
Unearned premium provision
The provision for unearned premiums comprises the proportion of gross premiums written which is estimated to be earned in the following or subsequent financial years, computed separately
for each insurance contract using the daily pro rata method.
Claims
Claims incurred in respect of general business consist of claims and claims handling expenses paid during the financial year together with the movement in the provision for
outstanding claims.
The outstanding claims provision comprises provisions for the group’s estimate of the ultimate cost of settling all claims incurred but unpaid at the reporting date whether reported or not, and
related internal and external claims handling expenses.
Deferred acquisition costs
Acquisition costs comprise all direct and indirect costs arising from the conclusion of insurance contracts. Deferred acquisition costs represent the portion of acquisition costs incurred which
correspond to the unearned premium provision.
Revenue recognition
Revenue is measured at the fair value of the consideration received or receivable. Revenue is reduced for estimated customer returns, rebates and other similar allowances.
Goods sold and services rendered
Revenue from the sale of goods is recognised when the significant risks and rewards of ownership have been transferred to the buyer. Revenue from services rendered is recognised
in profit or loss in proportion to the stage of completion of the transaction at reporting date. The stage of completion is assessed by reference to surveys of the work performed.
Revenue is not recognised if there are significant uncertainties regarding recovery of the consideration due, associated costs or the possible return of goods as well as continuing
management involvement with goods to a degree usually associated with ownership. Where the group acts as agent and is remunerated on a commission basis, only the commission
income, and not the value of the business transaction, is included in revenue.
The recovery of duties and taxes payable on imports and exports are not recognised in revenue, but netted off against the expense paid on behalf of the customer.
Insurance premiums
Insurance premiums are stated before deducting reinsurances and commissions, and are accounted for when they become due.
Interest
Interest is recognised on the time proportion basis, taking account of the principal debt outstanding and the effective rate over the period to maturity.
60
Rental income
Rental income is recognised in profit or loss on a straight-line basis over the term of the lease.
Dividend income
Dividend income from investments is recognised when the right to receive payment has been established.
Royalty income
Royalty income is recognised on an accrual basis in accordance with the substance of the relevant agreement.
Operating leases
Payments and receipts under operating leases are recognised in profit or loss on a straight-line basis over the term of the lease.
Segmental reporting
A segment is a distinguishable component of the group that is engaged in providing products or services which are subject to risks and rewards that are different from those of
other segments. The basis of segmental reporting is representative of the internal structure used for management reporting as well as the structure in which the chief operating
decision-makers review the information.
The basis of segmental allocation is determined as follows:
•
Revenue that can be directly attributed to a segment and the relevant portion of the profit that can be allocated on a reasonable basis to a segment, whether from sales to
external customers or from transactions with other segments of the group.
•
Total assets are those assets that are employed by a segment in its operating activities and that are either directly attributable to the segment or can be allocated to the segment
on a reasonable basis. Total assets exclude investments in equity accounted companies (with the exception of KAP), investments and loans, short-term loans receivable, and
cash and cash equivalents.
Judgements and estimates
Judgements and estimates are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be
reasonable under the circumstances.
The group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions
that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities during the next financial year are discussed below.
Useful lives and residual values
The estimated useful lives for intangible assets with a finite life, property, plant and equipment and vehicle rental fleet are:
Intangible assets
Customer relationship and trade and brand names
Contracts and licences
Software
10 – 20 years
Over the term of the contract or project
1 – 8 years
Patents, trademarks, trade names and brand names, which are considered to be well-established growing brands and product lines for which there is no foreseeable limit to the
period in which these assets are expected to generate cash flows, are classified as indefinite useful life assets. The classification of such assets is reviewed annually.
Indefinite useful life intangible assets, excluding goodwill, recognised at fair value in business combinations, are expected to generate cash flows indefinitely and the carrying value would
only be recovered in the event of disposal of such assets. Accordingly, deferred taxation is raised at the capital gains taxation rate on the fair value of such assets exceeding its taxation base.
Buildings
5 – 80 years
Bus fleet
5 – 10 years
Computer equipment
2 – 4 years
Long-haul motor vehicles
5 – 10 years
Motor vehicles
4 – 10 years
Office equipment and furniture
3 – 16 years
Plant and machinery
3 – 60 years
Over the period of the buy-back agreement or estimated holding period
The estimated useful lives and residual values are reviewed annually, taking cognisance of the forecasted commercial and economic realities and through benchmarking of accounting
treatments in the specific industries where these assets are used.
The fair value of standing timber which has become marketable, is based on the market price of the estimated recoverable timber volumes, net of harvesting costs. The fair value of younger
standing timber is based on the present value of the net cash flows expected to be generated by the plantation at maturity.
Impairment of assets
Investments, goodwill, property, plant and equipment, investment property and intangible assets that have an indefinite useful life, and intangible assets that are not yet ready for use are
assessed annually for impairment.
Deferred taxation assets are recognised to the extent that it is probable that taxable income will be available in the future against which these can be utilised. Future taxable profits are estimated
based on business plans which include estimates and assumptions regarding economic growth, interest, inflation, taxation rates and competitive forces.
Contingent liabilities
Management applies its judgement to the fact patterns and advice it receives from its attorneys, advocates and other advisors in assessing if an obligation is probable, more likely than not, or
remote. This judgement application is used to determine if the obligation is recognised as a liability or disclosed as a contingent liability.
61
Valuation of equity compensation benefits
Management classifies its share-based payment scheme as an equity-settled scheme based on the assessment of its role and that of the employees in the transaction. In applying its judgement,
management consulted with external expert advisors in the accounting and share-based payment advisory industry. The critical assumptions as used in the valuation model are detailed in
note 20.7.
Post-employment benefit obligations
In applying its judgement to defined benefit plans, management consulted with external expert advisors in the accounting and post-employment benefit obligation industry. The critical
estimates as used in each benefit plan are detailed in note 24.
Consolidation of special-purpose entities
Certain special-purpose entities established as part of the B-BBEE transactions have been consolidated as part of the group results. The group does not have any significant direct or indirect
shareholding in these entities, but the substance of the relationship between the group and these entities was assessed and judgement was made that these are controlled entities.
Buy-back lease commitments
When a buy-back agreement is entered into, a provision is raised in respect of future reconditioning costs that may be incurred before the vehicle is made available for sale. Management based
this provision on historical data and past experience.
Provision for bad debts
The provision for bad debts was based on a combination of specifically identified doubtful debtors and providing for older debtors.
A provision for bad debts held agianst instalment sales receivables is raised when there is objective evidence that the assets are impaired. Factors taken into account to determine impairment
of an asset are the level of arrears, part payment of instalments or missed instalments. Estimated future cash flows, that are discounted at the effective interest rate, are determined utilising past
payment history and probability of default.
Fair values in business combinations
Management uses valuation techniques to determine the fair value of assets and liabilities acquired in business combination. Fair value of property, plant and equipment is
determined by using external valuations as well as rental return on property.
Although a comprehensive valuation exercise is performed for each business combination, the group applies initial accounting for its business combinations which will allow the group a period
of one year after the acquisition date to adjust the provisional amounts recognised for a business combination.
Claims made under insurance contracts
The operations’ estimates for reported and unreported losses and establishing resulting provisions are continually reviewed and updated, and adjustments resulting from this
review are reflected in income. The process relies upon the basic assumption that past experience adjusted for the effect of current developments and likely trends is an appropriate
basis for predicting future events.
The process used to determine the assumptions is intended to result in estimates of the most likely or expected outcome. The sources of data used as input for the assumptions
are internal, using detailed studies that are carried out annually. The assumptions are checked to ensure that they are consistent with observable market prices or other published
information.
The nature of the business makes it relatively easy to predict the likely outcome of claims and the ultimate cost of notified claims. Each notified claim is assessed on a separate, case-by-case
basis with due regard to the claim circumstances, information available from loss adjusters and historical evidence of the size of similar claims. Case estimates are reviewed regularly and are
updated as and when new information arises. The provisions are based on information currently available. However, the ultimate liabilities may vary as a result of subsequent developments.
62
NOTES TO THE ANNUAL FINANCIAL STATEMENTS
Gross of Net of taxation
and nontaxation and
controlling
non-controlling
interests
interests
2014
2014
Rm
Rm
1.
CAPITAL ITEMS
Capital items reflect and affect the resources committed
in producing operating/trading performance and are not
the performance itself. These items deal with the platform/
capital base of the entity.
(Income)/expenses of a capital nature are included in
the ‘capital items’ line in the income statement. These
(income)/expense items are:
1.1 Foreign currency translation reserve released
on disposal of subsidiary
1.2 Gain on bargain purchase
1.3 Impairment/(Reversal of impairment)
Goodwill
Intangible assets (including software)
Other
1.4 L oss on disposal of intangible assets
1.5 L oss on scrapping of vehicle rental fleet
1.6 L oss/(Profit) on disposal of property, plant
and equipment and investment property
1.7 (Profit)/Loss on sale of investments
Gross of
taxation and
non-controlling
interests
2013#
Rm
Net of taxation
and noncontrolling
interests
2013#
Rm
Gross of
taxation and
non-controlling
interests
2012#
Rm
Net of taxation
and noncontrolling
interests
2012#
Rm
6
(1)
76
14
–
14
48
45
3
6
(1)
71
14
–
9
48
31
1
–
–
336
16
323
(3)
–
9
4
–
–
139
21
119
(1)
–
6
2
–
–
57
–
–
46
11
1
12
–
–
51
–
–
40
11
–
4
22
(1 651)
10
(1 068)
(38)
12
(31)
4
19
96
14
80
(1 500)
(950)
323
120
185
149
All notes have been restated and re-presented where applicable.
#
63
2.
OPERATING PROFIT
Operating profit is stated after taking account of the following items:
2.1 Amortisation and depreciation
Amortisation
Depreciation
Recognised in:
Cost of sales
2.2 Auditors’ remuneration
Audit fees
Expenses
Fees for other services
Under/(over) provision in prior year
2.3 Personnel expenses
Retirement plans (note 2.4)
Salaries and wages
Share-based payments – equity-settled (note 20.7)
2.4 Post-retirement benefit expenses
Contributions to defined benefit plans
Contributions to defined contribution plans
2.5 Net foreign exchange (gains)/losses
Net loss/(gain) on forward exchange contracts
Net gain on conversion of monetary assets – realised
Net (gain)/loss on conversion of monetary assets – unrealised
2.6 Operating lease charges – properties
Rental of properties
Rental recovered from third parties on long-term leases
2014
Rm
2013#
Rm
2012#
Rm
198
1 818
281
1 512
127
1 049
2 016
1 793
1 176
75
1 066
875
101
1 016
676
100
816
260
2 016
1 793
1 176
74
11
7
1
61
2
11
(1)
49
1
15
1
93
73
66
245
17 436
248
348
14 738
144
177
11 076
95
17 929
15 230
11 348
91
154
117
231
50
127
245
348
177
57
(180)
(123)
(4)
(383)
(521)
(61)
(586)
621
(246)
(908)
(26)
3 057
(80)
2 655
(57)
2 152
(59)
2 977
2 598
2 093
424
279
236
58
(136)
(10)
(4)
46
(8)
(295)
243
–
(88)
34
(52)
57 672
56 415
2.7 Operating lease charges – other
Leases of plant. equipment. vehicles and other
2.8 Fair value (gains)/losses (excluding forward exchange contracts)
Fair value adjustment on cross-currency and interest rate swaps
Fair value adjustment on note purchase agreements
Fair value adjustment on financial assets through profit or loss
2.9 Number of employees
64
55 876
Expense
Rm
3.
FINANCE COSTS AND INVESTMENT INCOME
2014
Dividends received
Interest
Banks
Convertible bonds
Loans
Other
2013 #
Dividends received
Interest
Banks
Convertible bonds
Loans
Other
2012 #
Dividends received
Interest
Associate and joint-venture companies
Banks
Convertible bonds
Loans
Other
4.
TAXATION
4.1 Taxation charge
Normal taxation
South African normal taxation – current year
South African normal taxation – prior year adjustment
Foreign normal taxation – current year
Foreign normal taxation – prior year adjustment
Deferred taxation
South African deferred taxation – current year
South African deferred taxation – prior year adjustment
South African deferred taxation – change in rate
Foreign deferred taxation – current year
Foreign deferred taxation – prior year adjustment
Secondary taxation on companies (STC)
Current year
Income
Rm
Net
Rm
–
(3)
(3)
652
1 562
961
311
(477)
–
(811)
(200)
175
1 562
150
111
3 486
(1 491)
1 995
–
(3)
(3)
270
1 298
998
58
(514)
–
(434)
(47)
(244)
1 298
564
11
2 624
(998)
1 626
–
(24)
(24)
–
309
1 020
911
7
(10)
(415)
–
(540)
(50)
(10)
(106)
1 020
371
(43)
2 247
(1 039)
1 208
2014
Rm
2013#
Rm
2012#
Rm
301
72
823
–
452
(6)
494
–
133
–
433
(2)
1 196
940
564
416
(77)
–
419
–
(142)
4
–
187
(6)
(82)
(4)
(1)
146
3
758
43
62
–
–
15
1 954
983
641
For detail on deferred taxation assets/(liabilities) refer to note 15.
65
4.2 Reconciliation of rate of taxation
South African standard rate of taxation
Effect of different statutory taxation rates of subsidiaries in other jurisdictions
Effect of profit of equity accounted companies
Prior year adjustments
STC
Net creation of unrecognised taxation losses and deductible temporary differences
Permanent differences and other
Effective rate of taxation
5.
2014
Rm
2013#
Rm
2012#
Rm
%
%
%
28.0
(12.2)
(0.7)
–
–
0.1
0.5
28.0
(16.1)
(0.8)
–
–
0.9
0.2
28.0
(15.7)
(1.6)
(0.1)
0.3
0.3
(0.2)
15.7
12.2
11.0
DISCONTINUED OPERATIONS
5.1 Disposal of KAP and JD Group’s Financial Services division
On 27 June 2014, Steinhoff announced that it had disposed of 400 million shares in KAP, which resulted in Steinhoff’s interest decreasing to 45%. As a result, KAP is
no longer controlled by Steinhoff and will be equity accounted effective 30 June 2014.
On 30 June 2014, the JD Group received an offer, subject to due diligence and conditions precedent, to dispose of the JD Consumer Finance division (excluding
insurance companies), which provided instalment sale financing on furniture products and unsecured products. The disposal of the JD Consumer Finance division is
consistent with JD Group’s long-term turnaround strategy.
5.2 Analysis of profit for the year from discontinued operations
The results of the discontinued operations included in the income statement are set out below.
2014
Rm
2013#
Rm
2012#
Rm
18 501
(12 503)
18 227
(12 393)
11 269
(8 212)
5 998
514
(511)
(6 310)
6
5 834
581
(431)
(4 422)
(27)
3 057
446
(467)
(1 888)
89
Operating (loss)/profit
Net finance costs
Share of (loss)/profit of equity accounted
companies
(303)
(596)
1 535
(404)
1 237
(146)
(5)
14
11
(Loss)/Profit before taxation
Taxation
(904)
307
1 145
(286)
1 102
(222)
Loss on disposal of discontinued operations
Attributable income taxation
(597)
(229)
226
859
–
–
880
–
–
(Loss)/Profit for the year from discontinued operations
(600)
859
880
(Loss)/Profit from discontinued operations attributable to:
(265)
(335)
549
310
773
107
(600)
859
880
Revenue
Cost of sales
Gross profit
Capital items (note 5.3)
66
Gross of Net of taxation
and nontaxation and
controlling
non-controlling
interests
interests
2014
2014
Rm
Rm
5.3 Capital items for the year from discontinued
operations
Profit on sale of investments
Impairment
Loss/(Profit) on disposal of property, plant and
equipment
Gain on bargain purchase
Capital items per income statement
5.4 Cash flows from discontinued operations
Net cash inflow/(outflow) from operating activities
Net cash (outflow)/inflow from investing activities
Net cash outflow from financing activities
Net cash outflow
Gross of
taxation and
non-controlling
interests
2013#
Rm
Net of taxation
and noncontrolling
interests
2013#
Rm
Gross of
taxation and
non-controlling
interests
2012#
Rm
Net of taxation
and noncontrolling
interests
2012#
Rm
(94)
78
(53)
40
(20)
49
(5)
25
(12)
15
(10)
(5)
10
–
(1)
–
(2)
–
(1)
–
1
(93)
1
(82)
(6)
229
(14)
(79)
27
–
19
–
(89)
–
(96)
–
223
(93)
27
19
(89)
(96)
2014
Rm
2013
Rm
2012
Rm
1 218
(864)
(794)
(550)
705
(580)
969
(1 212)
(15)
(440)
(425)
(258)
67
6.
2014
Cents
2013#
Cents
2012#
Cents
From discontinued operations
510.2
(13.4)
355.6
30.1
264.6
44.7
496.8
385.7
309.3
455.2
(10.9)
320.6
23.7
246.6
35.7
444.3
344.3
282.3
461.7
(18.2)
359.4
31.2
273.2
39.2
Headline earnings per share
443.5
390.6
312.4
Diluted headline earnings per share is calculated by dividing the diluted headline earnings by the diluted weighted
average number of shares in issue during the year.
416.7
(14.7)
323.3
24.6
253.5
31.4
402.0
347.9
284.9
479.6
376.2
285.9
Adjusted diluted headline earnings per share from continuing operations
430.6
336.5
263.8
3 946
3 102
2 463
EARNINGS PER SHARE
The calculation of per share numbers uses the exact unrounded numbers which may result in differences when
compared to calculating the numbers using the rounded number of shares and earnings as disclosed below.
Basic earnings per share is calculated by dividing the net earnings attributable to ordinary shareholders by the
weighted average number of ordinary shares in issue during the year, excluding shares purchased by the group and
held as treasury shares.
Diluted earnings per share is calculated by dividing the diluted earnings attributable to ordinary shareholders
by the diluted weighted average number of ordinary shares in issue during the year. The calculation assumes
conversion of all dilutive potential shares, regardless of whether the applicable market price triggers have been met.
The calculation does not recognise any funds to be received from the exercise of allocated rights or any projected
growth in attributable earnings arising from such additional funds, which could compensate for any dilution in
earnings per share.
Headline earnings per share
Headline earnings is an additional earnings number that is permitted by IAS 33 – Earnings Per Share. The starting
point is earnings as determined in IAS 33, excluding seperately identifiable re-measurements, net of related
taxation (both current and deferred) and related non-controlling interest other than re-measurements specifically
included in headline earnings.
Seperately identifiable re-measurements are those where the applicable IFRS explicitly requires separate disclosure
of the operating and/or the platform re-measurement in the consolidated financial statements. No adjustments
would be permitted on the basis of voluntary disclosure of gains or losses (or components of these).”
Headline earnings per share is calculated by dividing the headline earnings by the weighted average number of
ordinary shares in issue during the year.
KAP Industrial Holdings Limited (KAP) will be equity accounted effective 30 June 2014. The full earnings from KAP
were included in discontinued operations for the years presented. In future 45% of KAP’s earnings will be included
in continuing operations. Headline earnings per share was adjusted to disclose the effect on headline earnings per
share had KAP been equity accounted as part of continuing operations for the years presented.
Net asset value per share
Net asset value per ordinary share is calculated by dividing the ordinary shareholders’ equity, adjusted by the
cumulative preference shares, by the number of ordinary shares in issue at year-end.
Notes:
1. The rights issue announced on 2 July 2014, although accounted for post 30 June 2014, led to the restatement of comparative per share numbers, none of which
resulted in a deviation of more than 1%.
68
2014
Million
2013#
Million
2012#
Million
1 836
(11)
–
19
133
1 770
(13)
31
17
15
1 656
(15)
39
17
31
Weighted average number of ordinary shares at end of the year for the purpose of basic earnings per share and
headline earnings per share
Effect of dilutive potential ordinary shares – convertible bonds 2
Effect of dilutive potential ordinary shares – other
1 977
486
25
1 820
464
21
1 728
405
26
Weighted average number of ordinary shares for the purpose of diluted earnings per share and diluted
headline earnings per share
2 488
2 305
2 159
6.1 Weighted average number of ordinary shares
Issued ordinary shares at beginning of the year
Effect of own shares held
Effect of capitalisation share award
Effect of rights issue1
Effect of shares issued
Notes:
1. The rights issue announced on 2 July 2014, although accounted for post 30 June 2014, led to the restatement of comparative per share numbers, none of
which resulted in a deviation of more than 1%.
2. All the ordinary shares underlying the convertible bonds are treated as dilutive potential ordinary shares, without taking into account the probability of
conversion.
Continuing
operations
Rm
6.2 Earnings and headline earnings attributable to owners of the parent
2014
Earnings for the year attributable to owners of the parent
Dividend entitlement on cumulative preference shares
Earnings attributable to owners of the parent
Adjusted for capital items of equity accounted companies
Adjusted for capital items (note 1 and note 5.3)
Discontinued
operations
Rm
Total
Rm
10 355
(269)
(265)
–
10 090
(269)
10 086
(8)
(950)
(265)
–
(93)
9 821
(8)
(1 043)
Headline earnings attributable to owners of the parent
9 128
(358)
8 770
2013 #
6 747
(274)
549
–
7 296
(274)
6 473
(50)
120
549
–
19
7 022
(50)
139
6 543
568
7 111
2012
4 882
(310)
773
–
5 655
(310)
4 572
149
773
(96)
5 345
53
4 721
677
5 398
#
69
Continuing
operations
Rm
6.3 Diluted earnings and diluted headline earnings attributable to owners of the parent
2014
Dilutive adjustment on earnings – convertible bonds1
Dilutive effect of listed subsidiaries’ and equity accounted companies’ potential shares
Dilutive adjustment on earnings – other
Discontinued
operations
Rm
Total
Rm
10 086
1 228
–
10
(265)
–
(5)
–
9 821
1 228
(5)
10
Diluted earnings attributable to owners of the parent
11 324
(8)
(950)
(270)
–
(93)
11 054
(8)
(1 043)
Diluted headline earnings attributable to owners of the parent
10 366
(363)
10 003
2013 #
6 473
907
–
10
549
–
(2)
–
7 022
907
(2)
10
7 390
(5)
(50)
120
547
–
–
19
7 937
(5)
(50)
139
7 455
566
8 021
2012 #
4 572
753
(1)
773
–
–
5 345
753
(1)
5 324
149
773
(96)
6 097
53
5 473
677
6 150
2014
Rm
2013#
Rm
2012#
Rm
9 128
355
6 543
305
4 721
219
9 483
1 228
10
(4)
6 848
907
10
(5)
4 940
753
–
(1)
10 717
7 760
5 692
86 235
(3 381)
60 113
(3 497)
47 085
(3 837)
82 854
56 616
43 248
6.4 Adjusted headline earnings and adjusted diluted headline earnings attributable
to owners of the parent
Headline earnings from continuing operations attributable to owners of the parent
Headline earnings of equity accounted KAP
Adjusted headline earnings attributable to owners of the parent
Dilutive effect of equity accounted companies’ potential shares
Adjusted diluted headline earnings attributable to owners of the parent
6.5 Net asset value
Attributable to owners of the parent
Attributable to ordinary shareholders
Notes:
1. All the ordinary shares underlying the convertible bonds are treated as dilutive potential ordinary shares, without taking into account the probability of
conversion.
70
7.
2014
Cents
2013
Cents
2012
Cents
150
80
–
–
–
80
7.3 Distribution to Steinhoff Investment preference shareholders
A preference dividend in respect of the period 1 January 2013 to 30 June 2013 (2013: 1 January 2012 to 30 June
2012; 2012: 1 January 2011 to 30 June 2011) was paid on 28 October 2013 (2013: 29 October 2012; 2012:
31 October 2011) to those Steinhoff Investment preference shareholders recorded in the books of the company
at the close of business on 25 October 2013 (2013: 26 October 2012; 2012: 28 October 2011).
348
370
335
A preference dividend in respect of the period 1 July 2013 to 31 December 2013 (2013: 1 July 2012 to
31 December 2012; 2012: 1 July 2011 to 31 December 2011) was paid on 22 April 2014 (2013: 22 April 2013;
2012: 23 April 2012) to those Steinhoff Investment preference shareholders recorded in the books of the
company at the close of business on 17 April 2014 (2013: 19 April 2013; 2012: 20 April 2012).
354
356
374
The directors of Steinhoff Investment have resolved to declare and pay preference dividends on 27 October
2014 (2013: 28 October 2013; 2012: 29 October 2012) for the period 1 January 2014 to 30 June 2014 (2013:
1 January 2013 to 30 June 2013; 2012: 1 January 2012 to 30 June 2012) to those Steinhoff Investment
preference shareholders recorded in the books of the company at the close of business on 24 October 2014
(2013: 25 October 2013; 2012: 26 October 2012).
365
348
370
2014
Rm
2013#
Rm
2012#
Rm
15 572
374
–
–
(21)
2 925
12 590
1 960
–
–
–
1 022
DISTRIBUTION TO SHAREHOLDERS
7.1 Cash dividend to ordinary shareholders
The board has declared a cash dividend from retained earnings of 150 cents (2013: 80 cents) per share
payable to shareholders registered at the close of business on Friday, 14 November 2014.
7.2 Capital distribution to ordinary shareholders
The board has resolved to award capitalisation shares to shareholders recorded in the register at the close of
business on Friday, 30 November 2012 (the share award). Shareholders will, however, be entitled to decline
the share award or any part thereof and instead elect to receive a cash distribution of 80 cents per share
(the capital distribution). The share award and capital distribution alternative will be awarded from the share
premium account and will accordingly be done by way of a reduction of the Contributed Tax Capital of the
Company, as defined in the Income Tax Act, 58 of 1962 (as amended) (the ITA).
8.
GOODWILL
Carrying amount at beginning of the year
Arising on business combinations (note 28)
Disposal of subsidiaries (note 29)
Transfer to assets classified as held for sale
Impairments
Exchange differences on consolidation of foreign subsidiaries
18 850
7 295
(209)
(767)
(15)
2 656
Carrying amount at end of the year
27 810
18 850
15 572
Cost
Accumulated impairment
27 976
(166)
18 994
(144)
15 695
(123)
27 810
18 850
15 572
When the group acquires a business that qualifies as a business combination in respect of IFRS 3 – Business Combinations, the group allocates the purchase price paid to the assets
acquired, including identifiable intangible assets, and the liabilities assumed. Any excess of the aggregate of the consideration transferred, non-controlling interest in the acquiree
and for a business combination achieved in stages, the acquisition-date fair value of the acquirer’s previously held equity interest in the acquiree, over the fair value of those net
assets is considered to be goodwill. The goodwill acquired in a business combination is allocated, at acquisition, to the cash-generating unit (CGU) that is expected to benefit from
that business. Goodwill is assessed for impairment annually, irrespective of whether there is any indication of impairment.
Review of impairment
The impairment test compares the carrying amount of the unit, including goodwill, to the value in use, or fair value of the unit. The recoverable amount of the CGU is
determined from the value in use calculation. The key assumptions for the value in use calculation are those regarding the discount rates, growth rates and the expected
changes to the selling prices and the direct costs during the period. The discount rates are based on the weighted average cost of capital, while growth rates are based
on management’s experience and expectations. Growth rates used do not exceed the long-term average growth rate for the area in which the CGU operates. Changes in
selling prices and direct costs are based on past practices and expectations of future changes in the market, and are derived from the most recent financial budgets and
forecasts that have been prepared by management.
Where an intangible asset, such as a trademark, trade name and brand name and/or patent has been assessed as having an indefinite useful life (see accounting policies),
the cash flow of the CGU, supporting the goodwill and driven by the trademark, brand or patent is also assumed to be indefinite.
An impairment charge is required for both goodwill and other indefinite lived intangible assets when the carrying amount exceeds the recoverable amount. An impairment
charge of R15 million was recorded for the year ended 30 June 2014 (2013: R21 million; 2012: R nil).
The group prepared cash flow forecasts derived from the most recent financial budgets approved by management for the next year and extrapolated cash flows for the
following years based on an estimated growth rate as set out on the next page.
All impairment testing was consistent with methods applied as at 30 June 2013.
71
Impairment tests for CGUs containing goodwill
The following units have significant carrying amounts of goodwill:
Pre-tax
discount rate Forecasted cash flows
Europe
Conforama Holdings S.A.
Steinhoff Retail GmbH (Austria)
Alvaglen Estates Limited
Pacific Rim
Steinhoff Asia Pacific
Southern Africa
KAP Industrial Holdings Limited1
JD Group Limited
United Kingdom
Steinhoff UK Holdings
JWC (International) Limited
Various other units
3.96% Budget years 1 to 3, thereafter 1.0% growth rate.
3.65% – 3.82% Budget years 1 to 3, thereafter 1.0% growth rate.
4.59% Budget years 1 to 3, thereafter 1.0% growth rate.
13.65% Budget year 1, thereafter growth for sales of 3.5% and growth
of expenses of 2.5% until year 5, and thereafter zero sales
growth with a reduced discount rate.
10.80% – 11.60% Budget year 1, thereafter 6.0% – 7.5% growth rate until year 3
and thereafter 5.0%.
8.47% Budget year 1 to 3, thereafter 2.7% growth rate.
8.47% Budget year 1, thereafter growth of 2.7% until year 3 and
thereafter 1.0% growth rate.
3.65% – 5.00% Budget year 1, thereafter 1.0% to 2.0% growth rate.
Notes:
1. Subsidiary became an associate company during the year.
72
2014
Rm
2013#
Rm
2012#
Rm
11 076
9 652
159
8 844
2 985
–
7 049
2 396
–
1 412
1 290
1 186
–
205
183
935
1 707
1 568
4 339
3 597
3 041
175
62
155
67
–
149
27 810
18 850
15 572
9.
Trade and
brand names
Rm
Patents and
trademarks
Rm
Software and
ERP systems
Rm
Other
Rm
Total
Rm
INTANGIBLE ASSETS
Additions
Amortisation
Disposals
Acquired on acquisition of subsidiaries (note 28)
Transfer to property, plant and equipment
Reclassification
21 782
5 468
(2)
–
1 572
–
–
–
1 211
1 064
–
–
–
47
–
–
–
–
338
147
(110)
(3)
399
(6)
(2)
119
5
156
31
(34)
–
1 761
–
–
(119)
10
23 340
5 646
(146)
(3)
3 779
(6)
(2)
–
1 226
Additions
Amortisation
Disposals
Impairment
Transfer from property, plant and equipment
Reclassification
30 031
52
(4)
–
830
–
–
–
5
6 788
1 111
–
–
–
–
(6)
(24)
–
–
–
887
306
(237)
(28)
–
(322)
–
394
–
124
1 805
10
(141)
(1)
4
(3)
–
–
(5)
9
33 834
368
(382)
(29)
834
(331)
(24)
394
–
6 921
Additions
Amortisation
Disposals
Impairment
Transfer (to)/from property, plant and equipment
37 702
–
(5)
–
–
(6 896)
–
–
(2)
4 623
1 081
–
–
–
–
(1 025)
(18)
–
–
–
1 124
369
(215)
(52)
61
(27)
–
(171)
86
101
1 678
10
(70)
–
2
(29)
(14)
(8)
–
1
41 585
379
(290)
(52)
63
(7 977)
(32)
(179)
84
4 725
35 422
38
1 276
1 570
38 306
Cost
Amortisation and impairment
30 033
(2)
1 126
(15)
1 330
(443)
1 939
(134)
34 428
(594)
Net book value at 1 July 2012
30 031
1 111
887
1 805
33 834
Cost
37 706
(4)
1 098
(17)
2 207
(1 083)
1 966
(288)
42 977
(1 392)
Net book value at 30 June 2013
37 702
1 081
1 124
1 678
41 585
Cost
35 441
(19)
39
(1)
2 357
(1 081)
1 676
(106)
39 513
(1 207)
35 422
38
1 276
1 570
38 306
2014
Rm
2013
Rm
2012
Rm
1
1 532
–
37
65
1 532
69
12
193
1 532
65
15
1 570
1 678
1 805
The net book value of other intangible assets consists of:
Customer relationships
Dealership agreements
Contracts
Other
73
Review of impairment
In determining the appropriate methodology to be adopted in the valuation of the value in use of the majority of the group’s intangible assets, the relief from royalty approach was
considered to be the most applicable as a primary valuation methodology because it is predominantly and widely used as a basis for the structuring of licensing agreements both
locally in the countries where these intangible assets originate and internationally, and this approach is generally accepted internationally as a reliable means of valuing trademarks.
IAS 38 – Intangible Assets (IAS 38) gives guidance on how the fair value of intangible assets can be determined. The guidance has been applied throughout the valuation of the trade names,
brand names and trademarks. Impairment tests typically take into account the most recent management forecast whereafter a reasonable rate of growth is applied based on market and
industry conditions. Discount rates used in the discounted cash flow models are based on a weighted average cost of capital, while royalty rates used are determined with reference to industry
benchmarks.
Impairment
All intangible assets were tested for impairment during the year under review and a R32 million impairment was recognised (2013: R331 million; 2012: R nil). Included in the 2013
impairment charge is an impairment of R345 million relating to JD Group’s capitalised software development costs (primarily relating to the SAP infrastructure) as the carrying
value of capitalised software development costs exceeded the recoverable amount. The impairment indicator identified in this regard was the fact that the total SAP project costs to
date were materially higher than initially budgeted. Management obtained a valuation from a third party within the IT industry evidencing the fact that the carrying amount exceeded
the recoverable amount. This valuation formed the basis of the impairment calculation, with the fair value less costs to sell determined to be its recoverable amount.
All impairment testing was done consistently with methods used in the prior year.
Useful lives
Under IAS 38, the useful life of an asset is either finite or indefinite. An indefinite life does not mean an infinite useful life, but rather that there is no foreseeable limit to the period
over which the asset can be expected to generate cash flows for the entity. Intangible assets with an indefinite useful life are not amortised; they are tested for impairment at least
annually.
The majority of the group’s trade names, brand names and/or trademarks have been assessed as having an indefinite useful life. The majority of these trade names and brand names were
assessed independently at the time of the acquisitions, and the indefinite useful life assumptions were supported by the following evidence:
•
The industry is a mature, well-established industry.
•
The trade names, brand names and/or trademarks are long established relative to the market and have been in existence for a long time.
•
The intangible assets relate to trade names, brand names, trademarks and patents rather than products and are therefore not vulnerable to typical product lifecycles or to the
technical, technological, commercial or other types of obsolescence that can be seen to limit the useful lives of other trade names and brand names.
•
There is a relatively low turnover of comparable intangible assets implying stability within the industry.
Royalty rates
The royalty rate represents the assumed amount which would be paid to the owner of the intangible asset as a royalty fee, expressed as a percentage of revenue, for the use of the
intangible asset. It is necessary to look to the industry in which the brand is operational to determine an appropriate notional royalty rate.
A database search of the RoyaltySource Intellectual Property Database for comparable worldwide licensing or franchising transactions of trademarks in the retail industry, focusing on furniture
and/or household goods, revealed royalty rates varying from 2.5% to 5.0%, with an average rate of 4.0%. The royalty rates used in assessing the value in use of the Steinhoff trade names and
brand names all fall within or below this recommended range and vary from 0.25% to 4.0%.
74
Land and
buildings
Rm
Plant and
machinery
Rm
Long-haul
motor
vehicles,
motor
vehicles,
bus fleet
and
equipment
Rm
19 859
3 110
(2)
(240)
(124)
(23)
981
(3)
93
623
–
1 210
77
(12)
(115)
(21)
(8)
638
(77)
32
–
2
2 526
853
–
(495)
(89)
–
148
(1)
53
–
–
10. PROPERTY, PLANT AND EQUIPMENT
Additions
Reclassification of assets held for sale
Depreciation
Disposals
Impairment
Acquisition of subsidiary companies (note 28)
Disposal of subsidiary companies (note 29)
Reclassification
Transfer from investment property
Transfer from intangible assets
Exchange differences on consolidation of
foreign subsidiaries
Capital
work-inprogress
Rm
65
571
–
–
(1)
–
624
(3)
(138)
–
–
Office and
computer
equipment,
Leasehold furniture and
improvements other assets
Rm
Rm
2 840
383
(1)
(612)
(47)
–
350
–
(113)
–
–
Total
Rm
704
246
–
(190)
(10)
(23)
222
(50)
73
–
–
27 204
5 240
(15)
(1 652)
(292)
(54)
2 963
(134)
–
623
2
832
6
(15)
(1)
149
22
993
25 106
71
1 732
(13)
2 980
3
1 117
–
2 949
–
994
3
34 878
64
Additions
Depreciation
Disposals
Impairment
Reclassification
Transfer to investment property
Transfer to intangible assets
25 177
3 575
(45)
(336)
(32)
(8)
1
–
644
(37)
–
1 719
104
(26)
(215)
(17)
(19)
2
–
27
–
–
2 983
903
(3)
(583)
(109)
(1)
19
(27)
2
–
–
1 117
1 287
(4)
–
(3)
–
–
–
(1 139)
–
(364)
2 949
674
4
(779)
(37)
–
3
–
199
–
–
997
219
1
(315)
(9)
(2)
12
–
267
–
(30)
34 942
6 762
(73)
(2 228)
(207)
(30)
37
(27)
–
(37)
(394)
5 232
27
34
45
642
172
6 152
Additions
Depreciation
Disposals
Impairment
Reclassification
Transfer from/(to) intangible assets
34 171
1 815
–
(315)
(213)
–
8 760
(1 574)
(153)
–
939
421
(3)
–
(11)
–
155
(82)
(796)
(94)
3 655
973
–
(822)
(85)
(39)
70
(33)
384
–
1 312
505
(17)
(476)
(1)
24
8
(103)
130
9
44 897
4 942
(32)
(2 442)
(455)
(44)
8 997
(6 743)
–
(84)
35
428
143
4 959
46 806
393
167
564
4 531
1 534
53 995
26 419
(1 242)
2 610
(891)
5 000
(2 017)
1 117
–
5 062
(2 113)
2 142
(1 145)
42 350
(7 408)
4 315
Cost
Accumulated depreciation and impairment
1 602
271
(11)
(225)
(12)
(27)
4
(1 626)
390
–
25 177
3 218
957
(1)
(604)
(133)
(2)
–
(3 325)
45
1
27
1 719
11
2 983
1 117
2 949
997
34 942
Cost
35 979
(1 808)
2 653
(1 051)
5 696
(2 478)
939
–
6 627
(2 972)
2 758
(1 446)
54 652
(9 755)
34 171
1 602
3 218
939
3 655
1 312
44 897
Cost
48 829
(2 023)
970
(577)
351
(184)
564
–
7 928
(3 397)
3 778
(2 244)
62 420
(8 425)
46 806
393
167
564
4 531
1 534
53 995
75
Land and buildings
Details of land and buildings are available for inspection by shareholders on request at the various registered offices of the company and its subsidiaries.
Encumbered assets
Assets with a book value of R16 856 million (2013: R8 635 million; 2012: R7 303 million) are encumbered as set out in note 23.
Insurance
Property, plant and equipment, with the exception of motor vehicles, bus fleet, long-haul motor vehicles and land, are insured at approximate cost of replacement. Motor vehicles are
insured at market value. Bus fleet and long-haul motor vehicles are self-insured.
Impairment losses
Refer to ‘Capital items’ (note 1 and 5.3).
Useful lives
The estimated useful lives are reflected under ‘Judgements and estimates’ in accounting policies.
2014
Rm
11. INVESTMENT PROPERTY
Balance at beginning of the year
Additions
Disposals
Reclassification to assets held for sale
Transfer from/(to) property, plant and equipment
Balance at end of the year
2013#
Rm
2012#
Rm
480
13
–
(19)
(27)
(20)
–
472
6
–
–
(35)
–
37
1 042
14
39
–
–
–
(623)
427
480
472
1 656
–
–
(223)
328
1 451
74
–
(177)
308
–
1 761
1 656
205
204
223
214
177
105
409
437
282
No depreciation was recognised on investment property in the current or prior years as the residual values exceeded
the carrying values of all properties classified as investment property.
At 30 June 2014, investment property was valued by management at R548 million (2013: R631 million; 2012:
R564 million). The fair valuation of the group’s investment has been carried out by Steinhoff Properties. The fair
value was based on the income approach whereby the market related net income of the property is discounted at the
market yield for a similar property. The market yields used in the valuation ranged between 9.00% and 11.25% (2013:
8.00% and 11.00%; 2012: 6.00% and 12.00%). In estimating the fair value of investment properties, the highest and
best use for the majority of the properties is their current use. There has been no change to the valuation technique
since the previous year.
The fair value of investment property is classified as level 3 based on the fair value hierarchy. There were no transfers
between the levels during the year.
No restrictions exist on the sale of investment property.
There are no material contractual obligations to purchase, construct or develop investment property. There are,
however, service level agreements and building maintenance contracts in place with third-party contractors for
security, repairs, maintenance and minor enhancements.
12. CONSUMABLE BIOLOGICAL ASSETS
Carrying amount at beginning of the year
Acquired on acquisition of subsidiary company (note 28)
Decrease due to harvesting
Fair value adjustment to plantations
Expenses incurred in the management and operations of plantations
Harvesting expenses
1 761
–
(1 875)
(205)
319
The group owned and managed timber plantations for use in manufacturing timber products. In terms of IAS 41 – Agriculture, the plantations are valued at fair value less
estimated costs to sell. The Faustmann formula and discounted cash flow models were applied in determining the fair value of the plantations. The principal assumptions used
in the Faustmann formula include surveying physical hectares planted, age analysis and the industry mean annual incremental growth.
The fair value of mature standing timber, being the age at which it becomes marketable, is based on the market price of the estimated recoverable timber volumes, net of
harvesting costs. The fair value of younger standing timber is based on the present value of the net cash flows expected to be generated by the plantation at maturity.
At 30 June 2014, before being derecognised as part of the KAP disposal, consumable biological assets were valued by management at R1 875 million (2013: R1 761 million;
2012: R1 656 million). The valuation of the group’s consumable biological assets has been carried out by management. The valuation technique is consistent with the method
used at 30 June 2013. The fair value of consumable biological assets is classified as level 3 based on the fair value hierarchy. There were no transfers between the levels
during the year.
The Faustmann formula is sensitive to the market price and the growth rate used to determine the fair value of timber plantations. A one percent increase in the market price and growth rate
would result in an increase in the fair valuation of the timber plantations of R16 million and R8 million (2013: R15 million and R3 million; 2012: R13 million and R5 million), respectively.
Encumbered consumable biological assets
None of the group’s consumable biological assets are encumbered.
Commitments
There are no amounts committed for the development and acquisition of consumable biological assets.
76
Nature of business
13. INVESTMENTS IN EQUITY ACCOUNTED COMPANIES
13.1 Associate companies
Listed
PSG Group Limited2
2014
% holding
2013#
% holding
2012#
% holding
44.7
–
–
19.6
–
20.2
24.5 – 50.0
24.5 – 50.0
24.5 – 50.0
% holding
% holding
% holding
–
33.0 – 50.0
33.0 – 50.0
Rm
Rm
Rm
10 039
5 518
(4 519)
(4 179)
(150)
–
–
–
–
–
–
–
–
–
–
6 709
–
–
6 709
44.7%
2 999
1 042
–
–
–
–
–
–
–
–
Carrying amount of the group’s interest in KAP
4 041
–
–
Market value of KAP
4 088
–
–
Non-current assets
Current assets
Current liabilities
–
–
–
–
–
17 470
8 388
(9 115)
(6 593)
(4 160)
14 682
6 278
(8 373)
(4 640)
(3 187)
Net assets
–
5 990
4 760
Revenue
–
3 056
2 052
Profit for the year
–
–
1 516
21
1 025
(19)
–
1 537
1 006
Unlisted
Various unlisted associate companies
Diverse manufacturing business
Investment company
Insurance, manufacturing, retail and logistics
No material impairments were recognised during any year presented on associate companies.
1. KAP was previously accounted for as a subsidiary and became an associate on 30 June 2014.
2.PSG was derecognised as an associate on 13 June 2014, and the 18.6% interest held is classified as investments and loans at
30 June 2014.
Commitments
The group’s obligation in respect of losses and contingent liabilities from associate companies is limited to
the extent of the carrying values of the investments.
13.2
Joint-venture companies
Nature of business
Various joint-venture companies
Automotive, insurance and manufacturing
No material impairments were recognised during either year presented on joint-venture companies.
KAP’s joint ventures were derecognised when KAP became an associate.
13.3
Summarised information in respect of material associate companies
Summarised information in respect of KAP
The summarised financial information below represents amounts shown in the associate’s financial
statements prepared in accordance with IFRS. As KAP became an associate on 30 June 2014, only the
statement of financial position disclosure is included below.
Non-current assets
Current assets
Current liabilities
Net assets
Reconciliation of the above summarised financial information to the carrying amount of the interest in KAP
recognised in the consolidated financial statements:
Net assets of KAP
Proportion of the group’s ownership interest in KAP
Proportion of the group’s ownership interest in the net assets of KAP
Transitory goodwill1
1. The recognition of KAP as an associate company took place on 30 June 2014 and therefore, the fair value allocation in terms of
IAS 28 – Investments in Associates and Joint Ventures will be completed and the final allocation done before 30 June 2015 as
allowed by IFRS.
Summarised information in respect of PSG
The summarised financial information below represents amounts shown in the associate’s financial
statements prepared in accordance with IFRS. PSG’s financial year end is 28 February. Adjustments are
made for material transactions occurring between 28 February and 30 June each year (where necessary).
PSG was derecognised as an associate on 13 June 2014 (refer to the directors’ report).
77
2014
Rm
2013#
Rm
50
41
–
–
–
–
–
–
5 990
19.6%
1 172
809
(29)
4 760
20.2%
962
809
–
Carrying amount of the group’s interest in PSG
–
1 952
1 771
Market value of PSG
–
2 400
2 200
Dividends received from PSG
Reconciliation of the above summarised financial information to the carrying amount of the interest in PSG
recognised in the consolidated financial statements:
Net assets of PSG
Proportion of the group’s ownership interest in PSG
Proportion of the group’s ownership interest in the net assets of PSG
Goodwill
Dividend received post PSG year-end
2012#
Rm
The 30 June 30-day volume-weighted average share prices on the JSE Limited (JSE) were used to
determine the market value of listed associates. Where there were impairment indicators, discounted cash
flows were used to determine the value in use of these associates. This is consistent with methods and
models applied in the prior year. For listed associates, publicly available information was used to determine
value in use. No impairment was recognised on listed associates during any of the years presented. The fair
value of listed associates is classified as level 1 in the fair value hierarchy. There were no transfers between
levels during the year for listed associates.
13.4
Summarised information in respect of individually immaterial associate and joint-venture
companies
Aggregate carrying amount of the group’s interests in these associate and joint-venture companies
182
682
570
13.5
Aggregate total comprehensive income from associate and joint-venture companies
The group’s share of profit
The group’s share of other comprehensive income/(loss)
290
1
240
(1)
334
–
The group’s share of total comprehensive income
291
239
334
3 769
3 685
4
80
592
206
386
6 038
73
–
4
69
517
68
449
534
68
–
5
63
430
69
361
370
10 399
1 124
868
5 928
3 228
1 710
14. INVESTMENTS AND LOANS
Long-term investments and loans
Listed investments
Ordinary shares1
Preference shares
Unit trusts
Unlisted investments
Ordinary shares
Preference shares
Loans receivable carried at amortised cost
Interest-bearing loans
1. This includes the investment in PSG which was reclassified from an associate company to a listed investment.
A fair value adjustment of R220 million (2013: R1 million; 2012: R2 million) on the listed shares was processed directly in other comprehensive income during the year. These
fair value adjustments decreased (2013: decreased; 2012: increased) the carrying value of the investments to equal the market value at year-end.
A fair value adjustment of R165 million (2013: R23 million; 2012: R1 million) on the unlisted ordinary shares was processed directly in other comprehensive income during the
year. These fair value adjustments increased (2013: decreased; 2012: decreased) the carrying value of the investments to equal the market value at year-end.
Details of investments are available at the registered office of the company for inspection by shareholders.
The unsecured long-term loans receivable consist of various loans with repayment terms ranging between 13 and 73 months unless called earlier, bearing interest at marketrelated interest rates and participating in profit share.
None of the loans receivable are past due or impaired at reporting date and there are no indications that any of these counterparties will not meet their repayment obligations.
The fair value of investments and loans is disclosed in note 31.
78
15.
2014
Rm
2013
Rm
2012
Rm
(8 922)
58
1 090
(279)
(7 066)
(1)
(1)
–
(6 000)
(670)
9
–
43
32
(208)
189
(16)
(25)
(3)
(79)
23
(26)
63
(22)
(20)
21
(5)
(758)
649
(1 366)
–
(43)
(156)
(1 545)
–
(62)
(116)
(266)
2
(9 488)
(8 922)
(7 066)
64
189
171
185
(4)
39
147
(8)
58
(26)
42
132
(538)
94
81
605
210
(189)
785
520
886
1 390
730
697
Realisation of the deferred taxation asset is expected out of future taxable income which was assessed and deemed to be reasonable.
Liabilities
Provision for taxation on temporary differences resulting from South African normal taxation rate (28%),
SA CGT rate (18.6%) and foreign taxation rates:
Equity component of convertible bonds
–
(159)
Intangible assets
(7 918)
(7 153)
Investments
(583)
–
Prepayments and provisions
(92)
169
Property, plant and equipment (including consumable biological assets)
(2 322)
(3 330)
68
74
Other
(65)
(62)
(185)
(5 925)
–
266
(2 290)
47
(101)
DEFERRED TAXATION ASSETS/(LIABILITIES)
15.1 Deferred taxation movement
(Liabilities)/assets
Deferred taxation of subsidiaries acquired
Deferred taxation of subsidiaries disposed
Transferred to asset/liabilities held for sale
Amounts charged directly to other comprehensive income and equity
Actuarial reserve
Cash flow hedge and fair value adjustments
Convertible bond
Other
Current year charge
15.2
Deferred taxation balances
Assets
Provision for taxation on temporary differences resulting from South African normal taxation rate (28%),
South African capital gains taxation (SA CGT) rate (18.6%) and foreign taxation rates:
Equalisation of operating lease payments
Prepayments and provisions
Property, plant and equipment (including consumable biological assets)
Other
Taxation losses and credits
Taxation losses
Total deferred taxation assets
Taxation losses and credits
Taxation losses
Total deferred taxation liabilities
15.3
Unrecognised deferred taxation assets
Deferred taxation assets have not been recognised in respect of the following items:
Taxation losses
(10 912)
(10 461)
(8 188)
34
(10 878)
809
(9 652)
425
(7 763)
2 722
3 711
2 024
5 479
7 717
6 072
The taxation losses and deductible temporary differences do not expire under current taxation legislation.
Deferred taxation assets have not been recognised in respect of these items because it is not yet certain
that future taxable profits will be available against which the group can realise the benefits therefrom.
15.4
Taxation losses
Estimated taxation losses available for offset against future taxable income
79
16. TRADE AND OTHER RECEIVABLES
Non-current trade and other receivables
Instalment sale and loan receivables1
Derivative financial assets
Non-current trade and other receivables (financial assets)
2014
Rm
2013#
Rm
2012#
Rm
55
–
3 087
87
2 453
166
55
15
3 174
–
2 619
–
70
3 174
2 619
Current trade and other receivables
Trade receivables
Instalment sale and loan receivables1
Other amounts due
Less: Provision for bad debts
13 163
415
2 635
(890)
13
10 950
6 644
1 141
(1 749)
155
8 606
4 800
1 805
(1 393)
88
Current trade and other receivables (financial assets)
Prepayments
Taxation receivable
Value added taxation receivable
15 336
1 275
451
1 050
17 141
1 121
391
1 386
13 906
478
247
903
18 112
20 039
15 534
1. During the year JD Group’s consumer finance business was classified as a disposal group held for sale (refer to the directors’ report).
The credit terms of instalment sale and loan receivables range from 3 to 36 months.
The credit period on sales of goods is between 30 and 90 days. Where relevant, interest is charged at market-related rates on outstanding balances.
Before accepting any new customers, credit risk management uses various credit bureaux and performs credit assessments to assess the potential customer’s credit potential
and credit limit. The credit limits are reviewed on a regular basis as and when increased limits are required. Customers with material balances are subject to additional security
requirements or are insured as appropriate.
In determining the recoverability of a customer, the group considers any change in the credit quality of the customer from the date credit was initially granted up to the
reporting date.
The provision against instalment sales and loan receivables has been deducted against the current portion of the instalment sales and loan receivables. Due to the nature of
the calculation of the provision, it was not split into non-current and current portions.
Given the diverse nature of the group’s operations (both geographically and segmentally), it does not have significant concentration of credit risk in respect of trade receivables,
with exposure spread over a large number of customers. Accordingly, the directors believe that no further credit provision is required in excess of the provision for bad debts.
No customer represents more than 5% of the total trade receivables at year-end.
In 2013, R50 million (2012: R30 million) of the BCM group’s (subsidiary of KAP) trade receivables, as well as the applicable insurance policies were ceded in favour of facilities
with banks.
The group’s exposure to currency and credit risk related to trade and other receivables is disclosed in notes 31.3 and 31.6.
17. VEHICLE RENTAL FLEET
Acquired on acquisition of subsidiary companies
Additions
Scrapping of vehicle rental fleet
Transfer to inventories
Impairment
Depreciation
Encumbered assets
Assets with a book value of R255 million (2013: R320 million; 2012: R260 million) are encumbered as set out in note 23.
80
2014
Rm
2013
Rm
2012
Rm
455
–
800
(16)
(570)
(2)
(133)
372
–
785
(16)
(586)
–
(100)
–
540
–
(18)
(147)
–
(3)
534
455
372
18. INVENTORIES
18.1 Inventories at cost less provisions
Consumables and spares
Development properties
Finished goods and merchandise
Raw materials
Work-in-progress
18.2
Amount of write-down of inventories to net realisable value included as an expense during the year
2014
Rm
2013#
Rm
2012#
Rm
–
4
17 599
282
36
206
4
15 402
727
108
191
4
13 584
635
125
17 921
16 447
14 539
52
74
14
767
180
2
–
279
–
7 212
–
24
73
4
–
114
149
–
–
27
–
–
10
61
8 440
(1 575)
364
–
98
–
6 865
364
98
(153)
(43)
–
(59)
(9)
–
(39)
–
(397)
(196)
(68)
(436)
296
(338)
Included in the balances above are vehicles relating to the operations of Unitrans Automotive (subsidiary of
JD Group), which were subject to a lien of R1 459 million (2013: R1 331 million; 2012: R1 233 million) in
respect of the manufacturers’ floorplan financing, comprising interest-bearing and interest-free amounts and
which are included in trade and other payables.
Inventories carried at net realisable value are immaterial.
19. ASSETS/(LIABILITIES) AND DISPOSAL GROUPS CLASSIFIED AS HELD FOR SALE
As described in note 5, JD Group plans to dispose of the JD Consumer Finance division (excluding insurance
companies) and anticipates that the disposal will be completed within the next financial year. An impairment loss
was recognised on the disposal group held for sale as at 30 June 2014.
These assets are available for immediate sale in their present condition. Management is committed to the sale,
which is expected to occur within 12 months of being classified as held for sale.
The carrying amount of total assets held for sale still carried on the statement of financial position is:
Assets
Goodwill
Intangible assets
Deferred taxation asset
Inventories
Accounts receivable (including instalment sale and loan receivables)
Impairment of disposal group
Liabilities
Accounts payable
Employee benefits
Provisions
Net assets/(liabilities) and disposal groups classified as held for sale
6 669
81
2014
Number
of shares
2013
Number of
shares
2012
Number of
shares
2014
Rm
2013#
Rm
2012#
Rm
Ordinary shares of 0.5 cent each
3 000 000 000
3 000 000 000
3 000 000 000
15
15
15
Issued
Shares in issue at beginning of the year
Shares issued during the year
1 836 154 196
273 726 496
1 769 701 344
66 452 852
1 656 077 985
113 623 359
9
2
9
*
8
1
Shares in issue at end of the year
2 109 880 692
1 836 154 196
1 769 701 344
11
9
9
9 953
10 079
8 676
20. ORDINARY SHARE CAPITAL AND PREMIUM
20.1 Authorised
20.2
20.3
20.4
Share premium
Profit on treasury share transactions net of capital
gains taxation
Share premium arising on issue and utilisation of
shares net of transaction costs
1
57
17
10 683
–
1 518
(1 701)
2 699
(1 313)
20 637
9 953
10 079
Treasury shares
Purchases of shares
Sale of shares
Total issued ordinary share capital and premium
20.5
(11 053 042)
–
1 089 242
–
(13 863 094)
(4 794 527)
7 763 072
(158 493)
(14 879 187)
–
1 439 525
(423 432)
(161)
–
20
–
(190)
(131)
149
11
(210)
–
18
2
(9 963 800)
(11 053 042)
(13 863 094)
(141)
(161)
(190)
1 825 101 154
1 755 838 250
20 507
9 801
9 898
9 801
10 706
10 685
–
9 898
1 593
1 518
(131)
8 474
2 735
2 700
–
21
–
206
(1 690)
35
(1 311)
20 507
9 801
9 898
2 099 916 892
Movement of net share capital and premium
Movement for the year
Net shares issued
Purchases of shares
Proceeds on sale of shares net of capital gains
taxation
The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at the meetings of the company.
* Amount is less than R500 000.
20.6
2014
Number
of shares
2013
Number of
shares
2012
Number of
shares
Unissued shares
Reserved for bond holders
Shares reserved for future participation in share schemes
Shares reserved for current participation in share schemes
Shares under the control of the directors until the forthcoming annual general meeting
Unissued shares
529 416 368
104 372 913
35 885 136
87 605 581
132 839 310
481 911 689
118 890 841
31 147 659
180 000 000
351 895 615
404 544 723
128 768 804
37 585 134
325 000 000
334 399 995
Total unissued shares1
890 119 308
1 163 845 804
1 230 298 656
At year-end the directors were still authorised, by resolutions of the shareholders and until the forthcoming annual general meeting, to issue 75 million unissued
shares and in respect of convertible instruments 13 million unissued shares, subject to the listings requirements of the JSE.
1.On 2 July 2014, Steinhoff launched a rights offer to all its shareholders. The rights offer closed on 1 August 2014 and the group issued 350 million additional ordinary shares. This rights offer
increased the shares reserved for convertible bond holders by 12.6 million shares.
82
20.7
20.7.1 Steinhoff
20.7.1.1 Steinhoff Share Rights Scheme
At the annual general meeting on 1 December 2003, a share incentive scheme was approved and implemented. The share rights granted
annually until 1 December 2009 fell under the rules of this scheme. Scheme rules included measurement of share price growth and headline
earnings growth over a three-year period against the companies included in the INDI 25 Index, as well as reaching annual incentive bonus
targets and continued service conditions.
Only one share grant remained unvested under this scheme and vesting occurred on 1 December 2012. Certain employees did not meet their
annual incentive bonus targets, and the majority of rights forfeited during the prior year relate to these employees.
No rights are outstanding under this share scheme. This scheme was replaced by the Steinhoff Executive Share Right Scheme.
20.7.1.2 Steinhoff Executive Share Right Scheme
At the annual general meeting on 6 December 2010, a new share incentive scheme was approved and implemented. The share rights granted
since December 2010 relate to the Executive Share Right Scheme, and are subject to the following conditions:
a) Rights are granted to qualifying senior executives on an annual basis.
b) Vesting of rights occur on the third anniversary of grant date, provided performance criteria as set by Steinhoff’s remuneration committee
at or about the time of the grant date have been achieved.
c) In the event of performance criteria not being satisfied by the third anniversary of the relevant annual grant, all rights attaching to the
particular grant will lapse.
2014
Number
of rights
2013
Number
of rights
2012
Number
of rights
The number of share rights, for the above schemes is:
Outstanding at beginning of the year
Exercised during the year
Forfeited during the year 1
Granted during the year
31 147 659
(9 741 951)
(357 992)
14 837 420
37 585 134
(13 661 554)
(2 772 447)
9 996 526
42 152 376
(1 041 400)
(14 860 355)
11 334 513
Outstanding at end of the year
35 885 136
31 147 659
37 585 134
Exercisable at end of the year
–
38 500
134 000
2
1. Certain divisions and individuals did not meet performance targets for the share vesting and forfeited their share rights relating to these grants. In the 2012 financial year
the forfeiture related to the 2008 share grant which did not vest.
2. These shares were exercisable under the vested Unitrans Share scheme.
Assumptions
The fair value of services received in return for share rights granted is measured by reference to the fair value of the share rights granted. The
estimated fair value of the services received is measured based on the assumption that all vesting conditions are met and all employees remain
in service. The pricing model used was the Black-Schöles model. The volatility was estimated using the Steinhoff daily closing share price over
a rolling three-year period.
Fair value of share rights and assumptions:
Fair value at measurement date
Share price at grant date
Exercise price
Expected volatility
Dividend yield
Risk-free interest rate
Option life
2013 grant
2012 grant
2011 grant
R37.78
R40.42
R0.005
26.33%
2.32%
6.72%
3 years
R25.01
R27.39
R0.005
21.44%
3.08%
5.37%
3 years
R21.30
R23.40
R0.005
28.53%
3.20%
6.12%
3 years
2010 grant
2009 grants
R19.74
R6.98 to R11.07
R21.50 R13.96 to R18.84
R0.005
R0.005
23.80% 40.93% to 49.80%
2.90%
4.84% to 5.86%
6.41%
7.82% to 8.29%
3 years
3 to 3.4 years
Refer to note 34 for directors’ interests in the share incentive scheme.
83
20.7.2 JD Group
20.7.2.1 The JD Group Employee Share Incentive Scheme
The JD Group Employee Share Incentive Scheme, which was approved by the directors on 29 March 1996, amended by special resolution on
31 January 2001 and amended again on 11 August 2003, served as an incentive to current employees (including executive and non-executive
directors) of JD Group to render services to JD Group by giving them the opportunity to acquire ordinary shares and enabling them to share
in the wealth of JD Group. This scheme has become redundant and is being phased out. No further options will be issued under this scheme.
1 092 810 (2013: 3 129 750; 2012: 5 139 892) JD Group shares are under option to employees of JD Group in terms of this scheme, at prices
varying between R27.00 and R63.63 per share (2013: R25.20 and R79.83 per share; 2012: R16.19 and R79.83 per share).
20.7.2.2 The JD Group Share Appreciation Rights Scheme (the SAR Scheme)
The SAR Scheme, which was approved by JD Group shareholders on 12 August 2009, is a new generation incentive scheme with the overarching
goal of creating value to shareholders and financial benefits for participants. The SAR Scheme is structured to optimise JD Group’s interest,
as only the appreciation value of the share price is settled. Compared to a normal share option scheme, this reduces the dilutive impact on
JD Group’s dilutive earnings per share considerably. The SAR Scheme also facilitates the attraction and retention of key talent.
At year-end, no unvested share appreciation rights exist under this scheme (2013: 5 486 000; 2012: 8 831 500 at prices varying between
2013: R40.67 and R51.30 per share; 2012: R40.67 and R51.30 per share). No further rights will be granted under this scheme.
20.7.2.3 The JD Group Long-term Share-based Incentive Scheme (LTIS)
At the annual general meeting on 20 November 2013, the JD Group shareholders approved the LTIS in order to attract, retain and incentivise
key executives and senior employees who are able to influence the performance of the JD Group. The share rights that will be granted annually
since this meeting, are subject to the following rules of the LTIS:
a) Rights are granted to qualifying key executives and senior employees on an annual basis.
b) Vesting of rights occur on the third anniversary of grant date, provided performance criteria as set by JD Group’s remuneration committee
at or about the time of the grant date have been achieved.
c) In the event of performance criteria not being satisfied by the third anniversary of the relevant annual grant, all rights attaching to the
particular grant will lapse.
At year-end, 1 959 543 (2013: nil; 2012: nil) unvested share rights exist under this scheme.
Fair value of share rights and assumptions:
Date of grant
Fair value at measurement date
Share price at grant date
Exercise price
Expected volatility
Dividend yield
Option life
84
Grant 1
2 December 2013
R18.56
R27.99
R0.050
29.00%
8.00%
3 years
21.
2014
Number of
shares
2013
Number of
shares
2012
Number of
shares
2014
Rm
2013#
Rm
2012#
Rm
1 000 000 000
1 000 000 000
1 000 000 000
1
1
1
495 000 000
495 000 000
495 000 000
*
*
*
2 000
2 000
2 000
*
*
*
15 000 000
15 000 000
15 000 000
*
*
*
PREFERENCE SHARE CAPITAL AND PREMIUM
21.1 Authorised
Steinhoff
Variable rate, cumulative, non-redeemable,
non-participating preference shares of 0.1
cents each
Steinhoff Investment
Variable rate, cumulative, non-redeemable,
non-participating preference shares of 0.1
cents each
Steinhoff Africa
Variable rate, cumulative, redeemable
preference shares of 1 cent each
21.2
Issued
Steinhoff Investment
In issue at beginning and end of the year
21.3
Steinhoff Africa
In issue at beginning of the year
Shares redeemed during the year
1 585
(252)
1 850
(265)
2 000
(150)
*
*
*
*
*
*
In issue at end of the year
1 333
1 585
1 850
*
*
*
3 877
(378)
4 276
(398)
4 501
(225)
(118)
(1)
–
3 877
4 276
(439)
59
(445)
6
Share premium
Share premium redeemed during the year
Loss on treasury share transactions net of
capital gains taxation
3 381
21.4
Treasury shares
Sale of shares
Total issued preference share capital
and premium
(3 347 393)
3 347 393
(380)
380
(3 979 170)
631 777
(4 049 465)
70 295
–
(3 347 393)
(3 979 170)
–
(380)
(439)
15 001 333
11 654 192
11 022 680
3 381
3 497
3 837
Terms of issued Steinhoff Investment preference shares
The preference shares earn dividends on the issue price at the rate of 82.5% of the SA prime lending rate quoted by Absa Bank Limited or its successor in title
in South Africa. Although the rights to receive dividends are cumulative, declaration of such dividends is at the discretion of the board of directors of Steinhoff
Investment.
Terms of issued Steinhoff Africa preference shares
The preference shares earn dividends on the issue price at the rate of 88% of the SA prime lending rate quoted by Standard Bank Group Limited or its successor in
title in South Africa. Although the rights to receive dividends are cumulative, declaration of such dividends is at the discretion of the board of directors of Steinhoff
Africa.
The directors are authorised, by resolution of the shareholders and until the forthcoming annual general meeting, to dispose of the unissued preference shares,
subject to the listings requirements of the JSE relating to a general authority of directors to issue shares for cash.
* Amount less than R500 000.
85
22.
NON-CONTROLLING INTERESTS
22.1 Details of subsidiaries that have material non-controlling interests:
Name of subsidiary
Proportion of ownership
interests and voting rights
held by non-controlling
interests
2014
2013
%
%
JD Group Limited1
KAP Industrial Holdings Limited1, 2
Individually immaterial subsidiaries with noncontrolling interests
14
n/a
44
38
Profit allocated
to non-controlling interests
2014
2013#
Rm
Rm
Accumulated
2014
2013#
Rm
Rm
(598)
309
336
292
1 117
–
3 849
2 536
62
25
424
270
(227)
653
1 541
6 655
2014
Rm
2013#
Rm
1. Incorporated in South Africa.
2. KAP became an associate on 30 June 2014.
22.2
Summarised financial information in respect of each of the group’s subsidiaries that has material noncontrolling interests:
The summarised financial information below represents amounts before intragroup eliminations and consolidation entries.
22.2.1 JD Group Limited
Non-current assets
Current assets
Current liabilities
Revenue from continuing operations
6 852
14 183
(5 726)
(7 485)
30 582
9 903
13 231
(6 431)
(7 562)
29 153
Profit for the year from continuing operations
(Loss)/Profit for the year from discontinued operations
201
(2 124)
622
10
(Loss)/Profit for the year
(1 923)
632
(Loss)/Profit attributable to owners of the parent
Profit attributable to the non-controlling interests
(1 947)
24
606
26
(Loss)/Profit for the year
(1 923)
632
Total comprehensive (loss)/income attributable to owners of the parent
Total comprehensive income attributable to the non-controlling interests
(1 929)
24
609
26
Total comprehensive (loss)/income for the year
(1 905)
635
Dividends paid to non-controlling interests
Net inflow/(outflow) from operating activities
Net outflow from investing activities
Net (outflow)/inflow from financing activities
Net cash inflow/(outflow)
86
124
489
(212)
(197)
80
259
(2 238)
(1 494)
3 000
(732)
2014
Rm
2013#
Rm
–
–
–
–
9 697
5 423
(4 848)
(3 971)
14 748
13 513
Profit for the year from discontinued operations
757
711
Profit attributable to owners of the parent
Profit attributable to the non-controlling interests
724
33
677
34
Profit for the year
757
711
Total comprehensive income attributable to owners of the parent
Total comprehensive income attributable to the non-controlling interests
739
33
739
34
772
773
84
71
22.2.2 KAP Industrial Holdings Limited
Non-current assets
Current assets
Current liabilities
Revenue
Dividends paid to non-controlling interests
1 238
(838)
(385)
Net inflow from operating activities
Net outflow from investing activities
Net outflow from financing activities
15
(50)
2014
Rm
2013#
Rm
2012#
Rm
1 667
3 731
–
355
2 308
877
369
1 628
300
5 398
3 540
2 297
24 198
4 644
2 847
–
3 768
153
17 206
3 484
293
18 515
3 492
3 075
306
3 499
146
11 880
5 565
140
12 423
2 992
–
376
2 882
136
11 949
5 918
77
56 593
46 618
36 753
Total interest-bearing loans and borrowings
Portion payable before 30 June 2015 included in current liabilities
61 991
(6 411)
50 158
(5 117)
39 050
(5 192)
Total non-current interest-bearing loans and borrowings
55 580
45 041
33 858
6 411
9 528
10 487
8 320
17 764
9 481
5 117
8 024
17 843
9 282
7 966
1 926
5 192
7 755
5 329
11 428
3 022
6 324
61 991
50 158
39 050
Net cash inflow/(outflow)
23.
1 587
(1 161)
(476)
INTEREST-BEARING LOANS AND BORROWINGS
23.1 Analysis of closing balance
Secured financing
Capitalised finance lease and instalment sale agreements
Mortgage and term loans
Phaello senior secured notes
Unsecured financing
Convertible bonds (debt portions)
Steinhoff Services domestic medium-term note programme
JD Group domestic medium-term note programme
Promissory notes
US note purchase agreements
Preference shares: Micawber 455 Proprietary Limited
Syndicated loan facilities
Term loans
Other loans
The book value of assets encumbered in favour of the above mortgage and term loans and finance
lease and instalment sale agreements amounts to R17 111 million (2013: R8 955 million; 2012: R7 303
million) (note 10 and 17) together with a bank balance to the value of R nil million (2013: R519 million).
23.2 Analysis of repayment
Repayable within the next year and thereafter
Next year
Within two years
Within three years
Within four years
Within five years
Thereafter
Except for the 2005 note purchase agreement carried at fair value, all other loans and borrowings are
carried at amortised cost. The fair values of interest-bearing loans and borrowings are disclosed in note 31.
87
23.
INTEREST-BEARING LOANS AND BORROWINGS
23.3 Loan details
Steinhoff
Secured
Mortgage loan
Loans with various banks, repayable over various
repayment terms and secured under mortgage
bonds over various properties in Europe in favour
of the relevant banks.
Syndicated property loan. This loan is secured by
a charge over the assets financed by this loan.
Capitalised finance lease and instalment sale
agreements
Secured hire purchase and lease agreements
repayable in monthly or annual instalments over
periods of one to five years. These leases are with
various counterparties.
Unsecured
Convertible bond due 2013
The bond was fully redeemed by 31 July 2013.
The bond was converted and redeemed during
October and November 2013.
The bond is convertible to 145.04 million ordinary
shares of Steinhoff at R24.74 per ordinary share.
The coupon rate is 5% per annum and the
redemption price is 107.51%.
The coupon rate is 6.375% per annum and the
redemption price is 100%.
The coupon rate is 4.5% per annum and the
redemption price is 110.68%.
The coupon rate is 4% per annum and the
redemption price is 100%.
The fair values of the liability components and the
equity conversion components were determined at
issuance of the bonds and were calculated using
market interest rates for equivalent non-convertible
bonds. The residual amounts, representing the values
of the equity conversion components, are included in
shareholders’ equity, net of deferred taxation.
All underlying number of shares relating to the
convertible bonds were adjusted for effects of the
rights issue on 2 July 2014.
88
Facility
million
Maturity
date
Interest
rate
2014
Rm
2013#
Rm
2012#
Rm
€190
Various
maturities
up to June 2024
3.05%
to 6.13%
2 392
785
734
€92
31 July 2016
1 339
1 478
831
–
–
EURIBOR
plus
3.50%
Various
1 378
–
–
R1 500
31 July 2013
5.70%
–
12
1 468
R1 600
20 July 2015
9.63%
–
1 778
1 696
€390
22 May 2016
5.00%
5 795
4 994
3 892
€417
26 May 2017
6.38%
5 780
5 072
–
€468
31 March 2018
4.50%
6 657
5 716
4 438
€465
30 January 2021
4.00%
5 966
–
–
Facility
million
Steinhoff Services domestic medium-term note
programme: senior unsecured
UTR40 – R250 million fixed rate note. Issued on
10 September 2010. Interest is payable semiannually in arrears.
UTR42 – R150 million floating rate note. Issued
on 19 April 2011. Interest is payable quarterly in
arrears.
UTR43 – R200 million floating rate note. Issued
on 19 April 2011. Interest is payable quarterly in
arrears.
SHS01 – R227 million floating rate note. Issued
on 15 December 2011. Interest is payable quarterly
in arrears.
on 29 June 2012. Interest is payable quarterly
in arrears.
in arrears.
SHS05 – R421 million fixed rate note. Issued on
29 June 2012. Interest is payable semi-annually
in arrears.
on 12 December 2012. Interest is payable quarterly
in arrears.
on 10 April 2013. Interest is payable quarterly
in arrears.
in arrears.
in arrears.
in arrears.
SHS11U – R300 million floating rate note. Issued
on 19 November 2013. Interest is payable quarterly
in arrears.
SHS12 – R100 million floating rate note. Issued on
12 December 2013. Interest is payable quarterly
in arrears.
SHS13U – R100 million floating rate note. Issued
on 12 May 2014. Interest is payable quarterly
in arrears.
in arrears.
SHS15U – R50 million fixed rate note. Ceded
in arrears.1
SHS16U – R100 million floating rate note. Ceded
in arrears.1
in arrears.1
in arrears.1
Fixed rate notes that have been repaid
Floating rate notes that have been repaid
Maturity
date
Interest
rate
2014
Rm
2013#
Rm
2012#
Rm
10 September 2017
10.16%
258
258
258
19 April 2016
JIBAR plus 2.25%
152
152
152
6 April 2015
JIBAR plus 3.00%
204
204
204
15 December 2016
JIBAR plus 2.30%
228
228
228
29 June 2015
JIBAR plus 1.70%
179
179
179
29 June 2017
JIBAR plus 2.30%
654
655
401
29 June 2017
8.75%
428
430
171
12 December 2017
JIBAR plus 2.20%
582
582
–
10 April 2016
JIBAR plus 1.60%
152
152
–
21 May 2016
JIBAR plus 1.60%
200
200
–
21 December 2014
JIBAR plus 0.85%
100
100
–
28 July 2014
JIBAR plus 0.65%
202
200
–
19 November 2016
JIBAR plus 1.70%
303
–
–
12 December 2016
JIBAR plus 1.60%
100
–
–
21 May 2015
JIBAR plus 1.00%
101
–
–
17 June 2017
JIBAR plus 1.60%
201
–
–
19 September 2014
8.08%
50
–
–
29 June 2016
JIBAR plus 2.40%
100
–
–
30 September 2016
JIBAR plus 4.75%
200
–
–
30 November 2016
JIBAR plus 2.40%
250
–
–
21 November 2012
19 May 2013 to
19 April 2014
10.49%
JIBAR plus
1.20% to 2.75%
–
–
–
152
1 007
392
R10 000
Steinhoff, Steinhoff Africa and certain Unitrans subsidiaries in the KAP group have committed themselves as guarantors in respect of the Steinhoff Services
(previously Unitrans Services) notes in issue. Subsequent to year-end, the Unitrans subsidiaries have been released of their guarantees by early redemption of
UTR40, UTR42 and UTR43.
Steinhoff, Steinhoff Investment and Steinhoff Africa have committed themselves as guarantors in respect of the Steinhoff Services (SHS) note programme.
1. These loans were ceded from JD Group.
89
Promissory notes
This loan was repaid during the year
2005 US note purchase agreement
Senior notes series B
The group has entered into a combined crosscurrency interest rate swap on the series B loan
(note 31). The series B loan is fair valued through
profit or loss in order to eliminate the accounting
mismatch arising from measuring the derivative
hedging instrument through profit or loss. These
notes benefit from a guarantor group of certain
Steinhoff Europe subsidiaries.
Senior notes series A
Facility
million
Maturity
date
Interest
rate
2014
Rm
2013#
Rm
2012#
Rm
–
6 September 2013
to 29 May 2014
5.75% to 11.53%
–
256
229
1 594
1 539
1 275
431
395
332
302
277
232
$149
15 March 2015 EURIBOR plus 0.88%
$41
25 April 2015
Senior notes series B
$29
25 April 2019
Senior notes series C
$33
25 April 2022
€38
€38
25 April 2019
25 April 2022
Senior notes series D
Senior notes series E
The group has entered into a combined crosscurrency interest rate swap on the series A, B and
C loans (note 31). These swaps are designated
as cash flow hedges. The notes are carried at
amortised cost.
Preference shares: Micawber
“A” redeemable preference shares issued by
Micawber with a par value of R1 per share.
Syndicated loan facilities
Revolving credit facility 1
Structured term loan
Term loan
Amortising term loan repayable semi-annually in
£3.5 million instalments.1
This loan was repaid during the prior year
€60 million instalments.
This loan was repaid during the year
Term loans
Revolving term loan
Revolving term loan
R67 million instalments
Amortising term loan
Term loan
Term loan
Amortising term loan 2
Amortising term loan2
Amortising term loan2
Term loans that have been repaid
Amortising term loan that has been repaid
Other loans
–
€1 800
€20
£17
–
EURIBOR plus
3.07%
EURIBOR plus
3.49%
EURIBOR plus
3.74%
5.38%
5.92%
345
316
265
548
548
486
486
389
389
28 January 2015 74.00% of SA prime
153
146
136
16 612
6 590
6 414
291
258
207
303
–
377
–
–
359
29 June 2019
EURIBOR plus
1.75%
31 March 2031
Structured rate of
4.10% plus 3.00%
31 March 2016 LIBOR plus 3.00%
30 July 2012 LIBOR plus 2.75%
29 June 2016
EURIBOR plus
2.00%
–
4 655
4 969
R394
15 July 2016
R400 17 December 2015
R201
15 June 2015
JIBAR plus 2.45%
JIBAR plus 2.20%
JIBAR plus 2.50%
401
404
209
399
505
348
398
505
488
R180
8 May 2017
JIBAR plus 2.20%
182
243
303
R90
15 July 2015
JIBAR plus 2.85%
92
153
214
AUD19
16 May 2019
R1 000
23 June 2017
R450
31 August 2020
R346 28 September 2017
R75
24 August 2016
R300
8 May 2017
– 27 December 2014
to 8 May 2015
–
31 March 2013
BBR plus 0.50%
JIBAR plus 2.00%
JIBAR plus 2.70%
JIBAR plus 2.45%
8.66%
9.01%
JIBAR plus 2.20%
to 2.30%
LIBOR plus 3.25%
20
1 001
453
346
76
300
–
168
–
–
–
–
–
604
–
–
–
–
–
–
603
–
245
–
–
197
1
–
1. The margin could vary depending on the achievement of financial covenants.
2. These loans were ceded from JD Group.
90
JD Group
Secured
agreements
periods of one to five years. These leases are with
Unsecured
Amortising term loans
Floating rate loans that have been repaid
Fixed rate loans that have been ceded to Steinhoff
Floating rate loan that has been ceded to Steinhoff
Term loans
Floating rate term loans that have been repaid
Floating rate revolving term loans that have been
repaid
Fixed rate term loans that have been repaid
Floating rate term loans that have been ceded to
Steinhoff
The convertible bond due 2017 was redeemed
during the year.
JD Group domestic medium-term note programme:
senior unsecured
JDG01 – listed fixed rate note
JDG03 – listed floating rate note
JDG04 – listed floating rate note
JDG02U – unlisted floating rate note
JDG10U – unlisted fixed rate note
Unlisted floating rate notes that have been repaid
The interest on the notes is payable quarterly in
arrears.
Promissory notes
Floating rate note that has been repaid
Flixed rate note that has been repaid
Accrued interest
KAP
On 30 June 2014, KAP became an associate and its
interest-bearing debt was derecognised.
Secured
agreements
periods of five to eight years. These leases are with
Facility
million
Maturity
date
Interest
rate
2014
Rm
2013#
Rm
2012#
Rm
–
–
SA prime less
2.50% to 0.90%
289
345
337
30 July 2013 to
30 November 2016
– 24 August 2016 to
8 May 2017
– 28 September 2017
JIBAR plus 1.90%
to 2.40%
8.66% to 9.01%
–
317
200
–
505
635
JIBAR plus 2.45%
–
458
–
JIBAR plus 1.98%
to 2.60%
JIBAR plus 2.00%
–
765
925
–
–
350
–
750
750
–
350
350
–
943
929
–
–
22 August 2012 to
30 May 2016
– 30 December 2013
–
–
R1 000
31 July 2014 to
8.72% to 9.19%
30 April 2015
19 September
2014 to
30 September JIBAR plus 2.25%
2016
to 4.75%
19 June 2017
7.50%
R8 000
–
30 October 2015
15 April 2016
15 April 2018
22 January 2015
21 February 2016
14 November 2014
28 November 2014
29 January 2015
29 January 2015
4 February 2015
18 March 2015
14 November 2013
to 15 May 2014
7.17%
JIBAR plus 1.65%
JIBAR plus 2.03%
JIBAR plus 1.25%
JIBAR plus 1.80%
JIBAR plus 0.95%
JIBAR plus 1.00%
JIBAR plus 1.00%
6.98%
JIBAR plus 1.00%
JIBAR plus 1.40%
JIBAR plus 0.65%
to 0.80%
1 000
450
300
100
85
200
125
203
114
100
170
–
1 000
450
300
100
85
–
–
–
–
–
–
1 140
–
–
–
–
–
–
–
–
–
–
–
–
17 July 2013
11 November 2012
JIBAR plus 0.41%
6.35% to 6.53%
–
–
48
50
–
74
–
147
–
–
6.50% to 7.40%
–
10
32
91
Phaello senior secured notes
PCF03U – unlisted floating rate note
Term loans
Loan payable in monthly instalments of
R0.4 million.
Amortising term loan repayable in quarterly
instalments. This loan is secured by a charge over
assets with a book value of R29 million. (BIM =
Banco International Mozambique prime rate)
Amortising term loan repayable in quarterly
instalments of MGA624 million. The loan is
secured by the assets purchased that it financed
and in addition, €1.1 million guarantee from a bank.
(MGA = Malagasy ariary)
Unsecured
Other loans
23.4
Convertible bonds
Proceeds from issue of convertible bonds
Amount classified as equity
Redemption of Steinhoff convertible bonds due 2013
and 2015, and JD Group convertible bond due 2017
Conversion of Steinhoff convertible bonds due 2013,
2015 and 2017
Coupon interest
Market implied interest
Exchange differences on consolidation of foreign
subsidiaries
24.
EMPLOYEE BENEFITS
Conforama France Pension Fund
Other pension funds
Post-employment benefits
Performance-based bonus accrual
Leave pay accrual
Other
Total liability
Transferred to short-term employee benefits
Long-term employee benefits
24.1
24.2
Facility
million
Maturity
date
Interest
rate
2014
Rm
2013#
Rm
2012#
Rm
–
–
–
28 March 2016
1 November 2016
27 June 2017
JIBAR plus 1.65%
JIBAR plus 1.65%
JIBAR plus 1.75%
–
–
–
305
202
370
300
–
–
–
1 June 2018
–
23
27
–
9 April 2014
SA prime minus
5.00%
BIM plus 1.00%
–
9
18
–
17 August 2014
11.00%
–
13
18
–
various
various
–
66
76
61 991
50 158
39 050
18 515
6 457
(802)
(1 050)
12 423
4 467
(317)
(1 427)
10 733
1 000
(71)
–
(1 770)
(22)
–
(1 101)
1 729
(941)
1 387
(670)
1 020
2 220
2 945
411
24 198
18 515
12 423
594
62
–
285
331
346
444
113
–
372
416
265
338
98
85
401
361
268
1 618
(750)
1 610
(888)
1 551
(846)
868
722
705
Defined contribution plans
The group has various defined contribution plans to which employees contribute. The assets of these schemes are held in administered trust funds separate
from the group’s assets.
Defined benefit plans
Various defined benefit plans are in operation throughout the group. The assets of these schemes are held in administered trust funds separate from the group’s
assets. Certain of the funds have a surplus which has not been recognised as the employer is not entitled to any of the surplus or unutilised reserves.
Conforama France Pension Fund
Under the scheme, the employees are entitled to retirement benefits based on final salary on attainment of retirement age (or earlier withdrawal or death) and the
number of years worked for Conforama. No other post-retirement benefits are provided.
The fund was valued on 30 June 2012, which is in line with group policies. There are 8 406 (2013: 8 141; 2012: 8 777) employees currently covered by the fund.
92
24.3
Conforama Pension Fund
2014
2013#
Rm
Rm
2012#
Rm
Other Pension Funds
2014
2013#
Rm
Rm
The financial details of the different funds
and the effect on the group’s annual
financial statements are:
The amount included in the consolidated
statement of position arising from the
entity’s obligation in respect of its
defined benefit plans are as follows:
Present value of funded defined benefit
obligation
Fair value of plan asset
(631)
37
(476)
32
(363)
25
(1 342)
1 280
(1 147)
1 034
(927)
829
Net liability arising from defined benefit
obligation
2012#
Rm
(594)
(444)
(338)
(62)
(113)
(98)
Components of defined benefit cost
recognised in comprehensive income
Service cost
Net interest expense
Other expenses
(28)
(13)
–
(23)
(11)
–
(17)
(15)
–
–
(5)
(7)
–
(5)
(8)
–
(45)
–
Components of defined benefit cost recognised
in profit or loss
(41)
(34)
(32)
(12)
(13)
(45)
Remeasurement on the net defined benefit
liability:
Return on plan assets (excluding amounts
included in net interest expense)
Remeasurement gains/(losses) arising from
changes in:
Demographic assumptions
Financial assumptions
Experience adjustments
Actuarial loss (IAS 19)
–
–
1
33
35
44
(25)
(18)
(26)
–
–
(14)
19
–
–
–
–
(34)
9
(70)
70
–
–
(58)
–
–
–
–
–
(50)
Components of defined benefit cost recognised
in other comprehensive income
(69)
5
(33)
42
(23)
(6)
(110)
(29)
(65)
30
(36)
(51)
(476)
(28)
(14)
(363)
(23)
(12)
(289)
(17)
(15)
(1 147)
–
(57)
(927)
–
(46)
(756)
–
(45)
(25)
(18)
(26)
–
16
(18)
22
–
(14)
19
–
–
–
10
–
–
–
(34)
–
(6)
12
9
(70)
70
–
–
–
88
–
(58)
–
–
–
–
51
–
–
–
(50)
–
–
52
(64)
(93)
(14)
(235)
(167)
(128)
(631)
(476)
(363)
(1 342)
(1 147)
(927)
Movements in the present value of the
defined benefit obligation
Opening defined benefit obligation
Current service cost
Interest cost
Remeasurement gains/(losses) arising from
changes in:
Demographic assumptions
Financial assumptions
Experience adjustments
Actuarial losses (IAS 19)
Past service cost
Acquired on acquisition of subsidiary company
Benefits paid
Closing defined benefit obligation
93
Conforama Pension Fund
2014
2013#
Rm
Rm
Movements in the fair value of the plan
assets
Opening fair value of plan assets
Interest income
Remeasurement gain/(loss)
Return on plan assets (excluding amounts
included in net interest expense)
Employer contributions
Other expenses
Acquired on acquisition of subsidiary company
Benefits paid
32
1
–
25
1
–
21
–
(1)
–
22
–
–
(22)
–
10
–
–
(10)
1
12
–
3
(12)
4
6
Other Pension Funds
2014
2013#
Rm
Rm
1 034
52
–
2012#
Rm
829
41
–
707
–
(20)
33
41
(7)
–
(88)
35
39
(8)
–
(51)
44
31
–
–
(52)
1
215
149
119
Closing fair value of plan assets
37
32
25
1 280
1 034
829
The major categories of plan assets are:
Equities/diversified growth fund
Bonds
Cash
Escrow account
–
–
37
–
–
–
32
–
–
–
25
–
832
433
4
11
686
337
5
6
531
298
–
–
Total market value of assets
37
32
25
1 280
1 034
829
2.5%
2.0%
2.0%
2.8%
2.0%
2.0%
3.0%
2.0%
2.0%
4.2%
n/a
3.2%
4.6%
n/a
3.3%
4.7%
n/a
2.8%
Performancebased bonus
Rm
Leave pay
Rm
Total
Rm
Performance-based bonus and leave pay accruals
Additional accrual raised
Amounts unused reversed
Amounts utilised
Net acquisition and disposal of subsidiaries and businesses
267
188
(2)
(112)
61
(1)
201
154
(9)
(144)
145
14
468
342
(11)
(256)
206
13
Amounts utilised
Transferred to assets classified as held for sale
401
304
(25)
(309)
(1)
2
–
361
293
(77)
(176)
(3)
1
17
762
597
(102)
(485)
(4)
3
17
Amounts utilised
Transferred to assets classified as held for sale
372
316
(23)
(217)
(9)
(155)
1
416
213
(29)
(180)
(21)
(90)
22
788
529
(52)
(397)
(30)
(245)
23
285
331
616
The principal assumptions used for the
purposes of the actuarial valuations are:
Discount rate
Expected rates of salary increase
Inflation
24.4
2012#
Rm
Performance-based bonus accrual
The bonus payable is fixed by applying a specific formula based on the employee’s achievement of performance targets.
Leave pay accrual
The leave pay accrual relates to vesting leave pay to which employees may become entitled on leaving the employment of the group. The accrual arises as
employees render a service that increases their entitlement to future compensated leave and is calculated based on an employee’s total cost of employment.
The accrual is utilised when employees become entitled to and are paid for the accumulated leave or utilise compensated leave due to them.
94
25.
Dilapidation,
onerous lease
and onerous
contract
provisions
Rm
Warranty
provisions
Rm
Other
Rm
Total
Rm
PROVISIONS
Additional provision raised
Amounts utilised
2 019
231
–
(253)
24
43
110
266
(3)
(304)
294
4
743
182
(254)
(361)
125
112
2 872
679
(257)
(918)
443
159
2 064
–
367
–
547
11
2 978
11
Amounts utilised
2 064
1 025
–
(306)
121
367
14
(280)
(16)
54
558
435
(337)
(556)
478
2 989
1 474
(617)
(878)
653
Amounts utilised
2 904
209
(587)
(1 063)
(5)
122
139
246
(14)
(19)
8
26
578
443
(182)
(516)
250
277
3 621
898
(783)
(1 598)
253
425
1 580
386
850
2 816
2014
Rm
2013#
Rm
2012#
Rm
1 603
1 213
2 609
1 012
2 094
895
2 816
3 621
2 989
Long-term provisions
Short-term provisions
Dilapidation, onerous lease and onerous contract provisions
Provision for dilapidation of buildings occupied by the group and provision for long-term leases containing onerous provisions or terms in comparison with average terms
and conditions of leases.
Provision for unfavourable legally binding contracts where the terms of the contract are unfavourable based on market-related rates.
Warranty provisions
The warranty provision represents management’s best estimate, based on past experience, of the group’s liability under warranties granted on products sold.
Other provisions
Other provisions include the amounts under insurance contracts, see note 32.
95
26.
2014
Rm
2013#
Rm
2012#
Rm
34
354
–
231
–
218
388
231
218
Current trade and other payables
Trade payables
Accruals
Floorplan creditors
Cash received in advance
Other payables and amounts due
Derivative financial liabilities
21 676
2 023
1 663
3 138
3 267
197
18 438
2 290
1 521
2 497
2 752
33
15 869
1 880
1 233
1 382
3 376
30
Trade and other payables (financial liabilities)
Taxation payable
Value added taxation payable
Shareholders for dividends
31 964
94
745
1 419
–
27 531
11
853
1 352
–
23 770
8
651
914
108
34 222
29 747
25 451
14 122
9 459
6 678
(532)
3 258
2 865
(114)
(88)
154
308
229
1 535
914
2 710
(105)
198
385
165
–
1 237
–
1 801
(131)
(53)
72
14
–
80
(1 745)
295
207
(27)
(8)
175
27
33
84
118
(105)
TRADE AND OTHER PAYABLES
Non-current trade and other payables
The fair value of trade and other payables is disclosed in note 31.
27.
96
CASH GENERATED FROM OPERATIONS
Operating profit
Adjusted for:
Operating profit of discontinued operations including loss on disposal
Debtors costs
Depreciation and amortisation
Fair value adjustments of consumable biological assets and decrease due to harvesting
Fair value (profit)/loss on financial assets
Impairments
Inventories written-down to net realisable value and movement in provision for inventories
Net loss/(profit) on disposal and scrapping of property, plant and equipment, vehicle rental fleet, intangible
assets and investment property
Profit on disposal of investments
Share-based payment expense
Other non-cash adjustments
Cash generated before working capital changes
19 039
15 428
9 748
Working capital changes
(Increase)/Decrease in inventories
(Increase)/Decrease in vehicle rental fleet
Increase in secured instalment sale and loan receivables
Decrease/(Increase) in trade and other receivables
Decrease/(Increase) in assets held for sale
Movement in net derivative financial liabilities/assets
Decrease in liabilities held for sale
Decrease in non-current and current provisions
Increase/(Decrease) in non-current and current employee benefits
Decrease in deferred government grants
Increase/(Decrease) in trade and other payables
(1 001)
(784)
(1 368)
1 746
400
284
(67)
(1 452)
36
–
4 484
814
(773)
(893)
(681)
15
(56)
–
(20)
(30)
–
(1 106)
(1 079)
152
–
740
(44)
92
–
(497)
(108)
(1)
1 365
Net changes in working capital
2 278
(2 730)
620
21 317
12 698
10 368
28.
NET CASH FLOW ON ACQUISITION OF SUBSIDIARIES AND BUSINESSES
The fair value of assets and liabilities assumed at date of acquisition was:
Assets
Intangible assets
Investment property
Cash on hand
Liabilities
Non-current interest-bearing loans and borrowings
Deferred taxation liability
Current interest-bearing loans and borrowings
Bank overdraft and short-term facilities
Working capital
Existing non-controlling interests
2014
Rm
2013#
Rm
2012#
Rm
63
8 997
–
–
–
172
63
12
494
834
37
–
–
(10)
1
1
–
2
3 779
2 963
39
74
9
69
237
–
1 252
(2 879)
(5)
(361)
(26)
335
(132)
(11)
(2)
–
(808)
(36)
(1)
(1 816)
(907)
(897)
(1 605)
6 407
(125)
7
–
9 479
(3 954)
Total assets and liabilities acquired
Less: Non-controlling interests’ portion of assets and liabilities acquired
6 733
–
Group’s share of total assets and liabilities acquired
Goodwill at acquisition
Gain on bargain purchase at acquisition
6 733
7 295
(1)
7
374
–
5 525
1 960
(93)
14 027
(494)
(2)
(7 058)
–
–
–
381
(2)
–
–
–
–
–
7 392
(1 252)
(180)
–
(2 107)
(742)
(4 032)
6 473
379
(921)
–
63
8 997
–
–
–
172
63
12
494
256
834
37
–
–
(10)
1
1
–
2
1 855
2 434
2 605
39
74
9
69
238
–
1 252
(2 879)
(5)
(361)
(26)
335
(132)
(11)
(2)
–
(808)
(36)
(1)
(1 816)
(723)
(897)
(1 605)
6 920
(126)
6 733
263
10 328
Total consideration
Cash and cash equivalents on hand at acquisition
Purchase price settled through loan account
Purchase price settled through issue of shares
Purchase price settled by introducing non-controlling interests in existing subsidiaries
Discount on introduction of non-controlling interests in exisiting subsidiaries
Investment in associate company that became a subsidiary
Net cash outflow/(inflow) on acquisition of subsidiaries
The goodwill arising on the acquisition of these companies is attributable to the strategic business advantages
acquired, principal retail locations and leases, as well as knowledgeable employees and management strategies
that did not meet the criteria for recognition as other intangible assets on the date of acquisition.
The carrying value of identifiable assets and liabilities immediately prior to the acquisition was:
Assets
Goodwill
Intangible assets
Investment property
Cash on hand
Liabilities
Non-current interest bearing-loans and borrowings
Current interest-bearing loans and borrowings
Bank overdraft and short-term facilities
Working capital
Total assets and liabilities acquired
97
29.
Other
Rm
2014
Rm
2013#
Rm
2012#
Rm
NET CASH FLOW ON DISPOSAL OF SUBSIDIARIES
AND BUSINESSES
The carrying values of assets and liabilities disposed of at the date
of disposal were:
Assets
Goodwill
Intangible assets
Investment property
Investment in equity accounted companies
Cash on hand
Liabilities
Working capital
205
1 085
6 614
19
1 875
145
33
70
898
4
6 892
129
–
–
475
11
5
130
209
7 977
6 743
19
1 875
620
44
75
1 028
–
–
27
–
–
–
–
1
18
–
6
134
–
–
–
–
–
3
(3 028)
(994)
53
(2 761)
(133)
(171)
(5 912)
(53)
(3 161)
(1 165)
(5 859)
(2 814)
–
–
(5)
(19)
–
(9)
(53)
–
Carrying value of assets and liabilities disposed
Investment in associate company recognised
Profit on disposal
4 214
(4 041)
1 346
1 377
–
87
5 591
(4 041)
1 433
22
(17)
–
81
–
8
1 519
(898)
1 464
(130)
2 983
(1 028)
5
(18)
89
(3)
621
1 334
1 955
(13)
86
2014
Rm
2013#
Rm
2012#
Rm
1 370
1 055
1 245
718
1 104
971
19 272
13 838
10 313
Property
Rm
Plant,
equipment,
vehicles and
other
Rm
2014
Total
Rm
2013
Total
Rm
2012
Total
Rm
3 167
8 109
5 237
308
428
33
3 475
8 537
5 270
3 155
8 475
4 762
2 771
7 953
4 375
Proceeds on disposal
Cash on hand at date of disposal
Net cash inflow/(outflow) on disposal of subsidiaries
30.
KAP
Rm
COMMITMENTS AND CONTINGENCIES
30.1 Capital expenditure
Contracts for capital expenditure authorised
Capital expenditure authorised but not contracted for
30.2
30.3
30.4
Capital expenditure will be financed from cash and existing loan facilities.
Borrowing facilities
In terms of the memorandum of incorporation, the borrowing powers of the company are unlimited.
Unutilised borrowing facilities at 30 June
Operating leases
Amounts outstanding under non-cancellable operating lease
agreements payable within the next year and thereafter:
Next year
Within two to five years
Thereafter
Balances denominated in currencies other than South African Rands were converted at the closing rates of exchange ruling at 30 June 2014.
30.5
Contingent liabilities
Certain companies in the group are involved in disputes where the outcomes are uncertain. However, the directors are confident that they will be able to defend
these actions and that the potential of outflow or settlement is remote and, if not, that the potential impact on the group will not be material.
There is no other litigation, current or pending, which is considered likely to have a material adverse effect on the group.
The group has a number of guarantees and sureties outstanding at year-end. However, the directors are confident that no material liability will arise as a result of
these guarantees and sureties.
Suretyships, guarantees and indemnities in favour of funders in respect of the liabilities of the Company and/or Steinhoff Africa Holdings Proprietary Limited and
certain liabilities of the KAP group benefit from cross guarantees, suretyships and indemnities by the Company, Steinhoff Investment and certain subsidiaries
of Steinhoff Africa Proprietary Limited (Steinhoff Africa) and KAP respectively. Subsequent to year-end, the Unitrans subsidiaries have been released of their
guarantees by early redemption of UTR40, UTR42 and UTR43.
Steinhoff Investment Holdings Limited (Steinhoff Investment) has subordinated R4 250 million of the shareholder’s loan due from Steinhoff Africa in favour of all
other creditors.
98
Steinhoff has subordinated R992 million of the shareholder’s loan due from Steinhoff Investment in favour of all other creditors.
31.
FINANCIAL INSTRUMENTS
The executive team is responsible for implementing the risk management strategy to ensure that an appropriate risk management framework is operating effectively across
the group, embedding a risk management culture throughout the group. The board and the audit and risk committee are provided with a consolidated view of the risk profile
of the group, and any major exposures and relevant mitigating actions are identified.
The system of risk management is designed so that the different business units are able to tailor and adapt their risk management processes to suit their specific
circumstances.
Regular management reporting and internal audit reports provide a balanced assessment of key risks and controls. The financial director provides quarterly confirmation
to the board that financial and accounting control frameworks have operated satisfactorily and consistently.
The group does not speculate in the trading of derivative or other financial instruments. It is group policy to hedge exposure to cash and future contracted transactions.
31.1
Total financial assets and liabilities
Loans and
receivables
and
other financial
liabilities at
Total carrying
fair value
values
Rm
Rm
At fair value
through profit
or loss1
Rm
Designated
as at
fair value
through
profit or loss
Rm
Available for
sale financial
assets
Rm
Loans and
receivables
and
other financial
liabilities at
amortised cost
Rm
(financial assets)
80
–
3 895
6 424
10 399
6 424
10 399
–
–
–
55
55
55
55
2014
Total fair
values
Rm
Non-current financial assets
80
–
3 895
6 479
10 454
6 479
10 454
(financial assets)
13
–
–
–
–
–
–
–
–
15 323
5 928
16 341
15 336
5 928
16 341
15 323
5 928
16 341
15 336
5 928
16 341
Current financial assets
13
–
–
37 592
37 605
37 592
37 605
(55 580)
(55 580)
(59 548)
(59 548)
Long-term interest-bearing
loans and borrowings
(financial liabilities)
–
–
–
(34)
–
–
Non-current financial
liabilities
(34)
–
–
(55 580)
(55 614)
(59 548)
(59 582)
–
(4 817)
(6 411)
(4 831)
(6 425)
–
–
(2 436)
(2 436)
(2 436)
(2 436)
–
–
(31 767)
(31 964)
(31 767)
(31 964)
Short-term interest-bearing
Bank overdrafts and shortterm facilities
Current financial liabilities
Net (gains) and losses
recognised in profit or loss
recognised in equity
–
–
(197)
(1 594)
–
(34)
–
(34)
(197)
(1 594)
–
(39 020)
(40 811)
(39 034)
(40 825)
(138)
(1 594)
3 895
(50 529)
(48 366)
(54 511)
(52 348)
(143)
43
(354)
(286)
55
69
124
98
(285)
(162)
–
–
(1 506)
(1 506)
78
–
3 656
3 734
78
–
2 150
2 228
168
–
168
Total interest income from
continuing and discontinued
operations
Total interest expense from
operations
–
(143)
1. This category includes derivative financial instruments.
99
2013
#
At fair value Designated as at
through profit fair value through
or loss1
profit or loss
Rm
Rm
Total carrying
values
Rm
Loans and
receivables and
other financial
liabilities at
fair value
Rm
Total fair
values
Rm
(financial assets)
69
–
72
983
1 124
983
1 124
87
–
–
3 087
3 174
3 087
3 174
156
–
72
4 070
4 298
4 070
4 298
(financial assets)
155
–
–
–
–
–
–
–
–
16 986
3 228
9 249
17 141
3 228
9 249
16 986
3 228
9 249
17 141
3 228
9 249
155
–
–
29 463
29 618
29 463
29 618
–
(1 539)
–
(43 502)
(45 041)
(45 597)
(47 136)
liabilities
–
(1 539)
–
(43 502)
(45 041)
(45 597)
(47 136)
–
–
–
(5 117)
(5 117)
(5 128)
(5 128)
–
–
–
(3 162)
(3 162)
(3 162)
(3 162)
(33)
–
–
(27 498)
(27 531)
(27 498)
(27 531)
(33)
–
–
(35 777)
(35 810)
(35 788)
(35 821)
278
(1 539)
72
(45 746)
(46 935)
(47 852)
(49 041)
(60)
46
–
(737)
(751)
–
–
23
–
23
(60)
46
23
(737)
(728)
–
–
(1 245)
(1 245)
66
–
3 266
3 332
66
–
2 021
2 087
Net losses recognised in
equity
operations
operations
100
Available for
sale financial
assets
Rm
Loans and
receivables and
other financial
liabilities at
amortised cost
Rm
2012
#
At fair value Designated as at
through profit fair value through
or loss1
profit or loss
Rm
Rm
Available for
sale financial
assets
Rm
Loans and
receivables and
other financial
liabilities at
amortised cost
Rm
Total carrying
values
Rm
Loans and
receivables and
other financial
liabilities at
fair value
Rm
Total fair
values
Rm
Investments and loans 2
(financial assets)
63
–
74
731
868
731
868
166
–
–
2 453
2 619
2 453
2 619
229
–
74
3 184
3 487
3 184
3 487
(financial assets)
88
–
–
–
–
–
–
–
–
13 818
1 710
8 057
13 906
1 710
8 057
13 818
1 710
8 057
13 906
1 710
8 057
88
–
–
23 585
23 673
23 585
23 673
–
(1 275)
–
(32 583)
(33 858)
(32 952)
(34 227)
liabilities
–
(1 275)
–
(32 583)
(33 858)
(32 952)
(34 227)
–
–
–
(5 192)
(5 192)
(5 212)
(5 212)
–
–
–
(2 090)
(2 090)
(2 090)
(2 090)
(30)
–
–
(23 740)
(23 770)
(23 740)
(23 770)
(30)
–
–
(31 022)
(31 052)
(31 042)
(31 072)
287
(1 275)
74
(36 836)
(37 750)
(37 225)
(38 139)
(295)
243
–
(17)
(69)
–
–
(2)
–
(2)
(295)
243
(2)
(17)
(71)
–
–
(1 129)
(1 129)
100
–
2 309
2 409
100
–
1 180
1 280
Net gains recognised in
equity
operations
operations
No items were classified as ‘held to maturity’ during either period presented.
2. Certain 2012 figures included in this note have been reclassified to conform with the categories adopted for disclosure in 2014 and 2013.
101
Fair value
Fair value
hierarchy
31.2
Valuation techniques and key inputs
2014
Rm
2013
Rm
2012
Rm
3 769
73
68
Fair values
Listed investments – ordinary shares,
preference shares and unit trusts
Level 1
Quoted 30-day volume weighted average
prices in an active market.
Unlisted investments – ordinary shares
Level 2
Adjusted quoted prices in an active market.
Trade and other receivables – derivative
financial assets – interest rate swaps
Level 2
Trade and other payables – derivative
financial liabilities – interest rate swaps
Level 2
The fair values of interest rate swaps are
based on broker quotes. Those quotes are
tested for reasonability by discounting
estimated future cash flows based on the
terms and maturity of each contract using
market interest rates for a similar instrument
at the measurement date.
Level 2
Trade and other receivables – derivative
financial assets – foreign currency forward
contracts
Trade and other payables – derivative
financial liabilities – foreign currency
forward contracts
Level 2
Interest-bearing loans and borrowings –
Level 2
The fair values of forward exchange
contracts are based on their listed market
price, if available. If a listed market price is
not available, then the fair value is estimated
by discounting the difference between
the contractual forward price and current
forward price for the residual maturity of
the contract using a risk-free interest rate
(based on government bonds).
Discounted cash flow. Future cash flows are
estimated based on forward exchange rates
(from observable forward exchange rates at
the end of the reporting period) and contract
forward rates, discounted at a rate that
reflects the credit risk of the counterparty.
206
68
69
–
87
166
–
–
13
155
88
(66)
(33)
(30)
(1 594)
(1 539)
(1 275)
(165)
The fair values are not necessarily indicative of the amounts the group could realise in the normal course of business.
There were no level 3 financial assets or financial liabilities at 30 June 2014, 30 June 2013 and 30 June 2012. There were no transfers between level 1 and level 2
during the year.
31.3
Foreign currency risk
The group’s manufacturing and sourcing operating costs and expenses are principally incurred in South African rand, Polish zloty, US dollars and Hungarian
forint. Its revenue derived from outside southern Africa, however, is principally in euros, Swiss franc, UK pounds, US dollars and Australian dollars. The group’s
business model is based on the strategy of locating production in, and sourcing materials from, emerging low-cost economies and supplying finished products
into developed economies.
It is group policy to hedge exposure to cash and future contracted transactions in foreign currencies for a range of forward periods, but not to hedge exposure for
the translation of reported profits or reported assets and liabilities.
Exposure to currency risk
Currency risk (or foreign exchange risk) as defined by IFRS 7, arises on financial instruments that are denominated in a foreign currency, i.e. in a currency other
than the functional currency in which they are measured. For the purpose of IFRS 7, currency risk does not arise from financial instruments that are non-monetary
items or from financial instruments denominated in the functional currency.
Differences resulting from the translation of subsidiary financial statements into the group’s presentation currency are not taken into consideration.
102
The carrying amounts of the group’s material foreign currency denominated monetary assets and liabilities (excluding intragroup loan balances) that will have an
impact on profit or loss when exchange rates change, at reporting date are as follows:
Euros
Rm
2014
UK pounds
Rm
US dollars
Rm
1
187
36
–
–
(154)
–
146
2
(193)
(160)
(1)
–
52
35
(646)
(2 025)
(1 030)
Pre-derivative position
Derivative effect
70
146
(206)
–
(3 614)
(1 505)
Open position
216
(206)
(5 119)
2013
Trade and other receivables (financial assets excluding financial derivatives)
Long-term interest-bearing loans and borrowings
Trade and other payables (financial liabilities excluding financial derivatives)
–
247
36
(1)
(339)
–
62
1
(377)
(33)
59
90
22
(2 527)
(1 667)
Derivative effect
(57)
(290)
(347)
(32)
(4 023)
7 390
Short-term interest-bearing loans and borrowings
Open position
(347)
(379)
3 367
2012
–
151
38
(1)
(207)
–
308
24
(556)
(2)
47
64
75
(2 104)
(1 101)
Derivative effect
(19)
106
(226)
4
(3 019)
6 254
87
(222)
3 235
Open position
The following significant exchange rates applied during the year and were used in calculating
sensitivities:
Rand
Euro
UK pound
US dollar
Euro
UK pound
US dollar
Forecast
rate1
30 June 2015
Forecast
rate
30 June 2014
Forecast
rate1
30 June 2013
Reporting
date spot
rate
2014
Reporting
date spot
rate
2013
Reporting
date spot
rate
2012
14.1025
17.7125
10.5950
12.4780
14.9799
9.8958
9.8483
13.1347
8.1050
14.5721
18.1816
10.6697
12.9209
15.0735
9.8780
10.3447
12.8350
8.1700
0.7962
1.3311
0.8330
1.2609
0.7498
1.2151
0.8015
1.3657
0.8572
1.3080
0.8060
1.2662
1. T he forecast rates represent a weighting of foreign currency rates forecasted by the major banks that the group transacts with regularly. These rates are not necessarily management’s
expectations of currency movements.
103
Sensitivity analysis
The table below indicates the group’s sensitivity at year-end to the movements in the major currencies that the group is exposed to on its financial instruments.
The percentages given below represent a weighting of foreign currency rates forecasted by the major banks that the group transacts with regularly. This analysis
assumes that all other variables, in particular interest rates, remain constant. The analysis was performed on the same basis for 2013 and 2012.
The impact on the reported numbers of using the forecast rates as opposed to the reporting date spot rates is set out below.
2014
Rm
2013#
Rm
2012#
Rm
(7)
5
36
12
2
6
(4)
(5)
(26)
–
13
–
–
–
27
–
–
115
13
–
–
1
59
28
13
155
88
(1)
(1)
–
(11)
–
(53)
(131)
–
(17)
(1)
–
(1)
–
(14)
–
(7)
–
–
–
–
(23)
(197)
(33)
(30)
(184)
122
58
(34)
87
166
Fair value (loss)/gain for the year recognised in other comprehensive income
(69)
(41)
76
The following table indicates the periods in which the cash flows associated with derivatives that are
cash flow hedges are expected to occur (this table includes the cash flows under the 2012 note purchase
agreement):
Payable in 12 months
Payable April 2015
Payable April 2019
Payable April 2022
11
427
299
341
13
401
271
310
70
329
230
263
1 078
995
892
Through (profit)/loss
Euro weakening by 3.2% (2013: 3.4%; 2012: 4.8%) to the Rand
UK pound weakening by 2.6% (2013: weakening by 0.6%; 2012: strengthening by 2.3%) to the Rand
US dollar weakening by 0.7% (2013: strengthening by 0.2%; 2012: weakening by 0.8%) to the Rand
If the foreign currencies were to weaken/strengthen against the Rand, by the same percentages as set
out in the table above, it would have an equal, but opposite effect on profit or loss.
Foreign exchange contracts
The group uses forward exchange contracts to hedge its foreign currency risk against the functional
currency of its various global operations. Most of the forward exchange contracts have maturities of
less than one year after reporting date. As a matter of policy, the group does not enter into derivative
contracts for speculative purposes. The fair values of such contracts at year-end, by currency, were:
Short-term derivatives
Assets
Fair value of foreign exchange contracts
Euro
Polish zloty
Swiss franc
US dollar
Third currency embedded derivatives
Liabilities
Fair value of foreign exchange contracts
Croatian kuna
Euro
New Zealand dollar
Swiss franc
UK pounds
US dollar
Interest rate swap and third currency embedded derivatives
Net derivative assets
Long-term derivatives
Interest rate swaps and cross-currency derivatives
Currency options are only purchased as a cost-effective alternative to forward currency contracts.
Cash flow hedges
The group classifies certain of its forward exchange contracts that hedge forecast transactions as cash
flow hedges. The fair value of such contracts recognised as derivative assets and liabilities and adjusted
against the hedging reserve at year-end was:
Total expected cash flows
Changes in the fair value of forward exchange contracts of economically hedged monetary assets and liabilities in foreign currencies and for which no hedge
accounting is applied, are recognised in profit or loss.
104
31.4
Interest rate risk
Given the group’s global footprint and its strategy of low-cost manufacturing and sourcing in emerging markets and sales in developed countries, the group follows
a policy of maintaining a balance between fixed and variable rate loans to reflect, as accurately as possible, different interest rate environments, the stability of the
relevant currencies, the effect which the relevant interest rates have on group operations and consumer spending within these environments. These variables are
taken into account in structuring the group’s borrowings to achieve a reasonable, competitive, market-related cost of funding.
As part of the process of managing the group’s borrowings mix, the interest rate characteristics of new borrowings and the refinancing of existing borrowings are
positioned according to expected movements in interest rates. Interest rate exposure is managed within limits agreed by the board.
The interest and related terms of the group’s interest-bearing loans are disclosed in note 23.
At the reporting date the interest rate profile of the group’s financial instruments were:
2014
Subject to interest rate movement
Variable
Variable Variable JIBAR
other
EURIBOR and SA prime
Rm
Rm
Rm
Fixed
rate
Rm
Non-interestbearing
Rm
Total
Rm
Non-current financial liabilities
5 173
63
(19 871)
(5 775)
62
1 364
(7 137)
(2 570)
–
171
(334)
(1 779)
1 159
21 292
(26 934)
(614)
4 060
14 715
(1 304)
(29 942)
10 454
37 605
(55 580)
(40 680)
Effect of interest rate swaps
(20 410)
(2 827)
(8 281)
–
(1 942)
–
(5 097)
2 662
(12 471)
–
(48 201)
(165)
(23 237)
(8 281)
(1 942)
(2 435)
(12 471)
(48 366)
2013
–
3 222
(12 790)
(3 465)
73
1 839
(8 141)
(3 498)
–
561
(3)
(143)
3 766
11 446
(24 100)
(789)
372
12 550
(7)
(27 915)
4 211
29 618
(45 041)
(35 810)
(13 033)
(2 440)
(9 727)
–
415
–
(9 677)
2 527
(15 000)
–
(47 022)
87
(15 473)
(9 727)
415
(7 150)
(15 000)
(46 935)
2012
7
1 722
(12 315)
(2 399)
9
2 378
(5 028)
(2 326)
–
298
(217)
(375)
3 184
9 313
(16 255)
(1 578)
287
9 962
(43)
(24 374)
3 487
23 673
(33 858)
(31 052)
(12 985)
(1 917)
(4 967)
–
(294)
–
(5 336)
1 917
(14 168)
–
(37 750)
–
(14 902)
(4 967)
(294)
(3 419)
(14 168)
(37 750)
#
#1
1. Certain 2012 figures included in this note have been reclassified to conform with the categories adopted for disclosure in 2014 and 2013.
Sensitivity analysis
The group is sensitive to movements in the EURIBOR, JIBAR and SA prime rates, which are the primary interest rates to which the group is exposed.
The sensitivities calculated below are based on an increase of 100 basis points for each interest category. These rates are also used when reporting sensitivities
internally to key management personnel.
Through (profit)/loss
EURIBOR – 100 basis point increase
JIBAR and SA prime – 100 basis point increase
A 100 basis point decrease in the above rates would have had an equal, but opposite effect on profit or loss.
2014
Rm
2013#
Rm
2012#
Rm
232
83
155
97
149
50
105
Cross-currency interest rate swap contracts
The group has entered into a number of cross-currency interest rate swap contracts to effectively convert fixed-interest US dollar borrowings into variable
interest euro borrowings. The value of the group’s cross-currency interest rate swaps can effectively be split into two components: a portion that is attributable to
converting a US dollar-denominated borrowing liability into a euro-denominated borrowing liability (the currency portion) – the value of this portion changes as
currency exchange rates change; and a portion that is attributable to converting fixed-rate US dollar interest payments into variable rate euro interest payments
(the interest portion) – the value of this portion of the swap changes as US dollar fixed-interest rates, euro variable interest rates and foreign currency exchange
rates change.
The swaps are dedicated to convert a total of US$242 million of the fixed-rate US dollar-denominated senior notes (note 23) to a variable rate euro liability. The
maturity dates of the swaps are identical to those of the underlying series of senior notes that they effectively offset.
Under the terms of the swaps, the group receives fixed interest at rates varying from 4.49% to 6.27% and pays floating rate interest at fixed spreads above the
six-month EURIBOR rate. The interest payments are due bi-annually, with reset dates being the first day of each calculation period. The embedded derivatives
contained within the transactions were calculated with the assistance of major investment banks.
The fair value of the swaps entered into on 15 March 2005 was estimated as a liability of R31 million (2013: asset of R81 million; 2012: asset of R109 million) and is
offset with the liability arising from the fair value of the underlying debt liability (the US dollar-denominated senior notes, see note 23) which effectively decreased
(2013: increased; 2012: increased) with a fairly similar amount. These fixed-interest rate note purchase agreement liabilities are fair valued through profit or loss
in order to eliminate the potential accounting mismatch arising from measuring the derivative cross-currency interest rate swaps at fair value through profit or loss.
31.5
31.6
The fair value of the swaps entered into on 12 April 2012 was estimated as a liability of R34 million (2013: asset of R6 million; 2012: asset of R57 million). These
swaps are designated as cash flow hedges of the exposure to variability in the cash flows arising from foreign currency exchange, initially on the note’s US dollar
nominal value to be exchanged, and subsequent to the effective date, on the repayments of US dollar interest and capital on the notes.
Other price risks
Equity price sensitivity analysis
A one percent change in the 30-day VWAP used in the valuation of the listed ordinary shares would result in a R37 million (2013 and 2012: R nil) adjustment to the
fair value, through other comprehensive income before taxation.
Credit risk
Potential concentration of credit risk consists principally of short-term cash and cash equivalent investments, trade and other receivables, and loans receivable.
The group deposits short-term cash surpluses with major banks of quality credit standing. Trade receivables comprise a large and widespread customer base and
group companies perform ongoing credit evaluations on the financial condition of their customers, and appropriate use is made of credit guarantee insurance.
At 30 June 2014, the group did not consider there to be any significant concentration of credit risk which had not been adequately provided for. The amounts
presented in the statement of financial position are net of provisions for bad debts, estimated by the group companies’ management based on prior experience
and the current economic environment.
The carrying amounts of financial assets represent the maximum credit exposure.
The maximum exposure to credit risk at the reporting date without taking account of the value of any collateral obtained was:
2014
Rm
2013#
Rm
2012#
Rm
10 454
37 605
(470)
4 298
29 618
(9 731)
3 487
23 673
(7 253)
47 589
24 185
19 907
The maximum exposure to credit risk, including JD Group’s instalment sale and loan receivables, at the
reporting date by segment was (carrying amounts):
Retail activities
Manufacturing, sourcing, logistics and corporate services – International operations
Properties
13 945
2 683
29 616
1 815
5 924
2 864
12 749
227
4 320
3 075
9 675
283
Assets of companies classified as discontinued operation during the 2014 financial year
48 059
–
21 764
12 152
17 353
9 807
48 059
33 916
27 160
34 581
355
7 252
5 688
183
16 717
349
15 636
1 071
143
12 825
278
13 488
514
55
48 059
33 916
27 160
Less: JD Group’s instalment sale and loan receivables1
1. Included in the trade and other receivables balance is the JD Group’s instalment sale and loan receivables. These have been
analysed separately, due to the different credit risk relating to this book. JD Group’s instalment sale and loan receivables
relating to the disposal group for 2014 are included in assets held for sale.
The maximum exposure to credit risk at the reporting date by geographical region was (carrying amounts):
Continental Europe
Pacific Rim
Southern Africa
United Kingdom
Other regions
106
Ageing of financial assets excluding
JD Group’s instalment sales and loan
receivables
Not past due or impaired
Past due 1 to 30 days but not impaired
Past due more than 90 days but not impaired
Past due but not impaired in full
2014
Rm
2014
%
2013#
Rm
2013#
%
2012#
Rm
2012#
%
46 596
431
96
70
362
34
97.9
0.9
0.2
0.1
0.8
0.1
22 838
689
212
99
198
149
94.4
2.9
0.9
0.4
0.8
0.6
19 009
470
124
68
191
45
95.5
2.4
0.6
0.3
1.0
0.2
47 589
100.0
24 185
100.0
19 907
100.0
Credit exposure by class to JD Group’s
instalment sale and loans receivables
2014
Up to date
Performing
Non-performing
Secured
Rm
Unsecured
Rm
Total
Rm
Secured
Rm
Unsecured
Rm
Total
Rm
–
–
449
1
1
19
1
1
468
2 732
1 033
3 498
872
281
1 756
3 604
1 314
5 254
449
21
470
7 263
2 909
10 172
Secured
Rm
Total operations
Unsecured
Rm
Total
Rm
3 703
1 123
2 272
1 508
484
641
5 211
1 607
2 913
7 098
2 633
9 731
3 573
1 358
1 075
875
245
127
4 448
1 603
1 202
6 006
1 247
7 253
2013 #
Up to date
Performing
Non-performing
2012
Up to date
Performing
Non-performing
#
The ‘classes’ have been determined on credit product sold across all retail brands
Secured
Secured against retail product sold
Unsecured
Unsecured in nature and includes personal loans
The debtors book has been analysed into the following types of accounts, reflecting the accounts in the following categories :
Up to date
These accounts have no arrears, are therefore up to date and are therefore neither past due nor impaired.
PerformingThese accounts are in arrears by less than four contractual instalments and are considered to be past due. Arrears is defined as less
than 95% of an instalment.
Non-performingThese accounts are in arrears by four or more contractual instalments. Arrears is defined as less than 95% of a contractual
instalment. An impairment provision is raised against these accounts.
Risk analysis for up to date accounts
2014
Low risk
Medium risk
High risk
Secured
Rm
Unsecured
Rm
Total
Rm
Secured
Rm
Unsecured
Rm
Total
Rm
–
–
–
–
1
–
–
1
–
1 066
1 224
442
521
340
11
1 587
1 564
453
–
1
1
2 732
872
3 604
107
2013 #
Low risk
Medium risk
High risk
2012
Low risk
Medium risk
High risk
Movement in provision for bad debts and impairments
Additional provision raised (including amounts acquired on acquisition of subsidiaries)
Amounts used during the year
Eliminated on disposal of subsidiaries and businesses
31.7
Secured
Rm
Total operations
Unsecured
Rm
Total
Rm
1 255
1 243
1 205
728
458
322
1 983
1 701
1 527
3 703
1 508
5 211
1 642
634
1 297
353
166
356
1 995
800
1 653
3 573
875
4 448
2014
Rm
2013#
Rm
2012#
Rm
(1 749)
(3 753)
22
1 571
3 057
39
(77)
(1 393)
(1 179)
32
891
_
_
(100)
(451)
(1 161)
79
163
_
4
(27)
(890)
(1 749)
(1 393)
The group has liens over items sold until full payment has been received from customers. The fair value of collateral held against these loans and receivables is
linked to the value of the liens. Furthermore the group has credit insurance to cover its exposure to risk on receivables. In the prior year, in addition to the liens
over inventories, the group had collateral over other assets of counterparties valued at R294 million (2012: R277 million).
Liquidity risk
Liquidity risk is the risk that an entity will encounter difficulty in meeting its obligations associated with financial liabilities. Liquidity risk arises because of the
possibility that the entity could be required to pay its liabilities earlier than expected.
The group manages liquidity risk by monitoring forecast cash flows and by ensuring that adequate borrowing facilities are available. Cash surpluses and shortterm financing needs of manufacturing and sales companies are mainly centralised in African and European central offices. These central treasury offices invest
net cash reserves on the financial markets, mainly in short-term instruments linked to variable interest rates.
The following table details the group’s remaining contractual maturity for its financial liabilities. The table has been drawn up on the undiscounted cash flows of
financial liabilities based on the earliest date on which the group can be required to pay. The table includes both interest and principal cash flows:
2014
Rm
0 to 3 months
4 to 12 months
Year 2
Years 3 to 5
After 5 years
31.8
31.9
2013#
Rm
2012#
Rm
(30 417)
(11 311)
(12 959)
(40 164)
(10 321)
(30 569)
(9 227)
(10 286)
(38 496)
(2 233)
(25 429)
(7 558)
(8 968)
(21 852)
(7 068)
(105 172)
(90 811)
(70 875)
Treasury risk
A finance forum, consisting of senior executives of the group, meets on a regular basis to analyse currency and interest rate exposure and to review and, if required,
adjust the group’s treasury management strategies in the context of prevailing and forecast economic conditions.
Capital risk
The group manages its capital to ensure that entities in the group will be able to continue as going concerns while maximising the return to stakeholders through
the optimisation of the debt and equity balance.
The capital structure of the group consists of debt, which includes the borrowings disclosed in note 22, cash and cash equivalents, and equity attributable to equity
holders of the parent, comprising issued capital, reserves and retained earnings as disclosed in the statement of changes in equity.
The group’s risk management committee reviews the capital structure of the group on a semi-annual basis. As a part of this review, the committee considers the
cost of capital and the risks associated with each class of capital. Based on recommendations of the committee, the group will balance its overall capital structure
through the payment of dividends, new share issues and share buy-backs as well as the issue of new debt or the redemption of existing debt.
108
32.
INSURANCE AND INSURANCE RISK MANAGEMENT
32.1 Assets under insurance contracts
Short term operations
Unearned reinsurance premium
Claims outstanding
Deferred acquisition costs
32.2
Liabilities under insurance contracts
32.2.1 Short-term operations
Provision for unearned premiums
Provision for outstanding claims, including the incurred but not recognised (IBNR) provision
Reinsurance premium due
32.2.2
Long-term operation
Provision for outstanding claims, including IBNR
2014
Rm
2013#
Rm
2012#
Rm
75
58
40
62
19
40
56
29
37
173
121
122
210
131
17
75
59
67
24
60
37
358
201
121
54
76
43
38
30
22
130
81
52
79
218
523
105
68
196
370
93
59
195
226
57
925
727
537
832
(56)
(216)
734
(1)
(103)
255
(4)
(73)
It is expected that all insurance contract liabilities will be settled within 12 months from
year‑end.
The group believes that the liabilities for claims reported in the statement of financial position
are adequate. However it recognises that the process of estimation is based upon certain
variables and assumptions which could differ when the claims arise.
32.3
32.4
Financial assets
Investments
Treasury bills
Short-term deposits
Cash at bank
Revenue
Premium income comprised the following:
32.4.1
Short-term operations
Gross premiums written
Outward reinsurance premiums
560
630
178
Long-term operation
Gross premiums written
1 153
24
951
(13)
208
(4)
Earned premiums
1 177
938
204
Total premium income
1 737
1 568
382
Earned premiums
32.4.2
32.4.3
109
32.5
Insurance risk management
32.5.1 African operations
Risk management objectives and policies for mitigating risk
The primary insurance activity carried out by the insurance operation assumes the risk of loss from persons that are directly subject to the risk. The
insured risks are directly associated to furniture and equipment acquired by the policyholder on credit terms from furniture retailers within the JD Group.
The theory of probability is applied to the pricing and provisioning for the portfolio of insurance contracts. The principal risk to the operation is pricing
for the relevant insurance contracts written. Pricing risk is considered to be low due to the low sums insured and the short duration of the indemnity
period. All contracts are renewable monthly.
The operation manages its insurance risk through underwriting limits, approval procedures for transactions, and by reviewing its pricing methodology
regularly. The credit risk is low due to the creditworthiness of the policyholder being assessed at point of sale by the furniture retailer.
Underwriting strategy
The operation’s underwriting strategy is to ensure a balanced portfolio and is based on a large portfolio of similar risks over a large geographical area.
This reduces the variability of the outcome.
Terms and conditions of insurance contracts
The short-term operation offers a single product with basic and comprehensive cover options. The insurance contract protects the policyholder against
physical loss or damage of the insured movable asset.
The long-term operation offers a credit life product with basic and comprehensive cover options. The insurance contract protects the policyholder
against the financial obligations from the credit sale agreement in the event of death, disability or retrenchment. The operation also reinsures a funeral
product with individual, immediate family, parent and extended family cover options.
Claims development
The operation is liable for all insured events that occurred during the term of the contract, even if the loss is discovered after the end of the contract term,
subject to pre-determined time scales dependent on the nature of insurance contract. The operation is therefore exposed to the risk that claims reserves
will not be adequate to fund historic claims (run-off risk).
The majority of the operation’s insurance contracts are classified as ‘short-tailed’, meaning that any claim is settled within a year after the loss date.
In terms of IFRS 4 – Insurance Contracts, an insurer need only disclose claims run-off information where uncertainty exists about the amount and timing
of claims payments not resolved within one year. Therefore detailed claims run-off information is not presented.
Transactions in financial instruments may result in the operation assuming financial risks. These include market risk, interest rate risk, credit risk,
and liquidity risk. Each of these financial risks is described below, together with a summary of the ways in which the operation manages these risks.
Market risk
Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices will affect the operation’s income
or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within
acceptable parameters, while optimising the return.
The operation has no significant market risk exposure due to the nature and duration of its financial instruments. The operation does not transact in
foreign currency.
Credit risk
The operation has exposure to credit risk, which is the risk that a counterparty will be unable to pay amounts in full when due.
The operation structures the levels of credit risk it accepts by placing limits on its exposure to a single counterparty, or groups of counterparties. Such
risks are subject to an annual or more frequent review.
The major concentration of credit risk arises from the operation’s cash balances and trade and other receivables. Reputable financial institutions are
used for investing and cash handling purposes. Management makes regular reviews to assess the degree of compliance with the operation’s procedures
on credit.
Liquidity risk
Liquidity risk is the risk that the operation will encounter difficulty in meeting obligations associated with financial liabilities. Liquidity risk is the risk
that cash may not be available to pay obligations when due at a reasonable cost. The operation’s liabilities are matched by appropriate assets and it has
significant liquid resources to cover its obligations. The operation’s liquidity and ability to meet such calls are monitored quarterly by the board and
monthly by the investment and capital management committee. Trade and other payables all fall due within 12 months.
Capital management
The operation manages its capital base to achieve a prudent balance between maintaining capital ratios to support business growth and confidence, and
providing competitive returns to shareholders. The capital management process ensures that the operation maintains sufficient capital levels for legal
and regulatory compliance purposes. The operation ensures that its actions do not compromise sound governance and appropriate business practices
and it eliminates any negative effect on payment capacity, liquidity or profitability.
Long-term operations
The capital adequacy requirement is determined according to generally accepted actuarial principles in terms of the guidelines issued by the Actuarial
Society of South Africa. It is an estimate of the minimum capital that will be required to provide for future experience that is more adverse than
that assumed in the calculation of policyholder liabilities. As at 30 June 2014, the operation’s capital adequacy requirement was R44 million (2013:
R43 million; 2012: R43 million) and the ratio of excess assets to capital adequacy requirements was 12 times (2013: 11 times; 2012: 9 times).
Short-term operations
The operations submit quarterly and annual returns to the Financial Services Board in terms of the Short-term Insurance Act, 53 of 1998. The operations
are required at all times to maintain a statutory surplus asset ratio as defined in the Short-term Insurance Act. The quarterly return as at 30 June 2014
submitted by the operations to the regulator showed that the companies met the minimum capital requirements as at year-end.
110
32.5.2
International operations
Risk management objectives and policies for mitigating risk
Each line of business and each policy is underwritten individually. The risks and exposures are assessed and then mitigated using any of the following:
premium, capital, reinsurance protection and collateral (e.g. letter of credit).
Underwriting strategy
The underwriting strategy is to assist the clients in managing their insurance risk by providing cost effective bespoke solutions. The insurance
operations are unable to underwrite compulsory insurance.
Terms and conditions of insurance contracts
The terms and conditions of the insurance contracts reflect the usual market cover for the risks being insured. The policies also include specific
conditions reflecting the structure of the insurance operations.
Claims development
The claims function is largely outsourced to third party adjusters. Based on their assessment of the loss a claims reserve is created on behalf of the
relevant client. The claim reserve is then adjusted to reflect claim payments or additional claim costs as the claim develops.
Market risk, credit risk, liquidity risk and capital management
The risks are continually monitored by the insurance managers with oversight ultimately provided by the White Rock board of directors at the quarterly
meetings.
Market risk is minimised by holding funds in local currency in order to match the expected claims.
Reinsurance is used to mitigate insurance risk but a credit risk remains. The creditworthiness of the reinsurers is considered on an annual basis by
reviewing their financial strength prior to finalisation of any contract.
All assets are held in cash using current bank accounts. The cash is deposited with European banks with a minimum Standard & Poor’s credit rating
of “A-” (or equivalent).
33.
RELATED-PARTY TRANSACTIONS
Related-party relationships exist between shareholders, subsidiaries, joint-venture companies and associate companies within the group and its company directors and
group key management personnel.
These transactions are concluded at arm’s length in the normal course of business and include transactions as a result of the group-wide treasury management of foreign
currency movements. All material intergroup transactions are eliminated on consolidation.
33.1
Significant subsidiaries
Steinhoff Investment Holdings Limited
Steinhoff Africa Holdings Proprietary Limited
Ainsley Holdings Proprietary Limited
JD Group Limited
Steinhoff Services Limited
Steinhoff Finance Holdings GmbH
Steinhoff Möbel Holdings Alpha GmbH
Steinhoff Europe AG
Pat Cornick International BV
Steinhoff Asia Pacific Holdings Proprietary Limited
Steinhoff Asia Pacific Limited
Steinhoff Germany GmbH
Steinhoff Europe AG
Steinhoff Retail GmbH
Conforama Holdings S.A.
Steinhoff UK Holdings Limited
Homestyle Operation Limited
Steinhoff UK Beds Limited
Tau Enterprises GmbH
Hemisphere International Properties BV
Country of incorporation
2014
Ownership
%
2013
Ownership
%
2012
Ownership
%
South Africa
South Africa
South Africa
South Africa
South Africa
South Africa
Austria
Austria
Austria
The Netherlands
Australia
Australia
Germany
Switzerland
Austria
France
United Kingdom
United Kingdom
United Kingdom
Germany
The Netherlands
100
100
100
45
86
100
100
100
100
100
100
100
100
100
100
99
100
100
100
100
100
100
100
100
62
56
100
100
100
100
100
100
100
100
100
100
99
100
100
100
–
100
100
100
100
62
50
100
100
100
100
100
100
100
100
100
100
99
100
100
100
–
100
A full list of subsidiaries of the company is available for inspection by shareholders on request at the registered office of the company.
1. Subsidiary became an associate company.
111
33.2
Trading transactions
Key management personnel did not have any material transaction with the group. All transactions were at market related prices.
The following is a summary of material transactions with associate companies and joint-venture companies during the year and receivables and payables balances
at year-end:
Goods and services purchased from:
Associate and joint-venture companies of KAP Industrial Holdings Limited
Goods and services sold to:
Associate and joint-venture companies of KAP Industrial Holdings Limited
Associate and joint-venture companies of JD Group Limited and its subsidiaries
Dividend received from:
Associate and joint-venture companies of JD Group Limited and its subsidiaries
PSG Group Limited
Receivables from:
KAP Industrial Holdings Limited
Payables to:
Loans to/(from) associate companies
Loungefoam Proprietary Limited
Wanchai Property International Limited
33.3
33.5
33.6
2013#
Rm
2012#
Rm
93
200
–
33
33
–
50
–
50
73
71
2
43
2
41
193
38
155
21
–
21
91
30
26
35
37
30
(116)
–
(116)
–
284
–
5
279
300
(20)
12
308
198
183
185
103
184
56
381
288
240
Compensation of key management personnel
Key management personnel are defined as directors of the company, executive directors of the company’s
major subsidiaries (as defined in the JSE Listing Requirements) as well as top executive management
members.
Key management personnel compensation
– Short-term employee benefits
– Share-based payments – related expense
33.4
2014
Rm
Number of members
30
30
27
The three top earners received R34.9 million (2013: R24.9 million; 2012: R29.7 million) and share vestings to the value of R36.2 million (2013: R22.6 million;
2012: R nil) in compensation during the year. The employees of listed subsidiaries as well as the directors of Steinhoff have been excluded from this calculation.
Directors
Details relating to directors’ emoluments, shareholding in the company and interest of directors and officers are disclosed in note 34.
Shareholders
The principal shareholders of the company are detailed in the analysis of shareholders in the integrated report.
Directors’ shareholdings are detailed in note 34.
Interest of directors and officers in contracts
All directors and officers of the company have, other than described below, confirmed that they had no interest in any agreement of significance with the
company or any of its subsidiary companies, which could have resulted in a conflict of interest during the year.
During the year under review, contracts were concluded with the following companies:
• Hoffman Attorneys (of which SJ Grobler is a partner) provided legal services to group companies and was reimbursed for legal and related expenses to the amount
of approximately R8.3 million (2013: R9.3 million; 2012: R8.0 million).
• PSG Capital Limited and associate companies (of which JF Mouton is a director) (a subsidiary of PSG Group Limited of which JF Mouton and MJ Jooste are
directors) acted as sponsor and advisor to the group, in respect of which fees were paid totalling approximately R1.3 million (2013: R0.2 million; 2012: R0.2 million).
• MJD Aviation Partnership (of which MJ Jooste, KJ Grové and DM van der Merwe are partners) provided aviation services to the group to the amount of R0.2 million
(2013: R0.3 million; 2012: R0.7 million).
• During the 2013 financial year, KAP Manufacturing purchased a property for R19.9 million from Soundprops 123 Proprietary Limited which is a subsidiary of the
Courthiel Holdings Proprietary Limited of which CE Daun is a director.
• During the year, Mayfair Speculators Proprietary Limited (of which MJ Jooste is a director) made short term deposits with a subsidiary of the group. Interest paid
during the year amounted to R3.4 million. Subsequent to year end, the deposit of R186 million was repaid.
All the contracts were concluded at arm’s length in the normal course of business and are no more favourable than those arranged with third parties.
112
Basic
foreign
remuneration
€’000
34.
REMUNERATION REPORT
34.1 Remuneration
Executive directors
2014
HJK Ferreira
SJ Grobler 3
TLJ Guibert4
MJ Jooste
AB la Grange
FJ Nel
DM van der Merwe
150
180
901
1 744
279
90
850
Company
contribution
Basic and expense
remuneration allowances
R’000
R’000
3 192
2 930
–
–
2 353
1 568
–
474
346
–
825
278
228
719
Annual
bonus
‘000
Deferred
bonus1
R’000
R 3 000
R 3 000
€ 450
R 11 306
R 3 000
R 1 750
R 3 230
–
–
–
–
–
–
–
Project
incentive1
R’000
–
–
–
–
–
–
–
.
2013
HJK Ferreira
SJ Grobler 3
TLJ Guibert4
MJ Jooste
AB la Grange 5
FJ Nel
DM van der Merwe
150
180
839
1 617
263
87
790
3 328
3 154
–
–
2 392
1 644
–
467
341
–
825
278
281
560
R 2 750
R 2 750
€ 400
R 7 500
R 2 250
R 1 625
R 3 000
2 500
2 500
–
8 500
2 500
–
2 500
–
–
–
–
–
–
–
.
2012
HJK Ferreira
SJ Grobler 3
TLJ Guibert4
MJ Jooste
FJ Nel
DM van der Merwe
150
175
743
1 308
72
100
2 902
2 767
–
–
1 581
3 767
434
319
–
957
285
569
R 2 500
R 2 500
€ 192
R 6 750
R 1 500
R 2 625
–
–
–
–
–
–
7 500
7 500
–
13 500
2 500
7 500
Company
directors’
fees2
R’000
Remuneration
and fees
(including
foreign amounts
converted to
rand for
reporting
purposes)
R’000
744
744
744
744
744
744
744
9 527
9 560
19 811
37 481
10 310
5 560
16 692
5 208
108 941
705
705
705
705
705
705
705
11 469
11 513
14 903
36 061
11 134
5 252
15 817
4 935
106 149
664
664
664
664
664
664
15 562
15 572
10 403
35 498
7 280
16 166
3 984
100 481
1. Refer to the remuneration report in the integrated report.
2. Directors’ fees were paid with basic remuneration.
3. Includes fees and remuneration in respect of professional services rendered.
4. Paid to an entity as management fees.
5. AB la Grange changed from an alternate director to an executive director on 5 March 2013.
113
Basic
foreign
remuneration
€’000
Alternate directors
and officers
2014
JNS du Plessis
KJ Grové
A Krüger-Steinhoff 3
M Nel
2013
JNS du Plessis
KJ Grové
M Nel
2012
JNS du Plessis
KJ Grové
AB la Grange
M Nel
60
–
–
50
60
–
–
50
60
–
–
113
30
Company
contribution
Basic and expense
remuneration allowances
R’000
R’000
2 716
3 405
–
2 283
2 695
3 226
–
2 022
2 236
2 572
–
2 417
1 583
1. Refer to the remuneration report in the integrated report.
2. Directors’ fees were paid with basic remuneration.
3. Non-executive director.
114
–
621
–
323
–
569
–
273
–
514
–
294
203
Annual
bonus
‘000
Deferred
bonus1
R’000
R 2 000
R 4 500
–
R 1 750
–
–
–
–
R 1 750
R 3 072
–
R 1 375
R 1 650
R 3 500
–
R 2 000
R 1 000
–
3 000
–
–
–
–
–
–
–
Project
incentive1
R’000
–
–
–
–
–
–
–
–
–
8 000
–
7 500
5 000
Company
directors’
fees2
R’000
Remuneration
and fees
(including
foreign amounts
converted to
rand for
reporting
purposes)
R’000
744
744
344
744
6 307
9 270
344
5 806
2 576
21 727
705
705
326
705
5 838
10 572
326
4 948
2 441
21 684
664
664
306
664
664
5 175
15 250
306
14 047
8 762
2 962
43 540
Fees as director
Non-executive directors
2014
SF Booysen
DC Brink
YZ Cuba1
CE Daun
D Konar
MT Lategan
JF Mouton2
FA Sonn1
HJ Sonn3
BE Steinhoff
PDJ van den Bosch
CH Wiese
Basic
R’000
Committees
R’000
Fees for
services
R’000
Total
R’000
390
390
195
390
1 560
390
390
195
273
390
390
390
364
360
17
–
–
204
34
65
–
–
34
34
–
–
–
–
–
–
–
–
–
5 960
3 866
–
754
750
212
390
1 560
594
424
260
273
6 350
4 290
424
5 343
1 112
9 826
16 281
368
368
295
294
1 470
368
368
368
368
368
98
343
339
32
–
–
192
32
122
–
32
10
–
–
–
–
–
–
–
–
4 791
3 108
–
711
707
327
294
1 470
560
400
490
5 159
3 508
108
4 733
1 102
7 899
13 734
345
345
345
345
1 380
259
345
345
345
345
330
318
30
–
–
135
30
115
–
30
–
–
–
–
–
–
–
–
4 341
1 850
675
663
375
345
1 380
394
375
460
4 686
2 225
4 399
988
6 191
11 578
2014
R’000
2013
R’000
2012
R’000
5 985
140 964
5 394
136 173
4 597
151 002
146 949
141 567
155 599
2013
SF Booysen
DC Brink
YZ Cuba
CE Daun
D Konar
MT Lategan
JF Mouton2
FA Sonn
BE Steinhoff
PDJ van den Bosch
CH Wiese 4
2012
SF Booysen
DC Brink
YZ Cuba
CE Daun
D Konar
MT Lategan5
JF Mouton2
FA Sonn
BE Steinhoff
PDJ van den Bosch
1. YZ Cuba and FA Sonn retired on 3 December 2013.
2. Paid to various entities as management fees.
3. J Sonn was appointed as an independent non-executive director on 3 December 2013.
4. CH Wiese was appointed as an independent non-executive director on 5 March 2013.
5. MT Lategan was appointed as a independent non-executive director on 23 September 2011.
Directors’ fees and remuneration
Remuneration paid by:
– Company
– Subsidiary companies
115
Offer date
34.2
Share rights
Executive directors
HJK Ferreira
July 2009 2
December 2010 2
December 2011
December 2012
December 2013
Number
of rights
Number of
(exercised)/
Number
rights as at
of rights as at awarded during
30 June 2012 the two years 30 June 2014
601 348
464 684
392 487
–
–
(601 348)
(464 684)
–
393 250
442 919
–
–
392 487
393 250
442 919
1 458 519
(229 863)
1 228 656
601 348
464 684
392 487
–
–
(601 348)
(464 684)
–
393 250
442 919
–
–
392 487
393 250
442 919
1 458 519
(229 863)
1 228 656
SJ Grobler
July 2009 2
December 2010 2
December 2011
December 2012
December 2013
TLJ Guibert
December 2011
December 2012
December 2013
568 281
–
–
–
610 207
858 437
568 281
610 207
858 437
568 281
1 468 644
2 036 925
MJ Jooste
July 2009 2
December 2010 2
December 2011
December 2012
December 2013
1 957 602
1 266 034
1 056 504
–
–
(1 957 602)
(1 266 034)
–
1 186 514
1 669 183
–
–
1 056 504
1 186 514
1 669 183
4 280 140
(367 939)
3 912 201
AB la Grange
July 2009
December 2010 2
December 2011
December 2012
December 2013
398 202
354 045
321 126
–
–
(398 202)
(354 045)
–
393 250
487 490
–
–
321 126
393 250
487 490
1 073 373
128 493
1 201 866
FJ Nel
July 2009
December 2010 2
December 2011
December 2012
December 2013
366 720
265 534
231 924
–
–
(366 720)
(265 534)
–
229 396
258 369
–
–
231 924
229 396
258 369
864 178
(144 489)
719 689
DM van der Merwe
July 2009 2
December 2010 2
December 2011
December 2012
December 2013
626 776
486 812
428 168
–
–
(626 776)
(486 812)
–
610 207
858 437
–
–
428 168
610 207
858 437
1 541 756
355 056
1 896 812
11 244 766
980 039
12 224 805
Total executive directors
1, 2
2
1. Granted prior to being a director.
2. The market price of share rights exercised was R27.39 for 1 December 2012 and R40.15 for 1 December 2013.
116
Number
of rights
Number of
(exercised)/
Number
rights as at
of rights as at awarded during
30 June 2012 the two years 30 June 2014
Offer date
Alternate directors
JNS du Plessis
July 2009 2
December 2010 2
December 2011
December 2012
December 2013
KJ Grové
July 2009
December 2010 2
December 2011
M Nel
July 2009
December 20101,2
December 2011
December 2012
December 2013
2
1,2
Total alternate directors and officers
Share rights in associate company: KAP
KJ Grové
398 218
292 087
249 765
–
–
(398 218)
(292 087)
–
262 166
295 279
–
–
249 765
262 166
295 279
940 070
(132 860)
807 210
427 978
309 789
267 605
(427 978)
(309 789)
–
–
–
267 605
1 005 372
(737 767)
267 605
180 267
141 618
196 597
–
–
(180 267)
(141 618)
–
229 396
278 565
–
–
196 597
229 396
278 565
518 482
186 076
704 558
2 463 924
December 2012
December 2013
(684 551)
1 779 373
–
–
2 377 036
2 818 191
2 377 036
2 818 191
–
5 195 227
5 195 227
Some of the exercised share rights were sold by directors during the year. Refer to note 34.3 for directors’ interest in share capital.
All the share rights granted were granted on 1 December 2012 and 1 December 2013. The purchase price for Steinhoff shares is 0.5 cents per share and
KAP shares is 20 cents per share.
1. Granted prior to being a director.
2. The market price of share rights exercised was R27.39 for 1 December 2012 and R40.15 for 1 December 2013.
2014
Value of share rights exercised during the year
Executive directors
HJK Ferreira
SJ Grobler
MJ Jooste
AB la Grange
FJ Nel
DM van der Merwe
Alternate directors
JNS du Plessis
KJ Grové
M Nel
2013
Number of
rights
exercised
Value of rights
exercised
R’000
Number of
rights
exercised
Value of rights
exercised
R’000
464 684
464 684
1 266 034
354 045
265 534
486 812
18 657
18 657
50 831
14 215
10 661
19 546
601 348
601 348
1 957 602
398 202
366 720
626 776
16 471
16 471
53 619
10 907
10 044
17 167
3 301 793
132 567
4 551 996
124 679
292 087
309 789
141 618
11 727
12 438
5 686
398 218
427 978
180 267
10 907
11 722
4 938
743 494
29 851
1 006 463
27 567
No vesting occurred during the 2012 financial year.
117
Direct interest
Beneficial
34.3
Interest in Steinhoff share capital
Executive directors
2014
HJK Ferreira
SJ Grobler
MJ Jooste
AB la Grange
FJ Nel
DM van der Merwe
2013
HJK Ferreira
SJ Grobler
MJ Jooste
AB la Grange
FJ Nel
DM van der Merwe
2012
HJK Ferreira
SJ Grobler
MJ Jooste
FJ Nel
DM van der Merwe
Non-executive directors
2014
SF Booysen
DC Brink
CE Daun
D Konar
ML Lategan
JF Mouton
BE Steinhoff
PDJ van den Bosch
CH Wiese
2013
SF Booysen
DC Brink
YZ Cuba
CE Daun
D Konar
ML Lategan
JF Mouton
FA Sonn
BE Steinhoff
PDJ van den Bosch
CH Wiese1
Total
–
–
–
968 250
1 950 181
–
2 663 090
4 281 816
65 527 209
–
2 554
5 283 814
–
–
–
–
–
–
2 663 090
4 281 816
65 527 209
968 250
1 952 735
5 283 814
2 918 431
77 758 483
–
80 676 914
–
–
–
747 641
1 791 441
–
2 848 406
4 244 369
71 913 617
–
399 634
5 639 814
–
–
–
–
–
–
2 848 406
4 244 369
71 913 617
747 641
2 191 075
5 639 814
2 539 082
85 045 840
–
87 584 922
–
–
–
5 717
–
2 173 025
3 474 318
67 644 874
1 900 358
5 089 851
–
–
–
–
–
2 173 025
3 474 318
67 644 874
1 906 075
5 089 851
5 717
80 282 426
–
80 288 143
–
–
–
356 271
142 247
–
7 923 741
669 561
–
213 907
200 000
2 399 856
–
194 759
7 000 000
182 692 813
–
44 729 337
–
–
–
–
39 815
–
–
–
–
213 907
200 000
2 399 856
356 271
376 821
7 000 000
190 616 554
669 561
44 729 337
9 091 820
237 430 672
39 815
246 562 307
–
–
103 417
–
351 008
82 733
–
–
2 497 198
669 561
–
213 907
125 803
–
2 399 856
–
72 491
7 000 000
67 574
169 440 730
–
42 739 037
–
–
–
–
–
36 196
–
–
–
–
–
213 907
125 803
103 417
2 399 856
351 008
191 420
7 000 000
67 574
171 937 928
669 561
42 739 037
3 703 917
222 059 398
36 196
225 799 511
1. CH Wiese in addition to his shareholding has one million single stock futures which is an indirect interest beneficial.
118
Indirect
interest
Indirect
Beneficial Non-beneficial
Direct interest
Beneficial
2012
SF Booysen
DC Brink
CE Daun
D Konar
ML Lategan
JF Mouton
FA Sonn
BE Steinhoff
PDJ van den Bosch
Alternate directors
2014
JNS du Plessis
KJ Grové
M Nel
2013
JNS du Plessis
KJ Grové
M Nel
2012
JNS du Plessis
KJ Grové
AB la Grange
M Nel
Indirect
interest
Indirect
Beneficial Non-beneficial
Total
–
–
–
339 412
80 000
–
–
2 414 698
647 441
206 840
121 647
386 646
–
44 096
6 205 200
65 342
163 913 248
–
–
–
–
–
35 000
–
–
–
–
206 840
121 647
386 646
339 412
159 096
6 205 200
65 342
166 327 946
647 441
3 481 551
170 943 019
35 000
174 459 570
–
–
746 112
309 310
688 723
1 272 678
63 500
–
–
2 068
–
–
688 723
1 274 746
809 612
309 310
1 055 422
2 024 901
2 068
3 082 391
–
–
746 112
237 153
513 676
1 087 022
63 502
–
–
2 068
–
–
513 676
1 089 090
809 614
237 153
983 265
1 664 200
2 068
2 649 533
–
492 500
667 743
491 913
124 731
111 644
206 544
61 404
–
–
–
2 000
–
–
–
111 644
701 044
729 147
491 913
124 731
1 776 887
379 592
2 000
2 158 479
1. Non-executive director.
119
35.
RESTATEMENTS AND RECLASSIFICATIONS
35.1 New Accounting Standards Adopted
The following are a list of standards adopted during the year which resulted in restating the prior year figures.
35.1.1 IFRS 10 – Consolidated Financial Statements
IFRS 10 provides a new definition of control which requires the investor to assess control by referring to the investor’s exposure or rights to variable
returns from its involvement with the investee and the ability to affect those returns through its power over the investee.
35.1.2
The group has reassessed the control conclusion for its investees at 1 July 2013. As a consequence, the group has determined that it has control of Van
Den Bosch Beheer BV which was previously accounted for as a joint venture using the proportionate method of consolidation. The group has determined
that it has control over White Rock Insurance, which was previously not accounted for. The group has applied the transitional provisions and the 2012
opening statement of financial position and 2013 results have been restated accordingly.
IFRS 11 – Joint Arrangements and IAS 28 – Investments in Associates and Joint Ventures
IFRS 11 has removed the option to account for joint ventures using proportionate consolidation and instead joint arrangements that meet the definition
of a joint venture under IFRS 11 must be accounted for using the equity method.
The group previously accounted for joint ventures using the proportionate consolidation method. The group has applied IFRS 11 retrospectively in
accordance with the transitional provisions and the 2012 opening statement of financial position and 2013 results have been restated accordingly.
35.2
35.1.3
IFRS 12 – Disclosure of Interests in Other Entities
IFRS 12 requires an entity to disclose information that enables users of financial statements to evaluate the nature of, and risks associated with, its
interests in other entities; and the effects of those interests on its financial position, financial performance and cash flows. The group has adopted IFRS
13 and has included additional disclosures as required by this standard.
35.1.4
IFRS 13 – Fair Value Measurement
IFRS 13 establishes a single framework for measuring fair value and making disclosures about fair value measurements, when such measurements are
required or permitted by other IFRSs. IFRS 13 provides for a revised definition of fair value, being the price at which an orderly transaction to sell an
asset or transfer a liability would take place between market participants at the measurement date. It replaces and expands the disclosure requirement
about fair value measurements on other IFRSs, including IFRS 7 – Financial Instruments – Disclosures. The group has included additional disclosure
as required by this standard.
35.1.5
IAS 19 – Employee Benefits (Revised)
IAS 19R includes a number of amendments to the accounting for defined benefit plans. The principal impact arises from the requirement to replace the
interest cost on the defined benefit obligation and the expected return on plan assets with a net interest cost/income based on the net benefit liability/
asset, calculated using the discount rate used to measure the defined benefit obligation. This has increased the income statement charge as the discount
rate now applied to the assets is lower than the expected return on plan assets. There is a limited effect on total comprehensive income as the decreased
charge in the income statement is offset by a debit in other comprehensive income. The group has applied the standard retrospectively in accordance
with the transitional provisions and the 2012 opening statement of financial position and the 2013 results have been restated accordingly. The group
has early adopted Defined Benefit Plans: Employee contributions which was issued in November 2013.
On 30 June 2014, the JD Group received an offer, subject to due diligence and conditions precedent, to dispose of the JD Consumer Finance division (excluding
insurance companies), which provided instalment sale financing on furniture products and unsecured products. The disposal of the JD Consumer Finance division
is consistent with JD Group’s long-term turnaround strategy. At 30 June 2014, this division is shown as a discontinued operation in the income statement and as
a disposal group held for sale in the statement of financial position.
On 23 June 2014, Steinhoff announced the launch of a bookbuild of up to 400 million of its KAP shares. The shares were successfully placed with investors at a
price of R3.85 per share. Effective 30 June 2014, Steinhoff’s shareholding in KAP decreased to 45% of the issued ordinary shares, and Steinhoff assessed that
it no longer controls KAP in terms of IFRS 10 – Consolidated Financial Statements. KAP has therefore been disclosed as a discontinued operation and the 45%
interest has been recognised on 30 June 2014 as an investment in an associate. From 30 June 2014, KAP will be equity accounted.
120
35.3
As previously
reported
Rm
IFRS 10
and 11
Rm
IAS 19R
Rm
Discontinued
operations
Rm
Restated
Rm
Effect of the restatement on the financial statements
INCOME STATEMENT
Year ended 30 June 2013
Revenue
Cost of sales
115 486
(75 401)
679
(534)
–
–
(18 227)
12 393
97 938
(63 542)
Gross profit
Capital items
40 085
1 801
(5 868)
(24 703)
(350)
145
18
(54)
(69)
–
–
–
–
(11)
–
(5 834)
(581)
431
4 422
27
34 396
1 238
(5 491)
(20 361)
(323)
Operating profit
Finance costs
Share of profit/(loss) of equity accounted companies
10 965
(3 267)
1 250
260
40
(2)
–
(6)
(11)
(11)
–
–
(1 535)
656
(252)
(14)
9 459
(2 624)
998
240
Taxation
9 208
(1 268)
32
(6)
(22)
5
(1 145)
286
8 073
(983)
Profit from discontinued operations
7 940
26
(17)
(859)
7 090
–
–
–
859
859
Profit for the year
7 940
26
(17)
–
7 949
7 300
7 300
–
640
640
–
13
13
–
13
13
–
(17)
(17)
–
–
–
–
–
(549)
549
–
(310)
310
7 296
6 747
549
653
343
310
7 940
26
(17)
–
7 949
Diluted Basic headline
earnings
earnings
per share
per share
Cents
Cents
Diluted
headline
earnings
per share
Cents
Profit for the year
Earnings per share reconciliation
Basic
earnings
per share
Cents
As previously reported
Rights offer
Dilutive potential shares no longer dilutive
IFRS 10 and 11
IAS 19R
389.9
(3.9)
–
0.6
(0.9)
347.5
(2.8)
(0.2)
0.5
(0.7)
394.8
(3.9)
–
0.6
(0.9)
350.8
(2.8)
(0.1)
0.7
(0.7)
Continuing and discontinued operations
385.7
(30.1)
344.3
(23.7)
390.6
(31.2)
347.9
(24.6)
355.6
320.6
359.4
323.3
121
Profit for the year
Actuarial gains on defined benefit plans
Deferred taxation
As previously
report
Rm
IFRS 10
and 11
Rm
IAS 19R
Rm
Discontinued
operations
Rm
Restated
Rm
7 940
26
(17)
–
7 949
82
(20)
–
–
21
(5)
–
–
103
(25)
62
–
16
–
78
Exchange differences on translation of foreign operations
Net fair value loss on cash flow hedges and other fair value reserves
Deferred taxation
Other comprehensive loss of equity accounted companies, net of deferred taxation
6 245
(41)
(3)
–
34
–
–
(1)
–
–
–
–
–
–
–
–
6 279
(41)
(3)
(1)
6 201
33
–
–
6 234
Total other comprehensive income for the year
6 263
33
16
–
6 312
14 203
59
(1)
–
14 261
13 536
667
7
52
(1)
–
–
–
13 542
719
14 203
59
(1)
–
14 261
122
As previously
report
Rm
IFRS 10
and 11
Rm
IAS 19R
Rm
Discontinued
operations
Rm
Restated
Rm
18 850
41 585
44 811
480
1 761
2 659
1 157
729
3 174
–
–
86
–
–
(25)
(33)
–
–
–
–
–
–
–
–
–
1
–
–
–
–
–
–
–
–
–
–
18 850
41 585
44 897
480
1 761
2 634
1 124
730
3 174
115 206
28
1
–
115 235
Current assets
Inventories
455
16 320
19 878
3 228
9 188
–
127
161
–
61
–
–
–
–
–
–
–
–
–
–
455
16 447
20 039
3 228
9 249
Assets classified as held for sale
49 069
364
349
–
–
–
–
–
49 418
364
49 433
349
–
–
49 782
164 639
377
1
–
165 017
Reserves
9 801
46 854
3 497
–
(37)
–
–
(2)
–
–
–
–
9 801
46 815
3 497
60 152
6 467
(37)
188
(2)
–
–
–
60 113
6 655
Total equity
66 619
151
(2)
–
66 768
Employee benefits
Provisions
45 041
722
9 652
2 608
231
–
–
(1)
1
–
–
–
1
–
–
–
–
–
–
–
45 041
722
9 652
2 609
231
58 254
–
1
–
58 255
Current liabilities
Employee benefits
Provisions
29 614
887
1 008
5 027
3 162
133
(1)
4
90
–
–
2
–
–
–
–
–
–
–
–
29 747
888
1 012
5 117
3 162
Liabilities classified as held for sale
39 698
68
226
–
2
–
–
–
39 926
68
39 766
226
2
–
39 994
164 639
377
1
–
165 017
3 104
(2)
–
–
3 102
As at 30 June 2013
ASSETS
Non-current assets
Goodwill
Intangible assets
Investment property
Total assets
123
As previously
report
Rm
IFRS 10
and 11
Rm
IAS 19R
Rm
Discontinued
operations
Rm
Restated
Rm
INCOME STATEMENT
Revenue
Cost of sales
80 143
(51 509)
–
–
–
–
(11 269)
8 212
68 874
(43 297)
Gross profit
Capital items
28 634
1 127
(5 431)
(16 319)
(96)
–
–
–
–
–
–
–
–
–
–
(3 057)
(446)
467
1 888
(89)
25 577
681
(4 964)
(14 431)
(185)
Operating profit
Finance costs
7 915
(2 511)
1 157
345
–
–
–
–
–
–
–
–
(1 237)
264
(118)
(11)
6 678
(2 247)
1 039
334
Taxation
6 906
(863)
–
–
–
–
(1 102)
222
5 804
(641)
Profit from discontinued operations
6 043
–
–
(880)
5 163
–
–
–
880
880
Profit for the year
6 043
–
–
–
6 043
5 655
5 655
–
388
388
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(773)
773
–
(107)
107
5 655
4 882
773
388
281
107
Profit for the year
6 043
–
–
–
6 043
Basic
earnings
per share
Cents
Diluted
earnings
per share
Cents
Basic
headline
earnings
per share
Cents
Diluted
headline
earnings
per share
Cents
As previously reported
Rights offer
312.3
(3.0)
284.6
(2.3)
315.4
(3.0)
287.1
(2.2)
Continuing and discontinued operations
309.3
(44.7)
282.3
(35.7)
312.4
(39.2)
284.9
(31.4)
264.6
246.6
273.2
253.5
Earnings per share reconciliation
The 2012 income statement, statement of other comprehesive income and statement of cash flows were not restated for the new accounting statements adopted. The statement of
financial position disclosed for 2012 has been restated to reflect the balances on 1 July 2012.
124
As at 1 July 2012
ASSETS
Non-current assets
Goodwill
Intangible assets
Investment property
As previously
report
Rm
IFRS 10
and 11
Rm
IAS 19R
Rm
Discontinued
operations
Rm
Restated
Rm
15 572
33 834
34 878
472
1 656
2 353
884
697
2 619
–
–
64
–
–
(12)
(16)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
15 572
33 834
34 942
472
1 656
2 341
868
697
2 619
92 965
36
–
–
93 001
Current assets
Inventories
372
14 431
15 475
1 710
8 011
–
108
59
–
46
–
–
–
–
–
–
–
–
–
–
372
14 539
15 534
1 710
8 057
Assets classified as held for sale
39 999
98
213
–
–
–
–
–
40 212
98
40 097
213
–
–
40 310
133 062
249
–
–
133 311
Reserves
9 898
33 394
3 837
–
(43)
–
–
(1)
–
–
–
–
9 898
33 350
3 837
47 129
6 508
(43)
170
(1)
–
–
–
47 085
6 678
Total equity
53 637
127
(1)
–
53 763
Employee benefits
Provisions
33 858
705
7 765
2 093
218
–
–
(1)
1
–
–
–
(1)
–
–
–
–
–
–
–
33 858
705
7 763
2 094
218
Total assets
44 639
–
(1)
–
44 638
Current liabilities
Employee benefits
Provisions
25 392
845
885
5 136
2 092
59
(1)
10
56
(2)
–
2
–
–
–
–
–
–
–
–
25 451
846
895
5 192
2 090
Liabilities classified as held for sale
34 350
436
122
–
2
–
–
–
34 474
436
34 786
122
2
–
34 910
133 062
249
–
–
133 311
2 466
(3)
–
–
2 463
125
As previously
report
Rm
IFRS 10
and 11
Rm
IAS 19R
Rm
Discontinued
operations
Rm
Restated
Rm
7 230
(8 656)
1 230
(10)
6
21
–
–
–
–
–
–
7 220
(8 650)
1 251
NET (DECREASE)/INCREASE IN CASH AND CASH EQUIVALENTS
Effects of exchange rate translations on cash and cash equivalents
(196)
8 011
1 373
17
46
(2)
–
–
–
–
–
–
(179)
8 057
1 371
CASH AND CASH EQUIVALENTS AT END OF THE YEAR
9 188
61
–
–
9 249
36.
NEW ACCOUNTING PRONOUNCEMENTS
Effective
date –
annual
periods
commencing
on or after
At the date of authorisation of these annual financial statements, there are standards and interpretations in issue but not yet effective. These include
the following standards and interpretations that have not been early adopted and may have an impact on future financial statements:
IFRS 9
Financial Instruments
IFRS 15
Revenue from Contracts with Customers
IAS 36
Impairment of Assets: Recoverable amount disclosures for non-financial assets
IAS 39
Financial Instruments: Recognition and Measurement: Novation of derivatives and continuation of hedge accounting
IFRIC 21
Levies
126
1 January 2018
1 January 2017
1 January 2014
1 January 2014
1 January 2014
36.1
IFRS 9
In July 2014, the IASB issued the completed version of IFRS 9 – Financial Instruments (IFRS 9). The statement addresses the classification and measurement of
financial assets and financial liabilities. The new standard enhances the ability of investors and other users of financial information to understand the accounting
of financial assets and financial liabilities and aims to reduce complexity. The group is in the process of evaluating the impact the standard will have on the group.
This standard will be adopted by the effective date.
36.2
IFRS 15
In June 2014, the IASB issued IFRS 15 – Revenue from Contracts with Customers (IFRS 15). The standard is aimed at improving the financial reporting of revenue
and improving the comparability of the top line in financial statements globally. The core principle of the new standard is for companies to recognise revenue to
depict the transfer of goods or services to customers in amounts that reflect the consideration to which the company expects to be entitled in exchange for those
goods or services. The group is in the process of evaluating the impact the standard will have on the group. This standard will be adopted by the effective date.
36.3
IAS 36 (revised)
In May 2013, the IASB issued amendments to IAS 36 – Impairment of Assets (IAS 36). The amendments published clarify the IASB’s intention that the scope of
those disclosures is limited to the recoverable amount of impaired assets that is based on fair value less costs of disposal. The group does not expect any changes
upon the adoption of this standard. This standard will be adopted during the 2015 financial year.
36.4
IAS 39 (revised)
In June 2013, the IASB issued amendments to IAS 39 – Financial Instruments: Recognition and Measurement (IAS 39). The amendments will allow hedge accounting
to continue in a situation where a derivative, which has been designated as a hedging instrument, is novated to effect clearing with a central counterparty as a
result of laws or regulation, if specific conditions are met. This relief has been introduced in response to legislative changes across many jurisdictions that would
lead to the widespread novation of over-the-counter derivatives. The group is in the process of evaluating the impact the amendments will have on the group. This
standard will be adopted during the 2015 financial year.
36.5
IFRIC 21
In May 2013, the IASB issued a new interpretation which clarifies that the obligating event (as defined in IAS 37 – Provisions, Contingent Liabilities and Contingent
Assets) that gives rise to a liability to pay a levy is the activity described in the relevant legislation that triggers the payment of the levy. The group is in the process
of evaluating the impact the interpretation will have on the group. This standard will be adopted during the 2015 financial year.
Annexure 2
UNAUDITED AND UNREVIEWED INTERIM FINANCIAL STATEMENTS OF STEINHOFF AS AT 31 DECEMBER 2014
In accordance with Listings Requirement 8.1, the Steinhoff Board hereby take responsibility for the historical financial information contained in this Annexure.
UNAUDITED INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 DECEMBER 2014
CONDENSED CONSOLIDATED INCOME STATEMENT
Six months
ended
31 Dec 2014
Unaudited
Rm
Six months
ended
31 Dec 2013
Unaudited1
R
% change
Year ended
30 June 2014
Audited
Rm
Revenue
64 615
57 796
12
117 364
Operating profit before depreciation, amortisation and capital items
7 923
(1 115)
6 836
(974)
16
14 638
(2 016)
Operating profit before capital items
Capital items
6 808
66
5 862
(19)
16
12 622
1 500
Earnings before finance charges, dividend income, equity accounted earnings and taxation
Net finance charges
Dividend income
6 874
(59)
28
186
5 843
(889)
3
112
18
14 122
(1 998)
3
290
Taxation
7 029
(752)
5 069
(534)
39
12 417
(1 954)
6 277
(1 502)
4 535
184
38
10 463
(600)
Profit for the period
4 775
4 719
1
9 863
Attributable to:
4 946
(171)
4 611
108
7
10 090
(227)
Profit for the period from continuing operations
(Loss)/profit for the period from discontinued operations
4 775
4 719
1
9 863
Headline earnings per ordinary share (cents)2
Diluted headline earnings per ordinary share (cents)2
Basic earnings per ordinary share (cents)2
Diluted earnings per ordinary share (cents)2
248.4
225.2
251.5
227.7
232.8
210.0
232.6
209.8
7
7
8
9
461.7
416.7
510.2
455.2
Headline earnings per ordinary share (cents)2
Diluted headline earnings per ordinary share (cents)2
Basic earnings per ordinary share (cents)2
Diluted earnings per ordinary share (cents)2
203.6
188.6
198.8
184.7
240.6
216.2
239.6
215.4
(15)
(13)
(17)
(14)
443.5
402.0
496.8
444.3
Number of ordinary shares in issue (m)
Weighted average number of ordinary shares in issue (m)
Earnings attributable to ordinary shareholders (Rm)
Headline earnings attributable to ordinary shareholders (Rm)
2 518
2 431
4 832
4 947
2 022
1 869
4 478
4 497
25
30
8
10
2 100
1 977
9 821
8 770
14.1590
13.5482
5
14.1106
Average currency translation rate (rand:euro)
Notes
1. The December 2013 figures have been re-presented for the discontinued operations.
2. The rights issue announced on 2 July 2014, led to the restatement of December 2013 per share numbers, none of which resulted in a deviation of more than 1%.
127
ADDITIONAL INFORMATION
Continuing
operations
Rm
Discontinued
operations
Rm
Total
Rm
31 December 2014
Earnings/(loss) attributable to owners of the parent
6 226
(114)
(1 280)
–
4 946
(114)
Earnings/(loss) attributable to ordinary shareholders
6 112
(1 280)
4 832
Capital items
Impairments
Profit on disposal of intangible assets and property, plant and equipment
Other
1
(70)
3
308
–
–
Total capital items
(66)
308
242
Taxation effects of capital items
Non-controlling interests' portion of capital items
Capital items of equity accounted companies (net of taxation)
(24)
(1)
15
(86)
(31)
–
(110)
(32)
15
Headline earnings/(loss)
6 036
31 December 2013
4 479
(133)
132
–
4 611
(133)
Earnings attributable to ordinary shareholders
4 346
132
4 478
Capital items
Impairments
Loss on disposal of intangible assets
Loss on disposal and dilution of investments
Other
3
38
17
(39)
15
–
–
19
18
38
17
(20)
Total capital items
19
34
53
(3)
(9)
(3)
(10)
(9)
–
(13)
(18)
(3)
Headline earnings
(1 089)
309
(70)
3
4 947
4 350
147
4 497
30 June 2014
Earnings/(loss) attributable to owners of the parent
10 355
(269)
(265)
–
10 090
(269)
Earnings/(loss) attributable to ordinary shareholders
10 086
(265)
9 821
Capital items
Impairments
Loss on disposal of intangible assets
Profit on disposal and dilution of investments
Other
76
45
(1 651)
30
78
–
(94)
10
154
45
(1 745)
40
(1 500)
–
(6)
229
(1 506)
229
(1 500)
223
(1 277)
561
(11)
(8)
(251)
(65)
–
310
(76)
(8)
9 128
(358)
8 770
Total capital items
Headline earnings/(loss)
128
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Six months
ended
31 Dec 2014
Unaudited
Rm
Six months
ended
31 Dec 2013
Unaudited
Rm
Year ended
30 June 2014
Audited
Rm
4 775
4 719
9 863
(83)
19
(67)
12
(145)
43
(64)
(55)
(102)
(3 087)
992
(182)
(15)
5 633
(29)
14
10
5 959
(124)
32
1
(2 292)
5 628
5 868
Other comprehensive (loss)/income for the period
(2 356)
5 573
5 766
Total comprehensive income for the period
2 419
10 292
15 629
2 589
(170)
10 185
107
15 844
(215)
2 419
10 292
15 629
Actuarial loss on defined benefit plans
Deferred taxation
Exchange differences on translation of foreign subsidiaries
Net value gain/(loss) on cash flow hedges and other fair value reserves
Deferred taxation
Other comprehensive (loss)/income of equity accounted companies, net of deferred taxation
129
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Balance at beginning of the period
Changes in ordinary stated share capital
Net shares issued
Net movement in treasury shares
Changes in preference share capital
Net utilisation of treasury shares
Changes in reserves
Total comprehensive income for the period attributable to owners of the parent
Equity portion of convertible bonds redeemed and issued net of deferred taxation
Ordinary dividends
Premium/(discount) on introduction and recognition of non-controlling interests
Other reserve movements
Changes in non-controlling interests
Total comprehensive (loss)/income for the period attributable to non-controlling interests
Dividends and capital distributions paid
Released on derecognition of subsidiary
Other transactions with non-controlling interests
Balance at end of the period
Comprising:
Ordinary stated share capital
Preference share capital
Distributable reserves
Convertible and redeemable bonds reserve
Foreign currency translation reserve
Share-based payment reserve
Other reserves
130
Six months
ended
31 Dec 2014
Unaudited
Rm
Six months
ended
31 Dec 2013
Unaudited
Rm
Year ended
30 June 2014
Audited
Rm
87 776
66 768
66 768
20 260
(6)
7 009
5
10 685
21
(500)
–
(378)
262
(496)
380
2 589
(51)
(3 749)
(217)
191
–
3
10 185
(2)
(1 516)
(99)
175
(22)
(43)
15 844
351
(1 516)
(152)
431
228
346
(170)
(8)
–
–
1
107
(198)
(56)
–
(49)
(215)
(208)
(1 768)
(2 814)
(109)
106 119
82 148
87 776
40 761
2 881
47 615
1 379
10 696
1 202
221
1 364
16 815
3 381
39 968
858
13 499
811
357
6 459
20 507
3 381
46 637
1 430
13 784
1 011
(515)
1 541
106 119
82 148
87 776
UNAUDITED INTERIM RESULTS AS AT 31 DECEMBER 2014
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
31 Dec 2014
Unaudited
Rm
31 Dec 2013
Unaudited
Rm
30 June 2014
Audited
Rm
63 742
54 799
4 235
11 777
2 057
142
66 934
53 641
2 826
6 999
926
3 164
66 116
54 422
4 223
10 399
1 390
70
136 752
134 490
136 620
21 105
26 496
18 434
4 782
20 890
27 343
10 947
–
18 455
24 040
16 341
6 865
70 817
59 180
65 701
Total assets
207 569
193 670
202 321
Ordinary stated share capital and reserves
101 874
2 881
72 308
3 381
82 854
3 381
104 755
1 364
75 689
6 459
86 235
1 541
Total equity
106 119
82 148
87 776
45 330
10 879
2 810
48 607
10 587
4 089
55 580
10 878
2 859
59 019
63 283
69 317
36 247
6 038
112
34
35 430
8 348
4 461
–
36 185
6 411
2 436
196
42 431
48 239
45 228
207 569
193 670
202 321
Closing exchange rate (rand:euro)
4 045
14.0070
3 576
14.4990
3 946
14.5721
ASSETS
Non-current assets
Goodwill and intangible assets
Property, plant and equipment, investment property and biological assets
Other long-term assets
Current assets
Inventories
Accounts receivable, short-term loans and other current assets
Assets held for sale
Interest-bearing long-term liabilities
Other long-term liabilities and provisions
Current liabilities
Accounts payable, provisions and other current liabilities
Interest-bearing short-term liabilities
Liabilities held for sale
131
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
Six months
ended
31 Dec 2014
Unaudited
Rm
Six months
ended
31 Dec 2013
Unaudited1
Rm
Year ended
30 June 2014
Audited1
Rm
9 072
9 048
19 039
Increase in inventories
Increase in vehicle rental fleet
(Increase)/decrease in receivables
Increase in payables
(2 334)
(398)
(1 120)
1 163
(2 095)
(102)
(972)
633
(1 001)
(323)
2 431
3 001
Cash generated before working capital changes
Changes in working capital
(2 689)
(2 536)
4 108
Movement in instalment sale and loan receivables
Net dividends paid
Net finance income/(costs)
Taxation paid
6 383
(815)
(3 849)
223
(897)
6 512
(998)
(1 792)
(780)
(704)
23 147
(1 754)
(1 818)
(1 842)
(1 592)
1 045
(5 736)
7 373
2 238
(4 297)
2 884
16 141
(16 371)
6 200
Net increase in cash and cash equivalents
Effects of exchange rate changes on cash and cash equivalents
Cash and cash equivalents at beginning of period
2 682
(589)
16 341
825
873
9 249
5 970
1 122
9 249
Cash and cash equivalents at end of period
18 434
10 947
16 341
Notes
1. The cash flow has been re-presented to combine the secured and unsecured instalment sales receivables movement, previously disclosed separately under working
capital and cash flows from operating activities. Additions to vehicle rental fleet which are financed through finance leases are now excluded from working capital
movements as non-cash items.
132
SEGMENTAL ANALYSIS
Retail activities
Manufacturing sourcing, logistics and corporate services
Properties
Intersegment revenue eliminations
Operating profit before capital items – continuing operations
Retail activities
Properties
Reconciliation between operating profit per income statement and
operating profit per segmental analysis
Operating profit before capital items per income statement
Add: KAP equity accounted earnings at 45%
31 Dec 2014
Unaudited
Rm
Six months
ended
31 Dec 2014
Unaudited
Rm
Six months
ended
31 Dec 2013
Unaudited1
Rm
% change
Year ended
30 June 2014
Audited
Rm
41 061
16 989
36 654
15 349
12
11
73 262
30 587
18 747
1 834
17 561
1 295
7
42
33 381
2 911
78 631
(14 016)
70 859
(13 063)
11
140 141
(22 777)
64 615
57 796
12
117 364
2 660
351
2 279
326
17
8
4 579
862
2 146
186
1 651
1 991
158
1 266
8
18
30
4 451
324
2 730
6 994
6 020
16
12 946
6 808
186
5 862
158
12 622
324
6 994
6 020
12 946
%
30 June 2014
Audited
Rm
%
76 911
18 324
50
12
79 958
13 787
49
8
10
2
28
16 892
4 041
36 615
11
3
24
19 419
4 041
45 401
12
3
28
100
152 783
100
162 606
100
%
31 Dec 2013
Unaudited
Rm
81 980
16 579
50
10
16 852
4 085
45 629
165 125
Total assets
Retail activities
Properties
Notes
133
RECONCILIATION OF TOTAL ASSETS PER STATEMENT OF FINANCIAL POSITION TO TOTAL ASSETS PER SEGMENTAL ANALYSIS
31 Dec 2014
Unaudited
Rm
31 Dec 2013
Unaudited
Rm
30 June 2014
Audited
Rm
Total assets per statement of financial position
Less: Cash and cash equivalents
Less: Investments in equity accounted companies
Add: 45% investment in KAP
Less: Investments and loans
Less: Short-term loans receivable
Less: Assets of discontinued operations and assets held for sale
207 569
(18 434)
(4 235)
4 085
(11 777)
(7 301)
(4 782)
193 670
(10 947)
(2 826)
4 041
(6 999)
(4 955)
(19 201)
202 321
(16 341)
(4 223)
4 041
(10 399)
(5 928)
(6 865)
Total assets per segmental analysis
165 125
152 783
162 606
%
Year ended
30 June 2014
Audited
Rm
%
Six months
ended
31 Dec 2014
Unaudited
Rm
%
Six months
ended
31 Dec 2013
Unaudited1
Rm
40 861
1 959
17 035
4 760
63
3
26
8
36 821
1 669
15 314
3 992
64
3
26
7
73 850
4 094
30 572
8 848
63
3
26
8
64 615
100
57 796
100
117 364
100
31 Dec 2014
Unaudited
Rm
%
31 Dec 2013
Unaudited
Rm
%
30 June 2014
Audited
Rm
%
109 709
2 090
19 322
5 631
80
2
14
4
100 962
1 985
25 487
6 056
75
1
19
5
106 627
2 222
17 730
10 041
78
2
13
7
136 752
100
134 490
100
136 620
100
Continental Europe
Pacific Rim
Southern Africa
United Kingdom
Non-current assets
Continental Europe
Pacific Rim
Southern Africa
United Kingdom
Notes
134
UNAUDITED RESULTS AS AT 31 DECEMBER 2014
FAIR VALUES OF FINANCIAL INSTRUMENTS
Fair value as at
31 Dec 2014
Rm
Fair value as at
31 Dec 2013
Rm
Fair value as at
30 June 2014
Rm
Fair value
hierarchy
4 868
202
518
(1 682)
(127)
126
214
60
(1 602)
(239)
3 769
206
13
(1 594)
(197)
Level 11
Level 22
Level 22
Level 22
Level 22
1. Valued using unadjusted quoted prices in active markets for identical financial instruments. This category includes listed shares and unit trusts.
2. Valued using techniques where all of the inputs that have a significant effect on the valuation are directly or indirectly based on observable market data. These inputs include published interest rate yield curves
and foreign exchange rates.
SELECTED EXPLANATORY NOTES
Statement of compliance
The condensed consolidated interim financial information for the six months ended 31 December 2014, has been prepared and presented in accordance with the framework concepts and the
measurement and recognition requirements of International Financial Reporting Standards (IFRS), the SAICA Financial Reporting Guide as issued by the Accounting Practices Committee and
the Financial Reporting Pronouncements as issued by the Financial Reporting Standards Council, the information required by IAS 34 – Interim Financial Reporting, the Listings Requirements
of the JSE Limited and the Companies Act, 71 of 2008, as amended, of South Africa. The consolidated interim financial information should be read in conjunction with the annual financial
statements for the year ended 30 June 2014.
Basis of preparation
The condensed interim financial statements are prepared in millions of South African rands (Rm) on the historical-cost basis, except for certain assets and liabilities which are carried at
amortised cost, and certain financial instruments which are stated at their fair value.
Accounting policies
The accounting policies adopted in the preparation of the condensed interim financial information are consistent with those of the annual financial statements for the year ended 30 June 2014
except during the period under review, the group adopted all the IFRS and interpretations that were effective and deemed applicable to the group. None of these standards and interpretations
had a material impact on the results.
Effect of restatement of prior period
The 31 December 2013 per share numbers have been restated for the bonus element of the rights issue announced on 2 July 2014. The effect of this restatement was a decrease in the respective
earnings per share figures for the period ended 31 December 2013 of between 1.7 cents per share and 2.4 cents per share.
Effect of re-presentation of prior period
The prior period figures in the income statement have been re-presented to disclose the discontinued operations: KAP Industrial Holdings Limited group and the financial services
division of JD Group Limited.
The effect of the above re-presentation was a decrease in the earnings per share figures from continuing operations for the six months ended 31 December 2013 of between
5.6 cents per share and 7.8 cents per share. Revenue from continuing operations and profit from continuing operations for the six months ended 31 December 2013 decreased by
R9 627 million and R184 million, respectively.
135
Annexure 3
6 (SIX) MONTHS’ UNAUDITED AND UNREVIEWED HISTORICAL FINANCIAL INFORMATION ON GENESIS INVESTMENT
HOLDING GMBH FOR THE HALF YEAR ENDED 31 DECEMBER 2014
In accordance with Listings Requirement 8.1, the sole director of Genesis Investment Holding GmbH hereby takes responsibility for the historical financial
information contained in this Annexure.
GENESIS INVESTMENT HOLDING GMBH
CONDENSED CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2014 (6 MONTHS)
€’000
Revenue
532 138
Operating profit before depreciation and amortisation
32 122
(13 473)
Earnings before finance charges and taxation
Net finance charges
18 649
(4 369)
Taxation
14 280
(100)
Attributable to:
14 180
14 180
–
14 180
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AT 31 DECEMBER 2014
€’000
ASSETS
Non-current assets
Property, plant and equipment and investment property
571 610
248 538
8 533
6 429
835 110
Current assets
Inventories
198 879
78 065
84 956
361 900
Total assets
Total equity
Interest-bearing long-term liabilities
1 197 011
178 798
57
178 855
224 497
148 137
61 370
434 005
Current liabilities
Interest-bearing short-term liabilities
302 781
281 370
584 151
136
1 197 011
FOR THE YEAR ENDED 31 DECEMBER 2014 (6 MONTHS)
€’000
Interest received
Interest paid
Taxation paid
92 289
10 955
(15 324)
(872)
87 048
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to intangible assets and property, plant and equipment
Increase in investments and short-term loans receivable
(13 527)
2 997
(10 530)
Decrease in long-term interest-bearing loans and borrowings
Increase in short-term interest-bearing loans and borrowings
(73 985)
16 735
Net cash outflow from financing activities
(57 250)
NET INCREASE IN CASH AND CASH EQUIVALENTS
19 268
65 688
CASH AND CASH EQUIVALENTS AT END OF THE YEAR
84 956
137
Annexure 4
PRO FORMA STATEMENT OF FINANCIAL POSITION AND INCOME STATEMENT OF THE COMPANY SUBSEQUENT TO THE
IMPLEMENTATION OF THE SCHEME, AS IF FOR THE STATEMENT OF FINANCIAL POSITION PURPOSES THE SCHEME
HAD BEEN IMPLEMENTED ON 31 DECEMBER 2014, AND FOR INCOME STATEMENT PURPOSES ON 1 JULY 2014
In accordance with Listings Requirement 8.1 and 8.16, the Steinhoff Board hereby takes responsibility for the historical financial information contained in
this Annexure.
PRO FORMA FINANCIAL INFORMATION
The pro forma income statement and statement of financial position (“pro forma financial information”) of the Company are set out below to illustrate the effects of the Scheme and
the acquisition contemplated in the kika-Leiner Sale Agreement (“Acquisition”) (collectively the “Transactions”) on the Company’s results for the period ended 31 December 2014.
The pro forma financial information has been prepared for illustrative purposes only, in order to provide information about the impact of the Transactions on the financial position
and results of operations of the Company had the Transactions occurred on 1 July 2014 for income statement purposes and on 31 December 2014 for statement of financial position
purposes.
The pro forma financial effects are presented in accordance with the Listings Requirements, the Guide on Pro Forma Financial Information issued by SAICA, ISAE 3420 and the
measurement and recognition requirements of IFRS.
Because of its nature, the pro forma financial information may not give a fair reflection of the Company’s financial position, changes in equity, results of operations or cash flows
after the Transactions.
The accounting policies applied in quantifying pro forma adjustments are consistent with the Steinhoff group’s accounting policies at 30 June 2014 and 31 December 2014.
The reporting accountants’ report relating to the pro forma financial information is included in Annexure 6 to this Prospectus. The pro forma financial information is the responsibility of the
Steinhoff Board.
138
139
–
61
61
–
61
6 874
(59)
28
186
7 029
(752)
6 277
(1 502)
4 775
4 946
(171)
4 775
203.6
188.6
198.8
184.7
Earnings before finance charges, dividend income, equity accounted
earnings and taxation
Net finance charges
Dividend income
Taxation
(Loss)/profit from discontinued operations
Continuing and discontinued operations:
Headline earnings per ordinary share (cents)
Diluted headline earnings per ordinary share (cents)
Basic earnings per ordinary share (cents)
Diluted earnings per ordinary share (cents)
Number of ordinary shares in issue (millions)
Weighted average number of ordinary shares in issue (millions)
Diluted number of ordinary shares in issue (millions)
Diluted weighted average number of ordinary shares in issue (millions)
Headline earnings attributable to ordinary shareholders (R’millions)
Diluted headline earnings attributable to ordinary shareholders
(R’millions)
Earnings attributable to ordinary shareholders (R’millions)
Diluted earnings attributable to ordinary shareholders (R’millions)
61
6 808
66
Operating profit before capital items
Capital items
–
7 923
(1 115)
–
38
–
38
61
61
61
61
2 518
2 431
3 016
2 975
4 947
5 610
4 832
5 493
69
(8)
–
69
–
–
–
–
–
–
64 615
5 671
4 893
5 554
2 518
2 469
3 016
3 013
5 008
202.8
188.2
198.2
184.3
4 836
5 007
(171)
4 836
(1 502)
6 338
7 098
(760)
6 874
10
28
186
6 808
66
7 923
(1 115)
64 615
1 467
1 463
1 463
–
–
–
–
1 467
1 463
1 463
–
1 463
13
1 450
2 033
(583)
2 183
(150)
–
–
2 189
(6)
2 609
(420)
21 924
(569)
(569)
(569)
926
926
926
926
(569)
(503)
(503)
–
(503)
–
(503)
(582)
79
(109)
(473)
–
–
(109)
–
(109)
–
–
6 569
5 787
6 448
3 444
3 395
3 942
3 939
5 906
174.0
166.7
170.5
163.7
5 796
5 967
(171)
5 796
(1 489)
7 285
8 549
(1 264)
8 948
(613)
28
186
8 888
60
10 423
(1 535)
86 539
Pro forma
Pro forma
adjustment
Pro forma Pepkor unaudited Pro forma Pepkor after Rights Offer
relating to the after Rights Offer 6 months ended
transaction and transaction
31 Dec 20143
Rights Offer2
adjustments
adjustment
adjustments4
Operating profit before depreciation, amortisation and capital items
Steinhoff
unaudited
6 months ended
31 Dec 20141
Revenue
R’millions
201
201
201
–
–
–
–
201
201
201
–
201
–
201
202
(1)
264
(62)
–
–
264
–
455
(191)
7 535
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
kika-Leiner
Genesis N.V.
unaudited
unaudited
6 months ended 6 months ended
5
31 Dec 2014
31 Dec 20146
(49)
(49)
(49)
–
–
–
–
(49)
(49)
(49)
–
(49)
–
(49)
(49)
–
(49)
–
–
–
(49)
–
(49)
–
–
6 721
5 939
6 600
3 444
3 395
3 942
3 939
6 058
178.4
170.6
174.9
167.6
5 948
6 119
(171)
5 948
(1 489)
7 437
8 702
(1 265)
9 163
(675)
28
186
9 103
60
10 829
(1 726)
94 074
Group pro forma
Pro forma after Rights Offer
and all
Genesis
transaction
transaction
7
adjustments
adjustments
140
–
–
(64)
(2 292)
2 419
2 589
(170)
2 419
4 946
(114)
15
100
4 947
Total other comprehensive income for the period
Non-controlling interests (NCI’s)
Headline earnings reconciliation
Adjusted for capital items of equity accounted companies (net of tax)
Adjusted for capital items (net of tax and NCI's)
Headline earnings attributable to ordinary shareholders
61
61
–
–
–
61
61
–
61
61
4 775
5 008
5 007
(114)
15
100
2 480
2 650
(170)
2 480
(2 292)
(64)
4 836
1 467
1 463
–
–
4
1 631
1 645
(14)
1 631
168
–
1 463
(569)
(503)
(66)
–
–
(503)
(503)
–
(503)
–
–
(503)
5 906
5 967
(180)
15
104
3 608
3 792
(184)
3 608
(2 124)
(64)
5 796
Pro forma
Pro forma
adjustment
Pro forma Pepkor unaudited Pro forma Pepkor after Rights Offer
relating to the after Rights Offer 6 months ended
31 Dec 20143
Rights Offer2
adjustments
adjustment
adjustments4
Consolidated statement of comprehensive income
Items that will not be reclassified subsequently to profit or loss, net of
taxation
Items that may be reclassified subsequently to profit or loss, net of
taxation
R’millions
Steinhoff
unaudited
6 months ended
31 Dec 20141
201
201
–
–
–
201
201
–
201
–
–
201
–
–
–
–
–
–
–
–
–
–
–
–
kika-Leiner
Genesis N.V.
unaudited
unaudited
6 months ended 6 months ended
5
31 Dec 2014
31 Dec 20146
(49)
(49)
–
–
–
(49)
(49)
–
(49)
–
–
(49)
6 058
6 119
(180)
15
104
3 760
3 944
(184)
3 760
(2 124)
(64)
5 948
Group pro forma
Pro forma after Rights Offer
and all
Genesis
transaction
transaction
7
adjustments
adjustments
141
–
–
70 817
207 569
101 874
2 881
104 755
1 364
106 119
Total assets
Total equity
–
–
66 035
4 782
–
–
–
–
45 330
10 879
2 810
59 019
–
–
–
–
–
–
–
–
–
136 752
21 105
26 496
18 434
–
–
–
–
–
–
59 019
45 330
10 879
2 810
106 119
104 755
1 364
101 874
2 881
207 569
70 817
66 035
4 782
21 105
26 496
18 434
136 752
63 742
54 799
4 235
11 777
2 057
142
4 421
3 743
127
551
8 651
8 627
24
8 627
–
20 422
13 326
13 250
76
7 893
2 554
2 803
7 096
1 760
4 399
83
431
423
–
15 491
12 050
3 441
–
42 763
42 763
–
40 763
2 000
59 495
–
–
–
–
–
–
59 495
59 495
–
–
–
–
–
78 931
61 123
14 447
3 361
157 533
156 145
1 388
151 264
4 881
287 486
84 143
79 285
4 858
28 998
29 050
21 237
203 343
124 997
59 198
4 318
12 208
2 480
142
Pro forma
Pro forma
adjustment
Pro forma
Pro forma Pepkor after Rights Offer
relating to the after Rights Offer Pepkor unaudited
Rights Offer2
adjustments
adjustment at 31 Dec 2014 3
adjustments4
63 742
54 799
4 235
11 777
2 057
142
Steinhoff
unaudited
at 31 Dec 20141
Current assets
Inventories
ASSETS
Non-current assets
Property, plant and equipment and investment property
Other long-term assets
R’millions
6 080
3 145
2 075
860
2 505
2 504
1
2 504
–
16 767
5 069
5 069
–
2 786
1 093
1 190
11 698
8 007
3 481
–
120
90
–
kika-Leiner
unaudited at
31 Dec 20145
–
–
–
–
1
1
–
1
–
1
1
1
–
–
–
1
–
–
–
–
–
–
–
Genesis N.V.
unaudited at
31 Dec 20146
2 504
2 504
–
–
(2 554)
(2 554)
–
(2 554)
–
(50)
(50)
(50)
–
–
–
(50)
–
–
–
–
–
–
–
87 515
66 772
16 522
4 221
157 485
156 096
1 389
151 215
4 881
304 204
89 163
84 305
4 858
31 784
30 143
22 378
215 041
133 004
62 679
4 318
12 328
2 570
142
Pro forma Group pro forma
Genesis after Rights Offer
adjustments7
adjustments
142
4 045
1 514
2 518
–
4 045
1 514
2 518
207 569
42 431
42 397
34
36 247
6 038
112
–
20 422
7 350
7 315
35
6 778
459
78
926
59 495
1 241
1 241
–
–
–
1 241
4 393
763
3 444
287 486
51 022
50 953
69
43 025
6 497
1 431
–
16 767
8 182
8 182
–
4 241
3 941
–
kika-Leiner
unaudited at
31 Dec 20145
–
1
–
–
–
–
–
–
Genesis N.V.
unaudited at
31 Dec 20146
–
(50)
–
–
–
–
–
–
The final allocation will require a detailed identification and valuation exercise which will be completed as part of the Steinhoff year-end process at 30 June 2015.
10.The pro forma statement of financial position is based on the assumption that the Transaction occurred on 31 December 2014.
9. The pro forma statement of comprehensive income is based on the assumption that the Transaction occurred on 1 July 2014.
8. Apart from the above adjustments there are no other post balance sheet events which need adjustment to the pro forma financial information.
vi. All the adjustments are of a continuing nature except the Transaction costs.
v. Included in the total equity of the Genesis group is a reverse acquisition reserve account. The balance of this account will be determined on listing date. It will be calculated as the Steinhoff market capitalisation on the listing date, less the Steinhoff group stated capital balance on that date. At 31 December
2014, using the Steinhoff share price of R59.40 on this date, the reverse acquisition reserve calculated to a debit balance of R111 651 million. The stated capital of the group will increase with the same amount at this date, resulting in a zero effect on total equity.
iv. Once-off Transaction costs of R49 million have been expensed.
iii. Standard consolidation journal entries in terms of IFRS which include inter alia the elimination of kika-Leiner and Genesis group’s ‘at acquisition’ share capital and accumulated reserves.
ii. The Acquisition has been accounted for in terms of IFRS 3, using the principles of reverse acquisition accounting. Management’s best estimate is that no fair value adjustments in terms of IFRS 3 are required to the statement of financial position of Genesis Group. The final allocation will require a detailed
identification and valuation exercise which will be completed as part of the acquisition process.
7. The column titled “Pro forma Genesis transaction adjustments” refers to the requirements of IFRS 3 and Steinhoff management’s best estimate at this stage:
i. Genesis made an offer to exchange all Steinhoff shares held by Steinhoff shareholders for shares in Genesis.
6. The column titled “Genesis N.V. unaudited 6 months ended 31 Dec 2014” has been prepared based on the Genesis N.V. results. These interim results are prepared from the unpublished management accounts of Genesis.
5. The column titled “kika-Leiner unaudited 6 months ended 31 Dec 2014” has been prepared based on the kika-Leiner unaudited Group interim financial statements for the 6 months ended 31 December 2014. The kika-Leiner interim financial statements were converted to ZAR for inclusion in these pro forma results
using the average Rand:Euro exchange rate of 14.16 for the statement of comprehensive income and the closing Rand:Euro exchange rate of 14.01 for the statement of financial position. These interim results are prepared from the unpublished management accounts of kika-Leiner. The Company is satisfied with
the quality of those management accounts.
vi. Standard consolidation journal entries in terms of IFRS which include inter alia the elimination of Pepkor’s ‘at acquisition’ share capital and accumulated reserves. All the adjustments are of a continuing nature except once-off Securities Transfer Tax and Transaction costs.
v. Securities Transfer Tax of R63 million and Transaction costs of R46 million have been expensed.
iv. Interest was calculated on R13 291 million borrowed funds at an after tax interest rate of 5.9%. A preference dividend was calculated at 72% of SA prime on the R2 000 million perpetual preference shares raised.
iii. The transaction is funded by the issue of 926 million Steinhoff Shares to the value of R52 759 million (based on a transaction share price of R57), cash of R15 086 million to vendors, and cash of R205 million (relating to Securities Transfer Tax and Transaction costs).
4. The column titled “Pro forma Pepkor transaction adjustments” refers to the requirements of IFRS 3 and Steinhoff management’s best estimate at this stage:
i. Steinhoff purchased 100% of the share capital of Pepkor.
ii. The excess purchase consideration paid to Pepkor shareholders over the net asset value of R8 627 million at 31 December 2014 has been allocated as follows:
– R41 061 million to goodwill;
– R18 434 million to intangible assets which have an indefinite life; and
– R3 441 million to deferred tax liabilities raised on the fair value adjustments.
3. The column titled “Pepkor unaudited 6 months ended 31 Dec 2014” has been prepared based on the Pepkor unaudited Group interim financial statements for the 6 months ended 31 December 2014. These interim results are prepared from the unpublished management accounts of Pepkor. The Company is
satisfied with the quality of those management accounts.
4 391
529
3 444
304 204
59 204
59 135
69
47 266
10 438
1 431
Pro forma Group pro forma
Genesis after Rights Offer
adjustments7
adjustments
2. The “Pro forma adjustment relating to the Rights Offer” column refers to the impact of the Rights Offer which closed on 1 August 2014. Interest on the net proceeds of R17 859 million was calculated for the period from 1 July 2014 to the dates of receipt of these proceeds at 6% per annum before tax.
1. The column titled “Steinhoff unaudited 6 months ended 31 Dec 2014” has been prepared based on the Steinhoff unaudited Group interim financial statements for the 6 months ended 31 December 2014.
Assumptions and notes
NAV per share (cents)
Tangible NAV per share (cents)
Number of ordinary shares in issue (millions)
–
–
42 431
207 569
–
–
42 397
34
–
–
–
36 247
6 038
112
Pro forma
Pro forma
adjustment
Pro forma
Pro forma Pepkor after Rights Offer
relating to the after Rights Offer Pepkor unaudited
Rights Offer2
adjustments
adjustment at 31 Dec 20143
adjustments4
Current liabilities
R’millions
Steinhoff
unaudited
at 31 Dec 20141
Annexure 5
HISTORICAL FINANCIAL INFORMATION OF THE COMPANY FOR THE PERIOD ENDED 30 JUNE 2015
In accordance with Listings Requirement 8.1, the Board hereby takes responsibility for the historical financial information contained in this Annexure.
(Incorporated in the Netherlands)
AUDITED ANNUAL FINANCIAL STATEMENTS
30 June 2015
Preparation supervised by: Robert Harmzen
Contents
Directors’ responsibility and approval
Page
144
Directors’ report
145
Statement of comprehensive income
146
Statement of financial position
146
Statement of changes in equity
146
Statement of cash flows
146
Summary of accounting policies
147
Notes to the annual financial statements
148
143
144
DIRECTORS’ REPORT
for the period ended 30 June 2015
Company registration number
63570173
Registered office
Herengracht 466
1017 CA Amsterdam
The Netherlands
Directors
JL Coetzer (Appointed 24 July 2015)
R Harmzen
SH Muller (Appointed 24 July 2015)
Shareholder
Stichting Genesis International
Company secretary
PO Box 1955
Bramley
2018
Review of operations and financial results
The financial results of the company are set out in the attached financial statements. The company was
incorporated on 22 June 2015 and has operated for eight days in the financial period.
Events after the reporting date
On 30 July 2015, the company authorised a prospectus to be sent to shareholders which will have the following
impacts, if implemented by shareholders:
The Company will acquire kika-Leiner by way of a share purchase of all of the issued share capital of Genesis
Investment Holding GmbH resulting in Genesis Investment Holding GmbH becoming a wholly-owned subsidiary
of the Company.
On the implementation of the scheme, the Company will issue ordinary shares to the scheme participants, and
will at the same time or as soon as reasonably possible thereafter acquire and/or cancel the incorporation shares
currently in issue. Subsequent to implementation of the scheme, Steinhoff International Holdings Limited will
become a wholly-owned subsidiary of the Company, after which the Company will list on the Prime Standard of
the Frankfurt Stock Exchange, accompanied by an inward listing on the Johannesburg Stock Exchange.
145
Notes
2015
€
Operating expenses
1
(19 415)
Loss before taxation
Taxation
2
(19 415)
– Loss for the period
(19 415)
–
Other comprehensive income
Total comprehensive loss for the period
(19 415)
Loss per share (cents)
Headline loss per share (cents)
3
3
(21.57)
(21.57)
as at 30 June 2015
Notes
2015
€
ASSETS
Current assets
47 495 Total assets
47 495 EQUITY AND LIABILITIES
Reserves
4
45 000
(19 415)
25 585
Current liabilities
Accruals and other payables
Related party short-term loans payable
5
19 410 2 500
21 910 Total equity and liabilities
47 495 Net asset value per share (cents)
3
28.43
Reserves
€
Total
€
GENESIS INTERNATIONAL HOLDINGS N.V
STATEMENT OF CHANGES IN EQUITY
Share
capital
€
Issue of shares
Total comprehensive loss for the period
Loss for the period
Other comprehensive income
– 45 000 – – – (19 415)
– 45 000 (19 415)
– –
(19 415)
–
(19 415)
–
45 000 (19 415)
25 585 Notes
2015
€
Cash utilised in operations
Net cash outflow from operating activities
6
(5)
(5)
Issue of shares
Proceeds from related party loan
45 000 2 500 Net cash inflow from financing activities
47 500 Net increase in cash and cash equivalents
47 495 CASH AND CASH EQUIVALENTS AT END OF THE PERIOD
47 495 146
ACCOUNTING POLICIES
Genesis International Holdings N.V. (“the company”) is a Dutch registered company company which was incorporated on 22 June 2015.
STATEMENT OF COMPLIANCE
The annual financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS), the interpretations adopted by the International
Accounting Standards Board (IASB), the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee, interpretations adopted by the International
Financial Reporting Interpretations Committee of the IASB (IFRIC) and the JSE Listings Requirements.
ADOPTION OF NEW AND REVISED STANDARDS
At incorporation on 22 June 2015, the company has adopted all the new and revised standards and interpretations issued by the IASB and the IFRIC that are relevant to its operations
and effective for annual reporting periods beginning on or after 1 July 2014.
BASIS OF PREPARATION
The annual financial statements are prepared in euro on the historical-cost basis, except for certain assets and liabilities which are carried at amortised cost.
The preparation of financial statements in conformity with IFRS requires management to make judgements, estimates and assumptions that may affect the application of policies
and reported amounts of assets, liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are
believed to be reasonable under the circumstances, the results of which form the basis of making the judgements about carrying values of assets and liabilities that are not readily
apparent from other sources.
The estimates and underlying assumptions are reviewed on an on-going basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if
the revision only affects that period, or in the period of the revision and future periods if the revision affects both current and future periods.
Judgements made by management in the application of IFRS that have a significant effect on the financial statements and estimates with a significant risk of material adjustment in
the next financial year are discussed under Judgements and estimates.
TAXATION
Current taxation
Income taxation on the profit or loss for the year comprises current and deferred taxation. Income taxation is recognised in profit or loss except to the extent that it relates to items
recognised directly in other comprehensive income or equity, in which case it is recognised directly in other comprehensive income or equity.
Current taxation is the expected taxation payable on the taxable income for the year, using taxation rates enacted or substantially enacted at the reporting date, and any adjustment
to taxation payable in respect of previous years.
Initial recognition
Financial assets and financial liabilities are recognised on the company’s statement of financial position when the company becomes a party to the contractual provisions of the
instrument.
Initial measurement
All financial instruments are initially recognised at fair value, including transaction costs that are incremental to the company and directly attributable to the acquisition or issue
of the financial asset or financial liability.
Subsequent measurement
All financial liabilities are classified as financial liabilities at amortised cost. Cash and cash equivalents consist of cash balances held with a bank and are classified as loans and receivables.
Loans and receivables are carried at amortised cost, with interest recognised in profit or loss for the period using the effective interest method.
Derecognition
The company derecognises a financial asset when the rights to receive cash flows from the asset have expired or have been transferred and the company has transferred
substantially all risks and rewards of ownership.
A financial liability is derecognised when, and only when, the liability is extinguished, i.e. when the obligation specified in the contract is discharged, cancelled or has expired.
Impairment of financial assets
An impairment loss for loans and receivables is recognised in profit or loss when there is evidence that the company will not be able to collect all amounts due according to the
original terms of the receivables.
The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets.
Effective-interest method
The effective-interest method is a method of calculating the amortised cost of a financial instrument and of allocating interest income over the relevant period. The effective interest
rate is the rate that exactly discounts estimated future cash receipts (including all fees on points paid or received that form an integral part of the effective interest rate, transaction
costs and other premiums or discounts) through the expected life of a financial instrument, or, where appropriate, a shorter period.
JUDGEMENTS AND ESTIMATES
Judgements and estimates are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be
reasonable under the circumstances.
The company makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates
and assumptions are constantly assessed.
CONTINGENT LIABILITIES
Management applies its judgement to the fact patterns and advice it receives from its attorneys, advocates and other advisors in assessing if an obligation is probable, more likely
than not, or remote. This judgement application is used to determine if the obligation is recognised as a liability or disclosed as a contingent liability.
147
2015
€
1.
LOSS BEFORE TAXATION
Operating loss is stated after taking account of the following items:
Auditors’ remuneration
Tax advisor fees
Other professional fees
Number of employees
No remuneration was paid to directors of the company during the period.
2.
TAXATION
As the company has incurred a fiscal loss, no corporate income tax is due. No deferred tax asset was raised on the fiscal loss as it is not probable that
the company will realise taxable income in the foreseeable future.
3.
LOSS PER SHARE
Basic loss per share
Basic loss per share is calculated by dividing the net loss attributable to ordinary shareholders by the weighted average number of ordinary shares in
issue during the year.
Headline loss per share
Headline loss per share is calculated by dividing the headline loss by the weighted average number of ordinary shares in issue during the year.
There are no instruments with a potential dilutive effect on loss per share, therefore basic and diluted loss per share is equal.
Net asset value per ordinary share is calculated by dividing the ordinary shareholder’s equity by the number of ordinary shares in issue at year-end.
The company does not have intangible assets, therefore the net asset value and tangible net asset value per share is equal.
Loss and headline loss attributable to owners of the parent
Weighted average number of ordinary shares
4.
5.
ORDINARY SHARE CAPITAL
Authorised
450 000 ordinary shares of €0.50 each
Issued
90 000 ordinary shares of €0.50 each
(19 415)
90 000
225 000
45 000
RELATED PARTY SHORT-TERM LOANS PAYABLE
Stichting Genesis International N.V. is the sole shareholder of the company. The loan does not bear interest and has no fixed terms of repayment.
6.
4 235
3 025
12 100
– CASH UTILISED IN OPERATIONS
Loss before taxation
Increase in accruals and other payables
Cash utilised in operations
7.
COMMITMENTS AND CONTINGENCIES
There is no litigation, current or pending, which is considered likely to have a material adverse effect on the company. The company has no material
commitments.
8.
2 500
(19 415)
19 410 (5)
The company does not speculate in the trading of derivative or other financial instruments.
8.1
Total financial assets and liabilities
Loans and receivables and other financial liabilities at carrying and fair values
Accruals and other payables
Related party loans payable
47 495 (19 410)
(2 500)
25 585 No items were classified as ‘held to maturity’, ‘designated as at fair value through profit or loss’ or ‘available for sale’ during either period presented.
148
8.2
Fair values
The fair values of financial assets and financial liabilities are determined as follows:
Non-derivative financial liabilities:
Fair value, which is determined for disclosure purposes, is calculated based on the present value of future principal and interest cash
flows, discounted at the market rate of interest at the reporting date. The financial assets and liabilities are categorized into level 2 fair
value categories as inputs used to determine fair value are not based on quoted prices within the level 1 category.
The fair values are not necessarily indicative of the amounts the company could realise in the normal course of business.
No fair value adjustments were made to any of the financial assets and liabilities.
8.3
Foreign currency risk
The financial assets and financial liabilities of the company are all denominated in euro and therefore the company does not have any
exposure to foreign currency risk.
8.4
Interest rate risk
The financial assets and financial liabilities of the company are all interest free and therefore the company is not exposed to any
interest rate risk.
8.5
Credit risk
At 30 June 2015, the company did not consider there to be any significant concentration of credit risk which had not been adequately
provided for.
The carrying amounts of financial assets represent the maximum credit exposure.
The maximum exposure to credit risk at the reporting date without taking account of the value of any collateral obtained was:
2015
€
47 495 Ageing of financial assets
None of the financial assets of the company have been assessed to be past their due terms or to be impaired.
9.
8.6
Liquidity risk
Liquidity risk is the risk that an entity will encounter difficulty in meeting its obligations associated with financial liabilities. Liquidity
risk may also arise because of the possibility that the entity could be required to pay its liabilities earlier than expected.
The company manages liquidity risk by monitoring forecast cash flows and by ensuring that adequate borrowing facilities are
available.
All financial liabilities are repayable within 12 months.
8.7
Capital risk
The company manages its capital to ensure that the company will be able to continue as a going concern while maximising the return
to stakeholders through the optimisation of the debt and equity balance.
The capital structure of the company consists of debt, and equity attributable to equity holders of the parent, comprising issued share
capital and retained earnings as disclosed in the statement of changes in equity.
The company’s risk management committee will review the capital structure on a semi-annual basis. As a part of this review, the
committee will consider the cost of capital and the risks associated with each class of capital. Based on recommendations of the
committee, the company will balance its overall capital structure through the payment of dividends, new share issues and share buybacks as well as the issue of new debt or the redemption of existing debt.
NEW ACCOUNTING PRONOUNCEMENTS
Effective date
- annual
periods
commencing on
or after
At the date of authorisation of these annual financial statements, there are standards and interpretations in issue but not yet effective. These include
the following standards and interpretations that have not been early adopted and may have an impact on future financial statements:
IFRS 9
Financial Instruments
IFRS 10
Consolidated Financial Statements: Investment entities: Applying the consolidation exception
IFRS 11
Joint arrangements: Investment entities: Applying the consolidation exception
IFRS 12
Disclosure of Interests in Other Entities: Investment entities: Applying the consolidation exception
IFRS 14
Regulatory Deferral Accounts
IFRS 15
Revenue from Contracts with Customers
IAS 1
Presentation of Financial Statements: Disclosure initiative
IAS 27
Separate Financial Statements: Investment entities: Equity method in separate financial statements
IAS 28
Investments in Associates: Investment entities: Applying the consolidation exception
Annual Improvements to IFRSs 2012 – 2014 Cycle
1 January 2018
1 January 2016
1 January 2016
1 January 2016
1 January 2016
1 January 2018
1 January 2016
1 January 2016
1 January 2016
1 January 2016
149
IFRS 9
In July 2014, the IASB issued the completed version of IFRS 9 - Financial Instruments (IFRS 9). The statement addresses the classification and measurement of financial assets
and financial liabilities. The new standard enhances the ability of investors and other users of financial information to understand the accounting of financial assets and financial
liabilities and aims to reduce complexity. The company is in the process of evaluating the impact the standard will have on the company. This standard will be adopted by the
effective date.
IFRS 10, IFRS 11, IFRS 12, IAS 27 and IAS 28
In December 2014, the IASB issued Investment Entities: Applying the Consolidation Exception. The amendments provide clarification to the requirements on accounting for
investment entities. The amendments also provide relief in particular circumstances. The company currently does not meet the definition of an investment entity and therefore the
amendments are not expected to affect the company. The amendments will be adopted by the effective date.
IFRS 14
In December 2012, the IASB decided to develop an interim standard to provide short-term guidance until the rate-regulated activities research project is completed. The company
is in the process of evaluating the impact the standard will have on the company. This standard will be adopted by the effective date.
IFRS 15
In June 2014, the IASB issued IFRS 15 - Revenue from Contracts with Customers (IFRS 15). The standard is aimed at improving the financial reporting of revenue and improving
the comparability of the top line in financial statements globally. The core principle of the new standard is for companies to recognise revenue to depict the transfer of goods or
services to customers in amounts that reflect the consideration to which the company expects to be entitled in exchange for those goods or services. The company is in the process
of evaluating the impact the standard will have on the company. This standard will be adopted by the effective date.
IAS 1
In December 2014, the IASB made improvements on the effectiveness of disclosure by issuing amendments to IAS 1: Presentation of Financial Statements. The amendments
encourage companies to apply further professional judgement in determining what information to disclose in their financial statements. The company is in the process of
evaluating the impact the amendments will have on the company. The amendments will be adopted by the effective date.
Annual Improvements to IFRSs 2012-2014
In September 2014, the IASB issued Annual Improvements to IFRSs 2012-2014. The improvements cover the following topics: IFRS 5 Non-current Assets Held for Sale and
Discontinued Operations: Changes in methods of disposal; IFRS 7 Financial Instruments: Disclosures: Servicing contracts and Applicability of the amendments to IFRS 7 to
condensed interim financial statements; IAS 19: Employee Benefits: Discount rate: regional market issue and IAS 34: Interim Financial Reporting: Disclosure of information
'elsewhere in the interim financial report'. The company is in the process of evaluating the impact the standard will have on the company. The improvements will be adopted by
the effective date.
150
Annexure 6
REPORTING ACCOUNTANTS’ REPORT ON THE PRO FORMA FINANCIAL INFORMATION INCLUDED IN THIS PROSPECTUS
The Directors
Herengracht 466
1017 CA Amsterdam
The Netherlands
Dear Sirs
INDEPENDENT REPORTING ACCOUNTANT’S ASSURANCE REPORT ON THE COMPILATION OF PRO FORMA FINANCIAL INFORMATION INCLUDED IN A CIRCULAR
OF GENESIS INTERNATIONAL HOLDINGS N.V. (GENESIS) (THE COMPANY) RELATING TO A SCHEME OF ARRANGEMENT IN TERMS OF SECTION 114 OF THE
COMPANIES ACT WHICH HAS BEEN PROPOSED BY THE STEINHOFF BOARD BETWEEN STEINHOFF AND THE STEINHOFF SHAREHOLDERS, PURSUANT TO
WHICH SCHEME, IF IMPLEMENTED, THE COMPANY WILL ACQUIRE ALL OF THE STEINHOFF SHARES FROM THE SCHEME PARTICIPANTS FOR A SCHEME
CONSIDERATION OF ONE GENESIS SHARE FOR EVERY ONE STEINHOFF SHARE.
We have completed our assurance engagement to report on the compilation of pro forma financial information of Genesis International Holdings N.V. by the directors. The pro forma
financial information, as set out in Annexure 4 of the combined prospectus and pre-listing statement (“the Prospectus”), to be dated on or about 7 August 2015, consists of the
statement of financial position and statement of comprehensive income and related notes. The pro forma financial information has been compiled on the basis of the applicable
criteria specified in the JSE Limited (JSE) Listings Requirements.
The pro forma financial information has been compiled by the directors to illustrate the impact of the corporate action or event, described in section 2, paragraph 3 of the Prospectus,
on the company’s financial position as at 31 December 2014, and the company’s financial performance for the period then ended, as if the corporate action or event had taken place
on 01 July 2014, being the commencement date of the financial period for the purposes of the statement of comprehensive income and at 31 December 2014, being the last day of
the financial period for the purposes of the statement of financial position. As part of this process, information about the company’s financial position and financial performance
has been extracted by the directors from the company’s unaudited financial results for the 6 months ended 31 December 2014.
Directors’ responsibility for the pro forma financial information
The directors are responsible for compiling the pro forma financial information on the basis of the applicable criteria specified in the JSE Listings Requirements and described in
Annexure 4 of the Prospectus.
Reporting accountant’s responsibility
Our responsibility is to express an opinion about whether the pro forma financial information has been compiled, in all material respects, by the directors on the basis specified
in the JSE Listings Requirements based on our procedures performed. We conducted our engagement in accordance with the International Standard on Assurance Engagements
(ISAE) 3420, Assurance Engagements to Report on the Compilation of Pro Forma Financial Information Included in a Prospectus, which is applicable to an engagement of this
nature. This standard requires that we comply with ethical requirements and plan and perform our procedures to obtain reasonable assurance about whether the pro forma financial
information has been compiled, in all material respects, on the basis specified in the JSE Listings Requirements.
For purposes of this engagement, we are not responsible for updating or reissuing any reports or opinions on any historical financial information used in compiling the pro forma
financial information, nor have we, in the course of this engagement, performed an audit or review of the financial information used in compiling the pro forma financial information.
As the purpose of pro forma financial information included in a prospectus is solely to illustrate the impact of a significant corporate action or event on unadjusted financial
information of the entity as if the corporate action or event had occurred or had been undertaken at an earlier date selected for purposes of the illustration, we do not provide any
assurance that the actual outcome of the event or transaction at 31 December 2014 would have been as presented.
A reasonable assurance engagement to report on whether the pro forma financial information has been compiled, in all material respects, on the basis of the applicable criteria
involves performing procedures to assess whether the applicable criteria used in the compilation of the pro forma financial information provides a reasonable basis for presenting
the significant effects directly attributable to the corporate action or event, and to obtain sufficient appropriate evidence about whether:
•
•
The related pro forma adjustments give appropriate effect to those criteria; and
The pro forma financial information reflects the proper application of those adjustments to the unadjusted financial information.
Our procedures selected depend on our judgment, having regard to our understanding of the nature of the company, the corporate action or event in respect of which the pro forma
financial information has been compiled, and other relevant engagement circumstances.
Our engagement also involves evaluating the overall presentation of the pro forma financial information. We believe that the evidence we have obtained is sufficient and appropriate
to provide a basis for our opinion.
Opinion
In our opinion, the pro forma financial information has been compiled, in all material respects, on the basis of the applicable criteria specified by the JSE Listings Requirements
and described in Annexure 4 of the Prospectus.
Consent
We consent to the inclusion of our report on the pro forma financial information and the references thereto in the Circular, in the form and context in which they appear.
Deloitte & Touche
Registered Auditor
Per: Xavier Botha
30 July 2015
Deloitte & Touche Riverwalk Office Park
41 Matroosberg Street
Ashlea Gardens X6
0081
National executive: *LL Bam Chief Executive *AE Swiegers Chief Operating Officer *GM Pinnock Audit *DL Kennedy Risk Advisory *NB Kader Tax TP Pillay Consulting *K Black
Clients & Industries *JK Mazzocco Talent & Transformation *MJ Jarvis Finance *M Jordan Strategy S Gwala Managed Services *TJ Brown Chairman of the Board *MJ Comber
Deputy Chairman of the Board
A full list of partners and directors is available on request
* Partner and Registered Auditor
B-BBEE rating: Level 2 contributor in terms of the Chartered Accountancy Profession Sector Code
Member of Deloitte Touche Tohmatsu Limited”
151
Annexure 7
REPORT BY THE AUDITOR IN TERMS OF REGULATION 78 OF THE COMPANIES REGULATIONS
152
FINANCIAL INFORMATION REQUIRED IN TERMS OF REGULATION 78 OF THE COMPANIES ACT IN RESPECT OF STEINHOFF
Financial year ended
30 Jun 14
Rm
30 Jun 13*
Rm
30 Jun 12*
Rm
12 417
10 463
(600)
9 863
8 073
7 090
859
7 949
5 804
5 163
880
6 043
(58)
(36)
(106)
(77)
415
478
Consolidated
Rm
Standalone
Rm
ASSETS
Non-current assets
Goodwill
Intangible assets
Investment property
Investment in subsidiary companies
Current assets
Inventories
Share scheme settlement receivable
136 620
27 810
38 306
53 995
427
–
4 223
10 399
1 390
70
65 701
534
17 921
18 112
5 928
16 341
–
6 865
38 788
–
–
–
–
38 229
–
–
20
539
1 019
–
–
–
25
2
992
–
Total assets
202 321
39 807
20 507
62 347
3 381
1 541
20 992
13 627
–
–
Total equity
87 776
34 619
LIABILITIES
Employee benefits
Provisions
Current liabilities
Employee benefits
Provisions
Intergroup loan payable
Deferred dividend receivable
69 317
55 580
868
10 878
1 603
388
45 228
34 222
750
1 213
6 411
2 436
–
–
196
726
–
–
–
–
726
4 462
46
–
–
–
–
3 719
697
–
Total liabilities
114 545
5 188
202 321
39 807
Consolidated
Profit before tax from continuing operations
Profit after tax from continuing operations
(Loss)/Profit from discontinued operations
Profit from continuing and discontinued operations
Standalone
(Loss)/Profit before tax
(Loss)/Profit after tax
CONSOLIDATED AND STANDALONE STATEMENT OF FINANCIAL POSITION
as at 30 June 2014
EQUITY
Reserves
*Prior year figures have been restated and represented as disclosed in the 2014 Group Annual Financial Statements
153
Annexure 8
REPORTING ACCOUNTANTS’ REPORT ON THE HISTORICAL FINANCIAL INFORMATION FOR THE COMPANY
154
155
Annexure 9
CONSENT LETTERS OF THE COMPANY’S REPORTING ACCOUNTANTS, JOINT SOUTH AFRICAN LEGAL ADVISORS,
INTERNATIONAL LEGAL ADVISORS, THE TRANSACTION SPONSOR, THE INDEPENDENT SPONSOR, THE COMPANY’S
BANKER, COMPANY SECRETARY AND THE TRANSFER SECRETARIES
156
157
w
158
159
160
161
162
163
164
165
Annexure 10
DETAILS OF THE INCORPORATION DIRECTORS, THE PROPOSED DIRECTORS AND THE PROPOSED MEMBERS OF
SENIOR MANAGEMENT
DETAILS OF THE INCORPORATION DIRECTORS
Robert Harmzen (63) Director
Mr Harmzen has an NBA qualification (Nederlandse Beroepsorganisatie van Accounts) from the Netherlands Institute of Chartered Accountants.
Mr Harmzen has been in the past 5 (five) years or is presently the director or partner in the following companies and/or partnerships:
Directorships and Partnerships
Eaglepack BV
Second Euro Netherlands Holding BV
Second Euro Netherlands Ridderkerk Real Estate BV
Second Euro Netherlands Westpoint Real Estate BV
Second Euro Netherlands B + W Real Estate BV
Dailycer Holdings Coöperatief UA
Dailycer Investments BV
Delicia Investments BV
Gpc Holdings Coöperatief UA
GPC Holdings BV
GPC III BV
Genband Coöperatie UA
Genband Holdings BV
Genband Canada BV
Genband Netherlands BV
Genband NS BV
Rema Investments Coöperatief UA
Rema Investments BV
Schoeller Arca Systems Participations BV
Magnum SAS Holding Coöperatief UA
Rema BV
Schoeller Allibert Participations BV
CP Group Holding Coöperatief BV
CP Group Holding BV
CP Group BV
CP group 1 BV
CP Group 2 BV
OEP Master BV
OEP Technologie Holding BV
OEP Technologie BV
RFID Technologie BV
Library Solutions BV
Smartrac NV
OEP Portal Brasil Coöperatief UA
OEP AAT Coöperatief U.A.
OEP Network Integration Services Coöperatief U.A.
OEP Turkey Tech B.V.
OEP Nutrition Coöperatief U.A.
Sonneborn Dutch Coöperatief U.A.
Sonneborn Dutch Holdings B.V.
OEP East Balt Coöperatief U.A.
OEP East Balt B.V.
East Balt Deutschland GmbH
OEP Holdings 5 Coöperatief U.A.
OEP 5 B.V.
OEP Pantera Coöperatief U.A.
OEP Pantera Holdings B.V.
OEP Additives Coöperatief U.A.
OEP Additives B.V.
OEP 8 Coöperatief U.A.
OEP 8 B.V.
OEP Holdings 10 Coöperatief U.A.
166
Status
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Status
OEP 10 B.V.
OEP Italy High Tech S.r.l.
OEP Italy High Tech Due S.r.l
OEP Cosmetics Coöperatief U.A.
PeroxyChem Coöperatief U.A.
PeroxyChem Netherlands B.V.
PeroxyChem Netherlands Holdings B.V.
OEP Brasil Electronics Coöperatief U.A.
One Equity Marine B.V.
European Shipyards Holding B.V.
Provisur Technologies Coöperatief U.A.
Quinte West Coöperatief U.A.
OEP 11 Coöperatief U.A.
Bosca Equipment Leasing Ltd
OEP Life Science Coöperatief U.A.
OEP Life Science Holding B.V.
Woundchek Laboraories B.V.
Woundchek Coöperatief B.A.
R. Harmzen B.V.
R. Harmzen Beheer B.V.
Borean B.V.
Borean Corporate & Financial Services B.V.
Laguna Investments Holdings B.V.
Laguna Investments Alpha B.V.
Laguna Investments Beta B.V.
Sapotoro B.V.
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Inactive
Inactive
Inactive
Inactive
Stephanus Hilgard Muller (54) Director
Mr Muller holds the qualifications BComm Acc Hon, CA(SA).
Mr Muller has been in the past 5 (five) years or is presently the director or partner in the following companies and/or partnerships:
Status
Kap Industrial Holdings Ltd
Home of Living Brands Ltd
Sacoil Holdings Ltd
JD Group Ltd
Active
Active
Active
Inactive
Johannes Lodewicus Coetzer (55) Director
Mr Coetzer holds the qualification CA(SA).
Mr Coetzer has been in the past 5 (five) years or is presently the director or partner in the following companies and/or partnerships:
Status
Kwanare Trading (Pty) Ltd
Kwanare (Pty) Ltd
Kwanare Stud Game Breeders (Pty) Ltd
Villa Savannah no 2 (Pty) Ltd
MarAnnCo Trading (Pty) Ltd
MarAnnCo Consulting (Pty) Ltd
PricewaterhouseCoopers Incorporated
PricewaterhouseCoopers Tax Services (Pty) Ltd
Active
Active
Active
Active
Active
Active
Inactive
Inactive
167
DETAILS OF PROPOSED DIRECTORS TO BE APPOINTED TO THE MANAGEMENT BOARD
Markus Johannes Jooste (54) Chief Executive Officer
Mr Jooste has been the Chief Executive Officer of the Group since 1998, having joined the Group in 1988.
In 1988, Mr Jooste joined Gommagomma Holdings Proprietary Limited (now Steinhoff Africa Holdings Proprietary Limited) as financial director. In 1998, Mr Jooste was appointed
as executive director and took responsibility for the European operations of the Group and also for directing the group’s international marketing and financial disciplines. In
2000, Mr Jooste was appointed group managing director of Steinhoff and chairman of Steinhoff Africa and currently also acts as chief executive officer for the Group’s northern
hemisphere operations. Subsequent to Steinhoff’s acquisition of Conforama, one of the leading French household goods retailers, Mr Jooste joined their board. Mr Jooste also
serves on the boards of various unlisted group companies and the following listed companies: PSG Group (member of the remuneration committee), KAP Industrial Holdings
Limited and Phumelela Gaming and Leisure Limited (member of the remuneration committee).
Mr Jooste has been in the past 5 (five) years or is presently the director or partner in the following companies and/or partnerships:
Status
Bravoscar Finance Company (Pty) Limited
Casaspec Properties (Pty) Limited
Cape Thoroughbred Sales (Pty) Limited
Conforama Holding SA
Erf 2825 Hermanus (Pty) Limited
Galicia Investments (Pty) Limited
Homestyle Group Operations Limited
JD Group Limited
Jomar Services (Pty) Limited
Kenilworth Racing (Pty) Limited
Klawervlei Stud (Pty) Limited
Mayfair Holdings (Pty) Limited
Mayfair Speculators (Pty) Limited
MG Property 1 (Pty) Limited
Morning Tide Investments 82 (Pty) Limited
Pepkor Holdings (Pty) Limited
Phumelela Gaming & Leisure Limited
PSG Financial Services Limited
PSG Group Limited
Relyon Group Limited
Stafric Investments & Management Services (Pty) Limited
Steinhoff Africa Holdings (Pty) Limited
Steinhoff Asia Pacific Holdings (Pty) Ltd
Steinhoff Europe AG
Steinhoff Europe AG
Steinhoff Europe Group Services GmbH
Steinhoff Finance Holding GmbH
Steinhoff International Holdings Limited
Steinhoff Möbel Holding Alpha GmbH
Steinhoff (UK) Holdings Limited
Steinhoff UK Retail Limited
Uhambo Property Investments (Pty) Limited
kika Möbel-Handels GmbH
Rudolf Leiner GmbH
LKM Beteiligungs GmbH
Capitec Bank Holdings Limited
Capitec Bank Limited
The Racing Association
Somwes Eiendomme (Pty) Limited
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Inactive
Inactive
Inactive
Inactive
168
Daniël Maree van der Merwe (57) Chief Operating Officer
Mr van der Merwe has been the Chief Operating Officer of the Group since 2013, having joined the Group in 1998.
Mr van der Merwe was admitted as an attorney of the High Court of South Africa in 1986 and practiced as an attorney specialising in the commercial and labour law fields. In
1990, Mr van der Merwe joined the Roadway Transport Group and was instrumental in developing the strategic direction and growth of this group. In early 1998, following the
merger of Roadway Transport Group with Steinhoff Africa, Mr van der Merwe joined Steinhoff. He previously acted as chief executive officer for the Group’s southern hemisphere
operations and was appointed as chief operating officer on 5 March 2013. Mr van der Merwe holds several other appointments within the Steinhoff Group and currently serves on
the boards of Steinhoff Asia Pacific Limited, Steinhoff UK Holdings Limited, JD Group and KAP Industrial Holdings Limited (member of the human resources and remuneration
and nomination committees).
Mr van der Merwe has been in the past 5 (five) years or is presently the director or partner in the following companies and/or partnerships :
Status
Anglo Dutch Properties (Pty) Limited
Bennorth Property Investments (Pty) Limited
Bravoscar Finance Company (Pty) Limited
JD Group Limited
Klawervlei Stud (Pty) Limited
Ruby Street Investments (Pty) Limited
Silverglade Trading 19 (Pty) Limited
Steinhoff Asia Pacific Holdings Pty Limited
Steinhoff UK Holdings Limited
Ainsley Holdings (Pty) Limited
Scale Top Investments (Pty) Limited
SHF Raw Materials (Pty) Limited
Shockproof Investments (Pty) Limited
Soenel Wildboerdery (Pty) Limited
Steinbuild Holdings (Pty) Limited
Steinhoff Timber Industries (Pty) Limited
Unitrans Holdings (Pty) Limited
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Inactive
Inactive
Inactive
Inactive
Inactive
Inactive
Inactive
Inactive
Andries Benjamin la Grange (40) Chief Financial Officer
Mr la Grange has been the Chief Financial Officer of the Group since 2013.
Mr la Grange completed his articles with PricewaterhouseCoopers Inc. and spent two and a half years in their international and corporate tax division. He joined Steinhoff in 2003
as manager of the corporate tax division, after which he moved to the Steinhoff corporate finance division before his appointment as chief financial officer for the Group’s southern
hemisphere operations. In 2009, Mr la Grange was appointed as an alternate director to the Steinhoff Board and was appointed as chief financial officer on 5 March 2013. He also
serves on the boards of KAP Industrial Holdings Limited and JD Group and is an alternate director of PSG Group.
Mr la Grange has been in the past 5 (five) years or is presently the director or partner in the following companies and/or partnerships:
Status
BEMI Future Holdings (Pty) Ltd
BEMI Water (Pty) Ltd
JD Group Limited
Middelkraal Trust
Phaello Finance Company (Pty) Limited
Phaello Finance Company Guarantor (Pty) Limited
PSG Group Limited
Rainford Aviation Investments (Pty) Limited
SA Poco Retail (Pty) Limited
Steinhoff Asia Pacific Holdings Pty Limited
Steinhoff Services Limited
Fundiswa Investments (Pty) Limited
JD Consumer Finance (Pty) Limited
Rainford Aviation Investments (Pty) Limited
SHF Raw Materials (Pty) Limited
Steinbuild Holdings (Pty) Limited
Unitrans Holdings (Pty) Limited
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Inactive
Inactive
Inactive
Inactive
Inactive
Inactive
Inactive
169
DETAILS OF PROPOSED DIRECTORS TO BE APPOINTED TO THE SUPERVISORY BOARD
Deenadayalen Konar (60) Independent Supervisory Director - Chairman
Dr Konar has been the independent non-executive chairman of the Group since 1998, having been appointed to the Steinhoff board in 1998.
Dr Konar is an independent consultant and professional director. Prior positions include executive director of internal audit portfolio and head of investments at the Independent
Development Trust, and professor and head of the department of accountancy at the University of Durban-Westville. He is a past patron of the Institute of Internal Auditors South
Africa, and a member of the King Committee on Corporate Governance in South Africa, the Corporate Governance Network and the Institute of Directors. He was appointed
chairperson of the ministerial panel for the review of the regulation of accountants and auditors in South Africa in 2003 and served as chairman of the audit committee of the
International Monetary Fund. Dr Konar was appointed chairman of the Steinhoff board in September 2008 and held various committee positions, including chairman of the
Steinhoff audit committee. Dr Konar is also a non-executive director of Lonmin plc, Alexander Forbes Equity Holdings Limited, JD Group, Mustek Limited, Illovo Sugar Limited,
Sappi Limited, Exxaro Resources Limited and Yeboyethu Limited.
Dr Konan has been in the past 5 (five) years or is presently the director or partner in the following companies and/or partnerships:
Alexander Forbes Equity Holdings Limited Group
Credit Suisse Securities Johannesburg (Pty) Ltd
Exxaro Resources Limited
Illovo Sugar Limited
Lonmin Public Limited
Mustek Limited
Old Mutual Investment Group (South Africa) Limited
Outsourced Risk And Compliance Assessment (Proprietary) Limited
Sappi Limited
Yeboyethu Limited
Macsteel Service Centres Sa 2005 (Proprietary) Limited
JD Group Limited
Makalani Holdings (Pty) Limited
Mutual and Federal Insurance Company Limited
Old Mutual Investment Group Limited
Pareto Limited
Sentech
Status
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Inactive
Inactive
Inactive
Inactive
Inactive
Inactive
Inactivee
Stefanes Francois Booysen (51) Independent Supervisory Director
Dr Booysen has been an independent non-executive director of the Group since September 2009.
He completed his articles with Ernst & Young and acted as lecturer at the University of South Africa. In 2006, he was appointed as council member of the University of Pretoria.
Dr Booysen is the former group chief executive officer of Absa Group Limited. He also serves on the boards of Clover Limited, Senwes Limited and Vukile Property Fund Limited.
Dr Booysen has been in the past 5 (five) years or is presently the director or partner in the following companies and/or partnerships:
Status
Afrisake
Angor Property Specialists (Pty) Limited
Bosveld Sitrus (Pty) Limited
Brandan Booysen Trust
Clover Industries Limited
Efficient Financial Holdings Limited
Metrofibre Networx (Pty) Limited
Nimro (Pty) Limited
PCI Fintrade (Pty) Limited
PCI Properties (Pty) Limited
PCI Propfundi (Pty) Limited
PCI Rentals (Pty) Limited
Roxanne Booysen Trust
Senwes Limited
Songhai Capital (Pty) Limited
STRB Lewende Trust
Trusteeboard Investments (Pty) Limited
University Of Pretoria
Vukile Property Fund Limited
CMD Communications (Pty) Limited
Cornwall Hill College
JD Group Limited
Le Touessrok Body Corporate
Senbel (Pty) Limited
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Inactive
Inactive
Inactive
Inactive
Inactive
170
David Charles Brink (74) Independent Supervisory Director
Mr Brink has been an independent non-executive director of the Group since December 2007.
Mr Brink is a board member of the National Business Initiative, chairman of the board of the Wits University Foundation and a vice president of the Institute of Directors in South
Africa. He is also a member of the Millennium Labour Council, a past chairman of Absa Group Limited, Murray & Roberts Holdings Limited and Unitrans Limited, and a past director
of Sanlam, BHP Billiton Limited and Sappi Limited. In 2010, Mr Brink was appointed by the board of Steinhoff as the senior independent non-executive director.
Mr Brink has been in the past 5 (five) years or is presently the director or partner in the following companies and/or partnerships:
Status
Lingeron Investments (Pty) Limited
National Business Initiative
See Ahead Investments (Pty) Limited
JD Group Limited
The Business Trust (JOBCO)
Absa Bank Limited Limited
Absa Group Limited Limited
Active
Active
Active
Active
Inactive
Inactive
Inactive
Inactive
Claas Edmund Daun (71) Independent Supervisory Director
Mr Daun has been an independent non-executive director of the Group since 1998, having initially joined the Group in 1992.
Mr Daun has extensive experience in management and investments worldwide and is a corporate investor in several industries. Mr Daun was instrumental in developing the KAP
businesses and acted as chairman of KAP Industrial for many years. Mr Daun resigned from the KAP board on 25 June 2012. He is currently a member of the boards of KAP AG,
Courthiel Holdings Proprietary Limited, Daun and Cie AG, Stöhr AG, Mech Baumwoll-Spinnerei and Weberei AG, and holds several other directorships. Mr Daun is honorary consul
of South Africa in Lower Saxony, Germany. He holds a master’s degree in business commerce from the University of Cologne and qualified as a chartered accountant in 1975.
Mr Daun has been in the past 5 (five) years or is presently the director or partner in the following companies and/or partnerships:
Status
Courthiel Holdings (Pty) Ltd
Kap Textile Holdings SA Limited
Spinners & Weavers Ltd, Harare
DAUN & CIE. Akteingesellschaft, Rastede
Mech. Baumwoll- Spinnerei & Weberei Bayreuth AG, Bayreuth
Stöhr AG, Mönchengladbach (Supervisory Board)
Kap – Beteiligungs AG, Stadtaltendorf (Supervisory Board)
Mehler AG, Fulda (Supervisory Board)
Fitor SA, Portugal
Active
Active
Active
Active
Active
Active
Active
Active
Active
Inactive
Inactive
Thierry Louis Joseph Guibert (43) Independent Supervisory Director
Mr Guibert has been a non-executive director of the Group since 1 January 2015. He previously served as the chief executive officer of Conforama from 2008, and was also an
executive director of Steinhoff from May 2011 until December 2014.
After graduating from the Reims Business School, Mr Guibert began his career in 1995 as an auditor at KPMG. He then joined the previous holding company of Conforama, the
French listed PPR Group, in 1999. Following various financial positions held within PPR, Mr Guibert was appointed as chief financial officer and chief operating officer of FNAC,
a European retailer within the same group.
Mr Guibert has been in the past 5 (five) years or is presently the director or partner in the following companies and/or partnerships:
Lacoste Holding SAS
Rossini Investissement SAS
Lacoste SA
Devanlay SA
Lacoste France SA
Lacoste E-commerce SAS
Comptoir de la Bonneterie Française SA
Tricotage de Saint-Louis SA
Cemalac SAS
Aigle SA
Aigle International SA
Lacoste Alligator SA
Sporloisirs SA
Patentex SA
Lacoste USA Inc
Dong-Il Devanlay Inc.
Fabricant Co. Limited
Montaigne Garments (Shanghai) Co. Limited
Status
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
171
Sidas Spa
Devanlay Ventures España, SL
Devanlay Ventures Holdings, SL
Meubles investissements (SARL)
Meubles Immos (SCI)
Aligre Hotelinvest (SAS)
Eco-Mobilier (SAS)
Steinhoff International Holding Limited
Active
Active
Active
Active
Active
Active
Active
Active
Marthinus Theunis Lategan (57) Independent Supervisory Director
Dr Lategan has been an independent non-executive director in of the Group since September 2011.
Dr Lategan lectured in Accounting and Taxation at the University of Johannesburg until 1987, after which he returned to the auditing practise at Price Waterhouse. He joined Rand
Merchant Bank in 1994 and later became head of their Structured Finance unit. In 1999 he became chief executive officer for the Corporate Banking unit of First National Bank.
In 2004 he was appointed to the executive management committee of the FirstRand Group and served on various committees. In 2005, Dr Lategan was appointed chief executive
officer for FirstRand Africa and Emerging Markets and, in 2007, he relocated to India to set up FirstRand Banking Group, India. He retired from the FirstRand Group in July 2010.
He currently serves as vice chairman for Barclays Africa Corporate and previously acted as chairman of RARE Holdings Limited, an AltX listed company of which he is still a
non-executive director. Dr Lategan is an independent non executive director of Steinhoff International Holdings Limited, and a member of Steinhoff’s Audit and Remuneration
committees. Since 2007, Dr Lategan has served as a member of the Council of the University of the Witwatersrand, Johannesburg and also chairs it Finance Committee.
Dr Lategan has been in the past 5 (five) years or is presently the director or partner in the following companies and/or partnerships:
Status
Business Venture Investments No 59 (Pty) Limited
Die Lategan Familie Trust
MT Lategan Familie Trust
Rare Holdings Limited
Stormberg Trust
Thanila Trust
Thekwane Investments (Pty) Limited
The Rautenbach Family Trust
Megapro Marketing Holdings (Pty) Limited
Barclays Bank Mozambique, SA
Xtraspace (Pty) Limited
Capstone 556 (Pty) Limited
JD Group Limited
Ellerine Retail Limited
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Inactive
Inactive
Inactive
Johannes Fredericus Mouton (67) Independent Supervisory Director
Mr Mouton has been an independent non-executive director of the Group since October 2002.
Mr Mouton started his career with Federale Volksbeleggings Limited as financial manager and after a period as financial director with Kanhym Limited, established Senekal Mouton
and Kitshoff Inc, a stockbroking company, and member of the JSE. He served as member of several JSE committees and was instrumental in various corporate transactions. He
has more than 35 years’ experience in financial management and investment banking. As non-executive chairman of the PSG Group he also serves as a trustee of various trusts
administered on behalf of the University of Stellenbosch.
Mr Mouton has been in the past 5 (five) years or is presently the director or partner in the following companies and/or partnerships:
Status
PSG Financial Services Ltd
PSG Group Ltd
Charite Beleggings (Pty) Ltd
Dana Beleggings (Pty) Ltd
PSG Konsult Ltd
Steinhoff International Holdings Ltd
Klipbank Beleggings (Pty) Ltd
Zeder Investments Ltd
Zeder Financial Services Ltd
Klein Gustrouw Estate (Pty) Ltd
Gwarrynek (Pty) Ltd
J F M Investments (Pty) Ltd
My Favourite Beleggings (Pty) Ltd
Piet Mouton Beleggings (Pty) Ltd
Jan Mouton Beleggings (Pty) Ltd
Deidre Beleggings (Pty) Ltd
Channel Life Limited
Enjasu Beleggings (Pty) Limited
Paladin Capital Limited
PSG Capital Limited
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Inactive
Inactive
Inactive
Inactive
172
PSG Konsult Financial Planning (Pty) Limited
PSG Konsult Securities (Pty) Limited
Pioneer Limited
Channel Life Holdings (Pty) Limited
Curro Holdings Limited
Velocity Holdings Limited
Inactive
Inactive
Inactive
Inactive
Inactive
Inactive
Heather Joan Sonn (42) Independent Supervisory Director
Ms Sonn has been an independent non-executive director of the Group since 2013.
Following completion of her studies in 1997, Ms Sonn joined Merrill Lynch New York as an investment banking analyst. She returned to South Africa in 1999 and took up a position
with Sanlam Investment Management in Cape Town. Ms Sonn has served as chief executive for Legae Securities, deputy chief executive for WIP Capital, chief executive for The
Citizens Movement, is a former director of Strate and was instrumental in building the basis for Barclays’ global integrated bank initiative while at Barclays Bank PLC. She currently
serves on the board of Prescient Limited and as an alternate director for Macsteel Service Centres SA Limited. She is also a fellow and moderator of the Aspen Institute’s Global
Leadership Network.
Ms Sonn has been in the past 5 (five) years or is presently the director or partner in the following companies and/or partnerships:
Status
Africa Leadership Initiative (fellow of The Aspen Institute and Global Moderator)
Blue Pearl Investments (Pty) Ltd
Ekapa Mining (Pty) Limited
Ekapa Mineral (Pty) Limited
Franklin Sonn Family Trust
Gamiro Investment Group
Greenpeace Africa (voting member)
Khana Energy (Pty) Ltd
Kheip Investments (Pty) Ltd
Prescient Limited
Prescient Foundation
South African Wind Energy Association (SAWEA)
The Ishta Trust
Esor Limited
Foodbank South Africa
TSIBA Education Trust (Tertiary School in Business Administration)
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Inactive
Inactive
Inactive
Bruno Ewald Steinhoff (76) Non-Executive Supervisory Director
Mr Steinhoff has been a non-executive director of the Group since 2008.
Mr Steinhoff is the founder of the Group and served as chairman of Steinhoff until the end of September 2008. He relinquished executive duties at Steinhoff with effect from 1 April
2008 and continued serving as a non-executive director, assisting with special projects for the Group. After studying industrial business, Mr Steinhoff started his furniture trade
and distribution business in June 1964 in Westerstede, Germany. During this period, he also gained furniture retail experience, having spent three years in Berlin. In 1971, he
expanded the business into manufacturing with the first upholstery factory in Remels. During the 1980s, Mr Steinhoff acquired interests in central and eastern Europe and in a joint
venture in South Africa with Claas Daun involving Gommagomma Holdings. He has more than 50 years’ experience in the furniture business and more than 40 years’ manufacturing
experience.
Mr Steinhoff has been in the past 5 (five) years or is presently the director or partner in the following companies and/or partnerships:
Status
BS Beteiligungs-und Verwaltungs GmbH
Bruno Steinhoff Beratungs- und Verwaltungs GmbH
Steinhoff Familienholding GmbH
Steinhoff Europe AG (AUS)
Steinhoff Familien Beteiligungs-und Verwaltungs GmbH
Energiehof Ocholt Verwaltungs GmbH
BS Vermögensverwaltungsgesellschaft mbH
Erste Biogas Ocholt GmbH & Co KG
Bruno Steinhoff Familienstiftung
Clausberg AG
Landesbeirat Commerzbank Hamburg
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Inactive
Inactive
173
Paul Denise Julia van den Bosch (51) Non-Executive Supervisory Director
Mr van den Bosch has been a non-executive director of the Group since December 2010.
Mr van den Bosch joined HabufaMeubelen B.V. in Hapert in 1985 after the completion of his studies at the European University in Antwerp. He is currently the general manager of
the Van den Bosch Beheer Group B.V. Mr van den Bosch is the founder of the Henders & Hazel® concept. He is a member of the Round Table of Neerpelt in Belgium which actively
drives and promotes activities around social and economic issues in that region.
Mr van den Bosch has been in the past 5 (five) years or is presently the director or partner in the following companies and/or partnerships:
Status
Van den Bosch Beheer BV
Habufa Meubelen BV
Habufa Onroerend Goed BV
Hachmer BV
Hachmer Beheer BV
H.B.R. Holding BV
B.M.R. Prod Trade Filiala Sibiu SRL
Habufa Belgium NV
P.D.J. van den Bosch Beheer BV
Charlie SA
Vadebo NV
Actifina NV ( in Lommel, Belgium)
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Christoffel Hendrik Wiese (72) Non-Executive Supervisory Director
Dr Wiese has been a non-executive director of the Group since April 2015 following completion of the Pepkor Acquisition. He was previously appointed as an independent nonexecutive director to the Steinhoff Board on 5 March 2013.
He practiced at the Cape Bar in the 1970s before joining Pepkor Holdings of which he has been the chairperson and controlling shareholder since 1981. In addition he acts as
Chairman and controlling shareholder of Shoprite Holdings Limited, Invicta Holdings Limited, Tradehold Limited and Brait SA Limited, and he is a former chairman of the Industrial
Development Corporation. Dr Wiese has served on the boards of many listed companies over the years and is a past director of the South African Reserve Bank.
Dr Wiese has been in the past 5 (five) years or is presently the director or partner in the following companies and/or partnerships:
Afropulse 500
Alenti 252
Auburn Avenue Trading 143
Azuradox
Brait South Africa
CWP Wine Brands
Deuceprops 1014
Deuceprops 1015
Deuceprops 1016
Deuceprops 1018
Deuceprops 3001
Dorsland Diamante
FI Funding And Investments Finance
FI Funding And Investments Holdco
FI Operations
Fincom
Granadino Investments
Grene Properties
Invicta Holdings
Loncape Finance
Lourensford Brokenhill Sawmill
Lourensford Estate Farming Enterprises
Lourensford Events
Lourensford Fruit Company
Lourensford Holdings
Lourensford Leasing
Lourensford Properties
Lourensford Sawmills
Lourensford Trout Farming
Lourensford Winery
Matrix Development
Newshelf 1093
Oryx Eco Tours
Oryx Game Farming
Oryx Management Services
174
Status
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Status
Oswestry Topco Limited
Pallinghurst Resources (Guernsey) GP Ltd
Pallinghurst Resources Ltd
Parinol
Pepgro
Pepkor
Pepkor Holdings
Pepkorfin
Radaj 2
Schonegevel Holdings
Securivest
Sereno Properties No 8
Shoprite Holdings
Steinhoff International Holdings
Thibault Square Financial Serv
Titan Asset Management
Titan Financial Services
Titan Funding
Titan Global Investments
Titan Group Investments
Titan Manor
Titan Nominees
Titan Portfolio
Titan Premier Investments
Titan Share Dealers
Titan Trademarks
Toerama
Tomil Holdings
Tradehold
Wiesfam Trust
Wieskor
Worldquest Investment Resources
Xantium Trading 326
Yserfamilie
Zoloworx Investments
Anglo African Shipping Company (Pty) Limited
Aussenkjer Boerdery (Pty) Limited
Bato Boerdery (Pty) Limited
Cenfund Investments
CCIJ Investments (Pty) Limited
Chonette Beleggings (Pty) Limited
Dewberry Trading 4 (Pty) Limited
Elandspad Investments (Pty) Limited
Energy Africa (Pty) Limited
Executive Goldclub Investments (Pty) Limited
Georgia Avenue Investments (Pty) Limited
Greatermans Finance Company (Pty) Limited
Helderberg Vrugteverpakkers (Pty) Limited
Incapart Investments 143
Indada Trading 141 (Pty) Limited
Inkonka Investments (Pty) Limited
Jeke Trading (Pty) Limited
Just Jasmine Investments 143
Klee Investments (Pty) Limited
Lanzerac Landgoed (Pty) Limited
Lanzerac Manor (Pty) Limited
Luna Group (Pty) Limited
Luna Holdings
Main Street 290 (Pty) Limited
Massif Investments (Pty) Limited
Mayabex (Pty) Limited
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Inactive
Inactive
Inactive
Inactive
Inactive
Inactive
Inactive
Inactive
Inactive
Inactive
Inactive
Inactive
Inactive
Inactive
Inactive
Inactive
Inactive
Inactive
Inactive
Inactive
Inactive
Inactive
Inactive
Inactive
Inactive
Inactive
175
Status
McDuck Investment Holdings (Pty) Limited
Mettle Vehicle Finance
Miniscule Investments (Pty) Limited
Minor Investments
Moxispot (Pty) Limited
Paleofin
Palaeofin Security SPV (Pty) Limited
Primedia Holdings Limited
Poundstretcher Limited
PSG Group Limited
Rickshaw Trade and Invest 2 (Pty) Limited
SAE Lifestyle Wines (Pty) Limited
Sangricraft Investments (Pty) Limited
Titan Prefco
Titan Prefco Holdings
Tulca (Pty) Limited
Vendak Beleggings (Pty) Limited
Ventiwiz Investments (Pty) Limited
VRE Investments (Pty) Limited
Western Crown Properties (Pty) Limited
Wouter J de Wet Beleggings (Pty) Limited
Inactive
Inactive
Inactive
Inactive
Inactive
Inactive
Inactive
Inactive
Inactive
Inactive
Inactive
Inactive
Inactive
Inactive
Inactive
Inactive
Inactive
Inactive
Inactive
Inactive
Inactive
Inactive
Inactive
Inactive
Inactive
Angela Krüger-Steinhoff (42) Non-Executive Supervisory Director
Ms. Krüger-Steinhoff has been an alternate non-executive director of the Group since December 2007.
Ms. Krüger-Steinhoff obtained a degree in Economic Science in 1997 at the European business school, Oestrich-winkel, Germany. She joined the Steinhoff group in 1997 as a
financial manager. In 1999 she was seconded to act as managing director of the Australian operations. She resigned from the group at the end of 2005 and now attends to the
Steinhoff family investments. She has more than 10 years’ experience in the industry, with specific knowledge of and extensive experience in management and investments globally.
Ms. Krüger-Steinhoff also holds a position on the advisory committees of Oldenburgische Landesbank AG in Germany, HSH Nordbank AG and Commerzbank AG.
Ms. Krüger-Steinhoff has been in the past 5 (five) years or is presently the director or partner in the following companies and/or partnerships:
ANF Agrarbetrieb Niederer Fläming GmbH
ASV Beteiligungsgesellschaft MBH
BIOGAS Felgentreu Steinhoff Beteiligungsgesellschaft mbH
BRUNO Steinhoff Familienstiftung
BS Beteiligungs- und Verwaltungs GBMH
BS Vermögensverwaltungsgesellschaft mbH
Commerzbank AG (member of the Advisory Committee)
HSH Nordbank AG (member of the Advisory Committee)
Landgut Wiesenburg GmbH
Nuthequelle Landwirtschaftliche Beteiligungs GmbH
Oldenburgische Landesbank AG (member of the Advisory Committee)
Pritzenower Biorind GmbH
Reppininchen Erste Biogas Betriebs GMBH
Reppininchen Zweite Biogas Betriebs GMBH
Reppininchen Dritte Biogas Betriebs GMBH
Steinhoff Familien Beteiligungs -und Verwaltungs GmbH
Steinhoff Familienholding GmbH
Steinhoff International Holdings LTD
TPP Felgentreu GmbH
Wiesenburg Erste Biogas Betriebs GMBH
Wiesenburg Zweite Biogas Betriebs GMBH
Wiesenburg Dritte Biogas Betriebs GMBH
Wiesenburger Marktfrucht GMBH
176
Status
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
DETAILS OF PROPOSED MEMBERS OF SENIOR MANAGEMENT OF THE COMPANY
Johannes Nicolaas Stephanus Du Plessis (65) Senior Management
Mr Du Plessis has been an executive director of the Group since 2002. He was previously a member of the Group’s group services team and non-executive director of Steinhoff.
Mr Du Plessis has also been an alternate executive director of Steinhoff with effect from March 2006.
Mr Du Plessis was a member of the Johannesburg and later the Cape Bars. He was admitted as counsel during 1974 and took silk in 1989. During the course of his career, he has
been exposed to a wide range of commercial matters and has occasionally acted as judge in the High Court. He advises on and is engaged in matters related to governance, tax,
property, competition and the environment. He also serves on the board of Clover Industries Limited.
Mr Du Plessis has been in the past 5 (five) years or is presently the director or partner in the following companies and/or partnerships:
Clover Industries Limited
Klawervlei Stud (Pty) Ltd
Steinhoff Africa Property Services (Pty) Ltd
Steinhoff At Work (Pty) Ltd
Matlotlo Trading 130 (Pty) Limited
Black Ridge Investments 11 (Pty) Limited
Bambinello Stud (Pty) Limited
Twin River Trading 104 (Pty) Limited
Coral Lagoon Investments 183 (Pty) Limited
Status
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Karel Johan Grové (66) Senior Management
Mr Grové has been an executive director of the Group since 2007, as the chief executive officer of KAP Industrial, in which the Group owns a 43% (forty three percent) associate
shareholding. He initially joined Steinhoff as a non-executive director in September 2000 and became an alternate executive director of Steinhoff with effect from December 2007.
Mr Grové has more than 39 years’ experience in the accounting and banking industries. His career began in 1969 when he was appointed cost and works accountant with Shaft
Sinkers Proprietary Limited. In 1976, he founded Medical Leasing Services, a company providing specialised financial services, mainly to medical doctors. In 1987, the business
was sold to Absa Group Limited. The name was changed to MLS Bank and Mr Grové was appointed chief executive officer, a position he held until 1995. Later that year, he
established Imperial Bank and served on the main board of Imperial Holdings until he joined Unitrans Limited as chief executive officer in September 1998. Mr Grové was appointed
an executive director of Steinhoff, following the approval and implementation of the acquisition of the majority shareholding in Unitrans Limited. He also serves on the board of
SA PGA Tour.
Mr Grové has been in the past 5 (five) years or is presently the director or partner in the following companies and/or partnerships:
263 Oxford Road (Pty) Ltd
KAP Industrial Holdings Ltd
KAP Manufacturing (Pty) Ltd
PG Bison Holdings (Pty) Ltd
Rainford Aviation Investments (Pty) Ltd
Roadway Transport (Pty) Ltd
Spare Parts Logistics (Pty) Ltd (in process of deregistration)
Steinhoff Africa Holdings (Pty) Ltd
Steinhoff Services (Pty) Ltd
Unitrans Automotive (Pty) Ltd
Unitrans Employee Benefit Trust
Unitrans Express Logistics (Pty) Ltd
Unitrans Holdings (Pty) Ltd
Unitrans Motors (Pty) Ltd
Unitrans Motor Enterprises (Pty) Ltd
Unitrans Passenger (Pty) Ltd
Unitrans Properties (Pty) Ltd
Unitrans Rentals (South Africa) (Pty) Ltd
Unitrans Supply Chain Solutions (Pty) Ltd
Unitrans Zululand (Pty) Ltd
Blazing Sun Investments 46 (Pty) Ltd
Status
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
177
Mariza Nel (42) Senior Management
Ms Nel has been an executive member of the Group’s group services team since 2004 and an alternate director on the board of Steinhoff since 2011
Ms Nel is responsible for the Group’s stakeholder communication, investor relations and is global head of human resources and information technology. Ms Nel began her career
in 1996 as group financial controller at Edinburgh-based Scottish and Newcastle plc and was appointed general manager for Scandinavia and the Baltic States in 2000. She joined
Steinhoff as part of the group services team in 2004 and has been involved in many operational and corporate functions throughout the Group. Since 2007, Ms Nel has been
responsible for the Group’s stakeholder communication and investor relations functions and was also appointed as global head of human resources and information technology
of the Group in April 2011.
Ms Nel has been in the past 5 (five) years or is presently the director or partner in the following companies and/or partnerships:
Spree Web Solutions (Pty) Limited
Steinhoff At Work (Pty) Limited
Status
Active
Active
Active
Active
Active
Hendrik Johan Karel Ferreira (60) Senior Management
Mr Ferreira has been Executive Director: Mergers and Acquisitions of the Group since 2009, having joined the Group in 2002.
Mr Ferreira commenced his career in corporate finance in 1986 and worked at several investment banks before joining Steinhoff in January 2002, after which he was appointed as
an alternate director in December 2005. During his career with South African investment banks, he was involved with various corporate finance transactions, including Steinhoff’s
initial public offering on the JSE in 1998. Mr Ferreira has extensive corporate finance experience and expertise in the field of mergers and acquisitions, fund raising and financing
transactions, company restructures and general corporate finance. Mr Ferreira has been involved in most of the corporate transactions concluded by Steinhoff. Mr Ferreira also
serves as a member of the issuer services regulation advisory committee of the JSE.
Mr Ferreira has been in the past 5 (five) years or is presently the director or partner in the following companies and/or partnerships:
Steinhoff At Work (Pty) Limited
Status
Active
Active
Active
Stephanus Johannes Grobler (55) Senior Management
Mr Grobler has been Executive Director: Group Treasury and Financing Activities of the Group since 2009, having joined the Group in 2000.
In December 1999, Mr Grobler was appointed company secretary of Steinhoff and joined Steinhoff more formally in July 2000. He was appointed to the Steinhoff Board in 2005 and
became an executive director of Steinhoff in May 2009. Mr Grobler was admitted as an attorney of the High Court of South Africa in 1989. He was also admitted as a notary public,
conveyancer and to appear in the High Court of South Africa. Mr Grobler gained extensive experience practicing in the business and corporate law fields advising various listed and
unlisted companies on commercial and company law issues. Mr Grobler was also head of the legal department of Steinhoff. He acts as director for various groups and companies.
Mr Grobler has been in the past 5 (five) years or is presently the director or partner in the following companies and/or partnerships:
Ainsley Holdings (Pty) Ltd
At Work Holdings (Pty) Ltd
Bayne Investments (Pty) Ltd
Beau Beleggings (Pty) Ltd
Clidet No 451 (Pty) Ltd
Homestyle Group Operations Ltd
Homestyle Operations Ltd
IB Investment Holdings (Pty) Ltd
Mosselbank (Pty) Ltd
Pat Cornick International BV
Rainford Aviation Investments (Pty) Ltd
Relyon Group Ltd
Retail Interest Ltd
Steinhoff Africa Holdings (Pty) Ltd
Steinhoff Africa Secretarial Services (Pty) Ltd
Steinhoff Africa Textiles (Kzn) (Pty) Ltd
Steinhoff Asia Pacific Ltd
Steinhoff At Work (Pty) Ltd
Steinhoff Europe AG
Steinhoff Extended Family NPC
Steinhoff Finance Holding Gmbh
Steinhoff Services (Pty) Ltd
Steinhoff (UK) Holdings Ltd
Steinhoff UK Retail Ltd
178
Status
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Wood Chemicals South Africa (Pty) Ltd
Aapjas Investments (Pty) Ltd
Basin View Properties (Pty) Ltd
Danclove Office Park (Pty) Ltd
Definitely Done Construction (Pty) Ltd
Elmaretch Ingenieurswerke (Pty) Ltd
Frikkie Nel Familie Trust
Hoffman Attorneys
Hoffman Inc
Lichtenburg Beleggings (Pty) Ltd
Middelkraal Trust
Randcirca (Pty) Ltd
Steff Grobler Beherend (Pty) Ltd
Stehan Grobler Trust
Suez Beleggings (Pty) Ltd
Tweerivier Trust
Walter Seymour (Pty) Ltd
Status
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Frederik Johannes Nel (55) Senior Management
Mr Nel has been the Financial Director of the Group since 1990, having joined the Group in 1989.
Since 1998 Mr Nel acted as company secretary for the Group as well as financial director. He qualified as a chartered accountant in 1993 and began his career as an accountant
with a private company. He joined Gommagomma Holdings Proprietary Limited (now Steinhoff Africa Holdings Proprietary Limited) as financial manager in 1989, being appointed
financial director in 1990.
Mr Nel has been in the past 5 (five) years or is presently the director or partner in the following companies and/or partnerships:
Klawervlei Stud (Pty) Ltd
Richtig Investments CC
Steinhoff Africa Property Services (Pty) Limited
Steinhoff Europe AG
Ulingo Trading and Investments CC
Status
Active
Active
Active
Active
Active
Active
Active
Active
Active
179
Annexure 11
RISK FACTORS
If the Scheme is implemented, Steinhoff Shareholders will receive the Scheme Consideration, being Ordinary Shares and will, accordingly, become Shareholders of the Company,
and Steinhoff will become a wholly-owned subsidiary of the Company.
Steinhoff Shareholders should carefully consider the contents of this Prospectus and should consult with their own legal, business and tax advisers to determine the appropriateness
and consequences of an investment in the Company. Steinhoff Shareholders should consider carefully whether investment in the Company is suitable for them, in the light of their
personal circumstances and the financial resources available to them.
There may be risks of which the Board is not aware or are currently deemed immaterial.
The risks described below should be read in conjunction with the rest of this Prospectus and are not presented in any particular order. If any of the events described below actually
occurs, the Group’s business, financial condition or results of operations could be materially adversely affected and, accordingly, the value and trading price of the Ordinary Shares
may decline, resulting in a loss of all or part of any investment in the Ordinary Shares.
References in these risk factors to the Articles of Association are to the Articles of Association after the exection of the Deeds of Amendment.
RISK
COMMENTARY
RISK RELATING TO THE COMPANY AS AT THE DATE OF THIS PROSPECTUS
The Company has no material assets, and will not have traded, as at the date of this
Prospectus
The Company will only acquire material assets on the implementation of the Scheme
and the kika-Leiner Sale Agreement.
Implications of a secondary listing on the JSE
Please refer to section 4, paragraph 4 of this Prospectus for the implications of the
Company having a secondary listing on the JSE, as opposed, to a primary listing.
RISKS RELATING TO THE GROUP’S BUSINESS
The Group’s ability to increase sales, maintain or increase prices and/or to recover
fixed costs may be adversely affected by volatile economic conditions
Historically, the furniture and household goods industries have been cyclical,
generally fluctuating with economic cycles and conditions. Demand is sensitive
to general economic conditions, including housing activity, interest rate levels,
current economic growth, credit availability, unemployment and other factors that
affect consumer spending habits. Due to the discretionary nature of most furniture
and household goods purchases and the fact that they often represent a significant
expenditure to the average consumer, such purchases may be deferred during times
of economic uncertainty. These general economic factors affect not only the ultimate
consumer, but also impact the Group’s owned and third-party mass and specialty
retailers, who are the Group’s primary customers for wholesale and distribution of
its manufactured and sourced products. Consequently, recessions or prolonged
economic downturns in the markets in which the Group operates could have a
material adverse effect on its business, financial condition or results of operations.
If the Group fails to integrate its acquisitions effectively, including the Pepkor
Acquisition, the Group’s business and financial results could be adversely affected
The Group has grown both organically and through a number of strategic acquisitions
and joint venture arrangements, which have historically contributed to the expansion
of its business and operations. The Group’s ability to continue to grow its business in
new markets will depend partly on its success in identifying and making appropriate
acquisitions and joint venture arrangements in the future. Moreover, the Group’s
future operating results will largely depend upon its ability to manage and integrate
the operations of past, as well as any future, acquisitions.
For example, following the Pepkor Acquisition, the Group may incur additional costs
and management time on the integration of the Pepkor Group including, among other
things, the combination of purchasing, sourcing and logistics infrastructure, the
negotiation of greater volume-based discounts from suppliers and more favourable
shipping rates between the Group’s key sourcing locations and distribution and
retail outlets. The Group may also undertake an examination of the Pepkor Group’s
operations, including its operating and IT systems and the location and footprint of its
store portfolio. There can be no assurances that the Group will be able to successfully
integrate the Pepkor Group’s operations with its own sourcing, production or retail
operations. These integration plans may be more complex or timely than expected
and costs to achieve these plans may be greater than anticipated. Key suppliers or
business partners may also choose to change or terminate their relationship with the
Group or the Pepkor Group following the Pepkor Acquisition.
In addition to the Pepkor Acquisition, upon the completion of the Scheme, and
alongside the integration processes being undertaken following the Pepkor
Acquisition, there can be no assurances that the Group will be able to successfully
integrate the operations of kika-Leiner with its other operations in a reasonable period
of time or at all, particularly in respect of its procurement and supply chain activities,
product offering and sales densities.
If the Group is unable to successfully integrate acquisitions, this may negatively
impact the profitability of the acquired businesses, as well as lead to write-offs of the
Group’s intangible assets, including goodwill. In the event the Group is forced to write
off a portion of the value of its intangible assets, this could have a material adverse
effect on its business, financial condition and results of operations.
180
RISK
COMMENTARY
The Group may not be able to manage the continuing expansion of its business
effectively
The Group’s retail and production operations have historically expanded significantly
through organic growth across its operating divisions and through the acquisition
of other companies, such as the retail operations acquired as part of the Pepkor
Acquisition and the kika-Leiner Acquisition. The Group’s management structures,
systems, procedures or controls may not be adequate or sufficiently developed to
support the continued expansion of its operations. Furthermore, Management may
not be able to allocate the time and resources necessary to effectively manage this
expansion. If the Group is unable to manage the expansion of its business efficiently
and effectively, its competitiveness, business, financial condition or results of
operations could be materially adversely affected.
The Group may not be able to identify opportunities or conclude transactions to
expand its business
The industry in which the Group operates is characterised by opportunities that
arise and may need to be evaluated quickly and, if mutually satisfactory terms can be
rapidly agreed, concluded within short periods of time. However, while Management
expects to continue to evaluate potential transactions, no assurances can be given
that it will be able, at any time, to identify and conclude transactions on acceptable
terms or at all.
The Group may also face competition from its competitors for potential growth
opportunities for example, in France, where the total market size for furniture is
€9,100,000,000 (nine billion one hundred million Euro) per annum, Conforama is the
second largest retailer of furniture and household goods by market share, according
to Ipea, with a market share of approximately 16% (sixteen percent). According to
the same Ipea report, Conforama and its two primary competitors, BUT and Ikea, in
France have a combined market share of 45% (forty five percent), with Ikea having
approximately 18% (eighteen percent), and BUT having approximately 12% (twelve
percent) of the market share in France. The remaining market is highly fragmented.
The Group may face increased competition with other leading retailers for market
share growth opportunities or it may be unable to take advantage of perceived
consolidation opportunities, either of which may adversely affect its ability to
successfully maintain and grow its market share in France. The failure to identify
or conclude potential transactions could materially adversely affect the Group’s
business, financial condition or results of operations.
The Group operates in highly competitive markets
The furniture and household goods market is fragmented and highly competitive, and
consists of a large number of manufacturers and retailers that produce and distribute
products similar to those of the Group. Moreover, the European furniture and
household goods market is characterised by a limited number of large competitors,
which, like the Group, are able to supply the industry by sourcing products globally
and by offering products at reduced prices. Notwithstanding the Group’s own sourcing
abilities, the added competition and flexibility of competitors (and customers) that are
now able to supply via a mix of sourced and manufactured products has placed, and
will continue to place, additional pressure on the Group’s operations and competitive
advantages. The Group also faces intensified competition in the e-commerce sector
due to lower barriers to entry and the development of the online market for certain
classes of products.
Competition is generally based on product quality, timing of delivery, product design,
product availability, brand name recognition, price and customer service. In certain
of the Group’s markets, particularly the Pacific Rim, France, Germany, the United
Kingdom and Eastern Europe, the Group competes with a limited number of large
companies which may have greater financial and other resources at their disposal.
The Sub-Saharan African furniture and household goods market, on the other hand,
is more concentrated, with fewer than four major competitors in each different
segment in which the Group operates.
Additionally, the Group also faces competition in the new geographic markets
and product categories where it competes following the Pepkor Acquisition, in
particular clothing, footwear and apparel, accessories and household goods. The
Group’s success in these markets and across these product categories depends in
large part on its ability to identify customer preferences and translate such demand
into appropriate, saleable merchandise in a timely manner. Even if the Group
reacts appropriately to changes in fashion trends, consumers may consider its
offerings to be outdated or associate its brands with styles that are less fashionable
than those of its competitors. In particular, the emergence and success of “fast
fashion”, which requires short merchandising cycles, has accelerated the pace of
fashion development. If the Group does not correctly interpret trends and respond
appropriately, it may lose its target customers to competing retailers. As a result,
the Group may lose market share or be left with excess or slow-moving inventory,
in which case it may be forced to rely on markdowns or promotional sales, thereby
reducing its revenue and margins.
No assurance can be given that the Group will be able to maintain its competitive
position in all or any of the markets in which it operates.
181
RISK
COMMENTARY
The Group faces seasonal and other fluctuations in consumer demand, rapidly
changing consumer tastes and the risk of product obsolescence
Seasonal fluctuations in customer demand for certain of the Group’s products,
particularly around holiday periods, can create corresponding fluctuations in the
Group’s revenue and operating profit. The Group’s exposure to seasonality and other
fluctuations in demand is primarily due to the markets in which the Group operates (and
relevant local holidays), consumer demand, climate and macroeconomic conditions.
The Group typically incurs additional expenses in advance of seasonal sales peaks
in anticipation of higher sales during such periods, including the cost of additional
inventory, advertising and employees. An unanticipated decrease in demand for the
Group’s products could require the Group to sell excess inventory at a substantial
markdown, which could reduce its revenues and operating profit. Alternatively, an
unanticipated increase in demand for certain products could leave the Group unable
to fulfil such demand and result in lost sales and customer dissatisfaction. Such
seasonal fluctuations and/or unexpected events or developments, such as natural
or manmade disasters, depressed economic conditions, increased interest rates, or
product sourcing issues, may have an adverse impact on consumer demand for the
Group’s products and, consequently, on the Group’s business, financial condition or
results of operations.
Many of the products that the Group sells at its retail locations, such as furniture and
household goods, clothing and footwear, and other consumer goods, are also subject
to trends and geographic consumer tastes, which can change rapidly. If the Group
is unable to anticipate or respond to such changes in a timely manner, its products
may become less attractive to customers, and its sales and earnings may decline.
Changes in consumer demand and tastes can also result in product obsolescence,
which may lead to increases in unsalable inventory that may need to be written off,
therefore negatively impacting the Group’s profitability. Price erosion can similarly
impact the Group’s profitability by decreasing its revenues and margins. Any of
the foregoing factors could have a material adverse effect on the Group’s business,
results of operations or financial condition.
The Group has potential exposure to product liability claims and to loss of reputation
The packaging, marketing, distribution and sale of the Group’s products entails
an inherent risk of product liability, product recall and resultant adverse publicity.
Products may contain contaminants or be of inferior quality which could result in
illness, injury or death. As a consequence, the Group has exposure to product liability
claims. If a product liability claim is successful, the Group’s insurance may not be
adequate to cover all liabilities that it may incur and the Group may not be able to
continue to maintain such insurance or obtain comparable insurance at a reasonable
cost, if at all. In addition, even if a product liability claim is not successful or is not
fully pursued, the negative publicity surrounding any assertion that the Group’s
products caused injury could materially adversely affect the Group’s reputation and,
consequently, its business, results of operations or financial condition.
The Group may not be adequately insured
The Group maintains external and self-insurance policies and programmes covering
a range of potential risks, other than political and other risks for which insurance is
not available. No assurances can be given, however, that the Group’s insurance is
adequate to cover all insurable risks in each of the geographical regions in which it
operates or that Management’s evaluation of internal and third-party risk management
audits will be effective in ensuring that the Group obtains sufficient insurance
coverage or retains adequate and cost-effective self-insurance programmes in the
future. In addition, the Group may be affected by one or more events that are excluded
from insurance cover or for which the relevant insurance company or re-insurers may
not have adequate resources and liquidity to fulfil their respective obligations to the
Group should it make a large insurance claim. This could cause the Group to suffer
a material loss, which could adversely impact its business, results of operations or
financial condition.
The Group depends on the skills and expertise of its senior executive officers and
other members of its Management Board
The Group’s strategic development depends, in part, on the continued contributions
of its senior executive officers and members of its Management Board who are
experienced in the markets and business in which the Group operates. The loss of
the services of certain of these senior executive officers and other members of its
Management Board could negatively impact the Group’s operations and its ability to
develop the business. In addition, as Management works to continue development
and expansion of the business, Management believes that the Group’s future success
will depend on its ability to manage, attract and retain skilled and qualified personnel.
Competition for skilled employees in the industries in which the Group operates
is intense, and the Group cannot be certain that it will be successful in managing,
attracting and retaining the personnel required to successfully conduct its operations.
Any of the foregoing could have a material adverse effect on the Group’s business,
financial condition or results of operations.
182
RISK
COMMENTARY
The Group is subject to IT risk
The Group is dependent on the permanent and uninterrupted availability of its
IT systems and IT infrastructure provided by third parties. The computer and
management systems used by the Group could be damaged by a range of factors,
such as telecommunication problems, software errors, inadequate capacity at
IT centres, fire, power cuts or damage and attacks by third parties. It is possible
that the Group’s servers could be damaged by physical or electronic break-ins and
computer viruses or similar disruptions, despite the security systems in place.
Unforeseen problems in the Group’s systems may also cause disruption to the
Group’s operations. There can be no assurance that the existing security systems,
IT security policy, data protection, physical access security, access protection, user
administration and IT planning are sufficient to prevent loss of data or an extended
failure of the network. Sustained or repeated problems or damage to the network and
technical systems of the Group or its IT service providers in the future which interrupt
or delay the contractual provision of services by the Group to its customers could
lead to contractual claims for compensation and contractual penalties or result in the
loss of customers or revenues. In addition, significant IT system-related issues could
cause the Group to suffer substantial reputational damage or market disadvantages.
Any of the foregoing could have a material adverse effect on the Group’s business,
Additionally, the Group faces risks related to integration of its current IT systems with
those of the Pepkor Group following the Pepkor Acquisition.
The Group depends on efficient logistics systems
The Group depends on the efficiency of its logistics networks, which include the
movement of raw materials and finished goods primarily by way of road, rail and
sea, and the delivery of final products to end users. The primary means by which
the Group transports its goods is ocean borne container. The Group contracts with
third parties to ship cargos by ocean borne container. Transport by ocean borne
container involves particular risks including the risk of delay in transport, loss of
and/or damage to the cargo due to factors beyond the Group’s control. These factors
include adverse natural conditions such as violent storms, tidal waves and tsunamis
as well as terrorist attacks and piracy, which has increased in frequency in recent
years. The occurrence of these events could have a material adverse impact on the
Group’s cost of operations. There can be no assurance that the insurance coverage
the Group has will be adequate, that its insurers will pay a particular claim or that
its insurance premiums will not increase as a result of the occurrence of any of
these circumstances. Because logistics are crucial to the Group’s business, highly
advanced processes and systems are employed from merchandise pickup and goods
movement to intelligent route planning. Despite historic investment in the Group’s
logistics network, the Group remains vulnerable to external issues beyond its control
such as the failure of third party suppliers to ensure that the appropriate quality and
quantity of goods are shipped, as well as possible delays to delivery which could
be caused by disruption to the Group’s distribution networks. The risk of delay in
the delivery of goods is particularly significant in instances where large amounts
of goods are shipped ahead of peak trading seasons, where the occurrence of or
delay in delivery could result in the Group’s inability to meet orders and therefore
significantly impact the Group’s profitability for that period. Moreover, while the
Group strategically targets its investment into its own warehousing and logistics
technologies, no assurances can be given that the Group’s focused investment will
earn a sufficient return on such investments in its fulfilment facilities. Any breakdown
of the Group’s logistics systems could have a material adverse effect on its business,
The Group’s operations depend on its ability to source and produce finished goods
and raw materials of appropriate quality from reliable sources and suppliers
Because the Group’s business model depends, in part, on the sourcing of finished
goods and low-cost raw materials from reliable sources and suppliers (being those
who are able to provide the required goods and materials at competitive prices and
within agreed time frames), it seeks to attain greater control over its supply of finished
goods and raw materials. The principal finished goods that the Group sources from
third parties include upholstered furniture, case goods and bedding products, as
well as clothing, footwear and apparel, accessories, household goods and cellular
products, while the principal raw materials that the Group purchases from third
parties for use in its operations include fabrics, foam, glass, leather, particleboard,
steel, springs and timber. The Group cannot give any assurances that the cost of
these finished goods and raw materials will not increase in the future or that it
will continue to have access to the necessary finished goods and raw materials at
reasonable prices. If the Group is unable to source finished goods and raw materials
of appropriate quality from reliable sources and suppliers, it could have a material
adverse effect on its business, financial condition or results of operations.
The Group may not be able to pass on the cost of oil, gas and electricity to its
customers
The Group’s operations depend on oil, gas and electricity, either in the manufacturing
process or to transport goods between facilities/stores and the Group’s customers
and/or the end-consumer. Oil, gas and electricity prices have historically been
volatile and depend on the actual and expected changes in the supply and demand of
oil, gas and electricity, changes in global economic growth and political uncertainty,
especially in oil producing countries. In the past, the Group has been able to pass
increased costs on to the customer or end-consumer. However, it may not succeed
in doing so in the future and may not continue to have access to affordably priced oil,
gas and electricity. This would lead to a reduction in operating margins and volume,
which could materially adversely affect the Group’s business, financial condition or
183
RISK
COMMENTARY
The Group is exposed to fluctuations in currency exchange rates
The Group is exposed to foreign exchange risk as a result of its business model,
which includes the strategy of sourcing finished products and raw materials from, and
locating manufacturing facilities in, emerging, low-cost economies and supplying
finished products into developed economies. As a result, volatility in the exchange
rates between the countries where the Group sources and produces its products and
the countries where it sells its products could have a negative impact on the Group’s
operating margins.
While the Group’s sourcing and manufacturing costs are incurred principally in Polish
zloty, Hungarian forint and currencies that are pegged to the U.S. dollar, the Group
earns revenues principally in rand, euro, Swiss franc, pound sterling, Polish zloty
and Australian dollars. Accordingly, any significant and sustained appreciation of the
currencies in which the Group incurs sourcing and manufacturing costs against the
currencies in which the Group earns revenues would adversely affect the Group’s
operating margins, thereby reducing its gross profit. Furthermore, going forward, the
Group will report its results in euro. To the extent these currencies appreciate against
the euro, the Group will record an increase in its sourcing and production costs,
which would negatively impact its gross profit.
It is the Group’s policy to hedge certain transactional currency risk associated with
sourcing products via foreign exchange contracts. Such hedging measures may
have the effect of increasing costs for the Group to the extent it receives a less
advantageous currency exchange rate than the prevailing rate available from time
to time. Should the Group fail to adequately hedge its transactional risk or suffer
increased costs or decreased competitiveness as a result of its hedging efforts, this
could have a material adverse effect on the Group’s business, financial condition or
In addition, Hungary and Poland, where the Group has a significant number of
sourcing and manufacturing facilities, are each members of the European Union
and may in the future replace their respective local currencies with the euro. If
such a change were to result in an increase in the Group’s costs of sourcing and
manufacturing products from these countries, it could have a negative impact on the
Group’s operating margins and its gross profit.
The Group is exposed to fluctuations in interest rates
As at 31 December 2014, the Group had R51 billion outstanding financial
indebtedness. The outstanding indebtedness is denominated in a combination of
currencies and consists of fixed and variable rate instruments. The interest rate on the
variable rate indebtedness is pegged to a number of different benchmarks including
EURIBOR, JIBAR, and the South African prime rate. While certain indebtedness is
hedged using cross-currency interest rate swaps, the Group is subject to the risk of
a material sustained increase in interest rates set by these benchmarks, which would
lead to an increase in the Groups cost of borrowing. An increase in interest rates
could therefore have an adverse effect on the Group’s business, financial condition
and results of operations.
The Group also faces risks related to the interest rate swap agreements that it has
entered or may enter into in the future, which may not be effective in mitigating
projected risks inherent in a particular borrowing position. If the Group is unsuccessful
in its hedging strategy for interest rate risk, it may realise losses on hedging positions
or it may limit the Group’s ability to capture a gain that it would otherwise attain in
the absence of a hedge. For example, while the Group has entered into a number
of cross-currency interest rate swap contracts to effectively convert fixed-interest
U.S. dollar borrowings into variable interest euro borrowings, there is no assurance
that the Group would not achieve a lower cost of funding in the absence of these
agreements. Further, there can be no assurance that the Group will be able to find
suitable instruments for hedging at times when it may choose to do so in the future.
The Group will require additional capital expenditure to expand and develop
184
The development and expansion of the Group’s business and operations is likely
to continue to involve significant capital expenditure. Management expects that its
capital expenditure plans are likely to require further financial resources, which may
be met from existing resources, future offerings of shares, issues of debt instruments,
borrowings or a combination thereof. The Group cannot make any assurance that
financing will be available when and in the amounts required, on terms acceptable
to it, or even at all. In addition, the ability of the Group’s African Operations division
to borrow and spend certain funds may be limited by South African exchange
control regulations. If the Group does not have sufficient financial resources or
funding available to it when required to fund its capital expenditure, the growth and
development of the Group’s business may be limited, which could have a material
adverse effect on its business, results of operations or financial condition.
RISK
COMMENTARY
Natural disasters could adversely affect the Group’s business
Severe weather conditions, such as hurricanes, floods, earthquakes or tornadoes, as
well as other natural disasters, in regions (i) in which the Group has manufacturing
facilities, distribution facilities or retail stores or (ii) from which the Group obtains
products could negatively impact the Group’s operations. The effects of natural
disasters and other severe weather events could damage the Group’s facilities
and equipment and force a temporary halt in manufacturing and retail operations.
Moreover, natural disasters may lead to the lack of an adequate work force, a
temporary disruption in the supply of products, interference in the transport of goods,
delays in the delivery of goods to the Group’s distribution centres or stores, stock
losses and/or a reduction in the availability of products in the Group’s stores.
Furthermore, the Group’s insurance coverage with respect to natural disasters is
limited and is subject to deductibles and coverage limits. Such coverage may not be
adequate, or may not continue to be available at commercially reasonable rates and
terms. Any of these factors could materially adversely affect the Group’s business,
financial condition and results of operations.
The Group may be unable to protect its intellectual property rights
The Group’s intellectual property is important to the operation of its business and
its competitive position in the markets in which it operates. The Group protects
its intellectual property through a combination of registered trademarks and other
trademark and service mark rights. If the Group’s efforts to protect its intellectual
property are inadequate, or if any third party misappropriates or infringes on the
Group’s intellectual property, the value of the Group’s brand may be harmed, which
could have a material adverse effect upon its business, financial condition and results
of operations.
The Group is subject to a variety of risks as a result of its diverse business operations
The Group operates across a variety of markets and industries and faces risks
specific to each of its businesses. In addition to the risks set out in this section,
these risks primarily include: (i) a reduced pricing model and/or discounted product
pricing by its major competitors; and (ii) loss of competitive advantages, including
import protections. Should any of the foregoing occur, the Group’s business, financial
condition and results of operations could be materially adversely impacted.
The Group faces risks in relation to its outstanding loans and borrowings
As at 31 December 2014, the Group had outstanding interest-bearing loans and
borrowings in the amount of R51.4 billion. The terms of the agreements and
instruments governing the Group’s debt, including the private placement notes issued
by Steinhoff Europe AG and the Group’s syndicated loan facility, contain a number of
covenants and other provisions that restrict the Group’s ability to, inter alia, make
certain payments, including dividends or other distributions, incur or guarantee debt,
engage in certain transactions with affiliates and other related parties, sell assets,
issue share capital of certain subsidiaries and create liens. While these limitations
are subject to market standard exceptions and qualifications, they could limit the
Company’s ability to pay dividends, finance future operations or pursue acquisitions
and other business activities that may be of interest.
In addition, the Group’s debt includes terms related to the Group’s debt to equity ratio,
debt to EBITDA, interest cover and EBITDA cover, which may limit its ability to incur
additional indebtedness and its flexibility in planning for, or reacting to, changes in
its business and the markets in which it operates. As a result, these restrictions could
impair the Group’s ability to obtain additional financing in the future and place it at
a competitive disadvantage compared to any competitors that have less debt, which
could have a material adverse effect on the Group’s business, financial condition or
The Group’s ability to comply with its debt covenants may be affected by events
beyond its control. If the Group were to fail to comply with any of the financial or
non-financial covenants (due, for example, to deterioration in financial performance
or declines in asset valuations or certain operational indicators), it could result in
an event of default and the acceleration of the Group’s obligations to repay those
borrowings, increased borrowing costs or cancellation of certain credit facilities.
Changes in the Group’s creditworthiness may affect its ability to meet future liquidity
requirements and to access new funding
In the course of its operations, the Group faces liquidity risks arising from potential
inabilities to meet contractual obligations on their due dates and fund assets. These
obligations are funded through the proceeds of the Group’s ongoing operations as
well as periodic borrowings and funding arrangements, which the Group enters
into from time to time. The Group’s creditworthiness for new funding arrangements
depends on many factors, including its gearing position, the retail environment in
general, the state of the economy and the level of drawn debt, some of which are
outside of the Group’s control. Deterioration in any of these factors could potentially
impact the cost and accessibility of new funding or other credit arrangements in the
future, thereby having an adverse impact on the Group’s business, financial condition
or results of operations.
185
RISK
COMMENTARY
Fluctuations in the price, availability or quality of raw materials or sourced products
could cause delays or increases in the costs of materials
The Group sources various types of raw materials for the production of the furniture and
household goods sold in its retail stores and to third-party retailers, including wood,
fabrics, leathers, glass, upholstered filling material, steel and other commodities. On
a global and regional basis, the sources and prices of these materials and components
are susceptible to significant price fluctuations due to supply and demand trends,
transportation costs, government regulations and tariffs, the economic climate
and other circumstances beyond the Group’s control. In particular, volatility in oil
markets in recent periods has led to significant fluctuations in the price of petroleumbased products, which affects the cost of the Group’s polyurethane foam, polyester,
polyethylene foam and steel innerspring component parts.
In addition to its manufacturing capabilities, the Group also sources products from
independent manufacturers, including upholstery, case goods, homeware, beds,
bedroom furniture, electronics and appliances, as well as clothing, footwear and
apparel, accessories, household goods and cellular products for the Pepkor Group’s
retail outlets.
Additionally, many of the suppliers of the Group’s raw materials and sourced products
are dependent upon other suppliers in countries other than where they are located.
This global interdependence is subject to delays in delivery, availability, quality and
pricing (including tariffs) of products. Furthermore, the Group is subject to the risk
that the efforts that it takes to manage exposure to supply chain interruptions may
be unsuccessful. The delivery of goods from these suppliers may be delayed by
customs, labour issues, changes in political, economic and social conditions, laws
and regulations. Unfavourable fluctuations in the availability of these products could
negatively affect the Group’s ability to meet the demands of its customers and have a
negative impact on product margin.
The Group’s suppliers of raw materials and finished goods could choose to
discontinue business with the Group or could change the terms under which they
are willing to do business, such as price, minimum quantities, required lead times or
payment terms. Fluctuations in the price, availability or quality of (i) the raw materials
the Group uses in manufacturing its products or (ii) the products it sources could
have a negative effect on the Group’s cost of sales and its ability to meet the demands
of its customers. In the event of a significant disruption in the Group’s supply of
raw materials or sourced products, the Group may not be able to locate alternative
sources at an acceptable price or in a timely manner. In addition, if the price of raw
materials increases, the Group may not be able to pass along to customers all or a
portion of the higher costs, due to competitive and market pressures or other reasons.
Any of these factors could disrupt the Group’s production capabilities or decrease
its revenue, which could have a material adverse effect on the Group’s business,
The Group is exposed to the risk of default on the part of certain customers or
counterparties
The Group faces the risk of default by one or more counterparties in respect of cash
deposits placed with major financial institutions and trade receivables from and loans
to customers. To the extent any of these financial institutions holding cash deposits on
behalf of the Group were to experience financial difficulties, the Group could lose some
or all of these amounts on deposit. Further, if the Group’s existing customers were to
experience financial difficulty, this could result in write-offs of trade receivables or
customer loans or loss of future business. The Group’s customers could be impacted,
for example, by the continued management of credit risk by financial institutions and
the relatively low levels of growth over recent years in many of the regions where the
Group operates, which has caused a decrease in the availability of credit for many
furniture and household goods retailers, which form a significant portion of the
Group’s customer base. In certain instances, this has caused furniture and household
goods retailers to exit the market or be forced into bankruptcy. Furthermore, many of
the Group’s customers rely in part on consumers’ ability to finance their purchases
with credit from third parties. If consumers are unable to obtain financing, they may
defer their purchases, which could have a negative impact on the Group’s customers.
The Group is subject to risks associated with the suppliers from whom certain of its
raw materials and products are sourced
Certain products that the Group sells, or uses in the manufacture of products that
it sells, are sourced from a wide variety of suppliers in locations around the world.
Global sourcing of many of the products sold by the Group, and used by the Group
in the production of its products, is an important aspect of the Group’s strategy of
sourcing and manufacturing products in low-cost locations and distributing them
through Group-owned and third-party retailers in developed markets. All of the
Group’s suppliers must comply with applicable laws, including labour, safety and
environmental laws, and otherwise be certified as meeting the Group’s required
supplier standards of conduct. However, the Group’s ability to find qualified suppliers
who meet its standards, and to access products in a timely and efficient manner,
is a significant challenge, in particular given that many of the Group’s suppliers of
raw materials and finished goods are located in disparate jurisdictions. Political
and economic instability in the countries in which foreign suppliers are located,
the financial instability of suppliers, suppliers’ failure to meet the Group’s supplier
standards, labour and safety problems experienced by suppliers, the availability of
raw materials to suppliers, merchandise quality issues, currency exchange rates,
transport availability and cost, transport security, inflation and other factors relating
to the suppliers and the countries in which they are located are beyond the Group’s
control. These and other factors affecting the Group’s suppliers and its access to
raw materials and products could adversely affect the Group’s business, financial
condition or results of operations.
186
RISK
COMMENTARY
RISKS RELATING TO REGULATORY, POLITICAL AND ECONOMIC DEVELOPMENTS
The Group is subject to various government regulations in the markets in which it
operates
The Group’s operations are subject to various laws and regulations in the jurisdictions
in which it operates, relating to such matters as health and safety, employment and
environmental issues. Historically, compliance with these laws and regulations
has not resulted in material costs or had any material adverse effect on the Group’s
operations. However, if the Group fails to comply with any such laws or regulations,
it could be subject to liability, including, but not limited to, mandatory shut downs,
damages, criminal prosecutions, financial penalties, loss of trade agreements
and contracts, and injunctive action. In addition, future changes in such laws and
regulations could negatively impact the Group’s business.
Furthermore, the Group may be regarded by anti-trust authorities as having a large
market share in some of the jurisdictions in which it operates. The Group’s operations
in these countries may, consequently, be subject to certain anti-competition
legislation and regulatory oversight. Certain expansions of its operations in these
countries through acquisitions may require regulatory approval. While to date all
acquisitions have been approved by regulatory authorities, it is possible that, in the
future, the Group may not receive approval to make additional acquisitions or that
such approval may be subject to various conditions which could affect its ability to
expand its operations in that market. From an acquisitive growth perspective, any
of the foregoing occurrences could have a material adverse effect on the Group’s
The Group’s costs may increase as a result of developments in environmental, health
and safety and labour laws, and tax regimes
The Group depends on logistics for the transport of its products and raw materials
and on the reliable sourcing of finished goods and raw materials. Developments
in environmental, health and safety and labour laws, and tax regimes in respect of
the logistics and raw material-related industries with which the Group has dealings
may lead to additional costs, such as carbon emissions and other indirect taxes.
Moreover, the complexity of compliance with potential future regulations related
to the Group’s carbon footprint and health and safety, labour and related laws may
further increase the Group’s operating costs. As the Group imports many products
and raw materials from other jurisdictions, costs may also increase in the event of
changes and/or increases in import and/or excise duties being levied or charged on
the Group’s products. Should any of the foregoing occur, it could have a material
adverse effect on the Group’s business, financial condition or results of operations.
In addition, although the Company is incorporated under the laws of the Netherlands,
the Group is resident in South Africa for tax purposes. Accordingly, the Group is
subject to taxes in South Africa, and may also be subject to taxes in the various other
jurisdictions in which it operates. Significant judgement is required in evaluating
and estimating the Group’s provision and accruals for these taxes and, during the
ordinary course of business, there may be transactions for which the ultimate tax
determination is uncertain. The final outcome of tax audits could be materially
different from the estimates of Management that underlie the Group’s historical tax
provisions and accruals. Developments in an audit, litigation, or the relevant laws,
regulations, administrative practices, principles, and interpretations could have a
material effect on the Group’s operating results or cash flows in the period or periods
for which that development occurs, as well as for prior and subsequent periods.
The Group may also be subject to audit in various jurisdictions, and such jurisdictions
may assess additional tax liabilities against it.
The Group is subject to South African exchange control regulations
The Group is subject to South Africa’s exchange control regulations, which restrict
the export of capital from the Common Monetary Area. These regulations restrict the
ability of the Group’s African Operations division to raise and deploy capital outside
the Common Monetary Area. In general, South African companies are not permitted
to export capital from South Africa or to hold foreign currency without the approval
of the South African Reserve Bank, and are required to repatriate the profits of their
foreign operations to South Africa. As a result, the Group’s operations in South Africa
may have limited financial flexibility, which could materially adversely affect its
187
RISK
COMMENTARY
RISKS RELATING TO THE ORDINARY SHARES AND ADMISSION
Certain shareholders of the Company exercise significant influence over the Group
and, as a result, investors may not be able to influence the outcome of important
decisions in the future
As a result of the Pepkor Acquisition, and upon the Scheme becoming effective, the
Voting Pool Parties will hold or control approximately 33% (thirty three percent)
of the total voting share capital of the Company. After the Scheme has become
operative, the Voting Pool Parties are able to exercise significant influence over all
matters requiring shareholder approval, including appointment of the members of the
Management Board and of the Supervisory Board, significant corporate transactions,
the issuance of Shares or other equity securities and the payment of any dividends on
the Shares. In particular, the interest of the Voting Pool Parties may conflict with the
interests of other investors in the Company, and the Voting Pool Parties may support
resolutions not supported by a large majority of the other investors at the General
Meeting or vice versa.
Furthermore, the Voting Pool Parties are subject to certain informal arrangements
which regulate the relationships among them (the “Voting Pool Arrangements”). In
particular, the Voting Pool Arrangements comprise matters in respect of which the
Voting Pool Parties will vote their Shares together, based on the decision of a majority
of the Voting Pool Parties, including in respect of (i) any resolution proposed at a
General Meeting; (ii) any decision on the entry into any transaction which concerns
directly or indirectly more than 1% (one percent) of the aggregate voting rights of the
Company; and (iii) any transaction by which the composition of the voting rights of
the Voting Pool Parties will be significantly changed.
As a result, the concentration of ownership among the Voting Pool Parties may: (i)
deter a third party from making a takeover offer for the Company and thereby have
the effect of delaying or deterring a change of control of the Group; (ii) deprive
shareholders of an opportunity to receive a premium for their Ordinary Shares as a
part of a sale of the Group; and (iii) affect the market price and liquidity of the Ordinary
Shares.
The market price of the Ordinary Shares may fluctuate and may decline below the
Admission Price, and trading in the Ordinary Shares may be very limited which might
lead to holders not being able to sell their Ordinary Shares at a reasonable price or
at all
No assurances can be given that an active trading market for the Ordinary Shares will
develop or, if developed, can be sustained or will be liquid following the Admission.
Furthermore, the price of the Ordinary Shares at the commencement of trading on the
FSE and the JSE (the “Admission Price”) is not necessarily indicative of the prices
at which the Ordinary Shares will subsequently trade on the stock exchanges. If an
active trading market is not developed or maintained, the liquidity and trading price of
the Ordinary Shares could be adversely affected.
Publicly traded securities from time to time experience significant price and volume
fluctuations that may be unrelated to the operating performance of the companies that
have issued them. In addition, the market price of the Ordinary Shares may prove to
be highly volatile and may fluctuate significantly in response to a number of factors,
many of which are beyond the Group’s control, including new government regulation,
variations in operating results in the Group’s reporting periods, changes in financial
estimates by securities analysts, changes in market valuation of similar companies,
announcements by the Group or its competitors of significant contracts, acquisitions,
strategic alliances, joint ventures, capital commitments or new services, loss of major
customers, additions or departures of key personnel, any shortfall in revenue or net
income or any increase in losses from levels expected by securities analysts, future
issues or sales of ordinary shares and stock market price and volume fluctuations.
Any of these events could result in a material decline in the price of the Ordinary
Shares.
188
RISK
COMMENTARY
Future offerings of debt or equity securities by the Company may adversely affect
the market price of the Ordinary Shares and may dilute investors’ shareholdings. The
Ordinary Shares may also be subject to dilution upon the exercise of outstanding
options over Ordinary Shares and conversion of the Convertible Bonds
Effective as per the Deeds of Amendment, the Management Board will have been
designated as the corporate body authorised to (i) issue Ordinary Shares, grant rights
to subscribe for Ordinary Shares and/or limit or exclude statutory pre-emptive rights
in relation thereto, (ii) grant rights to subscribe for Ordinary Shares and/or Preference
Shares and to limit or exclude statutory pre-emptive rights in relation thereto and (iii)
to issue Preference Shares, grant rights to subscribe for Preference Shares and/or
limit or exclude statutory pre-emptive rights in relation thereto. These designations
are limited to: in the case of (i) up to 10% (ten percent) of the issued share capital
after the Scheme has become operative plus up to an additional 10% (ten percent)
of such capital which may be used in connection with or on the occasion of mergers
and acquisitions and strategic alliances; in the case of (ii) up to 10% (ten percent)
of the issued share capital after the Scheme has become operative; and in the case
of (iii) up to 10% (ten percent) of the authorised number of Preference Shares in the
Company’s capital. Each of the foregoing authorisations will be valid for a period of
5 (five) years following the date of execution of the Deeds of Amendment. If these
authorisations are used during a particular year, then the Management Board is
expected to propose to the General Meeting that the Management Board is designated
with additional authorities so that as of the date of the annual General Meeting at
which this proposal is put to a vote the ability to issue or grant is restored back to
the (up to) 10% (ten percent). In addition, it is contemplated the General Meeting will
designate the Management Board as the corporate body authorised and, accordingly,
the Management Board will resolve (i) to issue such number of Ordinary Shares as are
needed for the Scheme, (ii) to grant such number of rights to subscribe for Ordinary
Shares as are needed for the purposes of replacing the rights to acquire Steinhoff
Shares under existing Steinhoff stock options and convertible bonds with rights to
acquire Ordinary Shares and (iii) to exclude all statutory pre-emptive rights in relation
thereto. As a result, the designations set out in the preceding paragraphs remain
available.
Upon the Scheme becoming operative, the Company will have an authorised share
capital and an issued share capital as set out in section 1, paragraph 4 of this
Prospectus. In addition, upon the Scheme becoming operative, rights will have
been granted or will have been proposed to be granted as contemplated in section
1, paragraph 4. of this Prospectus. The equity interests of holders of the Ordinary
Shares will be diluted to the extent that Ordinary Shares are issued pursuant to these
rights (and any additional rights allocated under the Group’s share incentive scheme
or a similar arrangement).
The market price of the Ordinary Shares could further decline if substantial numbers
of Ordinary Shares are sold by the Voting Pool Parties in the public market or if there
is a perception that such sales could occur. The Voting Pool Parties are not subject to
lock-up provisions, and neither is any other person. The Voting Pool has an indefinite
life with Voting Pool Members having reciprocal pre-emptive rights in respect of each
other’s Shares.
The Company may in the future seek to raise capital through public or private debt
or equity financings by issuing additional Ordinary Shares, Preference Shares, debt
or equity securities convertible into Ordinary Shares, Preference Shares or rights to
acquire these securities and exclude the pre-emptive rights pertaining to the then
outstanding Ordinary Shares and Preference Shares. In addition, the Company may
in the future seek to issue additional Ordinary Shares and Preference Shares as
consideration for or otherwise in connection with the acquisition of new businesses.
The issuance of any additional Shares may dilute an investor’s shareholding interest
in the Company. Furthermore, any additional debt or equity financing the Company
may need may not be available on terms favourable to the Company or at all, which
could adversely affect the Company’s future plans and the market price of the
Ordinary Shares. Any additional offering or issuance of Shares by the Company, or
the perception that an offering or issuance may occur, could also have a negative
impact on the market price of the Ordinary Shares and could increase the volatility in
the market price of the Ordinary Shares.
The Group cannot make any assurance that it will pay cash dividends or make other
similar payments in the future
The Company intends to target a dividend pay-out ratio in line with listed international
retailers from time to time, provided the Group’s business remains stable. Since the
Company does not itself conduct any operating business, its ability to pay dividends
depends on its operating subsidiaries and associated companies making profits and
distributing these to the Company or transferring them to the Company via existing
profit/loss transfer agreements. Any decision as to whether to pay cash dividends
or other distributions (such as a return of capital to shareholders through share
dividends, for example) will depend upon a variety of factors, including the Group’s
cash flow, capital expenditure plans and other cash requirements existing at the
time, loan covenants and other considerations. Under the terms of the Articles of
Association, distributions may only be paid out of profits (including retained earnings
and distributable reserves). No assurance can be given that cash dividends or other
similar payments will be paid in the future.
189
RISK
COMMENTARY
Holders of Ordinary Shares outside the Netherlands may suffer dilution if they are
unable to exercise pre-emptive rights in future offerings
In the event of an increase in the Company’s share capital, holders of Ordinary Shares
are generally entitled to full pre-emptive rights unless these rights are limited or
excluded either by virtue of Dutch law, a resolution of the General Meeting upon a
proposal of the Management Board which has been approved by the Supervisory
Board, or by a resolution of the Management Board (if the Management Board has
been designated by the General Meeting for this purpose). However, holders of
Ordinary Shares have no pre-emptive rights in respect of issues of, or grants of rights
to subscribe for, Shares of another class (and holders of Preference Shares have no
pre-emptive rights in respect of Ordinary Shares). Furthermore, holders of Ordinary
Shares outside the Netherlands may not be able to exercise pre-emptive rights, and
therefore suffer dilution, unless local securities laws have been complied with.
In particular, U.S. holders of the Ordinary Shares may further not be able to receive
(or trade) or exercise pre-emptive rights in respect of the Ordinary Shares unless a
registration statement under the Securities Act is effective with respect to such rights
or an exemption from the registration requirements of the Securities Act is available.
The Group does not plan to become a registrant under the U.S. securities laws. If
U.S. holders of the Ordinary Shares are not able to receive (or trade) or exercise preemptive rights granted in respect of their shares in any pre-emptive offering by the
Company or participate in a rights offer, as the case may be, then they may not receive
the economic benefit of such rights or participation. In addition, their proportional
ownership interests in the Company will be diluted.
The rights and responsibilities of Shareholders are governed by Dutch law and
the Articles of Association, which differ in some respects from the rights and
responsibilities of shareholders under South African law and the current constitutional
documents of Steinhoff
The Company’s corporate affairs are governed by its Articles of Association, the
Management Board Rules and the Supervisory Board Rules and the laws governing
companies incorporated in the Netherlands. The rights of Shareholders and the
responsibilities of members of the Management Board and Supervisory Board
under Dutch law differ from the rights of shareholders and the responsibilities of a
company’s board of directors under German law or South African law.
For example, the provisions of Dutch corporate law and the Articles of Association
have the effect of concentrating control over certain corporate decisions and
transactions in the hands of the Management Board and the Supervisory Board.
As a result, holders of Ordinary Shares may have more difficulty in protecting their
interests in the face of actions by members of the Management Board and/or the
Supervisory Board than if the Company were incorporated in South Africa. Dutch
law also requires that in the performance of its duties, the Management Board and
the Supervisory Board will need to consider the interests of the Company and its
business, its shareholders, employees and other stakeholders, and it is possible that
some of these parties will have interests that differ from, or are in addition to, the
interests of the Shareholders. It may further be difficult for Shareholders who are not
familiar with Dutch corporate law and market practice to exercise their shareholder
rights due to foreign legal concepts, language and customs. In addition, General
Meetings will be held in the Netherlands, in Amsterdam, Rotterdam, Eindhoven,
Utrecht or Haarlemmermeer (including Schiphol Airport), and it may therefore be
expensive and otherwise burdensome to attend these meetings in person (for those
shareholders who prefer to vote in person rather than sending a proxy), in particular
for shareholders who reside outside of the Netherlands.
These aspects could have a material adverse effect on the value of the Ordinary
Shares and could materially impact the rights of the holders of the Ordinary Shares.
Investors may have difficulty enforcing their rights against the Company and its
respective directors and officers in U.S. courts
The Company is incorporated under the laws of the Netherlands and all the Group’s
assets are located outside the United States. The members of the Management Board
and the Supervisory Board and officers of the Group named herein are non-residents
of the United States. All or a substantial proportion of the assets of these individuals
are located outside the United States. As a result, it may be difficult for investors
to effect service of process within the United States upon the Company or persons
residing outside the United States, or to enforce outside the United States judgments
obtained against such persons in U.S. courts in any action, including actions
predicated upon the civil liability provisions of the U.S. federal securities laws. In
addition, it may be difficult for investors to enforce, in original actions brought in
courts in jurisdictions located outside the United States rights predicated upon
the U.S. federal securities laws. No assurance can be given that U.S. investors will
be able to enforce any judgments obtained in U.S. courts in civil and commercial
matters, whether or not predicated solely upon U.S. federal securities laws, against
the Company, members of the Management Board and the Supervisory Board and
officers of the Group named herein who are residents of the Netherlands or countries
other than the United States.
Investors with a reference currency other than the euro will become subject to foreign
exchange rate risk when investing in the Ordinary Shares
The Ordinary Shares are, and any dividends to be declared in respect of the Ordinary
Shares will be, denominated in euro unless the Management Board determines in its
sole discretion that payment shall be made in a different currency. An investment in
the Ordinary Shares by an investor whose principal currency is not the euro exposes
the investor to currency exchange rate risk that may impact the value of the investment
in the Ordinary Shares or any dividends.
190
Annexure 12
SIGNED POWERS OF ATTORNEY BY THE INCORPORATION DIRECTORS AND STEINHOFF DIRECTORS AUTHORISING
EACH RESPECTIVE SIGNATORY TO SIGN FOR AND ON BEHALF OF THE BOARD AND THE STEINHOFF BOARD
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