Financial statements > Company financial statements > Notes to the company financial statements

NOtes to the COmpany financial statements
for the year ended 31 December 2015

1.  

ACCOUNTING POLICIES 

1.1  

Basis of preparation 

The company financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS), IFRIC interpretations, SAICA Financial Reporting Guides, the requirements of the Companies Act, No 71 of 2008, as amended, and the Listing Requirements of the JSE Limited. 

The financial statements are prepared using the historical cost convention and are prepared on the going concern basis.

The financial statements are prepared using accrual accounting whereby the effects of transactions and other events are recognised when they occur rather than when the cash is received. 

Assets and liabilities and income and expenses are not offset unless specifically permitted by an accounting standard. 

Accounting policies are the specific principles, bases, conventions, rules and practices applied in preparing and presenting financial statements. Changes in accounting policies resulting from the initial application of a standard or an interpretation are accounted for in accordance with the transitional provisions in the accounting standard. If no such guidance is given, they are applied retrospectively. 

Changes in accounting estimates resulting from new information or new developments are recognised in the income statement in the period they occur.

Prior period errors are retrospectively restated unless it is impracticable to do so, in which case they are applied prospectively. 

    

1.2 

Judgements, estimates and assumptions 

The accounting estimates and critical judgements applied by the key management of Hulamin Limited are discussed in the group's consolidated financial statements (see note 1.37). 

    

1.3 

Principal accounting policies 

The principal accounting policies applied by the company are the same as those presented in note 1 to the consolidated group financial statements, to the extent that the group's transactions and balances are applicable to the company financial statements. Principally, the accounting policies which are not directly relevant to the company financial statements are those relating to consolidation accounting. 

The accounting policies which are either different, or additional, to those applied by the group are stated as follows:

Subsidiaries

Subsidiaries are all entities over which the group has control, generally accompanying a shareholding of more than one half of the voting rights.

The company financial statements recognise interests in subsidiaries, which include loans granted to subsidiaries by the company, at cost, except in the case of certain limited group reorganisations where net assets are disposed. In these instances, interests in subsidiaries will be based on the carrying amount of the net assets disposed. 

Interest income

Interest income comprises interest earned on loan to subsidiary. Interest income is disclosed under revenue in the income statement. 

When a loan and receivable is impaired, the company reduces the carrying amount to its recoverable amount, being the estimated future cash flow discounted at the original effective interest rate of the instrument, and continues unwinding the discount as interest income. Interest income on impaired loans and receivables is recognised using the original effective
interest rate. 

   2015 
R'000 
2014 
R'000 

2.

INVESTMENT IN SUBSIDIARIES

Investment in shares in subsidiaries  2 473 367  2 449 071 
Loan to subsidiary  766 621  754 718 
 3 239 988  3 203 789 
 

Included in the investment in shares in subsidiaries is an investment in cumulative redeemable preference shares of Hulamin Operations (Pty) Ltd.

The effective interest rate on the loan to subsidiary for the year was 12,7%. No fixed repayment terms have been set, and consequently no portion of the loan is considered past due.

The loan to subsidiary is subordinated in favour of Nedbank as security for group borrowings.

   
       

3.

DEFERRED TAX ASSET

At beginning of year  19 685  19 095 
Income statement 
Current year charge (note 7) (961) (289)
Deferred tax credit on other comprehensive items  (756) 879 
At end of year  17 968  19 685 
Deferred income tax asset analysed as follows: 
Post-retirement medical aid provision  17 963  19 680 
Other 
 17 968  19 685 
Deferred tax asset to be recovered after more than 12 months  17 963  19 680 
Deferred tax asset to be recovered within 12 months 
 17 968  19 685 
        

4.

SHARE CAPITAL AND SHARE PREMIUM

   
 

4.1

Authorised 

   
    800 000 000 ordinary shares of no par value    
(2014: 800 000 000 ordinary shares of 10 cents each) –  80 000 
31 477 333 A ordinary shares of no par value 
(2014: 45 000 000 A ordinary shares of 10 cents each) –  4 500 
36 072 000 B ordinary shares of 10 cents each 
(2014: 28 000 000 B ordinary shares of 10 cents each) –  2 800 
Total authorised share capital  –  87 300 

The A ordinary shares consist of 4 721 600 A1 shares and 26 755 733 A2 shares.

The B ordinary shares consist of 9 018 000 B1 shares, 9 018 000 B2 shares and 18 036 000 B3 shares.  

        

4.2 

Issued 

Ordinary shares 
Opening balance: 319 596 836 ordinary shares of 10 cents each 
(2014: 319 268 492 ordinary shares of 10 cents each) 31 960  31 926 
Issued during year: nil 
(2014: 328 344 ordinary shares of 10 cents each) –  34 
Transfer from share premium  1 785 620  – 
Closing balance: 319 596 836 ordinary shares of no par value 
(2014: 319 596 836 ordinary shares of 10 cents each) 1 817 580  31 960 
A ordinary shares 
Issued during year: A1 and A2 ordinary shares 
(4 721 600 A1 ordinary shares of no par value, 26 755 733 A2 ordinary shares of no par value)   59 656  – 
B ordinary shares 
Issued during the year: B1, B2 and B3 ordinary shares 
(9 018 000 B1 ordinary shares of no par value, 9 018 000 B2 ordinary shares of no par value, 18 036 000 B3 ordinary shares of no par value) 361  – 
Total issued stated/share capital  1 877 597  31 960 
Share premium 
Opening balance  1 785 620  1 785 620 
Transfer to share capital  (1 785 620) – 
Stated capital/share capital and share premium  1 877 597  1 817 580 
        

4.3 

Unissued 

Under option to employees 
Details of the employee share incentive schemes including the share options outstanding at the end of the year, the range of exercise prices and the weighted average contractual lives related thereto, are set out in the group financial statements. 

Under the control of the directors 
At 31 December 2015, 6 801 529 unissued ordinary shares (2014: 6 801 529) were under the control of the directors,
for the purpose, inter alia, of existing employee share incentive schemes.

   2015 
R'000 
2014 
R'000 

5.

POST-RETIREMENT MEDICAL AID BENEFITS 

The company has undertaken to contribute to the medical aid costs after retirement of employees engaged prior to 30 June 1996. The obligation is unfunded. 
Amounts recognised in the balance sheet are as follows: 
Present value of unfunded obligations  64 154  70 287 
Liability in the balance sheet  64 154  70 287 
The liability can be reconciled as follows: 
Balance at beginning of year  70 287  68 169 
Total expense accrued  5 589  3 716 
Remeasurements: 
Actuarial (gains)/losses arising from changes in financial assumptions  (4 160) 1 402 
Actuarial losses arising from changes in experience adjustments  1 459  1 739 
Benefit payments  (9 021) (4 739)
Balance at end of year  64 154  70 287 
Amounts recognised in the income statement are as follows: 
Interest costs  5 849  5 021 
Settlement gain (note i) (260) (1 305)
5 589  3 716 
Amounts recognised in other comprehensive income are as follows: 
Remeasurements: 
Actuarial (gains)/losses arising from changes in financial assumptions  (4 160) 1 402 
Actuarial losses arising from changes in experience adjustments  1 459  1 739 
Principal risks 

Through its PRMA subsidy benefit, the group is exposed to a number of risks, principally changes in: 

  • Financial assumptions: 
    • Discount rate, which is set having regard to the market yield on suitable government bonds taking into account the estimated duration of the liability 
    • Long-term price inflation rate, which is measured by the relationship between the yields of conventional and inflation-linked government bonds, taking into account the estimated duration of the liability 
    • Medical inflation rate 
  • Demographic assumptions: 
    • Post-retirement mortality 
    • Family statistics.

The demographic assumptions used in the valuation of the liability are consistent with those of the prior year.

Changes in the principal financial assumptions are detailed below. 

Principal financial assumptions: 
Discount rate (%) 10,85  8,80 
Future company subsidy rate – in service (%) 8,85  7,15 
Future company subsidy rate – pensioners (%) 9,15  7,90 
Sensitivity of future medical inflation rate 
1% increase in future medical inflation rate – effect on the aggregate of the service and interest costs  585  540 
1% increase in future medical inflation rate – effect on the obligation  5 389  6 132 
1% decrease in future medical inflation rate – effect on the aggregate of the service and interest costs  (515) (471)
1% decrease in future medical inflation rate – effect on the obligation  (4 751) (5 362)

The above sensitivity analyses are based on a change in an assumption while holding all other assumptions constant. In practice this is unlikely to occur and changes in some of the assumptions may be correlated. When calculating the sensitivity the same method has been applied as when calculating the liability recognised within the statement of financial position. The methods and types of assumptions used in preparing the sensitivity analysis did not change compared to the previous year.

The average duration of the benefit obligation at 31 December 2015 is 8,6 years (2014: 8,9 years). 

Estimated benefits payable by the group in the next financial year  6 003  5 926 
      

6.

ADMINISTRATIVE EXPENSES 

Post-retirement medical aid costs  5 589  3 716 
Auditors' remuneration (note 6.1) 150  145 
Share-based payment costs on A ordinary shares redeemed  –  3 624 
Other costs  4 695  4 874 
10 434  12 359 
        

6.1

Auditors' remuneration 

Audit fees  141  137 
Expenses 
150  145 
        

6.2

Directors' emoluments

Non-executives 
Fees  3 866  4 246 
3 866  4 246 
 

7.

TAXATION

South African normal taxation: 
Current 
Current year  22 836  23 334 
Deferred 
Current year (note 3) 961  289 
23 797  23 623 
Normal rate of taxation (%) 28,0  28,0 
Adjusted for: 
Items of a capital nature (%) –  1,3 
Effective rate of taxation(%) 28,0  29,3 
 

8.

RELATED PARTY TRANSACTIONS

During the year the company, in the ordinary course of business, entered into the following related party transactions: 
Interest received from subsidiary  90 465  87 916 
Agency fees received from subsidiary  104  80 
  Management fees received from subsidiary 4 853 5 108
      
  Transactions with non-executive directors are detailed in the group annual financial statements.    
      
The following balances were outstanding at the end of the reporting period: 
Loan balance owing by subsidiary (note 2) 766 621  754 718