Basis of presentation

These summarised provisional consolidated financial statements have been prepared in accordance with the framework concepts and the measurement and recognition requirements of International Financial Reporting Standards (IFRS) and the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee and Financial Reporting Pronouncements as issued by Financial Reporting Standards Council, and include disclosure as required by IAS 34 – Interim Financial Reporting and the Companies Act of South Africa. They do not include all the information required for a complete set of International Financial Reporting Standards financial statements. However, selected explanatory notes are included to explain events and transactions that are significant to an understanding to the changes in the Group’s financial position and performance since the last consolidated financial statements as at and for the year ended June 30  2013.

In preparing these summarised provisional consolidated financial statements, management make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates.

The significant judgements made by management in applying the Group’s accounting policies and the key sources of estimation uncertainty were the same as those that applied to the consolidated financial statements as at and for the year ended June 30 2013.

Significant accounting policies

Except as described below, the accounting policies applied in these summarised provisional consolidated financial statements are the same as those applied in the Group’s consolidated financial statements as at and for the year ended June 30  2013. The following changes in accounting policies are also expected to be reflected in the Group’s consolidated financial statements as at and for the year ended June 30 2014.

Changes in accounting policies

The Group has adopted the following new standards and amendments to standards, including any consequential amendments to other standards, with a date of initial application of July 1 2013.

IFRS 10 – Consolidated Financial Statements
IFRS 11 – Joint Arrangements
IFRS 13 – Fair Value Measurement
IAS 19 – Employee Benefits

The nature and the effect of the changes are further explained below.

IFRS 10 – Consolidated Financial Statements
IFRS 10 addresses the divergence arising from the control-based principles in IAS 27 and the risks and rewards based approach in SIC 12, and in addition, provides greater guidance on de facto control.

Management has reassessed the control conclusion for each of its investees at July 1  2013. No changes were identified and the adoption of this new standard has thus had no impact on the financial results.

IFRS 11 – Joint Arrangements
IFRS 11 identifies two types of joint arrangements, joint operations and joint ventures, and prohibits the use of proportionate consolidation for joint ventures.

Management has re-evaluated the Group’s involvement in the various joint arrangements and no changes in the accounting treatments were identified.

IFRS 13 – Fair Value Measurement
IFRS 13 is a single cohesive standard consolidating the principles of fair value measurement and disclosures for financial reporting. Fair value measurements of a non-financial asset will take into account a market participant’s ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.

In accordance with the transitional provisions of IFRS 13, the Group has applied the new fair value measurement guidance prospectively. Notwithstanding the above, the change had no significant impact on the measurements of the Group’s assets and liabilities.

IAS 19 – Employee Benefits
The revised IAS 19 changes the accounting for defined benefit plans and termination benefits. The most significant change relates to the accounting for changes in defined benefit obligations and plan assets. The amendments require the recognition of changes in defined benefit obligations and in the fair value of plan assets when they occur, and hence eliminate the corridor approach permitted under the previous version of IAS 19 and accelerate the recognition of past service costs. All actuarial gains and losses are recognised immediately through other comprehensive income in order for the net pension asset or liability recognised in the consolidated statement of financial position to reflect the full value for the plan deficit or surplus. Furthermore, the interest cost and expected return on plan assets used in the previous version of IAS 19 are replaced with a “net interest” amount, which is calculated by applying the discount rate to the net defined benefit liability or asset.

The adoption of the changes to this statement have had a limited impact on the results of the Group as previously reported. No adjustment has been made to the results for the year to June 30  2013 as the amounts are considered to be immaterial. The impact of the change in policy have been included in the results for the year to June 30  2014.

Net acquisition of businesses, subsidiaries, associates and investments

The Group acquired the remaining issued share capital of HoLB, being 71,7%, for a consideration of R532 million, with effect from July 1  2013; and the entire issued share capital of Mvelaserve that it did not already own, being 65,3%, for a consideration of R847 million, with effect from November 1  2013. Management believes that these acquisitions will enable HOLB and Mvelaserve to continue to service their customers more efficiently, with significantly enhanced offerings. HOLB and Mvelaserve will also benefit from being able to offer their products to the wider customer base of the Group.

A 60% stake in the share capital of Avelino, was acquired by the Group with effect from January 1  2014 for a consideration of R$48,6 million (R229,7 million). This acquisition forms part of the Group’s strategic expansion plans in the international foodservice industry.

During the year 31,9% of the issued ordinary capital of Adcock was acquired by the Group, to add to the 2,3% held at June 30  2013, for a consideration of R3,9 billion. The majority of the shares acquired were acquired in January and February 2014. The Group has accounted for Adcock as an associate with effect from March 1  2014.

The Group also made a number of less significant acquisitions during the year.

The acquisitions were funded from its existing cash resources.

The remeasurement of the Group’s existing 28,3% of HOLB and 34,7% of Mvelaserve, resulted in a gain of R74,0 million and a loss of R3,1 million, respectively. These amounts have been included in net capital items in the summarised provisional consolidated income statement for the year.

The following table summarises the amounts of assets acquired and liabilities assumed which have been included in these results from the respective dates.

Fair value of financial instruments

The Group’s investments of R2,4 billion (2013: R2,5 billion) include R0,3 billion (2013: R0,1 billion) recorded at cost, R1,4 billion (2013: R1,5 billion) recorded and measured at fair value using quoted prices (level 1) and R0,7 billion (2013: R0,8 billion) recorded and measured at fair value using factors not based on observable data (level 3). Level 3 investments are valued using discounted cash flows with a discount rate of 15,3% (2013: 15,1%). Fair value gains recognised in the income statement total R12 million (2013: R60 million) and other reductions of R174 million relate to purchases and disposals net of foreign exchange gains of R27 million recognised in currency translation reserve.

The carrying amounts of all financial assets and liabilities approximate their fair values, with the exception of borrowings which have been accounted for at amortised cost. The fair value of borrowings is R16,7 billion (carrying value R16,8 billion).

Subsequent event

With effect from July 1  2014, the Group has acquired a 60% interest in DAC a leading Italian foodservice provider as well as a significant controlling stake in PCL, a specialist chilled products storage and distribution business operating in the United Kingdom. The aggregate purchase consideration was approximately £95 million (R1,7 billion).

Audit report

The auditors, Deloitte & Touche, have issued their opinion on the Group’s consolidated financial statements for the year ended June 30  2014. The audit was conducted in accordance with International Standards on Auditing. They have issued an unmodified opinion. A copy of the auditors’ report together with a copy of the audited consolidated financial statements are available at the Company’s registered office.

These summarised provisional consolidated financial statements have been derived from the Group’s consolidated financial statements and are consistent in all material respects with the Group’s consolidated financial statements. These summarised provisional consolidated financial statements have been audited by the Group’s auditors who have issued an unmodified opinion. The auditors’ report does not necessarily report on all of the information contained in this announcement. Any reference to future financial information included in this announcement has not been reviewed or reported on by the auditors. Shareholders are advised, that in order to obtain a full understanding of the nature of the auditors’ engagement they should obtain a copy of that report together with the accompanying financial information from the Company’s registered office.

Preparer of the financial statements

These summarised provisional consolidated financial statements have been prepared under the supervision of NEJ Goodwin CA(SA) and were approved by the board of directors on August 29  2014.

Exchange rates

The following exchange rates were used in the translation of foreign interests and foreign transactions during the periods:

Supplementary pro forma information regarding the currency effects of the translation of foreign operations on the Group

The pro forma financial information has been compiled for illustrative purposes only and is the responsibility of the board. Due to the nature of this information, it may not fairly present the Group’s financial position, changes in equity and results of operations or cash flows. An unmodified reasonable assurance report has been issued by the Group’s auditors, Deloitte & Touche, in terms of ISAE 3420: Assurance Engagements to Report on the Compilation of Pro Forma information in a Prospectus, and is available for inspection at the Company’s registered office. The pro forma information has been compiled in terms of the JSE Listings Requirements and the Revised Guide on Pro Forma Information by SAICA.

The average rand exchange rate weakened against the major currencies in which the Group’s foreign operations trade, namely sterling (13,87 in 2013 to 16,91 in 2014), the euro (11,46 in 2013 to 14,11 in 2014) and the Australian dollar (9,08 in 2013 to 9,54 in 2014). The illustrative information, detailed below, has been prepared on the basis of applying the 2013 average rand exchange rates to the 2014 foreign subsidiary income statements and recalculating the reported income of the Group for the year.