DIRECTORS' STATUTORY REPORT
The directors have pleasure in submitting the annual financial statements of the company for the 15 month period to 31 March 2010.
NATURE OF BUSINESS
Tongaat Hulett is an agri-processing business that includes the integrated components of land management, property development and agriculture. The activities are dealt with in detail in the Annual Report.
CHANGE IN FINANCIAL YEAR END
Tongaat Hulett has changed its financial year end from 31 December to 31 March which corresponds with the sugar season in all the countries in which Tongaat Hulett operates.
FINANCIAL RESULTS
The net profit attributable to shareholders for the 15 month period to 31 March 2010 amounted to R2,898 billion (2008 - R649 million). This translates into a headline earnings per share of 826,5 cents (2008 – 565,6 cents) based on the weighted average number of shares in issue during the period.
DIVIDENDS
An interim dividend number 164 of 100 cents per share was paid on 17 September 2009 and a final distribution number 165 for the financial period ended 31 March 2010, by way of the issue of fully paid ordinary shares of R1,00 each as a scrip distribution payable to ordinary shareholders registered at the close of business on 16 July 2010 has been declared. As an alternative to this final distribution, ordinary shareholders will be entitled, in respect of all or part of their shareholding, to elect to receive a cash dividend of 175 cents per ordinary share in lieu of the scrip distribution, which will be paid only to shareholders who so elect, on or before 12:00 on Friday, 16 July 2010. A circular relating to the scrip distribution and the cash dividend alternative will be posted to shareholders on or about 18 June 2010.
The salient dates of the declaration and payment of this final dividend are as follows:
| Last date to trade ordinary shares | ||||
| “CUM” dividend | Friday | 9 July 2010 | ||
| Ordinary shares trade “EX” dividend | Monday | 12 July 2010 | ||
| Record date | Friday | 16 July 2010 | ||
| Payment date | Thursday | 22 July 2010 |
Share certificates may not be dematerialised or re-materialised, nor may transfers between registers take place between Monday 12 July 2010 and Friday 16 July 2010, both days inclusive.
The dividend is declared in the currency of the Republic of South Africa. Dividends paid by the United Kingdom transfer secretaries will be paid in British currency at the rate of exchange ruling at the close of business on Friday 9 July 2010.
SHARE CAPITAL
There was no change in the authorised capital of the company.
During the period, 430 246 shares were allotted (including 61 818 shares to directors) in respect of options exercised in terms of the company’s employee share incentive schemes for a total consideration of R14 million. Details of the unissued ordinary shares and the company’s share incentive schemes are set out in notes 11, 34 and 35.
Shareholders will be asked to consider an ordinary resolution at the forthcoming annual general meeting to place unissued shares of the company up to five percent of the number of shares in issue at 27 July 2010 under the control of the directors until the following annual general meeting.
At the previous annual general meeting, a general authority was granted by shareholders for the company to acquire its own shares in terms of the Companies Act. The directors consider that it will be advantageous for the company were this general authority to continue. Such authority will be used if the directors consider that it is in the best interests of the company and shareholders to effect any such acquisitions having regard to prevailing circumstances and the cash resources of the company at the relevant time. Shareholders will be asked to consider a special resolution to this effect at the forthcoming annual general meeting with the proviso that the number of ordinary shares acquired in any one financial year may not exceed five percent of the ordinary shares in issue at the date on which this resolution is passed.
In compliance with the Listings Requirements of the JSE Limited (“JSE”), the acquisition of shares or debentures (“securities”) pursuant to a general authority may only be made by a company subject to such acquisitions:
- being effected through the order book operated by the JSE trading system;
- being authorised there to by the company's articles of association;
- being authorised by the shareholders of the company in terms of a special resolution of the company in general meeting which will be valid only until the next annual general meeting of the company; provided that such authority will not extend beyond 15 months from the date of the resolution;
- not being made at a price greater than ten percent above the weighted average of the market value for the securities for the five business days immediately preceding the date on which the transaction is effected. The JSE should be consulted for a ruling if the company’s securities have not traded in such five business day period.
Further, in terms of the Listings Requirements of the JSE, the directors consider that in their opinion, taking into account the effect of the maximum acquisition by the company of shares issued by it as referred to above:
- the company and its subsidiaries (together “the group”) will be able, in the ordinary course of business, to pay its debts for a period of 12 months from 26 May 2010;
- the assets of the company and of the group will be in excess of the liabilities of the company and the group for a period of 12 months from 26 May 2010. For this purpose, the assets and liabilities will be recognised and measured in accordance with the accounting policies used in the company’s latest audited group annual financial statements;
- the ordinary capital and reserves of the company and the group will be sufficient for the company’s and the group’s present requirements for 12 months from 26 May 2010;
- the working capital of the company and the group for a period of 12 months from 26 May 2010 will be adequate for the company’s and the group’s requirements.
SHARE SCHEMES
Shareholders will be asked to consider ordinary resolutions in relation to the amendments of the share schemes at the forthcoming annual general meeting, more specifically an ordinary resolution that the provisions of the Tongaat Hulett Share Appreciation Right Scheme (“SAR”), Tongaat Hulett Long Term Incentive Plan (“LTIP”) and the Tongaat Hulett Deferred Bonus Plan (“DBP”) (collectively referred to as “the Plans”) be amended to ensure compliance with the Schedule 14 of the JSE Listing Requirements and, where appropriate, the King Code of Governance Principles – 2009 and the King Report on Governance for South Africa – 2009 (“King III”).
The main points of the amendments are summarised as follows:
- The maximum number of Shares that may be issued under the Plans is set to 13 000 000, amounting to approximately (9,4%) of all issued share capital. This requirement replaces the previous limit which was expressed as 10% of the issued share capital. This limit is permitted to be increased proportionately to reflect changes in capital structure, as specified in the Rules. In addition, it is clarified that shares purchased in the market in settlement of the Plans and awards that are forfeited are excluded from this limit.
- The limit of a fixed number of shares, namely 1 200 000, that can be allocated to any participant under any of the Plans has been added.
- The Plans have been amended to confirm the requirement that employees’ base pay, grade, performance and retention requirement form the primary basis upon which awards under the SAR and LTIP are made.
- The discretion afforded to the Remuneration Committee in the case of termination of employment of a participant has been limited within a specific framework and certain of the provisions applicable to good leavers are harmonised.
- King III requires the application of company performance conditions to govern the vesting of awards under the Plans, and precludes the application of retesting. The application of company performance conditions has been applied since the approval of the Plans. Future awards will have relevant performance conditions, will not provide for retesting, and will apply the principle of graduated vesting as recommend by King III.
- Certain points of clarity and administrative changes to the Plans as required by the JSE Listing Requirements and King III are proposed and will be available for inspection at the Company’s offices (21 days) before the annual general meeting.
No new awards under the Company’s two previous plans, namely The Tongaat-Hulett Group Limited 2001 Share Option Scheme and The Tongaat-Hulett Group Limited Employee Share Incentive Scheme have been made since 2004 and these plans are winding down as participants exercise their outstanding awards, all of which have vested and will be settled by shares issued from unissued share capital as provided for in the rules governing their operation. No changes are thus being made to the rules of these plans.
Shareholders will also be asked to consider an ordinary resolution that the provisions of the Tongaat Hulett Long Term Incentive Plan (“LTIP”) be amended to make provision for the introduction of retention awards without Company performance vesting conditions.
The purpose of such awards of unconditional LTIPs is to assist with key and high potential employee retention and talent management. The King III Report on Corporate Governance notes that: “When companies face the risk of losing key employees, remuneration policies to retain them may be adopted. Incentive schemes to encourage retention should be established separately, or should be clearly distinguished, from those relating to reward performance and should be disclosed in the annual remuneration report voted on by shareholders.” These awards will be made on a targeted basis where key and high potential employee retention risks exist.
Any such awards for executive directors will be awarded on the basis that a significant portion of any LTIP award will be subject to company performance vesting conditions.
The retention awards will complement the existing LTIP awards and awards under the SAR and DBP and the combined value of all the awards will remain within market benchmarks and within the Plan limits set in the ordinary resolution above. The terms of the retention awards will, apart from the absence of company performance conditions, be identical to the existing conditional awards awarded under the LTIP.
SUBSIDIARY COMPANIES AND JOINT VENTURES
The principal subsidiaries and joint ventures of the company are reflected in
note 26.
The attributable interest of the company in the results of its consolidated subsidiaries and joint ventures for the 15 month period to 31 March 2010 is as follows:
| 15 months to | 12 months to | ||||
| 31 March 2010 | 31 Dec 2008 | ||||
| In the aggregate amount of: | |||||
| Net profit - (R million) | 935 | 506 | |||
| Net losses- (R million) | 96 | 5 | |||
DIRECTORATE
During the period, Mr C M L Savage and Mrs E le R Bradley retired from the Tongaat Hulett Board at the close of business of the annual general meeting having reached the mandatory retirement age in terms of the articles of association of the company. In addition, Messrs P M Baum and J G Williams resigned from the board in August 2009. Two new independent non-executive directors were appointed to the board. The composition of the board, at 31 March 2010, is as follows: J B Magwaza (Chairman), P H Staude (CEO), B G Dunlop, F Jakoet, J John, R P Kupara, A A Maleiane, T V Maphai, M Mia, N Mjoli-Mncube, M H Munro, T H Nyasulu, C B Sibisi and R H J Stevens.
Directors retiring by rotation at the annual general meeting in accordance with article 61 of the articles of association are Messrs J B Magwaza, R H J Stevens and C B Sibisi, and Mrs J John. These directors are eligible an offer themselves for re-election. Mrs R P Kupara and Mr A A Maleiane were appointed during the course of the 15 month period to 31 March 2010 and Ms T N Mgoduso was appointed on 21 May 2010. These directors, who are required to retire at the annual general meeting in accordance with article 59 of the articles of association, are eligible and offer themselves for election. Details of each of these retiring directors are set out here.
DIRECTORS’ SHAREHOLDINGS
At 31 March 2010, the present directors of the company beneficially held a total of 224 162 ordinary shares equivalent to 0,22 percent in the company (31 December 2008 –120 929 shares equivalent to 0,12 percent). Details of the directors’ shareholdings and interests in the share incentive schemes are provided in notes
33 and 34. There has been no change in these holdings between 31 March and 26 May 2010.
AUDIT AND COMPLIANCE COMMITTEE
The Corporate Laws Amendment Act No 24 of 2006 (the Act) came into effect on 14 December 2007. The Tongaat Hulett Audit and Compliance Committee has considered the provisions of the Act and has taken the necessary steps to ensure compliance. The committee confirms that during the period under review it carried out its functions responsibly and in accordance with its terms of reference as detailed in the Corporate Governance section of the Annual Report. In addition, the committee is satisfied that the designated auditors of the company are independent of the company.
EVENTS SUBSEQUENT TO STATEMENT OF FINANCIAL POSITION DATE
There were no material events between the date of the statement of financial position and the date of this report.
