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Integrated annual report 2012
PSV Integrated annual report 2012
To view the PSV integrated annual report online, please visit our website at: www.psv.co.za
PSV integrated annual report 2012 www.psv.co.za
Contents
Glossary of terms .................................................... IFC
Scope of report ..........................................................1
Glossary of terms
CEO Chief Executive OfficerCryoshield Cryoshield (Pty) LimitedDRC Democratic Republic of CongoEngineered Linings Engineered Linings (Pty) LimitedFD Financial DirectorGRI Global Reporting InitiativeJSE JSE Securities ExchangeMitech PSV Mitech Control Valves (Pty) Limited
Omnirapid Omnirapid Mining and Engineering Supplies (Pty) Limited
Petrologic Petrologic (Pty) LimitedPSV PSV Holdings Limited Pumps Business Corporate action including the sale of
PSV Services (Pty) Limited, PSV Zambia (Pvt) Limited, APE Pumps (Pty) Limited, Mather + Platt (Pty) Limited and the associated property
RAGI Rand Air and Gas Installations (Pty) Limited
SARS South African Revenue ServicesTurbo Agencies Incorporating Turbo Agencies (Pty) Limited:
(Botswana), Turbo Agencies (Pvt) Limited: (Zambia), Turbo Agencies (DRC): SPRL (DRC)
Vision, mission and goals ...........................................2
Key strategic objectives .............................................3
Milestones .................................................................3
Group structure ..........................................................4
Key indicators and drivers ..........................................6
Group directorate .......................................................8
Chairman’s report ....................................................10
CEO’s report.............................................................12
Group overview [ page 2 – 15 ]
Operating environment ............................................16
Stakeholders............................................................16
Operating context [ page 16 – 17 ]
Financial highlights ..................................................18
Non-financial highlights ...........................................19
Wealth distribution ...................................................19
Sustainability report .................................................20
Performance review [ page 18 – 23 ]
Board Committees and attendance ..........................25
Corporate Governance report ...................................26
Risk management ....................................................34
Corporate Governance [ page 24 – 35 ]
Analysis of shareholders ..........................................90
Notice of Annual General Meeting ............................92
Form of proxy ..........................................................99
Administration .......................................................101
Annual financial report [ page 38 – 89 ]
JSE share information ..............................................37
Interaction with shareholders ...................................37
Shareholders’ diary ..................................................37
Shareholders [ page 36 – 37 ]
Integrated annual report 2012
1www.psv.co.za PSV integrated annual report 2012
This document contains the annual financial reports and financial statements of PSV and its subsidiaries and covers
the financial year from 1 March 2011 to 29 February 2012. The previous year’s report was published in August
2011. The financial results for the year ended 28 February 2011 have been restated by disclosing the results of the
Pump Business as discontinued operations to enhance comparability.
The report contains feedback from the Chairman and CEO. Activities and performance of the Group are discussed in
conjunction with an evaluation of risks and the manner in which stakeholder communication is upheld.
This is the first integrated report published by PSV and is a self-declared entry level 3 document. External assurance
for the annual financial statements has been provided by our external auditor, KPMG, whose unmodified audit
opinion is available for inspection at the registered office of PSV.
The PSV Board confirms its responsibility for the integrity of the integrated report, the content of which has been
collectively assessed by the Directors who believe that all material issues have been addressed.
The financial statements were prepared according to International Financial Reporting Standards (IFRS), the
requirements of the South African Companies Act, regulations of the JSE Limited (JSE) and recommendations of
King III. The Group reported in accordance with the guidelines of the GRI G3, the details of which can be found on
the website.
Scope ofreport
PSV Holdings Limited (“PSV”) is a recognised provider of industrial engineering
products and services throughout Africa. PSV comprises two main areas of
operations: Valves and Industrial Supplies and Specialised Services. A detailed Group
structure can be found on page 4 of this annual report.
Any queries regarding this annual report or its contents should be directed to:
Tony Dreisenstock Chief Financial Officer Tel: 011 657 6000 Fax: 086 032 9778Cnr. Barbara & North Reef Road, Henville Ext, Elandsfontein, South AfricaEmail: [email protected]
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To view the PSV integrated annual report online, please visit our website at: www.psv.co.za
2 PSV integrated annual report 2012 www.psv.co.za
PSV is committed to sustainable practices across the Group as
these pertain to the environment, the economy, our people through
sustainable labour practices and human rights, to the society in which
we operate and the various financial components of the Group. We are
also committed to the production of quality products which meet various
accreditation standards in accordance to high levels of manufacturing
standards. See further details in the Sustainability report on page 20
of this integrated annual report.
– to increase shareholder value
– to embrace Broad-based Black Economic Empowerment principles
– to empower every employee through participation in a share or other incentive scheme
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Goals
Vision To be a recognised provider of industrial
engineering products and services throughout Africa.
Mission To continue developing as an industrial
engineering group focused on specialised valves,
engineering linings, industrial supplies and
cryogenics through the provision of superior
customer service throughout Africa.
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’08PSV successfully concluded the purchase of Rand Air and Gas Installations
’88Establishment of PSV Services with three staff members
’06Listing of PSV as an industrial engineering group, on the Alternative Exchange of the JSE
’90Expansion of manufacturing base to meet order demand
’03Secure large mining supply contract in Zambia
’94Relocation to larger premises to house Company expansion
’12 ’11Disposal of the Pump Business (post balance sheet event)
Acquisition of Mitech
> >
> >
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Milestones
’09PSV added Mather + Platt as a brand name to its already sizeable pump capability
’01Establishment of PSV Zambia in Kitwe to supply mines in the copper belt
>
’07PSV successfully concluded the 100% acquisition of APE Pumps, Dasher and Engineered Linings further strengthening the overall service offering. A Black Economic Empowerment (“BEE”) deal with Vunani Capital is successfully entered into
’10The acquisition of Cryoshield becomes unconditional, strengthening PSV’s cryogenics capability
’11Acquisition of Turbo Agencies
>
>
Disposal of Group Line Projects
’11PSV has to change the way in which
the business is structured to grow and
endure the current economic climate.
Key strategic objectivesFocus and growth of consolidated cryogenics
operation
Continue downsizing and streamlining the Group by
disposing or closing down non-profitable subsidiaries
Implement a more effective operational model
Devolving expensive head office and shared services
costs to the underlying trading operations
Pay off debt
Recapitalise businesses that require cash flow for
effective operations
Bed down the current African footprint and then shift
to a phase of expansion
Refocus PSV and concentrate on fundamentals, such
as profitability
Pay maiden divided
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To view the PSV integrated annual report online, please visit our website at: www.psv.co.za
4 PSV integrated annual report 2012 www.psv.co.za
Group structure
2011 – 2012 New acquisition
In October 2011 PSV announced the acquisition of Mitech, a specialised control valve business
PSV Zambia
PSV Thuthuka
Mather + Platt
PSV Services
APE Pumps
(100%)
(100%)
(100%)
(100%)
(100%)
Pumps, Spares and Valves
In March 2012 the businesses
of RAGI and Cryoshield were
merged to form African
Cryogenics
Rand Air and Gas
Cryoshield
(100%)
(100%)
Petrologic (100%)
Specialised Services
Engineering Linings (100%)
Group Line Projects (100%)
Omnirapid (100%)
Turbo Agencies (100%)
Engineering Linings and Industrial Supplies
In a transaction referred to as
the Pump Business disposal,
these businesses were sold by
PSV Holdings to WPIL Limited
for R54 million. See additional
details in the CEO’s report
contained on page 12 of this
integrated annual report
Group Line Projects was
disposed in September 2011
for a profit of R18,8 million
2011 – 2012 Disposals and Acquisitions
PSV had typically reported across three segments; however, due to the
corporate actions going forward will report across two segments:
“PSV, reshaping our industrial engineering offering”
2012 onwardsPSV Holdings
2006 – 2011
African CryogenicsPetrologicEngineered Linings
(100%)(100%)(100%)
Specialised Services
MitechOmnirapidTurbo Agencies
(100%)(100%)(100%)
Valves and Industrial Supplies
Turbo Agencies was
acquired on 1 March 2011
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This segment includes Mitech, the local manufacturer
of Globe Control Valves, Pneumatic Actuators,
Desuperheaters and all ied equipment for the
process industry. Mitech makes use of computer
aided manufacturing facil it ies which enabled
the company to grow to becoming a formidable
manufacturer of Globe Control Valves and Pneumatic
Actuators in South Africa. The Machine Shop has
CNC (Computer Pneumatically Controlled) machines
as well as many manually operated ones. Mitech
has clients countrywide, with a head office in
Gauteng. The company further exports through
agents in Zambia, Zimbabwe, United Kingdom, New
Zealand, Australia, Singapore and Malaysia.
The industrial supplies component enables PSV to
source piping, fittings, flanges and steel from internal
and external suppliers. These consumables are
provided to mining and industrial clients locally in
South Africa as well as being exported to other African
countries.
Valves and Industrial Supplies
Turbo Agencies specialises in areas where market
demand is consistent. Turbo Agencies equips
workshops and computerised vehicle testing
stations, supplies overhead crane refurbishment
and maintenance, undertakes general workshop
equipment maintenance, provides consultancy
services on workshop requirements and is a one-
stop solution for mining projects. Turbo Agencies
currently employs 137 people comprising 35 in
Botswana, 70 in Zambia and 32 in the Democratic
Republic of Congo.
A specialist in flow control valves with
a substantial pattern library on hand,
strong agency agreements and suppliers
of piping, fittings, flanges and steel from
internal and external suppliers.
The segment offers an array of lining solutions
including geosynthetic and plastic lining solutions
used for the purpose of containment and corrosion
protection. Work is undertaken together with mining
operators to assist with functions such as protection
of seepage and environmental protection.
PSV supplies much needed design and manufacturing
capability, through the manufacture of cryogenic
storage tankers, road tankers, cryogenic liquid
transfer systems including vacuum insulated lines and
vacuum process vessels to the gas industry in South
Africa and Africa. It has the capability to manufacture
large capacity, new generation, cryogenic freezing
equipment, which requires specialised fabricating
techniques in stainless steel.
The wide range of pumps, valves, regulators and
vapourisers supply gases to industries such as
hospitals, welding workshops, food and beverages and
ship container purification. Our cryogenic capability
offers a full repair and complete refurbishment
service.
The petrochemical sector is supported through the
provision of fuel pumps and dispensers, bulk meters,
point-of-sale forecourt and retail store software to
an array of petroleum companies in South Africa and
neighbouring countries.
Specialised ServicesManufacture, support and supply
of services and product to the
petrochemical and cryogenic markets
and specialising in the supply and
installation of geosynthetic linings for
all containment applications including
dams, leach pads and floating covers.
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6 PSV integrated annual report 2012 www.psv.co.za
Key indicatorsand drivers
PSV is a diversified engineering group and as
such key indicators and even the environment
differ across companies. PSV has endeavoured to
unpack key indicators for the different operating
segments and business as follows:
t
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African Cryogenics
• Industry capex shrinkage
• Dumping cheap imported product into South Africa – no trade protection
• Capex spend of major gas companies
• Transition to high-labour, low-margin refurbishment business in tough times
• Diversification into new revenue streams
Petrologic
• Geographic area required to be serviced
• Market knowledge
• Diversification into much more profitable revenue streams
• Downsizing and rationalising business operations
Engineered Linings
• Exchange rates
• Crude oil price
• Global economy
• Lining suppliers cutting out middleman
• Erosion of margins to secure business
• Implementing preferred installation contracts with key suppliers
Omnirapid
• Volatility in the steel prices
• Supply of steel into the market
• Revels in times when steel is in short supply
• Superb service ethic
Mitech
• Exchange rates
• Price of precious metals
• Price of metal castings
• Sourcing of reliable competitive and ethical foundries
• Marketing and market penetration
• Credibility in the market place
• Export market opportunities
• Establishment of Indian company as a sales and procurement office
Turbo Agencies
• Exchange rates
• Economic conditions associated with mining activity in Africa
• Stability of African Governments
• Diversity of blue chip agencies
• Expansion into new Zambian copper belt
• Inroads made into West African countries such as Burkina Faso, Liberia and Sierra Leone
Valves and Industrial Supplies Specialised Services
PSV Holdings (Corporate)• Sustainability of head office infrastructure • Improvement in local economic conditions
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8 PSV integrated annual report 2012 www.psv.co.za
Group directorate
Anthony de la Rue
t
Peter Robinson
t
Abilio JD da Silva
t
Anthony R Dreisenstock
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David J Kelly
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Ralph Patmore
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Ralph Patmore (60)
Chairperson
Ralph Patmore holds BCom and MBL degrees. He co-founded Iliad Africa in
1998 and was the CEO until 2008. He currently serves as a Non-executive
Director on the boards of various companies.
Anthony de la Rue (65)
Independent Non-executive Director
Anthony de la Rue is a chartered accountant who was previously the
CEO for Ernst & Young Zimbabwe and served on their Global Practice
Council prior to his retirement in 2004. He is currently a Non-executive
Director on the boards of various companies.
Anthony (Tony) R Dreisenstock (51)
Financial Director
Tony holds BCom and BAcc degrees obtained from the University of the
Witwatersrand as well as an H Dip Tax Law obtained at the University of
Johannesburg. Tony is a qualified chartered accountant. He successfully
operated a strategic management consultancy practice until August 2005
when he was recruited by PSV to assist in listing the Company and to
assume the role of Financial Director.
David (Dave) J Kelly (53)
Non-executive Director
Dave was born in Britain and now resides in South Africa. He obtained an
O-level academic qualification and a City & Guilds diploma at the London
Institute in the United Kingdom. He is the Managing Director of Group Line,
which was disposed of to Wonder Stone in September 2011.
Abilio (Abie) JD da Silva (50)
Chief Executive Officer
Abie is the co-founder of the Group and was appointed as the Chief
Executive Officer upon listing. He has retained the position and steered
the Company towards the growth objectives it has achieved to date.
He obtained a National Technical Certificate 5 from the Johannesburg
Technical College and a Business Management Diploma from Damelin
College.
Peter Robinson (51)
Non-executive Director
Peter qualified at Huddersfield Technical College in the United Kingdom.
As a co-founder of PSV, Peter was instrumental in securing long-term
contracts for the supply and repair of rotating machinery (pumps, pump
spares, etc) to various geographical areas throughout Africa. He is the
Managing Director of PSV Services, which has now been disposed of to
WPIL Limited in the new financial year.
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10 PSV integrated annual report 2012 www.psv.co.za
Chairman’s report
Review
The year proved to be an eventful one which saw the restructuring of
the Board, a business unit being sold and one business being acquired.
Post the year-end a second business unit was disposed of.
It is not my place to comment on the restructuring of the Board other
than to say that the Non-executive Directors were not re-elected
at the shareholders Annual General Meeting, which resulted in the
appointment of two new Independent Non-executive Directors in
November, namely Anthony de la Rue and myself. Post the period
under review, in May 2012, Portia Molefe was appointed as the third
Independent Non-executive Director and at the same time I was asked
to Chair the Board. Unfortunately Portia recently resigned her position.
The tough trading conditions experienced during the period and
the Group’s high level of debt made for an exceedingly tough year.
It was necessary to reduce the debt and ensure that sufficient working
capital was made available for the business units to exploit the pockets
of activity where decent returns could be generated. To this end,
management achieved more than was anticipated through the sale of
Group Line Projects, during the period under review, and the cluster
of Pump Businesses, Mather + Platt, APE Pumps, PSV Services and
PSV Zambia, post the period. In total R110 million was realised which
retired the Investec debt obligation and generated working capital for
the remaining businesses going forward.
Mitech, a small top end valve manufacturing business was acquired
during the year, firstly, due to the opportunistic value of the deal and
secondly, as it provided access to a segment of the market that we
have not operated in. Management feels that the ailing business can
be returned to its former position as the industry “go to” specialised
valve manufacturer.
As the newly appointed Chairman I find myself in the
unenviable position of having to report on the activities
of the Group for a period during which I was not
Chairman and had only been exposed to the group as an
Independent Non-executive Director for a little more than
three months.
11www.psv.co.za PSV integrated annual report 2012
At the same time the Group will revisit and clarify its strategic intent so
as to ensure that any future acquisitive growth will be focused and in
line with our core competencies.
The state of the economy and the potential risks of a fall out in Europe
and its consequences for our economy are well publicised. The two
segments operate in varying market sectors and geographic areas;
however, we are subject to the economic times and the resultant tough
market conditions. The nature of the Group’s operating companies in
both segments is small and flexible, which will enable us to survive and
prosper when opportunities arise in these difficult times.
We feel that the Group has turned the corner and although not problem
free, is ready to start the journey of continuous improvement from a
results perspective.
ConclusionIt has been a tough couple of years and we would like to thank all the
stakeholders who have travelled the difficult road with the Group.
Personally I am excited about the prospects and look forward to working
with the Board members and management over the next few years.
Ralph PatmoreChairperson
7 August 2012
The Pump Businesses, disposed of post the year-end, are reflected
in the financials as discontinued operations for ease of comparison.
The remainder of the Group operates under two segments, namely the
Valve and Industrial Supplies and the Specialised Services. Details of the
group’s operating performance are expanded upon in the CEO’s report
but it was a year of mixed fortunes.
In the Valve and Industrial Supplies segment, Omnirapid management
deserves special mention as they outperformed the market through
their dedication to service delivery and attention to detail resulting in
a record profit performance, while controlling their working capital
exceptionally well. In the same division, Turbo Agencies provided the
Group with access to the broader African market where growth levels
are higher than in South Africa. They made good penetration into the
chosen market segments and once they bring their working capital
controls totally in line they will be one of the Group’s gems.
The Specialised Services segment had a disappointing year due to the
extremely tough trading conditions in the gas industry and due to the
continuing underperformance from Petrologic. A priority for the current
financial year is to rectify the Petrologic performance.
ProspectsThe Group is now sitting with a healthy balance sheet and will be in a
position to provide working capital to the remaining operating companies
for organic expansion. The effects will only be felt in the second half of
the year as the last of the disposals was only consummated at the end
of May 2012.
The objective is to consolidate, rectify underperforming businesses
and ensure that the remaining operating segments are both profitable
and cash generative, and provide the shareholders with an acceptable
return on capital employed.
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CEO’s report
Corporate actions
In September 2011, PSV sold Group Line Projects to Wonderstone
Limited, for a profit of R18,8 million.
Post the finalisation of this 2012 reporting period, PSV sold various
companies making up the Pump Business transaction. This included
the sale of PSV Services, APE Pumps, PSV Zambia and Mather + Platt
Pumps and their respective property. At a special general meeting
held on 31 May 2012, shareholders voted in favour of the sale
which culminates in a R54 million inflow of cash to the PSV Group.
An intercompany loan account of R15 million was also settled.
The cash received from Group Line Projects went towards the
settlement of debt held with Investec. The funds received from the
sale of the Pump Business will be used to settle the remaining
Investec debt, provide the Group with working capital and pay a
special dividend to shareholders.
In October 2011, PSV acquired Mitech Control Valves. The acquisition
makes business sense to PSV as it gives the Company access to the
high-end control valve market, a segment PSV has not previously been
involved in. Other synergies include the ability to broaden our existing
valve range in the South African, African and international markets.
Overview of results
I am pleased to report a 51,9% increase in turnover from continuing
operations from R223,3 million to R339,2 million coupled with
an improvement in gross margins by 1% to 18,6%. Operational
expenditure increased, but disproportionally to the increase in turnover
(21% of turnover versus 27% in February 2011). As a result, the
With the cash injection from the sale of the Pump Business,
PSV is reshaping, remaining an engineering business, but
focusing on cryogenics, agency business, geosynthetic
linings and the specialist procurement and supply of
product. The reshaping and consolidation of the Group is
necessitated by continued tough economic and market
conditions experienced by all companies across the Group.
13www.psv.co.za PSV integrated annual report 2012
to the negative R10,7 million in 2011. The generation of record levels
of operational cash belies the poor results for the year and confirms the
commercial strength of the underlying subsidiaries.
The net asset value per share of 49,87 cents and the net tangible asset
value per share of 30,96 cents remains higher than the average share
price which averaged 16,8 cents per share for the year. The discount
to tangible net asset value per share remains close to 50%. However,
further impairments of the carrying values of the cash-generating units
were not justified.
Operational overview
This annual report contains the first financial year in which PSV is reporting
results in the new segmental format of only two segments, namely Valves
and Industrial Supplies and Specialised Services. The manner in which the
segments are now constructed means that they contribute almost equally
to the Group. The financial results for the year ended 28 February 2011
have been restated by disclosing the results of the Pumps Business as
discontinued operations to enhance comparability.
Valves and Industrial Supplies
This segment contributed R167,7 million or 49,4% to Group revenue.
The gross profit improved by 241,7% to R45,0 million from only
R10,1 million in 2011. Gross profit margin also improved satisfactorily
to 26,8% from 20,7% in 2011.
Exceptional trading performances by Omnirapid Industrial and Mining
Supplies and the new acquisition, Turbo Agencies, were highlights
for the year under review. Both companies exceeded budgeted
expectations and experienced the best years in their trading histories.
Group generated an EBITDA margin of 2,5% on turnover amounting to
R8,4 million compared to a R14,3 million loss in the prior year.
Notwithstanding the improved EBITDA,the continuing operations
incurred a loss after tax of R30 million due to the following impairments:
• Goodwill and intangibles arising in Engineered Linings and Rand Air
and Gas Installations amounting to R12,7 million.
• Alignment of the carrying value of the Pump Business in the process
of being disposed of, to the purchase consideration to be received.
The impairment amounts to R12,2 million and has been included in
the profit from discontinued operations.
• Impairment of the deferred tax assets arising in PSV Holdings
and Petrologic. The total impairment amounts to R8,7 million.
PSV Holdings is an investment holding company that recovers the
bulk of its costs from its underlying subsidiaries. As there are limited
possibilities of this company reflecting taxable income, the deferred
tax asset has been impaired. The deferred tax asset in Petrologic has
been impaired due to the poor trading results made by this subsidiary.
We expect that this company will become profitable within the next
two years and consequently the Group is taking the necessary steps
in its restructuring process to mitigate further losses.
The total comprehensive loss for the year amounted to R17,7 million
which is R9 million more than the previous year. PSV incurred a headline
loss per share from continued operations of 11,98 cents compared to a
loss of 9,02 cents in 2011.
Cash flows generated from operations amounted to R31,5 million and
PSV ended the year in a positive cash position of R9,2 million compared
Omnirapid Industrial and Mining Supplies
Omnirapid, a business which is 14 years old, is one of the mainstays
of the PSV Group. The strategic strength of Omnirapid is market
knowledge, trade relationships, coupled with outstanding service
delivery levels and turnaround times. Furthermore pricing is keen and
competitive. Expert procurement makes it easy for clients to return to
Omnirapid time and again, especially when product is difficult to source.
This impeccable success record of Omnirapid has manifested once
again in record breaking results.
Turbo Agencies
Turbo Agencies has a head office in Gabarone in Botswana with branch
offices in Zambia and the DRC. Another branch office has been opened
in Lusaka for the supply and equipping of motor workshops for a large
car manufacturer and a further office is being opened in Solwezi to
service companies and mines on the “new” copper belt. Turbo Agencies
has seen great success in the support of mining houses and in this
regard will look towards expanding into Burkino Faso, Liberia and
Sierra Leone.
Turbo Agencies experienced a record year with the highest turnover
ever in its history. The company produced R82 million in turnover
coupled with excellent gross and operating margins which ranged
between 34% and 12,5% respectively. These margins are primarily
linked to the risk of operating in Africa. Cash flow management and
financial controls have had to be strengthened and the results of various
meetings and financial management changes implemented is starting
to bear results. A bank overdraft for Turbo Agencies will also be put into
place but going forward PSV management will view this as a process of
continual improvement.
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CEO’s report (continued)
The management of PSV expects good prospects for Turbo Agencies,
with strong order books and annuity type income from crane
maintenance operations. In this respect, PSV has succeeded in
establishing a credible and reputable platform to launch the Group into
Africa. The well-established distribution networks enjoyed by Turbo are
slowly being leveraged by PSV’s South African subsidiaries creating
a new dimension in horizontal integration possibilities.
Turbo Agencies has extremely strong relationships with customers
and carries blue chip agencies such as Hilti Fasteners, Sykes
Picavant, Facom Tools, Arndt Hand Tools, Ridgid Tooling, Orbis of
Germany, Actia Muller – France, Kito Lifting, Lincoln Welding, Acmi
Motori Power, Captels Weighbridges, amongst others.
Mitech
Mitech is a specialised control valve business which was purchased
at a very attractive price. Mitech used to be one of the biggest players
in the manufacture of control valves in South Africa but for a number
of reasons the market has lost faith in the brand name of late. The
valves are used primarily in the mining and petrochemical industries.
Basically one valve has one application and its own pattern – making
Mitech a highly specialised and niched valve manufacturer. PSV took
over the business in September 2011 and plans to reposition it until
it enjoys the impeccable reputation it commanded many years back.
Currently Mitech is exhibiting signs of a company on the come-back.
PSV only expects Mitech to turn to sustainable profitability in the
February 2013 year.
Five months of Mitech’s results have been included into this set
of PSV results and they are immaterial in relation to the Group’s
consolidated results.
Mitech has a two-fold strategy, with the first part concentrating on
the overseas valve market but here once again, markets are tight and
a marketing strategy takes time to implement and gain penetration.
The second part of the strategy which is fundamental to this business
is the foundry. Foundries in South Africa are generally uncompetitive
and as a result, PSV has established a company to source castings
from Indian foundries in the Coimbatore industrial area. This allows
PSV to source castings at extremely competitive prices with the
cost of these castings partially funded with Indian Government
subsidies (in the form of tax- free cash grants). The acquisition and
procurement of the raw material is easier than in South Africa and
this is a springboard to access Asian markets in a more immediate
way. PSV has exchange control approval for the establishment of
the office in Coimbatore. This business also requires cash flow and
capital and will take time before it becomes fully operational.
Specialised Services
This segment contributed the remaining 50,5% contribution to
turnover which amounted to R171,5 million with a gross profit
contribution of R18,0 million which was 20% – less than the gross
profit contribution of R28,6 million in 2011.
The cryogenic companies, Rand Air and Gas Installations (“RAGI”) and
Cryoshield, both suffered from the deep recession that the gas industry
finds itself in. The erosion of gross margins, higher operating costs and
poor cash flows characterised these companies. Difficult conditions
prevailed until May 2012. We have noticed a strong surge in high-
margin cash generative orders coming through in the last few months.
This augers well for this new merged company for the February
2013 year.
African Cryogenics
PSV is the owner of two separately operated cryogenics businesses,
namely RAGI and Cryoshield, both essentially involved in the
manufacture of cryogenic containers and the provision of innovative
technologically advanced cryogenic-based applications used to
solve industrial problems. Recently, it was decided to amalgamate
the two businesses into African Cryogenics with the name change,
complementary skills sets and management being well accepted by
customers across the country.
The cryogenics business had one of the worst years in a 10-year
cycle. Margins continue to be slim and much of the work is labour
intensive, with overtime due to factory inefficiencies (physical layout).
RAGI suffered in particular due to a tightening of the market and the
resultant dumping of cheap product into the South Africa market.
This can be seen in the RAGI margins which plummeted from gross
margins of 25% to 8%.
Cryoshield is a more diversified company than RAGI and undertook
engineering work, which is not cryogenic orientated and this has
largely added to Cryoshield’s success. This enabled Cryoshield to
enjoy a better year than expected given the state of the cryogenics
market place in South Africa. A goal for PSV is to move both
companies into suitable premises, which are of the right height and
contain sufficient crane lifting ability and loading bays to cater for
current projects as well as proposed new revenue lines, making
African Cryogenics capable of a multitude of services and products.
The cryogenics business remains a boutique for PSV and an area
where high margins can be commanded in the future due to the high
level of engineering and sheer skill sets required. This is an area PSV
wishes to grow.
15www.psv.co.za PSV integrated annual report 2012
currently assessing all options in the short term to ensure that PSV
does not have to continue to capitalise this business indefinitely.
Sustainability
This is PSV’s first self-declared integrated annual report where
more sustainability issues have been identified and addressed in our
Sustainability report contained on page 20. PSV remains committed to
sustainable practices and for the first time is measuring and monitoring
emissions and resources including water consumption, energy
consumption and CO2 emissions through business flight.
Economic, environmental, labour practices, human rights, society
and product performance indicators have been elaborated on in the
separate Sustainability report.
Risk management
A separate risk management report is contained with this annual report
which elaborates on strategic, financial, operational, human resources
and legal risks. Furthermore PSV has established a Risk Committee
under the leadership of Ralph Patmore.
Prospects
The management of PSV expects the trading environment to become
easier in the second quarter of the 2013 financial year, mainly
attributable to the reduced gearing in the Group subsequent to the
disposal of the Pump Business. This will release additional working
capital and permit our remaining companies to implement aggressive
organic growth strategies. In addition, the elimination of the Investec
debt will reduce finance costs in the holding company, thereby
minimising interest costs and increasing profitability by R4 to R5 million
per annum.
Engineered Linings
Engineered Linings is a specialist contracting company, concentrating
on the supply and installation of geosynthetic liners for the purpose
of containment, environmental protection and corrosion protection.
Engineered Linings faced two challenges over this financial year. The
first, was the unexpected retirement and resignation of three senior
management personnel. PSV is happy to report that a new sales and
marketing Director has joined Engineered Linings and together with
the remaining management team, is taking the company forward.
Engineered Linings is a business involved in the sourcing, supply
and installation of geosynthetic linings in which sourcing and supply
is essentially low margin high-volume business, and installation
generates low volume but with high margins. The world economy
contracted and suppliers of geosynthetic linings pounced upon the
opportunity to go directly to the end-user. Engineering Linings had to
adapt by implementing aggressive tendering strategies resulting in
escalating order books and increasing market share.
Petrologic
Despite promising prospects, Petrologic had a tough year as it
was forced to operate on uneconomic revenue streams. In order
to maintain service levels with the petroleum companies it is
necessary to maintain an expensive infrastructure, making this
business marginal in nature. Petrologic is currently attempting to
obtain additional income streams which will assist in returning the
company to profit. Notwithstanding PSV has instructed management
to downsize and rightsize the business and offload uneconomic
contracts in order to return the company to profitability. The Board is
Appreciation
I wish to thank my fellow Board members, subsidiary management, staff,
customers, suppliers, shareholders and all other stakeholders for their
support during the year. The year was once again not without challenges,
but tenacity, dedication and hard work by all once again prevailed.
Abie da Silva
CEO
7 August 2012
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16 PSV integrated annual report 2012 www.psv.co.za
Operating environmentThe operating environment for PSV Holdings as a group is mixed due to
diversity of the underlying businesses. In general the economic climate
still remains difficult; however, PSV is beginning to see order books
increase in some segments and a slight uptick in contracting activity,
but management does not expect the environment to normalise until the
second quarter of 2013.
Valves and Industrial Supplies
Specialised Services
Omnirapid African Cryogenics• Experience record year • Industry capex shrinkage
Mitech Petrologic• Marketing and market
penetration are difficult at this stage and remain in a formative stage
• Restructuring has become a critical business imperative
Turbo Agencies Engineered Linings• Experienced good growth
with the African market place primarily as a result of strong agency brand names
• Internal restructuring is paying off
• Order book has increased
• Better prepared to analyse costs and pricing structures to be competitive
StakeholdersPSV categorises stakeholders as groups, people or organisations that
have a direct interest in the various businesses of the PSV Group.
Stakeholder evaluation has been undertaken at Group as well as
subsidiary level and still remains in the early stages of engagement.
Engagement with stakeholders takes various forms including informal
calls, customer meetings, staff meetings and newsletters to formal
meetings with regulators.
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17www.psv.co.za PSV integrated annual report 2012
Details of the Group’s key stakeholders, the type of engagement, material issued raised and actions are provided in the table below:
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Stakeholder Type of engagement Material issue raised Action taken
Shareholders Active website, dissemination of information through a defined contact list, calls with strategic shareholders if and when required
Earnings and sustainability of the company, dividend payments The profitable sale of underlying companies and the restructuring of segments in order to maintain a sustainable company for the future
Staff Quality newsletter
Individual Company staff meetings
General information Company and employee issues on a social trend
Training on new revised employee handbook short version of Company policies and procedures
Awareness of rules and regulations within the workplace Training to all employees
Performance counselling Intention to improve employee expected standard of performance for the position
After counselling ensure guidance, monitoring, training, evaluation over a time period are given to employees
IR – Process, disciplinary hearings Regulate discipline in the workplace through progressive disciplinary method
Conduct disciplinary hearings, outside chairperson ensure procedural and substantive issues are adhered to
Grievance procedures Allow aggrieved employee to resolve issues through a fair process HR regulate to ensure fairness
Employment Equity Forum EE representatives engage in meaningful discussions to eliminate barriers of the past
Quarterly meetings
Trade unions Changes in employment conditions, retrenchments, etc Bargaining best packages for employees, all decisions equal and fair as per SA Legislation
The engagements are not that often, very rarely
Customers Formalised business dealings, meetings, telephone conversations, credit checks and reviews
Competitive pricing structures Conscious effort to meet expectations where applicable
Complaints Recorded, addressed and resolved
Suppliers One-on-one business dealings, presentations on product features, correspondence and factory visits, if required
Record complaints Recorded, addressed and resolved
Database of suppliers kept and maintained Oversee across the Group and updated accordingly
Delivery of products Timeous delivery is strived for
Government/municipalities/parastatals
Meetings, industry body representation and conference participation
Transformation remains a key driver for PSV PSV has BEE partner, Vunani Investments
Regulators Reporting, correspondence, formal meetings and feedback session
Regulatory compliance PSV adheres to the listing requirements of the JSE, the Companies Act, and all other requirements for a public company
Financiers Formal meetings, updated status meetings and feedback sessions
Loan agreements and overdrafts to PSV PSV has kept their providers of finance informed of all developments within Company pertaining to overdraft requirements and the process for settling debt
Communities and civil society
Active CSI initiatives, meetings with representatives from organisations supported
Help, support and assistance required Assistance in the form of money or physical requirements such as books, blankets, etc
PSV staff also give of their own personal time
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18 PSV integrated annual report 2012 www.psv.co.za
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Financial highlights• Strong cash flow from operations
• Successful post balance sheet event sale of the Pumps Business
• Record turnover and profitability from Omnirapid and Turbo Agencies
• Payment of special dividend declared from cash received from sale of Pump Business
19www.psv.co.za PSV integrated annual report 2012
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Financial highlights Non-fi nancial highlights
• Continuation of Corporate Social Investment drive
• Board constituted of new members
• Successfully settled into the new industrial park
• No industrial action
• Zero material accidents or incidents
Revenue (R’000)
0
50 000
100 000
150 000
200 000
250 000
300 000
350 000
400 000
450 000
500 000
20122011201020092008
Operating profit (R’000)
20122011201020092008-80 000
-60 000
-40 000
-20 000
0
20 000
40 000
60 000
Headline earnings per share (cents)
20122011201020092008-12
-10
-8
-6
-4
-2
0
2
4
6
8
10
Cash flow generated by/(utilised in) operations (R'000)
201220112010200920080
10 000
20 000
30 000
40 000
50 000
Wealth distribution
Wealth distributed and retained – 2012
3%
12%
-19%
95%
9%
Employees
GovernmentDepreciation and amortisation
Providers of capital
Retained loss
Wealth distributed and retained – 2011
Employees
GovernmentRetained for future growth
Providers of capital
10%2% 3%
85%
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To view the PSV integrated annual report online, please visit our website at: www.psv.co.za
20 PSV integrated annual report 2012 www.psv.co.za
Sustainability report
Strategy
As a manufacturing group in the industrial engineering sector,
PSV Holdings Limited has a responsibility to operate taking into
consideration how its decisions and actions impact stakeholders,
including people, the habitat and environment in which the Group
operates. PSV recognises that sustainability is integrated within all
facets of their business and is aligned to the Group’s objectives.
As a result, PSV is committed to improve the management of risks and
opportunities in the social, environmental and economic spheres to
ensure the Group’s future success.
The Group is in the process of improving policies and procedures
and information gathering and data assessment that are linked to
sustainability. This will have a direct benefit to the Group, as well as
its stakeholders, and could assist the Group’s ability to achieve their
strategic goals. In addition, this will help improve the reporting of
sustainability matters and the quality of stakeholder engagements.
This report has been prepared in line with the Global Reporting Initiative
(GRI) and meets the requirements on a C+ reporting level. The report
includes information from continuing operations to ensure comparability
in future reporting periods. In addition, it has been independently
assured by SustainabilityServices. PSV is making every effort to
continually improve on their sustainability development and reporting.
For an indicator-by-indicator discussion of the report’s compliance to
the GRI indicators, please visit our website at www.psvholdings.com.
Social performance
PSV operates throughout South Africa as well as in other African
countries including Botswana, Zambia and the DRC.
Human resource management
The human resources management responsibility is centralised at the
Group’s head office in Elandsfontein, although the responsibility of
direct management of employees remains with each of the subsidiaries.
PSV ensures compliance with South African labour and other legislation
which includes but is not limited to the Labour Relations Act, Basic
Conditions of Employment Act, the Employment Equity Act, the Skills
Development Act, the Unemployment Insurance Act, Broad-based
Black Economic Empowerment Act and the Occupational Health and
Safety Act. No incidents of non-compliance were noted in the period
under review.
Our demographic and male to female split is as follows:
0
50
100
150
200
250
300
350
WhiteIndianColouredAfrican
Demographic male to female splitFebruary 2012
Male Female
0
50
100
150
200
250
300
350
WhiteIndianColouredAfrican
Demographic male to female splitFebruary 2011
Male Female
Fair and sustained employment
PSV strives to treat all staff equitably and responsibly, in compliance
with applicable legislation, to ensure that their full potential is reached.
The Group is committed to the principles of employment equity as
well as achieving a productive and fair working environment, free of
discrimination. The Group recognises the importance of employment
equity and through recruitment and training continuously tries to
improve on previous employment equity standings.
The Group makes every effort to remunerate staff and Directors fairly
and equitably. Permanent employees reap the benefit of a basic salary,
retirement fund contributions, medical aid and other benefits. This is not
applicable to non-permanent staff. The annual increases for non-union
employees are recommended by the Managing Director of each Group
company and approved by the Remuneration Committee. Increases
21www.psv.co.za PSV integrated annual report 2012
the “investing in tomorrow’s leaders” internal programme which has
produced successful graduates into the Group as well as apprentices
skilled in turning, boilermaking and fitting.
A comprehensive performance and career development review system
is in place, with all staff members being reviewed at least once a year.
During the year, R266 811 (2011: R281 145) was spent on training
318 employees across the group. A total of 2 544 hours of training took
place during the year, compared to 167 hours in 2011. These measures
assist in determining future training objectives and needs.
Health and safety
PSV understands that the social-economic development of people
and the enforcement of operational safety standards are of the utmost
importance. The Group is in the process of implementing a number of
improved initiatives that are focused on improving occupational health
and safety. By the appointment of a Health and Safety and Quality
officer, PSV has reaffirmed their commitment to the adherence of
Health and Safety Legislation which will enhance safety performance. In
addition, this will ensure that all incidences of injuries in the work place
are properly recorded and learnt from. PSV hopes to report on total
recordable lost time injuries frequency rates in the future.
With the appointment of this officer, a number of our factories have
been ISO Quality rated.
PSV is happy to report that there were no fatalities at any of its
subsidiaries for the period under review.
Organisational health and wellness
PSV holds Wellness Days for all employees twice a year to encourage
lifestyle changes to ensure optimal health. The purpose of this initiative
for employees that fall within the bargaining unit are negotiated with
representative trade unions, except in those instances where there
are industry-wide bargaining agreements. The Group will continue to
respect these agreements.
Codes and practices, policies and procedures that guide business
and employee conduct, non-discrimination, industrial relations,
recruitment, employment equity and grievance and dispute settlement
are communicated to staff through induction programmes, on notice
boards and employment contracts. PSV operates in an environment of
trust and respect towards all employees. In instances where corruption
by an employee is suspected, the employee is suspended pending an
investigation. Disciplinary hearings with the employee are held and the
employee is dismissed if found guilty. If the matter remains unresolved
and is considered to be of a serious nature, legal action is taken against
the employee. Corruption is a practice not tolerated within the Group.
Human rights
PSV is guided by human rights policies detailed in the South African
Constitution. South Africa’s endorsement of various International Labour
Organisation principles relating to child labour is also binding on the
Group. There were no contraventions of these principles for the period
under review.
Skills development and retention
Although the Group has no formal skills management and training
policy, a key initiative of the Group is to nurture and develop the Group’s
skills base internally to meet the current and future skills requirements
of the Group. The Group encourages training and skills development
as and when required to empower employees with skills to improve
efficiency, safety and progress within the Group. PSV continues with
is to identify health risks, provide health education and influence
positive behaviour change as well which leads to healthier and happier
employees. PSV recognises this initiative will enhance overall employee
performance.
The Wellness Day is also used as a platform to promote the awareness
and prevention of HIV/AIDS and other illnesses. The Group remains
committed to ensure the fair, compassionate and non-discriminatory
treatment of employees who are impacted by disease.
Corporate social initiatives
The Group recognises that Corporate Social Responsibility (CSR) is
no longer an optional “to do” and has identified CSR as a vital part of
the Group’s business principles. The Group has been honoured to be
involved with some fantastic projects throughout the year and continues
to encourage all management and staff to improve on identifying and
investing in sustainable projects in conjunction with local communities.
PSV believes that the smallest action can better another person’s
existence, and has the potential to create a phenomenal ripple effect
which could lead to major change. PSV has invested in taking the time
and making the effort into social investment.
The Group undertook several social investment projects in the
year including:
Mohau’s Home for Orphans and Disabled Children
This home cares for abandoned and disabled children. The home was in
need of a variety of appliances, healthcare items, stationary and more.
PSV donated appliances such as stoves, fridges and dishwashers as
well as food supplies, stationary, schoolbags, nappies, formula milk,
beds, linen and blankets, supplies and installed a new water tank which
was delivered just before Christmas.
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22 PSV integrated annual report 2012 www.psv.co.za
El-Shammah Home for Abandoned Babies
This charity takes in abandoned, abused and orphaned babies. This
home has a “drop box” in which parents can place unwanted children in.
The box is fitted with an alarm that is activated once an unwanted baby
is placed in the box. These homes, which do so much for the community
are always in need of basic necessities to care for infants. PSV donated
nappies, baby formula, baby accessories, cots and other items were
donated in the year.
ACVV
PSV staff teamed up with ACVV, a non-profit welfare organisation
dedicated to promoting and supporting children, families and
communities. Their primary focus is the protection of children, ensuring
their well-being within their families by means of implementing
awareness programmes and interventions. As part of their awareness
campaign, ACVV runs a camp during the June school holidays for
50 “at risk” adolescent girls. The camp programme consists of a
number of workshop discussions addressing issues of drug abuse, body
and self-image, and making positive life choices. PSV was proud to
provide sponsorship for this programme in the form of a cash donation.
Community Project
PSV approached a group of seven unemployed women from the
Brooklyn community to assist them in developing their enterprise. The
dream was to start a second hand charity shop, similar to the Hospice
shops. Goods were sold on the street pavement but later a small
shop was found to rent. The Group supports these women and their
developing enterprise by making a financial contribution towards their
monthly rent.
Nelson Mandela Day – 67 minutes
PSV joined this nation-wide initiative by packing vehicles with
blankets and food parcels donated by the Group and staff members.
Approximately 250 blankets and over 150 food parcels were collected.
In addition to this, a bakkie with donated clothes and blankets was
filled. Staff members helped distribute these donations to the people of
Etwetwa squatter camp in Daveyton.
Schoolbag and Stationary Project
PSV Holdings donated a total of 80 schoolbags with full stationary items
to pupils from poor communities in the Benoni and Edenvale areas.
The schoolbags were distributed to 1st grade pupils at the Verkenner
Primary School and to the Compass Centre in Edenvale.
Environmental performance
Defining sustainability and reporting on the subject within PSV’s
decentralised operation has proven to be a challenge in the year under
review. Meaningful data-gathering on environmental performance has
been identified as a goal for PSV and the need for improvement is
recognised.
The need to drive the concept of sustainability and the formalisation
of policies and procedures relating to sustainability practices has
been identified by the Directors and subsequent to year-end this
need has been communicated to management and employees of
PSV. Management and employees need to be sensitised to broader
sustainability thinking at an operational level, to ensure the Group
responds to the management of risks and opportunities presented by
the energy crisis, global warming and other environmental issues.
Primary focus will be given to reduce the Group’s overall carbon
footprint by focusing on the reduction and recycling of paper usage,
reducing water and electricity consumption and reducing greenhouse
gas emissions. Currently, the Group does encourage recycling of paper,
plastic and cans.
The Group recognises water as a scarce resource in South Africa and
thus the management of this resource is a concern for the Group. In
operations 5 806 kilolitres of municipal water was estimated as being
used in the year under review.
The Group’s primary energy consumption is electricity sourced from the
national energy utility, Eskom. 74 588 metric tons of CO2 were emitted
in the year from purchased electricity. C02 emitted from business travel
(flights) amounted to 43,6 metric tons. The Group plans to implement
various energy-saving and cost reduction initiatives going forward
as well as procedures to improve the recording and measurement of
emissions in the future.
Economic performance
The Group’s objective is to create sustainable business to create wealth
for its stakeholders. The performance of the Group is discussed in the
CEO’s report and is evidenced in the annual financial statements.
The Group contributes to overall growth of the country through:
• Investing in skills development and training;
• Creating job opportunities;
• Supporting local and small business enterprises where possible; and
• Corporate social investment programmes.
The Group does not get financial assistance from the Government.
Sustainability report (continued)
23www.psv.co.za PSV integrated annual report 2012
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24 PSV integrated annual report 2012 www.psv.co.za
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Remuneration Committeet
tNominations Committee
Social and Ethics Committeet
Audit and Risk Committeet
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Board Committees and attendance
The Board of Directors is mindful and cognisant that Corporate Governance is essential to protect the interests of all stakeholders and remains committed to compliance with legal requirements and sound Corporate
Governance principles.
Details of the membership and responsibility of the Board and Committees are summarised below:
Board/Committee Roles and responsibilities Members
PSV Holdings Board The Board is the focal point of the Group’s Corporate Governance structure and the overriding body
at which strategic decisions are made. It is responsible for the governance process, sustainable
growth and Company affairs
Ralph Patmore (Chairperson)
Abie da Silva (Executive Director)
Peter Robinson (Executive Director)
Tony Dreisenstock (Executive Director)
Dave Kelly (Non-executive Director)
Anthony de la Rue (Independent Non-executive Director)
Audit and Risk Committee This committee is responsible for:
• Reviewing annual financial statements
• Ensuring effective internal control
• Liaising and nominate external auditors and their fee structure
• Evaluating the independence of the auditors
• Pre-approving contracts with external auditors for the provision of non-audit services
Anthony de la Rue (Chairperson)
Ralph Patmore
Tony Dreisenstock (FD) (by invitation)
Remuneration Committee Incorporated into proceedings at the Board meeting
Nominations Committee Incorporated into proceedings at the Board meeting
Social and Ethics Committee The Board established the Social and Ethics Committee in compliance with the requirement of
Section 74 and Regulation 43(5) of the Act which regulates social and ethical practices.
The committee, although still very new, will monitor:
• Social and economic development
• Good corporate citizenship
• The environment, health and public safety
• Consumer relationships and
• Labour and employment
Abie da Silva
Tony Dreisenstock
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26 PSV integrated annual report 2012 www.psv.co.za
The Board of Directors of PSV Holdings Limited (“the Board”) regards
Corporate Governance as vitally important to the success of the
business of the Group and is unreservedly committed to applying the
principles necessary to ensure that good governance is practiced in
all of its business dealings in respect of its shareowners and relevant
stakeholders.
The content of this document is aimed to inform internal and external
stakeholders of the Group transparently and honestly through fair
and understandable disclosure. The Board firmly believes that good
Corporate Governance is essentially about responsible leadership and
the Board realises the importance of their function to act as custodians
in this regard. In all dealings the Group strives to ensure that the
interests of stakeholders are foremost in all decisions.
The Board is cognisant of its challenge in balancing the achievement
of the Group’s performance objectives within a framework of sound
Corporate Governance principles. The Board believes that the business
will prosper in an environment of good and balanced Corporate
Governance.
Statement of compliance
The Board confirms that the Group has complied with the principles
of King III except where otherwise explained in the report. The Group
will continue to improve corporate and operational practices to
achieve sound Corporate Governance practices, through integrity
and accountability. For easy reference a King III compliance matrix is
included at the end of this report. All areas marked “partially applied” or
“under review” will be considered during the ensuing year.
The Board also confirms that the Group has complied with the
provisions set out in the Listings Requirements of the JSE.
Board of DirectorsThe leadership of the Group is provided by a unitary effective Board
which at year-end comprised three Executive Directors and four Non-
executive Directors, three of whom are independent. The Independent
Non-executive Directors are high-merit objective individuals who
collectively contribute a wide range of skills and knowledge to the
decision-making processes of the Board and also ensure proper
deliberation of all matters requiring the Board’s attention. Independence
of the Board is monitored annually in terms of the requirements of
King III, when formal mandatory declarations of personal interests are
made by each Director.
The Board is satisfied with the knowledge and skills levels of the Board.
The composition of the Board consists of a majority of Non-executive
Directors, the majority of whom are independent. All Directors are
required to attend the AltX Directors Induction Programme, hosted by
the Wits Business School.
There are two key tasks at the head of the Group namely, the running of
the Board and the executive responsibility for the running of the Group’s
day-to-day business. There is a clear division of responsibilities at the
head of the Group to ensure a balance of power and authority, such that
no one individual has unfettered powers of decision-making.
ChairmanThe Chairman of the Board is Mr Ralph Patmore, an Independent Non-
executive Director.
The Chairman provides leadership and guidance to the Board as a
whole, and encourages proper deliberation of all matters requiring the
Board’s attention, and obtains optimum input from the other Board
members. He also takes responsibility for ensuring effective governance
practices. The Chairman also represents the Company to stakeholders.
Chief Executive Officer
The Chief Executive Officer (“CEO”), Mr Abie da Silva, accepts full
responsibility for the sound and efficient operation of the business as
well as the implementation of all strategies and policies adopted by
the Board. Managing Directors of the various businesses in the Group
assist him in this task. Board authority conferred on management is
delegated through the CEO, in accordance with approved authority
levels. Mr da Silva ensures the maintenance of good relations with all
the shareholders of the Group.
There is a clear division between the responsibilities of the Board and
management. Mr da Silva ensures clear communication from the Board
to executive management of the Group to ensure that all strategic
objectives of the Company are achieved. For this purpose he meets on a
regular basis with his Executive Committee, which consists of strategic
head office employees and Managing Directors of the subsidiary
companies in the Group. He ensures that the Group has an effective
management team and actively participates in the development of
management and succession planning.
Rotation of Directors
One-third of the Directors are subject, by rotation, to retirement and
re-election at the Annual General Meeting in terms of the Company’s
Memorandum of Incorporation.
Biographical details of each Director are set out on page 9 of this
annual report.
Meeting attendance
The Board meets at least quarterly, and more frequently if circumstances
or decisions require. They furthermore confer through round robin
deliberations when necessary.
Corporate Governance report
27www.psv.co.za PSV integrated annual report 2012
Meetings are conducted in accordance with formal agendas and
annual work plans, ensuring that all substantive matters are properly
addressed. Any Director may request that additional matters be added
to the agenda. Copies of Board packs are circulated to the Directors well
in advance of the meetings to ensure proper preparation to enhance
constructive and informed deliberations.
Attendance by Directors at Board meetings is provided below:
Name of Director10 March
201131 May
201118 August
20112 March
2012
CE Chimombe-Munyoro1 Attended Attended Attended –
P Robinson Attended Attended Attended Attended
GS Nzalo1 Attended Attended Attended –
MM Patel1 Attended Attended Attended –
AJD da Silva Attended Attended Attended Attended
AR Dreisenstock Attended Attended Attended Attended
DJ Kelly Attended Apologies Attended Attended
RB Patmore2 – – – Attended
A de la Rue2 – – – Attended
E Dube1 – – – –
1 Resigned 29 September 2011 2 Appointed 8 November 2011
A representative from the Company’s Designated Adviser attends the
Board meetings as required in terms of the JSE Listings Requirements.
Board processes
Directors’ share dealings
The Board has an approved trading policy in terms of which dealing
in the Group’s shares by Directors and employees is prohibited during
closed periods.
Directors may not deal in the Company’s shares without first advising
and obtaining clearance from the CEO and the Financial Director.
The CEO and Financial Director may not deal in the Company’s shares
without first advising and obtaining clearance from the Chairman of
the Board. No Director or Executive Committee member may trade in
PSV shares during closed periods as defined in terms of the JSE
Listings Requirements. The Board keeps the Company Secretary
advised of all their dealings in securities. All dealings are announced on
SENS within 48 hours.
Interest in contracts
During the year ended 29 February 2012 none of the Directors had a
significant interest in any contract or arrangement entered into by the
Company or its subsidiaries, other than as disclosed in note 24 to the
annual financial statements.
Directors are required to inform the Board timeously of conflicts or
potential conflicts of interest they may have in relation to particular
items of business. Directors are obliged to recuse themselves from
discussions or decisions on matters in which they have a conflicting
interest.
Board appointments
In terms of the approved appointments to the Board policy, all Board
members are required to assist with the identification and nomination of
potential Board candidates. Appointments to the Board are conducted
in a formal and transparent manner in terms of the Board policy.
The Board will from time to time assess the skills of the Board to ensure
that it consists of the required competency levels to be efficient and to
provide strategic guidance to the Group.
Should the assessment indicate a lack of competency in a certain area,
the Board will consider the appointment of a Director to fulfil this need.
Closed periods
Closed periods are exercised from the date of the financial year-end
until the Group’s results are published on SENS. Additional closed
periods are enforced as required in terms of any corporate activity or
when Directors are in possession of price-sensitive information.
Directors of the Company and its major subsidiaries, the Company
Secretary, senior managers in the Group, their associates or members
or immediate family are not allowed to deal directly or indirectly, at
any time, in the securities of the Company on the basis of unpublished
price-sensitive information regarding the Company’s business or affairs.
These individuals are made aware of restricted or closed periods for
dealings and the provision of insider trading legislation.
Self-evaluation
Although the Board has not formally conducted a self-evaluation, they
are continually reviewing processes in various areas, including its
performance and strategic planning, Board composition, relationship
with management and other stakeholders, and succession planning.
Areas requiring improvement have been identified, and are receiving
attention.
Changes to the Board
During the past financial year, Ms Chimombe-Munyoro, Mr Patel and
Mr Nzalo were not re-elected by shareholders at the Annual General
Meeting of PSV held on 29 September 2011.
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28 PSV integrated annual report 2012 www.psv.co.za
Mr Patmore and Mr de la Rue were appointed as an Independent Non-
executive Directors with effect from 8 November 2011. Subsequent
to the year-end, Ms Portia Molefe was appointed as an Independent
Non-executive Director with effect from 2 May 2012, however due
to an increase in personal professional commitments, resigned on
11 July 2012.
Board charter
The purpose of the Board charter is to set out specific responsibilities
to be discharged by the Board, and every member of the Board,
in accordance with King III. The Board charter has been reviewed
during the past financial year to align the content thereof with the
recommendations of King III.
The Company is accountable to its shareowners and stakeholders
by setting a charter for the Board, which regulates how business is
conducted while adhering to best practice and the highest standard of
business conduct.
The primary responsibilities of the Board include the regular review of
the strategic direction of investment decisions and performance against
approved plans, budgets and best practice standards. The Board retains
full and effective control of the Group and decisions on material matters
are reserved for the Board.
The objectives of the Board charter are to ensure that all Board
members acting on behalf of the Group are aware of their duties and
responsibilities as Board members and the various legislation and
regulations affecting their conduct and to ensure that the principles of
good Corporate Governance are applied in all their dealings in respect,
and on behalf, of the Group.
The Board charter is reviewed annually.
Board Committees
While the Board remains accountable and responsible for the
performance and affairs of the Company, Board sub-committees
assist the Board in discharging its duties and responsibilities and
do not in any way mitigate or discharge the Board of its duties and
responsibilities.
Board Committees observe the same rules of conduct and procedures
as the Board unless the Board determines otherwise. Board Committees
will only speak to and act for the Board when so authorised. The
authority conferred on a Board Committee will not derogate from the
authority delegated to the CEO by the Board. Members of the Board
Committees will ensure transparency and full disclosure to the Board,
except where the Board Committees have been mandated otherwise
by the Board.
In keeping with the recommendations of King III, Board Committees
currently comprise three sub-committees, namely the Audit Committee,
Risk Committee and Remuneration Committee. The sub-committees
have formally determined terms of reference, clearly agreed upon
reporting procedures and written scope of authority which are reviewed
annually and approved by the Board. The Chairman of each Board
Committee is required to attend Annual General Meetings to answer
questions raised by shareholders. A Social and Ethics Committee was
established post the close of this 2012 financial year and is still to meet.
Audit Committee
The Audit Committee currently comprises two Independent Non-
executives, Mr Anthony de la Rue (Chairman) and Mr Ralph Patmore.
The Board is satisfied that the two members of the Audit Committee
are highly qualified individuals who on a collective basis have sufficient
qualifications and experience to fulfil its duties. The members of
the committee are also permitted by the Board to consult with
specialists when required. The Board is in the process of identifying
an additional Independent Non-executive Director so as to meet
the requirements of King III for three Independent Non-executive
Directors required to be members of the Audit Committee.
The Financial Director attends all the meetings by invitation. The JSE
Designated Adviser attends all Audit Committee meetings in compliance
with the JSE Listings Requirements. The external auditors attended the
meetings and also have unrestricted access to the Chairman of the
Audit Committee.
The Audit Committee met four times during the financial year.
The attendance by members at the Audit Committee meetings is
provided below:
Name of Director19 May
201121 July
20118 August
201124 Feb
2012
GS Nzalo1 Attended Attended Attended –
MM Patel1 Attended Attended Attended –
AJD da Silva Apologies Apologies – –
RB Patmore2 – – – Attended
A de la Rue2 – – – Attended
A Dreisenstock – – – Attended
1 Resigned 29 September 2011 2 Appointed 8 November 2011
Corporate Governance report (continued)
29www.psv.co.za PSV integrated annual report 2012
The Audit Committee operates in terms of a formal mandate which
sets out the functions and duties of the committee. These functions
are based on the relevant provisions of the 2008 Companies Act, as
amended, as well as relevant Corporate Governance recommendations
in terms of King III. These include, inter alia, to:
• Review the annual financial statements to ensure that they present
a true, balanced and understandable assessment of the financial
position and performance of the Company
• Ensure an effective internal control environment in the Company
• Nominate the external auditor for appointment as the registered
independent auditor after satisfying itself through enquiry that the
external audit firm and the designated audit partner are independent
• Determine the fees to be paid to the external auditor as well as its
terms of engagement
• Ensure that the appointment of the external auditor complies with the
provisions of the 2008 Companies Act, as amended, and any other
legislation relating to the appointment of auditors
• Evaluate the independence and effectiveness of the external auditors
• Approve a non-audit service policy which determines the nature
and extent of any non-audit services which the external auditor may
provide to the Company
• Pre-approve any proposed contract with the external auditor for the
provision of non-audit services to the Company
• Satisfy itself as to the appropriateness of the expertise and
experience of the Financial Director
The Company does not have a separate internal audit function and the
Audit Committee therefore pays particular attention to the adequacy of
internal controls and the integrity of financial reporting. In fulfilling its
function, the committee specifically oversees: financial reporting risks,
internal financial controls, fraud risks and IT risks.
The Audit Committee has identified the implementation of an effective,
independent internal audit function in the Company as a priority for
the ensuing financial year. The Audit Committee will also oversee the
integrated reporting process of the Company from the ensuing year.
Risk Committee
The Risk Committee comprises two members, Mr Ralph Patmore
(Chairman) and Mr Anthony de la Rue. The Financial Director of the
Company, Mr Tony Dreisenstock, attended the meetings by invitation.
The Risk Committee met once during the 2012 financial year.
The attendance by members at the Risk Committee meetings is
provided below:
Name of Director 24 February 2012
RB Patmore1 Attended
A de la Rue1 Attended
1 Appointed 8 November 2011
The Risk Committee forms part of a unitary Board even though it has
specific statutory responsibilities over and above the responsibilities
assigned by the Board.
The Risk Committee assists the Board in fulfilling its fiduciary
responsibilities in respect of the governance of risk tolerance and risk
appetite of the Company.
The Risk Committee has an independent role, operating as an overseer
and maker of recommendations to the Board for consideration and final
approval.
The committee does not assume the function of management, which
remains the role of the Executive Directors, officers and other senior
management members. The role of the Risk Committee is to assist the
Board to ensure that the Company has implemented an effective policy
and plan for risk management that enhances the Company’s ability
to achieve strategic objectives, and the disclosure regarding risk is
comprehensive, timely and relevant.
The committee oversees the development and annual review of a policy
and plan for risk management to recommend for approval to the Board.
The Group acknowledges the importance of risk management and
Corporate Governance principles.
Risk is an intrinsic part of all activities undertaken by PSV.
The organisation is exposed to certain risks, which are influenced by its
specific choices and actions. The Board of PSV along with its Executive
Committee and management recognise that risk management is
a critical management tool to ensure that the Group achieves its
objectives. The Risk Committee has been formulated with the specific
objective of identifying those risks and implementing policies to combat
and mitigate those risks.
The Risk Committee reviews the effectiveness of the system for
monitoring compliance with laws and regulations and the results of
management’s investigation and follow-up (including disciplinary
action) of any fraudulent acts or non-compliance, obtains regular
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30 PSV integrated annual report 2012 www.psv.co.za
updates from management and Group’s legal counsel regarding
compliance matters and ensures that all regulatory compliance matters
have been considered in the preparation of the financial statements.
The Risk Committee liaises closely with the Audit Committee to
exchange information relevant to risk and related matters.
Remuneration Committee
A Remuneration Committee had been established in compliance
with the requirements of King III. The committee consisted of three
members. The Remuneration Committee twice during the financial year.
The attendance by members at the Remuneration Committee meetings
is provided below:
Name of Director7 March
201124 May
2011
CE Chimombe-Munyoro1 Attended Attended
GS Nzalo1 Attended Attended
MM Patel1 Attended Attended
1 Resigned 29 September 2011
All three the above members of the Committee were not reappointed
as Directors of PSV and currently the Remuneration Committee has
not been reconstituted. However it will be with three Non-executive
Directors and the CEO of PSV as members.
The role of the committee is to assist the Board to ensure that the
Company remunerates Directors and executives fairly and responsibly;
and the disclosure of Director and remuneration is accurate, complete
and transparent.
The Committee performs, inter alia, the following functions:
1. Oversee the establishment of a remuneration policy that will
promote the achievement of strategic objectives at all levels in the
Group and encourage individual performance;
2. Ensure that the remuneration policy is put to a non-binding advisory
vote at the general meeting of shareholders annually;
3. Review the outcomes of the implementation of the remuneration
policy on an annual basis;
4. Ensure that the mix of fixed and variable payments, in cash, shares
and other elements, meets the Company’s needs and strategic
objectives;
5. Satisfy itself as to the accuracy of recorded performance measures
that govern the vesting of incentives;
6. Ensure that all benefits, including retirement benefits and other
financial arrangements, are justified and correctly valued;
7. Consider the results of the evaluation of the performance of the
CEO and other Executive Directors, both as Directors and as
Executives in determining remuneration;
8. Regularly review incentive schemes to ensure continued
contribution to shareholder value and that these are administered
in terms of the rules; and
9. Advise on the remuneration of Non-executive Directors.
Remuneration philosophy
PSV is committed to its shareholders and therefore determines
their remuneration policy and philosophy on best practices in the
market. The Group’s Directors are remunerated on a cost to company
basis, which includes benefits such as medical aid, life insurance, death
cover, disability, funeral cover and retirement. Increases are based
on individual performance and measured against defined targets for
the Group.
Remuneration of Non-executive Directors
Type of feeProposed annual fee
in ZAR 2012*
BoardChairpersonMember
240 000200 000
Audit CommitteeChairpersonMember
230 000200 000
Risk CommitteeChairpersonMember
230 000200 000
Corporate Governance and Nomination CommitteeChairpersonMember
210 000200 000
Remuneration CommitteeChairpersonMember
210 000200 000
Safety, Health, Environment and Sustainable Development CommitteeChairpersonMember
210 000200 000
* The annual remuneration payable to any non-executive director will be limited to a maximum of R240 000, notwithstanding the number of committees he/she is a member/chairman of.
Fees as set out above were approved at a Special Annual General
Meeting on 31 May 2012.
Corporate Governance report (continued)
31www.psv.co.za PSV integrated annual report 2012
Directors’ remuneration is set out in note 25 of the annual financial
statements.
The three highest paid members of management (excluding Executive
Directors) are set out below:
29 Feb 2012R
2011R
Employee 1 3 185 313 1 200 043Employee 2 1 057 353 972 108Employee 3 912 767 845 000
Total 5 155 433 3 017 151
Company Secretary
The appointment and removal of the Company Secretary is approved by
the Board. The Company Secretary advises the Board on the appropriate
procedures for the management of meetings and the implementation of
governance procedures, and is further responsible for providing the
Board collectively, and each Director individually, with guidance on
the discharge of their responsibilities in terms of the legislation and
regulatory requirements applicable to South Africa.
The Board is satisfied that there is an arm’s length relationship
between the Company Secretary and PSV. The Board has unlimited
access to the Company Secretary, who advises the Board and its
committees on issues including compliance with Group policies and
procedures, statutory regulations and relevant governance principles
and recommendations.
Merchantec Capital was appointed in January 2011 as the Company
Secretary of PSV Holding Limited. The Board has considered and is
satisfied that the Company Secretary has the required qualifications
and experience.
Relations with shareholders
The Group maintains dialogue with its key financial audiences,
especially institutional shareholders and analysts. The Investor Relations
team manages the dialogue with these audiences and presentations
take place at the time of publishing interim and final results.
The Group adopts a proactive stance in timely dissemination of
appropriate information to stakeholders through print and electronic
news releases and the statutory publication of the Group’s financial
performance.
The Group’s website provides the latest and historical financial and
other information, including the financial reports.
The Board encourages shareholders to attend its Annual General
Meeting, notice of which is contained in this annual report, where
shareholders will have the opportunity to put questions to the Board,
including the Chairmen of the Board Committees.
Shareholders are able to provide feedback to PSV Holdings via the
website in the “contact us” domain where an email is produced
directly to the CEO’s office. An Investor Relations Consultancy has
been appointed who further disseminate information to the market and
shareholders are also encouraged to contact the consultancy should
they require additional information.
Stakeholders
The stakeholders of the Group include suppliers, employees,
Government and quasi Government organisations, shareholders
and customers. Each stakeholder is communicated with by either
the holding company or the subsidiary directly, and feedback is also
encouraged in writing, telephonically or via the website.
Fraud and illegal acts
The Group does not engage in nor tolerate any illegal acts in the
conduct of its business. The Directors’ policy is to actively pursue and
prosecute the perpetrators of fraudulent or other illegal activities, should
they become aware of any such acts.
Insider trading
No employee may deal, directly or indirectly, in PSV shares on the basis
of unpublished price-sensitive information regarding the business or
affairs of the Group.
Code of Conduct
The Group is committed to the highest ethical standards of business
conduct and to complying fully with all applicable laws and regulations.
The Directors, employees, employees of outsourced functions as well
as suppliers to PSV, are all expected to comply with these principles
and act in terms of the Code of Conduct. The Directors believe that the
ethical standards of the Group, as stipulated in the Code of Conduct, are
monitored and are being met. Where there is non-compliance with the
Code of Conduct, the appropriate discipline is enforced with consistency
as the Group responds to offences and prevents recurrences.
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32 PSV integrated annual report 2012 www.psv.co.za
King III Compliance Matrix
ApplyPartially
applyUnder
review
Boards and Directors (continued)
Directors and executives are fairly and responsibly remunerated
Remuneration of Directors and senior executives is disclosed
The Company’s remuneration policy is approved by its shareholders
Internal audit
Effective risk-based internal audit
Written assessment of the effectiveness of the Company’s system of internal controls and risk management
Internal audit is strategically positioned to achieve its objectives
Audit Committee
Effective and independent
Suitably skilled and experienced Independent Non-executive Directors
Chaired by an Independent Non-executive Director
Oversees integrated reporting
A combined assurance model is applied to improve efficiency in assurance activities
Satisfies itself of the expertise, resources and experience of the Company’s finance function
Oversees internal audit
Integral to the risk management process
Oversees the external audit process
Reports to the Board and shareholders on how it has discharged its duties
Corporate Governance report (continued)
ApplyPartially
applyUnder
review
Ethical leadership and corporate citizenship
Effective leadership based on an ethical foundation
Responsible corporate citizen
Effective management of Company’s ethics
Assurance statement on ethics in integrated report
Boards and Directors
The Board is the focal point for and custodian of Corporate Governance
Strategy, risk, performance and sustainability are inseparable
Directors act in the best interests of the Company
The Chairman of the Board is an Independent Non-executive Director
Framework for the delegation of authority has been established
The Board comprises a balance of power, with a majority of Non-executive Directors who are independent
Directors are appointed through a formal process
Formal induction and ongoing training of Directors is conducted
The Board is assisted by a competent, suitably qualified and experienced Company Secretary
Regular performance evaluations of the Board, its committees and the individual Directors
Appointment of well-structured committees and oversight of key functions
An agreed governance framework between the Group and its subsidiary Boards is in place
33www.psv.co.za PSV integrated annual report 2012
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Compliance with laws, codes, rules and standards
The Board ensures that the Company complies with relevant laws
The Board and Directors have a working understanding of the relevance and implications of non-compliance
Compliance risk forms an integral part of the Company’s risk management process
The Board has delegated to management the implementation of an effective compliance framework and processes
Governing stakeholder relationships
Appreciation that stakeholders’ perceptions affect a company’s reputation
Management proactively deals with stakeholder relationships
There is an appropriate balance between its various stakeholder groupings
Equitable treatment of stakeholders
Transparent and effective communication to stakeholders
Disputes are resolved effectively and timeously
The governance of information technology
The Board is responsible for information technology (IT) governance
IT is aligned with the performance and sustainability objectives of the Company
Management is responsible for the implementation of an IT governance framework
The Board monitors and evaluates significant IT investments and expenditure
ApplyPartially
applyUnder
review
The governance of information technology (continued)
IT is an integral part of the Company’s risk management
IT assets are managed effectively
The Risk Committee and Audit Committee assist the Board in carrying out its IT responsibilities
The governance of risk
The Board is responsible for the governance of risk and setting levels of risk tolerance
The Risk Management Committee assists the Board in carrying out its risk responsibilities
The Board delegates the process of risk management to management
The Board ensures that risk assessments and monitoring are performed on a continual basis
Frameworks and methodologies are implemented to increase the probability of anticipating unpredictable risks
Management implements appropriate risk responses
The Board receives assurance on the effectiveness of the risk management process
Sufficient risk disclosure to stakeholders
Integrated reporting and disclosure
Ensures the integrity of the Company’s integrated report
Sustainability reporting and disclosure is integrated with the Company’s financial reporting
Sustainability reporting and disclosure is independently assured
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34 PSV integrated annual report 2012 www.psv.co.za
PSV is aware that risk is an intrinsic aspect of business and is inseparable from opportunity. PSV’s risk
management policy is one of promoting a culture of continuous improvement by aligning and entrenching
risk management with key organisational processes and procedures, thereby boosting value through
effectively leveraging opportunities and better managing uncertainties, ensure an environment where we can
grow shareholder value and pursue new business opportunities, while developing our staff, our assets, our
environment and our reputation.
The Risk Committee reports into the Board of Directors which is responsible for:
• Approving the enterprise risk management framework and the policies for the management of risk;
• Reviewing the Group’s top risks;
• Reporting on risks to stakeholders.
The primary role of the Risk Management Committee is to:
• Champion and promote enterprise risk management and the risk management process and culture
throughout the Group;
• Review and prioritise the risks identified and then assess the extent those risks identified have been
mitigated;
• Monitor and track the progress of the subsidiaries that are responsible and accountable and report on the
status of significant risks.
Description of risk Mitigation strategies Progress to date
Strategic
Solvency and liquidity
Downsizing the business with the two-fold objective
• Liquidate primary debt
• Disposing of non-profitable businesses Pump Businesses sold on 31 May 2012 for R54 million. Primary debt of R33 million now expunged
Business model Currently the business operates a hybrid partially decentralised model. This has resulted in increased tax exposure and the unnecessary impairment of deferred tax assets, thereby eroding shareholders’ wealth. Therefore, the development of an appropriate and relevant business model is being evaluated
A comprehensive decentralised model is currently being implemented
Focus on the recruitment of young talent and planning and nurturing them for the future
The programme “investing in tomorrow’s leaders” has proven to be successful
Embarked upon an aggressive worldwide recruitment campaign in order to source suitable requisite talent subordinate to current senior management
Have successfully sourced an experienced individual from the UK to bolster Engineered Linings management team
Extensive training programmes Internal and external training programmes have been initiated for management
B-BBEE • Identification of new viable strategic partners
• Process still continues
• Re-aligning procurement policies to acquire level 4 and higher rated companies
• Process still continues
• Identification of previously disadvantaged individuals working within the Company and promoting them accordingly
• Policy has been most successful with four apprentices integrated into the subsidiaries
Risk management
35www.psv.co.za PSV integrated annual report 2012
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Description of risk Mitigation strategies Progress to date
Financial
Debtors collections • Strict credit vetting and granting of credit limits to customers
• Process still continues
• Accountability KPAs implemented with senior management of subsidiaries
• Process still continues
Foreign currency exposure
Covering exposure with a combination of forward exchange contracts or currency futures
Cover with forward exchange contracts and currency hedges
Operational
Over trading Implementation of rigorous review policies Ongoing
Quality assurance • Appointment of subordinate health and safety officers at subsidiary level
• Appointments were made
• Regular meetings and follow up to ensure compliance with all regulatory covenants
• PSV implements OHSAS 18001
Human resources
Change management
The Risk Committee will develop a formal policy management in this regard
Realign strategy with health and safety officers in each subsidiary rather than at Group level – ongoing
Standardisation of employment contracts
Dedicated HR function to, in the long-term, of employment standardise all employment contracts
PSV is currently implementing proper salary banding procedures. Wherever possible, subject statutory limitations, existing employment contracts have been amended
Legal
Proper authorisation of material contracts
Implementing limits of authority Ongoing
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The Group maintains dialogue with its key
financial audiences, especially institutional
and private shareholders and analysts.
37www.psv.co.za PSV integrated annual report 2012
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Share price performance
Opening price 1 March 2011 21c
Closing price 29 February 2012 27c
Closing high for the period (29 February 2012) 27c
Closing low for the period (28 July 2011) 9c
Number of shares in issue 272 547 699
Volume traded during period 29 170 007
Ratio of volume traded to shares in issue (%) 10,70
Total (R) value traded during the period 4 983 563
JSE share informationas at 29 February 2012
The Group maintains dialogue with its key financial audiences,
especially institutional and private shareholders and analysts.
The Investor Relations team together with the CEO and FD manages
the dialogue with these respective audiences. The Group adopts a
proactive stance in timely dissemination of appropriate information
to stakeholders and shareholders through print and electronic
news releases and the statutory publication of the Group’s financial
performance.
The Group’s website provides the latest and historical financial and
other information, including the financial reports as well as information
on the subsidiaries of the Company.
The Board encourages shareholders to attend its Annual General
Meeting, notice of which is contained in this annual report, where
shareholders will have the opportunity to put questions to the Board,
including the Chairmen of the Board Committees.
Shareholders are able to provide feedback to PSV Holdings via the
website in the “contact us” domain where an email is produced
directly to the CEO’s office. An Investor Relations Consultancy has
been appointed who further disseminate information to the market and
shareholders are also encouraged to contact the consultancy should
they require additional information.
Interaction with shareholders
Financial year-end 29 February 2012
Reports and profit announcements Final results publication May 2012 Special dividend declaration 30 July 2012 Annual report August/September 2012 Interim results publication November 2012
Annual General Meeting 17 September 2012
Shareholders’ diary
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38 PSV integrated annual report 2012 www.psv.co.za
Audit Committee report ................................................................39
Directors’ responsibility statement ..................................................41
Certification by Company Secretary ................................................41
Directors’ report ............................................................................42
Report of independent auditors .....................................................44
Statements of comprehensive income ............................................45
Statements of financial position .....................................................46
Statements of changes in equity ....................................................48
Statements of cash flows...............................................................50
Accounting policies .......................................................................51
Notes to the annual financial statements ........................................60
The annual financial statements have been audited in compliance with
Section 30 of the Companies Act of 2008.
Tony Dreisenstock CA(SA) was responsible for the supervision of the
preparation of the annual financial statements.
The annual financial statements were published on 7 August 2012.
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39www.psv.co.za PSV integrated annual report 2012
Audit Committee report for the year ended 29 February 2012
AppointmentThe Audit Committee is appointed at each Annual General Meeting
as required by the new Companies Act 71 of 2008 (the Act) Part D,
Section 94. This section requires the Audit Committee to prepare
a report to be included in the annual financial statements for that
financial year, specifying the matters set out below. The JSE Listing
Requirements (AltX section paragraph 21.5) requires the issuer to
appoint an Audit Committee that “must fulfil the role as set out in the
King Code”.
Constitution of the committeeDue to changes in the directorship during the year, a new Audit
Committee was appointed by the Board which was subsequently
approved by the shareholders at the Special General Meeting held on
31 May 2012. The committee has three Independent Non-executive
Directors as required by the Act and the Board is satisfied that the
qualifications, skill and experience of the committee members meet the
requirements of the Act and enable it to fulfil its mandate. The Chairman
of the committee is a chartered accountant.
ResponsibilitiesThe Act requires the Audit Committee to prepare “a report” which covers
the following matters:
• Describe how the committee carried out its functions;
• State whether the committee is satisfied that the auditor was
independent of the Company;
• Comment as appropriate on the accounting practices and the internal
financial controls of the company.
In addition, the Act sets out the “duties” of the Audit Committee:
• To nominate an independent auditor;
• To determine the fees and terms of engagement of the auditor;
• To ensure the appointment complies with the Act;
• To determine the nature and extent of non-audit services that the
auditor may or may not provide;
• To pre-approve any proposed agreement for the auditor to provide
non-audit services;
• To deal with any concerns relating to accounting practices, internal
audit, the content or auditing of the Company’s financial statements,
internal financial controls, or any related matter;
• To make submissions to the Board on any matter concerning
accounting policies, financial control, records and reporting;
• To perform any oversight function required by the Board.
Activities of the Audit Committee during the year:
• Held quarterly meetings of the committee;
• Reviewed management accounts and reports, budgets, budget
variations, strategic, financial and operational risks, analysed
the balance sheet and income statement, examined working
capital management, examined funding structures, assessed
the performance of subsidiaries, examined executive and staff
remuneration, assessed the state of internal controls and areas of
weakness, examined the business model, examined the security and
integrity of the IT environment, other related matters;
• Approved the external audit plan and year-end programme for the
year ended 29 February 2012;
• Examined the final report of the external auditors, and held year-end
meetings with the external auditors in the absence of management,
to cover matters in their final report, and held discussions on the
year-end audit adjustments;
• Commissioned and considered an independent calculation of
impairments of intangibles;
• Reviewed and approved accounting treatment of significant matters;
• Reviewed and satisfied itself as to the independence and competence
of the external auditor, having due regard to the scope of additional
services provided by them and that such services were properly
authorised and have not impaired their independence;
• Assessed and satisfied itself as to the competence of the Financial
Director;
• Reviewed and approved shareholder announcements;
• Satisfied itself as to the compliance of the final consolidated financial
statements for the year ended 29 February 2012 with the Act and
International Financial Reporting Standards, reviewed and approved
the results and recommended same to the Board for acceptance;
• The Board has subsequently approved the results for 2012 which will
be open for discussion at the forthcoming Annual General Meeting;
• Approved the fees of the external auditor, having given due
consideration to additional work performed by the auditors at
year-end.
Key matters arising out of the work of the Audit Committee:
• The mandate and policies of the committee are inadequate and will
be reviewed and developed to adequately support the audit, finance
and administration functions of the Group;
• The establishment of an internal audit function is an urgent
requirement. Options are being pursued to establish this function;
• Lack of adequate internal controls were experienced in countries
outside South Africa where the group operates. Management in these
countries have been informed that the group is taking direct control
over these accounting offices and systems are being put in place to
correct the position and establish proper procedures and disciplines;
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40 PSV integrated annual report 2012 www.psv.co.za
• Alignment and development of the Group IT function are a work in
progress;
• Scrutiny of the performance of subsidiaries is a principal focus area
and measures are being taken to improve results of those companies
which are not meeting the targets for return on capital and assets;
• Key performance targets are being developed which will guide the
operations of the Group and its subsidiaries in the future;
• Working capital management is variable. Standard targets have now
been set and subsidiaries are required to meet these targets going
forward;
• The gearing of the Group is of concern for a number of reasons, most
important of which is that the current level of gearing inhibits the
availability of working capital for the expansion of existing operations
and growth. The Group has undertaken a programme of reduction
and restructuring of debt. The current sale of the pump group for
R54 million which was approved at the Special General Meeting on
31 May 2012 is part of this initiative, and will significantly strengthen
the balance sheet of the Group, release additional working capital,
and position the group to rapidly increase turnover and profitability
of existing operations;
• The year-end process did not operate as smoothly as management
would have wished. We have analysed the reasons for this and are
putting in place measures to correct this in the future;
• A review is under way by management to ensure that qualified
accountants are positioned to fill any current gaps in resources;
• The structure of the finance department is under review by
management to meet the needs of growing multi-country operations;
• A review of the business model is due to take place shortly to assess
what changes need to be made to make this more effective and
financially efficient.
Conclusion
Notwithstanding the ongoing initiatives or matters requiring attention
noted above, the committee has satisfied itself that the internal control
environment, disciplines and procedures are adequate to comply with
the Act, to minimise the financial risks of the Group, and to provide
adequate information in a timeous manner to enable management and
the Audit Committee to perform their responsibilities.
The committee is of the opinion that its objectives were met during the
year under review.
Anthony de la Rue
Audit Committee Chairman
7 August 2012
Audit Committee report (continued)for the year ended 29 February 2012
41www.psv.co.za PSV integrated annual report 2012
In terms of Section 88(2)(e) of the Companies Act, 2008 (Act 71 of 2008), as amended (“the Act”), I certify
that, to the best of my knowledge and belief, the Group has, in respect of the financial year reported upon,
lodged with the Registrar of Companies all returns required of a public company in terms of the Act and that
all such returns are true, correct and up to date.
Merchantec Capital
Company Secretary
7 August 2012
Certification by Company Secretary
The Directors are responsible for the preparation and fair presentation of the consolidated and separate
annual financial statements of PSV Holdings Limited, comprising the statements of financial position at
29 February 2012, and the statements of comprehensive income, changes in equity and cash flows for the
year then ended, and the notes to the financial statements which include a summary of significant accounting
policies and other explanatory notes, in accordance with International Financial Reporting Standards and the
requirements of the Companies Act of South Africa. In addition, the Directors are responsible for preparing
the Directors’ report.
The Directors are also responsible for such internal control as the Directors determine what is necessary to
enable the preparation of financial statements that are free from material misstatement, whether due to fraud
or error, and for maintaining adequate accounting records and an effective system of risk management as well
as the preparation of the supplementary schedules included in these financial statements.
The Directors have made an assessment of the ability of the Company and its subsidiaries to continue as going
concerns and have no reason to believe that the businesses will not be going concerns in the year ahead.
The auditor is responsible for reporting on whether the consolidated and separate annual financial statements
are fairly presented in accordance with the applicable financial reporting framework.
Approval of consolidated and separate annual financial statementsThe consolidated and separate annual financial statements of PSV Holdings Limited, as identified in the first
paragraph, were approved by the Board of Directors on 7 August 2012 and signed by
AJD da Silva AR Dreisenstock
Chief Executive Officer Chief Financial Officer
Directors’ responsibility statement
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42 PSV integrated annual report 2012 www.psv.co.za
Directors’ report
The Directors have pleasure in submitting their report together with the Company and Group annual financial
statements for the financial year ended 29 February 2012.
Nature of businessPSV is a specialised industrial engineering group focused on specialised valves, engineering linings, industrial
supplies and cryogenics to the mining, petrochemical, water and waste water management sectors in South
Africa and Africa.
Financial statementsThe Company and Group’s results and financial position are contained in the annual financial statements on
pages 45 to 91 of the report.
The audited annual financial statements have been prepared in accordance with International Financial
Reporting Standards (“IFRS”) and their interpretation adopted by the International Accounting Standards Board
(“IASB”), the Listings Requirements of the JSE Limited (“JSE”), the Companies Act, 2008 (as amended) and
the Companies Regulations, and remain consistent with those applied to the preliminary results announced
on 31 May 2011.
Results of operationsThe Group’s trading results have been marred by the necessity to impair the following assets:
• Goodwill and intangibles arising in Engineered Linings and Rand Air and Gas Installations amounting to
R12,7 million.
• Alignment of the carrying value of the Pump Business in the process of being disposed of, to the purchase
consideration to be received. The impairment amounts to R12,2 million and has been included in the profit
from discontinued operations.
• Impairment of the deferred tax assets arising in PSV Holdings and Petrologic. The total impairment amounts
to R12,3 million. PSV Holdings is an investment holding company that recovers the bulk of its costs from
its underlying subsidiaries. As there are limited possibilities of this company reflecting taxable income, the
deferred tax asset has been impaired. The deferred tax asset in Petrologic has been impaired due to the
poor trading results made by this subsidiary. We expect that this company will become profitable within
the next two years and consequently the Group is taking the necessary steps in its restructuring process
to mitigate further losses.
As a result of these material impairments, the Group’s basic loss per share from continuing operations
increased from 9,21 cents to 12,00 cents, and its headline loss per share from continuing operations
increased from 9,02 cents to 11,98 cents.
Disposal of the pumps business
Shareholders voted in favour of the disposal of the Group’s pump companies comprising PSV Services
(Pty) Limited, PSV Zambia (Pvt) Limited, APE Pumps (Pty) Limited, Mather + Platt (Pty) Limited and the
property these companies operate from, PSV Properties 2 (Pty) Limited for a total purchase consideration
amounting to R54 million. As stated previously, the main purpose for the disposal is to settle debt, provide
working capital to the Group’s remaining subsidiaries and pay a special dividend to shareholders. The results
of the Pump Business’ operations have been reflected as part of the profit from discontinued operations.
The Pump Businesses were sold to WPIL Limited, a global player in large engineered water handling pumps
for the power, municipal mining and oil and gas sectors.
Dividends
No dividends were paid nor recommended to shareholders during the financial year ended 29 February 2012
(2011: nil).
However, following the disposal of the Pump Business, the Board is in the process of finalising the declaration
of a special once off dividend to shareholders, subject to the payment of the proceeds by the purchaser as
mentioned above. A further announcement in this regard will be made in due course.
Property, plant and equipment
During the year the Group invested R11 143 748 in new property, plant and equipment in order to expand its
operations. Details of property, plant and equipment are contained in note 7 of the annual financial statements.
Borrowing powers
In terms of the Company’s Articles of Association, its borrowing powers are unlimited. The borrowing powers
of the Group’s wholly owned operating subsidiaries may in terms of its Articles of Association be limited by
the Company.
43www.psv.co.za PSV integrated annual report 2012
Certification by the Company Secretary
Refer to page 41 for the certification by the company secretary.
Litigation
There are no legal or arbitration proceedings, including any such proceedings that are pending or threatened,
of which PSV is aware that may have, or have had during the 12 months preceding the date of the annual
report, a material effect on the financial position of the Group.
Independent auditors
The independent auditors, KPMG Inc., were re-appointed during the year.
Stated capital
Details of the authorised and issued stated capital of the Company and the movements during the period are
contained in note 15 of the annual financial statements.
Directors and secretary
The names of the Directors in office are set out on page 9.
The interests of Directors in the issued share capital of the Company are provided on page 91 of the
annual report.
During the year under review, the following changes were made to the Board:
CE Chimombe-Munyoro, E Dube (Alternate), MM Patel, GS Nzalo were not re-elected by shareholders at
the Annual General Meeting held on 29 September 2011. DJ Kelly’s designation changed from Executive
Director to Non-executive Director on 30 September 2011 as a result of the disposal of Group Line Projects.
The following independent Non-executive Directors were appointed:
• Ralph Patmore (Chairperson of the Board and the Risk Committee)*
• Anthony de la Rue (Chairperson of the Audit Committee)*
• Portia Molefe (Chairperson of the Social and Ethics Committee) **
* Appointed 8 November 2011 ** Appointed 2 May 2012 and resigned on 11 July 2012
During the year PSV appointed Merchantec Capital as Company Secretary, replacing M Pretorius.
In accordance with the requirements of the JSE Limited, a detailed report on Directors’ remuneration appears
in note 23.
There are no employees considered to be prescribed officers of PSV Holdings. Details of the top earners, other
than Directors, is provided in note 24.
Significant shareholdersDetails of significant shareholders are included on page 91 of this annual report.
Subsidiary companiesDetails of the Company’s subsidiary companies appear in note 11 to the annual financial statements.
Special resolutions by subsidiary companiesThe authority of the wholly owned subsidiaries to purchase their own and the Company’s shares, subject to
the relevant provisions of the Act and the Listings Requirements of the JSE, will be approved by shareholders
on 17 September 2012 and filed with CPIC.
No other special resolutions were passed by subsidiary companies during the period under review, or between
the reporting date and the date of this report.
Approval of annual financial statementsThe consolidated and separate annual financial statements of PSV Holdings Limited and its subsidiaries were
approved by the Board of Directors on 7 August 2012 and are signed on its behalf by
AJD da Silva AR Dreisenstock
Chief Executive Officer Chief Financial Officer
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44 PSV integrated annual report 2012 www.psv.co.za
To the shareholders of PSV Holdings Limited
Report on the financial statements
We have audited the consolidated and separate annual financial statements of PSV Holdings Limited, which
comprise the statements of financial position at 29 February 2012, and the statements of comprehensive
income, changes in equity and cash flows for the year then ended, and the notes to the financial
statements which include a summary of significant accounting policies and other explanatory notes, as set
out on pages 45 to 91.
Directors’ responsibility for the financial statements
The Company’s Directors are responsible for the preparation and fair presentation of these financial
statements in accordance with International Financial Reporting Standards and the requirements of the
Companies Act of South Africa, and for such internal control as the Directors determine is necessary to enable
the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
Auditor’s responsibility
Our responsibility is to express an opinion on these financial statements based on our audit. We conducted
our audit in accordance with International Standards on Auditing. Those standards require that we comply
with ethical requirements, and plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures
in the financial statements. The procedures selected depend on the auditor’s judgement, including the
assessment of the risks of material misstatement of the financial statements, whether due to fraud or error.
In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation
and fair presentation of the financial statements in order to design audit procedures that are appropriate
in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s
internal control. An audit also includes evaluating the appropriateness of accounting policies used and the
reasonableness of accounting estimates made by management, as well as evaluating the overall presentation
of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
audit opinion.
Opinion In our opinion, these financial statements present fairly, in all material respects, the consolidated and
separate financial position of PSV Holdings Limited at 29 February 2012, and its consolidated and separate
financial performance and consolidated and separate cash flows for the year then ended in accordance with
International Financial Reporting Standards and the requirements of the Companies Act of South Africa.
Other reports required by the Companies Act As part of our audit of the financial statements for the year ended 29 February 2012, we have read the
Directors’ report, the Audit Committee’s report and the Certification by Company Secretary for the purpose
of identifying whether there are material inconsistencies between these reports and the audited financial
statements. These reports are the responsibility of the respective preparers. Based on reading these reports
we have not identified material inconsistencies between these reports and the audited financial statements.
However, we have not audited these reports and accordingly do not express an opinion on these reports.
KPMG Inc.
Registered Auditor
Per TG Cheadle
Chartered Accountant (SA)
Registered Auditor
Director
7 August 2012
Report of independent auditors
KPMG Crescent
85 Empire Road
Parktown
45www.psv.co.za PSV integrated annual report 2012
Group Company
2012 2011 2012 2011
Notes R R R R
Revenue 339 242 565 223 276 768 23 719 627 25 620 000
Cost of sales (276 172 966) (184 433 909) – –
Gross profit 63 069 599 38 842 859 23 719 627 25 620 000
Other income 15 366 586 4 527 191 32 454 636 2 212 177
Other expenses (92 137 089) (64 946 966) (43 535 615) (52 859 608)
Results from operating activities 2 (13 700 904) (21 576 916) 12 638 648 (25 027 431)
Finance income 3 380 056 163 497 17 340 483 4 503 646
Finance costs 3 (10 319 062) (4 930 541) (15 248 509) (12 363 506)
Net finance costs (9 939 006) (4 767 044) 2 091 974 (7 859 860)
(Loss)/Profit before income tax (23 639 910) (26 343 960) 14 730 622 (32 887 291)
Income tax (expense)/credit 4 (6 321 895) 3 576 033 (3 006 064) 2 119 807
(Loss)/Profit for the year from continuing operations (29 961 805) (22 767 927) 11 724 558 (30 767 484)
(Loss)/Profit from discontinued operations 5 (6 482 297) 14 462 138 – –
Gain on sale of discontinued operations 5 18 820 210 – – –
(Loss)/Profit for the year attributable to ordinary shareholders (17 623 892) (8 305 789) 11 724 558 (30 767 484)
Other comprehensive lossForeign currency translation loss (96 179) – – –
Total comprehensive (loss)/profit for the year (17 720 071) (8 305 789) 11 724 558 (30 767 484)
Earnings/(Loss) per shareBasic (loss) per share (cents) 6 (7,06) (3,36)
Diluted (loss) per share (cents) 6 (6,83) (3,30)
Basic (loss) per share (cents) – continuing operations 6 (12,00) (9,21)
Diluted (loss) per share (cents) – continuing operations 6 (11,61) (9,04)
Statements of comprehensive incomefor the year ended 29 February 2012
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46 PSV integrated annual report 2012 www.psv.co.za
Statements of financial position as at 29 February 2012
Group Company
2012 2011 2012 2011
Notes R R R R
ASSETS
Non-current assets Property, plant and equipment 7 31 860 127 45 739 345 7 634 482 2 820 825
Intangible assets 8 15 353 434 18 040 742 – –
Goodwill 9 32 056 838 32 997 332 – –
Loans receivable 10 688 060 – – –
Investment in subsidiaries 11 – – 114 115 536 120 055 582
Deferred taxation assets 17 2 410 108 11 741 509 – 3 006 064
Total non-current assets 82 368 567 108 518 928 121 750 018 125 882 471
Current assets Inventories 12 42 866 901 52 583 578 – 1 940 913
Loans to Group companies 11 – – 42 438 665 19 932 790
Trade and other receivables 13 57 613 569 58 015 640 12 204 763 19 234 294
Short-term portion of loans receivable 10 1 000 000 – 1 000 000 –
Taxation receivable 838 451 7 205 412 – –
Cash and cash equivalents 14 27 180 014 26 531 674 9 243 117 13 753 076
Assets held for sale 5 78 949 436 37 122 185 – –
Total current assets 208 448 371 181 458 489 64 886 545 54 861 073
Total assets 290 816 938 289 977 417 186 636 563 180 743 544
EQUITY Share capital 15 271 606 106 270 806 106 274 494 010 270 806 106
Share-based payment reserve 205 782 263 021 395 243 263 021
Foreign currency translation reserve (3 195 623) (3 099 444) – –
Retained loss (142 844 627) (125 220 735) (200 934 736) (212 659 294)
Total equity attributable to equity holders of the Company 125 771 638 142 748 948 73 954 517 58 409 833
47www.psv.co.za PSV integrated annual report 2012
Group Company
2012 2011 2012 2011Notes R R R R
LIABILITIES Non-current liabilities Deferred purchase consideration 16 20 503 934 – 20 503 934 –Deferred taxation liabilities 17 5 695 681 4 655 668 – –Loans and borrowings 18 22 499 840 20 984 713 16 665 728 16 273 490
Total non-current liabilities 48 699 455 25 640 381 37 169 662 16 273 490
Current liabilities Loans from Group companies 11 – – 43 826 494 47 619 124Loans from Directors 1 600 000 – 1 600 000 –Trade and other payables 19 57 749 051 46 200 358 6 069 556 5 643 201Taxation payable 2 476 742 948 865 – –Current portion of deferred purchase consideration 16 1 953 252 5 622 724 1 953 252 5 622 724Bank overdraft 14 18 010 869 37 199 721 16 019 515 37 104 215Current portion of loans and borrowings 18 9 089 812 13 138 277 6 043 567 10 070 957Liabilities held for sale 5 25 466 119 18 478 143 – –
Total current liabilities 116 345 845 121 588 088 75 512 384 106 060 221
Total liabilities 165 045 300 147 228 469 112 682 046 122 333 711
Total equity and liabilities 290 816 938 289 977 417 186 636 563 180 743 544
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48 PSV integrated annual report 2012 www.psv.co.za
Statements of changes in equityfor the year ended 29 February 2012
Share capital R
Share-based payment reserve
R
Foreign currency translation
(deficit)/reserve R
Retained loss R
Total R
GroupBalance at 28 February 2010 270 806 106 1 669 696 (3 099 444) (119 155 318) 150 221 040
Total comprehensive income for the period (Loss) for the year – – – (8 305 789) (8 305 789)
Total comprehensive (loss) for the period – – – (8 305 789) (8 305 789)
Transactions with owners, recorded directly in equity
Contributions by and distributions to owners Share-based payment transactions – 833 697 – – 833 697
Transfer of vested shares from share-based payment reserve – (2 240 372) – 2 240 372 –
– (1 406 675) – 2 240 372 833 697
Balance at 28 February 2011 270 806 106 263 021 (3 099 444) (125 220 735) 142 748 948
Total comprehensive income for the period (Loss) for the year – – – (17 623 892) (17 623 892)
Other comprehensive income Foreign currency translation reserve – – (96 179) – (96 179)
Total comprehensive (loss) for the period – – (96 179) (17 623 892) (17 720 071)
Transactions with owners, recorded directly in equity
Contributions by and distributions to owners Issue of shares 2 887 904 – – – 2 887 904
Acquisition of shares by subsidiary company (2 887 904) – – – (2 887 904)
Issue of shares to Directors 800 000 – – – 800 000
Share-based payment transactions – (57 239) – – (57 239)
800 000 (57 239) – – 742 761
Balance at 29 February 2012 271 606 106 205 782 (3 195 623) (142 844 627) 125 771 638
49www.psv.co.za PSV integrated annual report 2012
Share capital R
Share-based payment reserve
R
Accumulated loss
RTotal
R
CompanyBalance at 28 February 2010 270 806 106 1 669 696 (184 132 182) 88 343 620Total comprehensive income for the period (Loss) for the year – – (30 767 484) (30 767 484)
Transactions with owners recorded directly in equity Contributions by and distributions to owners Share-based payment transactions – 833 697 – 833 697Transfer of vested shares from share-based payment reserve – (2 240 372) 2 240 372 –
– (1 406 675) 2 240 372 833 697
Balance at 28 February 2011 270 806 106 263 021 (212 659 294) 58 409 833
Total comprehensive income for the period Profit for the year – – 11 724 558 11 724 558
Transactions with owners, recorded directly in equity Contributions by and distributions to owners Issue of shares 2 887 904 – – 2 887 904Transfer of shares to treasury shares – – – –Issue of shares to Directors 800 000 – – 800 000Share-based payment transactions – 132 222 – 132 222
3 687 904 132 222 – 3 820 126
Balance at 29 February 2012 274 494 010 395 243 (200 934 736) 73 954 517
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Statements of cash flowsfor the year ended 29 February 2012
Group Company
2012 2011 2012 2011Notes R R R R
Cash generated by/(utilised in) operations 21 32 980 845 17 498 686 18 278 439 (11 711 315)Financial income 380 056 163 497 17 340 483 4 503 646 Financial expenses (10 319 062) (4 930 541) (15 248 509) (12 363 506)Taxation paid 22 (4 677 439) (5 687 994) – –
Net cash from/(used in) operating activities 18 364 400 7 043 648 20 370 413 (19 571 175)
Additions to property, plant and equipment to expand operations (11 143 748) (7 448 281) (7 130 161) (1 324 367)Proceeds on disposal of property, plant and equipment 2 342 968 1 763 401 362 463 319 500 Additions to intangible assets – (157 800) – – Settlement of purchase and deferred purchase considerations (5 893 357) (4 500 000) (5 893 357) (4 500 000)Net cash paid to acquire Turbo Agencies, net of cash reserves (3 204 036) – (10 997 065) – Cash paid to acquire Cryoshield – (6 074 800) – (6 074 800)Proceeds on disposal of Group Line Projects 37 464 252 – 35 000 000 –
Net cash from/(used in) investing activities 19 566 079 (16 417 480) 11 341 880 (11 579 667)
Loan granted to previous vendors of Turbo Agencies (1 688 060) – (1 000 000) – External loans granted to finance property, plant and equipment 4 545 252 4 337 332 4 584 068 24 547 682 Settlement/(raising) of third party debt (11 042 240) 6 288 774 (8 219 220) (1 636 364)Loans to Group companies – – (10 502 400) – Repayment of loan granted – 219 402 – 190 600
Net cash (used in)/from financing activities (8 185 048) 10 845 508 (15 137 552) 23 101 918
Net increase/(decrease) in cash and cash equivalents 29 745 431 1 471 676 16 574 741 (8 048 924)Cash at acquisition of subsidiary – 295 779 – – Cash transferred to held for sale (9 908 239) (307 723) – – Cash and cash equivalents at beginning of year (10 668 047) (12 127 779) (23 351 139) (15 302 215)
Cash and cash equivalents at end of year 9 169 145 (10 668 047) (6 776 398) (23 351 139)
51www.psv.co.za PSV integrated annual report 2012
PSV Holdings Limited (“the Company”) is a Company domiciled in South Africa. The consolidated financial statements at 29 February 2012 comprise the Company and its subsidiaries (together referred to as “the Group”).
The principal accounting policies adopted in the preparation of the financial statements are set out below.
Statement of complianceThe Company and Group’s annual financial statements have been prepared in accordance with and comply with International Financial Reporting Standards (“IFRS”) and its interpretations adopted by the International Accounting Standards Board (“IASB”) and the requirements of the Companies Act of South Africa and the AC500 Series.
Basis of measurementThe annual financial statements are prepared on the historical cost basis except for derivative financial instruments which are stated at fair value.
Accounting for business combinationsThe Group has applied IFRS 3 – Business Combinations (2008) in accounting for business combinations.
For acquisitions on or after 1 March 2010, the Group measures goodwill at the acquisition date as:• the fair value of consideration transferred, plus• the recognised amount of any non-controlling interests in the acquiree, plus• if the business combination is achieved in stages, the fair value of the existing equity interest in the
acquiree, less• the net recognised amount (generally fair value) of the identifiable assets acquired and liabilities assumed.
When the excess is negative, a bargain purchase gain is recognised immediately in profit or loss.
The consideration transferred does not include amounts related to the settlement of pre-existing relationships. Such amounts are generally recognised in profit or loss.
Costs related to the acquisition, other than those associated, with the issue of debt or equity securities, that the Group incurs in connection with the business combination are expensed as incurred.
Use of estimates and judgementThe 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. Actual results may differ from these estimates.
Accounting policiesfor the year ended 29 February 2012
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.
In particular, information about areas of estimation and critical judgements in applying accounting policies that have the most significant effect on the amount recognised in the financial statements are described in the following notes:• Note 8 useful lives and impairment tests on intangible assets.• Note 9 impairment test on goodwill.• Note 17 impairment of deferred tax assets.• Note 23 business combinations acquired.
The accounting policies set out below have been applied consistently to all periods presented.
Functional and presentation currencyThe financial statements are presented in Rand, which is the Company’s functional currency, and all values are rounded to the nearest Rand except when otherwise indicated.
Basis of consolidation
SubsidiariesThe Group financial statements include the financial statements of the Company and its subsidiaries. Where an investment in a subsidiary was acquired and disposed of during the financial year its results are included from, or to, the date control commences or ceases.
Subsidiaries are those entities over whose financial and operating policies the Group has the power to exercise control, so as to obtain benefits from their activities. In assessing control, potential voting rights that are presently exercisable are taken into account.
New acquisitions are included in the Group financial statements using the purchase method whereby the assets and liabilities are measured at their fair value. The purchase consideration is allocated on the basis of the fair values on the dates of acquisition.
All intra-group transactions and balances arising are eliminated in preparing the consolidated financial statements. Unrealised losses are eliminated in the same way as unrealised gains, but only to the extent that there is no evidence of impairment.
All companies in the Group maintain consistent accounting policies and have the same year-end.
Loss of controlOn the loss of control, the Group derecognises the assets and liabilities of the subsidiary, any non-controlling interests and the other components of equity related to the subsidiary. Any surplus or deficit arising on the loss
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of control is recognised in profit or loss. If the Group retains any interest in the previous subsidiary, then such interest is measured at fair value at the date that control is lost. Subsequently it is accounted for as an equity-accounted investee or as an available-for-sale financial asset depending on the level of influence retained.
Foreign currencies
Foreign currency transactionsForeign currency transactions are translated at the rates of exchange ruling at the dates of the transactions. Balances on monetary assets and liabilities outstanding on foreign transactions at the end of the financial year are translated to Rand at the rates ruling at that date. The foreign currency gain or loss on monetary items is the difference between amortised cost in the functional currency at the beginning of the period, adjusted for effective interest and prepayments during the period, and the amortised cost in foreign currency translated at the exchange rate at the end of the reporting period. Gains or losses on translation are recognised in profit or loss.
Non-monetary assets and liabilities that are measured in terms of historical cost in 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 to Rand at the foreign exchange rates ruling at the dates the fair value was determined.
Foreign subsidiariesThe assets and liabilities of foreign subsidiaries, including goodwill and fair value adjustments arising on acquisition, whose functional currencies are not Rand, are translated into Rand at rates of exchange ruling at the end of the financial year and the results of operations and cash flow items are translated at an appropriate weighted average rate of exchange for the year. Gains and losses on translation are taken directly to a foreign currency translation reserve in shareholders’ equity.
Where loans to the foreign subsidiaries are long-term in nature and its settlement is neither planned nor likely in the foreseeable future, it forms part of the Company’s net investment in the foreign subsidiary, the translation gains or losses arising on converting the loans to the rates of exchange ruling at the end of the financial year are taken directly to a foreign currency translation reserve in shareholders’ equity in the Group financial statements and to the profit and loss for the Company. On disposal of the net investment, the translation gains or losses are recognised in profit and loss.
Revenue recognitionRevenue is recognised only when it is probable that the economic benefits associated with a transaction will flow to the Group and Company and the amount of revenue can be measured reliably. No revenue is recognised if there are significant uncertainties regarding the recovery of the consideration due or associated costs for the possible return of goods.
Accounting policies (continued)for the year ended 29 February 2012
GoodsRevenue arising from the sale of goods is measured at the fair value of the consideration received, or receivable net of returns and allowances, trade discounts, volume rebates and value added taxes. Revenue is recognised when the significant risks and rewards of ownership of the goods have passed to the buyer, recovery of the consideration is probable, the associated costs and possible return of the goods can be estimated reliably, and there is no continuing management involvement with the goods.
Where the Group enters into contracts, the percentage of completion method is used to recognise revenue.
Financial incomeInterestInterest income is recognised in profit and loss as it accrues using the effective interest method.
Exchange gainsGains on foreign currency transactions are included in finance income.
Financial expensesFinance expenses comprise interest payable on borrowings and the unwinding of discounts arising on deferred purchase considerations owing to vendors on investments acquired; calculated on the principal outstanding using the effective interest method. Losses on foreign currency transactions are also included in financial expenses.
TaxationIncome tax expense comprises current and deferred tax. Income tax expense is recognised in profit and loss except to the extent that it relates to a business combination or items recognised directly in equity, in which case it is recognised directly in equity.
Current taxation comprises taxation payable calculated on the basis of the expected taxable income for the year, using the taxation rates enacted or substantively enacted at the reporting date, and any adjustments of taxation payable for previous years. Deferred taxation is recognised in respect of temporary differences. Temporary differences are differences between the carrying amounts of assets and liabilities for financial reporting purposes and their tax base.
Deferred taxation is not recognised for the following temporary differences:• the initial recognition of goodwill• the initial recognition of assets and liabilities in a transaction that is not a business combination and that
affects neither accounting nor taxable profit• differences relating to investments in subsidiaries to the extent that the timing of the reversal is controlled
by the company and it is probable that they will not reverse in the foreseeable future
Deferred taxation is recognised in profit and loss except to the extent that it relates to a transaction that is recorded directly in equity. The amount of deferred taxation provided is based on the expected manner of
53www.psv.co.za PSV integrated annual report 2012
the realisation or settlement of the carrying amount of assets and liabilities using taxation rates enacted or substantively enacted at the reporting date. A deferred taxation asset is recognised to the extent that it is probable that future taxable profits will be available against which the associated unutilised taxation losses and deductible temporary differences can be utilised. Deferred taxation assets are reduced to the extent that it is no longer probable that the related taxation benefit will be realised.
The carrying value of a deferred tax asset is reviewed at the end of each reporting period.
Property, plant and equipmentProperty, plant and equipment are recorded at cost, less accumulated depreciation and impairment losses. All assets except for land are depreciated on the straight-line method over their expected useful lives to an estimated residual value. The estimated useful lives are currently:• Buildings 50 years• Plant and machinery 5 to 10 years• Motor vehicles 5 years• Furniture and office equipment 6 years• Computer equipment 3 years• Patterns and dies 3 to 20 years• Leasehold improvements Shorter of useful lives or lease term
Cost includes expenditure that is directly attributable to the acquisition of the asset.
Where parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items of property, plant and equipment. Residual values and useful lives are reassessed annually. Depreciation of an item of property, plant and equipment begins when it is available for the use and ceases at the earlier of the date it is classified as held for sale or the date it is derecognised.
Gains and losses on disposal of property, plant and equipment are determined by reference to their carrying amount and are taken to profit and loss.
Subsequent costsThe cost of replacing part of an item of property, plant and equipment is recognised in the carrying amount of the item if it is probable that the future economic benefits embodied within the part will flow to the Group and its cost can be measured reliably. The carrying amount of the replaced part is derecognised. The costs of the day-to-day servicing of property, plant and equipment are recognised in profit or loss as incurred.
Lease assets
Finance leasesLeases in terms of which the Group assumes substantially all the risks and rewards of ownership are classified as finance leases. Property, plant and equipment subject to finance lease agreements are capitalised initially
at the lesser of their fair value and the present value of the minimum lease payments and the corresponding liability to the lessor is raised. Lease payments are allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability, which is charged against operating profit, and the capital repayment, which reduces the liability to the lessor. These assets are treated on the same basis as the property, plant and equipment owned by the Group and are subject to impairment testing.
Operating leasesOther leases that do not transfer substantially all the risks and rewards of ownership, are treated as operating leases with lease payments charged against operating profit. Payments made under operating leases are charged against income on a straight-line basis over the period of the lease.
Intangible assetsIntangible assets are stated at cost less accumulated amortisation and impairment losses. The current estimated useful lives are:• Market relationships 10 to 20 years• Customer relationships 1 to 7 years• Technology relationships 10 years
The amortisation methods, useful lives and residual values are reviewed at each financial year-end.
Amortisation is recognised in profit and loss on the straight line basis over the estimated useful lives or intangible assets, other than goodwill, from the date they are available for use, since this most closely reflects the expected portion of consumptions of the future economic benefits embodied in the asset.
Intangible assets are reviewed annually for impairment by management and with the assistance of independent valuers.
GoodwillAll business combinations are accounted for by applying the purchase method, any differences between the fair value of consideration transferred and the fair value of the identifiable assets, liabilities and contingent liabilities acquired is recognised as goodwill.
Where the excess is negative, it is recognised immediately in profit and loss as a gain made on acquisition of business combinations.
Goodwill is tested annually for impairment losses. Impairment losses recorded are not subsequently reversed. Gains and losses on disposal of an entity include the carrying amount of goodwill relating to the entity sold. Goodwill is allocated to cash generating units for the purpose of impairment testing.
Payment in advancePayments in advance are capitalised and are released to profit and loss in the period they are legally due.
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Impairment of assetsThe carrying amount of the Group’s assets, other than inventories, receivables and deferred tax assets, which are separately assessed, are reviewed at each balance date to determine whether there is an indication of impairment and at any time when there is an indication of impairment. If there is any indication that an asset may be impaired, its recoverable amount is estimated. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset of CGU. An impairment loss is recognised whenever the carrying amount of an asset or its cash generating unit (“CGU”) exceeds its recoverable amount.
A previously recognised impairment loss, other than for goodwill, is reversed if the recoverable amount increases as a result of a change in the estimates and market conditions used to determine the recoverable amount, but not to an amount higher than the carrying amount that would have been determined (net of depreciation and amortisation) had no impairment loss been recognised in previous years.
A CGU is the smallest identifiable asset group that generates cash flows that are largely independent from other assets and groups. Impairment losses recognised in respect of CGUs are allocated first to reduce the carrying amount of goodwill allocated to the CGU and then to reduce the carrying amount to the other assets in the unit on a pro rata basis.
Impairment of financial assetsA financial asset is assessed at each reporting date to determine whether there is any objective evidence that it is impaired. A financial asset is considered to be impaired if objective evidence indicates that one or more events have had a negative effect on the estimated future cash flows of the asset.
Individually significant financial assets are tested for impairment on an individual basis. The remaining financial assets are assessed collectively in Groups that share similar credit risk characteristics.
An impairment loss in respect of a financial asset measured at amortised cost is calculated as the difference between its carrying amount and the present value of the estimated future cash flows discounted at the original effective interest rate. An impairment loss in respect of an available-for-sale financial asset is calculated by reference to its fair value.
All impairment losses are recognised in profit or loss.
InventoriesInventories are stated at the lower of cost or net realisable value. Cost is determined using weighted average cost. These are regularly reviewed and updated to reflect input cost of raw materials, direct labour, other direct costs and related normal production overheads. Slow-moving goods and obsolete inventories are written down to their estimated net realisable value.
Accounting policies (continued)for the year ended 29 February 2012
Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and selling expenses.
Trade and other receivablesThe fair value of trade and other receivables is estimated as the present value of the future cash flows, discounted at the market interest rate at the reporting date.
Cash and cash equivalentsCash and cash equivalents are measured at amortised cost.
ProvisionsProvisions are recognised when the Group has a present legal or constructive obligation as a result of past events, for which it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate of the obligation can be made. If the effect is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability.
Stated capital
Ordinary sharesOrdinary shares are classified as equity. Incremental costs directly attributable to the issue of ordinary shares are recognised as a deduction from equity.
Repurchase of share capitalWhen share capital recognised as equity is repurchased, the amount of the consideration paid, including directly attributable costs, is recognised as a deduction from equity. Repurchased shares are classified as treasury shares and are presented as a deduction from total equity.
Employee benefits
Short-term employee benefitsThe cost of all short-term employee benefits is recognised during the period in which the employee renders the related service.
An accrual is made for the estimated liability for annual leave and performance bonuses as a result of services rendered by employees up to the balance sheet date.
Defined contribution plansCertain subsidiaries in the Group contribute to a defined contribution fund for employees. A defined contribution plan is a post-employment benefit plan under which an entity pays fixed contributions into a separate entity and will have no legal or constructive obligation to pay further amounts. Obligations for contributions to defined
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contribution pension plans are recognised as an employee benefit expense in the income statement when they are due. Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in future payments is available.
Financial instruments
Non-derivative financial instrumentsNon-derivative financial instruments comprise investments in equity and debt securities, trade and other receivables, cash and cash equivalents, loans and borrowings, and trade and other payables.
Non-derivative financial instruments are recognised initially at fair value plus, for instruments not at fair value through profit or loss, any directly attributable transaction costs. Subsequent to initial recognition non-derivative financial instrument are measured at amortised cost using the effective interest method less any impairment losses.
A financial instrument is recognised if the Group becomes a party to the contractual provisions of the instrument. Financial assets are derecognised if the Group’s contractual rights to the cash flows from the financial assets expire or if the Group transfers the financial asset to another party without retaining control or substantially all risks and rewards of the asset. Regular way purchases and sales of financial assets are accounted for at trade date, ie the date that the Group commits itself to purchase or sell the asset. Financial liabilities are derecognised if the Group’s obligations specified in the contract expire or are discharged or cancelled.
Cash and cash equivalents comprise cash balances and call deposits. Bank overdrafts that are repayable on demand and form an integral part of the Group’s cash management are included as a component of cash and cash equivalents for the purpose of the statement of cash flows.
OffsetFinancial assets and liabilities are offset and the net amount presented in the statement of financial position when, and only when, the Group has a legal right to offset the amount, and intends either to settle on a net basis or to realise the assets and settle the liability simultaneously.
Earnings per shareThe Group presents basic and diluted earnings per share (“EPS”) data for its ordinary shares. Basic EPS is calculated by dividing the profit or loss attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding during the period. Diluted EPS is determined by adjusting the profit or loss attributable to ordinary shareholders and the weighted average number of ordinary shares outstanding for the effects of all dilutive potential ordinary shares, which comprise deferred equity purchase considerations and share awards granted to employees.
Non-current assets held-for-sale and discontinued operationsNon-current assets are classified as held-for-sale if their carrying amount will be recovered principally through a sale transaction, not through continuing use. 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 carrying amount and fair value less costs to sell. Any impairment losses arising are recognised in profit or loss as capital items.
A discontinued operation is a component of the Group’s business that represents a separate major line of business or geographical area of operations or a subsidiary acquired exclusively with a view to resale. Classification as a discontinued operation occurs upon the earlier of disposal or when the operation meets the criteria to be classified as held-for-sale. When an operation is classified as a discontinued operation, the comparative statement of comprehensive income and statement of cash flows are restated as if the operation has been discontinued from the start of the comparative period.
Operating segmentsAn operating segment is a component of the Group that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions with any of the Group’s other components. The Group determines and presents operating segments based on a the information that is internally provided to the Group’s Chief Executive Officer (CEO), who is the Group’s Chief Operating decision-maker.
An operating segment’s operating results are reviewed regularly by the CEO to make decisions about resources to be allocated to the segment and assess its performance, and for which discrete financial information is available. Segment results that are reported to the CEO include items directly attributable to a segment as well as those that can be allocated on a reasonable basis.
Share-based payment transactionsEquity settledThe fair value of share options and deferred delivery shares granted to selected employees, including Directors, is recognised as an employee expense with a corresponding increase in equity. The fair value is measured at grant date and 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 determined by using a binomial option-pricing model. In valuing the share options, no account is taken of any performance conditions, other than conditions linked to the price of the shares of the Company.
The cost of the share options is recognised, together with a corresponding increase in shareholders’ equity, over the vesting period ending on that date on which the employees become fully entitled to take up the share options. The cumulative expense recognised for share options granted at each reporting date until the vesting
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date reflects the extent to which the vesting period has expired and the number of share option grants that will ultimately vest in the opinion of the Directors of the Company, at that date. This is based on the best available estimate of the number of share options that will ultimately vest. No expense is recognised for share options that do not ultimately vest, except for where forfeiture is only due to share prices not achieving the threshold for vesting.
Where the terms of the share options are modified, as a minimum, an expense is recognised as if the terms had not been modified. In addition, an expense is recognised for any increase in the value of the options, as a result of the modification, as measured at the date of modification.
Where an unvested share option is cancelled, the unrecognised cost is charged to profit or loss. However, if a new share option is substituted for the cancelled share option and designated as a replacement share option on the date that it is granted, the cancelled and new share option grant are treated as if they were a modification of the original grant, as described above.
Group share-based payment transactionsTransactions 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 for 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 options and the market price of the share at the time of exercising the option. The recharge arrangement is accounted for separately from the underlying equity-settled share-based payment upon initial recognition, as follows:• The subsidiary recognises a recharge liability and a corresponding adjustment against equity for the capital
contribution recognised in respect of the share-based payment.• The parent recognises a recharge asset and a corresponding adjustment to the carrying amount of the
investment in the subsidiary.
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 recharge amount 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 recharge 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.
Accounting policies (continued)for the year ended 29 February 2012
Standards and interpretations in issue but not yet effectiveA number of new standards, amendments to standards and interpretations are not yet effective for the year ended 29 February 2012.
These include the following standards and interpretations that are applicable to the business of the group, and have not been applied in preparing these consolidated financial statements.
IFRS 7 – Disclosures: Transfers of financial assetsIn terms of the amendment to this standard, effective for the Group for the year ending 28 February 2013, additional disclosure will be provided regarding transfers of financial assets that are:• not derecognised in their entirety; and• derecognised in their entirety but for which the PSV Group retains continuing involvement.
The amendment may result in additional disclosures to the extent that it applies to securitisation transactions entered into.
Management will provide the required disclosures to the extent that they are applicable to the Group.
Amendment to IAS 1 – Presentation of Financial StatementsThe amendment to IAS 1 will be adopted by the Group for the first time for its financial reporting period ending 28 February 2014.
The Company will present those items of other comprehensive income that may be reclassified to profit or loss in the future separately from those that would never be reclassified to profit or loss. The related tax effects for the two sub-categories will be shown separately. This is a change in presentation and will have no impact on the recognition or measurement of items in the financial statements. This amendment will be applied retrospectively and the comparative information will be restated.
IAS 27 (2011) – Separate Financial StatementsIAS 27 (2011) supersedes IAS 27 (2008) and is effective for the Group for the year ending 28 February 2014. IAS 27 (2011) carries forward the existing accounting and disclosure requirements for separate financial statements only, with some minor clarifications. The adoption of IAS 27 (2011) will not have a significant impact on the Company’s separate financial statements.
Amendment to IAS 32 and IFRS 7 – Offsetting of financial assets and financial liabilitiesThe amendment to IAS 32 will be adopted by the Group for the first time for its financial reporting period ending 28 February 2014. An entity may offset financial assets and financial liabilities when it currently has a legally enforceable right to set off the recognised amounts. IAS 32 previously did not provide guidance on what was meant by “currently has a legal enforceable right to set off”. The IASB decided to include guidance in IAS 32 to clarify the criteria.
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The amendments clarify that an entity currently has a legally enforceable right to set-off if that right is:
• Not contingent on a future event; and
– Enforceable in all of the following circumstances;
– The normal course of business;
– The event of default; and
– The event of insolvency or bankruptcy.
IFRS 7 disclosure requirements have been amended so that the IASB and the US Financial Accounting
Standards Board can have common disclosure requirements. New disclosures are required for financial assets
and liabilities that are:
• Offset in the statement of financial position; or
• Subject to master netting arrangements or similar arrangements.
The amendment will be adopted by the Group for the year ending 20 February 2015.
Management will assess the impact of the amendment on any possible offsetting arrangements.
IFRS 10 – Consolidated Financial StatementsIFRS 10 – Consolidated Financial Statements supersedes IAS 27 Consolidated and Separate Financial
Statements and SIC-12 Consolidation – Special Purpose Entities and is effective for the Group for the year
ending 28 February 2014. IFRS 10 provides a single model to be applied in the control analysis for all
investees, including entities that currently are defined as special purpose entities in the scope of SIC-12.
The consolidation procedures are carried forward from IAS 27 (2008) and remain unchanged. An investor
controls an investee when:
• it is exposed to or has rights to variable returns from its involvement with that investee;
• has the ability to affect those returns through its power over that investee; and
• there is a link between power and returns.
The exposure to risks and rewards of an investee does not, on its own, determine that the investor has control
over an investee. It is one of the factors of the control analysis.
In assessing control over an investee, the investor considers:
• the purpose and design of the investee so as to identify the investee’s relevant activities;
• how decisions about such activities are made;
• who has the current ability to direct those activities; and
• who receives returns there from.
IFRS 10 states that there must be both power and returns and a linkage between the two in order to have control. The definition also includes the concept of de facto control, which may result in the consolidation of entities in which less than 50% voting rights are held.
If there is a change in control conclusion between IAS 27/SIC 12 and IFRS 10, retrospective application will be required. IFRS 10 may result in additional entities that were not consolidated previously being consolidated. Alternatively, existing subsidiaries or special purpose entities may no longer meet the consolidation criteria. The Group will perform a detailed exercise before the period in which IFRS 10 becomes effective for the first time (1 March 2013) to determine the appropriate accounting of affected entities.
IFRS 12 – Disclosure of Interests in Other EntitiesIFRS 12 combines, in a single standard, the disclosure requirements for subsidiaries, associates and joint arrangements, as well as unconsolidated structured entities. The standard is effective for the Group for the year ending 28 February 2014.
The required disclosures aim to provide information to enable users to evaluate:• the nature of, and risks associated with, an entity’s interests in other entities, and• the effects of those interests on the entity’s financial position, financial performance and cash flows.
The following specific disclosure areas are addressed in IFRS 12:• significant judgements and assumptions made in determining the nature of interests in an entity or
arrangement;• interests in subsidiaries;• interests in joint arrangements and associates; and• interests in unconsolidated structured entities, even if an entity concludes that a structured entity should
not be consolidated.
IFRS 12 may result in additional disclosures for the Group in respect of the affected entities. Management will assess the impact of the new standard in detail in order to determine whether the adoption of the new standard would increase the level of disclosure provided for the entity’s interests in subsidiaries and structured entities.
IFRS 13 – Fair Value MeasurementIFRS 13 – Fair Value Measurement will be effective for the Group for the year ending 28 February 2014. It will be applied prospectively and comparatives will not be restated.
IFRS 13 replaces the fair value measurement guidance contained in individual IFRS with a single source of fair value measurement guidance. It defines fair value, establishes a framework for measuring fair value and sets out disclosure requirements for fair value measurements for both non-financial and financial items. IFRS 13
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58 PSV integrated annual report 2012 www.psv.co.za
does not introduce new requirements to measure assets and liabilities at fair value, nor does it eliminate the practicability exceptions to fair value measurement that currently exist in certain standards.
IFRS 13 defines fair value as 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, ie an exit price.
A fair value measurement requires an entity to determine:• the particular asset or liability that is the subject of the measurement;• for a non-financial asset, the asset’s highest and best use and whether the asset would be used by a market
participant on a stand-alone basis or in combination with other assets;• the principal (or most advantageous market) for the asset or liability; and• when market prices for the asset, liability or equity instrument are not available, the valuation technique(s)
appropriate for the measurement, maximising the use of relevant observable inputs and minimising the use of unobservable inputs. In respect of a non-financial asset, a fair value measurement considers a market participant’s ability to generate economic benefit by using the asset or by selling it to another market participant who will use the asset in its highest and best use.
If an entity manages a group of financial assets and liabilities that are measured at fair value on the basis of its net exposure to market or credit risks, it is permitted to measure the fair value of the group on the basis of its net exposures to particular risks if this is in accordance with its documented strategy and information is reported on this basis to its key management personnel.
The fair value of a liability or an entity’s own equity instrument is measured using quoted prices for the transfer of identical instruments. When such prices are not available, an entity measures fair value from the perspective of a market participant holding the identical item as an asset. If quoted prices in an active market for the corresponding asset are also not available, then other observable inputs are used, such as prices in an inactive market for the asset. Otherwise, an entity uses another valuation technique(s), such as a present value measurement or the pricing of a similar liability or instrument.
IFRS 13 requires disclosure of the fair value hierarchy, which was introduced by IFRS 7, to be applied to all fair value measurements. The fair value hierarchy gives highest priority to Level 1 inputs and the lowest priority to Level 3 inputs. Where an entity has assets and liabilities (including non-financial assets and liabilities) which were disclosed as Level 3 on the fair value hierarchy, the following disclosure is required:• its valuation policies and procedures;• analysis of changes in fair value measurements from period to period; and• narrative description of the sensitivity of these assets and liabilities measurements to changes in
unobservable inputs, including the effect of any interrelationships between unobservable inputs as well as quantitative information on significant unobservable inputs used in measuring fair value.
Accounting policies (continued)for the year ended 29 February 2012
The Group is already required to recognise its financial instruments initially at fair value and to provide fair value disclosures relating to its financial instruments in terms of IFRS 7. As a result, management will perform an assessment to determine the impact of the new standard in detail, taking into account that the Group uses fair value measurement on a limited basis.
IFRS 9 (2009) – Financial InstrumentsThe revised statement is effective for the Group for the year ending 29 February 2016 with restatement of comparatives required, subject to transitional provisions.
IFRS 9 addresses the initial measurement and classification of financial assets and will replace the relevant sections of IAS 39. Under IFRS 9, there are two options in respect of classification of financial assets, namely, financial assets measured at amortised cost or at fair value. Financial assets are measured at amortised cost when the business model is to hold assets in order to collect contractual cash flows and when they give rise to cash flows that are solely payments of principal and interest on the principal outstanding. All other financial assets are measured at fair value. Embedded derivatives are no longer separated from hybrid contracts that have a financial asset host. The amendment may have an impact on the Group’s results as a consequence of the new classification requirements on financial assets if instruments classified as loans and receivables do not meet the criteria for measurement at amortised cost. Subject to a detailed analysis of the loans and receivables, management expects that most of the Group’s receivables would qualify for measurement at amortised cost and accordingly it is not expected to significantly impact the Group’s results.
In respect of the embedded derivative amendment, the Group has not historically concluded contracts that contain embedded derivatives. However, management will continuously review this position in order to ensure that the relevant requirements are appropriately applied should the Group enter into embedded derivatives contracts in future.
IFRS 9 (2010) addresses both financial assets and financial liabilities and is effective for the Group for the year ending 29 February 2016, with restatement of comparatives required subject to transitional provisions.
IFRS 9 (2010) incorporates the guidance in IAS 39 dealing with fair value measurement, derivatives embedded in host contracts that are not financial assets, and the requirements of IFRIC 9 – Reassessment of Embedded Derivatives. Under IFRS 9 (2010), the classification and measurement requirements of financial liabilities are the same as per IAS 39, barring the following two aspects:
The fair value option
Fair value changes for financial liabilities (other than financial guarantees and loan commitments) designated at fair value through profit or loss, attributable to the changes in the credit risk of the liability will be presented in other comprehensive income. The remaining change is recognised in profit or loss. However, if the requirement creates or enlarges an accounting mismatch in profit or loss, then the whole fair value change
59www.psv.co.za PSV integrated annual report 2012
is presented in profit or loss. The determination as to whether such presentation would create or enlarge an accounting mismatch is made on initial recognition and is not subsequently reassessed.
Certain derivatives linked to unquoted equity instruments
Under IFRS 9 (2010), derivative liabilities that are linked to and must be settled by delivery of an unquoted equity instrument whose fair value cannot be reliably measured, are measured at fair value.
Management expects an insignificant impact from the application of IFRS 9 (2010) in respect of financial liabilities as classification and measurement of financial liabilities under IFRS 9 are mostly the same as in IAS 39. In addition, the Group has not designated any of its financial liabilities at fair value through profit or loss. Historically, the Group has not concluded derivative liabilities contracts that require settlement by unquoted equity instruments. Although management has not yet assessed the impact of the revision in detail, it does not expect any significant impact on the financial results.
Non-applicable standards, amendments and interpretationsThe other remaining standards, amendments and interpretations issued but not yet effective have been assessed for applicability to the Group and management has concluded that they are not applicable to the business of the group and will therefore have no impact on future financial statements.
Amendment to IAS 19 Employee Benefits: Defined benefit plansThe amendments to IAS 19 will be adopted by the Group for the first time for its financial reporting period ending 29 February 2014.
In terms of the amendments, the following key changes will have an impact on the Group:• The definitions of short-term and other long-term employee benefits have been amended and the distinction
between the two depends on when the entity expects the benefit to be settled;• Additional disclosures required for defined benefit plans; and• Possible changes to the timing of the recognition of termination benefits.
This amendment will most significantly impact the Bank’s recognition of actuarial gains and losses.
The impact on the financial statements for 29 February 2014 cannot be reasonably estimated as at 29 February 2012.
Determination of fair valuesA number of the Group’s accounting policies and disclosures require the determination of fair value, for both financial and non-financial assets and liabilities. Fair values have been determined for measurement and/or disclosure purposes based on the following methods. When applicable, further information about the assumptions made in determining fair values is disclosed in the notes specific to that asset or liability.
Property, plant and equipmentThe fair value of property, plant and equipment recognised as a result of a business combination is the estimated amount for which a property could be exchanged on the date of acquisition between a willing buyer and a willing seller in an arm’s length transaction after proper marketing wherein the parties had each acted knowledgeably. The fair value of items of plant, equipment, fixtures and fittings is based on the market approach and cost approaches using quoted market prices for similar items when available and depreciated replacement cost when appropriate. Depreciated replacement cost reflects adjustments for physical deterioration as well as functional and economic obsolescence.
Intangible assetsThe fair value of patents and trademarks acquired in a business combination is based on the discounted estimated royalty payments that have been avoided as a result of the patent or trademark being owned. The fair value of customer relationships acquired in a business combination is determined using the multi-period excess earnings method, whereby the subject asset is valued after deducting a fair return on all other assets that are part of creating the related cash flows.
The fair value of other intangible assets is based on the discounted cash flows expected to be derived from the use and eventual sale of the assets.
InventoriesThe fair value of inventories acquired in a business combination is determined based on the estimated selling price in the ordinary course of business less the estimated costs of completion and sale, and a reasonable profit margin based on the effort required to complete and sell the inventories.
Trade and other receivablesThe fair value of trade and other receivables is estimated at the present value of future cash flows, discounted at the market rate of interest at the reporting date. This fair value is determined for disclosure purposes or when such assets are acquired in a business combination.
Other non-derivative financial liabilitiesFair 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. In respect of the liability component of convertible notes, the market rate of interest is determined by reference to similar liabilities that do not have a conversion option. For finance leases the market rate of interest is determined by reference to similar lease agreements.
Deferred purchase considerationThe fair value of deferred consideration arising in a business combination is the total consideration payable discounted to present value using market rates at the acquisition date.
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60 PSV integrated annual report 2012 www.psv.co.za
1. Segmental reportingThe Group is organised into two main business segments; Valves and Industrial Supplies and Specialised Services. The Group manufactures and distributes in three main geographical areas; South Africa, Botswana and Zambia.
Segment assets consist primarily of: Segment liabilities consist primarily of:– property, plant and equipment – borrowings– payments in advance – payables– inventories Deferred tax liabilities are excluded.– receivables – cashDeferred tax assets are excluded.
2012
Valves & Industrial Supplies
R
Specialised Services
ROther
RTotal
R
Revenue – external customers 167 722 911 171 519 654 – 339 242 565 Gross profit 45 029 265 18 040 334 – 63 069 599 Depreciation and amortisation 1 998 001 3 124 886 4 364 091 9 486 978 Other operating expenses 25 831 885 7 848 693 48 969 533 82 650 111 Impairment of goodwill and intangible assets – 14 235 333 – 14 235 333Profit/(Loss) before tax 28 780 649 (3 296 622) (49 123 937) (23 639 910) Capital expenditure (15 952 747) (3 583 734) (6 795 971) (26 332 452) Gross assets 69 560 306 68 039 403 150 807 121 288 406 830 Gross liabilities 32 332 376 32 920 112 94 087 131 159 349 619
2011
Revenue – external customers 49 073 750 174 203 018 – 223 276 768 Gross profit 10 099 261 28 743 598 – 38 842 859 Depreciation and amortisation 95 327 2 875 520 3 268 038 6 238 885 Other operating expenses 6 948 180 31 081 177 20 678 723 58 708 080 Profit/(Loss) before tax 5 097 499 270 913 (31 712 373) (26 343 961) Capital expenditure (7 411) (4 349 410) (1 248 272) (5 605 093) Gross assets 17 036 475 103 611 012 164 674 262 285 321 749Gross liabilities 2 227 132 47 632 763 92 712 906 142 572 801
The segment results for 2012 exclude the results of the Pumps Segment which has been classified as a discontinued operation. Group Line Projects (Pty) Limited was classified as a discontinued operation in the prior year. Refer to note 5 for further details.
Notes to the annual financial statementsfor the year ended 29 February 2012
61www.psv.co.za PSV integrated annual report 2012
Group Company
2012 2011 2012 2011R R R R
2. Results from operating activitiesThe following items have been charged/(credited) in arriving at results from operating activities:Amortisation of intangible assets 2 888 000 3 237 289 – – Auditors’ remunerationAudit fee – current year 1 412 799 1 163 025 277 912 320 538 Depreciation 9 164 926 7 190 074 1 982 314 (1 350 959) Directors’ remuneration 10 493 754 8 038 592 6 376 824 4 274 318 Fees paid for Secretarial services 261 704 90 694 215 133 66 629 Gain on bargain purchase 10 788 130 – – – Impairment of related party loans – – 9 511 860 17 146 737 Impairment of investments – – 2 106 097 10 192 093 (Loss)/Profit on sale of property, plant and equipment (636 643) (520 195) (28 273) – Operating lease charges in respect of buildings 9 189 668 4 756 322 3 653 579 1 089 000 Impairment of trade receivables – 1 178 988 – – Impairment of goodwill 8 175 025 – – – Impairment of intangible assets 6 060 308 – – – Impairment of property, plant and equipment 10 700 000 998 330 – 198 944 Retirement fund contributions 4 558 398 4 595 873 826 442 716 299 Salaries and wages 89 671 224 58 480 601 14 057 270 8 872 317 Equity-settled share-based payment transactions (57 239) 833 696 132 222 833 696
At 29 February 2012, the Group had the following share-based payment arrangements:
Share option programme (equity settled)On 21 June 2009, the Group established a share option programme whereby share awards were granted to employees.
Further grants on similar terms were offered to employees on 10 December 2009, 27 January 2010 and 10 February 2010. Additional grants were made in November 2011.
The terms of the share option programme is as follows:All employees of any company within the Group is entitled to participate in the share scheme on the following terms:– After having worked at the Group company for one year an employee shall receive a grant letter advising that should they remain within the Group employment for a further two years they shall be entitled to
shares in PSV Holdings Limited equivalent to the value of one month’s salary. There is no consideration payable for these share options and the vesting price is zero cents.
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62 PSV integrated annual report 2012 www.psv.co.za
Notes to the annual financial statements (continued)for the year ended 29 February 2012
Group2012 2011
R R2. Results from operating activities (continued)
The movements in the number of shares allocated to eligible participants are as follows:As at 28 February 1 375 603 8 877 944 New allocations 7 050 200 –Redeemed allocations (3 774 603) (7 502 341)Allocations at 29 February 4 651 200 1 375 603 The outstanding share options will vest on the following dates:By 28 February 2013 4 068 300 –On 12 September 2013 582 900 –
4 651 200 –The grants allocated on 1 November 2011 were for no consideration, while the fair value at that date was 15 cents per share. The difference between the fair value and the grant value is amortised as a share-based payment cost over the period between the grant date and the vesting date.At vesting date, the full cost of the grant will have been expensed in the statement of comprehensive income.As at 29 February 2012 there are no outstanding options relating to the Directors of PSV Holdings.
Group Company2012 2011 2012 2011
R R R R3. Finance income and finance costs
Recognised in profit or lossInterest income on loans and receivables – – 3 284 630 3 831 025 Interest income on bank deposits 406 460 1 120 695 188 124 670 851 Dividends received – – 13 867 729 –Foreign exchange profit – 49 689 – 1 770 Interest income from SARS – 18 010 – –Transfer to discontinued operations (26 404) (1 024 897) – –Finance income 380 056 163 497 17 340 483 4 503 646 Foreign exchange loss 665 986 – 691 199 – Interest expense on bank overdrafts and loans 5 364 565 5 075 482 11 122 529 10 771 002 Interest expense on finance leases 1 775 669 2 320 720 266 777 92 468 Interest paid – SARS 426 823 – – – Unwinding of interest on deferred purchase considerations 2 594 074 950 036 2 594 074 950 036 Interest paid – other 921 694 550 000 573 930 550 000 Transfer to discontinued operations (1 429 749) (3 965 697) – – Finance costs 10 319 062 4 930 541 15 248 509 12 363 506 Net finance costs recognised in profit or loss from continuing operations (9 939 006) (4 767 044) 2 091 974 (7 859 860)
63www.psv.co.za PSV integrated annual report 2012
Group Company2012 2011 2012 2011
% % % %
4. Income tax expenseSouth African normal taxationCurrent tax expense 4 531 227 3 564 242 – –
– current year 4 521 756 4 026 444 – – – prior year under/(over) provision 9 471 (462 202) – –
Deferred tax expense 4 048 163 (2 294 494) 3 006 064 (2 119 807)
– current year (8 327 028) (3 430 401) (6 429 090) (1 027 323)– impairment of previously recognised deferred tax asset and deferred tax asset not raised in the current year 12 383 467 1 769 549 9 435 154 – – prior year overprovision (42 731) (633 642) – (1 092 484)– change in capital gains tax rate 34 455 – – –
Total normal taxation 8 579 390 1 269 748 3 006 064 (2 119 807)Transfer to discontinued operations (2 257 495) (4 845 781) – –
Total taxation charge 6 321 895 (3 576 033) 3 006 064 (2 119 807)
The effective rate of taxation differs from the standard rate of taxation as follows:Base rate 28,00 28,00 28,00 28,00Non-deductibles (22,90) (4,08) (38,15) (24,95)Reduced CGT rate (0,15) (28,83) – –Prior year current tax (0,04) (4,18) – –Prior year deferred tax 0,18 (5,74) – 3,40Foreign taxes (2,93) 0,00 – –Impairment of deferred tax and deferred tax not recognised (28,90) 16,02 30,56 –Effective rate of taxation (26,74) 1,19 20,41 6,45
GroupPumps Segment
RTotal
R5. Discontinued operations and assets and liabilities held for sale
The following has been reclassified as held for sale in the current year:ASSETS Non-current assets Property, plant and equipment 18 640 419 18 640 419 Intangible assets – – Goodwill – – Deferred tax asset 4 864 374 4 864 374 Total non-current assets 23 504 793 23 504 793
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64 PSV integrated annual report 2012 www.psv.co.za
Notes to the annual financial statements (continued)for the year ended 29 February 2012
GroupPumps Segment
RTotal
R5. Discontinued operations and assets and liabilities held for sale (continued)
Current assets Inventories 27 085 931 27 085 931 Trade and other receivables 13 215 505 13 215 505 Taxation receivable 5 234 968 5 234 968 Cash and cash equivalents 9 908 239 9 908 239 Total current assets 55 444 643 55 444 643 Total assets 78 949 436 78 949 436 LIABILITIES Non-current liabilities Deferred taxation liabilities 1 304 337 1 304 337Loans and borrowings 535 379 535 379 Total non-current liabilities 1 839 716 1 839 716Current liabilities Loans from Group companies Trade and other payables 23 327 785 23 327 786 Taxation payable – – Current portion of loans and borrowings 298 618 298 618 Total current liabilities 23 626 403 23 626 404 Total liabilities 25 466 119 25 466 120
Group Pumps
Segment R
Group Line Projects
R
Engineering Linings
R PSVP1
R Total
R The following was reclassified as held for sale in the prior year:ASSETS Non-current assets Property, plant and equipment – 1 974 663 2 341 714 7 400 000 11 716 377 Intangible assets – 1 413 500 – – 1 413 500 Goodwill – 3 039 117 – – 3 039 117 Deferred tax asset – – – – – Total non-current assets – 6 427 280 2 341 714 7 400 000 16 168 994 Current assets Inventories – 10 313 923 – – 10 313 923 Loans to Group companies – – – – – Trade and other receivables – 10 331 545 – – 10 331 545 Taxation receivable – – – – –Cash and cash equivalents – 307 723 – – 307 723 Total current assets – 20 953 191 – – 20 953 191 Total assets – 27 380 471 2 341 714 7 400 000 37 122 185
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Group Pumps Segment
R Group Line Projects
R Engineering Linings
R PSV Property 1
R Total
R 5. Discontinued operations and assets and liabilities held for sale (continued)
LIABILITIES Non-current liabilities Deferred taxation liabilities – 532 060 – – 532 060 Loans and borrowings – 414 971 – – 414 971 Total non-current liabilities – 947 031 – – 947 031 Current liabilities Loans from group companies Trade and other payables – 12 031 638 – – 12 031 638 Taxation payable – 48 136 – – 48 136 Bank overdraft – – – – – Current portion of loans and borrowings – 416 610 849 629 4 185 099 5 451 338 Total current liabilities – 12 496 384 849 629 4 185 099 17 531 112 Total liabilities – 13 443 415 849 629 4 185 099 18 478 143
Group2012
R2011
RDiscontinued operationsRevenue 122 386 662 155 168 942 Cost of sales (90 571 948) (118 580 595)Gross profit 31 814 714 36 588 347 Other income 286 864 1 079 910 Other expenses (34 923 035) (15 419 537)Results from operating activities (2 821 457) 22 248 720 Finance income 26 404 1 024 897 Finance costs (1 429 749) (3 965 698)Net finance costs (1 403 345) (2 940 801)Profit before income tax (4 224 802) 19 307 919 Income tax on ordinary activities of discontinued operations (2 257 495) (4 845 781)Loss for the year from discontinued operations (6 482 297) 14 462 138 Gain on sale of Group Line Projects 18 820 210 – Profit for the year 12 337 913 14 462 138 The Pumps Segment has been sold for a purchase consideration of R54 million. The sale was approved by shareholders in a shareholders meeting held on the 31 May 2012. The effective date of the sale was 13 June 2012.Group Line Projects (Pty) Limited was sold for a purchase consideration of R35 million. The effective sale date was 7 October 2011.
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66 PSV integrated annual report 2012 www.psv.co.za
Notes to the annual financial statements (continued)for the year ended 29 February 2012
Group2012
R2011
R6. Earnings per share
Loss attributable to ordinary shareholders (17 623 892) (8 305 789)Loss attributable to ordinary shareholders – continuing operations (29 961 805) (22 767 927)Weighted average number of ordinary shares in issue 249 770 838 247 209 570 Basic loss per share (cents) (7,06) (3,36)Basic loss per share (cents) – continuing operations (12,00) (9,21)Basic earnings per share (cents) – discontinued operations 4,94 5,85Basic 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.Reconciliation of weighted average number of sharesShares in issue 272 547 699 247 961 670 Effect of weighting of shares issued during the year (22 776 861) (752 100)Weighted average number of shares 249 770 838 247 209 570 Reconciliation of headline lossLoss attributable to ordinary shareholders (17 623 892) (8 305 789)Profit on disposal of property, plant and equipment (636 643) (520 195) Profit on disposal of discontinued operations (18 820 210) –Gain on bargain purchase (10 788 130) –Impairment of non-current assets 10 700 000 998 330 Impairment of intangible assets 6 060 308 – Impairment of goodwill 8 175 025 – Deferred tax on impairment of intangibles (1 696 886) – Headline loss (24 630 428) (7 827 654) Headline loss – continuing operations (29 926 376) (22 289 791) Headline loss per share (cents) (9,86) (3,17) Headline loss per share (cents) – continuing operations (11,98) (9,02) Headline earnings per share (cents) – discontinued operations 2,12 5,85 Headline loss per share is calculated by dividing the headline earnings attributable to ordinary shareholders by the weighted average number of ordinary shares in issue during the year.Dilutive effectThe calculation of diluted loss per share and diluted headline loss per share are based on:Weighted average number of shares in issue for basic and headline loss per share 249 770 838 247 209 570 Potentially dilutive share grants 8 272 855 4 530 289 Number of shares for diluted loss per share 258 043 693 251 739 859 Diluted loss per share (cents) (6,83) (3,30)Diluted loss per share (cents) – continuing operations (11,61) (9,04)Diluted earnings per share (cents) – discontinued operations 4,78 5,74Diluted loss per share is calculated by dividing the net loss attributable to ordinary shareholders by the diluted weighted average number of ordinary shares in issue during the year.Diluted headline loss per share (cents) (9,55) (3,11) Diluted headline loss per share (cents) – continuing operations (11,60) (8,85) Diluted headline earnings per share (cents) – discontinued operations 2,05 5,74Diluted headline loss per share is calculated by dividing the headline earnings attributable to ordinary shareholders by the diluted weighted average number of ordinary shares in issue during the year.
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CostR
Accumulated depreciation
R
Carrying amount
R7. Property, plant and equipment
2012 Group – owned Computer equipment and software 3 906 698 (3 113 035) 793 663 Furniture and fittings 2 630 345 (1 489 392) 1 140 953 Land and buildings 2 983 197 (88 543) 2 894 654 Leasehold improvements 2 611 359 (600 995) 2 010 364 Motor vehicles 4 584 018 (2 831 285) 1 752 733 Office equipment 563 457 (309 308) 254 149 Patterns and dies 784 365 (103 727) 680 638 Plant and machinery 12 869 996 (5 777 346) 7 092 650
30 933 435 (14 313 631) 16 619 804 Group – leased Computer equipment and software 306 602 (249 086) 57 516 Furniture and fittings 451 485 (96 922) 354 563 Motor vehicles 14 573 582 (5 095 913) 9 477 669 Office equipment – – – Plant and machinery 7 654 417 (2 303 842) 5 350 575
22 986 086 (7 745 763) 15 240 323 Total 53 919 521 (22 059 394) 31 860 127 Company – owned Computer equipment and software 1 494 475 (1 240 656) 253 819 Furniture and fittings 963 424 (474 125) 489 299 Land and buildings – – – Leasehold improvements 1 035 484 (84 807) 950 677 Motor vehicles – – – Office equipment 63 510 (41 626) 21 884 Patterns and dies – – – Plant and machinery – – –
3 556 893 (1 841 214) 1 715 679 Company – leased Computer equipment and software 167 546 (156 850) 10 696 Furniture and fittings 451 485 (96 922) 354 563 Motor vehicles 451 296 (125 771) 325 525 Office equipment – – – Plant and machinery 7 425 506 (2 197 487) 5 228 019
8 495 833 (2 577 030) 5 918 803 Total 12 052 726 (4 418 244) 7 634 482
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68 PSV integrated annual report 2012 www.psv.co.za
Notes to the annual financial statements (continued)for the year ended 29 February 2012
CostR
Accumulated depreciation
R
Carrying amount
R7. Property, plant and equipment (continued)
2011 Group – owned Computer equipment and software 2 885 565 (2 041 877) 843 688 Furniture and fittings 2 125 828 (1 081 953) 1 043 875 Land and buildings 19 389 543 (370 745) 19 018 798 Leasehold improvements 837 951 (488 157) 349 794 Motor vehicles 5 332 229 (3 135 871) 2 196 358 Office equipment 437 761 (326 384) 111 377 Patterns and dies 12 426 823 (2 508 150) 9 918 673 Plant and machinery 9 767 104 (6 223 667) 3 543 437
53 202 804 (16 176 804) 37 026 000 Group – leased Computer equipment and software 306 603 (156 060) 150 543 Furniture and fittings 249 714 (9 400) 240 314 Motor vehicles 8 304 839 (3 200 246) 5 104 593 Office equipment 57 070 (14 270) 42 800 Plant and machinery 5 398 443 (2 223 348) 3 175 095
14 316 669 (5 603 324) 8 713 345 Total 67 519 473 (21 780 128) 45 739 345 Company – owned Computer equipment and software 1 269 107 773 051 496 056 Furniture and fittings 776 431 319 475 456 956 Land and buildings – – – Leasehold improvements 359 400 9 606 349 794 Motor vehicles 118 212 – 118 212 Office equipment 63 510 31 039 32 471 Patterns and dies – – – Plant and machinery – – –
2 586 660 1 133 171 1 453 489 Company – leased Computer equipment and software 167 545 109 712 57 833 Furniture and fittings 249 714 9 400 240 314 Motor vehicles 220 792 108 074 112 718 Office equipment 57 070 14 270 42 800 Plant and machinery 2 028 639 1 114 968 913 671
2 723 760 1 356 424 1 367 336 Total 5 310 420 2 489 595 2 820 825
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Opening carrying
valueR
AdditionsR
Transfers inR
Acquisition of business
RDisposals
R
Transfers out
R
Transferred to held
assets held for sale
RImpairment
RDepreciation
RTotal
R
7. Property, plant and equipment (continued)Reconciliation of the carrying amount2012Group – ownedComputer equipment and software 843 688 665 546 – 184 725 (31 261) (26 454) (14 144) – (828 437) 793 663 Furniture and fittings 1 043 875 574 992 – 221 404 (34 009) – (226 451) – (438 858) 1 140 953 Land and buildings 19 018 798 120 193 – 195 563 (51 915) – (5 599 953) (10 700 000) (88 032) 2 894 654 Leasehold improvements 349 794 1 773 407 – – – – – – (112 837) 2 010 364 Motor vehicles 2 196 358 623 765 – 642 274 (371 544) (118 212) (510 999) – (708 909) 1 752 733 Office equipment 111 377 67 947 (219) 268 307 (4 388) – (38 955) – (149 920) 254 149 Patterns and dies 9 918 673 158 561 – 746 957 (92 400) – (9 378 906) – (672 247) 680 638 Plant and equipment 3 543 437 3 122 346 – 8 273 556 (293 325) (4 797 213) (834 576) – (1 921 575) 7 092 650
37 026 000 7 106 757 (219) 10 532 786 (878 842) (4 941 879) (16 603 984) (10 700 000) (4 920 815) 16 619 804
Group – leasedComputer equipment and software 150 543 – – – – – – – (93 027) 57 516 Furniture and fittings 240 314 144 701 42 800 – – – – – (73 252) 354 563 Motor vehicles 5 104 593 3 227 117 118 212 4 655 918 (827 483) – (480 872) – (2 319 816) 9 477 669 Office equipment 42 800 – – – – (42 800) – – – – Plant and machinery 3 175 095 665 173 4 823 886 – – – (1 555 563) – (1 758 016) 5 350 575
8 713 345 4 036 991 4 984 898 4 655 918 (827 483) (42 800) (2 036 435) – (4 244 111) 15 240 323
Total 45 739 345 11 143 748 4 984 679 15 188 704 (1 706 325) (4 984 679) (18 640 419) (10 700 000) (9 164 926) 31 860 127
Company – ownedComputer equipment and software 496 056 225 369 – – – – – – (467 606) 253 819 Furniture and fittings 456 956 186 992 – – – – – – (154 649) 489 299 Land and buildings – – – – – – – – – – Leasehold improvements 349 794 676 084 – – – – – – (75 201) 950 677 Motor vehicles 118 212 – – – – (118 212) – – – – Office equipment 32 471 – – – – – – – (10 587) 21 884 Patterns and dies – – – – – – – – – – Plant and machinery – – – – – – – – – –
1 453 489 1 088 445 – – – (118 212) – – (708 043) 1 715 679
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To view the PSV integrated annual report online, please visit our website at: www.psv.co.za
70 PSV integrated annual report 2012 www.psv.co.za
Notes to the annual financial statements (continued)for the year ended 29 February 2012
Opening carrying
valueR
AdditionsR
Transfers inR
Acquisition of business
RDisposals
R
Transfers out
R
Transferred to held
assets held for sale
RImpairment
RDepreciation
RTotal
R7. Property, plant and equipment (continued)
Reconciliation of the carrying amount (continued)2012Company – leasedComputer equipment and software 57 833 – – – – – – – (47 137) 10 696 Furniture and fittings 240 314 144 701 42 800 – – – – – (73 252) 354 563 Motor vehicles 112 718 339 136 118 212 – (173 178) – – – (71 363) 325 525 Office equipment 42 800 – – – – (42 800) – – – – Plant and machinery 913 671 572 981 4 823 886 – – – – – (1 082 519) 5 228 019
1 367 336 1 056 818 4 984 898 – (173 178) (42 800) – – (1 274 271) 5 918 803 2 820 825 2 145 263 4 984 898 – (173 178) (161 012) – – (1 982 314) 7 634 482
Opening carrying
valueR
AdditionsR
Transfers inR
Acquisition of business
R Disposals
R
Transferred to held
assets held for sale
R Impairment
R Depreciation
R Total
R 2011Group – ownedComputer equipment and software 770 100 785 809 – 53 733 (5 293) (16 617) – (744 044) 843 688 Furniture and fittings 1 704 400 76 366 – 15 013 – (27 970) (319 944) (403 990) 1 043 875 Land and buildings 29 439 960 32 127 – – – (9 741 713) (517 609) (193 967) 19 018 798 Leasehold improvements 250 272 359 400 – – (77 184) – – (182 694) 349 794 Motor vehicles 2 406 071 1 029 398 – 55 488 (164 432) (401 324) – (728 843) 2 196 358 Office equipment 177 453 27 525 – 4 021 – – – (97 622) 111 377 Patterns and dies 10 416 311 77 888 – – – – – (575 526) 9 918 673 Plant and equipment 3 927 845 722 139 – 664 239 (20 497) (504 416) – (1 245 873) 3 543 437
49 092 412 3 110 652 – 792 494 (267 406) (10 692 040) (837 553) (4 172 559) 37 026 000 Group – leasedComputer equipment and software 113 682 139 057 – – – – – (102 196) 150 543 Furniture and fittings 229 712 249 715 – – – – (160 779) (78 334) 240 314 Motor vehicles 4 298 935 3 948 857 – – (656 002) (1 024 337) – (1 462 860) 5 104 593 Office equipment 52 314 – – – – – – (9 514) 42 800 Plant and machinery 4 859 504 – – – (319 798) – – (1 364 611) 3 175 095
9 554 147 4 337 629 – – (975 800) (1 024 337) (160 779) (3 017 515) 8 713 345 Total 58 646 559 7 448 281 – 792 494 (1 243 206) (11 716 377) (998 332) (7 190 074) 45 739 345
71www.psv.co.za PSV integrated annual report 2012
Opening carrying
valueR
AdditionsR
Transfers inR
Acquisition of business
R Disposals
R
Transferred to held
assets held for sale
R Impairment
R Depreciation
R Total
R
7. Property, plant and equipment (continued)Reconciliation of the carrying amount (continued)2011Company – ownedComputer equipment and software 483 941 475 138 – – – – – (463 023) 496 056 Furniture and fittings 505 379 121 904 – – – – (38 167) (132 160) 456 956 Land and buildings – – – – – – – – – Leasehold improvements – 359 400 – – – – – (9 606) 349 794 Motor vehicles – 118 212 – – – – – – 118 212 Office equipment 43 058 – – – – – – (10 587) 32 471
1 032 378 1 074 654 – – – – (38 167) (615 376) 1 453 489
Company – leasedComputer equipment and software 113 682 – – – – – – (55 849) 57 833 Furniture and fittings 229 712 249 713 – – – – (160 777) (78 334) 240 314 Motor vehicles 156 876 – – – – – – (44 158) 112 718 Office equipment 52 314 – – – – – – (9 514) 42 800 Plant and machinery 1 780 899 – – – (319 500) – – (547 728) 913 671
2 333 483 249 713 – – (319 500) – (160 777) (735 583) 1 367 336
3 365 861 1 324 367 – – (319 500) – (198 944) (1 350 959) 2 820 825
Group
2012 2011
CostR
Accumulateddepreciation
and impairment
R
Carrying value
RCost
R
Accumulateddepreciation
and impairment
R
Carrying value
R
8. Intangible assetsMarket relationships 7 176 120 1 993 021 5 183 099 9 199 000 1 754 204 7 444 796 Customer relationships 7 284 742 2 684 842 4 599 900 9 241 184 6 469 645 2 771 539 Technology relationships 8 455 508 2 885 073 5 570 435 9 625 514 1 801 107 7 824 407
22 916 370 7 562 936 15 353 434 28 065 698 10 024 956 18 040 742
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To view the PSV integrated annual report online, please visit our website at: www.psv.co.za
72 PSV integrated annual report 2012 www.psv.co.za
Notes to the annual financial statements (continued)for the year ended 29 February 2012
Group
2012
Opening value
R Amortisation
R Additions
RImpairment
R
Acquisition of business
R
Closing value
R
8. Intangible assets (continued)Carrying value reconciliationMarket relationships 7 444 796 (677 037) – (2 734 660) 1 150 000 5 183 099Customer relationships 2 771 539 (1 126 997) – (2 155 642) 5 111 000 4 599 899 Technology relationships 7 824 407 (1 083 966) – (1 170 006) – 5 570 435
18 040 742 (2 888 000) – (6 060 308) 6 261 000 15 353 434
Group
2011
Opening value
R Amortisation
RAdditions
R
Transfers to held for sale
R
Acquisition of business
R
Closing value
R
Market relationships 9 070 032 (645 486) – (1 251 750) 272 000 7 444 796 Customer relationships 4 373 417 (1 601 878) – – – 2 771 539 Technology relationships 7 504 282 (989 925) 157 800 (161 750) 1 314 000 7 824 407
20 947 731 (3 237 289) 157 800 (1 413 500) 1 586 000 18 040 742
For details of the methodology adopted for the impairment of intangible assets, refer to note 9.The impairment charge in the current year related to the Rand Air and Gas Installations (Pty) Limited intangible assets.
Group Company
2012 2011 2012 2011R R R R
9. GoodwillOpening balance 32 997 332 31 691 449 – – Subsidiary acquired (refer to note 23) 7 234 531 4 345 000 – – Impairment of goodwill (8 175 025) – – – Transfers to held for sale – (3 039 117)
Closing balance 32 056 838 32 997 332 – –
For the purpose of impairment testing, goodwill is allocated to the Group’s individual operating subsidiaries or cash-generating units. These represent the lowest level within the Group at which goodwill is monitored for internal management purposes.
73www.psv.co.za PSV integrated annual report 2012
Group Company
2012 2011 2012 2011R R R R
9. Goodwill (continued)The aggregate carrying amounts of goodwill allocated to each of the units are as follows:Omnirapid Mining and Industrial Supplies 17 606 734 17 606 734 Group Line Projects (Pty) Limited – 3 039 117 Engineered Linings (Pty) Limited 2 870 573 10 256 781 Rand Air and Gas Installations (Pty) Limited – 788 817 Cryoshield (Pty) Limited 4 345 000 4 345 000 Turbo Agencies (Pty) Limited 7 234 531 – Transfers to assets held for sale – (3 039 117)
32 056 838 32 997 332
The recoverable amounts of the operating subsidiaries were based on their value in use and were assessed by management. Where the value in use was less than the recoverable amount, an impairment charge was processed.
The value in use for the cash-generating units was determined by discounting the future cash flows from the continuing use of the unit, after eliminating all intercompany management fees and is based on the following key assumptions:* Cash flows were based on actual operating results and a five-year forecast business plan;* A terminal growth rate of 6% was used thereafter;* Revenue and operating costs were projected to grow by between 5% to 10% for the years 2013 to 2017; and* A pre-tax discount rate of between 26% and 29% was used in determining the recoverable amounts of the units.
Management do not anticipate that there are any reasonably possible changes in key assumptions that will impact on the recoverable amounts of the cash-generating units.
10. Loans receivable Loan to the previous vendors of Turbo Agencies 1 688 060 – – – Less current portion (1 000 000) – – –
688 060 – – –
The R1 million loan is interest free and repayable in December 2012.
The remaining loan is an amount owing by the previous vendors of Turbo Agencies to PSV Holdings Limited. This bears interest of 11% and will reduce the amount payable in terms of the deferred purchase consideration (note 16) in 2014.
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To view the PSV integrated annual report online, please visit our website at: www.psv.co.za
74 PSV integrated annual report 2012 www.psv.co.za
Notes to the annual financial statements (continued)for the year ended 29 February 2012
Issued share capital
Percentage holding Cost of shares Loans to/(from)2012 2011 2012 2011 2012 2011
R % %
11. Investment in subsidiariesHeld by PSV Holdings LimitedOperating companiesPSV Services (Pty) Limited 200 100 100 11 672 971 11 672 971 596 613 1 312 315 PSV Thuthuka (Pty) Limited 200 100 100 – 2 106 098 – (1 401 711)PSV Zambia (Pvt) Limited 18 943 100 100 1 280 924 1 280 924 1 327 303 1 327 303 Omnirapid Mining and Industrial Supplies (Pty) Limited 100 100 100 20 151 954 20 136 321 (13 316 196) (12 496 862)Group Line Projects (Pty) Limited – – 100 – 13 344 698 – (6 149 828)Petrologic (Pty) Limited 258 100 100 14 920 152 14 920 152 – 6 134 970 Umzantsi Africa Pumps & Valves (Pty ) Limited 120 100 100 120 120 – – Engineered Linings (Pty) Limited 100 100 100 32 659 437 32 659 437 (19 704 892) (17 825 085)APE Pumps (Pty) Limited 100 100 100 603 109 603 109 9 307 108 8 492 897 PSV Mitech Control Valves (Pty) Limited 100 100 100 100 100 6 700 254 2 665 305 PSV Properties 2 (Pty) Limited 100 100 100 100 100 (3 796 246) (3 435 032)Abiton (Pty) Limited 100 100 100 100 100 (378) (956)Rand Air and Gas Installations (Pty) Limited 3 876 100 100 15 739 451 15 739 451 (7 008 782) (6 309 650)Mather + Platt (Pty) Limited 2 100 100 1 1 – – Cryoshield (Pty) Limited 100 100 100 7 592 000 7 592 000 – – Turbo Agencies (Pty) Limited 47 590 100 – 9 495 117 – 21 620 061 – PSV Treasury (Pty) Limited 100 100 100 – – 2 887 326 –
114 115 536 120 055 582 (1 387 829) (27 686 334)
Total owing by subsidiaries 42 438 665 19 932 790 Total owing to subsidiaries (43 826 494) (47 619 126)
(1 387 829) (27 686 336)
For terms and conditions relating to related party loans, refer to note 24.
Group Company
2012 2011 2012 2011R R R R
12. InventoriesRaw materials and consumables 13 993 936 12 639 496 – – Work in progress 11 514 308 10 671 405 – – Finished goods and merchandise 44 444 588 39 586 600 – 1 940 913 Transferred to assets held for sale (27 085 931) (10 313 923) – –
42 866 901 52 583 578 – 1 940 913
The amount of write-down of inventories recognised as an expense is R1 065 786 (2011: R542 508 income). This expense/(income) is included in the cost of sales line item in the statement of comprehensive income.
75www.psv.co.za PSV integrated annual report 2012
Group Company
2012 2011 2012 2011R R R R
12. Inventories (continued)Provision for obsolete stockOpening balance 3 241 494 3 784 002 759 798 – Provisions raised/(utilised) during the period 1 543 879 (542 508) (759 798) 759 798
Closing balance 4 785 373 3 241 494 – 759 798
13. Trade and other receivablesTrade receivables 57 498 534 64 010 782 9 408 607 18 781 326 Prepayments 8 414 617 1 497 314 1 307 655 24 931 Deposits 727 851 575 083 344 651 428 037 VAT 3 820 023 2 090 795 1 118 025 – Derivatives – 66 600 – Other 368 049 106 611 25 825 – Transferred to assets held for sale (13 215 505) (10 331 545)
57 613 569 58 015 640 12 204 763 19 234 294
Trade receivables are non-interest bearing and are generally on 30-day terms. There was an addition to the provision for doubtful debts of R242 181 (2011: R949 488 reversal) during the year.
Provision for doubtful debtsOpening balance 3 932 948 4 882 436 Impairment loss/(gain) processed through profit and loss 242 181 (949 488)
Closing balance 4 175 129 3 932 948
For terms and conditions relating to related party receivables, refer to note 24.
The Group’s exposure to credit and currency risks, and impairment losses related to trade and other receivables is disclosed in note 20.
A cession of the trade debtors has been given as security for the banking and loan facilities provided by Investec Bank.
14. Cash and cash equivalentsBank and cash balances 37 088 253 26 839 397 9 243 117 13 753 076 Bank overdraft (18 010 869) (37 199 721) (16 019 515) (37 104 215)Transferred to assets held for sale (9 908 239) (307 723) – –
Cash and cash equivalents in the statement of cash flow 9 169 145 (10 668 047) (6 776 398) (23 351 139)
The Group’s exposure to interest rate risk and a sensitivity analysis for financial assets and liabilities are disclosed in note 20.3.
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To view the PSV integrated annual report online, please visit our website at: www.psv.co.za
76 PSV integrated annual report 2012 www.psv.co.za
Notes to the annual financial statements (continued)for the year ended 29 February 2012
Group Company2012 2011 2012 2011
R R R R
15. Share capitalAuthorised1 000 000 000 ordinary shares of no par valueIssued272 547 699 (2011: 247 961 670) ordinary shares of no par value 271 606 106 270 806 106 274 494 010 270 806 106
Number of shares issued to external parties:Total shares in issue 272 547 699 247 961 670 272 547 699 247 961 670Treasury shares held by company/subsidiary (19 623 843) (752 100) (19 623 843) (752 100)
Net shares held by external parties 252 923 856 247 209 570 252 923 856 247 209 570
Reconciliation of number of shares in issue:Shares in issue at beginning of year 247 961 670 247 961 670 247 961 670 247 961 670Shares issued in terms of share incentive scheme 24 586 029 – 24 586 029 –Total shares in issue 272 547 699 247 961 670 272 547 699 247 961 670
Group Line Projects
R
Rand Air and Gas
RCryoshield
R
Turbo Agencies – Vendor 1 – Parry
R
Turbo Agencies – Vendor 2
– Earthwise R
Total R
16. Purchase consideration payablePurchase price 14 601 234 15 710 848 7 592 000 – – 37 904 082Cumulative unwinding of interest to 28 February 2011 1 281 310 2 226 527 408 280 – – 3 916 117Revision to value of investment in Group Line (1 434 952) – – – – (1 434 952)
SettlementsCash (10 887 724) (16 199 999) (6 074 800) – – (33 162 523)Shares issued (1 600 000) – – – – (1 600 000)Balance owing at 28 February 2011 1 959 868 1 737 376 1 925 480 – – 5 622 724
Long-term portion – – – – –Current portion 1 959 868 1 737 376 1 925 480 – – 5 622 724
Acquisitions during the year – – – 9 336 773 12 000 000 21 336 773Unwinding of interest 2012 120 296 62 625 87 713 1 120 413 1 203 027 2 594 074SettlementsCash (2 080 164) (1 800 001) (2 013 193) – (1 203 027) (7 096 385)Balance owing at 29 February 2012 – – – 10 457 186 12 000 000 22 457 186Long-term portion 10 457 186 10 046 748 20 503 934Current portion – 1 953 252 1 953 252
77www.psv.co.za PSV integrated annual report 2012
16. Purchase consideration payable (continued)The outstanding instalments for Group Line Projects (Pty) Limited, Rand Air and Gas Installations (Pty) Limited and Cryoshield (Pty) Limited were settled in the current year.
Turbo Agencies was acquired by PSV Holdings effective 1 March 2011. The purchase price is payable as follows:– R12 000 000 payable to Earthwise. Interest is calculated at prime rate plus 1% which was payable monthly from March 2011 until February 2012. Thereafter, the purchase price is payable in monthly instalments
of R270 293 commencing on 1 March 2012 with the last instalment payable on 1 March 2016. Remaining capital balance of R2 million is payable on 1 March 2012.– The deferred purchase consideration payable to the Parrys. The amount payable in three annual instalments of R4 million settled in either cash or issue of shares as elected by PSV. These payments are subject
to profit warranty clauses. The first payment is due on 31 May 2013.
Group Company
2012 2011 2012 2011R R R R
17. Deferred taxationThe movement on the deferred taxation account is as follows:Balance at beginning of year 7 085 841 4 839 602 3 006 064 886 257Charged to statement of comprehensive income (4 048 163) 2 294 494 (3 006 064) 2 119 807
– current year 8 327 028 3 430 401 6 429 090 1 027 323– prior year overprovision 42 731 633 642 – 1 092 484– impairment (12 383 467) (1 769 549) (9 435 154) –– change in Capital Gains Tax rate (34 455) – – –
Other (6 323 251) (48 255) – –
– acquisition of subsidiary (2 763 214) (463 226) – –– transferred to held for sale (3 560 037) 414 971 – –
Balance at end of year (3 285 573) 7 085 841 – 3 006 064
Balance at end of year is made up of:Deferred taxation assets 2 410 108 11 741 509 – 3 006 064Deferred taxation liabilities (5 695 681) (4 655 668) –
(3 285 373) 7 085 841 – 3 006 064
Comprising:Capital allowances (2 425 173) (3 103 843) – (122 788)Provisions 1 503 337 2 378 034 – 185 522Intangibles (3 516 076) (4 174 701) – –Advance receipts (538 654) 137 431 – –Prepayments (430 805) (73 835) – (6 980)Share-based payment reserve 5 247 –Estimated taxation losses 2 116 551 11 922 755 – 2 950 310
(3 285 573) 7 085 841 – 3 006 064
The computed tax losses in PSV Holdings, Petrologic and Mitech in respect of which a deferred tax asset has not been raised amounted to R33 696 986 (2011: R14 446 818).
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To view the PSV integrated annual report online, please visit our website at: www.psv.co.za
78 PSV integrated annual report 2012 www.psv.co.za
Notes to the annual financial statements (continued)for the year ended 29 February 2012
Group Company
2012 2011 2012 2011R R R R
18. BorrowingsLocalSecuredInstalment sale and finance lease agreements for motor vehicles and equipment payable over periods from two to five years at interest rates between 7,75% and 10,5%. Secured by motor vehicle and equipment with a book value of R15 240 323. 14 459 703 9 914 451 5 771 306 1 187 238
Portion classified as held for sale in the current year. Refer to note 5 for details. (833 997) (948 670) – –
Mortgage bond – Secured by first covering bond over Unit 419, Greenhills Industrial Estate, Sam Green Road, Tunney Ext 6. The bond is repayable in 120 equal instalments. Current monthly instalments on the bond amount to R69 340 and bear interest linked to prime less 1,5%. – 4 185 099 – –
This loan has been classified as held for sale in the prior year. Refer to note 5 for details. – (4 185 099) – –
Mortgage bond – Secured by first covering bond over 10 Hamburg Avenue, Aeroport, Gauteng and 8 Station Road, Montague Gardens, Cape Town. The bond is repayable in 120 equal instalments. Current monthly instalments for these two bonds amount to R21 966 and bear interest linked to prime less 0,5%. – 849 629 – –
This loan has been classified as held for sale in the prior year. Refer to note 5 for details. – (849 629) – –
Investec long-term loan – The loan is fixed over five years with quarterly repayments of the capital and interest. The loan bears interest at 11,28%, secured by a cession of book debtors. The intention is to settle the loan when the proceeds from the sale of the Pump division is received. 16 937 989 20 117 482 16 937 989 20 117 482
UnsecuredThe Syagrus loan is unsecured and bears interest at 14,5% payable monthly. The loan is payable within one month after balance sheet date. – 5 039 727 – 5 039 727
Loan owing to previous vendors of Turbo Agencies. Repayable in February 2014. The loan is unsecured and bears interest at the prime borrowing rate. 1 025 957 – – –
Total borrowings 31 589 652 34 122 990 22 709 295 26 344 447Less: Current portion (9 089 812) (13 138 277) (6 043 567) (10 070 957)
22 499 840 20 984 713 16 665 728 16 273 490
79www.psv.co.za PSV integrated annual report 2012
Group Company
2012 2011 2012 2011R R R R
19. Trade and other payablesTrade payables 56 716 869 42 660 423 949 885 807 541Accruals 8 235 830 4 518 400 3 721 014 1 376 812Vat payable 6 005 107 4 980 011 – 2 499 721Payroll accruals 8 510 009 5 696 473 1 309 548 870 020Derivatives – 42 909 – –Other payables 1 609 021 333 780 89 109 89 107Transferred to liabilities held for sale (23 327 785) (12 031 638) – –
57 749 051 46 200 358 6 069 556 5 643 201
Trade payables are non-interest bearing and are normally settled on 30-day terms. Accruals are non-interest bearing and, other than employee benefit accruals, have an average term of 30 days.
For terms and conditions relating to related party payables, refer to note 24.
The Group’s exposure to liquidity and currency risk related to trade and other payables are disclosed in note 20.2 and 20.3.
20. OverviewThe Group and Company have exposure to the following risks from its use of financial instruments:• credit risk• liquidity risk• market risk
This note presents information about the Group and Company’s exposure to each of the above risks, the Group’s objectives, policies and processes for measuring and managing risk, and the Group’s management of capital. Further quantitative disclosures are included throughout these financial statements.
The Board of Directors has overall responsibility for the establishment and oversight of the Group’s risk management framework.
The Board of Directors is also responsible for analysing the risks faced by the Group, to set appropriate risk limits and controls, and to monitor risks and adherence to limits.
20.1 Credit riskCredit risk is the risk of financial loss to the Group and Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Group and Company receivables from customers.
The Group’s exposure to credit risk is influenced mainly by the individual characteristics of each customer. The demographics of the Group’s customer base, including the default risk of the industry and country in which customers operate have less of an influence on credit risk.
The Group has established a credit process under which each new customer is evaluated individually for creditworthiness before the Group’s standard payment terms and conditions are offered. The Group’s review includes external ratings, where available, and in some cases bank references. Exposure limits are established for each customer, in accordance with the approval framework. All new clients are required to complete a credit application.
More than 50% of the Group’s customers have been transacting with the Group for over five years, and losses have occurred infrequently. In monitoring customer credit risk, customers are grouped according to their credit characteristics, including geographic location, industry, ageing profile, maturity and existence of previous financial difficulties.
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To view the PSV integrated annual report online, please visit our website at: www.psv.co.za
80 PSV integrated annual report 2012 www.psv.co.za
Notes to the annual financial statements (continued)for the year ended 29 February 2012
20. Overview (continued)20.1 Credit risk (continued)
The Group and Company does not require collateral in respect of trade and other receivables, as it mainly renders services to major companies in the industries in which they operate and the exposure to credit risk is monitored on an ongoing basis. The Group is in the process of assessing the feasibility of credit guarantee insurance.
The Group and Company establishes an allowance for impairment that represents its estimate of incurred losses in respect of trade and other receivables. The key components of this allowance are a specific loss component that relates to individually significant exposures in respect of losses that have been incurred but not yet identified.
At reporting date there was an allowance for impairment based on the above process.
Exposure to credit riskThe carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk at the reporting date was:
Group Company
2012 2011 2012 2011R R R R
Trade and other receivables – excludes prepayments and VAT 45 378 929 64 692 476 9 408 607 18 781 326
Group
2012 2011
Gross Impairment Gross ImpairmentR R R R
Impairment lossesThe ageing of trade and other receivables at the reporting date was:Not past due 38 946 802 10 127 60 783 793 120 237Past due 9 227 494 2 977 275 7 841 631 3 812 711
48 174 286 2 987 402 68 625 424 3 932 948
2012 2011
The Group defines “past due” as invoices which are more than 60 days past due. The movement in the allowance for impairment in respect of trade receivables during the year was as follows:Balance at beginning of year 3 932 948 4 882 436Impairment provision utilised (945 546) (949 488)
2 987 402 3 932 948
20.2 Liquidity riskLiquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due.
The Group’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due under normal conditions.
The Group manages its working capital requirements stringently and ensures that it has sufficient cash on demand to meet expected operational expenses for the short-term, including the servicing of financial obligations; this excludes the potential impact of extreme circumstances that cannot reasonably be predicted such as natural disasters.
81www.psv.co.za PSV integrated annual report 2012
20. Overview (continued)20.2 Liquidity risk (continued)
In addition, the Group maintains the following lines of credit:– R16 million overdraft facility with Investec Bank Limited secured by unrestricted cession of book debts by all Group companies (except PSV Mitech Control Valves (Pty) Limited) and cross guarantees and suretyships from Group companies.
R3 million overdraft facility with FNB secured by an unrestricted cession of book debts and a general notial bond over its inventories.
Interest on the above are variable with the prime overdraft rate.
Where acquisitions are made, transactions are structured in such a way so as to settle the purchase price over a period.
The following are the contractual maturities of financial liabilities:
Group
Carrying Contractual 12 months 12 months amount cash flows or less or more
R R R R
Non-derivative financial liabilities2012Deferred purchase consideration 22 457 186 26 703 771 3 243 510 23 460 261 Trade and other payables 51 743 944 51 743 944 51 743 944 – Loans and borrowings 31 589 652 34 183 763 10 126 911 24 056 852 Bank overdraft 18 010 869 18 010 869 18 010 869 –
123 801 651 130 642 347 83 125 234 47 517 113
Derivative financial liabilities Forward exchange contracts – – – –
Total 123 801 651 130 642 347 83 125 234 47 517 113
2011Deferred purchase consideration 5 622 724 5 800 000 5 800 000 – Trade and other payables 58 189 089 58 189 089 58 189 089 – Loans and borrowings 40 106 388 48 478 883 16 689 591 31 789 292 Bank overdraft 37 199 721 37 199 721 37 199 721 –
141 117 922 149 667 693 117 878 401 31 789 292
Derivative financial liabilities Forward exchange contracts 42 909 296 111 296 111 –
Total 141 160 831 149 963 804 118 174 512 31 789 292
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82 PSV integrated annual report 2012 www.psv.co.za
Notes to the annual financial statements (continued)for the year ended 29 February 2012
Company
Carrying Contractual 12 months 12 months amount cash flows or less or more
R R R R
20. Overview (continued)20.2 Liquidity risk (continued)
Non-derivative financial liabilities2012Deferred purchase consideration 22 457 186 26 703 771 3 243 510 23 460 261 Trade and other payables 6 069 556 6 069 556 6 069 556 – Loans and borrowings 22 709 295 24 526 039 6 708 359 17 817 680 Bank overdraft 16 019 515 16 019 515 16 019 515 –
67 255 552 73 318 881 32 040 940 41 277 941
2011Deferred purchase consideration 5 622 724 5 800 000 5 800 000 – Trade and other payables 3 143 480 3 143 480 3 143 480 – Loans and borrowings 26 344 447 28 452 003 7 782 188 20 669 815 Bank overdraft 37 014 215 37 014 215 37 014 215 –
72 124 866 74 409 698 53 739 883 20 669 815
20.3 Market riskMarket risk is the risk that changes in market prices, such as foreign currency exchange rates may cause a decrease in fair values of future cash flows of financial instruments and consequently result in a financial loss for the Group.
20.3.1 Currency riskThe Group is exposed to currency risk on certain Group creditors that are denominated in a currency other than the functional currency of the Company, the South African Rand. The currency in which these transactions primarily are denominated is Euros, US Dollars and Botswanan Pulas.
The table below presents the Rand equivalent of the foreign currency exposure:
2012 2011
USD GBP Euro ZMK BWP USD GBP Euro ZMK
Trade receivables 4 037 877 – – 25 267 20 097 799 14 872 – – – Cash and cash equivalents 1 224 954 – – 42 217 (1 985 174) 89 809 – 5 171 419 929 167 Trade payables (3 876 199) (66 625) (2 246 244) (280 162) (971 002) (589 082) – – –
Gross exposure 1 386 632 (66 625) (2 246 244) (212 678) 17 141 623 (484 401) – 5 171 419 929 167 Forward exchange contracts – – – – – 296 111 – – –
Net exposure 1 386 632 (66 625) (2 246 244) (212 678) 17 141 623 (188 290) – 5 171 419 929 167
83www.psv.co.za PSV integrated annual report 2012
Reporting date spot rate Average rate
2012 2011 2012 2011
20. Overview (continued)20.3 Market risk (continued)
20.3.1 Currency risk (continued)The following significant exchange rates applied at year-end:USD 7,53 7,07 7,37 7,22 GBP 11,94 11,40 11,77 11,15 Euro 10,12 9,65 10,20 9,52 BWP 1,03 1,03 1,08 1,05 ZMK 0,0014 0,0015 0,0015 0,0015
Sensitivity analysisA 10% strengthening in the Rand against the following currency would have increased/(decreased) profit or loss and equity by the amounts shown below.
2012 2011
USD 1 044 134 (133 121)GBP (79 550) – Euro (2 273 199) 4 990 BWP – – ZMK (30) 62 989
A 10% weakening in the Rand against the above currencies at 29 February 2012 would have an equal and opposite effect on the above currencies to the amounts shown above, on the basis that all other variables remain constant.
20.3.2 Interest rate riskBorrowings are generally at a rate linked to the prime bank overdraft rate. The Group had Group interest-bearing borrowings at year-end as well as instalment sale liabilities and finance leases. At the reporting date the interest rate profile of the Group’s interest-bearing financial instruments was as follows:
2012 2011
Variable rate instruments Financial liabilities Bank overdraft 18 010 869 37 199 721 Instalment sale liabilities, leases and bonds 31 589 652 40 106 388
49 600 521 77 306 109
A change of 1% basis points in interest rates would have increased/(reduced) profit or loss and equity by the amounts shown below based on year-end balances:
2012 2011
1% decrease 1% increase 1% decrease 1% increaseR R R R
Variable rate instruments 496 005 (496 005) 773 061 (773 061)
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84 PSV integrated annual report 2012 www.psv.co.za
Notes to the annual financial statements (continued)for the year ended 29 February 2012
20. Overview (continued)20.4 Capital management
The Board’s policy is to maintain a strong capital base to sustain future development of the business and maintain creditor and market confidence. Capital is defined as share capital less accumulated losses.
There were no changes in the Company’s approach to capital management during the year.
20.5 Fair valuesThe fair values of financial assets and liabilities, together with the carrying amounts shown in the statement of financial position, are as follows:
Group Company
2012 2011 2012 2011
Carrying Fair Carrying Fair Carrying Fair Carrying Fair amount value amount value amount value amount value
R R R R R R R R
Financial assets Derivatives – – 66 600 – – – – –Trade and other receivables 57 613 569 57 613 569 64 692 476 64 692 476 12 204 783 12 204 783 19 234 294 19 234 294Cash and bank balances 27 180 014 27 180 014 26 839 397 26 839 397 9 243 117 9 243 117 13 753 076 13 753 076Loans receivable 1 688 060 1 688 060 – – 1 000 000 1 000 000 – –
86 481 643 86 481 643 91 598 473 91 531 873 22 447 900 22 447 900 32 987 370 32 987 370
Financial liabilities Loans and borrowings 33 189 652 33 189 652 40 106 388 40 106 388 22 709 295 22 709 295 26 344 447 26 344 447Derivatives – – 42 909 – – – – –Trade and other payables 51 743 944 51 743 944 58 189 089 58 189 089 6 069 556 6 069 556 3 143 480 3 143 480Bank overdraft 18 010 869 18 010 869 37 199 721 37 199 721 16 019 515 16 019 515 37 014 215 37 014 215Deferred purchase consideration 22 457 186 22 457 186 5 622 724 5 622 724 22 457 186 22 457 186 5 622 724 5 622 724
125 401 651 125 401 651 141 160 831 141 117 922 67 255 552 67 255 552 72 124 866 72 124 866
Group
Level 1 Level 2 Level 3 Total
Fair value hierarchy28 February 2012Derivative financial assets – – – – Derivative financial liabilities – – – –
– – – –
28 February 2011Derivative financial assets – 66 600 – 66 600 Derivative financial liabilities – (42 909) – (42 909)
– 23 691 – 23 691
85www.psv.co.za PSV integrated annual report 2012
Group Company2012 2011 2012 2011
R R R R
21. Cash flow information(Loss)/profit before taxation (23 639 910) (26 343 960) 14 730 622 (32 887 291)(Loss)/profit before tax from discontinued operation (4 224 802) 19 307 919 – – Gain on sale of discontinued operation 18 820 210 – – – Finance expenses 10 319 062 4 930 541 15 248 509 12 363 506 Finance income (380 056) (163 497) (17 340 483) (4 503 646)Interest on deferred purchase consideration 2 594 074 950 036 2 594 074 950 036 Share based payment charge (57 239) 833 697 132 222 833 697 Depreciation 9 164 926 7 190 074 1 982 314 1 350 959 Amortisation of intangibles 2 888 000 3 237 289 – – Impairment of intangibles 6 060 308 – – – Impairment of Goodwill 8 175 025 – – – Impairment of investments and related party loans – – 11 617 957 10 192 093 Gain on acquisition of business combination (10 788 130) – – – Gain on sale of discontinued operation (18 820 210) – (21 655 302) – Impairment of property, plant and equipment 10 700 000 998 332 – – (Profit)/loss on disposal of property, plant and equipment (636 643) (520 195) (28 273) 198 944 Movement in FCTR (96 179) – – – Share grants to Directors 800 000 – – – Loans from Directors 1 600 000 – 1 600 000 –
12 478 436 10 420 236 8 881 640 (11 501 702)Changes in working capital requirements(Increase)/decrease in inventory (4 877 141) (1 500 861) 1 940 913 (1 940 913)Decrease/(increase) in trade and other receivables 1 157 593 10 793 538 7 029 531 (583 110)Increase in trade and other payables 24 221 957 (2 214 227) 426 355 2 314 410
32 980 845 17 498 686 18 278 439 (11 711 315)Taxation paidBalance receivable at beginning of year (6 256 547) (4 004 435) – – Charge for the year 4 531 227 3 564 242 – – Acquisition of business combination 2 806 082 (80 224) – – Transferred to held for sale 5 234 968 (48 136) – – Balance receivable at end of year (1 638 291) 6 256 547 – –
4 677 439 5 687 994 – –
22. Retirement benefit informationEmployees of the Group contribute to the Alexander Forbes provident fund. Those employed before 1 September 2010 may elect to contribute 10%, 12% or 19% of their pensionable salary to the fund. Those employed after 1 September 2010 contribute 10% of their pensionable salary to the fund.All permanent salaried staff are required to join the fund. At year-end the total number of employees in the Company belonging to the fund was 179 (2011: 147).
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86 PSV integrated annual report 2012 www.psv.co.za
Notes to the annual financial statements (continued)for the year ended 29 February 2012
TurboR
PSV MitechR
TotalR
23. Business combinations acquiredThe following business combination took place in the 2012 financial year:Non-current assets 7 587 711 8 349 304 15 937 015
Property, plant and equipment 6 839 400 8 349 304 15 188 704 Deferred taxation 748 311 – 748 311
Current assets 19 596 396 6 866 744 26 463 140
Inventories 5 625 369 6 866 744 12 492 113 Trade and other receivables 13 971 027 – 13 971 027
Non-current liabilities 3 564 927 1 758 525 5 323 452
Deferred taxation – 1 758 525 1 758 525 Shareholders loans 2 000 000 – 2 000 000Borrowings 1 564 927 – 1 564 927
Current liabilities 14 024 940 2 669 392 16 694 332
Current portion of long-term borrowings 1 232 721 – 1 232 721 Taxation payable 2 806 082 – 2 806 082 Trade and other payables 7 985 129 2 669 392 10 654 521 Bank overdraft 2 001 008 – 2 001 008
Fair value of net assets acquired 9 594 242 10 788 131 20 382 373Purchased loans 11 841 659 11 841 659 Goodwill 7 234 531 7 234 531 Bargain purchase price (10 788 130) (10 788 130) Intangibles 6 261 000 – 6 261 000 Deferred tax on intangibles (1 753 000) – (1 753 000)
Purchase consideration 21 336 773 1 21 336 774
Settled as follows:
Deferred equity consideration – The Parry’s 9 336 772 – 9 336 772 Deferred equity consideration – Earthwise 12 000 000 – 12 000 000
Unwinding of interest 2 323 440 – 2 323 440 Cash paid (1 203 027) (1) (1 203 028)
Balance owing at 29 February 2012 22 457 186 – 22 457 186
Refer to note 16 for the details of the deferred purchase considerations raised to settle the purchase. 100% of the shares of Turbo were acquired with effect from 1 March 2011. The assets of PSV Mitech were acquired on 1 September 2011. PSV acquired the business as a going concern for a consideration of R1 as the business was historically loss making. Independent valuations were performed on the property, plant and equipment and inventory of PSV Mitech. The net results of this exercise was the booking of a bargain purchase consideration of R10,8 million in terms of IFRS 3.
87www.psv.co.za PSV integrated annual report 2012
24. Related party transactionsThe Company has no holding company. All related party transactions are concluded under terms that are no less favourable than those arranged with third parties. Outstanding trading balances at year-end are unsecured, interest free and settlement is in cash. Outstanding loan receivable and payable balances at year-end are unsecured, bear interest at the prime interest rate and have no fixed terms of repayment.
Purchase transactionsIn 2012, total services rendered by CDR Contracts, an employment agency in which Mr P Robinson, one of the Directors of the Group, owns shares, amounted to R10 782 249 (2011: R9 983 799).
Outstanding balancesThe amount payable to CDR Contracts at year-end is R1 296 039 (2011: R1 043 354). This is indicated in trade and other payables.
Management feesAll management fees are intra-group and have been eliminated on consolidation.
Loans from DirectorsAt year-end there were loans of R1,6 million due to Directors. This was for performance-based bonuses due to the Directors. These were settled in March 2012. In addition, the R1 025 957 loan payable to the director of Turbo Agencies Group is repayable in February 2014 (refer to note 18).
Directors’ remuneration and share optionsDetailed disclosure of Directors’ remuneration is made in note 25.
Group companiesDetails of subsidiary companies are given in note 11.
Other key management compensationRemuneration paid to the three highest earners, other than Directors:
Basic remuneration
R
Other benefits
R
Retirement and medical
R
Incentives and bonuses
RTotal
R
2012Employee 1 1 037 338 – 115 260 2 032 716 3 185 313Employee 2 906 274 – 75 556 75 523 1 057 353Employee 3 615 951 96 000 130 616 70 200 912 767
2 559 563 96 000 321 432 2 178 439 5 155 433
2011Employee 1 880 498 123 888 106 722 88 935 1 200 043Employee 2 832 973 – 69 721 69 414 972 108Employee 3 561 005 96 000 122 995 65 000 845 000
2 274 476 219 888 299 438 223 349 3 017 151
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88 PSV integrated annual report 2012 www.psv.co.za
Notes to the annual financial statements (continued)for the year ended 29 February 2012
25. Directors’ remunerationDirectors’ remuneration in respect of the financial year ended 29 February 2012 was as follows:
Basic remuneration
R
Other benefits
R
Retirement and medical
R
Incentives and bonuses
R
Directors’ fees
R
Share grants
RTotal
R
2012Executive AJD da Silva 1 457 239 87 500 259 951 950 391 – 200 000 2 955 081 AR Dreisenstock 1 457 239 87 500 259 951 950 391 – 200 000 2 955 081 DJ Kelly 627 620 75 000 70 369 800 000 – 200 000 1 772 989 P Robinson 1 416 847 150 000 226 703 950 391 – 200 000 2 943 941
Non-executiveE Chimombe-Munyoro – – – – 175 000 – 175 000 GS Nzalo – – – – 140 000 – 140 000 MM Patel – – – – 151 662 – 151 662 A de la Rue – – – – 63 333 – 63 333R Patmore – – – – 63 333 – 63 333
4 958 945 400 000 816 974 3 651 173 593 328 800 000 11 220 420
2011Executive AJD da Silva 1 273 505 150 000 242 821 250 000 – – 1 916 326 AR Dreisenstock 1 273 505 150 000 242 821 250 000 – – 1 916 326 DJ Kelly 1 245 455 150 000 197 809 250 000 – – 1 843 264 P Robinson 1 278 189 150 000 242 821 250 000 – – 1 921 010
Non-executiveE Chimombe-Munyoro – – – – 158 333 – 158 333 GS Nzalo – – – – 140 000 – 140 000 MM Patel – – – – 143 333 – 143 333
5 070 654 600 000 926 272 1 000 000 441 666 – 8 038 592
PSV Holdings Limited executive and non-executive remuneration is approved annually by the Remuneration Committee.Details of the Directors’ interests in the share capital of the Company are provided on pages 90 and 91. There has been no change in the Directors’ interest between the reporting date and the date of approval of the annual financial statements.
89www.psv.co.za PSV integrated annual report 2012
26. Going concernThe Directors have made an assessment at the ability of the Company and its subsidiaries to continue as going concerns and have no reason to believe that the business will not be going concerns in the year ahead.
27. Subsequent eventsShareholders voted in favour of the disposal of the Group’s pump companies comprising PSV Services (Pty) Limited, PSV Zambia (Pvt) Limited, APE Pumps (Pty) Limited, Mather + Platt (Pty) Limited and the property these companies operate from, PSV Properties 2 (Pty) Limited for a total purchase consideration amounting to R54 million. As stated previously, the main purpose for the disposal is to settle debt, provide working capital to the Group’s remaining subsidiaries and pay a special dividend to shareholders. The results of the Pump Business’ operations have been reflected as part of the profit from discontinued operations.
The Pump Businesses were sold to WPIL Limited, a global player in large engineered water handling pumps for the power, municipal mining and oil and gas sectors.
28. Operating leasesNon-cancellable operating lease rentals are payable as follows:
Group Company
2012 2011 2012 2011R R R R
Within 1 year 4 659 286 4 284 545 4 579 286 3 926 000 Years 2 – 5 20 895 331 19 433 292 20 634 777 19 106 257
After 5 years 27 371 736 33 140 318 27 371 736 33 140 318
Total 52 926 354 56 858 155 52 585 800 56 172 575
The Group leases warehouse, factory and administration facilities under operating leases. These leases typically run for a period from between 5 to 10 years, with an option to renew the lease after that date.
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90 PSV integrated annual report 2012 www.psv.co.za
Analysis of shareholdersas at 29 February 2012
Size of holdingsNumber of
shareholdings% of total
shareholdingsNumber of
shares% of
shares in issue
1 – 1 000 shares 302 32,30 108 145 0,041 001 – 10 000 shares 234 25,03 1 184 146 0,4310 001 – 100 000 shares 277 29,63 10 926 571 4,01100 001 – 1 000 000 shares 105 11,23 34 435 496 12,631 000 001 shares and over 17 1,81 225 893 341 82,89
Total 935 100,00 272 547 699 100,00
Distribution of shareholdersRetail shareholders 824 88,13 159 588 035 58,55Empowerment partners 1 0,11 47 500 000 17,43Public companies 4 0,43 19 801 794 7,27Private companies 16 1,71 8 658 893 3,18Treasury 2 0,21 23 253 061 8,53Trusts 37 3,96 5 916 507 2,17Custodians 3 0,32 2 003 627 0,74Other corporations 11 1,18 1 641 505 0,60Close corporations 23 2,46 1 566 510 0,57Investment partnerships 4 0,42 2 604 385 0,96Share trust 1 0,11 7 575 0,00Unclaimed scrip 3 0,32 1 298 0,00Stockbrokers and nominees 6 0,64 4 509 0,00
Total 935 100,00 272 547 699 100,00
Shareholder typeNon-public shareholders 13 1,39 185 563 186 68,08
Directors of the Company or its subsidiaries Directors and Associates (direct holding) 5 114 614 400 42,05 Directors and Associates (indirect holding) 4 3 110 803 1,14 Holders holding more than 10% (excluding Directors’ holding) Wonderwall Investments 36 (Pty) Limited 1 47 500 000 17,43 Share Trusts 1 7 575 0,00 Treasury (less Directors’ interests) 2 20 330 408 7,46
Public shareholders 922 98,61 86 984 513 31,92
Total 935 100,00 272 547 699 100,00
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Beneficial shareholders with a holding greater than 5% of the shares in issueNumber of
shareholdingsNumber of
shares% of
shares in issue
Mr Peter Robinson 1 52 778 600 19,36Mr Abilio Jose Duarte da Silva 1 52 578 600 19,29Wonderwall Investments 36 (Pty) Limited 1 47 500 000 17,43PSV Treasury (Pty) Limited 1 19 443 029 7,13
Total 4 172 300 229 63,21
Total number of shareholdings 935
Total number of shares in issue 272 547 699
Holding entity name (as per unit register) Director Direct holding Indirect holding
Non-public breakdown – Directors of the Company or any of its subsidiaries
Mr Peter Robinson Mr P Robinson 52 778 600 974 217 Mr Abilio Jose Duarte da Silva Mr AJD da Silva 52 578 600 974 218 Da Silva Family Trust Mr AJD da Silva – 188 150 Mr Anthony Robert Dreisenstock Mr AR Dreisentock 5 828 600 974 218 David Joseph Kelly Mr DJ Kelly 3 428 600 –
Direct holding 114 614 400 3 110 803
Holders holding more than 10% of issued capital (excluding Directors’ holding)Wonderwall Investments 36 (Pty) Limited 47 500 000
47 500 000
Share schemes (excluding Directors’ holding)Share trusts 7 575
Treasury (own holdings)PSV Treasury (Pty) Limited 19 443 029 PSV Holdings Limited 887 379
20 330 408
Non-public shareholding 185 563 186
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92 PSV integrated annual report 2012 www.psv.co.za
PSV Holdings Limited
Incorporated in the Republic of South Africa
(Registration number: 1998/004365/06)
Share code: PSV
ISIN: ZAE000078705
(“PSV” or “the Company” or “the Group”)
If you are in any doubt as to what action you should take in respect of the following resolutions,
please consult your Central Securities Depository Participant (“CSDP”), broker, banker, attorney,
accountant or other professional adviser immediately.
Notice is hereby given of the Annual General Meeting (“Annual General Meeting”) of shareholders of PSV
which will be held at 9:00 on Monday, 17 September 2012 at the corner of Barbara and North Reef Roads,
Henville Extension, Elandsfontein, Johannesburg, for the purpose of considering, and, if deemed fit, passing,
with or without modification, the resolutions set out hereafter.
The Board of Directors of the Company (“the Board”) has determined that, in terms of Section 62(3)(a), as read
with Section 59 of the Companies Act, 2008 (Act 71 of 2008), the record date for the purposes of determining
which shareholders of the Company are entitled to participate in and vote at the Annual General Meeting is
Friday, 7 September 2012. Accordingly, the last day to trade PSV shares in order to be recorded in the Register
to be entitled to vote will be Friday, 31 August 2012.
1. To receive, consider and adopt the annual financial statements of the Company and the Group for the
financial year ended 29 February 2012, including the reports of the auditors, Directors and the Audit
Committee.
2. To re-elect, David Joseph Kelly who, in terms of Article 24 of the Company’s Memorandum of
Incorporation, retires by rotation at this Annual General Meeting but, being eligible to do so, offers himself
for re-election.
3. To re-elect, Peter Robinson who, in terms of Article 24 of the Company’s Memorandum of Incorporation,
retires by rotation at this Annual General Meeting but, being eligible to do so, offers himself for re-election.
An abbreviated curriculum vitae in respect of each director offering himself for re-election appears on
page 9 of the annual report to which this notice is attached.
Notice of Annual General Meeting
4. To confirm the re-appointment of KPMG as independent auditors of the Company with Terence Cheadle,
being the individual registered auditor who has undertaken the audit of the Company for the ensuing
financial year and to authorise the Directors to determine the auditors’ remuneration.
As special business, to consider and, if deemed fit, to pass, with or without modification, the following
resolutions:
5. Special resolution number 1
Non-executive Directors’ remuneration
“Resolved that, in terms of the provisions of Section 66(9) of the Companies Act, 71 of 2008, the
annual remuneration payable to the Non-executive Directors of PSV for their services as Directors of the
Company for the financial year ending 2013, be and is hereby approved as follows:
Type of fee
Proposed annual fee in ZAR for the year
ending 2013
BoardChairpersonMember
240 000200 000
Audit and Risk CommitteeChairpersonMember
230 000200 000
Corporate Governance and Nomination CommitteeChairpersonMember
210 000200 000
Remuneration CommitteeChairpersonMember
210 000200 000
Safety, Health, Environment and Sustainable Development CommitteeChairpersonMember
210 000200 000
Social and Ethics CommitteeChairpersonMember
210 000200 000
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Reason for and effect of special resolution number 1
The reason for and effect of special resolution number 1 is to approve the remuneration of the Non-
executive Directors of the Company for their services as Directors for the ensuing financial year.
6. Ordinary resolution number 1
Approval of remuneration policy
“Resolved that the remuneration policy of the Directors of PSV, as set out on page 30 of the annual
report, be and is hereby approved as a non-binding advisory vote of shareholders of the Company in terms
of the King III Report on Corporate Governance.”
7. Ordinary resolution number 2
Control of authorised but unissued ordinary shares
“Resolved that the authorised but unissued ordinary shares in the capital of PSV be and are hereby
placed under the control and authority of the Directors of the Company (“Directors”) and that the Directors
be and are hereby authorised and empowered to allot and issue all or any of such ordinary shares, or to
issue any options in respect of all or any of such ordinary shares, to such person/s on such terms and
conditions and at such times as the Directors may from time to time and in their discretion deem fit,
subject to the provisions of Sections 38 and 41 of the Companies Act, 71 of 2008, the Memorandum
of Incorporation of the Company and the Listings Requirements of JSE Limited, as amended from time
to time.”
8. Ordinary resolution number 3
Approval to issue ordinary shares, and to sell treasury shares, for cash
“Resolved that the Directors of PSV and/or any of its subsidiaries from time to time be and are hereby
authorised, by way of a general authority, to:
• allot and issue, or to issue any options in respect of, all or any of the authorised but unissued ordinary
shares in the capital of the Company; and/or
• sell or otherwise dispose of or transfer, or issue any options in respect of, ordinary shares in the capital
of the Company purchased by subsidiaries of the Company,
for cash, to such person/s on such terms and conditions and at such times as the Directors may from
time to time in their discretion deem fit, subject to the Companies Act, 2008 (Act 71 of 2008), the
Memorandum of Incorporation of the Company and its subsidiaries and the Listings Requirements of
JSE Limited (“the JSE Listings Requirements”) from time to time.
The JSE Listings Requirements currently provide, inter alia, that:
• the securities which are the subject of the issue for cash must be of a class already in issue, or where
this is not the case, must be limited to such securities or rights that are convertible into a class already
in issue;
• any such issue may only be made to “public shareholders” as defined in the JSE Listings Requirements
and not to related parties;
• the number of ordinary shares issued for cash shall not in any one financial year in the aggregate
exceed 50% (fifty percent) of the number of issued ordinary shares. The number of ordinary shares
which may be issued shall be based, inter alia, on the number of ordinary shares in issue, added to
those that may be issued in future (arising from the conversion of options/convertibles) at the date
of such application, less any ordinary shares issued, or to be issued in future arising from options/
convertible ordinary shares issued during the current financial year; plus any ordinary shares to be
issued pursuant to a rights issue which has been announced, is irrevocable and is fully underwritten,
or an acquisition which has had final terms announced;
• this general authority will be valid until the earlier of the Company’s next Annual General Meeting or the
expiry of a period of 15 (fifteen) months from the date that this authority is given;
• an announcement giving full details, including the impact on net asset value per share, net tangible
asset value per share, earnings per share and headline earnings per share and, if applicable, diluted
earnings and headline earnings per share, will be published when the Company has issued ordinary
shares representing, on a cumulative basis within 1 (one) financial year, 5% (five percent) or more of
the number of ordinary shares in issue prior to the issue;
• in determining the price at which an issue of ordinary shares may be made in terms of this authority,
the maximum discount permitted will be 10% (ten percent) of the weighted average traded price on the
JSE Limited of the ordinary shares over the 30 (thirty) business days prior to the date that the price of
the issue is agreed between the issuer and the party subscribing for the securities; and
• whenever the Company wishes to use ordinary shares, held as treasury stock by a subsidiary of the
Company, such use must comply with the JSE Listings Requirements as if such use was a fresh issue
of ordinary shares.”
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94 PSV integrated annual report 2012 www.psv.co.za
Notice of Annual General Meeting (continued)
Under the JSE Listings Requirements, ordinary resolution number 3 must be passed by a 75% (seventy
five percent) majority of the votes cast in favour of the resolution by all members present or represented
by proxy at the Annual General Meeting.
9. Special resolution number 2
General approval to acquire shares
“Resolved, by way of a general approval that PSV and/or any of its subsidiaries from time to time be
and are hereby authorised to acquire ordinary shares in the Company in terms of sections 46 and 48 of
the Companies Act, 2008 (Act 71 of 2008), the Memorandum of Incorporation of the Company and its
subsidiaries and the Listings Requirements of JSE Limited (“the JSE”), as amended from time to time.
The JSE Listings Requirements currently provide, inter alia, that:
• the acquisition of the ordinary shares must be effected through the order book operated by the
JSE trading system and done without any prior understanding or arrangement between the Company
and the counter party;
• this general authority shall only be valid until the earlier of the Company’s next Annual General Meeting
or the expiry of a period of 15 (fifteen) months from the date of passing of this special resolution;
• in determining the price at which the Company’s ordinary shares are acquired in terms of this general
authority, the maximum premium at which such ordinary shares may be acquired will be 10% (ten
percent) of the weighted average of the market value at which such ordinary shares are traded on
the JSE, as determined over the 5 (five) business days immediately preceding the date on which the
transaction is effected;
• at any point in time, the Company may only appoint one agent to effect any acquisition/s on its behalf.
• the acquisitions of ordinary shares in the aggregate in any one financial year may not exceed 20%
(twenty percent) of the Company’s issued ordinary share capital;
• the Company may only effect the repurchase once a resolution has been passed by the board of
directors of the Company (“the Board”) confirming that the Board has authorised the repurchase, that
the Company has passed the solvency and liquidity test (“test”) and that since the test was done there
have been no material changes to the financial position of the Group;
• the Company or its subsidiaries may not acquire ordinary shares during a prohibited period as defined
in paragraph 3.67 of the JSE Listings Requirements;
• an announcement will be published once the Company has cumulatively repurchased 3% (three
percent) of the number of the ordinary shares in issue at the time this general authority is granted
(“initial number”), and for each 3% (three percent) in aggregate of the initial number acquired
thereafter.”
Reason for and effect of special resolution number 2
The reason for and effect of this special resolution number 2 is to obtain an authority for, and to authorise,
the Company and the Company’s subsidiaries, by way of a general authority, to acquire the Company’s
issued ordinary shares.
It is the intention of the directors of the Company to use such authority should prevailing circumstances
(including tax dispensations and market conditions) in their opinion warrant it.
Other disclosure in terms of Section 11.26 of the JSE Listings Requirements
The JSE Listings Requirements require the following disclosure, which are contained in the annual report
of which this notice forms part:
• Directors and management – page 9;
• Major shareholders of the Company – page 90 to 91;
• Directors’ interests in securities – page 87;
• Share capital of the Company – page 76; and
• Litigation statement – page 43.
Material change
There have been no material changes in the affairs or financial position of the Company and its
subsidiaries since the Company’s financial year-end and the date of this notice.
Directors’ responsibility statement
The Directors, whose names are given on page 9 of the annual report of which this notice forms part,
collectively and individually accept full responsibility for the accuracy of the information pertaining to
special resolution number 2 and certify that to the best of their knowledge and belief there are no facts
in relation to special resolution number 2 that have been omitted which would make any statement in
relation to special resolution number 2 false or misleading, and that all reasonable enquiries to ascertain
such facts have been made and that special resolution number 2 together with this notice contains all
information required by law and the JSE Listings Requirements in relation to special resolution number 2.
95www.psv.co.za PSV integrated annual report 2012
Adequacy of working capital
At the time that the contemplated repurchase is to take place, the Directors of the Company will ensure
that, after considering the effect of the maximum repurchase and for a period of 12 months thereafter:
• the Company and its subsidiaries will be able to pay their debts as they become due in the ordinary
course of business;
• the consolidated assets of the Company and its subsidiaries, fairly valued in accordance with
International Financial Reporting Standards, will be in excess of the consolidated liabilities of the
Company and its subsidiaries;
• the issued share capital and reserves of the Company and its subsidiaries will be adequate for the
purpose of the ordinary business of the Company and its subsidiaries; and
• the working capital available to the Company and its subsidiaries will be sufficient for the Group’s
requirements.
The Company may not enter the market to proceed with the repurchase until its Designated Adviser,
Merchantec Proprietary Limited, has discharged of all of its responsibilities in terms of the JSE Listings
Requirements insofar as they apply to working capital statements for the purposes of undertaking an
acquisition of its issued ordinary shares.
10. Ordinary resolution number 4
Signature of documents
“Resolved that each director of PSV be and is hereby individually authorised to sign all such documents
and do all such things as may be necessary for or incidental to the implementation of those resolutions
to be proposed at the Annual General Meeting convened to consider the resolutions which are passed, in
the case of ordinary resolutions, or are passed and registered by the Companies and Intellectual Property
Commission, in the case of special resolutions.”
Other businessTo transact such other business as may be transacted at the Annual General Meeting of the Company.
Voting and proxiesSpecial resolutions to be adopted at this Annual General Meeting require approval from 75% of the shares
represented in person or by proxy at the meeting. Ordinary resolutions to be adopted require approval from
a simple majority, which is more than 50% of the shares represented in person or by proxy at the meeting.
A shareholder entitled to attend and vote at the Annual General Meeting is entitled to appoint a proxy or proxies
to attend and act in his/her stead. A proxy need not be a member of the Company. For the convenience of
registered members of the Company, a form of proxy is attached hereto.
The attached form of proxy is only to be completed by those ordinary shareholders who:
• hold ordinary shares in certificated form; or
• are recorded on the sub-register in “own name” dematerialised form.
Ordinary shareholders who have dematerialised their ordinary shares through a CSDP or broker without “own
name” registration and who wish to attend the Annual General Meeting, must instruct their CSDP or broker to
provide them with the relevant Letter of Representation to attend the meeting in person or by proxy and vote.
If they do not wish to attend in person or by proxy, they must provide the CSDP or broker with their voting
instructions in terms of the relevant custody agreement entered into between them and the CSDP or broker.
Proxy forms should be forwarded to reach the transfer secretaries, Computershare Investor Services
Proprietary Limited, at least 48 hours, excluding Saturdays, Sundays and public holidays, before the time
of the meeting.
Kindly note that meeting participants, which include proxies, are required to provide reasonably satisfactory
identification before being entitled to attend or participate in a shareholders’ meeting. Forms of identification
include valid identity documents, driver’s licences and passports.
By order of the Board
Merchantec Proprietary Limited
Company Secretary
8 August 2012
Johannesburg
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96 PSV integrated annual report 2012 www.psv.co.za
Notes
97www.psv.co.za PSV integrated annual report 2012
Notes
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98 PSV integrated annual report 2012 www.psv.co.za
Notes
99www.psv.co.za PSV integrated annual report 2012
Form of proxy
PSV Holdings LimitedIncorporated in the Republic of South Africa(Registration number 1998/004365/06)Share code: PSVISIN: ZAE000078705(“PSV” or “the Company” or “the Group”)
For use only by ordinary shareholders who:• hold ordinary shares in certificated form (“certificated ordinary shareholders”); or• have dematerialised their ordinary shares (“dematerialised ordinary shareholders”) and are registered with
“own name” registration, at this Annual General Meeting of shareholders of the Company to be held at 9:00 on Monday, 17 September 2012 at the registered office of PSV, corner Barbara and North Reef Roads, Henville Extension, Elandsfontein, Johannesburg, 1429, and any adjournment thereof.
Dematerialised ordinary shareholders holding ordinary shares other than with “own name” registration who wish to attend the Annual General Meeting must inform their Central Securities Depository Participant (“CSDP”) or broker of their intention to attend the Annual General Meeting and request their CSDP or broker to issue them with the relevant Letter of Representation to attend the Annual General Meeting in person or by proxy and vote. If they do not wish to attend the Annual General Meeting in person or by proxy, they must provide their CSDP or broker with their voting instructions in terms of the relevant custody agreement entered into between them and the CSDP or broker. These ordinary shareholders must not use this form of proxy.
Name of beneficial shareholder
Name of registered shareholder
Address
Telephone work ( ) Telephone home ( )
being the holder/custodian of ordinary shares in the Company, hereby appoint (see note):
1. or failing him/her,
2. or failing him/her,
3. the Chairperson of the meeting,
as my/our proxy to attend and act for me/us on my/our behalf at the Annual General Meeting of the company convened for purpose of considering and, if deemed fit, passing, with or without modification, the special and ordinary resolutions to be proposed thereat (“resolutions”) and at each postponement or adjournment thereof and to vote for and/or against
such resolutions, and/or abstain from voting, in respect of the ordinary shares in the issued share capital of the Company registered in my/our name/s in accordance with the following instructions:
Number of ordinary shares
For Against Abstain
1. To receive, consider and adopt the annual financial statements of the Company and Group for the financial year ended 29 February 2012
2. To approve the re-election as director of David Joseph Kelly who retires by rotation
3. To approve the re-election as director of Peter Robinson who retires by rotation
4. To confirm the re-appointment of KPMG as auditors of the Company together with Mr Terence Cheadle for the ensuing financial year
5. Special resolution number 1Approval of the non-executive directors’ remuneration
6. Ordinary resolution number 1Approval of the remuneration policy
7. Ordinary resolution number 2Control of authorised but unissued ordinary shares
8. Ordinary resolution number 3Approval to issue ordinary shares, and to sell treasury shares, for cash
9. Special resolution number 2General approval to acquire shares
10. Ordinary resolution number 4Signature of documents
Please indicate instructions to proxy in the space provided above by the insertion therein of the relevant number of votes exercisable.
A member entitled to attend and vote at the Annual General Meeting may appoint one or more proxies to attend and act in his stead. A proxy so appointed need not be a member of the Company.
Signed at on 2012
Signature
Assisted by (if applicable)
Please read the instructions on the reverse side of this form of proxy.
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100 PSV integrated annual report 2012 www.psv.co.za
1. The form of proxy must only be completed by shareholders who hold shares in certificated form or who are recorded on the sub-register in electronic form in “own name”.
2. All other beneficial owners who have dematerialised their shares through a CSDP or broker and wish to attend the Annual General Meeting must provide the CSDP or broker with their voting instructions in terms of the relevant custody agreement entered into between them and the CSDP or broker.
3. A shareholder entitled to attend and vote at the Annual General Meeting may insert the name of a proxy or the names of two alternate proxies (none of whom need be a shareholder of the Company) of the shareholder’s choice in the space provided, with or without deleting “the Chairperson of the meeting”. The person whose name stands first on this form of proxy and who is present at the Annual General Meeting will be entitled to act as proxy to the exclusion of those proxy(ies) whose names follow. Should this space be left blank, the proxy will be exercised by the Chairperson of the meeting.
4. A shareholder is entitled to one vote on a show of hands and, on a poll, one vote in respect of each ordinary share held. A shareholder’s instructions to the proxy must be indicated by the insertion of the relevant number of votes exercisable by that shareholder in the appropriate space provided. If an “X” has been inserted in one of the blocks to a particular resolution, it will indicate the voting of all the shares held by the shareholder concerned. Failure to comply with this will be deemed to authorise the proxy to vote or to abstain from voting at the Annual General Meeting as he/she deems fit in respect of all the shareholders’ votes exercisable thereat. A shareholder or the proxy is not obliged to use all the votes exercisable by the shareholders or by the proxy, but the total of the votes cast and in respect of which abstention is recorded may not exceed the total of the votes exercisable by the shareholder or the proxy.
5. A vote given in terms of an instrument of proxy shall be valid in relation to the Annual General Meeting notwithstanding the death, insanity or other legal disability of the person granting it, or the revocation of the proxy, or the transfer of the ordinary shares in respect of which the proxy is given, unless notice as to any of the aforementioned matters shall or have been received by the transfer secretaries not less than 48 hours before the commencement of the Annual General Meeting.
6. If a shareholder does not indicate on this form that his/her proxy is to vote in favour of or against any resolution or to abstain from voting, or gives contradictory instructions, or should any further resolution(s) or any amendment(s) which may properly be put before the Annual General Meeting be proposed, such proxy shall be entitled to vote as he/she thinks fit.
7. The Chairperson of the Annual General Meeting may reject or accept any form of proxy which is completed and/or received other than in compliance with these notes.
8. A shareholder’s authorisation to the proxy including the Chairperson of the Annual General Meeting, to vote on such shareholder’s behalf, shall be deemed to include the authority to vote on procedural matters at the Annual General Meeting.
Form of proxy instructions
9. The completion and lodging of this form of proxy will not preclude the relevant shareholder from attending the Annual General Meeting and speaking and voting in person thereat to the exclusion of any proxy appointed in terms hereof.
10. Documentary evidence establishing the authority of a person signing the form of proxy in a representative capacity must be attached to this form of proxy, unless previously recorded by the Company’s transfer secretaries or waived by the Chairperson of the Annual General Meeting.
11. A minor or any other person under legal incapacity must be assisted by his/her parent or guardian, as applicable, unless the relevant documents establishing his/her capacity are produced or have been registered by the transfer secretaries of the Company.
12. Where there are joint holders of ordinary shares: • anyoneholdermaysigntheformofproxy; • thevote(s)oftheseniorordinaryshareholders(forthatpurposesenioritywillbedeterminedbytheorderin
which the names of ordinary shareholders appear in the Company’s register of ordinary shareholders) who tender a vote (whether in person or by proxy) will be accepted to the exclusion of the vote(s) of the other joint shareholder(s).
13. Forms of proxy should be lodged with or mailed to Computershare Investor Services Proprietary Limited:
Hand deliveries to: Postal deliveries to:Computershare Investor Services Proprietary Limited Computershare Investor Services Proprietary LimitedGround Floor, 70 Marshall Street PO Box 61051Johannesburg Marshalltown2001 2107
to be received by no later than 9:00 on Thursday, 13 September 2012 (or 48 hours before any adjournment of the Annual General Meeting which date, if necessary, will be notified on SENS).
14. A deletion of any printed matter and the completion of any blank space need not be signed or initialled. Any alteration or correction must be signed and not merely initialled.
101www.psv.co.za PSV integrated annual report 2012
Administration
Business address
PSV Holdings Office Park, Corner Barbara and North Reef Roads, Elandsfontein
Telephone: +27 (0) 11 657 6000, Facsimile: +27 (0) 11 822 8470
Company Secretary and registered office
Merchantec Capital
2nd Floor, North Block, Hyde Park Office Tower, Corner 6th Road and Jan Smuts Avenue, Hyde Park
Telephone: +27 (0) 11 325 6363, Facsimile: +27 (0) 11 325 6362
Transfer secretaries
Computershare Investor Services (Pty) Limited
Ground Floor, 70 Marshall Street, Johannesburg, 2001
(PO Box 61051, Marshalltown, 2107)
Telephone: +27 (0) 11 370 5000, Facsimile: +27 (0) 11 688 5210
Attorneys
Mahons Attorneys
Building 1, 19 Impala Road, Chislehurston, Johannesburg, 2196
(PO Box 782244, Sandton City, 2146)
Telephone: +27 (0) 10 500 1175, Facsimile: +27 (0) 73 577 1607
Designated adviser
Merchantec Capital
2nd Floor, North Block, Hyde Park Office Tower, Corner 6th Road and Jan Smuts Avenue, Hyde Park
(PO Box 41480, Craighall, 2024)
Telephone: +27 (0) 11 325 6363, Facsimile: +27 (0) 11 325 6362
Auditors
KPMG Incorporated
KPMG Crescent, 85 Empire Road, Parktown, 2193
Telephone: +27 (0) 11 647 7111, Facsimile: +27 (0) 11 647 8000
Investor Relations
Keyter Rech Investor Solutions
Vanessa Rech
Telephone: +27 (0) 11 447 8656, Facsimile: +27 (0) 11 447 9391
Email: [email protected]
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Maxx Corporate Communications©
102 PSV integrated annual report 2012 www.psv.co.za
Physical Address
PSV Holdings Office Park
Corner Barbara and North Reef Roads
Elandsfontein
Postal Address
Postnet Suite 229
Private Bag X19
Gardenview, 2047
Tel +27 11 657 6000
Fax +27 11 822 8470
www.psvholdings.com