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Directors’ report |
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The directors have pleasure in presenting the annual financial statements of the company and the group for the year ended 31 December 2004. Holding company The company's holding company is Daun & Cie AG, a company incorporated in Germany. Nature of business The group comprises two divisions being Industrial and Consumer. The activities of these divisions include automotive leather, trim and components; footwear and related leather processing; fresh and processed meat; polyester fibre and PET bottle resin and textiles. Their activities are dealt with separately in the annual report. Change of name and listing category Following the acquisitions detailed below, the company changed its name to KAP International Holdings Limited and was moved to the Diversified Industrial sector of the JSE Securities Exchange South Africa to better reflect the nature of the group. Acquisitions On 1 July 2004, the group acquired the following interests:
Disposals On 1 January 2004, the group disposed of its entire shareholding in the following companies to a related party, Courthiel Holdings (Proprietary) Limited, a subsidiary of Daun & Cie AG, for a total consideration of R2,5 million: Exotan (Proprietary) Limited, Camdeboo Meat Processors Limited, Matsapa Hides & Stores (Proprietary) Limited, Border Export (Proprietary) Limited, Bregin & Co (Cape) (Proprietary) Limited, Cape Produce Export Co (Proprietary) Limited, South West Wool Sorters (Proprietary) Limited, OSB Exports (Proprietary) Limited, Kaftan NV, Manzini Hide Collectors (Proprietary) Limited, S M Lurie Company (Proprietary) Limited, S M Lurie and Company (Botswana) (Proprietary) Limited, G H Hackmann (Proprietary) Limited, Hideskin Namibia (Proprietary) Limited, African Hide Trading Namibia (Proprietary) Limited, Oudtshoorn Ostrich Processors (Proprietary) Limited, Kolosus Leathers Africa, Barvan Pvt and Velskin Product (Proprietary) Limited. The net liability value disposed of was R1,0 million. The group sold its investment in Inyati Limited to a related party, Conrapp Properties (Proprietary) Limited, a subsidiary of Daun & Cie AG, for a total consideration of R1,00 on 31 December 2004. No profit or loss was incurred in the sale. Financial results Commentary on the financial results is included in the chief executive officer's report accompanying the annual financial statements. Dividend The board has resolved to declare a capitalisation share award with a cash alternative of 5 cents per share. The dividend policy of the group is to have a payout ratio of 20% of headline earnings and to declare dividends annually with no interim dividend. Share capital and share premium The authorised share capital of the company was increased from 200 000 000 ordinary shares of R0,20 each to 1 200 000 000 ordinary shares of R0,20 each by shareholders in a general meeting held on 10 November 2004. 250 600 000 ordinary shares of R0,20 each were issued as consideration shares for the acquisition by the company of the shares in and claims against Dano Textile Industries (Proprietary) Limited, Hosaf Fibres (Proprietary) Limited, Casa Rosada Investments (Proprietary) Limited and Marker Investments (Proprietary) Limited as authorised by shareholders in a general meeting on 10 November 2004. The costs of the issue, amounting to R2,0 million were set off against the share premium that arose from the issue of such shares. The unissued shares are under the control of the directors. This resolution is subject to renewal by ordinary resolution of the following annual general meeting: Directorate and secretary The directors and secretary of the company for the year ended 31 December 2004 are set out below:
Directors appointed by the board and retiring at the annual general meeting in accordance with the articles of association are Messrs M J Jooste, F Möller, J B Magwaza, I N Moloto and S H Nomvete. Mr R D Radford retires by rotation. These directors are all eligible and offer themselves for re-election. Details of each of the retiring directors are set out on page 3. Directors' shareholding At 31 December 2004, the present directors of the company held direct and indirect interests in 332 522 060 (2003: 164 459 840) or 79,41% (2003: 97,82%) of the company's issued ordinary shares. Further details are set out on page 2 and note 32. At 15 April 2005 following a share disposal to increase shareholder spread the interest of directors of the company was 325 322 060 shares or 77,69%. Contracts Mr C E Daun and Mr P C T Schouten had interests in the contracts concluded for the acquisition and disposals listed above. Their interest was declared at the respective board meetings and in the circular to shareholders dated 19 October 2004. Daun & Cie AG did not vote on the ordinary resolution for the acquisition at the general meeting of shareholders held on 10 November 2004. No other contracts in which directors and officers of the company had an interest and that significantly affected the affairs and business of the company or any of its subsidiaries were entered into during the year. Corporate governance The group complies in all material respects with the JSE Securities Exchange South Africa (JSE) Listing Requirements and the Code of Corporate Practice and Conduct published in the King II Report on Corporate Governance except as listed below:
Changes in accounting policies During the year, the group adopted IFRS 3 relating to the treatment of business combinations. The result thereof at 31 December 2004 was that negative goodwill of R190,039 million was recognised in the income statement. During the year, the group changed its accounting policy with respect to the treatment of joint ventures. These are now accounted for in the group financial statements using the equity method of accounting. The effects of these changes in accounting policies are reflected in note 1.1 to the annual financial statements. Non-consolidation of entity PF2 Properties (Proprietary) Limited, which was acquired on 1 December 2003 for R1,00 was not consolidated. The net asset value of the company totals R23 million. However, these assets are leased to KAP International Holdings Limited and this lease agreement has been capitalised in these financial statements. The leased assets have been converted to owned assets as a result of the acquisition. Consequently, the non-consolidation has no effect on the group financial statements. Subsidiary companies and joint ventures The principal subsidiaries and joint ventures of the group are reflected in notes 5 and 6. The aggregate net profits of consolidated subsidiaries amount to R108,4 million (2003: R6 million). The aggregate net losses amounted to R2,6 million(2003: R5,4 million). Borrowing facilities and limits The group's borrowing facilities and usage thereof are set out in note 14. In terms of the articles of association of the company and its subsidiaries, there is no limitation of borrowing powers. There were no other material events between the balance sheet date and the date of this report. Special resolutions The following special resolutions were passed at a meeting of shareholders held on 10 November 2004:
Special resolutions were passed in subsidiaries to change names and to adopt new memoranda and articles of association in line with the holding company. Subsequent events No material change has taken place in the affairs of the group between the end of the financial year and the date of this report. Responsibility of directors The directors are responsible for the preparation and integrity of the annual financial statements of the company and group and the other information included in this report. The external auditors, Deloitte & Touche, are responsible for independently auditing and reporting on the financial statements. The directors, supported by the audit committee, are of the opinion, based on the information and explanations given by management and on comment by the independent auditors on the results of their statutory audit, that the group's internal accounting controls are adequate, and the financial records may be relied upon for preparing the financial statements and maintaining accountability for assets and liabilities. The internal controls are designed to provide an acceptable, but not absolute, level of assurance that the assets are safeguarded and the transactions are executed and recorded in accordance with generally accepted business practices and the group's policies and procedures. These controls are implemented by trained and skilled personnel with appropriate segregation of duties and are monitored by management. Nothing has come to the attention of the directors to indicate that any material breakdown in the functioning of these controls, procedures and systems has occurred during the period under review. The financial statements set out in this report have been prepared by management in accordance with South African Statements of Generally Accepted Accounting Practice and incorporate responsible disclosure based on appropriate accounting policies consistently applied and supported by reasonable and prudent judgements and estimates. The directors have reasonable expectation that the group has adequate resources to continue in operation for the foreseeable future and the annual financial statements have therefore been prepared on a going concern basis. Approval of annual financial statements The annual financial statements for the year ended 31 December 2004, set out on pages 34 to 85 were approved by the board of directors and are signed on its behalf by
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![C E Daun [signature]](../images/ce_cdaun_sig.gif)
![P C T Schouten [signature]](../images/pct_schouten_sig.gif)