Notes

Basis of preparation

The preliminary condensed consolidated financial statements are prepared in accordance with requirements of the JSE Listings Requirements and the requirements of the Companies Act of South Africa. The Listings Requirements require preliminary reports to be prepared in accordance with the framework concepts and the measurement and recognition requirements of International Financial Reporting Standards ("IFRS") and the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee and Financial Pronouncements as issued by Financial Reporting Standards Council and to also, as a minimum, contain the information required by IAS 34 Interim Financial Reporting.

The accounting policies applied in the preparation of the condensed consolidated financial statements are in terms of IFRS and are consistent with those applied in the previous consolidated annual financial statements. These results have been prepared under the supervision of the Chief Financial Officer, Mr B G Wood.

New standards, interpretations and amendments adopted by the Group

The accounting policies adopted in the preparation of these preliminary condensed consolidated financial statements are consistent with those followed in the preparation of the Group's annual consolidated financial statements for the year ended 30 June 2020, except for the adoption of new and amended IFRS and International Financial Reporting Interpretations Committee interpretations, which became effective during the current review period. The application of these standards and interpretations did not have a significant impact on the Group's reported results and cash flows for the year ended 30 June 2021 and the financial position at 30 June 2021.

There are no material contingent assets or liabilities at 30 June 2021.

Capital commitments will be funded by cash generated by operations.

The Group does not fair value its financial assets or liabilities in accordance with quoted prices in active markets or market observables, as their carrying value approximates fair value due to the short-term nature of these items, and/or existing terms are equivalent to market observables. There were no transfers into or out of Level 3 financial instruments during the period.

During the 2014 financial year, the Group implemented a share incentive scheme for all employees of the Group and its franchisees that had been in the employ of the Group and/or franchise network for a period of three uninterrupted years at each allotment date in August every year from implementation date. As a result, 9,9 million of the Group's shares net of forfeitures were held by qualifying staff members at 30 June 2021 (2020: 9 million). Until vesting, the shares will continue to be accounted for as treasury shares and have an impact on the diluted weighted average number of shares.

The fifth allotment of shares in the scheme, granted in 2017, vested on 31 August 2020. A total of 116 employees qualified for the vesting (2020: 94). This resulted in a decrease in treasury shares of 1 128 860 (2020: 909 106) shares.

The scheme is classified as an equity settled scheme in terms of IFRS 2, Share-based Payment, and has resulted in an expense of R19 million (2020: R25 million) in the Group's results; R9 million (2020: R13 million) of this charge is a once-off accelerated expense for franchise staff.

No adjustments to earnings are required for diluted earnings per share calculations, as the share awards do not have an impact on diluted earnings.

An interest-bearing loan of R500 million is repayable in full on 29 November 2021, and as such, has been disclosed as a current liability as at 30 June 2021. The Group intends to refinance the facility for a further three years and is in negotiations in this regard.

During the year the following impairments were recorded:

• An impairment of R4 million on a building used for administration purposes which was deemed unsafe for use (structurally unsound) and demolished; and
• An impairment of R6 million on equipment at PiViCal Panels which is not fit for purpose and/or damaged, and requires replacement (by year end, various components had already been replaced).

In the prior year, equipment and machinery at the SAMCA floor tile factory with a carrying value of R16 million was impaired, following a decision to upgrade the factory. The impairment was recorded as the components were deemed to have negligible recoverable amounts as they could not be reused elsewhere or sold to third parties.

During the fourth quarter of the prior financial year, trading in the Group's operations ceased for a five-week period as a result of the national lockdown brought about by the Covid-19 pandemic. During this time, the Group incurred losses as it was unable to trade and profits remained suppressed thereafter as activities resumed incrementally with the phased relaxation of regulated restrictions. During the final month of the prior financial year, much improved trading results and profit growth were achieved. The Group has since experienced robust demand for its products and recorded increased turnover and profitability.

To date, the pandemic has not had a materially adverse effect on the collection of receivable balances due to the Group. No material impairments directly attributable to the pandemic have been recorded, and the Group remains a going concern.

During the social unrest in July 2021 experienced in Gauteng and KwaZulu-Natal ("KZN"), the Group closed all of its 18 stores in KZN for 10 days, as well as 16 stores in other hotspots for shorter periods of time. Although trade was disrupted and two of the Group stores looted, the Group was fortunate to not experience material loss during this time. Business interruption and asset loss insurance claims have been lodged with insurers.

The founder and non-controlling shareholder in Ezee Tile Adhesive Manufacturers Proprietary Limited ("Ezee Tile"), Mike du Plessis, retired with effect from 1 July 2021. As a result, the Group acquired his shareholding in Ezee Tile for R120 million subsequent to year-end, increasing the Group's stake in this company to 97,54%.

The directors are not aware of any other matters or circumstances arising since the end of the reporting period which will significantly affect the financial position at 30 June 2021 or the results of its operations or cash flow for the year then ended.