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Notes

1. BASIS OF PREPARATION AND CHANGES IN ACCOUNTING POLICY

Basis of preparation

The condensed consolidated interim financial statements are prepared in accordance with the requirements of the JSE Limited Listings Requirements and the requirements of the Companies Act of South Africa. The Listings Requirements require interim 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 International Accounting Standard ("IAS") 34 Interim Financial Reporting.

The accounting policies applied in the preparation of the condensed consolidated interim 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 reviewed interim 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 six months ended 31 December 2020 and the financial position at 31 December 2020.

2. COMMITMENTS AND CONTINGENCIES

There are no material contingent assets or liabilities at 31 December 2020.

(Rand millions unless otherwise stated)
Capital commitments 31 December 2020 31 December 2019   30 June
2020
 
– Contracted 328 307   358  
– Authorised but not contracted for 122 287   355  
Total 450 594   713  

3. FAIR VALUES OF FINANCIAL INSTRUMENTS

The Group does not fair value its financial assets or liabilities in accordance with quoted prices in active markets or market observables, as there is no difference between their fair value and carrying 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 during the period.

4. STAFF SHARE SCHEME

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, 10,5 million of the Group's shares net of forfeitures were held by qualifying staff members at 31 December 2020 (2019: eight 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 (2019: 94), of which one employee opted to retain the shares (2019: five) and the balance received the net value of the awards in cash. This resulted in a decrease in treasury shares of 1 128 860 (2019: 909 106) shares.

The scheme is classified as an equity settled scheme in terms of IFRS 2, Share-based Payment, and has resulted in a charge of R13 million (2019: R15 million) to the Group's income; R9 million (2019: R13 million) of this charge is a once-off accelerated expense for franchise staff.

5. EARNINGS PER SHARE

Reviewed 
six months to  31 December 
2020 
Reviewed 
six months to  31 December 
2019 
   Audited 
year to 
30 June 
2020 
  
Reconciliation of shares in issue (all figures in millions): 
– Total number of shares issued  1 322  1 322     1 322    
– Shares held by Share Incentive Trust  (10) (10)    (10)   
– Shares held by Retention Trust  (6) –     –    
– BEE treasury shares  (64) (63)    (64)   
– Shares held by Italtile Ceramics Proprietary Limited  (24) (16)    (18)   
Shares in issue to external parties  1 218  1 233     1 230    
Reconciliation of share numbers used for earnings per share calculations (all figures in millions): 
Weighted average number of shares  1 225  1 231     1 231    
Dilution effect of share awards       
Diluted weighted average number of shares  1 231  1 237     1 236    
Reconciliation of headline earnings (Rand millions): 
– Profit attributable to equity shareholders  954  679     964    
– Profit on sale of property, plant and equipment – after taxation  (13) –     (1)   
– Impairment of plant and equipment – after taxation  –     11    
Headline earnings  945  679     974    
Adjusted EPS (cents)*  77,9  58,4     81,5    
Adjusted diluted EPS (cents)*  77,5  58,1     81,1    
Headline EPS (cents) 77,1  55,3     79,2    
Adjusted headline EPS (cents)*  77,1  58,4     82,3    
Diluted headline EPS (cents) 76,8  55,0     78,8    
Adjusted diluted headline EPS (cents)*  76,8  58,1     82,0    
Dividends per share (cents) 31,0  23,0     33,0    
Net asset value per share (cents) 517,0  450,0     458,0    
* Adjusted for once-off charge of R39 million in the prior period related to the BBBEE transaction.

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

6. DISAGGREGATION OF REVENUE FROM CONTRACTS WITH CUSTOMERS

  (Rand millions unless otherwise stated)
  Reviewed
six months to
31 December
2020
    Restated
six months to
31 December
2019
  Audited
year to
30 June
2020
Turnover# 4 833     3 824   6 690  
Royalty income from franchising 67     78   129  
Profit before taxation 28     56   89  
Other franchise income 4 928     3 958   6 908  
# Turnover represents net revenue from sale of goods, excluding value added tax and intercompany sales.

7. RECONCILIATION OF PROFIT BEFORE TAX TO CASH GENERATED FROM OPERATIONS

   (Rand millions unless otherwise stated)
             
   Reviewed 
six months to 
31 December 
2020 
  Restated 
six months to 
31 December 
2019 
  Audited 
year to 
30 June 
2020 
 
Cash flows from operating activities: 
Profit before taxation  1 413  1 011     1 457    
Adjusted for: 
   Income from associates  –  –     (1)   
   BBBEE transaction charge  –  39     39    
   Depreciation  154  157     299    
   Depreciation – right-of-use asset  34  24     62    
   Lease liability finance cost payment  15  12     26    
   Lease payment  –  –*    –    
   Profit on sale of property, plant and equipment  (17)    (1)   
   Impairment of property, plant and equipment  –     16    
   Finance income  (22) (58)    (74)   
   Finance costs (excluding IFRS 16 finance costs) 14  25     55    
   Share-based payment expenses  35  33     84    
   Foreign currency translation difference  (13)      
   Working capital changes: 
      Inventory  (106) (107)    (39)   
      Trade and other receivables  (237) (81)    90    
      Trade and other payables (including provisions) 50  (104)    137    
Cash generated by operations  1 324  953*    2 159    
# Less than R1 million.
* Cash flows related to IFRS 16 have been restated as detailed in note 8.

8. RESTATEMENT OF CASH FLOW DISCLOSURE

Cash flows related to IFRS 16 have been restated as disclosure requirements of IFRS 16 Leases were incorrectly applied on adoption of the standard (lease capital payments and interest payments were erroneously disclosed in aggregate in operating cash flows). Accordingly, the comparative figures have been adjusted to apportion the lease payment under operating activities and lease liability capital repayments under financing activities.

The restatement had the following impact on cash flow disclosures:

   (Rand millions unless otherwise stated)   
   As previously 
disclosed 
    Restatement     Restated  disclosure    
Cash flow from operating activities                   
– Lease payment  (33)    33         
Cash generated by operations  920     33     953    
– Lease liability finance costs       (12)    (12)   
Total cash flow from operating activities  (495)    21     (474)   
Cash flow from financing activities                   
– Lease liability payments       (21)    (21)   
Total cash flow from financing activities  340     (21)    319    

9. INTEREST-BEARING LOANS

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 31 December 2020.

10. COVID-19

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 seen robust demand for its products and recorded increased turnover and profits.

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

11. EVENTS AFTER REPORTING DATE

The directors are not aware of any matters or circumstances arising since the end of the reporting period which significantly affect the financial position at 31 December 2020 or the results of its operations or cash flow for the period then ended.