Notes

Basis of preparation
The reviewed interim condensed consolidated financial statements are prepared in accordance with the requirements of the JSE 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 South African Institute of Chartered Accountants Financial Reporting Guides as issued by the Accounting Practices Committee and Financial Pronouncements as issued by the 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 reviewed interim 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 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 2021, 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 2021 and the financial position at 31 December 2021.

There are no material contingent assets or liabilities at 31 December 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 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, 7,2 million of the Group's shares net of forfeitures were held by qualifying staff members at 31 December 2021 (2020: 10,5 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 sixth allotment of shares in the scheme, granted in 2018, vested on 31 August 2021. A total of 104 employees qualified for the vesting (2020: 116), of which three employees opted to retain the shares (2020: one). This resulted in a decrease in treasury shares of 1 163 757 (2020: 1 128 860) 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 R7,1 million (2020: R13 million) to the Group's income; R9 million of the prior year charge is a once-off accelerated expense for franchise staff.

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

An interest-bearing loan of R500 million was repaid in full on 29 November 2021 using the proceeds of another R500 million loan from another financial institution. This loan is repayable in November 2024 and has thus been disclosed as a non-current liability at 31 December 2021.

The founder and non-controlling shareholder in Ezee Tile Adhesive Manufacturers Proprietary Limited (“Ezee Tile”), Mike du Plessis, retired with effect from 30 June 2021. As a result, the Group acquired his shareholding in Ezee Tile for R120 million during July 2021 increasing the Group’s stake in this company to 98,29% (June 2021: 71,04%).

Awards issued in accordance with the Ceramic Industries Escrow Scheme (a retention scheme) and which vested on 31 December 2020, resulted in a cash outflow of R99 million from the Group during the review period as vested shares were acquired from participants. This acquisition of the vested retention shares has increased the Group’s effective holding in Ceramic Industries to 98,06% (June 2021: 95,47%).

During the civil 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’s stores were looted, the Group was fortunate to not experience material loss during this time. Business interruption and asset loss insurance claims have been assessed and settled by insurers.

During the prior financial year, the Group experienced robust demand for its product as the home improvement industry’s share of wallet was elevated given various other sectors of the economy experienced restricted trade. As lockdown restrictions have eased, this demand has tapered off, with the continued impact of the pandemic being disruptions to global supply chains.

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.

The directors are not aware of any matters or circumstances arising since the end of the reporting period which significantly impact the financial position at 31 December 2021 or the results of its operations or cash flow for the period then ended.